Mangayao v.

de Guzman, 55 SCRA 540 (1974)

DECISION

FERNANDO, J.:

A simple and bare recital of the undisputed facts reveals unmistakably the
jurisdictional infirmity of the challenged actuation of respondent Judge of the Court
of First Instance of Zamboanga del Sur. 1 Petitioners after obtaining a judgment in
their favor in a previous case in a lower court and having such decision affirmed on
appeal by this Court were sued in the sala of respondent Judge on the very same
matter thus conclusively disposed of. What is worse, respondent Judge would
restrain the execution of a judgment of this Court no less already final and
executory. Petitioners had no recourse but to institute this certiorari proceeding.
They were right in doing so. Their plea must be granted.

Petitioners are non Christian Filipinos of the Subano tribe. They filed on March 21,
1960 an action for the recovery of property and declaration of nullity of contract
against respondents Santay Lasud and Guintana Cia Lasud in the Court of First
Instance of Zamboanga del Sur, docketed as Civil Case No. 575. They obtained a
decision in their favor, affirmed on appeal by this Court on May 29, 1964. 2 The
decision became final and executory on October 5, 1964. Then on April 1, 1965,
petitioners were by virtue thereof placed in possession of the property in question
private respondents being reimbursed likewise in accordance therewith, in the sum
of five thousand pesos. There was in the meanwhile an action by private
respondents for the annulment of such judgment, notwithstanding its having been
affirmed by this Court and becoming final and executory. Respondent Judge
surprisingly issued an order restraining petitioners Tumipus Mangayao, and
Guimanda Bubungan to desist from executing or causing the execution of the
decision in Civil Case No. 575. 3

It is already apparent why on such a showing this Court immediately issued a

resolution requiring respondents to answer and granting the writ of preliminary
injunction prayed for. The answers were duly forthcoming, both from respondent
Judge and private respondents. As was to be expected, no valid issue could be
raised as to the legal question involved on the above facts. The situation presented
is that of a judgment final and executory, from this Court no less, being sought to
be thwarted by private respondents. What was indeed surprising was the receptivity
of respondent Judge to such an unwarranted move. To give a semblance of
deceptive plausibility, private respondents could only surmise in their answer that
the case before respondent Judge "was very much open for presentation of proof
with respect to the other issues, among which were the question of indefeasibility of
title, unenforceability of contract under the Statute of Frauds; the issue of whether
the transaction was a sale or mortgage; prescription of action; intervention of the
rights of an innocent purchaser for value, . . ." 4
It is much too clear then, that there is a fatal flaw in this attempt, without the least
color of support in law, to reopen a matter conclusively and finally determined by
this Tribunal itself. To repeat, we find, for Petitioners.

1. The well-settled doctrine of the law of the case ought to have cautioned
respondent Judge against the step he took. The latest case in point as of the time
the order complained of was issued is Kabigting v. Acting Director of Prisons, 5 a
1962 decision. As emphasized by the ponente, the then Justice now Chief Justice,
Makalintal: "It need not be stated that the Supreme Court, being the court of last
resort, is the final arbiter of all legal questions properly brought before it and that
its decision in any given case constitutes the law of that particular case. Once its
judgment becomes final it is binding on all inferior courts, and hence beyond their
power and authority to alter or modify. If petitioner had any ground to believe that
the decision of this Court in Special Proceeding No. 12276 should further be
reviewed his remedy was to ask for a reconsideration thereof. In fact he did file two
motions for that purpose, both of which were denied. A new petition before an
inferior court on the same grounds was unjustified. As much, indeed, was clearly
indicated by this Court in its resolution of April 3, 1959, hereinabove reproduced in
its entirety. The import of the resolution is too plain to be misunderstood." 6 So it
has been from 1919, when in Compagnie Franco-Indochinoise v. Deutsche-
Australische Dampschiffs Gesellschaft, 7 this Court, through Justice Street,
categorically declared that a decision that has become the law of the case "is not
subject to review or reversal in any court." 8 What is more, in 1967, there is a
reaffirmation of the doctrine by this Tribunal in People v. Olarte, 9 where it was
stressed by Justice J.B.L. Reyes that a ruling constituting the law of the case, "even
if erroneous, . . . may no longer be disturbed or modified since it has become final .
. ." 10 Then, in Sanchez v. Court of Industrial Relations, 11 promulgated in 1969,
there is the pronouncement that the law of the case "does not apply solely to what
is embodied in [this Court’s] decision but likewise to its implementation carried out
in fealty to what has been . . . decreed." 12 What was done by respondent Judge
appears to be both clearly inexplicable and unjustifiable.

