FIRST DIVISION 2.

Deed of Absolute Sale covering Lot 168-I-3 of subdivision plan (LRC) Psd-256394 executed
on 7 June 1979, in favor of defendant Clarita Joaquin, for a consideration
of P1[2],000.00 (Exh. D), pursuant to which TCT No. S-109772 was issued in her name (Exh.
G.R. No. 126376 : November 20, 2003
D-1);

SPOUSES BERNARDO BUENAVENTURA and CONSOLACION JOAQUIN,

SPOUSES JUANITO EDRA and NORA JOAQUIN, SPOUSES RUFINO VALDOZ and
EMMA JOAQUIN, and NATIVIDAD JOAQUIN, petitioners, vs. COURT OF APPEALS,
SPOUSES LEONARDO JOAQUIN and FELICIANA LANDRITO, SPOUSES FIDEL
JOAQUIN and CONCHITA BERNARDO, SPOUSES TOMAS JOAQUIN and
SOLEDAD ALCORAN, SPOUSES ARTEMIO JOAQUIN and SOCORRO ANGELES,
SPOUSES ALEXANDER MENDOZA and CLARITA JOAQUIN, SPOUSES
TELESFORO CARREON and FELICITAS JOAQUIN, SPOUSES DANILO VALDOZ
and FE JOAQUIN, and SPOUSES GAVINO JOAQUIN and LEA ASIS, respondents.
DECISION
CARPIO, J.:
3 Deed of Absolute Sale covering Lot 168-I-1 of subdivision plan (LRC) Psd-256394 executed
on 12 May 1988, in favor of defendant spouses Fidel Joaquin and Conchita Bernardo, for a
consideration of P54,[3]00.00 (Exh. E), pursuant to which TCT No. 155329 was issued to them
(Exh. E-1);
4. Deed of Absolute Sale covering Lot 168-I-2 of subdivision plan (LRC) Psd-256394 executed
on 12 May 1988, in favor of defendant spouses Artemio Joaquin and Socorro Angeles, for a
consideration of P[54,3]00.00 (Exh. F), pursuant to which TCT No. 155330 was issued to them
(Exh. F-1); and
5. Absolute Sale of Real Property covering Lot 168-C-4 of subdivision plan (LRC) Psd-256395
executed on 9 September 1988, in favor of Tomas Joaquin, for a consideration of P20,000.00
(Exh. G), pursuant to which TCT No. 157203 was issued in her name (Exh. G-1).

The Case
[6. Deed of Absolute Sale covering Lot 168-C-1 of subdivision plan (LRC) Psd-256395
executed on 7 October 1988, in favor of Gavino Joaquin, for a consideration of P25,000.00
This is a petition for review on certiorari1 to annul the Decision2 dated 26 June 1996 of the (Exh. K), pursuant to which TCT No. 157779 was issued in his name (Exh. K-1).]
Court of Appeals in CA-G.R. CV No. 41996. The Court of Appeals affirmed the
Decision3 dated 18 February 1993 rendered by Branch 65 of the Regional Trial Court of
In seeking the declaration of nullity of the aforesaid deeds of sale and certificates of title,
Makati (trial court) in Civil Case No. 89-5174. The trial court dismissed the case after it found
plaintiffs, in their complaint, aver:
that the parties executed the Deeds of Sale for valid consideration and that the plaintiffs did not
have a cause of action against the defendants.
- XX-
The Facts
The deeds of sale, Annexes C, D, E, F, and G, [and K] are simulated as they are, are NULL
AND VOID AB INITIO because
The Court of Appeals summarized the facts of the case as follows:

Defendant spouses Leonardo Joaquin and Feliciana Landrito are the parents of plaintiffs
Consolacion, Nora, Emma and Natividad as well as of defendants Fidel, Tomas, Artemio,
Clarita, Felicitas, Fe, and Gavino, all surnamed JOAQUIN. The married Joaquin children are
joined in this action by their respective spouses.
Sought to be declared null and void ab initio are certain deeds of sale of real property executed
by defendant parents Leonardo Joaquin and Feliciana Landrito in favor of their co-defendant
children and the corresponding certificates of title issued in their names, to wit:
1. Deed of Absolute Sale covering Lot 168-C-7 of subdivision plan (LRC) Psd-256395
executed on 11 July 1978, in favor of defendant Felicitas Joaquin, for a consideration
of P6,000.00 (Exh. C), pursuant to which TCT No. [36113/T-172] was issued in her name
(Exh. C-1);
a) Firstly, there was no actual valid consideration for the deeds of sale xxx over the
properties in litis;
b) Secondly, assuming that there was consideration in the sums reflected in the questioned
deeds, the properties are more than three-fold times more valuable than the measly sums
appearing therein;
c) Thirdly, the deeds of sale do not reflect and express the true intent of the parties (vendors
and vendees); and
d) Fourthly, the purported sale of the properties in litis was the result of a deliberate conspiracy
designed to unjustly deprive the rest of the compulsory heirs (plaintiffs herein) of their
legitime.
- XXI - The Ruling of the Court of Appeals

Necessarily, and as an inevitable consequence, Transfer Certificates of Title Nos. 36113/T-172,
S-109772, 155329, 155330, 157203 [and 157779] issued by the Registrar of Deeds over the
properties in litis xxx are NULL AND VOID AB INITIO.
Defendants, on the other hand aver (1) that plaintiffs do not have a cause of action against them
as well as the requisite standing and interest to assail their titles over the properties in litis; (2)
that the sales were with sufficient considerations and made by defendants parents voluntarily,
in good faith, and with full knowledge of the consequences of their deeds of sale; and (3) that
the certificates of title were issued with sufficient factual and legal basis.4 (Emphasis in the
original)
The Ruling of the Trial Court
Before the trial, the trial court ordered the dismissal of the case against defendant spouses
Gavino Joaquin and Lea Asis.5 Instead of filing an Answer with their co-defendants, Gavino
Joaquin and Lea Asis filed a Motion to Dismiss.6 In granting the dismissal to Gavino Joaquin
and Lea Asis, the trial court noted that compulsory heirs have the right to a legitime but such
right is contingent since said right commences only from the moment of death of the decedent
pursuant to Article 777 of the Civil Code of the Philippines. 7cräläwvirtualibräry
After trial, the trial court ruled in favor of the defendants and dismissed the complaint. The trial
court stated:
In the first place, the testimony of the defendants, particularly that of the xxx father will show
that the Deeds of Sale were all executed for valuable consideration. This assertion must prevail
over the negative allegation of plaintiffs.
The Court of Appeals affirmed the decision of the trial court. The appellate court ruled:
To the mind of the Court, appellants are skirting the real and decisive issue in this case, which
is, whether xxx they have a cause of action against appellees.
Upon this point, there is no question that plaintiffs-appellants, like their defendant brothers and
sisters, are compulsory heirs of defendant spouses, Leonardo Joaquin and Feliciana Landrito,
who are their parents. However, their right to the properties of their defendant parents, as
compulsory heirs, is merely inchoate and vests only upon the latters death. While still alive,
defendant parents are free to dispose of their properties, provided that such dispositions are not
made in fraud of creditors.
Plaintiffs-appellants are definitely not parties to the deeds of sale in question. Neither do they
claim to be creditors of their defendant parents. Consequently, they cannot be considered as
real parties in interest to assail the validity of said deeds either for gross inadequacy or lack of
consideration or for failure to express the true intent of the parties. In point is the ruling of the
Supreme Court in Velarde, et al. vs. Paez, et al., 101 SCRA 376, thus:
The plaintiffs are not parties to the alleged deed of sale and are not principally or subsidiarily
bound thereby; hence, they have no legal capacity to challenge their validity.
Plaintiffs-appellants anchor their action on the supposed impairment of their legitime by the
dispositions made by their defendant parents in favor of their defendant brothers and sisters.
But, as correctly held by the court a quo, the legitime of a compulsory heir is computed as of
the time of the death of the decedent. Plaintiffs therefore cannot claim an impairment of their
legitime while their parents live.

And then there is the argument that plaintiffs do not have a valid cause of action against With this posture taken by the Court, consideration of the errors assigned by plaintiffs-
defendants since there can be no legitime to speak of prior to the death of their parents. The appellants is inconsequential.
court finds this contention tenable. In determining the legitime, the value of the property left at
the death of the testator shall be considered (Art. 908 of the New Civil Code). Hence, the
WHEREFORE, the decision appealed from is hereby AFFIRMED, with costs against
legitime of a compulsory heir is computed as of the time of the death of the decedent. Plaintiffs
plaintiffs-appellants.
therefore cannot claim an impairment of their legitime while their parents live.

SO ORDERED.9cräläwvirtualibräry
All the foregoing considered, this case is DISMISSED.

Hence, the instant petition.

In order to preserve whatever is left of the ties that should bind families together, the
counterclaim is likewise DISMISSED.
Issues
No costs.
Petitioners assign the following as errors of the Court of Appeals:
SO ORDERED.8
1. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE IN
QUESTION HAD NO VALID CONSIDERATION.
2. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT EVEN ASSUMING
THAT THERE WAS A CONSIDERATION, THE SAME IS GROSSLY INADEQUATE.
3. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE DEEDS OF SALE
DO NOT EXPRESS THE TRUE INTENT OF THE PARTIES.
4. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE
WAS PART AND PARCEL OF A CONSPIRACY AIMED AT UNJUSTLY DEPRIVING
THE REST OF THE CHILDREN OF THE SPOUSES LEONARDO JOAQUIN AND
FELICIANA LANDRITO OF THEIR INTEREST OVER THE SUBJECT PROPERTIES.
5. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT PETITIONERS HAVE A
GOOD, SUFFICIENT AND VALID CAUSE OF ACTION AGAINST THE PRIVATE
RESPONDENTS.10
The Ruling of the Court
We find the petition without merit.
We will discuss petitioners legal interest over the properties subject of the Deeds of Sale before
discussing the issues on the purported lack of consideration and gross inadequacy of the prices
of the Deeds of Sale.
Whether Petitioners have a legal interest
over the properties subject of the Deeds of Sale
Petitioners Complaint betrays their motive for filing this case. In their Complaint, petitioners
asserted that the purported sale of the properties in litis was the result of a deliberate conspiracy
designed to unjustly deprive the rest of the compulsory heirs (plaintiffs herein) of their
legitime. Petitioners strategy was to have the Deeds of Sale declared void so that ownership of
the lots would eventually revert to their respondent parents. If their parents die still owning the
lots, petitioners and their respondent siblings will then co-own their parents estate by hereditary
succession.11cräläwvirtualibräry
It is evident from the records that petitioners are interested in the properties subject of the
Deeds of Sale, but they have failed to show any legal right to the properties. The trial and
appellate courts should have dismissed the action for this reason alone. An action must be
prosecuted in the name of the real party-in-interest.12cräläwvirtualibräry
[T]he question as to real party-in-interest is whether he is the party who would be benefitted or
injured by the judgment, or the party entitled to the avails of the suit.
xxx
In actions for the annulment of contracts, such as this action, the real parties are those who are
parties to the agreement or are bound either principally or subsidiarily or are prejudiced in their
rights with respect to one of the contracting parties and can show the detriment which would
positively result to them from the contract even though they did not intervene in it (Ibaez v.
Hongkong & Shanghai Bank, 22 Phil. 572 [1912]) xxx.
These are parties with a present substantial interest, as distinguished from a mere expectancy or
future, contingent, subordinate, or consequential interest. The phrase present substantial
interest more concretely is meant such interest of a party in the subject matter of the action as
will entitle him, under the substantive law, to recover if the evidence is sufficient, or that he has
the legal title to demand and the defendant will be protected in a payment to or recovery by
him.13cräläwvirtualibräry
Petitioners do not have any legal interest over the properties subject of the Deeds of Sale. As
the appellate court stated, petitioners right to their parents properties is merely inchoate and
vests only upon their parents death. While still living, the parents of petitioners are free to
dispose of their properties. In their overzealousness to safeguard their future legitime,
petitioners forget that theoretically, the sale of the lots to their siblings does not affect the value
of their parents estate. While the sale of the lots reduced the estate, cash of equivalent value
replaced the lots taken from the estate.
Whether the Deeds of Sale are void
for lack of consideration
Petitioners assert that their respondent siblings did not actually pay the prices stated in the
Deeds of Sale to their respondent father. Thus, petitioners ask the court to declare the Deeds of
Sale void.
A contract of sale is not a real contract, but a consensual contract. As a consensual contract, a
contract of sale becomes a binding and valid contract upon the meeting of the minds as to
price. If there is a meeting of the minds of the parties as to the price, the contract of sale is
valid, despite the manner of payment, or even the breach of that manner of payment. If the real
price is not stated in the contract, then the contract of sale is valid but subject to reformation. If
there is no meeting of the minds of the parties as to the price, because the price stipulated in the
contract is simulated, then the contract is void.14 Article 1471 of the Civil Code states that if the
price in a contract of sale is simulated, the sale is void.
It is not the act of payment of price that determines the validity of a contract of sale. Payment
of the price has nothing to do with the perfection of the contract. Payment of the price goes into
the performance of the contract. Failure to pay the consideration is different from lack of
consideration. The former results in a right to demand the fulfillment or cancellation of the
obligation under an existing valid contract while the latter prevents the existence of a valid
contract.15cräläwvirtualibräry
Petitioners failed to show that the prices in the Deeds of Sale were absolutely simulated. To
prove simulation, petitioners presented Emma Joaquin Valdozs testimony stating that their
father, respondent Leonardo Joaquin, told her that he would transfer a lot to her through a deed
of sale without need for her payment of the purchase price.16 The trial court did not find the
allegation of absolute simulation of price credible. Petitioners failure to prove absolute
simulation of price is magnified by their lack of knowledge of their respondent siblings
financial capacity to buy the questioned lots.17 On the other hand, the Deeds of Sale which
petitioners presented as evidence plainly showed the cost of each lot sold. Not only did
respondents minds meet as to the purchase price, but the real price was also stated in the Deeds
of Sale. As of the filing of the complaint, respondent siblings have also fully paid the price to
their respondent father.18
ridiculous contracts, use miserable judgment, and lose money by them indeed, all they have in
the world; but not for that alone can the law intervene and restore. There must be, in addition,
a violation of the law, the commission of what the law knows as an actionable wrong, before
the courts are authorized to lay hold of the situation and remedy it. (Emphasis in the original)
Moreover, the factual findings of the appellate court are conclusive on the parties and carry
greater weight when they coincide with the factual findings of the trial court. This Court will
not weigh the evidence all over again unless there has been a showing that the findings of the
lower court are totally devoid of support or are clearly erroneous so as to constitute serious
abuse of discretion.20 In the instant case, the trial court found that the lots were sold for a valid
consideration, and that the defendant children actually paid the purchase price stipulated in
their respective Deeds of Sale. Actual payment of the purchase price by the buyer to the seller
is a factual finding that is now conclusive upon us.
WHEREFORE, we AFFIRM the decision of the Court of Appeals in toto.

