G.R. No.

L-38498 August 10, 1989
ISAAC BAGNAS, ENCARNACION BAGNAS, SILVESTRE BAGNAS MAXIMINA BAGNAS,
SIXTO BAGNAS and AGATONA ENCARNACION, petitioners,
vs.
HON. COURT OF APPEALS, ROSA L. RETONIL TEOFILO ENCARNACION, and JOSE B.
NAMBAYAN respondents.
Beltran, Beltran & Beltran for petitioners.
Jose M. Legaspi for private respondents.
NARVASA, J.:
and (by way of affirmative defense) that the plaintiffs could not question or seek annulment of the sales because
they were mere collateral relatives of the deceased vendor and were not bound, principally or subsidiarily, thereby.
After the plaintiffs had presented their evidence, the defendants filed a motion for dismissal in effect, a demurrer
to the evidence reasserting the defense set up in their answer that the plaintiffs, as mere collateral relatives of
Hilario Mateum, had no light to impugn the latter's disposition of his properties by means of the questioned
conveyances and submitting, additionally, that no evidence of fraud maintaining said transfers had been presented.
The Trial Court granted the motion to dismiss, holding (a) on the authority of Armentia vs. Patriarca, that the
plaintiffs, as mere collateral relatives, not forced heirs, of Hilario Mateum, could not legally question the
disposition made by said deceased during his lifetime, regardless of whether, as a matter of objective reality, said
dispositions were valid or not; and (b) that the plaintiffs evidence of alleged fraud was insufficient, the fact that the
deeds of sale each stated a consideration of only Pl.00 not being in itself evidence of fraud or simulation.

The facts underlying this appeal by certiorari are not in dispute. Hilario Mateum of Kawit, Cavite, died on March
11, 1964, single, without ascendants or descendants, and survived only by collateral relatives, of whom petitioners
herein, his first cousins, were the nearest. Mateum left no will, no debts, and an estate consisting of twenty-nine
parcels of land in Kawit and Imus, Cavite, ten of which are involved in this appeal.
On April 3, 1964, the private respondents, themselves collateral relatives of Mateum though more remote in
degree than the petitioners, registered with the Registry of Deeds for the Province of Cavite two deeds of sale
purportedly executed by Mateum in their (respondents') favor covering ten parcels of land. Both deeds were in
Tagalog, save for the English descriptions of the lands conveyed under one of them; and each recited the
reconsideration of the sale to be" ... halagang ISANG PISO (Pl.00), salaping Pilipino, at mga naipaglingkod,
ipinaglilingkod sa aking kapakanan ..." ("the sum of ONE PESO Pl.00), Philippine Currency, and services
rendered, being rendered and to be rendered for my benefit"). One deed was dated February 6,1963 and covered
five parcels of land, and the other was dated March 4, 1963, covering five other parcels, both, therefore, antedating
Mateum's death by more than a year. It is asserted by the petitioners, but denied by the respondents, that said sales
notwithstanding, Mateum continued in the possession of the lands purportedly conveyed until his death, that he
remained the declared owner thereof and that the tax payments thereon continued to be paid in his name. Whatever
the truth, however, is not crucial. What is not disputed is that on the strength of the deeds of sale, the respondents
were able to secure title in their favor over three of the ten parcels of land conveyed thereby.
On May 22,1964 the petitioners commenced suit against the respondents in the Court of First Instance of Cavite,
seeking annulment of the deeds of sale as fictitious, fraudulent or falsified, or, alternatively, as donations void for
want of acceptance embodied in a public instrument. Claiming ownership pro indiviso of the lands subject of the
deeds by virtue of being intestate heirs of Hilario Mateum, the petitioners prayed for recovery of ownership and
possession of said lands, accounting of the fruits thereof and damages. Although the complaint originally sought
recovery of all the twenty-nine parcels of land left by Mateum, at the pre-trial the parties agreed that the
controversy be limited to the ten parcels subject of the questioned sales, and the Trial Court ordered the exclusion
of the nineteen other parcels from the action. Of the ten parcels which remained in litigation, nine were assessed
for purposes of taxation at values aggregating P10,500 00. The record does not disclose the assessed value of the
tenth parcel, which has an area of 1,443 square meters.
In answer to the complaint, the defendants (respondents here) denied the alleged fictitious or fraudulent character
of the sales in their favor, asserting that said sales were made for good and valuable consideration; that while "...
they may have the effect of donations, yet the formalities and solemnities of donation are not required for their
validity and effectivity, ... that defendants were collateral relatives of Hilario Mateum and had done many good
things for him, nursing him in his last illness, which services constituted the bulk of the consideration of the sales;
On appeal by the plaintiffs to the Court of Appeals, that court affirmed, adverting with approval to the Trial
Court's reliance on the Armentia ruling which, it would appear, both courts saw as denying, without exception, to
collaterals, of a decedent, not forced heirs, the right to impugn the latter's dispositions inter vivos of his property.
The Appellate Court also analyzed the testimony of the plaintiffs' witnesses, declared that it failed to establish
fraud of any kind or that Mateum had continued paying taxes on the lands in question even after executing the
deeds conveying them to the defendants, and closed with the statement that "... since in duly notarized and
registered deeds of sale consideration is presumed, we do not and it necessary to rule on the alternative allegations
of the appellants that the said deed of sale were (sic) in reality donations.
One issue clearly predominates here. It is whether, in view of the fact that, for properties assuredly worth in actual
value many times over their total assessed valuation of more than P10,000.00, the questioned deeds of sale each
state a price of only one peso (P1.00) plus unspecified past, present and future services to which no value is
assigned, said deeds were void or inexistent from the beginning ("nulo") or merely voidable, that is, valid until
annulled. If they were only voidable, then it is a correct proposition that since the vendor Mateum had no forced
heirs whose legitimes may have been impaired, and the petitioners, his collateral relatives, not being bound either
principally or subsidiarily to the terms of said deeds, the latter had and have no actionable right to question those
transfers.
On the other hand, if said deeds were void ab initio because to all intents and purposes without consideration, then
a different legal situation arises, and quite another result obtains, as pointed out by the eminent civil law authority,
Mr. Justice J.B.L. Reyes who, in his concurring opinion in Armentia, said:
I ... cannot bring myself to agree to the proposition that the heirs intestate would have no legal standing to
contest the conveyance made by the deceased if the same were made without any consideration, or for a false
and fictitious consideration. For under the Civil Code of the Philippines, Art. 1409, par. 3, contracts with a
cause that did not exist at the time of the transaction are inexistent and void from the beginning. The same is
true of contracts stating a false cause (consideration) unless the persons interested in upholding the contract
should prove that there is another true and lawful consideration therefor. (lbid., Art. 1353).
If therefore the contract has no causa or consideration, or the causa is false and fictitious (and no true
hidden causa is proved) the property allegedly conveyed never really leaves the patrimony of the transferor,
and upon the latter's death without a testament, such property would pass to the transferor's heirs intestate and
be recoverable by them or by the Administrator of the transferor's estate. In this particular regard, I think
Concepcion vs. Sta. Ana, 87 Phil. 787 and Sobs vs. Chua Pua Hermanos, 50 Phil. 536, do not correctly state
the present law, and must be clarified.
To be sure the quoted passage does not reject and is not to be construed as rejecting the
Concepcion and Solis rulings as outrightly erroneous, far from it. On the contrary, those rulings undoubtedly read
and applied correctly the law extant in their time: Art. 1276 of the Civil Code of 1889 under which the statement
of a false cause in a contract rendered it voidable only, not void ab initio. In observing that they "... do not
correctly state the present law and must be clarified," Justice Reyes clearly had in mind the fact that the law as it is
now (and already was in the time Armentia) no longer deems contracts with a false cause, or which are absolutely
simulated or fictitious, merely voidable, but declares them void, i.e., inexistent ("nulo") unless it is shown that they
are supported by another true and lawful cause or consideration. A logical consequence of that change is the
juridical status of contracts without, or with a false, cause is that conveyances of property affected with such a vice
cannot operate to divest and transfer ownership, even if unimpugned. If afterwards the transferor dies the property
descends to his heirs, and without regard to the manner in which they are called to the succession, said heirs may
bring an action to recover the property from the purported transferee. As pointed out, such an action is not founded
on fraud, but on the premise that the property never leaves the estate of the transferor and is transmitted upon his
death to heirs, who would labor under no incapacity to maintain the action from the mere fact that they may be
only collateral relatives and bound neither principally or subsidiarily under the deed or contract of conveyance.
