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G.R. No. 172036               April 23, 2010

SPOUSES FAUSTINO AND JOSEFINA GARCIA, SPOUSES MELITON GALVEZ AND HELEN GALVEZ, and
CONSTANCIA ARCAIRA represented by their Attorney-in-Fact JULIANA O. MOTAS, Petitioners,
vs.
COURT OF APPEALS, EMERLITA DE LA CRUZ, and DIOGENES G. BARTOLOME, Respondents.

DECISION

CARPIO, J.:

G.R. No. 172036 is a petition for review1 assailing the Decision2 promulgated on 25 January 2006 as well as the
Resolution3 promulgated on 16 March 2006 of the Court of Appeals (appellate court) in CA-G.R. CV No. 63651. The
appellate court reversed and set aside the decision of Branch 23 of the Regional Trial Court of Trece Martires City, Cavite
(trial court) in Civil Case No. TM-622. The appellate court ordered Emerlita Dela Cruz (Dela Cruz) to return to spouses
Faustino and Josefina Garcia, spouses Meliton and Helen Galvez, and Constancia Arcaira (collectively, petitioners) the
amount in excess of one-half percent of ₱1,500,000. Dela Cruz’s co-defendant, Diogenes Bartolome (Bartolome), did not
incur any liability.

The appellate court narrated the facts as follows:

On May 28, 1993, plaintiffs spouses Faustino and Josefina Garcia and spouses Meliton and Helen Galvez (herein
appellees) and defendant Emerlita dela Cruz (herein appellant) entered into a Contract to Sell wherein the latter agreed to
sell to the former, for Three Million One Hundred Seventy Thousand Two Hundred Twenty (₱3,170,220.00) Pesos, five (5)
parcels of land situated at Tanza, Cavite particularly known as Lot Nos. 47, 2768, 2776, 2767, 2769 and covered by
Transfer Certificate of Title Nos. T-340674, T-340673, T-29028, T-29026, T-29027, respectively. At the time of the
execution of the said contract, three of the subject lots, namely, Lot Nos. 2776, 2767, and 2769 were registered in the
name of one Angel Abelida from whom defendant allegedly acquired said properties by virtue of a Deed of Absolute Sale
dated March 31, 1989.

As agreed upon, plaintiffs shall make a down payment of Five Hundred Thousand (₱500,000.00) Pesos upon signing of
the contract. The balance of Two Million Six Hundred Seventy Thousand Two Hundred Twenty (₱2,670,220.00) Pesos
shall be paid in three installments, viz: Five Hundred Thousand (₱500,000.00) Pesos on June 30, 1993; Five Hundred
Thousand (₱500,000.00) Pesos on August 30, 1993; One Million Six Hundred Seventy Thousand Two Hundred Twenty
(₱1,670,220.00) Pesos on December 31, 1993.

On its due date, December 31, 1993, plaintiffs failed to pay the last installment in the amount of One Million Six Hundred
Seventy Thousand Two Hundred Twenty (₱1,670,220.00) Pesos. Sometime in July 1995, plaintiffs offered to pay the
unpaid balance, which had already been delayed by one and [a] half year, which defendant refused to accept. On
September 23, 1995, defendant sold the same parcels of land to intervenor Diogenes G. Bartolome for Seven Million
Seven Hundred Ninety Three Thousand (₱7,793,000.00) Pesos.

In order to compel defendant to accept plaintiffs’ payment in full satisfaction of the purchase price and, thereafter, execute
the necessary document of transfer in their favor, plaintiffs filed before the RTC a complaint for specific performance.

In their complaint, plaintiffs alleged that they discovered the infirmity of the Deed of Absolute Sale covering Lot Nos. 2776,
2767 and 2769, between their former owner Angel Abelida and defendant, the same being spurious because the
signature of Angel Abelida and his wife were falsified; that at the time of the execution of the said deed, said spouses
were in the United States; that due to their apprehension regarding the authenticity of the document, they withheld
payment of the last installment which was supposedly due on December 31, 1993; that they tendered payment of the
unpaid balance sometime in July 1995, after Angel Abelida ratified the sale made in favor [of] defendant, but defendant
refused to accept their payment for no jusitifiable reason.

In her answer, defendant denied the allegation that the Deed of Absolute Sale was spurious and argued that plaintiffs
failed to pay in full the agreed purchase price on its due date despite repeated demands; that the Contract to Sell contains
a proviso that failure of plaintiffs to pay the purchase price in full shall cause the rescission of the contract and forfeiture of
one-half (1/2%) percent of the total amount paid to defendant; that a notarized letter stating the indended rescission of the
contract to sell and forfeiture of payments was sent to plaintiffs at their last known address but it was returned with a
notation "insufficient address."

Intervenor Diogenes G. Bartolome filed a complaint in intervention alleging that the Contract to Sell dated May 31, 1993
between plaintiffs and defendant was rescinded and became ineffective due to unwarranted failure of the plaintiffs to pay
the unpaid balance of the purchase price on or before the stipulated date; that he became interested in the subject parcels
of land because of their clean titles; that he purchased the same from defendant by virtue of an Absolute Deed of Sale
executed on September 23, 1995 in consideration of the sum of Seven Million Seven Hundred Ninety Three Thousand
(₱7,793,000.00) Pesos.4

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The Decision of the Trial Court

In its Decision dated 15 April 1999, the trial court ruled that Dela Cruz’s rescission of the contract was not valid. The trial
court applied Republic Act No. 6552 (Maceda Law) and stated that Dela Cruz is not allowed to unilaterally cancel the
Contract to Sell. The trial court found that petitioners are justified in withholding the payment of the balance of the
consideration because of the alleged spurious sale between Angel Abelida and Emerlita Dela Cruz. Moreover, intervenor
Diogenes Bartolome (Bartolome) is not a purchaser in good faith because he was aware of petitioners’ interest in the
subject parcels of land.

The dispositive portion of the trial court’s decision reads:

ACCORDINGLY, defendant Emerlita dela Cruz is ordered to accept the balance of the purchase price in the amount of
₱1,670,220.00 within ten (10) days after the judgment of this Court in the above-entitled case has become final and
executory and to execute immediately the final deed of sale in favor of plaintiffs.

Defendant is further directed to pay plaintiffs the amount of ₱400,000.00 as moral damages and ₱100,000.00 as
exemplary damages.

The deed of sale executed by defendant Emerlita dela Cruz in favor of Atty. Diogenes Bartolome is declared null and void
and the amount of ₱7,793,000.00 which was paid by intervenor Bartolome to Emerlita dela Cruz as the consideration of
the sale of the five (5) parcels of land is hereby directed to be returned by Emerlita dela Cruz to Atty. Diogenes Bartolome
within ten (10) days from the finality of judgment.

Further, defendant is directed to pay plaintiff the sum of ₱100,000.00 as attorney’s fees.

SO ORDERED.5

Dela Cruz and Bartolome appealed from the judgment of the trial court.

The Decision of the Appellate Court

The appellate court reversed the trial court’s decision and dismissed Civil Case No. TM-622. Dela Cruz’s obligation under
the Contract to Sell did not arise because of petitioners’ undue failure to pay in full the agreed purchase price on the
stipulated date. Moreover, judicial action for the rescission of a contract is not necessary where the contract provides that
it may be revoked and cancelled for violation of any of its terms and conditions. The dispositive portion of the appellate
court’s decision reads:

WHEREFORE, in view of all the foregoing, the appealed decision of the Regional Trial Court is hereby REVERSED and
SET ASIDE and Civil Case No. TM-622 is, consequently, DISMISSED. Defendant is however ordered to return to
plaintiffs the amount in excess of one-half (1/2%) percent of One Million Five Hundred Thousand (₱1,500,000.00) Pesos
which was earlier paid by plaintiffs.

SO ORDERED.6

The appellate court likewise resolved to deny petitioners’ Motion for Reconsideration for lack of merit.7

Hence, this petition.

Issues

Petitioners raised the following grounds for the grant of their petition:

I. The Honorable Court of Appeals erred when it failed to consider the provisions of Republic Act 6552, otherwise
known as the Maceda Law.

II. The Honorable Court of Appeals erred when it failed to consider that Respondent Dela Cruz could not pass title
over the three (3) properties at the time she entered to a Contract to Sell as her purported ownership was tainted
with fraud, thereby justifying Petitioners Spouses Garcia, Spouses Galvez and Arcaira’s suspension of payment.

III. The Honorable Court of Appeals gravely erred when it failed to consider that Respondent Dela Cruz’s
"rescission" was done in evident bad faith and malice on account of a second sale she entered with Respondent
Bartolome for a much bigger amount.

IV. The Honorable Court of Appeals erred when it failed to declare Respondent Bartolome is not an innocent
purchaser for value despite the presence of evidence as to his bad faith.8

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The Court’s Ruling

The petition has no merit.

Both parties admit the following: (1) the contract between petitioners and Dela Cruz was a contract to sell; (2) petitioners
failed to pay in full the agreed purchase price of the subject property on the stipulated date; and (3) Dela Cruz did not
want to accept petitioners’ offer of payment and did not want to execute a document of transfer in petitioners’ favor.

The pertinent provisions of the contract, denominated Contract to Sell, between the parties read:

Failure on the part of the vendees to comply with the herein stipulation as to the terms of payment shall cause the
rescission of this contract and the payments made shall be returned to the vendees subject however, to forfeiture in favor
of the Vendor equivalent to 1/2% of the total amount paid.

xxx

It is hereby agreed and covenanted that possession shall be retained by the VENDOR until a Deed of Absolute Sale shall
be executed by her in favor of the Vendees. Violation of this provision shall authorize/empower the VENDOR [to] demolish
any construction/improvement without need of judicial action or court order.

That upon and after the full payment of the balance, a Deed of Absolute Sale shall be executed by the Vendor in favor of
the Vendees.

That the duplicate original of the owner’s copy of the Transfer Certificate of Title of the above subject parcels of land shall
remain in the possession of the Vendor until the execution of the Deed of Absolute Sale.9

Contracts are law between the parties, and they are bound by its stipulations. It is clear from the above-quoted provisions
that the parties intended their agreement to be a Contract to Sell: Dela Cruz retains ownership of the subject lands and
does not have the obligation to execute a Deed of Absolute Sale until petitioners’ payment of the full purchase price.
Payment of the price is a positive suspensive condition, failure of which is not a breach but an event that prevents the
obligation of the vendor to convey title from becoming effective. Strictly speaking, there can be no rescission or resolution
of an obligation that is still non-existent due to the non-happening of the suspensive condition.10 Dela Cruz is thus not
obliged to execute a Deed of Absolute Sale in petitioners’ favor because of petitioners’ failure to make full payment on the
stipulated date.

We ruled thus in Pangilinan v. Court of Appeals:11

Article 1592 of the New Civil Code, requiring demand by suit or by notarial act in case the vendor of realty wants to
rescind does not apply to a contract to sell but only to contract of sale. In contracts to sell, where ownership is retained by
the seller and is not to pass until the full payment, such payment, as we said, is a positive suspensive condition, the failure
of which is not a breach, casual or serious, but simply an event that prevented the obligation of the vendor to convey title
from acquiring binding force. To argue that there was only a casual breach is to proceed from the assumption that the
contract is one of absolute sale, where non-payment is a resolutory condition, which is not the case.

The applicable provision of law in instant case is Article 1191 of the New Civil Code which provides as follows:

Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply
with what is incumbent upon him.

The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in
either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.

The Court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.

This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with
Articles 1385 and 1388 and the Mortgage Law. (1124)

Pursuant to the above, the law makes it available to the injured party alternative remedies such as the power to rescind or
enforce fulfillment of the contract, with damages in either case if the obligor does not comply with what is incumbent upon
him. There is nothing in this law which prohibits the parties from entering into an agreement that a violation of the terms of
the contract would cause its cancellation even without court intervention. The rationale for the foregoing is that in
contracts providing for automatic revocation, judicial intervention is necessary not for purposes of obtaining a judicial
declaration rescinding a contract already deemed rescinded by virtue of an agreement providing for rescission even
without judicial intervention, but in order to determine whether or not the rescission was proper. Where such propriety is
sustained, the decision of the court will be merely declaratory of the revocation, but it is not in itself the revocatory act.
Moreover, the vendor’s right in contracts to sell with reserved title to extrajudicially cancel the sale upon failure of the

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vendee to pay the stipulated installments and retain the sums and installments already received has long been recognized
by the well-established doctrine of 39 years standing. The validity of the stipulation in the contract providing for automatic
rescission upon non-payment cannot be doubted. It is in the nature of an agreement granting a party the right to rescind a
contract unilaterally in case of breach without need of going to court. Thus, rescission under Article 1191 was inevitable
due to petitioners’ failure to pay the stipulated price within the original period fixed in the agreement.

Petitioners justify the delay in payment by stating that they had notice that Dela Cruz is not the owner of the subject land,
and that they took pains to rectify the alleged defect in Dela Cruz’s title. Be that as it may, Angel Abelida’s (Abelida)
affidavit12 confirming the sale to Dela Cruz only serves to strengthen Dela Cruz’s claim that she is the absolute owner of
the subject lands at the time the Contract to Sell between herself and petitioners was executed. Dela Cruz did not
conceal from petitioners that the title to Lot Nos. 2776, 2767 and 2769 still remained under Abelida’s name, and
the Contract to Sell13 even provided that petitioners should shoulder the attendant expenses for the transfer of
ownership from Abelida to Dela Cruz.

The trial court erred in applying R.A. 6552,14 or the Maceda Law, to the present case. The Maceda Law applies to
contracts of sale of real estate on installment payments, including residential condominium apartments but excluding
industrial lots, commercial buildings and sales to tenants. The subject lands, comprising five (5) parcels and aggregating
69,028 square meters, do not comprise residential real estate within the contemplation of the Maceda Law. 15 Moreover,
even if we apply the Maceda Law to the present case, petitioners’ offer of payment to Dela Cruz was made a year and a
half after the stipulated date. This is beyond the sixty-day grace period under Section 4 of the Maceda Law.16 Petitioners
still cannot use the second sentence of Section 4 of the Maceda Law against Dela Cruz for Dela Cruz’s alleged failure to
give an effective notice of cancellation or demand for rescission because Dela Cruz merely sent the notice to the address
supplied by petitioners in the Contract to Sell.

It is undeniable that petitioners failed to pay the balance of the purchase price on the stipulated date of the Contract to
Sell. Thus, Dela Cruz is within her rights to sell the subject lands to Bartolome. Neither Dela Cruz nor Bartolome can be
said to be in bad faith.

WHEREFORE, we DENY the petition. We AFFIRM in toto the Court of Appeals’ Decision promulgated on 25 January
2006 as well as the Resolution promulgated on 16 March 2006 in CA-G.R. CV No. 63651.

Costs against petitioners.

SO ORDERED.

ANTONIO T. CARPIO
Associate Justice

Heirs of Jesus M. Mascunana v. C.A. 461 SCRA 186, June 23, 2005

FACTS:

GertrudisWuthrich and her six other siblings were the co-owners of a parcel of land in San Carlos City, Negros
Occidental Cadastre. Over time, Gertrudis and two other co-owners sold each of their one-seventh (1/7) shares, or
a total area of 741 square meters, to Jesus Mascuñana. The latter then sold a portion of his 140-square-meter
undivided share of the property to DiosdadoSumilhig. However, the parties agreed to revoke the said deed of sale
and, in lieu thereof, executed a Deed of Absolute Sale on August 12, 1961. In the said deed, Mascuñana, as vendor,
sold an undivided 469-square-meter portion of the property for ₱4,690.00, with ₱3,690.00 as down payment.
Meanwhile, Mascuñana died intestate on April 20, 1965 and was survived by his heirs, Eva M. Ellisin, Renee
Hewlett, CarmenVda. deOpeña, MarilouDy and Jose Ma. R. Mascuñana.

Consequently, on April 24, 1968, Sumilhig executed a Deed of Sale of Real Property on a portion of Lot No. 124-B
with an area of 469 square meters and the improvements thereon, in favor of Corazon Layumas, the wife of Judge
Rodolfo Layumas, for the price of ₱11,000.00. The spouses Layumas, moreover, took possession of the property
and caused the cutting of tall grasses thereon.In January 1985, the spouses Layumas allowed AquilinoBarte to stay
on a portion of the property to ward off squatters. On November 17, 1986, the heirs of Mascuñana filed a
Complaint for recovery of possession of Lot No. 124-B and damages with a writ of preliminary injunction, alleging
that they owned the subject lot by virtue of successional rights from their deceased father. They averred that Barte

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surreptitiously entered the premises, fenced the area and constructed a house thereon without their consent. In
their answer, the spouses Layumas filed a Motion for Leave to Intervene, alleging therein that they had a legal
interest in Lot No. 124-B-1 as its buyers from Sumilhig, who in turn purchased the same from Mascuñana.On May
5, 2003, the CA affirmed the decision of the trial court. It ruled that the contract between the petitioners’ father and
Sumilhig was one of sale. Foremost, the CA explained, the contract was denominated as a “Deed of Absolute Sale.”
The stipulations in the contract likewise revealed the clear intention on the part of the vendor (Mascuñana) to
alienate the property in favor of the vendee (Sumilhig).

ISSUE:

Whether or not the contract of alienation of Lot No. 124- B in favor of DiosdadoSumilhig in 1961 was a contract of
sale.

RULING:

YES. The petitioners reiterated their pose that the deed of absolute sale over the property executed by their father,
Jesus Mascuñana, as vendor, and DiosdadoSumilhig as vendee, was a contract to sell and not a contract of sale.
They assert that on its face, the contract appears to be a contract to sell, because the payment of the ₱1,000.00
balance of the purchase price was subject to a suspensive condition. The petitioners’ contention has no factual and
legal bases.

A deed of sale is considered absolute in nature where there is neither a stipulation in the deed that title to the
property sold is reserved in the seller until full payment of the price, nor one giving the vendor the right to
unilaterally resolve the contract the moment the buyer fails to pay within a fixed period. Applying these principles
in the instant case, it cannot be gainsaid that the contract of sale between the parties is absolute, not conditional.
There is no reservation of ownership nor a stipulation providing for a unilateral rescission by either party. In fact,
the sale was consummated upon the delivery of the lot to respondent. Thus, Art. 1477 of the New Civil Code
provides that the ownership of the thing sold shall be transferred to the vendee upon the actual or constructive
delivery thereof.

G.R. No. 158646               June 23, 2005

HEIRS OF JESUS M. MASCUÑANA, represented by JOSE MA. R. MASCUÑANA, petitioners,

vs.
COURT OF APPEALS, AQUILINO BARTE, and SPOUSES RODOLFO and CORAZON LAYUMAS, respondents.

DECISION

CALLEJO, SR., J.:

This is a petition for review on certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 53117 affirming
the Decision2 of the Regional Trial Court (RTC) of San Carlos City, Negros Occidental, which ordered the dismissal of the
petitioners’ complaint for recovery of possession and damages.

The Antecedents

Gertrudis Wuthrich and her six other siblings were the co-owners of a parcel of land identified as Lot No. 124 of the San
Carlos City, Negros Occidental Cadastre, with an area of 1,729 square meters and covered by Transfer Certificate of Title
(TCT) No. 1453-R (T-29937)-38.3 Over time, Gertrudis and two other co-owners sold each of their one-seventh (1/7)
shares, or a total area of 741 square meters, to Jesus Mascuñana. The latter then sold a portion of his 140-square-meter
undivided share of the property to Diosdado Sumilhig. Mascuñana later sold an additional 160-square-meter portion to
Sumilhig on April 7, 1961. However, the parties agreed to revoke the said deed of sale and, in lieu thereof, executed a
Deed of Absolute Sale on August 12, 1961. In the said deed, Mascuñana, as vendor, sold an undivided 469-square-meter
portion of the property for ₱4,690.00, with ₱3,690.00 as down payment, and under the following terms of payment:

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That the balance of ONE THOUSAND PESOS (₱1,000.00) shall be paid by the VENDEE unto the VENDOR as soon as
the above-portions of Lot 124 shall have been surveyed in the name of the VENDEE and all papers pertinent and
necessary to the issuance of a separate Certificate of Title in the name of the VENDEE shall have been prepared.4

On December 31, 1961, Mascuñana and Jose G. Estabillo executed a Deed of Exchange and Absolute Sale of Real
Estate,5 in which Estabillo deeded to Mascuñana a portion of his property abutting that of Sumilhig on the southeast.

In the meantime, a survey was conducted for the co-owners of Lot No. 124 on July 9, 1962. The subdivision plan of the
said lot was approved by the Director of Lands on August 2, 1962. The portion of the property deeded to Sumilhig was
identified in the said plan as Lot No. 124-B.6

Meanwhile, Mascuñana died intestate on April 20, 1965 and was survived by his heirs, Eva M. Ellisin, Renee Hewlett,
Carmen Vda. de Opeña, Marilou Dy and Jose Ma. R. Mascuñana.

On April 24, 1968, Sumilhig executed a Deed of Sale of Real Property 7 on a portion of Lot No. 124-B with an area of 469
square meters and the improvements thereon, in favor of Corazon Layumas, the wife of Judge Rodolfo Layumas, for the
price of ₱11,000.00. The spouses Layumas then had the property subdivided into two lots: Lot No. 124-B-2 with an area
of 71 square meters under the name of Jesus Mascuñana, and Lot No. 124-B-1, with an area of 469 square meters under
their names.8 The spouses Layumas took possession of the property and caused the cutting of tall grasses thereon. Upon
the plea of a religious organization, they allowed a chapel to be constructed on a portion of the property. 9 In January 1985,
the spouses Layumas allowed Aquilino Barte to stay on a portion of the property to ward off squatters. 10 Barte and his kin,
Rostom Barte, then had their houses constructed on the property.

On October 1, 1985, the spouses Layumas received a Letter11 from the counsel of Renee Tedrew, offering to buy their
share of the property for US$1,000.00. For her part, Corazon Layumas wrote Pepito Mascuñana, offering to pay the
amount of ₱1,000.00, the balance of the purchase price of the property under the deed of absolute sale executed by
Mascuñana and Sumilhig on August 12, 1961.12 However, the addressee refused to receive the mail matter.13

Unknown to the spouses Layumas, TCT No. 898614 was issued over Lot No. 124-B in the name of Jesus Mascuñana on
March 17, 1986.

On November 17, 1986, the heirs of Mascuñana filed a Complaint 15 for recovery of possession of Lot No. 124-B and
damages with a writ of preliminary injunction, alleging that they owned the subject lot by virtue of successional rights from
their deceased father. They averred that Barte surreptitiously entered the premises, fenced the area and constructed a
house thereon without their consent. Attached as annexes to the complaint were TCT No. 8986 and a certification 16 from
the Office of the City Treasurer, Land Tax Division, vouching that the property in question was owned by the petitioners
and that they had paid the taxes thereon until 1992.

In his answer to the complaint, Barte admitted having occupied a portion of Lot No. 124-B, but claimed that he secured
the permission of Rodolfo Layumas, the owner of the subject property. He added that he did not fence the property, and
that the petitioners did not use the same as a passageway in going to Broce Street from their house. Barte raised the
following special defenses: (a) the petitioners were estopped from asserting ownership over the lot in question because
they did not object when he occupied the said portion of the lot; (b) neither did the petitioners protest when a church was
built on the property, or when residential houses were constructed thereon; (c) the petitioners still asked Barte and the
other occupants whether they had notified Rodolfo Layumas of the constructions on the property; and (d) the heirs of
Mascuñana, through the lawyer of Mrs. Renee M. Tedrew, even wrote a letter 17 to Rodolfo Layumas on October 1, 1985,
expressing her willingness to buy the subject property for US$1,000.00.

On April 8, 1991, the spouses Layumas filed a Motion for Leave to Intervene, 18 alleging therein that they had a legal
interest in Lot No. 124-B-1 as its buyers from Sumilhig, who in turn purchased the same from Mascuñana. In their answer
in intervention,19 the spouses Layumas alleged that they were the true owners of the subject property and that they had
wanted to pay the taxes thereon, but the Land Tax clerk refused to receive their payments on account that the petitioners
had already made such payment. The spouses Layumas further maintained that the petitioners had no cause of action
against Barte, as they had authorized him to occupy a portion of Lot No. 124-B-1. The spouses Layumas also averred that
the petitioners were estopped from denying their right of ownership and possession of the subject lot, as one of them had
even offered to repurchase a portion of Lot No. 124-B via letter. The said spouses interposed a counterclaim for
damages, claiming ownership over the property, and prayed, thus:

WHEREFORE, it is most respectfully prayed that this HONORABLE COURT render judgment in favor of the Intervenors
and the defendant Aquilino Barte, ordering:

1. That the complaint against Aquilino Barte be dismissed with costs against the plaintiff;

2. That the Intervenors spouses Judge Rodolfo S. Layumas and Corazon A. Layumas be declared as the legal
and true owners of Lot 124-B;

3. That the plaintiffs should deliver immediately to the Intervenors, TCT No. 8986 which is in their possession;

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4. That the plaintiffs be made to pay to the Intervenors the sum of THIRTY THOUSAND (₱30,000.00) PESOS
moral damages; TEN THOUSAND (₱10,000.00) PESOS attorney’s fees plus THREE HUNDRED (₱300.00)
PESOS as appearance fee per hearing.

Intervenors pray for such other relief and remedies as may be deemed by this Honorable Court as just and equitable in
the premises.

At the trial, intervenor Rodolfo Layumas testified that he and his wife bought the subject property in 1968, and that nobody
objected to their possession of the land, including the petitioners. In 1970, a religious organization asked his permission to
construct a chapel on the disputed lot; he allowed the construction since the same would be used for the fiesta. He further
declared that part of the chapel still stood on the property. In 1985, a fire razed the town’s public market, thereby
dislocating numerous people. Barte was one of the fire victims, who also happened to be a good friend and political
supporter of Rodolfo. Out of goodwill, Barte was allowed to occupy a portion of the said lot, along with some other fire
victims. Rodolfo clarified that the others were to stay there only on a temporary basis, but admitted that Barte’s children
also stayed in the subject property.20

Rodolfo Layumas further narrated that in 1987, Corazon wrote one of the petitioners-heirs, Pepito Mascuñana, requesting
that the title of the lot be transferred in Sumilhig’s name so that they could likewise arrange for the conveyance of the title
in their names. Pepito failed to claim the letter, and thereafter, filed a case of ejectment against Barte and Rodolfo
Layumas’ brother-in-law, Pepito Antonio. The case, the witness added, was dismissed as against the two parties. Offered
in evidence were the following: a Sworn Statement on the Current and Fair Market Value of the Real Property issued in
1973 as required by Presidential Decree No. 76, and tax receipts.21

Rodolfo Layumas admitted on cross-examination that at the time they bought the property from Sumilhig, the title was still
in the possession of the Wuthrich family. He added that he filed an adverse claim before the Register of Deeds of San
Carlos City, Negros Occidental, on Lot No. 124-B in January 1986, or after the case had already been filed in court.
Lastly, the witness deposed that he did not fence the property after buying the same, but that his brother-in-law
constructed a coco-lumber yard thereon upon his authority.22

On January 30, 1996, the trial court rendered judgment in favor of Barte and the spouses Layumas. The fallo of the
decision reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of Intervenors-counterclaimants and

defendant and against plaintiffs-counterclaim defendants ordering as follows:

1. The dismissal of the plaintiff’s complaint with costs against them;

2. The plaintiffs to jointly pay Intervenors-counterclaimants now RTC Judge Rodolfo S. Layumas and Corazon A.
Layumas:

(a) ₱10,000.00 for attorney’s fees; and

(b) ₱30,000.00 as moral damages;

3. The plaintiffs, as counterclaim defendants, to comply with the above-stated obligation of their late father, Mr.
Jesus Mascuñana, under the Deed of Absolute Sale, Exh. "3", pp. 92-93, Exp., thru plaintiff Mr. Jose Mascuñana,
including the desegragation (sic) survey to desegregate the 469-square-meter portion of said Lot No. 124-B, San
Carlos Cadastre, this province, sold to the late Diosdado Sumilhig, if the same has not yet been done despite
what has been said herein earlier to said effect, and the execution of the Final Deed of Sale in their capacity as
the heirs and successors-in-interest of the late Mr. Jesus Mascuñana, thru Mr. Jose Mascuñana, covering the
469-square-meter desegregated portion of said Lot No. 124-B, within sixty (60) days counted from the finality of
this Decision, in favor of the Intervenors-spouses, after which the said Intervenors-spouses shall pay them, thru
Mr. Jose Mascuñana, the ₱1,000.00 balance due to them as successors-in-interest of the late Mr. Jesus
Mascuñana;

4. In case plaintiffs fail to comply with what are herein ordered for them to do, the Clerk of Court V of this Court to
do all that they were to do as herein ordered in the text and dispositive portion hereof, at the expense of
Intervenors spouses to be later reimbursed by plaintiffs, including the desegragation (sic) survey of said 469-
square-meter portion of said Lot [No.] 124-B, San Carlos Cadastre, Negros Occidental, if the same has not yet
been done and the execution of the Final Deed of Sale on behalf of all the plaintiffs as heirs and successors-in-
interest of the late Mr. Jesus Mascuñana covering the said desegregated portion of 469 square meters of the
aforesaid lot, in favor of Intervenors spouses, to the end that separate title therefor may be issued in their names,
after they shall have paid the ₱1,000.00 balance due plaintiffs under said Deed of Absolute Sale, Exh. "3."

SO ORDERED.23

Forthwith, the petitioners appealed the case to the CA, raising the following issues of fact and law:
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a. Whether or not the contract of alienation of Lot No. 124-B in favor of Diosdado Sumilhig in 1961 was a contract
to sell or a contract of sale;

b. Whether or not Diosdado Sumilhig had any right to sell Lot No. 124-B in favor of intervenor Corazon Layumas
in 1968.24

On May 5, 2003, the CA affirmed the decision of the trial court. It ruled that the contract between the petitioners’ father
and Sumilhig was one of sale. Foremost, the CA explained, the contract was denominated as a "Deed of Absolute Sale."
The stipulations in the contract likewise revealed the clear intention on the part of the vendor (Mascuñana) to alienate the
property in favor of the vendee (Sumilhig). In three various documents, the late Mascuñana even made declarations that
Sumilhig was already the owner of the disputed land. The CA added that the admission may be given in evidence against
Mascuñana and his predecessors-in-interest under Section 26, Rule 130 of the Revised Rules on Evidence. As to the
argument that the contract between Mascuñana and Sumilhig was not effective because it was subject to a suspensive
condition that did not occur, the CA ruled that the condition referred to by the petitioners refers only to the payment of the
balance of the purchase price and not to the effectivity of the contract.1avvphi1.zw+

As to the petitioners’ contention that even if the contract were one of sale, ownership cannot be transferred to Sumilhig
because Mascuñana was not yet the owner of the lot at the time of the alleged sale, the appellate court ruled that the
registration of the land to be sold is not a prerequisite to a contract of sale.

The Present Petition

Aggrieved, the petitioners filed the instant petition for review on certiorari with this Court, where the following lone legal
issue was raised:

WAS THE SALE OF LOT NO. 124-B MADE BY JESUS M. MASCUÑANA IN FAVOR OF DIOSDADO SUMILHIG A
CONTRACT TO SELL OR CONTRACT OF SALE?25

We note that the original action of the petitioners against Aquilino Barte was one for recovery of possession of Lot No.
124-B. With the intervention of the respondents Rodolfo and Corazon Layumas who claimed ownership over the property,
and the acquiescence of the parties, evidence was adduced to prove who, between the petitioners (as plaintiffs) and the
respondents (as defendants-intervenors) were the lawful owners of the subject property and entitled to its possession.

The petitioners resolutely contend that the Deed of Absolute Sale dated August 12, 1961 between their father and
Sumilhig was a mere contract to sell because at the time of the said sale, the late Mascuñana was not yet the registered
owner of Lot No. 124 or any of its portions. They assert that Sumilhig could not have acquired any rights over the lot due
to the fact that a person can only sell what he owns or is authorized to sell, and the buyer can acquire no more than what
the seller can transfer legally. Finally, the petitioners insist that the document in controversy was subject to a suspensive
condition, not a resolutory condition, which is a typical attribute of a contract of sale.

The petition is denied for lack of merit.

The issues raised by the petitioners in this case are factual, and under Rule 45 of the Rules of Court, only questions of
law may be raised in this Court, the reason being that this Court is not a trier of facts. It is not to re-examine the evidence
on record and to calibrate the same. Moreover, the findings and conclusions of the trial court as affirmed by the CA are
conclusive on the Court, absent of any evidence that the trial court, as well as the CA ignored, misinterpreted and
misconstrued facts and circumstances of substance which, if considered, would alter or reverse the outcome of the case.26

We have reviewed the records and find no justification for a reversal or even a modification of the assailed decision of the
CA.

Even on the merits of the petition, the Court finds that the decision of the trial court as well as the ruling of the CA are
based on the evidence on record and the applicable law.

The petitioners reiterated their pose that the deed of absolute sale over the property executed by their father, Jesus
Mascuñana, as vendor, and Diosdado Sumilhig as vendee, was a contract to sell and not a contract of sale. They assert
that on its face, the contract appears to be a contract to sell, because the payment of the ₱1,000.00 balance of the
purchase price was subject to a suspensive condition: the survey of the property, the segregation of the portion thereof
subject of the sale, and the completion of the documents necessary for the issuance of a Torrens title over the property to
and in the name of Sumilhig who was the vendee. The petitioners assert that Sumilhig never paid the aforesaid amount to
the vendor; hence, the obligation of the latter and his predecessors-in-interest (herein petitioners) to execute a final deed
of sale never arose. As such, they aver, title to the property remained reserved in the vendor and his heirs even after his
death. There was no need for the vendor to rescind the deed or collect the said amount of ₱1,000.00 under Article 1191 of
the New Civil Code because such a remedy applies only to contracts of sale. The petitioners insist that Sumilhig never
acquired title over the property; he could not have transferred any title to the respondents. Sumilhig could not have
transferred that which he did not own.

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The petitioners’ contention has no factual and legal bases.

