Gr-no.-167874[1] 1x352f

1 SPOUSES CARMEN S. TONGSON G.R. No. 167874 and JOSE C. TONGSON substituted by his children namely: Present: JOSE TONGSON, JR., RAUL TONGSON, CARPIO, J., Chairperson,TITA TONGSON, BRION, GLORIA TONGSON DEL CASTILLO,ALMA TONGSON, ABAD, and Petitioners - versus - EMERGENCY PAWNSHOP BULA INC. and DANILO R. NAPALA, Respondents. January 15, 2010

DECISION CARPIO, J.: The Case Before the Court is a petition for review[1] of the 31 August 2004 Decision[2] and 10 March 2005 Resolution[3] of the Court of Appeals in CA-G.R. CV No. 58242. In the 31 August 2004 Decision, the Court of Appeals partially granted the appeal filed by Emergency Pawnshop Bula, Inc. (EPBI) and Danilo R. Napala (Napala) by modifying the decision of the trial court. In the 10 March 2005 Resolution, the Court of Appeals denied the motion for partial reconsideration filed by the Spouses Jose C. Tongson and Carmen S. Tongson (Spouses Tongson). The Facts In May 1992, Napala offered to purchase from the Spouses Tongson their 364-square meter parcel of land, situated in Davao City and covered by Transfer Certificate of Title (TCT) No. 143020, for P3,000,000. Finding the offer acceptable, the Spouses Tongson executed with Napala a Memorandum of Agreement[4] dated 8 May 1992. On 2 December 1992, respondents lawyer Atty. Petronilo A. Raganas, Jr. prepared a Deed of Absolute Sale[5] indicating the consideration as only P400,000. When Carmen Tongson noticed that the consideration was very low, she [complained] and called the attention of Napala but the latter told her not to worry as he would be the one to pay for the taxes and she would receive the net amount of P3,000,000.[6] To conform with the consideration stated in the Deed of Absolute Sale, the parties executed another Memorandum of Agreement, which allegedly replaced the first Memorandum of Agreement,[7] showing that the selling price of the land was only P400,000.[8] Upon g the Deed of Absolute Sale, Napala paid P200,000 in cash to the Spouses Tongson and issued a postdated Philippine National Bank (PNB) check in the amount of P2,800,000,[9] representing the remaining balance of the purchase price of the subject property. Thereafter, TCT No. 143020 was cancelled and TCT No. T-186128 was issued in the name of EPBI.[10] When presented for payment, the PNB check was dishonored for the reason Drawn Against Insufficient Funds. Despite the Spouses Tongson's repeated demands to either pay the full value of the check or to return the subject parcel of land, Napala failed to do either. Left with no other recourse, the Spouses Tongson filed with the Regional Trial Court, Branch 16, Davao City a Complaint for Annulment of Contract and Damages with a Prayer for the Issuance of a Temporary Restraining Order and a Writ of Preliminary Injunction.[11] In their Answer, respondents countered that Napala had already delivered to the Spouses Tongson the amount of P2,800,000 representing the face value of the PNB check, as evidenced by a receipt issued by the Spouses Tongson. Respondents pointed out that the Spouses Tongson never returned the PNB check claiming that it was misplaced. Respondents asserted that the payment they made rendered the filing of the complaint baseless.[12] At the pre-trial, Napala itted, among others, issuing the postdated PNB check in the sum of P2,800,000.[13] The Spouses Tongson, on the other hand, itted issuing a receipt which showed that they received the PNB check from Napala. Thereafter, trial ensued. The Ruling of the Trial Court The trial court found that the purchase price of the subject property has not been fully paid and that Napalas assurance to the Spouses Tongson that the PNB check would not bounce constituted fraud that induced the Spouses Tongson to enter

2 into the sale. Without such assurance, the Spouses Tongson would not have agreed to the contract of sale. Accordingly, there was fraud within the ambit of Article 1338 of the Civil Code,[14] justifying the annulment of the contract of sale, the award of damages and attorneys fees, and payment of costs. The dispositive portion of the 9 December 1996 Decision of the trial court reads: WHEREFORE, judgment is hereby rendered I Annulling the contract entered into by the plaintiffs with the defendants; II Declaring the writs of preliminary injunctions issued permanent; III Ordering defendants to: 1)

reconvey the property subject matter of the case to the plaintiffs;