2. There is another aspect that militates as strongly against the actuation of

respondent Judge. Had he taken the trouble of carefully going over our 1964
decision in Mangayao v. Lasud, 13 which is the law of this case, it could not have
escaped his attention that Justice J.B.L. Reyes, as ponente, after noting the plain
and explicit provisions in the Administrative Code 14 and the Public Land Act 15
requiring the approval of the authorities concerned to deeds of sale by illiterate
non-Christians, as petitioners in this case, continued in this wise: "The plain text of
both laws clearly imports that non-approved conveyances and encumbrances of
realty by illiterate non-Christians (which appellees are admitted to be) are not valid,
i.e., not binding or obligatory; they are ab initio void, as correctly held by the
appealed decision. The approval of the executive authority is not in the nature of a
ratification of a defective conveyance; such approval is an essential requisite for its
validity, and without it the proposed contract is absolutely void or inexistent. To
hold the contract as merely voidable, i.e., as operative and binding if not
disapproved, would not only do violence to the text of the statutes that requires
executive approval, and not disapproval, but would nullify the obvious intent of the
statute to guard the patrimony of illiterate non-Christians from those who are
inclined to prey upon their ignorance or ductility (Porkan v. Yatco, 70 Phil. 161;
Porkan v. Navarro, 73 Phil. 698; Madale v. Sa Raya, 49 Off. Gaz. 536), since it is
not to be expected that the illiterate non-Christian who signs away his real property
for lack of instructions and discrimination, would thereafter be sharp enough to ask
the executive authority to refuse approval of his contract; nor would the literate
buyer be at all likely to do so. The net result of appellants’ ‘voidable conveyance’
theory, therefore, would be that the illiterate non-Christian could be stripped of his
immovable just as if the protective statutes heretofore quoted had not been
enacted at all." 16 Respondent Judge thus did manifest a failure to abide not only
by a final decision of this Court, but by the clear policy of the law given expression
in such vigorous and forthright language by Justice J.B.L. Reyes. When it is further
considered that the unrest in that region of the Philippines is partly attributed to the
exploitation of the poor and the oppressed perpetrated by those with means,
irrespective of the faith that they profess, it becomes even more manifest why
respondent Judge must be taken to task. The trend in our fundamental law set forth
in general language in the 1935 Constitution by the adoption of the social justice
principle, 17 made more explicit in the present Constitution 18 is, to repeat an
aphorism of the late President Magsaysay, that "he who has less in life should have
more in law." Independently then of the applicability of the law of the case doctrine,
this petition is meritorious.

WHEREFORE, the writ of certiorari is granted and the order of the lower court of
April 29, 1965 for the issuance of a preliminary injunction is nullified and set aside.
Respondent Judge, or whoever is acting in his place, is directed to dismiss Civil
Case No. 798 of the Court of First Instance of Zamboanga del Sur entitled, "Santay
Lasud and Guintana Cia Lasud v. Mangayao, Bubungan, The Development Bank of
the Philippines and the Province of Zamboanga del Sur" for annulment of judgment
with preliminary injunction filed by private respondents Santay Lasud and Guintana
Cia Lasud. The writ of preliminary injunction issued by this Court by virtue of its
resolution of September 10, 1965 is made permanent. With costs against
respondents.

Zaldivar, Barredo, Antonio, Fernandez and Aquino, JJ., concur.

De Leon v. CA, GR# 88788 (1992)

DECISION

CRUZ, J.:

The petitioner is challenging the purported sale to the private respondents of two
parcels of land which he claims is his own by right of inheritance.
The said properties were part of the Buenavista Estate, which had been purchased
by the Republic of the Philippines for distribution among landless tenants and
farmers. On April 1, 1955, Lot No. S-117 thereof, covering over 14,200 square
meters, was sold to Manuel de Leon by the Department of Agriculture on behalf of
the Republic. On August 5, 1969, Lot 43 thereof, consisting of 11,847 square
meters, was also sold by the Republic, through the Land Authority, to the heirs of
annulled Leon, represented by the herein petitioner, his grandson. chanrobles law library : red

The first Deed of Sale carried the following limitation on the disposition of the
land: chanrob1es virtual 1aw library

1. That it shall not be sold, assigned, encumbered, mortgaged or transferred, within

the period of five (5) years from the date hereof without first obtaining the written
consent of the Secretary of Agriculture and Natural Resources.

2. That except by hereditary succession, it shall not be conveyed, transferred or

assigned in favor of any person who is not landless and disqualified to acquire or
own land in the Philippines.