The deed of absolute sale executed by Jesus Mascuñana and Sumilhig, provides, thus:

That the VENDOR is the true and absolute owner of a parcel of land known as Lot No. 124 of the Cadastral Survey of San
Carlos, situated at Broce Street and is free from liens and encumbrances, and covered by O.C.T. No. T-299[3]7 (R-1453)
of Reg. of Deeds, Negros Occ.

That for and in consideration of the sum of FOUR THOUSAND SIX HUNDRED NINETY PESOS (₱4,690.00), Philippine
Currency, to be paid by the VENDEE in the manner hereinafter stated, the VENDOR does hereby sell, transfer, cede and
convey, a portion of the above-described property containing an area of 469 square meters, the sketch of which can be
found at the back of this document and having a frontage at Broce Street of around 14 meters, and from the Broce Street
to the interior on its Southwest side with a length of 30.9 meters, with a length of 24.8 meters on its Northeast side where
it turned to the right with a length of 2.8 meters and continuing to Northwest with a length of 6.72 meters, the backyard
dimension is 17.5 meters to the Northwest, unto the VENDEE, his heirs and assigns, by way of Absolute Sale, upon the
receipt of the down payment of THREE THOUSAND SIX HUNDRED NINETY PESOS (₱3,690.00), which is hereby
acknowledged by the VENDOR as received by him.lawphil.net

That the balance of ONE THOUSAND PESOS (₱1,000.00) shall be paid by the VENDEE unto the VENDOR as soon as
the above-portions of Lot 124 shall have been surveyed in the name of the VENDEE and all papers pertinent and
necessary to the issuance of a separate Certificate of Title in the name of the VENDEE shall have been prepared.

The evidence on record shows that during the lifetime of vendor Jesus Mascuñana, and even after his death, his heirs,
the petitioners herein, unequivocably declared that Diosdado Sumilhig was the owner of the property subject of this case,
and that the respondents acquired title over the property, having purchased the same via a deed of absolute sale from
Diosdado Sumilhig. Thus, on December 31, 1961, Jesus Mascuñana and Jose Estabillo executed a Deed of Exchange
and Absolute Sale of Real Estate, in which both parties declared that they were co-owners of portions of Lot No. 124
abutted by the property owned by Diosdado Sumilhig.27

In the subdivision plan of Lot No. 124, signed by Ricardo Quilop, Private Land Surveyor, following his survey of Lot No.
124 on July 9, 1962 for and in behalf of Jesus Mascuñana, et al., it appears that Lot No. 124-B with an area of 540 square
meters belonged to Diosdado Sumilhig,28 which is abutted by Lot No. 124-C, owned by Jesus Mascuñana.

On October 1, 1985, long after the death of Jesus Mascuñana, one of his heirs, petitioner Renee Tedrew, through
counsel, wrote respondent Rodolfo Layumas offering to buy the property occupied by his overseer Aquilino Barte for
US$1,000.00:

ATTY. RODOLFO S. LAYUMAS

San Carlos City
Negros Occidental

Dear Atty. Layumas:

This has reference to the lot located at Broce Street, portions of which are presently occupied by Mr. Barte.

Mrs. Renee Tedrew (nee Agapuyan), who is now in the United States, would like to offer the amount of $1,000.00 to buy
your share of the said lot.

If you are amenable, kindly inform the undersigned for him to communicate [with] Mrs. Tedrew in California.

Very truly yours,

(Sgd.)
SAMUEL SM LEZAMA29

It was only after the respondents rejected the proposal of petitioner Renee Tedrew that the petitioners secured title over
the property on March 17, 1986 in the name of Jesus Mascuñana (already deceased at the time), canceling TCT No. 967
issued on July 6, 1962 under the name of Jesus Mascuñana, who appears to be a co-owner of Lot No. 124 with an
undivided two-seventh (2/7) portion thereof.30

While it is true that Jesus Mascuñana executed the deed of absolute sale over the property on August 12, 1961 in favor of
Diosdado Sumilhig for ₱4,690.00, and that it was only on July 6, 1962 that TCT No. 967 was issued in his name as one of
the co-owners of Lot No. 124, Diosdado Sumilhig and the respondents nevertheless acquired ownership over the
property. The deed of sale executed by Jesus Mascuñana in favor of Diosdado Sumilhig on August 12, 1961 was a
perfected contract of sale over the property. It is settled that a perfected contract of sale cannot be challenged on the
ground of the non-transfer of ownership of the property sold at that time of the perfection of the contract, since it is
consummated upon delivery of the property to the vendee. It is through tradition or delivery that the buyer acquires
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ownership of the property sold. As provided in Article 1458 of the New Civil Code, when the sale is made through a public
instrument, the execution thereof is equivalent to the delivery of the thing which is the object of the contract, unless the
contrary appears or can be inferred. The record of the sale with the Register of Deeds and the issuance of the certificate
of title in the name of the buyer over the property merely bind third parties to the sale. As between the seller and the
buyer, the transfer of ownership takes effect upon the execution of a public instrument covering the real property. 31 Long
before the petitioners secured a Torrens title over the property, the respondents had been in actual possession of the
property and had designated Barte as their overseer.

Article 1458 of the New Civil Code provides:

By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain in money or its equivalent.

A contract of sale may be absolute or conditional.

Thus, there are three essential elements of sale, to wit:

a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price;

b) Determinate subject matter; and

c) Price certain in money or its equivalent.32

In this case, there was a meeting of the minds between the vendor and the vendee, when the vendor undertook to deliver
and transfer ownership over the property covered by the deed of absolute sale to the vendee for the price of ₱4,690.00 of
which ₱3,690.00 was paid by the vendee to the vendor as down payment. The vendor undertook to have the property
sold, surveyed and segregated and a separate title therefor issued in the name of the vendee, upon which the latter would
be obliged to pay the balance of ₱1,000.00. There was no stipulation in the deed that the title to the property remained
with the vendor, or that the right to unilaterally resolve the contract upon the buyer’s failure to pay within a fixed period
was given to such vendor. Patently, the contract executed by the parties is a deed of sale and not a contract to sell. As the
Court ruled in a recent case:

In Dignos v. Court of Appeals (158 SCRA 375), we have said that, although denominated a "Deed of Conditional Sale," a
sale is still absolute where the contract is devoid of any proviso that title is reserved or the right to unilaterally rescind is
stipulated, e.g., until or unless the price is paid. Ownership will then be transferred to the buyer upon actual or
constructive delivery (e.g. by the execution of a public document) of the property sold. Where the condition is imposed
upon the perfection of the contract itself, the failure of the condition would prevent such perfection. If the condition is
imposed on the obligation of a party which is not fulfilled, the other party may either waive the condition or refuse to
proceed with the sale. (Art. 1545, Civil Code)

Thus, in one case, when the sellers declared in a "Receipt of Down Payment" that they received an amount as purchase
price for a house and lot without any reservation of title until full payment of the entire purchase price, the implication was
that they sold their property. In People’s Industrial and Commercial Corporation v. Court of Appeals, it was stated:

A deed of sale is considered absolute in nature where there is neither a stipulation in the deed that title to the property
sold is reserved in the seller until full payment of the price, nor one giving the vendor the right to unilaterally resolve the
contract the moment the buyer fails to pay within a fixed period.

Applying these principles to this case, it cannot be gainsaid that the contract of sale between the parties is absolute, not
conditional. There is no reservation of ownership nor a stipulation providing for a unilateral rescission by either party. In
fact, the sale was consummated upon the delivery of the lot to respondent. Thus, Art. 1477 provides that the ownership of
the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof.33

The condition in the deed that the balance of ₱1,000.00 shall be paid to the vendor by the vendee as soon as the property
sold shall have been surveyed in the name of the vendee and all papers pertinent and necessary to the issuance of a
separate certificate of title in the name of the vendee shall have been prepared is not a condition which prevented the
efficacy of the contract of sale. It merely provides the manner by which the total purchase price of the property is to be
paid. The condition did not prevent the contract from being in full force and effect:

The stipulation that the "payment of the full consideration based on a survey shall be due and payable in five (5) years
from the execution of a formal deed of sale" is not a condition which affects the efficacy of the contract of sale. It merely
provides the manner by which the full consideration is to be computed and the time within which the same is to be paid.
But it does not affect in any manner the effectivity of the contract. …34

In a contract to sell, ownership is retained by a seller and is not to be transferred to the vendee until full payment of the
price. Such payment is a positive suspensive condition, the failure of which is not a breach of contract but simply an event
that prevented the obligation from acquiring binding force.35
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It bears stressing that in a contract of sale, the non-payment of the price is a resolutory condition which extinguishes the
transaction that, for a time, existed and discharges the obligation created under the transaction. 36 A seller cannot
unilaterally and extrajudicially rescind a contract of sale unless there is an express stipulation authorizing it. In such case,
the vendor may file an action for specific performance or judicial rescission.37

Article 1169 of the New Civil Code provides that in reciprocal obligations, neither party incurs in delay if the other does not
comply or is not ready to comply in a proper manner with what is incumbent upon him; from the moment one of the parties
fulfills his obligation, delay by the other begins. In this case, the vendor (Jesus Mascuñana) failed to comply with his
obligation of segregating Lot No. 124-B and the issuance of a Torrens title over the property in favor of the vendee, or the
latter’s successors-in-interest, the respondents herein. Worse, petitioner Jose Mascuñana was able to secure title over
the property under the name of his deceased father.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs against the petitioners.

SO ORDERED.

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

G.R. No. 188064               June 1, 2011

MILA A. REYES, Petitioner,
vs.
VICTORIA T. TUPARAN, Respondent.

DECISION

MENDOZA, J.:

Subject of this petition for review is the February 13, 2009 Decision 1 of the Court of Appeals (CA) which affirmed with
modification the February 22, 2006 Decision2 of the Regional Trial Court, Branch 172, Valenzuela City (RTC), in Civil
Case No. 3945-V-92, an action for Rescission of Contract with Damages.

On September 10, 1992, Mila A. Reyes (petitioner) filed a complaint for Rescission of Contract with Damages against
Victoria T. Tuparan (respondent) before the RTC. In her Complaint, petitioner alleged, among others, that she was the
registered owner of a 1,274 square meter residential and commercial lot located in Karuhatan, Valenzuela City, and
covered by TCT No. V-4130; that on that property, she put up a three-storey commercial building known as RBJ Building
and a residential apartment building; that since 1990, she had been operating a drugstore and cosmetics store on the
ground floor of RBJ Building where she also had been residing while the other areas of the buildings including the
sidewalks were being leased and occupied by tenants and street vendors.

In December 1989, respondent leased from petitioner a space on the ground floor of the RBJ Building for her pawnshop
business for a monthly rental of ₱4,000.00. A close friendship developed between the two which led to the respondent
investing thousands of pesos in petitioner’s financing/lending business from February 7, 1990 to May 27, 1990, with
interest at the rate of 6% a month.

On June 20, 1988, petitioner mortgaged the subject real properties to the Farmers Savings Bank and Loan Bank, Inc.
(FSL Bank) to secure a loan of ₱2,000,000.00 payable in installments. On November 15, 1990, petitioner’s outstanding
account on the mortgage reached ₱2,278,078.13. Petitioner then decided to sell her real properties for at least
₱6,500,000.00 so she could liquidate her bank loan and finance her businesses. As a gesture of friendship, respondent
verbally offered to conditionally buy petitioner’s real properties for ₱4,200,000.00 payable on installment basis without
interest and to assume the bank loan. To induce the petitioner to accept her offer, respondent offered the following
conditions/concessions:

1. That the conditional sale will be cancelled if the plaintiff (petitioner) can find a buyer of said properties for the
amount of ₱6,500,000.00 within the next three (3) months provided all amounts received by the plaintiff from the
defendant (respondent) including payments actually made by defendant to Farmers Savings and Loan Bank
would be refunded to the defendant with additional interest of six (6%) monthly;

2. That the plaintiff would continue using the space occupied by her and drugstore and cosmetics store without
any rentals for the duration of the installment payments;

3. That there will be a lease for fifteen (15) years in favor of the plaintiff over the space for drugstore and
cosmetics store at a monthly rental of only ₱8,000.00 after full payment of the stipulated installment payments are
made by the defendant;

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4. That the defendant will undertake the renewal and payment of the fire insurance policies on the two (2) subject
buildings following the expiration of the then existing fire insurance policy of the plaintiff up to the time that plaintiff
is fully paid of the total purchase price of ₱4,200,000.00.3

After petitioner’s verbal acceptance of all the conditions/concessions, both parties worked together to obtain FSL Bank’s
approval for respondent to assume her (petitioner’s) outstanding bank account. The assumption would be part of
respondent’s purchase price for petitioner’s mortgaged real properties. FSL Bank approved their proposal on the condition
that petitioner would sign or remain as co-maker for the mortgage obligation assumed by respondent.

On November 26, 1990, the parties and FSL Bank executed the corresponding Deed of Conditional Sale of Real
Properties with Assumption of Mortgage. Due to their close personal friendship and business relationship, both parties
chose not to reduce into writing the other terms of their agreement mentioned in paragraph 11 of the complaint. Besides,
FSL Bank did not want to incorporate in the Deed of Conditional Sale of Real Properties with Assumption of Mortgage any
other side agreement between petitioner and respondent.

Under the Deed of Conditional Sale of Real Properties with Assumption of Mortgage, respondent was bound to pay the
petitioner a lump sum of ₱1.2 million pesos without interest as part of the purchase price in three (3) fixed installments as
follows:

a) ₱200,000.00 – due January 31, 1991

b) ₱200,000.00 – due June 30, 1991

c) ₱800,000.00 – due December 31, 1991

Respondent, however, defaulted in the payment of her obligations on their due dates. Instead of paying the amounts due
in lump sum on their respective maturity dates, respondent paid petitioner in small amounts from time to time. To
compensate for her delayed payments, respondent agreed to pay petitioner an interest of 6% a month. As of August 31,
1992, respondent had only paid ₱395,000.00, leaving a balance of ₱805,000.00 as principal on the unpaid installments
and ₱466,893.25 as unpaid accumulated interest.

Petitioner further averred that despite her success in finding a prospective buyer for the subject real properties within the
3-month period agreed upon, respondent reneged on her promise to allow the cancellation of their deed of conditional
sale. Instead, respondent became interested in owning the subject real properties and even wanted to convert the entire
property into a modern commercial complex. Nonetheless, she consented because respondent repeatedly professed
friendship and assured her that all their verbal side agreement would be honored as shown by the fact that since
December 1990, she (respondent) had not collected any rentals from the petitioner for the space occupied by her
drugstore and cosmetics store.

On March 19, 1992, the residential building was gutted by fire which caused the petitioner to lose rental income in the
amount of ₱8,000.00 a month since April 1992. Respondent neglected to renew the fire insurance policy on the subject
buildings.

Since December 1990, respondent had taken possession of the subject real properties and had been continuously
collecting and receiving monthly rental income from the tenants of the buildings and vendors of the sidewalk fronting the
RBJ building without sharing it with petitioner.

On September 2, 1992, respondent offered the amount of ₱751,000.00 only payable on September 7, 1992, as full
payment of the purchase price of the subject real properties and demanded the simultaneous execution of the
corresponding deed of absolute sale.

Respondent’s Answer

Respondent countered, among others, that the tripartite agreement erroneously designated by the petitioner as a Deed of
Conditional Sale of Real Property with Assumption of Mortgage was actually a pure and absolute contract of sale with a
term period. It could not be considered a conditional sale because the acquisition of contractual rights and the
performance of the obligation therein did not depend upon a future and uncertain event. Moreover, the capital gains and
documentary stamps and other miscellaneous expenses and real estate taxes up to 1990 were supposed to be paid by
petitioner but she failed to do so.

Respondent further averred that she successfully rescued the properties from a definite foreclosure by paying the
assumed mortgage in the amount of ₱2,278,078.13 plus interest and other finance charges. Because of her payment, she
was able to obtain a deed of cancellation of mortgage and secure a release of mortgage on the subject real properties
including petitioner’s ancestral residential property in Sta. Maria, Bulacan.

Petitioner’s claim for the balance of the purchase price of the subject real properties was baseless and unwarranted
because the full amount of the purchase price had already been paid, as she did pay more than ₱4,200,000.00, the
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agreed purchase price of the subject real properties, and she had even introduced improvements thereon worth more
than ₱4,800,000.00. As the parties could no longer be restored to their original positions, rescission could not be resorted
to.

Respondent added that as a result of their business relationship, petitioner was able to obtain from her a loan in the
amount of ₱400,000.00 with interest and took several pieces of jewelry worth ₱120,000.00. Petitioner also failed and
refused to pay the monthly rental of ₱20,000.00 since November 16, 1990 up to the present for the use and occupancy of
the ground floor of the building on the subject real property, thus, accumulating arrearages in the amount of ₱470,000.00
as of October 1992.

Ruling of the RTC

On February 22, 2006, the RTC handed down its decision finding that respondent failed to pay in full the ₱4.2 million total
purchase price of the subject real properties leaving a balance of ₱805,000.00. It stated that the checks and receipts
presented by respondent refer to her payments of the mortgage obligation with FSL Bank and not the payment of the
balance of ₱1,200,000.00. The RTC also considered the Deed of Conditional Sale of Real Property with Assumption of
Mortgage executed by and among the two parties and FSL Bank a contract to sell, and not a contract of sale. It was of the
opinion that although the petitioner was entitled to a rescission of the contract, it could not be permitted because her non-
payment in full of the purchase price "may not be considered as substantial and fundamental breach of the contract as to
defeat the object of the parties in entering into the contract."4 The RTC believed that the respondent’s offer stated in her
counsel’s letter dated September 2, 1992 to settle what she thought was her unpaid balance of ₱751,000.00 showed her
sincerity and willingness to settle her obligation. Hence, it would be more equitable to give respondent a chance to pay the
balance plus interest within a given period of time.

Finally, the RTC stated that there was no factual or legal basis to award damages and attorney’s fees because there was
no proof that either party acted fraudulently or in bad faith.

Thus, the dispositive portion of the RTC Decision reads:

WHEREFORE, judgment is hereby rendered as follows:

1. Allowing the defendant to pay the plaintiff within thirty (30) days from the finality hereof the amount of
₱805,000.00, representing the unpaid purchase price of the subject property, with interest thereon at 2% a month
from January 1, 1992 until fully paid. Failure of the defendant to pay said amount within the said period shall
cause the automatic rescission of the contract (Deed of Conditional Sale of Real Property with Assumption of
Mortgage) and the plaintiff and the defendant shall be restored to their former positions relative to the subject
property with each returning to the other whatever benefits each derived from the transaction;

2. Directing the defendant to allow the plaintiff to continue using the space occupied by her for drugstore and
cosmetic store without any rental pending payment of the aforesaid balance of the purchase price.

3. Ordering the defendant, upon her full payment of the purchase price together with interest, to execute a
contract of lease for fifteen (15) years in favor of the plaintiff over the space for the drugstore and cosmetic store
at a fixed monthly rental of ₱8,000.00; and

4. Directing the plaintiff, upon full payment to her by the defendant of the purchase price together with interest, to
execute the necessary deed of sale, as well as to pay the Capital Gains Tax, documentary stamps and other
miscellaneous expenses necessary for securing the BIR Clearance, and to pay the real estate taxes due on the
subject property up to 1990, all necessary to transfer ownership of the subject property to the defendant.

No pronouncement as to damages, attorney’s fees and costs.

SO ORDERED.5

Ruling of the CA

On February 13, 2009, the CA rendered its decision affirming with modification the RTC Decision. The CA agreed with the
RTC that the contract entered into by the parties is a contract to sell but ruled that the remedy of rescission could not
apply because the respondent’s failure to pay the petitioner the balance of the purchase price in the total amount of
₱805,000.00 was not a breach of contract, but merely an event that prevented the seller (petitioner) from conveying title to
the purchaser (respondent). It reasoned that out of the total purchase price of the subject property in the amount of
₱4,200,000.00, respondent’s remaining unpaid balance was only ₱805,000.00. Since respondent had already paid a
substantial amount of the purchase price, it was but right and just to allow her to pay the unpaid balance of the purchase
price plus interest. Thus, the decretal portion of the CA Decision reads:

WHEREFORE, premises considered, the Decision dated 22 February 2006 and Order dated 22 December 2006 of the
Regional Trial Court of Valenzuela City, Branch 172 in Civil Case No. 3945-V-92 are AFFIRMED with MODIFICATION in
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that defendant-appellant Victoria T. Tuparan is hereby ORDERED to pay plaintiff-appellee/appellant Mila A. Reyes, within
30 days from finality of this Decision, the amount of ₱805,000.00 representing the unpaid balance of the purchase price of
the subject property, plus interest thereon at the rate of 6% per annum from 11 September 1992 up to finality of this
Decision and, thereafter, at the rate of 12% per annum until full payment. The ruling of the trial court on the automatic
rescission of the Deed of Conditional Sale with Assumption of Mortgage is hereby DELETED. Subject to the foregoing,
the dispositive portion of the trial court’s decision is AFFIRMED in all other respects.

SO ORDERED.6

After the denial of petitioner’s motion for reconsideration and respondent’s motion for partial reconsideration, petitioner
filed the subject petition for review praying for the reversal and setting aside of the CA Decision anchored on the following

ASSIGNMENT OF ERRORS

A. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN DISALLOWING THE
OUTRIGHT RESCISSION OF THE SUBJECT DEED OF CONDITIONAL SALE OF REAL PROPERTIES WITH
ASSUMPTION OF MORTGAGE ON THE GROUND THAT RESPONDENT TUPARAN’S FAILURE TO PAY PETITIONER
REYES THE BALANCE OF THE PURCHASE PRICE OF ₱805,000.00 IS NOT A BREACH OF CONTRACT DESPITE
ITS OWN FINDINGS THAT PETITIONER STILL RETAINS OWNERSHIP AND TITLE OVER THE SUBJECT REAL
PROPERTIES DUE TO RESPONDENT’S REFUSAL TO PAY THE BALANCE OF THE TOTAL PURCHASE PRICE OF
₱805,000.00 WHICH IS EQUAL TO 20% OF THE TOTAL PURCHASE PRICE OF ₱4,200,000.00 OR 66% OF THE
STIPULATED LAST INSTALLMENT OF ₱1,200,000.00 PLUS THE INTEREST THEREON. IN EFFECT, THE COURT OF
APPEALS AFFIRMED AND ADOPTED THE TRIAL COURT’S CONCLUSION THAT THE RESPONDENT’S NON-
PAYMENT OF THE ₱805,000.00 IS ONLY A SLIGHT OR CASUAL BREACH OF CONTRACT.

B. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN DISREGARDING AS
GROUND FOR THE RESCISSION OF THE SUBJECT CONTRACT THE OTHER FRAUDULENT AND MALICIOUS
ACTS COMMITTED BY THE RESPONDENT AGAINST THE PETITIONER WHICH BY THEMSELVES SUFFICIENTLY
JUSTIFY A DENIAL OF A GRACE PERIOD OF THIRTY (30) DAYS TO THE RESPONDENT WITHIN WHICH TO PAY
TO THE PETITIONER THE ₱805,000.00 PLUS INTEREST THEREON.

C. EVEN ASSUMING ARGUENDO THAT PETITIONER IS NOT ENTITLED TO THE RESCISSION OF THE SUBJECT
CONTRACT, THE COURT OF APPEALS STILL SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN REDUCING
THE INTEREST ON THE ₱805,000.00 TO ONLY "6% PER ANNUM STARTING FROM THE DATE OF FILING OF THE
COMPLAINT ON SEPTEMBER 11, 1992" DESPITE THE PERSONAL COMMITMENT OF THE RESPONDENT AND
AGREEMENT BETWEEN THE PARTIES THAT RESPONDENT WILL PAY INTEREST ON THE ₱805,000.00 AT THE
RATE OF 6% MONTHLY STARTING THE DATE OF DELINQUENCY ON DECEMBER 31, 1991.

D. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN THE APPRECIATION AND/OR
MISAPPRECIATION OF FACTS RESULTING INTO THE DENIAL OF THE CLAIM OF PETITIONER REYES FOR
ACTUAL DAMAGES WHICH CORRESPOND TO THE MILLIONS OF PESOS OF RENTALS/FRUITS OF THE SUBJECT
REAL PROPERTIES WHICH RESPONDENT TUPARAN COLLECTED CONTINUOUSLY SINCE DECEMBER 1990,
EVEN WITH THE UNPAID BALANCE OF ₱805,000.00 AND DESPITE THE FACT THAT RESPONDENT DID NOT
CONTROVERT SUCH CLAIM OF THE PETITIONER AS CONTAINED IN HER AMENDED COMPLAINT DATED APRIL
22, 2006.

E. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN THE APPRECIATION OF
FACTS RESULTING INTO THE DENIAL OF THE CLAIM OF PETITIONER REYES FOR THE ₱29,609.00 BACK
RENTALS THAT WERE COLLECTED BY RESPONDENT TUPARAN FROM THE OLD TENANTS OF THE
PETITIONER.

F. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN DENYING THE PETITIONER’S
EARLIER "URGENT MOTION FOR ISSUANCE OF A PRELIMINARY MANDATORY AND PROHIBITORY INJUNCTION"
DATED JULY 7, 2008 AND THE "SUPPLEMENT" THERETO DATED AUGUST 4, 2008 THEREBY CONDONING THE
UNJUSTIFIABLE FAILURE/REFUSAL OF JUDGE FLORO ALEJO TO RESOLVE WITHIN ELEVEN (11) YEARS THE
PETITIONER’S THREE (3) SEPARATE "MOTIONS FOR PRELIMINARY INJUNCTION/ TEMPORARY RESTRAINING
ORDER, ACCOUNTING AND DEPOSIT OF RENTAL INCOME" DATED MARCH 17, 1995, AUGUST 19, 1996 AND
JANUARY 7, 2006 THEREBY PERMITTING THE RESPONDENT TO UNJUSTLY ENRICH HERSELF BY
CONTINUOUSLY COLLECTING ALL THE RENTALS/FRUITS OF THE SUBJECT REAL PROPERTIES WITHOUT ANY
ACCOUNTING AND COURT DEPOSIT OF THE COLLECTED RENTALS/FRUITS AND THE PETITIONERS "URGENT
MOTION TO DIRECT DEFENDANT VICTORIA TUPARAN TO PAY THE ACCUMULATED UNPAID REAL ESTATE
TAXES AND SEF TAXES ON THE SUBJECT REAL PROPERTIES" DATED JANUARY 13, 2007 THEREBY EXPOSING
THE SUBJECT REAL PROPERTIES TO IMMINENT AUCTION SALE BY THE CITY TREASURER OF VALENZUELA
CITY.

G. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN DENYING THE
PETITIONER’S CLAIM FOR MORAL AND EXEMPLARY DAMAGES AND ATTORNEY’S FEES AGAINST THE
RESPONDENT.
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In sum, the crucial issue that needs to be resolved is whether or not the CA was correct in ruling that there was no legal
basis for the rescission of the Deed of Conditional Sale with Assumption of Mortgage.

Position of the Petitioner

The petitioner basically argues that the CA should have granted the rescission of the subject Deed of Conditional Sale of
Real Properties with Assumption of Mortgage for the following reasons:

1. The subject deed of conditional sale is a reciprocal obligation whose outstanding characteristic is reciprocity
arising from identity of cause by virtue of which one obligation is correlative of the other.

2. The petitioner was rescinding – not enforcing – the subject Deed of Conditional Sale pursuant to Article 1191 of
the Civil Code because of the respondent’s failure/refusal to pay the ₱805,000.00 balance of the total purchase
price of the petitioner’s properties within the stipulated period ending December 31, 1991.

3. There was no slight or casual breach on the part of the respondent because she (respondent) deliberately
failed to comply with her contractual obligations with the petitioner by violating the terms or manner of payment of
the ₱1,200,000.00 balance and unjustly enriched herself at the expense of the petitioner by collecting all rental
payments for her personal benefit and enjoyment.

Furthermore, the petitioner claims that the respondent is liable to pay interest at the rate of 6% per month on her unpaid
installment of ₱805,000.00 from the date of the delinquency, December 31, 1991, because she obligated herself to do so.

Finally, the petitioner asserts that her claim for damages or lost income as well as for the back rentals in the amount of
₱29,609.00 has been fully substantiated and, therefore, should have been granted by the CA. Her claim for moral and
exemplary damages and attorney’s fees has been likewise substantiated.

Position of the Respondent

The respondent counters that the subject Deed of Conditional Sale with Assumption of Mortgage entered into between the
parties is a contract to sell and not a contract of sale because the title of the subject properties still remains with the
petitioner as she failed to pay the installment payments in accordance with their agreement.

Respondent echoes the RTC position that her inability to pay the full balance on the purchase price may not be
considered as a substantial and fundamental breach of the subject contract and it would be more equitable if she would
be allowed to pay the balance including interest within a certain period of time. She claims that as early as 1992, she has
shown her sincerity by offering to pay a certain amount which was, however, rejected by the petitioner.

Finally, respondent states that the subject deed of conditional sale explicitly provides that the installment payments shall
not bear any interest. Moreover, petitioner failed to prove that she was entitled to back rentals.

The Court’s Ruling

The petition lacks merit.

The Court agrees with the ruling of the courts below that the subject Deed of Conditional Sale with Assumption of
Mortgage entered into by and among the two parties and FSL Bank on November 26, 1990 is a contract to sell and not a
contract of sale. The subject contract was correctly classified as a contract to sell based on the following pertinent
stipulations:

8. That the title and ownership of the subject real properties shall remain with the First Party until the full payment of the
Second Party of the balance of the purchase price and liquidation of the mortgage obligation of ₱2,000,000.00. Pending
payment of the balance of the purchase price and liquidation of the mortgage obligation that was assumed by the Second
Party, the Second Party shall not sell, transfer and convey and otherwise encumber the subject real properties without the
written consent of the First and Third Party.

9. That upon full payment by the Second Party of the full balance of the purchase price and the assumed mortgage
obligation herein mentioned the Third Party shall issue the corresponding Deed of Cancellation of Mortgage and the First
Party shall execute the corresponding Deed of Absolute Sale in favor of the Second Party.7

Based on the above provisions, the title and ownership of the subject properties remains with the petitioner until the
respondent fully pays the balance of the purchase price and the assumed mortgage obligation. Thereafter, FSL Bank shall
then issue the corresponding deed of cancellation of mortgage and the petitioner shall execute the corresponding deed of
absolute sale in favor of the respondent.

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Accordingly, the petitioner’s obligation to sell the subject properties becomes demandable only upon the happening of the
positive suspensive condition, which is the respondent’s full payment of the purchase price. Without respondent’s full
payment, there can be no breach of contract to speak of because petitioner has no obligation yet to turn over the title.
Respondent’s failure to pay in full the purchase price is not the breach of contract contemplated under Article 1191 of the
New Civil Code but rather just an event that prevents the petitioner from being bound to convey title to the respondent.
The 2009 case of Nabus v. Joaquin & Julia Pacson8 is enlightening:

The Court holds that the contract entered into by the Spouses Nabus and respondents was a contract to sell, not a
contract of sale.

A contract of sale is defined in Article 1458 of the Civil Code, thus:

Art. 1458. By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.

xxx

Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The essential elements of a
contract of sale are the following:

a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price;

b) Determinate subject matter; and

c) Price certain in money or its equivalent.

Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the first essential element is
lacking. In a contract to sell, the prospective seller explicitly reserves the transfer of title to the prospective buyer,
meaning, the prospective seller does not as yet agree or consent to transfer ownership of the property subject of the
contract to sell until the happening of an event, which for present purposes we shall take as the full payment of the
purchase price. What the seller agrees or obliges himself to do is to fulfill his promise to sell the subject property when the
entire amount of the purchase price is delivered to him. In other words, the full payment of the purchase price partakes of
a suspensive condition, the non-fulfillment of which prevents the obligation to sell from arising and, thus, ownership is
retained by the prospective seller without further remedies by the prospective buyer.

x x x           x x x          x x x

Stated positively, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, the
prospective seller’s obligation to sell the subject property by entering into a contract of sale with the prospective buyer
becomes demandable as provided in Article 1479 of the Civil Code which states:

Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the
promise is supported by a consideration distinct from the price.

A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while expressly reserving the
ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the said property
exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase
price.

A contract to sell as defined hereinabove, may not even be considered as a conditional contract of sale where the seller
may likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition, because in a
conditional contract of sale, the first element of consent is present, although it is conditioned upon the happening of a
contingent event which may or may not occur. If the suspensive condition is not fulfilled, the perfection of the contract of
sale is completely abated. However, if the suspensive condition is fulfilled, the contract of sale is thereby perfected, such
that if there had already been previous delivery of the property subject of the sale to the buyer, ownership thereto
automatically transfers to the buyer by operation of law without any further act having to be performed by the seller.

In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the purchase price,
ownership will not automatically transfer to the buyer although the property may have been previously delivered to him.
The prospective seller still has to convey title to the prospective buyer by entering into a contract of absolute sale.

Further, Chua v. Court of Appeals, cited this distinction between a contract of sale and a contract to sell:

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

It is not the title of the contract, but its express terms or stipulations that determine the kind of contract entered into by the
parties. In this case, the contract entitled "Deed of Conditional Sale" is actually a contract to sell. The contract stipulated
that "as soon as the full consideration of the sale has been paid by the vendee, the corresponding transfer documents
shall be executed by the vendor to the vendee for the portion sold." Where the vendor promises to execute a deed of
absolute sale upon the completion by the vendee of the payment of the price, the contract is only a contract to sell." The
aforecited stipulation shows that the vendors reserved title to the subject property until full payment of the purchase price.

xxx

Unfortunately for the Spouses Pacson, since the Deed of Conditional Sale executed in their favor was merely a contract to
sell, the obligation of the seller to sell becomes demandable only upon the happening of the suspensive condition. The full
payment of the purchase price is the positive suspensive condition, the failure of which is not a breach of contract, but
simply an event that prevented the obligation of the vendor to convey title from acquiring binding force . Thus, for
its non-fulfilment, there is no contract to speak of, the obligor having failed to perform the suspensive condition which
enforces a juridical relation. With this circumstance, there can be no rescission or fulfillment of an obligation that is still
non-existent, the suspensive condition not having occurred as yet. Emphasis should be made that the breach
contemplated in Article 1191 of the New Civil Code is the obligor’s failure to comply with an obligation already extant, not
a failure of a condition to render binding that obligation. [Emphases and underscoring supplied]

Consistently, the Court handed down a similar ruling in the 2010 case of Heirs of Atienza v. Espidol, 9 where it was
written:

Regarding the right to cancel the contract for non-payment of an installment, there is need to initially determine if what the
parties had was a contract of sale or a contract to sell. In a contract of sale, the title to the property passes to the buyer
upon the delivery of the thing sold. In a contract to sell, on the other hand, the ownership is, by agreement, retained by the
seller and is not to pass to the vendee until full payment of the purchase price. In the contract of sale, the buyer’s non-
payment of the price is a negative resolutory condition; in the contract to sell, the buyer’s full payment of the price is a
positive suspensive condition to the coming into effect of the agreement. In the first case, the seller has lost and cannot
recover the ownership of the property unless he takes action to set aside the contract of sale. In the second case, the title
simply remains in the seller if the buyer does not comply with the condition precedent of making payment at the time
specified in the contract. Here, it is quite evident that the contract involved was one of a contract to sell since the Atienzas,
as sellers, were to retain title of ownership to the land until respondent Espidol, the buyer, has paid the agreed price.
Indeed, there seems no question that the parties understood this to be the case.