2)

pay plaintiffs:

a) P100,000 as moral damages; b) P50,000 as exemplary damages; c) P20,000 as attorneys fees; and d) P35,602.50 cost of suit broken down as follows: P70.00 bond fee P60.00 lis pendens fee P902.00 docket fee P390.00 docket fee P8.00 summons fee P12.00 SDF P178.50 Xerox P9,000 Sidcor Insurance Bond fee P25,000 Sidcor Insurance Bond fee or the total sum of P205,602.50. It is further ordered that the monetary award be offsetted [sic] to defendants downpayment of P200,000 thereby leaving a balance of P5,602.50.[15] Respondents appealed to the Court of Appeals. The Ruling of the Court of Appeals The Court of Appeals agreed with the trial courts finding that Napala employed fraud when he misrepresented to the Spouses Tongson that the PNB check in the amount of P2,800,000 would be properly funded at its maturity. However, the Court of Appeals found that the issuance and delivery of the PNB check and fraudulent representation made by Napala could not be considered as the determining cause for the sale of the subject parcel of land. Hence, such fraud could not be made the basis for annulling the contract of sale. Nevertheless, the fraud employed by Napala is a proper and valid

3 basis for the entitlement of the Spouses Tongson to the balance of the purchase price in the amount of P2,800,000 plus interest at the legal rate of 6% per annum computed from the date of filing of the complaint on 11 February 1993. Finding the trial courts award of damages unconscionable, the Court of Appeals reduced the moral damages from P100,000 to P50,000 and the exemplary damages from P50,000 to P25,000. The dispositive portion of the 31 August 2004 Decision of the Court of Appeals reads: WHEREFORE, the instant appeal is PARTIALLY GRANTED. The assailed decision of the Regional Trial Court, 11th Judicial Region, Branch 16, Davao City, in Civil Case No. 21,858-93, is hereby MODIFIED, to read: WHEREFORE, judgment is hereby rendered ordering defendants to pay plaintiffs: a) the sum of P2,800,000.00 representing the balance of the purchase price of the subject parcel of land, plus interest at the legal rate of 6% per annum computed from the date of filing of the complaint on 11 February 1993, until the finality of the assailed decision; thereafter, the interest due shall be at the legal rate of 12% per annum until fully paid; b) P50,000 as moral damages; c) P25,000 as exemplary damages; d) P20,000 as attorneys fees; and e) The costs of suit in the total amount of P35,602.50. It is understood, however, that plaintiffs entitlement to items a to d, is subject to the condition that they have not received the same or equivalent amounts in criminal case for Violation of Batas Pambansa Bilang 22, docketed as Criminal Case No. 30508-93, before the Regional Trial Court of Davao City, Branch 12, instituted against the defendant Danilo R. Napala by plaintiff Carmen S. Tongson. SO ORDERED.[16] The Spouses Tongson filed a partial motion for reconsideration which was denied by the Court of Appeals in its Resolution dated 10 March 2005. The Issues The Spouses Tongson raise the following issues: 1. WHETHER THE CONTRACT OF SALE CAN BE ANNULLED BASED ON THE FRAUD EMPLOYED BY NAPALA; and 2. WHETHER THE COURT OF APPEALS ERRED IN REDUCING THE AMOUNT OF DAMAGES AWARDED BY THE TRIAL COURT. The Ruling of the Court The petition has merit. On the existence of fraud A contract is a meeting of the minds between two persons, whereby one is bound to give something or to render some service to the other.[17] A valid contract requires the concurrence of the following essential elements: (1) consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price; (2) determinate subject matter; and (3) price certain in money or its equivalent.[18] In the present case, there is no question that the subject matter of the sale is the 364-square meter Davao lot owned by the Spouses Tongson and the selling price agreed upon by the parties is P3,000,000. Thus, there is no dispute as regards

4 the presence of the two requisites for a valid sales contract, namely, (1) a determinate subject matter and (2) a price certain in money. The problem lies with the existence of the remaining element, which is consent of the contracting parties, specifically, the consent of the Spouses Tongson to sell the property to Napala. Claiming that their consent was vitiated, the Spouses Tongson point out that Napalas fraudulent representations of sufficient funds to pay for the property induced them into g the contract of sale. Such fraud, according to the Spouses Tongson, renders the contract of sale void.

