FIRST DIVISION

G. R. No. 146608 - October 23, 2003

SPOUSES CONSTANTE FIRME AND AZUCENA E. FIRME, Petitioners, vs. UKAL ENTERPRISES
AND DEVELOPMENT CORPORATION,Respondent.

DECISION

CARPIO, J.:

The Case

This is a petition for review on certiorari of the Decision 1 dated 3 January 2001 of the Court of Appeals
in CA-G.R. CV No. 60747. The Court of Appeals reversed the Decision 2 of the Regional Trial Court,
Branch 223, Quezon City ("trial court"), which held that there was no perfected contract of sale since
there was no consent on the part of the seller.

The Facts

Petitioner Spouses Constante and Azucena Firme ("Spouses Firme") are the registered owners of a
parcel of land 3 ("Property") located on Dahlia Avenue, Fairview Park, Quezon City. Renato de Castro
("De Castro"), the vice president of Bukal Enterprises and Development Corporation ("Bukal
Enterprises") authorized his friend, Teodoro Aviles ("Aviles"), a broker, to negotiate with the Spouses
Firme for the purchase of the Property.

On 28 March 1995, Bukal Enterprises filed a complaint for specific performance and damages with the
trial court, alleging that the Spouses Firme reneged on their agreement to sell the Property. The
complaint asked the trial court to order the Spouses Firme to execute the deed of sale and to deliver
the title to the Property to Bukal Enterprises upon payment of the agreed purchase price.

During trial, Bukal Enterprises presented five witnesses, namely, Aviles, De Castro, Antonio Moreno,
Jocelyn Napa and Antonio Ancheta.

Aviles testified that De Castro authorized him to negotiate on behalf of Bukal Enterprises for the
purchase of the Property. According to Aviles, he met with the Spouses Firme on 23 January 1995 and
he presented them with a draft deed of sale 4 ("First Draft") dated February 1995. The First Draft of
the deed of sale provides:

DEED OF ABSOLUTE SALE

KNOW ALL MEN BY THESE PRESENTS:

This DEED OF ABSOLUTE SALE made and executed by and between the Spouses CONSTANTE FIRME
and AZUCENA E. FIRME, both of legal age, Filipino citizens and with postal address at No. 1450 Union,
Paco, City of Manila, hereinafter called the VENDOR, and
BUKAL ENTERPRISES and DEVELOPMENT CORPORATION, a corporation duly organized and registered
in accordance with Philippine Laws, with business address at Dahlia Avenue, Fairview Park, Quezon
City, herein represented by its PRESIDENT, MRS. ZENAIDA A. DE CASTRO, hereinafter called the
VENDEE.

WITNESSETH:

That the VENDOR is the absolute and registered owner of a certain parcel of land located at Fairview
Park, Quezon City, and more particularly described as follows:

A parcel of land (Lot 4, Block 33 of the consolidation-subdivision plan (LRC) Pcs-8124, Sheet No. I,
being a portion of the consolidation of Lots 41-B-2-A and 41-B-2-C, Psd-1136 and Lot (LRC) Pcs-2665,
(LRC) GLRO) Record. No. 1037), situated in Quezon City, Island of Luzon. Bound ed on the NE., points
2 to 5 by Road Lot 24, of the consolidation-subdivision plan. Beginning at a point marked "1" on plan,
being S. 67 deg. 23W., 9288.80 m. from BLLM I, Mp of Montalban, Rizal; thence N. 85 deg. 35E.,
17.39 m. to point 2; thence S. 54 de g. 22E., 4.00 m. to point 3; thence S. 14 deg. 21E., 17.87 m. to
point 4; thence 3 deg. 56E., 17.92 m. to point 5; thence N. 85 deg. 12 W., 23.38 m. to point 6;
thence N. 4 deg. 55 W., 34.35 m. to the point of beginning; containing an area of EIGHT HUNDRED
AND SIX (806) SQUARE METERS, more or less.

VENDORS title thereto being evidenced by Transfer Certificate of Title No. 264243 issued by the
Register of Deeds of Quezon City;

That the VENDOR, for and in consideration of the sum of THREE MILLION TWO HUNDRED TWENTY
FOUR THOUSAND PESOS (P3,224,000.00) Philippine Currency, to them in hand paid and receipt
whereof is hereby acknowledged, do hereby SELL, TRANSFER and CONVEY unto the said VENDEE, its
assigns, transferees and successors in interest the above describ ed property, free from all liens and
encumbrances whatsoever;

It is hereby mutually agreed that the VENDEE shall bear all the expenses for the capital gains tax,
documentary stamps, documentation, notarization, removal and relocation of the squatters,
registration, transfer tax and other fees as may be required by law;

That the VENDOR shall pay the real estate tax for the current year and back real estate taxes, charges
and penalties if there are any.

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

CONSTANTE FIRME BUKAL ENTERPRISES AND

DEVELOPMENT CORP.

BY:
AZUCENA E. FIRME ZENAIDA A. DE CASTRO
VENDOR President

xx x

The Spouses Firme rejected this First Draft because of several objectionable conditions, including the
payment of capital gains and other government taxes by the seller and the relocation of the squatters
at the sellers expense. During their second meeting, Aviles presented to the Spouses Firme another
draft deed of sale 5 ("Second Draft") dated March 1995. The Spouses Firme allegedly accepted the
Second Draft in view of the deletion of the objectionable conditions contained in the First Draft.
According to Aviles, the Spouses Firme were willing to sell the Property at P4,000 per square meter.
They then agreed that payment would be made at the Far East Bank and Trust Company ("FEBTC"),
Padre Faura Branch, Manila. However, the scheduled payment had to be postponed due to problems in
the transfer of funds. The Spouses Firme later informed Aviles that they were no longer interested in
selling the Property.6 cräläwvir t u
al ibräry

De Castro testified that he authorized Aviles to negotiate for Bukal Enterprises the purchase of the
Property owned by the Spouses Firme. The Property was located beside the Dahlia Commercial
Complex owned by Bukal Enterprises. Aviles informed him that the Spouses Firme agreed to sell the
Property at P4,000 per square meter, payable in cash for a lump sum of P3,224,000. Furthermore,
Bukal Enterprises agreed to pay the taxes due and to undertake the relocation of the squatters on the
Property. For this purpose, Bukal Enterprises applied for a loan of P4,500,000 which FEBTC granted.
Bukal Enterprises then relocated the four families squatting on the Property at a cost of P60,000 per
family. After the squatters vacated the Property, Bukal Enterprises fenced the area, covered it with
filling materials, and constructed posts and riprap. Bukal Enterprises spent approximately P300,000
for these improvements. In a letter7 dated 7 March 1995, Bukal Enterprises offered to pay the
purchase price of P3,224,000 to the Spouses Firme upon e xecution of the transfer documents and
delivery of the owners duplicate copy of TCT No. 264243. The Spouses Firme did not accept this offer
but instead sent Bukal Enterprises a letter demanding that its workers vacate the Property. Bukal
Enterprises then filed a complaint for specific performance and damages.8 cräläwvir tuali b
r äry

Antonio Moreno, one of the alleged squatters on the Property, testified that he constructed his house
on the Property sometime in 1982. On 26 February 1995, he was summoned together with the other
squatters to a meeting with Aviles regarding their relocation. They agreed to relocate provided they
would be given financial assistance of P60,000 per family. Thus, on 6 March 1995, the squatter
families were each paid P60,000 in the presence of De Castro and Aviles. Thereafter, they voluntarily
demolished their houses and vacated the Property.9 cräläwvir tuali b
r äry

Jocelyn Mapa, the manager of FEBTC, Padre Faura Branch, testified that Bukal Enterprises has been
their client since 1994. According to her, Bukal Enterprises applied for a loan of P4,500,000 on the
third week of February 1995 allegedly to buy a lot in Fairview. FEBTC approved the loan on the last
week of February and released the proceeds on the first week of March. 10 cräl äwvirt ualibräry

Antonio Ancheta ("Ancheta"), barangay captain of Barangay Fairview, testified that he was present
when one of the officers of Bukal Enterprises, a certain Renato, paid each of the four squatter families
around P60,000 to P100,000. Ancheta informed Dr. Constante Firme that he told the squatters to
leave considering that they already received payment for their relocation. According to Ancheta, Dr.
Constante Firme must have misunderstood him and thought that the squatters left through Anchetas
own efforts.11cräläwvir tualibräry

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

Dr. Firme testified that on 30 January 1995, he and his wife met with Aviles at the Aristocrat
Restaurant in Quezon City. Aviles arranged the meeting with the Spouses Firme involving their
Property in Fairview. Aviles offered to buy the Property at P2,500 per square meter. The Spouses
Firme did not accept the offer because they were reserving the Property for their children. On 6
February 1995, the Spouses Firme met again with Aviles upon the latters insistence. Aviles showed
the Spouses Firme a copy of a draft deed of sale 12 ("Third Draft") which Aviles prepared. The Third
Draft of the deed of sale provides:

CONRACT OF SALE

KNOW ALL MEN BY THESE PRESENTS:

This AGREEMENT, executed this ___ day of February, 1995, by and between the Spouses CONSTANTE
FIRME and AZUCENA E. FIRME, both of legal age, Filipino citizen and with postal address at
__________, Quezon City, hereinafter referred to as the VENDORS, and BUKAL ENTERPRISES and
DEVELOPMENT CORPORATION, a corporation duly organized and registered in accordance with
Philippine Laws, with postal address at Fairview Park, Quezon City, herein represented by its President
and Chief Executive Officer, hereinafter referred to as the VENDEE.

WITNESSETH:

That for and in consideration of the sum of THREE MILLION TWO HUNDRED TWENTY FOUR THOUSAND
PESOS (P3,224,000.00), Philippine Currency, payable in the form hereinafter expressed, agreed to sell
to the VENDEE and the VENDEE has agreed to buy from the VENDORS, a parcel of land situated at
Dahlia Avenue corner Rolex Street, Fairview Park, Quezon City, containing an area of 806 Square
Meters more or less, of which the VENDORS are the absolute registered owners in accordance with the
Land Registration Act, as evidenced by Transfer Certificate of Title No. 264243 issued by the Register
of Deeds of Quezon City, more particularly described and bounded as follows:

(DESCRIPTION AND BOUNDARIES OF PROPERTY)

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

1. The VENDEE agrees to pay the VENDORS upon execution of this Contract the sum of ONE MILLION
PESOS (P1,000,000.00), Philippine Currency, as downpayment and agrees to pay the balance of TWO
MILLION TWO HUNDRED TWENTY FOUR THOUSAND PESOS (P2,224,000.00) at the post office address
of the VENDORS in Quezon City, or such other place or Office as the VENDORS may designate within a
period of sixty (60) days counted from the date of this Contract;

2. The VENDORS have hereunto authorized the VENDEE to mortgage the property and submit this
Contract, together with a certified true copy of the TCT, Tax Declaration, Tax Clearance and
Vicinity/Lot Plan, with their Lending Bank. The proceeds of the VENDEES Loan shall directly be paid
and remitted by the Bank to the VENDORS;

3. The said parcel of land shall remain in the name of the VENDORS until the Lending Bank of the
VENDEE shall have issued a Letter Guaranty Payment in favor of the VENDORS, at which time the
VENDORS agree to execute a Deed of Absolute Sale in favor of the VENDEE and cause the issuance of
the Certificate of Title in the name of the latter. The Capital Gains Tax and Documentary Stamps shall
be charged from the VENDORS in accordance with law;

4. The payment of the balance of P2,224,000.00 by the VENDEE to the VENDORS shall be within a
period of sixty (60) days effective from the date of this Contract. After the lapse of 60 days and the
loan has not yet been released due to fortuitous events the VENDEE shall pay an interest of the
balance a monthly interest based on existing bank rate until said fortuitous event is no longer present;

5. The VENDEE shall remove and relocate the Squatters, however, such actual, reasonable and
necessary expenses shall be charged to the VENDORS upon presentation of receipts and documents to
support the act;

6. The VENDEE shall be allowed for all legal purposes to take possession of the parcel of land after the
execution of this Contract and payment of the downpayment;

7. The VENDEE shall shoulder all expenses like the documentation, registration, transfer tax and
relocation of the property.

IN WITNESS WHEREOF, we have hereunto affixed our signatures this ____ day of February, 1995, at
Quezon City, Philippines.
 CONSTANTE E. FIRME BUKAL ENTERPRISES DEV. CORP.
VENDOR VENDEE
BY:
AZUCENA E. FIRME ________________________
VENDOR President & Chief Executive Officer

xx x

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

On 7 August 1998, the trial court rendered judgment against Bukal Enterprises as follows:

WHEREFORE, in the light of the foregoing premises, the above-entitled case [is] hereby DISMISSED
and plaintiff BUKAL ENTERPRISES DEVELOPMENT CORPORATION is hereby ordered to pay the
defendants Spouses Constante and Azuce na Firme:

1. the sum of Three Hundred Thirty Five Thousand Nine Hundred Sixty Four and 90/100
(P335,964.90) as and by way of actual and compensatory damages;

2. the sum of Five Hundred Thousand Pesos (P500,000.00) as and by way of moral damages;

3. the sum of One Hundred Thousand Pesos (P100,000.00) as and by way of attorneys fees; and

4. the costs of the suit.

SO ORDERED.16 cräl äw vi rt ua
l ibrä
ry

Bukal Enterprises appealed to the Court of Appeals, which reversed and set aside the decision of the
trial court. The dispositive portion of the decision reads:

WHEREFORE, premises considered, the Decision, dated August 7, 1998, is hereby REVERSED and SET
ASIDE. The complaint is granted and the appellees are directed to henceforth execute the Deed of
Absolute Sale transferring the ownership of the subject property to the appellant immediately upon
receipt of the purchase price of P3,224,000.00 and to perform all such acts necessary and proper to
effect the transfer of the property covered by TCT No. 264243 to appellant. Appellant is directed to
deliver the payment of the purchase price of the property within sixty days from the finality of this
judgment. Costs against appellees.

SO ORDERED.17 cräl äw vi rt ua
l ibrä
ry
Hence, the instant petition.

The Ruling of the Trial Court

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

The Ruling of the Court of Appeals

The Court of Appeals held that the lack of a board resolution authorizing Aviles to act on behalf of
Bukal Enterprises in the purchase of the Property was cured by ratification. Bukal Ent erprises ratified
the purchase when it filed the complaint for the enforcement of the sale.

The Court of Appeals also held there was a perfected contract of sale. The appellate court ruled that
the Spouses Firme revealed their intent to sell the Property w hen they met with Aviles twice. The
Spouses Firme rejected the First Draft because they considered the terms unacceptable. When Aviles
presented the Second Draft without the objectionable provisions, the Spouses Firme no longer had
any cause for refusing to sell the Property. On the other hand, the acts of Bukal Enterprises in fencing
the Property, constructing posts, relocating the squatters and obtaining a loan to purchase the
Property are circumstances supporting their claim that there was a perfected co ntract of sale.

The Spouses Firme allowed Bukal Enterprises to exercise acts of ownership over the Property when
the latter introduced improvements on the Property and evicted the squatters. These acts constitute
partial performance of the contract of sale that takes the oral contract out of the scope of the Statute
of Frauds.

The Issues

The Spouses Firme raise the following issues:

1. WHETHER THE COURT OF APPEALS ERRED IN FINDING THAT THERE WAS A PERFECTED CONTRACT
OF SALE BETWEEN PETITIONERS AND RESPONDENT DESPITE THE ADDUCED EVIDENCE PATENTLY TO
THE CONTRARY;

2. WHETHER THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE ALLEGED CONTRACT OF
SALE IS ENFORCEABLE DESPITE THE FACT THAT THE SAME IS COVERED BY THE STATUTE OF
FRAUDS;

3. WHETHER THE COURT OF APPEALS ERRED IN DISREGARDING THE FACT THAT IT WAS NOT
LEGALLY AND FACTUALLY POSSIBLE FOR RESPONDENT TO PERFECT A CONTRACT OF SALE; AND

4. THE COURT OF APPEALS ERRED IN RULING THAT THE AWARD BY THE TRIAL COURT OF MORAL
AND COMPENSATORY DAMAGES TO PETITIONERS IS IMPROPER.18

The Ruling of the Court

The petition is meritorious.

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

Whether there was a perfected contract of sale

We agree with the finding of the trial court that there was no perfected contract of sale. Clearly, the
Court of Appeals misapprehended the facts of the case in ruling otherwise.

First, the records indubitably show that there was no consent on the part of the Spouses Firme. Aviles
did not present any draft deed of sale during his first meeting with the Spouses Firme on 30 January
1995.23 Dr. Firme was consistent in his testimony that he and his wife rejected the provisions of the
Third Draft presented by Aviles during their second meeting on 6 February 1995. The Spouses Firme
found the terms and conditions unacceptable and told Aviles that they would not sell the
property.24 Aviles showed them only one draft deed of sale (Third Draft) during their second and last
meeting on 6 February 1995.25 When shown a copy of the First Draft, Dr. Firme testified that it was
not the deed of sale shown to them by Aviles during their second meeting 26 and that the Third Draft
was completely different from the First Draft.27 cräl äw vi rt ua
l ibrä
ry

On the other hand, Aviles gave conflicting testimony as to what transpired during the two meetings
with the Spouses Firme. In his direct examination, Aviles testified that during his first meeting with
the Spouses Firme on 23 January 1995, he showed them the First Draft which the Spouses Firme
rejected.28 On their second meeting, Aviles showed the Spouses Firme the Second Draft, which the
Spouses Firme allegedly approved because the objectionable conditions contained in the First Draft
were already deleted. However, a perusal of the First Draft and the Second Draft would show that
both deeds of sale contain exactly the same provisions. The only difference is that the date of the First
Draft is February 1995 while that of the Second Draft is March 1995.

When Aviles testified again as rebuttal witness, his testimony became more confusing. Avile s testified
that during his first meeting with the Spouses Firme on 30 January 1995, he showed them the Third
Draft, which was not acceptable to the latter.29 However, upon further questioning by his counsel,
Aviles concurred with Dr. Firmes testimony that he presented the Third Draft (Exh. "5"; Exh. "L") to
the Spouses Firme only during their second meeting. He also stated that he prepared and presented to
the Spouses Firme the First Draft (Exh. "C") and the Second Draft (Exh. "C -1") during their first or
second meeting. He testified:

ATTY. MARQUEDA:

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

Q: May I see the document Exhibit 5 L? 31 cräl äwvi rt ua

l ibräry

INTERPRETER:

Witness going over the record.

ATTY. MARQUEDA:

Q: Is that the same document that was presented by you to Mr. Firme on the second meeting or there
is a different contract?

A: This is the same document draft of the document that I submitted to them during our second
meeting. That was February. This was the draft.

Q: What about Exhibit C and C-1 [which] were identified by you. When was this presented to Dr.
Firme?

A: This is the same.

Q: Exhibit C and C-1?

A: Yes because I prepared two documents during our meeting. One already with notarial, the one
without notarial page and the other one with notarial page already, so I prepared two documents but
with the same contents both were dated February of 1995.32 cräl äwvir tualibräry

Q: So, you are referring now to Exhibit C and C-1 for the plaintiff?

A: C-1 is already in the final form because we agreed already as to the date of the payment, so I
prepared already another document which is dated March 1995. 33 (Emphasis supplied)

In his cross-examination, Aviles again changed his testimony. According to him, he presented the
Third Draft to the Spouses Firme during their first meeting.34 However, when he went over the
records, he again changed his answer and stated that he presented the Third Draft during th eir second
meeting.35 cräl äwvir tuali b
r äry

In his re-direct examination, Aviles gave another version of what he presented to the Spouses Firme
during the two meetings. According to him, he presented the Third Draft during the first meeting. On
their second meeting, he presented the First and the Second Drafts to the Spouses Firme. 36 cräl äwvi rt ua
l ibräry

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

Considering the glaring inconsistencies in Aviles te stimony, it was proper for the trial court to give
more credence to the testimony of Dr. Firme.