In Armentia the Court determined that the conveyance questioned was merely annullable not void ab initio, and
that the plaintiff s action was based on fraud vitiating said conveyance. The Court said:
Hypothetically admitting the truth of these allegations (of plaintiffs complaint), the conclusion is irresistible
that the sale is merely voidable. Because Marta Armentia executed the document, and this is not controverted
by plaintiff. Besides, the fact that the vendees were minors, makes the contract, at worst, annullable by them,
Then again, inadequacy of consideration does not imply total want of consideration. Without more, the parted
acts of Marta Armentia after the sale did not indicate that the said sale was void from the being.
The sum total of all these is that, in essence, plaintiffs case is bottomed on fraud, which renders the contract
voidable.
It therefore seems clear that insofar as it may be considered as setting or reaffirming precedent, Armentia only
ruled that transfers made by a decedent in his lifetime, which are voidable for having been fraudulently made or
obtained, cannot be posthumously impugned by collateral relatives succeeding to his estate who are not principally
or subsidiarily bound by such transfers. For the reasons already stated, that ruling is not extendible to transfers
which, though made under closely similar circumstances, are void ab initio for lack or falsity of consideration.
The petitioners here argue on a broad front that the very recitals of the questioned deeds of sale reveal such want
or spuriousness of consideration and therefore the void character of said sales. They:
1. advert to a decision of the Court of Appeals in Montinola vs. Herbosa (59 O.G. No. 47, pp, 8101, 8118) holding
that a price of P l.00 for the sale of things worth at least P20,000.00 is so insignificant as to amount to no price at
all, and does not satisfy the law which, while not requiring for the validity of a sale that the price be adequate,
prescribes that it must be real, not fictitious, stressing the obvious parallel between that case and the present one in
stated price and actual value of the property sold;
2. cite Manresa to the same effect: that true price, which is essential to the validity of a sale, means existent, real
and effective price, that which does not consist in an insignificant amount as, say, P.20 for a house; that it is not
the same as the concept of a just price which entails weighing and measuring, for economic equivalence, the
amount of price against all the factors that determine the value of the thing sold; but that there is no need of such a
close examination when the immense disproportion between such economic values is patent a case of insignificant
or ridiculous price, the unbelievable amount of which at once points out its inexistence;
3. assert that Art. 1458 of the Civil Code, in prescribing that a sale be for a ... price certain in money or its
equivalent ... requires that "equivalent" be something representative of money, e.g., a check or draft, again citing
Manresa to the effect that services are not the equivalent of money insofar as said requirement is concerned and
that a contract is not a true sale where the price consists of services or prestations;
4. once more citing Manresa also point out that the "services" mentioned in the questioned deeds of sale are not
only vague and uncertain, but are unknown and not susceptible of determination without the necessity of a new
agreement between the parties to said deeds.
Without necessarily according all these assertions its full concurrence, but upon the consideration alone that the
apparent gross, not to say enormous, disproportion between the stipulated price (in each deed) of P l.00 plus
unspecified and unquantified services and the undisputably valuable real estate allegedly sold worth at least
P10,500.00 going only by assessments for tax purposes which, it is well-known, are notoriously low indicators of
actual value plainly and unquestionably demonstrates that they state a false and fictitious consideration, and no
other true and lawful cause having been shown, the Court finds both said deeds, insofar as they purport to be sales,
not merely voidable, but void ab initio.
Neither can the validity of said conveyances be defended on the theory that their true causa is the liberality of the
transferor and they may be considered in reality donations because the law also prescribes that donations of
immovable property, to be valid, must be made and accepted in a public instrument, and it is not denied by the
respondents that there has been no such acceptance which they claim is not required.
The transfers in question being void, it follows as a necessary consequence and conformably to the concurring
opinion in Armentia, with which the Court fully agrees, that the properties purportedly conveyed remained part of
the estate of Hilario Mateum, said transfers notwithstanding, recoverable by his intestate heirs, the petitioners
herein, whose status as such is not challenged.
The private respondents have only themselves to blame for the lack of proof that might have saved the questioned
transfers from the taint of invalidity as being fictitious and without ilicit cause; proof, to be brief, of the character
and value of the services, past, present, and future, constituting according to the very terms of said transfers the
principal consideration therefor. The petitioners' complaint (par. 6) averred that the transfers were "... fraudulent,
fictitious and/or falsified and (were) ... in reality donations of immovables ...," an averment that the private
respondents not only specifically denied, alleging that the transfers had been made "... for good and valuable
consideration ...," but to which they also interposed the affirmative defenses that said transfers were "... valid,
binding and effective ...," and, in an obvious reference to the services mentioned in the deeds, that they "... had
done many good things to (the transferor) during his lifetime, nursed him during his ripe years and took care of
him during his previous and last illness ...," (pars. 4, 6, 16 and 17, their answer). The onus, therefore, of showing
the existence of valid and illicit consideration for the questioned conveyances rested on the private respondents.
But even on a contrary assumption, and positing that the petitioners initially had the burden of showing that the
transfers lacked such consideration as they alleged in their complaint, that burden was shifted to the private
respondents when the petitioners presented the deeds which they claimed showed that defect on their face and it
became the duty of said respondents to offer evidence of existent lawful consideration.
As the record clearly demonstrates, the respondents not only failed to offer any proof whatsoever, opting to rely on
a demurrer to the petitioner's evidence and upon the thesis, which they have maintained all the way to this Court,
that petitioners, being mere collateral relatives of the deceased transferor, were without right to the conveyances in
question. In effect, they gambled their right to adduce evidence on a dismissal in the Trial Court and lost, it being
the rule that when a dismissal thus obtained is reversed on appeal, the movant loses the right to present evidence in
his behalf.
WHEREFORE, the appealed Decision of the Court of Appeals is reversed. The questioned transfers are declared
void and of no force or effect. Such certificates of title as the private respondents may have obtained over the
properties subject of said transfers are hereby annulled, and said respondents are ordered to return to the
petitioners possession of an the properties involved in tills action, to account to the petitioners for the fruits thereof
during the period of their possession, and to pay the costs. No damages, attorney's fees or litigation expenses are
awarded, there being no evidence thereof before the Court.
SO ORDERED.
G.R. No. L-37831 November 23, 1981
RESTITUTA V. VDA. DE GORDON, petitioner,
vs.
THE COURT OF APPEALS and ROSARIO DUAZO, respondents.
TEEHANKEE, J.:
The Court affirms the appealed decision finding the same to be in accordance with the applicable law. The
appellate court correctly upheld the tax sale of the real properties at which respondent Rosario Duazo acquired the
same and her ownership upon petitioner Restituta V. Vda. de Gordon's failure to redeem the same, having found
the sale to have been conducted "under the direction and supervision of the City Treasurer of Quezon City after the
proper procedure and legal formalities had been duly accomplished."
The apppellate court's decision under review held as follows:
The opposition [to respondent Duazo's petition for consolidation of ownership] has not controverted by
specific denials the material averments in the petition. Hence the material averments in the petition are deemed
admitted. (Section 1, Rule 9, Revised Rules of Court)
Moreover, the opposition has not raised the issue of irregularity in the public sale of the two parcels of land in
question. This defense is deemed waived. (Section 2, Rule 9, Id.)
The uncontested averments in the petition and the annex attached to said petition disclose that the two parcels
of land in question were sold at public auction at the City Hall, Quezon City on December 3, 1964 under the
direction and supervision of the City Treasurer of Quezon City after the proper procedures and legal
formalities had been duly accomplished; that the taxes against the two parcels of land in question for the years
1953 to 1963, inclusive, remained unpaid; that the City Treasurer of Quezon City, upon warrant of a certified
copy of the record of such delinquency, advertised for sale the two parcels of land in question to satisfy the
taxes, penalties and costs for a period of thirty (30) days prior to the sale on December 3, 1964, by keeping a
notice of sale posted at the main entrance on the City Hall and in a public and conspicuous place in the district
where the same is located and by publication of said notice once a week for three (3) weeks in the "DAILY
MIRROR", a newspaper of general circulation in Quezon City, the advertisement stating the amount of taxes
and penalties due, time and place of sale, name of the taxpayer against whom the taxes are levied, approximate
area, lot and block number, location by district, street and street number of the property; "hat at the public sale
on December 3, 1964, the two parcels of land in question were sold to [Duazo] for the amount of P10,500.00
representing the tax, penalty and costs; that the certificate of sale executed by the City treasurer was duly
registered on December 28, 1964 in the office of the Register of Deeds of Quezon City; that upon the failure of
the registered owner to redeem the two parcels of land in question within the one year period prescribed by
law, the City Treasurer of Quezon City executed on January 4, 1966 a final deed of sale of said lands and the
improvements thereon; and that said final deed of sale was also registered in the Office of the Register of
Deeds of Quezon City on January 18, 1966.