Admittedly, Espidol was unable to pay the second installment of ₱1,750,000.00 that fell due in December 2002. That
payment, said both the RTC and the CA, was a positive suspensive condition failure of which was not regarded a breach
in the sense that there can be no rescission of an obligation (to turn over title) that did not yet exist since the
suspensive condition had not taken place. x x x. [Emphases and underscoring supplied]

Thus, the Court fully agrees with the CA when it resolved: "Considering, however, that the Deed of Conditional Sale was
not cancelled by Vendor Reyes (petitioner) and that out of the total purchase price of the subject property in the amount of
₱4,200,000.00, the remaining unpaid balance of Tuparan (respondent) is only ₱805,000.00, a substantial amount of the
purchase price has already been paid. It is only right and just to allow Tuparan to pay the said unpaid balance of the
purchase price to Reyes."10

Granting that a rescission can be permitted under Article 1191, the Court still cannot allow it for the reason that,
considering the circumstances, there was only a slight or casual breach in the fulfillment of the obligation.

Unless the parties stipulated it, rescission is allowed only when the breach of the contract is substantial and fundamental
to the fulfillment of the obligation. Whether the breach is slight or substantial is largely determined by the attendant
circumstances.11 In the case at bench, the subject contract stipulated the following important provisions:

2. That the purchase price of ₱4,200,000.00 shall be paid as follows:

a) ₱278,078.13 received in cash by the First Party but directly paid to the Third Party as partial payment of the
mortgage obligation of the First Party in order to reduce the amount to ₱2,000,000.00 only as of November 15,
1990;

b) ₱721,921.87 received in cash by the First Party as additional payment of the Second Party;

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c) ₱1,200,000.00 to be paid in installments as follows:

1. ₱200,000.00 payable on or before January 31, 1991;

2. ₱200,000.00 payable on or before June 30, 1991;

3. ₱800,000.00 payable on or before December 31, 1991;

Note: All the installments shall not bear any interest.

d) ₱2,000,000.00 outstanding balance of the mortgage obligation as of November 15, 1990 which is hereby
assumed by the Second Party.

xxx

3. That the Third Party hereby acknowledges receipts from the Second Party ₱278,078.13 as partial payment of the loan
obligation of First Party in order to reduce the account to only ₱2,000,000.00 as of November 15, 1990 to be assumed by
the Second Party effective November 15, 1990.12

From the records, it cannot be denied that respondent paid to FSL Bank petitioner’s mortgage obligation in the amount of
₱2,278,078.13, which formed part of the purchase price of the subject property. Likewise, it is not disputed that
respondent paid directly to petitioner the amount of ₱721,921.87 representing the additional payment for the purchase of
the subject property. Clearly, out of the total price of ₱4,200,000.00, respondent was able to pay the total amount of
₱3,000,000.00, leaving a balance of ₱1,200,000.00 payable in three (3) installments.

Out of the ₱1,200,000.00 remaining balance, respondent paid on several dates the first and second installments of
₱200,000.00 each. She, however, failed to pay the third and last installment of ₱800,000.00 due on December 31, 1991.
Nevertheless, on August 31, 1992, respondent, through counsel, offered to pay the amount of ₱751,000.00, which was
rejected by petitioner for the reason that the actual balance was ₱805,000.00 excluding the interest charges.

Considering that out of the total purchase price of ₱4,200,000.00, respondent has already paid the substantial amount of
₱3,400,000.00, more or less, leaving an unpaid balance of only ₱805,000.00, it is right and just to allow her to settle,
within a reasonable period of time, the balance of the unpaid purchase price. The Court agrees with the courts below that
the respondent showed her sincerity and willingness to comply with her obligation when she offered to pay the petitioner
the amount of ₱751,000.00.

On the issue of interest, petitioner failed to substantiate her claim that respondent made a personal commitment to pay a
6% monthly interest on the ₱805,000.00 from the date of delinquency, December 31, 1991. As can be gleaned from the
contract, there was a stipulation stating that: "All the installments shall not bear interest." The CA was, however, correct in
imposing interest at the rate of 6% per annum starting from the filing of the complaint on September 11, 1992.1avvphi1

Finally, the Court upholds the ruling of the courts below regarding the non-imposition of damages and attorney’s fees.
Aside from petitioner’s self-serving statements, there is not enough evidence on record to prove that respondent acted
fraudulently and maliciously against the petitioner. In the case of Heirs of Atienza v. Espidol,13 it was stated:

Respondents are not entitled to moral damages because contracts are not referred to in Article 2219 of the Civil Code,
which enumerates the cases when moral damages may be recovered. Article 2220 of the Civil Code allows the recovery
of moral damages in breaches of contract where the defendant acted fraudulently or in bad faith. However, this case
involves a contract to sell, wherein full payment of the purchase price is a positive suspensive condition, the non-
fulfillment of which is not a breach of contract, but merely an event that prevents the seller from conveying title to the
purchaser. Since there is no breach of contract in this case, respondents are not entitled to moral damages.

In the absence of moral, temperate, liquidated or compensatory damages, exemplary damages cannot be granted for they
are allowed only in addition to any of the four kinds of damages mentioned.

WHEREFORE, the petition is DENIED.

SO ORDERED.

EYES V. TUPARAN (G.R. NO. 188064; JUNE 1, 2011)

CASE DIGEST: MILA A. REYES v. VICTORIA T. TUPARAN. (G.R. No. 188064; June 1, 2011).

FACTS: Mila A. Reyes (petitioner) filed a complaint for Rescission of Contract with Damages against Victoria T. Tuparan
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(respondent) before the RTC.In her Complaint, petitioner alleged, among others, that she was the registered owner of a
1,274 square meter residential and commercial lot located in Karuhatan, Valenzuela City, and covered by TCT No. V-4130.

Petitioner mortgaged the subject real properties to the Farmers Savings Bank and Loan Bank, Inc. (FSL Bank) to secure a
loan. Petitioner then decided to sell her real properties so she could liquidate her bank loan and finance her businesses. As
a gesture of friendship, respondent verbally offered to conditionally buy petitioner's real properties.

The parties and FSL Bank executed the corresponding Deed of Conditional Sale of Real Properties with Assumption of
Mortgage. Due to their close personal friendship and business relationship, both parties chose not to reduce into writing
the other terms of their agreement mentioned in paragraph 11 of the complaint.

Respondent, however, defaulted in the payment of her obligations on their due dates. Instead of paying the amounts due
in lump sum on their respective maturity dates, respondent paid petitioner in small amounts from time to time.

Respondent countered, among others, that the tripartite agreement erroneously designated by the petitioner as a Deed of
Conditional Sale of Real Property with Assumption of Mortgage was actually a pure and absolute contract of sale with a
term period. It could not be considered a conditional sale because the acquisition of contractual rights and the
performance of the obligation therein did not depend upon a future and uncertain event.

Respondent further averred that she successfully rescued the properties from a definite foreclosure by paying the assumed
mortgage plus interest and other finance charges.

The RTC handed down its decision finding that respondent failed to pay in full the total purchase price of the subject real
properties. It stated that the checks and receipts presented by respondent refer to her payments of the mortgage obligation
with FSL Bank. The RTC also considered the Deed of Conditional Sale of Real Property with Assumption of Mortgage
executed by and among the two parties and FSL Bank a contract to sell, and not a contract of sale.

The CA rendered its decision affirming with modification the RTC Decision.The CA agreed with the RTC that the contract
entered into by the parties is a contract to sell but ruled that the remedy of rescission could not apply because the
respondent's failure to pay the petitioner the balance of the purchase was not a breach of contract, but merely an event
that prevented the seller (petitioner) from conveying title to the purchaser (respondent).

ISSUE: Was the agreement a contract to sell and not a contract of sale?

HELD: The Court agrees with the ruling of the courts below that the subject Deed of Conditional Sale with Assumption of
Mortgage entered into by and among the two parties and FSL Bank on November 26, 1990 is a contract to sell and not a
contract of sale.

The title and ownership of the subject properties remains with the petitioner until the respondent fully pays the balance of
the purchase price and the assumed mortgage obligation. Thereafter, FSL Bank shall then issue the corresponding deed of
cancellation of mortgage and the petitioner shall execute the corresponding deed of absolute sale in favor of the
respondent.

Accordingly, the petitioner's obligation to sell the subject properties becomes demandable only upon the happening of the

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positive suspensive condition, which is the respondent's full payment of the purchase price. Without respondent's full
payment, there can be no breach of contract to speak of because petitioner has no obligation yet to turn over the title.
Respondent's failure to pay in full the purchase price is not the breach of contract contemplated under Article 1191 of the
New Civil Code but rather just an event that prevents the petitioner from being bound to convey title to the respondent.

Thus, the Court fully agrees with the CA when it resolved: "Considering, however, that the Deed of Conditional Sale was
not cancelled by Vendor Reyes (petitioner) and that out of the total purchase price of the subject property in the amount of
?4,200,000.00, the remaining unpaid balance of Tuparan (respondent) is only ?805,000.00, a substantial amount of the
purchase price has already been paid.It is only right and just to allow Tuparan to pay the said unpaid balance of the
purchase price to Reyes."

Granting that a rescission can be permitted under Article 1191, the Court still cannot allow it for the reason that,
considering the circumstances, there was only a slight or casual breach in the fulfillment of the obligation.

Out of the P1,200,000.00 remaining balance, respondent paid on several dates the first and second installments of
P200,000.00 each. She, however, failed to pay the third and last installment of P800,000.00 due on December 31, 1991.
Nevertheless, on August 31, 1992, respondent, through counsel, offered to pay the amount of P751,000.00, which was
rejected by petitioner for the reason that the actual balance was P805,000.00 excluding the interest charges.

Considering that out of the total purchase price of P4,200,000.00, respondent has already paid the substantial amount of
P3,400,000.00, more or less, leaving an unpaid balance of only P805,000.00, it is right and just to allow her to settle,
within a reasonable period of time, the balance of the unpaid purchase price. The Court agrees with the courts below that
the respondent showed her sincerity and willingness to comply with her obligation when she offered to pay the petitioner
the amount of P751,000.00. DENIED.

G.R. No. 179965               February 20, 2013

NICOLAS P. DIEGO, Petitioner,
vs.
RODOLFO P. DIEGO and EDUARDO P. DIEGO, Respondents.

DECISION

DEL CASTILLO, J.:

It is settled jurisprudence, to the point of being elementary, that an agreement which stipulates that the seller shall
execute a deed of sale only upon or after tl1ll payment of the purchase price is a contract to sell, not a contract of sale.
In Reyes v. Tuparan,  1  this Court declared in categorical terms that "[w]here the vendor promises to execute a deed of
absolute sale upon the completion by the vendee of the payment of the price, the contract is only a contract to
sell. The aforecited stipulation shows that the vendors reserved title to the subject property until full payment of
the purchase price."

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In this case, it is not disputed as in tact both parties agreed that the deed of sale shall only be executed upon payment of
the remaining balance of the purchase price. Thus, pursuant to the above stated jurisprudence, we similarly declare that
the transaction entered into by the parties is a contract to sell.

Before us is a Petition for Review on Certiorari2 questioning the June 29, 2007 Decision3 and the October 3, 2007
Resolution4 of the Court of Appeals (CA) in CA-G.R. CV No. 86512, which affirmed the April 19, 2005 Decision 5 of the
Regional Trial Court (RTC), Branch 40, of Dagupan City in Civil Case No. 99-02971-D.

Factual Antecedents

In 1993, petitioner Nicolas P. Diego (Nicolas) and his brother Rodolfo, respondent herein, entered into an oral contract to
sell covering Nicolas’s share, fixed at ₱500,000.00, as co-owner of the family’s Diego Building situated in Dagupan City.
Rodolfo made a downpayment of ₱250,000.00. It was agreed that the deed of sale shall be executed upon payment of the
remaining balance of ₱250,000.00. However, Rodolfo failed to pay the remaining balance.

Meanwhile, the building was leased out to third parties, but Nicolas’s share in the rents were not remitted to him by herein
respondent Eduardo, another brother of Nicolas and designated administrator of the Diego Building. Instead, Eduardo
gave Nicolas’s monthly share in the rents to Rodolfo. Despite demands and protestations by Nicolas, Rodolfo and
Eduardo failed to render an accounting and remit his share in the rents and fruits of the building, and Eduardo continued
to hand them over to Rodolfo.

Thus, on May 17, 1999, Nicolas filed a Complaint6 against Rodolfo and Eduardo before the RTC of Dagupan City and
docketed as Civil Case No. 99-02971-D. Nicolas prayed that Eduardo be ordered to render an accounting of all the
transactions over the Diego Building; that Eduardo and Rodolfo be ordered to deliver to Nicolas his share in the rents; and
that Eduardo and Rodolfo be held solidarily liable for attorney’s fees and litigation expenses.

Rodolfo and Eduardo filed their Answer with Counterclaim7 for damages and attorney’s fees. They argued that Nicolas
had no more claim in the rents in the Diego Building since he had already sold his share to Rodolfo. Rodolfo admitted
having remitted only ₱250,000.00 to Nicolas. He asserted that he would pay the balance of the purchase price to Nicolas
only after the latter shall have executed a deed of absolute sale.

Ruling of the Regional Trial Court

After trial on the merits, or on April 19, 2005, the trial court rendered its Decision 8 dismissing Civil Case No. 99-02971-D
for lack of merit and ordering Nicolas to execute a deed of absolute sale in favor of Rodolfo upon payment by the latter of
the ₱250,000.00 balance of the agreed purchase price. It made the following interesting pronouncement:

It is undisputed that plaintiff (Nicolas) is one of the co-owners of the Diego Building, x x x. As a co-owner, he is entitled to
[his] share in the rentals of the said building. However, plaintiff [had] already sold his share to defendant Rodolfo Diego in
the amount of ₱500,000.00 and in fact, [had] already received a partial payment in the purchase price in the amount of
₱250,000.00. Defendant Eduardo Diego testified that as per agreement, verbal, of the plaintiff and defendant
Rodolfo Diego, the remaining balance of ₱250,000.00 will be paid upon the execution of the Deed of Absolute
Sale. It was in the year 1997 when plaintiff was being required by defendant Eduardo Diego to sign the Deed of Absolute
Sale. Clearly, defendant Rodolfo Diego was not yet in default as the plaintiff claims which cause [sic] him to refuse to sign
[sic] document. The contract of sale was already perfected as early as the year 1993 when plaintiff received the partial
payment, hence, he cannot unilaterally revoke or rescind the same. From then on, plaintiff has, therefore, ceased to be a
co-owner of the building and is no longer entitled to the fruits of the Diego Building.

Equity and fairness dictate that defendant [sic] has to execute the necessary document regarding the sale of his share to
defendant Rodolfo Diego. Correspondingly, defendant Rodolfo Diego has to perform his obligation as per their verbal
agreement by paying the remaining balance of ₱250,000.00.9

To summarize, the trial court ruled that as early as 1993, Nicolas was no longer entitled to the fruits of his aliquot share in
the Diego Building because he had "ceased to be a co-owner" thereof. The trial court held that when Nicolas received the
₱250,000.00 downpayment, a "contract of sale" was perfected. Consequently, Nicolas is obligated to convey such share
to Rodolfo, without right of rescission. Finally, the trial court held that the ₱250,000.00 balance from Rodolfo will only be
due and demandable when Nicolas executes an absolute deed of sale.

Ruling of the Court of Appeals

Nicolas appealed to the CA which sustained the trial court’s Decision in toto. The CA held that since there was a perfected
contract of sale between Nicolas and Rodolfo, the latter may compel the former to execute the proper sale document.
Besides, Nicolas’s insistence that he has since rescinded their agreement in 1997 proved the existence of a perfected
sale. It added that Nicolas could not validly rescind the contract because: "1) Rodolfo ha[d] already made a partial
payment; 2) Nicolas ha[d] already partially performed his part regarding the contract; and 3) Rodolfo opposes the
rescission."10

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The CA then proceeded to rule that since no period was stipulated within which Rodolfo shall deliver the balance of the
purchase price, it was incumbent upon Nicolas to have filed a civil case to fix the same. But because he failed to do so,
Rodolfo cannot be considered to be in delay or default.

Finally, the CA made another interesting pronouncement, that by virtue of the agreement Nicolas entered into with
Rodolfo, he had already transferred his ownership over the subject property and as a consequence, Rodolfo is legally
entitled to collect the fruits thereof in the form of rentals. Nicolas’ remaining right is to demand payment of the balance of
the purchase price, provided that he first executes a deed of absolute sale in favor of Rodolfo.

Nicolas moved for reconsideration but the same was denied by the CA in its Resolution dated October 3, 2007.

Hence, this Petition.

Issues

The Petition raises the following errors that must be rectified:

THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT THERE WAS NO PERFECTED
CONTRACT OF SALE BETWEEN PETITIONER NICOLAS DIEGO AND RESPONDENT RODOLFO DIEGO OVER
NICOLAS’S SHARE OF THE BUILDING BECAUSE THE SUSPENSIVE CONDITION HAS NOT YET BEEN FULFILLED.

II

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE CONTRACT OF SALE BETWEEN
PETITIONER AND RESPONDENT RODOLFO DIEGO REMAINS LEGALLY BINDING AND IS NOT RESCINDED
GIVING MISPLACED RELIANCE ON PETITIONER NICOLAS’ STATEMENT THAT THE SALE HAS NOT YET BEEN
REVOKED.

III

THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT PETITIONER NICOLAS DIEGO ACTED
LEGALLY AND CORRECTLY WHEN HE UNILATERALLY RESCINDED AND REVOKED HIS AGREEMENT OF SALE
WITH RESPONDENT RODOLFO DIEGO CONSIDERING RODOLFO’S MATERIAL, SUBSTANTIAL BREACH OF THE
CONTRACT.

IV

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER HAS NO MORE RIGHTS OVER
HIS SHARE IN THE BUILDING, DESPITE THE FACT THAT THERE WAS AS YET NO PERFECTED CONTRACT OF
SALE BETWEEN PETITIONER NICOLAS DIEGO AND RODOLFO DIEGO AND THERE WAS YET NO TRANSFER OF
OWNERSHIP OF PETITIONER’S SHARE TO RODOLFO DUE TO THE NON-FULFILLMENT BY RODOLFO OF THE
SUSPENSIVE CONDITION UNDER THE CONTRACT.

THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT RESPONDENT RODOLFO HAS
UNJUSTLY ENRICHED HIMSELF AT THE EXPENSE OF PETITIONER BECAUSE DESPITE NOT HAVING PAID THE
BALANCE OF THE PURCHASE PRICE OF THE SALE, THAT RODOLFO HAS NOT YET ACQUIRED OWNERSHIP
OVER THE SHARE OF PETITIONER NICOLAS, HE HAS ALREADY BEEN APPROPRIATING FOR HIMSELF AND FOR
HIS PERSONAL BENEFIT THE SHARE OF THE INCOME OF THE BUILDING AND THE PORTION OF THE BUILDING
ITSELF WHICH WAS DUE TO AND OWNED BY PETITIONER NICOLAS.

VI

THE HONORABLE COURT OF APPEALS ERRED IN NOT AWARDING ACTUAL DAMAGES, ATTORNEY’S FEES AND
LITIGATION EXPENSES TO THE PETITIONER DESPITE THE FACT THAT PETITIONER’S RIGHTS HAD BEEN
WANTONLY VIOLATED BY THE RESPONDENTS.11

Petitioner’s Arguments

In his Petition, the Supplement12 thereon, and Reply,13 Nicolas argues that, contrary to what the CA found, there was no
perfected contract of sale even though Rodolfo had partially paid the price; that in the absence of the third element in a
sale contract – the price – there could be no perfected sale; that failing to pay the required price in full, Nicolas had the
right to rescind the agreement as an unpaid seller.
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Nicolas likewise takes exception to the CA finding that Rodolfo was not in default or delay in the payment of the agreed
balance for his (Nicolas’s) failure to file a case to fix the period within which payment of the balance should be made. He
believes that Rodolfo’s failure to pay within a reasonable time was a substantial and material breach of the agreement
which gave him the right to unilaterally and extrajudicially rescind the agreement and be discharged of his obligations as
seller; and that his repeated written demands upon Rodolfo to pay the balance granted him such rights.

Nicolas further claims that based on his agreement with Rodolfo, there was to be no transfer of title over his share in the
building until Rodolfo has effected full payment of the purchase price, thus, giving no right to the latter to collect his share
in the rentals.

Finally, Nicolas bewails the CA’s failure to award damages, attorney’s fees and litigation expenses for what he believes is
a case of unjust enrichment at his expense.

Respondents’ Arguments

Apart from echoing the RTC and CA pronouncements, respondents accuse the petitioner of "cheating" them, claiming that
after the latter received the ₱250,000.00 downpayment, he "vanished like thin air and hibernated in the USA, he being an
American citizen,"14 only to come back claiming that the said amount was a mere loan.

They add that the Petition is a mere rehash and reiteration of the petitioner’s arguments below, which are deemed to have
been sufficiently passed upon and debunked by the appellate court.

Our Ruling

The Court finds merit in the Petition.

The contract entered into by Nicolas and Rodolfo was a contract to sell.

a) The stipulation to execute a deed of sale upon full payment of the purchase price is a unique and
distinguishing characteristic of a contract to sell. It also shows that the vendor reserved title to the property until
full payment.

There is no dispute that in 1993, Rodolfo agreed to buy Nicolas’s share in the Diego Building for the price of ₱500,000.00.
There is also no dispute that of the total purchase price, Rodolfo paid, and Nicolas received, ₱250,000.00. Significantly, it
is also not disputed that the parties agreed that the remaining amount of ₱250,000.00 would be paid after Nicolas shall
have executed a deed of sale.

This stipulation, i.e., to execute a deed of absolute sale upon full payment of the purchase price, is a unique and
distinguishing characteristic of a contract to sell. In Reyes v. Tuparan,15 this Court ruled that a stipulation in the
contract, "[w]here the vendor promises to execute a deed of absolute sale upon the completion by the vendee of
the payment of the price," indicates that the parties entered into a contract to sell. According to this Court, this
particular provision is tantamount to a reservation of ownership on the part of the vendor. Explicitly stated, the Court ruled
that the agreement to execute a deed of sale upon full payment of the purchase price "shows that the vendors reserved
title to the subject property until full payment of the purchase price." 16

In Tan v. Benolirao,17 this Court, speaking through Justice Brion, ruled that the parties entered into a contract to sell as
revealed by the following stipulation:

d) That in case, BUYER has complied with the terms and conditions of this contract, then the SELLERS shall execute and
deliver to the BUYER the appropriate Deed of Absolute Sale;18

The Court further held that "[j]urisprudence has established that where the seller promises to execute a deed of
absolute sale upon the completion by the buyer of the payment of the price, the contract is only a contract to
sell."19

b) The acknowledgement receipt signed by Nicolas as well as the contemporaneous acts of the parties show that
they agreed on a contract to sell, not of sale. The absence of a formal deed of conveyance is indicative of a
contract to sell.

In San Lorenzo Development Corporation v. Court of Appeals,20 the facts show that spouses Miguel and Pacita Lu (Lu)
sold a certain parcel of land to Pablo Babasanta (Pablo). After several payments, Pablo wrote Lu demanding "the
execution of a final deed of sale in his favor so that he could effect full payment of the purchase price."21 To prove his
allegation that there was a perfected contract of sale between him and Lu, Pablo presented a receipt signed by Lu
acknowledging receipt of ₱50,000.00 as partial payment.22

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However, when the case reached this Court, it was ruled that the transaction entered into by Pablo and Lu was only
a contract to sell, not a contract of sale. The Court held thus:

The receipt signed by Pacita Lu merely states that she accepted the sum of fifty thousand pesos (₱50,000.00) from
Babasanta as partial payment of 3.6 hectares of farm lot situated in Sta. Rosa, Laguna. While there is no stipulation that
the seller reserves the ownership of the property until full payment of the price which is a distinguishing feature of a
contract to sell, the subsequent acts of the parties convince us that the Spouses Lu never intended to transfer
ownership to Babasanta except upon full payment of the purchase price.

Babasanta’s letter dated 22 May 1989 was quite telling. He stated therein that despite his repeated requests for the
execution of the final deed of sale in his favor so that he could effect full payment of the price, Pacita Lu allegedly refused
to do so. In effect, Babasanta himself recognized that ownership of the property would not be transferred to him
until such time as he shall have effected full payment of the price. Moreover, had the sellers intended to transfer
title, they could have easily executed the document of sale in its required form simultaneously with their
acceptance of the partial payment, but they did not. Doubtlessly, the receipt signed by Pacita Lu should legally
be considered as a perfected contract to sell.23

In the instant case, records show that Nicolas signed a mere receipt24 acknowledging partial payment of ₱250,000.00 from
Rodolfo. It states:

July 8, 1993

Received the amount of [₱250,000.00] for 1 share of Diego Building as partial payment for Nicolas Diego.

(signed)
Nicolas Diego25

As we ruled in San Lorenzo Development Corporation v. Court of Appeals,26 the parties could have executed a document
of sale upon receipt of the partial payment but they did not. This is thus an indication that Nicolas did not intend to
immediately transfer title over his share but only upon full payment of the purchase price. Having thus reserved title over
the property, the contract entered into by Nicolas is a contract to sell. In addition, Eduardo admitted that he and Rodolfo
repeatedly asked Nicolas to sign the deed of sale 27 but the latter refused because he was not yet paid the full amount. As
we have ruled in San Lorenzo Development Corporation v. Court of Appeals, 28 the fact that Eduardo and Rodolfo asked
Nicolas to execute a deed of sale is a clear recognition on their part that the ownership over the property still remains with
Nicolas. In fine, the totality of the parties’ acts convinces us that Nicolas never intended to transfer the ownership over his
share in the Diego Building until the full payment of the purchase price. Without doubt, the transaction agreed upon by the
parties was a contract to sell, not of sale.

In Chua v. Court of Appeals,29 the parties reached an impasse when the seller wanted to be first paid the consideration
before a new transfer certificate of title (TCT) is issued in the name of the buyer. Contrarily, the buyer wanted to secure a
new TCT in his name before paying the full amount. Their agreement was embodied in a receipt containing the following
terms: "(1) the balance of ₱10,215,000.00 is payable on or before 15 July 1989; (2) the capital gains tax is for the account
of x x x; and (3) if [the buyer] fails to pay the balance x x x the [seller] has the right to forfeit the earnest money x x
x."30 The case eventually reached this Court. In resolving the impasse, the Court, speaking through Justice Carpio, held
that "[a] perusal of the Receipt shows that the true agreement between the parties was a contract to sell."31 The Court
noted that "the agreement x x x was embodied in a receipt rather than in a deed of sale, ownership not having passed
between them."32 The Court thus concluded that "[t]he 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."33 Thus, the "true agreement between the parties was a contract to sell."34

In the instant case, the parties were similarly embroiled in an impasse. The parties’ agreement was likewise embodied
only in a receipt. Also, Nicolas did not want to sign the deed of sale unless he is fully paid. On the other hand, Rodolfo did
not want to pay unless a deed of sale is duly executed in his favor. We thus say, pursuant to our ruling in Chua v. Court of
Appeals35 that the agreement between Nicolas and Rodolfo is a contract to sell.

This Court cannot subscribe to the appellate court’s view that Nicolas should first execute a deed of absolute sale in favor
of Rodolfo, before the latter can be compelled to pay the balance of the price. This is patently ridiculous, and goes against
every rule in the book. This pronouncement virtually places the prospective seller in a contract to sell at the mercy of the
prospective buyer, and sustaining this point of view would place all contracts to sell in jeopardy of being rendered
ineffective by the act of the prospective buyers, who naturally would demand that the deeds of absolute sale be first
executed before they pay the balance of the price. Surely, no prospective seller would accommodate.

In fine, "the need to execute a deed of absolute sale upon completion of payment of the price generally indicates
that it is a contract to sell, as it implies the reservation of title in the vendor until the vendee has completed the
payment of the price."36 In addition, "[a] stipulation reserving ownership in the vendor until full payment of the price is x x
x typical in a contract to sell."37 Thus, contrary to the pronouncements of the trial and appellate courts, the parties to this
case only entered into a contract to sell; as such title cannot legally pass to Rodolfo until he makes full payment of the
agreed purchase price.
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c) Nicolas did not surrender or deliver title or possession to Rodolfo.

Moreover, there could not even be a surrender or delivery of title or possession to the prospective buyer Rodolfo. This
was made clear by the nature of the agreement, by Nicolas’s repeated demands for the return of all rents unlawfully and
unjustly remitted to Rodolfo by Eduardo, and by Rodolfo and Eduardo’s repeated demands for Nicolas to execute a deed
of sale which, as we said before, is a recognition on their part that ownership over the subject property still remains with
Nicolas.

Significantly, when Eduardo testified, he claimed to be knowledgeable about the terms and conditions of the transaction
between Nicolas and Rodolfo. However, aside from stating that out of the total consideration of ₱500,000.00, the amount
of ₱250,000.00 had already been paid while the remaining ₱250,000.00 would be paid after the execution of the Deed of
Sale, he never testified that there was a stipulation as regards delivery of title or possession.38

It is also quite understandable why Nicolas belatedly demanded the payment of the rentals. Records show that the
structural integrity of the Diego Building was severely compromised when an earthquake struck Dagupan City in 1990. 39 In
order to rehabilitate the building, the co-owners obtained a loan from a bank.40 Starting May 1994, the property was leased
to third parties and the rentals received were used to pay off the loan. 41 It was only in 1996, or after payment of the loan
that the co-owners started receiving their share in the rentals. 42 During this time, Nicolas was in the USA but immediately
upon his return, he demanded for the payment of his share in the rentals which Eduardo remitted to Rodolfo. Failing
which, he filed the instant Complaint. To us, this bolsters our findings that Nicolas did not intend to immediately transfer
title over the property.

It must be stressed that it is anathema in a contract to sell that the prospective seller should deliver title to the property to
the prospective buyer pending the latter’s payment of the price in full. It certainly is absurd to assume that in the absence
of stipulation, a buyer under a contract to sell is granted ownership of the property even when he has not paid the seller in
full. If this were the case, then prospective sellers in a contract to sell would in all likelihood not be paid the balance of the
price.

This ponente has had occasion to rule that "[a] contract to sell is one where the prospective seller reserves the transfer of
title to the prospective buyer until the happening of an event, such as full payment of the purchase price. What the seller
obliges himself to do is to sell the subject property only when the entire amount of the purchase price has already been
delivered to him. ‘In other words, the full payment of the purchase price partakes of a suspensive condition, the
nonfulfillment of which prevents the obligation to sell from arising and thus, ownership is retained by the prospective seller
without further remedies by the prospective buyer.’ It does not, by itself, transfer ownership to the buyer."43

The contract to sell is terminated or cancelled.

Having established that the transaction was a contract to sell, what happens now to the parties’ agreement?

The remedy of rescission is not available in contracts to sell.44 As explained in Spouses Santos v. Court of Appeals:45

In view of our finding in the present case that the agreement between the parties is a contract to sell, it follows that the
appellate court erred when it decreed that a judicial rescission of said agreement was necessary. This is because there
was no rescission to speak of in the first place. As we earlier pointed out, in a contract to sell, title remains with the vendor
and does not pass on to the vendee until the purchase price is paid in full. Thus, in a contract to sell, the payment of the
purchase price is a positive suspensive condition. Failure to pay the price agreed upon is not a mere breach, casual or
serious, but a situation that prevents the obligation of the vendor to convey title from acquiring an obligatory force. This is
entirely different from the situation in a contract of sale, where non-payment of the price is a negative resolutory condition.
The effects in law are not identical. In a contract of sale, the vendor has lost ownership of the thing sold and cannot
recover it, unless the contract of sale is rescinded and set aside. In a contract to sell, however, the vendor remains the
owner for as long as the vendee has not complied fully with the condition of paying the purchase price. If the vendor
should eject the vendee for failure to meet the condition precedent, he is enforcing the contract and not rescinding it.
When the petitioners in the instant case repossessed the disputed house and lot for failure of private respondents to pay
the purchase price in full, they were merely enforcing the contract and not rescinding it. As petitioners correctly point out,
the Court of Appeals erred when it ruled that petitioners should have judicially rescinded the contract pursuant to Articles
1592 and 1191 of the Civil Code. Article 1592 speaks of non-payment of the purchase price as a resolutory condition. It
does not apply to a contract to sell. As to Article 1191, it is subordinated to the provisions of Article 1592 when applied to
sales of immovable property. Neither provision is applicable in the present case.46

Similarly, we held in Chua v. Court of Appeals47 that "Article 1592 of the Civil Code permits the buyer to pay, even after
the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially
or by notarial act. However, Article 1592 does not apply to a contract to sell where the seller reserves the ownership until
full payment of the price,"48 as in this case.1âwphi1

Applying the above jurisprudence, we hold that when Rodolfo failed to fully pay the purchase price, the contract to sell
was deemed terminated or cancelled.49 As we have held in Chua v. Court of Appeals,50 "[s]ince the agreement x x x is a
mere contract to sell, the full payment of the purchase price partakes of a suspensive condition. The non-fulfillment of
the condition prevents the obligation to sell from arising and ownership is retained by the seller without further
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remedies by the buyer." Similarly, we held in Reyes v. Tuparan51 that "petitioner’s obligation to sell the subject properties
becomes demandable only upon the happening of the positive suspensive condition, which is the respondent’s full
payment of the purchase price. Without respondent’s full payment, there can be no breach of contract to speak of
because petitioner has no obligation yet to turn over the title. Respondent’s failure to pay in full the purchase price in
full is not the breach of contract contemplated under Article 1191 of the New Civil Code but rather just an event that
prevents the petitioner from being bound to convey title to respondent." Otherwise stated, Rodolfo has no right to compel
Nicolas to transfer ownership to him because he failed to pay in full the purchase price. Correlatively, Nicolas has no
obligation to transfer his ownership over his share in the Diego Building to Rodolfo.52

Thus, it was erroneous for the CA to rule that Nicolas should have filed a case to fix the period for Rodolfo’s payment of
the balance of the purchase price. It was not Nicolas’s obligation to compel Rodolfo to pay the balance; it was Rodolfo’s
duty to remit it.