Whether the Deeds of Sale are void

SO ORDERED.

for gross inadequacy of price

Petitioners ask that assuming that there is consideration, the same is grossly inadequate as to
invalidate the Deeds of Sale.

Articles 1355 of the Civil Code states:

Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not invalidate
a contract, unless there has been fraud, mistake or undue influence. (Emphasis supplied)

Article 1470 of the Civil Code further provides:

Art. 1470. Gross inadequacy of price does not affect a contract of sale, except as may indicate
a defect in the consent, or that the parties really intended a donation or some other act or
contract. (Emphasis supplied)

Petitioners failed to prove any of the instances mentioned in Articles 1355 and 1470 of the
Civil Code which would invalidate, or even affect, the Deeds of Sale. Indeed, there is no
requirement that the price be equal to the exact value of the subject matter of sale. All the
respondents believed that they received the commutative value of what they gave. As we stated
in Vales v. Villa:19cräläwvirtualibräry

Courts cannot follow one every step of his life and extricate him from bad bargains, protect
him from unwise investments, relieve him from one-sided contracts, or annul the effects of
foolish acts. Courts cannot constitute themselves guardians of persons who are not legally
incompetent. Courts operate not because one person has been defeated or overcome by another,
but because he has been defeated or overcome illegally. Men may do foolish things, make
 THIRD DIVISION to Morales' surviving heirs, in accordance with the award earlier made by the City of
Cebu.11 This was followed by another letter of the same tenor dated October 10, 1986
addressed to Governor Osmundo G. Rama.12
[G.R. NO. 170115 : February 19, 2008]

PROVINCE OF CEBU, Petitioner, v. HEIRS OF RUFINA MORALES, NAMELY:
FELOMINA V. PANOPIO, NENITA VILLANUEVA, ERLINDA V. ADRIANO and
CATALINA V. QUESADA, Respondents.
DECISION
YNARES-SANTIAGO, J.:
1
This is a Petition for Review on Certiorari of the Decision of the Court of Appeals dated
March 29, 2005 in CA-G.R. CV No. 53632, which affirmed in toto the Decision2 of the
Regional Trial Court of Cebu City, Branch 6, in Civil Case No. CEB-11140 for specific
performance and reconveyance of property. Also assailed is the Resolution 3 dated August 31,
2005 denying the motion for reconsideration.
On September 27, 1961, petitioner Province of Cebu leased 4 in favor of Rufina Morales a 210-
square meter lot which formed part of Lot No. 646-A of the Banilad Estate. Subsequently or
sometime in 1964, petitioner donated several parcels of land to the City of Cebu. Among those
donated was Lot No. 646-A which the City of Cebu divided into sub-lots. The area occupied by
Morales was thereafter denominated as Lot No. 646-A-3, for which Transfer Certificate of
Title (TCT) No. 308835 was issued in favor of the City of Cebu.
On July 19, 1965, the city sold Lot No. 646-A-3 as well as the other donated lots at public
auction in order to raise money for infrastructure projects. The highest bidder for Lot No. 646-
A-3 was Hever Bascon but Morales was allowed to match the highest bid since she had a
preferential right to the lot as actual occupant thereof.6 Morales thus paid the required deposit
and partial payment for the lot.7
The requests remained unheeded thus, Quesada, together with the other nieces of Morales
namely, respondents Nenita Villanueva and Erlinda V. Adriano, as well as Morales' sister,
Felomina V. Panopio, filed an action for specific performance and reconveyance of property
against petitioner, which was docketed as Civil Case No. CEB-11140 before Branch 6 of the
Regional Trial Court of Cebu City.13 They also consigned with the court the amount of
P13,450.00 representing the balance of the purchase price which petitioner allegedly refused to
accept.14
Panopio died shortly after the complaint was filed.15
Respondents averred that the award at public auction of the lot to Morales was a valid and
binding contract entered into by the City of Cebu and that the lot was inadvertently returned to
petitioner under the compromise judgment in Civil Case No. 238-BC. They alleged that they
could not pay the balance of the purchase price during the pendency of said case due to
confusion as to whom and where payment should be made. They thus prayed that judgment be
rendered ordering petitioner to execute a final deed of absolute sale in their favor, and that TCT
No. 104310 in the name of petitioner be cancelled.16
Petitioner filed its answer but failed to present evidence despite several opportunities given
thus, it was deemed to have waived its right to present evidence.17
On March 6, 1996, the trial court rendered judgment, the dispositive part of which reads:
WHEREFORE, judgment is rendered in favor of the plaintiffs and against the defendant
Province of Cebu, hereby directing the latter to convey Lot 646-A-3 to the plaintiffs as heirs of
Rufina Morales, and in this connection, to execute the necessary deed in favor of said
plaintiffs.

In the meantime, petitioner filed an action for reversion of donation against the City of Cebu
No pronouncement as to costs.
docketed as Civil Case No. 238-BC before Branch 7 of the then Court of First Instance of
Cebu. On May 7, 1974, petitioner and the City of Cebu entered into a compromise agreement
which the court approved on July 17, 1974.8 The agreement provided for the return of the SO ORDERED.18
donated lots to petitioner except those that have already been utilized by the City of Cebu.
Pursuant thereto, Lot No. 646-A-3 was returned to petitioner and registered in its name under
In ruling for the respondents, the trial court held thus:
TCT No. 104310.9

Morales died on February 20, 1969 during the pendency of Civil Case No. 238-BC.10 Apart
from the deposit and down payment, she was not able to make any other payments on the
balance of the purchase price for the lot.
On March 11, 1983, one of the nieces of Morales, respondent Catalina V. Quesada, wrote to
then Cebu Governor Eduardo R. Gullas asking for the formal conveyance of Lot No. 646-A-3
[T]he Court is convinced that there was already a consummated sale between the City of Cebu
and Rufina Morales. There was the offer to sell in that public auction sale. It was accepted by
Rufina Morales with her bid and was granted the award for which she paid the agreed
downpayment. It cannot be gainsaid that at that time the owner of the property was the City of
Cebu. It has the absolute right to dispose of it thru that public auction sale. The donation by the
defendant Province of Cebu to Cebu City was not voided in that Civil Case No. 238-BC. The
compromise agreement between the parties therein on the basis of which judgment was
rendered did not provide nullification of the sales or disposition made by the City of Cebu.
Being virtually successor-in-interest of City of Cebu, the defendant is bound by the contract
lawfully entered into by the former. Defendant did not initiate any move to invalidate the sale
for one reason or another. Hence, it stands as a perfectly valid contract which defendant must
respect. Rufina Morales had a vested right over the property. The plaintiffs being the heirs or
successors-in-interest of Rufina Morales, have the right to ask for the conveyance of the
property to them. While it may be true that the title of the property still remained in the name
of the City of Cebu until full payment is made, and this could be the reason why the lot in
question was among those reverted to the Province, the seller's obligation under the contract
was, for all legal purposes, transferred to, and assumed by, the defendant Province of Cebu. It
is then bound by such contract.19
Petitioner appealed to the Court of Appeals which affirmed the decision of the trial court in
toto. Upon denial of its motion for reconsideration, petitioner filed the instant petition under
Rule 45 of the Rules of Court, alleging that the appellate court erred in:
FINDING THAT RUFINA MORALES AND RESPONDENTS, AS HER HEIRS, HAVE
THE RIGHT TO EQUAL THE BID OF THE HIGHEST BIDDER OF THE SUBJECT
PROPERTY AS LESSEES THEREOF;
FINDING THAT WITH THE DEPOSIT AND PARTIAL PAYMENT MADE BY RUFINA
MORALES, THE SALE WAS IN EFFECT CLOSED FOR ALL LEGAL PURPOSES, AND
THAT THE TRANSACTION WAS PERFECTED AND CONSUMMATED;
FINDING THAT LACHES AND/OR PRESCRIPTION ARE NOT APPLICABLE AGAINST
RESPONDENTS;
FINDING THAT DUE TO THE PENDENCY OF CIVIL CASE NO. 238-BC, PLAINTIFFS
WERE NOT ABLE TO PAY THE AGREED INSTALLMENTS;
AFFIRMING THE DECISION OF THE TRIAL COURT IN FAVOR OF THE
RESPONDENTS AND AGAINST THE PETITIONERS.20
The petition lacks merit.
The appellate court correctly ruled that petitioner, as successor-in-interest of the City of Cebu,
is bound to respect the contract of sale entered into by the latter pertaining to Lot No. 646-A-3.
The City of Cebu was the owner of the lot when it awarded the same to respondents'
predecessor-in-interest, Morales, who later became its owner before the same was erroneously
returned to petitioner under the compromise judgment. The award is tantamount to a perfected
contract of sale between Morales and the City of Cebu, while partial payment of the purchase
price and actual occupation of the property by Morales and respondents effectively transferred
ownership of the lot to the latter. This is true notwithstanding the failure of Morales and
respondents to pay the balance of the purchase price.
Petitioner can no longer assail the award of the lot to Morales on the ground that she had no
right to match the highest bid during the public auction. Whether Morales, as actual occupant
and/or lessee of the lot, was qualified and had the right to match the highest bid is a foregone
matter that could have been questioned when the award was made. When the City of Cebu
awarded the lot to Morales, it is assumed that she met all qualifications to match the highest
bid. The subject lot was auctioned in 1965 or more than four decades ago and was never
questioned. Thus, it is safe to assume, as the appellate court did, that all requirements for a
valid public auction sale were complied with.
A sale by public auction is perfected "when the auctioneer announces its perfection by the fall
of the hammer or in other customary manner".21 It does not matter that Morales merely
matched the bid of the highest bidder at the said auction sale. The contract of sale was
nevertheless perfected as to Morales, since she merely stepped into the shoes of the highest
bidder.
Consequently, there was a meeting of minds between the City of Cebu and Morales as to the
lot sold and its price, such that each party could reciprocally demand performance of the
contract from the other.22 A contract of sale is a consensual contract and 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. The elements of a valid contract of sale
under Article 1458 of the Civil Code are: (1) consent or meeting of the minds; (2) determinate
subject matter; and (3) price certain in money or its equivalent.23 All these elements were
present in the transaction between the City of Cebu and Morales.
There is no merit in petitioner's assertion that there was no perfected contract of sale because
no "Contract of Purchase and Sale" was ever executed by the parties. As previously stated, a
contract of sale is a consensual contract that is perfected upon a meeting of minds as to the
object of the contract and its price. Subject to the provisions of the Statute of Frauds, a formal
document is not necessary for the sale transaction to acquire binding effect.24 For as long as the
essential elements of a contract of sale are proved to exist in a given transaction, the contract is
deemed perfected regardless of the absence of a formal deed evidencing the same.
Similarly, petitioner erroneously contends that the failure of Morales to pay the balance of the
purchase price is evidence that there was really no contract of sale over the lot between
Morales and the City of Cebu. On the contrary, the fact that there was an agreed price for the
lot proves that a contract of sale was indeed perfected between the parties. Failure to pay the
balance of the purchase price did not render the sale inexistent or invalid, but merely gave rise
to a right in favor of the vendor to either demand specific performance or rescission of the
contract of sale.25 It did not abolish the contract of sale or result in its automatic invalidation.
As correctly found by the appellate court, the contract of sale between the City of Cebu and
Morales was also partially consummated. The latter had paid the deposit and downpayment for
the lot in accordance with the terms of the bid award. She first occupied the property as a
lessee in 1961, built a house thereon and was continuously in possession of the lot as its owner
until her death in 1969. Respondents, on the other hand, who are all surviving heirs of Morales,
likewise occupied the property during the latter's lifetime and continue to reside on the property
to this day.26
The stages of a contract of sale are as follows: (1) negotiation, covering the period from the
time the prospective contracting parties indicate interest in the contract to the time the contract
is perfected; (2) perfection, which takes place upon the concurrence of the essential elements of
the sale which are the meeting of the minds of the parties as to the object of the contract and
upon the price; and (3) consummation, which begins when the parties perform their respective
undertakings under the contract of sale, culminating in the extinguishment thereof.27 In this
case, respondents' predecessor had undoubtedly commenced performing her obligation by
making a down payment on the purchase price. Unfortunately, however, she was not able to
complete the payments due to legal complications between petitioner and the city.
Thus, the City of Cebu could no longer dispose of the lot in question when it was included as
among those returned to petitioner pursuant to the compromise agreement in Civil Case No.
238-BC. The City of Cebu had sold the property to Morales even though there remained a
balance on the purchase price and a formal contract of sale had yet to be executed. Incidentally,
the failure of respondents to pay the balance on the purchase price and the non-execution of a
formal agreement was sufficiently explained by the fact that the trial court, in Civil Case No.
238-BC, issued a writ of preliminary injunction enjoining the city from further disposing the
donated lots. According to respondents, there was confusion as to the circumstances of
payment considering that both the city and petitioner had refused to accept payment by virtue
of the injunction.28 It appears that the parties simply mistook Lot 646-A-3 as among those not
yet sold by the city.
that it took a long time for respondents to bring suit for specific performance and consign the
balance of the purchase price, it is equally true that petitioner or its predecessor did not take
any action to have the contract of sale rescinded. Article 1592 allows the vendee to pay as long
as no demand for rescission has been made.30 The consignation of the balance of the purchase
price before the trial court thus operated as full payment, which resulted in the extinguishment
of respondents' obligation under the contract of sale.
Finally, petitioner cannot raise the issue of prescription and laches at this stage of the
proceedings. Contrary to petitioner's assignment of errors, the appellate court made no findings
on the issue because petitioner never raised the matter of prescription and laches either before
the trial court or Court of Appeals. It is basic that defenses and issues not raised below cannot
be considered on appeal.31 Thus, petitioner cannot plead the matter for the first time before this
Court.
WHEREFORE, in view of the foregoing, the petition is hereby DENIED and the decision and
resolution of the Court of Appeals in CA-G.R. CV No. 53632 are AFFIRMED.
SO ORDERED.

