SECOND DIVISION

[G.R. No. 134219. June 08, 2005]

SPOUSES MARIO AND ELIZABETH TORCUATOR, petitioners, vs. SPOUSES REMEGIO AND GLORIA BERNABE and
SPOUSES DIOSDADO and LOURDES SALVADOR, respondents.
DECISION
TINGA, J.:

In the instant Petition,[1] spouses Mario and Elizabeth Torcuator assail the Decision[2] of the Court of Appeals in
C.A.-G.R. CV No. 36427, which affirmed the trial courts dismissal of their complaint for specific performance, [3] and
its Resolution[4] which denied their motion for reconsideration.
The facts as summarized by the Court of Appeals are as follows:
The subject of this action is Lot 17, Block 5 of the Ayala Alabang Village, Muntinlupa, Metro-Manila, with an area of
569 square meters and covered by TCT No. S-79773. The lower court found that the above parcel of land was
purchased by the spouses Diosdado and Lourdes Salvador (Salvadors, for short) from the developers of Ayala
Alabang subject, among others, to the following conditions:--

It is part of the condition of buying a lot in Ayala Alabang Village (a) that the lot buyer shall deposit with Ayala
Corporation a cash bond (about P17,000.00 for the Salvadors) which shall be refunded to him if he builds a
residence thereon within two (2) years of purchase, otherwise the deposit shall be forfeited, (b) architectural plans
for any improvement shall be approved by Ayala Corporation, and (c) no lot may be resold by the buyer unless a
residential house has been constructed thereon (Ayala Corporation keeps the Torrens Title in their [sic]
possession).

(p. 5, RTC Decision)

Evidences on record further reveal that on December 18, 1980, the Salvadors sold the parcel of land to the spouses
Remigio and Gloria Bernabe (Bernabes, for expediency). Given the above restrictions, the Salvadors concomitantly
executed a special power of attorney authorizing the Bernabes to construct a residential house on the lot and to
transfer the title of the property in their names.

The Bernabes, on the other hand, without making any improvement, contracted to sell the parcel of land to the
spouses Mario and Elizabeth Torcuator (Torcuators, for brevity) sometime in September of 1986. Then again,
confronted by the Ayala Alabang restrictions, the parties agreed to cause the sale between the Salvadors and the
Bernabes cancelled (Exhibit D), in favor of (a) a new deed of sale from the Salvadors directly to the Torcuators; (b)
a new Irrevocable Special Power of Attorney (Exhibit F) executed by the Salvadors to the Torcuators in order for
the latter to build a house on the land in question; and (c) an Irrevocable Special Power of Attorney (Exhibit E) from
the Salvadors to the Bernabes authorizing the latter to sell, transfer and convey, with power of substitution, the
subject lot.

The Torcuators thereafter had the plans of their house prepared and offered to pay the Bernabes for the land upon
delivery of the sale contract. For one reason or another, the deed of sale was never consummated nor was
payment on the said sale ever effected. Subseuqently, the Bernabes sold the subject land to Leonardo Angeles, a
brother-in-law (Exh. 7). The document however is not notarized. As a result, the Torcuators commenced the
instant action against the Bernabes and Salvadors for Specific Performance or Rescission with Damages.

After trial, the court a quo rendered its decision, the decretal portion reads:--
From all the foregoing disquisition, especially since the plaintiffs did not suffer any real damage (by January, 1987
they could have purchased another lot in Ayala Alabang, and the architectural plans they commissioned Arch.
Selga to prepare could then be used by the plaintiffs), the complaint filed by the plaintiff spouses is dismissed.
Since the plaintiff acted with sincerity and without delay in asserting what they believed to be their prerogatives,
i.e., without any malice or desire to take advantage of another, the counter-claim interposed by the Bernabes
against the Torcuator spouses is similarly dismissed.

Makati, Metro-Manila, August 20, 1991.[5]

The Court of Appeals dismissed the appeal, ruling that the sale between the Bernabes and the Torcuators was
tainted with serious irregularities and bad faith. The appellate court agreed with the trial courts conclusion that the
parties entered into the contract with the intention of reneging on the stipulation disallowing the sale or transfer
of vacant lots in Ayala Alabang Village.
It also ruled that the parties deprived the government of taxes when they made it appear that the property
was sold directly by the Salvadors to the Torcuators. Since there were actually two sales,  i.e., the first sale between
the Salvadors and the Bernabes and the second between the Bernabes and Torcuators, taxes should have been
paid for both transfers.[6]
The Court of Appeals denied petitioners motion for reconsideration in its Resolution[7] dated June 15, 1998.
Petitioners then filed the instant petition, averring that the appellate court erred in dismissing their appeal on
the strength of issues which were neither pleaded nor proved. The conditions allegedly imposed by Ayala
Corporation on the sale of lots in Ayala Alabang Village were: (a) that the lot-buyer shall deposit with Ayala
Corporation a cash bond (about P17,000.00 for the Salvadors) which shall be refunded to him if he builds a
residence thereon within two (2) years of purchase, otherwise the deposit shall be forfeited; (b) architectural plans
for any improvement shall be approved by Ayala Corporation; and (c) no lot may be resold by the buyer unless a
residential house has been constructed thereon (Ayala Corporation keeps the Torrens title in their (sic)
possession.)[8]
According to petitioners, the stipulation prohibiting the sale of vacant lots in Ayala Alabang Village, adverted
to by the appellate court in its decision as evidence that the sale between the Bernabes and the Torcuators was
tainted with serious irregularities, was never presented or offered in evidence by any of the parties. Without such
stipulation having been presented, marked and offered in evidence, the trial court and the appellate court should
not have considered the same.
The appellate court allegedly also erred in declaring that the contract of sale subject of the case is void, as it
was intended to deprive the government of revenue since the matter of taxes was not even mentioned in the
appealed decision of the trial court.
Further, petitioners assert that the contract was a perfected contract of sale not a mere contract to sell. The
trial court thus erred in declaring that the contract was void due only to petitioners failure to deliver the agreed
consideration. Likewise, the fact that the contract calls for the payment of the agreed purchase price in United
States Dollars does not result in the contract being void. The most that could be demanded, in accordance with
jurisprudence, is to pay the obligation in Philippine currency.
Petitioners also dispute the trial courts finding that they did not suffer any real damage as a result of the
transaction. On the contrary, they claim that respondents refusal to transfer the property caused them actual and
moral damages.
Respondents filed their Comment/Opposition (To the Petition for Certiorari) [9] dated November 4, 1998
countering that petitioners knew of the condition prohibiting the sale of vacant lots in Ayala Alabang Village as the
same was annotated on the title of the property which was submitted and adopted by both parties as their
evidence. The fact that the agreement required petitioners to construct a house in the name of the Salvadors
shows that petitioners themselves knew of the condition and acknowledged its validity.
 As regards petitioners contention that the Court of Appeals should not have ruled on the matter of taxes due
the government, respondents assert that the appellate court has the power to review the entire case to determine
the validity of the judgment of the lower court. Thus, it may review even matters which were not raised on appeal.
Respondents refer to the circumstances surrounding the transaction as proof that the parties entered into a
mere contract to sell and not a contract of sale. Allegedly, the memorandum containing the agreement of the
parties merely used the term offer. The payment of the purchase price was ostensibly a condition sine qua non to
the execution of the deed of sale in favor of petitioners, especially since the Bernabes came to the Philippines with
the express purpose of selling the property and were leaving for the United States as soon as they were paid.
Moreover, petitioners were required to construct a residential house on the property before it could be sold to
them in accordance with the condition imposed by Ayala Corporation.
Further, respondents maintain that the transaction was not consummated due to the fault of petitioners who
failed not only to prepare the necessary documentation but also to pay the purchase price for the property. They
also argue that the special power of attorney executed by the Salvadors in favor of petitioners merely granted the
latter the right to construct a residential house on the property in the name of the Salvadors. The original
document was not even given to the Torcuators precisely because they have not paid the purchase price.
Petitioners filed a Reply[10] dated January 20, 1999 in reiteration of their arguments.
In the Resolution[11] dated February 10, 1999, the parties were required to file their respective memoranda.
Accordingly, petitioners filed their Memorandum[12] on April 19, 1999. On the other hand, in view of respondents
disappearance without notice, the Court resolved to dispense with their memorandum. [13]
The trial court denied petitioners complaint on three (3) grounds, namely: (1) the alleged nullity of the
contract between the parties as it violated Ayala Corporations condition that the construction of a house is a
prerequisite to any sale of lots in Ayala Alabang Village; (2) non-payment of the purchase price; and (3) the nullity
of the contract as it called for payment in United States Dollars. To these reasons, the Court of Appeals added a
fourth basis for denying petitioners appeal and that is the alleged nullity of the agreement because it deprived the
government of taxes.
An analysis of the facts obtaining in this case leads us to affirm the assailed decisions although from a slightly
different but related thrust.
Let us begin by characterizing the agreement entered into by the parties, i.e., whether the agreement is a
contract to sell as the trial court ruled, or a contract of sale as petitioners insist.
The differences between a contract to sell and a contract of sale are well-settled in jurisprudence. As early as
1951, we held that in a contract of sale, title passes to the buyer upon delivery of the thing sold, while in a contract
to sell, ownership is reserved in the seller and is not to pass until the full payment of the purchase price is made. In
the first case, non-payment of the price is a negative resolutory condition; in the second case, full payment is a
positive suspensive condition. Being contraries, their effect in law cannot be identical. In the first case, the vendor
has lost and cannot recover the ownership of the land sold until and unless the contract of sale is itself resolved
and set aside. In the second case, however, the title remains in the vendor if the vendee does not comply with the
condition precedent of making payment at the time specified in the contract. [14]
In other words, in a contract to sell, ownership is retained by the seller and is not to pass to the buyer until
full payment of the price or the fulfillment of some other conditions either of which is a future and uncertain event
the non-happening of which is not a breach, casual or serious, but simply an event that prevents the obligation of
the vendor to convey title from acquiring binding force. [15]
We have carefully examined the agreement between the parties and are far from persuaded that it was a
contract of sale.
Firstly, the agreement imposed upon petitioners the obligation to fully pay the agreed purchase price for the
property. That ownership shall not pass to petitioners until they have fully paid the price is implicit in the
agreement. Notably, respondent Remigio Bernabe testified, without objection on the part of petitioners, that he
specifically informed petitioners that the transaction should be completed, i.e., that he should receive the full
payment for the property, before he left for the United States on October 14, 1986. [16]
Moreover, the deed of sale would have been issued only upon full payment of the purchase price, among
other things. Petitioner Mario Torcuator acknowledged this fact when he testified that the deed of sale and
original special power of attorney were only to be delivered upon full payment of the purchase price. [17]
As correctly observed by the trial court, the Salvadors did not execute a deed of sale in favor of petitioners,
and instead executed a special power of attorney authorizing the Bernabes to sell the property on their behalf, in
order to afford the latter a measure of protection that would guarantee full payment of the purchase price before
any deed of sale in favor of petitioners was executed.
Remarkably, the records are bereft of any indication that petitioners ever attempted to tender payment or
consign the purchase price as required by law. The Complaint[18] filed by petitioners makes no mention at all of a
tender of payment or consignation having been made, much less that petitioners are willing and ready to pay the
purchase price. Petitioners averments to the effect that they have sufficient funds to pay for the property and have
even applied for a telegraphic transfer from their bank account to the Bernabes bank account, uncoupled with
actual tender and consignation, are utterly self- serving.
The trial court correctly noted that petitioners should have consigned the amount due in court instead of
merely sending respondents a letter expressing interest to push through with the transaction. 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. Consignation of the amount due in court is essential in order to extinguish the obligation to
pay and oblige the vendor to convey title.[19]
On this score, even assuming that the agreement was a contract of sale, respondents may not be compelled
to deliver the property and execute the deed of absolute sale. In cases such as the one before us, which involve the
performance of an obligation and not merely the exercise of a privilege or right, payment may be effected not by
mere tender alone but by both tender and consignation. The rule is different in cases which involve an exercise of a
right or privilege, such as in an option contract, legal redemption or sale with right to repurchase, wherein mere
tender of payment would be sufficient to preserve the right or privilege. [20] Hence, absent a valid tender of
payment and consignation, petitioners are deemed to have failed to discharge their obligation to pay.
Secondly, the parties clearly intended the construction of a residential house on the property as another
suspensive condition which had to be fulfilled. Ayala Corporation retained title to the property and the Salvador
spouses were precluded from selling it unless a residence had been constructed thereon. The Ayala stipulation was
a pervasive, albeit unwritten, condition in light of which the transaction in this case was negotiated. The parties
undoubtedly understood that they had to contend with the Ayala stipulation which is why they resorted to the
execution of a special power of attorney authorizing petitioners to construct a residential building on the property
in the name of the Salvadors. Had the agreement been a contract of sale as petitioners would impress upon the
Court, the special power of attorney would have been entirely unnecessary as petitioners would have had the right
to compel the Salvadors to transfer ownership to them. [21]
Thirdly, there was neither actual nor constructive delivery of the property to petitioners. Apart from the fact
that no public document evidencing the sale was executed, which would have been considered equivalent to
delivery, petitioners did not take actual, physical possession of the property. The special power of attorney, which
petitioners count on as evidence that they took possession of the property, can by no means be interpreted as
delivery or conveyance of ownership over the property. Taken by itself, in fact, the special power of attorney can
be interpreted as tied up with any number of property arrangements, such as a contract of lease or a joint venture.
That is why respondents, especially the Salvadors, never intended to deliver the title to petitioners and
conformably with that they executed only a special power of attorney. Indeed, continuously looming large as an
essentiality in their judgment to dispose of their valuable property is the prior or contemporaneous receipt of the
commensurate price therefor.
This brings us to the application of the Statute of Frauds. Article 1403 of the Civil Code provides:
Art. 1403. The following contracts are unenforceable unless they are ratified:

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

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

....
The term Statute of Frauds is descriptive of statutes which require certain classes of contracts, such as
agreements for the sale of real property, to be in writing. It does not deprive the parties the right to contract with
respect to the matters therein involved, but merely regulates the formalities of the contract necessary to render it
enforceable. The purpose of the statute is to prevent fraud and perjury in the enforcement of obligations
depending for their evidence on the unassisted memory of witnesses by requiring certain enumerated contracts
and transactions to be evidenced by a writing signed by the party to be charged. [22] The written note or
memorandum, as contemplated by Article 1403 of the Civil Code, should embody the essentials of the contract. [23]
In the instant case, petitioners present as written evidence of the agreement the special power of attorney
executed in their favor by the Salvadors and the summary of agreement [24] allegedly initialed by respondent
Remigio Bernabe. These documents do not suffice as notes or memoranda as contemplated by Article 1403 of the
Civil Code.
The special power of attorney does not contain the essential elements of the purported contract and, more
tellingly, does not even refer to any agreement for the sale of the property. In any case, it was rendered virtually
inoperable as a consequence of the Salvadors adamant refusal to part with their title to the property.
The summary of agreement, on the other hand, is fatally deficient in the fundamentals and ambiguous in the
rest of its terms. For one, it does not mention when the alleged consideration should be paid and transfer of
ownership effected. The document does not even refer to a particular property as the object thereof. For another,
it is unclear whether the supposed purchase price isP600.00, P590.00 or P570.00/square meter. The other
conditions, such as payment of documentary stamp taxes, capital gains tax and other registration expenses, are
likewise uncertain.
Conformably with Article 1405[25] of the Civil Code, however, respondents acceptance of the agreement
foisted by petitioners on them is deemed to have arisen from their failure to object to the testimony of petitioner
Mario Torcuator on the matter[26] and their cross-examination of said petitioner thereon. [27]
Be that as it may, considering our ruling that the agreement was a contract to sell, respondents were not
obliged to convey title to the property before the happening of two (2) suspensive conditions, namely: full
payment of the purchase price and construction of a residence on the property. They were acting perfectly within
their right when they considered the agreement cancelled after unsuccessfully demanding payment from
petitioners.
That said, the question of whether the transaction violated the Uniform Currency Act, Republic Act No. 529, is
already moot. The contract having been cancelled, any resolution regarding the validity of the stipulation requiring
payment of the purchase price in foreign currency would not serve any further purpose.
Petitioners next insist that the condition requiring the construction of a house on any residential lot located in
Ayala Alabang Village before it can be sold was never submitted in evidence and was never testified to by any of
the witnesses presented during the trial. Hence, the trial court and the Court of Appeals should not have used this
as basis for its denial of petitioners cause.
 This assertion, however, is completely untrue. While the Formal Offer of Evidence[28] of petitioners,
respondents Offer of Exhibits,[29] and the Formal Offer of Evidence (On Rebuttal) [30] of petitioners make no mention
of any stipulation prohibiting the sale of vacant lots in Ayala Alabang Village, respondents maintain that petitioners
are fully aware of the prohibition as the conditions imposed by Ayala Corporation on the sale of Ayala Alabang lots
are inscribed on the title of the property which was submitted in evidence by both parties.
Despite petitioners remonstration that the inscriptions on the title are hardly legible, [31] we are inclined to
give credence to respondents account. It is quite implausible that a lawyer such as petitioner Mario Torcuator
would not take the precaution of checking the original title of the property with the Registry of Deeds to ascertain
whether there are annotations therein that would prejudice his position.
More importantly, petitioner Mario Torcuator himself testified on the existence of the condition prohibiting
the sale of vacant lots in Ayala Alabang Village, viz:
ATTY. J. DE DIOS, JR.
Q -Mr. witness aside from this summary of agreement which has been marked as Exhibit J do you still
have a document relating to his transaction between you and the defendant?
A -Yes, sir, as I indicated in my earlier testimony there was supposed to be a letter addressed to Ayala
Corporation which defendant Salvador should sign in order to request Ayala to deliver to me the
TCT covering the lot subject of the transaction.
Q -This letter that you are referring to do you still have a copy of that letter?
A -Yes, sir.
Q -I am showing to you a xerox copy of a letter addressed to Ayala Corporation and signed by Diosdado
and Lourdes Salvador, can you please explain to this Court what is the relation of this document
with what you are referring to executed by the defendant Diosdado Salvador and Lourdes Salvador
addressed to Ayala Corporation?
A -This is the letter of Mr. Salvador, sir, signed in my presence.
Q -Can you tell the Court where is the original of this document?
A -All of the original copies of that letter are with the defendant Bernabe, sir.
Q -Can you tell the Court how did you come to have a xerox copy of this document?
A -Yes, because as soon as the copies of the documents for the transaction were signed by Mrs. Salvador
who was then in New York, they were sent by the spouses to the daughter of Mr. Salvador who in
turn told me that all the originals are supposed to be delivered to Mr. Bernabe and I was given a
xerox copy of the same.
ATTY. J. DE DIOS, JR.
- And which for purpose of identification, your Honor, may we request that this letter addressed to
Ayala Corporation and signed by Diosdado Salvador and Lourdes Salvador be marked as Exhibit K
for the plaintiff, your Honor.
COURT
- Mark it.
...
ATTY. J. DE DIOS, JR.
- Mr. Witness, this letter appears to be, does it contain any date? Can you tell this Court why this
document does not contain the date?
 ATTY. A. MAGNO
- Incompetent, your Honor, because he was not the one who made that document.
COURT
- Let him explain.
ATTY. MAGNO
- Yes, your Honor.
ATTY. J. DE DIOS, JR.
- Because, your Honor, there is a requirement by Ayala Corporation that no lot or property may be
transferred until there is a complete building or structure built on the lot and so what I
was supposed to get only from Mr. Salvador, aside from the deed of absolute sale, is
merely a special power of attorney to authorize me to construct my house in the lot and
upon completion of the house that is the time that I would be allowed by Ayala
Corporation to transfer the property in my name. Therefore, the letter requesting Ayala
Corporation to release the title in the name of Mr. Salvador to was deliberately undated
because it would be only dated when I completed the house. [32] [Emphasis supplied]
The fact that petitioners agreed to construct a residential house on the property in the name of the Salvadors
further proves that they knew that a direct sale to them of a vacant lot would contravene the condition imposed
by Ayala Corporation on the original buyers of lots in Ayala Alabang Village. Hence, they agreed on the elaborate
plan whereby the Salvador spouses, in whose names the property was registered, would execute a special power
of attorney in favor of petitioners authorizing the latter to construct a residential house on the property in the
name of the Salvadors. The records even indicate that the documents to effectuate this plan were prepared by
petitioner Mario Torcuator himself.
In his testimony, for instance, petitioner Mario Torcuator stated that: [B]ased on our discussion, your Honor,
from the P600 per square meter price, we agreed upon, they agreed to give me a rebate of 5% in the form of
discount because there was a problem in the documentation which I tried to solve which are the papers in favor of
Bernabe missing. I suggested to Mr. Bernabe that we prepare a new set of document which will be signed by Mr.
Salvador as the previous owner and because of that I will be getting in effect a 5% discount as my commission. [33]
This was confirmed by respondent Remigio Bernabe:
Q - Now, where there any documents presented to you during that
occasion?
A - Yes, sir.
Q - By whom?
A - Mr. Torcuator prepared some documents for me to sign.
Q - And do you recall what was that documents?
A - Yes, sir. Mr. Torcuator prepared a documents for cancellation
of the deed of sale of Mr. Salvador to Remigio Bernabe, and cancellation also of the
irrevocable power of attorney of Salvador to Bernabe, and power of attorney of Salvador
authorizing Remigio Bernabe to sell the property and power of attorney of Salvador given to
Mr. Torcuator.[34]
Petitioners therefore cannot feign ignorance of the condition imposed by Ayala Corporation.
We do not agree, however, with the trial court and appellate courts ruling that the transaction between the
parties was void for being contrary to good customs and morals. [35]
 In order to declare the agreement void for being contrary to good customs and morals, it must first be shown
that the object, cause or purpose thereof contravenes the generally accepted principles of morality which have
received some kind of social and practical confirmation. [36]
We are not inclined to rule that the transaction in this case offended good customs and morals. It should be
emphasized that the proscription imposed by Ayala Corporation was on the resale of the property without a
residential house having been constructed thereon. The condition did not require that the original lot buyer should
himself construct a residential house on the property, only that the original buyer may not resell a vacant lot. In
view of our finding that the agreement between the parties was a mere contract to sell, no violation of the
condition may be inferred from the transaction as no transfer of ownership was made. In fact, the agreement in
this case that petitioners will construct a residential house on the property in the name of the Salvadors (who
retained ownership of the property until the fulfillment of the twin conditions of payment and construction of a
residence) was actually in compliance with or obeisance to the condition.
Finally, the issue of whether the agreement violated the law as it deprived the government of capital gains
tax is wholly irrelevant. Capital gains taxes, after all, are only imposed on gains presumed to have been realized
from sales, exchanges or dispositions of property. Having declared that the contract to sell in this case was aborted
by petitioners failure to comply with the twin suspensive conditions of full payment and construction of a
residence, the obligation to pay taxes never arose. Hence, any error the appellate court may have committed when
it passed upon the issue of taxes despite the fact that no evidence on the matter was pleaded, adduced or proved
is rather innocuous and does not warrant reversal of the decisions under review.
WHEREFORE, the instant petition is DENIED. Costs against petitioners.
SO ORDERED.
Austria-Martinez, (Acting Chairman), Callejo, Sr., and  Chico-Nazario, JJ., concur.
Puno, (Chairman),  on official leave.

