1) Tanay vs Fausto

SECOND DIVISION

[G.R. No. 140182. April 12, 2005]

TANAY RECREATION CENTER AND DEVELOPMENT

CORP., petitioner, vs. CATALINA MATIENZO FAUSTO and
ANUNCIACION FAUSTO PACUNAYEN, respondents.

DECISION
AUSTRIA-MARTINEZ, J.:

Petitioner Tanay Recreation Center and Development Corp. (TRCDC) is

the lessee of a 3,090-square meter property located in Sitio Gayas, Tanay,
Rizal, owned by Catalina Matienzo Fausto,[1] under a Contract of Lease
executed on August 1, 1971. On this property stands the Tanay Coliseum
Cockpit operated by petitioner. The lease contract provided for a 20-year
term, subject to renewal within sixty days prior to its expiration. The contract
also provided that should Fausto decide to sell the property, petitioner shall
have the priority right to purchase the same.[2]
On June 17, 1991, petitioner wrote Fausto informing her of its intention to
renew the lease.[3] However, it was Faustos daughter, respondent
Anunciacion F. Pacunayen, who replied, asking that petitioner remove the
improvements built thereon, as she is now the absolute owner of the
property.[4] It appears that Fausto had earlier sold the property to Pacunayen
on August 8, 1990, for the sum of P10,000.00 under a Kasulatan ng Bilihan
Patuluyan ng Lupa,[5] and title has already been transferred in her name under
Transfer Certificate of Title (TCT) No. M-35468.[6]
Despite efforts, the matter was not resolved. Hence, on September 4,
1991, petitioner filed an Amended Complaint for Annulment of Deed of Sale,
Specific Performance with Damages, and Injunction, docketed as Civil Case
No. 372-M.[7]
In her Answer, respondent claimed that petitioner is estopped from
assailing the validity of the deed of sale as the latter acknowledged her
ownership when it merely asked for a renewal of the lease. According to
respondent, when they met to discuss the matter, petitioner did not demand
for the exercise of its option to purchase the property, and it even asked for
grace period to vacate the premises.[8]
After trial on the merits, the Regional Trial Court of Morong, Rizal (Branch
78), rendered judgment extending the period of the lease for another seven
years from August 1, 1991 at a monthly rental of P10,000.00, and dismissed
petitioners claim for damages.[9]
On appeal, docketed as CA-G.R. CV No. 43770, the Court of Appeals
(CA) affirmed with modifications the trial courts judgment per its Decision
dated June 14, 1999.[10] The dispositive portion of the decision reads:

WHEREFORE, the appealed decision is AFFIRMED AND ACCORDINGLY

MODIFIED AS DISCUSSED.

Furthermore, we resolved:

1.0. That TRCDC VACATE the leased premises immediately;

2.0. To GRANT the motion of Pacunayen to allow her to withdraw the amount
of P320,000.00, deposited according to records, with this court.

3.0. To order TRCDC to MAKE THE NECESSARY ACCOUNTING regarding

the amounts it had already deposited (for unpaid rentals for the extended
period of seven [7] years of the contract of lease). In case it had not yet
completed its deposit, to immediately pay the remaining balance to
Pacunayen.

4.0. To order TRCDC to PAY the amount of P10,000.00 as monthly rental,

with regard to its continued stay in the leased premises even after the
expiration of the extended period of seven (7) years, computed from August 1,
1998, until it finally vacates therefrom.

SO ORDERED.[11]

In arriving at the assailed decision, the CA acknowledged the priority right

of TRCDC to purchase the property in question. However, the CA interpreted
such right to mean that it shall be applicable only in case the property is sold
to strangers and not to Faustos relative. The CA stated that (T)o interpret it
otherwise as to comprehend all sales including those made to relatives and to
the compulsory heirs of the seller at that would be an absurdity, and her
(Faustos) only motive for such transfer was precisely one of preserving the
property within her bloodline and that someone administer the property.[12] The
CA also ruled that petitioner already acknowledged the transfer of ownership
and is deemed to have waived its right to purchase the property.[13] The CA
even further went on to rule that even if the sale is annulled, petitioner could
not achieve anything because the property will be eventually transferred to
Pacunayen after Faustos death.[14]
Petitioner filed a motion for reconsideration but it was denied per
Resolution dated September 14, 1999.[15]
Dissatisfied, petitioner elevated the case to this Court on petition for
review on certiorari, raising the following grounds:

THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS

REVERSIBLE ERROR IN HOLDING THAT THE CONTRACTUAL
STIPULATION GIVING PETITIONER THE PRIORITY RIGHT TO
PURCHASE THE LEASED PREMISES SHALL ONLY APPLY IF THE
LESSOR DECIDES TO SELL THE SAME TO STRANGERS;

THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS

REVERSIBLE ERROR IN HOLDING THAT PETITIONERS PRIORITY RIGHT
TO PURCHASE THE LEASED PREMISES IS INCONSEQUENTIAL.[16]

The principal bone of contention in this case refers to petitioners priority

right to purchase, also referred to as the right of first refusal.
Petitioners right of first refusal in this case is expressly provided for in the
notarized Contract of Lease dated August 1, 1971, between Fausto and
petitioner, to wit:

7. That should the LESSOR decide to sell the leased premises, the LESSEE
shall have the priority right to purchase the same;[17]

When a lease contract contains a right of first refusal, the lessor is under a
legal duty to the lessee not to sell to anybody at any price until after he has
made an offer to sell to the latter at a certain price and the lessee has failed to
accept it. The lessee has a right that the lessor's first offer shall be in his
favor.[18] Petitioners right of first refusal is an integral and indivisible part of the
contract of lease and is inseparable from the whole contract. The
consideration for the lease includes the consideration for the right of first
refusal[19] and is built into the reciprocal obligations of the parties.
It was erroneous for the CA to rule that the right of first refusal does not
apply when the property is sold to Faustos relative.[20] When the terms of an
agreement have been reduced to writing, it is considered as containing all the
terms agreed upon. As such, there can be, between the parties and their
successors in interest, no evidence of such terms other than the contents of
the written agreement, except when it fails to express the true intent and
agreement of the parties.[21] In this case, the wording of the stipulation giving
petitioner the right of first refusal is plain and unambiguous, and leaves no
room for interpretation. It simply means that should Fausto decide to sell the
leased property during the term of the lease, such sale should first be offered
to petitioner. The stipulation does not provide for the qualification that such
right may be exercised only when the sale is made to strangers or persons
other than Faustos kin. Thus, under the terms of petitioners right of first
refusal, Fausto has the legal duty to petitioner not to sell the property to
anybody, even her relatives, at any price until after she has made an offer to
sell to petitioner at a certain price and said offer was rejected by petitioner.
Pursuant to their contract, it was essential that Fausto should have first
offered the property to petitioner before she sold it to respondent. It was only
after petitioner failed to exercise its right of first priority could Fausto then
lawfully sell the property to respondent.
The rule is that a sale made in violation of a right of first refusal is valid.
However, it may be rescinded, or, as in this case, may be the subject of an
action for specific performance.[22] In Riviera Filipina, Inc. vs. Court of
Appeals,[23] the Court discussed the concept and interpretation of the right of
first refusal and the consequences of a breach thereof, to wit:

. . . It all started in 1992 with Guzman, Bocaling & Co. v. Bonnevie where
the Court held that a lease with a proviso granting the lessee the right of first
priority all things and conditions being equal meant that there should be
identity of the terms and conditions to be offered to the lessee and all other
prospective buyers, with the lessee to enjoy the right of first priority. A deed of
sale executed in favor of a third party who cannot be deemed a purchaser in
good faith, and which is in violation of a right of first refusal granted to the
lessee is not voidable under the Statute of Frauds but rescissible under
Articles 1380 to 1381 (3) of the New Civil Code.

Subsequently in 1994, in the case of Ang Yu Asuncion v. Court of Appeals,

the Court en banc departed from the doctrine laid down in Guzman, Bocaling
& Co. v. Bonnevie and refused to rescind a contract of sale which violated
the right of first refusal. The Court held that the so-called right of first refusal
cannot be deemed a perfected contract of sale under Article 1458 of the New
Civil Code and, as such, a breach thereof decreed under a final judgment
does not entitle the aggrieved party to a writ of execution of the judgment but
to an action for damages in a proper forum for the purpose.

In the 1996 case of Equatorial Realty Development, Inc. v. Mayfair

Theater, Inc., the Court en banc reverted back to the doctrine in Guzman
Bocaling & Co. v. Bonnevie stating that rescission is a relief allowed for the
protection of one of the contracting parties and even third persons from all
injury and damage the contract may cause or to protect some incompatible
and preferred right by the contract.

Thereafter in 1997, in Paraaque Kings Enterprises, Inc. v. Court of

Appeals, the Court affirmed the nature of and the concomitant rights and
obligations of parties under a right of first refusal. The Court, summarizing the
rulings in Guzman, Bocaling & Co. v. Bonnevie and Equatorial Realty
Development, Inc. v. Mayfair Theater, Inc., held that in order to have full
compliance with the contractual right granting petitioner the first option to
purchase, the sale of the properties for the price for which they were finally
sold to a third person should have likewise been first offered to the former.
Further, there should be identity of terms and conditions to be offered to the
buyer holding a right of first refusal if such right is not to be rendered illusory.
Lastly, the basis of the right of first refusal must be the current offer to sell of
the seller or offer to purchase of any prospective buyer.

The prevailing doctrine therefore, is that a right of first refusal means

identity of terms and conditions to be offered to the lessee and all other
prospective buyers and a contract of sale entered into in violation of a right of
first refusal of another person, while valid, is rescissible.[24]
It was also incorrect for the CA to rule that it would be useless to annul the
sale between Fausto and respondent because the property would still remain
with respondent after the death of her mother by virtue of succession, as in
fact, Fausto died in March 1996, and the property now belongs to respondent,
being Faustos heir.[25]
For one, Fausto was bound by the terms and conditions of the lease
contract. Under the right of first refusal clause, she was obligated to offer the
property first to petitioner before selling it to anybody else. When she sold the
property to respondent without offering it to petitioner, the sale while valid is
rescissible so that petitioner may exercise its option under the contract.
With the death of Fausto, whatever rights and obligations she had over the
property, including her obligation under the lease contract, were transmitted to
her heirs by way of succession, a mode of acquiring the property, rights and
obligation of the decedent to the extent of the value of the inheritance of the
heirs. Article 1311 of the Civil Code provides:

ART. 1311. Contracts take effect only between the parties, their assigns and
heirs, except in case where the rights and obligations arising from the contract
are not transmissible by their nature, or by stipulation or by provision of law.
The heir is not liable beyond the value of the property he received from the
decedent.

A lease contract is not essentially personal in character.[26] Thus, the rights

and obligations therein are transmissible to the heirs. The general rule is that
heirs are bound by contracts entered into by their predecessors-in-interest
except when the rights and obligations arising therefrom are not transmissible
by (1) their nature, (2) stipulation or (3) provision of law.[27]
In this case, the nature of the rights and obligations are, by their nature,
transmissible. There is also neither contractual stipulation nor provision of law
that makes the rights and obligations under the lease contract intransmissible.
The lease contract between petitioner and Fausto is a property right, which is
a right that passed on to respondent and the other heirs, if any, upon the
death of Fausto.
In DKC Holdings Corporation vs. Court of Appeals,[28] the Court held that
the Contract of Lease with Option to Buy entered into by the late Encarnacion
Bartolome with DKC Holdings Corporation was binding upon her sole heir,
Victor, even after her demise and it subsists even after her death. The Court
ruled that:

. . . Indeed, being an heir of Encarnacion, there is privity of interest between

him and his deceased mother. He only succeeds to what rights his mother
had and what is valid and binding against her is also valid and binding
as against him. This is clear from Paraaque Kings Enterprises vs. Court of
Appeals, where this Court rejected a similar defense-

With respect to the contention of respondent Raymundo that he is not

privy to the lease contract, not being the lessor nor the lessee referred
to therein, he could thus not have violated its provisions, but he is
nevertheless a proper party. Clearly, he stepped into the shoes of the
owner-lessor of the land as, by virtue of his purchase, he assumed all
the obligations of the lessor under the lease contract. Moreover, he
received benefits in the form of rental payments. Furthermore, the
complaint, as well as the petition, prayed for the annulment of the sale
of the properties to him. Both pleadings also alleged collusion between
 him and respondent Santos which defeated the exercise by petitioner
of its right of first refusal.

In order then to accord complete relief to petitioner, respondent

Raymundo was a necessary, if not indispensable, party to the case. A
favorable judgment for the petitioner will necessarily affect the rights of
respondent Raymundo as the buyer of the property over which
petitioner would like to assert its right of first option to
buy.[29] (Emphasis supplied)

Likewise in this case, the contract of lease, with all its concomitant
provisions, continues even after Faustos death and her heirs merely stepped
into her shoes.[30] Respondent, as an heir of Fausto, is therefore bound to fulfill
all its terms and conditions.
There is no personal act required from Fausto such that respondent
cannot perform it. Faustos obligation to deliver possession of the property to
petitioner upon the exercise by the latter of its right of first refusal may be
performed by respondent and the other heirs, if any. Similarly,
nonperformance is not excused by the death of the party when the other party
has a property interest in the subject matter of the contract.[31]
The CA likewise found that petitioner acknowledged the legitimacy of the
sale to respondent and it is now barred from exercising its right of first refusal.
According to the appellate court:

Second, when TRCDC, in a letter to Fausto, signified its intention to renew the
lease contract, it was Pacunayen who answered the letter on June 19, 1991.
In that letter Pacunayen demanded that TRCDC vacate the leased premises
within sixty (60) days and informed it of her ownership of the leased premises.
The pertinent portion of the letter reads:

Furtherly, please be advised that the land is no longer under the absolute
ownership of my mother and the undersigned is now the real and absolute
owner of the land.

Instead of raising a howl over the contents of the letter, as would be its
expected and natural reaction under the circumstances, TRCDC surprisingly
kept silent about the whole thing. As we mentioned in the factual antecedents
of this case, it even invited Pacunayen to its special board meeting particularly
to discuss with her the renewal of the lease contract. Again, during that
meeting, TRCDC did not mention anything that could be construed as
challenging Pacunayens ownership of the leased premises. Neither did
TRCDC assert its priority right to purchase the same against Pacunayen.[32]

The essential elements of estoppel are: (1) conduct of a party amounting

to false representation or concealment of material facts or at least calculated
to convey the impression that the facts are otherwise than, and inconsistent
with, those which the party subsequently attempts to assert; (2) intent, or at
least expectation, that this conduct shall be acted upon by, or at least
influence, the other party; and (3) knowledge, actual or constructive, of the
real facts.[33]
The records are bereft of any proposition that petitioner waived its right of
first refusal under the contract such that it is now estopped from exercising the
same. In a letter dated June 17, 1991, petitioner wrote to Fausto asking for a
renewal of the term of lease.[34]Petitioner cannot be faulted for merely seeking
a renewal of the lease contract because obviously, it was working on the
assumption that title to the property is still in Faustos name and the latter has
the sole authority to decide on the fate of the property. Instead, it was
respondent who replied, advising petitioner to remove all the improvements on
the property, as the lease is to expire on the 1st of August 1991. Respondent
also informed petitioner that her mother has already sold the property to
her.[35] In order to resolve the matter, a meeting was called among petitioners
stockholders, including respondent, on July 27, 1991, where petitioner, again,
proposed that the lease be renewed. Respondent, however, declined. While
petitioner may have sought the renewal of the lease, it cannot be construed as
a relinquishment of its right of first refusal. Estoppel must be intentional and
unequivocal.[36]
Also, in the excerpts from the minutes of the special meeting, it was further
stated that the possibility of a sale was likewise considered.[37] But respondent
also refused to sell the land, while the improvements, if for sale shall be
subject for appraisal.[38] After respondent refused to sell the land, it was then
that petitioner filed the complaint for annulment of sale, specific performance
and damages.[39] Petitioners acts of seeking all possible avenues for the
amenable resolution of the conflict do not amount to an intentional and
unequivocal abandonment of its right of first refusal.
Respondent was well aware of petitioners right to priority of sale, and that
the sale made to her by her mother was merely for her to be able to take
charge of the latters affairs. As admitted by respondent in her Appellees Brief
filed before the CA, viz.:
After June 19, 1991, TRCDC invited Pacunayen to meeting with the officers of
the corporation. . . . In the same meeting, Pacunayens attention was
called to the provision of the Contract of Lease had by her mother with
TRCDC, particularly paragraph 7 thereof, which states:

7. That should the lessor decide to sell the leased premises, the LESSEE
shall have the priority right to purchase the same.

Of course, in the meeting she had with the officers of TRCDC, Pacunayen
explained that the sale made in her favor by her mother was just a formality so
that she may have the proper representation with TRCDC in the absence of
her parents, more so that her father had already passed away, and there was
no malice in her mine (sic) and that of her mother, or any intention on their
part to deceive TRCDC. All these notwithstanding, and for her to show their
good faith in dealing with TRCDC, Pacunayen started the ground work to
reconvey ownership over the whole land, now covered by Transfer Certificare
(sic) of Title No. M-259, to and in the name of her mother (Fausto), but the
latter was becoming sickly, old and weak, and they found no time to do it as
early as they wanted to.[40](Emphasis supplied)

Given the foregoing, the Kasulatan ng Bilihan Patuluyan ng Lupa dated

August 8, 1990 between Fausto and respondent must be
rescinded. Considering, however, that Fausto already died on March 16,
1996, during the pendency of this case with the CA, her heirs should have
been substituted as respondents in this case. Considering further that the
Court cannot declare respondent Pacunayen as the sole heir, as it is not the
proper forum for that purpose, the right of petitioner may only be enforced
against the heirs of the deceased Catalina Matienzo Fausto, represented by
respondent Pacunayen.
In Paraaque Kings Enterprises, Inc. vs. Court of Appeals,[41] it was ruled
that the basis of the right of the first refusal must be the current offer to sell of
the seller or offer to purchase of any prospective buyer. It is only after the
grantee fails to exercise its right of first priority under the same terms and
within the period contemplated, could the owner validly offer to sell the
property to a third person, again, under the same terms as offered to the
grantee. The circumstances of this case, however, dictate the application of a
different ruling. An offer of the property to petitioner under identical terms and
conditions of the offer previously given to respondent Pacunayen would be
inequitable. The subject property was sold in 1990 to respondent Pacunayen
for a measly sum of P10,000.00. Obviously, the value is in a small amount
because the sale was between a mother and daughter. As admitted by said
respondent, the sale made in her favor by her mother was just a formality so
that she may have the proper representation with TRCDC in the absence of
her parents[42] Consequently, the offer to be made to petitioner in this case
should be under reasonable terms and conditions, taking into account the fair
market value of the property at the time it was sold to respondent.
In its complaint, petitioner prayed for the cancellation of TCT No. M-35468
in the name of respondent Pacunayen,[43] which was issued by the Register of
Deeds of Morong on February 7, 1991.[44] Under ordinary circumstances, this
would be the logical effect of the rescission of the Kasulatan ng Bilihan
Patuluyan ng Lupa between the deceased Fausto and respondent
Pacunayen. However, the circumstances in this case are not ordinary. The
buyer of the subject property is the sellers own daughter. If and when the title
(TCT No. M-35468) in respondent Pacunayens name is cancelled and
reinstated in Faustos name, and thereafter negotiations between petitioner
and respondent Pacunayen for the purchase of the subject property break
down, then the subject property will again revert to respondent Pacunayen as
she appears to be one of Faustos heirs. This would certainly be a winding
route to traverse. Sound reason therefore dictates that title should remain in
the name of respondent Pacunayen, for and in behalf of the other heirs, if any,
to be cancelled only when petitioner successfully exercises its right of first
refusal and purchases the subject property.
Petitioner further seeks the award of the following damages in its favor:
(1) P100,000.00 as actual damages; (2) P1,100,000.00 as compensation for
lost goodwill or reputation; (3) P100,000.00 as moral damages;
(4) P100,000.00 as exemplary damages; (5) P50,000.00 as attorneys fees;
(6) P1,000.00 appearance fee per hearing; and (7) the costs of suit.[45]
According to petitioner, respondents act in fencing the property led to the
closure of the Tanay Coliseum Cockpit and petitioner was unable to conduct
cockfights and generate income of not less than P100,000.00 until the end of
September 1991, aside from the expected rentals from the cockpit space
lessees in the amount of P11,000.00.[46]
Under Article 2199 of the Civil Code, it is provided that:

Except as provided by law or by stipulation, one is entitled to an adequate

compensation only for such pecuniary loss suffered by him as he has
duly proved. Such compensation is referred to as actual or compensatory
damages. (Emphasis supplied)

The rule is that actual or compensatory damages cannot be presumed, but

must be proved with reasonable degree of certainty. A court cannot rely on
speculations, conjectures, or guesswork as to the fact and amount of
damages, but must depend upon competent proof that they have been
suffered by the injured party and on the best obtainable evidence of the actual
amount thereof. It must point out specific facts, which could afford a basis for
measuring whatever compensatory or actual damages are borne.[47]
In the present case, there is no question that the Tanay Coliseum Cockpit
was closed for two months and TRCDC did not gain any income during said
period. But there is nothing on record to substantiate petitioners claim that it
was bound to lose some P111,000.00 from such closure. TRCDCs president,
Ambrosio Sacramento, testified that they suffered income losses with the
closure of the cockpit from August 2, 1991 until it re-opened on October 20,
1991.[48] Mr. Sacramento, however, cannot state with certainty the amount of
such unrealized income.[49] Meanwhile, TRCDCs accountant, Merle Cruz,
stated that based on the corporations financial statement for the years 1990
and 1991,[50] they derived the amount of P120,000.00 as annual income from
rent.[51] From said financial statement, it is safe to presume that TRCDC
generated a monthly income of P10,000.00 a month (P120,000.00 annual
income divided by 12 months). At best therefore, whatever actual damages
that petitioner suffered from the cockpits closure for a period of two months
can be reasonably summed up only to P20,000.00.
Such award of damages shall earn interest at the legal rate of six percent
(6%) per annum, which shall be computed from the time of the filing of the
Complaint on August 22, 1991, until the finality of this decision. After the
present decision becomes final and executory, the rate of interest shall
increase to twelve percent (12%) per annum from such finality until its
satisfaction, this interim period being deemed to be equivalent to a
forbearance of credit.[52] This is in accord with the guidelines laid down by the
Court in Eastern Shipping Lines, Inc. vs. Court of Appeals,[53] regarding the
manner of computing legal interest, viz.:

II. With regard particularly to an award of interest in the concept of actual and
compensatory damages, the rate of interest, as well as the accrual thereof, is
imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of

money, i.e., a loan or forbearance of money, the interest due should be that
which may have been stipulated in writing. Furthermore, the interest due shall
itself earn legal interest from the time it is judicially demanded. In the absence
of stipulation, the rate of interest shall be 12% per annum to be computed
from default, i.e., from judicial or extrajudicial demand under and subject to
the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damages awarded may be imposed at
the discretion of the court at the rate of 6% per annum. No interest, however,
shall be adjudged on unliquidated claims or damages except when or until the
demand can be established with reasonable certainty. Accordingly, where the
demand is established with reasonable certainty, the interest shall begin to
run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil
Code) but when such certainty cannot be so reasonably established at the
time the demand is made, the interest shall begin to run only from the date the
judgment of the court is made (at which time quantification of damages may
be deemed to have been reasonably ascertained). The actual base for the
computation of legal interest shall, in any case, be on the amount finally
adjudged.

3. When the judgment of the court awarding a sum of money becomes final
and executory, the rate of legal interest, whether the case falls under
paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality
until its satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit.[54]

Petitioner also claims the amount of P1,100,000.00 as compensation for

lost goodwill or reputation. It alleged that with the unjust and wrongful conduct
of the defendants as above-described, plaintiff stands to lose its goodwill and
reputation established for the past 20 years.[55]
An award of damages for loss of goodwill or reputation falls under actual
or compensatory damages as provided in Article 2205 of the Civil Code, to
wit:

Art. 2205. Damages may be recovered:

(1) For loss or impairment of earning capacity in cases of temporary or

permanent personal injury;

(2) For injury to the plaintiffs business standing or commercial credit.

Even if it is not recoverable as compensatory damages, it may still be

awarded in the concept of temperate or moderate damages.[56] In arriving at a
reasonable level of temperate damages to be awarded, trial courts are guided
by the ruling that:
. . . There are cases where from the nature of the case, definite proof of
pecuniary loss cannot be offered, although the court is convinced that there
has been such loss. For instance, injury to one's commercial credit or to the
goodwill of a business firm is often hard to show certainty in terms of money.
Should damages be denied for that reason? The judge should be empowered
to calculate moderate damages in such cases, rather than that the plaintiff
should suffer, without redress from the defendant's wrongful act. (Araneta v.
Bank of America, 40 SCRA 144, 145)[57]

In this case, aside from the nebulous allegation of petitioner in its

amended complaint, there is no evidence on record, whether testimonial or
documentary, to adequately support such claim. Hence, it must be denied.
Petitioners claim for moral damages must likewise be denied. The award
of moral damages cannot be granted in favor of a corporation because, being
an artificial person and having existence only in legal contemplation, it has no
feelings, no emotions, no senses. It cannot, therefore, experience physical
suffering and mental anguish, which can be experienced only by one having a
nervous system.[58] Petitioner being a corporation,[59] the claim for moral
damages must be denied.
With regard to the claim for exemplary damages, it is a requisite in the
grant thereof that the act of the offender must be accompanied by bad faith or
done in wanton, fraudulent or malevolent manner.[60] Moreover, where a party
is not entitled to actual or moral damages, an award of exemplary damages is
likewise baseless.[61] In this case, petitioner failed to show that respondent
acted in bad faith, or in wanton, fraudulent or malevolent manner.
Petitioner likewise claims the amount of P50,000.00 as attorneys fees, the
sum of P1,000.00 for every appearance of its counsel, plus costs of suit. It is
well settled that no premium should be placed on the right to litigate and not
every winning party is entitled to an automatic grant of attorney's fees. The
party must show that he falls under one of the instances enumerated in Article
2208 of the Civil Code. In this case, since petitioner was compelled to engage
the services of a lawyer and incurred expenses to protect its interest and right
over the subject property, the award of attorneys fees is proper. However
there are certain standards in fixing attorney's fees, to wit: (1) the amount and
the character of the services rendered; (2) labor, time and trouble involved; (3)
the nature and importance of the litigation and business in which the services
were rendered; (4) the responsibility imposed; (5) the amount of money and
the value of the property affected by the controversy or involved in the
employment; (6) the skill and the experience called for in the performance of
the services; (7) the professional character and the social standing of the
attorney; and (8) the results secured, it being a recognized rule that an
attorney may properly charge a much larger fee when it is contingent than
when it is not.[62]Considering the foregoing, the award of P10,000.00 as
attorneys fees, including the costs of suit, is reasonable under the
circumstances.
WHEREFORE, the instant Petition for Review is PARTIALLY GRANTED.
The Court of Appeals Decision dated June 14, 1999 in CA-G.R. CV No. 43770
is MODIFIED as follows:

(1) the Kasulatan ng Bilihan Patuluyan ng Lupa dated August 8, 1990

between Catalina Matienzo Fausto and respondent Anunciacion Fausto
Pacunayen is hereby deemed rescinded;

(2) The Heirs of the deceased Catalina Matienzo Fausto who are hereby
deemed substituted as respondents, represented by respondent Anunciacion
Fausto Pacunayen, are ORDERED to recognize the obligation of Catalina
Matienzo Fausto under the Contract of Lease with respect to the priority right
of petitioner Tanay Recreation Center and Development Corp. to purchase
the subject property under reasonable terms and conditions;

(3) Transfer Certificate of Title No. M-35468 shall remain in the name of
respondent Anunciacion Fausto Pacunayen, which shall be cancelled in the
event petitioner successfully purchases the subject property;

(4) Respondent is ORDERED to pay petitioner Tanay Recreation Center and

Development Corporation the amount of Twenty Thousand Pesos
(P20,000.00) as actual damages, plus interest thereon at the legal rate of six
percent (6%) per annum from the filing of the Complaint until the finality of this
Decision. After this Decision becomes final and executory, the applicable rate
shall be twelve percent (12%) per annum until its satisfaction; and,

(5) Respondent is ORDERED to pay petitioner the amount of Ten Thousand

Pesos (P10,000.00) as attorneys fees, and to pay the costs of suit.

(6) Let the case be remanded to the Regional Trial Court, Morong, Rizal
(Branch 78) for further proceedings on the determination of the reasonable
terms and conditions of the offer to sell by respondents to petitioner, without
prejudice to possible mediation between the parties.

The rest of the unaffected dispositive portion of the Court of Appeals

Decision is AFFIRMED.
 SO ORDERED.
Puno, (Chairman), Callejo, Sr., Tinga, and Chico-Nazario, JJ., concur.

2) PUP vs Golden Horizon Realty Corporation

FIRST DIVISION

POLYTECHNIC UNIVERSITY G.R. No. 183612

OF THE PHILIPPINES,
Petitioner,

- versus -

GOLDEN HORIZON REALTY

CORPORATION,
Respondent.

x------------------------------------------x

NATIONAL DEVELOPMENT G.R. No. 184260

COMPANY,
Petitioner, Present:

- versus - PUNO, C.J., Chairperson,

CARPIO MORALES,
GOLDEN HORIZON REALTY LEONARDO-DE CASTRO,
CORPORATION, BERSAMIN, and
Respondent. VILLARAMA, JR., JJ.

Promulgated:

March 15, 2010

x-----------------------------------------------------------------------------------------x

DECISION
VILLARAMA, JR., J.:

The above-titled consolidated petitions filed under Rule 45 of the 1997 Rules of
Civil Procedure, as amended, seek to reverse the Decision[1] dated June 25, 2008
and Resolution dated August 22, 2008 of the Court of Appeals (CA) in CA-G.R.
CV No. 84399 which affirmed the Decision[2] dated November 25, 2004 of the
Regional Trial Court (RTC) of Makati City, Branch 144 in Civil Case No. 88-
2238.

The undisputed facts are as follows:

Petitioner National Development Company (NDC) is a government- owned and

controlled corporation, created under Commonwealth Act No. 182, as amended by
Com. Act No. 311 and Presidential Decree (P.D.) No. 668. Petitioner Polytechnic
University of the Philippines (PUP) is a public, non-sectarian, non-profit
educational institution created in 1978 by virtue of P.D. No. 1341.

In the early sixties, NDC had in its disposal a ten (10)-hectare property located
along Pureza St., Sta. Mesa, Manila. The estate was popularly known as the NDC
Compound and covered by Transfer Certificate of Title Nos. 92885, 110301 and
145470.

On September 7, 1977, NDC entered into a Contract of Lease (C-33-77) with

Golden Horizon Realty Corporation (GHRC) over a portion of the property, with
an area of 2,407 square meters for a period of ten (10) years, renewable for another
ten (10) years with mutual consent of the parties.[3]

On May 4, 1978, a second Contract of Lease (C-12-78) was executed between

NDC and GHRC covering 3,222.80 square meters, also renewable upon mutual
consent after the expiration of the ten (10)-year lease period. In addition, GHRC
as lessee was granted the option to purchase the area leased, the price to be
negotiated and determined at the time the option to purchase is exercised. [4]
Under the lease agreements, GHRC was obliged to construct at its own expense
buildings of strong material at no less than the stipulated cost, and other
improvements which shall automatically belong to the NDC as lessor upon the
expiration of the lease period. Accordingly, GHRC introduced permanent
improvements and structures as required by the terms of the contract. After the
completion of the industrial complex project, for which GHRC spent P5 million, it
was leased to various manufacturers, industrialists and other businessmen thereby
generating hundreds of jobs.[5]

On June 13, 1988, before the expiration of the ten (10)-year period under the
second lease contract, GHRC wrote a letter to NDC indicating its exercise of the
option to renew the lease for another ten (10) years. As no response was received
from NDC, GHRC sent another letter on August 12, 1988, reiterating its desire to
renew the contract and also requesting for priority to negotiate for its purchase
should NDC opt to sell the leased premises.[6] NDC still did not reply but
continued to accept rental payments from GHRC and allowed the latter to remain
in possession of the property.

Sometime after September 1988, GHRC discovered that NDC had decided to
secretly dispose the property to a third party. On October 21, 1988, GHRC filed in
the RTC a complaint for specific performance, damages with preliminary
injunction and temporary restraining order.[7]

In the meantime, then President Corazon C. Aquino issued Memorandum Order No.
214 dated January 6, 1989, ordering the transfer of the whole NDC Compound to the
National Government, which in turn would convey the said property in favor of PUP
at acquisition cost. The memorandum order cited the serious need of PUP,
considered the Poor Mans University, to expand its campus, which adjoins the NDC
Compound, to accommodate its growing student population, and the willingness of
PUP to buy and of NDC to sell its property. The order of conveyance of the 10.31-
hectare property would automatically result in the cancellation of NDCs total
obligation in favor of the National Government in the amount of P57,193,201.64.[8]

On February 20, 1989, the RTC issued a writ of preliminary injunction enjoining
NDC and its attorneys, representatives, agents and any other persons assisting it
from proceeding with the sale and disposition of the leased premises.[9]
On February 23, 1989, PUP filed a motion to intervene as party defendant,
claiming that as a purchaser pendente lite of a property subject of litigation it is
entitled to intervene in the proceedings. The RTC granted the said motion and
directed PUP to file its Answer-in-Intervention.[10]

PUP also demanded that GHRC vacate the premises, insisting that the latters lease
contract had already expired. Its demand letter unheeded by GHRC, PUP filed
an ejectment case (Civil Case No. 134416) before the Metropolitan Trial Court
(MeTC) of Manila on January 14, 1991.[11]

Due to this development, GHRC filed an Amended and/or Supplemental

Complaint to include as additional defendants PUP, Honorable Executive
Secretary Oscar Orbos and Judge Ernesto A. Reyes of the Manila MeTC, and to
enjoin the afore-mentioned defendants from prosecuting Civil Case No. 134416
for ejectment. A temporary restraining order was subsequently issued by the RTC
enjoining PUP from prosecuting and Judge Francisco Brillantes, Jr. from
proceeding with the ejectmentcase.[12]

In its Second Amended and/or Supplemental Complaint, GHRC argued that

Memorandum Order No. 214 is a nullity, for being violative of the writ of
injunction issued by the trial court, apart from being an infringement of the
Constitutional prohibition against impairment of obligation of contracts, an
encroachment on legislative functions and a bill of attainder. In the alternative,
should the trial court adjudge the memorandum order as valid, GHRC contended
that its existing right must still be respected by allowing it to purchase the leased
premises.[13]

Pre-trial was set but was suspended upon agreement of the parties to await the final
resolution of a similar case involving NDC, PUP and another lessee of NDC,
Firestone Ceramics, Inc. (Firestone), then pending before the RTC of Pasay
City.[14]

On November 14, 2001, this Court rendered a decision in G.R. Nos. 143513
(Polytechnic University of the Philippines v. Court of Appeals) and 143590
(National Development Corporation v. Firestone Ceramics, Inc.),[15] which
declared that the sale to PUP by NDC of the portion leased by Firestone pursuant
to Memorandum Order No. 214 violated the right of first refusal granted to
Firestone under its third lease contract with NDC. We thus decreed:
WHEREFORE, the petitions in G.R. No. 143513 and G.R. No.
143590 are DENIED. Inasmuch as the first contract of lease fixed the
area of the leased premises at 2.90118 hectares while the second contract
placed it at 2.60 hectares, let a ground survey of the leased premises be
immediately conducted by a duly licensed, registered surveyor at the
expense of private respondent FIRESTONE CERAMICS, INC., within
two (2) months from the finality of the judgment in this case. Thereafter,
private respondent FIRESTONE CERAMICS, INC., shall have six (6)
months from receipt of the approved survey within which to exercise its
right to purchase the leased property at P1,500.00 per square meter, and
petitioner Polytechnic University of the Philippines is ordered
to reconvey the property to FIRESTONE CERAMICS, INC., in the
exercise of its right of first refusal upon payment of the purchase price
thereof.

SO ORDERED.[16]

The RTC resumed the proceedings and when mediation and pre-trial failed to settle
the case amicably, trial on the merits ensued.[17]

On November 25, 2004, the RTC rendered its decision upholding the right of first
refusal granted to GHRC under its lease contract with NDC and ordering PUP
to reconvey the said portion of the property in favor of GHRC. The dispositive
portion reads:
WHEREFORE, premises considered, judgment is hereby rendered
in favor of the plaintiff and against the defendants ordering the plaintiff
to cause immediate ground survey of the premises subject of the leased
contract under Lease Contract No. C-33-77 and C-12-78 measuring
2,407 and 3,222.8 square meters respectively, by a duly licensed and
registered surveyor at the expense of the plaintiff within two months
from receipt of this Decision and thereafter, the plaintiff shall have six
(6) months from receipt of the approved survey within which to exercise
its right to purchase the leased property at P554.74 per square
meter. And finally, the defendant PUP, in whose name the property is
titled, is hereby ordered to reconvey the aforesaid property to the
plaintiff in the exercise of its right of its option to buy or first
refusal upon payment of the purchase price thereof.
 The defendant NDC is hereby further ordered to pay the plaintiff
attorneys fees in the amount of P100,000.00.

The case against defendant Executive Secretary is dismissed and

this decision shall bind defendant Metropolitan Trial Court, Branch 20 of
Manila.

With costs against defendants NDC and PUP.

SO ORDERED.[18]

NDC and PUP separately appealed the decision to the CA.[19] By Decision of June
25, 2008, the CA affirmed in toto the decision of the RTC.[20]

Both the RTC and the CA applied this Courts ruling in Polytechnic University of
the Philippines v. Court of Appeals (supra), considering that GHRC is similarly
situated as a lessee of NDC whose right of first refusal under the lease contract was
violated by the sale of the property to PUP without NDC having first offered to sell
the same to GHRC despite the latters request for the renewal of the lease and/or to
purchase the leased premises prior to the expiration of the second lease contract.
The CA further agreed with the RTCs finding that there was an implied renewal of
the lease upon the failure of NDC to act on GHRCs repeated requests for renewal
of the lease contract, both verbal and written, and continuing to accept monthly
rental payments from GHRC which was allowed to continue in possession of the
leased premises.

The CA also rejected the argument of NDC and PUP that even assuming that
GHRC had the right of first refusal, said right pertained only to the second lease
contract, C-12-78 covering 3,222.80 square meters, and not to the first lease
contract, C-33-77 covering 2,407 square meters, which had already expired. It
sustained the RTCs finding that the two (2) lease contracts were interrelated
because each formed part of GHRCs industrial complex, such that business
operations would be rendered useless and inoperative if the first contract were to
be detached from the other, as similarly held in the afore-mentioned case
of Polytechnic University of the Philippines v. Court of Appeals.
Petitioner PUP argues that respondents right to exercise the option to purchase had
expired with the termination of the original contract of lease and was not carried
over to the subsequent implied new lease between respondent and petitioner
NDC. As testified to by their witnesses Leticia Cabantog and
Atty. Rhoel Mabazza, there was no agreement or document to the effect that
respondents request for extension or renewal of the subject contracts of lease for
another ten (10) years was approved by NDC. Hence, respondent can no longer
exercise the option to purchase the leased premises when the same were conveyed
to PUP pursuant to Memorandum Order No. 214 dated January 6, 1989, long after
the expiration of C-33-77 and C-12-78 in September 1988.[21]

Petitioner PUP further contends that while it is conceded that there was an implied
new lease between respondent and petitioner NDC after the expiration of the lease
contracts, the same did not include the right of first refusal originally granted to
respondent. The CA should have applied the ruling in Dizon v. Magsaysay[22] that
the lessee cannot any more exercise its option to purchase after the lapse of the one
(1)-year period of the lease contract. With the implicit renewal of the lease on a
monthly basis, the other terms of the original contract of lease which are revived in
the implied new lease under Article 1670 of the Civil Code are only those terms
which are germane to the lessees right of continued enjoyment of the property
leased. The provision entitling the lessee the option to purchase the leased premises
is not deemed incorporated in the impliedly renewed contract because it is alien to
the possession of the lessee. Consequently, as in this case, respondents right of
option to purchase the leased premises was not violated despite the impliedly
renewed contract of lease with NDC. Respondent cannot favorably invoke the
decision in G.R. Nos. 143513 and 143590 (Polytechnic University of the
Philippines v. Court of Appeals)for the simple reason, among others, that unlike in
said cases, the contracts of lease of respondent with NDC were not mutually
extended or renewed for another ten (10) years. Thus, when the leased premises
were conveyed to PUP, respondent did not any more have any right of first refusal,
which incidentally appears only in the second lease contract and not in the first
lease contract.[23]

On its part, petitioner NDC assails the CA in holding that the contracts of lease
were impliedly renewed for another ten (10)-year period. The provisions of C-33-
77 and C-12-78 clearly state that the lessee is granted the option to renew for
another ten (10) years with the mutual consent of both parties. As regards the
continued receipt of rentals by NDC and possession by the respondent of the leased
premises, the impliedly renewed lease was only month-to-month and not ten (10)
years since the rentals are being paid on a monthly basis, as held in Dizon v.
Magsaysay.[24]

Petitioner NDC further faults the CA in sustaining the RTCs decision which
erroneously granted respondent the option to purchase the leased premises at the
rate of P554.74 per square meter, the same rate for which NDC sold the property to
petitioner PUP and/or the National Government, which is the mere acquisition cost
thereof. It must be noted that such consideration or rate was imposed by
Memorandum Order No. 214 under the premise that it shall, in effect, be a sale
and/or purchase from one (1) government agency to another. It was intended
merely as a transfer of one (1) user of the National Government to another, with
the beneficiary, PUP in this case, merely returning to the petitioner/transferor the
cost of acquisition thereof, as appearing on its accounting books. It does not in any
way reflect the true and fair market value of the property, nor was it a price a
willing seller would demand and accept for parting with his real property. Such
benefit, therefore, cannot be extended to respondent as a private entity, as the latter
does not share the same pocket, so to speak, with the National Government. [25]

The issue to be resolved is whether or not our ruling in Polytechnic University of

the Philippines v. Court of Appeals applies in this case involving another lessee of
NDC who claimed that the option to purchase the portion leased to it was similarly
violated by the sale of the NDC Compound in favor of PUP pursuant to
Memorandum Order No. 214.

We rule in the affirmative.

The second lease contract contained the following provision:

III. It is mutually agreed by the parties that this Contract of Lease

shall be in full force and effect for a period of ten (10) years counted
from the effectivity of the payment of rental as provided under sub-
paragraph (b) of Article I, with option to renew for another ten (10) years
 with the mutual consent of both parties. In no case should the rentals be
increased by more than 100% of the original amount fixed.

