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G.R. No. L-11827 July 31, 1961 Smelting Co. and its stockholders George Krakower, Segundina Vivas,
FERNANDO A. GAITE, plaintiff-appellee,
vs.
ISABELO FONACIER, GEORGE KRAKOWER, LARAP MINES &
SMELTING CO., INC., SEGUNDINA VIVAS, FRNACISCO DANTE,
PACIFICO ESCANDOR and FERNANDO TY, defendants-
appellants.
Alejo Mabanag for plaintiff-appellee.
Simplicio U. Tapia, Antonio Barredo and Pedro Guevarra for
defendants-appellants.
REYES, J.B.L., J.:
This appeal comes to us directly from the Court of First Instance
because the claims involved aggregate more than P200,000.00.
Defendant-appellant Isabelo Fonacier was the owner and/or holder,
either by himself or in a representative capacity, of 11 iron lode mineral
claims, known as the Dawahan Group, situated in the municipality of
Jose Panganiban, province of Camarines Norte.
By a "Deed of Assignment" dated September 29, 1952(Exhibit "3"),
Fonacier constituted and appointed plaintiff-appellee Fernando A. Gaite
as his true and lawful attorney-in-fact to enter into a contract with any
individual or juridical person for the exploration and development of the
mining claims aforementioned on a royalty basis of not less than P0.50
per ton of ore that might be extracted therefrom. On March 19, 1954,
Gaite in turn executed a general assignment (Record on Appeal, pp.
17-19) conveying the development and exploitation of said mining
claims into the Larap Iron Mines, a single proprietorship owned solely
by and belonging to him, on the same royalty basis provided for in
Exhibit "3". Thereafter, Gaite embarked upon the development and
exploitation of the mining claims in question, opening and paving roads
within and outside their boundaries, making other improvements and
installing facilities therein for use in the development of the mines, and
in time extracted therefrom what he claim and estimated to be
approximately 24,000 metric tons of iron ore.
For some reason or another, Isabelo Fonacier decided to revoke the
authority granted by him to Gaite to exploit and develop the mining
claims in question, and Gaite assented thereto subject to certain
conditions. As a result, a document entitled "Revocation of Power of
Attorney and Contract" was executed on December 8, 1954 (Exhibit
"A"),wherein Gaite transferred to Fonacier, for the consideration of
P20,000.00, plus 10% of the royalties that Fonacier would receive from
the mining claims, all his rights and interests on all the roads,
improvements, and facilities in or outside said claims, the right to use
the business name "Larap Iron Mines" and its goodwill, and all the
records and documents relative to the mines. In the same document,
Gaite transferred to Fonacier all his rights and interests over the "24,000
tons of iron ore, more or less" that the former had already extracted
from the mineral claims, in consideration of the sum of P75,000.00,
P10,000.00 of which was paid upon the signing of the agreement, and
b. The balance of SIXTY-FIVE THOUSAND PESOS
(P65,000.00) will be paid from and out of the first letter of
credit covering the first shipment of iron ores and of the first
amount derived from the local sale of iron ore made by the
Larap Mines & Smelting Co. Inc., its assigns, administrators,
or successors in interests.
To secure the payment of the said balance of P65,000.00, Fonacier
promised to execute in favor of Gaite a surety bond, and pursuant to
the promise, Fonacier delivered to Gaite a surety bond dated December
8, 1954 with himself (Fonacier) as principal and the Larap Mines and
Pacifico Escandor, Francisco Dante, and Fernando Ty as sureties
(Exhibit "A-1"). Gaite testified, however, that when this bond was
presented to him by Fonacier together with the "Revocation of Power of
Attorney and Contract", Exhibit "A", on December 8, 1954, he refused
to sign said Exhibit "A" unless another bond under written by a bonding
company was put up by defendants to secure the payment of the
P65,000.00 balance of their price of the iron ore in the stockpiles in the
mining claims. Hence, a second bond, also dated December 8, 1954
(Exhibit "B"),was executed by the same parties to the first bond Exhibit
"A-1", with the Far Eastern Surety and Insurance Co. as additional
surety, but it provided that the liability of the surety company would
attach only when there had been an actual sale of iron ore by the Larap
Mines & Smelting Co. for an amount of not less then P65,000.00, and
that, furthermore, the liability of said surety company would
automatically expire on December 8, 1955. Both bonds were attached
to the "Revocation of Power of Attorney and Contract", Exhibit "A", and
made integral parts thereof.
On the same day that Fonacier revoked the power of attorney he gave
to Gaite and the two executed and signed the "Revocation of Power of
Attorney and Contract", Exhibit "A", Fonacier entered into a "Contract
of Mining Operation", ceding, transferring, and conveying unto the
Larap Mines and Smelting Co., Inc. the right to develop, exploit, and
explore the mining claims in question, together with the improvements
therein and the use of the name "Larap Iron Mines" and its good will, in
consideration of certain royalties. Fonacier likewise transferred, in the
same document, the complete title to the approximately 24,000 tons of
iron ore which he acquired from Gaite, to the Larap & Smelting Co., in
consideration for the signing by the company and its stockholders of the
surety bonds delivered by Fonacier to Gaite (Record on Appeal, pp. 82-
94).
Up to December 8, 1955, when the bond Exhibit "B" expired with
respect to the Far Eastern Surety and Insurance Company, no sale of
the approximately 24,000 tons of iron ore had been made by the Larap
Mines & Smelting Co., Inc., nor had the P65,000.00 balance of the price
of said ore been paid to Gaite by Fonacier and his sureties payment of
said amount, on the theory that they had lost right to make use of the
period given them when their bond, Exhibit "B" automatically expired
(Exhibits "C" to "C-24"). And when Fonacier and his sureties failed to
pay as demanded by Gaite, the latter filed the present complaint against
them in the Court of First Instance of Manila (Civil Case No. 29310) for
the payment of the P65,000.00 balance of the price of the ore,
consequential damages, and attorney's fees.
All the defendants except Francisco Dante set up the uniform defense
that the obligation sued upon by Gaite was subject to a condition that
the amount of P65,000.00 would be payable out of the first letter of
credit covering the first shipment of iron ore and/or the first amount
derived from the local sale of the iron ore by the Larap Mines & Smelting
Co., Inc.; that up to the time of the filing of the complaint, no sale of the
iron ore had been made, hence the condition had not yet been fulfilled;
and that consequently, the obligation was not yet due and demandable.
Defendant Fonacier also contended that only 7,573 tons of the
estimated 24,000 tons of iron ore sold to him by Gaite was actually
delivered, and counterclaimed for more than P200,000.00 damages.
At the trial of the case, the parties agreed to limit the presentation of
evidence to two issues:
(1) Whether or not the obligation of Fonacier and his sureties to pay
Gaite P65,000.00 become due and demandable when the defendants
failed to renew the surety bond underwritten by the Far Eastern Surety

and Insurance Co., Inc. (Exhibit "B"), which expired on December 8,
1955; and
(2) Whether the estimated 24,000 tons of iron ore sold by plaintiff Gaite
to defendant Fonacier were actually in existence in the mining claims
when these parties executed the "Revocation of Power of Attorney and
Contract", Exhibit "A."
On the first question, the lower court held that the obligation of the
defendants to pay plaintiff the P65,000.00 balance of the price of the
approximately 24,000 tons of iron ore was one with a term: i.e., that it
would be paid upon the sale of sufficient iron ore by defendants, such
sale to be effected within one year or before December 8, 1955; that
the giving of security was a condition precedent to Gait's giving of credit
to defendants; and that as the latter failed to put up a good and sufficient
security in lieu of the Far Eastern Surety bond (Exhibit "B") which
expired on December 8, 1955, the obligation became due and
demandable under Article 1198 of the New Civil Code.
As to the second question, the lower court found that plaintiff Gaite did
have approximately 24,000 tons of iron ore at the mining claims in
question at the time of the execution of the contract Exhibit "A."
Judgment was, accordingly, rendered in favor of plaintiff Gaite ordering
defendants to pay him, jointly and severally, P65,000.00 with interest at
6% per annum from December 9, 1955 until payment, plus costs. From
this judgment, defendants jointly appealed to this Court.
During the pendency of this appeal, several incidental motions were
presented for resolution: a motion to declare the appellants Larap Mines
& Smelting Co., Inc. and George Krakower in contempt, filed by
appellant Fonacier, and two motions to dismiss the appeal as having
become academic and a motion for new trial and/or to take judicial
notice of certain documents, filed by appellee Gaite. The motion for
contempt is unmeritorious because the main allegation therein that the
appellants Larap Mines & Smelting Co., Inc. and Krakower had sold the
iron ore here in question, which allegedly is "property in litigation", has
not been substantiated; and even if true, does not make these
appellants guilty of contempt, because what is under litigation in this
appeal is appellee Gaite's right to the payment of the balance of the
price of the ore, and not the iron ore itself. As for the several motions
presented by appellee Gaite, it is unnecessary to resolve these motions
in view of the results that we have reached in this case, which we shall
hereafter discuss.
The main issues presented by appellants in this appeal are:
(1) that the lower court erred in holding that the obligation of appellant
Fonacier to pay appellee Gaite the P65,000.00 (balance of the price of
the iron ore in question)is one with a period or term and not one with a
suspensive condition, and that the term expired on December 8, 1955;
and
(2) that the lower court erred in not holding that there were only 10,954.5
tons in the stockpiles of iron ore sold by appellee Gaite to appellant
Fonacier.
The first issue involves an interpretation of the following provision in the
contract Exhibit "A":
7. That Fernando Gaite or Larap Iron Mines hereby transfers
to Isabelo F. Fonacier all his rights and interests over the
24,000 tons of iron ore, more or less, above-referred to
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together with all his rights and interests to operate the mine in
consideration of the sum of SEVENTY-FIVE THOUSAND
PESOS (P75,000.00) which the latter binds to pay as follows:
a. TEN THOUSAND PESOS (P10,000.00) will be paid upon
the signing of this agreement.
b. The balance of SIXTY-FIVE THOUSAND PESOS
(P65,000.00)will be paid from and out of the first letter of credit
covering the first shipment of iron ore made by the Larap
Mines & Smelting Co., Inc., its assigns, administrators, or
successors in interest.
We find the court below to be legally correct in holding that the shipment
or local sale of the iron ore is not a condition precedent (or suspensive)
to the payment of the balance of P65,000.00, but was only a suspensive
period or term. What characterizes a conditional obligation is the fact
that its efficacy or obligatory force (as distinguished from its
demandability) is subordinated to the happening of a future and
uncertain event; so that if the suspensive condition does not take place,
the parties would stand as if the conditional obligation had never
existed. That the parties to the contract Exhibit "A" did not intend any
such state of things to prevail is supported by several circumstances:
1) The words of the contract express no contingency in the buyer's
obligation to pay: "The balance of Sixty-Five Thousand Pesos
(P65,000.00) will be paid out of the first letter of credit covering the first
shipment of iron ores . . ." etc. There is no uncertainty that the payment
will have to be made sooner or later; what is undetermined is merely
the exact date at which it will be made. By the very terms of the contract,
therefore, the existence of the obligation to pay is recognized; only
its maturity or demandability is deferred.
2) A contract of sale is normally commutative and onerous: not only
does each one of the parties assume a correlative obligation (the seller
to deliver and transfer ownership of the thing sold and the buyer to pay
the price),but each party anticipates performance by the other from the
very start. While in a sale the obligation of one party can be lawfully
subordinated to an uncertain event, so that the other understands that
he assumes the risk of receiving nothing for what he gives (as in the
case of a sale of hopes or expectations, emptio spei), it is not in the
usual course of business to do so; hence, the contingent character of
the obligation must clearly appear. Nothing is found in the record to
evidence that Gaite desired or assumed to run the risk of losing his right
over the ore without getting paid for it, or that Fonacier understood that
Gaite assumed any such risk. This is proved by the fact that Gaite
insisted on a bond a to guarantee payment of the P65,000.00, an not
only upon a bond by Fonacier, the Larap Mines & Smelting Co., and the
company's stockholders, but also on one by a surety company; and the
fact that appellants did put up such bonds indicates that they admitted
the definite existence of their obligation to pay the balance of
P65,000.00.
3) To subordinate the obligation to pay the remaining P65,000.00 to the
sale or shipment of the ore as a condition precedent, would be
tantamount to leaving the payment at the discretion of the debtor, for
the sale or shipment could not be made unless the appellants took steps
to sell the ore. Appellants would thus be able to postpone payment
indefinitely. The desireability of avoiding such a construction of the
contract Exhibit "A" needs no stressing.
4) Assuming that there could be doubt whether by the wording of the
contract the parties indented a suspensive condition or a suspensive
period (dies ad quem) for the payment of the P65,000.00, the rules of
interpretation would incline the scales in favor of "the greater reciprocity

