CASES on SALES MARTINEZ vs CA, 56 SCRA 647 This is a petition for review by certiorari of the judgment of the Court

of Appeal which reverses the judgment of the Court of First Instance of Pampanga in favorof petitioners-appellants against the Secretary and Undersecretary of Public Works & Communicationsin the case instituted to annul the order directing the removal by the petitioners of the dikes they had constructedon Lot No. 15856 of the Register of Deeds of Pampanga; The spouses Romeo Martinez and Leonor Suarez, now petitioners-appellees, are the registered owners of two (2) parcels of land located in Lubao, Pampanga, covered by transfer certificate of title No.15856 of the Register of Deeds of the said province. Both parcels of land are fishponds. The property involved in the instant case is the second parcel mentioned in the above-named transfer certificate of title. The disputed property was originally owned by one Paulino Montemayor, who secured a "titulo real"over it way back in 1883. After the death of Paulino Montemayor the said property passed to hissuccessors-in-interest, Maria Montemayor and Donata Montemayor, who in turn, sold it, as well as thefirst parcel, to a certain Potenciano Garcia. chanroblesvirtualawlibrarychanrobles virtual lawlibrary Because Potenciano Garcia was prevented by the then municipal president of Lubao, Pedro Beltran,from restoring the dikes constructed on the contested property, the former, on June 22, 1914, filedCivil Case No. 1407 with the Court of First Instance against the said Pedro Beltran to restrain thelatter in his official capacity from molesting him in the possession of said second parcel, and on evendate, applied for a writ of preliminary injunction, which was issued against said municipal president.The Court, by decision promulgated June 12, 1916, declared permanent the preliminary injunction,which, decision, on appeal, was affirmed by the Supreme Court on August 21, 1918. From June 22,1914, the dikes around the property in question remained closed until a portion thereof was againopened just before the outbreak of the Pacific War. chanroblesvirtualawlibrarychanrobles virtual lawlibrary On April 17, 1925. Potenciano Garcia applied for the registration of both parcels of land in his name,and the Court of First Instance of Pampanga, sitting as land registration court, granted the registration over and against the opposition of the Attorney-General and the Director of Forestry. Pursuant to theCourt's decision, original certificate of title No. 14318, covering said parcels 1 and 2 was issued to thespouses Potenciano Garcia and Lorenza Sioson. chanroblesvirtualawlibrarychanrobles virtual law library These parcels of land were subsequently bought by Emilio Cruz de Dios in whose name transfercertificate of title No. 1421 was first issued on November 9, 1925. chanroblesvirtualawlibrarychanrobles virtual law library Thereafter, the ownership of these properties changed hands until eventually they were acquired bythe herein appellee spouses who hold them by virtue of transfer certificate of title No. 15856. chanroblesvirtualawlibrarychanrobles virtual law library To avoid any untoward incident, the disputants agreed to refer the matter to the Committee on Riversand Streams, by then composed of the Honorable Pedro Tuason, at that time Secretary of Justice, aschairman, and the Honorable Salvador Araneta and Vicente Orosa, Secretary of Agriculture andNational Resources and Secretary of Public Works and Communications, respectively, as members.This committee thereafter appointed a Sub-Committee to investigate the case and to conduct anocular inspection of the contested property, and on March 11, 1954, said Sub-Committee submitted itsreport to the Committee on Rivers and Streams to the effect that Parcel No. 2 of transfer certificate of title No. 15856 was not a public river but a private fishpond owned by the herein spouses.. Issue: WON THE COURT OF APPEALS ERRED IN ORDERING THE CANCELLATION OF THE REGISTRATION OF LOTNO. 2 OF TRANSFER CERTIFICATE OF TITLE NO. 15856 NOTWITHSTANDING THE FACT THAT THETORRENS TITLE COVERING IT HAS BEEN VESTED IN THE PETITIONERS WHO ARE THE SEVENTH OF THE SUCCESSIVE INNOCENT PURCHASERS THEREOF AND WHO IN PURCHASING THE SAME RELIEDON THE PRINCIPLE THAT THE PERSONS DEALING WITH REGISTERED LAND NEED NOT GO BEHINDTHE REGISTER TO DETERMINE THE CONDITION OF THE PROPERTY As regards the 3rd assignment of error, there is no weight in the appellants' argument that, being a purchaser for value and in good faith of Lot No. 2, the nullification of its registration would be contrary to the law and to the applicable decisions of the Supreme Court as it would destroy the stability of the title which is the core of the system of registration. Appellants cannot be deemed purchasers for value and in good faith because before purchasing a parcel of land, it cannot be contended that the appellants who were the vendees did not know exactly the condition of the land that they were buying and the obstacles or restrictions thereon that may be put up by the government in connection with their project of converting Lot No. 2 in question

