G.R. No.

173881 December 1, 2010

HYATT ELEVATORS and ESCALATORS CORPORATION, Petitioner,

vs.
CATHEDRAL HEIGHTS BUILDING COMPLEX ASSOCIATION, INC., Respondent.

PERALTA, J.:

Before this Court is a petition for review on certiorari,1 under Rule 45 of the Rules of Court, seeking to set aside the April
20, 2006 Decision2 and July 31, 2006 Resolution3 of the Court of Appeals (CA), in CA-G.R. CV No. 80427.

The facts of the case are as follows:

On October 1, 1994, petitioner Hyatt Elevators and Escalators Corporation entered into an "Agreement to Service
Elevators" (Service Agreement)4 with respondent Cathedral Heights Building Complex Association, Inc., where petitioner
was contracted to maintain four passenger elevators installed in respondent's building. Under the Service Agreement,
the duties and obligations of petitioner included monthly inspection, adjustment and lubrication of machinery, motors,
control parts and accessory equipments, including switches and electrical wirings.5 Section D (2) of the Service
Agreement provides that respondent shall pay for the additional charges incurred in connection with the repair and
supply of parts.

Petitioner claims that during the period of April 1997 to July 1998 it had incurred expenses amounting to Php
1,161,933.47 in the maintenance and repair of the four elevators as itemized in a statement of account.6 Petitioner
demanded from respondent the payment of the aforesaid amount allegedly through a series of demand letters, the last
one sent on July 18, 2000.7 Respondent, however, refused to pay the amount.

Petitioner filed with the Regional Trial Court (RTC), Branch 100, Quezon City, a Complaint for sum of money against
respondent. Said complaint was docketed as Civil Case No. Q-01-43055.

On March 5, 2003, the RTC rendered Judgment8 ruling in favor of petitioner, the dispositive portion of which reads:

WHEREFORE, premises considered, JUDGMENT IS HEREBY RENDERED IN FAVOR OF THE PLAINTIFF AND AGAINST THE
DEFENDANT ordering the latter to pay Plaintiff as follows:

1. The sum of 1,161,933.27 representing the costs of the elevator parts used, and for services and maintenance, with
legal rate of interest from the filing of the complaint;

2. The sum of 50,000.00 as attorney's fees;

3. The costs of suit.

SO ORDERED.9

The RTC held that based on the sales invoices presented by petitioner, a contract of sale of goods was entered into
between the parties. Since petitioner was able to fulfill its obligation, the RTC ruled that it was incumbent on respondent
to pay for the services rendered. The RTC did not give credence to respondent's claim that the elevator parts were never
delivered and that the repairs were questionable, holding that such defense was a mere afterthought and was never
raised by respondent against petitioner at an earlier time.

Respondent filed a Motion for Reconsideration.10 On August 17, 2003, the RTC issued a Resolution11 denying
respondent's motion. Respondent then filed a Notice of Appeal.12

On April 20, 2006, the CA rendered a Decision finding merit in respondent's appeal, the dispositive portion of which
reads:

WHEREFORE, premises considered, the instant appeal is GRANTED. The Judgment of the Regional Trial Court, Branch
100, Quezon City, dated March 5, 2003, is hereby REVERSED and SET ASIDE. The complaint below is dismissed.

SO ORDERED.13

In reversing the RTC, the CA ruled that respondent did not give its consent to the purchase of the spare parts allegedly
installed in the defective elevators. Aside from the absence of consent, the CA also held that there was no perfected
contract of sale because there was no meeting of minds upon the price. On this note, the CA ruled that the Service
Agreement did not give petitioner the unbridled license to purchase and install any spare parts and demand, after the
lapse of a considerable length of time, payment of these prices from respondent according to its own dictated price.

Aggrieved, petitioner filed a Motion for Reconsideration,14 which was, however, denied by the CA in a Resolution dated
July 31, 2006.

Hence, herein petition, with petitioner raising a lone issue for this Court's resolution, to wit:

WHETHER OR NOT THERE IS A PERFECTED CONTRACT OF SALE BETWEEN PETITIONER AND RESPONDENT WITH REGARDS
TO THE SPARE PARTS DELIVERED AND INSTALLED BY PETITIONER ON THE FOUR ELEVATORS OF RESPONDENT AT ITS
HOSPITAL UNDER THE AGREEMENT TO SERVICE ELEVATORS AS TO RENDER RESPONDENT LIABLE FOR THEIR PRICES?15

Before anything else, this Court shall address a procedural issue raised by respondent in its Comment16 that the petition
should be denied due course for raising questions of fact.

The determination of whether there exists a perfected contract of sale is essentially a question of fact. It is already a
well-settled rule that the jurisdiction of this Court in cases brought before it from the CA by virtue of Rule 45 of the
Revised Rules of Court is limited to reviewing errors of law. Findings of fact of the CA are conclusive upon this Court.
There are, however, recognized exceptions to the foregoing rule, namely: (1) when the findings are grounded entirely on
speculation, surmises, or conjectures; (2) when the inference made is manifestly mistaken, absurd, or impossible; (3)
when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the
findings of fact are conflicting; (6) when, in making its findings, the Court of Appeals went beyond the issues of the case,
or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary
to those of the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are
based; (9) when the facts set forth in the petition, as well as in the petitioners main and reply briefs, are not disputed by
the respondent; and (10) when the findings of fact are premised on the supposed absence of evidence and contradicted
by the evidence on record.17

The present case falls under the 7th exception, as the RTC and the CA arrived at conflicting findings of fact.
Having resolved the procedural aspect, this Court shall now address the substantive issue raised by petitioner. Petitioner
contends that the CA erred when it ruled that there was no perfected contract of sale between petitioner and
respondent with regard to the spare parts delivered and installed.

It is undisputed that a Service Agreement was entered into by petitioner and respondent where petitioner was
commissioned to maintain respondent's four elevators. Embodied in the Service Agreement is a stipulation relating to
expenses incurred on top of regular maintenance of the elevators, to wit:

SERVICE AND INSPECTION FEE:

xxxx

(2) In addition to the service fee mentioned in the preceding paragraph under this article, the Customer shall pay
whatever additional charges in connection with the repair, supply of parts other than those specifically mentioned in
ARTICLE A.2., or servicing of the elevator/s subject of this contract.18

Petitioner claims that during the period of April 1997 to July 1998, it had used parts in the maintenance and repair of the
four elevators in the total amount of 1,161,933.47 as itemized in a statement of account19 and supported by sales
invoices, delivery receipts, trouble call reports and maintenance and checking reports. Respondent, however, refuses to
pay the said amount arguing that petitioner had not complied with the Standard Operating Procedure (SOP) following a
breakdown of an elevator.

As testified to by respondent's witness Celestino Aguilar, the SOP following an elevator breakdown is as follows: (a) they
(respondent) will notify petitioner's technician; (b) the technician will evaluate the problem and if the problem is
manageable the repair was done right there and then; (c) if some parts have to be replaced, petitioner will present the
defective parts to the building administrator and a quotation is made; (d) the quotation is then indorsed to respondent's
Finance Department; and (e) a purchase order is then prepared and submitted to the Board of Directors for approval.20

Based on the foregoing procedure, respondent contends that petitioner had failed to follow the SOP since no purchase
orders from respondent's Finance Manager, or Board of Directors relating to the supposed parts used were secured
prior to the repairs. Consequently, since the repairs were not authorized, respondent claims that it has no way of
verifying whether the parts were actually delivered and installed as alleged by petitioner.

At the outset, this Court observes that the SOP is not embodied in the Service Agreement nor was a document
evidencing the same presented in the RTC. The SOP appears, however, to be the industry practice and as such was not
contested by petitioner. Nevertheless, petitioner offers an excuse for non-compliance with the SOP on its claim that the
SOP was not followed upon the behest and request of respondent.

A perusal of petitioner's petition and evidence in the RTC shows that the main thrust of its case is premised on the
following claims: first, that the nature and operations of a hospital necessarily dictate that the elevators are in good
running condition at all times; and, second, that there was a verbal agreement between petitioner's service manager
and respondent's building engineer that the elevators should be running in good condition at all times and breakdowns
should only last one day.
In order to prove its allegations, petitioner presented Wilson Sua, its finance manager, as its sole witness. Sua testified
to the procedure followed by petitioner in servicing respondent's elevators, to wit:

Q: Can you tell us Mr. witness, what is the procedure actually followed whenever there is a need for trouble call
maintenance or repair?

A: The St. Lukes Cathedrals personnel, which includes the administrative officers, the guard on duty, or the
receptionist, will call us through the phone if their elevators brake (sic) down.

Q: Then, what happened?

A: Immediately, we dispatched our technicians to check the trouble.

Q: And who were these technicians whom you normally or regularly dispatched to attend to the trouble of the elevators
of the defendant?

A: With regard to this St. Lukes, we dispatched Sunny Jones and Gilbert Cinamin.

Q: And what happened after dispatching these technicians?

A: They come back immediately to the office to request the parts needed for the troubleshooting of the elevators.

Q: Then what happened?

A: A part will be brought to the project cite and they will install it and note it in the trouble call report and have it
received properly by the building guard or the receptionist or by the building engineers, and they will test it for a couple
of weeks to determine if the parts are the correct part needed for that elevator and we will secure their approval,
thereafter we will issue our invoices and delivery receipts.

Q: This trouble call reports, are these in writing?

A: Yes, sir. These are in writing and these are being written within that day.

Q: Within the day of?

A: Of the trouble. And have it received by the duly personnel of St. Lukes Cathedral.

Q: And who prepared this trouble call reports?

A: The technician who actually checked the elevator.

Q: When do the parts being installed?

A: On the same date they brought the parts on the project cite.

Q: You mentioned sales invoice and delivery receipts. Who prepared these invoice?
A: Those were prepared by our inventory clerk under my supervision?

Q: How about the delivery receipts?

A: Just the same.

Q: When would the sales invoice be prepared?

A: After the approval of the building engineer.

Q: But at the time that the sales invoice and delivery receipts were being prepared after the approval of the building
engineer, what happened to the parts? Were they already installed or what?

A: They were already installed.

Q: Now, why would the parts be installed before the preparation of the sales invoice and the delivery receipts?

A: There was an agreement between the building engineer and our service manager that the elevator should be running
in good condition at all times, breakdown should be at least one day only. It cannot stop for more than a day.21

On cross examination, Sua testified that the procedure was followed on the authority of a verbal agreement between
petitioner's service manager and respondent's engineer, thus:

Q: So, you mean to say that despite the fact that material are expensive you immediately installed these equipments
without the prior approval of the board?

A: There is no need for the approval of the board since there is a verbal agreement between the building engineer and
the Hyatt service manager to have the elevator run.

Q: Aside from the building engineer, there is a building administrator?

A: No, ma'am. He is already the building administrator and the building engineer. That is engineer Tisor.

Q: And with regard to the fact that the delivery receipts were acknowledged by the engineer, is that true?

A: Yes, ma'am.

Q: You also mentioned earlier that aside from the building engineer, the receptionist and guards are also authorized. Are
you sure that they are authorized to receive the delivery receipts?

A: Yes, ma'am. It was an instruction given by Engineer Tisor, the building engineer and also the building administrator to
have it received.

Q: So, all these agreements are only verbally, it is not in writing?

A: Yes, ma'am.22

In its petition, petitioner claims that because of the special circumstances of the building being a hospital, the procedure
actually followed since October 1, 1994 was as follows:

1. Whenever any of the four elevators broke down, the administrative officers, security guard or the receptionist of
respondent called petitioner by telephone;

2. Petitioner dispatched immediately a technician to the St. Lukes Cathedral Heights Building to check the trouble;

3. If the breakdown could be repaired without installation of parts, repair was done on the spot;

4. If the repair needed replacement of damaged parts, the technician went back to petitioners office to get the
necessary replacement parts;

5. The technician then returned to the St. Lukes Cathedral Heights Building and installed the replacement parts and
finished the repair;

6. The placement parts, which were installed in the presence of the security guard, building engineers or receptionist of
respondents whoever was available, were indicated in the trouble call report or sometimes in the delivery receipt and
copy of the said trouble call report or delivery receipt was then given to the blue security guard, building engineers or
receptionist, who duly acknowledged the same;

7. Based on the trouble call report or the delivery receipts, which already indicated the replacement parts installed and
the services rendered, respondent should prepare the purchase order, but this step was never followed by respondent
for whatever reason;

8. In the meantime, the elevator was tested for a couple of weeks to see if the replacement parts were correct and the
approval of the building engineers was secured;

9. After the building engineers gave their approval that the replacement parts were correct or after the lapse of two
weeks and nothing was heard or no complaint was lodged, then the corresponding sales invoices and delivery receipts, if
nothing had been issued yet, were prepared by petitioner and given to respondent, thru its receptionists or security
guards;

10. For its purposes, respondent should compare the trouble call reports or delivery receipts which indicated the
replacement parts installed or with the sales invoices and delivery receipts to confirm the correctness of the transaction;

11. If respondent had any complaint that the parts were not actually installed or delivered or did not agree with the
price of the parts indicated in the sales invoices, then it should bring its complaint or disagreement to the attention of
petitioner. In this regard, no complaint or disagreement as to the prices of the spare parts has been lodged by
respondent.23

In varying language, our Rules of Court, in speaking of burden of proof in civil cases, states that each party must prove
his own affirmative allegations and that the burden of proof lies on the party who would be defeated if no evidence
were given on either side.1avvphi1 Thus, in civil cases, the burden of proof is generally on the plaintiff, with respect to
his complaint.24 In the case at bar, it is petitioner's burden to prove that it is entitled to its claims during the period in
dispute.

After an extensive review of the records and evidence on hand, this Court rules that petitioner has failed to discharge its
burden.

This Court finds that the testimony of Sua alone is insufficient to prove the existence of the verbal agreement, especially
in view of the fact that respondent insists that the SOP should have been followed. It is an age-old rule in civil cases that
one who alleges a fact has the burden of proving it and a mere allegation is not evidence.25

The testimony of Sua, at best, only alleges but does not prove the existence of the verbal agreement. It may even be
hearsay. It bears stressing, that the agreement was supposedly entered into by petitioner's service manager and
respondent's building engineer. It behooves this Court as to why petitioner did not present their service manager and
Engineer Tisor, respondent's building engineer, the two individuals who were privy to the transactions and who could
ultimately lay the basis for the existence of the alleged verbal agreement. It should have occurred to petitioner during
the course of the trial that said testimonies would have proved vital and crucial to its cause. Therefore, absent such
testimonies, the existence of the verbal agreement cannot be sustained by this Court.

Moreover, even assuming arguendo, that this Court were to believe the procedure outlined by Sua, his testimony26
clearly mentions that prior to the preparation of the sales invoices and delivery receipts, the parts delivered and
installed must have been accepted by respondent's engineer or building administrator. However, again, petitioner
offered no evidence of such acceptance by respondents engineer prior to the preparation of the sales invoices and
delivery receipts.

This Court is not unmindful of the fact that petitioner also alleges in its petition that the non-observance of the SOP was
the practice way back in 1994 when petitioner started servicing respondent's elevators. On this note, petitioner argued
in the following manner:

And most importantly, the Court of Appeals failed to appreciate that the parts being sought to be paid by petitioner in
the Complaint were delivered and installed during the period from April 1997 to July 1998, which followed the same
actual procedure adopted since October 1, 1994. Based on the same procedure adopted because of the special
circumstances of St. Luke's Cathedral Heights Building being a hospital, respondent has paid the replacement parts
installed from October 1994 to March 1997. Never did respondent question the adopted actual procedure from October
1994 to March 1997. x x x27

Was the procedure claimed by petitioner the adopted practice since 1994? This Court rules that other than the
foregoing allegation, petitioner has failed to prove the same. A perusal of petitioner's Formal Offer of Evidence28 would
show that the only documents presented by it are sales invoices, trouble call reports and delivery receipts, all relating to
the alleged transactions between 1997 to 1998. It is unfortunate that petitioner had failed to present in the RTC the
documents from 1994 to 1996 for it may have proven that the non-observance of the SOP was the practice since 1994.
Such documents could have shown that respondent had paid petitioner in the past without objection on similar
transactions under similar billing procedures. The same would have also validated petitioner's claim that the secretary
and security guards were all authorized to sign the documents. Unfortunately, for petitioner's cause, this Court has no
basis to validate its claim, because other than its bare allegation in the petition, petitioner offers no proof to
substantiate the same.
By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and deliver a
determinate thing, and the other to pay therefor a price certain in money or its equivalent.29 The absence of any of the
essential elements will negate the existence of a perfected contract of sale. In the case at bar, the CA ruled that there
was no perfected contract of sale between petitioner and respondent, to wit:

Aside from the absence of consent, there was no perfected contract of sale because there was no meeting of minds
upon the price. As the law provides, the fixing of the price can never be left to the discretion of one of the contracting
parties. In this case, the absence of agreement as to the price is evidenced by the lack of purchase orders issued by
CHBCAI where the quantity, quality and price of the spare parts needed for the repair of the elevators are stated. In
these purchase orders, it would show that the quotation of the cost of the spare parts earlier informed by Hyatt is
acceptable to CHBCAI. However, as revealed by the records, it was only Hyatt who determined the price, without the
acceptance or conformity of CHBCAI. From the moment the determination of the price is left to the judgment of one of
the contracting parties, it cannot be said that there has been an arrangement on the price since it is not possible for the
other contracting party to agree on something of which he does not know beforehand.30

Based on the evidence presented in the RTC, it is clear to this Court that petitioner had failed to secure the necessary
purchase orders from respondent's Board of Directors, or Finance Manager, to signify their assent to the price of the
parts to be used in the repair of the elevators. In Boston Bank of the Philippines v. Manalo,31 this Court explained that
the fixing of the price can never be left to the decision of one of the contracting parties, to wit:

A definite agreement as to the price is an essential element of a binding agreement to sell personal or real property
because it seriously affects the rights and obligations of the parties. Price is an essential element in the formation of a
binding and enforceable contract of sale. The fixing of the price can never be left to the decision of one of the
contracting parties. But a price fixed by one of the contracting parties, if accepted by the other, gives rise to a perfected
sale.32

There would have been a perfected contract of sale had respondent accepted the price dictated by petitioner even if
such assent was given after the services were rendered. There is, however, no proof of such acceptance on the part of
respondent.