It would appear that after Nicolas refused to sign the deed as there was yet no full payment, Rodolfo and Eduardo hired
the services of the Daroya Accounting Office "for the purpose of estimating the amount to which [Nicolas] still owes
[Rodolfo] as a consequence of the unconsummated verbal agreement regarding the former’s share in the co-ownership of
[Diego Building] in favor of the latter." 53 According to the accountant’s report, after Nicolas revoked his agreement with
Rodolfo due to non-payment, the downpayment of ₱250,000.00 was considered a loan of Nicolas from Rodolfo. 54 The
accountant opined that the ₱250,000.00 should earn interest at 18%.55 Nicolas however objected as regards the
imposition of interest as it was not previously agreed upon. Notably, the contents of the accountant’s report were not
disputed or rebutted by the respondents. In fact, it was stated therein that "[a]ll the bases and assumptions made
particularly in the fixing of the applicable rate of interest have been discussed with [Eduardo]."56

We find it irrelevant and immaterial that Nicolas described the termination or cancellation of his agreement with Rodolfo as
one of rescission. Being a layman, he is understandably not adept in legal terms and their implications. Besides, this
Court should not be held captive or bound by the conclusion reached by the parties. The proper characterization of an
action should be based on what the law says it to be, not by what a party believed it to be. "A contract is what the law
defines it to be x x x and not what the contracting parties call it."57

On the other hand, the respondents’ additional submission – that Nicolas cheated them by "vanishing and hibernating" in
the USA after receiving Rodolfo’s ₱250,000.00 downpayment, only to come back later and claim that the amount he
received was a mere loan – cannot be believed. How the respondents could have been cheated or disadvantaged by
Nicolas’s leaving is beyond comprehension. If there was anybody who benefited from Nicolas’s perceived "hibernation", it
was the respondents, for they certainly had free rein over Nicolas’s interest in the Diego Building. Rodolfo put off payment
of the balance of the price, yet, with the aid of Eduardo, collected and appropriated for himself the rents which belonged to
Nicolas.

Eduardo is solidarily liable with Rodolfo as regards the share of Nicolas in the rents.

For his complicity, bad faith and abuse of authority as the Diego Building administrator, Eduardo must be held solidarily
liable with Rodolfo for all that Nicolas should be entitled to from 1993 up to the present, or in respect of actual damages
suffered in relation to his interest in the Diego Building. Eduardo was the primary cause of Nicolas’s loss, being directly
responsible for making and causing the wrongful payments to Rodolfo, who received them under obligation to return them
to Nicolas, the true recipient.1âwphi1 As such, Eduardo should be principally responsible to Nicolas as well. Suffice it to
state that every person must, in the exercise of his rights and in the performance of his duties, act with justice, give
everyone his due, and observe honesty and good faith; and every person who, contrary to law, wilfully or negligently
causes damage to another, shall indemnify the latter for the same.58

Attorney’s fees and other costs.

"Although attorney’s fees are not allowed in the absence of stipulation, the court can award the same when the
defendant’s act or omission has compelled the plaintiff to incur expenses to protect his interest or where the defendant
acted in gross and evident bad faith in refusing to satisfy the plaintiff’s plainly valid, just and demandable claim." 59 In the
instant case, it is beyond cavil that petitioner was constrained to file the instant case to protect his interest because of
respondents’ unreasonable and unjustified refusal to render an accounting and to remit to the petitioner his rightful share
in rents and fruits in the Diego Building. Thus, we deem it proper to award to petitioner attorney’s fees in the amount of
₱50,000.00,60 as well as litigation expenses in the amount of ₱20,000.00 and the sum of ₱1,000.00 for each court
appearance by his lawyer or lawyers, as prayed for.

WHEREFORE, premises considered, the Petition is GRANTED. The June 29, 2007 Decision and October 3, 2007
Resolution of the Court of Appeals in CA-G.R. CV No. 86512, and the April 19, 2005 Decision of the Dagupan City
Regional Trial Court, Branch 40 in Civil Case No. 99-02971-D, are hereby ANNULLED and SET ASIDE.

The Court further decrees the following:

1. The oral contract to sell between petitioner Nicolas P. Diego and respondent Rodolfo P. Diego
is DECLARED terminated/cancelled;

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2. Respondents Rodolfo P. Diego and Eduardo P. Diego are ORDERED to surrender possession and control, as
the case may be, of Nicolas P. Diego’s share in the Diego Building. Respondents are further commanded to
return or surrender to the petitioner the documents of title, receipts, papers, contracts, and all other documents in
any form or manner pertaining to the latter’s share in the building, which are deemed to be in their unauthorized
and illegal possession;

3. Respondents Rodolfo P. Diego and Eduardo P. Diego are ORDERED to immediately render an accounting of
all the transactions, from the period beginning 1993 up to the present, pertaining to Nicolas P. Diego’s share in
the Diego Building, and thereafter commanded to jointly and severally remit to the petitioner all rents, monies,
payments and benefits of whatever kind or nature pertaining thereto, which are hereby deemed received by them
during the said period, and made to them or are due, demandable and forthcoming during the said period and
from the date of this Decision, with legal interest from the filing of the Complaint;

4. Respondents Rodolfo P. Diego and Eduardo P. Diego are ORDERED, immediately and without further delay
upon receipt of this Decision, to solidarily pay the petitioner attorney’s fees in the amount of ₱50,000.00; litigation
expenses in the amount of ₱20,000.00 and the sum of ₱1,000.00 per counsel for each court appearance by his
lawyer or lawyers;

5. The payment of ₱250,000.00 made by respondent Rodolfo P. Diego, with legal interest from the filing of the
Complaint, shall be APPLIED, by way of compensation, to his liabilities to the petitioner and to answer for all
damages and other awards and interests which are owing to the latter under this Decision; and

6. Respondents’ counterclaim is DISMISSED.

SO ORDERED.

G.R. No. 135634 May 31, 2000

HEIRS OF JUAN SAN ANDRES (VICTOR S. ZIGA) and SALVACION S. TRIA, petitioners,

vs.
VICENTE RODRIGUEZ, respondent.

MENDOZA, J.:

This is a petition for review on certiorari of the decision of the Court of Appeals 1 reversing the decision of the Regional
Trial Court, Naga City, Branch 19, in Civil Case No. 87-1335, as well as the appellate court's resolution denying
reconsideration.

The antecedent facts are as follows:

Juan San Andres was the registered owner of Lot No. 1914-B-2 situated in Liboton, Naga City. On September 28, 1964,
he sold a portion thereof, consisting of 345 square meters, to respondent Vicente S. Rodriguez for P2,415.00. The sale is
evidenced by a Deed of Sale. 2

Upon the death of Juan San Andres on May 5, 1965, Ramon San Andres was appointed judicial administrator of the
decedent's estate in Special Proceedings No. R-21, RTC, Branch 19, Naga City. Ramon San Andres engaged the
services of a geodetic engineer, Jose Peñero, to prepare a consolidated plan (Exh. A) of the estate. Engineer Peñero also
27
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prepared a sketch plan of the 345-square meter lot sold to respondent. From the result of the survey, it was found that
respondent had enlarged the area which he purchased from the late Juan San Andres by 509 square meters. 3

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

In his Re-amended Answer filed on February 6, 1989, respondent alleged that apart from the 345-square meter lot which
had been sold to him by Juan San Andres on September 28, 1964, the latter likewise sold to him the following day the
remaining portion of the lot consisting of 509 square meters, with both parties treating the two lots as one whole parcel
with a total area of 854 square meters. Respondent alleged that the full payment of the 509-square meter lot would be
effected within five (5) years from the execution of a formal deed of sale after a survey is conducted over said property.
He further alleged that with the consent of the former owner, Juan San Andres, he took possession of the same and
introduced improvements thereon as early as 1964.

As proof of the sale to him of 509 square meters, respondent attached to his answer a receipt (Exh. 2) 5 signed by the late
Juan San Andres, which reads in full as follows:

Received from Vicente Rodriguez the sum of Five Hundred (P500.00) Pesos representing an advance
payment for a residential lot adjoining his previously paid lot on three sides excepting on the frontage with
the agreed price of Fifteen (15.00) Pesos per square meter and the payment of the full consideration
based on a survey shall be due and payable in five (5) years period from the execution of the formal deed
of sale; and it is agreed that the expenses of survey and its approval by the Bureau of Lands shall be
borne by Mr. Rodriguez.

Naga City, September 29, 1964.

(Sgd.)

JUAN R. SAN ANDRES

Vendor

Noted:

(Sgd.)

VICENTE RODRIGUEZ

Vendee

Respondent also attached to his answer a letter of judicial administrator Ramon San Andres (Exh. 3), 6 asking
payment of the balance of the purchase price. The letter reads:

Dear Inting,

Please accommodate my request for Three Hundred (P300.00) Pesos as I am in need of funds as I
intimated to you the other day.

We will just adjust it with whatever balance you have payable to the subdivision.

Thanks.

Sincere
ly,

(Sgd.)

RAMO
N SAN
ANDRE
S

Vicente Rodriguez

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Penafrancia Subdivision, Naga City

P.S.

You can let bearer Enrique del Castillo sign for the amount.

Received One Hundred Only

(Sgd.)

RAMON SAN ANDRES

3/30/66

Respondent deposited in court the balance of the purchase price amounting to P7,035.00 for the aforesaid 509-square
meter lot.

While the proceedings were pending, judicial administrator Ramon San Andres died and was substituted by his son
Ricardo San Andres. On the other band, respondent Vicente Rodriguez died on August 15, 1989 and was substituted by
his heirs. 7

Petitioner, as plaintiff, presented two witnesses. The first witness, Engr. Jose Peñero, 8 testified that based on his survey
conducted sometime between 1982 and 1985, respondent had enlarged the area which he purchased from the late Juan
San Andres by 509 square meters belonging to the latter's estate. According to Peñero, the titled property (Exh. A-5) of
respondent was enclosed with a fence with metal holes and barbed wire, while the expanded area was fenced with
barbed wire and bamboo and light materials.

The second witness, Ricardo San Andres, 9 administrator of the estate, testified that respondent had not filed any claim
before Special Proceedings No. R-21 and denied knowledge of Exhibits 2 and 3. However, he recognized the signature in
Exhibit 3 as similar to that of the former administrator, Ramon San Andres. Finally, he declared that the expanded portion
occupied by the family of respondent is now enclosed with barbed wire fence unlike before where it was found without
fence.

On the other hand, Bibiana B. Rodriguez, 10 widow of respondent Vicente Rodriguez, testified that they had purchased the
subject lot from Juan San Andres, who was their compadre, on September 29, 1964, at P15.00 per square meter.
According to her, they gave P500.00 to the late Juan San Andres who later affixed his signature to Exhibit 2. She added
that on March 30, 1966; Ramon San Andres wrote them a letter asking for P300.00 as partial payment for the subject lot,
but they were able to give him only P100.00. She added that they had paid the total purchase price of P7,035.00 on
November 21, 1988 by depositing it in court. Bibiana B. Rodriquez stated that they had been in possession of the 509-
square meter lot since 1964 when the late Juan San Andres signed the receipt. (Exh. 2) Lastly, she testified that they did
not know at that time the exact area sold to them because they were told that the same would be known after the survey
of the subject lot.

On September 20, 1994, the trial court 11 rendered judgment in favor of petitioner. It ruled that there was no contract of
sale to speak of for lack of a valid object because there was no sufficient indication in Exhibit 2 to identify the property
subject of the sale, hence, the need to execute a new contract.

Respondent appealed to the Court of Appeals, which on April 21, 1998 rendered a decision reversing the decision of the
trial court. The appellate court held that the object of the contract was determinable, and that there was a conditional sale
with the balance of the purchase price payable within five years from the execution of the deed of sale. The dispositive
portion of its decision's reads:

IN VIEW OF ALL THE FOREGOING, the judgment appealed from is hereby REVERSED and SET ASIDE
and a new one entered DISMISSING the complaint and rendering judgment against the plaintiff-appellee:

1. to accept the P7,035.00 representing the balance of the purchase price of the portion and which is
deposited in court under Official Receipt No. 105754 (page 122, Records);

2. to execute the formal deed of sale over the said 509 square meter portion of Lot 1914-B-2 in favor of
appellant Vicente Rodriguez;

3. to pay the defendant-appellant the amount of P50,000.00 as damages and P10,000.00 attorney's fees
as stipulated by them during the trial of this case; and

4. to pay the costs of the suit.

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SO ORDERED.

Hence, this petition. Petitioner assigns the following errors as having been allegedly committed by the trial court:

I. THE HON. COURT OF APPEALS ERRED IN HOLDING THAT THE DOCUMENT

(EXHIBIT "2") IS A CONTRACT TO SELL DESPITE ITS LACKING ONE OF THE
ESSENTIAL ELEMENTS OF A CONTRACT, NAMELY, OBJECT CERTAIN AND
SUFFICIENTLY DESCRIBED.

II. THE HON. COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER IS

OBLIGED TO HONOR THE PURPORTED CONTRACT TO SELL DESPITE NON-
FULFILLMENT BY RESPONDENT OF THE CONDITION THEREIN OF PAYMENT OF
THE BALANCE OF THE PURCHASE PRICE.

III. THE HON. COURT OF APPEALS ERRED IN HOLDING THAT CONSIGNATION

WAS VALID DESPITE NON-COMPLIANCE WITH THE MANDATORY REQUIREMENTS
THEREOF.

IV. THE HON. COURT OF APPEALS ERRED IN HOLDING THAT LACHES AND
PRESCRIPTION DO NOT APPLY TO RESPONDENT WHO SOUGHT INDIRECTLY TO
ENFORCE THE PURPORTED CONTRACT AFTER THE LAPSE OF 24 YEARS.

The petition has no merit.

First. Art. 1458 of the Civil Code provides:

By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.

A contract of sale may be absolute or conditional.

As thus defined, the essential elements of sale are the following:

a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price;

b) Determinate subject matter; and,

c) Price certain in money or its equivalent. 12

As shown in the receipt, dated September 29, 1964, the late Juan San Andres received P500.00 from respondent as
"advance payment for the residential lot adjoining his previously paid lot on three sides excepting on the frontage ; the
agreed purchase price was P15.00 per square meter; and the full amount of the purchase price was to be based on the
results of a survey and would be due and payable in five (5) years from the execution of a deed of sale.

Petitioner contends, however, that the "property subject of the sale was not described with sufficient certainty such that
there is a necessity of another agreement between the parties to finally ascertain the identity; size and purchase price of
the property which is the object of the alleged sale." 1 He argues that the "quantity of the object is not determinate as in
fact a survey is needed to determine its exact size and the full purchase price therefor" 14 In support of his contention,
petitioner cites the following provisions of the Civil Code:

Art. 1349. The object of every contract must be determinate as to its kind. The fact that the quantity is not
determinable shall not be an obstacle to the existence of a contract, provided it is possible to determine
the same without the need of a new contract between the parties.

Art. 1460. . . . The requisite that a thing be determinate is satisfied if at the time the contract is entered
into, the thing is capable of being made determinate without the necessity of a new and further agreement
between the parties.

Petitioner's contention is without merit. There is no dispute that respondent purchased a portion of Lot 1914-B-2
consisting of 345 square meters. This portion is located in the middle of Lot 1914-B-2, which has a total area of 854
square meters, and is clearly what was referred to in the receipt as the "previously paid lot." Since the lot subsequently
sold to respondent is said to adjoin the "previously paid lot" on three sides thereof, the subject lot is capable of being
determined without the need of any new contract. The fact that the exact area of these adjoining residential lots is subject
to the result of a survey does not detract from the fact that they are determinate or determinable. As the Court of Appeals
explained: 15

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Concomitantly, the object of the sale is certain and determinate. Under Article 1460 of the New Civil
Code, a thing sold is determinate if at the time the contract is entered into, the thing is capable of being
determinate without necessity of a new or further agreement between the parties. Here, this definition
finds realization.

Appellee's Exhibit "A" (page 4, Records) affirmingly shows that the original 345 sq. m. portion earlier sold
lies at the middle of Lot 1914-B-2 surrounded by the remaining portion of the said Lot 1914-B-2 on three
(3) sides, in the east, in the west and in the north. The northern boundary is a 12 meter road.
Conclusively, therefore, this is the only remaining 509 sq. m. portion of Lot 1914-B-2 surrounding the 345
sq. m. lot initially purchased by Rodriguez. It is quite difined, determinate and certain. Withal, this is the
same portion adjunctively occupied and possessed by Rodriguez since September 29, 1964, unperturbed
by anyone for over twenty (20) years until appellee instituted this suit.

Thus, all of the essential elements of a contract of sale are present, i.e., that there was a meeting of the minds between
the parties, by virtue of which the late Juan San Andres undertook to transfer ownership of and to deliver a determinate
thing for a price certain in money. As Art. 1475 of the Civil Code provides:

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

That the contract of sale is perfected was confirmed by the former administrator of the estates, Ramon San Andres, who
wrote a letter to respondent on March 30, 1966 asking for P300.00 as partial payment for the subject lot. As the Court of
Appeals observed:

Without any doubt, the receipt profoundly speaks of a meeting of the mind between San Andres and
Rodriguez for the sale of the property adjoining the 345 square meter portion previously sold to Rodriguez
on its three (3) sides excepting the frontage. The price is certain, which is P15.00 per square meter.
Evidently, this is a perfected contract of sale on a deferred payment of the purchase price. All the pre-
requisite elements for a valid purchase transaction are present. Sale does not require any formal
document for its existence and validity. And delivery of possession of land sold is a consummation of the
sale (Galar vs. Husain, 20 SCRA 186 [1967]). A private deed of sale is a valid contract between the
parties (Carbonell v. CA, 69 SCRA 99 [1976]).

In the same vein, after the late Juan R. San Andres received the P500.00 downpayment on March 30,
1966, Ramon R. San Andres wrote a letter to Rodriguez and received from Rodriguez the amount of
P100.00 (although P300.00 was being requested) deductible from the purchase price of the subject
portion. Enrique del Castillo, Ramon's authorized agent, correspondingly signed the receipt for the
P100.00. Surely, this is explicitly a veritable proof of he sale over the remaining portion of Lot 1914-B-2
and a confirmation by Ramon San Andres of the existence thereof. 16

There is a need, however, to clarify what the Court of Appeals said is a conditional contract of sale. Apparently, the
appellate court considered as a "condition" the stipulation of the parties that the full consideration, based on a survey of
the lot, would be due and payable within five (5) years from the execution of a formal deed of sale. It is evident from the
stipulations in the receipt that the vendor Juan San Andres sold the residential lot in question to respondent and
undertook to transfer the ownership thereof to respondent without any qualification, reservation or condition. In Ang Yu
Asuncion v. Court of Appeals, 17 we held:

In Dignos v. Court of Appeals (158 SCRA 375), we have said that, although denominated a "Deed of
Conditional Sale," a sale is still absolute where the contract is devoid of any  proviso  that title is reserved
or the right to unilaterally rescind is stipulated, e.g., until or unless the price is paid. Ownership will then
be transferred to the buyer upon actual or constructive delivery (e.g., by the execution of a public
document) of the property sold. Where the condition is imposed upon the perfection of the contract itself,
the failure of the condition would prevent such perfection. If the condition is imposed on the obligation of a
party which is not fulfilled, the other party may either waive the condition or refuse to proceed with the
sale. (Art. 1545, Civil Code).

Thus, in. one case, when the sellers declared in a "Receipt of Down Payment" that they received an amount as purchase
price for a house and lot without any reservation of title until full payment of the entire purchase price, the implication was
that they sold their property. 18 In People's Industrial Commercial Corporation v. Court of Appeals, 19 it was stated:

A deed of sale is considered absolute in nature where there is neither a stipulation in the deed that title to
the property sold is reserved in the seller until full payment of the price, nor one giving the vendor the right
to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period.

Applying these principles to this case, it cannot be gainsaid that the contract of sale between the parties is absolute, not
conditional. There is no reservation of ownership nor a stipulation providing for a unilateral rescission by either party. In
fact, the sale was consummated upon the delivery of the lot to respondent. 20 Thus, Art. 1477 provides that the ownership
of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof.
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The stipulation that the "payment of the full consideration based on a survey shall be due and payable in five (5) years
from the execution of a formal deed of sale" is not a condition which affects the efficacy of the contract of sale. It merely
provides the manner by which the full consideration is to be computed and the time within which the same is to be paid.
But it does not affect in any manner the effectivity of the contract. Consequently, the contention that the absence of a
formal deed of sale stipulated in the receipt prevents the happening of a sale has no merit.

Second. With respect to the contention that the Court of Appeals erred in upholding the validity of a consignation of
P7,035.00 representing the balance of the purchase price of the lot, nowhere in the decision of the appellate court is there
any mention of consignation. Under Art. 1257 of this Civil Code, consignation is proper only in cases where an existing
obligation is due. In this case, however, the contracting parties agreed that full payment of purchase price shall be due
and payable within five (5) years from the execution of a formal deed of sale. At the time respondent deposited the
amount of P7,035.00 in the court, no formal deed of sale had yet been executed by the parties, and, therefore, the five-
year period during which the purchase price should be paid had not commenced. In short, the purchase price was not yet
due and payable.

This is not to say, however, that the deposit of the purchase price in the court is erroneous. The Court of Appeals correctly
ordered the execution of a deed of sale and petitioners to accept the amount deposited by respondent.

Third. The claim of petitioners that the price of P7,035.00 is iniquitous is untenable. The amount is based on the
agreement of the parties as evidenced by the receipt (Exh. 2). Time and again, we have stressed the rule that a contract
is the law between the parties, and courts have no choice but to enforce such contract so long as they are not contrary to
law, morals, good customs or public policy. Otherwise, court would be interfering with the freedom of contract of the
parties. Simply put, courts cannot stipulate for the parties nor amend the latter's agreement, for to do so would be to alter
the real intentions of the contracting parties when the contrary function of courts is to give force and effect to the intentions
of the parties.

Fourth. Finally, petitioners argue that respondent is barred by prescription and laches from enforcing the contract. This
contention is likewise untenable. The contract of sale in this case is perfected, and the delivery of the subject lot to
respondent effectively transferred ownership to him. For this reason, respondent seeks to comply with his obligation to
pay the full purchase price, but because the deed of sale is yet to be executed, he deemed it appropriate to deposit the
balance of the purchase price in court. Accordingly, Art. 1144 of the Civil Code has no application to the instant
case. 21 Considering that a survey of the lot has already been conducted and approved by the Bureau of Lands,
respondent's heirs, assign or successors-in-interest should reimburse the expenses incurred by herein petitioners,
pursuant to the provisions of the contract.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with the modification that respondent is ORDERED to
reimburse petitioners for the expenses of the survey.

SO ORDERED.

G.R. No. 59550 January 11, 1995

EDILBERTO NOEL (now PINITO W. MERCADO) as ADMINISTRATOR OF THE INTESTATE ESTATE OF GREGORIO
NANAMAN and HILARIA TABUCLIN, petitioner,
vs.
COURT OF APPEALS and JOSE C. DELESTE, respondents.

G.R. No. 60636 January 11, 1995

PINITO W. MERCADO, as SPECIAL ADMINISTRATOR OF THE INTESTATE ESTATE OF GREGORIO NANAMAN

and HILARIA TABUCLIN, petitioner,
vs.
HONORABLE COURT OF APPEALS and JOSE C. DELESTE, respondents.

QUIASON, J.:

The consolidated cases, G.R. Nos. 59550 and 60636, are petitions for review on certiorari  under Rule 45 of the Revised
Rules of court of the Amended Decision dated May 14, 1981 of the Court of Appeals in CA-G.R. No. 56303-R, which

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affirmed in toto the decision of the Court of First Instance, Branch II, Lanao del Norte in Special Proceedings No. 596 (II-
94) in favor of Jose C. Deleste, private respondent herein.

Gregorio Nanaman and Hilaria Tabuclin (Nanaman spouses) were a childless, legally-married couple. Gregorio, however,
had a child named Virgilio Nanaman by another woman. Since he was two years old, Virgilio was reared by Gregorio and
Hilaria. He was sent to school by the couple until he reached third year of the law course.

During their marriage, Gregorio and Hilaria acquired certain property including a 34.7-hectare land in Tambo, Iligan City
on which they planted sugarcane, corn and bananas. They also lived there with Virgilio and fifteen tenants.

On October 2, 1945, Gregorio died. Hilaria then administered the property with the help of Virgilio enjoyed the procedure
of the land to the exclusion of Juan Nanaman, the brother of Gregorio, and Esperanza and Caridad Nanaman, Gregorio's
daughters by still another woman. In 1953, Virgilio declared the property in his name for taxation purposes under Tax
Declaration No. 5534 (Exhs. 13 & 13-A). On November 1, 1952, Hilaria and Virgilio, mortgaged the 34.7-hectare land in
favor of private respondent, in consideration of the amount of P4,800.00 (Exh. 5).

On February 16, 1954, Hilaria and Virgilio executed a deed of sale over the same tract of land also in favor of private
respondent in consideration of the sum of P16,000.00 (Exh. 7). Witnesses to the sale were the wife of Virgilio, Rosita S.
Nanaman, Rufo C. Salas, the driver of private respondent, and Remedios Pilotan. The document was notarized on
February 17, 1954 and was registered with the Register of Deeds of Iligan city on March 2, 1954. The tax declaration in
the name of Virgilio was cancelled and a new tax declaration was issued in the name of private respondent. Having
discovered that the property was in arrears in the payment of taxes from 1952, private respondent paid the taxes for 1952,
1953 and 1954 (Exhs. 13-B, 13-C & 14-B). From then on, private respondent has paid the taxes on the property.

On May 15, 1954, Hilaria died. On October 27, 1954, Esperanza and Caridad Nanaman filed intestate estate proceedings
concerning the estate of their father, Gregorio. Included in the list of property of the estate was the 34.7-hectare land.
Inasmuch as only Esperanza, Caridad and Virgilio Nanaman were named as heirs of Gregorio in the petition, Juan
Nanaman, Gregorio's brother, opposed it. On November 26, 1954, the petition was amended to include the estate of
Hilaria with Alejo Tabuclin, Hilaria's brother, and Julio Tabuclin, a son of Hilaria's deceased brother, Jose, as additional
petitioners.

Having been appointed special administrator of the estate of the Nanaman couple, Juan Nanaman included the 34.7-
hectare land in the list of the assets of the estate.

Juan also reported that Virgilio took the amount of P350.00 from the procedure of the estate without prior permission and
that five tenants in contempt of court. Accordingly, in its Order of January 30, 1956, the probate court required private
respondent and said tenants to appear before it and "show cause why they should not be cited for contempt for illegally
interfering in the land" under special administration.

On June 16, 1956, when Edilberto Noel took over as regular administrator of the estate, he was not able to take
possession of the land in question because it was in the possession of private respondent and some heirs of Hilaria.

On July 18, 1957, private respondent and the heirs of the Nanaman spouses executed an amicable settlement of the
Nanaman estate. In the document, private respondent agreed "to relinquish his rights to one-half (1/2) of the entire parcel
of land in Tambo, Iligan City, indicated in item 1 under the Estate, sold to him by Hilaria Tabuclin, in favor of all the heirs of
the abovementioned intestate [estate] for the reason that not all of the heirs of Gregorio Nanaman have signed and
agreed" (G.R. No. 60636, Rollo, p. 67). The court approved the amicable settlement but when it was questioned by some
heirs, the court set aside its approval and declared it null and void (Exh. H-1).

The court thereafter ordered Noel, as regular administrator, to file an action to recover the 34.7-hectare land from private
respondent. Consequently, on April 30, 1963, Noel filed an action against private respondent for the version of title over
the 34.7-hectare land to the Nanaman estate and to order private respondent to pay the rentals and attorney's fees to the
estate.

On December 14, 1973, the trial court rendered a decision, holding that the action for annulment of the deed of sale had
prescribed in 1958 inasmuch as the sale was registered in 1954 and that Gregorio's heirs had slept on their rights by
allowing Hilaria to exercise rights of ownership over Gregorio's share of the conjugal property after his death in 1945. On
the issue that Hilaria had no authority to dispose of one-half of the property pertaining to her husband, the trial court ruled:
(1) that Hilaria in effect acted as administratrix over the estate of Gregorio; (2) that she sold the 34.7- hectare land in order
to pay the debts of the conjugal partnership; and (3) that out of the purchase price of P16,000.00, P4,000.00 was in
payment to private respondent (who was a doctor of medicine) for medical services rendered and medicine administered
during Gregorio's ailment and P800.00 was used to pay taxes in arrears.

Noel appealed to the Court of Appeals. In its Decision of February 18, 1980, the appellate court ruled that the transaction
between Hilaria and Virgilio on one hand and private respondent on the other, was indeed a sale. It found that no fraud,

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mistake or misrepresentation attended in the execution of the deed of sale and that no proof was shown that the contract
was merely a mortgage.

The appellate court, however, agreed with Noel that Hilaria could not validly sell the 37.7-hectare land because it was
conjugal property, and Hilaria could sell only her one-half share thereof.

On the issue of prescription, the appellate court ruled that since no fraud, mistake or misrepresentation attended the
execution of the deed of sale, the prescriptive period of ten years had not yet elapsed when the action to recover the
property was filed in 1963. Moreover, the appellate court held that in the absence of proof of adverse possession by
Hilaria, she should be considered as holding the property pursuant to her usufructuary rights over the same under the
provisions of the Spanish Civil Code of 1889, the law in force at the time of the death of Gregorio.

Finding that Noel's claim for rentals of P5,000.00 per annum from 1957 was uncontroverted, the appellate court ruled that
one-half thereof belonged to the estate of Gregorio. The dispositive portion of the decision states:

WHEREFORE, the judgment appealed from is set aside and another is hereby entered declaring the
intestate estate of Gregorio Nanaman and the defendant-appellee co-owners of the land in question in the
proportion of one-half (1/2) interest each; ordering defendant-appellee Jose C. Deleste to return to
plaintiff-appellant, as administrator of Gregorio Nanaman's estate the land in question, and to pay plaintiff
as such administrator the sum of P2,500.00 as rental of the 1/2 interest of the estate from the year 1957
until the land is returned to the estate with legal interest from the filing of plaintiff's complaint; and, to, pay
the expenses of litigation and attorney's fees to plaintiff in the sum of P3,000.00. Costs against the
appellee, Jose C. Deleste (G.R. No. 60636, Rollo,  p. 42).

Private respondent filed a motion for the reconsideration of said decision praying for the total affirmance of the decision of
the trial court. Noel also filed a motion for reconsideration praying for the return of ownership and possession of the entire
tract of land to the estate of the 34.7-hectare land.

The appellate court took into account that since Gregorio's death, Hilaria and Virgilio took physical possession of the
property and enjoyed its fruits which were delivered to them by the tenants; that Virgilio instituted said tenants; and that he
declared the property in his own name for tax purposes. The court also ruled that the non-payment of the real estate taxes
by Juan constituted abandonment of the property and his non-filing of an action to recover the same from the time that
private respondent "usurped" the property until the filing of the complaint in 1963 by Noel amounted to laches (G.R. No.
60636, Rollo, p. 50).

Hence, the appellate court tacked "the physical possession of Hilaria and Virgilio to the possession of the defendant for
another nine (9) years up to the time the complaint was filed." It considered the "change of conditions or relations" which
had transpired in the case such as private respondent's registration of his muniment of title over the property; the
cancellation of Virgilio's tax declaration and the issuance of another tax declaration in the name of private respondent;
private respondent's payment of taxes from 1952 "up to the present;" the execution of a new tenancy agreement between
private respondent and the tenants; and private respondent's purchase of plows, a carabao and insecticides for use in the
ricefield.

Stating that it was "proscribed from taking away property from the alert and the industrious and dumping it into the hands
and possession of one has previously slept on his rights," the appellate court in its amended decision decreed:

WHEREFORE, Our decision of February 18, 1980 is hereby affirmed and reiterated insofar as it upheld
the regularity and due execution of the deed of sale (Exh. A or 7) and the transaction affecting the
undivided one-half portion of the property described in par. 3 of the complaint appertaining to the share of
Hilaria Tabuclin, as evidenced by said Exh. A or 7, and is reconsidered and set aside and another one
entered affirming the decision of the lower court in all its parts, including the award of damages and the
costs of suit. No costs in this instance (G.R. No. 60636, Rollo,  p. 52).

II

Pinito W. Mercado, as new administrator of the estate, appealed to this Court, questioning the court of Appeals' Amended
Decision applying the doctrine of laches and equating the said doctrine with acquisitive prescription (G.R. No. 59550).

Subsequently, another petition for certiorari  to declare the sale to private respondent as an equitable mortgage, was filed
by Atty. Bonifacio Legaspi (G.R. No. 60636). Said counsel explained that he represented the heirs of Hilaria while the
counsel in G.R. No. 59550 represented the heirs of Gregorio (G.R. No. 60636, Rollo, pp. 104-107). These two cases,
arising as they do from the same decision of the Court of Appeals, were consolidated in the resolution of September 2,
1991 and are herein jointly considered.