Lessee shall also have the option to purchase the area leased,
the price to be negotiated and determined at the time the option to
purchase is exercised. [EMPHASIS SUPPLIED]

An option is a contract by which the owner of the property agrees with another
person that the latter shall have the right to buy the formers property at a fixed
price within a certain time. It is a condition offered or contract by which the owner
stipulates with another that the latter shall have the right to buy the property at a
fixed price within a certain time, or under, or in compliance with certain terms and
conditions; or which gives to the owner of the property the right to sell or demand
a sale.[26] It binds the party, who has given the option, not to enter into the principal
contract with any other person during the period designated, and, within that
period, to enter into such contract with the one to whom the option was granted, if
the latter should decide to use the option.[27]

Upon the other hand, a right of first refusal is a contractual grant, not of the sale
of a property, but of the first priority to buy the property in the event the owner
sells the same.[28] As distinguished from an option contract, in a right of first
refusal, while the object might be made determinate, the exercise of
the right of first refusal would be dependent not only on the owners eventual
intention to enter into a binding juridical relation with another but also on terms,
including the price, that are yet to be firmed up.[29]

As the option to purchase clause in the second lease contract has no definite period
within which the leased premises will be offered for sale to respondent lessee and
the price is made subject to negotiation and determined only at the time the option
to buy is exercised, it is obviously a mere right of refusal, usually inserted in lease
contracts to give the lessee the first crack to buy the property in case
the lessor decides to sell the same. That respondent was granted a right of first
refusal under the second lease contract appears not to have been disputed by
petitioners. What petitioners assail is the CAs erroneous conclusion that such right
of refusal subsisted even after the expiration of the original lease period, when
respondent was allowed to continue staying in the leased premises under an
implied renewal of the lease and without the right of refusal carried over to such
month-to-month lease. Petitioners thus maintain that no right of refusal was
violated by the sale of the property in favor of PUP pursuant to Memorandum
Order No. 214.

Petitioners position is untenable.

When a lease contract contains a right of first refusal, the lessor has the legal duty
to the lessee not to sell the leased property to anyone at any price until after
the lessor has made an offer to sell the property to the lessee and the lessee has
failed to accept it. Only after the lessee has failed to exercise his right of first
priority could the lessor sell the property to other buyers under the same terms and
conditions offered to the lessee, or under terms and conditions more favorable to
the lessor.[30]

Records showed that during the hearing on the application for a writ of preliminary
injunction, respondent adduced in evidence a letter of Antonio A. Henson dated 15
July 1988 addressed to Mr. Jake C. Lagonera, Director and Special Assistant to
Executive Secretary Catalino Macaraeg, reviewing a proposed memorandum order
submitted to President Corazon C. Aquino transferring the whole NDC Compound,
including the premises leased by respondent, in favor of petitioner PUP. This letter
was offered in evidence by respondent to prove the existence of documents as of
that date and even prior to the expiration of the second lease contract or the lapse
of the ten (10)-year period counted from the effectivity of the rental payment --
that is, one hundred and fifty (150) days from the signing of the contract (May 4,
1978), as provided in Art. I, paragraph (b) of C-12-78, or on October 1, 1988.

Respondent thus timely exercised its option to purchase on August 12,

1988. However, considering that NDC had been negotiating through the National
Government for the sale of the property in favor of PUP as early as July 15, 1988
without first offering to sell it to respondent and even when respondent
communicated its desire to exercise the option to purchase granted to it under the
lease contract, it is clear that NDC violated respondents right of first refusal. Under
the premises, the matter of the right of refusal not having been carried over to the
impliedly renewed month-to-month lease after the expiration of the second lease
contract on October 21, 1988 becomes irrelevant since at the time of the
negotiations of the sale to a third party, petitioner PUP, respondents right of first
refusal was still subsisting.

Petitioner NDC in its memorandum contended that the CA erred in applying the
ruling in Polytechnic University of the Philippines v. Court of Appeals pointing out
that the case of lessee Firestone Ceramics, Inc. is different because the lease
contract therein had not yet expired while in this case respondents lease contracts
have already expired and never renewed. The date of the expiration of the lease
contract in said case is December 31, 1989 which is prior to the issuance of
Memorandum Order No. 214 on January 6, 1989. In contrast, respondents lease
contracts had already expired (September 1988) at the time said memorandum
order was issued.[31]

Such contention does not hold water. As already mentioned, the reckoning point of
the offer of sale to a third party was not the issuance of Memorandum Order No.
214 on January 6, 1989 but the commencement of such negotiations as early as
July 1988 when respondents right of first refusal was still subsisting and the lease
contracts still in force. Petitioner NDC did not bother to respond to respondents
letter of June 13, 1988 informing it of respondents exercise of the option to renew
and requesting to discuss further the matter with NDC, nor to the subsequent letter
of August 12, 1988 reiterating the request for renewing the lease for another ten
(10) years and also the exercise of the option to purchase under the lease
contract. Petitioner NDC had dismissed these letters as mere informative in nature,
and a request at its best.[32]

Perusal of the letter dated August 12, 1988, however, belies such claim of
petitioner NDC that it was merely informative, thus:

August 12, 1988

HON. ANTONIO HENSON

General Manager
NATIONAL DEVELOPMENT COMPANY
377 Se(n). Gil J. Puyat Avenue
Makati, Metro Manila
 REF: Contract of Lease
Nos. C-33-77 & C-12-78

Dear Sir:

This is further to our earlier letter dated June 13, 1988 formally
advising your goodselves of our intention to exercise our option for
another ten (10) years. Should the National Development Company
opt to sell the property covered by said leases, we also request for
priority to negotiate for its purchase at terms and/or conditions
mutually acceptable.

As a backgrounder, we wish to inform you that since the start of our

lease, we have improved on the property by constructing bodega-type
buildings which presently house all legitimate trading and manufacturing
concerns. These business are substantial taxpayers, employ not less than
300 employees and contribute even foreign earnings.

It is in this context that we are requesting for the extension of the

lease contract to prevent serious economic disruption and
dislocation of the business concerns, as well as provide ourselves, the
lessee, an opportunity to recoup our investments and obtain a fair
return thereof.

Your favorable consideration on our request will be very much

appreciated.

very truly yours,

TIU HAN TENG

President[33]

As to petitioners argument that respondents right of first refusal can be invoked

only with respect to the second lease contract which expressly provided for the
option to purchase by the lessee, and not in the first lease contract which contained
no such clause, we sustain the RTC and CA in finding that the second contract,
covering an area of 3,222.80 square meters, is interrelated to and inseparable from
the first contract over 2,407 square meters. The structures built on the leased
premises, which are adjacent to each other, form part of an integrated system of a
commercial complex leased out to manufacturers, fabricators and other
businesses. Petitioners submitted a sketch plan and pictures taken of the driveways,
in an effort to show that the leased premises can be used separately by respondent,
and that the two (2) lease contracts are distinct from each other. [34] Such was a
desperate attempt to downplay the commercial purpose of respondents substantial
improvements which greatly contributed to the increased value of the leased
premises. To prove that petitioner NDC had considered the leased premises as a
single unit, respondent submitted evidence showing that NDC issued only one (1)
receipt for the rental payments for the two portions.[35] Respondent further
presented the blueprint plan prepared by its witness, Engr. Alejandro E. Tinio, who
supervised the construction of the structures on the leased premises, to show the
building concept as a one-stop industrial site and integrated commercial
complex.[36]

In fine, the CA was correct in declaring that there exists no justifiable reason not to
apply the same rationale in Polytechnic University of the Philippines v. Court of
Appeals in the case of respondent who was similarly prejudiced by petitioner
NDCs sale of the property to PUP, as to entitle the respondent to exercise its option
to purchase until October 1988 inasmuch as the May 4, 1978 contract embodied
the option to renew the lease for another ten (10) years upon mutual consent and
giving respondent the option to purchase the leased premises for a price to be
negotiated and determined at the time such option was exercised by respondent. It
is to be noted that Memorandum Order No. 214 itself declared that the transfer is
subject to such liens/leases existing [on the subject property]. Thus:
...we now proceed to determine whether FIRESTONE should be
allowed to exercise its right of first refusal over the property. Such
right was expressly stated by NDC and FIRESTONE in par. XV of
their third contract denominated as A-10-78 executed on 22
December 1978 which, as found by the courts a quo, was interrelated
to and inseparable from their first contract denominated as C-30-65
executed on 24 August 1965 and their second contract denominated
as C-26-68 executed on 8 January 1969. Thus -

Should the LESSOR desire to sell the leased

premises during the term of this Agreement, or any
extension thereof, the LESSOR shall first give to the
LESSEE, which shall have the right of first option to
 purchase the leased premises subject to mutual agreement
of both parties.

In the instant case, the right of first refusal is an integral and

indivisible part of the contract of lease and is inseparable from the whole
contract. The consideration for the right is built into the reciprocal
obligations of the parties. Thus, it is not correct for petitioners to insist
that there was no consideration paid by FIRESTONE to entitle it to the
exercise of the right, inasmuch as the stipulation is part and parcel of the
contract of lease making the consideration for the lease the same as that
for the option.

It is a settled principle in civil law that when a lease contract

contains a right of first refusal, the lessor is under a legal duty to the
lessee not to sell to anybody at any price until after he has made an offer
to sell to the latter at a certain price and the lessee has failed to accept it.
The lessee has a right that the lessors first offer shall be in his favor.

The option in this case was incorporated in the contracts of

lease by NDC for the benefit of FIRESTONE which, in view of the
total amount of its investments in the property, wanted to be assured
that it would be given the first opportunity to buy the property at a
price for which it would be offered. Consistent with their
agreement, it was then implicit for NDC to have first offered the
leased premises of 2.60 hectares to FIRESTONE prior to the sale in
favor of PUP. Only if FIRESTONE failed to exercise its right of
first priority could NDC lawfully sell the property to petitioner
PUP.[37] [EMPHASIS SUPPLIED]

As we further ruled in the afore-cited case, the contractual grant of a right of first
refusal is enforceable, and following an earlier ruling in Equatorial Realty
Development, Inc. v. Mayfair Theater, Inc.,[38] the execution of such right consists
in directing the grantor to comply with his obligation according to the terms at
which he should have offered the property in favor of the grantee and at that price
when the offer should have been made. We then determined the proper rate at
which the leased portion should be reconveyed to respondent by PUP, to whom
the lessor NDC sold it in violation of respondent lessees right of first refusal, as
follows:
 It now becomes apropos to ask whether the courts a quo were
correct in fixing the proper consideration of the sale at P1,500.00 per
square meter. In contracts of sale, the basis of the right of first refusal
must be the current offer of the seller to sell or the offer to purchase of
the prospective buyer. Only after the lessee-grantee fails to exercise its
right under the same terms and within the period contemplated can the
owner validly offer to sell the property to a third person, again, under the
same terms as offered to the grantee. It appearing that the whole NDC
compound was sold to PUP for P554.74 per square meter, it would have
been more proper for the courts below to have ordered the sale of the
property also at the same price. However, since FIRESTONE never
raised this as an issue, while on the other hand it admitted that the
value of the property stood at P1,500.00 per square meter, then we
see no compelling reason to modify the holdings of the courts a
quo that the leased premises be sold at that price.[39] [EMPHASIS
SUPPLIED]

In the light of the foregoing, we hold that respondent, which did not offer any
amount to petitioner NDC, and neither disputed the P1,500.00 per square meter
actual value of NDCs property at that time it was sold to PUP at P554.74 per
square meter, as duly considered by this Court in the Firestone case, should be
bound by such determination. Accordingly, the price at which the leased premises
should be sold to respondent in the exercise of its right of first refusal under the
lease contract with petitioner NDC, which was pegged by the RTC at P554.74 per
square meter, should be adjusted to P1,500.00 per square meter, which more
accurately reflects its true value at that time of the sale in favor of petitioner PUP.

Indeed, basic is the rule that a party to a contract cannot unilaterally withdraw a
right of first refusal that stands upon valuable consideration. [40] We have
categorically ruled that it is not correct to say that there is no consideration for the
grant of the right of first refusal if such grant is embodied in the same contract of
lease. Since the stipulation forms part of the entire lease contract, the consideration
for the lease includes the consideration for the grant of the right of first refusal. In
entering into the contract, the lessee is in effect stating that it consents to lease the
premises and to pay the price agreed upon provided the lessor also consents that,
should it sell the leased property, then, the lessee shall be given the right to match
the offered purchase price and to buy the property at that price.[41]
We have further stressed that not even the avowed public welfare or the
constitutional priority accorded to education, invoked by petitioner PUP in
the Firestone case, would serve as license for us, and any party for that matter, to
destroy the sanctity of binding obligations. While education may be prioritized for
legislative and budgetary purposes, it is doubtful if such importance can be used to
confiscate private property such as the right of first refusal granted to a lessee of
petitioner NDC.[42]Clearly, no reversible error was committed by the CA in
sustaining respondents contractual right of first refusal and ordering
the reconveyance of the leased portion of petitioner NDCs property in its favor.

WHEREFORE, the petitions are DENIED. The Decision dated November 25,
2004 of the Regional Trial Court of Makati City, Branch 144 in Civil Case No. 88-
2238, as affirmed by the Court of Appeals in its Decision dated June 25, 2008 in
CA-G.R. CV No. 84399, is hereby AFFIRMED with MODIFICATION in that
the price to be paid by respondent Golden Horizon Realty Corporation for the
leased portion of the NDC Compound under Lease Contract Nos. C-33-77 and C-
12-78 is hereby increased to P1,500.00 per square meter.

No pronouncement as to costs.

SO ORDERED.

3) Macion vs Guiani

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 106837 August 4, 1993

HENRY MACION and ANGELES MACION, petitioners,

vs.
HON. JAPAL M. GUIANI, in his capacity as Presiding Judge of the Regional Trial Court
Branch 14, Cotabato City and DELA VIDA INSTITUTE represented by MS. JOSEPHINE
LANZADERAS, respondents.

Leonardo J. Rendon for petitioners.

Mama Dalandag for private respondent Dela Vida Institute.

ROMERO, J.:

The subject of this litigation revolves around two (2) parcels of adjoining lots owned by petitioners
which are the proposed extension sites of De La Vida Institute, an educational institution located in
Cotabato City.

On April 26, 1991, the petitioners and private respondent entered into a contract to sell under which
terms, private respondent, as president of De la Vida Institute, assured petitioners that they would
buy the said properties on or before July 31, 1991 in the amount of P1,750,000.00. In the meantime,
petitioners surrendered the physical possession of the two lots to private respondent who promptly
built an edifice worth P800,000.00.1

But on July 31, 1991, the sale did not materialize. Consequently, petitioners filed a complaint for
unlawful detainer against private respondent (MTCC Civil Case No. 2739). In retaliation, private
respondent filed a complaint for reformation of the contract to sell executed on April 26, 1991 (Civil
Case 592).2 Afterwards, the parties met to settle their differences.

On February 6, 1992, the parties entered into a compromise agreement which stipulated among
others that petitioners would give private respondent five (5) months to raise the amount of
P2,060,000.00;3 that in the event of failure to raise the said amount within the designated period,
private respondent would vacate the premises immediately. The compromise agreement, inter alia,
provided:

6. that upon the execution of this agreement, the defendant will furnish the plaintiff
with xerox copy of the land title for each lot which the latter may use for the purpose
of providing information in securing a loan from any financing or banking institution of
their choice.

7. that if within the period of five (5) months from and after February 6, 1992, the
plaintiff succeeds in obtaining funds for the purpose of settling their obligations with
defendants in the total sum of P2,060,000.00 the latter shall oblige themselves to
execute, sign and deliver to the former the corresponding Deed of Sale for the two
(2) lots which is the subject of this case and turn-over to said plaintiff the owner's
duplicate copy of TCT Nos. T-22004 and T-22005 of the Registry of Deeds for the
City of Cotabato.

In affirmation of the compromise agreement, the Board of Trustees of De La Vida College passed
thereafter a resolution expressing full support to the said agreement entered into between the
parties.4

On March 10, 1992, private respondent wrote petitioners that "the compromise agreement we have
had in the presence of Judge Guiani is not the same as per attached xerox copy you gave us." In
that letter, which essentially was a counter proposal, private respondent said that the price of
P2,060,000.00 was higher than they were willing to pay in the amount of P2,000,000.00 only.5 Other
matters taken up in the letter were: De la Vida Institute would admit students and hold classes until
July 6, 1992 but in case they (private respondent) fail to deliver the said amount, they would
voluntarily vacate the premises and that "in the event that the bank and other lending institutions
give its nod and approval to our loan and require the submission of other documents, you will give to
us the Deed of Sale and Owner's copies of the Titles of the two (2) to t expedite release of the
amount concerned."6

On March 25, 1992, the trial court approved the compromise agreement dated February 6, 1992.

Two (2) months after, private respondents, alleging that they had negotiated a loan from the Bank of
the Philippine Islands, wrote letters dated May 19, 20 and 26 requesting petitioners to execute with
them a contract to sell in their favor. On May 28, 1992, private respondent filed with the trial court an
urgent motion for an order directing petitioners to execute a contract to sell in private respondent's
favor in accordance with paragraph 7 of the compromise agreement.7

On July 8, 1992, petitioners filed a motion for execution of judgement alleging that after a lapse of
five (5) months from February 6, 1992, private respondent have failed to settle their obligations with
petitioners.8

In its order dated August 6, 1992, respondent judge denied the motion for execution and directed
petitioners to execute the required contract to sell in favor of private respondent. Respondent judge
opined that the proximate cause of private respondent's failure to comply with the compromise
agreement was the refusal of petitioners to execute a contract to sell as required under the
agreement. Respondent judge added that petitioners should have executed the contract to sell
because anyway they would not be prejudiced since there was no transfer of ownership involved in a
contract to sell.9

Hence this instant petition for certiorari, with prayer for a temporary restraining order enjoining
respondent judge from enforcing its August 6, 1992 order.

On October 7, 1992, petitioners filed an Omnibus Urgent Motion praying that private respondent be
ordered to consign with the court below P135,000.00 representing rentals from May 1991 to January
1992. In our resolution dated November 18, 1992, we granted said prayer. On March 9, 1992,
private respondent consigned with the Office of the Clerk of Court the sum of P135,000.00. On
March 29, 1993, petitioners filed with the lower court a motion to withdraw the consigned amount
and on April 5, 1993, the trial court released the consigned amount to petitioners. 10

The issue in the case at bar is whether or not respondent judge committed grave abuse of discretion
in ordering petitioner to execute a contract to sell in favor of private respondent.

We dismiss the petition.

The resolution of this case hinges on whether the compromise agreement gives private respondent-
buyer the right to demand from petitioner-sellers the execution of a contract to sell in favor of the
former.

Apparently, paragraph 7 of the compromise agreement does not give such right to private
respondent-buyer. To wit:
 7. that if within the period of five (5) months from and after February 6, 1992, the
plaintiff succeeds in obtaining funds for the purpose of settling their obligations with
defendants in the total sum of P2,060,000.00 the latter shall oblige themselves to
execute, sign and deliver to the former the corresponding Deed of Sale for the two
(2) lots which is the subject of this case and turn-over to said plaintiff the owner's
duplicate copy of TCT Nos. T-22004 and T-22005 of the Registry of Deeds for the
City of Cotabato. (Italics provided).

From the aforecited paragraph, it is clear that the seller is obliged to execute a Deed of Sale and not
a Contract to Sell upon payment of the full price of P2.06 million. Thereafter, the sellers would turn
over to the buyers, respondents herein, the owner's duplicate copy of Transfer Certificate of Title
Nos. T-22004 and T-22005.

However, in the interpretation of the compromise agreement, we must delve in the

contemporaneous and subsequent acts of the parties to fathom the real intention of the parties. 11 A
review of the facts reveal that even prior to the signing of the compromise agreement and the filing
of Civil Case No. 592 before the trial court, the parties had already entered into a contract to sell.
Thereafter, when the transaction failed to materialize, the parties filed suits against each other;
petitioners, their unlawful detainer case, and private respondent a complaint for reformation of
contract, alleging that petitioners in fact had caused the preparation of the contract to sell dated April
26, 1991 with the understanding that the land would be used as a collateral in obtaining a loan with
DBP.

Said contract to sell was superseded by the compromise agreement entered into on February 6,
1992 containing the abovequoted paragraph. It must be recalled that private respondent was given
five (5) months from February 6, 1992, i. e., on or before July 6, 1992 to secure the purchase price
of the two (2) lots. We note that within the time frame agreed upon by the parties, private
respondents wrote three (3) letters dated may 19, 20 and 26 requesting petitioners to execute a
contract to sell in its favor.

Under these factual circumstances, we opine that the compromise agreement must be interpreted as
bestowing upon private respondent-buyer the power to demand a contract to sell from petitioner-
sellers. Where the seller promised to execute a deed of absolute sale upon completing payment of
the price, it is a contract to sell. 12 In the case at bar, the sale is still in the executory stage since the
passing of title is subject to a suspensive condition, namely, that if private respondent is able to
secure the needed funds to be used in the purchased of the two (2) lots owned by petitioners. A
mere executory sale, one where the sellers merely promise to transfer the property at some future
date, or where some conditions have to be fulfilled before the contract is converted from an
executory to an executed one, does not pass ownership over the real estate being sold. 13

In our jurisdiction, it has been that an accepted bilateral promise to buy and sell is in a sense similar
to, but not exactly the same, as a perfected contract of sale because there is already a meeting of
minds upon the thing which is the object of the contract and upon the price. 14 But a contract of sale
is consummated only upon the delivery and payment. It cannot be denied that the compromise
agreement, having been signed by both parties, is tantamount to a bilateral promise to buy and sell a
certain thing for a price certain. Hence, this gives the contracting parties rights in personam, such
that each has the right to demand from the other the fulfillment of their respective
undertakings. 15 Demandability may be exercised at any time after the execution of the Deed. 16

The order of respondent judge directing petitioners to issue a contract to sell does not place
petitioners in any danger of losing their property without consideration, for, to repeat, in a contract to
sell there is no immediate transfer of ownership. In contracts to sell, payment is a positive
suspensive condition, failure of which does not constitute a breach but an event that prevents the
obligation of the vendor to convey title from materializing, in accordance with Article 1184 of the Civil
Code. 17 Petitioners as promisors were never obliged to convey title before the happening of the
suspensive condition. In fact, nothing stood in the way of their selling the property to another after a
unsuccessful demand for said price upon the expiration of the time agreed upon.

Since the period given by the petitioners under the compromise agreement has already lapsed, we
order the trial court to fix anew a period within which private respondents could secure the needed
funds for the purchase of the
land. 18 Moreover, considering that private respondents have only consigned rentals from May 1991
to January 1992 and have since accepted students for the present school year, it is only proper that
they be ordered to deposit the monthly rentals collected thereafter with the trial court.

WHEREFORE, the instant petition is DISMISSED. Petitioners are hereby ordered to EXECUTE a
contract to sell in favor of private respondents. On the other hand, private respondent is ordered to
DEPOSIT with the trial court current rentals pending consummation of the transaction between the
parties. The trial court is ordered to FIX anew the period within which private respondents may be
given the opportunity to raise funds for the purchase of the two (2) adjoining lots owned by
petitioners.

SO ORDERED.

Feliciano, Bidin, Melo and Vitug, JJ., concur.

# Footnotes

1 Exhibit D, Rollo, p. 27.

2 Exhibit E, Rollo, p. 30.

3 Calculated as follows: P1,750,000 as price of defendants' 2 parcels of lots situated

along Notre Dame Avenue, Cotabato City + P175,000 as interest of 2% a month on
P1,750,000 for five months from February 6, 1992 to July 6, 1992. Provided the only
interest due upon full payment of P1,750,000 and back rentals of P135,000 shall be
accounted and paid by complainant. (Ex. If the above obligations are fully paid on
May, 31, 1992 then the interest from June 1, 1992 to July 6, 1992 shall no longer be
due and payable) + P135,000 as rentals for the period from May 1991 to January
1992.

4 Exhibit B-3, Rollo, p. 22.

5 P1,750,000.00—as price of the two (2) parcels of lots situated along Norte Dame
Avenue Cotabato City.

P175,000.00—as interest of two (2)% percent a month of P1,750,000.00 for five

months from February 6, 1992 to July 6, 1992.

P75,000.00—as rentals for the period from May 1991 to Jan. 1992.
 6 Exhibit K, Rollo, p. 53.

7 Exhibit O, Rollo, p. 58-60.

8 Exhibit Q, Rollo, p. 63.

9 Exhibit A, Rollo, p. 18.

10 Rollo, pp. 144-146.

11 Article 1371, Civil Code.

12 Dichosos v. Roxas, G.R. No. 17442, July 31, 1962, 5 SCRA 781.

13 Mccullough and Co., v. Berger, 43 Phil., 823 (1992).

14 Article 1479, Civil Code. El Banco Nacional Filipino v. Ah Sing, 69 Phil. 611
(1940); Manuel v. Rodriguez, 109 Phi. 1 (1960).

15 Villamor v. CA, G. R. No. 97332, October 10, 1991, 202 SCRA 607; Borromeo v.
Franco, et al., 5 Phil. 29 (1905).

16 Sanchez v. Rigos, G.R. No. L-25494, June 14, 1972, 45 SCRA 368, 376.

17 Alfonso v. CA, G.R. No. 63745, June 8, 1990, 186 SCRA 400; Manuel v.
Rodriguez, 109 Phil. 1 (1960); Luzon Brokerage Co. Inc. v. Maritime Building Co.
Inc., G.R. No. 25885, January 31, 1972, 43 SCRA 93.

18 Article 1197, Civil Code.

Perfection Stage:

1) Villonco Realty Company vs Bormaheco

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-26872 July 25, 1975

VILLONCO REALTY COMPANY, plaintiff-appellee and EDITH PEREZ DE TAGLE, intervenor-

appellee,
vs.
BORMAHECO, INC., FRANCISCO N. CERVANTES and ROSARIO N. CERVANTES, defendants-
appellants. Meer, Meer & Meer for plaintiff-appellee.

J. Villareal, Navarro and Associates for defendants-appellants.

P. P. Gallardo and Associates for intervenor-appellee.

AQUINO, J.:

This action was instituted by Villonco Realty Company against Bormaheco, Inc. and the spouses
Francisco N. Cervantes and Rosario N. Cervantes for the specific performance of a supposed
contract for the sale of land and the improvements thereon for one million four hundred thousand
pesos. Edith Perez de Tagle, as agent, intervened in order to recover her commission. The lower
court enforced the sale. Bormaheco, Inc. and the Cervantes spouses, as supposed vendors,
appealed.

This Court took cognizance of the appeal because the amount involved is more than P200,000 and
the appeal was perfected before Republic Act No. 5440 took effect on September 9, 1968. The facts
are as follows:

Francisco N. Cervantes and his wife, Rosario P. Navarra-Cervantes, are the owners of lots 3, 15 and
16 located at 245 Buendia Avenue, Makati, Rizal with a total area of three thousand five hundred
square meters (TCT Nos. 43530, 43531 and 43532, Exh. A, A-1 and A-2). The lots were mortgaged
to the Development Bank of the Phil (DBP) on April 21, 1959 as security for a loan of P441,000. The
mortgage debt was fully paid on July 10, 1969.

Cervantes is the president of Bormaheco, Inc., a dealer and importer of industrial and agricultural
machinery. The entire lots are occupied by the building, machinery and equipment of Bormaheco,
Inc. and are adjacent to the property of Villonco Realty Company situated at 219 Buendia Avenue.

In the early part of February, 1964 there were negotiations for the sale of the said lots and the
improvements thereon between Romeo Villonco of Villonco Realty Company "and Bormaheco, Inc.,
represented by its president, Francisco N. Cervantes, through the intervention of Edith Perez de
Tagle, a real estate broker".

In the course of the negotiations, the brothers Romeo Villonco and Teofilo Villonco conferred with
Cervantes in his office to discuss the price and terms of the sale. Later, Cervantes "went to see
Villonco for the same reason until some agreement" was arrived at. On a subsequent occasion,
Cervantes, accompanied by Edith Perez de Tagle, discussed again the terms of the sale with
Villonco.

During the negotiations, Villonco Realty Company assumed that the lots belonged to Bormaheco,
Inc. and that Cervantes was duly authorized to sell the same. Cervantes did not disclose to the
broker and to Villonco Realty Company that the lots were conjugal properties of himself and his wife
and that they were mortgaged to the DBP.

Bormaheco, Inc., through Cervantes, made a written offer dated February 12, 1964, to Romeo
Villonco for the sale of the property. The offer reads (Exh. B):
 BORMAHECO, INC.

February 12,1964

Mr. Romeo
Villonco Villonco Building
Buendia Avenue
Makati, Rizal.

Dear Mr. Villonco:

This is with reference to our telephone conversation this noon on the matter of the
sale of our propertylocated at Buendia Avenue, with a total area of 3,500 sq. m.,
under the following conditions:

(1) That we are offering to sell to you the above property at the price
of P400.00 per square meter;

(2) That a deposit of P100,000.00 must be placed as earnest money

on the purchase of the above property which will become part
payment of the property in the event that the sale is consummated;

(3) That this sale is to be consummated only after I shall have also
consummated my purchase of another property located at Sta. Ana,
Manila;

(4) That if my negotiations with said property will not be

consummated by reason beyond my control, I will return to you your
deposit of P100,000 and the sale of my property to you will not also
be consummated; and

(5) That final negotiations on both properties can be definitely known

after 45 days.

If the above terms is (are) acceptable to your Board, please issue out the said
earnest money in favor of Bormaheco, Inc., and deliver the same thru the bearer,
Miss Edith Perez de Tagle.

Very truly yours,

SGD. FRANCISCO N.
CERVANTES
President

The property mentioned in Bormaheco's letter was the land of the National Shipyards & Steel
Corporation (Nassco), with an area of twenty thousand square meters, located at Punta, Sta. Ana,
Manila. At the bidding held on January 17, 1964 that land was awarded to Bormaheco, Inc., the
highest bidder, for the price of P552,000. The Nassco Board of Directors in its resolution of February
18, 1964 authorized the General Manager to sign the necessary contract (Exh. H).
On February 28, 1964, the Nassco Acting General Manager wrote a letter to the Economic
Coordinator, requesting approval of that resolution. The Acting Economic Coordinator approved the
resolution on March 24, 1964 (Exh. 1).

In the meanwhile, Bormaheco, Inc. and Villonco Realty Company continued their negotiations for the
sale of the Buendia Avenue property. Cervantes and Teofilo Villonco had a final conference on
February 27, 1964. As a result of that conference Villonco Realty Company, through Teofilo Villonco,
in its letter of March 4, 1964 made a revised counter- offer (Romeo Villonco's first counter-offer was
dated February 24, 1964, Exh. C) for the purchase of the property. The counter-offer was accepted
by Cervantes as shown in Exhibit D, which is quoted below:

VILLONCO REALTY COMPANY

V. R. C. Building
219 Buendia Avenue, Makati,
Rizal, Philippines

March 4, 1964

Mr. Francisco Cervantes.

Bormaheco, Inc.
245 Buendia Avenue
Makati, Rizal

Dear Mr. Cervantes:

In reference to the letter of Miss E. Perez de Tagle dated February 12th and 26,
1964 in respect to the terms and conditions on the purchase of your property located
at Buendia Ave., Makati, Rizal, with a total area of 3,500 sq. meters., we hereby
revise our offer, as follows:

1. That the price of the property shall be P400.00 per sq. m., including the
improvements thereon;

2. That a deposit of P100,000.00 shall be given to you as earnest money which will
become as part payment in the event the sale is consummated;

3. This sale shall be cancelled, only if your deal with another property in Sta. Ana
shall not be consummated and in such case, the P100,000-00 earnest money will be
returned to us with a 10% interest p.a. However, if our deal with you is finalized, said
P100,000.00 will become as part payment for the purchase of your property without
interest:

4. The manner of payment shall be as follows:

a. P100,000.00 earnest money and

650,000.00 as part of the down payment, or
P750,000.00 as total down payment

b. The balance is payable as follows:

P100,000.00 after 3 months
125,000.00 -do-
 212,500.00 -do-
P650,000.00 Total

As regards to the other conditions which we have discussed during our last
conference on February 27, 1964, the same shall be finalized upon preparation of
the contract to sell.*

If the above terms and conditions are acceptable to you, kindly sign your conformity
hereunder. Enclosed is our check for ONE HUNDRED THOUSAND (P100,000.00)
PESOS, MBTC Check No. 448314, as earnest money.

Very truly yours,

VILLONCO REALTY
COMPANY
(Sgd.) TEOFILO
VILLONCO

CONFORME:

BORMAHECO, INC.
(Sgd.) FRANCISCO CERVANTES

That this sale shall be subject to favorable consummation of a property in Sta. Ana
we are negotiating.

(Sgd.) FRANCISCO CERVANTES

The check for P100,000 (Exh. E) mentioned in the foregoing letter-contract was delivered by Edith
Perez de Tagle to Bormaheco, Inc. on March 4, 1964 and was received by Cervantes. In the
voucher-receipt evidencing the delivery the broker indicated in her handwriting that the earnest
money was "subject to the terms and conditions embodied in Bormaheco's letter" of February 12 and
Villonco Realty Company's letter of March 4, 1964 (Exh. E-1; 14 tsn).

Then, unexpectedly, in a letter dated March 30, 1964, or twenty-six days after the signing of the
contract of sale, Exhibit D, Cervantes returned the earnest money, with interest amounting to
P694.24 (at ten percent per annum). Cervantes cited as an excuse the circumstance that "despite
the lapse of 45 days from February 12, 1964 there is no certainty yet" for the acquisition of the Punta
property (Exh. F; F-I and F-2). Villonco Realty Company refused to accept the letter and the checks
of Bormaheco, Inc. Cervantes sent them by registered mail. When he rescinded the contract, he was
already aware that the Punta lot had been awarded to Bormaheco, Inc. (25-26 tsn).

Edith Perez de Tagle, the broker, in a letter to Cervantes dated March 31, 1964 articulated her shock
and surprise at Bormaheco's turnabout. She reviewed the history of the deal and explained why
Romeo Villonco could not agree to the rescission of the sale (Exh. G).**

Cervantes in his letter of April 6, 1964, a reply to Miss Tagle's letter, alleged that the forty-five day
period had already expired and the sale to Bormaheco, Inc. of the Punta property had not been
consummated. Cervantes said that his letter was a "manifestation that we are no longer interested to
sell" the Buendia Avenue property to Villonco Realty Company (Annex I of Stipulation of Facts). The
latter was furnished with a copy of that letter.
In a letter dated April 7, 1964 Villonco Realty Company returned the two checks to Bormaheco, Inc.,
stating that the condition for the cancellation of the contract had not arisen and at the same time
announcing that an action for breach of contract would be filed against Bormaheco, Inc. (Annex G of
Stipulation of Facts).
1äw phï1.ñët

On that same date, April 7, 1964 Villonco Realty Company filed the complaint (dated April 6) for
specific performance against Bormaheco, Inc. Also on that same date, April 7, at eight-forty-five in
the morning, a notice of lis pendens was annotated on the titles of the said lots.

Bormaheco, Inc. in its answers dated May 5 and 25, 1964 pleaded the defense that the perfection of
the contract of sale was subject to the conditions (a) "that final acceptance or not shall be made after
45 days" (sic) and (b) that Bormaheco, Inc. "acquires the Sta. Ana property".

On June 2, 1964 or during the pendency of this case, the Nassco Acting General Manager wrote to
Bormaheco, Inc., advising it that the Board of Directors and the Economic Coordinator had approved
the sale of the Punta lot to Bormaheco, Inc. and requesting the latter to send its duly authorized
representative to the Nassco for the signing of the deed of sale (Exh. 1).

The deed of sale for the Punta land was executed on June 26, 1964. Bormaheco, Inc. was
represented by Cervantes (Exh. J. See Bormaheco, Inc. vs. Abanes, L-28087, July 31, 1973, 52
SCRA 73).

In view of the disclosure in Bormaheco's amended answer that the three lots were registered in the
names of the Cervantes spouses and not in the name of Bormaheco, Inc., Villonco Realty Company
on July 21, 1964 filed an amended complaint impleading the said spouses as defendants.
Bormaheco, Inc. and the Cervantes spouses filed separate answers.

As of January 15, 1965 Villonco Realty Company had paid to the Manufacturers' Bank & Trust
Company the sum of P8,712.25 as interests on the overdraft line of P100,000 and the sum of
P27.39 as interests daily on the same loan since January 16, 1965. (That overdraft line was later
settled by Villonco Realty Company on a date not mentioned in its manifestation of February 19,
1975).

Villonco Realty Company had obligated itself to pay the sum of P20,000 as attorney's fees to its
lawyers. It claimed that it was damaged in the sum of P10,000 a month from March 24, 1964 when
the award of the Punta lot to Bormaheco, Inc. was approved. On the other hand, Bormaheco, Inc.
claimed that it had sustained damages of P200,000 annually due to the notice of lis pendens which
had prevented it from constructing a multi-story building on the three lots. (Pars. 18 and 19,
Stipulation of Facts).
1äw phï1.ñët

Miss Tagle testified that for her services Bormaheco, Inc., through Cervantes, obligated itself to pay
her a three percent commission on the price of P1,400,000 or the amount of forty-two thousand
pesos (14 tsn).

After trial, the lower court rendered a decision ordering the Cervantes spouses to execute in favor of
Bormaheco, Inc. a deed of conveyance for the three lots in question and directing Bormaheco, Inc.
(a) to convey the same lots to Villonco Realty Company, (b) to pay the latter, as consequential
damages, the sum of P10,000 monthly from March 24, 1964 up to the consummation of the sale, (c)
to pay Edith Perez de Tagle the sum of P42,000 as broker's commission and (d) pay P20,000 as to
attorney's fees (Civil Case No. 8109).
Bormaheco, Inc. and the Cervantes spouses appealed. Their principal contentions are (a) that no
contract of sale was perfected because Cervantes made a supposedly qualified acceptance of the
revised offer contained in Exhibit D, which acceptance amounted to a counter-offer, and because the
condition that Bormaheco, inc. would acquire the Punta land within the forty-five-day period was not
fulfilled; (2) that Bormaheco, Inc. cannot be compelled to sell the land which belongs to the
Cervantes spouses and (3) that Francisco N. Cervantes did not bind the conjugal partnership and
his wife when, as president of Bormaheco, Inc., he entered into negotiations with Villonco Realty
Company regarding the said land.

We hold that the appeal, except as to the issue of damages, is devoid of merit.

"By the contract of sale one of the contracting parties obligates himself to transfer the ownership of
and to deliver a determining thing, and the other to pay therefor a price certain in money or its
equivalent. A contract of sale may be absolute or conditional" (Art. 1458, Civil Code).

"The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is
the object of the contract and upon the price. From that moment, the parties may reciprocally
demand performance, subject to the provisions of the law governing the form of contracts" (Art.
1475, Ibid.).

"Contracts are perfected by mere consent, and from that moment the parties are bound not only to
the fulfillment of what has been expressly stipulated but also to all the consequences which,
according to their nature, may be in keeping with good faith, usage and law" (Art. 1315, Civil Code).

"Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause
which are to constitute the contract. The offer must be certain and the acceptance absolute. A
qualified acceptance constitutes a counter-offer" (Art. 1319, Civil Code). "An acceptance may be
express or implied" (Art. 1320, Civil Code).

Bormaheco's acceptance of Villonco Realty Company's offer to purchase the Buendia Avenue
property, as shown in Teofilo Villonco's letter dated March 4, 1964 (Exh. D), indubitably proves that
there was a meeting of minds upon the subject matter and consideration of the sale. Therefore, on
that date the sale was perfected. (Compare with McCullough vs. Aenlle & Co., 3 Phil. 285; Goyena
vs. Tambunting, 1 Phil. 490). Not only that Bormaheco's acceptance of the part payment of one
hundred ,thousand pesos shows that the sale was conditionally consummated or partly executed
subject to the purchase by Bormaheco, Inc. of the Punta property. The nonconsummation of that
purchase would be a negative resolutory condition (Taylor vs. Uy Tieng Piao, 43 Phil. 873).

On February 18, 1964 Bormaheco's bid for the Punta property was already accepted by the Nassco
which had authorized its General Manager to sign the corresponding deed of sale. What was
necessary only was the approval of the sale by the Economic Coordinator and a request for that
approval was already pending in the office of that functionary on March 4, 1964.

Bormaheco, Inc. and the Cervantes spouses contend that the sale was not perfected because
Cervantes allegedly qualified his acceptance of Villonco's revised offer and, therefore, his
acceptance amounted to a counter-offer which Villonco Realty Company should accept but no such
acceptance was ever transmitted to Bormaheco, Inc. which, therefore, could withdraw its offer.

That contention is not well-taken. It should be stressed that there is no evidence as to what changes
were made by Cervantes in Villonco's revised offer. And there is no evidence that Villonco Realty
Company did not assent to the supposed changes and that such assent was never made known to
Cervantes.
What the record reveals is that the broker, Miss Tagle, acted as intermediary between the parties. It
is safe to assume that the alleged changes or qualifications made by Cervantes were approved by
Villonco Realty Company and that such approval was duly communicated to Cervantes or
Bormaheco, Inc. by the broker as shown by the fact that Villonco Realty Company paid, and
Bormaheco, Inc. accepted, the sum of P100,000 as earnest money or down payment. That crucial
fact implies that Cervantes was aware that Villonco Realty Company had accepted the modifications
which he had made in Villonco's counter-offer. Had Villonco Realty Company not assented to those
insertions and annotations, then it would have stopped payment on its check for P100,000. The fact
that Villonco Realty Company allowed its check to be cashed by Bormaheco, Inc. signifies that the
company was in conformity with the changes made by Cervantes and that Bormaheco, Inc. was
aware of that conformity. Had those insertions not been binding, then Bormaheco, Inc. would not
have paid interest at the rate of ten percent per annum, on the earnest money of P100,000.

The truth is that the alleged changes or qualifications in the revised counter — offer (Exh. D) are not
material or are mere clarifications of what the parties had previously agreed upon.

Thus, Cervantes' alleged insertion in his handwriting of the figure and the words "12th and" in
Villonco's counter-offer is the same as the statement found in the voucher-receipt for the earnest
money, which reads: "subject to the terms and conditions embodied in Bormaheco's letter of Feb.
12, 1964 and your letter of March 4, 1964" (Exh. E-1).

Cervantes allegedly crossed out the word "Nassco" in paragraph 3 of Villonco's revised counter-offer
and substituted for it the word "another" so that the original phrase, "Nassco's property in Sta. Ana",
was made to read as "another property in Sta. Ana". That change is trivial. What Cervantes did was
merely to adhere to the wording of paragraph 3 of Bormaheco's original offer (Exh. B) which
mentions "another property located at Sta. Ana." His obvious purpose was to avoid jeopardizing his
negotiation with the Nassco for the purchase of its Sta. Ana property by unduly publicizing it.