The principal issues to be resolved in this appeal are (1) whether the price is so grossly inadequate as to justify
the setting aside of the public sale and (2) whether the oppositor [Gordon] is entitled to redeem the two parcels
of land in question.
The combined assessed value of the two parcels of land is P16,800.00. The price paid at the public sale is
P10,500.00. The residential house on the land is assessed at P45,580.00. But the assessment was made in
1961. The present value of the residential house must be much less now considering the depreciation for over
ten years.
While the price of P10,500.00 is less than the total assessed value of the land and the improvement thereon,
said price cannot be considered so grossly inadequate as to be shocking to the conscience of the court.
In Director of Lands vs. Abarca, 61 Phil. 70, cited by the lower court in the order appealed from, the Supreme
Court considered the price of P877.25 as so inadequate to shock the conscience of the court because the
assessed value of the property in question was P60,000.00. The assessed value of the land was more than sixty
times the price paid at the auction sale.
In the case at bar, the price of P10,500.00 is about one sixth of the total assessed value of the two parcels of
land in question and the residential house thereon. The finding of the lower court that the house and land in
question have a fair market value of not less than P200,000.00 has no factual basis. It cannot be said, therefore,
that the price of P10,500.00 is so inadequate as to be shocking to the conscience of the court.
Mere inadequacy of the price alone is not sufficient ground to annul the public sale. (Barrozo vs. Macaraeg, 83
Phil. 378).
Moreover, in Velasquez vs. Coronet, 5 SCRA 985, 988, the Supreme Court has held:
It is true that respondent treasurer now claims that the prices for which the lands were sold are
unconscionable considering the wide divergence between their assessed values and the amounts for which
they had been actually sold. However, while in ordinary sales for reasons of equity a transaction may be
invalidated on the ground of inadequacy of price, or when such inadequacy shocks one's conscience as to
justify- the courts to interfere, such does not follow when the law gives to the owner the right to redeem, as
when a sale is made at public auction upon the theory that the lesser the price the easier it is for the owner
to effect the redemption. And so it was aptly said:
When there is the right to redeem, inadequacy of pace should not be material because the judgment debtor
may reacquire the property or also sell his right to redeeem and thus recover the loss he claims to have
suffered by reason of the price obtained at the auction sale. (emphasis supplied).
The contention that the oppositor can still redeem the two parcels of land in question because the public
sale has not been judicially confirmed deserves scant consideration. The cases cited by the oppositor and
by the lower court all refer to foreclosure of mortgage sales which are by express provision of law subject
to judicial confirmation. The public sale in the instant case is governed by Section 40 of Commonwealth
Act No. 470 which gives the delinquent taxpayer a period of one year from the date of the sale within
 which to repurchase the property sold. In case the delinquent taxpayer does not repurchase the property
sold within the period of one year from the date of the sale, it becomes a mandatory duty of the provincial
treasurer to issue in favor of the purchaser a final deed of sale. (Velasquez vs. Coronel, supra) We find that
the oppositor is not entitled to repurchase the two parcels of land in question because she failed to do so
within one year from the date of the sale thereof.
WHEREFORE, the order appealed from is hereby reversed and the ownership of [Duazo] over the two
parcels of land in question and the improvements thereon is declared consolidated. The Register of Deeds
of Quezon City is hereby ordered to cancel Transfer Certificates of Title Nos. 12204 and 12205 and to
issue the corresponding transfer certificates of title to [Duazo] over the two parcels of land in question,
upon the payment of the prescribed fees. No pronouncement as to costs.
The Court finds petitioner's assignment of errors to be without merit.
Petitioner's first assignment of error as to alleged lack of personal notice of the tax sale is negated by her own
averments in her own opposition filed in the court a quo that "(T)he Oppositor in the above entitled petition is a
woman 80 years of age. She was not aware of the auction sale conducted by the City Treasurer of Quezon City on
December 3, 1964 or if there was any notice sent to her, the same did not reach her or it must have escaped her
mind considering her age. ...
Petitioner's second assignment of error that the period for redemption should be the two-year period provided in
Republic Act No. 1275 likewise has no merit, since the specific law governing tax sales of properties in Quezon
City is the Quezon City Charter, Commonwealth Act No. 502 which provides in section 31 thereof for a one-year
redemption period. The special law covering Quezon City necessarily prevails over the general law. Furthermore,
as respondent has pointed out, as of the time of filing in 1974 of respondent's brief, petitioner had not then for a
period of 10 years (and 17 years as of now) sought to exercise her alleged right of redemption or make an actual
tender thereof, as follows:
Morever, even if we do concede, merely for the sake of argument, that the provisions of Rep. Act No. 1275
may be made applicable in this case which is certainly not and Petitioner should have been granted TWO (2)
YEARS from date of the public sale, within which to exercise her right of redemption, yet since the sale of the
questioned land to herein Respondent in that public auction in 1964, herein Petitioner never had shown any
good faith in exercising her right of redemption. Since 1964 when the auction sale took place, up to the
present, 1974, or a period of TEN (10) YEARS have already elapsed and yet herein Petitioner never made any
tender of payments with either the Court of First Instance of Quezon City or the Court of Appeals, or the
Supreme Court, at least to show her good faith.
Furthermore, if herein Petitioner really believes in good faith, that [she] had still that right of redemption, then
she should have paid the real estate taxes, but as the records wig show, since 1964, Private Respondent Duazo
is the one paying the real estate taxes of the lands in question
Petitioner's third and last assignment of error as to the alleged gross inadequacy of the purchase price must
likewise fail. As the Court has held in Velasquez vs. Coronet  alleged gross inadequacy of price is not material
"when the law gives the owner the right to redeem as when a sale is made at public auction, upon the theory that
the lesser the price the easier it is for the owner to effect the redemption." As the Court further stressed in the
recent case of Tajonera vs. Court of Appeals, 7 the law governing tax sales for delinquent taxes may be "harsh and
drastic, but it is a necessary means of insuring the prompt collection of taxes so essential to the life of the
Government."
ACCORDINGLY, the appellate court's decision under review is hereby affirmed. Without costs.
Makasiar, Guerrero, De Castro * and Melencio-Herrera, JJ., concur.
Fernandez, J., took no part.
G.R. No. L-67888 October 8, 1985
IMELDA ONG, ET AL., petitioners,
vs.
ALFREDO ONG, ET AL., respondents.
Faustino Y Bautista and Fernando M. Mangubat for private respondent.
RELOVA, J.:
This is a petition for review on certiorari of the decision, dated June 20, 1984, of the Intermediate Appellate Court,
in AC-G.R. No. CV-01748, affirming the judgment of the Regional Trial Court of Makati, Metro Manila.
Petitioner Imelda Ong assails the interpretation given by respondent Appellate Court to the questioned Quitclaim
Deed.
Records show that on February 25, 1976 Imelda Ong, for and in consideration of One (P1.00) Peso and other
valuable considerations, executed in favor of private respondent Sandra Maruzzo, then a minor, a Quitclaim Deed
whereby she transferred, released, assigned and forever quit-claimed to Sandra Maruzzo, her heirs and assigns, all
her rights, title, interest and participation in the ONE-HALF (½) undivided portion of the parcel of land,
particularly described as follows:
A parcel of land (Lot 10-B of the subdivision plan (LRC) Psd 157841, being a portion of Lot 10, Block 18,
Psd-13288, LRC (GLRC) Record No. 2029, situated in the Municipality of Makati, Province of Rizal, Island
of Luzon ... containing an area of ONE HUNDRED AND TWENTY FIVE (125) SQUARE METERS, more
or less.
On November 19, 1980, Imelda Ong revoked the aforesaid Deed of Quitclaim and, thereafter, on January 20, 1982
donated the whole property described above to her son, Rex Ong-Jimenez.
On June 20, 1983, Sandra Maruzzo, through her guardian (ad litem) Alfredo Ong, filed with the Regional Trial
Court of Makati, Metro Manila an action against petitioners, for the recovery of ownership/possession and
nullification of the Deed of Donation over the portion belonging to her and for Accounting.
In their responsive pleading, petitioners claimed that the Quitclaim Deed is null and void inasmuch as it is
equivalent to a Deed of Donation, acceptance of which by the donee is necessary to give it validity. Further, it is
averred that the donee, Sandra Maruzzo, being a minor, had no legal personality and therefore incapable of
accepting the donation.
