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Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-26872 July 25, 1975
VILLONCO REALTY COMPANY, plaintiff-appellee and EDITH PEREZ DE TAGLE,
intervenor-appellee,
vs.
BORMAHECO, INC., FRANCISCO N. CERVANTES and ROSARIO N.
CERVANTES, defendants-appellants. Meer, Meer & Meer for plaintiff-appellee.
J. Villareal, Navarro and Associates for defendants-appellants.
P. P. Gallardo and Associates for intervenor-appellee.
AQUINO, J.:
This action was instituted by Villonco Realty Company against Bormaheco, Inc. and
the spouses Francisco N. Cervantes and Rosario N. Cervantes for the specific
performance of a supposed contract for the sale of land and the improvements
thereon for one million four hundred thousand pesos. Edith Perez de Tagle, as agent,
intervened in order to recover her commission. The lower court enforced the sale.
Bormaheco, Inc. and the Cervantes spouses, as supposed vendors, appealed.
This Court took cognizance of the appeal because the amount involved is more than
P200,000 and the appeal was perfected before Republic Act No. 5440 took effect on
September 9, 1968. The facts are as follows:
Francisco N. Cervantes and his wife, Rosario P. Navarra-Cervantes, are the owners
of lots 3, 15 and 16 located at 245 Buendia Avenue, Makati, Rizal with a total area of
three thousand five hundred square meters (TCT Nos. 43530, 43531 and 43532, Exh.
A, A-1 and A-2). The lots were mortgaged to the Development Bank of the Phil (DBP)
on April 21, 1959 as security for a loan of P441,000. The mortgage debt was fully paid
on July 10, 1969.
Cervantes is the president of Bormaheco, Inc., a dealer and importer of industrial and
agricultural machinery. The entire lots are occupied by the building, machinery and
equipment of Bormaheco, Inc. and are adjacent to the property of Villonco Realty
Company situated at 219 Buendia Avenue.
In the early part of February, 1964 there were negotiations for the sale of the said lots
and the improvements thereon between Romeo Villonco of Villonco Realty Company
"and Bormaheco, Inc., represented by its president, Francisco N. Cervantes, through
the intervention of Edith Perez de Tagle, a real estate broker".
In the course of the negotiations, the brothers Romeo Villonco and Teofilo Villonco
conferred with Cervantes in his office to discuss the price and terms of the sale. Later,
Cervantes "went to see Villonco for the same reason until some agreement" was
arrived at. On a subsequent occasion, Cervantes, accompanied by Edith Perez de
Tagle, discussed again the terms of the sale with Villonco.
During the negotiations, Villonco Realty Company assumed that the lots belonged to
Bormaheco, Inc. and that Cervantes was duly authorized to sell the same. Cervantes
did not disclose to the broker and to Villonco Realty Company that the lots were
conjugal properties of himself and his wife and that they were mortgaged to the DBP.
Bormaheco, Inc., through Cervantes, made a written offer dated February 12, 1964,
to Romeo Villonco for the sale of the property. The offer reads (Exh. B):
BORMAHECO, INC.

February 12,1964
Mr. Romeo
Villonco Villonco Building
Buendia Avenue
Makati, Rizal.
Dear Mr. Villonco:
This is with reference to our telephone conversation this noon on the matter of the
sale of our property located at Buendia Avenue, with a total area of 3,500 sq. m.,
under the following conditions:
(1) That we are offering to sell to you the above property at the price of P400.00 per
square meter;
(2) That a deposit of P100,000.00 must be placed as earnest money on the purchase
of the above property which will become part payment of the property in the event
that the sale is consummated;
(3) That this sale is to be consummated only after I shall have also consummated my
purchase of another property located at Sta. Ana, Manila;
(4) That if my negotiations with said property will not be consummated by reason
beyond my control, I will return to you your deposit of P100,000 and the sale of my
property to you will not also be consummated; and
(5) That final negotiations on both properties can be definitely known after 45 days.
If the above terms is (are) acceptable to your Board, please issue out the said earnest
money in favor of Bormaheco, Inc., and deliver the same thru the bearer, Miss Edith
Perez de Tagle.
Very truly yours,
SGD. FRANCISCO N. CERVANTES
President
The property mentioned in Bormaheco's letter was the land of the National Shipyards
& Steel Corporation (Nassco), with an area of twenty thousand square meters,
located at Punta, Sta. Ana, Manila. At the bidding held on January 17, 1964 that land
was awarded to Bormaheco, Inc., the highest bidder, for the price of P552,000. The
Nassco Board of Directors in its resolution of February 18, 1964 authorized the
General Manager to sign the necessary contract (Exh. H).
On February 28, 1964, the Nassco Acting General Manager wrote a letter to the
Economic Coordinator, requesting approval of that resolution. The Acting Economic
Coordinator approved the resolution on March 24, 1964 (Exh. 1).
In the meanwhile, Bormaheco, Inc. and Villonco Realty Company continued their
negotiations for the sale of the Buendia Avenue property. Cervantes and Teofilo
Villonco had a final conference on February 27, 1964. As a result of that conference
Villonco Realty Company, through Teofilo Villonco, in its letter of March 4, 1964 made
a revised counter- offer (Romeo Villonco's first counter-offer was dated February 24,
1964, Exh. C) for the purchase of the property. The counter-offer was accepted by
Cervantes as shown in Exhibit D, which is quoted below:
VILLONCO REALTY COMPANY
V. R. C. Building
219 Buendia Avenue, Makati,
Rizal, Philippines
March 4, 1964
Mr. Francisco Cervantes.
Bormaheco, Inc.
245 Buendia Avenue

Makati, Rizal
Dear Mr. Cervantes:
In reference to the letter of Miss E. Perez de Tagle dated February 12th and 26, 1964
in respect to the terms and conditions on the purchase of your property located at
Buendia Ave., Makati, Rizal, with a total area of 3,500 sq. meters., we hereby revise
our offer, as follows:
1. That the price of the property shall be P400.00 per sq. m., including the
improvements thereon;
2. That a deposit of P100,000.00 shall be given to you as earnest money which will
become as part payment in the event the sale is consummated;
3. This sale shall be cancelled, only if your deal with another property in Sta. Ana shall
not be consummated and in such case, the P100,000-00 earnest money will be
returned to us with a 10% interest p.a. However, if our deal with you is finalized, said
P100,000.00 will become as part payment for the purchase of your property without
interest:
4. The manner of payment shall be as follows:
a. P100,000.00 earnest money and
650,000.00 as part of the down payment, or
P750,000.00 as total down payment
b. The balance is payable as follows:
P100,000.00 after 3 months
125,000.00 -do212,500.00 -doP650,000.00 Total
As regards to the other conditions which we have discussed during our last
conference on February 27, 1964, the same shall be finalized upon preparation of the
contract to sell.*
If the above terms and conditions are acceptable to you, kindly sign your conformity
hereunder. Enclosed is our check for ONE HUNDRED THOUSAND (P100,000.00)
PESOS, MBTC Check No. 448314, as earnest money.
Very truly yours,
VILLONCO REALTY COMPANY
(Sgd.) TEOFILO VILLONCO
CONFORME:
BORMAHECO, INC.
(Sgd.) FRANCISCO CERVANTES
That this sale shall be subject to favorable consummation of a property in Sta. Ana we
are negotiating.
(Sgd.) FRANCISCO CERVANTES
The check for P100,000 (Exh. E) mentioned in the foregoing letter-contract was
delivered by Edith Perez de Tagle to Bormaheco, Inc. on March 4, 1964 and was
received by Cervantes. In the voucher-receipt evidencing the delivery the broker
indicated in her handwriting that the earnest money was "subject to the terms and
conditions embodied in Bormaheco's letter" of February 12 and Villonco Realty
Company's letter of March 4, 1964 (Exh. E-1; 14 tsn).
Then, unexpectedly, in a letter dated March 30, 1964, or twenty-six days after the
signing of the contract of sale, Exhibit D, Cervantes returned the earnest money, with
interest amounting to P694.24 (at ten percent per annum). Cervantes cited as an
excuse the circumstance that "despite the lapse of 45 days from February 12, 1964
there is no certainty yet" for the acquisition of the Punta property (Exh. F; F-I and F-

2). Villonco Realty Company refused to accept the letter and the checks of
Bormaheco, Inc. Cervantes sent them by registered mail. When he rescinded the
contract, he was already aware that the Punta lot had been awarded to Bormaheco,
Inc. (25-26 tsn).
Edith Perez de Tagle, the broker, in a letter to Cervantes dated March 31, 1964
articulated her shock and surprise at Bormaheco's turnabout. She reviewed the
history of the deal and explained why Romeo Villonco could not agree to the
rescission of the sale (Exh. G).**
Cervantes in his letter of April 6, 1964, a reply to Miss Tagle's letter, alleged that the
forty-five day period had already expired and the sale to Bormaheco, Inc. of the Punta
property had not been consummated. Cervantes said that his letter was a
"manifestation that we are no longer interested to sell" the Buendia Avenue property
to Villonco Realty Company (Annex I of Stipulation of Facts). The latter was furnished
with a copy of that letter.
In a letter dated April 7, 1964 Villonco Realty Company returned the two checks to
Bormaheco, Inc., stating that the condition for the cancellation of the contract had not
arisen and at the same time announcing that an action for breach of contract would
be filed against Bormaheco, Inc. (Annex G of Stipulation of Facts).1wph1.t
On that same date, April 7, 1964 Villonco Realty Company filed the complaint (dated
April 6) for specific performance against Bormaheco, Inc. Also on that same date,
April 7, at eight-forty-five in the morning, a notice of lis pendens was annotated on the
titles of the said lots.
Bormaheco, Inc. in its answers dated May 5 and 25, 1964 pleaded the defense that
the perfection of the contract of sale was subject to the conditions (a) "that final
acceptance or not shall be made after 45 days" (sic) and (b) that Bormaheco, Inc.
"acquires the Sta. Ana property".
On June 2, 1964 or during the pendency of this case, the Nassco Acting General
Manager wrote to Bormaheco, Inc., advising it that the Board of Directors and the
Economic Coordinator had approved the sale of the Punta lot to Bormaheco, Inc. and
requesting the latter to send its duly authorized representative to the Nassco for the
signing of the deed of sale (Exh. 1).
The deed of sale for the Punta land was executed on June 26, 1964. Bormaheco, Inc.
was represented by Cervantes (Exh. J. See Bormaheco, Inc. vs. Abanes, L-28087,
July 31, 1973, 52 SCRA 73).
In view of the disclosure in Bormaheco's amended answer that the three lots were
registered in the names of the Cervantes spouses and not in the name of Bormaheco,
Inc., Villonco Realty Company on July 21, 1964 filed an amended complaint
impleading the said spouses as defendants. Bormaheco, Inc. and the Cervantes
spouses filed separate answers.
As of January 15, 1965 Villonco Realty Company had paid to the Manufacturers'
Bank & Trust Company the sum of P8,712.25 as interests on the overdraft line of
P100,000 and the sum of P27.39 as interests daily on the same loan since January
16, 1965. (That overdraft line was later settled by Villonco Realty Company on a date
not mentioned in its manifestation of February 19, 1975).
Villonco Realty Company had obligated itself to pay the sum of P20,000 as attorney's
fees to its lawyers. It claimed that it was damaged in the sum of P10,000 a month
from March 24, 1964 when the award of the Punta lot to Bormaheco, Inc. was
approved. On the other hand, Bormaheco, Inc. claimed that it had sustained damages
of P200,000 annually due to the notice of lis pendens which had prevented it from
constructing a multi-story building on the three lots. (Pars. 18 and 19, Stipulation of

Facts).1wph1.t
Miss Tagle testified that for her services Bormaheco, Inc., through Cervantes,
obligated itself to pay her a three percent commission on the price of P1,400,000 or
the amount of forty-two thousand pesos (14 tsn).
After trial, the lower court rendered a decision ordering the Cervantes spouses to
execute in favor of Bormaheco, Inc. a deed of conveyance for the three lots in
question and directing Bormaheco, Inc. (a) to convey the same lots to Villonco Realty
Company, (b) to pay the latter, as consequential damages, the sum of P10,000
monthly from March 24, 1964 up to the consummation of the sale, (c) to pay Edith
Perez de Tagle the sum of P42,000 as broker's commission and (d) pay P20,000 as
to attorney's fees (Civil Case No. 8109).
Bormaheco, Inc. and the Cervantes spouses appealed. Their principal contentions
are (a) that no contract of sale was perfected because Cervantes made a supposedly
qualified acceptance of the revised offer contained in Exhibit D, which acceptance
amounted to a counter-offer, and because the condition that Bormaheco, inc. would
acquire the Punta land within the forty-five-day period was not fulfilled; (2) that
Bormaheco, Inc. cannot be compelled to sell the land which belongs to the Cervantes
spouses and (3) that Francisco N. Cervantes did not bind the conjugal partnership
and his wife when, as president of Bormaheco, Inc., he entered into negotiations with
Villonco Realty Company regarding the said land.
We hold that the appeal, except as to the issue of damages, is devoid of merit.
"By the contract of sale one of the contracting parties obligates himself to transfer the
ownership of and to deliver a determining thing, and the other to pay therefor a price
certain in money or its equivalent. A contract of sale may be absolute or conditional"
(Art. 1458, Civil Code).
"The contract of sale is perfected at the moment there is a meeting of minds upon the
thing which is the object of the contract and upon the price. From that moment, the
parties may reciprocally demand performance, subject to the provisions of the law
governing the form of contracts" (Art. 1475, Ibid.).
"Contracts are perfected by mere consent, and from that moment the parties are
bound not only to the fulfillment of what has been expressly stipulated but also to all
the consequences which, according to their nature, may be in keeping with good faith,
usage and law" (Art. 1315, Civil Code).
"Consent is manifested by the meeting of the offer and the acceptance upon the thing
and the cause which are to constitute the contract. The offer must be certain and the
acceptance absolute. A qualified acceptance constitutes a counter-offer" (Art. 1319,
Civil Code). "An acceptance may be express or implied" (Art. 1320, Civil Code).
Bormaheco's acceptance of Villonco Realty Company's offer to purchase the Buendia
Avenue property, as shown in Teofilo Villonco's letter dated March 4, 1964 (Exh. D),
indubitably proves that there was a meeting of minds upon the subject matter and
consideration of the sale. Therefore, on that date the sale was perfected. (Compare
with McCullough vs. Aenlle & Co., 3 Phil. 285; Goyena vs. Tambunting, 1 Phil. 490).
Not only that Bormaheco's acceptance of the part payment of one hundred ,thousand
pesos shows that the sale was conditionally consummated or partly executed subject
to the purchase by Bormaheco, Inc. of the Punta property. The nonconsummation of
that purchase would be a negative resolutory condition (Taylor vs. Uy Tieng Piao, 43
Phil. 873).
On February 18, 1964 Bormaheco's bid for the Punta property was already accepted
by the Nassco which had authorized its General Manager to sign the corresponding
deed of sale. What was necessary only was the approval of the sale by the Economic

Coordinator and a request for that approval was already pending in the office of that
functionary on March 4, 1964.
Bormaheco, Inc. and the Cervantes spouses contend that the sale was not perfected
because Cervantes allegedly qualified his acceptance of Villonco's revised offer and,
therefore, his acceptance amounted to a counter-offer which Villonco Realty
Company should accept but no such acceptance was ever transmitted to Bormaheco,
Inc. which, therefore, could withdraw its offer.
That contention is not well-taken. It should be stressed that there is no evidence as to
what changes were made by Cervantes in Villonco's revised offer. And there is no
evidence that Villonco Realty Company did not assent to the supposed changes and
that such assent was never made known to Cervantes.
What the record reveals is that the broker, Miss Tagle, acted as intermediary between
the parties. It is safe to assume that the alleged changes or qualifications made by
Cervantes were approved by Villonco Realty Company and that such approval was
duly communicated to Cervantes or Bormaheco, Inc. by the broker as shown by the
fact that Villonco Realty Company paid, and Bormaheco, Inc. accepted, the sum of
P100,000 as earnest money or down payment. That crucial fact implies that
Cervantes was aware that Villonco Realty Company had accepted the modifications
which he had made in Villonco's counter-offer. Had Villonco Realty Company not
assented to those insertions and annotations, then it would have stopped payment on
its check for P100,000. The fact that Villonco Realty Company allowed its check to be
cashed by Bormaheco, Inc. signifies that the company was in conformity with the
changes made by Cervantes and that Bormaheco, Inc. was aware of that conformity.
Had those insertions not been binding, then Bormaheco, Inc. would not have paid
interest at the rate of ten percent per annum, on the earnest money of P100,000.
The truth is that the alleged changes or qualifications in the revised counter offer
(Exh. D) are not material or are mere clarifications of what the parties had previously
agreed upon.
Thus, Cervantes' alleged insertion in his handwriting of the figure and the words "12th
and" in Villonco's counter-offer is the same as the statement found in the voucherreceipt for the earnest money, which reads: "subject to the terms and conditions
embodied in Bormaheco's letter of Feb. 12, 1964 and your letter of March 4, 1964"
(Exh. E-1).
Cervantes allegedly crossed out the word "Nassco" in paragraph 3 of Villonco's
revised counter-offer and substituted for it the word "another" so that the original
phrase, "Nassco's property in Sta. Ana", was made to read as "another property in
Sta. Ana". That change is trivial. What Cervantes did was merely to adhere to the
wording of paragraph 3 of Bormaheco's original offer (Exh. B) which mentions
"another property located at Sta. Ana." His obvious purpose was to avoid jeopardizing
his negotiation with the Nassco for the purchase of its Sta. Ana property by unduly
publicizing it.
It is noteworthy that Cervantes, in his letter to the broker dated April 6, 1964 (Annex 1)
or after the Nassco property had been awarded to Bormaheco, Inc., alluded to the
"Nassco property". At that time, there was no more need of concealing from the public
that Bormaheco, Inc. was interested in the Nassco property.
Similarly, Cervantes' alleged insertion of the letters "PA" ( per annum) after the word
"interest" in that same paragraph 3 of the revised counter-offer (Exh. D) could not be
categorized as a major alteration of that counter-offer that prevented a meeting of the
minds of the parties. It was understood that the parties had contemplated a rate of ten
percent per annum since ten percent a month or semi-annually would be usurious.

