[G.R. No. 166862. December 20, 2006.] MANILA METAL CONTAINER CORPORATION, petitioner, REYNALDO C. TOLENTINO, intervenor, vs.

PHILIPPINE NATIONAL BANK, respondent, DMCI-PROJECT DEVELOPERS, INC., intervenor. DECISION CALLEJO, SR., J p: Before us is a petition for review on certiorari of the Decision 1 of the Court of Appeals (CA) in CA-G.R. No. 46153 which affirmed the decision 2 of the Regional Trial Court (RTC), Branch 71, Pasig City, in Civil Case No. 58551, and its Resolution 3 denying the motion for reconsideration filed by petitioner Manila Metal Container Corporation (MMCC). The Antecedents Petitioner was the owner of a 8,015 square meter parcel of land located in Mandaluyong (now a City), Metro Manila. The property was covered by Transfer Certificate of Title (TCT) No. 332098 of the Registry of Deeds of Rizal. To secure a P900,000.00 loan it had obtained from respondent Philippine National Bank (PNB), petitioner executed a real estate mortgage over the lot. Respondent PNB later granted petitioner a new credit accommodation of P1,000,000.00; and, on November 16, 1973, petitioner executed an Amendment 4 of Real Estate Mortgage over its property. On March 31, 1981, petitioner secured another loan of P653,000.00 from respondent PNB, payable in quarterly installments of P32,650.00, plus interests and other charges. 5 On August 5, 1982, respondent PNB filed a petition for extrajudicial foreclosure of the real estate mortgage and sought to have the property sold at public auction for P911,532.21, petitioner's outstanding obligation to respondent PNB as of June 30, 1982, 6 plus interests and attorney's fees. After due notice and publication, the property was sold at public auction on September 28, 1982 where respondent PNB was declared the winning bidder for P1,000,000.00. The Certificate of Sale 7 issued in its favor was registered with the Office of the Register of Deeds of Rizal, and was annotated at the dorsal portion of the title on February 17, 1983. Thus, the period to redeem the property was to expire on February 17, 1984. SEHACI Petitioner sent a letter dated August 25, 1983 to respondent PNB, requesting that it be granted an extension of time to redeem/repurchase the property. 8 In its reply dated August 30, 1983, respondent PNB informed petitioner that the request had been referred to its Pasay City Branch for appropriate action and recommendation. 9 In a letter 10 dated February 10, 1984, petitioner reiterated its request for a one year extension from February 17, 1984 within which to redeem/repurchase the property on installment basis. It reiterated its request to repurchase the property on installment. 11 Meanwhile, some PNB Pasay City Branch personnel informed petitioner that as a matter of policy, the bank does not accept "partial redemption." 12 Since petitioner failed to redeem the property, the Register of Deeds cancelled TCT No. 32098 on June 1, 1984, and issued a new title in favor of respondent PNB. 13Petitioner's offers had not yet been acted upon by respondent PNB. Meanwhile, the Special Assets Management Department (SAMD) had prepared a statement of account, and as of June 25, 1984 petitioner's obligation amounted to P1,574,560.47. This included the bid price of P1,056,924.50, interest, advances of insurance premiums, advances on realty taxes, registration expenses, miscellaneous expenses and publication cost. 14 When apprised of the statement of account, petitioner remitted P725,000.00 to respondent PNB as "deposit to repurchase," and Official Receipt No. 978191 was issued to it. 15 In the meantime, the SAMD recommended to the management of respondent PNB that petitioner be allowed to repurchase the property for P1,574,560.00. In a letter dated November 14, 1984, the PNB management informed petitioner that it was rejecting the offer and the recommendation of the SAMD. It was suggested that petitioner purchase the property for P2,660,000.00, its minimum market value. Respondent PNB gave petitioner until December 15, 1984 to act on the proposal; otherwise, its P725,000.00 deposit would be returned and the property would be sold to other interested buyers. 16 Petitioner, however, did not agree to respondent PNB's proposal. Instead, it wrote another letter dated December 12, 1984 requesting for a reconsideration. Respondent PNB replied in a letter dated December 28, 1984, wherein it reiterated its proposal that petitioner purchase the property for P2,660,000.00. PNB again informed petitioner that it would return the deposit should petitioner desire to withdraw its offer to purchase the property. 17 On February 25, 1985, petitioner, through counsel, requested that PNB reconsider its letter dated December 28, 1984. Petitioner declared that it had already agreed to the SAMD's offer to purchase the property for P1,574,560.47, and that was why it had paid P725,000.00. Petitioner warned respondent PNB that it would seek judicial recourse should PNB insist on the position. 18 On June 4, 1985, respondent PNB informed petitioner that the PNB Board of Directors had accepted petitioner's offer to purchase the property, but for P1,931,389.53 in cash less the P725,000.00 already deposited with it. 19 On page two of the letter was a space above the typewritten name of petitioner's President, Pablo Gabriel, where he was to affix his signature. However, Pablo Gabriel did not conform to the letter but merely indicated therein that he had received it. 20 Petitioner did not respond, so PNB requested petitioner in a letter dated June 30, 1988 to submit an amended offer to repurchase.

Petitioner rejected respondent's proposal in a letter dated July 14, 1988. It maintained that respondent PNB had agreed to sell the property for P1,574,560.47, and that since its P725,000.00 downpayment had been accepted, respondent PNB was proscribed from increasing the purchase price of the property. 21 Petitioner averred that it had a net balance payable in the amount of P643,452.34. Respondent PNB, however, rejected petitioner's offer to pay the balance of P643,452.34 in a letter dated August 1, 1989. 22 On August 28, 1989, petitioner filed a complaint against respondent PNB for "Annulment of Mortgage and Mortgage Foreclosure, Delivery of Title, or Specific Performance with Damages." To support its cause of action for specific performance, it alleged the following: 34.As early as June 25, 1984, PNB had accepted the down payment from Manila Metal in the substantial amount of P725,000.00 for the redemption/repurchase price of P1,574,560.47 as approved by its SMAD and considering the reliance made by Manila Metal and the long time that has elapsed, the approval of the higher management of the Bank to confirm the agreement of its SMAD is clearly a potestative condition which cannot legally prejudice Manila Metal which has acted and relied on the approval of SMAD. The Bank cannot take advantage of a condition which is entirely dependent upon its own will after accepting and benefiting from the substantial payment made by Manila Metal. 35.PNB approved the repurchase price of P1,574,560.47 for which it accepted P725,000.00 from Manila Metal. PNB cannot take advantage of its own delay and long inaction in demanding a higher amount based on unilateral computation of interest rate without the consent of Manila Metal. Petitioner later filed an amended complaint and supported its claim for damages with the following arguments: 36.That in order to protect itself against the wrongful and malicious acts of the defendant Bank, plaintiff is constrained to engage the services of counsel at an agreed fee of P50,000.00 and to incur litigation expenses of at least P30,000.00, which the defendant PNB should be condemned to pay the plaintiff Manila Metal. 37.That by reason of the wrongful and malicious actuations of defendant PNB, plaintiff Manila Metal suffered besmirched reputation for which defendant PNB is liable for moral damages of at least P50,000.00. cCESaH 38.That for the wrongful and malicious act of defendant PNB which are highly reprehensible, exemplary damages should be awarded in favor of the plaintiff by way of example or correction for the public good of at least P30,000.00. 23 Petitioner prayed that, after due proceedings, judgment be rendered in its favor, thus: a)Declaring the Amended Real Estate Mortgage (Annex "A") null and void and without any legal force and effect. b)Declaring defendant's acts of extra-judicially foreclosing the mortgage over plaintiff's property and setting it for auction sale null and void. c)Ordering the defendant Register of Deeds to cancel the new title issued in the name of PNB (TCT NO. 43792) covering the property described in paragraph 4 of the Complaint, to reinstate TCT No. 37025 in the name of Manila Metal and to cancel the annotation of the mortgage in question at the back of the TCT No. 37025 described in paragraph 4 of this Complaint. d)Ordering the defendant PNB to return and/or deliver physical possession of TCT No. 37025 described in paragraph 4 of this Complaint to the plaintiff Manila Metal. the

e)Ordering the defendant PNB to pay the plaintiff Manila Metal's actual damages, moral and exemplary damages in the aggregate amount of not less than P80,000.00 as may be warranted by the evidence and fixed by this Honorable Court in the exercise of its sound discretion, and attorney's fees of P50,000.00 and litigation expenses of at least P30,000.00 as may be proved during the trial, and costs of suit. Plaintiff likewise prays for such further reliefs which may be deemed just and equitable in the premises. 24 In its Answer to the complaint, respondent PNB averred, as a special and affirmative defense, that it had acquired ownership over the property after the period to redeem had elapsed. It claimed that no contract of sale was perfected between it and petitioner after the period to redeem the property had expired. During pre-trial, the parties agreed to submit the case for decision, based on their stipulation of facts. 25 The parties agreed to limit the issues to the following:

1.Whether or not the June 4, 1985 letter of the defendant approving/accepting plaintiff's offer to purchase the property is still valid and legally enforceable. 2.Whether or not the plaintiff has waived its right to purchase the property when it failed to conform with the conditions set forth by the defendant in its letter dated June 4, 1985. 3.Whether or not there is a perfected contract of sale between the parties. 26 While the case was pending, respondent PNB demanded, on September 20, 1989, that petitioner vacate the property within 15 days from notice, 27 but petitioners refused to do so. On March 18, 1993, petitioner offered to repurchase the property for P3,500,000.00. 28 The offer was however rejected by respondent PNB, in a letter dated April 13, 1993. According to it, the prevailing market value of the property was approximately P30,000,000.00, and as a matter of policy, it could not sell the property for less than its market value. 29 On June 21, 1993, petitioner offered to purchase the property for P4,250,000.00 in cash. 30 The offer was again rejected by respondent PNB on September 13, 1993. 31 On May 31, 1994, the trial court rendered judgment dismissing the amended complaint and respondent PNB's counterclaim. It ordered respondent PNB to refund the P725,000.00 deposit petitioner had made. 32 The trial court ruled that there was no perfected contract of sale between the parties; hence, petitioner had no cause of action for specific performance against respondent. The trial court declared that respondent had rejected petitioner's offer to repurchase the property. Petitioner, in turn, rejected the terms and conditions contained in the June 4, 1985 letter of the SAMD. While petitioner had offered to repurchase the property per its letter of July 14, 1988, the amount of P643,422.34 was way below the P1,206,389.53 which respondent PNB had demanded. It further declared that the P725,000.00 remitted by petitioner to respondent PNB on June 4, 1985 was a "deposit," and not a downpayment or earnest money. TDCAIS On appeal to the CA, petitioner made the following allegations: I THE LOWER COURT ERRED IN RULING THAT DEFENDANT-APPELLEE'S LETTER DATED 4 JUNE 1985 APPROVING/ACCEPTING PLAINTIFF-APPELLANT'S OFFER TO PURCHASE THE SUBJECT PROPERTY IS NOT VALID AND ENFORCEABLE. II THE LOWER COURT ERRED IN RULING THAT THERE WAS NO PERFECTED CONTRACT OF SALE BETWEEN PLAINTIFF-APPELLANT AND DEFENDANT-APPELLEE. III THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-APPELLANT WAIVED ITS RIGHT TO PURCHASE THE SUBJECT PROPERTY WHEN IT FAILED TO CONFORM WITH CONDITIONS SET FORTH BY DEFENDANT-APPELLEE IN ITS LETTER DATED 4 JUNE 1985. IV THE LOWER COURT ERRED IN DISREGARDING THE FACT THAT IT WAS THE DEFENDANTAPPELLEE WHICH RENDERED IT DIFFICULT IF NOT IMPOSSIBLE FOR PLAINTIFF-APPELLANT TO COMPLETE THE BALANCE OF THEIR PURCHASE PRICE. V THE LOWER COURT ERRED IN DISREGARDING THE FACT THAT THERE WAS NO VALID RESCISSION OR CANCELLATION OF SUBJECT CONTRACT OF REPURCHASE. VI THE LOWER COURT ERRED IN DECLARING THAT PLAINTIFF FAILED AND REFUSED TO SUBMIT THE AMENDED REPURCHASE OFFER. VII THE LOWER COURT ERRED IN DISMISSING THE AMENDED COMPLAINT OF PLAINTIFFAPPELLANT. VIII THE LOWER COURT ERRED IN NOT AWARDING PLAINTIFF-APPELLANT ACTUAL, MORAL AND EXEMPLARY DAMAGES, ATTORNEY'S FEES AND LITIGATION EXPENSES. 33

Meanwhile, on June 17, 1993, petitioner's Board of Directors approved Resolution No. 3-004, where it waived, assigned and transferred its rights over the property covered by TCT No. 33099 and TCT No. 37025 in favor of Bayani Gabriel, one of its Directors. 34 Thereafter, Bayani Gabriel executed a Deed of Assignment over 51% of the ownership and management of the property in favor of Reynaldo Tolentino, who later moved for leave to intervene as plaintiff-appellant. On July 14, 1993, the CA issued a resolution granting the motion, 35 and likewise granted the motion of Reynaldo Tolentino substituting petitioner MMCC, as plaintiff-appellant, and his motion to withdraw as intervenor. 36 The CA rendered judgment on May 11, 2000 affirming the decision of the RTC. 37 It declared that petitioner obviously never agreed to the selling price proposed by respondent PNB (P1,931,389.53) since petitioner had kept on insisting that the selling price should be lowered to P1,574,560.47. Clearly therefore, there was no meeting of the minds between the parties as to the price or consideration of the sale. cSEAHa The CA ratiocinated that petitioner's original offer to purchase the subject property had not been accepted by respondent PNB. In fact, it made a counter-offer through its June 4, 1985 letter specifically on the selling price; petitioner did not agree to the counter-offer; and the negotiations did not prosper. Moreover, petitioner did not pay the balance of the purchase price within the sixty-day period set in the June 4, 1985 letter of respondent PNB. Consequently, there was no perfected contract of sale, and as such, there was no contract to rescind. According to the appellate court, the claim for damages and the counterclaim were correctly dismissed by the court a quo for no evidence was presented to support it. Respondent PNB's letter dated June 30, 1988 cannot revive the failed negotiations between the parties. Respondent PNB merely asked petitioner to submit an amended offer to repurchase. While petitioner reiterated its request for a lower selling price and that the balance of the repurchase be reduced, however, respondent rejected the proposal in a letter dated August 1, 1989. Petitioner filed a motion for reconsideration, which the CA likewise denied. Thus, petitioner filed the instant petition for review on certiorari, alleging that: I.THE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT RULED THAT THERE IS NO PERFECTED CONTRACT OF SALE BETWEEN THE PETITIONER AND RESPONDENT. II.THE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT RULED THAT THE AMOUNT OF PHP725,000.00 PAID BY THE PETITIONER IS NOT AN EARNEST MONEY. III.THE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT RULED THAT THE FAILURE OF THE PETITIONER-APPELLANT TO SIGNIFY ITS CONFORMITY TO THE TERMS CONTAINED IN PNB'S JUNE 4, 1985 LETTER MEANS THAT THERE WAS NO VALID AND LEGALLY ENFORCEABLE CONTRACT OF SALE BETWEEN THE PARTIES. IV.THE COURT OF APPEALS ERRED ON A QUESTION OF LAW THAT NON-PAYMENT OF THE PETITIONER-APPELLANT OF THE BALANCE OF THE OFFERED PRICE IN THE LETTER OF PNB DATED JUNE 4, 1985, WITHIN SIXTY (60) DAYS FROM NOTICE OF APPROVAL CONSTITUTES NO VALID AND LEGALLY ENFORCEABLE CONTRACT OF SALE BETWEEN THE PARTIES. V.THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT HELD THAT THE LETTERS OF PETITIONER-APPELLANT DATED MARCH 18, 1993 AND JUNE 21, 1993, OFFERING TO BUY THE SUBJECT PROPERTY AT DIFFERENT AMOUNT WERE PROOF THAT THERE IS NO PERFECTED CONTRACT OF SALE. 38 The threshold issue is whether or not petitioner and respondent PNB had entered into a perfected contract for petitioner to repurchase the property from respondent. Petitioner maintains that it had accepted respondent's offer made through the SAMD, to sell the property for P1,574,560.00. When the acceptance was made in its letter dated June 25, 1984; it then deposited P725,000.00 with the SAMD as partial payment, evidenced by Receipt No. 978194 which respondent had issued. Petitioner avers that the SAMD's acceptance of the deposit amounted to an acceptance of its offer to repurchase. Moreover, as gleaned from the letter of SAMD dated June 4, 1985, the PNB Board of Directors had approved petitioner's offer to purchase the property. It claims that this was the suspensive condition, the fulfillment of which gave rise to the contract. Respondent could no longer unilaterally withdraw its offer to sell the property for P1,574,560.47, since the acceptance of the offer resulted in a perfected contract of sale; it was obliged to remit to respondent the balance of the original purchase price of P1,574,560.47, while respondent was obliged to transfer ownership and deliver the property to petitioner, conformably with Article 1159 of the New Civil Code. HcSDIE Petitioner posits that respondent was proscribed from increasing the interest rate after it had accepted respondent's offer to sell the property for P1,574,560.00. Consequently, respondent could no longer validly make a counter-offer of P1,931,789.88 for the purchase of the property. It likewise maintains that, although the P725,000.00 was considered as "deposit for the repurchase of the property" in the receipt issued by the SAMD, the amount constitutes earnest money as contemplated in Article 1482 of the New Civil Code. Petitioner cites the rulings of this Court in Villonco v. Bormaheco 39 and Topacio v. Court of Appeals. 40

Petitioner avers that its failure to append its conformity to the June 4, 1984 letter of respondent and its failure to pay the balance of the price as fixed by respondent within the 60-day period from notice was to protest respondent's breach of its obligation to petitioner. It did not amount to a rejection of respondent's offer to sell the property since respondent was merely seeking to enforce its right to pay the balance of P1,570,564.47. In any event, respondent had the option either to accept the balance of the offered price or to cause the rescission of the contract. Petitioner's letters dated March 18, 1993 and June 21, 1993 to respondent during the pendency of the case in the RTC were merely to compromise the pending lawsuit, they did not constitute separate offers to repurchase the property. Such offer to compromise should not be taken against it, in accordance with Section 27, Rule 130 of the Revised Rules of Court. For its part, respondent contends that the parties never graduated from the "negotiation stage" as they could not agree on the amount of the repurchase price of the property. All that transpired was an exchange of proposals and counterproposals, nothing more. It insists that a definite agreement on the amount and manner of payment of the price are essential elements in the formation of a binding and enforceable contract of sale. There was no such agreement in this case. Primarily, the concept of "suspensive condition" signifies a future and uncertain event upon the fulfillment of which the obligation becomes effective. It clearly presupposes the existence of a valid and binding agreement, the effectivity of which is subordinated to its fulfillment. Since there is no perfected contract in the first place, there is no basis for the application of the principles governing "suspensive conditions." According to respondent, the Statement of Account prepared by SAMD as of June 25, 1984 cannot be classified as a counter-offer; it is simply a recital of its total monetary claims against petitioner. Moreover, the amount stated therein could not likewise be considered as the counter-offer since as admitted by petitioner, it was only recommendation which was subject to approval of the PNB Board of Directors. Neither can the receipt by the SAMD of P725,000.00 be regarded as evidence of a perfected sale contract. As gleaned from the parties' Stipulation of Facts during the proceedings in the court a quo, the amount is merely an acknowledgment of the receipt of P725,000.00 as deposit to repurchase the property. The deposit of P725,000.00 was accepted by respondent on the condition that the purchase price would still be approved by its Board of Directors. Respondent maintains that its acceptance of the amount was qualified by that condition, thus not absolute. Pending such approval, it cannot be legally claimed that respondent is already bound by any contract of sale with petitioner. According to respondent, petitioner knew that the SAMD has no capacity to bind respondent and that its authority is limited to administering, managing and preserving the properties and other special assets of PNB. The SAMD does not have the power to sell, encumber, dispose of, or otherwise alienate the assets, since the power to do so must emanate from its Board of Directors. The SAMD was not authorized by respondent's Board to enter into contracts of sale with third persons involving corporate assets. There is absolutely nothing on record that respondent authorized the SAMD, or made it appear to petitioner that it represented itself as having such authority. Respondent reiterates that SAMD had informed petitioner that its offer to repurchase had been approved by the Board subject to the condition, among others, "that the selling price shall be the total bank's claim as of documentation date . . . payable in cash (P725,000.00 already deposited) within 60 days from notice of approval." A new Statement of Account was attached therein indicating the total bank's claim to be P1,931,389.53 less deposit of P725,000.00, or P1,206,389.00. Furthermore, while respondent's Board of Directors accepted petitioner's offer to repurchase the property, the acceptance was qualified, in that it required a higher sale price and subject to specified terms and conditions enumerated therein. This qualified acceptance was in effect a counter-offer, necessitating petitioner's acceptance in return. aIAEcD The Ruling of the Court The ruling of the appellate court that there was no perfected contract of sale between the parties on June 4, 1985 is correct. A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. 41 Under Article 1318 of the New Civil Code, there is no contract unless the following requisites concur: (1)Consent of the contracting parties; (2)Object certain which is the subject matter of the contract; (3)Cause of the obligation which is established. Contracts are perfected by mere consent which is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. 42 Once perfected, they bind other contracting parties and the obligations arising therefrom have the form of law between the parties and should be complied with in good faith. The parties are bound not only to the fulfillment of what has been expressly stipulated but also to the consequences which, according to their nature, may be in keeping with good faith, usage and law. 43 By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. 44 The absence of any of the essential elements will negate the existence of a perfected contract of sale. As the Court ruled in Boston Bank of the Philippines v. Manalo: 45

A definite agreement as to the price is an essential element of a binding agreement to sell personal or real property because it seriously affects the rights and obligations of the parties. Price is an essential element in the formation of a binding and enforceable contract of sale. The fixing of the price can never be left to the decision of one of the contracting parties. But a price fixed by one of the contracting parties, if accepted by the other, gives rise to a perfected sale. 46 A contract of sale is consensual in nature and is perfected upon mere meeting of the minds. When there is merely an offer by one party without acceptance of the other, there is no contract. 47 When the contract of sale is not perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation between the parties. 48 In San Miguel Properties Philippines, Inc. v. Huang, 49 the Court ruled that the stages of a contract of sale are as follows: (1) negotiation, covering the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is perfected; (2) perfection, which takes place upon the concurrence of the essential elements of the sale which are the meeting of the minds of the parties as to the object of the contract and upon the price; and (3)consummation, which begins when the parties perform their respective undertakings under the contract of sale, culminating in the extinguishment thereof. A negotiation is formally initiated by an offer, which, however, must be certain. 50 At any time prior to the perfection of the contract, either negotiating party may stop the negotiation. At this stage, the offer may be withdrawn; the withdrawal is effective immediately after its manifestation. To convert the offer into a contract, the acceptance must be absolute and must not qualify the terms of the offer; it must be plain, unequivocal, unconditional and without variance of any sort from the proposal. In Adelfa Properties, Inc. v. Court of Appeals, 51 the Court ruled that: . . . The rule is that except where a formal acceptance is so required, although the acceptance must be affirmatively and clearly made and must be evidenced by some acts or conduct communicated to the offeror, it may be shown by acts, conduct, or words of the accepting party that clearly manifest a present intention or determination to accept the offer to buy or sell. Thus, acceptance may be shown by the acts, conduct, or words of a party recognizing the existence of the contract of sale. 52 A qualified acceptance or one that involves a new proposal constitutes a counter-offer and a rejection of the original offer. A counter-offer is considered in law, a rejection of the original offer and an attempt to end the negotiation between the parties on a different basis. 53 Consequently, when something is desired which is not exactly what is proposed in the offer, such acceptance is not sufficient to guarantee consent because any modification or variation from the terms of the offer annuls the offer. 54 The acceptance must be identical in all respects with that of the offer so as to produce consent or meeting of the minds. In this case, petitioner had until February 17, 1984 within which to redeem the property. However, since it lacked the resources, it requested for more time to redeem/repurchase the property under such terms and conditions agreed upon by the parties. 55 The request, which was made through a letter dated August 25, 1983, was referred to the respondent's main branch for appropriate action. 56 Before respondent could act on the request, petitioner again wrote respondent as follows: 1.Upon approval of our request, we will pay your goodselves ONE HUNDRED & FIFTY THOUSAND PESOS (P150,000.00); aEHIDT 2.Within six months from date of approval of our request, we will pay another FOUR HUNDRED FIFTY THOUSAND PESOS (P450,000.00); and 3.The remaining balance together with the interest and other expenses that will be incurred will be paid within the last six months of the one year grave period requested for. 57 When the petitioner was told that respondent did not allow "partial redemption," 58 it sent a letter to respondent's President reiterating its offer to purchase the property. 59 There was no response to petitioner's letters dated February 10 and 15, 1984. The statement of account prepared by the SAMD stating that the net claim of respondent as of June 25, 1984 was P1,574,560.47 cannot be considered an unqualified acceptance to petitioner's offer to purchase the property. The statement is but a computation of the amount which petitioner was obliged to pay in case respondent would later agree to sell the property, including interests, advances on insurance premium, advances on realty taxes, publication cost, registration expenses and miscellaneous expenses. There is no evidence that the SAMD was authorized by respondent's Board of Directors to accept petitioner's offer and sell the property for P1,574,560.47. Any acceptance by the SAMD of petitioner's offer would not bind respondent. As this Court ruled in AF Realty Development, Inc. vs. Diesehuan Freight Services, Inc.: 60 Section 23 of the Corporation Code expressly provides that the corporate powers of all corporations shall be exercised by the board of directors. Just as a natural person may authorize another to do certain acts in his behalf, so may the board of directors of a corporation validly delegate some of its functions to individual officers or agents appointed by it. Thus, contracts or acts of a corporation must be made either by the board of directors or by a corporate agent duly authorized by the board. Absent such valid delegation/authorization, the rule is that the declarations of an individual director relating to the affairs of the corporation, but not in the course of, or connected with the performance of authorized duties of such director, are held not binding on the corporation.

Thus, a corporation can only execute its powers and transact its business through its Board of Directors and through its officers and agents when authorized by a board resolution or its by-laws. 61 It appears that the SAMD had prepared a recommendation for respondent to accept petitioner's offer to repurchase the property even beyond the one-year period; it recommended that petitioner be allowed to redeem the property and pay P1,574,560.00 as the purchase price. Respondent later approved the recommendation that the property be sold to petitioner. But instead of the P1,574,560.47 recommended by the SAMD and to which petitioner had previously conformed, respondent set the purchase price at P2,660,000.00. In fine, respondent's acceptance of petitioner's offer was qualified, hence can be at most considered as a counter-offer. If petitioner had accepted this counter-offer, a perfected contract of sale would have arisen; as it turns out, however, petitioner merely sought to have the counter-offer reconsidered. This request for reconsideration would later be rejected by respondent. We do not agree with petitioner's contention that the P725,000.00 it had remitted to respondent was "earnest money" which could be considered as proof of the perfection of a contract of sale under Article 1482 of the New Civil Code. The provision reads: ART. 1482.Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract. This contention is likewise negated by the stipulation of facts which the parties entered into in the trial court: 8.On June 8, 1984, the Special Assets Management Department (SAMD) of PNB prepared an updated Statement of Account showing MMCC's total liability to PNB as of June 25, 1984 to be P1,574,560.47 and recommended this amount as the repurchase price of the subject property. 9.On June 25, 1984, MMCC paid P725,000.00 to PNB as deposit to repurchase the property. The deposit of P725,000 was accepted by PNB on the condition that the purchase price is still subject to the approval of the PNB Board. 62 Thus, the P725,000.00 was merely a deposit to be applied as part of the purchase price of the property, in the event that respondent would approve the recommendation of SAMD for respondent to accept petitioner's offer to purchase the property for P1,574,560.47. Unless and until the respondent accepted the offer on these terms, no perfected contract of sale would arise. Absent proof of the concurrence of all the essential elements of a contract of sale, the giving of earnest money cannot establish the existence of a perfected contract of sale. 63 It appears that, per its letter to petitioner dated June 4, 1985, the respondent had decided to accept the offer to purchase the property for P1,931,389.53. However, this amounted to an amendment of respondent's qualified acceptance, or an amended counter-offer, because while the respondent lowered the purchase price, it still declared that its acceptance was subject to the following terms and conditions: 1.That the selling price shall be the total Bank's claim as of documentation date (pls. see attached statement of account as of 5-31-85), payable in cash (P725,000.00 already deposited) within sixty (60) days from notice of approval; ESHAcI 2.The Bank sells only whatever rights, interests and participation it may have in the property and you are charged with full knowledge of the nature and extent of said rights, interests and participation and waive your right to warranty against eviction. 3.All taxes and other government imposts due or to become due on the property, as well as expenses including costs of documents and science stamps, transfer fees, etc., to be incurred in connection with the execution and registration of all covering documents shall be borne by you; 4.That you shall undertake at your own expense and account the ejectment of the occupants of the property subject of the sale, if there are any; 5.That upon your failure to pay the balance of the purchase price within sixty (60) days from receipt of advice accepting your offer, your deposit shall be forfeited and the Bank is thenceforth authorized to sell the property to other interested parties. 6.That the sale shall be subject to such other terms and conditions that the Legal Department may impose to protect the interest of the Bank. 64 It appears that although respondent requested petitioner to conform to its amended counter-offer, petitioner refused and instead requested respondent to reconsider its amended counter-offer. Petitioner's request was ultimately rejected and respondent offered to refund its P725,000.00 deposit. In sum, then, there was no perfected contract of sale between petitioner and respondent over the subject property. IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The assailed decision is AFFIRMED. Costs against petitioner Manila Metal Container Corporation.

