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Republic of the Philippines The facts of this case may be briefly stated as follows:

SUPREME COURT
Manila Clara Tambunting de Legarda died testate on April 22, 1950. Among
the properties left by the deceased is the "Legarda Tambunting
SECOND DIVISION Subdivision" located on Rizal Avenue Extension, City of Manila,
containing an area of 80,238.90 sq. m., covered by Transfer
G.R. No. L-41847 December 12, 1986 Certificates of Title No. 62042; 45142; 45149; 49578; 40957 and
59585. Shortly after the death of said deceased, plaintiff Catalino
CATALINO LEABRES, petitioner, Leabres bought, on a partial payment of Pl,000.00 a portion (No. VIII,
vs. Lot No. 1) of the Subdivision from surviving husband Vicente J.
COURT OF APPEALS and MANOTOK REALTY, INC., respondents. Legarda who acted as special administrator, the deed or receipt of
said sale appearing to be dated May 2, 1950 (Annex "A"). Upon
Magtanggol C. Gunigundo for petitioner. petition of Vicente L. Legarda, who later was appointed a regular
administrator together with Pacifica Price and Augusto Tambunting on
Marcelo de Guzman for respondents. August 28, 1950, the Probate Court of Manila in the Special
Proceedings No. 10808) over the testate estate of said Clara
Tambunting, authorized through its order of November 21, 1951 the
sale of the property.
PARAS, J.:
In the meantime, Vicente L. Legarda was relieved as a regular
Administrator and the Philippine Trust Co. which took over as such
Before Us is a Petition for certiorari to review the decision of the Court administrator advertised the sale of the subdivision which includes the
of Appeals which is quoted hereunder: lot subject matter herein, in the issues of August 26 and 27,
September 2 and 3, and 15 and 17, 1956 of the Manila Times and
In Civil Case No. 64434, the Court of First Instance of Manila made Daily Mirror. In the aforesaid Special Proceedings No. 10808, no
the following quoted decision: adverse claim or interest over the subdivision or any portion thereof
was ever presented by any person, and in the sale that followed, the
(1) Upon defendant's counterclaim, ordering plaintiff Catalino Manotok Realty, Inc. emerged the successful bidder at the price of
Leabres to vacate and/or surrender possession to defendant P840,000.00. By order of the Probate Court, the Philippine Trust Co.
Manotok Realty, Inc. the parcel of land subject matter of the executed the Deed of Absolute Sale of the subdivision dated January
complaint described in paragraph 3 thereof and described in 7, 1959 in favor of the Manotok Realty, Inc. which deed was judicially
the Bill of Particulars dated March 4, 1966; approved on March 20, 1959, and recorded immediately in the proper
Register of Deeds which issued the corresponding Certificates of Title
(2) To pay defendant the sum of P81.00 per month from March to the Manotok Realty, Inc., the defendant appellee herein.
20, 1959, up to the time he actually vacates and/or surrenders
possession of the said parcel of land to the defendant Manotok A complaint dated February 8, 1966, was filed by herein plaintiff,
Realty, Inc., and which seeks, among other things, for the quieting of title over the lot
subject matter herein, for continuing possession thereof, and for
(3) To pay attorney's fees to the defendant in the amount of damages. In the scheduled hearing of the case, plaintiff Catalino
P700.00 and pay the costs. (Decision, R.A., pp. 54-55). Leabres failed to appear although he was duly notified, and so the trial
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Court, in its order dated September 14, 1967, dismissed the complaint In the First Assigned Error, it is contended that the denial of his
(Annex "E").<re||an1w> In another order of dismissal was Motion for Reconsideration dated October 9, 1967, the plaintiff-
amended as to make the same refer only to plaintiff's complaint and appellant was not accorded his day in Court.
the counter claim of the defendant was reinstated and as the evidence
thereof was already adduced when defendant presented its evidence The rule governing dismissal of actions for failure to prosecute is
in three other cases pending in the same Court, said counterclaim provided for in Section 3, Rule 17 of the Rules of Court, as follows:
was also considered submitted for resolution. The motion for
reconsideration dated January 22, 1968 (Annex " I "), was filed by If the plaintiff fails to appear at the time of the trial, or to prosecute his
plaintiff, and an opposition thereto dated January 25, 1968, was action for an unreasonable length of time, or to comply with these
likewise filed by defendant but the Court a quo dismissed said motion rules or any order of the Court, the action may be dismissed upon
in its order dated January 12, 1970 (Annex "K"), "for lack of merits" motion of the defendant or upon the Court's own motion. This
(pp. 71-72, Record on Appeal). dismissal shall have the effect of an adjudication upon the merits,
unless otherwise provided by the Court.
Appealing the decision of the lower Court, plaintiff-appellant advances
the following assignment of errors: Under the afore-cited section, it is discretionary on the part of the
Court to dismiss an action for failure to prosecute, and its action will
I not be reversed upon appeal in the absence of abuse. The burden of
showing abuse of this discretion is upon the appellant since every
THE LOWER COURT ERRED IN DENYING THE MOTION presumption is toward the correctness of the Court's action (Smith,
FOR RECONSIDERATION, DATED OCTOBER 9, 1967, Bell & Co., et al vs. American Pres. Lines, Ltd., and Manila Terminal
THUS DEPRIVING THE PLAINTIFF-APPELLANT HIS DAY IN Co., No. L-5304, April 30, 1954; Adorable vs. Bonifacio, G. R. No. L-
COURT. 0698, April 22, 1959); Flores vs. Phil. Alien Property Administration,
G.R. No. L-12741, April 27, 1960). By the doctrine laid down in these
II cases, and by the provisions of Section 5, Rules 131 of the Rules of
Court, particularly paragraphs (m) and (o) which respectively presume
THE LOWER COURT ERRED IN ORDERING THE the regularity of official performance and the passing upon by the
PLAINTIFF-APPELLANT CATALINO LEABRES TO VACATE Court over all issues within a case, it matters not if the Court
AND/OR SURRENDER THE POSSESSION OF THE LOT dismissing the action for failure to prosecute assigns any special
SUBJECT MATTER OF THE COMPLAINT TO DEFENDANT- reason for its action or not. We take note of the fact that the Order
APPELLEE. declaring appellant in default was handed down on September 14,
1967. Appellant took no steps to have this Order set aside. It was only
III on January 22, 1968, after he was furnished a copy of the Court's
decision dated December 9, 1967 or about four months later that he
THE LOWER COURT ERRED IN ORDERING THE attached this Order and the decision of the Court. Appellant slept on
PLAINTIFF-APPELLANT TO PAY DEFENDANT-APPELLEE his rights-if he had any. He had a chance to have his day in Court but
THE SUM OF P 81.00 PER MONTH FROM MARCH 20, 1969, he passed it off. Four months later he alleges that sudden illness had
UP TO THE TIME HE ACTUALLY VACATE THE PARCEL OF prevented him. We feel appellant took a long time too-long in fact-to
LAND. (Appellant's Brief, p. 7) inform the Court of his sudden illness. This sudden illness that
according to him prevented him from coming to Court, and the time it
took him to tell the Court about it, is familiar to the forum as an oft
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repeated excuse to justify indifference on the part of litigants or has therefore the better right over the lot in question because in cases
outright negligence of those who represent them which subserves the of lands registered under the Torrens Law, adverse interests not
interests of justice. In the instant case, not only did the appellant therein annotated which are without the previous knowledge by third
wantonly pass off his chance to have a day in Court but he has also parties do not bind the latter. As to the improvement which appellant
failed to give a convincing, just and valid reason for the new hearing claims to have introduced on the lot, purchase of registered lands for
he seeks. The trial court found it so; We find it so. The trial Court in value and in good faith hold the same free from all liens and
refusing to give appellant a new trial does not appear to have abused encumbrances except those noted on the titles of said land and those
his discretion as to justify our intervention. burdens imposed by law. (Sec. 39, Act. 496).<re||an1w> An
occupant of a land, or a purchaser thereof from a person other than
The Second and Third Assignments of Error are hereby jointly treated the registered owner, cannot claim good faith so as to be entitled to
in our discussion since the third is but a consequence of the second. retention of the parcels occupied by him until reimbursement of the
value of the improvements he introduced thereon, because he is
It is argued that had the trial Court reconsidered its order dated charged with notice of the existence of the owner's certificate of title
September 14, 1967 dismissing the complaint for failure to prosecute, (J.M. Tuason & Co. vs. Lecardo, et al., CA-G.R. No. 25477-R, July 24,
plaintiff-appellant might have proved that he owns the lot 1962; J.M. Tuason & Co., Inc. vs. Manuel Abundo, CA-G.R. No.
subjectmatter of the case, citing the receipt (Annex A) in his favor; that 29701-R, November 18, 1968).
he has introduced improvements and erected a house thereon made
of strong materials; that appellee's adverse interest over the property Appellant has not convinced the trial Court that appellee acted in bad
was secured in bad faith since he had prior knowledge and notice of faith in the acquisition of the property due to the latter's knowledge of
appellant's physical possession or acquisition of the same; that due to a previous acquisition by the former, and neither are we impressed by
said bad faith appellant has suffered damages, and that for all the the claim. The purchaser of a registered land has to rely on the
foregoing, the judgment should be reversed and equitable relief be certificate of title thereof. The good faith of appellee coming from the
given in his favor. knowledge that the certificate of title covering the entire subdivision
contain no notation as to appellant's interest, and the fact that the
As above stated, the Legarda-Tambunting Subdivision which includes records of these eases like Probate Proceedings Case No. 10808, do
the lot subject matter of the instant case, is covered by Torrens not show the existence of appellant's claim, strongly support the
Certificates of Title. Appellant anchors his claim on the receipt (Annex correctness of the lower Court's decision
"A") dated May 2, 1950, which he claims as evidence of the sale of
said lot in his favor. Admittedly, however, Catalino Leabres has not WHEREFORE, in view of the foregoing, we find no reason to amend
registered his supposed interest over the lot in the records of the or set aside the decision appealed from, as regards to plaintiff-
Register of Deeds, nor did he present his claim for probate in the appellant Catalino Leabres. We therefore affirm the same, with costs
testate proceedings over the estate of the owner of said subdivision, against appellant. (pp. 33-38, Rollo)
in spite of the notices advertised in the papers. (Saldana vs. Phil.
Trust Co., et al.; Manotok Realty, Inc., supra). Petitioner now comes to us with the following issues:

On the other hand, defendant-appellee, Manotok Realty, Inc., bought (1) Whether or not the petitioner was denied his day in court
the whole subdivision which includes the subject matter herein by and deprived of due process of law.
order and with approval of the Probate Court and upon said approval,
the Deed of Absolute Sale in favor of appellee was immediately (2) Whether or not the petitioner had to submit his receipt to
registered with the proper Register of Deeds. Manotok Realty, Inc. the probate court in order that his right over the parcel of land
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in dispute could be recognized valid and binding and Petitioner should have submitted the receipt of alleged sale to the
conclusive against the Manotok Realty, Inc. Probate Court for its approval of the transactions. Thus, the
respondent Court did not err in holding that the petitioner should have
(3) Whether or not the petitioner could be considered as a submitted his receipt to the probate court in order that his right over
possessor in good faith and in the concept of owner. (p. 11, the subject land could be recognized-assuming of course that the
Rollo) receipt could be regarded as sufficient proof.

Petitioner's contention that he was denied his day in court holds no Anent his possession of the land, petitioner cannot be deemed a
water. Petitioner does not deny the fact that he failed to appear on the possessor in good faith in view of the registration of the ownership of
date set for hearing on September 14, 1967 and as a consequence of the land. To consider petitioner in good faith would be to put a
his non-appearance, the order of dismissal was issued, as provided premium on his own gross negligence. The Court resolved to DENY
for by Section 3, Rule 17 of the Revised Rules of Court. the petition for lack of merit and to AFFIRM the assailed judgment.

Moreover, as pointed out by private respondent in its brief, the hearing Feria (Chairman), Fernan, Alampay and Gutierrez, Jr., JJ., concur.
on June 11, 1967 was not ex parte. Petitioner was represented by his
counsel on said date, and therefore, petitioner was given his day in
Court.

The main objection of the petition in the lower court's proceeding is


the reception of respondent's evidence without declaring petitioner in
default. We find that there was no necessity to declare petitioner in
default since he had filed his answer to the counterclaim of
respondent.

Petitioner anchors his main arguments on the receipt (Exh. 1) dated


May 2, 1950, as a basis of a valid sale. An examination of the receipt
reveals that the same can neither be regarded as a contract of sale or
a promise to sell. There was merely an acknowledgment of the sum of
One Thousand Pesos (P1,000.00). There was no agreement as to the
total purchase price of the land nor to the monthly installment to be
paid by the petitioner. The requisites of a valid Contract of Sale
namely 1) consent or meeting of the minds of the parties; 2)
determinate subject matter; 3) price certain in money or its equivalent-
are lacking in said receipt and therefore the "sale" is not valid nor
enforceable. Furthermore, it is a fact that Dona Clara Tambunting died
on April 22, 1950. Her estate was thereafter under custodia legis of
the Probate Court which appointed Don Vicente Legarda as Special
Administrator on August 28, 1950. Don Vicente Legarda entered into
said sale in his own personal-capacity and without court approval,
consequently, said sale cannot bind the estate of Clara Tambunting.
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Republic of the Philippines doors, sash and windows for the public but only upon special
SUPREME COURT order of its select customers. . . . I cannot believe that
Manila petitioner company would take, as in fact it has taken, all the
trouble and expense of registering a special trade name for its
EN BANC sash business and then orders company stationery carrying
the bold print "Oriental Sash Factory (Celestino Co &
G.R. No. L-8506 August 31, 1956 Company, Prop.) 926 Raon St. Quiapo, Manila, Tel. No.
33076, Manufacturers of all kinds of doors, windows, sashes,
CELESTINO CO & COMPANY, petitioner, furniture, etc. used season-dried and kiln-dried lumber, of the
vs. best quality workmanships" solely for the purpose of supplying
COLLECTOR OF INTERNAL REVENUE, respondent. the needs for doors, windows and sash of its special and
limited customers. One ill note that petitioner has chosen for
Office of the Solicitor General Ambrosio Padilla, Fisrt Assistant its tradename and has offered itself to the public as a
Solicitor General Guillermo E. Torres and Solicitor Federico V. Sian "Factory", which means it is out to do business, in its chosen
for respondent. lines on a big scale. As a general rule, sash factories receive
orders for doors and windows of special design only in
particular cases but the bulk of their sales is derived from a
BENGZON, J.:
ready-made doors and windows of standard sizes for the
average home. Moreover, as shown from the investigation of
Appeal from a decision of the Court of Tax Appeals. petitioner's book of accounts, during the period from January
1, 1952 to September 30, 1952, it sold sash, doors and
Celestino Co & Company is a duly registered general copartnership windows worth P188,754.69. I find it difficult to believe that this
doing business under the trade name of "Oriental Sash Factory". amount which runs to six figures was derived by petitioner
From 1946 to 1951 it paid percentage taxes of 7 per cent on the gross entirely from its few customers who made special orders for
receipts of its sash, door and window factory, in accordance with these items.
section one hundred eighty-six of the National Revenue Code
imposing taxes on sale of manufactured articles. However in 1952 it Even if we were to believe petitioner's claim that it does not
began to claim liability only to the contractor's 3 per cent tax (instead manufacture ready-made sash, doors and windows for the
of 7 per cent) under section 191 of the same Code; and having failed public and that it makes these articles only special order of its
to convince the Bureau of Internal Revenue, it brought the matter to customers, that does not make it a contractor within the
the Court of Tax Appeals, where it also failed. Said the Court: purview of section 191 of the national Internal Revenue Code.
there are no less than fifty occupations enumerated in the
To support his contention that his client is an ordinary aforesaid section of the national Internal Revenue Code
contractor . . . counsel presented . . . duplicate copies of subject to percentage tax and after reading carefully each and
letters, sketches of doors and windows and price quotations every one of them, we cannot find under which the business of
supposedly sent by the manager of the Oriental Sash Factory manufacturing sash, doors and windows upon special order of
to four customers who allegedly made special orders to doors customers fall under the category of "road, building,
and window from the said factory. The conclusion that counsel navigation, artesian well, water workers and other construction
would like us to deduce from these few exhibits is that the work contractors" are those who alter or repair buildings,
Oriental Sash Factory does not manufacture ready-made structures, streets, highways, sewers, street railways railroads
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logging roads, electric lines or power lines, and includes any Since the petitioner, by clear proof of facts not disputed by the
other work for the construction, altering or repairing for which respondent, manufacturers sash, windows and doors only for
machinery driven by mechanical power is used. (Payton vs. special customers and upon their special orders and in
City of Anadardo 64 P. 2d 878, 880, 179 Okl. 68). accordance with the desired specifications of the persons
ordering the same and not for the general market: since the
Having thus eliminated the feasibility off taxing petitioner as a doors ordered by Don Toribio Teodoro & Sons, Inc., for
contractor under 191 of the national Internal Revenue Code, instance, are not in existence and which never would have
this leaves us to decide the remaining issue whether or not existed but for the order of the party desiring it; and since
petitioner could be taxed with lesser strain and more accuracy petitioner's contractual relation with his customers is that of a
as seller of its manufactured articles under section 186 of the contract for a piece of work or since petitioner is engaged in
same code, as the respondent Collector of Internal Revenue the sale of services, it follows that the petitioner should be
has in fact been doing the Oriental Sash Factory was taxed under section 191 of the Tax Code and NOT under
established in 1946. section 185 of the same Code." (Appellant's brief, p. 11-12).