[1]
 Rollo, pp. 13-42; Dated August 6, 1998.
[2]
  Id. at 44-49. The Decision dated January 30, 1998 was penned by Associate Justice Conrado M. Vasquez, Jr. and
concurred in by Associate Justices Fermin A. Martin, Jr. and Artemio G. Tuquero.
[3]
 Decision, dated August 20, 1991 penned by Judge Salvador P. De Guzman, Jr., Regional Trial Court, Branch 142,
Makati, Metro Manila; id. at 53-61.
[4]
  Id. at 51; Dated June 15, 1998.
[5]
  Id. at 44-46.
[6]
  Id. at 44-49.
[7]
 Supra, note 4.
[8]
 CA Records, pp. 36-37. Brief for the Appellants dated August 27, 1992.
[9]
 Rollo, pp. 70-83.
[10]
 Id. at 85-99.
[11]
 Id.  at 104.
[12]
 Id.  at 105-169.
[13]
 Id.  at 209.
[14]
 Philippine National Bank v. Court of Appeals, 330 Phil. 1048 (1996), citing  Bowe v. Court of Appeals 220 SCRA
158 (1993), Lim v. Court of Appeals, 182 SCRA 564 (1990) and Sing Yee v. Santos, 47 O.G. 6372 (1951). See
also San Lorenzo Development Corporation v. Court of Appeals, G.R. No. 124242, January 21, 2005.
[15]
 Ibid citing Jacinto v. Kaparaz, 209 SCRA 246 (1992).
[16]
 TSN, June 22, 1989, pp. 24-26.
[17]
 TSN, November 8, 1988, p. 81.
[18]
 RTC Records, pp. 1-5.
[19]
 San Lorenzo Development Corporation v. Court of Appeals, G.R. No. 124242, January 21, 2005  citing  Vda. De
Zulueta, et al. v. Octaviano, 205 Phil. 247 (1983).
[20]
 Adelfa Properties, Inc. v. Court of Appeals, 310 Phil. 623 (1995).
[21]
 Supra  note 15.
[22]
 Rosencor Development Corporation v. Inquing, G.R. No. 140479, March 8, 2001, 354 SCRA 119.
[23]
 Paredes v. Espino, 131 Phil. 94 (1968).
[24]
 RTC Records, pp. 73 and 147.
[25]
 Art. 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of Article 1403, are ratified by the
failure to object to the presentation of oral evidence to prove the same, or by the acceptance of benefits
under them.
[26]
 TSN, November 8, 1988, pp. 11-12.
[27]
 TSN, November 8, 1988, pp. 38-103.
[28]
 RTC Records, pp. 141-148.
[29]
 Id.  at 167-168.
[30]
 Id.  at 183-185.
[31]
 Rollo, p. 119.
[32]
 TSN, November 8, 1988, pp. 24-36.
[33]
 TSN, November 6, 1987, pp. 42-43.
[34]
 TSN, June 22, 1989, pp. 14-16.
[35]
 Civil Code, Art. 1409. The following contracts are inexistent and void from the beginning:
(1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order
or public policy.
[36]
 Cui v. Arellano University, No. L-15127, 112 Phil. 135 (1961) citing  Manresa. See also  Philippine American
General Insurance Company, Inc. v. Mutuc, No. L-19632, November 13, 1974, 61 SCRA 22.

Republic of the Philippines

SUPREME COURT
Manila
 EN BANC

G.R. No. L-9871             January 31, 1958

ATKINS, KROLL and CO., INC., petitioner, 

vs.
B. CUA HIAN TEK, respondent.

Ross Selph, Carrascoso and Janda for petitioner.

Ponciano T. Castro for respondent.

BENGZON, J.:

Review of a Court of Appeals' decision. For its failure to deliver one thousand cartons of sardines, which it had sold
to B. Cua Hian Tek, petitioner was sued, and after trial was ordered by the Manila court of first instance to Pay
damages, which on appeal was reduced by the Court of Appeals to P3,240.15 representing unrealized profits.

There was no such contract of sale, says petitioner, but only an option to buy, which was not enforceable for lack
of consideration because in accordance with Art. 1479 of the New Civil Code "an accepted unilatateral promise to
buy or to sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a
consideration distinct from the price.

Simple are the facts of this case: Dated September 13, 1951, petitioner sent to respondent a letter of the following
tenor:

Sir (s) /Madam:

We are pleased to make you herewith the following firm offer, subject to reply by September 23, 1951:

Quantity and Commodity:

400 Ctns. Luneta brand Sardines in Tomato Sauce 48/15-oz. Ovals at $8.25 Ctn.

300 Ctns. Luntea brand Sardines Natural 48/15 oz. talls at $6.25 Ct.

300 Ctns. Luneta brand Sardines in Tomato Sauce 100/5-oz. talls at $7.48 Ct.

Price(s):

All prices C ad F Manila Cosular Fees of $6.00 to be added.

Shipmet:

Durig September/October from US Ports.

Supplier:

Atkins, Kroll & Co., Sa Frasisco, Cal. U.S.A.

We are looking forward to receive your valued order and remain .

 Very truly yours,
The Court of first instance and the Court of Appeals1 found that B. Cua Hian Tek accepted the offer unconditionally
and delivered his letter of acceptance Exh. B on September 21, 1951. However, due to shortage of catch of
sardines by the packers in California, Atkins Kroll & Co., failed to deliver the commodities it had offered for sale.
There are other details to which reference shall not be made, as they touch the question whether the acceptance
had been handed on time; and on that issue of Court of Appeals definitely found for plaintiff.

Ayway, in presenting its case before this Court petitioner does not dispute such timely acceptance. It merely raises
the point that the acceptance only created an option, which, lacking consideration, had no obligatory force.

The offer Exh. A, petitioner argues, "was a promise to sell a determinate thing for a price certain. Upon its
acceptance by respondent, the offer became an accepted unilateral promise to sell a determinate thing for price
certain. Inasmuch as there was no consideration to support the promise to sell distinct from the price, it follows
that under Art. 1479 aforequoted, the promise is not binding on the petitioner even if it was accepted by
respondent." (p. 12 brief of petitioner.).

The argument, maifestly assumes that only a unilateral promise arose when the offeree accepted. Such
assumption is a mistake, because a bilateral cotract to sell and to buy was created upon acceptance. So much so
that B. Cua Hian Tek could be sued, he had backed out after accepting, by refusing to get the sardines and/or to
pay for their price. Indeed, the word "option" is found neither in the offer nor in the acceptance. On the copntrary
Exh. B accepted "the firm offer for the sale" and adds, "the undersigned buyer has immediately filed an application
for import license . . ." (Emphasis Ours.).

Petitioner, however, insists the offer was a mere offer of option, because the "firm offer" Exh. A. was a continuing
offer to sell until September 23, "an option is nothing more than a continuing offer" for a specified time. In our
opinion implies more than that: it implies the legal obligation to keep open for the time specified. 2 Yet the letter
Exh. A did not by itself produce the legal obligation of keeping the offer open up ot Septmber 23. It could be
withdrawn before acceptance, because it is admitted, there was no consideration for it.

ART. 1324. When the offerer has showed the offeree a certain period to accept, the offer may be
withdrawn at any time before acceptance by communicating such withdrawal, except when the option is
founded upon a consideration, as somnething paid or promissed. (n) (New Civil Code.).

Ordinarily an offer to buy or sell may be withdrawn or countermanded before accepatnce, even though
the offer provides that it will not be withdrawn or countermanded, or allows the offeree a certain time
within which to accept it, unless such provision or agreement is supported by an independent
consideration. . . (77 Corpus Juris Secundum p. 636.).

Furthermore, an option is unilateral: a promise to sell3 at the price fixed whenever the offeree should decide to
exercise his option within the specified time. After accepting the promise and before he exercises his option, the
holder of the option is not bound to buy. He is free either to buy or not to later. In this case, however, upon
accepeting herein petitioner's offer a bilateral promise to sell and to buy ensued, and the respondent ipso facto
assumed the obligations of a purchaser. He did not just get the right subsequently to buy or not to buy. It was not a
mere option then; it was bilalteral contract of sale.

Lastly, even supposing that Exh. A granted an option which is not binding for lack of consideration, the authorities
hold that .

If the option is given without a consideration, it is a mere offer of a contract of sale, which is not binding
until accepted. If, however, acceptance is made before a withdrawal, it constitutes a binding contract of
 sale, even though the option was not supported by a sufficient consideration. . . (77 Corpus Juris
Secundum p. 652. See also 27 Ruling Case Law 339 and cases cited.).

It can be taken for granted, as contended by the defendants, that the option contract was not valid for
lack of consideration. But it was, at least, an offer to sell, which was accepted by letter, and of this
acceptance the offerer had knowledge before said offer was withdrawn. The concurrence of both acts—
the offer and the acceptance—could at all events have generated a contract, if none there was before
(atrs. 1254 and 1262 of the Civil Code). (Zayco vs. Serra, 44 Phil. 331.).

One additional observation should be made before the closing this opinion. The defense in the court of first
instance rested on the proposition or propositions that the offer had not been precedent had not been fulfilled.
This option-without-consideration idea was never mentioned in the answer. A Change of theory in the appellate
courts is not permitted.

In order that a question may be raised on appeal, it is essential that it be within the issues made by the
parties in their pleadings. Consequently, when a party deliberately adopts a certain theory, and the case is
tried and decided upon that theory in the court below, he will not be permitted to change his theory on
appeal because, to permit him to do so, would be unfair to the adverse party. (Rules of Court by Moran—
1957 Ed. Vol. I p.715 citing Agoncillo vs. Javier, 38 Phil. 424; American Express Company vs. Natividad, 46
Phil. 207; San Agustin vs. Barrios, 68 Phil. 465, 480; Toribio vs. Dacasa, 55 Phil. 461.) .

We must therefore hold, as the lower courts have held that there was a contract of sale between the parties. And
as no legal excuse has been proven, the seller's failure to comply therewith gave around to an award for damages,
which has been fixed by the Court of Appeals at P3,240.15-amount which petitioner does not dispute in this final
instance.

Consequently, the decision under review should be, and it is hereby affirmed, with cost against petitioner.

Paras, C.J., Padilla, Montemayor, Reyes, A., Concepcion, Reyes, J.B.L., Endencia, and Felix, JJ., concur.
Bautista Angelo, J., concurs in the result.

Footnotes

1
 p. 6 brief of petitioner.

2
 Morase vs. Burleigh 170 La. 270, 127 So. 624.

3
 Or to buy as the case may be.

SECOND DIVISION
[G.R. No. 117187. July 20, 2001]
UNION MOTOR CORPORATION, petitioner-appellant, vs. THE COURT OF APPEALS, JARDINE-MANILA FINANCE,
INC., SPOUSES ALBIATO BERNAL and MILAGROS BERNAL, respondents-appelles.
DECISION
DE LEON, JR., J.:

Before us on appeal, by way of a petition for review on certiorari, is the Decision[1] dated March 30, 1994 and
Resolution[2] dated September 14, 1994 of the Court of Appeals [3] which affirmed the Decision dated March 6, 1989
of the Regional Trial Court of Makati, Metro Manila, Branch 150, in Civil Case No. 920 as well as its Resolution
dated September 14, 1994 which denied the Motion for Reconsideration of the petitioner.
The facts are as follows:
On September 14, 1979, the respondent Bernal spouses purchased from petitioner Union Motor Corporation
one Cimarron Jeepney for Thirty Seven Thousand Seven Hundred Fifty Eight Pesos and Sixty Centavos (P37,758.60)
to be paid in installments. For this purpose, the respondent spouses executed a promissory note and a deed of
chattel mortgage in favor of the petitioner. Meanwhile, the petitioner entered into a contract of assignment of the
promissory note and chattel mortgage with Jardine-Manila Finance, Inc. Through Manuel Sosmea, an agent of the
petitioner, the parties agreed that the respondent spouses would pay the amount of the promissory note to
Jardine-Manila Finance, Inc., the latter being the assignee of the petitioner.  To effectuate the sale as well as the
assignment of the promissory note and chattel mortgage, the respondent spouses were required to sign a notice of
assignment, a deed of assignment, a sales invoice, a registration certificate, an affidavit, and a disclosure
statement. The respondent spouses were obliged to sign all these documents for the reason that, according to
Sosmea, it was a requirement of petitioner Union Motor Corporation and Jardine-Manila Finance, Inc. for the
respondent spouses to accomplish all the said documents in order to have their application approved.  Upon the
respondent spouses tender of the downpayment worth Ten Thousand Thirty-Seven Pesos (P10,037.00), and the
petitioners acceptance of the same, the latter approved the sale. Although the respondent spouses have not yet
physically possessed the vehicle, Sosmea required them to sign the receipt as a condition for the delivery of the
vehicle.
The respondent spouses continued paying the agreed installments even if the subject motor vehicle remained
undelivered inasmuch as Jardine-Manila Finance, Inc. promised to deliver the subject jeepney.  The respondent
spouses have paid a total of Seven Thousand Five Hundred Seven Pesos (P7,507.00) worth of installments before
they discontinued paying on account of non-delivery of the subject motor vehicle. According to the respondent
spouses, the reason why the vehicle was not delivered was due to the fact that Sosmea allegedly took the subject
motor vehicle in his personal capacity.
On September 11, 1981, Jardine-Manila Finance, Inc., filed a complaint for a sum of money, docketed as Civil
Case No. 42849, against the respondent Bernal spouses before the then Court of First Instance of Manila. This case
was later on transferred to the Regional Trial Court of Makati, Branch 150. On November 10, 1981, the complaint
was amended to include petitioner Union Motor Corporation as alternative defendant, the reason being that if the
respondent spouses refusal to pay Jardine-Manila Finance, Inc. was due to petitioners non-delivery of the unit, the
latter should pay Jardine-Manila Finance, Inc. what has been advanced to the petitioner. After the petitioner filed
its answer, the respondent spouses filed their amended answer with cross-claim against the former and
counterclaim against Jardine-Manila Finance, Inc.Following the presentation of evidence of Jardine-Manila Finance,
Inc., the respondent spouses presented as witnesses Albiato Bernal and Pacifico Tacub in support of their defense
and counterclaim against the plaintiff and cross-claim against the petitioner. The petitioner did not present any
evidence inasmuch as the testimony of the witness it presented was ordered stricken off the record for his
repeated failure to appear for cross-examination on the scheduled hearings. The trial court deemed the
presentation of the said witness as having been waived by the petitioner.
On March 6, 1989, the trial court rendered a decision, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered ordering:
 1. Plaintiff to pay spouses Bernals the sum of P7,507.15 plus legal interest until fully paid;
2. Union Motor Corporation to pay defendants spouses Bernals the downpayment in the amount of
P10,037.00, plus legal interest until fully paid;
3. Union Motor Corporation to pay plaintiff P23,268.29, plus legal interest until fully paid, and attorneys
fees equivalent to 20% of the amount due to plaintiff.
Union Motor Corporation shall further pay defendants spouses Bernals the sum of P20,000.00 as moral damages,
P10,000.00 as attorneys fees and costs of suit. [4]

The petitioner interposed an appeal before the Court of Appeals while the respondent spouses appealed to
hold the petitioner solidarily liable with Jardine-Manila Finance, Inc. The appellate court denied both appeals and
affirmed the trial courts decision by holding that:
Now, as to the appeal of defendant Union Motors, it must be noted that said defendant had failed to adduce
evidence in court to support its claim of non-liability. We cannot see how the absence of any evidence in favor of
said defendant can result in favorable reliefs to its side on appeal. There is simply no evidence to speak of in
appellant Union Motors favor to cause a reversal of the lower courts decision. In the case of Tongson v. C.A. G.R.
No. 77104, Nov. 6, 1992, the Supreme Court reiterated that:

As mandated by the Rules of Court, each party must prove his own affirmative allegation, i.e., one who
asserts the affirmative of the issue has the burden of presenting at the trial such amount of evidence
required by law to obtain a favorable judgment: by preponderance of evidence in civil cases, and by
proof beyond reasonable doubt in criminal cases. x x x.

Hence, the instant petition anchored on the following assigned errors:

I
THE HONORABLE COURT OF APPEALS (SECOND DIVISION) GRAVELY ERRED AND ABUSED ITS DISCRETION IN
NOT FINDING THAT THE LOWER COURT A QUOS DECISION OF MARCH 6, 1989 IS CONTRARY TO LAW AND
THE EVIDENCE ON RECORD;

II
THE HONORALBLE COURT OF APPEALS (SECOND DIVISION) GRAVELY ERRED AND ABUSED ITS DISCRETION IN
NOT FINDING THAT THE APPEALED DECISION WAS RENDERED IN DEPRIVATION AND IN DENIAL OF HEREIN
PETITIOENR-APPELLANTS RIGHT TO DUE PROCESS.

The first issue to be resolved in the instant case is whether there has been a delivery, physical or constructive,
of the subject motor vehicle.
On this score, petitioner Union Motor Corporation maintains that the respondent spouses are not entitled to
a return of the downpayment for the reason that there was a delivery of the subject motor vehicle. According to
the petitioner, the appellate court erred in holding that no delivery was made by relying exclusively on the
testimonial evidence of respondent Albiato Bernal without considering the other evidence on record, like the sales
invoice and delivery receipt which constitute an admission that there was indeed delivery of the subject motor
vehicle.Also, there was a constructive delivery of the vehicle when respondent Albiato Bernal signed the
registration certificate of the subject vehicle.Inasmuch as there was already delivery of the subject motor vehicle,
ownership has been transferred to the respondent spouses. The Chattel Mortgage Contract signed by the
respondent Bernal spouses in favor of the petitioner likewise proves that ownership has already been transferred
to them for the reason that, under Article 2085 of the New Civil Code, the mortgagor must be the owner of the
property.[5] As owners of the jeepney, the respondent Bernal spouses should bear the loss thereof in accordance
with Article 1504 of the New Civil Code which provides that when the ownership of goods is transferred to the
buyer, the goods are at the buyers risk whether actual delivery has been made or not.  These, then, are the
contentions of the petitioner.
The main allegation of the respondent Bernal spouses, on the other hand, is that they never came into
possession of the subject motor vehicle. Thus, it is but appropriate that they be reimbursed by the petitioner of the
initial payment which they made. They also claim that Jardine-Manila Finance, Inc., and the petitioner conspired to
defraud and deprive them of the subject motor vehicle for which they suffered damages.
We rule in favor of the respondent Bernal spouses.
Undisputed is the fact that the respondent Bernal spouses did not come into possession of the subject
Cimarron jeepney that was supposed to be delivered to them by the petitioner. The registration certificate, receipt
and sales invoice that the respondent Bernal spouses signed were explained during the hearing without any
opposition by the petitioner. According to testimonial evidence adduced by the respondent spouses during the
trial of the case, the said documents were signed as a part of the processing and for the approval of their
application to buy the subject motor vehicle. Without such signed documents, no sale, much less delivery, of the
subject jeepney could be made. The documents were not therefore an acknowledgment by respondent spouses of
the physical acquisition of the subject motor vehicle but merely a requirement of petitioner so that the said subject
motor vehicle would be delivered to them.
We have ruled that the issuance of a sales invoice does not prove transfer of ownership of the thing sold to
the buyer; an invoice is nothing more than a detailed statement of the nature, quantity and cost of the thing sold
and has been considered not a bill of sale.[6]
The registration certificate signed by the respondent spouses does not conclusively prove that constructive
delivery was made nor that ownership has been transferred to the respondent spouses. Like the receipt and the
invoice, the signing of the said documents was qualified by the fact that it was a requirement of petitioner for the
sale and financing contract to be approved. In all forms of delivery, it is necessary that the act of delivery, whether
constructive or actual, should be coupled with the intention of delivering the thing. The act, without the intention,
is insufficient.[7] The critical factor in the different modes of effecting delivery which gives legal effect to the act, is
the actual intention of the vendor to deliver, and its acceptance by the vendee. Without that intention, there is no
tradition.[8] Enlightening is Addison v. Felix and Tioco[9]wherein we ruled that:
The Code imposes upon the vendor the obligation to deliver the thing sold. The thing is considered to be delivered
when it is placed in the hands and possession of the vendee. (Civil Code, Art. 1462). It is true that the same article
declares that the execution of a public instrument is equivalent to the delivery of the thing which is the object of
the contract, but, in order that this symbolic delivery may produce the effect of tradition, it is necessary that the
vendor shall have had control over the thing sold that, at the moment of the sale, its material delivery could have
been made.  It is not enough to confer upon the purchaser the ownership and the right of possession.  The thing sold
must be placed in his control. When there is no impediment whatever to prevent the thing sold passing into the
tenancy of the purchaser by the sole will of the vendor, symbolic delivery through the execution of a public
instrument is sufficient. But if, notwithstanding the execution of the instrument, the purchaser cannot have the
enjoyment and material tenancy of the thing and make use of it himself or through another in his name, because
such tenancy and enjoyment are opposed by the interposition of another will, then fiction yields to reality-the
delivery has not been effected. (Italics supplied)