into a fishpond. Nevertheless, they willfully and voluntarily assumed the risks attendant to the sale of said lot. One who buys something with knowledge of defect or lack of title in his vendor cannot claim that he acquired it in good faith. The ruling is that a purchaser of a registered property cannot go beyond the record to make inquiries as to the legality of the title of the registered owner, but may rely on the registry to determine if there is no lien or encumbrances over the same, cannot be availed of as against the law and the accepted principle that rivers are parts of the public domain for public use and not capable of private appropriation or acquisition by prescription. FOR ALL THE FOREGOING, the judgment of the Court of Appeals appealed from is in accordance withlaw, and the same is hereby affirmed with costs against the petitioners-appellants. it was held that the incontestable and indefeasible character of a Torrens certificate of title does not operate when the land covered thereby is not capable of registration. It is, therefore, clear that the authorities cited by the appellants as to the conclusiveness and incontestability of a Torrens certificate of title do not apply here. The Land Registration Court has no jurisdiction over non-registerable properties, such as public navigable rivers which are parts of the public domain, and cannot validly adjudge the registration of title in favor of a private applicant. Hence, the judgment of the Court of First Instance of Pampanga as regards the Lot No. 2 of Certificate of Title No. 15856 in the name of petitioners-appellants may be attacked at any time, either directly or collaterally, by the State which is not bound by any prescriptive period provided for by the Statute of Limitations (Article 1108, par. 4, new Civil Code). The right of reversion or reconveyance to the Stateof the public properties fraudulently registered and which are not capable of private appropriation orprivate acquisition does not prescribe. (Republic v. Ramona Ruiz, et al., G.R. No. L-23712, April 29,1968, 23 SCRA 348; Republic v. Ramos, G.R. No.L-15484, January 31, 1963, 7 SCRA 47.) When it comes to registered properties, the jurisdiction of the Secretary of Public Works & Communications under Republic Act 2056 to order the removal or obstruction to navigation along public and navigable creek or river included therein, has been definitely settled and is no longer open to question. Melliza v. Iloilo City [G.R. No. L-24732. April 30, 1968.] Facts: Juliana Melliza during her lifetime owned, among other properties, 3 parcels of residential land in Iloilo City (OCT 3462). Said parcels of land were known as Lots Nos. 2, 5 and 1214. The total area of Lot 1214 was 29,073 sq. m. On 27 November 1931 she donated to the then Municipality of Iloilo, 9,000 sq. m. of Lot 1214, to serve as site for the municipal hall. The donation was however revoked by the parties for the reason that the area donated was found inadequate to meet the requirements of the development plan of the municipality, the so- called Arellano Plan. Subsequently, Lot 1214 was divided by Certeza Surveying Co., Inc. into Lots 1214-A and 1214-B. And still later, Lot 1214-B was further divided into Lots 1214-B-1, Lot 1214-B-2 and Lot 1214-B-3. As approved by the Bureau of Lands, Lot 1214-B-1, with 4,562 sq. m., became known as Lot 1214-B; Lot 1214B-2, with 6,653 sq. m., was designated as Lot 1214-C; and Lot 1214-B-3, with 4,135 sq. m., became Lot 1214-D. On 15 November 1932, Juliana Melliza executed an instrument without any caption providing for the absolute sale involving all of lot 5, 7669 sq. m. of Lot 2 (sublots 2-B and 2-C), and a portion of 10,788 sq. m. of Lot 1214 (sublots 1214-B2 and 1214-B3) in favor of the Municipal Government of Iloilo for the sum of P6,422; these lots and portions being the ones needed by the municipal government for the construction of avenues, parks and City hall site according the Arellano plan. On 14 January 1938, Melliza sold her remaining interest in Lot 1214 to Remedios Sian Villanueva (thereafter TCT 18178). Remedios in turn on 4 November 1946 transferred her rights to said portion of land to Pio Sian Melliza (thereafter TCT 2492). Annotated at the back of Pio Sian Mellizas title certificate was the following that a portion of 10,788 sq. m. of Lot 1214 now designated as Lots 1412-B-2 and 1214-B-3 of the subdivision plan belongs to the Municipality of Iloilo as per instrument dated 15 November 1932. On 24 August 1949 the City of Iloilo, which succeeded to the Municipality of Iloilo, donated the city hall site together with the building thereon, to the University of the Philippines (Iloilo branch). The site donated consisted of Lots 1214-B, 1214-C and 1214-D, with a total area of 15,350 sq. m., more or less. Sometime in 1952, the University of the Philippines enclosed the site donated with a wire fence. Pio Sian Melliza thereupon made representations, thru his lawyer, with the city authorities for payment of the value of the lot (Lot 1214-B). No recovery was obtained, because as alleged by Pio Sian Melliza, the City did not have funds. The University of the Philippines, meanwhile, obtained Transfer Certificate of Title No. 7152 covering the three lots, Nos. 1214-B, 1214-C and 1214-D. On 10 December 1955 Pio Sian Melizza filed an action in the CFI Iloilo against Iloilo City and the University of the Philippines for recovery of Lot 1214-B or of its value. After stipulation of facts and trial, the CFI rendered its decision on 15 August 1957, dismissing the complaint. Said court ruled that the instrument executed by Juliana Melliza in favor of Iloilo municipality included in the conveyance Lot 1214-B, and thus it held that Iloilo City had the right to donate Lot 1214-B to UP. Pio Sian Melliza appealed to the Court of Appeals. On 19 May 1965, the CA affirmed the interpretation of the CFI that the portion of Lot 1214 sold by