It is noteworthy that Cervantes, in his letter to the broker dated April 6, 1964 (Annex 1) or after the
Nassco property had been awarded to Bormaheco, Inc., alluded to the "Nassco property". At that
time, there was no more need of concealing from the public that Bormaheco, Inc. was interested in
the Nassco property.

Similarly, Cervantes' alleged insertion of the letters "PA" ( per annum) after the word "interest" in that
same paragraph 3 of the revised counter-offer (Exh. D) could not be categorized as a major
alteration of that counter-offer that prevented a meeting of the minds of the parties. It was
understood that the parties had contemplated a rate of ten percent per annum since ten percent a
month or semi-annually would be usurious.

Appellants Bormaheco, Inc. and Cervantes further contend that Cervantes, in clarifying in the
voucher for the earnest money of P100,000 that Bormaheco's acceptance thereof was subject to the
terms and conditions embodied in Bormaheco's letter of February 12, 1964 and your (Villonco's)
letter of March 4, 1964" made Bormaheco's acceptance "qualified and conditional".

That contention is not correct. There is no incompatibility between Bormaheco's offer of February 12,
1964 (Exh. B) and Villonco's counter-offer of March 4, 1964 (Exh. D). The revised counter-offer
merely amplified Bormaheco's original offer.

The controlling fact is that there was agreement between the parties on the subject matter, the price
and the mode of payment and that part of the price was paid. "Whenever earnest money is given in
a contract of sale, it shall be considered as part of the price and as proof of the perfection of the
contract" (Art. 1482, Civil Code).
"It is true that an acceptance may contain a request for certain changes in the terms of the offer and
yet be a binding acceptance. 'So long as it is clear that the meaning of the acceptance is positively
and unequivocally to accept the offer, whether such request is granted or not, a contract is formed.' "
(Stuart vs. Franklin Life Ins. Co., 165 Fed. 2nd 965, citing Sec. 79, Williston on Contracts).

Thus, it was held that the vendor's change in a phrase of the offer to purchase, which change does
not essentially change the terms of the offer, does not amount to a rejection of the offer and the
tender of a counter-offer (Stuart vs. Franklin Life Ins. Co., supra).

The instant case is not governed by the rulings laid down in Beaumont vs. Prieto, 41 Phil. 670, 985,
63 L. Ed. 770, and Zayco vs. Serra, 44 Phil. 326. In those two cases the acceptance radically altered
the offer and, consequently, there was no meeting of the minds of the parties.

Thus, in the Zayco case, Salvador Serra offered to sell to Lorenzo Zayco his sugar central for
P1,000,000 on condition that the price be paid in cash, or, if not paid in cash, the price would be
payable within three years provided security is given for the payment of the balance within three
years with interest. Zayco, instead of unconditionally accepting those terms, countered that he was
going to make a down payment of P100,000, that Serra's mortgage obligation to the Philippine
National Bank of P600,000 could be transferred to Zayco's account and that he (plaintiff) would give
a bond to secure the payment of the balance of the price. It was held that the acceptance was
conditional or was a counter-offer which had to be accepted by Serra. There was no such
acceptance. Serra revoked his offer. Hence, there was no perfected contract.

In the Beaumont case, Benito Valdes offered to sell to W Borck the Nagtahan Hacienda owned by
Benito Legarda, who had empowered Valdes to sell it. Borck was given three months from
December 4, 1911 to buy the hacienda for P307,000. On January 17, 1912 Borck wrote to Valdes,
offering to purchase the hacienda for P307,000 payable on May 1, 1912. No reply was made to that
letter. Borck wrote other letters modifying his proposal. Legarda refused to convey the property.

It was held that Borck's January 17th letter plainly departed from the terms of the offer as to the time
of payment and was a counter-offer which amounted to a rejection of Valdes' original offer. A
subsequent unconditional acceptance could not revive that offer.

The instant case is different from Laudico and Harden vs. Arias Rodriguez, 43 Phil. 270 where the
written offer to sell was revoked by the offer or before the offeree's acceptance came to the offeror's
knowledge.

Appellants' next contention is that the contract was not perfected because the condition that
Bormaheco, Inc. would acquire the Nassco land within forty-five days from February 12, 1964 or on
or before March 28, 1964 was not fulfilled. This contention is tied up with the following letter of
Bormaheco, Inc. (Exh. F):

BORMAHECO, INC.

March 30, 1964

Villonco Realty Company

V.R.C. Building
219 Buendia Ave.,
Makati, Rizal
 Gentlemen:

We are returning herewith your earnest money together with interest thereon at 10%
per annum. Please be informed that despite the lapse of the 45 days from February
12, 1964 there is no certainty yet for us to acquire a substitute property, hence the
return of the earnest money as agreed upon.

Very truly yours,

SGD. FRANCISCO N.
CERVANTES
President

Encl.: P.N.B. Check No. 112994 J

P.N.B. Check No. 112996J

That contention is predicated on the erroneous assumption that Bormaheco, Inc. was to acquire the
Nassco land within forty-five days or on or before March 28, 1964.

The trial court ruled that the forty-five-day period was merely an estimate or a forecast of how long it
would take Bormaheco, Inc. to acquire the Nassco property and it was not "a condition or a deadline
set for the defendant corporation to decide whether or not to go through with the sale of its Buendia
property".

The record does not support the theory of Bormaheco, Inc. and the Cervantes spouses that the
forty-five-day period was the time within which (a) the Nassco property and two Pasong Tamo lots
should be acquired, (b) when Cervantes would secure his wife's consent to the sale of the three lots
and (c) when Bormaheco, Inc. had to decide what to do with the DBP encumbrance.

Cervantes in paragraph 3 of his offer of February 12, 1964 stated that the sale of the Buendia lots
would be consummated after he had consummated the purchase of the Nassco property. Then, in
paragraph 5 of the same offer he stated "that final negotiations on both properties can be definitely
known after forty-five days" (See Exh. B).

It is deducible from the tenor of those statements that the consummation of the sale of the Buendia
lots to Villonco Realty Company was conditioned on Bormaheco's acquisition of the Nassco land.
But it was not spelled out that such acquisition should be effected within forty-five days from
February 12, 1964. Had it been Cervantes' intention that the forty-five days would be the period
within which the Nassco land should be acquired by Bormaheco, then he would have specified that
period in paragraph 3 of his offer so that paragraph would read in this wise: "That this sale is to be
consummated only after I shall have consummated my purchase of another property located at Sta.
Ana, Manila within forty-five days from the date hereof ." He could have also specified that period in
his "conforme" to Villonco's counter-offer of March 4, 1964 (Exh. D) so that instead of merely stating
"that this sale shall be subject to favorable consummation of a property in Sta. Ana we are
negotiating" he could have said: "That this sale shall be subject to favorable consummation within
forty-five days from February 12, 1964 of a property in Sta. Ana we are negotiating".

No such specification was made. The term of forty-five days was not a part of the condition that the
Nassco property should be acquired. It is clear that the statement "that final negotiations on both
property can be definitely known after 45 days" does not and cannot mean that Bormaheco, Inc.
should acquire the Nassco property within forty-five days from February 12, 1964 as pretended by
Cervantes. It is simply a surmise that after forty-five days (in fact when the forty-five day period
should be computed is not clear) it would be known whether Bormaheco, Inc. would be able to
acquire the Nassco property and whether it would be able to sell the Buendia property. That
aforementioned paragraph 5 does not even specify how long after the forty-five days the outcome of
the final negotiations would be known.

It is interesting to note that in paragraph 6 of Bormaheco's answer to the amended complaint, which
answer was verified by Cervantes, it was alleged that Cervantes accepted Villonco's revised
counter-offer of March 4, 1964 subject to the condition that "the final negotiations (acceptance) will
have to be made by defendant within 45 daysfrom said acceptance" (31 Record on Appeal). If that
were so, then the consummation of Bormaheco's purchase of the Nassco property would be made
within forty-five days from March 4, 1964.

What makes Bormaheco's stand more confusing and untenable is that in its three answers it
invariably articulated the incoherent and vague affirmative defense that its acceptance of Villonco's
revised counter-offer was conditioned on the circumstance "that final acceptance or not shall be
made after 45 days" whatever that means. That affirmative defense is inconsistent with the other
aforequoted incoherent statement in its third answer that "the final negotiations (acceptance) will
have to be made by defendant within 45 days from said acceptance" (31 Record on Appeal). 1äw phï1.ñët

Thus, Bormaheco's three answers and paragraph 5 of his offer of February 12, 1964 do not sustain
at all its theory that the Nassco property should be acquired on or before March 28, 1964. Its
rescission or revocation of its acceptance cannot be anchored on that theory which, as articulated in
its pleadings, is quite equivocal and unclear.

It should be underscored that the condition that Bormaheco, Inc. should acquire the Nassco property
was fulfilled. As admitted by the appellants, the Nassco property was conveyed to Bormaheco, Inc.
on June 26, 1964. As early as January 17, 1964 the property was awarded to Bormaheco, Inc. as
the highest bidder. On February 18, 1964 the Nassco Board authorized its General Manager to sell
the property to Bormaheco, Inc. (Exh. H). The Economic Coordinator approved the award on March
24, 1964. It is reasonable to assume that had Cervantes been more assiduous in following up the
transaction, the Nassco property could have been transferred to Bormaheco, Inc. on or before March
28, 1964, the supposed last day of the forty-five-day period.

The appellants, in their fifth assignment of error, argue that Bormaheco, Inc. cannot be required to
sell the three lots in question because they are conjugal properties of the Cervantes spouses. They
aver that Cervantes in dealing with the Villonco brothers acted as president of Bormaheco, Inc. and
not in his individual capacity and, therefore, he did not bind the conjugal partnership nor Mrs.
Cervantes who was allegedly opposed to the sale.

Those arguments are not sustainable. It should be remembered that Cervantes, in rescinding the
contract of sale and in returning the earnest money, cited as an excuse the circumstance that there
was no certainty in Bormaheco's acquisition of the Nassco property (Exh. F and Annex 1). He did not
say that Mrs. Cervantes was opposed to the sale of the three lots. He did not tell Villonco Realty
Company that he could not bind the conjugal partnership. In truth, he concealed the fact that the
three lots were registered "in the name of FRANCISCO CERVANTES, Filipino, of legal age, married
to Rosario P. Navarro, as owner thereof in fee simple". He certainly led the Villonco brothers to
believe that as president of Bormaheco, Inc. he could dispose of the said lots. He inveigled the
Villoncos into believing that he had untrammelled control of Bormaheco, Inc., that Bormaheco, Inc.
owned the lots and that he was invested with adequate authority to sell the same.

Thus, in Bormaheco's offer of February 12, 1964, Cervantes first identified the three lots as
"our property" which "we are offering to sell ..." (Opening paragraph and par. 1 of Exh. B). Whether
the prounoun "we" refers to himself and his wife or to Bormaheco, Inc. is not clear. Then, in
paragraphs 3 and 4 of the offer, he used the first person and said: "I shall have consummated my
purchase" of the Nassco property; "... my negotiations with said property" and "I will return to you
your deposit". Those expressions conveyed the impression and generated the belief that the
Villoncos did not have to deal with Mrs. Cervantes nor with any other official of Bormaheco, Inc.

The pleadings disclose that Bormaheco, Inc. and Cervantes deliberately and studiously avoided
making the allegation that Cervantes was not authorized by his wife to sell the three lots or that he
acted merely as president of Bormaheco, Inc. That defense was not interposed so as not to place
Cervantes in the ridiculous position of having acted under false pretenses when he negotiated with
the Villoncos for the sale of the three lots.

Villonco Realty Company, in paragraph 2 of its original complaint, alleged that "on February 12,
1964, after some prior negotiations, the defendant (Bormaheco, Inc.) made a formal offer to sell to
the plaintiff the property of the said defendant situated at the abovenamed address along Buendia
Avenue, Makati, Rizal, under the terms of the letter-offer, a copy of which is hereto attached as
Annex A hereof", now Exhibit B (2 Record on Appeal).

That paragraph 2 was not, repeat, was not denied by Bormaheco, Inc. in its answer dated May 5,
1964. It did not traverse that paragraph 2. Hence, it was deemed admitted. However, it filed an
amended answer dated May 25, 1964 wherein it denied that it was the owner of the three lots. It
revealed that the three lots "belong and are registered in the names of the spouses Francisco N.
Cervantes and Rosario N. Cervantes."

The three answers of Bormaheco, Inc. contain the following affirmative defense:

13. That defendant's insistence to finally decide on the proposed sale of the land in
question after 45 days had not only for its purpose the determination of its acquisition
of the said Sta. Ana (Nassco) property during the said period, but also to negotiate
with the actual and registered owner of the parcels of land covered by T.C.T. Nos.
43530, 43531 and 43532 in question which plaintiff was fully aware that the same
were not in the name of the defendant (sic; Par. 18 of Answer to Amended
Complaint, 10, 18 and 34, Record on Appeal).

In that affirmative defense, Bormaheco, Inc. pretended that it needed forty- five days within which to
acquire the Nassco property and "to negotiate" with the registered owner of the three lots. The
absurdity of that pretension stands out in bold relief when it is borne in mind that the answers of
Bormaheco, Inc. were verified by Cervantes and that the registered owner of the three lots is
Cervantes himself. That affirmative defense means that Cervantes as president of Bormaheco, Inc.
needed forty-five days in order to "negotiate" with himself (Cervantes).

The incongruous stance of the Cervantes spouses is also patent in their answer to the amended
complaint. In that answer they disclaimed knowledge or information of certain allegations which were
well-known to Cervantes as president of Bormaheco, Inc. and which were admitted in Bormaheco's
three answers that were verified by Cervantes.

It is significant to note that Bormaheco, Inc. in its three answers, which were verified by Cervantes,
never pleaded as an affirmative defense that Mrs. Cervantes opposed the sale of the three lots or
that she did not authorize her husband to sell those lots. Likewise, it should be noted that in their
separate answer the Cervantes spouses never pleaded as a defense that Mrs. Cervantes was
opposed to the sale of three lots or that Cervantes could not bind the conjugal partnership. The
appellants were at first hesitant to make it appear that Cervantes had committed the skullduggery of
trying to sell property which he had no authority to alienate.

It was only during the trial on May 17, 1965 that Cervantes declared on the witness stand that his
wife was opposed to the sale of the three lots, a defense which, as already stated, was never
interposed in the three answers of Bormaheco, Inc. and in the separate answer of the Cervantes
spouses. That same viewpoint was adopted in defendants' motion for reconsideration dated
November 20, 1965.

But that defense must have been an afterthought or was evolved post litem motam since it was
never disclosed in Cervantes' letter of rescission and in his letter to Miss Tagle (Exh. F and Annex
1). Moreover, Mrs. Cervantes did not testify at the trial to fortify that defense which had already been
waived for not having been pleaded (See sec. 2, Rule 9, Rules of Court).

Taking into account the situation of Cervantes vis-a-vis Bormaheco, Inc. and his wife and the fact
that the three lots were entirely occupied by Bormaheco's building, machinery and equipment and
were mortgaged to the DBP as security for its obligation, and considering that appellants' vague
affirmative defenses do not include Mrs. Cervantes' alleged opposition to the sale, the plea that
Cervantes had no authority to sell the lots strains the rivets of credibility (Cf. Papa and Delgado vs.
Montenegro, 54 Phil. 331; Riobo vs. Hontiveros, 21 Phil. 31).

"Obligations arising from contracts have the force of law between the contracting parties and should
be complied with in good faith" (Art. 1159, Civil Code). Inasmuch as the sale was perfected and even
partly executed, Bormaheco, Inc., and the Cervantes spouses, as a matter of justice and good faith,
are bound to comply with their contractual commitments.

Parenthetically, it may be observed that much misunderstanding could have been avoided had the
broker and the buyer taken the trouble of making some research in the Registry of Deeds and
availing themselves of the services of a competent lawyer in drafting the contract to sell.

Bormaheco, Inc. and the Cervantes spouses in their sixth assignment of error assail the trial court's
award to Villonco Realty Company of consequential damage amounting to ten thousand pesos
monthly from March 24, 1964 (when the Economic Coordinator approved the award of the Nassco
property to Bormaheco, Inc.) up to the consummation of the sale. The award was based on
paragraph 18 of the stipulation of facts wherein Villonco Realty Company "submits that the delay in
the consummation of the sale" has caused it to suffer the aforementioned damages.

The appellants contend that statement in the stipulation of facts simply means that Villonco Realty
Company speculates that it has suffered damages but it does not mean that the parties have agreed
that Villonco Realty Company is entitled to those damages.

Appellants' contention is correct. As rightly observed by their counsel, the damages in question were
not specifically pleaded and proven and were "clearly conjectural and speculative".

However, appellants' view in their seventh assignment of error that the trial court erred in ordering
Bormaheco, Inc. to pay Villonco Realty Company the sum of twenty thousand pesos as attorney's
fees is not tenable. Under the facts of the case, it is evident that Bormaheco, Inc. acted in gross and
evident bad faith in refusing to satisfy the valid and just demand of Villonco Realty Company for
specific performance. It compelled Villonco Realty Company to incure expenses to protect its
interest. Moreover, this is a case where it is just and equitable that the plaintiff should recover
attorney's fees (Art. 2208, Civil Code).
The appellants in their eighth assignment of error impugn the trial court's adjudication of forty-two
thousand pesos as three percent broker's commission to Miss Tagle. They allege that there is no
evidence that Bormaheco, Inc. engaged her services as a broker in the projected sale of the three
lots and the improvements thereon. That allegation is refuted by paragraph 3 of the stipulation of
facts and by the documentary evidence. It was stipulated that Miss Tagle intervened in the
negotiations for the sale of the three lots. Cervantes in his original offer of February 12, 1964
apprised Villonco Realty Company that the earnest money should be delivered to Miss Tagle, the
bearer of the letter-offer. See also Exhibit G and Annex I of the stipulation of facts.

We hold that the trial court did not err in adjudging that Bormaheco, Inc. should pay Miss Tagle her
three percent commission.

WHEREFORE, the trial court's decision is modified as follows:

1. Within ten (10) days from the date the defendants-appellants receive notice from the clerk of the
lower court that the records of this case have been received from this Court, the spouses Francisco
N. Cervantes and Rosario P. Navarra-Cervantes should execute a deed conveying to Bormaheco,
Inc. their three lots covered by Transfer Certificate of Title Nos. 43530, 43531 and 43532 of the
Registry of Deeds of Rizal.

2. Within five (5) days from the execution of such deed of conveyance, Bormaheco, Inc. should
execute in favor of Villonco Realty Company, V. R. C. Building, 219 Buendia Avenue, Makati, Rizal a
registerable deed of sale for the said three lots and all the improvements thereon, free from all lien
and encumbrances, at the price of four hundred pesos per square meter, deducting from the total
purchase price the sum of P100,000 previously paid by Villonco Realty Company to Bormaheco, Inc.

3. Upon the execution of such deed of sale, Villonco Realty Company is obligated to pay
Bormaheco, Inc. the balance of the price in the sum of one million three hundred thousand pesos
(P1,300,000).

4. Bormaheco, Inc. is ordered (a) to pay Villonco Realty Company twenty thousand pesos (P20,000)
as attorney's fees and (b) to pay Edith Perez de Tagle the sum of forty-two thousand pesos
(P42,000) as commission. Costs against the defendants-appellants.

SO ORDERED.

Makalintal, C.J, Castro. Fernando, Makasiar, Antonio, Esguerra, Muñoz Palma, Concepcion Jr. and
Martin, JJ., concur.

Teehankee, J., is on leave.

Separate Opinions
BARREDO, J., concurring:

The comprehensive and well prepared opinion of Mr. Justice Aquino deserves concurrence and I do
not hesitate to accord my assent to it. The only purpose of the following lines is to express my
personal view regarding two basic points which I feel should be thoroughly emphasized.

1. I am not for giving the letter proposal of appellant Francisco Cervantes to Romeo Villonco of
February 12, 1964, Exhibit B, any decisive importance. To my mind, it has no more legal significance
than what is appears to be — a mere unaccepted proposal. Accordingly, to my mind, paragraph (5)
thereof to the effect that "final negotiations on both properties can be definitely known after 45 days"
has no relevance in the disposition of this case, there being nothing in the record to show that the
same was accepted by appellee.

What to me is the actual contract between appellee and appellant Francisco Cervantes is the
counter-offer signed by Teofilo Villonco and addressed to the latter of March 4, 1964, Exhibit D,
which does not even make any reference to the above-mentioned proposal of Cervantes of February
12, 1964, even as it mentions specifically the letters of the agent, Miss E. Perez de Tagle, of
February 12 and 26, 1964. The last paragraph of said Exhibit D reads thus: "If the above terms and
conditions are acceptable to you, kindly sign your conformity hereunder. Enclosed is our check for
One Hundred Thousand (P100,000) Pesos, M.B.T.C. Cheek No. 448314, as earnest money." And it
is undisputed that Francisco Cervantes did affix his signature in the place indicated for his
conformity, albeit under the typewritten words, Bormaheco, Inc. It is also a fact that on the same
date, the stipulated P100,000 earnest money was received by Cervantes.

It is true that in the voucher-receipt evidencing the delivery of the earnest money, the agent, Miss
Tagle, indicated in her own handwriting that the same was "subject to the terms and conditions
embodied in Bormaheco's letter of February 12, 1974 and Villonco Realty Company's letter of March
4, 1974," but it is my considered opinion that such reservation cannot be understood as
comprehending reference to the above-quoted paragraph (5) of the proposal of February 12, for the
simple reason that since the parties had in fact continued negotiating after February 12 until the final
conference of February 27, Cervantes must be deemed as having intended his signing of his
conformity to the letter of March 4 to be the formalization of the "final negotiations" referred to in said
paragraph (5), thereby rendering said provision of no further consequence. It should be noted that,
to be sure, as said paragraph (5) was worded, the idea it conveyed was that Cervantes was just
making a mere tentative offer which he would finalize only after 45 days, and so, when he signed
Villonco's counter-offer of March 4 and accepted the P100,000 earnest money tendered therein, no
other significance could be given to such acts than that they were meant to finalize and perfect the
transaction in advance of the 45-day waiting period originally proposed by him. Indeed, in the
addendum written and signed by Cervantes himself (not by the agent) to the March 4 letter, all that
he stated was that "this sale shall be subject to favorable consummation of a property in Sta. Ana we
are negotiating", and this was none other than the Nassco property which the Nassco Board
authorized its manager on February 18, 1964 to sell to appellants who had won the award the day
before. In other words, when Cervantes signed the space for his conformity to the terms of that letter
of March 4, he already knew or must have known that the acquisition of the Nassco property was
already an impending certainty and must have cared less about what had become an unnecessary
waiting period, hence the omission of any mention thereof by him in his addendum.

My conclusion, therefore, is that said acts of Cervantes of signing his conformity to Villonco's
counter-offer of March 4 and accepting the P100,000 earnest money therein offered resulted in a
completely perfected contract of sale between the parties per Article 1482 of the Civil Code, needing
only the execution of the corresponding deed of sale for its consummation and subject solely to the
negative resolutory condition that the "sale shall be cancelled, only if your (Cervantes') deal with
another property in Sta. Ana (indisputably the Nassco transaction) shall not be consummated",
without stipulating anymore a period for such consummation, since evidently, with the sale thereof
having been authorized already by the Nassco Board on February 18, 1964, the Villoncos must have
been made to understand or they did understand that such consummation was inexorably
forthcoming. In fact, the Nassco Board already approved on March 3, 1964 not only the award but
the actual sale of the property to appellants, and the Economic Coordinator gave his sanction
thereto on March 24 following. Thus, as of March 3, one day before Cervantes accepted Villonco's
counter-offer, nothing more was left to formalize the transaction with Nassco except that approval of
the Economic Coordinator.

I cannot believe that Cervantes did not have up-to-date information of the progress of his
transactions with Nassco. Actually, from the legal standpoint, he was under obligation, if only in
consequence of his offer of February 12 and his continuous conversations and negotiations with the
Villoncos up to the signing of their agreement on March 4, to keep constant and close tract thereof in
order that he might be able to inform the parties he was dealing with of the real status thereof, the
finalization of the same being a material factor in the accomplishment of their common purpose.
Withal, equity would assume that he did what ought to have been done by him in taking ordinary
care of his concerns, which he is presumed to have taken, according to Section 5 (d) of rule 131.
Under these circumstances, I am amply persuaded that he must have been aware of the favorable
actuations of the Nassco authorities all the while that he was dealing with appellee up to March 4,
the day after the Nassco Board approved the sale. Accordingly, I hold that when he gave his
conformity to the counter-offer of the Villoncos of March 4, he was already fully confident his
transaction with Nassco would eventually materialize.

What is worse is that assuming that the 45-day period invoked by him could be considered in this
discussion, it would be inequitable to allow him to take advantage thereof in the light of the
circumstances extant in the record. It cannot be denied that, as already stated, the Economic
Coordinator approved the Nassco transaction on March 24, 1964. Anyone would know, and much
more so Cervantes who was directly interested therein and must have been anxiously and even
excitedly waiting for it, that that was the last requisite for the inevitable execution of the deed of sale
in his favor. One has to be very naive and it would be contrary to the ordinary course of human
experience and business practices for anyone to concede to appellants that when Cervantes wrote
his letter to Villonco Realty Company of March 30, 1964 stating that "despite the lapse of 45 days
from February 12, 1964, there is no certainty yet for us to acquire a substitute property", he did not
even have the slightest inkling of the favorable action of the Economic Coordinator of March 24. The
same or more may be said relative to his letter to Miss Tagle of as late as April 6, 1964 wherein he
alleged that the forty-five day period had already expired and the sale to Bormaheco, Inc. of the
Punta (Nassco) property had not been consummated as of then and that, therefore, his letter was a
"manifestation that we are no longer interested to sell" the Buendia property to the Villoncos.

I have no doubt whatsoever that the whole trouble here is that after Cervantes had already signed
his conformity and received earnest money on March 4, he had a change of heart, perhaps dictated
by reasons of better economic advantage, and banking on the idea, albeit erroneous, that he could
utilize paragraph (5) of his letter of February 12 as a escape door through which he could squeeze
out of the perfected contract with the Villoncos, he opted to actually back out and break with them
thru his letters of March 30 to them and of April 6 to the agent, Miss Tagle. The Court would certainly
be sanctioning a deliberate mala fide breach of a contract already definitely perfected were it to buy
the theory of non-perfection appellants are lamely pressing on Us. No amount of rationalization can
convince me that the Villoncos had agreed to any 45-day suspensive condition for the perfection of
the agreement, but even on the remote assumption that they did, I would hold as I do hold that the
purchase of the Nassco property by appellants was virtually consummated, from the viewpoint of the
spirit and intent of the contract here in question, on March 24, 1964, when the Economic Coordinator
approved the same and nothing else remained to be done to formalize it except the actual execution
of the deed of sale which in fact took place on June 26, 1964, hence, Cervantes had no more
excuse for further delaying compliance with his agreement with the Villoncos. In other words, for all
legal purposes, assuming hypothetically the plausibility of the theory of appellants about a 45-day
waiting period, the negative resolutory condition arising from said theory became inoperative four
days before said 45 days expired. After the approval of the sale by the Economic Coordinator, there
was nothing anymore that could impede the formal conveyance of the Nassco property to
appellants, other than their own desistance, and even that might have been legally controversial if
Nassco insisted otherwise. Reading all the communications exchanged between the parties, the
conclusion therefrom is inevitable that the 45-day period stipulation was inextricably tied up with
appellants' being able to acquire the Nassco property. In other words, Cervantes merely wanted to
be sure that they would get the Nassco property before proceeding with the sale of the Buendia
property. To construe the 45-day stipulation as giving Cervantes the absolute right to disregard the
Villoncos entirely until after the 45 days had expired is to render the whole of Cervantes' letter of
February 12 as totally meaningless, legally non-existent and as deceitfully farcical. Consequently,
the acquisition of the Nassco property having actually eventualized, it cannot lie in the lips of
Cervantes to claim that he may not be compelled to proceed with the transaction. To view the
situation otherwise is to condone resort to ambiguity as a means of deception and informality in
contractual obligations, which in my opinion is contrary to the elementary requirements of
candidness and honest dealing between responsible contracting parties, and in that sense offensive
to public policy.

2. The contention of appellants that inasmuch as in actual fact the Buendia property contemplated in
the contract is the conjugal property of Cervantes spouses and that since in dealing with the
Villoncos, Cervantes acted as President of Bormaheco, Inc., the appellee cannot have any right to
compel the conveyance to them thereof is in my view definitely puerile. It is predicated on duplicity
and smacks of utter bad faith.

I do not find in the evidence before Us adequate basis for accepting the suggestion that Francisco
Cervantes acted for and in behalf of Bormaheco, Inc. in his dealing with the Villoncos. The mere fact
that he signed his letter of February 12, 1964 over the title of President, there being no showing that
he was duly authorized to make the offer therein contained in the name of the corporation, did not
convert it into a corporate act. The language of the letter which is conspicuously sprinkled with the
pronoun I used by Cervantes to refer to himself rather than exclusively the pronoun we does not so
indicate. Besides, Cervantes is undisputably the registered owner with his wife of the property
therein mentioned, and being evidently conscious, as he ought to have been of this fact, he knew his
act would be ultra vires and void, if he were to act for the corporation. He was the manager of the
conjugal partnership and he knew it was only in that capacity that he could in good faith give validity
to his representation, assuming the conformity of his wife. Unless Cervantes wants Us to hold that
he deliberately negotiated with the Villoncos clothed in dubious garments of authority precisely to
afford him the opportunity to repudiate at his convenience any agreement they may enter into with
him. I am for holding as I do hold that Bormaheco, Inc. had nothing to do with the transaction here in
controversy. In any event, if Cervantes may held to have acted for Bormaheco, Inc., in spite of the
absence of evidence of any authority for him to do so, it must be because Bormaheco, Inc. is
Cervantes himself, and there being no proof to the contrary, the corporate shield of Bormaheco, Inc.
may be deemed pierced in order to prevent any further fraudulent implications in his actuations.
Moreover, it may be observed that the March 4 letter of Teofilo Villonco was not addressed to
Bormaheco, Inc. but to Francisco Cervantes and it does not even mention his being President of that
corporation.

Anent the requirement of consent of Mrs. Cervantes under Article 166 of the Civil Code, I consider
any defense along this line as unavailing to the appellants in this case. As very ably discussed in the
main opinion of Mr. Justice Aquino, the answer of the defendants, make no reference at all to any
lack of such consent. And considering that the subsequent testimony of Cervantes to the effect that
his wife opposed the transaction cannot cure such omission, if only because any husband in the
circumstances revealed in the record is estopped from setting up such a defense (cf Riobo vs.
Hontiveros, 21 Phil. 31; Papi vs. Montenegro, 54 Phil. 531; see Civil Law by Reyes & Puno, 1964 ed.
p. 192), and that from her silence in her answer in this respect Mrs. Cervantes may either be
presumed to have given her consent thereto or to have ratified the same (Montederamos vs.
Ynonoy, 56 Phil. 457; Castañeda vs. Samson, 43 Phil. 751), it is obvious that the belated invocation
of this defense now should be deemed in fact and in law as an unacceptable and ineffective
afterthought. Besides, it appearing that the sale of the Buendia property was purposely to enable the
spouses to acquire the Nassco property, I have grave doubts as to the application of Article 166 to
the sale here in dispute. I believe that the disposition by a husband prohibited by the Code unless
consented to by the wife refers to a transaction outrightly prejudicial to the partnership and cannot
comprehend a sale made precisely for its benefit and causing no loss thereto beyond the ordinary
risks of misjudgment of a manager acting in good faith.

IN VIEW OF THE FOREGOING, I would not even require the formality of the serial execution of
instruments by the Cervantes spouses and Bormaheco, Inc. In the view I have taken above, it would
be legally feasible for the sale to the Villonco Realty Property to be made directly by the spouses.
But I would not insist in the modification of the dispositive portion of the judgment, since the result
would be the same anyway.

Separate Opinions

BARREDO, J., concurring:

The comprehensive and well prepared opinion of Mr. Justice Aquino deserves concurrence and I do
not hesitate to accord my assent to it. The only purpose of the following lines is to express my
personal view regarding two basic points which I feel should be thoroughly emphasized.

1. I am not for giving the letter proposal of appellant Francisco Cervantes to Romeo Villonco of
February 12, 1964, Exhibit B, any decisive importance. To my mind, it has no more legal significance
than what is appears to be — a mere unaccepted proposal. Accordingly, to my mind, paragraph (5)
thereof to the effect that "final negotiations on both properties can be definitely known after 45 days"
has no relevance in the disposition of this case, there being nothing in the record to show that the
same was accepted by appellee.

What to me is the actual contract between appellee and appellant Francisco Cervantes is the
counter-offer signed by Teofilo Villonco and addressed to the latter of March 4, 1964, Exhibit D,
which does not even make any reference to the above-mentioned proposal of Cervantes of February
12, 1964, even as it mentions specifically the letters of the agent, Miss E. Perez de Tagle, of
February 12 and 26, 1964. The last paragraph of said Exhibit D reads thus: "If the above terms and
conditions are acceptable to you, kindly sign your conformity hereunder. Enclosed is our check for
One Hundred Thousand (P100,000) Pesos, M.B.T.C. Cheek No. 448314, as earnest money." And it
is undisputed that Francisco Cervantes did affix his signature in the place indicated for his
conformity, albeit under the typewritten words, Bormaheco, Inc. It is also a fact that on the same
date, the stipulated P100,000 earnest money was received by Cervantes.

It is true that in the voucher-receipt evidencing the delivery of the earnest money, the agent, Miss
Tagle, indicated in her own handwriting that the same was "subject to the terms and conditions
embodied in Bormaheco's letter of February 12, 1974 and Villonco Realty Company's letter of March
4, 1974," but it is my considered opinion that such reservation cannot be understood as
comprehending reference to the above-quoted paragraph (5) of the proposal of February 12, for the
simple reason that since the parties had in fact continued negotiating after February 12 until the final
conference of February 27, Cervantes must be deemed as having intended his signing of his
conformity to the letter of March 4 to be the formalization of the "final negotiations" referred to in said
paragraph (5), thereby rendering said provision of no further consequence. It should be noted that,
to be sure, as said paragraph (5) was worded, the idea it conveyed was that Cervantes was just
making a mere tentative offer which he would finalize only after 45 days, and so, when he signed
Villonco's counter-offer of March 4 and accepted the P100,000 earnest money tendered therein, no
other significance could be given to such acts than that they were meant to finalize and perfect the
transaction in advance of the 45-day waiting period originally proposed by him. Indeed, in the
addendum written and signed by Cervantes himself (not by the agent) to the March 4 letter, all that
he stated was that "this sale shall be subject to favorable consummation of a property in Sta. Ana we
are negotiating", and this was none other than the Nassco property which the Nassco Board
authorized its manager on February 18, 1964 to sell to appellants who had won the award the day
before. In other words, when Cervantes signed the space for his conformity to the terms of that letter
of March 4, he already knew or must have known that the acquisition of the Nassco property was
already an impending certainty and must have cared less about what had become an unnecessary
waiting period, hence the omission of any mention thereof by him in his addendum.

My conclusion, therefore, is that said acts of Cervantes of signing his conformity to Villonco's
counter-offer of March 4 and accepting the P100,000 earnest money therein offered resulted in a
completely perfected contract of sale between the parties per Article 1482 of the Civil Code, needing
only the execution of the corresponding deed of sale for its consummation and subject solely to the
negative resolutory condition that the "sale shall be cancelled, only if your (Cervantes') deal with
another property in Sta. Ana (indisputably the Nassco transaction) shall not be consummated",
without stipulating anymore a period for such consummation, since evidently, with the sale thereof
having been authorized already by the Nassco Board on February 18, 1964, the Villoncos must have
been made to understand or they did understand that such consummation was inexorably
forthcoming. In fact, the Nassco Board already approved on March 3, 1964 not only the award but
the actual sale of the property to appellants, and the Economic Coordinator gave his sanction
thereto on March 24 following. Thus, as of March 3, one day before Cervantes accepted Villonco's
counter-offer, nothing more was left to formalize the transaction with Nassco except that approval of
the Economic Coordinator.

I cannot believe that Cervantes did not have up-to-date information of the progress of his
transactions with Nassco. Actually, from the legal standpoint, he was under obligation, if only in
consequence of his offer of February 12 and his continuous conversations and negotiations with the
Villoncos up to the signing of their agreement on March 4, to keep constant and close tract thereof in
order that he might be able to inform the parties he was dealing with of the real status thereof, the
finalization of the same being a material factor in the accomplishment of their common purpose.
Withal, equity would assume that he did what ought to have been done by him in taking ordinary
care of his concerns, which he is presumed to have taken, according to Section 5 (d) of rule 131.
Under these circumstances, I am amply persuaded that he must have been aware of the favorable
actuations of the Nassco authorities all the while that he was dealing with appellee up to March 4,
the day after the Nassco Board approved the sale. Accordingly, I hold that when he gave his
conformity to the counter-offer of the Villoncos of March 4, he was already fully confident his
transaction with Nassco would eventually materialize.

What is worse is that assuming that the 45-day period invoked by him could be considered in this
discussion, it would be inequitable to allow him to take advantage thereof in the light of the
circumstances extant in the record. It cannot be denied that, as already stated, the Economic
Coordinator approved the Nassco transaction on March 24, 1964. Anyone would know, and much
more so Cervantes who was directly interested therein and must have been anxiously and even
excitedly waiting for it, that that was the last requisite for the inevitable execution of the deed of sale
in his favor. One has to be very naive and it would be contrary to the ordinary course of human
experience and business practices for anyone to concede to appellants that when Cervantes wrote
his letter to Villonco Realty Company of March 30, 1964 stating that "despite the lapse of 45 days
from February 12, 1964, there is no certainty yet for us to acquire a substitute property", he did not
even have the slightest inkling of the favorable action of the Economic Coordinator of March 24. The
same or more may be said relative to his letter to Miss Tagle of as late as April 6, 1964 wherein he
alleged that the forty-five day period had already expired and the sale to Bormaheco, Inc. of the
Punta (Nassco) property had not been consummated as of then and that, therefore, his letter was a
"manifestation that we are no longer interested to sell" the Buendia property to the Villoncos.

I have no doubt whatsoever that the whole trouble here is that after Cervantes had already signed
his conformity and received earnest money on March 4, he had a change of heart, perhaps dictated
by reasons of better economic advantage, and banking on the idea, albeit erroneous, that he could
utilize paragraph (5) of his letter of February 12 as a escape door through which he could squeeze
out of the perfected contract with the Villoncos, he opted to actually back out and break with them
thru his letters of March 30 to them and of April 6 to the agent, Miss Tagle. The Court would certainly
be sanctioning a deliberate mala fide breach of a contract already definitely perfected were it to buy
the theory of non-perfection appellants are lamely pressing on Us. No amount of rationalization can
convince me that the Villoncos had agreed to any 45-day suspensive condition for the perfection of
the agreement, but even on the remote assumption that they did, I would hold as I do hold that the
purchase of the Nassco property by appellants was virtually consummated, from the viewpoint of the
spirit and intent of the contract here in question, on March 24, 1964, when the Economic Coordinator
approved the same and nothing else remained to be done to formalize it except the actual execution
of the deed of sale which in fact took place on June 26, 1964, hence, Cervantes had no more
excuse for further delaying compliance with his agreement with the Villoncos. In other words, for all
legal purposes, assuming hypothetically the plausibility of the theory of appellants about a 45-day
waiting period, the negative resolutory condition arising from said theory became inoperative four
days before said 45 days expired. After the approval of the sale by the Economic Coordinator, there
was nothing anymore that could impede the formal conveyance of the Nassco property to
appellants, other than their own desistance, and even that might have been legally controversial if
Nassco insisted otherwise. Reading all the communications exchanged between the parties, the
conclusion therefrom is inevitable that the 45-day period stipulation was inextricably tied up with
appellants' being able to acquire the Nassco property. In other words, Cervantes merely wanted to
be sure that they would get the Nassco property before proceeding with the sale of the Buendia
property. To construe the 45-day stipulation as giving Cervantes the absolute right to disregard the
Villoncos entirely until after the 45 days had expired is to render the whole of Cervantes' letter of
February 12 as totally meaningless, legally non-existent and as deceitfully farcical. Consequently,
the acquisition of the Nassco property having actually eventualized, it cannot lie in the lips of
Cervantes to claim that he may not be compelled to proceed with the transaction. To view the
situation otherwise is to condone resort to ambiguity as a means of deception and informality in
contractual obligations, which in my opinion is contrary to the elementary requirements of
candidness and honest dealing between responsible contracting parties, and in that sense offensive
to public policy.

2. The contention of appellants that inasmuch as in actual fact the Buendia property contemplated in
the contract is the conjugal property of Cervantes spouses and that since in dealing with the
Villoncos, Cervantes acted as President of Bormaheco, Inc., the appellee cannot have any right to
compel the conveyance to them thereof is in my view definitely puerile. It is predicated on duplicity
and smacks of utter bad faith.
I do not find in the evidence before Us adequate basis for accepting the suggestion that Francisco
Cervantes acted for and in behalf of Bormaheco, Inc. in his dealing with the Villoncos. The mere fact
that he signed his letter of February 12, 1964 over the title of President, there being no showing that
he was duly authorized to make the offer therein contained in the name of the corporation, did not
convert it into a corporate act. The language of the letter which is conspicuously sprinkled with the
pronoun I used by Cervantes to refer to himself rather than exclusively the pronoun we does not so
indicate. Besides, Cervantes is undisputably the registered owner with his wife of the property
therein mentioned, and being evidently conscious, as he ought to have been of this fact, he knew his
act would be ultra vires and void, if he were to act for the corporation. He was the manager of the
conjugal partnership and he knew it was only in that capacity that he could in good faith give validity
to his representation, assuming the conformity of his wife. Unless Cervantes wants Us to hold that
he deliberately negotiated with the Villoncos clothed in dubious garments of authority precisely to
afford him the opportunity to repudiate at his convenience any agreement they may enter into with
him. I am for holding as I do hold that Bormaheco, Inc. had nothing to do with the transaction here in
controversy. In any event, if Cervantes may held to have acted for Bormaheco, Inc., in spite of the
absence of evidence of any authority for him to do so, it must be because Bormaheco, Inc. is
Cervantes himself, and there being no proof to the contrary, the corporate shield of Bormaheco, Inc.
may be deemed pierced in order to prevent any further fraudulent implications in his actuations.
Moreover, it may be observed that the March 4 letter of Teofilo Villonco was not addressed to
Bormaheco, Inc. but to Francisco Cervantes and it does not even mention his being President of that
corporation.