The act of signing the registration certificate was not intended to transfer the ownership of the subject motor
vehicle to respondent Bernal spouses inasmuch as the petitioner still needed the same for the approval of the
financing contract with Jardine-Manila Finance, Inc. The record shows that the registration certificate was
submitted to Jardine-Manila Finance, Inc., which took possession thereof until Sosmea requested the latter to hand
over the said document to him. The fact that the registration certificate was still kept by Jardine-Manila Finance,
Inc. and its unhesitating move to give the same to Sosmea just goes to show that the respondent spouses still had
no complete control over the subject motor vehicle as they did not even possess the said certificate of registration
nor was their consent sought when Jardine-Manila Finance, Inc. handed over the said document to Sosmea.
 Inasmuch as there was neither physical nor constructive delivery of a determinate thing, (in this case, the
subject motor vehicle) the thing sold remained at the sellers risk. [10] The petitioner should therefore bear the loss
of the subject motor vehicle after Sosmea allegedly stole the same.
Petitioners reliance on the Chattel Mortgage Contract executed by the respondent spouses does not help its
assertion that ownership has been transferred to the latter since there was neither delivery nor transfer of
possession of the subject motor vehicle to respondent spouses.Consequently, the said accessory contract of
chattel mortgage has no legal effect whatsoever inasmuch as the respondent spouses are not the absolute owners
thereof, ownership of the mortgagor being an essential requirement of a valid mortgage
contract. The Carlos case[11] cited by the petitioner is not applicable to the case at bar for the reason that in the said
case, apart from the fact that it has a different issue, the buyer took possession of the personal property and was
able to sell the same to a third party. In the instant case, however, the respondent spouses never acquired
possession of the subject motor vehicle. The manifestations of ownership are control and enjoyment over the
thing owned. The respondent spouses never became the actual owners of the subject motor vehicle inasmuch as
they never had dominion over the same.
The petitioner also disputes the finding of the appellate court that there was no delivery. It did not consider,
according to the petitioner, the fact that the circumstance of non-delivery was not shown and that the respondent
spouses never made any demand for the possession of the vehicle. Contrary to the petitioners allegation, the
respondent spouses presented sufficient evidence to prove that Sosmea took delivery and possession of that
subject motor vehicle in his personal capacity as shown by a document [12] on which he (Sosmea) personally
acknowledged receipt of the registration certificate from Jardine-Manila Finance, Inc. Also, respondent Albiato
Bernal testified to the effect that they went several times to the office of the petitioner to demand the delivery of
the subject motor vehicle. The petitioner failed to refute that testimonial evidence considering that it waived its
right to present evidence.
Anent the second issue, the petitioner claims that the trial court committed a violation of due process when it
ordered the striking off of the testimony of the petitioners witness as well as the declaration that petitioner has
abandoned its right to present evidence. According to the petitioner, the delays in the hearing of the case were
neither unjust nor deliberate. It just so happened that from August 5, 1986 up to June 1987, the designated
counsel for the petitioner was either appointed to the government or was short of time to go over the records of
the case inasmuch as he was a new substitute counsel. During the last time the petitioners counsel moved for the
postponement of the case, witness Ambrosio Balones was not available due to gastro-enteritis as shown by a
medical certificate.
Well-settled is the rule that factual findings of the Court of Appeals are conclusive on the parties and not
reviewable by the Supreme Court and they carry even more weight when the Court of Appeals affirms the factual
findings of the trial court.[13] In the present case, the trial court found that after the direct testimony of petitioners
witness, Ambrosio Balones, the continuation of the cross-examination was postponed and re-scheduled for four
(4) times from November 21, 1986 up to June 19, 1987, all at the instance of petitioner Union Motor
Corporation. For three (3) times, the witness did not appear whenever the case was called for hearing. On June 19,
1987, when asked by the trial court why the witness was not present, the petitioners counsel could not give any
good reason for his absence. Neither did the petitioner offer to present any other witness to testify on that
day. The appellate court assented to these findings by quoting the decision of the trial court, to wit:
Defendant Union Motors Corporation has no evidence as the testimony of its only witness, Ambrosio Balones, was
orderd stricken off the record in the hearing of June 19, 1987, for his continuous failure to appear on scheduled
hearings. The Court further considered said defendant to have waived further presentation of evidence. [14]

The petitioner attempts to shift the blame on the respondents for the failure of its witness, Balones, to finish
his testimony. It was at the instance of Atty. Tacub, counsel for the respondents, that the testimony of petitioners
witness, Balones, was discontinued after Atty. Tacub asked for a recess and later on for the postponement of the
cross-examination of the said witness. The petitioner had the duty to produce its witness when he was called to
finish his testimony. To place the blame on the respondent spouses is to put a premium on the negligence of the
petitioner to require its own witness to testify on cross-examination. By presenting witness Balones on direct-
examination, the petitioner had the corresponding duty to make him available for cross-examination in accordance
with fair play and due process. The respondents should not be prejudiced by the repeated failure of the petitioner
to present its said witness for cross-examination. Hence, the trial court ordered that the unfinished testimony of
said witness be stricken off the record.
However, we cannot affirm that part of the ruling of the courts a quo awarding moral damages to the
respondents. For moral damages to be awarded in cases of breach of contract, the plaintiff must prove bad faith or
fraudulent act on the part of the defendant. [15] In the instant case, the allegations about connivance and fraudulent
schemes by the petitioner and Manuel Sosmea were merely general allegations and without any specific evidence
to sustain the said claims. In fact, Exhibit 1 which bears the name and signature of Sosmea as the person who
received the registration certificate militates against the respondent spouses claim that the petitioner connived
with its agent to deprive them of the possession of the subject motor vehicle.  The said document shows that
Sosmea acted only in his personal and private capacity, thereby effectively excluding any alleged participation of
the petitioner in depriving them of the possession of the subject motor vehicle. The petitioner should not be held
liable for the acts of its agent which were done by the latter in his personal capacity.
However, we affirm the award of attorneys fees. When a party is compelled to litigate with third persons or
to incur expenses to protect his interest, attorneys fees should be awarded. [16] In the present case, the respondent
spouses were forced to implead the petitioner Union Motor Corporation on account of the collection suit filed
against them by Jardine-Manila Finance, Inc., a case which was eventually won by the respondent spouses.
WHEREFORE, the appealed Decision dated March 30, 1994 of the Court of Appeals is hereby AFFIRMED with
the MODIFICATION that the award of moral damages is deleted. With costs against the petitioner.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, and Buena, JJ., concur.
Quisumbing, J.,  on official leave.

[1]
 Penned by Associate Justice Lourdes K. Tayao-Jaguros and concurred in by Presiding Justice Vicente V. Mendoza
(now Associate Justice of the Supreme Court) and Associate Justice Jesus M. Elbinias, in CA-G.R. CV No.
21691; Rollo, pp. 25-34.
[2]
 Rollo, p. 36.
[3]
 Special Former Second Division.
[4]
 Rollo, pp. 25-26.
[5]
 Land Settlement and Development Corporation v. Carlos, 22 SCRA 202, 203, 205, 206 (1968).
[6]
 P.T. Cerna Corporation v. Court of Appeals, 221 SCRA 19 (1993); Norkis Distributors, Inc. v. Court of Appeals, 193
SCRA 694 (1991).
[7]
 Norkis Distributors, Inc. v. Court of Appeals, 193 SCRA 694, 698 (1991).
[8]
 Id., p. 699, citing Abuan v. Garcia, 14 SCRA 759 (1965).
[9]
 38 Phil. 404, 408 (1918).
[10]
 Article 1496, New Civil Code.
[11]
 Supra, Note No. 5.
[12]
 Exhibit 1.
[13]
 Borromeo v. Sun, 317 SCRA 176, 182 (1999).
[14]
 CA Decision, p. 8; Rollo, p. 32.
[15]
 Article 2220, New Civil Code.
[16]
 Article 2208(2), New Civil Code.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 139173             February 28, 2007

SPOUSES ONNIE SERRANO AND AMPARO HERRERA, Petitioners 

vs.
GODOFREDO CAGUIAT, Respondent.

DECISION

SANDOVAL-GUTIERREZ, J.:

Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended,
assailing the Decision1 of the Court of Appeals dated January 29, 1999 and its Resolution dated July 14, 1999 in CA-
G.R. CV No. 48824.

Spouses Onnie and Amparo Herrera, petitioners, are the registered owners of a lot located in Las Piñas, Metro
Manila covered by Transfer Certificate of Title No. T-9905.

Sometime in March 1990, Godofredo Caguiat, respondent, offered to buy the lot. Petitioners agreed to sell it
atP1,500.00 per square meter. Respondent then gave petitioners P100,000.00 as partial payment. In turn,
petitioners gave respondent the corresponding receipt stating that respondent promised to pay the balance of the
purchase price on or before March 23, 1990, thus:

Las Piñas, Metro Manila

March 19, 1990

RECEIPT FOR PARTIAL PAYMENT OF LOT NO. 23 COVERED BY TCT NO. T-9905, LAS PIÑAS, METRO MANILA

RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE HUNDRED THOUSAND PESOS (P100,000.00)
AS PARTIAL PAYMENT OF OUR LOT SITUATED IN LAS PIÑAS, M.M. COVERED BY TCT NO. T-9905 AND WITH AN
AREA OF 439 SQUARE METERS.

MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR BEFORE MARCH 23, 1990, AND
THAT WE WILL EXECUTE AND SIGN THE FINAL DEED OF SALE ON THIS DATE.

SIGNED THIS 19th DAY OF MARCH, 1990 AT LAS PIÑAS, M.M.

(SGD) AMPARO HERRERA                 (SGD) ONNIE SERRANO"2

On March 28, 1990, respondent, through his counsel Atty. Ponciano Espiritu, wrote petitioners informing them of
his readiness to pay the balance of the contract price and requesting them to prepare the final deed of sale. 3

On April 4, 1990, petitioners, through Atty. Ruben V. Lopez, sent a letter 4 to respondent stating that petitioner
Amparo Herrera is leaving for abroad on or before April 15, 1990 and that they are canceling the transaction.
Petitioners also informed respondent that he can recover the earnest money of P100,000.00 anytime.

Again, on April 6, 1990,5 petitioners wrote respondent stating that they delivered to his counsel Philippine National
Bank Manager’s Check No. 790537 dated April 6, 1990 in the amount of P100,000.00 payable to him.

In view of the cancellation of the contract by petitioners, respondent filed with the Regional Trial Court, Branch 63,
Makati City a complaint against them for specific performance and damages, docketed as Civil Case No. 90-1067. 6

On June 27, 1994, after hearing, the trial court rendered its Decision 7 finding there was a perfected contract of sale
between the parties and ordering petitioners to execute a final deed of sale in favor of respondent. The trial court
held:

xxx

In the evaluation of the evidence presented by the parties as to the issue as to who was ready to comply with his
obligation on the verbal agreement to sell on March 23, 1990, shows that plaintiff’s position deserves more weight
and credibility. First, the P100,000.00 that plaintiff paid whether as downpayment or earnest money showed that
there was already a perfected contract. Art. 1482 of the Civil Code of the Philippines, reads as follows, to wit:

‘Art. 1482. Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as
proof of the perfection of the contract.’

Second, plaintiff was the first to react to show his eagerness to push through with the sale by sending defendants
the letter dated March 25, 1990. (Exh. ‘D’) and reiterated the same intent to pursue the sale in a letter dated April
6, 1990. Third, plaintiff had the balance of the purchase price ready for payment (Exh. ‘C’). Defendants’ mere
allegation that it was plaintiff who did not appear on March 23, 1990 is unavailing. Defendants’ letters (Exhs. ‘2’
and ‘5’) appear to be mere afterthought.

On appeal, the Court of Appeals, in its assailed Decision of January 29, 1999, affirmed the trial court’s judgment.

Forthwith, petitioners filed their motion for reconsideration but it was denied by the appellate court in its
Resolution8 dated July 14, 1999.

Hence, the present recourse.

The basic issue to be resolved is whether the document entitled "Receipt for Partial Payment" signed by both
parties earlier mentioned is a contract to sell or a contract of sale.

Petitioners contend that the Receipt is not a perfected contract of sale as provided for in Article 1458 9 in relation
to Article 147510 of the Civil Code. The delivery to them of P100,000.00 as down payment cannot be considered as
proof of the perfection of a contract of sale under Article 1482 11 of the same Code since there was no clear
agreement between the parties as to the amount of consideration.
Generally, the findings of fact of the lower courts are entitled to great weight and should not be disturbed except
for cogent reasons.14 Indeed, they should not be changed on appeal in the absence of a clear showing that the
trial court overlooked, disregarded, or misinterpreted some facts of weight and significance, which if considered
would have altered the result of the case.1awphi1.net12 In the present case, we find that both the trial court and
the Court of Appeals interpreted some significant facts resulting in an erroneous resolution of the issue involved.

In holding that there is a perfected contract of sale, both courts mainly relied on the earnest money given by
respondent to petitioners. They invoked Article 1482 of the Civil Code which provides that "Whenever earnest
money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the
contract."

We are not convinced.

In San Miguel Properties Philippines, Inc. v. Spouses Huang, 13 we held that the stages of a contract of sale are:
(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 is 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.

With the above postulates as guidelines, we now proceed to determine the real nature of the contract entered
into by the parties.

It is a canon in the interpretation of contracts that the words used therein should be given their natural and
ordinary meaning unless a technical meaning was intended. 14 Thus, when petitioners declared in the said "Receipt
for Partial Payment" that they –

RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE HUNDRED THOUSAND PESOS (P100,000.00)
AS PARTIAL PAYMENT OF OUR LOT SITUATED IN LAS PIÑAS, M.M. COVERED BY TCT NO. T-9905 AND WITH AN
AREA OF 439 SQUARE METERS.

MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR BEFORE MARCH 23, 1990, AND
THAT WE WILL EXECUTE AND SIGN THE FINAL DEED OF SALE ON THIS DATE.

there can be no other interpretation than that they agreed to a conditional contract of sale, consummation of
which is subject only to the full payment of the purchase price.

A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor's obligation to
transfer title is subordinated to the happening of a future and uncertain event, so that if the suspensive condition
does not take place, the parties would stand as if the conditional obligation had never existed. The suspensive
condition is commonly full payment of the purchase price.15

The differences between a contract to sell and a contract of sale are well-settled in jurisprudence. As early as 1951,
in Sing Yee v. Santos,16 we held that:

x x x [a] distinction must be made between a contract of sale in which title passes to the buyer upon delivery of the
thing sold and a contract to sell x x x where by agreement the ownership is reserved in the seller and is not to pass
until the full payment, of the purchase price is made. In the first case, non-payment of the price is a negative
resolutory condition; in the second case, full payment is a positive suspensive condition. Being contraries, their
effect in law cannot be identical. In the first case, the vendor has lost and cannot recover the ownership of the land
sold until and unless the contract of sale is itself resolved and set aside. In the second case, however, the title
remains in the vendor if the vendee does not comply with the condition precedent of making payment at the time
specified in the contract.

In other words, in a contract to sell, ownership is retained by the seller and is not to pass to the buyer until full
payment of the price.17

In this case, the "Receipt for Partial Payment" shows that the true agreement between the parties is a contract to
sell.

First, ownership over the property was retained by petitioners and was not to pass to respondent until full
payment of the purchase price. Thus, petitioners need not push through with the sale should respondent
fail to remit the balance of the purchase price before the deadline on March 23, 1990. In effect,
petitioners have the right to rescind unilaterally the contract the moment respondent fails to pay within
the fixed period.18

Second, the agreement between the parties was not embodied in a deed of sale. The absence of a formal
deed of conveyance is a strong indication that the parties did not intend immediate transfer of ownership,
but only a transfer after full payment of the purchase price. 19

Third, petitioners retained possession of the certificate of title of the lot. This is an additional indication
that the agreement did not transfer to respondent, either by actual or constructive delivery, ownership of
the property.20

It is true that Article 1482 of the Civil Code provides that "Whenever earnest money is given in a contract of sale, it
shall be considered as part of the price and proof of the perfection of the contract." However, this article speaks
ofearnest money given in a contract of sale. In this case, the earnest money was given in a contract to sell. The
earnest money forms part of the consideration only if the sale is consummated upon full payment of the purchase
price.21 Now, since the earnest money was given in a contract to sell, Article 1482, which speaks of a contract of
sale, does not apply.

As previously discussed, the suspensive condition (payment of the balance by respondent) did not take place.
Clearly, respondent cannot compel petitioners to transfer ownership of the property to him.

WHEREFORE, we GRANT the instant Petition for Review. The challenged Decision of the Court of Appeals
isREVERSED and respondent’s complaint is DISMISSED.

SO ORDERED.

ANGELINA SANDOVAL-GUTIERREZ
Associate Justice

WE CONCUR:

REYNATO S. PUNO
Chief Justice
Chairperson

(On official leave)

RENATO C. CORONA ADOLFO S. AZCUNA
Associate Justice Asscociate Justice
 CANCIO C. GARCIA
Associate Justice

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above
Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s
Division.

REYNATO S. PUNO
Chief Justice

Footnotes

1
 Penned by Associate Justice Conchita Carpio Morales (now a member of this Court) and concurred in by
Associate Justice Jainal D. Rasul and Associate Justice Bernardo P. Abesamis (both retired).

2
 Exhibit "B," Records, p. 124.

3
 Exhibit "D," id., p. 125.

4
 Exhibit "2," id., p. 173.

5
 Exhibit "5," Rollo, p. 177.

6
 Records, pp. 1-4.

7
 Id., pp. 423-430.

8
 Id., p. 25.

9
 Article 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 himself to pay therefore a price certain in
money or its equivalent. A contract of sale may be absolute or conditional.

10
 Article 1475. The contract of sale is perfected at the moment there is a meeting of the minds upon the
thing which is the object of the contract and upon the price.

From that moment, the parties may reciprocally demand performance, subject to the provisions
of the law governing the form of contracts.

11
 Article 1482. Whenever earnest money is given in a contract of sale, it shall be considered as part of the
price and as proof of the perfection of the contract.

12
 Gamaliel C. Villanueva and Irene C. Villanueva v. Court of Appeals, Spouses Jose and Leonila Dela Cruz,
and Spouses Guido and Felicitas Pile, G.R. No. 107624, January 28, 1997, 267 SCRA 89.
 13
 G.R. No. 137290, July 31, 2000, 336 SCRA 737, citing Ang Yu Asuncion v. Court of Appeals, 238 SCRA 602
(1994).

14
 Tan v. Court of Appeals, G.R. No. 100942, August 12, 1992, 212 SCRA 586.

15
 Philippine National Bank v. Court of Appeals and Lapaz Kaw Ngo, G.R. No. 119580, September 26, 1996,
citing Rose Packing Co., Inc. v. Court of Appeals, 167 SCRA 309, 318 (1988)  and Lim v. Court of
Appeals, 182 SCRA 564, 670 (1990), with citations.

16
 47 O.G. 6372 (1951).

17
 Id., citing Jacinto v. Kaparaz, 209 SCRA 246, 254 (1992).

18
 Tomas K. Chua v. Court of Appeals and Encarnacion Valdes-Choy, G.R. No. 119255, April 9, 2003, 401
SCRA 54.

19
 Id.

20
 Id.

21
 Id.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 118509 December 1, 1995

LIMKETKAI SONS MILLING, INC., petitioner, 

vs.
COURT OF APPEALS, BANK OF THE PHILIPPINE ISLANDS and NATIONAL BOOK STORE, respondents.

MELO, J.:

The issue in the petition before us is whether or not there was a perfected contract between petitioner Limketkai
Sons Milling, Inc. and respondent Bank of the Philippine Islands (BPI) covering the sale of a parcel of land,
approximately 3.3 hectares in area, and located in Barrio Bagong Ilog, Pasig City, Metro Manila.

Branch 151 of the Regional Trial Court of the National Capital Judicial Region stationed in Pasig ruled that there
was a perfected contract of sale between petitioner and BPI. It stated that there was mutual consent between the
parties; the subject matter is definite; and the consideration was determined. It concluded that all the elements of
a consensual contract are attendant. It ordered the cancellation of a sale effected by BPI to respondent National
Book Store (NBS) while the case was pending and the nullification of a title issued in favor of said respondent NBS.

Upon elevation of the case to the Court of Appeals, it was held that no contract of sale was perfected because
there was no concurrence of the three requisites enumerated in Article 1318 of the Civil Code. The decision of the
trial court was reversed and the complaint dismissed.

Hence, the instant petition.

Shorn of the interpretations given to the acts of those who participated in the disputed sale, the findings of facts of
the trial court and the Court of Appeals narrate basically the same events and occurrences. The records show that
on May 14, 1976, Philippine Remnants Co., Inc. constituted BPI as its trustee to manage, administer, and sell its
real estate property. One such piece of property placed under trust was the disputed lot, a 33,056-square meter
lot at Barrio Bagong Ilog, Pasig, Metro Manila covered by Transfer Certificate of Title No. 493122.

On June 23, 1988, Pedro Revilla, Jr., a licensed real estate broker was given formal authority by BPI to sell the lot
for P1,000.00 per square meter. This arrangement was concurred in by the owners of the Philippine Remnants.

Broker Revilla contacted Alfonso Lim of petitioner company who agreed to buy the land. On July 8, 1988,
petitioner's officials and Revilla were given permission by Rolando V. Aromin, BPI Assistant Vice-President, to enter
and view the property they were buying.

On July 9, 1988, Revilla formally informed BPI that he had procured a buyer, herein petitioner. On July 11, 1988,
petitioner's officials, Alfonso Lim and Albino Limketkai, went to BPI to confirm the sale. They were entertained by
Vice-President Merlin Albano and Asst. Vice-President Aromin. Petitioner asked that the price of P1,000.00 per
square meter be reduced to P900.00 while Albano stated the price to be P1,100.00. The parties finally agreed that
the lot would be sold at P1,000.00 per square meter to be paid in cash. Since the authority to sell was on a first
come, first served and non-exclusive basis, it may be mentioned at this juncture that there is no dispute over
petitioner's being the first comer and the buyer to be first served.

Notwithstanding the final agreement to pay P1,000.00 per square meter on a cash basis, Alfonso Lim asked if it
was possible to pay on terms. The bank officials stated that there was no harm in trying to ask for payment on
terms because in previous transactions, the same had been allowed. It was the understanding, however, that
should the term payment be disapproved, then the price shall be paid in cash.