The City of Cebu was no longer the owner of Lot 646-A-3 when it ceded the same to petitioner
under the compromise agreement in Civil Case No. 238-BC. At that time, the city merely
retained rights as an unpaid seller but had effectively transferred ownership of the lot to
Morales. As successor-in-interest of the city, petitioner could only acquire rights that its
predecessor had over the lot. These rights include the right to seek rescission or fulfillment of
the terms of the contract and the right to damages in either case. 29

In this regard, the records show that respondent Quesada wrote to then Cebu Governor
Eduardo R. Gullas on March 11, 1983, asking for the formal conveyance of Lot 646-A-3
pursuant to the award and sale earlier made by the City of Cebu. On October 10, 1986, she
again wrote to Governor Osmundo G. Rama reiterating her previous request. This means that
petitioner had known, at least as far back as 1983, that the city sold the lot to respondents'
predecessor and that the latter had paid the deposit and the required down payment. Despite
this knowledge, however, petitioner did not avail of any rightful recourse to resolve the matter.

Article 1592 of the Civil Code pertinently provides:

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 shall of right
take place, the vendee may pay, even after the expiration of the period, as long as no demand
for rescission of the contract has been made upon him either judicially or by notarial act. After
the demand, the court may not grant him a new term. (Underscoring supplied)cralawlibrary