Upon admission of the documents involved, the parties filed their responsive memoranda and submitted the case
for decision.
On December 12, 1983, the trial court rendered judgment in favor of respondent Maruzzo and held that the
Quitclaim Deed is equivalent to a Deed of Sale and, hence, there was a valid conveyance in favor of the latter.
Petitioners appealed to the respondent Intermediate Appellate Court. They reiterated their argument below and, in
addition, contended that the One (P1.00) Peso consideration is not a consideration at all to sustain the ruling that
the Deed of Quitclaim is equivalent to a sale.
On June 20, 1984, respondent Intermediate Appellate Court promulgated its Decision affirming the appealed
judgment and held that the Quitclaim Deed is a conveyance of property with a valid cause or consideration; that
the consideration is the One (P1.00) Peso which is clearly stated in the deed itself; that the apparent inadequacy is
of no moment since it is the usual practice in deeds of conveyance to place a nominal amount although there is a
more valuable consideration given.
Not satisfied with the decision of the respondent Intermediate Appellate Court, petitioners came to Us questioning
the interpretation given by the former to this particular document.
On March 15, 1985, respondent Sandra Maruzzo, through her guardian ad litem Alfredo Ong, filed an Omnibus
Motion informing this Court that she has reached the age of majority as evidenced by her Birth Certificate and she
prays that she be substituted as private respondent in place of her guardian ad litem Alfredo Ong. On April 15,
1985, the Court issued a resolution granting the same.
A careful perusal of the subject deed reveals that the conveyance of the one- half (½) undivided portion of the
above-described property was for and in consideration of the One (P 1.00) Peso and the other valuable
considerations (emphasis supplied) paid by private respondent Sandra Maruzzo through her representative,
Alfredo Ong, to petitioner Imelda Ong. Stated differently, the cause or consideration is not the One (P1.00) Peso
alone but also the other valuable considerations. As aptly stated by the Appellate Court-
... although the cause is not stated in the contract it is presumed that it is existing unless the debtor proves the
contrary (Article 1354 of the Civil Code). One of the disputable presumptions is that there is a sufficient cause
of the contract (Section 5, (r), Rule 131, Rules of Court). It is a legal presumption of sufficient cause or
consideration supporting a contract even if such cause is not stated therein (Article 1354, New Civil Code of
the Philippines.) This presumption cannot be overcome by a simple assertion of lack of consideration
especially when the contract itself states that consideration was given, and the same has been reduced into a
public instrument with all due formalities and solemnities. To overcome the presumption of consideration the
alleged lack of consideration must be shown by preponderance of evidence in a proper action. (Samanilla vs,
Cajucom, et al., 107 Phil. 432).
The execution of a deed purporting to convey ownership of a realty is in itself prima facie evidence of the
existence of a valuable consideration, the party alleging lack of consideration has the burden of proving such
allegation. (Caballero, et al. vs. Caballero, et al., (CA), 45 O.G. 2536).
Moreover, even granting that the Quitclaim deed in question is a donation, Article 741 of the Civil Code provides
that the requirement of the acceptance of the donation in favor of minor by parents of legal representatives applies
only to onerous and conditional donations where the donation may have to assume certain charges or burdens
(Article 726, Civil Code). The acceptance by a legal guardian of a simple or pure donation does not seem to be
necessary (Perez vs. Calingo, CA-40 O.G. 53). Thus, Supreme Court ruled in Kapunan vs. Casilan and Court of
Appeals, (109 Phil. 889) that the donation to an incapacitated donee does not need the acceptance by the lawful
representative if said donation does not contain any condition. In simple and pure donation, the formal acceptance
is not important for the donor requires no right to be protected and the donee neither undertakes to do anything nor
assumes any obligation. The Quitclaim now in question does not impose any condition.
The above pronouncement of respondent Appellate Court finds support in the ruling of this Court in Morales
Development Co., Inc. vs. CA, 27 SCRA 484, which states that "the major premise thereof is based upon the fact
that the consideration stated in the deeds of sale in favor of Reyes and the Abellas is P1.00. It is not unusual,
however, in deeds of conveyance adhering to the Anglo-Saxon practice of stating that the consideration given is
the sum of P1.00, although the actual consideration may have been much more. Moreover, assuming that said
consideration of P1.00 is suspicious, this circumstance, alone, does not necessarily justify the inference that Reyes
and the Abellas were not purchasers in good faith and for value. Neither does this inference warrant the conclusion
that the sales were null and void ab initio. Indeed, bad faith and inadequacy of the monetary consideration do not
render a conveyance inexistent, for the assignor's liberality may be sufficient cause for a valid contract (Article
1350, Civil Code), whereas fraud or bad faith may render either rescissible or voidable, although valid until
annulled, a contract concerning an object certain entered into with a cause and with the consent of the contracting
parties, as in the case at bar."
WHEREFORE. the appealed decision of the Intermediate Appellate Court should be, as it is hereby AFFIRMED,
with costs against herein petitioners.
SO ORDERED.
Teehankee (Chairman), Melencio-Herrera, Plana, De la Fuente and Patajo, JJ., concur.
Gutierrez, Jr., J., in the result.
G.R. No. L-55999 August 24, 1984
SPOUSES SALVACION SERRANO LADANGA and AGUSTIN S. LADANGA, petitioners,
vs.
COURT OF APPEALS and BERNARDO S. ASENETA, as Guardian of the Incompetent
CLEMENCIA A. ASENETA, respondents.
Venusto P. France and Ambrosia Padilla, Mempia, Reyes & Equidez Law Office for petitioners.
Agrava, Lucero & Gineta for private respondents.
AQUINO, J.:
The spouses Salvacion Serrano and Doctor Agustin S. Ladanga appealed from the decision of the Court of
Appeals (affirming the decision of the Manila Court of First Instance), declaring void the sale to Salvacion by her
aunt, Clemencia A. Aseneta, of the 166-square-meter lot with a house located at 1238 Sison Street, Paco, Manila
for non-payment of the price of P26,000. It ordered the register of deeds of Manila to issue a new title to
Clemencia.
The said spouses were further ordered to pay to Clemencia's estate P21,000 as moral and exemplary damages and
attorney's fees and to render to Bernardo an accounting of the rentals of the property from April 6, 1974.
The Appellate Court and Judge Jose C. Colayco found that Clemencia, a spinster who retired as division
superintendent of public schools at 65 in 1961, had a nephew named Bernardo S. Aseneta, the child of her sister
Gloria, and a niece named Salvacion, the daughter of her sister Flora. She legally adopted Bernardo in 1961 (Exh.
B).
On a single date, April 6, 1974 (when Clemencia was about 78 years old), she signed nine deeds of sale in favor of
Salvacion for various real properties. One deed of sale concerned the said Paco property (administered by the
Ladanga spouses) which purportedly was sold to Salvacion for P26,000 (Exh. C). The total price involved in the
nine deeds of sale and in the tenth sale executed on November 8, 1974 was P92,200.
On the witness stand, Clemencia denied having "received even one centavo" of the price of P26,000 (15, 16, 32
tsn August 16, 1976), much less the P92,000. She considered the allegation that she received the price as a he,
exclaiming on the witness stand: "Susmaryosep! P92,000!" (15, 28-30 tsn August 16, 1976). This testimony was
corroborated by Soledad L. Maninang, 69, a dentist with whom Clemencia had lived for more than thirty years in
Kamuning, Quezon City.
The notary testified that the deed of sale for the Paco property was signed in the office of the Quezon City registry
of deeds. He did not see Salvacion giving any money to Clemencia.
In May, 1975, Bernardo as guardian of Clemencia, filed an action for reconveyance of the Paco property,
accounting of the rentals and damages. Clemencia was not mentally incompetent but she was placed under
guardianship because she was an easy prey for exploitation and deceit.
Parenthetically, it should be stated that she died on May 21, 1977 at the age of 80. She allegedly bequeathed her
properties in a holographic will dated November 23, 1973 to Doctor Maninang. In that will she disinherited
Bernardo. The will was presented for probate (Exh. 22-A and 22-C).
The testate case was consolidated with the intestate proceeding filed by Bernardo in the sala of Judge Ricardo L.
Pronove at Pasig, Rizal. He dismissed the testate case. He appointed Bernardo as administrator in the intestate case
(p. 23, Bernardo's brief).