III

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There are no cogent reasons to deviate from the ruling of the Court of Appeals that the contract involving the 34.7-hectare
property was one of sale and not of mortgage in the absence of a showing that the findings complained of are totally
devoid of support in the record or that they are so glaringly erroneous as to constitute serious abuse of discretion (Andres
v. Manufacturers Hanover & Trust Corporation, 177 SCRA 618 [1989]). It should be noted that two contracts had been
executed involving said property (the November 1, 1952 mortgage and the February 16, 1954 sale). In the absence of
proof of gross inadequacy of the price, that the sale was made with what might appear as an inadequate consideration
does not make the contract one of mortgage (Askay v. Cosalan, 46 Phil. 179 [1924]).

We find, however, that the resolution of these petitions hinges on whether Hilaria and Virgilio could dispose of the entire
property sold to private respondent and assuming that they did not have full ownership thereof, whether the right of action
to recover the share of the collateral heirs of Gregorio had prescribed or been lost through laches.

Gregorio died in 1945 long before the effectivity of the Civil Code of the Philippines on August 30, 1950. Under Article
2263 of the said Code, "rights to the inheritance of a person who died, with or without a will, before the effectivity of this
Code, shall be governed by the Civil Code of 1889, by other previous laws, and by the rules of Court."

Thus, succession to the estate of Gregorio was governed primarily by the provisions of the Spanish Civil Code of 1889.
Under Article 953 thereof, a spouse like Hilaria, who is survived by brothers or sisters or children of brothers or sisters of
the decedent, as is obtaining in this case, was entitled to receive in usufruct the part of the inheritance pertaining to said
heirs. Hilaria, however, had full ownership, not merely usufruct, over the undivided half of the estate (Spanish Civil Code
of 1889, Art. 493). It is only this undivided half-interest that she could validly alienate.

On the other hand, Virgilio was not an heir of Gregorio under the Spanish Civil Code of 1889. Although he was treated as
a child by the Nanaman spouses, illegitimate children who were not natural were disqualified to inherit under the said
Code (Cid v. Burnaman, 24 SCRA 434 [1968]). Article 998 of the Civil Code of the Philippines, which gave an illegitimate
child certain hereditary rights, could not benefit Virgilio because the right of ownership of the collateral heirs of Gregorio
had become vested upon his death (Civil Code of the Philippines, Art. 2253; Uson v. Del Rosario, 92 Phil. 530 [1953]).
Therefore, Virgilio had no right at all to transfer ownership over which he did not own.

In a contract of sale, it is essential that the seller is the owner of the property he is selling. The principal obligation of a
seller is "to transfer the ownership of" the property sold (Civil Code of the Philippines, Art. 1458). This law stems from the
principle that nobody can dispose of that which does not belong to him (Azcona v. Reyes, 59 Phil. 446 [1934]; Coronel v.
Ona, 33 Phil. 456 [1916). NEMO DAT QUAD NON HABET  .

While it cannot be said that fraud attended the sale to private respondent, clearly there was a mistake on the part of
Hilaria and Virgilio in selling an undivided interest in the property which belonged to the collateral heirs of Gregorio.

The sale, having been made in 1954, was governed by the Civil Code of the Philippines. Under Article 1456 of said Code,
an implied trust was created on the one-half undivided interest over the 34.7-hectare land in favor of the real owners.

Said Article provides:

If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a
trustee of an implied trust for the benefit of the person from whom the property comes.

In Diaz v. Gorricho, 103 Phil. 261 (1958), the Court said that Article 1456 merely expresses a rule recognized
in Gayondato v. Insular Treasurer, 49 Phil. 244 (1926). Applying said rule, the Gayondato court held that the buyer of a
parcel of land at a public auction to satisfy a judgment against a widow acquired only one-half interest the land
corresponding to the share of the window and the other half belonging to the heirs of her husband became impressed with
a constructive trust in behalf of said heirs.

On the issue of prescription, we hold that the action for recovery of title or possession over the 34.7-hectare land had not
yet prescribed when the complaint was filed on April 30, 1963.

In its Amended Decision, the Court of Appeals reckoned the prescriptive period from the death of Gregorio on October 2,
1945.

Under the law in force in 1945, the surviving spouse was given the management of the conjugal property until the affairs
of the conjugal partnership were terminated. The surviving spouse became the owner of one-half interest of the conjugal
estate in his own right. he also became a trustee with respect to the other half for the benefit of whoever may be legally
entitled to inherit the said portion. "He could therefore no more acquire a title by prescription against those for whom he
was administering the conjugal estate than could a guardian his ward or a judicial administrator against the heirs of an
estate. . . . The surviving husband as the administrator and liquidator of the conjugal estate occupies the position of a
trustee of the highest order and is not permitted by the law to hold that estate or any portion thereof adversely to those for
whose benefit the law imposes upon him duty of administration and liquidation" (Pamittan v. Lasam, 60 Phil. 908 [1934]).

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The possession of Virgilio, his registration of the land in his name for tax purposes, his hiring of tenants to till the land, and
his enjoyment of the produce of the tenants, appear more as acts done to help Hilaria in managing the conjugal property.
There is no evidence to prove indubitably that Virgilio asserted a claim of ownership over the property in his own right and
adverse to all including Hilaria.

In the same manner, the doctrine of laches does not apply. Upon orders of the court in the intestate proceedings, Noel,
the administrator of the estate of the Nanaman spouses, immediately filed an action to recover possession and ownership
of the property. There is no evidence showing any failure or neglect on his part, for an unreasonable and unexplained
length of time, to do that which, by exercising due diligence, could or should have been done earlier (Cristobal v. Melchor,
78 SCRA 175 [1977]). The doctrine of stale demands would apply only where by reason of the lapse of time, "[i]t would be
inequitable to allow a party to enforce his legal rights" (Z.E. Lotho, Inc. v. Ice and cold Storage Industries of the
Philippines, Inc., 3 SCRA 744 [1961]). Moreover, this Court, except for every strong reasons, is not disposed to sanction
the application of the doctrine of laches to prejudice or defeat the right of an owner or original transferee (Raneses v.
Intermediate Appellate Court, 187 SCRA 397 [1990]).

The action to recover the undivided half-interest of the collateral heirs of Gregorio prescribes in ten years. The cause of
action is based on Article 1456 of the Civil Code of the Philippines, which made private respondent a trustee of an implied
trust in favor of the said heirs. Under Article 1144 of the Civil Code of the Philippines, actions based upon an obligation
created by law, can be brought within ten years from the time the right of action accrues (Rosario v. Auditor General, 103
Phil. 1132 [1958]).

The ten-year prescriptive period within which the collateral heirs of Gregorio could file an action to recover their share in
the property sold to private respondent ( prescripcion extintiva) accrued only on march 2, 1954, when the deed of sale
was registered with the Register of Deeds (Cf. Arradaza v. Court of Appeals, 170 SCRA 12 [1987]). From march 2, 1954
to April 30, 1963, when the complaint for the recovery of the property was filed, less than ten years had elapsed.
Therefore, the action had not been barred by prescription.

The ten-year prescriptive period before title to real estate shall vest by adverse possession (  prescripcion adquisitiva) is
also reckoned in the case of private respondent from March 2, 1954 (Corporacion de PP. Agustinos Recoletos v.
Crisostomo, 32 Phil. 427 [1915]).

WHEREFORE, the Amended Decision dated May 14, 1981 of the Court of Appeals is REVERSED and SET ASIDE and
the Decision dated February 18, 1980 is REINSTATED and AFFIRMED in toto.

SO ORDERED.

REPUBLIC VS. HEIRS OF FRANCISCA DIGNOS-SORONO

NOVEMBER 11, 2010 ~ VBDIAZ

REPUBLIC VS. HEIRS OF FRANCISCA  DIGNOS-SORONO

G.R. No. 171571

March 24, 2008

FACTS: 2 were adjudicated by the then Court of First Instance of Cebu in favor of the following in four equal shares:

a) Francisca Dignos, married to Blas Sorono                     ¼ share in the two lots;

b) Tito Dignos ¼ share in the two lots;

c) predecessors-in-interest  of  the respondents              ¼ share in the two lots;

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and

d) predecessors-in-interest  of the respondents                ¼ share in the two lots

It appears that the two lots were not partitioned by the adjudicatees.

It appears further that the heirs of Tito Dignos, who was awarded ¼ share in the two lots, sold the entire two lots to the then Civil

Aeronautics Administration (CAA) via a public instrument entitled ”Extrajudicial Settlement and Sale” without the knowledge of

respondents whose predecessors-in-interest  were the adjudicatees of the rest of the ¾ portion of the two lots.

In 1996, CAAs successor-in-interest, the Mactan Cebu International Airport Authority (MCIAA), erected a security fence one of the

lot  and relocated a number of families, who had built their dwellings within the airport perimeter, to a portion of said lot to enhance

airport security.

MCIAA later caused the issuance in its name of a Tax Declarations of the 2 lots.

Respondents soon asked the agents of MCIAA to cease giving third persons permission to occupy the lots but the same was ignored.

Respondents thereupon filed a Complaint for Quieting of Title, Legal Redemption with Prayer for a Writ of Preliminary Injunction

against MCIAA before the RTC of Lapu-lapu City. Respondents further alleged that neither they nor their predecessors-in-interests

sold, alienated or disposed of their shares in the lots of which they have been in continuous peaceful possession. Respondents

furthermore alleged that neither petitioner nor its predecessor-in-interest had given them any written notice of its acquisition of the ¼

share of Tito Dignos.

The Republic, represented by the MCIAA in its Answer with Counterclaim, maintained that from the time the lots were sold to its

predecessor-in-interest CAA, it has been in open, continuous, exclusive, and notorious possession thereof; through acquisitive

prescription, it had acquired valid title to the lots since it was a purchaser in good faith and for value; and assuming  arguendo that it

did not have just title, it had, by possession for over 30 years, acquired ownership thereof by extraordinary prescription. At all events,

petitioner contended that respondents action was barred by estoppel and laches.

The trial court found for respondents. the CA affirmed the trial court’s decision. Hence, the present petition for review on certiorari

ISSUE:

1. WON the sale of the entire 2 lots by the heirs of Tito binding to the respondents

2. WON estoppel and laches should work against respondents

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HELD: the petition is denied

1.  NO. Article 493 of the Civil Code provides:

Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto, and he may therefore alienate,

assign or mortgage it, and even substitute another person in its enjoyment, except when personal rights are involved. But the effect of

the alienation of the mortgage, with respect to the co-owners, shall be limited to the portion which may be allotted to him in the

division upon the termination of the co-ownership.

Apropos is the following pertinent portion of this Courts decision in Bailon-Casilao v. CA:

As early as 1923, this Court has ruled that even if a co-owner sells the whole property as his, the sale will affect only his own share

but not those of the other co-owners who did not consent to thesale.This is because under the aforementioned codal provision, the

sale or other disposition affects only his undivided share and the transferee gets only what would correspond to his grantor in the

partition of the thing owned in common.

From the foregoing, it may be deduced that since a co-owner is entitled to sell his undivided share, a sale of the entire property by one

co-owner without the consent of the other co-owners is NOT null and void. However, only the rights of the co-owner-seller are

transferred, thereby making the buyer a co-owner of the property.

Petitioners predecessor-in-interest CAA thus acquired only the rights pertaining to the sellers-heirs of Tito Dignos, which is only ¼

undivided share of the two lots.

2. NO. Registered lands cannot be the subject of acquisitive prescription. Petitioners’ insistence that it acquired the property through

acquisitive prescription, if not ordinary, then extraordinary, does not lie. It bears emphasis at this juncture that in the Extrajudicial

Settlement and Sale forged by CAA and Tito Dignos heirs the following material portions thereof  validate the claim of

respondents that the two lots were registered:  x x x x

1. That since the OCT of Title of the above-mentioned property/ies has/have been lost and/or destroyed… and the

VENDEE hereby binds itself to reconstitute said title/s at its own expense and that the HEIRS-VENDORS, their heirs,

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successors and assigns bind themselves to help in the reconstitution of title so that the said lot/s may be registered in the

name of the VENDEE in accordance with law  x x x x

NOTES:

As for petitioners argument that the redemption price should be ¼ of the prevailing market value, not of the actual purchase price,

since, so it claims, (1) the respondents received just compensation for the property at the time it was purchased by the Government;

and, (2) the property, due to improvements introduced by petitioner in its vicinity, is now worth several hundreds of millions of pesos,

the law is not on its side.

Thus, Article 1088 of the Civil Code provides:

Should any of the heirs sell his hereditary rights to a stranger before the partition, any or all of the co-heirs may be subrogated to the

rights of the purchaser by reimbursing him for the price of the sale, provided they do so within the period of one month from the

time they were notified in writing of the sale by the vendor. The Court may take judicial notice of the increase in value of the lots.

As mentioned earlier, however, the heirs of Tito Dignos did not notify respondents about the sale. At any rate, since the Extrajudicial

Settlement and Sale stipulates, thus:

That the HEIRS-VENDORS, their heirs, assigns and successors, undertake and agree to warrant and defend the possession and

ownership of the property/ies herein sold against any and all just claims of all persons whomsoever and should the VENDEE be

disturbed in its possession, to prosecute and defend the same in the Courts of Justice.

Petitioner is not without any remedy. This decision is, therefore, without prejudice to petitioners right to seek redress against the

vendors-heirs of Tito Dignos and their successors-in-interest.

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G.R. No. 171571               March 24, 2008

REPUBLIC OF THE PHILIPPINES, Represented by MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY

(MCIAA), Petitioner,
vs.
HEIRS OF FRANCISCA DIGNOS-SORONO, namely: TEODORO SORONO, LUCIO SORONO, JR., ARSENIO T.

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SORONO, RODULFO S. OLIVAR, ALFONSA T. SORONO, CONSTANCIO S. LUMONGSOD, EULALIA S.

LIMPANGOG, and FLORENCIA S. BAGUIO; HEIRS OF JUAN L. AMISTOSO, 1 namely: MARIO L. AMISTOSO, LYN-
LYN AMISTOSO, ALLAN L. AMISTOSO, RAQUEL S. AMISTOSO, EUFRONIO S. AMISTOSO, JR., and ROGELIO S.
AMISTOSO; HEIRS OF BRIGILDA D. AMISTOSO, namely: VICTOR A. YAGONG, HEDELIZA A. YAGONG, and
CIRIACA A. YAGONG; HEIRS OF PASTOR DIGNOS; HEIRS OF ISABEL DIGNOS, namely: DR. NAPOLEON A.
AMORES, VICENTE A. BASMAYOR, DOMINGO A. BASMAYOR, and LYDIA A. BASMAYOR; HEIRS OF DONATA
DIGNOS, namely: TRINIDAD D. FUENTES, NICASIA D. FUENTES, and IRINEO D. FUENTES; HEIRS OF SEGUNDA
DIGNOS, namely: HONORATA D. CORTES and BENIGNO D. CORTES; HEIRS OF GREGORIA DIGNOS, namely:
RITA D. FUENTES and JOSE D. FUENTES; HEIRS OF DOMINGO FUENTES, namely: CIRILA P. DIGNOS and
BASILIO P. DIGNOS; and HEIR OF ISABELO DIGNOS, namely: TERESITA R. DIGNOS, 2 Respondents.

DECISION

CARPIO MORALES, J.:

Assailed via petition for review on certiorari is the April 23, 2005 decision of the Court of Appeals 3 affirming that of the
Regional Trial Court (RTC) of Lapu-lapu City, Branch 54.4

Lot Nos. 2296 and 2316 of the Cadastral Survey of Opon, Lapu-lapu City were adjudicated on December 7, 1929 by the
then Court of First Instance of Cebu in favor of the following in four equal shares:

a) Francisca Dignos, married to Blas Sorono – ¼ share in the two lots;
b) Tito Dignos, married to Candida Torrebillas – ¼ share in the two lots;
c) Isabel Dignos, married to Fabiano Amores;
Donata Dignos, married to Estanislao Fuentes;
Segunda Dignos, married to Demetrio Cortes;
Gregoria Dignos, married to Severo Fuentes;
Domingo Dignos, married to Venturada Potot; and
Isabelo Dignos, married to Petronilla Gamallo – ¼ share in the two lots; and
d) Silveria Amistuoso, married to Melecio Tumulak;
Mario Amistuoso, married to Rufina Tampus;
Juan Amistuoso, married to Narcisa Cosef;
Brigilda Amistuoso, married to Casimiro Yagong; and
Pastor Amistuoso, widower – ¼ share in the two lots.5

It appears that the two lots were not partitioned by the adjudicatees.

It appears further that the heirs of Tito Dignos, who, as reflected above, was awarded ¼ share in the two lots, sold for
₱2,565.59 the entire two lots to the then Civil Aeronautics Administration (CAA) via a public instrument entitled
"Extrajudicial Settlement and Sale" executed on October 11, 1957, without the knowledge of respondents whose
predecessors-in-interest were the adjudicatees of the rest of the ¾ portion of the two lots.6

In 1996, CAA’s successor-in-interest, the Mactan Cebu International Airport Authority (MCIAA), erected a security fence
traversing Lot No. 2316 and relocated a number of families, who had built their dwellings within the airport perimeter, to a
portion of said lot to enhance airport security in line with the standards set by the International Civil Aviation Organization
and the Federal Aviation Authority.

MCIAA later caused the issuance in its name of Tax Declaration No. 00548 covering Lot No. 2296 and Tax Declaration
No. 00568 covering Lot No. 2316.

Respondents soon asked the agents of MCIAA to cease giving third persons permission to occupy the lots but the same
was ignored.1avvphi1

Respondents thereupon filed on January 8, 1996 a Complaint for Quieting of Title, Legal Redemption with Prayer for a
Writ of Preliminary Injunction against MCIAA before the RTC of Lapu-lapu City, 7 alleging that the existence of the tax
declarations "would cast a cloud on their valid and existing titles" to the lots. They alleged that "corresponding original
certificates of title in favor of the decreed owners were . . . issued but the same could no longer be found and located, and
in all probability, were lost during the Second World War."8 (This claim was not specifically denied by petitioner in its
Answer with Counterclaim.)9

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Respondents further alleged that neither they nor their predecessors-in-interests sold, alienated or disposed of their
shares in the lots of which they have been in continuous peaceful possession.

Respondents furthermore alleged that neither petitioner nor its predecessor-in-interest had given them any written notice
of its acquisition of the ¼ share of Tito Dignos.

Respondents thus prayed as follows:

1) Upon the filing of this complaint, that a restraining order be issued enjoining the defendant and any of its
officers, agents, employees, and any third person acting on their behest, to desist from occupying their portions of
Lots 2296 and 2316, Opon Cadastre, and upon due notice and hearing, to issue the corresponding writ of
preliminary injunction for the same purpose;

2) To declare the tax declarations of the defendant or any of its predecessors-in-interests covering Lots 2296 and
2316, Opon Cadastre, to be null and void:

3) To grant unto the plaintiffs the right of preemption  in the sale of the one-fourth share of Tito Dignos in the
above-mentioned parcels of land under the provisions of Articles 1620 and 1623 of the Civil Code;

4) To order the defendant to reimburse plaintiffs the sum of ₱10,000.00 acceptance fee, the sums of ₱1,000.00
per appearance fee, the sum of ₱10,000.00 for costs of litigation;

5) To order the defendant to pay the plaintiffs the sum of P100,000.00 for moral damages.

Plaintiffs further pray for such orders as may be just and equitable under the premises.10 (Underscoring supplied)

Republic of the Philippines, represented by the MCIAA (hereafter petitioner), in its Answer with Counterclaim,11 maintained
that from the time the lots were sold to its predecessor-in-interest CAA, it has been in open, continuous, exclusive, and
notorious possession thereof; through acquisitive prescription, it had acquired valid title to the lots since it was a
purchaser in good faith and for value; and assuming arguendo that it did not have just title, it had, by possession for over
30 years, acquired ownership thereof by extraordinary prescription.

At all events, petitioner contended that respondents’ action was barred by estoppel and laches.

The trial court found for respondents. It held that respondents and their predecessors-in-interest were in peaceful and
continuous possession of their shares in the lots, and were disturbed of such possession only in 1996 when petitioner put
up the security fence that traversed Lot No. 2316 and relocated families that had built their houses within the airport
perimeter to a portion of said lot.

On petitioner’s claim that it had acquired ownership by extraordinary prescription, the trial court brushed it aside on the
ground that registered lands cannot be the subject of acquisitive prescription.

Neither, held the trial court, had respondents’ action prescribed, as actions for quieting of title cannot prescribe if the
plaintiffs are in possession of the property in question, as in the case of herein respondents.

On petitioner’s defense of laches, the trial court also brushed the same aside in light of its finding that respondents, who
have long been in possession of the lots, came to know of the sale only in 1996. The trial court added that respondents
could not be charged with constructive notice of the 1957 Extrajudicial Settlement and Sale of the lots to CAA as it was
erroneously registered under Act No. 3344,12 the law governing recording of instruments or deeds relating to real estate
which are not registered under the Torrens system. The subject lots being registered, the trial court found, the registration
of the deed should have been made under Act No. 496, 13 the applicable law in 1957. In fine, the trial court held that the
registration of the deed under Act No. 3344 did not operate as constructive notice to the whole world.14

Concluding, the trial court held that the questioned sale was valid only with respect to Tito Dignos’ ¼ share of the lots, and
that the sale thereof was subject to the right of legal redemption by respondents following Article 1088 of the Civil Code,
reading:

Should any of the heirs sell his hereditary rights to a stranger before partition, any or all of the co-heirs may be subrogated
to the rights of the purchaser by reimbursing him for the price of the sale, provided they do so within the period of one
month from the time they were notified in writing of the sale by the vendor.

In light of its finding that the heirs of Tito Dignos did not give notice of the sale to respondents, the trial court held that the
period for legal redemption had not yet lapsed; and the redemption price should be ¼ of the purchase price paid by the
CAA for the two lots.

The trial court thus disposed:

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WHEREFORE, all premises considered, the Court rules in favor of plaintiffs and hence renders judgment:

a) Declaring Tax Declarations Nos. 00915 and 00935, as well as all other tax declarations covering Lot 2296 and
Lot 2316 under the names of the Civil Aeronautics Administration, the Bureau of Air Transportation and the
defendant Mactan Cebu International Airport Authority, as null and void and directing the City Assessor of Lapu-
Lapu City to cancel them;

b) Declaring the Extrajudicial Settlement and Sale affecting Lot 2296 and Lot 2316 (Exhibit "H" for plaintiffs) as
void and ineffective as regards the three-fourth[s] (3/4) shares of plaintiffs in both lots and declaring the herein
plaintiffs as owners of such three fourth[s] shares and;

c) Ordering the defendant to resell to plaintiffs for a total price of Six Hundred forty Pesos (P640.00) the one-
fourth (1/4) shares in Lot 2296 and Lot 2316 it had purchased from the heirs of the late Tito Dignos in 1957;

No pronouncement as to costs.

SO ORDERED. 15

As priorly stated, the Court of Appeals affirmed the trial court’s decision.

Hence, the present petition for review on certiorari which proffers the following

GROUNDS FOR ALLOWANCE OF THE PETITION

THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE TRIAL COURT’S DECISION WHEN
RESPONDENTS NO LONGER HAVE ANY RIGHT TO RECOVER LOTS 2296 AND 2316 DUE TO THE PRIOR SALE
THEREOF TO THE REPUBLIC AND UPON THE EQUITABLE GROUNDS OF ESTOPPEL AND LACHES.16

The petition fails.

Article 493 of the Civil Code provides:

Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto, and he may
therefore alienate, assign or mortgage it, and even substitute another person in its enjoyment, except when personal
rights are involved. But the effect of the alienation of the mortgage, with respect to the co-owners, shall be limited to the
portion which may be allotted to him in the division upon the termination of the co-ownership.

Apropos is the following pertinent portion of this Court’s decision in Bailon-Casilao v. CA:

As early as 1923, this Court has ruled that even if a co-owner sells the whole property as his, the sale will affect only his
own share but not those of the other co-owners who did not consent to the sale [Punsalan v. Boon Liat, 44 Phil. 320
(1923)]. This is because under the aforementioned codal provision, the sale or other disposition affects only his undivided
share and the transferee gets only what would correspond to his grantor in the partition of the thing owned in common.
[Ramirez v. Bautista, 14 Phil. 528 (1909)]. Consequently, by virtue of the sales made by Rosalia and Gaudencio Bailon
which are valid with respect to their proportionate shares, and the subsequent transfers which culminated in the sale to
private respondent Celestino Afable, the said Afable thereby became a co-owner of the disputed parcel of land as
correctly held by the lower court since the sales produced the effect of substituting the buyers in the enjoyment thereof
[Mainit v. Bandoy, 14 Phil. 730 (1910)].

From the foregoing, it may be deduced that since a co-owner is entitled to sell his undivided share, a sale of the entire
property by one co-owner without the consent of the other co-owners is not null and void. However, only the rights of the
co-owner-seller are transferred, thereby making the buyer a co-owner of the property.17 (Emphasis and underscoring
supplied)

Petitioner’s predecessor-in-interest CAA thus acquired only the rights pertaining to the sellers-heirs of Tito Dignos, which
is only ¼ undivided share of the two lots.

Petitioner’s insistence that it acquired the property through acquisitive prescription, if not ordinary, then extraordinary,
does not lie. The trial court’s discrediting thereof is well taken. It bears emphasis at this juncture that in the Extrajudicial
Settlement and Sale forged by CAA and Tito Dignos’ heirs in 1957, the following material portions thereof validate the
claim of respondents that the two lots were registered:

xxxx

4. That since the Original Transfer Certificate of Title of the above-mentioned property/ies has/have been lost and/or
destroyed, or since the said lot/s is/are covered by Cadastral Case No. 19, and a decree issued on March 19, 1930,
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bearing Decree No./s 474824 & 474825, and the VENDEE hereby binds itself to reconstitute said title/s at its own
expense and that the HEIRS-VENDORS, their heirs, successors and assigns bind themselves to help in the reconstitution
of title so that the said lot/s may be registered in the name of the VENDEE in accordance with law[.]18

xxxx

The trial court’s discrediting of petitioner’s invocation of laches and prescription of action is well-taken too.

As for petitioner’s argument that the redemption price should be ¼ of the prevailing market value, not of the actual
purchase price, since, so it claims, "(1) they received just compensation for the property at the time it was purchased by
the Government; and, (2) the property, due to improvements introduced by petitioner in its vicinity, is now worth several
hundreds of millions of pesos,"19 the law is not on its side. Thus, Article 1088 of the Civil Code provides:

Should any of the heirs sell his hereditary rights to a stranger before the partition, any or all of the co-heirs may be
subrogated to the rights of the purchaser by reimbursing him for the price of the sale, provided they do so within the
period of one month from the time they were notified in writing of the sale by the vendor. (Emphasis and underscoring
supplied)

The Court may take judicial notice of the increase in value of the lots. As mentioned earlier, however, the heirs of Tito
Dignos did not notify respondents about the sale. At any rate, since the Extrajudicial Settlement and Sale stipulates, thus:

That the HEIRS-VENDORS, their heirs, assigns and successors, undertake and agree to warrant and defend the
possession and ownership of the property/ies herein sold against any and all just claims of all persons whomsoever  and
should the VENDEE be disturbed in its possession, to prosecute and defend the same in the Courts of
Justice20 (Emphasis and underscoring supplied),

petitioner is not without any remedy. This decision is, therefore, without prejudice to petitioner’s right to seek redress
against the vendors-heirs of Tito Dignos and their successors-in-interest.

WHEREFORE, the petition is, in light of the foregoing disquisition, DENIED.

SO ORDERED.

CONCHITA CARPIO MORALES

Associate Justice

WE CONCUR:

Pichel v. Alonzo

Facts:

Respondent Prudencio Alonzo was awarded by the Government that parcel of land in Basilan City in accordance with
Republic Act No. 477. The award was cancelled by the Board of Liquidators on January 27, 1965 on the ground that,
previous thereto, plaintiff was proved to have alienated the land to another, in violation of law. In 1972, plaintiff's rights to
the land were reinstated.

On August 14, 1968, plaintiff and his wife sold to defendant Luis Pichel all the fruits of the coconut trees which may be
harvested in the land in question for the period, September 15, 1968 to January 1, 1976, in consideration of P4,200.00.
Even as of the date of sale, however, the land was still under lease to one, Ramon Sua, and it was the agreement that part
of the consideration of the sale, in the sum of P3,650.00, was to be paid by defendant directly to Ramon Sua so as to
release the land from the clutches of the latter. Pending said payment plaintiff refused to allow the defendant to make any
harvest. In July 1972, defendant for the first time since the execution of the deed of sale in his favor, caused the harvest of
the fruit of the coconut trees in the land.

Alonzo filed for the annulment of the contract on the ground that it violated the provisions of R.A. 477, which states that
lands awarded under the said law shall not be subject to encumbrance or alienation, otherwise the awardee shall no longer
be entitled to apply for another piece of land. The lower court ruled that the contract, which it held as a contract of lease, is
null and void.

Issues:

(1) Whether the respondent had the right or authority to execute the "Deed of Sale" in 1968, his award having been
cancelled previously by the Board of Liquidators on January 27, 1965

(2) Whether the contract is one for lease of the land, or for sale of coconut fruits

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(3) Whether the contract is an encumbrance as contemplated by R.A. 477

Held:

(1) Until and unless an appropriate proceeding for reversion is instituted by the State, and its reacquisition of the
ownership and possession of the land decreed by a competent court, the grantee cannot be said to have been divested of
whatever right that he may have over the same property. Herein respondent is not deemed to have lost any of his rights as
grantee during the period material to the case at bar, i.e., from the cancellation of the award in 1965 to its reinstatement in
1972. Within said period, respondent could exercise all the rights pertaining to a grantee.

(2) A perusal of the deed fails to disclose any ambiguity or obscurity in its provisions, nor is there doubt as to the real
intention of the contracting parties. The terms of the agreement are clear and unequivocal, hence the literal and plain
meaning thereof should be observed. The document in question expresses a valid contract of sale. It has the essential
elements of a contract of sale. The subject matter of the contract of sale in question are the fruits of the coconut trees on
the land during the years from September 15, 1968 up to January 1, 1976, which subject matter is a determinate thing.
Under Article 1461 of the New Civil Code, things having a potential existence may be the object of the contract of sale.
Pending crops which have potential existence may be the subject matter of sale. The essential difference between a
contract of sale and a lease of things is that the delivery of the thing sold transfers ownership, while in lease no such
transfer of ownership results as the rights of the lessee are limited to the use and enjoyment of the thing leased.

The contract was clearly a "sale of the coconut fruits." The vendor sold, transferred and conveyed "by way of absolute sale,
all the coconut fruits of his land," thereby divesting himself of all ownership or dominion over the fruits during the seven-
year period. The possession and enjoyment of the coconut trees cannot be said to be the possession and enjoyment of the
land itself because these rights are distinct and separate from each other, the first pertaining to the accessory or
improvements (coconut trees) while the second, to the principal (the land). A transfer of the accessory or improvement is
not a transfer of the principal. It is the other way around, the accessory follows the principal. Hence, the sale of the nuts
cannot be interpreted nor construed to be a lease of the trees, much less extended further to include the lease of the land
itself.

The grantee of a parcel of land under R.A. No. 477 is not prohibited from alienating or disposing of the natural and/or
industrial fruits of the land awarded to him. What the law expressly disallows is the encumbrance or alienation of the land
itself or any of the permanent improvements thereon. Permanent improvements on a parcel of land are things
incorporated or attached to the property in a fixed manner, naturally or artificially. They include whatever is built, planted
or sown on the land which is characterized by fixity, immutability or immovability. Houses, buildings, machinery, animal
houses, trees and plants would fall under the category of permanent improvements, the alienation or encumbrance of
which is prohibited. The purpose of the law is not violated when a grantee sells the produce or fruits of his land. On the
contrary, the aim of the law is thereby achieved, for the grantee is encouraged and induced to be more industrious and
productive, thus making it possible for him and his family to be economically self-sufficient and to lead a respectable life.
At the same time, the Government is assured of payment on the annual installments on the land. We agree with herein
petitioner that it could not have been the intention of the legislature to prohibit the grantee from selling the natural and
industrial fruits of his land, for otherwise, it would lead to an absurd situation wherein the grantee would not be able to
receive and enjoy the fruits of the property in the real and complete sense.

G.R. No. L-36902 January 30, 1982

LUIS PICHEL, petitioner,
vs.
PRUDENCIO ALONZO, respondent.

GUERRERO, J.:

This is a petition to review on certiorari the decision of the Court of First Instance of Basilan City dated January 5, 1973 in
Civil Case No. 820 entitled "Prudencio Alonzo, plaintiff, vs. Luis Pichel, defendant."

This case originated in the lower Court as an action for the annulment of a "Deed of Sale" dated August 14, 1968 and
executed by Prudencio Alonzo, as vendor, in favor of Luis Pichel, as vendee, involving property awarded to the former by
the Philippine Government under Republic Act No. 477. Pertinent portions of the document sued upon read as follows:

That the VENDOR for and in consideration of the sum of FOUR THOUSAND TWO HUNDRED PESOS
(P4,200.00), Philippine Currency, in hand paid by the VENDEE to the entire satisfaction of the VENDOR,
the VENDOR hereby sells transfers, and conveys, by way of absolute sale, all the coconut fruits of his
coconut land, designated as Lot No. 21 - Subdivision Plan No. Psd- 32465, situated at Balactasan
Plantation, Lamitan, Basilan City, Philippines;

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That for the herein sale of the coconut fruits are for all the fruits on the aforementioned parcel of land
presently found therein as well as for future fruits to be produced on the said parcel of land during the
years period; which shag commence to run as of SEPTEMBER 15,1968; up to JANUARY 1, 1976 (sic);

That the delivery of the subject matter of the Deed of Sale shall be from time to time and at the expense
of the VENDEE who shall do the harvesting and gathering of the fruits;

That the Vendor's right, title, interest and participation herein conveyed is of his own exclusive and
absolute property, free from any liens and encumbrances and he warrants to the Vendee good title
thereto and to defend the same against any and all claims of all persons whomsoever. 1

After the pre-trial conference, the Court a quo issued an Order dated November 9, 1972 which in part read thus:

The following facts are admitted by the parties:

Plaintiff Prudencio Alonzo was awarded by the Government that parcel of land designated as Lot No. 21
of Subdivision Plan Psd 32465 of Balactasan, Lamitan, Basilan City in accordance with Republic Act No.
477. The award was cancelled by the Board of Liquidators on January 27, 1965 on the ground that,
previous thereto, plaintiff was proved to have alienated the land to another, in violation of law. In 197 2,
plaintiff's rights to the land were reinstated.