Thus, respondents could still tender payment of the full purchase price as no demand for
rescission had been made upon them, either judicially or through notarial act. While it is true
G.R. No. L-35702 May 29, 1973
DOMINGO D. RUBIAS, plaintiff-appellant,
vs.
ISAIAS BATILLER, defendant-appellee.
Gregorio M. Rubias for plaintiff-appellant.
Vicente R. Acsay for defendant-appellee.
TEEHANKEE, J.:
In this appeal certified by the Court of Appeals to this Court as involving purely legal
questions, we affirm the dismissal order rendered by the Iloilo court of first instance after pre-
trial and submittal of the pertinent documentary exhibits.
Such dismissal was proper, plaintiff having no cause of action, since it was duly established in
the record that the application for registration of the land in question filed by Francisco
Militante, plaintiff's vendor and predecessor interest, had been dismissed by decision of 1952
of the land registration court as affirmed by final judgment in 1958 of the Court of Appeals and
hence, there was no title or right to the land that could be transmitted by the purported sale to
plaintiff.
As late as 1964, the Iloilo court of first instance had in another case of ejectment likewise
upheld by final judgment defendant's "better right to possess the land in question . having been
in the actual possession thereof under a claim of title many years before Francisco Militante
sold the land to the plaintiff."
Furthermore, even assuming that Militante had anything to sell, the deed of sale executed in
1956 by him in favor of plaintiff at a time when plaintiff was concededly his counsel of record
in the land registration case involving the very land in dispute (ultimately decided adversely
against Militante by the Court of Appeals' 1958 judgment affirming the lower court's dismissal
of Militante's application for registration) was properly declared inexistent and void by the
lower court, as decreed by Article 1409 in relation to Article 1491 of the Civil Code.
The appellate court, in its resolution of certification of 25 July 1972, gave the following
backgrounder of the appeal at bar:
On August 31, 1964, plaintiff Domingo D. Rubias, a lawyer, filed a suit
to recover the ownership and possession of certain portions of lot under
Psu-99791 located in Barrio General Luna, Barotac Viejo, Iloilo which
he bought from his father-in-law, Francisco Militante in 1956 against its
present occupant defendant, Isaias Batiller, who illegally entered said
portions of the lot on two occasions — in 1945 and in 1959. Plaintiff
prayed also for damages and attorneys fees. (pp. 1-7, Record on Appeal).
In his answer with counter-claim defendant claims the complaint of the
plaintiff does not state a cause of action, the truth of the matter being
that he and his predecessors-in-interest have always been in actual, open
and continuous possession since time immemorial under claim of
ownership of the portions of the lot in question and for the alleged
malicious institution of the complaint he claims he has suffered moral
damages in the amount of P 2,000.00, as well as the sum of P500.00 for
attorney's fees. ...
On December 9, 1964, the trial court issued a pre-trial order, after a pre-
trial conference between the parties and their counsel which order reads
as follows..
'When this case was called for a pre-trial
conference today, the plaintiff appeared assisted
by himself and Atty. Gregorio M. Rubias. The
defendant also appeared, assisted by his counsel
Atty. Vicente R. Acsay.
A. During the pre-trial conference, the parties
have agreed that the following facts are
attendant in this case and that they will no longer
introduced any evidence, testimonial or
documentary to prove them:
1. That Francisco Militante claimed ownership of a parcel of land
located in the Barrio of General Luna, municipality of Barotac Viejo
province of Iloilo, which he caused to be surveyed on July 18-31, 1934,
whereby he was issued a plan Psu-99791 (Exhibit "B"). (The land
claimed contained an area of 171:3561 hectares.)
2. Before the war with Japan, Francisco Militante filed with the Court of
First Instance of Iloilo an application for the registration of the title of
the land technically described in psu-99791 (Exh. "B") opposed by the
Director of Lands, the Director of Forestry and other oppositors.
However, during the war with Japan, the record of the case was lost
before it was heard, so after the war Francisco Militante petitioned this
court to reconstitute the record of the case. The record was
reconstituted on the Court of the First Instance of Iloilo and docketed
as Land Case No. R-695, GLRO Rec. No. 54852. The Court of First
Instance heard the land registration case on November 14, 1952,
and after the trial this court dismissed the application for registration.
The appellant, Francisco Militante, appealed from the decision of this
Court to the Court of Appeals where the case was docketed as CA-GR
No. 13497-R..
3. Pending the disposal of the appeal in CA-GR No. 13497-R and more
particularly on June 18, 1956, Francisco Militante sold to the plaintiff,
Domingo Rubias the land technically described in psu-99791 (Exh. "A").
The sale was duly recorded in the Office of the Register of Deeds for the
province of Iloilo as Entry No. 13609 on July 11, 1960 (Exh. "A-1").
(NOTE: As per deed of sale, Exh. A, what Militante purportedly sold to
plaintiff-appellant, his son-in-law, for the sum of P2,000.00 was "a
parcel of untitled land having an area Of 144.9072 hectares ... surveyed
under Psu 99791 ... (and) subject to the exclusions made by me, under
(case) CA-i3497, Land Registration Case No. R-695, G.L.R.O. No.
54852, Court of First Instance of the province of Iloilo. These exclusions
referred to portions of the original area of over 171 hectares originally
claimed by Militante as applicant, but which he expressly recognized
during the trial to pertain to some oppositors, such as the Bureau of
Public Works and Bureau of Forestry and several other individual
occupants and accordingly withdrew his application over the same. This
is expressly made of record in Exh. A, which is the Court of Appeals'
decision of 22 September 1958 confirming the land registration
court's dismissal of Militante's application for registration.)
4. On September 22,1958 the Court of appeals in CA-G.R. No. 13497-R
promulgated its judgment confirming the decision of this Court in Land
Case No. R-695, GLRO Rec. No. 54852 which dismissed the application
for Registration filed by Francisco Militante (Exh. "I").
5. Domingo Rubias declared the land described in Exh. 'B' for taxation
purposes under Tax Dec. No. 8585 (Exh. "C") for 1957; Tax Dec. Nos.
9533 (Exh. "C-1") and 10019 (Exh. "C-3")for the year 1961; Tax Dec.
No. 9868 (Exh. "C-2") for the year 1964, paying the land taxes under
Tax Dec. No. 8585 and 9533 (Exh. "D", "D-1", "G-6").
6. Francisco Militante immediate predecessor-in-interest of the plaintiff,
has also declared the land for taxation purposes under Tax Dec. No.
5172 in 1940 (Exh. "E") for 1945; under Tax Dec. No. T-86 (Exh. "E-
1") for 1948; under Tax Dec. No. 7122 (Exh. "2"), and paid the land
taxes for 1940 (Exhs. "G" and "G-7"), for 1945 46 (Exh. "G-1") for 1947
(Exh. "G-2"), for 1947 & 1948 (Exh. "G-3"), for 1948 (Exh. "G-4"), and
for 1948 and 1949 (Exh. "G-5").
B. During the trial of this case on the merit, the plaintiff will prove by competent evidence the
7. Tax Declaration No. 2434 in the name of Liberato Demontaño for the
following:
land described therein (Exh. "F") was cancelled by Tax. Dec. No. 5172
of Francisco Militante (Exh. "E"). Liberato Demontaño paid the land tax
under Tax Dec. No. 2434 on Dec. 20, 1939 for the years 1938 (50%) and
1959 (Exh. "H").
8. The defendant had declared for taxation purposes Lot No. 2 of the
Psu-155241 under Tax Dec. Not. 8583 for 1957 and a portion of Lot No.
2, Psu-155241, for 1945 under Tax Dec. No. 8584 (Exh. "2-A" Tax No.
8583 (Exh. "2") was revised by Tax Dec. No. 9498 in the name of the
defendant (Exh. "2-B") and Tax Dec. No. 8584 (Exh. "2-A") was
cancelled by Tax Dec. No. 9584 also in the name of the defendant (Exh.
"2-C"). The defendant paid the land taxes for Lot 2, Psu-155241, on
Nov. 9, 1960 for the years 1945 and 1946, for the year 1950, and for the
year 1960 as shown by the certificate of the treasurer (Exh. "3"). The
defendant may present to the Court other land taxes receipts for the
payment of taxes for this lot.
9. The land claimed by the defendant as his own was surveyed on June 6
and 7,1956, and a plan approved by Director of Land on November 15,
1956 was issued, identified as Psu 155241 (Exh. "5").
10. On April 22, 1960, the plaintiff filed forcible Entry and Detainer
case against Isaias Batiller in the Justice of the Peace Court of Barotac
Viejo Province of Iloilo (Exh. "4") to which the defendant Isaias Batiller
riled his answer on August 29, 1960 (Exh. "4-A"). The Municipal
Court of Barotac Viejo after trial, decided the case on May 10, 1961 in
favor of the defendant and against the plaintiff (Exh. "4-B"). The
plaintiff appealed from the decision of the Municipal Court of Barotac
Viejo which was docketed in this Court as Civil Case No. 5750 on June
3, 1961, to which the defendant, Isaias Batiller, on June 13, 1961 filed
his answer (Exh. "4-C"). And this Court after the trial. decided the case
on November 26, 1964, in favor of the defendant, Isaias Batiller and
against the plaintiff (Exh. "4-D").
(NOTE: As per Exh. 4-B, which is the Iloilo court of first instance
decision of 26 November 1964 dismissing plaintiff's therein complaint
for ejectment against defendant, the iloilo court expressly found "that
plaintiff's complaint is unjustified, intended to harass the defendant" and
"that the defendant, Isaias Batiller, has a better right to possess the land
in question described in Psu 155241 (Exh. "3"), Isaias Batiller having
been in the actual physical possession thereof under a claim of title
many years before Francisco Militante sold the land to the plaintiff-
hereby dismissing plaintiff's complaint and ordering the plaintiff to pay
the defendant attorney's fees ....")
1. That the land he purchased from Francisco Militante under Exh. "A"
was formerly owned and possessed by Liberato Demontaño but that on
September 6, 1919 the land was sold at public auction by virtue of a
judgment in a Civil Case entitled "Edw J. Pflieder plaintiff vs. Liberato
Demontaño Francisco Balladeros and Gregorio Yulo, defendants", of
 which Yap Pongco was the purchaser (Exh. "1-3"). The sale was
registered in the Office of the Register of Deeds of Iloilo on August 4,
1920, under Primary Entry No. 69 (Exh. "1"), and a definite Deed of
Sale was executed by Constantino A. Canto, provincial Sheriff of Iloilo,
on Jan. 19, 1934 in favor of Yap Pongco (Exh. "I"), the sale having been
registered in the Office of the Register of Deeds of Iloilo on February
10, 1934 (Exh. "1-1").
2. On September 22, 1934, Yap Pongco sold this land to Francisco
Militante as evidenced by a notarial deed (Exh. "J") which was
registered in the Registry of Deeds on May 13, 1940 (Exh. "J-1").
3. That plaintiff suffered damages alleged in his complaint.
C. Defendants, on the other hand will prove by competent evidence during the trial of this case
the following facts:
1. That lot No. 2 of the Psu-1552 it (Exh. '5') was originally owned and
possessed by Felipe Batiller, grandfather of the defendant Basilio
Batiller, on the death of the former in 1920, as his sole heir. Isaias
Batiller succeeded his father , Basilio Batiller, in the ownership and
possession of the land in the year 1930, and since then up to the present,
the land remains in the possession of the defendant, his possession being
actual, open, public, peaceful and continuous in the concept of an owner,
exclusive of any other rights and adverse to all other claimants.
2. That the alleged predecessors in interest of the plaintiff have never
been in the actual possession of the land and that they never had any title
thereto.
3. That Lot No. 2, Psu 155241, the subject of Free Patent application of
the defendant has been approved.
4. The damages suffered by the defendant, as alleged in his
counterclaim."'1
The appellate court further related the developments of the case, as follows:
On August 17, 1965, defendant's counsel manifested in open court that
before any trial on the merit of the case could proceed he would file
a motion to dismiss plaintiff's complaint which he did, alleging
that plaintiff does not have cause of action against him because the
property in dispute which he (plaintiff) allegedly bought from his father-
in-law, Francisco Militante was the subject matter of LRC No. 695 filed
in the CFI of Iloilo, which case was brought on appeal to this Court and
docketed as CA-G.R. No. 13497-R in which aforesaid case plaintiff was
the counsel on record of his father-in-law, Francisco Militante. Invoking
Arts. 1409 and 1491 of the Civil Code which reads:
'Art. 1409. The following contracts are inexistent
and void from the beginning:
xxx xxx xxx
(7) Those expressly prohibited by law.
'ART. 1491. The following persons cannot acquire
any purchase, even at a public auction, either in
person of through the mediation of another: .
xxx xxx xxx
(5) Justices, judges, prosecuting attorneys, clerks of superior and
inferior courts, and other officers and employees connected with the
administration of justice, the property and rights of in litigation or levied
upon an execution before the court within whose jurisdiction or territory
they exercise their respective functions; this prohibition includes the act
of acquiring an assignment and shall apply to lawyers, with respect to
the property and rights which may be the object of any litigation in
which they may take part by virtue of their profession.'
defendant claims that plaintiff could not have acquired any interest in the
property in dispute as the contract he (plaintiff) had with Francisco
Militante was inexistent and void. (See pp. 22-31, Record on Appeal).
Plaintiff strongly opposed defendant's motion to dismiss claiming that
defendant can not invoke Articles 1409 and 1491 of the Civil Code as
Article 1422 of the same Code provides that 'The defense of illegality of
contracts is not available to third persons whose interests are not directly
affected' (See pp. 32-35 Record on Appeal).
On October 18, 1965, the lower court issued an order disclaiming
plaintiffs complaint (pp. 42-49, Record on Appeal.) In the aforesaid
order of dismissal the lower court practically agreed with defendant's
contention that the contract (Exh. A) between plaintiff and Francism
Militante was null and void. In due season plaintiff filed a motion for
reconsideration (pp. 50-56 Record on Appeal) which was denied by the
lower court on January 14, 1966 (p. 57, Record on Appeal).
Hence, this appeal by plaintiff from the orders of October 18, 1965 and
January 14, 1966.
 Plaintiff-appellant imputes to the lower court the following errors:
'1. The lower court erred in holding that the
contract of sale between the plaintiff-appellant
and his father-in-law, Francisco Militante, Sr.,
now deceased, of the property covered by Plan
Psu-99791, (Exh. "A") was void, not voidable
because it was made when plaintiff-appellant was
the counsel of the latter in the Land Registration
case.
'2. The lower court erred in holding that the
defendant-appellee is an interested person to
question the validity of the contract of sale
between plaintiff-appellant and the deceased,
Francisco Militante, Sr.
'3. The lower court erred in entertaining the
motion to dismiss of the defendant-appellee after
he had already filed his answer, and after the
termination of the pre-trial, when the said motion
to dismiss raised a collateral question.
'4. The lower court erred in dismissing the
complaint of the plaintiff-appellant.'
The appellate court concluded that plaintiffs "assignment of errors gives rise to two (2) legal
posers — (1) whether or not the contract of sale between appellant and his father-in-law, the
late Francisco Militante over the property subject of Plan Psu-99791 was void because it was
made when plaintiff was counsel of his father-in-law in a land registration case involving the
property in dispute; and (2) whether or not the lower court was correct in entertaining
defendant-appellee's motion to dismiss after the latter had already filed his answer and after he
(defendant) and plaintiff-appellant had agreed on some matters in a pre-trial conference.
Hence, its elevation of the appeal to this Court as involving pure questions of law.
It is at once evident from the foregoing narration that the pre-trial conference held by the trial
court at which the parties with their counsel agreed and stipulated on the material and relevant
facts and submitted their respective documentary exhibits as referred to in the pre-trial
order, supra,2 practically amounted to a fulldress trial which placed on record all the facts and
exhibits necessary for adjudication of the case.
The three points on which plaintiff reserved the presentation of evidence at the-trial dealing
with the source of the alleged right and title of Francisco Militante's
predecessors, supra,3 actually are already made of record in the stipulated facts and admitted
exhibits. The chain of Militante's alleged title and right to the land as supposedly traced back to
Liberato Demontaño was actually asserted by Militante (and his vendee, lawyer and son-in-
law, herein plaintiff) in the land registration case and rejected by the Iloilo land registration
court which dismissed Militante's application for registration of the land. Such dismissal, as
already stated, was affirmed by the final judgment in 1958 of the Court of Appeals. 4
The four points on which defendant on his part reserved the presentation of evidence at the trial
dealing with his and his ancestors' continuous, open, public and peaceful possession in the
concept of owner of the land and the Director of Lands' approval of his survey plan
thereof, supra,5 are likewise already duly established facts of record, in the land registration
case as well as in the ejectment case wherein the Iloilo court of first instance recognized the
superiority of defendant's right to the land as against plaintiff.
No error was therefore committed by the lower court in dismissing plaintiff's complaint upon
defendant's motion after the pre-trial.
1. The stipulated facts and exhibits of record indisputably established plaintiff's lack of cause
of action and justified the outright dismissal of the complaint. Plaintiff's claim of ownership to
the land in question was predicated on the sale thereof for P2,000.00 made in 1956 by his
father-in- law, Francisco Militante, in his favor, at a time when Militante's application for
registration thereof had already been dismissed by the Iloilo land registration court and was
pending appeal in the Court of Appeals.
With the Court of Appeals' 1958 final judgment affirming the dismissal of Militante's
application for registration, the lack of any rightful claim or title of Militante to the land was
conclusively and decisively judicially determined. Hence, there was no right or title to the land
that could be transferred or sold by Militante's purported sale in 1956 in favor of plaintiff.
Manifestly, then plaintiff's complaint against defendant, to be declared absolute owner of the
land and to be restored to possession thereof with damages was bereft of any factual or legal
basis.
2. No error could be attributed either to the lower court's holding that the purchase by a lawyer
of the property in litigation from his client is categorically prohibited by Article 1491,
paragraph (5) of the Philippine Civil Code, reproduced supra;6 and that consequently,
plaintiff's purchase of the property in litigation from his client (assuming that his client could
sell the same since as already shown above, his client's claim to the property was defeated and
rejected) was void and could produce no legal effect, by virtue of Article 1409, paragraph (7)
of our Civil Code which provides that contracts "expressly prohibited or declared void by law'
are "inexistent and that "(T)hese contracts cannot be ratified. Neither can the right to set up the
defense of illegality be waived."
The 1911 case of Wolfson vs. Estate of Martinez7 relied upon by plaintiff as holding that a sale
of property in litigation to the party litigant's lawyer "is not void but voidable at the election of
the vendor" was correctly held by the lower court to have been superseded by the later 1929
case of Director of Lands vs. Abagat.8 In this later case of Abagat, the Court expressly cited
two antecedent cases involving the same transaction of purchase of property in litigation by the
lawyer which was expressly declared invalid under Article 1459 of the Civil Code of Spain (of
which Article 1491 of our Civil Code of the Philippines is the counterpart) upon challenge
thereof not by the vendor-client but by the adverse parties against whom the lawyer was to
enforce his rights as vendee thus acquired.
These two antecedent cases thus cited in Abagat clearly superseded (without so expressly
stating the previous ruling in Wolfson:
The spouses, Juan Soriano and Vicente Macaraeg, were the owners of
twelve parcels of land. Vicenta Macaraeg died in November, 1909,
leaving a large number of collateral heirs but no descendants. Litigation
between the surviving husband, Juan Soriano, and the heirs of Vicenta
immediately arose, and the herein appellant Sisenando Palarca acted as
Soriano's lawyer. On May 2, 1918, Soriano executed a deed for the
aforesaid twelve parcels of land in favor of Sisenando Palarca and on the
following day, May 3, 1918, Palarca filed an application for the
registration of the land in the deed. After hearing, the Court of First
Instance declared that the deed was invalid by virtue of the provisions of
article 1459 of the Civil Code, which prohibits lawyers and solicitors
from purchasing property rights involved in any litigation in which they
take part by virtue of their profession. The application for registration
was consequently denied, and upon appeal by Palarca to the Supreme
Court, the judgement of the lower court was affirmed by a decision
promulgated November 16,1925. (G.R. No. 24329, Palarca vs. Director
of Lands, not reported.)
In the meantime cadastral case No. 30 of the Province of Tarlac was
instituted, and on August 21, 1923, Eleuteria Macaraeg, as
administratrix of the estate of Vicente Macaraeg, filed claims for the
parcels in question. Buenaventura Lavitoria administrator of the estate of
Juan Soriano, did likewise and so did Sisenando Palarca. In a decision
dated June 21, 1927, the Court of First Instance, Judge Carballo
presiding, rendered judgment in favor of Palarea and ordered the
registration of the land in his name. Upon appeal to this court by the
administration of the estates of Juan Soriano and Vicente Macaraeg, the
judgment of the court below was reversed and the land adjudicated to
the two estates as conjugal property of the deceased spouses. (G.R. No.
28226, Director of Lands vs. Abagat, promulgated May 21, 1928, not
reported.)9
In the very case of Abagat itself, the Court, again affirming the invalidity and nullity of the
lawyer's purchase of the land in litigation from his client, ordered the issuance of a writ of
possession for the return of the land by the lawyer to the adverse parties without
reimbursement of the price paid by him and other expenses, and ruled that "the appellant
Palarca is a lawyer and is presumed to know the law. He must, therefore, from the beginning,
have been well aware of the defect in his title and is, consequently, a possessor in bad faith."
As already stated, Wolfson and Abagat were decided with relation to Article 1459 of the Civil
Code of Spain then adopted here, until it was superseded on August 30, 1950 by the Civil Code
of the Philippines whose counterpart provision is Article 1491.
Article 1491 of our Civil Code (like Article 1459 of the Spanish Civil Code) prohibits in its six
paragraphs certain persons, by reason of the relation of trust or their peculiar control over the
property, from acquiring such property in their trust or control either directly or indirectly and
"even at a public or judicial auction," as follows: (1) guardians; (2) agents; (3) administrators;
(4) public officers and employees; judicial officers and employees, prosecuting attorneys, and
lawyers; and (6) others especially disqualified by law.
In Wolfson which involved the sale and assignment of a money judgment by the client to the
lawyer, Wolfson, whose right to so purchase the judgment was being challenged by the
judgment debtor, the Court, through Justice Moreland, then expressly reserved decision on
"whether or not the judgment in question actually falls within the prohibition of the article" and
held only that the sale's "voidability can not be asserted by one not a party to the transaction or
his representative," citing from Manresa 10 that "(C)onsidering the question from the point of
view of the civil law, the view taken by the code, we must limit ourselves to classifying as void
all acts done contrary to the express prohibition of the statute. Now then: As the code does not
recognize such nullity by the mere operation of law, the nullity of the acts hereinbefore referred
to must be asserted by the person having the necessary legal capacity to do so and decreed by a
competent
court." 11
The reason thus given by Manresa in considering such prohibited acquisitions under Article
1459 of the Spanish Civil Code as merely voidable at the instance and option of the vendor and
not void — "that the Code does not recognize such nullity de pleno derecho" — is no longer
true and applicable to our own Philippine Civil Code which does recognize the absolute nullity
of contracts "whose cause, object, or purpose is contrary to law, morals, good customs, public
order or public policy" or which are "expressly prohibited or declared void by law" and
declares such contracts "inexistent and void from the beginning." 12
The Supreme Court of Spain and modern authors have likewise veered from Manresa's view of
the Spanish codal provision itself. In its sentencia of 11 June 1966, the Supreme Court of Spain
ruled that the prohibition of Article 1459 of the Spanish Civil Code is based on public policy,
that violation of the prohibition contract cannot be validated by confirmation or ratification,
holding that:
... la prohibicion que el articulo 1459 del C.C. establece respecto a los
administradores y apoderados, la cual tiene conforme a la doctrina de
esta Sala, contendia entre otras, en S. de 27-5-1959, un fundamento
de orden moral lugar la violacion de esta a la nulidad de pleno
derecho del acto o negocio celebrado, ... y prohibicion legal,
afectante orden publico, no cabe con efecto alguno la
aludida retification ... 13
The criterion of nullity of such prohibited contracts under Article 1459 of the Spanish Civil
Code (Article 1491 of our Civil Code) as a matter of public order and policy as applied by the
Supreme Court of Spain to administrators and agents in its above cited decision should
certainly apply with greater reason to judges, judicial officers, fiscals and lawyers under
paragraph 5 of the codal article.
Citing the same decisions of the Supreme Court of Spain, Gullon Ballesteros, his "Curso de
Derecho Civil, (Contratos Especiales)" (Madrid, 1968) p. 18, affirms that, with respect to
Article 1459, Spanish Civil Code:.
Que caracter tendra la compra que se realice por estas personas?
Porsupuesto no cabe duda de que el caso (art.) 1459, 40 y 50, la nulidad
esabsoluta porque el motivo de la prohibicion es de orden publico. 14
Perez Gonzales in such view, stating that "Dado el caracter prohibitivo delprecepto, la
consequencia de la infraccion es la nulidad radical y ex lege." 15
Castan, quoting Manresa's own observation that.
"El fundamento do esta prohibicion es clarisimo. No sa trata con este precepto tan solo de
guitar la ocasion al fraude; persiguese, ademasel proposito de rodear a las personas que
intervienen en la administrcionde justicia de todos los retigios que necesitan pora ejercer su
ministerio librandolos de toda suspecha, que aunque fuere in fundada, redundura endescredito
de la institucion." 16 arrives at the contrary and now accepted view that "Puede considerace en
nuestro derecho inexistente 'o radicalmente nulo el contrato en los siguentes cases: a) ...; b)
cuando el contrato se ha celebrado en violacion de una prescripcion 'o prohibicion legal,
fundada sobre motivos de orden publico (hipotesis del art. 4 del codigo) ..." 17
since its juridical effects and plaintiff's alleged cause of action founded thereon were being
asserted against defendant-appellant. The principles governing the nullity of such prohibited
contracts and judicial declaration of their nullity have been well restated by Tolentino in his
treatise on our Civil Code, as follows:
Parties Affected. — Any person may invoke the in existence of the
contract whenever juridical effects founded thereon are asserted against
him. Thus, if there has been a void transfer of property, the transferor
can recover it by the accion reinvindicatoria; and any prossessor may
refuse to deliver it to the transferee, who cannot enforce the contract.
Creditors may attach property of the debtor which has been alienated by
the latter under a void contract; a mortgagee can allege the inexistence of
a prior encumbrance; a debtor can assert the nullity of an assignment of
credit as a defense to an action by the assignee.
Action On Contract. — Even when the contract is void or inexistent, an
action is necessary to declare its inexistence, when it has already been
fulfilled. Nobody can take the law into his own hands; hence, the
intervention of the competent court is necessary to declare the absolute
nullity of the contract and to decree the restitution of what has been
given under it. The judgment, however, will retroact to the very day
when the contract was entered into.