Appellants Bormaheco, Inc. and Cervantes further contend that Cervantes, in


clarifying in the voucher for the earnest money of P100,000 that Bormaheco's
acceptance thereof was subject to the terms and conditions embodied in
Bormaheco's letter of February 12, 1964 and your (Villonco's) letter of March 4, 1964"
made Bormaheco's acceptance "qualified and conditional".
That contention is not correct. There is no incompatibility between Bormaheco's offer
of February 12, 1964 (Exh. B) and Villonco's counter-offer of March 4, 1964 (Exh. D).
The revised counter-offer merely amplified Bormaheco's original offer.
The controlling fact is that there was agreement between the parties on the subject
matter, the price and the mode of payment and that part of the price was paid.
"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" (Art. 1482, Civil Code).
"It is true that an acceptance may contain a request for certain changes in the terms
of the offer and yet be a binding acceptance. 'So long as it is clear that the meaning of
the acceptance is positively and unequivocally to accept the offer, whether such
request is granted or not, a contract is formed.' " (Stuart vs. Franklin Life Ins. Co., 165
Fed. 2nd 965, citing Sec. 79, Williston on Contracts).
Thus, it was held that the vendor's change in a phrase of the offer to purchase, which
change does not essentially change the terms of the offer, does not amount to a
rejection of the offer and the tender of a counter-offer (Stuart vs. Franklin Life Ins. Co.,
supra).
The instant case is not governed by the rulings laid down in Beaumont vs. Prieto, 41
Phil. 670, 985, 63 L. Ed. 770, and Zayco vs. Serra, 44 Phil. 326. In those two cases
the acceptance radically altered the offer and, consequently, there was no meeting of
the minds of the parties.
Thus, in the Zayco case, Salvador Serra offered to sell to Lorenzo Zayco his sugar
central for P1,000,000 on condition that the price be paid in cash, or, if not paid in
cash, the price would be payable within three years provided security is given for the
payment of the balance within three years with interest. Zayco, instead of
unconditionally accepting those terms, countered that he was going to make a down
payment of P100,000, that Serra's mortgage obligation to the Philippine National
Bank of P600,000 could be transferred to Zayco's account and that he (plaintiff) would
give a bond to secure the payment of the balance of the price. It was held that the
acceptance was conditional or was a counter-offer which had to be accepted by
Serra. There was no such acceptance. Serra revoked his offer. Hence, there was no
perfected contract.
In the Beaumont case, Benito Valdes offered to sell to W Borck the Nagtahan
Hacienda owned by Benito Legarda, who had empowered Valdes to sell it. Borck was
given three months from December 4, 1911 to buy the hacienda for P307,000. On
January 17, 1912 Borck wrote to Valdes, offering to purchase the hacienda for
P307,000 payable on May 1, 1912. No reply was made to that letter. Borck wrote
other letters modifying his proposal. Legarda refused to convey the property.
It was held that Borck's January 17th letter plainly departed from the terms of the offer
as to the time of payment and was a counter-offer which amounted to a rejection of
Valdes' original offer. A subsequent unconditional acceptance could not revive that
offer.
The instant case is different from Laudico and Harden vs. Arias Rodriguez, 43 Phil.
270 where the written offer to sell was revoked by the offer or before the offeree's
acceptance came to the offeror's knowledge.
Appellants' next contention is that the contract was not perfected because the

condition that Bormaheco, Inc. would acquire the Nassco land within forty-five days
from February 12, 1964 or on or before March 28, 1964 was not fulfilled. This
contention is tied up with the following letter of Bormaheco, Inc. (Exh. F):
BORMAHECO, INC.
March 30, 1964
Villonco Realty Company
V.R.C. Building
219 Buendia Ave.,
Makati, Rizal
Gentlemen:
We are returning herewith your earnest money together with interest thereon at 10%
per annum. Please be informed that despite the lapse of the 45 days from February
12, 1964 there is no certainty yet for us to acquire a substitute property, hence the
return of the earnest money as agreed upon.
Very truly yours,
SGD. FRANCISCO N. CERVANTES
President
Encl.: P.N.B. Check No. 112994 J
P.N.B. Check No. 112996J
That contention is predicated on the erroneous assumption that Bormaheco, Inc. was
to acquire the Nassco land within forty-five days or on or before March 28, 1964.
The trial court ruled that the forty-five-day period was merely an estimate or a forecast
of how long it would take Bormaheco, Inc. to acquire the Nassco property and it was
not "a condition or a deadline set for the defendant corporation to decide whether or
not to go through with the sale of its Buendia property".
The record does not support the theory of Bormaheco, Inc. and the Cervantes
spouses that the forty-five-day period was the time within which (a) the Nassco
property and two Pasong Tamo lots should be acquired, (b) when Cervantes would
secure his wife's consent to the sale of the three lots and (c) when Bormaheco, Inc.
had to decide what to do with the DBP encumbrance.
Cervantes in paragraph 3 of his offer of February 12, 1964 stated that the sale of the
Buendia lots would be consummated after he had consummated the purchase of the
Nassco property. Then, in paragraph 5 of the same offer he stated "that final
negotiations on both properties can be definitely known after forty-five days" (See
Exh. B).
It is deducible from the tenor of those statements that the consummation of the sale
of the Buendia lots to Villonco Realty Company was conditioned on Bormaheco's
acquisition of the Nassco land. But it was not spelled out that such acquisition should
be effected within forty-five days from February 12, 1964. Had it been Cervantes'
intention that the forty-five days would be the period within which the Nassco land
should be acquired by Bormaheco, then he would have specified that period in
paragraph 3 of his offer so that paragraph would read in this wise: "That this sale is to
be consummated only after I shall have consummated my purchase of another
property located at Sta. Ana, Manila within forty-five days from the date hereof ." He
could have also specified that period in his "conforme" to Villonco's counter-offer of
March 4, 1964 (Exh. D) so that instead of merely stating "that this sale shall be
subject to favorable consummation of a property in Sta. Ana we are negotiating" he
could have said: "That this sale shall be subject to favorable consummation within
forty-five days from February 12, 1964 of a property in Sta. Ana we are negotiating".
No such specification was made. The term of forty-five days was not a part of the

condition that the Nassco property should be acquired. It is clear that the statement
"that final negotiations on both property can be definitely known after 45 days" does
not and cannot mean that Bormaheco, Inc. should acquire the Nassco property within
forty-five days from February 12, 1964 as pretended by Cervantes. It is simply a
surmise that after forty-five days (in fact when the forty-five day period should be
computed is not clear) it would be known whether Bormaheco, Inc. would be able to
acquire the Nassco property and whether it would be able to sell the Buendia
property. That aforementioned paragraph 5 does not even specify how long after the
forty-five days the outcome of the final negotiations would be known.
It is interesting to note that in paragraph 6 of Bormaheco's answer to the amended
complaint, which answer was verified by Cervantes, it was alleged that Cervantes
accepted Villonco's revised counter-offer of March 4, 1964 subject to the condition
that "the final negotiations (acceptance) will have to be made by defendant within 45
days from said acceptance" (31 Record on Appeal). If that were so, then the
consummation of Bormaheco's purchase of the Nassco property would be made
within forty-five days from March 4, 1964.
What makes Bormaheco's stand more confusing and untenable is that in its three
answers it invariably articulated the incoherent and vague affirmative defense that its
acceptance of Villonco's revised counter-offer was conditioned on the circumstance
"that final acceptance or not shall be made after 45 days" whatever that means. That
affirmative defense is inconsistent with the other aforequoted incoherent statement in
its third answer that "the final negotiations (acceptance) will have to be made by
defendant within 45 days from said acceptance" (31 Record on Appeal).1wph1.t
Thus, Bormaheco's three answers and paragraph 5 of his offer of February 12, 1964
do not sustain at all its theory that the Nassco property should be acquired on or
before March 28, 1964. Its rescission or revocation of its acceptance cannot be
anchored on that theory which, as articulated in its pleadings, is quite equivocal and
unclear.
It should be underscored that the condition that Bormaheco, Inc. should acquire the
Nassco property was fulfilled. As admitted by the appellants, the Nassco property was
conveyed to Bormaheco, Inc. on June 26, 1964. As early as January 17, 1964 the
property was awarded to Bormaheco, Inc. as the highest bidder. On February 18,
1964 the Nassco Board authorized its General Manager to sell the property to
Bormaheco, Inc. (Exh. H). The Economic Coordinator approved the award on March
24, 1964. It is reasonable to assume that had Cervantes been more assiduous in
following up the transaction, the Nassco property could have been transferred to
Bormaheco, Inc. on or before March 28, 1964, the supposed last day of the forty-fiveday period.
The appellants, in their fifth assignment of error, argue that Bormaheco, Inc. cannot
be required to sell the three lots in question because they are conjugal properties of
the Cervantes spouses. They aver that Cervantes in dealing with the Villonco brothers
acted as president of Bormaheco, Inc. and not in his individual capacity and,
therefore, he did not bind the conjugal partnership nor Mrs. Cervantes who was
allegedly opposed to the sale.
Those arguments are not sustainable. It should be remembered that Cervantes, in
rescinding the contract of sale and in returning the earnest money, cited as an excuse
the circumstance that there was no certainty in Bormaheco's acquisition of the
Nassco property (Exh. F and Annex 1). He did not say that Mrs. Cervantes was
opposed to the sale of the three lots. He did not tell Villonco Realty Company that he
could not bind the conjugal partnership. In truth, he concealed the fact that the three

lots were registered "in the name of FRANCISCO CERVANTES, Filipino, of legal age,
married to Rosario P. Navarro, as owner thereof in fee simple". He certainly led the
Villonco brothers to believe that as president of Bormaheco, Inc. he could dispose of
the said lots. He inveigled the Villoncos into believing that he had untrammelled
control of Bormaheco, Inc., that Bormaheco, Inc. owned the lots and that he was
invested with adequate authority to sell the same.
Thus, in Bormaheco's offer of February 12, 1964, Cervantes first identified the three
lots as "our property" which "we are offering to sell ..." (Opening paragraph and par. 1
of Exh. B). Whether the prounoun "we" refers to himself and his wife or to
Bormaheco, Inc. is not clear. Then, in paragraphs 3 and 4 of the offer, he used the
first person and said: "I shall have consummated my purchase" of the Nassco
property; "... my negotiations with said property" and "I will return to you your deposit".
Those expressions conveyed the impression and generated the belief that the
Villoncos did not have to deal with Mrs. Cervantes nor with any other official of
Bormaheco, Inc.
The pleadings disclose that Bormaheco, Inc. and Cervantes deliberately and
studiously avoided making the allegation that Cervantes was not authorized by his
wife to sell the three lots or that he acted merely as president of Bormaheco, Inc. That
defense was not interposed so as not to place Cervantes in the ridiculous position of
having acted under false pretenses when he negotiated with the Villoncos for the sale
of the three lots.
Villonco Realty Company, in paragraph 2 of its original complaint, alleged that "on
February 12, 1964, after some prior negotiations, the defendant (Bormaheco, Inc.)
made a formal offer to sell to the plaintiff the property of the said defendant situated at
the abovenamed address along Buendia Avenue, Makati, Rizal, under the terms of
the letter-offer, a copy of which is hereto attached as Annex A hereof", now Exhibit B
(2 Record on Appeal).
That paragraph 2 was not, repeat, was not denied by Bormaheco, Inc. in its answer
dated May 5, 1964. It did not traverse that paragraph 2. Hence, it was deemed
admitted. However, it filed an amended answer dated May 25, 1964 wherein it denied
that it was the owner of the three lots. It revealed that the three lots "belong and are
registered in the names of the spouses Francisco N. Cervantes and Rosario N.
Cervantes."
The three answers of Bormaheco, Inc. contain the following affirmative defense:
13. That defendant's insistence to finally decide on the proposed sale of the land in
question after 45 days had not only for its purpose the determination of its acquisition
of the said Sta. Ana (Nassco) property during the said period, but also to negotiate
with the actual and registered owner of the parcels of land covered by T.C.T. Nos.
43530, 43531 and 43532 in question which plaintiff was fully aware that the same
were not in the name of the defendant (sic; Par. 18 of Answer to Amended Complaint,
10, 18 and 34, Record on Appeal).
In that affirmative defense, Bormaheco, Inc. pretended that it needed forty- five days
within which to acquire the Nassco property and "to negotiate" with the registered
owner of the three lots. The absurdity of that pretension stands out in bold relief when
it is borne in mind that the answers of Bormaheco, Inc. were verified by Cervantes
and that the registered owner of the three lots is Cervantes himself. That affirmative
defense means that Cervantes as president of Bormaheco, Inc. needed forty-five
days in order to "negotiate" with himself (Cervantes).
The incongruous stance of the Cervantes spouses is also patent in their answer to
the amended complaint. In that answer they disclaimed knowledge or information of

certain allegations which were well-known to Cervantes as president of Bormaheco,


Inc. and which were admitted in Bormaheco's three answers that were verified by
Cervantes.
It is significant to note that Bormaheco, Inc. in its three answers, which were verified
by Cervantes, never pleaded as an affirmative defense that Mrs. Cervantes opposed
the sale of the three lots or that she did not authorize her husband to sell those lots.
Likewise, it should be noted that in their separate answer the Cervantes spouses
never pleaded as a defense that Mrs. Cervantes was opposed to the sale of three lots
or that Cervantes could not bind the conjugal partnership. The appellants were at first
hesitant to make it appear that Cervantes had committed the skullduggery of trying to
sell property which he had no authority to alienate.
It was only during the trial on May 17, 1965 that Cervantes declared on the witness
stand that his wife was opposed to the sale of the three lots, a defense which, as
already stated, was never interposed in the three answers of Bormaheco, Inc. and in
the separate answer of the Cervantes spouses. That same viewpoint was adopted in
defendants' motion for reconsideration dated November 20, 1965.
But that defense must have been an afterthought or was evolved post litem motam
since it was never disclosed in Cervantes' letter of rescission and in his letter to Miss
Tagle (Exh. F and Annex 1). Moreover, Mrs. Cervantes did not testify at the trial to
fortify that defense which had already been waived for not having been pleaded (See
sec. 2, Rule 9, Rules of Court).
Taking into account the situation of Cervantes vis-a-vis Bormaheco, Inc. and his wife
and the fact that the three lots were entirely occupied by Bormaheco's building,
machinery and equipment and were mortgaged to the DBP as security for its
obligation, and considering that appellants' vague affirmative defenses do not include
Mrs. Cervantes' alleged opposition to the sale, the plea that Cervantes had no
authority to sell the lots strains the rivets of credibility (Cf. Papa and Delgado vs.
Montenegro, 54 Phil. 331; Riobo vs. Hontiveros, 21 Phil. 31).
"Obligations arising from contracts have the force of law between the contracting
parties and should be complied with in good faith" (Art. 1159, Civil Code). Inasmuch
as the sale was perfected and even partly executed, Bormaheco, Inc., and the
Cervantes spouses, as a matter of justice and good faith, are bound to comply with
their contractual commitments.
Parenthetically, it may be observed that much misunderstanding could have been
avoided had the broker and the buyer taken the trouble of making some research in
the Registry of Deeds and availing themselves of the services of a competent lawyer
in drafting the contract to sell.
Bormaheco, Inc. and the Cervantes spouses in their sixth assignment of error assail
the trial court's award to Villonco Realty Company of consequential damage
amounting to ten thousand pesos monthly from March 24, 1964 (when the Economic
Coordinator approved the award of the Nassco property to Bormaheco, Inc.) up to the
consummation of the sale. The award was based on paragraph 18 of the stipulation of
facts wherein Villonco Realty Company "submits that the delay in the consummation
of the sale" has caused it to suffer the aforementioned damages.
The appellants contend that statement in the stipulation of facts simply means that
Villonco Realty Company speculates that it has suffered damages but it does not
mean that the parties have agreed that Villonco Realty Company is entitled to those
damages.
Appellants' contention is correct. As rightly observed by their counsel, the damages in
question were not specifically pleaded and proven and were "clearly conjectural and

speculative".
However, appellants' view in their seventh assignment of error that the trial court
erred in ordering Bormaheco, Inc. to pay Villonco Realty Company the sum of twenty
thousand pesos as attorney's fees is not tenable. Under the facts of the case, it is
evident that Bormaheco, Inc. acted in gross and evident bad faith in refusing to satisfy
the valid and just demand of Villonco Realty Company for specific performance. It
compelled Villonco Realty Company to incure expenses to protect its interest.
Moreover, this is a case where it is just and equitable that the plaintiff should recover
attorney's fees (Art. 2208, Civil Code).
The appellants in their eighth assignment of error impugn the trial court's adjudication
of forty-two thousand pesos as three percent broker's commission to Miss Tagle. They
allege that there is no evidence that Bormaheco, Inc. engaged her services as a
broker in the projected sale of the three lots and the improvements thereon. That
allegation is refuted by paragraph 3 of the stipulation of facts and by the documentary
evidence. It was stipulated that Miss Tagle intervened in the negotiations for the sale
of the three lots. Cervantes in his original offer of February 12, 1964 apprised Villonco
Realty Company that the earnest money should be delivered to Miss Tagle, the
bearer of the letter-offer. See also Exhibit G and Annex I of the stipulation of facts.
We hold that the trial court did not err in adjudging that Bormaheco, Inc. should pay
Miss Tagle her three percent commission.
WHEREFORE, the trial court's decision is modified as follows:
1. Within ten (10) days from the date the defendants-appellants receive notice from
the clerk of the lower court that the records of this case have been received from this
Court, the spouses Francisco N. Cervantes and Rosario P. Navarra-Cervantes should
execute a deed conveying to Bormaheco, Inc. their three lots covered by Transfer
Certificate of Title Nos. 43530, 43531 and 43532 of the Registry of Deeds of Rizal.
2. Within five (5) days from the execution of such deed of conveyance, Bormaheco,
Inc. should execute in favor of Villonco Realty Company, V. R. C. Building, 219
Buendia Avenue, Makati, Rizal a registerable deed of sale for the said three lots and
all the improvements thereon, free from all lien and encumbrances, at the price of four
hundred pesos per square meter, deducting from the total purchase price the sum of
P100,000 previously paid by Villonco Realty Company to Bormaheco, Inc.
3. Upon the execution of such deed of sale, Villonco Realty Company is obligated to
pay Bormaheco, Inc. the balance of the price in the sum of one million three hundred
thousand pesos (P1,300,000).
4. Bormaheco, Inc. is ordered (a) to pay Villonco Realty Company twenty thousand
pesos (P20,000) as attorney's fees and (b) to pay Edith Perez de Tagle the sum of
forty-two thousand pesos (P42,000) as commission. Costs against the defendantsappellants.
SO ORDERED.
Makalintal, C.J, Castro. Fernando, Makasiar, Antonio, Esguerra, Muoz Palma,
Concepcion Jr. and Martin, JJ., concur.
Teehankee, J., is on leave.

Separate Opinions
BARREDO, J., concurring:
The comprehensive and well prepared opinion of Mr. Justice Aquino deserves
concurrence and I do not hesitate to accord my assent to it. The only purpose of the
following lines is to express my personal view regarding two basic points which I feel
should be thoroughly emphasized.
1. I am not for giving the letter proposal of appellant Francisco Cervantes to Romeo
Villonco of February 12, 1964, Exhibit B, any decisive importance. To my mind, it has
no more legal significance than what is appears to be a mere unaccepted
proposal. Accordingly, to my mind, paragraph (5) thereof to the effect that "final
negotiations on both properties can be definitely known after 45 days" has no
relevance in the disposition of this case, there being nothing in the record to show
that the same was accepted by appellee.
What to me is the actual contract between appellee and appellant Francisco
Cervantes is the counter-offer signed by Teofilo Villonco and addressed to the latter of
March 4, 1964, Exhibit D, which does not even make any reference to the abovementioned proposal of Cervantes of February 12, 1964, even as it mentions
specifically the letters of the agent, Miss E. Perez de Tagle, of February 12 and 26,
1964. The last paragraph of said Exhibit D reads thus: "If the above terms and
conditions are acceptable to you, kindly sign your conformity hereunder. Enclosed is
our check for One Hundred Thousand (P100,000) Pesos, M.B.T.C. Cheek No.
448314, as earnest money." And it is undisputed that Francisco Cervantes did affix his
signature in the place indicated for his conformity, albeit under the typewritten words,
Bormaheco, Inc. It is also a fact that on the same date, the stipulated P100,000
earnest money was received by Cervantes.
It is true that in the voucher-receipt evidencing the delivery of the earnest money, the
agent, Miss Tagle, indicated in her own handwriting that the same was "subject to the
terms and conditions embodied in Bormaheco's letter of February 12, 1974 and
Villonco Realty Company's letter of March 4, 1974," but it is my considered opinion
that such reservation cannot be understood as comprehending reference to the
above-quoted paragraph (5) of the proposal of February 12, for the simple reason that
since the parties had in fact continued negotiating after February 12 until the final
conference of February 27, Cervantes must be deemed as having intended his
signing of his conformity to the letter of March 4 to be the formalization of the "final
negotiations" referred to in said paragraph (5), thereby rendering said provision of no
further consequence. It should be noted that, to be sure, as said paragraph (5) was
worded, the idea it conveyed was that Cervantes was just making a mere tentative
offer which he would finalize only after 45 days, and so, when he signed Villonco's
counter-offer of March 4 and accepted the P100,000 earnest money tendered therein,
no other significance could be given to such acts than that they were meant to finalize
and perfect the transaction in advance of the 45-day waiting period originally
proposed by him. Indeed, in the addendum written and signed by Cervantes himself
(not by the agent) to the March 4 letter, all that he stated was that "this sale shall be
subject to favorable consummation of a property in Sta. Ana we are negotiating", and
this was none other than the Nassco property which the Nassco Board authorized its
manager on February 18, 1964 to sell to appellants who had won the award the day
before. In other words, when Cervantes signed the space for his conformity to the
terms of that letter of March 4, he already knew or must have known that the
acquisition of the Nassco property was already an impending certainty and must have

cared less about what had become an unnecessary waiting period, hence the
omission of any mention thereof by him in his addendum.
My conclusion, therefore, is that said acts of Cervantes of signing his conformity to
Villonco's counter-offer of March 4 and accepting the P100,000 earnest money
therein offered resulted in a completely perfected contract of sale between the parties
per Article 1482 of the Civil Code, needing only the execution of the corresponding
deed of sale for its consummation and subject solely to the negative resolutory
condition that the "sale shall be cancelled, only if your (Cervantes') deal with another
property in Sta. Ana (indisputably the Nassco transaction) shall not be
consummated", without stipulating anymore a period for such consummation, since
evidently, with the sale thereof having been authorized already by the Nassco Board
on February 18, 1964, the Villoncos must have been made to understand or they did
understand that such consummation was inexorably forthcoming. In fact, the Nassco
Board already approved on March 3, 1964 not only the award but the actual sale of
the property to appellants, and the Economic Coordinator gave his sanction thereto
on March 24 following. Thus, as of March 3, one day before Cervantes accepted
Villonco's counter-offer, nothing more was left to formalize the transaction with
Nassco except that approval of the Economic Coordinator.
I cannot believe that Cervantes did not have up-to-date information of the progress of
his transactions with Nassco. Actually, from the legal standpoint, he was under
obligation, if only in consequence of his offer of February 12 and his continuous
conversations and negotiations with the Villoncos up to the signing of their agreement
on March 4, to keep constant and close tract thereof in order that he might be able to
inform the parties he was dealing with of the real status thereof, the finalization of the
same being a material factor in the accomplishment of their common purpose. Withal,
equity would assume that he did what ought to have been done by him in taking
ordinary care of his concerns, which he is presumed to have taken, according to
Section 5 (d) of rule 131. Under these circumstances, I am amply persuaded that he
must have been aware of the favorable actuations of the Nassco authorities all the
while that he was dealing with appellee up to March 4, the day after the Nassco Board
approved the sale. Accordingly, I hold that when he gave his conformity to the
counter-offer of the Villoncos of March 4, he was already fully confident his
transaction with Nassco would eventually materialize.
What is worse is that assuming that the 45-day period invoked by him could be
considered in this discussion, it would be inequitable to allow him to take advantage
thereof in the light of the circumstances extant in the record. It cannot be denied that,
as already stated, the Economic Coordinator approved the Nassco transaction on
March 24, 1964. Anyone would know, and much more so Cervantes who was directly
interested therein and must have been anxiously and even excitedly waiting for it, that
that was the last requisite for the inevitable execution of the deed of sale in his favor.
One has to be very naive and it would be contrary to the ordinary course of human
experience and business practices for anyone to concede to appellants that when
Cervantes wrote his letter to Villonco Realty Company of March 30, 1964 stating that
"despite the lapse of 45 days from February 12, 1964, there is no certainty yet for us
to acquire a substitute property", he did not even have the slightest inkling of the
favorable action of the Economic Coordinator of March 24. The same or more may be
said relative to his letter to Miss Tagle of as late as April 6, 1964 wherein he alleged
that the forty-five day period had already expired and the sale to Bormaheco, Inc. of
the Punta (Nassco) property had not been consummated as of then and that,
therefore, his letter was a "manifestation that we are no longer interested to sell" the

Buendia property to the Villoncos.