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

Q. Now, the next question which states: "But did you not have any occasion to talk to him after that
second meeting?" and the answer of Dr. Firme is "He called up a month after, thats March 2, 1995."
What can you say on this?

A. I called him to inform him that the loan was already transferred from Makati to Padre Faura Branch
of the Far East Bank, so I scheduled already the payment of their property.
Q. When?

A. On March 4, 1995.

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

A. He mentioned that they are no longer interested to sell their property, perhaps they would like a
higher price of the property. They did not mention to me. I do not know what was their reason.

Q. The next question "So, what happened next?" The answer is "He called up two days later, March 4
and my wife answered the telephone and told him that the property is not for sale, sir." What can you
say on this?

A. That is true. That is what Mrs. Firme told me during our conversation on the telephone that they
are no longer interested to sell the property for obvious reason.

Q. When was that?

A. March 4, 1995, your honor.39 (Emphasis supplied)

Significantly, De Castro also admitted that he was aware of the Spouses Firmes refusal to sell the
Property.40cräläwvir tuali bräry

The confusing testimony of Aviles taken together with De Castros admission that he was aware of the
Spouses Firmes refusal to sell the Property reinforces Dr. Firmes testimony that he and his wife never
consented to sell the Property.

Consent is one of the essential elements of a valid contract. The Civil Code provides:

Art. 1318. There is no contract unless the follo wing requisites concur:

1. Consent of the contracting parties;

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

3. Cause of the obligation which is established.

The absence of any of these essential elements will negate the existence of a perfected contract of
sale.41 Thus, where there is want of consent, the contract is non-existent.42 As held in Salonga, et al.
v. Farrales, et al.:43 cräl äwvi rt ua
l ibrä
ry

It is elementary that consent is an essential element for the existence of a contract, and where it is
wanting, the contract is non-existent. The essence of consent is the conformity of the parties on
the terms of the contract, the acceptance by one of the offer made by the other. The contract
to sell is a bilateral contract. Where there is merely an offer by one party, without the acceptance of
the other, there is no consent. (Emphasis supplied)

In this case, the Spouses Firme flatly rejected the offer of Aviles to buy the Property on behalf of
Bukal Enterprises. There was therefore no concurrence of the offer and the acceptance on the subject
matter, consideration and terms of payment as would result in a perfected contract of sale. 44 Under
Article 1475 of the Civil Code, the contract of sale is perfected at the moment there is a meeting of
minds on the thing which is the object of the contract and on the price.
Another piece of evidence which supports the contention of the Spouses Firme that they did not
consent to the contract of sale is the fact they never signed any deed of sale. If the Spouses Firme
were already agreeable to the offer of Bukal Enterprises as embodied in the Second Draft, then the
Spouses Firme could have simply affixed their signatures on the deed of sale, but they did not.

Even the existence of a signed document purporting to be a contract of sale does not preclude a
finding that the contract is invalid when the evidence shows that there was no meeting of the minds
between the seller and buyer.45 In this case, what were offered in evidence were mere unsigned deeds
of sale which have no probative value.46 Bukal Enterprises failed to show the existence of a perfected
contract of sale by competent proof.

Second, there was no approval from the Board of Directors of Bukal Enterprises as would finalize any
transaction with the Spouses Firme. Aviles did not have the proper authority to negotiate for Bukal
Enterprises. Aviles testified that his friend, De Castro, had asked him to negotiate with the Spouses
Firme to buy the Property.47 De Castro, as Bukal Enterprises vice president, testified that he
authorized Aviles to buy the Property.48However, there is no Board Resolution authorizing Aviles to
negotiate and purchase the Property on behalf of Bukal Enterprises. 49 crä
l äwvirt ualibräry

It is the board of directors or trustees which exercises almost all the corporate powers in a
corporation. Thus, the Corporation Code provides:

SEC. 23. The board of directors or trustees. Unless otherwise provided in this Code, the corporate
powers of all corporations formed under this Code shall be exercised, all business conducted and all
property of such corporations controlled and held by the board of dire ctors or trustees to be elected
from among the holders of stock, or where there is no stock, from among the members of the
corporation, who shall hold office for one (1) year and until their successors are elected and qualified.
xx x

SEC. 36. Corporate powers and capacity. Every corporation incorporated under this Code has the
power and capacity:

xx x

7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal
with such real and personal property, including securities and bonds of other corporations, as the
transaction of a lawful business of the corporation may reasonably and necessarily require, subject to
the limitations prescribed by the law and the Constitution.

xx x

Under these provisions, the power to purchase real property is vested in the board of directors or
trustees. While a corporation may appoint agents to negotiate for the purchase of real property
needed by the corporation, the final say will have to be with the board, whose approval will finalize the
transaction.50 A corporation can only exercise its powers and transact its business through its board of
directors and through its officers and agents when authorized by a board resolution or its by-
laws.51 As held in AF Realty & Development, Inc. v. Dieselman Freight Services, Co.:52 cräl äwv
i rt ualibrä
ry

Section 23 of the Corporation Code expressly provides that the corporate powers of all corporations
shall be exercised by the board of directors. Just as a natural person may authorize another to do
certain acts in his behalf, so may the board of directors of a corporation validly dele gate some of its
functions to individual officers or agents appointed by it. Thus, contracts or acts of a corporation must
be made either by the board of directors or by a corporate agent duly authorized by the board. Absent
such valid delegation/authorization, the rule is that the declarations of an individual director relating to
the affairs of the corporation, but not in the course of, or connected with, the performance of
authorized duties of such director, are held not binding on the corporation. (Emphasis supplied)
In this case, Aviles, who negotiated the purchase of the Property, is neither an officer of Bukal
Enterprises nor a member of the Board of Directors of Bukal Enterprises. There is no Board Resolution
authorizing Aviles to negotiate and purchase the Property for Bukal Enterprises. There is also no
evidence to prove that Bukal Enterprises approved whatever transaction Aviles made with the Spouses
Firme. In fact, the president of Bukal Enterprises did not sign any of the deeds of sale presented to
the Spouses Firme. Even De Castro admitted that he had never met the Spouses Firme. 53 Considering
all these circumstances, it is highly improba ble for Aviles to finalize any contract of sale with the
Spouses Firme.

Furthermore, the Court notes that in the Complaint filed by Bukal Enterprises with the trial court,
Aviles signed 54 the verification and certification of non-forum shopping.55 The verification and
certification of non-forum shopping was not accompanied by proof that Bukal Enterprises authorized
Aviles to file the complaint on behalf of Bukal Enterprises.

The power of a corporation to sue and be sued is exercised by the board of directors. "The physical
acts of the corporation, like the signing of documents, can be performed only by natural persons duly
authorized for the purpose by corporate by-laws or by a specific act of the board of directors." 56cräl ä
wvi rt ua
l ibräry

The purpose of verification is to secure an assurance that the allegations in the pleading are true and
correct and that it is filed in good faith.57True, this requirement is procedural and not jurisdictional.
However, the trial court should have ordered the correction of the complaint since Aviles was neither
an officer of Bukal Enterprises nor authorized by its Board of Directors to act on behalf of Bukal
Enterprises.

Whether the Statute of Frauds is applicable

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

Art. 1403. The following contracts are unenforceable, unless they are ratified:

(1) Those entered into in the name of another person by one who has been given no authority or legal
representation, or who has acted beyond his powers;

(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following
cases an agreement hereafter made shall be unenforceable by action, unless the same, or some note
or memorandum thereof, be in writing and subscribed by the party charged or by his agent; evidence,
therefore, of the agreement cannot be received without the writing, or a secondary evidence of its
contents:

xx x

(e) An agreement for the leasing for a longer period than one year, or for the sale of real property or
of an interest therein;

xx x

Whether Bukal Enterprises is a builder in good faith

Bukal Enterprises is not a builder in good faith. The Spouses Firme did not accept Aviles offer to
purchase the Property. Aviles testified that when he calle d the Spouses Firme on 2 March 1995, Dr.
Firme informed him that they were no longer interested in selling the Property. On 4 March 1995,
Aviles called again and this time Mrs. Firme told him that they were not selling the Property. Aviles
informed De Castro of the refusal of the Spouses Firme to sell the Property. However, Bukal
Enterprises still proceeded in relocating the squatters and constructing improvements on the Property.
De Castro testified:

ATTY. EJERCITO:

Q: The truth of the matter, Mr. Witness, is that the post was constructed sometime late 1994. Is that
not correct?

A: No, sir. It is not true.

Q: When was it constructed?

A: That March.

Q: When in March?

A: 1995.

Q: When in March 1995?

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

Q: When were the squatters removed?

WITNESS:

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

ATTY. EJERCITO:

Q: When did you find out that the Spouses Firme did not want to sell the same?

A: First week of March 1995.

Q: In your Complaint you said you find out on March 3, 1995. Is that not correct?

A: I cannot exactly remember, sir.

ATTY. MARQUEDA:

In the Complaint it does not state March 3. Maybe counsel was thinking of this Paragraph 6 which
states, "When the property was rid of the squatters on March 2, 1995 for the documentation and
payment of the sale, xxx".

ATTY. EJERCITO:

Q: So, you found out on March 2, 1995 that the defendants were no longer interested in selling to you
the property. Is that correct?

A: Yes, sir, because Mr. Aviles relayed it to me.

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

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

Q: In so many words, Mr. Witness, you learned that the Spouses Firme were no longer interested in
selling the property before you spent allegedly all the sum of money for the relocation of squatters for
all this construction that you are telling this Court now?

WITNESS:

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

ATTY. EJERCITO:

Q: You mean to say that you did not believe Mr. Aviles when he told you that the Spouses Firme were
no longer selling the property?

A: No, sir.

Q: Was there anything formal when you say the Spouses Firme agreed to sell the property?

A: None, sir.

Q: And yet that time you believe Mr. Aviles when he verbally told you that the Sps. Firme agreed to
sell the property? At what point of the transaction with the Spouses Firme were you advised by your
lawyer?

WITNESS:

A: At the time when they refused to sell the lot.

ATTY. EJERCITO:

Q: Was that before the squatters were relocated allegedly by Bukal Enterprises?

A: Yes, sir.

Q: In fact, it was the lawyer who advised you to relocate the squatters. Is it not true?

A: No, sir.59 (Emphasis supplied)

Bukal Enterprises is obviously a builder in bad faith. No deed of sale has been executed in this case.
Despite the refusal of the Spouses Firme to sell the Pro perty, Bukal Enterprises still proceeded to
introduce improvements on the Property. Bukal Enterprises introduced improvements on the Property
without the knowledge and consent of the Spouses Firme. When the Spouses Firme learned about the
unauthorized constructions made by Bukal Enterprises on the Property, they advised the latter to
desist from further acts of trespass on their Property.60cräläwvir tuali bräry

The Civil Code provides:

Art. 449. He who builds, plants or sows in bad faith on the land of another, loses what is built, planted
or sown without right of indemnity.

Art. 450. The owner of the land on which anything has been built, planted or s own in bad faith may
demand the demolition of the work, or that the planting or sowing be removed, in order to replace
things in their former condition at the expense of the person who built, planted or sowed; or he may
compel the builder or planter to pay the price of the land, and the owner the proper rent.

Under these provisions the Spouses Firme have the following options: (1) to appropriate what Bukal
Enterprises has built without any obligation to pay indemnity; (2) to ask Bukal Enterprises to remove
what it has built; or (3) to compel Bukal Enterprises to pay the value of the land. 61 Since the Spouses
Firme are undoubtedly not selling the Property to Bukal Enterprises, they may exercise any of the first
two options. They may appropriate what has been built without paying indemnity or they may ask
Bukal Enterprises to remove what it has built at Bukal Enterprises own expense.

Bukal Enterprises is not entitled to reimbursement for the expenses incurred in relocating the
squatters. Bukal Enterprises spent for the relocation of the squatters even after learning that the
Spouses Firme were no longer interested in selling the Property. De Castro testified that even though
the Spouses Firme did not require them to remove the squatters, they chose to spend for the
relocation of the squatters since they were interested in purchasing the Property. 62 crä
l äwv
i rt ualibrä
ry

Whether the Spouses Firme are entitled to compensatory and moral damages

The Court agrees with the Court of Appeals to delete the award for compensatory and moral damages.
In awarding actual damages, the trial court took into account the traveling expenses incurred by the
Spouses Firme who are already residing in the United States. However, the trial court failed to
consider the testimony of Dr. Firme that they normally travel to the Ph ilippines more than once a year
to visit their children.63 Thus, the expenses for the roundtrip tickets dated 1996-1997 could not be
attributed solely for the attendance of hearings in the case.

Nevertheless, an award of nominal damages of P30,000 is warranted since Bukal Enterprises violated
the property rights of the Spouses Firme.64The Civil Code provides:

Art. 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which has been
violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by him.

Art. 2222. The court may award nominal damages in every obligation arising from any source
enumerated in article 1157, or in every case where any property right has been invaded.

The award of damages is also in accordance with Article 451 of the Civil Code which states that the
landowner is entitled to damages from the builder in bad faith. 65
cräl äwvi rt ua
l ibräry

WHEREFORE, we SET ASIDE the Decision of the Court of Appeals and RENDER a new one:

1. Declaring that there was no perfected contract of sale;

2. Ordering Bukal Enterprises to pay the Spouses Firme P30,000 as nominal damages.

SO ORDERED.

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

Ynares-Santiago, J., on official leave.

 THIRD DIVISION

[G.R. NO. 145017 : January 28, 2005]

DR. JOSE and AIDA YASON, Petitioners, v. FAUSTINO ARCIAGA, FELIPE NERI ARCIAGA, DOMINGO
ARCIAGA, and ROGELIO ARCIAGA, Respondents.

DE CISIO N

SANDOVAL-GUTIERREZ, J.:

Before us is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of C ivil Procedure, as
amended, assailing the Amended Decision 1 of the C ourt of Appeals dated September 13, 2000 in C A G.R. C V
No. 55668, entitled "Faustino Arciaga, et. al. v. Dr. Jose Yason and Aida Yason."

The factual antecedents as borne by the records are:

Spouses Emilio and C laudia Arciaga were owners of Lot No. 303-B situated in Barangay Putatan, Muntinlupa
C ity, with an area of 5,274 square meters covered by TC T No. 40913 of the Registry of Deeds of Makati C ity.
On March 28, 1983, they executed a Deed of C onditional Sale whereby they sold Lot No. 303 -B
for P265,000.00 to spouses Dr. Jose and Aida Yason, petitioners. They tendered an initial payment
of P150,000.00. On April 19, 1983, upon payment of the balance of P115,000.00, spouses Emilio and
C laudia Arciaga executed a Deed of Absolute Sale. That day, C laudia died. She was survived by her spouse
and their six (6) children, namely: Faustino, Felipe Neri, Domingo, Rogelio, Virginia, and Juanita.

Petitioners had the Deed of Absolute Sale registered in the Registry of Deeds of Makati C ity. They entrusted
its registration to one Jesus Medina to whom they delivered the document of sale and the amount
of P15,000.00 as payment for the capital gains tax. Without their knowledge, Medina falsified the Deed of
Absolute Sale and had the document registered in the Registry of Deeds of Makati C ity. He made it appear
that the sale took place on July 2, 1979, instead of April 19, 1983, and that the price of the lot was
only P25,000.00, instead of P265,000.00. On the basis of the fabricated deed, TC T No. 40913 in the names
of spouses Arciaga was cancelled and in lieu thereof, TC T No. 120869 was issued in the names of
petitioners.

Subsequently, petitioners had Lot No. 303-B subdivided into 23 smaller lots. Thus, TC T No. 120869 was
cancelled and in lieu thereof, TC T Nos. 132942 to 132964 were issued. Petitioners then sold several lots to
third persons, except the 13 lots covered by TC T Nos. 132942, 132943, 132945, 132946, 132948, 132950,
132951, 132953, 132954, 132955, 132958, 132962 and 132963, which they retained.

Sometime in April 1989, spouses Arciaga's children learned of the falsified document of sale. Four of them,
namely: Faustino, Felipe Neri, Domingo and Rogelio, herein respondents, caused the filing with the Office
of the Provincial Prosecutor of Makati C ity a complaint for falsification of documents against petitioners,
docketed as I.S No. 89-1966. It was only after receiving the subpoena in April 1989 when they learned that
the Deed of Absolute Sale was falsified. However, after the preliminary investigation, the Provincial
Prosecutor dismissed the complaint for falsification for lack of probable cause.

Undaunted, respondents, on October 12, 1989, filed with the Regional Trial C ourt (RTC ), Branch 62, Makati
C ity, a complaint for annulment of the 13 land titles, mentioned earlier, against petitioners. Respondents
alleged inter alia that the Deed of Absolute Sale is void ab initio considering that (1) C laudia Arciaga did not
give her consent to the sale as she was then seriously ill, weak, and unable to talk and (2) Jesus Medina
falsified the Deed of Absolute Sale; that without C laudia's consent, the contract is void; and that the 13 land
titles are also void because a forged deed conveys no title.

In their answer, petitioners specifically denied the allegations in the complaint and averred that they validly
acquired the property by virtue of the notarized Deed of C onditional Sale and the Deed of Absolute Sale
executed by spouses Emilio and C laudia Arciaga, respondents' parents. The Deed of Absolute Sale was duly
signed by the parties in the morning of April 19, 1983 when C laudia was still alive. It was in the evening of
the same day when she died. Hence, the contract of sale is valid. Furthermore, they have no participation in
the falsification of the Deed of Absolute Sale by Medina. In fact, they exerted efforts to locate him but to no
avail.

On August 29, 1995, the trial court rendered a Decision dismissing respondents' complaint a nd sustaining
the validity of the Deed of C onditional Sale and the Deed of Absolute Sale. The dispositive portion reads:

"WHEREFORE, Premises C onsidered, the C OMPLAINT is hereby ordered DISMISSED, without pronouncement
as to costs.

SO ORDERED."

In their appeal to the C ourt of Appeals, respondents alleged that the trial court clearly overlooked vital and
significant facts which, if considered, would alter the result. Likewise, the trial court erred in concluding that
the Deed of Absolute Sale forged by Medina transferred ownership to the vendees, being buyers in good
faith; and in finding that C laudia Arciaga consented to the sale of the lots to petitioner spouses. 2

Initially, the C ourt of Appeals in its Decision dated February 21, 2000 affirmed the trial court's ruling. But
upon respondents' motion for reconsideration, the Appellate C ourt reconsidered its Decision. In its Amended
Decision, it declared the Deed of Absolute Sale void, thus:

"WHEREFORE, Our decision dated February 21, 2000 is hereby SET ASIDE. The Deed of Absolute Sale dated
April 19, 1983 is hereby declared null and void. The Registry of Deeds for Makati C ity is hereby ordered to
cancel TC T Nos. 132942, 132943, 132945, 132946, 132948, 132950, 132951, 132953, 132954, 132955,
132958, 132962 and 132963 issued in the name of Jose Yason and to reinstate TC T No. 40913 in the name
of Emilio Arciaga.

SO ORDERED."

In reversing its own Decision, the Appellate C ourt held:

"There is no evidence showing that said July 2, 1979 Deed of Absolute Sale covering the subject property
was ever executed by the parties. The appellees themselves who were supposedly the vendees did not even
know of the existence of such sale. What the appellees were claiming was that they entrusted to one Jesus
Medina the original copies of the purported Deed of Absolute Sale dated April 19, 1983 and the owner's copy
of TC T No. 40913 together with the amount of P15,000.00 for capital gains tax and expenses for
registration.

x x x

It turned out that Medina did not use the Deed of Sale dated April 19, 1983 but fabricated a Deed of
Absolute Sale dated July 2, 1979 with a reduced consideration of P25,000.00.

x x x

Being a forged document, the July 2, 1979 Deed of Absolute Sale is indeed null and void.

