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PROPERTIES,
ROSARIO
JIMENEZ-CASTAEDA
INC., petitioner,
and
SALUD
REGALADO, J.:
The main issues presented for resolution in this petition for review on certiorari of the
judgment of respondent Court of appeals, dated April 6, 1993, in CA-G.R. CV No.
34767 1 are (1) whether of not the "Exclusive Option to Purchase" executed between
petitioner Adelfa Properties, Inc. and private respondents Rosario JimenezCastaeda and Salud Jimenez is an option contract; and (2) whether or not there was
a valid suspension of payment of the purchase price by said petitioner, and the legal
effects thereof on the contractual relations of the parties.
The records disclose the following antecedent facts which culminated in the present
appellate review, to wit:
1. Herein private respondents and their brothers, Jose and Dominador Jimenez, were
the registered co-owners of a parcel of land consisting of 17,710 square meters,
covered by Transfer Certificate of Title (TCT) No. 309773, 2situated in Barrio Culasi,
Las Pias, Metro Manila.
2. On July 28, 1988, Jose and Dominador Jimenez sold their share consisting of onehalf of said parcel of land, specifically the eastern portion thereof, to herein petitioner
pursuant to a "Kasulatan sa Bilihan ng Lupa." 3Subsequently, a "Confirmatory
Extrajudicial Partition Agreement" 4 was executed by the Jimenezes, wherein the
eastern portion of the subject lot, with an area of 8,855 square meters was
adjudicated to Jose and Dominador Jimenez, while the western portion was allocated
to herein private respondents.
3. Thereafter, herein petitioner expressed interest in buying the western portion of the
property from private respondents. Accordingly, on November 25, 1989, an "Exclusive
Option to Purchase" 5 was executed between petitioner and private respondents,
under the following terms and conditions:
12. The trial court rendered judgment 13 therein on September 5, 1991 holding that
the agreement entered into by the parties was merely an option contract, and
declaring that the suspension of payment by herein petitioner constituted a counteroffer which, therefore, was tantamount to a rejection of the option. It likewise ruled
that herein petitioner could not validly suspend payment in favor of private
respondents on the ground that the vindicatory action filed by the latter's kin did not
involve the western portion of the land covered by the contract between petitioner and
private respondents, but the eastern portion thereof which was the subject of the sale
between petitioner and the brothers Jose and Dominador Jimenez. The trial court
then directed the cancellation of the exclusive option to purchase, declared the sale to
intervenor Emylene Chua as valid and binding, and ordered petitioner to pay
damages and attorney's fees to private respondents, with costs.
13. On appeal, respondent Court of appeals affirmed in toto the decision of the
court a quo and held that the failure of petitioner to pay the purchase price within the
period agreed upon was tantamount to an election by petitioner not to buy the
property; that the suspension of payment constituted an imposition of a condition
which was actually a counter-offer amounting to a rejection of the option; and that
Article 1590 of the Civil Code on suspension of payments applies only to a contract of
sale or a contract to sell, but not to an option contract which it opined was the nature
of the document subject of the case at bar. Said appellate court similarly upheld the
validity of the deed of conditional sale executed by private respondents in favor of
intervenor Emylene Chua.
In the present petition, the following assignment of errors are raised:
1. Respondent court of appeals acted with grave abuse of discretion in making its
finding that the agreement entered into by petitioner and private respondents was
strictly an option contract;
2. Granting arguendo that the agreement was an option contract, respondent court of
Appeals acted with grave abuse of discretion in grievously failing to consider that
while the option period had not lapsed, private respondents could not unilaterally and
prematurely terminate the option period;
3. Respondent Court of Appeals acted with grave abuse of discretion in failing to
appreciate fully the attendant facts and circumstances when it made the conclusion of
law that Article 1590 does not apply; and
4. Respondent Court of Appeals acted with grave abuse of discretion in conforming
with the sale in favor of appellee Ma. Emylene Chua and the award of damages and
attorney's fees which are not only excessive, but also without in fact and in law. 14
Moreover, that the parties really intended to execute a contract to sell, and not a
contract of sale, is bolstered by the fact that the deed of absolute sale would have
been issued only upon the payment of the balance of the purchase price, as may be
gleaned from petitioner's letter dated April 16, 1990 16 wherein it informed private
respondents that it "is now ready and willing to pay you simultaneously with the
execution of the corresponding deed of absolute sale."
Secondly, it has not been shown there was delivery of the property, actual or
constructive, made to herein petitioner. The exclusive option to purchase is not
contained in a public instrument the execution of which would have been considered
equivalent to delivery. 17 Neither did petitioner take actual, physical possession of the
property at any given time. It is true that after the reconstitution of private
respondents' certificate of title, it remained in the possession of petitioner's counsel,
Atty. Bayani L. Bernardo, who thereafter delivered the same to herein petitioner.
Normally, under the law, such possession by the vendee is to be understood as a
delivery. 18 However, private respondents explained that there was really no intention
on their part to deliver the title to herein petitioner with the purpose of transferring
ownership to it. They claim that Atty. Bernardo had possession of the title only
because he was their counsel in the petition for reconstitution. We have no reason not
to believe this explanation of private respondents, aside from the fact that such
contention was never refuted or contradicted by petitioner.
2. Irrefragably, the controverted document should legally be considered as a
perfected contract to sell. On this particular point, therefore, we reject the position and
ratiocination of respondent Court of Appeals which, while awarding the correct relief
to private respondents, categorized the instrument as "strictly an option contract."
The important task in contract interpretation is always the ascertainment of the
intention of the contracting parties and that task is, of course, to be discharged by
looking to the words they used to project that intention in their contract, all the words
not just a particular word or two, and words in context not words standing
alone. 19Moreover, judging from the subsequent acts of the parties which will
hereinafter be discussed, it is undeniable that the intention of the parties was to enter
into a contract to sell. 20 In addition, the title of a contract does not necessarily
determine its true nature. 21 Hence, the fact that the document under discussion is
entitled "Exclusive Option to Purchase" is not controlling where the text thereof shows
that it is a contract to sell.
An option, as used in the law on sales, is a continuing offer or contract by which the
owner stipulates with another that the latter shall have the right to buy the property at
a fixed price within a certain time, or under, or in compliance with, certain terms and
conditions, or which gives to the owner of the property the right to sell or demand a
The records also show that private respondents accepted the offer of petitioner to buy
their property under the terms of their contract. At the time petitioner made its offer,
private respondents suggested that their transfer certificate of title be first
reconstituted, to which petitioner agreed. As a matter of fact, it was petitioner's
counsel, Atty. Bayani L. Bernardo, who assisted private respondents in filing a petition
for reconstitution. After the title was reconstituted, the parties agreed that petitioner
would pay either in cash or manager's check the amount of P2,856,150.00 for the lot.
Petitioner was supposed to pay the same on November 25, 1989, but it later offered
to make a down payment of P50,000.00, with the balance of P2,806,150.00 to be
paid on or before November 30, 1989. Private respondents agreed to the counteroffer made by petitioner. 31 As a result, the so-called exclusive option to purchase was
prepared by petitioner and was subsequently signed by private respondents, thereby
creating a perfected contract to sell between them.
On the other hand, a contract, like a contract to sell, involves a meeting of minds two
persons whereby one binds himself, with respect to the other, to give something or to
render some service. 26 Contracts, in general, are perfected by mere consent, 27 which
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. 28
It cannot be gainsaid that the offer to buy a specific piece of land was definite and
certain, while the acceptance thereof was absolute and without any condition or
qualification. The agreement as to the object, the price of the property, and the terms
of payment was clear and well-defined. No other significance could be given to such
acts that than they were meant to finalize and perfect the transaction. The parties
even went beyond the basic requirements of the law by stipulating that "all expenses
including the corresponding capital gains tax, cost of documentary stamps are for the
account of the vendors, and expenses for the registration of the deed of sale in the
Registry of Deeds are for the account of Adelfa properties, Inc." Hence, there was
nothing left to be done except the performance of the respective obligations of the
parties.
While there is jurisprudence to the effect that a contract which provides that the initial
payment shall be totally forfeited in case of default in payment is to be considered as
an option contract, 37 still we are not inclined to conform with the findings of
respondent court and the court a quo that the contract executed between the parties
is an option contract, for the reason that the parties were already contemplating
the payment of the balance of the purchase price, and were not merely quoting an
agreed value for the property. The term "balance," connotes a remainder or
something remaining from the original total sum already agreed upon.
In other words, the alleged option money of P50,000.00 was actually earnest money
which was intended to form part of the purchase price. The amount of P50,000.00
was not distinct from the cause or consideration for the sale of the property, but was
itself a part thereof. It is a statutory rule that whenever earnest money is given in a
contract of sale, it shall be considered as part of the price and as proof of the
perfection of the contract. 38 It constitutes an advance payment and must, therefore,
be deducted from the total price. Also, earnest money is given by the buyer to the
seller to bind the bargain.
There are clear distinctions between earnest money and option money, viz.: (a)
earnest money is part of the purchase price, while option money ids the money given
as a distinct consideration for an option contract; (b) earnest money is given only
where there is already a sale, while option money applies to a sale not yet perfected;
and (c) when earnest money is given, the buyer is bound to pay the balance, while
when the would-be buyer gives option money, he is not required to buy. 39
The aforequoted characteristics of earnest money are apparent in the so-called option
contract under review, even though it was called "option money" by the parties. In
addition, private respondents failed to show that the payment of the balance of the
purchase price was only a condition precedent to the acceptance of the offer or to the
exercise of the right to buy. On the contrary, it has been sufficiently established that
such payment was but an element of the performance of petitioner's obligation under
the contract to sell. 40
II
1. This brings us to the second issue as to whether or not there was valid suspension
of payment of the purchase price by petitioner and the legal consequences thereof.
To justify its failure to pay the purchase price within the agreed period, petitioner
invokes Article 1590 of the civil Code which provides:
Art. 1590. Should the vendee be disturbed in the possession or
ownership of the thing acquired, or should he have reasonable
and, secondarily, the fact that the contract to sell had been validly rescinded by
private respondents.
The records of this case reveal that as early as February 28, 1990 when petitioner
caused its exclusive option to be annotated anew on the certificate of title, it already
knew of the dismissal of civil Case No. 89-5541. However, it was only on April 16,
1990 that petitioner, through its counsel, wrote private respondents expressing its
willingness to pay the balance of the purchase price upon the execution of the
corresponding deed of absolute sale. At most, that was merely a notice to pay. There
was no proper tender of payment nor consignation in this case as required by law.
The 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. 43 Besides, a mere tender of payment is not sufficient to compel private
respondents to deliver the property and execute the deed of absolute sale. It is
consignation which is essential in order to extinguish petitioner's obligation to pay the
balance of the purchase price. 44 The rule is different in case of an option
contract 45 or in legal redemption or in a sale with right to repurchase, 46 wherein
consignation is not necessary because these cases involve an exercise of a right or
privilege (to buy, redeem or repurchase) rather than the discharge of an obligation,
hence tender of payment would be sufficient to preserve the right or privilege. This is
because the provisions on consignation are not applicable when there is no obligation
to pay. 47 A contract to sell, as in the case before us, involves the performance of an
obligation, not merely the exercise of a privilege of a right. consequently, performance
or payment may be effected not by tender of payment alone but by both tender and
consignation.
Furthermore, petitioner no longer had the right to suspend payment after the
disturbance ceased with the dismissal of the civil case filed against it. Necessarily,
therefore, its obligation to pay the balance again arose and resumed after it received
notice of such dismissal. Unfortunately, petitioner failed to seasonably make payment,
as in fact it has deposit the money with the trial court when this case was originally
filed therein.
By reason of petitioner's failure to comply with its obligation, private respondents
elected to resort to and did announce the rescission of the contract through its letter
to petitioner dated July 27, 1990. That written notice of rescission is deemed sufficient
under the circumstances. Article 1592 of the Civil Code which requires rescission
either by judicial action or notarial act is not applicable to a contract to
sell. 48 Furthermore, judicial action for rescission of a contract is not necessary where
the contract provides for automatic rescission in case of breach, 49 as in the contract
involved in the present controversy.
MELO, J.:p
The petition before us has its roots in a complaint for specific performance to compel
herein petitioners (except the last named, Catalina Balais Mabanag) to consummate
the sale of a parcel of land with its improvements located along Roosevelt Avenue in
Quezon City entered into by the parties sometime in January 1985 for the price of
P1,240,000.00.
The undisputed facts of the case were summarized by respondent court in this wise:
On January 19, 1985, defendants-appellants Romulo Coronel, et al.
(hereinafter referred to as Coronels) executed a document entitled
"Receipt of Down Payment" (Exh. "A") in favor of plaintiff Ramona
P1,190,000.00 Balance
Down
payment
A motion for reconsideration was filed by petitioner before the new presiding judge of
the Quezon City RTC but the same was denied by Judge Estrella T. Estrada, thusly:
The prayer contained in the instant motion, i.e., to annul the
decision and to render anew decision by the undersigned Presiding
Judge should be denied for the following reasons: (1) The instant
case became submitted for decision as of April 14, 1988 when the
parties terminated the presentation of their respective documentary
evidence and when the Presiding Judge at that time was Judge
Reynaldo Roura. The fact that they were allowed to file memoranda
at some future date did not change the fact that the hearing of the
case was terminated before Judge Roura and therefore the same
should be submitted to him for decision; (2) When the defendants
and intervenor did not object to the authority of Judge Reynaldo
Roura to decide the case prior to the rendition of the decision, when
they met for the first time before the undersigned Presiding Judge
at the hearing of a pending incident in Civil Case No. Q-46145 on
November 11, 1988, they were deemed to have acquiesced thereto
and they are now estopped from questioning said authority of
Judge Roura after they received the decision in question which
happens to be adverse to them; (3) While it is true that Judge
Reynaldo Roura was merely a Judge-on-detail at this Branch of the
Court, he was in all respects the Presiding Judge with full authority
to act on any pending incident submitted before this Court during
his incumbency. When he returned to his Official Station at
Macabebe, Pampanga, he did not lose his authority to decide or
resolve such cases submitted to him for decision or resolution
because he continued as Judge of the Regional Trial Court and is
of co-equal rank with the undersigned Presiding Judge. The
standing rule and supported by jurisprudence is that a Judge to
whom a case is submitted for decision has the authority to decide
the case notwithstanding his transfer to another branch or region of
the same court (Sec. 9, Rule 135, Rule of Court).
Coming now to the twin prayer for reconsideration of the Decision
dated March 1, 1989 rendered in the instant case, resolution of
which now pertains to the undersigned Presiding Judge, after a
meticulous examination of the documentary evidence presented by
the parties, she is convinced that the Decision of March 1, 1989 is
supported by evidence and, therefore, should not be disturbed.
suspensive conditions, and because of the absence of Ramona P. Alcaraz, who left
for the United States of America, said contract could not possibly ripen into a contract
absolute sale.
Plainly, such variance in the contending parties' contentions is brought about by the
way each interprets the terms and/or conditions set forth in said private instrument.
Withal, based on whatever relevant and admissible evidence may be available on
record, this, Court, as were the courts below, is now called upon to adjudge what the
real intent of the parties was at the time the said document was executed.
The Civil Code defines a contract of sale, thus:
Art. 1458. By the contract of sale one of the contracting parties
obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain in
money or its equivalent.
Sale, by its very nature, is a consensual contract because it is perfected by mere
consent. The essential elements of a contract of sale are the following:
a) Consent or meeting of the minds, that is, consent to transfer
ownership in exchange for the price;
b) Determinate subject matter; and
The heart of the controversy which is the ultimate key in the resolution of the other
issues in the case at bar is the precise determination of the legal significance of the
document entitled "Receipt of Down Payment" which was offered in evidence by both
parties. There is no dispute as to the fact that said document embodied the binding
contract between Ramona Patricia Alcaraz on the one hand, and the heirs of
Constancio P. Coronel on the other, pertaining to a particular house and lot covered
by TCT No. 119627, as defined in Article 1305 of the Civil Code of the Philippines
which reads as follows:
Art. 1305. A contract is a meeting of minds between two persons
whereby one binds himself, with respect to the other, to give
something or to render some service.
While, it is the position of private respondents that the "Receipt of Down Payment"
embodied a perfected contract of sale, which perforce, they seek to enforce by means
of an action for specific performance, petitioners on their part insist that what the
document signified was a mere executory contract to sell, subject to certain
seller still has to convey title to the prospective buyer by entering into a contract of
absolute sale.
It is essential to distinguish between a contract to sell and a conditional contract of
sale specially in cases where the subject property is sold by the owner not to the
party the seller contracted with, but to a third person, as in the case at bench. In a
contract to sell, there being no previous sale of the property, a third person buying
such property despite the fulfillment of the suspensive condition such as the full
payment of the purchase price, for instance, cannot be deemed a buyer in bad faith
and the prospective buyer cannot seek the relief of reconveyance of the property.
There is no double sale in such case. Title to the property will transfer to the buyer
after registration because there is no defect in the owner-seller's title per se, but the
latter, of course, may be used for damages by the intending buyer.
In a conditional contract of sale, however, upon the fulfillment of the suspensive
condition, the sale becomes absolute and this will definitely affect the seller's title
thereto. In fact, if there had been previous delivery of the subject property, the seller's
ownership or title to the property is automatically transferred to the buyer such that,
the seller will no longer have any title to transfer to any third person. Applying Article
1544 of the Civil Code, such second buyer of the property who may have had actual
or constructive knowledge of such defect in the seller's title, or at least was charged
with the obligation to discover such defect, cannot be a registrant in good faith. Such
second buyer cannot defeat the first buyer's title. In case a title is issued to the
second buyer, the first buyer may seek reconveyance of the property subject of the
sale.
With the above postulates as guidelines, we now proceed to the task of deciphering
the real nature of the contract entered into by petitioners and private respondents.
It is a canon in the interpretation of contracts that the words used therein should be
given their natural and ordinary meaning unless a technical meaning was intended
(Tan vs. Court of Appeals, 212 SCRA 586 [1992]). Thus, when petitioners declared in
the said "Receipt of Down Payment" that they
Received from Miss Ramona Patricia Alcaraz of 146 Timog,
Quezon City, the sum of Fifty Thousand Pesos purchase price of
our inherited house and lot, covered by TCT No. 1199627 of the
Registry of Deeds of Quezon City, in the total amount of
P1,240,000.00.
without any reservation of title until full payment of the entire purchase price,
the natural and ordinary idea conveyed is that they sold their property.
There is no doubt that unlike in a contract to sell which is most commonly entered into
so as to protect the seller against a buyer who intends to buy the property in
installment by withholding ownership over the property until the buyer effects full
payment therefor, in the contract entered into in the case at bar, the sellers were the
one who were unable to enter into a contract of absolute sale by reason of the fact
that the certificate of title to the property was still in the name of their father. It was the
sellers in this case who, as it were, had the impediment which prevented, so to speak,
the execution of an contract of absolute sale.
What is clearly established by the plain language of the subject document is that
when the said "Receipt of Down Payment" was prepared and signed by petitioners
Romeo A. Coronel, et al., the parties had agreed to a conditional contract of sale,
consummation of which is subject only to the successful transfer of the certificate of
title from the name of petitioners' father, Constancio P. Coronel, to their names.
The Court significantly notes this suspensive condition was, in fact, fulfilled on
February 6, 1985 (Exh. "D"; Exh. "4"). Thus, on said date, the conditional contract of
sale between petitioners and private respondent Ramona P. Alcaraz became
obligatory, the only act required for the consummation thereof being the delivery of
the property by means of the execution of the deed of absolute sale in a public
instrument, which petitioners unequivocally committed themselves to do as evidenced
by the "Receipt of Down Payment."
Article 1475, in correlation with Article 1181, both of the Civil Code, plainly applies to
the case at bench. Thus,
Art. 1475. The contract of sale is perfected at the moment there is a
meeting of minds upon the thing which is the object of the contract
and upon the price.
From the moment, the parties may reciprocally demand
performance, subject to the provisions of the law governing the
form of contracts.
Art. 1181. In conditional obligations, the acquisition of rights, as well
as the extinguishment or loss of those already acquired, shall
depend upon the happening of the event which constitutes the
condition.
Since the condition contemplated by the parties which is the issuance of a certificate
of title in petitioners' names was fulfilled on February 6, 1985, the respective
obligations of the parties under the contract of sale became mutually demandable,
effect the issuance of new certificate title from that of their father's name to their
names and that, on February 6, 1985, this condition was fulfilled (Exh. "D"; Exh. "4").
We, therefore, hold that, in accordance with Article 1187 which pertinently provides
Art. 1187. The effects of conditional obligation to give, once the
condition has been fulfilled, shall retroact to the day of the
constitution of the obligation . . .
In obligation to do or not to do, the courts shall determine, in each
case, the retroactive effect of the condition that has been complied
with.
the rights and obligations of the parties with respect to the perfected contract
of sale became mutually due and demandable as of the time of fulfillment or
occurrence of the suspensive condition on February 6, 1985. As of that point
in time, reciprocal obligations of both seller and buyer arose.
Petitioners also argue there could been no perfected contract on January 19, 1985
because they were then not yet the absolute owners of the inherited property.
(Ibid.)
Article 774 of the Civil Code defines Succession as a mode of transferring ownership
as follows:
not aware that they set their own trap for themselves, for Article 1186 of the
Civil Code expressly provides that:
Art. 1186. The condition shall be deemed fulfilled when the obligor
voluntarily prevents its fulfillment.
Besides, it should be stressed and emphasized that what is more controlling than
these mere hypothetical arguments is the fact that the condition herein referred to
was actually and indisputably fulfilled on February 6, 1985, when a new title was
issued in the names of petitioners as evidenced by TCT No. 327403 (Exh. "D"; Exh.
"4").
The inevitable conclusion is that on January 19, 1985, as evidenced by the document
denominated as "Receipt of Down Payment" (Exh. "A"; Exh. "1"), the parties entered
into a contract of sale subject only to the suspensive condition that the sellers shall
Moreover, petitioners are estopped from raising the alleged absence of Ramona P.
Alcaraz because although the evidence on record shows that the sale was in the
name of Ramona P. Alcaraz as the buyer, the sellers had been dealing with
Concepcion D. Alcaraz, Ramona's mother, who had acted for and in behalf of her
daughter, if not also in her own behalf. Indeed, the down payment was made by
Concepcion D. Alcaraz with her own personal check (Exh. "B"; Exh. "2") for and in
behalf of Ramona P. Alcaraz. There is no evidence showing that petitioners ever
questioned Concepcion's authority to represent Ramona P. Alcaraz when they
accepted her personal check. Neither did they raise any objection as regards
payment being effected by a third person. Accordingly, as far as petitioners are
concerned, the physical absence of Ramona P. Alcaraz is not a ground to rescind the
contract of sale.
Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her
obligation to pay the full purchase price is concerned. Petitioners who are precluded
from setting up the defense of the physical absence of Ramona P. Alcaraz as aboveexplained offered no proof whatsoever to show that they actually presented the new
transfer certificate of title in their names and signified their willingness and readiness
to execute the deed of absolute sale in accordance with their agreement. Ramona's
corresponding obligation to pay the balance of the purchase price in the amount of
P1,190,000.00 (as buyer) never became due and demandable and, therefore, she
cannot be deemed to have been in default.
Article 1169 of the Civil Code defines when a party in a contract involving reciprocal
obligations may be considered in default, to wit:
Art. 1169. Those obliged to deliver or to do something, incur in
delay from the time the obligee judicially or extrajudicially demands
from them the fulfillment of their obligation.
xxx xxx xxx
In reciprocal obligations, neither party incurs in delay if the other
does not comply or is not ready to comply in a proper manner with
what is incumbent upon him. From the moment one of the parties
fulfill his obligation, delay by the other begins. (Emphasis supplied.)
There is thus neither factual nor legal basis to rescind the contract of sale between
petitioners and respondents.
BANK, petitioner,
On July 14, 1983 Lapaz made a formal offer to purchase the parcel
of land consisting of 1,250.70 [square meters] located at the corner
of Carlos Palanca and Helios Streets, Sta. Cruz, Manila, owned by
and registered in the name of . . . PNB . . . PNB advised Lapaz of
its approval of the latter's offer to purchase the subject property
subject to the terms and conditions stated in its official
communication to the plaintiff [private respondent] dated
September 8, 1983, viz:
In a letter dated January 23, 1984, Lapaz, citing the then prevailing
credit squeeze, requested for adjustment of payment
proposals . . . .
B. PNB's acceptance of Ms. Ngo's offer was in fact a counter-offer which she rejected
by her insistence that PNB delete condition number 6.
two
case;
cancelled,
deemed
the
separate
transactions
first
having
been
effects
thereof
applicable
to
the
Even private respondent admits in her pleadings that she failed to remit the
required down payment under the first letter-agreement, dated September 8,
1983. On this basis, respondent appellate court held that "[t]hus, it was just
proper for the [petitioner] Bank to cancel the agreement to protect its
interests 9," as it did so on October 16, 1984. Notwithstanding such ruling,
however, respondent court theorized that because private respondent
accepted the terms and conditions in that first letter-agreement, and
petitioner approved the revival thereof in another letter-agreement, dated
May 14, 1986, conformity to this second letter-agreement by private
respondent would be superfluous, the letter-agreement dated May 14, 1986
being "merely a revival of the first agreement which was duly approved by
the bank and the terms and conditions thereof accepted by the appellee
[private respondent]" 10. Needless to say, this postulation of respondent court
is in complete disregard of the status of the first letter-agreement as being
non-existent and totally inefficacious as a result of its cancellation.
Respondent court then proceeded to state that petitioner having already
complied with the condition that the shoulder all expenses for the ejectment
From the foregoing, it is clear that private respondent and petitioner were
negotiating for terms mutually acceptable to them. Unfortunately, a mutually
acceptable set of terms was not reached between them, and petitioner
exercised its right under the second letter-agreement to cancel the same.
This process of negotiation undertaken in 1986 by herein private parties is
undeniably distinct from and entirely independent of the events that
transpired in 1983 in the context of the first letter agreement. Precisely
another negotiation was necessary because this 1986 transaction is different
and separate from that undertaken by the said parties in 1983.
Both letter-agreements are in the nature of contracts to sell; non-compliance
with the suspensive conditions set forth therein prevents the obligation of the
vendor to convey title from having obligatory force
The fundamental flaw in the reasoning of both the trial court and the
respondent appellate court is their admitted premise that both letteragreements are contracts of sale the perfection of which are proven by the
earnest money tendered to and accepted by petitioner in the form of
deposits of P100,000.00 and P200,000.00 under the first and second letteragreements, respectively.
A perusal of the letter-agreements shows that they are contracts to sell and
not contracts of sale.
A contract to sell is akin to a conditional sale where the efficacy or obligatory
force of the vendor's obligation to transfer title is subordinated to the
happening of 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 12. The suspensive condition is commonly full payment of
the purchase price 13.
Thus it has been held that a deed of sale is absolute in nature
although denominated as a "Deed of Conditional Sale" where
nowhere in the contract in question is a proviso or stipulation to the
effect that title to the property is sold is reversed in the vendor until
full payment of the purchase price, nor is there a stipulation giving
the vendor the right to unilaterally rescind the contract the moment
the vendee fails to pay within a fixed period . . . . 14
If it were not full payment of the purchase price upon which depends the
passing of title from the vendor to the vendee, it may be some other
condition or conditions that have been stipulated and must be fulfilled before
The differences between a contract to sell and a contract of sale are wellsettled in jurisprudence. As early as 1951, we have held that:
1. . . .
3. . . .
4. . . .
The petitioner corporation's obligation to sell is unequivocally
subject to a positive suspensive condition, i.e., the private
respondent's opening, making or indorsing of an irrevocable and
unconditional letter of credit. The former agreed to deliver the scrap
BELLOSILLO, J.:
On 11 April 1981 El contract of "Conditional Sale of Registered Lands" was executed
between the spouses Vivencio and Elena Babasa as vendors and Tabangao Realty,
Inc. (TABANGAO) as vendee over three (3) parcels of land, Lots Nos. 17827-A,
17827-B and 17827-C, situated in Brgy. Libjo, Batangas City. Since the certificates of
title over the lots were in the name of third persons who had already executed deeds
of reconveyance and disclaimer in favor of the BABASAS, it was agreed that the total
purchase price of P2,121,920.00 would be paid in the following manner: P300,000.00
upon signing of the contract, and P1,821,920.00 upon presentation by the BABASAS
of transfer certificates of titles in their name, free from all liens and encumbrances,
and delivery of registerable documents of sale in favor of TABANGAO within twenty
(20) months from the signing of the contract. In the meantime, the retained balance of
the purchase price would earn interest at seventeen percent (17%) per annum or
P20,648.43 monthly payable to the BABASAS until 31 December 1982. It was
expressly stipulated that TABANGAO would have the absolute and unconditional right
to take immediate possession of the lots as well as introduce any improvement
thereon.
On 18 May 1981 TABANGAO leased the lots to Shell Gas Philippines, Inc. (SHELL),
which immediately started the construction thereon of a Liquefied Petroleum Gas
Terminal Project, an approved zone export enterprise of the Export Processing Zone.
TABANGAO is the real estate arm of SHELL.
The parties substantially complied with the terms of the contract. TABANGAO paid
the first installment of P300,000.00 to the BABASAS while the latter delivered actual
possession of the lots to the former. In addition, TABANGAO paid P379,625.00 to the
tenants of the lots as disturbance compensation and as payment for existing crops as
well as P334,700.00 to the owners of the houses standing thereon in addition to
granting them residential lots with the total area of 2,800 square meters. TABANGAO
likewise paid the stipulated monthly interest for the 20-month period amounting to
P408,580.80. Meanwhile, the BABASAS filed Civil Case No. 519 1and Petition No.
373 2 for the transfer of titles of the lots in their name.
G.R. No. 124045 May 21, 1998
Despite the pendency of the case the BABASAS put up several structures within the
area in litigation to impede the movements of persons and vehicles therein, laid claim
to twelve (12) heads of cattle belonging to intervenor SHELL and threatened to collect
levy from all buyers of liquefied petroleum gas (LPG) for their alleged use of the
BABASA estate in their business transactions with intervenor SHELL. As a result,
SHELL applied for and was granted on 10 April 1990 a temporary restraining order
against the Babasa spouses and anyone acting for and in their behalf upon filing of a
P2-million bond. 4
Eventually, judgment was rendered in favor of TABANGAO and SHELL. 5 The court a
quo ruled that the 20-month period stipulated in the contract was never meant to be
its term such that upon its expiration the respective obligations of the parties would be
extinguished. On the contrary, the expiration thereof merely gave rise to the right of
TABANGAO to either rescind the contract or to demand that the BABASAS comply
with their contractual obligation to deliver to it clean titles and registerable documents
of sale. The notarial rescission executed by the BABASAS was declared void and of
no legal effect
4. Plaintiff Tabangao Realty, Inc., is directed to pay the defendantspouses Vivencio Babasa and Elena Cantos-Babasa the remaining
balance of P1,821,920.00 out of the full purchase price for these
three lots enumerated in the agreement dated April 11, 1981 plus
interest thereon of 17% per annumor P20,648.43 a month
compounded annually beginning January 1983 until fully paid;
5. The Order dated April 10, 1990 issued in favor of the intervenor
enjoining and restraining defendant-spouses Vivencio Babasa and
Elena Cantos-Babasa and/or anyone acting for and in their behalf
from putting up any structure on the three lots or interfering in any
way in the activities of the intervenor, its employees and agents, is
made permanent, and the bond posted by the intervenor cancelled;
and,
But the BABASAS lament that they never intended to sell their ancestral lots but were
merely forced to do so when TABANGAO dangled the threat of expropriation by the
government (through the Export Processing Zone Authority) in the event voluntary
negotiations failed. Although a cause to commiserate with petitioners may be
perceived, it is not enough to provide them with an avenue to escape contractual
obligations validly entered into. We have already held that contracts are valid even
though one of the parties entered into it against his own wish and desire, or even
against his better judgment. 9 Besides, a threat of eminent domain proceedings by the
government cannot be legally classified as the kind of imminent, serious and wrongful
injury to a contracting party as to vitiate his consent. 10 Private landowners ought to
realize, and eventually accept, that property rights must yield to the valid exercise by
the state of its all-important power of eminent domain. 11
Finally, petitioners contend that ownership over the three (3) lots was never
transferred to TABANGAO and that the contract of 11 April 1981 was rendered lifeless
when the 20-month period stipulated therein expired without them being able to
deliver clean certificates of title to TABANGAO through no fault of their own.
Consequently, their unilateral rescission dated 28 February 1983 should have been
upheld as valid.
We disagree. Although denominated "Conditional Sale of Registered Lands," we hold,
as did respondent court, that the 11 April 1981 between petitioners and respondent
TABANGAO is one of absolute sale. Aside from the terms and stipulations used
therein indicating such kind of sale, there is absolutely no proviso reserving title in the
BABASAS until full payment of the purchase price, nor any stipulation giving them the
right to unilaterally rescind the contract in case of non-payment. A deed of sale is
absolute in nature although denominated a "conditional sale" absent such
stipulations. 12 In such cases, ownership of the thing sold passes to the vendee upon
the constructive or actual delivery thereof. 13 In the instant case, ownership over Lots
Nos. 17827-A, 17827-B and 17827-C passed to TABANGAO both by constructive and
actual delivery. Constructive delivery was accomplished upon the execution of the
contract of 11 April 1981 without any reservation of title on the part of the BABASAS
while actual delivery was made when TABANGAO took unconditional possession of
the lots and leased them to its associate company SHELL which constructed its multimillion peso LPG Project thereon. 14
We do not agree with petitioners that their contract with TABANGAO lost its efficacy
when the 20-month period stipulated therein expired without petitioners being able to
deliver clean certificates of title such that TABANGAO may no longer demand
performance of their obligation. In Romero v. Court of Appeals 15 and Lim v. Court of
Appeals 16 the Court distinguished between a condition imposed on the perfection of a
contract and a condition imposed merely on the performance of an obligation. While
5. In the event that the DEBTOR fails to comply with any of its
promises or undertakings in this document, the DEBTOR agrees
without reservation that the CREDITOR shall have the right and the
power to consider the Logging Agreement dated December 2, 1960
as rescinded without the necessity of any judicial suit, and the
CREDITOR shall be entitled as a matter of right to Fifty Thousand
Pesos (P50,000.00) by way of and for liquidated damages;
ALUMCO continued its logging operations, but again incurred an unpaid account, for
the period from 9 December 1964 to 15 July 1965, in the amount of P61,133.74, in
addition to the indebtedness that it had previously acknowledged.
That on 19 July 1965, petitioner UP informed respondent ALUMCO that it had, as of
that date, considered as rescinded and of no further legal effect the logging
agreement that they had entered in 1960; and on 7 September 1965, UP filed a
complaint against ALUMCO, which was docketed as Civil Case No. 9435 of the Court
of First Instance of Rizal (Quezon City), for the collection or payment of the herein
before stated sums of money and alleging the facts hereinbefore specified, together
with other allegations; it prayed for and obtained an order, dated 30 September 1965,
for preliminary attachment and preliminary injunction restraining ALUMCO from
continuing its logging operations in the Land Grant.
That before the issuance of the aforesaid preliminary injunction UP had taken steps to
have another concessionaire take over the logging operation, by advertising an
invitation to bid; that bidding was conducted, and the concession was awarded to Sta.
Clara Lumber Company, Inc.; the logging contract was signed on 16 February 1966.
That, meantime, ALUMCO had filed several motions to discharge the writs of
attachment and preliminary injunction but were denied by the court;
That on 12 November 1965, ALUMCO filed a petition to enjoin petitioner University
from conducting the bidding; on 27 November 1965, it filed a second petition for
preliminary injunction; and, on 25 February 1966, respondent judge issued the first of
the questioned orders, enjoining UP from awarding logging rights over the concession
to any other party.
3. In the event that the payments called for in Nos. 1 and 2 of this
paragraph are not sufficient to liquidate the foregoing indebtedness
of the DEBTOR in favor of the CREDITOR, the balance outstanding
after the said payments have been applied shall be paid by the
DEBTOR in full no later than June 30, 1965;
That UP received the order of 25 February 1966 after it had concluded its contract
with Sta. Clara Lumber Company, Inc., and said company had started logging
operations.
That, on motion dated 12 April 1966 by ALUMCO and one Jose Rico, the court, in an
order dated 14 January 1967, declared petitioner UP in contempt of court and, in the
suit." As to such special stipulation, and in connection with Article 1191 of the Civil
Code, this Court stated in Froilan vs. Pan Oriental Shipping Co., et al., L-11897, 31
October 1964, 12 SCRA 276:
there is nothing in the law that prohibits the parties from entering
into agreement that violation of the terms of the contract would
cause cancellation thereof, even without court intervention. In other
words, it is not always necessary for the injured party to resort to
court for rescission of the contract.
Of course, it must be understood that the act of party in treating a contract as
cancelled or resolved on account of infractions by the other contracting party must be
made known to the other and is always provisional, being ever subject to scrutiny and
review by the proper court. If the other party denies that rescission is justified, it is
free to resort to judicial action in its own behalf, and bring the matter to court. Then,
should the court, after due hearing, decide that the resolution of the contract was not
warranted, the responsible party will be sentenced to damages; in the contrary case,
the resolution will be affirmed, and the consequent indemnity awarded to the party
prejudiced.
In other words, the party who deems the contract violated may consider it resolved or
rescinded, and act accordingly, without previous court action, but it proceeds at its
own risk. For it is only the final judgment of the corresponding court that will
conclusively and finally settle whether the action taken was or was not correct in law.
But the law definitely does not require that the contracting party who believes itself
injured must first file suit and wait for a judgment before taking extrajudicial steps to
protect its interest. Otherwise, the party injured by the other's breach will have to
passively sit and watch its damages accumulate during the pendency of the suit until
the final judgment of rescission is rendered when the law itself requires that he should
exercise due diligence to minimize its own damages (Civil Code, Article 2203).
We see no conflict between this ruling and the previous jurisprudence of this Court
invoked by respondent declaring that judicial action is necessary for the resolution of
a reciprocal obligation, 1 since in every case where the extrajudicial resolution is
contested only the final award of the court of competent jurisdiction can conclusively
settle whether the resolution was proper or not. It is in this sense that judicial action
will be necessary, as without it, the extrajudicial resolution will remain contestable and
subject to judicial invalidation, unless attack thereon should become barred by
acquiescence, estoppel or prescription.
Fears have been expressed that a stipulation providing for a unilateral rescission in
case of breach of contract may render nugatory the general rule requiring judicial
In fact, even without express provision conferring the power of cancellation upon one
contracting party, the Supreme Court of Spain, in construing the effect of Article 1124
of the Spanish Civil Code (of which Article 1191 of our own Civil; Code is practically a
reproduction), has repeatedly held that, a resolution of reciprocal or synallagmatic
contracts may be made extrajudicially unless successfully impugned in court.
In the light of the foregoing principles, and considering that the complaint of petitioner
University made out aprima facie case of breach of contract and defaults in payment
by respondent ALUMCO, to the extent that the court below issued a writ of
preliminary injunction stopping ALUMCO's logging operations, and repeatedly denied
its motions to lift the injunction; that it is not denied that the respondent company had
profited from its operations previous to the agreement of 5 December 1964
("Acknowledgment of Debt and Proposed Manner of Payment"); that the excuses
offered in the second amended answer, such as the misconduct of its former
manager Cesar Guy, and the rotten condition of the logs in private respondent's pond,
which said respondent was in a better position to know when it executed the
acknowledgment of indebtedness, do not constitute on their face sufficient excuse for
non-payment; and considering that whatever prejudice may be suffered by
respondent ALUMCO is susceptibility of compensation in damages, it becomes plain
that the acts of the court a quo in enjoining petitioner's measures to protect its interest
without first receiving evidence on the issues tendered by the parties, and in
subsequently refusing to dissolve the injunction, were in grave abuse of discretion,
correctible by certiorari, since appeal was not available or adequate. Such injunction,
therefore, must be set aside.
For the reason that the order finding the petitioner UP in contempt of court has open
appealed to the Court of Appeals, and the case is pending therein, this Court abstains
from making any pronouncement thereon.
WHEREFORE, the writ of certiorari applied for is granted, and the order of the
respondent court of 25 February 1966, granting the Associated Lumber Company's
petition for injunction, is hereby set aside. Let the records be remanded for further
proceedings conformably to this opinion.
MELENCIO-HERRERA, J.:
The Resolution, dated May 2, 1980, issued by Presidential Executive Assistant
Jacobo Clave in O.P. Case No. 1459, directing petitioners Palay, Inc. and Alberto
Onstott jointly and severally, to refund to private respondent, Nazario Dumpit, the
amount of P13,722.50 with 12% interest per annum, as resolved by the National
Housing Authority in its Resolution of July 10, 1979 in Case No. 2167, as well as the
Resolution of October 28, 1980 denying petitioners' Motion for Reconsideration of
said Resolution of May 2, 1980, are being assailed in this petition.
On March 28, 1965, petitioner Palay, Inc., through its President, Albert Onstott
executed in favor of private respondent, Nazario Dumpit, a Contract to Sell a parcel of
Land (Lot No. 8, Block IV) of the Crestview Heights Subdivision in Antipolo, Rizal, with
an area of 1,165 square meters, - covered by TCT No. 90454, and owned by said
corporation. The sale price was P23,300.00 with 9% interest per annum, payable with
a downpayment of P4,660.00 and monthly installments of P246.42 until fully paid.
Paragraph 6 of the contract provided for automatic extrajudicial rescission upon
default in payment of any monthly installment after the lapse of 90 days from the
On May 10, 1973, or almost six (6) years later, private respondent wrote petitioner
offering to update all his overdue accounts with interest, and seeking its written
consent to the assignment of his rights to a certain Lourdes Dizon. He followed this
up with another letter dated June 20, 1973 reiterating the same request. Replying
petitioners informed respondent that his Contract to Sell had long been rescinded
pursuant to paragraph 6 of the contract, and that the lot had already been resold.
Questioning the validity of the rescission of the contract, respondent filed a letter
complaint with the National Housing Authority (NHA) for reconveyance with an
altenative prayer for refund (Case No. 2167). In a Resolution, dated July 10, 1979,
the NHA, finding the rescission void in the absence of either judicial or notarial
demand, ordered Palay, Inc. and Alberto Onstott in his capacity as President of the
corporation, jointly and severally, to refund immediately to Nazario Dumpit the amount
of P13,722.50 with 12% interest from the filing of the complaint on November 8, 1974.
Petitioners' Motion for Reconsideration of said Resolution was denied by the NHA in
its Order dated October 23, 1979. 1
On appeal to the Office of the President, upon the allegation that the NHA Resolution
was contrary to law (O.P. Case No. 1459), respondent Presidential Executive
Assistant, on May 2, 1980, affirmed the Resolution of the NHA. Reconsideration
sought by petitioners was denied for lack of merit. Thus, the present petition wherein
the following issues are raised:
I
Whether notice or demand is not mandatory under the
circumstances and, therefore, may be dispensed with by stipulation
in a contract to sell.
II
Whether petitioners may be held liable for the refund of the
installment payments made by respondent Nazario M. Dumpit.
We hold that resolution by petitioners of the contract was ineffective and inoperative
against private respondent for lack of notice of resolution, as held in the U.P. vs.
Angeles case, supra
Petitioner relies on Torralba vs. De los Angeles 8 where it was held that "there was no
contract to rescind in court because from the moment the petitioner defaulted in the
timely payment of the installments, the contract between the parties was
deemed ipso facto rescinded." However, it should be noted that even in that case
notice in writing was made to the vendee of the cancellation and annulment of the
contract although the contract entitled the seller to immediate repossessing of the
land upon default by the buyer.
The indispensability of notice of cancellation to the buyer was to be later underscored
in Republic Act No. 6551 entitled "An Act to Provide Protection to Buyers of Real
Estate on Installment Payments." which took effect on September 14, 1972, when it
specifically provided:
Sec. 3(b) ... the actual cancellation of the contract shall take place
after thirty days from receipt by the buyer of the notice of
cancellation or the demand for rescission of the contract by a
notarial act and upon full payment of the cash surrender value to
the buyer. (Emphasis supplied).
The contention that private respondent had waived his right to be notified under
paragraph 6 of the contract is neither meritorious because it was a contract of
adhesion, a standard form of petitioner corporation, and private respondent had no
freedom to stipulate. A waiver must be certain and unequivocal, and intelligently
made; such waiver follows only where liberty of choice has been fully
accorded. 9 Moreover, it is a matter of public policy to protect buyers of real estate on
installment payments against onerous and oppressive conditions. Waiver of notice is
one such onerous and oppressive condition to buyers of real estate on installment
payments.
Regarding the second issue on refund of the installment payments
made by private respondent. Article 1385 of the Civil Code
provides:
ART. 1385. Rescission creates the obligation to return the things
which were the object of the contract, together with their fruits, and
the price with its interest; consequently, it can be carried out only
when he who demands rescission can return whatever he may be
obliged to restore.
reciprocal obligations, neither party incurs in delay if the other party does not comply
or is not ready to comply in a proper manner with what was incumbent upon him. 24
Even assuming for the sake of argument that the petitioners were ready to comply
with their obligation, we find that rescission of the contract will still not prosper. The
rescission of a sale of an immovable property is specifically governed by Article 1592
of the New Civil Code, which reads:
In the sale of immovable property, even though it may have been stipulated
that upon failure to pay the price at the time agreed upon the rescission of
the contract shall of right take place, the vendee may pay, even after the
expiration of the period, as long as no demand for rescission of the contract
has been made upon him either judicially or by a notarial act. After the
demand, the court may not grant him a new term. 25
It is not disputed that the petitioners did not make a judicial or notarial demand for
rescission.1avvphi1 The November 20, 1989 letter of the petitioners informing the
respondent of the automatic rescission of the agreement did not amount to a demand
for rescission, as it was not notarized. 26 It was also made five days after the
respondent's attempt to make the payment of the purchase price. This offer to pay
prior to the demand for rescission is sufficient to defeat the petitioners' right under
article 1592 of the Civil Code. 27 Besides, the Memorandum Agreement between the
parties did not contain a clause expressly authorizing the automatic cancellation of
the contract without court intervention in the event that the terms thereof were
violated. A seller cannot unilaterally and extrajudicially rescind a contract or sale
where there is no express stipulation authorizing him to extrajudicially
rescind. 28 Neither was there a judicial demand for the rescission thereof. Thus, when
the respondent filed his complaint for specific performance, the agreement was still in
force inasmuch as the contract was not yet rescinded. At any rate, considering that
the six-month period was merely an approximation of the time if would take to
reconstitute the lost title and was not a condition imposed on the perfection of the
contract and considering further that the delay in payment was only thirty days which
was caused by the respondents justified but mistaken belief that an extension to pay
was granted to him, we agree with the Court of Appeals that the delay of one month in
payment was a mere casual breach that would not entitle the respondents to rescind
the contract. Rescission of a contract will not be permitted for a slight or casual
breach, but only such substantial and fundamental breach as would defeat the very
object of the parties in making the agreemant. 29
Petitioners' insistence that the respondent should have consignated the amount is not
determinative of whether respondent's action for specific performance will lie.
Petitioners themselves point out that the effect of cansignation is to extinguish the
Spouses Guillermo Nombre and Victoriana Cari-an died without issue in 1924 and
1938, respectively. Nombre's heirs include his nephews and grandnephews.
Victoriana Cari-an was succeeded by her late brother's son, Gregorio Cari-an. The
latter was declared as Victoriana's heir in the estate proceedings for Nombre and his
wife (Special Proceeding No. 7-7279). 1 After Gregorio died in 1971, his wife,
Generosa Martinez, and children, Rodolfo, Carmen, Leonardo and Fredisminda, all
surnamed Cari-an, were also adjudged as heirs by representation to Victoriana's
estate. 2 Leonardo Cari-an passed away, leaving his widow, Nelly Chua vda. de Carian and minor son Leonell, as his heirs.
Two parcels of land, denominated as Lot No. 1616 and 1617 of the Kabankalan
Cadastre with an area of 29,350 square meters and 460,948 square meters,
respectively, formed part of the estate of Nombre and Cari-an.
On September 15, 1978, Gregorio Cari-an's heirs, herein collectively referred to as
private respondents Cari-an, executed the Deed of Sale of Rights, Interests and
Participation worded as follows:
NOW, THEREFORE, for and in consideration of the sum of TWO HUNDRED
SEVENTY-FIVE THOUSAND (P275,000.00) Pesos, Philippine Currency, to
be paid by the VENDEES to the VENDORS, except the share of the minor
child of Leonardo Cari-an, which should be deposited with the Municipal
Treasurer of Himamaylan, Province of Negros Occidental, by the order of the
Court of First Instance of Negros Occidental, Branch VI, Himamaylan, by
those presents, do hereby SELL, CEDE, TRANSFER and CONVEY by way
of ABSOLUTE SALE, all the RIGHTS, INTERESTS and PARTICIPATION of
the Vendors as to the one-half (1/2) portion pro-indiviso of Lots Nos. 1616
and 1617 (Fishpond), of the Kabankalan Cadastre, pertaining to the one-half
(1/2) portion pro-indiviso of late Victoriana Cari-an unto and in favor of the
Vendees, their heirs, successors and assigns;
xxx xxx xxx
ROMERO, J.:
Before us are consolidated petitions for review of the decision of the Court of Appeals
in CA-G.R. CV No. 39975 which affirmed the trial court's pronouncement that the
deed of sale of rights, interests and participation in favor of petitioners is null and void.
That this Contract of Sale of rights, interests and participations shall become
effective only upon the approval by the Honorable Court of First Instance of
Negros Occidental, Branch VI- Himamayla. (Emphasis supplied.)
Pedro Escanlar and Francisco Holgado, the vendees, were concurrently the lessees
of the lots referred to above.3 They stipulated that the balance of the purchase price
Being former lessees, petitioners continued in possession of Lot Nos. 1616 and 1617.
Interestingly, they continued to pay rent based on their lease contract. On September
10, 1981, petitioners moved to intervene in the probate proceedings of Nombre and
Cari-an as the buyers of private respondent Cari-an's share in Lot Nos. 1616 and
1617. Petitioners' motion for approval of the September 15, 1978 sale before the
same court, filed on November 10, 1981, was opposed by private respondents Carian on January 5, 1982. 8
On September 16, 1982, the probate court approved a motion filed by the heirs of
Cari-an and Nombre to sell their respective shares in the estate. On September 21,
1982, private respondents Cari-an, in addition to some heirs of Guillermo
Nombre, 9 sold their shares in eight parcels of land including Lot Nos. 1616 and 1617
to the spouses Ney Sarrosa Chua and Paquito Chua for P1,850,000.00. One week
later, the vendor-heirs, including private respondents Cari-an, filed a motion for
approval of sale of hereditary rights, i.e. the sale made on September 21, 1982 to the
Chuas.
Private respondents Cari-an instituted this case for cancellation of sale against
petitioners (Escanlar and Holgado) on November 3, 1982. 10 They complained of
petitioners' failure to pay the balance of the purchase price by May 31, 1979 and
alleged that they only received a total of P132,551.00 in cash and goods. Petitioners
replied that the Cari-ans, having been paid, had no right to resell the subject lots; that
the Chuas were purchasers in bad faith; and that the court approval of the sale to the
Chuas was subject to their existing claim over said properties.
On April 20, 1983, petitioners also sold their rights and interests in the subject parcels
of land (Lot Nos. 1616 and 1617) to Edwin Jayme for P735,000.00 11 and turned over
possession of both lots to the latter. The Jaymes in turn, were included in the civil
case as fourth-party defendants.
On December 3, 1984, the probate court approved the September 21, 1982 sale
"without prejudice to whatever rights, claims and interests over any of those
properties of the estate which cannot be properly and legally ventilated and resolved
by the court in the same intestate proceedings." 12 The certificates of title over the
eight lots sold by the heirs of Nombre and Cari-an were later issued in the name of
respondents Ney Sarrosa Chua and Paquito Chua.
The trial court allowed a third-party complaint against the third-party defendants
Paquito and Ney Chua on January 7, 1986 where Escanlar and Holgado alleged that
the Cari-ans conspired with the Chuas when they executed the second sale on
September 21, 1982 and that the latter sale is illegal and of no effect. Respondents
favor of Paquito and Ney Chua, which was approved by the probate court, was
upheld. The dispositive portion of the lower court's decision reads:
On April 28, 1988, the trial court approved the Chuas' motion to file a fourth-party
complaint against the spouses Jayme. Respondents Chua alleged that the Jaymes
refused to vacate said lots despite repeated demands; and that by reason of the
illegal occupation of Lot Nos. 1616 and 1617 by the Jaymes, they suffered materially
from uncollected rentals.
Meanwhile, the Regional Trial Court of Himamaylan which took cognizance of Special
Proceeding No. 7-7279 (Intestate Estate of Guillermo Nombre and Victoriana Cari-an)
had
rendered
its
decision
on
October
30,
1987. 14 The probate court concluded that since all the properties of the estate were
disposed of or sold by the declared heirs of both spouses, the case is considered
terminated and the intestate estate of Guillermo Nombre and Victoriana Cari-an is
closed. The court held:
As regards the various incidents of this case, the Court finds no cogent
reason to resolve them since the very object of the various incidents in this
case is no longer m existence, that is to say, the properties of the estate of
Guillermo Nombre and Victoriana Cari-an had long been disposed of by the
rightful heirs of Guillermo Nombre and Victoriana Cari-an. In this respect,
there is no need to resolve the Motion for Subrogation of Movants Pedro
Escanlar and Francisco Holgado to be subrogated to the rights of the heirs
of Victoriana Cari-an since all the properties of the estate had been
transferred and titled to in the name of spouses Ney S. Chua and
Dr. Paquito Chua. Since the nature of the proceedings in this case is
summary, this Court, being a Probate Court, has no jurisdiction to pass upon
the validity or invalidity of the sale of rights of the declared heirs of Guillermo
Nombre and Victoriana Cari-an to third Parties. This issue must be raised in
another action where it can be properly ventilated and resolved. . . . Having
determined, after exhausted (sic) and lengthy hearings, the rightful heirs of
Guillermo Nombre and Victoriana Cari-an, the Court found out that the
second issue has become moot and academic considering that there are no
more properties left to be partitioned among the declared heirs as that had
long ago been disposed of by the declared heirs . . . . (Emphasis supplied).
The seminal case at bar was resolved by the trial court on December 18, 1991 in
favor of cancellation of the September 15, 1978 sale. Said transaction was nullified
because it was not approved by the probate court as required by the contested deed
of sale of rights, interests and participation and because the Cari-ans were not fully
paid. Consequently, the Deed of Sale executed by the heirs of Nombre and Cari-an in
The distinction between contracts of sale and contracts to sell with reserved title has
been recognized by this Court in repeated decisions, according to Justice J.B.L.
Reyes in Luzon Brokerage Co. Inc. v. Maritime Building Co., Inc., 21 upholding the
power of promisors under contracts to sell in case of failure of the other party to
complete payment, to extrajudicially terminate the operation of the contract, refuse
the conveyance, and retain the sums of installments already received where such
rights are expressly provided for.
In contracts to sell, ownership is retained by the seller and is not to pass until the full
payment of the price. Such payment is a positive suspensive condition, the failure of
which is not a breach of contract but simply an event that prevented the obligation of
the vendor to convey title from acquiring binding force. 22 To illustrate, although a deed
of conditional sale is denominated as such, absent a proviso that title to the property
sold is reserved in the vendor until full payment of the purchase price nor a stipulation
giving the vendor the right to unilaterally rescind the contract the moment the vendee
fails to pay within a fixed period, by its nature, it shall be declared a deed of absolute
sale. 23
The September 15, 1978 sale of rights, interests and participation as to 1/2
portion pro indiviso of the two subject lots is a contract of sale for the following
reasons: First, private respondents as sellers did not reserve unto themselves the
ownership of the property until full payment of the unpaid balance of P225,000.00.
Second, there is no stipulation giving the sellers the right to unilaterally rescind the
contract the moment the buyer fails to pay within the fixed period. 24 Prior to the sale,
petitioners were in possession of the subject property as lessees. Upon sale to them
of the rights, interests and participation as to the 1/2 portion pro indiviso, they
remained in possession, not in concept of lessees anymore but as owners now
through symbolic delivery known as traditio brevi manu. 25 Under Article 1477 of the
Civil Code, the ownership of the thing sold is acquired by the vendee upon actual or
constructive delivery thereof. 26
In a contract of sale, the non-payment of the price is a resolutory condition which
extinguishes the transaction that, for a time, existed and discharges the obligations
created thereunder. The remedy of an unpaid seller in a contract of sale is to seek
either specific performance or rescission. 27
2. Next to be discussed is the stipulation in the disputed September 15, 1978 Deed of
Sale of Rights, Interests and Participation which reads: "(t)his Contract of Sale of
rights, interests and participations shall become effective only upon the approval by
the Honorable Court of First Instance of Negros Occidental, Branch VI-Himamaylan."
Notably, the trial court and the Court of Appeals both held that the deed of sale is null
and void for not having been approved by the probate court.
controversial stipulation was a legal requirement for the validity of the sale. But the
contemporaneous and subsequent acts of the parties reveal that the original objective
of the parties was to give effect to the deed of sale even without court
approval. 34 Receipt and acceptance of the numerous installments on the balance of
the purchase price by the Cari-ans and leaving petitioners in possession of Lot Nos.
1616 and 1617 reveal their intention to effect the mutual transmission of rights and
obligations. It was only after private respondents Cari-an sold their shares in the
subject lots again to the spouses Chua, in September 1982, that these same heirs
filed the case at bar for the cancellation of the September 1978 conveyance. Worth
considering too is the fact that although the period to pay the balance of the purchase
price expired in May 1979, the heirs continued to accept payments until late 1979 and
did not seek judicial relief until late 1982 or three years later.
Second, we hold that the requisite approval was virtually rendered impossible by the
Cari-ans because they opposed the motion for approval of the sale filed by
petitioners 35 and sued the latter for the cancellation of that sale. The probate court
explained:
In the case of Dillena v. Court of Appeals, 28 the Court declared that it is within the
jurisdiction of the probate court to approve the sale of properties of a deceased
person by his prospective heirs before final adjudication. 29 It is settled that court
approval is necessary for the validity of any disposition of the decedent's estate.
However, reference to judicial approval cannot adversely affect the substantive rights
of the heirs to dispose of their ideal share in the co-heirship and/or co-ownership
among the heirs. 30 It must be recalled that during the period of indivision of a
decedent's estate, each heir, being a co-owner, has full ownership of his part and may
therefore alienate it. 31 But the effect of the alienation with respect to the co-owners
shall be limited to the portion which may be allotted to him in the division upon the
termination
of
the
co-ownership. 32
(e) While it is true that Escanlar and Holgado filed a similar motion for the
approval of Deed of Sale executed by some of the heirs in their favor
concerning the one-half (1/2) portions of Lots 1616 and 1617 as early as
November 10, 1981, yet the Court could not have favorably acted upon it,
because there exists a pending case for the rescission of that contract,
instituted by the vendors therein against Pedro Escanlar and Francisco
Holgado and filed before another branch of this Court. Until now, this case,
which attacks the very source of whatever rights or interests Holgado and
Escanlar may have acquired over one-half (1/2) portions of Lots Nos. 1616
and 1617, is pending resolution by another court. Otherwise, if this Court
meddles on these issues raised in that ordinary civil action seeking for the
rescission of an existing contract, then, the act of this Court would be totally
ineffective, as the same would be in excess of its jurisdiction. 36
From the foregoing, it is clear that hereditary rights in an estate can be validly sold
without need of court approval and that when private respondents Cari-an sold their
rights, interests and participation in Lot Nos. 1616 and 1617, they could legally sell
the same without the approval of the probate court.
Having provided the obstacle and the justification for the stipulated approval not to be
granted, private respondents Cari-an should not be allowed to cancel their first
transaction with petitioners because of lack of approval by the probate court, which
lack is of their own making.
3. With respect to rescission of a sale of real property, Article 1592 of the Civil Code
governs:
In the sale of immovable property, even though it may have been stipulated
that upon failure to pay the price at the time agreed upon the rescission of
A review of our records show that it has been past due from last
maturity with interest arrearages amounting to P25,826.08 as of
February 19, 1982. The last payment received by us was on
December 24, 1980 for P20,283. 14. In order to place your account
in current form, we request you to remit payments to cover interest,
charges, and at least part of the principal.
On March 17, 1982, petitioner filed Civil Case No. 45217 against respondent spouses
for rescission and damages before the Regional Trial Court of Pasig, Branch 159.
Then, in its reply to PNB's letter of February 19, 1982, petitioner demanded the return
of the payments it made on the ground that its assumption of mortgage was never
approved. On May 31, 1983, 8 while this case was pending, the mortgage was
foreclosed. The property was subsequently bought by PNB during the public auction.
Thus, an amended complaint was filed impleading PNB as party defendant.
On July 12, 1990, the trial court 9 ruled that the failure of respondent spouses to
deliver actual possession to petitioner entitled the latter to rescind the sale, and in
view of such failure and of the denial of the latter's assumption of mortgage, PNB was
obliged to return the payments made by the latter. The dispositive portion of said
decision states: 10
IN VIEW OF ALL THE FOREGOING, the Court hereby renders
judgment in favor of plaintiff and against defendants:
(1) Declaring the rescission of the Deed of Sale with Assumption of
Mortgage executed between plaintiff and defendants Spouses
Quiambao, dated June 26, 1979;
(2) Ordering defendants Spouses Quiambao to return to plaintiff the
amount of P187,144.77 (P108,000.00 plus P79,145.77) with legal
interest of 12% per annum from date of filing of herein complaint,
that is, March 17, 1982 until the same is fully paid;
(3) Ordering defendant PNB to return to plaintiff the amount of
P62,163.59 (P41,880.45 and P20,283.14) with 12% interest
thereon from date of herein judgment until the same is fully paid.
No award of other damages and attorney's fees, the same not
being warranted under the facts and circumstances of the case.
The petition is devoid of merit. It fails to appreciate the difference between a condition
and a warranty and the consequences of such distinction.
Conspicuous Absence of an Imposed Condition
The alleged "failure" of respondent spouses to eject the lessees from the lot in
question and to deliver actual and physical possession thereof cannot be considered
a substantial breach of a condition for two reasons: first, such "failure" was not
stipulated as a condition whether resolutory or suspensive in the contract; and
second, its effects and consequences were not specified either. 13
The provision adverted to by petitioner does not impose a condition or an obligation to
eject the lessees from the lot. The deed of sale provides in part: 14
We hereby also warrant that we are the lawful and absolute owners
of the above described property, free from any lien and/or
encumbrance, and we hereby agree and warrant to defend its title
and peaceful possession thereof in favor of the said Power
Commercial and Industrial Development Corporation, its
successors and assigns, against any claims whatsoever of any and
all third persons; subject, however, to the provisions hereunder
provided to wit:
By his own admission, Anthony Powers, General Manager of petitioner-corporation,
did not ask the corporation's lawyers to stipulate in the contract that Respondent
Reynaldo was guaranteeing the ejectment of the occupants, because there was
already a proviso in said deed of sale that the sellers were guaranteeing the peaceful
possession by the buyer of the land in question. 15 Any obscurity in a contract, if the
above-quoted provision can be so described, must be construed against the party
who caused it. 16 Petitioner itself caused the obscurity because it omitted this alleged
condition when its lawyer drafted said contract.
If the parties intended to impose on respondent spouses the obligation to eject the
tenants from the lot sold, it should have included in the contract a provision similar to
that referred to in Romero vs. Court of Appeals, 17where the ejectment of the
occupants of the lot sold by private respondent was the operative act which set into
motion the period of petitioner's compliance with his own obligation, i.e., to pay the
balance of the purchase price. Failure to remove the squatters within the stipulated
period gave the other party the right to either refuse to proceed with the agreement or
to waive that condition of ejectment in consonance with Article 1545 of the Civil Code.
In the case cited, the contract specifically stipulated that the ejectment was a
The key word is control, not possession, of the land as petitioner would like us to
believe. The Court has consistently held that: 23
Absent a stipulation therefor, we cannot say that the parties intended to make its
nonfulfillment a ground for rescission. If they did intend this, their contract should
have expressly stipulated so. In Ang vs. C.A., 18 rescission was sought on the ground
that the petitioners had failed to fulfill their obligation "to remove and clear" the lot
sold, the performance of which would have given rise to the payment of the
consideration by private respondent. Rescission was not allowed, however, because
the breach was not substantial and fundamental to the fulfillment by the petitioners of
the obligation to sell.
. . . (I)n order that this symbolic delivery may produce the effect of
tradition, it is necessary that the vendor shall have had
such control over the thing sold that . . . its material delivery could
have been made. It is not enough to confer upon the purchaser
the ownership and the right of possession. The thing sold must be
placed in his control. When there is no impediment whatever to
prevent the thing sold passing into the tenancy of the purchaser by
the sole will of the vendor, symbolic delivery through the execution
of a public instrument is sufficient. But if, notwithstanding the
execution of the instrument, the purchaser cannot have the
enjoyment and material tenancy of the thing and make use of it
himself or through another in his name, because such tenancy and
enjoyment are opposed by the interposition of another will, then
fiction yields to reality the delivery has not been effected.
As stated, the provision adverted to in the contract pertains to the usual warranty
against eviction, and not to a condition that was not met.
The terms of the contract are so clear as to leave no room for any other
interpretation. 19
Furthermore, petitioner was well aware of the presence of the tenants at the time it
entered into the sales transaction. As testified to by Reynaldo, 20 petitioner's counsel
during the sales negotiation even undertook the job of ejecting the squatters. In fact,
petitioner actually filed suit to eject the occupants. Finally, petitioner in its letter to
PNB of December 23, 1980 admitted that it was the "buyer(s) and new owner(s) of
this lot."
Effective Symbolic Delivery
The Court disagrees with petitioner's allegation that the respondent spouses failed to
deliver the lot sold. Petitioner asserts that the legal fiction of symbolic delivery yielded
to the truth that, at the execution of the deed of sale, transfer of possession of said lot
was impossible due to the presence of occupants on the lot sold. We find this
misleading.
Although most authorities consider transfer of ownership as the primary purpose of
sale, delivery remains an indispensable requisite as our law does not admit the
doctrine of transfer of property by mere consent. 21 The Civil Code provides that
delivery can either be (1) actual (Article 1497) or (2) constructive (Articles 14981501). Symbolic delivery (Article 1498), as a species of constructive delivery, effects
the transfer of ownership through the execution of a public document. Its efficacy can,
however, be prevented if the vendor does not possess control over the thing sold, 22 in
which case this legal fiction must yield to reality.
Considering that the deed of sale between the parties did not stipulate or infer
otherwise, delivery was effected through the execution of said deed. The lot sold had
been placed under the control of petitioner; thus, the filing of the ejectment suit was
subsequently done. It signified that its new owner intended to obtain for itself and to
terminate said occupants' actual possession thereof. Prior physical delivery or
possession is not legally required and the execution of the deed of sale is deemed
equivalent to delivery. 24 This deed operates as a formal or symbolic delivery of the
property sold and authorizes the buyer to use the document as proof of ownership.
Nothing more is required.
Requisites of Breach of Warranty Against Eviction
Obvious to us in the ambivalent stance of petitioner is its failure to establish any
breach of the warranty against eviction. Despite its protestation that its acquisition of
the lot was to enable it to set up a warehouse for its asbestos products and that
failure to deliver actual possession thereof defeated this purpose, still no breach of
warranty against eviction can be appreciated because the facts of the case do not
show that the requisites for such breach have been satisfied. A breach of this
warranty requires the concurrence of the following circumstances:
(1) The purchaser has been deprived of the whole or part of the thing sold;
(2) This eviction is by a final judgment;
(4) The vendor has been summoned and made co-defendant in the suit for eviction at
the instance of the vendee.25
In the absence of these requisites, a breach of the warranty against eviction
under Article 1547 cannot be declared.
Petitioner argues in its memorandum that it has not yet ejected the occupants of said
lot, and not that it has been evicted therefrom. As correctly pointed out by
Respondent Court, the presence of lessees does not constitute an encumbrance of
the land, 26 nor does it deprive petitioner of its control thereof.
We note, however, that petitioner's deprivation of ownership and control finally
occurred when it failed and/or discontinued paying the amortizations on the mortgage,
causing the lot to be foreclosed and sold at public auction. But this deprivation is due
to petitioner's fault, and not to any act attributable to the vendor-spouses.
Because petitioner failed to impugn its integrity, the contract is presumed, under the
law, to be valid and subsisting.
Absence of Mistake In Payment
Contrary to the contention of petitioner that a return of the payments it made to PNB
is warranted under Article 2154 of the Code, solutio indebiti does not apply in this
case. This doctrine applies where: (1) a payment is made when there exists no
binding relation between the payor, who has no duty to pay, and the person who
received the payment, and (2) the payment is made through mistake, and not through
liberality or some other cause. 27
In this case, petitioner was under obligation to pay the amortizations on the mortgage
under the contract of sale and the deed of real estate mortgage. Under the deed of
sale (Exh. "2"), 28 both parties agreed to abide by any and all the requirements of PNB
in connection with the real estate mortgage. Petitioner was aware that the deed of
mortgage (Exh. "C") made it solidarily and, therefore, primarily 29 liable for the
mortgage obligation: 30
(e) The Mortgagor shall neither lease the mortgaged property. . .
nor sell or dispose of the same in any manner, without the written
consent of the Mortgagee. However, if not withstanding this
stipulation and during the existence of this mortgage, the property
Therefore, it cannot be said that it did not have a duty to pay to PNB the
amortization on the mortgage.
Also, petitioner insists that its payment of the amortization was a mistake because
PNB disapproved its assumption of mortgage after it failed to submit the necessary
papers for the approval of such assumption.
But even if petitioner was a third party in regard to the mortgage of the land
purchased, the payment of the loan by petitioner was a condition clearly imposed by
the contract of sale. This fact alone disproves petitioner's insistence that there was a
"mistake" in payment. On the contrary, such payments were necessary to protect its
interest as a "the buyer(s) and new owner(s) of the lot."
The quasi-contract of solutio indebiti is one of the concrete manifestations of the
ancient principle that no one shall enrich himself unjustly at the expense of
another. 31 But as shown earlier, the payment of the mortgage was an obligation
petitioner assumed under the contract of sale. There is no unjust enrichment where
the transaction, as in this case, is quid pro quo, value for value.
All told, respondent Court did not commit any reversible error which would warrant the
reversal of the assailed Decision.
WHEREFORE, the petition is hereby DENIED, and the assailed Decision is
AFFIRMED.
SO ORDERED.
NUTRIMIX
FEEDS
vs.
COURT
OF
APPEALS
and
EVANGELISTA, respondents.
DECISION
CALLEJO, SR., J.:
Date
Amount
21334
P 7,260.00
21420
6,990.00
21437
41,510.00
21722
45,185.00
22048
44,540.00
22054
45,246.00
22186
August 2, 1993
84,900.00
Total:
P275,631.00
===========
CORPORATION, petitioner,
SPOUSES
EFREN
AND
Invoice
MAURA
Check Number
Due Date
Amount
P 47,760.00
-do-
BTS052087
131,340.00
-do-
BTS052091
59,700.00
-do-
BTS062721
August 4, 1993
47,860.00
-do-
BTS062720
August 5, 1993
43,780.00
-do-
BTS062774
August 6, 1993
15,000.00
-do-
BTS062748
September
1993
11,
-do-
BTS062763
September
1993
11,
-do-
BTS062766
September
1993
18,
Total:
47,180.00
48,440.00
49,460.00
P490,520.00
==========
of the case with Civil Case No. 1026-M-93. On May 13, 1994, the petitioner filed its
Answer with Counterclaim, alleging that the death of the respondents animals was
due to the widespread pestilence in their farm. The petitioner, likewise, maintained
that it received information that the respondents were in an unstable financial
condition and even sold their animals to settle their obligations from other enraged
and insistent creditors. It, moreover, theorized that it was the respondents who mixed
poison to its feeds to make it appear that the feeds were contaminated.
A joint trial thereafter ensued.
During the hearing, the petitioner presented Rufino Arenas, Nutrimix Assistant
Manager, as its lone witness. He testified that on the first week of August 1993,
Nutrimix President Efren Bartolome met the respondents to discuss the possible
settlement of their unpaid account. The said respondents still pleaded to the petitioner
to continue to supply them with animal feeds because their livestock were supposedly
suffering from a disease.6
For her part, respondent Maura Evangelista testified that as direct buyers of animal
feeds from the petitioner, Mr. Bartolome, the company president, gave them a
discount of P12.00 per bag and a credit term of forty-five to seventy-five days. 7 For
the operation of the respondents poultry and piggery farm, the assorted animal feeds
sold by the petitioner were delivered in their residence and stored in an adjacent
bodega made of concrete wall and galvanized iron sheet roofing with monolithic
flooring.8
It appears that in the morning of July 26, 1993, three various kinds of animal feeds,
numbering 130 bags, were delivered to the residence of the respondents in Sta.
Rosa, Marilao, Bulacan. The deliveries came at about 10:00 a.m. and were fed to the
animals at approximately 1:30 p.m. at the respondents farm in Balasing, Sta. Maria,
Bulacan. At about 8:30 p.m., respondent Maura Evangelista received a radio
message from a worker in her farm, warning her that the chickens were dying at rapid
intervals. When the respondents arrived at their farm, they witnessed the death of
18,000 broilers, averaging 1.7 kilos in weight, approximately forty-one to forty-five
days old. The broilers then had a prevailing market price of P46.00 per kilo.9
On July 27, 1993, the respondents received another delivery of 160 bags of animal
feeds from the petitioner, some of which were distributed to the contract growers of
the respondents. At that time, respondent Maura Evangelista requested the
representative of the petitioner to notify Mr. Bartolome of the fact that their broilers
died after having been fed with the animal feeds delivered by the petitioner the
previous day. She, likewise, asked that a technician or veterinarian be sent to oversee
the untoward occurrence. Nevertheless, the various feeds delivered on that day were
still fed to the animals. On July 27, 1993, the witness recounted that all of the
chickens and hogs died.10 Efren Evangelista suffered from a heart attack and was
hospitalized as a consequence of the massive death of their animals in the farm. On
August 2, 1993, another set of animal feeds were delivered to the respondents, but
In dismissing the complaint in Civil Case No. 1026-M-93, the CA ruled that the
respondents were not obligated to pay their outstanding obligation to the petitioner in
view of its breach of warranty against hidden defects. The CA gave much credence to
the testimony of Dr. Rodrigo Diaz, who attested that the sample feeds distributed to
the various governmental agencies for laboratory examination were taken from a
sealed sack bearing the brand name Nutrimix. The CA further argued that the
declarations of Dr. Diaz were not effectively impugned during cross-examination, nor
was there any contrary evidence adduced to destroy his damning allegations.
On March 7, 2002, the petitioner filed with this Court the instant petition for review on
the sole ground that
THE HONORABLE COURT OF APPEALS ERRED IN CONCLUDING THAT
THE CLAIMS OF HEREIN PETITIONER FOR COLLECTION OF SUM OF
MONEY AGAINST PRIVATE RESPONDENTS MUST BE DENIED
BECAUSE OF HIDDEN DEFECTS.
The Present Petition
The petitioner resolutely avers that the testimony of Dr. Diaz can hardly be considered
as conclusive evidence of hidden defects that can be attributed to the petitioner.
Parenthetically, the petitioner asserts, assuming that the sample feeds were taken
from a sealed sack bearing the brand name Nutrimix, it cannot decisively be
presumed that these were the same feeds brought to the respondents farm and
given to their chickens and hogs for consumption.
It is the contention of the respondents that the appellate court correctly ordered the
dismissal of the complaint in Civil Case No. 1026-M-93. They further add that there
was sufficient basis for the CA to hold the petitioner guilty of breach of warranty
thereby releasing the respondents from paying their outstanding obligation.
The Ruling of the Court
Oft repeated is the rule that the Supreme Court reviews only errors of law in petitions
for review on certiorari under Rule 45. However, this rule is not absolute. The Court
may review the factual findings of the CA should they be contrary to those of the trial
court. Conformably, this Court may review findings of facts when the judgment of the
CA is premised on a misapprehension of facts.25
The threshold issue is whether or not there is sufficient evidence to hold the petitioner
guilty of breach of warranty due to hidden defects.
The petition is meritorious.
The provisions on warranty against hidden defects are found in Articles 1561 and
1566 of the New Civil Code of the Philippines, which read as follows:
A review of the facts of the case would reveal that the petitioner delivered the animal
feeds, allegedly containing rat poison, on July 26, 1993; but it is astonishing that the
respondents had the animal feeds examined only on October 20, 1993, or barely
three months after their broilers and hogs had died. On cross-examination,
respondent Maura Evangelista testified in this manner:
Atty. Cruz:
Q Madam Witness, you said in the last hearing that believing that the 250
bags of feeds delivered to (sic) the Nutrimix Feeds Corporation on August 2,
1993 were poison (sic), allegedly your husband Efren Evangelista burned
the same with the chicken[s], is that right?
A Yes, Sir. Some, Sir.
Q And is it not a fact, Madam Witness, that you did not, as according to you,
used (sic) any of these deliveries made on August 2, 1993?
A We were able to feed (sic) some of those deliveries because we did not
know yet during that time that it is the cause of the death of our chicks (sic),
Sir.
(b) the defect must exist at the time the sale was made;
(c) the defect must ordinarily have been excluded from the contract;
(d) the defect, must be important (renders thing UNFIT or considerably
decreases FITNESS);
Q But according to you, the previous deliveries were not used by you
because you believe (sic) that they were poison (sic)?
A Which previous deliveries, Sir[?]
Q Those delivered on July 26 and 22 (sic), 1993?
A Those were fed to the chickens, Sir. This is the cause of the death of the
chickens.
Q And you stated that this last delivery on August 2 were poison (sic) also
and you did not use them, is that right?
Atty. Roxas:
That is misleading.
Atty. Cruz:
She stated that.
Atty. Roxas:
Moreover, Dr. Diaz even admitted that the feeds that were submitted for analysis
came from a sealed bag. There is simply no evidence to show that the feeds given to
the animals on July 26 and 27, 1993 were identical to those submitted to the expert
witnesses in October 1993.
It bears stressing, too, that the chickens brought to the Philippine Nuclear Research
Institute for laboratory tests were healthy animals, and were not the ones that were
ostensibly poisoned. There was even no attempt to have the dead fowls examined.
Neither was there any analysis of the stomach of the dead chickens to determine
whether the petitioners feeds really caused their sudden death. Mere sickness and
death of the chickens is not satisfactory evidence in itself to establish a prima facie
case of breach of warranty.36
Likewise, there was evidence tending to show that the respondents combined
different kinds of animal feeds and that the mixture was given to the animals.
Respondent Maura Evangelista testified that it was common practice among chicken
and hog raisers to mix animal feeds. The testimonies of respondent Maura
Evangelista may be thus summarized:
Cross-Examination
Atty. Cruz:
Q Because, Madam Witness, you ordered chicken booster mash from
Nutrimix Feeds Corporation because in July 1993 you were taking care of
many chickens, as a matter of fact, majority of the chickens you were taking
care [of] were chicks and not chickens which are marketable?
A What I can remember was that I ordered chicken booster mash on that
month of July 1993 because we have some chicks which have to be fed with
chicken booster mash and I now remember that on the particular month of
July 1993 we ordered several bags of chicken booster mash for the
consumption also of our chicken in our other poultry and at the same time
they were also used to be mixed with the feeds that were given to the hogs.
Q You mean to say [that], as a practice, you are mixing chicken booster
mash which is specifically made for chick feeds you are feeding the same to
the hogs, is that what you want the Court to believe?
A Yes, Sir, because when you mix chicken booster mash in the feeds of hogs
there is a better result, Sir, in raising hogs.37
Re-Direct Examination
Re-Cross Examination
unsettled accounts, claiming anew that their animals were poisoned with the animal
feeds supplied by the petitioner. The volte-face of the respondents deserves scant
consideration for having been conjured as a mere afterthought.
In essence, we hold that the respondents failed to prove that the petitioner is guilty of
breach of warranty due to hidden defects. It is, likewise, rudimentary that common law
places upon the buyer of the product the burden of proving that the seller of the
product breached its warranty.39 The bevy of expert evidence adduced by the
respondents is too shaky and utterly insufficient to prove that the Nutrimix feeds
caused the death of their animals. For these reasons, the expert testimonies lack
probative weight. The respondents case of breach of implied warranty was
fundamentally based upon the circumstantial evidence that the chickens and hogs
sickened, stunted, and died after eating Nutrimix feeds; but this was not enough to
raise a reasonable supposition that the unwholesome feeds were the proximate
cause of the death with that degree of certainty and probability required. 40 The rule is
well-settled that if there be no evidence, or if evidence be so slight as not reasonably
to warrant inference of the fact in issue or furnish more than materials for a mere
conjecture, the court will not hesitate to strike down the evidence and rule in favor of
the other party.41 This rule is both fair and sound. Any other interpretation of the law
would unloose the courts to meander aimlessly in the arena of speculation.42
Atty. Cruz:
Q Madam Witness, is it not a fact that the mixing of these feeds by you is
your own concuction (sic) and without the advice of a veterinarian expert to
do so?
A That is common practice among raisers to mix two feeds, Sir.
Q By yourself, Madam Witness, who advised you to do the mixing of these
two types of feeds for feeding your chickens?
A That is common practice of chicken raisers, Sir.38
Even more surprising is the fact that during the meeting with Nutrimix President Mr.
Bartolome, the respondents claimed that their animals were plagued by disease, and
that they needed more time to settle their obligations with the petitioner. It was only
after a few months that the respondents changed their justification for not paying their
It must be stressed, however, that the remedy against violations of warranty against
hidden defects is either to withdraw from the contract (accion redhibitoria) or to
demand a proportionate reduction of the price (accion quanti minoris), with damages
in either case.43 In any case, the respondents have already admitted, both in their
testimonies and pleadings submitted, that they are indeed indebted to the petitioner
for the unpaid animal feeds delivered to them. For this reason alone, they should be
held liable for their unsettled obligations to the petitioner.
WHEREFORE, in light of all the foregoing, the petition is GRANTED. The assailed
Decision of the Court of Appeals, dated February 12, 2002, is REVERSED and SET
ASIDE. The Decision of the Regional Trial Court of Malolos, Bulacan, Branch 9, dated
January 12, 1998, is REINSTATED. No costs.
SO ORDERED.