I have no doubt whatsoever that the whole trouble here is that after Cervantes had
already signed his conformity and received earnest money on March 4, he had a
change of heart, perhaps dictated by reasons of better economic advantage, and
banking on the idea, albeit erroneous, that he could utilize paragraph (5) of his letter
of February 12 as a escape door through which he could squeeze out of the perfected
contract with the Villoncos, he opted to actually back out and break with them thru his
letters of March 30 to them and of April 6 to the agent, Miss Tagle. The Court would
certainly be sanctioning a deliberate mala fide breach of a contract already definitely
perfected were it to buy the theory of non-perfection appellants are lamely pressing
on Us. No amount of rationalization can convince me that the Villoncos had agreed to
any 45-day suspensive condition for the perfection of the agreement, but even on the
remote assumption that they did, I would hold as I do hold that the purchase of the
Nassco property by appellants was virtually consummated, from the viewpoint of the
spirit and intent of the contract here in question, on March 24, 1964, when the
Economic Coordinator approved the same and nothing else remained to be done to
formalize it except the actual execution of the deed of sale which in fact took place on
June 26, 1964, hence, Cervantes had no more excuse for further delaying
compliance with his agreement with the Villoncos. In other words, for all legal
purposes, assuming hypothetically the plausibility of the theory of appellants about a
45-day waiting period, the negative resolutory condition arising from said theory
became inoperative four days before said 45 days expired. After the approval of the
sale by the Economic Coordinator, there was nothing anymore that could impede the
formal conveyance of the Nassco property to appellants, other than their own
desistance, and even that might have been legally controversial if Nassco insisted
otherwise. Reading all the communications exchanged between the parties, the
conclusion therefrom is inevitable that the 45-day period stipulation was inextricably
tied up with appellants' being able to acquire the Nassco property. In other words,
Cervantes merely wanted to be sure that they would get the Nassco property before
proceeding with the sale of the Buendia property. To construe the 45-day stipulation
as giving Cervantes the absolute right to disregard the Villoncos entirely until after the
45 days had expired is to render the whole of Cervantes' letter of February 12 as
totally meaningless, legally non-existent and as deceitfully farcical. Consequently, the
acquisition of the Nassco property having actually eventualized, it cannot lie in the lips
of Cervantes to claim that he may not be compelled to proceed with the transaction.
To view the situation otherwise is to condone resort to ambiguity as a means of
deception and informality in contractual obligations, which in my opinion is contrary to
the elementary requirements of candidness and honest dealing between responsible
contracting parties, and in that sense offensive to public policy.
2. The contention of appellants that inasmuch as in actual fact the Buendia property
contemplated in the contract is the conjugal property of Cervantes spouses and that
since in dealing with the Villoncos, Cervantes acted as President of Bormaheco, Inc.,
the appellee cannot have any right to compel the conveyance to them thereof is in my
view definitely puerile. It is predicated on duplicity and smacks of utter bad faith.
I do not find in the evidence before Us adequate basis for accepting the suggestion
that Francisco Cervantes acted for and in behalf of Bormaheco, Inc. in his dealing
with the Villoncos. The mere fact that he signed his letter of February 12, 1964 over
the title of President, there being no showing that he was duly authorized to make the
offer therein contained in the name of the corporation, did not convert it into a
corporate act. The language of the letter which is conspicuously sprinkled with the

pronoun I used by Cervantes to refer to himself rather than exclusively the pronoun
we does not so indicate. Besides, Cervantes is undisputably the registered owner with
his wife of the property therein mentioned, and being evidently conscious, as he
ought to have been of this fact, he knew his act would be ultra vires and void, if he
were to act for the corporation. He was the manager of the conjugal partnership and
he knew it was only in that capacity that he could in good faith give validity to his
representation, assuming the conformity of his wife. Unless Cervantes wants Us to
hold that he deliberately negotiated with the Villoncos clothed in dubious garments of
authority precisely to afford him the opportunity to repudiate at his convenience any
agreement they may enter into with him. I am for holding as I do hold that
Bormaheco, Inc. had nothing to do with the transaction here in controversy. In any
event, if Cervantes may held to have acted for Bormaheco, Inc., in spite of the
absence of evidence of any authority for him to do so, it must be because
Bormaheco, Inc. is Cervantes himself, and there being no proof to the contrary, the
corporate shield of Bormaheco, Inc. may be deemed pierced in order to prevent any
further fraudulent implications in his actuations. Moreover, it may be observed that the
March 4 letter of Teofilo Villonco was not addressed to Bormaheco, Inc. but to
Francisco Cervantes and it does not even mention his being President of that
corporation.
Anent the requirement of consent of Mrs. Cervantes under Article 166 of the Civil
Code, I consider any defense along this line as unavailing to the appellants in this
case. As very ably discussed in the main opinion of Mr. Justice Aquino, the answer of
the defendants, make no reference at all to any lack of such consent. And considering
that the subsequent testimony of Cervantes to the effect that his wife opposed the
transaction cannot cure such omission, if only because any husband in the
circumstances revealed in the record is estopped from setting up such a defense (cf
Riobo vs. Hontiveros, 21 Phil. 31; Papi vs. Montenegro, 54 Phil. 531; see Civil Law by
Reyes & Puno, 1964 ed. p. 192), and that from her silence in her answer in this
respect Mrs. Cervantes may either be presumed to have given her consent thereto or
to have ratified the same (Montederamos vs. Ynonoy, 56 Phil. 457; Castaeda vs.
Samson, 43 Phil. 751), it is obvious that the belated invocation of this defense now
should be deemed in fact and in law as an unacceptable and ineffective afterthought.
Besides, it appearing that the sale of the Buendia property was purposely to enable
the spouses to acquire the Nassco property, I have grave doubts as to the application
of Article 166 to the sale here in dispute. I believe that the disposition by a husband
prohibited by the Code unless consented to by the wife refers to a transaction
outrightly prejudicial to the partnership and cannot comprehend a sale made precisely
for its benefit and causing no loss thereto beyond the ordinary risks of misjudgment of
a manager acting in good faith.
IN VIEW OF THE FOREGOING, I would not even require the formality of the serial
execution of instruments by the Cervantes spouses and Bormaheco, Inc. In the view I
have taken above, it would be legally feasible for the sale to the Villonco Realty
Property to be made directly by the spouses. But I would not insist in the modification
of the dispositive portion of the judgment, since the result would be the same anyway.

Separate Opinions
BARREDO, J., concurring:
The comprehensive and well prepared opinion of Mr. Justice Aquino deserves
concurrence and I do not hesitate to accord my assent to it. The only purpose of the
following lines is to express my personal view regarding two basic points which I feel
should be thoroughly emphasized.
1. I am not for giving the letter proposal of appellant Francisco Cervantes to Romeo
Villonco of February 12, 1964, Exhibit B, any decisive importance. To my mind, it has
no more legal significance than what is appears to be a mere unaccepted
proposal. Accordingly, to my mind, paragraph (5) thereof to the effect that "final
negotiations on both properties can be definitely known after 45 days" has no
relevance in the disposition of this case, there being nothing in the record to show
that the same was accepted by appellee.
What to me is the actual contract between appellee and appellant Francisco
Cervantes is the counter-offer signed by Teofilo Villonco and addressed to the latter of
March 4, 1964, Exhibit D, which does not even make any reference to the abovementioned proposal of Cervantes of February 12, 1964, even as it mentions
specifically the letters of the agent, Miss E. Perez de Tagle, of February 12 and 26,
1964. The last paragraph of said Exhibit D reads thus: "If the above terms and
conditions are acceptable to you, kindly sign your conformity hereunder. Enclosed is
our check for One Hundred Thousand (P100,000) Pesos, M.B.T.C. Cheek No.
448314, as earnest money." And it is undisputed that Francisco Cervantes did affix his
signature in the place indicated for his conformity, albeit under the typewritten words,
Bormaheco, Inc. It is also a fact that on the same date, the stipulated P100,000
earnest money was received by Cervantes.
It is true that in the voucher-receipt evidencing the delivery of the earnest money, the
agent, Miss Tagle, indicated in her own handwriting that the same was "subject to the
terms and conditions embodied in Bormaheco's letter of February 12, 1974 and
Villonco Realty Company's letter of March 4, 1974," but it is my considered opinion
that such reservation cannot be understood as comprehending reference to the
above-quoted paragraph (5) of the proposal of February 12, for the simple reason that
since the parties had in fact continued negotiating after February 12 until the final
conference of February 27, Cervantes must be deemed as having intended his
signing of his conformity to the letter of March 4 to be the formalization of the "final
negotiations" referred to in said paragraph (5), thereby rendering said provision of no
further consequence. It should be noted that, to be sure, as said paragraph (5) was
worded, the idea it conveyed was that Cervantes was just making a mere tentative
offer which he would finalize only after 45 days, and so, when he signed Villonco's
counter-offer of March 4 and accepted the P100,000 earnest money tendered therein,
no other significance could be given to such acts than that they were meant to finalize
and perfect the transaction in advance of the 45-day waiting period originally
proposed by him. Indeed, in the addendum written and signed by Cervantes himself
(not by the agent) to the March 4 letter, all that he stated was that "this sale shall be
subject to favorable consummation of a property in Sta. Ana we are negotiating", and
this was none other than the Nassco property which the Nassco Board authorized its
manager on February 18, 1964 to sell to appellants who had won the award the day
before. In other words, when Cervantes signed the space for his conformity to the
terms of that letter of March 4, he already knew or must have known that the
acquisition of the Nassco property was already an impending certainty and must have

cared less about what had become an unnecessary waiting period, hence the
omission of any mention thereof by him in his addendum.
My conclusion, therefore, is that said acts of Cervantes of signing his conformity to
Villonco's counter-offer of March 4 and accepting the P100,000 earnest money
therein offered resulted in a completely perfected contract of sale between the parties
per Article 1482 of the Civil Code, needing only the execution of the corresponding
deed of sale for its consummation and subject solely to the negative resolutory
condition that the "sale shall be cancelled, only if your (Cervantes') deal with another
property in Sta. Ana (indisputably the Nassco transaction) shall not be
consummated", without stipulating anymore a period for such consummation, since
evidently, with the sale thereof having been authorized already by the Nassco Board
on February 18, 1964, the Villoncos must have been made to understand or they did
understand that such consummation was inexorably forthcoming. In fact, the Nassco
Board already approved on March 3, 1964 not only the award but the actual sale of
the property to appellants, and the Economic Coordinator gave his sanction thereto
on March 24 following. Thus, as of March 3, one day before Cervantes accepted
Villonco's counter-offer, nothing more was left to formalize the transaction with
Nassco except that approval of the Economic Coordinator.
I cannot believe that Cervantes did not have up-to-date information of the progress of
his transactions with Nassco. Actually, from the legal standpoint, he was under
obligation, if only in consequence of his offer of February 12 and his continuous
conversations and negotiations with the Villoncos up to the signing of their agreement
on March 4, to keep constant and close tract thereof in order that he might be able to
inform the parties he was dealing with of the real status thereof, the finalization of the
same being a material factor in the accomplishment of their common purpose. Withal,
equity would assume that he did what ought to have been done by him in taking
ordinary care of his concerns, which he is presumed to have taken, according to
Section 5 (d) of rule 131. Under these circumstances, I am amply persuaded that he
must have been aware of the favorable actuations of the Nassco authorities all the
while that he was dealing with appellee up to March 4, the day after the Nassco Board
approved the sale. Accordingly, I hold that when he gave his conformity to the
counter-offer of the Villoncos of March 4, he was already fully confident his
transaction with Nassco would eventually materialize.
What is worse is that assuming that the 45-day period invoked by him could be
considered in this discussion, it would be inequitable to allow him to take advantage
thereof in the light of the circumstances extant in the record. It cannot be denied that,
as already stated, the Economic Coordinator approved the Nassco transaction on
March 24, 1964. Anyone would know, and much more so Cervantes who was directly
interested therein and must have been anxiously and even excitedly waiting for it, that
that was the last requisite for the inevitable execution of the deed of sale in his favor.
One has to be very naive and it would be contrary to the ordinary course of human
experience and business practices for anyone to concede to appellants that when
Cervantes wrote his letter to Villonco Realty Company of March 30, 1964 stating that
"despite the lapse of 45 days from February 12, 1964, there is no certainty yet for us
to acquire a substitute property", he did not even have the slightest inkling of the
favorable action of the Economic Coordinator of March 24. The same or more may be
said relative to his letter to Miss Tagle of as late as April 6, 1964 wherein he alleged
that the forty-five day period had already expired and the sale to Bormaheco, Inc. of
the Punta (Nassco) property had not been consummated as of then and that,
therefore, his letter was a "manifestation that we are no longer interested to sell" the

Buendia property to the Villoncos.


I have no doubt whatsoever that the whole trouble here is that after Cervantes had
already signed his conformity and received earnest money on March 4, he had a
change of heart, perhaps dictated by reasons of better economic advantage, and
banking on the idea, albeit erroneous, that he could utilize paragraph (5) of his letter
of February 12 as a escape door through which he could squeeze out of the perfected
contract with the Villoncos, he opted to actually back out and break with them thru his
letters of March 30 to them and of April 6 to the agent, Miss Tagle. The Court would
certainly be sanctioning a deliberate mala fide breach of a contract already definitely
perfected were it to buy the theory of non-perfection appellants are lamely pressing
on Us. No amount of rationalization can convince me that the Villoncos had agreed to
any 45-day suspensive condition for the perfection of the agreement, but even on the
remote assumption that they did, I would hold as I do hold that the purchase of the
Nassco property by appellants was virtually consummated, from the viewpoint of the
spirit and intent of the contract here in question, on March 24, 1964, when the
Economic Coordinator approved the same and nothing else remained to be done to
formalize it except the actual execution of the deed of sale which in fact took place on
June 26, 1964, hence, Cervantes had no more excuse for further delaying
compliance with his agreement with the Villoncos. In other words, for all legal
purposes, assuming hypothetically the plausibility of the theory of appellants about a
45-day waiting period, the negative resolutory condition arising from said theory
became inoperative four days before said 45 days expired. After the approval of the
sale by the Economic Coordinator, there was nothing anymore that could impede the
formal conveyance of the Nassco property to appellants, other than their own
desistance, and even that might have been legally controversial if Nassco insisted
otherwise. Reading all the communications exchanged between the parties, the
conclusion therefrom is inevitable that the 45-day period stipulation was inextricably
tied up with appellants' being able to acquire the Nassco property. In other words,
Cervantes merely wanted to be sure that they would get the Nassco property before
proceeding with the sale of the Buendia property. To construe the 45-day stipulation
as giving Cervantes the absolute right to disregard the Villoncos entirely until after the
45 days had expired is to render the whole of Cervantes' letter of February 12 as
totally meaningless, legally non-existent and as deceitfully farcical. Consequently, the
acquisition of the Nassco property having actually eventualized, it cannot lie in the lips
of Cervantes to claim that he may not be compelled to proceed with the transaction.
To view the situation otherwise is to condone resort to ambiguity as a means of
deception and informality in contractual obligations, which in my opinion is contrary to
the elementary requirements of candidness and honest dealing between responsible
contracting parties, and in that sense offensive to public policy.
2. The contention of appellants that inasmuch as in actual fact the Buendia property
contemplated in the contract is the conjugal property of Cervantes spouses and that
since in dealing with the Villoncos, Cervantes acted as President of Bormaheco, Inc.,
the appellee cannot have any right to compel the conveyance to them thereof is in my
view definitely puerile. It is predicated on duplicity and smacks of utter bad faith.
I do not find in the evidence before Us adequate basis for accepting the suggestion
that Francisco Cervantes acted for and in behalf of Bormaheco, Inc. in his dealing
with the Villoncos. The mere fact that he signed his letter of February 12, 1964 over
the title of President, there being no showing that he was duly authorized to make the
offer therein contained in the name of the corporation, did not convert it into a
corporate act. The language of the letter which is conspicuously sprinkled with the

pronoun I used by Cervantes to refer to himself rather than exclusively the pronoun
we does not so indicate. Besides, Cervantes is undisputably the registered owner with
his wife of the property therein mentioned, and being evidently conscious, as he
ought to have been of this fact, he knew his act would be ultra vires and void, if he
were to act for the corporation. He was the manager of the conjugal partnership and
he knew it was only in that capacity that he could in good faith give validity to his
representation, assuming the conformity of his wife. Unless Cervantes wants Us to
hold that he deliberately negotiated with the Villoncos clothed in dubious garments of
authority precisely to afford him the opportunity to repudiate at his convenience any
agreement they may enter into with him. I am for holding as I do hold that
Bormaheco, Inc. had nothing to do with the transaction here in controversy. In any
event, if Cervantes may held to have acted for Bormaheco, Inc., in spite of the
absence of evidence of any authority for him to do so, it must be because
Bormaheco, Inc. is Cervantes himself, and there being no proof to the contrary, the
corporate shield of Bormaheco, Inc. may be deemed pierced in order to prevent any
further fraudulent implications in his actuations. Moreover, it may be observed that the
March 4 letter of Teofilo Villonco was not addressed to Bormaheco, Inc. but to
Francisco Cervantes and it does not even mention his being President of that
corporation.
Anent the requirement of consent of Mrs. Cervantes under Article 166 of the Civil
Code, I consider any defense along this line as unavailing to the appellants in this
case. As very ably discussed in the main opinion of Mr. Justice Aquino, the answer of
the defendants, make no reference at all to any lack of such consent. And considering
that the subsequent testimony of Cervantes to the effect that his wife opposed the
transaction cannot cure such omission, if only because any husband in the
circumstances revealed in the record is estopped from setting up such a defense (cf
Riobo vs. Hontiveros, 21 Phil. 31; Papi vs. Montenegro, 54 Phil. 531; see Civil Law by
Reyes & Puno, 1964 ed. p. 192), and that from her silence in her answer in this
respect Mrs. Cervantes may either be presumed to have given her consent thereto or
to have ratified the same (Montederamos vs. Ynonoy, 56 Phil. 457; Castaeda vs.
Samson, 43 Phil. 751), it is obvious that the belated invocation of this defense now
should be deemed in fact and in law as an unacceptable and ineffective afterthought.
Besides, it appearing that the sale of the Buendia property was purposely to enable
the spouses to acquire the Nassco property, I have grave doubts as to the application
of Article 166 to the sale here in dispute. I believe that the disposition by a husband
prohibited by the Code unless consented to by the wife refers to a transaction
outrightly prejudicial to the partnership and cannot comprehend a sale made precisely
for its benefit and causing no loss thereto beyond the ordinary risks of misjudgment of
a manager acting in good faith.
IN VIEW OF THE FOREGOING, I would not even require the formality of the serial
execution of instruments by the Cervantes spouses and Bormaheco, Inc. In the view I
have taken above, it would be legally feasible for the sale to the Villonco Realty
Property to be made directly by the spouses. But I would not insist in the modification
of the dispositive portion of the judgment, since the result would be the same anyway.