This Court shares the observation of the CA that the signatures of receipt by the information clerk or the guard on duty
on the sales invoices and delivery receipts merely pertain to the physical receipt of the papers. It does not indicate that
the parts stated were actually delivered and installed. Moreover, because petitioner failed to prove the existence of the
verbal agreement which allegedly authorized the aforementioned individuals to sign in respondents behalf, such
signatures cannot be tantamount to an approval or acceptance by respondent of the parts allegedly used and the price
quoted by petitioner. Furthermore, what makes the claims doubtful and questionable is that the date of the sales
invoice and the date stated in the corresponding delivery receipt are too far apart as aptly found by the CA, to wit:

Further, We note that the date stated in the sales invoice vis-a-vis the date stated in the corresponding delivery receipt
is too far apart. For instance, Delivery Receipt No. 3492 dated February 13, 1998 has a corresponding Sales Invoice No.
7147 dated June 30, 1998. What puts doubt to this transaction is the fact that the sales invoice was prepared only after
four (4) months from the delivery. The considerable length of time that has lapsed from the delivery to the issuance of
the sales invoice is questionable. Further the delivery receipts were received months after its preparation. In the case of
Delivery Receipt No. 3850 dated November 26, 1997, Gumisad received this only on July 20, 1998, or after a lapse of
eight (8) months. Such kind of procedure followed by Hyatt is certainly contrary to usual business practice, especially
since in this case, it involves considerable amount of money.33
Based on the foregoing, the CA was thus correct when it concluded that "the Service Agreement did not give petitioner
the unbridled license to purchase and install any spare parts and demand, after the lapse of a considerable length of
time, payment of these prices from respondent according to its own dictated price."34

Withal, this Court rules that petitioner's claim must fail for the following reasons: first, petitioner failed to prove the
existence of the verbal agreement that would authorize non-observance of the SOP; second, petitioner failed to prove
that such procedure was the practice since 1994; and, third, there was no perfected contract of sale between the parties
as there was no meeting of minds upon the price.

To stress, the burden of proof is on the plaintiff. He must rely on the strength of his case and not on the weakness of
respondent's defense. Based on the manner by which petitioner had presented its claim, this Court is of the opinion that
petitioner's case leaves too much to be desired.

WHERFORE, premises considered, the petition is DENIED. The April 20, 2006 Decision and July 31, 2006 Resolution of the
Court of Appeals, in CA-G.R. CV No. 80427, are AFFIRMED.

SO ORDERED.

G.R. No. 165168 July 9, 2010

SPS. NONILON (MANOY) and IRENE MONTECALVO, Petitioners,

vs.
HEIRS (Substitutes) OF EUGENIA T. PRIMERO, represented by their Attorney-in-Fact, ALFREDO T. PRIMERO, JR.,
Respondents.

DECISION

DEL CASTILLO, J.:

Jurisprudence is replete with rulings that in civil cases, the party who alleges a fact has the burden of proving it. Burden
of proof is the duty of a party to present evidence on the facts in issue necessary to prove the truth of his claim or
defense by the amount of evidence required by law.11 In this case, the petitioners awfully failed to discharge their
burden to prove by preponderance of evidence that the Agreement they entered into with respondents' predecessor-in-
interest is a contract of sale and not a mere contract to sell, or that said Agreement was novated after the latter
subsequently entered into an oral contract of sale with them over a determinate portion of the subject property more
than a decade ago.

Petitioners filed this appeal from the Decision of the Court of Appeals (CA) affirming the Regional Trial Court's (RTC's)
dismissal of their action for specific performance where they sought to compel the respondents to convey the property
subject of their purported oral contract of sale.

Factual Antecedents
The property involved in this case is a portion of a parcel of land known as Lot No. 263 located at Sabayle Street, Iligan
City. Lot No. 263 has an area of 860 square meters covered by Original Certificate of Title (OCT) No. 0-2712 registered in
the name of Eugenia Primero (Eugenia), married to Alfredo Primero, Sr. (Alfredo).

In the early 1980s, Eugenia leased the lot to petitioner Irene Montecalvo (Irene) for a monthly rental of 500.00. On
January 13, 1985, Eugenia entered into an un-notarized Agreement3 with Irene, where the former offered to sell the
property to the latter for 1,000.00 per square meter. They agreed that Irene would deposit the amount of 40,000.00
which shall form part of the down payment equivalent to 50% of the purchase price. They also stipulated that during the
term of negotiation of 30 to 45 days from receipt of said deposit, Irene would pay the balance of 410,000.00 on the
down payment. In case Irene defaulted in the payment of the down payment, the deposit would be returned within 10
days from the lapse of said negotiation period and the Agreement deemed terminated. However, if the negotiations
pushed through, the balance of the full value of 860,000.00 or the net amount of 410,000.00 would be paid in 10
equal monthly installments from receipt of the down payment, with interest at the prevailing rate.

Irene failed to pay the full down payment within the stipulated 30-45-day negotiation period. Nonetheless, she
continued to stay on the disputed property, and still made several payments with an aggregate amount of 293,000.00.
On the other hand, Eugenia did not return the 40,000.00 deposit to Irene, and refused to accept further payments only
in 1992.

Thereafter, Irene caused a survey of Lot No. 263 and the segregation of a portion equivalent to 293 square meters in her
favor. However, Eugenia opposed her claim and asked her to vacate the property. Then on May 13, 1996, Eugenia and
the heirs of her deceased husband Alfredo filed a complaint for unlawful detainer against Irene and her husband, herein
petitioner Nonilon Montecalvo (Nonilon) before the Municipal Trial Court (MTC) of Iligan City. During the preliminary
conference, the parties stipulated that the issue to be resolved was whether their Agreement had been rescinded and
novated. Hence, the MTC dismissed the case for lack of jurisdiction since the issue is not susceptible of pecuniary
estimation. The MTC's Decision dismissing the ejectment case became final as Eugenia and her children did not appeal
therefrom.4

On June 18, 1996, Irene and Nonilon retaliated by instituting Civil Case No. II-3588 with the RTC of Lanao del Norte for
specific performance, to compel Eugenia to convey the 293-square meter portion of Lot No. 263.5

Proceedings before the Regional Trial Court

Trial on the merits ensued and the contending parties adduced their respective testimonial and documentary evidence
before the trial court.

Irene testified that after their Agreement for the purpose of negotiating the sale of Lot No. 263 failed to materialize, she
and Eugenia entered into an oral contract of sale and agreed that the amount of 40,000.00 she earlier paid shall be
considered as down payment. Irene claimed that she made several payments amounting to 293,000.00 which
prompted Eugenia's daughters Corazon Calacat (Corazon) and Sylvia Primero (Sylvia) to ask Engr. Antonio Ravacio (Engr.
Ravacio) to conduct a segregation survey on the subject property. Thereafter, Irene requested Eugenia to execute the
deed of sale, but the latter refused to do so because her son, Atty. Alfredo Primero, Jr. (Atty. Primero), would not agree.

On March 22, 1999, herein respondents filed with the court a quo a "Notice of Death of the Defendant"6 manifesting
that Eugenia passed away on February 28, 1999 and that the decedent's surviving legal heirs agreed to appoint their co-
heir Atty. Primero, to act as their representative in said case. In an Order7 dated April 8, 1999, the trial court substituted
the deceased defendant with Atty. Primero.

Respondents, on the other hand, presented the testimony of Atty. Primero to establish that Eugenia could not have sold
the disputed portion of Lot No. 263 to the petitioners. According to Atty. Primero, at the time of the signing of the
Agreement on January 13, 1985, Eugenia's husband, Alfredo, was already dead. Eugenia merely managed or
administered the subject property and had no authority to dispose of the same since it was a conjugal property. In
addition, respondents asserted that the deposit of 40,000.00 was retained as rental for the subject property.

Respondents likewise presented Sylvia, who testified that the receipts issued to petitioners were for the lot rentals.8
Another sister of Atty. Primero, Corazon, testified that petitioners were their tenants in subject land, which she co-owns
with her mother Eugenia.9 She denied having sold the purported 293-square meter portion of Lot No. 263 to the
petitioners.10

As rebuttal witness, petitioners presented Engr. Ravacio, a surveyor who undertook the segregation of the 293-square
meter portion out of the subject property.11

On October 22, 2001, the RTC rendered a Decision:12 (1) dismissing the complaint and the counterclaim for lack of legal
and factual bases; (2) ordering petitioners to pay respondents 2,500.00 representing rentals due, applying therefrom
the amount deposited and paid; and (3) ordering petitioner to pay 12% legal interest from finality of decision until full
payment of the amount due.13

Aggrieved, petitioners appealed the Decision of the trial court to the CA.

Proceedings before the Court of Appeals

Both parties filed their respective briefs before the appellate court.14 Thereafter, on November 28, 2003, the CA
rendered a Decision15 affirming the RTC Decision.16

Petitioners timely filed a Motion for Reconsideration.17 However, in a Resolution18 dated June 27, 2004, the CA
resolved to deny the same for lack of merit.19

Issues

Petitioners thus filed this Petition for Review on Certiorari anchored on the following grounds.

1. WHETHER AN ORAL CONTRACT OF SALE OF A PORTION OF [A] LOT IS BINDING [UPON] THE SELLER.

2. WHETHER A SELLER IN AN ORAL CONTRACT OF SALE OF A PORTION OF [A] LOT CAN BE COMPELLED TO EXECUTE THE
REQUIRED DEED OF SALE AFTER THE AGREED CONSIDERATION WAS PAID AND POSSESSION THEREOF DELIVERED TO
AND ENJOYED BY THE BUYER.

3. WHETHER THE BUYER HAS A RIGHT TO ENFORCE AN ORAL CONTRACT OF SALE AFTER THE PORTION SOLD IS
SEGREGATED BY AGREEMENT OF THE PARTIES.
4. WHETHER THE SELLER IS BOUND BY THE HANDWRITTEN RECEIPTS PREPARED AND SIGNED BY HER EXPRESSLY
INDICATING PAYMENTS OF LOTS.

5. WHETHER THE TRIAL COURT COULD RENDER A JUDGMENT ON ISSUES NOT DEFINED IN THE PRE-TRIAL ORDER.

Our Ruling

The petition lacks merit.

The Agreement dated January 13, 1985 is a contract to sell. Hence, with petitioners' non-compliance with its terms and
conditions, the obligation of the respondents to deliver and execute the corresponding deed of sale never arose.

The CA found that the Agreement dated January 13, 1985 is not a contract of sale but a mere contract to sell, the
efficacy of which is dependent upon the resolutory condition that Irene pay at least 50% of the purchase price as down
payment within 30-45 days from the day Eugenia received the 40,000.00

deposit.20 Said court further found that such condition was admittedly not met.21

Petitioners admit that the Agreement dated January 13, 1985 is at most, "a preliminary agreement for an eventual
contract."22 However, they argue that contrary to the findings of the appellate court, it was not only the buyer, Irene,
who failed to meet the condition of paying the balance of the 50% down payment.23 They assert that the Agreement
explicitly required Eugenia to return the deposit of 40,000.00 within 10 days, in case Irene failed to pay the balance of
the 50% down payment within the stipulated period.24 Thus, petitioners posit that for the cancellation clause to
operate, two conditions must concur, namely, (1) buyer fails to pay the balance of the 50% down payment within the
agreed period and (2) seller should return the deposit of 40,000.00 within 10 days if the first condition was not
complied with. Petitioners conclude that since both seller and buyer failed to discharge their reciprocal obligations,
being in pari delictu, the seller could not repudiate their agreement to sell.

The petitioners' contention is without merit.

There is no dispute as to the due execution and existence of the Agreement. The issue thus presented is whether the
said Agreement is a contract of sale or a contract to sell. For a better understanding and resolution of the issue at hand,
it is apropos to reproduce herein the Agreement in haec verba:

Agreement

This Agreement, made and executed by and between:

EUGENIA T. PRIMERO, a Filipino of legal age and residing in Camague, Iligan City (hereinafter called the OWNER)

- and -

IRENE P. MONTECALVO, Filipino of legal age and presently residing at Sabayle St., Iligan City (hereinafter [called] the
INTERESTED PARTY);

WITNESSETH:
1. That the OWNER is the true and absolute owner of a parcel of land located at Sabayle St. immediately fronting the St.
Peter's College which is presently leased to the INTERESTED PARTY;

2. That the property referred to contains an area of EIGHT HUNDRED SIXTY SQUARE METERS at the value of One
Thousand Pesos (1,000.00) per square meters;

3. That this agreement is entered into for the purpose of negotiating the sale of the above referred property between
the same parties herein under the following terms and conditions, to wit:

a) That the term of this negotiation is for a period of Thirty to Forty Five (30-45) days from receipt of a deposit;

b) That Forty Thousand Pesos (40,000.00) shall be deposited to demonstrate the interest of the Interested Party to
acquire the property referred to above, which deposit shall not earn any interest;

c) That should the contract or agreement push through the deposit shall form part of the down payment of Fifty percent
(50%) of the total or full value. Otherwise the deposit shall be returned within TEN (10) days from the lapse of the period
of negotiation;

4. That should this push through, the balance of Four Hundred Ten Thousand on the down payment shall be made upon
execution of the Agreement to Sell and the balance of the full value of Eight Hundred Sixty Thousand or Four Hundred
Ten Thousand Pesos shall be paid in equal monthly installment within Ten (10) months from receipt of the down
payment with [sic] according to prevailing interest.

IN WITNESS WHEREOF, the parties have signed these presents in the City of Iligan this 13th day of January 1985.

(Signed)
IRENE PEPITO MONTECALVO (Signed)
EUGENIA TORRES PRIMERO
SIGNED IN THE PRESENCE OF:

(Signed)
(Signed)
In Salazar v. Court of Appeals,25 we distinguished a contract of sale from a contract to sell in that in a contract of sale
the title to the property passes to the buyer upon the delivery of the thing sold; in a contract to sell, ownership is, by
agreement, reserved in the seller and is not to pass to the buyer until full payment of the purchase price. Otherwise
stated, in a contract of sale, the seller loses ownership over the property and cannot recover it until and unless the
contract is resolved or rescinded; whereas, in a contract to sell, title is retained by the seller until full payment of the
price.26 In the latter contract, payment of the price is a positive suspensive condition, failure of which is not a breach
but an event that prevents the obligation of the vendor to convey title from becoming effective.27

In the Agreement, Eugenia, as owner, did not convey her title to the disputed property to Irene since the Agreement was
made for the purpose of negotiating the sale of the 860-square meter property.28
On this basis, we are more inclined to characterize the agreement as a contract to sell rather than a contract of sale.
Although not by itself controlling, the absence of a provision in the Agreement transferring title from the owner to the
buyer is taken as a strong indication that the Agreement is a contract to sell.29

In a contract to sell, the prospective seller explicitly reserves the transfer of title to the prospective buyer, meaning, the
prospective seller does not as yet agree or consent to transfer ownership of the property subject of the contract to sell
until the happening of an event, which for present purposes we shall take as the full payment of the purchase price.30
What the seller agrees or obliges himself to do is to fulfill his promise to sell the subject property when the entire
amount of the purchase price is delivered to him.31 In other words, the full payment of the purchase price partakes of a
suspensive condition, the non-fulfillment of which prevents the obligation to sell from arising and thus, ownership is
retained by the prospective seller without further remedies by the prospective buyer.32 A contract to sell is commonly
entered into in order to protect the seller against a buyer who intends to buy the property in installment by withholding
ownership over the property until the buyer effects full payment therefor.33

In this case, the Agreement expressly provided that it was "entered into for the purpose of negotiating the sale of the
above referred property between the same parties herein x x x." The term of the negotiation shall be for a period of 30-
45 days from receipt of the 40,000.00 deposit and the buyer has to pay the balance of the 50% down payment
amounting to 410,000.00 within the said period of negotiation. Thereafter, an Agreement to Sell shall be executed by
the parties and the remainder of the purchase price amounting to another 410,000.00 shall be paid in 10 equal
monthly installments from receipt of the down payment. The assumption of both parties that the purpose of the
Agreement was for negotiating the sale of Lot No. 263, in its entirety, for a definite price, with a specific period for
payment of a specified down payment, and the execution of a subsequent contract for the sale of the same on
installment payments leads to no other conclusion than that the predecessor-in-interest of the herein respondents and
the herein petitioner Irene entered into a contract to sell.

As stated in the Agreement, the payment of the purchase price, in installments within the period stipulated, constituted
a positive suspensive condition, the failure of which is not really a breach but an event that prevents the obligation of
the seller to convey title in accordance with Article 1184 of the Civil Code.34 Hence, for petitioners' failure to comply
with the terms and conditions laid down in the Agreement, the obligation of the predecessor-in-interest of the
respondents to deliver and execute the corresponding deed of sale never arose.

The fact that the predecessor-in-interest of the respondents failed to return the 40,000.00 deposit subsequent to the
expiration of the period of negotiation did not prevent the respondents from repudiating the Agreement. The obligation
of the respondent to convey the property never came to pass as the petitioners did not comply with the positive
suspensive condition of full payment of the purchase price within the period as stipulated.

The alleged oral contract of sale for the 293-square meter portion of the property was not proved by preponderant
evidence. Hence, petitioners cannot compel the successors-in-interest of the deceased Eugenia to execute a deed of
absolute sale in their favor.

Petitioners alleged in their Complaint that in 1992, Eugenia refused to accept further payments and suggested that she
will convey to petitioners 293 square meters of her 860-square meter property, in proportion to payments already
made. Thus, Eugenia caused the segregation of the area where the petitioners' building now stands, consisting of 293
square meters.1avvphi1
In support of their contention, petitioners presented the testimony of Irene, who testified that Eugenia segregated for
them an area of 293 square meters for the agreed price of 1,000.00 per square meter.35 The total purchase price
allegedly agreed upon by the parties, amounting to 293,000.00, corresponded to the amount of payments already
made by Irene.36 They likewise presented (1) 82 receipts covering the period October 13, 1986 to July 10, 1994;37 (2)
the testimony of the surveyor, Engr. Ravacio, to show that the segregation survey of the 293-square meter portion of
the property was made with the knowledge and consent of Eugenia; and (3) the resulting subdivision plan.