It is noteworthy that Caltan's rationale for his conclusion that fundamental consideration of If the void contract is still fully executory, no party need bring an action
public policy render void and inexistent such expressly prohibited purchase (e.g. by public to declare its nullity; but if any party should bring an action to enforce it,
officers and employees of government property intrusted to them and by justices, judges, the other party can simply set up the nullity as a defense. 20
fiscals and lawyers of property and rights in litigation and submitted to or handled by them,
under Article 1491, paragraphs (4) and (5) of our Civil Code) has been adopted in a new article
ACCORDINGLY, the order of dismissal appealed from is hereby affirmed, with costs in all
of our Civil Code, viz, Article 1409 declaring such prohibited contracts as "inexistent and void
instances against plaintiff-appellant. So ordered.
from the beginning." 18

Indeed, the nullity of such prohibited contracts is definite and permanent and cannot be cured
by ratification. The public interest and public policy remain paramount and do not permit of
compromise or ratification. In his aspect, the permanent disqualification of public and judicial
officers and lawyers grounded on public policy differs from the first three cases of guardians,
agents and administrators (Article 1491, Civil Code), as to whose transactions it had been
opined that they may be "ratified" by means of and in "the form of a new contact, in which
cases its validity shall be determined only by the circumstances at the time the execution of
such new contract. The causes of nullity which have ceased to exist cannot impair the validity
of the new contract. Thus, the object which was illegal at the time of the first contract, may
have already become lawful at the time of the ratification or second contract; or the service
which was impossible may have become possible; or the intention which could not be
ascertained may have been clarified by the parties. The ratification or second contract would
then be valid from its execution; however, it does not retroact to the date of the first
contract." 19