Juliana Melliza was not limited to the 10,788 square meters specifically mentioned but included whatever was needed for the construction of avenues, parks and the city hall site. Nonetheless, it ordered the remand of the case for reception of evidence to determine the area actually taken by Iloilo City for the construction of avenues, parks and for city hall site. Hence, this appeal. The Supreme Court affirmed the decision appealed from insofar as it affirms that of the CFI, and dismissed the complaint; without costs. 1. Interpretation of contract involves question of law The interpretation of the public instrument dated 15 November 1932 involves a question of law, since the contract is in the nature of law as between the parties and their successors in interest. 2. Intent of the parties as to the object of the public instrument The paramount intention of the parties was to provide Iloilo municipality with lots sufficient or adequate in area for the construction of the Iloilo City hall site, with its avenues and parks. For this matter, a previous donation for this purpose between the same parties was revoked by them, because of inadequacy of the area of the lot donated. Said instrument described 4 parcels of land by their lot numbers and area; and then it goes on to further describe, not only those lots already mentioned, but the lots object of the sale, by stating that said lots were the ones needed for the construction of the city hall site, avenues and parks according to the Arellano plan. If the parties intended merely to cover the specified lots (Lots 2, 5, 1214-C and 1214-D), there would scarcely have been any need for the next paragraph, since these lots were already plainly and very clearly described by their respective lot number and areas. Said next paragraph does not really add to the clear description that was already given to them in the previous one. It is therefore the more reasonable interpretation to view it as describing those other portions of land contiguous to the lots that, by reference to the Arellano plan, will be found needed for the purpose at hand, the construction of the city hall site. 3. Requirement, that sale must have a determinate thing as object, is fulfilled if object of sale is capable of being made determinate at the time of the contract The requirement of the law that a sale must have for its object a determinate thing, is fulfilled as long as, at the time the contract is entered into, the object of the sale is capable of being made determinate without the necessity of a new or further agreement between the parties (Art. 1273, old Civil Code; Art. 1460, New Civil Code). The specific mention of some of the lots plus the statement that the lots object of the sale are the ones needed for city hall site; avenues and parks, according to the Arellano plan, sufficiently provides a basis, as of the time of the execution of the contract, for rendering determinate said lots without the need of a new and further agreement of the parties. 4. Arellano plan in existence since 1928; Area of land needed for the city hall site known The Arellano plan was in existence as early as 1928. The previous donation of land for city hall sit on 27 November 1931 was revoked on 6 March 1932 for being inadequate in area under said Arellano plan. The area needed under that plan for city hall site was then already known; that the specific mention of some of the lots covered by the sale in effect fixed the corresponding location of the city hall site under the plan; that, therefore, considering the said lots specifically mentioned in the public instrument, and the projected city hall site, with its area, as then shown in the Arellano plan (Exhibit 2), it could be determined which, and how much of the portions of land contiguous to those specifically named, were needed for the construction of the city hall site. 5. Lot 1214-B is contiguous to Lot 1214-C and 1214-D, and is in the heart of the city hall site Lot 1214-B is contiguous to Lots 1214-C and 1214-D, admittedly covered by the public instrument. It is stipulated that, after execution of the contract, the Municipality of Iloilo possessed it together with the other lots sold. It sits practically in the heart of the city hall site. 6. Pio Sian Melliza a notary public and thus aware of the terms of the public instrument Pio Sian Melliza, from the stipulation of facts, was the notary public of the public instrument. As such, he was aware of its terms. Said instrument was also registered with the Register of Deeds and such registration was annotated at the back of the corresponding title certificate of Juliana Melliza. From these stipulated facts, it can be inferred that Pio Sian Melliza knew of the aforesaid terms of the instrument or is chargeable with knowledge of them; that knowing so, he should have examined the Arellano plan in relation to the public instrument; that furthermore, he should have taken notice of the possession first by the Municipality of Iloilo, then by the City of Iloilo and later by the University of the Philippines of Lot 1214-B as part of the city hall site conveyed under that public instrument, and raised proper objections thereto if it was his position that the same was not included in the same. 7. Principles of civil law, as well as laches, estoppel and equity applied; Lot included in conveyance