The percentage tax imposed in section 191 of our Tax Code is But the argument rests on a false foundation. Any builder or
generally a tax on the sales of services, in contradiction with homeowner, with sufficient money, may order windows or doors of the
the tax imposed in section 186 of the same Code which is a kind manufactured by this appellant. Therefore it is not true that it
tax on the original sales of articles by the manufacturer, serves special customers only or confines its services to them alone.
producer or importer. (Formilleza's Commentaries and And anyone who sees, and likes, the doors ordered by Don Toribio
Jurisprudence on the National Internal Revenue Code, Vol. II, Teodoro & Sons Inc. may purchase from appellant doors of the same
p. 744). The fact that the articles sold are manufactured by the kind, provided he pays the price. Surely, the appellant will not refuse,
seller does not exchange the contract from the purview of for it can easily duplicate or even mass-produce the same doors-it is
section 186 of the National Internal Revenue Code as a sale of mechanically equipped to do so.
articles.
That the doors and windows must meet desired specifications is
There was a strong dissent; but upon careful consideration of the neither here nor there. If these specifications do not happen to be of
whole matter are inclines to accept the above statement of the facts the kind habitually manufactured by appellant special forms for
and the law. The important thing to remember is that Celestino Co & sash, mouldings of panels it would not accept the order and no
Company habitually makes sash, windows and doors, as it has sale is made. If they do, the transaction would be no different from a
represented in its stationery and advertisements to the public. That it purchasers of manufactured goods held is stock for sale; they are
"manufactures" the same is practically admitted by appellant itself. bought because they meet the specifications desired by the
The fact that windows and doors are made by it only when customers purchaser.
place their orders, does not alter the nature of the establishment, for it
is obvious that it only accepted such orders as called for the Nobody will say that when a sawmill cuts lumber in accordance with
employment of such material-moulding, frames, panels-as it ordinarily the peculiar specifications of a customer-sizes not previously held in
manufactured or was in a position habitually to manufacture. stock for sale to the public-it thereby becomes an employee or servant
of the customer,1 not the seller of lumber. The same consideration
Perhaps the following paragraph represents in brief the appellant's applies to this sash manufacturer.
position in this Court:

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The Oriental Sash Factory does nothing more than sell the goods that generally performed by it-it thereby contracts for a piece of work
it mass-produces or habitually makes; sash, panels, mouldings, filing special orders within the meaning of Article 1467. The orders
frames, cutting them to such sizes and combining them in such forms herein exhibited were not shown to be special. They were merely
as its customers may desire. orders for work nothing is shown to call them special requiring
extraordinary service of the factory.
On the other hand, petitioner's idea of being a contractor doing
construction jobs is untenable. Nobody would regard the doing of two The thought occurs to us that if, as alleged-all the work of appellant is
window panels a construction work in common parlance.2 only to fill orders previously made, such orders should not be
called special work, but regular work. Would a factory do business
Appellant invokes Article 1467 of the New Civil Code to bolster its performing only special, extraordinary or peculiar merchandise?
contention that in filing orders for windows and doors according to
specifications, it did not sell, but merely contracted for particular Anyway, supposing for the moment that the transactions were not
pieces of work or "merely sold its services". sales, they were neither lease of services nor contract jobs by a
contractor. But as the doors and windows had been admittedly
Said article reads as follows: "manufactured" by the Oriental Sash Factory, such transactions could
be, and should be taxed as "transfers" thereof under section 186 of
A contract for the delivery at a certain price of an article which the National Revenue Code.
the vendor in the ordinary course of his business
manufactures or procures for the general market, whether the The appealed decision is consequently affirmed. So ordered.
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
contract for a piece of work.

It is at once apparent that the Oriental Sash Factory did not merely
sell its services to Don Toribio Teodoro & Co. (To take one instance)
because it also sold the materials. The truth of the matter is that it sold
materials ordinarily manufactured by it sash, panels, mouldings
to Teodoro & Co., although in such form or combination as suited the
fancy of the purchaser. Such new form does not divest the Oriental
Sash Factory of its character as manufacturer. Neither does it take the
transaction out of the category of sales under Article 1467 above
quoted, because although the Factory does not, in the ordinary course
of its business, manufacture and keep on stockdoors of the kind sold
to Teodoro, it could stock and/or probably had in stock the sash,
mouldings and panels it used therefor (some of them at least).

In our opinion when this Factory accepts a job that requires the use of
extraordinary or additional equipment, or involves services not

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Republic of the Philippines For this business venture, private respondent kept samples or models
SUPREME COURT of its woodwork on display from where its customers may refer to
Manila when placing their orders.

THIRD DIVISION Sometime in March 1979, the examiners of the petitioner


Commissioner of Internal Revenue conducted an investigation of the
G.R. No. 71122 March 25, 1988 business tax liabilities of private respondent pursuant to Letter of
Authority No. 08307 NA dated November 23, 1978. As per the
COMMISSIONER OF INTERNAL REVENUE, petitioner, examination, the total gross sales of private respondent for the year
vs. 1977 from both its local and foreign dealings amounted to
ARNOLDUS CARPENTRY SHOP, INC. and COURT OF TAX P5,162,787.59 (Rollo. p. 60). From this amount, private respondent
APPEALS, respondents. reported in its quarterly percentage tax returns P2,471,981.62 for its
gross local sales. The balance of P2,690,805.97, which is 52% of the
The Solicitor General for petitioner. total gross sales, was considered as its gross export sales (CTA
Decision, p. 12).
Generoso Jacinto for respondents.
Based on such an examination, BIR examiners Honesto A. Vergel de
Dios and Voltaire Trinidad made a report to the Commissioner
classifying private respondent as an "other independent contractor"
under Sec. 205 (16) [now Sec. 169 (q)] of the Tax Code. The relevant
CORTES, J.:
portion of the report reads:
Assailed in this petition is the decision of the Court of Tax Appeals in
Examination of the records show that per purchase
CTA case No. 3357 entitled "ARNOLDUS CARPENTRY SHOP, INC.
orders, which are hereby attached, of the taxpayer's
v. COMMISSIONER OF INTERNAL REVENUE."
customers during the period under review, subject
corporation should be considered a contractor and not
The facts are simple. a manufacturer. The corporation renders service in the
course of an independent occupation representing the
Arnoldus Carpentry Shop, Inc. (private respondent herein) is a will of his employer only as to the result of his work,
domestic corporation which has been in existence since 1960. It has and not as to the means by which it is accomplished,
for its secondary purpose the "preparing, processing, buying, selling, (Luzon Stevedoring Co. v. Trinidad, 43 Phil. 803).
exporting, importing, manufacturing, trading and dealing in cabinet Hence, in the computation of the percentage tax, the
shop products, wood and metal home and office furniture, cabinets, 3% contractor's tax should be imposed instead of the
doors, windows, etc., including their component parts and materials, 7% manufacturer's tax. [Rollo, p. 591 (Emphasis
of any and all nature and description" (Rollo, pp. 160-161). These supplied.)
furniture, cabinets and other woodwork were sold locally and exported
abroad. xxx xxx xxx

As a result thereof, the examiners assessed private respondent for


deficiency tax in the amount of EIGHTY EIGHT THOUSAND NINE
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HUNDRED SEVENTY TWO PESOS AND TWENTY THREE Hence, this petition for review wherein petitioner raises the sole issue
CENTAVOS ( P88,972.23 ). Later, on January 31, 1981, private of. Whether or not the Court of Tax Appeals erred in holding that
respondent received a letter/notice of tax deficiency assessment private respondent is a manufacturer and not a contractor and
inclusive of charges and interest for the year 1977 in the amount of therefore not liable for the amount of P108,720.92, as deficiency
ONE HUNDRED EIGHT THOUSAND SEVEN HUNDRED TWENTY contractor's tax, inclusive of surcharge and interest, for the year 1977.
PESOS AND NINETY TWO CENTAVOS ( P 108,720.92 ). This tax
deficiency was a consequence of the 3% tax imposed on private The petition is without merit.
respondent's gross export sales which, in turn, resulted from the
examiners' finding that categorized private respondent as a contractor 1. Private respondent is a "manufacturer" as defined in the Tax Code
(CTA decision, p.2). and not a "contractor" under Section 205(e) of the Tax Code as
petitioner would have this Court decide.
Against this assessment, private respondent filed on February 19,
1981 a protest with the petitioner Commissioner of Internal Revenue. (a) Section 205 (16) [now Sec. 170 (q)] of the Tax
In the protest letter, private respondent's manager maintained that the Code defines "independent contractors" as:
carpentry shop is a manufacturer and therefor entitled to tax
exemption on its gross export sales under Section 202 (e) of the ... persons (juridical and natural) not enumerated
National Internal Revenue Code. He explained that it was the 7% tax above (but not including individuals subject to the
exemption on export sales which prompted private respondent to occupation tax under Section 12 of the Local Tax
exploit the foreign market which resulted in the increase of its foreign Code) whose activity consists essentially of the sale of
sales to at least 52% of its total gross sales in 1977 (CTA decision, all kinds of services for a fee regardless of whether or
pp. 1213). not the performance of the service calls for the
exercise or use of the physical or mental faculties of
On June 23, 1981, private respondent received the final decision of such contractors or their employees. (Emphasis
the petitioner stating: supplied.)

It is the stand of this Office that you are considered a Private respondent's business does not fall under this definition.
contractor an not a manufacturer. Records show that
you manufacture woodworks only upon previous order Petitioner contends that the fact that private respondent "designs and
from supposed manufacturers and only in accordance makes samples or models that are 'displayed' or presented or
with the latter's own design, model number, color, etc. 'submitted' to prospective buyers who 'might choose' therefrom"
[Rollo p. 64] (Emphasis supplied.) signifies that what private respondent is selling is a kind of service its
shop is capable of rendering in terms of woodwork skills and
On July 22, 1981, private respondent appealed to the Court of Tax craftsmanship (Brief for Petitioner, p. 6). He further stresses the point
Appeals alleging that the decision of the Commissioner was contrary that if there are no orders placed for goods as represented by the
to law and the facts of the case. sample or model, the shop does not produce anything; on the other
hand, if there are orders placed, the shop goes into fall production to
On April 22, 1985, respondent Court of Tax Appeals rendered the fill up the quantity ordered (Petitioner's Brief, p. 7).
questioned decision holding that private respondent was a
manufacturer thereby reversing the decision of the petitioner.

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The facts of the case do not support petitioner's claim. Petitioner is And in all the purchase orders presented as exhibits,
ignoring the fact that private respondent sells goods which it keeps in whether from foreign or local buyers, reference was
stock and not services. As the respondent Tax Court had found: made to the model number of the product being
ordered or to the sample submitted by petitioner.
xxx xxx xxx
Respondent's examiners, in their memorandum to the
Petitioner [private respondent herein] claims, and the Commissioner of Internal Revenue, stated that
records bear petitioner out, that it had a ready stock of petitioner manufactured only upon previous orders
its shop products for sale to its foreign and local from customers and "only in accordance with the
buyers. As a matter of fact, the purchase orders from latter's own design, model number, color, etc." (Exh.
its foreign buyers showed that they ordered by referring '1', p. 27, BIR records.) Their bare statement that the
to the models designated by petitioner. Even model numbers and designs were the customers' own,
purchases by local buyers for television cabinets unaccompanied by adequate evidence, is difficult to
(Exhs. '2 to13', pp. 1-13, BIR records) were by orders believe. It ignores commonly accepted and recognized
for existing models except only for some adjustments business practices that it is not the customer but the
in sizes and accessories utilized. manufacturer who furnishes the samples or models
from which the customers select when placing their
With regard to the television cabinets, petitioner orders, The evidence adduced by petitioner to prove
presented three witnesses its bookkeeper, production that the model numbers and designs were its own is
manager and manager who testified that samples of more convincing [CTA decision, pp. 6-8.] (Emphasis
television cabinets were designed and made by supplied)
petitioner, from which models the television companies
such as Hitachi National and others might choose, then xxx xxx xxx
specified whatever innovations they desired. If found to
be saleable, some television cabinets were This Court finds no reason to disagree with the Tax Court's finding of
manufactured for display and sold to the general fact. It has been consistently held that while the decisions of the Court
public. These cabinets were not exported but only sold of Tax Appeals are appealable to the Supreme Court, the former's
locally. (t.s.n., pp. 2235, February 18,1982; t.s.n., pp. finding of fact are entitled to the highest respect. The factual findings
7-10, March 25, 1982; t.s.n., pp. 3-6, August 10, 1983.) can only be disturbed on the part of the tax court [Collector of Intern.
al Revenue v. Henderson, L-12954, February 28, 1961, 1 SCRA 649;
xxx xxx xxx Aznar v. Court of Tax Appeals, L-20569, Aug. 23, 1974, 58 SCRA
519; Raymundo v. de Joya, L-27733, Dec. 3, 1980, 101 SCRA 495;
In the case of petitioner's other woodwork products Industrial Textiles Manufacturing Co. of the Phils. , Inc. v.
such as barometer cases, knife racks, church furniture, Commissioner of Internal Revenue, L-27718 and L-27768, May
school furniture, knock down chairs, etc., petitioner's 27,1985,136 SCRA 549.]
above-mentioned witnesses testified that these were
manufactured without previous orders. Samples were (b) Neither can Article 1467 of the New Civil Code help petitioner's
displayed, and if in stock, were available for immediate cause. Article 1467 states:
sale to local and foreign customers. Such testimony
was not contradicted by respondent (petitioner herein).
Abueva| Page 10 of 46
A contract for the delivery at a certain price of an article Which the entitled to the greatest weight as an administrative view [National
vendor in the ordinary course of his business manufactures or Federation of Sugar Workers (NFSW) v. Ovejera, G.R. No. 59743,
procures for the - general market, whether the same is on hand at the May 31, 1982, 114 SCRA 354, 391; Sierra Madre Trust v. Hon. Sec.
time or not, is a contract of sale, but if the goods are to be of Agriculture and Natural Resources, Nos. 32370 and 32767, April
manufactured specially for the customer and upon his special order, 20, 1983,121 SCRA 384; Espanol v. Chairman and Members of the
and not for the general market, it is a contract for a piece of work. Board of Administrators, Phil. Veterans Administration, L-44616, June
29, 1985, 137 SCRA 3141, "one who has ready for the sale to the
Petitioner alleged that what exists prior to any order is but the sample general public finished furniture is a manufacturer, and the mere fact
model only, nothing more, nothing less and the ordered quantity that he did not have on hand a particular piece or pieces of furniture
would never have come into existence but for the particular order as ordered does not make him a contractor only" (BIR Ruling No. 33-1,
represented by the sample or model [Brief for Petitioner, pp. 9-101.] series of 1960). Likewise,

Petitioner wants to impress upon this Court that under Article 1467, xxx xxx xxx
the true test of whether or not the contract is a piece of work (and thus
classifying private respondent as a contractor) or a contract of sale When the vendor enters into a contract for the delivery
(which would classify private respondent as a manufacturer) is of an article which in the ordinary course of his
the mere existence of the product at the time of the perfection of the business he manufactures or procures for the general
contract such that if the thing already exists, the contract is of sale, if market at a price certain (Art. 1458) such contract is
not, it is work. one of sale even if at the time of contracting he may
not have such article on hand. Such articles fall within
This is not the test followed in this jurisdiction. As can be clearly seen the meaning of "future goods" mentioned in Art. 1462,
from the wordings of Art. 1467, what determines whether the contract par. 1. [5 Padilla, Civil Law: Civil Code Annotated 139
is one of work or of sale is whether the thing has been manufactured (1974)
specially for the customer and upon his special order." Thus, if the
thing is specially done at the order of another, this is a contract for a xxx xxx xxx
piece of work. If, on the other hand, the thing is manufactured or
procured for the general market in the ordinary course of one's These considerations were what precisely moved the respondent
business, it is a b contract of sale. Court of Tax Appeals to rule that 'the fact that [private respondent]
kept models of its products... indicate that these products were for
Jurisprudence has followed this criterion. As held in Commissioner of sale to the general public and not for special orders,' citing Celestino
Internal Revenue v. Engineering Equipment and Supply Co. (L-27044 Co and Co. v. Collector of Internal Revenue [99 Phil, 841 (1956)].
and L-27452, June 30, 1975, 64 SCRA 590, 597), "the distinction (CTA Decision, pp. 8-9.)
between a contract of sale and one for work, labor and materials is
tested by the inquiry whether the thing transferred is one not in Petitioner alleges that the error of the respondent Tax Court was due
existence and which never would have existed but for the order of the to the 'heavy albeit misplaced and indiscriminate reliance on the case
party desiring to acquire it, or a thing which would have existed and of Celestino Co and Co. v. Collector of Internal Revenue [99 Phil. 841,
has been the subject of sale to some other persons even if the order 842 (1956)] which is not a case in point' 1 Brief for Petitioner, pp. 14-
had not been given." (Emphasis supplied.) And in a BIR ruling, which 15). The Commissioner of Internal Revenue made capital of the
as per Sec. 326 (now Sec. 277) of the Tax Court the Commissioner difference between the kinds of business establishments involved a
has the power to make and which, as per settled jurisprudence is FACTORY in the Celestino Co case and a CARPENTRY SHOP in
Abueva| Page 11 of 46
this case (Brief for Petitioner, pp. 14-18). Petitioner seems to have In this wise, it is noteworthy to again cite the findings of fact of the
missed the whole point in the former case. respondent Tax Court:

True, the former case did mention the fact of the business concern xxx xxx xxx
being a FACTORY, Thus:
Petitioner [private respondent herein] claims, and the
xxx xxx xxx records bear petitioner out, that it had a ready stock of
its shop products for sale to its foreign and local
... I cannot believe that petitioner company would take, buyers. As a matter of fact, the purchase orders from
as in fact it has taken, all the trouble and expense of its foreign buyers showed that they ordered by referring
registering a special trade name for its sash business to the models designed by petitioner. Even purchases
and then orders company stationery carrying the bold by local buyers for television cabinets... were by orders
print "Oriental Sash Factory (Celestino Co and for existing models. ...
Company, Prop.) 926 Raon St., Quiapo, Manila, Tel.
No. 33076, Manufacturers of all kinds of doors, With regard to the television cabinets, petitioner
windows, sashes furniture, etc. used season dried and presented three witnesses... who testified that samples
kiln-dried lumber, of the best quality workmanship" of television cabinets were designed and made by
solely for the purpose of supplying the need for doors, petitioner, from which models the television companies
windows and sash of its special and limited customers. ... might choose, then specified whatever innovations
One will note that petitioner has chosen for its trade they desired. If found to be saleable, some television
name and has offered itself to the public as a cabinets were manufactured for display and sold to the
FACTORY, which means it is out to do business in its general public.
chosen lines on a big scale. As a general rule, sash
factories receive orders for doors and windows of xxx xxx xxx
special design only in particular cases but the bulk of
their sales is derived from ready-made doors and In the case of petitioner's other woodwork products...
windows of standard sizes for the average home. these were manufactured without previous
[Emphasis supplied.] orders. Samples were displayed, and if in stock, were
available for immediate sale to local and foreign
xxx xxx xxx customers. (CTA decision, pp. 6-8.1 [Emphasis
supplied.]
However, these findings were merely attendant facts to show what the
Court was really driving at thehabituality of the production of the (c) The private respondent not being a "contractor" as defined by the
goods involved for the general public. Tax Code or of the New Civil Code, is it a 'manufacturer' as countered
by the carpentry shop?
In the instant case, it may be that what is involved is a CARPENTRY
SHOP. But, in the same vein, there are also attendant facts herein to Sec. 187 (x) [now Sec. 157 (x)] of the Tax Code defines a
show habituality of the production for the general public. manufacturer' as follows:

Abueva| Page 12 of 46
"Manufacturer" includes every person who by physical the tax exemption under See. 202 (d) and (e) mow Sec. 167 (d) and
or chemical process alters the exterior texture or form (e)] of the Tax Code which states:
or inner substance of any raw material or manufactured
or partially manufactured product in such manner as to Sec. 202. Articles not subject to percentage tax on
prepare it for a special use or uses to which it could not sales. The following shall be exempt from the
have been in its original condition, or who by any such percentage taxes imposed in Sections 194, 195, 196,
process alters the quality or any such raw material or 197, 198, 199, and 201:
manufactured or partially manufactured product so as
to reduce it to marketable shape or prepare it for any of xxx xxx xxx
the uses of industry, or who by any such process
combines any such raw material or manufactured or (d) Articles shipped or exported by the manufacturer or
partially manufactured products with other materials or producer, irrespective of any shipping arrangement that
products of the same or different kinds and in such may be agreed upon which may influence or determine
manner that the finished product of such process or the transfer of ownership of the articles so exported.
manufacture can be put to a special use or uses to
which such raw material or manufactured or partially (e) Articles sold by "registered export producers" to (1)
manufactured products in their original condition would other" registered export producers" (2) "registered
not have been put, and who in addition alters such raw export traders' or (3) foreign tourists or travelers, which
material or manufactured or partially manufactured are considered as "export sales."
products, or combines the same to produce such
finished products for the purpose of their sale or
The law is clear on this point. It is conceded that as a rule, as argued
distribution to others and not for his own use or
by petitioner, any claim for tax exemption from tax statutes is strictly
consumption.
construed against the taxpayer and it is contingent upon private
respondent as taxpayer to establish a clear right to tax exemption
It is a basic rule in statutory construction that when the language of [Brief for Petitioners, p. 181. Tax exemptions are strictly construed
the law is clear and unequivocal, the law must be taken to mean against the grantee and generally in favor of the taxing authority [City
exactly what it says [Banawa et al. v. Mirano et al., L-24750, May 16, of Baguio v. Busuego, L-29772, Sept. 18, 1980, 100 SCRA 1161; they
1980, 97 SCRA 517, 533]. are looked upon with disfavor [Western Minolco Corp. v.
Commissioner Internal Revenue, G.R. No. 61632, Aug. 16,1983,124
The term "manufacturer" had been considered in its ordinary and 1211. They are held strictly against the taxpayer and if expressly
general usage. The term has been construed broadly to include such mentioned in the law, must at least be within its purview by clear
processes as buying and converting duck eggs to salted eggs ('balut") legislative intent [Commissioner of Customs v. Phil., Acetylene Co., L-
[Ngo Shiek v. Collector of Internal Revenue, 100 Phil. 60 (1956)1; the 22443, May 29, 1971, 39 SCRA 70, Light and Power Co. v.
processing of unhusked kapok into clean kapok fiber [Oriental Kapok Commissioner of Customs, G.R. L-28739 and L-28902, March 29,
Industries v. Commissioner of Internal Revenue, L-17837, Jan. 31, 1972, 44 SCRA 122].
1963, 7 SCRA 132]; or making charcoal out of firewood Bermejo v.
Collector of Internal Revenue, 87 Phil. 96 (1950)]. Conversely therefore, if there is an express mention or if the taxpayer
falls within the purview of the exemption by clear legislative intent,
2. As the Court of Tax Appeals did not err in holding that private then the rule on strict construction will not apply. In the present case
respondent is a "manufacturer," then private respondent is entitled to
Abueva| Page 13 of 46
the respondent Tax Court did not err in classifying private respondent
as a "manufacturer". Clearly, the 'latter falls with the term
'manufacturer' mentioned in Art. 202 (d) and (e) of the Tax Code. As
the only question raised by petitioner in relation to this tax exemption
claim by private respondent is the classification of the latter as a
manufacturer, this Court affirms the holding of respondent Tax Court
that private respondent is entitled to the percentage tax exemption on
its export sales.

There is nothing illegal in taking advantage of tax exemptions. When


the private respondent was still exporting less and producing locally
more, the petitioner did not question its classification as a
manufacturer. But when in 1977 the private respondent produced
locally less and exported more, petitioner did a turnabout and
imposed the contractor's tax. By classifying the private respondent as
a contractor, petitioner would likewise take away the tax exemptions
granted under Sec. 202 for manufacturers. Petitioner's action finds no
support in the applicable law.

WHEREFORE, the Court hereby DENIES the Petition for lack of merit
and AFFIRMS the Court of Tax Appeals decision in CTA Case No.
3357.

SO ORDERED.

Abueva| Page 14 of 46
Republic of the Philippines (B) Mr. Parsons binds himself to pay Mr. Quiroga for the beds
SUPREME COURT received, within a period of sixty days from the date of their
Manila shipment.

EN BANC (C) The expenses for transportation and shipment shall be


borne by M. Quiroga, and the freight, insurance, and cost of
G.R. No. L-11491 August 23, 1918 unloading from the vessel at the point where the beds are
received, shall be paid by Mr. Parsons.
ANDRES QUIROGA, plaintiff-appellant,
vs. (D) If, before an invoice falls due, Mr. Quiroga should request
PARSONS HARDWARE CO., defendant-appellee. its payment, said payment when made shall be considered as
a prompt payment, and as such a deduction of 2 per cent shall
Alfredo Chicote, Jose Arnaiz and Pascual B. Azanza for appellant. be made from the amount of the invoice.
Crossfield & O'Brien for appellee.
The same discount shall be made on the amount of any
AVANCEA, J.: invoice which Mr. Parsons may deem convenient to pay in
cash.
On January 24, 1911, in this city of manila, a contract in the following
tenor was entered into by and between the plaintiff, as party of the (E) Mr. Quiroga binds himself to give notice at least fifteen
first part, and J. Parsons (to whose rights and obligations the present days before hand of any alteration in price which he may plan
defendant later subrogated itself), as party of the second part: to make in respect to his beds, and agrees that if on the date
when such alteration takes effect he should have any order
CONTRACT EXECUTED BY AND BETWEEN pending to be served to Mr. Parsons, such order shall enjoy
ANDRES QUIROGA AND J. PARSONS, BOTH the advantage of the alteration if the price thereby be lowered,
MERCHANTS ESTABLISHED IN MANILA, FOR THE but shall not be affected by said alteration if the price thereby
EXCLUSIVE SALE OF "QUIROGA" BEDS IN THE be increased, for, in this latter case, Mr. Quiroga assumed the
VISAYAN ISLANDS. obligation to invoice the beds at the price at which the order
was given.
ARTICLE 1. Don Andres Quiroga grants the exclusive right to
sell his beds in the Visayan Islands to J. Parsons under the (F) Mr. Parsons binds himself not to sell any other kind except
following conditions: the "Quiroga" beds.

(A) Mr. Quiroga shall furnish beds of his manufacture to Mr. ART. 2. In compensation for the expenses of advertisement
Parsons for the latter's establishment in Iloilo, and shall invoice which, for the benefit of both contracting parties, Mr. Parsons
them at the same price he has fixed for sales, in Manila, and, may find himself obliged to make, Mr. Quiroga assumes the
in the invoices, shall make and allowance of a discount of 25 obligation to offer and give the preference to Mr. Parsons in
per cent of the invoiced prices, as commission on the sale; case anyone should apply for the exclusive agency for any
and Mr. Parsons shall order the beds by the dozen, whether of island not comprised with the Visayan group.
the same or of different styles.
Abueva| Page 15 of 46
ART. 3. Mr. Parsons may sell, or establish branches of his and, on the part of the defendant, to pay their price. These features
agency for the sale of "Quiroga" beds in all the towns of the exclude the legal conception of an agency or order to sell whereby the
Archipelago where there are no exclusive agents, and shall mandatory or agent received the thing to sell it, and does not pay its
immediately report such action to Mr. Quiroga for his approval. price, but delivers to the principal the price he obtains from the sale of
the thing to a third person, and if he does not succeed in selling it, he
ART. 4. This contract is made for an unlimited period, and may returns it. By virtue of the contract between the plaintiff and the
be terminated by either of the contracting parties on a previous defendant, the latter, on receiving the beds, was necessarily obliged
notice of ninety days to the other party. to pay their price within the term fixed, without any other consideration
and regardless as to whether he had or had not sold the beds.
Of the three causes of action alleged by the plaintiff in his complaint,
only two of them constitute the subject matter of this appeal and both It would be enough to hold, as we do, that the contract by and
substantially amount to the averment that the defendant violated the between the defendant and the plaintiff is one of purchase and sale, in
following obligations: not to sell the beds at higher prices than those of order to show that it was not one made on the basis of a commission
the invoices; to have an open establishment in Iloilo; itself to conduct on sales, as the plaintiff claims it was, for these contracts are
the agency; to keep the beds on public exhibition, and to pay for the incompatible with each other. But, besides, examining the clauses of
advertisement expenses for the same; and to order the beds by the this contract, none of them is found that substantially supports the
dozen and in no other manner. As may be seen, with the exception of plaintiff's contention. Not a single one of these clauses necessarily
the obligation on the part of the defendant to order the beds by the conveys the idea of an agency. The words commission on sales used
dozen and in no other manner, none of the obligations imputed to the in clause (A) of article 1 mean nothing else, as stated in the contract
defendant in the two causes of action are expressly set forth in the itself, than a mere discount on the invoice price. The word agency,
contract. But the plaintiff alleged that the defendant was his agent for also used in articles 2 and 3, only expresses that the defendant was
the sale of his beds in Iloilo, and that said obligations are implied in a the only one that could sell the plaintiff's beds in the Visayan Islands.
contract of commercial agency. The whole question, therefore, With regard to the remaining clauses, the least that can be said is that
reduced itself to a determination as to whether the defendant, by they are not incompatible with the contract of purchase and sale.
reason of the contract hereinbefore transcribed, was a purchaser or
an agent of the plaintiff for the sale of his beds. The plaintiff calls attention to the testimony of Ernesto Vidal, a former
vice-president of the defendant corporation and who established and
In order to classify a contract, due regard must be given to its managed the latter's business in Iloilo. It appears that this witness,
essential clauses. In the contract in question, what was essential, as prior to the time of his testimony, had serious trouble with the
constituting its cause and subject matter, is that the plaintiff was to defendant, had maintained a civil suit against it, and had even
furnish the defendant with the beds which the latter might order, at the accused one of its partners, Guillermo Parsons, of falsification. He
price stipulated, and that the defendant was to pay the price in the testified that it was he who drafted the contract Exhibit A, and, when
manner stipulated. The price agreed upon was the one determined by questioned as to what was his purpose in contracting with the plaintiff,
the plaintiff for the sale of these beds in Manila, with a discount of replied that it was to be an agent for his beds and to collect a
from 20 to 25 per cent, according to their class. Payment was to be commission on sales. However, according to the defendant's
made at the end of sixty days, or before, at the plaintiff's request, or in evidence, it was Mariano Lopez Santos, a director of the corporation,
cash, if the defendant so preferred, and in these last two cases an who prepared Exhibit A. But, even supposing that Ernesto Vidal has
additional discount was to be allowed for prompt payment. These are stated the truth, his statement as to what was his idea in contracting
precisely the essential features of a contract of purchase and sale. with the plaintiff is of no importance, inasmuch as the agreements
There was the obligation on the part of the plaintiff to supply the beds, contained in Exhibit A which he claims to have drafted, constitute, as
Abueva| Page 16 of 46
we have said, a contract of purchase and sale, and not one of them, he waives his right and cannot complain for having acted thus
commercial agency. This only means that Ernesto Vidal was mistaken at his own free will.
in his classification of the contract. But it must be understood that a
contract is what the law defines it to be, and not what it is called by For the foregoing reasons, we are of opinion that the contract by and
the contracting parties. between the plaintiff and the defendant was one of purchase and sale,
and that the obligations the breach of which is alleged as a cause of
The plaintiff also endeavored to prove that the defendant had returned action are not imposed upon the defendant, either by agreement or by
beds that it could not sell; that, without previous notice, it forwarded to law.
the defendant the beds that it wanted; and that the defendant received
its commission for the beds sold by the plaintiff directly to persons in The judgment appealed from is affirmed, with costs against the
Iloilo. But all this, at the most only shows that, on the part of both of appellant. So ordered.
them, there was mutual tolerance in the performance of the contract in
disregard of its terms; and it gives no right to have the contract
considered, not as the parties stipulated it, but as they performed it.
Only the acts of the contracting parties, subsequent to, and in
connection with, the execution of the contract, must be considered for
the purpose of interpreting the contract, when such interpretation is
necessary, but not when, as in the instant case, its essential
agreements are clearly set forth and plainly show that the contract
belongs to a certain kind and not to another. Furthermore, the return
made was of certain brass beds, and was not effected in exchange for
the price paid for them, but was for other beds of another kind; and for
the letter Exhibit L-1, requested the plaintiff's prior consent with
respect to said beds, which shows that it was not considered that the
defendant had a right, by virtue of the contract, to make this return. As
regards the shipment of beds without previous notice, it is insinuated
in the record that these brass beds were precisely the ones so
shipped, and that, for this very reason, the plaintiff agreed to their
return. And with respect to the so-called commissions, we have said
that they merely constituted a discount on the invoice price, and the
reason for applying this benefit to the beds sold directly by the plaintiff
to persons in Iloilo was because, as the defendant obligated itself in
the contract to incur the expenses of advertisement of the plaintiff's
beds, such sales were to be considered as a result of that
advertisement.

