Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No.

L-37751 July 20, 1982 MANUEL LAPINIG and LEONCIO CHAVAS, petitioners, vs. THE HONORABLE COURT OF APPEALS and FRANCISCO V. JORVINA, respondents.

GUERRERO, J.: This is a petition to review the decision of the Court of Appeals promulgated on September 24, 1973 in CA-G.R. No. 49348-R entitled "Francisco V. Jorvina, Plaintiff- Appellant, versus, People's Homesite and Housing Corporation, Defendant-Appellee, Manuel Lapinig and Leoncio Chavas, Intervenors-Appellees." A complaint was filed in the Court of First Instance of Rizal, Quezon City, Branch IV, by private respondent Francisco V. Jorvina against the People's Homesite and Housing Corporation (hereinafter referred to as PHHC) praying that Lot 10, Block E-156, Psd-68807 of the East Avenue Subdivision be re-awarded to him, for damages and attorney's fees. After therein defendant PHHC filed its Answer, a complaint in intervention was filed with leave of court by petitioners Manuel Lapinig and Leoncio Chavas praying that the PHHC be ordered to execute the Final Deed of Sale in their favor and that plaintiff Jorvina be ordered to pay to them moral and compensatory damages and attorney's fees. At the pre-trial on June 25, 1970, the parties submitted the following "Stipulation of Facts": 1. That, the parties admit the personal circumstances of each party and the jurisdiction of this Honorable Court over the subject matter of this litigation; 2. That, People's Homesite and Housing Corporation (PHHC for brevity) is the registered owner of a parcel of land Identified as Lot No. 10, Block E-156 of the PHHC East Avenue Subdivision in Quezon City; 3. That, on January 28, 1958, plaintiff filed with the defendant PHHC an "Application to Purchase a Lot" and as a result thereof was awarded Lot No. 10, Block E-156, thereafter paying the required 10% deposit in the amount of P546.96; 4. That,on November 2, 1962, a complaint was filed by Mrs. Arsenia Lapinig with the PHHC contesting the award of the lot in controversy in favor of plaintiff Jorvina, copy of which is attached and marked as Annex "A" and made an integral part hereof; 5. That, on January 3, 1963, the PHHC Board of Directors adopted Resolution No. 282 sustaining the award of the lot in question to plaintiff Francisco V. Jorvina and denying Lapinig's appeal for reconsideration; 6. That, on April 1, 1963, the General Manager of defendant PHHC formally notified the plaintiff of Resolution No. 282 of the PHHC Board of Directors, sustaining the award of the lot to the plaintiff; 7. That, on March 20, 1964, a "Conditional Contract to Sell" was executed between the plaintiff Francisco V. Jorvina and defendant PHHC; that since then plaintiff complied with the terms of payment and paid certain amounts reflected in the PHHC Passbook issued by defendant to the plaintiff which, as of February, 1966, amounted to P2,490.31;

8. That, sometime in April 1965, the Presidential Investigating Committee (Gancayco Committee) reinvestigated the lot award in question and that on November 22, 1965 the said Committee, through State Prosecutor Maura Navarro, recommended the cancellation of the award in favor of F. V. Jorvina, herein plaintiff, and the re-award of the lot in favor of Manuel Lapinig and Andronico Alcovendas, pro-indiviso, copy of which recommendation is attached and marked as Annex "B" and made an integral part hereof; that, Francisco V. Jorvina was not given the notice of this reinvestigation or the opportunity to be heard and to adduce his own evidence; 9. That, the recommendation of the Presidential Investigating Committee was approved by the PHHC Board of Directors under Resolution No. 541 dated January 13, 1966, copy of which is attached and marked as Annex "C" and made an integral part hereof; 10. That, on February 1, 1966, Manuel Lapinig and Andronico Alcovendas paid the 10% initial payment of P546.96, Order of Payment being attached and marked as Annex "D" and made integral part hereof; 11. That, on February 3. 1966, plaintiff remitted a check for P163.95 to defendant PHHC, acceptance of which was refused, and that a few days thereafter plaintiff received a letter from the Acting General Manager of defendant PHHC, dated January 31, 1966, stating that Lot 10, Block E-156 was re-awarded to Arsenia Lapinig and Andronico Alcovendas; 12. That, on December 7, 1966, the PHHC Board of Directors under Resolution No. 765, copy attached marked as Annex "E" and made integral part hereof, approved the request for the transfer of rights of the one-half undivided portion from Andronico Alcovendas to Leoncio Chavas who was found qualified under PHHC rules and regulations: 13. That, on November 7, 1969, Resolution No. 372, copy attached and marked as Annex "F" was approved by the PHHC Board of Directors confirming its previous Board Resolution No. 541, dated January 13, 1966 (marked as Annex "C" herein) and Board Resolution No. 765 dated December 7, 1966 (marked as Annex "E" herein), likewise ordering that the "Conditional Contract to Sell" be executed in favor of Lapinig and Chavas; 14. That, on June 4, 1968, defendant PHHC and Manuel Lapinig and Leoncio Chavas executed a "Conditional Contract to Sell" over Lot 10, Block E-156; 15. That, the parties reserve their rights to present such additional evidence as they may respectively deem necessary within the scope of the issues raised. xxx xxx xxx 1 Resolving the case, the Court of First Instance upheld the authority and power of the PHHC to cancel the award of the lot in question to Jorvina and to re-award the same property to intervenors Lapinig and Chavas. The Court ruled that the PHHC had the duty of carrying out the policy of the government "to acquire large estates ... for their subdivision and resale to bona fide occupants," and that it merely complied with the recommendation of the Presidential Investigating Committee to give preference to the actual occupants of the lot. Moreover, the Court held that as owner of the property in controversy, the PHHC had the right to dispose of the lot in favor of whoever it may choose under its rules and regulations. The dispositive portion of the decision of the Court of First Instance dated August 13, 1970 is quoted hereunder: WHEREFORE, judgment is hereby rendered dismissing the plaintiff's complaint with costs against him. Neither the counterclaim of defendant PHHC nor the claim for damages of the intervenors is awarded because there is no evidence supporting the same. SO ORDERED. 2