For 20 long years, Pio Sian Melliza and his predecessors-in-interest, did not object to said possession, nor exercise any act of possession over Lot 1214-B. Applying, therefore, principles of civil law, as well as laches, estoppel, and equity, said lot must necessarily be deemed included in the conveyance in favor of Iloilo municipality, now Iloilo City. Pichel v. Alonzo [G.R. No. L-36902. January 30, 1982.] First Division, Guerrero (J): 5 concur Facts: Prudencio Alonzo was awarded by the Government that parcel of land designated as Lot 21 of Subdivision Plan Psd-32465 of Balactasan, Lamitan, Basilan City in accordance with RA 477. The award was cancelled by the Board of Liquidators on 27 January 1965 on the ground that, previous thereto, Alonzo was proved to have alienated the land to another, in violation of law. In 1972, Alonzos rights to the land were reinstated. On 14 August 1968, Alonzo and his wife sold to Pichel through a deed of sale all the fruits of the coconut trees which may be harvested in the land for the period, from 15 September 1968 to 1 January 1976, in consideration of P4,200.00. It was further stipulated that the vendors right, title, interest and participation herein conveyed is of his own exclusive and absolute property, free from any liens and encumbrances and he warrants to the Vendee good title thereto and to defend the same against any and all claims of all persons whomsoever. Even as of the date of sale, however, the land was still under lease to one Ramon Sua, and it was the agreement that part of the consideration of the sale, in the sum of P3,650.00, was to be paid by Pichel directly to Ramon Sua so as to release the land from the clutches of the latter. Pending said payment Alonzo refused to allow the Pichel to make any harvest. In July 1972, Pichel for the first time since the execution of the deed of sale in his favor, caused the harvest of the fruit of the coconut trees in the land. Alonzo filed an action for the annulment of a Deed of Sale before the CFI Basilan City. On 5 January 1973, the lower court rendered its decision holding that although the agreement in question is denominated by the parties as a deed of sale of fruits of the coconut trees found in the vendors land, it actually is, for all legal intents and purposes, a contract of lease of the land itself; an encumbrance prohibited under RA 477. The court thus held that the deed of sale is null and void, and ordered Alonzo to pay back Pichel the consideration of the sale in the sum of P4,200 with interests from the date of the filing of the complaint until paid, and Pichel to pay the sum of P500.00 as attorneys fees; with costs against Pichel. Hence, the petition to review on certiorari was raised before the Supreme Court. The Supreme Court set aside the judgment of the lower court and entered another dismissing the complaint; without costs. 1. Vendor grantee under RA 477, and could exercise all the rights pertaining thereto, following ruling in Ras v. Sua In Ras vs. Sua, it was categorically stated that a cancellation of an award granted pursuant to the provisions of RA 477 does not automatically divest the awardee of his rights to the land. Such cancellation does not result in the immediate reversion of the property subject of the award, to the State. Until and unless an appropriate proceeding for reversion is instituted by the State, and its reacquisition of the ownership and possession of the land decreed by a competent court, the grantee cannot be said to have been divested of whatever right that he may have over the same property. In the present case, there is nothing in the record to show that at any time after the supposed cancellation of the award on 27 January 1965, reversion proceedings against Lot 21 were instituted by the State. Instead, the admitted fact is that the award was reinstated in 1972. Applying the doctrine announced in the Ras case, therefore, Alonzo is not deemed to have lost any of his rights as grantee of Lot 21 under RA 477 during the period material to the present case, i.e., from the cancellation of the award in 1965 to its reinstatement in 1972. Within said period, Alonzo could exercise all the rights pertaining to a grantee with respect to Lot 21. 2. Court to apply the contract according to its express terms The first and fundamental duty of the courts is the application of the contract according to its express terms, interpretation being resorted to only when such literal application is impossible. 3. Contract clear and unequivocal; Construction or interpretation of document not called for Construction or interpretation of the document in question is not called for. A perusal of the deed fails to disclose any ambiguity or obscurity in its provisions, nor is there doubt as to the real intention of the contracting parties. The terms of the agreement are clear and unequivocal, hence the literal and plain meaning thereof should be observed. Such is the mandate of the Civil Code of the Philippines which provides that if the terms of a contract ar e clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulation shall control. In the present case, the Deed of Sale dated 14 August 1968 is precisely what it purports to be. It is a document evidencing the agreement of herein parties for the sale of coconut fruits of Lot 21, and not for the lease of the land itself. In clear and express terms, the document defines the object of the contract thus: the herein sale of coconut fruits are for all the fruits on the aforementioned parcel of land during the years from 15 September 1968; up to 1 January 1976. 