In respect to the defendant's obligation to order by the dozen, the only


one expressly imposed by the contract, the effect of its breach would
only entitle the plaintiff to disregard the orders which the defendant
might place under other conditions; but if the plaintiff consents to fill
Abueva| Page 17 of 46
Republic of the Philippines business in the Philippine Islands, with office in Manila, in
SUPREME COURT addition to its other business, was acting as exclusive agents
Manila in the Philippines for the Starr Piano Company of Richmond,
Indiana, U.S. A. It would seem that this last company dealt in
EN BANC cinematographer equipment and machinery, and the Arco
Amusement Company desiring to equipt its cinematograph
G.R. No. L-47538 June 20, 1941 with sound reproducing devices, approached Gonzalo Puyat &
Sons, Inc., thru its then president and acting manager, Gil
GONZALO PUYAT & SONS, INC., petitioner, Puyat, and an employee named Santos. After some
vs. negotiations, it was agreed between the parties, that is to say,
ARCO AMUSEMENT COMPANY (formerly known as Teatro Salmon and Coulette on one side, representing the plaintiff,
Arco), respondent. and Gil Puyat on the other, representing the defendant, that
the latter would, on behalf of the plaintiff, order sound
Feria & Lao for petitioner. reproducing equipment from the Starr Piano Company and
J. W. Ferrier and Daniel Me. Gomez for respondent. that the plaintiff would pay the defendant, in addition to the
price of the equipment, a 10 per cent commission, plus all
expenses, such as, freight, insurance, banking charges,
LAUREL, J.:
cables, etc. At the expense of the plaintiff, the defendant sent
a cable, Exhibit "3", to the Starr Piano Company, inquiring
This is a petition for the issuance of a writ of certiorari to the Court of about the equipment desired and making the said company to
Appeals for the purpose of reviewing its Amusement Company quote its price without discount. A reply was received by
(formerly known as Teatro Arco), plaintiff-appellant, vs. Gonzalo Puyat Gonzalo Puyat & Sons, Inc., with the price, evidently the list
and Sons. Inc., defendant-appellee." price of $1,700 f.o.b. factory Richmond, Indiana. The
defendant did not show the plaintiff the cable of inquiry nor the
It appears that the respondent herein brought an action against the reply but merely informed the plaintiff of the price of $1,700.
herein petitioner in the Court of First Instance of Manila to secure a Being agreeable to this price, the plaintiff, by means of Exhibit
reimbursement of certain amounts allegedly overpaid by it on account "1", which is a letter signed by C. S. Salmon dated November
of the purchase price of sound reproducing equipment and machinery 19, 1929, formally authorized the order. The equipment arrived
ordered by the petitioner from the Starr Piano Company of Richmond, about the end of the year 1929, and upon delivery of the same
Indiana, U.S.A. The facts of the case as found by the trial court and to the plaintiff and the presentation of necessary papers, the
confirmed by the appellate court, which are admitted by the price of $1.700, plus the 10 per cent commission agreed upon
respondent, are as follows: and plus all the expenses and charges, was duly paid by the
plaintiff to the defendant.
In the year 1929, the "Teatro Arco", a corporation duly
organized under the laws of the Philippine Islands, with its Sometime the following year, and after some negotiations
office in Manila, was engaged in the business of operating between the same parties, plaintiff and defendants, another
cinematographs. In 1930, its name was changed to Arco order for sound reproducing equipment was placed by the
Amusement Company. C. S. Salmon was the president, while plaintiff with the defendant, on the same terms as the first
A. B. Coulette was the business manager. About the same order. This agreement or order was confirmed by the plaintiff
time, Gonzalo Puyat & Sons, Inc., another corporation doing by its letter Exhibit "2", without date, that is to say, that the
Abueva| Page 18 of 46
plaintiff would pay for the equipment the amount of $1,600, fraud in concealing the true price and hence would still be liable to
which was supposed to be the price quoted by the Starr Piano reimburse the respondent for the overpayments made by the latter.
Company, plus 10 per cent commission, plus all expenses
incurred. The equipment under the second order arrived in due The petitioner now claims that the following errors have been incurred
time, and the defendant was duly paid the price of $1,600 with by the appellate court:
its 10 per cent commission, and $160, for all expenses and
charges. This amount of $160 does not represent actual out- I. El Tribunal de Apelaciones incurrio en error de derecho al
of-pocket expenses paid by the defendant, but a mere flat declarar que, segun hechos, entre la recurrente y la recurrida
charge and rough estimate made by the defendant equivalent existia una relacion implicita de mandataria a mandante en la
to 10 per cent of the price of $1,600 of the equipment. transaccion de que se trata, en vez de la de vendedora a
compradora como ha declarado el Juzgado de Primera
About three years later, in connection with a civil case in Instncia de Manila, presidido entonces por el hoy Magistrado
Vigan, filed by one Fidel Reyes against the defendant herein Honorable Marcelino Montemayor.
Gonzalo Puyat & Sons, Inc., the officials of the Arco
Amusement Company discovered that the price quoted to II. El Tribunal de Apelaciones incurrio en error de derecho al
them by the defendant with regard to their two orders declarar que, suponiendo que dicha relacion fuerra de
mentioned was not the net price but rather the list price, and vendedora a compradora, la recurrente obtuvo, mediante dolo,
that the defendants had obtained a discount from the Starr el consentimiento de la recurrida en cuanto al precio de
Piano Company. Moreover, by reading reviews and literature $1,700 y $1,600 de las maquinarias y equipos en cuestion, y
on prices of machinery and cinematograph equipment, said condenar a la recurrente ha obtenido de la Starr Piano
officials of the plaintiff were convinced that the prices charged Company of Richmond, Indiana.
them by the defendant were much too high including the
charges for out-of-pocket expense. For these reasons, they We sustain the theory of the trial court that the contract between the
sought to obtain a reduction from the defendant or rather a petitioner and the respondent was one of purchase and sale, and not
reimbursement, and failing in this they brought the present one of agency, for the reasons now to be stated.
action.
In the first place, the contract is the law between the parties and
The trial court held that the contract between the petitioner and the should include all the things they are supposed to have been agreed
respondent was one of outright purchase and sale, and absolved that upon. What does not appear on the face of the contract should be
petitioner from the complaint. The appellate court, however, by a regarded merely as "dealer's" or "trader's talk", which can not bind
division of four, with one justice dissenting held that the relation either party. (Nolbrook v. Conner, 56 So., 576, 11 Am. Rep., 212;
between petitioner and respondent was that of agent and principal, Bank v. Brosscell, 120 III., 161; Bank v. Palmer, 47 III., 92; Hosser v.
the petitioner acting as agent of the respondent in the purchase of the Copper, 8 Allen, 334; Doles v. Merrill, 173 Mass., 411.) The letters,
equipment in question, and sentenced the petitioner to pay the Exhibits 1 and 2, by which the respondent accepted the prices of
respondent alleged overpayments in the total sum of $1,335.52 or $1,700 and $1,600, respectively, for the sound reproducing equipment
P2,671.04, together with legal interest thereon from the date of the subject of its contract with the petitioner, are clear in their terms and
filing of the complaint until said amount is fully paid, as well as to pay admit no other interpretation that the respondent in question at the
the costs of the suit in both instances. The appellate court further prices indicated which are fixed and determinate. The respondent
argued that even if the contract between the petitioner and the admitted in its complaint filed with the Court of First Instance of Manila
respondent was one of purchase and sale, the petitioner was guilty of that the petitioner agreed to sell to it the first sound reproducing
Abueva| Page 19 of 46
equipment and machinery. The third paragraph of the respondent's that the petitioner is the exclusive agent of the same company in the
cause of action states: Philippines. It is out of the ordinary for one to be the agent of both the
vendor and the purchaser. The facts and circumstances indicated do
3. That on or about November 19, 1929, the herein plaintiff not point to anything but plain ordinary transaction where the
(respondent) and defendant (petitioner) entered into an respondent enters into a contract of purchase and sale with the
agreement, under and by virtue of which the herein defendant petitioner, the latter as exclusive agent of the Starr Piano Company in
was to secure from the United States, and sell and deliver to the United States.
the herein plaintiff, certain sound reproducing equipment and
machinery, for which the said defendant, under and by virtue It follows that the petitioner as vendor is not bound to reimburse the
of said agreement, was to receive the actual cost price plus respondent as vendee for any difference between the cost price and
ten per cent (10%), and was also to be reimbursed for all out the sales price which represents the profit realized by the vendor out
of pocket expenses in connection with the purchase and of the transaction. This is the very essence of commerce without
delivery of such equipment, such as costs of telegrams, which merchants or middleman would not exist.
freight, and similar expenses. (Emphasis ours.)
The respondents contends that it merely agreed to pay the cost price
We agree with the trial judge that "whatever unforseen events might as distinguished from the list price, plus ten per cent (10%)
have taken place unfavorable to the defendant (petitioner), such as commission and all out-of-pocket expenses incurred by the petitioner.
change in prices, mistake in their quotation, loss of the goods not The distinction which the respondents seeks to draw between the cost
covered by insurance or failure of the Starr Piano Company to price and the list price we consider to be spacious. It is to be observed
properly fill the orders as per specifications, the plaintiff (respondent) that the twenty-five per cent (25%) discount granted by the Starr piano
might still legally hold the defendant (petitioner) to the prices fixed of Company to the petitioner is available only to the latter as the former's
$1,700 and $1,600." This is incompatible with the pretended relation exclusive agent in the Philippines. The respondent could not have
of agency between the petitioner and the respondent, because in secured this discount from the Starr Piano Company and neither was
agency, the agent is exempted from all liability in the discharge of his the petitioner willing to waive that discount in favor of the respondent.
commission provided he acts in accordance with the instructions As a matter of fact, no reason is advanced by the respondent why the
received from his principal (section 254, Code of Commerce), and the petitioner should waive the 25 per cent discount granted it by the Starr
principal must indemnify the agent for all damages which the latter Piano Company in exchange for the 10 percent commission offered
may incur in carrying out the agency without fault or imprudence on by the respondent. Moreover, the petitioner was not duty bound to
his part (article 1729, Civil Code). reveal the private arrangement it had with the Starr Piano Company
relative to such discount to its prospective customers, and the
While the latters, Exhibits 1 and 2, state that the petitioner was to respondent was not even aware of such an arrangement. The
receive ten per cent (10%) commission, this does not necessarily respondent, therefore, could not have offered to pay a 10 per cent
make the petitioner an agent of the respondent, as this provision is commission to the petitioner provided it was given the benefit of the
only an additional price which the respondent bound itself to pay, and 25 per cent discount enjoyed by the petitioner. It is well known that
which stipulation is not incompatible with the contract of purchase and local dealers acting as agents of foreign manufacturers, aside from
sale. (See Quiroga vs. Parsons Hardware Co., 38 Phil., 501.) obtaining a discount from the home office, sometimes add to the list
price when they resell to local purchasers. It was apparently to guard
In the second place, to hold the petitioner an agent of the respondent against an exhorbitant additional price that the respondent sought to
in the purchase of equipment and machinery from the Starr Piano limit it to 10 per cent, and the respondent is estopped from
Company of Richmond, Indiana, is incompatible with the admitted fact questioning that additional price. If the respondent later on discovers
Abueva| Page 20 of 46
itself at the short end of a bad bargain, it alone must bear the blame,
and it cannot rescind the contract, much less compel a reimbursement
of the excess price, on that ground alone. The respondent could not
secure equipment and machinery manufactured by the Starr Piano
Company except from the petitioner alone; it willingly paid the price
quoted; it received the equipment and machinery as represented; and
that was the end of the matter as far as the respondent was
concerned. The fact that the petitioner obtained more or less profit
than the respondent calculated before entering into the contract or
reducing the price agreed upon between the petitioner and the
respondent. Not every concealment is fraud; and short of fraud, it
were better that, within certain limits, business acumen permit of the
loosening of the sleeves and of the sharpening of the intellect of men
and women in the business world.

The writ of certiorari should be, as it is hereby, granted. The decision


of the appellate court is accordingly reversed and the petitioner is
absolved from the respondent's complaint in G. R. No. 1023, entitled
"Arco Amusement Company (formerly known as Teatro Arco),
plaintiff-appellant, vs. Gonzalo Puyat & Sons, Inc., defendants-
appellee," without pronouncement regarding costs. So ordered.

Abueva| Page 21 of 46
Republic of the Philippines appellant, and the next installment in the sum of
SUPREME COURT P4,000.00 to be paid on or before September 15, 1965.
Manila
On November 25, 1965, the Dignos spouses sold the
THIRD DIVISION same land in favor of defendants spouses, Luciano
Cabigas and Jovita L. De Cabigas, who were then U.S.
G.R. No. L-59266 February 29, 1988 citizens, for the price of P35,000.00. A deed of
absolute sale (Exh. J, also marked Exh. 3) was
SILVESTRE DIGNOS and ISABEL LUMUNGSOD, petitioners, executed by the Dignos spouses in favor of the
vs. Cabigas spouses, and which was registered in the
HON. COURT OF APPEALS and ATILANO G. JABIL, respondents. Office of the Register of Deeds pursuant to the
provisions of Act No. 3344.

As the Dignos spouses refused to accept from plaintiff-


BIDIN, J.: appellant the balance of the purchase price of the land,
and as plaintiff- appellant discovered the second sale
This is a petition for review on certiorari seeking the reversal of the: made by defendants-appellants to the Cabigas
(1) Decision * of the 9th Division, Court of Appeals dated July spouses, plaintiff-appellant brought the present suit.
31,1981, affirming with modification the Decision, dated August 25, (Rollo, pp. 27-28)
1972 of the Court of First Instance ** of Cebu in civil Case No. 23-L
entitled Atilano G. Jabil vs. Silvestre T. Dignos and Isabela After due trial, the Court of first Instance of Cebu rendered its
Lumungsod de Dignos and Panfilo Jabalde, as Attorney-in-Fact of Decision on August 25,1972, the decretal portion of which reads:
Luciano Cabigas and Jovita L. de Cabigas; and (2) its Resolution
dated December 16, 1981, denying defendant-appellant's WHEREFORE, the Court hereby declares the deed of
(Petitioner's) motion for reconsideration, for lack of merit. sale executed on November 25, 1965 by defendant
Isabela L. de Dignos in favor of defendant Luciano
The undisputed facts as found by the Court of Appeals are as follows: Cabigas, a citizen of the United States of America, null
and void ab initio, and the deed of sale executed by
The Dignos spouses were owners of a parcel of land, defendants Silvestre T. Dignos and Isabela
known as Lot No. 3453, of the cadastral survey of Lumungsod de Dignos not rescinded. Consequently,
Opon, Lapu-Lapu City. On June 7, 1965, appellants the plaintiff Atilano G. Jabil is hereby ordered to pay
(petitioners) Dignos spouses sold the said parcel of the sum, of Sixteen Thousand Pesos (P16,000.00) to
land to plaintiff-appellant (respondent Atilano J. Jabil) the defendants-spouses upon the execution of the
for the sum of P28,000.00, payable in two installments, Deed of absolute Sale of Lot No. 3453, Opon Cadastre
with an assumption of indebtedness with the First and when the decision of this case becomes final and
Insular Bank of Cebu in the sum of P12,000.00, which executory.
was paid and acknowledged by the vendors in the
deed of sale (Exh. C) executed in favor of plaintiff- The plaintiff Atilano G. Jabil is ordered to reimburse the
defendants Luciano Cabigas and Jovita L. de Cabigas,
through their attorney-in-fact, Panfilo Jabalde,
Abueva| Page 22 of 46
reasonable amount corresponding to the expenses or A motion for reconsideration of said decision was filed by the
costs of the hollow block fence, so far constructed. defendants- appellants (petitioners) Dignos spouses, but on
December 16, 1981, a resolution was issued by the Court of Appeals
It is further ordered that defendants-spouses Silvestre denying the motion for lack of merit.
T. Dignos and Isabela Lumungsod de Dignos should
return to defendants-spouses Luciano Cabigas and Hence, this petition.
Jovita L. de Cabigas the sum of P35,000.00, as equity
demands that nobody shall enrich himself at the In the resolution of February 10, 1982, the Second Division of this
expense of another. Court denied the petition for lack of merit. A motion for reconsideration
of said resolution was filed on March 16, 1982. In the resolution dated
The writ of preliminary injunction issued on September April 26,1982, respondents were required to comment thereon, which
23, 1966, automatically becomes permanent in virtue comment was filed on May 11, 1982 and a reply thereto was filed on
of this decision. July 26, 1982 in compliance with the resolution of June 16,1 982. On
August 9,1982, acting on the motion for reconsideration and on all
With costs against the defendants. subsequent pleadings filed, this Court resolved to reconsider its
resolution of February 10, 1982 and to give due course to the instant
From the foregoing, the plaintiff (respondent herein) and defendants- petition. On September 6, 1982, respondents filed a rejoinder to reply
spouss (petitioners herein) appealed to the Court of Appeals, which of petitioners which was noted on the resolution of September 20,
appeal was docketed therein as CA-G.R. No. 54393-R, "Atilano G. 1982.
Jabil v. Silvestre T. Dignos, et al."
Petitioners raised the following assignment of errors:
On July 31, 1981, the Court of Appeals affirmed the decision of the
lower court except as to the portion ordering Jabil to pay for the I
expenses incurred by the Cabigas spouses for the building of a fence
upon the land in question. The disposive portion of said decision of THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF
the Court of Appeals reads: LAW IN GROSSLY, INCORRECTLY INTERPRETING THE TERMS
OF THE CONTRACT, EXHIBIT C, HOLDING IT AS AN ABSOLUTE
IN VIEW OF THE FOREGOING CONSIDERATIONS, SALE, EFFECTIVE TO TRANSFER OWNERSHIP OVER THE
except as to the modification of the judgment as PROPERTY IN QUESTION TO THE RESPONDENT AND NOT
pertains to plaintiff-appellant above indicated, the MERELY A CONTRACT TO SELL OR PROMISE TO SELL; THE
judgment appealed from is hereby AFFIRMED in all COURT ALSO ERRED IN MISAPPLYING ARTICLE 1371 AS
other respects. WARRANTING READING OF THE AGREEMENT, EXHIBIT C, AS
ONE OF ABSOLUTE SALE, DESPITE THE CLARITY OF THE
With costs against defendants-appellants. TERMS THEREOF SHOWING IT IS A CONTRACT OF PROMISE
TO SELL.
SO ORDERED.
II
Judgment MODIFIED.