10

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. 109125 December 2, 1994
ANG YU ASUNCION, ARTHUR GO AND KEH TIONG, petitioners,
vs.
THE HON. COURT OF APPEALS and BUEN REALTY DEVELOPMENT
CORPORATION, respondents.
Antonio M. Albano for petitioners.
Umali, Soriano & Associates for private respondent.
VITUG, J.:
Assailed, in this petition for review, is the decision of the Court of Appeals, dated 04
December 1991, in CA-G.R. SP No. 26345 setting aside and declaring without force
and effect the orders of execution of the trial court, dated 30 August 1991 and 27
September 1991, in Civil Case No. 87-41058.
The antecedents are recited in good detail by the appellate court thusly:
On July 29, 1987 a Second Amended Complaint for Specific Performance was filed
by Ang Yu Asuncion and Keh Tiong, et al., against Bobby Cu Unjieng, Rose Cu
Unjieng and Jose Tan before the Regional Trial Court, Branch 31, Manila in Civil Case
No. 87-41058, alleging, among others, that plaintiffs are tenants or lessees of
residential and commercial spaces owned by defendants described as Nos. 630-638
Ongpin Street, Binondo, Manila; that they have occupied said spaces since 1935 and
have been religiously paying the rental and complying with all the conditions of the
lease contract; that on several occasions before October 9, 1986, defendants
informed plaintiffs that they are offering to sell the premises and are giving them
priority to acquire the same; that during the negotiations, Bobby Cu Unjieng offered a
price of P6-million while plaintiffs made a counter offer of P5-million; that plaintiffs
thereafter asked the defendants to put their offer in writing to which request
defendants acceded; that in reply to defendant's letter, plaintiffs wrote them on
October 24, 1986 asking that they specify the terms and conditions of the offer to sell;
that when plaintiffs did not receive any reply, they sent another letter dated January
28, 1987 with the same request; that since defendants failed to specify the terms and
conditions of the offer to sell and because of information received that defendants
were about to sell the property, plaintiffs were compelled to file the complaint to
compel defendants to sell the property to them.
Defendants filed their answer denying the material allegations of the complaint and
interposing a special defense of lack of cause of action.
After the issues were joined, defendants filed a motion for summary judgment which
was granted by the lower court. The trial court found that defendants' offer to sell was
never accepted by the plaintiffs for the reason that the parties did not agree upon the
terms and conditions of the proposed sale, hence, there was no contract of sale at all.
Nonetheless, the lower court ruled that should the defendants subsequently offer their
property for sale at a price of P11-million or below, plaintiffs will have the right of first
refusal. Thus the dispositive portion of the decision states:
WHEREFORE, judgment is hereby rendered in favor of the defendants and against

the plaintiffs summarily dismissing the complaint subject to the aforementioned


condition that if the defendants subsequently decide to offer their property for sale for
a purchase price of Eleven Million Pesos or lower, then the plaintiffs has the option to
purchase the property or of first refusal, otherwise, defendants need not offer the
property to the plaintiffs if the purchase price is higher than Eleven Million Pesos.
SO ORDERED.
Aggrieved by the decision, plaintiffs appealed to this Court in
CA-G.R. CV No. 21123. In a decision promulgated on September 21, 1990 (penned
by Justice Segundino G. Chua and concurred in by Justices Vicente V. Mendoza and
Fernando A. Santiago), this Court affirmed with modification the lower court's
judgment, holding:
In resume, there was no meeting of the minds between the parties concerning the
sale of the property. Absent such requirement, the claim for specific performance will
not lie. Appellants' demand for actual, moral and exemplary damages will likewise fail
as there exists no justifiable ground for its award. Summary judgment for defendants
was properly granted. Courts may render summary judgment when there is no
genuine issue as to any material fact and the moving party is entitled to a judgment
as a matter of law (Garcia vs. Court of Appeals, 176 SCRA 815). All requisites
obtaining, the decision of the court a quo is legally justifiable.
WHEREFORE, finding the appeal unmeritorious, the judgment appealed from is
hereby AFFIRMED, but subject to the following modification: The court a quo in the
aforestated decision gave the plaintiffs-appellants the right of first refusal only if the
property is sold for a purchase price of Eleven Million pesos or lower; however,
considering the mercurial and uncertain forces in our market economy today. We find
no reason not to grant the same right of first refusal to herein appellants in the event
that the subject property is sold for a price in excess of Eleven Million pesos. No
pronouncement as to costs.
SO ORDERED.
The decision of this Court was brought to the Supreme Court by petition for review on
certiorari. The Supreme Court denied the appeal on May 6, 1991 "for insufficiency in
form and substances" (Annex H, Petition).
On November 15, 1990, while CA-G.R. CV No. 21123 was pending consideration by
this Court, the Cu Unjieng spouses executed a Deed of Sale (Annex D, Petition)
transferring the property in question to herein petitioner Buen Realty and
Development Corporation, subject to the following terms and conditions:
1. That for and in consideration of the sum of FIFTEEN MILLION PESOS
(P15,000,000.00), receipt of which in full is hereby acknowledged, the VENDORS
hereby sells, transfers and conveys for and in favor of the VENDEE, his heirs,
executors, administrators or assigns, the above-described property with all the
improvements found therein including all the rights and interest in the said property
free from all liens and encumbrances of whatever nature, except the pending
ejectment proceeding;
2. That the VENDEE shall pay the Documentary Stamp Tax, registration fees for the
transfer of title in his favor and other expenses incidental to the sale of abovedescribed property including capital gains tax and accrued real estate taxes.
As a consequence of the sale, TCT No. 105254/T-881 in the name of the Cu Unjieng
spouses was cancelled and, in lieu thereof, TCT No. 195816 was issued in the name
of petitioner on December 3, 1990.
On July 1, 1991, petitioner as the new owner of the subject property wrote a letter to
the lessees demanding that the latter vacate the premises.

11

On July 16, 1991, the lessees wrote a reply to petitioner stating that petitioner brought
the property subject to the notice of lis pendens regarding Civil Case No. 87-41058
annotated on TCT No. 105254/T-881 in the name of the Cu Unjiengs.
The lessees filed a Motion for Execution dated August 27, 1991 of the Decision in
Civil Case No. 87-41058 as modified by the Court of Appeals in CA-G.R. CV No.
21123.
On August 30, 1991, respondent Judge issued an order (Annex A, Petition) quoted as
follows:
Presented before the Court is a Motion for Execution filed by plaintiff represented by
Atty. Antonio Albano. Both defendants Bobby Cu Unjieng and Rose Cu Unjieng
represented by Atty. Vicente Sison and Atty. Anacleto Magno respectively were duly
notified in today's consideration of the motion as evidenced by the rubber stamp and
signatures upon the copy of the Motion for Execution.
The gist of the motion is that the Decision of the Court dated September 21, 1990 as
modified by the Court of Appeals in its decision in CA G.R. CV-21123, and elevated to
the Supreme Court upon the petition for review and that the same was denied by the
highest tribunal in its resolution dated May 6, 1991 in G.R. No.
L-97276, had now become final and executory. As a consequence, there was an
Entry of Judgment by the Supreme Court as of June 6, 1991, stating that the
aforesaid modified decision had already become final and executory.
It is the observation of the Court that this property in dispute was the subject of the
Notice of Lis Pendens and that the modified decision of this Court promulgated by the
Court of Appeals which had become final to the effect that should the defendants
decide to offer the property for sale for a price of P11 Million or lower, and considering
the mercurial and uncertain forces in our market economy today, the same right of
first refusal to herein plaintiffs/appellants in the event that the subject property is sold
for a price in excess of Eleven Million pesos or more.
WHEREFORE, defendants are hereby ordered to execute the necessary Deed of
Sale of the property in litigation in favor of plaintiffs Ang Yu Asuncion, Keh Tiong and
Arthur Go for the consideration of P15 Million pesos in recognition of plaintiffs' right of
first refusal and that a new Transfer Certificate of Title be issued in favor of the buyer.
All previous transactions involving the same property notwithstanding the issuance of
another title to Buen Realty Corporation, is hereby set aside as having been executed
in bad faith.
SO ORDERED.
On September 22, 1991 respondent Judge issued another order, the dispositive
portion of which reads:
WHEREFORE, let there be Writ of Execution issue in the above-entitled case
directing the Deputy Sheriff Ramon Enriquez of this Court to implement said Writ of
Execution ordering the defendants among others to comply with the aforesaid Order
of this Court within a period of one (1) week from receipt of this Order and for
defendants to execute the necessary Deed of Sale of the property in litigation in favor
of the plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the consideration of
P15,000,000.00 and ordering the Register of Deeds of the City of Manila, to cancel
and set aside the title already issued in favor of Buen Realty Corporation which was
previously executed between the latter and defendants and to register the new title in
favor of the aforesaid plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go.
SO ORDERED.
On the same day, September 27, 1991 the corresponding writ of execution (Annex C,
Petition) was issued. 1

On 04 December 1991, the appellate court, on appeal to it by private respondent, set


aside and declared without force and effect the above questioned orders of the court
a quo.
In this petition for review on certiorari, petitioners contend that Buen Realty can be
held bound by the writ of execution by virtue of the notice of lis pendens, carried over
on TCT No. 195816 issued in the name of Buen Realty, at the time of the latter's
purchase of the property on 15 November 1991 from the Cu Unjiengs.
We affirm the decision of the appellate court.
A not too recent development in real estate transactions is the adoption of such
arrangements as the right of first refusal, a purchase option and a contract to sell. For
ready reference, we might point out some fundamental precepts that may find some
relevance to this discussion.
An obligation is a juridical necessity to give, to do or not to do (Art. 1156, Civil Code).
The obligation is constituted upon the concurrence of the essential elements thereof,
viz: (a) The vinculum juris or juridical tie which is the efficient cause established by the
various sources of obligations (law, contracts, quasi-contracts, delicts and quasidelicts); (b) the object which is the prestation or conduct; required to be observed (to
give, to do or not to do); and (c) the subject-persons who, viewed from the
demandability of the obligation, are the active (obligee) and the passive (obligor)
subjects.
Among the sources of an obligation is a contract (Art. 1157, Civil Code), which 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 (Art. 1305, Civil Code). A
contract undergoes various stages that include its negotiation or preparation, its
perfection and, finally, its consummation. Negotiation covers the period from the time
the prospective contracting parties indicate interest in the contract to the time the
contract is concluded (perfected). The perfection of the contract takes place upon the
concurrence of the essential elements thereof. A contract which is consensual as to
perfection is so established upon a mere meeting of minds, i.e., the concurrence of
offer and acceptance, on the object and on the cause thereof. A contract which
requires, in addition to the above, the delivery of the object of the agreement, as in a
pledge or commodatum, is commonly referred to as a real contract. In a solemn
contract, compliance with certain formalities prescribed by law, such as in a donation
of real property, is essential in order to make the act valid, the prescribed form being
thereby an essential element thereof. The stage of consummation begins when the
parties perform their respective undertakings under the contract culminating in the
extinguishment thereof.
Until the contract is perfected, it cannot, as an independent source of obligation,
serve as a binding juridical relation. In sales, particularly, to which the topic for
discussion about the case at bench belongs, the contract is perfected when a person,
called the seller, obligates himself, for a price certain, to deliver and to transfer
ownership of a thing or right to another, called the buyer, over which the latter agrees.
Article 1458 of the Civil Code provides:
Art. 1458. By the contract of sale one of the contracting parties obligates himself to
transfer the ownership of and to deliver a determinate thing, and the other to pay
therefor a price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
When the sale is not absolute but conditional, such as in a "Contract to Sell" where
invariably the ownership of the thing sold is retained until the fulfillment of a positive
suspensive condition (normally, the full payment of the purchase price), the breach of

12

the condition will prevent the obligation to convey title from acquiring an obligatory
force. 2 In Dignos vs. Court of Appeals (158 SCRA 375), we have said that, although
denominated a "Deed of Conditional Sale," a sale is still absolute where the contract
is devoid of any proviso that title is reserved or the right to unilaterally rescind is
stipulated, e.g., until or unless the price is paid. Ownership will then be transferred to
the buyer upon actual or constructive delivery (e.g., by the execution of a public
document) of the property sold. Where the condition is imposed upon the perfection
of the contract itself, the failure of the condition would prevent such perfection. 3 If the
condition is imposed on the obligation of a party which is not fulfilled, the other party
may either waive the condition or refuse to proceed with the sale (Art. 1545, Civil
Code). 4
An unconditional mutual promise to buy and sell, as long as the object is made
determinate and the price is fixed, can be obligatory on the parties, and compliance
therewith may accordingly be exacted. 5
An accepted unilateral promise which specifies the thing to be sold and the price to
be paid, when coupled with a valuable consideration distinct and separate from the
price, is what may properly be termed a perfected contract of option. This contract is
legally binding, and in sales, it conforms with the second paragraph of Article 1479 of
the Civil Code, viz:
Art. 1479. . . .
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. (1451a) 6
Observe, however, that the option is not the contract of sale itself. 7 The optionee has
the right, but not the obligation, to buy. Once the option is exercised timely, i.e., the
offer is accepted before a breach of the option, a bilateral promise to sell and to buy
ensues and both parties are then reciprocally bound to comply with their respective
undertakings. 8
Let us elucidate a little. A negotiation is formally initiated by an offer. An imperfect
promise (policitacion) is merely an offer. Public advertisements or solicitations and the
like are ordinarily construed as mere invitations to make offers or only as proposals.
These relations, until a contract is perfected, are not considered binding
commitments. Thus, at any time prior to the perfection of the contract, either
negotiating party may stop the negotiation. The offer, at this stage, may be withdrawn;
the withdrawal is effective immediately after its manifestation, such as by its mailing
and not necessarily when the offeree learns of the withdrawal (Laudico vs. Arias, 43
Phil. 270). Where a period is given to the offeree within which to accept the offer, the
following rules generally govern:
(1) If the period is not itself founded upon or supported by a consideration, the offeror
is still free and has the right to withdraw the offer before its acceptance, or, if an
acceptance has been made, before the offeror's coming to know of such fact, by
communicating that withdrawal to the offeree (see Art. 1324, Civil Code; see also
Atkins, Kroll & Co. vs. Cua, 102 Phil. 948, holding that this rule is applicable to a
unilateral promise to sell under Art. 1479, modifying the previous decision in South
Western Sugar vs. Atlantic Gulf, 97 Phil. 249; see also Art. 1319, Civil Code; Rural
Bank of Paraaque, Inc., vs. Remolado, 135 SCRA 409; Sanchez vs. Rigos, 45
SCRA 368). The right to withdraw, however, must not be exercised whimsically or
arbitrarily; otherwise, it could give rise to a damage claim under Article 19 of the Civil
Code which ordains that "every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and observe

honesty and good faith."


(2) If the period has a separate consideration, a contract of "option" is deemed
perfected, and it would be a breach of that contract to withdraw the offer during the
agreed period. The option, however, is an independent contract by itself, and it is to
be distinguished from the projected main agreement (subject matter of the option)
which is obviously yet to be concluded. If, in fact, the optioner-offeror withdraws the
offer before its acceptance (exercise of the option) by the optionee-offeree, the latter
may not sue for specific performance on the proposed contract ("object" of the option)
since it has failed to reach its own stage of perfection. The optioner-offeror, however,
renders himself liable for damages for breach of the option. In these cases, care
should be taken of the real nature of the consideration given, for if, in fact, it has been
intended to be part of the consideration for the main contract with a right of withdrawal
on the part of the optionee, the main contract could be deemed perfected; a similar
instance would be an "earnest money" in a contract of sale that can evidence its
perfection (Art. 1482, Civil Code).
In the law on sales, the so-called "right of first refusal" is an innovative juridical
relation. Needless to point out, it cannot be deemed a perfected contract of sale
under Article 1458 of the Civil Code. Neither can the right of first refusal, understood
in its normal concept, per se be brought within the purview of an option under the
second paragraph of Article 1479, aforequoted, or possibly of an offer under Article
1319 9 of the same Code. An option or an offer would require, among other things, 10 a
clear certainty on both the object and the cause or consideration of the envisioned
contract. In a right of first refusal, while the object might be made determinate, the
exercise of the right, however, would be dependent not only on the grantor's eventual
intention to enter into a binding juridical relation with another but also on terms,
including the price, that obviously are yet to be later firmed up. Prior thereto, it can at
best be so described as merely belonging to a class of preparatory juridical relations
governed not by contracts (since the essential elements to establish the vinculum
juris would still be indefinite and inconclusive) but by, among other laws of general
application, the pertinent scattered provisions of the Civil Code on human conduct.
Even on the premise that such right of first refusal has been decreed under a final
judgment, like here, its breach cannot justify correspondingly an issuance of a writ of
execution under a judgment that merely recognizes its existence, nor would it
sanction an action for specific performance without thereby negating the
indispensable element of consensuality in the perfection of contracts. 11 It is not to say,
however, that the right of first refusal would be inconsequential for, such as already
intimated above, an unjustified disregard thereof, given, for instance, the
circumstances expressed in Article 19 12 of the Civil Code, can warrant a recovery for
damages.
The final judgment in Civil Case No. 87-41058, it must be stressed, has merely
accorded a "right of first refusal" in favor of petitioners. The consequence of such a
declaration entails no more than what has heretofore been said. In fine, if, as it is here
so conveyed to us, petitioners are aggrieved by the failure of private respondents to
honor the right of first refusal, the remedy is not a writ of execution on the judgment,
since there is none to execute, but an action for damages in a proper forum for the
purpose.
Furthermore, whether private respondent Buen Realty Development Corporation, the
alleged purchaser of the property, has acted in good faith or bad faith and whether or
not it should, in any case, be considered bound to respect the registration of the lis
pendens in Civil Case No. 87-41058 are matters that must be independently

13

addressed in appropriate proceedings. Buen Realty, not having been impleaded in


Civil Case No. 87-41058, cannot be held subject to the writ of execution issued by
respondent Judge, let alone ousted from the ownership and possession of the
property, without first being duly afforded its day in court.
We are also unable to agree with petitioners that the Court of Appeals has erred in
holding that the writ of execution varies the terms of the judgment in Civil Case No.
87-41058, later affirmed in CA-G.R. CV-21123. The Court of Appeals, in this regard,
has observed:
Finally, the questioned writ of execution is in variance with the decision of the trial
court as modified by this Court. As already stated, there was nothing in said decision
13
that decreed the execution of a deed of sale between the Cu Unjiengs and
respondent lessees, or the fixing of the price of the sale, or the cancellation of title in
the name of petitioner (Limpin vs. IAC, 147 SCRA 516; Pamantasan ng Lungsod ng
Maynila vs. IAC, 143 SCRA 311; De Guzman vs. CA, 137 SCRA 730; Pastor vs. CA,
122 SCRA 885).
It is likewise quite obvious to us that the decision in Civil Case No. 87-41058 could not
have decreed at the time the execution of any deed of sale between the Cu Unjiengs
and petitioners.
WHEREFORE, we UPHOLD the Court of Appeals in ultimately setting aside the
questioned Orders, dated 30 August 1991 and 27 September 1991, of the court a
quo. Costs against petitioners.
SO ORDERED.
Narvasa, C.J., Padilla, Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo,
Quiason, Puno and Mendoza, JJ., concur.
Kapunan, J., took no part.
Feliciano, J., is on leave.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 133638
April 15, 2005
PERPETUA VDA. DE APE, Petitioner,
vs.
THE HONORABLE COURT OF APPEALS and GENOROSA CAWIT VDA. DE
LUMAYNO, Respondents.
DECISION
CHICO-NAZARIO, J.:
Before Us is a petition for review on certiorari of the Decision1 of the Court of Appeals
in CA-G.R. CV No. 45886 entitled, "Generosa Cawit de Lumayno, accompanied by
her husband Braulio Lumayno v. Fortunato Ape, including his wife Perpetua de Ape."
The pertinent facts are as follows:
Cleopas Ape was the registered owner of a parcel of land particularly known as Lot
No. 2319 of the Escalante Cadastre of Negros Occidental and covered by Original
Certificate of Title (OCT) No. RP 1379 (RP-154 [300]).2 Upon Cleopas Ape's death
sometime in 1950, the property passed on to his wife, Maria Ondoy, and their eleven
(11) children, namely: Fortunato, Cornelio, Bernalda, Bienvenido, Encarnacion,
Loreta, Lourdes, Felicidad, Adela, Dominador, and Angelina, all surnamed Ape.
On 15 March 1973, Generosa Cawit de Lumayno (private respondent herein), joined

by her husband, Braulio,3 instituted a case for "Specific Performance of a Deed of