It was Albano who dictated the terms under which the installment payment may be approved, and acting thereon,
Alfonso Lim, on the same date, July 11, 1988, wrote BPI through Merlin Albano embodying the payment initially of
10% and the remaining 90% within a period of 90 days.

Two or three days later, petitioner learned that its offer to pay on terms had been frozen. Alfonso Lim went to BPI
on July 18, 1988 and tendered the full payment of P33,056,000.00 to Albano. The payment was refused because
Albano stated that the authority to sell that particular piece of property in Pasig had been withdrawn from his unit.
The same check was tendered to BPI Vice-President Nelson Bona who also refused to receive payment.

An action for specific performance with damages was thereupon filed on August 25, 1988 by petitioner against BPI.
In the course of the trial, BPI informed the trial court that it had sold the property under litigation to NBS on July
14, 1989. The complaint was thus amended to include NBS.

On June 10, 1991, the trial court rendered judgment in the case as follows:
 WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendants Bank of
the Philippine Islands and National Book Store, Inc.: —

1. Declaring the Deed of Sale of the property covered by T.C.T. No. 493122 in the name of the
Bank of the Philippine Islands, situated in Barrio Bagong Ilog, Pasig, Metro Manila, in favor of
National Book Store, Inc., null and void;

2. Ordering the Register of Deeds of the Province of Rizal to cancel the Transfer Certificate of
Title which may have been issued in favor of National Book Store, Inc. by virtue of the
aforementioned Deed of Sale dated July 14, 1989;

3. Ordering defendant BPI, upon receipt by it from plaintiff of the sum of P33,056,000.00, to
execute a Deed of Sale in favor of plaintiff of the aforementioned property at the price of
P1,000.00 per square meter; in default thereof, the Clerk of this Court is directed to execute the
said deed;

4. Ordering the Register of Deeds of Pasig, upon registration of the said deed, whether executed
by defendant BPI or the Clerk of Court and payment of the corresponding fees and charges, to
cancel said T.C.T. No. 493122 and to issue, in lieu thereof, another transfer certificate of title in
the name of plaintiff;

5. Ordering defendants BPI and National Book Store, Inc. to pay, jointly and severally, to the
plaintiff the sums of P10,000,000.00 as actual and consequential damages and P150,000.00 as
attorney's fees and litigation expenses, both with interest at 12%  per annum from date hereof;

6. On the cross-claim of defendant bank against National Book Store, ordering the latter to
indemnify the former of whatever amounts BPI shall have paid to the plaintiff by reason hereof;
and

7. Dismissing the counterclaims of the defendants against the plaintiff and National Book Store's
cross-claim against defendant bank.

Costs against defendants.

(pp. 44-45, Rollo.)

As earlier intimated, upon the decision being appealed, the Court of Appeals (Buena [P], Rasul, and Mabutas,JJ.),
on August 12, 1994, reversed the trial court's decision and dismissed petitioner's complaint for specific
performance and damages.

The issues raised by the parties revolve around the following four questions:

(1) Was there a meeting of the minds between petitioner Limketkai and respondent BPI as to the subject matter of
the contract and the cause of the obligation?

(2) Were the bank officials involved in the transaction authorized by BPI to enter into the questioned contract?

(3) Is there competent and admissible evidence to support the alleged meeting of the minds?

(4) Was the sale of the disputed land to the NBS during the pendency of trial effected in good faith?
There is no dispute in regard to the following: (a) that BPI as trustee of the property of Philippine Remnant Co.
authorized a licensed broker, Pedro Revilla, to sell the lot for P1,000.00 per square meter; (b) that Philippine
Remnants confirmed the authority to sell of Revilla and the price at which he may sell the lot; (c) that petitioner
and Revilla agreed on the former buying the property; (d) that BPI Assistant Vice-President Rolando V. Aromin
allowed the broker and the buyer to inspect the property; and (e) that BPI was formally informed about the broker
having procured a buyer.

The controversy revolves around the interpretation or the significance of the happenings or events at this point.

Petitioner states that the contract to sell and to buy was perfected on July 11, 1988 when its top officials and
broker Revilla finalized the details with BPI Vice-Presidents Merlin Albano and Rolando V. Aromin at the BPI offices.

Respondents, however, contend that what transpired on this date were part of continuing negotiations to buy the
land and not the perfection of the sale. The arguments of respondents center on two propositions — (1) Vice-
Presidents Aromin and Albano had no authority to bind BPI on this particular transaction and (2) the subsequent
attempts of petitioner to pay under terms instead of full payment in cash constitutes a counter-offer which
negates the existence of a perfected contract.

The alleged lack of authority of the bank officials acting in behalf of BPI is not sustained by the record.

At the start of the transactions, broker Revilla by himself already had full authority to sell the disputed lot. Exhibit B
dated June 23, 1988 states, "this will serve as your authority to sell on an as is, where is basis the property located
at Pasig Blvd., Bagong Ilog . . . ." We agree with Revilla's testimony that the authority given to him was to sell and
not merely to look for a buyer, as contended by respondents.

Revilla testified that at the time he perfected the agreement to sell the litigated property, he was acting for and in
behalf of the BPI as if he were the Bank itself. This notwithstanding and to firm up the sale of the land, Revilla saw
it fit to bring BPI officials into the transaction. If BPI could give the authority to sell to a licensed broker, we see no
reason to doubt the authority to sell of the two BPI Vice-Presidents whose precise job in the Bank was to manage
and administer real estate property.

Respondent BPI alleges that sales of trust property need the approval of a Trust Committee made up of top bank
officials. It appears from the record that this trust committee meets rather infrequently and it does not have to
pass on regular transactions.

Rolando Aromin was BPI Assistant Vice-President and Trust Officer. He directly supervised the BPI Real Property
Management Unit. He had been in the Real Estate Division since 1985 and was the head supervising officer of real
estate matters. Aromin had been with the BPI Trust Department since 1968 and had been involved in the handling
of properties of beneficial owners since 1975 (tsn., December 3, 1990, p. 5).

Exhibit 10 of BPI, the February 15, 1989 letter from Senior Vice-President Edmundo Barcelon, while purporting to
inform Aromin of his poor performance, is an admission of BPI that Aromin was in charge of Torrens titles, lease
contracts, problems of tenants, insurance policies, installment receivables, management fees, quitclaims, and
other matters involving real estate transactions. His immediate superior, Vice-President Merlin Albano had been
with the Real Estate Division for only one week but he was present and joined in the discussions with petitioner.

There is nothing to show that Alfonso Lim and Albino Limketkai knew Aromin before the incident. Revilla brought
the brothers directly to Aromin upon entering the BPI premises. Aromin acted in a perfectly natural manner on the
transaction before him with not the slightest indication that he was acting ultra vires. This shows that BPI held
Aromin out to the public as the officer routinely handling real estate transactions and, as Trust Officer, entering
into contracts to sell trust properties.
Respondents state and the record shows that the authority to buy and sell this particular trust property was later
withdrawn from Trust Officer Aromin and his entire unit. If Aromin did not have any authority to act as alleged,
there was no need to withdraw authority which he never possessed.

Petitioner points to Areola vs.  Court of Appeals  (236 SCRA 643 [1994]) which cited Prudential Bank vs. Court of
Appeals (22 SCRA 350 [1993]), which in turn relied upon McIntosh vs. Dakota Trust Co. (52 ND 752, 204 NW 818,
40 ALR 1021), to wit:

Accordingly a banking corporation is liable to innocent third persons where the representation is
made in the course of its business by an agent acting within the general scope of his authority
even though, in the particular case, the agent is secretly abusing his authority and attempting to
perpetrate a fraud upon his principal or some other person for his own ultimate benefit.

(at pp. 652-653.)

In the present case, the position and title of Aromin alone, not to mention the testimony and documentary
evidence about his work, leave no doubt that he had full authority to act for BPI in the questioned transaction.
There is no allegation of fraud, nor is there the least indication that Aromin was acting for his own ultimate benefit.
BPI later dismissed Aromin because it appeared that a top official of the bank was personally interested in the sale
of the Pasig property and did not like Aromin's testimony. Aromin was charged with poor performance but his
dismissal was only sometime after he testified in court. More than two long years after the disputed transaction,
he was still Assistant Vice-President of BPI.

The records show that the letter of instruction dated June 14, 1988 from the owner of Philippine Remnants Co.
regarding the sale of the firm's property was addressed to Aromin. The P1,000.00 figure on the first page of broker
Revilla's authority to sell was changed to P1,100.00 by Aromin. The price was later brought down again to
P1,000.00, also by Aromin. The permission given to petitioner to view the lot was signed by Aromin and honored
by the BPI guards. The letter dated July 9, 1988 from broker Revilla informing BPI that he had a buyer was
addressed to Aromin. The conference on July 11, 1988 when the contract was perfected was with Aromin and
Vice-President Albano. Albano and Aromin were the ones who assured petitioner Limketkai's officers that term
payment was possible. It was Aromin who called up Miguel Bicharra of Philippine Remnants to state that the BPI
rejected payment on terms and it was to Aromin that Philippine Remnants gave the go signal to proceed with the
cash sale. Everything in the record points to the full authority of Aromin to bind the bank, except for the self-
serving memoranda or letters later produced by BPI that Aromin was an inefficient and undesirable officer and
who, in fact, was dismissed after he testified in this case. But, of course, Aromin's alleged inefficiency is not proof
that he was not fully clothed with authority to bind BPI.

Respondents' second contention is that there was no perfected contract because petitioner's request to pay on
terms constituted a counter-offer and that negotiations were still in progress at that point.

Asst. Vice-President Aromin was subpoenaed as a hostile witness for petitioner during trial. Among his statements
is one to the effect that —

. . . Mr. Lim offered to buy the property at P900.00 per square meter while Mr. Albano counter-
offered to sell the property at P1,100.00 per square meter but after the usual haggling, we finally
agreed to sell the property at the price of P1,000.00 per square meter . . .

(tsn, 12-3-90, p. 17; Emphasis supplied.)

Asked if there was a meeting of the minds between the buyer and the bank in respect to the price of P1,000.00 per
square meter, Aromin answered:
 Yes, sir, as far as my evaluation there was a meeting of the minds as far as the price is concerned,
sir.

(ibid, p. 17.)

The requirements in the payment of the purchase price on terms instead of cash were suggested by BPI Vice-
President Albano. Since the authority given to broker Revilla specified cash payment, the possibility of paying on
terms was referred to the Trust Committee but with the mutual agreement that "if the proposed payment on
terms will not be approved by our Trust Committee, Limketkai should pay in cash . . . the amount was no longer
subject to the approval or disapproval of the Committee, it is only on the terms." (ibid, p. 19). This is
incontrovertibly established in the following testimony of Aromin:

A. After you were able to agree on the price of P1,000.00/sq. m., since the
letter or authority says the payment must be in cash basis, what transpired
later on?

B. After we have agreed on the price, the Lim brothers inquired on how to go
about submitting the covering proposal if  they will be allowed to pay on terms.
They requested us to give them a guide on how to prepare the corresponding
letter of proposal. I recall that, upon the request of Mr. Albino Limketkai, we
dictated a guide on how to word a written firm offer that was to be submitted
by Mr. Lim to the bank setting out the terms of payment but with the mutual
agreement that if his proposed payment on terms will not be approved by our
trust committee, Limketkai should pay the price in cash.

Q And did buyer Limketkai agree to pay in cash in case the offer of terms will be
cash (disapproved).

A Yes, sir.

Q At the start, did they show their willingness to pay in cash?

A Yes, sir.

Q You said that the agreement on terms was to be submitted to the trust
committee for approval, are you telling the Court that what was to be
approved by the trust committee was the provision on the payment on terms?

A Yes, sir.

Q So the amount was no longer subject to the approval or disapproval of the

committee, it is only on the terms?

A Yes, sir.

(tsn, Dec. 3, 1990, pp. 18-19; Emphasis supplied.)

The record shows that if payment was in cash, either broker Revilla or Aromin had full authority. But because
petitioner took advantage of the suggestion of Vice-President Albano, the matter was sent to higher officials.
Immediately upon learning that payment on terms was frozen and/or denied, Limketkai exercised his right within
the period given to him and tendered payment in full. The BPI rejected the payment.
In its Comment and Memorandum, respondent NBS cites Ang Yu Asuncion vs. Court of Appeals (238 SCRA 602
[1994]) to bolster its case. Contrarywise, it would seem that the legal principles found in said case strengthen and
support petitioner's submission that the contract was perfected upon the meeting of the minds of the parties.

The negotiation or preparation stage started with the authority given by Philippine Remnants to BPI to sell the lot,
followed by (a) the authority given by BPI and confirmed by Philippine Remnants to broker Revilla to sell the
property, (b) the offer to sell to Limketkai, (c) the inspection of the property and finally (d) the negotiations with
Aromin and Albano at the BPI offices.

The perfection of the contract took place when Aromin and Albano, acting for BPI, agreed to sell and Alfonso Lim
with Albino Limketkai, acting for petitioner Limketkai, agreed to buy the disputed lot at P1,000.00 per square
meter. Aside from this there was the earlier agreement between petitioner and the authorized broker. There was a
concurrence of offer and acceptance, on the object, and on the cause thereof.

The phases that a contract goes through may be summarized as follows:

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 (Toyota Shaw, Inc. vs. Court of Appeals, G.R. No. 116650, May 23, 1995).

But in more graphic prose, we turn to Ang Yu Asuncion, per Justice Vitug:

. . . A contract undergoes various stages that include its negotiation or preparation, its perfection
and, finally, its consummation. Negotiation covers the period  from the time the prospective
contracting parties indicate interest in the contract to the time the contract is concluded
(perfected). Theperfection  of the contract takes place upon the concurrence of the essential
elements thereof. A contract which is consensual as to perfection is so established upon a mere
meeting of minds, i.e., the concurrence of offer and acceptance, on the object and on the cause
thereof. A contract which requires, in addition to the above, the delivery of the object of the
agreement, as in a pledge orcommodatum, is commonly referred to as a real contract. In
a solemn  contract, compliance with certain formalities prescribed by law, such as in a donation
of real property, is essential in order to make the act valid, the prescribed form being thereby an
essential element thereof. The stage of consummation begins when the parties perform their
respective undertakings under the contract culminating in the extinguishment thereof.

Until the contract is perfected, it cannot, as an independent source of obligation, serve as a

binding juridical relation. In sales, particularly, to which the topic for discussion about the case at
bench belongs, the contract is perfected when a person, called the seller, obligates himself, for a
price certain, to deliver and to transfer ownership of a thing or right to another, called the buyer,
over which the latter agrees.

(238 SCRA 602; 611 [1994].)

In Villonco Realty Company vs. Bormaheco (65 SCRA 352 [1975]), bearing factual antecendents similar to this case,
the Court, through Justice Aquino (later to be Chief Justice), quoting authorities, upheld the perfection of the
contract of sale thusly:
 The contract of sale is perfected at the moment there is a meeting of minds upon the thing which
is the object of the contract and upon the price. From that moment, the parties may reciprocally
demand performance, subject to the provisions of the law governing the form of contracts. (Art.
1475,Ibid.)

xxx xxx xxx

Consent is manifested by the meeting of the offer and the acceptance upon the thing and the
cause which are to constitute the contract. The offer must be certain and the acceptance
absolute. A qualified acceptance constitutes a counter-offer (Art. 1319, Civil Code). "An
acceptance may be express or implied." (Art. 1320, Civil Code).

xxx xxx xxx

It is true that an acceptance may contain a request for certain changes in the terms of the offer
and yet be a binding acceptance. "So long as it is clear that the meaning of the acceptance is
positively and unequivocally to accept the offer, whether such request is granted or not, a
contract is formed." (Stuart vs. Franklin Life Ins. Co., 105 Fed. 2nd 965, citing Sec. 79, Williston on
Contracts).

xxx xxx xxx

. . . the vendor's change in a phrase of the offer to purchase, which change does not essentially
change the terms of the offer, does not amount to a rejection of the offer and the tender or a
counter-offer. (Stuart vs. Franklin Life Ins. Co., supra.)

(at pp. 362-363; 365-366.)

In the case at bench, the allegation of NBS that there was no concurrence of the offer and acceptance upon the
cause of the contract is belied by the testimony of the very BPI official with whom the contract was perfected.
Aromin and Albano concluded the sale for BPI. The fact that the deed of sale still had to be signed and notarized
does not mean that no contract had already been perfected. A sale of land is valid regardless of the form it may
have been entered into (Claudel vs. Court of Appeals, 199 SCRA 113, 119 [1991]). The requisite form under Article
1458 of the Civil Code is merely for greater efficacy or convenience and the failure to comply therewith does not
affect the validity and binding effect of the act between the parties (Vitug, Compendium of Civil Law and
Jurisprudence, 1993 Revised Edition, p. 552). If the law requires a document or other special form, as in the sale of
real property, the contracting parties may compel each other to observe that form, once the contract has been
perfected. Their right may be exercised simultaneously with action upon the contract (Article 1359, Civil Code).

Regarding the admissibility and competence of the evidence adduced by petitioner, respondent Court of Appeals
ruled that because the sale involved real property, the statute of frauds is applicable.

In any event, petitioner cites Abrenica vs. Gonda  (34 Phil. 739 [1916]) wherein it was held that contracts infringing
the Statute of Frauds are ratified when the defense fails to object, or asks questions on cross-examination. The
succinct words of Justice Araullo still ring in judicial cadence:

As no timely objection or protest was made to the admission of the testimony of the plaintiff
with respect to the contract; and as the motion to strike out said evidence came too late; and,
furthermore, as the defendants themselves, by the cross-questions put by their counsel to the
witnesses in respect to said contract, tacitly waived their right to have it stricken out, that
evidence, therefore, cannot be considered either inadmissible or illegal, and court, far from
 having erred in taking it into consideration and basing his judgment thereon, notwithstanding the
fact that it was ordered to be stricken out during the trial, merely corrected the error he
committed in ordering it to be so stricken out and complied with the rules of procedure
hereinbefore cited.

(at p. 748.)

In the instant case, counsel for respondents cross-examined petitioner's witnesses at length on the contract itself,
the purchase price, the tender of cash payment, the authority of Aromin and Revilla, and other details of the
litigated contract. Under the Abrenica rule (reiterated in a number of cases, among them Talosig vs. Vda. de Nieba
43 SCRA 472 [1972]), even assuming that parol evidence was initially inadmissible, the same became competent
and admissible because of the cross-examination, which elicited evidence proving the evidence of a perfected
contract. The cross-examination on the contract is deemed a waiver of the defense of the Statute of Frauds (Vitug,
Compendium of Civil Law and Jurisprudence, 1993 Revised Edition, supra, p. 563).

The reason for the rule is that as pointed out in Abrenica "if the answers of those witnesses were stricken out, the
cross-examination could have no object whatsoever, and if the questions were put to the witnesses and answered
by them, they could only be taken into account by connecting them with the answers given by those witnesses on
direct examination" (pp. 747-748).

Moreover, under Article 1403 of the Civil Code, an exception to the unenforceability of contracts pursuant to the
Statute of Frauds is the existence of a written note or memorandum evidencing the contract. The memorandum
may be found in several writings, not necessarily in one document. The memorandum or memoranda is/are
written evidence that such a contract was entered into.

We cite the findings of the trial court on this matter:

In accordance with the provisions of Art. 1403 of the Civil Code, the existence of a written
contract of the sale is not necessary so long as the agreement to sell real property is evidenced
by a written note or memorandum, embodying the essentials of the contract and signed by the
party charged or his agent. Thus, it has been held:

The Statute of Frauds, embodied in Article 1403 of the Civil Code of the
Philippines,does not require that the contract itself be written. The plain test of
Article 1403, Paragraph (2) is clear that a written note or memorandum,
embodying the essentials of the contract and signed by the party charged, or
his agent suffices to make the verbal agreement enforceable, taking it out of
the operation of the statute. (Emphasis supplied)

xxx xxx xxx

In the case at bar, the complaint in its paragraph 3 pleads that the deal had
been closed by letter and telegram (Record on Appeal, p. 2), and the letter
referred to was evidently the one copy of which was appended as Exhibit A to
plaintiffs opposition to the motion to dismiss. The letter, transcribed above in
part, together with the one marked as Appendix B, constitute an adequate
memorandum of the transaction. They are signed by the defendant-appellant;
refer to the property sold as a Lot in Puerto Princesa, Palawan, covered by
T.C.T. No. 62, give its area as 1,825 square meters and the purchase price of
four (P4.00) pesos per square meter payable in cash. We have in them,
 therefore, all the essential terms of the contract and they satisfy the
requirements of the Statute of Frauds.

(Footnote 26, Paredes vs. Espino, 22 SCRA 1000 [1968]).

While there is no written contract of sale of the Pasig property executed by BPI in favor of
plaintiff, there are abundant notes and memoranda extant in the records of this case evidencing
the elements of a perfected contract. There is Exhibit P, the letter of Kenneth Richard Awad
addressed to Roland Aromin, authorizing the sale of the subject property at the price of
P1,000.00 per square meter giving 2% commission to the broker and instructing that the sale be
on cash basis. Concomitantly, on the basis of the instruction of Mr. Awad, (Exh. P), an authority
to sell, (Exh. B) was issued by BPI to Pedro Revilla, Jr., representing Assetrade Co., authorizing the
latter to sell the property at the initial quoted price of P1,000.00 per square meter which was
altered on an unaccepted offer by Technoland. After the letter authority was issued to Mr.
Revilla, a letter authority was signed by Mr. Aromin allowing the buyer to enter the premises of
the property to inspect the same (Exh. C). On July 9, 1988, Pedro Revilla, Jr., acting as agent of
BPI, wrote a letter to BPI informing it that he had procured a buyer in the name of Limketkai Sons
Milling, Inc. with offices at Limketkai Bldg., Greenhills, San Juan, Metro Manila, represented by its
Exec. Vice-President, Alfonso Lim (Exh. D). On July 11, 1988, the plaintiff, through Alfonso Lim,
wrote a letter to the bank, through Merlin Albano, confirming their transaction regarding the
purchase of the subject property (Exh. E). On July 18, 1988, the plaintiff tendered upon the
officials of the bank a check for P33,056,000.00 covered by Check No. CA510883, dated July 18,
1988. On July 1, 1988, Alfonso Zamora instructed Mr. Aromin in a letter to resubmit new offers
only if there is no transaction closed with Assetrade Co. (Exh. S). Combining all these notes and
memoranda, the Court is convinced of the existence of perfected contract of sale. Aptly, the
Supreme Court, citing American cases with approval, held:

No particular form of language or instrument is necessary to constitute a

memorandum or note in writing under the statute of frauds; any document or
writing, formal or informal, written either for the purpose of furnishing
evidence of the contract or for another purpose, which satisfies all the
requirements of the statute as to contents and signature, as discussed
respectively infra  secs. 178-200, and infra secs. 201-205, is a sufficient
memorandum or note. A memorandum may be written as well with lead pencil
as with pen and ink. It may also be filled in on a printed form. (37 C.J.S., 653-
654).