It appears, however, that a Deed of C onditional Sale dated March 28, 1983 (Exh. 1, Record, p. 289) and a
Deed of Absolute Sale dated April 19, 1983 (Exh. 2, Record, p. 290) were purportedly executed by Emilio
Arciaga and the appellees and that the said property was allegedly sold for P265,000.00.
 x x x

The curious part about the controversial deeds is the date of their supposed execution, especially the date of
the Absolute Deed of Sale which coincides with the date of the death of C laudia Arciaga. Also intriguing is
the fact that only a thumbmark and not a signature of C laudia Arciaga was affixed on the supposed deeds,
when in fact she could definitely read and write.

Appellants claimed that their mother C laudia Rivera never gave her consent to the sale. They said that the
thumbmark of their mother C laudia Arciaga was allegedly fixed on the Deed of C onditional Sale, if indeed it
was prepared before the death of their mother on April 19, 1983, when she was already very ill and
bedridden and could not anymore give her consent thereto, and the Deed of Absolute Sale was
thumbmarked when she was already dead.

x x x

As between the testimony of the appellants and their sister Virginia Arciaga-Reyes, We are inclined to
believe the claim of the former that their mother C laudia Rivera Arciaga died at around 10:00 in the
morning.

x x x

The time when C laudia Rivera Arciaga actually died, to Us, is crucial if only to determine the cred ibility of
witnesses.

As between Virginia Arciaga Reyes and Jacklyn de Mesa, the latter is more credible. Ï‚ η αñrοblÎ µÅ¡ νι
r â€Ï…αl lÎ ±Ï‰l ιbrÎ ±rÿ

She did not have any interest in the controverted property, unlike the appellants and Virginia Reye s, who
are the children of C laudia Rivera Arciaga. The cardinal rule in the law of evidence is that the testimony
must not only proceed from the mouth of a credible witness but must also be credible in itself ( People v.
Serdan, G.R. 87318, September 2, 1992).

x x x

We certainly cannot believe the testimony of Virginia Arciaga Reyes that her mother C laudia went to the
house of Atty. Fresnedi for the execution of the Deed of C onditional Sale. A person who is physically fit to
travel can definitely write his signature, as only minimal effort is needed to perform this simple mechanical
act. But what appeared in the deed was only a purported thumb mark of C laudia. Even Virginia Reyes said
that her mother could write. Her testimony only supports the claim of the a ppellants that C laudia Rivera
Arciaga was already very ill and weak when the Deed of C onditional Sale was purportedly executed, and was
already dead when she was made to affix her thumb mark on the Deed of Absolute Sale.

x x x

In sum, the inconsistent testimonies of the appellee and his witnesses, particularly that of Virginia Arciaga
Reyes, clearly show that C laudia Rivera Arciaga did not voluntarily affix her thumb mark on the Deed of
C onditional Sale and Deed of Absolute Sale."

Hence, this Petition for Review on Certiorari alleging that the C ourt of Appeals erred in declaring the Deed of
Absolute Sale void for lack of consent on the part of C laudia Arciaga and because the same document was
forged by Medina.

The petition is impressed with merit.

The rule is that only questions of law may be raised in a Petition for Review on Certiorari; and that the
factual findings of the trial court, when adopted and confirmed by the C ourt of Appeals, are final and
conclusive on this C ourt. 3 However, there are exceptions, such as when the findings of the C ourt of Appeals
are contrary to those of the trial court, 4 as in this case.
In determining whether the Deed of Absolute Sale dated April 19, 1983 is valid, it must contain the essential
requisites of contracts, viz: (1) consent of the contracting parties; (2) object certain which is the subject
matter of the contract; and (3) cause of the obligation which is established. 5 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.6 Consent is manifested by the meeting of the offer and the acceptance upon the thing
and the cause which are to constitute the contract.7 To enter into a valid legal agreement, the parties
must have the capacity to do so.

The law presumes that every person is fully competent to enter into a contract until satisfactory proof to the
contrary is presented. The burden of proof is on the individual asserting a lack of capacit y to contract, and
this burden has been characterized as requiring for its satisfaction clear and convincing evidence .

The Appellate C ourt, in its Amended Decision, held that the Deed of Absolute Sale is void for lack of consent
on the part of C laudia Arciaga who could not have affixed her thumbmark thereon since she was very ill
then. In fact, she died a few hours thereafter.

Thus, the basic issue for our resolution is whether C laudia Arciaga voluntarily affixed her thumbmark on the
documents of sale.

Respondents contend that C laudia did not give her consent to the contracts of sale. Since she knew how to
read and write, she should have signed each document instead of merely affixing her thumbmark thereon.

Domingo Arciaga, one of the respondents, testified that her mother C laudia was 82 years old when she died
on April 19, 1983 due to "old age" and illness for four (4) months. On March 28, 1983, when the C onditional
Deed of Sale was allegedly executed, she was already very weak and thin and could no longer s peak.
C onsidering her physical condition, she could not have affixed her thumbmark on the C onditional Deed of
Sale that day.8

Domingo further testified that their mother C laudia, at the time of her death, was being attended to by his
sisters Juanita and Virginia Arciaga; that he saw Virginia holding the thumb of their mother to enable her to
affix her thumbmark on the Deed of Absolute Sale, then being held by Juanita, thus:

"Q: Now, you have examined the document entitled Deed of Sale dated April 19, 1983, when for the first
time did you see this document? chanrobl esvi rt u
al a
wl ibra
ry

A: When my mother died.

Q: When? chanrobl esvi rtualawli brary

A: April 19, 1983.

Q: At what particular occasion or will you please tell the Honorable C ourt the circumstances how you were
able to see this document on April 19, 1983? chanrobl esvi rt u
al a
wl ibra
ry

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

Q: Who is Virginia Arciaga? chanrobl esvir tualawl ibrary

A: My sister.

Q: How about Juanita Arciaga? chanrobl esv

i rt ua
l awlibrary

A: My sister also.
Q: How about Rogelio Arciaga? chanrobl esv
i rt ua
l awlibrary

A: I have also a brother named Rogelio Arciaga but the one I mentioned has the same name as my brother.

Q: After that what happened? chanrobl esvi rt ualawli b

r ary

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

Q: After that what happened next? chanrobl esvi rtualawli brary

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

Domingo's testimony was corroborated by his brother Felipe Arciaga who testified that their mother was
already dead when her thumbmark was affixed on the document of sale, thus:

"Q: Did you hear any conversation between Domingo and your sisters holding the document? chanrobl esvi rtualawl ibra
ry

A: Yes, sir.

Q: What was the conversation that you heard? chanrobl esvi rt ua

la
w library

A: My brother said that it should not be thumbmarked since my mother is already dead. My sisters Virginia
and Juanita replied that the thumb marking will no longer proceed." 10

Upon the other hand, petitioners maintain that C laudia voluntarily affixed her thumbmark on the Deeds of
C onditional and Absolute Sale which were notarized by Atty. Jaime Fresnedi. and Absolute Sale which were
notarized by Atty. Jaime Fresnedi. Virginia Arciaga Andres, daughter of C laudia, testified that she took care
of her mother. Five (5) months prior to the execution of the C onditional Deed of Sale on March 28, 1983,
her parents informed her and her siblings that they would sell their land. After the sale, her brother Felipe
Neri borrowed P50,000.00 from their father. Her father signed the two documents of sale, while her mother
affixed her thumbmark thereon. Then Atty. Jaime Fresnedi notarized the C onditional Deed of Sale in his
office, while the Deed of Absolute Sale was notarized in her house. Her brothers (respondents herein) were
all notified of the sale.11
ς η αñrο
bl εš νι
r â€Ï…αl lÎ ±Ï‰l ιbrÎ ±rÿ

Atty. Jaime Fresnedi testified that he notarized the subject documents and knew that C laudia affixed her
thumbmark thereon, thus:

"Q: What is the importance of the signatures in these two (2) documents? chanrobl esvi rtualawl ibrary

A: That the parties who executed these documents appeared before me, your Honor.

x x x

Q: And when did you notarize the said document, this Deed of Absolute Sale dated April 19, 1983? chanrobl esvi rt u
al a
wl ibra
ry

A: It was notarized in the same date.

Q: Where was it notarized? chanrobl esvi rtualawli brary

A: It was also notarized in my office.

A: Yes, sir.12
 x x x

Q: Do you know personally C laudia Arciaga, the wife of Emilio Arciaga? chanrobl esv
i rt ualawli b
r ary

A: No, I do not know her personally.

x x x

Q: Prior to the execution of this document, Absolute Deed of Sale dated April 19, 1983, have you not met
C laudia Rivera? chanrobl esv
i rt ua
l awlibrary

A: I cannot remember.

x x x

Q: When you notarized this document on April 19, 1983, did you talk to C laudia Rivera? chanrobl esv
i rt ua
l awlibrary

A: I cannot remember. 13

x x x

C OURT:

Q: Did you ascertain whether the person who affixed that thumbmark was really C LAUDIA ARC IAGA? chanroblesvirt ualawli b
r ary

A: Yes, your Honor.

Q: What means did you take to ascertain that the one who affixed that thumbmark was C LAUDIA
ARC IAGA? chanro
bl e
svir tualawl ibrary

A: Because, your Honor, when there is a party, not necessarily your Honor in this case, whenever a party
would request me to prepare a document and notarize such document, I asked his name and he answered.
Let us say for example, this Mr. dela C ruz, he says he is Mr. dela C ruz or Mrs. Arciaga. That thru that
introduction I knew that they were the ones who affixed their signatures or affix th eir thumbmarks.

Q: In this particular case, did you do that? chanrobl esvi rt ua

l awlibrary

A: Yes, your Honor."14

The C ourt of Appeals, reversing the trial court, held that respondents were able to prove that C laudia
Arciaga could not have affixed her thumbmark voluntarily on the C onditional Deed of Sale as "she was
already very ill and bedridden and could not anymore give her consent thereto;" and that "the Absolute
Deed of Sale was thumbmarked when she was already dead."

While it is true that C laudia was sick and bedridden, respondents failed to prove that she could no longer
understand the terms of the contract and that she did not affix her thumbmark thereon. Unfortunat ely, they
did not present the doctor or the nurse who attended to her to confirm that indeed she was mentally and
physically incapable of entering into a contract. Mere weakness of mind alone, without imposition of fraud, is
not a ground for vacating a contract.15 Only if there is unfairness in the transaction, such as gross
inadequacy of consideration, the low degree of intellectual capacity of the party, may be taken into
consideration for the purpose of showing such fraud as will afford a ground for annulling a contract. 16Hence,
a person is not incapacitated to enter into a contract merely because of advanced years or by reason of
physical infirmities, unless such age and infirmities impair his mental faculties to the extent that he is unable
to properly, intelligently and fairly understand the provisions of said contract. Respon dents failed to show
that C laudia was deprived of reason or that her condition hindered her from freely exercising her own will at
the time of the execution of the Deed of C onditional Sale.
Also, it is of no moment that C laudia merely affixed her thumbmark on the document. The signature may be
made by a person's cross or mark even though he is able to read and write and is valid if the deed is in all
other respects a valid one. 17

Significantly, there is no evidence showing that C laudia was forced or coerced in affixing her thumbmark on
the Deed of C onditional Sale.

Respondents insist that their mother died in the morning of April 19, 1983, hence, she could no longer aff ix
her thumbmark on the Deed of Absolute Sale. Petitioners, however, maintain that she died in the evening of
that day and that she affixed her thumbmark on the deed in the morning of that same day.

Respondents should have offered in evidence the C ertifica te of Death of C laudia to show the exact date and
time of her death. Again, they should have presented the attending physician to testify whether or not
C laudia could still affix her thumbmark then.

As earlier mentioned, the burden is on the respondents to prove the lack of capacity on the part of C laudia
to enter into a contract. And in proving this, they must offer clear and convincing evidence. This they failed
to do.

The C ourt of Appeals also held that there is inconsistency in the testimonies of Virgin ia Arciaga and Atty.
Jaime Fresnedi. While Virginia testified that the Deed of Absolute Sale was notarized in her house where
C laudia lived, Atty. Fresnedi declared on the witness stand that he notarized the document in his office. The
Appellate C ourt concluded that such inconsistency clearly shows that C laudia did not voluntarily affix her
thumbmark on the document of absolute sale.

Records disclose, however, that when Atty. Fresnedi testified in court, nine (9) years had passed from the
time he notarized the Deed of Absolute Sale. C onsidering the length of time that passed and the numerous
documents he must have notarized, his failure to remember exactly where he notarized the contract of sale
is understandable. Thus, we cannot sustain the finding and conclusion of the C ourt of Appeals on this
point.
ς η α ñrο
bl εš νι
r â€Ï…αl lÎ ±Ï‰l ιbrÎ ±rÿ

In Chilianchin v. Coquinco,18 this C ourt held that a notarial document must be sustained in full force and
effect so long as he who impugns it does not present strong, complete, and conclusive proof o f its falsity or
nullity on account of some flaws or defects provided by law. Here, respondents failed to present such proof.

It bears emphasis that a notarized Deed of Absolute Sale has in its favor the presumption of regularity, and
it carries the evidentiary weight conferred upon it with respect to its execution. 19

All told, we are convinced and so hold that there was consent on the part of C laudia Arciaga when she
executed the C onditional Deed of Sale and the Deed of Absolute Sale being assailed by respondents. These
documents, therefore, are valid.

WHEREFORE, the challenged Decision of the C ourt of Appeals in C A -G.R. C V No. 55668 is REVERSED. The
Decision of the RTC , Branch 62, Makati C ity dismissing respondents' complaint is AFFIRMED.

SO ORDERED.

Panganiban, (Chairman), Corona, Carpio-Morales, and Garcia, JJ., concur.

Endnotes:
 FIRST DIVISION

[G.R. NO. 145330 October 14, 2005]

SPOUSES GOMER and LEONOR RAMOS, Petitioners, v. SPOUSES SANTIAGO and MINDA HERUELA,
SPOUSES CHERRY and RAYMOND PALLORI, Respondents.

DE CISIO N

CARPIO, J.:

The C ase

Before the C ourt is a Petition for Review 1 assailing the Decision 2 dated 23 August 2000 and the Order dated
20 September 2000 of the Regional Trial C ourt ("trial court") of Misamis Oriental, Branch 21, in C ivil C ase
No. 98-060. The trial court dismissed the plaintiffs' action for recovery of ownership with damages.

The Antecedent Facts

The spouses Gomer and Leonor Ramos ("spouses Ramos") own a parcel of land, consisting of 1,883 square
meters, covered by Transfer C ertificate of Title ("TC T") No. 16535 of the Register of Deeds of C agayan de
Oro C ity. On 18 February 1980, the spouses Ramos made an agreement with the spouses Santiago and
Minda Heruela ("spouses Heruela") 3 covering 306 square meters of the land ("land"). According to the
spouses Ramos, the agreement is a contract of conditional sale. The spouses Heruela allege that the
contract is a sale on installment basis.

On 27 January 1998, the spouses Ramos filed a complaint for Recovery of Ownership with Damages against
the spouses Heruela. The case was docketed as C ivil C ase No. 98-060. The spouses Ramos allege that out of
the P15,3004 consideration for the sale of the land, the spouses Heruela paid only P4,000. The last
installment that the spouses Heruela paid was on 18 December 1981. The spouses Ramos assert that the
spouses Heruela's unjust refusal to pay the balance of the purchase price caused the cancel lation of the
Deed of C onditional Sale. In June 1982, the spouses Ramos discovered that the spouses Heruela were
already occupying a portion of the land. C herry and Raymond Pallori ("spouses Pallori"), daughter and son -
in-law, respectively, of the spouses Heruela, erected another house on the land. The spouses Heruela and
the spouses Pallori refused to vacate the land despite demand by the spouses Ramos.

The spouses Heruela allege that the contract is a sale on installment basis. They paid P2,000 as down
payment and made the following installment payments:

31 March 1980 P

200
2 May 1980 P (for April and May 1980)

400
20 June 1980 P (for June 1980)

200
8 October 1980 P (for July, August and part of
September 1980)
500
5 March 1981 P (for October and November 1980)

400
18 December 1981 P (for December 1980 and part of
January 1981)
300

The spouses Heruela further allege that the 306 square meters specified in the contract was reduced to 282
square meters because upon subdivision of the land, 24 square meters became part of the road. The
spouses Heruela claim that in March 1982, they expr essed their willingness to pay the balance of P11,300
but the spouses Ramos refused their offer.

The Ruling of the Trial Court

In its Decision5 dated 23 August 2000, the trial court ruled that the contract is a sale by installment. The
trial court ruled that the spouses Ramos failed to comply with Section 4 of Republic Act No. 6552 ("RA
6552"),6 as follows:

SEC . 4. In case where less than two years of installments were paid, the seller shall give the buyer a grace
period of not less than sixty days from the date the installment became due. If the buyer fails to pay the
installments due at the expiration of the grace period, the seller may cancel the contract after thirty days
from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a
notarial act.

The dispositive portion of the Decision reads:

WHEREFORE, the complaint is hereby dismissed and plaintiff[s] are ordered to execute the corresponding
Deed of Sale in favor of defendants after the latter have paid the remaining balance of Eleven Thousand and
Three Hundred Pesos (P11,300.00).

Plaintiffs are further ordered to pay defendants the sum of P20,000.00, as Attorney's fees and P10,000.00
as litigation expenses.

SO ORDERED.7

In an Order 8 dated 20 September 2000, the trial court denied the spouses Ramos' motion for
reconsideration.

Hence, this petition.

The Issues

The spouses Ramos raise the following issues:

I. Whether RA 6552 is applicable to an absolute sale of land;

II. Whether Articles 1191 and 1592 of the C ivil C ode are applicable to the present case;

III. Whether the spouses Ramos have a right to cancel the s ale;

IV. Whether the spouses Heruela have a right to damages. 9

 The Ruling of the Court

The petition is partly meritorious.

The Agreement is a Contract to Sell

In its Decision, the trial court ruled on whether the contract made by the parties is a conditional sale or a
sale on installment. The spouses Ramos' premise is that since the trial court ruled that the contract is a sale
on installment, the trial court also in effect declared that the sale is an absolute sale. The spouses Ramos
allege that RA 6552 is not applicable to an absolute sale.

Article 1458 of the C ivil C ode provides that a contract of sale may be absolute or conditional. A contract of
sale is absolute when title to the property passes to the vendee upon delivery of the thing sold. 10 A deed of
sale is absolute when there is no stipulation in the contract that title to the property remains with the seller
until full payment of the purchase price. 11 The sale is also absolute if there is no stipulation giving the
vendor the right to cancel unilaterally the contract the moment the vendee fails to pay within a fixed
period.12 In a conditional sale, as in a contract to sell, ownership remains with the vendor and does not pass
to the vendee until full payment of the purchase price. 13 The full payment of the purchase price partakes of
a suspensive condition, and non-fulfillment of the condition prevents the obligation to sell from arising. 14

In this case, the agreement of the parties is embodied in a one -page, handwritten document. 15 The
document does not contain the usual terms and conditions of a formal dee d of sale. The original document,
elevated to this C ourt as part of the Records, is torn in part. Only the words "LMENT BASIS" is legible on the
title. The names and addresses of the parties and the identity of the property cannot be ascertained. The
agreement only provides for the following terms of the sale:

TERM[S] OF SALE:

PRIC E PER SQM P50.00 X 306 SQM P 15,300.00

DOWN PAYMENT (TWO THOUSAND PESOS) ' 2,000.00

BALANC E PAYABLE AT MINIMUM OF P200.00 P 13,300.00

PER MONTH UNTIL FULLY PAID =======

In Manuel v. Rodriguez, et al.,16 the C ourt ruled that to be a written contract, all the terms must be in
writing, so that a contract partly in writing and partly oral is in legal effect an oral contract. The C ourt
reiterated the Manuel ruling in Alfonso v. Court of Appeals:17

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

The records show that the spouses Heruela did not immediately take actual, physical possession of the land.
According to the spouses Ramos, in March 1981, they allowed the niece of the spouses Heruela to occupy a
portion of the land. Indeed, the spouses Ramos alleged that they only discovered in June 1982 that the
spouses Heruela were already occupying the land. In their answer to the complaint, the spouses Heruela and
the spouses Pallori alleged that their occupation of the land is lawful because having made partial payments
of the purchase price, "they already considered themselves owners" of the land. 18C learly, there was no
transfer of title to the spouses Heruela. The spouses Ramos retained their ownership of the land. This only
shows that the parties did not intend the transfer of ownership until full payment of the purchase price.
 RA 6552 is the Applicable Law

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

Articles 119119 and 159220 of the C ivil C ode are applicable to contracts of sale. In contracts to sell, RA 6552
applies. In Rillo v. Court of Appeals,21 the C ourt declared:

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

Sections 3 and 4 of RA 6552 provide:

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

(a) To pay, without additional interest, the unpaid installments due within the total grace period earned by
him, which is hereby fixed at the rate of one month grace period for every one year of installment payments
made: Provided, That this right shall be exercised by the buyer only once in every five years of the life of
the contract and its extensions, if any.