On the contrary, Napala insists that the Spouses Tongson willingly consented to the sale of the subject property making the contract of sale valid. Napala maintains that no fraud attended the execution of the sales contract. The trial and appellate courts had conflicting findings on the question of whether the consent of the Spouses Tongson was vitiated by fraud. While the Court of Appeals agreed with the trial courts finding that Napala employed fraud when he assured the Spouses Tongson that the postdated PNB check was fully funded when it fact it was not, the Court of Appeals disagreed with the trial courts ruling that such fraud could be the basis for the annulment of the contract of sale between the parties. Under Article 1338 of the Civil Code, there is fraud when, 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. In order that fraud may vitiate consent, it must be the causal (dolo causante), not merely the incidental (dolo incidente), inducement to the making of the contract.[19] Additionally, the fraud must be serious.[20] We find no causal fraud in this case to justify the annulment of the contract of sale between the parties. It is clear from the records that the Spouses Tongson agreed to sell their 364-square meter Davao property to Napala who offered to pay P3,000,000 as purchase price therefor. Contrary to the Spouses Tongsons belief that the fraud employed by Napala was already operational at the time of the perfection of the contract of sale, the misrepresentation by Napala that the postdated PNB check would not bounce on its maturity hardly equates to dolo causante. Napalas assurance that the check he issued was fully funded was not the principal inducement for the Spouses Tongson to sign the Deed of Absolute Sale. Even before Napala issued the check, the parties had already consented and agreed to the sale transaction. The Spouses Tongson were never tricked into selling their property to Napala. On the contrary, they willingly accepted Napalas offer to purchase the property at P3,000,000. In short, there was a meeting of the minds as to the object of the sale as well as the consideration therefor. Some of the instances where this Court found the existence of causal fraud include: (1) when the seller, who had no intention to part with her property, was tricked into believing that what she signed were papers pertinent to her application for the reconstitution of her burned certificate of title, not a deed of sale;[21] (2) when the signature of the authorized corporate officer was forged;[22] or (3) when the seller was seriously ill, and died a week after g the deed of sale raising doubts on whether the seller could have read, or fully understood, the contents of the documents he signed or of the consequences of his act.[23] Suffice it to state that nothing analogous to these badges of causal fraud exists in this case. However, while no causal fraud attended the execution of the sales contract, there is fraud in its general sense, which involves a false representation of a fact,[24] when Napala inveigled the Spouses Tongson to accept the postdated PNB check on the representation that the check would be sufficiently funded at its maturity. In other words, the fraud surfaced when Napala issued the worthless check to the Spouses Tongson, which is definitely not during the negotiation and perfection stages of the sale. Rather, the fraud existed in the consummation stage of the sale when the parties are in the process of performing their respective obligations under the perfected contract of sale. In Swedish Match, AB v. Court of Appeals,[25] the Court explained the three stages of a contract, thus: I n general, contracts undergo three distinct stages, to wit: negotiation; perfection or birth; and consummation. Negotiation begins from the time the prospective contracting parties manifest their interest in the contract and ends at the moment of agreement of the parties. Perfection or birth of the contract takes place when the parties agree upon the essential