The second sale was subject to a similar condition, thus: chanrob1es virtual 1aw library

1. . . .

2. That except by hereditary succession it shall not be subdivided, sold or in any

manner transferred or encumbered, within the period of FIFTEEN (15) years from
the date of execution hereof, without first obtaining the written consent of Governor
of the Land Authority and only to persons who are qualified to purchased said land
under Commonwealth Act No. 539, Republic Act No. 1162, as amended, Republic
Act No. 1400 as amended and/or Republic Act No. 3844 or to government banking
institutions or agencies or to any private banking institutions.

On July 24, 1969, the herein private respondents filed a complaint against the
petitioner for partition of the lands and accounting in the Court of First Instance of
Bulacan. They alleged that they had bought 1/2 of the lands from Maria de los
Santos, the widow of Manuel de Leon, by virtue of a "Tuluyang Bilihan" dated March
18, 1959. 1 She had filed to deliver possession to them until her death on February
5, 1960. The petitioner, who had succeeded her in the lands, had resisted their
demands for accounting of the income from the said properties. chanrobles.com:cralaw:red

In his answer, the petitioner averred that the subject properties belonged to him as
the sole heir of Manuel de Leon. The alleged "Tuluyang Bilihan" was a nullity
because Maria de los Santos had no authority to convey the properties during the
prohibited period without the written consent of the appropriate authorities.

After trial, Judge Benigno M. Puno sustained the private respondents in a decision
dated April 15, 1977. 2 This was affirmed on appeal by the respondent court on
February 16, 1989, and reconsideration was denied on June 15, 1989. 3
The Court of Appeals agreed that the "Tuluyang Bilihan" was genuine and valid and
that the alleged lack of the stipulated written consent could be invoked only by the
Republic of the Philippines and not by the petitioner. He was not a party to the
"Tuluyang Bilihan." Besides, the said stipulations were not applicable to cases of
hereditary succession, and De los Santos, who sold the lands, was the heir of her
husband, Manuel de Leon.

The petitioner has come to this Court for relief. Specifically, he claims that the
Court of Appeals should not have recognized the "Tuluyang Bilihan" as valid
because the contents thereof were not explained to Maria de los Santos. He repeats
his argument that the sale, assuming it was not simulated, violated the conditions
above-quoted and was therefore void. He also insists that the complaint was barred
by laches or prescriptions and that he should not have been prevented from
invoking the dead man’s statute.

We hold first of all that the stipulations in the first deed of sale in favor of Manuel
de Leon were binding on his heirs, who were also bound directly this time, by the
similar stipulations in the second deed of sale.

The purpose of these stipulations was to keep within the family the property which
the government had sold to the tenant or farmer for a minimum cost to enable him
to acquire his own land. Hence, it was necessary for Maria de los Santos, before
selling the subject properties to the private respondents, to first secure the written
consent to such sale of the Secretary of Agriculture and Natural Resources (in the
case of the first lot) and of the Governor of the Land Authority (in the case of the
second lot).

The only exception to the said conditions is when the land is acquired by or
transferred to another person by hereditary succession. Thus, when the lands were
inherited by Maria de los Santos as the surviving spouse of Manuel de Leon, there
was no need for such written consent. But such consent was still necessary when,
as transferee of the properties, she later sold them to the private respondents. The
lands were transferred to the private respondents by virtue of the "Tuluyang
Bilihan" and not by hereditary succession. To be valid, therefore, the sale needed
the written consent of the above-named officials. chanrobles law library

There is no pretense that such consent was ever obtained.

We disagree with the respondent court that because Maria de los Santos acquired
the subject lands by hereditary successions she was thereby released from the
conditions of the sales made on April 1, 1955, and August 5, 1969. There is no
reason why, as heir, she should be treated less strictly than her predecessor-in-
interest in the disposition of the lands during the prohibited period.

The Court has held as follows: chanrob1es virtual 1aw library

It is undisputed that Free Patent No. 298112 was issued to petitioner Apolonio Egao
over Lot No. 662 on 12 August, 1965. Sec. 118 of Commonwealth Act No. 141, as
amended, prohibits the alienation or encumbrance, within a period of five (5) years
from the date of issuance of the patent, of lands acquired under free patent or
homestead. Assuming, arguendo, the authenticity of the Deeds of Sale executed by
the Egaos in favor of Marfori over portions of Lot No. 662 (the land in question),
dated 7 May 1964, 14 January and 6 October 1965, it clearly appears that all deeds
were executed within the prohibited period of five (5) years. As correctly found by
the appellate court —