On appeal to the Court of Appeals, Jorvina obtained a reversal. Respondent Court of Appeals stressed that not only had the disputed lot been awarded to Jorvina and deposit from him accepted, but more than that, a "Conditional Contract To Sell" had been executed in said awardee's favor on May 20, 1964 wherein the PHHC agreed to sell the lot to Jorvina on installments, which the latter in fact later paid. Thus, reasoned the respondent Court, if the law on contracts were to govern, the PHHC could not just unilaterally annul the aforementioned agreement which, under the New Civil Code, is the law between the parties and should be complied with in good faith. The appellate court decision promulgated on September 24, 1973 reversed the judgment appealed from and ordered the contract in favor of plaintiff-appellant to be maintained and specifically performed and his rights to the lot reinstated. 3 Examining the "Conditional Contract To Sell" dated March 20, 1964 4 executed between the PHHC and herein private respondent Jorvina (see No. 7, "Stipulation of Facts", supra), We find the same to have been validly entered into. By virtue thereof, the PHHC agreed to sell the lot in question to Jorvina for the sum of P5,469.60 payable in monthly installments over a period of ten (10) years, with interest at the rate of 6% per annum. The document was duly signed by the parties in the presence of witnesses and acknowledged before a notary public. It has the essential elements of a perfected contract, namely, consent, subject matter, and cause or consideration. 5 Upon perfection of a contract, "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." 6 Thus, the PHHC as a consequence of its having entered into the "Conditional Contract To Sell" with Jorvina, may NOT unilaterally cancel the award in favor of Jorvina nor re-award the subject property to other persons. To do so would be to violate Jorvina's rights as the awardee of the lot in question under the "Conditional Contract To Sell" of March 20, 1964. The fact that the PHHC is a government corporation does not exempt it from compliance with its contractual obligations. Herein petitioners make capital of the recommendations of the Presidential Investigating Committee for the cancellation of Jorvina's award and for a re-award in favor of Lapinig and Alcovendas, which recommendation was approved by the PHHC Board of Directors on January 13, 1966. They point out that the Committee was precisely created "to investigate and cancel irregular awards", and contend that in making its recommendations for the disposition of Lot 10, Block E-156, the Committee merely gave recognition to the preferential right of Lapinig and Alcovendas to purchase the disputed lot as the actual and bona fide occupants thereof. We do not agree. The procedure adopted by the Presidential investigating Committee when it inquired into Jorvina's award was arbitrary, oppressive and inquisitorial. As admitted by the parties in the lower Court, said awardee was not given notice of the reinvestigation nor the opportunity to be heard and to adduce his evidence (see No. 8, "Stipulation of Facts", supra). In other words, not even the most basic requisites of due process were met. The records show that a previous investigation of the award to Jorvina brought about by the complaint filed by Mrs. Arsenia Lapinig had been conducted, resulting in the letter of then PHHC General Manager Angel Macapagal dated April 1, 1963, formally notifying Jorvina of the decision in his favor, thus: With reference to the adverse claim of Mrs. Arsenia Lapinig over the above-stated lot awarded to you, I wish to inform you that in view of the findings and recommendation of the Board's Committee on Investigation which had carefully reviewed the records of this case, the PHHC Board of Directors sustained the award of said lot in your favor and denied her appeal for reconsideration of the decision of the PHHC Administrative Investigating Committee under Resolution No. 282, dated January 3, 1963 ... In view thereof, please come to this Corporation upon receipt hereof for the execution of the "Conditional Contract To Sell" in your favor. 7 The letter dated November 28, 1968 of then PHHC General Manager Esteban Bernido to the Office of the Government Corporate Counsel clearly stated the failure of Mrs. Lapinig to prove her allegations of fraud and misrepresentation in the award to Jorvina. Pertinent portions of the letter reads: The records show that the subject lot was originally awarded to Mr. Francisco Jorvina on January 28, 1958, when he paid the required 10% deposit in the amount of P546.96. However, on February 10, 1960, a formal complaint was filed by one Mrs. Arsenia Lapinig with the PHHC contesting the award of the above-mentioned property in favor of Mr. Jorvina. After hearings of the case conducted by the PHHC Administrative Investigating Committee, the said Committee in its Memorandum Report dated January 25, 1961 recommended that award in favor of Mr. Jorvina be sustained for failure on the part of the complainant for failure on the part of the complainant to establish fraud and