On August 14, 1968, plaintiff and his wife sold to defendant an the fruits of the coconut trees which may
be harvested in the land in question for the period, September 15, 1968 to January 1, 1976, in
consideration of P4,200.00. Even as of the date of sale, however, the land was still under lease to one,
Ramon Sua, and it was the agreement that part of the consideration of the sale, in the sum of P3,650.00,
was to be paid by defendant directly to Ramon Sua so as to release the land from the clutches of the
latter. Pending said payment plaintiff refused to snow the defendant to make any harvest.

In July 1972, defendant for the first time since the execution of the deed of sale in his favor, caused the
harvest of the fruit of the coconut trees in the land.

xxx xxx xxx

Considering the foregoing, two issues appear posed by the complaint and the answer which must needs
be tested in the crucible of a trial on the merits, and they are:

First.— Whether or nor defendant actually paid to plaintiff the full sum of P4,200.00 upon execution of the
deed of sale.

Second.— Is the deed of sale, Exhibit 'A', the prohibited encumbrance contemplated in Section 8 of
Republic Act No. 477? 2

Anent the first issue, counsel for plaintiff Alonzo subsequently 'stipulated and agreed that his client ... admits fun payment
thereof by defendant. 3 The remaining issue being one of law, the Court below considered the case submitted for
summary judgment on the basis of the pleadings of the parties, and the admission of facts and documentary evidence
presented at the pre-trial conference.

The lower court rendered its decision now under review, holding that although the agreement in question is denominated
by the parties as a deed of sale of fruits of the coconut trees found in the vendor's land, it actually is, for all legal intents
and purposes, a contract of lease of the land itself. According to the Court:

... the sale aforestated has given defendant complete control and enjoyment of the improvements of the
land. That the contract is consensual; that its purpose is to allow the enjoyment or use of a thing; that it is
onerous because rent or price certain is stipulated; and that the enjoyment or use of the thing certain is
stipulated to be for a certain and definite period of time, are characteristics which admit of no other
conclusion. ... The provisions of the contract itself and its characteristics govern its nature. 4

The Court, therefore, concluded that the deed of sale in question is an encumbrance prohibited by Republic Act No. 477
which provides thus:

Sec. 8. Except in favor of the Government or any of its branches, units, or institutions, land acquired
under the provisions of this Act or any permanent improvements thereon shall not be thereon and for a
term of ten years from and after the date of issuance of the certificate of title, nor shall they become liable
to the satisfaction of any debt contracted prior to the expiration of such period.

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Any occupant or applicant of lands under this Act who transfers whatever rights he has acquired on said
lands and/or on the improvements thereon before the date of the award or signature of the contract of
sale, shall not be entitled to apply for another piece of agricultural land or urban, homesite or residential
lot, as the case may be, from the National Abaca and Other Fibers Corporation; and such transfer shall
be considered null and void. 5

The dispositive portion of the lower Court's decision states:

WHEREFORE, it is the judgment of this Court that the deed of sale, Exhibit 'A', should be, as it is, hereby
declared nun and void; that plaintiff be, as he is, ordered to pay back to defendant the consideration of the
sale in the sum of P4,200.00 the same to bear legal interest from the date of the filing of the complaint
until paid; that defendant shall pay to the plaintiff the sum of P500.00 as attorney's fees.

Costs against the defendant. 6

Before going into the issues raised by the instant Petition, the matter of whether, under the admitted facts of this case, the
respondent had the right or authority to execute the "Deed of Sale" in 1968, his award over Lot No. 21 having been
cancelled previously by the Board of Liquidators on January 27, 1965, must be clarified. The case in point is Ras vs.
Sua  7 wherein it was categorically stated by this Court that a cancellation of an award granted pursuant to the provisions
of Republic Act No. 477 does not automatically divest the awardee of his rights to the land. Such cancellation does not
result in the immediate reversion of the property subject of the award, to the State. Speaking through Mr. Justice J.B.L.
Reyes, this Court ruled that "until and unless an appropriate proceeding for reversion is instituted by the State, and its
reacquisition of the ownership and possession of the land decreed by a competent court, the grantee cannot be said to
have been divested of whatever right that he may have over the same property." 8

There is nothing in the record to show that at any time after the supposed cancellation of herein respondent's award on
January 27, 1965, reversion proceedings against Lot No. 21 were instituted by the State. Instead, the admitted fact is that
the award was reinstated in 1972. Applying the doctrine announced in the above-cited Ras case, therefore, herein
respondent is not deemed to have lost any of his rights as grantee of Lot No. 21 under Republic Act No. 477 during the
period material to the case at bar, i.e., from the cancellation of the award in 1965 to its reinstatement in 1972. Within said
period, respondent could exercise all the rights pertaining to a grantee with respect to Lot No. 21.

This brings Us to the issues raised by the instant Petition. In his Brief, petitioner contends that the lower Court erred:

1. In resorting to construction and interpretation of the deed of sale in question where the terms thereof
are clear and unambiguous and leave no doubt as to the intention of the parties;

2. In declaring — granting without admitting that an interpretation is necessary — the deed of sale in
question to be a contract of lease over the land itself where the respondent himself waived and
abandoned his claim that said deed did not express the true agreement of the parties, and on the
contrary, respondent admitted at the pre-trial that his agreement with petitioner was one of sale of the
fruits of the coconut trees on the land;

3. In deciding a question which was not in issue when it declared the deed of sale in question to be a
contract of lease over Lot 21;

4. In declaring furthermore the deed of sale in question to be a contract of lease over the land itself on the
basis of facts which were not proved in evidence;

5. In not holding that the deed of sale, Exhibit "A" and "2", expresses a valid contract of sale;

6. In not deciding squarely and to the point the issue as to whether or not the deed of sale in question is
an encumbrance on the land and its improvements prohibited by Section 8 of Republic Act 477; and

7. In awarding respondent attorney's fees even granting, without admitting, that the deed of sale in
question is violative of Section 8 of Republic Act 477.

The first five assigned errors are interrelated, hence, We shall consider them together. To begin with, We agree with
petitioner that construction or interpretation of the document in question is not called for. A perusal of the deed fails to
disclose any ambiguity or obscurity in its provisions, nor is there doubt as to the real intention of the contracting parties.
The terms of the agreement are clear and unequivocal, hence the literal and plain meaning thereof should be observed.
Such is the mandate of the Civil Code of the Philippines which provides that:

Art. 1370. If the terms of a contract are clear and leave no doubt upon the intention of the contracting
parties, the literal meaning of its stipulation shall control ... .

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Pursuant to the afore-quoted legal provision, the first and fundamental duty of the courts is the application of the contract
according to its express terms, interpretation being resorted to only when such literal application is impossible. 9

Simply and directly stated, the "Deed of Sale dated August 14, 1968 is precisely what it purports to be. It is a document
evidencing the agreement of herein parties for the sale of coconut fruits of Lot No. 21, and not for the lease of the land
itself as found by the lower Court. In clear and express terms, the document defines the object of the contract thus: "the
herein sale of the coconut fruits are for an the fruits on the aforementioned parcel of land during the years ...(from)
SEPTEMBER 15, 1968; up to JANUARY 1, 1976." Moreover, as petitioner correctly asserts, the document in question
expresses a valid contract of sale. It has the essential elements of a contract of sale as defined under Article 1485 of the
New Civil Code which provides thus:

Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership
of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its
equivalent.

A contract of sale may be absolute or conditional.

The subject matter of the contract of sale in question are the fruits of the coconut trees on the land during the years from
September 15, 1968 up to January 1, 1976, which subject matter is a determinate thing. Under Article 1461 of the New
Civil Code, things having a potential existence may be the object of the contract of sale. And in Sibal vs. Valdez, 50 Phil.
512, pending crops which have potential existence may be the subject matter of the sale. Here, the Supreme Court, citing
Mechem on Sales and American cases said which have potential existence may be the subject matter of sale. Here, the
Supreme Court, citing Mechem on Sales and American cases said:

Mr. Mechem says that a valid sale may be made of a thing, which though not yet actually in existence, is
reasonably certain to come into existence as the natural increment or usual incident of something already
in existence, and then belonging to the vendor, and the title will vest in the buyer the moment the thing
comes into existence. (Emerson vs. European Railway Co., 67 Me., 387; Cutting vs. Packers Exchange,
21 Am. St. Rep. 63) Things of this nature are said to have a potential existence. A man may sell property
of which he is potentially and not actually possess. He may make a valid sale of the wine that a vineyard
is expected to produce; or the grain a field may grow in a given time; or the milk a cow may yield during
the coming year; or the wool that shall thereafter grow upon sheep; or what may be taken at the next case
of a fisherman's net; or fruits to grow; or young animals not yet in existence; or the goodwill of a trade and
the like. The thing sold, however, must be specific and Identified. They must be also owned at the time by
the vendor. (Hull vs. Hull 48 Conn. 250 (40 Am. Rep., 165) (pp. 522-523).

We do not agree with the trial court that the contract executed by and between the parties is "actually a contract of lease
of the land and the coconut trees there." (CFI Decision, p. 62, Records). The Court's holding that the contract in question
fits the definition of a lease of things wherein one of the parties binds himself to give to another the enjoyment or use of a
thing for a price certain and for a period which may be definite or indefinite (Art. 1643, Civil Code of the Philippines) is
erroneous. The essential difference between a contract of sale and a lease of things is that the delivery of the thing sold
transfers ownership, while in lease no such transfer of ownership results as the rights of the lessee are limited to the use
and enjoyment of the thing leased.

In Rodriguez vs. Borromeo, 43 Phil. 479, 490, the Supreme Court held:

Since according to article 1543 of the same Code the contract of lease is defined as the giving or the
concession of the enjoyment or use of a thing for a specified time and fixed price, and since such contract
is a form of enjoyment of the property, it is evident that it must be regarded as one of the means of
enjoyment referred to in said article 398, inasmuch as the terms enjoyment, use, and benefit involve the
same and analogous meaning relative to the general utility of which a given thing is capable. (104
Jurisprudencia Civil, 443)

In concluding that the possession and enjoyment of the coconut trees can therefore be said to be the possession and
enjoyment of the land itself because the defendant-lessee in order to enjoy his right under the contract, he actually takes
possession of the land, at least during harvest time, gather all of the fruits of the coconut trees in the land, and gain
exclusive use thereof without the interference or intervention of the plaintiff-lessor such that said plaintiff-lessor is
excluded in fact from the land during the period aforesaid, the trial court erred. The contract was clearly a "sale of the
coconut fruits." The vendor sold, transferred and conveyed "by way of absolute sale, all the coconut fruits of his land,"
thereby divesting himself of all ownership or dominion over the fruits during the seven-year period. The possession and
enjoyment of the coconut trees cannot be said to be the possession and enjoyment of the land itself because these rights
are distinct and separate from each other, the first pertaining to the accessory or improvements (coconut trees) while the
second, to the principal (the land). A transfer of the accessory or improvement is not a transfer of the principal. It is the
other way around, the accessory follows the principal. Hence, the sale of the nuts cannot be interpreted nor construed to
be a lease of the trees, much less extended further to include the lease of the land itself.

The real and pivotal issue of this case which is taken up in petitioner's sixth assignment of error and as already stated
above, refers to the validity of the "Deed of Sale", as such contract of sale, vis-a-vis the provisions of Sec. 8, R.A. No. 477.
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The lower Court did not rule on this question, having reached the conclusion that the contract at bar was one of lease. It
was from the context of a lease contract that the Court below determined the applicability of Sec. 8, R.A. No. 477, to the
instant case.

Resolving now this principal issue, We find after a close and careful examination of the terms of the first paragraph of
Section 8 hereinabove quoted, that the grantee of a parcel of land under R.A. No. 477 is not prohibited from alienating or
disposing of the natural and/or industrial fruits of the land awarded to him. What the law expressly disallows is the
encumbrance or alienation of the land itself or any of the permanent improvements thereon. Permanent improvements on
a parcel of land are things incorporated or attached to the property in a fixed manner, naturally or artificially. They include
whatever is built, planted or sown on the land which is characterized by fixity, immutability or immovability. Houses,
buildings, machinery, animal houses, trees and plants would fall under the category of permanent improvements, the
alienation or encumbrance of which is prohibited by R.A. No. 477. While coconut trees are permanent improvements of a
land, their nuts are natural or industrial fruits which are meant to be gathered or severed from the trees, to be used,
enjoyed, sold or otherwise disposed of by the owner of the land. Herein respondents, as the grantee of Lot No. 21 from
the Government, had the right and prerogative to sell the coconut fruits of the trees growing on the property.

By virtue of R.A. No. 477,  bona fide occupants, veterans, members of guerilla organizations and other qualified persons
were given the opportunity to acquire government lands by purchase, taking into account their limited means. It was
intended for these persons to make good and productive use of the lands awarded to them, not only to enable them to
improve their standard of living, but likewise to help provide for the annual payments to the Government of the purchase
price of the lots awarded to them. Section 8 was included, as stated by the Court a quo, to protect the grantees from
themselves and the incursions of opportunists who prey on their misery and poverty." It is there to insure that the grantees
themselves benefit from their respective lots, to the exclusion of other persons.

The purpose of the law is not violated when a grantee sells the produce or fruits of his land. On the contrary, the aim of
the law is thereby achieved, for the grantee is encouraged and induced to be more industrious and productive, thus
making it possible for him and his family to be economically self-sufficient and to lead a respectable life. At the same time,
the Government is assured of payment on the annual installments on the land. We agree with herein petitioner that it
could not have been the intention of the legislature to prohibit the grantee from selling the natural and industrial fruits of
his land, for otherwise, it would lead to an absurd situation wherein the grantee would not be able to receive and enjoy the
fruits of the property in the real and complete sense.

Respondent through counsel, in his Answer to the Petition contends that even granting arguendo that he executed a deed
of sale of the coconut fruits, he has the "privilege to change his mind and claim it as (an) implied lease," and he has the
"legitimate right" to file an action for annulment "which no law can stop." He claims it is his "sole construction of the
meaning of the transaction that should prevail and not petitioner. (sic). 10 Respondent's counsel either misapplies the law
or is trying too hard and going too far to defend his client's hopeless cause. Suffice it to say that respondent-grantee, after
having received the consideration for the sale of his coconut fruits, cannot be allowed to impugn the validity of the
contracts he entered into, to the prejudice of petitioner who contracted in good faith and for a consideration.

The issue raised by the seventh assignment of error as to the propriety of the award of attorney's fees made by the lower
Court need not be passed upon, such award having been apparently based on the erroneous finding and conclusion that
the contract at bar is one of lease. We shall limit Ourselves to the question of whether or not in accordance with Our ruling
in this case, respondent is entitled to an award of attorney's fees. The Civil Code provides that:

Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial
costs, cannot be recovered, except:

(1) When exemplary damages are awarded;

(2) When the defendant's act or omission has compelled the plaintiff to litigate with third persons or to
incur expenses to protect his interest;

(3) In criminal cases of malicious prosecution against the plaintiff;

(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;

(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly
valid, just and demandable claim;

(6) In actions for legal support;

(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;

(8) In actions for indemnity under workmen's compensation and employer's liability laws;

(9) In a separate civil action to recover civil liability arising from a crime;
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(10) When at least double judicial costs are awarded;

(11) In any other case where the court deems it just and equitable that attorney's fees and expenses of
litigation should be recovered.

In all cases, the attorney's fees and expenses of litigation must be reasonable.

We find that none of the legal grounds enumerated above exists to justify or warrant the grant of attorney's fees to herein
respondent.

IN VIEW OF THE FOREGOING, the judgment of the lower Court is hereby set aside and another one is entered
dismissing the Complaint. Without costs.

SO ORDERED.

Teehankee (Chairman), Makasiar, Fernandez, Melencio-Herrera and Plana, JJ., concur.

 G.R. No. 188417 : September 24, 2012

MILAGROS DE BELEN VDA. DE CABALU, MELITON CABALU, SPS. ANGELA CABALU and RODOLFO
TALAVERA, and PATRICIO ABUS, Petitioners, v.
SPS. RENATO DOLORES TABU and LAXAMANA, Municipal Trial Court in Cities, Tarlac City, Branch
II,Respondents.

MENDOZA, J.:
FACTS:

Faustina Maslum (Faustina) was the original owner of a parcel of land covered by TCT No. 16776. The land had a total
area of 140,211 square meters. On December 8, 1941, Faustina died without any children. She left a holographic will,
assigning and distributing her property to her nephews and nieces. The said holographic will, however, was not probated.

Benjamin Laxamana was one of Faustinas heirs. He died in 1960. He had two heirs: his wife and his son, Domingo
Laxamana (Domingo). On March 5, 1975, Domingo executed a Deed of Sale in favor of Laureano Cabalu covering 9,000
square meters of the land inherited by his father from Faustina.

On August 1, 1994, the legitimate heirs of Faustina executed a Deed of Extra-Judicial Succession with Partition. The said
deed imparted 9,000 square meters of the land covered by TCT No. 16776 to Domingo.

Thereafter, Domingo sold 4,500 square meters of the 9,000 square meters of the land to his nephew, Eleazar Tabamo. The
remaining portion was registered in Domingos name under TCT No. 281353.

On August 4, 1996, Domingo died. On October 8, 1996, or two (2) months after Domingos death, Domingo purportedly
executed a Deed of Sale of TCT No. 281353 in favor of Renato Tabu (Tabu). Tabu and his wife Dolores Laxamana
subdivided the lot into two which resulted to TCT Nos. 291338 and 291339.

Consequently, petitioners Milagros de Belen Vda. De Cabalu, Meliton Cabalu, Spouses Angela Cabalu and Rodolfo
Talavera, and Patricio Abus filed a complaint before the RTC seeking to declare TCT Nos. 291338 and 291339 as null and
void. They averred that they were the lawful owners of the subject property because it was sold to their father, Laureano
Cabalu, by Domingo, through a Deed of Absolute Sale, dated March 5, 1975.

The RTC declared the deeds dated March 5, 1975 and October 8, 1996 null and void. On appeal, the CA partially granted
the petition and deleted the RTCs decision declaring the October 8, 1996 null and void.

ISSUES: 

I. Whether or not the Deed of Sale of Undivided Parcel of Land covering the 9,000 square meter property executed
by Domingo in favor of Laureano Cabalu on March 5, 1975, is valid? 

II. Whether or not the Deed of Sale dated October 8, 1996, covering the 4,500 square meter portion of the 9,000
square meter property, executed by Domingo in favor of Renato Tabu, is null and void?

HELD: Petition is partially granted.

CIVIL LAW: future inheritance; contractual capacity

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FIRST ISSUE:

The CA did not err in declaring the March 5, 1975 Deed of Sale null and void.

Thus, and as correctly found by the RTC, even if Benjamin died sometime in 1960, Domingo in 1975 could not yet validly
dispose of the whole or even a portion thereof for the reason that he was not the sole heir of Benjamin, as his mother only
died sometime in 1980. Besides, under Article 1347 of the Civil Code, "No contract may be entered into upon future
inheritance except in cases expressly authorized by law." Paragraph 2 of Article 1347, characterizes a contract entered into
upon future inheritance as void. The law applies when the following requisites concur: (1) the succession has not yet been
opened; (2) the object of the contract forms part of the inheritance; and (3) the promissor has, with respect to the object,
an expectancy of a right which is purely hereditary in nature.

In this case, at the time the deed was executed, Faustinas will was not yet probated; the object of the contract, the 9,000
square meter property, still formed part of the inheritance of his father from the estate of Faustina; and Domingo had a
mere inchoate hereditary right therein.

Domingo became the owner of the said property only on August 1, 1994, the time of execution of the Deed of Extrajudicial
Succession with Partition by the heirs of Faustina, when the 9,000 square meter lot was adjudicated to him.

SECOND ISSUE:

The CA erred in deleting that portion in the RTC decision declaring the Deed of Absolute Sale, dated
October 8, 1996, null and void.

Regarding the deed of sale covering the remaining 4,500 square meters of the subject property executed in favor of Renato
Tabu, it is evidently null and void.The document itself, the Deed of Absolute Sale, dated October 8, 1996, readily shows
that it was executed on August 4, 1996 more than two months after the death of Domingo. Contracting parties must be
juristic entities at the time of the consummation of the contract. Stated otherwise, to form a valid and legal agreement it is
necessary that there be a party capable of contracting and a party capable of being contracted with. Hence, if any one party
to a supposed contract was already dead at the time of its execution, such contract is undoubtedly simulated and false and,
therefore, null and void by reason of its having been made after the death of the party who appears as one of the
contracting parties therein. The death of a person terminates contractual capacity.

The contract being null and void, the sale to Renato Tabu produced no legal effects and transmitted no rights whatsoever.
Consequently, TCT No. 286484 issued to Tabu by virtue of the October 8, 1996 Deed of Sale, as well as its derivative titles,
TCT Nos. 291338 and 291339, both registered in the name of Rena to Tabu, married to Dolores Laxamana, are likewise
void.

Petition is PARTIALLY GRANTED.

G.R. No. 188417 : September 24, 2012

MILAGROS DE BELEN VDA. DE CABALU, MELITON CABALU, SPS. ANGELA CABALU and RODOLFO
TALAVERA, and PATRICIO ABUS, Petitioners, v. SPS. RENATO DOLORES TABU and LAXAMANA,
Municipal Trial Court in Cities, Tarlac City, Branch II, Respondents.

DECISION

MENDOZA, J.:

This is a "Petition for Review on Certiorari (under Rule 45)" of the Rules of Court assailing the June 16,
2009 Decision1Ï‚rνll of the Court of Appeals (CA) in CA-GR. CV No. 81469 entitled "Milagros De Belen
Vda de Cabalu v. Renato Tabu."

The Facts

The property subject of the controversy is a 9,000 square meter lot situated in Mariwalo, Tarlac, which
was a portion of a property registered in the name of the late Faustina Maslum (Faustina) under Transfer
Certificate of Title (TCT) No. 16776 with a total area of 140,211 square meters.2ςrνll

On December 8, 1941, Faustina died without any children. She left a holographic will, dated July 27, 1939,
assigning and distributing her property to her nephews and nieces. The said holographic will, however,
was not probated. One of the heirs was the father of Domingo Laxamana (Domingo), Benjamin Laxamana,
who died in 1960. On March 5, 1975, Domingo allegedly executed a Deed of Sale of Undivided Parcel of
Land disposing of his 9,000 square meter share of the land to Laureano Cabalu.3ςrνll
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 51

On August 1, 1994, to give effect to the holographic will, the forced and legitimate heirs of Faustina
executed a Deed of Extra-Judicial Succession with Partition. The said deed imparted 9,000 square meters
of the land covered by TCT No. 16776 to Domingo. Thereafter, on December 14, 1995, Domingo sold
4,500 square meters of the 9,000 square meters to his nephew, Eleazar Tabamo. The document was
captioned Deed of Sale of a Portion of Land. On May 7, 1996, the remaining 4,500 square meters of
Domingos share in the partition was registered under his name under TCT No. 281353.4ςrνll

On August 4, 1996, Domingo passed away.

On October 8, 1996, two months after his death, Domingo purportedly executed a Deed of Absolute Sale
of TCT No. 281353 in favor of respondent Renato Tabu (Tabu). The resultant transfer of title was
registered as TCT No. 286484. Subsequently, Tabu and his wife, Dolores Laxamana (respondent spouses),
subdivided the said lot into two which resulted into TCT Nos. 291338 and 291339.5ςrνll

On January 15, 1999, respondent Dolores Laxamana-Tabu, together with Julieta Tubilan-Laxamana,
Teresita Laxamana, Erlita Laxamana, and Gretel Laxamana, the heirs of Domingo, filed an unlawful
detainer action, docketed as Civil Case No. 7106, against Meliton Cabalu, Patricio Abus, Roger Talavera,
Jesus Villar, Marcos Perez, Arthur Dizon, and all persons claiming rights under them. The heirs claimed
that the defendants were merely allowed to occupy the subject lot by their late father, Domingo, but,
when asked to vacate the property, they refused to do so. The case was ruled in favor of Domingos heirs
and a writ of execution was subsequently issued.6ςrνll

On February 4, 2002, petitioners Milagros de Belen Vda. De Cabalu, Meliton Cabalu, Spouses Angela
Cabalu and Rodolfo Talavera, and Patricio Abus (petitioners), filed a case for Declaration of Nullity of Deed
of Absolute Sale, Joint Affidavit of Nullity of Transfer Certificate of Title Nos. 291338 and 291339, Quieting
of Title, Reconveyance, Application for Restraining Order, Injunction and Damages (Civil Case No. 9290)
against respondent spouses before the Regional Trial Court, Branch 63, Tarlac City (RTC).7ςrνll

In their complaint, petitioners claimed that they were the lawful owners of the subject property because it
was sold to their father, Laureano Cabalu, by Domingo, through a Deed of Absolute Sale, dated March 5,
1975. Hence, being the rightful owners by way of succession, they could not be ejected from the subject
property.8ςrνll

In their Answer, respondent spouses countered that the deed of sale from which the petitioners anchored
their right over the 9,000 square meter property was null and void because in 1975, Domingo was not yet
the owner of the property, as the same was still registered in the name of Faustina. Domingo became the
owner of the property only on August 1, 1994, by virtue of the Deed of Extra-Judicial Succession with
Partition executed by the forced heirs of Faustina. In addition, they averred that Domingo was of unsound
mind having been confined in a mental institution for a time.9ςrνll

On September 30, 2003, the RTC dismissed the complaint as it found the Deed of Absolute Sale, dated
March 5, 1975, null and void for lack of capacity to sell on the part of Domingo. Likewise, the Deed of
Absolute Sale, dated October 8, 1996, covering the remaining 4,500 square meters of the subject
property was declared ineffective having been executed by Domingo two months after his death on August
4, 1996. The fallo of the Decision10Ï‚rνll reads:chanroblesvirtuallawlibrary

WHEREFORE, in view of the foregoing, the complaint is hereby DISMISSED, and the decision is hereby
rendered by way of:

1. declaring null and void the Deed of Absolute Sale dated March 5, 1975, executed by Domingo
Laxamana in favor of Laureano Cabalu;

2. declaring null and void the Deed of Absolute Sale dated October 8, 1996, executed by Domingo
Laxamana in favor of Renato Tabu, and that TCT Nos. 293338 and 291339, both registered in the name of
Renato Tabu, married to Dolores Laxamana be cancelled;

3. restoring to its former validity, TCT No. 16770 in the name of Faustina Maslum subject to partition by
her lawful heirs.

Costs de oficio.

SO ORDERED.11ςrνll

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 52

Not in conformity, both parties appealed to the CA. Petitioners contended that the RTC erred in declaring
void the Deed of Absolute Sale, dated March 5, 1975. They claimed that Domingo owned the property,
when it was sold to Laureano Cabalu, because he inherited it from his father, Benjamin, who was one of
the heirs of Faustina. Being a co-owner of the property left by Benjamin, Domingo could dispose of the
portion he owned, notwithstanding the will of Faustina not being probated.

Respondent spouses, on the other hand, asserted that the Deed of Sale, dated March 5, 1975, was
spurious and simulated as the signature, PTR and the document number of the Notary Public were
different from the latters notarized documents. They added that the deed was without consent, Domingo
being of unsound mind at the time of its execution. Further, they claimed that the RTC erred in canceling
TCT No. 266583 and insisted that the same should be restored to its validity because Benjamin and
Domingo were declared heirs of Faustina.

On June 16, 2009, the CA rendered its decision and disposed as follows:chanroblesvirtuallawlibrary

WHEREFORE, in the light of the foregoing, the instant appeal is partially GRANTED in that the decision of
the trial court is AFFIRMED WITH MODIFICATION that sub-paragraphs 2 & 3 of the disposition, which
reads:chanroblesvirtuallawlibrary

"2. declaring null and void the Deed of Absolute Sale dated October 8, 1996, executed by Domingo
Laxamana in favor of Renato Tabu, and that TCT Nos. 291338 and 291339, both registered in the name of
Renato Tabu, married to Dolores Laxamana be cancelled;

3. restoring to its former validity, TCT No. 16776 in the name of Faustina Maslum subject to partition by
her lawful heirs," are DELETED.

IT IS SO ORDERED.12ςrνll

In finding Domingo as one of the heirs of Faustina, the CA explained as follows:chanroblesvirtuallawlibrary

It appears from the records that Domingo was a son of Benjamin as apparent in his Marriage Contract and
Benjamin was a nephew of Faustina as stated in the holographic will and deed of succession with partition.
By representation, when Benjamin died in 1960, Domingo took the place of his father in succession. In the
same vein, the holographic will of Faustina mentioned Benjamin as one of her heirs to whom Faustina
imparted 9,000 square meters of her property. Likewise, the signatories to the Deed of Extra-judicial
Succession with Partition, heirs of Faustina, particularly declared Domingo as their co-heir in the
succession and partition thereto. Furthermore, the parties in this case admitted that the relationship was
not an issue.13ςrνll

Although the CA found Domingo to be of sound mind at the time of the sale on March 5, 1975, it sustained
the RTCs declaration of nullity of the sale on the ground that the deed of sale was simulated.

The CA further held that the RTC erred in canceling TCT No. 266583 in the name of Domingo and in
ordering the restoration of TCT No. 16770, registered in the name of Faustina, to its former validity,
Domingo being an undisputed heir of Faustina.

Hence, petitioners interpose the present petition before this Court anchored on the following:

GROUNDS

(A)

THE DEED OF SALE OF UNDIVIDED PARCEL OF LAND EXECUTED ON MARCH 5, 1975 BY DOMINGO
LAXAMANA IN FAVOR OF LAUREANO CABALU IS VALID BECAUSE IT SHOULD BE ACCORDED THE
PRESUMPTION OF REGULARITY AND DECLARED VALID FOR ALL PURPOSES AND INTENTS.

(B)

THE SUBPARAGRAPH NO. 2 OF THE DECISION OF THE REGIONAL TRIAL COURT SHOULD STAY BECAUSE
THE HONORABLE COURT OF APPEALS DID NOT DISCUSS THE ISSUE AND DID NOT STATE THE LEGAL
BASIS WHY SAID PARAGRAPH SHOULD BE DELETED FROM THE SEPTEMBER 30, 2003 DECISION OF THE
REGIONAL TRIAL COURT.14ςrνll

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 53

The core issues to be resolved are 1) whether the Deed of Sale of Undivided Parcel of Land covering the
9,000 square meter property executed by Domingo in favor of Laureano Cabalu on March 5, 1975, is
valid; and 2) whether the Deed of Sale, dated October 8, 1996, covering the 4,500 square meter portion
of the 9,000 square meter property, executed by Domingo in favor of Renato Tabu, is null and void.

Petitioners contend that the Deed of Absolute Sale executed by Domingo in favor of Laureano Cabalu on
March 5, 1975 should have been declared valid because it enjoyed the presumption of regularity.
According to them, the subject deed, being a public document, had in its favor the presumption of
regularity, and to contradict the same, there must be clear, convincing and more than preponderant
evidence, otherwise, the document should be upheld. They insist that the sale transferred rights of
ownership in favor of the heirs of Laureano Cabalu.

They further argue that the CA, in modifying the decision of the RTC, should not have deleted the portion
declaring null and void the Deed of Absolute Sale, dated October 8, 1996, executed by Domingo in favor
of Renato Tabu, because at the time of execution of the said deed of sale, the seller, Domingo was already
dead. Being a void document, the titles originating from the said instrument were also void and should be
cancelled.

Respondent spouses, in their Comment15Ï‚rνll and Memorandum,16Ï‚rνll counter that the issues raised

are not questions of law and call for another calibration of the whole evidence already passed upon by the
RTC and the CA. Yet, they argue that petitioners reliance on the validity of the March 5, 1975 Deed of Sale
of Undivided Parcel of Land, based on presumption of regularity, was misplaced because both the RTC and
the CA, in the appreciation of evidence on record, had found said deed as simulated.

It is well to note that both the RTC and the CA found that the evidence established that the March 5, 1975
Deed of Sale of Undivided Parcel of Land executed by Domingo in favor of Laureano Cabalu was a fictitious
and simulated document. As expounded by the CA, viz:chanroblesvirtuallawlibrary

Nevertheless, since there are discrepancies in the signature of the notary public, his PTR and the
document number on the lower-most portion of the document, as well as the said deed of sale being
found only after the plaintiffs-appellants were ejected by the defendants-appellants; that they were
allegedly not aware that the said property was bought by their father, and that they never questioned the
other half of the property not occupied by them, it is apparent that the sale dated March 5, 1975 had the
earmarks of a simulated deed written all over it. The lower court did not err in pronouncing that it be
declared null and void.17ςrνll

Petitioners, in support of their claim of validity of the said document of deed, again invoke the legal
presumption of regularity. To reiterate, the RTC and later the CA had ruled that the sale, dated March 5,
1975, had the earmarks of a simulated deed, hence, the presumption was already rebutted. Verily and as
aptly noted by the respondent spouses, such presumption of regularity cannot prevail over the facts
proven and already established in the records of this case.

Even on the assumption that the March 5, 1975 deed was not simulated, still the sale cannot be deemed
valid because, at that time, Domingo was not yet the owner of the property. There is no dispute that the
original and registered owner of the subject property covered by TCT No. 16776, from which the subject
9,000 square meter lot came from, was Faustina, who during her lifetime had executed a will, dated July
27, 1939. In the said will, the name of Benjamin, father of Domingo, appeared as one of the heirs. Thus,
and as correctly found by the RTC, even if Benjamin died sometime in 1960, Domingo in 1975 could not
yet validly dispose of the whole or even a portion thereof for the reason that he was not the sole heir of
Benjamin, as his mother only died sometime in 1980.