Section 124 of the Public Land Act provided (sic) that any acquisition, conveyance,
alienation, transfer or other contract made or executed in violation of any of the
provisions of Sections 118, 121, 120, 122 and 123 of this Act shall be unlawful, null
and void from its execution and shall produce the effect of annulling and canceling
the grant, title, patent or permit originally issued, recognized or confirmed, actually
or - prescriptively, and cause the reversion of the property and its improvements to
the state.

x          x           x

Deeds of sale of patented lands, perfected within the prohibited five (5) year period
are null and void (Sec. 124, Public Land Act). No title passed from the Egaos to
Marfori which could be validly transferred to herein respondents Bontilao and
Dignos. Nemo dat quod non habet (nobody can dispose of that which does not
belong to him). 4

. . . The restrictions and qualifications attached to every alienation of these lands

are mandatory, with the primordial aim to preserve land grants to the family of the
applicant for free patent. 5

. . . The provision of the law which prohibits the sale or encumbrance of the
homestead within five years after the grant of the patent is mandatory, the purpose
of the law being to promote a definite public policy, which is to preserve and keep
in the family of the patentee that portion of the public land which the State had
gratuitously given to them. 6

. . . [W]e have consistently ruled that a sale of the homestead within the 5-year
prohibitive period is void ab initio and the same cannot be ratified nor can it acquire
validity through the passage of time. 7

While these cases referred to homestead and free patents, we do not see why the
above doctrine should not also apply to the case at bar. The reason for the a
distribution and sale of the Buenavista Estate was also to promote the distribution
of land for the landless conformably to the constitutional intent. While it is true that
the lots were not granted outright or for free, the purchase price thereof was
intentionally minimal, precisely to enable the buyers to acquire the lots under the
easiest terms. Thus, in the dispute before us, the first lot was sold for only P177.50
and the second lot for only P236.94. The two lots covered a total area of more than
two and a half hectares. chanrobles virtual lawlibrary
In holding that only the Republic of the Philippines could question the validity of the
"Tuluyang Bilihan" on the ground of non-compliance with the consent stipulations,
the Court of Appeals is supported by ample jurisprudence. Thus: chanrob1es virtual 1aw library

Furthermore, a private individual may not bring an action for reversion or any
action which would have the effect of canceling 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 the Solicitor General or the
officer acting in his stead may do so. 8

. . . [T]he forfeiture of a homestead is a matter between the State and the grantee
or his heirs, and that until the State had taken steps to annul the grant and asserts
title to the homestead the purchaser is, also against the vendor or his heirs, no
more entitled to keep the land than any intruder. 9

. . . [W]hen a grant of land is made by the government, the question of its validity
is a matter between the grantor and the grantee, and unless the point is raised by
the - Government and the grant is set aside, a third person cannot question the
legality of the concession. 10

On the other hand, no less than Manresa has expressed the contrary view, based
on the public policy that an heir, like the herein petitioner, cannot be prevented
from inheriting property rightfully belonging to his predecessor. 11

In any event, as the "Tuluyang Bilihan" was null and void ab initio, ownership of the
disputed lands was not transferred to the private respondents but remained with
Maria de los Santos. The Republic of the Philippines, if not the petitioner, may still
ask for the reversion of the properties to the State for violation of the conditions in
the deeds of sale. Meanwhile the petitioner would have preferential rights of
possession thereover vis-a-vis the private respondents, who rely only on the void
"Tuluyang Bilihan." chanrobles law library : red

Thus, as we held in the Egao cases: chanrob1es virtual 1aw library

While the government has not taken steps to assert its title, by reversion, to a
homestead sold on violation of the Public Land Act, the vendor or his heirs is better
entitled to the possession of the land, the vendees being in no better situation than
any intruder.

It is only fair, however, that the private respondents be allowed to at least recover
the purchase price of the land, with legal interest from the time of the execution of
the Tuluyang Bilihan until the refund is actually made. This ruling is based on the
findings of the lower court that the said instrument, although deficient for lack of
the required consent, was validly executed.

We shall support this factual finding because the petitioner was rather ambivalent
in assailing the authenticity of the "Tuluyang Bilihan." At first he doubted its
genuineness because it was only thumbprinted and not signed by Maria de los
Santos. On appeal, he alleged that the contents of the instruments should have
been explained to her because she was illiterate.

In view of the above resolutions, it is no longer necessary to examine the other

objections raised in the petition.