SO ORDERED.

[G.R. No. 139173. February 28, 2007.] SPOUSES ONNIE SERRANO AND AMPARO HERRERA, petitioners, vs. GODOFREDO CAGUIAT, respondent. DECISION SANDOVAL-GUTIERREZ, J p: Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, assailing the Decision 1 of the Court of Appeals dated January 29, 1999 and its Resolution dated July 14, 1999 in CA-G.R. CV No. 48824. Spouses Onnie and Amparo Herrera, petitioners, are the registered owners of a lot located in Las Pias, Metro Manila covered by Transfer Certificate of Title No. T-9905. Sometime in March 1990, Godofredo Caguiat, respondent, offered to buy the lot. Petitioners agreed to sell it at P1,500.00 per square meter. Respondent then gave petitioners P100,000.00 as partial payment. In turn, petitioners gave respondent the corresponding receipt stating that respondent promised to pay the balance of the purchase price on or before March 23, 1990, thus: Las Pias, Metro Manila March 19, 1990 RECEIPT FOR PARTIAL PAYMENT OF LOT NO. 23 COVERED BY TCT NO. T-9905, LAS PIAS, METRO MANILA RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE HUNDRED THOUSAND PESOS (P100,000.00) AS PARTIAL PAYMENT OF OUR LOT SITUATED IN LAS PIAS, M.M. COVERED BY TCT NO. T-9905 AND WITH AN AREA OF 439 SQUARE METERS. MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR BEFORE MARCH 23, 1990, AND THAT WE WILL EXECUTE AND SIGN THE FINAL DEED OF SALE ON THIS DATE. SIGNED THIS 19TH DAY OF MARCH, 1990 AT LAS PIAS, M.M. (SGD) AMPARO HERRERA(SGD) ONNIE SERRANO" 2 On March 28, 1990, respondent, through his counsel Atty. Ponciano Espiritu, wrote petitioners informing them of his readiness to pay the balance of the contract price and requesting them to prepare the final deed of sale. 3 On April 4, 1990, petitioners, through Atty. Ruben V. Lopez, sent a letter 4 to respondent stating that petitioner Amparo Herrera is leaving for abroad on or before April 15, 1990 and that they are canceling the transaction. Petitioners also informed respondent that he can recover the earnest money of P100,000.00 anytime. aITDAE Again, on April 6, 1990, 5 petitioners wrote respondent stating that they delivered to his counsel Philippine National Bank Manager's Check No. 790537 dated April 6, 1990 in the amount of P100,000.00 payable to him. In view of the cancellation of the contract by petitioners, respondent filed with the Regional Trial Court, Branch 63, Makati City a complaint against them for specific performance and damages, docketed as Civil Case No. 90-1067. 6 On June 27, 1994, after hearing, the trial court rendered its Decision 7 finding there was a perfected contract of sale between the parties and ordering petitioners to execute a final deed of sale in favor of respondent. The trial court held: xxx xxx xxx In the evaluation of the evidence presented by the parties as to the issue as to who was ready to comply with his obligation on the verbal agreement to sell on March 23, 1990, shows that plaintiff's position deserves more weight and credibility. First, the P100,000.00 that plaintiff paid whether as downpayment or earnest money showed that there was already a perfected contract. Art. 1482 of the Civil Code of the Philippines, reads as follows, to wit: 'Art. 1482.Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract.'

Second, plaintiff was the first to react to show his eagerness to push through with the sale by sending defendants the letter dated March 25, 1990. (Exh. 'D') and reiterated the same intent to pursue the sale in a letter dated April 6, 1990. Third, plaintiff had the balance of the purchase price ready for payment (Exh. 'C'). Defendants' mere allegation that it was plaintiff who did not appear on March 23, 1990 is unavailing. Defendants' letters (Exhs. '2' and '5') appear to be mere afterthought. On appeal, the Court of Appeals, in its assailed Decision of January 29, 1999, affirmed the trial court's judgment. Forthwith, petitioners filed their motion for reconsideration but it was denied by the appellate court in its Resolution 8 dated July 14, 1999. Hence, the present recourse. The basic issue to be resolved is whether the document entitled "Receipt for Partial Payment" signed by both parties earlier mentioned is a contract to sell or a contract of sale. Petitioners contend that the Receipt is not a perfected contract of sale as provided for in Article 1458 9 in relation to Article 1475 10 of the Civil Code. The delivery to them of P100,000.00 as down payment cannot be considered as proof of the perfection of a contract of sale under Article 1482 11 of the same Code since there was no clear agreement between the parties as to the amount of consideration. Generally, the findings of fact of the lower courts are entitled to great weight and should not be disturbed except for cogent reasons. Indeed, they should not be changed on appeal in the absence of a clear showing that the trial court overlooked, disregarded, or misinterpreted some facts of weight and significance, which if considered would have altered the result of the case. 12 In the present case, we find that both the trial court and the Court of Appeals interpreted some significant facts resulting in an erroneous resolution of the issue involved. In holding that there is a perfected contract of sale, both courts mainly relied on the earnest money given by respondent to petitioners. They invoked Article 1482 of the Civil Code which provides that "Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract." We are not convinced. In San Miguel Properties Philippines, Inc. v. Spouses Huang, 13 we held that the stages of a contract of sale are: (1) negotiation, covering the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is perfected; (2) perfection, which takes place upon the concurrence of the essential elements of the sale, which is the meeting of the minds of the parties as to the object of the contract and upon the price; and (3) consummation, which begins when the parties perform their respective undertakings under the contract of sale, culminating in the extinguishment thereof. acADIT With the above postulates as guidelines, we now proceed to determine the real nature of the contract entered into by the parties. It is a canon in the interpretation of contracts that the words used therein should be given their natural and ordinary meaning unless a technical meaning was intended. 14 Thus, when petitioners declared in the said "Receipt for Partial Payment" that they RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE HUNDRED THOUSAND PESOS (P100,000.00) AS PARTIAL PAYMENT OF OUR LOT SITUATED IN LAS PIAS, M.M. COVERED BY TCT NO. T-9905 AND WITH AN AREA OF 439 SQUARE METERS. MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR BEFORE MARCH 23, 1990, AND THAT WE WILL EXECUTE AND SIGN THE FINAL DEED OF SALE ON THIS DATE. there can be no other interpretation than that they agreed to a conditional contract of sale, consummation of which is subject only to the full payment of the purchase price. A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor's obligation to transfer title is subordinated to the happening of a future and uncertain event, so that if the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed. The suspensive condition is commonly full payment of the purchase price. 15 The differences between a contract to sell and a contract of sale are well-settled in jurisprudence. As early as 1951, in Sing Yee v. Santos, 16 we held that: . . . [a] distinction must be made between a contract of sale in which title passes to the buyer upon delivery of the thing sold and a contract to sell . . . where by agreement the ownership is reserved in the seller and is not to pass until the full payment, of the purchase price is made. In the first case, nonpayment of the price is a negative resolutory condition; in the second case, full payment is a positive suspensive condition. Being contraries, their effect in law cannot be identical. In the first case, the

vendor has lost and cannot recover the ownership of the land sold until and unless the contract of sale is itself resolved and set aside. In the second case, however, the title remains in the vendor if the vendee does not comply with the condition precedent of making payment at the time specified in the contract. In other words, in a contract to sell, ownership is retained by the seller and is not to pass to the buyer until full payment of the price. 17 In this case, the "Receipt for Partial Payment" shows that the true agreement between the parties is a contract to sell. First, ownership over the property was retained by petitioners and was not to pass to respondent until full payment of the purchase price. Thus, petitioners need not push through with the sale should respondent fail to remit the balance of the purchase price before the deadline on March 23, 1990. In effect, petitioners have the right to rescind unilaterally the contract the moment respondent fails to pay within the fixed period. 18 Second, the agreement between the parties was not embodied in a deed of sale. The absence of a formal deed of conveyance is a strong indication that the parties did not intend immediate transfer of ownership, but only a transfer after full payment of the purchase price. 19 Third, petitioners retained possession of the certificate of title of the lot. This is an additional indication that the agreement did not transfer to respondent, either by actual or constructive delivery, ownership of the property. 20 It is true that Article 1482 of the Civil Code provides that "Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and proof of the perfection of the contract." However, this article speaks of earnest money given in a contract of sale. In this case, the earnest money was given in a contract to sell. The earnest money forms part of the consideration only if the sale is consummated upon full payment of the purchase price. 21 Now, since the earnest money was given in a contract to sell, Article 1482, which speaks of a contract of sale, does not apply. DcAaSI As previously discussed, the suspensive condition (payment of the balance by respondent) did not take place. Clearly, respondent cannot compel petitioners to transfer ownership of the property to him. WHEREFORE, we GRANT the instant Petition for Review. The challenged Decision of the Court of Appeals is REVERSED and respondent's complaint is DISMISSED. SO ORDERED.

[G.R. No. 128325. September 14, 1999.] SPOUSES RODOLFO CAOILI and IMELDA CAOILI, petitioners, vs. COURT OF APPEALS and ROSITA VDA. DE SANTIAGO, respondents. SYNOPSIS Petitioners were lessees of a parcel of land with an area of 42.90 square meters including a one door apartment located at 1752 Tecson de Guia Street, Tondo, Manila, belonging to private respondent Rosita Vda. de Santiago. On March 30, 1987, private respondent secured a loan from petitioners in the amount of P30,000.00 with the understanding that the latter shall not pay their monthly rentals as long as the loan was not paid. On or about July 10, 1990, an agreement was made between the parties herein for the sale of the property being occupied by petitioners, although it was not formally written. On December 14, 1990, a receipt denominated as an addendum to agreement was signed by private respondent for the sale of the subject property to petitioners in the amount of P250,000.00. It was stated therein that private respondent received from petitioners the sum P140,000.00 in addition to the partial payment of P60,000.00 the balance payable when the good title in the name of herein vendor is delivered to the spouses. Respondent failed to comply prompting petitioner to send two demand letters demanding the delivery of the title within 15 days or just refund the amount of P430,000.00. Due to this inaction, petitioners filed a complaint for collection of sum of money in the Regional Trial Court (RTC) of Manila. After trial on the merits, the RTC of Manila rendered judgment in favor of the petitioners and ordering the private respondents to pay the amount of P489,520 with legal interest. Respondent interposed an appeal, and on December 9, 1996, the Court of Appeals set aside the appealed judgment and ordered the respondent to pay the petitioners the amount of P33,600.00. Petitioners filed a motion for reconsideration, but the same was denied. Hence this present petition. The main issue to be resolved in this petition is whether or not the Court of Appeals erred in reducing the amount awarded by the court a quo. cCESaH The Court found the instant petition meritorious. Records show that the receipt marked as Exhibit "B", which was signed by private respondent herself, indubitably shows that the agreement was to convey the subject premises to petitioners for the sum of P250,000.00 and not as a simple loan as what the private respondent strongly averred. It confirms that there was meeting of the minds upon the subject property, which is the object of the contract and upon the price, which is P250,000.00. Moreover, the receipt was acknowledged before a notary public on December 28, 1990 and as such is considered a public document. Being a public document, it is prima facie evidence of the execution of the instrument or document involved. Exhibit B being a notarized document has in its favor the presumption of regularity and to contradict the same, there must be evidence that is clear, convincing and more than merely preponderant. Otherwise, the document should be upheld. There being no proof to the contrary, the parties are therefor bound to comply with the clear and unequivocal terms under Exhibit B and in view of the failure of private respondent to deliver a good title to petitioners, she is under obligation to pay double the amount which private respondent received from petitioners as acknowledged in Exhibit B. Wherefore, the decision of the Court of Appeals was set aside and the decision of the RTC was reinstated. SYLLABUS 1.REMEDIAL LAW; CIVIL PROCEDURE; SPECIAL CIVIL ACTION; CERTIORARI; LIMITED TO REVIEW OR REVISION OF ERRORS OF LAW; CASE AT BAR. At the outset, it must be stated that this petition for review on certiorari was filed pursuant to Rule 45 of the Revised Rules of Court wherein a review is not a matter of right but of sound judicial discretion and will be granted only when there are special and important reasons therefor. It is not the function of this Court to re-examine the evidence submitted by the parties unless the findings of fact of the Court of Appeals are not supported by evidence on record or the judgment is based on a misapprehension of facts. This Court is limited to the review or revision of errors of law and not to analyze or weigh the evidence all over again. CaDEAT 2.ID.; ID.; ID.; ID.; QUESTION OF FACT DISTINGUISHED FROM QUESTION OF LAW. The issue of whether or not the Court of Appeals erred in reducing the amount awarded by the court a quo raised a question of fact as it involves an examination of the probative value of the evidence presented by the parties. In the case of Reyes vs. Court of Appeals, we held: "Clearly, the main issue to be resolved is the authenticity of the Deed of Extrajudicial Partition and Settlement which is a question of fact rather than of law. In the case of Manila Bay Club Corporation v. Court of Appeals, this Court held that for a question to be one of law, it must involve no examination of the probative value of the evidence presented by the litigants or any of them. To reiterate the distinction between the two types of questions: there is a question of law in a given case when the doubt or difference arises as to what the law is pertaining to certain state of facts, and there is aquestion of fact when the doubt arises as to the truth or the falsity of alleged facts." 3.ID.; ID.; ID.; ID.; FINDINGS OF FACT OF LOWER COURT ARE NOT REVIEWABLE ON APPEAL; EXCEPTIONS THEREOF. However, the rule that findings of fact of the lower court are not reviewable on appeal by this Court is subject to exceptions. Thus: "Settled is the rule that the jurisdiction of this Court in cases brought before it from the Court of Appeals via Rule 45 of the Rules of Court is limited to reviewing errors of law. Findings of fact of the latter are conclusive, exceptin the following instances: (1) when the findings are grounded entirely on speculations, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd, or impossible; (3) when there is a grave abuse of discretion; (4) when the judgment is based on misapprehension of facts; (5) when the findings of fact are conflicting; (6) when in making its findings the Court of Appeals went beyond the issues of the case, or its findings are contrary to the admissions of both appellant and appellee; (7) when the findings are contrary to those of the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the

petition as well as in the petitioner's main and reply briefs are not disputed by the respondent; and (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record." 4.ID.; ID.; PLEADINGS; ADMISSION OR NON-ADMISSION OF SUPPLEMENTAL PLEADING IS NOT A MATTER OF RIGHT BUT DISCRETIONARY ON THE COURT. There is no question that the parties initially entered into a contract of lease. The notarized "Kasunduan" dated March 30, 1987 evidences the relationship between petitioners, as lessees, and private respondent, as lessor, wherein the latter borrowed from the former the amount of P30,000.00 on condition that petitioners will not pay the monthly rentals as long as the said amount is not fully paid by private respondent. Private respondent admitted that there was an agreement for the purchase of the subject premises but the same was not made in writing. The absence of a formal deed of sale does not render the agreement null and void or without any effect. The provision of Article 1358 of the Civil Code on the necessity of a public document is only for convenience, not for validity or enforceability. It does not mean that no contract has been perfected so long as the essential requisites of consent of the contracting parties, object, and cause of the obligation concur. 5.ID.; EVIDENCE; ADMISSIBILITY OF EVIDENCE; RECEIPT ACKNOWLEDGED BEFORE A NOTARY PUBLIC IS CONSIDERED A PUBLIC DOCUMENT; CASE AT BAR. As stated, Exhibit "B", above-quoted, which is denominated as a "Receipt" and "Addendum to Agreement dated August 8, 1990" bolsters the claim of petitioners that there was indeed an agreement for the sale of the subject property. This "Receipt" was acknowledged before a notary public on December 28, 1990 and as such is considered a public document. Being a public document, it is a prima facie evidence of the facts therein stated. It may be presented without further proof, the certificate of acknowledgment being prima facie evidence of the execution of the instrument or document involved. Exhibit "B" being a notarized document has in its favor the presumption of regularity, and to contradict the same, there must be evidence that is clear, convincing and more than merely preponderant. Otherwise the document should be upheld. There being no proof to the contrary, the parties are therefor bound to comply with the clear and unequivocal terms under Exhibit "B" and in view of the failure of private respondent to deliver a good title to petitioners, she is under obligation to pay double the amount which private respondent received from petitioners as acknowledge in Exhibit "B".

DECISION

GONZAGA-REYES, J p: Before this Court is a petition for review on certiorari which seeks to set aside the Decision dated December 9, 1996 of the Court of Appeals 1 in CA-G.R. CV No. 48363 and prays for the reinstatement of the Decision 2 dated January 9, 1995 of the Regional Trial Court of Manila, Branch 31 in Civil Case No. 93-65569. llcd Petitioners spouses Rodolfo and Imelda Caoili were lessees of a parcel of land with an area of 42.90 square meters including a one (1) door apartment unit located at 1752 Tecson de Guia St., Tondo, Manila belonging to private respondent Rosita Vda. de Santiago. On March 30, 1987, private respondent secured a loan from petitioners in the amount of P30,000.00 with the understanding that the latter shall not pay their monthly rentals as long as the loan is not paid. 3 On or about July 10, 1990, an agreement was made between the parties herein for the sale of the property being occupied by petitioners, although it was not "formal or written". 4

On December 14, 1990, a "Receipt" denominated as an "Addendum to Agreement dated August 8, 1990" was signed by private respondent in the presence of Alicia B. Ay-ay and Benilda Miller and acknowledged before notary public Crispulo B. Ducusin for the sale of the subject property to petitioners in the amount of P250,000.00. It was stated therein that private respondent received from petitioners the sum of P140,000.00, in addition to the partial payment of P60,000.00, the "balance payable when the good title in the name of herein vendor is delivered to the spouses." 5 Petitioners sent two (2) letters 6 to private respondent demanding delivery of the title or corresponding transfer certificate of title over the subject property within 15 days or make a refund "double (the) amount you have received as agreed or the total amount of Four Hundred Thirty Thousand (P430,000.00) pesos". Private respondent refused to comply. Hence, a complaint for collection of sum of money was filed with the Regional Trial Court of Manila, Branch 31 by herein petitioners against private respondent praying, inter alia, that the latter be ordered to pay the former the amount of P489,520.00 with interest. The case was docketed as Civil Case No. 93-65569. Private respondent Rosita Vda. de Santiago filed her Answer alleging, as special and affirmative defenses, that plaintiffs were mere lessees of the apartment and lot in question; that sometime in March 1987, she obtained a loan in the amount of P30,000.00 from plaintiffs, the same to be offset by the monthly rental of P1,300.00 and that said loan in fact had been offset by January 1989, or after 23 months; that since plaintiffs have not been paying the monthly rentals even after January 1989, defendant again obtained from the spouses another loan of P60,000.00 on July 10, 1990, which was totally set off by the monthly rentals as of October 26, 1993 when she filed her answer to the complaint. On the matter of the receipt, Exhibit "B", she denied having received the amount of P140,000.00 which was the alleged value of the improvements introduced by plaintiffs on the leased premises and that it was only upon the assurance of plaintiffs that they would give to her the receipts showing the actual amounts spent for the improvements that she signed Exhibit "B" even without the opportunity of first reading it but the receipts for expenses of the improvements were never shown to her. 7

On January 9, 1995, the Regional Trial Court of Manila, Branch 31 rendered judgment, the dispositive portion 8 of which reads: "WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendant ordering the latter to pay: 1.The amount of P489,520.00 (P244,760.00 x 2) with legal interest until the full amount is fully paid; 2.Attorney's fees in the amount of P20,000.00 plus P1,000.00 per appearance; 3.That the status quo is maintained until the aforesaid amounts are fully paid by the defendant; and 4.The costs of this suit." Defendant-appellant interposed an appeal and the Court of Appeals rendered judgment on December 9, 1996, the dispositive portion 9 of which decision reads, to wit: LLpr "WHEREFORE, the appealed decision dated January 9, 1995 is hereby SET ASIDE and judgment is hereby rendered ORDERING defendant-appellant Rosita Vda. de Santiago to PAY plaintiffs-appellees, the spouses Rodolfo Caoili and Imelda Caoili, the amount of P33,600.00, with legal interest until fully paid. No costs." On January 2, 1997, plaintiffs-appellees Caoili filed a Motion for Reconsideration 10 of the decision of the Court of Appeals arguing that they were able to substantiate the causes of action in their complaint; that they were able to establish material, pertinent and relevant documentary evidences supported by the unrefuted oral testimonies of both spouses; that the findings of fact of the court a quo were based and founded on unrefuted documents and oral testimonies of plaintiffs-appellees in contrast with the general denials and oral testimony of defendant-appellant which were selfserving and therefore inadmissible; that defendant-appellant had been in absolute bad faith in dealing with plaintiffsappellees on the transaction between them; and that since the subject property is still subject to successional rights of the children of defendant-appellant, it was highly impossible for defendant-appellant to deliver a good title to plaintiffsappellees. On January 27, 1997, plaintiffs-appellees Caoili filed a Supplemental Motion for Reconsideration with Leave of Court. Said Supplemental Motion for Reconsideration was denied and expunged from the record as it "would, in effect, render nugatory the mandatory procedural rule that a motion for reconsideration should be filed within a reglementary period of 15 days from receipt of the judgment or order sought to be reconsidered." 11 The Court of Appeals in a Resolution 12 dated January 18, 1997 denied plaintiffs-appellees' Motion for Reconsideration. Hence, the present petition interposed by plaintiffs Caoili raising the issue that: "THE HONORABLE COURT OF APPEALS ERRED IN MODIFYING THE DECISION OF THE COURT A QUO IN REDUCING THE AMOUNT OF THE AWARDED CLAIM FOR P489,520.00 (P244,760.00 x 2) WITH INTEREST UNTIL THE FULL AMOUNT IS FULLY PAID TO P33,600.00 WITH LEGAL INTEREST UNTIL FULLY PAID NO COST." In their petition, petitioners Caoili contend that there was no legal justification for the Court of Appeals to reduce the amount awarded to them by the trial court. Petitioner Imelda Caoili allegedly testified and identified how partial payments were made to private respondent through Exhibits "C" to "J" in the total amount of P95,700.00 which amount did not include the first payment of P30,000.00 and other advances reaching a total of P200,000.00. Petitioners further argue that private respondent, on cross-examination, admitted having received the amounts of P60,000.00; P49,000.00 and P35,000.00 covered by different checks in the total sum of P144,000.00 and that the amount of P35,000.00 was received by private respondent for "effecting or finishing papers contemplated for the house and lot." Petitioners aver that the purported sale did not materialize because of the death of private respondent's husband Francisco Santiago; thus private respondent remained indebted to petitioners in accordance with the terms and conditions of Exhibit "B". Finally, petitioners argue that private respondent was placed under estoppel in denying the terms and conditions of the agreement and the receipt of payments when she admitted having received the two (2) letters of demand, Exhibits "K" and "L", respectively. In their Comment/Opposition, private respondent alleged that while petitioners insist that the receipt dated December 9, 1990 is an addendum to an alleged agreement made on August 8, 1990, petitioners nonetheless failed to present the alleged Agreement of August 8, 1990 or any evidence that would prove the sale of the subject property to them. Private respondent submits that there was really no sale as the transaction between the parties was a simple loan. In their Reply, petitioners argue that the absence of a written contract in their initial agreement was cured when the receipt marked as Exhibit "B" was executed on December 14, 1990 wherein private respondent acknowledged having sold the property to petitioners and having received the amount of P140,000.00 from the latter, in addition to partial payments of P60,000.00, for the agreed total amount of P250,000.00, the balance of the price being payable when good title will be delivered to petitioners. The main issue raised by petitioners in their petition is whether or not the Court of Appeals erred in reducing the amount awarded by the court a quo.

At the outset, it must be stated that this petition for review on certiorari was filed pursuant to Rule 45 of the Revised Rules of Court wherein a review is not a matter of right but of sound judicial discretion and will be granted only when there are special and important reasons therefor. 13 It is not the function of this Court to re-examine the evidence submitted by the parties unless the findings of fact of the Court of Appeals are not supported by evidence on record or the judgment is based on a misapprehension of facts. 14 This Court is limited to the review or revision of errors of law and not to analyze or weigh the evidence all over again. 15 The issue of whether or not the Court of Appeals erred in reducing the amount awarded by the court a quo raised a question of fact as it involves an examination of the probative value of the evidence presented by the parties. In the case of Reyes vs. Court of Appeals, 16 we held: cdrep "Clearly, the main issue to be resolved is the authenticity of the Deed of Extrajudicial Partition and Settlement which is a question of fact rather than of law. In the case of Manila Bay Club Corporation v. Court of Appeals, 17 this Court held that for a question to be one of law, it must involve no examination of the probative value of the evidence presented by the litigants or any of them. To reiterate the distinction between the two types of questions: there is a question of law in a given case when the doubt or difference arises as to what the law is pertaining to certain state of facts, and there is a question of fact when the doubt arises as to the truth or the falsity of alleged facts." (underscoring supplied). However, the rule that findings of fact of the lower court are not reviewable on appeal by this Court is subject to exceptions. Thus: "Settled is the rule that the jurisdiction of this Court in cases brought before it from the Court of Appeals via Rule 45 of the Rules of Court is limited to reviewing errors of law. Findings of fact of the latter are conclusive, except in the following instances: (1) when the findings are grounded entirely on speculations, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd, or impossible; (3) when there is a grave abuse of discretion; (4) when the judgment is based on misapprehension of facts; (5) when the findings of fact are conflicting; (6) when in making its findings the Court of Appeals went beyond the issues of the case, or its findings are contrary to the admissions of both appellant and appellee; (7) when the findings are contrary to those of the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondent; and (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record." 18 (underscoring supplied). The instant petition is an admitted exception under no. 7 above-quoted. The trial court considered Exhibit "B" as valid and binding between the parties therein and ruled that the same belies the posture of private respondent herein that she merely obtained a loan from petitioners which is to be offset by the monthly rentals. 19 On the other hand, the Court of Appeals ruled that Exhibit "B", which is the "Addendum to the Agreement dated August 8, 1990", is "not a true and faithful documentation of the alleged receipt of P140,000.00 and the alleged sale of the property on July 10, 1990." It stated, however, that Exhibit "B" contemplated two (2) separate obligations, namely: (1) the obligation of petitioners to pay the balance upon delivery of the title; and (2) the obligation of private respondent to make a refund in double the amount agreed upon, if the title to the property is not good and cannot be made good within a reasonable time. 20 The Court of Appeals likewise ruled that since petitioners have not complied with their obligation to present the receipts of expenses for improvements made, then private respondent had been released from the obligation to refund double the amount claimed by petitioners. 21 The ruling seems to be inconsistent because if the said Exhibit "B" is not a true and faithful documentation of the alleged receipt of P140,000.00 and the alleged sale of the property, as the Court of Appeals held, then there can be no separate obligations that can be ascribed to the parties therein. In resolving the issue of whether or not the Court of Appeals erred in reducing the amount awarded to petitioners, we should first determine whether there was a contract for the sale of the subject property, as petitioners claim, or merely a loan, as asserted by private respondent. There is no question that the parties initially entered into a contract of lease. The notarized "Kasunduan" dated March 30, 1987 22 evidences the relationship between petitioners, as lessees, and private respondent, as lessor, wherein the latter borrowed from the former the amount of P30,000.00 on condition that petitioners will not pay the monthly rentals as long as the said amount is not fully paid by private respondent. Private respondent admitted that there was an agreement for the purchase of the subject premises but the same was not made in writing. 23 The absence of a formal deed of sale does not render the agreement null and void or without any effect. The provision of Article 1358 of the Civil Code 24 on the necessity of a public document is only for convenience, not for validity or enforceability. 25 It does not mean that no contract has been perfected 26 so long as the essential requisites of consent of the contracting parties, object, and cause of the obligation concur. 27 There is the "Receipt" marked as Exhibit "B", reproduced hereunder, which states: "RECEIPT Addendum to Agreement dated August 8, 1990.