of interests", since sale is essentially onerous. The Civil Code of the
Philippines, Article 1378, paragraph 1, in fine, provides:
If the contract is onerous, the doubt shall be settled in favor of
the greatest reciprocity of interests.
and there can be no question that greater reciprocity obtains if the
buyer' obligation is deemed to be actually existing, with only its maturity
(due date) postponed or deferred, that if such obligation were viewed
as non-existent or not binding until the ore was sold.
The only rational view that can be taken is that the sale of the ore to
Fonacier was a sale on credit, and not an aleatory contract where the
transferor, Gaite, would assume the risk of not being paid at all; and that
the previous sale or shipment of the ore was not a suspensive condition
for the payment of the balance of the agreed price, but was intended
merely to fix the future date of the payment.
This issue settled, the next point of inquiry is whether appellants,
Fonacier and his sureties, still have the right to insist that Gaite should
wait for the sale or shipment of the ore before receiving payment; or, in
other words, whether or not they are entitled to take full advantage of
the period granted them for making the payment.
We agree with the court below that the appellant have forfeited the right
court below that the appellants have forfeited the right to compel Gaite
to wait for the sale of the ore before receiving payment of the balance
of P65,000.00, because of their failure to renew the bond of the Far
Eastern Surety Company or else replace it with an equivalent
guarantee. The expiration of the bonding company's undertaking on
December 8, 1955 substantially reduced the security of the vendor's
rights as creditor for the unpaid P65,000.00, a security that Gaite
considered essential and upon which he had insisted when he executed
the deed of sale of the ore to Fonacier (Exhibit "A"). The case squarely
comes under paragraphs 2 and 3 of Article 1198 of the Civil Code of the
Philippines:
"ART. 1198. The debtor shall lose every right to make use of
the period:
(1) . . .
(2) When he does not furnish to the creditor the guaranties or
securities which he has promised.
(3) When by his own acts he has impaired said guaranties or
securities after their establishment, and when through
fortuitous event they disappear, unless he immediately gives
new ones equally satisfactory.
Appellants' failure to renew or extend the surety company's bond upon
its expiration plainly impaired the securities given to the creditor
(appellee Gaite), unless immediately renewed or replaced.
There is no merit in appellants' argument that Gaite's acceptance of the
surety company's bond with full knowledge that on its face it would
automatically expire within one year was a waiver of its renewal after
the expiration date. No such waiver could have been intended, for Gaite
stood to lose and had nothing to gain barely; and if there was any, it
could be rationally explained only if the appellants had agreed to sell
the ore and pay Gaite before the surety company's bond expired on
December 8, 1955. But in the latter case the defendants-appellants'
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obligation to pay became absolute after one year from the transfer of
the ore to Fonacier by virtue of the deed Exhibit "A.".
All the alternatives, therefore, lead to the same result: that Gaite acted
within his rights in demanding payment and instituting this action one
year from and after the contract (Exhibit "A") was executed, either
because the appellant debtors had impaired the securities originally
given and thereby forfeited any further time within which to pay; or
because the term of payment was originally of no more than one year,
and the balance of P65,000.00 became due and payable thereafter.
Coming now to the second issue in this appeal, which is whether there
were really 24,000 tons of iron ore in the stockpiles sold by appellee
Gaite to appellant Fonacier, and whether, if there had been a short-
delivery as claimed by appellants, they are entitled to the payment of
damages, we must, at the outset, stress two things: first, that this is a
case of a sale of a specific mass of fungible goods for a single price or
a lump sum, the quantity of "24,000 tons of iron ore, more or less,"
stated in the contract Exhibit "A," being a mere estimate by the parties
of the total tonnage weight of the mass; and second, that the evidence
shows that neither of the parties had actually measured of weighed the
mass, so that they both tried to arrive at the total quantity by making an
estimate of the volume thereof in cubic meters and then multiplying it
by the estimated weight per ton of each cubic meter.
The sale between the parties is a sale of a specific mass or iron ore
because no provision was made in their contract for the measuring or
weighing of the ore sold in order to complete or perfect the sale, nor
was the price of P75,000,00 agreed upon by the parties based upon
any such measurement.(see Art. 1480, second par., New Civil Code).
The subject matter of the sale is, therefore, a determinate object, the
mass, and not the actual number of units or tons contained therein, so
that all that was required of the seller Gaite was to deliver in good faith
to his buyer all of the ore found in the mass, notwithstanding that the
quantity delivered is less than the amount estimated by them (Mobile
Machinery & Supply Co., Inc. vs. York Oilfield Salvage Co., Inc. 171 So.
872, applying art. 2459 of the Louisiana Civil Code). There is no charge
in this case that Gaite did not deliver to appellants all the ore found in
the stockpiles in the mining claims in questions; Gaite had, therefore,
complied with his promise to deliver, and appellants in turn are bound
to pay the lump price.
But assuming that plaintiff Gaite undertook to sell and appellants
undertook to buy, not a definite mass, but approximately 24,000 tons of
ore, so that any substantial difference in this quantity delivered would
entitle the buyers to recover damages for the short-delivery, was there
really a short-delivery in this case?
We think not. As already stated, neither of the parties had actually
measured or weighed the whole mass of ore cubic meter by cubic
meter, or ton by ton. Both parties predicate their respective claims only
upon an estimated number of cubic meters of ore multiplied by the
average tonnage factor per cubic meter.
Now, appellee Gaite asserts that there was a total of 7,375 cubic meters
in the stockpiles of ore that he sold to Fonacier, while appellants
contend that by actual measurement, their witness Cirpriano Manlañgit
found the total volume of ore in the stockpiles to be only 6.609 cubic
meters. As to the average weight in tons per cubic meter, the parties
are again in disagreement, with appellants claiming the correct tonnage
factor to be 2.18 tons to a cubic meter, while appellee Gaite claims that
the correct tonnage factor is about 3.7.
In the face of the conflict of evidence, we take as the most reliable
estimate of the tonnage factor of iron ore in this case to be that made
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by Leopoldo F. Abad, chief of the Mines and Metallurgical Division of

the Bureau of Mines, a government pensionado to the States and a
mining engineering graduate of the Universities of Nevada and
California, with almost 22 years of experience in the Bureau of Mines.
This witness placed the tonnage factor of every cubic meter of iron ore
at between 3 metric tons as minimum to 5 metric tons as maximum.
This estimate, in turn, closely corresponds to the average tonnage
factor of 3.3 adopted in his corrected report (Exhibits "FF" and FF-1")
by engineer Nemesio Gamatero, who was sent by the Bureau of Mines
to the mining claims involved at the request of appellant Krakower,
precisely to make an official estimate of the amount of iron ore in Gaite's
stockpiles after the dispute arose.

Even granting, then, that the estimate of 6,609 cubic meters of ore in
the stockpiles made by appellant's witness Cipriano Manlañgit is
correct, if we multiply it by the average tonnage factor of 3.3 tons to a
cubic meter, the product is 21,809.7 tons, which is not very far from the
estimate of 24,000 tons made by appellee Gaite, considering that actual
weighing of each unit of the mass was practically impossible, so that a
reasonable percentage of error should be allowed anyone making an
estimate of the exact quantity in tons found in the mass. It must not be
forgotten that the contract Exhibit "A" expressly stated the amount to be
24,000 tons, more or less. (ch. Pine River Logging & Improvement Co.
vs U.S., 279, 46 L. Ed. 1164).

There was, consequently, no short-delivery in this case as would entitle

appellants to the payment of damages, nor could Gaite have been guilty
of any fraud in making any misrepresentation to appellants as to the
total quantity of ore in the stockpiles of the mining claims in question,
as charged by appellants, since Gaite's estimate appears to be
substantially correct.

WHEREFORE, finding no error in the decision appealed from, we

hereby affirm the same, with costs against appellants.

Bengzon, C.J., Padilla, Labrador, Concepcion, Barrera, Paredes,

Dizon, De Leon and Natividad, JJ., concur.

[G.R. No. 131784. September 16, 1999]


FELIX L. GONZALES, petitioner, vs. THE HEIRS OF THOMAS and
PAULA CRUZ, herein represented by ELENA C.
TALENS, respondents.
DECISION
PANGANIBAN, J.:
If a stipulation in a contract admits of several meanings, it shall be
understood as bearing that import most adequate to render it
effectual. An obligation cannot be enforced unless the plaintiff has
fulfilled the condition upon which it is premised. Hence, an obligation to
purchase cannot be implemented unless and until the sellers have
shown their title to the specific portion of the property being sold.
The Case
Before us is a Petition for Review on Certiorari assailing the
August 13, 1997 Decision[1] of the Court of Appeals[2] in CA-GR CV No.
303754, which disposed as follows:
WHEREFORE, the decision of the trial court dated November 16, 1990
is hereby REVERSED. The appellee FELIX GONZALES is hereby
ordered to surrender possession of the property covered by the
Contract of Lease/Purchase to the appellants, Heirs of Thomas and
Paula Cruz, and to pay to the appellants the following amounts:
1. P15,000.00 per annum as rentals counted from
December 1, 1984 until the appellants shall have
recovered possession of the property subject of the
Contract of Lease/Purchase;
2. P15,000.00 as attorneys fees; and
3. Costs of suit.[3]
On the other hand, the trial court [4] Decision,[5] which was
reversed by the CA, ruled as follows:
WHEREFORE, premises considered, this Court hereby renders
judgment in favor of the defendant, Felix Gonzales, and against the
plaintiffs, as follows:
(1) Ordering the dismissal of the case;
(2) Sentencing the plaintiffs, jointly and severally, the sum
of P20,000.00 as moral damages and the other sum of
P10,000.00 as and for attorneys fees; and
(3) To pay the costs.[6]
The Facts
We hereby reproduce, unedited, the Court of Appeals summary
of the facts of this case as follows:
On December 1, 1983, Paula Ao Cruz together with the plaintiffs heirs
of Thomas and Paula Cruz, namely Ricardo A. Cruz, Carmelita M. Cruz,
Salome A. Cruz, Irenea C. Victoria, Leticia C. Salvador and Elena C.
Talens, entered into a Contract of Lease/Purchase with the defendant,
Felix L. Gonzales, the sole proprietor and manager of Felgon Farms, of
a half-portion of a parcel of land containing an area of 12 hectares, more
or less, and an accretion of 2 hectares, more or less, situated in
Rodriguez Town, Province of Rizal and covered by Transfer Certificate
of Title No. 12111 (Exhibit A, p. 157, Records). The contract of
Lease/Purchase contains the following provisions:
OBLICON 1/23/2017 ACJUCO 5
1. The terms of this Contract is for a period of one year upon the signing
thereof. After the period of this Contract, the LESSEE shall purchase
the property on the agreeable price of One Million Pesos
(P1,000,000.00) payable within Two (2) Years period with an interest of
12% per annum subject to the devalued amount of the Philippine Peso,
according to the following schedule of payment:
Upon the execution of the Deed of Sale 50% - and thereafter 25% every
six (6) months thereafter, payable within the first ten (10) days of the
beginning of each period of six (6) months.
2. The LESSEE shall pay by way of annual rental an amount equivalent
to Two Thousand Five Hundred (P2,500.00) Pesos per hectare, upon
the signing of this contract on Dec. 1, 1983.
xxxxxxxxx
9. The LESSORS hereby commit themselves and shall undertake to
obtain a separate and distinct T.C.T. over the herein leased portion to
the LESSEE within a reasonable period of time which shall not in any
case exceed four (4) years, after which a new Contract shall be
executed by the herein parties which shall be the same in all respects
with this Contract of Lease/Purchase insofar as the terms and
conditions are concerned.
xxxxxxxxx
(Exhibits A, A-1; pp. 157-158. Records)
The defendant Gonzales paid the P2,500.00 per hectare or P15,000.00
annual rental on the half-portion of the property covered by Transfer
Certificate of Title No. 12111 in accordance with the second provision
of the Contract of Lease/Purchase (p. 12, TSN, September 14, 1989)
and thereafter took possession of the property, installing thereon the
defendant Jesus Sambrano as his caretaker (pp. 16-17, 27, TSN,
December 12, 1989). The defendant Gonzales did not, however,
exercise his option to purchase the property immediately after the
expiration of the one-year lease on November 30, 1984 (pp. 19-20,
TSN, September 14, 1989). He remained in possession of the property
without paying the purchase price provided for in the Contract of
Lease/Purchase (Ibid.) and without paying any further rentals thereon
(p. 36, TSN, November 7, 1989).
A letter was sent by one of the plaintiffs-heirs Ricardo Cruz to the
defendant Gonzales informing him of the lessors decision to rescind the
Contract of Lease/Purchase due to a breach thereof committed by the
defendant (Exhibit C; p. 162, Records). The letter also served as a
demand on the defendant to vacate the premises within 10 days from
receipt of said letter (Ibid.).
The defendant Gonzales refused to vacate the property and continued
possession thereof (p. 2, Record). The matter was therefore brought
before the barangay captain of San Isidro, but owing to the defendants
refusal to appear before the barangay, a certification allowing the case
to be brought to Court was issued on March 18, 1987 (Exhibit E; p. 165,
Records).
The lessor, Paula Ao Cruz died the following day, March 19, 1987 (p.
9, TSN, September 14, 1989).
A final demand letter to vacate the premises was sent by the remaining
lessors who are also the heirs of the deceased lessor Paula Ao Cruz,
through their counsel on August 24, 1987 which the defendant