Sale with Damages" against Fortunato and his wife Perpetua (petitioner herein)
before the then Court of First Instance of Negros Occidental. It was alleged in the
complaint that on 11 April 1971, private respondent and Fortunato entered into a
contract of sale of land under which for a consideration of P5,000.00, Fortunato
agreed to sell his share in Lot No. 2319 to private respondent. The agreement was
contained in a receipt prepared by private respondent's son-in-law, Andres Flores, at
her behest. Said receipt was attached to the complaint as Annex "A" thereof and later
marked as Exhibit "G" for private respondent. The receipt states:
April 11, 1971
TO WHOM IT MAY CONCERN:
This date received from Mrs. Generosa Cawit de Lumayno the sum of THIRTY
PESOS ONLY as Advance Payment of my share in Land Purchased, for FIVE
THOUSAND PESOS LOT #2319.
(Signed)
FORTUNATO APE
P30.00 WITNESS:
(Illegible)4
As private respondent wanted to register the claimed sale transaction, she
supposedly demanded that Fortunato execute the corresponding deed of sale and to
receive the balance of the consideration. However, Fortunato unjustifiably refused to
heed her demands. Private respondent, therefore, prayed that Fortunato be ordered
to execute and deliver to her "a sufficient and registrable deed of sale involving his
one-eleventh (1/11) share or participation in Lot No. 2319 of the Escalante Cadastre;
to pay P5,000.00 in damages; P500.00 reimbursement for litigation expenses as well
as additional P500.00 for every appeal made; P2,000.00 for attorney's fees; and to
pay the costs.5
Fortunato and petitioner denied the material allegations of the complaint and claimed
that Fortunato never sold his share in Lot No. 2319 to private respondent and that his
signature appearing on the purported receipt was forged. By way of counterclaim, the
defendants below maintained having entered into a contract of lease with respondent
involving Fortunato's portion of Lot No. 2319. This purported lease contract
commenced in 1960 and was supposed to last until 1965 with an option for another
five (5) years. The annual lease rental was P100.00 which private respondent and
her husband allegedly paid on installment basis. Fortunato and petitioner also
assailed private respondent and her husband's continued possession of the rest of
Lot No. 2319 alleging that in the event they had acquired the shares of Fortunato's
co-owners by way of sale, he was invoking his right to redeem the same. Finally,
Fortunato and petitioner prayed that the lease contract between them and respondent
be ordered annulled; and that respondent be ordered to pay them attorney's fees;
moral damages; and exemplary damages.6
In their reply,7 the private respondent and her husband alleged that they had
purchased from Fortunato's co-owners, as evidenced by various written instruments,8
their respective portions of Lot No. 2319. By virtue of these sales, they insisted that
Fortunato was no longer a co-owner of Lot No. 2319 thus, his right of redemption no
longer existed.
Prior to the resolution of this case at the trial court level, Fortunato died and was
substituted in this action by his children named Salodada, Clarita, Narciso, Romeo,

14

Rodrigo, Marieta, Fortunato, Jr., and Salvador, all surnamed Ape.9


During the trial, private respondent testified that she and her husband acquired the
various portions of Lot No. 2319 belonging to Fortunato's co-owners. Thereafter, her
husband caused the annotation of an adverse claim on the certificate of title of Lot
No. 2319.10 The annotation states:
Entry No. 123539 Adverse claim filed by Braulio Lumayno. Notice of adverse
claim filed by Braulio Lumayno affecting the lot described in this title to the extent of
77511.93 square meters, more or less, the aggregate area of shares sold to him on
the basis of (alleged) sales in his possession. Doc. No. 157, Page No. 33, Book No.
XI, Series of 1967 of Alexander Cawit of Escalante, Neg. Occ. Date of instrument.
June 22, 1967 at 8:30 a.m. (SGD) FEDENCIORRAZ, Actg. Register of Deeds.11
In addition, private respondent claimed that after the acquisition of those shares, she
and her husband had the whole Lot No. 2319 surveyed by a certain Oscar Mascada
who came up with a technical description of said piece of land.12 Significantly, private
respondent alleged that Fortunato was present when the survey was conducted.13
Also presented as evidence for private respondent were pictures taken of some parts
of Lot No. 2319 purportedly showing the land belonging to Fortunato being bounded
by a row of banana plants thereby separating it from the rest of Lot No. 2319.14
As regards the circumstances surrounding the sale of Fortunato's portion of the land,
private respondent testified that Fortunato went to her store at the time when their
lease contract was about to expire. He allegedly demanded the rental payment for
his land but as she was no longer interested in renewing their lease agreement, they
agreed instead to enter into a contract of sale which Fortunato acceded to provided
private respondent bought his portion of Lot No. 2319 for P5,000.00. Thereafter, she
asked her son-in-law Flores to prepare the aforementioned receipt. Flores read the
document to Fortunato and asked the latter whether he had any objection thereto.
Fortunato then went on to affix his signature on the receipt.
For her part, petitioner insisted that the entire Lot No. 2319 had not yet been formally
subdivided;15 that on 11 April 1971 she and her husband went to private respondent's
house to collect past rentals for their land then leased by the former, however, they
managed to collect only thirty pesos;16 that private respondent made her (petitioner's)
husband sign a receipt acknowledging the receipt of said amount of money;17 and that
the contents of said receipt were never explained to them.18 She also stated in her
testimony that her husband was an illiterate and only learned how to write his name in
order to be employed in a sugar central.19 As for private respondent's purchase of the
shares owned by Fortunato's co-owners, petitioner maintained that neither she nor
her husband received any notice regarding those sales transactions.20 The testimony
of petitioner was later on corroborated by her daughter-in-law, Marietta Ape Dino.21
After due trial, the court a quo rendered a decision22 dismissing both the complaint
and the counterclaim. The trial court likewise ordered that deeds or documents
representing the sales of the shares previously owned by Fortunato's co-owners be
registered and annotated on the existing certificate of title of Lot No. 2319. According
to the trial court, private respondent failed to prove that she had actually paid the
purchase price of P5,000.00 to Fortunato and petitioner. Applying, therefore, the
provision of Article 1350 of the Civil Code,23 the trial court concluded that private
respondent did not have the right to demand the delivery to her of the registrable
deed of sale over Fortunato's portion of the Lot No. 2319.
The trial court also rejected Fortunato and petitioner's claim that they had the right of
redemption over the shares previously sold to private respondent and the latter's
husband, reasoning as follows:

Defendants in their counterclaim invoke their right of legal redemption under Article
1623 of the New Civil Code in view of the alleged sale of the undivided portions of the
lot in question by their co-heirs and co-owners as claimed by the plaintiffs in their
complaint. They have been informed by the plaintiff about said sales upon the filing of
the complaint in the instant case as far back as March 14, 1973. Defendant
themselves presented as their very own exhibits copies of the respective deeds of
sale or conveyance by their said co-heirs and co-owners in favor of the plaintiffs or
their predecessors-in-interest way back on January 2, 1992 when they formally
offered their exhibits in the instant case; meaning, they themselves acquired
possession of said documentary exhibits even before they formally offered them in
evidence. Under Art. 1623 of the New Civil Code, defendants have only THIRTY (30)
DAYS counted from their actual knowledge of the exact terms and conditions of the
deeds of sale or conveyance of their co-heirs' and co-owners' share within which to
exercise their right of legal redemption.24
Within the reglementary period, both parties filed their respective notices of appeal
before the trial court with petitioner and her children taking exception to the finding of
the trial court that the period within which they could invoke their right of redemption
had already lapsed.25 For her part, private respondent raised as errors the trial court's
ruling that there was no contract of sale between herself and Fortunato and the
dismissal of their complaint for specific performance.26
The Court of Appeals, in the decision now assailed before us, reversed and set aside
the trial court's dismissal of the private respondent's complaint but upheld the portion
of the court a quo's decision ordering the dismissal of petitioner and her children's
counterclaim. The dispositive portion of the appellate court's decision reads:
WHEREFORE, the decision dated March 11, 1994, is hereby REVERSED and SET
ASIDE insofar as the dismissal of plaintiffs-appellants' complaint is concerned, and
another one is entered ordering the defendant-appellant Fortunato Ape and/or his
wife Perpetua de Ape and successors-in-interest to execute in favor of plaintiffappellant Generosa Cawit de Lumayno a Deed of Absolute Sale involving the oneeleventh (1/11) share or participation of Fortunato Ape in Lot No. 2319, Escalante
Cadastre, containing an area of 12,527.19 square meters, more or less, within (30)
days from finality of this decision, and in case of non-compliance with this Order, that
the Clerk of Court of said court is ordered to execute the deed on behalf of the
vendor. The decision is AFFIRMED insofar as the dismissal of defendants-appellants'
counterclaim is concerned.
Without pronouncement as to costs.27
The Court of Appeals upheld private respondent's position that Exhibit "G" had all the
earmarks of a valid contract of sale, thus:
Exhibit G is the best proof that the P5,000.00 representing the purchase price of the
1/11th share of Fortunato Ape was not paid by the vendee on April 11, 1971, and/or up
to the present, but that does not affect the binding force and effect of the document.
The vendee having paid the vendor an advance payment of the agreed purchase
price of the property, what the vendor can exact from the vendee is full payment upon
his execution of the final deed of sale. As is shown, the vendee precisely instituted
this action to compel the vendor Fortunato Ape to execute the final document, after
she was informed that he would execute the same upon arrival of his daughter "Bala"
from Mindanao, but afterwards failed to live up to his contractual obligation (TSN, pp.
11-13, June 10, 1992).
It is not right for the trial court to expect plaintiff-appellant to pay the balance of the
purchase price before the final deed is executed, or for her to deposit the equivalent

15

amount in court in the form of consignation. Consignation comes into fore in the case
of a creditor to whom tender of payment has been made and refuses without just
cause to accept it (Arts. 1256 and 1252, N.C.C.; Querino vs. Pelarca, 29 SCRA 1).
As vendee, plaintiff-appellant Generosa Cawit de Lumayno does not fall within the
purview of a debtor.
We, therefore, find and so hold that the trial court should have found that exhibit G
bears all the earmarks of a private deed of sale which is valid, binding and
enforceable between the parties, and that as a consequence of the failure and refusal
on the part of the vendor Fortunato Ape to live up to his contractual obligation, he
and/or his heirs and successors-in-interest can be compelled to execute in favor of,
and to deliver to the vendee, plaintiff-appellant Generosa Cawit de Lumayno a
registerable deed of absolute sale involving his one-eleventh (1/11th) share or
participation in Lot No. 2319, Escalante Cadastre, containing an area of 12,527.19
square meters, more or less, within 30 days from finality of this decision, and, in case
of non-compliance within said period, this Court appoints the Clerk of Court of the trial
court to execute on behalf of the vendor the said document.28
The Court of Appeals, however, affirmed the trial court's ruling on the issue of
petitioner and her children's right of redemption. It ruled that Fortunato's receipt of the
Second Owner's Duplicate of OCT (RP) 1379 (RP-154 ([300]), containing the adverse
claim of private respondent and her husband, constituted a sufficient compliance with
the written notice requirement of Article 1623 of the Civil Code and the period of
redemption under this provision had long lapsed.
Aggrieved by the decision of the appellate court, petitioner is now before us raising,
essentially, the following issues: whether Fortunato was furnished with a written notice
of sale of the shares of his co-owners as required by Article 1623 of the Civil Code;
and whether the receipt signed by Fortunato proves the existence of a contract of
sale between him and private respondent.
In her memorandum, petitioner claimed that the Court of Appeals erred in sustaining
the court a quo's pronouncement that she could no longer redeem the portion of Lot
No. 2319 already acquired by private respondent for no written notice of said sales
was furnished them. According to her, the Court of Appeals unduly expanded the
scope of the law by equating Fortunato's receipt of Second Owner's Duplicate of OCT
(RP) 1379 (RP-154 ([300]) with the written notice requirement of Article 1623. In
addition, she argued that Exhibit "G" could not possibly be a contract of sale of
Fortunato's share in Lot No. 2319 as said document does not contain "(a) definite
agreement on the manner of payment of the price."29 Even assuming that Exhibit "G"
is, indeed, a contract of sale between private respondent and Fortunato, the latter did
not have the obligation to deliver to private respondent a registrable deed of sale in
view of private respondent's own failure to pay the full purchase price of Fortunato's
portion of Lot No. 2319. Petitioner is also of the view that, at most, Exhibit "G" merely
contained a unilateral promise to sell which private respondent could not enforce in
the absence of a consideration distinct from the purchase price of the land. Further,
petitioner reiterated her claim that due to the illiteracy of her husband, it was
incumbent upon private respondent to show that the contents of Exhibit "G" were fully
explained to him. Finally, petitioner pointed out that the Court of Appeals erred when
it took into consideration the same exhibit despite the fact that only its photocopy was
presented before the court.
On the other hand, private respondent argued that the annotation on the second
owner's certificate over Lot No. 2319 constituted constructive notice to the whole
world of private respondent's claim over the majority of said parcel of land. Relying

on our decision in the case of Cabrera v. Villanueva,30 private respondent insisted that
when Fortunato received a copy of the second owner's certificate, he became fully
aware of the contracts of sale entered into between his co-owners on one hand and
private respondent and her deceased husband on the other.
Private respondent also averred that "although (Lot No. 2319) was not actually
partitioned in a survey after the death of Cleopas Ape, the land was partitioned in a
'hantal-hantal' manner by the heirs. Each took and possessed specific portion or
premises as his/her share in land, farmed their respective portion or premises, and
improved them, each heir limiting his/her improvement within the portion or premises
which were his/her respective share."31 Thus, when private respondent and her
husband purchased the other parts of Lot No. 2319, it was no longer undivided as
petitioner claims.
The petition is partly meritorious.
Article 1623 of the Civil Code provides:
The right of legal pre-emption or redemption shall not be exercised except within thirty
days from the notice in writing by the prospective vendor, or by the vendor, as the
case may be. The deed of sale shall not be recorded in the Registry of Property,
unless accompanied by an affidavit of the vendor that he has given written notice
thereof to all possible redemptioners.
Despite the plain language of the law, this Court has, over the years, been tasked to
interpret the "written notice requirement" of the above-quoted provision. In the case
Butte v. Manuel Uy & Sons, Inc.,32 we declared that
In considering whether or not the offer to redeem was timely, we think that the notice
given by the vendee (buyer) should not be taken into account. The text of Article
1623 clearly and expressly prescribes that the thirty days for making the redemption
are to be counted from notice in writing by the vendor. Under the old law (Civ. Code
of 1889, Art. 1524), it was immaterial who gave the notice; so long as the redeeming
co-owner learned of the alienation in favor of the stranger, the redemption period
began to run. It is thus apparent that the Philippine legislature in Article 1623
deliberately selected a particular method of giving notice, and that method must be
deemed exclusive. (39 Am. Jur., 237; Payne vs. State, 12 S.W. 2(d) 528). As ruled in
Wampler vs. Lecompte, 150 Atl. 458 (affd. in 75 Law Ed. [U.S.] 275)
why these provisions were inserted in the statute we are not informed, but we may
assume until the contrary is shown, that a state of facts in respect thereto existed,
which warranted the legislature in so legislating.
The reasons for requiring that the notice should be given by the seller, and not by the
buyer, are easily divined. The seller of an undivided interest is in the best position to
know who are his co-owners that under the law must be notified of the sale. Also, the
notice by the seller removes all doubts as to fact of the sale, its perfection; and its
validity, the notice being a reaffirmation thereof, so that the party notified need not
entertain doubt that the seller may still contest the alienation. This assurance would
not exist if the notice should be given by the buyer.33
The interpretation was somehow modified in the case of De Conejero, et al. v. Court
of Appeals, et al.34 wherein it was pointed out that Article 1623 "does not prescribe a
particular form of notice, nor any distinctive method for notifying the redemptioner"
thus, as long as the redemptioner was notified in writing of the sale and the
particulars thereof, the redemption period starts to run. This view was reiterated in
Etcuban v. The Honorable Court of Appeals, et al.,35 Cabrera v. Villanueva,36 Garcia,
et al. v. Calaliman, et al.,37 Distrito, et al. v. The Honorable Court of Appeals, et al.,38
and Mariano, et al. v. Hon. Court of Appeals, et al.39

16

However, in the case of Salatandol v. Retes,40 wherein the plaintiffs were not
furnished any written notice of sale or a copy thereof by the vendor, this Court again
referred to the principle enunciated in the case of Butte. As observed by Justice
Vicente Mendoza, such reversion is only sound, thus:
Art. 1623 of the Civil Code is clear in requiring that the written notification should
come from the vendor or prospective vendor, not from any other person. There is,
therefore, no room for construction. Indeed, the principal difference between Art.
1524 of the former Civil Code and Art. 1623 of the present one is that the former did
not specify who must give the notice, whereas the present one expressly says the
notice must be given by the vendor. Effect must be given to this change in statutory
language.41
In this case, the records are bereft of any indication that Fortunato was given any
written notice of prospective or consummated sale of the portions of Lot No. 2319 by
the vendors or would-be vendors. The thirty (30)-day redemption period under the
law, therefore, has not commenced to run.
Despite this, however, we still rule that petitioner could no longer invoke her right to
redeem from private respondent for the exercise of this right "presupposes the
existence of a co-ownership at the time the conveyance is made by a co-owner and
when it is demanded by the other co-owner or co-owners."42 The regime of coownership exists when ownership of an undivided thing or right belongs to different
persons.43 By the nature of a co-ownership, a co-owner cannot point to specific
portion of the property owned in common as his own because his share therein
remains intangible.44 As legal redemption is intended to minimize co-ownership,45
once the property is subdivided and distributed among the co-owners, the community
ceases to exist and there is no more reason to sustain any right of legal redemption.46
In this case, records reveal that although Lot No. 2319 has not yet been formally
subdivided, still, the particular portions belonging to the heirs of Cleopas Ape had
already been ascertained and they in fact took possession of their respective parts.
This can be deduced from the testimony of petitioner herself, thus:
Q
When the plaintiffs leased the share of your husband, were there any metes
and bounds?
A
It was not formally subdivided. We have only a definite portion. (hantalhantal)
Q
This hantal-hantal of your husband, was it also separate and distinct from the
hantal-hantal or the share of the brothers and sisters of your husband?
A
Well, this property in question is a common property.
Q
To the north, whose share was that which is adjacent to your husband's
assumed partition?
A
I do not know what [does] this "north" [mean].
COURT
(To Witness)
Q
To the place from where the sun rises, whose share was that?
A
The shares of Cornelia, Loreta, Encarnacion and Adela.
Q
How could you determine their own shares?
A
They were residing in their respective assumed portions.
Q
How about determining their respective boundaries?
A
It could be determined by stakes and partly a row of banana plantations
planted by my son-in-law.
Q
Who is this son-in-law you mentioned?
A
Narciso Ape.

ATTY. CAWIT
(Continuing)
Q
You said that there were stakes to determine the hantal-hantal of your
husband and the hantal-hantal of the other heirs, did I get you right?
ATTY. TAN
Admitted, Your Honor.

ATTY. CAWIT
Q
Mrs. Ape, in 1960, Cleopas Ape was already dead, is that correct?
A
Certainly, since he died in 1950.
Q
By the manifestation of your counsel that the entire land (13 hectares) of your
father-in-law, Cleopas Ape, was leased to Generosa Lumayno, is this correct?
A
No, it is only the assumed portion of my husband [which] was leased to
Generosa Lumayno.
Q
For clarification, it was only the share of your husband [which] was leased to
Generosa Cawit Lumayno?
A
Yes.47
ATTY. CAWIT
Q
My question: is that portion which you said was leased by your husband to the
Lumayno[s] and which was included to the lease by your mother-in-law to the
Lumayno[s], when the Lumayno[s] returned your husband['s] share, was that the
same premises that your husband leased to the Lumayno[s]?
A
The same.
Q
In re-possessing this portion of the land corresponding to the share of your
husband, did your husband demand that they should re-possess the land from the
Lumayno[s] or did the Lumayno[s] return them to your husband voluntarily?
A
They just returned to us without paying the rentals.
COURT
Q
Was the return the result of your husband's request or just voluntarily they
returned it to your husband?
A
No, sir, it was just returned voluntarily, and they abandoned the area but my
husband continued farming.48
Similarly telling of the partition is the stipulation of the parties during the pre-trial
wherein it was admitted that Lot No. 2319 had not been subdivided nevertheless,
"Fortunato Ape had possessed a specific portion of the land ostensibly corresponding
to his share."49
From the foregoing, it is evident that the partition of Lot No. 2319 had already been
effected by the heirs of Cleopas Ape. Although the partition might have been informal
is of no moment for even an oral agreement of partition is valid and binding upon the
parties.50 Likewise, the fact that the respective shares of Cleopas Ape's heirs are still
embraced in one and the same certificate of title and have not been technically
apportioned does not make said portions less determinable and identifiable from one
another nor does it, in any way, diminish the dominion of their respective owners.51
Turning now to the second issue of the existence of a contract of sale, we rule that
the records of this case betray the stance of private respondent that Fortunato Ape
entered into such an agreement with her.
A contract of sale is a consensual contract, thus, it is perfected by mere consent of
the parties. It is born from the moment there is a meeting of minds upon the thing
which is the object of the sale and upon the price.52 Upon its perfection, the parties
may reciprocally demand performance, that is, the vendee may compel the transfer of

17

the ownership and to deliver the object of the sale while the vendor may demand the
vendee to pay the thing sold.53 For there to be a perfected contract of sale, however,
the following elements must be present: consent, object, and price in money or its
equivalent. In the case of Leonardo v. Court of Appeals, et al.,54 we explained the
element of consent, to wit:
The essence of consent is the agreement of the parties on the terms of the contract,
the acceptance by one of the offer made by the other. It is the concurrence of the
minds of the parties on the object and the cause which constitutes the contract. The
area of agreement must extend to all points that the parties deem material or there is
no consent at all.
To be valid, consent must meet the following requisites: (a) it should be intelligent, or
with an exact notion of the matter to which it refers; (b) it should be free and (c) it
should be spontaneous. Intelligence in consent is vitiated by error; freedom by
violence, intimidation or undue influence; spontaneity by fraud.55
In this jurisdiction, the general rule is that he who alleges fraud or mistake in a
transaction must substantiate his allegation as the presumption is that a person takes
ordinary care for his concerns and that private dealings have been entered into fairly
and regularly.56 The exception to this rule is provided for under Article 1332 of the Civil
Code which provides that "[w]hen one of the parties is unable to read, or if the
contract is in a language not understood by him, and mistake or fraud is alleged, the
person enforcing the contract must show that the terms thereof have been fully
explained to the former."
In this case, as private respondent is the one seeking to enforce the claimed contract
of sale, she bears the burden of proving that the terms of the agreement were fully
explained to Fortunato Ape who was an illiterate. This she failed to do. While she
claimed in her testimony that the contents of the receipt were made clear to
Fortunato, such allegation was debunked by Andres Flores himself when the latter
took the witness stand. According to Flores:
ATTY. TAN
Q
Mr. Witness, that receipt is in English, is it not?
A
Yes, sir.
Q
When you prepared that receipt, were you aware that Fortunato Ape doesn't
know how to read and write English?
A
Yes, sir, I know.
Q
Mr. Witness, you said you were present at the time of the signing of that
alleged receipt of P30.00, correct?
A
Yes, sir.
Q
Where, in what place was this receipt signed?
A
At the store.
Q
At the time of the signing of this receipt, were there other person[s] present
aside from you, your mother-in-law and Fortunato Ape?
A
In the store, yes, sir.
Q
When you signed that document of course you acted as witness upon request
of your mother-in-law?
A
No, this portion, I was the one who prepared that document.
Q
Without asking of (sic) your mother-in-law, you prepared that document or it
was your mother-in-law who requested you to prepare that document and acted as
witness?
A
She requested me to prepare but does not instructed (sic) me to act as
witness. It was our opinion that whenever I prepared the document, I signed it as a

witness.
Q
Did it not occur to you to ask other witness to act on the side of Fortunato Ape
who did not know how to read and write English?
A
It occurred to me.
Q
But you did not bother to request a person who is not related to your motherin-law, considering that Fortunato Ape did not know how to read and write English?
A
The one who represented Fortunato Ape doesn't know also how to read and
write English. One a maid.
Q
You mentioned that there [was another] person inside the store, under your
previous statement, when the document was signed, there [was another] person in
the store aside from you, your mother-in-law and Fortunato Ape, is not true?
A
That is true, there is one person, but that person doesn't know how to read
also.

Q
Of course, Mr. Witness, since it occurred to you that there was need for other
witness to sign that document for Fortunato Ape, is it not a fact that the Municipal
Building is very near your house?
A
Quite (near).
Q
But you could readily proceed to the Municipal Building and request one who
is knowledgeable in English to act as witness?
A
I think there is no need for that small receipt. So I don't bother myself to go.
Q
You did not consider that receipt very important because you said that small
receipt?
A
Yes, I know.57
As can be gleaned from Flores's testimony, while he was very much aware of
Fortunato's inability to read and write in the English language, he did not bother to
fully explain to the latter the substance of the receipt (Exhibit "G"). He even
dismissed the idea of asking somebody else to assist Fortunato considering that a
measly sum of thirty pesos was involved. Evidently, it did not occur to Flores that the
document he himself prepared pertains to the transfer altogether of Fortunato's
property to his mother-in-law. It is precisely in situations such as this when the
wisdom of Article 1332 of the Civil Code readily becomes apparent which is "to
protect a party to a contract disadvantaged by illiteracy, ignorance, mental weakness
or some other handicap."58
In sum, we hold that petitioner is no longer entitled to the right of redemption under
Article 1632 of the Civil Code as Lot No. 2319 had long been partitioned among its
co-owners. This Court likewise annuls the contract of sale between Fortunato and
private respondent on the ground of vitiated consent.
WHEREFORE, premises considered, the decision dated 25 March 1998 of the Court
of Appeals is hereby REVERSED and SET ASIDE and the decision dated 11 March
1994 of the Regional Trial Court, Branch 58, San Carlos City, Negros Occidental,
dismissing both the complaint and the counterclaim, is hereby REINSTATED. No
costs.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.

18

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 134219
June 08, 2005
SPOUSES MARIO AND ELIZABETH TORCUATOR, petitioners,
vs.
SPOUSES REMEGIO AND GLORIA BERNABE and SPOUSES DIOSDADO and
LOURDES SALVADOR, respondents.
DECISION
TINGA, J.:
In the instant Petition,1 spouses Mario and Elizabeth Torcuator assail the D E C I S I
O N2 of the Court of Appeals in C.A.-G.R. CV No. 36427, which affirmed the trial
courts dismissal of their complaint for specific performance,3 and its Resolution4
which denied their motion for reconsideration.
The facts as summarized by the Court of Appeals are as follows:
The subject of this action is Lot 17, Block 5 of the Ayala Alabang Village, Muntinlupa,
Metro-Manila, with an area of 569 square meters and covered by TCT No. S-79773.
The lower court found that the above parcel of land was purchased by the spouses
Diosdado and Lourdes Salvador (Salvadors, for short) from the developers of Ayala
Alabang subject, among others, to the following conditions:-"It is part of the condition of buying a lot in Ayala Alabang Village (a) that the lot buyer
shall deposit with Ayala Corporation a cash bond (about P17,000.00 for the
Salvadors) which shall be refunded to him if he builds a residence thereon within two
(2) years of purchase, otherwise the deposit shall be forfeited, (b) architectural plans
for any improvement shall be approved by Ayala Corporation, and (c) no lot may be
resold by the buyer unless a residential house has been constructed thereon (Ayala
Corporation keeps the Torrens Title in their [sic] possession).
(p. 5, RTC Decision)
Evidences on record further reveal that on December 18, 1980, the Salvadors sold
the parcel of land to the spouses Remigio and Gloria Bernabe (Bernabes, for
expediency). Given the above restrictions, the Salvadors concomitantly executed a
special power of attorney authorizing the Bernabes to construct a residential house
on the lot and to transfer the title of the property in their names.
The Bernabes, on the other hand, without making any improvement, contracted to sell
the parcel of land to the spouses Mario and Elizabeth Torcuator (Torcuators, for
brevity) sometime in September of 1986. Then again, confronted by the Ayala
Alabang restrictions, the parties agreed to cause the sale between the Salvadors and
the Bernabes cancelled (Exhibit "D"), in favor of (a) a new deed of sale from the
Salvadors directly to the Torcuators; (b) a new Irrevocable Special Power of Attorney
(Exhibit F) executed by the Salvadors to the Torcuators in order for the latter to build a
house on the land in question; and (c) an Irrevocable Special Power of Attorney
(Exhibit E) from the Salvadors to the Bernabes authorizing the latter to sell, transfer
and convey, with power of substitution, the subject lot.
The Torcuators thereafter had the plans of their house prepared and offered to pay
the Bernabes for the land upon delivery of the sale contract. For one reason or

another, the deed of sale was never consummated nor was payment on the said sale
ever effected. Subseuqently, the Bernabes sold the subject land to Leonardo Angeles,
a brother-in-law (Exh. "7"). The document however is not notarized. As a result, the
Torcuators commenced the instant action against the Bernabes and Salvadors for
Specific Performance or Rescission with Damages.
After trial, the court a quo rendered its decision, the decretal portion reads:-"From all the foregoing disquisition, especially since the plaintiffs did not suffer any
real damage (by January, 1987 they could have purchased another lot in Ayala
Alabang, and the architectural plans they commissioned Arch. Selga to prepare could
then be used by the plaintiffs), the complaint filed by the plaintiff spouses is
dismissed. Since the plaintiff acted with sincerity and without delay in asserting what
they believed to be their prerogatives, i.e., without any malice or desire to take
advantage of another, the counter-claim interposed by the Bernabes against the
Torcuator spouses is similarly dismissed.
Makati, Metro-Manila, August 20, 1991.5
The Court of Appeals dismissed the appeal, ruling that the sale between the
Bernabes and the Torcuators was tainted with serious irregularities and bad faith. The
appellate court agreed with the trial courts conclusion that the parties entered into the
contract with the intention of reneging on the stipulation disallowing the sale or
transfer of vacant lots in Ayala Alabang Village.
It also ruled that the parties deprived the government of taxes when they made it
appear that the property was sold directly by the Salvadors to the Torcuators. Since
there were actually two sales, i.e., the first sale between the Salvadors and the
Bernabes and the second between the Bernabes and Torcuators, taxes should have
been paid for both transfers.6
The Court of Appeals denied petitioners motion for reconsideration in its Resolution7
dated June 15, 1998.
Petitioners then filed the instant petition, averring that the appellate court erred in
dismissing their appeal on the strength of issues which were neither pleaded nor
proved. The conditions allegedly imposed by Ayala Corporation on the sale of lots in
Ayala Alabang Village were: "(a) that the lot-buyer shall deposit with Ayala
Corporation a cash bond (about P17,000.00 for the Salvadors) which shall be
refunded to him if he builds a residence thereon within two (2) years of purchase,
otherwise the deposit shall be forfeited; (b) architectural plans for any improvement
shall be approved by Ayala Corporation; and (c) no lot may be resold by the buyer
unless a residential house has been constructed thereon (Ayala Corporation keeps
the Torrens title in their (sic) possession.)"8
According to petitioners, the stipulation prohibiting the sale of vacant lots in Ayala
Alabang Village, adverted to by the appellate court in its decision as evidence that the
sale between the Bernabes and the Torcuators was tainted with serious irregularities,
was never presented or offered in evidence by any of the parties. Without such
stipulation having been presented, marked and offered in evidence, the trial court and
the appellate court should not have considered the same.
The appellate court allegedly also erred in declaring that the contract of sale subject
of the case is void, as it was intended to deprive the government of revenue since the
matter of taxes was not even mentioned in the appealed decision of the trial court.
Further, petitioners assert that the contract was a perfected contract of sale not a
mere contract to sell. The trial court thus erred in declaring that the contract was void
due only to petitioners failure to deliver the agreed consideration. Likewise, the fact
that the contract calls for the payment of the agreed purchase price in United States

19

Dollars does not result in the contract being void. The most that could be demanded,
in accordance with jurisprudence, is to pay the obligation in Philippine currency.
Petitioners also dispute the trial courts finding that they did not suffer any real
damage as a result of the transaction. On the contrary, they claim that respondents
refusal to transfer the property caused them actual and moral damages.
Respondents filed their Comment/Opposition (To the Petition for Certiorari)9 dated
November 4, 1998 countering that petitioners knew of the condition prohibiting the
sale of vacant lots in Ayala Alabang Village as the same was annotated on the title of
the property which was submitted and adopted by both parties as their evidence. The
fact that the agreement required petitioners to construct a house in the name of the
Salvadors shows that petitioners themselves knew of the condition and
acknowledged its validity.
As regards petitioners contention that the Court of Appeals should not have ruled on
the matter of taxes due the government, respondents assert that the appellate court
has the power to review the entire case to determine the validity of the judgment of
the lower court. Thus, it may review even matters which were not raised on appeal.
Respondents refer to the circumstances surrounding the transaction as proof that the
parties entered into a mere contract to sell and not a contract of sale. Allegedly, the
memorandum containing the agreement of the parties merely used the term "offer."
The payment of the purchase price was ostensibly a condition sine qua non to the
execution of the deed of sale in favor of petitioners, especially since the Bernabes
came to the Philippines with the express purpose of selling the property and were
leaving for the United States as soon as they were paid. Moreover, petitioners were
required to construct a residential house on the property before it could be sold to
them in accordance with the condition imposed by Ayala Corporation.
Further, respondents maintain that the transaction was not consummated due to the
fault of petitioners who failed not only to prepare the necessary documentation but
also to pay the purchase price for the property. They also argue that the special
power of attorney executed by the Salvadors in favor of petitioners merely granted the
latter the right to construct a residential house on the property in the name of the
Salvadors. The original document was not even given to the Torcuators precisely
because they have not paid the purchase price.
Petitioners filed a Reply10 dated January 20, 1999 in reiteration of their arguments.
In the Resolution11 dated February 10, 1999, the parties were required to file their
respective memoranda. Accordingly, petitioners filed their Memorandum12 on April 19,
1999. On the other hand, in view of respondents disappearance without notice, the
Court resolved to dispense with their memorandum.13
The trial court denied petitioners complaint on three (3) grounds, namely: (1) the
alleged nullity of the contract between the parties as it violated Ayala Corporations
condition that the construction of a house is a prerequisite to any sale of lots in Ayala
Alabang Village; (2) non-payment of the purchase price; and (3) the nullity of the
contract as it called for payment in United States Dollars. To these reasons, the Court
of Appeals added a fourth basis for denying petitioners appeal and that is the alleged
nullity of the agreement because it deprived the government of taxes.
An analysis of the facts obtaining in this case leads us to affirm the assailed decisions
although from a slightly different but related thrust.
Let us begin by characterizing the agreement entered into by the parties, i.e., whether
the agreement is a contract to sell as the trial court ruled, or a contract of sale as
petitioners insist.
The differences between a contract to sell and a contract of sale are well-settled in

jurisprudence. As early as 1951, we held that in a contract of sale, title passes to the
buyer upon delivery of the thing sold, while in a contract to sell, ownership is reserved
in the seller and is not to pass until the full payment of the purchase price is made. In
the first case, non-payment of the price is a negative resolutory condition; in the
second case, full payment is a positive suspensive condition. Being contraries, their
effect in law cannot be identical. In the first case, the vendor has lost and cannot
recover the ownership of the land sold until and unless the contract of sale is itself
resolved and set aside. In the second case, however, the title remains in the vendor if
the vendee does not comply with the condition precedent of making payment at the
time specified in the contract.14
In other words, in a contract to sell, ownership is retained by the seller and is not to
pass to the buyer until full payment of the price or the fulfillment of some other
conditions either of which is a future and uncertain event the non-happening of which
is not a breach, casual or serious, but simply an event that prevents the obligation of
the vendor to convey title from acquiring binding force.15
We have carefully examined the agreement between the parties and are far from
persuaded that it was a contract of sale.
Firstly, the agreement imposed upon petitioners the obligation to fully pay the agreed
purchase price for the property. That ownership shall not pass to petitioners until they
have fully paid the price is implicit in the agreement. Notably, respondent Remigio
Bernabe testified, without objection on the part of petitioners, that he specifically
informed petitioners that the transaction should be completed, i.e., that he should
receive the full payment for the property, before he left for the United States on
October 14, 1986.16
Moreover, the deed of sale would have been issued only upon full payment of the
purchase price, among other things. Petitioner Mario Torcuator acknowledged this
fact when he testified that the deed of sale and original special power of attorney
were only to be delivered upon full payment of the purchase price.17
As correctly observed by the trial court, the Salvadors did not execute a deed of sale
in favor of petitioners, and instead executed a special power of attorney authorizing
the Bernabes to sell the property on their behalf, in order to afford the latter a
measure of protection that would guarantee full payment of the purchase price before
any deed of sale in favor of petitioners was executed.
Remarkably, the records are bereft of any indication that petitioners ever attempted to
tender payment or consign the purchase price as required by law. The Complaint18
filed by petitioners makes no mention at all of a tender of payment or consignation
having been made, much less that petitioners are willing and ready to pay the
purchase price. Petitioners averments to the effect that they have sufficient funds to
pay for the property and have even applied for a telegraphic transfer from their bank
account to the Bernabes bank account, uncoupled with actual tender and
consignation, are utterly self- serving.
The trial court correctly noted that petitioners should have consigned the amount due
in court instead of merely sending respondents a letter expressing interest to push
through with the transaction. Mere sending of a letter by the vendee expressing the
intention to pay without the accompanying payment is not considered a valid tender of
payment. Consignation of the amount due in court is essential in order to extinguish
the obligation to pay and oblige the vendor to convey title.19
On this score, even assuming that the agreement was a contract of sale, respondents
may not be compelled to deliver the property and execute the deed of absolute sale.
In cases such as the one before us, which involve the performance of an obligation

20

and not merely the exercise of a privilege or right, payment may be effected not by
mere tender alone but by both tender and consignation. The rule is different in cases
which involve an exercise of a right or privilege, such as in an option contract, legal
redemption or sale with right to repurchase, wherein mere tender of payment would
be sufficient to preserve the right or privilege.20 Hence, absent a valid tender of
payment and consignation, petitioners are deemed to have failed to discharge their
obligation to pay.
Secondly, the parties clearly intended the construction of a residential house on the
property as another suspensive condition which had to be fulfilled. Ayala Corporation
retained title to the property and the Salvador spouses were precluded from selling it
unless a residence had been constructed thereon. The Ayala stipulation was a
pervasive, albeit unwritten, condition in light of which the transaction in this case was
negotiated. The parties undoubtedly understood that they had to contend with the
Ayala stipulation which is why they resorted to the execution of a special power of
attorney authorizing petitioners to construct a residential building on the property in
the name of the Salvadors. Had the agreement been a contract of sale as petitioners
would impress upon the Court, the special power of attorney would have been entirely
unnecessary as petitioners would have had the right to compel the Salvadors to
transfer ownership to them.21
Thirdly, there was neither actual nor constructive delivery of the property to
petitioners. Apart from the fact that no public document evidencing the sale was
executed, which would have been considered equivalent to delivery, petitioners did
not take actual, physical possession of the property. The special power of attorney,
which petitioners count on as evidence that they took possession of the property, can
by no means be interpreted as delivery or conveyance of ownership over the property.
Taken by itself, in fact, the special power of attorney can be interpreted as tied up with
any number of property arrangements, such as a contract of lease or a joint venture.
That is why respondents, especially the Salvadors, never intended to deliver the title
to petitioners and conformably with that they executed only a special power of
attorney. Indeed, continuously looming large as an essentiality in their judgment to
dispose of their valuable property is the prior or contemporaneous receipt of the
commensurate price therefor.
This brings us to the application of the Statute of Frauds. Article 1403 of the Civil
Code provides:
Art. 1403. The following contracts are unenforceable unless they are ratified:

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

(e) An agreement for the leasing for a longer period than one year, or for the sale of
real property or an interest therein;
....
The term "Statute of Frauds" is descriptive of statutes which require certain classes of
contracts, such as agreements for the sale of real property, to be in writing. It does not
deprive the parties the right to contract with respect to the matters therein involved,
but merely regulates the formalities of the contract necessary to render it enforceable.
The purpose of the statute is to prevent fraud and perjury in the enforcement of

obligations depending for their evidence on the unassisted memory of witnesses by


requiring certain enumerated contracts and transactions to be evidenced by a writing
signed by the party to be charged.22 The written note or memorandum, as
contemplated by Article 1403 of the Civil Code, should embody the essentials of the
contract.23
In the instant case, petitioners present as written evidence of the agreement the
special power of attorney executed in their favor by the Salvadors and the summary
of agreement24 allegedly initialed by respondent Remigio Bernabe. These documents
do not suffice as notes or memoranda as contemplated by Article 1403 of the Civil
Code.
The special power of attorney does not contain the essential elements of the
purported contract and, more tellingly, does not even refer to any agreement for the
sale of the property. In any case, it was rendered virtually inoperable as a
consequence of the Salvadors adamant refusal to part with their title to the property.
The summary of agreement, on the other hand, is fatally deficient in the fundamentals
and ambiguous in the rest of its terms. For one, it does not mention when the alleged
consideration should be paid and transfer of ownership effected. The document does
not even refer to a particular property as the object thereof. For another, it is unclear
whether the supposed purchase price is P600.00, P590.00 or P570.00/square meter.
The other conditions, such as payment of documentary stamp taxes, capital gains tax
and other registration expenses, are likewise uncertain.
Conformably with Article 140525 of the Civil Code, however, respondents acceptance
of the agreement foisted by petitioners on them is deemed to have arisen from their
failure to object to the testimony of petitioner Mario Torcuator on the matter26 and their
cross-examination of said petitioner thereon.27
Be that as it may, considering our ruling that the agreement was a contract to sell,
respondents were not obliged to convey title to the property before the happening of
two (2) suspensive conditions, namely: full payment of the purchase price and
construction of a residence on the property. They were acting perfectly within their
right when they considered the agreement cancelled after unsuccessfully demanding
payment from petitioners.
That said, the question of whether the transaction violated the Uniform Currency Act,
Republic Act No. 529, is already moot. The contract having been cancelled, any
resolution regarding the validity of the stipulation requiring payment of the purchase
price in foreign currency would not serve any further purpose.
Petitioners next insist that the condition requiring the construction of a house on any
residential lot located in Ayala Alabang Village before it can be sold was never
submitted in evidence and was never testified to by any of the witnesses presented
during the trial. Hence, the trial court and the Court of Appeals should not have used
this as basis for its denial of petitioners cause.
This assertion, however, is completely untrue. While the Formal Offer of Evidence28 of
petitioners, respondents Offer of Exhibits,29 and the Formal Offer of Evidence (On
Rebuttal)30 of petitioners make no mention of any stipulation prohibiting the sale of
vacant lots in Ayala Alabang Village, respondents maintain that petitioners are fully
aware of the prohibition as the conditions imposed by Ayala Corporation on the sale
of Ayala Alabang lots are inscribed on the title of the property which was submitted in
evidence by both parties.
Despite petitioners remonstration that the inscriptions on the title are "hardly
legible,"31 we are inclined to give credence to respondents account. It is quite
implausible that a lawyer such as petitioner Mario Torcuator would not take the

21

precaution of checking the original title of the property with the Registry of Deeds to
ascertain whether there are annotations therein that would prejudice his position.
More importantly, petitioner Mario Torcuator himself testified on the existence of the
condition prohibiting the sale of vacant lots in Ayala Alabang Village, viz:
ATTY. J. DE DIOS, JR.
Q -Mr. witness aside from this summary of agreement which has been marked as
Exhibit "J" do you still have a document relating to his transaction between you and
the defendant?
A -Yes, sir, as I indicated in my earlier testimony there was supposed to be a letter
addressed to Ayala Corporation which defendant Salvador should sign in order to
request Ayala to deliver to me the TCT covering the lot subject of the transaction.
Q -This letter that you are referring to do you still have a copy of that letter?
A -Yes, sir.
Q -I am showing to you a xerox copy of a letter addressed to Ayala Corporation and
signed by Diosdado and Lourdes Salvador, can you please explain to this Court what
is the relation of this document with what you are referring to executed by the
defendant Diosdado Salvador and Lourdes Salvador addressed to Ayala
Corporation?
A -This is the letter of Mr. Salvador, sir, signed in my presence.
Q -Can you tell the Court where is the original of this document?
A -All of the original copies of that letter are with the defendant Bernabe, sir.
Q -Can you tell the Court how did you come to have a xerox copy of this document?
A -Yes, because as soon as the copies of the documents for the transaction were
signed by Mrs. Salvador who was then in New York, they were sent by the spouses to
the daughter of Mr. Salvador who in turn told me that all the originals are supposed to
be delivered to Mr. Bernabe and I was given a xerox copy of the same.
ATTY. J. DE DIOS, JR.
- And which for purpose of identification, your Honor, may we request that this letter
addressed to Ayala Corporation and signed by Diosdado Salvador and Lourdes
Salvador be marked as Exhibit "K" for the plaintiff, your Honor.
COURT
- Mark it.
...
ATTY. J. DE DIOS, JR.
- Mr. Witness, this letter appears to be, does it contain any date? Can you tell this
Court why this document does not contain the date?
ATTY. A. MAGNO
- Incompetent, your Honor, because he was not the one who made that document.
COURT
- Let him explain.
ATTY. MAGNO
- Yes, your Honor.
ATTY. J. DE DIOS, JR.
- Because, your Honor, there is a requirement by Ayala Corporation that no lot or
property may be transferred until there is a complete building or structure built
on the lot and so what I was supposed to get only from Mr. Salvador, aside from
the deed of absolute sale, is merely a special power of attorney to authorize me
to construct my house in the lot and upon completion of the house that is the
time that I would be allowed by Ayala Corporation to transfer the property in my
name. Therefore, the letter requesting Ayala Corporation to release the title in the

name of Mr. Salvador to was deliberately undated because it would be only dated
when I completed the house.32 [Emphasis supplied]
The fact that petitioners agreed to construct a residential house on the property in the
name of the Salvadors further proves that they knew that a direct sale to them of a
vacant lot would contravene the condition imposed by Ayala Corporation on the
original buyers of lots in Ayala Alabang Village. Hence, they agreed on the elaborate
plan whereby the Salvador spouses, in whose names the property was registered,
would execute a special power of attorney in favor of petitioners authorizing the latter
to construct a residential house on the property in the name of the Salvadors. The
records even indicate that the documents to effectuate this plan were prepared by
petitioner Mario Torcuator himself.
In his testimony, for instance, petitioner Mario Torcuator stated that: "[B]ased on our
discussion, your Honor, from the P600 per square meter price, we agreed upon, they
agreed to give me a rebate of 5% in the form of discount because there was a
problem in the documentation which I tried to solve which are the papers in favor of
Bernabe missing. I suggested to Mr. Bernabe that we prepare a new set of document
which will be signed by Mr. Salvador as the previous owner and because of that I will
be getting in effect a 5% discount as my commission."33
This was confirmed by respondent Remigio Bernabe:
Q - Now, where there any documents presented to you during that
occasion?
A - Yes, sir.
Q - By whom?
A - Mr. Torcuator prepared some documents for me to sign.
Q - And do you recall what was that documents?
A - Yes, sir. Mr. Torcuator prepared a documents for cancellation
of the deed of sale of Mr. Salvador to Remigio Bernabe, and cancellation also of the
irrevocable power of attorney of Salvador to Bernabe, and power of attorney of
Salvador authorizing Remigio Bernabe to sell the property and power of attorney of
Salvador given to Mr. Torcuator.34
Petitioners therefore cannot feign ignorance of the condition imposed by Ayala
Corporation.
We do not agree, however, with the trial court and appellate courts ruling that the
transaction between the parties was void for being contrary to good customs and
morals.35
In order to declare the agreement void for being contrary to good customs and
morals, it must first be shown that the object, cause or purpose thereof contravenes
the generally accepted principles of morality which have received some kind of social
and practical confirmation.36
We are not inclined to rule that the transaction in this case offended good customs
and morals. It should be emphasized that the proscription imposed by Ayala
Corporation was on the resale of the property without a residential house having been
constructed thereon. The condition did not require that the original lot buyer should
himself construct a residential house on the property, only that the original buyer may
not resell a vacant lot. In view of our finding that the agreement between the parties
was a mere contract to sell, no violation of the condition may be inferred from the
transaction as no transfer of ownership was made. In fact, the agreement in this case
that petitioners will construct a residential house on the property in the name of the
Salvadors (who retained ownership of the property until the fulfillment of the twin
conditions of payment and construction of a residence) was actually in compliance

22

with or obeisance to the condition.


Finally, the issue of whether the agreement violated the law as it deprived the
government of capital gains tax is wholly irrelevant. Capital gains taxes, after all, are
only imposed on gains presumed to have been realized from sales, exchanges or
dispositions of property. Having declared that the contract to sell in this case was
aborted by petitioners failure to comply with the twin suspensive conditions of full
payment and construction of a residence, the obligation to pay taxes never arose.
Hence, any error the appellate court may have committed when it passed upon the
issue of taxes despite the fact that no evidence on the matter was pleaded, adduced
or proved is rather innocuous and does not warrant reversal of the decisions under
review.
WHEREFORE, the instant petition is DENIED. Costs against petitioners.
SO ORDERED.
Austria-Martinez, (Acting Chairman), Callejo, Sr., and Chico-Nazario, JJ., concur.
Puno, (Chairman), on official leave.
G.R. No. L-11827
July 31, 1961
FERNANDO A. GAITE, plaintiff-appellee,
vs.
ISABELO FONACIER, GEORGE KRAKOWER, LARAP MINES & SMELTING CO.,
INC., SEGUNDINA VIVAS, FRNACISCO DANTE, PACIFICO ESCANDOR and
FERNANDO TY, defendants-appellants.
Alejo Mabanag for plaintiff-appellee.Simplicio U. Tapia, Antonio Barredo and Pedro
Guevarra for defendants-appellants.
REYES, J.B.L., J.:
This appeal comes to us directly from the Court of First Instance because the claims
involved aggregate more than P200,000.00.
Defendant-appellant Isabelo Fonacier was the owner and/or holder, either by himself
or in a representative capacity, of 11 iron lode mineral claims, known as the Dawahan
Group, situated in the municipality of Jose Panganiban, province of Camarines Norte.
By a "Deed of Assignment" dated September 29, 1952(Exhibit "3"), Fonacier
constituted and appointed plaintiff-appellee Fernando A. Gaite as his true and lawful
attorney-in-fact to enter into a contract with any individual or juridical person for the
exploration and development of the mining claims aforementioned on a royalty basis
of not less than P0.50 per ton of ore that might be extracted therefrom. On March 19,
1954, Gaite in turn executed a general assignment (Record on Appeal, pp. 17-19)
conveying the development and exploitation of said mining claims into the Larap Iron
Mines, a single proprietorship owned solely by and belonging to him, on the same
royalty basis provided for in Exhibit "3". Thereafter, Gaite embarked upon the
development and exploitation of the mining claims in question, opening and paving
roads within and outside their boundaries, making other improvements and installing
facilities therein for use in the development of the mines, and in time extracted
therefrom what he claim and estimated to be approximately 24,000 metric tons of iron
ore.
For some reason or another, Isabelo Fonacier decided to revoke the authority granted
by him to Gaite to exploit and develop the mining claims in question, and Gaite
assented thereto subject to certain conditions. As a result, a document entitled
"Revocation of Power of Attorney and Contract" was executed on December 8, 1954
(Exhibit "A"),wherein Gaite transferred to Fonacier, for the consideration of

P20,000.00, plus 10% of the royalties that Fonacier would receive from the mining
claims, all his rights and interests on all the roads, improvements, and facilities in or
outside said claims, the right to use the business name "Larap Iron Mines" and its
goodwill, and all the records and documents relative to the mines. In the same
document, Gaite transferred to Fonacier all his rights and interests over the "24,000
tons of iron ore, more or less" that the former had already extracted from the mineral
claims, in consideration of the sum of P75,000.00, P10,000.00 of which was paid
upon the signing of the agreement, and
b. The balance of SIXTY-FIVE THOUSAND PESOS (P65,000.00) will be paid from
and out of the first letter of credit covering the first shipment of iron ores and of the
first amount derived from the local sale of iron ore made by the Larap Mines &
Smelting Co. Inc., its assigns, administrators, or successors in interests.
To secure the payment of the said balance of P65,000.00, Fonacier promised to
execute in favor of Gaite a surety bond, and pursuant to the promise, Fonacier
delivered to Gaite a surety bond dated December 8, 1954 with himself (Fonacier) as
principal and the Larap Mines and Smelting Co. and its stockholders George
Krakower, Segundina Vivas, Pacifico Escandor, Francisco Dante, and Fernando Ty as
sureties (Exhibit "A-1"). Gaite testified, however, that when this bond was presented
to him by Fonacier together with the "Revocation of Power of Attorney and Contract",
Exhibit "A", on December 8, 1954, he refused to sign said Exhibit "A" unless another
bond under written by a bonding company was put up by defendants to secure the
payment of the P65,000.00 balance of their price of the iron ore in the stockpiles in
the mining claims. Hence, a second bond, also dated December 8, 1954 (Exhibit
"B"),was executed by the same parties to the first bond Exhibit "A-1", with the Far
Eastern Surety and Insurance Co. as additional surety, but it provided that the liability
of the surety company would attach only when there had been an actual sale of iron
ore by the Larap Mines & Smelting Co. for an amount of not less then P65,000.00,
and that, furthermore, the liability of said surety company would automatically expire
on December 8, 1955. Both bonds were attached to the "Revocation of Power of
Attorney and Contract", Exhibit "A", and made integral parts thereof.
On the same day that Fonacier revoked the power of attorney he gave to Gaite and
the two executed and signed the "Revocation of Power of Attorney and Contract",
Exhibit "A", Fonacier entered into a "Contract of Mining Operation", ceding,
transferring, and conveying unto the Larap Mines and Smelting Co., Inc. the right to
develop, exploit, and explore the mining claims in question, together with the
improvements therein and the use of the name "Larap Iron Mines" and its good will, in
consideration of certain royalties. Fonacier likewise transferred, in the same
document, the complete title to the approximately 24,000 tons of iron ore which he
acquired from Gaite, to the Larap & Smelting Co., in consideration for the signing by
the company and its stockholders of the surety bonds delivered by Fonacier to Gaite
(Record on Appeal, pp. 82-94).
Up to December 8, 1955, when the bond Exhibit "B" expired with respect to the Far
Eastern Surety and Insurance Company, no sale of the approximately 24,000 tons of
iron ore had been made by the Larap Mines & Smelting Co., Inc., nor had the
P65,000.00 balance of the price of said ore been paid to Gaite by Fonacier and his
sureties payment of said amount, on the theory that they had lost right to make use of
the period given them when their bond, Exhibit "B" automatically expired (Exhibits "C"
to "C-24"). And when Fonacier and his sureties failed to pay as demanded by Gaite,
the latter filed the present complaint against them in the Court of First Instance of
Manila (Civil Case No. 29310) for the payment of the P65,000.00 balance of the price

23

of the ore, consequential damages, and attorney's fees.


All the defendants except Francisco Dante set up the uniform defense that the
obligation sued upon by Gaite was subject to a condition that the amount of
P65,000.00 would be payable out of the first letter of credit covering the first shipment
of iron ore and/or the first amount derived from the local sale of the iron ore by the
Larap Mines & Smelting Co., Inc.; that up to the time of the filing of the complaint, no
sale of the iron ore had been made, hence the condition had not yet been fulfilled;
and that consequently, the obligation was not yet due and demandable. Defendant
Fonacier also contended that only 7,573 tons of the estimated 24,000 tons of iron ore
sold to him by Gaite was actually delivered, and counterclaimed for more than
P200,000.00 damages.
At the trial of the case, the parties agreed to limit the presentation of evidence to two
issues:
(1) Whether or not the obligation of Fonacier and his sureties to pay Gaite P65,000.00
become due and demandable when the defendants failed to renew the surety bond
underwritten by the Far Eastern Surety and Insurance Co., Inc. (Exhibit "B"), which
expired on December 8, 1955; and
(2) Whether the estimated 24,000 tons of iron ore sold by plaintiff Gaite to defendant
Fonacier were actually in existence in the mining claims when these parties executed
the "Revocation of Power of Attorney and Contract", Exhibit "A."
On the first question, the lower court held that the obligation of the defendants to pay
plaintiff the P65,000.00 balance of the price of the approximately 24,000 tons of iron
ore was one with a term: i.e., that it would be paid upon the sale of sufficient iron ore
by defendants, such sale to be effected within one year or before December 8, 1955;
that the giving of security was a condition precedent to Gait's giving of credit to
defendants; and that as the latter failed to put up a good and sufficient security in lieu
of the Far Eastern Surety bond (Exhibit "B") which expired on December 8, 1955, the
obligation became due and demandable under Article 1198 of the New Civil Code.
As to the second question, the lower court found that plaintiff Gaite did have
approximately 24,000 tons of iron ore at the mining claims in question at the time of
the execution of the contract Exhibit "A."
Judgment was, accordingly, rendered in favor of plaintiff Gaite ordering defendants to
pay him, jointly and severally, P65,000.00 with interest at 6% per annum from
December 9, 1955 until payment, plus costs. From this judgment, defendants jointly
appealed to this Court.
During the pendency of this appeal, several incidental motions were presented for
resolution: a motion to declare the appellants Larap Mines & Smelting Co., Inc. and
George Krakower in contempt, filed by appellant Fonacier, and two motions to
dismiss the appeal as having become academic and a motion for new trial and/or to
take judicial notice of certain documents, filed by appellee Gaite. The motion for
contempt is unmeritorious because the main allegation therein that the appellants
Larap Mines & Smelting Co., Inc. and Krakower had sold the iron ore here in
question, which allegedly is "property in litigation", has not been substantiated; and
even if true, does not make these appellants guilty of contempt, because what is
under litigation in this appeal is appellee Gaite's right to the payment of the balance of
the price of the ore, and not the iron ore itself. As for the several motions presented
by appellee Gaite, it is unnecessary to resolve these motions in view of the results
that we have reached in this case, which we shall hereafter discuss.
The main issues presented by appellants in this appeal are:
(1) that the lower court erred in holding that the obligation of appellant Fonacier to pay

appellee Gaite the P65,000.00 (balance of the price of the iron ore in question)is one
with a period or term and not one with a suspensive condition, and that the term
expired on December 8, 1955; and
(2) that the lower court erred in not holding that there were only 10,954.5 tons in the
stockpiles of iron ore sold by appellee Gaite to appellant Fonacier.
The first issue involves an interpretation of the following provision in the contract
Exhibit "A":
7. That Fernando Gaite or Larap Iron Mines hereby transfers to Isabelo F. Fonacier all
his rights and interests over the 24,000 tons of iron ore, more or less, above-referred
to together with all his rights and interests to operate the mine in consideration of the
sum of SEVENTY-FIVE THOUSAND PESOS (P75,000.00) which the latter binds to
pay as follows:
a. TEN THOUSAND PESOS (P10,000.00) will be paid upon the signing of this
agreement.
b. The balance of SIXTY-FIVE THOUSAND PESOS (P65,000.00)will be paid from
and out of the first letter of credit covering the first shipment of iron ore made by the
Larap Mines & Smelting Co., Inc., its assigns, administrators, or successors in
interest.
We find the court below to be legally correct in holding that the shipment or local sale
of the iron ore is not a condition precedent (or suspensive) to the payment of the
balance of P65,000.00, but was only a suspensive period or term. What characterizes
a conditional obligation is the fact that its efficacy or obligatory force (as distinguished
from its demandability) 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. That the parties to the contract
Exhibit "A" did not intend any such state of things to prevail is supported by several
circumstances:
1) The words of the contract express no contingency in the buyer's obligation to pay:
"The balance of Sixty-Five Thousand Pesos (P65,000.00) will be paid out of the first
letter of credit covering the first shipment of iron ores . . ." etc. There is no uncertainty
that the payment will have to be made sooner or later; what is undetermined is merely
the exact date at which it will be made. By the very terms of the contract, therefore,
the existence of the obligation to pay is recognized; only its maturity or demandability
is deferred.
2) A contract of sale is normally commutative and onerous: not only does each one of
the parties assume a correlative obligation (the seller to deliver and transfer
ownership of the thing sold and the buyer to pay the price),but each party anticipates
performance by the other from the very start. While in a sale the obligation of one
party can be lawfully subordinated to an uncertain event, so that the other
understands that he assumes the risk of receiving nothing for what he gives (as in the
case of a sale of hopes or expectations, emptio spei), it is not in the usual course of
business to do so; hence, the contingent character of the obligation must clearly
appear. Nothing is found in the record to evidence that Gaite desired or assumed to
run the risk of losing his right over the ore without getting paid for it, or that Fonacier
understood that Gaite assumed any such risk. This is proved by the fact that Gaite
insisted on a bond a to guarantee payment of the P65,000.00, an not only upon a
bond by Fonacier, the Larap Mines & Smelting Co., and the company's stockholders,
but also on one by a surety company; and the fact that appellants did put up such
bonds indicates that they admitted the definite existence of their obligation to pay the
balance of P65,000.00.