4. Contract of sale valid, essential elements valid The document in question expresses a valid contract of sale as it has the essential elements of a contract of sale as defined under Article 1458 of the New Civil Code. Article 1458 provides that 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, and that a contract of sale may be absolute or conditional. The subject matter of the contract of sale are the fruits of the coconut trees on the land during the years from 15 September 1968 up to 1 January 1976, which subject matter is a determinate thing. 5. Things having potential existence may be the object of the contract of sale Under Article 1461 of the New Civil Code, things having a potential existence may be the object of the contract of sale. A valid sale may be made of a thing, which though not yet actually in existence, is reasonably certain to come into existence as the natural increment or usual incident of something already in existence, and then belonging to the vendor, and the title will vest in the buyer the moment the thing comes into existence (Emerson vs. European Railway Co., 67 Me., 387; Cutting vs. Packers Exchange, 21 Am. St. Rep., 63). Things of this nature are said to have a potential existence. A man may sell property of which he is potentially and not actually possessed. He may make a valid sale of the wine that a vineyard is expected to produce; or the grain a fieldmay grow in a given time; or the milk a cow may yield during the coming year; or the wool that shall thereafter grow upon sheep; or what may be taken at the next case of a fishermans net; or fruits to grow; or young animals not yet in existence; or the good will of a trade and the like. The thing sold, however, must be specific and identified. They must be also owned at the time by the vendor (Hull vs. Hull, 48 Conn., 250; 40 Am. Rep., 165) pp. 522-523). Thus, pending crops which have potential existence may be the subject matter of sale (Sibal vs. Valdez, 50 Phil. 512). 6. Contract of sale and lease of things distinguished The essential difference between a contract of sale and a lease of things is that the delivery of the thing sold transfers ownership, while in lease no such transfer of ownership results as the rights of the lessee are limited to the use and enjoyment of the thing leased. In the present case, the lower courts holding that the contract in question fits the definition of a lease of things wherein one of the parties binds himself to give to another the enjoyment or use of a thing for a price certain and for a period which may be definite or indefinite (Art. 1643, Civil Code of the Philippines) is erroneous. 7. Contract of lease, enjoyment of property Article 1543 of the Civil Code defines the contract of lease as the giving or the concession of the enjoyment or use of a thing for a specified time and fixed price, and since such contract is a form of enjoyment of the property, it is evident that it must be regarded as one of the means of enjoyment referred to in said Article 398, inasmuch as the terms enjoyment, use, and benefit involve the same and analogous meaning relative to the general utility of which a given thing is capable. (104 Jurisprudencia Civil, 443; Rodriguez vs. Borromeo, 43 Phil. 479, 490). 8. Transfer of accessory does not transfer principal The possession and enjoyment of the coconut trees cannot be said to be the possession and enjoyment of the land itself because these rights are distinct and separate from each other, the first pertaining to the accessory or improvements (coconut trees) while the second, to the principal (the land). A transfer of the accessory or improvement is not a transfer of the principal. It is the other way around, the accessory follows the principal. In the present case, the sale of the nuts cannot be interpreted nor construed to be a lease of the trees, much less extended further to include the lease of the land itself. In cannot be said that the possession and enjoyment of the coconut trees to be the possession and enjoyment of the land itself because the lessee in order to enjoy his right under the contract, he actually takes possession of the land, at least during harvest time, gathers all of the fruits of the coconut trees in the land, and gains exclusive use thereof without the interference or intervention of the lessor. Yu Tek v. Gonzales [G.R. No. 9935. February 1, 1915.] First Division, Trent (J): 4 concur, 1 dissents Facts: A written contract was executed between Basilio Gonzalez and Yu Tek and Co., where Gonzales was obligated to deliver 600 piculs of sugar of the 1st and 2nd grade to Yu Tek, within the period of 3 months (1 January-31 March 1912) at any place within the municipality of Sta. Rosa, which Yu Tek & Co. or its representative may designate; and in case, Gonnzales does not deliver, the contract will be rescinded and Gonzales shall be obligated to return the P3,000 received and also the sum of P1,200 by way of indemnity for loss and damages. No sugar had been delivered to Yu Tek & Co. under this contract nor had it been able to recover the P3,000. Yu Tek & Co. filed a complaint against Gonzales, and prayed for judgment for the P3,000 and the additional P1,200. Judgment was rendered for P3,000 only, and from this judgment both parties appealed. The Supreme Court affirmed the judgment appealed from with the modification allowing the recovery of P1,200 under paragraph 4 of the contract, without costs. 1. Rights determined by the writing itself Parties are presumed to have reduced to writing all the essential conditions of their contract. The rights of the parties must be determined by the writing itself.