As already stated, in the instant case, the trial court and the Appellate Court declared void the sale of the Paco
property. The Ladanga spouses contend that the Appellate Court disregarded the rule on burden of proof. This
contention is devoid of merit because Clemencia herself testified that the price of P26,000 was not paid to her. The
burden of the evidence shifted to the Ladanga spouses. They were not able to prove the payment of that amount.
The sale was fictitious.
The Ladanga spouses argue that the Appellate Court erred in not considering that inadequacy of price may indicate
a donation or some other contract; in disregarding the presumption that the sale was fair and regular and for a
sufficient consideration; in overlooking important facts and in not holding that Bernardo had no right to file a
complaint to annul the sale.
As a rule, only important legal issues, as contemplated in section 4, Rule 45 of the Rules of Court, may be raised
in a review of the Appellate Court's decision. This case does not fall within any of the exceptions to that rule (2
Moran's Comments on the Rules of Court, 1979 Ed. p. 475; Ramos vs. Pepsi-Cola Bottling Co., 125 Phil. 701).
The questions ventilated by the Ladangas in their briefs and in their comment of April 3, 1984 may be reduced to
the issue of the validity of the sale which the vendor Clemencia herself assailed in her testimony on August 16 and
December 3, 1976 when she was eighty years old. Her testimony and that of the notary leave no doubt that the
price of P26,000 was never paid.
A contract of sale is void and produces no effect whatsoever where the price, which appears therein as paid, has in
fact never been paid by the purchaser to the vendor (Meneses Vda. de Catindig vs. Heirs of Catalina Roque, L-
25777, November 26, 1976, 74 SCRA 83, 88; Mapalo vs. Mapalo, 123 Phil. 979, 987; Syllabus, Ocejo, Perez &
Co. vs. Flores and Bas, 40 Phil. 921).
Such a sale is inexistent and cannot be considered consummated (Borromeo' vs. Borromeo, 98 Phil. 432; Cruzado
vs. Bustos and Escaler, 34 Phil. 17; Garanciang vs. Garanciang, L-22351, May 21, 1969, 28 SCRA 229).
It was not shown that Clemencia intended to donate the Paco property to the Ladangas. Her testimony and the
notary's testimony destroyed any presumption that the sale was fair and regular and for a true consideration.
Judge Colayco concluded that the Ladangas abused Clemencia's confidence and defrauded her of properties with a
market value of P393,559.25 when she was already 78 years old.
The contention that Bernardo had no right to institute the instant action because he was not a compulsory heir of
Clemencia cannot be sustained. Bernardo was Clemencia's adopted son. Moreover, Clemencia, by testifying in this
case, tacitly approved the action brought in her behalf.
But the moral damages awarded by the trial court is not sanctioned by articles 2217 to 2220 of the Civil Code.
Clemencia's own signature in the deed brought about the mess within which she was entangled.
WHEREFORE, the judgment of the Appellate Court is affirmed with the modification that the adjudication for
moral and exemplary damages is discarded. No costs.
SO ORDERED.
Concepcion, Jr., Guerrero, Escolin and Cuevas, JJ., concur.
Makasiar, J., (Chairman) and Abad Santos, JJ., took no part.
[G.R. No. L-10141. January 31, 1958.]
REPUBLIC OF THE PHILIPPINES, Petitioner, v. PHILIPPINE RESOURCES
DEVELOPMENT CORPORATION and the COURT OF APPEALS, Respondents.
Solicitor General Ambrosio Padilla and Solicitor Frine C. Zaballero for Petitioner.
Vicente L. Santiago for respondent Corporation.
SYLLABUS
1. PLEADING AND PRACTICE; INTERVENTION; WHERE INTERVENOR POSSESS LEGAL INTEREST
IN THE MATTER IN LITIGATION; RIGHT TO INTERVENE.” In the exercise of discretion under the section 3
of Rule 13 of the Rules of Court, the court shall consider whether the intervention will unduly delay the
adjudication of the rights of the original parties and whether the intervenor’s rights may be fully protected in a
separate proceeding. Although the respondent corporation is entitled to bring a separate action against any or all
the parties thereto, yet as the determination of the issues joined by the parties in the case would vitally affect the
rights not only of the original parties but also of the herein respondent corporation; and as the allowance of the
complaint in intervention, far from unduly delaying the adjudication of the rights of the original parties or bringing
confusion in the original case, would help clarify the vital issue of the ownership of the materials involved and
would prevent multiplicity of suits, intervention should be allowed.
2. OBLIGATION AND CONTRACT; PAYMENT; KINDS OF PAYMENT; IN TERMS OF MONEY OR ITS
EQUIVALENT.” Although Article 1458 of the new Civil Code provides that price . . . is always paid in terms of
money and the supposed payment being in kind it is no payment at all," yet the same article provides that the
purchaser may pay "a price certain in money or its equivalent" which means that payment of the price need not be
money.
3. CORPORATIONS; POWER TO SUE AND BE SUED; BOARD OF DIRECTORS NOT THE PRESIDENT.”
The power of a corporation to sue and be sued in any court is lodged in the board of directors that exercised its
corporate powers, and not in the president.
4. ATTORNEY AND CLIENT; AUTHORITY TO APPEAR AS COUNSEL.” Where the motion for admission of
complaint in intervention and the complaint in intervention attached thereto, signed by counsel and filed in the
Court of First Instance begin with the following statement; "COMES NOW the above-named Intervenor, by its
undersigned counsel. . . .", and underneath his typewritten name is affixed the description "Counsel for the
Intervenor," the latter’s authority to appear for the respondent corporation not having questioned in the Court of
First Instance, it is presumed that he was properly authorized to file the complaint-in-intervention and appear for
his client.
5. CORPORATION; DERIVATIVE SUIT; A SINGLE STOCKHOLDER MAY SUE IN BEHALF OF THE
CORPORATION.” Where the counsel is the secretary treasurer of the respondent corporation and a member of the
board of directors, and the other members of the board, who should normally initiate the action to protect the
corporate properties and interests are the ones to be adversely affected thereby, Held: That a single stockholder
under such circumstances may sue in behalf of the corporation. Counsel as a stockholder and director of the
respondent corporation may sue in its behalf and file the complaint-in-intervention in the proper court.
DECISION
PADILLA, J.:
This is a petition under Rule 46 to review a judgment rendered by the Court of Appeals in CA-GR No. 15767-R,
Philippine Resources Development Corporation v. The Hon. Judge Magno Gatmaitan Et. Al.
The findings of the Court of Appeals are, as follows:
It appears that on May 6, I955, the Republic of the Philippines in representation of the Bureau of Prisons instituted
against Macario Apostol and the Empire Insurance Co. a complaint docketed as Civil Case No. 26166 of the Court
of First Instance of Manila. The complaint alleges as the first cause of action, that defendant Apostol submitted the
highest bid in the amount of P450.00 per ton for the purchase of 100 tons of Palawan Almaciga from the Bureau
of Prisons; that a contract therefor was drawn and by virtue of which, Apostol obtained goods from the Bureau of
Prisons valued P15,878.59; that of said account, Apostol paid only P691.10 leaving a balance obligation of P15,
187.49. The complaint further avers, as second cause of action, that Apostol submitted the best bid with the
Bureau of Prisons for the purchase of three million board feet of logs at P88.00 per 1,000 board feet; that a
contract was executed between the Director of Prisons and Apostol pursuant to which contract Apostol obtained
deliveries of logs valued at P65,830.00; and that Apostol failed to pay a balance account of P18,827.57. All told,
the total demand set forth in complaint against Apostol is for P34,015.06 with legal interests thereon from January
8, 1952. The Empire Insurance Company was included in the complaint having executed a performance bond of
P10,000.00 in favor of Apostol.
In his answer, Apostol interposed payment as a defense and sought the dismissal of the complaint.
On July 19, 1955, the Philippine Resources Development Corporation moved to intervene, appending to its
motion, the complaint in intervention of even date. The complaint recites that for sometime prior to Apostol’s
transactions the corporate had some goods deposited in a warehouse at 1201 Herran, Manila; that Apostol, then the
president of the corporation but without the knowledge or consent of the stockholders thereof, disposed of said
goods by delivering the same to the Bureau of Prisons in an attempt to settle his personal debts with the latter
entity; that upon discovery of Apostol’s act, the corporation took steps to recover said goods by demanding from
the Bureau of Prisons the return thereof; and that upon the refusal of the Bureau to return said goods, the
corporation sought leave to intervene in Civil Case No. 26166.
As aforestated, His Honor denied the motion for intervention and thereby issued an order to this effect on July 23,
1955. A motion for the reconsideration of said order was filed by the movant corporation and the same was
likewise denied by His Honor on August 18, 1955. . . . (Annex L.)