misrepresentation in obtaining the award. This recommendation was approved by the ChairmanGeneral Manager on January 30, 1961. Mrs. Lapinig appealed the decision of the PHHC Investigating Committee to the PHHC Board of Directors. On January 3, 1963 the PHHC Board approved Resolution No. 282 sustaining the award of Mr. Jorvina in view of the reasons stated in the Committee Report dated December 18, 1962 of the Board's Committee on Investigation ... On March 20, 1964, a Conditional Contract to Sell over the subject lot was executed by the PHHC in his favor. 8 Since it is undisputed that the PHHC had accepted several installment payments from Jorvina, there has therefore been a partial performance of the contract. Assuming that the Presidential Investigating Committee had discovered a ground to annul the "Conditional Contract To Sell" dated March 20, 1964, the PHHC should have filed an action for annulment of the contract within the prescribed period. It did not do so. Instead, it merely approved the Committee's recommendations and accepted the initial payment made by the new awardees, Lapinig and Alcovendas. Undoubtedly, the new award is arbitrary and violative of the original awardee's (Jorvina) property rights. Petitioners' claim that they have the preferential right to purchase Lot No. 10, Block E-156 as actual and bona fideoccupants thereof is without merit. To begin with, the character of their possession of the subject property has not been clearly established. What appears on record is that the subject property was re-awarded pro-indiviso to: (1) herein petitioner Lapinig as the "actual occupant" of the lot, and (2) the predecessor-in-interest of herein petitioner Chavas, Andronico Alcovendas, "who is being relocated from Lot 22, Block E-115 the award of which was sustained because the lot is already covered by title and has already been transferred to an innocent purchaser for value." 9 We find no claim of possession in good faith of the lot in litigation by the aforenamed new awardees, which is the essential ingredient for the pertinent invocation by petitioners of the government policy and PHHC function of acquiring large estates for their resale to "bona fide occupants." 10 The cases of Guardiano vs. Encarnacion 11 and PHHC vs. Tiongco 12 cited by petitioners are, therefore, not applicable. In Guardiano, this Court sustained the action of the PHHC in upholding the preferential right of therein petitioner Guardiano to purchase the PHHC lot subject of the controversy as against the original awardee Encarnacion. Guardiano's "initial status as a squatter had been legalized with her having been duly accepted by the PHHC as a 'registered squatter' or bona fide occupant occupying the lot since 1945. 13 This Court also found that Encarnacion had merely been granted a "tentative award", and that there was "no perfected contract to sell" reached between (him) and the PHHC nor was the 'Conditional Contract to Sell' ever executed between them." 14No monthly payments were made by Encarnacion to the PHHC other than the initial deposit. 15 In the Tiongcocase, this Tribunal emphasized that according to the PHHC's own investigators, therein defendants Tiongco and Escasa were "bona fide squatters since 1949 and introduced improvements therein ... and that their names were included in the list of bona fide squatters during the census by the PHHC (in 1957)." 16 Thus, in both the cited cases. the actual occupants f the disputed PHHC lots were expressly found to be possessors in good faith. In the instant case as already stated above, there is nothing in the record to warrant the same finding. Herein petitioners further assert that they had already signed a "Conditional Contract To Sell" over the property in question. There is such a document on record as Exhibit "1" (Intervenors) which bear the signatures of petitioners. However, it is not signed by the General Manager of the PHHC. It is, therefore, no contract at all and does not give rise to any enforceable right or demandable obligation. On the facts and by law, private respondent Jorvina has a better right, over petitioners Lapinig and Chavas to Lot 10, Block 156 of the East Avenue Subdivision in Quezon City. The decision brought to Us for review must be affirmed. WHEREFORE, the decision of respondent Court of Appeals dated September 24, 1973 is hereby AFFIRMED. Costs against petitioners. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION

G.R. No. 107207 November 23, 1995 VIRGILIO R. ROMERO, petitioner, vs. HON. COURT OF APPEALS and ENRIQUETA CHUA VDA. DE ONGSIONG, respondents.

VITUG, J.: The parties pose this question: May the vendor demand the rescission of a contract for the sale of a parcel of land for a cause traceable to his own failure to have the squatters on the subject property evicted within the contractually-stipulated period? Petitioner Virgilio R. Romero, a civil engineer, was engaged in the business of production, manufacture and exportation of perlite filter aids, permalite insulation and processed perlite ore. In 1988, petitioner and his foreign partners decided to put up a central warehouse in Metro Manila on a land area of approximately 2,000 square meters. The project was made known to several freelance real estate brokers. A day or so after the announcement, Alfonso Flores and his wife, accompanied by a broker, offered a parcel of land measuring 1,952 square meters. Located in Barangay San Dionisio, Paraaque, Metro Manila, the lot was covered by TCT No. 361402 in the name of private respondent Enriqueta Chua vda. de Ongsiong. Petitioner visited the property and, except for the presence of squatters in the area, he found the place suitable for a central warehouse. Later, the Flores spouses called on petitioner with a proposal that should he advance the amount of P50,000.00 which could be used in taking up an ejectment case against the squatters,

private respondent would agree to sell the property for only P800.00 per square meter. Petitioner expressed his concurrence. On 09 June 1988, a contract, denominated "Deed of Conditional Sale," was executed between petitioner and private respondent. The simply-drawn contract read: DEED OF CONDITIONAL SALE
KNOW ALL MEN BY THESE PRESENTS:

This Contract, made and executed in the Municipality of Makati, Philippines this 9th day of June, 1988 by and between: ENRIQUETA CHUA VDA. DE ONGSIONG, of legal age, widow, Filipino and residing at 105 Simoun St., Quezon City, Metro Manila, hereinafter referred to as the VENDOR; -andVIRGILIO R. ROMERO, married to Severina L. Lat, of Legal age, Filipino, and residing at 110 San Miguel St., Plainview Subd., Mandaluyong Metro Manila, hereinafter referred to as the VENDEE: W I T N E S S E T H : That WHEREAS, the VENDOR is the owner of One (1) parcel of land with a total area of ONE THOUSAND NINE HUNDRED FIFTY TWO (1,952) SQUARE METERS, more or less, located in Barrio San Dionisio, Municipality of Paraaque, Province of Rizal, covered by TCT No. 361402 issued by the Registry of Deeds of Pasig and more particularly described as follows:

xxx xxx xxx WHEREAS, the VENDEE, for (sic) has offered to buy a parcel of land and the VENDOR has accepted the offer, subject to the terms and conditions hereinafter stipulated: NOW, THEREFORE, for and in consideration of the sum of ONE MILLION FIVE HUNDRED SIXTY ONE THOUSAND SIX HUNDRED PESOS (P1,561,600.00) ONLY, Philippine Currency, payable by VENDEE to in to (sic) manner set forth, the VENDOR agrees to sell to the VENDEE, their heirs, successors, administrators, executors, assign, all her rights, titles and interest in and to the property mentioned in the FIRST WHEREAS CLAUSE, subject to the following terms and conditions: 1. That the sum of FIFTY THOUSAND PESOS (P50,000.00) ONLY Philippine Currency, is to be paid upon signing and execution of this instrument. 2. The balance of the purchase price in the amount of ONE MILLION FIVE HUNDRED ELEVEN THOUSAND SIX HUNDRED PESOS (P1,511,600.00) ONLY shall be paid 45 days after the removal of all squatters from the above described property. 3. Upon full payment of the overall purchase price as aforesaid, VENDOR without necessity of demand shall immediately sign, execute, acknowledged (sic) and deliver the corresponding deed of absolute sale in favor of the VENDEE free

