Cavite Development Bank vs. Lim, G.R. No.

131679, February 1, 2000

Facts:

Petitioners Cavite Development Bank (CDB) and Far East Bank and Trust Company (FEBTC)
are banking institutions duly organized and existing under Philippine laws. On or about June 15,
1983, a certain Rodolfo Guansing obtained a loan in the amount of P90,000.00 from CDB, to
secure which he mortgaged a parcel of land situated at No. 63 Calavite Street, La Loma, Quezon
City and covered by TCT No. 300809 registered in his name. As Guansing defaulted in the
payment of his loan, CDB foreclosed the mortgage. At the foreclosure sale held on March 15,
1984, the mortgaged property was sold to CDB as the highest bidder. Guansing failed to redeem,
and on March 2, 1987, CDB consolidated title to the property in its name. TCT No. 300809 in the
name of Guansing was cancelled and, in lieu thereof, TCT No. 355588 was issued in the name
of CDB. 1âwphi1.nêt

On June 16, 1988, private respondent Lolita Chan Lim, assisted by a broker named Remedios
Gatpandan, offered to purchase the property from CDB. The written Offer to Purchase, signed by
Lim and Gatpandan, states in part:

We hereby offer to purchase your property at #63 Calavite and Retiro Sts., La Loma,
Quezon City for P300,000.00 under the following terms and conditions:

(1) 10% Option Money;

(2) Balance payable in cash;

(3) Provided that the property shall be cleared of illegal occupants or tenants.

Pursuant to the foregoing terms and conditions of the offer, Lim paid CDB P30,000.00 as Option
Money, for which she was issued Official Receipt No. 3160, dated June 17, 1988, by CDB.
However, after some time following up the sale, Lim discovered that the subject property was
originally registered in the name of Perfecto Guansing, father of mortgagor Rodolfo Guansing,
under TCT No. 91148. Rodolfo succeeded in having the property registered in his name under
TCT No. 300809, the same title he mortgaged to CDB and from which the latter's title (TCT No.
355588) was derived. It appears, however, that the father, Perfecto, instituted Civil Case No. Q-
39732 in the Regional Trial Court, Branch 83, Quezon City, for the cancellation of his son's title.
On March 23, 1984, the trial court rendered a decision 2 restoring Perfecto's previous title (TCT
No. 91148) and cancelling TCT No. 300809 on the ground that the latter was fraudulently
secured by Rodolfo. This decision has since become final and executory.

Aggrieved by what she considered a serious misrepresentation by CDB and its mother-company,
FEBTC, on their ability to sell the subject property, Lim, joined by her husband, filed on August
29, 1989 an action for specific performance and damages against petitioners in the Regional
Trial Court, Branch 96, Quezon City, where it was docketed as Civil Case No. Q-89-2863. On
April 20, 1990, the complaint was amended by impleading the Register of Deeds of Quezon City
as an additional defendant.

1
On March 10, 1993, the trial court rendered a decision in favor of the Lim spouses. It ruled that:
(1) there was a perfected contract of sale between Lim and CDB, contrary to the latter's
contention that the written offer to purchase and the payment of P30,000.00 were merely pre-
conditions to the sale and still subject to the approval of FEBTC; (2) performance by CDB of its
obligation under the perfected contract of sale had become impossible on account of the 1984
decision in Civil Case No. Q-39732 cancelling the title in the name of mortgagor Rodolfo
Guansing; (3) CDB and FEBTC were not exempt from liability despite the impossibility of
performance, because they could not credibly disclaim knowledge of the cancellation of Rodolfo
Guansing's title without the admitting their failure to discharge their duties to the public as
reputable banking institutions; and (4) CDB and FEBTC are liable for damages for the prejudice
caused against the Lims.3 Based on the foregoing findings, the trial court ordered CDB and
FEBTC to pay private respondents, jointly and severally, the amount of P30,000.00 plus interest
at the legal rate computed from June 17, 1988 until full payment. It also ordered petitioners to
pay private respondents, jointly and severally, the amounts of P250,000.00 as moral damages,
P50,000.00 as exemplary damages, P30,000.00 as attorney's fees, and the costs of the suit. 4

Petitioners brought the matter to the Court of Appeals, which, on October 14, 1997, affirmed in
toto the decision of the Regional Trial Court. 

Issue:

Petitioners contend that —

1. The Honorable Court of Appeals erred when it held that petitioners CDB and FEBTC
were aware of the decision dated March 23, 1984 of the Regional Trial Court of Quezon
City in Civil Case No. Q-39732.

2. The Honorable Court of Appeals erred in ordering petitioners to pay interest on the
deposit of THIRTY THOUSAND PESOS (P30,000.00) by applying Article 2209 of the
New Civil Code.

Ruling:

Petitioners deny that a contract of sale was ever perfected between them and private respondent
Lolita Chan Lim. They contend that Lim's letter-offer clearly states that the sum of P30,000,00
was given as option money, not as earnest money. 5 They thus conclude that the contract
between CDB and Lim was merely an option contract, not a contract of sale.

The contention has no merit. Contracts are not defined by the parries thereto but by principles of
law.6 In determining the nature of a contract, the courts are not bound by the name or title given
to it by the contracting parties.7 In the case at bar, the sum of P30,000.00, although denominated
in the offer to purchase as "option money," is actually in the nature of earnest money or down
payment when considered with the other terms of the offer. In Carceler v. Court of Appeals,8 we
explained the nature of an option contract, viz. —

An option contract is a preparatory contract in which one party grants to the other, for a
fixed period and under specified conditions, the power to decide, whether or not to enter
into a principal contract, it binds the party who has given the option not to enter into the
principal contract with any other person during the period; designated, and within that
period, to enter into such contract with the one to whom the option was granted, if the

2
 latter should decide to use the option. It is a separate agreement distinct from the
contract to which the parties may enter upon the consummation of the option.

An option contract is therefore a contract separate from and preparatory to a contract of sale
which, if perfected, does not result in the perfection or consummation of the sale. Only when the
option is exercised may a sale be perfected.

In this case, however, after the payment of the 10% option money, the Offer to Purchase
provides for the payment only of the balance of the purchase price, implying that the "option
money" forms part of the purchase price. This is precisely the result of paying earnest money
under Art. 1482 of the Civil Code. It is clear then that the parties in this case actually entered into
a contract of sale, partially consummated as to the payment of the price. Moreover, the following
findings of the trial court based on the testimony of the witnesses establish that CDB accepted
Lim's offer to purchase:

Given CDB's acceptance of Lim's offer to purchase, it appears that a contract of sale was
perfected and, indeed, partially executed because of the partial payment of the purchase price.
There is, however, a serious legal obstacle to such sale, rendering it impossible for CDB to
perform its obligation as seller to deliver and transfer ownership of the property.

Nemo dat quod non habet, as an ancient Latin maxim says. One cannot give what one does not
have. In applying this precept to a contract of sale, a distinction must be kept in mind between
the "perfection" and "consummation" stages of the contract.

A contract of sale is perfected at the moment there is a meeting of minds upon the thing which is
the object of the contract and upon the price.10 It is, therefore, not required that, at the perfection
stage, the seller be the owner of the thing sold or even that such subject matter of the sale exists
at that point in time.11 Thus, under Art. 1434 of the Civil Code, when a person sells or alienates a
thing which, at that time, was not his, but later acquires title thereto, such title passes by
operation of law to the buyer or grantee. This is the same principle behind the sale of "future
goods" under Art. 1462 of the Civil Code. However, under Art. 1459, at the time of delivery or
consummation stage of the sale, it is required that the seller be the owner of the thing sold.
Otherwise, he will not be able to comply with his obligation to transfer ownership to the buyer. It
is at the consummation stage where the principle of nemo dat quod non habet applies.

In Dignos v. Court of Appeals,12 the subject contract of sale was held void as the sellers of the
subject land were no longer the owners of the same because of a prior sale. 13 Again, in Nool
v. Court of Appeals,14 we ruled that a contract of repurchase, in which the seller does not have
any title to the property sold, is invalid:

We cannot sustain petitioners' view. Article 1370 of the Civil Code is applicable only to
valid and enforceable contracts. The Regional Trial Court and the Court of Appeals rules
that the principal contract of sale contained in Exhibit C and the auxiliary contract of
repurchase in Exhibit D are both void. This conclusion of the two lower courts appears to
find support in Dignos v. Court of Appeals, where the Court held:

Be that as it may, it is evident that when petitioners sold said land to the Cabigas
spouses, they were no longer owners of the same and the sale is null and void.

In the present case, it is clear that the sellers no longer had any title to the parcels of land
at the time of sale. Since Exhibit D, the alleged contract of repurchase, was dependent
on the validity of Exhibit C, it is itself void. A void contract cannot give rise to a valid one.
Verily, Article 1422 of the Civil Code provides that (a) contract which is the direct result of
a previous illegal contract, is also void and inexistent.

3
 We should however add that Dignos did not cite its basis for ruling that a "sale is null and
void" where the sellers "were no longer the owners" of the property. Such a situation
(where the sellers were no longer owners) does not appear to be one of the void
contracts enumerated in Article 1409 of the Civil Code. Moreover, the Civil Code itself
recognizes a sale where the goods are to be acquired . . . by the seller after the
perfection of the contract of sale, clearly implying that a sale is possible even if the seller
was not the owner at the time of sale, provided he acquires title to the property later on.

In the present case, however, it is likewise clear that the sellers can no longer deliver the
object of the sale to the buyers, as the buyers themselves have already acquired title and
delivery thereof from the rightful owner, the DBP. Thus, such contract may be deemed to
be inoperative and may thus fall, by analogy, under item No. 5 of Article 1409 of the Civil
Code: Those which contemplate an impossible service. Article 1459 of the Civil Code
provides that "the vendor must have a right to transfer the ownership thereof [subject of
the sale] at the time it is delivered." Here, delivery of ownership is no longer possible. It
has become impossible.15

In this case, the sale by CDB to Lim of the property mortgaged in 1983 by Rodolfo Guansing
must, therefore, be deemed a nullity for CDB did not have a valid title to the said property. To be
sure, CDB never acquired a valid title to the property because the foreclosure sale, by virtue of
which, the property had been awarded to CDB as highest bidder, is likewise void since the
mortgagor was not the owner of the property foreclosed.

A foreclosure sale, though essentially a "forced sale," is still a sale in accordance with Art. 1458
of the Civil Code, under which the mortgagor in default, the forced seller, becomes obliged to
transfer the ownership of the thing sold to the highest bidder who, in turn, is obliged to pay
therefor the bid price in money or its equivalent. Being a sale, the rule that the seller must be the
owner of the thing sold also applies in a foreclosure sale. This is the reason Art. 2085 16 of the
Civil Code, in providing for the essential requisites of the contract of mortgage and pledge,
requires, among other things, that the mortgagor or pledgor be the absolute owner of the thing
pledged or mortgaged, in anticipation of a possible foreclosure sale should the mortgagor default
in the payment of the loan.

In this case, there is no evidence that CDB observed its duty of diligence in ascertaining the
validity of Rodolfo Guansing's title. It appears that Rodolfo Guansing obtained his fraudulent title
by executing an Extra-Judicial Settlement of the Estate With Waiver where he made it appear
that he and Perfecto Guansing were the only surviving heirs entitled to the property, and that
Perfecto had waived all his rights thereto. This self-executed deed should have placed CDB on
guard against any possible defect in or question as to the mortgagor's title. Moreover, the alleged
ocular inspection report20 by CDB's representative was never formally offered in evidence.
Indeed, petitioners admit that they are aware that the subject land was being occupied by
persons other than Rodolfo Guansing and that said persons, who are the heirs of Perfecto
Guansing, contest the title of Rodolfo.

4
Heirs of San Miguel vs. Court of Appeals, G.R. No. 136054, September 5, 2001

Facts:

This case involves a parcel of land originally claimed by Severina

San Miguel (petitioners predecessor-in-interest, hereafter,
Severina). The land is situated in Panapan, Bacoor, Cavite with an
area of six hundred thirty two square meters (632 sq. m.), more
or less.

Without Severinas knowledge, Dominador managed to cause the

subdivision of the land into three (3) lots.

On September 25, 1974, Dominador, et al. filed a petition with

the Court of First Instance, Cavite, as a land registration court, to
issue title over Lots 1 and 2 of LRC Psu-1313, in their names. 5 cräläwvirtualibräry

On July 19, 1977, the Land Registration Commission (hereafter

LRC) rendered a decision directing the issuance of Original
Certificate of Title No. 0-1816 in the names of Dominador, et al.

On or about August 22, 1978, Severina filed with the Court of

First Instance of Cavite a petition for review of the decision
alleging that the land registration proceedings were fraudulently
concealed by Dominador from her. 6 cräläwvirtualibräry

On December 27, 1982, the court resolved to set aside the

decision of July 19, 1977, and declared Original Certificate of Title
No. 0-1816 as null and void.

On July 13, 1987, the Register of Deeds of Cavite issued Transfer

Certificate of Title No. T-223511 in the names of Severina and
her heirs.

On February 15, 1990, the trial court issued an order in favor of

Severinas heirs

On August 6, 1993, Severinas heirs, decided not to pursue the

writs of possession and demolition and entered into a
compromise with Dominador, et al. According to the compromise,
Severinas heirs were to sell the subject lots 10 to Dominador, et
al. for one and a half million pesos (P1.5 M) with the delivery of

5
Transfer Certificate of Title No. T-223511 (hereafter, the
certificate of title) conditioned upon the purchase of another
lot 11 which was not yet titled at an additional sum of three
hundred thousand pesos (P300,000.00). The salient features of
the compromise (hereafter kasunduan) are: 12 cräläwvirtualibräry

5. Na ang  Lot 1  at Lot 2, plano  LRCPsu-1313  na binabanggit sa

itaas na ipinagkasundo ng mga tagapagmana ni Severina San
Miguel na kilala sa kasulatang ito sa
taguring  LAPINA  (representing Severinas heirs), na ilipat sa
pangalan nina  SAN MIGUEL  (representing Dominadors heirs)
alang alang sa halagang ISANG MILYON AT LIMANG DAANG
LIBONG PISO  (P1,500,000.00)  na babayaran nina  SAN
MIGUEL  kina  LAPINA;

6. Na si  LAPINA  at  SAN MIGUEL  ay nagkakasundo na ang lote na

sakop ng plano  LRC- Psu-1312, may sukat na 108 metro
cuadrado ay ipagbibili na rin kina  SAN MIGUEL  sa halagang
TATLONG DAANG LIBONG PISO (P300,000.00);

7. Na kinikilala ni  SAN MIGUEL  na ang tunay na may-ari ng

nasabing lote na sakop ng plano  LRC Psu-1312  ay
sina  LAPINA  at sila na ang magpapatitulo nito at sina  LAPINA  ay
walang pananagutan sa pagpapatitulo nito at sa paghahabol ng
sino mang tao;

8. Na ang nasabing halaga na TATLONG DAANG LIBONG

PISO  (P300,000.00)  ay babayaran nina  SAN
MIGUEL  kina  LAPINA  sa loob ng dalawang  (2)  buwan mula sa
petsa ng kasulatang ito at kung hindi mabayaran nina  SAN
MIGUEL  ang nasabing halaga sa takdang panahon ay mawawalan
ng kabuluhan ang kasulatang ito;

9. Na sina  LAPINA  at  SAN MIGUEL  ay nagkakadunso (sic) rin na

ang owners copy ng  Transfer Certificate of Title No. T-223511  na
sumasakop sa  Lots 1  at  2, plano LRC Psu-1313  ay ilalagay
lamang nina  LAPINA  kina SAN MIGUEL  pagkatapos mabayaran
ang nabanggit na P300,000.00

On the same day, on August 6, 1993, pursuant to

the  kasunduan,  Severinas heirs and Dominador, et al. executed a
deed of sale designated as kasulatan sa bilihan ng lupa. 13 cräläwvirtualibräry

6
On November 16, 1993, Dominador, et al. filed with the trial
court, 14 Branch 19, Bacoor, Cavite, a motion praying that
Severinas heirs deliver the owners copy of the certificate of title
to them. 15cräläwvirtualibräry

In time, Severinas heirs opposed the motion stressing that under

the kasunduan, the certificate of title would only be surrendered
upon Dominador, et al.s payment of the amount of three hundred
thousand pesos (P300,000.00) within two months from August 6,
1993, which was not complied with. 16 cräläwvirtualibräry

Dominador, et al. admitted non-payment of three hundred

thousand pesos (P300,000.00) for the reason that Severinas
heirs have not presented any proof of ownership over the untitled
parcel of land covered by LRC- Psu-1312. Apparently, the parcel
of land is declared in the name of a third party, a certain Emiliano
Eugenio. 17 cräläwvirtualibräry

Dominador, et al. prayed that compliance with the kasunduan be

deferred until such time that Severinas heirs could produce proof
of ownership over the parcel of land.

According to Severinas heirs, since Dominador, et al. have not

paid the amount of three hundred thousand pesos (P300,000.00),
then they were justified in withholding release of the certificate of
title. 

The Trial Courts Ruling

On June 27, 1994, the trial court issued an order to wit: 22 cräläwvirtualibräry

WHEREFORE, finding the Motion to Order to be impressed with

merit, the defendants-oppositors-vendors Heirs of Severina San
Miguel are hereby ordered to surrender to the movant-plaintiffs-
vendees-Heirs of Dominador San Miguel the Transfer Certificates
of Title No. 223511 and for herein defendants-oppositors-vendors
to pay for the capital gains and related expenses for the transfer
of the two lots subject of the sale to herein movants-plaintiffs-
vendees-Heirs of Dominador San Miguel.

7
 The Court of Appeals Ruling

On June 29, 1998, the Court of Appeals promulgated a decision

denying the appeal, and affirming the decision of the trial court.
The Court of Appeals added that the other matters raised in the
petition were extraneous to the kasunduan. 26 The Court of
Appeals upheld the validity of the contract of sale and sustained
the parties freedom to contract. The Court of Appeals decided,
thus:

Issue:

First, when it held that the kasunduan had no effect on

the kasulatan sa bilihan ng lupa. Second, when it ordered them
to surrender the certificate of title to Dominador, et al., despite
non-compliance with their prior obligations stipulated under
the kasunduan. Third, when it did not find that
the kasunduan was null and void for having been entered into by
Dominador, et al. fraudulently and in bad faith

However, we sift through the arguments and identify the main

legal issue, which is whether Dominador, et al. may be compelled
to pay the three hundred thousand pesos (P300,000.00) as
agreed upon in the kasunduan (as a pre-requisite for the release
of the certificate of title), despite Severinas heirs lack of evidence
of ownership over the parcel of land covered by LRC Psu-1312.

Ruling:

Severinas heirs anchor their claim on the kasunduan, stressing on

their freedom to stipulate and the binding effect of contracts. This
argument is misplaced. 33 The Civil Code provides :

Article 1306. The contracting parties may establish such

stipulations, clauses, terms and conditions as they may deem
convenient provided they are not contrary to law, morals, good
customs, public order or public policy (underscoring ours).

8
It is basic that the law is deemed written into every
contract. 34 Although a contract is the law between the parties,
the provisions of positive law which regulate contracts are
deemed written therein and shall limit and govern the relations
between the parties. 35 The Civil Code provisions on sales state:

Article 1458. By the contract of sale one of the contracting parties

obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay a price certain in money
or its equivalent. xxx

Article 1459. The thing must be licit and the vendor must have a
right to transfer the ownership thereof at the time it is delivered.

Article 1495. The vendor is bound to transfer the ownership of

and deliver, as well as warrant the thing which is the object of
sale (underscoring ours).

True, in contracts of sale, the vendor need not possess title to the
thing sold at the perfection of the contract. 36 However, the
vendor must possess title and must be able to transfer title at the
time of delivery. In a contract of sale, title only passes to the
vendee upon full payment of the stipulated consideration, or upon
delivery of the thing sold. 37
cräläwvirtualibräry

Under the facts of the case, Severinas heirs are not in a position
to transfer title. Without passing on the question of who actually
owned the land covered by LRC Psu -1312, we note that there is
no proof of ownership in favor of Severinas heirs. In fact, it is a
certain Emiliano Eugenio, who holds a tax declaration over the
said land in his name. 38 Though tax declarations do not prove
ownership of the property of the declarant, tax declarations and
receipts can be strong evidence of ownership of land when
accompanied by possession for a period sufficient for
prescription. 39 Severinas heirs have nothing to counter this
document.

Therefore, to insist that Dominador, et al. pay the price under

such circumstances would result in Severinas heirs unjust
enrichment. 40 Basic is the principle in law, Niguno non deue
enriquecerse tortizamente condano de otro. 41 The essence of a
sale is the transfer of title or an agreement to transfer it for a
price actually paid or promised. 42 In Nool v. Court of

9
Appeals, 43 we held that if the sellers cannot deliver the object of
the sale to the buyers, such contract may be deemed to be
inoperative. By analogy, such a contract may fall under Article
1405, No. 5 of the Civil Code, to wit:

Article 1405. The following contracts are inexistent and void from
the beginning: xxx

(5) Those which contemplate an impossible service.