Received from the Spouses RODOLFO CAOILI and IMELDA CAOILI, both Filipino, both of legal ages, the sum of ONE HUNDRED FORTY (P140,000.00) THOUSAND PESOS, Philippine Currency, in addition to the partial payment of Six (sic) Thousand (P60,000.00) pesos for the purchase of a parcel of land together with its improvement situated at 1752 Tecson de Guia St., Tondo, Manila, containing an area of more or less 42.90 square meters which I have sold on July 10, 1990 and agreed to convey to said spouses for the sum of P250,000.00, balance payable when the good title in the name of herein vendor is delivered to the spouses. A reasonable time, after delivery of title, is to be allowed for examination thereof. It is agreed that, if the title to said premises is not good and cannot be made good within a reasonable time then this agreement shall be null and void and the above amount in double the amount shall be refunded and paid to the vendee. Manila, December 14, 1990. LLjur (SIGNED) ROSITA ROBLES VDA. DE SANTIAGO Vendor SIGNED IN THE PRESENCE OF: (signed) Alicia B. Ay-ay (signed) Benilda Miller" 28 Exhibit "B", which was signed by private respondent herself 29 indubitably shows that the agreement was to convey the subject premises to petitioners for the sum of P250,000.00. It confirms that there was a meeting of the minds upon the subject property, which is the object of the contract and upon the price, which is P250,000.00. 30 The agreement is subject to the condition that the balance is "payable when the good title in the name of herein vendor is delivered to the spouses" and a "reasonable time, after delivery of title, is to be allowed for examination thereof." The obligation to deliver title is likewise subject to a penal clause that "if the title to said premises is not good and cannot be made good within a reasonable time then this agreement shall be null and void" and a sum double the "above amount" shall be refunded and paid to the vendee." The said document clearly acknowledges that petitioners have paid the amount of P140,000.00 "in addition to the partial payment of P60,000.00" and the balance is payable "when the good title in the name of the vendor is delivered to the spouses." Verily, under the agreement, private respondent was obligated to deliver a good title to petitioners and this condition is the operative act which would give rise to the corresponding obligation of petitioners to pay the balance of the purchase price. 31 Since it is not disputed that private respondent has not delivered a good title, petitioners have by law the right to either refuse to proceed with the agreement or to waive that condition pursuant to Article 1545 of the Civil Code. 32 Furthermore, subsequent developments show that the parties indeed agreed on a contract for the sale of the subject premises. Private respondent herself admitted33 having received advances and payments from petitioners after December 14, 1990 (the date of execution of Exhibit "B") as shown by receipts marked as Exhibits "C" to "J", to wit: 1.Exhibit "C" 34 is a Far East Bank check dated January 4, 1991 payable to the order of private respondent signed by petitioner Imelda Caoili in the amount P49,000.00; 2.Exhibit "D" 35 is a receipt dated May 30, 1991 signed by private respondent for the sum of P15,000.00 as "partial payment House & Lot"; 3.Exhibit "E" 36 is a receipt dated September 3, 1992 signed by private respondent in the amount of P12,000.00 also as "partial payment"; 4.Exhibit "F" 37 is a receipt dated September 3, 1991 signed by private respondent in the amount of P5,000.00 as "Partial payment re papers transfer"; 5.Exhibit "G" 38 is a receipt dated November 11, 1992 signed by private respondent in the amount of P3,500.00 as "advance payment"; 6.Exhibit "H" 39 is a receipt dated November 27, 1992 signed by private respondent in the amount of P2,000.00 as "advance payment"; 7.Exhibit "I" 40 is a receipt dated July 23, 1992 signed by private respondent in the amount of P5,000.00 as "additional payment"; and 8.Exhibit "J" 41 is a check dated July 23, 1992 payable to the order of private respondent signed by petitioner Imelda Caoili in the amount of P4,200.00. It is to be observed that Exhibit "D", for instance, is a receipt in the amount of P15,000.00 expressly denominated as partial payment for "House & Lot", 42 while Exhibit "F" is a receipt in the amount of P5,000.00 as "partial payment re papers transfer." 43 These receipts corroborate the fact that there was an agreement for the sale of the subject property. llcd The evidence shows that private respondent received payments from petitioners in the following amounts: a total of P95,700.00 as shown in Exhibits "C" to "J"; P200,000.00 as shown in Exhibit "B"; and P30,000.00 as shown in Exhibit "A". However, the amount of P30,000.00 (Exhibit "A") was clearly a loan by private respondent with the understanding that petitioners will not pay the rentals until the amount of loan is not paid ("hanggang hindi ko nababayaran ang nasabing

halaga"). The receipt evidencing payment of P30,000.00 was made in 1987, several years before the agreement for the sale of the subject property was made. Private respondent claims that the amount of P60,000.00 mentioned in Exhibit "B" as partial payment was a loan which she incurred and which was offset by the monthly rentals. However, aside from private respondent's bare allegation, 44 no proof to that effect was presented. As regards the amount of P140,000.00 also mentioned in Exhibit "B", petitioners claim that it "represents the loan of P30,000.00 plus the deposits I made in the house plus the repairs of the faucets" 45 while private respondent averred that it was spent for "renovation and building of an additional room of the house". 46Whatever the amount represented, what is confirmed is that it was acknowledged as part of the purchase price in the document signed by private respondent herself. As stated, Exhibit "B", above-quoted, which is denominated as a "Receipt" and "Addendum to Agreement dated August 8, 1990" bolsters the claim of petitioners that there was indeed an agreement for the sale of the subject property. This "Receipt" was acknowledged before a notary public on December 28, 1990 47 and as such is considered a public document. 48 Being a public document, it is a prima facie evidence of the facts therein stated. 49 It may be presented without further proof, the certificate of acknowledgment being prima facie evidence of the execution of the instrument or document involved. 50 Exhibit "B" being a notarized document has in its favor the presumption of regularity, and to contradict the same, there must be evidence that is clear, convincing and more than merely preponderant. 51 Otherwise the document should be upheld. 52 There being no proof to the contrary, the parties are therefor bound to comply with the clear and unequivocal terms under Exhibit "B" and in view of the failure of private respondent to deliver a good title to petitioners, she is under obligation to pay double the amount which private respondent received from petitioners as acknowledged in Exhibit "B". As regards the amount to be awarded to petitioners, from the evidence thus presented, private respondent has received from petitioners the amount of P95,700.00 as shown in Exhibits "C" to "J" and P140,000.00 in addition to P60,000.00 as shown in Exhibit "B", or an aggregate amount of P295,700.00. It should be noted, however, that in their demand letter, 53 petitioners claim that a total of P215,000.00 has been received by private respondent and in their complaint, 54 petitioners alleged that per their latest computation, they have paid private respondent the amount of P244,760.00. This being the case, petitioners should be deemed under estoppel to claim an amount more than what they had prayed for. Accordingly, the trial court's decision ordering private respondent to pay petitioners the amount of P489,520.00, which is double the amount of P244,760.00, is upheld. Finally, petitioners contend that their Supplemental Motion for Reconsideration was submitted after the main Motion for Reconsideration had been filed within the required period and which motion had not yet been timely resolved. They argue that had the Supplemental Motion for Reconsideration been admitted, the meritorious allegations therein would have been given due course. cda The rule is well-settled that the admission or non-admission of a supplemental pleading is not a matter of right but is discretionary on the court. 55 As differentiated from an amended pleading which takes the place of the original pleading, a supplemental pleading does not extinguish the existence of the original; it only serves to bolster or adds something to the primary pleading. A supplement exists side by side with the original; it does not replace that which it supplements; 56 it does not supersede the original but assumes that the original pleading is to stand and the issues joined under the original pleading remain as issues to be tried in the action.57 A supplemental pleading supplies deficiencies in aid of an original pleading, not to entirely substitute the latter. 58 A perusal of the Supplemental Motion for Reconsideration reveals that the arguments raised by petitioners in the supplemental motion are matters which have already been substantially discussed, considered, and passed by the Court of Appeals in its decision. Thus, even assuming a grati argumenti that the supplemental motion was admitted as part of the record, the Court of Appeals would not have decided otherwise. WHEREFORE, the Decision dated December 9, 1996 of the Court of Appeals in CA-G.R. CV No. 48363 is hereby SET ASIDE. Accordingly, the Decision dated January 9, 1995 of the Regional Trial Court of Manila, Branch 31 in Civil Case No. 93-65569 is REINSTATED. No pronouncement as to costs. SO ORDERED.

[G.R. No. 160132. April 17, 2009.] SERAFIN, RAUL, NENITA, NAZARETO, NEOLANDA, all surnamed NARANJA, AMELIA NARANJARUBINOS, NILDA NARANJA-LIMANA, and NAIDA NARANJA-GICANO, petitioners, vs. COURT OF APPEALS, LUCILIA P. BELARDO, represented by her Attorney-in-Fact, REBECCA CORDERO, and THE LOCAL REGISTER OF DEEDS, BACOLOD CITY, respondents. DECISION NACHURA, J p: This petition seeks a review of the Court of Appeals (CA) Decision 1 dated September 13, 2002 and Resolution 2 dated September 24, 2003 which upheld the contract of sale executed by petitioners' predecessor, Roque Naranja, during his lifetime, over two real properties. Roque Naranja was the registered owner of a parcel of land, denominated as Lot No. 4 in Consolidation-Subdivision Plan (LRC) Pcs-886, Bacolod Cadastre, with an area of 136 square meters and covered by Transfer Certificate of Title (TCT) No. T-18764. Roque was also a co-owner of an adjacent lot, Lot No. 2, of the same subdivision plan, which he co-owned with his brothers, Gabino and Placido Naranja. When Placido died, his one-third share was inherited by his children, Nenita, Nazareto, Nilda, Naida and Neolanda, all surnamed Naranja, herein petitioners. Lot No. 2 is covered by TCT No. T-18762 in the names of Roque, Gabino and the said children of Placido. TCT No. T-18762 remained even after Gabino died. The other petitioners Serafin Naranja, Raul Naranja, and Amelia Naranja-Rubinos are the children of Gabino. 3 The two lots were being leased by Esso Standard Eastern, Inc. for 30 years from 1962-1992. For his properties, Roque was being paid P200.00 per month by the company. 4 In 1976, Roque, who was single and had no children, lived with his half sister, Lucilia P. Belardo (Belardo), in Pontevedra, Negros Occidental. At that time, a catheter was attached to Roque's body to help him urinate. But the catheter was subsequently removed when Roque was already able to urinate normally. Other than this and the influenza prior to his death, Roque had been physically sound. 5 Roque had no other source of income except for the P200.00 monthly rental of his two properties. To show his gratitude to Belardo, Roque sold Lot No. 4 and his one-third share in Lot No. 2 to Belardo on August 21, 1981, through a Deed of Sale of Real Property which was duly notarized by Atty. Eugenio Sanicas. The Deed of Sale reads: I, ROQUE NARANJA, of legal age, single, Filipino and a resident of Bacolod City, do hereby declare that I am the registered owner of Lot No. 4 of the Cadastral Survey of the City of Bacolod, consisting of 136 square meters, more or less, covered by Transfer Certificate of Title No. T-18764 and a co-owner of Lot No. 2, situated at the City of Bacolod, consisting of 151 square meters, more or less, covered by Transfer Certificate of Title No. T-18762 and my share in the aforesaid Lot No. 2 is one-third share. HSaIDc That for and in consideration of the sum of TEN THOUSAND PESOS (P10,000.00), Philippine Currency, and other valuable consideration, receipt of which in full I hereby acknowledge to my entire satisfaction, by these presents, I hereby transfer and convey by way of absolute sale the abovementioned Lot No. 4 consisting of 136 square meters covered by Transfer Certificate of Title No. T18764 and my one-third share in Lot No. 2, covered by Transfer Certificate of Title No. T-18762, in favor of my sister LUCILIA P. BELARDO, of legal age, Filipino citizen, married to Alfonso D. Belardo, and a resident of Pontevedra, Negros Occidental, her heirs, successors and assigns. IN WITNESS WHEREOF, I have hereunto set my hand this 21st day of August, 1981 at Bacolod City, Philippines. (SGD.) ROQUE NARANJA 6 Roque's copies of TCT No. T-18764 and TCT No. T-18762 were entrusted to Atty. Sanicas for registration of the deed of sale and transfer of the titles to Belardo. But the deed of sale could not be registered because Belardo did not have the money to pay for the registration fees. 7 Belardo's only source of income was her store and coffee shop. Sometimes, her children would give her money to help with the household expenses, including the expenses incurred for Roque's support. At times, she would also borrow money from Margarita Dema-ala, a neighbor. 8 When the amount of her loan reached P15,000.00, Dema-ala required a security. On November 19, 1983, Roque executed a deed of sale in favor of Dema-ala, covering his two properties in consideration of the P15,000.00 outstanding loan and an additional P15,000.00, for a total of P30,000.00. Dema-ala explained that she wanted Roque to execute the deed of sale himself since the properties were still in his name. Belardo merely acted as a witness. The titles to the properties were given to Dema-ala for safekeeping. 9 Three days later, or on December 2, 1983, Roque died of influenza. The proceeds of the loan were used for his treatment while the rest was spent for his burial. 10 In 1985, Belardo fully paid the loan secured by the second deed of sale. Dema-ala returned the certificates of title to Belardo, who, in turn, gave them back to Atty. Sanicas. 11

Unknown to Belardo, petitioners, the children of Placido and Gabino Naranja, executed an Extrajudicial Settlement Among Heirs 12 on October 11, 1985, adjudicating among themselves Lot No. 4. On February 19, 1986, petitioner Amelia Naranja-Rubinos, accompanied by Belardo, borrowed the two TCTs, together with the lease agreement with Esso Standard Eastern, Inc., from Atty. Sanicas on account of the loan being proposed by Belardo to her. Thereafter, petitioners had the Extrajudicial Settlement Among Heirs notarized on February 25, 1986. With Roque's copy of TCT No. T-18764 in their possession, they succeeded in having it cancelled and a new certificate of title, TCT No. T-140184, issued in their names. 13 ADTCaI In 1987, Belardo decided to register the Deed of Sale dated August 21, 1981. With no title in hand, she was compelled to file a petition with the RTC to direct the Register of Deeds to annotate the deed of sale even without a copy of the TCTs. In an Order dated June 18, 1987, the RTC granted the petition. But she only succeeded in registering the deed of sale in TCT No. T-18762 because TCT No. T-18764 had already been cancelled. 14 On December 11, 1989, Atty. Sanicas prepared a certificate of authorization, giving Belardo's daughter, Jennelyn P. Vargas, the authority to collect the payments from Esso Standard Eastern, Inc. But it appeared from the company's Advice of Fixed Payment that payment of the lease rental had already been transferred from Belardo to Amelia NaranjaRubinos because of the Extrajudicial Settlement Among Heirs. On June 23, 1992, Belardo, 15 through her daughter and attorney-in-fact, Rebecca Cordero, instituted a suit for reconveyance with damages. The complaint prayed that judgment be rendered declaring Belardo as the sole legal owner of Lot No. 4, declaring null and void the Extrajudicial Settlement Among Heirs, and TCT No. T-140184, and ordering petitioners to reconvey to her the subject property and to pay damages. The case was docketed as Civil Case No. 7144. Subsequently, petitioners also filed a case against respondent for annulment of sale and quieting of title with damages, praying, among others, that judgment be rendered nullifying the Deed of Sale, and ordering the Register of Deeds of Bacolod City to cancel the annotation of the Deed of Sale on TCT No. T-18762. This case was docketed as Civil Case No. 7214. On March 5, 1997, the RTC rendered a Decision in the consolidated cases in favor of petitioners. The trial court noted that the Deed of Sale was defective in form since it did not contain a technical description of the subject properties but merely indicated that they were Lot No. 4, covered by TCT No. T-18764 consisting of 136 square meters, and one-third portion of Lot No. 2 covered by TCT No. T-18762. The trial court held that, being defective in form, the Deed of Sale did not vest title in private respondent. Full and absolute ownership did not pass to private respondent because she failed to register the Deed of Sale. She was not a purchaser in good faith since she acted as a witness to the second sale of the property knowing that she had already purchased the property from Roque. Whatever rights private respondent had over the properties could not be superior to the rights of petitioners, who are now the registered owners of the parcels of land. The RTC disposed, thus: IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered: 1.Dismissing Civil Case No. 7144. 2.Civil Case No. 7214. a)Declaring the Deed of Sale dated August 21, 1981, executed by Roque Naranja, covering his one-third (1/3) share of Lot 2 of the consolidation-subdivision plan (LRC) Pcs-886, being a portion of the consolidation of Lots 240-A, 240-B, 240-C and 240-D, described on plan, Psd33443 (LRC) GLRO Cad. Rec. No. 55 in favor of Lucilia Belardo, and entered as Doc. No. 80, Page 17, Book No. XXXVI, Series of 1981 of Notary Public Eugenio Sanicas of Bacolod City, as null and void and of no force and effect; TEcCHD b)Ordering the Register of Deeds of Bacolod City to cancel Entry No. 148123 annotate at the back of Transfer Certificate of Title No. T-18762; c)Ordering Lucilia Belardo or her successors-in-interest to pay plaintiffs the sum of P20,000.00 as attorney's fees, the amount of P500.00 as appearance fees. Counterclaims in both Civil Cases Nos. 7144 and 7214 are hereby DISMISSED. SO ORDERED. 16 On September 13, 2002, the CA reversed the RTC Decision. The CA held that the unregisterability of a deed of sale will not undermine its validity and efficacy in transferring ownership of the properties to private respondent. The CA noted that the records were devoid of any proof evidencing the alleged vitiation of Roque's consent to the sale; hence, there is no reason to invalidate the sale. Registration is only necessary to bind third parties, which petitioners, being the heirs of Roque Naranja, are not. The trial court erred in applying Article 1544 of the Civil Code to the case at bar since petitioners are not purchasers of the said properties. Hence, it is not significant that private respondent failed to register the deed of sale before the extrajudicial settlement among the heirs. The dispositive portion of the CA Decision reads: WHEREFORE, the decision dated March 5, 1997 in Civil Case Nos. 7144 and 7214 is hereby REVERSED and SET ASIDE. In lieu thereof, judgment is hereby rendered as follows:

1.Civil Case No. 7214 is hereby ordered DISMISSED for lack of cause of action. 2.In Civil Case No. 7144, the extrajudicial settlement executed by the heirs of Roque Naranja adjudicating among themselves Lot No. 4 of the consolidation-subdivision plan (LRC) Pcs-886 of the Bacolod Cadastre is hereby declared null and void for want of factual and legal basis. The certificate of title issued to the heirs of Roque Naranja (Transfer Certificate of [T]i[t]le No. T-140184) as a consequence of the void extra-judicial settlement is hereby ordered cancelled and the previous title to Lot No. 4, Transfer Certificate of Title No. T-18764, is hereby ordered reinstated. Lucilia Belardo is hereby declared the sole and legal owner of said Lot No. 4, and one-third of Lot No. 2 of the same consolidation-subdivision plan, Bacolod Cadastre, by virtue of the deed of sale thereof in her favor dated August 21, 1981. SO ORDERED. 17 The CA denied petitioners' motion for reconsideration on September 24, 2003. 18 Petitioners filed this petition for review, raising the following issues: 1.WHETHER OR NOT THE HONORABLE RESPONDENT COURT OF APPEALS IS CORRECT IN IGNORING THE POINT RAISED BY [PETITIONERS] THAT THE DEED OF SALE WHICH DOES NOT COMPL[Y] WITH THE PROVISIONS OF ACT NO. 496 IS [NOT] VALID. TaDIHc 2.WHETHER OR NOT THE ALLEGED DEED OF SALE [OF REAL PROPERTIES] IS VALID CONSIDERING THAT THE CONSENT OF THE LATE ROQUE NARANJA HAD BEEN VITIATED; . . . THERE [IS] NO CONCLUSIVE SHOWING THAT THERE WAS CONSIDERATION AND THERE [ARE] SERIOUS IRREGULARITIES IN THE NOTARIZATION OF THE SAID DOCUMENTS. 19 In her Comment, private respondent questioned the Verification and Certification of Non-Forum Shopping attached to the Petition for Review, which was signed by a certain Ernesto Villadelgado without a special power of attorney. In their reply, petitioners remedied the defect by attaching a Special Power of Attorney signed by them. Pursuant to its policy to encourage full adjudication of the merits of an appeal, the Court had previously excused the late submission of a special power of attorney to sign a certification against forum-shopping. 20 But even if we excuse this defect, the petition nonetheless fails on the merits. The Court does not agree with petitioners' contention that a deed of sale must contain a technical description of the subject property in order to be valid. Petitioners anchor their theory on Section 127 of Act No. 496, 21 which provides a sample form of a deed of sale that includes, in particular, a technical description of the subject property. To be valid, a contract of sale need not contain a technical description of the subject property. Contracts of sale of real property have no prescribed form for their validity; they follow the general rule on contracts that they may be entered into in whatever form, provided all the essential requisites for their validity are present.22 The requisites of a valid contract of sale under Article 1458 of the Civil Code are: (1) consent or meeting of the minds; (2) determinate subject matter; and (3) price certain in money or its equivalent. The failure of the parties to specify with absolute clarity the object of a contract by including its technical description is of no moment. What is important is that there is, in fact, an object that is determinate or at least determinable, as subject of the contract of sale. The form of a deed of sale provided in Section 127 of Act No. 496 is only a suggested form. It is not a mandatory form that must be strictly followed by the parties to a contract. In the instant case, the deed of sale clearly identifies the subject properties by indicating their respective lot numbers, lot areas, and the certificate of title covering them. Resort can always be made to the technical description as stated in the certificates of title covering the two properties. On the alleged nullity of the deed of sale, we hold that petitioners failed to submit sufficient proof to show that Roque executed the deed of sale under the undue influence of Belardo or that the deed of sale was simulated or without consideration. A notarized document carries the evidentiary weight conferred upon it with respect to its due execution, and documents acknowledged before a notary public have in their favor the presumption of regularity. It must be sustained in full force and effect so long as he who impugns it does not present strong, complete, and conclusive proof of its falsity or nullity on account of some flaws or defects provided by law. 23 HSATIC Petitioners allege that Belardo unduly influenced Roque, who was already physically weak and senile at that time, into executing the deed of sale. Belardo allegedly took advantage of the fact that Roque was living in her house and was dependent on her for support. There is undue influence when a person takes improper advantage of his power over the will of another, depriving the latter of a reasonable freedom of choice. 24One who alleges any defect, or the lack of consent to a contract by reason of fraud or undue influence, must establish by full, clear and convincing evidence, such specific acts that vitiated the party's consent; otherwise, the latter's presumed consent to the contract prevails. 25 For undue influence to be present, the

influence exerted must have so overpowered or subjugated the mind of a contracting party as to destroy his free agency, making him express the will of another rather than his own. 26 Petitioners adduced no proof that Roque had lost control of his mental faculties at the time of the sale. Undue influence is not to be inferred from age, sickness, or debility of body, if sufficient intelligence remains. 27 The evidence presented pertained more to Roque's physical condition rather than his mental condition. On the contrary, Atty. Sanicas, the notary public, attested that Roque was very healthy and mentally sound and sharp at the time of the execution of the deed of sale. Atty. Sanicas said that Roque also told him that he was a Law graduate. 28 Neither was the contract simulated. The late registration of the Deed of Sale and Roque's execution of the second deed of sale in favor of Dema-ala did not mean that the contract was simulated. We are convinced with the explanation given by respondent's witnesses that the deed of sale was not immediately registered because Belardo did not have the money to pay for the fees. This explanation is, in fact, plausible considering that Belardo could barely support herself and her brother, Roque. As for the second deed of sale, Dema-ala, herself, attested before the trial court that she let Roque sign the second deed of sale because the title to the properties were still in his name. Finally, petitioners argue that the Deed of Sale was not supported by a consideration since no receipt was shown, and it is incredulous that Roque, who was already weak, would travel to Bacolod City just to be able to execute the Deed of Sale. The Deed of Sale which states "receipt of which in full I hereby acknowledge to my entire satisfaction" is an acknowledgment receipt in itself. Moreover, the presumption that a contract has sufficient consideration cannot be overthrown by a mere assertion that it has no consideration. 29 Heirs are bound by contracts entered into by their predecessors-in-interest. 30 As heirs of Roque, petitioners are bound by the contract of sale that Roque executed in favor of Belardo. Having been sold already to Belardo, the two properties no longer formed part of Roque's estate which petitioners could have inherited. The deed of extrajudicial settlement that petitioners executed over Lot No. 4 is, therefore, void, since the property subject thereof did not become part of Roque's estate. WHEREFORE, premises considered, the petition is DENIED. The Court of Appeals Decision dated September 13, 2002 and Resolution dated September 24, 2003 are AFFIRMED. AaSCTD SO ORDERED.