from all liens and encumbrances and all Real Estate taxes are all paid and updated. It is hereby agreed, covenanted and stipulated by and between the parties hereto that if after 60 days from the date of the signing of this contract the VENDOR shall not be able to remove the squatters from the property being purchased, the downpayment made by the buyer shall be returned/reimbursed by the VENDOR to the VENDEE. That in the event that the VENDEE shall not be able to pay the VENDOR the balance of the purchase price of ONE MILLION FIVE HUNDRED ELEVEN THOUSAND SIX HUNDRED PESOS (P1,511,600.00) ONLY after 45 days from written notification to the VENDEE of the removal of the squatters from the property being purchased, the FIFTY THOUSAND PESOS (P50,000.00) previously paid as downpayment shall be forfeited in favor of the VENDOR. Expenses for the registration such as registration fees, documentary stamp, transfer fee, assurances and such other fees and expenses as may be necessary to transfer the title to the name of the VENDEE shall be for the account of the VENDEE while capital gains tax shall be paid by the VENDOR. IN WITNESS WHEREOF, the parties hereunto signed those (sic) presents in the City of Makati MM, Philippines on this 9th day of June, 1988. (Sgd.) (Sgd.) VIRGILIO R. ROMERO ENRIQUETA CHUA VDA.

DE ONGSIONG Vendee Vendor SIGNED IN THE PRESENCE OF: (Sgd.) (Sgd.)

Rowena C. Ongsiong Jack M. Cruz
1

Alfonso Flores, in behalf of private respondent, forthwith received and acknowledged a check for P50,000.00 2 from petitioner. 3 Pursuant to the agreement, private respondent filed a complaint for ejectment (Civil Case No. 7579) against Melchor Musa and 29 other squatter families with the Metropolitan Trial Court of Paraaque. A few months later, or on 21 February 1989, judgment was rendered ordering the defendants to vacate the premises. The decision was handed down beyond the 60-day period (expiring 09 August 1988) stipulated in the contract. The writ of execution of the judgment was issued, still later, on 30 March 1989. In a letter, dated 07 April 1989, private respondent sought to return the P50,000.00 she received from petitioner since, she said, she could not "get rid of the squatters" on the lot. Atty. Sergio A.F. Apostol, counsel for petitioner, in his reply of 17 April 1989, refused the tender and stated:.
Our client believes that with the exercise of reasonable diligence considering the favorable decision rendered by the Court and the writ of execution issued pursuant thereto, it is now possible to eject the squatters from the premises of the subject property, for which reason, he proposes that he shall take it upon himself to eject the squatters, provided, that expenses which shall be incurred by reason thereof 4 shall be chargeable to the purchase price of the land.

Meanwhile, the Presidential Commission for the Urban Poor ("PCUD"), through its Regional Director for Luzon, Farley O. Viloria, asked the Metropolitan Trial Court of Paraaque for a grace period of 45 days from 21 April 1989 within which to

relocate and transfer the squatter families. Acting favorably on the request, the court suspended the enforcement of the writ of execution accordingly. On 08 June 1989, Atty. Apostol reminded private respondent on the expiry of the 45-day grace period and his client's willingness to "underwrite the expenses for the execution of the judgment and ejectment of the occupants."5 In his letter of 19 June 1989, Atty. Joaquin Yuseco, Jr., counsel for private respondent, advised Atty. Apostol that the Deed of Conditional Sale had been rendered null and void by virtue of his client's failure to evict the squatters from the premises within the agreed 60-day period. He added that private respondent had "decided to retain the property." 6 On 23 June 1989, Atty. Apostol wrote back to explain: The contract of sale between the parties was perfected from the very moment that there was a meeting of the minds of the parties upon the subject lot and the price in the amount of P1,561,600.00. Moreover, the contract had already been partially fulfilled and executed upon receipt of the downpayment of your client. Ms. Ongsiong is precluded from rejecting its binding effects relying upon her inability to eject the squatters from the premises of subject property during the agreed period. Suffice it to state that, the provision of the Deed of Conditional Sale do not grant her the option or prerogative to rescind the contract and to retain the property should she fail to comply with the obligation she has assumed under the contract. In fact, a perusal of the terms and conditions of the contract clearly shows that the right to rescind the contract and to demand the return/reimbursement of the downpayment is granted to our client for his protection.

Instead, however, of availing himself of the power to rescind the contract and demand the return, reimbursement of the downpayment, our client had opted to take it upon himself to eject the squatters from the premises. Precisely, we refer you to our letters addressed to your client dated April 17, 1989 and June 8, 1989. Moreover, it is basic under the law on contracts that the power to rescind is given to the injured party. Undoubtedly, under the circumstances, our client is the injured party. Furthermore, your client has not complied with her obligation under their contract in good faith. It is undeniable that Ms. Ongsiong deliberately refused to exert efforts to eject the squatters from the premises of the subject property and her decision to retain the property was brought about by the sudden increase in the value of realties in the surrounding areas.
Please consider this letter as a tender of payment to your client and a demand to 7 execute the absolute Deed of Sale.