On 3 September 1955, in a petition for a writ of certiorari filed in the Court of Appeals, the herein respondent
corporation prayed for the setting aside of the order of the Court of First Instance that had denied the admission of
its complaint-in-intervention and for an order directing the latter Court to allow the herein respondent corporation
to intervene in the action (Annex G). On 12 December 1955 the Court of Appeals set aside the order denying the
motion to intervene and ordered the respondent court to admit the herein respondent corporation’s complaint-in-
intervention, with costs against Macario Apostol.
On 9 January 1956 the Republic of the Philippines filed this petition in this Court for the purpose stated at the
beginning of this opinion.
The Government contends that the intervenor has no legal interest in the matter in litigation, because the action
brought in the Court of First Instance of Manila against Macario Apostol and the Empire Insurance Company
(Civil Case No. 26166, Annex A) is just for the collection from the defendant Apostol of a sum of money, the
unpaid balance of the purchase price of logs and almaciga bought by him from the Bureau of Prisons, whereas the
intervenor seeks to recover ownership and possession of G.I. sheets, black sheets, M.S. plates, round bars and G.I.
pipes that it claims it owns an intervention which would change a personal action into one ad rem and would
unduly delay the disposition of the case.
The Court of Appeals held that:
Petitioner ardently claims that the reason behind its motion to intervene is the desire to protect its rights and
interests over some materials purportedly belonging to it; that said materials were unauthorizedly and illegally
assigned and delivered to the Bureau of Prisons by petitioning corporation’s president Macario Apostol in
payment of the latter’s personal accounts with the said entity; and that the Bureau of Prisons refused to return said
materials despite petitioner’s demands to do so.
Petitioner refers to the particulars recited in Apostol’s answer dated July 12, 1955 to the effect that Apostol had
paid unto the Bureau of Prisons his accounts covered, among others, by BPPO 1077 for the sum of P4,638.40 and
BPPO 1549 for the amount of P4,398.54. Petitioner, moreover, points to the Statement of Paid and Unpaid
accounts of Apostol dated January 16, 1954 prepared by the accounting officer of the Bureau of Prisons (Annex B.
Complaint in Intervention), wherein it appears that the aforementioned accounts covered respectively by BPPO
Nos. 1077 for 892 pieces of GI sheets and 1549 for 399 pieces of GI pipes in the total sum of P9,036.94 have not
been credited to Apostol’s account in view of lack of supporting papers; and that according to the reply letter of
the Undersecretary of Justice, said GI sheets and pipes were delivered by Macario Apostol to the Bureau of
Prisons allegedly in Apostol’s capacity as owner and that the black iron sheets were delivered by Apostol as
President of the petitioner corporation.
Respondents, on the other hand, assert that the subject matter of the original litigation is a sum of money allegedly
due to the Bureau of Prisons from Macario Apostol and not the goods or materials reportedly turned over by
Apostol in payment of his private debts to the Bureau of Prisons and the recovery of which is sought by the
petitioner; and that for this reason, petitioner has no legal interest in the very subject matter in litigation as to
entitle it to intervene.
We find no merit in respondents’ contention. It is true that the very subject matter of the original case is a sum of
money. But it is likewise true as borne out by the records, that the materials purportedly belonging to the petitioner
corporation have been assessed and evaluated and their price equivalent in terms of money have been determined;
and that said materials for whatever price they have been assessed, have been assigned by defendant now
respondent Apostol as tokens of payment of his private debts with the Bureau of Prisons. In view of these
considerations, it becomes enormously plain in the event the respondent judge decides to credit Macario Apostol
with the value of the goods delivered by the latter to the Bureau of Prisons, the petitioner corporation stands to be
adversely affected by such judgment. The conclusion, therefore, is inescapable that the petitioner possesses a legal
interest in the matter in litigation and that such interest is of an actual, material, direct and immediate nature as to
entitle petitioner to intervene.
x       x       x
Section 3 of Rule 13 of the Rules of Court endows the lower court with discretion to allow or disapprove a motion
for intervention (Santarromana Et. Al. v. Barrios, 63 Phil. 456); and that in the exercise of such discretion, the
court shall consider whether or not the intervention will unduly delay or prejudice the adjudication of the rights of
the original parties and whether or not the intervenor’s rights may be fully protected in a separate proceeding. The
petitioner in the instant case is positively authorized to file a separate action against any of all the respondents. But
considering that the resolution of the issues raised in and joined by the pleadings in the main case, would vitally
affect the rights not only of the original parties but also of the herein petitioner; that far from unduly delaying or
prejudicing the adjudication of the rights of the original parties or bringing about confusion in the original case,
the admission of the complaint in intervention would help clarify the vital issue of the true and real ownership of
the materials involved, besides preventing an abhorrent multiplicity of suits, we believe that the motion to
intervene should be given due course.
We find no reason for disturbing the foregoing pronouncements. The Government argues that "Price . . . is always
paid in terms of money and the supposed payment being in kind, it is no payment at all," citing article 1458 of the
new Civil Code. However, the same article provides that the purchaser may pay "a price certain in money or its
equivalent," which means that payment of the price need not be in money. Whether the G.I. sheets, black sheets,
M.S. plates, round bars and G.I. pipes claimed by the respondent corporation to belong to it and delivered to the
Bureau of Prisons by Macario Apostol in payment of his account is sufficient payment therefor, is for the Court to
pass upon and decide after hearing all the parties in the case. Should the trial court hold that it is as to credit
Apostol with the value or price of the materials delivered by him, certainly the herein respondent corporation
would be affected adversely if its claim of ownership of such sheets, plates, bars and pipes is true.
The Government reiterates its original stand that counsel appearing for the respondent corporation has no authority
to represent it and/or sue in its behalf. The Court of Appeals held that:
Respondents aver also that petitioner lacks legal capacity to sue and that its counsel is acting merely in an
individual capacity without the benefit of a corporate act authorizing him to bring suit. In this connection,
respondents invoke among others section 20 of Rule 127 which provision, in our opinion, squarely disproves their
claim as by virtue thereof, the authority of petitioner’s counsel is presumed. Withal, the claim of the counsel for
the petitioner that a resolution to proceed against Apostol, had been unanimously adopted by the stockholders of
the corporation, has not been refuted.
Evidently, petitioner is a duly organized corporation with offices at the Samanillo Building and that as such, it is
endowed with a personality distinct and separate from that of its president or stockholders. It has the right to bring
suit to safeguard its interests and ordinarily, such right is exercised at the instance of the president. However,
under the circumstance now obtaining, such right properly devolves upon the other officers of the corporation as
said right is sought to be exercised against the president himself who is the very object of the intended suit.
The power of a corporation to sue and be sued in any court is lodged in the board of directors which exercises its
corporate powers, 2 and not in the president, as contended by the Government. The "motion for admission of
complaint in intervention" (Annex C) and the "complaint in intervention" attached thereto, signed by counsel and
filed in the Court of First Instance begin with the following statement: "COMES NOW the above-named
Intervenor, by its undersigned counsel, . . .," and underneath his typewritten name is affixed the description
"Counsel for the Intervenor." As counsel’s authority to appear for the respondent corporation was never
questioned in the Court of First Instance, it is to be presumed that he was properly authorized to file the complaint-
in intervention and appear for his client. 1 It was only in the Court of Appeals where his authority to appear was
questioned. As the Court of Appeals was satisfied that counsel was duly authorized by his client to file the
complaint-in-intervention and to appear in its behalf, the resolution of the Court of Appeals on this point should
not be disturbed.
Granting that counsel has not been actually authorized by the board of directors to appear for and in behalf of the
respondent corporation, the fact that counsel is the secretary-treasurer of the respondent corporation and a member
of the board of directors; and that the other members of the board, namely, Macario Apostol, the president, and his
wife Pacita R. Apostol, who should normally initiate the action to protect the corporate properties and interests are
the ones to be adversely affected thereby, a single stockholder under such circumtances may sue in behalf of the
corporation. Counsel as a stockholder and director of the respondent corporation may sue in its behalf and file the
complaint-in-intervention in the proper court.
The judgment under review is affirmed, without pronouncement as to costs.
Paras, C.J., Bengzon, Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion, Reyes, J. B. L., Endencia
and Felix, JJ., concur.
G.R. No. L-116650 May 23, 1995
TOYOTA SHAW, INC., petitioner,
vs.
COURT OF APPEALS and LUNA L. SOSA, respondents.