Gonzales received but did not heed (Exhibits D and D-1; pp. 163-164,
Records).
The property subject of the Contract of Lease/Purchase is currently the
subject of an Extra-Judicial Partition (Exhibits G and G-1; pp. 168-169,
Records). Title to the property remains in the name of the plaintiffs
predecessors-in-interest, Bernardina Calixto and Severo Cruz (Exhibit
B; p. 160, Records).
Alleging breach of the provisions of the Contract of Lease/Purchase,
the plaintiffs filed a complaint for recovery of possession of the property
- subject of the contract with damages, both moral and compensatory
and attorneys fees and litigation expenses (p. 3, Records).
Alleging breach of paragraph nine of the Contract of Lease/Purchase,
and payment of only P50,000.00 of the P500,000.00 agreed down
payment on the purchase price of P1,000,000.00, the defendant
Gonzales filed his answer on November 23, 1987 praying for a
dismissal of the complaint filed against him and an award of moral,
exemplary and actual damages, as well as litigation expenses (pp. 19-
22, Records).
The defendant Sambrano was, upon motion, declared in default for
failure to file an answer despite valid service of summons (p. 30,
Records).
The parties limited the issues to be resolved to:
(1) Whether or not paragraph 9 of the contract is a condition
precedent before the defendant is to pay the down
payment;
(2) Whether or not plaintiffs can rescind the Contract of
Lease/Purchase; and
(3) Whether or not plaintiffs can terminate the Contract of
Lease. (p. 4, Decision; p. 262, Records)
After the termination of the pre-trial conference, the trial court
proceeded to hear the case on the merits and arrived at its appealed
decision based on the following findings and conclusions:
Paragraph 9 of the contract clearly indicates that the lessors-plaintiffs
shall obtain a Transfer Certificate of Title in the name of the lessee
within 4 years before a new contract is to be entered into under the
same terms and conditions as the original Contract of
Lease/Purchase. Thus, before a deed of Sale can be entered into
between the plaintiffs and the defendant, the plaintiffs have to obtain
the Transfer Certificate of Title in favor of the defendant. Article 1181 of
the New Civil Code states that: In conditional obligations, the acquisition
of rights, as well as the extinguishment or loss of those already
acquired, shall depend upon the happening of the event which
constitutes the condition. When the obligation assumed by a party to a
contract is expressly subjected to a condition, the obligation cannot be
enforced against him unless the condition is complied with (Wise & Co.
vs. Kelly, 37 Phil. 695; PNB vs. Philippine Trust Co., 68 Phil. 48).
The failure of the plaintiffs to secure the Transfer Certificate of Title, as
provided for in the contract, does not entitle them to rescind the
contract[.] Article 1191 of the New Civil Code states that: The power to
rescind obligations is implied in reciprocal ones, in case one of the
obligors should not comply with what is incumbent upon him. The
injured party may choose between the fulfillment of the obligation, with
the payment of damages in either case. He may seek rescission, even
OBLICON 1/23/2017 ACJUCO 6
after he has chosen fulfillment, if the latter should become impossible x
x x. The power to rescind is given to the injured party. Where the plaintiff
is the party who did not perform, he is not entitled to insist upon the
performance of the contract by the defendant or recover damages by
reason of his own breach (Mateos vs. Lopez, 6 Phil. 206; Borque vs. Yu
Chipco, 14 Phil. 95). An action for specific performance of a contract is
an equitable proceeding, and he who seeks to enforce it must himself
be fair and reasonable, and do equity (Seva vs. Berwin, 48 Phil. 581). In
this case, plaintiffs failed to comply with the conditions precedent after
2-1/2 years from the execution of the contract so as to entitle them to
rescind the contract. Although the contract stated that the same be
done within 4 years from execution, still, the defendant has to be
assured that the land subject of the case will be transferred in his name
without any encumbrances, as the Extra-Judicial Partition dated July
17, 1989 was being processed, and continues to be in process to this
date. The failure to secure the Transfer Certificate of Title in favor of the
defendant entitles not the plaintiffs but, rather, the defendant to either
rescind or to ask for specific performances.
Are the plaintiffs entitled to terminate the Contract of Lease? Article
1670 of the New Civil Code states that:
If at the end of the contract the lessee should continue enjoying the
thing leased for fifteen days with the acquies[c]ence of the lessor and
unless a notice to the contrary by either party has previously been
given, it is understood that there is an implied new lease, not for the
period of the original contract, but for the time established in Articles
1682 and 1687. The other terms of the original contract shall be revived.
Article 1682 of the New Civil Code states that:
The lease of a piece of rural land, when its duration has not been fixed,
is understood to have been made for all the time necessary for the
gathering of the fruits which the whole estate leased may yield in one
year, or which it may yield once, although two or more years may have
to elapse for the purpose.
The plaintiffs filed the complaint on October 12, 1987 after making an
extra-judicial demand on July 2, 1986. The contract was entered into on
December 1, 1983. The demand was thus made more than a year and
a half from the expiry date of the original lease considering that there
was no payment made for the second year of the lease. If one has to
consider the fact that the defendant was given the option to purchase
the property after two years, then, the lease would presumably run for
at least two years. If that is so, then, the demand was made seven
months after the expiration of the two-year lease. Still, this demand by
the plaintiffs will come under the implied new lease of Articles 1682 and
1670 so that the plaintiffs are not entitled to terminate the Contract of
Lease.
In sum, the plaintiffs cannot terminate the Contract of Lease due to their
failure to notify the defendant in due time of their intention to that
effect. Nor can they rescind the Contract of Purchase in view of the fact
that there is a condition precedent which the plaintiffs have not
fulfilled. It is the defendant now who has the option to either rescind or
demand the performance of the contract. Moreover, according to Article
1654 of the New Civil Code, the lessor is obliged to deliver the thing
which is the object of the contract in such condition as to render it fit for
the use intended. Considering that the lessors-plaintiffs have not
delivered the property in whole over the protest of the defendant, the
latter suffered damages therefor. (p. 4-6, Decision; pp. 262-264,
Records)
Their complaint thus dismissed, the plaintiffs, now appellants, assign
the trial court of having committed the following errors:

I In his Memorandum,[8] petitioner submits the following main
THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT
PLAINTIFFS-APPELLANTS COULD NOT VALIDLY RESCIND AND
TERMINATE THE LEASE/PURCHASE CONTRACT (EXHIBIT A) AND
THEREAFTER TO TAKE POSSESSION OF THE LAND IN QUESTION
AND EJECT THEREFROM DEFENDANTS-APPELLEES.
II
THE TRIAL COURT EQUALLY ERRED IN NOT GRANTING THE
RELIEFS PLEADED AND PRAYED FOR BY PLAINTIFFS-
APPELLANTS IN THEIR COMPLAINT. (p. 42, Rollo)
The case was submitted for decision without the appellees brief as per
the Courts resolution dated July 8, 1992 (p. 71, Rollo).
Ruling of the Court of Appeals
The Court of Appeals reversed the trial court in this wise:
The trial court, in its decision interpreted the ninth provision of the
Contract of Lease/Purchase to mean that before the appellee exercises
his option to purchase the property by paying the 50% plus interest on
the P1,000,000.00 purchase price, the appellants must first transfer the
title to the property in the appellees name. The Court finds this
interpretation of the provision strained if not altogether absurd. The
transfer of title to the property in the appellees name cannot be
interpreted as a condition precedent to the payment of the agreed
purchase price because such interpretation not only runs counter [to]
the explicit provisions of the contract but also is contrary to the normal
course of things anent the sale of real properties. The terms of the
contract [are] explicit and require no interpretation. Upon the expiration
of the lease, the lessee shall purchase the property. Besides, the
normal course of things anent the sale of real properties dictates that
there must first be payment of the agreed purchase
price before transfer of title to the vendees name can be made.
This was precisely what the appellants and Paula Ao Cruz had in mind
when they had the ninth provision incorporated in the Contract of
Lease/Purchase. They had asked for a period of 4 years from the time
they receive the downpayment of 50% within which to have [the] title to
the property transferred in the name of the appellee. The reason for this
four (4) year period is [that] title to the property still remains in the name
of the original owners, the predecessors-in-interest of the herein
appellants and [transferring] the title to their names and eventually to
the lessee-purchaser, appellee herein, would take quite some time.
The appellee wanted to have the title to the property transferred in his
name first before he exercises his option to purchase allegedly in
accordance with the ninth provision of the contract. But the ninth
provision does not give him this right. A reading of the contract in its
entirety shows that the 4 year period asked for by the appellants within
which to have title to the property transferred in the appellees name will
only start to run when the appellee exercises his option to
purchase. Since the appellee never exercised his option to purchase,
then appellee is not entitled to have the title to the property transferred
in his name.
Attributing reversible errors to the appellate court, petitioner
elevated the case to this Court.[7]
The Issues
OBLICON 1/23/2017 ACJUCO 7
issues:
I. Whether or not the Court of Appeals has gravely erred and committed
grave abuse of discretion in the interpretation of [the] law between the
parties.
II. Whether or not the Court of Appeals committed serious mistakes in
the finding of facts which resulted [in] departing from the usual course
of judicial proceedings.
For these issues to be resolved, petitioner asks this Court to
answer the following questions:
1. Is there a conflict between the statement in paragraph 1 of the
Lease/Purchase Contract and that [in] paragraph No. 9 thereof?
2. Is paragraph 9 of the Lease/Purchase Contract a condition precedent
before petitioner could exercise his option to buy the property?
3. Can plaintiff rescind or terminate the Contract of Lease after the one-
year period?
In fine, the resolution of this case depends upon the proper
interpretation of paragraph nine of the Contract.
The Courts Ruling
The Petition is meritorious.
Main Issue: Interpretation of Paragraph Nine
In its first paragraph, the disputed agreement provides that
petitioner shall lease the property for one year, after which he shall
purchase it. Paragraph nine, on the other hand, requires herein
respondents to obtain a separate and distinct Transfer Certificate of
Title (TCT) over the property, viz.:
9. The LESSORS hereby commit themselves and shall undertake to
obtain a separate and distinct T.C.T. over the lease portion to the
LESSEE within a reasonable period of time which shall not in any case
exceed four (4) years, after which a new Contract shall be executed by
the herein parties which shall be the same in all respects with this
Contract of Lease/Purchase insofar as the terms and conditions are
concerned.
Alleging that petitioner has not purchased the property after the
lapse of one year, respondents seek to rescind the Contract and to
recover the property. Petitioner, on the other hand, argues that he could
not be compelled to purchase the property, because respondents have
not complied with paragraph nine, which obligates them to obtain a
separate and distinct title in their names. He contends that paragraph
nine was a condition precedent to the purchase of the property.
To be sure, this paragraph and the entire agreement, for that
matter -- is not a model of how a contract should be worded. It is an
invitation to a litigation, as in fact the parties had to go all to way up to
this Court to plead for a resolution of their conflict which is rooted in their
failure to express themselves clearly. Small wonder, even the two lower
courts gave contradictory understanding of this provision, thereby
necessitating the intervention of the highest court of the land.

Both the trial court and the Court of Appeals (CA) interpreted this
provision to mean that the respondents had obliged themselves to
obtain a TCT in the name of petitioner-lessee. The trial court held that
this obligation was a condition precedent to petitioners purchase of the
property. Since respondents had not performed their obligation, they
could not compel petitioner to buy the parcel of land. The CA took the
opposite view, holding that the property should be purchased first
before respondents may be obliged to obtain a TCT in the name of
petitioner-lessee-buyer.
As earlier noted, petitioner disagrees with the interpretation of the
two courts and maintains that respondents were obligated to procure a
TCT in their names before he could be obliged to purchase the property
in question.
Basic is the rule in the interpretation of contracts that if some
stipulation therein should admit of several meanings, it shall be
understood as bearing that import most adequate to render it
effectual.[9] Considering the antecedents of the ownership of the
disputed lot, it appears that petitioners interpretation renders clause
nine most effectual.
The record shows that at the time the contract was executed, the
land in question was still registered in the name of Bernardina Calixto
and Severo Cruz, respondents predecessors-in-interest. There is no
showing whether respondents were the only heirs of Severo Cruz or
whether the other half of the land in the name of Bernardina Calixto was
adjudicated to them by any means. In fact, they admit that extrajudicial
proceedings were still ongoing.Hence, when the Contract of
Lease/Purchase was executed, there was no assurance that the
respondents were indeed the owners of the specific portion of the lot
that petitioner wanted to buy, and if so, in what concept and to what
extent.
Thus, the clear intent of the ninth paragraph was for respondents
to obtain a separate and distinct TCT in their names. This was
necessary to enable them to show their ownership of the stipulated
portion of the land and their concomitant right to dispose of it. Absent
any title in their names, they could not have sold the disputed parcel of
land.
It is a well-settled principle in law that no one can give what one
does not have -- nemo dat quod non habet. Accordingly, one can sell
only what one owns or is authorized to sell, and the buyer can acquire
no more than what the seller can transfer legally. [10]
Because the property remained registered in the names of their
predecessors-in-interest, private respondents could validly sell only
their undivided interest in the estate of Severo Cruz, the extent of which
was however not shown in the records. There being no partition of the
estate thus far, there was no guarantee as to how much and which
portion would be adjudicated to respondents.
In a contract of sale, the title to the property passes to the vendee
upon the delivery of the thing sold.[11] In this case, the respondent could
not deliver ownership or title to a specific portion of the yet undivided
property. True, they could have intended to sell their hereditary interest,
but in the context of the Contract of Lease/Purchase, the parties under
paragraph nine wanted the specific portion of the land to be segregated,
identified and specifically titled. Hence, by the said Contract, the
respondents as sellers were given a maximum of four years within
which to acquire a separate TCT in their names, preparatory to the
execution of the deed of sale and the payment of the agreed price in
the manner described in paragraph nine.
This interpretation is bolstered by the P50,000 petitioner
advanced to respondents in order to help them expedite the transfer of
the TCT to their names. Ineluctably, the intention of the parties was to
have the title transferred first to respondents names as a condition for
the completion of the purchase.
OBLICON 1/23/2017 ACJUCO 8
In holding that clause nine was not a condition precedent to the
purchase of the property, the CA relied on a literal interpretation to the
effect that the TCT should be obtained in the name of the petitioner-
vendee. It reasoned that the title could be transferred to the name of the
buyer only after the completion of the purchase. Thus, petitioner should
first purchase the property before respondents could be obliged to
transfer the TCT to his name.
We disagree. The literal interpretation not only ignores the factual
backdrop of the case; it also utilizes a faulty parsing of paragraph nine,
which should purportedly read as follows: The lessors x x x shall
undertake to obtain a separate and distinct TCT xxx to the
LESSEE within a reasonable period of time which shall not in any case
exceed four (4) years x x x. Read in its entirety, however, paragraph
nine does not say that the TCT should be obtained in the name of the
lessee. In fact, paragraph nine requires respondents to obtain a TCT
over the herein leased portion to the LESSEE, thereby showing that the
crucial phrase to the LESSEE adverts to the leased portion and not to
the name which should appear in the new TCT.
Furthermore, the CA interpretation ignores the other part of
paragraph nine, stating that after a separate TCT had been obtained, a
new contract shall be executed by the herein parties which shall be the
same in all respects with this Contract of Lease/Purchase insofar as the
terms and conditions are concerned.
If, as the CA held, petitioner should purchase the property first
before the title can be transferred to his name, why should there be a
waiting period of four years before the parties can execute the new
contract evidencing the sale? Why should the petitioner still be required
to pay rentals after it purchases and pays for the property? The Contract
could not have envisioned this absurd scenario.
Clearly, the appellate courts literal interpretation of the first portion
of paragraph nine renders the latter portion thereof ineffectual. In other
words, that portion can only mean that the respondents should first
obtain a TCT in their names, after which petitioner is given time to
purchase and pay for the property.
Respondents insist that the obligation of petitioner to buy the
disputed land immediately after the termination of the one year lease
period is explicit.[12] However, it is more reasonable to state that the first
paragraph was effectively modified by the ninth. To repeat, petitioner
can be compelled to perform his obligation under the first paragraph,
only after respondents have complied with the ninth. Unless and until
respondents have done so, the first paragraph cannot be enforced
against petitioner.
In sum, we hold that the ninth provision was intended to ensure
that respondents would have a valid title over the specific portion they
were selling to petitioner. Only after the title is assured may the
obligation to buy the land and to pay the sums stated in the Contract be
enforced within the period stipulated. Verily, the petitioners obligation to
purchase has not yet ripened and cannot be enforced until and unless
respondents can prove their title to the property subject of the Contract.
Secondary Issues
Ninth Clause Was a Condition Precedent
Because the ninth clause required respondents to obtain a
separate and distinct TCT in their names and not in the name of
petitioner, it logically follows that such undertaking was a condition
precedent to the latters obligation to purchase and pay for the land. Put
 OBLICON 1/23/2017 ACJUCO 9

differently, petitioners obligation to purchase the land is a conditional

one and is governed by Article 1181 of the Civil Code. [13]
Condition has been defined as every future and uncertain event
upon which an obligation or provision is made to depend. It is a future
and uncertain event upon which the acquisition or resolution of rights is
made to depend by those who execute the juridical act. [14] Without it,
the sale of the property under the Contract cannot be perfected, and
petitioner cannot be obliged to purchase the property. When the
consent of a party to a contract is given subject to the fulfillment of a
suspensive condition, the contract is not perfected unless that condition
is first complied with.[15]
The Court has held that [w]hen the obligation assumed by a party
to a contract is expressly subjected to a condition, the obligation cannot
be enforced against him unless the condition is complied
with.[16] Furthermore, [t]he obligatory force of a conditional obligation is
subordinated to the happening of a future and uncertain event, so that
if that event does not take place, the parties would stand as if the
conditional obligation had never existed. [17]
In this case, the obligation of the petitioner to buy the land cannot
be enforced unless respondents comply with the suspensive condition
that they acquire first a separate and distinct TCT in their names. The
suspensive condition not having been fulfilled, then the obligation of the
petitioner to purchase the land has not arisen.