(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments
on the property equivalent to fifty per cent of the total payments made and, after five years of installments,
an additional five per cent every year but not to exceed ninety per cent of the total payments
made: Provided, That the actual cancellation of the contract shall take place after thirty days from receipt by
the buyer of the notice of cancellation or the demand for rescission of the contra ct by a notarial act and
upon full payment of the cash surrender value to the buyer.

Down payments, deposits or options on the contract shall be included in the computation of the total
number of installments made.

Sec. 4. In case where less than two years of installments were paid, the seller shall give the buyer a grace
period of not less than sixty days from the date the installment became due. If the buyer fails to pay the
installments due at the expiration of the grace period, the seller may cancel the contract after thirty days
from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a
notarial act.

In this case, the spouses Heruela paid less than two years of installments. Thus, Section 4 of RA 6552
applies. However, there was neither a notice of cancellation nor demand for rescission by notarial act to the
spouses Heruela. In Olympia Housing, Inc. v. Panasiatic Travel Corp.,22 the C ourt ruled that the vendor
could go to court to demand judicial rescission in lieu of a notarial act of rescission. However, an action for
reconveyance is not an action for rescission. The C ourt explained in Olympia:

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

xxx

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

In the present case, there being no valid rescission of the contract to sell, the action for reconveyance is
premature. Hence, the spouses Heruela have not lost the statutory grace period within which to pay. The
trial court should have fixed the grace period to sixty days conformably with Section 4 of RA 6552.

The spouses Heruela are not entirely fault-free. They have been remiss in performing their obligation. The
trial court found that the spouses Heruela offered once to pay the balance of the purchase price. However,
the spouses Heruela did not consign the payment during the pendency of the case. In the meanwhile, the
spouses Heruela enjoyed the use of the land.

For the breach of obligation, the court, in its discretion, and applying Article 2209 of the C ivil C ode, 24may
award interest at the rate of 6% per annum on the amount of damages. 25 The spouses Heruela have been
enjoying the use of the land since 1982. In 1995, they allowed their daughter and son -in-law, the spouses
Pallori, to construct a house on the land. Under the circumstances, the C ourt deems it proper to award
interest at 6% per annum on the balance of the purchase price.

The records do not show when the spouses Ramos made a demand from the spouses Heruela for payment
of the balance of the purchase price. The complaint only alleged that the spouses Heruela's "unjust refusal
to pay in full the purchase price xxx has caused the Deed of C onditional Sale to be rescinded, revoked and
annulled."26 The complaint did not specify when the spouses Ramos made the demand for payment. For
purposes of computing the legal interest, the reckoning period should be the filing on 27 January 1998 of
the complaint for reconveyance, which the spouses Ramos erroneously considered an action for rescission of
the contract.

The C ourt notes the reduction of the land area from 306 square meters to 282 square meters. Upon
subdivision of the land, 24 square meters became part of the road. However, Sa ntiago Heruela expressed
his willingness to pay for the 306 square meters agreed upon despite the reduction of the land area. 27Thus,
there is no dispute on the amount of the purchase price even with the reduction of the land area.

On the Award of Attorney's Fees and Litigation Expenses

The trial court ordered the spouses Ramos to pay the spouses Heruela and the spouses Pallori the amount
of P20,000 as attorney's fees and P10,000 as litigation expenses. Article 2208 28 of the C ivil C ode provides
that subject to certain exceptions, attorney's fees and expenses of litigation, oth er than judicial costs,
cannot be recovered in the absence of stipulation. None of the enumerated exceptions applies to this case.
Further, the policy of the law is to put no premium on the right to litigate. 29 Hence, the award of attorney's
fees and litigation expenses should be deleted.

WHEREFORE, we AFFIRM the Decision dated 23 August 2000 of the Regional Trial C ourt of Misamis
Oriental, Branch 21, dismissing the complaint for Recovery of Ownership with Damages, with the
following MODIFICATION:

1. The spouses Heruela shall pay the spouses Ramos P11,300 as balance of the purchase price plus interest
at 6% per annum from 27 January 1998. The spouses Heruela shall pay within 60 days from finality of this
Decision;

2. Upon payment, the spouses Ramos shall execute a deed of absolute sale of the land and deliver th e
certificate of title in favor of the spouses Heruela;

3. In case of failure to thus pay within 60 days from finality of this Decision, the spouses Heruela and the
spouses Pallori shall immediately vacate the premises without need of further demand, and t he down
payment and installment payments of P4,000 paid by the spouses Heruela shall constitute rental for the
land;
4. The award of P20,000 as attorney's fees and P10,000 as litigation expenses in favor of the spouses
Heruela and the spouses Pallori is deleted.

SO ORDERED.
 SECOND DIVISION

[G.R. NO. 145470 December 9, 2005]

SPS. LUIS V. CRUZ and AIDA CRUZ, Petitioners, v. SPS. ALEJANDRO FERNANDO, SR., and RITA
FERNANDO, Respondents.

DE CISIO N

AUSTRIA-MARTINEZ, J.:

For resolution is a Petition for Review on Certiorari under Rule 45 of the Rules of C ourt, assailing the
Decision1 dated October 3, 2000 of the C ourt of Appeals (C A) in C A -G.R. C V No. 61247, dismissing
petitioners' appeal and affirming the decision of the Regional Trial C ourt (RTC ) of Malolos, Bulacan, Branch
79, in C ivil C ase No. 877-M-94.

The antecedent facts are as follows:

Luis V. C ruz and Aida C ruz (petitioners) are occupants of the front portion of a 710 -square meter property
located in Sto. C risto, Baliuag, Bulacan. On October 21, 1994, spouses Alejandro Fernando, Sr. and Rita
Fernando (respondents) filed before the RTC a complaint for accion publiciana against petitioners,
demanding the latter to vacate the premises and to pay the amount of P500.00 a month as reasonable
rental for the use thereof. Respondents alleged in their complaint that: (1) they are owner s of the property,
having bought the same from the spouses C lodualdo and Teresita Glorioso (Gloriosos) per Deed of Sale
dated March 9, 1987; (2) prior to their acquisition of the property, the Gloriosos offered to sell to petitioners
the rear portion of the property but the transaction did not materialize due to petitioners' failure to exercise
their option; (3) the offer to sell is embodied in a Kasunduan dated August 6, 1983 executed before the
Barangay C aptain; (4) due to petitioners' failure to buy the allotted portion, respondents bought the whole
property from the Gloriosos; and (5) despite repeated demands, petitioners refused to vacate the property. 2

Petitioners filed a Motion to Dismiss but the RTC dismissed it for lack of merit in its Order dated March 6,
1995.3 Petitioners then filed their Answer setting forth the affirmative defenses that: (1) the Kasunduanis a
perfected contract of sale; (2) the agreement has already been "partially consummated" as they already
relocated their house from the rear portion of the lot to the front portion that was sold to them; (3) Mrs.
Glorioso prevented the complete consummation of the sale when she refused to have the exact boundaries
of the lot bought by petitioners surveyed, and the existing survey was made without their knowl edge and
participation; and (4) respondents are buyers in bad faith having bought that portion of the lot occupied by
them (petitioners) with full knowledge of the prior sale to them by the Gloriosos. 4

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

PREMISES C ONSIDERED, the herein plaintiffs was able to prove by preponderance of evidence the case
of accion publiciana, against the defendants and judgment is hereby rendered as follows:

1. Ordering defendants and all persons claiming under them to vacate placefully (sic) the premises in
question and to remove their house therefore (sic);

2. Ordering defendants to pay plaintiff the sum of P500.00 as reasonable rental per month beginning
October 21, 1994 when the case was filed before this C ourt and every month thereafter until they vacate
the subject premises and to pay the costs of suit.
The counter claim is hereby DISMISSED for lack of merit.

SO ORDERED.5

Petitioners appealed the RTC decision but it was affirmed by the C A per its Decision dated October 3, 2000.

Hence, the present petition raising the following issues:

1. Whether the Honorable C ourt of Appeals committed an error of law in holding that the Agreement
(Kasunduan) between the parties was a "mere offer to sell," and not a perfected "C ontract of Purchase and
Sale"?chanrobl esvir tualawl ibrary

2. Whether the Honorable C ourt of Appeals committed an error of law in not holding that where the parties
clearly gave the petitioners a period of time within which to pay the price, but did not fix said period,
the remedy of the vendors is to ask the C ourt to fix the period for the payment of the price, and not an
"accion publiciana"? chanrobl esvi rtualawli brary

3. Whether the Honorable C ourt of Appeals committed an error of law in not ordering re spondents to at least
deliver the "back portion" of the lot in question upon payment of the agreed price thereof by petitioners,
assuming that the Regional Trial C ourt was correct in finding that the subject matter of the sale was said
"back portion", and not the "front" portion of the property? chanrobl esvir tualawli brary

4. Whether the Honorable C ourt of Appeals committed an error of law in affirming the decision of the trial
court ordering the petitioners, who are possessors in good faith, to pay rentals f or the portion of the lot
possessed by them? 6

The RTC dwelt on the issue of which portion was being sold by the Gloriosos to petitioners, finding that it
was the rear portion and not the front portion that was being sold; while the C A construed the Kasunduan as
a mere contract to sell and due to petitioners' failure to pay the purchase price, the Gloriosos were not
obliged to deliver to them (petitioners) the portion being sold.

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

The resolution of the issues in this case principally is dependent on the interpretation of the Kasunduandated
August 6, 1983 executed by petitioners and the Gloriosos. The Kasunduan provided the following pertinent
stipulations:

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

b. Na sa titulong papapanaugin ang magiging kabuuang sukat na mauukol sa mga ipinagsusumbong ay 223
metrong parisukat at ang 10 metro nito ay bilang kaloob ng mga maysumbong sa mg a Ipinagsusumbong na
bahagi ng right of way;

c. Na ang right of way ay may luwang na 1.75 meters magmula sa daang Lopez Jaena patungo sa likuran
ng lote na pagtatayuan ng bahay ng mga Ipinagsusumbong na kanyang bibilhin ;

d. Na ang gugol sa pagpapasukat at pagpapanaog ng titulo ay paghahatian ng magkabilang panig na ang

panig ay magbibigay ng halagang hindi kukulanging sa halagang tig -AAPAT NA DAANG PISO (P400.00);

e. Na ang ipinagsusumbong ay tiyakang ililipat ang bahay sa bahaging kanilang nabili o mabibili sa buwan
ng Enero 31, 1984;7 (Emphasis supplied) Ï‚ rα lÎ ±Ï‰lÎ ¹
brαrÿ
Under Article 1458 of the C ivil C ode, a contract of sale is a contract by which one of the contracting parties
obligates himself to transfer the ownership and to deliver a determinate thing, and the other to pay therefor
a price certain in money or its equivalent. Article 1475 of the C ode further provides that the contract of sale
is perfected at the moment there is meeting of the minds upon the thing which is the object of the contract
and upon the price. From that moment the parties may reciprocally deman d performance subject to the
provisions of the law governing the form of contracts.

In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold, as
distinguished from a contract to sell where ownership is, by a greement, reserved in the vendor and is not to
pass to the vendee until full payment of the purchase price. 8 Otherwise stated, in a contract of sale, the
vendor loses ownership over the property and cannot recover it until and unless the contract is resolved or
rescinded; whereas, in a contract to sell, title is retained by the vendor until full payment of the price. In the
latter contract, payment of the price is a positive suspensive condition, failure of which is not a breach but
an event that prevents the obligation of the vendor to convey title from becoming effective.

The Kasunduan provides for the following terms and conditions: (a) that the Gloriosos agreed to sell to
petitioners a portion of the property with an area of 213 meters at the price of P40.00 per square meter; (b)
that in the title that will be caused to be issued, the aggregate area is 223 square meters with 10 meters
thereof serving as right of way; (c) that the right of way shall have a width of 1.75 meters from Lopez Jaena
road going towards the back of the lot where petitioners will build their house on the portion of the lot that
they will buy; (d) that the expenses for the survey and for the issuance of the title will be divided between
the parties with each party giving an amount of no less than P400.00; and (e) that petitioners will definitely
relocate their house to the portion they bought or will buy by January 31, 1984.

The foregoing terms and conditions show that it is a contract to sell and not a contract of sale. For one, the
conspicuous absence of a definite manner of payment of the purchase price in the agreement confirms the
conclusion that it is a contract to sell. This is because the manner of payment of the purchase price is
an essential element before a valid and binding contract of sale can exist .9Although the C ivil C ode
does not expressly state that the minds of the parties must also meet on the terms or manner of payment of
the price, the same is needed, otherwise there is no sale. 10 As held in Toyota Shaw, Inc. v. Court of
Appeals,11 a definite agreement on the manner of payment of the price is an essential element in the
formation of a binding and enforceable contract of sale.

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

For another, the telltale provision in the Kasunduan that: "Na pumayag ang mga maysumbong
na pagbilhan ang mga ipinagsumbong na bahagi ng lupa at ang ipagbibili ay may sukat na 213 metrong
parisukat humigit kumulang sa halagang P40.00 bawat metrong parisukat," simply means that the Gloriosos
only agreed to sell a portion of the property and that the portion to be sold measures 213 square meters.

Another significant provision is that which reads: "Na ang ipinagsusumbong ay tiyakang ililipat ang bahay sa
bahaging kanilang nabili o mabibili sa buwan ng Enero 31, 1984." The foregoing indicates that a contract of
sale is yet to be consummated and ownership of the property remained in the Gloriosos. Othe rwise, why
would the alternative term "mabibili" be used if indeed the property had already been sold to petitioners.

In addition, the absence of any formal deed of conveyance is a strong indication that the parties did not
intend immediate transfer of ownership.12

Normally, in a contract to sell, the payment of the purchase price is the positive suspensive condition upon
which the transfer of ownership depends. 13 The parties, however, are not prohibited from stipulating other
lawful conditions that must be fulfilled in order for the contract to be converted from a contract to sell or at
the most an executory sale into an executed one. 14

In the present case, aside from the payment of the purchase price, there existed another suspens ive
condition, i.e.: that petitioners will relocate their house to the portion they bought or will buy by January 31,
1984.
Petitioners failed to abide by the express condition that they should relocate to the rear portion of the
property being bought by January 31, 1984. Indeed, the Kasunduan discloses that it is the rear portion that
was being sold by the Gloriosos, and not the front portion as petitioners stubbornly claim. This is evident
from the provisions establishing a right of way from Lopez Jaena r oad going towards the back of the lot, and
requiring them to relocate their house to the portion being sold by January 31, 1984. Petitioners are
presently occupying the front portion of the property. Why the need for a right of way and for petitioners to
relocate if the front portion on which their house stands is the portion being sold?chanrobl esvir t u
al a
wl ibra
ry

This condition is a suspensive condition noncompliance of which prevented the Gloriosos from proceeding
with the sale and ultimately transferring title to petitioners; and the Kasunduan from having obligatory
force.15 It is established by evidence that the petitioners did not transfer their house located in the front
portion of the subject property to the rear portion which, under the Kasunduan, they intended to buy. Thus,
no obligation arose on the part of the Gloriosos to consider the subject property as having been sold to
petitioners because the latter's non-fulfillment of the suspensive condition rendered the contract to sell
ineffective and unperfected.

Petitioners admit that they have not paid a single centavo to the Gloriosos. However, petitioners argue that
their nonpayment of the purchase price was due to the fact that there is yet to be a survey made of the
property. But evidence shows, and petitioners do not dispute, that as early as August 12, 1983, or six days
after the execution of the Kasunduan, a survey has already been made and the property was subdivided into
Lot Nos. 565-B-1 (front portion) and 565-B-2 (rear portion), with Lot No. 565-B-2 measuring 223 square
meters as the portion to be bought by petitioners.

Petitioners question the survey made, asserting that it is a "table survey" made wi thout their knowledge and
participation. It should be pointed out that the Kasunduan merely provides that the expenses for the survey
will be divided between them and that each party should give an amount of no less than P400.00. Nowhere
is it stated that the survey is a condition precedent for the payment of the purchase price.

Petitioners further claim that respondents have no cause of action against them because their obligation to
pay the purchase price did not yet arise, as the agreement did not provid e for a period within which to pay
the purchase price. They argue that respondents should have filed an action for specific performance or
judicial rescission before they can avail of accion publiciana.

Notably, petitioners never raised these arguments dur ing the proceedings before the RTC . Suffice it to say
that issues raised for the first time on appeal and not raised timely in the proceedings in the lower court are
barred by estoppel. 16 Matters, theories or arguments not brought out in the original proceedings cannot be
considered on review or appeal where they are raised for the first time. To consider the alleged facts and
arguments raised belatedly would amount to trampling on the basic principles of fair play, justice and due
process.17

Moreover, it would be inutile for respondents to first petition the court to fix a period for the performance of
the contract. In the first place, respondents are not parties to the Kasunduan between petitioners and the
Gloriosos, and they have no standing whatsoever to seek such recourse. In the second place, such recourse
properly pertains to petitioners. It was they who should have sought the court's intercession. If petitioners
believed that they have an actionable contract for the sale of the property, prudence and common sense
dictate that they should have sought its enforcement forthwith. Instead, petitioners whiled away their time.

Furthermore, there is no need for a judicial rescission of the Kasunduan for the simple reason that the
obligation of the Gloriosos to transfer the property to petitioners has not yet arisen. There can be no
rescission of an obligation that is nonexistent, considering that the suspensive conditions therefor have not
yet happened.18

Hence, petitioners have no superior right of ownership or possession to speak of. Their occupation of the
property was merely through the tolerance of the owners. Evidence on record shows that petitioners and
their predecessors were able to live and build their house on the property through the permission and
kindness of the previous owner, Pedro Hipolito, who was their relative, 19 and subsequently, Teresita
Glorioso, who is also their relative. They have no title or, at the very least, a contract of lease over the
property. Based as it was on mere tolerance, petitioners' possession could neither ripen into ownersh ip nor
operate to bar any action by respondents to recover absolute possession thereof. 20
There is also no merit to petitioners' contention that respondents are b uyers in bad faith. As explained
in Coronel v. Court of Appeals:

In a contract to sell, there being no previous sale of the property, a third person buying such property
despite the fulfillment of the suspensive condition such as the full payment of the pu rchase 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-seller's title per se, but the latter, of
course, may be sued for damages by the intending buyer. 21 (Emphasis supplied) Ï‚ rα l αωlÎ ¹
brαrÿ

A person who occupies the land of another at the latter's forbearance or permission without any contract
between them is necessarily bound by an implied promise that he will vacate upon demand. 22

C onsidering that petitioners' continued possession of the property has already been rendered unlawful, they
are bound to pay reasonable rental for the use and occupation thereof, which in this case was appr opriately
pegged by the RTC at P500.00 per month beginning October 21, 1994 when respondents filed the case
against them until they vacate the premises.