DAVIDE, JR., J.:
At the heart of the present controversy is the document marked Exhibit "A" for the private respondent, which was The next day, 15 June 1989, Sosa and Gilbert went to Toyota to deliver the downpayment of P100,000.00. They
signed by a sales representative of Toyota Shaw, Inc. named Popong Bernardo. The document reads as follows: met Bernardo who then accomplished a printed Vehicle Sales Proposal (VSP) No. 928, on which Gilbert signed
under the subheading CONFORME. This document shows that the customer's name is "MR. LUNA SOSA" with
4 home address at No. 2316 Guijo Street, United Parañaque II; that the model series of the vehicle is a "Lite Ace
1500" described as "4 Dr minibus"; that payment is by "installment," to be financed by "B.A.," with the initial
cash outlay of P100,000.00 broken down as follows:
4 June 1989

a) downpayment — P 53,148.00
AGREEMENTS BETWEEN MR. SOSA
& POPONG BERNARDO OF TOYOTA b) insurance — P 13,970.00
SHAW, INC. c) BLT registration fee — P 1,067.00
CHMO fee — P 2,715.00
service fee — P 500.00
1. all necessary documents will be submitted to TOYOTA SHAW, INC. (POPONG BERNARDO) a week after, accessories — P 29,000.00
upon arrival of Mr. Sosa from the Province (Marinduque) where the unit will be used on the 19th of June.
 
2. the downpayment of P100,000.00 will be paid by Mr. Sosa on June 15, 1989.
and that the "BALANCE TO BE FINANCED" is "P274,137.00." The spaces provided for "Delivery Terms" were
3. the TOYOTA SHAW, INC. LITE ACE yellow, will be pick-up [sic] and released by TOYOTA SHAW, INC. not filled-up. It also contains the following pertinent provisions:
on the 17th of June at 10 a.m.
CONDITIONS OF SALES
Very truly yours,
1. This sale is subject to availability of unit.
(Sgd.) POPONG BERNARDO.
2. Stated Price is subject to change without prior notice, Price prevailing and in effect at time of selling will
Was this document, executed and signed by the petitioner's sales representative, a perfected contract of sale, apply. . . .
binding upon the petitioner, breach of which would entitle the private respondent to damages and attorney's fees?
The trial court and the Court of Appeals took the affirmative view. The petitioner disagrees. Hence, this petition
for review on certiorari. Rodrigo Quirante, the Sales Supervisor of Bernardo, checked and approved the VSP.

The antecedents as disclosed in the decisions of both the trial court and the Court of Appeals, as well as in the
pleadings of petitioner Toyota Shaw, Inc. (hereinafter Toyota) and respondent Luna L. Sosa (hereinafter Sosa) are
as follows. Sometime in June of 1989, Luna L. Sosa wanted to purchase a Toyota Lite Ace. It was then a seller's
market and Sosa had difficulty finding a dealer with an available unit for sale. But upon contacting Toyota Shaw,
Inc., he was told that there was an available unit. So on 14 June 1989, Sosa and his son, Gilbert, went to the
Toyota office at Shaw Boulevard, Pasig, Metro Manila. There they met Popong Bernardo, a sales representative of
Toyota.
Sosa emphasized to Bernardo that he needed the Lite Ace not later than 17 June 1989 because he, his family, and
a balikbayan guest would use it on 18 June 1989 to go to Marinduque, his home province, where he would
celebrate his birthday on the 19th of June. He added that if he does not arrive in his hometown with the new car,
he would become a "laughing stock." Bernardo assured Sosa that a unit would be ready for pick up at 10:00 a.m.
on 17 June 1989. Bernardo then signed the aforequoted "Agreements Between Mr. Sosa & Popong Bernardo of
Toyota Shaw, Inc." It was also agreed upon by the parties that the balance of the purchase price would be paid by
credit financing through B.A. Finance, and for this Gilbert, on behalf of his father, signed the documents of Toyota
and B.A. Finance pertaining to the application for financing.
On 17 June 1989, at around 9:30 a.m., Bernardo called Gilbert to inform him that the vehicle would not be ready
for pick up at 10:00 a.m. as previously agreed upon but at 2:00 p.m. that same day. At 2:00 p.m., Sosa and Gilbert
met Bernardo at the latter's office. According to Sosa, Bernardo informed them that the Lite Ace was being
readied for delivery. After waiting for about an hour, Bernardo told them that the car could not be delivered
because "nasulot ang unit ng ibang malakas."
Toyota contends, however, that the Lite Ace was not delivered to Sosa because of the disapproval by B.A. Finance
of the credit financing application of Sosa. It further alleged that a particular unit had already been reserved and
earmarked for Sosa but could not be released due to the uncertainty of payment of the balance of the purchase
price. Toyota then gave Sosa the option to purchase the unit by paying the full purchase price in cash but Sosa
refused.
After it became clear that the Lite Ace would not be delivered to him, Sosa asked that his downpayment be
refunded. Toyota did so on the very same day by issuing a Far East Bank check for the full amount of
P100,000.00, the receipt of which was shown by a check voucher of Toyota, which Sosa signed with the
reservation, "without prejudice to our future claims for damages."
Thereafter, Sosa sent two letters to Toyota. In the first letter, dated 27 June 1989 and signed by him, he demanded
the refund, within five days from receipt, of the downpayment of P100,000.00 plus interest from the time he paid
it and the payment of damages with a warning that in case of Toyota's failure to do so he would be constrained to
take legal action. The second, dated 4 November 1989 and signed by M. O. Caballes, Sosa's counsel, demanded
one million pesos representing interest and damages, again, with a warning that legal action would be taken if
payment was not made within three days. Toyota's counsel answered through a letter dated 27 November
1989 refusing to accede to the demands of Sosa. But even before this answer was made and received by Sosa, the
latter filed on 20 November 1989 with Branch 38 of the Regional Trial Court (RTC) of Marinduque a complaint
against Toyota for damages under Articles 19 and 21 of the Civil Code in the total amount of P1,230,000.00. He
alleges, inter alia, that:
9. As a result of defendant's failure and/or refusal to deliver the vehicle to plaintiff, plaintiff suffered
embarrassment, humiliation, ridicule, mental anguish and sleepless nights because: (i) he and his family were
constrained to take the public transportation from Manila to Lucena City on their way to Marinduque; (ii) his
balikbayan-guest canceled his scheduled first visit to Marinduque in order to avoid the inconvenience of taking
public transportation; and (iii) his relatives, friends, neighbors and other provincemates, continuously irked
him about "his Brand-New Toyota Lite Ace — that never was." Under the circumstances, defendant should be
made liable to the plaintiff for moral damages in the amount of One Million Pesos (P1,000,000.00).
In its answer to the complaint, Toyota alleged that no sale was entered into between it and Sosa, that Bernardo had
no authority to sign Exhibit "A" for and in its behalf, and that Bernardo signed Exhibit "A" in his personal
capacity. As special and affirmative defenses, it alleged that: the VSP did not state date of delivery; Sosa had not
completed the documents required by the financing company, and as a matter of policy, the vehicle could not and
would not be released prior to full compliance with financing requirements, submission of all documents, and
execution of the sales agreement/invoice; the P100,000.00 was returned to and received by Sosa; the venue was
improperly laid; and Sosa did not have a sufficient cause of action against it. It also interposed compulsory
counterclaims.
After trial on the issues agreed upon during the pre-trial session, the trial court rendered on 18 February 1992 a
decision in favor of Sosa. It ruled that Exhibit "A," the "AGREEMENTS BETWEEN MR. SOSA AND POPONG
BERNARDO," was a valid perfected contract of sale between Sosa and Toyota which bound Toyota to deliver the
vehicle to Sosa, and further agreed with Sosa that Toyota acted in bad faith in selling to another the unit already
reserved for him.
As to Toyota's contention that Bernardo had no authority to bind it through Exhibit "A," the trial court held that
the extent of Bernardo's authority "was not made known to plaintiff," for as testified to by Quirante, "they do not
volunteer any information as to the company's sales policy and guidelines because they are internal matters."
Moreover, "[f]rom the beginning of the transaction up to its consummation when the downpayment was made by
the plaintiff, the defendants had made known to the plaintiff the impression that Popong Bernardo is an authorized
sales executive as it permitted the latter to do acts within the scope of an apparent authority holding him out to the
public as possessing power to do these acts." Bernardo then "was an agent of the defendant Toyota Shaw, Inc. and
hence bound the defendants."