Anent the requirement of consent of Mrs. Cervantes under Article 166 of the Civil Code, I consider
any defense along this line as unavailing to the appellants in this case. As very ably discussed in the
main opinion of Mr. Justice Aquino, the answer of the defendants, make no reference at all to any
lack of such consent. And considering that the subsequent testimony of Cervantes to the effect that
his wife opposed the transaction cannot cure such omission, if only because any husband in the
circumstances revealed in the record is estopped from setting up such a defense (cf Riobo vs.
Hontiveros, 21 Phil. 31; Papi vs. Montenegro, 54 Phil. 531; see Civil Law by Reyes & Puno, 1964 ed.
p. 192), and that from her silence in her answer in this respect Mrs. Cervantes may either be
presumed to have given her consent thereto or to have ratified the same (Montederamos vs.
Ynonoy, 56 Phil. 457; Castañeda vs. Samson, 43 Phil. 751), it is obvious that the belated invocation
of this defense now should be deemed in fact and in law as an unacceptable and ineffective
afterthought. Besides, it appearing that the sale of the Buendia property was purposely to enable the
spouses to acquire the Nassco property, I have grave doubts as to the application of Article 166 to
the sale here in dispute. I believe that the disposition by a husband prohibited by the Code unless
consented to by the wife refers to a transaction outrightly prejudicial to the partnership and cannot
comprehend a sale made precisely for its benefit and causing no loss thereto beyond the ordinary
risks of misjudgment of a manager acting in good faith.

IN VIEW OF THE FOREGOING, I would not even require the formality of the serial execution of
instruments by the Cervantes spouses and Bormaheco, Inc. In the view I have taken above, it would
be legally feasible for the sale to the Villonco Realty Property to be made directly by the spouses.
But I would not insist in the modification of the dispositive portion of the judgment, since the result
would be the same anyway.

Footnotes

* Underscoring supplied. Note that, according to the defendants, Cervantes inserted

"12th and" between the "February" and "26" in the second line of the foregoing letter,
that in paragraph 3 of the terms and conditions he crossed out "Nassco's" and wrote
"another" and that he inserted "pa" after "interest" (p. 7, defendants-appellants' brief).
There is no stipulation nor testimony on the alleged insertions.

**

"March 31,1964

Mr. Francisco Cervantes

President, BORMAHECO, INC.
245 Buendia Avenue
Makati, Rizal

Dear Mr. Cervantes:

As your official and authorized representative on the sale of your property located at
245 Buendia Avenue, Makati, Rizal, with a total area of 3,500 square meters, at
P400.00 per square meter or a total purchase cost of P1,400.000.00, in favor of Mr.
Romeo Villonco of Villonco Realty Co., I was surprised and shocked at the news of
your actions yesterday afternoon when you had a certain Mr. de Guzman bring to Mr.
Romeo Villonco, your letter dated March 30th, 1964, together with 2 checks. One for
P100.000.00 and another for P694.25 as 10% interest on the same.

If you will recall, this deal on selling your property started way back in October 1963
when you ordered me to negotiate for you certain properties to buy in order that you
could move to a bigger location than that at 245 Buendia Avenue which was
becoming too small for your needs.

You also authorized me to negotiate with my BUYERS, one of whom was the
Villonco Brothers who owned the adjacent property, on the sale of your property.
Plenty of conferences were held between you and me, and also between the
Villoncos and me on the said property, specially after your Formal Bidding of the
NASSCO PROPERTY, located at Punta. Sta. Ana, was made on January 17, 1964.

After this made (sic) was made, you called me and had me offer your property at 245
Buendia Avenue to the Villoncos. For this you made your formal offer as per your
letter dated February 12, 1964. And that after there were many personal conferences
made between you and the Villoncos either by phone and also personally at their
office in my presence.

After your Formal Offer of February 12, 1964, and the subsequent acceptance by the
Villoncos of your offer, and the payment of the EARNEST MONEY of P100,000.00
which you accepted on March 4, 1964 and signed CONFORME to the LETTER
CONTRACT of the same date, this deal become a close deal as the said Earnest
Money becomes a part of the down payment on the property.

The only stipulation mentioned in your Contractual Letter of March 4, 1964 which
followed your letter of February 12, 1964, was that the said sale becomes ineffective
only if the purchase of the property at Sta. Ana is not approved by the NASSCO or
the OEC. However, from all my follow up on the matter at the NASSCO and the
OEC, it appears that your bid on purchasing the said property at Sta. Ana has been
approved by the NASSCO BOARD on March 3, 1964, and subsequently approved
by the Office of the Economic Coordinator and signed by Mr. Adevoso on March
25,1964. This, therefore, removes the stipulation on your letter of Feb. 12, 1964 and
thus effecting the consummation of this deal.

Mr. Romeo Villonco has called me to his office and has returned to me your letter
and the checks, as he is not agreeable to a cancellation of this deal with them on the
purchase of your property at 245 Buendia Avenue, Makati, Rizal, for the following
reasons:

(1.) That this deal has been made after a Formal Written Offer from you after several
lengthy verbal conferences between you, and which terms have been agreed upon;

(2.) That after the Earnest Money had been received by you, I, as your official
representative have followed the matter and have kept them informed on the
progress of the deal with the NASSCO and the OEC, this being the only stipulation
on the consummation of the deal; and as such made it necessary that the Villoncos
mortgage several of their properties with the bank to have ready the Cash payment
required by you as per your Contractual Letter of March 4, 1964;

(3.) That in all big business firms, the presence of a large amount of spot cash is
always not present, thus it was necessary that the Villoncos raised this spot cash
which was one of your requirements for this sale;

(4.) That the Villoncos have put aside all other projects in favor of this deal, since the
same requires a large amount of cash, not only for the payment of the land, but also
for the cost of the new building to be erected; (5.) That the stipulation on the letters of
February 12, 1964 and March 4, 1964 wherein the approval and consequent
purchase of the lot at Sta. Ana, Manila has been removed by the approval of your bid
purchase of the property of the NASSCO, at Punta, Sta. Ana which has been
approved by the NASSCO BOARD on March 3, 1964 and the OEC on March 25,
1964;

For all the above reasons, Mr. Romeo Villonco will not agree to your backing out of
this deal or rescinding your Contractual Agreement with them for any other reason
whatsoever.
 2) Osesmer vs Paraiso

THIRD DIVISION

RIZALINO, substituted by his G.R. No. 157493

heirs, JOSEFINA, ROLANDO
and FERNANDO, ERNESTO, Present:
LEONORA, BIBIANO, JR.,
LIBRADO and YNARES-SANTIAGO, J.,
ENRIQUETA, all surnamed Chairperson,
OESMER, AUSTRIA-MARTINEZ,
Petitioners, CALLEJO, SR., and
CHICO-NAZARIO, JJ.

- versus -
Promulgated:

PARAISO DEVELOPMENT February 5, 2007

CORPORATION,
Respondent.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997
Revised Rules of Civil Procedure seeking to reverse and set aside the Court of
Appeals Decision[1] dated 26 April 2002 in CA-G.R. CV No. 53130
entitled, Rizalino, Ernesto, Leonora, Bibiano, Jr., Librado, Enriqueta, Adolfo, and
Jesus, all surnamed Oesmer vs. Paraiso Development Corporation, as modified by
its Resolution[2] dated 4 March 2003, declaring the Contract to Sell valid and
binding with respect to the undivided proportionate shares of the six signatories of
the said document, herein petitioners, namely: Ernesto, Enriqueta, Librado,
Rizalino, Bibiano, Jr., and Leonora (all surnamed Oesmer); and ordering them to
execute the Deed of Absolute Sale concerning their 6/8 share over the subject
parcels of land in favor of herein respondent Paraiso Development Corporation,
and to pay the latter the attorneys fees plus costs of the suit. The assailed Decision,
as modified, likewise ordered the respondent to tender payment to the petitioners in
the amount of P3,216,560.00 representing the balance of the purchase price of the
subject parcels of land.
The facts of the case are as follows:

Petitioners Rizalino, Ernesto, Leonora, Bibiano, Jr., Librado, and Enriqueta, all
surnamed Oesmer, together with Adolfo Oesmer (Adolfo) and Jesus Oesmer
(Jesus), are brothers and sisters, and the co-owners of undivided shares of two
parcels of agricultural and tenanted land situated in Barangay Ulong Tubig,
Carmona, Cavite, identified as Lot 720 with an area of 40,507 square meters (sq.
m.) and Lot 834 containing an area of 14,769 sq. m., or a total land area of 55,276
sq. m. Both lots are unregistered and originally owned by their parents, Bibiano
Oesmer and Encarnacion Durumpili, who declared the lots for taxation purposes
under Tax Declaration No. 3438[3] (cancelled by I.D. No. 6064-A) for Lot 720 and
Tax Declaration No. 3437[4] (cancelled by I.D. No. 5629) for Lot 834. When the
spouses Oesmer died, petitioners, together with Adolfo and Jesus, acquired the lots
as heirs of the former by right of succession.

Respondent Paraiso Development Corporation is known to be engaged in the real

estate business.

Sometime in March 1989, Rogelio Paular, a resident and former Municipal

Secretary of Carmona, Cavite, brought along petitioner Ernesto to meet with a
certain Sotero Lee, President of respondent Paraiso Development Corporation, at
Otani Hotel in Manila. The said meeting was for the purpose of brokering the sale
of petitioners properties to respondent corporation.

Pursuant to the said meeting, a Contract to Sell[5] was drafted by the Executive
Assistant of Sotero Lee, Inocencia Almo. On 1 April 1989, petitioners Ernesto and
Enriqueta signed the aforesaid Contract to Sell. A check in the amount
of P100,000.00, payable to Ernesto, was given as option money. Sometime
thereafter, Rizalino, Leonora, Bibiano, Jr., and Librado also signed the said
Contract to Sell. However, two of the brothers, Adolfo and Jesus, did not sign the
document.

On 5 April 1989, a duplicate copy of the instrument was returned to respondent

corporation. On 21 April 1989, respondent brought the same to a notary public for
notarization.

In a letter[6] dated 1 November 1989, addressed to respondent corporation,

petitioners informed the former of their intention to rescind the Contract to Sell and
to return the amount of P100,000.00 given by respondent as option money.

Respondent did not respond to the aforesaid letter. On 30 May 1991, herein
petitioners, together with Adolfo and Jesus, filed a Complaint[7] for Declaration of
Nullity or for Annulment of Option Agreement or Contract to Sell with Damages
before the Regional Trial Court (RTC) of Bacoor, Cavite. The said case was
docketed as Civil Case No. BCV-91-49.

During trial, petitioner Rizalino died. Upon motion of petitioners, the trial court
issued an Order,[8] dated 16 September 1992, to the effect that the deceased
petitioner be substituted by his surviving spouse, Josefina O. Oesmer, and his
children, Rolando O. Oesmer and Fernando O. Oesmer. However, the name of
Rizalino was retained in the title of the case both in the RTC and the Court of
Appeals.

After trial on the merits, the lower court rendered a Decision[9] dated 27 March
1996 in favor of the respondent, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered

in favor of herein [respondent] Paraiso Development Corporation. The
assailed Contract to Sell is valid and binding only to the undivided
proportionate share of the signatory of this document and recipient of the
check, [herein petitioner] co-owner Ernesto Durumpili Oesmer. The
latter is hereby ordered to execute the Contract of
Absolute Sale concerning his 1/8 share over the subject two parcels of
land in favor of herein [respondent] corporation, and to pay the latter the
 attorneys fees in the sum of Ten Thousand (P10,000.00) Pesos plus costs
of suit.

The counterclaim of [respondent] corporation is hereby Dismissed

for lack of merit.[10]

Unsatisfied, respondent appealed the said Decision before the Court of

Appeals. On 26 April 2002, the appellate court rendered a Decision modifying the
Decision of the court a quo by declaring that the Contract to Sell is valid and
binding with respect to the undivided proportionate shares of the six signatories of
the said document, herein petitioners, namely: Ernesto, Enriqueta, Librado,
Rizalino, Bibiano, Jr., and Leonora (all surnamed Oesmer). The decretal portion of
the said Decision states that:

WHEREFORE, premises considered, the Decision of the court a quo is

hereby MODIFIED. Judgment is hereby rendered in favor of
herein [respondent] Paraiso Development Corporation. The assailed
Contract to Sell is valid and binding with respect to the undivided
proportionate share of the six (6) signatories of this document, [herein
petitioners], namely, Ernesto, Enriqueta, Librado, Rizalino, Bibiano, Jr.,
and Leonora (all surnamed Oesmer). The said [petitioners] are hereby
ordered to execute the Deed of Absolute Sale concerning their 6/8 share
over the subject two parcels of land and in favor of herein [respondent]
corporation, and to pay the latter the attorneys fees in the sum of Ten
Thousand Pesos (P10,000.00) plus costs of suit.[11]

Aggrieved by the above-mentioned Decision, petitioners filed a Motion for

Reconsideration of the same on 2 July 2002. Acting on petitioners Motion for
Reconsideration, the Court of Appeals issued a Resolution dated 4 March 2003,
maintaining its Decision dated 26 April 2002, with the modification that
respondent tender payment to petitioners in the amount of P3,216,560.00,
representing the balance of the purchase price of the subject parcels of land. The
dispositive portion of the said Resolution reads:

WHEREFORE, premises considered, the assailed Decision is

hereby modified. Judgment is hereby rendered in favor of herein
[respondent] Paraiso Development Corporation. The assailed Contract to
 Sell is valid and binding with respect to the undivided proportionate
shares of the six (6) signatories of this document, [herein petitioners],
namely, Ernesto, Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora
(all surnamed Oesmer). The said [petitioners] are hereby ordered to
execute the Deed of Absolute Sale concerning their 6/8 share over the
subject two parcels of land in favor of herein [respondent]
corporation, and to pay the latter attorneys fees in the sum of Ten
Thousand Pesos (P10,000.00) plus costs of suit. Respondent is likewise
ordered to tender payment to the above-named [petitioners] in the
amount of Three Million Two Hundred Sixteen Thousand Five Hundred
Sixty Pesos (P3,216,560.00) representing the balance of the purchase
price of the subject two parcels of land. [12]

Hence, this Petition for Review on Certiorari.

Petitioners come before this Court arguing that the Court of Appeals erred:

I. On a question of law in not holding that, the supposed Contract

to Sell (Exhibit D) is not binding upon petitioner Ernesto Oesmers
co-owners (herein petitioners Enriqueta, Librado, Rizalino,
Bibiano, Jr., and Leonora).

II. On a question of law in not holding that, the supposed Contract

to Sell (Exhibit D) is void altogether considering that respondent
itself did not sign it as to indicate its consent to be bound by its
terms. Moreover, Exhibit D is really a unilateral promise to sell
without consideration distinct from the price, and hence, void.

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

Petitioners also assert that the supposed Contract to Sell (Exhibit D), contrary to
the findings of the Court of Appeals, is not couched in simple language.

They further claim that the supposed Contract to Sell does not bind the respondent
because the latter did not sign the said contract as to indicate its consent to be
bound by its terms. Furthermore, they maintain that the supposed Contract to Sell
is really a unilateral promise to sell and the option money does not bind petitioners
for lack of cause or consideration distinct from the purchase price.

The Petition is bereft of merit.

It is true that the signatures of the five petitioners, namely: Enriqueta, Librado,
Rizalino, Bibiano, Jr., and Leonora, on the Contract to Sell did not confer authority
on petitioner Ernesto as agent authorized to sell their respective shares in the
questioned properties because of Article 1874 of the Civil Code, which expressly
provides that:

Art. 1874. When a sale of a piece of land or any interest therein is

through an agent, the authority of the latter shall be in writing; otherwise,
the sale shall be void.

The law itself explicitly requires a written authority before an agent can sell an
immovable. The conferment of such an authority should be in writing, in as clear
and precise terms as possible. It is worth noting that petitioners signatures are
found in the Contract to Sell. The Contract is absolutely silent on the establishment
of any principal-agent relationship between the five petitioners and their brother
and co-petitioner Ernesto as to the sale of the subject parcels of land. Thus, the
Contract to Sell, although signed on the margin by the five petitioners, is not
sufficient to confer authority on petitioner Ernesto to act as their agent in selling
their shares in the properties in question.
However, despite petitioner Ernestos lack of written authority from the five
petitioners to sell their shares in the subject parcels of land, the supposed Contract
to Sell remains valid and binding upon the latter.

As can be clearly gleaned from the contract itself, it is not only petitioner Ernesto
who signed the said Contract to Sell; the other five petitioners also personally
affixed their signatures thereon. Therefore, a written authority is no longer
necessary in order to sell their shares in the subject parcels of land because, by
affixing their signatures on the Contract to Sell, they were not selling their shares
through an agent but, rather, they were selling the same directly and in their own
right.

The Court also finds untenable the following arguments raised by petitioners to the
effect that the Contract to Sell is not binding upon them, except to Ernesto,
because: (1) the signatures of five of the petitioners do not signify their consent to
sell their shares in the questioned properties since petitioner Enriqueta merely
signed as a witness to the said Contract to Sell, and that the other petitioners,
namely: Librado, Rizalino, Leonora, and Bibiano, Jr., did not understand the
importance and consequences of their action because of their low degree of
education and the contents of the aforesaid contract were not read nor explained to
them; and (2) assuming that the signatures indicate consent, such consent was
merely conditional, thus, the effectivity of the alleged Contract to Sell was subject
to a suspensive condition, which is the approval by all the co-owners of the sale.

It is well-settled that contracts are perfected by mere consent, upon the acceptance
by the offeree of the offer made by the offeror. From that moment, the parties are
bound not only to the fulfillment of what has been expressly stipulated but also to
all the consequences which, according to their nature, may be in keeping with good
faith, usage and law. To produce a contract, the acceptance must not qualify the
terms of the offer. However, the acceptance may be express or implied. For a
contract to arise, the acceptance must be made known to the offeror. Accordingly,
the acceptance can be withdrawn or revoked before it is made known to the
offeror.[13]

In the case at bar, the Contract to Sell was perfected when the petitioners consented
to the sale to the respondent of their shares in the subject parcels of land by
affixing their signatures on the said contract. Such signatures show their
acceptance of what has been stipulated in the Contract to Sell and such acceptance
was made known to respondent corporation when the duplicate copy of the
Contract to Sell was returned to the latter bearing petitioners signatures.

As to petitioner Enriquetas claim that she merely signed as a witness to the said
contract, the contract itself does not say so. There was no single indication in the
said contract that she signed the same merely as a witness. The fact that her
signature appears on the right-hand margin of the Contract to Sell is
insignificant. The contract indisputably referred to the Heirs of Bibiano and
Encarnacion Oesmer, and since there is no showing that Enriqueta signed the
document in some other capacity, it can be safely assumed that she did so as one of
the parties to the sale.

Emphasis should also be given to the fact that petitioners Ernesto and
Enriqueta concurrently signed the Contract to Sell. As the Court of Appeals
mentioned in its Decision,[14] the records of the case speak of the fact that petitioner
Ernesto, together with petitioner Enriqueta, met with the representatives of the
respondent in order to finalize the terms and conditions of the Contract to
Sell. Enriqueta affixed her signature on the said contract when the same was
drafted. She even admitted that she understood the undertaking that she and
petitioner Ernesto made in connection with the contract. She likewise disclosed
that pursuant to the terms embodied in the Contract to Sell, she updated the
payment of the real property taxes and transferred the Tax Declarations of the
questioned properties in her name.[15] Hence, it cannot be gainsaid that she merely
signed the Contract to Sell as a witness because she did not only actively
participate in the negotiation and execution of the same, but her subsequent actions
also reveal an attempt to comply with the conditions in the said contract.

With respect to the other petitioners assertion that they did not understand the
importance and consequences of their action because of their low degree of
education and because the contents of the aforesaid contract were not read nor
explained to them, the same cannot be sustained.

We only have to quote the pertinent portions of the Court of Appeals Decision,
clear and concise, to dispose of this issue. Thus,
 First, the Contract to Sell is couched in such a simple language
which is undoubtedly easy to read and understand. The terms of the
Contract, specifically the amount of P100,000.00 representing the option
money paid by [respondent] corporation, the purchase price of P60.00
per square meter or the total amount of P3,316,560.00 and a brief
description of the subject properties are well-indicated thereon that any
prudent and mature man would have known the nature and extent of the
transaction encapsulated in the document that he was signing.

Second, the following circumstances, as testified by the witnesses

and as can be gleaned from the records of the case clearly indicate the
[petitioners] intention to be bound by the stipulations chronicled in the
said Contract to Sell.

As to [petitioner] Ernesto, there is no dispute as to his intention to

effect the alienation of the subject property as he in fact was the one who
initiated the negotiation process and culminated the same by affixing his
signature on the Contract to Sell and by taking receipt of the amount
of P100,000.00 which formed part of the purchase price.

xxxx

As to [petitioner] Librado, the [appellate court] finds it

preposterous that he willingly affixed his signature on a document
written in a language (English) that he purportedly does not
understand. He testified that the document was just brought to him by an
18 year old niece named Baby and he was told that the document was for
a check to be paid to him. He readily signed the Contract to Sell without
consulting his other siblings. Thereafter, he exerted no effort in
communicating with his brothers and sisters regarding the document
which he had signed, did not inquire what the check was for and did not
thereafter ask for the check which is purportedly due to him as a result of
his signing the said Contract to Sell. (TSN, 28 September 1993, pp. 22-
23)

The [appellate court] notes that Librado is a 43 year old family

man (TSN, 28 September 1993, p. 19). As such, he is expected to act
with that ordinary degree of care and prudence expected of a good father
of a family. His unwitting testimony is just divinely disbelieving.
 The other [petitioners] (Rizalino, Leonora and Bibiano Jr.) are
likewise bound by the said Contract to Sell. The theory adopted by the
[petitioners] that because of their low degree of education, they did not
understand the contents of the said Contract to Sell is devoid of
merit. The [appellate court] also notes that Adolfo (one of the co-heirs
who did not sign) also possess the same degree of education as that of
the signing co-heirs (TSN, 15 October 1991, p. 19). He, however, is
employed at the Provincial Treasury Office at Trece Martirez, Caviteand
has even accompanied Rogelio Paular to the Assessors Office to locate
certain missing documents which were needed to transfer the titles of the
subject properties. (TSN, 28 January 1994, pp. 26 & 35) Similarly, the
other co-heirs [petitioners], like Adolfo, are far from ignorant, more so,
illiterate that they can be extricated from their obligations under the
Contract to Sell which they voluntarily and knowingly entered into with
the [respondent] corporation.

The Supreme Court in the case of Cecilia Mata v. Court of

Appeals (207 SCRA 753 [1992]), citing the case of Tan Sua Sia v. Yu
Baio Sontua (56 Phil. 711), instructively ruled as follows:

The Court does not accept the petitioners claim that she did not
understand the terms and conditions of the transactions because she only
reached Grade Three and was already 63 years of age when she signed
the documents. She was literate, to begin with, and her age did not make
her senile or incompetent. x x x.

At any rate, Metrobank had no obligation to explain the

documents to the petitioner as nowhere has it been proven that she is
unable to read or that the contracts were written in a language not known
to her. It was her responsibility to inform herself of the meaning and
consequence of the contracts she was signing and, if she found them
difficult to comprehend, to consult other persons, preferably lawyers, to
explain them to her. After all, the transactions involved not only a few
hundred or thousand pesos but, indeed, hundreds of thousands of pesos.

As the Court has held:

x x x The rule that one who signs a contract is presumed to know its
contents has been applied even to contracts of illiterate persons on the
ground that if such persons are unable to read, they are negligent if they
fail to have the contract read to them. If a person cannot read the
 instrument, it is as much his duty to procure some reliable persons to
read and explain it to him, before he signs it, as it would be to read it
before he signed it if he were able to do and his failure to obtain a
reading and explanation of it is such gross negligence as will estop from
avoiding it on the ground that he was ignorant of its contents.[16]

That the petitioners really had the intention to dispose of their shares in the subject
parcels of land, irrespective of whether or not all of the heirs consented to the said
Contract to Sell, was unveiled by Adolfos testimony as follows:

ATTY. GAMO: This alleged agreement between you and your other
brothers and sisters that unless everybody will agree, the
properties would not be sold, was that agreement in writing?

WITNESS: No sir.
ATTY. GAMO: What you are saying is that when your brothers and
sisters except Jesus and you did not sign that agreement which
had been marked as [Exhibit] D, your brothers and sisters were
grossly violating your agreement.

WITNESS: Yes, sir, they violated what we have agreed upon.[17]

We also cannot sustain the allegation of the petitioners that assuming the
signatures indicate consent, such consent was merely conditional, and that, the
effectivity of the alleged Contract to Sell was subject to the suspensive condition
that the sale be approved by all the co-owners. The Contract to Sell is clear
enough. It is a cardinal rule in the interpretation of contracts that if the terms of a
contract are clear and leave no doubt upon the intention of the contracting parties,
the literal meaning of its stipulation shall control.[18] The terms of the Contract
to Sell made no mention of the condition that before it can become valid and
binding, a unanimous consent of all the heirs is necessary. Thus, when the
language of the contract is explicit, as in the present case, leaving no doubt as to
the intention of the parties thereto, the literal meaning of its stipulation is
controlling.

In addition, the petitioners, being owners of their respective undivided

shares in the subject properties, can dispose of their shares even without the
consent of all the co-heirs. Article 493 of the Civil Code expressly provides:
 Article 493. Each co-owner shall have the full ownership of his
part and of the fruits and benefits pertaining thereto, and he may
therefore alienate, assign or mortgage it, and even substitute another
person in its enjoyment, except when personal rights are involved. But
the effect of the alienation or the mortgage, with respect to the co-
owners, shall be limited to the portion which may be allotted to him in
the division upon the termination of the co-ownership. [Emphases
supplied.]

Consequently, even without the consent of the two co-heirs, Adolfo and Jesus, the
Contract to Sell is still valid and binding with respect to the 6/8 proportionate
shares of the petitioners, as properly held by the appellate court.

Therefore, this Court finds no error in the findings of the Court of Appeals
that all the petitioners who were signatories in the Contract to Sell are bound
thereby.

The final arguments of petitioners state that the Contract to Sell is void
altogether considering that respondent itself did not sign it as to indicate its consent
to be bound by its terms; and moreover, the Contract to Sell is really a unilateral
promise to sell without consideration distinct from the price, and hence, again,
void. Said arguments must necessarily fail.

The Contract to Sell is not void merely because it does not bear the signature
of the respondent corporation. Respondent corporations consent to be bound by the
terms of the contract is shown in the uncontroverted facts which established that
there was partial performance by respondent of its obligation in the said Contract
to Sell when it tendered the amount of P100,000.00 to form part of the purchase
price, which was accepted and acknowledged expressly by petitioners. Therefore,
by force of law, respondent is required to complete the payment to enforce the
terms of the contract. Accordingly, despite the absence of respondents signature in
the Contract to Sell, the former cannot evade its obligation to pay the balance of
the purchase price.
 As a final point, the Contract to Sell entered into by the parties is not a
unilateral promise to sell merely because it used the word option money when it
referred to the amount of P100,000.00, which also form part of the purchase price.

Settled is the rule that in the interpretation of contracts, the ascertainment of

the intention of the contracting parties is to be discharged by looking to the words
they used to project that intention in their contract, all the words, not just a
particular word or two, and words in context, not words standing alone.[19]

In the instant case, the consideration of P100,000.00 paid by respondent to

petitioners was referred to as option money. However, a careful examination of the
words used in the contract indicates that the money is not option money
but earnest money.Earnest money and option money are not the same but
distinguished thus: (a) earnest money is part of the purchase price, while option
money is the money given as a distinct consideration for an option contract; (b)
earnest money is given only where there is already a sale, while option money
applies to a sale not yet perfected; and, (c) when earnest money is given, the buyer
is bound to pay the balance, while when the would-be buyer gives option money,
he is not required to buy, but may even forfeit it depending on the terms of the
option.[20]

The sum of P100,000.00 was part of the purchase price. Although the same was
denominated as option money, it is actually in the nature of earnest money or down
payment when considered with the other terms of the contract. Doubtless, the
agreement is not a mere unilateral promise to sell, but, indeed, it is a Contract to
Sell as both the trial court and the appellate court declared in their Decisions.
WHEREFORE, premises considered, the Petition is DENIED, and the Decision
and Resolution of the Court of Appeals dated 26 April 2002 and 4 March 2003,
respectively, are AFFIRMED, thus, (a) the Contract to Sell is DECLARED valid
and binding with respect to the undivided proportionate shares in the subject
parcels of land of the six signatories of the said document, herein petitioners
Ernesto, Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora (all surnamed
Oesmer); (b) respondent is ORDERED to tender payment to petitioners in the
amount of P3,216,560.00 representing the balance of the purchase price for the
latters shares in the subject parcels of land; and (c) petitioners are
further ORDERED to execute in favor of respondent the Deed of Absolute Sale
covering their shares in the subject parcels of land after receipt of the balance of
the purchase price, and to pay respondent attorneys fees plus costs of the
suit. Costs against petitioners.

SO ORDERED.

MINITA V. CHICO-NAZARIO
Associate Justice

WE CONCUR:

CONSUELO YNARES SANTIAGO

Associate Justice
Chairperson

MA. ALICIA AUSTRIA MARTINEZ ROMEO J. CALLEJO, SR.

Associate Justice Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division
Chairpersons Attestation, it is hereby certified that the conclusions in the above
Decision were reached in consultation before the case was assigned to the writer of
the opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice

3) Naranja vs CA

THIRD DIVISION

SERAFIN, RAUL, NENITA, NAZARETO, G.R. No. 160132

NEOLANDA, all surnamed NARANJA,
AMELIA NARANJA-RUBINOS, NILDA
NARANJA-LIMANA, and NAIDA NARANJA-
GICANO, Present:

Petitioners,
YNARES-SANTIAGO, J.,

- versus - Chairperson,

AUSTRIA-MARTINEZ,
COURT OF APPEALS, LUCILIA P. BELARDO, CHICO-NAZARIO,
represented by her Attorney-in-Fact,
NACHURA, and
REBECCA CORDERO, and THE LOCAL
REGISTER OF DEEDS, BACOLOD CITY, PERALTA, JJ.

Respondents.

Promulgated:

April 17, 2009

x------------------------------------------------------------------------------------x

DECISION

NACHURA, J.:

This petition seeks a review of the Court of Appeals (CA) Decision[1] dated
September 13, 2002 and Resolution[2] dated September 24, 2003 which upheld
the contract of sale executed by petitioners predecessor, Roque Naranja, during
his lifetime, over two real properties.

Roque Naranja was the registered owner of a parcel of land, denominated

as Lot No. 4 in Consolidation-Subdivision Plan (LRC) Pcs-886, Bacolod Cadastre,
with an area of 136 square meters and covered by Transfer Certificate of Title
(TCT) No. T-18764. Roque was also a co-owner of an adjacent lot, Lot No. 2, of the
same subdivision plan, which he co-owned with his brothers, Gabino and Placido
Naranja. When Placido died, his one-third share was inherited by his children,
Nenita, Nazareto, Nilda, Naida and Neolanda, all surnamed Naranja, herein
petitioners. Lot No. 2 is covered by TCT No. T-18762 in the names of Roque,
Gabino and the said children of Placido. TCT No. T-18762 remained even after
Gabino died. The other petitioners Serafin Naranja, Raul Naranja, and Amelia
Naranja-Rubinos are the children of Gabino.[3]

The two lots were being leased by Esso Standard Eastern, Inc. for 30 years
from 1962-1992. For his properties, Roque was being paid P200.00 per month by
the company.[4]

In 1976, Roque, who was single and had no children, lived with his half
sister, Lucilia P. Belardo (Belardo), in Pontevedra, Negros Occidental. At that time,
a catheter was attached to Roques body to help him urinate. But the catheter was
subsequently removed when Roque was already able to urinate normally. Other
than this and the influenza prior to his death, Roque had been physically sound.[5]

Roque had no other source of income except for the P200.00 monthly
rental of his two properties. To show his gratitude to Belardo, Roque sold Lot No.
4 and his one-third share in Lot No. 2 to Belardo on August 21, 1981, through a
Deed of Sale of Real Property which was duly notarized by Atty. Eugenio Sanicas.
The Deed of Sale reads:

I, ROQUE NARANJA, of legal age, single, Filipino and a resident of Bacolod City,
do hereby declare that I am the registered owner of Lot No. 4 of the Cadastral Survey of
the City of Bacolod, consisting of 136 square meters, more or less, covered by Transfer
Certificate of Title No. T-18764 and a co-owner of Lot No. 2, situated at the City of
Bacolod, consisting of 151 square meters, more or less, covered by Transfer Certificate
of Title No. T-18762 and my share in the aforesaid Lot No. 2 is one-third share.
 That for and in consideration of the sum of TEN THOUSAND PESOS (P10,000.00),
Philippine Currency, and other valuable consideration, receipt of which in full I hereby
acknowledge to my entire satisfaction, by these presents, I hereby transfer and convey
by way of absolute sale the above-mentioned Lot No. 4 consisting of 136 square meters
covered by Transfer Certificate of Title No. T-18764 and my one-third share in Lot No. 2,
covered by Transfer Certificate of Title No. T-18762, in favor of my sister LUCILIA P.
BELARDO, of legal age, Filipino citizen, married to Alfonso D. Belardo, and a resident of
Pontevedra, Negros Occidental, her heirs, successors and assigns.

IN WITNESS WHEREOF, I have hereunto set my hand this 21st day of August,
1981 at Bacolod City, Philippines.

(SGD.)

ROQUE NARANJA[6]

Roques copies of TCT No. T-18764 and TCT No. T-18762 were entrusted to
Atty. Sanicas for registration of the deed of sale and transfer of the titles to
Belardo. But the deed of sale could not be registered because Belardo did not
have the money to pay for the registration fees.[7]

Belardos only source of income was her store and coffee shop. Sometimes,
her children would give her money to help with the household expenses,
including the expenses incurred for Roques support. At times, she would also
borrow money from Margarita Dema-ala, a neighbor.[8] When the amount of her
loan reached P15,000.00, Dema-ala required a security. On November 19, 1983,
Roque executed a deed of sale in favor of Dema-ala, covering his two properties
in consideration of the P15,000.00 outstanding loan and an additional P15,000.00,
for a total of P30,000.00. Dema-ala explained that she wanted Roque to execute
the deed of sale himself since the properties were still in his name. Belardo
merely acted as a witness. The titles to the properties were given to Dema-ala for
safekeeping.[9]
 Three days later, or on December 2, 1983, Roque died of influenza. The
proceeds of the loan were used for his treatment while the rest was spent for his
burial.[10]

In 1985, Belardo fully paid the loan secured by the second deed of sale.
Dema-ala returned the certificates of title to Belardo, who, in turn, gave them
back to Atty. Sanicas.[11]

Unknown to Belardo, petitioners, the children of Placido and Gabino

Naranja, executed an Extrajudicial Settlement Among Heirs[12] on October 11,
1985, adjudicating among themselves Lot No. 4. On February 19, 1986, petitioner
Amelia Naranja-Rubinos, accompanied by Belardo, borrowed the two TCTs,
together with the lease agreement with Esso Standard Eastern, Inc., from Atty.
Sanicas on account of the loan being proposed by Belardo to her. Thereafter,
petitioners had the Extrajudicial Settlement Among Heirs notarized on February
25, 1986. With Roques copy of TCT No. T-18764 in their possession, they
succeeded in having it cancelled and a new certificate of title, TCT No. T-140184,
issued in their names.[13]

In 1987, Belardo decided to register the Deed of Sale dated August 21,
1981. With no title in hand, she was compelled to file a petition with the RTC to
direct the Register of Deeds to annotate the deed of sale even without a copy of
the TCTs. In an Order dated June 18, 1987, the RTC granted the petition. But she
only succeeded in registering the deed of sale in TCT No. T-18762 because TCT No.
T-18764 had already been cancelled.[14]

On December 11, 1989, Atty. Sanicas prepared a certificate of

authorization, giving Belardos daughter, Jennelyn P. Vargas, the authority to
collect the payments from Esso Standard Eastern, Inc. But it appeared from the
companys Advice of Fixed Payment that payment of the lease rental had already
been transferred from Belardo to Amelia Naranja-Rubinos because of the
Extrajudicial Settlement Among Heirs.

On June 23, 1992, Belardo,[15] through her daughter and attorney-in-fact,

Rebecca Cordero, instituted a suit for reconveyance with damages. The complaint
prayed that judgment be rendered declaring Belardo as the sole legal owner of
Lot No. 4, declaring null and void the Extrajudicial Settlement Among Heirs, and
TCT No. T-140184, and ordering petitioners to reconvey to her the subject
property and to pay damages. The case was docketed as Civil Case No. 7144.

Subsequently, petitioners also filed a case against respondent for

annulment of sale and quieting of title with damages, praying, among others, that
judgment be rendered nullifying the Deed of Sale, and ordering the Register of
Deeds of Bacolod City to cancel the annotation of the Deed of Sale on TCT No. T-
18762. This case was docketed as Civil Case No. 7214.

On March 5, 1997, the RTC rendered a Decision in the consolidated cases in

favor of petitioners. The trial court noted that the Deed of Sale was defective in
form since it did not contain a technical description of the subject properties but
merely indicated that they were Lot No. 4, covered by TCT No. T-18764 consisting
of 136 square meters, and one-third portion of Lot No. 2 covered by TCT No. T-
18762. The trial court held that, being defective in form, the Deed of Sale did not
vest title in private respondent. Full and absolute ownership did not pass to
private respondent because she failed to register the Deed of Sale. She was not a
purchaser in good faith since she acted as a witness to the second sale of the
property knowing that she had already purchased the property from Roque.
Whatever rights private respondent had over the properties could not be superior
to the rights of petitioners, who are now the registered owners of the parcels of
land. The RTC disposed, thus:

IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered:

 1. Dismissing Civil Case No. 7144.

2. Civil Case No. 7214.

a) Declaring the Deed of Sale dated August 21, 1981, executed by

Roque Naranja, covering his one-third (1/3) share of Lot 2 of the consolidation-
subdivision plan (LRC) Pcs-886, being a portion of the consolidation of Lots 240-
A, 240-B, 240-C and 240-D, described on plan, Psd-33443 (LRC) GLRO Cad. Rec.
No. 55 in favor of Lucilia Belardo, and entered as Doc. No. 80, Page 17, Book No.
XXXVI, Series of 1981 of Notary Public Eugenio Sanicas of Bacolod City, as null
and void and of no force and effect;

b) Ordering the Register of Deeds of Bacolod City to cancel Entry

No. 148123 annotate at the back of Transfer Certificate of Title No. T-18762;

c) Ordering Lucilia Belardo or her successors-in-interest to pay

plaintiffs the sum of P20,000.00 as attorneys fees, the amount of P500.00 as
appearance fees.

Counterclaims in both Civil Cases Nos. 7144 and 7214 are hereby
DISMISSED.

SO ORDERED.[16]

On September 13, 2002, the CA reversed the RTC Decision. The CA held
that the unregisterability of a deed of sale will not undermine its validity and
efficacy in transferring ownership of the properties to private respondent. The CA
noted that the records were devoid of any proof evidencing the alleged vitiation
of Roques consent to the sale; hence, there is no reason to invalidate the sale.
Registration is only necessary to bind third parties, which petitioners, being the
heirs of Roque Naranja, are not. The trial court erred in applying Article 1544 of
the Civil Code to the case at bar since petitioners are not purchasers of the said
properties. Hence, it is not significant that private respondent failed to register
the deed of sale before the extrajudicial settlement among the heirs. The
dispositive portion of the CA Decision reads:

WHEREFORE, the decision dated March 5, 1997 in Civil Cases Nos. 7144 and
7214 is hereby REVERSED and SET ASIDE. In lieu thereof, judgment is hereby rendered
as follows:

1. Civil Case No. 7214 is hereby ordered DISMISSED for lack of cause of action.

2. In Civil Case No. 7144, the extrajudicial settlement executed by the heirs of
Roque Naranja adjudicating among themselves Lot No. 4 of the consolidation-
subdivision plan (LRC) Pcs 886 of the Bacolod Cadastre is hereby declared null and void
for want of factual and legal basis. The certificate of title issued to the heirs of Roque
Naranja (Transfer Certificate of [T]i[t]le No. T-140184) as a consequence of the void
extra-judicial settlement is hereby ordered cancelled and the previous title to Lot No. 4,
Transfer Certificate of Title No. T-18764, is hereby ordered reinstated. Lucilia Belardo is
hereby declared the sole and legal owner of said Lot No. 4, and one-third of Lot No. 2 of
the same consolidation-subdivision plan, Bacolod Cadastre, by virtue of the deed of sale
thereof in her favor dated August 21, 1981.

SO ORDERED.[17]

The CA denied petitioners motion for reconsideration on September 24,

[18]
2003. Petitioners filed this petition for review, raising the following issues:
 1. WHETHER OR NOT THE HONORABLE RESPONDENT COURT OF APPEALS IS CORRECT IN
IGNORING THE POINT RAISED BY [PETITIONERS] THAT THE DEED
OF SALE WHICH DOES NOT COMPL[Y] WITH THE PROVISIONS OF ACT NO. 496 IS
[NOT] VALID.

2. WHETHER OR NOT THE ALLEGED DEED OF SALE [OF REAL PROPERTIES] IS VALID
CONSIDERING THAT THE CONSENT OF THE LATE ROQUE NARANJA HAD BEEN
VITIATED; x x x THERE [IS] NO CONCLUSIVE SHOWING THAT THERE WAS
CONSIDERATION AND THERE [ARE] SERIOUS IRREGULARITIES IN THE
NOTARIZATION OF THE SAID DOCUMENTS.[19]

In her Comment, private respondent questioned the Verification and

Certification of Non-Forum Shopping attached to the Petition for Review, which
was signed by a certain Ernesto Villadelgado without a special power of attorney.
In their reply, petitioners remedied the defect by attaching a Special Power of
Attorney signed by them.

Pursuant to its policy to encourage full adjudication of the merits of an

appeal, the Court had previously excused the late submission of a special power
of attorney to sign a certification against forum-shopping.[20] But even if we
excuse this defect, the petition nonetheless fails on the merits.

The Court does not agree with petitioners contention that a deed of sale
must contain a technical description of the subject property in order to be valid.
Petitioners anchor their theory on Section 127 of Act No. 496,[21] which provides a
sample form of a deed of sale that includes, in particular, a technical description
of the subject property.