On the other hand, respondents counter that the alleged contract of sale is contradicted by petitioners' own evidence.

We cannot sustain the contention of the petitioners. The primal issue to be resolved is whether the parties subsequently
entered into a contract of sale over the segregated 293-square meter portion of Lot No. 263. It is a fundamental
principle that for a contract of sale to be valid, the following elements must be present: (a) consent or meeting of the
minds; (b) determinate subject matter; and (3) price certain in money or its equivalent.38 Until the contract of sale is
perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation between the parties.39

Contrary to petitioners' allegations that the 82 receipts indicated that they were issued "for payment of lot (at
Sabayle)",40 a cursory examination thereof shows that the receipts from 1986 to 1992 do not consistently indicate
"Sabayle Lot" or "Sabayle Lot Deposit". More than half of the receipts presented merely indicated receipt of differing
sums of money from the petitioners. In addition, the receipts for the years 1993 to 1994 do not establish installment
payments for the purchase of the disputed portion of Lot No. 263. Rather, the receipts indicate that the same were
issued as proof of "cash advance",41 "cash for groceries, electric bill, water bill, telephone/long distance",42 "cash",43
"cash for mktg"44 and "x x x cash to be paid a month after".45 These are not consistent with the allegation of the
petitioners that they have paid the full amount of the purchase price for the 293-square meter portion of the lot by
1992.

Moreover, the testimony of petitioners' witness, surveyor Engr. Ravacio, shows that Eugenia was neither around when
the survey was conducted nor gave her express consent to the conduct of the same.46 On the other hand, respondents'
witness, Sylvia, testified that the receipts issued to the petitioners were for the lot rentals.47 In addition, respondents'
third witness, Corazon, testified that petitioners were their tenants in subject land, which she co-owns with her mother
Eugenia, and disclaimed any sale of any portion of their lot to the petitioners.48

Thirdly, since the surveyor himself, Engr. Ravacio, admitted that Eugenia did not give her express consent to the conduct
of the segregation plan, the resulting subdivision plan, submitted by the petitioners to the trial court to prove that
Eugenia caused the segregation of the 293-square meter area, cannot be appreciated.

Section 1 of Rule 133 of the Rules of Court provides that in civil cases, the party having the burden of proof must
establish his case by a preponderance of evidence. However, the evidence presented by the petitioners, as considered
above, fails to convince this Court that Eugenia gave her consent to the purported oral deed of sale for the 293-square
meter portion of her property. We are hence in agreement with the finding of the CA that there was no contract of sale
between the parties. As a consequence, petitioners cannot rightfully compel the successors-in-interest of Eugenia to
execute a deed of absolute sale in their favor.

The courts below correctly modified the rental award to 2,500.00 per month.

Lastly, petitioners argue that the courts below erred in imposing a 2,500.00 monthly rental from 1985 onwards, since
said amount is far greater than the last agreed monthly rental (December 1984) of 500.00.
In its Decision, the CA affirmed the ruling of the RTC "that the trial court had authority to fix a reasonable value for the
continued use and occupancy of the leased premises after the termination of the lease contract, and that it was not
bound by the stipulated rental in the contract of lease since it is equally settled that upon termination or expiration of
the contract of lease, the rental stipulated therein may no longer be the reasonable value for the use and occupation of
the premises as a result of the change or rise in values. Moreover, the trial court can take judicial notice of the general
increase in rentals of real estate especially of business establishments".49 The appellate court likewise held that the
petitioners failed to discharge their burden to show that the said price was exorbitant or unconscionable.50 Hence, the
CA found no reason to disturb the trial court's decision ordering the petitioners to pay 2,500.00 as monthly rentals.51
The appellate court further held that "to deprive Eugenia of the rentals due her as the owner-lessor of the subject
property would result to unjust enrichment on the part of Irene."52

The courts below correctly took judicial notice of the nature of the leased property subject of the case at bench based
on its location and commercial viability. As described in the Agreement, the property is immediately in front of St.
Peter's College.53 More significantly, it is stated in the Declaration of Real Property submitted by the petitioners as
evidence in the trial court, that the property is used predominantly for commercial purposes.54 The assessment by the
trial court of the area where the property is located is therefore fairly grounded.

Furthermore, the trial court also had factual basis in arriving at the said conclusion, the same being based on the un-
rebutted testimony of a witness who is a real estate broker. With respect to the prevailing valuation of the property in
litigation, witness Atty. Primero, a licensed real estate broker testified that:

x x x There is no fixed pricing for each year because it always depends on the environment so that if the price in 1986, as
you were referring to 1986, it would have risen or increased from 1,000.00, then it would increase to 3,000.00, then it
would increase to 7,000.00 and again increase to 15,000.00 and right now the current price of property in that area is
25,000.00 per square meter.55

The RTC rightly modified the rental award to 2,500.00 per month, considering that it is settled jurisprudence that
courts may take judicial notice of the general increase in rentals, particularly in business establishments.

WHEREFORE, the petition is DENIED. The November 28, 2003 Decision of the Court of Appeals affirming the October 22,
2001 Decision of the Regional Trial Court of Lanao del Norte, Branch 2, is hereby AFFIRMED.

SO ORDERED.

[G.R. No. 168220. August 31, 2005]

SPS. RUDY PARAGAS and CORAZON B. PARAGAS, petitioners, vs. HRS. OF DOMINADOR BALACANO, namely:
DOMINIC, RODOLFO, NANETTE and CYRIC, all surnamed BALACANO, represented by NANETTE BALACANO and
ALFREDO BALACANO, respondents.

This petition for review seeks to annul the Decision[1] dated 15 February 2005 of the Court of Appeals in CA-G.R. CV No.
64048, affirming with modification the 8 March 1999 Decision[2] of the Regional Trial Court (RTC), Branch 21, of
Santiago City, Isabela, in Civil Case No. 21-2313. The petition likewise seeks to annul the Resolution[3] dated 17 May
2005 denying petitioners motion for reconsideration.
The factual antecedents were synthesized by the Court of Appeals in its decision.

Gregorio Balacano, married to Lorenza Sumigcay, was the registered owner of Lot 1175-E and Lot 1175-F of the Subd.
Plan Psd-38042 [located at Baluarte, Santiago City, Isabela] covered by TCT No. T-103297 and TCT No. T-103298 of the
Registry of Deeds of the Province of Isabela.

Gregorio and Lorenza had three children, namely: Domingo, Catalino and Alfredo, all surnamed Balacano. Lorenza died
on December 11, 1991. Gregorio, on the other hand, died on July 28, 1996.

Prior to his death, Gregorio was admitted at the Veterans General Hospital in Bayombong, Nueva Vizcaya on June 28,
1996 and stayed there until July 19, 1996. He was transferred in the afternoon of July 19, 1996 to the Veterans Memorial
Hospital in Quezon City where he was confined until his death.

Gregorio purportedly sold on July 22, 1996, or barely a week prior to his death, a portion of Lot 1175-E (specifically
consisting of 15,925 square meters from its total area of 22,341 square meters) and the whole Lot 1175-F to the Spouses
Rudy (Rudy) and Corazon Paragas (collectively, the Spouses Paragas) for the total consideration of P500,000.00. This sale
appeared in a deed of absolute sale notarized by Atty. Alexander V. de Guzman, Notary Public for Santiago City, on the
same date July 22, 1996 and witnessed by Antonio Agcaoili (Antonio) and Julia Garabiles (Julia). Gregorios certificates of
title over Lots 1175-E and 1175-F were consequently cancelled and new certificates of title were issued in favor of the
Spouses Paragas.

The Spouses Paragas then sold on October 17, 1996 a portion of Lot 1175-E consisting of 6,416 square meters to
Catalino for the total consideration of P60,000.00.

Domingos children (Dominic, Rodolfo, Nanette and Cyric, all surnamed Balacano;) filed on October 22, 1996 a complaint
for annulment of sale and partition against Catalino and the Spouses Paragas. They essentially alleged in asking for the
nullification of the deed of sale that: (1) their grandfather Gregorio could not have appeared before the notary public on
July 22, 1996 at Santiago City because he was then confined at the Veterans Memorial Hospital in Quezon City; (2) at the
time of the alleged execution of the deed of sale, Gregorio was seriously ill, in fact dying at that time, which vitiated his
consent to the disposal of the property; and (3) Catalino manipulated the execution of the deed and prevailed upon the
dying Gregorio to sign his name on a paper the contents of which he never understood because of his serious condition.
Alternatively, they alleged that assuming Gregorio was of sound and disposing mind, he could only transfer a half
portion of Lots 1175-E and 1175-F as the other half belongs to their grandmother Lorenza who predeceased Gregorio
they claimed that Lots 1175-E and 1175-F form part of the conjugal partnership properties of Gregorio and Lorenza.
Finally, they alleged that the sale to the Spouses Paragas covers only a 5-hectare portion of Lots 1175-E and 1175-F
leaving a portion of 6,416 square meters that Catalino is threatening to dispose. They asked for the nullification of the
deed of sale executed by Gregorio and the partition of Lots 1175-E and 1175-F. They likewise asked for damages.

Instead of filing their Answer, the defendants Catalino and the Spouses Paragas moved to dismiss the complaint on the
following grounds: (1) the plaintiffs have no legal capacity - the Domingos children cannot file the case because Domingo
is still alive, although he has been absent for a long time; (2) an indispensable party is not impleaded that Gregorios
other son, Alfredo was not made a party to the suit; and (3) the complaint states no cause of action that Domingos
children failed to allege a ground for the annulment of the deed of sale; they did not cite any mistake, violence,
intimidation, undue influence or fraud, but merely alleged that Gregorio was seriously ill. Domingos children opposed
this motion.
The lower court denied the motion to dismiss, but directed the plaintiffs-appellees to amend the complaint to include
Alfredo as a party. Alfredo was subsequently declared as in default for his failure to file his Answer to the Complaint.

The defendants-appellees filed their Answer with Counterclaim on May 7, 1997, denying the material allegations of the
complaint. Additionally, they claimed that: (1) the deed of sale was actually executed by Gregorio on July 19 (or 18),
1996 and not July 22, 1996; (2) the Notary Public personally went to the Hospital in Bayombong, Nueva Vizcaya on July
18, 1996 to notarize the deed of sale already subject of a previously concluded covenant between Gregorio and the
Spouses Paragas; (3) at the time Gregorio signed the deed, he was strong and of sound and disposing mind; (4) Lots
1175-E and 1175-F were Gregorios separate capital and the inscription of Lorenzas name in the titles was just a
description of Gregorios marital status; (5) the entire area of Lots 1175-E and 1175-F were sold to the Spouses Paragas.
They interposed a counterclaim for damages.

At the trial, the parties proceeded to prove their respective contentions.

Plaintiff-appellant Nanette Balacano testified to prove the material allegations of their complaint. On Gregorios medical
condition, she declared that: (1) Gregorio, who was then 81 years old, weak and sick, was brought to the hospital in
Bayombong, Nueva Vizcaya on June 28, 1996 and stayed there until the afternoon on July 19, 1996; (2) thereafter,
Gregorio, who by then was weak and could no longer talk and whose condition had worsened, was transferred in the
afternoon of July 19, 1996 to the Veterans Memorial Hospital in Quezon City where Gregorio died. She claimed that
Gregorio could not have signed a deed of sale on July 19, 1996 because she stayed at the hospital the whole of that day
and saw no visitors. She likewise testified on their agreement for attorneys fees with their counsel and the litigation
expenses they incurred.

Additionally, the plaintiffs-appellees presented in evidence Gregorios medical records and his death certificate.

Defendants-appellees, on the other hand, presented as witnesses Notary Public de Guzman and instrumental witness
Antonio to prove Gregorios execution of the sale and the circumstances under the deed was executed. They uniformly
declared that: (1) on July 18, 1996, they went to the hospital in Bayombong, Nueva Vizcaya where Gregorio was
confined with Rudy; (2) Atty. De Guzman read and explained the contents of the deed to Gregorio; (3) Gregorio signed
the deed after receiving the money from Rudy; (4) Julia and Antonio signed the deed as witnesses. Additionally, Atty. De
Guzman explained that the execution of the deed was merely a confirmation of a previous agreement between the
Spouses Paragas and Gregorio that was concluded at least a month prior to Gregorios death; that, in fact, Gregorio had
previously asked him to prepare a deed that Gregorio eventually signed on July 18, 1996. He also explained that the
deed, which appeared to have been executed on July 22, 1996, was actually executed on July 18, 1996; he notarized the
deed and entered it in his register only on July 22, 1996. He claimed that he did not find it necessary to state the precise
date and place of execution (Bayombong, Nueva Vizcaya, instead of Santiago City) of the deed of sale because the deed
is merely a confirmation of a previously agreed contract between Gregorio and the Spouses Paragas. He likewise stated
that of the stated P500,000.00 consideration in the deed, Rudy paid Gregorio P450,000.00 in the hospital because Rudy
had previously paid Gregorio P50,000.00. For his part, Antonio added that he was asked by Rudy to take pictures of
Gregorio signing the deed. He also claimed that there was no entry on the date when he signed; nor did he remember
reading Santiago City as the place of execution of the deed. He described Gregorio as still strong but sickly, who got up
from the bed with Julias help.

Witness for defendants-appellants Luisa Agsalda testified to prove that Lot 1175-E was Gregorios separate property. She
claimed that Gregorios father (Leon) purchased a two-hectare lot from them in 1972 while the other lot was purchased
from her neighbor. She also declared that Gregorio inherited these lands from his father Leon; she does not know,
however, Gregorios brothers share in the inheritance. Defendant-appellant Catalino also testified to corroborate the
testimony of witness Luisa Agsalda; he said that Gregorio told him that he (Gregorio) inherited Lots 1175-E and 1175-F
from his father Leon. He also stated that a portion of Lot 1175-E consisting of 6,416 square meters was sold to him by
the Spouses Paragas and that he will pay the Spouses Paragas P50,000.00, not as consideration for the return of the land
but for the transfer of the title to his name.

Additionally, the defendants-appellants presented in evidence the pictures taken by Antonio when Gregorio allegedly
signed the deed.[4]

The lower court, after trial, rendered the decision declaring null and void the deed of sale purportedly executed by
Gregorio Balacano in favor of the spouses Rudy Paragas and Corazon Paragas. In nullifying the deed of sale executed by
Gregorio, the lower court initially noted that at the time Gregorio executed the deed, Gregorio was ill. The lower courts
reasoning in declaring the deed of sale null and void and this reasonings premises may be summarized as follows: (1) the
deed of sale was improperly notarized; thus it cannot be considered a public document that is usually accorded the
presumption of regularity; (2) as a private document, the deed of sales due execution must be proved in accordance
with Section 20, Rule 132 of the Revised Rules on Evidence either: (a) by anyone who saw the document executed or
written; or (b) by evidence of the genuineness of the signature or handwriting of the maker; and (3) it was incumbent
upon the Spouses Paragas to prove the deed of sales due execution but failed to do so the lower court said that witness
Antonio Agcaoili is not credible while Atty. Alexander De Guzman is not reliable.[5]

The lower court found the explanations of Atty. De Guzman regarding the erroneous entries on the actual place and
date of execution of the deed of sale as justifications for a lie. The lower court said

The Court cannot imagine an attorney to undertake to travel to another province to notarize a document when he must
certainly know, being a lawyer and by all means, not stupid, that he has no authority to notarize a document in that
province. The only logical thing that happened was that Rudy Paragas brought the deed of sale to him on July 22, 1996
already signed and requested him to notarize the same which he did, not knowing that at that time the vendor was
already in a hospital and [sic] Quezon City. Of course had he known, Atty. De Guzman would not have notarized the
document. But he trusted Rudy Paragas and moreover, Gregorio Balacano already informed him previously in June that
he will sell his lands to Paragas. In addition [sic, (,) was omitted] Rudy Paragas also told him that Balacano received an
advance of P50,000.00.