Abueva| Page 23 of 46
THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN It is significant to note that this petition was denied by the Second
INCORRECTLY APPLYING AND OR IN MISAPPLYING ARTICLE Division of this Court in its Resolution dated February 1 0, 1 982 for
1592 OF THE NEW CIVIL CODE AS WARRANTING THE lack of merit, but on motion for reconsideration and on the basis of all
ERRONEOUS CONCLUSION THAT THE NOTICE OF RESCISSION, subsequent pleadings filed, the petition was given due course.
EXHIBIT G, IS INEFFECTIVE SINCE IT HAS NOT BEEN
JUDICIALLY DEMANDED NOR IS IT A NOTARIAL ACT. I.

III The contract in question (Exhibit C) is a Deed of Sale, with the


following conditions:
THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN
REJECTING THE APPLICABILITY OF ARTICLES 2208,2217 and 1. That Atilano G..Jabilis to pay the amount of Twelve
2219 OF THE NEW CIVIL CODE AND ESTABLISHED Thousand Pesos P12,000.00) Phil. Philippine Currency
JURISPRUDENCE AS TO WARRANT THE AWARD OF DAMAGES as advance payment;
AND ATTORNEY'S FEES TO PETITIONERS.
2. That Atilano G. Jabil is to assume the balance of
IV Twelve Thousand Pesos (P12,000.00) Loan from the
First Insular Bank of Cebu;
PLAINTIFF'S COMPLAINT FOR SPECIFIC PERFORMANCE
SHOULD HAVE BEEN DISMISSED, HE HAVING COME TO COURT 3. That Atilano G. Jabil is to pay the said spouses the
WITH UNCLEAN HANDS. balance of Four. Thousand Pesos (P4,000.00) on or
before September 15,1965;
V
4. That the said spouses agrees to defend the said
BY AND LARGE, THE COURT OF APPEALS COMMITTED AN Atilano G. Jabil from other claims on the said property;
ERROR IN AFFIRMING WITH MODIFICATION THE DECISION OF
THE TRIAL COURT DUE TO GRAVE MISINTERPRETATION, 5. That the spouses agrees to sign a final deed of
MISAPPLICATION AND MISAPPREHENSION OF THE TERMS OF absolute sale in favor of Atilano G. Jabil over the
THE QUESTIONED CONTRACT AND THE LAW APPLICABLE above-mentioned property upon the payment of the
THERETO. balance of Four Thousand Pesos. (Original Record, pp.
10-11)
The foregoing assignment of errors may be synthesized into two main
issues, to wit: In their motion for reconsideration, petitioners reiterated their
contention that the Deed of Sale (Exhibit "C") is a mere contract to sell
I. Whether or not subject contract is a deed of absolute and not an absolute sale; that the same is subject to two (2) positive
sale or a contract Lot sell. suspensive conditions, namely: the payment of the balance of
P4,000.00 on or before September 15,1965 and the immediate
II. Whether or not there was a valid rescission thereof. assumption of the mortgage of P12,000.00 with the First Insular Bank
of Cebu. It is further contended that in said contract, title or ownership
There is no merit in this petition. over the property was expressly reserved in the vendor, the Dignos
Abueva| Page 24 of 46
spouses until the suspensive condition of full and punctual payment of On the contrary, all the elements of a valid contract of sale under
the balance of the purchase price shall have been met. So that there Article 1458 of the Civil Code, are present, such as: (1) consent or
is no actual sale until full payment is made (Rollo, pp. 51-52). meeting of the minds; (2) determinate subject matter; and (3) price
certain in money or its equivalent. In addition, Article 1477 of the
In bolstering their contention that Exhibit "C" is merely a contract to same Code provides that "The ownership of the thing sold shall be
sell, petitioners aver that there is absolutely nothing in Exhibit "C" that transferred to the vendee upon actual or constructive delivery
indicates that the vendors thereby sell, convey or transfer their thereof." As applied in the case of Froilan v. Pan Oriental Shipping
ownership to the alleged vendee. Petitioners insist that Exhibit "C" (or Co., et al. (12 SCRA 276), this Court held that in the absence of
6) is a private instrument and the absence of a formal deed of stipulation to the contrary, the ownership of the thing sold passes to
conveyance is a very strong indication that the parties did not intend the vendee upon actual or constructive delivery thereof.
"transfer of ownership and title but only a transfer after full payment"
(Rollo, p. 52). Moreover, petitioners anchored their contention on the While it may be conceded that there was no constructive delivery of
very terms and conditions of the contract, more particularly paragraph the land sold in the case at bar, as subject Deed of Sale is a private
four which reads, "that said spouses has agreed to sell the herein instrument, it is beyond question that there was actual delivery
mentioned property to Atilano G. Jabil ..." and condition number five thereof. As found by the trial court, the Dignos spouses delivered the
which reads, "that the spouses agrees to sign a final deed of absolute possession of the land in question to Jabil as early as March 27,1965
sale over the mentioned property upon the payment of the balance of so that the latter constructed thereon Sally's Beach Resort also known
four thousand pesos." as Jabil's Beach Resort in March, 1965; Mactan White Beach Resort
on January 15,1966 and Bevirlyn's Beach Resort on September 1,
Such contention is untenable. 1965. Such facts were admitted by petitioner spouses (Decision, Civil
Case No. 23-L; Record on Appeal, p. 108).
By and large, the issues in this case have already been settled by this
Court in analogous cases. Moreover, the Court of Appeals in its resolution dated December
16,1981 found that the acts of petitioners, contemporaneous with the
Thus, it has been held that a deed of sale is absolute in nature contract, clearly show that an absolute deed of sale was intended by
although denominated as a "Deed of Conditional Sale" where the parties and not a contract to sell.
nowhere in the contract in question is a proviso or stipulation to the
effect that title to the property sold is reserved in the vendor until full Be that as it may, it is evident that when petitioners sold said land to
payment of the purchase price, nor is there a stipulation giving the the Cabigas spouses, they were no longer owners of the same and
vendor the right to unilaterally rescind the contract the moment the the sale is null and void.
vendee fails to pay within a fixed period Taguba v. Vda. de Leon, 132
SCRA 722; Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., II.
86 SCRA 305).
Petitioners claim that when they sold the land to the Cabigas spouses,
A careful examination of the contract shows that there is no such the contract of sale was already rescinded.
stipulation reserving the title of the property on the vendors nor does it
give them the right to unilaterally rescind the contract upon non- Applying the rationale of the case of Taguba v. Vda. de Leon (supra)
payment of the balance thereof within a fixed period. which is on all fours with the case at bar, the contract of sale being
absolute in nature is governed by Article 1592 of the Civil Code. It is

Abueva| Page 25 of 46
undisputed that petitioners never notified private respondents Jabil by
notarial act that they were rescinding the contract, and neither did
they file a suit in court to rescind the sale. The most that they were
able to show is a letter of Cipriano Amistad who, claiming to be an
emissary of Jabil, informed the Dignos spouses not to go to the house
of Jabil because the latter had no money and further advised
petitioners to sell the land in litigation to another party (Record on
Appeal, p. 23). As correctly found by the Court of Appeals, there is no
showing that Amistad was properly authorized by Jabil to make such
extra-judicial rescission for the latter who, on the contrary, vigorously
denied having sent Amistad to tell petitioners that he was already
waiving his rights to the land in question. Under Article 1358 of the
Civil Code, it is required that acts and contracts which have for their
object the extinguishment of real rights over immovable property must
appear in a public document.

Petitioners laid considerable emphasis on the fact that private


respondent Jabil had no money on the stipulated date of payment on
September 15,1965 and was able to raise the necessary amount only
by mid-October 1965.

It has been ruled, however, that "where time is not of the essence of
the agreement, a slight delay on the part of one party in the
performance of his obligation is not a sufficient ground for the
rescission of the agreement" (Taguba v. Vda. de Leon, supra).
Considering that private respondent has only a balance of P4,000.00
and was delayed in payment only for one month, equity and justice
mandate as in the aforecited case that Jabil be given an additional
period within which to complete payment of the purchase price.

WHEREFORE, the petition filed is hereby Dismissed for lack of merit


and the assailed decision of the Court of Appeals is Affirmed in toto.

SO ORDERED.

Abueva| Page 26 of 46
SECOND DIVISION 3. That upon full payment of the consideration hereof, the SELLER
shall execute a Deed of Absolute Sale in favor of the BUYER that the
payment of capital gains tax shall be for the account of the SELLER
and that documentary stamps, transfer tax, registration expenses for
[G.R. No. 135528. July 14, 2004] the transfer of title including the notarization and preparation of this
Contract and subsequent documents if any are to be executed, real
estate taxes from January 1, 1986 and other miscellaneous expenses
shall be for the account of the BUYER; the SELLER hereby
SPOUSES ORLANDO A. RAYOS and MERCEDES T. represents that all association dues has been paid but that
RAYOS, petitioners, vs. THE COURT OF APPEALS and subsequent to the execution of this Contract the payment of the same
SPOUSES ROGELIO and VENUS MIRANDA, respondents. shall devolve upon the BUYER.[6]

DECISION The petitioners obliged themselves to execute a deed of absolute


CALLEJO, SR., J.: sale over the property in favor of the respondents upon the full
payment of the purchase price thereof.
This is a petition for review on certiorari of the Decision[1] of the Respondent Rogelio Miranda filed an application dated May 4,
Court of Appeals[2] in CA-G.R. CV No. 46727 which affirmed the 1986 with the PSB to secure the approval of his assumption of the
Decision[3] of the Regional Trial Court of Makati, Branch 62, in Civil petitioners obligation on the loan, and appended thereto a General
Case No. 15639 for specific performance and damages, and Civil Information sheet.[7] Respondent Rogelio Miranda stated therein that
Case No. 15984 for sum of money and damages. he was the Acting Municipal Treasurer of Las Pias and had an unpaid
The two (2) cases stemmed from the following antecedent facts: account with the Manila Banking Corporation in the amount
of P18,777.31. The PSB disapproved his application. Nevertheless,
On December 24, 1985, petitioner Orlando A. Rayos, a practicing respondent Rogelio Miranda paid the first quarterly installment on the
lawyer, and his wife, petitioner Mercedes T. Rayos, secured a short- petitioners loan on March 21, 1986 in the amount of P29,190.28. The
term loan from the Philippine Savings Bank (PSB) payable within a said amount was paid for the account of the petitioners. Respondent
period of one (1) year in quarterly installments of P29,190.28, the first Rogelio Miranda, likewise, paid the second quarterly installment in the
quarterly payment to start on March 24, 1986. The loan was amount of P29,459.00 on June 23, 1986, also for the account of the
evidenced by a promissory note which the petitioners executed on petitioners.[8]
December 24, 1985.[4] To secure the payment of the loan, the
petitioners-spouses executed, on the same date, a Real Estate In the meantime, respondent Rogelio Miranda secured the
Mortgage over their property covered by Transfer Certificate of Title services of petitioner Orlando Rayos as his counsel in a suit he filed
(TCT) No. 100156 located in Las Pias, Metro Manila.[5] against the Manila Banking Corporation, relative to a loan from the
bank in the amount of P100,000.00. Both parties agreed to the
On December 26, 1985, the petitioners, as vendors, and the payment of attorneys fees, as follows:
respondents, Spouses Miranda, as vendees, executed a Deed of Sale
with Assumption of Mortgage over the subject property for the price Our agreement is as follows:
of P214,000.00. However, on January 29, 1986, the petitioners-
spouses, likewise, executed a Contract to Sell the said property in 1. You will pay me P700.00 as filing fee and other
favor of the respondents forP250,000.00 with the following condition: miscellaneous expenses which I personally received
from you this morning;
Abueva| Page 27 of 46
2. Award to you of any amount in terms of moral, claiming that the petitioner agreed to render professional services on
exemplary or actual and other forms of damages shall a contingent basis.[14]
accrue to you in the amount of 70% thereof;
Petitioner Orlando Rayos again wrote respondent Rogelio
Miranda on November 30, 1986, reminding the latter of the last
3. 30% of the award to you in the concept of No. 2
quarterly payment of his loan with the PSB. He also advised the
hereof shall pertain to me as my contingent fee;
respondent to thereafter request the bank for the cancellation of the
mortgage on his property and to receive the owners duplicate of his
4. All attorneys fees that the court shall award to me title over the same. Petitioner Orlando Rayos also wrote that their
or by the management of TMBC if they agree to dispute over his attorneys fees in Civil Case No. 13670 should be
extrajudicially settle shall pertain exclusively to me; treated differently.[15]
5. Execution of judgment expenses shall be for your Petitioner Orlando Rayos then received a Letter dated November
account; 27, 1986 from the PSB, reminding him that his loan with the bank
would mature on December 24, 1986, and that it expected him to pay
6. Should the case be appealed, my contingent fee his loan on or before the said date.[16] Fearing that the respondents
shall increase by 10% if the appeal is to the would not be able to pay the amount due, petitioner Orlando Rayos
Intermediate Appellate Court on questions of facts paid P27,981.41[17] to the bank on December 12, 1986, leaving the
and law, and if appealed from there to the Supreme balance of P1,048.04. In a Letter dated December 18, 1986, the
Court, then another 10% shall accrue to me.[9] petitioner advised the PSB not to turn over to the respondents the
owners duplicate of the title over the subject property, even if the latter
On May 14, 1986, petitioner Orlando Rayos filed respondent paid the last quarterly installment on the loan, as they had not
Rogelio Mirandas complaint against the bank with the Regional Trial assumed the payment of the same.[18]
Court of Makati, docketed as Civil Case No. 13670.[10]In the On December 24, 1986, respondent Rogelio Miranda arrived at
meantime, the latter paid the third quarterly installment on the PSB the PSB to pay the last installment on the petitioners loan in the
loan account amounting to P29,215.66, for which the bank issued a amount of P29,223.67. He informed the bank that the petitioners had
receipt for the account of the petitioners. executed a deed of sale with assumption of mortgage in their favor,
The parties executed a Compromise Agreement in Civil Case No. and that he was paying the balance of the loan, conformably to said
13670 in which they agreed that each party shall pay for the deed. On the other hand, the bank informed the respondent that it
respective fees of their respective counsels.[11] The trial court was not bound by said deed, and showed petitioner Orlando Rayos
rendered judgment on October 23, 1986 based on the said Letter dated December 18, 1986. The respondent was also informed
compromise agreement.[12] Petitioner Orlando Rayos demanded the that the petitioners had earlier paid the amount of P27,981.41 on the
payment of attorneys fees in the amount of P5,631.93, but respondent loan. The bank refused respondent Rogelio Mirandas offer to pay the
Rogelio Miranda refused to pay. loan, and confirmed its refusal in a Letter dated December 24,
1986.[19]
On November 12, 1986, petitioner Orlando Rayos wrote to
respondent Rogelio Miranda and enclosed a copy of his motion in On even date, respondent Rogelio Miranda wrote the PSB,
Civil Case No. 13670 for the annotation of his attorneys lien at the tendering the amount of P29,223.67 and enclosed Interbank Check
dorsal portion of the latters title used as security for the loan with the No. 01193344 payable to PSB.[20] Thereafter, on December 29, 1986,
Manila Banking Corporation.[13] The respondent opposed the motion, the petitioners paid the balance of their loan with the bank in the
amount of P1,081.39 and were issued a receipt therefor.[21] On
Abueva| Page 28 of 46
January 2, 1987, the PSB wrote respondent Rogelio Miranda that it (g) That a Writ of Attachment be issued against the
was returning his check.[22] properties of defendant Rayos spouses as security for
the satisfaction of any judgment that may be
On January 2, 1987, respondent Rogelio Miranda filed a recovered.
complaint against the petitioners and the PSB for damages with a
prayer for a writ of preliminary attachment with the RTC of
PLAINTIFF FURTHER PRAYS for such other remedies and relief as
Makati. The case was docketed as Civil Case No. 15639 and raffled
are just or equitable in the premises.[23]
to Branch 61 of the court. The respondent alleged inter alia that the
petitioners and the PSB conspired to prevent him from paying the last
quarterly payment of the petitioners loan with the bank, despite the The trial court granted the respondents plea for a writ of
existence of the deed of sale with assumption of mortgage executed preliminary attachment on a bond of P260,000.00. After posting the
by him and the petitioners, and in refusing to turn over the owners requisite bond, the respondent also filed a criminal complaint against
duplicate of TCT No. 100156, thereby preventing the transfer of the petitioner Orlando Rayos for estafa with the Office of the Provincial
title to the property in his name. Respondent Rogelio Miranda prayed Prosecutor of Makati, docketed as I.S. No. 87-150. He, likewise, filed
that: a complaint for disbarment in this Court against petitioner Orlando
Rayos, docketed as Administrative Case No. 2974. Unaware of the
said complaint, the petitioner wrote the respondent on January 3,
WHEREFORE, it is respectfully prayed that judgment be rendered in
1986 that as soon as his payment to the PSB of P29,223.67 was
favor of plaintiff and against defendants, ordering the latter, jointly and
refunded, the owners duplicate of the title would be released to
severally, as follows:
him.[24] On January 5, 1986, petitioner Orlando Rayos wrote
respondent Rogelio Miranda, reiterating that he would release the title
(a) To pay to plaintiff the sum of P267,197.33, with legal
in exchange for his cash settlement of P29,421.41.[25] The respondent
interest from date of demand, as actual or failed to respond.
compensatory damages representing the unreturned
price of the land; In the meantime, the PSB executed on January 8, 1987 a
Release of Real Estate Mortgage in favor of the petitioners,[26] and
(b) To pay to plaintiff the sum of P500,000.00 as released the owners duplicate of title of TCT No. 100156.[27] On
consequential damages; January 17, 1987, petitioner Orlando Rayos wrote respondent Rogelio
Miranda, reiterating his stance in his Letters of January 3 and 5, 1987.
(c) To pay to plaintiff the sum of P1,000,000.00 as moral In the meantime, the petitioners received the complaint in Civil
damages; Case No. 15639 and filed their Answer with Counterclaim in which
they alleged that:
(d) To pay to plaintiff the sum of P100,000.00 as exemplary
damages by way of example or correction for the public 14. That plaintiff has no cause of action against defendants Rayos,
good; the latter are willing to deliver the title sought by plaintiff under the
terms set out in their letters dated January 3, 5, 17, and 20, hereto
(e) To pay to plaintiff the sum of P100,000.00 for and as marked as Annexes 1, 1-A, 1-B and 1-C;[28]
attorneys fees;
Petitioner Orlando Rayos filed a complaint on February 1, 1987
(f) To pay for the costs of suit; and against respondent Rogelio Miranda with the Regional Trial Court of
Makati, docketed as Civil Case No. 15984 for Specific Performance
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with Damages for the collection of the amount of P29,223.67 which he PLAINTIFF further prays for such other remedies and relief as are just
had paid to the PSB on December 12 and 19, 1986, and his attorneys or equitable in the premises.[29]
fees in Civil Case No. 13670. The trial court consolidated the cases in
Branch 62 of the RTC. In the meantime, petitioner Orlando Rayos filed an Amended
Complaint in Civil Case No. 15984 impleading his wife and that of
Respondent Rogelio Miranda filed an Amended Complaint in Civil
respondent Rogelio Miranda as parties to the case. On March 4,
Case No. 15639 for specific performance with damages, impleading
1987, the trial court issued an Order granting the petitioners motion in
the officers of the PSB as parties-defendants. He alleged that of the
Civil Case No. 15639 for the discharge of the attachment on their
purchase price of the property of P214,000.00, he had paid the
property.[30] The court also denied the respondents motion for
entirety thereof to the petitioners, and that petitioner Orlando Rayos
reconsideration of the Order of the court. The respondents, thereafter,
acted unethically in trying to collectP5,631.93 from him as his
filed a petition for review with the Court of Appeals for the nullification
attorneys fees in Civil Case No. 13670, and in having such claim
of the said Order.
annotated at the dorsal portion of his title over the property he
mortgaged to the Manila Banking Corporation. On July 9, 1987, the public prosecutor dismissed the charge
of estafa against petitioner Orlando Rayos.[31] The respondents
Respondent Rogelio Miranda prayed that, after due proceedings,
appealed the resolution to the Department of Justice.
judgment be rendered in his favor, thus:
On May 26, 1987, the PSB and its officers filed their Answer in
WHEREFORE, it is respectfully prayed that judgment be rendered in Civil Case No. 15639, and alleged the following by way of special
favor of plaintiff and against defendants, as follows: and/or affirmative defenses, thus:

(a) Ordering defendants spouses Orlando A. Rayos and Mercedes T. 27. The application for the plaintiff to assume the mortgage loan of the
Rayos to deliver forthwith to plaintiff the Owners Duplicate of Transfer defendants Spouses Rayos was not approved, and it was NOT even
Certificate of Title No. 100156, Registry of Deeds for Pasay City; recommended by the Marketing Group of defendant PSBank for
approval by its Top Management, because the credit standing of the
(b) Ordering defendants, jointly and severally, to pay to plaintiff the plaintiff was found out to be not good;
sum of P1,000,000.00 as moral damages;
28. The acceptance of the payments made by the plaintiff for three (3)
(c) Ordering defendants, jointly and severally, to pay to plaintiff the amortizations on the loan of defendants Spouses Rayos was merely
sum of P867,197.33 as exemplary damages by way of example or allowed upon the insistence of the plaintiff, which payments were duly
correction for the public good; and accordingly receipted, and said acceptance was in accordance
with the terms of the Real Estate Mortgage executed by the
(d) Ordering defendants, jointly and severally, to pay to plaintiff the defendants Spouses Rayos in favor of the defendant PSBank and is
sum of P100,000.00 for and as attorneys fees; also allowed by law;[32]

(e) Ordering defendants, jointly, to pay the costs of suit; and The parties in Civil Case No. 15639 agreed to submit the case for
the trial courts decision on the basis of their pleadings and their
(f) Ordering the issuance of a Writ of Attachment against the respective affidavits. In a Resolution dated July 26, 1988, then
properties of defendants Rayos spouses as security for the Undersecretary of Justice Silvestre Bello III affirmed the Public
satisfaction of any judgment that may be recovered. Prosecutors resolution in I.S. No. 87-150.[33]

Abueva| Page 30 of 46
On January 30, 1989, the petitioners sold the property to II. In Civil Case No. 15984, this Court orders Defendant Rogelio
Spouses Mario and Enriqueta Ercia for P144,000.00. The said Miranda to pay to Plaintiff Orlando Rayos the sum of P4,133.19 at
spouses were not impleaded as parties-defendants in Civil Case No. 12% interest per annum, from the date of the filing of the complaint on
15639. On May 18, 1989, the petitioners filed an amended complaint Feb. 11, 1987 until fully paid.
in Civil Case No. 15984, appending thereto a copy of the Contract to
Sell in favor of the respondents. The trial court admitted the said No costs in both cases.
complaint.
On November 15, 1989, this Court rendered its Decision SO ORDERED.[35]
dismissing the complaint for disbarment against Rayos.[34]
The petitioners appealed the decision to the Court of Appeals
On January 29, 1993, the trial court rendered judgment, the contending that:
dispositive portion of which reads:
I. THE COURT A QUO COMMITTED A GRAVE ERROR IN
WHEREFORE, premises considered, judgment is hereby rendered, NOT FINDING THAT ROGELIO A. MIRANDA
as follows: COMMITTED A BREACH OF CONTRACT IN NOT
PAYING THE FULL CONTINGENT FEE OF 30% IN
WRITING IN THE MANILABANK CASE AND BECAUSE
I. (a) In Civil Case No. 15639, this Court orders plaintiff Rogelio
OF THAT BREACH, HE CANNOT NOW DEMAND
Miranda to refund to spouses Orlando and Mercedes T. Rayos the
SPECIFIC PERFORMANCE AND THE COURT A
total sum of P29,069.45, Rayos paid to PS Bank as the last
QUOSHOULD HAVE LEFT THE PARTIES AS THEY
amortization and as release of mortgage fee, without any interest; and
ARE;
upon receipt of the sum of P29,069.45 from Rogelio Miranda,
Spouses Orlando and Mercedes T. Rayos shall deliver to Rogelio II. THE COURT A QUO SIMILARLY COMMITTED AN
Miranda Transfer Certificate of Title No. 100156 of the Registry of ERROR IN NOT FINDING THAT THE DECISION IN
Deeds of Pasay City; and, deliver to Rogelio Miranda the possession SEVA VS. ALFREDO BERWIN & CO. & MEDEL IS
of the parcel of land described in the said title; APPLICABLE FOUR SQUARE WHEREBY HE WHO
BREACHES HIS CONTRACT IS NOT ENTITLED TO
(b) Dismissing the complaint for damages of Plaintiff Rogelio Miranda SPECIFIC PERFORMANCE;[36]
against Spouses Orlando and Remedios (sic) T. Rayos, Philippine
Savings Bank, Jose Araullo, Cesar I. Valenzuela, Dionisio Hernandez, On July 27, 1998, the Court of Appeals rendered judgment
Nestor E. Valenzuela, Raul T. Totanes, and Belinda Lim, for affirming with modification the decision of the RTC, thus:
insufficiency of evidence; while the counterclaims of PS Bank, Jose
Araullo, Cesar Valenzuela, Dionisio Hernandez, Nestor E. Valenzuela, WHEREFORE, premises considered, the appealed decision of the
Raul Totanes, and Belinda Lim, are likewise dismissed for Regional Trial Court of Makati City, is hereby AFFIRMED, with the
insufficiency of evidence. modification abovestated.[37]

(c) The counterclaims of Spouses Orlando and Mercedes T. Rayos The petitioners filed the instant petition, and ascribed the
will be treated in Civil Case No. 15984; following errors on the appellate court:
I. THE COURT OF APPEALS (CA) COMMITTED AN
ERROR IN NOT FINDING THAT THE PRIVATE

Abueva| Page 31 of 46
RESPONDENT MIRANDA COMMITTED THE FIRST the last quarterly installment because he thought that the respondents
BREACH FOR FAILURE TO ASSUME THE LOAN THUS would not be able to pay the same. The petitioners argue that they
HE FAILED TO SURROGATE (sic) HIMSELF TO PSB. had no other alternative but to pay the last quarterly installment due
on their loan with the PSB, considering that they received a demand
II. THE CA COMMITTED AN ERROR IN FINDING THAT letter from the bank on November 28, 1986, coupled by its denial of
PETITIONERS PRE-EMPTED PRIVATE RESPONDENT the respondents request to assume the payment of the loan. They
MIRANDA IN DEPOSITING THE LAST AMORTIZATION insist that they did not block the respondents payment of the balance
WHEN MIRANDA HAD NO LEGAL STANDING WITH
of the loan with the bank. The petitioners contend that even if the
PSB DUE TO THE LATTERS NON-APPROVAL OF THE parties committed a breach of their respective obligations under the
ASSUMPTION OF THE LOAN. contract to sell, it behooved the Court of Appeals to apply Article 1192
III. THE CA COMMITTED AN ERROR IN FINDING BOTH of the Civil Code in the instant case, which reads:
PARTIES GUILTY OF FIRST VIOLATING THE
OBLIGATIONS INCUMBENT UPON THEM EVEN The power to rescind obligation is implied in reciprocal ones, in case
INFERRING THAT PETITIONERS COMMITTED THE one of the obligors should not comply with what is incumbent upon
BREACH FIRST BUT LATER CONCLUDING THAT THE him.
BREACH WAS COMMITTED BY BOTH PARTIES. IT DID
NOT MAKE A CORRECT ASSESSMENT OF WHO The injured party may choose between the fulfillment and the
ACTUALLY COMMITTED THE FIRST BREACH. rescission of the obligation, with the payment of damages in either
case. He may also seek rescission, even after he has chosen
IV. THE CA COMMITTED AN ERROR IN NOT ALLOWING
fulfillment, if the latter should become impossible.
THE OFFSET IF ITS DECISION STOOD OF THE
AMOUNT OF P4,133.19 PLUS 12% INT. P.A. FROM THE
FILING OF THE COMPLAINT (CV 15984), THUS, The court shall decree the rescission claimed, unless there be just
ENTIRELY DISREGARDING THE DECISION OF THE cause authorizing the fixing of a period.
TRIAL COURT IN SAID CASE ALLOWING ONLY THE
DECISION IN CV 15639. This is understood to be without prejudice to the rights of third
persons who have acquired the thing, in accordance with articles
V. THE CA COMMITTED AN ERROR IN NOT APPLYING 1385 and 1388 and the Mortgage Law.
THE DECSION (sic) LAID DOWN IN SEVA VS. ALFRED
BERWIN & CO. AND MEDEL THAT A PERSON The petition has no merit.
HIMSELF AT FAULT CANNOT ENFORCE SPECIFIC
PERFORMANCE.[38] The assailed ruling of the Court of Appeals reads:

The petitioners assert that the Court of Appeals erred in not After due study, the Court finds that there was no basis in fact and law
finding that the respondents first committed a breach of their contract for the appellants to usurp the payment of the last amortization on the
to sell upon their failure to pay the amount due for the last quarterly mortgage upon the parcel of land it had conveyed to the
installment of their loan from the PSB. The petitioners fault the Court Mirandas.Even if the appellants wanted to keep their good credit
of Appeals for not relying on the resolution of Undersecretary Silvestre standing, they should not have preempted Miranda in paying the final
Bello III affirming the dismissal of the criminal complaint for estafa in amortization. There is no sufficient showing that Miranda was in
I.S. No. 87-150, as cited by this Court in its decision in Miranda v. danger of defaulting on the said payment. In fact, it appears that he
Rayos,[39] where it was also held that petitioner Orlando Rayos paid approached the bank to tender payment, but he was refused by the
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bank, because he was beaten to the draw, so to speak, by the mortgagor of his obligation but that on the contrary, both the vendor
appellants. Appellants were able to do so because, for some reasons, and the vendee, or the party in whose favor the alienation or
the Mirandas assumption of the mortgage has not been approved by encumbrance is made shall be, jointly and severally, liable for said
the bank. In doing so, the appellants had unilaterally cancelled the mortgage obligations. There is every reason to believe that it was
deed of sale with assumption of mortgage, without the consent of the pursuant to the said provision in the real estate mortgage that
Mirandas. This conduct by the appellants is, to say the least, complainant tried to assume the loan obligation of the Rayoses by
injudicious as under Article 1308 of the Civil Code, contracts must filling up and submitted the loan application (page 30, records) sent by
bind both contracting parties and their validity or compliance cannot Orland Rayos. By signing the loan application and the general
be left to the will of one of them. information sheet (page 31, records) in connection with said
application, complainant showed that he knew that there was a need
Just as nobody can be forced to enter into a contract, in the same to formally apply to the bank in order for him to assume the mortgage.
manner, once a contract is entered into, no party can renounce it
unilaterally or without the consent of the other. It is a general principle We find respondent spouses version that when complainants
of law that no one may be permitted to change his mind or disavow application to assume the mortgage loan was disapproved he begged
and go back upon his own acts, or to proceed contrary thereto, to the that he be allowed to pay the quarterly amortization credible, owing to
prejudice of the other party. In a regime of law and order, repudiation the fact that complainant made the payments for the account of the
of an agreement validly entered into cannot be made without any Rayoses. Hence, complainant knew that since his application to the
ground or reason in law or in fact for such repudiation. PSB was not approved, there was no substitution of parties and so he
had to pay for the account of respondent spouses as shown by the
In the same way that the Rayos spouses must respect their contract receipts issued by the PSB.
with the Mirandas for the sale of real property and assumption of
mortgage, Rogelio Miranda has to recognize his obligations under his As for the charge that Rayos paid the last installment to block
agreement to pay contingent attorneys fees to Orlando Rayos.[40] complainant from getting the title and transferring the same to his
name, respondents version is more satisfactory and
The Court of Appeals erred in so ruling. convincing. Respondent Orland Rayos paid the last amortization
when it became apparent that complainant would not be able to give
The findings and disquisitions of the Court of Appeals cannot the payment on the due date as he was still trying to sell his Lancer
prevail over our findings in Miranda v. Rayos,[41] a case which involves car. Even if complainant was able to pay the last installment of the
the same parties, and where we held that the petitioners cannot be mortgage loan, the title would not be released to him as he knew very
faulted for paying the amortization due for the last quarterly well that his application to assume the mortgage was disapproved and
installment on their loan with the PSB: he had no personality as far as PSB was concerned.[42]

It is difficult to imagine that complainant would be so nave as to be Contrary to the ruling of the Court of Appeals, the petitioners did
totally unaware of the provisions of the original contract between the not unilaterally cancel their contract to sell with the respondents when
PSB and the spouses Rayos. He is a degree holder (A.B. Pre-Law they paid the total amount of P29,062.80 to the PSB in December
and B.S.C.) and Acting Municipal Treasurer of Las Pias. In short, he is 1986.[43] In fact, the petitioners wrote the respondents on January 3, 5
not an ordinary layman. As a buyer with a knowledge of law, it was and 17, 1987, that they were ready to execute the deed of absolute
unnatural for him to read the provisions of the real estate mortgage sale and turn over the owners duplicate of TCT No. 100156 upon the
wherein it is provided, among others, that the sale of the property respondents remittance of the amount of P29,223.67. The petitioners
covered by the mortgage does not in any manner relieve the reiterated the same stance in their Answer with Counterclaim in Civil
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Case No. 15639. The petitioners cannot, likewise, be faulted for accordance with Article 1184 of the Civil Code.[47] In Lacanilao v.
refusing to execute a deed of absolute sale over the property in favor Court of Appeals,[48] we held that:
of the respondents, and in refusing to turn over the owners duplicate
of TCT No. 100156 unless the respondents refunded the said It is well established that where the seller promised to execute a deed
amount. The respondents were obliged under the contract to sell to of absolute sale upon completion of payment of the purchase price by
pay the said amount to the PSB as part of the purchase price of the the buyer, the agreement is a contract to sell. In contracts to sell,
property. On the other hand, it cannot be argued by the petitioners where ownership is retained by the seller until payment of the price in
that the respondents committed a breach of their obligation when they full, such payment is a positive suspensive condition, failure of which
refused to refund the said amount. is not really a breach but an event that prevents the obligation of the
vendor to convey title in accordance with Article 1184 of the Civil
It bears stressing that the petitioners and the respondents
Code.
executed two interrelated contracts, viz: the Deed of Sale with
Assumption of Mortgage dated December 26, 1985, and the Contract
to Sell dated January 29, 1986. To determine the intention of the The non-fulfillment by the respondent of his obligation to pay,
parties, the two contracts must be read and interpreted which is a suspensive condition to the obligation of the petitioners to
together.[44] Under the two contracts, the petitioners bound and sell and deliver the title to the property, rendered the contract to sell
obliged themselves to execute a deed of absolute sale over the ineffective and without force and effect.[49] The parties stand as if the
property and transfer title thereon to the respondents after the conditional obligation had never existed. Article 1191 of the New Civil
payment of the full purchase price of the property, inclusive of the Code will not apply because it presupposes an obligation already
quarterly installments due on the petitioners loan with the PSB: extant.[50] There can be no rescission of an obligation that is still non-
existing, the suspensive condition not having happened.[51]
3. That upon full payment of the consideration hereof, the SELLER However, the respondents may reinstate the contract to sell by
shall execute a Deed of Absolute Sale in favor of the BUYER that the paying the P29,223.67, and the petitioners may agree thereto and
payment of capital gains tax shall be for the account of the SELLER accept the respondents late payment.[52] In this case, the petitioners
and that documentary stamps, transfer tax, registration expenses for had decided before and after the respondents filed this complaint in
the transfer of title including the notarization and preparation of this Civil Case No. 15639 to accept the payment of P29,223.67, to
Contract and subsequent documents if any are to be executed, real execute the deed of absolute sale over the property and cause the
estate taxes from January 1, 1986 and other miscellaneous expenses transfer of the title of the subject property to the respondents. The
shall be for the account of the BUYER; the SELLER hereby petitioners even filed its amended complaint in Civil Case No. 15984
represents that all association dues has been paid but that for the collection of the said amount. The Court of Appeals cannot,
subsequent to the execution of this Contract the payment of the same thus, be faulted for affirming the decision of the trial court and ordering
shall devolve upon the BUYER.[45] the petitioners to convey the property to the respondents upon the
latters payment of the amount of P29,223.67, provided that the
Construing the contracts together, it is evident that the parties property has not been sold to a third-party who acted in good faith.
executed a contract to sell and not a contract of sale. The petitioners
IN VIEW OF ALL THE FOREGOING, the petition is DENIED
retained ownership without further remedies by the
respondents[46] until the payment of the purchase price of the property DUE COURSE. The Decision of the Court of Appeals in CA-G.R. CV
in full. Such payment is a positive suspensive condition, failure of No. 46727 is AFFIRMED, except as to the factual finding that the
which is not really a breach, serious or otherwise, but an event that petitioners usurped the payment of the last amortization on the
prevents the obligation of the petitioners to convey title from arising, in mortgage upon the parcel of land. Costs against the petitioners.