2. Parol evidence not admissible as it should not serve to incorporate additional conditions into a contract While parol evidence is admissible in a variety of ways to explain the meaning of written contracts, it cannot serve the purpose of incorporating into the contract additional contemporaneous conditions which are not mentioned at all in the writing, unless there has been fraud or mistake. In the present case, Gonzales alleged that the court erred in refusing to permit parol evidence showing that the parties intended that the sugar was to be secured from the crop which the defendant raised on his plantation, and that he was unable to fulfill the contract by reason of the almost total failure of his crop. The case appears to be one to which the rule which excludes parol evidence to add to or vary the terms of a written contract is decidedly applicable. There is not the slightest intimation in the contract that the sugar was to be raised by Gonzales. In the contract, Gonzales undertook to deliver a specified quantity of sugar within a specified time. The contract placed no restriction upon him in the matter of obtaining the sugar, as he was at liberty to purchase it on the market or raise it himself, notwithstanding that he owned a plantation himself. 3. Cases where parol evidence was denied by the Court In Pastor v. Gaspar (2 Phil 592) the Court declined to allow parol evidence showing that a party to a written contract was to become a partner in a firm instead of a creditor of the firm. In Eveland vs. Eastern Mining Co. (14 Phil 509) a contract of employment provided that the plaintiff should receive from the defendant a stipulated salary and expenses The defendant in said case sought to interpose as a defense to recovery that the payment of the salary was contingent upon the plaintiffs employment redounding to the benefit of the defendant company. The contract contained no such condition and the court declined to receive parol evidence thereof. 4. Perfected contract of sale defined; Relief for non-delivery Article 1450 defines a perfected sale as follows: The sale shall be perfected between vendor and vendee and shall be binding on both of them, if they have agreed upon the thing which is the object of the contract and upon the price, even when neither has been delivered. Article 1452 provides that the injury to or the profit of the thing sold shall, after the contract has been perfected, be governed by the provisions of articles 1096 and 1182. There is a perfected sale with regard to the thing whenever the article of sale has been physically segregated from all other articles. 5. Perfected sale; Cases In McCullough vs. Aenlle & Co. (3 Phil 285), a particular tobacco factory with its contents was held sold under a contract which did not provide for either delivery of the price or of the thing until a future time. In Barretto vs. Santa Marina (26 Phil 200), specified shares of stock in a tobacco factory were held sold by a contract which deferred delivery of both the price and the stock until the latter had been appraised by an inventory of the entire assets of the company. In Borromeo vs. Franco (5 Phil. Rep., 49) a sale of a specific house was held perfected between the vendor and vendee, although the delivery of the price was withheld until the necessary documents of ownership were prepared by the vendee. In Tan Leonco vs. Go Inqui (8 Phil. Rep., 531) the plaintiff had delivered a quantity of hemp into the warehouse of the defendant. The defendant drew a bill of exchange in the sum of P800, representing the price which had been agreed upon for the hemp thus delivered. Prior to the presentation of the bill for payment, in said case, the hemp was destroyed. Whereupon, the defendant suspended payment of the bill. It was held that the hemp having been already delivered, the title had passed and the loss was the vendees. It is our purpose to distinguish the case at bar from all these cases. 6. Contract in present case merely an executory agreement: a promise of sale and not a sale The contract in the present case was merely an executory agreement; a promise of sale and not a sale. As there was no perfected sale, it is clear that articles 1452, 1096, and 1182 are not applicable. The agreement upon the thing which was the object of the contract was not within the meaning of article 1450. Sugar is one of the staple commodities of this country. For the purpose of sale its bulk is weighed, the customary unit of weight being denominated a picul. There was no delivery under the contract. If called upon to designate the article sold, it is clear that Gonzales could only say that it was sugar. He could only use this generic name for the thing sold. There was no appropriation of any particular lot of sugar. Neither party could point to any specific quantity of sugar. 7. Present case different from cases cited with perfected contracts The contract in the present case is different from the contracts discussed in the cases referred to. In the McCullough case, for instance, the tobacco factory which the parties dealt with was specifically pointed out and distinguished from all other tobacco factories. So, in the Barretto case, the particular shares of stock which the parties desired to transfer were capable of designation. In the Tan Leonco case, where a quantity of hemp was the subject of the contract, it was shown that quantity had been deposited in a specific warehouse, and thus set apart and distinguished from all other hemp. 8. American jurisprudence; Executory contracts In Witt Shoe Co. vs. Seegars & Co. (122 La., 145; 47 Sou., 444), a contract was entered into by a traveling salesman for a quantity of shoes, the sales having been made by sample. Since Mitchell was offering to sell by sample shoes, part of which had