[G.R. No. 103577. October 7, 1996.] ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL, ANNABELLE C. GONZALES (for herself and on behalf of Floraida C. Tupper, as attorney-in-fact), CIELITO A. CORONEL, FLORAIDA A. ALMONTE, and CATALINA BALAIS MABANAG,petitioners, vs. THE COURT OF APPEALS, CONCEPCION D. ALCARAZ and RAMONA PATRICIA ALCARAZ, assisted by GLORIA F. NOEL as attorney-infact, respondents. SYLLABUS 1.CIVIL LAW; SALES; ESSENTIAL ELEMENTS THEREOF. 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. DCScaT 2.ID.; ID.; CONTRACT TO SELL DISTINGUISHED FROM CONDITIONAL CONTRACT OF SALE. 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 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. 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 (cf. Homesite and Housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). 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. 3.ID.; ID.; ID.; SALE OF SUBJECT PROPERTY TO A THIRD PERSON; EFFECTS THEREOF. It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases where the subject property is sold by the owner not to the party the seller contracted with, but to a third person, as in the case at bench. In a contract to sell, there being no previous sale of the property, a third person buying such property despite the fulfillment of the suspensive condition such as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the property. There is no double sale in such case. Title to the property will transfer to the buyer after registration because there is no defect in the owner-seller's title per se, but the latter, of course, may be sued for damages by the intending buyer. In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale becomes absolute and this will definitely affect the seller's title thereto. In fact, if there had been previous delivery of the subject property, the seller's ownership or title to the property is automatically transferred to the buyer such that, the seller will no longer have any title to transfer to any third person. Applying Article 1544 of the Civil Code, such second buyer of the property who may have had actual or constructive knowledge of such defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first buyer's title. In case a title is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the sale. 4.ID.; ID.; CONTRACT OF SALE; INTERPRETATION OF WORDS USED THEREIN SHOULD BE GIVEN ORDINARY MEANING; CASE AT BENCH. It is a canon in the interpretation of contracts that the words used therein should be given their natural and ordinary meaning unless a technical meaning was intended (Tan vs. Court of Appeals, 212 SCRA 586 [1992]). Thus, . . . When the "Receipt of Down Payment" is considered in its entirety, it becomes more manifest that there was a clear intent on the part of petitioners to transfer title to the buyer, but since the transfer certificate of title was still in the name of petitioner's father, they could not fully effect such transfer although the buyer was then willing and able to immediately pay the purchase price. Therefore, petitioners-sellers undertook upon receipt of the down payment from private respondent Ramona P. Alcaraz, to cause the issuance of a new certificate of title in their names from that of their father, after which, they promised to present said title, now in their names, to the latter and to execute the deed of absolute sale whereupon, the latter shall, in turn, pay the entire balance of the purchase price. The agreement could not have been a contract to sell because the sellers herein made no express reservation of ownership or title to the subject parcel of land. Furthermore, the circumstance which prevented the parties from entering into an absolute contract of sale pertained to the sellers themselves (the certificate of title was not in their names) and not the full payment of the purchase price. Under the established facts and circumstances of the case, the Court may safely presume that, had the certificate of title been in the names of petitioners-sellers at that time, there would have been no reason why an absolute contract of sale could not have been executed and consummated right there and then. 5.ID.; ID.; ID.; WHEN RECIPROCAL OBLIGATIONS OF SELLER AND BUYER AROSE IN CASE AT BENCH. On January 19, 1985, as evidenced by the document denominated as "Receipt of Down Payment" (Exh. "A", Exh. "1"), the parties entered into a contract of sale subject only to the suspensive condition that the sellers shall effect the issuance of new certificate of title from that of their father's name to their names. . . . On February 6, 1985, this condition was fulfilled (Exh. "D"; Exh. "4"). We therefore, hold that, in accordance with Article 1187 . . . the rights and obligations of the parties with respect to the perfected contract of sale became mutually due and demandable as of the time of fulfillment or occurrence of the suspensive condition on February 6, 1985. As of that point in time, reciprocal obligations of both seller

and buyer arose, that is, . . . petitioners, as sellers, were obliged to present the transfer certificate of title already in their names to private respondent Ramona P. Alcaraz, the buyer, and to immediately execute the deed of absolute sale, while the buyer on her part, was obliged to forthwith pay the balance of the purchase price amounting to P1,190,000.00. 6.ID.; WILLS AND SUCCESSION; RIGHTS THERETO TRANSMITTED FROM MOMENT OF DECEDENT'S DEATH; CASE AT BENCH. Petitioners also argue there could be no perfected contract on January 19, 1985 because they were then not yet the absolute owners of the inherited property. We cannot sustain this argument. Article 774 of the Civil Code defines succession as a mode of transferring ownership as follows: Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and obligations to the extent and value of the inheritance of a person are transmitted through his death to another or others by his will or by operation of law. Petitioners-sellers in the case at bar being the sons and daughters of the decedent Constancio P. Coronel are compulsory heirs who were called to succession by operation of law. Thus, at the point their father drew his last breath, petitioners stepped into his shoes insofar as the subject property is concerned, such that any rights or obligations pertaining thereto became binding and enforceable upon them. It is expressly provided that rights to the succession are transmitted from the moment of death of the decedent (Article 777, Civil Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]). 7.ID.; SALES; CONTRACT OF SALE; ESTOPPEL; PETITIONERS PRECLUDED FROM DENYING OWNERSHIP OF SUBJECT PROPERTY AT TIME OF SALE; CASE AT BENCH. Aside from this, petitioners are precluded from raising their supposed lack of capacity to enter into an agreement at that time and they cannot be allowed to now take a posture contrary to that which they took when they entered into the agreement with private respondent Ramona P. Alcaraz. . . . Having represented themselves as the true owners of the subject property at the time of sale, petitioners cannot claim now that they were not yet the absolute owners thereof at that time. 8.ID.; ID.; ID.; RESCISSION; PHYSICAL ABSENCE OF BUYER NOT A GROUND THEREFOR IN CASE AT BENCH. Petitioners also contend that although there was in fact a perfected contract of sale between them and Ramona P. Alcaraz, the latter breached her reciprocal obligation when she rendered impossible the consummation thereof by going to the United States of America, without leaving her address, telephone number, and Special Power of Attorney (Paragraphs 14 and 15, Answer with Compulsory Counterclaim to the Amended Complaint, p. 2; Rollo, p. 43), for which reason, so petitioners conclude, they were correct in unilaterally rescinding the contract of sale. We do not agree with petitioners that there was a valid rescission of the contract of sale in the instant case. We note that these supposed grounds for petitioners' rescission, are mere allegations found only in their responsive pleadings, which by express provision of the rules, are deemed controverted even if no reply is filed by the plaintiffs (Sec. 11, Rule 6, Revised Rules of Court). The records are absolutely bereft of any supporting evidence to substantiate petitioners' allegations. We had stressed time and again that allegations must be proven by sufficient evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882 [1961]; Recaro vs. Embisan, 2 SCRA 598 [1961]). Mere allegation is not an evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]). Even assuming arguendo that Ramona P. Alcaraz was in the United States of America on February 6, 1985, we cannot justify petitioners-sellers' act of unilaterally and extrajudicially rescinding the contract of sale, there being no express stipulation authorizing the sellers to extrajudicially rescind the contract of sale. (cf Dignos vs. CA, 158 SCRA 375 [1988];Taguba vs. Vda. de Leon, 132 SCRA 722 [1984]). Moreover, petitioners are estopped from raising the alleged absence of Ramona P. Alcaraz because although the evidence on record shows that the sale was in the name of Ramona P. Alcaraz as the buyer, the sellers had been dealing with Concepcion D. Alcaraz, Ramona's mother, who had acted for and in behalf of her daughter, if not also in her own behalf. Indeed, the down payment was made by Concepcion D. Alcaraz with her own personal check (Exh. "B"; Exh. "2") for and in behalf of Ramona P. Alcaraz. There is no evidence showing that petitioners ever questioned Concepcion's authority to represent Ramona P. Alcaraz when they accepted her personal check. Neither did they raise any objection as regards payment being effected by a third person. Accordingly, as far as petitioners are concerned, the physical absence of Ramona P. Alcaraz is not a ground to rescind the contract of sale. 9.ID.; ID.; ID.; ID.; ID.; BUYER NOT CONSIDERED IN DEFAULT IN CASE AT BENCH. Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her obligation to pay the full purchase price is concerned. Petitioners who are precluded from setting up the defense of the physical absence of Ramona P. Alcaraz as above-explained offered no proof whatsoever to show that they actually presented the new transfer certificate of title in their names and signified their willingness and readiness to execute the deed of absolute sale in accordance with their agreement. Ramona's corresponding obligation to pay the balance of the purchase price in the amount of P1,190,000.00 (as buyer) never became due and demandable and, therefore, she cannot be deemed to have been in default. Article 1169 of the Civil Code defines when a party in a contract involving reciprocal obligations may be considered in default, . . . There is thus neither factual nor legal basis to rescind the contract of sale between petitioners and respondents. 10.ID.; ID.; DOUBLE SALE; WHEN SECOND BUYER IS ENTITLED TO TITLE OR OWNERSHIP OF PROPERTY. With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag, gave rise to a case of double sale where Article 1544 of the Civil Code will apply. . . . The record of the case shows that the Deed of Absolute Sale dated April 25, 1985 as proof of the second contract of sale was registered with the Registry of Deeds of Quezon City giving rise to the issuance of a new certificate of title in the name of Catalina B. Mabanag on June 5, 1985. Thus, the second paragraph of Article 1544 shall apply. The above-cited provision on double sale presumes title or ownership to pass to the first buyer, the exceptions being: (a) when the second buyer, in good faith, registers the sale ahead of the first buyer, and (b) should there be no inscription by either of the two buyers, when the second buyer, in good faith, acquires possession of the property ahead of the first buyer. Unless, the second buyer satisfies these requirements, title or ownership will not transfer to him to the prejudice of the first buyer. 11.ID.; ID.; ID.; ID.; CASE AT BENCH. Petitioners point out that the notice of lis pendens in the case at bar was annotated on the title of the subject property only on February 22, 1985, whereas, the second sale between petitioners Coronels and petitioner. Mabanag was supposedly perfected prior thereto or on February 18, 1985. The idea conveyed is that at the time petitioner Mabanag, the second buyer, bought the property under a clean title, she was unaware of any adverse claim or previous sale, for which reason she is a buyer in good faith. We are not persuaded by such argument. In

a case of double sale, what finds relevance and materiality is not whether or not the second buyer was a buyer in good faith but whether or not said second buyer registers such second sale in good faith, that is, without knowledge of any defect in the title of the property sold. As clearly borne out by the evidence in this case, petitioner Mabanag could not have in good faith, registered the sale entered into on February 18, 1985 because as early as February 22, 1985, a notice of lis pendens had been annotated on the transfer certificate of title in the names of petitioners, whereas petitioner Mabanag registered the said sale sometime in April, 1985. At the time of registration, therefore, petitioner Mabanag knew that the same property had already been previously sold to private respondents, or, at least, she was charged with knowledge that a previous buyer is claiming title to the same property. Petitioner Mabanag cannot close her eyes to the defect in petitioners' title to the property at the time of the registration of the property. CAScIH DECISION MELO, J p: The petition before us has its roots in a complaint for specific performance to compel herein petitioners (except the last named, Catalina Balais Mabanag) to consummate the sale of a parcel of land with its improvements located along Roosevelt Avenue in Quezon City entered into by the parties sometime in January 1985 for the price of P1,240,000.00 The undisputed facts of the case were summarized by respondent court in this wise: On January 19, 1985, defendants-appellants Romulo Coronel, et al. (hereinafter referred to as Coronels) executed a document entitled "Receipt of Down Payment" (Exh. "A") in favor of plaintiff Ramona Patricia Alcaraz (hereinafter referred to as Ramona) which is reproduced hereunder: RECEIPT OF DOWN PAYMENT P1,240,000.00 Total amount 50,000.00 Down payment P1,190,000.00 Balance Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand Pesos purchase price of our inherited house and lot, covered by TCT No. 119627 of the Registry of Deeds of Quezon City, in the total amount of P1,240,000.00. We bind ourselves to effect the transfer in our names from our deceased father, Constancio P. Coronel, the transfer certificate of title immediately upon receipt of the down payment above-stated. On our presentation of the TCT already in our name, We will immediately execute the deed of absolute sale of said property and Miss Ramona Patricia Alcaraz shall immediately pay the balance of the P1,190,000.00. Clearly, the conditions appurtenant to the sale are the following: 1.Ramona will make a down payment of Fifty Thousand (P50,000.00) Pesos upon execution of the document aforestated; 2.The Coronels will cause the transfer in their names of the title of the property registered in the name of their deceased father upon receipt of the Fifty Thousand (P50,000.00) Pesos down payment; 3.Upon the transfer in their names of the subject property, the Coronels will execute the deed of absolute sale in favor of Ramona and the latter will pay the former the whole balance of One Million One Hundred Ninety Thousand (P1,190,000.00) Pesos. On the same date (January 15, 1985), plaintiff-appellee Concepcion D. Alcaraz (hereinafter referred to as Concepcion), mother of Ramona, paid the down payment of Fifty Thousand (P50,000.00) Pesos (Exh. "B", Exh. "2"). On February 6, 1985, the property originally registered in the name of the Coronels' father was transferred in their names under TCT No. 327043 (Exh. "D"; Exh. "4") On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to intervenorappellant Catalina B. Mabanag (hereinafter referred to as Catalina) for One Million Five Hundred Eighty Thousand (P1,580,000.00) Pesos after the latter has paid Three Hundred Thousand (P300,000.00) Pesos (Exhs. "F-3"; Exh. "6-C") For this reason, Coronels canceled and rescinded the contract (Exh. "A") with Ramona by depositing the down payment paid by Concepcion in the bank in trust for Ramona Patricia Alcaraz. On February 22, 1985, Concepcion, et al., filed a complaint for specific performance against the Coronels and caused the annotation of a notice of lis pendens at the back of TCT No. 327403 (Exh. "E"; Exh. "5").

On April 2, 1985, Catalina caused the annotation of a notice of adverse claim covering the same property with the Registry of Deeds of Quezon City (Exh. "F"; Exh. "6"). On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject property in favor of Catalina (Exh. "G"; Exh. "7"). On June 5, 1985, a new title over the subject property was issued in the name of Catalina under TCT No. 351582 (Exh. "H"; Exh. "8"). (Rollo, pp. 134-136) In the course of the proceedings before the trial court (Branch 83, RTC, Quezon City) the parties agreed to submit the case for decision solely on the basis of documentary exhibits. Thus, plaintiffs therein (now private respondents) proffered their documentary evidence accordingly marked as Exhibits "A" through "J", inclusive of their corresponding submarkings. Adopting these same exhibits as their own, then defendants (now petitioners) accordingly offered and marked them as Exhibits "1" through "10", likewise inclusive of their corresponding submarkings. Upon motion of the parties, the trial court gave them thirty (30) days within which to simultaneously submit their respective memoranda, and an additional 15 days within which to submit their corresponding comment or reply thereto, after which, the case would be deemed submitted for resolution. On April 14, 1988, the case was submitted for resolution before Judge Reynaldo Roura, who was then temporarily detailed to preside over Branch 82 of the RTC of Quezon City. On March 1, 1989, judgment was handed down by Judge Roura from his regular bench at Macabebe, Pampanga for the Quezon City branch, disposing as follows: WHEREFORE, judgment for specific performance is hereby rendered ordering defendant to execute in favor of plaintiffs a deed of absolute sale covering that parcel of land embraced in and covered by Transfer Certificate of Title No. 327403 (now TCT No. 331582) of the Registry of Deeds for Quezon City, together with all the improvements existing thereon free from all liens and encumbrances, and once accomplished, to immediately deliver the said document of sale to plaintiffs and upon receipt thereof, the plaintiffs are ordered to pay defendants the whole balance of the purchase price amounting to P1,190,000.00 in cash. Transfer Certificate of Title No. 331582 of the Registry of Deeds for Quezon City in the name of intervenor is hereby canceled and declared to be without force and effect. Defendants and intervenor and all other persons claiming under them are hereby ordered to vacate the subject property and deliver possession thereof to plaintiffs. Plaintiffs' claim for damages and attorney's fees, as well as the counterclaims of defendants and intervenors are hereby dismissed. No pronouncement as to costs. So Ordered. Macabebe, Pampanga for Quezon City, March 1, 1989. A motion for reconsideration was filed by petitioners before the new presiding judge of the Quezon City RTC but the same was denied by Judge Estrella T. Estrada, thusly: The prayer contained in the instant motion, i.e., to annul the decision and to render anew decision by the undersigned Presiding Judge should be denied for the following reasons: (1) The instant case became submitted for decision as of April 14, 1988 when the parties terminated the presentation of their respective documentary evidence and when the Presiding Judge at that time was Judge Reynaldo Roura. The fact that they were allowed to file memoranda at some future date did not change the fact that the hearing of the case was terminated before Judge Roura and therefore the same should be submitted to him for decision; (2) When the defendants and intervenor did not object to the authority of Judge Reynaldo Roura to decide the case prior to the rendition of the decision, when they met for the first time before the undersigned Presiding Judge at the hearing of a pending incident in Civil Case No. Q-46145 on November 11, 1988, they were deemed to have acquiesced thereto and they are now estopped from questioning said authority of Judge Roura after they received the decision in question which happens to be adverse to them; (3) While it is true that Judge Reynaldo Roura was merely a Judge-on-detail at this Branch of the Court, he was in all respects the Presiding Judge with full authority to act on any pending incident submitted before this Court during his incumbency. When he returned to his Official Station at Macabebe, Pampanga, he did not lose his authority to decide or resolve such cases submitted to him for decision or resolution because he continued as Judge of the Regional Trial Court and is of co-equal rank with the undersigned Presiding Judge. The standing rule and supported by jurisprudence is that a Judge to whom a case is submitted for decision has the authority to decide the case notwithstanding his transfer to another branch or region of the same court (Sec. 9, Rule 135, Rule of Court). Coming now to the twin prayer for reconsideration of the Decision dated March 1, 1989 rendered in the instant case, resolution of which now pertains to the undersigned Presiding Judge, after a meticulous examination of the documentary evidence presented by the parties, she is convinced that the Decision of March 1, 1989 is supported by evidence and, therefore, should not be disturbed.

IN VIEW OF THE FOREGOING, the "Motion for Reconsideration and/or to Annul Decision and Render Anew Decision by the Incumbent Presiding Judge" dated March 20, 1989 is hereby DENIED. SO ORDERED. Quezon City, Philippines, July 12, 1989. Petitioners thereupon interposed an appeal, but on December 16, 1991, the Court of Appeals (Buena, Gonzaga-Reyes, Abad Santos (P), JJ.) rendered its decision fully agreeing with the trial court. Hence, the instant petition which was filed on March 5, 1992. The last pleading, private respondents' Reply Memorandum, was filed on September 15, 1993. The case was, however, re-raffled to undersigned ponente only on August 28, 1996, due to the voluntary inhibition of the Justice to whom the case was last assigned. While we deem it necessary to introduce certain refinements in the disquisition of respondent court in the affirmance of the trial court's decision, we definitely find the instant petition bereft of merit. The heart of the controversy which is the ultimate key in the resolution of the other issues in the case at bar is the precise determination of the legal significance of the document entitled "Receipt of Down Payment" which was offered in evidence by both parties. There is no dispute as to the fact that said document embodied the binding contract between Ramona Patricia Alcaraz on the one hand, and the heirs of Constancio P. Coronel on the other, pertaining to a particular house and lot covered by TCT No. 119627, as defined in Article 1305 of the Civil Code of the Philippines which reads as follows: Art. 1305.A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. While, it is the position of private respondents that the "Receipt of Down Payment" embodied a perfected contract of sale, which perforce, they seek to enforce by means of an action for specific performance, petitioners on their part insist that what the document signified was a mere executory contract to sell, subject to certain suspensive conditions, and because of the absence of Ramona P. Alcaraz, who left for the United States of America, said contract could not possibly ripen into a contract of absolute sale. Plainly, such variance in the contending parties' contentions is brought about by the way each interprets the terms and/or conditions set forth in said private instrument. Withal, based on whatever relevant and admissible evidence may be available on record, this Court, as were the courts below, is now called upon to adjudge what the real intent of the parties was at the time the said document was executed. The Civil Code defines a contract of sale, 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. 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. In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court had occasion to rule: Hence, We hold that the contract between the petitioner and the respondent was a contract to sell where the ownership or title is retained by the seller and is not to pass until the full payment of the price, such payment being a positive suspensive condition and failure of which is not a breach, casual or serious, but simply an event that prevented the obligation of the vendor to convey title from acquiring binding force. 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 (cf. Homesite and Housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). 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. It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases where the subject property is sold by the owner not to the party the seller contracted with, but to a third person, as in the case at bench. In a contract to sell, there being no previous sale of the property, a third person buying such property despite the fulfillment of the suspensive condition such as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the property. There is no double sale in such case. Title to the property will transfer to the buyer after registration because there is no defect in the ownerseller's title per se, but the latter, of course, may be sued for damages by the intending buyer. In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale becomes absolute and this will definitely affect the seller's title thereto. In fact, if there had been previous delivery of the subject property, the seller's ownership or title to the property is automatically transferred to the buyer such that, the seller will no longer have any title to transfer to any third person. Applying Article 1544 of the Civil Code, such second buyer of the property who may have had actual or constructive knowledge of such defect in the seller's title, or at least was charged with the obligation to discover such defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first buyer's title. In case a title is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the sale. With the above postulates as guidelines, we now proceed to the task of deciphering the real nature of the contract entered into by petitioners and private respondents. It is a canon in the interpretation of contracts that the words used therein should be given their natural and ordinary meaning unless a technical meaning was intended (Tan vs. Court of Appeals, 212 SCRA 586 [1992]). Thus, when petitioners declared in the said "Receipt of Down Payment" that they Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand Pesos purchase price of our inherited house and lot, covered by TCT No. 1199627 of the Registry of Deeds of Quezon City, in the total amount of P1,240,000.00. without any reservation of title until full payment of the entire purchase price, the natural and ordinary idea conveyed is that they sold their property. When the "Receipt of Down Payment" is considered in its entirety, it becomes more manifest that there was a clear intent on the part of petitioners to transfer title to the buyer, but since the transfer certificate of title was still in the name of petitioner's father, they could not fully effect such transfer although the buyer was then willing and able to immediately pay the purchase price. Therefore, petitioners-sellers undertook upon receipt of the down payment from private respondent Ramona P. Alcaraz, to cause the issuance of a new certificate of title in their names from that of their father, after which, they promised to present said title, now in their names, to the latter and to execute the deed of absolute sale whereupon, the latter shall, in turn, pay the entire balance of the purchase price. The agreement could not have been a contract to sell because the sellers herein made no express reservation of ownership or title to the subject parcel of land. Furthermore, the circumstance which prevented the parties from entering into an absolute contract of sale pertained to the sellers themselves (the certificate of title was not in their names) and not the full payment of the purchase price. Under the established facts and circumstances of the case, the Court may safely presume that, had the certificate of title been in the names of petitioners-sellers at that time, there would have been no reason why an absolute contract of sale could not have been executed and consummated right there and then. Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely promise to sell the property to private respondent upon the fulfillment of the suspensive condition. On the contrary, having already agreed to sell the subject property, they undertook to have the certificate of title changed to their names and immediately thereafter, to execute the written deed of absolute sale.

Thus, the parties did not merely enter into a contract to sell where the sellers, after compliance by the buyer with certain terms and conditions, promised to sell the property to the latter. What may be perceived from the respective undertakings of the parties to the contract is that petitioners had already agreed to sell the house and lot they inherited from their father, completely willing to transfer full ownership of the subject house and lot to the buyer if the documents were then in order. It just so happened, however, that the transfer certificate of title was then still in the name of their father. It was more expedient to first effect the change in the certificate of title so as to bear their names. That is why they undertook to cause the issuance of a new transfer of the certificate of title in their names upon receipt of the down payment in the amount of P50,000.00. As soon as the new certificate of title is issued in their names, petitioners were committed to immediately execute the deed of absolute sale. Only then will the obligation of the buyer to pay the remainder of the purchase price arise. There is no doubt that unlike in a contract to sell which is most commonly entered into so as to protect the seller against a buyer who intends to buy the property in installment by withholding ownership over the property until the buyer effects full payment therefor, in the contract entered into in the case at bar, the sellers were the ones who were unable to enter into a contract of absolute sale by reason of the fact that the certificate of title to the property was still in the name of their father. It was the sellers in this case who, as it were, had the impediment which prevented, so to speak, the execution of a contract of absolute sale. What is clearly established by the plain language of the subject document is that when the said "Receipt of Down Payment" was prepared and signed by petitioners Romulo A. Coronel, et al., the parties had agreed to a conditional contract of sale, consummation of which is subject only to the successful transfer of the certificate of title from the name of petitioners' father, Constancio P. Coronel to their names. The Court significantly notes that this suspensive condition was, in fact, fulfilled on February 6, 1985 (Exh. "D"; Exh. "4"). Thus, on said date, the conditional contract of sale between petitioners and private respondent Ramona P. Alcaraz became obligatory, the only act required for the consummation thereof being the delivery of the property by means of the execution of the deed of absolute sale in a public instrument, which petitioners unequivocally committed themselves to do as evidenced by the "Receipt of Down Payment." Article 1475, in correlation with Article 1181, both of the Civil Code, plainly applies to the case at bench. Thus, Art. 1475.The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts. Art. 1181.In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition. Since the condition contemplated by the parties which is the issuance of a certificate of title in petitioners' names was fulfilled on February 6, 1985, the respective obligations of the parties under the contract of sale became mutually demandable, that is, petitioners, as sellers, were obliged to present the transfer certificate of title already in their names to private respondent Ramona P. Alcaraz, the buyer, and to immediately execute the deed of absolute sale, while the buyer on her part, was obliged to forthwith pay the balance of the purchase price amounting to P1,190,000.00. It is also significant to note that in the first paragraph in page 9 of their petition, petitioners conclusively admitted that: 3.The petitioners-sellers Coronel bound themselves "to effect the transfer in our names from our deceased father Constancio P. Coronel, the transfer certificate of title immediately upon receipt of the downpayment above-stated." The sale was still subject to this suspensive condition. (Emphasis supplied.) Petitioners themselves recognized that they entered into a contract of sale subject to a suspensive condition. Only, they contend, continuing in the same paragraph, that: . . . Had petitioners-sellers not complied with this condition of first transferring the title to the property under their names, there could be no perfected contract of sale. (Emphasis supplied.) not aware that they have set their own trap for themselves, for Article 1186 of the Civil Code expressly provides that: Art. 1186.The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. Besides, it should be stressed and emphasized that what is more controlling these mere hypothetical arguments is the fact that the condition herein referred to was actually and indisputably fulfilled on February 6, 1985, when a new title was issued in the names of petitioners as evidenced by TCT No. 327403 (Exh. "D"; Exh. "4"). The inevitable conclusion is that on January 19, 1985, as evidenced by the document denominated as "Receipt of Down Payment" (Exh. "A"; Exh. "1"), the parties entered into a contract of sale subject only to the suspensive condition that the sellers shall effect the issuance of new certificate of title from that of their father's name to their names and that, on February 6, 1985, this condition was fulfilled (Exh. "D"; Exh "4").

We, therefore, hold that, in accordance with Article 1187 which pertinently provides Art. 1187.The effects of conditional obligation to give, once the condition has been fulfilled, shall retroact to the day of the constitution of the obligation . . . In obligations to do or not to do, the courts shall determine, in each case, the retroactive effect of the condition that has been complied with. the rights and obligations of the parties with respect to the perfected contract of sale became mutually due and demandable as of the time of fulfillment or occurrence of the suspensive condition on February 6, 1985. As of that point in time, reciprocal obligations of both seller and buyer arose. Petitioners also argue there could be no perfected contract on January 19, 1985 because they were then not yet the absolute owners of the inherited property. We cannot sustain this argument. Article 774 of the Civil Code defines Succession as a mode of transferring ownership as follows: Art. 774.Succession is a mode of acquisition by virtue of which the property, rights and obligations to the extent and value of the inheritance of a person are transmitted through his death to another or others by his will or by operation of law. Petitioners-sellers in the case at bar being the sons and daughters of the decedent Constancio P. Coronel are compulsory heirs who were called to succession by operation of law. Thus, at the point their father drew his last breath, petitioners stepped into his shoes insofar as the subject property is concerned, such that any rights or obligations pertaining thereto became binding and enforceable upon them. It is expressly provided that rights to the succession are transmitted from the moment of death of the decedent (Article 777, Civil Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]). Be it also noted that petitioners' claim that succession may not be declared unless the creditors have been paid is rendered moot by the fact that they were able to effect the transfer of the title to the property from the decedent's name to their names on February 6, 1985. Aside from this, petitioners are precluded from raising their supposed lack of capacity to enter into an agreement at that time and they cannot be allowed to now take a posture contrary to that which they took when they entered into the agreement with private respondent Ramona P. Alcaraz. The Civil Code expressly states that: Art. 1431.Through estoppel an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon. Having represented themselves as the true owners of the subject property at the time of sale, petitioners cannot claim now that they were not yet the absolute owners thereof at that time. Petitioners also contend that although there was in fact a perfected contract of sale between them and Ramona P. Alcaraz, the latter breached her reciprocal obligation when she rendered impossible the consummation thereof by going to the United States of America, without leaving her address, telephone number, and Special Power of Attorney (Paragraphs 14 and 15, Answer with Compulsory Counterclaim to the Amended Complaint, p. 2; Rollo, p. 43), for which reason, so petitioners conclude, they were correct in unilaterally rescinding the contract of sale. We do not agree with petitioners that there was a valid rescission of the contract of sale in the instant case. We note that these supposed grounds for petitioners' rescission, are mere allegations found only in their responsive pleadings, which by express provision of the rules, are deemed controverted even if no reply is filed by the plaintiffs (Sec. 11, Rule 6, Revised Rules of Court). The records are absolutely bereft of any supporting evidence to substantiate petitioners' allegations. We have stressed time and again that allegations must be proven by sufficient evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882 [1961]; Recaro vs. Embisan, 2 SCRA 598 [1961]). Mere allegation is not an evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]). Even assuming arguendo that Ramona P. Alcaraz was in the United States of America on February 6, 1985, we cannot justify petitioners-sellers' act of unilaterally and extrajudicially rescinding the contract of sale, there being no express stipulation authorizing the sellers to extrajudicially rescind the contract of sale. (cf Dignos vs. CA, 158 SCRA 375 [1988]; Taguba vs. Vda. de Leon, 132 SCRA 722 [1984]). Moreover, petitioners are estopped from raising the alleged absence of Ramona P. Alcaraz because although the evidence on record shows that the sale was in the name of Ramona P. Alcaraz as the buyer, the sellers had been dealing with Concepcion D. Alcaraz, Ramona's mother, who had acted for and in behalf of her daughter, if not also in her own behalf. Indeed, the down payment was made by Concepcion D. Alcaraz with her own personal check (Exh. "B"; Exh. "2") for and in behalf of Ramona P. Alcaraz. There is no evidence showing that petitioners ever questioned Concepcion's authority to represent Ramona P. Alcaraz when they accepted her personal check. Neither did they raise any objection as regards payment being effected by a third person. Accordingly, as far as petitioners are concerned, the physical absence of Ramona P. Alcaraz is not a ground to rescind the contract of sale.

Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her obligation to pay the full purchase price is concerned. Petitioners who are precluded from setting up the defense of the physical absence of Ramona P. Alcaraz as above-explained offered no proof whatsoever to show that they actually presented the new transfer certificate of title in their names and signified their willingness and readiness to execute the deed of absolute sale in accordance with their agreement. Ramona's corresponding obligation to pay the balance of the purchase price in the amount of P1,190,000.00 (as buyer) never became due and demandable and, therefore, she cannot be deemed to have been in default. Article 1169 of the Civil Code defines when a party in a contract involving reciprocal obligations may be considered in default, to wit: Art. 1169.Those obliged to deliver or to do something, incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. xxx xxx xxx 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 fulfill his obligation, delay by the other begins. (Emphasis supplied.) There is thus neither factual nor legal basis to rescind the contract of sale between petitioners and respondents. With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag, gave rise to a case of double sale where Article 1544 of the Civil Code will apply, to wit: 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 record of the case shows that the Deed of Absolute Sale dated April 25, 1985 as proof of the second contract of sale was registered with the Registry of Deeds of Quezon City giving rise to the issuance of a new certificate of title in the name of Catalina B. Mabanag on June 5, 1985. Thus, the second paragraph of Article 1544 shall apply. The above-cited provision on double sale presumes title or ownership to pass to the first buyer, the exceptions being: (a) when the second buyer, in good faith, registers the sale ahead of the first buyer, and (b) should there be no inscription by either of the two buyers, when the second buyer, in good faith, acquires possession of the property ahead of the first buyer. Unless, the second buyer satisfies these requirements, title or ownership will not transfer to him to the prejudice of the first buyer. In his commentaries on the Civil Code, an accepted authority on the subject, now a distinguished member of the Court, Justice Jose C. Vitug, explains: The governing principle is prius tempore, potior jure (first in time, stronger in right). Knowledge by the first buyer of the second sale cannot defeat the first buyer's rights except when the second buyer first registers in good faith the second sale (Olivares vs. Gonzales, 159 SCRA 33). Conversely, knowledge gained by the second buyer of the first sale defeats his rights even if he is first to register, since knowledge taints his registration with bad faith (see alsoAstorga vs. Court of Appeals, G.R. No. 58530, 26 December 1984). In Cruz vs. Cabana (G.R. No. 56232, 22 June 1984, 129 SCRA 656), it was held that it is essential, to merit the protection of Art. 1544, second paragraph, that the second realty buyer must act in good faith in registering his deed of sale (citingCarbonell vs. Court of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R. No. 95843, 02 September 1992). (J. Vitug, Compendium of Civil Law and Jurisprudence, 1993 Edition, p. 604). Petitioners point out that the notice of lis pendens in the case at bar was annotated on the title of the subject property only on February 22, 1985, whereas, the second sale between petitioners Coronels and petitioner Mabanag was supposedly perfected prior thereto or on February 18, 1985. The idea conveyed is that at the time petitioner Mabanag, the second buyer, bought the property under a clean title, she was unaware of any adverse claim or previous sale, for which reason she is a buyer in good faith. We are not persuaded by such argument.

In a case of double sale, what finds relevance and materiality is not whether or not the second buyer was a buyer in good faith but whether or not said second buyer registers such second sale in good faith, that is, without knowledge of any defect in the title of the property sold. As clearly borne out by the evidence in this case, petitioner Mabanag could not have in good faith, registered the sale entered into on February 18, 1985 because as early as February 22, 1985, a notice of lis pendens had been annotated on the transfer certificate of title in the names of petitioners, whereas petitioner Mabanag registered the said sale sometime in April, 1985. At the time of registration, therefore, petitioner Mabanag knew that the same property had already been previously sold to private respondents, or, at least, she was charged with knowledge that a previous buyer is claiming title to the same property. Petitioner Mabanag cannot close her eyes to the defect in petitioners' title to the property at the time of the registration of the property. This Court had occasions to rule that: If a vendee in a double sale registers the sale after he has acquired knowledge that there was a previous sale of the same property to a third party or that another person claims said property in a previous sale, the registration will constitute a registration in bad faith and will not confer upon him any right. (Salvoro vs. Tanega, 87 SCRA 349 [1978]; citing Palarca vs. Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43 Phil. 554; Fernandez vs. Mercader, 43 Phil. 581.) Thus, the sale of the subject parcel of land between petitioners and Ramona P. Alcaraz, perfected on February 6, 1985, prior to that between petitioners and Catalina B. Mabanag on February 18, 1985, was correctly upheld by both the courts below. Although there may be ample indications that there was in fact an agency between Ramona as principal and Concepcion, her mother, as agent insofar as the subject contract of sale is concerned, the issue of whether or not Concepcion was also acting in her own behalf as a co-buyer is not squarely raised in the instant petition, nor in such assumption disputed between mother and daughter. Thus, We will not touch this issue and no longer disturb the lower courts' ruling on this point. WHEREFORE, premises considered, the instant petition is hereby DISMISSED and the appealed judgment AFFIRMED. SO ORDERED.

[G.R. No. 171702. February 12, 2009.] MANILA MINING CORPORATION, petitioner, vs. MIGUEL TAN, doing business under the name and style of MANILA MANDARIN MARKETING, respondent. DECISION QUISUMBING, J p: Assailed in this petition for review on certiorari are the Decision 1 dated December 20, 2005 and the Resolution 2 dated February 24, 2006 of the Court of Appeals in CA-G.R. CV No. 84385. The Court of Appeals had affirmed the Decision 3 dated October 27, 2004 of the Regional Trial Court (RTC), Branch 55, Manila, in Civil Case No. 01-101786. The facts of the case are as follows: Miguel Tan, doing business under the name and style of Manila Mandarin Marketing, was engaged in the business of selling electrical materials. From August 19 to November 26, 1997, Manila Mining Corporation (MMC) ordered and received various electrical materials from Tan valued at P2,347,880. MMC agreed to pay the purchase price within 30 days from delivery, or be charged interest of 18% per annum, and in case of suit to collect the same, to pay attorney's fees equal to 25% of the claim. 4 EHDCAI MMC made partial payments in the amount of P464,636. But despite repeated demands, it failed to give the remaining balance of P1,883,244, which was covered by nine invoices. 5 On September 3, 2001, Tan filed a collection suit against MMC at the Manila RTC. 6 After Tan completed presenting evidence, MMC filed a Demurrer to Evidence. 7 On December 18, 2003, the RTC issued an Order, denying the demurrer and directing MMC to present evidence. 8 MMC offered as sole witness Rainier Ibarrola, its accountant from year 2000 to 2002. Ibarrola confirmed that it was standard office procedure for a supplier to present the original sales invoice and purchase order when claiming to be paid. He testified that the absence of stamp marks on the invoices and purchase orders negated receipt of said documents by MMC's representatives. 9 On rebuttal, Tan presented Wally de los Santos, his sales representative in charge of MMC's account. De los Santos testified that he delivered the originals of the invoices and purchase orders to MMC's accounting department. As proof, he showed three customer's acknowledgment receipts bearing the notation: I/We signed below to signify my/our receipt of your statement of account with you for the period and the amount stated below, together with the corresponding original copies of the invoices, purchase order and requisition slip attached for purpose of verification, bearing acknowledgment of my/our receipt of goods. 10 On October 27, 2004, the RTC ruled for Tan. Its ruling stated as follows: WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff, and against the defendant, ordering the defendant to pay the principal amount of ONE MILLION EIGHT HUNDRED EIGHTY-THREE THOUSAND TWO HUNDRED FORTY-FOUR PESOS (P1,883,244.00), with interest thereon at the rate of eighteen [percent] (18%) per annum starting after thirty (30) days from each date of delivery of the merchandise sold until finality hereof, and thereafter, at the rate of twelve percent (12%) per annum, and the further sum equal to [twenty five percent] (25%) of the principal amount as liquidated damages. cAaETS SO ORDERED. 11 On November 30, 2004, MMC moved for reconsideration, but its motion was denied by the RTC in an Order dated January 5, 2005. On appeal, the Court of Appeals affirmed the RTC's decision. The decretal portion of the Court of Appeals Decision dated December 20, 2005 reads: WHEREFORE, premises considered, the appeal is DENIED. The Decision of the RTC dated October 27, 2004 is hereby AFFIRMED. SO ORDERED. 12 Hence, this petition, which raises as sole issue:

WHETHER OR NOT PETITIONER'S OBLIGATION TO PAY HAD ALREADY LEGALLY ACCRUED CONSIDERING THAT RESPONDENT HAS NOT FULLY COMPLIED WITH ALL THE PREREQUISITES FOR PAYMENT IMPOSED UNDER PETITIONER'S PURCHASE ORDERS, THERE BEING NO PROOF THAT RESPONDENT HAD ACTUALLY DONE SO. 13 Simply stated, we are now called upon to address the question of whether MMC should pay for the electrical materials despite its allegation that Tan failed to comply with certain requisites for payment. TDCAHE Petitioner contends that respondent's claim for payment was premature inasmuch as the original invoices and purchase orders were not sent to its accounting department. Consequently, Tan's claims were not verified and processed. MMC believes that mere delivery of the goods did not automatically give rise to its obligation to pay. It relies on Article 1545 of the Civil Code to justify its refusal to pay: ART. 1545.Where the obligation of either party to a contract of sale is subject to any condition which is not performed, such party may refuse to proceed with the contract or he may waive performance of the condition . . . . AcaEDC Petitioner also assails the probative value of the documentary evidence presented during trial. MMC claims that the unauthenticated photocopies of invoices and purchase orders did not satisfy the Best Evidence Rule, 14 which requires the production of the original writing in court. It adds that by Tan's failure to yield the original documents, he was presumed to have suppressed evidence under Section 3 (e), 15 Rule 131 of the Rules of Court. In its Memorandum dated February 20, 2007, 16 petitioner refutes any liability altogether, denying that it consented to the sale. MMC maintains that the unmarked documents indicated a mere offer to sell, which it did not act upon. MMC also charges Tan with laches for filing his claim nearly four years after the transaction. EScIAa In his Memorandum dated January 30, 2007, 17 respondent Tan counters that the petition presents a factual issue which has already been settled by the Court of Appeals. He stresses that findings of fact by the appellate court are conclusive on the Supreme Court and only questions of law may be entertained by it. After serious consideration, we are in agreement that the petition lacks merit. Petitioner poses a question of fact which is beyond this Court's power to review. This Court's jurisdiction is generally limited to reviewing errors of law that may have been committed by the Court of Appeals. We reiterate the oft-repeated and fully established rule that findings of fact of the Court of Appeals, especially when they are in agreement with those of the trial court, are accorded not only respect but even finality, and are binding on this Court. Barring a showing that the findings complained of were devoid of support, they must stand. For this Court is not expected or required to examine or refute anew the oral and documentary evidence submitted by the parties. The trial court, having heard the witnesses and observed their demeanor and manner of testifying, is admittedly in a better position to assess their credibility. 18 We cannot weigh again the merits of their testimonies. TAIDHa Having thoroughly reviewed the records of this case, we find no persuasive much less compelling reason to overturn the findings and conclusions of the trial court and appellate court. We hereby sustain their findings and conclusions. Worth stressing, Article 1475 of the Civil Code provides the manner by which a contract of sale is perfected: ART. 1475.The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts. TAESDH In this case, the purchase orders constituted accepted offers when Tan supplied the electrical materials to MMC. 19 Hence, petitioner cannot evade its obligation to pay by claiming lack of consent to the perfected contracts of sale. The invoices furnished the details of the transactions. As regards respondent's failure to present the original documents, suffice it to say that the best evidence rule applies only if the contents of the writing are directly in issue. Where the existence of the writing or its general purport is all that is in issue, secondary evidence may be introduced in proof. 20 MMC did not deny the contents of the invoices and purchase orders. Its lone contention was that Tan did not submit the original copies to facilitate payment. But we are in agreement that photocopies of the documents were admissible in evidence to prove the contract of sale between the parties. Neither is there merit to petitioner's contention that respondent was guilty of delay in filing the collection case. A careful examination of the records shows that Tan brought suit against MMC less than a year after the latter stopped making partial payments. Tan is, therefore, not guilty of laches. Laches is the neglect to assert a right or claim which, taken together with lapse of time and other circumstances causing prejudice to adverse party, operates as bar in a court of equity. 21 Here, Tan had no reason to go to court while MMC was paying its obligation, even if partially, under the contracts of sale. WHEREFORE, the petition is DENIED for lack of merit. The Decision dated December 20, 2005 and Resolution dated February 24, 2006 of the Court of Appeals in CA-G.R. CV No. 84385 are AFFIRMED. ISO ORDERED.

[G.R. No. 156539. September 5, 2007.] DOMINGO A. DIZON, petitioner, vs. ELPIDIO R. DIZON, respondent. DECISION SANDOVAL-GUTIERREZ, J p: Before us is the instant Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, assailing the Decision 1 dated October 18, 2002 and Resolution 2 dated January 7, 2003 rendered by the Court of Appeals in CA-G.R. SP No. 45492, entitled "Elpidio R. Dizon, petitioner, v. The Honorable Presiding Judge, Regional Trial Court, Manila, Branch 41, Deputy Sheriff Cesar Q. Cabildo and Domingo A. Dizon, respondents." Domingo A. Dizon, petitioner, purchased from his nephew, Elpidio R. Dizon (herein respondent), a house and lot located on Limay St., Tondo, Manila. However, respondent failed to deliver the house and lot to petitioner. It appears that the coowner of the lot, respondent's brother Ricardo, did not give said respondent a written authority to sell his 1/2 share. Consequently, petitioner filed with the Regional Trial Court (RTC), Branch 41, Manila a complaint for specific performance and sum of money with damages against respondent, docketed as Civil Case No. 90-51838. cSTDIC On March 20, 1992, the trial court rendered a Decision rescinding the contract of sale between the parties, thus: PREMISES CONSIDERED, judgment is hereby rendered: HTacDS 1)declaring the contract of sale entered into by and between plaintiff and defendant over that undivided portion of Lot 27-B-3 in the name of Ricardo Dizon and the building constructed thereon rescinded; 2)ordering defendant to pay plaintiff as follows: ADTEaI a)a sum of P207,000.00 with interest thereon at the legal rate from January 29, 1990 until the same is fully paid; b)the sum of P350,000.00 with interest thereon at the rate of 3% a month from January 29, 1990 until the same is fully paid; and aDSAEI c)the sum of P50,000.00 as and by way of attorney's fees and expenses of litigation. 3 On January 13, 1997, the trial court issued a writ of execution implemented by sheriff Cesar Cabildo. He scheduled the auction sale of respondent's properties for the satisfaction of the above judgment on April 3, 1997 at 10:00 a.m. ESCacI Petitioner's attorney-in-fact as well as respondent and his counsel participated in the sale. Petitioner emerged as the highest bidder, having offered P180,000.00 for the two (2) parcels of land owned by respondent which were attached by the sheriff. The proceedings at the auction sale were duly recorded in the Minutes of Sheriff's Sale 4 signed by the parties and their counsels. CDTHSI In the afternoon of the same date, the sheriff went to the house of respondent and showed him the "Supplemental Minutes on Sheriff's Sale" specifying that petitioner's counsel arrived at 10:45 a.m. (after the auction sale at 10:25 a.m.) and offered a new bid of P1,690,074.41 covering the same properties in lieu of the earlier bid of P180,000.00. Respondent refused to sign the supplemental sale contending that it will be difficult for him to redeem the property. Besides, the auction sale had already been perfected and, therefore, the subsequent sale is "a new or second sale." Consequently, he filed a motion to quash the "Supplemental Minutes on Sheriff's Sale" alleging inter alia that the supplemental sale is void because it was prepared at 10:25 a.m. after the auction sale at 10:00 a.m. ESHAcI In an Order dated May 5, 1997, the trial court denied respondent's motion to quash "it appearing that the subject supplemental sale redounds to the benefit of movant-defendant as it obviates the execution and/or garnishment of any other property, income, or deposits of movant-defendant." 5 Respondent filed a motion for reconsideration, but it was also denied by the trial court in its Order dated August 12, 1997. He then filed a petition for certiorari and prohibition with the Court of Appeals alleging that the RTC judge committed grave abuse of discretion in upholding the validity of the "Supplemental Minutes on Sheriff's Sale." In its assailed Decision dated October 18, 2002, the appellate court granted the petition and set aside the questioned Orders of the RTC dated May 5, 1997 and August 12, 1997, thus: TEAICc The record shows that the auction sale begun on time, that is 10:00 AM of April 3, 1997, wherein both parties as well as their respective counselsappeared and participated in the bid as reflected in the Minutes of Sheriff's Sale. As certified by the respondent sheriff himself, the said sale was finished at exactly 10:25 o'clock in the morning of said date. The amended bid therefore of private respondent's counsel made at 10:45 AM of even date could not be considered as valid as the same was made after the perfection of the auction sale.

xxx xxx xxx Consequently, the respondent judge is considered to have gravely abused his discretion in upholding the validity of the Supplemental Minutes on Sheriff's Sale. 6 TaDAIS Petitioner filed a motion for reconsideration but it was denied by the appellate court in its Resolution dated January 7, 2003. Hence, the instant petition. HSTCcD Petitioner contends that as the highest bidder, he has the option to amend his bid in order to conform to the amounts awarded in his favor by the trial court. Respondent maintains that since the auction sale had been perfected, its consideration can no longer be modified; and that it will be difficult for him to redeem his properties valued at P1,690,074.41 instead of only P180,000.00. IDaEHS Article 1476, paragraph 2 of the Civil Code provides: Article 1476.In the case of a sale by auction: aIcCTA xxx xxx xxx (2)A sale by auction is perfected when the auctioneer announces its perfection by the fall of the hammer, or in other customary manner. Until such announcement is made, any bidder may retract his bid; and the auctioneer may withdraw the goods from the sale unless the auction has been announced to be without reserve. During the public auction conducted on April 3, 1997 which ended at 10:25 a.m., the sheriff declared petitioner the highest bidder. Considering that the auction sale had already been perfected, a supplemental sale with higher consideration at the instance of only one party (herein petitioner) could no longer be validly executed.DTaAHS We therefore rule that in denying respondent's motion to quash the "Supplemental Minutes on Sheriff's Sale," and declaring the supplemental sale valid, the trial court gravely abused its discretion. WHEREFORE, we DENY the petition and AFFIRM the challenged Decision and Resolution of the Court of Appeals in CAG.R. SP No. 45492. Costs against petitioner.CSHDTE SO ORDERED. Puno, C.J., Corona, Azcuna and Garcia, JJ., concur.

G.R. No. L-23630

August 25, 1925

TIBURCIO LEOQUINCO, plaintiff-appellant, vs. THE POSTAL SAVINGS BANK, ET AL., defendants-appellees. JOHNSON, J.: This action was commenced in the Court of First Instance of the City of Manila on the 15th day of May, 1924, against the Postal Savings Bank (El Banco Postal de Ahorros) and its board of directors composed of Cipriano Unson, Miguel Unson, Antonio Villa-Real, Jose Topacio, Ben F. Wright, and Jose Alba. Plaintiff alleged that he was the highest bidder at a public auction held by the defendants on March 31, 1924, for the sale of a piece or parcel of land belonging to the Bank, situated at Navotas, Province of Rizal, having offered P27,000 for said property; that in Resolution No. 31 of the board of directors of the Bank, authorizing the sale of said property at public auction, as well as in the public notice announcing said sale, the board of directors have expressly reserved to themselves the right to reject any and all bids; that as such highest bidder at said auction, he wrote a letter to the defendants on May 9, 1924, advising that he was ready to tender payment for the land as soon as the deed of sale of the same in his favor is executed and delivered by the defendants; that the defendants refused to execute the deed in spite of requests made therefor by him; that said refusal caused him damages in the sum of P25,000 more or less. Plaintiff prayed that said defendants be ordered to execute and deliver the deed of sale of said land in his favor, and to pay him damages amounting to P25,000, and the costs. The defendants answered, admitting the allegations of the complaint, except the conclusions of law therein set forth and the damages alleged to have been suffered by plaintiff. As a special defense, the defendants alleged that in Resolution No. 31 of the board of directors of the Postal Savings Bank, authorizing the sale at public auction of the property in question, as well as in the notice announcing said sale, the defendants expressly reserved to themselves "the right to reject any and all bids," and that they never accepted the bid or offer of the plaintiff. The defendants prayed for relief from the complaint, with costs against the plaintiff. Upon the issue thus presented the cause was brought on for trial, at the conclusion of which and after a careful consideration of the evidence adduced pro and con, the Honorable C.A. Imperial, judge, rendered a judgment holding that the plaintiff had not established his case, and dismissed the complaint without costs. From said judgment the plaintiff appealed, and now raises several questions of both fact and law. There is no dispute as to the facts of this case which are essential to the decision thereof. They are clearly set forth in the pleadings and admitted by both parties. It only remains to be added that the defendants not only did not accept the plaintiff's bid, but on May 10, 1924, they wrote him a letter, advising him that his bid was rejected by the board of directors at its meeting of May 6, 1924. There is absolutely no merit in this appeal. It may be summarily disposed of, without need for a discussion of the errors assigned by appellant's counsel. Appellant set forth and admitted in his pleadings that in the resolution adopted by the board of directors authorizing the sale at public auction of the land, as well as in the notice announcing the auction, the appellees had expressly reserved to themselves the right to reject any and all bids. By taking part in the auction and offering his bid, the appellant voluntarily submitted to the terms and conditions of the auction sale, announced in the notice, and clearly acknowledged the right so reserved to the appellees. The appellees, making use of that right, rejected his offer. Clearly, the appellant has no ground of action to compel them to execute a deed of sale of the land in his favor, nor to compel them to accept his bid or offer. "The owner of property offered for sale at auction has the right to prescribe the manner, conditions and terms of sale, and where these are reasonable and are made known to the buyer, they are binding upon him, and he cannot acquire a title in opposition to them, and against the consent of the owner. ..." (Farr vs. John, 23 Iowa, 286; Batemann, on Auctions, p. 2; 6 Corpus Juris, p. 827.) The owner of property offered for sale either at public or private auction has the right to prescribe the manner, conditions and terms of such sale. He may provide that all of the purchase price shall be paid at the time of the sale or any portion thereof, or that time will be given for the payment. (Blossom vs. Milwaukee and Chicago Railroad Co., 3 Wallace [U.S.], 196.) The conditions of a public sale announced by an auctioneer or the owner of the property at the time and place of the sale, are binding upon a purchaser, whether he knew them or not. (Kennell vs. Boyer, 144 Iowa, 303; Vanleervs. Fain, 6 Humphrey [Tenn.], 104.) Therefore, the sentence appealed from should be and is hereby affirmed, with costs against the appellant. So ordered.

G.R. No. L-34727

March 9, 1932

PACIFIC COMMERCIAL COMPANY, plaintiff-appellee, vs. ERMITA MARKET & COLD STORES, INC., defendant-appellant. Jose Perez Cardenas and Guevara, Francisco & Recto for appellant. Jose Yulo for appellee. OSTRAND, J.: This is an appeal from a judgment of the Court of First Instance of Manila, ordering defendant to pay plaintiff the sum of P1,740 with interest thereon at the rate of 10 per cent per annum from January 1, 1928, to date of payment; likewise, to pay plaintiff P174 for attorneys' fees and costs of collection; and to pay P250.67 with legal interest from date of filing of complaint to date of payment for work, labor, and services rendered and for materials used in the installation of a refrigerating machine for the defendant, and pay the costs. It appears that on September 14, 1927, the Pacific Commercial Co., the plaintiff herein, sold to the Ermita Market & Cold Stores, Inc., the defendant herein, an automatic refrigerating machine of the following description: Una maquina refrigeradora automatica York Style Y-26 capacidad Dos toneladas de refrigeracion consistente en: Compresor de amoniaco York, de Doble Cilinfro, Condensador, Recibidor, Separador de aciete, Juego de manometros, Valvulas, Valvula reguladora de agua, Control automatico, Aparato de seguridad, Motor Electrico GE de cinco caballos de fuerza 220 volts Corriente alterna, de Una Fase, montadas todas en una basee de hierro, asi como tambien incluye una bomba centrifuga para circulacion de argua y correas. The parties signed the usual printed sales-contract form of the plaintiff company, the purchase price being P2,550, payable by installments on dates and in amounts stated in the sales contract. The delivery of the machines was made on December 7, 1927, and by mutual agreement between the vendor and the vendee, the former installed the machine which was completed on December 26, 1927. The installation, including materials used, amounted to P250.67, to be paid by the Ermita Market & Cold Stores, Inc., to the Pacific Commercial Company. Complying with the terms of the sales contract, the defendant paid the plaintiff the amount of P810 against the purchase price of the machine, leaving a balance of P1,740. A few days after installation of the automatic refrigerating machine, the Ermita Market & Cold Stores advised the Pacific Commercial Company that the machine was not serving the purpose for which it was sold to defendant and that it was lacking ammonia receiver and oil separator. The plaintiff company in turn advised the defendant that the machine installed was complete, having all the accessories as stated in the contract. However, upon the insistence of the defendant, the plaintiff, just to please the president of the defendant company, delivered and installed on the machine an additional oil separator without charge. The machine did not give the result expected from it, and the defendant refused to pay the installation of the machine. The Pacific Commercial Company thereupon brought this action. In its answer, the defendant generally and specially denied the allegations contained in plaintiff's complaint, and by way of special defense alleged substantially that the machine delivered to the defendant by the plaintiff was not the machine described in the contract of sale inasmuch as the said machine was not automatic and as it was lacking ammonia receiver, oil separator, and the implements necessary to make the said machine automatic. By way of cross-complaint, the defendant further alleges that it bought the machine in question from the plaintiff for the purpose of running the business of cold storage; that the temperature in the refrigerating rooms did not reach, and had never reached, the necessary temperature for the preservation of meat, fish, vegetables, and fruits; that owing to the negligence of the plaintiff in not repairing or putting in good working condition the said refrigerating machine, the defendant had been forced to close its establishment and for which reason the defendant claimed damages against the plaintiff as follows: P5,000 for expenses in advertising and propaganda; P15,000 as the value of fish, pork, meat, vegetables and fruits alleged to have deteriorated in the refrigerating rooms; P30,000 for the loss of its clientele and decrease in its sales; P20,000 for the loss of the whole business; and "P3,600 for rentals of the premises, salaries of the manager, guard and warehouseman, from May 10, 1928, up to October of the same year, at the rate of P600 a month, because of the refusal of the plaintiff to withdraw the refrigerating machine in question from the premises where it was installed. In other words, the defendant asks for damages in the total sum of P73,600. Replying to the defendant's cross-complaint, the plaintiff denied generally and specifically each and every and every allegation in the said cross-complaint and by way of special defense, alleged that whatever defects or deficiency there might have been in the temperature in the refrigerating rooms of defendant's establishment, or in the functioning of the machine, these were due to the defects and imperfections of the coils which were supplied and installed by the defendant itself, as well as to the incompetency and inefficiency of the defendant's personnel to operate the machine.

After trial, the court below rendered the judgment above mentioned, and, as hereinbefore stated, the defendant appealed to this court. After a careful examination of the record, we have not the least doubt that the plaintiff delivered the machine as described in the sales contract, and the fact that the defendant could not use it satisfactorily in the three cold stores division cannot be attributed to plaintiff's fault; as far as we can see, the machine was strictly in accordance with the written contract between the parties, and the defendant can hardly honestly say that there was any deception by the plaintiff. (See article 327, Code of Commerce; Palanca vs. Fred Wilson & Co., 37 Phil., 506.) But it is clear that the defendant company did not fully understand the use of the motor. It complains that the machine would not properly refrigerate the refrigerating rooms, but it is evident that the machine could not operate automatically when the defendant had three refrigerating rooms which it expected to maintain at three different temperatures. The defendant also complained that the machine was not equipped with a thermostat and that the lack of its obstructed the work of the refrigerating. In the first place, the thermostat was not include in the sales contract and in the second place it would not have been of any service to defendant because it could not possibly operate automatically at three different temperatures with the defendant's insufficient equipment. The defendant's complaint that the machine did not contain an oil separator is not true; the oil separator is combined with the receiver and condenser in a single combined piece in the machine. The evidence in this case is clear to us, and we cannot find any errors committed by the court below. It may be that the machine could have given satisfaction to the defendant if the coils had been installed properly and the machine had been operated by competent persons. Any deficiency in this regard could not be the plaintiff's fault; the coils were supplied and installed by someone other than the plaintiff, and the machine was being operated by the defendant itself. The judgment appealed from is therefore affirmed in its entirely, with costs against appellant. So ordered. Avancea, C.J., Johnson, Street, Malcolm, Villamor, Romualdez, Villa-Real, and Imperial, JJ., concur.