Finally, petitioners seek compensation for the value of the improvements introduced on the property. Ag ain,
this is the first time that they are raising this point. As such, petitioners are now barred from seeking such
relief.23

WHEREFORE, the petition is DENIED. The Decision of the C ourt of Appeals dated October 3, 2000 in C A -
G.R. C V No. 61247 is AFFIRMED.

SO ORDERED.

Endnotes:
 SECOND DIVISION

G.R. No. 166790, Novembe r 19, 2014

JUAN P. CABRERA, Petitioner, v. HENRY YSAAC, Respondent.

DE CISIO N

LEONEN, J.:

Unless all the co-owners have agreed to partition their property, none of them may sell a definite
portion of the land. The co-owner may only sell his or her proportionate interest in the co-ownership. A
contract of sale which purports to sell a specific or definite portion of unpartitioned land is null and void ab
initio.

In this petition for review on certiorari, 1 Juan P. C abrera assails the C ourt of Appeals' decision dated June
19, 20032 and resolution dated January 3, 2005. 3 These decisions ruled that a specific performance to
execute a deed of sale over a parcel of land is not available as a relief for Juan C abrera.

It appears that the heirs of Luis and Matilde Ysaac co-owned a 5,517-square-meter parcel of land located in
Sabang, Naga C ity, covered by Original C ertificate of Title (OC T) No. 506. 4 One of the co-owners is
respondent, Henry Ysaac.

Henry Ysaac leased out portions of the property to several lessees. Juan C abrera, one of the lessees, leased
a 95-square-meter portion of the land beginning in 1986. 5 chanRobl esvi rt ualLawli b
r ary

On May 6, 1990, Henry Ysaac needed money and offered to sell the 95 -square-meter piece of land to Juan
C abrera.6 He told Henry Ysaac that the land was too small for his needs because there was no parking space
for his vehicle.7
chanRobl esvi rtualLawlibrary

In order to address Juan C abrera's concerns, Henry Ysaac expanded his offer to include the two adjoining
lands that Henry Ysaac was then leasing to the Borbe family and the Espiritu family. Those three parcels of
land have a combined area of 439-square-meters. However, Henry Ysaac warned Juan C abrera that the sale
for those two parcels could only proceed if the two families agree to it.

Juan C abrera accepted the new offer. Henry Ysaac and Juan C abrera settled on the price of P250.00 per
square meter, but Juan C abrera stated that he could only pay in full after his retirement on June 15,
1992.8 Henry Ysaac agreed but demanded for an initial payment of P1,500.00, which Juan C abrera paid. 9 chanRobl esvi rtualLawli b
r ary

According to Juan C abrera, Henry Ysaac informed him that the Borbe family and the Espiritu family were no
longer interested in purchasing the properties they were leasing. Since Mamerta Espiritu of the Espiritu
family initially considered purchasing the property and had made an initial deposit for it, Juan C abrera
agreed to reimburse this earlier payment. On June 9, 1990, Juan C abrera paid the amount of
P6,100.00.10 Henry Ysaac issued a receipt for this amount. P3,100.00 of the'amount paid was reimbursed to
Mamerta Espiritu and, in turn, she gave Juan C abrera the receipts issued to her by Henry Ysaac. 11 chanRobl esvi rtualLawli brary

On June 15, 1992, Juan C abrera tried to pay the balance of the purchase price to Henry Ysaac. However, at
that time, Henry Ysaac was in the United States. The only person in Henry Ysaac's residence was his wife.
The wife refused to accept Juan C abrera's payment. 12 chanRobl esvi rtualLawli brary

Sometime in September 1993, Juan C abrera alleged that Henry Ysaac approached him, requesting to reduce
the area of the land subject of their transaction. Part of the 439-square-meter land was going to be made
into a barangay walkway, and another part was being occupied by a family that was difficult to eject. 13 Juan
C abrera agreed to the proposal. The land was surveyed again. According to Juan C abrera, Henry Ysaac
agreed to shoulder the costs of the resurvey, which Juan C abrera advanced in the amount of P3 ,000.00.

The resurvey shows that the area now covered by the transaction was 321 square meters. 14 Juan C abrera
intended to show the sketch plan and pay the amount due for the payment of the lot. However, on that day,
Henry Ysaac was in Manila. Once more, Henry Ysaac's wife refused to receive the payment because of lack
of authority from her husband. 15 chanRobl esvi rt ual L
awl ibrary

On September 21, 1994, Henry Ysaac's counsel, Atty. Luis Ruben General, wrote a letter addressed to Atty.
Leoncio C lemente, Juan C abrera's counsel. 16 Atty. General informed Atty. C lemente that his client is formally
rescinding the contract of sale because Juan C abrera failed to pay the balance of the purchase price of the
land between May 1990 and May 1992. The letter also stated that Juan C abrera's initial payment of
P1,500.00 and the subsequent payment of P6,100.00 were going to be applied as payment for overdue rent
of the parcel of land Juan C abrera was leasing from Henry Ysaac. 17 The letter also denied the allegation of
Juan C abrera that Henry Ysaac agreed to shoulder the costs of the resurveying of the property. 18 chanRobl esvi rt ualLawlibrary

Juan C abrera, together with his uncle, Delfin C abrera, went to Henry Ysaac's house on September 16, 1995
to settle the matter.19 Henry Ysaac told Juan C abrera that he could no longer sell the property because the
new administrator of the property was his brother, Franklin Ysaac. 20 chanRobl esvi rt ualLawlibrary

Due to Juan C abrera's inability to enforce the contract of sale between him and Henry Ysaac, he decided to
file a civil case for specific performance on September 20, 1995. 21 Juan C abrera prayed for the execution of
a formal deed of sale and for the transfer of the title of the property in his name. 22 He tendered the sum of
P69,650.00 to the clerk of court as payment of the remaining balance of the original sale price. 23 On
September 22, 1995, a notice of lis pendens was annotated on OC T No. 560. 24 chanRobl esvi rt ual L
awl ibra
ry

In his answer with counterclaim, 25 Henry Ysaac prayed for the dismissal of Juan C abrera's complaint. 26He
also prayed for compensation in the form of moral damages, attorney's fees, and incidental litigation
expenses.27chanRobl esvi rtualLawli brary

Before the Regional Trial C ourt decided the case, the heirs of Luis and Matilde Ysaac, under the
administration of Franklin Ysaac, sold their property to the local government of Naga C ity on February 12,
1997.28 The property was turned into a project for the urban poor of the city. 29 chanRobl esvi rt ual Lawlibrary

During the trial, C orazon Borbe C ombe of the Borbe family testified that contrary to what Juan C abrera
claimed, her family never agreed to sell the land they were formerly leasing from He nry Ysaac in favor of
Juan C abrera.30 The Borbe family bought the property from Naga C ity's urban poor program after the sale
between the Ysaacs and the local government of Naga C ity. 31 chanRobl esvi rt u
al L
awl ibrary

On September 22, 1999, the Regional Trial C ourt of Naga C ity ruled that the contract of sale between Juan
C abrera and Henry Ysaac was duly rescinded when the former failed to pay the balance of the purchase
price in the period agreed upon. 32 The Regional Trial C ourt found that there was an agreeme nt between Juan
C abrera and Henry Ysaac as to the sale of land and the corresponding unit price. 33 However, aside from the
receipts turned over by Mamerta Espiritu of the Espiritu family to Juan C abrera, there was no "evidence that
the other adjoining lot occupants agreed to sell their respective landholdings" to Juan C abrera. 34 The
Regional Trial C ourt also doubted that Juan C abrera was willing and able to pay Henry Ysaac on June 15,
1992. According to the trial court: chanrobl esvi rt u
al lawli b
r ary

[A]fter the said refusal of Henry Ysaac's wife, plaintiff [Juan C abrera] did not bother to write to the
defendant [Henry Ysaac] or to any of the co-owners his intention to pay for the land or he could have
consigned the amount in court at the same time notifying [Henry Ysaac] of the consignation in accordance
with Article 1256 of the C ivil C ode. Furthermore, in September, 1993 [Juan C abrera] was able to meet
[Henry Ysaac] when the latter allegedly talked to him about the reduction of the area he was going to buy.
There is no showing that [Juan C abrera] again tendered his payment to Henry Ysaac. Instead, he allegedly
made his offer after he had the land resurveyed but defendant was then in Manila. There is no evidence as
to what date this offer was made. . .

. . . [T]he court does not see any serious demand made for performance of the contract on the part of [Juan
C abrera] in 1992 when he allegedly promised to pay the balance of the purchase price. Neither could he
demand for the sale of the adjoining lots because. the occupants thereof did not manifest their consent
thereto. At the most, he could have demanded the sale of the lot which he was occupying. If his payment
was refused in 1995, he cannot demand for damages because the rescission of the contract was relaye d to
him in writing in Exhibit "4". 35

The Regional Trial C ourt dismissed Juan C abrera's complaint and Henry Ysaac's counterclaim. 36 Juan C abrera
appealed the Regional Trial C ourt's decision. 37 chanRobl esvi rt ualLa
w libra
ry

The C ourt of Appeals agreed with the Regional Trial C ourt that there was a perfected contract of sale
between Juan C abrera and Henry Ysaac. 38 According to the C ourt of Appeals, even if the subject of the sale
is part of Henry Ysaac's undivided property, a co -owner may sell a definite portion of the property.39 chanRobl esvi rt ualLawli b
r ary

The C ourt of Appeals also ruled that the contract of sale between Juan C abrera and Henry Ysaac was not
validly rescinded.40 For the rescission to be valid under Article 1592 of the C ivil C ode, it should hav e been
done through a judicial or notarial act and not merely through a letter. 41 chanRobl esvi rt ual L
awl ibrary

However, due to the sale of the entire property of the Ysaac family in favor of the local government of Naga
C ity, the C ourt of Appeals ruled that the verbal contract between Juan C abrera and Henry Ysaac cannot be
subject to the remedy of specific performance. 42 The local government of Naga C ity was an innocent
purchaser for value, and following the rules on double sales, it had a preferential right since the sale, it
entered into was in a public instrument, while the one with Juan C abrera was only made orally. 43The only
recourse the C ourt of Appeals could do is to order Henry Ysaac to return the initial payment of the purchase
price of P10,600.00 (P1,500.00 and P6,100.00 as evidenced by the receipts issued by Henry Ysaac to Juan
C abrera, and P3,000.00 for the surveying expenses) as payment of actual damages. The C ourt of Appeals
likewise awarded attorney's fees and litigation costs. To wit: chanrobl esvi rt u
al lawli b
r ary

WHEREFORE, premises considered, the assailed decision of the lower court is hereby SET ASIDE and a new
one is entered as follows: ChanRobl esVi rt ua
l awlibrary

1. Declaring that there is no valid rescission of the contract of sale of the s ubject lot between plaintiff-
appellant [Juan P. C abrera] and defendant-appellee [Henry Ysaac]; however, specific performance is not an
available relief to plaintiff because of the supervening sale of the property to the C ity of Naga, an innocent
purchaser and for value;

2. Ordering [Henry Ysaac] to pay [Juan P. C abrera] actual damages in the amount of P10,600.00, with legal
interest of 12% per annum from September 20, 1995 until paid;

3. Ordering [Henry Ysaac] to pay [Juan P. C abrera], the amount of thirty thousand pesos (P30,000.00) by
way of attorney's fees and litigation expenses.

Henry Ysaac filed his motion for reconsideration dated July 14, 2003 of the decision of the C ourt of
Appeals.44 On the other hand, Juan C abrera immediately filed a petition for review on certiorari with this
court.45 In the resolution dated October 15, 2003, this court denied the petition "for being premature since
respondent's motion for reconsideration of the questioned decision of the C ourt of Appeals is still pending
resolution."46
chanRobl esvi rt ual La
wl ibra
ry

In the resolution dated January 3, 2005, the C ourt of Appeals denied Henry Ysaac's motion for
reconsideration. On February 24, 2005, Juan C abrera filed another petition with this court, questioning the
propriety of the C ourt of Appeals' decision and resolution.

This court initially noted that the petition was filed out of time. The stamp on the petition states that it was
received by this court on March 24, 2005, 47 while the reglementary period to file the petition ex pired on
February 28, 2005. Thus, the petition was dismissed in this court's resolution dated April 27,
2005.48Petitioner filed a motion for reconsideration. 49 However, the same was denied with finality in this
court's resolution dated August 17, 2005. 50 chanRobl esvi rt ual La
w libra
ry

In a letter addressed to the C hief Justice, petitioner argued that it would be unfair to him if a clerical error
would deprive his petition from being judged on the merits. Petitioner emphasized that the registry receipts
show that he filed the petition on February 24, 2005, not March 24, 2005, as noted by this court in his
pleading.51 This court treated the letter as a second motion for reconsideration. In the resolution dated
March 31, 2006, this court found merit in petitioner's letter. 52 The petition was reinstated, and respondent
was ordered to file his comment. 53 Respondent filed his comment on September 18, 2006. 54This court
required petitioner to file a reply, 55 which petitioner complied with on January 15, 2007. 56 chanRobl esvi rt ual La
wl ibra
ry

The issues raised by petitioner and respondent are summarized as follows:

 1. Whether this court could take cognizance of issues not raised by petitioner but by respondent in his
comment to the petition for review;

2. Whether there was a valid contract of sale between petitioner and respondent;

3. Whether the contract of sale still subsisted;

a. Whether the contract was terminated through rescission;

b. Whether the contract was no longer enforceable due to the supervening sale of the property
to the local government of Naga C ity;

4. Whether petitioner is entitled to the execution of a deed of sale in his favor; and

5. Whether petitioner is entitled to actual damages, attorney's fees, and costs of litigation.

The petition should be denied. cral aw red

This court can resolve issues

raised by both parties

Petitioner stated that the errors in this case are: (1) "the [C ourt of Appeals] erred in holding that the relief
of specific performance is not available to [petitioner] supposedly because of the supervening sale of [the]
property to the C ity Government of Naga"; 57 and (2) "consequently, the [C ourt of Appeals] erred in not
ordering the execution of the necessary deed of sale in favor of [petitioner]." 58 Petitioner argues that this
court should limit its adjudication to these two errors.59 chanRobl esvi rt ua
lL
awl ibrary

On the other hand, respondent raised issues on the validity of the contract of sale in favor of petitioner, and
the propriety of the award of actual damages with interest, attorney's fees, and litigation expenses. 60 chanRobl esvi rt u
al L
awl ibrary

For petitioner, if respondent wanted to raise issues regarding the C ourt of Appeals' decision, respondent
should have interposed a separate appeal. 61 chanRobl esvi rt ualLa
w libra
ry

Petitioner's position is erroneous. This court can resolve issues and assignments of error argued by
petitioner and respondent.

This court "is clothed with ample authority to review matters, even if they are not assigned as errors in their
appeal, if it finds that their consideration is necessary to arrive at a just decision of the case." 62 We can
consider errors not raised by the parties, more so if these errors were raised by respondent.

Respondent raised different issues compared with those raised by petitioner. However, the assignment of
error of respondent was still responsive to the main argument of petitioner. Petitioner's argument works on
the premise that there was a valid contract. By attacking the validity of the contract, respondent was merely
responding to the premise of petitioner's main argument. T he issue is relevant to the final disposition of this
case; hence, it should be considered by this court in arriving at a decision. cral aw red

II

There was no valid contract of sale

between petitioner and respondent

Petitioner agrees with the decision of the C ourt of Appeals that there was a perfected contract of sale
between him and respondent. 63 chanRobl esvi rt ualLawlibrary

Respondent, however, argues that there was no contract between him and petitioner because under Article
1475 of the C ivil C ode, there has to be a meeting of the minds as to the price and the object of the
contract.64 Respondent argues that there was no meeting of the minds as to the final price 65 and size 66 of
the property subject of the sale.

In addition, while respondent admits that he was willing to sell the property being leased from him by the
Borbe family and the Espiritu family, petitioner presented no evidence to show that these families agreed to
the sale in favor of petitioner. During trial, C orazon Borbe C ombe of the Borbe family testified that her
family never agreed to allow the sale of the property in favor of petitioner. 67 Respondent likewise alleged
that Mamerta Espiritu of the Espiritu family eventually bought the property occupied by her family, which is
contrary to the claim that petitioner obtained the consent of Mamerta Espiritu to have the land sold in his
favor.68
chanRobl esvi rt u
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awl ibrary

Petitioner replied that respondent sold 113 square meters of the 321-square-meter property to the Espiritu
family on January 17, 1996. 69 chanRobl esvi rt ual Lawli b
r ary

Petitioner argued that Mamerta Espiritu was not a buyer in good faith because in 1990, sh e voluntarily
agreed to surrender the lot for sale in favor of petitioner because she did not have the money to pay for the
lot. Hence, the sale in favor of Mamerta Espiritu should not supersede the sale in favor of petitioner. 70 chanRobl esvi rt ual Lawli brary

The Regional Trial C ourt ruled that there was a valid contract of sale, although it found that there was no
evidence to support petitioner's claim that he was able to secure the consent of the Espiritu family and the
Borbe family to the sale of the land. 71 There was a valid contract of sale subject to a suspensive condition,
but the suspensive condition was not complied with.

For the C ourt of Appeals, there was a valid contract of sale. 72 The C ourt of Appeals' ruling was based on the
idea that a co-owner could sell a definite portion of the land owned in common, and not because the
suspensive conditions of the contract were complied with. In ruling this way, the C ourt of Appeals relied
on Pamplona v. Morato,73 which stated that: chanrobl esvi rtuallawl ibra
ry

. . . [A] "co-owner may validly sell his undivided share of the property owned in common. (If the part sold
happens to be his allotted share after partition, the transaction is entirely valid). Now then if there has been
no express partition as yet, but the co-owner who sells points out to his buyers the boundaries of the part
he was selling, and the other co-owners make no objection, there is in effect already a partial partition, and
the sale of the definite portion can no longer be assailed." 74

We find that there was no contract of sale. It was null ab initio.

As defined by the C ivil C ode, "[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." 75 For there to be a valid
contract, there must be consent of the contracting parties, an object certain which is the subject matter of
the contract, and cause of the obligation which is established. 76 chanRobl esvi rt ual L
awl ibrary

Sale is a special contract. The seller obligates himself to deliver a determinate thing and to transfer its
ownership to the buyer. In turn, the buyer pays for a price certain in money or its equivalent. 77 A "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.'" 78 The seller and buyer must agree as to the certain thing that will be subject
of the sale as well as the price in which the thing will be sold. The thing to be sold is the object of the
contract, while the price is the cause or consideration.

The object of a valid sales contract must be owned by the seller. If the seller is not the owner, the seller
must be authorized by the owner to sell the object. 79 chanRobl esvi rt ual L
awl ibrary

Specific rules attach when the seller co-owns the object of the contract. Sale of a portion of the property is
considered an alteration of the thing owned in common. Under the C ivil C ode, such disposition requires the
unanimous consent of the other co-owners.80 However, the rules also allow a co-owner to alienate his or her
part in the co-ownership. These two rules are reconciled through jurisprudence. 81 chanRobl esvi rt u
al L
awl ibrary

If the alienation precedes the partition, the co-owner cannot sell a definite portion of the land without
consent from his or her co-owners. He or she could only sell the undivided interest of the co -owned
property.82 As summarized in Lopez v. Ilustre,83 "[i]f he is the owner of an undivided half of a tract of land,
he has a right to sell and convey an undivided half, but he has no right to divide the lot into two parts, and
convey the whole of one part by metes and bounds." 84 chanRobl esvi rt ual Lawlibrary
The undivided interest of a co-owner is also referred to as the "ideal or abstract quota " or "proportionate
share." On the other hand, the definite portion of the land refers to specific metes and bounds of a co -
owned property.