not been manufactured and the rest of which were incorporated in Witt Shoe Co.s stock in Lynchburg, Va., it was impossible that he and Seegars & Co. should at that time have agreed upon the specific objects, the title to which was to pass, and hence there could have been no sale. In State vs. Shields, et al. (110 La., 547, 34 Sou., 673), it was held that in receiving an order for a quantity of goods, of a kind and at a price agreed on, to be supplied from a general stock, warehoused at another place, the agent receiving the order merely enters into an executory contract for the sale of the goods, which does not divest or transfer the title of any determinate object, and which becomes effective for that purpose only when specific goods are thereafter appropriated to the contract; and, in the absence of a more specific agreement on the subject, that such appropriation takes place only when the goods as ordered are delivered to the public carriers at the place from which they are to be shipped, consigned to the person by whom the order is given, at which time and place, therefore, the sale is perfected and the title passes. 9. American jurisprudence: Recovery of payment; Applicability to present case In Larue & Prevost vs. Rugely, Blair & Co. (10 La. Ann., 242), the defendants therein had made a contract for the sale, by weight, of a lot of cotton, had received $3,000 on account of the price, and had given an order for its delivery, which had been presented to the purchaser, and recognized by the press in which the cotton was stored, but that the cotton had been destroyed by fire before it was weighed. It was held that it was still at the risk of the seller, and that the buyer was entitled to recover the $3,000 paid on account of the price. Similarly, in the present case, Gonzales having defaulted in his engagement, Yu Tek & Co. is entitled to recover the P3,000 which it advanced to Gonzales. 10. Contracting parties free to stipulate; Stipulation clear, no room for interpretation; Liquidated damage The contract plainly states that if Gonzales fails to deliver the 600 piculs of sugar within the timeagreed on, the contract will be rescinded and he will be obliged to return the P3,000 and pay the sum of P1,200 by way of indemnity for loss and damages. There cannot be the slightest doubt about the meaning of this language or the intention of the parties. There is no room for either interpretation or construction. Under the provisions of article 1255 of the Civil Code contracting parties are free to execute the contracts that they may consider suitable, provided they are not in contravention of law, morals, or public order. In our opinion there is nothing in the contract under consideration which is opposed to any of these principles. Thus, this is a clear case of liquidated damages. Atilano vs. Atilano, 28 SCRA 231 When Deed of Sale is merely an Evidence of the Contract Eulogio acquired by purchase lot 535. Thereafter, he obtained a transfer certificate of title in his name. A few years later, he had the land subdivided into five parts. After the subdivision had been effected, he executed a deed of sale in favor of his brother supposedly covering lot 535-E. His brother thereupon obtained a transfer of certificate in his name. But even prior to the execution of the sale, the brother had possession of the subject property and had built his house thereon. Years later, when the heirs of the brother had his lots resurveyed for subdivision, it was discovered that the land they were occupying on the strength of the deed of sale was not lot 535-E, but actually lot 535-A. On the other had, the lot which Eulogio was occupying as residence was actually 535-E. The brothers heirs filed an action in court seeking possession of the real lot 535-E, which had a bigger lot area. The court held that the object of the sale was actually 535-A, although the deed of sale referred to lot 535-E. there was only a mistake in designating the particular lot to be sol in the instrument, which mistake was deemed pro forma and did not vitiate the consent of the parties or affect the validity and binding effect of the contract of sale. The reason is that when one seeks to sell or buy a real property, one sells or buys the property as he sees it in its actual setting and by its physical metes and bounds, and not by the mere lot number assigned to it in the certificate of title. It was clear that when the brothers entered into a contract they were referring to lot 535-A because even before that, the brother had already been occupying said lot as his residence. Atilano emphasizes the point that the true contract of sale is intangible or properly a legal concept. The deed of sale is merely an evidence of the contract. And when the deed fails to cover the real contract or the true meeting of the minds of the parties, then the deed must give way to the real contract of the parties. The defect in the final deed would not work to invalidate the contract where all the essential elements for its validity are present ad can be proven. Case of Luis Pichel vs. Prudencio Alonzo G.R.No. L- 36902 30January1982 FACTS OF THE CASE: That Prudencio Alonzo (VENDOR) executed a deed of sale for the coconut fruits of his land in Balactasan Plantation in Lamitan, Basilan, in favor of Luis Pichel (VENDEE). The land from which the subject coconut fruits are derived from was