Respondents Cannot Rescind the Contract

In the same vein, respondents cannot rescind the contract,

because they have not caused the transfer of the TCT to their names,
which is a condition precedent to petitioners obligation. This Court has
held that there can be no rescission (or more properly, resolution) of an
obligation as yet non-existent, because the suspensive condition has
not happened.[18]

Since the reversal of the CA Decision is inevitable, the trial courts

judgment should be reinstated. However, we find no sufficient factual or
legal justifications for the award of moral damages and attorneys fees.
WHEREFORE, the petition is GRANTED and the appealed
Decision is REVERSED and SET ASIDE. The Decision of the trial court
is REINSTATED, but the award of moral damages and attorneys fees
is DELETED for lack of basis. No costs.
SO ORDERED.
Melo, (Chairman), Purisima, and Gonzaga-Reyes, JJ., concur.
Vitug, J., no part; did not participate in deliberations (in PHILJA on
official business).

G.R. No. 103577 October 7, 1996

ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A.
CORONEL, ANNABELLE C. GONZALES (for herself and on behalf
of Florida C. Tupper, as attorney-in-fact), CIELITO A. CORONEL,
FLORAIDA A. ALMONTE, and CATALINA BALAIS
MABANAG, petitioners,
vs.
THE COURT OF APPEALS, CONCEPCION D. ALCARAZ, and
RAMONA PATRICIA ALCARAZ, assisted by GLORIA F. NOEL as
attorney-in-fact, respondents.

MELO, J.:p
The petition before us has its roots in a complaint for specific
performance to compel herein petitioners (except the last named,
Catalina Balais Mabanag) to consummate the sale of a parcel of land
with its improvements located along Roosevelt Avenue in Quezon City
entered into by the parties sometime in January 1985 for the price of
P1,240,000.00.
The undisputed facts of the case were summarized by respondent court
in this wise:
On January 19, 1985, defendants-appellants Romulo Coronel, et al.
(hereinafter referred to as Coronels) executed a document entitled
"Receipt of Down Payment" (Exh. "A") in favor of plaintiff Ramona
Patricia Alcaraz (hereinafter referred to as Ramona) which is
reproduced hereunder:
RECEIPT OF DOWN PAYMENT
P1,240,000.00 — Total amount
50,000 — Down payment
———————————
P1,190,000.00 — Balance
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon
City, the sum of Fifty Thousand Pesos purchase price of our inherited
house and lot, covered by TCT No. 119627 of the Registry of Deeds of
Quezon City, in the total amount of P1,240,000.00.
We bind ourselves to effect the transfer in our names from our
deceased father, Constancio P. Coronel, the transfer certificate of title
immediately upon receipt of the down payment above-stated.
On our presentation of the TCT already in or name, We will immediately
execute the deed of absolute sale of said property and Miss Ramona
Patricia Alcaraz shall immediately pay the balance of the
P1,190,000.00.
Clearly, the conditions appurtenant to the sale are the following:
1. Ramona will make a down payment of Fifty Thousand (P50,000.00)
Pesos upon execution of the document aforestated;
2. The Coronels will cause the transfer in their names of the title of the
property registered in the name of their deceased father upon receipt of
the Fifty Thousand (P50,000.00) Pesos down payment;
3. Upon the transfer in their names of the subject property, the Coronels
will execute the deed of absolute sale in favor of Ramona and the latter
will pay the former the whole balance of One Million One Hundred
Ninety Thousand (P1,190,000.00) Pesos.
On the same date (January 15, 1985), plaintiff-appellee Concepcion D.
Alcaraz (hereinafter referred to as Concepcion), mother of Ramona,
paid the down payment of Fifty Thousand (P50,000.00) Pesos (Exh.
"B", Exh. "2").
OBLICON 1/23/2017 ACJUCO 10
On February 6, 1985, the property originally registered in the name of
the Coronels' father was transferred in their names under TCT
No. 327043 (Exh. "D"; Exh. "4")
On February 18, 1985, the Coronels sold the property covered by TCT
No. 327043 to intervenor-appellant Catalina B. Mabanag (hereinafter
referred to as Catalina) for One Million Five Hundred Eighty Thousand
(P1,580,000.00) Pesos after the latter has paid Three Hundred
Thousand (P300,000.00) Pesos (Exhs. "F-3"; Exh. "6-C")
For this reason, Coronels canceled and rescinded the contract (Exh.
"A") with Ramona by depositing the down payment paid by Concepcion
in the bank in trust for Ramona Patricia Alcaraz.
On February 22, 1985, Concepcion, et al., filed a complaint for specific
performance against the Coronels and caused the annotation of a
notice of lis pendens at the back of TCT No. 327403 (Exh. "E"; Exh.
"5").
On April 2, 1985, Catalina caused the annotation of a notice of adverse
claim covering the same property with the Registry of Deeds of Quezon
City (Exh. "F"; Exh. "6").
On April 25, 1985, the Coronels executed a Deed of Absolute Sale over
the subject property in favor of Catalina (Exh. "G"; Exh. "7").
On June 5, 1985, a new title over the subject property was issued in the
name of Catalina under TCT No. 351582 (Exh. "H"; Exh. "8").
(Rollo, pp. 134-136)
In the course of the proceedings before the trial court (Branch 83, RTC,
Quezon City) the parties agreed to submit the case for decision solely
on the basis of documentary exhibits. Thus, plaintiffs therein (now
private respondents) proffered their documentary evidence accordingly
marked as Exhibits "A" through "J", inclusive of their corresponding
submarkings. Adopting these same exhibits as their own, then
defendants (now petitioners) accordingly offered and marked them as
Exhibits "1" through "10", likewise inclusive of their corresponding
submarkings. Upon motion of the parties, the trial court gave them thirty
(30) days within which to simultaneously submit their respective
memoranda, and an additional 15 days within which to submit their
corresponding comment or reply thereof, after which, the case would
be deemed submitted for resolution.
On April 14, 1988, the case was submitted for resolution before Judge
Reynaldo Roura, who was then temporarily detailed to preside over
Branch 82 of the RTC of Quezon City. On March 1, 1989, judgment was
handed down by Judge Roura from his regular bench at Macabebe,
Pampanga for the Quezon City branch, disposing as follows:
WHEREFORE, judgment for specific performance is hereby rendered
ordering defendant to execute in favor of plaintiffs a deed of absolute
sale covering that parcel of land embraced in and covered by Transfer
Certificate of Title No. 327403 (now TCT No. 331582) of the Registry of
Deeds for Quezon City, together with all the improvements existing
thereon free from all liens and encumbrances, and once accomplished,
to immediately deliver the said document of sale to plaintiffs and upon
receipt thereof, the said document of sale to plaintiffs and upon receipt
thereof, the plaintiffs are ordered to pay defendants the whole balance
of the purchase price amounting to P1,190,000.00 in cash. Transfer
Certificate of Title No. 331582 of the Registry of Deeds for Quezon City
in the name of intervenor is hereby canceled and declared to be without

force and effect. Defendants and intervenor and all other persons
claiming under them are hereby ordered to vacate the subject property
and deliver possession thereof to plaintiffs. Plaintiffs' claim for damages
and attorney's fees, as well as the counterclaims of defendants and
intervenors are hereby dismissed.
No pronouncement as to costs.
So Ordered.
Macabebe, Pampanga for Quezon City, March 1, 1989.
(Rollo, p. 106)
A motion for reconsideration was filed by petitioner before the new
presiding judge of the Quezon City RTC but the same was denied by
Judge Estrella T. Estrada, thusly:
The prayer contained in the instant motion, i.e., to annul the decision
and to render anew decision by the undersigned Presiding Judge
should be denied for the following reasons: (1) The instant case became
submitted for decision as of April 14, 1988 when the parties terminated
the presentation of their respective documentary evidence and when
the Presiding Judge at that time was Judge Reynaldo Roura. The fact
that they were allowed to file memoranda at some future date did not
change the fact that the hearing of the case was terminated before
Judge Roura and therefore the same should be submitted to him for
decision; (2) When the defendants and intervenor did not object to the
authority of Judge Reynaldo Roura to decide the case prior to the
rendition of the decision, when they met for the first time before the
undersigned Presiding Judge at the hearing of a pending incident in
Civil Case No. Q-46145 on November 11, 1988, they were deemed to
have acquiesced thereto and they are now estopped from questioning
said authority of Judge Roura after they received the decision in
question which happens to be adverse to them; (3) While it is true that
Judge Reynaldo Roura was merely a Judge-on-detail at this Branch of
the Court, he was in all respects the Presiding Judge with full authority
to act on any pending incident submitted before this Court during his
incumbency. When he returned to his Official Station at Macabebe,
Pampanga, he did not lose his authority to decide or resolve such cases
submitted to him for decision or resolution because he continued as
Judge of the Regional Trial Court and is of co-equal rank with the
undersigned Presiding Judge. The standing rule and supported by
jurisprudence is that a Judge to whom a case is submitted for decision
has the authority to decide the case notwithstanding his transfer to
another branch or region of the same court (Sec. 9, Rule 135, Rule of
Court).
Coming now to the twin prayer for reconsideration of the Decision dated
March 1, 1989 rendered in the instant case, resolution of which now
pertains to the undersigned Presiding Judge, after a meticulous
examination of the documentary evidence presented by the parties, she
is convinced that the Decision of March 1, 1989 is supported by
evidence and, therefore, should not be disturbed.
IN VIEW OF THE FOREGOING, the "Motion for Reconsideration and/or
to Annul Decision and Render Anew Decision by the Incumbent
Presiding Judge" dated March 20, 1989 is hereby DENIED.
SO ORDERED.
Quezon City, Philippines, July 12, 1989.
(Rollo, pp. 108-109)
Petitioners thereupon interposed an appeal, but on December 16, 1991,
the Court of Appeals (Buena, Gonzaga-Reyes, Abad Santos (P), JJ.)
rendered its decision fully agreeing with the trial court.
Hence, the instant petition which was filed on March 5, 1992. The last
pleading, private respondents' Reply Memorandum, was filed on
September 15, 1993. The case was, however, re-raffled to
OBLICON 1/23/2017 ACJUCO 11
undersigned ponente only on August 28, 1996, due to the voluntary
inhibition of the Justice to whom the case was last assigned.
While we deem it necessary to introduce certain refinements in the
disquisition of respondent court in the affirmance of the trial court's
decision, we definitely find the instant petition bereft of merit.
The heart of the controversy which is the ultimate key in the resolution
of the other issues in the case at bar is the precise determination of the
legal significance of the document entitled "Receipt of Down Payment"
which was offered in evidence by both parties. There is no dispute as
to the fact that said document embodied the binding contract between
Ramona Patricia Alcaraz on the one hand, and the heirs of Constancio
P. Coronel on the other, pertaining to a particular house and lot covered
by TCT No. 119627, as defined in Article 1305 of the Civil Code of the
Philippines which reads as follows:
Art. 1305. A contract is a meeting of minds between two persons
whereby one binds himself, with respect to the other, to give something
or to render some service.
While, it is the position of private respondents that the "Receipt of Down
Payment" embodied a perfected contract of sale, which perforce, they
seek to enforce by means of an action for specific performance,
petitioners on their part insist that what the document signified was a
mere executory contract to sell, subject to certain suspensive
conditions, and because of the absence of Ramona P. Alcaraz, who left
for the United States of America, said contract could not possibly ripen
into a contract absolute sale.
Plainly, such variance in the contending parties' contentions is brought
about by the way each interprets the terms and/or conditions set forth
in said private instrument. Withal, based on whatever relevant and
admissible evidence may be available on record, this, Court, as were
the courts below, is now called upon to adjudge what the real intent of
the parties was at the time the said document was executed.
The Civil Code defines a contract of sale, thus:
Art. 1458. By the contract of sale one of the contracting parties obligates
himself to transfer the ownership of and to deliver a determinate thing,
and the other to pay therefor a price certain in money or its equivalent.
Sale, by its very nature, is a consensual contract because it is perfected
by mere consent. The essential elements of a contract of sale are the
following:
a) Consent or meeting of the minds, that is, consent to transfer
ownership in exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be considered as a
Contract of Sale because the first essential element is lacking. In a
contract to sell, the prospective seller explicity 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. What
the seller agrees or obliges himself to do is to fulfill is promise to sell the