To illustrate, if a ten-hectare property is owned equally by ten co-owners, the undivided interest of a co-
owner is one hectare. The definite portion of that interest is usually determined during judicial or
extrajudicial partition. After partition, a definite portion of the property held in common is allocated to a
specific co-owner. The co-ownership is dissolved and, in effect, each of the former co-owners is free to
exercise autonomously the rights attached to his or her ownership over the definite portion of the land.

It is crucial that the co-owners agree to which portion of the land goes to whom.

Hence, prior to partition, a sale of a definite portion of common property requires the consent of all co -
owners because it operates to partition the land with respect to the co -owner selling his or her share. The
co-owner or seller is already marking which portion should redound to his or her autonomous ownership
upon future partition.

The object of the sales contract between petitioner and respondent was a definite portion of a co -owned
parcel of land. At the time of the alleged sale between petitioner and respondent, the entire property was
still held in common. This is evidenced by the original certificate of title, which was under the names of
Matilde Ysaac, Priscilla Ysaac, Walter Ysaac, respondent Henry Ysaac, Elizabeth Ysaac, Norma Ysaac, Luis
Ysaac, Jr., George Ysaac, Franklin Ysaac, Marison Ysaac, Helen Ysaac, Erlinda Ysaac, and Maridel Ysaac. 85 chanRobl esvi rt ua
lL
awl ibrary

The rules allow respondent to sell his undivided interest in the co-ownership. However, this was not the
object of the sale between him and petitioner. The object of the sale was a definite portion. Even if it was
respondent who was benefiting from the fruits of the lease contract to petitioner, respondent has "no right
to sell or alienate a concrete, specific or determinate part of the thing ow ned in common, because his right
over the thing is represented by quota or ideal portion without any physical adjudication." 86chanRobl esvi rt ual Lawlibrary

There was no showing that respondent was authorized by his co -owners to sell the portion of land occupied
by Juan C abrera, the Espiritu family, or the Borbe family. Without the consent of his co -owners, respondent
could not sell a definite portion of the co-owned property.

Respondent had no right to define a 95-square-meter parcel of land, a 439-square-meter parcel of land, or a
321-square-meter parcel of land for purposes of selling to petitioner. The determination of those metes and
bounds are not binding to the co-ownership and, hence, cannot be subject to sale, unless consented to by
all the co-owners.

In finding that there was a valid contract of sale between petitioner and respondent, the C ourt of Appeals
erred in the application of Pamplona v. Moreto.87 The ruling in Pamplona should be read and applied only in
situations similar to the context of that case.

Pamplona involved the Spouses Moreto who owned three (3) parcels of land with a total, area of 2,346
square meters. The spouses had six (6) children. After the wife had died, the husband sold one of the
parcels to the Pamplona family, even if the conjugal partnership had not yet been liquidated. The parcel sold
measured 781 square meters, which was less than the ideal share of the husband in the estate . This court
allowed the sale to prosper because of the tolerance from the husband's co -heirs. This court ruled: chanrobl esvir tuall a
wl ibra
ry

The title may be pro-indiviso or inchoate but the moment the co-owner as vendor pointed out its location
and even indicated the boundaries over which the fences were to be erected without objection, protest or
complaint by the other co-owners, on the contrary they acquiesced and tolerated such alienation, occupation
and possession, We rule that a factual partition or termination of the co-ownership, although partial, was
created, and barred not only the vendor, Flaviano Moreto, but also his heirs, the private respondents herein
from asserting as against the vendees-petitioners any right or title in derogation of the de ed of sale
executed by said vendor Flaviano Moreto. 88(Emphasis supplied)

In Pamplona, the co-heirs of Flaviano Moreto only questioned the sale to the Pamplona family nine (9) years
after the sale. By then, the Pamplona family had exercised several acts o f ownership over the land. That is
why this court considered it acquiescence or tolerance on the part of the co -heirs when they allowed the
Pamplonas to take possession and build upon the land sold, and only questioned these acts several years
later.
The ruling in Pamplona does not apply to petitioner. There was no evidence adduced during the trial that
respondent's co-owners acquiesced or tolerated the sale to petitioner. The co -owners tolerated petitioner's
possession of a portion of their land because petitioner was a lessee over a 95-square-meter portion of the
property, not the buyer of the 321-square-meter portion.

There was also no evidence of consent to sell from the co -owners. When petitioner approached respondent
in 1995 to enforce the contract of sale, respondent referred him to Franklin Ysaac, the administrator over
the entire property. Respondent's act suggests the absence of consent from the co -owners. Petitioner did
not show that he sought Franklin Ysaac's consent as administrator and the con sent of the other co-owners.
Without the consent of the co-owners, no partial partition operated in favor of the sale to petitioner.

At best, the agreement between petitioner and respondent is a contract to sell, not a contract of sale. A
contract to sell is a promise to sell an object, subject to suspensive conditions. 89 Without the fulfillment of
these suspensive conditions, the sale does not operate to determine the obligation of the seller to deliver the
object.

A co-owner could enter into a contract to sell a definite portion of the property. However, such contract is
still subject to the suspensive condition of the partition of the property, and that the other co -owners agree
that the part subject of the contract to sell vests in favor of the co -owner's buyer. Hence, the co-owners'
consent is an important factor for the sale to ripen.

A non-existent contract cannot be a

source of obligations, and it cannot be
enforced by the courts

Since petitioner believes that there was a perfected contract of sale between him and respondent, he argues
that a deed of sale should be formally executed. Petitioner agrees with the C ourt of Appeals' finding that
there was no valid rescission of the contract in accordance with Article 1592 of the C ivil C ode. 90 However,
petitioner disagrees with the C ourt of Appeals when it ruled that the contract was no longer enforceable due
to the supervening sale with the local government of Naga C ity. Petitioner argues that the sale in favor of
the local government of Naga C ity was not made in good faith. Before the sale was finalized between the
local government and the heirs of Luis and Matilde Ysaac, petitioner had a notice of lis pendens annotated to
OC T No. 506.91 It was presumed that the local government had due notice of petitioner's adverse claim,
thus, it cannot be considered an innocent purchaser.

For respondent, due to the inexistence of a valid contract of sale, petitioner cannot demand specific
performance from respondent. 92 Respondent disagrees with the C ourt of Appea ls when it stated that Article
1592 of the rescission of contract of sale applies. There is no need to apply Article 1592 because there was
no contract to begin with. 93 The contract between respondent and petitioner was terminated by virtue of the
letter dated September 21, 1994. 94 chanRobl esvi rt ual L
awl ibrary

We rule in favor of respondent.

The absence of a contract of sale means that there is no source of obligations for respondent, as seller, or
petitioner, as buyer. Rescission is impossible because ther e is no contract to rescind. The rule in Article 1592
that requires a judicial or notarial act to formalize rescission of a contract of sale of an immovable property
does not apply. This court does not need to rule whether a letter is a valid method of res cinding a sales
contract over an immovable property because the question is moot and academic.

Even if we assume that respondent had full ownership of the property and that he agreed to sell a portion of
the property to petitioner, the letter was enough to cancel the contract to sell.

Generally, "[t]he power to rescind obligations is implied in reciprocal ones, in case one of the obligors should
not comply with what is incumbent on him." 95 chanRobl esvi rt ual L
awl ibrary

For the sale of immovable property, the following provision governs its rescission: chanrobl esv
i rt ua
l lawli brary

Article 1592. In the sale of immovable property, even though it may have been stipulated that upon failure
to pay the price at the time agreed upon the rescission of the contract sh all of right take place, the vendee
may pay, even after the expiration of the period, as long as no demand for rescission of the contract has
been made upon him either judicially or by notarial act. After the demand, the court may not grant him a
new term.

This provision contemplates (1) a contract of sale of an immovable property and (2) a stipulation in the
contract that failure to pay the price at the time agreed upon will cause the rescission of the contract. The
vendee or the buyer can still pay even after the time agreed upon, if the agreement between the parties has
these requisites. This right of the vendee to pay ceases when the vendor or the seller demands the
rescission of the contract judicially or extrajudicially. In case of an extrajudicial d emand to rescind the
contract, it should be notarized.

Hence, this provision does not apply if it is not a contract of sale of an immovable property and merely
a contract to sell an immovable property. A contract to sell is "where the ownership or title i s 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." 96
chanRobl esvi rt ualLawli b
r ary

In a similar case entitled Manuel v. Rodriguez, 97 Eusebio Manuel offered to buy the land owned by Payatas
Subdivision, Inc. The Secretary-Treasurer of Payatas Subdivision, Eulogio.Rodriguez, Sr., agreed to sell the
land to Eusebio Manuel after negotiations. Similar to this case, the agreement was only made orally and not
in writing. An initial payment was made, and a final payment was to be made nine (9) to ten (10) months
later. Manuel never paid for the latter installment; hence, Eulogio Rodriguez cancelled their agreement and
sold the land to someone else.

In Manuel, this court categorically stated that Article 1592 "does not apply to a contract to sell or promise to
sell, where title remains with the vendor until fulfillment to a positive suspensive condition, such as full
payment of the price."98 This court upheld that the contract to sell was validly cancelled through the non -
payment of Eusebio Manuel. The same conclusion applie s in this case.

The law does not prescribe a form to rescind a contract to sell immovable property. In Manuel, the non-
payment operated to cancel the contract. If mere non-payment is enough to cancel a contract to sell, the
letter given to petitioner's lawyer is also an acceptable form of rescinding the contract. The law does not
require notarization for a letter to rescind a contract to sell immovable property. Notarization is only
required if a contract of sale is being rescinded.

Petitioner argued that he was willing to comply with the suspensive condition on the contract to sell because
he was ready to pay the balance of the purchase price on June 15, 1992. 99 However, his argument is
unmeritorious. As ruled by the Regional Trial C ourt, petitioner shoul d have resorted to the various modes of
consignment when respondent's wife refused to accept the payment on respondent's behalf. 100 chanRobl esvi rt ual Lawli b
r ary

Therefore, even if we assumed that the contract between petitioner and respondents were perfected, the
strict requisites in Article 1592 did not apply because the only perfected contract was a contract to sell, not
a contract of sale. The courts cannot enforce the right of petitioner to buy respondent's property. We cannot
order the execution of a deed of sale between petitioner and respondent.

The question of double sale also becomes moot and academic. There was no valid sale between petitioner
and respondent, while there was a valid sale between the local government of Naga C ity and respondent
and his co-owners. Since there is only one valid sale, the rule on double sales under Article 1544 of the C ivil
C ode does not apply. 101
chanRobl esvi rt ualLawli brary

Compensatory damages, attorney's

fees, and costs of litigation

Respondent argued that petitioner is not entitled to the compensatory damages that the C ourt of Appeals
awarded. According to respondent, petitioner continues to occupy the 95 -square-meter property that he has
been leasing since 1986 because the parcel was not included in the sale to the local government of Naga
C ity.102 Since April 30, 1990, petitioner has not been paying rent to respondent despite his continued
occupation of the property. 103 Therefore, there was no unjust enrichment on the part of respondent when he
applied petitioner's initial payment over the sale of the property as payment for rent.

Respondent argued further that the award of attorney's fees and litigation expenses in fav or of petitioner
was also erroneous because prior to this litigation, respondent already informed petitioner that his claim has
no basis in law and fact. 104 Yet, petitioner persisted on filing this case. 105 chanRobl esvi rt ualLawlibrary
We rule that petitioner is entitled to the return of the amount of money because he paid it as consideration
for ownership of the land. Since the ownership of the land could not be transferred to him, the money he
paid for that purpose must be returned to him. Otherwise, respo ndent will be unjustly enriched.

Respondent's claim for rent in arrears is a separate cause of action from this case. For petitioner's earnest
money payment to be considered payment for his rent liabilities, the rules of compensation under Article
1279 of the C ivil C ode must be followed. 106 chanRobl esvi rt ual Lawlibrary

It was not proven during trial if petitioner's rental liability to respondent is due, or if it is already liquidated
and demandable. Hence, this court is limited to uphold the ruling of the C ourt of Appeals, but such payment
could be subject to the rule on compensation.

However, petitioner is not entitled to attorney's fees and the costs of litigation. The C ourt of Appeals
awarded attorney's fees to petitioner "just to protect his right [beca use petitioner] reached this court to seek
justice for himself."107
chanRobl esvi rt ual Lawli b
r ary

C ontrary to the C ourt of Appeals' ruling, we find that petitioner did not have a clear right over the property
in question. The C ourt of Appeals awarded attorne y's fees and litigation costs on the premise that the
contract between petitioner and respondent was perfected. Without a valid contract that stipulates his
rights, petitioner risked litigation in order to determine if he has rights, and not to protect rig hts that he
currently has. Hence, the award of attorney's fees and litigation costs was not properly justified. chanrobl esl aw

WHEREFORE, the petition is DENIED. The C ourt of Appeals' decision dated June 19, 2003 in C A -G.R. C V
No. 65869 is SET ASIDE. The contract between petitioner and respondent is DECLARED invalid and,
therefore, cannot be subject to specific performance. Respondent is ORDERED to return P10,600.00 to
petitioner, with legal interest of 12% per annum from September 20, 1995 until June 30, 20 13 and 6% per
annum from July 1, 2013 until fully paid. The award of attorney's fees and litigation expenses is DELETED.

SO ORDERED.

Carpio, (Chairperson), Brion, Del Castillo, and Mendoza, JJ., concur.

Endnotes:
 SECOND DIVISION

[G.R. NO. 142411. October 14, 2005]

WINIFREDA URSAL, Petitioner, v. COURT OF APPEALS, THE RURAL BANK OF LARENA (SIQUIJOR),
INC. and SPOUSES JESUS MONESET and CRISTITA MONESET, Respondents.

DE CISIO N

AUSTRIA-MARTINEZ, J.:

Before us is a Petition for Review on Certiorariunder Rule 45 of the Rules of C ourt seeking the reversal of the
Decision1 of the C ourt of Appeals (C A) dated June 28, 1999 and the Resolution dated January 31, 2000
denying petitioner's motion for reconsideration. 2

These are the facts:

The spouses Jesus and C ristita Moneset (Monesets) are the registered owners of a 333 -square meter land
together with a house thereon situated at Sitio Laguna, Basak, C ebu C ity covered by Transfer C ertificate of
Title No. 78374.3 On January 9, 1985, they executed a "C ontract to Sell Lot & House" in favor of petitioner
Winifreda Ursal (Ursal), with the following terms and conditions:

That the VENDOR (C ristita R. Moneset) offers to SELL and the VENDEE accepts to BUY at the agreed lump
sum price of P130,000.00 payable on the installment basis as follows:

1. That on the date of the signing of this agreement, the VENDEE will tender an earnest money or
downpayment of P50,000.00 to the VENDOR, and by these presents, the latter hereby acknowledges receipt
of said amount from the former;

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

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

4. That on the date of receipt of the downpayment of P50,000.00 by the VENDOR, it is mutually agreed for
VENDEE to occupy and take physical possession of the premises as well as for the latter (VENDEE) to keep
and hold in possession the corresponding transfer certificate of title No. ______ of the land in question
which is the subject of this agreement;

5. That on the date of final payment by the VENDEE to the VENDOR, the latter shall execute at her expense
the corresponding document of DEED OF ABSOLUTE SALE for the former as well as the payment of realty
clearances, BIR C apital Gain Tax, sales tax or transfer fees and attorney's fees; that, for the issuance of title
in VENDEE's name shall be the exclusive account of said VENDEE. 4

Petitioner paid the down payment and took possession of the property. She immediately built a concrete
perimeter fence and an artesian well, and planted fruit bearing trees and flowering plants thereon which all
amounted to P50,000.00. After paying six monthly installments, petitioner stopped paying due to the
Monesets' failure to deliver to her the transfer certificate of title of the property as per their agreement; and
because of the failure of the Monesets to turn over said title, petitioner failed to have the contract of sale
annotated thereon.5

Unknown to petitioner, the Monesets executed on November 5, 1985 an absolute deed of sale in favor of Dr.
Rafael C anora, Jr. over the said property for P14,000.00.6 On September 15, 1986, the Monesets executed
another sale, this time with pacto de retro with Restituto Bundalo. 7 On the same day, Bundalo, as attorney -
in-fact of the Monesets, executed a real estate mortgage over said property with Rural Bank of Larena
(hereafter Bank) located in Siquijor for the amount of P100,000.00.8 The special power of attorney made by
the Monesets in favor of Bundalo as well as the real estate mortgage was then annotated on the title on
September 16, 1986.9 For the failure of the Monesets to pay the loan, the Bank served a notice of
extrajudicial foreclosure dated January 27, 1988 on Bundalo. 10

On September 30, 1989, Ursal filed an action for declaration of non-effectivity of mortgage and damages
against the Monesets, Bundalo and the Bank. She claimed that the defendants committed fraud and/or bad
faith in mortgaging the property she earlier bought from the Monesets with a bank located in another island,
Siquijor; and the Bank acted in bad faith since it granted the real estate mortgage in spite of its knowledge
that the property was in the possession of petitioner. 11

The Monesets answered that it was Ursal who stopped paying the agreed monthly installments in breach of
their agreement.12 The Bank, on the other hand, averred that the title of the property was in the name of
"C ristita Radaza Moneset married to Jesus Moneset" and did not show any legal infirmity. 13

Bundalo, meanwhile, was not served summons because he could no longer be found at his given address. 14

Trial on the merits proceeded. Thereafter, the Regional Trial C ourt of C ebu C ity, Branch 24, rendered its
decision finding that Ursal is more credible than the Monesets and that the Monesets are liable for damages
for fraud and breach of the contract to sell:

The evidence of [Ursal] show that she was the first to acquire a substantial interest over the lot and house
by virtue of the execution of the C ontract to Sell (Exh. "A"). After the execution of Exh. "A" plaintiff took
possession of the questioned lot and house after she made a downpayment of P50,000.00. '[S]he paid the
installments for six (6) months without fail. [However] plaintiff (stopped) paying the installment because
defendant spouses failed to give her the Transfer C ertificate of Title over the lot and house despite repeated
demands. It is evident then that the first to violate the conditions of Exh. "A" were the defendants Spouses
Moneset. This is the reason why plaintiff was not able to annotate Exh. "A" on the TC T. The evidence of
plaintiff show that there was no intention on her part to discontinue paying the installments. In a reciprocal
obligation, one cannot be compelled to do if the other party fails to do his part (Art. 1169, New C ivil C ode).

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

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

As to the real estate mortgage, the trial court held that the same was valid and the Bank was not under any
obligation to look beyond the title, although the present controversy could have been avoided had the Bank
been more astute in ascertaining the nature of petitioner's poss ession of the property, thus:
The Real Estate Mortgage and the Foreclosure Proceedings cannot be considered null and void in the sense
that per se the formalities required by law were complied with except for the fact that behind their execution
there was fraud, deceit and bad faith on the part of defendant spouses Moneset and Bundalo.

The defendant Rural Bank of Larena for its part could have avoided this situation if the bank appraiser who
made the ocular inspection of the subject house and lot went deeper and investigated further whe n he
learned that the owner is not the actual occupant. He was however told by Moneset that the actual occupant
was only a lessee. Banking on this information that the actual occupant was only a lessee with no other right
over and above such, the bank approved a loan of P100,000.00 in favor of Moneset through Bundalo their
attorney-in-fact.

Likewise the Rural Bank of Larena had the right to rely on what appeared on the certificate of title of the
Monesets and it was under no obligation to look beyond the ce rtificate and investigate the title of the
mortgagor appearing on the face of the certificate.