As applied to the case at bar, the lower court therefore properly acted upon defendant-
appellant's motion to dismiss on the ground of nullity of plaintiff's alleged purchase of the land,
G.R. No. L-21438 September 28, 1966
AIR FRANCE, petitioner,
vs.
RAFAEL CARRASCOSO and the HONORABLE COURT OF APPEALS, respondents.
Lichauco, Picazo and Agcaoili for petitioner.
Bengzon Villegas and Zarraga for respondent R. Carrascoso.
SANCHEZ, J.:
The Court of First Instance of Manila 1 sentenced petitioner to pay respondent Rafael
Carrascoso P25,000.00 by way of moral damages; P10,000.00 as exemplary damages; P393.20
representing the difference in fare between first class and tourist class for the portion of the trip
Bangkok-Rome, these various amounts with interest at the legal rate, from the date of the filing
of the complaint until paid; plus P3,000.00 for attorneys' fees; and the costs of suit.
On appeal,2 the Court of Appeals slightly reduced the amount of refund on Carrascoso's plane
ticket from P393.20 to P383.10, and voted to affirm the appealed decision "in all other
respects", with costs against petitioner.
The case is now before us for review on certiorari.
The facts declared by the Court of Appeals as " fully supported by the evidence of record", are:
Plaintiff, a civil engineer, was a member of a group of 48 Filipino pilgrims that left
Manila for Lourdes on March 30, 1958.
On March 28, 1958, the defendant, Air France, through its authorized agent,
Philippine Air Lines, Inc., issued to plaintiff a "first class" round trip airplane ticket
from Manila to Rome. From Manila to Bangkok, plaintiff travelled in "first class",
but at Bangkok, the Manager of the defendant airline forced plaintiff to vacate the
"first class" seat that he was occupying because, in the words of the witness Ernesto
G. Cuento, there was a "white man", who, the Manager alleged, had a "better right"
to the seat. When asked to vacate his "first class" seat, the plaintiff, as was to be
expected, refused, and told defendant's Manager that his seat would be taken over
his dead body; a commotion ensued, and, according to said Ernesto G. Cuento,
"many of the Filipino passengers got nervous in the tourist class; when they found
out that Mr. Carrascoso was having a hot discussion with the white man [manager],
they came all across to Mr. Carrascoso and pacified Mr. Carrascoso to give his seat
to the white man" (Transcript, p. 12, Hearing of May 26, 1959); and plaintiff
reluctantly gave his "first class" seat in the plane.3
1. The trust of the relief petitioner now seeks is that we review "all the findings" 4 of respondent
Court of Appeals. Petitioner charges that respondent court failed to make complete findings of
fact on all the issues properly laid before it. We are asked to consider facts favorable to
petitioner, and then, to overturn the appellate court's decision.
Coming into focus is the constitutional mandate that "No decision shall be rendered by any
court of record without expressing therein clearly and distinctly the facts and the law on which
it is based". 5 This is echoed in the statutory demand that a judgment determining the merits of
the case shall state "clearly and distinctly the facts and the law on which it is based"; 6 and that
"Every decision of the Court of Appeals shall contain complete findings of fact on all issues
properly raised before it". 7
A decision with absolutely nothing to support it is a nullity. It is open to direct attack. 8 The
law, however, solely insists that a decision state the "essential ultimate facts" upon which the
court's conclusion is drawn. 9 A court of justice is not hidebound to write in its decision every
bit and piece of evidence 10 presented by one party and the other upon the issues raised. Neither
is it to be burdened with the obligation "to specify in the sentence the facts" which a party
"considered as proved". 11 This is but a part of the mental process from which the Court draws
the essential ultimate facts. A decision is not to be so clogged with details such that prolixity, if
not confusion, may result. So long as the decision of the Court of Appeals contains the
necessary facts to warrant its conclusions, it is no error for said court to withhold therefrom
"any specific finding of facts with respect to the evidence for the defense". Because as this
Court well observed, "There is no law that so requires". 12 Indeed, "the mere failure to specify
(in the decision) the contentions of the appellant and the reasons for refusing to believe them is
not sufficient to hold the same contrary to the requirements of the provisions of law and the
Constitution". It is in this setting that in Manigque, it was held that the mere fact that the
findings "were based entirely on the evidence for the prosecution without taking into
consideration or even mentioning the appellant's side in the controversy as shown by his own
testimony", would not vitiate the judgment. 13 If the court did not recite in the decision the
testimony of each witness for, or each item of evidence presented by, the defeated party, it does
not mean that the court has overlooked such testimony or such item of evidence. 14 At any rate,
the legal presumptions are that official duty has been regularly performed, and that all the
matters within an issue in a case were laid before the court and passed upon by it. 15
Findings of fact, which the Court of Appeals is required to make, maybe defined as "the written
statement of the ultimate facts as found by the court ... and essential to support the decision and
judgment rendered thereon". 16 They consist of the court's "conclusions" with respect to the
determinative facts in issue". 17 A question of law, upon the other hand, has been declared as
"one which does not call for an examination of the probative value of the evidence presented
by the parties." 18
2. By statute, "only questions of law may be raised" in an appeal by certiorari from a judgment
of the Court of Appeals. 19 That judgment is conclusive as to the facts. It is not appropriately
the business of this Court to alter the facts or to review the questions of fact. 20
With these guideposts, we now face the problem of whether the findings of fact of the Court of
Appeals support its judgment.
3. Was Carrascoso entitled to the first class seat he claims?
It is conceded in all quarters that on March 28, 1958 he paid to and received from petitioner a
first class ticket. But petitioner asserts that said ticket did not represent the true and complete
intent and agreement of the parties; that said respondent knew that he did not have confirmed
reservations for first class on any specific flight, although he had tourist class protection; that,
accordingly, the issuance of a first class ticket was no guarantee that he would have a first class
ride, but that such would depend upon the availability of first class seats.
These are matters which petitioner has thoroughly presented and discussed in its brief before
the Court of Appeals under its third assignment of error, which reads: "The trial court erred in
finding that plaintiff had confirmed reservations for, and a right to, first class seats on the
"definite" segments of his journey, particularly that from Saigon to Beirut". 21
And, the Court of Appeals disposed of this contention thus:
Defendant seems to capitalize on the argument that the issuance of a first-class
ticket was no guarantee that the passenger to whom the same had been issued,
would be accommodated in the first-class compartment, for as in the case of
plaintiff he had yet to make arrangements upon arrival at every station for the
necessary first-class reservation. We are not impressed by such a reasoning. We
cannot understand how a reputable firm like defendant airplane company could
have the indiscretion to give out tickets it never meant to honor at all. It received the
corresponding amount in payment of first-class tickets and yet it allowed the
passenger to be at the mercy of its employees. It is more in keeping with the
ordinary course of business that the company should know whether or riot the
tickets it issues are to be honored or not.22
Not that the Court of Appeals is alone. The trial court similarly disposed of petitioner's
contention, thus:
On the fact that plaintiff paid for, and was issued a "First class" ticket, there can be no question.
Apart from his testimony, see plaintiff's Exhibits "A", "A-1", "B", "B-1," "B-2", "C" and "C-1",
and defendant's own witness, Rafael Altonaga, confirmed plaintiff's testimony and testified as
follows:
Q. In these tickets there are marks "O.K." From what you know, what does this OK
mean?
A. That the space is confirmed.
Q. Confirmed for first class?
A. Yes, "first class". (Transcript, p. 169)
xxx xxx xxx
Defendant tried to prove by the testimony of its witnesses Luis Zaldariaga and Rafael Altonaga
that although plaintiff paid for, and was issued a "first class" airplane ticket, the ticket was
subject to confirmation in Hongkong. The court cannot give credit to the testimony of said
witnesses. Oral evidence cannot prevail over written evidence, and plaintiff's Exhibits "A", "A-
l", "B", "B-l", "C" and "C-1" belie the testimony of said witnesses, and clearly show that the
plaintiff was issued, and paid for, a first class ticket without any reservation whatever.
Furthermore, as hereinabove shown, defendant's own witness Rafael Altonaga testified that the
reservation for a "first class" accommodation for the plaintiff was confirmed. The court cannot
believe that after such confirmation defendant had a verbal understanding with plaintiff that the
"first class" ticket issued to him by defendant would be subject to confirmation in Hongkong. 23
We have heretofore adverted to the fact that except for a slight difference of a few pesos in the
amount refunded on Carrascoso's ticket, the decision of the Court of First Instance was
affirmed by the Court of Appeals in all other respects. We hold the view that such a judgment
of affirmance has merged the judgment of the lower court. 24 Implicit in that affirmance is a
determination by the Court of Appeals that the proceeding in the Court of First Instance was
free from prejudicial error and "all questions raised by the assignments of error and all
questions that might have been raised are to be regarded as finally adjudicated against the
appellant". So also, the judgment affirmed "must be regarded as free from all error". 25 We
reached this policy construction because nothing in the decision of the Court of Appeals on this
point would suggest that its findings of fact are in any way at war with those of the trial court.
Nor was said affirmance by the Court of Appeals upon a ground or grounds different from
those which were made the basis of the conclusions of the trial court. 26
If, as petitioner underscores, a first-class-ticket holder is not entitled to a first class seat,
notwithstanding the fact that seat availability in specific flights is therein confirmed, then an air
passenger is placed in the hollow of the hands of an airline. What security then can a passenger
have? It will always be an easy matter for an airline aided by its employees, to strike out the
very stipulations in the ticket, and say that there was a verbal agreement to the contrary. What
if the passenger had a schedule to fulfill? We have long learned that, as a rule, a written
document speaks a uniform language; that spoken word could be notoriously unreliable. If only
to achieve stability in the relations between passenger and air carrier, adherence to the ticket so
issued is desirable. Such is the case here. The lower courts refused to believe the oral evidence
intended to defeat the covenants in the ticket.
The foregoing are the considerations which point to the conclusion that there are facts upon
which the Court of Appeals predicated the finding that respondent Carrascoso had a first class
ticket and was entitled to a first class seat at Bangkok, which is a stopover in the Saigon to
Beirut leg of the flight. 27 We perceive no "welter of distortions by the Court of Appeals of
petitioner's statement of its position", as charged by petitioner. 28 Nor do we subscribe to
petitioner's accusation that respondent Carrascoso "surreptitiously took a first class seat to
provoke an issue". 29 And this because, as petitioner states, Carrascoso went to see the Manager
at his office in Bangkok "to confirm my seat and because from Saigon I was told again to see
the Manager". 30 Why, then, was he allowed to take a first class seat in the plane at Bangkok, if
he had no seat? Or, if another had a better right to the seat?
4. Petitioner assails respondent court's award of moral damages. Petitioner's trenchant claim is
that Carrascoso's action is planted upon breach of contract; that to authorize an award for moral
damages there must be an averment of fraud or bad faith; 31 and that the decision of the Court of
Appeals fails to make a finding of bad faith. The pivotal allegations in the complaint bearing
on this issue are:
3. That ... plaintiff entered into a contract of air carriage with the Philippine Air
Lines for a valuable consideration, the latter acting as general agents for and in
behalf of the defendant, under which said contract, plaintiff was entitled to, as
defendant agreed to furnish plaintiff, First Class passage on defendant's plane
during the entire duration of plaintiff's tour of Europe with Hongkong as starting
point up to and until plaintiff's return trip to Manila, ... .
4. That, during the first two legs of the trip from Hongkong to Saigon and from
Saigon to Bangkok, defendant furnished to the plaintiff First Class accommodation
but only after protestations, arguments and/or insistence were made by the plaintiff
with defendant's employees.
5. That finally, defendant failed to provide First Class passage, but instead furnished
plaintiff only Tourist Class accommodations from Bangkok to Teheran and/or
Casablanca, ... the plaintiff has been compelled by defendant's employees to leave
the First Class accommodation berths at Bangkok after he was already seated.
6. That consequently, the plaintiff, desiring no repetition of the inconvenience and
embarrassments brought by defendant's breach of contract was forced to take a Pan
American World Airways plane on his return trip from Madrid to Manila. 32
xxx xxx xxx
2. That likewise, as a result of defendant's failure to furnish First Class accommodations
aforesaid, plaintiff suffered inconveniences, embarrassments, and humiliations, thereby causing
plaintiff mental anguish, serious anxiety, wounded feelings, social humiliation, and the like
injury, resulting in moral damages in the amount of P30,000.00. 33
xxx xxx xxx
The foregoing, in our opinion, substantially aver: First, That there was a contract to furnish
plaintiff a first class passage covering, amongst others, the Bangkok-Teheran leg; Second, That
said contract was breached when petitioner failed to furnish first class transportation at
Bangkok; and Third, that there was bad faith when petitioner's employee compelled Carrascoso
to leave his first class accommodation berth "after he was already, seated" and to take a seat in
the tourist class, by reason of which he suffered inconvenience, embarrassments and
humiliations, thereby causing him mental anguish, serious anxiety, wounded feelings and
social humiliation, resulting in moral damages. It is true that there is no specific mention of the
term bad faith in the complaint. But, the inference of bad faith is there, it may be drawn from
the facts and circumstances set forth therein. 34 The contract was averred to establish the
relation between the parties. But the stress of the action is put on wrongful expulsion.
Quite apart from the foregoing is that (a) right the start of the trial, respondent's counsel placed
petitioner on guard on what Carrascoso intended to prove: That while sitting in the plane in
Bangkok, Carrascoso was ousted by petitioner's manager who gave his seat to a white
man; 35 and (b) evidence of bad faith in the fulfillment of the contract was presented without
objection on the part of the petitioner. It is, therefore, unnecessary to inquire as to whether or
not there is sufficient averment in the complaint to justify an award for moral damages.
Deficiency in the complaint, if any, was cured by the evidence. An amendment thereof to
conform to the evidence is not even required. 36 On the question of bad faith, the Court of
Appeals declared:
That the plaintiff was forced out of his seat in the first class compartment of the
plane belonging to the defendant Air France while at Bangkok, and was transferred
to the tourist class not only without his consent but against his will, has been
sufficiently established by plaintiff in his testimony before the court, corroborated
by the corresponding entry made by the purser of the plane in his notebook which
notation reads as follows:
"First-class passenger was forced to go to the tourist class against his
will, and that the captain refused to intervene",
and by the testimony of an eye-witness, Ernesto G. Cuento, who was a co-
passenger. The captain of the plane who was asked by the manager of defendant
company at Bangkok to intervene even refused to do so. It is noteworthy that no one
on behalf of defendant ever contradicted or denied this evidence for the plaintiff. It
could have been easy for defendant to present its manager at Bangkok to testify at
the trial of the case, or yet to secure his disposition; but defendant did neither. 37
The Court of appeals further stated —
Neither is there evidence as to whether or not a prior reservation was made by the
white man. Hence, if the employees of the defendant at Bangkok sold a first-class
ticket to him when all the seats had already been taken, surely the plaintiff should
not have been picked out as the one to suffer the consequences and to be subjected
to the humiliation and indignity of being ejected from his seat in the presence of
others. Instead of explaining to the white man the improvidence committed by
defendant's employees, the manager adopted the more drastic step of ousting the
plaintiff who was then safely ensconsced in his rightful seat. We are strengthened in
our belief that this probably was what happened there, by the testimony of
defendant's witness Rafael Altonaga who, when asked to explain the meaning of the
letters "O.K." appearing on the tickets of plaintiff, said "that the space is confirmed
for first class. Likewise, Zenaida Faustino, another witness for defendant, who was
the chief of the Reservation Office of defendant, testified as follows:
 "Q How does the person in the ticket-issuing office know what
reservation the passenger has arranged with you?
A They call us up by phone and ask for the confirmation." (t.s.n., p. 247,
June 19, 1959)
In this connection, we quote with approval what the trial Judge has said on this
point:
Why did the, using the words of witness Ernesto G. Cuento, "white man"
have a "better right" to the seat occupied by Mr. Carrascoso? The record
is silent. The defendant airline did not prove "any better", nay, any right
on the part of the "white man" to the "First class" seat that the plaintiff
was occupying and for which he paid and was issued a corresponding
"first class" ticket.
If there was a justified reason for the action of the defendant's Manager
in Bangkok, the defendant could have easily proven it by having taken
the testimony of the said Manager by deposition, but defendant did not
do so; the presumption is that evidence willfully suppressed would be
adverse if produced [Sec. 69, par (e), Rules of Court]; and, under the
circumstances, the Court is constrained to find, as it does find, that the
Manager of the defendant airline in Bangkok not merely asked but
threatened the plaintiff to throw him out of the plane if he did not give
up his "first class" seat because the said Manager wanted to
accommodate, using the words of the witness Ernesto G. Cuento, the
"white man".38
It is really correct to say that the Court of Appeals in the quoted portion first
transcribed did not use the term "bad faith". But can it be doubted that the recital of
facts therein points to bad faith? The manager not only prevented Carrascoso from
enjoying his right to a first class seat; worse, he imposed his arbitrary will; he
forcibly ejected him from his seat, made him suffer the humiliation of having to go
to the tourist class compartment - just to give way to another passenger whose right
thereto has not been established. Certainly, this is bad faith. Unless, of course, bad
faith has assumed a meaning different from what is understood in law. For, "bad
faith" contemplates a "state of mind affirmatively operating with furtive design or
with some motive of self-interest or will or for ulterior purpose." 39
And if the foregoing were not yet sufficient, there is the express finding of bad
faith in the judgment of the Court of First Instance, thus:
The evidence shows that the defendant violated its contract of
transportation with plaintiff in bad faith, with the aggravating
circumstances that defendant's Manager in Bangkok went to the extent
of threatening the plaintiff in the presence of many passengers to have
him thrown out of the airplane to give the "first class" seat that he was
occupying to, again using the words of the witness Ernesto G. Cuento, a
"white man" whom he (defendant's Manager) wished to accommodate,
and the defendant has not proven that this "white man" had any "better
right" to occupy the "first class" seat that the plaintiff was occupying,
duly paid for, and for which the corresponding "first class" ticket was
issued by the defendant to him.40
5. The responsibility of an employer for the tortious act of its employees need not be essayed.
It is well settled in law. 41 For the willful malevolent act of petitioner's manager, petitioner, his
employer, must answer. Article 21 of the Civil Code says:
ART. 21. Any person who willfully causes loss or injury to another in a manner that
is contrary to morals, good customs or public policy shall compensate the latter for
the damage.
In parallel circumstances, we applied the foregoing legal precept; and, we held that upon the
provisions of Article 2219 (10), Civil Code, moral damages are recoverable. 42
6. A contract to transport passengers is quite different in kind and degree from any other
contractual relation. 43 And this, because of the relation which an air-carrier sustains with the
public. Its business is mainly with the travelling public. It invites people to avail of the
comforts and advantages it offers. The contract of air carriage, therefore, generates a relation
attended with a public duty. Neglect or malfeasance of the carrier's employees, naturally, could
give ground for an action for damages.
Passengers do not contract merely for transportation. They have a right to be treated by the
carrier's employees with kindness, respect, courtesy and due consideration. They are entitled to
be protected against personal misconduct, injurious language, indignities and abuses from such
employees. So it is, that any rule or discourteous conduct on the part of employees towards a
passenger gives the latter an action for damages against the carrier. 44
Thus, "Where a steamship company 45 had accepted a passenger's check, it was a breach of
contract and a tort, giving a right of action for its agent in the presence of third persons to
falsely notify her that the check was worthless and demand payment under threat of ejection,
though the language used was not insulting and she was not ejected." 46 And this, because,
although the relation of passenger and carrier is "contractual both in origin and nature"
nevertheless "the act that breaks the contract may be also a tort". 47 And in another case,
"Where a passenger on a railroad train, when the conductor came to collect his fare tendered
him the cash fare to a point where the train was scheduled not to stop, and told him that as soon
as the train reached such point he would pay the cash fare from that point to destination, there
was nothing in the conduct of the passenger which justified the conductor in using insulting
language to him, as by calling him a lunatic," 48 and the Supreme Court of South Carolina there
held the carrier liable for the mental suffering of said passenger.1awphîl.nèt
Petitioner's contract with Carrascoso is one attended with public duty. The stress of
Carrascoso's action as we have said, is placed upon his wrongful expulsion. This is a violation
of public duty by the petitioner air carrier — a case of quasi-delict. Damages are proper.
7. Petitioner draws our attention to respondent Carrascoso's testimony, thus — the declarant". 51 The utterance of the purser regarding his entry in the notebook was
spontaneous, and related to the circumstances of the ouster incident. Its trustworthiness has
been guaranteed. 52 It thus escapes the operation of the hearsay rule. It forms part of the res
Q You mentioned about an attendant. Who is that attendant and purser?
gestae.

A When we left already — that was already in the trip — I could not help it. So one
At all events, the entry was made outside the Philippines. And, by an employee of petitioner. It
of the flight attendants approached me and requested from me my ticket and I said,
would have been an easy matter for petitioner to have contradicted Carrascoso's testimony. If it
What for? and she said, "We will note that you transferred to the tourist class". I
were really true that no such entry was made, the deposition of the purser could have cleared
said, "Nothing of that kind. That is tantamount to accepting my transfer." And I also
up the matter.
said, "You are not going to note anything there because I am protesting to this
transfer".
We, therefore, hold that the transcribed testimony of Carrascoso is admissible in evidence.
Q Was she able to note it?
8. Exemplary damages are well awarded. The Civil Code gives the court ample power to grant
exemplary damages — in contracts and quasi- contracts. The only condition is that defendant
A No, because I did not give my ticket.
should have "acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner." 53 The
manner of ejectment of respondent Carrascoso from his first class seat fits into this legal
Q About that purser? precept. And this, in addition to moral damages.54

A Well, the seats there are so close that you feel uncomfortable and you don't have
enough leg room, I stood up and I went to the pantry that was next to me and the
purser was there. He told me, "I have recorded the incident in my notebook." He
read it and translated it to me — because it was recorded in French — "First class
passenger was forced to go to the tourist class against his will, and that the captain
refused to intervene."
Mr. VALTE —
I move to strike out the last part of the testimony of the witness because the best
evidence would be the notes. Your Honor.
9. The right to attorney's fees is fully established. The grant of exemplary damages justifies a
similar judgment for attorneys' fees. The least that can be said is that the courts below felt that
it is but just and equitable that attorneys' fees be given. 55 We do not intend to break faith with
the tradition that discretion well exercised — as it was here — should not be disturbed.
10. Questioned as excessive are the amounts decreed by both the trial court and the Court of
Appeals, thus: P25,000.00 as moral damages; P10,000.00, by way of exemplary damages, and
P3,000.00 as attorneys' fees. The task of fixing these amounts is primarily with the trial
court. 56 The Court of Appeals did not interfere with the same. The dictates of good sense
suggest that we give our imprimatur thereto. Because, the facts and circumstances point to the
reasonableness thereof.57

On balance, we say that the judgment of the Court of Appeals does not suffer from reversible
COURT —
error. We accordingly vote to affirm the same. Costs against petitioner. So ordered.