subject property when the entire amount of the purchase price is
delivered to him. 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.
In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court had occasion to
rule:
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.
Stated positively, upon the fulfillment of the suspensive condition which
is the full payment of the purchase price, the prospective seller's
obligation to sell the subject property by entering into a contract of sale
with the prospective buyer becomes demandable as provided in Article
1479 of the Civil Code which states:
Art. 1479. A promise to buy and sell a determinate thing for a price
certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for
a price certain is binding upon the promissor if the promise is supported
by a consideration distinct from the price.
A contract to sell may thus be defined as a bilateral contract whereby
the prospective seller, while expressly reserving the ownership of the
subject property despite delivery thereof to the prospective buyer, binds
himself to sell the said property exclusively to the prospective buyer
upon fulfillment of the condition agreed upon, that is, full payment of the
purchase price.
A contract to sell as defined hereinabove, may not even be considered
as a conditional contract of sale where the seller may likewise reserve
title to the property subject of the sale until the fulfillment of a suspensive
condition, because in a conditional contract of sale, the first element of
consent is present, although it is conditioned upon the happening of a
contingent event which may or may not occur. If the suspensive
condition is not fulfilled, the perfection of the contract of sale is
completely abated (cf. Homesite and housing Corp. vs. Court of
Appeals, 133 SCRA 777 [1984]). However, if the suspensive condition
is fulfilled, the contract of sale is thereby perfected, such that if there
had already been previous delivery of the property subject of the sale
to the buyer, ownership thereto automatically transfers to the buyer by
operation of law without any further act having to be performed by the
seller.
In a contract to sell, upon the fulfillment of the suspensive condition
which is the full payment of the purchase price, ownership will not
automatically transfer to the buyer although the property may have been
previously delivered to him. The prospective seller still has to convey
title to the prospective buyer by entering into a contract of absolute sale.
It is essential to distinguish between a contract to sell and a conditional
contract of sale specially in cases where the subject property is sold by
the owner not to the party the seller contracted with, but to a third
person, as in the case at bench. In a contract to sell, there being no
previous sale of the property, a third person buying such property
despite the fulfillment of the suspensive condition such as the full
payment of the purchase price, for instance, cannot be deemed a buyer
in bad faith and the prospective buyer cannot seek the relief of
OBLICON 1/23/2017 ACJUCO 12
reconveyance of the property. There is no double sale in such case.
Title to the property will transfer to the buyer after registration because
there is no defect in the owner-seller's title per se, but the latter, of
course, may be used for damages by the intending buyer.
In a conditional contract of sale, however, upon the fulfillment of the
suspensive condition, the sale becomes absolute and this will definitely
affect the seller's title thereto. In fact, if there had been previous delivery
of the subject property, the seller's ownership or title to the property is
automatically transferred to the buyer such that, the seller will no longer
have any title to transfer to any third person. Applying Article 1544 of
the Civil Code, such second buyer of the property who may have had
actual or constructive knowledge of such defect in the seller's title, or at
least was charged with the obligation to discover such defect, cannot
be a registrant in good faith. Such second buyer cannot defeat the first
buyer's title. In case a title is issued to the second buyer, the first buyer
may seek reconveyance of the property subject of the sale.
With the above postulates as guidelines, we now proceed to the task of
deciphering the real nature of the contract entered into by petitioners
and private respondents.
It is a canon in the interpretation of contracts that the words used therein
should be given their natural and ordinary meaning unless a technical
meaning was intended (Tan vs. Court of Appeals, 212 SCRA 586
[1992]). Thus, when petitioners declared in the said "Receipt of Down
Payment" that they —
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon
City, the sum of Fifty Thousand Pesos purchase price of our inherited
house and lot, covered by TCT No. 1199627 of the Registry of Deeds
of Quezon City, in the total amount of P1,240,000.00.
without any reservation of title until full payment of the entire purchase
price, the natural and ordinary idea conveyed is that they sold their
property.
When the "Receipt of Down Payment" is considered in its entirety, it
becomes more manifest that there was a clear intent on the part of
petitioners to transfer title to the buyer, but since the transfer certificate
of title was still in the name of petitioner's father, they could not fully
effect such transfer although the buyer was then willing and able to
immediately pay the purchase price. Therefore, petitioners-sellers
undertook upon receipt of the down payment from private respondent
Ramona P. Alcaraz, to cause the issuance of a new certificate of title in
their names from that of their father, after which, they promised to
present said title, now in their names, to the latter and to execute the
deed of absolute sale whereupon, the latter shall, in turn, pay the entire
balance of the purchase price.
The agreement could not have been a contract to sell because the
sellers herein made no express reservation of ownership or title to the
subject parcel of land. Furthermore, the circumstance which prevented
the parties from entering into an absolute contract of sale pertained to
the sellers themselves (the certificate of title was not in their names)
and not the full payment of the purchase price. Under the established
facts and circumstances of the case, the Court may safely presume
that, had the certificate of title been in the names of petitioners-sellers
at that time, there would have been no reason why an absolute contract
of sale could not have been executed and consummated right there and
then.
Moreover, unlike in a contract to sell, petitioners in the case at bar did
not merely promise to sell the properly to private respondent upon the

fulfillment of the suspensive condition. On the contrary, having already
agreed to sell the subject property, they undertook to have the
certificate of title changed to their names and immediately thereafter, to
execute the written deed of absolute sale.
Thus, the parties did not merely enter into a contract to sell where the
sellers, after compliance by the buyer with certain terms and conditions,
promised to sell the property to the latter. What may be perceived from
the respective undertakings of the parties to the contract is that
petitioners had already agreed to sell the house and lot they inherited
from their father, completely willing to transfer full ownership of the
subject house and lot to the buyer if the documents were then in order.
It just happened, however, that the transfer certificate of title was then
still in the name of their father. It was more expedient to first effect the
change in the certificate of title so as to bear their names. That is why
they undertook to cause the issuance of a new transfer of the certificate
of title in their names upon receipt of the down payment in the amount
of P50,000.00. As soon as the new certificate of title is issued in their
names, petitioners were committed to immediately execute the deed of
absolute sale. Only then will the obligation of the buyer to pay the
remainder of the purchase price arise.
There is no doubt that unlike in a contract to sell which is most
commonly entered into so as to protect the seller against a buyer who
intends to buy the property in installment by withholding ownership over
the property until the buyer effects full payment therefor, in the contract
entered into in the case at bar, the sellers were the one who were
unable to enter into a contract of absolute sale by reason of the fact that
the certificate of title to the property was still in the name of their father.
It was the sellers in this case who, as it were, had the impediment which
prevented, so to speak, the execution of an contract of absolute sale.
What is clearly established by the plain language of the subject
document is that when the said "Receipt of Down Payment" was
prepared and signed by petitioners Romeo A. Coronel, et al., the parties
had agreed to a conditional contract of sale, consummation of which is
subject only to the successful transfer of the certificate of title from the
name of petitioners' father, Constancio P. Coronel, to their names.
The Court significantly notes this suspensive condition was, in fact,
fulfilled on February 6, 1985 (Exh. "D"; Exh. "4"). Thus, on said date,
the conditional contract of sale between petitioners and private
respondent Ramona P. Alcaraz became obligatory, the only act
required for the consummation thereof being the delivery of the property
by means of the execution of the deed of absolute sale in a public
instrument, which petitioners unequivocally committed themselves to
do as evidenced by the "Receipt of Down Payment."
Article 1475, in correlation with Article 1181, both of the Civil Code,
plainly applies to the case at bench. Thus,
Art. 1475. The contract of sale is perfected at the moment there is a
meeting of minds upon the thing which is the object of the contract and
upon the price.
From the moment, the parties may reciprocally demand performance,
subject to the provisions of the law governing the form of contracts.
Art. 1181. In conditional obligations, the acquisition of rights, as well as
the extinguishment or loss of those already acquired, shall depend upon
the happening of the event which constitutes the condition.
Since the condition contemplated by the parties which is the issuance
of a certificate of title in petitioners' names was fulfilled on February 6,
OBLICON 1/23/2017 ACJUCO 13
1985, the respective obligations of the parties under the contract of sale
became mutually demandable, that is, petitioners, as sellers, were
obliged to present the transfer certificate of title already in their names
to private respondent Ramona P. Alcaraz, the buyer, and to
immediately execute the deed of absolute sale, while the buyer on her
part, was obliged to forthwith pay the balance of the purchase price
amounting to P1,190,000.00.
It is also significant to note that in the first paragraph in page 9 of their
petition, petitioners conclusively admitted that:
3. The petitioners-sellers Coronel bound themselves "to effect the
transfer in our names from our deceased father Constancio P. Coronel,
the transfer certificate of title immediately upon receipt of the
downpayment above-stated". The sale was still subject to this
suspensive condition. (Emphasis supplied.)
(Rollo, p. 16)
Petitioners themselves recognized that they entered into a contract of
sale subject to a suspensive condition. Only, they contend, continuing
in the same paragraph, that:
. . . Had petitioners-sellers not complied with this condition of first
transferring the title to the property under their names, there could be
no perfected contract of sale. (Emphasis supplied.)
(Ibid.)
not aware that they set their own trap for themselves, for Article 1186
of the Civil Code expressly provides that:
Art. 1186. The condition shall be deemed fulfilled when the obligor
voluntarily prevents its fulfillment.
Besides, it should be stressed and emphasized that what is more
controlling than these mere hypothetical arguments is the fact that
the condition herein referred to was actually and indisputably fulfilled on
February 6, 1985, when a new title was issued in the names of
petitioners as evidenced by TCT No. 327403 (Exh. "D"; Exh. "4").
The inevitable conclusion is that on January 19, 1985, as evidenced by
the document denominated as "Receipt of Down Payment" (Exh. "A";
Exh. "1"), the parties entered into a contract of sale subject only to the
suspensive condition that the sellers shall effect the issuance of new
certificate title from that of their father's name to their names and that,
on February 6, 1985, this condition was fulfilled (Exh. "D"; Exh. "4").
We, therefore, hold that, in accordance with Article 1187 which
pertinently provides —
Art. 1187. The effects of conditional obligation to give, once the
condition has been fulfilled, shall retroact to the day of the constitution
of the obligation . . .
In obligation to do or not to do, the courts shall determine, in each case,
the retroactive effect of the condition that has been complied with.
the rights and obligations of the parties with respect to the perfected
contract of sale became mutually due and demandable as of the time
of fulfillment or occurrence of the suspensive condition on February 6,

1985. As of that point in time, reciprocal obligations of both seller and
buyer arose.
Petitioners also argue there could been no perfected contract on
January 19, 1985 because they were then not yet the absolute owners
of the inherited property.
We cannot sustain this argument.
Article 774 of the Civil Code defines Succession as a mode of
transferring ownership as follows:
Art. 774. Succession is a mode of acquisition by virtue of which the
property, rights and obligations to be extent and value of the inheritance
of a person are transmitted through his death to another or others by
his will or by operation of law.
Petitioners-sellers in the case at bar being the sons and daughters of
the decedent Constancio P. Coronel are compulsory heirs who were
called to succession by operation of law. Thus, at the point their father
drew his last breath, petitioners stepped into his shoes insofar as the
subject property is concerned, such that any rights or obligations
pertaining thereto became binding and enforceable upon them. It is
expressly provided that rights to the succession are transmitted from
the moment of death of the decedent (Article 777, Civil Code; Cuison
vs. Villanueva, 90 Phil. 850 [1952]).
Be it also noted that petitioners' claim that succession may not be
declared unless the creditors have been paid is rendered moot by the
fact that they were able to effect the transfer of the title to the property
from the decedent's name to their names on February 6, 1985.
Aside from this, petitioners are precluded from raising their supposed
lack of capacity to enter into an agreement at that time and they cannot
be allowed to now take a posture contrary to that which they took when
they entered into the agreement with private respondent Ramona P.
Alcaraz. The Civil Code expressly states that:
Art. 1431. Through estoppel an admission or representation is rendered
conclusive upon the person making it, and cannot be denied or
disproved as against the person relying thereon.
Having represented themselves as the true owners of the subject
property at the time of sale, petitioners cannot claim now that they were
not yet the absolute owners thereof at that time.
Petitioners also contend that although there was in fact a perfected
contract of sale between them and Ramona P. Alcaraz, the latter
breached her reciprocal obligation when she rendered impossible the
consummation thereof by going to the United States of America, without
leaving her address, telephone number, and Special Power of Attorney
(Paragraphs 14 and 15, Answer with Compulsory Counterclaim to the
Amended Complaint, p. 2; Rollo, p. 43), for which reason, so petitioners
conclude, they were correct in unilaterally rescinding rescinding the
contract of sale.
We do not agree with petitioners that there was a valid rescission of the
contract of sale in the instant case. We note that these supposed
grounds for petitioners' rescission, are mere allegations found only in
their responsive pleadings, which by express provision of the rules, are
deemed controverted even if no reply is filed by the plaintiffs (Sec. 11,
Rule 6, Revised Rules of Court). The records are absolutely bereft of
any supporting evidence to substantiate petitioners' allegations. We
OBLICON 1/23/2017 ACJUCO 14
have stressed time and again that allegations must be proven by
sufficient evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882 [1961];
Recaro vs. Embisan, 2 SCRA 598 [1961]. Mere allegation is not an
evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]).
Even assuming arguendo that Ramona P. Alcaraz was in the United
States of America on February 6, 1985, we cannot justify petitioner-
sellers' act of unilaterally and extradicially rescinding the contract of
sale, there being no express stipulation authorizing the sellers to
extarjudicially rescind the contract of sale. (cf. Dignos vs. CA, 158
SCRA 375 [1988]; Taguba vs. Vda. de Leon, 132 SCRA 722 [1984])
Moreover, petitioners are estopped from raising the alleged absence of
Ramona P. Alcaraz because although the evidence on record shows
that the sale was in the name of Ramona P. Alcaraz as the buyer, the
sellers had been dealing with Concepcion D. Alcaraz, Ramona's
mother, who had acted for and in behalf of her daughter, if not also in
her own behalf. Indeed, the down payment was made by Concepcion
D. Alcaraz with her own personal check (Exh. "B"; Exh. "2") for and in
behalf of Ramona P. Alcaraz. There is no evidence showing that
petitioners ever questioned Concepcion's authority to represent
Ramona P. Alcaraz when they accepted her personal check. Neither
did they raise any objection as regards payment being effected by a
third person. Accordingly, as far as petitioners are concerned, the
physical absence of Ramona P. Alcaraz is not a ground to rescind the
contract of sale.
Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default,
insofar as her obligation to pay the full purchase price is concerned.
Petitioners who are precluded from setting up the defense of the
physical absence of Ramona P. Alcaraz as above-explained offered no
proof whatsoever to show that they actually presented the new transfer
certificate of title in their names and signified their willingness and
readiness to execute the deed of absolute sale in accordance with their
agreement. Ramona's corresponding obligation to pay the balance of
the purchase price in the amount of P1,190,000.00 (as buyer) never
became due and demandable and, therefore, she cannot be deemed to
have been in default.
Article 1169 of the Civil Code defines when a party in a contract
involving reciprocal obligations may be considered in default, to wit:
Art. 1169. Those obliged to deliver or to do something, incur in delay
from the time the obligee judicially or extrajudicially demands from them
the fulfillment of their obligation.
xxx xxx xxx
In reciprocal obligations, neither party incurs in delay if the other does
not comply or is not ready to comply in a proper manner with what is
incumbent upon him. From the moment one of the parties fulfill his
obligation, delay by the other begins. (Emphasis supplied.)
There is thus neither factual nor legal basis to rescind the contract of
sale between petitioners and respondents.
With the foregoing conclusions, the sale to the other petitioner, Catalina
B. Mabanag, gave rise to a case of double sale where Article 1544 of
the Civil Code will apply, to wit:
Art. 1544. If the same thing should have been sold to different vendees,
the ownership shall be transferred to the person who may have first
taken possession thereof in good faith, if it should be movable property.