The approval of the P100,000.00 loan from the Rural Bank of Larena was made possible through the
deception and bad faith of defendant spouses Moneset and Bundalo but the pertinent documents were per
se in order. The court is of the honest belief that the case against the defendant bank be dismissed for lack
of merit. The court however believes that for reasons of equity the bank should give the plaintiff Ursal the
preferential right to redeem the subject house and lot. 16

The trial court then disposed of the case as follows:

Wherefore premises considered, judgment is hereby rendered in favor of the defendant Rural Bank of Larena
dismissing the complaint against it for lack of merit and against the defendant spouses Moneset ordering
them to:

1. reimburse to plaintiff Ursal the following:

A.) downpayment of P50,000.00

b.) monthly installments for six months at P3,000.00 per month - - - P18,000.00

c.) expenses improvements P61, 676.52

2. pay to plaintiff the following:

A.) moral damages - - - - - - - - - - - - - - - - - P30,000.00

b.) exemplary damages - - - - - - - - - - - P20,000.00

c.) litigation expenses - - - - - - - - - - - - - P 5,000.00

d.) attorney's fees - - - - - - - - - - - - - - - - - P10,000.00

e.) costs

3. order the defendant Rural Bank of Larena to give the plaintiff the preferential right to redeem the subject
house and lot.

SO ORDERED.17

Both Ursal and the Monesets appealed the decision to the C A. Ursal alleged that the Bank was guilty of bad
faith for not investigating the
presence of Ursal on the property in question, while the Monesets claimed that the trial court erred in giving
preferential right to Ursal to redeem the property and in ordering them to pay damages. 18

The C A affirmed in toto the decision of the trial court. It held that the Bank did not have prior knowledge of
the contract to sell the house and lot and the Monesets acted fraudulently thus they cannot be given
preferential right to redeem the property and were therefore correctly ordered to pay damages. 19

The Monesets filed a motion for reconsideration which was denied outright for having been filed out of
time.20 Ursal's motion for reconsideration was denied by the C A on January 31, 2000 for lack of merit. 21

Hence, the present petition raising the sole error:

"That with grave abuse of discretion amounting to excess of jurisdiction, the Honorable Court of
Appeals erred in rendering a decision and Resolution NOT in accordance with law and the
applicable rulings of the Supreme Court." 22

Petitioner claims that: the Bank was duly informed through its appraiser that the house and lot to be
mortgaged by Monesets were in the possession of a lessee; the Bank should have taken this as a cue to
investigate further the Monesets' right over the same; the case of Embrado v. Court of Appeals (233 SC RA
335) held that where a purchaser neglects to make the necessary inquiry and close s his eyes to facts which
should put a reasonable man on his guard to the possibility of the existence of a defect in his vendor's title,
he cannot claim that he is a purchaser in good faith; Sec. 50 of Act 496 provides that where a party has
knowledge of a prior existing interest which is unregistered at the time he acquired the land, his knowledge
of that prior unregistered interest has the effect of registration as to him and the Torrens system cannot be
used as a shield against fraud; following Art. 2176 of the C ivil C ode, respondent Bank is obliged to pay for
the damage done.23

Petitioner then prayed that the Deed of Real Estate Mortgage be declared as non -effective and non-
enforceable as far as petitioner is concerned; that she be declared as the absolute owner of the house and
lot in question; that the Monesets be ordered to execute a deed of absolute sale covering the subject
property; and that the Bank be ordered to direct the collection or payment of the loan of P100,000.00 plus
interest from the Monesets for they were the ones who received and enjoyed the said loan. 24

On the other hand, respondent Bank in its C omment argues that: its interest in the property was only that
of mortgagee and not a purchaser thus its interest is limited only to ascertaining that the mortgagor is the
registered owner; the case cited is inapplicable at bar since it involves the purchase of real property; Ursal
was purportedly only a lessee of the property, thus as mortgagor who is not entitled to possess the
mortgaged property, they no longer considered the lease in the processing and approv al of the loan; Sec. 50
of Act No. 496 is also inapplicable since the alleged prior existing interest was only that of a lessee; in any
case, it was the Monesets who lied to the Bank anent the real nature of the encumbrance, thus, it is the
Monesets who are guilty of fraud and not the Bank. 25

In her "Rejoinder,"26 petitioner argued that: under the law on mortgage, the mortgagor must be the owner
of the property he offers as security of his loan; the mortgagee like herein Bank which neglects to verify the
ownership of the property offered as security of the loan runs the risk of his folly; the Bank's negligence is
not excusable because an adverse claim and notice of lis pendens were already annotated on the certificate
of title when the mortgage was constituted or when the deed of real estate mortgage was annotated; it
would be unfair to put the blame on petitioner who was innocent of the transaction; the trial court found
that the Bank even provided its appraiser the amount of P15,000.00 to redeem the pacto de retro sale
allegedly executed in favor of Dr. C anora; this should ha ve aroused the Bank's suspicion and prompted it to
investigate further the property; the trial court recognized the bad faith committed by the Monesets and
ordered them to pay the sum of P126,676.52 in damages but exonerated the Bank who is equally guilty of
bad faith; the Monesets cannot pay the damages as they have no money and property thus if the decision of
the trial court as affirmed by the C A is to be enforced, they will only be holding an empty bag while the Bank
which is equally guilty will go free; what would be fair is to let the

two respondents bear jointly and severally the consequences of their transaction and let the innocent
petitioner ultimately own the house and lot in question. 27
The petitioner, in her Memorandum dated July 31, 2005, raised the issues of: "(1) Whether or not the
document captioned: 'C ontract to Sell Lot and House' (Exh. 'A') is valid and binding so much so that the
herein Petitioner who is the Vendee is the lawful and true owner of the lot and house in question; (2)
Whether or not the herein respondents spouses Jesus Moneset and C ristita Moneset who were the vendors
and/or mortgagors together with respondent Restituto Bundalo were conniving and acting in bad faith; and
(3) Whether or not respondent Rural Bank of Larena measured up to the strict requirement of making a
thorough investigation of the property offered as colla teral before granting a loan and be considered as
innocent mortgagee and entitled to the protection of the law." 28 Petitioner reiterated her arguments in
support of the first and third issues raised in the Memorandum while she merely adopted the C A findings in
support of the second issue, i.e., when the Monesets encumbered the Transfer C ertificate of Title (TC T) to
Dr. C anora and thereafter to Bundalo, they committed bad faith or fraud since the contract to sell with Ursal
was still valid and subsisting. 29

Respondent Bank, in its Memorandum dated July 20, 2005, reiterated the arguments it made in its
C omment that: the case cited by petitioner requiring extra ordinary diligence is inapplicable in this cas e
since what is involved here is mortgage and not sale; as mortgagee, its interest is limited only to
determining whether the mortgagor is the registered owner of the property whose certificate of title showed
that there were no existing encumbrances there on; and even with unregistered encumbrances, the Bank has
priority by the registration of the loan documents. 30

No memorandum is filed by respondent Monesets.

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

We agree. Banks cannot merely rely on certificates of title in ascertaining the status of mortgaged
properties; as their business is impressed with public interest, they are expected to exercise more care and
prudence in their dealings than private individuals. 31 Indeed, the rule that persons dealing with registered
lands can rely solely on the certificate of title does not apply to banks. 32

As enunciated in Cruz v. Bancom:33

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

Our agreement with petitioner on this point of law, notwithstanding, we are constrained to refrain fr om
granting the prayers of her petition, to wit: that the Deed of Real Estate Mortgage be declared as non -
effective and non-enforceable as far as petitioner is concerned; that she be declared as the absolute owner
of the house and lot in question; that the Monesets be ordered to execute a deed of absolute sale covering
the subject property; and that the Bank be ordered to direct the collection or payment of the loan
of P100,000.00 plus interest from the Monesets for they were the ones who received and enjoy ed the said
loan.35

The reason is that, the contract between petitioner and the Monesets being one of "C ontract to Sell Lot and
House," petitioner, under the circumstances, never acquired ownership over the property and her rights
were limited to demand for specific performance from the Monesets, which at this juncture however is no
longer feasible as the property had already been sold to other persons.

A contract to sell is 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. 36

In such contract, the prospective seller expressly reserves the transf er of title to the prospective buyer, until
the happening of an event, which in this case is the full payment of the purchase price. What the seller
agrees or obligates himself to do is to fulfill his promise to sell the subject property when the entire am ount
of the purchase price is delivered to him. Stated differently, the full payment of the purchase price partakes
of a suspensive condition, the non-fulfillment of which prevents the obligation to sell from arising and thus,
ownership is retained by the prospective seller without further remedies by the prospective buyer. 37

It is different from contracts of sale, since ownership in contracts to sell is reserved by the vendor and is not
to pass to the vendee until full payment of the purchase price, while in contracts of sale, title to the property
passess to the vendee upon the delivery of the thing sold. In contracts of sale the vendor loses ownership
over the property and cannot recover it unless and until the contract is resolved or rescinded, while
in contracts to sell, title is retained by the vendor until full payment of the price. 38 In contracts to sell, full
payment is a positive suspensive condition while in contracts of sale, non-payment is a negative resolutory
condition.39

A contract to sell may further be distinguished from a conditional contract of sale, in that, the fulfillment of
the suspensive condition, which is the full payment of the purchase price, will not automatically transfer
ownership to the buyer although the property may have been previously delivered to him. The prospective
vendor still has to convey title to the

prospective buyer by entering into a contract of absolute sale. While in a conditional contract of sale, the
fulfillment of the suspensive condition renders the sale absolute and affects the seller's title thereto such
that if there was previous delivery of the property, the seller's ownership or title to the property is
automatically transferred to the buyer. 40

Indeed, in contracts to sell the obligation of the seller to sell becomes demandable only upon the happening
of the suspensive condition, that is, the full payment of the purchase price by the buyer. I t is only upon the
existence of the contract of sale that the seller becomes obligated to transfer the ownership of the thing sold
to the buyer. Prior to the existence of the contract of sale, the seller is not obligated to transfer the
ownership to the buyer, even if there is a contract to sell between them.41

In this case, the parties not only titled their contract as "C ontract to Sell Lot and House" but specified in
their agreement that the vendor shall only execute a deed of absolute sale on the date of the final payment
by vendee.42 Such provision signifies that the parties truly intended their contract to be that of contract to
sell.43

Since the contract in this case is a contract to sell, the ownership of the property remained with the
Monesets even after petitioner has paid the down payment and took possession of the property. In Flancia
v. Court of Appeals,44 where the vendee in the contract to sell also took possession of the property, this
C ourt held that the subsequent mortgage constituted by the owner over said property in favor of another
person was valid since the vendee retained absolute ownership over the property.45 At most, the vendee in
the contract to sell was entitled only to damages. 46

Petitioner attributes her decision to stop paying installments to the failure of the Monesets to comply with
their agreement to deliver the transfer certificate of title after the down payment of P50,000.00. On this
point, the trial court was correct in holding that for such failure, the Monesets are liable to pay damages
pursuant to Art. 1169 of the C ivil C ode on reciprocal obligations. 47

The vendors' breach of the contract, notwithstanding, ownership still remained with the Monesets and
petitioner cannot justify her failure to complete the payment.

In Pangilinan v. Court of Appeals,48 the vendees contended that their failure to pay the balance of the total
contract price was because the vendor reneged on its obligation to improve the subdivision and its facilities.
In said case, the C ourt held that the vendees were barred by lache s from asking for specific performance
eight years from the date of last installment. The C ourt held that:

'(the vendees) instead of being vigilant and diligent in asserting their rights over the subject property had
failed to assert their rights when the law requires them to act. Laches or "stale demands" is based upon
grounds of public policy which requires, for the peace of society, the discouragement of stale claims and
unlike the statute of limitations, is not a mere question of time but is principally a question of the inequity or
unfairness of permitting a right or claim to be enforced or asserted.
The legal adage finds application in the case at bar. Tempus enim modus tollendi obligations et actiones,
quia tempus currit contra desides et sui juris co ntemptores'For time is a means of dissipating obligations and
actions, because time runs against the slothful and careless of their own rights." 49

In this case, petitioner instituted an action for "Declaration of Non-Effectivity of Mortgage with
Damages" four years from the date of her last installment and only as a reaction to the foreclosure
proceedings instituted by respondent Bank. After the Monesets failed to d eliver the TC T, petitioner merely
stopped paying installments and did not institute an action for specific performance, neither did she consign
payment of the remaining balance as proof of her willingness and readiness to comply with her part of the
obligation. As we held in San Lorenzo Development Corp. v. Court of Appeals, 50 the perfected contract to sell
imposed on the vendee the obligation to pay the balance of the purchase price. There being an obligation to
pay the price, the vendee should have made the proper tender of payment and consignation of the price in
court as required by law. C onsignation of the amounts due in court is essential in order to extinguish the
vendee's obligation to pay the balance of the purchase price. 51 Since there is no indication in the records
that petitioner even attempted to make the proper consignation of the amounts due, the obligation on the
part of the Monesets to transfer ownership never acquired obligatory force.

In other words, petitioner did not acquire ownership over the subject property as she did not pay in full the
equal price of the contract to sell. Further, the Monesets' breach did not entitle petitioner to any preferential
treatment over the property especially when such property has been sold to other persons.

As explained in Coronel v. Court of Appeals:52

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 o f 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-seller's
title per se, but the latter, of course, may be sued for damages by the intending buyer. 53 (Emphasis
supplied)Ï‚ rα l α ωl ιbrÎ ±rÿ

In this case, the lower courts found that the property was sold to Dr. C anora and then to Bundalo who in
turn acted as attorney-in-fact for the Monesets in mortgaging the property to respondent Bank. The trial
court and the C A erred in giving petitioner the preferential right to redeem the property as such would
prejudice the rights of the subsequent buyers who were not parties in the proceedings below. While the
matter of giving petitioner preferential right to redeem the property wa s not put in issue before us, in the
exercise of our discretionary power to correct manifest and palpable error, we deem it proper to delete said
portion of the decision for being erroneous. 54

Petitioner's rights were limited to asking for specific performance and damages from the Monesets. Specific
performance, however, is no longer feasible at this point as explained above. This being the case, it follows
that petitioner never had any cause of action against respondent Bank. Having no cause of action against
the bank and not being an owner of the subject property, petitioner is not entitled to redeem the subject
property.

Petitioner had lost her right to demand specific performance when the Mon esets executed a Deed of
Absolute Sale in favor of Dr. C anora. C ontrary to what she claims, petitioner had no vested right over the
property.

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

At this point, let it be stated that the courts below and even this C ourt have no jurisdiction to resolve the
issue whether there was bad faith among the Monesets, C anora and Bundalo. C anora was never impleaded.
Bundalo has not been served with summons.
WHEREFORE, the petition is DENIED. The decision of the Regional Trial C ourt of C ebu C ity, Branch 24,
promulgated on February 5, 1993 and the decision of the C ourt of Appeals dated June 28, 1999 are
hereby AFFIRMED. However, in the higher interest of substantial justice, the C ourt MODIFIES the same to
the effect that the portion ordering the Rural Bank of Larena (Siquijor), Inc. to give petitioner the
preferential right to redeem the house and lot covered by Transfer C ertificate of Title No. 78374
is DELETED for lack of legal basis.

No costs.

SO ORDERED.

Puno, J., (Chairman), Tinga, and Chico-Nazario, JJ., concur.

Callejo, Sr., J., no part.

Endnotes:
 SECOND DIVISION

G.R. No. 200602, December 11, 2013

ACE FOODS, INC., Petitioners, v. MICRO PACIFIC TECHNOLOGIES CO., LTD., 1Respondent.

DE CISIO N

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari2 are the Decision3 dated October 21, 2011 and
Resolution4 dated February 8, 2012 of the C ourt of Appeals (C A) in C A -G.R. C V No. 89426 which reversed
and set aside the Decision 5 dated February 28, 2007 of the Regional Trial C ourt of Makati, Branch 148 (RTC )
in C ivil C ase No. 02-1248, holding petitioner AC E Foods, Inc. (AC E Foods) liable to respondent Micro Pacific
Technologies C o., Ltd. (MTC L) for the payment of C isco Routers and Frame Relay Products (subject
products) amounting to P646,464.00 pursuant to a perfected contract of sale.

The Facts

AC E Foods is a domestic corporation engaged in the trading and distribution of consumer goods in wholesale
and retail bases,6 while MTC L is one engaged in the supply of computer hardware and equipment. 7

On September 26, 2001, MTC L sent a letter-proposal8 for the delivery and sale of the subject products to be
installed at various offices of AC E Foods. Aside from the itemization of the products offered for sale, the said
proposal further provides for the following terms, viz.:9
TERMS : Thirty (30) days upon delivery

VALIDITY : Prices are based on current dollar rate and subject to changes without prior notice.

DELIVERY : Immediate delivery for items on stock, otherwise thirty (30) to forty -five days upon receipt of
[Purchase Order]

WARRANTY : One (1) year on parts and services. Accessories not included in warranty.
On October 29, 2001, AC E Foods accepted MTC L’s proposal and accordingly issued Purchase Order No.
10002310 (Purchase Order) for the subject products amounting to P646,464.00 (purchase price). Thereaft er,
or on March 4, 2002, MTC L delivered the said products to AC E Foods as reflected in Invoice No.
773311 (Invoice Receipt). The fine print of the invoice states, inter alia, that “[t]itle to sold property is
reserved in MIC ROPAC IFIC TEC HNOLOGIES C O., LTD. until full compliance of the terms and conditions of
above and payment of the price” 12 (title reservation stipulation). After delivery, the subject products were
then installed and configured in AC E Foods’s premises. MTC L’s demands against AC E Foods to pay the
purchase price, however, remained unheeded. 13 Instead of paying the purchase price, AC E Foods sent MTC L
a Letter 14 dated September 19, 2002, stating that it “ha[s] been returning the [subject products] to [MTC L]
thru [its] sales representative Mr. Mark Anteola who has agreed to pull out the said [products] but had failed
to do so up to now.”