The court further declared that "Luna Sosa proved his social standing in the community and suffered besmirched
reputation, wounded feelings and sleepless nights for which he ought to be compensated." Accordingly, it
disposed as follows:
WHEREFORE, viewed from the above findings, judgment is hereby rendered in favor of the plaintiff and
against the defendant:
1. ordering the defendant to pay to the plaintiff the sum of P75,000.00 for moral damages;
2. ordering the defendant to pay the plaintiff the sum of P10,000.00 for exemplary damages;
3. ordering the defendant to pay the sum of P30,000.00 attorney's fees plus P2,000.00 lawyer's
transportation fare per trip in attending to the hearing of this case;
4. ordering the defendant to pay the plaintiff the sum of P2,000.00 transportation fare per trip of the
plaintiff in attending the hearing of this case; and
5. ordering the defendant to pay the cost of suit.
SO ORDERED.
Dissatisfied with the trial court's judgment, Toyota appealed to the Court of Appeals. The case was docketed as
CA-G.R. CV No. 40043. In its decision promulgated on 29 July 1994, the Court of Appeals affirmed in toto the
appealed decision.
Toyota now comes before this Court via this petition and raises the core issue stated at the beginning of
the ponencia and also the following related issues: (a) whether or not the standard VSP was the true and
documented understanding of the parties which would have led to the ultimate contract of sale, (b) whether or not
Sosa has any legal and demandable right to the delivery of the vehicle despite the non-payment of the
consideration and the non-approval of his credit application by B.A. Finance, (c) whether or not Toyota acted in
good faith when it did not release the vehicle to Sosa, and (d) whether or not Toyota may be held liable for
damages.
We find merit in the petition.
Neither logic nor recourse to one's imagination can lead to the conclusion that Exhibit "A" is a perfected contract
of sale.
Article 1458 of the Civil Code defines a contract of sale as follows:
Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of
and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
and Article 1475 specifically provides when it is deemed perfected:
Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is
the object of the contract and upon the price.
From that moment, the parties may reciprocally demand performance, subject to the provisions of the law
governing the form of contracts.
What is clear from Exhibit "A" is not what the trial court and the Court of Appeals appear to see. It is not a
contract of sale. No obligation on the part of Toyota to transfer ownership of a determinate thing to Sosa and no
correlative obligation on the part of the latter to pay therefor a price certain appears therein. The provision on the
downpayment of P100,000.00 made no specific reference to a sale of a vehicle. If it was intended for a contract of
sale, it could only refer to a sale on installment basis, as the VSP executed the following day confirmed. But
nothing was mentioned about the full purchase price and the manner the installments were to be paid.
This Court had already ruled that a definite agreement on the manner of payment of the price is an essential
element in the formation of a binding and enforceable contract of sale. This is so because the agreement as to the
manner of payment goes into the price such that a disagreement on the manner of payment is tantamount to a
failure to agree on the price. Definiteness as to the price is an essential element of a binding agreement to sell
personal property.
Moreover, Exhibit "A" shows the absence of a meeting of minds between Toyota and Sosa. For one thing, Sosa
did not even sign it. For another, Sosa was well aware from its title, written in bold letters, viz.,
AGREEMENTS BETWEEN MR. SOSA & POPONG BERNARDO OF TOYOTA SHAW, INC.
that he was not dealing with Toyota but with Popong Bernardo and that the latter did not misrepresent that he had
the authority to sell any Toyota vehicle. He knew that Bernardo was only a sales representative of Toyota and
hence a mere agent of the latter. It was incumbent upon Sosa to act with ordinary prudence and reasonable
diligence to know the extent of Bernardo's authority as an agent in respect of contracts to sell Toyota's vehicles. A
person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent.
At the most, Exhibit "A" may be considered as part of the initial phase of the generation or negotiation stage of a
contract of sale. There are three stages in the contract of sale, namely:
(a) preparation, conception, or generation, which is the period of negotiation and bargaining, ending at the
moment of agreement of the parties;
(b) perfection or birth of the contract, which is the moment when the parties come to agree on the terms of the
contract; and
(c) consummation or death, which is the fulfillment or performance of the terms agreed upon in the contract.
The second phase of the generation or negotiation stage in this case was the execution of the VSP. It must be
emphasized that thereunder, the downpayment of the purchase price was P53,148.00 while the balance to be paid
on installment should be financed by B.A. Finance Corporation. It is, of course, to be assumed that B.A. Finance
Corp. was acceptable to Toyota, otherwise it should not have mentioned B.A. Finance in the VSP.
Financing companies are defined in Section 3(a) of R.A. No. 5980, as amended by P.D. No. 1454 and P.D. No.
1793, as "corporations or partnerships, except those regulated by the Central Bank of the Philippines, the
Insurance Commission and the Cooperatives Administration Office, which are primarily organized for the purpose
of extending credit facilities to consumers and to industrial, commercial, or agricultural enterprises, either by
discounting or factoring commercial papers or accounts receivables, or by buying and selling contracts, leases,
chattel mortgages, or other evidence of indebtedness, or by leasing of motor vehicles, heavy equipment and
industrial machinery, business and office machines and equipment, appliances and other movable property."
Accordingly, in a sale on installment basis which is financed by a financing company, three parties are thus
involved: the buyer who executes a note or notes for the unpaid balance of the price of the thing purchased on
installment, the seller who assigns the notes or discounts them with a financing company, and the financing
company which is subrogated in the place of the seller, as the creditor of the installment buyer. Since B.A. Finance
did not approve Sosa's application, there was then no meeting of minds on the sale on installment basis.
We are inclined to believe Toyota's version that B.A. Finance disapproved Sosa's application for which reason it
suggested to Sosa that he pay the full purchase price. When the latter refused, Toyota cancelled the VSP and
returned to him his P100,000.00. Sosa's version that the VSP was cancelled because, according to Bernardo, the
vehicle was delivered to another who was "mas malakas" does not inspire belief and was obviously a delayed
afterthought. It is claimed that Bernardo said, "Pasensiya kayo, nasulot ang unit ng ibang malakas," while the
Sosas had already been waiting for an hour for the delivery of the vehicle in the afternoon of 17 June 1989.
However, in paragraph 7 of his complaint, Sosa solemnly states:
On June 17, 1989 at around 9:30 o'clock in the morning, defendant's sales representative, Mr. Popong
Bernardo, called plaintiff's house and informed the plaintiff's son that the vehicle will not be ready for pick-up
at 10:00 a.m. of June 17, 1989 but at 2:00 p.m. of that day instead. Plaintiff and his son went to defendant's
office on June 17 1989 at 2:00 p.m. in order to pick-up the vehicle but the defendant for reasons known only to
its representatives, refused and/or failed to release the vehicle to the plaintiff. Plaintiff demanded for an
explanation, but nothing was given; . . . (Emphasis supplied).
The VSP was a mere proposal which was aborted in lieu of subsequent events. It follows that the VSP created no
demandable right in favor of Sosa for the delivery of the vehicle to him, and its non-delivery did not cause any
legally indemnifiable injury.
The award then of moral and exemplary damages and attorney's fees and costs of suit is without legal basis.
Besides, the only ground upon which Sosa claimed moral damages is that since it was known to his friends,
townmates, and relatives that he was buying a Toyota Lite Ace which they expected to see on his birthday, he
suffered humiliation, shame, and sleepless nights when the van was not delivered. The van became the subject
matter of talks during his celebration that he may not have paid for it, and this created an impression against his
business standing and reputation. At the bottom of this claim is nothing but misplaced pride and ego. He should
not have announced his plan to buy a Toyota Lite Ace knowing that he might not be able to pay the full purchase
price. It was he who brought embarrassment upon himself by bragging about a thing which he did not own yet.
Since Sosa is not entitled to moral damages and there being no award for temperate, liquidated, or compensatory
damages, he is likewise not entitled to exemplary damages. Under Article 2229 of the Civil Code, exemplary or
corrective damages are imposed by way of example or correction for the public good, in addition to moral,
temperate, liquidated, or compensatory damages.
Also, it is settled that for attorney's fees to be granted, the court must explicitly state in the body of the decision,
and not only in the dispositive portion thereof, the legal reason for the award of attorney's fees. No such explicit
determination thereon was made in the body of the decision of the trial court. No reason thus exists for such an
award.
WHEREFORE, the instant petition is GRANTED. The challenged decision of the Court of Appeals in CA-G.R.
CV NO. 40043 as well as that of Branch 38 of the Regional Trial Court of Marinduque in Civil Case No. 89-14
are REVERSED and SET ASIDE and the complaint in Civil Case No. 89-14 is DISMISSED. The counterclaim
therein is likewise DISMISSED.
No pronouncement as to costs.

SO ORDERED.