24

3) To subordinate the obligation to pay the remaining P65,000.00 to the sale or


shipment of the ore as a condition precedent, would be tantamount to leaving the
payment at the discretion of the debtor, for the sale or shipment could not be made
unless the appellants took steps to sell the ore. Appellants would thus be able to
postpone payment indefinitely. The desireability of avoiding such a construction of the
contract Exhibit "A" needs no stressing.
4) Assuming that there could be doubt whether by the wording of the contract the
parties indented a suspensive condition or a suspensive period (dies ad quem) for the
payment of the P65,000.00, the rules of interpretation would incline the scales in favor
of "the greater reciprocity of interests", since sale is essentially onerous. The Civil
Code of the Philippines, Article 1378, paragraph 1, in fine, provides:
If the contract is onerous, the doubt shall be settled in favor of the greatest reciprocity
of interests.
and there can be no question that greater reciprocity obtains if the buyer' obligation is
deemed to be actually existing, with only its maturity (due date) postponed or
deferred, that if such obligation were viewed as non-existent or not binding until the
ore was sold.
The only rational view that can be taken is that the sale of the ore to Fonacier was a
sale on credit, and not an aleatory contract where the transferor, Gaite, would assume
the risk of not being paid at all; and that the previous sale or shipment of the ore was
not a suspensive condition for the payment of the balance of the agreed price, but
was intended merely to fix the future date of the payment.
This issue settled, the next point of inquiry is whether appellants, Fonacier and his
sureties, still have the right to insist that Gaite should wait for the sale or shipment of
the ore before receiving payment; or, in other words, whether or not they are entitled
to take full advantage of the period granted them for making the payment.
We agree with the court below that the appellant have forfeited the right court below
that the appellants have forfeited the right to compel Gaite to wait for the sale of the
ore before receiving payment of the balance of P65,000.00, because of their failure to
renew the bond of the Far Eastern Surety Company or else replace it with an
equivalent guarantee. The expiration of the bonding company's undertaking on
December 8, 1955 substantially reduced the security of the vendor's rights as creditor
for the unpaid P65,000.00, a security that Gaite considered essential and upon which
he had insisted when he executed the deed of sale of the ore to Fonacier (Exhibit
"A"). The case squarely comes under paragraphs 2 and 3 of Article 1198 of the Civil
Code of the Philippines:
"ART. 1198. The debtor shall lose every right to make use of the period:
(1) . . .
(2) When he does not furnish to the creditor the guaranties or securities which he has
promised.
(3) When by his own acts he has impaired said guaranties or securities after their
establishment, and when through fortuitous event they disappear, unless he
immediately gives new ones equally satisfactory.
Appellants' failure to renew or extend the surety company's bond upon its expiration
plainly impaired the securities given to the creditor (appellee Gaite), unless
immediately renewed or replaced.
There is no merit in appellants' argument that Gaite's acceptance of the surety
company's bond with full knowledge that on its face it would automatically expire
within one year was a waiver of its renewal after the expiration date. No such waiver
could have been intended, for Gaite stood to lose and had nothing to gain barely; and

if there was any, it could be rationally explained only if the appellants had agreed to
sell the ore and pay Gaite before the surety company's bond expired on December 8,
1955. But in the latter case the defendants-appellants' obligation to pay became
absolute after one year from the transfer of the ore to Fonacier by virtue of the deed
Exhibit "A.".
All the alternatives, therefore, lead to the same result: that Gaite acted within his
rights in demanding payment and instituting this action one year from and after the
contract (Exhibit "A") was executed, either because the appellant debtors had
impaired the securities originally given and thereby forfeited any further time within
which to pay; or because the term of payment was originally of no more than one
year, and the balance of P65,000.00 became due and payable thereafter.
Coming now to the second issue in this appeal, which is whether there were really
24,000 tons of iron ore in the stockpiles sold by appellee Gaite to appellant Fonacier,
and whether, if there had been a short-delivery as claimed by appellants, they are
entitled to the payment of damages, we must, at the outset, stress two things: first,
that this is a case of a sale of a specific mass of fungible goods for a single price or a
lump sum, the quantity of "24,000 tons of iron ore, more or less," stated in the
contract Exhibit "A," being a mere estimate by the parties of the total tonnage weight
of the mass; and second, that the evidence shows that neither of the parties had
actually measured of weighed the mass, so that they both tried to arrive at the total
quantity by making an estimate of the volume thereof in cubic meters and then
multiplying it by the estimated weight per ton of each cubic meter.
The sale between the parties is a sale of a specific mass or iron ore because no
provision was made in their contract for the measuring or weighing of the ore sold in
order to complete or perfect the sale, nor was the price of P75,000,00 agreed upon by
the parties based upon any such measurement.(see Art. 1480, second par., New Civil
Code). The subject matter of the sale is, therefore, a determinate object, the mass,
and not the actual number of units or tons contained therein, so that all that was
required of the seller Gaite was to deliver in good faith to his buyer all of the ore found
in the mass, notwithstanding that the quantity delivered is less than the amount
estimated by them (Mobile Machinery & Supply Co., Inc. vs. York Oilfield Salvage Co.,
Inc. 171 So. 872, applying art. 2459 of the Louisiana Civil Code). There is no charge
in this case that Gaite did not deliver to appellants all the ore found in the stockpiles in
the mining claims in questions; Gaite had, therefore, complied with his promise to
deliver, and appellants in turn are bound to pay the lump price.
But assuming that plaintiff Gaite undertook to sell and appellants undertook to buy,
not a definite mass, but approximately 24,000 tons of ore, so that any substantial
difference in this quantity delivered would entitle the buyers to recover damages for
the short-delivery, was there really a short-delivery in this case?
We think not. As already stated, neither of the parties had actually measured or
weighed the whole mass of ore cubic meter by cubic meter, or ton by ton. Both parties
predicate their respective claims only upon an estimated number of cubic meters of
ore multiplied by the average tonnage factor per cubic meter.
Now, appellee Gaite asserts that there was a total of 7,375 cubic meters in the
stockpiles of ore that he sold to Fonacier, while appellants contend that by actual
measurement, their witness Cirpriano Manlagit found the total volume of ore in the
stockpiles to be only 6.609 cubic meters. As to the average weight in tons per cubic
meter, the parties are again in disagreement, with appellants claiming the correct
tonnage factor to be 2.18 tons to a cubic meter, while appellee Gaite claims that the
correct tonnage factor is about 3.7.

25

In the face of the conflict of evidence, we take as the most reliable estimate of the
tonnage factor of iron ore in this case to be that made by Leopoldo F. Abad, chief of
the Mines and Metallurgical Division of the Bureau of Mines, a government
pensionado to the States and a mining engineering graduate of the Universities of
Nevada and California, with almost 22 years of experience in the Bureau of Mines.
This witness placed the tonnage factor of every cubic meter of iron ore at between 3
metric tons as minimum to 5 metric tons as maximum. This estimate, in turn, closely
corresponds to the average tonnage factor of 3.3 adopted in his corrected report
(Exhibits "FF" and FF-1") by engineer Nemesio Gamatero, who was sent by the
Bureau of Mines to the mining claims involved at the request of appellant Krakower,
precisely to make an official estimate of the amount of iron ore in Gaite's stockpiles
after the dispute arose.
Even granting, then, that the estimate of 6,609 cubic meters of ore in the stockpiles
made by appellant's witness Cipriano Manlagit is correct, if we multiply it by the
average tonnage factor of 3.3 tons to a cubic meter, the product is 21,809.7 tons,
which is not very far from the estimate of 24,000 tons made by appellee Gaite,
considering that actual weighing of each unit of the mass was practically impossible,
so that a reasonable percentage of error should be allowed anyone making an
estimate of the exact quantity in tons found in the mass. It must not be forgotten that
the contract Exhibit "A" expressly stated the amount to be 24,000 tons, more or less.
(ch. Pine River Logging & Improvement Co. vs U.S., 279, 46 L. Ed. 1164).
There was, consequently, no short-delivery in this case as would entitle appellants to
the payment of damages, nor could Gaite have been guilty of any fraud in making any
misrepresentation to appellants as to the total quantity of ore in the stockpiles of the
mining claims in question, as charged by appellants, since Gaite's estimate appears
to be substantially correct.
WHEREFORE, finding no error in the decision appealed from, we hereby affirm the
same, with costs against appellants.
Bengzon, C.J., Padilla, Labrador, Concepcion, Barrera, Paredes, Dizon, De Leon and
Natividad, JJ., concur.
FIRST DIVISION
G.R. No. 165420
June 30, 2005
CONCEPCION R. AINZA, substituted by her legal heirs, DR. NATIVIDAD A.
TULIAO, CORAZON A. JALECO and LILIA A. OLAYON, petitioners,
vs.
SPOUSES ANTONIO PADUA and EUGENIA PADUA, respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition for review on certiorari assails the February 24, 2004 decision of the
Court of Appeals in CA-G.R. CV No. 70239,1 and its September 28, 2004 resolution,
denying reconsideration thereof.2
In her complaint for partition of real property, annulment of titles with damages,3
Concepcion Ainza (Concepcion) alleged that respondent-spouses Eugenia (Eugenia)
and Antonio Padua (Antonio) owned a 216.40 sq. m. lot with an unfinished residential
house located at No. 85-A Durian corner Pajo Sts., Barangay Quirino 2-C, Project 2,
Quezon City, covered by Transfer Certificate of Title No. 271935. Sometime in April
1987, she bought one-half of an undivided portion of the property from her daughter,
Eugenia and the latters husband, Antonio, for One Hundred Thousand Pesos

(P100,000.00).
No Deed of Absolute Sale was executed to evidence the transaction, but cash
payment was received by the respondents, and ownership was transferred to
Concepcion through physical delivery to her attorney-in-fact and daughter, Natividad
Tuliao (Natividad). Concepcion authorized Natividad and the latters husband,
Ceferino Tuliao (Ceferino) to occupy the premises, and make improvements on the
unfinished building.
Thereafter, Concepcion alleged that without her consent, respondents caused the
subdivision of the property into three portions and registered it in their names under
TCT Nos. N-155122, N-155123 and N-155124 in violation of the restrictions
annotated at the back of the title.
On the other hand, Antonio averred that he bought the property in 1980 and
introduced improvements thereon. Between 1989 and 1990, he and his wife,
Eugenia, allowed Natividad and Ceferino to occupy the premises temporarily. In 1994,
they caused the subdivision of the property and three (3) separate titles were issued.
Thereafter, Antonio requested Natividad to vacate the premises but the latter refused
and claimed that Concepcion owned the property. Antonio thus filed an ejectment suit
on April 1, 1999. Concepcion, represented by Natividad, also filed on May 4, 1999 a
civil case for partition of real property and annulment of titles with damages.
Antonio claimed that his wife, Eugenia, admitted that Concepcion offered to buy one
third (1/3) of the property who gave her small amounts over several years which
totaled P100,000.00 by 1987 and for which she signed a receipt.
On January 9, 2001, the Regional Trial Court of Quezon City, Branch 85, rendered
judgment4 in favor of Concepcion, the dispositive portion of which states:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
plaintiff and against the defendants and ordering:
1. the subdivision of the subject property between the said plaintiff and defendants in
equal shares with one-half of the property, including the portion occupied by the
spouses Severino and Natividad Tuliao to be awarded to the plaintiff;
2. the cancellation of Transfer Certificates of Title Nos. N-155122, N-155123, N155124 of the Registry of Deeds of Quezon City;
3. the defendants to pay to the plaintiff P50,000.00 as attorneys fees.
SO ORDERED.5
The trial court upheld the sale between Eugenia and Concepcion. It ruled that the
sale was consummated when both contracting parties complied with their respective
obligations. Eugenia transferred possession by delivering the property to Concepcion
who in turn paid the purchase price. It also declared that the transfer of the property
did not violate the Statute of Frauds because a fully executed contract does not fall
within its coverage.
On appeal by the respondents, the Court of Appeals reversed the decision of the trial
court, and declared the sale null and void. Applying Article 124 of the Family Code,
the Court of Appeals ruled that since the subject property is conjugal, the written
consent of Antonio must be obtained for the sale to be valid. It also ordered the
spouses Padua to return the amount of P100,000.00 to petitioners plus interest.6
The sole issue for resolution in this petition for review is whether there was a valid
contract of sale between Eugenia and Concepcion.
A contract of sale is perfected by mere consent, upon a meeting of the minds on the
offer and the acceptance thereof based on subject matter, price and terms of
payment.7
In this case, there was a perfected contract of sale between Eugenia and

26

Concepcion. The records show that Eugenia offered to sell a portion of the property to
Concepcion, who accepted the offer and agreed to pay P100,000.00 as
consideration. The contract of sale was consummated when both parties fully
complied with their respective obligations. Eugenia delivered the property to
Concepcion, who in turn, paid Eugenia the price of One Hundred Thousand Pesos
(P100,000.00), as evidenced by the receipt which reads:
RECEIPT
Received the amount of ONE HUNDRED THOUSAND PESOS (P100,000.00) as
payment for the lot on 85-A Durian St., Project 2, Quezon City, from Mrs. Concepcion
R. Ainza, on April, 1987.
_______(Sgd.)______
Mrs.. Eugenia A. Padua8
The verbal contract of sale between Eugenia and Concepcion did not violate the
provisions of the Statute of Frauds that a contract for the sale of real property shall be
unenforceable unless the contract or some note or memorandum of the sale is in
writing and subscribed by the party charged or his agent.9 When a verbal contract has
been completed, executed or partially consummated, as in this case, its enforceability
will not be barred by the Statute of Frauds, which applies only to an executory
agreement.10 Thus, where one party has performed his obligation, oral evidence will
be admitted to prove the agreement.11
In the instant case, the oral contract of sale between Eugenia and Concepcion was
evidenced by a receipt signed by Eugenia. Antonio also stated that his wife admitted
to him that she sold the property to Concepcion.
It is undisputed that the subject property was conjugal and sold by Eugenia in April
1987 or prior to the effectivity of the Family Code on August 3, 1988, Article 254 of
which repealed Title V, Book I of the Civil Code provisions on the property relations
between husband and wife. However, Article 256 thereof limited its retroactive effect
only to cases where it would not prejudice or impair vested or acquired rights in
accordance with the Civil Code or other laws. In the case at bar, vested rights of
Concepcion will be impaired or prejudiced by the application of the Family Code;
hence, the provisions of the Civil Code should be applied.
In Felipe v. Heirs of Aldon, et al.,12 the legal effect of a sale of conjugal properties by
the wife without the consent of the husband was clarified, to wit:
The legal ground which deserves attention is the legal effect of a sale of lands
belonging to the conjugal partnership made by the wife without the consent of the
husband.
It is useful at this point to re-state some elementary rules: The husband is the
administrator of the conjugal partnership. (Art. 165, Civil Code) Subject to certain
exceptions, the husband cannot alienate or encumber any real property of the
conjugal partnership without the wifes consent. (Art. 166, Idem.) And the wife cannot
bind the conjugal partnership without the husbands consent, except in cases
provided by law. (Art. 172, Idem.).
In the instant case, Gimena, the wife, sold lands belonging to the conjugal partnership
without the consent of the husband and the sale is not covered by the phrase "except
in cases provided by law." The Court of Appeals described the sale as "invalid" a
term which is imprecise when used in relation to contracts because the Civil Code
uses specific names in designating defective contracts, namely: rescissible (Arts.
1380 et seq.), voidable (Arts. 1390 et seq.), unenforceable (Arts. 1403, et seq.), and
void or inexistent (Arts. 1409 et seq.).1awphi1.zw+
The sale made by Gimena is certainly a defective contract but of what

category? The answer: it is a voidable contract.


According to Art. 1390 of the Civil Code, among the voidable contracts are "[T]hose
where one of the parties is incapable of giving consent to the contract." (Par. 1.) In the
instant case Gimena had no capacity to give consent to the contract of sale. The
capacity to give consent belonged not even to the husband alone but to both
spouses.
The view that the contract made by Gimena is a voidable contract is supported
by the legal provision that contracts entered by the husband without the
consent of the wife when such consent is required, are annullable at her
instance during the marriage and within ten years from the transaction
questioned. (Art. 173, Civil Code).
Gimenas contract is not rescissible for in such a contract all the essential elements
are untainted but Gimenas consent was tainted. Neither can the contract be
classified as unenforceable because it does not fit any of those described in Art. 1403
of the Civil Code. And finally, the contract cannot be void or inexistent because it is
not one of those mentioned in Art. 1409 of the Civil Code. By process of elimination, it
must perforce be a voidable contract.
The voidable contract of Gimena was subject to annulment by her husband only
during the marriage because he was the victim who had an interest in the contract.
Gimena, who was the party responsible for the defect, could not ask for its
annulment. Their children could not likewise seek the annulment of the contract while
the marriage subsisted because they merely had an inchoate right to the lands sold.
(Emphasis supplied)
The consent of both Eugenia and Antonio is necessary for the sale of the conjugal
property to be valid. Antonios consent cannot be presumed.13 Except for the selfserving testimony of petitioner Natividad, there is no evidence that Antonio
participated or consented to the sale of the conjugal property. Eugenia alone is
incapable of giving consent to the contract. Therefore, in the absence of Antonios
consent, the disposition made by Eugenia is voidable.14
The contract of sale between Eugenia and Concepcion being an oral contract, the
action to annul the same must be commenced within six years from the time the right
of action accrued.15 Eugenia sold the property in April 1987 hence Antonio should
have asked the courts to annul the sale on or before April 1993. No action was
commenced by Antonio to annul the sale, hence his right to seek its annulment was
extinguished by prescription.
Even assuming that the ten (10)-year prescriptive period under Art. 173 should apply,
Antonio is still barred from instituting an action to annul the sale because since April
1987, more than ten (10) years had already lapsed without any such action being
filed.
In sum, the sale of the conjugal property by Eugenia without the consent of her
husband is voidable. It is binding unless annulled. Antonio failed to exercise his right
to ask for the annulment within the prescribed period, hence, he is now barred from
questioning the validity of the sale between his wife and Concepcion.
WHEREFORE, the petition is GRANTED. The decision dated February 24, 2004 of
the Court of Appeals in CA-G.R. CV No. 70239 and its resolution dated September
28, 2004 are REVERSED and SET ASIDE. The decision dated January 9, 2001 of the
Regional Trial Court of Quezon City, Branch 85, in Civil Case No. Q-99-37529, is
REINSTATED.
SO ORDERED.
Davide, Jr., C.J. (Chairman), Quisumbing, Carpio, and Azcuna, JJ., concur.

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