WHEREFORE, the challenged decision of the Court of Appeals is REVERSED and a

new judgment is rendered: a) declaring the "Tuluyang Bilihan" dated March 18,
1959, null and void ab initio for violation of the conditions stipulated in the Deed of
Sale dated April 1, 1955, and the Deed of Sale dated August 5, 1969; b)
recognizing the petitioner’s preferential right to the possession of the subject
properties, without prejudice to the right of the State to ask for its reversion to it
for violation of the conditions of the said Deeds of Sale; and c) requiring the
petitioner to refund to the private respondents the amount of P2,300.00, the
consideration of the annulled "Tuluyang Bilihan," with legal interest thereon from
March 18, 1959, until it is fully paid. No pronouncement as to costs. chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph

SO ORDERED.

Griño-Aquino, Medialdea and Bellosillo, JJ., concur.

DONATO REYES YAP and MELITONA MARAVILLAS, petitioners,

vs.
HON. EZEKIEL S. GRAGEDA, as Judge of the Court of First Instance of Albay and JOSE A.
RICO, respondents.

Jose P. Oira for petitioners.

Rodolfo A. Madrid for respondents.

GUTIERREZ, JR., J.:

We are asked in this petition to review the amended decision of the respondent court which declared
as absolutely null and void the sale of a residential lot in Guinobatan, Albay to a Chinese national
and ordered its reconveyance to the vendors thirty years after the sale inspite of the fact that the
vendee had been a naturalized Filipino citizen for fifteen years at the time.

We grant the petition. The questioned decision and the order amending it are reversed and set
aside.

The facts are not disputed.

On April 12, 1939, Maximino Rico, for and in his own behalf and that of the minors Maria Rico,
Filomeno Rico, Prisco Rico, and Lourdes' Rico, executed a Deed of Absolute Sale (Annex 'A' to the
complaint) over Lot 339 and a portion of Lot 327 in favor of the petitioner Donato Reyes Yap who
was then a Chinese national. Respondent Jose A. Rico is the eldest son of Maximino Rico, one of
the vendors in Annex 'A'.

Subsequently, the petitioner as vendee caused the registration of the instrument of sale and the
cancellation of Original Certificates of Title Nos. 29332 and 29410 and the consequent issuance in
his favor of Transfer Certificate of Title No. T-2433 covering the two lots subject matter of the
Contract of Sale.

After the lapse of nearly fifteen years from and after the execution of the deed of absolute sale,
Donato Reyes Yap was admitted as a Filipino citizen and allowed to take his oath of allegiance to
the Republic of the Philippines. He was, thereafter, issued Certificate of Naturalization No. 7, File
No. 19 of the Court of First Instance of Albay.

On December 1, 1967, the petitioner ceded the major portion of Lot No. 327 consisting of 1,078
square meters which he acquired by purchase under the deed of sale in favor of his engineer son,
Felix Yap, who was also a Filipino citizen because of the Filipino citizenship of his mother and the
naturalization of his father Donato Reyes Yap.

Subsequently, Lourdes Rico, aunt and co-heir of respondent Jose A. Rico. sold the remaining
portion of Lot 327 to the petitioner who had his rights thereon duly registered under Act 496.
Petitioner, Donato Reyes Yap, has been in possession of the lots in question since 1939, openly,
publicly, continuously, and adversely in the concept of owner until the present time. The petitioner
has one surviving son by his first marriage to a Filipino wife. He has five children by his second
marriage also to a Filipina and has a total of 23 grandchildren all of whom are Filipino citizens.

The respondent court considered Section 5, Article XIII of the 1935 Constitution that "no private
agricultural land shall be transferred or assigned except to individuals, corporations, or associations
qualified to acquire or hold lands of the public domain in the Philippines" to be an absolute and
unqualified prohibition and, therefore, ruled that a conveyance contrary to it would not be validated
nor its void nature altered by the subsequent naturalization of the vendee.

The dispositive portion of the amended decision reads:

WHEREFORE, in view of all the foregoing, the Contract of Sale embodied in the
'Escritura de Compra Venta' which is attached to the Complaint as Annex 'A', is
hereby declared null and void ab initio and without any legal force and effect.

The action to recover Lot 339 of the Cadastral Survey of Guinobatan, Albay, covered
by Transfer Certificate of Title No. T2433. and Lot 327 covered by the same Transfer
Certificate of Title, is hereby granted to plaintiff, upon payment of the consideration
price of P150.00 and declaring plaintiff as the lawful owner and entitled to the
possession thereof.

Defendant Donato Reyes Yap is hereby ordered to produce his Transfer Certificate
of Title No. T-2433 to the Register of Deeds of Albay, so as to enable said office to
make the due and proper annotations on said title as well as in the original of the
declaration of nullity as herein adjudged. Let Transfer Certificate of Title issued to
plaintiff, concerning said Lots 339 and 327 of the Cadastral Survey of Guinobatan,
Albay.
 COSTS AGAINST DEFENDANTS.

The rulings in Vasquez v.Leng Seng Giap et al. (96 Phil. 447) and Sarosa Vda. de Bersabia v.
Cuenco (113 SCRA 547) sustain the petitioner's contentions. We stated in Sarosa Vda de Bersabia:

There should be no question that the sale of the land in question in 1936 by Epifania
to Ong King Po was inexistent and void from the beginning (Art. 1409 [7], Civil Code)
because it was a contract executed against the mandatory provision of the 1935
Constitution, which is an expression of public policy to conserve lands for the
Filipinos. Said provision reads:

Save in cases of hereditary succession, no private agricultural land

shall be transferred or assigned except to in. individuals,
corporations, or associations, qualified to acquire or hold lands of the
public domain.

Had this been a suit between Epifania and Ong King Po she could have been
declared entitled to the litigated land on the basis, as claimed, of the ruling in
Philippine Banking Corporation vs. Lui She, reading:

... For another thing, and this is not only cogent but also important.
Article 1416 of the Civil Code provides as an exception to the rule
on pari delicto that when the agreement is not illegal per se but is
merely prohibited, and the prohibition by the law is designed for the
protection of the plaintiff, he may, if public policy is thereby enhanced,
recover what he has sold or delivered. ...

But the factual set-up has changed. The litigated property is now in the hands of a
naturalized Filipino. It is no longer owned by a disqualified vendee. Respondent, as a
naturalized citizen, was constitutionally qualified to own the subject property. There
would be no more public policy to be served in allowing petitioner Epifania to recover
the land as it is already in the hands of a qualified person. Applying by analogy the
ruling of this Court in Vasquez vs. Giap and Leng Seng Giap & Sons:

... if the ban on aliens from acquiring not only agricultural but also
urban lands, as construed by this Court in the Krivenko case, is to
preserve the nation's lands for future generations of Filipinos, that
aim or purpose would not be thwarted but achieved by making lawful
the acquisition of real estate by aliens who became Filipino citizens
by naturalization.

Only recently, we had occasion to reiterate the above rulings in Vicente Godines v. Fong Pak
Luen, et al. (G.R. No. L-36731, January 27, 1983).

WHEREFORE, the amended judgment of the respondent court is hereby REVERSED and SET
ASIDE. The complaint is DISMISSED.

SO ORDERED.

Teehankee (Chairman), Melencio-Herrera, Plana, Vasquez and Relova, JJ., concur.

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 property located 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).
1äwphï1.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).
1äwphï1.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 days from 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). 1äwphï1.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.

LORENZO ZAYCO, DIONISIO INZA, and SEVERINO LIZARRAGA, plaintiffs-appellants,

vs.
SALVADOR SERRA, VENANCIO CONCEPCION, and PHIL. C. WHITAKER, defendants-
appellees.

A. P. Seva, Montinola, Montinola and Hontiveros and J. M. Arroyo for appellants.

Antonio Sanz, Perkins and Kincaid and Emilio I. Hilado for appellee Serra.
No appearance for the others appellees.

AVANCEÑA, J.:

On November 7, 1918, the plaintiff, Lorenzo Zayco, and the defendant, Salvador Serra, entered into
a contract, the pertinent clauses of which are following:

1. That the party of the first part shall give the party of the second part an option to buy
the Palma Central for the sum of one million pesos (P1,000,000).

xxx     xxx     xxx

4. That in the case the purchase of the Palma Central is made and the party of the second
part cannot pay the whole price in cash, then he will be given a period not exceeding three
years within which to make the full payment, computed from the day of the execution of the
contract of sale, provided that the party of the second part gives a security or bond to the
satisfaction of the party of the first part to guarantee the payment of the balance of the
purchase price, with interest thereon at a reasonable rate.

xxx     xxx     xxx

6. That this option of the party of the second part to purchase the Palma Central, or to
become a partner of, or join, the party of the first, expires on the 30th of June, 1919.

7. That hereafter, in case of the sale of the Palma Central, or the formation of a partnership
to operate the same, the party of the second part shall have preference to make such sale,
or become a partner, over any other persons desiring to purchase the central or enter into
partnership.

Under date of June 28, 1919, the plaintiff, Lorenzo Zayco, through his attorney, wrote a letter
(Exhibit A) to the defendant, Salvador Serra, accepting the foregoing contract and placing at his
disposal a cash order of the Bank of the Philippine Islands of Iloilo in the amount of P100,000, in part
payment of the price of the Palma Central and Estate. In this letter, notice was also given to Serra
that the Philippine National Bank agreed to transfer his long term loan of P600,000, to the account of
Zayco and to hold the latter responsible for all the amounts had and received on account of this loan,
Serra to be completely relieved from all responsibility arising therefrom. Offer was further made in
this letter to give the bond required by the contract of November 7, 1918, to secure the payment of
the balance of the price of the Palma Central and Estate. The letter ended with a demand by Zayco
on Serra to execute the deed of sale. Serra had knowledge of this letter on June 30, 1919, as may
be inferred from his answer bearing that date (Exhibit C). On the following 15th of July, Serra wrote
to Zayco's attorney, stating that the option contract of November 7, 1918, was cancelled and
annulled.

On the same day, June 30, 1919, Zayco brought suit against Serra to compel him to execute the
deed of sale and conveyance of the Palma Central and Estate and to pay, in addition, P500,000 as
damages.

It might be well to make a brief statement of the proceedings had thereafter until the holding of the
trial.

To this complaint the defendant demurred on the ground, among others, that the contract of
November 7, 1918, does not specify the part of the price that was to be paid in cash and the part
that was to be paid within a period not exceeding three years.

Before the court could pass upon this demurrer, Zayco filed an amended complaint on September 9,
1919, which was later withdrawn, and substituted by another one dated October 21, 1919.

To this amended complaint of October 21, 1919, another demurrer was filed, one of its grounds
being the same as that alleged in the first demurrer, to wit, that the contract of November 7, 1918,
does not stipulate what part of the price was to be in cash and what part within a period not
exceeding three years. The court sustained this demurrer and granted the plaintiff a period within
which to amend his complaint.

On January 23, 1920, the last amended complaint was filed in which, for the first time, an allegation
is made that subsequent to the contract of November 7, 1918, and prior to June 28, 1919, a
stipulation was made by the plaintiff, Zayco, and the defendant, Serra, that the sum to be paid in
cash on account of the total price of the sale was P100,000.

A demurrer was also interposed to this last amended complaint, which was overruled.

The defendant filed his answer on February 27, 1920, containing a general and specific denial of all
and each of the allegations of the complaint and a special defense consisting in that the contract of
November 7, 1918, did not specify a sufficient consideration on the part of the plaintiff Zayco.

On March 19, 1920, the plaintiff filed a supplemental complaint in which Philip Whitaker, Venancio
Concepcion, and Eusebio R. de Luzuriaga were included as defendants, and it was alleged that,
without the knowledge of the plaintiff Zayco, the defendant Serra sold the Palma Central and Estate
to said Messrs. Philip Whitaker, Venancio Concepcion, and Eusebio R. de Luzuriaga on January 29,
1920, for the sum of P1,500,000 on the terms and conditions specified in said contract. It is prayed
in this complaint that, at all events, the plaintiff Zayco be declared entitled to purchase from the
defendant, Serra, the Palma Central and Estate on the same terms and conditions as those of the
sale to Messrs. Whitaker, Concepcion, and Luzuriaga.

Later Mr. Eusebio R. de Luzuriaga was excluded from this complaint. The plaintiff Zayco having
assigned his rights to Dionisio Inza and Severino Lizarraga, these parties were admitted to intervene
as plaintiffs. The cause having been tried, the court below rendered judgment absolving the
defendants from the complaint.
By the terms of the contract of November 7, 1918, Zayco was granted the right: (a) To purchase
the Palma Central and Estate until June 30, 1919, and (b) have preference, after that date, over any
other purchaser making the same terms.

The court below holds that this contract of November 7, 1918, has no consideration and is, for this
reason, null and void. This conclusion, however, is not supported by the evidence.

It is true that the contract does not state any consideration on the part of Serra, but it is presumed
that there is a consideration in all contracts (art. 1277, Civ. Code). Besides, a consideration can be
proved and, in this case, there is evidence showing its existence.

The Palma Central was in competition with the Bearin Central of Lizarraga Hermanos and both were
doing their best to gain the greater number of supporters, which, as is well-known, constitutes the
basis and measures of their development. Zayco owned an estate containing 350 hectares used for
cultivating cane, situated between both centrals is such a way as to constitute an opening to them
from the adjacent estates. Owing to this circumstance, Zayco has been the subject of solicitations of
both centrals, each making the most favorable offers to win him. Lizarraga Hermanos went so far as
to offer to remit his debt, amounting to P40,000, if he became a supporter of their central. Serra, in
turn, offered to give him 60 per cent of the sugar of his cane milled in the Palma Central instead of
55 per cent, as allowed by the other centrals, and besides, they promised to assist him in acquiring
this central. Zayco, at last, decided to become, as he in fact became, a supporter of the Palma
Central.

All this, which preceded and led to the execution of the contract of November 7, 1918, is evidently a
sufficient consideration to give life to the contract. It meant, on the part of Zayco, the waiver of
positive benefits which he would have obtained from Lizarraga Hermanos. It meant at the same
time, on the part of Serra, an expansion of his central and the consequent increase in his production
and profit. Under such circumstance Zayco's support to the Palma Central was a prestation of thing
or service which positively benefited Serra.

As has been stated, Zayco prays in this action that Serra be compelled to sell to him the Palma
Central in accordance with the contract to sell of November 7, 1918. It having been determined that
there exists a consideration for this contract, the same is binding upon the parties.

However, it is not necessary to view the question from this standpoint. It can be taken for granted, as
contended by the defendants, that the option contract was not valid for lack of consideration. But it
was, at least, an offer to sell, which was accepted by letter, and of this acceptance the offerer had
knowledge before said offer was withdrawn. The concurrence of both acts — the offer and the
acceptance — could at all events have generated a contract, if none there was before (arts. 1254
and 1262 of the Civil Code).

However, Zayco's acceptance, as his letter of June 28, 1919, indicates, could not, in itself, convert
the offer of sale made by Serra in the document of November 7, 1918, into a perfect contract. In
order for the acceptance to have this effect, it must be plain and unconditional, and it will not be so if
it involves any new proposal, for in that case it would not mean conformity with the offer, which is
what gives rise to the generation of the contract. The letter of acceptance of Zayco lacks these
requisites.

It should be noted that, according to the terms of the offer, in case the total of the agreed price of
P1,000,000 could not be paid in cash, the balance was to be paid within a period not exceeding
three years. This means that a part of this price was to be paid in cash. But the amount of this first
payment was not determined. Consequently, when Zayco accepted the offer, tendering the sum of
P100,000 as first payment, his acceptance involved a proposal, not contained in the offer, that this
precisely, and not any other, should be the amount of the first payment. This proposal, in turn,
required acceptance on the part of Serra. For this reason, Zayco's acceptance did not imply
conformity with the offer of Serra, but only when the latter shall, in turn, have accepted his proposal
that the amount to be paid in cash was P100,000. Not only was this not accepted by Serra, but Serra
cancelled his offer on July 15, 1919.

An attempt was made to prove the allegation contained in the last amended complaint to the effect
that subsequent to the execution of the contract November 7, 1918, Zayco and Serra agreed, as a
suppletory stipulation, that the amount of the first payment to be made in cash should be P100,000.
It is said that this stipulation is contained in a letter sent by Serra to Zayco. This letter, however, was
not introduced in evidence, but was alleged to have been lost, and secondary evidence of its
contents was presented which consisted in the testimonies of Zayco, his son, Rafael, and Antonio
Velez. Upon examination of the testimony of these witnesses, the same is found so uncertain and
contradictory on many points affecting their veracity as not to be considered sufficient to prove either
the loss of the alleged letter, or its existence and contents. Moreover, it is strange, if that stipulation
ever existed, that Zayco, in accepting the offer, not only agreed to pay P100,000 in cash, but agreed
also, as part of his acceptance, to assume Serra's obligations in connection with the credit of
P600,000 given him by the National Bank. It is stranger still that this stipulation, being so important a
part of the contract, was not alleged in the original complaint, and notwithstanding that in the
demurrer to this complaint attention was called to the fact that this stipulation was lacking, this
allegation was not made in the two successive amended complaints but only in the fourth, after the
court had sustained the demurrer filed on this ground.

Our conclusion is that the acceptance made by Zayco of Serra's offer was not sufficient to give life to
a contract and is no ground for compelling Serra to execute the sale offered.

As to plaintiff's claim that they have preference over the defendants, Messrs. Venancio Concepcion
and Phil. C. Whitaker in the purchase of the Palma Central, two members of this court and the writer
of this opinion believe that the plaintiffs are entitled to this preference, but the majority of the court
hold otherwise, for the reason that the plaintiffs have not formally offered to repay the defendant
Concepcion and Whitaker incurred under the contract.

For the foregoing reasons, the judgment appealed from is affirmed with the costs against the
appellants. So ordered.

Araullo, C. J., Johnson, Street, Malcolm, Villamor, Ostrand, and Johns, JJ., concur.