[G.R. No. 42416. April 9, 1935.] MACONDRAY & CO., INC., plaintiff-appellant, vs. PRAXEDES R. DE SANTOS, defendant-appellee. SYLLABUS 1.CONTRACT; SALE OF PERSONAL PROPERTY PAYABLE IN INSTALLMENT; ARTICLE 1454-A OF THE CIVIL CODE. The defendant as the only ground of her demurrer, alleges that under the provisions of Act No. 4122, article 1454-A of the Civil Code, there is no cause of action against her. Granting that there was a contract between the parties for the sale of personal property payable in installments, which does not clearly appear in the record before this court, the complaint does not allege nor does it appear in the record that there was a failure to pay two or more installments. In order to apply the provisions of article 1454-A of the Civil Code it must appear that there was a contract for the sale of personal payable in installments and that there has been a failure to pay two or more installments. DECISION GODDARD, J p: In this case the defendant demurred to the complaint, the trial court sustained the demurrer and gave the plaintiff five days within which to amend, if it so desired. Within the time designated the plaintiff excepted to the order sustaining the demurrer and gave notice that it elected to stand upon its complaint and thereupon the lower court, upon motion of the defendant, dismissed the complaint with costs against the plaintiff. In due time the plaintiff excepted to the order dismissing the complaint and moved for a new trial. Upon the denial of this motion the plaintiff excepted and upon appeal to this court alleges that the trial court erred: "I.In sustaining the demurrer of the defendant to the plaintiff's complaint; "II.In dismissing the case; "III.In not rendering judgment in accordance with the prayer of the plaintiff's complaint; "IV.Conceding, but not admitting, that the case falls under the provisions of Act No. 4122, the lower court erred in not finding that the said law is unconstitutional in that it confiscates property without due process of law and denies the equal protection of the laws to the plaintiff. "V.In not granting the plaintiff's motion for new trial." The complaint alleges, for a first cause of action, that on January 11, 1934, the defendant executed and delivered to the plaintiff a promissory note for the sum of P1,000, with interest thereon at the rate of 12 per cent per annum, payable in installments as set forth in said promissory note and in case of default in the payment of the principal or interest an additional sum equal to 20 per cent of the total amount due was to be paid as attorney's fees; that to guarantee the payment of this note the defendant executed a duly registered chattel mortgage on a Willis 77, Sedan, automobile; that one of the conditions of said mortgage is that if the mortgaged property be lost, destroyed or damaged, for any cause whatsoever, the mortgagee would immediately have the right to foreclose and declare the whole amount of the principal and interest, secured by said mortgage, due and payable; that on January 21, 1934, the mortgaged automobile, while in possession and control of the defendant, met with an accident resulting in its total wreck and loss; that by reason of the failure of the defendant to replace or to restore the automobile to its former condition or to pay the value thereof plaintiff foreclosed its mortgage and what remained of the wrecked automobile was sold at public auction for the sum of P50; that after applying this amount to the account of defendant there was an unpaid balance of P980.39 plus interest at 12 per cent per annum from March 24, 1934, until paid, and 20 per cent of the amount due as attorney's fees, which defendant refused to pay in spite of demand therefor. As a second and alternative cause of action, the plaintiff reproduces the allegations contained in the first cause of action and alleges that another condition of the abovementioned chattel mortgage is that the defendant agreed to use extraordinary care and diligence in the preservation and maintenance of the mortgaged property and further engaged to pay any and all damages for deterioration, reasonable wear and tear excepted, resulting directly or indirectly from carelessness or neglect of any kind on the part of the mortgagor and alleges further that through the carelessness, neglect or reckless imprudence of the defendant and or her agents while the automobile was in her possession or under her control the same was totally wrecked by reason of which the plaintiff was damaged in the sums mentioned in the first cause of action and therefore the plaintiff prays that defendant be sentenced to pay the plaintiff the above-mentioned sum of P980.39 with interest at the rate of 12 per cent per annum from March 24, 1934, until paid, and 20 per cent of said sum as attorney's fees and the costs of this case. The defendant, as the only ground of her demurrer, alleges that under the provisions of Act No. 4122, article 1454-A of the Civil Code, there is no cause of action against her. That article of the Civil Code reads as follows:. "ART. 1454-A.In a contract for the sale of personal property payable in installments, failure to pay two or more installments shall confer upon the vendor the right to cancel the sale or foreclose the

mortgage if one has been given on the property, without reimbursement to the purchaser of the installments already paid, if there be an agreement to this effect. "However, if the vendor has chosen to foreclose the mortgage he shall have no further action against the purchaser for the recovery of any unpaid balance owing by the same, and any agreement to the contrary shall be null and void." Granting that there was a contract between the parties for the sale of personal property payable in installments, which does not clearly appear in the record before this court, the complaint does not allege nor does it appear in the record that there was a failure to pay two or more installments. On the contrary the promissory note, copied in the complaint, was executed January 11, 1934, and, according to the complaint, on or about January 21, 1934, the automobile, while in the possession of the defendant, was wrecked and by reason of the failure of the defendant to replace said automobile or to pay the value thereof the plaintiff foreclosed the mortgage on what remained of the wrecked automobile and brought this suit to recover the balance due on the promissory note executed in its favor. In order to apply the provisions of article 1454-A of the Civil Code it must appear that there was a contract for the sale of personal property payable in installments and that there has been a failure to pay two or more installments. In view of the above, the trial court erred in sustaining the demurrer. The appellant's first, second, third and fifth assignments of error are sustained. Wherefore it is not necessary to pass upon the fourth assignment of error. The order of the trial court dismissing the complaint is hereby set aside and this case will be remanded to the trial court for further proceedings in accordance with law, with the costs of this appeal against the defendant-appellee. Malcolm, Abad Santos, Hull, Vickers, Butte and Diaz, JJ., concur.

[G.R. No. 46306. October 27, 1939.] LEVY HERMANOS, INC., plaintiff-appellant, vs. LAZARO BLAS GERVACIO, defendant-appellee.. SYLLABUS 1.INSTALLMENT SALES; ARTICLE 1454-A OF THE CIVIL CODE (ACT No. 4122). In Macondray & Co. vs. De Santos (33 Off. Gaz., 2170), we held that "in order to apply the provisions of article 1454-A of the Civil Code it must appear that there was a contract for the sale of personal property payable in installments and that there has been a failure to pay two or more installments." The contract, in the instant case, while a sale of personal property, is not, however, one on installments, but on straight term, in which the balance, after payment of the initial sum, should be paid in its totality at the time specified in the promissory note. The transaction is not, therefore, the one contemplated in Act No. 4122 and accordingly the mortgagee is not bound by the prohibition therein contained as to its right to the recovery of the unpaid balance. 2.ID.; ID. Undoubtedly, the law is aimed at those sales where the price is payable in several installments, for, generally, it is in these cases that partial payments consist in relatively small amounts, constituting thus a great temptation for improvident purchasers to buy beyond their means. There is no such temptation where the price is to be paid in cash, or, as in the instant case, party in cash and partly in one term, for, in the latter case, the partial payments are not so small as to place purchasers off their guard and delude them to a miscalculation of their ability to pay. Theoretically, perhaps, there is no difference between paying the price in two installments and paying the same partly in cash and partly in one installment, in so far as the size of each partial payment is concerned; but in actual practice the difference exists, for, according to the regular course of business, in contracts providing for payment of the price in two installments, there is generally a provision for initial payment. But all these considerations are immaterial, the language of the law being so clear as to require no construction at all.

DECISION MORAN, J p: On February 24, 1938, plaintiff filed a complaint in the Court of First Instance of Manila, which substantially recites the following facts: On March 15, 1937, plaintiff Levy Hermanos, Inc., sold to defendant Lazaro Blas Gervacio, a Packard car. Defendant, after making the initial payment, executed a promissory note for the balance of P2,400, payable on or before June 15, 1937, with interest at 12 per cent per annum, and to secure the payment of the note, he mortgaged the car to the plaintiff. Defendant failed to pay the note at its maturity; wherefore, plaintiff foreclosed the mortgage and the car was sold at public auction, at which plaintiff was the highest bidder for P800. The present action is for the collection of the balance of P1,600 and interest. Defendant admitted the allegations of the complaint, and with this admission, the parties submitted the case for decision. The lower court applied the provisions of Act No. 4122, inserted as articles 1454-A of the Civil Code, and rendered judgment in favor of the defendant. Plaintiff appealed. Article 1454-A of the Civil Code reads as follows: "In a contract for the sale of personal property payable in installments, failure to pay two or more installments shall confer upon the vendor the right to cancel the sale or foreclose the mortgage if one has been given on the property, without reimbursement to the purchaser of the installments already paid, if there be an agreement to this effect. "However, if the vendor has chosen to foreclose the mortgage he shall have no further action against the purchaser for the recovery of any unpaid balance owing by the same, and any agreement to the contrary shall be null and void."

In Macondray & Co. vs. De Santos (33 Off. Gaz., 2170), we held that "in order to apply the provisions of article 1454-A of the Civil Code it must appear that there was a contract for the sale of personal property payable in installments and that there has been a failure to pay two or more installments." The contract, in the instant case, while a sale of personal property, is not, however, one on installments, but on straight term, in which the balance, after payment of the initial sum, should be paid in its totality at the time specified in the promissory note. The transaction is not, therefore, the one contemplated in Act No. 4122 and accordingly the mortgagee is not bound by the prohibition therein contained as to its right to the recovery of the unpaid balance. Undoubtedly, the law is aimed at those sales where the price is payable in several installments, for, generally, it is in these cases that partial payments consist in relatively small amounts, constituting thus a great temptation for improvident purchasers to buy beyond their means. There is no such temptation where the price is to be paid in cash, or, as in the instant case, partly in cash and partly in one term, for, in the latter case, the partial payments are not so small as to place purchasers off their guard and delude them to a miscalculation of their ability to pay. Theoretically, perhaps, there is no difference between paying the price in two installments and paying the same partly in cash and partly in one installment, in so far as the size of each partial payment is concerned; but in actual practice the difference exists, for, according to the regular course of business, in contracts providing for payment of the price in two installments, there is generally a provision for initial payment. But all these considerations are immaterial, the language of the law being so clear as to require no construction at all. The suggestion that the cash payment made in this case should be considered as an installment in order to bring the contract sued upon under the operation of the law, is completely untenable. A cash payment cannot be considered as a payment by installment, and even if it can be so considered, still the law does not apply, for it requires non-payment of two or more installments in order that its provisions may be invoked. Here, only one installment was unpaid. Judgment is reversed, and defendant-appellee is hereby sentenced to pay plaintiff-appellant the sum of P1,600 interest at the rate of 12 per cent per annum from June 15, 1937, and the sum of P52.08 with interest at the rate of 6 per cent from the date of the filing of the complaint, with costs in both instances against the appellee. Avancea, C.J., Villa-Real, Imperial, Diaz and Concepcion, JJ., concur.

[G.R. No. 94828. September 18, 1992.] SPOUSES ROMULO DE LA CRUZ and DELIA DE LA CRUZ, and DANIEL FAJARDO, petitioners, vs. ASIAN CONSUMER AND INDUSTRIAL FINANCE CORPORATION and the HONORABLE COURT OF APPEALS, respondents. SYLLABUS 1.CIVIL LAW; SPECIAL CONTRACTS; SALE; REMEDIES OF UNPAID SELLER OF PERSONAL PROPERTY PAYABLE IN INSTALLMENT; RULE. The instant case is covered by the so-called "Recto Law", now Art. 1484 of the New Civil Code, which provides: "In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies: (1) Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should the vendee's failure to pay cover two or more installments; (3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void." In this jurisdiction, the three (3) remedies provided for in the "Recto Law" are alternative and not cumulative; the exercise of one would preclude the other remedies. Consequently, should the vendee-mortgagor default in the payment of two or more of the agreed installments, the vendor-mortgagee has the option to avail of any of these three (3) remedies: either to exact fulfillment of the obligation, to cancel the sale, or to foreclose the mortgage on the purchased chattel, if one was constituted. (Pacific Commercial Co. vs. De la Rama, 72 Phil. 380 (1941); Manila Motor, Inc. vs. Fernandez, 99 Phil. 782 (1956); Radiowealth vs. Lavin, L-18563, April 27, 1963, 7 SCRA 804). 2.ID.; ID.; ID.; ID.; EFFECT OF FAILURE OF VENDOR TO FORECLOSE THE MORTGAGED PROPERTY. It is thus clear that while ASIAN eventually succeeded in taking possession of the mortgaged vehicle, it did not pursue the foreclosure of the mortgage as shown by the fact that no auction sale of the vehicle was ever conducted. As we ruled in Filinvest Credit Corp. v. Phil. Acetylene Co., Inc. (G.R. No. 50449, January 1982, 111 SCRA 421) "Under the law, the delivery of possession of the mortgaged property to the mortgagee, the herein appellee, can only operate to extinguish appellant's liability if the appellee had actually caused the foreclosure sale of the mortgaged property when it recovered possession thereof (Northern Motors, Inc. v. Sapinoso, 33 SCRA 356 [1970]; Universal Motors Corp. v. Dy Hian Tat, 28 SCRA 161 [1969]; Manila Motors Co., Inc. v. Fernandez, 99 Phil. 782 [1956]). It is worth noting that it is the fact of foreclosure and actual sale of the mortgaged chattel that bar recovery by the vendor of any balance of the purchaser's outstanding obligation not satisfied by the sale (New Civil Code, par. 3, Article 1484). As held by this Court, if the vendor desisted, on his own initiative, from consummating the auction sale, such desistance was a timely disavowal of the remedy of foreclosure, and the vendor can still sue for specific performance" (Industrial Finance Corp. v. Tobias, 78 SCRA 28 [1977]; Radiowealth, Inc. v. Lavin, L-18563, April 27, 1963, 7 SCRA 804; Pacific Commercial Co. v. dela Rama, 72 Phil. 380 [1941]). Consequently, in the case before Us, there being no actual foreclosure of the mortgaged property, ASIAN is correct in resorting to an ordinary action for collection of the unpaid balance of the purchase price. 3.ID.; ID.; ID.; ID.; ID.; POSSESSION OF MORTGAGED PROPERTY SHOULD BE RETURNED TO MORTGAGEEVENDEE UPON PAYMENT OF UNPAID BALANCE; CASE AT BAR. We note however that the trial court, as well as the Court of Appeals failed to consider that the vehicle was already in the possession of ASIAN when it directed petitioners herein to pay P184,466.67 representing the balance of the purchase price of the mortgaged property. Law and equity will not permit ASIAN to have its cake and eat it too, so to speak. By allowing ASIAN to retain possession of the vehicle and then directing petitioners to pay the unpaid balance would certainly result in unjust enrichment of the former. Accordingly, the ownership and possession of the vehicle should be returned to petitioners by ASIAN in the condition that it was when delivered to it, and if this be no longer feasible, to deduct from the adjudged liability of petitioners the amount of P60,000.00, its corresponding appraised value. DECISION

BELLOSILLO, J p: The pivotal point before Us is whether a chattel mortgagee, after opting to foreclose the mortgage but failing afterwards to sell the property at public auction, may still sue to recover the unpaid balance of the purchase price. On 22 September 1982, the spouses Romulo de la Cruz and Delia de la Cruz, and one Daniel Fajardo, petitioners herein, purchased on installment basis one (1) unit Hino truck from Benter Motor Sales Corporation (BENTER for brevity). To secure payment, they executed in favor of BENTER a chattel mortgage over the vehicle 1and a promissory note for P282,360.00 payable in thirty (30) monthly installments of P9,412.00. 2 On the same date, BENTER assigned its rights and interest over the vehicle in favor of private respondent Asian Consumer and Industrial Finance Corporation (ASIAN for brevity). 3 Although petitioners initially paid some installments they subsequently defaulted on more than two (2) installments. Thereafter, notwithstanding the demand letter of ASIAN, 4 petitioners failed to settle their obligation. On 26 September 1984, by virtue of a petition for extrajudicial foreclosure of chattel mortgage, the sheriff attempted to repossess the vehicle but was unsuccessful because of the refusal of the son of petitioner, Rolando de la Cruz to surrender the same. Hence, the return of the sheriff that the service was not satisfied. LLpr On 10 October 1984, petitioner Romulo de la Cruz brought the vehicle to the office of ASIAN and left it there where it was inventoried and inspected. 5 On 27 November 1984, ASIAN filed an ordinary action with the court a quo for collection of the balance of P196,152.99 of the purchase price, plus liquidated damages and attorney's fees. 6 After trial, the court below rendered judgment in favor of ASIAN. On appeal, the Court of Appeals affirmed the judgment and held that ". . . no extrajudicial foreclosure of chattel mortgage ever transpired in the case at bar. Undoubtedly, plaintiff had first chosen to extrajudically foreclose the mortgage, but this did not materialize through no fault of plaintiff, as defendant refused to surrender the Hino truck. The mere fact that the unit is now in possession of plaintiff and a Technical and Inspection Report was made in connection therewith is not conclusive of the extrajudicial foreclosure, for in this kind of foreclosure, possession of the chattel by the sheriff is necessary, aside from the sale at public auction." "Though the remedy of foreclosure was first chosen, this remedy however proved ineffectual due to no fault of plaintiff. Therefore, plaintiff may exercise other remedies such as exact fulfillment of the obligation and thereafter recover the deficiency. This is the essence of the rule of alternative remedies under Article 1484." LexLib Petitioners take exception. While they do not dispute that where the mortgagee elects the remedy of foreclosure which, according to them, includes the option to sell in a public or private sale, commences and pursues it, and in consideration of which he also performs everything that is incumbent upon him to do to implement the foreclosure they nevertheless insist that he should not later be allowed to change course midway in the process, abandon the foreclosure and shift to other remedies such as collection of the balance, especially after having recovered the mortgaged chattel from them and while retaining possession thereof. We do not agree with petitioners. It is not disputed that the instant case is covered by the so-called "Recto Law", now Art. 1484 of the New Civil Code, which provides: "In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies: (1) Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should the vendee's failure to pay cover two or more installments; (3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void." In this jurisdiction, the three (3) remedies provided for in the "Recto Law" are alternative and not cumulative; the exercise of one would preclude the other remedies. Consequently, should the vendee-mortgagor default in the payment of two or more of the agreed installments, the vendor-mortgagee has the option to avail of any of these three (3) remedies: either to exact fulfillment of the obligation, to cancel the sale, or to foreclose the mortgage on the purchased chattel, if one was constituted. 7 The records show that on 14 September 1984 ASIAN initiated a petition for extrajudicial foreclosure of the chattel mortgage. But the sheriff failed to recover the motor vehicle from petitioners due to the refusal of the son of petitioners Romulo and Delia de la Cruz to surrender it. It was not until 10 October 1984, or almost a month later that petitioners delivered the unit to ASIAN. The action to recover the balance of the purchase price was instituted on 27 November 1984. cdphil

It is thus clear that while ASIAN eventually succeeded in taking possession of the mortgaged vehicle, it did not pursue the foreclosure of the mortgage as shown by the fact that no auction sale of the vehicle was ever conducted. As we ruled in Filinvest Credit Corp. v. Phil. Acetylene Co., Inc. 8 "Under the law, the delivery of possession of the mortgaged property to the mortgagee, the herein appellee, can only operate to extinguish appellant's liability if the appellee had actually caused the foreclosure sale of the mortgaged property when it recovered possession thereof (Northern Motors, Inc. v. Sapinoso, 33 SCRA 356 [1970]; Universal Motors Corp. v. Dy Hian Tat, 28 SCRA 161 [1969]; Manila Motors Co., Inc. v. Fernandez, 99 Phil. 782 [1956]). It is worth noting that it is the fact of foreclosure and actual sale of the mortgaged chattel that bar recovery by the vendor of any balance of the purchaser's outstanding obligation not satisfied by the sale (New Civil Code, par. 3, Article 1484). As held by this Court, if the vendor desisted, on his own initiative, from consummating the auction sale, such desistance was a timely disavowal of the remedy of foreclosure, and the vendor can still sue for specific performance" (Industrial Finance Corp. v. Tobias, 78 SCRA 28 [1977]; Radiowealth, Inc. v. Lavin, L18563, April 27, 1963, 7 SCRA 804; Pacific Commercial Co. v. dela Rama, 72 Phil. 380 [1941]). Consequently, in the case before Us, there being no actual foreclosure of the mortgaged property, ASIAN is correct in resorting to an ordinary action for collection of the unpaid balance of the purchase price. We note however that the trial court, as well as the Court of Appeals failed to consider that the vehicle was already in the possession of ASIAN when it directed petitioners herein to pay P184,466.67 representing the balance of the purchase price of the mortgaged property. Law and equity will not permit ASIAN to have its cake and eat it too, so to speak. By allowing ASIAN to retain possession of the vehicle and then directing petitioners to pay the unpaid balance would certainly result in unjust enrichment of the former. Accordingly, the ownership and possession of the vehicle should be returned to petitioners by ASIAN in the condition that it was when delivered to it, and if this be no longer feasible, to deduct from the adjudged liability of petitioners the amount of P60,000.00, its corresponding appraised value. 9 WHEREFORE, the assailed decision is AFFIRMED, with the MODIFICATION that the subject vehicle be returned to petitioners or, at their option, they be allowed to deduct P60,000.00 from their adjudged liability. No costs. SO ORDERED. Grio-Aquino and Medialdea, JJ ., concur. Cruz, J ., is on leave.

[G.R. No. 158635. December 9, 2005.] MAGNA FINANCIAL SERVICES GROUP, INC., petitioner, vs. ELIAS COLARINA, respondent. DECISION CHICO-NAZARIO, J p: The undisputed facts of this case show that on 11 June 1997, Elias Colarina bought on installment from Magna Financial Services Group, Inc., one (1) unit of Suzuki Multicab, more particularly described as follows: MAKE- SUZUKI MULTICAB MODEL- ER HT ENGINE NO.- 834963 FRAME NO.- LTO-067886-RO7-C COLOR- WHITE 1 After making a down payment, Colarina executed a promissory note for the balance of P229,284.00 payable in thirty-six (36) equal monthly installments at P6,369.00 monthly, beginning 18 July 1997. To secure payment thereof, Colarina executed an integrated promissory note and deed of chattel mortgage over the motor vehicle. Colarina failed to pay the monthly amortization beginning January 1999, accumulating an unpaid balance of P131,607.00. Despite repeated demands, he failed to make the necessary payment. On 31 October 2000 Magna Financial Services Group, Inc. filed a Complaint for Foreclosure of Chattel Mortgage with Replevin 2 before the Municipal Trial Court in Cities (MTCC), Branch 2, Legaspi City, docketed as Civil Case No. 4822. 3 Upon the filing of a Replevin Bond, a Writ of Replevin was issued by the MTCC. On 27 December 2000, summons, together with a copy of the Writ of Replevin, was served on Colarina who voluntarily surrendered physical possession of the vehicle to the Sheriff, Mr. Antonio Lozano. On 02 January 2001, the aforesaid motor vehicle was turned over by the sheriff to Magna Financial Services Group, Inc. 4 On 12 July 2001, Colarina was declared in default for having filed his answer after more than six (6) months from the service of summons upon him. Thereupon, the trial court rendered judgment based on the facts alleged in the Complaint. In a decision dated 23 July 2001, it held: 5 WHEREFORE, judgment is hereby rendered in favor of plaintiff Magna Financial Services Group, Inc. and against the defendant Elias Colarina, ordering the latter: a)to pay plaintiff the principal sum of one hundred thirty one thousand six hundred seven (P131,607.00) pesos plus penalty charges at 4.5% per month computed from January, 1999 until fully paid; b)to pay plaintiff P10,000.00 for attorney's fees; and c)to pay the costs. The foregoing money judgment shall be paid within ninety (90) days from the entry of judgment. In case of default in such payment, the one (1) unit of Suzuki Multicab, subject of the writ of replevin and chattel mortgage, shall be sold at public auction to satisfy the said judgment. 6

Colarina appealed to the Regional Trial Court (RTC) of Legazpi City, Branch 4, where the case was docketed as Civil Case No. 10013. During the pendency of his appeal before the RTC, Colarina died and was substituted in the case by his heirs. 7 In a decision dated 30 January 2002, the RTC affirmed in toto the decision of the MTCC. 8 Colarina filed a Petition for Review before the Court of Appeals, docketed as CA-G.R. SP No. 69481. On 21 January 2003, the Court of Appeals rendered its decision 9holding: . . . We find merit in petitioners' assertion that the MTC and the RTC erred in ordering the defendant to pay the unpaid balance of the purchase price of the subject vehicle irrespective of the fact that the instant complaint was for the foreclosure of its chattel mortgage. The principal error committed by the said courts was their immediate grant, however erroneous, of relief in favor of the respondent for the payment of the unpaid balance without considering the fact that the very prayer it had sought was inconsistent with its allegation in the complaint. CTDAaE Verily, it is beyond cavil that the complaint seeks the judicial foreclosure of the chattel mortgage. The fact that the respondent had unconscionably sought the payment of the unpaid balance regardless of its complaint for the foreclosure of the said mortgage is glaring proof that it intentionally devised the same to deprive the defendant of his rights. A judgment in its favor will in effect allow it to retain the possession and ownership of the subject vehicle and at the same time claim against the defendant for the unpaid balance of its purchase price. In such a case, the respondent would luckily have its cake and eat it too. Unfortunately for the defendant, the lower courts had readily, probably unwittingly, made themselves abettors to respondent's devise to the detriment of the defendant. xxx xxx xxx WHEREFORE, finding error in the assailed decision, the instant petition is hereby GRANTED and the assailed decision is hereby REVERSED AND SET ASIDE. Let the records be remanded to the court of origin. Accordingly, the foreclosure of the chattel mortgage over the subject vehicle as prayed for by the respondent in its complaint without any right to seek the payment of the unpaid balance of the purchase price or any deficiency judgment against the petitioners pursuant to Article 1484 of the Civil Code of the Philippines, is hereby ORDERED. 10 A Motion for Reconsideration dated 11 February 2003 11 filed by Magna Financial Services Group, Inc., was denied by the Court of Appeals in a resolution dated 22 May 2003. 12 Hence, this Petition for Review on Certiorari based on the sole issue: WHAT IS THE TRUE NATURE OF A FORECLOSURE OF CHATTEL MORTGAGE, EXTRAJUDICIAL OR JUDICIAL, AS AN EXERCISE OF THE 3RD OPTION UNDER ARTICLE 1484, PARAGRAPH 3 OF THE CIVIL CODE. In its Memorandum, petitioner assails the decision of the Court of Appeals and asserts that a mortgage is only an accessory obligation, the principal one being the undertaking to pay the amounts scheduled in the promissory note. To secure the payment of the note, a chattel mortgage is constituted on the thing sold. It argues that an action for foreclosure of mortgage is actually in the nature of an action for sum of money instituted to enforce the payment of the promissory note, with execution of the security. In case of an extrajudicial foreclosure of chattel mortgage, the petition must state the amount due on the obligation and the sheriff, after the sale, shall apply the proceeds to the unpaid debt. This, according to petitioner, is the true nature of a foreclosure proceeding as provided under Rule 68, Section 2 of the Rules of Court. 13 On the other hand, respondent countered that the Court of Appeals correctly set aside the trial court's decision due to the inconsistency of the remedies or reliefs sought by the petitioner in its Complaint where it prayed for the custody of the chattel mortgage and at the same time asked for the payment of the unpaid balance on the motor vehicle. 14 Article 1484 of the Civil Code explicitly provides: ART. 1484.In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies: (1)Exact fulfillment of the obligation, should the vendee fail to pay; (2)Cancel the sale, should the vendee's failure to pay cover two or more installments; (3)Foreclose the chattel mortgage or the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. Our Supreme Court in Bachrach Motor Co., Inc. v. Millan 15 held: "Undoubtedly the principal object of the above amendment (referring to Act 4122 amending Art. 1454, Civil Code of 1889) was to remedy the abuses committed in connection with the foreclosure of chattel mortgages. This amendment prevents mortgagees from seizing the mortgaged property, buying it at foreclosure sale for a low price and then bringing the suit against the mortgagor for a deficiency judgment. The almost invariable result of this procedure was that the mortgagor found himself minus the property and still owing practically the full amount of his original indebtedness."ICcDaA