Severinas heirs insist that delivery of the certificate of title is

predicated on a condition - payment of three hundred thousand
pesos (P300,000.00) to cover the sale of Lot 3 of LRO Psu 1312.
We find this argument not meritorious. The condition cannot be
honored for reasons afore-discussed. Article 1183 of the Civil
Code provides that,

Impossible conditions, those contrary to good customs or public

policy and those prohibited by law shall annul the obligation
which depends upon them. If the obligation is divisible, that part
thereof which is not affected by the impossible or unlawful
condition shall be valid. xxx

Hence, the non-payment of the three hundred thousand pesos

(P300,000.00) is not a valid justification for refusal to deliver the
certificate of title.

Besides, we note that the certificate of title covers Lots 1 and 2 of

LRC Psu-1313, which were fully paid for by Dominador, et al.
Therefore, Severinas heirs are bound to deliver the certificate of
title covering the lots.

10
PNB vs. Court of Appeals, G.R. No. 118357, May 6, 1997

Facts:

3. ID.; ID.; ID.; ASSIGNMENT DIFFERENTIATED FROM SALE. — In assignments, a

consideration is not always a requisite, unlike in sales. Thus, an assignee may
maintain an action based on his title and it is immaterial whether or not he paid any
consideration therefor. Furthermore, in an assignment, title is transferred but
possession need not be delivered.

4. ID.; ID.; ID.; MEMORANDUM OF AGREEMENT INCLUDING ALL TANGIBLE THINGS

FOUND IN THE COAL-BEARING LAND, A CONTRACT OF SALE; OWNERSHIP IS
TRANSFERRED UPON ACTUAL OR CONSTRUCTIVE DELIVERY THEREOF. — In this
case, private respondent transferred possession over the subjects of the
"assignment" to MMIC. Since the MOA was actually a contract of sale, MMIC
acquired ownership over the Giporlos Project when private respondent delivered it to
MMIC. Under the Civil Code, unless the contract contains a stipulation that
ownership of the thing sold shall not pass to the purchaser until he has fully paid the
price, ownership of the thing sold shall be transferred to the vendee upon the actual
or constructive delivery thereof. In other words, payment of the purchase price is
not essential to the transfer of ownership as long as the property sold has been
delivered. Such delivery (traditio) operated to divest the vendor of title to the
property which may not be regained or recovered until and unless the contract is
resolved or rescinded in accordance with law. Consequently, the properties in the
Giporlos Project were, therefore, owned by MMIC notwithstanding its failure to pay
the consideration stipulated in the MOA. Private respondent, after such delivery and
MMIC’s continuous refusal to pay the consideration for the contract, correctly opted
to rescind the contract. That private respondent did not succeed in collecting
payment prior to the filing of the complaint for rescission with damages is a fault
entirely attributable to MMIC which at the time, acted upon the orders of
government authorities.

Facts:

Marinduque Mining and Industrial Corporation (MMIC) was founded by Jesus S.

Cabarrus in 1949. 3 Four years later or in 1953, Cabarrus established J. Cabarrus,
Inc. which subsequently was renamed Industrial Enterprises, Inc. (IEI). During the
period when most of the facts relevant to this case transpired, Cabarrus and his
family owned about 12% to 14% of the shares of stock in the MMIC 4 where he was
the President. He was also the President of IEI.

On July 27, 1979, IEI entered into a coal operating contract with the Bureau of
Energy Development (BED), with Cabarrus and then Minister of Energy Geronimo
Velasco as signatories. 5 The contract was pursuant to the Coal Development Act of
1976 (P.D. No. 972, as amended) and covered 2,000 hectares of two (2) coal blocks
in Barrio Carbon, Magsaysay, Eastern Samar.

11
While exploring this area, IEI found the adjacent areas, comprising of three (3) coal
blocks, to be likewise coal potentials. Hence, upon confirmation by the BED that
these three (3) adjacent coal blocks were in the free area, IEI filed an application for
another coal operating contract on August 12, 1981. Simultaneously, IEI applied for
the conversion of its July 27, 1979 coal operating contract from exploration to
development/production. IEI also followed up its application on the three (3) newly-
discovered coal blocks. All of these coal blocks were collectively known as the
Giporlos Coal Project.

Sometime in April, 1982, Minister Velasco informed Cabarrus that IEI’s application
for exploration of the three (3) coal blocks had been disapproved and that, instead,
the contract would be awarded to MMIC. Following Cabarrus’ letter of May 4, 1982 6
requesting that the rejection of IEI’s application be made in writing, Minister Velasco
wrote him a letter dated June 2, 1982, 7 where Minister Velasco said:

On March 28, 1983, Minister Velasco informed Cesar Zalamea, Chairman of the
Board of the Development Bank of the Philippines (DBP) and of the MMIC, that IEI’s
application for the conversion of its coal operating contract for the Giporlos area
from exploration to development/production had been put "under advisement in the
light of the ongoing discussion for the transfer of IEI’s rights and obligations" to
MMIC. 8

Thereafter, MMIC and IEI, through Chairman Zalamea and President Cabarrus, 9
respectively, entered into a Memorandum of Agreement (MOA) whereby IEI
assigned to MMIC all its rights and interests under the July 27, 1979 coal operating
contract.

MMIC and IEI, again through Zalamea and Cabarrus, respectively, jointly informed
the BED on August 10, 1983, that they had entered into the MOA "at the instance
and suggestion of the Hon. Minister of Energy in one of the earlier meetings of the
Board of Directors of MMIC." 10 MMIC and IEI were informed of the approval of the
MOA on August 29, 1983 by the then Acting BED Director Wenceslao R. de la Paz.
11

MMIC took over possession and control of the two (2) coal blocks even before the
MOA was finalized. However, instead of continuing the exploration and development
work actively pursued by IEI, MMIC completely stopped all works and dismissed the
work force thereon, leaving only a caretaker crew.

Consequently, IEI made written demands to MMIC, pursuant to the MOA, for the
reimbursement of all costs and expenses it had incurred on the project which, as of
July 31, 1983, had amounted to P31.66 million as audited by the Sycip, Gorres and
Velayo Company.

In view of MMIC’s failure to comply with its obligations under the MOA, IEI filed a
complaint against MMIC and Minister Velasco on August 7, 1984, for rescission of
the MOA and damages, before the Regional Trial Court of Makati, Branch 137.
Docketed as Civil Case No. 8109, the complaint alleged that MMIC acted in gross
and evident bad faith in entering into the MOA when it had no intention at all to
operate the two (2) coal blocks and of complying with any of its obligations under
the said agreement. It likewise alleged that Minister Velasco was instrumental in
causing the assignment of the coal operating contracts to MMIC when he did not act
on complainant IEI’s application for conversion of its coal operating contract from
exploration to development/production and in rejecting its application for another

12
coal operating contract for the exploration of additional three (3) coal blocks which
he had reserved for MMIC.

Meanwhile, on July 13, 1981, for various credit accommodations secured from the
Philippine National Bank (PNB), aggregating to four billion pesos
(P4,000,000,000.00) excluding interest and charges as of November 30, 1980, as
well as from the DBP, amounting to two billion pesos (P2,000,000,000.00), MMIC
entered into a Mortgage Trust Agreement (MTA) 12 whereby it constituted a
mortgage pari passu of its assets in favor of PNB and DBP.

Under the MTA, the PNB was constituted and appointed as the trustee tasked with
holding in trust the mortgaged properties "for the equal and ratable benefit of the
Beneficiaries in proportion to the amount of the obligation of the MORTGAGOR to
each of them" as provided therein. 14 One of the conditions of the mortgage was
that:jgc:chanrobles.com.ph

". . . Should the MORTGAGORS fail to deliver said properties, as aforestated, the
TRUSTEE, through its duly authorized representative, is authorized to take
possession of said properties and bring the same to the location of any of their
respective offices or to any other place and the expenses of locating and bringing
said properties to such place shall be for the account of the MORTGAGOR and shall
form part of the sums secured by this mortgage; Provided, however, that the
TRUSTEE shall have the option of selling said properties at any place where their
respective offices shall be located or at any place where said properties may be
found." 15 (Emphasis supplied.)

The MTA also provided that: jgc:chanrobles.com.ph

"For the purpose of extra-judicial foreclosure, the MORTGAGOR hereby appoints the
TRUSTEE, through its duly authorized representatives, its attorney-in-fact to sell the
mortgaged properties in accordance with the provision of Act No. 3135, as amended,
and/or Act No. 1508, as amended, and subject to the stipulations herein set forth, to
sign all documents and perform any act requisite or necessary to accomplish said
purpose and to appoint their representatives or substitutes as such attorneys-in-fact
with all the powers herein conferred. In extra-judicial foreclosure under Act No.
3135, as amended, the auction sale shall take place in the City or Capital of the
Province where the mortgaged properties are situated. In extra-judicial foreclosure
under Act No. 1508, as amended, the auction sale shall take place in such City or
Municipality as the TRUSTEE at its option, may elect by virtue of the provisions of
the first paragraph of this Condition." 16 (Emphasis supplied.)

The MTA was amended on April 27, 1984 with PNB Senior Vice President Gerardo
Agulto, Jr. and MMIC Senior Vice President Jose Luis Javier as signatories. 17
Premised on the fact that the mortgagor (MMIC) had "acquired additional personal
and real properties, including, but not limited to, leasehold rights on mining claims,
which pursuant to the terms of the Mortgage Trust Agreement are deemed covered
by the mortgage as after-acquired assets," the MTA amended Sec. 2.01 thereof to
read as follows: jgc:chanrobles.com.ph

13
"As security for the prompt and full payment by the MORTGAGOR of the Secured
Obligations, the MORTGAGOR hereby establishes and constitutes in favor of the
MORTGAGEES a first lien and mortgage of the first rank in and to each and every
item of the Mortgaged Properties, together with any and all substitutes or
replacements for or renewals of or additions to any thereof, all of which belong to
and are in the possession of (or will belong to and will be in the possession of) the
MORTGAGOR, free and clear of any liens or encumbrances of any nature
whatsoever." (Emphasis supplied.)

MMIC defaulted in the payment of its loan obligation with PNB and DBP which, as of
July 15, 1984 stood at P23.55 billion. As a consequence thereof, PNB and DBP
simultaneously filed in the provinces of Rizal, Samar, Negros and Surigao, joint
petitions for sale on foreclosure under Act Nos. 1508 and 3135, 19 of the MMIC
assets located at: (a) Island Cement in Antipolo, Rizal; (b) Sipalay Copper Mine in
Negros; (c) Bagacay and Giporlos Coal Projects in Samar, and (d) Nonoc Nickel
Project in Surigao. The petitions were premised on: (1) the MOA of July 13, 1984
which delineated MMIC’s mortgaged properties; (2) the April 27, 1984 amendment
to the MTA in favor of DBP and PNB which included in the mortgage MMIC’s
additional after-acquired assets; (3) the liabilities of MMIC secured by the mortgage
being past due, and (4) Presidential Decree No. 385 mandating PNB and DBP to
institute foreclosure proceedings when the arrearages of the borrower have
exceeded twenty percent (20%) of the principal obligation.

Deputy Sheriff Esteban G. Malindog of the Regional Trial Court in Catbalogan,

Samar, Branch XXVII, complied with the requirements of the law as to the posting
and publication of the notice of sale. Said notice, dated August 15, 1984, set for
August 31, 1984 the auction sale of the various mining equipment and other assets
of MMIC, including the equipment at the Giporlos Project.

On August 15, 1984, IEI advised PNB and DBP at their respective Manila and Makati
offices that the purchase price of the Giporlos Coal Project that it had assigned to
MMIC per the MOA, was still. unpaid. 20 However, despite said notice, the
foreclosure sale proceeded as scheduled and the various machineries and equipment
of MMIC were sold to PNB as the sole bidder for P33,940,940.00.

In its letter of September 20, 1984 to PNB and DBP, 21 IEI requested that the
movable properties in the Giporlos Coal Project which were detailed in a list attached
to its August 15, 1984 letter to said banks, be excluded from the foreclosed assets
of MMIC as the purchase price thereof under the MOA had remained unpaid. IEI
further informed PNB and DBP that a suit for rescission of the assignment of the
Giporlos Coal Project to MMIC (and damages) had been filed before the Regional
Trial Court of Makati.

On June 24, 1985, in view of the inclusion of the mining equipment and other
movable properties at the Giporlos Coal Project in the foreclosure sale of the assets
of MMIC, IEI filed an amended complaint impleading the PNB as an additional
defendant. 22 The amended complaint was admitted by the trial court on September
23, 1985. 

14
RTC Ruling: (Ctrl F mo na lng to, haba)

CA Ruling:

"WHEREFORE, the judgment appealed from is hereby reversed and set aside and the
appeal of plaintiff Industrial Enterprises, Inc., is DISMISSED. The complaint against
the defendants Marinduque Iron Mines Corporation and Minister of Energy is
dismissed for lack of jurisdiction. The case against defendant PNB is remanded to
the lower court for further proceedings. Cost against appellant Industrial
Enterprises, Inc.

Issue:

At the core of the instant petition is the legal question of ownership of the chattels
involved at the time of foreclosure. This issue appears to have been glossed over by
the courts below. Equally appropriate for determination by this Court is the legality
of the foreclosure proceedings on the assets of the MMIC. These two issues are the
keys to the resolution of the instant petition.

An important issue then is whether or not the chattels mortgaged to petitioner were
covered by the MOA so as to legally subject the same chattels to MMIC’s ownership
and, eventually, to the foreclosure proceedings.

Ruling:

The MOA was an assignment of private respondent’s "rights and interests on the
Coal Operating Contract described in the first whereas clause" thereof. In its most
general and comprehensive sense, an assignment is "a transfer or making over to
another of the whole of any property, real or personal, in possession or in action, or
of any estate or right therein. It includes transfers of all kinds of property, and is
peculiarly applicable to intangible personal property and, accordingly, it is ordinarily
employed to describe the transfer of non-negotiable choses in action and of rights in
or connected with property as distinguished from the particular item or property." 43

An assignment is a contract between the assignor and the assignee. It generally

operates by way of such contract or agreement. It is subject to the same requisites
as to validity of contracts. 44 Whether or not a transfer of a particular right or
interest is an assignment or some other transactions depends, not on the name by
which it calls itself, but on the legal effect of its provisions. This rule applies in
determining whether a particular transaction is an assignment or a sale. 45

As the aforequoted portions of the MOA state, its subject is described in the
"whereas clauses" thereof as follows: jgc:chanrobles.com.ph

"WHEREAS, IEI is the duly authorized operator over two coal blocks over an area
outlined and more particularly described in Annex ‘A’ of the Coal Operating Contract
entered into on the 27th day of July 1979 and between the Ministry of Energy,
through the Bureau of Energy Development (’BED’), and IEI; the Coal Operating
Contract and Annex A thereof being hereto attached and made an integral part of
this contract;"

15
Annex "A" of the coal operating contract is the technical description of the 2,000-
hectare coal-bearing land in Carbon, Magsaysay, Eastern Samar. Therefore, as
expressed in the MOA, the subject of the assignment was only private respondent’s
rights and interests over the coal operating contract covering said coal-rich land in
Eastern Samar.

However, a close scrutiny of the contract reveals that the MOA includes all tangible
things found in the coal-bearing land. Unquestionably, rights may be assigned as
they are intangible personal properties. The term "interests," on the other hand, is
broader and more comprehensive than the word "title" and its definition in a narrow
sense by lexicographers as any right in the nature of property less than title,
indicates that the terms are not considered synonymous. 46 It is practically
synonymous, however, with the word "estate" which is the totality of interest which
a person has from absolute ownership down to naked possession. 47 An "interest" in
land is the legal concern of a person in the thing or property, or in the right to some
of the benefits or uses from which the property is inseparable. 48

That the MOA conveyed to MMIC more than the title to or rights over the coal
operating contract but also the "things" covered thereby, is manifest in the manner
by which the parties, particularly private respondent IEI, implemented the MOA. It
disclosed the intention to include in the MOA the equipment and machineries used in
coal exploration. This intention is evident in the following letters of private
respondent: (1) letter of April 16, 1984 to Alfredo Velayo, President of MMIC, where
private respondent, through Cabarrus, included in the conditions for the negotiated
rescission of the MOA, the payment to private respondent of the amount of ten
million pesos (P10,000,000.00) for expenses such as those for the "recondition (of)
the equipment which have been left to the elements;" 49 (2) letter of May 2, 1984
to Velayo, where private respondent mentioned a "list of probable equipment(s) that
IEI would be interested to apply as part payment in the event of rescission of
contract;" 50 (3) letter of June 4, 1984 to Zalamea as Chairman of the Board of the
MMIC, 51 where private respondent attached an updated statement of account and
the expenses for rehabilitation of equipment, and (4) letter of August 15, 1984 to
petitioner and the DBP where private respondent enclosed a copy of "the movable
properties included in said Memorandum of Agreement" of August 1983. 52 Notably,
all these listed equipment were sold at the foreclosure sale initiated by petitioner. 53

Also worth noting is the absence of proof that, like a good father of the family,
private respondent exerted some effort to take the chattels out of the premises upon
the execution of the MOA. All that private respondent proved, through the testimony
of Cabarrus, was that the equipment and machineries were taken over by MMIC,
piled up and left to rot that trees even grew on them. 54 Coupled with this is private
respondents’ failure to prove the presence of insurmountable force 55 that would
have prevented it from retrieving its equipment and machineries from the Giporlos
Project area. All these show that private respondent considered these chattels as
subjects of the MOA.

16
Private respondent had all the right to exclude these chattels from the MOA because
they were not expressly stipulated therein. However, its sheer inaction upon the
execution of the MOA and its subsequent admissions through the aforesaid letters,
conclusively show that these equipment and machineries were subjects of the
assignment of rights to MMIC. It was only when the foreclosure sale was about to
take place that private respondent lifted a finger to object thereto on the ground
that the consideration stipulated in the MOA had not yet been paid by MMIC.

Moreover, while the MOA was expressly a contract for the assignment of rights and
interests, it is in fact a contract of sale. Under Art. 1458 of the Civil Code, by the
contract of sale, one of the contracting parties obligates himself to transfer the
ownership of and to deliver a determinate thing, and the other to pay therefor a
price certain in money or its equivalent. By the MOA, private respondent obligated
itself to transfer ownership of the coal operating contract and the properties found
therein. The coal operating contract is a determinate thing as it has been particularly
designated in the MOA. The subject of the coal operating contract was physically
segregated from all other pieces of coal-rich Eastern Samar property by the
technical description attached to said contract. 56 A list of the equipment and
machineries found on the property might not have been attached to the MOA but
these were itemized with specificity in private respondent’s letter of August 15,
1984.

Private respondent delivered the properties subject of the contract to MMIC, which
immediately gained control and possession of the Giporlos Project. This is explicit in
private respondent’s numerous demand letters 57 which are exemplified by its letter
of February 7, 1984 to Zalamea which states: jgc:chanrobles.com.ph

"Considering that all details necessary to determine the final purchase price are in
place; considering that the property has already been transferred in your name; and
considering finally that cash payment is stipulated in the contract, demand is hereby
respectfully made for the payment of the purchase price soonest." 58 (Emphasis
supplied.)

Another very telling letter of private respondent is that of April 16, 1984 to Mr.
Alfredo Velayo, President of MMIC, which partly reads: jgc:chanrobles.com.ph

"After the Memorandum of Agreement was signed, BED promptly approved the
transfer from IEI to MMIC. After the price was fixed with the assistance of SGV and
BED, MMIC took over the entire project last July 1983. . . ." 59

For its part, MMIC never denied that it had taken possession and control over the
Giporlos Project. In its replies to private respondent’s demand letters, MMIC in fact
acknowledged its obligations under the MOA while professing incapacity to fulfill the
same.

If the MOA merely embodied an assignment of rights over the coal-operating

contract and the properties found in the Giporlos Project and not a sale thereof, then
private respondent would not have insisted on the payment of MMIC’s obligations
under the MOA by attaching a statement of account to most of its demand letters.
60 In assignments, a consideration is not always a requisite, unlike in sales. Thus,
an assignee may maintain an action based on his title and it is immaterial whether
or not he paid any consideration therefor. 61 Furthermore, in an assignment, title is
transferred but possession need not be delivered. 62 In this case, private
respondent transferred possession over the subjects of the "assignment" to MMIC.

17
Since the MOA was actually a contract of sale, MMIC acquired ownership over the
Giporlos Project when private respondent delivered it to MMIC. Under the Civil Code,
unless the contract contains a stipulation that ownership of the thing sold shall not
pass to the purchaser until he has fully paid the price, 63 ownership of the thing sold
shall be transferred to the vendee upon the actual or constructive delivery thereof.
64 In other words, payment of the purchase price is not essential to the transfer of
ownership as long as the property sold has been delivered. 65 Such delivery
(tradition) operated to divest the vendor of title to the property which may not be
regained or recovered until and unless the contract is resolved or rescinded in
accordance with law. 66

Consequently, the properties in the Giporlos Project were, therefore, owned by MMIC
notwithstanding its failure to pay the consideration stipulated in the MOA. Private
respondent, after such delivery and MMIC’s continuous refusal to pay the
consideration for the contract, correctly opted to rescind the contract. 67 That
private respondent did not succeed in collecting payment prior to the filing of the
complaint for rescission with damages is a fault entirely attributable to MMIC which
at the time, acted upon the orders of government authorities.

It is erroneous for private respondent and the courts below to impute bad faith on
the part of petitioner for foreclosing the properties in the Giporlos Project. Petitioner
was simply acting in accordance with its rights as a mortgagee. The MTA, as
amended, clearly provides that the mortgage covers even "after- acquired"
properties. Because petitioner was simply implementing this contractual provision of
the MTA, its knowledge that MMIC had not yet paid the consideration stipulated in
the MOA could not have resulted in foreclosure in bad faith. After all, petitioner was
a total stranger as regards the MOA.

Ordinarily, by the nullification of the foreclosure sale, the properties involved would
revert to their original status of being mortgaged. 74 However, the situation in this
case is an exception to that rule. The MOA, the source of MMIC’s right of ownership
over the properties sold at the foreclosure sale, has been rescinded. Consequently,
petitioner should exclude said properties from the MMIC’s properties which were
mortgaged pari passu to the petitioner and DBP through the MTA. However, since
the foreclosed properties had been turned over to the Asset Privatization Trust, 75
petitioner must reimburse private respondent the value thereof at the time of the
foreclosure sale.

WHEREFORE, the Decision of the Court of Appeals is hereby REVERSED and SET
ASIDE insofar as it renders petitioner solidarily liable with Marinduque Mining and
Industrial Corporation for damages and AFFIRMED insofar as it nullifies the
foreclosure sale of August 31, 1984. Petitioner Philippine National Bank shall exclude
the properties sold at the foreclosure sale from the mortgaged properties of
Marinduque Mining and Industrial Corporation and return the same to private
respondent Industrial Enterprises Inc. or, should such return be not feasible,
reimburse said private respondent the value thereof at the time of the foreclosure
sale.

18
Heirs of Juan San Andres vs. Vicente Rodriguez, G.R. No. 135634, May 31, 2000

Facts:

Juan San Andres was the registered owner of Lot No. 1914-B-2 situated in Liboton, Naga City.
On September 28, 1964, he sold a portion thereof, consisting of 345 square meters, to
respondent Vicente S. Rodriguez for P2,415.00. The sale is evidenced by a Deed of Sale.  2

Upon the death of Juan San Andres on May 5, 1965, Ramon San Andres was appointed judicial
administrator of the decedent's estate in Special Proceedings No. R-21, RTC, Branch 19, Naga
City. Ramon San Andres engaged the services of a geodetic engineer, Jose Peñero, to prepare
a consolidated plan (Exh. A) of the estate. Engineer Peñero also prepared a sketch plan of the
345-square meter lot sold to respondent. From the result of the survey, it was found that
respondent had enlarged the area which he purchased from the late Juan San Andres by 509
square meters.  3

Accordingly, the judicial administrator sent a letter,  dated July 27, 1987, to respondent
4 

demanding that the latter vacate the portion allegedly encroached by him. However, respondent
refused to do so, claiming he had purchased the same from the late Juan San Andres.
Thereafter, on November 24, 1987, the judicial administrator brought an action, in behalf of the
estate of Juan San Andres, for recovery of possession of the 509-square meter lot.

In his Re-amended Answer filed on February 6, 1989, respondent alleged that apart from the
345-square meter lot which had been sold to him by Juan San Andres on September 28, 1964,
the latter likewise sold to him the following day the remaining portion of the lot consisting of 509
square meters, with both parties treating the two lots as one whole parcel with a total area of 854
square meters. Respondent alleged that the full payment of the 509-square meter lot would be
effected within five (5) years from the execution of a formal deed of sale after a survey is
conducted over said property. He further alleged that with the consent of the former owner, Juan
San Andres, he took possession of the same and introduced improvements thereon as early as
1964.

Respondent deposited in court the balance of the purchase price amounting to P7,035.00 for the
aforesaid 509-square meter lot.

While the proceedings were pending, judicial administrator Ramon San Andres died and was
substituted by his son Ricardo San Andres. On the other band, respondent Vicente Rodriguez
died on August 15, 1989 and was substituted by his heirs.  7

Petitioner, as plaintiff, presented two witnesses. The first witness, Engr. Jose Peñero,  testified
8 

that based on his survey conducted sometime between 1982 and 1985, respondent had
enlarged the area which he purchased from the late Juan San Andres by 509 square meters
belonging to the latter's estate. According to Peñero, the titled property (Exh. A-5) of respondent
was enclosed with a fence with metal holes and barbed wire, while the expanded area was
fenced with barbed wire and bamboo and light materials.

The second witness, Ricardo San Andres,  administrator of the estate, testified that respondent
9 

had not filed any claim before Special Proceedings No. R-21 and denied knowledge of Exhibits 2
and 3. However, he recognized the signature in Exhibit 3 as similar to that of the former
administrator, Ramon San Andres. Finally, he declared that the expanded portion occupied by
the family of respondent is now enclosed with barbed wire fence unlike before where it was found
without fence.

19
On the other hand, Bibiana B. Rodriguez,  widow of respondent Vicente Rodriguez, testified that
10 

they had purchased the subject lot from Juan San Andres, who was their compadre, on
September 29, 1964, at P15.00 per square meter. According to her, they gave P500.00 to the
late Juan San Andres who later affixed his signature to Exhibit 2. She added that on March 30,
1966; Ramon San Andres wrote them a letter asking for P300.00 as partial payment for the
subject lot, but they were able to give him only P100.00. She added that they had paid the total
purchase price of P7,035.00 on November 21, 1988 by depositing it in court. Bibiana B.
Rodriquez stated that they had been in possession of the 509-square meter lot since 1964 when
the late Juan San Andres signed the receipt. (Exh. 2) Lastly, she testified that they did not know
at that time the exact area sold to them because they were told that the same would be known
after the survey of the subject lot.

On September 20, 1994, the trial court  rendered judgment in favor of petitioner. It ruled that
11 

there was no contract of sale to speak of for lack of a valid object because there was no sufficient
indication in Exhibit 2 to identify the property subject of the sale, hence, the need to execute a
new contract.

Respondent appealed to the Court of Appeals, which on April 21, 1998 rendered a decision
reversing the decision of the trial court. 

Issue:

I. THE HON. COURT OF APPEALS ERRED IN HOLDING THAT THE DOCUMENT (EXHIBIT
"2") IS A CONTRACT TO SELL DESPITE ITS LACKING ONE OF THE ESSENTIAL ELEMENTS
OF A CONTRACT, NAMELY, OBJECT CERTAIN AND SUFFICIENTLY DESCRIBED.

II. THE HON. COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER IS OBLIGED TO
HONOR THE PURPORTED CONTRACT TO SELL DESPITE NON-FULFILLMENT BY
RESPONDENT OF THE CONDITION THEREIN OF PAYMENT OF THE BALANCE OF THE
PURCHASE PRICE.

Ruling:

The petition has no merit.

First. Art. 1458 of the Civil Code provides:

By the contract of sale one of the contracting parties obligates himself to transfer
the ownership of and to deliver a determinate thing, and the other to pay therefor
a price certain in money or its equivalent.

A contract of sale may be absolute or conditional.

As thus defined, the essential elements of sale are the following:

a) Consent or meeting of the minds, that is, consent to transfer ownership in

exchange for the price;

b) Determinate subject matter; and,

c) Price certain in money or its equivalent. 

12

20
As shown in the receipt, dated September 29, 1964, the late Juan San Andres received P500.00
from respondent as "advance payment for the residential lot adjoining his previously paid lot on
three sides excepting on the frontage; the agreed purchase price was P15.00 per square meter;
and the full amount of the purchase price was to be based on the results of a survey and would
be due and payable in five (5) years from the execution of a deed of sale.

Petitioner contends, however, that the "property subject of the sale was not described with
sufficient certainty such that there is a necessity of another agreement between the parties to
finally ascertain the identity; size and purchase price of the property which is the object of the
alleged sale." 1 He argues that the "quantity of the object is not determinate as in fact a survey is
needed to determine its exact size and the full purchase price therefor"  In support of his
14 

contention, petitioner cites the following provisions of the Civil Code:

Art. 1349. The object of every contract must be determinate as to its kind. The
fact that the quantity is not determinable shall not be an obstacle to the existence
of a contract, provided it is possible to determine the same without the need of a
new contract between the parties.

Art. 1460. . . . The requisite that a thing be determinate is satisfied if at the time
the contract is entered into, the thing is capable of being made determinate
without the necessity of a new and further agreement between the parties.

Petitioner's contention is without merit. There is no dispute that respondent purchased a portion
of Lot 1914-B-2 consisting of 345 square meters. This portion is located in the middle of Lot
1914-B-2, which has a total area of 854 square meters, and is clearly what was referred to in the
receipt as the "previously paid lot." Since the lot subsequently sold to respondent is said to adjoin
the "previously paid lot" on three sides thereof, the subject lot is capable of being determined
without the need of any new contract. The fact that the exact area of these adjoining residential
lots is subject to the result of a survey does not detract from the fact that they are determinate or
determinable. As the Court of Appeals explained:  15

Concomitantly, the object of the sale is certain and determinate. Under Article
1460 of the New Civil Code, a thing sold is determinate if at the time the contract
is entered into, the thing is capable of being determinate without necessity of a
new or further agreement between the parties. Here, this definition finds
realization.

Appellee's Exhibit "A" (page 4, Records) affirmingly shows that the original 345
sq. m. portion earlier sold lies at the middle of Lot 1914-B-2 surrounded by the
remaining portion of the said Lot 1914-B-2 on three (3) sides, in the east, in the
west and in the north. The northern boundary is a 12 meter road. Conclusively,
therefore, this is the only remaining 509 sq. m. portion of Lot 1914-B-2
surrounding the 345 sq. m. lot initially purchased by Rodriguez. It is quite difined,
determinate and certain. Withal, this is the same portion adjunctively occupied
and possessed by Rodriguez since September 29, 1964, unperturbed by anyone
for over twenty (20) years until appellee instituted this suit.

21
Thus, all of the essential elements of a contract of sale are present, i.e., that there was a meeting
of the minds between the parties, by virtue of which the late Juan San Andres undertook to
transfer ownership of and to deliver a determinate thing for a price certain in money. As Art. 1475
of the Civil Code provides:

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. . . .

That the contract of sale is perfected was confirmed by the former administrator of the estates,
Ramon San Andres, who wrote a letter to respondent on March 30, 1966 asking for P300.00 as
partial payment for the subject lot. As the Court of Appeals observed:

Without any doubt, the receipt profoundly speaks of a meeting of the mind
between San Andres and Rodriguez for the sale of the property adjoining the 345
square meter portion previously sold to Rodriguez on its three (3) sides excepting
the frontage. The price is certain, which is P15.00 per square meter. Evidently,
this is a perfected contract of sale on a deferred payment of the purchase price.
All the pre-requisite elements for a valid purchase transaction are present. Sale
does not require any formal document for its existence and validity. And delivery
of possession of land sold is a consummation of the sale (Galar vs. Husain, 20
SCRA 186 [1967]). A private deed of sale is a valid contract between the parties
(Carbonell v. CA, 69 SCRA 99 [1976]).

In the same vein, after the late Juan R. San Andres received the P500.00
downpayment on March 30, 1966, Ramon R. San Andres wrote a letter to
Rodriguez and received from Rodriguez the amount of P100.00 (although
P300.00 was being requested) deductible from the purchase price of the subject
portion. Enrique del Castillo, Ramon's authorized agent, correspondingly signed
the receipt for the P100.00. Surely, this is explicitly a veritable proof of he sale
over the remaining portion of Lot 1914-B-2 and a confirmation by Ramon San
Andres of the existence thereof.  16

There is a need, however, to clarify what the Court of Appeals said is a conditional contract of
sale. Apparently, the appellate court considered as a "condition" the stipulation of the parties that
the full consideration, based on a survey of the lot, would be due and payable within five (5)
years from the execution of a formal deed of sale. It is evident from the stipulations in the receipt
that the vendor Juan San Andres sold the residential lot in question to respondent and undertook
to transfer the ownership thereof to respondent without any qualification, reservation or condition.
In Ang Yu Asuncion v. Court of Appeals,  we held:
17 

In Dignos v. Court of Appeals (158 SCRA 375), we have said that, although

denominated a "Deed of Conditional Sale," a sale is still absolute where the
contract is devoid of any proviso that title is reserved or the right to unilaterally
rescind is stipulated, e.g., until or unless the price is paid. Ownership will then be
transferred to the buyer upon actual or constructive delivery (e.g., by the
execution of a public document) of the property sold. Where the condition is
imposed upon the perfection of the contract itself, the failure of the condition
would prevent such perfection. If the condition is imposed on the obligation of a
party which is not fulfilled, the other party may either waive the condition or refuse
to proceed with the sale. (Art. 1545, Civil Code).

22
Applying these principles to this case, it cannot be gainsaid that the contract of sale between the
parties is absolute, not conditional. There is no reservation of ownership nor a stipulation
providing for a unilateral rescission by either party. In fact, the sale was consummated upon the
delivery of the lot to respondent.  Thus, Art. 1477 provides that the ownership of the thing sold
20 

shall be transferred to the vendee upon the actual or constructive delivery thereof.

The stipulation that the "payment of the full consideration based on a survey shall be due and
payable in five (5) years from the execution of a formal deed of sale" is not a condition which
affects the efficacy of the contract of sale. It merely provides the manner by which the full
consideration is to be computed and the time within which the same is to be paid. But it does not
affect in any manner the effectivity of the contract. Consequently, the contention that the absence
of a formal deed of sale stipulated in the receipt prevents the happening of a sale has no merit.

23
Naranja vs. Court of Appeals, G.R. No. 160132, April 17, 2009

Facts:

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

The two lots were being leased by Esso Standard Eastern, Inc. for 30 years from 1962-1992. For
his properties, Roque was being paid ₱200.00 per month by the company. 4

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

Roque had no other source of income except for the ₱200.00 monthly rental of his two
properties. To show his gratitude to Belardo, Roque sold Lot No. 4 and his one-third share in Lot
No. 2 to Belardo on August 21, 1981, through a Deed of Sale of Real Property which was duly
notarized by Atty. Eugenio Sanicas. The Deed of Sale reads:

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

Belardo’s only source of income was her store and coffee shop. Sometimes, her children would
give her money to help with the household expenses, including the expenses incurred for
Roque’s support. At times, she would also borrow money from Margarita Dema-ala, a
neighbor.8 When the amount of her loan reached ₱15,000.00, Dema-ala required a security. On
November 19, 1983, Roque executed a deed of sale in favor of Dema-ala, covering his two
properties in consideration of the ₱15,000.00 outstanding loan and an additional ₱15,000.00, for
a total of ₱30,000.00. Dema-ala explained that she wanted Roque to execute the deed of sale
himself since the properties were still in his name. Belardo merely acted as a witness. The titles
to the properties were given to Dema-ala for safekeeping. 9

Three days later, or on December 2, 1983, Roque died of influenza. The proceeds of the loan
were used for his treatment while the rest was spent for his burial. 10

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

Unknown to Belardo, petitioners, the children of Placido and Gabino Naranja, executed an
Extrajudicial Settlement Among Heirs12 on October 11, 1985, adjudicating among themselves Lot
No. 4. On February 19, 1986, petitioner Amelia Naranja-Rubinos, accompanied by Belardo,
borrowed the two TCTs, together with the lease agreement with Esso Standard Eastern, Inc.,
from Atty. Sanicas on account of the loan being proposed by Belardo to her. Thereafter,
petitioners had the Extrajudicial Settlement Among Heirs notarized on February 25, 1986. With

24
Roque’s copy of TCT No. T-18764 in their possession, they succeeded in having it cancelled and
a new certificate of title, TCT No. T-140184, issued in their names. 13

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

On December 11, 1989, Atty. Sanicas prepared a certificate of authorization, giving Belardo’s
daughter, Jennelyn P. Vargas, the authority to collect the payments from Esso Standard Eastern,
Inc. But it appeared from the company’s Advice of Fixed Payment that payment of the lease
rental had already been transferred from Belardo to Amelia Naranja-Rubinos because of the
Extrajudicial Settlement Among Heirs.

On June 23, 1992, Belardo, 15 through her daughter and attorney-in-fact, Rebecca Cordero,
instituted a suit for reconveyance with damages. The complaint prayed that judgment be
rendered declaring Belardo as the sole legal owner of Lot No. 4, declaring null and void the
Extrajudicial Settlement Among Heirs, and TCT No. T-140184, and ordering petitioners to
reconvey to her the subject property and to pay damages. The case was docketed as Civil Case
No. 7144.

On March 5, 1997, the RTC rendered a Decision in the consolidated cases in favor of petitioners.

On September 13, 2002, the CA reversed the RTC Decision.

Issue:

1. WHETHER OR NOT THE HONORABLE RESPONDENT COURT OF APPEALS IS

CORRECT IN IGNORING THE POINT RAISED BY [PETITIONERS] THAT THE DEED OF
SALE WHICH DOES NOT COMPL[Y] WITH THE PROVISIONS OF ACT NO. 496 IS [NOT]
VALID.

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

25
Ruling:

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

To be valid, a contract of sale need not contain a technical description of the subject property.
Contracts of sale of real property have no prescribed form for their validity; they follow the
general rule on contracts that they may be entered into in whatever form, provided all the
essential requisites for their validity are present. 22 The requisites of a valid contract of sale under
Article 1458 of the Civil Code are: (1) consent or meeting of the minds; (2) determinate subject
matter; and (3) price certain in money or its equivalent.

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

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

On the alleged nullity of the deed of sale, we hold that petitioners failed to submit sufficient proof
to show that Roque executed the deed of sale under the undue influence of Belardo or that the
deed of sale was simulated or without consideration. 1avvphi1

A notarized document carries the evidentiary weight conferred upon it with respect to its due
execution, and documents acknowledged before a notary public have in their favor the
presumption of regularity. It must be sustained in full force and effect so long as he who impugns
it does not present strong, complete, and conclusive proof of its falsity or nullity on account of
some flaws or defects provided by law.23

Petitioners allege that Belardo unduly influenced Roque, who was already physically weak and
senile at that time, into executing the deed of sale. Belardo allegedly took advantage of the fact
that Roque was living in her house and was dependent on her for support.

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

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

Neither was the contract simulated. The late registration of the Deed of Sale and Roque’s
execution of the second deed of sale in favor of Dema-ala did not mean that the contract was
simulated. We are convinced with the explanation given by respondent’s witnesses that the deed

26
of sale was not immediately registered because Belardo did not have the money to pay for the
fees. This explanation is, in fact, plausible considering that Belardo could barely support herself
and her brother, Roque. As for the second deed of sale, Dema-ala, herself, attested before the
trial court that she let Roque sign the second deed of sale because the title to the properties
were still in his name.

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

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

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

WHEREFORE, premises considered, the petition is DENIED. The Court of Appeals Decision
dated September 13, 2002 and Resolution dated September 24, 2003 are AFFIRMED.

27
Samson vs. Court of Appeals, G.R. No. 108245, November 25, 1994

Facts:

The subject matter of this case is a commercial unit at the Madrigal Building, located
at Claro M. Recto Avenue, Sta. Cruz, Manila. The building is owned by Susana Realty
Corporation and the subject premises was leased to private respondent Angel
Santos. The lessee’s haberdashery store, Santos & Sons, Inc., occupied the
premises for almost twenty (20) years on a yearly basis. 2 Thus, the lease contract
in force between the parties in the year 1983 provided that the term of the lease
shall be one (1) year, starting on August 1, 1983 until July 31, 1984.

On June 28, 1984, the lessor Susana Realty Corporation, through its representative
Mr. Jes Gal R. Sarmiento, Jr., informed respondents that the lease contract which
was to expire on July 31, 1984 would not be renewed. 4

Nonetheless, private respondent’s lease contract was extended until December 31,
1984. 5 Private respondent also continued to occupy the leased premises beyond the
extended term.

On February 5, 1985, private respondent received a letter 6 from the lessor, through
its Real Estate Accountant Jane F. Bartolome, informing him of the increase in
rentals, retroactive to January 1985, pending renewal of his contract until the arrival
of Ms. Ma. Rosa Madrigal (one of the owners of Susana Realty).

Four days later or on February 9, 1985, petitioner Manolo Samson saw private
respondent in the latter’s house and offered to buy the store of Santos & Sons and
his right to lease the subject premises. 7 Petitioner was advised to return after a
week.

On February 15, 1985, petitioner returned to private respondent’s house to confirm

his offer. On said occasion, private respondent presented petitioner with a letter
containing his counter proposal, thus:

Petitioner affixed his signature on the letter-proposal signifying his acceptance. 8

They agreed that the consideration for the sale of the store and leasehold right of
Santos & Sons, Inc. shall be P300,000.00.

On February 20, 1985, petitioner paid P150,000.00 to private respondent

representing the value of existing improvements in the Santos & Sons store. The
parties agreed that the balance of P150,000.00 shall be paid upon the formal
renewal of the lease contract between private respondent and Susana Realty. It was
also a condition precedent to the transfer of the leasehold right of private
respondent to petitioner. 9

In March 1985, petitioner began to occupy the Santos & Sons store. He utilized the
store for the sale of his own goods. 10

28
All went well for a few months. In July 1985, however, petitioner received a notice
from Susana Realty, addressed to Santos & Sons, Inc., directing the latter to vacate
the leased premises on or before July 15, 1985. 11 Private respondent failed to
renew his lease over the premises and petitioner was forced to vacate the same on
July 16, 1985.chanrobles law library : red

Petitioner then filed an action for damages against private Respondent. He imputed

fraud and bad faith against private respondent when the latter stated in his letter-
proposal that his lease contract with Susana Realty has been impliedly renewed.
Petitioner claimed that this misrepresentation induced him to purchase the store of
Santos & Sons and the leasehold right of private Respondent.

In defense, respondent alleged that their agreement was to the effect that the
consideration for the sale was P300,000.00, broken down as follows: P150,000.00
shall be for the improvements in the store, and the balance of P150,000.00 shall be
for the sale of the leasehold right of Santos & Sons over the subject premises. The
balance shall be paid only after the formal renewal of the lease contract and its
actual transfer to petitioner.

Trial on the merits ensued. On November 29, 1990, the trial court rendered a
decision 12 in favor of petitioner.

Private respondent appealed to the Court of Appeals. In a Decision dated November

27, 1992, 14 the appellate court modified the decision of the trial court after finding
that private respondent did not exercise fraud or bad faith in its dealings with
petitioner

Issues:

The pivotal issue in the case at bench is whether or not private respondent Angel
Santos committed fraud or bad faith in representing to petitioner that his contract of
lease over the subject premises has been impliedly renewed by Susana Realty.
Undoubtedly, it was this representation which induced petitioner to enter into the
subject contract with private Respondent.

Ruling:

Bad faith is essentially a state of mind affirmatively operating with furtive design or
with some motive of ill-will. 16 It does not simply connote bad judgment or
negligence. It imports a dishonest purpose or some moral obliquity and conscious
doing of wrong. 17 Bad faith is thus synonymous with fraud and involves a design to
mislead or deceive another, not prompted by an honest mistake as to one’s rights or
duties, but by some interested or sinister motive. 18

29
In contracts, the kind of fraud that will vitiate consent is one where, through
insidious words or machinations of one of the contracting parties, the other is
induced to enter into a contract which, without them, he would not have agreed to.
19 This is known as dolo causante or causal fraud which is basically a deception
employed by one party prior to or simultaneous to the contract in order to secure
the consent of the other.

Petitioner claims that their agreement was that the amount of P300,000.00 is the
consideration for the transfer of private respondent’s leasehold right to him and he
paid P150,000.00 as downpayment therefor. He insists that private respondent
acted in bad faith in assuring him that his lease contract with Susana Realty has
been impliedly renewed and would be formally renewed upon the arrival of Tanya
Madrigal (representative of Susana Realty). As evidence of private respondent’s bad
faith, petitioner stresses that private respondent himself admitted that prior to
February 15, 1985, he was informed by his lawyer that he could not yet sell his
lease right to petitioner for his lease over the premises has not been renewed by
Susana Realty Corporation.

After carefully examining the records, we sustain the finding of public respondent
Court of Appeals that private respondent was neither guilty of fraud nor bad faith in
claiming that there was implied renewal of his contract of lease with Susana Realty.
The records will bear that the original contract of lease between the lessor Susana
Realty and the lessee private respondent was for a period of one year, commencing
on August 1, 1983 until July 31, 1984. Subsequently, however, private respondent’s
lease was extended until December 31, 1984. At this point, it was clear that the
lessor had no intention to renew the lease contract of private respondent for another
year. However, on February 5, 1985, the lessor, thru its Real Estate Accountant,
sent petitioner a letter 20 of even date, worded as follows:

Clearly, this letter led private respondent to believe and conclude that his lease
contract was impliedly renewed and that formal renewal thereof would be made
upon the arrival of Tanya Madrigal. This much was admitted by petitioner himself
when he testified during cross-examination that private respondent initially told him
of the fact that his lease contract with Susana Realty has already expired but he was
anticipating its formal renewal upon the arrival of Madrigal. 21 Thus, from the start,
it was known to both parties that, insofar as the agreement regarding the transfer of
private respondent’s leasehold right to petitioner was concerned, the object thereof
relates to a future right. 22 It is a conditional contract recognized in civil law, 23 the
efficacy of which depends upon an expectancy — the formal renewal of the lease
contract between private respondent and Susana Realty.

The records would also reveal that private respondent’s lawyer informed him that he
could sell the improvements within the store for he already owned them but the sale
of his leasehold right over the store could not as yet be made for his lease contract
had not been actually renewed by Susana Realty. Indeed, it was precisely pursuant
to this advice that private respondent and petitioner agreed that the improvements
in the store shall be sold to petitioner for P150,000.00 24 while the leasehold right
shall be sold for the same amount of P150,000.00, payable only upon the formal
renewal of the lease contract and the actual transfer of the leasehold right to
petitioner. 25 The efficacy of the contract between the parties was thus made
dependent upon the happening of this suspensive condition.

30
Moreover, public respondent Court of Appeals was correct when it faulted petitioner
for failing to exercise sufficient diligence in verifying first the status of private
respondent’s lease.

Indeed, petitioner had every opportunity to verify the status of the lease contract of
private respondent with Susana Realty. As held by this Court in the case of Caram,
Jr. v. Laureta, 27 the rule caveat emptor requires the purchaser to be aware of the
supposed title of the vendor and he who buys without checking the vendor’s title
takes all the risks and losses consequent to such failure. In the case at bench, the
means of verifying for himself the status of private respondent’s lease contract with
Susana Realty was open to petitioner. Nonetheless, no effort was exerted by
petitioner to confirm the status of the subject lease right. 28 He cannot now claim
that he has been deceived.

In sum, we hold that under the facts proved, private respondent cannot be held
guilty of fraud or bad faith when he entered into the subject contract with petitioner.
Causal fraud or bad faith on the part of one of the contracting parties which
allegedly induced the other to enter into a contract must be proved by clear and
convincing evidence. This petitioner failed to do.

31
Javier vs. Court of Appeals, G.R. No. 48194, March 15, 1990

Facts:

Private respondent is a holder of an ordinary timber license issued by the Bureau of Forestry
covering 2,535 hectares in the town of Medina, Misamis Oriental. On February 15, 1966 he
executed a "Deed of Assignment"   in favor of herein petitioners the material parts of which read
4

as follows: LEONARDO A. TIRO

At the time the said deed of assignment was executed, private respondent had a pending
application, dated October 21, 1965, for an additional forest concession covering an area of
2,000 hectares southwest of and adjoining the area of the concession subject of the deed of
assignment. Hence, on February 28, 1966, private respondent and petitioners entered into
another "Agreement"   with the following stipulations:
5

x x x           x x x          x x x

1. That LEONARDO TIRO hereby agrees and binds himself to transfer, cede and
convey whatever rights he may acquire, absolutely and forever, to
TIMBERWEALTH CORPORATION, a corporation duly organized and existing
under the laws of the Philippines, over a forest concession which is now pending
application and approval as additional area to his existing licensed area under
O.T. License No. 391-103166, situated at Medina, Misamis Oriental;

2. That for and in consideration of the aforementioned transfer of rights over said
additional area to TIMBERWEALTH CORPORATION, ESTRELLA F. JAVIER
and JOSE M. JAVIER, both directors and stockholders of said corporation, do
hereby undertake to pay LEONARDO TIRO, as soon as said additional area is
approved and transferred to TIMBERWEALTH CORPORATION the sum of
THIRTY THOUSAND PESOS (P30,000.00), which amount of money shall form
part of their paid up capital stock in TIMBERWEALTH CORPORATION;

3. That this Agreement is subject to the approval of the members of the Board of
Directors of the TIMBERWEALTH CORPORATION.

On November 18, 1966, the Acting Director of Forestry wrote private respondent that his forest
concession was renewed up to May 12, 1967 under O.T.L. No. 391-51267, but since the
concession consisted of only 2,535 hectares, he was therein informed that:

In pursuance of the Presidential directive of May 13, 1966, you are hereby given
until May 12, 1967 to form an organization such as a cooperative, partnership or
corporation with other adjoining licensees so as to have a total holding area of
not less than 20,000 hectares of contiguous and compact territory and an
aggregate allowable annual cut of not less than 25,000 cubic meters, otherwise,
your license will not be further renewed.  6

32
Consequently, petitioners, now acting as timber license holders by virtue of the deed of
assignment executed by private respondent in their favor, entered into a Forest Consolidation
Agreement   on April 10, 1967 with other ordinary timber license holders in Misamis Oriental,
7

namely, Vicente L. De Lara, Jr., Salustiano R. Oca and Sanggaya Logging Company. Under this
consolidation agreement, they all agreed to pool together and merge their respective forest
concessions into a working unit, as envisioned by the aforementioned directives. This
consolidation agreement was approved by the Director of Forestry on May 10, 1967.   The 8

working unit was subsequently incorporated as the North Mindanao Timber Corporation, with the
petitioners and the other signatories of the aforesaid Forest Consolidation Agreement as
incorporators.  9

On July 16, 1968, for failure of petitioners to pay the balance due under the two deeds of
assignment, private respondent filed an action against petitioners, based on the said contracts,
for the payment of the amount of P83,138.15 with interest at 6% per annum from April 10, 1967
until full payment, plus P12,000.00 for attorney's fees and costs.

On September 23, 1968, petitioners filed their answer admitting the due execution of the
contracts but interposing the special defense of nullity thereof since private respondent failed to
comply with his contractual obligations and, further, that the conditions for the enforceability of
the obligations of the parties failed to materialize. As a counterclaim, petitioners sought the return
of P55,586.00 which private respondent had received from them pursuant to an alleged
management agreement, plus attorney's fees and costs.

After trial, the lower court rendered judgment dismissing private respondent's complaint and
ordering him to pay petitioners the sum of P33,161.85 with legal interest at six percent per
annum from the date of the filing of the answer until complete payment. 

Issues:

The assignment of errors of petitioners hinges on the central issue of whether the deed of
assignment dated February 15, 1966 and the agreement of February 28, 1966 are null and void,
the former for total absence of consideration and the latter for non-fulfillment of the conditions
stated therein.

Ruling:

Petitioners contend that the deed of assignment conveyed to them the shares of stocks of private
respondent in Timberwealth Corporation, as stated in the deed itself. Since said corporation
never came into existence, no share of stocks was ever transferred to them, hence the said deed
is null and void for lack of cause or consideration.

33
We do not agree. As found by the Court of Appeals, the true cause or consideration of said deed
was the transfer of the forest concession of private respondent to petitioners for P120,000.00.
This finding is supported by the following considerations, viz:

1. Both parties, at the time of the execution of the deed of assignment knew that the
Timberwealth Corporation stated therein was non-existent.  18

2. In their subsequent agreement, private respondent conveyed to petitioners his inchoate right
over a forest concession covering an additional area for his existing forest concession, which
area he had applied for, and his application was then pending in the Bureau of Forestry for
approval.

3. Petitioners, after the execution of the deed of assignment, assumed the operation of the
logging concessions of private respondent.  19

4. The statement of advances to respondent prepared by petitioners stated: "P55,186.39

advances to L.A. Tiro be applied to succeeding shipments. Based on the agreement, we pay
P10,000.00 every after (sic) shipment. We had only 2 shipments"  20

5. Petitioners entered into a Forest Consolidation Agreement with other holders of forest
concessions on the strength of the questioned deed of assignment.  21

The aforesaid contemporaneous and subsequent acts of petitioners and private respondent
reveal that the cause stated in the questioned deed of assignment is false. It is settled that the
previous and simultaneous and subsequent acts of the parties are properly cognizable indica of
their true intention.   Where the parties to a contract have given it a practical construction by their
22

conduct as by acts in partial performance, such construction may be considered by the court in
construing the contract, determining its meaning and ascertaining the mutual intention of the
parties at the time of contracting.   The parties' practical construction of their contract has been
23

characterized as a clue or index to, or as evidence of, their intention or meaning and as an
important, significant, convincing, persuasive, or influential factor in determining the proper
construction of the agreement.  24

The deed of assignment of February 15, 1966 is a relatively simulated contract which states a
false cause or consideration, or one where the parties conceal their true agreement.   A contract
25

with a false consideration is not null and void per se.   Under Article 1346 of the Civil Code, a
26

relatively simulated contract, when it does not prejudice a third person and is not intended for any
purpose contrary to law, morals, good customs, public order or public policy binds the parties to
their real agreement.

The Court of Appeals, therefore, did not err in holding petitioners liable under the said deed and
in ruling that —

. . . In view of the analysis of the first and second assignment of errors, the
defendants-appellees are liable to the plaintiff-appellant for the sale and transfer
in their favor of the latter's forest concessions. Under the terms of the contract,
the parties agreed on a consideration of P120,000.00. P20,000.00 of which was
paid, upon the signing of the contract and the balance of P100,000.00 to be paid
at the rate of P10,000.00 for every shipment of export logs actually produced
from the forest concessions of the appellant sold to the appellees. Since plaintiff-
appellant's forest concessions were consolidated or merged with those of the
other timber license holders by appellees' voluntary act under the Forest
Consolidation Agreement (Exhibit D), approved by the Bureau of Forestry (Exhibit
D-3), then the unpaid balance of P49,338.15 (the amount of P70,661.85 having
been received by the plaintiff-appellant from the defendants-appellees) became
due and demandable.  27

34
As to the alleged nullity of the agreement dated February 28, 1966, we agree with petitioners that
they cannot be held liable thereon. The efficacy of said deed of assignment is subject to the
condition that the application of private respondent for an additional area for forest concession be
approved by the Bureau of Forestry. Since private respondent did not obtain that approval, said
deed produces no effect. When a contract is subject to a suspensive condition, its birth or
effectivity can take place only if and when the event which constitutes the condition happens or is
fulfilled.   If the suspensive condition does not take place, the parties would stand as if the
28

conditional obligation had never existed. 29

The said agreement is a bilateral contract which gave rise to reciprocal obligations, that is, the
obligation of private respondent to transfer his rights in the forest concession over the additional
area and, on the other hand, the obligation of petitioners to pay P30,000.00. The demandability
of the obligation of one party depends upon the fulfillment of the obligation of the other. In this
case, the failure of private respondent to comply with his obligation negates his right to demand
performance from petitioners. Delivery and payment in a contract of sale, are so interrelated and
intertwined with each other that without delivery of the goods there is no corresponding obligation
to pay. The two complement each other.  30

Moreover, under the second paragraph of Article 1461 of the Civil Code, the efficacy of the sale
of a mere hope or expectancy is deemed subject to the condition that the thing will come into
existence. In this case, since private respondent never acquired any right over the additional
area for failure to secure the approval of the Bureau of Forestry, the agreement executed
therefor, which had for its object the transfer of said right to petitioners, never became effective
or enforceable.

WHEREFORE, the decision of respondent Court of Appeals is hereby MODIFIED. The

agreement of the parties dated February 28, 1966 is declared without force and effect and the
amount of P30,000.00 is hereby ordered to be deducted from the sum awarded by respondent
court to private respondent. In all other respects, said decision of respondent court is affirmed.

35
Vda. De Rigonan vs. Derecho, G.R. No. 159571, July 15, 2005

Owners who, for a long period of time, fail to assert their rights to unregistered real property may
be deprived of it through prescription. Although the present respondents initially owned part of
the subject property by virtue of succession, their inaction for several decades bars them from
recovering it from petitioners who have possessed it as owners since 1928. The purpose of
prescription is to protect the diligent and vigilant, not those who sleep on their rights.

Facts:

The instant controversy revolves around a parcel of land located at Tuburan Sur, Danao City,
originally owned by Hilarion Derecho. When Hilarion died long before World War II, his eight
children -- Leonardo, Apolinar, Andres, Honorata, Dolores, Gerardo, Agaton, and Oliva --
became pro indiviso co-owners of the subject property by intestate succession. Subsequently,
Tax Declaration No. 002675 was issued under the name "Heirs of Hilarion."

On July 16, 1921, five of the co-owners -- Leonardo, Apolinar, Andres, Honorata, and Dolores --
sold the inherited property to Francisco Lacambra, subject to a five-year redemption
clause.6 Notably, the three other Derecho heirs -- Gerardo, Agaton, and Oliva -- were not parties
to the pacto de retro sale.

Sometime in 1928, two years after the period for redemption expired, Dolores -- together with her
husband, Leandro Rigonan -- purchased7 the land from Lacambra and immediately occupied it. 8

More than five decades passed without any controversy. On April 24, 1980, Leandro Rigonan
executed the assailed Affidavit of Adjudication in favor of his son, Teodoro Rigonan (the
deceased husband of Petitioner Delfina vda. de Rigonan). 9 Under this instrument, Leandro
declared himself to be the sole heir of Hilarion,10 while Teodoro obtained the cancellation of Tax
Declaration No. 00267,11 and acquired Tax Declaration No. 00667 in his own name. 12

During the same year, Teodoro mortgaged the subject property to the Rural Bank of Compostela
of Cebu. Dreading foreclosure, he settled his obligations with the bank 13 by securing the aid of
Spouses Valerio and Visminda Laude. On April 5, 1984, Teodoro executed the assailed Deed of
Absolute Sale of Unregistered Land in favor of Valerio Laude, 14 who then obtained Tax
Declaration No. 00726 under the latter’s name on May 10, 1984. 15

On November 10, 1993, respondents -- as the alleged heirs of Hilarion and pro indiviso owners
of the subject realty -- brought an action before the Regional Trial Court (RTC) of Danao City
(Branch 25), first, to recover the property; and, second, to annul the Deed of Sale in favor of
Laude16 and the Affidavit of Adjudication, whose validity and authenticity they assailed on the
ground of fraud. They likewise maintained that the subject property had not been partitioned
among the heirs; thus, it was still co-owned at the time it was conveyed to Petitioner Laude. 17

Petitioners did not deny the imputed fraud in the execution of the Affidavit of Adjudication. They,
however, averred that the document had no bearing on their claim of ownership, which had long
pertained to the Rigonan spouses following the 1928 conveyance from the absolute owner,
Lacambra.18 They theorized that the co-ownership over the property ended when the period for
redemption lapsed without any action on the part of the co-owners.19 Therefore, the Rigonan
spouses bought the property as legitimate vendees for value and in good faith, not in the
capacity of redeeming co-owners.20

36
Petitioners likewise argued that they and their predecessors-in-interest had continuously owned
and possessed the subject property for 72 years. Accordingly, acquisitive prescription had
allegedly set in, in their favor, when the case was filed in 1993. 21

Lastly, petitioners maintained that they were entitled to the equitable defense of laches.
Respondents and their forebears were rebuked for not asserting their rights over the property for
the past 72 years. They supposedly did so only after finding that the land had been developed,
and that it had appreciated in value.

CA Ruling:

On appeal, the CA held that the Affidavit of Adjudication and the Deed of Absolute Sale were
both void. 

Issue:

1. Whether at the time of the purchase in 1928, co-ownership still subsisted among the
heirs of Hilarion Derecho

Ruling:

Pacto de Retro and

Failure to Redeem

Under a pacto de retro sale, title to and ownership of property are immediately vested in the
vendee a retro, subject only to the resolutory condition that the vendor repurchases it within the
stipulated period. Pending the redemption, the vendor loses all ownership rights over the
property, save for the right to repurchase it upon compliance with the requirements provided in
Article 1518 of the Spanish Civil Code.35

In a number of cases, this Court has held that once the vendor fails to redeem the property within
the stipulated period, irrevocable title shall be vested in the vendee by operation of law.36

In the instant case, the parties to the contract stipulated a five-year redemption period, which
expired on July 16, 1926. The failure of the sellers to redeem the property within the stipulated
period indubitably vested absolute title and ownership in the vendee, Lacambra. Consequently,
barring any irregularities in the sale, the vendors definitively lost all title, rights and claims over
the thing sold. To all intents and purposes, therefore, the vendors a retro ceased to be co-
owners on July 16, 1926.

Clearly then, the parties to the sale -- Leonardo, Apolinar, Andres, and Honorata (but not
Dolores, as will be explained later), as well as all their successors-in-interest -- no longer had any
legal interest in the disputed property, none that they could have asserted in this action.

37
Purchase Beyond the

Redemption Period

As for Dolores, she reacquired legal interest in the property by virtue of the purchase in 1928,
two years after the period to redeem had already expired. 37

This purchase cannot be considered as a redemption in the concept of a pacto de retro sale,

which would imply that the period to redeem was extended long after it had already expired.
Such automatic extension is not possible because, as succinctly stated by Manresa, "if the
extension is made after the expiration of the period, then it is void and of no effect because there
is nothing to extend."38

Adiarte v. Tumaneng39 illustrates the legal effect of the expiration of the stipulated period for
redemption. In that case, Amanda Madamba sold two parcels of land to Spouses Cirilo Agudong
and Emiliana Tumaneng. However, she reserved for herself the right to repurchase the lots
within ten years. Five years after the period expired, Agudong executed a Contract promising to
resell the land to Madamba. When the former died without fulfilling his promise, the latter filed a
suit to compel the widow to execute a deed of sale in the plaintiff’s favor. The widow argued that
Madamba could no longer redeem the property, because the period for redemption had already
expired.

In debunking the widow’s defense, this Court ruled that the Contract did not constitute a promise
to resell, because the right to repurchase had been lost after the expiration of the stipulated
period. The original Contract of Sale with a right of repurchase no longer existed at the time
Agudong made the promise to sell. Therefore, the parties entered into an entirely new and
independent agreement to sell, which was binding on the widow.

In Umale v. Fernandez,40 the Court ruled that the vendors were entitled to redeem the property
despite the lapse of the period for redemption, inasmuch as the vendees had renounced their
right. On April 13, 1905, a parcel of land was sold a retro by Emigdio Umale and his wife to
Spouses Fernandez, without fixing any period for redemption. On June 12, 1909, Fernandez
executed a Contract allowing the Umale spouses to redeem the land despite the lapse of the
four-year period of redemption. This period was mandated by Article 1508 41 of the Spanish Civil
Code for cases in which no period had been stipulated. In 1911, Emigdio Umale redeemed the
land and took possession of it.

He then sued to compel the Fernandez couple to execute the instrument of redemption. The
defendants countered that the land belonged to them, because the vendors had failed to redeem
it within the term allowed by law. The Court ruled:

"In the absence of an express stipulation with regard to the period of redemption, the purchaser,
in the exercise of the freedom to make contracts that is possessed by all, has the power to
extend the period allowed by law, provided that the new period stipulated does not exceed the
ten years fixed by article 1508 of the code. For nothing in this article prohibits an extension, by
agreement, of the four years, which is the period prescribed by law in cases where, in sales with
right of repurchase, no period for redemption has been fixed by the parties." 42 [Emphasis
supplied]

In his Concurring Opinion,43 Justice Torres arrived at the same conclusion, but on a different
ground. He explained that the contracting parties had no right to extend the legal period for
redemption after it had already lapsed; and that, when the vendees alienated and returned the
property afterwards, they did so by virtue of a new Contract of Sale, independent of and distinct
from the previous one already terminated.

38
It is clear from Adiarte and Umale that after the expiration of the period for redemption, the
parties could either (1) enter into an entirely new contract involving the same property; or (2) if
they did not expressly stipulate the period, extend the time for redemption, provided the
extension did not exceed the maximum period of ten years allowed by Article 1508. 44

In the present case, Lacambra and the heirs stipulated a five-year redemption period. When it
lapsed, the vendee acquired absolute title, while the five co-owners-sellers were stripped of their
co-ownership of the property.

Therefore, when Dolores repurchased the property in 1928, she did so in her personal capacity,
no longer as a co-owner-seller. Following the ruling in Adiarte, she is deemed to have entered
into an entirely new contract, independent of the 1921 pacto de retro sale.

Acquisitive Prescription

Moreover, petitioners acquired title to the subject property by prescription. Section 41 of Act 190
(Code of Civil Procedure) provides:

"Title to land by prescription. -- Ten years actual adverse possession by any person claiming to
be the owner for that time of any land or interest in land, uninterruptedly continued for ten years
by occupancy, descent, grants, or otherwise, in whatever way such occupancy may have
commenced or continued, shall vest in every actual occupant or possessor of such land a full
and complete title, saving to the person under disabilities the rights secured by the next section.
In order to constitute such title by prescription or adverse possession, the possession by the
claimant or by the person under or through whom he claims must be actual, open, public,
continuous, under a claim of title exclusive of any other right and adverse to all claimants x x x."

This provision, as authoritatively and consistently interpreted by this Court, allows adverse
possession in any character to ripen into ownership after the lapse of ten years.58 "Prescription
lies under the said section even in the absence of good faith and just title." 59

In the instant case, the Rigonan spouses possessed the property in the concept of owners after
their purchase in 1928. They peacefully occupied it, were never ousted from it, and never
prevented from enjoying its fruits.

Furthermore, possession by the Rigonan spouses was adverse to the other heirs, as shown by
the following: one, the former obtained the cancellation of the Tax Declaration in the latter’s
name; two, the spouses executed the Affidavit of Adjudication, claiming that Leandro Rigonan
was the sole heir; three, petitioners did not share with respondents the enjoyment of the property
for a half-century; and four, Teodoro sold the property to Laude. Respondents were aware of
these facts and of their rightful share in the land. Therefore, they knew that petitioners were
holding the property adverse to their interests.

As petitioners have been in continuous possession and enjoyment of the disputed land since
1928, a length of time that has never been questioned, there can be no doubt that they obtained
title to it by acquisitive prescription.

To stress the folly of respondents’ protracted inaction, may we add that the present action would
still be barred, even if the Court were to apply the thirty-year period fixed by the present Civil
Code for the acquisition of ownership by extraordinary prescription 60 or for the extinction of the
right of action over immovables.

39
Spouses Buenaventura vs. Court of Appeals, G.R. No. 126376, November 20, 2003

Facts:

Defendant spouses Leonardo Joaquin and Feliciana Landrito are the parents of plaintiffs
Consolacion, Nora, Emma and Natividad as well as of defendants Fidel, Tomas, Artemio, Clarita,
Felicitas, Fe, and Gavino, all surnamed JOAQUIN. The married Joaquin children are joined in
this action by their respective spouses.

Sought to be declared null and void ab initio are certain deeds of sale of real property executed
by defendant parents Leonardo Joaquin and Feliciana Landrito in favor of their co-defendant
children and the corresponding certificates of title issued in their names, to wit:

1. Deed of Absolute Sale covering Lot 168-C-7 of subdivision plan (LRC) Psd-256395
executed on 11 July 1978, in favor of defendant Felicitas Joaquin, for a consideration of
₱6,000.00 (Exh. "C"), pursuant to which TCT No. [36113/T-172] was issued in her name
(Exh. "C-1");

2. Deed of Absolute Sale covering Lot 168-I-3 of subdivision plan (LRC) Psd-256394
executed on 7 June 1979, in favor of defendant Clarita Joaquin, for a consideration of
₱1[2],000.00 (Exh. "D"), pursuant to which TCT No. S-109772 was issued in her name
(Exh. "D-1");

3 Deed of Absolute Sale covering Lot 168-I-1 of subdivision plan (LRC) Psd-256394
executed on 12 May 1988, in favor of defendant spouses Fidel Joaquin and Conchita
Bernardo, for a consideration of ₱54,[3]00.00 (Exh. "E"), pursuant to which TCT No.
155329 was issued to them (Exh. "E-1");

4. Deed of Absolute Sale covering Lot 168-I-2 of subdivision plan (LRC) Psd-256394
executed on 12 May 1988, in favor of defendant spouses Artemio Joaquin and Socorro
Angeles, for a consideration of ₱[54,3]00.00 (Exh. "F"), pursuant to which TCT No.
155330 was issued to them (Exh. "F-1"); and

5. Absolute Sale of Real Property covering Lot 168-C-4 of subdivision plan (LRC) Psd-
256395 executed on 9 September 1988, in favor of Tomas Joaquin, for a consideration of
₱20,000.00 (Exh. "G"), pursuant to which TCT No. 157203 was issued in her name (Exh.
"G-1").

6. Deed of Absolute Sale covering Lot 168-C-1 of subdivision plan (LRC) Psd-256395
executed on 7 October 1988, in favor of Gavino Joaquin, for a consideration of
₱25,000.00 (Exh. "K"), pursuant to which TCT No. 157779 was issued in his name (Exh.
"K-1").]

In seeking the declaration of nullity of the aforesaid deeds of sale and certificates of title,
plaintiffs, in their complaint, aver:

- XX-

40
The deeds of sale, Annexes "C," "D," "E," "F," and "G," [and "K"] are simulated as they are, are
NULL AND VOID AB INITIO because –

a) Firstly, there was no actual valid consideration for the deeds of sale xxx over the
properties in litis;

b) Secondly, assuming that there was consideration in the sums reflected in the
questioned deeds, the properties are more than three-fold times more valuable than the
measly sums appearing therein;

c) Thirdly, the deeds of sale do not reflect and express the true intent of the parties
(vendors and vendees); and

d) Fourthly, the purported sale of the properties in litis was the result of a deliberate
conspiracy designed to unjustly deprive the rest of the compulsory heirs (plaintiffs herein)
of their legitime.

- XXI -

Necessarily, and as an inevitable consequence, Transfer Certificates of Title Nos. 36113/T-172,

S-109772, 155329, 155330, 157203 [and 157779] issued by the Registrar of Deeds over the
properties in litis xxx are NULL AND VOID AB INITIO.

Defendants, on the other hand aver (1) that plaintiffs do not have a cause of action against them
as well as the requisite standing and interest to assail their titles over the properties in litis; (2)
that the sales were with sufficient considerations and made by defendants parents voluntarily, in
good faith, and with full knowledge of the consequences of their deeds of sale; and (3) that the
certificates of title were issued with sufficient factual and legal basis.

RTC Ruling:

After trial, the trial court ruled in favor of the defendants and dismissed the complaint. 

CA Ruling:

The Court of Appeals affirmed the decision of the trial court.

Issue:

1. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE IN

QUESTION HAD NO VALID CONSIDERATION.

2. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT EVEN ASSUMING THAT
THERE WAS A CONSIDERATION, THE SAME IS GROSSLY INADEQUATE.

3. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE DEEDS OF SALE DO
NOT EXPRESS THE TRUE INTENT OF THE PARTIES.

41
Ruling:

Whether the Deeds of Sale are void for lack of consideration

Petitioners assert that their respondent siblings did not actually pay the prices stated in the
Deeds of Sale to their respondent father. Thus, petitioners ask the court to declare the Deeds of
Sale void.

A contract of sale is not a real contract, but a consensual contract. As a consensual contract, a
contract of sale becomes a binding and valid contract upon the meeting of the minds as to price.
If there is a meeting of the minds of the parties as to the price, the contract of sale is valid,
despite the manner of payment, or even the breach of that manner of payment. If the real price is
not stated in the contract, then the contract of sale is valid but subject to reformation. If there is
no meeting of the minds of the parties as to the price, because the price stipulated in the contract
is simulated, then the contract is void. Article 1471 of the Civil Code states that if the price in a
14 

contract of sale is simulated, the sale is void.

It is not the act of payment of price that determines the validity of a contract of sale. Payment of
the price has nothing to do with the perfection of the contract. Payment of the price goes into the
performance of the contract. Failure to pay the consideration is different from lack of
consideration. The former results in a right to demand the fulfillment or cancellation of the
obligation under an existing valid contract while the latter prevents the existence of a valid
contract. 15

Petitioners failed to show that the prices in the Deeds of Sale were absolutely simulated. To
prove simulation, petitioners presented Emma Joaquin Valdoz’s testimony stating that their
father, respondent Leonardo Joaquin, told her that he would transfer a lot to her through a deed
of sale without need for her payment of the purchase price. The trial court did not find the
16 

allegation of absolute simulation of price credible. Petitioners’ failure to prove absolute simulation
of price is magnified by their lack of knowledge of their respondent siblings’ financial capacity to
buy the questioned lots. On the other hand, the Deeds of Sale which petitioners presented as
17 

evidence plainly showed the cost of each lot sold. Not only did respondents’ minds meet as to
the purchase price, but the real price was also stated in the Deeds of Sale. As of the filing of the
complaint, respondent siblings have also fully paid the price to their respondent father. 18

Whether the Deeds of Sale are void for gross inadequacy of price

Petitioners ask that assuming that there is consideration, the same is grossly inadequate as to
invalidate the Deeds of Sale.

Articles 1355 of the Civil Code states:

Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a
contract, unless there has been fraud, mistake or undue influence. (Emphasis supplied)

Article 1470 of the Civil Code further provides:

Art. 1470. Gross inadequacy of price does not affect a contract of sale, except as may indicate a
defect in the consent, or that the parties really intended a donation or some other act or contract.
(Emphasis supplied)

42
Petitioners failed to prove any of the instances mentioned in Articles 1355 and 1470 of the Civil
Code which would invalidate, or even affect, the Deeds of Sale. Indeed, there is no requirement
that the price be equal to the exact value of the subject matter of sale. All the respondents
believed that they received the commutative value of what they gave. As we stated in Vales v.
Villa:
19

Courts cannot follow one every step of his life and extricate him from bad bargains, protect him
from unwise investments, relieve him from one-sided contracts, or annul the effects of foolish
acts. Courts cannot constitute themselves guardians of persons who are not legally incompetent.
Courts operate not because one person has been defeated or overcome by another, but
because he has been defeated or overcome illegally. Men may do foolish things, make ridiculous
contracts, use miserable judgment, and lose money by them – indeed, all they have in the world;
but not for that alone can the law intervene and restore. There must be, in addition, a violation of
the law, the commission of what the law knows as an actionable wrong, before the courts are
authorized to lay hold of the situation and remedy it. (Emphasis in the original)

Moreover, the factual findings of the appellate court are conclusive on the parties and carry
greater weight when they coincide with the factual findings of the trial court. This Court will not
weigh the evidence all over again unless there has been a showing that the findings of the lower
court are totally devoid of support or are clearly erroneous so as to constitute serious abuse of
discretion. In the instant case, the trial court found that the lots were sold for a valid
20 

consideration, and that the defendant children actually paid the purchase price stipulated in their
respective Deeds of Sale. Actual payment of the purchase price by the buyer to the seller is a
factual finding that is now conclusive upon us.

WHEREFORE, we AFFIRM the decision of the Court of Appeals in toto.

43
Boston Bank vs. Manalo, G.R. No. 158149, February 9, 2006

Facts:

The Xavierville Estate, Inc. (XEI) was the owner of parcels of land in Quezon City, known as the
Xavierville Estate Subdivision, with an area of 42 hectares. XEI caused the subdivision of the
property into residential lots, which was then offered for sale to individual lot buyers. 3

On September 8, 1967, XEI, through its General Manager, Antonio Ramos, as vendor, and The
Overseas Bank of Manila (OBM), as vendee, executed a "Deed of Sale of Real Estate" over
some residential lots in the subdivision, including Lot 1, Block 2, with an area of 907.5 square
meters, and Lot 2, Block 2, with an area of 832.80 square meters. The transaction was subject to
the approval of the Board of Directors of OBM, and was covered by real estate mortgages in
favor of the Philippine National Bank as security for its account amounting to ₱5,187,000.00, and
the Central Bank of the Philippines as security for advances amounting to
₱22,185,193.74.4 Nevertheless, XEI continued selling the residential lots in the subdivision as
agent of OBM.5

Sometime in 1972, then XEI president Emerito Ramos, Jr. contracted the services of Engr.
Carlos Manalo, Jr. who was in business of drilling deep water wells and installing pumps under
the business name Hurricane Commercial, Inc. For ₱34,887.66, Manalo, Jr. installed a water
pump at Ramos’ residence at the corner of Aurora Boulevard and Katipunan Avenue, Quezon
City. Manalo, Jr. then proposed to XEI, through Ramos, to purchase a lot in the Xavierville
subdivision, and offered as part of the downpayment the ₱34,887.66 Ramos owed him. XEI,
through Ramos, agreed. In a letter dated February 8, 1972, Ramos requested Manalo, Jr. to
choose which lots he wanted to buy so that the price of the lots and the terms of payment could
be fixed and incorporated in the conditional sale. 6 Manalo, Jr. met with Ramos and informed him
that he and his wife Perla had chosen Lots 1 and 2 of Block 2 with a total area of 1,740.3 square
meters.

In a letter dated August 22, 1972 to Perla Manalo, Ramos confirmed the reservation of the lots.
He also pegged the price of the lots at ₱200.00 per square meter, or a total of ₱348,060.00, with
a 20% down payment of the purchase price amounting to ₱69,612.00 less the ₱34,887.66 owing
from Ramos, payable on or before December 31, 1972; the corresponding Contract of
Conditional Sale would then be signed on or before the same date, but if the selling operations of
XEI resumed after December 31, 1972, the balance of the downpayment would fall due then, and
the spouses would sign the aforesaid contract within five (5) days from receipt of the notice of
resumption of such selling operations. It was also stated in the letter that, in the meantime, the
spouses may introduce improvements thereon subject to the rules and regulations imposed by
XEI in the subdivision. Perla Manalo conformed to the letter agreement. 7

The spouses Manalo took possession of the property on September 2, 1972, constructed a
house thereon, and installed a fence around the perimeter of the lots.

In the meantime, many of the lot buyers refused to pay their monthly installments until they were
assured that they would be issued Torrens titles over the lots they had purchased. 8 The spouses
Manalo were notified of the resumption of the selling operations of XEI.9 However, they did not
pay the balance of the downpayment on the lots because Ramos failed to prepare a contract of
conditional sale and transmit the same to Manalo for their signature. On August 14, 1973, Perla
Manalo went to the XEI office and requested that the payment of the amount representing the
balance of the downpayment be deferred, which, however, XEI rejected. On August 10, 1973,
XEI furnished her with a statement of their account as of July 31, 1973, showing that they had a
balance of ₱34,724.34 on the downpayment of the two lots after deducting the account of
Ramos, plus ₱3,819.6810 interest thereon from September 1, 1972 to July 31, 1973, and that the
interests on the unpaid balance of the purchase price of ₱278,448.00 from September 1, 1972 to

44
July 31, 1973 amounted to ₱30,629.28. 11 The spouses were informed that they were being billed
for said unpaid interests.12

On January 25, 1974, the spouses Manalo received another statement of account from XEI,
inclusive of interests on the purchase price of the lots. 13 In a letter dated April 6, 1974 to XEI,
Manalo, Jr. stated they had not yet received the notice of resumption of Lei’s selling operations,
and that there had been no arrangement on the payment of interests; hence, they should not be
charged with interest on the balance of the downpayment on the property. 14 Further, they
demanded that a deed of conditional sale over the two lots be transmitted to them for their
signatures. However, XEI ignored the demands. Consequently, the spouses refused to pay the
balance of the downpayment of the purchase price.15

Sometime in June 1976, Manalo, Jr. constructed a business sign in the sidewalk near his house.
In a letter dated June 17, 1976, XEI informed Manalo, Jr. that business signs were not allowed
along the sidewalk. It demanded that he remove the same, on the ground, among others, that
the sidewalk was not part of the land which he had purchased on installment basis from
XEI.16 Manalo, Jr. did not respond. XEI reiterated its demand on September 15, 1977. 17

Subsequently, XEI turned over its selling operations to OBM, including the receivables for lots
already contracted and those yet to be sold.18 On December 8, 1977, OBM warned Manalo, Jr.,
that "putting up of a business sign is specifically prohibited by their contract of conditional sale"
and that his failure to comply with its demand would impel it to avail of the remedies as provided
in their contract of conditional sale.19

Meanwhile, on December 5, 1979, the Register of Deeds issued Transfer Certificate of Title
(TCT) No. T-265822 over Lot 1, Block 2, and TCT No. T-265823 over Lot 2, Block 2, in favor of
the OBM.20 The lien in favor of the Central Bank of the Philippines was annotated at the dorsal
portion of said title, which was later cancelled on August 4, 1980. 21

Subsequently, the Commercial Bank of Manila (CBM) acquired the Xavierville Estate from OBM.
CBM wrote Edilberto Ng, the president of Xavierville Homeowners Association that, as of
January 31, 1983, Manalo, Jr. was one of the lot buyers in the subdivision. 22 CBM reiterated in its
letter to Ng that, as of January 24, 1984, Manalo was a homeowner in the subdivision. 23

In a letter dated August 5, 1986, the CBM requested Perla Manalo to stop any on-going
construction on the property since it (CBM) was the owner of the lot and she had no permission
for such construction.24 She agreed to have a conference meeting with CBM officers where she
informed them that her husband had a contract with OBM, through XEI, to purchase the property.
When asked to prove her claim, she promised to send the documents to CBM. However, she
failed to do so.25 On September 5, 1986, CBM reiterated its demand that it be furnished with the
documents promised,26 but Perla Manalo did not respond.

On July 27, 1987, CBM filed a complaint27 for unlawful detainer against the spouses with the
Metropolitan Trial Court of Quezon City. The case was docketed as Civil Case No. 51618. CBM
claimed that the spouses had been unlawfully occupying the property without its consent and that
despite its demands, they refused to vacate the property. The latter alleged that they, as
vendors, and XEI, as vendee, had a contract of sale over the lots which had not yet been
rescinded.

45
The plaintiffs alleged therein that they had always been ready, able and willing to pay the
installments on the lots sold to them by the defendant’s remote predecessor-in-interest, as might
be or stipulated in the contract of sale, but no contract was forthcoming; they constructed their
house worth ₱2,000,000.00 on the property in good faith; Manalo, Jr., informed the defendant,
through its counsel, on October 15, 1988 that he would abide by the terms and conditions of his
original agreement with the defendant’s predecessor-in-interest; during the hearing of the
ejectment case on October 16, 1988, they offered to pay ₱313,172.34 representing the balance
on the purchase price of said lots; such tender of payment was rejected, so that the subject lots
could be sold at considerably higher prices to third parties.

Issue:

2) whether petitioner or its predecessors-in-interest, the XEI or the OBM, as seller, and the
respondents, as buyers, forged a perfect contract to sell over the property; (3) whether petitioner
is estopped from contending that no such contract was forged by the parties; whether XEI had
agreed to allow the respondents to pay the purchase price of the property was raised by the
parties. 

Ruling:

We agree with petitioner’s contention that, for a perfected contract of sale or contract to sell to
exist in law, there must be an agreement of the parties, not only on the price of the property sold,
but also on the manner the price is to be paid by the vendee.

Under Article 1458 of the New Civil Code, in a contract of sale, whether absolute or conditional,
one of the contracting parties obliges himself to transfer the ownership of and deliver a
determinate thing, and the other to pay therefor a price certain in money or its equivalent. A
contract of sale is perfected at the moment there is a meeting of the minds upon the thing which
is the object of the contract and the price. From the averment of perfection, 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.55 On the other hand, when the contract of sale or to sell is not perfected, it cannot, as an
independent source of obligation, serve as a binding juridical relation between the parties. 56

A definite agreement as to the price is an essential element of a binding agreement to sell

personal or real property because it seriously affects the rights and obligations of the parties.
Price is an essential element in the formation of a binding and enforceable contract of sale. The
fixing of the price can never be left to the decision of one of the contracting parties. But a price
fixed by one of the contracting parties, if accepted by the other, gives rise to a perfected sale. 57

It is not enough for the parties to agree on the price of the property. The parties must also agree
on the manner of payment of the price of the property to give rise to a binding and enforceable
contract of sale or contract to sell. This is so because the agreement as to the manner of
payment goes into the price, such that a disagreement on the manner of payment is tantamount
to a failure to agree on the price.58

In a contract to sell property by installments, it is not enough that the parties agree on the price
as well as the amount of downpayment. The parties must, likewise, agree on the manner of
payment of the balance of the purchase price and on the other terms and conditions relative to
the sale. Even if the buyer makes a downpayment or portion thereof, such payment cannot be
considered as sufficient proof of the perfection of any purchase and sale between the parties.
Indeed, this Court ruled in Velasco v. Court of Appeals 59 that:

46
It is not difficult to glean from the aforequoted averments that the petitioners themselves admit
that they and the respondent still had to meet and agree on how and when the down-payment
and the installment payments were to be paid. Such being the situation, it cannot, therefore, be
said that a definite and firm sales agreement between the parties had been perfected over the lot
in question. Indeed, this Court has already ruled before that a definite agreement on the manner
of payment of the purchase price is an essential element in the formation of a binding and
enforceable contract of sale. The fact, therefore, that the petitioners delivered to the respondent
the sum of ₱10,000.00 as part of the downpayment that they had to pay cannot be considered as
sufficient proof of the perfection of any purchase and sale agreement between the parties herein
under article 1482 of the New Civil Code, as the petitioners themselves admit that some
essential matter – the terms of payment – still had to be mutually covenanted. 60

We agree with the contention of the petitioner that, as held by the CA, there is no showing, in the
records, of the schedule of payment of the balance of the purchase price on the property
amounting to ₱278,448.00. We have meticulously reviewed the records, including Ramos’
February 8, 1972 and August 22, 1972 letters to respondents, 61 and find that said parties
confined themselves to agreeing on the price of the property (₱348,060.00), the 20%
downpayment of the purchase price (₱69,612.00), and credited respondents for the ₱34,887.00
owing from Ramos as part of the 20% downpayment. The timeline for the payment of the
balance of the downpayment (₱34,724.34) was also agreed upon, that is, on or before XEI
resumed its selling operations, on or before December 31, 1972, or within five (5) days from
written notice of such resumption of selling operations. The parties had also agreed to
incorporate all the terms and conditions relating to the sale, inclusive of the terms of payment of
the balance of the purchase price and the other substantial terms and conditions in the
"corresponding contract of conditional sale," to be later signed by the parties, simultaneously with
respondents’ settlement of the balance of the downpayment.

Based on these two letters, the determination of the terms of payment of the ₱278,448.00 had
yet to be agreed upon on or before December 31, 1972, or even afterwards, when the parties
sign the corresponding contract of conditional sale.

Jurisprudence is that if a material element of a contemplated contract is left for future

negotiations, the same is too indefinite to be enforceable. 64 And when an essential element of a
contract is reserved for future agreement of the parties, no legal obligation arises until such
future agreement is concluded.65

So long as an essential element entering into the proposed obligation of either of the parties
remains to be determined by an agreement which they are to make, the contract is incomplete
and unenforceable.66 The reason is that such a contract is lacking in the necessary qualities of
definiteness, certainty and mutuality.67

There is no evidence on record to prove that XEI or OBM and the respondents had agreed, after
December 31, 1972, on the terms of payment of the balance of the purchase price of the
property and the other substantial terms and conditions relative to the sale. Indeed, the parties
are in agreement that there had been no contract of conditional sale ever executed by XEI, OBM
or petitioner, as vendor, and the respondents, as vendees. 68

The ruling of this Court in Buenaventura v. Court of Appeals has no bearing in this case because
the issue of the manner of payment of the purchase price of the property was not raised therein.

We reject the submission of respondents that they and Ramos had intended to incorporate the
terms of payment contained in the three contracts of conditional sale executed by XEI and other
lot buyers in the "corresponding contract of conditional sale," which would later be signed by
them.69 We have meticulously reviewed the respondents’ complaint and find no such allegation
therein.70 Indeed, respondents merely alleged in their complaint that they were bound to pay the
balance of the purchase price of the property "in installments." When respondent Manalo, Jr.

47
testified, he was never asked, on direct examination or even on cross-examination, whether the
terms of payment of the balance of the purchase price of the lots under the contracts of
conditional sale executed by XEI and other lot buyers would form part of the "corresponding
contract of conditional sale" to be signed by them simultaneously with the payment of the
balance of the downpayment on the purchase price.

We note that, in its letter to the respondents dated June 17, 1976, or almost three years from the
execution by the parties of their August 22, 1972 letter agreement, XEI stated, in part, that
respondents had purchased the property "on installment basis."71 However, in the said letter, XEI
failed to state a specific amount for each installment, and whether such payments were to be
made monthly, semi-annually, or annually. Also, respondents, as plaintiffs below, failed to
adduce a shred of evidence to prove that they were obliged to pay the ₱278,448.00 monthly,
semi-annually or annually. The allegation that the payment of the ₱278,448.00 was to be paid in
installments is, thus, vague and indefinite. Case law is that, for a contract to be enforceable, its
terms must be certain and explicit, not vague or indefinite. 72

There is no factual and legal basis for the CA ruling that, based on the terms of payment of the
balance of the purchase price of the lots under the contracts of conditional sale executed by XEI
and the other lot buyers, respondents were obliged to pay the ₱278,448.00 with pre-computed
interest of 12% per annum in 120-month installments. As gleaned from the ruling of the appellate
court, it failed to justify its use of the terms of payment under the three "contracts of conditional
sale" as basis for such ruling, to wit:

On the other hand, the records do not disclose the schedule of payment of the purchase price,
net of the downpayment. Considering, however, the Contracts of Conditional Sale (Exhs. "N," "O"
and "P") entered into by XEI with other lot buyers, it would appear that the subdivision lots sold
by XEI, under contracts to sell, were payable in 120 equal monthly installments (exclusive of the
downpayment but including pre-computed interests) commencing on delivery of the lot to the
buyer.73

By its ruling, the CA unilaterally supplied an essential element to the letter agreement of XEI and
the Respondents. Courts should not undertake to make a contract for the parties, nor can it
enforce one, the terms of which are in doubt. 74 Indeed, the Court emphasized in Chua v. Court of
Appeals75 that it is not the province of a court to alter a contract by construction or to make a new
contract for the parties; its duty is confined to the interpretation of the one which they have made
for themselves, without regard to its wisdom or folly, as the court cannot supply material
stipulations or read into contract words which it does not contain.

Respondents, as plaintiffs below, failed to allege in their complaint that the terms of payment of
the ₱278,448.00 to be incorporated in the "corresponding contract of conditional sale" were
those contained in the contracts of conditional sale executed by XEI and Soller, Aguila and
Roque.76 They likewise failed to prove such allegation in this Court.

Irrefragably, under Article 1469 of the New Civil Code, the price of the property sold may be
considered certain if it be so with reference to another thing certain. It is sufficient if it can be
determined by the stipulations of the contract made by the parties thereto 85 or by reference to an
agreement incorporated in the contract of sale or contract to sell or if it is capable of being
ascertained with certainty in said contract;86 or if the contract contains express or implied
provisions by which it may be rendered certain;87 or if it provides some method or criterion by
which it can be definitely ascertained. 88 As this Court held in Villaraza v. Court of Appeals, 89 the
price is considered certain if, by its terms, the contract furnishes a basis or measure for
ascertaining the amount agreed upon.

48
We have carefully reviewed the August 22, 1972 letter agreement of the parties and find no
direct or implied reference to the manner and schedule of payment of the balance of the
purchase price of the lots covered by the deeds of conditional sale executed by XEI and that of
the other lot buyers90 as basis for or mode of determination of the schedule of the payment by the
respondents of the ₱278,448.00.

The ruling of this Court in Mitsui Bussan Kaisha v. Manila Electric Railroad and Light
Company91 is not applicable in this case because the basic price fixed in the contract was ₱9.45
per long ton, but it was stipulated that the price was subject to modification "in proportion to
variations in calories and ash content, and not otherwise." In this case, the parties did not fix in
their letters-agreement, any method or mode of determining the terms of payment of the balance
of the purchase price of the property amounting to ₱278,448.00.

It bears stressing that the respondents failed and refused to pay the balance of the
downpayment and of the purchase price of the property amounting to ₱278,448.00 despite
notice to them of the resumption by XEI of its selling operations. The respondents enjoyed
possession of the property without paying a centavo. On the other hand, XEI and OBM failed and
refused to transmit a contract of conditional sale to the Respondents. The respondents could
have at least consigned the balance of the downpayment after notice of the resumption of the
selling operations of XEI and filed an action to compel XEI or OBM to transmit to them the said
contract; however, they failed to do so.

As a consequence, respondents and XEI (or OBM for that matter) failed to forge a perfected
contract to sell the two lots; hence, respondents have no cause of action for specific performance
against petitioner. Republic Act No. 6552 applies only to a perfected contract to sell and not to a
contract with no binding and enforceable effect.

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision of the Court of
Appeals in CA-G.R. CV No. 47458 is REVERSED and SET ASIDE. The Regional Trial Court of
Quezon City, Branch 98 is ordered to dismiss the complaint. Costs against the Respondents.

49
Serra vs. Court of Appeals, G.R. No. 103338, January 4, 1994

2. ID.; ID.; PROMISE TO BUY AND SELL A DETERMINATE THING FOR A PRICE;
DISTINGUISHED FROM ACCEPTED UNILATERAL PROMISE TO BUY OR SELL A
DETERMINATE THING FOR A PRICE. — 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 promisor
if the promise is supported by a consideration distinct from the price. (Article 1479,
New Civil Code) The first is a mutual promise and each has the right to demand from
the other the fulfillment of the obligation. While the second is merely an offer of one
to another, which if accepted, would create an obligation to the offeror to make good
his promise, provided the acceptance is supported by a consideration distinct from
the price. Article 1324 of the Civil Code provides that when an offeror has allowed
the offeree a certain period to accept, the offer may be withdrawn at anytime before
acceptance by communicating such withdrawal, except when the option is founded
upon consideration, as something paid or promised. On the other hand, Article 1479
of the Code provides that an accepted unilateral promise to buy and sell a
determinate thing for a price certain is binding upon the promisor if the promise is
supported by a consideration distinct from the price. In a unilateral promise to sell,
where the debtor fails to withdraw the promise before the acceptance by the
creditor, the transaction becomes a bilateral contract to sell and to buy, because
upon acceptance by the creditor of the offer to sell by the debtor, there is already a
meeting of the minds of the parties as to the thing which is determinate and the
price which is certain. In which case, the parties may then reciprocally demand
performance. Jurisprudence has taught us that an optional contract is a privilege
existing only in one party — the buyer. For a separate consideration paid, he is
given the right to decide to purchase or not, a certain merchandise or property, at
any time within the agreed period, at a fixed price. This being his prerogative, he
may not be compelled to exercise the option to buy before the time expires.

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 promisor if the promise is supported by a
consideration distinct from the price. (Article 1479, New Civil Code) The first is a
mutual promise and each has the right to demand from the other the fulfillment of
the obligation. While the second is merely an offer of one to another, which if
accepted, would create an obligation to the offeror to make good his promise,
provided the acceptance is supported by a consideration distinct from the price.

50
Facts:

Disputed in the present case is the efficacy of a "Contract of Lease with Option to
Buy," entered into between petitioner Federico Serra and private respondent Rizal
Commercial Banking Corporation. (RCBC).

Petitioner is the owner of a 374 square meter parcel of land located at Quezon St.,
Masbate, Masbate. Sometime in 1975, respondent bank, in its desire to put up a
branch in Masbate, Masbate, negotiated with petitioner for the purchase of the then
unregistered property. On May 20, 1975, a contract of LEASE WITH OPTION TO BUY
was instead forged by the parties.

The foregoing agreement was subscribed before Notary Public Romeo F. Natividad.
virtual law library
chanrobles.com :

Pursuant to said contract, a building and other improvements were constructed on

the land which housed the branch office of RCBC in Masbate, Masbate. Within three
years from the signing of the contract, petitioner complied with his part of the
agreement by having the property registered and placed under the TORRENS
SYSTEM, for which Original Certificate of Title No. 0-232 was issued by the Register
of Deeds of the Province of Masbate.

Petitioner alleges that as soon as he had the property registered, he kept on

pursuing the manager of the branch to effect the sale of the lot as per their
agreement. It was not until September 4, 1984, however, when the respondent
bank decided to exercise its option and informed petitioner, through a letter, 2 of its
intention to buy the property at the agreed price of not greater than P210.00 per
square meter or a total of P78,430.00. But much to the surprise of the respondent,
petitioner replied that he is no longer selling the property. 3

Hence, on March 14, 1985, a complaint for specific performance and damages was
filed by respondent against petitioner. In the complaint, respondent alleged that
during the negotiations it made clear to petitioner that it intends to stay
permanently on the property once its branch office is opened unless the exigencies
of the business requires otherwise. Aside from its prayer for specific performance, it
likewise asked for an award of P50,000.00 for attorney’s fees P100,000.00 as
exemplary damages and the cost of the suit. 4

A special and affirmative defenses, petitioner contended: chanrob1es virtual 1aw library

1. That the contract having been prepared and drawn by RCBC, it took undue
advantage on him when it set in lopsided terms.

2. That the option was not supported by any consideration distinct from the price
and hence not binding upon him. chanrobles virtual lawlibrary

3. That as a condition for the validity and/or efficacy of the option, it should have
been exercised within the reasonable time after the registration of the land under
the Torrens System; that its delayed action on the option has forfeited whatever its
claim to the same.

51
4. That extraordinary inflation supervened resulting in the unusual decrease in the
purchasing power of the currency that could not reasonably be foreseen or was
manifestly beyond the contemplation of the parties at the time of the establishment
of the obligation, thus, rendering the terms of the contract unenforceable,
inequitable and to the undue enrichment of RCBC. 5

and as counterclaim petitioner alleged that: chanrob1es virtual 1aw library

1. The rental of P700.00 has become unrealistic and unreasonable, that justice and
equity will require its adjustment.

2. By the institution of the complaint he suffered moral damages which may be

assessed at P100,000.00; and award of attorney’s fee of P25,000.00 and exemplary
damages at P100,000.00. 6

Initially, after trial on the merits, the court dismissed the complaint. Although it
found the contract to be valid, the court nonetheless ruled that the option to buy is
unenforceable because it lacked a consideration distinct from the price and that
RCBC did not exercise its option within reasonable time. The prayer for readjustment
of rental was denied, as well as that for moral and exemplary damages.

Issue:

1. The disputed contract is a contract of adhesion.

2. There was no consideration to support the option, distinct from the price,
hence the option cannot be exercised.

Ruling:

The petition is devoid of merit.

There is no dispute that the contract is valid and existing between the parties, as
found by both the trial court and the appellate court. Neither do we find the terms of
the contract unfairly lopsided to have it ignored.

A contract of adhesion is one wherein a party, usually a corporation, prepares the

stipulations in the contract, while the other party merely affixes his signature or his
"adhesion" thereto. These types of contracts are as binding as ordinary contracts.
Because in reality, the party who adheres to the contract is free to reject it entirely.
Although, this Court will not hesitate to rule out blind adherence to terms where
facts and circumstances will show that it is basically one-sided. 10

We do not find the situation in the present case to be inequitable. Petitioner is a

highly educated man, who, at the time of the trial was already a CPA-Lawyer, and
when he entered into the contract, was already a CPA, holding a respectable position
with the Metropolitan Manila Commission. It is evident that a man of his stature
should have been more cautious in transactions he enters into, particularly where it
concerns valuable properties. He is amply equipped to drive a hard bargain if he

52
would be so minded to.

Petitioner contends that the doctrines laid down in the cases of Atkins Kroll v. Cua
Hian Tek, 11 Sanchez v. Rigos, 12 and Vda. de Quirino v. Palarca 13 were
misapplied in the present case, because 1) the option given to the respondent bank
was not supported by a consideration distinct from the price; and 2) that the
stipulated price of "not greater than P210.00 per square meter" is not certain or
definite.
chanrobles virtual lawlibrary

Article 1324 of the Civil Code provides that when an offeror has allowed the offeree
a certain period to accept, the offer may be withdrawn at anytime before acceptance
by communicating such withdrawal, except when the option is founded upon
consideration, as something paid or promised. On the other hand, Article 1479 of
the Code provides that an accepted unilateral promise to buy and sell a determinate
thing for a price certain is binding upon the promisor if the promise is supported by
a consideration distinct from the price.

In a unilateral promise to sell, where the debtor fails to withdraw the promise before
the acceptance by the creditor, the transaction becomes a bilateral contract to sell
and to buy, because upon acceptance by the creditor of the offer to sell by the
debtor, there is already a meeting of the minds of the parties as to the thing which
is determinate and the price which is certain. 14 In which case, the parties may then
reciprocally demand performance. chanrobles lawlibrary : rednad

Jurisprudence has taught us that an optional contract is a privilege existing only in

one party — the buyer. For a separate consideration paid, he is given the right to
decide to purchase or not, a certain merchandise or property, at any time within the
agreed period, at a fixed price. This being his prerogative, he may not be compelled
to exercise the option to buy before the time expires. 15

On the other hand, what may be regarded as a consideration separate from the
price is discussed in the case of Vda. de Quirino v. Palarca 16 wherein the facts are
almost on all fours with the case at bar. The said case also involved a lease contract
with option to buy where we had occasion to say that "the consideration for the
lessor’s obligation to sell the leased premises to the lessee, should he choose to
exercise his option to purchase the same, is the obligation of the lessee to sell to the
lessor the building and/or improvements constructed and/or made by the former, if
he fails to exercise his option to buy said premises." 17

In the present case, the consideration is even more onerous on the part of the
lessee since it entails transferring of the building and/or improvements on the
property to petitioner, should respondent bank fail to exercise its option within the
period stipulated. 18

The bugging question then is whether the price "not greater than TWO HUNDRED
PESOS" is certain or definite. A price is considered certain if it is so with reference to
another thing certain or when the determination thereof is left to the judgment of a
specified person or persons. 19 And generally, gross inadequacy of price does not
affect a contract of sale. 20

Contracts are to be construed according to the sense and meaning of the terms
which the parties themselves have used. In the present dispute, there is evidence to
show that the intention of the parties is to peg the price at P210 per square meter.
This was confirmed by petitioner himself in his testimony.

53
Moreover, by his subsequent acts of having the land titled under the Torrens
System, and in pursuing the bank manager to effect the sale immediately, means
that he understood perfectly well the terms of the contract. He even had the same
property mortgaged to the respondent bank sometime in 1979, without the slightest
hint of wanting to abandon his offer to sell the property at the agreed price of P210
per square meter. 22

Finally, we agree with the courts a quo that there is no basis, legal or factual, in
adjusting the amount of the rent. The contract is the law between the parties and if
there is indeed reason to adjust the rent, the parties could by themselves negotiate
for the amendment of the contract. Neither could we consider the decline of the
purchasing power of the Philippine peso from 1983 to the time of the
commencement of the present case in 1985, to be so great as to result in an
extraordinary inflation. Extraordinary inflation exists when there in an unimaginable
increase or decrease of the purchasing power of the Philippine currency, or
fluctuation in the value of pesos manifestly beyond the contemplation of the parties
at the time of the establishment of the obligation. 23

Premises considered, we find that the contract of "LEASE WITH OPTION TO BUY"
between petitioner and respondent bank is valid, effective and enforceable, the price
being certain and that there was consideration distinct from the price to support the
option given to the lessee.

WHEREFORE, this petition is hereby DISMISSED, and the decision of the appellate
court is hereby AFFIRMED.

54
Abapo vs. Court of Appeals, G.R. No. 128677, March 2, 2000

Facts:

The late spouses Victoriano Abapo and Placida Mabalate owned a 1,695 square meter parcel of
land located in Inawayan, Cebu identified as Lot 3912 of the Cadastral Survey of Cebu. Of the
five (5) children the spouses left behind, only Santiago and Crispula have heirs, who are
6  7  8 

currently the antagonists in this drawn-out melodrama.

Dispute over the land, designated as Lot 3912 of the Cadastral Survey of Cebu, can be traced to
a contract executed by Crispula Abapo-Bacalso and Santiago Abapo in favor of Teodulfo
Quimada, their tenant. Under the contract denominated as "Deed of Sale Under Pacto de
Retro" dated August 8, 1967, the land was sold for P500.00, with right of repurchase within five
9 

(5) years failing which the conveyance would become absolute and irrevocable without the
necessity of drawing up a new deed. No redemption was done within the five (5) year period.

More than seven (7) years later, Teodulfo Quimada, through a notarized "Deed of Absolute
Sale"  dated February 13, 1975, yielded ownership of the property to Crispula Abapo-Bacalso
10 

and her husband, Pedro Bacalso, for the amount of P500.00. Since then until their deaths  , the
11 

spouses Bacalso had possession, enjoyed the fruits of the land and paid the corresponding real
estate taxes thereon to the exclusion of Santiago Abapo.

In an "Extrajudicial Declaration of Heirs"  dated February 20, 1990 private respondents, heirs of
12 

the spouses Bacalso, allotted unto themselves the subject land in equal pro indiviso shares and
succeeded to the possession and enjoyment of the land and paid real property taxes thereon,
again to the exclusion of Santiago.

On April 19, 1990, Santiago Abapo instituted  a petition for reconstitution of the original
13 

certificate of title over the property. The petition was granted and a reconstituted Original
Certificate of Title No. RO-2998  in the name of Victoriano Abapo was issued, with the owner's
14 

copy handed to Santiago.

Upon discovery of the said reconstitution of title, private respondents interposed  on July 29,
15 

1991 a petition to surrender owner's copy of the reconstituted Original Certificate of Title No. RO-
2998 in the hands of Santiago Abapo. In an Order  dated December 23, 1991, the trial court
16 

dismissed the petition without prejudice to the filing of the appropriate action.

Thus, on January 31, 1992, private respondents instituted the complaint 17 for "Quieting of Title
with Damages" against Santiago Abapo contending, among other things, that the latter's
possession of the owner's copy of the reconstituted original certificate of title and his claim as
owner of the property constitute a cloud over their title to it.

In his answer  , petitioner assailed the due execution of both the Deed of Sale under Pacto de
18 

Retro and the Deed of Absolute Sale. He vehemently swore that he never sold in 1967 his
interest in the disputed land. To strengthen his contentions, Teodulfo Quimada testified for him.

55
Issue:

A.

THE RESPONDENT HONORABLE COURT OF APPEALS HAS GRAVELY AND

IMPROVIDENTLY OVERLOOKED, BOTH IN SUBSTANCE AND IN LAW, IN NOT FINDING
THE DEED OF SALE UNDER PACTO DE RETRO DATED AUGUST 8, 1967 (EXH. "C", EXH.
"1", EXH, "1-A") TO BE THAT OF A MORTGAGE.

B.

THE RESPONDENT COURT OF APPEALS HAS GRAVELY AND IMPROVIDENTLY

OVERLOOKED, BOTH IN SUBSTANCE AND IN LAW, IN NOT FINDING THE DEED OF
ABSOLUTE SALE DATED FEBRUARY 13, 1975 (EXH. "D", EXH. "2", EXH. "2-A") ILLEGAL
AND VOID, EVEN ASSUMING WITHOUT CONCEDING THAT THE DEED OF ABSOLUTE
SALE UNDER PACTO DE RETRO DATED AUGUST 8, 1967 (EXH. "C", EXH. "1", EXH. "1-A")
WAS THE TRUE TRANSACTION COVERING THE SUBJECT PARCEL OF LAND.

C.

THE RESPONDENT HONORABLE COURT OF APPEALS HAS GRAVELY AND

IMPROVIDENTLY OVERLOOKED, BOTH IN SUBSTANCE AND IN LAW, IN NOT DECLARING
THE PETITIONER SANTIAGO ABAPO A LAWFUL CO-OWNER OVER THE SUBJECT
PARCEL OF LAND WITH CRISPULA WITH CRISPULA ABAPO-BACALSO, THE MOTHER OF
THE RESPONDENTS HEIRS, AND THAT THE PETITIONER SANTIAGO ABAPO IS THUS
ENTITLED TO ONE-HALF (1/2) SHARE OF THE SUBJECT PARCEL OF LAND.

Ruling:

Thus, the instant petition must fail.

First. The price of P500 is not unusually inadequate. The extant record reveals that the assessed
value of the land in dispute in 1970  was only P400. Thus, at the time of sale in 1967 the price of
27 

P500 is indisputably over and above the assessed value of P400.

Besides, the mere fact that the price is inadequate does not per se support the conclusion that
the contract was a loan or that the property was not at all sold to Teodulfo Quimada. The price
fixed in a sale with right to repurchase is not necessarily the true value of the land sold. The
rationale is that the vendor has the right to repurchase the land. It is the practice to fix a relatively
reduced price, although not a grossly inadequate one, in order to afford the vendor a retro every
facility to redeem the land.  Thus, inadequacy of price is not sufficient to set aside a sale unless
28 

it is grossly inadequate  or purely shocking to the conscience. 

29  30

Furthermore, Teodulfo Quimada himself unequivocally admitted that from 1967 until 1975 all the
fruits of the land belonged to him and only when the spouses Bacalso bought the land in 1975
did he, as tenant anew, share the fruits of the land with the spouses Bacalso.  This additional
31 

fact is clearly opposing to petitioner's stance that the contract executed in 1967 is an equitable
mortgage for this is incompatible to the provisions of Article 1602.

Second. The contracts in dispute, having been executed and attested through the intervention of
the notary public, are public documents. As such, they are evidence of the facts in clear,
unequivocal manner therein expressed.  They have the presumption of regularity, which the
32 

petitioner failed to overcome by clear, strong and convincing evidence.

56
In all the instances in which petitioner Santiago Abapo and Teodulfo Quimada were requested to
sign, there was, however, no proof that they were pressured, forced or intimidated by Pedro
Bacalso.  Apart from allegations and testimonies referring to deceitful manipulations attributed to
33 

Pedro Bacalso, petitioner showed no other evidence. Oral testimony, depending as it does
exclusively on human memory, is not as reliable as written or documentary evidence.  Thus,
34 

there is no room for construction inasmuch as the words of the contracts in dispute are clear and
readily understandable. 1âwphi1

It took petitioner and his witness, Teodulfo Quimada, more than two decades before they
questioned the validity of the disputed documents. Their silent acquiescence speaks strongly of
the staleness of their claim.

Because of the conclusions we have thus reached, there is no need to delve any further on the
other assigned errors as there is no basis to justify a reversal of the decision of the public
respondent.

WHEREFORE, the subject petition is hereby DENIED. The Decision and Resolution of the Court
of Appeals dated July 15, 1996 and March 3, 1997, respectively, in CA-G.R. CV No. 43706 are
hereby AFFIRMED. Costs against petitioner.

57
Bravo-Guerrero vs. Bravo, G.R. No. 152658, July 29, 2005

Facts:

Spouses Mauricio Bravo ("Mauricio") and Simona 5 Andaya Bravo ("Simona") owned two parcels
of land ("Properties") measuring 287 and 291 square meters and located along Evangelista
Street, Makati City, Metro Manila. The Properties are registered under TCT Nos. 58999 and
59000 issued by the Register of Deeds of Rizal on 23 May 1958. The Properties contain a large
residential dwelling, a smaller house and other improvements.

Mauricio and Simona had three children - Roland, Cesar and Lily, all surnamed Bravo. Cesar
died without issue. Lily Bravo married David Diaz, and had a son, David B. Diaz, Jr. ("David Jr.").
Roland had six children, namely, Lily Elizabeth Bravo-Guerrero ("Elizabeth"), Edward Bravo
("Edward"), Roland Bravo, Jr. ("Roland Jr."), Senia Bravo, Benjamin Mauricio Bravo, and their
half-sister, Ofelia Bravo ("Ofelia").

Simona executed a General Power of Attorney ("GPA") on 17 June 1966 appointing Mauricio as
her attorney-in-fact. In the GPA, Simona authorized Mauricio to "mortgage or otherwise
hypothecate, sell, assign and dispose of any and all of my property, real, personal or mixed, of
any kind whatsoever and wheresoever situated, or any interest therein xxx." 6 Mauricio
subsequently mortgaged the Properties to the Philippine National Bank (PNB) and Development
Bank of the Philippines (DBP) for ₱10,000 and ₱5,000, respectively. 7

On 25 October 1970, Mauricio executed a Deed of Sale with Assumption of Real Estate
Mortgage ("Deed of Sale") conveying the Properties to "Roland A. Bravo, Ofelia A. Bravo and
Elizabeth Bravo"8 ("vendees"). The sale was conditioned on the payment of ₱1,000 and on the
assumption by the vendees of the PNB and DBP mortgages over the Properties.

As certified by the Clerk of Court of the Regional Trial Court of Manila, the Deed of Sale was
notarized by Atty. Victorio Q. Guzman on 28 October 1970 and entered in his Notarial
Register.9 However, the Deed of Sale was not annotated on TCT Nos. 58999 and 59000. Neither
was it presented to PNB and DBP. The mortage loans and the receipts for loan payments issued
by PNB and DBP continued to be in Mauricio’s name even after his death on 20 November 1973.
Simona died in 1977.

On 23 June 1997, Edward, represented by his wife, Fatima Bravo, filed an action for the judicial
partition of the Properties. Edward claimed that he and the other grandchildren of Mauricio and
Simona are co-owners of the Properties by succession. Despite this, petitioners refused to share
with him the possession and rental income of the Properties. Edward later amended his
complaint to include a prayer to annul the Deed of Sale, which he claimed was merely simulated
to prejudice the other heirs.

In 1999, David Jr., whose parents died in 1944 and who was subsequently raised by Simona,
moved to intervene in the case. David Jr. filed a complaint-in-intervention impugning the validity
of the Deed of Sale and praying for the partition of the Properties among the surviving heirs of
Mauricio and Simona. The trial court allowed the intervention in its Order dated 5 May 1999.

58
Issues:

1. WHETHER THE COURT OF APPEALS ERRED IN NOT UPHOLDING THE VALIDITY AND
ENFORCEMENT OF THE DEED OF SALE WITH ASSUMPTION OF MORTGAGE.

2. WHETHER THE COURT OF APPEALS ERRED IN ORDERING THE PARTITION OF THE

PROPERTY IN QUESTION.

Ruling:

On the Requirement of the Wife’s Consent

We hold that the Court of Appeals erred when it declared the Deed of Sale void based on Article
166, which states:

Art. 166. Unless the wife has been declared a non compos mentis or a spendthrift, or is under
civil interdiction or is confined in a leprosarium, the husband cannot alienate or encumber any
real property of the conjugal partnership without the wife’s consent. If she refuses unreasonably
to give her consent, the court may compel her to grant the same.

This article shall not apply to property acquired by the conjugal partnerships before the effective
date of this Code.

Article 166 expressly applies only to properties acquired by the conjugal partnership after the
effectivity of the Civil Code of the Philippines ("Civil Code"). The Civil Code came into force on 30
August 1950.16 Although there is no dispute that the Properties were conjugal properties of
Mauricio and Simona, the records do not show, and the parties did not stipulate, when the
Properties were acquired.17 Under Article 1413 of the old Spanish Civil Code, the husband could
alienate conjugal partnership property for valuable consideration without the wife’s consent. 18

Even under the present Civil Code, however, the Deed of Sale is not void. It is well-settled that
contracts alienating conjugal real property without the wife’s consent are merely voidable under
the Civil Code – that is, binding on the parties unless annulled by a competent court – and not
void ab initio.19

Article 166 must be read in conjunction with Article 173 of the Civil Code ("Article 173"). The
latter prescribes certain conditions before a sale of conjugal property can be annulled for lack of
the wife’s consent, as follows:

Art. 173. The wife may, during the marriage and within ten years from the
transaction questioned, ask the courts for the annulment of any contract of the husband entered
into without her consent, when such consent is required, or any act or contract of the husband
which tends to defraud her or impair her interest in the conjugal partnership property. Should the
wife fail to exercise this right, she or her heirs after the dissolution of the marriage, may
demand the value of property fraudulently alienated by the husband. (Emphasis supplied)

Under the Civil Code, only the wife can ask to annul a contract that disposes of conjugal real
property without her consent. The wife must file the action for annulment during the marriage and
within ten years from the questioned transaction. Article 173 is explicit on the remedies available
if the wife fails to exercise this right within the specified period. In such case, the wife or her heirs
can only demand the value of the property provided they prove that the husband fraudulently
alienated the property. Fraud is never presumed, but must be established by clear and
convincing evidence.20

59
Respondents’ action to annul the Deed of Sale based on Article 166 must fail for having been
filed out of time. The marriage of Mauricio and Simona was dissolved when Mauricio died in
1973. More than ten years have passed since the execution of the Deed of Sale.

Further, respondents, who are Simona’s heirs, are not the parties who can invoke Article 166.
Article 173 reserves that remedy to the wife alone. Only Simona had the right to have the sale of
the Properties annulled on the ground that Mauricio sold the Properties without her consent.

Simona, however, did not assail the Deed of Sale during her marriage or even after Mauricio’s
death. The records are bereft of any indication that Simona questioned the sale of the Properties
at any time. Simona did not even attempt to take possession of or reside on the Properties after
Mauricio’s death. David Jr., who was raised by Simona, testified that he and Simona continued to
live in Pasay City after Mauricio’s death, while her children and other grandchildren resided on
the Properties.21

We also agree with the trial court that Simona authorized Mauricio to dispose of the Properties
when she executed the GPA. True, Article 1878 requires a special power of attorney for an agent
to execute a contract that transfers the ownership of an immovable. However, the Court has
clarified that Article 1878 refers to the nature of the authorization, not to its form. 22 Even if a
document is titled as a general power of attorney, the requirement of a special power of attorney
is met if there is a clear mandate from the principal specifically authorizing the performance of
the act.23

In Veloso v. Court of Appeals,24 the Court explained that a general power of attorney could
contain a special power to sell that satisfies the requirement of Article 1878, thus:

An examination of the records showed that the assailed power of attorney was valid and regular
on its face. It was notarized and as such, it carries the evidentiary weight conferred upon it with
respect to its due execution. While it is true that it was denominated as a general power of
attorney, a perusal thereof revealed that it stated an authority to sell, to wit:

"2. To buy or sell, hire or lease, mortgage or otherwise hypothecate lands, tenements and
hereditaments or other forms of real property, more specifically TCT No. 49138, upon such terms
and conditions and under such covenants as my said attorney shall deem fit and proper."

Thus, there was no need to execute a separate and special power of attorney since the general
power of attorney had expressly authorized the agent or attorney in fact the power to sell the
subject property. The special power of attorney can be included in the general power when
it is specified therein the act or transaction for which the special power is required.
(Emphasis supplied)

In this case, Simona expressly authorized Mauricio in the GPA to "sell, assign and dispose of
any and all of my property, real, personal or mixed, of any kind whatsoever and wheresoever
situated, or any interest therein xxx" as well as to "act as my general representative and agent,
with full authority to buy, sell, negotiate and contract for me and in my behalf." 25 Taken together,
these provisions constitute a clear and specific mandate to Mauricio to sell the Properties. Even if
it is called a "general power of attorney," the specific provisions in the GPA are sufficient for the
purposes of Article 1878. These provisions in the GPA likewise indicate that Simona consented
to the sale of the Properties.

60
Whether the Sale of the Properties was Simulated

or is Void for Gross Inadequacy of Price

We point out that the law on legitime does not bar the disposition of property for valuable
consideration to descendants or compulsory heirs. In a sale, cash of equivalent value replaces
the property taken from the estate. 26 There is no diminution of the estate but merely a substitution
in values. Donations and other dispositions by gratuitous title, on the other hand, must be
included in the computation of legitimes.27

Respondents, however, contend that the sale of the Properties was merely simulated. As proof,
respondents point to the consideration of ₱1,000 in the Deed of Sale, which respondents claim is
grossly inadequate compared to the actual value of the Properties.

Simulation of contract and gross inadequacy of price are distinct legal concepts, with different
effects. When the parties to an alleged contract do not really intend to be bound by it, the
contract is simulated and void.28 A simulated or fictitious contract has no legal effect
whatsoever29 because there is no real agreement between the parties.

In contrast, a contract with inadequate consideration may nevertheless embody a true agreement
between the parties. A contract of sale is a consensual contract, which becomes valid and
binding upon the meeting of minds of the parties on the price and the object of the sale. 30 The
concept of a simulated sale is thus incompatible with inadequacy of price. When the parties
agree on a price as the actual consideration, the sale is not simulated despite the inadequacy of
the price.31

Gross inadequacy of price by itself will not result in a void contract. Gross inadequacy of price
does not even affect the validity of a contract of sale, unless it signifies a defect in the consent or
that the parties actually intended a donation or some other contract. 32 Inadequacy of cause will
not invalidate a contract unless there has been fraud, mistake or undue influence. 33 In this case,
respondents have not proved any of the instances that would invalidate the Deed of Sale.

Respondents even failed to establish that the consideration paid by the vendees for the
Properties was grossly inadequate. As the trial court pointed out, the Deed of Sale stipulates
that, in addition to the payment of ₱1,000, the vendees should assume the mortgage loans from
PNB and DBP. The consideration for the sale of the Properties was thus ₱1,000 in cash and the
assumption of the ₱15,000 mortgage.

Respondents argue that ₱16,000 is still far below the actual value of the Properties. To bolster
their claim, respondents presented the following: (1) Tax Declarations No. A-001-00905 34 and A-
001-0090635 for the year 1979, which placed the assessed value of the Properties at ₱70,020
and their approximate market value at ₱244,290; and (2) a certified copy of the Department of
Finance’s Department Order No. 62-9736 dated 6 June 1997 and attached guidelines 37 which
established the zonal value of the properties along Evangelista Street at ₱15,000 per square
meter.

The subject Deed of Sale, however, was executed in 1970. The valuation of the Properties in
1979 or 1997 is of little relevance to the issue of whether ₱16,000 was a grossly inadequate
price to pay for the Properties in 1970. Certainly, there is nothing surprising in the sharp increase
in the value of the Properties nine or twenty-seven years after the sale, particularly when we
consider that the Properties are located in the City of Makati.

More pertinent are Tax Declarations No. 15812 38 and No. 15813,39 both issued in 1967,
presented by petitioners. These tax declarations placed the assessed value of both Properties at
₱16,160. Compared to this, the price of ₱16,000 cannot be considered grossly inadequate, much
less so shocking to the conscience40 as to justify the setting aside of the Deed of Sale.

61
Respondents next contend that the vendees did not make the mortgage payments on the
Properties. Respondents allege that the rents paid by the tenants leasing portions of the
Properties were sufficient to cover the mortgage payments to DBP and PNB.

Again, this argument does not help respondents’ cause. Assuming that the vendees failed to pay
the full price stated in the Deed of Sale, such partial failure would not render the sale void.
In Buenaventura v. Court of Appeals,41 the Court held:

xxx If there is a meeting of the minds of the parties as to the price, the contract of sale is valid,
despite the manner of payment, or even the breach of that manner of payment. xxx

It is not the act of payment of price that determines the validity of a contract of sale. Payment of
the price has nothing to do with the perfection of the contract. Payment of the price goes into the
performance of the contract. Failure to pay the consideration is different from lack of
consideration. The former results in a right to demand the fulfillment or cancellation of the
obligation under an existing valid contract while the latter prevents the existence of a valid
contract. (Emphasis supplied.)

Neither was it shown that the rentals from tenants were sufficient to cover the mortgage
payments. The parties to this case stipulated to only one tenant, a certain Federico M. Puno, who
supposedly leased a room on the Properties for ₱300 per month from 1992 to 1994. 42 This is
hardly significant, when we consider that the mortgage was fully paid by 1974. Indeed, the fact
that the Properties were mortgaged to DBP and PNB indicates that the conjugal partnership, or
at least Mauricio, was short of funds.

Petitioners point out that they were duly employed and had the financial capacity to buy the
Properties in 1970. Respondents did not refute this. Petitioners presented 72 receipts 43 showing
the mortgage payments made to PNB and DBP, and the Release of the Real Estate
Mortgage44 ("Mortgage Release") dated 5 April 1974. True, these documents all bear Mauricio’s
name. However, this tends to support, rather than detract from, petitioner-vendees’ explanation
that they initially gave the mortgage payments directly to Mauricio, and then later directly to the
banks, without formally advising the bank of the sale. The last 3 mortgage receipts and the
Mortgage Release were all issued in Mauricio’s name even after his death in 1970. Obviously,
Mauricio could not have secured the Mortgage Release and made these last payments.

62
Ramos vs. Heirs of Ramos, G.R. No. 14048, April 25, 2002

The burden of proving the alleged simulation of a contract falls on those who impugn
its regularity and validity. A failure to discharge this duty will result in the upholding
of the contract. The primary consideration in determining whether a contract is
simulated is the intention of the parties as manifested by the express terms of the
agreement itself, as well as the contemporaneous and subsequent actions of the
parties. The most striking index of simulation is not the filial relationship between
the purported seller and buyer, but the complete absence of any attempt in any
manner on the part of the latter to assert rights of dominion over the disputed
property.

Facts:

"Lucio Ramos and Salud Abejuela are spouses. . . . Lucio died on May 31, 1974 and
Salud on September 17, 1966.

"Out of their marriage, they begot the following children, namely: Juan Ramos,
Honorio Ramos, Josefa Ramos and Ramon Ramos.

"During their lifetime, they acquired real properties situated at Macasandig, Cagayan
de Oro City.

"Sometime in September 1972, the above-named children and Lucio Ramos himself,
executed an Extrajudicial Settlement of the estate of the deceased Salud
Abejuela. . . . .

"x       x       x

"On March 26, 1975, Juan Ramos and Josefa Ramos Reyes filed in the then Court of
First Instance of Misamis Oriental, a complaint for partition and annulment of
confirmatory deeds of sale against Ramon A. Ramos and Honorio Ramos. . . . The
case was docketed thereat as Civil Case No. 4667.

"Parties to said case, however, on November 10, 1975, submitted a compromise

agreement which was approved and adopted by the court as its decision in the case.
Under said compromise agreement, [the parties agreed, inter alia: ‘4. That [Juan
Ramos and Josefa Ramos Reyes] forever waive, quitclaim, relinquish, and renounce
whatever rights and interests they may have over Parcel 5 and [Lot 2961] . . .;’] 4

"Very much earlier, however, or to be exact, on January 11, 1954, there appeared in
the Notarial Register of Notary Public Fausto Eugenio of Cagayan de Oro City a
document denominated as a [D]eed of [A]bsolute [S]ale registered as Doc. No. 17,
Page 12; Book III and Series of 1954 of said [N]otarial [R]egister executed by Salud
Abejuela in favor of Ramon Ramos married to Nena Villamil and resident of Cagayan
de Oro City. Subject of the sale was Lot No. 2961 of the Cagayan Cadastral located
at Macasandig, Cagayan de Oro City containing an area of 50,000 square meters
and an alleged exclusive property of said Salud Abejuela." 5

On July 30, 1991, respondents filed with the Regional Trial Court (RTC) of Cagayan
de Oro City (Branch 20), 6 a suit against petitioner for the conveyance of title and
partition of Lot 2961. The CA continued: jgc:chanrobles.com.ph

"In this action, [herein respondents], who are surviving spouse and children . . . of

63
Honorio Ramos Sr., contend that Honorio Ramos Sr., co-owned the above-
mentioned Lot 2961 with Ramon Ramos; that the sale was simulated and fictitious
the purpose being only to enable said Ramon Ramos to use the land as collateral
security for a loan as he did use it when he was granted a loan by the Philippine
National Bank; that the understanding and agreement with his parents Lucio and
Salud Ramos was that, Ramon Ramos should hold said land in trust for his brother,
Honorio and same should be divided between the two in equal shares; that as proof
that the sale was fictitious and simulated, it was still Lucio Ramos with whom Ramon
Ramos live[d] with, who continued to harvest and enjoy the fruits of the coconut
trees planted [o]n said Lot 2961 until he died on May 31, 1974; that after Lucio
Ramos died Ramon Ramos went to his sister-in-law, Pureza N. Ramos, one of herein
[respondents] requesting her that she intercede for him in requesting his brother,
Honorio Ramos Sr., to allow him to harvest the coconuts planted on subject property
for the reason that his needs were greater tha[n] that o[f] his brother, his children
having finished already in their studies, while his, were still in high school and about
to enter college to which request Honorio Ramos Sr., agreed; that in 1984, after
sixteen years of exclusive enjoyment of the property by Ramon Ramos,
[respondents] requested Ramon Ramos that the property be partitioned but without
refusing the demand, he made the excuse that he [would] first consult his children
and the matter dragged and was shelved until last 1990 when Honorio Ramos
became very ill and sickly [and] again [respondents] made their demand for
partition . . . but again Ramon Ramos gave his feeble assurance not to worry
because he [would] give the share of [respondents]; that when they made a formal
demand for the partition and delivery of their one-half, pro-indiviso share, Ramon
Ramos repudiated his co-ownership of the lot with Honorio Ramos; . . ."

Issue:

"1. Whether or not the Deed of Absolute Sale executed by Salud Abejuela-Ramos on
January 11, 1954 was [a] real and genuine sale conveying ownership of the land in
favor of the vendee;

Ruling:

Validity of Conveyance

Petitioner disputes the CA finding that the Deed of Absolute Sale between him and
his mother, Salud, was simulated. He argues that it was executed with all the
formalities and requirements of law; hence, the document is vested with the
presumption of regularity and can be impugned only by strong, competent and
conclusive proof.

On the other hand, respondents maintain that the presumption of regularity was
overturned by several circumstances that prove simulation, as follows: (1) the
vendor and the vendee were mother and son, (2) the consideration of P1000 for the
lot was too low, and (3) petitioner did not have the means to pay for the supposed
purchase price.

We are not convinced that the Deed of Sale was simulated. The primary
consideration in determining the true nature of a contract is the intention of the

64
parties. 15 Such intention is determined from the express terms of their agreement
as well as from their contemporaneous and subsequent acts. 16 When they have no
intention to be bound at all, the purported contract is absolutely simulated and void.
17 When they conceal their true agreement, it is not completely void and they are
bound to their real agreement, provided it is not prejudicial to a third person and is
not intended for any purpose that is contrary to law, morals, good customs, public
order or public policy. 18 A duly executed contract carries with it the presumption of
validity. The party who impugns its regularity has the burden of proving its
simulation.

In the case at bar, we opine that respondents failed to show simulation. First, both
the trial and the appellate courts agree that respondents failed to prove the
existence of a contra documento. The evidentiary weight of Anastacio Gaylo’s
testimony that the contra documento was shown to him by Salud herself is weak,
considering that there was no explanation why parol evidence had been resorted to,
when the best evidence would have been the contra documento itself. 19

Second, mere mother-son relationship between the vendor and the vendee does not
prove their lack of intention to be bound by the 1954 Deed of Absolute Sale. Not all
contracts between family members are fictitious because, by itself, consanguinity is
not proof of simulation. In declaring the sale as fictitious, the CA relied on Suntay v.
Court of Appeals, 20 which ruled that" [t]he father who promises to bring home a
box of tools for his boy is not bound in contract . . . [because] the transaction was
understood by the parties not to have jural effects. . . . [This principle] has been
judicially applied to . . . a writing representing merely a family understanding."cralaw virtua1aw library

In Suntay, the Court said that the relationship between the buyer and seller may be
deemed a token of simulation because, among Filipinos, an uncle would almost
naively lend his land title to his nephew and agree to its cancellation in favor of the
latter, given the trust and intimacy between them. But this statement should be
understood in the context of the said case that a Deed of Resale was presented, and
that the vendee never exercised acts of ownership over the disputed land. Here,
despite the relation, intimacy and trust between petitioner and his mother, such
crucial factor as a contra documento was not proven. Moreover, as will be shown
later, petitioner exercised acts of dominion over the property that is the subject of
the present controversy.

Respondents claim that petitioner did not pay any consideration, because he was not
yet gainfully employed in 1954 when the Deed of Sale was executed. He vehemently
disputed this allegation, however, pointing out in his testimony that, in fact, he was
already working for a law firm in the province and earning a decent salary. 21 Since
no evidence was presented to show how much the lot was worth in 1954, there is no
basis for saying that the price was too low.

The CA cited two more circumstances to show that the Deed was simulated. First, in
the case for the partition of the estate of their mother, Juan and Josefa Ramos
impleaded Honorio Sr. as petitioner’s co-defendant. Second, in the compromise
judgment, petitioner did not demand the delivery of the disputed lot exclusively to
him, as he did in the case of another parcel of land (Parcel 5). According to the CA,
this inference is bolstered by the demand for partition expressed by Pureza Ramos
to enable her to enjoy exclusive dominion over her husband’s share in Lot 2961.

After a careful examination of the records, we believe that the CA merely speculated
on the intentions behind the parties’ actions in the settlement case. The mere

65
allegation that Honorio Sr. and petitioner were co-owners did not confer co-
ownership on them. Under Section 10, Rule 3 of the Rules of Court, a person whose
consent as a co-plaintiff cannot be obtained may be impleaded as a defendant. In
the present case, co-ownership cannot be implied from the failure of petitioner to
expressly demand the delivery of Lot 2961 solely to him. He did not have to do so,
because he was already in possession of it.

In a civil case, the plaintiff has the burden of proving facts asserted in the complaint,
petition or declaration. 22 Hence, respondents — as plaintiffs in the case for
partition and annulment of contract — had the burden of showing that the 1954
Deed was simulated, a burden they failed to discharge.

The trial court ruled that simulation had not been proven for the following reasons:
(1) respondents failed to present a witness who was present during the execution of
the Deed of Sale, and who could have testified that Salud had not intended to sell
the disputed land to petitioner; (2) the existence of the contra documento was not
established; and (3) the testimonies of the children that their mother had told them
that the sale was simulated were inadmissible in evidence for being hearsay.

Suntay v. CA 23 ruled that the most "protuberant index of simulation" was not the
relationship between the ostensible vendor and vendee. Rather, it was the complete
absence, on the part of the vendee, of any attempt in any manner to assert his
rights of ownership over the disputed property. The supposed buyer’s failure to take
exclusive possession of the property allegedly sold or, alternatively, to collect rentals
is contrary to the principle of ownership. Such failure is a clear badge of simulation
that renders the whole transaction void pursuant to Article 1409 of the Civil Code.
24

In the present case, however, the evidence clearly shows that petitioner hired
tenants to take care of and to harvest coconuts from Lot 2961. 25 Without any
protest from Salud or respondents, he declared the property for taxation and paid
realty taxes on it in his name. 26 His actions negated respondents’ allegation that
the parties never intended to be bound by the assailed contract.

66
Heirs of Pangan vs. Spouses Perreras, G.R. No. 157374, August 27, 2009

Facts:

The spouses Pangan were the owners of the lot and two-door apartment (subject properties)
located at 1142 Casañas St., Sampaloc, Manila. 5 On June 2, 1989, Consuelo agreed to sell to
the respondents the subject properties for the price of ₱540,000.00. On the same day, Consuelo
received ₱20,000.00 from the respondents as earnest money, evidenced by a receipt (June 2,
1989 receipt)6 that also included the terms of the parties’ agreement.

Three days later, or on June 5, 1989, the parties agreed to increase the purchase price from
₱540,000.00 to ₱580,000.00.

In compliance with the agreement, the respondents issued two Far East Bank and Trust
Company checks payable to Consuelo in the amounts of ₱200,000.00 and ₱250,000.00 on June
15, 1989. Consuelo, however, refused to accept the checks. She justified her refusal by saying
that her children (the petitioners-heirs) – co-owners of the subject properties – did not want to sell
the subject properties. For the same reason, Consuelo offered to return the ₱20,000.00 earnest
money she received from the respondents, but the latter rejected it. Thus, Consuelo filed a
complaint for consignation against the respondents on September 5, 1989, docketed as Civil
Case No. 89-50258, before the RTC of Manila, Branch 28.

The respondents, who insisted on enforcing the agreement, in turn instituted an action for
specific performance against Consuelo before the same court on September 26, 1989. This case
was docketed as Civil Case No. 89-50259. They sought to compel Consuelo and the petitioners-
heirs (who were subsequently impleaded as co-defendants) to execute a Deed of Absolute Sale
over the subject properties.

In her Answer, Consuelo claimed that she was justified in backing out from the agreement on the
ground that the sale was subject to the consent of the petitioners-heirs who became co-owners
of the property upon the death of her husband, Cayetano. Since the petitioners-heirs
disapproved of the sale, Consuelo claimed that the contract became ineffective for lack of the
requisite consent. She nevertheless expressed her willingness to return the ₱20,000.00 earnest
money she received from the respondents.

Issue:

Even assuming that the agreement amounted to a perfected contract, the petitioners-heirs posed
the question of the agreement’s proper characterization – whether it is a contract of sale or a
contract to sell. The petitioners-heirs posit that the agreement involves a contract to sell, and the
respondents’ belated payment of part of the purchase price, i.e., one day after the June 14, 1989
due date, amounted to the non-fulfillment of a positive suspensive condition that prevented the
contract from acquiring obligatory force. In support of this contention, the petitioners-heirs cite the
Court’s ruling in the case of Adelfa Rivera, et al. v. Fidela del Rosario, et al.: 

1. Was there a perfected contract between the parties?

2. What is the nature of the contract between them? and

3. What is the effect of the respondents’ belated payment on their contract?

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Ruling:

There was a perfected contract between the parties since all the essential requisites of a
contract were present

Article 1318 of the Civil Code declares that no contract exists unless the following requisites
concur: (1) consent of the contracting parties; (2) object certain which is the subject matter of the
contract; and (3) cause of the obligation established. Since the object of the parties’ agreement
involves properties co-owned by Consuelo and her children, the petitioners-heirs insist that their
approval of the sale initiated by their mother, Consuelo, was essential to its perfection.
Accordingly, their refusal amounted to the absence of the required element of consent.

That a thing is sold without the consent of all the co-owners does not invalidate the sale or render
it void. Article 493 of the Civil Code8 recognizes the absolute right of a co-owner to freely dispose
of his pro indiviso share as well as the fruits and other benefits arising from that share,
independently of the other co-owners. Thus, when Consuelo agreed to sell to the respondents
the subject properties, what she in fact sold was her undivided interest that, as quantified by the
RTC, consisted of one-half interest, representing her conjugal share, and one-sixth interest,
representing her hereditary share.

The petitioners-heirs nevertheless argue that Consuelo’s consent was predicated on their
consent to the sale, and that their disapproval resulted in the withdrawal of Consuelo’s consent.
Yet, we find nothing in the parties’ agreement or even conduct – save Consuelo’s self-serving
testimony – that would indicate or from which we can infer that Consuelo’s consent depended on
her children’s approval of the sale. The explicit terms of the June 8, 1989 receipt 9 provide no
occasion for any reading that the agreement is subject to the petitioners-heirs’ favorable consent
to the sale.

The presence of Consuelo’s consent and, corollarily, the existence of a perfected contract
between the parties are further evidenced by the payment and receipt of ₱20,000.00, an earnest
money by the contracting parties’ common usage. The law on sales, specifically Article 1482 of
the Civil Code, provides that whenever earnest money is given in a contract of sale, it shall
be considered as part of the price and proof of the perfection of the contract. Although the
presumption is not conclusive, as the parties may treat the earnest money differently, there is
nothing alleged in the present case that would give rise to a contrary presumption. In cases
where the Court reached a conclusion contrary to the presumption declared in Article 1482, we
found that the money initially paid was given to guarantee that the buyer would not back out from
the sale, considering that the parties to the sale have yet to arrive at a definite agreement as to
its terms – that is, a situation where the contract has not yet been perfected.10 These situations
do not obtain in the present case, as neither of the parties claimed that the ₱20,000.00 was given
merely as guarantee by the respondents, as vendees, that they would not back out from the sale.
As we have pointed out, the terms of the parties’ agreement are clear and explicit; indeed, all the
essential elements of a perfected contract are present in this case. While the respondents
required that the occupants vacate the subject properties prior to the payment of the second
installment, the stipulation does not affect the perfection of the contract, but only its execution.

In sum, the case contains no element, factual or legal, that negates the existence of a perfected
contract between the parties.

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The characterization of the contract can be considered irrelevant in this case in light of
Article 1592 and the Maceda Law, and the petitioners-heirs’ payment

The petitioners-heirs posit that the proper characterization of the contract entered into by the
parties is significant in order to determine the effect of the respondents’ breach of the contract
(which purportedly consisted of a one-day delay in the payment of part of the purchase price)
and the remedies to which they, as the non-defaulting party, are entitled.

The question of characterization of the contract involved here would necessarily call for a
thorough analysis of the parties’ agreement as embodied in the June 2, 1989 receipt, their
contemporaneous acts, and the circumstances surrounding the contract’s perfection and
execution. Unfortunately, the lower courts’ factual findings provide insufficient detail for the
purpose. A stipulation reserving ownership in the vendor until full payment of the price is, under
case law, typical in a contract to sell.11 In this case, the vendor made no reservation on the
ownership of the subject properties. From this perspective, the parties’ agreement may be
considered a contract of sale. On the other hand, jurisprudence has similarly established that the
need to execute a deed of absolute sale upon completion of payment of the price generally
indicates that it is a contract to sell, as it implies the reservation of title in the vendor until the
vendee has completed the payment of the price. When the respondents instituted the action for
specific performance before the RTC, they prayed that Consuelo be ordered to execute a Deed
of Absolute Sale; this act may be taken to conclude that the parties only entered into a contract
to sell.

Admittedly, the given facts, as found by the lower courts, and in the absence of additional details,
can be interpreted to support two conflicting conclusions. The failure of the lower courts to pry
into these matters may understandably be explained by the issues raised before them, which did
not require the additional details. Thus, they found the question of the contract’s characterization
immaterial in their discussion of the facts and the law of the case. Besides, the petitioners-heirs
raised the question of the contract’s characterization and the effect of the breach for the first time
through the present Rule 45 petition.

Points of law, theories, issues and arguments not brought to the attention of the lower court need
not be, and ordinarily will not be, considered by the reviewing court, as they cannot be raised for
the first time at the appellate review stage. Basic considerations of fairness and due process
require this rule.12

At any rate, we do not find the question of characterization significant to fully pass upon the
question of default due to the respondents’ breach; ultimately, the breach was cured and the
contract revived by the respondents’ payment a day after the due date. 1avvphi1

In cases of breach due to nonpayment, the vendor may avail of the remedy of rescission in a
contract of sale. Nevertheless, the defaulting vendee may defeat the vendor’s right to rescind the
contract of sale if he pays the amount due before he receives a demand for rescission, either
judicially or by a notarial act, from the vendor. This right is provided under Article 1592 of the Civil
Code:

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

Nonpayment of the purchase price in contracts to sell, however, does not constitute a breach;
rather, nonpayment is a condition that prevents the obligation from acquiring obligatory force and
results in its cancellation. We stated in Ong v. CA13 that:

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In a contract to sell, the payment of the purchase price is a positive suspensive condition, the
failure of which is not a breach, casual or serious, but a situation that prevents the obligation of
the vendor to convey title from acquiring obligatory force. The non-fulfillment of the condition of
full payment rendered the contract to sell ineffective and without force and effect. [Emphasis
supplied.]

As in the rescission of a contract of sale for nonpayment of the price, the defaulting vendee in a
contract to sell may defeat the vendor’s right to cancel by invoking the rights granted to him
under Republic Act No. 6552 or the Realty Installment Buyer Protection Act (also known as the
Maceda Law); this law provides for a 60-day grace period within which the defaulting vendee
(who has paid less than two years of installments) may still pay the installments due. Only after
the lapse of the grace period with continued nonpayment of the amounts due can the actual
cancellation of the contract take place. The pertinent provisions of the Maceda Law provide:

xxxx

Section 2. It is hereby declared a public policy to protect buyers of real estate on installment
payments against onerous and oppressive conditions.

Sec. 3. In all transactions or contracts involving the sale or financing of real estate on installment
payments, including residential condominium apartments but excluding industrial lots,
commercial buildings and sales to tenants under Republic Act Numbered Thirty-eight hundred
forty-four as amended by Republic Act Numbered Sixty-three hundred eighty-nine, where the
buyer has paid at least two years of installments, the buyer is entitled to the following rights in
case he defaults in the payment of succeeding installments:

xxxx

Section 4. In case where less than two years of installments were paid, the seller shall give the
buyer a grace period of not less than 60 days from the date the installment became due. If the
buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel
the contract after thirty days from the receipt by the buyer of the notice of cancellation or the
demand for rescission of the contract by notarial act. [Emphasis supplied.]

Significantly, the Court has consistently held that the Maceda Law covers not only sales on
installments of real estate, but also financing of such acquisition; its Section 3 is comprehensive
enough to include both contracts of sale and contracts to sell, provided that the terms on
payment of the price require at least two installments. The contract entered into by the parties
herein can very well fall under the Maceda Law.

Based on the above discussion, we conclude that the respondents’ payment on June 15, 1989 of
the installment due on June 14, 1989 effectively defeated the petitioners-heirs’ right to have the
contract rescinded or cancelled. Whether the parties’ agreement is characterized as one of sale
or to sell is not relevant in light of the respondents’ payment within the grace period provided
under Article 1592 of the Civil Code and Section 4 of the Maceda Law. The petitioners-heirs’
obligation to accept the payment of the price and to convey Consuelo’s conjugal and hereditary
shares in the subject properties subsists.

WHEREFORE, we DENY the petitioners-heirs’ petition for review on certiorari, and AFFIRM the
decision of the Court of Appeals dated June 24, 2002 and its resolution dated February 20, 2003
in CA-G.R. CV Case No. 56590. Costs against the petitioners-heirs.

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