Besides, under Article 1347 of the Civil Code, "No contract may be entered into upon future inheritance
except in cases expressly authorized by law." Paragraph 2 of Article 1347, characterizes a contract
entered into upon future inheritance as void. The law applies when the following requisites concur: (1) the
succession has not yet been opened; (2) the object of the contract forms part of the inheritance; and (3)
the promissor has, with respect to the object, an expectancy of a right which is purely hereditary in
nature.18ςrνll

In this case, at the time the deed was executed, Faustinas will was not yet probated; the object of the
contract, the 9,000 square meter property, still formed part of the inheritance of his father from the estate
of Faustina; and Domingo had a mere inchoate hereditary right therein.

Domingo became the owner of the said property only on August 1, 1994, the time of execution of the
Deed of Extrajudicial Succession with Partition by the heirs of Faustina, when the 9,000 square meter lot
was adjudicated to him.
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 54

The CA, therefore, did not err in declaring the March 5, 1975 Deed of Sale null and void.

Domingos status as an heir of Faustina by right of representation being undisputed, the RTC should have
maintained the validity of TCT No. 266583 covering the 9,000 square meter subject property. As correctly
concluded by the CA, this served as the inheritance of Domingo from Faustina.

Regarding the deed of sale covering the remaining 4,500 square meters of the subject property executed
in favor of Renato Tabu, it is evidently null and void. The document itself, the Deed of Absolute Sale,
dated October 8, 1996, readily shows that it was executed on August 4, 1996 more than two months after
the death of Domingo. Contracting parties must be juristic entities at the time of the consummation of the
contract. Stated otherwise, to form a valid and legal agreement it is necessary that there be a party
capable of contracting and a party capable of being contracted with. Hence, if any one party to a supposed
contract was already dead at the time of its execution, such contract is undoubtedly simulated and false
and, therefore, null and void by reason of its having been made after the death of the party who appears
as one of the contracting parties therein. The death of a person terminates contractual capacity.19ςrνll

The contract being null and void, the sale to Renato Tabu produced no legal effects and transmitted no
rights whatsoever. Consequently, TCT No. 286484 issued to Tabu by virtue of the October 8, 1996 Deed
of Sale, as well as its derivative titles, TCT Nos. 291338 and 291339, both registered in the name of Rena
to Tabu, married to Dolores Laxamana, are likewise void.

The CA erred in deleting that portion in the RTC decision declaring the Deed of Absolute Sale, dated
October 8, 1996, null and void and canceling TCT Nos. 291338 and 291339.ςηαοblενιrυαllαÏ
‰lιbrαr

WHEREFORE, the petition is partially GRANTED. The decretal portion of the June 16, 2009 Decision of the
Court of Appeals is hereby MODIFIED to read as follows:

1. The Deed of Absolute Sale, dated March 5, 1975, executed by Domingo Laxamana in favor of Laureano
Cabalu, is hereby declared as null and void.

2. The Deed of Absolute Sale, dated October 8, 1996, executed by Domingo Laxamana in favor of Renato
Tabu, and TCT No. 286484 as well as the derivative titles TCT Nos. 291338 and 291339, both registered in
the name of Renato Tabu, married to Dolores Laxamana, are hereby declared null and void and cancelled.

3. TCT No. 281353 in the name of Domingo Laxamana is hereby ordered restored subject to the partition
by his lawful heirs.

SO ORDERED.

[G.R. No. 118114. December 7, 1995.]

TEODORO ACAP, Petitioner, v. COURT OF APPEALS and EDY DE LOS REYES, Respondents.

DECISION

PADILLA, J.:

This is a petition for review on certiorari of the decision 1 of the Court of Appeals, 2nd Division, in CA-G.R.
No. 36177, which affirmed the decision 2 of the Regional Trial Court of Himamaylan, Negros Occidental
holding that private respondent Edy de los Reyes had acquired ownership of Lot No. 1130 of the Cadastral
Survey of Hinigaran, Negros Occidental based on a document entitled "Declaration of Heirship and Waiver
of Rights", and ordering the dispossession of petitioner as leasehold tenant of the land for failure to pay
rentals.

The facts of the case are as follows:chanrob1es virtual 1aw library

The title to Lot No. 1130 of the Cadastral Survey of Hinigaran, Negros Occidental was evidenced by OCT
No. R-12179. The lot has an area of 13,720 sq. meters. The title was issued and is registered in the name
54
 55

of spouses Santiago Vasquez and Lorenza Oruma. After both spouses died, their only son Felixberto
inherited the lot. In 1975, Felixberto executed a duly notarized document entitled "Declaration of Heirship
and Deed of Absolute Sale" in favor of Cosme Pido.

The evidence before the court a quo established that since 1960, petitioner Teodoro Acap had been the
tenant of a portion of the said land, covering an area of nine thousand five hundred (9,500) square
meters. When ownership was transferred in 1975 by Felixberto to Cosme Pido, Acap continued to be the
registered tenant thereof and religiously paid his leasehold rentals to Pido and thereafter, upon Pido’s
death, to his widow Laurenciana.

The controversy began when Pido died interstate and on 27 November 1981, his surviving heirs executed
a notarized document denominated as "Declaration of Heirship and Waiver of Rights of Lot No. 1130
Hinigaran Cadastre," wherein they declared, to quote its pertinent portions, that:jgc:chanrobles.com.ph

". . . Cosme Pido died in the Municipality of Hinigaran, Negros Occidental, he died interstate and without
any known debts and obligations which the said parcel of land is (sic) held liable.

That Cosme Pido was survived by his/her legitimate heirs, namely: LAURENCIANA PIDO, wife, ELY, ERVIN,
ELMER, and ELECHOR all surnamed PIDO; children;

That invoking the provisions of Sections 1, Rule 74 of the Rules of Court, the above-mentioned heirs do
hereby declare unto [sic] ourselves the only heirs of the late Cosme Pido and that we hereby adjudicate
unto ourselves the above-mentioned parcel of land in equal shares.

Now, therefore, We LAURENCIANA, 3 ELY, ELMER, ERVIN and ELECHOR all surnamed PIDO do hereby
waive, quitclaim all our rights, interests and participation over the said parcel of land in favor of EDY DE
LOS REYES, of legal age, (f)ilipino, married to VIRGINIA DE LOS REYES, and resident of Hinigaran, Negros
Occidental, Philippines. . . ." 4 (Emphasis supplied)

The document was signed by all of Pido’s heirs. Private respondent Edy de los Reyes did not sign said
document.

It will be noted that at the time of Cosme Pido’s death, title to the property continued to be registered in
the name of the Vasquez spouses. Upon obtaining the Declaration of Heirship with Waiver of Rights in his
favor, private respondent Edy de los Reyes filed the same with the Registry of Deeds as part of a notice of
an adverse claim against the original certificate of title.

Thereafter, private respondent sought for petitioner (Acap) to personally inform him that he (Edy) had
become the new owner of the land and that the lease rentals thereon should be paid to him. Private
respondent further alleged that he and petitioner entered into an oral lease agreement wherein petitioner
agreed to pay ten (10) cavans of palay per annum as lease rental. In 1982, petitioner allegedly complied
with said obligation. In 1983, however, petitioner refused to pay any further lease rentals on the land,
prompting private respondent to seek the assistance of the then Ministry of Agrarian Reform (MAR) in
Hinigaran, Negros Occidental. The MAR invited petitioner to a conference scheduled on 13 October 1983.
Petitioner did not attend the conference but sent his wife instead to the conference. During the meeting,
an officer of the Ministry informed Acap’s wife about private respondent’s ownership of the said land but
she stated that she and her husband (Teodoro) did not recognize private respondent’s claim of ownership
over the land.

On 28 April 1988, after the lapse of four (4) years, private respondent field a complaint for recovery of
possession and damages against petitioner, alleging in the main that as his leasehold tenant, petitioner
refused and failed to pay the agreed annual rental of ten (10) cavans of palay despite repeated demands.

During the trial before court a quo, petitioner reiterated his refusal to recognize private respondent’s
ownership over the subject land. He averred that he continues to recognize Cosme Pido as the owner of
the said land, and having been a registered tenant therein since 1960, he never reneged on his rental
obligations. When Pido died, he continued to pay rentals to Pido’s widow. When the latter left for abroad,
she instructed him to stay in the landholding and to pay the accumulated rentals upon her demand or
return from abroad.

Petitioner further claimed before the trial court that he had no knowledge about any transfer or sale of the
lot to private respondent in 1981 and even the following year after Laurenciana’s departure for abroad. He
denied having entered into a verbal lease tenancy contract with private respondent and that assuming
that the said lot was indeed sold to private respondent without his knowledge, R.A. 3844, as amended,
grants him the right to redeem the same at a reasonable price. Petitioner also bewailed private
respondent’s ejectment action as a violation of his right to security of tenure under P.D. 27.

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 56

On 20 August 1991, the lower court rendered a decision in favor of private respondent, the dispositive
part of which reads:jgc:chanrobles.com.ph

"WHEREFORE, premises considered, the Court renders judgment in favor of the plaintiff, Edy de los Reyes,
and against the defendant, Teodoro Acap ordering the following, to wit:chanrob1es virtual 1aw library

1. Declaring forfeiture of defendant’s preferred right to issuance of a Certificate of Land Transfer under
Presidential Decree No. 27 and his farmholdings;

2. Ordering the defendant Teodoro Acap to deliver possession of said farm to plaintiff, and;

3. Ordering the defendant to pay P5,000.00 as attorney’s fees, the sum of P1,000.00 as expenses of
litigation and the amount of P10,000.00 as actual damages." 5

In arriving at the above-mentioned judgment, the trial court stated that the evidence had established that
the subject land was "sold" by the heirs of Cosme Pido to private Respondent. This is clear from the
following disquisitions contained in the trial court’s six (6) page decisions:jgc:chanrobles.com.ph

"There is no doubt that defendant is a registered tenant of Cosme Pido. However, when the latter died
their tenancy relations changed since ownership of said land was passed on to his heirs who, by executing
a Deed of Sale, which defendant admitted in his affidavit, likewise passed on their ownership of Lot 1130
to herein plaintiff (private respondent). As owner hereof, plaintiff has the right to demand payment of
rental and the tenant is obligated to pay rentals due from the time demand is made. . . . 6

x       x       x

Certainly, the sale of the Pido family of Lot 1130 to herein plaintiff does not of itself extinguish the
relationship. There was only a change of the personality of the lessor in the person of herein plaintiff Edy
de los Reyes who being the purchaser or transferee, assumes the rights and obligations of the former
landowner to the tenant Teodoro Acap, herein defendant." 7

Aggrieved, petitioner appealed to the Court of Appeals, imputing error to the lower court when it ruled
that private respondent acquired ownership of Lot No. 1130 and that he, as tenant, should pay rentals to
private respondent and that failing to pay the same from 1983 to 1987, his right to a certificate of land
transfer under P.D. 27 was deemed forfeited.

The Court of Appeals brushed aside petitioner’s argument that the Declaration of Heirship and Waiver of
Rights (Exhibit "D"), the document relied upon by private respondent to prove his ownership to the lot,
was excluded by the lower court in its order dated 27 August 1990. The order indeed noted that the
document was not identified by Cosme Pido’s heirs and was not registered with the Registry of Deeds of
Negros Occidental. According to respondent court, however, since the Declaration of Heirship and Waiver
of Rights appears to have been duly notarized, no further proof of its due execution was necessary. Like
the trial court, respondent court was also convinced that the said documents stands as prima facie proof
of appellee’s (private respondent’s) ownership of the land in dispute.

With respect to its non-registration, respondent court noted, that petitioner had actual knowledge of the
subject sale of the land in dispute to private respondent because as early as 1983, he (petitioner) already
knew of private respondent’s claim over the said land but which he thereafter denied, and that in 1982, he
(petitioner) actually paid rent to private Respondent. Otherwise stated, respondent court considered this
fact of rental payment in 1982 as estoppel on petitioner’s part to thereafter refute private respondent’s
claim of ownership over the said land. Under these circumstances, respondent court ruled that indeed
there was deliberate refusal by petitioner to pay rent for a continued period of five years that merited
forfeiture of his otherwise preferred right to the issuance of a certificate of land transfer.

In the present, petitioner impugns the decision of the Court of Appeals as not in accord with the law and
evidence when it rules that private respondent acquired ownership of Lot No. 1130 through the
aforementioned Declaration of Heirship and Waiver of Rights.

Hence, the issues to be resolved presently are the following:chanrob1es virtual 1aw library

1. WHETHER OR NOT THE SUBJECT DECLARATION OF HEIRSHIP AND WAIVER OF RIGHTS IS A

RECOGNIZED MODE OF ACQUIRING OWNERSHIP BY PRIVATE RESPONDENT OVER THE LOT IN QUESTION.

2. WHETHER OR NOT THE SAID DOCUMENT CAN BE CONSIDERED A DEED OF SALE IN FAVOR OF

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 57

PRIVATE RESPONDENT OF THE LOT IN QUESTION.

Petitioner argues that the Regional Trial Court, in its order dated 7 August 1990, explicitly excluded the
document marked as Exhibit "D" (Declaration of Heirship, etc.) as private respondent’s evidence because
it was not registered with the Registry of Deeds and was not identified by anyone of the heirs of Cosme
Pido. The Court of Appeals, however, held the same to be admissible, it being a notarized document,
hence, a prima facie proof of private respondent’s ownership of the lot to which it refers.

Petitioner points out that the Declaration of Heirship and Waiver of Rights is not one of the recognized
modes of acquiring ownership under Article 712 of the Civil Code. Neither can the same be considered a
deed of sale so as to transfer ownership of the land to private respondent because no consideration is
stated in the contract (assuming it is a contract or deed of sale).

Private respondent defends the decision of respondent Court of Appeals as in accord with the evidence and
the law. He posits that while it may indeed be true that the trial court excluded his Exhibit "D" which is the
Declaration of Heirship and Waiver of Rights as part of his evidence, the trial court declared him
nonetheless owner of the subject lot based on other evidence adduced during the trial, namely the notice
of adverse claim (Exhibit "E") duly registered by him with the Registry of Deeds, which contains the
questioned Declaration of Heirship and Waiver of Rights as an integral part thereof.

We find the petition impressed with merit.

In the first place, an asserted right or claim to ownership or a real right over a thing arising from a
juridical act, however justified, is not per se sufficient to give rise to ownership over the res. That right or
title must be completed by fulfilling certain conditions imposed by law. Hence, ownership and real rights
are acquired only pursuant to a legal mode or process. While title is the juridical justification, mode is the
actual process of acquisition transfer of ownership over a thing in question. 8

Under Article 712 of the Civil Code, the modes of acquiring ownership are generally classified into two (2)
classes, namely, the original mode (i.e, through occupation, acquisitive prescription, law or intellectual
creation) and the derivative mode (i.e., through succession mortis causa or tradition as a result of certain
contracts, such as sale, barter, donation, assignment or mutuum).

In the case at bench, the trial court was obviously confused as to the nature and effect of the Declaration
of Heirship and Waiver of Rights, equating the same with a contract (deed) of sale. They are not the
same.

In a Contract of Sale, one of the contracting parties obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other party to pay a price certain in money or its equivalent. 9

Upon the other hand, a declaration of heirship and waiver of rights operates as a public instrument when
filed with the Registry of Deeds whereby the intestate heirs adjudicate and divide the estate left by the
decedent among themselves as they see fit. It is in effect an extrajudicial settlement between the heirs
under Rule 74 of the Rules of Court. 10

Hence, there is a marked difference between a sale of hereditary rights and a waiver of hereditary rights.
The first presumes the existence of a contract or deed of sale between the parties. 11 The second is,
technically speaking, a mode of extinction of ownership where there is an abdication or intentional
relinquishment of a known right with knowledge of its existence and intention to relinquish it, in favor of
other persons who are co-heirs in the succession. 12 Private respondent, being then a stranger to the
succession of Cosme Pido, cannot conclusively claim ownership over the subject lot on the sole basis of
the waiver document which neither recites the elements of either a sale, 13 or a donation, 14 or any other
derivative mode of acquiring ownership.

Quite surprisingly, both the trial court and public respondent Court of Appeals concluded that a "sale"
transpired between Cosme Pido’s heirs and private respondent and that petitioner acquired actual
knowledge of said sale when he was summoned by the Ministry of Agrarian Reform to discuss private
respondent’s claim over the lot in question. This conclusion has no basis both in fact and in law.

On record, Exhibit "D", which is the "Declaration of Heirship and Waiver of Rights" was excluded by the
trial court in its order dated 27 August 1990 because the document was neither registered with the
Registry of Deeds nor identified by the heirs of Cosme Pido. There is no showing that private respondent
had the same document attached to or made part of the record. What the trial court admitted was Annex
"E", a notice of adverse claim filed with Registry of Deeds which contained the Declaration of Heirship with
Waiver of rights an was annotated at the back of the Original Certificate of Title to the land in question.

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A notice of adverse claim, by its nature, does not however prove private respondent’s ownership over the
tenanted lot. "A notice of adverse claim is nothing but a notice of a claim adverse to the registered owner,
the validity of which is yet to be established in court at some future date, and is no better than a notice of
lis pendens which is a notice of a case already pending in court." 15

It is to be noted that while the existence of said adverse claim was duly proven, there is no evidence
whatsoever that a deed of sale was executed between Cosme Pido’s heirs and private respondent
transferring the rights of Pido’s heirs to the land in favor of private Respondent. Private respondent’s right
or interest therefore in the tenanted lot remains an adverse claim which cannot by itself be sufficient to
cancel the OCT to the land and title the same in private respondent’s name.

Consequently, while the transaction between Pido’s heirs and private respondent may be binding on both
parties, the right of petitioner as a registered tenant to the land cannot be perfunctorily forfeited on a
mere allegation of private respondent’s ownership without the corresponding proof thereof.

Petitioner had been a registered tenant in the subject land since 1960 and religiously paid lease rentals
thereon. In his mind, he continued to be the registered tenant of Cosme Pido and his family (after Pido’s
death), even if in 1982, private respondent allegedly informed petitioner that he had become the new
owner of the land.

Under the circumstances, petitioner may have, in good faith, assumed such statement of private
respondent to be true and may have in fact delivered 10 cavans of palay as annual rental for 1982 to
private Respondent. But in 1983, it is clear that petitioner had misgivings over private respondent’s claim
of ownership over the said land because in the October 1983 MAR conference, his wife Laurenciana
categorically denied all of private respondent’s allegations. In fact, petitioner even secured a certificate
from the MAR dated 9 May 1988 to the effect that he continued to be the registered tenant f Cosme Pido
and not a private Respondent. The reason is the private respondent never registered the Declaration of
Heirship with Waiver of Rights with the Registry of Deeds or with the MAR. Instead, he (private
respondent) sought to do indirectly what could not be done directly, i.e., file a notice of adverse claim on
the said lot to establish ownership thereof .

It stands to reason, therefore, to hold that there was no unjustified or deliberate refusal by petitioner to
pay the lease rentals or amortizations to the landowner/agricultural lessor which, in this case, private
respondent failed to established in his favor by clear and convincing evidence. 16

Consequently, the sanction of forfeiture of his preferred right to be issued a Certificate of Land Transfer
under P.D. 27 and to the possession of his farmholdings should not be applied against petitioners, since
private respondent has not established a cause of action for recovery of possession against petitioner.

WHEREFORE, premises considered, the Court hereby GRANTS, the petition and the decision of the RTC of
Himamaylan, Negros Occidental dated 20 August 1991 is hereby SET ASIDE. The private respondent’s
complaint for recovery of possession and damages against petitioner Acap is hereby DISMISSED for failure
to properly state a cause of action, without prejudice to private respondent taking the proper legal steps
to establish the legal mode by which he claims to have acquired ownership of the land in question.

SO ORDERED.

Davide, Jr., Bellosillo, Kapunan and Hermosisima, Jr., JJ., concur.

Endnotes:

[G.R. No. 104892. November 14, 1994.]

BONIFACIO OLEGARIO and ADELAIDA VICTORINO, Petitioners, v. THE HONORABLE COURT OF

APPEALS, MANUEL RIVERA, PAZ OLEGARIO, and SOCORRO OLEGARIO-TEVES, Respondents.

DECISION

PUNO, J.:

Spouses Marciliano Olegario and Aurelia Rivera-Olegario owned a parcel of land measuring 91 square
meters at 198 J.P. Rizal corner Antipolo Streets, Caloocan City as evidenced by Transfer Certificate of Title
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(TCT) No. 124222 of the Register of Deeds of Caloocan City. 1

The Olegario couples were childless but reared and educated private respondents Manuel Rivera, Paz
Olegario, and Socorro Olegario-Teves. Petitioner Bonifacio Olegario is the brother of Marciliano while
petitioner Adelaida Victorino is the niece of Aurelia.

On March 19, 1986, Aurelia Rivera-Olegario died at the age of eighty-three (83). To preclude her heirs
from inheriting and to avoid payment of taxes, Marciliano, then eighty (80) years old, executed on April
15, 1986 a Deed of Absolute Sale of the subject property in favor of private respondents. 2 The purported
consideration was FIFTY THOUSAND PESOS (P50,000.00). The contract of sale was not registered.

On March 10, 1988, Marciliano died intestate. Petitioners Bonifacio Olegario and Adelaida Victorino were
the sole heirs of spouses Olegario. On May 23, 1989, they executed a Deed of Extra-judicial Settlement of
Estate 3 covering the subject lot which was published in the Metropolitan Newsweek for three (3)
consecutive weeks. On July 13, 1989, the said Extra-judicial Settlement was recorded in the Register of
Deeds of Caloocan City. TCT No. C-124222 was then cancelled and TCT No. 190363 was issued in their
names. 4

On August 1, 1989, petitioners sold the subject lot for TWO HUNDRED THOUSAND PESOS (P200,000.00)
to Elena Adaon and Nestor Tejon. 5 TCT No. 190132 was then issued in vendees’ names.

Private respondents alleged that the Extra-judicial Settlement came to their knowledge only on August 21,
1989. On that same day, they tried to register their contract of sale three (3) years from its execution.
The registration was denied as the subject property has been transferred to Elena Adaon and Nestor
Tejon.

The fight for ownership of the subject lot ensued. Private respondents filed Civil Case No. C-13973 for
Annulment of Extra-judicial Settlement of Estate and Damages against petitioners. 6 As special and
affirmative defense, petitioners assailed the Deed of Absolute Sale between Marciliano Olegario and
private respondents. On the other hand, cross-claimants Elena Adaon and Nestor Tejon maintained they
were buyers in good faith and for value.

In due course, the trial court ruled in favor of private respondents. It annulled the Extra-judicial
Settlement of the subject lot and its sale to Adaon and Tejon, viz:jgc:chanrobles.com.ph

"WHEREFORE, the judgment is rendered for the plaintiffs and against the herein defendants, as
follows:jgc:chanrobles.com.ph

"a) The extra-judicial settlement of estate executed by defendants Bonifacio Olegario and Adelaida
Victorino on May 23, 1989 as well as Transfer Certificates of Title issued subsequent thereto, namely TCT
No. 190363 in the name of Bonifacio Olegario and Adelaida Victorino and TCT No. 190132 in the name of
Elena Adaon and Nestor Tejon are hereby declared NULL and VOID and without legal force and effect;

"b) The Register of Deeds of Caloocan City is hereby ordered to issue unto the herein plaintiffs new title in
lieu of the aforesaid cancelled titles in the name of the deceased Marciliano Olegario married to Aurelia R.
Olegario containing the same entry and/or inscription before said Title No. 124222 was cancelled;

"c) Defendants Bonifacio Olegario and Aurelia Victorino Rivera are hereby ordered to pay the herein
plaintiffs, jointly and severally, the amount of P30,000.00 as nominal damages and the further sum of
P10,000.00 for and/as attorney’s fees; and

"d) To pay costs of suit.

"With regards to the cross-claim of defendants Elena Adaon and Nestor Tejon, judgment is hereby
rendered against Bonifacio Olegario and Adelaida Victorino who are hereby ordered as
follows:jgc:chanrobles.com.ph

"a) Defendant Bonifacio Olegario is hereby ordered to pay cross-claimants Elena Adaon and Nestor Tejon
in the amount of P60,000.00 with legal interest from August 1, 1989;

"b) Defendant Adelaida Victorino is hereby ordered to pay cross-claimants Elena Adaon and Nestor Tejon
in the amount of P30,000.00 with legal interest from August 1, 1989;

"c) Defendants Bonifacio Olegario and Adelaida Victorino, jointly and severally, to pay cross-claimants the
amount of P5,000.00 for and/as attorney’s fees;

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"Counter-claim interposed by herein defendants and cross-claimants are hereby DISMISSED for lack of
evidence to support the same.

"SO ORDERED." 7

Petitioners elevated the case to respondent Court of Appeals. On January 7, 1992, the Sixteenth Division
of respondent court affirmed the impugned Decision with modifications, viz:jgc:chanrobles.com.ph

"WHEREFORE, except for the following modifications, to wit:chanrob1es virtual 1aw library

a) The extra-judicial settlement of estate executed by defendants-appellants Bonifacio Olegario and

Adelaida Victorino on May 23, 1989 as well as Transfer Certificates of Title issued subsequent thereto,
namely TCT No. 190363 in the name of Bonifacio Olegario and Adelaida Victorino and TCT No. 190132 in
the name of cross-appellants Elena Adaon and Nestor Tejon are hereby declared NULL and VOID and
without legal force and effect with respect to 3/4 portion of the subject lot pertaining to the plaintiffs-
appellees;

b) The Register of Deeds of Caloocan City is hereby ordered to issue unto the herein plaintiffs-appellees
new title corresponding to the 3/4 part of the disputed lot; and to cancel TCT No. 190363 in the name of
defendants-appellants Bonifacio Olegario and Adelaida Victorino and TCT No. 190132 in the name of
cross-claimants-appellants Elena Adaon and Nestor Tejon, and issue in lieu thereof new title corresponding
only to 1/4 portion of the subject property; and

c) Defendants-appellants Bonifacio Olegario and Adelaida Victorino are hereby ordered to pay the herein
plaintiffs-appellees, jointly and severally, the amount of P10,000.00 as nominal damages and the further
sum of P5,000.00 for and/as attorney’s fees, the appealed decision is hereby AFFIRMED in all other
respects. No costs.

SO ORDERED." 8

Petitioners now claim that respondent court erred in the following wise:chanrob1es virtual 1aw library

THAT THE RESPONDENT COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION WHEN IT FAILED TO
RESOLVE PETITIONERS’ SECOND ASSIGNMENT OF ERROR BEFORE IT AND CLOSING ITS EYES ON THE
EVIDENCE ON RECORD PATENTLY ERRED IN NOT DECLARING THAT THE PURPORTED DEED OF ABSOLUTE
SALE BETWEEN MARCILIANO OLEGARIO AND THE PRIVATE RESPONDENTS IS NULL AND VOID FOR BEING
ABSOLUTELY SIMULATED AND FICTITIOUS AND FOR BEING VIOLATIVE OR ARTICLE 130 OF THE FAMILY
CODE.

II

THAT THE RESPONDENT COURT OF APPEALS GRAVELY ERRED IN SUSTAINING THE EFFICACY OF THE
UNRECORDED DEED OF ABSOLUTE SALE OVER THAT OF THE EXTRA-JUDICIAL SETTLEMENT OF ESTATE
WHICH WAS EXECUTED AND RECORDED IN GOOD FAITH, CONTRARY TO THE EXPRESS PROVISIONS OF
ARTICLE 1544 OF THE CIVIL CODE.

III

THAT THE RESPONDENT COURT OF APPEALS PATENTLY ERRED IN HOLDING THAT CROSS-CLAIMANTS
ELENA ADAON AND NESTOR TEJON ARE NOT BUYERS IN GOOD FAITH OF THE SUBJECT PROPERTY.

IV

THAT THE RESPONDENT COURT OF APPEALS GRAVELY ERRED IN AWARDING P30,000.00 NOMINAL
DAMAGES AND P10,000.00 ATTORNEY’S FEES IN FAVOR OF THE PRIVATE RESPONDENTS DESPITE THE
PATENT ABSENCE OF FACTUAL AND LEGAL BASIS THEREFORE.

We find merit in the petition.

There is no question that petitioners are the lawful heirs of spouses Olegario. Under Article 160 of the New

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Civil Code, the subject lot is presumed to be conjugal property. The death of Aurelia Rivera-Olegario on
March 19, 1986 dissolved the conjugal partnership. By virtue of such dissolution, 1/2 of the property
should appertain to Marciliano as his share from the conjugal estate plus another 1/4 representing his
share as surviving spouse of Aurelia. 9 Petitioner Adelaida Victorino, as the sole surviving niece of Aurelia,
is entitled to the other 1/4 of the lot. 10 When Marciliano died intestate on March 10, 1986, petitioner
Bonifacio Olegario, the only surviving brother of Marciliano, stepped into his shoe.

We shall now determine whether the inheritance right of petitioners can be prejudiced by the sale of the
subject lot by the deceased Marciliano to private respondents. In a contract of sale, consideration is, as a
rule, different from the motive of the parties. Consideration is defined as some right, interest, benefit, or
advantage conferred upon the promissor, to which he is otherwise not lawfully entitled, or any detriment,
prejudice, loss, or disadvantage suffered or undertaken by the promisee other than to such as he is at the
time of consent bound to suffer. 11 As contradistinguished, motive is the condition of mind which incites
to action, but includes also the inference as to the existence of such condition, from an external fact of a
nature to produce such a condition. 12 Under certain circumstances, however, the motive of the parties
may be regarded as the consideration when it predetermines the purpose of the contract. 13 When they
blend to that degree, and the motive is unlawful, then the contract entered into is null and void. 14

In the case at bench, the primary motive of Marciliano is selling the controverted 91-square meter lot to
private respondents was to illegally frustrate petitioners’ right of inheritance and to avoid payment of
estate tax. This was unabashedly admitted by witness Susan Rivera, wife of private respondent Manuel
Rivera, on cross-examination. She declared:chanrob1es virtual 1aw library

Atty. Meris: (p. 12, TSN, June 18, 1991 [sic])

x       x       x

"Q: You mean to say that despite of your claim that your husband is the son of Marciliano Olegario and
Aurelia Olegario, they still executed a deed of absolute sale over the said lot owned by your parents in law
in favor of your husband and his two sisters?

A: It was decided that way to avoid paying tax, sir.

Q: In other words the sale was only fictitious or was only made in a way of avoiding paying taxes?

A: It was not that way but my parents in law were just avoiding distant relatives who might claim it. 15

x       x       x

Atty. Buenaventura: (p. 15, TSN, June 18, 1990)

"Q: And as a husband (sic) of Manuel you are familiar of the reason why this deed of sale was executed?

A: I have stated earlier that my father in law sold it to them for the reason that he would not want the
said property to be given to another party, sir.

Q: In other words, it was not really intended as honest to goodness sale between the former owner and
Manuel Rivera, your husband and her sister? (sic)

A: Yes, sir." 16

x       x       x

We also note that in their comment, rejoinder, and memorandum private respondents did not refute
petitioners’ charge that the said sale is fictitious. The conclusion is thus inescapable that the purported
sale of April 15, 1986 of the subject lot is null and void. Illegal motive predetermined the purpose of the
contract. 17

In addition, the trial court and respondent court failed to consider the lack of cause in the alleged deed of
sale of 1886. 18 The evidence does not show that private respondents had FIFTY THOUSAND PESOS
(P50,000.00) and paid the same to Marciliano. Private respondents allegedly borrowed THIRTY THOUSAND
PESOS (P30,000.00) from the cooperative of Mary Help of Christian Parish to prove their financial
capacity. However, they floundered in their cross-examinations.

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Atty. Meris:chanrob1es virtual 1aw library

(Cross-examination of respondent Manuel Rivera) (p. 39, TSN, June 4, 1990)

x       x       x

"Q: And how much did you buy the said property?

A: P50,000.00, sir.

Q: And did you bring this money at the City Hall?

A: No, sir.

Q: Did you give your father the said amount?

A: We spent it for the treatment of my father, for payment of the real estate tax and burial of my mother
Aurelia Olegario sir. (Emphasis supplied)." 19

x       x       x

Atty. Buenaventura on cross-examination of Paz Olegario (respondent), pp. 22, TSN, June 23, 1990.

x       x       x

"Q: Do you know how much was paid?

A: P50,000.00, sir

Q: Was it paid in cash or in other form?

x       x       x

A: No, sir.

Q: What do you mean by "no sir."cralaw virtua1aw library

Atty. Buenaventura:chanrob1es virtual 1aw library

May we make on record that the witness is having difficulty in answering the question despite being
repeatedly interpreted the meaning of the question propounded on to" .

x       x       x

"Q: When was the money given, after it (Deed of Sale) was executed on April 15, 1986?

A: Last week of April, sir.

Q: Do you know where the money came from?

Atty. Buenaventura:chanrob1es virtual 1aw library

May we manifest to the Honorable Court that there are some signal coming from the other witness that
has been presented before the Honorable Court and it seems that the witness is getting clue from the
other witness. (Emphasis supplied) 20

Applying Articles 1352 and 1409 21 of the Civil Code in relation to the indispensable requisite of a valid
cause, we hold that the alleged deed of sale is void.

It is also obvious to the eye that the contract of sale in 1986 is unregistered. Section 51 of Presidential

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Decree No. 1529, otherwise known as the Property Registration Decree, provides that" [T]he act of
registration shall be the operative act to convey or affect the land insofar as third persons are concerned."
Thus, even if the contract of sale is valid, it cannot adversely affect third persons because of its non-
registration. More specifically, it cannot prejudice petitioners as well as Elena Adaon and Nestor Tejon.

IN VIEW WHEREOF, the Decision of respondent court dated January 7, 1992 is REVERSED and SET ASIDE;
the Complaint in Civil Case No. C-13973 is ordered DISMISSED. No costs.

SO ORDERED.