To be valid, a contract of sale need not contain a technical description of

the subject property. Contracts of sale of real property have no prescribed form
for their validity; they follow the general rule on contracts that they may be
entered into in whatever form, provided all the essential requisites for their
validity are present.[22] The requisites of a valid contract of sale under Article 1458
of the Civil Code are: (1) consent or meeting of the minds; (2) determinate subject
matter; and (3) price certain in money or its equivalent.

The failure of the parties to specify with absolute clarity the object of a
contract by including its technical description is of no moment. What is important
is that there is, in fact, an object that is determinate or at least determinable, as
subject of the contract of sale. The form of a deed of sale provided in Section 127
of Act No. 496 is only a suggested form. It is not a mandatory form that must be
strictly followed by the parties to a contract.

In the instant case, the deed of sale clearly identifies the subject properties by
indicating their respective lot numbers, lot areas, and the certificate of title
covering them. Resort can always be made to the technical description as stated
in the certificates of title covering the two properties.

On the alleged nullity of the deed of sale, we hold that petitioners failed to
submit sufficient proof to show that Roque executed the deed of sale under the
undue influence of Belardo or that the deed of sale was simulated or without
consideration.

A notarized document carries the evidentiary weight conferred upon it with

respect to its due execution, and documents acknowledged before a notary public
have in their favor the presumption of regularity. It must be sustained in full force
and effect so long as he who impugns it does not present strong, complete, and
conclusive proof of its falsity or nullity on account of some flaws or defects
provided by law.[23]
 Petitioners allege that Belardo unduly influenced Roque, who was already
physically weak and senile at that time, into executing the deed of sale. Belardo
allegedly took advantage of the fact that Roque was living in her house and was
dependent on her for support.

There is undue influence when a person takes improper advantage of his

power over the will of another, depriving the latter of a reasonable freedom of
choice.[24] One who alleges any defect, or the lack of consent to a contract by
reason of fraud or undue influence, must establish by full, clear and convincing
evidence, such specific acts that vitiated the partys consent; otherwise, the latters
presumed consent to the contract prevails.[25] For undue influence to be present,
the influence exerted must have so overpowered or subjugated the mind of a
contracting party as to destroy his free agency, making him express the will of
another rather than his own.[26]

Petitioners adduced no proof that Roque had lost control of his mental
faculties at the time of the sale. Undue influence is not to be inferred from age,
sickness, or debility of body, if sufficient intelligence remains.[27] The evidence
presented pertained more to Roques physical condition rather than his mental
condition. On the contrary, Atty. Sanicas, the notary public, attested that Roque
was very healthy and mentally sound and sharp at the time of the execution of
the deed of sale. Atty. Sanicas said that Roque also told him that he was a Law
graduate.[28]

Neither was the contract simulated. The late registration of the Deed of
Sale and Roques execution of the second deed of sale in favor of Dema-ala did not
mean that the contract was simulated. We are convinced with the explanation
given by respondents witnesses that the deed of sale was not immediately
registered because Belardo did not have the money to pay for the fees. This
explanation is, in fact, plausible considering that Belardo could barely support
herself and her brother, Roque. As for the second deed of sale, Dema-ala, herself,
attested before the trial court that she let Roque sign the second deed of sale
because the title to the properties were still in his name.

Finally, petitioners argue that the Deed of Sale was not supported by a
consideration since no receipt was shown, and it is incredulous that Roque, who
was already weak, would travel to Bacolod City just to be able to execute the
Deed of Sale.

The Deed of Sale which states receipt of which in full I hereby acknowledge
to my entire satisfaction is an acknowledgment receipt in itself. Moreover, the
presumption that a contract has sufficient consideration cannot be overthrown by
a mere assertion that it has no consideration.[29]

Heirs are bound by contracts entered into by their predecessors-in-

interest.[30] As heirs of Roque, petitioners are bound by the contract of sale that
Roque executed in favor of Belardo. Having been sold already to Belardo, the two
properties no longer formed part of Roques estate which petitioners could have
inherited. The deed of extrajudicial settlement that petitioners executed over Lot
No. 4 is, therefore, void, since the property subject thereof did not become part
of Roques estate.

WHEREFORE, premises considered, the petition is DENIED. The Court of

Appeals Decision dated September 13, 2002 and Resolution dated September 24,
2003 are AFFIRMED.

SO ORDERED.

ANTONIO EDUARDO B. NACHURA

 Associate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

MA. ALICIA AUSTRIA-MARTINEZ MINITA V. CHICO-NAZARIO

Associate Justice Associate Justice

DIOSDADO M. PERALTA
Associate Justice

ATTESTATION
I attest that the conclusions in the above Decision were reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division
Chairperson's Attestation, I certify that the conclusions in the above Decision had
been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice
4) Dalion vs Sebasaje
261 Phil. 1033

MEDIALDEA, J.:
This is a petition to annul and set aside the decision of the Court of Appeals
rendered on May 26, 1987, upholding the validity of the sale of a parcel of
land by petitioner Segundo Dalion (hereafter, "Dalion") in favor of private
respondent Ruperto Sabesaje, Jr. (hereafter, "Sabesaje"), described thus:
"A parcel of land located at Panyawan, Sogod, Southern Leyte, declared in
the name of Segundo Dalion, under Tax Declaration No. 11148, with an area
of 8947 hectares, assessed at P180.00, and bounded on the North, by
Sergio Destriza and Titon Veloso, East, by Feliciano Destriza, by Barbara
Bonesa (sic); and West, by Catalino Espina." (pp. 36-37, Rollo)
The decision affirms in toto the ruling of the trial court[1] issued on January
17, 1984, the dispositive portion of which provides as follows:
"WHEREFORE, IN VIEW OF THE FOREGOING, the Court hereby renders
judgment.
(a) Ordering the defendants to deliver to the plaintiff the parcel of land
subject of this case, declared in the name of Segundo Dalion previously
under Tax Declaration No. 11148 and lately under Tax Declaration No. 2297
(1974) and to execute the corresponding formal deed of conveyance in a
public document in favor of the plaintiff of the said property subject of this
case, otherwise, should defendants for any reason fail to do so, the deed
shall be executed in their behalf by the Provincial Sheriff or his Deputy;
(b) Ordering the defendants to pay plaintiff the amount of P2,000.00 as
attorney's fees and P500.00 as litigation expenses, and to pay the costs;
and
(c) Dismissing the counter-claim." (p. 38, Rollo)
The facts of the case are as follows:
On May 28, 1973, Sabesaje sued to recover ownership of a parcel of land,
based on a private document of absolute sale, dated July 1, 1965 (Exhibit
"A"), allegedly executed by Dalion, who, however denied the fact of sale,
contending that the document sued upon is fictitious, his signature thereon,
a forgery; and that subject land is conjugal property, which he and his wife
acquired in 1960 from Saturnina Sabesaje as evidenced by the "Escritura
de Venta Absoluta" (Exhibit "B"). The spouses denied claims of Sabesaje
that after executing a deed of sale over the parcel of land, they had pleaded
with Sabesaje, their relative, to be allowed to administer the land because
Dalion did not have any means of livelihood. They admitted, however,
administering since 1958, five (5) parcels of land in Sogod, Southern Leyte,
which belonged to Leonardo Sabesaje, grandfather of Sabesaje, who died in
1956. They never received their agreed 10% and 15% commission on the
sales of copra and abaca, respectively. Sabesaje's suit, they countered, was
intended merely to harass, preempt and forestall Dalion's threat to sue for
these unpaid commissions.
From the adverse decision of the trial court, Dalion appealed, assigning
errors some of which, however, were disregarded by the appellate court, not
having been raised in the court below. While the Court of Appeals duly
recognizes Our authority to review matters even if not assigned as errors in
the appeal, We are not inclined to do so since a review of the case at bar
reveals that the lower court has judicially decided the case on its merits.
As to the controversy regarding the identity of the land, We have no reason
to dispute the Court of Appeals' findings as follows:
"To be sure, the parcel of land described in Exhibit "A" is the same property
deeded out in Exhibit "B". The boundaries delineating it from adjacent lots
are identical. Both documents detail out the following boundaries, to wit:
"On the
property of Sergio Destriza and Titon Veloso;
North

"On the East property of Feliciano Destriza;

"On the
property of Barbara Boniza; and
South

"On the
Catalino Espina."
West
(pp. 41-42, Rollo)
The issues in this case may thus be limited to: a) the validity of the contract
of sale of a parcel of land and b) the necessity of a public document for
transfer of ownership thereto.
The appellate court upheld the validity of the sale on the basis of Secs. 21
and 23 of Rule 132 of the Revised Rules of Court.
"SEC. 21. Private writing, its execution and authenticity, how proved.
Before any private writing may be received in evidence, its due execution
and authenticity must be proved either:
(a) By anyone who saw the writing executed;
(b) By evidence of the genuineness of the handwriting of the maker; or
(c) By a subscribing witness.
xxx xxx xxx.
"SEC. 23. Handwriting, how proved. The handwriting of a person may be
proved by any witness who believes it to be the handwriting of such person,
and has seen the person write, or has seen writing purporting to be his
upon which the witness has acted or been charged, and has thus acquired
knowledge of the handwriting of such person. Evidence respecting the
handwriting may also be given by a comparison, made by the witness or the
court, with writings admitted or treated as genuine by the party against
whom the evidence is offered, or proved to be genuine to the satisfaction of
the judge." (Rule 132, Revised Rules of Court)
And on the basis of the findings of fact of the trial court as follows:
Here, people who witnessed the execution of subject deed positively
testified on the authenticity thereof. They categorically stated that it had
been executed and signed by the signatories thereto. In fact, one of such
witnesses, Gerardo M. Ogsoc, declared on the witness stand that he was the
one who prepared said deed of sale and had copied parts thereof from the
"Escritura De Venta Absoluta" (Exhibit B) by which one Saturnina
Sabesaje sold the same parcel of land to appellant Segundo Dalion. Ogsoc
copied the boundaries thereof and the name of appellant Segundo Dalion's
wife, erroneously written as "Esmenia" in Exhibit "A" and "Esmena" in
Exhibit "B". (p. 41, Rollo)
xxx xxx xxx
"Against defendant's mere denial that he signed the document, the positive
testimonies of the instrumental witnesses Ogsoc and Espina, aside from the
testimony of the plaintiff, must prevail. Defendant has affirmatively alleged
forgery, but he never presented any witness or evidence to prove his claim
of forgery. Each party must prove his own affirmative allegations (Section 1,
Rule 131, Rules of Court). Furthermore, it is presumed that a person is
innocent of a crime or wrong (Section 5 (a), idem), and defense should have
come forward with clear and convincing evidence to show that plaintiff
committed forgery or caused said forgery to be committed, to overcome the
presumption of innocence. Mere denial of having signed does not suffice to
show forgery.
"In addition, a comparison of the questioned signatures (Exhs. A-2 or Z and
A3) with the admitted signatures or specimens (Exhs. X and Y or 3-C)
convinces the court that Exhs. A-2 or Z and A-3 were written by defendant
Segundo Dalion who admitted that Exhs. X and Y or 3-C are his signatures.
The questioned signatures and the specimens are very similar to each other
and appear to be written by one person.
"Further comparison of the questioned signatures and the specimens with
the signatures "Segundo D. Dalion" appeared at the back of the summons
(p. 9, Record); on the return card (p. 25, ibid.); back of the Court Orders
dated December 17, 1973 and July 30, 1974 and for October 7, 1974 (p. 54 &
p. 56, respectively, ibid.), and on the open court notice of April 13, 1983 (p.
235, ibid.) readily reveal that the questioned signatures are the signatures
of defendant Segundo Dalion.
"It may be noted that two signatures of Segundo D. Dalion appear on the
face of the questioned document (Exh. A), one at the right corner bottom of
the document (Exh. A?2) and the other at the left hand margin thereof
(Exh. A-3). The second signature is already a surplusage. A forger would
not attempt to forge another signature, an unnecessary one, for fear he may
commit a revealing error or an erroneous stroke." (Decision, pp. 10) (pp.
42-43, Rollo)
We see no reason for deviating from the appellate court's ruling (p.
44, Rollo) as we reiterate that
"Appellate courts have consistently subscribed to the principle that
conclusions and findings of fact by the trial courts are entitled to great
weight on appeal and should not be disturbed unless for strong and cogent
reasons, since it is undeniable that the trial court is in a more advantageous
position to examine real evidence, as well as to observe the demeanor of the
witnesses while testifying in the case (Chase v. Buencamino, Sr., G.R. No.
L-20395, May 13, 1985, 136 SCRA 365; Pring v. Court of Appeals, G.R. No.
L-41605, August 19, 1985, 138 SCRA 185)
Assuming authenticity of his signature and the genuineness of the
document, Dalion nonetheless still impugns the validity of the sale on the
ground that the same is embodied in a private document, and did not thus
convey title or right to the lot in question since "acts and contracts which
have for their object the creation, transmission, modification or extinction
of real rights over immovable property must appear in a public instrument"
(Art. 1358, par 1, NCC).
This argument is misplaced. The provision of Art. 1358 on the necessity of a
public document is only for convenience, not for validity or enforceability.
It is not a requirement for the validity of a contract of sale of a parcel of
land that this be embodied in a public instrument.
A contract of sale is a consensual contract, which means that the sale is
perfected by mere consent. No particular form is required for its validity.
Upon perfection of the contract, the parties may reciprocally demand
performance (Art. 1475, NCC), i.e., the vendee may compel transfer of
ownership of the object of the sale, and the vendor may require the vendee
to pay the thing sold (Art. 1458, NCC).
The trial court thus rightly and legally ordered Dalion to deliver to Sabesaje
the parcel of land and to execute the corresponding formal deed of
conveyance in a public document. Under Art. 1498, NCC, when the sale is
made through a public instrument, the execution thereof is equivalent to
the delivery of the thing. Delivery may either be actual (real) or
constructive. Thus, delivery of a parcel of land may be done by placing the
vendee in control and possession of the land (real) or by embodying the sale
in a public instrument (constructive).
As regards petitioners' contention that the proper action should have been
one for specific performance, We believe that the suit for recovery of
ownership is proper. As earlier stated, Art. 1475 of the Civil Code gives the
parties to a perfected contract of sale the right to reciprocally demand
performance, and to observe a particular form, if warranted, (Art. 1357).
The trial court, aptly observed that Sabesaje's complaint sufficiently alleged
a cause of action to compel Dalion to execute a formal deed of sale, and the
suit for recovery of ownership, which is premised on the binding effect and
validity inter partes of the contract of sale, merely seeks consummation of
said contract.
"x x x. A sale of a real property may be in a private instrument, but that
contract is valid and binding between the parties upon its perfection. And a
party may compel the other party to execute a public instrument
embodying their contract affecting real rights once the contract appearing
in a private instrument has been perfected (See Art. 1357).
"x x x." (p. 12, Decision, p. 272, Records)
ACCORDINGLY, the petition is DENIED and the decision of the Court of
Appeals upholding the ruling of the trial court is hereby AFFIRMED. No
costs.
SO ORDERED.
Narvasa, (Chairman), Cruz, Gancayco, and Griño-Aquino, JJ., concur.
 5) Limketai Sons Milling vs CA

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 118509 December 1, 1995

LIMKETKAI SONS MILLING, INC., petitioner,

vs.
COURT OF APPEALS, BANK OF THE PHILIPPINE ISLANDS and NATIONAL BOOK
STORE, respondents.

MELO, J.:

The issue in the petition before us is whether or not there was a perfected contract between
petitioner Limketkai Sons Milling, Inc. and respondent Bank of the Philippine Islands (BPI) covering
the sale of a parcel of land, approximately 3.3 hectares in area, and located in Barrio Bagong Ilog,
Pasig City, Metro Manila.

RTC-HELD THAT THERE IS A VALID CONTRACT OF SALE

Branch 151 of the Regional Trial Court of the National Capital Judicial Region stationed in Pasig
ruled that there was a perfected contract of sale between petitioner and BPI. It stated that there was
mutual consent between the parties; the subject matter is definite; and the consideration was
determined. It concluded that all the elements of a consensual contract are attendant. It ordered the
cancellation of a sale effected by BPI to respondent National Book Store (NBS) while the case was
pending and the nullification of a title issued in favor of said respondent NBS.

CA- REVERSED

Upon elevation of the case to the Court of Appeals, it was held that no contract of sale was perfected
because there was no concurrence of the three requisites enumerated in Article 1318 of the Civil
Code. The decision of the trial court was reversed and the complaint dismissed.

Hence, the instant petition.

Shorn of the interpretations given to the acts of those who participated in the disputed sale, the
findings of facts of the trial court and the Court of Appeals narrate basically the same events and
occurrences. The records show that on May 14, 1976, Philippine Remnants Co., Inc. constituted BPI
as its trustee to manage, administer, and sell its real estate property. One such piece of property
placed under trust was the disputed lot, a 33,056-square meter lot at Barrio Bagong Ilog, Pasig,
Metro Manila covered by Transfer Certificate of Title No. 493122.

On June 23, 1988, Pedro Revilla, Jr., a licensed real estate broker was given formal authority by BPI
to sell the lot for P1,000.00 per square meter. This arrangement was concurred in by the owners of
the Philippine Remnants.

Broker Revilla contacted Alfonso Lim of petitioner company who agreed to buy the land. On July 8,
1988, petitioner's officials and Revilla were given permission by Rolando V. Aromin, BPI Assistant
Vice-President, to enter and view the property they were buying.

On July 9, 1988, Revilla formally informed BPI that he had procured a buyer, herein petitioner. On
July 11, 1988, petitioner's officials, Alfonso Lim and Albino Limketkai, went to BPI to confirm the
sale. They were entertained by Vice-President Merlin Albano and Asst. Vice-President Aromin.
Petitioner asked that the price of P1,000.00 per square meter be reduced to P900.00 while Albano
stated the price to be P1,100.00. The parties finally agreed that the lot would be sold at P1,000.00
per square meter to be paid in cash. Since the authority to sell was on a first come, first served and
non-exclusive basis, it may be mentioned at this juncture that there is no dispute over petitioner's
being the first comer and the buyer to be first served.

Notwithstanding the final agreement to pay P1,000.00 per square meter on a cash basis, Alfonso
Lim asked if it was possible to pay on terms. The bank officials stated that there was no harm in
trying to ask for payment on terms because in previous transactions, the same had been allowed. It
was the understanding, however, that should the term payment be disapproved, then the price shall
be paid in cash.

It was Albano who dictated the terms under which the installment payment may be approved, and
acting thereon, Alfonso Lim, on the same date, July 11, 1988, wrote BPI through Merlin Albano
embodying the payment initially of 10% and the remaining 90% within a period of 90 days.

Two or three days later, petitioner learned that its offer to pay on terms had been frozen. Alfonso Lim
went to BPI on July 18, 1988 and tendered the full payment of P33,056,000.00 to Albano. The
payment was refused because Albano stated that the authority to sell that particular piece of
property in Pasig had been withdrawn from his unit. The same check was tendered to BPI Vice-
President Nelson Bona who also refused to receive payment.

An action for specific performance with damages was thereupon filed on August 25, 1988 by
petitioner against BPI. In the course of the trial, BPI informed the trial court that it had sold the
property under litigation to NBS on July 14, 1989. The complaint was thus amended to include NBS.

On June 10, 1991, the trial court rendered judgment in the case as follows:

WHEREFORE, judgment is hereby rendered in favor of plaintiff and against

defendants Bank of the Philippine Islands and National Book Store, Inc.: —

1. Declaring the Deed of Sale of the property covered by T.C.T. No. 493122 in the
name of the Bank of the Philippine Islands, situated in Barrio Bagong Ilog, Pasig,
Metro Manila, in favor of National Book Store, Inc., null and void;
 2. Ordering the Register of Deeds of the Province of Rizal to cancel the Transfer
Certificate of Title which may have been issued in favor of National Book Store, Inc.
by virtue of the aforementioned Deed of Sale dated July 14, 1989;

3. Ordering defendant BPI, upon receipt by it from plaintiff of the sum of

P33,056,000.00, to execute a Deed of Sale in favor of plaintiff of the aforementioned
property at the price of P1,000.00 per square meter; in default thereof, the Clerk of
this Court is directed to execute the said deed;

4. Ordering the Register of Deeds of Pasig, upon registration of the said deed,
whether executed by defendant BPI or the Clerk of Court and payment of the
corresponding fees and charges, to cancel said T.C.T. No. 493122 and to issue, in
lieu thereof, another transfer certificate of title in the name of plaintiff;

5. Ordering defendants BPI and National Book Store, Inc. to pay, jointly and
severally, to the plaintiff the sums of P10,000,000.00 as actual and consequential
damages and P150,000.00 as attorney's fees and litigation expenses, both with
interest at 12% per annum from date hereof;

6. On the cross-claim of defendant bank against National Book Store, ordering the
latter to indemnify the former of whatever amounts BPI shall have paid to the plaintiff
by reason hereof; and

7. Dismissing the counterclaims of the defendants against the plaintiff and National
Book Store's cross-claim against defendant bank.

Costs against defendants.

(pp. 44-45, Rollo.)

As earlier intimated, upon the decision being appealed, the Court of Appeals (Buena [P], Rasul, and
Mabutas, JJ.), on August 12, 1994, reversed the trial court's decision and dismissed petitioner's
complaint for specific performance and damages.

The issues raised by the parties revolve around the following four questions:

(1) Was there a meeting of the minds between petitioner Limketkai and respondent BPI as to the
subject matter of the contract and the cause of the obligation?

(2) Were the bank officials involved in the transaction authorized by BPI to enter into the questioned
contract?

(3) Is there competent and admissible evidence to support the alleged meeting of the minds?

(4) Was the sale of the disputed land to the NBS during the pendency of trial effected in good faith?

There is no dispute in regard to the following: (a) that BPI as trustee of the property of Philippine
Remnant Co. authorized a licensed broker, Pedro Revilla, to sell the lot for P1,000.00 per square
meter; (b) that Philippine Remnants confirmed the authority to sell of Revilla and the price at which
he may sell the lot; (c) that petitioner and Revilla agreed on the former buying the property; (d) that
BPI Assistant Vice-President Rolando V. Aromin allowed the broker and the buyer to inspect the
property; and (e) that BPI was formally informed about the broker having procured a buyer.

The controversy revolves around the interpretation or the significance of the happenings or events at
this point.

Petitioner states that the contract to sell and to buy was perfected on July 11, 1988 when its top
officials and broker Revilla finalized the details with BPI Vice-Presidents Merlin Albano and Rolando
V. Aromin at the BPI offices.

Respondents, however, contend that what transpired on this date were part of continuing
negotiations to buy the land and not the perfection of the sale. The arguments of respondents center
on two propositions — (1) Vice-Presidents Aromin and Albano had no authority to bind BPI on this
particular transaction and (2) the subsequent attempts of petitioner to pay under terms instead of full
payment in cash constitutes a counter-offer which negates the existence of a perfected contract.

The alleged lack of authority of the bank officials acting in behalf of BPI is not sustained by the
record.

At the start of the transactions, broker Revilla by himself already had full authority to sell the disputed
lot. Exhibit B dated June 23, 1988 states, "this will serve as your authority to sell on an as is, where
is basis the property located at Pasig Blvd., Bagong Ilog . . . ." We agree with Revilla's testimony that
the authority given to him was to sell and not merely to look for a buyer, as contended by
respondents.

Revilla testified that at the time he perfected the agreement to sell the litigated property, he was
acting for and in behalf of the BPI as if he were the Bank itself. This notwithstanding and to firm up
the sale of the land, Revilla saw it fit to bring BPI officials into the transaction. If BPI could give the
authority to sell to a licensed broker, we see no reason to doubt the authority to sell of the two BPI
Vice-Presidents whose precise job in the Bank was to manage and administer real estate property.

Respondent BPI alleges that sales of trust property need the approval of a Trust Committee made
up of top bank officials. It appears from the record that this trust committee meets rather infrequently
and it does not have to pass on regular transactions.

Rolando Aromin was BPI Assistant Vice-President and Trust Officer. He directly supervised the BPI
Real Property Management Unit. He had been in the Real Estate Division since 1985 and was the
head supervising officer of real estate matters. Aromin had been with the BPI Trust Department
since 1968 and had been involved in the handling of properties of beneficial owners since 1975 (tsn.,
December 3, 1990, p. 5).

Exhibit 10 of BPI, the February 15, 1989 letter from Senior Vice-President Edmundo Barcelon, while
purporting to inform Aromin of his poor performance, is an admission of BPI that Aromin was in
charge of Torrens titles, lease contracts, problems of tenants, insurance policies, installment
receivables, management fees, quitclaims, and other matters involving real estate transactions. His
immediate superior, Vice-President Merlin Albano had been with the Real Estate Division for only
one week but he was present and joined in the discussions with petitioner.

There is nothing to show that Alfonso Lim and Albino Limketkai knew Aromin before the incident.
Revilla brought the brothers directly to Aromin upon entering the BPI premises. Aromin acted in a
perfectly natural manner on the transaction before him with not the slightest indication that he was
acting ultra vires. This shows that BPI held Aromin out to the public as the officer routinely handling
real estate transactions and, as Trust Officer, entering into contracts to sell trust properties.

Respondents state and the record shows that the authority to buy and sell this particular trust
property was later withdrawn from Trust Officer Aromin and his entire unit. If Aromin did not have
any authority to act as alleged, there was no need to withdraw authority which he never possessed.

Petitioner points to Areola vs. Court of Appeals (236 SCRA 643 [1994]) which cited Prudential Bank
vs. Court of Appeals (22 SCRA 350 [1993]), which in turn relied upon McIntosh vs. Dakota Trust Co.
(52 ND 752, 204 NW 818, 40 ALR 1021), to wit:

Accordingly a banking corporation is liable to innocent third persons where the

representation is made in the course of its business by an agent acting within the
general scope of his authority even though, in the particular case, the agent is
secretly abusing his authority and attempting to perpetrate a fraud upon his principal
or some other person for his own ultimate benefit.

(at pp. 652-653.)

In the present case, the position and title of Aromin alone, not to mention the testimony and
documentary evidence about his work, leave no doubt that he had full authority to act for BPI in the
questioned transaction. There is no allegation of fraud, nor is there the least indication that Aromin
was acting for his own ultimate benefit. BPI later dismissed Aromin because it appeared that a top
official of the bank was personally interested in the sale of the Pasig property and did not like
Aromin's testimony. Aromin was charged with poor performance but his dismissal was only
sometime after he testified in court. More than two long years after the disputed transaction, he was
still Assistant Vice-President of BPI.

The records show that the letter of instruction dated June 14, 1988 from the owner of Philippine
Remnants Co. regarding the sale of the firm's property was addressed to Aromin. The P1,000.00
figure on the first page of broker Revilla's authority to sell was changed to P1,100.00 by Aromin. The
price was later brought down again to P1,000.00, also by Aromin. The permission given to petitioner
to view the lot was signed by Aromin and honored by the BPI guards. The letter dated July 9, 1988
from broker Revilla informing BPI that he had a buyer was addressed to Aromin. The conference on
July 11, 1988 when the contract was perfected was with Aromin and Vice-President Albano. Albano
and Aromin were the ones who assured petitioner Limketkai's officers that term payment was
possible. It was Aromin who called up Miguel Bicharra of Philippine Remnants to state that the BPI
rejected payment on terms and it was to Aromin that Philippine Remnants gave the go signal to
proceed with the cash sale. Everything in the record points to the full authority of Aromin to bind the
bank, except for the self-serving memoranda or letters later produced by BPI that Aromin was an
inefficient and undesirable officer and who, in fact, was dismissed after he testified in this case. But,
of course, Aromin's alleged inefficiency is not proof that he was not fully clothed with authority to bind
BPI.

Respondents' second contention is that there was no perfected contract because petitioner's request
to pay on terms constituted a counter-offer and that negotiations were still in progress at that point.

Asst. Vice-President Aromin was subpoenaed as a hostile witness for petitioner during trial. Among
his statements is one to the effect that —

. . . Mr. Lim offered to buy the property at P900.00 per square meter while Mr. Albano
counter-offered to sell the property at P1,100.00 per square meter but after the usual
 haggling, we finally agreed to sell the property at the price of P1,000.00 per square
meter . . .

(tsn, 12-3-90, p. 17; Emphasis supplied.)

Asked if there was a meeting of the minds between the buyer and the bank in respect to the price of
P1,000.00 per square meter, Aromin answered:

Yes, sir, as far as my evaluation there was a meeting of the minds as far as the price
is concerned, sir.

(ibid, p. 17.)

The requirements in the payment of the purchase price on terms instead of cash were suggested by
BPI Vice-President Albano. Since the authority given to broker Revilla specified cash payment, the
possibility of paying on terms was referred to the Trust Committee but with the mutual agreement
that "if the proposed payment on terms will not be approved by our Trust Committee, Limketkai
should pay in cash . . . the amount was no longer subject to the approval or disapproval of the
Committee, it is only on the terms." (ibid, p. 19). This is incontrovertibly established in the following
testimony of Aromin:

A. After you were able to agree on the price of P1,000.00/sq. m.,

since the letter or authority says the payment must be in cash basis,
what transpired later on?

B. After we have agreed on the price, the Lim brothers inquired on

how to go about submitting the covering proposal if they will be
allowed to pay on terms. They requested us to give them a guide on
how to prepare the corresponding letter of proposal. I recall that,
upon the request of Mr. Albino Limketkai, we dictated a guide on how
to word a written firm offer that was to be submitted by Mr. Lim to the
bank setting out the terms of payment but with the mutual agreement
that if his proposed payment on terms will not be approved by our
trust committee, Limketkai should pay the price in cash.

Q And did buyer Limketkai agree to pay in cash in case the offer of
terms will be cash (disapproved).

A Yes, sir.

Q At the start, did they show their willingness to pay in cash?

A Yes, sir.

Q You said that the agreement on terms was to be submitted to the

trust committee for approval, are you telling the Court that what was
to be approved by the trust committee was the provision on the
payment on terms?

A Yes, sir.
 Q So the amount was no longer subject to the approval or
disapproval of the committee, it is only on the terms?

A Yes, sir.

(tsn, Dec. 3, 1990, pp. 18-19; Emphasis supplied.)

The record shows that if payment was in cash, either broker Revilla or Aromin had full authority. But
because petitioner took advantage of the suggestion of Vice-President Albano, the matter was sent
to higher officials. Immediately upon learning that payment on terms was frozen and/or denied,
Limketkai exercised his right within the period given to him and tendered payment in full. The BPI
rejected the payment.

In its Comment and Memorandum, respondent NBS cites Ang Yu Asuncion vs. Court of
Appeals (238 SCRA 602 [1994]) to bolster its case. Contrarywise, it would seem that the legal
principles found in said case strengthen and support petitioner's submission that the contract was
perfected upon the meeting of the minds of the parties.

The negotiation or preparation stage started with the authority given by Philippine Remnants to BPI
to sell the lot, followed by (a) the authority given by BPI and confirmed by Philippine Remnants to
broker Revilla to sell the property, (b) the offer to sell to Limketkai, (c) the inspection of the property
and finally (d) the negotiations with Aromin and Albano at the BPI offices.

The perfection of the contract took place when Aromin and Albano, acting for BPI, agreed to sell and
Alfonso Lim with Albino Limketkai, acting for petitioner Limketkai, agreed to buy the disputed lot at
P1,000.00 per square meter. Aside from this there was the earlier agreement between petitioner and
the authorized broker. There was a concurrence of offer and acceptance, on the object, and on the
cause thereof.

The phases that a contract goes through may be summarized as follows:

a. preparation, conception or generation, which is the period of negotiation and

bargaining, ending at the moment of agreement of the parties;

b. perfection or birth of the contract, which is the moment when the parties come to
agree on the terms of the contract; and

c. consummation or death, which is the fulfillment or performance of the terms

agreed upon in the contract (Toyota Shaw, Inc. vs. Court of Appeals, G.R. No.
116650, May 23, 1995).

But in more graphic prose, we turn to Ang Yu Asuncion, per Justice Vitug:

. . . A contract undergoes various stages that include its negotiation or preparation,

its perfection and, finally, its consummation. Negotiation covers the period from the
time the prospective contracting parties indicate interest in the contract to the time
the contract is concluded (perfected). The perfection of the contract takes place upon
the concurrence of the essential elements thereof. A contract which is consensual as
to perfection is so established upon a mere meeting of minds, i.e., the concurrence of
offer and acceptance, on the object and on the cause thereof. A contract which
requires, in addition to the above, the delivery of the object of the agreement, as in a
 pledge or commodatum, is commonly referred to as a real contract. In
a solemn contract, compliance with certain formalities prescribed by law, such as in a
donation of real property, is essential in order to make the act valid, the prescribed
form being thereby an essential element thereof. The stage of consummation begins
when the parties perform their respective undertakings under the contract
culminating in the extinguishment thereof.

Until the contract is perfected, it cannot, as an independent source of obligation,

serve as a binding juridical relation. In sales, particularly, to which the topic for
discussion about the case at bench belongs, the contract is perfected when a
person, called the seller, obligates himself, for a price certain, to deliver and to
transfer ownership of a thing or right to another, called the buyer, over which the
latter agrees.

(238 SCRA 602; 611 [1994].)

In Villonco Realty Company vs. Bormaheco (65 SCRA 352 [1975]), bearing factual antecendents
similar to this case, the Court, through Justice Aquino (later to be Chief Justice), quoting authorities,
upheld the perfection of the contract of sale thusly:

The contract of sale is perfected at the moment there is a meeting of minds upon the
thing which is the object of the contract and upon the price. From that moment, the
parties may reciprocally demand performance, subject to the provisions of the law
governing the form of contracts. (Art. 1475, Ibid.)

xxx xxx xxx

Consent is manifested by the meeting of the offer and the acceptance upon the thing
and the cause which are to constitute the contract. The offer must be certain and the
acceptance absolute. A qualified acceptance constitutes a counter-offer (Art. 1319,
Civil Code). "An acceptance may be express or implied." (Art. 1320, Civil Code).

xxx xxx xxx

It is true that an acceptance may contain a request for certain changes in the terms
of the offer and yet be a binding acceptance. "So long as it is clear that the meaning
of the acceptance is positively and unequivocally to accept the offer, whether such
request is granted or not, a contract is formed." (Stuart vs. Franklin Life Ins. Co., 105
Fed. 2nd 965, citing Sec. 79, Williston on Contracts).

xxx xxx xxx

. . . the vendor's change in a phrase of the offer to purchase, which change does not
essentially change the terms of the offer, does not amount to a rejection of the offer
and the tender or a counter-offer. (Stuart vs. Franklin Life Ins. Co., supra.)

(at pp. 362-363; 365-366.)

In the case at bench, the allegation of NBS that there was no concurrence of the offer and
acceptance upon the cause of the contract is belied by the testimony of the very BPI official with
whom the contract was perfected. Aromin and Albano concluded the sale for BPI. The fact that the
deed of sale still had to be signed and notarized does not mean that no contract had already been
perfected. A sale of land is valid regardless of the form it may have been entered into (Claudel vs.
Court of Appeals, 199 SCRA 113, 119 [1991]). The requisite form under Article 1458 of the Civil
Code is merely for greater efficacy or convenience and the failure to comply therewith does not
affect the validity and binding effect of the act between the parties (Vitug, Compendium of Civil Law
and Jurisprudence, 1993 Revised Edition, p. 552). If the law requires a document or other special
form, as in the sale of real property, the contracting parties may compel each other to observe that
form, once the contract has been perfected. Their right may be exercised simultaneously with action
upon the contract (Article 1359, Civil Code).

Regarding the admissibility and competence of the evidence adduced by petitioner, respondent
Court of Appeals ruled that because the sale involved real property, the statute of frauds is
applicable.

In any event, petitioner cites Abrenica vs. Gonda (34 Phil. 739 [1916]) wherein it was held that
contracts infringing the Statute of Frauds are ratified when the defense fails to object, or asks
questions on cross-examination. The succinct words of Justice Araullo still ring in judicial cadence:

As no timely objection or protest was made to the admission of the testimony of the
plaintiff with respect to the contract; and as the motion to strike out said evidence
came too late; and, furthermore, as the defendants themselves, by the cross-
questions put by their counsel to the witnesses in respect to said contract, tacitly
waived their right to have it stricken out, that evidence, therefore, cannot be
considered either inadmissible or illegal, and court, far from having erred in taking it
into consideration and basing his judgment thereon, notwithstanding the fact that it
was ordered to be stricken out during the trial, merely corrected the error he
committed in ordering it to be so stricken out and complied with the rules of
procedure hereinbefore cited.

(at p. 748.)

In the instant case, counsel for respondents cross-examined petitioner's witnesses at length on the
contract itself, the purchase price, the tender of cash payment, the authority of Aromin and Revilla,
and other details of the litigated contract. Under the Abrenica rule (reiterated in a number of cases,
among them Talosig vs. Vda. de Nieba 43 SCRA 472 [1972]), even assuming that parol evidence
was initially inadmissible, the same became competent and admissible because of the cross-
examination, which elicited evidence proving the evidence of a perfected contract. The cross-
examination on the contract is deemed a waiver of the defense of the Statute of Frauds (Vitug,
Compendium of Civil Law and Jurisprudence, 1993 Revised Edition, supra, p. 563).

The reason for the rule is that as pointed out in Abrenica "if the answers of those witnesses were
stricken out, the cross-examination could have no object whatsoever, and if the questions were put
to the witnesses and answered by them, they could only be taken into account by connecting them
with the answers given by those witnesses on direct examination" (pp. 747-748).

Moreover, under Article 1403 of the Civil Code, an exception to the unenforceability of contracts
pursuant to the Statute of Frauds is the existence of a written note or memorandum evidencing the
contract. The memorandum may be found in several writings, not necessarily in one document. The
memorandum or memoranda is/are written evidence that such a contract was entered into.

We cite the findings of the trial court on this matter:

In accordance with the provisions of Art. 1403 of the Civil Code, the existence of a
written contract of the sale is not necessary so long as the agreement to sell real
property is evidenced by a written note or memorandum, embodying the essentials of
the contract and signed by the party charged or his agent. Thus, it has been held:

The Statute of Frauds, embodied in Article 1403 of the Civil Code of

the Philippines, does not require that the contract itself be
written. The plain test of Article 1403, Paragraph (2) is clear that a
written note or memorandum, embodying the essentials of the
contract and signed by the party charged, or his agent suffices to
make the verbal agreement enforceable, taking it out of the operation
of the statute. (Emphasis supplied)

xxx xxx xxx

In the case at bar, the complaint in its paragraph 3 pleads that the
deal had been closed by letter and telegram (Record on Appeal, p.
2), and the letter referred to was evidently the one copy of which was
appended as Exhibit A to plaintiffs opposition to the motion to
dismiss. The letter, transcribed above in part, together with the one
marked as Appendix B, constitute an adequate memorandum of the
transaction. They are signed by the defendant-appellant; refer to the
property sold as a Lot in Puerto Princesa, Palawan, covered by
T.C.T. No. 62, give its area as 1,825 square meters and the purchase
price of four (P4.00) pesos per square meter payable in cash. We
have in them, therefore, all the essential terms of the contract and
they satisfy the requirements of the Statute of Frauds.

(Footnote 26, Paredes vs. Espino, 22 SCRA 1000 [1968]).

While there is no written contract of sale of the Pasig property executed by BPI in
favor of plaintiff, there are abundant notes and memoranda extant in the records of
this case evidencing the elements of a perfected contract. There is Exhibit P, the
letter of Kenneth Richard Awad addressed to Roland Aromin, authorizing the sale of
the subject property at the price of P1,000.00 per square meter giving 2%
commission to the broker and instructing that the sale be on cash basis.
Concomitantly, on the basis of the instruction of Mr. Awad, (Exh. P), an authority to
sell, (Exh. B) was issued by BPI to Pedro Revilla, Jr., representing Assetrade Co.,
authorizing the latter to sell the property at the initial quoted price of P1,000.00 per
square meter which was altered on an unaccepted offer by Technoland. After the
letter authority was issued to Mr. Revilla, a letter authority was signed by Mr. Aromin
allowing the buyer to enter the premises of the property to inspect the same (Exh. C).
On July 9, 1988, Pedro Revilla, Jr., acting as agent of BPI, wrote a letter to BPI
informing it that he had procured a buyer in the name of Limketkai Sons Milling, Inc.
with offices at Limketkai Bldg., Greenhills, San Juan, Metro Manila, represented by
its Exec. Vice-President, Alfonso Lim (Exh. D). On July 11, 1988, the plaintiff,
through Alfonso Lim, wrote a letter to the bank, through Merlin Albano, confirming
their transaction regarding the purchase of the subject property (Exh. E). On July 18,
1988, the plaintiff tendered upon the officials of the bank a check for P33,056,000.00
covered by Check No. CA510883, dated July 18, 1988. On July 1, 1988, Alfonso
Zamora instructed Mr. Aromin in a letter to resubmit new offers only if there is no
transaction closed with Assetrade Co. (Exh. S). Combining all these notes and
 memoranda, the Court is convinced of the existence of perfected contract of sale.
Aptly, the Supreme Court, citing American cases with approval, held:

No particular form of language or instrument is necessary to

constitute a memorandum or note in writing under the statute of
frauds; any document or writing, formal or informal, written either for
the purpose of furnishing evidence of the contract or for another
purpose, which satisfies all the requirements of the statute as to
contents and signature, as discussed respectively infra secs. 178-
200, and infra secs. 201-205, is a sufficient memorandum or note. A
memorandum may be written as well with lead pencil as with pen and
ink. It may also be filled in on a printed form. (37 C.J.S., 653-654).

The note or memorandum required by the statute of frauds need not

be contained in a single document, nor, when contained in two or
more papers, need each paper be sufficient as to contents and
signature to satisfy the statute. Two or more writings properly
connected may be considered together, matters missing or uncertain
in one may be supplied or rendered certain by another, and their
sufficiency will depend on whether, taken together, they meet the
requirements of the statute as to contents and the requirements of
the statutes as to signature, as considered respectively infra secs.
179-200 and secs. 201-215.

(pp. 460-463, Original RTC Record).

The credibility of witnesses is also decisive in this case. The trial court directly observed the
demeanor and manner of testifying of the witnesses while the Court of Appeals relied merely on the
transcript of stenographic notes.

In this regard, the court of origin had this to say:

Apart from weighing the merits of the evidence of the parties, the Court had occasion
to observe the demeanor of the witnesses they presented. This is one important
factor that inclined the Court to believe in the version given by the plaintiff because
its witnesses, including hostile witness Roland V. Aromin, an assistant vice-president
of the bank, were straightforward, candid and unhesitating in giving their respective
testimonies. Upon the other hand, the witnesses of BPI were evasive, less than
candid and hesitant in giving their answers to cross examination questions.
Moreover, the witnesses for BPI and NBS contradicted each other. Fernando Sison
III insisted that the authority to sell issued to Mr. Revilla was merely an evidence by
which a broker may convince a prospective buyer that he had authority to offer the
property mentioned therein for sale and did not bind the bank. On the contrary,
Alfonso Zamora, a Senior Vice-President of the bank, admitted that the authority to
sell issued to Mr. Pedro Revilla, Jr. was valid, effective and binding upon the bank
being signed by two class "A" signatories and that the bank cannot back out from its
commitment in the authority to sell to Mr. Revilla.

While Alfredo Ramos of NBS insisted that he did not know personally and was not
acquainted with Edmundo Barcelon, the latter categorically admitted that Alfredo
Ramos was his friend and that they have even discussed in one of the luncheon
meetings the matter of the sale of the Pasig property to NBS. George Feliciano
 emphatically said that he was not a consultant of Mr. Ramos nor was he connected
with him in any manner, but his calling card states that he was a consultant to the
chairman of the Pacific Rim Export and Holdings Corp. whose chairman is Alfredo
Ramos. This deliberate act of Mr. Feliciano of concealing his being a consultant to
Mr. Alfredo Ramos evidently was done by him to avoid possible implication that he
committed some underhanded maneuvers in manipulating to have the subject
property sold to NBS, instead of being sold to the plaintiff.

(pp. 454-455, Original RTC Record.)

On the matter of credibility of witnesses where the findings or conclusions of the Court of Appeals
and the trial court are contrary to each other, the pronouncement of the Court in Serrano vs. Court of
Appeals (196 SCRA 107 [1991]) bears stressing:

It is a settled principle of civil procedure that the conclusions of the trial court
regarding the credibility of witnesses are entitled to great respect from the appellate
courts because the trial court had an opportunity to observe the demeanor of
witnesses while giving testimony which may indicate their candor or lack thereof.
While the Supreme Court ordinarily does not rule on the issue of credibility of
witnesses, that being a question of fact not properly raised in a petition under Rule
45, the Court has undertaken to do so in exceptional situations where, for instance,
as here, the trial court and the Court of Appeals arrived at divergent conclusions on
questions of fact and the credibility of witnesses.

(at p. 110.)

On the fourth question of whether or not NBS is an innocent purchaser for value, the record shows
that it is not. It acted in bad faith.

Respondent NBS ignored the notice of lis pendens annotated on the title when it bought the lot. It
was the willingness and design of NBS to buy property already sold to another party which led BPI to
dishonor the contract with Limketkai.

Petitioner cites several badges of fraud indicating that BPI and NBS conspired to prevent petitioner
from paying the agreed price and getting possession of the property:

1. The sale was supposed to be done through an authorized broker, but top officials of BPI
personally and directly took over this particular sale when a close friend became interested.

2. BPI Senior Vice President Edmundo Barcelon admitted that NBS's President, Alfredo Ramos, was
his friend; that they had lunch meetings before this incident and discussed NBS's purchase of the lot.
Barcelon's father was a business associate of Ramos.

3. George Feliciano, in behalf of NBS, offered P5 million and later P7 million if petitioner would drop
the case and give up the lot. Feliciano went to petitioner's office and haggled with Alfonso Lim but
failed to convince him inspite of various and increasing offers.

4. In a place where big and permanent buildings abound, NBS had constructed only a warehouse
marked by easy portability. The warehouse is bolted to its foundations and can easily be dismantled.
It is the very nature of the deed of absolute sale between BPI and NBS which, however, clearly
negates any allegation of good faith on the part of the buyer. Instead of the vendee insisting that the
vendor guarantee its title to the land and recognize the right of the vendee to proceed against the
vendor if the title to the land turns out to be defective as when the land belongs to another person,
the reverse is found in the deed of sale between BPI and NBS. Any losses which NBS may incur in
the event the title turns out to be vested in another person are to be borne by NBS alone. BPI is
expressly freed under the contract from any recourse of NBS against it should BPI's title be found
defective.

NBS, in its reply memorandum, does not refute or explain the above circumstance squarely. It simply
cites the badges of fraud mentioned in Oria vs. McMicking (21 Phil. 243 [1912]) and argues that the
enumeration there is exclusive. The decision in said case plainly states "the following are some of
the circumstances attending sales which have been denominated by courts (as) badges of fraud."
There are innumerable situations where fraud is manifested. One enumeration in a 1912 decision
cannot possibly cover all indications of fraud from that time up to the present and into the future.

The Court of Appeals did not discuss the issue of damages. Petitioner cites the fee for filing the
amended complaint to implead NBS, sheriffs fees, registration fees, plane fare and hotel expenses
of Cebu-based counsel. Petitioner also claimed, and the trial court awarded, damages for the profits
and opportunity losses caused to petitioner's business in the amount of P10,000,000.00.

We rule that the profits and the use of the land which were denied to petitioner because of the non-
compliance or interference with a solemn obligation by respondents is somehow made up by the
appreciation in land values in the meantime.

Prescinding from the above, we rule that there was a perfected contract between BPI and petitioner
Limketkai; that the BPI officials who transacted with petitioner had full authority to bind the bank; that
the evidence supporting the sale is competent and admissible; and that the sale of the lot to NBS
during the trial of the case was characterized by bad faith.

WHEREFORE, the questioned judgment of the Court of Appeals is hereby REVERSED and SET
ASIDE. The June 10, 1991 judgment of Branch 151 of the Regional Trial Court of The National
Capital Judicial Region stationed in Pasig, Metro Manila is REINSTATED except for the award of
Ten Million Pesos (P10,000,000.00) damages which is hereby DELETED.

SO ORDERED.

Feliciano, Romero, Vitug and Panganiban, JJ., concur.

6) Heirs of Biona vs CA

FIRST DIVISION

[G.R. No. 105647. July 31, 2001]

HEIRS OF ERNESTO BIONA, NAMELY: EDITHA B. BLANCAFLOR,
MARIANITA D. DE JESUS, VILMA B. BLANCAFLOR, ELSIE B.
RAMOS and PERLITA B. CARMEN, petitioners, vs. THE COURT OF
APPEALS and LEOPOLDO HILAJOS, respondents.

DECISION
KAPUNAN, J.:

Before us is a petition for review on certiorari under Rule 45 of the Decision of the Court of
Appeals dated March 31, 1992, reversing the decision of the Regional Trial Court, 11th Judicial
region, Branch 26, Surallah, South Cotabato and the Resolution dated May 26, 1992, denying the
subsequent motion for reconsideration.
Quoting from the decision of the Court of Appeals, the antecedent facts are as follows:

On October 23, 1953, the late Ernesto Biona, married to plaintiff-appellee Soledad
Biona, was awarded Homestead Patent No. V-840 over the property subject of this
suit, a parcel of agricultural land denominated as lot 177 of PLS-285-D, located in Bo.
3, Banga, Cotabato, containing an area of ten (10) hectares, forty-three (43) acres and
sixty-eight (68) centares, Original Certificate of Title No. (V-2323) P-3831 was issued
in his name by the Register of Deeds of Cotabato (Exh. C). On June 3, 1954, Ernesto
and Soledad Biona obtained a loan from the then Rehabilitation Finance Corporation
(now the Development Bank of the Philippines) and put up as collateral the subject
property (Exh. 4). On June 12, 1956, Ernesto Biona died (Exh. B) leaving as his heirs
herein plaintiffs-appellees, namely, his wife, Soledad Estrobillo Vda. De Biona, and
five daughters, Editha B. Blancaflor, Marianita B. de Jesus, Vilma B. Blancaflor,
Elsie B. Ramos and Perlita B. Carmen.

On March 1, 1960, plaintiff-appellee Soledad Biona obtained a loan from defendant-

appellant in the amount of P1,000 and as security therefore, the subject property was
mortgaged. It was further agreed upon by the contracting parties that for a period of
two years until the debt is paid, defendant-appellant shall occupy the land in dispute
and enjoy the usufruct thereof.

The two-year period elapsed but Soledad Biona was not able to pay her
indebtedness. Defendant-appellant continued occupying and cultivating the subject
property without protest from plaintiffs-appellees.

On July 3, 1962, defendant-appellant paid the sum of P1,400.00 to the Development

Bank of the Philippines to cancel the mortgage previously constituted by the Biona
spouses on June 3, 1953 (Exhs. 4 and 6).
Thereafter, and for a period of not less than twenty-five years, defendant-appellant
continued his peaceful and public occupation of the property, declaring it in his name
for taxation purposes (Exhs. 10 and 11), paying real estate property taxes thereon
(Exhs. 12, 13, 13-a to 13-e, F, G, H and I), and causing the same to be tenanted (Exhs.
7, 8, 9).

On June 19, 1985, plaintiffs-appellees, filed a complaint for recovery of ownership,

possession, accounting and damages, with a prayer for a writ of preliminary
mandatory injunction and/ or restraining order against defendant-appellant alleging,
among others, that the latter had unlawfully been depriving them of the use,
possession and enjoyment of the subject property; that the entire parcel of land, which
was devoted and highly suited to palay and corn, was yielding three harvests annually,
with an average of one hundred twenty (120) sacks of corn and eighty cavans of rice
per hectare; that plaintiffs-appellees were deprived of its total produce amounting to
P150,000.00. Plaintiffs-appellees prayed for the award of moral damages in the sum
of P50,000.00, exemplary damages in the amount of P20,000,00 and litigation
expenses in the amount of P2,000.00.

On September 19, 1986, defendant-appellant filed his answer with counterclaim

traversing the material allegations in the complaint and alleging, by way of
affirmative and special defenses, that: on September 11, 1961, Soledad Biona, after
obtaining the loan of P1,000.00 from defendant-appellant, approached and begged the
latter to buy the whole of Lot No. 177 since it was then at the brink of foreclosure by
the Development Bank of the Philippines and she had no money to redeem the same
nor the resources to support herself and her five small children; that defendant-
appellant agreed to buy the property for the amount of P4,300.00, which consideration
was to include the redemption price to be paid to the Development Bank of the
Philippines; that the purchase price paid by defendant far exceeded the then current
market value of the property and defendant had to sell his own eight-hectare parcel of
land in Surallah to help Soledad Biona; that to evidence the transaction, a deed of sale
was handwritten by Soledad Biona and signed by her and the defendant; that at the
time of the sale, half of the portion of the property was already submerged in water
and from the years 1969 to 1984, two and one-half hectares thereof were eroded by
the Allah River; that by virtue of his continuous and peaceful occupation of the
property from the time of its sale and for more than twenty- five years thereafter,
defendant possesses a better right thereto subject only to the rights of the tenants
whom he had allowed to cultivate the land under the Land Reform Program of the
government; that the complaint states no cause of action; that plaintiffs alleged right,
if any, is barred by the statutes of fraud. As counterclaim, defendant-appellant prayed
that plaintiffs-appellees be ordered to execute a formal deed of sale over the subject
property and to pay him actual, moral and exemplary damages as the trial court may
deem proper. He likewise prayed for the award of attorney's fees in the sum of
P10,000.00.

During the hearing of the case, plaintiffs-appellees presented in evidence the

testimonies of Editha Biona Blancaflor and Vilma Biona Blancaflor, and documentary
exhibits A to G and their submarkings.

Defendant-appellant, for his part, presented the testimonies of himself and Mamerto Famular,
including documentary exhibits 1 to 13, F, G, H, I, and their submarkings.[1]

On January 31, 1990, the RTC rendered a decision with the following dispositive
portion:

I (SIC) VIEW OF THE FOREGOING, decision is hereby rendered:

1. ordering the defendant to vacate possession of the lot in question to the extent of
six-tenths (6/10) of the total area thereof and to deliver the same to the plaintiff
Soledad Estrobillo Biona upon the latter's payment of the sum of P1,000.00 TO THE
FORMER IN REDEMPTION OF ITS MORTGAGE CONSTITUTED UNDER exh.
"1" of defendant;

2. ordering the defendant to vacate the possession of the remaining four-tenths (4/10)
of the area of the lot in question, representing the shares of the children of the late
Ernesto Biona and deliver the same to said plaintiffs; the defendant shall render an
accounting of the net produce of the area ordered returned to the co-plaintiffs of
Soledad Biona commencing from the date of the filing of the complaint until
possession thereto has been delivered to said co-plaintiffs and to deliver or pay 25%
of said net produce to said co-plaintiffs;

3. ordering the defendant to pay the costs of this suit.

The defendant's counter-claim are dismissed for lack of merit.

SO ORDERED. [2]

Dissatisfied, herein private respondent appealed to the Court of Appeals which reversed the
trial court's ruling. The dispositive portion reads as follows:

WHEREFORE, premises considered, the judgment appealed from is set aside and a
new one entered dismissing the complaint, and the plaintiffs-appellees are ordered to
execute a registrable deed of conveyance of the subject property in favor of the
defendant-appellant within ten (10) days from the finality of this decision. With costs
against plaintiffs-appellees. [3]
 Hence, the instant petition where the following assignment of errors were made:
I.- RESPONDENT COURT OF APPEALS ERRED IN CONCLUDING THAT THE
SIGNATURE OF SOLEDAD ESTROBILLO IN THE DEED OF SALE (EXHIBIT
"2"), A PRIVATE DOCUMENT, IS GENUINE.
II - RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT THE DEED OF
SALE (EXHIBIT 2) IS VALID AND COULD LEGALLY CONVEY TO PRIVATE
RESPONDENT OWNERSHIP AND TITLE OVER THE SUBJECT PROPERTY.
III - RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT HEREIN
PETITIONERS HAD LOST THEIR RIGHT TO RECOVER THE SUBJECT
PROPERTY BY VIRTUE OF THE EQUITABLE PRINCIPLE OF LACHES.
IV- RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT PRIVATE
RESPONDENT'S RIGHT OF ACTION UNDER THE DEED OF SALE (EXHIBIT "2")
HAD PRESCRIBED.[4]
As correctly pointed out by the Court of Appeals, the pivotal issue in the instant case is
whether or not the deed of sale is valid and if it effectively conveyed to the private respondents
the subject property.
In ruling in favor of the petitioners, the trial court refused to give weight to the evidence of
private respondent which consisted of (1) the handwritten and unnotarized deed of sale executed
by Soledad Biona in favor of the private respondent; and (2) the corresponding acknowledgment
receipt of the amount of P3,500.00 as partial payment for the land in dispute. To the mind of the
trial court, the signature of Soledad Biona on the deed of sale was not genuine. There was no
direct evidence to prove that Soledad Biona herself signed the document. Moreover, the deed of
sale was not notarized and therefore, did not convey any rights to the vendee. The trial court also
ruled that petitioners' rights over the land have not allegedly prescribed.
On the other hand, the respondent Court of Appeals accepted as genuine the deed of sale
(Exh. 2) which "sets forth in unmistakable terms that Soledad Biona agreed for the consideration
of P4,500.00, to transfer to defendant-appellant Lot 177. The fact that payment was made is
evidenced by the acknowledgment receipt for P3,500.00 (Exh. 3) signed by Soledad Biona, and
private respondent previous delivery of P1,000.00 to her pursuant to the Mutual Agreement
(Exh. 1).
The contract of sale between the contracting parties was consummated by the delivery of the
subject land to private respondent who since then had occupied and cultivated the same
continuously and peacefully until the institution of this suit."[5]
Given the contrary findings of the trial court and the respondent court, there is a need to re-
examine the evidence altogether. After a careful study, we are inclined to agree with the findings
and conclusions of the respondent court as they are more in accord with the law and evidence on
record.
As to the authenticity of the deed of sale, we subscribe to the Court of Appeals' appreciation
of evidence that private respondent has substantially proven that Soledad Biona indeed signed
the deed of sale of the subject property in his favor. His categorical statement in the trial court
that he himself saw Soledad Estrobillo affix her signature on the deed of sale lends
credence. This was corroborated by another witness, Mamerto Famular. Although the petitioners
consider such testimony as self-serving and biased,[6] it can not, however, be denied that private
respondent has shown by competent proof that a contract of sale where all the essential elements
are present for its validity was executed between the parties.[7] The burden is on the petitioners to
prove the contrary which they have dismally failed to do. As aptly stated by the Court of
Appeals:

Having established the due execution of the subject deed of sale and the receipt
evidencing payment of the consideration, the burden now shifted to plaintiffs-
appellees to prove by contrary evidence that the property was not so transferred. They
were not able to do this since the very person who could deny the due execution of the
document, Soledad Biona, did not testify. She similarly failed to take the witness
stand in order to deny her signatures on Exhs. 2 and 3. Admitting as true that she was
under medication in Manila while the hearing of the case was underway, it was easy
enough to get her deposition. Her non-presentation gives rise to the presumption that
if her testimony was taken, the same would be adverse to the claim by plaintiffs-
appellees.

It must also be noted that under Sec. 22 Rule 132 of our procedural law, evidence respecting
handwriting may also be given by a comparison, made by the witness or the court, with writings
admitted or treated as genuine by the party against whom the evidence is offered. Our own close
scrutiny of the signature of Soledad Biona appearing on Exh. 1, the document admitted by the
contending parties, reveals that it is the same as the signatures appearing on Exhs. 2 and 3, the
documents in dispute. Admittedly, as was pointed out by the trial court, the "S" in Exhs. 2 and 3
were written in printed type while that in Exh. 1 is in handwriting type. But a careful look at the
text of Exh. 2 would reveal that Soledad Biona alternately wrote the letter "S" in longhand and
printed form. Thus, the words "Sum" and "Sept.," found in the penultimate and last paragraphs of
the document, respectively, were both written in longhand, while her name appearing on first
part of the document, as well as the erased word "Sept." in the last paragraph thereof were
written in printed form. Moreover, all doubts about the genuineness of Soledad Biona's
signatures on Exhs. 2 and 3 are removed upon their comparison to her signature appearing on the
special power of attorney (Exh. A) presented in evidence by plaintiffs-appellees during trial. In
said document, Soledad Biona signed her name using the same fact that Soledad Estrobillo Biona
wrote her entire name on Exh. 2 while she merely affixed her maiden name on the other two
documents may have been due to the lesser options left to her when the lawyers who drafted the
two documents (Exhs. 2 and 3) already had typewritten the names "SOLEDAD ESTROBILLO"
thereon whereas in Exh. 2, it was Soledad Biona herself who printed and signed her own
name. Thus, in the special power of attorney (Exh. A), Soledad Biona signed her name in the
same manner it was typewritten on the document.[8]

We agree with the private respondent that all the requisites for a valid contract of sale are
present in the instant case. For a valuable consideration of P4,500.00, Soledad Biona agreed to
sell and actually conveyed the subject property to private respondent. The fact that the deed of
sale was not notarized does not render the agreement null and void and without any effect. The
provision of Article 1358 of the Civil Code[9] on the necessity of a public document is only for
convenience, and not for validity or enforceability.[10] The observance of which is only necessary
to insure its efficacy, so that after the existence of said contract had been admitted, the party
bound may be compelled to execute the proper document.[11] Undeniably, a contract has been
entered into by Soledad Biona and the private respondent. Regardless of its form, it was valid,
binding and enforceable between the parties. We quote with favor the respondent court's
ratiocination on the matter:

xxx The trial court cannot dictate the manner in which the parties may execute their
agreement, unless the law otherwise provides for a prescribed form, which is not so in
this case. The deed of sale so executed, although a private document, is effective as
between the parties themselves and also as the third persons having no better title, and
should be admitted in evidence for the purpose of showing the rights and relations of
the contracting parties (Carbonell v. Court of Appeals, 69 SCRA 99; Elumbaring v.
Elumbaring, 12 Phil. 384). Under Art. 1356 of the Civil Code, contracts shall be
obligatory in whatever form they may have been entered into provided all the
essential requisites for their necessary elements for a valid contract of sale were met
when Soledad Biona agreed to sell and actually conveyed Lot 177 to defendant-
appellant who paid the amount of P4,500.00 therefore. The deed of sale (Exh. 2) is not
made ineffective merely because it is not notarized or does not appear in a public
document. The contract is binding upon the contracting parties, defendant-appellant
and Soledad Biona, including her successors-in-interest. Pursuant to Art. 1357,
plaintiffs-appellees may be compelled by defendant-appellant to execute a public
document to embody their valid and enforceable contract and for the purpose of
registering the property in the latter's name (Clarin v. Rulona, 127 SCRA 512; Heirs
of Amparo v. Santos, 108 SCRA 43; Araneta v. Montelibano, 14 Phil. 117). [12]

Finally, we find no merit in petitioners' contention that their right over the land has not
prescribed. The principle of laches was properly applied against petitioner. Laches has been
defined as the 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, it is negligence or
omission to assert a right within a reasonable time, warranting a presumption that the party
entitled to assert it has either abandoned it or declined to assert it.[13] In the instant case, the Court
of Appeals point to the circumstances that warrant the principle to come into play:

Laches had been defined to be such neglect or omission to assert a right taken in
conjunction with the lapse of time and other circumstances causing prejudice to an
adverse party, as will bar him in equity (Heirs of Batiog Lacamen v. Heirs of Laruan,
65 SCRA 605, 609-610). In the instant suit, Soledad Biona, at the time of the
execution of the deed of sale (Exh. 2) on September 11, 1961, could only alienate that
portion of Lot 177 belonging to her, which is seven-twelfths of the entire
property. She had no power or authority to dispose of the shares of her co-owners, the
five daughters of the deceased Ernesto Biona, who were entitled to an indivisible five-
twelfths portion of the whole property. It is not disputed, however, that as early as
1960, when Soledad Biona borrowed money from defendant-appellant (Exh. L), the
latter entered, possessed and started occupying the same in the concept of an
owner. He caused its cultivation through various tenants under Certificates of Land
Transfer (Exhs. 7-9), declared the property in his name, religiously paid taxes thereon,
reaped benefits therefrom, and executed other acts of dominion without any protest or
interference from plaintiffs-appellees for more than twenty-five years. Even when the
five daughters of the deceased Ernesto Biona were way past the age of majority, when
they could have already asserted their right to their share, no sale in defendant-
appellant's favor was ever brought or any other action was taken by them to recover
their share. Instead, they allowed defendant-appellant to peacefully occupy the
property without protest. Although it is true that no title to registered land in
derogation of that of the registered owner shall be acquired by prescription or adverse
possession as the right to recover possession of registered land is imprescriptible,
jurisprudence has laid down the rule that a person and his heirs may lose their right to
recover back the possession of such property and title thereto by reason of
laches. (Victoriano v. Court of Appeals, 194 SCRA 19; Lola v. CA, 145 SCRA 439,
449). Indeed, it has been ruled in the case of Miguel v. Catalino, 26 SCRA 234, 239,
that:

'Courts can not look with favor at parties who, by their silence, delay and inaction,
knowingly induce another to spend time, effort and expense in cultivating the land,
paying taxes and making improvements thereof for 30 long years, only to spring from
ambush and claim title when the possessor's efforts and the rise of land values offer an
opportunity to make easy profit at his expense.'

Thus, notwithstanding the invalidity of the sale with respect to the share of plaintiffs-
appellees, the daughters of the late Ernesto Biona, they [allowed] the vendee,
defendant-appellant herein, to enter, occupy and possess the property in the concept of
an owner without demurrer and molestation for a long period of time, never claiming
the land as their own until 1985 when the property has greatly appreciated in
value. Vigilantibus non dormientibus sequitas subvenit. [14]

WHEREFORE, the Petition is DENIED and the assailed Decision of the Court of Appeals
is AFFIRMED.
SO ORDERED.
Puno, Pardo, and Ynares-Santiago, JJ., concur.
Davide, Jr., C.J., (Chairman), on official leave.


This case was transferred to the ponente pursuant to the resolution in A.M. No. 00-9-03-SC.
[1]
Rollo, pp. 40-42.
[2]
Id., at 60-61.
[3]
Id., at 50.
[4]
Id., at 11-12.
[5]
Id,, at 45.
[6]
Rollo, p. 14-15.
[7]
See Dizon v. Court of Appeals, 302 SCRA 288 (1999); Villanueva v. Court of Appeals, 267 SCRA 89 (1997).
[8]
Id., at 46-47.
[9]
ART. 1358. The following must appear in a public document:
(1) Acts and contracts which have for their object the creation, transmission, modification or extinguishment of real
rights over immovable property; sales of real property; sales of real property or of an interest therein are governed
by Articles 1403, No. 2, and 1405;
(2) The cession, repudiation or renunciation of hereditary rights or of those of the conjugal partnership of gains;
(3) The power to administer property, or any other power which has for its object an act appearing or which should
appear in a public document, or shuld prejudice a third person;
(4) The cession of actions or rights proceeding from an act appearing in a public document.
All other contracts where the amount involved exceeds five hundred pesos must appear in writing, even a private
one. But sales of goods, chattels or things in action are governed by Articles 1403, No. 2 and 1405.
[10]
Caoili v. Court of Appeals, 314 SCRA 345 (1999).
[11]
Cenido v. Apacionado, 318 SCRA 688 (1999).
[12]
Id., at 48.
[13]
Vda. De Cabrera v. CA, 267 SCRA 339, 355 (1997).
[14]
Rollo, pp. 48-50.

7) Secuya vs Gerarda

THIRD DIVISION

[G.R. No. 136021. February 22, 2000]

BENIGNA SECUYA, MIGUEL SECUYA, MARCELINO SECUYA, CORAZON

SECUYA, RUFINA SECUYA, BERNARDINO SECUYA, NATIVIDAD
SECUYA, GLICERIA SECUYA and PURITA SECUYA, petitioners, vs.
GERARDA M. VDA. DE SELMA, respondent. Ed-p

D E C I S I ON

PANGANIBAN, J.:
In an action for quieting of title, the plaintiffs must show not only that there is a cloud or
contrary interest over the subject real property, but that they have a valid title to it. In the
present case, the action must fail, because petitioners failed to show the requisite title.

The Case

Before us is a Petition for Review seeking to set aside the July 30, 1998 Decision of the
Court of Appeals (CA) in CA-G.R. CV No. 38580,[1] which affirmed the judgment[2] of the
Regional Trial Court (RTC) of Cebu City. The CA ruled:

"WHEREFORE, [there being] no error in the appealed decision, the same

is hereby AFFIRMED in toto."[3]

The decretal portion of the trial court Decision reads as follows: Mis-edp

"WHEREFORE, in view of all the foregoing [evidence] and considerations,

this court hereby finds the preponderance of evidence to be in favor of the
defendant Gerarda Selma as judgment is rendered:

"1. Dismissing this Complaint for Quieting of Title,

Cancellation of Certificate of Title of Gerarda vda. de Selma
and damages;

"2. Ordering the plaintiffs to vacate the premises in question

and turn over the possession of the same to the defendant
Gerarda Selma;

"3. Requiring the plaintiffs to pay defendant the sum of

P20,000 as moral damages, according to Art. 2217,
attorneys fees of P15,000.00, litigation expenses of
P5,000.00 pursuant to Art. 2208 No. 11 and to pay the costs
of this suit.

"SO ORDERED."[4]

Likewise challenged is the October 14, 1998 CA Resolution which denied petitioners
Motion for Reconsideration.[5]

The FactsMis-oedp

The present Petition is rooted in an action for quieting of title filed before the RTC by
Benigna, Miguel, Marcelino, Corazon, Rufina, Bernardino, Natividad, Gliceria and Purita
-- all surnamed Secuya -- against Gerarda M. vda. de Selma. Petitioners asserted
ownership over the disputed parcel of land, alleging the following facts:

"xxx xxx xxx

"8. The parcel of land subject of this case is a PORTION of Lot 5679 of the
Talisay-Minglanilla Friar Lands Estate, referred to and covered [o]n Page
279, Friar Lands Sale Certificate Register of the Bureau of Lands (Exh.
"K"). The property was originally sold, and the covering patent issued, to
Maxima Caballero Vda. de Cario (Exhs. "K-1"; "K-2). Lot 5679 has an area
of 12,750 square meters, more or less;

"9. During the lifetime of Maxima Caballero, vendee and patentee of Lot
5679, she entered into that AGREEMENT OF PARTITION dated January
5, 1938 with Paciencia Sabellona, whereby the former bound herself and
parted [with] one-third (1/3) portion of Lot 5679 in favor of the latter (Exh.
"D"). Among others, it was stipulated in said agreement of partition that
the said portion of one-third so ceded will be located adjoining the
municipal road (par. 5, Exh. "D"); Ed-pm-is

"10. Paciencia Sabellona took possession and occupation of that one-third

portion of Lot 5679 adjudicated to her. Later, she sold the three thousand
square meter portion thereof to Dalmacio Secuya on October 20, 1953, for
a consideration of ONE THOUSAND EIGHT HUNDRED FIFTY PESOS
(P1,850.00), by means of a private document which was lost (p. 8, tsn.,
8/8/89-Calzada). Such sale was admitted and confirmed by Ramon
Sabellona, only heir of Paciencia Sabellona, per that instrument
denominated CONFIRMATION OF SALE OF UNDIVIDED SHARES,
dated September 28, 1976 (Exh. "B");

"11. Ramon Sabellona was the only [or] sole voluntary heir of Paciencia
Sabellona, per that KATAPUSAN NGA KABUT-ON UG PANUGON NI
PACIENCIA SABELLONA (Last Will and Testament of Paciencia
Sabellona), dated July 9, 1954, executed and acknowledged before
Notary Public Teodoro P. Villarmina (Exh. "C"). Pursuant to such will,
Ramon Sabellona inherited all the properties left by Paciencia Sabellona;

"12. After the purchase [by] Dalmacio Secuya, predecessor-in-interest of

plaintiffs, of the property in litigation on October 20, 1953, Dalmacio,
together with his brothers and sisters - he being single - took physical
possession of the land and cultivated the same. In 1967, Edilberto
Superales married Rufina Secuya, niece of Dalmacio Secuya. With the
permission and tolerance of the Secuyas, Edilberto Superales constructed
his house on the lot in question in January 1974 and lived thereon
continuously up to the present (p. 8., tsn. 7/25/88 - Daclan). Said house is
inside Lot 5679-C-12-B, along lines 18-19-20 of said lot, per Certification
dated August 10, 1985, by Geodetic Engineer Celestino R. Orozco (Exh.
"F"); Jjs-c
 "13. Dalmacio Secuya died on November 20, 1961. Thus his heirs -
brothers, sisters, nephews and nieces - are the plaintiffs in Civil Case No.
CEB-4247 and now the petitioners;

"14. In 1972, defendant-respondent Gerarda Selma bought a 1,000

square-meter portion of Lot 5679, evidenced by Exhibit "P". Then on
February 19, 1975, she bought the bigger bulk of Lot 5679, consisting of
9,302 square meters, evidenced by that deed of absolute sale, marked as
Exhibit "5". The land in question, a 3,000-square meter portion of Lot
5679, is embraced and included within the boundary of the later
acquisition by respondent Selma;

"15. Defendant-respondent Gerarda Selma lodged a complaint, and had

the plaintiffs-petitioners summoned, before the Barangay Captain of the
place, and in the confrontation and conciliation proceedings at the Lupong
Tagapayapa, defendant-respondent Selma was asserting ownership over
the land inherited by plaintiffs-petitioners from Dalmacio Secuya of which
they had long been in possession x x x in concept of owner. Such claim of
defendant-respondent Selma is a cloud on the title of plaintiffs-petitioners,
hence, their complaint (Annex "C")."[6]

Respondent Selmas version of the facts, on the other hand, was summarized by the
appellate court as follows: Sc-jj

"She is the registered owner of Lot 5679-C-120 consisting of 9,302 square

meters as evidenced by TCT No. T-35678 (Exhibit "6", Record, p. 324),
having bought the same sometime in February 1975 from Cesaria
Caballero as evidenced by a notarized Deed of Sale (Exhibit "5", Record,
p. 323) and ha[ve] been in possession of the same since then. Cesaria
Caballero was the widow of Silvestre Aro, registered owner of the mother
lot, Lot. No. 5679 with an area of 12,750 square meters of the Talisay-
Minglanilla Friar Lands Estate, as shown by Transfer Certificate of Title
No. 4752 (Exhibit "10", Record, p. 340). Upon Silvestre Aros demise, his
heirs executed an "Extrajudicial Partition and Deed of Absolute Sale"
(Exhibit "11", Record, p. 341) wherein one-half plus one-fifth of Lot No.
5679 was adjudicated to the widow, Cesaria Caballero, from whom
defendant-appellee derives her title."[7]

The CA Ruling

In affirming the trial courts ruling, the appellate court debunked petitioners claim of
ownership of the land and upheld Respondent Selmas title thereto. It held that
respondents title can be traced to a valid TCT. On the other hand, it ruled that
petitioners anchor their claim on an "Agreement of Partition" which is void for being
violative of the Public Land Act. The CA noted that the said law prohibited the alienation
or encumbrance of land acquired under a free patent or homestead patent, for a period
of five years from the issuance of the said patent. S-jcj

Hence, this Petition.[8]

The Issues

In their Memorandum, petitioners urge the Court to resolve the following questions:

"1. Whether or not there was a valid transfer or conveyance of one-third

(1/3) portion of Lot 5679 by Maxima Caballero in favor of Paciencia
Sabellona, by virtue of [the] Agreement of Partition dated January 5,
1938[;] and

"2. Whether or not the trial court, as well as the appellate court, committed
grave abuse of discretion amounting to lack of jurisdiction in not making a
finding that respondent Gerarda M. vda. de Selma [was] a buyer in bad
faith with respect to the land, which is a portion of Lot 5679."[9]

For a clearer understanding of the above matters, we will divide the issues into
three: first, the implications of the Agreement of Partition; second, the validity of the
Deed of Confirmation of Sale executed in favor of the petitioners; and third, the validity
of private respondents title. Supr-eme

The Courts Ruling

The Petition fails to show any reversible error in the assailed Decision.

Preliminary Matter: The Action for Quieting of Title

In an action to quiet title, the plaintiffs or complainants must demonstrate a legal or an

equitable title to, or an interest in, the subject real property.[10] Likewise, they must show
that the deed, claim, encumbrance or proceeding that purportedly casts a cloud on their
title is in fact invalid or inoperative despite its prima facie appearance of validity or legal
efficacy.[11] This point is clear from Article 476 of the Civil Code, which reads:

"Whenever there is cloud on title to real property or any interest therein, by

reason of any instrument, record, claim, encumbrance or proceeding
which is apparently valid or effective but is in truth and in fact invalid,
ineffective, voidable or unenforceable, and may be prejudicial to said title,
an action may be brought to remove such cloud or to quiet title. Co-urt

"An action may also be brought to prevent a cloud from being cast upon
title to real property or any interest therein."
In the case at bar, petitioners allege that TCT No. 5679-C-120, issued in the name of
Private Respondent Selma, is a cloud on their title as owners and possessors of the
subject property, which is a 3,000--square-meter portion of Lot No. 5679-C-120 covered
by the TCT. But the underlying question is, do petitioners have the requisite title that
would enable them to avail themselves of the remedy of quieting of title?

Petitioners anchor their claim of ownership on two documents: the Agreement of

Partition executed by Maxima Caballero and Paciencia Sabellona and the Deed of
Confirmation of Sale executed by Ramon Sabellona. We will now examine these two
documents.

First Issue: The Real Nature of the "Agreement of Partition"

The duly notarized Agreement of Partition dated January 5, 1938, is worded as

follows: Jle-xj

"AGREEMENT OF PARTITION

"I, MAXIMA CABALLERO, Filipina, of legal age, married to Rafael Cario,

now residing and with postal address in the Municipality of Dumaguete,
Oriental Negros, depose the following and say:

"1. That I am the applicant of vacant lot No. 5679 of the Talisay-Minglanilla
Estate and the said application has already been indorsed by the District
Land Officer, Talisay, Cebu, for private sale in my favor;

"2. That the said Lot 5679 was formerly registered in the name of Felix
Abad y Caballero and the sale certificate of which has already been
cancelled by the Hon. Secretary of Agriculture and Commerce; Lex-juris

"3. That for and in representation of my brother, Luis Caballero, who is

now the actual occupant of said lot I deem it wise to have the said lot paid
by me, as Luis Caballero has no means o[r] any way to pay the
government;

"4. That as soon as the application is approved by the Director of Lands,

Manila, in my favor, I hereby bind myself to transfer the one-third (1/3)
portion of the above mentioned lot in favor of my aunt, Paciencia
Sabellana y Caballero, of legal age, single, residing and with postal
address in Tungkop, Minglanilla, Cebu. Said portion of one-third (1/3) will
be subdivided after the approval of said application and the same will be
paid by her to the government [for] the corresponding portion.

"5. That the said portion of one-third (1/3) will be located adjoining the
municipal road;
 "6. I, Paciencia Sabellana y Caballero, hereby accept and take the portion
herein adjudicated to me by Mrs. Maxima Caballero of Lot No. 5679
Talisay-Minglanilla Estate and will pay the corresponding portion to the
government after the subdivision of the same;

"IN WITNESS WHEREOF, we have hereunto set our hands this 5th day of
January, 1988, at Talisay, Cebu."[12]

The Agreement: An Express Trust, Not a Partition

Notwithstanding its purported nomenclature, this Agreement is not one of partition,

because there was no property to partition and the parties were not co-owners. Rather,
it is in the nature of a trust agreement. Juri-smis

Trust is the right to the beneficial enjoyment of property, the legal title to which is vested
in another. It is a fiduciary relationship that obliges the trustee to deal with the property
for the benefit of the beneficiary.[13] Trust relations between parties may either be
express or implied. An express trust is created by the intention of the trustor or of the
parties. An implied trust comes into being by operation of law.[14]

The present Agreement of Partition involves an express trust. Under Article 1444 of the
Civil Code, "[n]o particular words are required for the creation of an express trust, it
being sufficient that a trust is clearly intended." That Maxima Caballero bound herself to
give one third of Lot No. 5629 to Paciencia Sabellona upon the approval of the former's
application is clear from the terms of the Agreement. Likewise, it is evident that
Paciencia acquiesced to the covenant and is thus bound to fulfill her obligation therein.

As a result of the Agreement, Maxima Caballero held the portion specified therein as
belonging to Paciencia Sabellona when the application was eventually approved and a
sale certificate was issued in her name.[15] Thus, she should have transferred the same
to the latter, but she never did so during her lifetime. Instead, her heirs sold the entire
Lot No. 5679 to Silvestre Aro in 1955.

From 1954 when the sale certificate was issued until 1985 when petitioners filed their
Complaint, Paciencia and her successors-in-interest did not do anything to enforce their
proprietary rights over the disputed property or to consolidate their ownership over the
same. In fact, they did not even register the said Agreement with the Registry of
Property or pay the requisite land taxes. While petitioners had been doing nothing, the
disputed property, as part of Lot No. 5679, had been the subject of several sales
transactions[16] and covered by several transfer certificates of title. Jj-juris

The Repudiation of the Express Trust

While no time limit is imposed for the enforcement of rights under express
trusts,[17] prescription may, however, bar a beneficiary's action for recovery, if a
repudiation of the trust is proven by clear and convincing evidence and made known to
the beneficiary.[18]

There was a repudiation of the express trust when the heirs of Maxima Caballero failed
to deliver or transfer the property to Paciencia Sabellona, and instead sold the same to
a third person not privy to the Agreement. In the memorandum of incumbrances of TCT
No. 3087[19] issued in the name of Maxima, there was no notation of the Agreement
between her and Paciencia. Equally important, the Agreement was not registered; thus,
it could not bind third persons. Neither was there any allegation that Silvestre Aro, who
purchased the property from Maximas heirs, knew of it. Consequently, the subsequent
sales transactions involving the land in dispute and the titles covering it must be upheld,
in the absence of proof that the said transactions were fraudulent and irregular. Jksm

Second Issue: The Purported Sale to Dalmacio Secuya

Even granting that the express trust subsists, petitioners have not proven that they are
the rightful successors-in-interest of Paciencia Sabellona.

The Absence of the Purported Deed of Sale

Petitioners insist that Paciencia sold the disputed property to Dalmacio Secuya on
October 20, 1953, and that the sale was embodied in a private document. However,
such document, which would have been the best evidence of the transaction, was never
presented in court, allegedly because it had been lost. While a sale of a piece of land
appearing in a private deed is binding between the parties, it cannot be
considered binding on third persons, if it is not embodied in a public instrument
and recorded in the Registry of Property.[20]

Moreover, while petitioners could not present the purported deed evidencing the
transaction between Paciencia Sabellona and Dalmacio Secuya, petitioners immediate
predecessor-in-interest, private respondent in contrast has the necessary documents to
support her claim to the disputed property.

The Questionable Value of the Deed Executed by Ramon SabellonaChief

To prove the alleged sale of the disputed property to Dalmacio, petitioners instead
presented the testimony of Miguel Secuya, one of the petitioners; and a
Deed[21] confirming the sale executed by Ramon Sabellona, Paciencias alleged heir. The
testimony of Miguel was a bare assertion that the sale had indeed taken place and that
the document evidencing it had been destroyed. While the Deed executed by Ramon
ratified the transaction, its probative value is doubtful. His status as heir of Paciencia
was not affirmatively established. Moreover, he was not presented in court and was
thus not quizzed on his knowledge -- or lack thereof -- of the 1953 transaction.

Petitioners' Failure to Exercise Owners' Rights to the Property

Petitioners insist that they had been occupying the disputed property for forty-seven
years before they filed their Complaint for quieting of title. However, there is no proof
that they had exercised their rights and duties as owners of the same. They argue that
they had been gathering the fruits of such property; yet, it would seem that they had
been remiss in their duty to pay land taxes. If petitioners really believed that they owned
the property, they should have been more vigilant in protecting their rights thereto. As
noted earlier, they did nothing to enforce whatever proprietary rights they had over the
disputed parcel of land.

Third Issue: The Validity of Private Respondents TitleEsm

Petitioners debunk Private Respondent Selmas title to the disputed property, alleging
that she was aware of their possession of the disputed properties. Thus, they insist that
she could not be regarded as a purchaser in good faith who is entitled to the protection
of the Torrens system.

Indeed, a party who has actual knowledge of facts and circumstances that would move
a reasonably cautious man to make an inquiry will not be protected by the Torrens
system. In Sandoval v. Court of Appeals,[22] we held:

"It is settled doctrine that one who deals with property registered under the
Torrens system need not go beyond the same, but only has to rely on the
title. He is charged with notice only of such burdens and claims as are
annotated on the title.

"The aforesaid principle admits of an unchallenged exception: that a

person dealing with registered land has a right to rely on the Torrens
certificate of title and to dispense without the need of inquiring further
except when the party has actual knowledge of facts and circumstances
that would impel a reasonably cautious man to make such inquiry, or
when the purchaser has knowledge of a defect or the lack of title in his
vendor or of sufficient facts to induce a reasonably prudent man to inquire
into the status of title of the property in litigation. The presence of anything
which excites or arouses suspicion should then prompt the vendee to look
beyond the certificate and investigate the title of the vendor appearing on
the face of the certificate. One who falls within the exception can neither
be denominated an innocent purchaser for value nor a purchaser in good
faith; and hence does not merit the protection of the law." Esmsc

Granting arguendo that private respondent knew that petitioners, through Superales and
his family, were actually occupying the disputed lot, we must stress that the vendor,
Cesaria Caballero, assured her that petitioners were just tenants on the said lot. Private
respondent cannot be faulted for believing this representation, considering that
petitioners' claim was not noted in the certificate of the title covering Lot No. 5679.
Moreover, the lot, including the disputed portion, had been the subject of several sales
transactions. The title thereto had been transferred several times, without any
protestation or complaint from the petitioners. In any case, private respondent's title is
amply supported by clear evidence, while petitioners claim is barren of proof.

Clearly, petitioners do not have the requisite title to pursue an action for quieting of title.

WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED.
Costs against petitioners.

SO ORDERED. Esmmis

Melo, (Chairman), Vitug, Purisima, and Gonzaga-Reyes, JJ., concur.

[1]
Seventeenth Division, composed of J. Portia Alio-Hormachuelos (ponente), J. Buenaventura J. Guerrero
(chairman) and J. Renato C. Dacudao (member).
[2]
Penned by Judge German G. Lee Jr.
[3]
Rollo, p. 29.
[4]
RTC Decision, p. 13; rollo, p. 54.
[5]
Rollo, p. 31.
[6]
Petition, pp. 3-6; rollo, pp. 5-8.
[7]
CA Decision, p. 3; rollo, p. 27.
[8]
This case was deemed submitted for decision on July 29, 1999, upon simultaneous receipt by this Court of the
Memoranda of both parties. Petitioners Memorandum was signed by Atty. Alejandro V. Peregrino; respondents
Memorandum, by Atty. Roberto R. Palmares.
[9]
Memorandum for Petitioners, p. 6; rollo, p. 145.
[10]
Art. 477, Civil Code. "The plaintiff must have legal or equitable title to, or an interest in the real property which is
the subject matter of the action. He need not be in possession of said property."
[11]
Tolentino, Civil Code of the Philippines, Vol. II, p. 150.
[12]
Records, p. 53.
[13]
Rizal Surety & Insurance Company v. CA, , 261 SCRA 69, August 28, 1996.
[14]
Art. 1441, Civil Code.
[15]
Records, p. 6.
[16]
Lot No. 5679 was sold to Silvestre Aro in 1955, and TCT No. 4752 was issued in his name in 1959. Upon his
death, his heirs inherited the property, and his children sold their shares to Cesaria Caballero, Aros widow. Cesaria
Caballero then entered into several mortgage and sales transactions with several banks and with Francisco Sioson,
Edgar Adlawan and Private Respondent Gerarda Selma.
[17]
Aquino, Civil Code , Vol. II, p. 557.
[18]
See Mindanao Development Authority v. CA, 113 SCRA 429, April 5, 1982.
[19]
Dated March 9, 1954.
[20]
Article 709, Civil Code.
[21]
Records, p. 4.
[22]
260 SCRA 283, August 1, 1996, per Romero, J.

8) Yuviencio vs Decuycuy
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-55048 May 27, 1981

SUGA SOTTO YUVIENCO, BRITANIA SOTTO, and MARCELINO SOTTO, petitioners,

vs.
HON. AUXENCIO C. DACUYCUY, Judge of the CFI of Leyte, DELY RODRIGUEZ, FELIPE ANG
CRUZ, CONSTANCIA NOGAR, MANUEL GO, INOCENTES DIME, WILLY JULIO, JAIME YU,
OSCAR DY, DY CHIU SENG, BENITO YOUNG, FERNANDO YU, SEBASTIAN YU, CARLOS UY,
HOC CHUAN and MANUEL DY, respondents.

BARREDO, J.: 1äwphï1.ñ ët

Petition for certiorari and prohibition to declare void for being in grave abuse of discretion the orders
of respondent judge dated November 2, 1978 and August 29, 1980, in Civil Case No. 5759 of the
Court of First Instance of Leyte, which denied the motion filed by petitioners to dismiss the complaint
of private respondents for specific performance of an alleged agreement of sale of real property, the
said motion being based on the grounds that the respondents' complaint states no cause of action
and/or that the claim alleged therein is unenforceable under the Statute of Frauds.

Finding initially prima facie merit in the petition, We required respondents to answer and We issued
a temporary restraining order on October 7, 1980 enjoining the execution of the questioned orders.

In essence, the theory of petitioners is that while it is true that they did express willingness to sell to
private respondents the subject property for P6,500,000 provided the latter made known their own
decision to buy it not later than July 31, 1978, the respondents' reply that they were agreeable was
not absolute, so much so that when ultimately petitioners' representative went to Cebu City with a
prepared and duly signed contract for the purpose of perfecting and consummating the transaction,
respondents and said representative found variance between the terms of payment stipulated in the
prepared document and what respondents had in mind, hence the bankdraft which respondents
were delivering to petit loners' representative was returned and the document remained unsigned by
respondents. Hence the action below for specific performance.

To be more specific, the parties do not dispute that on July 12, 1978, petitioners, thru a certain
Pedro C. Gamboa, sent to respondents the following letter:

Mr. Yao King Ong

Life Bakery

Tacloban City

Dear Mr. Yao: 1äw phï1.ñët

This refers to the Sotto property (land and building) situated at Tacloban City. My
clients are willing to sell them at a total price of P6,500,000.00.

While there are other parties who are interested to buy the property, I am giving you
and the other occupants the preference, but such priority has to be exercised within a
given number of days as I do not want to lose the opportunity if you are not
interested. I am therefore gluing you and the rest of the occupants until July 31, 1978
within it which to decide whether you want to buy the property. If I do not hear from
you by July 31, I will offer or close the deal with the other interested buyer.

Thank you so much for the hospitality extended to me during my last trip to Tacloban,
and I hope to hear from you very soon. 1äw phï1.ñët

V
e
r
y

t
r
u
l
y

y
o
u
r
s
,

P
e
d
r
o

C
.

G
a
m
b
o
a
1

(Page 9, Record.)
Reacting to the foregoing letter, the following telegram was sent by "Yao King Ong &
tenants" to Atty. Pedro Gamboa in Cebu City:

Atty. Pedro Gamboa

Room 314, Maria Cristina Bldg.

Osmeña Boulevard, Cebu City

Reurlet dated July 12 inform Dra. Yuvienco we agree to buy property proceed
Tacloban to negotiate details1äw phï1.ñët

Y
a
o

K
i
n
g

O
n
g

&

t
e
n
a
n
t
s

(Page 10, Record.)

Likewise uncontroverted is the fact that under date of July 27, 1978, Atty. Gamboa
wired Yao King Ong in Tacloban City as follows:

NLT

YAO KING ONG

LIFE BAKERY

TACLOBAN CITY

PROPOSAL ACCEPTED ARRIVING TUESDAY MORNING WITH CONTRACT

PREPARE PAYMENT BANK DRAFT 1äwphï1.ñët
 A
T
T
Y
.

G
A
M
B
O
A

(Page 10, Id.)

Now, Paragraph 10 of the complaint below of respondents alleges: 1äwphï1.ñët

10. That on August 1, 1978, defendant Pedro Gamboa arrived Tacloban City bringing
with him the prepared contract to purchase and to sell referred to in his telegram
dated July 27, 1978 (Annex 'D' hereof) for the purpose of closing the transactions
referred to in paragraphs 8 and 9 hereof, however, to the complete surprise of
plaintiffs, the defendant (except def. Tacloban City Ice Plant, Inc.) without giving
notice to plaintiffs, changed the mode of payment with respect to the balance of
P4,500,000.00 by imposing upon plaintiffs to pay same amount within thirty (30) days
from execution of the contract instead of the former term of ninety (90) days as
stated in paragraph 8 hereof. (Pp. 10-11, Record.)

Additionally and to reenforce their position, respondents alleged further in their complaint: 1äw phï1.ñët

8. That on July 12, 1978, defendants (except defendant Tacloban City Ice Plant, Inc.)
finally sent a telegram letter to plaintiffs- tenants, through same Mr. Yao King Ong,
notifying them that defendants are willing to sell the properties (lands and building) at
a total price of P6,500,000.00, which herein plaintiffs-tenants have agreed to buy the
said properties for said price; a copy of which letter is hereto attached as integral part
hereof and marked as Annex 'C', and plaintiffs accepted the offer through a telegram
dated July 25, 1978, sent to defendants (through defendant Pedro C. Gamboa), a
copy of which telegram is hereto attached as integral part hereof and marked as
Annex C-1 and as a consequence hereof. plaintiffs except plaintiff Tacloban -
merchants' Realty Development Corporation) and defendants (except defendant
Tacloban City Ice Plant. Inc.) agreed to the following terms and conditions respecting
the payment of said purchase price, to wit: 1äwphï1.ñët

P2,000,000.00 to be paid in full on the date of the execution of the

contract; and the balance of P4,500,000.00 shall be fully paid within
ninety (90) days thereafter;

9. That on July 27, 1978, defendants sent a telegram to plaintiff- tenants, through the
latter's representative Mr. Yao King Ong, reiterating their acceptance to the
agreement referred to in the next preceding paragraph hereof and notifying plaintiffs-
tenants to prepare payment by bank drafts; which the latter readily complied with; a
copy of which telegram is hereto attached as integral part hereof and marked as
Annex "D"; (Pp 49-50, Record.)
It was on the basis of the foregoing facts and allegations that herein petitioners filed their motion to
dismiss alleging as main grounds: 1äwphï1.ñët

I. That plaintiff, TACLOBAN MERCHANTS' REALTY DEVELOPMENT

CORPORATION, amended complaint, does not state a cause of action and the claim
on which the action is founded is likewise unenforceable under the provisions of the
Statute of Frauds.

II. That as to the rest of the plaintiffs, their amended complaint does not state a
cause of action and the claim on which the action is founded is likewise
unenforceable under the provisions of the Statute of Frauds. (Page 81, Record.)

With commendable knowledgeability and industry, respondent judge ruled negatively on the motion
to dismiss, discoursing at length on the personality as real party-in-interest of respondent
corporation, while passing lightly, however, on what to Us are the more substantial and decisive
issues of whether or not the complaint sufficiently states a cause of action and whether or not the
claim alleged therein is unenforceable under the Statute of Frauds, by holding thus: 1äw phï1.ñët

The second ground of the motion to dismiss is that plaintiffs' claim is unenforceable
under the Statute of Frauds. The defendants argued against this motion and asked
the court to reject the objection for the simple reason that the contract of sale sued
upon in this case is supported by letters and telegrams annexed to the complaint and
other papers which will be presented during the trial. This contention of the
defendants is not well taken. The plaintiffs having alleged that the contract is backed
up by letters and telegrams, and the same being a sufficient memorandum, the
complaint states a cause of action and they should be given a day in court and
allowed to substantiate their allegations (Paredes vs. Espino, 22 SCRA 1000).

To take a contract for the sale of land out of the Statute of Frauds a mere note or
memorandum in writing subscribed by the vendor or his agent containing the name
of the parties and a summary statement of the terms of the sale either expressly or
by reference to something else is all that is required. The statute does not require a
formal contract drawn up with technical exactness for the language of Par. 2 of Art.
1403 of the Philippine Civil Code is' ... an agreement ... or some note or
memorandum thereof,' thus recognizing a difference between the contract itself and
the written evidence which the statute requires (Berg vs. Magdalena Estate, Inc., 92
Phil. 110; Ill Moran, Comments on the Rules of Court, 1952 ed. p. 187). See also
Bautista's Monograph on the Statute of Frauds in 21 SCRA p. 250. (Pp. 110-111,
Record)

Our first task then is to dwell on the issue of whether or not in the light of the foregoing
circumstances, the complaint in controversy states sufficiently a cause of action. This issue
necessarily entails the determination of whether or not the plaintiffs have alleged facts adequately
showing the existence of a perfected contract of sale between herein petitioners and the occupant
represented by respondent Yao King Ong.

In this respect, the governing legal provision is, of course, Article 1319 of the Civil Code which
provides:1äwphï1.ñët

ART. 1319. Consent is manifested by the meeting of the offer and the acceptance
upon the thing and the cause which are constitute the contract. The offer must be
certain the acceptance absolute. A qualified acceptance constitute a counter-offer.
 Acceptance made by letter or telegram does not bind offerer except from the time it
came to his knowledge. The contract, in a case, is presumed to have been entered
into in the place where the offer was made.

In the instant case, We can lay aside, for the moment, petitioners' contention that the letter of July
12, 1978 of Atty. Pedro C. Gamboa to respondents Yao King Ong and his companions constitute an
offer that is "certain", although the petitioners claim that it was a mere expression of willingness to
sell the subject property and not a direct offer of sale to said respondents. What We consider as
more important and truly decisive is what is the correct juridical significance of the telegram of
respondents instructing Atty. Gamboa to "proceed to Tacloban to negotiate details." We underline
the word "negotiate" advisedly because to Our mind it is the key word that negates and makes it
legally impossible for Us to hold that respondents' acceptance of petitioners' offer, assuming that it
was a "certain" offer indeed, was the "absolute" one that Article 1319 above-quoted requires.

Dictionally, the implication of "to negotiate" is practically the opposite of the Idea that an agreement
has been reached. Webster's Third International Dictionary, Vol. II (G. & C. Merriam Co., 1971
Philippine copyright) gives the meaning of negotiate as "to communicate or confer with another so as
to arrive at the settlement of some matter; meet with another so as to arrive through discussion at
some kind of agreement or compromise about something; — to arrange for or bring about through
conference or discussion; work at or arrive at or settle upon by meetings and agreements or
compromises — ". Importantly, it must be borne in mind that Yao King Ong's telegram simply says
"we agree to buy property". It does not necessarily connote acceptance of the price but instead
suggests that the details were to be subject of negotiation.

Respondents now maintain that what the telegram refers to as "details" to be "negotiated" are mere
"accidental elements", not the essential elements of the contract. They even invite attention to the
fact that they have alleged in their complaint (Par. 6) that it was as early as "in the month of October,
1977 (that) negotiations between plaintiffs and defendants for the purchase and sale (in question) —
were made, thus resulting to offers of same defendants and counter-offer of plaintiffs". But to Our
mind such alleged facts precisely indicate the failure of any meeting of the minds of the parties, and
it is only from the letter and telegrams above-quoted that one can determine whether or not such
meeting of the minds did materialize. As We see it, what such allegations bring out in bold relief is
that it was precisely because of their past failure to arrive at an agreement that petitioners had to put
an end to the uncertainty by writing the letter of July 12, 1978. On the other hand, that respondents
were all the time agreeable to buy the property may be conceded, but what impresses Us is that
instead of "absolutely" accepting the "certain" offer — if there was one — of the petitioners, they still
insisted on further negotiation of details. For anyone to read in the telegram of Yao that they
accepted the price of P6,500,000.00 would be an inference not necessarily warranted by the words
"we agree to buy" and "proceed Tacloban to negotiate details". If indeed the details being left by
them for further negotiations were merely accidental or formal ones, what need was there to say in
the telegram that they had still "to negotiate (such) details", when, being unessential per their
contention, they could have been just easily clarified and agreed upon when Atty. Gamboa would
reach Tacloban?

Anent the telegram of Atty. Gamboa of July 27, 1978, also quoted earlier above, We gather that it
was in answer to the telegram of Yao. Considering that Yao was in Tacloban then while Atty.
Gamboa was in Cebu, it is difficult to surmise that there was any communication of any kind
between them during the intervening period, and none such is alleged anyway by respondents.
Accordingly, the claim of respondents in paragraph 8 of their complaint below that there was an
agreement of a down payment of P2 M, with the balance of P4.5M to be paid within 90 days
afterwards is rather improbable to imagine to have actually happened.
Respondents maintain that under existing jurisprudence relative to a motion to dismiss on the
ground of failure of the complaint to state a cause of action, the movant-defendant is deemed to
admit the factual allegations of the complaint, hence, petitioners cannot deny, for purposes of their
motion, that such terms of payment had indeed been agreed upon.

While such is the rule, those allegations do not detract from the fact that under Article 1319 of the
Civil Code above-quoted, and judged in the light of the telegram-reply of Yao to Atty. Gamboa's
letter of July 12, 1978, there was not an absolute acceptance, hence from that point of view,
petitioners' contention that the complaint of respondents state no cause of action is correct.

Nonetheless, the alleged subsequent agreement about the P2 M down and P4.5 M in 90 days may
at best be deemed as a distinct cause of action. And placed against the insistence of petitioners, as
demonstrated in the two deeds of sale taken by Atty. Gamboa to Tacloban, Annexes 9 and 10 of the
answer of herein respondents, that there was no agreement about 90 days, an issue of fact arose,
which could warrant a trial in order for the trial court to determine whether or not there was such an
agreement about the balance being payable in 90 days instead of the 30 days stipulated in Annexes
9 and 10 above-referred to. Our conclusion, therefore, is that although there was no perfected
contract of sale in the light of the letter of Atty. Gamboa of July 12, 1978 and the letter-reply thereto
of Yao; it being doubtful whether or not, under Article 1319 of the Civil Code, the said letter may be
deemed as an offer to sell that is "certain", and more, the Yao telegram is far from being an
"absolute" acceptance under said article, still there appears to be a cause of action alleged in
Paragraphs 8 to 12 of the respondents' complaint, considering it is alleged therein that subsequent
to the telegram of Yao, it was agreed that the petitioners would sell the property to respondents for
P6.5 M, by paving P2 M down and the balance in 90 days and which agreement was allegedly
violated when in the deeds prepared by Atty. Gamboa and taken to Tacloban, only 30 days were
given to respondents.

But the foregoing conclusion is not enough to carry the day for respondents. It only brings Us to the
question of whether or not the claim for specific performance of respondents is enforceable under
the Statute of Frauds. In this respect, We man, view the situation at hand from two angles, namely,
(1) that the allegations contained in paragraphs 8 to 12 of respondents' complaint should be taken
together with the documents already aforementioned and (2) that the said allegations constitute a
separate and distinct cause of action. We hold that either way We view the situation, the conclusion
is inescapable e that the claim of respondents that petitioners have unjustifiably refused to proceed
with the sale to them of the property v in question is unenforceable under the Statute of Frauds.

It is nowhere alleged in said paragraphs 8 to 12 of the complaint that there is any writing or
memorandum, much less a duly signed agreement to the effect that the price of P6,500,000 fixed by
petitioners for the real property herein involved was agreed to be paid not in cash but in installments
as alleged by respondents. The only documented indication of the non-wholly-cash payment extant
in the record is that stipulated in Annexes 9 and 10 above-referred to, the deeds already signed by
the petitioners and taken to Tacloban by Atty. Gamboa for the signatures of the respondents. In
other words, the 90-day term for the balance of P4.5 M insisted upon by respondents choices not
appear in any note, writing or memorandum signed by either the petitioners or any of them, not even
by Atty. Gamboa. Hence, looking at the pose of respondents that there was a perfected agreement
of purchase and sale between them and petitioners under which they would pay in installments of P2
M down and P4.5 M within ninety 90) days afterwards it is evident that such oral contract involving
the "sale of real property" comes squarely under the Statute of Frauds (Article 1403, No. 2(e), Civil
Code.)
On the other score of considering the supposed agreement of paying installments as partly
supported by the letter and t telegram earlier quoted herein, His Honor declared with well studied
ratiocination, albeit legally inaccurate, that:
1äwphï1.ñët

The next issue relate to the State of Frauds. It is contended that plaintiffs' action for
specific performance to compel the defendants to execute a good and sufficient
conveyance of the property in question (Sotto land and building) is unenforceable
because there is no other note memorandum or writing except annexes "C", "C-l"
and "D", which by themselves did not give birth to a contract to sell. The argument is
not well founded. The rules of pleading limit the statement of the cause of action only
to such operative facts as give rise to the right of action of the plaintiff to obtain relief
against the wrongdoer. The details of probative matter or particulars of evidence,
statements of law, inferences and arguments need not be stated. Thus, Sec. 1 of
Rule 8 provides that 'every pleading shall contain in a methodical and logical form, a
plain concise and direct statement of the ultimate facts on which the party pleading
relies for his claim or defense, as the case may be, omitting the statement of mere
evidentiary facts.' Exhibits need not be attached. The contract of sale sued upon in
this case is supported by letters and telegrams annexed to the complaint and
plaintiffs have announced that they will present additional evidences during the trial
to prove their cause of action. The plaintiffs having alleged that the contract is
backed up by letters and telegrams, and the same being sufficient memorandum, the
complaint states a cause of action and they should be given their day in court and
allowed to substantiate their allegations (Parades vs. Espino, 22 SCRA 1000). (Pp
165-166, Record.)

The foregoing disquisition of respondent judge misses at least two (2) juridical substantive aspects
of the Statute of Frauds insofar as sale of real property is concerned. First, His Honor assumed that
the requirement of perfection of such kind of contract under Article 1475 of the Civil Code which
provides that "(t)he contract of sale is perfected at the moment there is a meeting of the minds upon
the thing which is the object of the contract and upon the price", the Statute would no longer apply as
long as the total price or consideration is mentioned in some note or memorandum and there is no
need of any indication of the manner in which such total price is to be paid.

We cannot agree. In the reality of the economic world and the exacting demands of business
interests monetary in character, payment on installments or staggered payment of the total price is
entirely a different matter from cash payment, considering the unpredictable trends in the sudden
fluctuation of the rate of interest. In other words, it is indisputable that the value of money - varies
from day to day, hence the indispensability of providing in any sale of the terms of payment when not
expressly or impliedly intended to be in cash.

Thus, We hold that in any sale of real property on installments, the Statute of Frauds read together
with the perfection requirements of Article 1475 of the Civil Code must be understood and applied in
the sense that the idea of payment on installments must be in the requisite of a note or
memorandum therein contemplated. Stated otherwise, the inessential elements" mentioned in the
case of Parades vs. Espino, 22 SCRA 1000, relied upon by respondent judge must be deemed to
include the requirement just discussed when it comes to installment sales. There is nothing in the
monograph re — the Statute of Frauds appearing in 21 SCRA 250 also cited by His Honor indicative
of any contrary view to this ruling of Ours, for the essence and thrust of the said monograph refers
only to the form of the note or memorandum which would comply with the Statute, and no doubt,
while such note or memorandum need not be in one single document or writing and it can be in just
sufficiently implicit tenor, imperatively the separate notes must, when put together', contain all the
requisites of a perfected contract of sale. To put it the other way, under the Statute of Frauds, the
contents of the note or memorandum, whether in one writing or in separate ones merely indicative
for an adequate understanding of all the essential elements of the entire agreement, may be said to
be the contract itself, except as to the form.

Secondly, We are of the considered opinion that under the rules on proper pleading, the ruling of the
trial court that, even if the allegation of the existence of a sale of real property in a complaint is
challenged as barred from enforceability by the Statute of Frauds, the plaintiff may simply say there
are documents, notes or memoranda without either quoting them in or annexing them to the
complaint, as if holding an ace in the sleeves is not correct. To go directly to the point, for Us to
sanction such a procedure is to tolerate and even encourage undue delay in litigation, for the simple
reason that to await the stage of trial for the showing or presentation of the requisite documentary
proof when it already exists and is asked to be produced by the adverse party would amount to
unnecessarily postponing, with the concomitant waste of time and the prolongation of the
proceedings, something that can immediately be evidenced and thereby determinable with
decisiveness and precision by the court without further delay.

In this connection, Moran observes that unlike when the ground of dismissal alleged is failure of the
complaint to state a cause of action, a motion to dismiss invoking the Statute of Frauds may be filed
even if the absence of compliance does not appear an the face of the complaint. Such absence may
be the subject of proof in the motion stage of the proceedings. (Moran, Comment on the Rules of
Court, Vol. 1, p. 494, 1979 ed.) It follows then that when such a motion is filed and all the documents
available to movant are before the court, and they are insufficient to comply with the Statute, it
becomes incumbent upon the plaintiff, for the reasons of policy We have just' indicated regarding
speedy administration of justice, to bring out what note or memorandum still exists in his possession
in order to enable the court to expeditiously determine then and there the need for further
proceedings. In other words, it would be inimical to the public interests in speedy justice for plaintiff
to play hide and seek at his own convenience, particularly, when, as is quite apparent as in the
instant case that chances are that there are no more writings, notes or memoranda of the installment
agreement alleged by respondents. We cannot divine any reason why any such document would be
withheld if they existed, except the unpermissible desire of the respondents to force the petitioners to
undergo the ordeals, time, effort and expenses of a futile trial.

In the foregoing premises, We find no alternative than to render judgment in favor of petitioners in
this certiorari and prohibition case. If at all, appeal could be available if the petitioners subjected
themselves to the trial ruled to be held by the trial court. We foresee even at this point, on the basis
of what is both extant and implicit in the records, that no different result can be probable. We
consider it as sufficiently a grave abuse of discretion warranting the special civil actions herein the
failure of respondent judge to properly apply the laws on perfection of contracts in relation to the
Statute of Frauds and the pertinent rules of pleading and practice, as We have discussed above.

ACCORDINGLY, the impugned orders of respondent judge of November 2, 1978 and August 29,
1980 are hereby set aside and private respondents' amended complaint, Annex A of the petition, is
hereby ordered dismissed and the restraining order heretofore issued by this Court on October 7,
1980 is declared permanent. Costs against respondents.

Guerrero,* Abad Santos and De Castro, JJ., concur. 1äwphï1.ñët

Mr. Justice Hermogenes Concepcion, Jr. is on leave.

Separate Opinions

AQUINO, J., concurring:

I concur in the result. Private respondents cannot prove any perfected sale which they can enforce.

Separate Opinions

AQUINO, J., concurring:

I concur in the result. Private respondents cannot prove any perfected sale which they can enforce.

Footnotes 1äwphï1.ñ ët

1 Yao King Ong was recognized as acting not only on his own behalf but also of his
co-tenants. On the other hand, the authority of Pedro C. Gamboa to make this offer
is not disputed, regardless of whether it was in writing or not. At this point, it may be
mentioned that among the plaintiffs in Civil Case No. 5759 is a corporation named
Tacloban Merchants Realty Development Corporation which registered its articles of
incorporation with the Securities and Exchange Commission on August 8, 1978 and
secured the issuance of the corresponding certificate on August 9, 1978. It appears
that said corporation was purportedly formed in order to carry out the intent of the
occupants of petitioners' property in question, albeit there are stockholders who are
not occupants and vice-versa. The personality as a real party-interest of this
corporation to be plaintiff is among the issues passed upon by His Honor.
Considering the ultimate manner We view this controversy, We believe it is not
essential for the final resolution thereof to deal with that matter here.

* Mr. Justice Juvenal K. Guerrero, Member of the First Division, was designated to sit
in the Second Division.
 9) Heirs of Cecilio Claudel vs CA

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 85240 July 12, 1991

HEIRS OF CECILIO (also known as BASILIO) CLAUDEL, namely, MODESTA CLAUDEL,

LORETA HERRERA, JOSE CLAUDEL, BENJAMIN CLAUDEL, PACITA CLAUDEL, CARMELITA
CLAUDEL, MARIO CLAUDEL, ROBERTO CLAUDEL, LEONARDO CLAUDEL, ARSENIA
VILLALON, PERPETUA CLAUDEL and FELISA CLAUDEL, petitioners,
vs.
HON. COURT OF APPEALS, HEIRS OF MACARIO, ESPERIDIONA, RAYMUNDA and
CELESTINA, all surnamed CLAUDEL, respondents.

Ricardo L. Moldez for petitioners.

Juan T. Aquino for private respondents

SARMIENTO, J.:

This petition for review on certiorari seeks the reversal of the decision rendered by the Court of
Appeals in CA-G.R. CV No. 044291 and the reinstatement of the decision of the then Court of First
Instance (CFI) of Rizal, Branch CXI, in Civil Case No. M-5276-P, entitled. "Heirs of Macario Claudel,
et al. v. Heirs of Cecilio Claudel, et al.," which dismissed the complaint of the private respondents
against the petitioners for cancellation of titles and reconveyance with damages.2

As early as December 28, 1922, Basilio also known as "Cecilio" Claudel, acquired from the Bureau
of Lands, Lot No. 1230 of the Muntinlupa Estate Subdivision, located in the poblacion of Muntinlupa,
Rizal, with an area of 10,107 square meters; he secured Transfer Certificate of Title (TCT) No. 7471
issued by the Registry of Deeds for the Province of Rizal in 1923; he also declared the lot in his
name, the latest Tax Declaration being No. 5795. He dutifully paid the real estate taxes thereon until
his death in 1937.3 Thereafter, his widow "Basilia" and later, her son Jose, one of the herein
petitioners, paid the taxes.

The same piece of land purchased by Cecilio would, however, become the subject of protracted
litigation thirty-nine years after his death.

Two branches of Cecilio's family contested the ownership over the land-on one hand the children of
Cecilio, namely, Modesto, Loreta, Jose, Benjamin, Pacita, Carmelita, Roberto, Mario, Leonardo,
Nenita, Arsenia Villalon, and Felisa Claudel, and their children and descendants, now the herein
petitioners (hereinafter referred to as HEIRS OF CECILIO), and on the other, the brother and sisters
of Cecilio, namely, Macario, Esperidiona, Raymunda, and Celestina and their children and
descendants, now the herein private respondents (hereinafter referred to as SIBLINGS OF
CECILIO). In 1972, the HEIRS OF CECILIO partitioned this lot among themselves and obtained the
corresponding Transfer Certificates of Title on their shares, as follows:

TCT No. 395391 1,997 sq. m. –– Jose Claudel

TCT No. 395392 1,997 sq. m. –– Modesta Claudel and children

TCT No. 395393 1,997 sq. m. –– Armenia C. Villalon

TCT No. 395394 1,997 sq. m. –– Felisa Claudel4

Four years later, on December 7, 1976, private respondents SIBLINGS OF CECILIO, filed Civil Case
No. 5276-P as already adverted to at the outset, with the then Court of First Instance of Rizal, a
"Complaint for Cancellation of Titles and Reconveyance with Damages," alleging that 46 years
earlier, or sometime in 1930, their parents had purchased from the late Cecilio Claudel several
portions of Lot No. 1230 for the sum of P30.00. They admitted that the transaction was verbal.
However, as proof of the sale, the SIBLINGS OF CECILIO presented a subdivision plan of the said
land, dated March 25, 1930, indicating the portions allegedly sold to the SIBLINGS OF CECILIO.

As already mentioned, the then Court of First Instance of Rizal, Branch CXI, dismissed the
complaint, disregarding the above sole evidence (subdivision plan) presented by the SIBLINGS OF
CECILIO, thus:

Examining the pleadings as well as the evidence presented in this case by the parties, the
Court can not but notice that the present complaint was filed in the name of the Heirs of
Macario, Espiridiona, Raymunda and Celestina, all surnamed Claudel, without naming the
different heirs particularly involved, and who wish to recover the lots from the defendants.
The Court tried to find this out from the evidence presented by the plaintiffs but to no avail.
On this point alone, the Court would not be able to apportion the property to the real party in
interest if ever they are entitled to it as the persons indicated therein is in generic term
(Section 2, Rule 3). The Court has noticed also that with the exception of plaintiff Lampitoc
and (sic) the heirs of Raymunda Claudel are no longer residing in the property as they have
(sic) left the same in 1967. But most important of all the plaintiffs failed to present any
document evidencing the alleged sale of the property to their predecessors in interest by the
father of the defendants. Considering that the subject matter of the supposed sale is a real
property the absence of any document evidencing the sale would preclude the admission of
oral testimony (Statute of Frauds). Moreover, considering also that the alleged sale took
place in 1930, the action filed by the plaintiffs herein for the recovery of the same more than
thirty years after the cause of action has accrued has already prescribed.

WHEREFORE, the Court renders judgment dismissing the complaint, without

pronouncement as to costs.

SO ORDERED.5

On appeal, the following errors6 were assigned by the SIBLINGS OF CECILIO:

 1. THE TRIAL COURT ERRED IN DISMISSING PLAINTIFFS' COMPLAINT DESPITE
CONCLUSIVE EVIDENCE SHOWING THE PORTION SOLD TO EACH OF PLAINTIFFS'
PREDECESSORS.

2. THE TRIAL COURT ERRED IN HOLDING THAT PLAINTIFFS FAILED TO PROVE ANY
DOCUMENT EVIDENCING THE ALLEGED SALE.

3. THE TRIAL COURT ERRED IN NOT GIVING CREDIT TO THE PLAN, EXHIBIT A,
SHOWING THE PORTIONS SOLD TO EACH OF THE PLAINTIFFS' PREDECESSORS-IN-
INTEREST.

4. THE TRIAL COURT ERRED IN NOT DECLARING PLAINTIFFS AS OWNERS OF THE

PORTION COVERED BY THE PLAN, EXHIBIT A.

5. THE TRIAL COURT ERRED IN NOT DECLARING TRANSFER CERTIFICATES OF

TITLE NOS. 395391, 395392, 395393 AND 395394 OF THE REGISTER OF DEEDS OF
RIZAL AS NULL AND VOID.

The Court of Appeals reversed the decision of the trial court on the following grounds:

1. The failure to bring and prosecute the action in the name of the real party in interest, namely the
parties themselves, was not a fatal omission since the court a quo could have adjudicated the lots to
the SIBLINGS OF CECILIO, the parents of the herein respondents, leaving it to them to adjudicate
the property among themselves.

2. The fact of residence in the disputed properties by the herein respondents had been made
possible by the toleration of the deceased Cecilio.

3. The Statute of Frauds applies only to executory contracts and not to consummated sales as in the
case at bar where oral evidence may be admitted as cited in Iñigo v. Estate of Magtoto7 and Diana,
et al. v. Macalibo.8

In addition,

. . . Given the nature of their relationship with one another it is not unusual that no document
to evidence the sale was executed, . . ., in their blind faith in friends and relatives, in their
lack of experience and foresight, and in their ignorance, men, in spite of laws, will make and
continue to make verbal contracts. . . .9

4. The defense of prescription cannot be set up against the herein petitioners despite the lapse of
over forty years from the time of the alleged sale in 1930 up to the filing of the "Complaint for
Cancellation of Titles and Reconveyance . . ." in 1976.

According to the Court of Appeals, the action was not for the recovery of possession of real property
but for the cancellation of titles issued to the HEIRS OF CECILIO in 1973. Since the SIBLINGS OF
CECILIO commenced their complaint for cancellation of titles and reconveyance with damages on
December 7, 1976, only four years after the HEIRS OF CECILIO partitioned this lot among
themselves and obtained the corresponding Transfer Certificates of Titles, then there is no
prescription of action yet.
Thus the respondent court ordered the cancellation of the Transfer Certificates of Title Nos. 395391,
395392, 395393, and 395394 of the Register of Deeds of Rizal issued in the names of the HEIRS
OF CECILIO and corollarily ordered the execution of the following deeds of reconveyance:

To Celestina Claudel, Lot 1230-A with an area of 705 sq. m.

To Raymunda Claudel, Lot 1230-B with an area of 599 sq. m.

To Esperidiona Claudel, Lot 1230-C with an area of 597 sq. m.

To Macario Claudel, Lot 1230-D, with an area of 596 sq. m.10

The respondent court also enjoined that this disposition is without prejudice to the private
respondents, as heirs of their deceased parents, the SIBLINGS OF CECILIO, partitioning among
themselves in accordance with law the respective portions sold to and herein adjudicated to their
parents.

The rest of the land, lots 1230-E and 1230-F, with an area of 598 and 6,927 square meters,
respectively would go to Cecilio or his heirs, the herein petitioners. Beyond these apportionments,
the HEIRS OF CECILIO would not receive anything else.

The crux of the entire litigation is whether or not the Court of Appeals committed a reversible error in
disposing the question of the true ownership of the lots.

And the real issues are:

1. Whether or not a contract of sale of land may be proven orally:

2. Whether or not the prescriptive period for filing an action for cancellation of titles and
reconveyance with damages (the action filed by the SIBLINGS OF CECILIO) should be
counted from the alleged sale upon which they claim their ownership (1930) or from the date
of the issuance of the titles sought to be cancelled in favor of the HEIRS OF CECILIO
(1976).

The rule of thumb is that a sale of land, once consummated, is valid regardless of the form it may
have been entered into.11 For nowhere does law or jurisprudence prescribe that the contract of sale
be put in writing before such contract can validly cede or transmit rights over a certain real property
between the parties themselves.

However, in the event that a third party, as in this case, disputes the ownership of the property, the
person against whom that claim is brought can not present any proof of such sale and hence has no
means to enforce the contract. Thus the Statute of Frauds was precisely devised to protect the
parties in a contract of sale of real property so that no such contract is enforceable unless certain
requisites, for purposes of proof, are met.

The provisions of the Statute of Frauds pertinent to the present controversy, state:

Art. 1403 (Civil Code). The following contracts are unenforceable, unless they are ratified:

xxx xxx xxx

 2) Those that do not comply with the Statute of Frauds as set forth in this number. In the
following cases, an agreement hereafter made shall be unenforceable by action unless the
same, or some note or memorandum thereof, be in writing, and subscribed by the party
charged, or by his agent; evidence, therefore, of the agreement cannot be received without
the writing, or a secondary evidence of its contents:

xxx xxx xxx

e) An agreement for the leasing for a longer period than one year, or for the sale of real
property or of an interest therein;

xxx xxx xxx

(Emphasis supplied.)

The purpose of the Statute of Frauds is to prevent fraud and perjury in the enforcement of
obligations depending for their evidence upon the unassisted memory of witnesses by requiring
certain enumerated contracts and transactions to be evidenced in Writing.12

The provisions of the Statute of Frauds originally appeared under the old Rules of Evidence.
However when the Civil Code was re-written in 1949 (to take effect in 1950), the provisions of the
Statute of Frauds were taken out of the Rules of Evidence in order to be included under the title on
Unenforceable Contracts in the Civil Code. The transfer was not only a matter of style but to show
that the Statute of Frauds is also a substantive law.

Therefore, except under the conditions provided by the Statute of Frauds, the existence of the
contract of sale made by Cecilio with his siblings13 can not be proved.

On the second issue, the belated claim of the SIBLINGS OF CECILIO who filed a complaint in court
only in 1976 to enforce a light acquired allegedly as early as 1930, is difficult to comprehend.

The Civil Code states:

Art. 1145. The following actions must be commenced within six years:

(1) Upon an oral contract . . . (Emphasis supplied).

If the parties SIBLINGS OF CECILIO had allegedly derived their right of action from the oral
purchase made by their parents in 1930, then the action filed in 1976 would have clearly prescribed.
More than six years had lapsed.

We do not agree with the parties SIBLINGS OF CECILIO when they reason that an implied trust in
favor of the SIBLINGS OF CECILIO was established in 1972, when the HEIRS OF CECILIO
executed a contract of partition over the said properties.

But as we had pointed out, the law recognizes the superiority of the torrens title.

Above all, the torrens title in the possession of the HEIRS OF CECILIO carries more weight as proof
of ownership than the survey or subdivision plan of a parcel of land in the name of SIBLINGS OF
CECILIO.
The Court has invariably upheld the indefeasibility of the torrens title. No possession by any person
of any portion of the land could defeat the title of the registered owners thereof.14

A torrens title, once registered, cannot be defeated, even by adverse, open and notorious
possession. A registered title under the torrens system cannot be defeated by
prescription. The title, once registered, is notice to the world. All persons must take notice.
1âw phi 1

No one can plead ignorance of the registration.15

xxx xxx xxx

Furthermore, a private individual may not bring an action for reversion or any action which
would have the effect of cancelling a free patent and the corresponding certificate of title
issued on the basis thereof, with the result that the land covered thereby will again form part
of the public domain, as only the Solicitor General or the officer acting in his stead may do
so.16

It is true that in some instances, the Court did away with the irrevocability of the torrens title, but the
circumstances in the case at bar varied significantly from these cases.

In Bornales v. IAC, 17 the defense of indefeasibility of a certificate of title was disregarded when the
transferee who took it had notice of the flaws in the transferor's title. No right passed to a transferee
from a vendor who did not have any in the first place. The transferees bought the land registered
under the torrens system from vendors who procured title thereto by means of fraud. With this
knowledge, they can not invoke the indefeasibility of a certificate of title against the private
respondent to the extent of her interest. This is because the torrens system of land registration,
though indefeasible, should not be used as a means to perpetrate fraud against the rightful owner of
real property.

Mere registration of the sale is not good enough, good faith must concur with registration. Otherwise
registration becomes an exercise in futility.18

In Amerol v. Bagumbaran,19 we reversed the decision of the trial court. In this case, the title was
wrongfully registered in another person's name. An implied trust was therefore created. This trustee
was compelled by law to reconvey property fraudulently acquired notwithstanding the irrevocability of
the torrens title.20

In the present case, however, the facts belie the claim of ownership.

For several years, when the SIBLINGS OF CECILIO, namely, Macario, Esperidiona Raymunda, and
Celestina were living on the contested premises, they regularly paid a sum of money, designated as
"taxes" at first, to the widow of Cecilio, and later, to his heirs.21 Why their payments were never
directly made to the Municipal Government of Muntinlupa when they were intended as payments for
"taxes" is difficult to square with their claim of ownership. We are rather inclined to consider this fact
as an admission of non-ownership. And when we consider also that the petitioners HEIRS OF
CECILIO had individually paid to the municipal treasury the taxes corresponding to the particular
portions they were occupying,22 we can readily see the superiority of the petitioners' position.

Renato Solema and Decimina Calvez, two of the respondents who derive their right from the
SIBLINGS OF CLAUDEL, bought a portion of the lot from Felisa Claudel, one of the HEIRS OF
CLAUDEL.23 The Calvezes should not be paying for a lot that they already owned and if they did not
acknowledge Felisa as its owner.
In addition, before any of the SIBLINGS OF CECILIO could stay on any of the portions of the
property, they had to ask first the permission of Jose Claudel again, one of the HEIRS OF
CECILIO.24 In fact the only reason why any of the heirs of SIBLINGS OF CECILIO could stay on the
lot was because they were allowed to do so by the HEIRS OF CECILIO.25

In view of the foregoing, we find that the appellate court committed a reversible error in denigrating
the transfer certificates of title of the petitioners to the survey or subdivision plan proffered by the
private respondents. The Court generally recognizes the profundity of conclusions and findings of
facts reached by the trial court and hence sustains them on appeal except for strong and cogent
reasons inasmuch as the trial court is in a better position to examine real evidence and observe the
demeanor of witnesses in a case.