subjected to a cancellation of the award in 1965, due to the reason of violation of the law that disallows alienation of land (the vendors rights to the land were reinstated in 1972) The vendor and his wife sold to the vendee the fruits of the coconut trees from 1968 to 1976 for consideration of 4,200. Even during the date of sale, the land was still leased to one Ramon Sua, and it was part of the agreement of the sale that the sum of 3,650.00 was to be paid by the vendor to Ramon Sua as to release the land. The RTC decided in favor of the vendor, due to the fact that the deed of sale that was executed was invalid, due to its supposed violation of RA No. 477, in which they equated the deed of sale executed by the parties as a contract of lease. ISSUES OF THE CASE:Was the Deed of Sale valid? - Yes, The RTC erred in constructing the deed of sale as a contract of lease. - There was no need on the part of the RTC to interpret the contract, since there was no ambiguity, it merely contracts the sale of the fruits of the land, not the land itself. - The S.C. relied upon ART 1370 of the Civil Code, regarding the rule on interpreting contracts. - Its interpretation in express form is the preferred. Construction shall be employed when such literal interpretation is impossible. - The possession of the coconut fruits for 7 years is different from possession of the land, since the coconut fruits are mere accessories and the land is the principal- a transfer of accessories does not necessarily mean a transfer of principal, it is the other way around. - The vendor after having received the consideration for the sale of his coconut fruits cannot be allowed to impugn the validity of the contracts he entered into, to the prejudice of petitioner who contracted in good faith and consideration HELD: The Judgment of the lower court has been set aside, and another one entered in its place, dismissing the complaint. Obligations and Contracts Terms: Difference between a contract of sale and a lease of things: that the delivery of the thing sold transfers ownership, while in a lease no such transfer of ownership results as the rights of the lessee are limited to the use and enjoyment of the thing leased. Contract of Lease- defined as giving or the concession of the enjoyment or use of a thing for a specified time and fixed price. Pichel vs. Alonzo 111 SCRA 341 Facts: This case originated in the lower Court as an action for the annulment of a "Deed of Sale" dated August 14, 1968 and executed by Prudencio Alonzo, as vendor, in favor of Luis Pichel, as vendee, involving property awarded to the former by the Philippine Government under Republic Act No. 477. That the sale of the coconut fruits are for all the fruits on the aforementioned parcel of land presently found therein as well as for future fruits to be produced on the said parcel of land during the years period; which shall commence to run as of SEPTEMBER 15,1968; up to JANUARY 1, 1976. In July 1972, defendant for the first time since the execution of the deed of sale in his favor, caused the harvest of the fruit of the coconut trees in the land. Issue: Whether or not the agreement in question is denominated by the parties as a deed of sale of fruits of the coconut trees found in the vendor's land or it actually is, for all legal intents and purposes, a contract of lease of the land itself? Held: The Supreme Court ruled that construction or interpretation of the document in question is not called for. A perusal of the deed failed to disclose any ambiguity or obscurity in its provisions, nor is there doubt as to the real intention of the contracting parties. The terms of the agreement are clear and unequivocal, hence the literal and plain meaning thereof should be observed. Such is the mandate of the Civil Code of the Philippines which provides that: Art. 1370. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulation shall control. Pursuant to the afore-quoted legal provision, the first and fundamental duty of the courts is the application of the contract according to its express terms, interpretation being resorted to only when such literal application is impossible. The provisions of the contract itself and its characteristics govern its nature. Simply and directly stated, the "Deed of Sale dated August 14, 1968 is precisely what it purports to be. It is a document evidencing the agreement of herein parties for the sale of coconut fruits of Lot No. 21, and not for the lease of the land itself as found by the lower Court. In clear and express terms, the document defines the object of the contract thus: "the herein sale of the coconut fruits are for the fruits on the aforementioned parcel of land during the years (from) SEPTEMBER 15, 1968; up to JANUARY 1, 1976." Moreover, as petitioner correctly asserts, the document in question expresses a valid contract of sale. It has the essential elements of a contract of sale as defined under Article 1485 of the New Civil Code which provides thus: Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefore a price certain in money or its equivalent.