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SO ORDERED.

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SECOND DIVISION records of the SSS Loans Department, the vendors (the Spouses
Sacramento) remained to be the debtors.
On July 1, 1992, respondent Romeo R. Lobregat, a lawyer and
[G.R. No. 137845. September 9, 2004] an Election Registrar in the Commission on Elections, filed a
Complaint against the petitioners, the Spouses Clemeno, and Nilus
Sacramento for breach of contract, specific performance with
damages with the RTC of Quezon City. The case was docketed as
ANGEL CLEMENO, JR., MALYN CLEMENO, and NILUS Civil Case No. 92-12620 and raffled to Branch 100. On May 7, 1993,
SACRAMENTO, petitioners, vs. ROMEO R. the trial court dismissed the case without prejudice for lack of interest
LOBREGAT, respondent. on the part of the plaintiff to prosecute.[5] The petitioners, for their part,
filed a Complaint against the respondent for recovery of possession of
DECISION property with damages, docketed as Civil Case No. 93-17268 and
raffled to Branch 93 of the court. In the meantime, the RTC, Branch
CALLEJO, SR., J.: 100 set aside its Order in Civil Case No. 92-12620 and reinstated the
case. The two (2) cases were then consolidated in the RTC, Branch
This is a petition for review of the Decision[1] of the Court of 100.
Appeals in CA-G.R. CV No. 53655 reversing the decision of the
Regional Trial Court of Quezon City, Branch 224, in Civil Case Nos.
92-12620 and 93-17268. The Evidence of
The Respondent

The Antecedents
On June 4, 1987, the respondent and petitioner Angel Clemeno,
Jr., relatives by consanguinity, entered into a verbal contract of sale
The Spouses Nilus and Teresita Sacramento were the owners of over the property covered by TCT No. 277244 under the following
a parcel of land covered by Transfer Certificate of Title (TCT) No. terms and conditions: (a) the respondent would pay the purchase
158728 and the house constructed thereon located at No. 68 price of the property in the amount of P270,000.00, inclusive of the
Madaling Araw Street, Teresa Heights Subdivision, Novaliches, balance of the loan of the petitioners, the Spouses Clemeno with the
Quezon City. The Spouses Sacramento mortgaged the property with SSS[6] within two years from June 4, 1987;[7] (b) the respondent would
the Social Security System (SSS) as security for their housing loan pay the monthly amortizations of the vendors loan with the SSS; and
and, likewise, surrendered the owners and duplicate copies of the (c) upon the payment of the purchase price of the property, the
certificate of title. On September 2, 1980, the spouses executed a Spouses Clemeno would execute a deed of sale in favor of the
Deed of Sale with Assumption of Mortgage in favor of Maria Linda respondent.[8] The respondent made a down payment ofP25,000.00
Clemeno and her husband Angel C. Clemeno, Jr., with the conformity for which petitioner Clemeno, Jr. issued a receipt dated June 4,
of the SSS.[2] On March 6, 1981, the Register of Deeds issued TCT 1987.[9] He then made a partial payment of P5,000.00 to petitioner
No. 277244 over the property in the name of the vendees,[3] who, in Clemeno, Jr. on July 8, 1987,[10] and another partial payment
turn, executed a Real Estate Mortgage Contract over the property in of P50,000.00 on February 9, 1988.[11] The respondent paid the realty
favor of the SSS to secure the payment of the amount ofP22,900.00, taxes due on the property for 1987 and 1988.[12]
the balance of the loan.[4] The Spouses Clemeno also surrendered the
owners duplicate copy of the said title to the SSS. However, per the
Abueva| Page 36 of 46
In the meantime, petitioner Clemeno, Jr. read a press release execute the deed of sale over the property and deliver the title over
from the SSS in the newspapers allowing delinquent borrowers to the property under his name, but petitioner Clemeno, Jr. refused to do
restructure the balance of their loans as of March 31, 1988 with no so unless the respondent agreed to buy the property at the price
arrearages on the balance of their account under certain terms and prevailing in 1992. The respondent refused.
conditions.[13] On February 26, 1988, he paid the amount of P6,692.63
to the SSS, in partial payment of his loan account.[14] He also made a On June 12, 1992, the respondents counsel wrote petitioner
written request to the SSS for a restructuring of his loan.[15] Thereafter, Clemeno, Jr., informing the latter that he (the respondent) had already
paid P113,049.96 of the purchase price of the property and that he
the SSS Loans Collection Department issued on March 15, 1988,
addressed to the borrower on record, that effective March 15, 1988, was ready to pay the balance thereof in the amount of P156,970.04.
the monthly amortization on the loan was P841.84.[16] Petitioner He demanded that petitioner Clemeno, Jr. execute a deed of absolute
Clemeno, Jr., as mortgagor, affixed his conformity thereto.[17] He then sale over the property and deliver the title thereto in his name upon
wrote a letter authorizing the respondent to pay the balance of his his receipt of the amount of P156,970.04.[25]
restructured loan with the SSS, which payments would be considered In his reply-letter, petitioner Clemeno, Jr. stated that he never
as partial payment of the house and lot.[18]Conformably, the sold the property to the respondent; that he merely tolerated the
respondent remitted to the SSS the monthly amortization payments respondents possession of the property for one year or until 1987,
for the account of petitioner Clemeno, Jr. However, the receipts after which the latter offered to buy the property, which offer was
issued by the SSS were in the name of petitioners Nilus Sacramento rejected; and that he instead consented to lease the property to the
or Clemeno, Jr.[19] respondent. The petitioner also declared in the said letter that even if
The respondent made additional partial payments for the sale of the respondent wanted to buy the property, the same was
the property to petitioner Clemeno, Jr. on January 17, 1989, and, unenforceable as there was no document executed by them to evince
March 20, 1989, in the total amount of P10,000.00.[20]He also the sale.[26]
continued remitting to the SSS the monthly amortizations due for the In their Answer to the complaint, the petitioners alleged that they
account of petitioner Clemeno, Jr.[21] entered into a verbal lease-purchase agreement over the house and
The respondent was able to secure a loan of P160,000.00 on lot with the respondent under the following terms and conditions:
April 1, 1989, which was more than sufficient to cover his balance of
the purchase of the property. He then offered to pay the said balance (a) The purchase price will be P270,000.00 to be paid in full not
to petitioner Clemeno, Jr.,[22] but the latter told him to keep the money later than June 1, 1988;
because the owners duplicate copy of the title was still with the SSS
and to instead continue paying the monthly amortizations due. The (b) The rental is P1,500.00 a month, for the whole period from
respondent did so and made payments until March 1990.[23] He no June 1987 to June 1, 1988;
longer paid after this date because the SSS informed him that
petitioner Clemeno, Jr. had already paid the balance of his account in (c) If the whole purchase price is not paid on the agreed date, the
full on March 23, 1990. Indeed, on May 9, 1990, the SSS had total amount equivalent to one-year rental shall be deducted
executed a Release of Real Estate Mortgage in favor of petitioner from the amount already paid by the plaintiff, who shall
Clemeno, Jr. and released the owners duplicate of TCT No. peacefully vacate the premises and surrender possession of
277244.[24] the house and lot to the defendants.
The respondent offered to pay the balance of the purchase price (d) The purchase price of P270,000.00 shall be
of the property to petitioner Clemeno, Jr. and asked the latter to payable: P90,000.00 upon taking possession of the
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property, P90,000.00 payable within six (6) months Petitioner Clemeno, Jr. and the respondent were townmates.
thereafter, and P90,000.00 not later than June 1, 1988.[27] Sometime in June 1987, petitioner Clemeno, Jr. agreed to sell the
property for P270,000.00 payable in three (3) installments:
The petitioners further alleged that despite the respondents (a) P90,000.00 upon the respondents taking possession of the
failure to comply with the conditions of their agreement, the latter was property; (b) P90,000.00 payable within six (6) months thereafter; and
still granted an extension of until September 1989 to pay the purchase (c) P90,000.00 not later than June 1, 1988. The respondent assured
price of the property, but managed to pay only P113,049.96, including petitioner Clemeno, Jr. that there would be nothing to worry about the
the monthly amortizations of their loan account with the SSS and documentation of the sale; being a lawyer, he would take care of
realty tax payments. The petitioners further alleged that the everything. However, the respondent failed to pay the balance of the
respondent even failed to pay any rental for the property from June purchase price of the property in the amount of P156,970.04 despite
1987 to June 1, 1988. They posited that the contract between the promises to do so.
parties was unenforceable under Article 1403(2) of the New Civil
On September 16, 1989, petitioner Clemeno, Jr. went to the
Code, and prayed that judgment be rendered in their favor as prayed
respondents house to talk to him anew, but the latter was nowhere to
for by them in their complaint in Civil Case No. 93-17268, thus:
be found. He made a typewritten letter to the respondent, stating that
the latter had been given more than enough time to exercise the
WHEREFORE, it is most respectfully prayed that after due hearing, a option to buy the property but failed to do so; hence, the offer was
decision in favor of plaintiff be rendered, ordering Defendant deemed cancelled. The petitioner left the letter with the respondents
daughter, Michelle Lobregat.
(a) And all other persons claiming under him to vacate the
premises located at 86 Madaling Araw St., Teresa The trial court rendered judgment in favor of the petitioners, as
Heights Subdivision, Novaliches, Quezon City; follows:

(b) To pay plaintiff a balance of P64,349.14 for the use and Accordingly, therefore, the Court hereby renders judgment in favor of
occupancy of the premises until May 31, 1993, and at Angel Clemeno, [Jr.] as against Romeo Lobregat and orders the latter
the rate of P3,628.80 a month from June 1, 1993 until and other persons claiming under him to:
the premises shall have been finally vacated;
1. Vacate the premises located at No. 86 Madaling Araw
(c) To pay P50,000.00 plus P2,000.00 per appearance as Street, Teresa Heights Subdivision, Novaliches, Quezon
and for attorneys fees; and City;

(d) To pay the costs of suit. 2. Pay Angel Clemeno, Jr. the amount of P64,349.14 for the
use and occupancy of the premises until May 31, 1993
Plaintiff further prays for such other relief reasonable and and at the rate of P3,628.80 a month from June 1, 1993
conscionable in the premises.[28] until the premises have been finally vacated;

3. Pay the amount of P50,000.00 as attorneys fees and


other legal expenses, and
The Evidence for the
Petitioners
4. To pay the costs of suit.

Abueva| Page 38 of 46
IT IS SO ORDERED.[29] 5. THAT THE LOWER COURT MISAPPLIED THE
PRINCIPLE OF STATUTE OF FRAUDS.[30]
The trial court ruled that since both the sale and lease
On February 23, 1999, the Court of Appeals rendered judgment
agreements were not reduced to writing, both contracts were
reversing the decision of the trial court. The fallo of the decision reads:
unenforceable under Article 1403(2) of the New Civil Code, and had
decided the case based on justice and equity.
WHEREFORE, the decision appealed from is REVERSED, and
The respondent appealed the decision to the Court of Appeals judgment is hereby rendered:
and raised the following assignment of errors:
1. In Civil Case No. Q-92-12620
1. THE LOWER COURT, AFTER THE COMPLETE,
MERITORIOUS AND WRITTEN PIECES OF EVIDENCE
SUBMITTED BY PLAINTIFF-APPELLANT LOBREGAT, (a) Ordering defendants-appellees to accept the remaining
FAILED/REFUSED TO CONSIDER THE SAME. balance of the purchase price of the house and lot
INSTEAD, DECIDED ONLY THE CASE OF ACCION subject of sale in the amount of P156,109.00 and,
PUBLICIANA FILED BY DEFENDANT-APPELLEE A. thereafter, execute in favor of plaintiff-appellant the
CLEMENO, JR. corresponding deed of sale or proper mode of
conveyance; and
2. THE LOWER COURT FAILED TO CONSIDER THAT
RECEIPTS ARE NOT CONTRACT OF SALE (b) Ordering defendants-appellees to pay, jointly and
BUT EVIDENCE FOR CONTRACT OF SALE AS EVEN severally, plaintiff-appellant P50,000.00 by way of moral
NOTED BY THE LOWER COURT. damages, P25,000.00 by way of exemplary damages,
3. THAT THE LOWER COURT FAILED TO CONSIDER and P15,000.00 as attorneys fees.
THAT THE PIECES OF EVIDENCE OF LOBREGAT
CLEARLY SHOW THAT [THE] SALE WAS THE 2. In Civil Case No. Q-93-17268 dismissing the complaint therein.
TRANSACTION BETWEEN HEREIN PARTIES
AS ADMITTED BY DEFENDANT-APPELLEE A. Costs against defendants-appellees.
CLEMENO, JR. (T.S.N., p. 16, Nov. 20, 1995) (T.S.N., pp.
26 & 27, April 19, 1996) SO ORDERED.[31]
3. THAT THE HONORABLE LOWER COURT
The Court of Appeals ruled that the contract entered into between
DISREGARDED ITS OWN RULING AS TO THE
the parties was a contract of sale, not a contract to sell. The appellate
APPELLEES INTENTIONAL FAILURE TO
court also ruled that Article 1403(2) was not applicable because the
FOLLOW/COMPLY WITH ITS ORDER DATED MAY 31,
contract was already partly performed, since partial payments had
1996.
been made by the respondent as evidenced by receipts signed by the
4. THAT THE LOWER COURT FAILED TO CONSIDER THE petitioners.
DELIBERATE OMISSION OF DEFENDANTS-
The petitioners now come to this Court, contending that:
APPELLEES TO OBSERVE THE NON-FORUM
SHOPPING REQUIREMENT. I