A few days later (or on 27 June 1989), private respondent, prompted by petitioner's continued refusal to accept the return of the P50,000.00 advance payment, filed with the Regional Trial Court of Makati, Branch 133, Civil Case No. 89-4394 for rescission of the deed of "conditional" sale, plus damages, and for the consignation of P50,000.00 cash. Meanwhile, on 25 August 1989, the Metropolitan Trial Court issued an alias writ of execution in Civil Case No. 7579 on motion of private respondent but the squatters apparently still stayed on. Back to Civil Case No. 89-4394, on 26 June 1990, the Regional Trial Court of Makati 8 rendered decision holding that private respondent had no right to rescind the contract since it was she

who "violated her obligation to eject the squatters from the subject property" and that petitioner, being the injured party, was the party who could, under Article 1191 of the Civil Code, rescind the agreement. The court ruled that the provisions in the contract relating to (a) the return/reimbursement of the P50,000.00 if the vendor were to fail in her obligation to free the property from squatters within the stipulated period or (b), upon the other hand, the sum's forfeiture by the vendor if the vendee were to fail in paying the agreed purchase price, amounted to "penalty clauses". The court added:
This Court is not convinced of the ground relied upon by the plaintiff in seeking the rescission, namely: (1) he (sic) is afraid of the squatters; and (2) she has spent so much to eject them from the premises (p. 6, tsn, ses. Jan. 3, 1990). Militating against her profession of good faith is plaintiffs conduct which is not in accord with the rules of fair play and justice. Notably, she caused the issuance of an alias writ of execution on August 25, 1989 (Exh. 6) in the ejectment suit which was almost two months after she filed the complaint before this Court on June 27, 1989. If she were really afraid of the squatters, then she should not have pursued the issuance of an alias writ of execution. Besides, she did not even report to the police the alleged phone threats from the squatters. To the mind of the Court, the so-called 9 squatter factor is simply factuitous (sic).

The lower court, accordingly, dismissed the complaint and ordered, instead, private respondent to eject or cause the ejectment of the squatters from the property and to execute the absolute deed of conveyance upon payment of the full purchase price by petitioner. Private respondent appealed to the Court of Appeals. On 29 May 1992, the appellate court rendered its decision.10 It opined that the contract entered into by the parties was subject to a resolutory condition, i.e., the ejectment of the squatters from the land, the non-occurrence of which resulted in the failure of the object of the contract; that private respondent substantially complied with her obligation to evict the squatters; that it was petitioner who was not ready to pay the purchase price and fulfill his part of the contract, and that the provision requiring a mandatory return/reimbursement of the P50,000.00 in case private respondent would fail to eject the squatters within the 60day period was not a penal clause. Thus, it concluded.

WHEREFORE, the decision appealed from is REVERSED and SET ASIDE, and a new one entered declaring the contract of conditional sale dated June 9, 1988 cancelled and ordering the defendant-appellee to accept the return of the downpayment in the amount of P50,000.00 which was deposited in the court 11 below. No pronouncement as to costs.

Failing to obtain a reconsideration, petitioner filed this petition for review on certiorari raising issues that, in fine, center on the nature of the contract adverted to and the P50,000.00 remittance made by petitioner. A perfected contract of sale may either be absolute or conditional 12 depending on whether the agreement is devoid of, or subject to, any condition imposed on the passing of title of the thing to be conveyed or on theobligation of a party thereto. When ownership is retained until the fulfillment of a positive condition the breach of the condition will simply prevent the duty to convey title from acquiring an obligatory force. If the condition is imposed on an obligation of a party which is not complied with, the other party may either refuse to proceed or waive said condition (Art. 1545, Civil Code). Where, of course, the condition is imposed upon the perfection of the contract itself, the failure of such condition would prevent the juridical relation itself from coming into existence. 13 In determining the real character of the contract, the title given to it by the parties is not as much significant as its substance. For example, a deed of sale, although denominated as a deed of conditional sale, may be treated as absolute in nature, if title to the property sold is not reserved in the vendor or if the vendor is not granted the right to unilaterally rescind the contract predicated on the fulfillment or non-fulfillment, as the case may be, of the prescribed condition. 14 The term "condition" in the context of a perfected contract of sale pertains, in reality, to the compliance by one party of an undertaking the fulfillment of which would beckon, in turn, the demandability of the reciprocal prestation of the other party. The

reciprocal obligations referred to would normally be, in the case of vendee, the payment of the agreed purchase price and, in the case of the vendor, the fulfillment of certain express warranties (which, in the case at bench is the timely eviction of the squatters on the property). It would be futile to challenge the agreement here in question as not being a duly perfected contract. A sale is at once perfected when a person (the seller) obligates himself, for a price certain, to deliver and to transfer ownership of a specified thing or right to another (the buyer) over which the latter agrees. 15 The object of the sale, in the case before us, was specifically identified to be a 1,952-square meter lot in San Dionisio, Paraaque, Rizal, covered by Transfer Certificate of Title No. 361402 of the Registry of Deeds for Pasig and therein technically described. The purchase price was fixed at P1,561,600.00, of which P50,000.00 was to be paid upon the execution of the document of sale and the balance of P1,511,600.00 payable "45 days after the removal of all squatters from the above described property." From the moment the contract is perfected, 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. Under the agreement, private respondent is obligated to evict the squatters on the property. The ejectment of the squatters is a condition the operative act of which sets into motion the period of compliance by petitioner of his own obligation, i.e., to pay the balance of the purchase price. Private respondent's failure "to remove the squatters from the property" within the stipulated period gives petitioner the right to either refuse to proceed with the agreement or waive that condition in consonance with Article 1545 of the Civil Code. 16This option clearly belongs to petitioner and not to private respondent.

We share the opinion of the appellate court that the undertaking required of private respondent does not constitute a "potestative condition dependent solely on his will" that might, otherwise, be void in accordance with Article 1182 of the Civil Code 17 but a "mixed" condition "dependent not on the will of the vendor alone but also of third persons like the squatters and government agencies and personnel concerned." 18 We must hasten to add, however, that where the so-called "potestative condition" is imposed not on the birth of the obligation but on its fulfillment, only the obligation is avoided, leaving unaffected the obligation itself. 19 In contracts of sale particularly, Article 1545 of the Civil Code, aforementioned, allows the obligee to choose between proceeding with the agreement or waiving the performance of the condition. It is this provision which is the pertinent rule in the case at bench. Here, evidently, petitioner has waived the performance of the condition imposed on private respondent to free the property from squatters. 20 In any case, private respondent's action for rescission is not warranted. She is not the injured party. 21 The right of resolution of a party to an obligation under Article 1191 of the Civil Code is predicated on a breach of faith by the other party that violates the reciprocity between them. 22 It is private respondent who has failed in her obligation under the contract. Petitioner did not breach the agreement. He has agreed, in fact, to shoulder the expenses of the execution of the judgment in the ejectment case and to make arrangements with the sheriff to effect such execution. In his letter of 23 June 1989, counsel for petitioner has tendered payment and demanded forthwith the execution of the deed of absolute sale. Parenthetically, this offer to pay, having been made prior to the demand for rescission, assuming for the sake of argument that such a demand is proper under Article 1592 23 of the Civil Code, would likewise suffice to defeat private respondent's prerogative to rescind thereunder.