The intention to sell is not actual selling. From the first week of June when, according to Atty. De Guzman, Gregorio
Balacano informed him that he will sell his land to Rudy Paragas, enough time elapsed to the time he was brought to the
hospital on June 28, 1996. Had there been a meeting of the minds between Gregorio Balacano and Rudy Paragas
regarding the sale, surely Gregorio Balacano would have immediately returned to the office of Atty. De Guzman to
execute the deed of sale. He did not until he was brought to the hospital and diagnosed to have liver cirrhosis. Because
of the seriousness of his illness, it is not expected that Gregorio Balacano would be negotiating a contract of sale. Thus,
Rudy Paragas negotiated with Catalino Balacano, the son of Gregorio Balacano with whom the latter was staying.[6]

The lower court also did not consider Antonio Agcaoili, petitioner Rudy Paragass driver, a convincing witness, concluding
that he was telling a rehearsed story. The lower court said

The only portion of his testimony that is true is that he signed the document. How could the Court believe that he
brought a camera with him just to take pictures of the signing? If the purpose was to record the proceeding for
posterity, why did he not take the picture of Atty. De Guzman when the latter was reading and explaining the document
to Gregorio Balacano? Why did he not take the picture of both Gregorio Balacano and Atty. de Guzman while the old
man was signing the document instead of taking a picture of Gregorio Balacano alone holding a ball pen without even
showing the document being signed? Verily there is a picture of a document but only a hand with a ball pen is shown
with it. Why? Clearly the driver Antonio Agcaoili must have only been asked by Rudy Paragas to tell a concocted story
which he himself would not dare tell in Court under oath.[7]

The lower court likewise noted that petitioner Rudy Paragas did not testify about the signing of the deed of sale. To the
lower court, Rudys refusal or failure to testify raises a lot of questions, such as: (1) was he (Rudy) afraid to divulge the
circumstances of how he obtained the signature of Gregorio Balacano, and (2) was he (Rudy) afraid to admit that he did
not actually pay the P500,000.00 indicated in the deed of sale as the price of the land?[8]

The lower court also ruled that Lots 1175-E and 1175-F were Gregorios and Lorenzas conjugal partnership properties.
The lower court found that these lots were acquired during the marriage because the certificates of title of these lots
clearly stated that the lots are registered in the name Gregorio, married to Lorenza Sumigcay. Thus, the lower court
concluded that the presumption of law (under Article 160 of the Civil Code of the Philippines) that property acquired
during the marriage is presumed to belong to the conjugal partnership fully applies to Lots 1175-E and 1175-F.[9]

Thus, on 8 March 1999, the RTC, Branch 21, of Santiago City, Isabela, rendered a Decision[10] in Civil Case No. 21-2313,
the dispositive portion of which reads as follows:

WHEREFORE in the light of the foregoing considerations judgment is hereby rendered:

1. DECLARING as NULL and VOID the deed of sale purportedly executed by Gregorio Balacano in favor of the spouses
Rudy Paragas and Corazon Paragas over lots 1175-E and 1175-F covered by TCT Nos. T-103297 and T-103298,
respectively;

2. ORDERING the cancellation of TCT Nos. T-258042 and T-258041 issued in the name of the spouses Rudy and Corazon
Paragas by virtue of the deed of sale; and

DECLARING the parcel of lands, lots 1175-E and 1175-F as part of the estate of the deceased spouses Gregorio Balacano
and Lorenza Balacano.[11]

In the assailed Decision dated 15 February 2005, the Court of Appeals affirmed the Decision of the trial court, with the
modification that Lots 1175-E and 1175-F were adjudged as belonging to the estate of Gregorio Balacano. The appellate
court disposed as follows:

WHEREFORE, premises considered, the appeal is hereby DISMISSED. We AFFIRM the appealed Decision for the reasons
discussed above, with the MODIFICATION that Lots 1175-E and 1175-F belong to the estate of Gregorio Balacano.

Let a copy of this Decision be furnished the Office of the Bar Confidant for whatever action her Office may take against
Atty. De Guzman.[12] (Emphasis in the original.)

Herein petitioners motion for reconsideration was met with similar lack of success when it was denied for lack of merit
by the Court of Appeals in its Resolution[13] dated 17 May 2005.

Hence, this appeal via a petition for review where petitioners assign the following errors to the Court of Appeals, viz:
A. THE HONORABLE COURT OF APPEALS, WITH GRAVE ABUSE OF DISCRETION, SERIOUSLY ERRED IN FINDING THAT
THERE WAS NO PERFECTED AND PARTIALLY EXECUTED CONTRACT OF SALE OVER LOTS 1175-E AND 1175-F PRIOR TO
THE SIGNING OF THE DEED OF SALE.

B. THE HONORABLE COURT OF APPEALS, WITH GRAVE ABUSE OF DISCRETION, SERIOUSLY FAILED TO APPRECIATE THE
SIGNIFICANCE OF THE JUDICIAL ADMISSION ON THE AUTHENTICITY AND DUE EXECUTION OF THE DEED OF SALE MADE
BY THE RESPONDENTS DURING THE PRE-TRIAL CONFERENCE.

C. THE HONORABLE COURT OF APPEALS, WITH GRAVE ABUSE OF DISCRETION, BASED ITS CONCLUSION THAT
GREGORIOS CONSENT TO THE SALE OF THE LOTS WAS ABSENT MERELY ON SPECULATIONS AND SURMISES.

D. THE HONORABLE COURT OF APPEALS, WITH GRAVE ABUSE OF DISCRETION, SERIOUSLY ERRED IN NOT RULING ON
THE ISSUE OF RESPONDENTS LACK OF LEGAL CAPACITY TO SUE FOR NOT BEING THE PROPER PARTIES IN INTEREST.

E. THE HONORABLE COURT OF APPEALS, WITH GRAVE ABUSE OF DISCRETION, SERIOUSLY ERRED IN DISMISSING ATTY.
ALEXANDER DE GUZMAN AND ANTONIO AGCAOILI AS NOT CREDIBLE WITNESSES.[14]

At bottom is the issue of whether or not the Court of Appeals committed reversible error in upholding the findings and
conclusions of the trial court on the nullity of the Deed of Sale purportedly executed between petitioners and the late
Gregorio Balacano.

To start, we held in Blanco v. Quasha[15] that this Court is not a trier of facts. As such, it is not its function to examine
and determine the weight of the evidence supporting the assailed decision. Factual findings of the Court of Appeals,
which are supported by substantial evidence, are binding, final and conclusive upon the Supreme Court,[16] and carry
even more weight when the said court affirms the factual findings of the trial court. Moreover, well- entrenched is the
prevailing jurisprudence that only errors of law and not of facts are reviewable by this Court in a petition for review on
certiorari under Rule 45 of the Revised Rules of Court.

The foregoing tenets in the case at bar apply with greater force to the petition under consideration because the factual
findings by the Court of Appeals are in full agreement with that of the trial court.

Specifically, the Court of Appeals, in affirming the trial court, found that there was no prior and perfected contract of
sale that remained to be fully consummated. The appellate court explained -

In support of their position, the defendants-appellants argue that at least a month prior to Gregorios signing of the
deed, Gregorio and the Spouses Paragas already agreed on the sale of Lots 1175-E and 1175-F; and that, in fact, this
agreement was partially executed by Rudys payment to Gregorio of P50,000.00 before Gregorio signed the deed at the
hospital. In line with this position, defendants-appellants posit that Gregorios consent to the sale should be determined,
not at the time Gregorio signed the deed of sale on July 18, 1996, but at the time when he agreed to sell the property in
June 1996 or a month prior to the deeds signing; and in June 1996, Gregorio was of sound and disposing mind and his
consent to the sale was in no wise vitiated at that time. The defendants-appellants further argue that the execution or
signing of the deed of sale, however, irregular it might have been, does not affect the validity of the previously agreed
sale of the lots, as the execution or signing of the deed is merely a formalization of a previously agreed oral contract.
...

In the absence of any note, memorandum or any other written instrument evidencing the alleged perfected contract of
sale, we have to rely on oral testimonies, which in this case is that of Atty. de Guzman whose testimony on the alleged
oral agreement may be summarized as follows: (1) that sometime in the first week of June 1996, Gregorio requested
him (Atty. de Guzman) to prepare a deed of sale of two lots; (2) Gregorio came to his firms office in the morning with a
certain Doming Balacano, then returned in the afternoon with Rudy; (3) he (Atty. de Guzman) asked Gregorio whether
he really intends to sell the lots; Gregorio confirmed his intention; (4) Gregorio and Rudy left the law office at 5:00 p.m.,
leaving the certificates of title; (5) he prepared the deed a day after Rudy and Gregorio came. With regard to the alleged
partial execution of this agreement, Atty. de Guzman said that he was told by Rudy that there was already a partial
payment of P50,000.00.

We do not consider Atty. de Guzmans testimony sufficient evidence to establish the fact that there was a prior
agreement between Gregorio and the Spouses Paragas on the sale of Lots 1175-E and 1175-F. This testimony does not
conclusively establish the meeting of the minds between Gregorio and the Spouses Paragas on the price or
consideration for the sale of Lots 1175-E and 1175-F Atty. de Guzman merely declared that he was asked by Gregorio to
prepare a deed; he did not clearly narrate the details of this agreement. We cannot assume that Gregorio and the
Spouses Paragas agreed to a P500,000.00 consideration based on Atty. de Guzmans bare assertion that Gregorio asked
him to prepare a deed, as Atty. de Guzman was not personally aware of the agreed consideration in the sale of the lots,
not being privy to the parties agreement. To us, Rudy could have been a competent witness to testify on the perfection
of this prior contract; unfortunately, the defendants-appellants did not present Rudy as their witness.

We seriously doubt too the credibility of Atty. de Guzman as a witness. We cannot rely on his testimony because of his
tendency to commit falsity. He admitted in open court that while Gregorio signed the deed on July 18, 1996 at
Bayombong, Nueva Vizcaya, he nevertheless did not reflect these matters when he notarized the deed; instead he
entered Santiago City and July 22, 1996, as place and date of execution, respectively. To us, Atty. de Guzmans propensity
to distort facts in the performance of his public functions as a notary public, in utter disregard of the significance of the
act of notarization, seriously affects his credibility as a witness in the present case. In fact, Atty. de Guzmans act in
falsifying the entries in his acknowledgment of the deed of sale could be the subject of administrative and disciplinary
action, a matter that we however do not here decide.

Similarly, there is no conclusive proof of the partial execution of the contract because the only evidence the plaintiffs-
appellants presented to prove this claim was Atty. de Guzmans testimony, which is hearsay and thus, has no probative
value. Atty. de Guzman merely stated that Rudy told him that Rudy already gave P50,000.00 to Gregorio as partial
payment of the purchase price; Atty. de Guzman did not personally see the payment being made.[17]

But, did Gregorio give an intelligent consent to the sale of Lots 1175-E and 1175-F when he signed the deed of sale? The
trial court as well as the appellate court found in the negative. In the Court of Appeals rationale-

It is not disputed that when Gregorio signed the deed of sale, Gregorio was seriously ill, as he in fact died a week after
the deeds signing. Gregorio died of complications caused by cirrhosis of the liver. Gregorios death was neither sudden
nor immediate; he fought at least a month-long battle against the disease until he succumbed to death on July 22, 1996.
Given that Gregorio purportedly executed a deed during the last stages of his battle against his disease, we seriously
doubt whether Gregorio could have read, or fully understood, the contents of the documents he signed or of the
consequences of his act. We note in this regard that Gregorio was brought to the Veterans Hospital at Quezon City
because his condition had worsened on or about the time the deed was allegedly signed. This transfer and fact of death
not long after speak volumes about Gregorios condition at that time. We likewise see no conclusive evidence that the
contents of the deed were sufficiently explained to Gregorio before he affixed his signature. The evidence the
defendants-appellants offered to prove Gregorios consent to the sale consists of the testimonies of Atty. de Guzman and
Antonio. As discussed above, we do not find Atty. de Guzman a credible witness. Thus, we fully concur with the
heretofore-quoted lower courts evaluation of the testimonies given by Atty. de Guzman and Antonio because this is an
evaluation that the lower court was in a better position to make.

Additionally, the irregular and invalid notarization of the deed is a falsity that raises doubts on the regularity of the
transaction itself. While the deed was indeed signed on July 18, 1996 at Bayombong, Nueva Vizcaya, the deed states
otherwise, as it shows that the deed was executed on July 22, 1996 at Santiago City. Why such falsity was committed,
and the circumstances under which this falsity was committed, speaks volume about the regularity and the validity of
the sale. We cannot but consider the commission of this falsity, with the indispensable aid of Atty. de Guzman, an
orchestrated attempt to legitimize a transaction that Gregorio did not intend to be binding upon him nor on his bounty.

Article 24 of the Civil Code tells us that in all contractual, property or other relations, when one of the parties is at a
disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age or other
handicap, the courts must be vigilant for his protection.[18]

Based on the foregoing, the Court of Appeals concluded that Gregorios consent to the sale of the lots was absent,
making the contract null and void. Consequently, the spouses Paragas could not have made a subsequent transfer of the
property to Catalino Balacano. Indeed, nemo dat quod non habet. Nobody can dispose of that which does not belong to
him.[19]

We likewise find to be in accord with the evidence on record the ruling of the Court of Appeals declaring the properties
in controversy as paraphernal properties of Gregorio in the absence of competent evidence on the exact date of
Gregorios acquisition of ownership of these lots.

On the credibility of witnesses, it is in rhyme with reason to believe the testimonies of the witnesses for the
complainants vis--vis those of the defendants. In the assessment of the credibility of witnesses, we are guided by the
following well-entrenched rules: (1) that evidence to be believed must not only spring from the mouth of a credible
witness but must itself be credible, and (2) findings of facts and assessment of credibility of witness are matters best left
to the trial court who had the front-line opportunity to personally evaluate the witnesses demeanor, conduct, and
behavior while testifying.[20]

In the case at bar, we agree in the trial courts conclusion that petitioners star witness, Atty. De Guzman is far from being
a credible witness. Unlike this Court, the trial court had the unique opportunity of observing the demeanor of said
witness. Thus, we affirm the trial court and the Court of Appeals uniform decision based on the whole evidence in record
holding the Deed of Sale in question to be null and void.

In Domingo v. Court of Appeals,[21] the Court declared as null and void the deed of sale therein inasmuch as the seller,
at the time of the execution of the alleged contract, was already of advanced age and senile. We held

. . . She died an octogenarian on March 20, 1966, barely over a year when the deed was allegedly executed on January
28, 1965, but before copies of the deed were entered in the registry allegedly on May 16 and June 10, 1966. The general
rule is that a person is not incompetent to contract merely because of advanced years or by reason of physical
infirmities. However, when such age or infirmities have impaired the mental faculties so as to prevent the person from
properly, intelligently, and firmly protecting her property rights then she is undeniably incapacitated. The unrebutted
testimony of Zosima Domingo shows that at the time of the alleged execution of the deed, Paulina was already
incapacitated physically and mentally. She narrated that Paulina played with her waste and urinated in bed. Given these
circumstances, there is in our view sufficient reason to seriously doubt that she consented to the sale of and the price
for her parcels of land. Moreover, there is no receipt to show that said price was paid to and received by her. Thus, we
are in agreement with the trial courts finding and conclusion on the matter: . . .

In the case at bar, the Deed of Sale was allegedly signed by Gregorio on his death bed in the hospital. Gregorio was an
octogenarian at the time of the alleged execution of the contract and suffering from liver cirrhosis at that circumstances
which raise grave doubts on his physical and mental capacity to freely consent to the contract. Adding to the dubiety of
the purported sale and further bolstering respondents claim that their uncle Catalino, one of the children of the
decedent, had a hand in the execution of the deed is the fact that on 17 October 1996, petitioners sold a portion of Lot
1175-E consisting of 6,416 square meters to Catalino for P60,000.00.[22] One need not stretch his imagination to
surmise that Catalino was in cahoots with petitioners in maneuvering the alleged sale.

On the whole, we find no reversible error on the part of the appellate court in CA-G.R. CV No. 64048 that would warrant
the reversal thereof.

WHEREFORE, the present petition is hereby DENIED. Accordingly, the Decision[23] and the Resolution,[24] dated 15
February 2005 and 17 May 2005, respectively, of the Court of Appeals in CA-G.R. CV No. 64048 are hereby AFFIRMED.
No costs.

SO ORDERED.

G.R. No. 173622 March 11, 2013

ROBERN DEVELOPMENT CORPORATION and RODOLFO M. BERNARDO, JR., Petitioners,

vs.
PEOPLE'S LANDLESS ASSOCIATION represented by FLORIDA RAMOS and NARDO LABORA, Respondent.

DECISION

DEL CASTILLO, J.:

"This Court cannot presume the existence of a sale of land, absent any direct proof of it."1

Challenged in this Petition for Review on Certiorari are the August 16, 2005 Decision2 and May 30, 2006 Resolution3 of
the Court of Appeals (CA) in CA-G.R. CV No. 66071, which ordered petitioner Robern Development Corporation (Robern)
to reconvey the 2,000-square meter lot it bought from Al-Amanah Islamic Development Bank of the Philippines (Al-
Amanah) to respondent People's Landless Association (PELA).

Factual Antecedents

Al-Amanah owned a 2000-square meter lot located in Magtu-od, Davao City and covered by Transfer Certificate of Title
(TCT) No. 138914.4 On December 12, 1992, Al-Amanah Davao Branch, thru its officer-in-charge Febe O. Dalig (OIC Dalig),
asked5 some of the members of PELA6 to desist from building their houses on the lot and to vacate the same, unless
they are interested to buy it. The informal settlers thus expressed their interest to buy the lot at 100.00 per square
meter, which Al-Amanah turned down for being far below its asking price.7 Consequently, Al-Amanah reiterated its
demand to the informal settlers to vacate the lot.8

In a letter9 dated March 18, 1993, the informal settlers together with other members comprising PELA offered to
purchase the lot for 300,000.00, half of which shall be paid as down payment and the remaining half to be paid within
one year. In the lower portion of the said letter, Al-Amanah made the following annotation:

Note:

Subject offer has been acknowledged/received but processing to take effect upon putting up of the partial amt. of
150,000.00 on or before April 15, 1993.

By May 3, 1993, PELA had deposited 150,000.00 as evidenced by four bank receipts.10 For the first three receipts, the
bank labelled the payments as "Partial deposit on sale of TCT No. 138914", while it noted the 4th receipt as "Partial/Full
payment on deposit on sale of A/asset TCT No. 138914."

In the meantime, the PELA members remained in the property and introduced further improvements.

On November 29, 1993, Al-Amanah, thru Davao Branch Manager Abraham D. Ututalum-Al Haj, wrote then PELA
President Bonifacio Cuizon, Sr. informing him of the Head Offices disapproval of PELAs offer to buy the said 2,000-
square meter lot, viz:

Dear Mr. Cuizon, Sr.,

Please be inform[ed] that your offer to purchase the lot covered by TCT No. T-138914, containing an area of 2,000
square meters, located at Bakingan, Barangay Magtuod, Davao City for 300,000.00 has been turned down by the top
management, due to the reason that your offered price is way below the selling price of the Bank which is 500.00 per
square meter, or negotiate but on Cash basis only.

You had been told regarding this matter, but you failed to counter offer since you have [conferred] with the Banks local
management. Despite x x x the time given to you to counter offer or to vacate the lot presently and illegally occupied by
you and the members of the association, still you refrain to hear our previous notices. You even deliberately construct
more residential structures without our permission. As such, you are finally instructed to vacate the lot and remove all
the house structures erected on the said lot within 15 days upon receipt of this letter. Failure on your part including that
of the members, the Bank will be constrained to take legal action against you.

Furthermore, you can withdraw the amount deposited in the name of your association anytime during banking hours.11

Subsequently, Al-Amanah sent similarly worded letters,12 all dated December 14, 1993, to 19 PELA members
demanding that they vacate the lot.