Should if be immovable property, the ownership shall belong to the
person acquiring it who in good faith first recorded it in Registry of
Property.
Should there be no inscription, the ownership shall pertain to the person
who in good faith was first in the possession; and, in the absence
thereof to the person who presents the oldest title, provided there is
good faith.
The record of the case shows that the Deed of Absolute Sale dated April
25, 1985 as proof of the second contract of sale was registered with the
Registry of Deeds of Quezon City giving rise to the issuance of a new
certificate of title in the name of Catalina B. Mabanag on June 5, 1985.
Thus, the second paragraph of Article 1544 shall apply.
The above-cited provision on double sale presumes title or ownership
to pass to the first buyer, the exceptions being: (a) when the second
buyer, in good faith, registers the sale ahead of the first buyer, and (b)
should there be no inscription by either of the two buyers, when the
second buyer, in good faith, acquires possession of the property ahead
of the first buyer. Unless, the second buyer satisfies these
requirements, title or ownership will not transfer to him to the prejudice
of the first buyer.
In his commentaries on the Civil Code, an accepted authority on the
subject, now a distinguished member of the Court, Justice Jose C.
Vitug, explains:
The governing principle is prius tempore, potior jure (first in time,
stronger in right). Knowledge by the first buyer of the second sale
cannot defeat the first buyer's rights except when the second buyer first
registers in good faith the second sale (Olivares vs. Gonzales, 159
SCRA 33). Conversely, knowledge gained by the second buyer of the
first sale defeats his rights even if he is first to register, since knowledge
taints his registration with bad faith (see also Astorga vs. Court of
Appeals, G.R. No. 58530, 26 December 1984). In Cruz
vs. Cabana (G.R. No. 56232, 22 June 1984, 129 SCRA 656), it has held
that it is essential, to merit the protection of Art. 1544, second
paragraph, that the second realty buyer must act in good faith in
registering his deed of sale (citing Carbonell vs. Court of Appeals, 69
SCRA 99, Crisostomo vs. CA, G.R. No. 95843, 02 September 1992).
(J. Vitug Compendium of Civil Law and Jurisprudence, 1993 Edition, p.
604).
Petitioner point out that the notice of lis pendens in the case at bar was
annoted on the title of the subject property only on February 22, 1985,
whereas, the second sale between petitioners Coronels and petitioner
Mabanag was supposedly perfected prior thereto or on February 18,
1985. The idea conveyed is that at the time petitioner Mabanag, the
second buyer, bought the property under a clean title, she was unaware
of any adverse claim or previous sale, for which reason she is buyer in
good faith.
We are not persuaded by such argument.
In a case of double sale, what finds relevance and materiality is not
whether or not the second buyer was a buyer in good faith but whether
or not said second buyer registers such second sale in good faith, that
is, without knowledge of any defect in the title of the property sold.
As clearly borne out by the evidence in this case, petitioner Mabanag
could not have in good faith, registered the sale entered into on
February 18, 1985 because as early as February 22, 1985, a notice
of lis pendens had been annotated on the transfer certificate of title in
OBLICON 1/23/2017 ACJUCO 15
the names of petitioners, whereas petitioner Mabanag registered the
said sale sometime in April, 1985. At the time of registration, therefore,
petitioner Mabanag knew that the same property had already been
previously sold to private respondents, or, at least, she was charged
with knowledge that a previous buyer is claiming title to the same
property. Petitioner Mabanag cannot close her eyes to the defect in
petitioners' title to the property at the time of the registration of the
property.
This Court had occasions to rule that:
If a vendee in a double sale registers that sale after he has acquired
knowledge that there was a previous sale of the same property to a third
party or that another person claims said property in a pervious sale, the
registration will constitute a registration in bad faith and will not confer
upon him any right. (Salvoro vs. Tanega, 87 SCRA 349 [1978]; citing
Palarca vs. Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43
Phil. 554; Fernandez vs. Mercader, 43 Phil. 581.)
Thus, the sale of the subject parcel of land between petitioners and
Ramona P. Alcaraz, perfected on February 6, 1985, prior to that
between petitioners and Catalina B. Mabanag on February 18, 1985,
was correctly upheld by both the courts below.
Although there may be ample indications that there was in fact an
agency between Ramona as principal and Concepcion, her mother, as
agent insofar as the subject contract of sale is concerned, the issue of
whether or not Concepcion was also acting in her own behalf as a co-
buyer is not squarely raised in the instant petition, nor in such
assumption disputed between mother and daughter. Thus, We will not
touch this issue and no longer disturb the lower courts' ruling on this
point.
WHEREFORE, premises considered, the instant petition is hereby
DISMISSED and the appealed judgment AFFIRMED.
SO ORDERED.
Narvasa, C.J., Davide, Jr. and Francisco, JJ., concur.
Panganiban, J., took no part.
FIRST DIVISION
G.R. No. 112127 July 17, 1995
CENTRAL PHILIPPINE UNIVERSITY, petitioner,
vs.
COURT OF APPEALS, REMEDIOS FRANCO, FRANCISCO N.
LOPEZ, CECILIA P. VDA. DE LOPEZ, REDAN LOPEZ AND
REMARENE LOPEZ, respondents.
BELLOSILLO, J.:
CENTRAL PHILIPPINE UNIVERSITY filed this petition for review
on certiorari of the decision of the Court of Appeals which reversed that
of the Regional Trial Court of Iloilo City directing petitioner to reconvey
to private respondents the property donated to it by their predecessor-
in-interest.
Sometime in 1939, the late Don Ramon Lopez, Sr., who was then a
member of the Board of Trustees of the Central Philippine College (now
Central Philippine University [CPU]), executed a deed of donation in

favor of the latter of a parcel of land identified as Lot No. 3174-B-1 of
the subdivision plan Psd-1144, then a portion of Lot No. 3174-B, for
which Transfer Certificate of Title No. T-3910-A was issued in the name
of the donee CPU with the following annotations copied from the deed
of donation —
1. The land described shall be utilized by the CPU exclusively for the
establishment and use of a medical college with all its buildings as part
of the curriculum;
2. The said college shall not sell, transfer or convey to any third party
nor in any way encumber said land;
3. The said land shall be called "RAMON LOPEZ CAMPUS", and the
said college shall be under obligation to erect a cornerstone bearing
that name. Any net income from the land or any of its parks shall be put
in a fund to be known as the "RAMON LOPEZ CAMPUS FUND" to be
used for improvements of said campus and erection of a building
thereon.1
On 31 May 1989, private respondents, who are the heirs of Don Ramon
Lopez, Sr., filed an action for annulment of donation, reconveyance and
damages against CPU alleging that since 1939 up to the time the action
was filed the latter had not complied with the conditions of the donation.
Private respondents also argued that petitioner had in fact negotiated
with the National Housing Authority (NHA) to exchange the donated
property with another land owned by the latter.
In its answer petitioner alleged that the right of private respondents to
file the action had prescribed; that it did not violate any of the conditions
in the deed of donation because it never used the donated property for
any other purpose than that for which it was intended; and, that it did
not sell, transfer or convey it to any third party.
On 31 May 1991, the trial court held that petitioner failed to comply with
the conditions of the donation and declared it null and void. The court a
quo further directed petitioner to execute a deed of the reconveyance
of the property in favor of the heirs of the donor, namely, private
respondents herein.
Petitioner appealed to the Court of Appeals which on 18 June 1993
ruled that the annotations at the back of petitioner's certificate of title
were resolutory conditions breach of which should terminate the rights
of the donee thus making the donation revocable.
The appellate court also found that while the first condition mandated
petitioner to utilize the donated property for the establishment of a
medical school, the donor did not fix a period within which the condition
must be fulfilled, hence, until a period was fixed for the fulfillment of the
condition, petitioner could not be considered as having failed to comply
with its part of the bargain. Thus, the appellate court rendered its
decision reversing the appealed decision and remanding the case to
the court of origin for the determination of the time within which
petitioner should comply with the first condition annotated in the
certificate of title.
Petitioner now alleges that the Court of Appeals erred: (a) in holding
that the quoted annotations in the certificate of title of petitioner are
onerous obligations and resolutory conditions of the donation which
must be fulfilled non-compliance of which would render the donation
revocable; (b) in holding that the issue of prescription does not deserve
"disquisition;" and, (c) in remanding the case to the trial court for the
fixing of the period within which petitioner would establish a medical
college.2
OBLICON 1/23/2017 ACJUCO 16
We find it difficult to sustain the petition. A clear perusal of the conditions
set forth in the deed of donation executed by Don Ramon Lopez, Sr.,
gives us no alternative but to conclude that his donation was onerous,
one executed for a valuable consideration which is considered the
equivalent of the donation itself, e.g., when a donation imposes a
burden equivalent to the value of the donation. A gift of land to the City
of Manila requiring the latter to erect schools, construct a children's
playground and open streets on the land was considered an onerous
donation.3 Similarly, where Don Ramon Lopez donated the subject
parcel of land to petitioner but imposed an obligation upon the latter to
establish a medical college thereon, the donation must be for an
onerous consideration.
Under Art. 1181 of the Civil Code, on conditional obligations, the
acquisition of rights, as well as the extinguishment or loss of those
already acquired, shall depend upon the happening of the event which
constitutes the condition. Thus, when a person donates land to another
on the condition that the latter would build upon the land a school, the
condition imposed was not a condition precedent or a suspensive
condition but a resolutory one.4 It is not correct to say that the
schoolhouse had to be constructed before the donation became
effective, that is, before the donee could become the owner of the land,
otherwise, it would be invading the property rights of the donor. The
donation had to be valid before the fulfillment of the condition. 5 If there
was no fulfillment or compliance with the condition, such as what
obtains in the instant case, the donation may now be revoked and all
rights which the donee may have acquired under it shall be deemed lost
and extinguished.
The claim of petitioner that prescription bars the instant action of private
respondents is unavailing.
The condition imposed by the donor, i.e., the building of a medical
school upon the land donated, depended upon the exclusive will of the
donee as to when this condition shall be fulfilled. When petitioner
accepted the donation, it bound itself to comply with the condition
thereof. Since the time within which the condition should be fulfilled
depended upon the exclusive will of the petitioner, it has been held that
its absolute acceptance and the acknowledgment of its obligation
provided in the deed of donation were sufficient to prevent the statute
of limitations from barring the action of private respondents upon the
original contract which was the deed of donation. 6
Moreover, the time from which the cause of action accrued for the
revocation of the donation and recovery of the property donated cannot
be specifically determined in the instant case. A cause of action arises
when that which should have been done is not done, or that which
should not have been done is done.7 In cases where there is no special
provision for such computation, recourse must be had to the rule that
the period must be counted from the day on which the corresponding
action could have been instituted. It is the legal possibility of bringing
the action which determines the starting point for the computation of the
period. In this case, the starting point begins with the expiration of a
reasonable period and opportunity for petitioner to fulfill what has been
charged upon it by the donor.
The period of time for the establishment of a medical college and the
necessary buildings and improvements on the property cannot be
quantified in a specific number of years because of the presence of
several factors and circumstances involved in the erection of an
educational institution, such as government laws and regulations
pertaining to education, building requirements and property restrictions
which are beyond the control of the donee.
 OBLICON 1/23/2017 ACJUCO 17

Thus, when the obligation does not fix a period but from its nature and
circumstances it can be inferred that a period was intended, the general
rule provided in Art. 1197 of the Civil Code applies, which provides that
the courts may fix the duration thereof because the fulfillment of the
obligation itself cannot be demanded until after the court has fixed the
period for compliance therewith and such period has arrived.8

This general rule however cannot be applied considering the different

set of circumstances existing in the instant case. More than a
reasonable period of fifty (50) years has already been allowed petitioner
to avail of the opportunity to comply with the condition even if it be
burdensome, to make the donation in its favor forever valid. But,
unfortunately, it failed to do so. Hence, there is no more need to fix the
duration of a term of the obligation when such procedure would be a
mere technicality and formality and would serve no purpose than to
delay or lead to an unnecessary and expensive multiplication of
suits. 9 Moreover, under Art. 1191 of the Civil Code, when one of the
obligors cannot comply with what is incumbent upon him, the obligee
may seek rescission and the court shall decree the same unless there
is just cause authorizing the fixing of a period. In the absence of any
just cause for the court to determine the period of the compliance, there
is no more obstacle for the court to decree the rescission claimed.

Finally, since the questioned deed of donation herein is basically a

gratuitous one, doubts referring to incidental circumstances of a
gratuitous contract should be resolved in favor of the least transmission
of rights and interests. 10Records are clear and facts are undisputed that
since the execution of the deed of donation up to the time of filing of the
instant action, petitioner has failed to comply with its obligation as
donee. Petitioner has slept on its obligation for an unreasonable length
of time. Hence, it is only just and equitable now to declare the subject
donation already ineffective and, for all purposes, revoked so that
petitioner as donee should now return the donated property to the heirs
of the donor, private respondents herein, by means of reconveyance.

WHEREFORE, the decision of the Regional Trial Court of Iloilo, Br. 34,
of 31 May 1991 is REINSTATED and AFFIRMED, and the decision of
the Court of Appeals of 18 June 1993 is accordingly MODIFIED.
Consequently, petitioner is directed to reconvey to private respondents
Lot No. 3174-B-1 of the subdivision plan Psd-1144 covered by Transfer
Certificate of Title No. T-3910-A within thirty (30) days from the finality
of this judgment.
G.R. No. 126444 December 4, 1998
Costs against petitioner. ALFONSO QUIJADA, CRESENTE QUIJADA, REYNELDA
QUIJADA, DEMETRIO QUIJADA, ELIUTERIA QUIJADA, EULALIO
QUIJADA, and WARLITO QUIJADA, petitioners,
SO ORDERED. vs.
COURT OF APPEALS, REGALADO MONDEJAR, RODULFO
Quiason and Kapunan, JJ., concur. GOLORAN, ALBERTO ASIS, SEGUNDINO RAS, ERNESTO
GOLORAN, CELSO ABISO, FERNANDO BAUTISTA, ANTONIO
MACASERO, and NESTOR MAGUINSAY, respondents.

MARTINEZ, J.:

Petitioners, as heirs of the late Trinidad Quijada, filed a complaint

against private respondents for quieting of title, recovery of possession
and ownership of parcels of land with claim for attorney's fees and
damages. The suit was premised on the following facts found by the
court of Appeals which is materially the same as that found by the trial
court:

Plaintiffs-appellees (petitioners) are the children of the late Trinidad

Corvera Vda, de Quijada. Trinidad was one of the heirs of the late Pedro
Corvera and inherited from the latter the two-hectare parcel of land

subject of the case, situated in the barrio of San Agustin, Talacogon,
Agusan del Sur. On April 5, 1956, Trinidad Quijada together with her
sisters Leonila Corvera Vda. de Sequeña and Paz Corvera Cabiltes and
brother Epapiadito Corvera executed a conditional deed of donation
(Exh. C) of the two-hectare parcel of land subject of the case in favor of
the Municipality of Talacogon, the condition being that the parcel of land
shall be used solely and exclusively as part of the campus of the
proposed provincial high school in Talacogon. Apparently, Trinidad
remained in possession of the parcel of land despite the donation. On
July 29, 1962, Trinidad sold one (1) hectare of the subject parcel of land
to defendant-appellant Regalado Mondejar (Exh. 1). Subsequently,
Trinidad verbally sold the remaining one (1) hectare to defendant-
appellant (respondent) Regalado Mondejar without the benefit of a
written deed of sale and evidenced solely by receipts of payment. In
1980, the heirs of Trinidad, who at that time was already dead, filed a
complaint for forcible entry (Exh. E) against defendant-appellant
(respondent) Regalado Mondejar, which complaint was, however,
dismissed for failure to prosecute (Exh. F). In 1987, the proposed
provincial high school having failed to materialize, the Sangguniang
Bayan of the municipality of Talacogon enacted a resolution reverting
the two (2) hectares of land donated back to the donors (Exh. D). In the
meantime, defendant-appellant (respondent) Regalado Mondejar sold
portions of the land to defendants-appellants (respondents) Fernando
Bautista (Exh. 5), Rodolfo Goloran (Exh. 6), Efren Guden (Exh. 7) and
Ernesto Goloran (Exh. 8).
On July 5, 1988, plaintiffs-appellees (petitioners) filed this action against
defendants-appellants (respondents). In the complaint, plaintiffs-
appellees (petitioners) alleged that their deceased mother never sold,
conveyed, transferred or disposed of the property in question to any
person or entity much less to Regalado Mondejar save the donation
made to the Municipality of Talacogon in 1956; that at the time of the
alleged sale to Regalado Mondejar by Trinidad Quijada, the land still
belongs to the Municipality of Talacogon, hence, the supposed sale is
null and void.
Defendants-appellants (respondents), on the other hand, in their
answer claimed that the land in dispute was sold to Regalado Mondejar,
the one (1) hectare on July 29, 1962, and the remaining one (1) hectare
on installment basis until fully paid. As affirmative and/or special
defense, defendants-appellants (respondents) alleged that plaintiffs
action is barred by laches or has prescribed.
The court a quo rendered judgment in favor of plaintiffs-appellees
(petitioners): firstly because "Trinidad Quijada had no legal title or right
to sell the land to defendant Mondejar in 1962, 1966, 1967 and 1968,
the same not being hers to dispose of because ownership belongs to
the Municipality of Talacogon (Decision, p. 4; Rollo, p. 39) and,
secondly, that the deed of sale executed by Trinidad Quijada in favor of
Mondejar did not carry with it the conformity and acquiescence of her
children, more so that she was already 63 years old at the time, and a
widow (Decision, p. 6; Rollo, p. 41)."1
The dispositive portion of the trial court's decision reads:
WHEREFORE, viewed from the above perceptions, the scale of justice
having tilted in favor of the plaintiffs, judgment is, as it is hereby
rendered:
1) ordering the Defendants to return and vacate the two (2) hectares of
land to Plaintiffs as described in Tax Declaration No. 1209 in the name
of Trinidad Quijada;
2) ordering any person acting in Defendants' behalf to vacate and
restore the peaceful possession of the land in question to Plaintiffs;
OBLICON 1/23/2017 ACJUCO 18
3) ordering the cancellation of the Deed of Sale executed by the late
Trinidad Quijada in favor of Defendant Regalado Mondejar as well as
the Deeds of Sale/Relinquishments executed by Mondejar in favor of
the other Defendants;
4) ordering Defendants to remove their improvements constructed on
the questioned lot;
5) ordering the Defendants to pay Plaintiffs, jointly and severally, the
amount of P10,000.00 representing attorney's fees;
6) ordering Defendants to pays the amount of P8,000.00 as expenses
of litigation; and
7) ordering Defendants to pay the sum of P30,000.00 representing
moral damages.
SO ORDERED.2
On appeal, the Court of Appeals reversed and set aside the judgment a
quo3 ruling that the sale made by Trinidad Quijada to respondent
Mondejar was valid as the former retained an inchoate interest on the
lots by virtue of the automatic reversion clause in the deed of
donation.4 Thereafter, petitioners filed a motion for reconsideration.
When the CA denied their motion,5 petitioners instituted a petition for
review to this Court arguing principally that the sale of the subject
property made by Trinidad Quijada to respondent Mondejar is void,
considering that at that time, ownership was already transferred to the
Municipality of Talacogon. On the contrary, private respondents
contend that the sale was valid, that they are buyers in good faith, and
that petitioners' case is barred by laches. 6
We affirm the decision of the respondent court.
The donation made on April 5, 1956 by Trinidad Quijada and her brother
and sisters7 was subject to the condition that the donated property shall
be "used solely and exclusively as a part of the campus of the proposed
Provincial High School in Talacogon."8 The donation further provides
that should "the proposed Provincial High School be discontinued or if
the same shall be opened but for some reason or another, the same
may in the future be closed" the donated property shall automatically
revert to the donor.9 Such condition, not being contrary to law, morals,
good customs, public order or public policy was validly imposed in the
donation. 10
When the Municipality's acceptance of the donation was made known
to the donor, the former became the new owner of the donated property
— donation being a mode of acquiring and transmitting ownership 11 —
notwithstanding the condition imposed by the donee. The donation is
perfected once the acceptance by the donee is made known to the
donor.12 According, ownership is immediately transferred to the latter
and that ownership will only revert to the donor if the resolutory
condition is not fulfilled.
In this case, that resolutory condition is the construction of the school.
It has been ruled that when a person donates land to another on the
condition that the latter would build upon the land a school, the condition
imposed is not a condition precedent or a suspensive condition but a
resolutory one. 13 Thus, at the time of the sales made in 1962 towards
1968, the alleged seller (Trinidad) could not have sold the lots since she
had earlier transferred ownership thereof by virtue of the deed of
donation. So long as the resolutory condition subsists and is capable of
fulfillment, the donation remains effective and the donee continues to

be the owner subject only to the rights of the donor or his successors-
in-interest under the deed of donation. Since no period was imposed by
the donor on when must the donee comply with the condition, the latter
remains the owner so long as he has tried to comply with the condition
within a reasonable period. Such period, however, became irrelevant
herein when the donee-Municipality manifested through a resolution
that it cannot comply with the condition of building a school and the
same was made known to the donor. Only then — when the non-
fulfillment of the resolutory condition was brought to the donor's
knowledge — that ownership of the donated property reverted to the
donor as provided in the automatic reversion clause of the deed of
donation.
The donor may have an inchoate interest in the donated property during
the time that ownership of the land has not reverted to her. Such
inchoate interest may be the subject of contracts including a contract of
sale. In this case, however, what the donor sold was the land itself which
she no longer owns. It would have been different if the donor-seller sold
her interests over the property under the deed of donation which is
subject to the possibility of reversion of ownership arising from the non-
fulfillment of the resolutory condition.
As to laches, petitioners' action is not yet barred thereby. Laches
presupposes failure or neglect for an unreasonable and unexplained
length of time, to do that which, by exercising due diligence, could or
should have been done earlier; 14 "it is negligence or omission to assert
a right within a reasonable time, thus, giving rise to a presumption that
the party entitled to assert it either has abandoned or declined to assert
it." 15 Its essential elements of:
a) Conduct on the part of the defendant, or of one under whom he
claims, giving rise to the situation complained of;
b) Delay in asserting complainant's right after he had knowledge of the
defendant's conduct and after he has an opportunity to sue;
c) Lack of knowledge or notice on the part of the defendant that the
complainant would assert the right on which he bases his suit; and,
d) Injury or prejudice to the defendant in the event relief is accorded to
the complainant. 16
are absent in this case. Petioners' cause of action to quiet title
commenced only when the property reverted to the donor and/or his
successors-in-interest in 1987. Certainly, when the suit was initiated the
following year, it cannot be said that petioners had slept on their rights
for a long time. The 1960's sales made by Trinidad Quijada cannot be
the reckoning point as to when petitioners' cause of action arose. They
had no interest over the property at that time except under the deed of
donation to which private respondents were not privy. Moreover,
petitioners had previously filed an ejectment suit against private
respondents only that it did not prosper on a technicality.
Be that at it may, there is one thing which militates against the claim of
petitioners. Sale, being a consensual contract, is perfected by mere
consent, which is manifested the moment there is a meeting of the
minds17 as to the offer and acceptance thereof on three (3) elements:
subject matter, price and terms of payment of the price. 18 Ownership
by the seller on the thing sold at the time of the perfection of the contract
of sale is not an element for its perfection. What the law requires is that
the seller has the right to transfer ownership at the time the thing sold
is delivered. 19 Perfection per se does not transfer ownership which
occurs upon the actual or constructive delivery of the thing sold. 20 A
perfected contract of sale cannot be challenged on the ground of non-
OBLICON 1/23/2017 ACJUCO 19
ownership on the part of the seller at the time of its perfection; hence,
the sale is still valid.
The consummation, however, of the perfected contract is another
matter. It occurs upon the constructive or actual delivery of the subject
matter to the buyer when the seller or her successors-in-interest
subsequently acquires ownership thereof. Such circumstance
happened in this case when petitioners — who are Trinidad Quijada's
heirs and successors-in-interest — became the owners of the subject
property upon the reversion of the ownership of the land to them.
Consequently, ownership is transferred to respondent Mondejar and
those who claim their right from him. Article 1434 of the New Civil Code
supports the ruling that the seller's "title passes by operation of law to
the buyer." 21 This rule applies not only when the subject matter of the
contract of sale is goods,22 but also to other kinds of property, including
real property. 23
There is also no merit in petitioners' contention that since the lots were
owned by the municipality at the time of the sale, they were outside the
commerce of men under Article 1409 (4) of the NCC; 24 thus, the
contract involving the same is inexistent and void from the beginning.
However, nowhere in Article 1409 (4) is it provided that the properties
of a municipality, whether it be those for public use or its patrimonial
property 25 are outside the commerce of men. Besides, the lots in this
case were conditionally owned by the municipality. To rule that the
donated properties are outside the commerce of men would render
nugatory the unchallenged reasonableness and justness of the
condition which the donor has the right to impose as owner thereof.
Moreover, the objects referred to as outsides the commerce of man are
those which cannot be appropriated, such as the open seas and the
heavenly bodies.
With respect to the trial court's award of attorney's fees, litigation
expenses and moral damages, there is neither factual nor legal basis
thereof. Attorney's fees and expenses of litigation cannot, following the
general rule in Article 2208 of the New Civil Code, be recovered in this
case, there being no stipulation to that effect and the case does not fall
under any of the
exceptions. 26 It cannot be said that private respondents had compelled
petitioners to litigate with third persons. Neither can it be ruled that the
former acted in "gross and evident bad faith" in refusing to satisfy the
latter's claims considering that private respondents were under an
honest belief that they have a legal right over the property by virtue of
the deed of sale. Moral damages cannot likewise be justified as none
of the circumstances enumerated under Articles 2219. 27 and 2220 28 of
the New Civil Code concur in this case
WHEREFORE, by virtue of the foregoing, the assailed decision of the
Court of Appeals is AFFIRMED.
SO ORDERED.
Melo, Puno and Mendoza, JJ., concur.
 OBLICON 1/23/2017 ACJUCO 20

G.R. No. 164748 January 27, 2006

THE SECRETARY OF EDUCATION and DR. BENITO TUMAMAO,
Schools Division Superintendent of Isabela, Petitioners,
vs.
HEIRS OF RUFINO DULAY, SR., represented by IGNACIA
VICENTE, RUFINO DULAY, JR., SUSANA DULAY, ADELAIDA
DULAY, LUZVIMINDA DULAY and CECILIA DULAY, Respondents.