In its Complaint, Magna Financial Services Group, Inc. made the following prayer: WHEREFORE, it is respectfully prayed that judgment render ordering defendant: 1.To pay the principal sum of P131,607.00 with penalty charges at 4.5% per month from January 1999 until paid plus liquidated damages. 2.Ordering defendant to reimburse the plaintiff for attorney's fee at 25% of the amount due plus expenses of litigation at not less than P10,000.00. 3.Ordering defendant to surrender to the plaintiff the possession of the Multicab described in paragraph 2 of the complaint. 4.Plaintiff prays for other reliefs just and equitable in the premises. It is further prayed that pendent lite, an Order of Replevin issue commanding the Provincial Sheriff at Legazpi City or any of his deputies to take such multicab into his custody and, after judgment, upon default in the payment of the amount adjudged due to the plaintiff, to sell said chattel at public auction in accordance with the chattel mortgage law. 16 In its Memorandum before us, petitioner resolutely declared that it has opted for the remedy provided under Article 1484(3) of the Civil Code, 17 that is, to foreclosethe chattel mortgage. It is, however, unmistakable from the Complaint that petitioner preferred to avail itself of the first and third remedies under Article 1484, at the same time suing for replevin. For this reason, the Court of Appeals justifiably set aside the decision of the RTC. Perusing the Complaint, the petitioner, under its prayer number 1, sought for the payment of the unpaid amortizations which is a remedy that is provided under Article 1484(1) of the Civil Code, allowing an unpaid vendee to exact fulfillment of the obligation. At the same time, petitioner prayed that Colarina be ordered to surrender possession of the vehicle so that it may ultimately be sold at public auction, which remedy is contained under Article 1484(3). Such a scheme is not only irregular but is a flagrant circumvention of the prohibition of the law. By praying for the foreclosure of the chattel, Magna Financial Services Group, Inc. renounced whatever claim it may have under the promissory note. 18 Article 1484, paragraph 3, provides that if the vendor has availed himself of the right to foreclose the chattel mortgage, "he shall have no further action against the purchaser to recover any unpaid balance of the purchase price. Any agreement to the contrary shall be void." In other words, in all proceedings for the foreclosure of chattel mortgages executed on chattels which have been sold on the installment plan, the mortgagee is limited to the property included in the mortgage. 19 Contrary to petitioner's claim, a contract of chattel mortgage, which is the transaction involved in the present case, is in the nature of a conditional sale of personal property given as a security for the payment of a debt, or the performance of some other obligation specified therein, the condition being that the sale shall be void upon the seller paying to the purchaser a sum of money or doing some other act named. 20 If the condition is performed according to its terms, the mortgage and sale immediately become void, and the mortgagee is thereby divested of his title. 21 On the other hand, in case of non payment, foreclosure is one of the remedies available to a mortgagee by which he subjects the mortgaged property to the satisfaction of the obligation to secure that for which the mortgage was given. Foreclosure may be effected either judicially or extrajudicially, that is, by ordinary action or by foreclosure under power of sale contained in the mortgage. It may be effected by the usual methods, including sale of goods at public auction. 22 Extrajudicial foreclosure, as chosen by the petitioner, is attained by causing the mortgaged property to be seized by the sheriff, as agent of the mortgagee, and have it sold at public auction in the manner prescribed by Section 14 of Act No. 1508, or the Chattel Mortgage Law. 23 This rule governs extrajudicial foreclosure of chattel mortgage. aCSEcA In sum, since the petitioner has undeniably elected a remedy of foreclosure under Article 1484(3) of the Civil Code, it is bound by its election and thus may not be allowed to change what it has opted for nor to ask for more. On this point, the Court of Appeals correctly set aside the trial court's decision and instead rendered a judgment of foreclosure as prayed for by the petitioner. The next issue of consequence is whether or not there has been an actual foreclosure of the subject vehicle. In the case at bar, there is no dispute that the subject vehicle is already in the possession of the petitioner, Magna Financial Services Group, Inc. However, actual foreclosure has not been pursued, commenced or concluded by it. Where the mortgagee elects a remedy of foreclosure, the law requires the actual foreclosure of the mortgaged chattel. Thus, in Manila Motor Co. v. Fernandez, 24our Supreme Court said that it is actual sale of the mortgaged chattel in accordance with Sec. 14 of Act No. 1508 that would bar the creditor (who chooses to foreclose) from recovering any unpaid balance. 25 And it is deemed that there has been foreclosure of the mortgage when all the proceedings of the foreclosure, including the sale of the property at public auction, have been accomplished. 26 That there should be actual foreclosure of the mortgaged vehicle was reiterated in the case of De la Cruz v. Asian Consumer and Industrial Finance Corporation: 27 It is thus clear that while ASIAN eventually succeeded in taking possession of the mortgaged vehicle, it did not pursue the foreclosure of the mortgage as shown by the fact that no auction sale of the vehicle

was ever conducted. As we ruled in Filinvest Credit Corp. v. Phil. Acetylene Co., Inc. (G.R. No. 50449, 30 January 1982, 111 SCRA 421) Under the law, the delivery of possession of the mortgaged property to the mortgagee, the herein appellee, can only operate to extinguish appellant's liability if the appellee had actually caused the foreclosure sale of the mortgaged property when it recovered possession thereof (Northern Motors, Inc. v. Sapinoso, 33 SCRA 356 [1970]; Universal Motors Corp. v. Dy Hian Tat, 28 SCRA 161 [1969]; Manila Motors Co., Inc. v. Fernandez, 99 Phil. 782 [1956]). Be that as it may, although no actual foreclosure as contemplated under the law has taken place in this case, since the vehicle is already in the possession of Magna Financial Services Group, Inc. and it has persistently and consistently avowed that it elects the remedy of foreclosure, the Court of Appeals, thus, ruled correctly in directing the foreclosure of the said vehicle without more. WHEREFORE, premises considered, the instant petition is DENIED for lack of merit and the decision of the Court of Appeals dated 21 January 2003 is AFFIRMED. Costs against petitioner. SO ORDERED. Puno, Austria-Martinez, Callejo, Sr. and Tinga, JJ., concur.

[G.R. No. 109966. May 31, 1999.] ELISCO TOOL MANUFACTURING CORPORATION, petitioner, vs. COURT OF APPEALS, ROLANDO LANTAN, and RINA LANTAN,respondents. SYNOPSIS Rolando was the head of the cash department of Elisco Tool Manufacturing Corporation when he entered into a car plan agreement with the latter. The contract entered into on January 9, 1980 provides that the lease rental was for P1,010.65 a month for five years payable thru salary deduction, with option to purchase at the end of the 5-year period or upon payment of the 60th monthly rental where all monthly rentals paid shall be applied to the full purchase price. In 1981, however, Elisco Tool ceased operations and Rolando was laid off. Nonetheless, as of December 4, 1984, Rolando was able to make payments for the car in the total amount of P61,070.94. Thus, when Eliseo Tool filed a complaint against Rolando alleging failure to pay monthly rentals, the trial court held that Rolando had fully paid the price of the car. On appeal to the Court of Appeals, the decision of the trial court was affirmed in toto. Hence, this petition for review. cdasia Rolando acquired the car to question under a typical car plan for executives of the Elizalde group of companies, where the transaction is a lease in name only. The so-called monthly rental are in truth monthly amortizations on the price of the car. Rolando's default in paying the installments was due to the cessation of operations of Elizalde Steel Corporation, and the latter's acceptance of payments through cash and checks from Rolando could have been impelled solely by petitioner's inability to deduct the amortizations from Rolando because of the termination. Hence, when petitioner accepted even late payments from Rolando more than 2 years after the latter's employment had been terminated, the same constituted a waiver of petitioner's right to collect interest upon the delayed payments. Consequently, the P61,070.94 already paid to petitioner would be considered payment of the full purchase price of the car or the total installments paid. Thus, it was correctly ruled that Rolando had already fulfilled his part of the obligation. SYLLABUS 1.CIVIL LAW; CONTRACTS; TYPICAL COMPANY CAR PLANS; ELUCIDATED. Rolando Lantan acquired the vehicle in question under a car plan for executives of the Elizalde group of companies. Under a typical car plan, the company advances the purchase price of a car to be paid back by the employee through monthly deductions from his salary. The company retains ownership of the motor vehicle until it shall have been fully paid for. However, retention of registration of the car in the company's name is only a form of a lien on the vehicle in the event that the employee would abscond before he has fully paid for it. There are also stipulations in car plan agreements to the effect that should the employment of the employee concerned be terminated before all installments are fully paid, the vehicle will be taken by the employer and all installments paid shall be considered rentals per agreement. cdasia 2.ID.; ID.; CONTRACT OF SALE ON INSTALLMENT DENOMINATED AS CONTRACT OF LEASE, ACKNOWLEDGED; REMEDIES OF VENDOR; CASE AT BAR. This Court has long been aware of the practice of vendors of personal property of denominating a contract of sale on installment as one of lease to prevent the ownership of the object of the sale from passing to the vendee until and unless the price is fully paid, like this case. Hence, the contract being one of sale on installment, the Court of Appeals correctly applied Art. 1484 and 1485 of the Civil Code which provides remedies the vendor may exercise. The remedies provided for in Art. 1484 are alternative, not cumulative. The exercise of one bars the exercise of the others. This limitation applies to contracts purporting to be leases of personal property with option to buy by virtue of Art. 1485. The condition that the lessor has deprived the lessee of possession or enjoyment of the thing for the purpose of applying Art. 1485 was fulfilled in this case by the filing by petitioner of the complaint for replevin to

recover possession of movable property. By virtue of the writ of seizure issued by the trial court, the deputy sheriff seized the vehicle on August 6, 1986 and thereby deprived private respondents of its use. The car was not returned to private respondent until April 16, 1989, after two (2) years and eight (8) months, upon issuance by the Court of Appeals of a writ of execution. 3.ID.; ID.; ID.; ID.; SPECIFIC PERFORMANCE; ALREADY SATISFIED IN CASE AT BAR. This case should be considered as one for specific performance, pursuant to Art. 1484(1), consistent with its prayer with respect to the unpaid installments. The prayer for the issuance of a writ of replevin is only for the purpose of insuring specific performance by private respondents. However, private respondents could no longer be held liable for the payment of interest on unpaid monthly "rentals" or installments because it was entered into in pursuance of a car plan adopted by the company for the benefit of its deserving employees. Indeed, private respondent's default in paying installments was due to the cessation of operations of Elizalde Steel Corporation, petitioner's sister company. Petitioner's acceptance of payments made by private respondents through cash and checks could have been impelled solely by petitioner's inability to deduct the amortizations from private respondent Rolando Lantan's salary which he stopped receiving when his employment was terminated in September 1982. Apparently, to minimize the adverse consequences of the termination of private respondent's employment, petitioner accepted even late payments. That petitioner accepted payments from private respondent Rolando Lantan more than two (2) years after the latter's employment had been terminated constitutes a waiver of petitioner's right to collect interest upon the delayed payments. The 2% surcharge is not provided for in the agreement. Its collection by the company would in fact run counter to the purpose of providing "added emoluments" to its deserving employees. Consequently, the total amount of P61,070.94 already paid to petitioner should be considered payment of the full purchase price of the car or the total installments paid. 4.ID.; DAMAGES; CASE AT BAR. Private respondents presented evidence that they "felt bad, were worried, embarrassed and mentally tortured" by the repossession of the car. This has not been rebutted by petitioner. There is thus a factual basis for the award of moral damages. In addition, petitioner acted in a wanton, fraudulent, reckless and oppressive manner in filing the instant case, hence, the award of exemplary damages is justified. The award of attorney's fees is likewise proper considering that private respondents were compelled to incur expenses to protect their rights. CHDAaS DECISION MENDOZA, J p: This is a petition for review of the decision 1 of the Court of Appeals which affirmed in toto the decision of the Regional Trial Court of Pasig, Branch 51, declaring respondent spouses Rolando Lantan and Rina Lantan owners of a 1979 model 2-door Colt Lancer car which they had acquired under a car plan for top employees of the Elizalde group of companies. cdtai The facts are as follows: Private respondent Rolando Lantan was employed at the Elisco Tool Manufacturing Corporation as head of its cash department. On January 9, 1980, he entered into an agreement with the company which provided as follows: 2 That, EMPLOYER is the owner of a car Colt Lancer 2-door, Model 1979, with Serial No. 3403 under LTC Registration Certificate No. 0526558; That, for and in consideration of a monthly rental of ONE THOUSAND TEN & 65/100 ONLY (P1,010.65) Philippine Currency, EMPLOYER desire to lease and EMPLOYEE accept in lease the motor vehicle aforementioned for a period of FIVE (5) years; That, the EMPLOYEE agree as he hereby agreed to pay the lease rental thru salary deduction from his monthly remuneration in the amount as above specified for a period of FIVE (5) years; That, for the duration of the lease contract, all expenses and costs of registration, insurance, repair and maintenance, gasoline, oil, part replacement inclusive of all expenses necessary to maintain the vehicle in top condition shall be for the account of the EMPLOYEE; That, at the end of FIVE (5) year period or upon payment of the 60th monthly rental, EMPLOYEE may exercise the option to purchase the motor vehicle from the EMPLOYER and all monthly rentals shall be applied to the payment of the full purchase price of the car and further, should EMPLOYEE desire to exercise this option before the 5-year period lapse, he may do so upon payment of the remaining balance on the five-year rental unto the EMPLOYER, it being understood however that the option is limited to the EMPLOYEE; That, upon failure of the EMPLOYEE to pay THREE (3) accumulated monthly rentals will vest upon the EMPLOYER the full right to lease the vehicle to another EMPLOYEE; That, in the event of resignation and or dismissal from the service, the EMPLOYEE shall return the subject motor vehicle to the EMPLOYER in its compound at Kalawaan Sur, Pasig, Metro Manila in good working and body condition. On the same day, January 9, 1980, private respondent executed a promissory note reading as follows: 3

PROMISSORY NOTE P60,639.00 FOR VALUE RECEIVED, we promise to pay [to] the order of ELISCO TOOL MFG. CORP. SPECIAL PROJECT, at its office at Napindan, Taguig, Metro Manila, Philippines, the sum of ONE THOUSAND TEN & 65/100 PESOS (P1,010.65), Philippine Currency, beginning January 9, 1980, without the necessity of notice or demand in accordance with the schedule of payment hereto attached as an integral part hereof. In case of default in the payment of any installment on the stipulated due date, we agree to pay as liquidated damages 2% of the amount due and unpaid for every thirty (30) days of default or fraction thereof. Where the default covers two successive installments, the entire unpaid balance shall automatically become due and payable.

It is further agreed that if upon such default attorney's services are availed of, an additional sum equal to TWENTY (20%) percent of the total amount due thereon, but in no case be less than P1,000.00 shall be paid to holder(s) hereof as attorney's fees in addition to the legal costs provided for by law. We agree to submit to the jurisdiction of the proper courts of Makati, Metro Manila or the Province of Rizal, at the option of the holder(s) waiving for this purpose any other venue. In case extraordinary inflation or deflation of the currency stipulated should occur before this obligation is paid in full, the value of the currency at the time of the establishment of the obligation will be the basis of payment. Holder(s) may accept partial payment reserving his right of recourse against each and all endorsers who hereby waive DEMAND PRESENTMENT and NOTICE. Acceptance by the holder(s) of payment or any part thereof after due date shall not be considered as extending the time for the payment of the aforesaid obligation or as a modification of any of the condition hereof. After taking possession of the car, private respondent installed accessories therein worth P15,000.00. In 1981, Elisco Tool ceased operations, as a result of which private respondent Rolando Lantan was laid off. Nonetheless, as of December 4, 1984, private respondent was able to make payments for the car in the total amount of P61,070.94. On June 6, 1986, petitioner filed a complaint, entitled "replevin plus sum of money," against private respondent Rolando Lantan, his wife Rina, and two other persons, identified only as John and Susan Doe, before the Regional Trial Court of Pasig, Metro Manila. Petitioner alleged that private respondents failed to pay the monthly rentals which, as of May 1986, totalled P39,054.86; that despite demands, private respondents failed to settle their obligation thereby entitling petitioner to the possession of the car; that petitioner was ready to post a bond in an amount double the value of the car, which was P60,000; and that in case private respondents could not return the car, they should be held liable for the amount of P60,000 plus the accrued monthly rentals thereof, with interest at the rate of 14%per annum, until fully paid. Petitioner's complaint contained the following prayer: WHEREFORE, plaintiffs prays that judgment be rendered as follows: ON THE FIRST CAUSE OF ACTION Ordering defendant Rolando Lantan to pay the plaintiff the sum of P39,054.86 plus legal interest from the date of demand until the whole obligation is fully paid; ON THE SECOND CAUSE OF ACTION To forthwith issue a Writ of Replevin ordering the seizure of the motor vehicle more particularly described in paragraph 3 of the Complaint, from defendant Rolando Lantan and/or defendants Rina Lantan, John Doe, Susan Doe and other person or persons in whose possession the said motor vehicle may be found, complete with accessories and equipment, and direct deliver thereof to plaintiff in accordance with law, and after due hearing to confirm said seizure and plaintiff's possession over the same; ON THE ALTERNATIVE CAUSE OF ACTION In the event that manual delivery of the subject motor vehicle cannot be effected for any reason, to render judgment in favor of plaintiff and against defendant Roland Lantan ordering the latter to pay the sum of SIXTY THOUSAND PESOS (P60,000.00) which is the estimated actual value of the

above-described motor vehicle, plus the accrued monthly rentals thereof with interests at the rate of fourteen percent (14%) per annum until fully paid; PRAYER COMMON TO ALL CAUSES OF ACTION 1.Ordering the defendant Rolando Lantan to pay the plaintiff an amount equivalent to twentyfive percent (25%) of his outstanding obligation, for and as attorney's fees; 2.Ordering defendants to pay the cost or expenses of collection, repossession, bonding fees and other incidental expenses to be proved during the trial; and 3.Ordering defendants to pay the costs of suit. Plaintiff also prays for such further reliefs as this Honorable Court may deem just and equitable under the premises. Upon petitioner's posting a bond in the amount of P120,000, the sheriff took possession of the car in question and after five (5) days turned it over to petitioner. 4 In due time, private respondents filed their answer. They claimed that the agreement on which the complaint was based had not been signed by petitioner's representative, Jose Ma. S. del Gallego, although it had been signed by private respondent Rolando Lantan; that their true agreement was "to buy and sell and not lease with option to buy" the car in question at a monthly amortization of P1,000; and that petitioner accepted the installment payments made by them and, in January 1986, agreed that the balance of the purchase price would be paid on or before December 31, 1986. Private respondents cited the provision of the agreement making respondent Rolando Lantan liable for the expenses for registration, insurance, repair and maintenance, gasoline, oil and part replacements, inclusive of all necessary expenses, as evidence that the transaction was one of sale. Private respondents further alleged that, in any event, petitioner had waived its rights under the agreement because of the following circumstances: (a) while the parties agreed that payment was to be made through salary deduction, petitioner accepted payments in cash or checks; (b) although they agreed that upon the employee's resignation, the car should be returned to the employer, private respondent Rolando Lantan was not required to do so when he resigned in September 1982; (c) petitioner did not lease the vehicle to another employee after private respondent Rolando Lantan had allegedly failed to pay three monthly "rentals"; and (d) petitioner failed to enforce the manner of payment under the agreement by its acceptance of payments in various amounts and on different dates. cdasia In its reply, petitioner maintained that the contract between the parties was one of lease with option to purchase and that the promissory note was merely a "nominal security" for the agreement. It contended that the mere acceptance of the amounts paid by private respondents and for indefinite periods of time was not evidence that the parties' agreement was one of purchase and sale. Neither was it guilty of laches because, under the law, an action based on a written contract can be brought within ten (10) years from the time the action accrues. On August 31, 1987, the trial court 5 rendered its decision. The trial court sustained private respondents' claim that the agreement in question was one of sale and held that the latter had fully paid the price of the car having paid the total amount of P61,070.94 aside from installing accessories in the car worth P15,000.00. Said the trial court: Plaintiff now comes claiming ownership of the car in question and has succeeded in repossessing the same by virtue of the writ of seizure issued in this case on July 29, 1986. Not content with recovering possession of the said car, plaintiff still asks that defendants should pay it the sum of P39,054.86, allegedly representing the rentals due on the car from the time of the last payment made by defendants to its repossession thereof. This is indeed a classic case of one having his cake and eating it too! Under the Recto law (Arts. 1484 & 1485, Civil Code), the vendor who repossesses the goods sold on installments, has no right to sue the vendee for the unpaid balance thereof. The Court can take judicial notice of the practice wherein executives enjoy car plans in progressive companies. The agreement of January 9, 1980 between the parties is one such car plan. If defendant Rolando Lantan failed to keep up with his amortizations on the car in question, it was not because of his own liking but rather he was pushed to it by circumstances when his employer folded up and sent him to the streets. That plaintiff was giving all the chance to defendants to pay the value of the car and acquire full ownership thereof is shown by the delay in instituting the instant case. . . . The court likewise found that the amount of P61,070.94 included a 2% penalty for the late payments for which there was no stipulation in the agreement: . . . The agreement and defendant Roland Lantan's promissory note of January 9, 1980 do not provide even for interest on the remaining balance of the purchase price of the car. This privilege extended by corporations to their top executives is considered additional emolument to them. And so the reason for the lack of provision for interest, much less penalty charges. Therefore, all payments made by defendant should be applied to the principal account. Since the principal was only P60,639.00, the defendants have made an overpayment of P431.94 which should be returned to defendant by plaintiff.

For this reason, it ordered petitioner to pay private respondents the amount of P431.94 as excess payment, as well as rentals at the rate of P1,000 a month for depriving private respondents of the use of their car, and moral damages for the worry, embarrassment, and mental torture suffered by them on account of the repossession of the car. The dispositive portion of the trial court's decision reads as follows: WHEREFORE, judgment is hereby rendered in favor of defendants and against plaintiff, dismissing plaintiff's complaint; declaring defendants the lawful owners of that Colt Lancer 2-door, Model 1979 with Serial No. 3403 under Registration Certificate No. 0526558; ordering plaintiff to deliver to defendants the aforesaid motor vehicle complete with all the accessories installed therein by defendants; should for any reason plaintiff is unable to deliver the said car to defendants, plaintiff is ordered to pay to defendants the value of said car in the sum of P60,639.00 plus P15,000.00, the value of the accessories, plus interest of 12% on the said sums from August 6, 1986; and sentencing plaintiff to pay defendants the following sums: a)P12,431.94 as actual damages broken down as follows: 1)P431.94 overpayment made by defendants to plaintiff; and 2)P12,000.00 rental on the car in question from August 6, 1986 to August 5, 1987, plus the sum of P1,000.00 a month beginning August 6, 1987 until the car is returned by plaintiff to, and is received by, defendant; b)the sum of P20,000.00 as moral damages; c)the sum of P5,000.00 as exemplary damages; and d)the sum of P5,000.00 as attorney's fees. Costs against the plaintiff. SO ORDERED. Petitioner appealed to the Court of Appeals. On the other hand, private respondents filed a motion for execution pending appeal. In its resolution of March 9, 1989, the Court of Appeals granted private respondents' motion and, upon the filing of a bond, in the amount of P70,000.00, it issued a writ of execution, pursuant to which the car was delivered to private respondents on April 16, 1989. 6 On August 26, 1992, the Court of Appeals rendered its decision, affirming in toto the decision of the trial court. Hence, the instant petition for review oncertiorari. Petitioner contends that the Court of Appeals erred (a)in disregarding the admission in the pleadings as to what documents contain the terms of the parties' agreement. (b)in holding that the interest stipulation in respondents' Promissory Note was not valid and binding. (c)in holding that respondents had fully paid their obligations. It further argues that On the assumption that the Lease Agreement with option to buy in this case may be treated as a sale on installments, the respondent Court of Appeals nonetheless erred in not finding that the parties have validly agreed that the petitioner as seller may [i] cancel the contract upon the respondent's default on three or more installments, [ii] retake possession of the personality, and [iii] keep the rents already paid. First. Petitioner does not deny that private respondent Rolando Lantan acquired the vehicle in question under a car plan for executives of the Elizalde group of companies. Under a typical car plan, the company advances the purchase price of a car to be paid back by the employee through monthly deductions from his salary. The company retains ownership of the motor vehicle until it shall have been fully paid for. 7 However, retention of registration of the car in the company's name is only a form of a lien on the vehicle in the event that the employee would abscond before he has fully paid for it. There are also stipulations in car plan agreements to the effect that should the employment of the employee concerned be terminated before all installments are fully paid, the vehicle will be taken by the employer and all installments paid shall be considered rentals per agreement. 8 This Court has long been aware of the practice of vendors of personal property of denominating a contract of sale on installment as one of lease to prevent the ownership of the object of the sale from passing to the vendee until and unless the price is fully paid. As this Court noted in Vda. de Jose v. Barrueco: 9

Sellers desirous of making conditional sales of their goods, but who do not wish openly to make a bargain in that form, for one reason or another, have frequently resorted to the device of making contracts in the form of leases either with options to the buyer to purchase for a small consideration at the end of term, provided the so-called rent has been duly paid, or with stipulations that if the rent throughout the term is paid, title shall thereupon vest in the lessee. It is obvious that such transactions are leases only in name. The so-called rent must necessarily be regarded as payment of the price in installments since the due payment of the agreed amount results, by the terms of the bargain, in the transfer of title to the lessee. casia In an earlier case, Manila Gas Corporation v. Calupitan, 10 which involved a lease agreement of a stove and a water heater, the Court said: . . . [W]e are of the opinion, and so hold, that when in a so-called contract of lease of personal property it is stipulated that the alleged lessee shall pay a certain amount upon signing the contract, and on or before the 5th of every month, another specific amount, by way of rental, giving the alleged lessee the right of option to buy the said personal property before the expiration of the period of lease, which is the period necessary for the payment of the said amount at the rate of so much a month, deducting the payments made by way of advance and alleged monthly rentals, and the said alleged lessee makes the advance payment and other monthly installments, noting in his account and in the receipts issued to him that said payments are on account of the price of the personal property allegedly leased, said contract is one of sale on installment and not of lease. 11 In U.S. Commercial v. Halili, 12 a lease agreement was declared to be in fact a sale of personal property by installment. Said the Court: 13 . . . There can hardly be any question that the so-called contracts of lease on which the present action is based were veritable leases of personal property with option to purchase, and as such come within the purview of the above article [Art. 1454-A of the old Civil Code on sale of personal property by installment]. In fact the instruments (Exhibits 'A' and 'B') embodying the contracts bear the heading or title 'Lease-Sale (Lease-Sale of Transportation and/or Mechanical Equipment).' The contracts fix the value of the vehicles conveyed to the lessee and expressly refer to the remainder of said value after deduction of the down payment made by the lessee as 'the unpaid balance of the purchase price of the leased equipment.' The contracts also provide that upon the full value (plus stipulated interest) being paid, the lease would terminate and title to the leased property would be transferred to the lessee. Indeed, as the defendant-appellant points out, the inclusion of a clause waiving benefit of Article 1454-A of the old Civil Code is conclusive proof of the parties' understanding that they were entering into a lease contract with option to purchase which come within the purview of said article. Being leases of personal property with option to purchase as contemplated in the above article, the contracts in question are subject to the provision that when the lessor in such case "has chosen to deprive the lessee of the enjoyment of such personal property," "he shall have no further action" against the lessee "for the recovery of any unpaid balance" owing by the latter, "agreement to the contrary being null and void." It was held that in choosing to deprive the defendant of possession of the leased vehicles, the plaintiff waived its right to bring an action to recover unpaid rentals on the said vehicles. In the case at bar, although the agreement provides for the payment by private respondents of "monthly rentals," the fifth paragraph thereof gives them the option to purchase the motor vehicle at the end of the 5th year or upon payment of the 60th monthly rental when "all monthly rentals shall be applied to the payment of the full purchase price of the car." It is clear that the transaction in this case is a lease in name only. The so-called monthly rentals are in truth monthly amortizations on the price of the car. Second. The contract being one of sale on installment, the Court of Appeals correctly applied to it the following provisions of the Civil Code: ART. 1484.In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies: (1)Exact fulfillment of the obligation, should the vendee fail to pay; (2)Cancel the sale, should the vendee's failure to pay cover two or more installments; (3)Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. ART. 1485.The preceding article shall be applied to contracts purporting to be leases of personal property with option to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing.