There is no need to still belabor the question of whether the P50,000.00 advance payment is reimbursable to petitioner or forfeitable by private respondent, since, on the basis of our foregoing conclusions, the matter has ceased to be an issue. Suffice it to say that petitioner having opted to proceed with the sale, neither may petitioner demand its reimbursement from private respondent nor may private respondent subject it to forfeiture. WHEREFORE, the questioned decision of the Court of Appeals is hereby REVERSED AND SET ASIDE, and another is entered ordering petitioner to pay private respondent the balance of the purchase price and the latter to execute the deed of absolute sale in favor of petitioner. No costs. SO ORDERED. Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 179653 July 31, 2009

UNITED MUSLIM AND CHRISTIAN URBAN POOR ASSOCIATION, INC. represented by its President, MANUEL V. BUEN, Petitioner, vs. BRYC-V DEVELOPMENT CORPORATION represented by its President, BENJAMIN QUIDILLA; and SEA FOODS CORPORATION, represented by its Executive Vice President, VICENTE T. HERNANDEZ,Respondents. DECISION NACHURA, J.:

This petition for review on certiorari seeks to set aside the Decision1 of the Court of Appeals (CA) in CA G.R. CV No. 62557 which affirmed in toto the Decision2 of the Regional Trial Court (RTC), Branch 16, Zamboanga City in Civil Case No. 467(4544). The facts are simple. Respondent Sea Foods Corporation (SFC) is the registered owner of Lot No. 300 located in Lower Calainan, Zamboanga City and covered by Transfer Certificate of Title (TCT) No. 3182 (T-576). Sometime in 1991, petitioner United Muslim and Christian Urban Poor Association, Inc. (UMCUPAI), an organization of squatters occupying Lot No. 300, through its President, Carmen T. Diola, initiated negotiations with SFC for the purchase thereof. UMCUPAI expressed its intention to buy the subject property using the proceeds of its pending loan application with National Home Mortgage Finance Corporation (NHMF). Thereafter, the parties executed a Letter of Intent to Sell by [SFC] and Letter of Intent to Purchase by UMCUPAI, providing, in pertinent part: WHEREAS, [SFC] is the registered owner of a parcel [of] land designated as Lot No. 300 situated in Lower Calarian, Zamboanga City, consisting of 61,736 square meters, and more particularly described in Transfer Certificate of Title No. 576 of the Registry of Deeds of Zamboanga City; WHEREAS, UMCUPAI, an association duly registered with the SEC (Registration No. 403410) and duly accredited with the Presidential Commission for the Urban Poor, has approached [SFC] and negotiated for the ACQUISITION of the abovedescribed property of [SFC]; WHEREAS, in pursuance to the negotiations between [SFC] and UMCUPAI, the latter has taken steps with the proper government authorities particularly the Mayor of Zamboanga City and its City Housing Board which will act as "Originator" in the acquisition of

said property which will enable UMCUPAI to avail of its Community Mortgage Program; WHEREAS, it appears that UMCUPAI will ultimately apply with the Home Mortgage and Finance Corporation for a loan to pay the acquisition price of said land; WHEREAS, as one of the steps required by the government authorities to initiate proceedings is to receive a formal manifestation of Intent to Sell from [SFC]; NOW, THEREFORE, for and in consideration of the foregoing premises, the parties hereto agree as follows: 1. [SFC] expressly declares its intention to sell Lot No. 300 with an area of 61,736 square meters situated in Lower Calarian, Zamboanga City and covered by TCT No. 576 of the Registry of Deeds of Zamboanga City to UMCUPAI at the price of P105.00 per square meter, free from all liens, charges and encumbrances; 2. That UMCUPAI hereby expressly declares its intention to buy the aforesaid property and shall endeavor to raise the necessary funds to acquire same at the abovementioned price of P105.00 per square meter; 3. That the Absolute Deed of Sale shall be executed, signed and delivered together with the title and all other pertinent documents upon full payment of the purchase price; 4. That [SFC] shall pay the capital gains tax and documentary stamps, Registration, transfer tax and other expenses shall be paid by the UMCUPAI.3 However, the intended sale was derailed due to UMCUPAIs inability to secure the loan from NHMF as not all its members occupying Lot No. 300 were willing to join the undertaking. Intent on buying the subject property, UMCUPAI, in a series of

conferences with SFC, proposed the subdivision of Lot No. 300 to allow the squatter-occupants to purchase a smaller portion thereof. Consequently, sometime in December 1994, Lot No. 300 was subdivided into three (3) parts covered by separate titles: 1. Lot No. 300-A with an area of 41,460 square meters under TCT No. T-117,448; 2. Lot No. 300-B with an area of 1,405 square meters under TCT No. T-117,449; and 3. Lot No. 300-C with an area of 18,872 square meters under TCT No. T-117,450. On January 11, 1995, UMCUPAI purchased Lot No. 300-A for P4,350,801.58. In turn, Lot No. 300-B was constituted as road right of way and donated by SFC to the local government. UMCUPAI failed to acquire Lot No. 300-C for lack of funds. On March 5, 1995, UMCUPAI negotiated anew with SFC and was given by the latter another three months to purchase Lot No. 300-C. However, despite the extension, the three-month period lapsed with the sale not consummated because UMCUPAI still failed to obtain a loan from NHMF. Thus, on July 20, 1995, SFC sold Lot No. 300-C for P2,547,585.00 to respondent BRYC-V Development Corporation (BRYC). A year later, UMCUPAI filed with the RTC a complaint against respondents SFC and BRYC seeking to annul the sale of Lot No. 300-C, and the cancellation of TCT No. T-121,523. UMCUPAI alleged that the sale between the respondents violated its valid and subsisting agreement with SFC embodied in the Letter of Intent. According to UMCUPAI, the Letter of Intent granted it a prior, better, and preferred right over BRYC in the purchase of Lot No. 300-C.