The note or memorandum required by the statute of frauds need not be

contained in a single document, nor, when contained in two or more papers,
need each paper be sufficient as to contents and signature to satisfy the
statute. Two or more writings properly connected may be considered together,
matters missing or uncertain in one may be supplied or rendered certain by
another, and their sufficiency will depend on whether, taken together, they
meet the requirements of the statute as to contents and the requirements of
the statutes as to signature, as considered respectively infra  secs. 179-200 and
secs. 201-215.

(pp. 460-463, Original RTC Record).

The credibility of witnesses is also decisive in this case. The trial court directly observed the demeanor and manner
of testifying of the witnesses while the Court of Appeals relied merely on the transcript of stenographic notes.
In this regard, the court of origin had this to say:

Apart from weighing the merits of the evidence of the parties, the Court had occasion to observe
the demeanor of the witnesses they presented. This is one important factor that inclined the
Court to believe in the version given by the plaintiff because its witnesses, including hostile
witness Roland V. Aromin, an assistant vice-president of the bank, were straightforward, candid
and unhesitating in giving their respective testimonies. Upon the other hand, the witnesses of BPI
were evasive, less than candid and hesitant in giving their answers to cross examination
questions. Moreover, the witnesses for BPI and NBS contradicted each other. Fernando Sison III
insisted that the authority to sell issued to Mr. Revilla was merely an evidence by which a broker
may convince a prospective buyer that he had authority to offer the property mentioned therein
for sale and did not bind the bank. On the contrary, Alfonso Zamora, a Senior Vice-President of
the bank, admitted that the authority to sell issued to Mr. Pedro Revilla, Jr. was valid, effective
and binding upon the bank being signed by two class "A" signatories and that the bank cannot
back out from its commitment in the authority to sell to Mr. Revilla.

While Alfredo Ramos of NBS insisted that he did not know personally and was not acquainted
with Edmundo Barcelon, the latter categorically admitted that Alfredo Ramos was his friend and
that they have even discussed in one of the luncheon meetings the matter of the sale of the Pasig
property to NBS. George Feliciano emphatically said that he was not a consultant of Mr. Ramos
nor was he connected with him in any manner, but his calling card states that he was a
consultant to the chairman of the Pacific Rim Export and Holdings Corp. whose chairman is
Alfredo Ramos. This deliberate act of Mr. Feliciano of concealing his being a consultant to Mr.
Alfredo Ramos evidently was done by him to avoid possible implication that he committed some
underhanded maneuvers in manipulating to have the subject property sold to NBS, instead of
being sold to the plaintiff.

(pp. 454-455, Original RTC Record.)

On the matter of credibility of witnesses where the findings or conclusions of the Court of Appeals and the trial
court are contrary to each other, the pronouncement of the Court in Serrano vs. Court of Appeals (196 SCRA 107
[1991]) bears stressing:

It is a settled principle of civil procedure that the conclusions of the trial court regarding the
credibility of witnesses are entitled to great respect from the appellate courts because the trial
court had an opportunity to observe the demeanor of witnesses while giving testimony which
may indicate their candor or lack thereof. While the Supreme Court ordinarily does not rule on
the issue of credibility of witnesses, that being a question of fact not properly raised in a petition
under Rule 45, the Court has undertaken to do so in exceptional situations where, for instance,
as here, the trial court and the Court of Appeals arrived at divergent conclusions on questions of
fact and the credibility of witnesses.

(at p. 110.)

On the fourth question of whether or not NBS is an innocent purchaser for value, the record shows that it is not. It
acted in bad faith.

Respondent NBS ignored the notice of lis pendens annotated on the title when it bought the lot. It was the
willingness and design of NBS to buy property already sold to another party which led BPI to dishonor the contract
with Limketkai.
Petitioner cites several badges of fraud indicating that BPI and NBS conspired to prevent petitioner from paying the
agreed price and getting possession of the property:

1. The sale was supposed to be done through an authorized broker, but top officials of BPI personally and directly
took over this particular sale when a close friend became interested.

2. BPI Senior Vice President Edmundo Barcelon admitted that NBS's President, Alfredo Ramos, was his friend; that
they had lunch meetings before this incident and discussed NBS's purchase of the lot. Barcelon's father was a
business associate of Ramos.

3. George Feliciano, in behalf of NBS, offered P5 million and later P7 million if petitioner would drop the case and
give up the lot. Feliciano went to petitioner's office and haggled with Alfonso Lim but failed to convince him inspite
of various and increasing offers.

4. In a place where big and permanent buildings abound, NBS had constructed only a warehouse marked by easy
portability. The warehouse is bolted to its foundations and can easily be dismantled.

It is the very nature of the deed of absolute sale between BPI and NBS which, however, clearly negates any
allegation of good faith on the part of the buyer. Instead of the vendee insisting that the vendor guarantee its title
to the land and recognize the right of the vendee to proceed against the vendor if the title to the land turns out to
be defective as when the land belongs to another person, the reverse is found in the deed of sale between BPI and
NBS. Any losses which NBS may incur in the event the title turns out to be vested in another person are to be
borne by NBS alone. BPI is expressly freed under the contract from any recourse of NBS against it should BPI's title
be found defective.

NBS, in its reply memorandum, does not refute or explain the above circumstance squarely. It simply cites the
badges of fraud mentioned in Oria vs. McMicking (21 Phil. 243 [1912]) and argues that the enumeration there is
exclusive. The decision in said case plainly states "the following are some of the circumstances attending sales
which have been denominated by courts (as) badges of fraud." There are innumerable situations where fraud is
manifested. One enumeration in a 1912 decision cannot possibly cover all indications of fraud from that time up to
the present and into the future.

The Court of Appeals did not discuss the issue of damages. Petitioner cites the fee for filing the amended complaint
to implead NBS, sheriffs fees, registration fees, plane fare and hotel expenses of Cebu-based counsel. Petitioner
also claimed, and the trial court awarded, damages for the profits and opportunity losses caused to petitioner's
business in the amount of P10,000,000.00.

We rule that the profits and the use of the land which were denied to petitioner because of the non-compliance or
interference with a solemn obligation by respondents is somehow made up by the appreciation in land values in
the meantime.

Prescinding from the above, we rule that there was a perfected contract between BPI and petitioner Limketkai;
that the BPI officials who transacted with petitioner had full authority to bind the bank; that the evidence
supporting the sale is competent and admissible; and that the sale of the lot to NBS during the trial of the case was
characterized by bad faith.

WHEREFORE, the questioned judgment of the Court of Appeals is hereby REVERSED and SET ASIDE. The June 10,
1991 judgment of Branch 151 of the Regional Trial Court of The National Capital Judicial Region stationed in Pasig,
Metro Manila is REINSTATED except for the award of Ten Million Pesos (P10,000,000.00) damages which is hereby
DELETED.
SO ORDERED.

Feliciano, Romero, Vitug and Panganiban, JJ., concur.

 
 
 
 
 
 
 
 
SECOND DIVISION
 
 
SPOUSES ALFREDO and G.R. No. 139233
BRIGIDA ROSARIO,
Petitioners,
Present:
 
- versus - PUNO, J., Chairman,
AUSTRIA-MARTINEZ,
CALLEJO, SR.,
TINGA, and
PCI LEASING AND FINANCE, INC., CHICO-NAZARIO,* JJ.
Respondent.
Promulgated:
 
November 11, 2005
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
 
DECISION
 
 
CALLEJO, SR., J.:
 
 
Before us is a petition for review on certiorari[1] of the Decision[2] dated June 30, 1999, of the Court of Appeals (CA)
in CA-G.R. SP No. 56081 affirming the decision of the Regional Trial Court (RTC) of Dagupan City, Branch 44, holding
the spouses Alfredo and Brigida Rosario, jointly and severally, liable to PCI Leasing and Finance, Inc. (PCI Leasing)
for the sum of P338,786.03, with interest, attorneys fees and costs.
 
The antecedent facts of the case are as follows:
 
On April 18, 1994, the spouses Rosario purchased an Isuzu Elf Pick-up Utility vehicle from CarMerchants,
Inc. The transaction was covered by a Purchase Agreement whereby the spouses undertook to make a
downpayment of P190,000.00 of the total purchase price of P380,000.00. The spouses then applied for a loan with
PCI Leasing to pay for the balance ofP190,000.00.
 
Upon the approval of their loan application, the spouses Rosario executed a Promissory Note [3] on May 6, 1994, in
favor of PCI Leasing covering the amount of the loan plus P84,008.00 as finance charges, in the total amount
of P274,008.00. The spouses undertook to pay the loan in monthly installments of P11,417.00, payable on the
29th day of each month starting on May 29, 1994 to April 29, 1996, at 22.10% annual interest. The spouses Rosario
also agreed that, in case of default, the payment of the outstanding sum with interest shall immediately become
due and payable. To secure the payment of the loan, they executed, on the same day, a Chattel Mortgage [4] in
favor of PCI Leasing over the Isuzu Elf 4BD1. The motor vehicle was delivered to the spouses and it was registered
in their names on May 16, 1994.[5]
 
Despite demands,[6] the spouses Rosario failed to pay the amortizations on their loan to PCI Leasing which, as of
November 29, 1995, amounted to P338,786.03, inclusive of P20,000.00 attorneys fees.[7]
 
On January 25, 1995, PCI Leasing filed a Complaint [8] against the spouses Rosario in the RTC of Dagupan City for
Sum of Money with Damages with a Prayer for a Writ of Replevin. The case was docketed as CV-95-00408-D.
 
After PCI Leasing posted the necessary bond for the manual delivery of the motor vehicle, [9] the RTC issued an
Order[10]for the issuance of a writ of replevin. On April 21, 1995, the Sheriff [11] seized the motor vehicle. After five
(5) days, without the court issuing an order discharging the writ, the Sheriff turned over the possession of the
vehicle to PCI Leasing.[12]
 
In their Answer to the complaint, the spouses Rosario alleged that the chattel mortgage they executed in favor of
PCI Leasing covering the motor vehicle was in effect a contract of sale of personal property, payable in installments
to be governed by Article 1484[13] of the New Civil Code of the Philippines. They further alleged that since PCI
Leasing opted to foreclose the chattel mortgage, it was estopped from collecting the balance of their account
under the promissory note and chattel mortgage. [14] By way of counterclaim, the spouses Rosario
claimed P100,000.00 as moral damages andP25,000.00 as attorneys fees, thus:
 
WHEREFORE, it is respectfully prayed that the Complaint be dismissed, the writ of
replevin quashed or dissolved, and the motor vehicle referred to therein returned and restored
to the possession of the defendants. It is further prayed that the plaintiff be made to pay the
defendants the sum of P100,000.00 as moral damages and P25,000.00 as reimbursable attorneys
fees. It is finally prayed that the defendants be granted such other measures of relief as this
Honorable Court may deem just and equitable in the premises. [15]
 
 
PCI Leasing presented its evidence. When it was time for the spouses Rosario to present their own
evidence, they failed to appear despite notice and were consequently declared in default. [16]
 
The trial court rendered judgment on September 12, 1996 in favor of PCI Leasing. The trial court declared
that the spouses Rosario were only able to pay the monthly installments on their loan from May to November
1994, and that, as of November 29, 1995, their account was overdue by P338,786.03, inclusive of attorneys fees
and liquidated damages. The trial court did not, however, resolve the issue of whether Article 1484 of the New
Civil Code was applicable. The decretal portion of the decision reads:
WHEREFORE, judgment is rendered in favor of the plaintiff and against the defendants,
sentencing the defendants to pay plaintiff the sum of P338,786.03 with interest as stipulated in
the contract plus the sum of 22.10% of the total amounts due for and as attorneys fees, plus
costs.
 
SO ORDERED.[17]
 
The spouses Rosario appealed the decision to the CA and ascribed the following errors to the trial court:
 I. THE LOWER COURT ERRED IN NOT HOLDING AND DECLARING THAT THE PLAINTIFF-APPELLEE
WAS IN FACT THE ASSIGNEE OR ONE SUBROGATED TO THE RIGHTS AND OBLIGATIONS OF THE
SELLER OF THE MOTOR VEHICLE, CARMERCHANTS, INC.;
 
II. THE LOWER COURT ERRED IN ADJUDGING THE DEFENDANTS-APPELLANTS LIABLE FOR THE
UNPAID BALANCE UNDER THE CHATTEL MORTGAGE AS WELL AS FOR DAMAGES, INTEREST AND
ATTORNEYS FEES.[18]
 
 
The spouses Rosario averred that, based on the evidence on record, CarMerchants, Inc. had assigned to
PCI Leasing its right to collect the balance of the purchase price of the motor vehicle; hence, it was subrogated to
the rights of CarMerchants, Inc., subject to the limitations and burdens provided for by law. The spouses Rosario
maintained that, by securing a writ of replevin from the RTC, PCI Leasing had opted to foreclose the chattel
mortgage under Article 1484 of the New Civil Code; thus, it was barred from suing for the unpaid balance of the
purchase price of the vehicle.
 
On June 30, 1999, the CA rendered judgment dismissing the appeal, declaring that the spouses Rosario
failed to prove their claim that PCI Leasing had agreed to be subrogated to the right of CarMerchants, Inc. to
collect the unpaid balance of the purchase price of the motor vehicle. The appellate court also ruled that even if
Article 1484 of the New Civil Code were to be applied, the chattel mortgage had not been foreclosed; hence, PCI
Leasing was not precluded from collecting the balance of the appellants account. It held that the remedy of the
unpaid seller under Article 1484 of the New Civil Code is alternative and not cumulative. [19]
 
The spouses Rosario, now the petitioners, filed the instant petition, raising the following as errors
committed by the CA:
 
(1) FOR NOT HOLDING THAT THE RESPONDENT WAS IN FACT AN ASSIGNEE AND
SUBROGATED TO THE RIGHTS AND THE LIMITATIONS THEREOF OF CARMERCHANTS, INC., AS
SELLER OF THE MOTOR VEHICLE BY INSTALLMENT;
 
(2) FOR NOT APPLYING THE PROVISIONS OF ART. 1484 OF THE CIVIL CODE AND THE
DECISIONS OF THE SUPREME COURT RELEVANT THERETO IN RESOLVING THE APPEAL BEFORE IT;
 
(3) FOR AFFIRMING THE DECISION OF THE TRIAL COURT SENTENCING THE PETITIONERS
TO PAY THE UNPAID INSTALLMENTS UNDER THE PROMISSORY NOTE AS WELL AS DAMAGES,
INTERESTS AND EXCESSIVE ATTORNEYS FEES DESPITE RESPONDENTS REPOSSESSION OF THE
MOTOR VEHICLE.
 
 
 
The petitioners arguments are basically a rehash of what they submitted in their appeal before the
appellate court. They aver that since respondent PCI Leasing was an assignee of CarMerchants, Inc., it was
proscribed from collecting from them the balance of the purchase price of the vehicle after having taken
possession of the chattel for purposes of foreclosure. They maintain that the respondent is not entitled to damages
and attorneys fees.
 
The petition is partially granted.
 
The Court notes that the principal issues raised by the petitioners are factual: (1) whether the respondent,
based on the evidence on record, is the assignee of the petitioners account with CarMerchants, Inc. (as the vendor
of the motor vehicle), and (2) whether the respondent is entitled to attorneys fees of 22.10% of the total amount
due from the petitioners. It is settled that in a petition for review on certiorari  under Rule 45 of the 1997 Rules of
Civil Procedure, only questions of law may be raised. [20] This rule, however, is not without exceptions. Factual issues
may be resolved by this Court in cases where (1) the conclusion is a finding grounded entirely on speculation,
surmise and conjecture; (2) the inference made is manifestly mistaken; (3) there is grave abuse of discretion; (4)
the judgment is based on a misapprehension of facts; (5) the findings of fact are conflicting; (6) the CA went
beyond the issues of the case and its findings are contrary to the admissions of both appellant and appellees; (7)
the findings of fact of the CA are contrary to those of the trial court; (8) said findings of fact are conclusions
without citation of specific evidence on which they are based; (9) the facts set forth in the petition as well as in the
petitioners main and reply briefs are not disputed by the respondents; and (10) the findings of fact of the CA are
premised on the supposed absence of evidence and contradicted by the evidence on record. [21] Upon careful
review of the records, the Court finds that the RTC and the CA misappreciated the evidence on record and as such,
the ruling in this case needs to be modified.
 
On the first issue, there is no factual basis for the petitioners claim that CarMerchants, Inc. had assigned
its rights to collect the balance of the purchase price to the respondent. The fact of the matter is that the
petitioners admitted in their petition at bench that they were declared in default and failed to prove such claim.
The evidence on record clearly shows that the petitioners secured a loan from the respondent to pay
the P190,000.00 balance to CarMerchants, Inc., and even executed a promissory note evidencing their loan in
favor of the respondent. The petitioners forthwith executed a chattel mortgage in favor of the respondent over the
vehicle as security for the payment of their loan and the interests thereon.
 
It bears stressing that, under Article 1625 of the New Civil Code, an assignment of credit, right or action
must appear in a public document to bind third persons. There is no evidence on record to prove that Car
Merchants, Inc. executed such a deed, assigning its right to collect the balance of the purchase price of the vehicle
from the petitioners; hence, Article 1484 of the New Civil Code does not apply in this case.
 
Even a cursory reading of the respondents complaint in the RTC will readily show that the respondent did
not allege that it was the assignee of CarMerchants, Inc. insofar as the right to collect the balance of the purchase
price of the vehicle from the petitioners was concerned. Neither did the respondent adduce any evidence that it
was such assignee. The respondent sued the petitioners for sum of money with prayer for a writ of replevin based
on the promissory note and the chattel mortgage executed by the petitioners in its favor.
 
 Even assuming that the respondent is the assignee of CarMerchants, Inc. and that Article 1484 of the New
Civil Code is applicable, it is not proscribed from suing the petitioners for their unpaid balance. The fact of the
matter is that the respondent did not foreclose the chattel mortgage, but opted to sue the petitioners for the
balance of their account under the promissory note, with a plea for a writ of replevin. By securing a writ of
replevin, the respondent did not thereby foreclose the chattel mortgage. As correctly ruled by the CA:
 
We rule: if there has been no foreclosure of the chattel mortgage or a foreclosure sale,
then the prohibition against further collection of the balance of the price does not apply. Where
the remedy is not foreclosure of the chattel mortgage, but specific performance of the obligation
to do payment, then the levy on the property is indeed not a foreclosure of the mortgage but is
instead a levy on execution (Tanjanlangit, et al. v. Southern Motors, Inc., L-10789, May 28, 1957;
Southern Motors v. Moscoso, 2 SCRA 168).
 
A creditor is not obliged to foreclose a chattel mortgage even if there is one; precisely
the law says that any of the remedies may be exercised by the seller. He may still sue for
fulfillment or for cancellation of the obligation, if he does not want to foreclose (Bachrach Motor
Co. v. Millan, 61 Phil. 409). As a matter of fact, he may avail himself of remedy no. 1 (specific
performance) and may still ask that a real estate mortgage be executed to secure the payment of
the obligation, in which case, and in the event of foreclosure, there can still be recovery of the
deficiency (Manila Trading v. Jalandoni [CA]O.G., August 31, 1941, p. 1698).
 
In the case before Us, that there was foreclosure of the chattel mortgage has not been
established; as a matter of fact, this is not obvious either in the evidence having been presented
to the court. What is only apparent was the execution of the promissory note and the chattel
mortgage.[22]
 
 
Anent the award of 22.10% of the total amount due as attorneys fees, this Court finds the same to be
without basis. The trial court awarded the 
 same without stating the reason therefor. [23] Moreover, as gleaned from the Statement of
[24]
Account  issued by the respondent, the P338,786.03 sought to be collected from the petitioners already includes
the legal expenses and attorneys fees of the respondent. Thus, the award of attorneys fees should be deleted.
 
IN LIGHT OF ALL THE FOREGOING, the petition is hereby PARTIALLY GRANTED. The Decision of the Court
of Appeals in CA-G.R. SP No. 56081 is AFFIRMED WITH MODIFICATION, in that the award of 22.10% of the total
amount due for and as attorneys fees is DELETED. No costs.
 
SO ORDERED.
ROMEO J. CALLEJO, SR.
Associate Justice
 
 
 
WE CONCUR:
 
 
 
REYNATO S. PUNO
Associate Justice
Chairman
 
 
 
MA. ALICIA AUSTRIA-MARTINEZ DANTE O. TINGA
Associate Justice Associate Justice
 
 
 
On leave
MINITA V. CHICO-NAZARIO
Associate Justice
 
 
 
 
 
ATTESTATION
 
 
I attest that the conclusions in the above decision were reached in consultation before the case was
assigned to the writer of the opinion of the Courts Division.
 
 
 
REYNATO S. PUNO
Associate Justice
Chairman, Second Division
 
 
 
 
 
 CERTIFICATION
 
 
Pursuant to Section 13, Article VIII of the Constitution and the Division Chairmans Attestation, it is hereby
certified that the conclusions in the above decision were reached in consultation before the case was assigned to
the writer of the opinion of the Courts Division.
 