Arrogante v. Deliarte528 scra 63 (future inheritance) 2007

FACTSThe lot in controversy, Lot No. 472-A, was originally conjugal property of the spouses Bernabe Deliarte,Sr. and Gregoria
Placencia who had nine children, including herein respondent Beethoven Deliarte andpetitioner Fe Deliarte Arrogante.The other
petitioners, Lordito, Johnston, and Arme, Jr., all surnamed Arrogante, are the children of Fe( nephews of Beethoven).Respondent
Leonora Duenas is the wife of Beethoven.On 1978, the Deliarte siblings agreed to waive and convey in favor of Beethoven all their
rights, interests,and claims to the subject lot in consideration ofP15,000.00. Bernabe, the parties ailing father, died onNovember 7,
1980.From then on, respondent Beethoven occupied and possessed the subject lot openly, peacefully, and inthe concept of
owner.He exercised full ownership and control over the subject lot without any objectionfrom all his siblings, or their heirs, until 1993
when the controversy arose. In fact, onMarch 26, 1986, allof Beethovens siblings, except Fe, signed a deed of confirmation of sale in
favor of Beethoven to ratify the1978 private deed of sale.Sometime in August 1993, petitioner Lordito Arrogante installed placards
on the fence erected byrespondents, claiming that the subject lot was illegally acquired by the latter.Respondents filed an action for
quieting of title and damages against the petitioners.Petitioners averred that Beethoven does not own the whole of the subject lot
because Bernabe was stillalive in 1978 when Beethovens siblings sold to him all their rights and claims to and interests in
thatlot.Thus, the siblings could sell only their respective inheritance from one-half of the subject lot,representing Gregorias
share in the conjugal property.ISSUEWhether or not the private deed ofsaleexecuted in 1978 is a valid conveyance of the
entirelot472-a to petitioner beethoven deliarte. - NORULINGArticle 1347, paragraph 2 of the Civil Code characterizes a contract
entered into upon future inheritanceas void.The law applies when the following requisites concur: (1) the succession has not yet
been opened; (2) the object of the contract forms part of the inheritance; and

(3) the promissor has, with respect to the object, an expectancy of a right which is purely hereditary innature.In this case, at the time
the contract was entered into, succession to Bernabe’s estate had yet to beopened, and the object thereof,i.e.,Bernabe’s share in the
subject lot, formed part of his children’sinheritance, and the children merely had an inchoate hereditary right thereto.True, the
prohibition on contracts respecting future inheritance admits of exceptions, as when a personpartitions his estate by an actinter
vivosunder Article 1080 of the Civil Code.However, the private deedof sale does not purport to be a partition of Bernabe’s estate as
would exempt it from the application ofArticle 1347.Nowhere in the said document does Bernabe separate, divide, and assign to his
children hisshare in the subject lot effective only upon his death. Indeed, the document does not even bear thesignature of
Bernabe.Neither did the parties demonstrate that Bernabe undertook an oral partition of his estate.Although wehave held on several
occasions that an oral or parole partition is valid, our holdings thereon were confinedto instances wherein the partition had actually
been consummated, enforced, and recognized by theparties. Absent a showing of an overt act by Bernabe indicative of an
unequivocal intent to partition hisestate among his children, his knowledge and ostensible acquiescence to the private deed of sale
doesnot equate to an oral partition by an actinter vivos.Besides, partition of property representing futureinheritance cannot be made
effective during the lifetime of its owner. Considering the foregoing, it follows that the 1986 deed of confirmation of sale which
sought to ratify the1978 sale likewise suffers from the same infirmity. In short, the 1986 deed is also void

G.R. No. 152132               July 24, 2007

LORDITO ARROGANTE, JOHNSTON ARROGANTE, ARME ARROGANTE, and FE D. ARROGANTE, Petitioners,

vs.
BEETHOVEN DELIARTE, Joined by SPOUSE LEONORA DUENAS, Respondents.

DECISION

NACHURA, J.:

This Petition for Review on Certiorari assails the Decision1 dated August 28, 2001 of the Court of Appeals (CA) in CA-
G.R. CV No. 58493 which affirmed the Decision2 dated February 18, 1997 of the Regional Trial Court (RTC), Branch 10,
of Cebu City in an action for quieting of title and damages.
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It appears that the lot in controversy, Lot No. 472-A (subject lot), is situated in Poblacion Daanbantayan, Cebu, and was
originally conjugal property of the spouses Bernabe Deliarte, Sr. and Gregoria Placencia who had nine children, including
herein respondent Beethoven Deliarte and petitioner Fe Deliarte Arrogante. The other petitioners, Lordito, Johnston, and
Arme, Jr., all surnamed Arrogante, are the children of Fe and, thus, nephews of Beethoven. Respondent Leonora Duenas
is the wife of Beethoven.

A series of misfortunes struck the Deliarte family. The first tragedy occurred when a brother of Beethoven and Fe was
hospitalized and eventually died in Davao. Beethoven shouldered the hospitalization and other related expenses,
including the transport of the body from Davao to Cebu and then to Daanbantayan.

The next occurrence took place a year after, when Gregoria was likewise hospitalized and subsequently died on July 29,
1978. Once again, Beethoven paid for all necessary expenses. Soon thereafter, it was Bernabe, the parties’ ailing father,
who died on November 7, 1980. Not surprisingly, it was Beethoven who spent for their father’s hospitalization and burial.

In between the deaths of Gregoria and Bernabe, on November 16, 1978, the Deliarte siblings agreed to waive and convey
in favor of Beethoven all their rights, interests, and claims to the subject lot in consideration of ₱15,000.00.3 At the signing
of the deed of absolute sale, the siblings who failed to attend the family gathering, either because they were dead or were
simply unable to, were represented by their respective spouses who signed the document on their behalf.4 Bernabe, who
was already blind at that time, was likewise present and knew of the sale that took place among his children.

Thus, from then on, Beethoven occupied and possessed the subject lot openly, peacefully, and in the concept of owner.
He exercised full ownership and control over the subject lot without any objection from all his siblings, or their heirs, until
1993 when the controversy arose.5 In fact, on March 26, 1986, all of Beethoven’s siblings, except Fe, signed a deed of
confirmation of sale in favor of Beethoven to ratify the 1978 private deed of sale.

Sometime in August 1993, petitioner Lordito Arrogante installed placards on the fence erected by respondents, claiming
that the subject lot was illegally acquired by the latter. 6 The placards depicted Beethoven as a land grabber who had
unconscionably taken the subject lot from Lordito who claimed that the lot is a devise from his grandfather.7 Allegedly, the
bequeathal was made in Bernabe’s last will and testament which was, unfortunately, torn up and destroyed by
Beethoven.8

Thus, on November 10, 1993, respondents filed an action for quieting of title and damages against the petitioners.

In their answer, the petitioners averred that Beethoven does not own the whole of the subject lot because Bernabe was
still alive in 1978 when Beethoven’s siblings sold to him all their rights and claims to and interests in that lot. Thus, the
siblings could sell only their respective inheritance from one-half of the subject lot, representing Gregoria’s share in the
conjugal property. Corollarily, the petitioners claimed that Fe continues to own 1/9 of one-half of the subject lot,
comprising Bernabe’s share of the property, which allegedly was not contemplated in the conveyance in 1978. According
to petitioners, this contention is supported by Fe’s failure to sign the deed of confirmation of sale in 1986.

As regards the damaging placards, the petitioners asseverated that Lordito acted on his own when he installed the same,
and that this was resorted to merely to air his grievance against his uncle, Beethoven, for claiming ownership of the entire
lot.

After trial, the RTC rendered a Decision quieting title on the subject lot in favor of respondents and directing petitioners,
jointly and severally, to pay the respondents ₱150,000.00 as moral damages, ₱25,000.00 as attorney’s fees, and
₱10,000.00 as litigation expenses.

On appeal, the CA affirmed the trial court’s decision but deleted the award of attorney’s fees and litigation expenses. In
ruling for the respondents, both the trial and appellate courts upheld the validity of the 1978 sale as between the parties.
Considering that petitioner Fe signed the document and consented to the transaction, she is now barred from repudiating
the terms thereof. In this regard, the RTC and the CA applied the parole evidence rule and allowed the introduction of
evidence on the additional consideration for the conveyance, namely, the expenses incurred by Beethoven during the
three tragedies that had befallen the Deliarte family. Both courts found that the sale was already completely executed,
thus removing it from the ambit of the Statute of Frauds.9

As for the award of moral damages, the trial and appellate courts held that the other petitioners’ failure to prevent Lordito
from putting up, or at least, removing the placards, amounted to the defamation and opprobrium of Beethoven with their
knowledge and acquiescence. Thus, the assessment of moral damages was appropriate, given the humiliation and
embarrassment suffered by Beethoven considering his stature and reputation in the community as an electrical engineer
handling several big projects.

However, petitioners insist that the lower courts erred in their rulings. They maintain that the 1978 sale did not
contemplate the alienation of Bernabe’s share in the conjugal partnership as he failed to sign the private document. As
such, the courts’ application of the parole evidence rule and the Statute of Frauds were erroneous. In the same vein, the
petitioners posit that both courts’ ruling that they are jointly and severally liable for moral damages is inconsistent with the
evidence on record that Lordito was the sole author of the damaging placards.

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In this appeal, the issues for the resolution of this Court are:

I.

WHETHER OR NOT THE PRIVATE DEED OF SALE EXECUTED IN 1978 IS A VALID CONVEYANCE OF THE
ENTIRE LOT 472-A TO PETITIONER BEETHOVEN DELIARTE.

II.

WHETHER OR NOT THE PAROLE EVIDENCE RULE IS APPLICABLE TO THIS CASE.

III.

WHETHER OR NOT THE STATUTE OF FRAUDS IS APPLICABLE TO THIS CASE.

IV.

WHETHER OR NOT THE PETITIONERS ARE JOINTLY AND SEVERALLY LIABLE FOR MORAL DAMAGES.

At the outset, we note that both the lower and the appellate courts failed to identify the applicable law.

First. The 1978 private deed of sale, insofar as it disposed of Bernabe’s share in the conjugal partnership prior to his
death, is void for being a conveyance of the Deliarte siblings’ future inheritance.

Article 1347, paragraph 2 of the Civil Code characterizes a contract entered into upon future inheritance as void. 10 The law
applies when the following requisites concur: (1) the succession has not yet been opened; (2) the object of the contract
forms part of the inheritance; and (3) the promissor has, with respect to the object, an expectancy of a right which is
purely hereditary in nature.11

In this case, at the time the contract was entered into, succession to Bernabe’s estate had yet to be opened, and the
object thereof, i.e., Bernabe’s share in the subject lot, formed part of his children’s inheritance, and the children merely
had an inchoate hereditary right thereto.

True, the prohibition on contracts respecting future inheritance admits of exceptions, as when a person partitions his
estate by an act inter vivos under Article 1080 of the Civil Code.12 However, the private deed of sale does not purport to be
a partition of Bernabe’s estate as would exempt it from the application of Article 1347. Nowhere in the said document
does Bernabe separate, divide, and assign to his children his share in the subject lot effective only upon his
death.13 Indeed, the document does not even bear the signature of Bernabe.

Neither did the parties demonstrate that Bernabe undertook an oral partition of his estate. Although we have held on
several occasions that an oral or parole partition is valid, our holdings thereon were confined to instances wherein the
partition had actually been consummated, enforced, and recognized by the parties.14 Absent a showing of an overt act by
Bernabe indicative of an unequivocal intent to partition his estate among his children, his knowledge and ostensible
acquiescence to the private deed of sale does not equate to an oral partition by an act inter vivos. Besides, partition of
property representing future inheritance cannot be made effective during the lifetime of its owner.15

Considering the foregoing, it follows that the 1986 deed of confirmation of sale which sought to ratify the 1978 sale
likewise suffers from the same infirmity.16 In short, the 1986 deed is also void.

Nevertheless, it is apparent that Bernabe treated his share17 in the subject lot as his children’s present inheritance, and he
relinquished all his rights and claim thereon in their favor subject to Beethoven’s compensation for the expenses he
initially shouldered for the family. The records reveal that Bernabe, prior to his hospitalization and death, wanted to ensure
that his children attended to the expenditure relating thereto, and even articulated his desire that such surpass the
provision for both his son and wife, Beethoven’s and Fe’s brother and mother, respectively. 18 Their arrangement
contemplated the Deliarte siblings’ equal responsibility for the family’s incurred expenses.

We take judicial notice of this collective sense of responsibility towards family. As with most nuclear Filipino families, the
Deliarte siblings endeavored to provide for their parents or any member of their family in need. This was evident in
Florenda Deliarte Nacua’s, the youngest Deliarte sibling’s, remittance to her parents of her salary for two years so they
could redeem the subject lot.19

Florenda corroborated the testimony of Beethoven that their father was present during, and was aware of, the transaction
that took place among his children.20 The 1978 deed of sale, albeit void, evidenced the consent and acquiescence of each
Deliarte sibling to said transaction. They raised no objection even after Beethoven forthwith possessed and occupied the
subject lot.

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The foregoing arrangement, vaguely reflected in the void deed of sale, points to a meeting of the minds among the parties
constitutive of an innominate contract, akin to both an onerous and a remuneratory donation.21 In this regard, Bernabe’s
waiver and relinquishment of his share in the subject lot is effectively a donation inter vivos to his children. However, the
gratuitous act is coupled with an onerous cause – equal accountability of the Deliarte siblings for the hospitalization and
death expenses of deceased family members to be taken from their shares in the subject lot. In turn, the remunerative
cause pertains to Beethoven’s recompense for the family expenses he initially shouldered.

During his lifetime, Bernabe remained the absolute owner of his undivided interest in the subject lot. Accordingly, he could
have validly disposed of his interest therein. His consent to the disposition of the subject lot in favor of Beethoven, agreed
upon among his children, is evident, considering his presence in, knowledge of, and acquiescence to the transaction.
Further, the arrangement was immediately effected by the parties with no objection from Bernabe or any of the Deliarte
siblings, including herein petitioner Fe. Ineluctably, the actual arrangement between the parties included Bernabe, and the
object thereof did not constitute future inheritance.

Second. The parole evidence rule is applicable. While the application thereof presupposes the existence of a valid
agreement, the innominate contract between the parties has been directly put in issue by the respondents. Verily, the
failure of the deed of sale to express the true intent and agreement of the parties supports the application of the parole
evidence rule.22

Contrary to petitioners’ contention, the absence of Bernabe’s signature in the 1978 deed of sale is not necessarily
conclusive of his dissent or opposition to the effected arrangement. As previously adverted to, the agreement had multiple
causes or consideration, apart from the ₱15,000.00 stated in the deed of sale. To repeat, the agreement between the
parties had both an onerous and a remunerative cause. Also worthy of note is the moral consideration for the agreement
given the relationship between the parties.

Third. We agree with both the lower and the appellate courts that the Statute of Frauds is not applicable to the instant
case.

The general rule is that contracts are valid in whatever form they may be. 23 One exception thereto is the Statute of Frauds
which requires a written instrument for the enforceability of a contract. 24 However, jurisprudence dictates that the Statute
of Frauds only applies to executory, not to completed, executed, or partially consummated, contracts.25

In the case at bench, we find that all requisites for a valid contract are present, specifically: (1) consent of the parties; (2)
object or subject matter, comprised of the parties’ respective shares in the subject lot; and (3) the consideration, over and
above the ₱15,000.00 stipulated price. We note that the agreement between the parties had long been consummated and
completed. In fact, the agreement clearly contemplated immediate execution by the parties. More importantly, the parties,
including petitioner Fe, ratified the agreement by the acceptance of benefits thereunder.26

One other thing militates against Fe’s claim of ownership - silence and palpable failure to object to the execution of the
agreement. Fe insists that she only intended to sell her share of the lot inherited from her mother’s estate, exclusive of her
father’s share therein.

We are not persuaded by the belated claim. This afterthought is belied by the express stipulations in the 1978 deed of
sale that the heirs of Bernabe and Gregoria, absolutely sell, quitclaim, and transfer the subject lot in favor of Beethoven.
Although a void contract is not a source of rights and obligations between the parties, the provisions in the written
agreement and their signature thereon are equivalent to an express waiver of all their rights and interests in the entire lot
in favor of Beethoven, regardless of which part pertained to their mother’s or father’s estate.

Truly significant is the fact that in all the years that Beethoven occupied the subject lot, Fe never disturbed the former in
his possession. Neither did she present her other siblings to buttress her contradicting claim over the subject lot. Likewise,
she never asked for a partition of the property even after the death of their father, Bernabe, to settle his estate, or when
her other siblings executed the deed of confirmation of sale in 1986. Fe also does not pretend to share in the payment of
realty taxes thereon, but merely advances the claim that Priscillana, one of their siblings, had already paid said
taxes.27 Ultimately, petitioner Fe is estopped from staking a claim on the subject lot and wresting ownership therein from
Beethoven.

Our holding in the case of Tinsay v. Yusay28 is still good law, thus:

Juana Servando not being a party to the partition agreement Exhibit 1, the agreement standing alone was, of course,
ineffective as against her. The attempt to partition her land among her heirs, constituting a partition of future inheritance
was invalid under the second paragraph of Article 1271 of the Civil Code and for the same reason the renunciation of all
interest in the land which now constitutes lots Nos. 241 and 713 made by the appellants in favor of the children of Jovito
Yusay would likewise be of no binding force as to the undivided portion which belonged to Juan Servando. But if the
parties entered into the partition agreement in good faith and treated all of the land as a present inheritance, and if the
appellants on the strength of the agreement obtained their Torrens title to the land allotted to them therein, and if Perpetua
Sian in reliance on the appellants’ renunciation of all interest claimed by her on behalf of her children in the cadastral case
refrained from presenting any opposition to the appellants’ claim to the entire fee in the land assigned to them in the
partition agreement and if the appellants after the death of Juana Servando continued to enjoy the benefits of the
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agreement refusing to compensate the heirs of Jovito Yusay for the latters’ loss of their interest in lots Nos. 2 and 744
through the registration of the lots in the name of the appellants and the subsequent alienation of the same to innocent
third parties, said appellants are now estopped from repudiating the partition agreement of 1911 and from claiming any
further interest in lots Nos. 241 and 713. There is, however, no reason why they should not be allowed to share in the
distribution of the other property left by Juana Servando.

Fourth. As to the lower courts’ award of moral damages, we sustain respondents’ entitlement thereto. Undeniably,
respondents suffered besmirched reputation, wounded feelings, and social humiliation due to the damaging
placards.29 The injury is aggravated because of the relationship among the parties. Respondent Beethoven was able to
prove that his nephews, petitioners Lordito, Johnston, and Arme, Jr., stayed with him at some point, and that he financially
supported and trained them to be electricians.30

Yet, Lordito denies malice in the aforesaid act. He argues that his only quarrel with Beethoven stems from the latter’s
claim of ownership over the subject lot which was, supposedly, already bequeathed to him by his grandfather, Bernabe.
Lordito maintains that his claim is valid, supported by a will Beethoven had torn up, which allegedly negates malice in his
act of putting up the placards.

We are not convinced.

To begin with, the supposed devise to Lordito appears to be void. Considering that Bernabe’s estate consisted merely of
his conjugal share in the subject lot, the bequeathal infringes on his compulsory heirs’ legitimes, including that of Lordito’s
mother, Fe.31 Lordito’s claim, therefore, is only subordinate to Beethoven’s claim as a compulsory heir, even without
delving into the innominate contract between the parties. In all, the ascription of malice and Lordito’s corresponding
liability for moral damages is correct given the words he employed in the placards.

However, we agree with petitioners that there is a dearth of evidence pointing to their collective responsibility for Lordito’s
act.

Corollary thereto, Lordito admits and claims sole responsibility for putting up the placards. The other petitioners’ specific
participation in the tortious act was not proven. Failure to prevent Lordito or command him to remove the placards, alone,
does not justify the finding that all the petitioners are jointly and severally liable. It does not suffice that all the petitioners
were moved by a common desire to acquire the subject property, absent any proof that they individually concurred in
Lordito’s act.

Entrenched is the rule that "the rights of a party cannot be prejudiced by an act, declaration, or omission of another." 32 The
exception under Section 32, Rule 130 of the Rules of Court does not obtain in this instance. The other petitioners’
acquiescence to and apparent concurrence in Lordito’s act cannot be inferred merely from their failure to remove the
placards or reprimand Lordito. While the placards indeed defamed Beethoven, there is nothing that directly links the other
petitioners to this dastardly act.

WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The August 28, 2001 Decision of the Court
of Appeals is hereby MODIFIED. Petitioner Lordito Arrogante is held solely liable to respondents for moral damages in the
amount of ₱150,000.00. The quieting of title in favor of respondents is hereby AFFIRMED. No costs.

SO ORDERED.

G.R. No. 104482             January 22, 1996

BELINDA TAÑEDO, for herself and in representation of her brothers and sisters, and TEOFILA CORPUZ TAÑEDO,
representing her minor daughter VERNA TAÑEDO, petitioners,
vs.
THE COURT OF APPEALS, SPOUSES RICARDO M. TAÑEDO AND TERESITA BARERA TAÑEDO, respondents.

DECISION

PANGANIBAN, J.:

Is a sale of future inheritance valid? In multiple sales of the same real property, who has preference in ownership? What is
the probative value of the lower court's finding of good faith in registration of such sales in the registry of property? These
are the main questions raised in this Petition for review on certiorari under Rule 45 of the Rules of Court to set aside and
reverse the Decision1 of the Court of Appeals2 in CA-G.R. CV NO. 24987 promulgated on September 26, 1991 affirming
the decision of the Regional Trial Court, Branch 63, Third Judicial Region, Tarlac, Tarlac in Civil Case No. 6328, and its
Resolution denying reconsideration thereof, promulgated on May 27, 1992.

By the Court's Resolution on October 25, 1995, this case (along with several others) was transferred from the First to the
Third Division and after due deliberation, the Court assigned it to the undersigned ponente for the writing of this Decision.

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The Facts

On October 20, 1962, Lazardo Tañedo executed a notarized deed of absolute sale in favor of his eldest brother, Ricardo
Tañedo, and the latter's wife, Teresita Barera, private respondents herein, whereby he conveyed to the latter in
consideration of P1,500.00, "one hectare of whatever share I shall have over Lot No. 191 of the cadastral survey of
Gerona, Province of Tarlac and covered by Title T-13829 of the Register of Deeds of Tarlac", the said property being his
"future inheritance" from his parents (Exh. 1). Upon the death of his father Matias, Lazaro executed an "Affidavit of
Conformity" dated February 28, 1980 (Exh. 3) to "re-affirm, respect, acknowledge and validate the sale I made in 1962."
On January 13, 1981, Lazaro executed another notarized deed of sale in favor of private respondents covering his
"undivided ONE TWELVE (1/12) of a parcel of land known as Lot 191 . . . " (Exh. 4). He acknowledged therein his receipt
of P10,000.00 as consideration therefor. In February 1981, Ricardo learned that Lazaro sold the same property to his
children, petitioners herein, through a deed of sale dated December 29, 1980 (Exh. E). On June 7, 1982, private
respondents recorded the Deed of Sale (Exh. 4) in their favor in the Registry of Deeds and the corresponding entry was
made in Transfer Certificate of Title No. 166451 (Exh. 5).

Petitioners on July 16, 1982 filed a complaint for rescission (plus damages) of the deeds of sale executed by Lazaro in
favor of private respondents covering the property inherited by Lazaro from his father.

Petitioners claimed that their father, Lazaro, executed an "Absolute Deed of Sale" dated December 29, 1980 (Exit. E).
Conveying to his ten children his allotted portion tinder the extrajudicial partition executed by the heirs of Matias, which
deed included the land in litigation (Lot 191).

Petitioners also presented in evidence: (1) a private writing purportedly prepared and signed by Matias dated December
28, 1978, stating that it was his desire that whatever inheritance Lazaro would receive from him should be given to his
(Lazaro's) children (Exh. A); (2) a typewritten document dated March 10, 1979 signed by Lazaro in the presence of two
witnesses, wherein he confirmed that he would voluntarily abide by the wishes of his father, Matias, to give to his
(Lazaro's) children all the property he would inherit from the latter (Exh. B); and (3) a letter dated January 1, 1980 of
Lazaro to his daughter, Carmela, stating that his share in the extrajudicial settlement of the estate of his father was
intended for his children, petitioners herein (Exh. C).

Private respondents, however presented in evidence a "Deed of Revocation of a Deed of Sale" dated March 12, 1981
(Exh. 6), wherein Lazaro revoked the sale in favor of petitioners for the reason that it was "simulated or fictitious without
any consideration whatsoever".

Shortly after the case a quo was filed, Lazaro executed a sworn statement (Exh. G) which virtually repudiated the
contents of the Deed of Revocation of a Deed of Sale (Exh. 6) and the Deed of Sale (Exh. 4) in favor of private
respondents. However, Lazaro testified that he sold the property to Ricardo, and that it was a lawyer who induced him to
execute a deed of sale in favor of his children after giving him five pesos (P5.00) to buy a "drink" (TSN September 18,
1985, pp. 204-205).

The trial court decided in favor of private respondents, holding that petitioners failed "to adduce a proponderance of
evidence to support (their) claim." On appeal, the Court of Appeals affirmed the decision of the trial court, ruling that the
Deed of Sale dated January 13, 1981 (Exh. 9) was valid and that its registration in good faith vested title in said
respondents.

The Issues

Petitioners raised the following "errors" in the respondent Court, which they also now allege in the instant Petition:

I. The trial court erred in concluding that the Contract of Sale of October 20, 1962 (Exhibit 7, Answer) is merely
voidable or annulable and not void ab initio pursuant to paragraph 2 of Article 1347 of the New Civil Code
involving as it does a "future inheritance".

II. The trial court erred in holding that defendants-appellees acted in good faith in registering the deed of sale of
January 13, 1981 (Exhibit 9) with the Register of Deeds of Tarlac and therefore ownership of the land in question
passed on to defendants-appellees.

III. The trial court erred in ignoring and failing to consider the testimonial and documentary evidence of plaintiffs-
appellants which clearly established by preponderance of evidence that they are indeed the legitimate and lawful
owners of the property in question.

IV. The decision is contrary to law and the facts of the case and the conclusions drawn from the established facts
are illogical and off-tangent.

From the foregoing, the issues may be restated as follows:

1. Is the sale of a future inheritance valid?

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2. Was the subsequent execution on January 13, 1981 (and registration with the Registry of Property) of a deed of
sale covering the same property to the same buyers valid?

3. May this Court review the findings of the respondent Court (a) holding that the buyers acted in good faith in
registering the said subsequent deed of sale and (b) in "failing to consider petitioners' evidence"? Are the
conclusions of the respondent Court "illogical and off-tangent"?

The Court's Ruling

At the outset, let it be clear that the "errors" which are reviewable by this Court in this petition for review on certiorari are
only those allegedly committed by the respondent Court of Appeals and not directly those of the trial court, which is not a
party here. The "assignment of errors" in the petition quoted above are therefore totally misplaced, and for that reason, the
petition should be dismissed. But in order to give the parties substantial justice we have decided to delve into the issues
as above re-stated. The errors attributed by petitioners to the latter (trial) court will be discussed only insofar as they are
relevant to the appellate court's assailed Decision and Resolution.

The sale made in 1962 involving future inheritance is not really at issue here. In context, the assailed Decision conceded
"it may be legally correct that a contract of sale of anticipated future inheritance is null and void."3

But to remove all doubts, we hereby categorically rule that, pursuant to Article 1347 of the Civil Code, "(n)o contract may
be entered into upon a future inheritance except in cases expressly authorized by law."

Consequently, said contract made in 1962 is not valid and cannot be the source of any right nor the creator of any
obligation between the parties.

Hence, the "affidavit of conformity" dated February 28, 1980, insofar as it sought to validate or ratify the 1962 sale, is also
useless and, in the words of the respondent Court, "suffers from the same infirmity." Even private respondents in their
memorandum4 concede this.

However, the documents that are critical to the resolution of this case are: (a) the deed of sale of January 13, 1981 in
favor of private respondents covering Lazaro's undivided inheritance of one-twelfth (1/12) share in Lot No. 191, which was
subsequently registered on June 7, 1982; and (b) the deed of sale dated December 29, 1980 in favor of petitioners
covering the same property. These two documents were executed after the death of Matias (and his spouse) and after a
deed of extra-judicial settlement of his (Matias') estate was executed, thus vesting in Lazaro actual title over said property.
In other words, these dispositions, though conflicting, were no longer infected with the infirmities of the 1962 sale.

Petitioners contend that what was sold on January 13, 1981 was only one-half hectare out of Lot No. 191, citing as
authority the trial court's decision. As earlier pointed out, what is on review in these proceedings by this Court is the Court
of Appeals' decision — which correctly identified the subject matter of the January 13, 1981 sale to be the entire undivided
1/12 share of Lazaro in Lot No. 191 and which is the same property disposed of on December 29, 1980 in favor of
petitioners.

Critical in determining which of these two deeds should be given effect is the registration of the sale in favor of private
respondents with the register of deeds on June 7, 1982.

Article 1544 of the Civil Code governs the preferential rights of vendees in cases of multiple sales, as follows:

Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the
person who may have first taken possession thereof in good faith, if it should be movable property.

Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the
possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith.

The property in question is land, an immovable, and following the above-quoted law, ownership shall belong to the buyer
who in good faith registers it first in the registry of property. Thus, although the deed of sale in favor of private respondents
was later than the one in favor of petitioners, ownership would vest in the former because of the undisputed fact of
registration. On the other hand, petitioners have not registered the sale to them at all.

Petitioners contend that they were in possession of the property and that private respondents never took possession
thereof. As between two purchasers, the one who registered the sale in his favor has a preferred right over the other who
has not registered his title, even if the latter is in actual possession of the immovable property.5

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As to third issue, while petitioners conceded the fact of registration, they nevertheless contended that it was done in bad
faith. On this issue, the respondent Court ruled;

Under the second assignment of error, plaintiffs-appellants contend that defendants-appellees acted in bad faith
when they registered the Deed of Sale in their favor as appellee Ricardo already knew of the execution of the
deed of sale in favor of the plaintiffs; appellants cite the testimony of plaintiff Belinda Tañedo to the effect that
defendant Ricardo Tañedo called her up on January 4 or 5, 1981 to tell her that he was already the owner of the
land in question "but the contract of sale between our father and us were (sic) already consumated" (pp. 9-10, tsn,
January 6, 1984). This testimony is obviously self-serving, and because it was a telephone conversation, the deed
of sale dated December 29, 1980 was not shown; Belinda merely told her uncle that there was already a
document showing that plaintiffs are the owners (p. 80). Ricardo Tañedo controverted this and testified that he
learned for the first time of the deed of sale executed by Lazaro in favor of his children "about a month or
sometime in February 1981" (p. 111, tsn, Nov. 28, 1984). . . .6

The respondent Court, reviewing the trial court's findings, refused to overturn the latter's assessment of the testimonial
evidence, as follows;

We are not prepared to set aside the finding of the lower court upholding Ricardo Tañedo's testimony, as it
involves a matter of credibility of witnesses which the trial judge, who presided at the hearing, was in a better
position to resolve. (Court of Appeals' Decision, p. 6.)

In this connection, we note the tenacious allegations made by petitioners, both in their basic petition and in their
memorandum, as follows:

1. The respondent Court allegedly ignored the claimed fact that respondent Ricardo "by fraud and deceit and with
foreknowledge" that the property in question had already been sold to petitioners, made Lazaro execute the deed
of January 13, 1981;

2. There is allegedly adequate evidence to show that only 1/2 of the purchase price of P10,000.00 was paid at the
time of the execution of the deed of sale, contrary to the written acknowledgment, thus showing bad faith;

3. There is allegedly sufficient evidence showing that the deed of revocation of the sale in favor of petitioners "was
tainted with fraud or deceit."

4. There is allegedly enough evidence to show that private respondents "took undue advantage over the
weakness and unschooled and pitiful situation of Lazaro Tañedo . . ." and that respondent Ricardo Tañedo
"exercised moral ascendancy over his younger brother he being the eldest brother and who reached fourth year
college of law and at one time a former Vice-Governor of Tarlac, while his younger brother only attained first year
high school . . . ;

5. The respondent Court erred in not giving credence to petitioners' evidence, especially Lazaro
Tañedo's Sinumpaang Salaysay dated July 27, 1982 stating that Ricardo Tañedo deceived the former in
executing the deed of sale in favor of private respondents.

To be sure, there are indeed many conflicting documents and testimonies as well as arguments over their probative value
and significance. Suffice it to say, however, that all the above contentions involve questions of fact, appreciation of
evidence and credibility of witnesses, which are not proper in this review. It is well-settled that the Supreme Court is not a
trier of facts. In petitions for review under Rule 45 of the Revised Rules of Court, only questions of law may be raised and
passed upon. Absent any whimsical or capricious exercise of judgment, and unless the lack of any basis for the
conclusions made by the lower courts be amply demonstrated, the Supreme Court will not disturb their findings. At most, it
appears that petitioners have shown that their evidence was not believed by both the trial and the appellate courts, and
that the said courts tended to give more credence to the evidence presented by private respondents. But this in itself is
not a reason for setting aside such findings. We are far from convinced that both courts gravely abused their respective
authorities and judicial prerogatives.

As held in the recent case of Chua Tiong Tay vs. Court of Appeals and Goldrock Construction and Development Corp.7

The Court has consistently held that the factual findings of the trial court, as well as the Court of Appeals, are final and
conclusive and may not be reviewed on appeal. Among the exceptional circumstances where a reassessment of facts
found by the lower courts is allowed are when the conclusion is a finding grounded entirely on speculation, surmises or
conjectures; when the inference made is manifestly absurd, mistaken or impossible; when there is grave abuse of
discretion in the appreciation of facts; when the judgment is premised on a misapprehension of facts; when the findings
went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee. After a
careful study of the case at bench, we find none of the above grounds present to justify the re-evaluation of the findings of
fact made by the courts below.

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In the same vein, the ruling in the recent case of South Sea Surety and Insurance Company, Inc. vs.  Hon. Court of
Appeals, et al.8 is equally applicable to the present case:

We see no valid reason to discard the factual conclusions of the appellate court. . . . (I)t is not the function of this
Court to assess and evaluate all over again the evidence, testimonial and documentary, adduced by the parties,
particularly where, such as here, the findings of both the trial court and the appellate court on the matter coincide.
(emphasis supplied)

WHEREFORE, the petition is DENIED and the assailed Decision of the Court of Appeals is AFFIRMED. No Costs.

SO ORDERED.

Narvasa, C.J., Davide, Jr., Melo and Francisco, JJ., concur.

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