The remedies provided for in Art. 1484 are alternative, not cumulative. The exercise of one bars the exercise of the others. 14 This limitation applies to contracts purporting to be leases of personal property with option to buy by virtue of Art. 1485. 15 The condition that the lessor has deprived the lessee of possession or enjoyment of the thing for the purpose of applying Art. 1485 was fulfilled in this case by the filing by petitioner of the complaint for replevin to recover possession of movable property. By virtue of the writ of seizure issued by the trial court, the deputy sheriff seized the vehicle on August 6, 1986 and thereby deprived private respondents of its use. 16 The car was not returned to private respondent until April 16, 1989, after two (2) years and eight (8) months, upon issuance by the Court of Appeals of a writ of execution. 17 Petitioner prayed that private respondents be made to pay the sum of P39,054.86, the amount that they were supposed to pay as of May 1986, plus interest at the legal rate. 18 At the same time, it prayed for the issuance of a writ of replevin or the delivery to it of the motor vehicle "complete with accessories and equipment." 19 In the event the car could not be delivered to petitioner, it was prayed that private respondent Rolando Lantan be made to pay petitioner the amount of P60,000.00, the "estimated actual value" of the car, "plus accrued monthly rentals thereof with interests at the rate of fourteen percent (14%) per annum until fully paid." 20 This prayer of course cannot be granted, even assuming that private respondents have defaulted in the payment of their obligation. This led the trial court to say that petitioner wanted to eat its cake and have it too.

Notwithstanding this impossibility in petitioner's choice of remedy, this case should be considered as one for specific performance, pursuant to Art. 1484(1), consistent with its prayer with respect to the unpaid installments as of May 1986. In this view, the prayer for the issuance of a writ of replevin is only for the purpose of insuring specific performance by private respondents. Both the trial court and the Court of Appeals correctly ruled that private respondents could no longer be held liable for the amounts of P39,054.86 or P60,000.00 because private respondents had fulfilled their part of the obligation. The agreement does not provide for the payment of interest on unpaid monthly "rentals" or installments because it was entered into in pursuance of a car plan adopted by the company for the benefit of its deserving employees. As the trial court correctly noted, the car plan was intended to give additional benefits to executives of the Elizalde group of companies. Petitioner contends that the promissory note provides for such interest payment. However, as the Court of Appeals held: The promissory note in which the 2% monthly interest on delayed payments appears does not form part of the contract. There is no consideration for the promissory note. There is nothing to show that plaintiff advanced the purchase price of the vehicle for Lantan so as to make the latter indebted to the former for the amount stated in the promissory note. Thus, as stated in the complaint: "That sometime in January, 1980, defendant Rolando Lantan entered into an agreement with the plaintiff for the lease of a motor vehicle supplied by the latter, with the option to purchase at the end of the period of lease . . ." In other words, plaintiff did not buy the vehicle for Rolando Lantan, advancing the purchase price for that purpose. There is nothing in the complaint or in the evidence to show such arrangement. Therefore, there was no indebtedness secured by a promissory note to speak of. There being no consideration for the promissory note, the same, including the penalty clause contained thereon, has no binding effect. 21 There is no evidence that private respondents received the amount of P60,639.00 indicated in the promissory note as its value. What was proven below is the fact that private respondents received from petitioner the 2-door Colt Lancer car which was valued at P60,000 and for which private respondent Rolando Lantan paid monthly amortizations of P1,010.65 through salary deductions. Indeed, as already stated, private respondents' default in paying installments was due to the cessation of operations of Elizalde Steel Corporation, petitioner's sister company. Petitioner's acceptance of payments made by private respondents through cash and checks could have been impelled solely by petitioner's inability to deduct the amortizations from private respondent Rolando Lantan's salary which he stopped receiving when his employment was terminated in September 1982. Apparently, to minimize the adverse consequences of the termination of private respondent's employment, petitioner accepted even late payments. That petitioner accepted payments from private respondent Rolando Lantan more than two (2) years after the latter's employment had been terminated constitutes a waiver of petitioner's right to collect interest upon the delayed payments. The 2% surcharge is not provided for in the agreement. Its collection by the company would in fact run counter to the purpose of providing "added emoluments" to its deserving employees. Consequently, the total amount of P61,070.94 already paid to petitioner should be considered payment of the full purchase price of the car or the total installments paid. cdlex Third. Private respondents presented evidence that they "felt bad, were worried, embarrassed and mentally tortured" by the repossession of the car. 22This has not been rebutted by petitioner. There is thus a factual basis for the award of moral damages. In addition, petitioner acted in a wanton, fraudulent, reckless and oppressive manner in filing the instant case, hence, the award of exemplary damages is justified. 23 The award of attorney's fees is likewise proper considering that private respondents were compelled to incur expenses to protect their rights. 24 WHEREFORE, the decision of the Court of Appeals is AFFIRMED with costs against petitioner. aisadc

SO ORDERED. Bellosillo, Puno, Quisumbing, and Buena, JJ., concur.

[G.R. No. 142618. July 12, 2007.] PCI LEASING AND FINANCE, INC., petitioner, vs. GIRAFFE-X CREATIVE IMAGING, INC., respondent. DECISION GARCIA, J p: On a pure question of law involving the application of Republic Act (R.A.) No. 5980, as amended by R.A. No. 8556, in relation to Articles 1484 and 1485 of the Civil Code, petitioner PCI Leasing and Finance, Inc. (PCI LEASING, for short) has directly come to this Court via this petition for review under Rule 45 of the Rules of Court to nullify and set aside the Decision and Resolution dated December 28, 1998 and February 15, 2000, respectively, of the Regional Trial Court (RTC) of Quezon City, Branch 227, in its Civil Case No. Q-98-34266, a suit for a sum of money and/or personal property with prayer for a writ of replevin, thereat instituted by the petitioner against the herein respondent, Giraffe-X Creative Imaging, Inc. (GIRAFFE, for brevity). The facts: On December 4, 1996, petitioner PCI LEASING and respondent GIRAFFE entered into a Lease Agreement, 1 whereby the former leased out to the latter one (1) set of Silicon High Impact Graphics and accessories worth P3,900,000.00 and one (1) unit of Oxberry Cinescan 6400-10 worth P6,500,000.00. In connection with this agreement, the parties subsequently signed two (2) separate documents, each denominated as Lease Schedule. 2 Likewise forming parts of the basic lease agreement were two (2) separate documents denominated Disclosure Statements of Loan/Credit Transaction (Single Payment or Installment Plan) 3 that GIRAFFE also executed for each of the leased equipment. These disclosure statements inter alia described GIRAFFE, vis--vis the two aforementioned equipment, as the "borrower" who acknowledged the "net proceeds of the loan," the "net amount to be financed," the "financial charges," the "total installment payments" that it must pay monthly for thirty-six (36) months, exclusive of the 36% per annum "late payment charges." Thus, for the Silicon High Impact Graphics, GIRAFFE agreed to pay P116,878.21 monthly, and for Oxberry Cinescan, P181,362.00 monthly. Hence, the total amount GIRAFFE has to pay PCI LEASING for 36 months of the lease, exclusive of monetary penalties imposable, if proper, is as indicated below: cdasiajur

P116,878.21 @ month (for the Silicon High Impact Graphics) x 36 months=P4,207,615.56 PLUS P181,362.00 @ month (for the Oxberry Cinescan) x 36 months=P6,529,032.00 Total Amount to be paid by GIRAFFE (or the NET CONTRACT AMOUNT )P10,736,647.56 =========== By the terms, too, of the Lease Agreement, GIRAFFE undertook to remit the amount of P3,120,000.00 by way of "guaranty deposit," a sort of performance and compliance bond for the two equipment. Furthermore, the same agreement embodied a standard acceleration clause, operative in the event GIRAFFE fails to pay any rental and/or other accounts due. A year into the life of the Lease Agreement, GIRAFFE defaulted in its monthly rental-payment obligations. And following a three-month default, PCI LEASING, through one Atty. Florecita R. Gonzales, addressed a formal pay-or-surrenderequipment type of demand letter 4 dated February 24, 1998 to GIRAFFE. The demand went unheeded. Hence, on May 4, 1998, in the RTC of Quezon City, PCI LEASING instituted the instant case against GIRAFFE. In its complaint, 5 docketed in said court as Civil Case No. 98-34266 and raffled to Branch 227 6 thereof, PCI LEASING prayed for the issuance of a writ of replevin for the recovery of the leased property, in addition to the following relief: 2.After trial, judgment be rendered in favor of plaintiff [PCI LEASING] and against the defendant [GIRAFFE], as follows: a.Declaring the plaintiff entitled to the possession of the subject properties; b.Ordering the defendant to pay the balance of rental/obligation in the total amount of P8,248,657.47 inclusive of interest and charges thereon; c.Ordering defendant to pay plaintiff the expenses of litigation and cost of suit. . . . (Words in bracket added.) EIDTAa Upon PCI LEASING's posting of a replevin bond, the trial court issued a writ of replevin, paving the way for PCI LEASING to secure the seizure and delivery of the equipment covered by the basic lease agreement. Instead of an answer, GIRAFFE, as defendant a quo, filed a Motion to Dismiss, therein arguing that the seizure of the two (2) leased equipment stripped PCI LEASING of its cause of action. Expounding on the point, GIRAFFE argues that, pursuant to Article 1484 of the Civil Code on installment sales of personal property, PCI LEASING is barred from further pursuing any claim arising from the lease agreement and the companion contract documents, adding that the agreement between the parties is in reality a lease of movables with option to buy. The given situation, GIRAFFE continues, squarely brings into applicable play Articles 1484 and 1485 of the Civil Code, commonly referred to as the Recto Law. The cited articles respectively provide: ART. 1484.In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies: (1)Exact fulfillment of the obligation, should the vendee fail to pay; (2)Cancel the sale, should the vendee's failure to pay cover two or more installments; (3)Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. (Emphasis added.) ART. 1485.The preceding article shall be applied to contracts purporting to be leases of personal property with option to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing. EaISDC It is thus GIRAFFE's posture that the aforequoted Article 1484 of the Civil Code applies to its contractual relation with PCI LEASING because the lease agreement in question, as supplemented by the schedules documents, is really a lease with option to buy under the companion article, Article 1485. Consequently, so GIRAFFE argues, upon the seizure of the leased equipment pursuant to the writ of replevin, which seizure is equivalent to foreclosure, PCI LEASING has no further

recourse against it. In brief, GIRAFFE asserts in its Motion to Dismiss that the civil complaint filed by PCI LEASING is proscribed by the application to the case of Articles 1484 and 1485, supra, of the Civil Code. In its Opposition to the motion to dismiss, PCI LEASING maintains that its contract with GIRAFFE is a straight lease without an option to buy. Prescinding therefrom, PCI LEASING rejects the applicability to the suit of Article 1484 in relation to Article 1485 of the Civil Code, claiming that, under the terms and conditions of the basic agreement, the relationship between the parties is one between an ordinary lessor and an ordinary lessee. In a decision 7 dated December 28, 1998, the trial court granted GIRAFFE's motion to dismiss mainly on the interplay of the following premises: 1) the lease agreement package, as memorialized in the contract documents, is akin to the contract contemplated in Article 1485 of the Civil Code, and 2) GIRAFFE's loss of possession of the leased equipment consequent to the enforcement of the writ of replevin is "akin to foreclosure, . . . the condition precedent for application of Articles 1484 and 1485 [of the Civil Code]." Accordingly, the trial court dismissed Civil Case No. Q-98-34266, disposing as follows: WHEREFORE, premises considered, the defendant [GIRAFFE] having relinquished any claim to the personal properties subject of replevin which are now in the possession of the plaintiff [PCI LEASING], plaintiff is DEEMED fully satisfied pursuant to the provisions of Articles 1484 and 1485 of the New Civil Code. By virtue of said provisions, plaintiff is DEEMED estopped from further action against the defendant, the plaintiff having recovered thru (replevin) the personal property sought to be payable/leased on installments, defendants being under protection of said RECTO LAW. In view thereof, this case is hereby DISMISSED. cIADaC With its motion for reconsideration having been denied by the trial court in its resolution of February 15, 2000, 8 petitioner has directly come to this Court via this petition for review raising the sole legal issue of whether or not the underlying Lease Agreement, Lease Schedules and the Disclosure Statements that embody the financial leasing arrangement between the parties are covered by and subject to the consequences of Articles 1484 and 1485 of the New Civil Code. As in the court below, petitioner contends that the financial leasing arrangement it concluded with the respondent represents a straight lease covered by R.A. No. 5980, the Financing Company Act, as last amended by R.A. No. 8556, otherwise known as Financing Company Act of 1998, and is outside the application and coverage of the Recto Law. To the petitioner, R.A. No. 5980 defines and authorizes its existence and business. The recourse is without merit. R.A. No. 5980, in its original shape and as amended, partakes of a supervisory or regulatory legislation, merely providing a regulatory framework for the organization, registration, and regulation of the operations of financing companies. As couched, it does not specifically define the rights and obligations of parties to a financial leasing arrangement. In fact, it does not go beyond defining commercial or transactional financial leasing and other financial leasing concepts. Thus, the relevancy of Article 18 of the Civil Code which reads: Article 18.In matters which are governed by . . . special laws, their deficiency shall be supplied by the provisions of this [Civil] Code. Petitioner foists the argument that the Recto Law, i.e., the Civil Code provisions on installment sales of movable property, does not apply to a financial leasing agreement because such agreement, by definition, does not confer on the lessee the option to buy the property subject of the financial lease. To the petitioner, the absence of an option-to-buy stipulation in a financial leasing agreement, as understood under R.A. No. 8556, prevents the application thereto of Articles 1484 and 1485 of the Civil Code. We are not persuaded. The Court can allow that the underlying lease agreement has the earmarks or made to appear as afinancial leasing, 9 a term defined in Section 3 (d) of R.A. No. 8556 as a mode of extending credit through a non-cancelable lease contract under which the lessor purchases or acquires, at the instance of the lessee, machinery, equipment, . . . office machines, and other movable or immovable property in consideration of the periodic payment by the lessee of a fixed amount of money sufficient to amortize at least seventy (70%) of the purchase price or acquisition cost, including any incidental expenses and a margin of profit over an obligatory period of not less than two (2) years during which the lessee has the right to hold and use the leased property . . . but with no obligation or option on his part to purchase the leased property from the owner-lessor at the end of the lease contract. In its previous holdings, however, the Court, taking into account the following mix: the imperatives of equity, the contractual stipulations in question and the actuations of parties vis--vis their contract, treated disguised transactions technically tagged as financing lease, like here, as creating a different contractual relationship. Notable among the Court's decisions because of its parallelism with this case is BA Finance Corporation v. Court of Appeals 10 which involved a motor vehicle. Thereat, the Court has treated a purported financial lease as actually a sale of a movable property on installments and prevented recovery beyond the buyer's arrearages. Wrote the Court in BA Finance:

The transaction involved . . . is one of a "financial lease" or "financial leasing," where a financing company would, in effect, initially purchase a mobile equipment and turn around to lease it to a client who gets, in addition, an option to purchase the property at the expiry of the lease period. . . . . xxx xxx xxx The pertinent provisions of [RA] 5980, thus implemented, read: "'Financing companies,' . . . are primarily organized for the purpose of extending credit facilities to consumers . . . either by . . . leasing of motor vehicles, . . . and office machines and equipment, . . . and other movable property." "'Credit' shall mean any loan, . . . any contract to sell, or sale or contract of sale of property or service, . . . under which part or all of the price is payable subsequent to the making of such sale or contract; any rental-purchase contract; . . . .;" TSHIDa The foregoing provisions indicate no less than a mere financing scheme extended by a financing company to a client in acquiring a motor vehicle and allowing the latter to obtain the immediate possession and use thereof pending full payment of the financial accommodation that is given. In the case at bench, . . . . [T]he term of the contract [over a motor vehicle] was for thirty six (36) months at a "monthly rental" . . . (P1,689.40), or for a total amount of P60,821.28. The contract also contained [a] clause [requiring the Lessee to give a guaranty deposit in the amount of P20,800.00] . . . After the private respondent had paid the sum of P41,670.59, excluding the guaranty deposit of P20,800.00, he stopped further payments. Putting the two sums together, the financing company had in its hands the amount of P62,470.59 as against the total agreed "rentals" of P60,821.28 or an excess of P1,649.31. The respondent appellate court considered it only just and equitable for the guaranty deposit made by the private respondent to be applied to his arrearages and thereafter to hold the contract terminated. Adopting the ratiocination of the court a quo, the appellate court said: . . . In view thereof, the guaranty deposit of P20,800.00 made by the defendant should and must be credited in his favor, in the interest of fairness, justice and equity. The plaintiff should not be allowed to unduly enrich itself at the expense of the defendant. . . . This is even more compelling in this case where although the transaction, on its face, appear ostensibly, to be a contract of lease, it is actually a financing agreement, with the plaintiff financing the purchase of defendant's automobile . . . . The Court is constrained, in the interest of truth and justice, to go into this aspect of the transaction between the plaintiff and the defendant . . . . with all the facts and circumstances existing in this case, and which the court must consider in deciding the case, if it is to decide the case according to all the facts. . . . . TASCDI xxx xxx xxx Considering the factual findings of both the court a quo and the appellate court, the only logical conclusion is that the private respondent did opt, as he has claimed, to acquire the motor vehicle, justifying then the application of the guarantee deposit to the balance still due and obligating the petitioner to recognize it as an exercise of the option by the private respondent. The result would thereby entitle said respondent to the ownership and possession of the vehicle as the buyer thereof. We, therefore, see no reversible error in the ultimate judgment of the appellate court. 11 (Italics in the original; underscoring supplied and words in bracket added.) In Cebu Contractors Consortium Co. v. Court of Appeals, 12 the Court viewed and thus declared a financial lease agreement as having been simulated to disguise a simple loan with security, it appearing that the financing company purchased equipment already owned by a capital-strapped client, with the intention of leasing it back to the latter. In the present case, petitioner acquired the office equipment in question for their subsequent lease to the respondent, with the latter undertaking to pay a monthly fixed rental therefor in the total amount of P292,531.00, or a total of P10,531,116.00 for the whole 36 months. As a measure of good faith, respondent made an up-front guarantee deposit in the amount of P3,120,000.00. The basic agreement provides that in the event the respondent fails to pay any rental due or is in a default situation, then the petitioner shall have cumulative remedies, such as, but not limited to, the following: 13 1.Obtain possession of the property/equipment; 2.Retain all amounts paid to it. In addition, the guaranty deposit may be applied towards the payment of "liquidated damages"; 3.Recover all accrued and unpaid rentals;

4.Recover all rentals for the remaining term of the lease had it not been cancelled, as additional penalty; 5.Recovery of any and all amounts advanced by PCI LEASING for GIRAFFE's account . . .; 6.Recover all expenses incurred in repossessing, removing, repairing and storing the property; and, 7.Recover all damages suffered by PCI LEASING by reason of the default. AEIHCS In addition, Sec. 6.1 of the Lease Agreement states that the guaranty deposit shall be forfeited in the event the respondent, for any reason, returns the equipment before the expiration of the lease. At bottom, respondent had paid the equivalent of about a year's lease rentals, or a total of P3,510,372.00, more or less. Throw in the guaranty deposit(P3,120,000.00) and the respondent had made a total cash outlay of P6,630,372.00 in favor of the petitioner. The replevin-seized leased equipment had, as alleged in the complaint, an estimated residual value of P6,900,000.00 at the time Civil Case No. Q-98-34266 was instituted on May 4, 1998. Adding all cash advances thus made to the residual value of the equipment, the total value which the petitioner had actually obtained by virtue of its lease agreement with the respondent amounts to P13,530,372.00 (P3,510,372.00 + P3,120,000.00 + P6,900,000.00 = P13,530,372.00). The acquisition cost for both the Silicon High Impact Graphics equipment and the Oxberry Cinescan was, as stated in no less than the petitioner's letter to the respondent dated November 11, 1996 14 approving in the latter's favor a lease facility, was P8,100,000.00. Subtracting the acquisition cost of P8,100,000.00 from the total amount, i.e., P13,530,372.00, creditable to the respondent, it would clearly appear that petitioner realized a gross income of P5,430,372.00 from its lease transaction with the respondent. The amount of P5,430,372.00 is not yet a final figure as it does not include the rentals in arrears, penalties thereon, andinterest earned by the guaranty deposit. As may be noted, petitioner's demand letter 15 fixed the amount of P8,248,657.47 as representing the respondent's "rental" balance which became due and demandable consequent to the application of the acceleration and other clauses of the lease agreement. Assuming, then, that the respondent may be compelled to pay P8,248,657.47, then it would end up paying a total of P21,779,029.47 (P13,530,372.00 + P8,248,657.47 = P21,779,029.47) for its use for a year and two months at the most of the equipment. All in all, for an investment of P8,100,000.00, the petitioner stands to make in a year's time, out of the transaction, a total of P21,779,029.47, or a net of P13,679,029.47, if we are to believe its outlandish legal submission that the PCI LEASING-GIRAFFE Lease Agreement was an honest-to-goodness straight lease. TEHIaD A financing arrangement has a purpose which is at once practical and salutary. R.A. No. 8556 was, in fact, precisely enacted to regulate financing companies' operations with the end in view of strengthening their critical role in providing credit and services to small and medium enterprises and to curtail acts and practices prejudicial to the public interest, in general, and to their clienteles, in particular. 16 As a regulated activity, financing arrangements are not meant to quench only the thirst for profit. They serve a higher purpose, and R.A. No. 8556 has made that abundantly clear. We stress, however, that there is nothing in R.A. No. 8556 which defines the rights and obligations, as between each other, of the financial lessor and the lessee. In determining the respective responsibilities of the parties to the agreement, courts, therefore, must train a keen eye on the attendant facts and circumstances of the case in order to ascertain the intention of the parties, in relation to the law and the written agreement. Likewise, the public interest and policy involved should be considered. It may not be amiss to state that, normally, financing contracts come in a standard prepared form, unilaterally thought up and written by the financing companies requiring only the personal circumstances and signature of the borrower or lessee; the rates and other important covenants in these agreements are still largely imposed unilaterally by the financing companies. In other words, these agreements are usually one-sided in favor of such companies. A perusal of the lease agreement in question exposes the many remedies available to the petitioner, while there are only the standard contractual prohibitions against the respondent. This is characteristic of standard printed form contracts. There is more. In the adverted February 24, 1998 demand letter 17 sent to the respondent, petitioner fashioned its claim in the alternative: payment of the full amount of P8,248,657.47, representing the unpaid balance for the entire 36month lease period or the surrender of the financed asset under pain of legal action. To quote the letter: Demand is hereby made upon you to pay in full your outstanding balance in the amount of P8,248,657.47 on or before March 04, 1998 OR to surrender to us the one (1) set Silicon High Impact Graphics and one (1) unit Oxberry Cinescan 6400-10 . . . We trust you will give this matter your serious and preferential attention. (Emphasis added). AacDHE Evidently, the letter did not make a demand for the payment of the P8,248,657.47 AND the return of the equipment; only either one of the two was required. The demand letter was prepared and signed by Atty. Florecita R. Gonzales, presumably petitioner's counsel. As such, the use of "or" instead of "and" in the letter could hardly be treated as a simple typographical error, bearing in mind the nature of the demand, the amount involved, and the fact that it was made by a lawyer. Certainly Atty. Gonzales would have known that a world of difference exists between "and" and "or" in the manner that the word was employed in the letter. A rule in statutory construction is that the word "or" is a disjunctive term signifying dissociation and independence of one thing from other things enumerated unless the context requires a different interpretation. 18

In its elementary sense, "or", as used in a statute, is a disjunctive article indicating an alternative. It often connects a series of words or propositions indicating a choice of either. When "or" is used, the various members of the enumeration are to be taken separately. 19 The word "or" is a disjunctive term signifying disassociation and independence of one thing from each of the other things enumerated. 20 The demand could only be that the respondent need not return the equipment if it paid the P8,248,657.47 outstanding balance, ineluctably suggesting that the respondent can keep possession of the equipment if it exercises its option to acquire the same by paying the unpaid balance of the purchase price. Stated otherwise, if the respondent was not minded to exercise its option of acquiring the equipment by returning them, then it need not pay the outstanding balance. This is the logical import of the letter: that the transaction in this case is a lease in name only. The so-called monthly rentals are in truth monthly amortizations of the price of the leased office equipment. On the whole, then, we rule, as did the trial court, that the PCI LEASING-GIRAFFE lease agreement is in reality a lease with an option to purchase the equipment. This has been made manifest by the actions of the petitioner itself, foremost of which is the declarations made in its demand letter to the respondent. There could be no other explanation than that if the respondent paid the balance, then it could keep the equipment for its own; if not, then it should return them. This is clearly an option to purchase given to the respondent. Being so, Article 1485 of the Civil Code should apply. The present case reflects a situation where the financing company can withhold and conceal up to the last moment its intention to sell the property subject of the finance lease, in order that the provisions of the Recto Law may be circumvented. It may be, as petitioner pointed out, that the basic "lease agreement" does not contain a "purchase option" clause. The absence, however, does not necessarily argue against the idea that what the parties are into is not a straight lease, but a lease with option to purchase. This Court has, to be sure, long been aware of the practice of vendors of personal property of denominating a contract of sale on installment as one of lease to prevent the ownership of the object of the sale from passing to the vendee until and unless the price is fully paid. As this Court noted in Vda. de Jose v. Barrueco: 21 Sellers desirous of making conditional sales of their goods, but who do not wish openly to make a bargain in that form, for one reason or another, have frequently resorted to the device of making contracts in the form of leases either with options to the buyer to purchase for a small consideration at the end of term, provided the so-called rent has been duly paid, or with stipulations that if the rent throughout the term is paid, title shall thereupon vest in the lessee. It is obvious that such transactions are leases only in name. The so-called rent must necessarily be regarded as payment of the price in installments since the due payment of the agreed amount results, by the terms of the bargain, in the transfer of title to the lessee. HESAIT In another old but still relevant case of U.S. Commercial v. Halili, 22 a lease agreement was declared to be in fact a sale of personal property by installments. Said the Court: . . . There can hardly be any question that the so-called contracts of lease on which the present action is based were veritable leases of personal property with option to purchase, and as such come within the purview of the above article [Art. 1454-A of the old Civil Code on sale of personal property by installment]. . . . Being leases of personal property with option to purchase as contemplated in the above article, the contracts in question are subject to the provision that when the lessor in such case "has chosen to deprive the lessee of the enjoyment of such personal property," "he shall have no further action" against the lessee "for the recovery of any unpaid balance" owing by the latter, "agreement to the contrary being null and void." In choosing, through replevin, to deprive the respondent of possession of the leased equipment, the petitioner waived its right to bring an action to recover unpaid rentals on the said leased items. Paragraph (3), Article 1484 in relation to Article 1485 of the Civil Code, which we are hereunder re-reproducing, cannot be any clearer. ART. 1484.In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies: xxx xxx xxx (3)Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. DIEcHa ART. 1485.The preceding article shall be applied to contracts purporting to be leases of personal property with option to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing. As we articulated in Elisco Tool Manufacturing Corp. v. Court of Appeals, 23 the remedies provided for in Article 1484 of the Civil Code are alternative, not cumulative. The exercise of one bars the exercise of the others. This limitation applies

to contracts purporting to be leases of personal property with option to buy by virtue of the same Article 1485. The condition that the lessor has deprived the lessee of possession or enjoyment of the thing for the purpose of applying Article 1485 was fulfilled in this case by the filing by petitioner of the complaint for a sum of money with prayer for replevin to recover possession of the office equipment.24 By virtue of the writ of seizure issued by the trial court, the petitioner has effectively deprived respondent of their use, a situation which, by force of the Recto Law, in turn precludes the former from maintaining an action for recovery of "accrued rentals" or the recovery of the balance of the purchase price plus interest. 25 The imperatives of honest dealings given prominence in the Civil Code under the heading: Human Relations, provide another reason why we must hold the petitioner to its word as embodied in its demand letter. Else, we would witness a situation where even if the respondent surrendered the equipment voluntarily, the petitioner can still sue upon its claim. This would be most unfair for the respondent. We cannot allow the petitioner to renege on its word. Yet more than that, the very word "or" as used in the letter conveys distinctly its intention not to claim both the unpaid balance and the equipment. It is not difficult to discern why: if we add up the amounts paid by the respondent, the residual value of the property recovered, and the amount claimed by the petitioner as sued upon herein (for a total ofP21,779,029.47), then it would end up making an instant killing out of the transaction at the expense of its client, the respondent. The Recto Law was precisely enacted to prevent this kind of aberration. Moreover, due to considerations of equity, public policy and justice, we cannot allow this to happen. Not only to the respondent, but those similarly situated who may fall prey to a similar scheme. ETDAaC WHEREFORE, the instant petition is DENIED and the trial court's decision is AFFIRMED. Costs against petitioner. SO ORDERED.