 
 
HILARIO G. DAVIDE, JR.
Chief Justice
 
 

*
 On leave.
[1]
 Transferred to the Second Division on October 5, 2005.
[2]
 Penned by Associate Justice Bernardo Ll. Salas (retired), with Associate Justices Cancio C. Garcia (now an
Associate Justice of the Supreme Court) and Candido V. Rivera (retired) concurring; Rollo, pp. 26-34.
[3]
 Exhibit A.
[4]
 Exhibit B.
[5]
 Exhibit C.
[6]
 Exhibits D, E & F.
[7]
 Exhibit G.
[8]
 Records, pp. 1-4.
[9]
 Id. at 13.
[10]
 Id. at 21.
[11]
 Sheriff IV Marcelino G. Bonuan.
[12]
 Records, p. 23.
[13]
 Art. 1484 reads:
In a contract of sale of personal property, the price of which is payable in installments, the vendor may exercise
any of the following remedies:
(1) Exact fulfillment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendees failure to pay cover two or more installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the
vendees failure to pay cover two or more installments. In this case, he shall have no further
action against the purchaser to recover any unpaid balance of the price. Any agreement to the
contrary shall be void.

[14]
 Records, pp. 33-37.
[15]
 Id at 36-37.
[16]
 Id. at 107.
[17]
 Id. at 116.
[18]
 CA Rollo, p. 38.
[19]
 Rollo, p. 33.
[20]
 Section 1, Rule 45 of the 1997 Rules of Civil Procedure.
[21]
 Sarmiento v. Court of Appeals, G.R. No. 110871, 2 July 1998, 291 SCRA 656.
[22]
 Rollo, pp. 32-33.
[23]
 In Del Rosario vs. Court of Appeals, G.R. No. 118325, 29 January 1997, 267 SCRA 158, the Court held:
 [L]ike the adjudication of actual or compensatory damages, the award of attorney's fees must be deleted.
The matter was dealt with only in the dispositive portion of the Trial Court's decision. Since the judgment does not
say why attorney's fees are awarded, there is no basis for such award, which should consequently be removed. So
did this Court rule, for instance, in Scott Consultants and Resource Development Corp., Inc. vs. Court of Appeals, et
al.:
 
It is settled that the award of attorney's fees is the exception rather than the rule and
counsel's fees are not to be awarded every time a party wins. The power of the court to award
attorney's fees under Article 2208 of the Civil Code demands factual, legal, and equitable
justification; its basis cannot be left to speculation or conjecture. Where 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.
[24]
 Exhibit G.

Republic of the Philippines

Supreme Court
Manila
FIRST DIVISION
 
SPOUSES FRANCISCO and MERCED RABAT, G.R. No. 158755
Petitioners,  
  Present:
   
  LEONARDO-DE CASTRO,
  Acting Chairperson,
- versus - *PERALTA,
  BERSAMIN,
  DEL CASTILLO, and
  PERLAS-BERNABE,  JJ.
PHILIPPINE NATIONAL BANK, Promulgated:
Respondent.  
June 18, 2012
x-----------------------------------------------------------------------------------------x
 
DECISION
 
BERSAMIN, J.:
 
The inadequacy of the bid price in an extrajudicial foreclosure sale of mortgaged properties  will not per
se invalidate the sale. Additionally, the foreclosing mortgagee is not precluded from recovering the deficiency
should the proceeds of the sale be insufficient to cover the entire debt.
Antecedents
 
The parties are before the Court a second time to thresh out an issue relating to the foreclosure sale of
the petitioners mortgaged properties. The first time was in G.R. No. 134406 entitled Philippine National Bank v.
Spouses Francisco and Merced Rabat, decided on November 15, 2000.[1] In G.R. No. 134406, the Court observed
that
 
The RABATs did not appeal from the decision of the trial court. As a matter of fact, in their
Appellees Brief filed with the Court of Appeals they prayed that said decision be affirmed in toto.
 As against the RABATs the trial courts findings of fact and conclusion are already settled and final.
More specifically, they are deemed to have unqualifiedly agreed with the trial court that the
foreclosure proceedings were valid in all respects, except as to the bid price. [2]
 
 
Accordingly, we extract the antecedent facts from the narrative of the decision in G.R. No. 134406, as
follows:
 
On 25 August 1979, respondent spouses Francisco and Merced Rabat (hereafter RABATs)
applied for a loan with PNB. Subsequently, the RABATs were granted on 14 January 1980 a
medium-term loan of P4.0 Million to mature three years from the date of implementation.
 
On 28 January 1980, the RABATs signed a Credit Agreement and executed a Real Estate
Mortgage over twelve (12) parcels of land which stipulated that the loan would be subject to
interest at the rate of 17% per annum, plus the appropriate service charge and penalty charge of
3% per annum on any amount remaining unpaid or not renewed when due.
 
On 25 September 1980, the RABATs executed another document denominated as
"Amendment to the Credit Agreement" purposely to increase the interest rate from 17% to 21%
per annum, inclusive of service charge and a penalty charge of 3% per annum to be imposed on
any amount remaining unpaid or not renewed when due. They also executed another Real Estate
Mortgage over nine (9) parcels of land as additional security for their medium-term loan of Four
Million (P4.0 M). These parcels of land are agricultural, commercial and residential lots situated
in Mati, Davao Oriental.
 
The several availments of the loan accommodation on various dates by the RABATs
reached the aggregate amount of THREE MILLION FIVE HUNDRED SEVENTEEN THOUSAND THREE
HUNDRED EIGHTY (P3,517,380), as evidenced by the several promissory notes, all of which were
due on 14 March 1983.
 
The RABATs failed to pay their outstanding balance on due date.
 
In its letter of 24 July 1986, in response to the letter of the RABATs of 16 June 1986
requesting for more time within which to arrive at a viable proposal for the settlement of their
account, PNB informed the RABATs that their request has been denied and gave the RABATs until
30 August 1986 to settle their account. The PNB sent the letter to 197 Wilson Street, San Juan,
Metro Manila.
For failure of the RABATs to pay their obligation, the PNB filed a petition for the
extrajudicial foreclosure of the real estate mortgage executed by the RABATs. After due notice
and publication, the mortgaged parcels of land were sold at a public auction held on 20 February
1987 and 14 April 1987. The PNB was the lone and highest bidder with a bid of P3,874,800.00.
 
As the proceeds of the public auction were not enough to satisfy the entire obligation of
the RABATs, the PNB sent anew demand letters. The letter dated 15 November 1990 was sent to
the RABATs at 197 Wilson Street, San Juan, Metro Manila; while another dated 30 August 1991
was sent to the RABATs at 197 Wilson Street, Greenhills, San Juan, Metro Manila, and also in
Mati, Davao Oriental.
 
Upon failure of the RABATs to comply with the demand to settle their remaining
outstanding obligation which then stood at P14,745,398.25, including interest, penalties and
other charges, PNB eventually filed on 5 May 1992 a complaint for a sum of money before the
Regional Trial Court of Manila. The case was docketed as Civil Case No. 92-61122, which was
assigned to Branch 14 thereof.
  
The RABATs filed their answer with counterclaim on 28 July 1992 to which PNB filed its
Reply and Answer to Counterclaim. On 2 January 1993, the RABATs filed an amended answer.
The RABATs admitted their loan availments from PNB and their default in the payment
thereof. However, they assailed the validity of the auction sales for want of notice to them
before and after the foreclosure sales.
 
They further added that as residents of Mati, Davao Oriental since 1970 up to the present,
they never received any notice nor heard about the foreclosure proceeding in spite of the claim
of PNB that the foreclosure proceeding had been duly published in the San Pedro Times, which is
not a newspaper of general circulation.
 
The RABATs likewise averred that the bid price was grossly inadequate and
unconscionable.
 
Lastly, the RABATs attacked the validity of the accumulated interest and penalty charges
because since their properties were sold in 1987, and yet PNB waited until 1992 before filing the
case. Consequently, the RABATs contended that they should not be made to suffer for the
interest and penalty charges from May 1987 up to the present. Otherwise, PNB would be allowed
to profit from its questionable scheme.
 
The PNB filed on 5 February 1993 its Reply to the Amended Answer and Answer to
Counterclaim.[3]
 
 

On June 14, 1994, the Regional Trial Court, Branch 14, in Manila (RTC) rendered its decision in  Civil Case
No. 92-61122,[4] disposing thus:
 
 
WHEREFORE, and in view of the foregoing considerations, judgment is hereby rendered
dismissing the complaint.
 
On the counterclaim, the two (2) auction sales of the mortgaged properties are hereby set
aside and ordering the plaintiff to reconvey to the defendants the remaining properties after the
sale [of] sufficient properties for the satisfaction of the obligation of the defendants.
 
The parties will bear their respective cost.
 
So ordered.
 
 
 
Only PNB appealed to the CA (CA-G.R. CV No. 49800), assigning the following two errors to the RTC, [5] to
wit:
 
I
WHETHER OR NOT THE TRIAL COURT ERRED IN NULLIFYING THE SHERIFF'S AUCTION SALE ON
THE GROUND THAT THE PNBS WINNING BID IS VERY LOW.
 
II
WHETHER OR NOT THE TRIAL COURT ERRED IN RULING THAT THE DEFENDANTS-APPELLEES ARE
NOT LIABLE TO PAY INTEREST AND PENALTY CHARGES AFTER THE AUCTION SALES UP TO THE
FILING OF THIS CASE.
  
On their part, the Spouses Rabat simply urged in their appellees brief that the decision of the RTC be
entirely affirmed.[6]
 
On June 29, 1998, the CA upheld the RTCs decision to nullify the foreclosure sales but rested its ruling
upon a different ground,[7] in that the Spouses Rabat could not have known of the foreclosure sales because they
had not actually received personal notices about the foreclosure proceedings. The CA concluded:
 
An examination of the exhibits show that the defendant-appellees given address is Mati,
Davao Oriental and not 197 Wilson Street, Greenhills, San Juan, Metro Manila as alleged by the
plaintiff-appellant (Exhibit C to J, pp. 208, 217, 220, 229, 236-239, Records). Records further show
that all subsequent communications by plaintiff-appellant was sent to defendant-appellees
address at Wilson Street, Greenhills, San Juan. This was the very reason why defendant-appellees
were not aware of the foreclosure proceedings.
 
As correctly found out by the trial court, there is a need for the setting aside of the two (2)
auction sales hence, there is yet no deficiency judgment to speak of.
 
WHEREFORE, the decision of the trial court dated 14 June 1994, is hereby affirmed in toto.
 
SO ORDERED.
 
PNB appealed in due course (G.R. No. 134406),[8] positing:
 
WHETHER OR NOT THE COURT OF APPEALS MAY REVIEW AND PASS UPON THE TRIAL COURTS
FINDING AND CONCLUSION ON AN ISSUE WHICH WAS NEVER RAISED ON APPEAL, AND,
THEREFORE, HAD ATTAINED FINALITY.
 
1. THE COURT OF APPEALS HAS SO FAR DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF
JUDICIAL PROCEEDINGS WHEN IT DECIDED AND RESOLVED A QUESTION OR ISSUE NOT
RAISED IN PETITIONER PNBS APPEAL;
 
2. THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT REVERSED THE
FINDING AND CONCLUSION OF THE TRIAL COURT ON AN ISSUE WHICH HAD ALREADY
ATTAINED FINALITY.
 
PNB argued that it had not raised the issue of lack of notice about the foreclosure sales because the fact
that the Spouses Rabat had not appealed the RTCs ruling as regards the lack of notice but had in fact prayed for
the affirmance of the RTCs judgment had rendered final the RTCs rejection of their allegation of lack of personal
notice; and that, consequently, the CA had committed grave abuse of discretion in still resolving the issue of lack of
notice despite its not having been raised during the appeal. [9]
 
On November 15, 2000, the Court promulgated its decision in G.R. No. 134406, decreeing:
 
 
 
WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals of 29 July
1998 in CA-G.R. CV No. 49800 is hereby SET ASIDE. The Court of Appeals is directed to DECIDE,
with reasonable dispatch, CA-G.R. CV No. 49800 on the basis of the errors raised by petitioner
Philippine National Bank in its Appellants Brief.
 
No pronouncement as to costs.
 
 SO ORDERED.[10]
 
To conform to the decision in G.R. No. 134406, the CA amended its decision on January 24, 2003 by
resolving the errors specifically assigned by PNB in its appellants brief.[11] The CA nonetheless affirmed the RTCs
decision, declaring that the bid price had been very low and observing that the mortgaged properties might have
been sold for a higher value had PNB first conducted a reappraisal of the properties.
 
Upon PNBs motion for reconsideration, however, the CA promulgated its questioned second amended
decision on March 26, 2003,[12] holding and ruling as follows:
 
After a thorough and conscientious review of the records and relevant laws and
jurisprudence, We find the motion for reconsideration to be meritorious.
 
While indeed no evidence was presented by appellant as to whether a reappraisal of the
mortgaged properties was conducted by it before submitting the bid price of ₱3,874,800.00 at
the auction sale, said amount approximates the loan value under its original appraisal in 1980,
which was ₱4 million.
 
There is no dispute that mere inadequacy of price per se will not set aside a judicial sale of
real property. Nevertheless, where the inadequacy of the price is purely shocking to the
conscience such that the mind revolts at it and such that a reasonable man would neither directly
nor indirectly be likely to consent to it, the sale shall be declared null and void. Said rule,
however, does not strictly apply in the case of extrajudicial foreclosure sales so that when a
supposed unconscionably low price paid by the bank-mortgagee for the mortgaged properties at
the public auction sale is assailed, the sale is not thereby readily set aside on account of such low
purchase price. It is well-settled that 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 a public auction, upon the
theory that the lesser the price the easier it is for the owner to effect the redemption. In fact, the
property may be sold for less than its fair market value.
 
Here, it may be that after the lapse of seven (7) years, the mortgaged properties may have
indeed appreciated in value but under the general rule cited above which had been consistently
applied to extrajudicial foreclosure sales. We are not inclined to invalidate the auction sale of
appellees mortgaged properties solely on the alleged gross inadequacy of purchase price
of₱3,874,800.00 which is actually almost the equivalent of the loan value of appellees twenty-
one (21) parcels of land under the Real Estate Mortgage executed in favor of appellant PNB in
1980. It has been held that no such disadvantage is suffered by the mortgagor as he stands to
gain with a reduced price because he possesses the right of redemption. Thus, the re-appraisal of
the mortgaged properties resulting in the appellant PNBs bid price of approximately the original
loan value of their mortgaged properties is beneficial rather than harmful considering the right of
redemption granted to appellees under the law. The claim of financial hardship or losses in their
business is not an excuse for appellees-mortgagors to evade their clear obligation to the bank-
mortgagee.
 
Further, the fact that the mortgaged property is sold at an amount less than its actual
market value should not militate against the right of appellant PNB to the recovery of the
deficiency in the loan obligation of appellees. Our Supreme Court had ruled in several cases that
in extrajudicial foreclosure of mortgage, where the proceeds of the sale are insufficient to pay
the debt, the mortgagee has the right to recover the deficiency from the debtor. A claim of
deficiency arising from the extrajudicial foreclosure sale is allowed. As to appellees claim of
allegedly excessive penalty interest charges, the same is without merit. We note that the
promissory notes expressly provide for a penalty charge of 3% per annum to be imposed on any
unpaid amount on due date.
  
WHEREFORE, premises considered, the present motion for reconsideration is hereby
GRANTED. Consequently, Our Amended Decision of January 24, 2003 is hereby SET ASIDE and a
new one is hereby entered GRANTING the appeal of plaintiff PNB. The decision appealed from in
Civil Case No. 92-61122 is hereby REVERSED and SET ASIDE. Judgment is hereby rendered
ordering the appellees to pay, jointly and severally, to appellant PNB: (1) the amount
of ₱14,745,398.25 plus accrued interest, service charge and penalty charge of 3% per
annum from February 29, 1992 until the same shall have been fully paid; (2) Ten Percent (10%) of
the total amount due as attorneys fees; and (3) the costs of suit.
 
No pronouncement as to costs.
 
SO ORDERED.[13]
 
The Spouses Rabat thereafter moved for the reconsideration of the second amended decision, but the CA
denied their motion.[14]
 

Hence, this appeal by the Spouses Rabat.

 
Issues
 
The Spouses Rabat frame the following issues for this appeal, thuswise:
 
WHETHER OR NOT THE COURT OF APPEALS ERRED IN UPHOLDING THE VALIDITY OF THE SUBJECT
AUCTION SALES AND ADJUDGING PAYMENT OF DEFICIENCY SUM, INTERESTS, PENALTY AND
SERVICE CHARGES AND ATTORNEYS FEES, IN COMPLETE AND ABSOLUTE DISREGARD OF ITS
EARLIER PRONOUNCEMENTS, THE ARGUMENTS OF HEREIN PETITIONERS AND EVIDENCE BORNE
IN THE RECORDS OF THE INSTANT CASE.
 
WHETHER OR NOT THE COURT OF APPEALS ERRED IN DEPARTING FROM ITS FINDING OF FACTS
AND CONCLUSIONS OF LAW AS STATED IN THE EARLIER RENDERED FIRST AMENDED DECISION
DATED 24 JANUARY 2003.[15]
 
The Spouses Rabat insist that the CAs reversal of the amended decision was unjustified. They pray that
the amended decision of the CA (which affirmed the RTCs judgment) be reinstated. They contend that PNB was not
entitled to recover any deficiency due to the invalidity of the forced sales. [16]
 
In its comment,[17] PNB counters that the petition for review does not raise a valid question of law; and
that the CAs second amended decision was regularly promulgated because the CA thereby acted well within its
right to correct itself considering that the amended decision did not yet attain finality under the pertinent rules
and jurisprudence.
 
Accordingly, the Court must pass upon and resolve three distinct issues. The first is whether the
inadequacy of the bid price of PNB invalidated the forced sale of the properties. The second is whether PNB was
entitled to recover any deficiency from the Spouses Rabat. The third is whether the CA validly rendered its second
amended decision.
 
Ruling
 
The appeal has no merit.
 
Anent the first issue, we rule against the Spouses Rabat. We have consistently held that  the inadequacy of
the bid price at a forced sale, unlike that in an ordinary sale, is immaterial and does not nullify the sale; in fact, in a
forced sale, a low price is considered more beneficial to the mortgage debtor because it makes redemption of the
property easier.[18]
 
In Bank of the Philippine Islands, etc. v. Reyes, [19] the Court discoursed on the effect of the inadequacy of
the price in a forced sale, stating:
 
Throughout a long line of jurisprudence, we have declared that unlike in an ordinary sale,
inadequacy of the price at a forced sale is immaterial and does not nullify a sale since, in a forced
sale, a low price is more beneficial to the mortgage debtor for it makes redemption of the
property easier.
 
In the early case of The National Loan and Investment Board v. Meneses, we also had the
occasion to state that:
 
As to the inadequacy of the price of the sale, this court has repeatedly held that
the fact that a property is sold at public auction for a price lower than its alleged
value, is not of itself sufficient to annul said sale, where there has been strict
compliance with all the requisites marked out by law to obtain the highest possible
price, and where there is no showing that a better price is obtainable. (Government
of the Philippines vs. De Asis, G. R. No. 45483, April 12, 1939; Guerrero vs. Guerrero,
57 Phil., 442; La Urbana vs. Belando, 54 Phil., 930; Bank of the Philippine Islands v .
Green, 52 Phil., 491.) (Emphases supplied.)
 
In Hulst v. PR Builders, Inc., we further elaborated on this principle:
 
[G]ross inadequacy of price does not nullify an execution sale. In an ordinary sale,
for reason of equity, a transaction may be invalidated on the ground of inadequacy of
price, or when such inadequacy shocks ones conscience as to justify the courts to
interfere; such does not follow 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 redemption. When there is a right to redeem,
inadequacy of price should not be material because the judgment debtor may re-
acquire the property or else sell his right to redeem and thus recover any loss he
claims to have suffered by reason of the price obtained at the execution sale. Thus,
respondent stood to gain rather than be harmed by the low sale value of the
auctioned properties because it possesses the right of redemption. x x x (Emphasis
supplied.)
 
It bears also to stress that the mode of forced sale utilized by petitioner was an
extrajudicial foreclosure of real estate mortgage which is governed by Act No. 3135, as
amended. An examination of the said law reveals nothing to the effect that there should be a
minimum bid price or that the winning bid should be equal to the appraised value of the
foreclosed property or to the amount owed by the mortgage debtor. What is clearly provided,
however, is that a mortgage debtor is given the opportunity to redeem the foreclosed property
within the term of one year from and after the date of sale. In the case at bar, other than the
mere inadequacy of the bid price at the foreclosure sale, respondent did not allege any
irregularity in the foreclosure proceedings nor did she prove that a better price could be had for
her property under the circumstances.
 
At any rate, we consider it notable enough that PNBs bid price of ₱3,874,800.00 might not even be said to
be outrageously low as to be shocking to the conscience. As the CA cogently noted in the second amended
decision,[20] thatbid price was almost equal to both the ₱4,000,000.00 applied for by the Spouses Rabat as loan,
and to the total sum of₱3,517,380.00 of their actual availment from PNB.
  
Resolving the second issue, we rule that PNB had the legal right to recover the deficiency amount.
In Philippine National Bank v. Court of Appeals,[21] we held that:
 
xxx it is settled that if the proceeds of the sale are insufficient to cover the debt in an
extrajudicial foreclosure of the mortgage, the mortgagee is entitled to claim the deficiency from
the debtor. For when the legislature intends to deny the right of a creditor to sue for any
deficiency resulting from foreclosure of security given to guarantee an obligation it expressly
provides as in the case of pledges [Civil Code, Art. 2115] and in chattel mortgages of a thing sold
on installment basis [Civil Code, Art. 1484(3)]. Act No. 3135, which governs the extrajudicial
foreclosure of mortgages, while silent as to the mortgagees right to recover, does not, on the
other hand, prohibit recovery of deficiency. Accordingly, it has been held that a deficiency claim
arising from the extrajudicial foreclosure is allowed. [22]
 
Indeed, as we indicated in Prudential Bank v. Martinez,[23] the fact that the mortgaged property was sold at an
amount less than its actual market value should not militate against the right to such recovery. [24]
 
There should be no question that PNB was legally entitled to recover the penalty charge of 3%  per
annum and attorneys fees equivalent to 10% of the total amount due. The documents relating to the loan and the
real estate mortgage showed that the Spouses Rabat had expressly conformed to such additional liabilities; hence,
they could not now insist otherwise. To be sure, the law authorizes the contracting parties to make any stipulations
in their covenants provided the stipulations are not contrary to law, morals, good customs, public order or public
policy.[25] Equally axiomatic are that a contract is the law between the contracting parties, and that they have the
autonomy to include therein such stipulations, clauses, terms and conditions as they may want to include.
[26]
 Inasmuch as the Spouses Rabat did not challenge the legitimacy and efficacy of the additional liabilities being
charged by PNB, they could not now bar PNB from recovering the deficiency representing the additional pecuniary
liabilities that the proceeds of the forced sales did not cover.
 