DECISION

CALLEJO, SR., J.:

This is a petition for review on certiorari of the Decision1 of the Court of

Appeals (CA) in CA-G.R. CV No. 78314 which affirmed the Decision2 of
the Regional Trial Court (RTC) of Santiago City, Isabela, Branch 35, in
Civil Case No. 35-2397.

The spouses Rufino Dulay, Sr. and Ignacia Vicente were the owners of
a parcel of land located in Rizal, Santiago, Isabela, with an area of
29,002 square meters. The lot was covered by Original Certificate of
Title No. P-6776.

On August 3, 1981, the spouses Dulay executed a deed of

donation3 over a 10,000-square-meter portion of their property in favor
of the Ministry of Education and Culture (now the Department of

Education, Culture and Sports [DECS]). The deed provided, among
others:
That for and in consideration of the benefits that may be derived from
the use of the above described property which is intended for school
purposes, the said DONORS do by by (sic) these presents TRANSFER
AND CONVEY by way of DONATION unto the DONEE, its successors
and assigns, the above property to become effective upon the signing
of this document.4
The property was subdivided. On April 13, 1983, Transfer Certificate of
Title (TCT) No. T-1433375 covering the portion identified as Lot 8858-A
was issued in the name of the Ministry of Education and Culture,
represented by Laurencio C. Ramel, the Superintendent of Schools of
Isabela. However, the property was not used for school purposes and
remained idle.
Sometime in 1988, the DECS, through its Secretary, started
construction of the Rizal National High School building on a parcel of
land it acquired from Alejandro Feliciano. The school site was about 2
kilometers away from the land donated by the spouses Dulay.
In a letter6 to the DECS Secretary dated August 19, 1994, the spouses
Dulay requested that the property be returned to them considering that
the land was never used since 1981, or a period of more than 13 years.
On August 28, 1994, the Barangay Council of Rizal, Santiago City
issued Resolution No. 397 recognizing the right of the donors to redeem
the subject parcel of land because of the DECS’ failure to utilize it for
the intended purpose. It further resolved that the Rizal National High
School no longer needed the donated land "considering its distance
from the main campus and [the] failure to utilize the property for a long
period of time."
On December 22, 1994, Rufino Dulay, Sr. passed away at the age of
80.8 His heirs sought the help of the Sangguniang Panlungsod of
Santiago City via an undated letter9 requesting the approval of a
resolution allowing them to redeem the donated property. The
Sangguniang Panlungsod denied the request inasmuch as the city
government was not a party to the deed of donation. 10
On August 31, 1997, the heirs of Dulay, Sr., herein respondents, filed a
complaint for the revocation of the deed of donation and cancellation of
TCT No. T-143337 before the RTC of Santiago City, Isabela, Branch
35, against the DECS Secretary and Dr. Benito Tumamao, the Schools
Division Superintendent of Isabela. Respondents alleged that there was
a condition in the deed of donation: that the DECS, as donee, utilize the
subject property for school purposes, that is, the construction of a
building to house the Rizal National High School. Respondents alleged
that the DECS did not fulfill the condition and that the land remained
idle up to the present. Respondents also averred that the donation inter
vivos was inofficious, since the late Rufino Dulay, Sr. donated more
than what he could give by will.
Petitioners, through the Office of the Solicitor General (OSG),
interposed the following defenses: (a) the DECS complied with said
condition because the land was being used by the school as its
technology and home economics laboratory; (b) the donation was not
inofficious for the donors were the owners of five other parcels of land,
all located at Rizal, Santiago City; (c) the DECS acquired the disputed
property by virtue of purchase made on December 8, 1997 by the
barangay of Rizal, Santiago City in the amount of P18,000.00 as
certified by its former Barangay Captain, Jesus San Juan;11 and (d) the
action of the respondents had prescribed. The OSG also claimed that
students planted a portion of the land with rice, mahogany seedlings,
and fruit-bearing trees; the produce would then be sold and the
OBLICON 1/23/2017 ACJUCO 21
proceeds used for the construction of a school building on the subject
property.
In their Reply,12 respondents denied that the donated land was being
used as a technology and home economics laboratory, and averred that
there were no improvements on the property. Moreover, the fact that
rice was planted on the lot was contrary to the intended purpose of the
donation. The respondents likewise denied that the property had been
sold to the barangay. While the other properties of the late donor had
been sold, the deeds thereon had not been registered, and the tax
declarations not yet transferred in the names of the purchasers.
Thereafter, trial ensued. On March 6, 2001, an ocular inspection of the
property was conducted by the parties and their respective counsels,
including the Presiding Judge. It was confirmed that the land was
barren, save for a small portion which was planted with palay. A
demolished house was also found in the periphery of the donated lot. 13
On December 26, 2002, the trial court rendered its decision in favor of
respondents. The fallo reads:
WHEREFORE, in the light of the foregoing considerations, the Court
hereby DECLARES the deed of donation, Exhibit "A," executed by the
late Rufino Dulay, Sr. and his wife Ignacia Vicente over a portion of the
land covered by O.C.T. No. P-6776 and now covered by T.C.T. No. T-
143337 in the name of the donee Department of Education and Culture
as REVOKED. The defendant DECS is ORDERED to execute the deed
of reconveyance of the land in favor of the plaintiffs heirs of Rufino
Dulay, Sr.
SO ORDERED.14
In revoking the deed of donation, the trial court ruled that the donation
was subject to a resolutory condition, namely, that the land donated
shall be used for school purposes. It was no longer necessary to
determine the intended "school purpose" because it was established
that the donee did not use the land. Thus, the condition was not
complied with since the property was donated in July 1981. Moreover,
the DECS did not intend to use the property for school purposes
because a school had already been built and established in another lot
located in the same barangay, about two kilometers away from the
subject land. Finally, the trial court rejected petitioners’ contention that
the donation was inofficious.
Aggrieved, the OSG appealed the decision to the CA.
On July 30, 2004, the appellate court rendered judgment affirming the
decision. The court held that the DECS failed to comply with the
condition in the donation, that is, to use the property for school
purposes. The CA further ruled that the donation was onerous
considering that the donee was burdened with the obligation to utilize
the land for school purposes; therefore, the four-year prescriptive period
under Article 764 of the New Civil Code did not apply. Moreover, the CA
declared that a deed of donation is considered a written contract and is
governed by Article 1144 of the New Civil Code, which provides for a
10-year prescriptive period from the time the cause of action accrues.
According to the CA, the respondents’ cause of action for the revocation
of the donation should be reckoned from the expiration of a reasonable
opportunity for the DECS to comply with what was incumbent upon it.
Petitioners filed a motion for reconsideration, which the CA denied.

Petitioners seek relief from this Court via petition for review on certiorari,
contending that:
I.
THE DEPARTMENT OF EDUCATION, THROUGH THE
RIZAL NATIONAL HIGH SCHOOL, HAD COMPLIED WITH
THE CONDITION IMPOSED IN THE DEED OF DONATION.
II.
RESPONDENTS’ RIGHT TO SEEK THE REVOCATION OF
THE DEED OF DONATION, IF THERE BE ANY, IS
ALREADY BARRED BY PRESCRIPTION AND LACHES.15
The Court shall resolve the issues raised by petitioners seriatim.
The donee failed to comply with the condition imposed in the deed of
donation
The issue of whether or not petitioner DECS was able to comply with
the condition imposed in the deed of donation is one of fact. There is a
question of fact when the doubt or difference arises as to the truth or
falsehood of alleged facts or when the query necessarily solicits
calibration of the whole evidence considering mostly the credibility of
witnesses, existence and relevancy of specific surrounding
circumstances, their relation to each other and to the whole and
probabilities of the situation.16 Under Rule 45 of the 1997 Rules of Civil
Procedure, only questions of law may be raised in a petition for review
on certiorari, for the simple reason that this Court is not a trier of facts.
It is not for the Court to calibrate the evidence on record, as this is the
function of the trial court. Although there are well-defined exceptions to
the rule, nevertheless, after a review of the records, we find no
justification to depart therefrom. Moreover, the trial court’s findings of
facts, as affirmed by the appellate court on appeal, are binding on this
Court, unless the trial and appellate courts overlooked, misconstrued or
misinterpreted facts and circumstances of substance which, if
considered, would change the outcome of the case. The case has been
reviewed thoroughly, and we find no justification to reverse the CA
decision.
Petitioners, through the OSG, maintain that the condition (to use the
property for school purposes) is not limited to the construction of a
school building, but includes utilizing it as a technology and home
economics laboratory where students and teachers plant palay,
mahogany seedlings, and fruit-bearing trees. The OSG insists that the
donee did not specify in the deed that the property should be used for
the construction of a school building. According to the OSG, the
proceeds of the harvest were used and are still being used by the Rizal
National High School for the construction and improvement of its
present school site. Moreover, it was verified that there was palay
planted on the donated property during the ocular inspection on the
property.
In their comment on the petition, respondents dispute petitioners’
contentions, and aver that no evidence was presented to prove that,
indeed, palay, mahogany seedlings and fruit-bearing trees were planted
on the property. Respondents also emphasized that when the trial court
inspected the subject property, it was discovered to be barren and
without any improvement although some portions thereof were planted
with palay. Petitioners even failed to adduce evidence to identify the
person who planted the palay.
OBLICON 1/23/2017 ACJUCO 22
The contention of petitioners has no merit.
As gleaned from the CA decision, petitioners failed to prove that the
donated property was used for school purposes as indicated in the deed
of donation:
We find it difficult to sustain that the defendant-appellants have
complied with the condition of donation. It is not amiss to state that other
than the bare allegation of the defendant-appellants, there is nothing in
the records that could concretely prove that the condition of donation
has been complied with by the defendant-appellants. In the same
breadth, the planting of palay on the land donated can hardly be
considered and could not have been the "school purposes" referred to
and intended by the donors when they had donated the land in question.
Also, the posture of the defendant-appellants that the land donated is
being used as technology and home economics laboratory of the Rizal
National High School is far from being the truth considering that not only
is the said school located two kilometers away from the land donated
but also there was not even a single classroom built on the land donated
that would reasonably indicate that, indeed, classes have been
conducted therein. These observations, together with the unrebutted
ocular inspection report made by the trial court which revealed that the
land donated remains idle and without any improvement thereon for
more than a decade since the time of the donation, give Us no other
alternative but to conclude that the defendant-appellants have, indeed,
failed to comply with what is incumbent upon them in the deed of
donation.17
In its Order18 dated March 6, 2001, the RTC reiterated that during the
ocular inspection of the property conducted in the presence of the
litigants and their counsel, it observed that "the land was barren; there
were no improvements on the donated property though a portion thereof
was planted with palay [and a demolished house built in 1979.]"
Moreover, petitioners failed to adduce a shred of evidence to prove that
the palay found in the property was planted by DECS personnel or at
its instance or even by students of the Rizal National High School. No
evidence was adduced to prove that there were existing plans to use
the property for school purposes. Petitioners even debilitated their
cause when they claimed in the trial court that the barangay acquired
the property by purchase, relying on the certification of former Barangay
Captain Jesus San Juan.
The right to seek the revocation of donation had not yet prescribed
when respondents filed their complaint
Anent the second issue, we reject the contention of the OSG that
respondents’ cause of action is already barred by prescription under
Article 764 of the New Civil Code, or four years from the non-
compliance with the condition in the deed of donation. Since such failure
to comply with the condition of utilizing the property for school purposes
became manifest sometime in 1988 when the DECS utilized another
property for the construction of the school building, the four-year
prescriptive period did not commence on such date. Petitioner was
given more than enough time to comply with the condition, and it cannot
be allowed to use this fact to its advantage. It must be stressed that the
donation is onerous because the DECS, as donee, was burdened with
the obligation to utilize the land donated for school purposes. Under
Article 733 of the New Civil Code, a donation with an onerous cause is
essentially a contract and is thus governed by the rules on
contract.19 We fully agree with the ruling of the appellate court:
xxx With this, [we] decline to apply the four-year prescriptive period for
the revocation of donation provided under Article 764 of the New Civil
Code and instead apply the general rules on contracts since Article 733
 OBLICON 1/23/2017 ACJUCO 23

of the same Code, specifically provided that onerous donations shall be

governed by the rules on contracts.

Corollarily, since a deed of donation is considered a written contract, it

is governed by Article 1144 of the New Civil Code, which provides that
the prescriptive period for an action arising from a written contract is ten
(10) years from the time the cause of action accrues. In the case of
donation, the accrual of the cause of action is from the expiration of the
time within which the donee must comply with the conditions or
obligations of the donation. In the instant case, however, it must be
noted that the subject donation fixed no period within which the donee
can comply with the condition of donation. As such, resort to Article
1197 of

the New Civil Code is necessary. Said article provides that if the
obligation does not fix a period, but from its nature and the
circumstances it can be inferred that a period was intended, the courts
may fix the duration thereof. Indeed, from the nature and circumstances
of the condition of the subject donation, it can be inferred that a period
was contemplated by the donors. The donors could not have intended
their property to remain idle for a very long period of time when, in fact,
they specifically obliged the defendant-appellants to utilize the land
donated for school purposes and thus put it in good use. xxx20

In Central Philippine University v. Court of Appeals, 21 a case squarely

in point, we have established that the legal possibility of bringing the
action begins with the expiration of a reasonable opportunity for the
donee to fulfill what has been charged upon it by the donor. Likewise,
we held that even if Article 1197 of the New Civil Code provides that the
courts may fix the duration when the obligation does not determine the
period but from its nature and circumstances it can be inferred that a
period was intended, the general rule cannot be applied because to do
so would be a mere technicality and would serve no other purpose than
to delay or lead to an unnecessary and expensive multiplication of
suits.22

Altogether, it has been 16 years since the execution of the deed of

donation. Petitioner DECS failed to use the property for the purpose
specified in the deed of donation. The property remained barren and
unutilized. Even after respondents sought the return of the property
before the courts, petitioner DECS still failed to draw up plans to use
the property for school purposes. In fine, petitioner DECS has no use
for the property; hence, the same shall be reverted to the respondents.

WHEREFORE, the petition is DENIED. The Decision of the Court of

Appeals in CA-G.R. CV No. 78314 dated July 30, 2004 is AFFIRMED.

SO ORDERED.

ROMEO J. CALLEJO, SR.

Associate Justice