In refutation, BRYC said that UMCUPAIs complaint did not state a cause of action since UMCUPAI had unequivocally recognized its ownership of Lot No. 300-C when UMCUPAI likewise sent BRYC a Letter of Intent dated August 18, 1995 imploring BRYC to re-sell the subject lot. In a separate Answer, SFC countered that the Letter of Intent dated October 4, 1991 is not, and cannot be considered, a valid and subsisting contract of sale. On the contrary, SFC averred that the document was drawn and executed merely to accommodate UMCUPAI and enable it to comply with the loan documentation requirements of NHMF. In all, SFC maintained that the Letter of Intent dated October 4, 1991 was subject to a condition i.e., payment of the acquisition price, which UMCUPAI failed to do when it did not obtain the loan from NHMF. After trial, the RTC dismissed UMCUPAIs complaint. The lower court found that the Letter of Intent was executed to facilitate the approval of UMCUPAIs loan from NHMF for its intended purchase of Lot No. 300. According to the RTC, the Letter of Intent was simply SFCs declaration of intention to sell, and not a promise to sell, the subject lot. On the whole, the RTC concluded that the Letter of Intent was neither a promise, nor an option contract, nor an offer contemplated under Article 1319 of the Civil Code, or a bilateral contract to sell and buy. As previously adverted to, the CA, on appeal, affirmed in toto the RTCs ruling. Hence, this recourse by UMCUPAI positing a sole issue for our resolution: IS THE LETTER OF INTENT TO SELL AND LETTER OF INTENT TO BUY A BILATERAL RECIPROCAL CONTRACT WITHIN THE MEANING OR CONTEMPLATION OF ARTICLE 1479, FIRST PARAGRAPH, CIVIL CODE OF THE PHILIPPINES?4

The petition deserves scant consideration. We completely agree with the lower courts rulings. Well-entrenched in jurisprudence is the rule that factual findings of the trial court, especially when affirmed by the appellate court, are accorded the highest degree of respect and are considered conclusive between the parties.5A review of such findings by this Court is not warranted except upon a showing of highly meritorious circumstances, such as: (1) when the findings of a trial court are grounded entirely on speculation, surmises or conjectures; (2) when a lower courts inference from its factual findings is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion in the appreciation of facts; (4) when the findings of the appellate court go beyond the issues of the case, or fail to notice certain relevant facts which, if properly considered, would justify a different conclusion; (5) when there is a misappreciation of facts; (6) when the findings of fact are conclusions without mention of the specific evidence on which they are based, or are premised on the absence of evidence, or are contradicted by evidence on record.6 None of the foregoing exceptions necessitating a reversal of the assailed decision obtain in this instance. UMCUPAI is adamant, however, that the CA erred when it applied the second paragraph of Article 1479 of the Civil Code instead of the first paragraph thereof. UMCUPAI urges us that the first paragraph of Article 1479 contemplates a bilateral reciprocal contract which is binding on the parties. Yet, UMCUPAI is careful not to designate the Letter of Intent as a Contract to Sell. UMCUPAI simply insists that the Letter of Intent is not a unilateral promise to sell or buy which has to be supported by a consideration distinct from the price for it to be binding on the promissor. In short, UMCUPAI claims that the Letter of Intent did not merely grant the parties the option to respectively sell or buy the subject property. Although not stated plainly, UMCUPAI claims that the Letter of Intent is equivalent to

a conditional contract of sale subject only to the suspensive condition of payment of the purchase price. UMCUPAI appears to labor under a cloud of confusion. The first paragraph of Article 1479 contemplates the bilateral relationship of a contract to sell as distinguished from a contract of sale which may be absolute or conditional under Article 14587 of the same code. It reads: Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price. The case of Coronel v. Court of Appeals8 is illuminating and explains the distinction between a conditional contract of sale under Article 1458 of the Civil Code and a bilateral contract to sell under Article 1479 of the same code: A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase price. A contract to sell as defined hereinabove, may not even be considered as a conditional contract of sale where the seller may likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition, because in a conditional contract of sale, the first element of consent is present, although it is conditioned upon the happening of a contingent event which may or may not occur. If the suspensive condition is not fulfilled, the perfection of the contract of sale is completely abated. However, if the suspensive condition is fulfilled, the contract of

sale is thereby perfected, such that if there had already been previous delivery of the property subject of the sale to the buyer, ownership thereto automatically transfers to the buyer by operation of law without any further act having to be performed by the seller. In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, ownership will not automatically transfer to the buyer although the property may have been previously delivered to him. The prospective seller still has to convey title to the prospective buyer by entering into a contract of absolute sale. It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases where the subject property is sold by the owner not to the party the seller contracted with, but to a third person, as in the case at bench. In a contract to sell, there being no previous sale of the property, a third person buying such property despite the fulfillment of the suspensive condition such as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the property. There is no double sale in such case. Title to the property will transfer to the buyer after registration because there is no defect in the owner-sellers title per se, but the latter, of course, may be sued for damages by the intending buyer. In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale becomes absolute and this will definitely affect the sellers title thereto. In fact, if there had been previous delivery of the subject property, the sellers ownership or title to the property is automatically transferred to the buyer such that, the seller will no longer have any title to transfer to any third person. Applying Article 1544 of the Civil Code, such second buyer of the property who may have had actual or constructive knowledge of such defect in the sellers title, or at least was charged with the obligation to discover such defect, cannot be a registrant in good faith. Such second buyer