Eventually, or on October 16, 2002, AC E Foods lodged a C omplaint 15 against MTC L before the RTC , praying
that the latter pull out from its premises the subject products since MTC L breached its “after delivery
services” obligations to it, particularly, to: (a) install and configure the subject products; (b) submit a cost
benefit study to justify the purchase of the subject products; and (c) train AC E Foods’s technicians on how
to use and maintain the subject products. 16 AC E Foods likewise claimed that the subject products MTC L
delivered are defective and not working. 17

For its part, MTC L, in its Answer with C ounterclaim, 18 maintained that it had duly complied with its
obligations to AC E Foods and that the subject products were in good working condition when they were
delivered, installed and configured in AC E Foods’s premises. Thereafter, MTC L even conducted a training
course for AC E Foods’s representatives/employees; MTC L, however, alleged that there was actually no
agreement as to the purported “after delivery services.” Further, MTC L posited that AC E Foods refused and
failed to pay the purchase price for the subject products despite the latter’s use of the same for a period of
nine (9) months. As such, MTC L prayed that AC E Foods be compelled to pay th e purchase price, as well as
damages related to the transaction. 19chanrobl esvi rt ualawl ibrary

The RTC Ruling

On February 28, 2007, the RTC rendered a Decision, 20 directing MTC L to remove the subject products from
AC E Foods’s premises and pay actual damages and attorney fees in the amounts of P200,000.00 and
P100,000.00, respectively.21

At the outset, it observed that the agreement between AC E Foods and MTC L is in the nature of a contract to
sell. Its conclusion was based on the fine print of the Invoice Receipt which expressly indicated that “title to
sold property is reserved in MIC ROPAC IFIC TEC HNOLOGIES C O., LTD. until full compliance of the terms and
conditions of above and payment of the price,” noting further that in a contract to sell, the prospective seller
explicitly reserves the transfer of title to the prospective buyer, and said transfer is conditioned upon the full
payment of the purchase price. 22 Thus, notwithstanding the execution of the Purchase Order and the
delivery and installation of the subject products at the offices of AC E Foods, by express stipulation stated in
the Invoice Receipt issued by MTC L and signed by AC E Foods, i.e., the title reservation stipulation, it is still
the former who holds title to the products until full payment of the purchase price therefor. In this relation,
it noted that the full payment of the price is a positive suspensive condition, the non -payment of which
prevents the obligation to sell on the part of the seller/vendor from materializing at all. 23 Since title
remained with MTC L, the RTC therefore directed it to withdraw the subject products from AC E Foods’s
premises. Also, in view of the foregoing, the RTC found it unnecessary to delve into the allegations of breach
since the non-happening of the aforesaid suspensive condition ipso jure prevented the obligation to sell from
arising.24

Dissatisfied, MTC L elevated the matter on appeal. 25 chanrobl esvi rt u

al a
wl ibra
ry

The CA Ruling

In a Decision26 dated October 21, 2011, the C A reversed and set aside the RTC ’s ruling, ordering AC E Foods
to pay MTC L the amount of P646,464.00, plus legal interest at the rate of 6% per annum to be computed
from April 4, 2002, and attorney’s fees amounting to P50,000.00. 27

It found that the agreement between the parties is in the nature of a contract of sale, observing that the
said contract had been perfected from the time AC E Foods sent the Purchase Order to MTC L which, in turn,
delivered the subject products covered by the Invoice Receipt and subsequently installed and configured
them in AC E Foods’s premises. 28 Thus, considering that MTC L had already complied with its obligation, AC E
Foods’s corresponding obligation arose and was then duty bound to pay the agreed purchase price within
thirty (30) days from March 5, 2002. 29 In this light, the C A concluded that it was erroneous for AC E Foods
not to pay the purchase price therefor, despite its receipt of the subject products, because its refus al to pay
disregards the very essence of reciprocity in a contract of sale. 30 The C A also dismissed AC E Foods’s claim
regarding MTC L’s failure to perform its “after delivery services” obligations since the letter -proposal,
Purchase Order and Invoice Receipt do not reflect any agreement to that effect. 31

Aggrieved, AC E Foods moved for reconsideration which was, however, denied in a Resolution 32 dated
February 8, 2012, hence, this petition.

The Issue Before the Court

The essential issue in this case is whether AC E Foods should pay MTC L the purchase price for the subject
products.

The Court’s Ruling

The petition lacks merit.

A contract is what the law defines it to be, taking into consideration its essential elements, and not what the
contracting parties call it.33 The real nature of a contract may be determined from the express terms of the
written agreement and from the contemporaneous and subsequent acts of the contracting parties. However,
in the construction or interpretation of an instrument, the intention of the parties is primordial and is
to be pursued. The denomination or title given by the parties in their contract is not conclusive of the
nature of its contents. 34

The very essence of a contract of sale is the transfer of ownership in exchange for a price paid or
promised.35 This may be gleaned from Article 1458 of the C ivil C ode which defines a contract of sale as
follows:
Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership
and to deliver a determinate thing, and the other to pay therefor a price certain in money or its
equivalent.

A contract of sale may be absolute or conditional. (Emphasis supplied)

C orollary thereto, a contract of sale is classified as a consensual contract, which means that the sale is
perfected by mere consent. No particular form is required for its validity. Upon perfection of the contract,
the parties may reciprocally demand performance, i.e., the vendee may compel transfer of ownership of the
object of the sale, and the vendor may require the vendee to pay the thing sold. 36

In contrast, a contract to sell is defined as a bilateral contract whereby the prospective seller, while
expressly reserving the ownership of the property despite delivery thereof to the prospective buyer, binds
himself to sell the property exclusively to the prospective buyer upon fulfillment of the condition agreed
upon, i.e., the full payment of the purchase price. A contract to sell 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 upo n the happening of a contingent event which may or
may not occur.37

In this case, the C ourt concurs with the C A that the parties have agreed to a contract of sale and not to a
contract to sell as adjudged by the RTC . Bearing in mind its consensual nature, a contract of sale had been
perfected at the precise moment AC E Foods, as evinced by its act of sending MTC L the Purchase Order,
accepted the latter’s proposal to sell the subject products in consideration of the purchase price of
P646,464.00. From that point in time, the reciprocal obligations of the parties – i.e., on the one hand, of
MTC L to deliver the said products to AC E Foods, and, on the other hand, of AC E Foods to pay the purchase
price therefor within thirty (30) days from delivery – already arose and consequently may be demanded.
Article 1475 of the C ivil C ode makes this clear:
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.
At this juncture, the C ourt must dispel the notion that the stipulation anent MTC L’s reservation of ownership
of the subject products as reflected in the Invoice Receipt, i.e., the title reservation stipulation, changed the
complexion of the transaction from a contract of sale into a contract to sell. Records are bereft of any
showing that the said stipulation novated the contract o f sale between the parties which, to repeat, already
existed at the precise moment AC E Foods accepted MTC L’s proposal. To be sure, novation, in its broad
concept, may either be extinctive or modificatory. It is extinctive when an old obligation is terminat ed by the
creation of a new obligation that takes the place of the former; it is merely modificatory when the old
obligation subsists to the extent it remains compatible with the amendatory agreement. In either case,
however, novation is never presumed, and the animus novandi, whether totally or partially, must appear by
express agreement of the parties, or by their acts that are too clear and unequivocal to be mistaken. 38

In the present case, it has not been shown that the title reservation stipulation ap pearing in the Invoice
Receipt had been included or had subsequently modified or superseded the original agreement of the
parties. The fact that the Invoice Receipt was signed by a representative of AC E Foods does not, by and of
itself, prove animus novandi since: (a) it was not shown that the signatory was authorized by AC E Foods
(the actual party to the transaction) to novate the original agreement; (b) the signature only proves that the
Invoice Receipt was received by a representative of AC E Foods to sho w the fact of delivery; and (c) as
matter of judicial notice, invoices are generally issued at the consummation stage of the contract and not its
perfection, and have been even treated as documents which are not actionable per se, although they may
prove sufficient delivery.39 Thus, absent any clear indication that the title reservation stipulation was actually
agreed upon, the C ourt must deem the same to be a mere unilateral imposition on the part of MTC L which
has no effect on the nature of the parties’ original agreement as a contract of sale. Perforce, the obligations
arising thereto, among others, AC E Foods’s obligation to pay the purchase price as well as to accept the
delivery of the goods,40 remain enforceable and subsisting.

As a final point, it may not be amiss to state that the return of the subject products pursuant to a rescissory
action41 is neither warranted by AC E Foods’s claims of breach – either with respect to MTC L’s breach of its
purported “after delivery services” obligations or the defe ctive condition of the products – since such claims
were not adequately proven in this case. The rule is clear: each party must prove his own affirmative
allegation; one who asserts the affirmative of the issue has the burden of presenting at the trial suc h
amount of evidence required by law to obtain a favorable judgment, which in civil cases, is by
preponderance of evidence. 42 This, however, AC E Foods failed to observe as regards its allegations of
breach. Hence, the same cannot be sustained.

WHEREFORE, the petition is DENIED. Accordingly, the Decision dated October 21, 2011 and Resolution
dated February 8, 2012 of the C ourt of Appeals in C A -G.R. C V No. 89426 are hereby AFFIRMED. chanRobl esvi rtualLawli b
r ary

SO ORDERED.

Carpio, (Chairperson), Brion, Perla s-Bernabe, and Leonen,* JJ., concur.

Endnotes:
 SECOND DIVISION

G.R. No. 190016, October 02, 2013

FREDERICK VENTURA, MARITES VENTURA-ROXAS, AND PHILIP VENTURA (HEIRS OF DECEASED

DOLORES C. VENTURA), Petitioners, v. HEIRS OF SPOUSES EUSTACIO T. ENDAYA AND TRINIDAD L.
ENDAYA, NAMELY, TITUS L. ENDAYA, ENRICO L. ENDAYA, AND JOSEPHINE ENDAYA-
BANTUG,1 Respondents

DE CISIO N

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari2 is the Decision3 dated August 18, 2006 of the C ourt of
Appeals (C A) in C A-G.R. C V No. 68465 which reversed and set aside the Dec ision4 dated August 7, 2000 of
the Regional Trial C ourt of Parañaque C ity, Branch 258 (RTC ) in C ivil C ase No. 96 -0500, dismissing
petitioners’ complaint for specific performance seeking to compel respondents to execute a deed of sale over
the properties subject of this case.

The Facts

On June 29, 1981, Dolores Ventura (Dolores) entered into a C ontract to Sell 5 (contract to sell) with spouses
Eustacio and Trinidad Endaya (Sps. Endaya) for the purchase of two parcels of land covered by Transfer
C ertificates of Title (TC T) Nos. 392225 6 and (343392) S-679757 (subject properties), denominated as Lots 8
and 9, Block 3, situated in Marian Road II, Marian Park 8 (now Barangay San Martin de Porres), 9 Parañaque
C ity, Metro Manila.

The contract to sell provides that the purchase price of P347,760.00 shall be paid by Dolores in the following
manner: (a) downpayment of P103,284.00 upon execution of the contract; and (b) the balance of
P244,476.00 within a 15-year period (payment period), plus 12% interest per annum (p.a.) on the
outstanding balance and 12% interest p.a. on arrearages. It further provides that all payments made shall
be applied in the following order: first, to the reimbursement of real estate taxes and other charges; second,
to the interest accrued to the date of payment; third, to the amortization of the principal obligation;
and fourth, to the payment of any other accessory obligation subsequently incurred by the owner in favor of
the buyer. It likewise imposed upon Dolores the obligation to pay the r eal property taxes over the subject
properties, or to reimburse Sps. Endaya for any tax payments made by them, plus 1% interest per month.
Upon full payment of the stipulated consideration, Sps. Endaya undertook to execute a final deed of sale and
transfer ownership over the same in favor of Dolores. 10
cral aw l i brary

Meanwhile, Dolores was placed in possession of the subject properties and allowed to erect a building
thereon.11 However, on April 10, 1992, before the payment period expired, Dolores passed away. 12 cral aw l i bra
ry

On November 28, 1996, Dolores’ children, Frederick Ventura, Marites Ventura -Roxas, and Philip Ventura
(petitioners), filed before the RTC a C omplaint 13 and, thereafter, an Amended C omplaint14 for specific
performance, seeking to compel Sps. Endaya to execute a deed of sale over the subject properties. In this
regard, they averred that due to the close friendship between their parents and Sps. Endaya, the latt er did
not require the then widowed Dolores to pay the downpayment stated in the contract to sell and, instead,
allowed her to pay amounts as her means would permit. The payments were made in cash as well as in
kind,15 and the same were recorded by respondent Trinidad herself in a passbook 16 given to Dolores to
evidence the receipt of said payments. As of June 15, 1996, the total payments made by Dolores and
petitioners amounted to P952,152.00, which is more than the agreed purchase price of P347,760.00,
including the 12% interest p.a. thereon computed on the outstanding balance. 17 However, when petitioners
demanded18 the execution of the corresponding deed of sale, Sps. Endaya refused.
For their part, Sps. Endaya filed their Answer, 19 admitting the execution and genuineness of the contract to
sell and the passbook. However, they countered that Dolores did not pay the stipulated downpayment and
remitted only a total of 22 installments. After her death in 1992, petitioners no longer remitted any
installment. Sps. Endaya also averred that prior to Dolores' death, the parties agreed to a restructuring of
the contract to sell whereby Dolores agreed to give a “bonus” of P265,673.93 and to pay interest at the
increased rate of 24% p.a. on the outstanding balance. T hey further claimed that in April 1996, when the
balance of the purchase price stood at P1,699,671.69, a final restructuring of the contract to sell was agreed
with petitioners, fixing the obligation at P3,000,000.00. Thereafter, the latter paid a total of P380,000.00 on
two separate occasions, 20 leaving a balance of P2,620,000.00. In any event, Sps. Endaya pointed out that
the automatic cancellation clause under the foregoing contract rendered the same cancelled as early as
1981 with Dolores’ failure to make a downpayment and to faithfully pay the installments; 21 hence,
petitioners’ complaint for specific performance must fail. In addition, Sps. Endaya interposed a counterclaim
for the alleged unpaid balance of P2,620,000.00, plus damages, attorney's fees a nd costs of suit.22 cral aw l i brary

In their Reply with Answer to C ounterclaim, 23 petitioners denied the existence of any restructuring of the
contract to sell, invoking 24 the Dead Man's Statute 25 and the Statute of Frauds. 26 In turn, Sps. Endaya filed a
Rejoinder,27 challenging the inapplicability of the foregoing principles since the case was not filed against an
estate or an administrator of an estate, and in view of the partial performance of the contract to sell. 28 cral aw l i brary

While the oral depositions of Sps. Endaya were taken at the 4 th Municipal C ircuit Trial C ourt of Malvar-Balete,
Batangas on account of their frailty and old age, they, however, did not make a formal offer of their
depositions and documentary evidence. Hence, the case was submitted for decision on the basis of the
petitioners' evidence. 29 cral aw l ibrary

The RTC Ruling

In a Decision30 dated August 7, 2000, the RTC found that petitioners were able to prove by a preponderance
of evidence the fact of full payment of the purchase price for the subject properties. 31 As such, it ordered
Sps. Endaya to execute a deed of absolute sale covering the sale of the subject properties in petitioners’
favor and to pay them attorney's fees and costs of suit. 32 Dissatisfied, Sps. Endaya elevated the matter to
the C A.

The CA Ruling and Subsequent Proceedings

In a Decision33 dated August 18, 2006 (August 18, 2006 Decision), the C A reversed and set aside the RTC
ruling. It found that petitioners were not able to show that they fully complied with their obligations under
the contract to sell. It observed that aside from the payment of the purchase price an d 12% interest p.a. on
the outstanding balance, the contract to sell imposed upon petitioners the obligations to pay 12% interest
p.a. on the arrears and to reimburse Sps. Endaya the amount of the pertinent real estate taxes due on the
subject properties, which the former, however, totally disregarded as shown in their summary of
payments.34 cral aw l i brary

Meanwhile, counsel for petitioners, Atty. German A. Gineta, passed away on June 12, 2006, 35 hence, the
notice of the August 18, 2006 Decision sent to him was returned unserved. 36 On the other hand, the notice
sent to petitioners at No. 2, Barangay San Martin de Porres, Parañaque C ity, was likewise returned unserved
for the reason “insufficient address.” 37 cral aw l i brary

Nonetheless, the C A deemed the service of the said notice to them as valid and complete as of March 9,
2007 pursuant to Section 8, 38 Rule 13 of the Rules of C ourt (Rules). Accordingly, it directed 39 the Division
C lerk of C ourt to issue the corresponding Entry of Judgment. An Entry of Judgment 40 was, thus, made in the
C A Book of Entries of Judgments certifying that the August 18, 2006 Decision became final and executory on
March 25, 2007. The records were thereafter remanded 41 to the RTC .

In July 2009, respondent Titus Endaya, heir of Sps. Enda ya,42 demanded43 petitioners to vacate the subject
properties, which they refused.

On November 10, 2009, petitioners filed the instant petition invoking the benevolence of the C ourt to set
aside the C A’s August 18, 2006 Decision and, instead, reinstate the RTC Decision in the interest of
substantial justice. They claimed that they had no knowledge of the demise of their counsel; therefore, they
were unable to file a timely motion for reconsideration before the C A or the proper petition before the C ourt.
Further, they contend that they have proven full payment of the purchase price within the payment period
as required by the contract to sell.

For their part, the heirs of Sps. Endaya (respondents) objected 44 to the belated filing of the petition long
after the said C A Decision had lapsed into finality, especially as the petition raised fac tual issues that are
improper in a petition for review on certiorari under Rule 45 of the Rules. In any case, they countered that
the C A correctly held that petitioners failed to fully comply with their obligations under the contract to sell;
thus, respondents are under no obligation to execute any deed of sale over the subject properties in favor of
petitioners.

On September 22, 2010, the C ourt gave due course to the petition and required the parties to file their
respective memoranda, 45 which they duly submitted.

The Issues Before the Court

The principal issues in this case are: (a) whether or not petitioners’ right to appeal before the C ourt should
be upheld; and (b) whether or not respondents should execute a deed of sale over the subject properties in
favor of petitioners.

The Court's Ruling

The petition is partly meritorious.

Anent the first issue, it is observed that the C A erroneously sent the notice of the assailed August 18, 2006
Decision to petitioners at No. 2, Barangay San Martin de Porres, Parañaque C ity, instead of their address of
record, i.e., Marian Road 2, Brgy. San Martin de Porres, Parañaque, Metro Manila 46 and thus, was returned
unserved for the reason “insufficient address.” 47 The notices of the Entry of Judgment48and the transmittal
letter 49 to the C lerk of C ourt of the RTC indicate this fact. As such, there was clearly no proper and valid
service of the said C A Decision which deprived petitioners of the opportunity to file a motion for
reconsideration before the C A and/or further appeal to the C ourt. Verily, it would be unjust and unfair to
allow petitioners to suffer the adverse effects of the premature entry of judgment made by the C A.
Therefore, the C ourt deems it prudent to set aside the foregoing entry and upholds petition ers' right to
appeal.

Nevertheless, with respect to the second issue, a thorough review of the records reveals no sufficient reason
to warrant the reversal of the C A’s August 18, 2006 Decision dismissing petitioners' complaint for specific
performance which sought to enforce the contract to sell and to compel respondents to execute a deed of
sale over the subject properties.

A contract to sell is 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 latter upon his fulfillment of the conditions agreed upon, i.e., the full
payment of the purchase price 50 and/or compliance with the other obligations stated in the contract to sell.
Given its contingent nature, the failure of the prospective buyer to make full payment 51 and/or abide by his
commitments stated in the contract to sell prevents the obligation of the prospective seller to execute the
corresponding deed of sale to effect the transfer of ownership to the buyer from arising. As discussed in Sps.
Serrano and Herrera v. Caguiat:52
A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor's obligation
to transfer title is subordinated to the happening of a future and uncertain event, so that if the suspensive
condition does not take place, the parties would stand as if the conditional obligation had never existed. x x
x.53
To note, while the quality of contingency inheres in a contract to sell, the same should not be confused with
a conditional contract of sale. In a contract to sell, the fulfillment of the suspensive condition will not
automatically transfer ownership 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.54 On the other hand, in a conditional contract of sale, the fulfillment of the suspensive
condition renders the sale absolute and the previous delivery of the property has the effect of automatically
transferring the seller’s ownership or title to the property to the buyer. 55
cral aw l i b
r ary

Keeping with these principles, the C ourt finds that respondents had no obligation to petitioners to execute a
deed of sale over the subject properties. As aptly pointed out by the C A, aside from the payment of the
purchase price and 12% interest p.a. on the outstanding balance, the contract to sell likewise imposed upon
petitioners the obligation to pay the real property taxes over the subject properties as well as 12% interest
p.a. on the arrears.56 However, the summary of payments 57 as well as the statement of account58 submitted
by petitioners clearly show that only the payments corresponding to the principal obligation and the 12%
interest p.a. on the outstanding balance were considered in arriving at the amount of P952,152.00. The
C ourt has examined the petition 59 as well as petitioners' memorandum 60 and found no justifiable reason for
the said omission. Hence, the reasonable conclusion would therefore be that petitioners indeed failed to
comply with all their obligations under the contract to sell and, as such, have no right to enforce th e same.
C onsequently, there lies no error on the part of the C A in reversing the RTC Decision and dismissing
petitioners’ complaint for specific performance seeking to compel respondents to execute a deed of sale over
the subject properties.

WHEREFORE, the Entry of Judgment in C A-G.R. C V No. 68465 is hereby LIFTED. The Decision dated
August 18, 2006 of the C ourt of Appeals in the said case is, however, AFFIRMED.

SO ORDERED.

Carpio, (Chairperson), Brion, Del Castillo, and Perez, JJ., concur.

Endnotes: