DELFIN TAN vs Benolirao

G.R. No. 153820

Is an annotation made pursuant to Section 4, Rule 74 of the Rules of Court (Rules) on a certificate of title covering
real property considered an encumbrance on the property? We resolve this question in the petition for review
on certiorari[1] filed by Delfin Tan (Tan) to assail the decision of the Court of Appeals (CA) in CA-G.R. CV No. 52033[2] and
the decision of the Regional Trial Court (RTC)[3] that commonly declared the forfeiture of his P200,000.00 down payment as
proper, pursuant to the terms of his contract with the respondents.
THE ANTECEDENTS
The facts are not disputed. Spouses Lamberto and Erlinda Benolirao and the Spouses Reynaldo and Norma Taningco were
the co-owners of a 689-square meter parcel of land (property) located in Tagaytay City and covered by Transfer Certificate of
Title (TCT) No. 26423. On October 6, 1992, the co-owners executed a Deed of Conditional Sale over the property in favor of
Tan for the price of P1,378,000.00. The deed stated:
a)

An initial down-payment of TWO HUNDRED (P200,000.00) THOUSAND PESOS, Philippine Currency,

upon signing of this contract; then the remaining balance of ONE MILLION ONE HUNDRED SEVENTY
EIGHT THOUSAND (P1,178,000.00) PESOS, shall be payable within a period of one hundred fifty (150) days
from date hereof without interest;

b)

That for any reason, BUYER fails to pay the remaining balance within above mentioned period, the BUYER
shall have a grace period of sixty (60) days within which to make the payment, provided that there shall be an
interest of 15% per annum on the balance amount due from the SELLERS;

c)

That should in case (sic) the BUYER fails to comply with the terms and conditions within the above stated
grace period, then the SELLERS shall have the right to forfeit the down payment, and to rescind this conditional
sale without need of judicial action;

d)

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

Pursuant to the Deed of Conditional Sale, Tan issued and delivered to the co-owners/vendors Metrobank Check No.
904407 for P200,000.00 as down payment for the property, for which the vendors issued a corresponding receipt.
On November 6, 1992, Lamberto Benolirao died intestate. Erlinda Benolirao (his widow and one of the vendors of
the property) and her children, as heirs of the deceased, executed an extrajudicial settlement of Lambertos estate on January
20, 1993. On the basis of the extrajudicial settlement, a new certificate of title over the property, TCT No. 27335, was issued
on March 26, 1993 in the names of the Spouses Reynaldo and Norma Taningco and Erlinda Benolirao and her
children. Pursuant to Section 4, Rule 74 of the Rules, the following annotation was made on TCT No. 27335:
x x x any liability to credirots (sic), excluded heirs and other persons having right to the property,
for a period of two (2) years, with respect only to the share of Erlinda, Andrew, Romano and Dion, all
surnamed Benolirao
As stated in the Deed of Conditional Sale, Tan had until March 15, 1993 to pay the balance of the purchase price. By
agreement of the parties, this period was extended by two months, so Tan had until May 15, 1993 to pay the balance. Tan
failed to pay and asked for another extension, which the vendors again granted. Notwithstanding this second extension, Tan
still failed to pay the remaining balance due on May 21, 1993. The vendors thus wrote him a letter demanding payment of the
balance of the purchase price within five (5) days from notice; otherwise, they would declare the rescission of the conditional
sale and the forfeiture of his down payment based on the terms of the contract.
Tan refused to comply with the vendors demand and instead wrote them a letter (dated May 28, 1993) claiming that
the annotation on the title, made pursuant to Section 4, Rule 74 of the Rules, constituted an encumbrance on the property that
would prevent the vendors from delivering a clean title to him. Thus, he alleged that he could no longer be required to pay the
balance of the purchase price and demanded the return of his down payment.
When the vendors refused to refund the down payment, Tan, through counsel, sent another demand letter to the
vendors on June 18, 1993. The vendors still refused to heed Tans demand, prompting Tan to file on June 19, 1993 a complaint

with the RTC of Pasay City for specific performance against the vendors, including Andrew Benolirao, Romano Benolirao,
Dion Benolirao as heirs of Lamberto Benolirao, together with Evelyn Monreal and Ann Karina Taningco (collectively,
therespondents). In his complaint, Tan alleged that there was a novation of the Deed of Conditional Sale done without his
consent since the annotation on the title created an encumbrance over the property. Tan prayed for the refund of the down
payment and the rescission of the contract.
On August 9, 1993, Tan amended his Complaint, contending that if the respondents insist on forfeiting the down
payment, he would be willing to pay the balance of the purchase price provided there is reformation of the Deed of
Conditional Sale.In the meantime, Tan caused the annotation on the title of a notice of lis pendens.
On August 21, 1993, the respondents executed a Deed of Absolute Sale over the property in favor of Hector de
Guzman (de Guzman) for the price of P689,000.00.
Thereafter, the respondents moved for the cancellation of the notice of lis pendens on the ground that it was
inappropriate since the case that Tan filed was a personal action which did not involve either title to, or possession of, real
property. The RTC issued an order dated October 22, 1993 granting the respondents motion to cancel the lis
pendens annotation on the title.
Meanwhile, based on the Deed of Absolute Sale in his favor, de Guzman registered the property and TCT No. 28104
was issued in his name. Tan then filed a motion to carry over the lis pendens annotation to TCT No. 28104 registered in de
Guzmans name, but the RTC denied the motion.
On September 8, 1995, after due proceedings, the RTC rendered judgment ruling that the respondents forfeiture of Tans down
payment was proper in accordance with the terms and conditions of the contract between the parties. [4] The RTC ordered Tan
to pay the respondents the amount of P30,000.00, plus P1,000.00 per court appearance, as attorneys fees, and to pay the cost
of suit.
On appeal, the CA dismissed the petition and affirmed the ruling of the trial court in toto. Hence, the present petition.
THE ISSUES
Tan argues that the CA erred in affirming the RTCs ruling to cancel the lis pendens annotation on TCT No.
27335. Due to the unauthorized novation of the agreement, Tan presented before the trial court two alternative remedies in his
complaint either the rescission of the contract and the return of the down payment, or the reformation of the contract to adjust
the payment period, so that Tan will pay the remaining balance of the purchase price only after the lapse of the required twoyear encumbrance on the title. Tan posits that the CA erroneously disregarded the alternative remedy of reformation of
contract when it affirmed the removal of the lis pendens annotation on the title.
Tan further contends that the CA erred when it recognized the validity of the forfeiture of the down payment in favor
of the vendors. While admitting that the Deed of Conditional Sale contained a forfeiture clause, he insists that this clause
applies only if the failure to pay the balance of the purchase price was through his own fault or negligence. In the present
case, Tan claims that he was justified in refusing to pay the balance price since the vendors would not have been able to
comply with their obligation to deliver a clean title covering the property.
Lastly, Tan maintains that the CA erred in ordering him to pay the respondents P30,000.00, plus P1,000.00 per court
appearance as attorneys fees, since he filed the foregoing action in good faith, believing that he is in the right.
The respondents, on the other hand, assert that the petition should be dismissed for raising pure questions of fact, in
contravention of the provisions of Rule 45 of the Rules which provides that only questions of law can be raised in petitions
for review on certiorari.
THE COURTS RULING
The petition is granted.
No new issues can be raised in the Memorandum
At the onset, we note that Tan raised the following additional assignment of errors in his Memorandum: (a) the CA
erred in holding that the petitioner could seek reformation of the Deed of Conditional Sale only if he paid the balance of the
purchase price and if the vendors refused to execute the deed of absolute sale; and (b) the CA erred in holding that the
petitioner was estopped from asking for the reformation of the contract or for specific performance.
The Courts September 27, 2004 Resolution expressly stated that No new issues may be raised by a party in his/its
Memorandum. Explaining the reason for this rule, we said that:
The raising of additional issues in a memorandum before the Supreme Court is irregular, because
said memorandum is supposed to be in support merely of the position taken by the party concerned in his

petition, and the raising of new issues amounts to the filing of a petition beyond the reglementary period.
The purpose of this rule is to provide all parties to a case a fair opportunity to be heard. No new points of
law, theories, issues or arguments may be raised by a party in the Memorandum for the reason that to
permit these would be offensive to the basic rules of fair play, justice and due process. [5]
Tan contravened the Courts explicit instructions by raising these additional errors. Hence, we disregard them and focus
instead on the issues previously raised in the petition and properly included in the Memorandum.
Petition raises a question of law
Contrary to the respondents claim, the issue raised in the present petition defined in the opening paragraph of this Decision is
a pure question of law. Hence, the petition and the issue it presents are properly cognizable by this Court.
Lis pendens annotation not proper in personal actions
Section 14, Rule 13 of the Rules enumerates the instances when a notice of lis pendens can be validly annotated on
the title to real property:
Sec. 14. Notice of lis pendens.
In an action affecting the title or the right of possession of real property, the plaintiff and the
defendant, when affirmative relief is claimed in his answer, may record in the office of the registry of deeds
of the province in which the property is situated a notice of the pendency of the action. Said notice shall
contain the names of the parties and the object of the action or defense, and a description of the property in
that province affected thereby. Only from the time of filing such notice for record shall a purchaser, or
encumbrancer of the property affected thereby, be deemed to have constructive notice of the pendency of
the action, and only of its pendency against the parties designated by their real names.
The notice of lis pendens hereinabove mentioned may be cancelled only upon order of the court,
after proper showing that the notice is for the purpose of molesting the adverse party, or that it is not
necessary to protect the rights of the party who caused it to be recorded.
The litigation subject of the notice of lis pendens must directly involve a specific property which is necessarily
affected by the judgment.[6]
Tans complaint prayed for either the rescission or the reformation of the Deed of Conditional Sale. While the Deed
does have real property for its object, we find that Tans complaint is an in personam action, as Tan asked the court to compel
the respondents to do something either to rescind the contract and return the down payment, or to reform the contract by
extending the period given to pay the remaining balance of the purchase price. Either way, Tan wants to enforce his personal
rights against the respondents, not against the property subject of the Deed. As we explained in Domagas v. Jensen:[7]
The settled rule is that the aim and object of an action determine its character. Whether a
proceeding is in rem, or in personam, or quasi in rem for that matter, is determined by its nature and
purpose, and by these only. A proceeding in personam is a proceeding to enforce personal rights and
obligations brought against the person and is based on the jurisdiction of the person, although it may
involve his right to, or the exercise of ownership of, specific property, or seek to compel him to control or
dispose of it in accordance with the mandate of the court. The purpose of a proceeding in personam is to
impose, through the judgment of a court, some responsibility or liability directly upon the person of the
defendant. Of this character are suits to compel a defendant to specifically perform some act or actions to
fasten a pecuniary liability on him.
Furthermore, as will be explained in detail below, the contract between the parties was merely a contract to sell where the
vendors retained title and ownership to the property until Tan had fully paid the purchase price. Since Tan had no claim of
ownership or title to the property yet, he obviously had no right to ask for the annotation of a lis pendens notice on the title of
the property.
Contract is a mere contract to sell
A contract is what the law defines it to be, taking into consideration its essential elements, and not what the
contracting parties call it.[8] Article 1485 of the Civil Code defines a contract of sale as follows:
Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership
and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
The very essence of a contract of sale is the transfer of ownership in exchange for a price paid or promised.[9]

In contrast, a contract to sell is defined as a bilateral contract whereby the prospective seller, while expressly
reserving the ownership of the property despite delivery thereof to the prospective buyer, binds himself to sell the
property exclusively to the prospective buyer upon fulfillment of the condition agreed, i.e., full payment of the purchase
price.[10] A contract to sell may not even be considered as a conditional contract of sale where the seller may
likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition, because in a
conditional contract of sale, the first element of consent is present, although it is conditioned upon the happening of a
contingent event which may or may not occur.[11]
In the present case, the true nature of the contract is revealed by paragraph D thereof, which states:
xxx
d) That in case, BUYER has complied with the terms and conditions of this contract, then the SELLERS shall
execute and deliver to the BUYER the appropriate Deed of Absolute Sale;
xxx
Jurisprudence has established that where the seller promises to execute a deed of absolute sale upon the completion
by the buyer of the payment of the price, the contract is only a contract to sell. [12] Thus, while the contract is denominated as a
Deed of Conditional Sale, the presence of the above-quoted provision identifies the contract as being a mere contract to sell.
A Section 4, Rule 74 annotation is an encumbrance on the property
While Tan admits that he refused to pay the balance of the purchase price, he claims that he had valid reason to do so
the sudden appearance of an annotation on the title pursuant to Section 4, Rule 74 of the Rules, which Tan considered an
encumbrance on the property.
We find Tans argument meritorious.
The annotation placed on TCT No. 27335, the new title issued to reflect the extrajudicial partition of Lamberto
Benoliraos estate among his heirs, states:
x x x any liability to credirots (sic), excluded heirs and other persons having right to the property,
for a period of two (2) years, with respect only to the share of Erlinda, Andrew, Romano and Dion, all
surnamed Benolirao [Emphasis supplied.]
This annotation was placed on the title pursuant to Section 4, Rule 74 of the Rules, which reads:
Sec. 4. Liability of distributees and estate. - If it shall appear at any time within two (2) years after the
settlement and distribution of an estate in accordance with the provisions of either of the first two sections
of this rule, that an heir or other person has been unduly deprived of his lawful participation in the estate,
such heir or such other person may compel the settlement of the estate in the courts in the manner
hereinafter provided for the purpose of satisfying such lawful participation. And if within the same time
of two (2) years, it shall appear that there are debts outstanding against the estate which have not
been paid, or that an heir or other person has been unduly deprived of his lawful participation
payable in money, the court having jurisdiction of the estate may, by order for that purpose, after
hearing,settle the amount of such debts or lawful participation and order how much and in what
manner each distributee shall contribute in the payment thereof, and may issue execution, if
circumstances require, against the bond provided in the preceding section or against the real estate
belonging to the deceased, or both. Such bond and such real estate shall remain charged with a liability to
creditors, heirs, or other persons for the full period of two (2) years after such distribution, notwithstanding
any transfers of real estate that may have been made. [Emphasis supplied.]

[13]

Senator Vicente Francisco discusses this provision in his book The Revised Rules of Court in the Philippines,
where he states:
The provision of Section 4, Rule 74 prescribes the procedure to be followed if within two years
after an extrajudicial partition or summary distribution is made, an heir or other person appears to have
been deprived of his lawful participation in the estate, or some outstanding debts which have not been paid
are discovered. When the lawful participation of the heir is not payable in money, because, for
instance, he is entitled to a part of the real property that has been partitioned, there can be no other
procedure than to cancel the partition so made and make a new division, unless, of course, the heir
agrees to be paid the value of his participation with interest. But in case the lawful participation of the
heir consists in his share in personal property of money left by the decedent, or in case unpaid debts are
discovered within the said period of two years, the procedure is not to cancel the partition, nor to appoint an
administrator to re-assemble the assets, as was allowed under the old Code, but the court, after hearing,
shall fix the amount of such debts or lawful participation in proportion to or to the extent of the assets they

have respectively received and, if circumstances require, it may issue execution against the real estate
belonging to the decedent, or both. The present procedure is more expedient and less expensive in that it
dispenses with the appointment of an administrator and does not disturb the possession enjoyed by the
distributees.[14] [Emphasis supplied.]
An annotation is placed on new certificates of title issued pursuant to the distribution and partition of a decedents
real properties to warn third persons on the possible interests of excluded heirs or unpaid creditors in these properties. The
annotation, therefore, creates a legal encumbrance or lien on the real property in favor of the excluded heirs or
creditors. Where a buyer purchases the real property despite the annotation, he must be ready for the possibility that
the title could be subject to the rights of excluded parties. The cancellation of the sale would be the logical consequence
where: (a) the annotation clearly appears on the title, warning all would-be buyers; (b) the sale unlawfully interferes with the
rights of heirs; and (c) the rightful heirs bring an action to question the transfer within the two-year period provided by law.
As we held in Vda. de Francisco v. Carreon:[15]
And Section 4, Rule 74 xxx expressly authorizes the court to give to every heir his lawful
participation in the real estate notwithstanding any transfers of such real estate and to issue execution
thereon. All this implies that, when within the amendatory period the realty has been alienated, the
court in re-dividing it among the heirs has the authority to direct cancellation of such alienation in
the same estate proceedings, whenever it becomes necessary to do so. To require the institution of a
separate action for such annulment would run counter to the letter of the above rule and the spirit of these
summary settlements. [Emphasis supplied.]
Similarly, in Sps. Domingo v. Roces,[16] we said:
The foregoing rule clearly covers transfers of real property to any person, as long as the deprived
heir or creditor vindicates his rights within two years from the date of the settlement and distribution of
estate. Contrary to petitioners contention, the effects of this provision are not limited to the heirs or
original distributees of the estate properties, but shall affect any transferee of the properties.
[Emphasis supplied.]
Indeed, in David v. Malay,[17] although the title of the property had already been registered in the name of the third
party buyers, we cancelled the sale and ordered the reconveyance of the property to the estate of the deceased for proper
disposal among his rightful heirs.
By the time Tans obligation to pay the balance of the purchase price arose on May 21, 1993 (on account of the
extensions granted by the respondents), a new certificate of title covering the property had already been issued on March 26,
1993, which contained the encumbrance on the property; the encumbrance would remain so attached until the expiration of
the two-year period. Clearly, at this time, the vendors could no longer compel Tan to pay the balance of the purchase since
considering they themselves could not fulfill their obligation to transfer a clean title over the property to Tan.
Contract to sell is not rescinded but terminated
What then happens to the contract?
We have held in numerous cases[18] that the remedy of rescission under Article 1191 cannot apply to mere contracts
to sell. We explained the reason for this in Santos v. Court of Appeals,[19] where we said:
[I]n a contract to sell, title remains with the vendor and does not pass on to the vendee until the purchase
price is paid in full. Thus, in a contract to sell, the payment of the purchase price is a positive suspensive
condition. Failure to pay the price agreed upon is not a mere breach, casual or serious, but a situation
that prevents the obligation of the vendor to convey title from acquiring an obligatory force. This is
entirely different from the situation in a contract of sale, where non-payment of the price is a negative
resolutory condition. The effects in law are not identical. In a contract of sale, the vendor has lost
ownership of the thing sold and cannot recover it, unless the contract of sale is rescinded and set aside. In a
contract to sell, however, the vendor remains the owner for as long as the vendee has not complied
fully with the condition of paying the purchase price. If the vendor should eject the vendee for failure to
meet the condition precedent, he is enforcing the contract and not rescinding it. x x x Article 1592 speaks
of non-payment of the purchase price as a resolutory condition. It does not apply to a contract to sell. As to
Article 1191, it is subordinated to the provisions of Article 1592 when applied to sales of immovable
property. Neither provision is applicable [to a contract to sell]. [Emphasis supplied.]
We, therefore, hold that the contract to sell was terminated when the vendors could no longer legally compel Tan to
pay the balance of the purchase price as a result of the legal encumbrance which attached to the title of the property. Since

Tans refusal to pay was due to the supervening event of a legal encumbrance on the property and not through his own fault or
negligence, we find and so hold that the forfeiture of Tans down payment was clearly unwarranted.
Award of Attorneys fees
As evident from our previous discussion, Tan had a valid reason for refusing to pay the balance of the purchase price
for the property. Consequently, there is no basis for the award of attorneys fees in favor of the respondents.
On the other hand, we award attorneys fees in favor of Tan, since he was compelled to litigate due to the respondents
refusal to return his down payment despite the fact that they could no longer comply with their obligation under the contract
to sell, i.e., to convey a clean title. Given the facts of this case, we find the award of P50,000.00 as attorneys fees proper.
Monetary award is subject to legal interest
Undoubtedly, Tan made a clear and unequivocal demand on the vendors to return his down payment as early as May
28, 1993. Pursuant to
our definitive ruling in Eastern Shipping Lines, Inc. v. Court of Appeals,[20] we hold that the vendors should return
the P200,000.00 down payment to Tan, subject to the legal interest of 6% per annum computed from May 28, 1993, the date
of the first demand letter.
Furthermore, after a judgment has become final and executory, the rate of legal interest, whether the obligation was in the
form of a loan or forbearance of money or otherwise, shall be 12% per annum from such finality until its satisfaction.
Accordingly, the principal obligation of P200,000.00 shall bear 6% interest from the date of first demand or from May 28,
1993. From the date the liability for the principal obligation and attorneys fees has become final and executory, an annual
interest of 12% shall be imposed on these obligations until their final satisfaction, this interim period being deemed to be by
then an equivalent to a forbearance of credit.
WHEREFORE, premises considered, we hereby GRANT the petition and, accordingly, ANNUL and SET
ASIDE the May 30, 2002 decision of the Court of Appeals in CA-G.R. CV No. 52033. Another judgment is rendered
declaring the Deed of Conditional Sale terminated and ordering the respondents to return the P200,000.00 down payment to
petitioner Delfin Tan, subject to legal interest of 6% per annum, computed from May 28, 1993. The respondents are also
ordered to pay, jointly and severally, petitioner Delfin Tan the amount of P50,000.00 as and by way of attorneys fees. Once
this decision becomes final and executory, respondents are ordered to pay interest at 12% per annum on the principal
obligation as well as the attorneys fees, until full payment of these amounts. Costs against the respondents.
SO ORDERED.
ARTURO D. BRION
Associate Justice
G.R. No. 52267
January 24, 1996
ENGINEERING & MACHINERY CORPORATION vs COURT OF APPEALS and PONCIANO L. ALMEDA
Is a contract for the fabrication and installation of a central air-conditioning system in a building, one of "sale" or "for a piece
of work"? What is the prescriptive period for filing actions for breach of the terms of such contract?
These are the legal questions brought before this Court in this Petition for review on certiorari under Rule 45 of the Rules of
Court, to set aside the Decision1 of the Court of Appeals2 in CA-G.R. No. 58276-R promulgated on November 28, 1978
(affirming in toto the decision3 dated April 15, 1974 of the then Court of First Instance of Rizal, Branch II 4 , in Civil Case No.
14712, which ordered petitioner to pay private respondent the amount needed to rectify the faults and deficiencies of the airconditioning system installed by petitioner in private respondent's building, plus damages, attorney's fees and costs).
By a resolution of the First Division of this Court dated November 13, 1995, this case was transferred to the Third. After
deliberating on the various submissions of the parties, including the petition, record on appeal, private respondent's comment
and briefs for the petitioner and the private respondent, the Court assigned the writing of this Decision to the undersigned,
who took his oath as a member of the Court on October 10, 1995.
The Facts
Pursuant to the contract dated September 10, 1962 between petitioner and private respondent, the former undertook to
fabricate, furnish and install the air-conditioning system in the latter's building along Buendia Avenue, Makati in
consideration of P210,000.00. Petitioner was to furnish the materials, labor, tools and all services required in order to so
fabricate and install said system. The system was completed in 1963 and accepted by private respondent, who paid in full the
contract price.
On September 2, 1965, private respondent sold the building to the National Investment and Development Corporation
(NIDC). The latter took possession of the building but on account of NIDC's noncompliance with the terms and conditions of
the deed of sale, private respondent was able to secure judicial rescission thereof. The ownership of the building having been
decreed back to private respondent, he re-acquired possession sometime in 1971. It was then that he learned from some
NIDC, employees of the defects of the air-conditioning system of the building.

Acting on this information, private respondent commissioned Engineer David R. Sapico to render a technical evaluation of
the system in relation to the contract with petitioner. In his report, Sapico enumerated the defects of the system and concluded
that it was "not capable of maintaining the desired room temperature of 76F - 2F (Exhibit C)"5 .
On the basis of this report, private respondent filed on May 8, 1971 an action for damages against petitioner with the then
Court of First Instance of Rizal (Civil Case No. 14712). The complaint alleged that the air-conditioning system installed by
petitioner did not comply with the agreed plans and specifications. Hence, private respondent prayed for the amount of
P210,000.00 representing the rectification cost, P100,000.00 as damages and P15,000.00 as attorney's fees.
Petitioner moved to dismiss the complaint, alleging that the prescriptive period of six months had set in pursuant to Articles
1566 and 1567, in relation to Article 1571 of the Civil Code, regarding the responsibility of a vendor for any hidden faults or
defects in the thing sold.
Private respondent countered that the contract dated September 10, 1962 was not a contract for sale but a contract for a piece
of work under Article 1713 of the Civil Code. Thus, in accordance with Article 1144 (1) of the same Code, the complaint was
timely brought within the ten-year prescriptive period.
In its reply, petitioner argued that Article 1571 of the Civil Code providing for a six-month prescriptive period is applicable to
a contract for a piece of work by virtue of Article 1714, which provides that such a contract shall be governed by the pertinent
provisions on warranty of title and against hidden defects and the payment of price in a contract of sale 6 .
The trial court denied the motion to dismiss. In its answer to the complaint, petitioner reiterated its claim of prescription as an
affirmative defense. It alleged that whatever defects might have been discovered in the air-conditioning system could have
been caused by a variety of factors, including ordinary wear and tear and lack of proper and regular maintenance. It pointed
out that during the one-year period that private respondent withheld final payment, the system was subjected to "very rigid
inspection and testing and corrections or modifications effected" by petitioner. It interposed a compulsory counterclaim
suggesting that the complaint was filed "to offset the adverse effects" of the judgment in Civil Case No. 71494, Court of First
Instance of Manila, involving the same parties, wherein private respondent was adjudged to pay petitioner the balance of the
unpaid contract price for the air-conditioning system installed in another building of private respondent, amounting to
P138,482.25.
Thereafter, private respondent filed an ex-parte motion for preliminary attachment on the strength of petitioner's own
statement to the effect that it had sold its business and was no longer doing business in Manila. The trial court granted the
motion and, upon private respondent's posting of a bond of F'50,000.00, ordered the issuance of a writ of attachment.
In due course, the trial court rendered a decision finding that petitioner failed to install certain parts and accessories called for
by the contract, and deviated from the plans of the system, thus reducing its operational effectiveness to the extent that 35
window-type units had to be installed in the building to achieve a fairly desirable room temperature. On the question of
prescription, the trial court ruled that the complaint was filed within the ten-year court prescriptive period although the
contract was one for a piece of work, because it involved the "installation of an air-conditioning system which the defendant
itself manufactured, fabricated, designed and installed."
Petitioner appealed to the Court of Appeals, which affirmed the decision of the trial court. Hence, it instituted the instant
petition.
The Submissions of the Parties
In the instant Petition, petitioner raised three issues. First, it contended that private respondent's acceptance of the work and
his payment of the contract price extinguished any liability with respect to the defects in the air-conditioning system. Second,
it claimed that the Court of Appeals erred when it held that the defects in the installation were not apparent at the time of
delivery and acceptance of the work considering that private respondent was not an expert who could recognize such defects.
Third, it insisted that, assuming arguendo that there were indeed hidden defects, private respondent's complaint was barred
by prescription under Article 1571 of the Civil Code, which provides for a six-month prescriptive period.
Private respondent, on the other hand, averred that the issues raised by petitioner, like the question of whether there was an
acceptance of the work by the owner and whether the hidden defects in the installation could have been discovered by simple
inspection, involve questions of fact which have been passed upon by the appellate court.
The Court's Ruling
The Supreme Court reviews only errors of law in petitions for review on certiorari under Rule 45. It is not the function of
this Court to re-examine the findings of fact of the appellate court unless said findings are not supported by the evidence on
record or the judgment is based on a misapprehension of facts7 of Appeals erred when it held that the defects in the
installation were not apparent at the time of delivery and acceptance of the work considering that private respondent was not
an expert who could recognize such defects. Third. it insisted that, assuming arguendo that there were indeed hidden defects,
private respondent's complaint was barred by prescription under Article 1571 of the Civil Code, which provides for a sixmonth prescriptive period.
Private respondent, on the other hand, averred that the issues raised by petitioner, like the question of whether here was an
acceptance of the work by the owner and whether the hidden defects in the installation could have been discovered by simple
inspection, involve questions of fact which have been passed upon by the appellate court.
The Court has consistently held that the factual findings of the trial court, as well as the Court of Appeals, are final
and conclusive and may not be reviewed on appeal. Among the exceptional circumstances where a reassessment of
facts found by the lower courts is allowed are when the conclusion is a finding grounded entirely on speculation,
surmises or conjectures; when the inference made is manifestly absurd, mistaken or impossible; when there is grave
abuse of discretion in the appreciation of facts; when the judgment is premised on a misapprehension of facts; when
the findings went beyond the issues of the case and the same are contrary to the admissions of both appellant and
appellee. After a careful study of the case at bench, we find none of the above grounds present to justify the reevaluation of the findings of fact made by the courts below.8
We see no valid reason to discard the factual conclusions of the appellate court. . . . (I)t is not the function of this
Court to assess and evaluate all over again the evidence, testimonial and documentary, adduced by the parties,

particularly where, such as here, the findings of both the trial court and the appellate court on the matter
coincide.9 (Emphasis supplied)
Hence, the first two issues will not be resolved as they raise questions of fact.
Thus, the only question left to be resolved is that of prescription. In their submissions, the parties argued lengthily on the
nature of the contract entered into by them, viz., whether it was one of sale or for a piece of work.
Article 1713 of the Civil Code defines a contract for a piece of work thus:
By the contract for a piece of work the contractor binds himself to execute a piece of work for the employer, in
consideration of a certain price or compensation. The contractor may either employ only his labor or skill, or also
furnish the material.
A contract for a piece of work, labor and materials may be distinguished from a contract of sale by the inquiry as to whether
the thing transferred is one not in existence and which would never have existed but for the order, of the person desiring it 10 .
In such case, the contract is one for a piece of work, not a sale. On the other hand, if the thing subject of the contract would
have existed and been the subject of a sale to some other person even if the order had not been given, then the contract is one
of sale11 .
Thus, Mr. Justice Vitug12 explains that A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business
manufactures or procures for the general market, whether the same is on hand at the time or not is a contract of sale,
but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general
market, it is a contract for a piece of work (Art. 1467, Civil Code). The mere fact alone that certain articles are made
upon previous orders of customers will not argue against the imposition of the sales tax if such articles are ordinarily
manufactured by the taxpayer for sale to the public (Celestino Co. vs. Collector, 99 Phil. 841).
To Tolentino, the distinction between the two contracts depends on the intention of the parties. Thus, if the parties intended
that at some future date an object has to be delivered, without considering the work or labor of the party bound to deliver, the
contract is one of sale. But if one of the parties accepts the undertaking on the basis of some plan, taking into account the
work he will employ personally or through another, there is a contract for a piece of work 13 .
Clearly, the contract in question is one for a piece of work. It is not petitioner's line of business to manufacture airconditioning systems to be sold "off-the-shelf." Its business and particular field of expertise is the fabrication and installation
of such systems as ordered by customers and in accordance with the particular plans and specifications provided by the
customers. Naturally, the price or compensation for the system manufactured and installed will depend greatly on the
particular plans and specifications agreed upon with the customers.
The obligations of a contractor for a piece of work are set forth in Articles 1714 and 1715 of the Civil Code, which provide:
Art. 1714. If the contractor agrees to produce the work from material furnished by him, he shall deliver the thing
produced to the employer and transfer dominion over the thing. This contract shall be governed by the following
articles as well as by the pertinent provisions on warranty of title and against hidden defects and the payment of
price in a contract of sale.
Art. 1715. The contractor shall execute the work in such a manner that it has the qualities agreed upon and has no
defects which destroy or lessen its value or fitness for its ordinary or stipulated use. Should the work be not of such
quality, the employer may require that the contractor remove the defect or execute another work. If the contractor
fails or refuses to comply with this obligation, the employer may have the defect removed or another work executed,
at the contractor's cost.
The provisions on warranty against hidden defects, referred to in Art. 1714 above-quoted, are found in Articles 1561 and
1566, which read as follows:
Art. 1561. The vendor shall be responsible for warranty against the hidden defects which the thing sold may have,
should they render it unfit for the use for which it is intended, or should they diminish its fitness for such use to such
an extent that, had the vendee been aware thereof, he would not have acquired it or would have given a lower price
for it; but said vendor shall not be answerable for patent defects or those which may be visible, or for those which
are not visible if the vendee is an expert who, by reason of his trade or profession, should have known them.
xxx
xxx
xxx
Art. 1566. The vendor is responsible to the vendee for any hidden faults or defects in the thing sold, even though he
was not aware thereof.
This provision shall not apply if the contrary has been stipulated, and the vendor was not aware of the hidden faults
or defects in the thing sold.
The remedy against violations of the warranty against hidden defects is either to withdraw from the contract (redhibitory
action) or to demand a proportionate reduction of the price (accion quanti manoris), with damages in either case14 .
In Villostas vs. Court of Appeals15 , we held that, "while it is true that Article 1571 of the Civil Code provides for a
prescriptive period of six months for a redhibitory action, a cursory reading of the ten preceding articles to which it refers will
reveal that said rule may be applied only in case of implied warranties"; and where there is an express warranty in the
contract, as in the case at bench, the prescriptive period is the one specified in the express warranty, and in the absence of
such period, "the general rule on rescission of contract, which is four years (Article 1389, Civil Code) shall apply" 16 .
Consistent with the above discussion, it would appear that this suit is barred by prescription because the complaint was filed
more than four years after the execution of the contract and the completion of the air-conditioning system.
However, a close scrutiny of the complaint filed in the trial court reveals that the original action is not really for enforcement
of the warranties against hidden defects, but one for breach of the contract itself. It alleged 17 that the petitioner, "in the
installation of the air conditioning system did not comply with the specifications provided" in the written agreement between
the parties, "and an evaluation of the air-conditioning system as installed by the defendant showed the following defects and
violations of the specifications of the agreement, to wit:
GROUND FLOOR:
"A. RIGHT WING:

Equipped with Worthington Compressor, Model 2VC4 directly driven by an Hp Elin electric motor 1750 rmp, 3
phase, 60 cycles, 220 volts, complete with starter evaporative condenser, circulating water pump, air handling unit
air ducts.
Defects Noted:
1. Deteriorated evaporative condenser panels, coils are full of scales and heavy corrosion is very evident.
2. Defective gauges of compressors;
3. No belt guard on motor;
4. Main switch has no cover;
5. Desired room temperature not attained;
Aside from the above defects, the following were noted not installed although provided in the specifications.
1. Face by-pass damper of G.I. sheets No. 16. This damper regulates the flow of cooled air depending on room
condition.
2. No fresh air intake provision were provided which is very necessary for efficient comfort cooling..
3. No motor to regulate the face and by-pass damper.
4. Liquid level indicator for refrigerant not provided.
5. Suitable heat exchanger is not installed. This is an important component to increase refrigeration efficiency.
6. Modulating thermostat not provided.
7. Water treatment device for evaporative condenser was not provided.
8. Liquid receiver not provided by sight glass.
B. LEFT WING:
Worthington Compressor Model 2VC4 is installed complete with 15 Hp electric motor, 3 phase, 220 volts 60 cycles
with starter.
Defects Noted:
Same as right wing. except No. 4, All other defects on right wing are common to the left wing.
SECOND FLOOR: (Common up to EIGHT FLOORS)
Compressors installed are MELCO with 7.5 Hp V-belt driven by 1800 RPM, -220 volts, 60 cycles, 3 phase, Thrige
electric motor with starters.
As stated in the specifications under, Section No. IV, the MELCO compressors do not satisfy the conditions stated
therein due to the following:
1. MELCO Compressors are not provided with automatic capacity unloader.
2. Not provided with oil pressure safety control.
3. Particular compressors do not have provision for renewal sleeves.
Out of the total 15 MELCO compressors installed to serve the 2nd floor up to 8th floors, only six (6) units are in
operation and the rest were already replaced. Of the remaining six (6) units, several of them have been replaced with
bigger crankshafts.
NINTH FLOOR:
Two (2) Worthington 2VC4 driven by 15 Hp, 3 phase, 220 volts, 60 cycles, 1750 rpm, Higgs motors with starters.
Defects Noted are similar to ground floor.
GENERAL REMARKS:
Under Section III, Design conditions of specification for air conditioning work, and taking into account "A" & "B"
same, the present systems are not capable of maintaining the desired temperature of 76 = 2F (sic).
The present tenant have installed 35 window type air conditioning units distributed among the different floor levels.
Temperature measurements conducted on March 29. 1971, revealed that 78F room (sic) is only maintained due to
the additional window type units.
The trial court, after evaluating the evidence presented, held that, indeed, petitioner failed to install items and parts required
in the contract and substituted some other items which were not in accordance with the specifications 18 , thus:
From all of the foregoing, the Court is persuaded to believe the plaintiff that not only had the defendant failed to
install items and parts provided for in the specifications of the air-conditioning system be installed, like face and bypass dampers and modulating thermostat and many others, but also that there are items, parts and accessories which
were used and installed on the air-conditioning system which were not in full accord with contract specifications.
These omissions to install the equipments, parts and accessories called for in the specifications of the contract, as
well as the deviations made in putting into the air-conditioning system equipments, parts and accessories not in full
accord with the contract specification naturally resulted to adversely affect the operational effectiveness of the airconditioning system which necessitated the installation of thirty-five window type of air-conditioning units
distributed among the different floor levels in order to be able to obtain a fairly desirable room temperature for the
tenants and actual occupants of the building. The Court opines and so holds that the failure of the defendant to
follow the contract specifications and said omissions and deviations having resulted in the operational
ineffectiveness of the system installed makes the defendant liable to the plaintiff in the amount necessary to rectify
to put the air conditioning system in its proper operational condition to make it serve the purpose for which the
plaintiff entered into the contract with the defendant.
The respondent Court affirmed the trial court's decision thereby making the latter's findings also its own.
Having concluded that the original complaint is one for damages arising from breach of a written contract - and not a suit to
enforce warranties against hidden defects - we here - with declare that the governing law is Article 1715 (supra). However,
inasmuch as this provision does not contain a specific prescriptive period, the general law on prescription, which is Article
1144 of the Civil Code, will apply. Said provision states, inter alia, that actions "upon a written contract" prescribe in ten (10)
years. Since the governing contract was executed on September 10, 1962 and the complaint was filed on May 8, 1971, it is
clear that the action has not prescribed.

What about petitioner's contention that "acceptance of the work by the employer relieves the contractor of liability for any
defect in the work"? This was answered by respondent Court19 as follows:
As the breach of contract which gave rise to the instant case consisted in appellant's omission to install the
equipments (sic), parts and accessories not in accordance with the plan and specifications provided for in the
contract and the deviations made in putting into the air conditioning system parts and accessories not in accordance
with the contract specifications, it is evident that the defect in the installation was not apparent at the time of the
delivery and acceptance of the work, considering further that plaintiff is not an expert to recognize the same. From
the very nature of things, it is impossible to determine by the simple inspection of air conditioning system installed
in an 8-floor building whether it has been furnished and installed as per agreed specifications.
Verily, the mere fact that the private respondent accepted the work does not, ipso facto, relieve the petitioner from liability for
deviations from and violations of the written contract, as the law gives him ten (10) years within which to file an action based
on breach thereof.
WHEREFORE, the petition is hereby DENIED and the assailed Decision is AFFIRMED. No costs.
SO ORDERED.
FIRST DIVISION
[G.R. No. 126376. November 20, 2003]
SPOUSES BERNARDO BUENAVENTURA vs. COURT OF APPEALS,
The Case
This is a petition for review on certiorari[1] to annul the Decision[2] dated 26 June 1996 of the Court of Appeals in CAG.R. CV No. 41996. The Court of Appeals affirmed the Decision[3] dated 18 February 1993 rendered by Branch 65 of the
Regional Trial Court of Makati (trial court) in Civil Case No. 89-5174. The trial court dismissed the case after it found that
the parties executed the Deeds of Sale for valid consideration and that the plaintiffs did not have a cause of action against the
defendants.
The Facts
The Court of Appeals summarized the facts of the case as follows:
Defendant spouses Leonardo Joaquin and Feliciana Landrito are the parents of plaintiffs Consolacion, Nora, Emma and
Natividad as well as of defendants Fidel, Tomas, Artemio, Clarita, Felicitas, Fe, and Gavino, all surnamed JOAQUIN. The
married Joaquin children are joined in this action by their respective spouses.
Sought to be declared null and void ab initio are certain deeds of sale of real property executed by defendant parents
Leonardo Joaquin and Feliciana Landrito in favor of their co-defendant children and the corresponding certificates of title
issued in their names, to wit:
1. Deed of Absolute Sale covering Lot 168-C-7 of subdivision plan (LRC) Psd-256395 executed on 11 July 1978,
in favor of defendant Felicitas Joaquin, for a consideration of P6,000.00 (Exh. C), pursuant to which TCT No.
[36113/T-172] was issued in her name (Exh. C-1);
2. Deed of Absolute Sale covering Lot 168-I-3 of subdivision plan (LRC) Psd-256394 executed on 7 June 1979, in
favor of defendant Clarita Joaquin, for a consideration of P1[2],000.00 (Exh. D), pursuant to which TCT No.
S-109772 was issued in her name (Exh. D-1);
3 Deed of Absolute Sale covering Lot 168-I-1 of subdivision plan (LRC) Psd-256394 executed on 12 May 1988,
in favor of defendant spouses Fidel Joaquin and Conchita Bernardo, for a consideration of P54,[3]00.00 (Exh.
E), pursuant to which TCT No. 155329 was issued to them (Exh. E-1);
4. Deed of Absolute Sale covering Lot 168-I-2 of subdivision plan (LRC) Psd-256394 executed on 12 May 1988,
in favor of defendant spouses Artemio Joaquin and Socorro Angeles, for a consideration of P[54,3]00.00 (Exh.
F), pursuant to which TCT No. 155330 was issued to them (Exh. F-1); and
5. Absolute Sale of Real Property covering Lot 168-C-4 of subdivision plan (LRC) Psd-256395 executed on 9
September 1988, in favor of Tomas Joaquin, for a consideration of P20,000.00 (Exh. G), pursuant to which
TCT No. 157203 was issued in her name (Exh. G-1).
[6. Deed of Absolute Sale covering Lot 168-C-1 of subdivision plan (LRC) Psd-256395 executed on 7 October
1988, in favor of Gavino Joaquin, for a consideration of P25,000.00 (Exh. K), pursuant to which TCT No.
157779 was issued in his name (Exh. K-1).]
In seeking the declaration of nullity of the aforesaid deeds of sale and certificates of title, plaintiffs, in their complaint, aver:
- XXThe deeds of sale, Annexes C, D, E, F, and G, [and K] are simulated as they are, are NULL AND VOID AB INITIO because
a) Firstly, there was no actual valid consideration for the deeds of sale xxx over the properties in litis;
b) Secondly, assuming that there was consideration in the sums reflected in the questioned deeds, the properties
are more than three-fold times more valuable than the measly sums appearing therein;
c) Thirdly, the deeds of sale do not reflect and express the true intent of the parties (vendors and vendees); and
d) Fourthly, the purported sale of the properties in litis was the result of a deliberate conspiracy designed to
unjustly deprive the rest of the compulsory heirs (plaintiffs herein) of their legitime.
- XXI Necessarily, and as an inevitable consequence, Transfer Certificates of Title Nos. 36113/T-172, S-109772, 155329, 155330,
157203 [and 157779] issued by the Registrar of Deeds over the properties in litis xxx are NULL AND VOID AB INITIO.
Defendants, on the other hand aver (1) that plaintiffs do not have a cause of action against them as well as the requisite
standing and interest to assail their titles over the properties in litis; (2) that the sales were with sufficient considerations and
made by defendants parents voluntarily, in good faith, and with full knowledge of the consequences of their deeds of sale;
and (3) that the certificates of title were issued with sufficient factual and legal basis. [4] (Emphasis in the original)
The Ruling of the Trial Court
Before the trial, the trial court ordered the dismissal of the case against defendant spouses Gavino Joaquin and Lea Asis.
[5]
Instead of filing an Answer with their co-defendants, Gavino Joaquin and Lea Asis filed a Motion to Dismiss. [6] In granting

the dismissal to Gavino Joaquin and Lea Asis, the trial court noted that compulsory heirs have the right to a legitime but such
right is contingent since said right commences only from the moment of death of the decedent pursuant to Article 777 of the
Civil Code of the Philippines.[7]
After trial, the trial court ruled in favor of the defendants and dismissed the complaint. The trial court stated:
In the first place, the testimony of the defendants, particularly that of the xxx father will show that the Deeds of Sale were all
executed for valuable consideration. This assertion must prevail over the negative allegation of plaintiffs.
And then there is the argument that plaintiffs do not have a valid cause of action against defendants since there can be no
legitime to speak of prior to the death of their parents. The court finds this contention tenable. In determining the legitime, the
value of the property left at the death of the testator shall be considered (Art. 908 of the New Civil Code). Hence, the legitime
of a compulsory heir is computed as of the time of the death of the decedent. Plaintiffs therefore cannot claim an impairment
of their legitime while their parents live.
All the foregoing considered, this case is DISMISSED.
In order to preserve whatever is left of the ties that should bind families together, the counterclaim is likewise DISMISSED.
No costs.
SO ORDERED.[8]
The Ruling of the Court of Appeals
The Court of Appeals affirmed the decision of the trial court. The appellate court ruled:
To the mind of the Court, appellants are skirting the real and decisive issue in this case, which is, whether xxx they have a
cause of action against appellees.
Upon this point, there is no question that plaintiffs-appellants, like their defendant brothers and sisters, are compulsory heirs
of defendant spouses, Leonardo Joaquin and Feliciana Landrito, who are their parents. However, their right to the properties
of their defendant parents, as compulsory heirs, is merely inchoate and vests only upon the latters death. While still alive,
defendant parents are free to dispose of their properties, provided that such dispositions are not made in fraud of creditors.
Plaintiffs-appellants are definitely not parties to the deeds of sale in question. Neither do they claim to be creditors of their
defendant parents. Consequently, they cannot be considered as real parties in interest to assail the validity of said deeds either
for gross inadequacy or lack of consideration or for failure to express the true intent of the parties. In point is the ruling of the
Supreme Court in Velarde, et al. vs. Paez, et al., 101 SCRA 376, thus:
The plaintiffs are not parties to the alleged deed of sale and are not principally or subsidiarily bound thereby; hence, they
have no legal capacity to challenge their validity.
Plaintiffs-appellants anchor their action on the supposed impairment of their legitime by the dispositions made by their
defendant parents in favor of their defendant brothers and sisters. But, as correctly held by the court a quo, the legitime of a
compulsory heir is computed as of the time of the death of the decedent. Plaintiffs therefore cannot claim an impairment of
their legitime while their parents live.
With this posture taken by the Court, consideration of the errors assigned by plaintiffs-appellants is inconsequential.
WHEREFORE, the decision appealed from is hereby AFFIRMED, with costs against plaintiffs-appellants.
SO ORDERED.[9]
Hence, the instant petition.
Issues
Petitioners assign the following as errors of the Court of Appeals:
1. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE IN QUESTION HAD
NO VALID CONSIDERATION.
2. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT EVEN ASSUMING THAT THERE WAS A
CONSIDERATION, THE SAME IS GROSSLY INADEQUATE.
3. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE DEEDS OF SALE DO NOT EXPRESS
THE TRUE INTENT OF THE PARTIES.
4. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE WAS PART AND
PARCEL OF A CONSPIRACY AIMED AT UNJUSTLY DEPRIVING THE REST OF THE CHILDREN OF
THE SPOUSES LEONARDO JOAQUIN AND FELICIANA LANDRITO OF THEIR INTEREST OVER
THE SUBJECT PROPERTIES.
5. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT PETITIONERS HAVE A GOOD,
SUFFICIENT AND VALID CAUSE OF ACTION AGAINST THE PRIVATE RESPONDENTS.[10]
The Ruling of the Court
We find the petition without merit.
We will discuss petitioners legal interest over the properties subject of the Deeds of Sale before discussing the issues on
the purported lack of consideration and gross inadequacy of the prices of the Deeds of Sale.
Whether Petitioners have a legal interest
over the properties subject of the Deeds of Sale
Petitioners Complaint betrays their motive for filing this case. In their Complaint, petitioners asserted that the purported
sale of the properties in litis was the result of a deliberate conspiracy designed to unjustly deprive the rest of the compulsory
heirs (plaintiffs herein) of their legitime. Petitioners strategy was to have the Deeds of Sale declared void so that ownership of
the lots would eventually revert to their respondent parents. If their parents die still owning the lots, petitioners and their
respondent siblings will then co-own their parents estate by hereditary succession. [11]
It is evident from the records that petitioners are interested in the properties subject of the Deeds of Sale, but they have
failed to show any legal right to the properties. The trial and appellate courts should have dismissed the action for this reason
alone. An action must be prosecuted in the name of the real party-in-interest. [12]
[T]he question as to real party-in-interest is whether he is the party who would be benefitted or injured by the judgment, or
the party entitled to the avails of the suit.
xxx

In actions for the annulment of contracts, such as this action, the real parties are those who are parties to the agreement or are
bound either principally or subsidiarily or are prejudiced in their rights with respect to one of the contracting parties and can
show the detriment which would positively result to them from the contract even though they did not intervene in it (Ibaez v.
Hongkong & Shanghai Bank, 22 Phil. 572 [1912]) xxx.
These are parties with a present substantial interest, as distinguished from a mere expectancy or future, contingent,
subordinate, or consequential interest. The phrase present substantial interest more concretely is meant such interest of a party
in the subject matter of the action as will entitle him, under the substantive law, to recover if the evidence is sufficient, or that
he has the legal title to demand and the defendant will be protected in a payment to or recovery by him.[13]
Petitioners do not have any legal interest over the properties subject of the Deeds of Sale. As the appellate court stated,
petitioners right to their parents properties is merely inchoate and vests only upon their parents death. While still living, the
parents of petitioners are free to dispose of their properties. In their overzealousness to safeguard their future legitime,
petitioners forget that theoretically, the sale of the lots to their siblings does not affect the value of their parents estate. While
the sale of the lots reduced the estate, cash of equivalent value replaced the lots taken from the estate.
Whether the Deeds of Sale are void
for lack of consideration
Petitioners assert that their respondent siblings did not actually pay the prices stated in the Deeds of Sale to their
respondent father. Thus, petitioners ask the court to declare the Deeds of Sale void.
A contract of sale is not a real contract, but a consensual contract. As a consensual contract, a contract of sale becomes a
binding and valid contract upon the meeting of the minds as to price. If there is a meeting of the minds of the parties as to the
price, the contract of sale is valid, despite the manner of payment, or even the breach of that manner of payment. If the real
price is not stated in the contract, then the contract of sale is valid but subject to reformation. If there is no meeting of the
minds of the parties as to the price, because the price stipulated in the contract is simulated, then the contract is void.
[14]
Article 1471 of the Civil Code states that if the price in a contract of sale is simulated, the sale is void.
It is not the act of payment of price that determines the validity of a contract of sale. Payment of the price has nothing to
do with the perfection of the contract. Payment of the price goes into the performance of the contract. Failure to pay the
consideration is different from lack of consideration. The former results in a right to demand the fulfillment or cancellation of
the obligation under an existing valid contract while the latter prevents the existence of a valid contract. [15]
Petitioners failed to show that the prices in the Deeds of Sale were absolutely simulated. To prove simulation,
petitioners presented Emma Joaquin Valdozs testimony stating that their father, respondent Leonardo Joaquin, told her that he
would transfer a lot to her through a deed of sale without need for her payment of the purchase price. [16] The trial court did not
find the allegation of absolute simulation of price credible. Petitioners failure to prove absolute simulation of price is
magnified by their lack of knowledge of their respondent siblings financial capacity to buy the questioned lots. [17] On the
other hand, the Deeds of Sale which petitioners presented as evidence plainly showed the cost of each lot sold. Not only did
respondents minds meet as to the purchase price, but the real price was also stated in the Deeds of Sale. As of the filing of the
complaint, respondent siblings have also fully paid the price to their respondent father.[18]
Whether the Deeds of Sale are void
for gross inadequacy of price
Petitioners ask that assuming that there is consideration, the same is grossly inadequate as to invalidate the Deeds of
Sale.
Articles 1355 of the Civil Code states:
Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract, unless there has
been fraud, mistake or undue influence. (Emphasis supplied)
Article 1470 of the Civil Code further provides:
Art. 1470. Gross inadequacy of price does not affect a contract of sale, except as may indicate a defect in the consent, or
that the parties really intended a donation or some other act or contract. (Emphasis supplied)
Petitioners failed to prove any of the instances mentioned in Articles 1355 and 1470 of the Civil Code which would
invalidate, or even affect, the Deeds of Sale. Indeed, there is no requirement that the price be equal to the exact value of the
subject matter of sale.All the respondents believed that they received the commutative value of what they gave. As we stated
in Vales v. Villa:[19]
Courts cannot follow one every step of his life and extricate him from bad bargains, protect him from unwise investments,
relieve him from one-sided contracts, or annul the effects of foolish acts. Courts cannot constitute themselves guardians of
persons who are not legally incompetent. Courts operate not because one person has been defeated or overcome by another,
but because he has been defeated or overcome illegally. Men may do foolish things, make ridiculous contracts, use miserable
judgment, and lose money by them indeed, all they have in the world; but not for that alone can the law intervene and
restore. There must be, in addition, a violation of the law, the commission of what the law knows as an actionable wrong,
before the courts are authorized to lay hold of the situation and remedy it. (Emphasis in the original)
Moreover, the factual findings of the appellate court are conclusive on the parties and carry greater weight when they
coincide with the factual findings of the trial court. This Court will not weigh the evidence all over again unless there has
been a showing that the findings of the lower court are totally devoid of support or are clearly erroneous so as to constitute
serious abuse of discretion. [20] In the instant case, the trial court found that the lots were sold for a valid consideration, and
that the defendant children actually paid the purchase price stipulated in their respective Deeds of Sale. Actual payment of the
purchase price by the buyer to the seller is a factual finding that is now conclusive upon us.
WHEREFORE, we AFFIRM the decision of the Court of Appeals in toto.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Panganiban, Ynares-Santiago, and Azcuna, JJ., concur.
SPOUSES ONNIE SERRANO AND G.R. No. 139173
AMPARO HERRERA, vs GODOFREDO

CAGUIAT,
.
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, assailing the
Decision[1] of the Court of Appeals dated January 29, 1999 and its Resolution dated July 14, 1999 in CA-G.R. CV No. 48824.
Spouses Onnie and Amparo Herrera, petitioners, are the registered owners of a lot located in Las Pias, Metro Manila covered
by Transfer Certificate of Title No. T-9905.
Sometime in March 1990, Godofredo Caguiat, respondent, offered to buy the lot. Petitioners agreed to sell it
at P1,500.00 per square meter. Respondent then gave petitioners P100,000.00 as partial payment. In turn, petitioners gave
respondent the corresponding receipt stating that respondent promised to pay the balance of the purchase price on or
before March 23, 1990, thus:
Las Pias, Metro Manila
March 19, 1990
RECEIPT FOR PARTIAL PAYMENT OF LOT NO. 23 COVERED BY TCT NO. T9905, LAS PIAS, METRO MANILA
RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE HUNDRED
THOUSAND PESOS (P100,000.00) AS PARTIAL PAYMENT OF OUR LOT SITUATED IN LAS PIAS,
M.M. COVERED BY TCT NO. T-9905 AND WITH AN AREA OF 439 SQUARE METERS.
MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR
BEFORE MARCH 23, 1990, AND THAT WE WILL EXECUTE AND SIGN THE FINAL DEED
OF SALE ON THIS DATE.
SIGNED THIS 19TH DAY OF MARCH, 1990 AT LAS PIAS, M.M.
(SGD) AMPARO HERRERA (SGD) ONNIE SERRANO[2]
On March 28, 1990, respondent, through his counsel Atty. Ponciano Espiritu, wrote petitioners informing them of
his readiness to pay the balance of the contract price and requesting them to prepare the final deed of sale.[3]
On April 4, 1990, petitioners, through Atty. Ruben V. Lopez, sent a letter [4] to respondent stating that petitioner
Amparo Herrera is leaving for abroad on or before April 15, 1990 and that they are canceling the transaction. Petitioners also
informed respondent that he can recover the earnest money of P100,000.00 anytime.
Again, on April 6, 1990,[5] petitioners wrote respondent stating that they delivered to his counsel Philippine National
Bank Managers Check No. 790537 dated April 6, 1990 in the amount of P100,000.00 payable to him.
In view of the cancellation of the contract by petitioners, respondent filed with the Regional Trial Court, Branch
63, Makati City a complaint against them for specific performance and damages, docketed as Civil Case No. 90-1067.[6]
On June 27, 1994, after hearing, the trial court rendered its Decision [7] finding there was a perfected contract of sale between
the parties and ordering petitioners to execute a final deed of sale in favor of respondent. The trial court held:
xxx
In the evaluation of the evidence presented by the parties as to the issue as to who was ready to
comply with his obligation on the verbal agreement to sell on March 23, 1990, shows that plaintiffs
position deserves more weight and credibility. First, the P100,000.00 that plaintiff paid whether as
downpayment or earnest money showed that there was already a perfected contract. Art. 1482 of the Civil
Code of the Philippines, reads as follows, to wit:
Art. 1482. Whenever earnest money is given in a contract of sale, it shall be considered
as part of the price and as proof of the perfection of the contract.
Second, plaintiff was the first to react to show his eagerness to push through with the sale by sending
defendants the letter dated March 25, 1990. (Exh. D) and reiterated the same intent to pursue the sale in a
letter dated April 6, 1990. Third, plaintiff had the balance of the purchase price ready for payment (Exh.
C). Defendants mere allegation that it was plaintiff who did not appear on March 23, 1990 is
unavailing. Defendants letters (Exhs. 2 and 5) appear to be mere afterthought.
On appeal, the Court of Appeals, in its assailed Decision of January 29, 1999, affirmed the trial courts
judgment.
Forthwith, petitioners filed their motion for reconsideration but it was denied by the appellate court in its
Resolution[8] dated July 14, 1999.
Hence, the present recourse.
The basic issue to be resolved is whether the document entitled Receipt for Partial Payment signed by both
parties earlier mentioned is a contract to sell or a contract of sale.
Petitioners contend that the Receipt is not a perfected contract of sale as provided for in Article 1458 [9] in relation to
Article 1475[10] of the Civil Code. The delivery to them of P100,000.00 as down payment cannot be considered as proof of
the perfection of a contract of sale under Article 1482 [11] of the same Code since there was no clear agreement between the
parties as to the amount of consideration.

Generally, the findings of fact of the lower courts are entitled to great weight and should not be disturbed except for
cogent reasons.14 Indeed, they should not be changed on appeal in the absence of a clear showing that the trial court
overlooked, disregarded, or misinterpreted some facts of weight and significance, which if considered would have
altered the result of the case. [12] In the present case, we find that both the trial court and the Court of Appeals interpreted
some significant facts resulting in an erroneous resolution of the issue involved.
In holding that there is a perfected contract of sale, both courts mainly relied on the earnest money given by
respondent to petitioners. They invoked Article 1482 of the Civil Code which provides that "Whenever earnest money is
given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract."
We are not convinced.
In San Miguel Properties Philippines, Inc. v. Spouses Huang, [13] we held that the stages of a contract of sale are:
(1) negotiation, covering the period from the time the prospective contracting parties indicate interest in the contract to the
time the contract is perfected; (2) perfection, which takes place upon the concurrence of the essential elements of the sale,
which is the meeting of the minds of the parties as to the object of the contract and upon the price; and (3) consummation,
which begins when the parties perform their respective undertakings under the contract of sale, culminating in the
extinguishment thereof.
With the above postulates as guidelines, we now proceed to determine the real nature of the contract entered into by
the parties.
It is a canon in the interpretation of contracts that the words used therein should be given their natural and ordinary
meaning unless a technical meaning was intended. [14] Thus, when petitioners declared in the said Receipt for Partial Payment
that they
RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE HUNDRED
THOUSAND PESOS (P100,000.00) AS PARTIAL PAYMENT OF OUR LOT SITUATED IN LAS PIAS,
M.M. COVERED BY TCT NO. T-9905 AND WITH AN AREA OF 439 SQUARE METERS.
MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR
BEFORE MARCH 23, 1990, AND THAT WE WILL EXECUTE AND SIGN THE FINAL DEED
OF SALE ON THIS DATE.
there can be no other interpretation than that they agreed to a conditional contract of sale, consummation of which is subject
only to the full payment of the purchase price.
A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor's obligation to
transfer title is subordinated to the happening of a future and uncertain event, so that if the suspensive condition does not take
place, the parties would stand as if the conditional obligation had never existed. The suspensive condition is commonly full
payment of the purchase price.[15]
The differences between a contract to sell and a contract of sale are well-settled in jurisprudence. As early as 1951,
in Sing Yee v. Santos,[16] we held that:
x x x [a] distinction must be made between a contract of sale in which title passes to the buyer upon
delivery of the thing sold and a contract to sell x x x where by agreement the ownership is reserved in the
seller and is not to pass until the full payment, of the purchase price is made. In the first case, non-payment
of the price is a negative resolutory condition; in the second case, full payment is a positive suspensive
condition. Being contraries, their effect in law cannot be identical. In the first case, the vendor has lost and
cannot recover the ownership of the land sold until and unless the contract of sale is itself resolved and set
aside. In the second case, however, the title remains in the vendor if the vendee does not comply with the
condition precedent of making payment at the time specified in the contract.
In other words, in a contract to sell, ownership is retained by the seller and is not to pass to the buyer until full
payment of the price.[17]
In this case, the Receipt for Partial Payment shows that the true agreement between the parties is a contract to sell.
First, ownership over the property was retained by petitioners and was not to pass to respondent until full payment
of the purchase price. Thus, petitioners need not push through with the sale should respondent fail to remit the balance of the
purchase price before the deadline on March 23, 1990. In effect, petitioners have the right to rescind unilaterally the contract
the moment respondent fails to pay within the fixed period.[18]
Second, the agreement between the parties was not embodied in a deed of sale. The absence of a formal deed of
conveyance is a strong indication that the parties did not intend immediate transfer of ownership, but only a transfer after full
payment of the purchase price.[19]

Third, petitioners retained possession of the certificate of title of the lot. This is an additional indication that the
agreement did not transfer to respondent, either by actual or constructive delivery, ownership of the property.[20]
It is true that Article 1482 of the Civil Code provides that Whenever earnest money is given in a contract of sale, it
shall be considered as part of the price and proof of the perfection of the contract. However, this article speaks ofearnest
money given in a contract of sale. In this case, the earnest money was given in a contract to sell. The earnest money forms
part of the consideration only if the sale is consummated upon full payment of the purchase price. [21] Now, since the earnest
money was given in a contract to sell, Article 1482, which speaks of a contract of sale, does not apply.
As previously discussed, the suspensive condition (payment of the balance by respondent) did not take
place. Clearly, respondent cannot compel petitioners to transfer ownership of the property to him.
WHEREFORE, we GRANT the instant Petition for Review. The challenged Decision of the Court of
Appeals is REVERSED and respondents complaint is DISMISSED.
RIZALINO, VS PARAISO DEVELOPMENT
CORPORATION,

G.R. No. 157493

before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure seeking
to reverse and set aside the Court of Appeals Decision [1] dated 26 April 2002 in CA-G.R. CV No. 53130 entitled, Rizalino,
Ernesto, Leonora, Bibiano, Jr., Librado, Enriqueta, Adolfo, and Jesus, all surnamed Oesmer vs. Paraiso Development
Corporation, as modified by its Resolution[2] dated 4 March 2003, declaring the Contract to Sell valid and binding with
respect to the undivided proportionate shares of the six signatories of the said document, herein petitioners, namely: Ernesto,
Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora (all surnamed Oesmer); and ordering them to execute the Deed of
Absolute Sale concerning their 6/8 share over the subject parcels of land in favor of herein respondent Paraiso Development
Corporation, and to pay the latter the attorneys fees plus costs of the suit. The assailed Decision, as modified, likewise
ordered the respondent to tender payment to the petitioners in the amount of P3,216,560.00 representing the balance of the
purchase price of the subject parcels of land.
The facts of the case are as follows:
Petitioners Rizalino, Ernesto, Leonora, Bibiano, Jr., Librado, and Enriqueta, all surnamed Oesmer, together with Adolfo
Oesmer (Adolfo) and Jesus Oesmer (Jesus), are brothers and sisters, and the co-owners of undivided shares of two parcels of
agricultural and tenanted land situated in Barangay Ulong Tubig, Carmona, Cavite, identified as Lot 720 with an area of
40,507 square meters (sq. m.) and Lot 834 containing an area of 14,769 sq. m., or a total land area of 55,276 sq. m. Both lots
are unregistered and originally owned by their parents, Bibiano Oesmer and Encarnacion Durumpili, who declared the lots
for taxation purposes under Tax Declaration No. 3438 [3] (cancelled by I.D. No. 6064-A) for Lot 720 and Tax Declaration No.
3437[4] (cancelled by I.D. No. 5629) for Lot 834. When the spouses Oesmer died, petitioners, together with Adolfo and Jesus,
acquired the lots as heirs of the former by right of succession.
Respondent Paraiso Development Corporation is known to be engaged in the real estate business.
Sometime in March 1989, Rogelio Paular, a resident and former Municipal Secretary of Carmona, Cavite, brought along
petitioner Ernesto to meet with a certain Sotero Lee, President of respondent Paraiso Development Corporation, at Otani
Hotel inManila. The said meeting was for the purpose of brokering the sale of petitioners properties to respondent
corporation.
Pursuant to the said meeting, a Contract to Sell[5] was drafted by the Executive Assistant of Sotero Lee, Inocencia Almo. On 1
April 1989, petitioners Ernesto and Enriqueta signed the aforesaid Contract to Sell. A check in the amount of P100,000.00,
payable to Ernesto, was given as option money. Sometime thereafter, Rizalino, Leonora, Bibiano, Jr., and Librado also signed
the said Contract to Sell. However, two of the brothers, Adolfo and Jesus, did not sign the document.
On 5 April 1989, a duplicate copy of the instrument was returned to respondent corporation. On 21 April 1989, respondent
brought the same to a notary public for notarization.
In a letter[6] dated 1 November 1989, addressed to respondent corporation, petitioners informed the former of their intention
to rescind the Contract to Sell and to return the amount of P100,000.00 given by respondent as option money.
Respondent did not respond to the aforesaid letter. On 30 May 1991, herein petitioners, together with Adolfo and Jesus, filed
a Complaint[7] for Declaration of Nullity or for Annulment of Option Agreement or Contract to Sell with Damages before the
Regional Trial Court (RTC) of Bacoor, Cavite. The said case was docketed as Civil Case No. BCV-91-49.
During trial, petitioner Rizalino died. Upon motion of petitioners, the trial court issued an Order, [8] dated 16 September 1992,
to the effect that the deceased petitioner be substituted by his surviving spouse, Josefina O. Oesmer, and his children,
Rolando O. Oesmer and Fernando O. Oesmer. However, the name of Rizalino was retained in the title of the case both in the
RTC and the Court of Appeals.

After trial on the merits, the lower court rendered a Decision [9] dated 27 March 1996 in favor of the respondent, the
dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of herein [respondent]
Paraiso Development Corporation. The assailed Contract to Sell is valid and binding only to the undivided
proportionate share of the signatory of this document and recipient of the check, [herein petitioner] coowner Ernesto Durumpili Oesmer. The latter is hereby ordered to execute the Contract of
Absolute Sale concerning his 1/8 share over the subject two parcels of land in favor of herein [respondent]
corporation, and to pay the latter the attorneys fees in the sum of Ten Thousand (P10,000.00) Pesos plus
costs of suit.
The counterclaim of [respondent] corporation is hereby Dismissed for lack of merit.[10]
Unsatisfied, respondent appealed the said Decision before the Court of Appeals. On 26 April 2002, the appellate court
rendered a Decision modifying the Decision of the court a quo by declaring that the Contract to Sell is valid and binding with
respect to the undivided proportionate shares of the six signatories of the said document, herein petitioners, namely: Ernesto,
Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora (all surnamed Oesmer). The decretal portion of the said Decision
states that:
WHEREFORE, premises considered, the Decision of the court a quo is hereby MODIFIED. Judgment is
hereby rendered in favor of herein [respondent] Paraiso Development Corporation. The assailed Contract to
Sell is valid and binding with respect to the undivided proportionate share of the six (6) signatories of this
document, [herein petitioners], namely, Ernesto, Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora (all
surnamed Oesmer). The said [petitioners] are hereby ordered to execute the Deed of Absolute Sale
concerning their 6/8 share over the subject two parcels of land and in favor of herein [respondent]
corporation, and to pay the latter the attorneys fees in the sum of Ten Thousand Pesos ( P10,000.00) plus
costs of suit.[11]
Aggrieved by the above-mentioned Decision, petitioners filed a Motion for Reconsideration of the same on 2 July
2002. Acting on petitioners Motion for Reconsideration, the Court of Appeals issued a Resolution dated 4 March 2003,
maintaining its Decision dated 26 April 2002, with the modification that respondent tender payment to petitioners in the
amount of P3,216,560.00, representing the balance of the purchase price of the subject parcels of land. The dispositive
portion of the said Resolution reads:
WHEREFORE, premises considered, the assailed Decision is hereby modified. Judgment is hereby
rendered in favor of herein [respondent] Paraiso Development Corporation. The assailed Contract to Sell is
valid and binding with respect to the undivided proportionate shares of the six (6) signatories of this
document, [herein petitioners], namely, Ernesto, Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora (all
surnamed Oesmer). The said [petitioners] are hereby ordered to execute the Deed of Absolute Sale
concerning their 6/8 share over the subject two parcels of land in favor of herein [respondent]
corporation, and to pay the latter attorneys fees in the sum of Ten Thousand Pesos (P10,000.00) plus costs
of suit. Respondent is likewise ordered to tender payment to the above-named [petitioners] in the amount of
Three Million Two Hundred Sixteen Thousand Five Hundred Sixty Pesos (P3,216,560.00) representing the
balance of the purchase price of the subject two parcels of land. [12]
Hence, this Petition for Review on Certiorari.
Petitioners come before this Court arguing that the Court of Appeals erred:
I.

II.

On a question of law in not holding that, the supposed Contract to Sell (Exhibit D) is
not binding upon petitioner Ernesto Oesmers co-owners (herein petitioners Enriqueta, Librado,
Rizalino, Bibiano, Jr., and Leonora).
On a question of law in not holding that, the supposed Contract to Sell (Exhibit D) is
void altogether considering that respondent itself did not sign it as to indicate its consent to be
bound by its terms. Moreover, Exhibit D is really a unilateral promise to sell without consideration
distinct from the price, and hence, void.

Petitioners assert that the signatures of five of them namely: Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora, on the
margins of the supposed Contract to Sell did not confer authority on petitioner Ernesto as agent to sell their respective shares
in the questioned properties, and hence, for lack of written authority from the above-named petitioners to sell their respective
shares in the subject parcels of land, the supposed Contract to Sell is void as to them. Neither do their signatures signify their
consent to directly sell their shares in the questioned properties. Assuming that the signatures indicate consent, such consent
was merely conditional. The effectivity of the alleged Contract to Sell was subject to a suspensive condition, which is the
approval of the sale by all the co-owners.

Petitioners also assert that the supposed Contract to Sell (Exhibit D), contrary to the findings of the Court of Appeals, is not
couched in simple language.
They further claim that the supposed Contract to Sell does not bind the respondent because the latter did not sign the said
contract as to indicate its consent to be bound by its terms. Furthermore, they maintain that the supposed Contract to Sell is
really a unilateral promise to sell and the option money does not bind petitioners for lack of cause or consideration distinct
from the purchase price.
The Petition is bereft of merit.
It is true that the signatures of the five petitioners, namely: Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora, on the
Contract to Sell did not confer authority on petitioner Ernesto as agent authorized to sell their respective shares in the
questioned properties because of Article 1874 of the Civil Code, which expressly provides that:
Art. 1874. When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in
writing; otherwise, the sale shall be void.
The law itself explicitly requires a written authority before an agent can sell an immovable. The conferment of such an
authority should be in writing, in as clear and precise terms as possible. It is worth noting that petitioners signatures are found
in the Contract to Sell. The Contract is absolutely silent on the establishment of any principal-agent relationship between the
five petitioners and their brother and co-petitioner Ernesto as to the sale of the subject parcels of land. Thus, the Contract to
Sell, although signed on the margin by the five petitioners, is not sufficient to confer authority on petitioner Ernesto to act as
their agent in selling their shares in the properties in question.
However, despite petitioner Ernestos lack of written authority from the five petitioners to sell their shares in the subject
parcels of land, the supposed Contract to Sell remains valid and binding upon the latter.
As can be clearly gleaned from the contract itself, it is not only petitioner Ernesto who signed the said Contract to Sell; the
other five petitioners also personally affixed their signatures thereon. Therefore, a written authority is no longer necessary in
order to sell their shares in the subject parcels of land because, by affixing their signatures on the Contract to Sell, they were
not selling their shares through an agent but, rather, they were selling the same directly and in their own right.
The Court also finds untenable the following arguments raised by petitioners to the effect that the Contract to Sell is not
binding upon them, except to Ernesto, because: (1) the signatures of five of the petitioners do not signify their consent to sell
their shares in the questioned properties since petitioner Enriqueta merely signed as a witness to the said Contract to Sell, and
that the other petitioners, namely: Librado, Rizalino, Leonora, and Bibiano, Jr., did not understand the importance and
consequences of their action because of their low degree of education and the contents of the aforesaid contract were not read
nor explained to them; and (2) assuming that the signatures indicate consent, such consent was merely conditional, thus, the
effectivity of the alleged Contract to Sell was subject to a suspensive condition, which is the approval by all the co-owners of
the sale.
It is well-settled that contracts are perfected by mere consent, upon the acceptance by the offeree of the offer made by the
offeror. From that moment, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to
all the consequences which, according to their nature, may be in keeping with good faith, usage and law. To produce a
contract, the acceptance must not qualify the terms of the offer. However, the acceptance may be express or implied. For a
contract to arise, the acceptance must be made known to the offeror. Accordingly, the acceptance can be withdrawn or
revoked before it is made known to the offeror.[13]
In the case at bar, the Contract to Sell was perfected when the petitioners consented to the sale to the respondent of their
shares in the subject parcels of land by affixing their signatures on the said contract. Such signatures show their acceptance of
what has been stipulated in the Contract to Sell and such acceptance was made known to respondent corporation when the
duplicate copy of the Contract to Sell was returned to the latter bearing petitioners signatures.
As to petitioner Enriquetas claim that she merely signed as a witness to the said contract, the contract itself does not say
so. There was no single indication in the said contract that she signed the same merely as a witness. The fact that her
signature appears on the right-hand margin of the Contract to Sell is insignificant. The contract indisputably referred to the
Heirs of Bibiano and Encarnacion Oesmer, and since there is no showing that Enriqueta signed the document in some other
capacity, it can be safely assumed that she did so as one of the parties to the sale.
Emphasis should also be given to the fact that petitioners Ernesto and Enriqueta concurrently signed the Contract to
Sell. As the Court of Appeals mentioned in its Decision, [14] the records of the case speak of the fact that petitioner Ernesto,
together with petitioner Enriqueta, met with the representatives of the respondent in order to finalize the terms and conditions
of the Contract to Sell. Enriqueta affixed her signature on the said contract when the same was drafted. She even admitted
that she understood the undertaking that she and petitioner Ernesto made in connection with the contract. She likewise
disclosed that pursuant to the terms embodied in the Contract to Sell, she updated the payment of the real property taxes and
transferred the Tax Declarations of the questioned properties in her name. [15] Hence, it cannot be gainsaid that she merely
signed the Contract to Sell as a witness because she did not only actively participate in the negotiation and execution of the
same, but her subsequent actions also reveal an attempt to comply with the conditions in the said contract.

With respect to the other petitioners assertion that they did not understand the importance and consequences of their action
because of their low degree of education and because the contents of the aforesaid contract were not read nor explained to
them, the same cannot be sustained.
We only have to quote the pertinent portions of the Court of Appeals Decision, clear and concise, to dispose of this
issue. Thus,
First, the Contract to Sell is couched in such a simple language which is undoubtedly easy to read
and understand. The terms of the Contract, specifically the amount of P100,000.00 representing the option
money paid by [respondent] corporation, the purchase price ofP60.00 per square meter or the total amount
of P3,316,560.00 and a brief description of the subject properties are well-indicated thereon that any
prudent and mature man would have known the nature and extent of the transaction encapsulated in the
document that he was signing.
Second, the following circumstances, as testified by the witnesses and as can be gleaned from the
records of the case clearly indicate the [petitioners] intention to be bound by the stipulations chronicled in
the said Contract to Sell.
As to [petitioner] Ernesto, there is no dispute as to his intention to effect the alienation of the
subject property as he in fact was the one who initiated the negotiation process and culminated the same by
affixing his signature on the Contract to Sell and by taking receipt of the amount of P100,000.00 which
formed part of the purchase price.
xxxx
As to [petitioner] Librado, the [appellate court] finds it preposterous that he willingly affixed his
signature on a document written in a language (English) that he purportedly does not understand. He
testified that the document was just brought to him by an 18 year old niece named Baby and he was told
that the document was for a check to be paid to him. He readily signed the Contract to Sell without
consulting his other siblings. Thereafter, he exerted no effort in communicating with his brothers and sisters
regarding the document which he had signed, did not inquire what the check was for and did not thereafter
ask for the check which is purportedly due to him as a result of his signing the said Contract to Sell. (TSN,
28 September 1993, pp. 22-23)
The [appellate court] notes that Librado is a 43 year old family man (TSN, 28 September 1993, p.
19). As such, he is expected to act with that ordinary degree of care and prudence expected of a good father
of a family. His unwitting testimony is just divinely disbelieving.
The other [petitioners] (Rizalino, Leonora and Bibiano Jr.) are likewise bound by the said Contract
to Sell. The theory adopted by the [petitioners] that because of their low degree of education, they did not
understand the contents of the said Contract to Sell is devoid of merit. The [appellate court] also notes that
Adolfo (one of the co-heirs who did not sign) also possess the same degree of education as that of the
signing co-heirs (TSN, 15 October 1991, p. 19). He, however, is employed at the Provincial Treasury
Office at Trece Martirez, Caviteand has even accompanied Rogelio Paular to the Assessors Office to locate
certain missing documents which were needed to transfer the titles of the subject properties. (TSN, 28
January 1994, pp. 26 & 35) Similarly, the other co-heirs [petitioners], like Adolfo, are far from ignorant,
more so, illiterate that they can be extricated from their obligations under the Contract to Sell which they
voluntarily and knowingly entered into with the [respondent] corporation.
The Supreme Court in the case of Cecilia Mata v. Court of Appeals (207 SCRA 753 [1992]), citing
the case of Tan Sua Sia v. Yu Baio Sontua (56 Phil. 711), instructively ruled as follows:
The Court does not accept the petitioners claim that she did not understand the terms and
conditions of the transactions because she only reached Grade Three and was already 63 years of age when
she signed the documents. She was literate, to begin with, and her age did not make her senile or
incompetent. x x x.
At any rate, Metrobank had no obligation to explain the documents to the petitioner as nowhere
has it been proven that she is unable to read or that the contracts were written in a language not known to
her. It was her responsibility to inform herself of the meaning and consequence of the contracts she was
signing and, if she found them difficult to comprehend, to consult other persons, preferably lawyers, to
explain them to her. After all, the transactions involved not only a few hundred or thousand pesos but,
indeed, hundreds of thousands of pesos.
As the Court has held:
x x x The rule that one who signs a contract is presumed to know its contents has been applied even to
contracts of illiterate persons on the ground that if such persons are unable to read, they are negligent if

they fail to have the contract read to them. If a person cannot read the instrument, it is as much his duty to
procure some reliable persons to read and explain it to him, before he signs it, as it would be to read it
before he signed it if he were able to do and his failure to obtain a reading and explanation of it is such
gross negligence as will estop from avoiding it on the ground that he was ignorant of its contents.[16]
That the petitioners really had the intention to dispose of their shares in the subject parcels of land, irrespective of whether or
not all of the heirs consented to the said Contract to Sell, was unveiled by Adolfos testimony as follows:
ATTY. GAMO: This alleged agreement between you and your other brothers and sisters that unless
everybody will agree, the properties would not be sold, was that agreement in writing?
WITNESS: No sir.
ATTY. GAMO: What you are saying is that when your brothers and sisters except Jesus and you did not
sign that agreement which had been marked as [Exhibit] D, your brothers and sisters were grossly
violating your agreement.
WITNESS: Yes, sir, they violated what we have agreed upon.[17]
We also cannot sustain the allegation of the petitioners that assuming the signatures indicate consent, such consent was
merely conditional, and that, the effectivity of the alleged Contract to Sell was subject to the suspensive condition that the
sale be approved by all the co-owners. The Contract to Sell is clear enough. It is a cardinal rule in the interpretation of
contracts that if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal
meaning of its stipulation shall control. [18] The terms of the Contract to Sell made no mention of the condition that before it
can become valid and binding, a unanimous consent of all the heirs is necessary. Thus, when the language of the contract is
explicit, as in the present case, leaving no doubt as to the intention of the parties thereto, the literal meaning of its stipulation
is controlling.
In addition, the petitioners, being owners of their respective undivided shares in the subject properties, can dispose
of their shares even without the consent of all the co-heirs. Article 493 of the Civil Code expressly provides:
Article 493. Each co-owner shall have the full ownership of his part and of the fruits and benefits
pertaining thereto, and he may therefore alienate, assign or mortgage it, and even substitute another person
in its enjoyment, except when personal rights are involved. But the effect of the alienation or the mortgage,
with respect to the co-owners, shall be limited to the portion which may be allotted to him in the division
upon the termination of the co-ownership. [Emphases supplied.]
Consequently, even without the consent of the two co-heirs, Adolfo and Jesus, the Contract to Sell is still valid and binding
with respect to the 6/8 proportionate shares of the petitioners, as properly held by the appellate court.
Therefore, this Court finds no error in the findings of the Court of Appeals that all the petitioners who were
signatories in the Contract to Sell are bound thereby.
The final arguments of petitioners state that the Contract to Sell is void altogether considering that respondent itself
did not sign it as to indicate its consent to be bound by its terms; and moreover, the Contract to Sell is really a unilateral
promise to sell without consideration distinct from the price, and hence, again, void. Said arguments must necessarily fail.
The Contract to Sell is not void merely because it does not bear the signature of the respondent
corporation. Respondent corporations consent to be bound by the terms of the contract is shown in the uncontroverted facts
which established that there was partial performance by respondent of its obligation in the said Contract to Sell when it
tendered the amount of P100,000.00 to form part of the purchase price, which was accepted and acknowledged expressly by
petitioners. Therefore, by force of law, respondent is required to complete the payment to enforce the terms of the
contract. Accordingly, despite the absence of respondents signature in the Contract to Sell, the former cannot evade its
obligation to pay the balance of the purchase price.
As a final point, the Contract to Sell entered into by the parties is not a unilateral promise to sell merely because it
used the word option money when it referred to the amount of P100,000.00, which also form part of the purchase price.
Settled is the rule that in the interpretation of contracts, the ascertainment of the intention of the contracting parties
is 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.[19]
In the instant case, the consideration of P100,000.00 paid by respondent to petitioners was referred to as option
money. However, a careful examination of the words used in the contract indicates that the money is not option money
but earnest money.Earnest money and option money are not the same but distinguished thus: (a) earnest money is part of the
purchase price, while option money is 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,
but may even forfeit it depending on the terms of the option.[20]
The sum of P100,000.00 was part of the purchase price. Although the same was denominated as option money, it is actually
in the nature of earnest money or down payment when considered with the other terms of the contract. Doubtless, the
agreement is not a mere unilateral promise to sell, but, indeed, it is a Contract to Sell as both the trial court and the appellate
court declared in their Decisions.
WHEREFORE, premises considered, the Petition is DENIED, and the Decision and Resolution of the Court of Appeals
dated 26 April 2002 and 4 March 2003, respectively, are AFFIRMED, thus, (a) the Contract to Sell is DECLARED valid
and binding with respect to the undivided proportionate shares in the subject parcels of land of the six signatories of the said
document, herein petitioners Ernesto, Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora (all surnamed Oesmer); (b)
respondent is ORDERED to tender payment to petitioners in the amount of P3,216,560.00 representing the balance of the
purchase price for the latters shares in the subject parcels of land; and (c) petitioners are further ORDERED to execute in
favor of respondent the Deed of Absolute Sale covering their shares in the subject parcels of land after receipt of the balance
of the purchase price, and to pay respondent attorneys fees plus costs of the suit. Costs against petitioners.
[G.R. No. 124242. January 21, 2005]
SAN LORENZO DEVELOPMENT CORPORATION, petitioner, vs. COURT OF APPEALS, PABLO S.
BABASANTA, SPS. MIGUEL LU and PACITA ZAVALLA LU, respondents.
From a coaptation of the records of this case, it appears that respondents Miguel Lu and Pacita Zavalla, (hereinafter, the
Spouses Lu) owned two (2) parcels of land situated in Sta. Rosa, Laguna covered by TCT No. T-39022 and TCT No. T-39023
both measuring 15,808 square meters or a total of 3.1616 hectares.
On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to respondent Pablo Babasanta,
(hereinafter, Babasanta) for the price of fifteen pesos (P15.00) per square meter. Babasanta made a downpayment of fifty
thousand pesos (P50,000.00) as evidenced by a memorandum receipt issued by Pacita Lu of the same date. Several other
payments totaling two hundred thousand pesos (P200,000.00) were made by Babasanta.
Sometime in May 1989, Babasanta wrote a letter to Pacita Lu to demand the execution of a final deed of sale in his
favor so that he could effect full payment of the purchase price. In the same letter, Babasanta notified the spouses about
having received information that the spouses sold the same property to another without his knowledge and consent. He
demanded that the second sale be cancelled and that a final deed of sale be issued in his favor.
In response, Pacita Lu wrote a letter to Babasanta wherein she acknowledged having agreed to sell the property to him
at fifteen pesos (P15.00) per square meter. She, however, reminded Babasanta that when the balance of the purchase price
became due, he requested for a reduction of the price and when she refused, Babasanta backed out of the sale. Pacita added
that she returned the sum of fifty thousand pesos (P50,000.00) to Babasanta through Eugenio Oya.
On 2 June 1989, respondent Babasanta, as plaintiff, filed before the Regional Trial Court (RTC), Branch 31, of San
Pedro, Laguna, a Complaint for Specific Performance and Damages [1] against his co-respondents herein, the Spouses Lu.
Babasanta alleged that the lands covered by TCT No. T- 39022 and T-39023 had been sold to him by the spouses at fifteen
pesos (P15.00) per square meter. Despite his repeated demands for the execution of a final deed of sale in his favor,
respondents allegedly refused.
In their Answer,[2] the Spouses Lu alleged that Pacita Lu obtained loans from Babasanta and when the total advances of
Pacita reached fifty thousand pesos (P50,000.00), the latter and Babasanta, without the knowledge and consent of Miguel Lu,
had verbally agreed to transform the transaction into a contract to sell the two parcels of land to Babasanta with the fifty
thousand pesos (P50,000.00) to be considered as the downpayment for the property and the balance to be paid on or before
31 December 1987. Respondents Lu added that as of November 1987, total payments made by Babasanta amounted to only
two hundred thousand pesos (P200,000.00) and the latter allegedly failed to pay the balance of two hundred sixty thousand
pesos (P260,000.00) despite repeated demands. Babasanta had purportedly asked Pacita for a reduction of the price from
fifteen pesos (P15.00) to twelve pesos (P12.00) per square meter and when the Spouses Lu refused to grant Babasantas
request, the latter rescinded the contract to sell and declared that the original loan transaction just be carried out in that the
spouses would be indebted to him in the amount of two hundred thousand pesos (P200,000.00). Accordingly, on 6 July 1989,
they purchased Interbank Managers Check No. 05020269 in the amount of two hundred thousand pesos ( P200,000.00) in the
name of Babasanta to show that she was able and willing to pay the balance of her loan obligation.
Babasanta later filed an Amended Complaint dated 17 January 1990[3] wherein he prayed for the issuance of a writ of
preliminary injunction with temporary restraining order and the inclusion of the Register of Deeds of Calamba, Laguna as
party defendant. He contended that the issuance of a preliminary injunction was necessary to restrain the transfer or
conveyance by the Spouses Lu of the subject property to other persons.
The Spouses Lu filed their Opposition[4] to the amended complaint contending that it raised new matters which seriously
affect their substantive rights under the original complaint. However, the trial court in its Order dated 17 January
1990[5] admitted the amended complaint.
On 19 January 1990, herein petitioner San Lorenzo Development Corporation (SLDC) filed a Motion for
Intervention[6] before the trial court. SLDC alleged that it had legal interest in the subject matter under litigation because on 3
May 1989, the two parcels of land involved, namely Lot 1764-A and 1764-B, had been sold to it in a Deed of Absolute Sale
with Mortgage.[7] It alleged that it was a buyer in good faith and for value and therefore it had a better right over the property
in litigation.
In his Opposition to SLDCs motion for intervention,[8] respondent Babasanta demurred and argued that the latter had no
legal interest in the case because the two parcels of land involved herein had already been conveyed to him by the Spouses
Lu and hence, the vendors were without legal capacity to transfer or dispose of the two parcels of land to the intervenor.
Meanwhile, the trial court in its Order dated 21 March 1990 allowed SLDC to intervene. SLDC filed its Complaint-inIntervention on 19 April 1990.[9] Respondent Babasantas motion for the issuance of a preliminary injunction was likewise

granted by the trial court in its Order dated 11 January 1991[10] conditioned upon his filing of a bond in the amount of fifty
thousand pesos (P50,000.00).
SLDC in its Complaint-in-Intervention alleged that on 11 February 1989, the Spouses Lu executed in its favor
an Option to Buy the lots subject of the complaint. Accordingly, it paid an option money in the amount of three hundred
sixteen thousand one hundred sixty pesos (P316,160.00) out of the total consideration for the purchase of the two lots of one
million two hundred sixty-four thousand six hundred forty pesos (P1,264,640.00). After the Spouses Lu received a total
amount of six hundred thirty-two thousand three hundred twenty pesos (P632,320.00) they executed on 3 May 1989
a Deed of Absolute Sale with Mortgage in its favor. SLDC added that the certificates of title over the property were delivered
to it by the spouses clean and free from any adverse claims and/or notice of lis pendens. SLDC further alleged that it only
learned of the filing of the complaint sometime in the early part of January 1990 which prompted it to file the motion to
intervene without delay. Claiming that it was a buyer in good faith, SLDC argued that it had no obligation to look beyond the
titles submitted to it by the Spouses Lu particularly because Babasantas claims were not annotated on the certificates of title
at the time the lands were sold to it.
After a protracted trial, the RTC rendered its Decision on 30 July 1993 upholding the sale of the property to SLDC. It
ordered the Spouses Lu to pay Babasanta the sum of two hundred thousand pesos (P200,000.00) with legal interest plus the
further sum of fifty thousand pesos (P50,000.00) as and for attorneys fees. On the complaint-in-intervention, the trial court
ordered the Register of Deeds of Laguna, Calamba Branch to cancel the notice of lis pendens annotated on the original of the
TCT No. T-39022 (T-7218) and No. T-39023 (T-7219).
Applying Article 1544 of the Civil Code, the trial court ruled that since both Babasanta and SLDC did not register the
respective sales in their favor, ownership of the property should pertain to the buyer who first acquired possession of the
property. The trial court equated the execution of a public instrument in favor of SLDC as sufficient delivery of the property
to the latter. It concluded that symbolic possession could be considered to have been first transferred to SLDC and
consequently ownership of the property pertained to SLDC who purchased the property in good faith.
Respondent Babasanta appealed the trial courts decision to the Court of Appeals alleging in the main that the trial court
erred in concluding that SLDC is a purchaser in good faith and in upholding the validity of the sale made by the Spouses Lu
in favor of SLDC.
Respondent spouses likewise filed an appeal to the Court of Appeals. They contended that the trial court erred in failing
to consider that the contract to sell between them and Babasanta had been novated when the latter abandoned the verbal
contract of sale and declared that the original loan transaction just be carried out. The Spouses Lu argued that since the
properties involved were conjugal, the trial court should have declared the verbal contract to sell between Pacita Lu and
Pablo Babasanta null and void ab initio for lack of knowledge and consent of Miguel Lu. They further averred that the trial
court erred in not dismissing the complaint filed by Babasanta; in awarding damages in his favor and in refusing to grant the
reliefs prayed for in their answer.
On 4 October 1995, the Court of Appeals rendered its Decision[11] which set aside the judgment of the trial court. It
declared that the sale between Babasanta and the Spouses Lu was valid and subsisting and ordered the spouses to execute the
necessary deed of conveyance in favor of Babasanta, and the latter to pay the balance of the purchase price in the amount of
two hundred sixty thousand pesos (P260,000.00). The appellate court ruled that the Absolute Deed of Sale with Mortgage in
favor of SLDC was null and void on the ground that SLDC was a purchaser in bad faith. The Spouses Lu were further
ordered to return all payments made by SLDC with legal interest and to pay attorneys fees to Babasanta.
SLDC and the Spouses Lu filed separate motions for reconsideration with the appellate court. [12] However, in
a Manifestation dated 20 December 1995,[13] the Spouses Lu informed the appellate court that they are no longer contesting
the decision dated 4 October 1995.
In its Resolution dated 11 March 1996,[14] the appellate court considered as withdrawn the motion for reconsideration
filed by the Spouses Lu in view of their manifestation of 20 December 1995. The appellate court denied SLDCs motion for
reconsideration on the ground that no new or substantial arguments were raised therein which would warrant modification or
reversal of the courts decision dated 4 October 1995.
Hence, this petition.
SLDC assigns the following errors allegedly committed by the appellate court:
THE COURT OF APPEALS ERRED IN HOLDING THAT SAN LORENZO WAS NOT A BUYER IN GOOD FAITH
BECAUSE WHEN THE SELLER PACITA ZAVALLA LU OBTAINED FROM IT THE CASH ADVANCE
OF P200,000.00, SAN LORENZO WAS PUT ON INQUIRY OF A PRIOR TRANSACTION ON THE PROPERTY.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE ESTABLISHED FACT THAT THE ALLEGED
FIRST BUYER, RESPONDENT BABASANTA, WAS NOT IN POSSESSION OF THE DISPUTED PROPERTY WHEN
SAN LORENZO BOUGHT AND TOOK POSSESSION OF THE PROPERTY AND NO ADVERSE CLAIM, LIEN,
ENCUMBRANCE OR LIS PENDENS WAS ANNOTATED ON THE TITLES.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE FACT THAT RESPONDENT BABASANTA
HAS SUBMITTED NO EVIDENCE SHOWING THAT SAN LORENZO WAS AWARE OF HIS RIGHTS OR INTERESTS
IN THE DISPUTED PROPERTY.
THE COURT OF APPEALS ERRED IN HOLDING THAT NOTWITHSTANDING ITS FULL CONCURRENCE ON THE
FINDINGS OF FACT OF THE TRIAL COURT, IT REVERSED AND SET ASIDE THE DECISION OF THE TRIAL
COURT UPHOLDING THE TITLE OF SAN LORENZO AS A BUYER AND FIRST POSSESSOR IN GOOD FAITH. [15]
SLDC contended that the appellate court erred in concluding that it had prior notice of Babasantas claim over the
property merely on the basis of its having advanced the amount of two hundred thousand pesos (P200,000.00) to Pacita Lu
upon the latters representation that she needed the money to pay her obligation to Babasanta. It argued that it had no reason to
suspect that Pacita was not telling the truth that the money would be used to pay her indebtedness to Babasanta. At any rate,
SLDC averred that the amount of two hundred thousand pesos (P200,000.00) which it advanced to Pacita Lu would be
deducted from the balance of the purchase price still due from it and should not be construed as notice of the prior sale of the
land to Babasanta. It added that at no instance did Pacita Lu inform it that the lands had been previously sold to Babasanta.

Moreover, SLDC stressed that after the execution of the sale in its favor it immediately took possession of the property
and asserted its rights as new owner as opposed to Babasanta who has never exercised acts of ownership. Since the titles bore
no adverse claim, encumbrance, or lien at the time it was sold to it, SLDC argued that it had every reason to rely on the
correctness of the certificate of title and it was not obliged to go beyond the certificate to determine the condition of the
property. Invoking the presumption of good faith, it added that the burden rests on Babasanta to prove that it was aware of the
prior sale to him but the latter failed to do so. SLDC pointed out that the notice of lis pendens was annotated only on 2 June
1989 long after the sale of the property to it was consummated on 3 May 1989.
Meanwhile, in an Urgent Ex-Parte Manifestation dated 27 August 1999, the Spouses Lu informed the Court that due to
financial constraints they have no more interest to pursue their rights in the instant case and submit themselves to the decision
of the Court of Appeals.[16]
On the other hand, respondent Babasanta argued that SLDC could not have acquired ownership of the property because
it failed to comply with the requirement of registration of the sale in good faith. He emphasized that at the time SLDC
registered the sale in its favor on 30 June 1990, there was already a notice of lis pendens annotated on the titles of the
property made as early as 2 June 1989. Hence, petitioners registration of the sale did not confer upon it any right. Babasanta
further asserted that petitioners bad faith in the acquisition of the property is evident from the fact that it failed to make
necessary inquiry regarding the purpose of the issuance of the two hundred thousand pesos (P200,000.00) managers check in
his favor.
The core issue presented for resolution in the instant petition is who between SLDC and Babasanta has a better right
over the two parcels of land subject of the instant case in view of the successive transactions executed by the Spouses Lu.
To prove the perfection of the contract of sale in his favor, Babasanta presented a document signed by Pacita Lu
acknowledging receipt of the sum of fifty thousand pesos (P50,000.00) as partial payment for 3.6 hectares of farm lot situated
at Barangay Pulong, Sta. Cruz, Sta. Rosa, Laguna. [17] While the receipt signed by Pacita did not mention the price for which
the property was being sold, this deficiency was supplied by Pacita Lus letter dated 29 May 1989 [18] wherein she admitted that
she agreed to sell the 3.6 hectares of land to Babasanta for fifteen pesos (P15.00) per square meter.
An analysis of the facts obtaining in this case, as well as the evidence presented by the parties, irresistibly leads to the
conclusion that the agreement between Babasanta and the Spouses Lu is a contract to sell and not a contract of sale.
Contracts, in general, are perfected by mere consent, [19] which is manifested by the meeting of the offer and the
acceptance upon the thing which are to constitute the contract. The offer must be certain and the acceptance absolute.
[20]
Moreover, contracts shall be obligatory in whatever form they may have been entered into, provided all the essential
requisites for their validity are present.[21]
The receipt signed by Pacita Lu merely states that she accepted the sum of fifty thousand pesos (P50,000.00) from
Babasanta as partial payment of 3.6 hectares of farm lot situated in Sta. Rosa, Laguna. While there is no stipulation that the
seller reserves the ownership of the property until full payment of the price which is a distinguishing feature of a contract to
sell, the subsequent acts of the parties convince us that the Spouses Lu never intended to transfer ownership to Babasanta
except upon full payment of the purchase price.
Babasantas letter dated 22 May 1989 was quite telling. He stated therein that despite his repeated requests for the
execution of the final deed of sale in his favor so that he could effect full payment of the price, Pacita Lu allegedly refused to
do so. In effect, Babasanta himself recognized that ownership of the property would not be transferred to him until such time
as he shall have effected full payment of the price. Moreover, had the sellers intended to transfer title, they could have easily
executed the document of sale in its required form simultaneously with their acceptance of the partial payment, but they did
not. Doubtlessly, the receipt signed by Pacita Lu should legally be considered as a perfected contract to sell.
The distinction between a contract to sell and a contract of sale is quite germane. In a contract of sale, title passes to the
vendee upon the delivery of the thing sold; whereas in a contract to sell, by agreement the ownership is reserved in the
vendor and is not to pass until the full payment of the price. [22] In a contract of sale, the vendor has lost and cannot recover
ownership until and unless the contract is resolved or rescinded; whereas in a contract to sell, title is retained by the vendor
until the full payment of the price, such payment being a positive suspensive condition and failure of which is not a breach
but an event that prevents the obligation of the vendor to convey title from becoming effective. [23]
The perfected contract to sell imposed upon Babasanta the obligation to pay the balance of the purchase price. There
being an obligation to pay the price, Babasanta should have made the proper tender of payment and consignation of the price
in court as required by law. 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. [24] Consignation of the amounts due in court is essential in order to
extinguish Babasantas obligation to pay the balance of the purchase price. Glaringly absent from the records is any indication
that Babasanta even attempted to make the proper consignation of the amounts due, thus, the obligation on the part of the
sellers to convey title never acquired obligatory force.
On the assumption that the transaction between the parties is a contract of sale and not a contract to sell, Babasantas
claim of ownership should nevertheless fail.
Sale, being a consensual contract, is perfected by mere consent [25] and from that moment, the parties may reciprocally
demand performance.[26] The essential elements of a contract of sale, to wit: (1) consent or meeting of the minds, that is, to
transfer ownership in exchange for the price; (2) object certain which is the subject matter of the contract; (3) cause of the
obligation which is established.[27]
The perfection of a contract of sale should not, however, be confused with its consummation. In relation to the
acquisition and transfer of ownership, it should be noted that sale is not a mode, but merely a title. A mode is the legal means
by which dominion or ownership is created, transferred or destroyed, but title is only the legal basis by which to affect
dominion or ownership.[28] Under Article 712 of the Civil Code, ownership and other real rights over property are acquired
and transmitted by law, by donation, by testate and intestate succession, and in consequence of certain contracts, by tradition.
Contracts only constitute titles or rights to the transfer or acquisition of ownership, while delivery or tradition is the mode of
accomplishing the same.[29] Therefore, sale by itself does not transfer or affect ownership; the most that sale does is to create
the obligation to transfer ownership. It is tradition or delivery, as a consequence of sale, that actually transfers ownership.

Explicitly, the law provides that the ownership of the thing sold is acquired by the vendee from the moment it is
delivered to him in any of the ways specified in Article 1497 to 1501. [30] The word delivered should not be taken restrictively
to mean transfer of actual physical possession of the property. The law recognizes two principal modes of delivery, to wit: (1)
actual delivery; and (2) legal or constructive delivery.
Actual delivery consists in placing the thing sold in the control and possession of the vendee. [31] Legal or constructive
delivery, on the other hand, may be had through any of the following ways: the execution of a public instrument evidencing
the sale;[32] symbolical tradition such as the delivery of the keys of the place where the movable sold is being kept; [33] traditio
longa manu or by mere consent or agreement if the movable sold cannot yet be transferred to the possession of the buyer at
the time of the sale;[34] traditio brevi manu if the buyer already had possession of the object even before the sale;
[35]
and traditio constitutum possessorium, where the seller remains in possession of the property in a different capacity.[36]
Following the above disquisition, respondent Babasanta did not acquire ownership by the mere execution of the receipt
by Pacita Lu acknowledging receipt of partial payment for the property. For one, the agreement between Babasanta and the
Spouses Lu, though valid, was not embodied in a public instrument. Hence, no constructive delivery of the lands could have
been effected. For another, Babasanta had not taken possession of the property at any time after the perfection of the sale in
his favor or exercised acts of dominion over it despite his assertions that he was the rightful owner of the lands. Simply
stated, there was no delivery to Babasanta, whether actual or constructive, which is essential to transfer ownership of the
property. Thus, even on the assumption that the perfected contract between the parties was a sale, ownership could not have
passed to Babasanta in the absence of delivery, since in a contract of sale ownership is transferred to the vendee only upon the
delivery of the thing sold.[37]
However, it must be stressed that the juridical relationship between the parties in a double sale is primarily governed by
Article 1544 which lays down the rules of preference between the two purchasers of the same property. It provides:
Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who
may have first taken possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in
the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in
the absence thereof, to the person who presents the oldest title, provided there is good faith.
The principle of primus tempore, potior jure (first in time, stronger in right) gains greater significance in case of double
sale of immovable property. When the thing sold twice is an immovable, the one who acquires it and first records it in the
Registry of Property, both made in good faith, shall be deemed the owner. [38] Verily, the act of registration must be coupled
with good faith that is, the registrant must have no knowledge of the defect or lack of title of his vendor or must not have
been aware of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him
with the defects in the title of his vendor.[39]
Admittedly, SLDC registered the sale with the Registry of Deeds after it had acquired knowledge of Babasantas claim.
Babasanta, however, strongly argues that the registration of the sale by SLDC was not sufficient to confer upon the latter any
title to the property since the registration was attended by bad faith. Specifically, he points out that at the time SLDC
registered the sale on 30 June 1990, there was already a notice of lis pendens on the file with the Register of Deeds, the same
having been filed one year before on 2 June 1989.
Did the registration of the sale after the annotation of the notice of lis pendens obliterate the effects of delivery and
possession in good faith which admittedly had occurred prior to SLDCs knowledge of the transaction in favor of Babasanta?
We do not hold so.
It must be stressed that as early as 11 February 1989, the Spouses Lu executed the Option to Buy in favor of SLDC upon
receiving P316,160.00 as option money from SLDC. After SLDC had paid more than one half of the agreed purchase price
ofP1,264,640.00, the Spouses Lu subsequently executed on 3 May 1989 a Deed of Absolute Sale in favor or SLDC. At the
time both deeds were executed, SLDC had no knowledge of the prior transaction of the Spouses Lu with Babasanta. Simply
stated, from the time of execution of the first deed up to the moment of transfer and delivery of possession of the lands to
SLDC, it had acted in good faith and the subsequent annotation of lis pendens has no effect at all on the consummated sale
between SLDC and the Spouses Lu.
A purchaser in good faith is one who buys property of another without notice that some other person has a right to, or
interest in, such property and pays a full and fair price for the same at the time of such purchase, or before he has notice of
the claim or interest of some other person in the property. [40] Following the foregoing definition, we rule that SLDC qualifies
as a buyer in good faith since there is no evidence extant in the records that it had knowledge of the prior transaction in favor
of Babasanta. At the time of the sale of the property to SLDC, the vendors were still the registered owners of the property and
were in fact in possession of the lands. Time and again, this Court has ruled that a person dealing with the owner of registered
land is not bound to go beyond the certificate of title as he is charged with notice of burdens on the property which are noted
on the face of the register or on the certificate of title. [41] In assailing knowledge of the transaction between him and the
Spouses Lu, Babasanta apparently relies on the principle of constructive notice incorporated in Section 52 of the Property
Registration Decree (P.D. No. 1529) which reads, thus:
Sec. 52. Constructive notice upon registration. Every conveyance, mortgage, lease, lien, attachment, order, judgment,
instrument or entry affecting registered land shall, if registered, filed, or entered in the office of the Register of Deeds for the
province or city where the land to which it relates lies, be constructive notice to all persons from the time of such registering,
filing, or entering.
However, the constructive notice operates as suchby the express wording of Section 52from the time of the registration of the
notice of lis pendens which in this case was effected only on 2 June 1989, at which time the sale in favor of SLDC had long
been consummated insofar as the obligation of the Spouses Lu to transfer ownership over the property to SLDC is concerned.
More fundamentally, given the superiority of the right of SLDC to the claim of Babasanta the annotation of the notice
of lis pendens cannot help Babasantas position a bit and it is irrelevant to the good or bad faith characterization of SLDC as a
purchaser. A notice of lis pendens, as the Court held in Natao v. Esteban,[42] serves as a warning to a prospective purchaser or

incumbrancer that the particular property is in litigation; and that he should keep his hands off the same, unless he intends to
gamble on the results of the litigation. Precisely, in this case SLDC has intervened in the pending litigation to protect its
rights. Obviously, SLDCs faith in the merit of its cause has been vindicated with the Courts present decision which is the
ultimate denouement on the controversy.
The Court of Appeals has made capital [43] of SLDCs averment in its Complaint-in-Intervention[44] that at the instance of
Pacita Lu it issued a check for P200,000.00 payable to Babasanta and the confirmatory testimony of Pacita Lu herself on
cross-examination.[45]However, there is nothing in the said pleading and the testimony which explicitly relates the amount to
the transaction between the Spouses Lu and Babasanta for what they attest to is that the amount was supposed to pay off the
advances made by Babasanta to Pacita Lu. In any event, the incident took place after the Spouses Lu had already executed
the Deed of Absolute Sale with Mortgage in favor of SLDC and therefore, as previously explained, it has no effect on the
legal position of SLDC.
Assuming ex gratia argumenti that SLDCs registration of the sale had been tainted by the prior notice of lis pendens and
assuming further for the same nonce that this is a case of double sale, still Babasantas claim could not prevail over that of
SLDCs. InAbarquez v. Court of Appeals,[46] this Court had the occasion to rule that if a vendee in a double sale registers the
sale after he has acquired knowledge of a previous sale, the registration constitutes a registration in bad faith and does not
confer upon him any right. If the registration is done in bad faith, it is as if there is no registration at all, and the buyer who
has taken possession first of the property in good faith shall be preferred.
In Abarquez, the first sale to the spouses Israel was notarized and registered only after the second vendee, Abarquez,
registered their deed of sale with the Registry of Deeds, but the Israels were first in possession. This Court awarded the
property to the Israels because registration of the property by Abarquez lacked the element of good faith. While the facts in
the instant case substantially differ from that in Abarquez, we would not hesitate to rule in favor of SLDC on the basis of its
prior possession of the property in good faith. Be it noted that delivery of the property to SLDC was immediately effected
after the execution of the deed in its favor, at which time SLDC had no knowledge at all of the prior transaction by the
Spouses Lu in favor of Babasanta.
The law speaks not only of one criterion. The first criterion is priority of entry in the registry of property; there being no
priority of such entry, the second is priority of possession; and, in the absence of the two priorities, the third priority is of the
date of title, with good faith as the common critical element. Since SLDC acquired possession of the property in good faith in
contrast to Babasanta, who neither registered nor possessed the property at any time, SLDCs right is definitely superior to
that of Babasantas.
At any rate, the above discussion on the rules on double sale would be purely academic for as earlier stated in this
decision, the contract between Babasanta and the Spouses Lu is not a contract of sale but merely a contract to sell.
In Dichoso v. Roxas,[47] we had the occasion to rule that Article 1544 does not apply to a case where there was a sale to one
party of the land itself while the other contract was a mere promise to sell the land or at most an actual assignment of the
right to repurchase the same land. Accordingly, there was no double sale of the same land in that case.
WHEREFORE, the instant petition is hereby GRANTED. The decision of the Court of Appeals appealed from is
REVERSED and SET ASIDE and the decision of the Regional Trial Court, Branch 31, of San Pedro, Laguna is
REINSTATED. No costs.