cannot defeat the first buyers title. In case a title is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the sale. In the instant case, however, the parties executed a Letter of Intent, which is neither a contract to sell nor a conditional contract of sale. As found by the RTC, and upheld by the CA, the Letter of Intent was executed to accommodate UMCUPAI and facilitate its loan application with NHMF. The 4th and 5th paragraphs of the recitals (whereas clauses) specifically provide: WHEREAS, it appears that UMCUPAI will ultimately apply with the Home Mortgage and Finance Corporation for a loan to pay the acquisition price of said land; WHEREAS, as one of the steps required by the government authorities to initiate proceedings is to receive a formal manifestation of Intent to Sell from [SFC]. Nowhere in the Letter of Intent does it state that SFC relinquishes its title over the subject property, subject only to the condition of complete payment of the purchase price; nor, at the least, that SFC, although expressly retaining ownership thereof, binds itself to sell the property exclusively to UMCUPAI. The Letter of Intent to Buy and Sell is just that a manifestation of SFCs intention to sell the property and UMCUPAIs intention to acquire the same. This is quite obvious from the reference to the execution of an Absolute Deed of Sale in paragraph three9 of the Letter of Intent. As the CA did, we quote with favor the RTCs disquisition: The Decision in this case hinges on the legal interpretation of the Agreement entered into by SFC and UMCUPAI denominated as "Letter of Intent to Sell by Landowner and Letter of Intent to Purchase by United Muslim and Christian Urban Poor Association, Inc."

Blacks Law Dictionary says that a Letter of Intent is customarily employed to reduce to writing a preliminary understanding of parties who intend to enter into contract. It is a phrase ordinarily used to denote a brief memorandum of the preliminary understanding of parties who intend to enter into a contract. It is a written statement expressing the intention of the parties to enter into a formal agreement especially a business arrangement or transaction. In their Agreement, SFC expressly declared its "intention" to sell and UMCUPAI expressly declared its "intention" to buy subject property. An intention is a mere idea, goal, or plan. It simply signifies a course of action that one proposes to follow. It simply indicates what one proposes to do or accomplish. A mere "intention" cannot give rise to an obligation to give, to do or not to do (Article 1156, Civil Code). One cannot be bound by what he proposes or plans to do or accomplish. A Letter of Intent is not a contract between the parties thereto because it does not bind one party, with respect to the other, to give something, or to render some service (Art. 1305, Civil Code). xxx xxx xxx

The Letter of Intent/Agreement between SFC and UMCUPAI is merely a written preliminary understanding of the parties wherein they declared their intention to enter into a contract of sale. It is subject to the condition that UMCUPAI will "apply with the Home Mortgage and Finance Corporation for a loan to pay the acquisition price of said land." One of the requirements for such loan is "a formal manifestation of Intent to Sell" from SFC. Thus, the Letter of Intent to Sell fell short of an "offer" contemplated in Article 1319 of the Civil Code because it is not a certain and definite proposal to make a contract but merely a declaration of SFCs intention to enter into a contract. UMCUPAIs declaration of intention to buy is also not certain and definite as it is subject to the condition that UMCUPAI shall endeavor to raise funds to acquire subject land. The acceptance of the offer must be absolute; it must be plain and unconditional. Moreover, the Letter

of Intent/Agreement does not contain a promise or commitment to enter into a contract of sale as it merely declared the intention of the parties to enter into a contract of sale upon fulfillment of a condition that UMCUPAI could secure a loan to pay for the price of a land. The Letter of Intent/Agreement is not an "option contract" because aside from the fact that it is merely a declaration of intention to sell and to buy subject to the condition that UMCUPAI shall raise the necessary funds to pay the price of the land, and does not contain a binding promise to sell and buy, it is not supported by a distinct consideration distinct from the price of the land intended to be sold and to be bought x x x No option was granted to UMCUPAI under the Letter of Intent/Agreement to buy subject land to the exclusion of all others within a fixed period nor was SFC bound under said Agreement to Sell exclusively to UMCUPAI only the said land within the fixed period.
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Neither can the Letter of Intent/Agreement be considered a bilateral reciprocal contract to sell and to buy contemplated under Article 1479 of the Civil Code which is reciprocally demandable. The Letter of Intent/Agreement does not contain a PROMISE to sell and to buy subject property. There was no promise or commitment on the part of SFC to sell subject land to UMCUPAI, but merely a declaration of its intention to buy the land, subject to the condition that UMCUPAI could raise the necessary funds to acquire the same at the price of P105.00 per square meter x x x While UMCUPAI succeeded in raising funds to acquire a portion of Lot No. 300-A, it failed to raise funds to pay for Lot No. 300-C. From October 4, 1991 when the Letter of Intent was signed to June, 1995, UMCUPAI had about three (3) years and eight (8) months within which to pursue its intention to buy subject land from SFC. Within that period, UMCUPAI had ample time within which to acquire Lot No. 300-C, as in fact it had acquired Lot No. 300-A which is much bigger than Lot No. 300-C and occupied by

more members of UMCUPAI. The failure of UMCUPAI to acquire Lot No. 300-C before it was sold to BRYC-V cannot be blamed on SFC because all that UMCUPAI had to do was to raise funds to pay for Lot No. 300-C which it did with respect to Lot No. 300A. SFC had nothing to do with SFCs unilateral action through Mrs. Antonina Graciano to "postpone" the processing of the acquisition of Lot No. 300-C, which it referred to as Phase II, until after the payment to SFC of the acquisition price for Lot No. 300A or Phase I x x x WHEREFORE, premises considered, the petition is hereby DENIED. The Decision of the Court of Appeals in CA G.R. CV No. 62557 and the Regional Trial Court in Civil Case No. 467(4544) are AFFIRMED. Costs against the petitioner. SO ORDERED.