I will allow that as part of his testimony. 49

Petitioner charges that the finding of the Court of Appeals that the purser made an entry in his
notebook reading "First class passenger was forced to go to the tourist class against his will,
and that the captain refused to intervene" is predicated upon evidence [Carrascoso's testimony
above] which is incompetent. We do not think so. The subject of inquiry is not the entry, but
the ouster incident. Testimony on the entry does not come within the proscription of the best
evidence rule. Such testimony is admissible. 49a

Besides, from a reading of the transcript just quoted, when the dialogue happened, the impact
of the startling occurrence was still fresh and continued to be felt. The excitement had not as
yet died down. Statements then, in this environment, are admissible as part of the res
gestae. 50 For, they grow "out of the nervous excitement and mental and physical condition of
 [G.R. NO. 124242 - January 21, 2005]
SAN LORENZO DEVELOPMENT CORPORATION, Petitioner, v. COURT OF
APPEALS, PABLO S. BABASANTA, SPS. MIGUEL LU and PACITA ZAVALLA
LU, Respondents.
DECISION
TINGA, J.:
From a coaptation of the records of this case, it appears that respondents Miguel Lu and Pacita
Zavalla, (hereinafter, the Spouses Lu) owned two (2) parcels of land situated in Sta. Rosa,
Laguna covered by TCT No. T-39022 and TCT No. T-39023 both measuring 15,808 square
meters or a total of 3.1616 hectares.
On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to respondent
Pablo Babasanta, (hereinafter, Babasanta) for the price of fifteen pesos (P15.00) per square
meter. Babasanta made a downpayment of fifty thousand pesos (P50,000.00) as evidenced by a
memorandum receipt issued by Pacita Lu of the same date. Several other payments totaling
two hundred thousand pesos (P200,000.00) were made by Babasanta.
Sometime in May 1989, Babasanta wrote a letter to Pacita Lu to demand the execution of a
final deed of sale in his favor so that he could effect full payment of the purchase price. In the
same letter, Babasanta notified the spouses about having received information that the spouses
sold the same property to another without his knowledge and consent. He demanded that the
second sale be cancelled and that a final deed of sale be issued in his favor.
In response, Pacita Lu wrote a letter to Babasanta wherein she acknowledged having agreed to
sell the property to him at fifteen pesos (P15.00) per square meter. She, however, reminded
Babasanta that when the balance of the purchase price became due, he requested for a
reduction of the price and when she refused, Babasanta backed out of the sale. Pacita added
that she returned the sum of fifty thousand pesos (P50,000.00) to Babasanta through Eugenio
Oya.
On 2 June 1989, respondent Babasanta, as plaintiff, filed before the Regional Trial Court
(RTC), Branch 31, of San Pedro, Laguna, a Complaint for Specific Performance and
Damages1 against his co-respondents herein, the Spouses Lu. Babasanta alleged that the lands
covered by TCT No. T - 39022 and T-39023 had been sold to him by the spouses at fifteen
pesos (P15.00) per square meter. Despite his repeated demands for the execution of a final
deed of sale in his favor, respondents allegedly refused.
In their Answer,2 the Spouses Lu alleged that Pacita Lu obtained loans from Babasanta and
when the total advances of Pacita reached fifty thousand pesos (P50,000.00), the latter and
Babasanta, without the knowledge and consent of Miguel Lu, had verbally agreed to transform
the transaction into a contract to sell the two parcels of land to Babasanta with the fifty
thousand pesos (P50,000.00) to be considered as the downpayment for the property and the
balance to be paid on or before 31 December 1987. Respondents Lu added that as of November
1987, total payments made by Babasanta amounted to only two hundred thousand pesos
(P200,000.00) and the latter allegedly failed to pay the balance of two hundred sixty thousand
pesos (P260,000.00) despite repeated demands. Babasanta had purportedly asked Pacita for a
reduction of the price from fifteen pesos (P15.00) to twelve pesos (P12.00) per square meter
and when the Spouses Lu refused to grant Babasanta's request, the latter rescinded the contract
to sell and declared that the original loan transaction just be carried out in that the spouses
would be indebted to him in the amount of two hundred thousand pesos (P200,000.00).
Accordingly, on 6 July 1989, they purchased Interbank Manager's Check No. 05020269 in the
amount of two hundred thousand pesos (P200,000.00) in the name of Babasanta to show that
she was able and willing to pay the balance of her loan obligation.
Babasanta later filed an Amended Complaint dated 17 January 19903 wherein he prayed for the
issuance of a writ of preliminary injunction with temporary restraining order and the inclusion
of the Register of Deeds of Calamba, Laguna as party defendant. He contended that the
issuance of a preliminary injunction was necessary to restrain the transfer or conveyance by the
Spouses Lu of the subject property to other persons.
The Spouses Lu filed their Opposition4 to the amended complaint contending that it raised new
matters which seriously affect their substantive rights under the original complaint. However,
the trial court in its Order dated 17 January 19905 admitted the amended complaint.
On 19 January 1990, herein petitioner San Lorenzo Development Corporation (SLDC) filed
a Motion for Intervention6 before the trial court. SLDC alleged that it had legal interest in the
subject matter under litigation because on 3 May 1989, the two parcels of land involved,
namely Lot 1764-A and 1764-B, had been sold to it in a Deed of Absolute Sale with
Mortgage.7 It alleged that it was a buyer in good faith and for value and therefore it had a better
right over the property in litigation.
In his Opposition to SLDC's motion for intervention,8 respondent Babasanta demurred and
argued that the latter had no legal interest in the case because the two parcels of land involved
herein had already been conveyed to him by the Spouses Lu and hence, the vendors were
without legal capacity to transfer or dispose of the two parcels of land to the intervenor.
Meanwhile, the trial court in its Order dated 21 March 1990 allowed SLDC to intervene. SLDC
filed its Complaint-in-Intervention on 19 April 1990.9 Respondent Babasanta's motion for the
issuance of a preliminary injunction was likewise granted by the trial court in its Order dated
11 January 199110 conditioned upon his filing of a bond in the amount of fifty thousand pesos
(P50,000.00).
SLDC in its Complaint-in-Intervention alleged that on 11 February 1989, the Spouses Lu
executed in its favor an Option to Buy the lots subject of the complaint. Accordingly, it paid an
option money in the amount of three hundred sixteen thousand one hundred sixty pesos
(P316,160.00) out of the total consideration for the purchase of the two lots of one million two
hundred sixty-four thousand six hundred forty pesos (P1,264,640.00). After the Spouses Lu
received a total amount of six hundred thirty-two thousand three hundred twenty pesos
(P632,320.00) they executed on 3 May 1989 a Deed of Absolute Sale with Mortgage in its
favor. SLDC added that the certificates of title over the property were delivered to it by the
spouses clean and free from any adverse claims and/or notice of lis pendens. SLDC further
alleged that it only learned of the filing of the complaint sometime in the early part of January
1990 which prompted it to file the motion to intervene without delay. Claiming that it was a
buyer in good faith, SLDC argued that it had no obligation to look beyond the titles submitted
to it by the Spouses Lu particularly because Babasanta's claims were not annotated on the
certificates of title at the time the lands were sold to it.
After a protracted trial, the RTC rendered its Decision on 30 July 1993 upholding the sale of
the property to SLDC. It ordered the Spouses Lu to pay Babasanta the sum of two hundred
thousand pesos (P200,000.00) with legal interest plus the further sum of fifty thousand pesos
(P50,000.00) as and for attorney's fees. On the complaint-in-intervention, the trial court ordered
the Register of Deeds of Laguna, Calamba Branch to cancel the notice of lis pendens annotated
on the original of the TCT No. T-39022 (T-7218) and No. T-39023 (T-7219).
Applying Article 1544 of the Civil Code, the trial court ruled that since both Babasanta and
SLDC did not register the respective sales in their favor, ownership of the property should
pertain to the buyer who first acquired possession of the property. The trial court equated the
execution of a public instrument in favor of SLDC as sufficient delivery of the property to the
latter. It concluded that symbolic possession could be considered to have been first transferred
to SLDC and consequently ownership of the property pertained to SLDC who purchased the
property in good faith.
Respondent Babasanta appealed the trial court's decision to the Court of Appeals alleging in the
main that the trial court erred in concluding that SLDC is a purchaser in good faith and in
upholding the validity of the sale made by the Spouses Lu in favor of SLDC.
Respondent spouses likewise filed an appeal to the Court of Appeals. They contended that the
trial court erred in failing to consider that the contract to sell between them and Babasanta had
been novated when the latter abandoned the verbal contract of sale and declared that the
original loan transaction just be carried out. The Spouses Lu argued that since the properties
involved were conjugal, the trial court should have declared the verbal contract to sell between
Pacita Lu and Pablo Babasanta null and void ab initio for lack of knowledge and consent of
Miguel Lu. They further averred that the trial court erred in not dismissing the complaint filed
by Babasanta; in awarding damages in his favor and in refusing to grant the reliefs prayed for
in their answer.
On 4 October 1995, the Court of Appeals rendered its Decision11 which set aside the judgment
of the trial court. It declared that the sale between Babasanta and the Spouses Lu was valid and
subsisting and ordered the spouses to execute the necessary deed of conveyance in favor of
Babasanta, and the latter to pay the balance of the purchase price in the amount of two hundred
sixty thousand pesos (P260,000.00). The appellate court ruled that the Absolute Deed of Sale
with Mortgage in favor of SLDC was null and void on the ground that SLDC was a purchaser
in bad faith. The Spouses Lu were further ordered to return all payments made by SLDC with
legal interest and to pay attorney's fees to Babasanta.
SLDC and the Spouses Lu filed separate motions for reconsideration with the appellate
court.12 However, in a Manifestation dated 20 December 1995,13 the Spouses Lu informed the
appellate court that they are no longer contesting the decision dated 4 October 1995.
In its Resolution dated 11 March 1996,14 the appellate court considered as withdrawn the
motion for reconsideration filed by the Spouses Lu in view of their manifestation of 20
December 1995. The appellate court denied SLDC's motion for reconsideration on the ground
that no new or substantial arguments were raised therein which would warrant modification or
reversal of the court's decision dated 4 October 1995.
Hence, this petition.
SLDC assigns the following errors allegedly committed by the appellate court:
THE COURT OF APPEALS ERRED IN HOLDING THAT SAN LORENZO WAS NOT A
BUYER IN GOOD FAITH BECAUSE WHEN THE SELLER PACITA ZAVALLA LU
OBTAINED FROM IT THE CASH ADVANCE OF P200,000.00, SAN LORENZO WAS
PUT ON INQUIRY OF A PRIOR TRANSACTION ON THE PROPERTY.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE ESTABLISHED
FACT THAT THE ALLEGED FIRST BUYER, RESPONDENT BABASANTA, WAS NOT
IN POSSESSION OF THE DISPUTED PROPERTY WHEN SAN LORENZO BOUGHT
AND TOOK POSSESSION OF THE PROPERTY AND NO ADVERSE CLAIM, LIEN,
ENCUMBRANCE OR LIS PENDENS WAS ANNOTATED ON THE TITLES.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE FACT THAT
RESPONDENT BABASANTA HAS SUBMITTED NO EVIDENCE SHOWING THAT SAN
LORENZO WAS AWARE OF HIS RIGHTS OR INTERESTS IN THE DISPUTED
PROPERTY.
THE COURT OF APPEALS ERRED IN HOLDING THAT NOTWITHSTANDING ITS
FULL CONCURRENCE ON THE FINDINGS OF FACT OF THE TRIAL COURT, IT
REVERSED AND SET ASIDE THE DECISION OF THE TRIAL COURT UPHOLDING
THE TITLE OF SAN LORENZO AS A BUYER AND FIRST POSSESSOR IN GOOD
FAITH.15
SLDC contended that the appellate court erred in concluding that it had prior notice of
Babasanta's claim over the property merely on the basis of its having advanced the amount of
two hundred thousand pesos (P200,000.00) to Pacita Lu upon the latter's representation that she
needed the money to pay her obligation to Babasanta. It argued that it had no reason to suspect
that Pacita was not telling the truth that the money would be used to pay her indebtedness to
Babasanta. At any rate, SLDC averred that the amount of two hundred thousand pesos
(P200,000.00) which it advanced to Pacita Lu would be deducted from the balance of the
purchase price still due from it and should not be construed as notice of the prior sale of the
land to Babasanta. It added that at no instance did Pacita Lu inform it that the lands had been
previously sold to Babasanta.
Moreover, SLDC stressed that after the execution of the sale in its favor it immediately took
possession of the property and asserted its rights as new owner as opposed to Babasanta who
has never exercised acts of ownership. Since the titles bore no adverse claim, encumbrance, or
lien at the time it was sold to it, SLDC argued that it had every reason to rely on the correctness
of the certificate of title and it was not obliged to go beyond the certificate to determine the
condition of the property. Invoking the presumption of good faith, it added that the burden rests
on Babasanta to prove that it was aware of the prior sale to him but the latter failed to do so.
SLDC pointed out that the notice of lis pendens was annotated only on 2 June 1989 long after
the sale of the property to it was consummated on 3 May 1989.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
Meanwhile, in an Urgent Ex-Parte Manifestation dated 27 August 1999, the Spouses Lu
informed the Court that due to financial constraints they have no more interest to pursue their
rights in the instant case and submit themselves to the decision of the Court of Appeals. 16
On the other hand, respondent Babasanta argued that SLDC could not have acquired ownership
of the property because it failed to comply with the requirement of registration of the sale in
good faith. He emphasized that at the time SLDC registered the sale in its favor on 30 June
1990, there was already a notice of lis pendens annotated on the titles of the property made as
early as 2 June 1989. Hence, petitioner's registration of the sale did not confer upon it any right.
Babasanta further asserted that petitioner's bad faith in the acquisition of the property is evident
from the fact that it failed to make necessary inquiry regarding the purpose of the issuance of
the two hundred thousand pesos (P200,000.00) manager's check in his favor.
The core issue presented for resolution in the instant petition is who between SLDC and
Babasanta has a better right over the two parcels of land subject of the instant case in view of
the successive transactions executed by the Spouses Lu.
To prove the perfection of the contract of sale in his favor, Babasanta presented a document
signed by Pacita Lu acknowledging receipt of the sum of fifty thousand pesos (P50,000.00) as
partial payment for 3.6 hectares of farm lot situated at Barangay Pulong, Sta. Cruz, Sta. Rosa,
Laguna.17 While the receipt signed by Pacita did not mention the price for which the property
was being sold, this deficiency was supplied by Pacita Lu's letter dated 29 May 198918 wherein
she admitted that she agreed to sell the 3.6 hectares of land to Babasanta for fifteen pesos
(P15.00) per square meter.
An analysis of the facts obtaining in this case, as well as the evidence presented by the parties,
irresistibly leads to the conclusion that the agreement between Babasanta and the Spouses Lu is