In a letter13 dated December 20, 1993, PELA, through Atty. Pedro S. Castillo, replied that it had already reached an
agreement with Al-Amanah regarding the sale of the subject lot based on their offered price:

Dear Mr. Ututalum-Al-Haj,

The Peoples Landless Association, Inc., through Mr. Bonifacio Cuizon, Sr. has requested us to assist them in
communicating with you anent your letter of 29 November 1993. According to Mr. Cuizon the present occupants of the
lot covered by T.C.T. No. T-138914 with an area of 2,000 square meters, had a definite agreement with the Islamic Bank
through its previous Manager or

Officer-in-Charge to buy this foreclosed property at 300,000.00. As a matter of fact their deposit of 150,000.00 was
on that basis. For this reason, the occupants, who are members of the association, have already made lot allocations
among themselves and have improved their respective houses.

It would be most unfair if the Bank would now renege on its commitment and eject these occupants. In line with the
national policy of granting landless members of our society the opportunity of owning land and providing shelter to their
families, it would be equitable and socially justifiable to grant these occupants their occupied areas pursuant to the
earlier agreement with the Bank.

For the foregoing reasons we hope that the Islamic Bank, for legal, moral and social grounds would reconsider.

Meanwhile, acting on Roberns undated written offer,14 Al-Amanah issued a Recommendation Sheet15 dated
December 27, 1993 addressed to its Board Operations Committee, indicating therein that Robern is interested to buy
the lot for 400,000.00; that it has already deposited 20% of the offered purchase price; that it is buying the lot on "as
is" basis; and, that it is willing to shoulder the relocation of all informal settlers therein. On December 29, 1993, the
Head Office informed the Davao Branch Manager that the Board Operations Committee had accepted Roberns offer.16

Eight days later, Robern was informed of the acceptance. Al-Amanah stressed that it is Roberns responsibility to eject
the occupants in the subject lot, if any, as well as the payment of the remaining amount within 15 days; otherwise, the
80,000.00 deposit shall be forfeited.17

In a letter18 dated January 13, 1994, Robern expressed to Al-Amanah its uncertainty on the status of the subject lot, viz.:

This is in connection with TCT No. 138914 which your bank offered to sell to us and which we committed to buy.

A group calling itself PEOPLES LANDLESS ASSOCIATION, INC. made representation with our office bringing with them
copies of official receipts totalling 150,000.00 issued by your bank which stated---"PARTIAL PAYMENT/DEPOSIT on sale
of TCT #138914".

While condition no. 6 in the sale of property to us states that the buyer shall be responsible for ejecting the squatters of
the property, the occupants of the said lot could hardly be categorized as squatters considering the supposed
transaction previously entered by your bank with them. We were greatly appalled that we should learn about this not
from the bank but from outside sources.1wphi1

My company is ready to finalize our transaction provided, however, that the problem with this group is cleared. In this
connection, we are requesting for a definite statement from your bank on whether the official receipts being brandished
by this group are genuine or not, and if they were, were they ever invalidated by virtue of the return of their deposit and
whether there was a cancellation of your agreement with them.
In the meantime, please consider the 15-day period for us to pay the amount of 320,000.00 imposed by your bank
suspended until such time that the legal problem with the lot occupants is settled.

To convince Robern that it has no existing contract with PELA, Al-Amanah furnished it with copies of the Head Offices
rejection letter of PELAs bid, the demand letters to vacate, and the proof of consignment of PELAs 150,000.00 deposit
to the Regional Trial Court (RTC) of Davao City that PELA refused to withdraw.19 Thereafter, on February 2, 1994, it
informed Robern that should the latter fail to pay the balance by February 9, 1994, its 80,000.00 deposit will be
forfeited and the lot shall be up for sale to other prospective buyers.20 Meanwhile, Al-Amanah requested for assistance
for the removal of the houses not only from the Office of the City Engineer of Davao City21 but also from Mayor Rodrigo
Duterte. Gaining a favorable legal opinion from the City Legal Officer, the matter was indorsed to the Chief of Demolition
Consensus of the Department of Public Services for action.22

On March 4, 1994, Robern paid the balance of the purchase price.23 The Deed of Sale24 over the realty was executed
on April 6, 1994 and TCT No. T-21298325 was issued in Roberns name the following day.

A week later, PELA consigned 150,000.00 in the RTC of Davao City.26 Then on April 14, 1994, it wrote27 Al-Amanah
asking the latter to withdraw the amount consigned. Part of the letter states:

xxxx

On March 21, 1994 (almost one month before the April 15, 1994 deadline) we came to your bank to remit the balance
and full payment [for] the abovementioned lot. [Inasmuch] as you refuse[d] to accept the payment, we have decided to
deposit the amount consigned to your bank.

In our dialogue at your office in 1993, we have agreed that documents will be processed as soon as we pay the
150,000.00 initial deposit. [Inasmuch] as we have not only paid the deposit but have also made full payment of the
account, kindly facilitate processing of the documents to finalize transaction.

We have not been remiss in doing our part of the transaction; please do your share.

Thank you.

Very truly yours,

For the occupants/claimants

T.C.T. No. T-13891428

Three months later, as its members were already facing eviction and possible demolition of their houses, and in order to
protect their rights as vendees, PELA filed a suit for Annulment and Cancellation of Void Deed of Sale29 against Al-
Amanah, its Director Engr. Farouk Carpizo (Engr. Carpizo), OIC Dalig, Robern, and Roberns President and General
Manager, petitioner Rodolfo Bernardo (Bernardo) before the RTC of Davao City. It insisted that as early as March 1993 it
has a perfected contract of sale with Al-Amanah. However, in an apparent act of bad faith and in cahoots with Robern,
Al-Amanah proceeded with the sale of the lot despite the prior sale to PELA.
Incidentally, the trial court granted PELAs prayer for a temporary restraining order.30 Subsequently, it issued on August
12, 1994 an Order31 finding merit in the issuance of the writ of preliminary injunction, inter alia. The RTCs grant of
injunctive relief was affirmed by the CA in CA-G.R. SP No. 3523832 when the factual and legal bases for its issuance were
questioned before the appellate court.

The respondents in the annulment case filed their respective Answers.33 Al-Amanah and Engr. Carpizo claimed that the
bank has every right to sell its lot to any interested buyer with the best offer and thus they chose Robern. They clarified
that the 150,000.00 PELA handed to them is not part of the payment but merely a deposit in connection with its offer.
They asserted that PELA was properly apprised that its offer to buy was subject to the approval of Al-Amanahs Head
Office. They stressed that Al-Amanah never entered into a sale with PELA for there was no perfected agreement as to
the price since the Head Office rejected

PELAs offer.

For their part, Robern and Bernardo asserted the corporations standing as a purchaser in good faith and for value in the
sale of the property, having relied on the clean title of Al-Amanah. They also alleged that the purported sale to PELA is
violative of the Statute of Frauds34 as there is no written agreement covering the same.

Ruling of the Regional Trial Court

In its August 10, 1999 Decision,35 the RTC dismissed PELAs Complaint. It opined that the March 18, 1993 letter PELA has
been relying upon as proof of a perfected contract of sale was a mere offer which was already rejected.

Furthermore, the annotation appearing in the bottom part of the said letter could not be construed as an acceptance
because the same is a mere acknowledgment of receipt of the letter (not the offer) which will still be subject to
processing. The RTC likewise ruled that being a corporation, only Al-Amanahs board of directors can bind the bank with
third persons involving the sale of its property. Thus, the purported offer made by Al-Amanahs OIC, who was never
conferred authority by the board of directors to sell the lot, cannot bind the bank. In contrast, when the Head Office
accepted Roberns offered price, it was duly approved by the board of directors, giving birth to a perfected contract of
sale between Al-Amanah and Robern.

Refusing to accept the Decision, PELA elevated its case to the CA.36

Ruling of the Court of Appeals

Reversing the RTC in its assailed Decision37 of August 16, 2005, the CA ruled that there was already a perfected contract
of sale between PELA and Al-Amanah. It held that the annotationon the lower portion of the March 18, 1993 letter could
be construed to mean that for Al-Amanah to accept PELAs offer, the sum of 150,000.00 must be first put up. The CA
also observed that the subsequent receipt by Al-Amanah of the amounts totalling 150,000.00, and the annotation of
"deposit on sale of TCT No. 138914," on the receipts it issued explicitly indicated an acceptance of the associations offer
to buy. Consequently, the CA invalidated the sale between Robern and Al-Amanah.

The CA also concluded that Al-Amanah is guilty of bad faith in dealing with PELA because it took Al-Amanah almost
seven months to reject PELAs offer while holding on to the 150,000.00 deposit. The CA thus adjudged PELA entitled to
moral and exemplary damages as well as attorneys fees.
The dispositive portion of the CA Decision reads:

WHEREFORE, premises considered, the assailed Decision is SET ASIDE. Judgment is hereby rendered:

1. DECLARING the contract of sale between PELA and defendant Bank valid and subsisting.

2. ORDERING the defendant Bank to receive the balance of 150,000.00 of the purchase price from PELA as consigned in
court.

3. DECLARING the deed of sale executed by defendant Bank in favor or Robern Development Corporation as invalid and,
therefore, void.

4. ORDERING defendant Bank to return to Robern the full amount of 400,000.00 which Robern paid as the purchase
price of the subject property within ten (10) days from finality of this decision. It shall earn a legal interest of twelve
percent (12%) per annum from the tenth (10th) day aforementioned if there is delay in payment.

5. ORDERING Robern Development Corporation to reconvey the land covered by T.C.T. No. 212983 in favor of Peoples
Landless Association within a similar period of ten (10) days from finality of this decision.

6. ORDERING defendant Bank to pay plaintiffs-appellants the following:

a. The sum of 100,000.00 as moral damages;

b. The sum of 30,000.00 as exemplary damages;

c. The sum of 30,000.00 as attorneys fees;

d. A legal interest of SIX PERCENT (6%) per annum on the sums awarded in (a), (b), and (c) from the date of this Decision
up to the time of full payment thereof.

SO ORDERED.38

Robern and Bernardo filed a Motion for Reconsideration39 which Al-Amanah adopted. The CA, however, was firm in its
disposition and thus denied40 the same. Aggrieved, Robern and Al-Amanah separately filed Petitions for Review on
Certiorari before us. However, Al-Amanahs Petition docketed as G.R. No. 173437, was denied on September 27, 2006
on procedural grounds.41 Al-Amanahs Motion for Reconsideration of the said Resolution of dismissal was

denied with finality on December 4, 2006.42

Hence, only the Petition of Robern and Bernardo subsists.

Petitioners Arguments

Petitioners stress that there was no sale between PELA and Al-Amanah, for neither a deed nor any written agreement
was executed. They aver that Dalig was a mere OIC of Al-Amanahs Davao Branch, who was never vested with authority
by the board of directors of Al-Amanah to sell the lot. With regard to the notation on the March 18, 1993 letter and the
four bank receipts, Robern contends that these are only in connection with PELAs offer.

Petitioners likewise contend that Robern is a purchaser in good faith. The PELA members are mere informal settlers. The
title to the lot was clean on its face, and at the time Al-Amanah accepted Roberns offer, the latter was unaware of the
alleged transaction with PELA. And when PELA later represented to Robern that it entered into a transaction with Al-
Amanah regarding the subject lot, Robern even wrote Al-Amanah to inquire about PELAs claim over the property. And
when informed by Al-Amanah that it rejected the offer of PELA and of its action of requesting assistance from the local
government to remove the occupants from the subject property, only then did Robern push through with the sale.

Respondents Arguments

PELA, on the other hand, claims that petitioners are not the proper parties who can assail the contract of sale between it
and the bank. It likewise argues that the Petition should be dismissed because the petitioners failed to attach the
material portions of the records that would support its allegations, as required by Section 4, Rule 45 of the Rules of
Court.43

Aside from echoing the finding of the CA that Al-Amanah has a perfected contract of sale with PELA, the latter further
invokes the reasoning of the RTC and the CA (CA-G.R. SP No. 35238) in finding merit in the issuance of the writ of
preliminary injunction, that is, that there was an apparent perfection of contract (of sale) between the Bank and
PELA.44 Furthermore, PELA claims that Al-Amanah accepted its offered price and the 150,000.00, thus barring the
application of the Statute of Frauds as the contract was already partially executed. As to the non-existence of a written
contract evidencing the same, PELA ascribes fault on the bank claiming that nothing happened despite its repeated
follow-ups for the OIC of Al-Amanah to execute the deed after payment of the 150,000.00 in May 1993.

Issue

At issue before us is whether there was a perfected contract of sale between PELA and Al-Amanah, the resolution of
which will decide whether the sale of the lot to Robern should be sustained or not.

Our Ruling

We shall first briefly address some matters raised by PELA.

PELAs contention that Robern cannot assail the alleged sale between PELA and Al-Amanah is untenable. Robern is one
of the parties who claim title to the disputed lot. As such, it is a real party in interest since it stands to be benefited or
injured by the judgment.45

Petitioners failure to attach the material portions of the record that would support the allegations in the Petition is not
fatal. We ruled in F.A.T. Kee Computer Systems, Inc. v. Online Networks International, Inc.,46 thus:

x x x However, such a requirement failure to attach material portions of the record was not meant to be an ironclad rule
such that the failure to follow the same would merit the outright dismissal of the petition. In accordance with Section 7
of Rule 45, the Supreme Court may require or allow the filing of such pleadings, briefs, memoranda or documents as it
may deem necessary within such periods and under such conditions as it may consider appropriate. More importantly,
Section 8 of Rule 45 declares that [i]f the petition is given due course, the Supreme Court may require the elevation of
the complete record of the case or specified parts thereof within fifteen (15) days from notice. x x x47

Anent the statement of the courts below that there was an apparent perfection of contract (of sale) between Al-
Amanah and PELA, we hold that the same is strictly confined to the resolution of whether a writ of preliminary
injunction should issue since the PELA members were then about to be evicted. PELA should not rely on such statement
as the same is not decisive of the rights of the parties and the merits of this case.

We shall now delve into the crucial issue of whether there was a perfected contract of sale between PELA and Al-
Amanah.

Essential Elements of a Contract of Sale

A contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the
contract and upon the price.48 Thus, for a contract of sale to be valid, all of the following essential elements must
concur: "a) consent or meeting of the minds; b) determinate subject matter; and c) price certain in money or its
equivalent."49

In the case at bench, there is no controversy anent the determinate subject matter, i.e., the 2,000-square meter lot. This
leaves us to resolve whether there was a concurrence of the remaining elements.

As for the price, fixing it can never be left to the decision of only one of the contracting parties.50 "But a price fixed by
one of the contracting parties, if accepted by the other, gives rise to a perfected sale."51

As regards consent, "when there is merely an offer by one party without acceptance of the other, there is no
contract."52 The decision to accept a bidders proposal must be communicated to the bidder.53 However, a binding
contract may exist between the parties whose minds have met, although they did not affix their signatures to any
written document,54 as acceptance may be expressed or implied.55 It "can be inferred from the contemporaneous and
subsequent acts of the contracting parties."56 Thus, we held:

x x x The rule is that except where a formal acceptance is so required, although the acceptance must be affirmatively
and clearly made and must be evidenced by some acts or conduct communicated to the offeror, it may be made either
in a formal or an informal manner, and may be shown by acts, conduct, or words of the accepting party that clearly
manifest a present intention or determination to accept the offer to buy or sell. Thus, acceptance may be shown by the
acts, conduct, or words of a party recognizing the existence of the contract of sale.57

There is no perfected contract of sale between PELA and Al-Amanah for want of consent and agreement on the price.

After scrutinizing the testimonial and documentary evidence in the records of the case, we find no proof of a perfected
contract of sale between Al-Amanah and PELA. The parties did not agree on the price and no consent was given,
whether express or implied.

When PELA Secretary Florida Ramos (Ramos) testified, she referred to the March 18, 1993 letter which PELA sent to Al-
Amanah as the document supposedly embodying the perfected contract of sale.58 However, we find that the March 18,
1993 letter referred to was merely an offer to buy, viz:
March 18, 1993

The Manager
Islamic Bank
Davao Branch

Davao City

Sir/Madam:

This has reference to the offer made by Messrs. Alejandro Padilla, Leonardo Labora, Boy Bartiana, Francisco Paig, and
Mr. Asterio Aki for the purchase of the acquired asset of the bank with an area of 2,000 square meters and covered by
T.C.T. No. T-138914, portions of which are occupied by their houses. These occupants have formed and registered a
group of x x x landless families who have occupied shoulders of National Highways, to be able to raise an amount that
would meet the approval of the Bank as the consideration for the purchase of the property. The group which is known
as PELA or Peoples Landless Association, is offering the bank the amount of THREE HUNDRED THOUSAND PESOS
(300,000.00) for the whole 2,000 sq. meters. Of this amount the buyers will pay a down payment of ONE HUNDRED
FIFTY THOUSAND PESOS (150,000.00) and the balance payable in one (1) year.

According to the plan of PELA, about 24 landless families can be accommodated in the property. We hope the Bank can
help these families own even a small plot for their shelter. This would be in line with the governments program of
housing which the present administration promised to put in high gear this year.59 (Emphasis supplied)

Neither can the note written by the bank that "subject offer has been acknowledged/received but processing to take
effect upon putting up of the partial amount of 150,000.00 on or before April 15, 1993" be construed as acceptance of
PELAs offer to buy. Taken at face value, the annotation simply means that the bank merely acknowledged receipt of
PELAs letter-offer. Furthermore, by processing, Al-Amanah only meant that it will act on the offer, i.e., it still has to
evaluate whether PELAs offer is acceptable. Until and unless Al-Amanah accepts, there is as yet no perfected contract of
sale. Notably here, the bank never signified its approval or acceptance of the offer.

We cannot agree with the CAs ratiocination that receipt of the amount, coupled with the phrase written on the four
receipts as "deposit on sale of TCT No. 138914," signified a tacit acceptance by Al-Amanah of PELAs offer. For sure, the
money PELA gave was not in the concept of an earnest money. Besides, as testified to by then OIC Dalig, it is the usual
practice of Al-Amanah to require submission of a bid deposit which is acknowledged by way of bank receipts before it
entertains offers. Thus:

Atty. Bolcan:

Now, as far as you can remember, these receipts state that these are partial deposits, what do you mean by that?

WITNESS:

A: x x x, we normally request an offeror to submit or make deposit, actually the bank does not entertain any offer
without any deposit and just like that, during my time x x x in buying the property for those interested the bank does not
entertain any offer unless they make a deposit.
xxxx

Q: Why do you issue receipts as officer-in-charge stating only partial deposits?

A: Because there was no sale, there was no consu[m]mated sale, so any amount which you will give as a deposit will be
accepted by the bank for the offer and that if their offer will be disapproved we will return the deposit because their
offer was very low and this might be disapproved by the head office in Manila.60

xxxx

Atty. Taasan:

Do you confirm that based on the interest of the plaintiff to acquire the property they made a deposit with said bank, as
evidenced by the receipts that were shown to you by your counsel, correct?

A: Yes, sir.

Q: And according to you, the bank does not entertain any offer to buy the property without deposits?

A: Yes, sir.

Q: In this case since the plaintiffs made a deposit x x x they were properly entertained, correct?

A: Yes because it is under negotiation, now while their offer price is below the selling price of the bank.61

The absence of a perfected contract of sale was further buttressed by the testimony of PELA Secretary Ramos on cross
examination, viz:

Atty. Rabor:

Since it was x x x hard earned money you did not require the Amanah Bank when you gave that 150,000.00 to reduce
your agreement into writing regarding the sale of this property?

A: I insisted but she will not issue that.62

xxxx

Atty. Bolcan:

Now, on April 15, 1993 when the deposit was made, you were present?

A: Yes, sir.

Q: Now, after making the deposit of One Hundred Fifty Thousand (150,000.00) Pesos on April 15, 1993 did you not
request for the bank to execute a document to prove that actually you are buying the property?
A: I even said to the OIC or the manager that maam, now that you have received our money, where is our paper that we
were the ones to buy that property, sir.

Q: To whom are you referring to?

A: Febe Dalig, the OIC, sir.

Q: And this OIC Febe Dalig informed you that the Offer on your part to buy the property is subject for approval by the
head office in Manila, is that correct?

A: Yes she told me that it would be subject to approval in Manila x x x.

Q: And later on you were informed by the bank that your offer was not accepted by the head office in Manila, is that
correct?

A: She did not inform us but we kept on following it up with their office and she told us that it did not arrive yet, sir.63
(Emphasis supplied)

PELA Secretary Ramos testimony thus corroborated OIC Daligs consistent stand that it is the Head Office which will
decide whether Al-Amanah would accept PELAs offer:

Atty. Bolcan:

And now, if there are interested persons making offer x x x what would you do?

A: Well, we have to screen the offer before we forward the offer to Manila for approval because

Court:

What would you do before you forward that to Manila?

A: We will be screening the offer x x x.

Atty. Bolcan:

And you said that it is referred to Manila?

A: Yes, sir.

Q: Who will eventually approve the offer made by the interested persons to buy the property?

A: We have a committee in Manila to approve the sale of the property.

Q: Do you have any idea who will approve the offer of the property?
A: I have no idea but the president, rather it consists of the president I think and then signed also by the vice-president
and some officers in the office, sir.

xxxx

Q: Now, in case of offers of the property of the bank, x x x the officer-in-charge of the bank, Al-Amanah Bank branch,
usually refers this matter to the head office in Manila?

A: Yes, sir.

Q: And it is the head office that will decide whether the offer will be approved or not?

A: Yes as head of the branch, we have to forward the offer whether it was acceptable or not.64

It is thus undisputed, and PELA even acknowledges, that OIC Dalig made it clear that the acceptance of the offer,
notwithstanding the deposit, is subject to the approval of the Head Office. Recognizing the corporate nature of the bank
and that the power to sell its real properties is lodged in the higher authorities,65 she never falsely represented to the
bidders that she has authority to sell the banks property. And regardless of PELAs insistence that she execute a written
agreement of the sale, she refused and told PELA to wait for the decision of the Head Office, making it clear that she has
no authority to execute any deed of sale.

Contracts undergo three stages: "a) negotiation which begins from the time the prospective contracting parties indicate
interest in the contract and ends at the moment of their agreement[; b) perfection or birth, x x x which takes place when
the parties agree upon all the essential elements of the contract x x x; and c) consummation, which occurs when the
parties fulfill or perform the terms agreed upon, culminating in the extinguishment thereof."66

In the case at bench, the transaction between Al-Amanah and PELA remained in the negotiation stage. The offer never
materialized into a perfected sale, for no oral or documentary evidence categorically proves that Al-Amanah expressed
amenability to the offered 300,000.00 purchase price. Before the lapse of the 1-year period PELA had set to pay the
remaining balance, Al-Amanah expressly rejected its offered purchase price, although it took the latter around seven
months to inform the former and this entitled PELA to award of damages.67 Al-Amanahs act of selling the lot to another
buyer is the final nail in the coffin of the negotiation with PELA. Clearly, there is no double sale, thus, we find no reason
to disturb the consummated sale between Al-Amanah and Robern.

At this juncture, it is well to stress that Al-Amanahs Petition before this Court docketed as G.R. No. 173437 was already
denied with finality on December 4, 2006. Hence, we see no reason to disturb paragraph 6 of the CAs Decision ordering
Al-Amanah to pay damages to PELA.

WHEREFORE, we PARTIALLY GRANT the Petition. Except for paragraph 6 of the Court of Appeals Decision which had
already been long settled,68 the rest of the judgment in the assailed August 16, 2005 Decision and May 30, 2006
Resolution of the Court of Appeals in CA-G.R. No. CV No. 66071 are hereby ANNULLED and SET ASIDE. The August 10,
1999 Decision of the Regional Trial Court of Davao City, Branch 12, dismissing the Complaint for Annulment and
Cancellation of Void Deed of Sale filed by respondent People's Landless Association is REINSTATED and AFFIRMED. The
amount of Pesos: Three Hundred Thousand (300,000.00) consigned with the Regional Trial Court of Davao City may
now be withdrawn by People's Landless Association.
SO ORDERED.

REVIEW

G.R. No. L-41847 December 12, 1986

CATALINO LEABRES, petitioner,

vs.
COURT OF APPEALS and MANOTOK REALTY, INC., respondents.

Magtanggol C. Gunigundo for petitioner.

Marcelo de Guzman for respondents.

PARAS, J.:

Before Us is a Petition for certiorari to review the decision of the Court of Appeals which is quoted hereunder:

In Civil Case No. 64434, the Court of First Instance of Manila made the following quoted decision:

(1) Upon defendant's counterclaim, ordering plaintiff Catalino Leabres to vacate and/or surrender possession to
defendant Manotok Realty, Inc. the parcel of land subject matter of the complaint described in paragraph 3 thereof and
described in the Bill of Particulars dated March 4, 1966;

(2) To pay defendant the sum of P81.00 per month from March 20, 1959, up to the time he actually vacates and/or
surrenders possession of the said parcel of land to the defendant Manotok Realty, Inc., and

(3) To pay attorney's fees to the defendant in the amount of P700.00 and pay the costs. (Decision, R.A., pp. 54-55).

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

Clara Tambunting de Legarda died testate on April 22, 1950. Among the properties left by the deceased is the "Legarda
Tambunting Subdivision" located on Rizal Avenue Extension, City of Manila, containing an area of 80,238.90 sq. m.,
covered by Transfer Certificates of Title No. 62042; 45142; 45149; 49578; 40957 and 59585. Shortly after the death of
said deceased, plaintiff Catalino Leabres bought, on a partial payment of Pl,000.00 a portion (No. VIII, Lot No. 1) of the
Subdivision from surviving husband Vicente J. Legarda who acted as special administrator, the deed or receipt of said
sale appearing to be dated May 2, 1950 (Annex "A"). Upon petition of Vicente L. Legarda, who later was appointed a
regular administrator together with Pacifica Price and Augusto Tambunting on 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.

In the meantime, Vicente L. Legarda was relieved as a regular Administrator and the Philippine Trust Co. which took over
as such administrator advertised the sale of the subdivision which includes the 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 Daily Mirror. In the aforesaid Special
Proceedings No. 10808, no adverse claim or interest over the subdivision or any portion thereof was ever presented by
any person, and in the sale that followed, the Manotok Realty, Inc. emerged the successful bidder at the price of
P840,000.00. By order of the Probate Court, the Philippine Trust Co. executed the Deed of Absolute Sale of the
subdivision dated January 7, 1959 in favor of the Manotok Realty, Inc. which deed was judicially approved on March 20,
1959, and recorded immediately in the proper Register of Deeds which issued the corresponding Certificates of Title to
the Manotok Realty, Inc., the defendant appellee herein.

A complaint dated February 8, 1966, was filed by herein plaintiff, which seeks, among other things, for the quieting of
title over the lot subject matter herein, for continuing possession thereof, and for damages. In the scheduled hearing of
the case, plaintiff Catalino Leabres failed to appear although he was duly notified, and so the trial Court, in its order
dated September 14, 1967, dismissed the complaint (Annex "E").<re||an1w> In another order of dismissal was
amended as to make the same refer only to plaintiff's complaint and the counter claim of the defendant was reinstated
and as the evidence thereof was already adduced when defendant presented its evidence in three other cases pending
in the same Court, said counterclaim was also considered submitted for resolution. The motion for reconsideration
dated January 22, 1968 (Annex " I "), was filed by plaintiff, and an opposition thereto dated January 25, 1968, was
likewise filed by defendant but the Court a quo dismissed said motion in its order dated January 12, 1970 (Annex "K"),
"for lack of merits" (pp. 71-72, Record on Appeal).

Appealing the decision of the lower Court, plaintiff-appellant advances the following assignment of errors:

THE LOWER COURT ERRED IN DENYING THE MOTION FOR RECONSIDERATION, DATED OCTOBER 9, 1967, THUS
DEPRIVING THE PLAINTIFF-APPELLANT HIS DAY IN COURT.

II

THE LOWER COURT ERRED IN ORDERING THE PLAINTIFF-APPELLANT CATALINO LEABRES TO VACATE AND/OR
SURRENDER THE POSSESSION OF THE LOT SUBJECT MATTER OF THE COMPLAINT TO DEFENDANT-APPELLEE.

III

THE LOWER COURT ERRED IN ORDERING THE PLAINTIFF-APPELLANT TO PAY DEFENDANT-APPELLEE THE SUM OF P 81.00
PER MONTH FROM MARCH 20, 1969, UP TO THE TIME HE ACTUALLY VACATE THE PARCEL OF LAND. (Appellant's Brief, p.
7)

In the First Assigned Error, it is contended that the denial of his Motion for Reconsideration dated October 9, 1967, the
plaintiff-appellant was not accorded his day in Court.

The rule governing dismissal of actions for failure to prosecute is provided for in Section 3, Rule 17 of the Rules of Court,
as follows:

If the plaintiff fails to appear at the time of the trial, or to prosecute his action for an unreasonable length of time, or to
comply with these rules or any order of the Court, the action may be dismissed upon motion of the defendant or upon
the Court's own motion. This dismissal shall have the effect of an adjudication upon the merits, unless otherwise
provided by the Court.
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 not be reversed upon appeal in the absence of abuse. The burden of showing abuse of this discretion
is upon the appellant since every presumption is toward the correctness of the Court's action (Smith, Bell & Co., et al vs.
American Pres. Lines, Ltd., and Manila Terminal Co., No. L-5304, April 30, 1954; Adorable vs. Bonifacio, G. R. No. L-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 cases, and by the provisions of Section 5, Rules 131 of the Rules of Court, particularly paragraphs (m) and
(o) which respectively presume the regularity of official performance and the passing upon by the Court over all issues
within a case, it matters not if the Court dismissing the action for failure to prosecute assigns any special reason for its
action or not. We take note of the fact that the Order declaring appellant in default was handed down on September 14,
1967. Appellant took no steps to have this Order set aside. It was only 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 attached this Order and the
decision of the Court. Appellant slept on his rights-if he had any. He had a chance to have his day in Court but he passed
it off. Four months later he alleges that sudden illness had prevented him. We feel appellant took a long time too-long in
fact-to 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 repeated excuse to justify
indifference on the part of litigants or outright negligence of those who represent them which subserves the interests of
justice. In the instant case, not only did the appellant wantonly pass off his chance to have a day in Court but he has also
failed to give a convincing, just and valid reason for the new hearing he seeks. The trial court found it so; We find it so.
The trial Court in refusing to give appellant a new trial does not appear to have abused his discretion as to justify our
intervention.

The Second and Third Assignments of Error are hereby jointly treated in our discussion since the third is but a
consequence of the second.

It is argued that had the trial Court reconsidered its order dated September 14, 1967 dismissing the complaint for failure
to prosecute, plaintiff-appellant might have proved that he owns the lot subjectmatter of the case, citing the receipt
(Annex A) in his favor; that he has introduced improvements and erected a house thereon made of strong materials;
that appellee's adverse interest over the property was secured in bad faith since he had prior knowledge and notice of
appellant's physical possession or acquisition of the same; that due to said bad faith appellant has suffered damages,
and that for all the foregoing, the judgment should be reversed and equitable relief be given in his favor.

As above stated, the Legarda-Tambunting Subdivision which includes the lot subject matter of the instant case, is
covered by Torrens Certificates of Title. Appellant anchors his claim on the receipt (Annex "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 registered his
supposed interest over the lot in the records of the Register of Deeds, nor did he present his claim for probate in the
testate proceedings over the estate of the owner of said subdivision, in spite of the notices advertised in the papers.
(Saldana vs. Phil. Trust Co., et al.; Manotok Realty, Inc., supra).

On the other hand, defendant-appellee, Manotok Realty, Inc., bought the whole subdivision which includes the subject
matter herein by order and with approval of the Probate Court and upon said approval, the Deed of Absolute Sale in
favor of appellee was immediately registered with the proper Register of Deeds. Manotok Realty, Inc. has therefore the
better right over the lot in question because in cases of lands registered under the Torrens Law, adverse interests not
therein annotated which are without the previous knowledge by third parties do not bind the latter. As to the
improvement which appellant claims to have introduced on the lot, purchase of registered lands for value and in good
faith hold the same free from all liens and encumbrances except those noted on the titles of said land and those 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 registered owner, cannot claim good faith so as to be entitled to retention of the parcels occupied by him until
reimbursement of the value of the improvements he introduced thereon, because he is charged with notice of the
existence of the owner's certificate of title (J.M. Tuason & Co. vs. Lecardo, et al., CA-G.R. No. 25477-R, July 24, 1962; J.M.
Tuason & Co., Inc. vs. Manuel Abundo, CA-G.R. No. 29701-R, November 18, 1968).

Appellant has not convinced the trial Court that appellee acted in bad faith in the acquisition of the property due to the
latter's knowledge of a previous acquisition by the former, and neither are we impressed by the claim. The purchaser of
a registered land has to rely on the certificate of title thereof. The good faith of appellee coming from the knowledge
that the certificate of title covering the entire subdivision contain no notation as to appellant's interest, and the fact that
the records of these eases like Probate Proceedings Case No. 10808, do not show the existence of appellant's claim,
strongly support the correctness of the lower Court's decision

WHEREFORE, in view of the foregoing, we find no reason to amend or set aside the decision appealed from, as regards
to plaintiff-appellant Catalino Leabres. We therefore affirm the same, with costs against appellant. (pp. 33-38, Rollo)

Petitioner now comes to us with the following issues:

(1) Whether or not the petitioner was denied his day in court and deprived of due process of law.

(2) Whether or not the petitioner had to submit his receipt to the probate court in order that his right over the
parcel of land in dispute could be recognized valid and binding and conclusive against the Manotok Realty, Inc.

(3) Whether or not the petitioner could be considered as a possessor in good faith and in the concept of owner. (p.
11, Rollo)

Petitioner's contention that he was denied his day in court holds no water. Petitioner does not deny the fact that he
failed to appear on the date set for hearing on September 14, 1967 and as a consequence of his non-appearance, the
order of dismissal was issued, as provided for by Section 3, Rule 17 of the Revised Rules of Court.

Moreover, as pointed out by private respondent in its brief, the hearing 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. Petitioner should have submitted the receipt of alleged sale to the Probate Court for its
approval of the transactions. Thus, the respondent Court did not err in holding that the petitioner should have
submitted his receipt to the probate court in order that his right over the subject land could be recognized-assuming of
course that the receipt could be regarded as sufficient proof.

Anent his possession of the land, petitioner cannot be deemed a possessor in good faith in view of the registration of the
ownership of the land. To consider petitioner in good faith would be to put a premium on his own gross negligence. The
Court resolved to DENY the petition for lack of merit and to AFFIRM the assailed judgment.

Feria (Chairman), Fernan, Alampay and Gutierrez, Jr., JJ., concur.

G.R. No. L-32811 March 31, 1980

FELIPE C. ROQUE, petitioner,

vs.
NICANOR LAPUZ and THE COURT OF APPEALS, respondents.

Taada, Sanchez, Taada, Taada for petitioner.

N.M. Lapuz for respondent.

GUERRERO, J.:

Appeal by certiorari from the Resolution of the respondent court 1 dated October 12, 1970 in CA-G.R. No. L-33998-R
entitled "Felipe C. Roque, plaintiff-appellee, versus Nicanor Lapuz, defendant-appellant" amending its original decision
of April 23, 1970 which affirmed the decision of the Court of First Instance of Rizal (Quezon City Branch) in Civil Case No.
Q-4922 in favor of petitioner, and the Resolution of the respondent court denying petitioner's motion for
reconsideration.

The facts of this case are as recited in the decision of the Trial Court which was adopted and affirmed by the Court of
Appeals:

Sometime in 1964, prior to the approval by the National Planning Commission of the consolidation and subdivision plan
of plaintiff's property known as the Rockville Subdivision, situated in Balintawak, Quezon City, plaintiff and defendant
entered into an agreement of sale covering Lots 1, 2 and 9, Block 1, of said property, with an aggregate area of 1,200
square meters, payable in 120 equal monthly installments at the rate of P16.00, P15.00 per square meter, respectively.
In accordance with said agreement, defendant paid to plaintiff the sum of P150.00 as deposit and the further sum of
P740.56 to complete the payment of four monthly installments covering the months of July, August, September, and
October, 1954. (Exhs. A and B). When the document Exhibit "A" was executed on June 25, 1954, the plan covering
plaintiff's property was merely tentative, and the plaintiff referred to the proposed lots appearing in the tentative plan.

After the approval of the subdivision plan by the Bureau of Lands on January 24, 1955, defendant requested plaintiff
that he be allowed to abandon and substitute Lots 1, 2 and 9, the subject matter of their previous agreement, with Lots
4 and 12, Block 2 of the approved subdivision plan, of the Rockville Subdivision, with a total area of 725 square meters,
which are corner lots, to which request plaintiff graciously acceded.
The evidence discloses that defendant proposed to plaintiff modification of their previous contract to sell because he
found it quite difficult to pay the monthly installments on the three lots, and besides the two lots he had chosen were
better lots, being corner lots. In addition, it was agreed that the purchase price of these two lots would be at the
uniform rate of P17.00 per square (meter) payable in 120 equal monthly installments, with interest at 8% annually on
the balance unpaid. Pursuant to this new agreement, defendant occupied and possessed Lots 4 and 12, Block 2 of the
approved subdivision plan, and enclosed them, including the portion where his house now stands, with barbed wires
and adobe walls.

However, aside from the deposit of P150.00 and the amount of P740.56 which were paid under their previous
agreement, defendant failed to make any further payment on account of the agreed monthly installments for the two
lots in dispute, under the new contract to sell. Plaintiff demanded upon defendant not only to pay the stipulated
monthly installments in arrears, but also to make up-to-date his payments, but defendant, instead of complying with the
demands, kept on asking for extensions, promising at first that he would pay not only the installments in arrears but also
make up-to-date his payment, but later on refused altogether to comply with plaintiff's demands.

Defendant was likewise requested by the plaintiff to sign the corresponding contract to sell in accordance with his
previous commitment. Again, defendant promised that he would sign the required contract to sell when he shall have
made up-to-date the stipulated monthly installments on the lots in question, but subsequently backed out of his
promise and refused to sign any contract in noncompliance with what he had represented on several occasions. And
plaintiff relied on the good faith of defendant to make good his promise because defendant is a professional and had
been rather good to him (plaintiff).

On or about November 3, 1957, in a formal letter, plaintiff demanded upon defendant to vacate the lots in question and
to pay the reasonable rentals thereon at the rate of P60.00 per month from August, 1955. (Exh. "B"). Notwithstanding
the receipt of said letter, defendant did not deem it wise nor proper to answer the same.

In reference to the mode of payment, the Honorable Court of Appeals found

Both parties are agreed that the period within which to pay the lots in question is ten years. They however, disagree on
the mode of payment. While the appellant claims that he could pay the purchase price at any time within a period of ten
years with a gradual proportionate discount on the price, the appellee maintains that the appellant was bound to pay
monthly installments.

On this point, the trial court correctly held that

It is further argued by defendant that under the agreement to sell in question, he has the right or option to pay the
purchase price at anytime within a period of ten years from 1954, he being entitled, at the same time, to a graduated
reduction of the price. The Court is constrained to reject this version not only because it is contradicted by the weight of
evidence but also because it is not consistent with what is reasonable, plausible and credible. It is highly improbable to
expect plaintiff, or any real estate subdivision owner for that matter, to agree to a sale of his land which would be
payable anytime in ten years at the exclusive option of the purchaser. There is no showing that defendant is a friend, a
relative, or someone to whom plaintiff had to be grateful, as would justify an assumption that he would have agreed to
extend to defendant such an extra- ordinary concession. Furthermore, the context of the document, Exhibit "B", not to
mention the other evidences on records is indicative that the real intention of the parties is for the payment of the
purchase price of the lot in question on an equal monthly installment basis for a period of ten years (Exhibits "A", "II", "J"
and "K").

On January 22, 1960, petitioner Felipe C, Roque (plaintiff below) filed the complaint against defendant Nicanor Lapuz
(private respondent herein) with the Court of First Instance of Rizal, Quezon City Branch, for rescission and cancellation
of the agreement of sale between them involving the two lots in question and prayed that judgment be rendered
ordering the rescission and cancellation of the agreement of sale, the defendant to vacate the two parcels of land and
remove his house therefrom and to pay to the plaintiff the reasonable rental thereof at the rate of P60.00 a month from
August 1955 until such time as he shall have vacated the premises, and to pay the sum of P2,000.00 as attorney's fees,
costs of the suit and award such other relief or remedy as may be deemed just and equitable in the premises.

Defendant filed a Motion to Dismiss on the ground that the complaint states no cause of action, which motion was
denied by the court. Thereafter, defendant filed his Answer alleging that he bought three lots from the plaintiff
containing an aggregate area of 1,200 sq. meters and previously known as Lots 1, 2 and 9 of Block 1 of Rockville
Subdivision at P16.00, P15.00 and P15.00, respectively, payable at any time within ten years. Defendant admits having
occupied the lots in question.

As affirmative and special defenses, defendant alleges that the complaint states no cause of action; that the present
action for rescission has prescribed; that no demand for payment of the balance was ever made; and that the action
being based on reciprocal obligations, before one party may compel performance, he must first comply what is
incumbent upon him.

As counterclaim, defendant alleges that because of the acts of the plaintiff, he lost two lots containing an area of 800 sq.
meters and as a consequence, he suffered moral damages in the amount of P200.000.00; that due to the filing of the
present action, he suffered moral damages amounting to P100,000.00 and incurred expenses for attorney's fees in the
sum of P5,000.00.

Plaintiff filed his Answer to the Counterclaim and denied the material averments thereof.

After due hearing, the trial court rendered judgment, the dispositive portion of which reads:

WHEREFORE, the Court renders judgment in favor of plain. plaintiff and against the defendant, as follows:

(a) Declaring the agreement of sale between plaintiff and defendant involving the lots in question (Lots 4 and 12,
Block 2 of the approved subdivision plan of the Rockville Subdivision) rescinded, resolved and cancelled;

(b) Ordering defendant to vacate the said lots and to remove his house therefrom and also to pay plaintiff the
reasonable rental thereof at the rate of P60.00 per month from August, 1955 until he shall have actually vacated the
premises; and

(c) Condemning defendant to pay plaintiff the sum of P2,000.00 as attorney's fees, as well as the costs of the suit.
(Record on Appeal, p. 118)

(a) Declaring the agreement of sale between plaintiff and defendant involving the lots in question (Lots 4 and 12,
Block 2 of the approved subdivision plan of the Rockville Subdivision) rescinded, resolved and cancelled;
(b) Ordering defendant to vacate the said lots and to remove his house therefrom and also to pay plaintiff the
reasonable rental thereof at the rate of P60.00 per month from August, 1955 until he shall have actually vacated
premises; and

(c) Condemning defendant to pay plaintiff the sum of P2,000.00 as attorney's fees, as well as the costs of the suit.
(Record on Appeal. p. 118)

Not satisfied with the decision of the trial court, defendant appealed to the Court of Appeals. The latter court, finding
the judgment appealed from being in accordance with law and evidence, affirmed the same.

In its decision, the appellate court, after holding that the findings of fact of the trial court are fully supported by the
evidence, found and held that the real intention of the parties is for the payment of the purchase price of the lots in
question on an equal monthly installment basis for the period of ten years; that there was modification of the original
agreement when defendant actually occupied Lots Nos. 4 and 12 of Block 2 which were corner lots that commanded a
better price instead of the original Lots Nos. 1, 2 and 9, Block I of the Rockville Subdivision; that appellant's bare
assertion that the agreement is not rescindable because the appellee did not comply with his obligation to put up the
requisite facilities in the subdivision was insufficient to overcome the presumption that the law has been obeyed by the
appellee; that the present action has not prescribed since Article 1191 of the New Civil Code authorizing rescission in
reciprocal obligations upon noncompliance by one of the obligors is the applicable provision in relation to Article 1149 of
the New Civil Code; and that the present action was filed within five years from the time the right of action accrued.

Defendant filed a Motion for Reconsideration of the appellate court's decision on the following grounds:

First Neither the pleadings nor the evidence, testimonial, documentary or circumstantial, justify the conclusion as to
the existence of an alleged subsequent agreement novatory of the original contract admittedly entered into between
the parties:

Second There is nothing so unusual or extraordinary, as would render improbable the fixing of ten ears as the period
within which payment of the stipulated price was to be payable by appellant;

Third Appellee has no right, under the circumstances on the case at bar, to demand and be entitled to the rescission
of the contract had with appellant;

Fourth Assuming that any action for rescission is availability to appellee, the same, contrary to the findings of the
decision herein, has prescribed;

Fifth Assumming further that appellee's action for rescission, if any, has not yet prescribed, the same is at least barred
by laches;

Sixth Assuming furthermore that a cause of action for rescission exists, appellant should nevertheless be entitled to
tile fixing of a period within which to comply with his obligation; and

Seventh At all events, the affirmance of the judgment for the payment of rentals on the premises from August, 1955
and he taxing of attorney's fees against appellant are not warranted b the circumstances at bar. (Rollo, pp. 87-88)
Acting on the Motion for Reconsideration, the Court of Appeals sustained the sixth ground raised by the appellant, that
assuming that a cause of action for rescission exists, he should nevertheless be entitled to the fixing of a period within
which to comply with his obligation. The Court of Appeals, therefore, amended its original decision in the following wise
and manner:

WHEREFORE, our decision dated April 23, 1970 is hereby amended in the sense that the defendant Nicanor Lapuz is
hereby granted a period of ninety (90) days from entry hereof within which to pay the balance of the purchase price in
the amount of P11,434,44 with interest thereon at the rate of 8% per annum from August 17, 1955 until fully paid. In the
event that the defendant fails to comply with his obligation as above stated within the period fixed herein, our original
judgment stands.

Petitioner Roque, as plaintiff-appellee below, filed a Motion for Reconsideration; the Court of Appeals denied it. He now
comes and appeals to this Court on a writ of certiorari.

The respondent Court of Appeals rationalizes its amending decision by considering that the house presently erected on
the land subject of the contract is worth P45,000.00, which improvements introduced by defendant on the lots subject
of the contract are very substantial, and thus being the case, "as a matter of justice and equity, considering that the
removal of defendant's house would amount to a virtual forfeiture of the value of the house, the defendant should be
granted a period within which to fulfill his obligations under the agreement." Cited as authorities are the cases of
Kapisanan Banahaw vs. Dejarme and Alvero, 55 Phil. 338, 344, where it is held that the discretionary power of the court
to allow a period within which a person in default may be permitted to perform the stipulation upon which the claim for
resolution of the contract is based should be exercised without hesitation in a case where a virtual forfeiture of valuable
rights is sought to be enforced as an act of mere reprisal for a refusal of the debtor to submit to a usurious charge, and
the case of Puerto vs. Go Ye Pin, 47 O.G. 264, holding that to oust the defendant from the lots without giving him a
chance to recover what his father and he himself had spent may amount to a virtual forfeiture of valuable rights.

As further reasons for allowing a period within which defendant could fulfill his obligation, the respondent court held
that there exists good reasons therefor, having in mind that which affords greater reciprocity of rights (Ramos vs. Blas,
51 O.G. 1920); that after appellant had testified that plaintiff failed to comply with his part of the contract to put up the
requisite facilities in the subdivision, plaintiff did not introduce any evidence to rebut defendant's testimony but simply
relied. upon the presumption that the law has been obeyed, thus said presumption had been successfully rebutted as
Exhibit "5-D" shows that the road therein shown is not paved The Court, however, concedes that plaintiff's failure to
comply with his obligation to put up the necessary facilities in the subdivision will not deter him from asking fr the
rescission of the agreement since this obligation is not correlative with defendant's obligation to buy the property.

Petitioner assails the decision of the Court of Appeals for the following alleged errors:

I. The Honorable Court of Appeals erred in applying paragraph 3, Article 1191 of the Civil Code which refers to
reciprocal obligations in general and, pursuant thereto, in granting respondent Lapuz a period of ninety (90) days from
entry of judgment within which to pay the balance of the purchase price.

II. The Honorable Court of Appeals erred in not holding that Article 1592 of the same Code, which specifically
covers sales of immovable property and which constitutes an exception to the third paragraph of Article 1191 of said
Code, is applicable to the present case.
III. The Honorable Court of Appeals erred in not holding that respondent Lapuz cannot avail of the provisions of
Article 1191, paragraph 3 of the Civil Code aforesaid because he did not raise in his answer or in any of the pleadings he
filed in the trial court the question of whether or not he is entitled, by reason of a just cause, to a fixing of a new period.

IV. Assuming arguendo that the agreement entered into by and between petitioner and respondent Lapuz was a
mere promise to sell or contract to sell, under which title to the lots in question did not pass from petitioner to
respondent, still the Honorable Court of Appeals erred in not holding that aforesaid respondent is not entitled to a new
period within which to pay petitioner the balance of P11,434.44 interest due on the purchase price of P12.325.00 of the
lots.

V. Assuming arguendo that paragraph 3, Article 1191 of the Civil Code is applicable and may be availed of by
respondent, the Honorable Court of Appeals nonetheless erred in not declaring that aid respondent has not shown the
existence of a just cause which would authorize said Court to fix a new period within which to pay the balance aforesaid.

VI. The Honorable Court of Appeals erred in reconsidering its original decision promulgated on April 23, 1970 which
affirmed the decision of the trial court.

The above errors may, however, be synthesized into one issue and that is, whether private respondent is entitled to the
Benefits of the third paragraph of Article 1191, New Civil Code, for the fixing of period within which he should comply
with what is incumbent upon him, and that is to pay the balance of P11,434,44 with interest thereon at the rate of 8%
1et annum from August 17, 1955 until fully paid since private respondent had paid only P150.00 as deposit and 4
months intallments amounting to P740.46, or a total of P890.46, the total price of the two lots agreed upon being
P12,325.00.

For his part, petitioner maintains that respondent is not entitled to the Benefits of paragraph 3, Article 1191, NCC and
that instead, Article 1592 of the New Civil Code which specifically covers sales of immovable property and which
constitute an exception to the third paragraph of Art. 1191 of aid Code, is the applicable law to the case at bar.

In resolving petitioner's assignment of errors, it is well that We lay clown the oda provisions and pertinent rulings of the
Supreme Court bearing on the crucial issue of whether Art. 1191, paragraph 3 of the New Civil Code applies to the case
at Bar as held by the appellate court and supported by the private respondent, or Art. 1592 of the same Code which
petitioner strongly argues in view of the peculiar facts and circumstances attending this case. Article 1191, New Civil
Code, provides:

Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one at the obligors should not comply
with hat is incumbent upon him

The injured partner may choose between the fulfillment and the rescission of the obligation, with the payment of
damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become
impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.

This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance
with articles 1385 and 1388 and the Mortgage Law.
Article 1592 also provides:

Art. 1592. In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price
at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the
expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or
by a notarial act. After the demand, the court may not grant him a new term.

The controlling and latest jurisprudence is established and settled in the celebrated case of Luzon Brokerage Co., Inc. vs.
Maritime Building Co., Inc. and Myers Building Co., G.R. No. L-25885, January 31, 1972, 43 SCRA 93, originally decided in
1972, reiterated in the Resolution on Motion to Reconsider dated August 18, 1972, 46 SCRA 381 and emphatically
repeated in the Resolution on Second Motion for Reconsideration promulgated November 16, 1978, 86 SCRA 309, which
once more denied Maritimes Second Motion for Reconsideration of October 7, 1972. In the original decision, the
Supreme Court speaking thru Justice J.B.L. Reyes said:

Under the circumstances, the action of Maritime in suspending payments to Myers Corporation was a breach of contract
tainted with fraud or malice (dolo), as distinguished from mere negligence (culpa), "dolo" being succinctly defined as a
"conscious and intention design to evade the normal fulfillment of existing obligations" (Capistrano, Civil Code of the
Philippines, Vol. 3, page 38), and therefore incompatible with good faith (Castan, Derecho Civil, 7th Ed., Vol. 3, page 129;
Diaz Pairo, Teoria de Obligaciones, Vol. 1, page 116).

Maritime having acted in bad faith, it was not entitled to ask the court to give it further time to make payment and
thereby erase the default or breach that it had deliberately incurred. Thus the lower court committed no error in
refusing to extend the periods for payment. To do otherwise would be to sanction a deliberate and reiterated
infringement of the contractual obligations incurred by Maritime, an attitude repugnant to the stability and obligatory
force of contracts.

The decision reiterated the rule pointed out by the Supreme Court in Manuel vs. Rodriguez, 109 Phil. 1, p. 10, that:

In contracts to sell, where ownership is retained by the seller and is not to pass until the fun payment of the price, such
payment, as we said is a positive suspensive condition, the failure of which is not a breach, casual or serious, but simply
an event that prevented the obligation of the vendor to convey title from acquiring binding i force in accordance with
Article 1117 of the Old Civil Code. To argue that there was only a casual breach is to proceed from the assumption that
the contract is one of absolute sale, where non-payment is a resolutory condition, which is not the case." Continuing,
the Supreme Court declared:

... appellant overlooks that its contract with appellee Myers s not the ordinary sale envisaged by Article 1592,
transferring ownership simultaneously with the delivery of the real property sold, but one in which the vendor retained
ownership of the immovable object of the sale, merely undertaking to convey it provided the buyer strictly complied
with the terms of the contract (see paragraph [d], ante page 5). In suing to recover possession of the building from
Maritime appellee Myers is not after the resolution or setting aside of the contract and the restoration of the parties to
the status quo ante as contemplated by Article 1592, but precisely enforcing the Provisions of the agreement that it is
no longer obligated to part with the ownership or possession of the property because Maritime failed to comply with
the specific condition precedent, which is to pay the installments as they fell due.