Abueva| Page 39 of 46
The Honorable Court of Appeals grossly erred in holding that the of the New Civil Code which requires that such contract must appear
contract entered by the parties is a contract of sale and not a contract in a public document.
to sell.[32]
On the other hand, the appellate court held that the petitioners
and the respondent entered into a verbal contract of sale and not a
II
contract to sell over the subject property, thus:
The Court of Appeals erred seriously when it held that Under Article
In the case at bench, Clemeno had agreed to sell his house and lot to
1356 of the Civil Code, contract shall be obligatory, in whatever form
Lobregat for a total consideration of P270,000.00 payable in
they may have been entered into, provided all the essential requisites
installments within a period of two (2) years. The receipt, Exhibit A, is
for their validity are present and that the contract of sale of a piece of
self-explanatory: it speaks of the receipt by Clemeno of the sum
land may be proved orally, totally ignoring the positive mandate of
of P25,000.00 from Lobregat as advance payment of the subject
Article 1358 of the Civil Code, [33]
house and lot, the total purchase price of which is P270,000.00.
Significantly, upon his receipt of the advance payment, Clemeno
III delivered the possession of the premises to Lobregat who is now the
present possessor thereof. Subsequent payments were made by
The Honorable Court of Appeals erred in holding that the Statute of Lobregat on the purchase price, all of which were duly receipted for by
Frauds cannot be raised as a defense against specific performance, Clemeno. The receipts Exhibits A-1, A-2 and A-3, for example, speak
there being partial performance of the down-payment and subsequent uniformly of additional part payment for the house and lot subject of
installments, even if short of the full price and after the expiry of the this case. Moreover, as suggested by Clemeno himself, Lobregat had
agreed dates of payment.[34] been religiously remitting the monthly payments on Clemenos loan
obligation with the SSS. Note, for instance, Exhibit A-4 one of the
The Court shall resolve these issues simultaneously as they are many receipts of payment to SSS where it is indicated that the real
interrelated. estate loan is in the name of Angel C. Clemeno, Jr., as borrower, but
The petitioners posit that the respondent failed to prove the bears the name of Romeo Lobregat, as payor, on behalf of Clemeno.
essential elements of a contract of sale over the subject property. It is as clear as sunlight that the parties had entered into a contract of
They contend that the receipts wherein they acknowledged the receipt sale and not merely a contract to sell.[36]
of the amounts therein specified do not conform to the legal
requirements of a contract of sale, and cited the ruling of this Court The petition has no merit.
in Manotok Realty, Inc. vs. Court of Appeal.[35] They also posit that We find and so hold that the contract between the parties was a
even by his own admission, the respondent defaulted in the payment perfected verbal contract of sale, not a contract to sell over the subject
of the purchase price of the property; hence, they are not obliged to property, with the petitioner as vendor and the respondent as vendee.
execute a deed of absolute sale over the property and deliver the title Sale is a consensual contract and is perfected by mere consent,
to him. The petitioners assert that even if they had entered into an which is manifested by a meeting of the minds as to the offer and
agreement with the respondent, such agreement was a mere contract acceptance thereof on three elements: subject matter, price and terms
to sell, not a contract of sale. They further assert that even if, indeed, of payment of the price.[37] The petitioners sold their property to the
the parties had entered into a contract of sale, the same is respondent for P270,000.00, payable on installments, and upon the
unenforceable under paragraph 2, Article 1403 of the New Civil Code, payment of the purchase price thereof, the petitioners were bound to
which provides that such contract must be in writing; and Article 1358 execute a deed of sale in favor of the respondent and deliver to him
the certificate of title over the property in his name. The parties later
Abueva| Page 40 of 46
agreed for the respondent to assume the payment of the petitioners Art. 1403. The following contracts are unenforceable, unless they are
loan amortization to the SSS, which payments formed part of the ratified:
purchase price of the property. The evidence shows that upon the
payment made by the respondent of the amount of P27,000.00 on (2) Those that do not comply with the Statute of Frauds as set forth in
June 4, 1987, the petitioners vacated their house and delivered this number. In the following cases, an agreement hereafter made
possession thereof to the respondent. Conformably to Article 1477 of shall be unenforceable by action, unless the same, or some note or
the New Civil Code, the ownership of the property was transferred to memorandum thereof, be in writing, and subscribed by the parties
the respondent upon such delivery. The petitioners cannot re-acquire charged, or by his agent; evidence, therefore, of the agreement
ownership and recover possession thereof unless the contract is cannot be received without the writing, or a secondary evidence of its
rescinded in accordance with law.[38] The failure of the respondent to contents:
complete the payment of the purchase price of the property within the
stipulated period merely accorded the petitioners the option to rescind (d) An agreement for the sale of goods, chattels or things in action, at
the contract of sale as provided for in Article 1592 of the New Civil a price not less than five hundred pesos, unless the buyer accepts
Code.[39] and receives part of such goods and chattels, or the evidences, or
The contract entered into by the parties was not a contract to sell some of them, of such things in action, or pay at the time some part of
because there was no agreement for the petitioners to retain the purchase money: but when a sale is made by auction and entry is
ownership over the property until after the respondent shall have paid made by the auctioneer in his sales book, at the time of the sale, of
the purchase price in full, nor an agreement reserving to the the amount and kind of property sold, terms of sale, price, names of
petitioners the right to unilaterally resolve the contract upon the the purchasers and person on whose account the sale is made, it is a
buyers failure to pay within a fixed period.[40]Unlike in a contract of sufficient memorandum;
sale, the payment of the price is a positive suspensive condition in a
contract to sell, failure of which is not a breach but an event that This is so because the provision applies only to executory, and
prevents the obligation of the vendor to convey the title from not to completed, executed or partially executed contracts.[42] In this
becoming effective.[41] case, the contract of sale had been partially executed by the parties,
with the transfer of the possession of the property to the respondent
The fact that the receipts issued by the SSS evidencing the and the partial payments made by the latter of the purchase price
respondents remittances of the monthly amortization payments of the thereof.
petitioners loan, and that the receipts issued to the respondent for the
payment of realty taxes for 1987 and 1988 were in the name of Nilus We agree with the petitioners contention that the respondent did
Sacramento and/or the petitioner Clemeno, Jr., does not negate the not pay the total purchase price of the property within the stipulated
fact of the transfer of the ownership over the property to the period. Moreover, the respondent did not pay the balance of the
respondent on June 4, 1987. Moreover, the deed of sale over the purchase price of the property. However, such failure to pay on the
property in favor of the respondent had not yet been executed by the part of the respondent was not because he could not pay, but
petitioners. The Spouses Sacramento and later, the petitioners, were because petitioner Angel Clemeno, Jr. told him not to do so. The latter
the borrowers, as per the records of the SSS. instructed the respondent to continue paying the monthly
amortizations due to the SSS on the loan. Unknown to the
The contract of sale of the parties is enforceable notwithstanding respondent, petitioner Angel Clemeno, Jr. wanted to increase the
the fact that it was an oral agreement and not reduced in writing as purchase price of the property at the prevailing market value in 1992,
required by Article 1403(2) of the New Civil Code, which reads: and not its value in 1987 when the contract of sale was perfected.

Abueva| Page 41 of 46
The petitioners failed to prove their claim that a lease purchase
agreement over the property was entered into. Except for their bare
claim, they failed to adduce a morsel of documentary evidence to
prove the same. On the other hand, all the receipts issued by them on
the partial payments made by the respondent were for the purchase
price of the property, and not as rentals thereof.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for
lack of merit. Costs against the petitioners.
SO ORDERED.

Abueva| Page 42 of 46
Republic of the Philippines Juanso Yu Book's death, Bernardina filed against her mother a case
SUPREME COURT for the partition of the said property in the then Court of First Instance
Manila of Leyte. 2 On August 17, 1970, the lower court 3 rendered a
"supplemental decision" 4 finding that the said property had been
THIRD DIVISION subdivided into Lots Nos. 6354 (13,788 square meters), 6353 (16,604
square meters), 6352 (23,868 square meters) and 6366 (71,656
square meters). The dispositive portion of said decision reads:

G.R. No. 75111 November 21, 1991 IN VIEW OF THE FOREGOING, the Court hereby
renders judgment:
MARGARITO ALMENDRA, DELIA ALMENDRA, BERNARDINA
OJEDA and MELECIA CENO, petitioners, 1. Declaring plaintiff Bernardina C. Ojeda as owner and
vs. entitled to the possession of Lot No. 6354 as described
THE HON. INTERMEDIATE APPELLATE COURT, ANGELES in the sketch found on page 44 of the record;
ALMENDRA, ROMAN ALMENDRA and MAGDALENO
CENO, respondents. 2. Declaring said plaintiff as owner and entitled to the
possession of Lot 6353 as described in the sketch,
Custodio P. Canete for petitioners. without prejudice to whatever may be the rights thereto
of her sister Melecia Ceno who is said to be presently
Serafin P. Ramento and Leon T. Tumandao for private respondents. in China;

3. Declaring defendant Aleja C. Almendra as owner


and entitled to the possession of Lot No. 6366 as
FERNAN, C.J.:p described in the sketch found on page 44 of the record;

4. Declaring said defendant also as owner and entitled


This is a petition for review on certiorari of the then Intermediate
Appellate Court's decision and resolution denying the motion for to the possession of Lot No. 6352 as described in the
reconsideration of said decision which upheld the validity of three (3) sketch, subject to whatever may be the rights thereto of
deeds of sale of real properties by a mother in favor of two of her her son Magdaleno Ceno who is said to be presently in
children in total reversal of the decision the lower court. China.

The mother, Aleja Ceno, was first married to Juanso Yu Book with No special pronouncement as to costs, except that the
whom she had three children named Magdaleno, Melecia and fees of the commissioner shall be proportionately
Bernardina, all surnamed Ceno. Sometime in the 1920's, Juanso Yu borne by the parties.
Book took his family to China where he eventually died. Aleja and her
daughter Bernardina later returned to the Philippines. SO ORDERED.

During said marriage, Aleja acquired a parcel of land which she Meanwhile, Aleja married Santiago Almendra with whom she had four
declared in her name under Tax Declaration No. 11500. 1 After children named Margarito, Angeles, Roman and Delia. During said
Abueva| Page 43 of 46
marriage Aleja and Santiago acquired a 59,196-square-meter parcel T/D No. 9635; having an area of 6.6181 hec., assessed at P1,580.00 .
of land in Cagbolo, Abuyog, Leyte. Original Certificate of Title No. . ." 10
10094 was issued therefor in the name of Santiago Almendra married
to Aleja Ceno and it was declared for tax purposes in his name. 5 On the same day, Aleja sold to Angeles and Roman again for P2,000
yet another parcel of land described in the deed of sale 11 as follows:
In addition to said properties, Aleja inherited from her father, Juan
Ceno, a 16,000-square-meter parcel of land also in Cagbolo. 6 For his A parcel of land designated as Lot No. 6352 in the
part, her husband Santiago inherited from his mother Nicolasa Alvero, name of Melicia Ceno, under Project PLS-645,
a 164-square-meter parcel of residential land located in Nalibunan, Abuyog, Leyte, which had been treated in the CIVIL
Abuyog, Leyte. 7 CASE No. 4387, For PARTITION OF REAL
PROPERTY, CFI-Leyte, Tacloban City, Branch 11;
While Santiago was alive, he apportioned all these properties among Bernardina Ojeda, Plaintiff, -vs.- Aleja C. Almendra,
Aleja's children in the Philippines, including Bernardina, who, in turn, defendant, wherein said SUPPLEMENTAL DECISION,
shared the produce of the properties with their parents. After dated August 17th, 1970, in said case by Judge Jesus
Santiago's death, Aleja sold to her daughter, Angeles Almendra, for N. Borromeo:
P2,000 two parcels of land more particularly described in the deed of
sale dated August 10, 1973, 8 as follows: PART OF THE DECISION,
COMMISSIONER'S REPORT:
1. Half-portion, which pertains to me as my conjugal
share, with my late husband Santiago Almendra of the Par. 3) That the partition, plaintiff and
land located at Bo. Cagbolo, under T/D No. 22234, defendant agreed to exchange the
covered by OCT No. P-10094 in name of Santiago names or owners of Lot No. 6353 which
Almendra; having an area of 5.9196 hectares; with is in the name of Magdaleno Ceno with
boundaries specifically designated at the technical Lot No. 6352 in the name of Melecia
descriptions of the title thereof; and hence the half Ceno as appearing in the sketch, copy
portion subject of sale shall have an area of more or of the Public Land Subdivision of
less 2.9598 hectares; specifically designated in the Abuyog, Leyte, under Project PLS-645 .
sketch below marked as X: the hilly portion. ...

2. Half-portion of a parcel of land located at Bo. DISPOSITIVE PORTION OF SAID


Cagbolo, Abuyog, Leyte under T/D No. 27190 in the DECISION:
name of Aleja Ceno; having an area of 1.6000 hectares
bounded as follows to wit: N. Cagbolo creek; E. Leon Par. 4) Declaring said defendant (Aleja
Elmido; S. Magno Elmido and W., Higasan River, C. Almendra) also as owner and entitled
which portion shall have an area of more or less 8000 to the possession of Lot No. 6352 as
hec. (sic), and designated as X in the sketch below: 9 described in the sketch, subject to
whatever may be the rights thereto of
On December 26, 1973, Aleja sold to her son, Roman Almendra, also her son Magdaleno Ceno who is said to
for P2,000 a parcel of land described in the deed of sale as located in be presently in China.
Cagbulo (sic), Abuyog, Leyte "under T/D No. 11500 which cancelled
Abueva| Page 44 of 46
Aleja died on May 7, 1975. On January 21, 1977 Margarito, Delia and in the contracts. The appellate court also stated that the uniformity in
Bernardina filed a complaint against Angeles and Roman for the the prices of the sale could not have nullified the sale because it had
annulment of the deeds of sale in their favor, partition of the properties been duly proven that there was consideration and that Angeles and
subjects therein and accounting of their produce. 12 From China, their Roman could afford to pay the same. Hence, it upheld validity of the
sister Melecia signed a special power of attorney in favor of deeds of sale and ordered the partition of the "undisposed" properties
Bernardina. Magdaleno, who was still in China, was impleaded as a left by Aleja and Santiago Almendra and, if an extrajudicial partition
defendant in the case and summons by publication was made on him. can be had, that it be made within a reasonable period of time after
Later, the plaintiffs informed the court that they had received a receipt of its decision.
document in Chinese characters which purportedly showed that
Magdaleno had died. Said document, however, was not produced in The plaintiffs' motion for reconsideration having been denied, they
court. Thereafter, Magdaleno was considered as in default without filed the instant petition for review on certioraricontending principally
prejudice to the provisions of Section 4, Rule 18 of the Rules of Court that the appellate court erred in having sanctioned the sale of
which allows the court to decide a case wherein there several particular portions of yet undivided real properties.
defendants upon the evidence submitted only by the answering
defendants. While petitioners' contention is basically correct, we agree with the
appellate court that there is no valid, legal and convincing reason for
On April 30, 1981, the lower court rendered a decision 13 the nullifying the questioned deeds of sale. Petitioner had not presented
dispositive portion of which states: any strong, complete and conclusive proof to override the evidentiary
value of the duly notarized deeds of sale. 15 Moreover, the testimony
WHEREFORE, judgment is hereby rendered declaring of the lawyer who notarized the deeds of sale that he saw not only
the deeds of sale herein (Exhs."E", "F"and"H") to be Aleja signing and affixing her thumbmark on the questioned deeds but
simulated and therefore null and void; ordering the also Angeles and Aleja "counting money between
partition of the estate of the deceased Aleja Ceno them," 16 deserves more credence than the self-serving allegations of
among her heirs and assigns; appointing the Acting the petitioners. Such testimony is admissible as evidence without
Clerk of Court, Atty. Cristina T. Pontejos, as further proof of the due execution of the deeds in question and is
commissioner, for the purpose of said partition, who is conclusive as to the truthfulness of their contents in the absence of
expected to proceed accordingly upon receipt of a copy clear and convincing evidence to the contrary. 17
of this decision; and to render her report on or before
30 days from said receipt. The expenses of the The petitioners' allegations that the deeds of sale were "obtained
commissioner shall be borne proportionately by the through fraud, undue influence and misrepresentation," and that there
parties herein. was a defect in the consent of Aleja in the execution of the documents
because she was then residing with Angeles, 18 had not been fully
SO ORDERED. substantiated. They failed to show that the uniform price of P2,000 in
all the sales was grossly inadequate. It should be emphasized that the
The defendants appealed to the then Intermediate Appellate Court sales were effected between a mother and two of her children in
which, on February 20, 1986 rendered a decision 14 finding that, in which case filial love must be taken into account. 19
nullifying the deeds of sale in question, the lower court totally
disregarded the testimony of the notary public confirming the On the other hand, private respondents Angeles and Roman amply
authenticity of the signatures of Aleja on said deeds and the fact that proved that they had the means to purchase the properties. Petitioner
Angeles and Roman actually paid their mother the amounts stipulated Margarito Almendra himself admitted that Angeles had a sari-sari
Abueva| Page 45 of 46
store and was engaged in the business of buying and selling SO ORDERED.
logs. 20 Roman was a policeman before he became an auto
mechanic and his wife was a school teacher 21

The unquestionability of the due execution of the deeds of sale


notwithstanding, the Court may not put an imprimatur on the intrinsic
validity of all the sales. The August 10, 1973 sale to Angeles of one-
half portion of the conjugal property covered by OCT No. P-10094
may only be considered valid as a sale of Aleja's one-
half interesttherein. Aleja could not have sold particular hilly portion
specified in the deed of sale in absence of proof that the conjugal
partnership property had been partitioned after the death of Santiago.
Before such partition, Aleja could not claim title to any definite portion
of the property for all she had was an ideal or abstract quota or
proportionate share in the entire property. 22

However, the sale of the one-half portion of the parcel of land covered
by Tax Declaration No. 27190 is valid because the said property is
paraphernal being Aleja's inheritance from her own father. 23

As regards the sale of the property covered by Tax Declaration No.


11500, we hold that, since the property had been found in Civil Case
No. 4387 to have been subdivided, Aleja could not have intended the
sale of the whole property covered by said tax declaration. She could
exercise her right of ownership only over Lot No. 6366 which was
unconditionally adjudicated to her in said case.

Lot No. 6352 was given to Aleja in Civil Case No. 4387 "subject to
whatever may be the rights thereto of her son Magdaleno Ceno." A
reading of the deed of Sale 24 covering parcel of land would show
that the sale is subject to the condition stated above; hence, the rights
of Magdaleno Ceno are amply protected. The rule on caveat
emptor applies.

WHEREFORE, the decision of the then Intermediate Appellate Court


is hereby affirmed subject to the modifications herein stated. The
lower court is directed to facilitate with dispatch the preparation and
approval of a project of partition of the properties considered unsold
under this decision. No costs.

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