Lastly, we uphold the CAs promulgation of the second amended decision. Verily, all courts of law have the
unquestioned power to alter, modify, or set aside their decisions before they become final and unalterable. [27] A
judgment that has attained finality becomes immutable and unalterable, and may thereafter no longer be
modified in any respect even if the modification is meant to correct erroneous conclusions of fact or law and
whether it will be made by the court that rendered it or by the highest court of the land. [28] The reason for the rule
of immutability is that if, on the application of one party, the court could change its judgment to the prejudice of
the other, the court could thereafter, on application of the latter, again change the judgment and continue this
practice indefinitely. [29] The equity of a particular case must yield to the overmastering need of certainty and
unalterability of judicial pronouncements. [30] The doctrine of immutability and inalterability of a final judgment has
a two-fold purpose, namely: (a) to avoid delay in the administration of justice and, thus, procedurally, to make
orderly the discharge of judicial business; and (b) to put an end to judicial controversies, at the risk of occasional
errors, which is precisely why courts exist. Indeed, controversies cannot drag on indefinitely; the rights and
obligations of every litigant must not hang in suspense for an indefinite period of time. [31] As such, the doctrine of
immutability is not a mere technicality to be easily brushed aside, but a matter of public policy as well as a time-
honored principle of procedural law.
 
It is no different herein. The amended decision that favored the Spouses Rabat would have attained
finality only after the lapse of 15 days from notice thereof to the parties without a motion for reconsideration
being timely filed or an appeal being seasonably taken. [32] Had that happened, the amended decision might have
become final and immutable. However, considering that PNB timely filed its motion for reconsideration  vis--vis the
amended decision, the CAs reversal of the amended decision and its promulgation of  the second amended
decision were valid and proper.
 
WHEREFORE, we AFFIRM the SECOND AMENDED DECISION promulgated on March 26, 2003 in CA-G.R.
CV No. 49800 entitled Philippine National Bank v. Spouses Francisco and Merced Rabat.
  
The petitioners shall pay the costs of suit.
 
SO ORDERED.
 
 
LUCAS P. BERSAMIN
Associate Justice
 
 
WE CONCUR:
 
 
 
TERESITA J. LEONARDO-DE CASTRO
Associate Justice
Acting Chairperson, First Division
 
 
 
 
DIOSDADO M. PERALTA MARIANO C. DEL CASTILLO
Associate Justice Associate Justice
 
 
 
 
ESTELA PERLAS-BERNABE
Associate Justice
 
 
ATTESTATION
 
I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned
to the writer of the opinion of the Courts Division.
 
 
 
TERESITA J. LEONARDO-DE CASTRO
Associate Justice
Acting Chairperson, First Division
 
CERTIFICATION
 
 
Pursuant to Section 13, Article VII of the Constitution and the Division Acting Chairpersons Attestation, I certify that
the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer
of the opinion of the Courts Division.
 
 
 
 
ANTONIO T. CARPIO
 Senior Associate Justice
(Per Section 12, R.A. 296,
The Judiciary Act of 1948, as amended)
 
 
 
 
 
 
 

* Vice Associate Justice M. S. Villarama, Jr., who penned the assailed decision of the Court of Appeals, per the raffle
of May 7, 2012.
[1] 
344 SCRA 706.
[2] 
Id., at p. 716.
[3] 
Id.,  pp. 707-710.
[4] 
Records, pp. 420-427; penned by Judge Inocencio D. Maliaman.
[5] 
Supra, note 1, at p. 712.
[6] 
Id.
[7]
 CA rollo, pp. 115-120; penned by Associate Justice Candido V. Rivera (retired/deceased), with Associate Justice
Bernardo Ll. Salas (retired) and Associate Justice Martin S. Villarama, Jr. (now a Member of this Court) concurring.
[8]
 Supra, note 1, pp. 712-714.
[9]
 CA rollo, p. 103.
[10]
 Id., p. 156.
[11]
 Id., pp. 121-135.
[12]
 Rollo, pp. 44-51; penned by Associate Justice Villarama, Jr., with Associate Justice Mercedes Gozo-Dadole
(retired) and Associate Justice Edgardo F. Sundiam (deceased) concurring.
[13]
 Id., pp. 49-51.
[14]
 Id., pp. 39-42.
[15] 
Id., p. 21.
[16] 
Id., pp. 24-25.
[17] 
Id., pp. 63-68.
[18]
 BPI Family Savings Bank, Inc. v. Avenido, G.R. No. 175816, December 7, 2011;  Suico Rattan & Buri Interiors Inc.
v. Court of Appeals, G.R. No. 138145, June 15, 2006, 490 SCRA 560; Sulit v Court of Appeals, G.R. No. 119247,
February 17, 1997, 268 SCRA 441, 453.
[19]
 G.R. No. 182769, February 1, 2012.
[20]
 Supra, note 12.
[21]
 G.R. No. 121739, June 14, 1999, 308 SCRA 229.
[22]
 Id., p. 235.
[23]
 G.R. No. 51768, September 14, 1990, 189 SCRA 612.
[24]
 Id., pp. 617.
[25]
 Article 1306, Civil Code.
[26]
 Ridjo Tape and Chemical Corp. v. Court of Appeals, G.R. No. 126074, February 24, 1998, 286 SCRA 544, 551.
[27]
 Marcopper Mining Corporation v. Briones, No. L-77210, September 19, 1988, 165 SCRA 464, 470.
[28]
 Siy v. National Labor Relations Commission, G..R. No. 158971, August 25, 2005, 468 SCRA 154, 161-162.
[29]
 Kline v. Murray, 257 P. 465, 79 Mont. 530.
[30]
 Flores v. Court of Appeals, 328 Phil. 995 (1996).
[31]
 Land Bank of the Philippines v. Arceo,  G.R. No. 158270, July 21, 2008, 559 SCRA 85.
[32] 
Heirs of Patriaca v. Court of Appeals, No. L-59701, August 31, 1983, 124 SCRA 410, 413.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 45158 June 2, 1994

ZENAIDA M. PALMA, petitioner, 
vs.
HONORABLE COURT OF APPEALS AND PRODUCTS, INC., respondents.

Cesar E. Palma for petitioner.

Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles Law Office for respondents.

QUIASON, J.:

This is a petition for review on certiorari  under Rule 45 of the Revised Rules of Court of the decision of the Court of
Appeals, affirming in toto the decision of the Court of First Instance of Manila in Civil Case No. 69208.

We deny the petition.

Reynaldo S. Palma and his wife, Zenaida, purchased from private respondent two Hino Diesel Trucks at a price of
P52,056.00 each or a total purchase price of P104,112.00, payable in installments. The Palmas executed two
promissory notes in favor of private respondent in the total amount of P104,112.00. It was stipulated therein: (1)
that each of the two promissory notes was payable in 24 equal monthly installments with interest of 12% per
annum on all unpaid installments; (2) that the debtors should pay attorney’s fees and other expenses of collection
in the event that said collection was made through a lawyer; and (3) that the acceleration clause would become
operative in case of default in the payment of any installment and make the subsequent installments due and
demandable. A chattel mortgage over the two trucks was constituted in favor of private respondent.

The Palmas only made an initial payment and failed to pay the succeeding installments despite demands made on
them. Hence, on April 14, 1967, private respondent filed a complaint with prayer for the issuance of a writ of
preliminary attachment.

On April 19, the trial court issued an order of attachment against the property, both real and personal, of the
Palmas.

Subsequently, on June 5, copies of the summons, order of attachment and attachment bond were served upon the
Palmas at their residence in Barrio Putol, Kawit, Cavite through Bella Samson, who refused to acknowledge the
receipt of the documents.
On June 8, the special sheriff was able to attach one of the trucks purchased from private respondent (Rollo, p. 65;
Record on Appeal, p. 11). On the other hand, the dismantled parts of the other truck were recovered in San Pablo
City by private respondent (Rollo, p. 65; Record on Appeal, p. 27). The special sheriff was also able to attach the
property of the Palmas located in Barrio Putol, Kawit, Cavite and covered by TCT No. T-14464. The attachment was
duly annotated on the said title on June 13 (Rollo, p. 65; Record on Appeal, p. 66).

For failure to file their answer and upon motion of private respondent, the Palmas were declared in default on
August 26. Private respondent presented its evidence ex parte.

On September 1, the Palmas sold the attached property located at Barrio Putol, Kawit, Cavite to Fernando and
Constancia Cresini (Rollo, p. 65; Record on Appeal, p. 106).

In due time, the trial court rendered its decision against the Palmas, the dispositive portion of which reads as
follows:

WHEREFORE, the Court hereby renders judgment ordering the defendant-spouses Zenaida M.
Palma and Reynaldo S. Palma to pay, jointly and severally, to the plaintiff-corporation the sum of
P99,931.71 with interest thereon at the rate of 12% per annum starting February 10, 1967 until
fully paid; the sum of P2,040.58 representing the premium paid for the attachment bond plus the
sum of P1,500.00 as attorney’s fees and the costs" (Rollo, p. 65; Record on Appeal, p. 17).

A writ of execution dated December 14, was issued and duly served on the Palmas but the same was returned
unsatisfied (Rollo, p. 65; Record on Appeal, p. 56).

On December 29, the Palmas filed a Petition for Relief from Judgment with the trial court, alleging that they failed
to file an answer because a copy of the complaint was served on a third party, who failed to give the same to them.
They prayed that a preliminary injunction be issued, restraining the enforcement of the decision and that after due
hearing the decision be set aside and a new trial be held (Rollo, p. 65; Record on Appeal, p. 21).

In its Order dated January 9, 1968, the trial court denied the Petition for Relief from Judgment for lack of merit
(Rollo, p. 65; Record on Appeal, p. 35). The motion for reconsideration of said order was likewise denied by the
trial court in its order dated February 21, 1968 (Rollo, p. 65; Record on Appeal, p. 50). Thereafter, an alias  writ of
execution was issued.

On August 27, the property located at Barrio Putol, Kawit, Cavite was sold at a public auction for P15,000.00 in
favor of private respondent as the highest bidder (Rollo, p. 65; Record on Appeal, p. 61). After the lapse of the one-
year redemption period with the property still unredeemed, the special sheriff executed the Sheriff’s Deed of
Absolute Sale and had the same registered with the Register of Deeds of Cavite on December 3 (Rollo, p. 65;
Record on Appeal, p. 74).

On May 7, 1970, an Ex-Parte Motion for Confirmation of Sheriff’s Sale was filed by private respondent but this was
denied by the trial court for failure to give notice to the interested parties (Rollo, p. 65; Record on Appeal, p. 80).
Another Motion for Confirmation of Sheriff’s Sale, this time with notice to all interested persons, was filed by
private respondent (Rollo, p. 65; Record on Appeal, pp. 81-83). The Palmas opposed said motion (Rollo, p. 65;
Record on Appeal, pp. 84-85).

On August 12, the trial court issued an Order confirming the Sheriff’s Deed of Sale (Rollo, p. 65; Record on Appeal,
p. 99). The Palmas filed a motion for reconsideration, contending that the attached property had already been
registered in the name of the Cresinis and therefore, the attachment and sale of the same deprived the new
owners of their right to due process of law (Rollo, p. 65; Record on Appeal, p. 111). The motion was denied (Rollo,
p. 65; Record on Appeal, p. 115).
Consequently, the Palmas appealed to the Court of Appeals.

On June 18, 1976, the Court of Appeals rendered its decision, the dispositive portion of which reads:

WHEREFORE, in view of the foregoing and finding no reversible error in the decision appealed
from, the same is hereby affirmed in toto. With costs against the appellants (Rollo, p. 38).

Reynaldo S. Palma died during the pendency of this case in the Court of Appeals; hence this petition was filed
solely by Zenaida M. Palma (Rollo, p. 16).

II

Petitioner contends that there was no proper service of summons upon her person, resulting to a denial of her
right to due process of law.

We do not agree. The trial court in its Order dated January 9, 1968 noted:

It is claimed by petitioner Zenaida M. Palma in her "affidavit of merit" dated December 28, 1967,
attached to the petition for relief dated September 28, 1967, that the complaint in this case was
received by "her niece, who was of minor age" who left those papers in the drawer of their small
table and that when she saw it, the period to answer the complaint had long expired. In her
testimony before this Court, she declared that the summons and complaint were received by her
son, Manolito Palma who left the papers in a drawer and she found it only on June 1967, and
that she went immediately to the Office of the Plaintiff where she allegedly told Mrs. Ferro that
she will return the two trucks. This material inconsistency of the statement of the petitioner
renders improbable her claim (Rollo, p. 65; Order, p. 32).

In addition thereto, we find that petitioner had voluntarily submitted to the jurisdiction of the trial court when she
filed her petition for relief from judgment (J.M. Tuason & Co., Inc. v. Estabillo, 62 SCRA 1 [1975]) praying that a
preliminary injunction be issued restraining plaintiffs from enforcing the judgment upon the filing of a bond and
that after due hearing a new trial be held on the merits of the case (Rollo, p. 65; Record on Appeal, pp. 20-21).

When the appearance is by motion for the purpose of objecting to the jurisdiction of the court over the person, it
must be for the sole and separate purpose of objecting to said jurisdiction. If the appearance is for any other
purpose, the defendant is deemed to have submitted himself to the jurisdiction of the court. Such an appearance
gives the court jurisdiction over the person (Flores v. Zurbito, 37 Phil. 746 [1918]). We have likewise ruled that
even though the defendant objects to the jurisdiction of the court, if at the same time he alleges any non-
jurisdictional ground for dismissing the action, the court acquires jurisdiction over him (Far East International
Import & Export Corporation v. Nankai Kogyo, Co., Ltd., 6 SCRA 725 [1962]).

Petitioner further contends that the trial court erred in rendering judgment for the entire amount of the purchase
price of the two trucks attached by private respondent, without deducting the value thereof.

Article 1484 of the Civil Code provides:

In a contract of sale of personal property the price of which is payable in installments, the vendor
may exercise any of the following remedies:

(1) Exact fulfillment of the obligation, should the vendee fail to pay;

(2) Cancel the sale, should the vendee’s failure to pay cover two or more installments;
 (3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the
vendee’s failure to pay cover two or more installments. In this case, he shall have no further
action against the purchaser to recover any unpaid balance of the price. Any agreement to the
contrary shall be void.

In the case at bench, private respondent opted for the first remedy provided by the law and brought an action for
collection of the unpaid balance, with prayer for an issuance of a writ of preliminary attachment. It did not elect to
cancel the sale or resort to a foreclosure of the chattel mortgage. A judgment in an action for specific performance,
as in this case, may be executed on all personal and real properties of the vendee which are not exempt from
execution and which are sufficient to satisfy such judgment.

The mere fact that private respondent secured possession of the trucks through an attachment did not necessarily
mean that it would resort to a foreclosure of the mortgage (Universal Motors Corporation v. Dy Hian Tat, 28 SCRA
161 [1969]). Since there was no showing of the valuation of the trucks when attached or that they were eventually
sold at a public auction, therefore, no value can be deducted from the purchase price.

Petitioner further questions the validity and legality of the issuance of the writ of execution, the subsequent sale at
a public auction and the confirmation of sale of her real property.

It will be noted that petitioner failed to file within the reglementary period an appeal from the Decision dated
September 29, 1967 of the trial court. When petitioner filed her petition for relief from judgment, the decision of
the trial court had long become final and executory.

Section 1, Rule 39 of the Revised Rules of Court provides:

Execution upon final judgment or orders. — Execution shall issue upon a judgment or order that
finally disposes of the action or proceeding. Such execution shall issue as a matter of right upon
the expiration of the period to appeal therefrom if no appeal has been perfected.

It is basic that once a judgment becomes final, the prevailing party is entitled, as a matter of right, to a writ of
execution, and the issuance thereof is the Court’s ministerial duty (Adlawan v. Tomol, 184 SCRA 31 [1990]).

The failure of petitioner to redeem the property after the expiration of the redemption period vests title over the
property to private respondent. Unlike in a foreclosure sale, there was no need to confirm the sale on execution
(Revised Rules of Court, Rule 39, Section 24).

Records show that the notice of attachment over petitioner’s real property was registered as early as June 13,
1967; while the sale of the same property to the Cresinis was on September 1, 1967. An attachment is a
proceeding in rem against a particular property and the attaching creditor acquires a specific lien upon the
attached property, which may ripen into a judgment against the res when the order of sale is made (Civil Code of
the Philippines, Art. 2242 [7]; Revised Rules of Court, Rules 39 and 57; Santos v. Aquino, Jr., 205 SCRA 127 [1992];
Vda. de Carvahal v. Coronado, 18 SCRA 635 [1966]).

Lastly, petitioner contends that her motions dated July 8, 1976 and July 20, 1976 were not acted upon by the
appellate court in violation of her right to due process of law. Such contention is unfounded. The aforementioned
motions were in fact acted upon by the appellate court in its Resolution dated August 3, 1976 (Rollo, p. 113; Brief
for Private Respondent, p. 42).

WHEREFORE, the petition is DENIED and the decision of the Court of Appeals is AFFIRMED in toto.

SO ORDERED.
 Davide, Jr., Bellosillo and Kapunan, JJ., concur.

Cruz, J., is on leave.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 75364 November 23, 1988

ANTONIO LAYUG, petitioner, 
vs.
INTERMEDIATE APPELLATE COURT and RODRIGO GABUYA, respondents.

Francisco Ma. Garcia for petitioner.

Moises F. Dalisay, Sr. for private respondent.

NARVASA, J.:

Involved in the appellate proceedings at bar is a contract for the purchase on installments by Antonio Layug of
twelve (12) lots owned by Rodrigo Gabuya, situated at Barrio Bara-as, Iligan City. The contract, entered into on
October 4, 1978, set the price for the lots at P120,000.00 payable in three (3) yearly installments, viz:

1. P40,000.00, Philippine Currency, upon the signing of this agreement/contract.

2. Another P40,000.00 after twelve (12) months or one year from the signing of the
contract/agreement.

3. The balance of P40,000.00 after 24 months or two years from the signing of the
contract/agreement.

The contract also provided for the automatic cancellation of the contract and forfeiture of all installments thus far
paid, which would be considered as rentals for the use of the lots, to wit:

... (S)hould the vendee fail to pay any of the yearly installments when due or otherwise fail to
comply with any of the terms and conditions herein stipulated, then this deed of conditional sale
shall automatically and without any further formality, become null and void, and all sums so paid
by the vendee by reason thereof, shall be considered as rentals and the vendor shall then and
there be free to enter into the premises, take possession thereof or sell the properties to any
other party. 1
Layug paid the first two annual installments, totalling P80,000.00. But he failed to pay the last installment of
P40,000.00, which fell due on October 5, 1980. Gabuya made several informal demands for payment; and when all
these proved unavailing, he made a formal written demand therefor under date of April 18, 1981 which was sent
to and received by Layug by registered mail. When this, too, went unheeded, Gabuya finally brought suit in the
Court of First Instance of Lanao del Norte for the annulment of his contract with Layug and for the recovery of
damages. 2

The Trial Court's judgment went against Layug. It declared the contract of conditional sale cancelled, and forfeited
in Gabuya's favor all payments made by Layug, considering them as rentals for the 12 lots for the period from the
perfection of the contract in 1978 to June 11, 1981, besides requiring him to pay attorney's fees. 3 The judgment
was, on appeal, affirmed by the Court of Appeals, except that it made the application of the forfeited payments, as
rentals, extend up to the date of its decision: August 30, 1985. 4

The Appellate Court overruled Layug's claim that the contract had not fixed the date for the payment of the third
and last installment and consequently, he could not be considered to have defaulted in the payment thereof. A
reading of the contract immediately makes possible the determination of the due dates of each yearly installment
intended by the parties; the first, on October 4, 1978, the date of execution of the contract; the second, after 12
months or 1 year "from the signing of the contract/agreement," or on October 5, 1979, and the third, or last, after
"24 months from ... (such) signing," or on October 5, 1980." That it was so understood by Layug is established by
the evidence. As observed by the Court of Appeals, when Layug "paid the first (second, actually) yearly installment
of P40,000.00 on January 24, 1980, or three (3) months and twenty (20) days beyond October 4, 1979, he paid an
additional amount of P800.00 as interest. If he did not agree that the first (second) installment was due on October
4, 1979, it puzzles Us why he had to pay an additional amount of P800.00 which was included in the receipt, Exhibit
'6'." 5

Correctly overruled, too, was Layug's other claim that there was some doubt as to the amount of the balance of his
obligation—by his computation he only owed P30,000.00, since there was an advance payment of P10,000.00
made by him for which he should be credited—and this had to be first resolved before his obligation to pay the last
installment could be exigible. The Court of Appeals declared this to be but a lame excuse for his delinquency; the
P10,000.00 was in truth part payment of the first installment of P40,000.00; for had it been otherwise, the
document of sale would have reflected it as a separate and distinct payment from the first installment of
P40,000.00 paid upon the signing of the agreement; but Layug subscribed to the contract without asking for its
revision. According to the Court of Appeals, "If the theory of the defendant-appellant that the P10,000.00 was
separate and distinct from the down payment of P40,000.00, then the balance as set forth in subpars. 2 and 3
quoted above should have been (correspondingly amended, e.g.,) P35,000.00 each, or a total of P70,000.00 for
both installments, instead of P40,000.00 per installment, or a total of P80,000.00." 6

Prescinding from the well established and oft applied doctrine that the findings of fact of the Court of Appeals are
conclusive and generally binding even on this Court, 7 nothing in the record has been brought to our attention to
justify modification, much less reversal, of those findings.