a contract to sell and not a contract of sale.
Contracts, in general, are perfected by mere consent,19 which is manifested by the meeting of
the offer and the acceptance upon the thing which are to constitute the contract. The offer must
be certain and the acceptance absolute.20 Moreover, contracts shall be obligatory in whatever
form they may have been entered into, provided all the essential requisites for their validity are
present.21
The receipt signed by Pacita Lu merely states that she accepted the sum of fifty thousand pesos
(P50,000.00) from Babasanta as partial payment of 3.6 hectares of farm lot situated in Sta.
Rosa, Laguna. While there is no stipulation that the seller reserves the ownership of the
property until full payment of the price which is a distinguishing feature of a contract to sell,
the subsequent acts of the parties convince us that the Spouses Lu never intended to transfer
ownership to Babasanta except upon full payment of the purchase price.
Babasanta's letter dated 22 May 1989 was quite telling. He stated therein that despite his
repeated requests for the execution of the final deed of sale in his favor so that he could effect
full payment of the price, Pacita Lu allegedly refused to do so. In effect, Babasanta himself
recognized that ownership of the property would not be transferred to him until such time as he
shall have effected full payment of the price. Moreover, had the sellers intended to transfer
title, they could have easily executed the document of sale in its required form simultaneously
with their acceptance of the partial payment, but they did not. Doubtlessly, the receipt signed
by Pacita Lu should legally be considered as a perfected contract to sell.
The distinction between a contract to sell and a contract of sale is quite germane. In a contract
of sale, title passes to the vendee upon the delivery of the thing sold; whereas in a contract to
sell, by agreement the ownership is reserved in the vendor and is not to pass until the full
payment of the price.22 In a contract of sale, the vendor has lost and cannot recover ownership
until and unless the contract is resolved or rescinded; whereas in a contract to sell, title is
retained by the vendor until the full payment of the price, such payment being a positive
suspensive condition and failure of which is not a breach but an event that prevents the
obligation of the vendor to convey title from becoming effective.23
The perfected contract to sell imposed upon Babasanta the obligation to pay the balance of the
purchase price. There being an obligation to pay the price, Babasanta should have made the
proper tender of payment and consignation of the price in court as required by law. Mere
sending of a letter by the vendee expressing the intention to pay without the accompanying
payment is not considered a valid tender of payment.24 Consignation of the amounts due in
court is essential in order to extinguish Babasanta's obligation to pay the balance of the
purchase price. Glaringly absent from the records is any indication that Babasanta even
attempted to make the proper consignation of the amounts due, thus, the obligation on the part
of the sellers to convey title never acquired obligatory force.
On the assumption that the transaction between the parties is a contract of sale and not a
contract to sell, Babasanta's claim of ownership should nevertheless fail.
Sale, being a consensual contract, is perfected by mere consent 25 and from that moment, the
parties may reciprocally demand performance.26 The essential elements of a contract of sale, to
wit: (1) consent or meeting of the minds, that is, to transfer ownership in exchange for the
price; (2) object certain which is the subject matter of the contract; (3) cause of the obligation
which is established.27
The perfection of a contract of sale should not, however, be confused with its consummation.
In relation to the acquisition and transfer of ownership, it should be noted that sale is not a
mode, but merely a title. A mode is the legal means by which dominion or ownership is
created, transferred or destroyed, but title is only the legal basis by which to affect dominion or
ownership.28 Under Article 712 of the Civil Code, "ownership and other real rights over
property are acquired and transmitted by law, by donation, by testate and intestate succession,
and in consequence of certain contracts, by tradition." Contracts only constitute titles or rights
to the transfer or acquisition of ownership, while delivery or tradition is the mode of
accomplishing the same.29 Therefore, sale by itself does not transfer or affect ownership; the
most that sale does is to create the obligation to transfer ownership. It is tradition or delivery,
as a consequence of sale, that actually transfers ownership.
Explicitly, the law provides that the ownership of the thing sold is acquired by the vendee from
the moment it is delivered to him in any of the ways specified in Article 1497 to 1501. 30 The
word "delivered" should not be taken restrictively to mean transfer of actual physical
possession of the property. The law recognizes two principal modes of delivery, to wit: (1)
actual delivery; and (2) legal or constructive delivery.
Actual delivery consists in placing the thing sold in the control and possession of the
vendee.31 Legal or constructive delivery, on the other hand, may be had through any of the
following ways: the execution of a public instrument evidencing the sale; 32 symbolical tradition
such as the delivery of the keys of the place where the movable sold is being kept; 33 traditio
longa manu or by mere consent or agreement if the movable sold cannot yet be transferred to
the possession of the buyer at the time of the sale;34 traditio brevi manu if the buyer already
had possession of the object even before the sale;35 and traditio constitutum possessorium,
where the seller remains in possession of the property in a different capacity.36
Following the above disquisition, respondent Babasanta did not acquire ownership by the mere
execution of the receipt by Pacita Lu acknowledging receipt of partial payment for the
property. For one, the agreement between Babasanta and the Spouses Lu, though valid, was not
embodied in a public instrument. Hence, no constructive delivery of the lands could have been
effected. For another, Babasanta had not taken possession of the property at any time after the
perfection of the sale in his favor or exercised acts of dominion over it despite his assertions
that he was the rightful owner of the lands. Simply stated, there was no delivery to Babasanta,
whether actual or constructive, which is essential to transfer ownership of the property. Thus,
even on the assumption that the perfected contract between the parties was a sale, ownership
could not have passed to Babasanta in the absence of delivery, since in a contract of sale
ownership is transferred to the vendee only upon the delivery of the thing sold. 37
However, it must be stressed that the juridical relationship between the parties in a double sale
is primarily governed by Article 1544 which lays down the rules of preference between the two
purchasers of the same property. It provides:
Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it should
be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in
good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was
first in the possession; and, in the absence thereof, to the person who presents the oldest title,
provided there is good faith.
The principle of primus tempore, potior jure (first in time, stronger in right) gains greater
significance in case of double sale of immovable property. When the thing sold twice is an
immovable, the one who acquires it and first records it in the Registry of Property, both made
in good faith, shall be deemed the owner.38 Verily, the act of registration must be coupled with
good faith' that is, the registrant must have no knowledge of the defect or lack of title of his
vendor or must not have been aware of facts which should have put him upon such inquiry and
investigation as might be necessary to acquaint him with the defects in the title of his vendor.39
Admittedly, SLDC registered the sale with the Registry of Deeds after it had acquired
knowledge of Babasanta's claim. Babasanta, however, strongly argues that the registration of
the sale by SLDC was not sufficient to confer upon the latter any title to the property since the
registration was attended by bad faith. Specifically, he points out that at the time SLDC
registered the sale on 30 June 1990, there was already a notice of lis pendens on the file with
the Register of Deeds, the same having been filed one year before on 2 June 1989.
Did the registration of the sale after the annotation of the notice of lis pendens obliterate the
effects of delivery and possession in good faith which admittedly had occurred prior to SLDC's
knowledge of the transaction in favor of Babasanta?chanroblesvirtualawlibrary
We do not hold so.
It must be stressed that as early as 11 February 1989, the Spouses Lu executed the Option to
Buy in favor of SLDC upon receiving P316,160.00 as option money from SLDC. After SLDC
had paid more than one half of the agreed purchase price of P1,264,640.00, the Spouses Lu
subsequently executed on 3 May 1989 a Deed of Absolute Sale in favor or SLDC. At the time
both deeds were executed, SLDC had no knowledge of the prior transaction of the Spouses Lu
with Babasanta. Simply stated, from the time of execution of the first deed up to the moment of
transfer and delivery of possession of the lands to SLDC, it had acted in good faith and the
subsequent annotation of lis pendens has no effect at all on the consummated sale between
SLDC and the Spouses Lu.
A purchaser in good faith is one who buys property of another without notice that some other
person has a right to, or interest in, such property and pays a full and fair price for the same at
the time of such purchase, or before he has notice of the claim or interest of some other person
in the property.40 Following the foregoing definition, we rule that SLDC qualifies as a buyer in
good faith since there is no evidence extant in the records that it had knowledge of the prior
transaction in favor of Babasanta. At the time of the sale of the property to SLDC, the vendors
were still the registered owners of the property and were in fact in possession of the
lands.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
Time and again, this Court has ruled that a person dealing with the owner of registered land is
not bound to go beyond the certificate of title as he is charged with notice of burdens on the
property which are noted on the face of the register or on the certificate of title. 41 In assailing
knowledge of the transaction between him and the Spouses Lu, Babasanta apparently relies on registration of the property by Abarquez lacked the element of good faith. While the facts in
the principle of constructive notice incorporated in Section 52 of the Property Registration the instant case substantially differ from that in Abarquez, we would not hesitate to rule in
Decree (P.D. No. 1529) which reads, thus: favor of SLDC on the basis of its prior possession of the property in good faith. Be it noted that
delivery of the property to SLDC was immediately effected after the execution of the deed in
its favor, at which time SLDC had no knowledge at all of the prior transaction by the Spouses
Sec. 52. Constructive notice upon registration. 'Every conveyance, mortgage, lease, lien,
Lu in favor of Babasanta.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
attachment, order, judgment, instrument or entry affecting registered land shall, if registered,
filed, or entered in the office of the Register of Deeds for the province or city where the land to
which it relates lies, be constructive notice to all persons from the time of such registering, The law speaks not only of one criterion. The first criterion is priority of entry in the registry of
filing, or entering. property; there being no priority of such entry, the second is priority of possession; and, in the
absence of the two priorities, the third priority is of the date of title, with good faith as the
common critical element. Since SLDC acquired possession of the property in good faith in
However, the constructive notice operates as such by the express wording of Section 52 from
contrast to Babasanta, who neither registered nor possessed the property at any time, SLDC's
the time of the registration of the notice of lis pendens which in this case was effected only on
right is definitely superior to that of Babasanta's.
2 June 1989, at which time the sale in favor of SLDC had long been consummated insofar as
the obligation of the Spouses Lu to transfer ownership over the property to SLDC is concerned.
At any rate, the above discussion on the rules on double sale would be purely academic for as
earlier stated in this decision, the contract between Babasanta and the Spouses Lu is not a
More fundamentally, given the superiority of the right of SLDC to the claim of Babasanta the
contract of sale but merely a contract to sell. In Dichoso v. Roxas,47 we had the occasion to rule
annotation of the notice of lis pendens cannot help Babasanta's position a bit and it is irrelevant
that Article 1544 does not apply to a case where there was a sale to one party of the land itself
to the good or bad faith characterization of SLDC as a purchaser. A notice of lis pendens, as
while the other contract was a mere promise to sell the land or at most an actual assignment of
the Court held in Nataño v. Esteban,42 serves as a warning to a prospective purchaser or
the right to repurchase the same land. Accordingly, there was no double sale of the same land
incumbrancer that the particular property is in litigation; and that he should keep his hands off
in that case.
the same, unless he intends to gamble on the results of the litigation." Precisely, in this case
SLDC has intervened in the pending litigation to protect its rights. Obviously, SLDC's faith in
the merit of its cause has been vindicated with the Court's present decision which is the WHEREFORE, the instant petition is hereby GRANTED. The decision of the Court of
ultimate denouement on the controversy. Appeals appealed from is REVERSED and SET ASIDE and the decision of the Regional Trial
Court, Branch 31, of San Pedro, Laguna is REINSTATED. No costs.
The Court of Appeals has made capital43 of SLDC's averment in its Complaint-in-
Intervention44 that at the instance of Pacita Lu it issued a check for P200,000.00 payable to
Babasanta and the confirmatory testimony of Pacita Lu herself on cross-
examination.45 However, there is nothing in the said pleading and the testimony which
explicitly relates the amount to the transaction between the Spouses Lu and Babasanta for what
they attest to is that the amount was supposed to pay off the advances made by Babasanta to
Pacita Lu. In any event, the incident took place after the Spouses Lu had already executed
the Deed of Absolute Sale with Mortgage in favor of SLDC and therefore, as previously
explained, it has no effect on the legal position of SLDC.

Assuming ex gratia argumenti that SLDC's registration of the sale had been tainted by the prior
notice of lis pendens and assuming further for the same nonce that this is a case of double sale,
still Babasanta's claim could not prevail over that of SLDC's. In Abarquez v. Court of
Appeals,46 this Court had the occasion to rule that if a vendee in a double sale registers the sale
after he has acquired knowledge of a previous sale, the registration constitutes a registration in
bad faith and does not confer upon him any right. If the registration is done in bad faith, it is as
if there is no registration at all, and the buyer who has taken possession first of the property in
good faith shall be preferred.

In Abarquez, the first sale to the spouses Israel was notarized and registered only after the
second vendee, Abarquez, registered their deed of sale with the Registry of Deeds, but the
Israels were first in possession. This Court awarded the property to the Israels because