The distinction between contracts of sale and contracts to sell with reserved title has been recognized by this Court in
repeated decisions upholding the power of promisors under contracts to sell in case of failure of the other party to
complete payment, to extrajudicially terminate the operation of the contract, refuse conveyance and retain the sums or
installments already received, where such rights are expressly provided for, as in the case at bar.

In the Resolution denying the first Motion for Reconsideration, 46 SCRA 381, the Court again speaking thru Justice J.B.L.
Reyes, reiterated the rule that in a contract to sell, the full payment of the price through the punctual performance of
the monthly payments is a condition precedent to the execution of the final sale 4nd to the transfer of the property
from the owner to the proposed buyer; so that there will be no actual sale until and unless full payment is made.

The Court further ruled that in seeking to oust Maritime for failure to pay the price as agreed upon, Myers was not
rescinding (or more properly, resolving) the contract but precisely enforcing it according to its expressed terms. In its
suit, Myers was not seeking restitution to it of the ownership of the thing sold (since it was never disposed of), such
restoration being the logical consequence of the fulfillment of a resolutory condition, expressed or implied (Art. 1190);
neither was it seeking a declaration that its obligation to sell was extinguished. What is sought was a judicial declaration
that because the suspensive condition (full and punctual payment) had not been fulfilled, its obligation to sell to
Maritime never arose or never became effective and, therefore, it (Myers) was entitled to repossess the property object
of the contract, possession being a mere incident to its right of ownership.

The decision also stressed that "there can be no rescission or resolution of an obligation as yet non-existent, because the
suspensive condition did not happen. Article 1592 of the New Civil Code (Art. 1504 of Old Civil Code) requiring demand
by suit or notarial act in case the vendor of realty wants to rescind does not apply to a contract to sell or promise to sell,
where title remains with the vendor until fulfillment to a positive condition, such as full payment of the price." (Manuel
vs, Rodriguez, 109 Phil. 9)

Maritime's Second Motion for Reconsideration was denied in the Resolution of the Court dated November 16, 1978, 86
SCRA 305, where the governing law and precedents were briefly summarized in the strong and emphatic language of
Justice Teehankee, thus:

(a) The contract between the parties was a contract to sell or conditional sale with title expressly reserved in the
vendor Myers Building Co., Inc. Myers until the suspensive condition of full and punctual payment of the full price shall
have been met on pain of automatic cancellation of the contract upon failure to pay any of the monthly installments
when due and retention of the sums theretofore paid as rentals. When the vendee, appellant Maritime, willfully and in
bad faith failed since March, 1961 to pay the P5,000. monthly installments notwithstanding that it was punctually
collecting P10,000. monthly rentals from the lessee Luzon Brokerage Co., Myers was entitled, as it did in law and fact,
to enforce the terms of the contract to sell and to declare the same terminated and cancelled.

(b) Article 1592 (formerly Article 1504) of the new Civil Code is not applicable to such contracts to self or conditional
sales and no error was committed by the trial court in refusing to extend the periods for payment.

(c) As stressed in the Court's decision, "it is irrelevant whether appellant Maritime's infringement of its contract was
casual or serious" for as pointed out in Manuel vs. Rodriguez, '(I)n contracts to self. whether ownership is retained by
the seller and is not to pass until the full payment of the price, such payment, as we said, is a positive suspensive
condition, the failure of which is not a breach, casual or serious, but simply an event that prevented the obligation of the
vendor to convey title from acquiring binding force ...

(d) It should be noted, however, that Maritimes breach was far from casual but a most serious breach of contract ...
(e) Even if the contract were considered an unconditional sale so that Article 1592 of the Civil Code could be
deemed applicable, Myers' answer to the complaint for interpleaded in the court below constituted a judicial demand
for rescission of the contract and by the very provision of the cited codal article, 'after the demand, the court may not
grant him a new term for payment; and

(f) Assumming further that Article 1191 of the new Civil Code governing rescission of reciprocal obligations could
be applied (although Article 1592 of the same Code is controlling since it deals specifically with sales of real property),
said article provides that '(T)he court shall decree the rescission claimed, unless there be just cause authorizing the fixing
of a period' and there exists to "just cause" as shown above for the fixing of a further period. ...

Under the first and second assignments of error which petitioner jointly discusses, he argues that the agreement
entered into between him and the respondent is a perfected contract of purchase and sale within the meaning of Article
1475 of the New Civil Code which provides that "the contract of sale is perfected at the moment there is a meeting of
minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may
reciprocally demand performance, subject to the provisions of the law governing the form of contract."

Petitioner contends that "(n)othing in the decision of the courts below would show that ownership of the property
remained with plaintiff for so long as the installments have not been fully paid. Which yields the conclusion that, by the
delivery of the lots to defendant, ownership likewise was transferred to the latter." (Brief for the Petitioner, p. 15) And
he concludes that the sale was consummated by the delivery of the two lots, the subject thereof, by him to the
respondent.

Under the findings of facts by the appellate court, it appears that the two lots subject of the agreement between the
parties herein were delivered by the petitioner to the private respondent who took possession thereof and occupied the
same and thereafter built his house thereon, enclosing the lots with adobe stone walls and barbed wires. But the
property being registered under the Land Registration Act, it is the act of registration of the Deed of Sale which could
legally effect the transfer of title of ownership to the transferee, pursuant to Section 50 of Act 496. (Manuel vs.
Rodriguez, et al., 109 Phil. 1; Buzon vs. Lichauco, 13 Phil. 354; Tuazon vs. Raymundo, 28 Phil. 635: Worcestor vs.
Ocampo, 34 Phil. 646). Hence, We hold that the contract between the petitioner and the respondent was a contract to
sell where the ownership or title is retained by the seller and is not to pass until the full payment of the price, such
payment being a positive suspensive condition and failure of which is not a breach, casual or serious, but simply an
event that prevented the obligation of the vendor to convey title from acquiring binding force.

In the case at bar, there is no writing or document evidencing the agreement originally entered into between petitioner
and private respondent except the receipt showing the initial deposit of P150.00 as shown in Exh. "A" and the payment
of the 4- months installment made by respondent corresponding to July, 1954 to October, 1954 in the sum of P740.56 as
shown in Exh. "B". Neither is there any writing or document evidencing the modified agreement when the 3 lots were
changed to Lots 4 and 12 with a reduced area of 725 sq. meters, which are corner lots. This absence of a formal deed of
conveyance is a very strong indication that the parties did not intend immediate transfer of ownership and title, but only
a transfer after full payment of the price. Parenthetically, We must say that the standard printed contracts for the sale of
the lots in the Rockville Subdivision on a monthly installment basis showing the terms and conditions thereof are
immaterial to the case at bar since they have not been signed by either of the parties to this case.

Upon the law and jurisprudence hereinabove cited and considering the nature of the transaction or agreement between
petitioner and respondent which We affirm and sustain to be a contract to sell, the following resolutions of petitioner's
assignment of errors necessarily arise, and so We hold that:
1. The first and second assignments of errors are without merit.

The overwhelming weight of authority culminating in the Luzon Brokerage vs. Maritime cases has laid down the rule that
Article 1592 of the New Civil Code does not apply to a contract to sell where title remains with the vendor until full
payment of the price as in the case at bar. This is the ruling in Caridad Estates vs. Santero, 71 Phil. 120; Aldea vs.
Inquimboy 86 Phil. 1601; Jocon vs. Capitol Subdivision, Inc., L-6573, Feb. 28, 1955; Miranda vs. Caridad Estates, L-2077
and Aspuria vs. Caridad Estates, L-2121 Oct. 3, 1950, all reiterated in Manuel vs. Rodriguez, et al. 109 Phil. 1, L-13435,
July 27, 1960. We agree with the respondent Court of Appeals that Art, 1191 of the New Civil Code is the applicable
provision where the obligee, like petitioner herein, elects to rescind or cancel his obligation to deliver the ownership of
the two lots in question for failure of the respondent to pay in fun the purchase price on the basis of 120 monthly equal
installments, promptly and punctually for a period of 10 years.

2. We hold that respondent as obligor is not entitled to the benefits of paragraph 3 of Art. 1191, NCC Having been
in default, he is not entitled to the new period of 90 days from entry of judgment within which to pay petitioner the
balance of P11,434.44 with interest due on the purchase price of P12,325.00 for the two lots.

Respondent a paid P150.00 as deposit under Exh. "A" and P740.56 for the 4-months installments corresponding to the
months of July to October, 1954. The judgment of the lower court and the Court of Appeals held that respondent was
under the obligation to pay the purchase price of the lots m question on an equal monthly installment basis for a period
of ten years, or 120 equal monthly installments. Beginning November, 1954, respondent began to default in complying
with his obligation and continued to do so for the remaining 116 monthly interest. His refusal to pay further installments
on the purchase price, his insistence that he had the option to pay the purchase price any time in ten years inspire of the
clearness and certainty of his agreement with the petitioner as evidenced further by the receipt, Exh. "B", his dilatory
tactic of refusing to sign the necessary contract of sale on the pretext that he will sign later when he shall have updated
his monthly payments in arrears but which he never attempted to update, and his failure to deposit or make available
any amount since the execution of Exh "B" on June 28, 1954 up to the present or a period of 26 years, are all
unreasonable and unjustified which altogether manifest clear bad faith and malice on the part of respondent puzzle
making inapplicable and unwarranted the benefits of paragraph 3, Art. 1191, N.C.C. To allow and grant respondent an
additional period for him to pay the balance of the purchase price, which balance is about 92% of the agreed price,
would be tantamount to excusing his bad faith and sanctioning the deliberate infringement of a contractual obligation
that is repugnant and contrary to the stability, security and obligatory force of contracts. Moreover, respondent's failure
to pay the succeeding 116 monthly installments after paying only 4 monthly installments is a substantial and material
breach on his part, not merely casual, which takes the case out of the application of the benefits of pa paragraph 3, Art.
1191, N.C.C.

At any rate, the fact that respondent failed to comply with the suspensive condition which is the full payment of the
price through the punctual performance of the monthly payments rendered petitioner's obligation to sell ineffective
and, therefore, petitioner was entitled to repossess the property object of the contract, possession being a mere
incident to his right of ownership (Luzon Brokerage Co., Inc. vs. Maritime Building Co., Inc., et al. 46 SCRA 381).

3. We further rule that there exists no just cause authorizing the fixing of a new period within which private
respondent may pay the balance of the purchase price. The equitable grounds or considerations which are the basis of
the respondent court in the fixing of an additional period because respondent had constructed valuable improvements
on the land, that he has built his house on the property worth P45,000.00 and placed adobe stone walls with barbed
wires around, do not warrant the fixing of an additional period. We cannot sanction this claim for equity of the
respondent for to grant the same would place the vendor at the mercy of the vendee who can easily construct
substantial improvements on the land but beyond the capacity of the vendor to reimburse in case he elects to rescind
the contract by reason of the vendee's default or deliberate refusal to pay or continue paying the purchase price of the
land. Under this design, strategem or scheme, the vendee can cleverly and easily "improve out" the vendor of his land.

More than that, respondent has not been honest, fair and reciprocal with the petitioner, hence it would not be fair and
reasonable to the petitioner to apply a solution that affords greater reciprocity of rights which the appealed decision
tried to effect between the parties. As matters stand, respondent has been enjoying the possession and occupancy of
the land without paying the other 116 monthly installments as they fall due. The scales of justice are already tipped in
respondent,s favor under the amended decision of the respondent court. It is only right that We strive and search for
the application of the law whereby every person must, in the exercise of his rights and in the performance of his duties,
act with justice, give everyone his due, and observe honesty and good faith (Art. 19, New Civil Code)

In the case at bar, respondent has not acted in good faith. With malice and deliberate intent, he has twisted the clear
import of his agreement with the petitioner in order to suit his ends and delay the fulfillment of his obligation to pay the
land he had enjoyed for the last 26 years, more than twice the period of ten years that he obliged himself to complete
payment of the price.

4. Respondent's contention that petitioner has not complied with his obligation to put up the necessary facilities in
the Rockville Subdivision is not sufficient nor does it constitute good reason to justify the grant of an additional period of
90 days from entry of judgment within which respondent may pay the balance of the purchase price agreed upon. The
Judgment of the appellate court concedes that petitioner's failure to comply with his obligation to put up the necessary
facilities in the subdivision will not deter him from asking for the rescission of the agreement since his obligation is not
correlative with respondent's obligation to buy the property. Since this is so conceded, then the right of the petitioner to
rescind the agreement upon the happening or in the event that respondent fails or defaults in any of the monthly
installments would be rendered nugatory and ineffective. The right of rescission would then depend upon an extraneous
consideration which the law does not contemplate.

Besides, at the rate the two lots were sold to respondent with a combined area of 725 sq. meters at the uniform price of
P17.00 per sq. meter making a total price of P12,325.00, it is highly doubtful if not improbable that aside from his
obligation to deliver title and transfer ownership to the respondent as a reciprocal obligation to that of the respondent
in paying the price in full and promptly as the installments fall due, petitioner would have assumed the additional
obligation "to provide the subdivision with streets ... provide said streets with street pavements concrete curbs and
gutters, fillings as required by regulations, adequate drainage facilities, tree plantings, adequate water facilities" as
required under Ordinance No. 2969 of Quezon City approved on May 11, 1956 (Answer of Defendant, Record on Appeal,
pp. 35-36) which was two years after the agreement in question was entered into June, 1y54.

The fact remains, however, that respondent has not protested to the petitioner nor to the authorities concerned the
alleged failure of petitioner to put up and provide such facilities in the subdivision because he knew too well that he has
paid only the aggregate sum of P890.56 which represents more or less 7% of the agreed price of P12,325.00 and that he
has not paid the real estate taxes assessed by the government on his house erected on the property under litigation.
Neither has respondent made any allegation in his Answer and in all his pleadings before the court up to the
promulgation of the Resolution dated October 12, 1970 by the Court of Appeals, to the effect that he was entitled to a
new period within which to comply with his obligation, hence the Court could not proceed to do so unless the Answer is
first amended. (Gregorio Araneta, Inc. vs. Philippine Sugar Estates Development Co., Ltd., G.R. No. L-22558, May 31,
1967, 20 SCRA 330, 335). It is quite clear that it is already too late in the day for respondent to claim an additional period
within which to comply with his obligation.

Precedents there are in Philippine jurisprudence where the Supreme Court granted the buyer of real property additional
period within which to complete payment of the purchase price on grounds of equity and justice as in (1) J.M. Tuazon
Co., Inc. vs. Javier, 31 SCRA 829 where the vendee religiously satisfied the monthly installments for eight years and paid
a total of P4,134.08 including interests on the principal obligation of only P3,691.20, the price of the land; after default,
the vendee was willing to pay all arrears, in fact offered the same to the vendor; the court granted an additional period
of 60 days -from receipt of judgment for the vendee to make all installment in arrears plus interest; (2) in Legarda
Hermanos vs. Saldaa, 55 SCRA 324, the Court ruled that where one purchase, from a subdivision owner two lots and
has paid more than the value of one lot, the former is entitled to a certificate of title to one lot in case of default.

On the other hand there are also cases where rescission was not granted and no new or additional period was
authorized. Thus, in Caridad Estates vs. Santero, 71 Phil. 114, the vendee paid, totalling P7,590.00 or about 25% of the
purchase price of P30,000.00 for the three lots involved and when the vendor demanded revocation upon the vendee's
default two years after, the vendee offered to pay the arears in check which the vendor refused; and the Court
sustained the revocation and ordered the vendee ousted from the possession of the land. In Ayala y Cia vs. Arcache, 98
Phil. 273, the total price of the land was P457,404.00 payable in installments; the buyer initially paid P100,000.00 or
about 25% of the agreed price; the Court ordered rescission in view of the substantial breach and granted no extension
to the vendee to comply with his obligation.

The doctrinal rulings that "a slight or casual breach of contract is not a ground for rescission. It must be so substantial
and fundamental to defeat the object of the parties" (Gregorio Araneta Inc. vs. Tuazon de Paterno, L-2886, August 22,
1962; Villanueva vs. Yulo, L-12985, Dec. 29,1959); that "where time is not of the essence of t 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"( Biando vs. Embestro L-11919, July 27, 1959; cases cited in Notes appended to Universal Foods Corporation
vs. Court of Appeals, 33 SCRA 1), convince and persuade Us that in the case at bar where the breach, delay or default
was committed as early as in the payment of the fifth monthly installment for November, 1954, that such failure
continued and persisted the next month and every month thereafter in 1955, 1956, 1957 and year after year to the end
of the ten-year period in 1964 (10 years is respondent's contention) and even to this time, now more than twice as long
a time as the original period without respondent adding, or even offering to add a single centavo to the sum he had
originally paid in 1954 which represents a mere 7% of the total price agreed upon, equity and justice may not be invoked
and applied. One who seeks equity and justice must come to court with clean hands, which can hardly be said of the
private respondent.

One final point, on the supposed substantial improvements erected on the land, respondent's house. To grant the
period to the respondent because of the substantial value of his house is to make the land an accessory to the house.
This is unjust and unconscionable since it is a rule in Our Law that buildings and constructions are regarded as mere
accessories to the land which is the principal, following the Roman maxim "omne quod solo inadeficatur solo cedit"
(Everything that is built on the soil yields to the soil).

Pursuant to Art. 1191, New Civil Code, petitioner is entitled to rescission with payment of damages which the trial court
and the appellate court, in the latter's original decision, granted in the form of rental at the rate of P60.00 per month
from August, 1955 until respondent shall have actually vacated the premises, plus P2,000.00 as attorney's fees. We
affirm the same to be fair and reasonable. We also sustain the right of the petitioner to the possession of the land,
ordering thereby respondent to vacate the same and remove his house therefrom.
WHEREFORE, IN VIEW OF THE FOREGOING, the Resolution appealed from dated October 12, 1970 is hereby REVERSED.
The decision of the respondent court dated April 23, 1970 is hereby REINSTATED and AFFIRMED, with costs against
private respondent.

SO ORDERED.