Petitioner adverts to the stipulation in his contract (a) granting him, as vendee, a "30 days grace period within
which to pay" any yearly installment not paid within the time fixed therefor, and (b) declaring him liable, in the
event of his failure to pay within the grace period, "for interest at the legal rate." He argues that the stipulation
indicates that rescission was not envisioned as a remedy against a failure to pay installments; such failure was not
ground for abrogating the contract but merely generated liability for interest at the legal rate. The argument is
unimpressive. It would negate the explicit provision that the failure to pay any of the yearly installments when due
(or to comply with any other covenant) would automatically render the contract null and void. The stipulations of a
contract shall be interpreted together, the law says, 8 attributing to the doubtful ones that sense which may result
from all of them taken jointly. The grace period clause should be read conjointly with the stipulation on rescission,
and in such a manner as to give both full effect. It is apparent that there is no such inconsistency between the two
as would support a hypothesis that one cannot be given effect without making the other a dead letter. The patent
and logical import of both provisions, taken together, is that when the vendee fails to pay any installment on its
due date, he becomes entitled to a grace period of 30 days to cure that default by paying the amount of the
installment plus interest; but that if he should still fail to pay within the grace period, then rescission of the
contract takes place. It was for the judicial affirmation of this plain proposition that the private respondent
instituted the original action for annulment which has given rise to this appeal.

Layug posits that, at the very least, he is entitled to a conveyance of at least 8 of the 12 lots subject of the
conditional sale, on the theory that since the total price of the 12 lots was P120,000.00, each lot then had a value
of P10,000.00 and, therefore, with his P80,000.00, he had paid in full the price for 8 lots. In support, he invokes our
earlier rulings in Legarda Hermanos v. Saldaña 9 and Calasanz v. Angeles. 10 The cited precedents are however
inapplicable. In  Legarda Hermanos, the contract of sale provided for payment of the price of two (2) subdivision
lots at P1,500.00 each, exclusive of interest, in 120 monthly installments, and at time of default, the buyer had
already paid P3,582.00, inclusive of interest; and in Calasanz, the agreement fixed a price of P3,720.00 with
interest at 7% per annum, and at time of default, the buyer had paid installments totaling P4,533.38, inclusive of
interest. Upon considerations of justice and equity and in light of the general provisions of the civil law, we
resolved in Legarda Hermanos to direct the conveyance of one of the lots to the buyer since he had already paid
more than the value thereof, and in Calasanz, to disallow cancellation by the seller and direct transfer of title to
the buyer upon his payment of the few installments yet unpaid. In both said cases, we strove to equitably allocate
the benefits and losses between the parties to preclude undue enrichment by one at the expense of the other; and
by this norm, Layug cannot be permitted to claim that all his payments should be credited to him in their entirety,
without regard whatever to the damages his default might have caused to Gabuya.

It is not however possible, in any event, to apply the rulings in Legarda Hermanos and Calasanz to the case at bar;
i.e., to resort to principles of equity and the general provisions of the Civil Code in resolution of the controversy.
That was done in the cited cases because there was at then no statute specifically governing the situation. It was
not so as regards the instant case. At the time of the execution of the contract in question, and the breach thereof,
there was a statute already in force and applicable thereto, Republic Act No. 6552. 11 This statute makes
unnecessary if not indeed improper, a resort to analogous provisions of the Civil Code. It also precludes a resort to
principles of equity it being axiomatic that where there is an adequate remedy at law available to the parties,
equity should not come into play. 12 And it allows a mitigation of the impact of the stringent contractual provisions
on Layug and makes possible the grant of some measure of relief to him under the circumstances of the case.

R.A. 6552 governs sales of real estate on installments. It recognizes the vendor's right to cancel such contracts
upon failure of the vendee to comply with the terms of the sale, but imposes, chiefly for the latter's protection,
certain conditions thereon. We have had occasion to rule that "even in residential properties the Act" recognizes
and reaffirms the vendor's right to cancel the contract to sell upon breach and nonpayment of the stipulated
installments. ..." 13

The law provides inter alia 14 that "in all transactions or contracts involving the sale or financing of real estate on
installment payments, including residential condominium apartments, ..., 15  where the buyer has paid at least two
years of installments, the buyer is entitled to the following rights in case he defaults in the payment of succeeding
installments:

[Grace Period]

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

[Refund of "Cash Surrender Value"]

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

In the case at bar, Layug had paid two (2) annual installments of P40,000.00 each. He is deemed therefore, in the
words of the law, to have "paid at least two years of installments." He therefore had a grace period of "one
month .. for every year of installment payments made," or two (2) months (corresponding to the two years of
installments paid) from October 5, 1980 within which to pay the final installment. That he made no payment within
this grace period is plain from the evidence. He has thus been left only with the right to a refund of the "cash
surrender value of the payments on the property equivalent to fifty percent of the total payments made," or
P40,000.00 (i.e., ½ of the total payments of P80,000.00).<äre||anº•1àw>  Such refund will be the operative act to
make effective the cancellation of the contract by Gabuya, conformably with the terms of the law. The additional
formality of a demand on Gabuya's part for rescission by notarial act would appear, in the premises, to be merely
circuitous and consequently superfluous.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED particularly in so far as it authorizes and sanctions
the cancellation by private respondent Gabuya of his contract of sale with petitioner Layug, but is MODIFIED only
in the sense that such cancellation shall become effective and fully operative only upon payment to the latter's
satisfaction of the "cash surrender value" of his payments, in the sum of P40,000.00. No costs.

Cruz, Gancayco, Griño-Aquino and Medialdea, JJ., concur.

Footnotes

1 Rollo, p. 216.

2 Id., p. 43. The suit was docketed as Case No. IV-726 and was raffled to Branch IV of the Court.

3 Rollo, p. 61: Brief for Appellant, p. 2.

4 The ponente was Quetulio-Losa, J., with whom concurred Gaviola, Jr. and Luciano, JJ.

5 Rollo, p. 56.

6 Rollo, p. 57.

7 Estate of Rodolfo Jalandoni, etc. v. C.A, 144 SCRA 334; Republic v. C.A., 145 SCRA 25; Balde v.
CA., 150 SCRA 365; Cu Bie v. I.A.C.,154 SCRA 599; Knecht v. C.A., G.R. No. 65114, February 23,
1988.

8 ART. 1374, Civil Code.

9 55 SCRA 328.
 10 135 SCRA 323.

11 Effective Sept. 14, 1972.

12 27 Am. Jr. 2d., p. 522.

13 Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., 86 SCRA 308.

14 Sec. 3.

15 ... but excluding industrial lots, commercial buildings and sale to tenants under Republic Act
Numbered Thirty-eight hundred forty-four, as amended by Republic Act Numbered Sixty-three
hundred eighty-nine.

FIRST DIVISION
[G.R. No. 141205. May 9, 2002]

ACTIVE REALTY & DEVELOPMENT CORPORATION, petitioner, vs.  NECITA G. DAROYA, represented by Attorney-
In-Fact Shirley Daroya-Quinones, respondents.
DECISION
PUNO, J.:

This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court which seeks to reverse
and set aside the Resolution of the Court of Appeals, dated August 3, 1999, denying due course to petitioners
appeal for insufficiency of form and substance.
Petitioner ACTIVE REALTY & DEVELOPMENT CORPORATION is the owner and developer of Town & Country
Hills Executive Village in Antipolo, Rizal. On January 2, 1985, it entered into a Contract to Sell [1] with respondent
NECITA DAROYA, a contract worker in the Middle East, whereby the latter agreed to buy a 515 sq. m. lot
for P224,025.00 in petitioners subdivision.
The contract to sell stipulated that the respondent shall pay the initial amount of P53,766.00 upon execution
of the contract and the balance of P170,259.00 in sixty (60) monthly installments of P4,893.35. Adding the down
payment and installment payments, it would appear that the total amount is P346,367.00, a figure higher than
that stated as the contract price.
On May 5, 1989, petitioner accepted respondents amortization in the amount of P40,000.00. By August 8,
1989, respondent was in default of P15,282.85 representing three (3) monthly amortizations. Petitioner sent
respondent a notice of cancellation[2] of their contract to sell, to take effect thirty (30) days from receipt of the
letter. It does not appear from the records, however, when respondent received the letter.Nonetheless, when
respondent offered to pay for the balance of the contract price, petitioner refused as it has allegedly sold the lot to
another buyer.
On August 26, 1991, respondent filed a complaint for specific performance and damages [3] against petitioner
before the Arbitration Branch of the Housing and Land Use Regulatory Board (HLURB).  It sought to compel the
petitioner to execute a final Deed of Absolute Sale in respondents favor after she pays any balance that may still be
due from her. Respondent claimed that she is entitled to the final deed of sale after she offered to pay the balance
of P24,048.47, considering that she has already paid the total sum of P314,816.76, which amount isP90,835.76
more than the total contract price of P224,025.00.
On June 14, 1993, HLURB Arbiter Alfredo M. Tan II found for the respondent. He ruled that the cancellation of
the contract to sell was void as petitioner failed to pay the cash surrender value to respondent as mandated by
law. However, as the subject lot was already sold to a third party and the respondent had agreed to a full refund of
her installment payments, petitioner was ordered to refund to respondent all her payments in the amount
of P314,816.70, with 12% interest per annum from August 26, 1991 (the date of the filing of the complaint) until
fully paid and to pay P10,000.00 as attorneys fees.[4]
On appeal, the HLURB Board of Commissioners set aside the Arbiters Decision. The Board refused to apply
the remedies provided under the Maceda Law and instead deemed it fit to formulate an equitable solution to the
case. It ruled that, as both parties were at fault, i.e.,respondent incurred in delay in her installment payments and
respondent failed to send a notarized notice of cancellation, petitioner was ordered to refund to the respondent
one half of the total amount she has paid or P157,408.35, which was allegedly akin to the remedy provided under
the Maceda Law.[5]
Respondent appealed to the Office of the President. On June 2, 1998, then Chief Presidential Counsel Renato
C. Corona, acting by authority of the President, modified the Decision of the HLURB as he found that it was not in
accord with the provisions of the Maceda Law.He held that as petitioner did not comply with the legal requisites
for a valid cancellation of the contract, the contract to sell between the parties subsisted and concluded that
respondent was entitled to the lot after payment of her outstanding balance. However, as the petitioner disclosed
that the lot was already sold to another person and that the actual value of the lot as of the date of the contract
was P1,700.00 per square meter,petitioner was ordered to refund to the respondent the amount of P875,000.00,
the true and actual value of the lot as of the date of the contract, with interest at 12% per annum computed
from August 26, 1991 until fully paid, or to deliver a substitute lot at the choice of respondent. [6]
Upon denial of its motion for reconsideration, petitioner assailed the Decision in the Court of
Appeals. However, its petition for review [7]was denied due course for insufficiency in form and substance,
[8]
 because: 1) no affidavit of service was attached to the petition; 2) except for certified true copies of the decision
and resolution of the Office of the President, no other material portions of the record, as would support the
allegations in the petition, were attached; and, 3) the certification of forum-shopping was signed by the head
counsel and vice-president of the petitioner corporation who was not authorized by a Board Resolution to
represent petitioner.
Petitioner moved for reconsideration. The Court of Appeals denied it on an entirely new ground, i.e., for
untimely filing of the petition for review. [9]
Petitioner now impugns the decision of the Court of Appeals and raises the following procedural issues:
I
THE HONORABLE COURT OF APPEALS GROSSLY ERRED IN RELYING TOO MUCH ON FORM RATHER THAN ON THE
MERITS OF THE PETITION THEREBY DENYING PETITIONER OF ITS RIGHT TO DUE PROCESS.

II
THE HONORABLE COURT OF APPEALS ANCHORED THE DENIAL OF PETITIONERS MOTION FOR RECONSIDERATION
ON INCONSISTENT AND CONFLICTING RULINGS NOT BORNE BY THE FACTS AND THE RECORDS OF THE CASE.

On the procedural points raised, we find for the petitioner.

Our perusal of the record reveals that petitioner substantially complied with the formal requirements of Rule
43 of the Rules of Court.[10]First, as to the non-attachment of the affidavit of service, the records bear that the
petition was accompanied by the original registry receipts issued by the post office, showing that the petition and
its annexes were served upon the parties. Moreover, respondents counsel of record, Atty. Sergio Guadiz, actually
received a copy of the petition. [11] Second, petitioner likewise complied with Section 6 (c) of Rule 43 requiring the
submission of copies of the award, judgment, final order and resolution appealed from. Its petition was
accompanied by the duplicate original of the appealed Decision of the Chief Presidential Legal Counsel and his
Resolution denying petitioners motion for reconsideration, the Decision of the HLURB Board of Commissioners and
that of the HLURB arbiter. A perusal of these documents will reveal that they contained all the relevant facts of the
case from which the appellate body can form its own decision. Its failure to submit the other documents, like the
Complaint, Answer, Position Papers and Appeal Memoranda of the parties before the HLURB, was due to the
refusal of the Office of the President to give them a certified true copy of these documents which were submitted
with said Office. Third, as to the lack of Board Resolution by petitioner corporation authorizing Atty. Rene Katigbak,
its Chief Legal Counsel and Vice-President for Legal Affairs, to represent it in the filing of the appeal, petitioner
admits that this was due to its honest belief that such authority is not required as it was not mentioned in Section
6(c) of Rule 43.[12] To make up for such omission, petitioner submitted a Secretarys Certificate [13] confirming and
ratifying the authority of Atty. Katigbak to represent petitioner. Finally, we find that the Court of Appeals erred in
denying petitioners motion for reconsideration due to untimely filing as the records clearly show that it was filed
on June 25, 1999, a day before the expiration of the period to appeal granted by the Court of Appeals. [14]
In denying due course to the petition, the appellate court gave premium to form and failed to consider the
important rights of the parties in the case at bar. [15] At the very least, petitioner substantially complied with the
procedural requirements for appeal, hence, it is best to give due course to the petition at bar to clarify the rights
and duties of a buyer in contracts to sell real estate on installment basis.
The issue to be resolved is whether or not the petitioner can be compelled to refund to the respondent the
value of the lot or to deliver a substitute lot at respondents option.
We find for the respondent and rule in the affirmative.
The contract to sell in the case at bar is governed by Republic Act No. 6552 --  The Realty Installment Buyer
Protection Act, or more popularly known as the Maceda Law -- which came into effect in September 1972. Its
declared public policy is to protect buyers of real estate on installment basis against onerous and oppressive
conditions.[16] The law seeks to address the acute housing shortage problem in our country that has prompted
thousands of middle and lower class buyers of houses, lots and condominium units to enter into all sorts of
contracts with private housing developers involving installment schemes. Lot buyers, mostly low income earners
eager to acquire a lot upon which to build their homes, readily affix their signatures on these contracts, without an
opportunity to question the onerous provisions therein as the contract is offered to them on a take it or leave it
basis.[17] Most of these contracts of adhesion, drawn exclusively by the developers, entrap innocent buyers by
requiring cash deposits for reservation agreements which oftentimes include, in fine print, onerous default clauses
where all the installment payments made will be forfeited upon failure to pay any installment due even if the
buyers had made payments for several years. [18]Real estate developers thus enjoy an unnecessary advantage over
lot buyers who they often exploit with iniquitous results. They get to forfeit all the installment payments of
defaulting buyers and resell the same lot to another buyer with the same exigent conditions. To help especially the
low income lot buyers, the legislature enacted R.A. No. 6552 delineating the rights and remedies of lot buyers and
protect them from one-sided and pernicious contract stipulations.
More specifically, Section 3 of R.A. No. 6552 provided for the rights of the buyer in case of default in the
payment of succeeding installments, where he has already paid at least two (2) years of installments, thus:
(a) To pay, without additional interest, the unpaid installments due within the total grace period earned by
him, which is hereby fixed at the rate of one month grace period for every one year of installment payments
made; x x x

(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments
on the property equivalent to fifty per cent of the total payments made; provided, that the
actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice
 of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the
cash surrender value to the buyer.

In this case, respondent has already paid in four (4) years a total of P314,860.76 or P90,835.76 more than
the contract price ofP224,035.00. In April 1989, petitioner decided to cancel the contract when the respondent
incurred in delay in the payment of P15,282.85, representing three (3) monthly amortizations. Petitioner refused
to accept respondents subsequent tender of payment of the outstanding balance alleging that it has already
cancelled the contract and sold the subject lot to another buyer. However, the records clearly show that the
petitioner failed to comply with the mandatory twin requirements for a valid and effective cancellation under the
law,[19] i.e., he failed to send a notarized notice of cancellation and refund the cash surrender value. At no time,
from the date it gave a notice of cancellation up to the time immediately before the respondent filed the case
against petitioner, did the latter exert effort to pay the cash surrender value. In fact, the records disclose that it
was only during the preliminary hearing of the case before the HLURB arbiter when petitioner offered to pay the
cash surrender value. Petitioner justifies its inaction on the ground that the respondent was always out of the
country. Even then, the records are bereft of evidence to show that petitioner attempted to pay the cash surrender
value to respondent through her last known address. The omission is surprising considering that even during the
times respondent was out of the country, petitioner has been sending her written notices to remind her to pay her
installment arrears through her last known address. Clearly, had respondent not filed a case demanding a final
deed of sale in her favor, petitioner would not have lifted a finger to give respondent what was due her actual
payment of the cash surrender value, among others.In disregard of basic equitable principles, petitioners stance
would enable it to resell the property, keep respondents installment payments, not to mention the cash surrender
value which it was obligated to return. The Layug[20]  case cited by petitioner is inapropos. In Layug, the lot buyer
did not pay for the outstanding balance of his account and the Court found that notarial rescission or cancellation
was no longer necessary as the seller has already filed in court a case for rescission of the contract to sell.  In the
case at bar, respondent offered to pay for her outstanding balance of the contract price but respondent refused to
accept it. Neither did petitioner adduce proof that the respondents offer to pay was made after the effectivity date
stated in its notice of cancellation. Moreover, there was no formal notice of cancellation or court action to rescind
the contract. Given the circumstances, we find it illegal and iniquitous that petitioner, without complying with the
mandatory legal requirements for canceling the contract, forfeited both respondents land and hard-earned money
after she has paid for, not just the contract price, but more than the consideration stated in the contract to sell.
Thus, for failure to cancel the contract in accordance with the procedure provided by law, we hold that the
contract to sell between the parties remains valid and subsisting. Following Section 3(a) of R.A. No. 6552,
respondent has the right to offer to pay for the balance of the purchase price, without interest, which she did in
this case. Ordinarily, petitioner would have had no other recourse but to accept payment. However, respondent
can no longer exercise this right as the subject lot was already sold by the petitioner to another buyer which lot, as
admitted by the petitioner, was valued at P1,700.00 per square meter. As respondent lost her chance to pay for
the balance of theP875,000.00 lot, it is only just and equitable that the petitioner be ordered to refund to
respondent the actual value of the lot resold, i.e.,P875,000.00, with 12% interest per annum computed from
August 26, 1991 until fully paid or to deliver a substitute lot at the option of the respondent.
On a final note, it would not be amiss to stress that the HLURB Board Decision ordering petitioner to refund
to respondent one half of her total payments is not an equitable solution as it punished the respondent for her
delinquent payments but totally disregarded petitioners failure to comply with the mandatory requisites for a
valid cancellation of the contract to sell. The Board failed to consider that the Maceda law was enacted to remedy
the plight of low and middle-income lot buyers, save them from the exacting default clauses in real estate sales
and assure them of a home they can call their own. Neither would the Decision of the HLURB Arbiter ordering a full
refund of the installment payments of respondent in the amount of P314,816.70 be justified as, under the law,
respondent is entitled to the lot she purchased after payment of her outstanding balance which she was ready and
willing to do. Thus, to penalize the petitioner for failing in its obligation to deliver the subject lot and to give the
respondent what is rightly hers, the petitioner was correctly ordered to refund to the respondent the actual value
of the land (P875,000.00) she lost to another buyer, plus interest at the rate of 12% per annum from August 26,
1991 until fully paid or to deliver a substitute lot at the choice of the respondent.
 IN VIEW WHEREOF, the Decision of then Chief Presidential Legal Assistant Renato Corona, Office of the
President, dated June 2, 1998, is AFFIRMED in toto. Costs against petitioner.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Kapunan, Ynares-Santiago, and  Austria-Martinez, JJ., concur.

[1]
 Rollo, pp. 28-31.
[2]
 Ibid., p. 32.
[3]
 Ibid., pp. 33-38.
[4]
 See Decision, Rollo, pp. 39-42.
[5]
 Decision, dated August 10, 1994, penned by Commissioner and Chief Executive Officer Ernesto C. Mendiola and
concurred in by DPWH Asst. Secretary Jose L. Altea and Commissioner Luis T. Tungpalan; Rollo, pp. 44-48.
[6]
 Decision, dated June 2, 1998; Rollo, pp. 4956.
[7]
 Rollo, pp. 62-73.
[8]
 Resolution, dated August 3, 1999; Rollo, 59-60.
[9]
 Rollo, p. 61.
[10]
 Appeals from quasi-judicial agencies to the Court of Appeals.
[11]
 Certification of Postmaster Cipriano Pagaduan; Rollo, p. 76.
[12]
 SEC. 6. Contents of the petition.  The petition for review shall (a) state the full names of the parties to the case,
without impleading the court or agencies either as petitioners or respondents; (b) contain a concise statement of
the facts and issues involved and the grounds relied upon for the review; (c) be accompanied by a clearly legible
duplicate original or a certified true copy of the award, judgment, final order or resolution appealed from, together
with certified true copies of such material portions of the record referred to therein and other supporting papers;
and (d) contain a sworn certification against forum shopping as provided in the last paragraph of section 2, Rule
42. The petition shall state the specific material dates showing that it was filed within the period fixed herein.
[13]
 Rollo, p. 78.
[14]
 See Annex N, Resolution of the Court of Appeals extending the time to file its petition for review; Rollo, pp. 79-
80.
[15]
 Yao vs. Court of Appeals, 344 SCRA 202 (2000).
[16]
 Section 3, R.A. 6552.
[17]
 Angeles vs. Calsanz, 135 SCRA 323 (1985).
[18]
 Realty Exchange Venture Corporation vs. Sendino, 233 SCRA 665, 668 (1994).
[19]
 Section 3 (b), R.A. 6552; Siska Development Corporation vs. Office of the President of the Philippines, 231 SCRA
674 (1994); Jison vs. Court of Appeals, 164 SCRA 339, 345 (1988).
[20]
 167 SCRA 227 (1988).