No clear specific contrary evidence was cited by the respondent appellate court to justify the reversal
of the lower court's findings. Thus, in this case, between the factual findings of the trial court and the
appellate court, those of the trial court must prevail over that of the latter.26

WHEREFORE, the petition is GRANTED We REVERSE and SET ASIDE the decision rendered
in CA-G.R. CV No. 04429, and we hereby REINSTATE the decision of the then Court of First
Instance of Rizal (Branch 28, Pasay City) in Civil Case No. M-5276-P which ruled for the
dismissal of the Complaint for Cancellation of Titles and Reconveyance with Damages filed
by the Heirs of Macario, Esperidiona Raymunda, and Celestina, all surnamed CLAUDEL.
Costs against the private respondents.

SO ORDERED.

Melencio-Herrera, Paras, Padilla and Regalado, JJ., concur.

 10) Spouses Alfredo vs Spouses Borras

FIRST DIVISION

[G.R. No. 144225. June 17, 2003]

SPOUSES GODOFREDO ALFREDO and CARMEN LIMON ALFREDO,

SPOUSES ARNULFO SAVELLANO and EDITHA B. SAVELLANO,
DANTON D. MATAWARAN, SPOUSES DELFIN F. ESPIRITU, JR.
and ESTELA S. ESPIRITU and ELIZABETH TUAZON, petitioners,
vs. SPOUSES ARMANDO BORRAS and ADELIA LOBATON
BORRAS, respondents.

DECISION
CARPIO, J.:

The Case

Before us is a petition for review assailing the Decision[1] of the Court of Appeals
dated 26 November 1999 affirming the decision[2] of the Regional Trial Court of Bataan,
Branch 4, in Civil Case No. DH-256-94. Petitioners also question the Resolution of the
Court of Appeals dated 26 July 2000 denying petitioners motion for reconsideration.

The Antecedent Facts

A parcel of land measuring 81,524 square meters (Subject Land) in Barrio Culis,
Mabiga, Hermosa, Bataan is the subject of controversy in this case. The registered
owners of the Subject Land were petitioner spouses, Godofredo Alfredo (Godofredo)
and Carmen Limon Alfredo (Carmen). The Subject Land is covered by Original
Certificate of Title No. 284 (OCT No. 284) issued to Godofredo and Carmen under
Homestead Patent No. V-69196.
On 7 March 1994, the private respondents, spouses Armando Borras (Armando)
and Adelia Lobaton Borras (Adelia), filed a complaint for specific performance against
Godofredo and Carmen before the Regional Trial Court of Bataan, Branch 4. The case
was docketed as Civil Case No. DH-256-94.
 Armando and Adelia alleged in their complaint that Godofredo and Carmen
mortgaged the Subject Land for P7,000.00 with the Development Bank of the
Philippines (DBP). To pay the debt, Carmen and Godofredo sold the Subject Land to
Armando and Adelia for P15,000.00, the buyers to pay the DBP loan and its
accumulated interest, and the balance to be paid in cash to the sellers.
Armando and Adelia gave Godofredo and Carmen the money to pay the loan to
DBP which signed the release of mortgage and returned the owners duplicate copy of
OCT No. 284 to Godofredo and Carmen. Armando and Adelia subsequently paid the
balance of the purchase price of the Subject Land for which Carmen issued a receipt
dated 11 March 1970. Godofredo and Carmen then delivered to Adelia the owners
duplicate copy of OCT No. 284, with the document of cancellation of mortgage, official
receipts of realty tax payments, and tax declaration in the name of
Godofredo. Godofredo and Carmen introduced Armando and Adelia, as the new owners
of the Subject Land, to the Natanawans, the old tenants of the Subject Land. Armando
and Adelia then took possession of the Subject Land.
In January 1994, Armando and Adelia learned that hired persons had entered the
Subject Land and were cutting trees under instructions of allegedly new owners of the
Subject Land. Subsequently, Armando and Adelia discovered that Godofredo and
Carmen had re-sold portions of the Subject Land to several persons.
On 8 February 1994, Armando and Adelia filed an adverse claim with the Register
of Deeds of Bataan. Armando and Adelia discovered that Godofredo and Carmen had
secured an owners duplicate copy of OCT No. 284 after filing a petition in court for the
issuance of a new copy. Godofredo and Carmen claimed in their petition that they lost
their owners duplicate copy. Armando and Adelia wrote Godofredo and Carmen
complaining about their acts, but the latter did not reply. Thus, Armando and Adelia filed
a complaint for specific performance.
On 28 March 1994, Armando and Adelia amended their complaint to include the
following persons as additional defendants: the spouses Arnulfo Savellano and Editha
B. Savellano, Danton D. Matawaran, the spouses Delfin F. Espiritu, Jr. and Estela S.
Espiritu, and Elizabeth Tuazon (Subsequent Buyers). The Subsequent Buyers, who are
also petitioners in this case, purchased from Godofredo and Carmen the subdivided
portions of the Subject Land. The Register of Deeds of Bataan issued to the
Subsequent Buyers transfer certificates of title to the lots they purchased.
In their answer, Godofredo and Carmen and the Subsequent Buyers (collectively
petitioners) argued that the action is unenforceable under the Statute of
Frauds. Petitioners pointed out that there is no written instrument evidencing the alleged
contract of sale over the Subject Land in favor of Armando and Adelia. Petitioners
objected to whatever parole evidence Armando and Adelia introduced or offered on the
alleged sale unless the same was in writing and subscribed by Godofredo. Petitioners
asserted that the Subsequent Buyers were buyers in good faith and for value. As
counterclaim, petitioners sought payment of attorneys fees and incidental expenses.
Trial then followed. Armando and Adelia presented the following witnesses: Adelia,
Jesus Lobaton, Roberto Lopez, Apolinario Natanawan, Rolando Natanawan, Tomas
Natanawan, and Mildred Lobaton. Petitioners presented two witnesses, Godofredo and
Constancia Calonso.
On 7 June 1996, the trial court rendered its decision in favor of Armando and
Adelia. The dispositive portion of the decision reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of

plaintiffs, the spouses Adelia Lobaton Borras and Armando F. Borras, and against the
defendant-spouses Godofredo Alfredo and Carmen Limon Alfredo, spouses Arnulfo
Sabellano and Editha B. Sabellano, spouses Delfin F. Espiritu, Jr. and Estela S.
Espiritu, Danton D. Matawaran and Elizabeth Tuazon, as follows:

1. Declaring the Deeds of Absolute Sale of the disputed parcel of land

(covered by OCT No. 284) executed by the spouses Godofredo
Alfredo and Camen Limon Alfredo in favor of spouses Arnulfo
Sabellano and Editha B. Sabellano, spouses Delfin F. Espiritu,
Danton D. Matawaran and Elizabeth Tuazon, as null and void;

2. Declaring the Transfer Certificates of Title Nos. T-163266 and T-

163267 in the names of spouses Arnulfo Sabellano and Editha B.
Sabellano; Transfer Certificates of Title Nos. T-163268 and
163272 in the names of spouses Delfin F. Espiritu, Jr. and Estela
S. Espiritu; Transfer Certificates of Title Nos. T-163269 and T-
163271 in the name of Danton D. Matawaran; and Transfer
Certificate of Title No. T-163270 in the name of Elizabeth
Tuazon, as null and void and that the Register of Deeds of Bataan
is hereby ordered to cancel said titles;

3. Ordering the defendant-spouses Godofredo Alfredo and Carmen Limon

Alfredo to execute and deliver a good and valid Deed of Absolute
Sale of the disputed parcel of land (covered by OCT No. 284) in
favor of the spouses Adelia Lobaton Borras and Armando F.
Borras within a period of ten (10) days from the finality of this
decision;

4. Ordering defendant-spouses Godofredo Alfredo and Carmen Limon

Alfredo to surrender their owners duplicate copy of OCT No. 284
issued to them by virtue of the Order dated May 20, 1992 of the
Regional Trial Court of Bataan, Dinalupihan Branch, to the
Registry of Deeds of Bataan within ten (10) days from the finality
of this decision, who, in turn, is directed to cancel the same as
there exists in the possession of herein plaintiffs of the owners
duplicate copy of said OCT No. 284 and, to restore and/or
 reinstate OCT No. 284 of the Register of Deeds of Bataan to its
full force and effect;

5. Ordering the defendant-spouses Godofredo Alfredo and Carmen Limon

Alfredo to restitute and/or return the amount of the respective
purchase prices and/or consideration of sale of the disputed
parcels of land they sold to their co-defendants within ten (10)
days from the finality of this decision with legal interest thereon
from date of the sale;

6. Ordering the defendants, jointly and severally, to pay plaintiff-spouses

the sum of P20,000.00 as and for attorneys fees and litigation
expenses; and

7. Ordering defendants to pay the costs of suit.

Defendants counterclaims are hereby dismissed for lack of merit.

SO ORDERED. [3]

Petitioners appealed to the Court of Appeals.

On 26 November 1999, the Court of Appeals issued its Decision affirming the
decision of the trial court, thus:

WHEREFORE, premises considered, the appealed decision in Civil Case No. DH-
256-94 is hereby AFFIRMED in its entirety. Treble costs against the defendants-
appellants.

SO ORDERED. [4]

On 26 July 2000, the Court of Appeals denied petitioners motion for

reconsideration.

The Ruling of the Trial Court

The trial court ruled that there was a perfected contract of sale between the
spouses Godofredo and Carmen and the spouses Armando and Adelia. The trial court
found that all the elements of a contract of sale were present in this case. The object of
the sale was specifically identified as the 81,524-square meter lot in Barrio Culis,
Mabigas, Hermosa, Bataan, covered by OCT No. 284 issued by the Registry of Deeds
of Bataan. The purchase price was fixed at P15,000.00, with the buyers assuming to
pay the sellers P7,000.00 DBP mortgage loan including its accumulated interest. The
balance of the purchase price was to be paid in cash to the sellers. The last payment
of P2,524.00 constituted the full settlement of the purchase price and this was paid on
11 March 1970 as evidenced by the receipt issued by Carmen.
The trial court found the following facts as proof of a perfected contract of sale: (1)
Godofredo and Carmen delivered to Armando and Adelia the Subject Land; (2)
Armando and Adelia treated as their own tenants the tenants of Godofredo and
Carmen; (3) Godofredo and Carmen turned over to Armando and Adelia documents
such as the owners duplicate copy of the title of the Subject Land, tax declaration, and
the receipts of realty tax payments in the name of Godofredo; and (4) the DBP
cancelled the mortgage on the Subject Property upon payment of the loan of Godofredo
and Carmen. Moreover, the receipt of payment issued by Carmen served as an
acknowledgment, if not a ratification, of the verbal sale between the sellers and the
buyers. The trial court ruled that the Statute of Frauds is not applicable because in this
case the sale was perfected.
The trial court concluded that the Subsequent Buyers were not innocent
purchasers. Not one of the Subsequent Buyers testified in court on how they purchased
their respective lots. The Subsequent Buyers totally depended on the testimony of
Constancia Calonso (Calonso) to explain the subsequent sale. Calonso, a broker,
negotiated with Godofredo and Carmen the sale of the Subject Land which Godofredo
and Carmen subdivided so they could sell anew portions to the Subsequent Buyers.
Calonso admitted that the Subject Land was adjacent to her own lot. The trial court
pointed out that Calonso did not inquire on the nature of the tenancy of the Natanawans
and on who owned the Subject Land. Instead, she bought out the tenants
for P150,000.00. The buy out was embodied in a Kasunduan. Apolinario Natanawan
(Apolinario) testified that he and his wife accepted the money and signed
the Kasunduan because Calonso and the Subsequent Buyers threatened them with
forcible ejectment. Calonso brought Apolinario to the Agrarian Reform Office where he
was asked to produce the documents showing that Adelia is the owner of the Subject
Land. Since Apolinario could not produce the documents, the agrarian officer told him
that he would lose the case. Thus, Apolinario was constrained to sign
the Kasunduan and accept the P150,000.00.
Another indication of Calonsos bad faith was her own admission that she saw an
adverse claim on the title of the Subject Land when she registered the deeds of sale in
the names of the Subsequent Buyers. Calonso ignored the adverse claim and
proceeded with the registration of the deeds of sale.
The trial court awarded P20,000.00 as attorneys fees to Armando and Adelia. In
justifying the award of attorneys fees, the trial court invoked Article 2208 (2) of the Civil
Code which allows a court to award attorneys fees, including litigation expenses, when
it is just and equitable to award the same. The trial court ruled that Armando and Adelia
are entitled to attorneys fees since they were compelled to file this case due to
petitioners refusal to heed their just and valid demand.

The Ruling of the Court of Appeals

 The Court of Appeals found the factual findings of the trial court well supported by
the evidence. Based on these findings, the Court of Appeals also concluded that there
was a perfected contract of sale and the Subsequent Buyers were not innocent
purchasers.
The Court of Appeals ruled that the handwritten receipt dated 11 March 1970 is
sufficient proof that Godofredo and Carmen sold the Subject Land to Armando and
Adelia upon payment of the balance of the purchase price. The Court of Appeals found
the recitals in the receipt as sufficient to serve as the memorandum or note as a writing
under the Statute of Frauds.[5] The Court of Appeals then reiterated the ruling of the trial
court that the Statute of Frauds does not apply in this case.
The Court of Appeals gave credence to the testimony of a witness of Armando and
Adelia, Mildred Lobaton, who explained why the title to the Subject Land was not in the
name of Armando and Adelia. Lobaton testified that Godofredo was then busy preparing
to leave for Davao. Godofredo promised that he would sign all the papers once they
were ready. Since Armando and Adelia were close to the family of Carmen, they trusted
Godofredo and Carmen to honor their commitment. Armando and Adelia had no reason
to believe that their contract of sale was not perfected or validly executed considering
that they had received the duplicate copy of OCT No. 284 and other relevant
documents. Moreover, they had taken physical possession of the Subject Land.
The Court of Appeals held that the contract of sale is not void even if only Carmen
signed the receipt dated 11 March 1970. Citing Felipe v. Heirs of Maximo Aldon,[6] the
appellate court ruled that a contract of sale made by the wife without the husbands
consent is not void but merely voidable. The Court of Appeals further declared that the
sale in this case binds the conjugal partnership even if only the wife signed the receipt
because the proceeds of the sale were used for the benefit of the conjugal
partnership. The appellate court based this conclusion on Article 161[7] of the Civil Code.
The Subsequent Buyers of the Subject Land cannot claim that they are buyers in
good faith because they had constructive notice of the adverse claim of Armando and
Adelia. Calonso, who brokered the subsequent sale, testified that when she registered
the subsequent deeds of sale, the adverse claim of Armando and Adelia was already
annotated on the title of the Subject Land. The Court of Appeals believed that the act of
Calonso and the Subsequent Buyers in forcibly ejecting the Natanawans from the
Subject Land buttresses the conclusion that the second sale was tainted with bad faith
from the very beginning.
Finally, the Court of Appeals noted that the issue of prescription was not raised in
the Answer. Nonetheless, the appellate court explained that since this action is actually
based on fraud, the prescriptive period is four years, with the period starting to run only
from the date of the discovery of the fraud. Armando and Adelia discovered the
fraudulent sale of the Subject Land only in January 1994. Armando and Adelia lost no
time in writing a letter to Godofredo and Carmen on 2 February 1994 and filed this case
on 7 March 1994.Plainly, Armando and Adelia did not sleep on their rights or lose their
rights by prescription.
 The Court of Appeals sustained the award of attorneys fees and imposed treble
costs on petitioners.

The Issues

Petitioners raise the following issues:

I

Whether the alleged sale of the Subject Land in favor of Armando and Adelia
is valid and enforceable, where (1) it was orally entered into and not in
writing; (2) Carmen did not obtain the consent and authority of her husband,
Godofredo, who was the sole owner of the Subject Land in whose name the
title thereto (OCT No. 284) was issued; and (3) it was entered into during the
25-year prohibitive period for alienating the Subject Land without the approval
of the Secretary of Agriculture and Natural Resources.

II

Whether the action to enforce the alleged oral contract of sale brought after 24
years from its alleged perfection had been barred by prescription and by
laches.

III

Whether the deeds of absolute sale and the transfer certificates of title over the
portions of the Subject Land issued to the Subsequent Buyers, innocent
purchasers in good faith and for value whose individual titles to their
respective lots are absolute and indefeasible, are valid.

IV

Whether petitioners are liable to pay Armando and Adelia P20,0000.00 as

attorneys fees and litigation expenses and the treble costs, where the claim of
Armando and Adelia is clearly unfounded and baseless.

Whether petitioners are entitled to the counterclaim for attorneys fees and
litigation expenses, where they have sustained such expenses by reason of
institution of a clearly malicious and unfounded action by Armando and
Adelia.[8]
 The Courts Ruling

The petition is without merit.

In a petition for review on certiorari under Rule 45, this Court reviews only errors of
law and not errors of facts.[9] The factual findings of the appellate court are generally
binding on this Court.[10] This applies with greater force when both the trial court and the
Court of Appeals are in complete agreement on their factual findings. [11] In this case,
there is no reason to deviate from the findings of the lower courts. The facts relied upon
by the trial and appellate courts are borne out by the record. We agree with the
conclusions drawn by the lower courts from these facts.

Validity and Enforceability of the Sale

The contract of sale between the spouses Godofredo and Carmen and the spouses
Armando and Adelia was a perfected contract. A contract is perfected once there is
consent of the contracting parties on the object certain and on the cause of the
obligation.[12] In the instant case, the object of the sale is the Subject Land, and the price
certain is P15,000.00. The trial and appellate courts found that there was a meeting of
the minds on the sale of the Subject Land and on the purchase price
of P15,000.00. This is a finding of fact that is binding on this Court. We find no reason to
disturb this finding since it is supported by substantial evidence.
The contract of sale of the Subject Land has also been consummated because the
sellers and buyers have performed their respective obligations under the contract. In a
contract of sale, the seller obligates himself to transfer the ownership of the determinate
thing sold, and to deliver the same, to the buyer who obligates himself to pay a price
certain to the seller.[13] In the instant case, Godofredo and Carmen delivered the Subject
Land to Armando and Adelia, placing the latter in actual physical possession of the
Subject Land. This physical delivery of the Subject Land also constituted a transfer of
ownership of the Subject Land to Armando and Adelia. [14] Ownership of the thing sold is
transferred to the vendee upon its actual or constructive delivery. [15] Godofredo and
Carmen also turned over to Armando and Adelia the documents of ownership to the
Subject Land, namely the owners duplicate copy of OCT No. 284, the tax declaration
and the receipts of realty tax payments.
On the other hand, Armando and Adelia paid the full purchase price as evidenced
by the receipt dated 11 March 1970 issued by Carmen. Armando and Adelia fulfilled
their obligation to provide the P7,000.00 to pay the DBP loan of Godofredo and
Carmen, and to pay the latter the balance of P8,000.00 in cash. The P2,524.00 paid
under the receipt dated 11 March 1970 was the last installment to settle fully the
purchase price. Indeed, upon payment to DBP of the P7,000.00 and the accumulated
interests, the DBP cancelled the mortgage on the Subject Land and returned the
owners duplicate copy of OCT No. 284 to Godofredo and Carmen.
 The trial and appellate courts correctly refused to apply the Statute of Frauds to this
case. The Statute of Frauds[16] provides that a contract for the sale of real property shall
be unenforceable unless the contract or some note or memorandum of the sale is in
writing and subscribed by the party charged or his agent. The existence of the receipt
dated 11 March 1970, which is a memorandum of the sale, removes the transaction
from the provisions of the Statute of Frauds.
The Statute of Frauds applies only to executory contracts and not to contracts either
partially or totally performed.[17] Thus, where one party has performed ones obligation,
oral evidence will be admitted to prove the agreement. [18] In the instant case, the parties
have consummated the sale of the Subject Land, with both sellers and buyers
performing their respective obligations under the contract of sale. In addition, a contract
that violates the Statute of Frauds is ratified by the acceptance of benefits under the
contract.[19]Godofredo and Carmen benefited from the contract because they paid their
DBP loan and secured the cancellation of their mortgage using the money given by
Armando and Adelia. Godofredo and Carmen also accepted payment of the balance of
the purchase price.
Godofredo and Carmen cannot invoke the Statute of Frauds to deny the existence
of the verbal contract of sale because they have performed their obligations, and have
accepted benefits, under the verbal contract. [20] Armando and Adelia have also
performed their obligations under the verbal contract. Clearly, both the sellers and the
buyers have consummated the verbal contract of sale of the Subject Land. The Statute
of Frauds was enacted to prevent fraud.[21] This law cannot be used to advance the very
evil the law seeks to prevent.
Godofredo and Carmen also claim that the sale of the Subject Land to Armando
and Adelia is void on two grounds. First, Carmen sold the Subject Land without the
marital consent of Godofredo. Second, the sale was made during the 25-year period
that the law prohibits the alienation of land grants without the approval of the Secretary
of Agriculture and Natural Resources.
These arguments are without basis.
The Family Code, which took effect on 3 August 1988, provides that any alienation
or encumbrance made by the husband of the conjugal partnership property without the
consent of the wife is void. However, when the sale is made before the effectivity of the
Family Code, the applicable law is the Civil Code.[22]
Article 173 of the Civil Code provides that the disposition of conjugal property
without the wifes consent is not void but merely voidable. Article 173 reads:

The wife may, during the marriage, and within ten years from the transaction
questioned, ask the courts for the annulment of any contract of the husband entered
into without her consent, when such consent is required, or any act or contract of the
husband which tends to defraud her or impair her interest in the conjugal partnership
property. Should the wife fail to exercise this right, she or her heirs, after the
dissolution of the marriage, may demand the value of property fraudulently alienated
by the husband.

In Felipe v. Aldon,[23] we applied Article 173 in a case where the wife sold some parcels
of land belonging to the conjugal partnership without the consent of the husband. We
ruled that the contract of sale was voidable subject to annulment by the
husband. Following petitioners argument that Carmen sold the land to Armando and
Adelia without the consent of Carmens husband, the sale would only be voidable and
not void.
However, Godofredo can no longer question the sale. Voidable contracts are
susceptible of ratification.[24] Godofredo ratified the sale when he introduced Armando
and Adelia to his tenants as the new owners of the Subject Land. The trial court noted
that Godofredo failed to deny categorically on the witness stand the claim of the
complainants witnesses that Godofredo introduced Armando and Adelia as the new
landlords of the tenants.[25] That Godofredo and Carmen allowed Armando and Adelia to
enjoy possession of the Subject Land for 24 years is formidable proof of Godofredos
acquiescence to the sale. If the sale was truly unauthorized, then Godofredo should
have filed an action to annul the sale. He did not. The prescriptive period to annul the
sale has long lapsed.Godofredos conduct belies his claim that his wife sold the Subject
Land without his consent.
Moreover, Godofredo and Carmen used most of the proceeds of the sale to pay
their debt with the DBP. We agree with the Court of Appeals that the sale redounded to
the benefit of the conjugal partnership. Article 161 of the Civil Code provides that the
conjugal partnership shall be liable for debts and obligations contracted by the wife for
the benefit of the conjugal partnership. Hence, even if Carmen sold the land without the
consent of her husband, the sale still binds the conjugal partnership.
Petitioners contend that Godofredo and Carmen did not deliver the title of the
Subject Land to Armando and Adelia as shown by this portion of Adelias testimony on
cross-examination:
Q -- No title was delivered to you by Godofredo Alfredo?
A -- I got the title from Julie Limon because my sister told me.[26]
Petitioners raise this factual issue for the first time. The Court of Appeals could have
passed upon this issue had petitioners raised this earlier. At any rate, the cited
testimony of Adelia does not convincingly prove that Godofredo and Carmen did not
deliver the Subject Land to Armando and Adelia. Adelias cited testimony must be
examined in context not only with her entire testimony but also with the other
circumstances.
Adelia stated during cross-examination that she obtained the title of the Subject
Land from Julie Limon (Julie), her classmate in college and the sister of
Carmen. Earlier, Adelias own sister had secured the title from the father of
Carmen. However, Adelias sister, who was about to leave for the United States, gave
the title to Julie because of the absence of the other documents. Adelias sister told
Adelia to secure the title from Julie, and this was how Adelia obtained the title from
Julie.
It is not necessary that the seller himself deliver the title of the property to the buyer
because the thing sold is understood as delivered when it is placed in the control and
possession of the vendee.[27] To repeat, Godofredo and Carmen themselves introduced
the Natanawans, their tenants, to Armando and Adelia as the new owners of the
Subject Land. From then on, Armando and Adelia acted as the landlords of the
Natanawans. Obviously, Godofredo and Carmen themselves placed control and
possession of the Subject Land in the hands of Armando and Adelia.
Petitioners invoke the absence of approval of the sale by the Secretary of
Agriculture and Natural Resources to nullify the sale. Petitioners never raised this issue
before the trial court or the Court of Appeals. Litigants cannot raise an issue for the first
time on appeal, as this would contravene the basic rules of fair play, justice and due
process.[28] However, we will address this new issue to finally put an end to this case.
The sale of the Subject Land cannot be annulled on the ground that the Secretary
did not approve the sale, which was made within 25 years from the issuance of the
homestead title. Section 118 of the Public Land Act (Commonwealth Act No. 141) reads
as follows:

SEC. 118. Except in favor of the Government or any of its branches, units, or
institutions or legally constituted banking corporation, lands acquired under free
patent or homestead provisions shall not be subject to encumbrance or alienation from
the date of the approval of the application and for a term of five years from and after
the date of the issuance of the patent or grant.

xxx

No alienation, transfer, or conveyance of any homestead after 5 years and before

twenty-five years after the issuance of title shall be valid without the approval of the
Secretary of Agriculture and Commerce, which approval shall not be denied except on
constitutional and legal grounds.

A grantee or homesteader is prohibited from alienating to a private individual a land

grant within five years from the time that the patent or grant is issued. [29] A violation of
this prohibition renders a sale void.[30] This prohibition, however, expires on the fifth
year.From then on until the next 20 years[31] the land grant may be alienated provided the
Secretary of Agriculture and Natural Resources approves the alienation. The Secretary
is required to approve the alienation unless there are constitutional and legal grounds to
deny the approval. In this case, there are no apparent constitutional or legal grounds for
the Secretary to disapprove the sale of the Subject Land.
The failure to secure the approval of the Secretary does not ipso facto make a sale
void.[32] The absence of approval by the Secretary does not nullify a sale made after the
expiration of the 5-year period, for in such event the requirement of Section 118 of the
Public Land Act becomes merely directory[33] or a formality.[34] The approval may be
secured later, producing the effect of ratifying and adopting the transaction as if the sale
had been previously authorized.[35] As held in Evangelista v. Montano:[36]

Section 118 of Commonwealth Act No. 141, as amended, specifically enjoins that the
approval by the Department Secretary "shall not be denied except on constitutional
and legal grounds." There being no allegation that there were constitutional or legal
impediments to the sales, and no pretense that if the sales had been submitted to the
Secretary concerned they would have been disapproved, approval was a ministerial
duty, to be had as a matter of course and demandable if refused. For this reason, and if
necessary, approval may now be applied for and its effect will be to ratify and adopt
the transactions as if they had been previously authorized. (Emphasis supplied)

Action Not Barred by Prescription and Laches

Petitioners insist that prescription and laches have set in. We disagree.
The Amended Complaint filed by Armando and Adelia with the trial court is
captioned as one for Specific Performance. In reality, the ultimate relief sought by
Armando and Adelia is the reconveyance to them of the Subject Land. An action for
reconveyance is one that seeks to transfer property, wrongfully registered by another, to
its rightful and legal owner.[37] The body of the pleading or complaint determines the
nature of an action, not its title or heading.[38] Thus, the present action should be treated
as one for reconveyance.[39]
Article 1456 of the Civil Code provides that a person acquiring property through
fraud becomes by operation of law a trustee of an implied trust for the benefit of the real
owner of the property. The presence of fraud in this case created an implied trust in
favor of Armando and Adelia. This gives Armando and Adelia the right to seek
reconveyance of the property from the Subsequent Buyers.[40]
To determine when the prescriptive period commenced in an action for
reconveyance, plaintiffs possession of the disputed property is material. An action for
reconveyance based on an implied trust prescribes in ten years. [41] The ten-year
prescriptive period applies only if there is an actual need to reconvey the property as
when the plaintiff is not in possession of the property. [42] However, if the plaintiff, as the
real owner of the property also remains in possession of the property, the prescriptive
period to recover title and possession of the property does not run against him.[43] In such
a case, an action for reconveyance, if nonetheless filed, would be in the nature of a suit
for quieting of title, an action that is imprescriptible.[44]
In this case, the appellate court resolved the issue of prescription by ruling that the
action should prescribe four years from discovery of the fraud. We must correct this
erroneous application of the four-year prescriptive period. In Caro v. Court of
Appeals,[45] we explained why an action for reconveyance based on an implied trust
should prescribe in ten years. In that case, the appellate court also erroneously applied
the four-year prescriptive period. We declared in Caro:

We disagree. The case of Liwalug Amerol, et al. v. Molok Bagumbaran, G.R. No. L-
33261, September 30, 1987,154 SCRA 396 illuminated what used to be a gray area on
the prescriptive period for an action to reconvey the title to real property and,
corollarily, its point of reference:

xxx It must be remembered that before August 30, 1950, the date of the effectivity of
the new Civil Code, the old Code of Civil Procedure (Act No. 190) governed
prescription. It provided:

SEC. 43. Other civil actions; how limited.- Civil actions other than for the recovery of
real property can only be brought within the following periods after the right of action
accrues:

xxx xxx xxx

3. Within four years: xxx An action for relief on the ground of fraud, but the right of
action in such case shall not be deemed to have accrued until the discovery of the
fraud;

xxx xxx xxx

In contrast, under the present Civil Code, we find that just as an implied or
constructive trust is an offspring of the law (Art. 1456, Civil Code), so is the
corresponding obligation to reconvey the property and the title thereto in favor of the
true owner. In this context, and vis-a-vis prescription, Article 1144 of the Civil Code
is applicable.

Article 1144. The following actions must be brought within ten years from the time
the right of action accrues:

(1) Upon a written contract;

(2) Upon an obligation created by law;

(3) Upon a judgment.

xxxxxxxxx

(Emphasis supplied).
An action for reconveyance based on an implied or constructive trust must perforce
prescribe in ten years and not otherwise. A long line of decisions of this Court, and
of very recent vintage at that, illustrates this rule. Undoubtedly, it is now well-settled
that an action for reconveyance based on an implied or constructive trust prescribes
in ten years from the issuance of the Torrens title over the property. The only
discordant note, it seems, is Balbin vs. Medalla which states that the prescriptive
period for a reconveyance action is four years. However, this variance can be
explained by the erroneous reliance on Gerona vs. de Guzman. But in Gerona, the
fraud was discovered on June 25,1948, hence Section 43(3) of Act No. 190, was
applied, the new Civil Code not coming into effect until August 30, 1950 as
mentioned earlier. It must be stressed, at this juncture, that article 1144 and article
1456, are new provisions. They have no counterparts in the old Civil Code or in the
old Code of Civil Procedure, the latter being then resorted to as legal basis of the four-
year prescriptive period for an action for reconveyance of title of real property
acquired under false pretenses.

An action for reconveyance has its basis in Section 53, paragraph 3 of Presidential
Decree No. 1529, which provides:

In all cases of registration procured by fraud, the owner may pursue all his legal and
equitable remedies against the parties to such fraud without prejudice, however, to the
rights of any innocent holder of the decree of registration on the original petition or
application, xxx

This provision should be read in conjunction with Article 1456 of the Civil Code,
which provides:

Article 1456. If property is acquired through mistake or fraud, the person obtaining it
is, by force of law, considered a trustee of an implied trust for the benefit of the
person from whom the property comes.

The law thereby creates the obligation of the trustee to reconvey the property and the
title thereto in favor of the true owner. Correlating Section 53, paragraph 3 of
Presidential Decree No. 1529 and Article 1456 of the Civil Code with Article 1144(2)
of the Civil Code, supra, the prescriptive period for the reconveyance of fraudulently
registered real property is ten (10) years reckoned from the date of the issuance of the
certificate of title xxx (Emphasis supplied)[46]

Following Caro, we have consistently held that an action for reconveyance based
on an implied trust prescribes in ten years.[47] We went further by specifying the
reference point of the ten-year prescriptive period as the date of the registration of the
deed or the issuance of the title.[48]
 Had Armando and Adelia remained in possession of the Subject Land, their action
for reconveyance, in effect an action to quiet title to property, would not be subject to
prescription. Prescription does not run against the plaintiff in actual possession of the
disputed land because such plaintiff has a right to wait until his possession is disturbed
or his title is questioned before initiating an action to vindicate his right.[49] His
undisturbed possession gives him the continuing right to seek the aid of a court of
equity to determine the nature of the adverse claim of a third party and its effect on his
title.[50]
Armando and Adelia lost possession of the Subject Land when the Subsequent
Buyers forcibly drove away from the Subject Land the Natanawans, the tenants of
Armando and Adelia.[51] This created an actual need for Armando and Adelia to seek
reconveyance of the Subject Land. The statute of limitation becomes relevant in this
case. The ten-year prescriptive period started to run from the date the Subsequent
Buyers registered their deeds of sale with the Register of Deeds.
The Subsequent Buyers bought the subdivided portions of the Subject Land on 22
February 1994, the date of execution of their deeds of sale. The Register of Deeds
issued the transfer certificates of title to the Subsequent Buyers on 24 February
1994. Armando and Adelia filed the Complaint on 7 March 1994. Clearly, prescription
could not have set in since the case was filed at the early stage of the ten-year
prescriptive period.
Neither is the action barred by laches. We have defined laches as the failure or
neglect, for an unreasonable time, to do that which, by the exercise of due diligence,
could or should have been done earlier.[52] It is negligence or omission to assert a right
within a reasonable time, warranting a presumption that the party entitled to assert it
either has abandoned it or declined to assert it.[53] Armando and Adelia discovered in
January 1994 the subsequent sale of the Subject Land and they filed this case on 7
March 1994. Plainly, Armando and Adelia did not sleep on their rights.

Validity of Subsequent Sale of Portions of the Subject Land

Petitioners maintain that the subsequent sale must be upheld because the
Subsequent Buyers, the co-petitioners of Godofredo and Carmen, purchased and
registered the Subject Land in good faith. Petitioners argue that the testimony of
Calonso, the person who brokered the second sale, should not prejudice the
Subsequent Buyers. There is no evidence that Calonso was the agent of the
Subsequent Buyers and that she communicated to them what she knew about the
adverse claim and the prior sale. Petitioners assert that the adverse claim registered by
Armando and Adelia has no legal basis to render defective the transfer of title to the
Subsequent Buyers.
We are not persuaded. Godofredo and Carmen had already sold the Subject Land
to Armando and Adelia. The settled rule is when ownership or title passes to the buyer,
the seller ceases to have any title to transfer to any third person.[54] If the seller sells the
same land to another, the second buyer who has actual or constructive knowledge of
the prior sale cannot be a registrant in good faith. [55] Such second buyer cannot defeat
the first buyers title.[56] In case a title is issued to the second buyer, the first buyer may
seek reconveyance of the property subject of the sale.[57]
Thus, to merit protection under the second paragraph of Article 1544 [58] of the Civil
Code, the second buyer must act in good faith in registering the deed.[59] In this case, the
Subsequent Buyers good faith hinges on whether they had knowledge of the previous
sale. Petitioners do not dispute that Armando and Adelia registered their adverse claim
with the Registry of Deeds of Bataan on 8 February 1994. The Subsequent Buyers
purchased their respective lots only on 22 February 1994 as shown by the date of their
deeds of sale. Consequently, the adverse claim registered prior to the second sale
charged the Subsequent Buyers with constructive notice of the defect in the title of the
sellers,[60] Godofredo and Carmen.
It is immaterial whether Calonso, the broker of the second sale, communicated to
the Subsequent Buyers the existence of the adverse claim. The registration of the
adverse claim on 8 February 1994 constituted, by operation of law, notice to the whole
world.[61]From that date onwards, the Subsequent Buyers were deemed to have
constructive notice of the adverse claim of Armando and Adelia. When the Subsequent
Buyers purchased portions of the Subject Land on 22 February 1994, they already had
constructive notice of the adverse claim registered earlier.[62] Thus, the Subsequent
Buyers were not buyers in good faith when they purchased their lots on 22 February
1994. They were also not registrants in good faith when they registered their deeds of
sale with the Registry of Deeds on 24 February 1994.
The Subsequent Buyers individual titles to their respective lots are not absolutely
indefeasible. The defense of indefeasibility of the Torrens Title does not extend to a
transferee who takes the certificate of title with notice of a flaw in his title. [63] The principle
of indefeasibility of title does not apply where fraud attended the issuance of the titles as
in this case.[64]

Attorneys Fees and Costs

We sustain the award of attorneys fees. The decision of the court must state the
grounds for the award of attorneys fees. The trial court complied with this
requirement.[65] We agree with the trial court that if it were not for petitioners unjustified
refusal to heed the just and valid demands of Armando and Adelia, the latter would not
have been compelled to file this action.
The Court of Appeals echoed the trial courts condemnation of petitioners fraudulent
maneuverings in securing the second sale of the Subject Land to the Subsequent
Buyers. We will also not turn a blind eye on petitioners brazen tactics. Thus, we uphold
the treble costs imposed by the Court of Appeals on petitioners.
WHEREFORE, the petition is DENIED and the appealed decision is
AFFIRMED. Treble costs against petitioners.
SO ORDERED.
 Davide, Jr., C.J., (Chairman), Vitug, Ynares-Santiago, and Azcuna, JJ., concur.

[1]
Penned by Associate Justice Martin S. Villarama, Jr. with Associate Justices Angelina Sandoval-
Gutierrez and Romeo A. Brawner, concurring, Sixth Division.
[2]
Penned by Judge Pedro B. Villafuerte.
[3]
Rollo, pp. 48-49.
[4]
Ibid., p. 50.
[5]
Rollo, p. 55.
[6]
205 Phil. 537 (1982).
[7]
Article 161 of the Civil Code provides as follows: The conjugal partnership shall be liable for:
All debts and obligations contracted by the husband for the benefit of the conjugal partnership, and those
contracted by the wife, also for the same purpose, in the cases where she may legally bind the
partnership.
x x x.
[8]
Rollo, pp. 106-107.
[9]
W-Red Construction and Development Corporation v. Court of Appeals, G.R. No. 122648, 17 August
2000, 338 SCRA 341.
[10]
Ibid.
[11]
Ibid.
[12]
Article 1318, Civil Code.
[13]
Article 1458, Civil Code.
[14]
Pealosa v. Santos, G.R. No. 133749, 23 August 2001, 363 SCRA 545.
[15]
Article 1477, Civil Code.
[16]
Article 1403, Civil Code.
[17]
Article 1497 of the Civil Code. See also The Associated Anglo-American Tobacco Corporation v. Court
of Appeals, G.R. No. 125602, 29 April 1999, 325 SCRA 694.
[18]
Ibid.
[19]
Article 1405, Civil Code.
[20]
Mactan Cebu International Airport Authority v. Court of Appeals, 331 Phil. 1046 (1996).
[21]
Ibid.
[22]
Spouses Guiang v. Court of Appeals, 353 Phil. 578 (1998).
[23]
Supra, see note 6.
[24]
Article 1390 of the Civil Code.
[25]
Rollo, p. 47.
[26]
Ibid., p. 18.
[27]
Article 1497 of the Civil Code. See also The Associated Anglo-American Tobacco Corporation v.
Court of Appeals, G.R. No. 125602, 29 April 1999, 325 SCRA 694.
[28]
Sumbad v. Court of Appeals, 368 Phil. 52 (1999).
[29]
Jacinto v. Jacinto, 105 Phil. 1218 (1959).
[30]
Ibid.
[31]
Ibid.
[32]
Ibid.
[33]
Ibid.; Evangelista v. Montano, 93 Phil. 275 (1953); Flores v. Plasina, 94 Phil. 327 (1954).
[34]
De los Santos v. Roman Catholic Church of Midsayap, 94 Phil. 405 (1954).
[35]
Ibid.
[36]
93 Phil. 275 (1953).
[37]
Ibid.
[38]
David v. Malay, G.R. No. 132644, 19 November 1999, 318 SCRA 711.
[39]
Ibid.
[40]
Ibid. See also Heirs of Olviga v. Court of Appeals, G.R. No. 104813, 21 October 1993, 227 SCRA 330.
[41]
Vda. de Cabrera v. Court of Appeals, 335 Phil. 19 (1997).
[42]
Ibid.
[43]
Supra, see note 38.
[44]
Ibid.
[45]
G.R. No. 76148, 20 December 1989, 180 SCRA 401.
[46]
Ibid.
[47]
Development Bank of the Philippines, G.R. No. 129471, 28 April 2000, 331 SCRA 267; David v.
Malay, supra, see note 38; Vda. de Cabrera v. Court of Appeals, supra, see note 41.
[48]
Supra, see note 38.
[49]
Supra, see note 38.
[50]
Supra, see note 38.
[51]
Rollo, p. 59; TSN, 8 March 1995, pp. 336-337 (Rolando Natanawan); TSN, 23 November 1994, p. 262
(Adelia Lobaton).
[52]
Coronel v. Court of Appeals, 331 Phil. 294 (1996).
[53]
Ibid.
[54]
Ibid.
[55]
Ibid.
[56]
Ibid.
[57]
Ibid.
[58]
Article 1544 of the Civil Code provides as follows: If the same thing should have been sold to
different vendees, the ownership shall be transferred to the person who may have first taken
possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith
first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the
possession; and, in the absence thereof, to the person who presents the oldest title, provided
there is good faith.
[59]
Bayoca v. Nogales, G.R. No. 138201, 12 September 2000, 340 SCRA 154.
[60]
See Balatbat v. Court of Appeals, 329 Phil. 858 (1996); Ocampo v. Court of Appeals, G.R. No. 97442,
30 June 1994, 233 SCRA 551.
[61]
Section 52 of the Property Registration Decree (PD No. 1529) provides as follows: Constructive
notice upon registration. Every x x x lien, x x x instrument or entry affecting registered land shall,
if registered, filed or entered in the office of the Register of Deeds for the province or city where
the land to which it relates lies, be constructive notice to all persons from the time of such
registering, filing or entering. See also Caviles v. Bautista, G.R. No. 102648, 24 November 1999,
319 SCRA 24; DBP v. Acting Register of Deeds of Nueva Ecija, UDK No. 7671, 23 June 1988,
162 SCRA 450.
[62]
Gardner v. Court of Appeals, G.R. No. L-59952, 31 August 1984, 131 SCRA 584; PNB v. Court of
Appeals, G.R. No. L-30831 & L-31176, 21 November 1979, 94 SCRA 357.
[63]
Supra, see note 41.
[64]
Supra, see note 41.
[65]
Cipriano v. Court of Appeals, 331 Phil. 1019 (1996).