5 elements of the contract. Consummation occurs when the parties fulfill or perform the agreed upon in the contract, culminating in the extinguishment thereof. Indisputably, the Spouses Tongson as the sellers had already performed their obligation of executing the Deed of Sale, which led to the cancellation of their title in favor of EPBI. Respondents as the buyers, on the other hand, failed to perform their correlative obligation of paying the full amount of the contract price. While Napala paid P200,000 cash to the Spouses Tongson as partial payment, Napala issued an insufficiently funded PNB check to pay the remaining balance of P2.8 million. Despite repeated demands and the filing of the complaint, Napala failed to pay the P2.8 million until the present. Clearly, respondents committed a substantial breach of their reciprocal obligation, entitling the Spouses Tongson to the rescission of the sales contract. The law grants this relief to the aggrieved party, thus: Article 1191 of the Civil Code provides: Article 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. Article 1385 of the Civil Code provides the effects of rescission, viz: ART. 1385. Rescission creates the obligation to return the things which were the object of the contract, together with their fruits, and the price with its interest; consequently, it can be carried out only when he who demands rescission can return whatever he may be obliged to restore. Neither shall rescission take place when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith. While they did not file an action for the rescission of the sales contract, the Spouses Tongson specifically prayed in their complaint for the annulment of the sales contract, for the immediate execution of a deed of reconveyance, and for the return of the subject property to them.[26] The Spouses Tongson likewise prayed for such other reliefs which may be deemed just and equitable in the premises. In view of such prayer, and considering respondents substantial breach of their obligation under the sales contract, the rescission of the sales contract is but proper and justified. Accordingly, respondents must reconvey the subject property to the Spouses Tongson, who in turn shall refund the initial payment of P200,000 less the costs of suit. Napalas claims that rescission is not proper and that he should be given more time to pay for the unpaid remaining balance of P2,800,000 cannot be countenanced. Having acted fraudulently in performing his obligation, Napala is not entitled to more time to pay the remaining balance of P2,800,000, and thereby erase the default or breach that he had deliberately incurred.[27] To do otherwise would be to sanction a deliberate and reiterated infringement of the contractual obligations incurred by Napala, an attitude repugnant to the stability and obligatory force of contracts.[28] The Court notes that the selling price indicated in the Deed of Absolute Sale was only P400,000, instead of the true purchase price of P3,000,000. The undervaluation of the selling price operates to defraud the government of the taxes due on the basis of the correct purchase price. Under the law,[29] the sellers have the obligation to pay the capital gains tax. In this case, Napala undertook to advance the capital gains tax, among other fees, under the Memorandum of Agreement, thus: ATTY. ALABASTRO: Q Is it not a fact that you were the one who paid for the capital gains tax? A No, I only advanced the money. Q To whom? A To BIR.

6 COURT: Q You were the one who went to the BIR to pay the capital gains tax? A It is embodied in the memorandum agreement.[30] While Carmen Tongson protested against the very low consideration, she eventually agreed to the reduced selling price indicated in the Deed of Absolute since Napala assured her not to worry about the taxes and expenses, as he had allegedly made arrangements with the Bureau of Internal Revenue (BIR) regarding the payment of the taxes, thus:

Q What is the amount in the Deed of Absolute Sale? A It was only Four Hundred Thousand. And he told me not to worry because x x x the BIR and not to worry because he will pay me what was agreed the amount of Three Million and he will be paying all these expenses so I was thinking, if that is the case, anyway he paid me the Two Hundred Thousand cash and a subsequent Two Point Eight Million downpayment check so I really thought that he was paying the whole amount. COURT: Proceed. ATTY. LIZA: Q So you eventually agreed that this consideration be reduced to Four Hundred Thousand Pesos and to be reflected in the Deed of Absolute Sale? A Yes, but when I was complaining to him why it is so because I was worried why that was like that but Mr. Napala told me dont worry because [he] can remedy this. And I asked him how can [he] remedy this? And he told me we can make another Memorandum of Agreement. COURT: Q Before you signed the Deed of Absolute Sale, you found out the amount? A Yes, sir. Q And you complained? A Yes.[31] Considering that the undervaluation of the selling price of the subject property, initiated by Napala, operates to defraud the government of the correct amount of taxes due on the sale, the BIR must therefore be informed of this Decision for its appropriate action. On the award of damages Citing Article 1338 of the Civil Code, the trial court awarded P100,000 moral damages and P50,000 exemplary damages to the Spouses Tongson. While agreeing with the trial court on the Spouses Tongsons entitlement to moral and exemplary damages, the Court of Appeals reduced such awards for being unconscionable. Thus, the moral damages was reduced from P100,000 to P50,000, and the exemplary damages was reduced from P50,000 to P25,000. As discussed above, Napala defrauded the Spouses Tongson in his acts of issuing a worthless check and representing to the Spouses Tongson that the check was funded, committing in the process a substantial breach of his obligation as a buyer. For such fraudulent acts, the law, specifically the Civil Code, awards moral damages to the injured party, thus:

7 ART. 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith. (Emphasis supplied) Considering that the Spouses Tongson are entitled to moral damages, the Court may also award exemplary damages, thus: ART. 2232. In contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner. Article 2234. When the amount of the exemplary damages need not be proved, the plaintiff must show that he is entitled to moral, temperate or compensatory damages before the court may consider the question of whether or not exemplary damages would be awarded. In case liquidated damages have been agreed upon, although no proof of loss is necessary in order that such liquidated damages may be recovered, nevertheless, before the court may consider the question of granting exemplary in addition to the liquidated damages, the plaintiff must show that he would be entitled to moral, temperate or compensatory damages were it not for the stipulation for liquidated damages. (Emphasis supplied) Accordingly, we affirm the Court of Appeals awards of moral and exemplary damages, which we find equitable under the circumstances in this case. WHEREFORE, we PARTIALLY GRANT the petition. We SET ASIDE the 31 August 2004 Decision and 10 March 2005 Resolution of the Court of Appeals in CA-G.R. CV No. 58242, except as to the award of moral and exemplary damages, and ORDER the rescission of the contract of sale between the Spouses Tongson and Emergency Pawnshop Bula, Inc. Let a copy of this Decision be forwarded to the Bureau of Internal Revenue for its appropriate action. SO ORDERED.

CARMEN DEL PRADO, Petitioner - versus -SPOUSES ANTONIO L. CABALLERO and LEONARDA CABALLERO, Respondents. G.R. No. 148225 March 3, 2010 DECISION NACHURA, J.: This is a petition for review on certiorari of the decision[1] of the Court of Appeals (CA) dated September 26, 2000 and its resolution denying the motion for reconsideration thereof. The facts are as follows: In a judgment rendered on February 1, 1985 in Cadastral Case No. N-6 (LRC Rec. No. N-611), Judge Juan Y. Reyes of the Regional Trial Court (RTC) of Cebu City, Branch 14, adjudicated in favor of Spouses Antonio L. Caballero and Leonarda B. Caballero several parcels of land situated in Guba, Cebu City, one of which was Cadastral Lot No. 11909, the subject of this controversy.[2] On May 21, 1987, Antonio Caballero moved for the issuance of the final decree of registration for their lots.[3] Consequently, on May 25, 1987, the same court, through then Presiding Judge Renato C. Dacudao, ordered the National Land Titles and Deeds Registration istration to issue the decree of registration and the corresponding titles of the lots in favor of the Caballeros.[4] On June 11, 1990, respondents sold to petitioner, Carmen del Prado, Lot No. 11909 on the basis of the tax declaration covering the property. The pertinent portion of the deed of sale reads as follows: That we, Spouses ANTONIO L. CABALLERO and LEONARDA B. CABALLERO, Filipinos, both of legal age and residents of Talamban, Cebu City, Philippines, for and in consideration of the sum of FORTY THOUSAND PESOS (P40,000.00),

8 Philippine Currency, paid by CARMEN DEL PRADO, Filipino, of legal age, single and a resident of Sikatuna St., Cebu City, Philippines, the receipt of which is full is hereby acknowledged, do by these presents SELL, CEDE, TRANSFER, ASSIGN & CONVEY unto the said CARMEN DEL PRADO, her heirs, assigns and/or successors-in-interest, one (1) uned parcel of land, situated at Guba, Cebu City, Philippines, and more particularly described and bounded, as follows: A parcel of land known as Cad. Lot No. 11909, bounded as follows: North : Lot 11903 East : Lot 11908 West : Lot 11910 South : Lot 11858 & 11912 containing an area of 4,000 square meters, more or less, covered by Tax Dec. No. 00787 of the Cebu City Assessors Office, Cebu City. of which parcel of land we are the absolute and lawful owners. Original Certificate of Title (OCT) No. 1305, covering Lot No. 11909, was issued only on November 15, 1990, and entered in the Registration Book of the City of Cebu on December 19, 1990.[5] Therein, the technical description of Lot No. 11909 states that said lot measures about 14,457 square meters, more or less.[6] On March 20, 1991, petitioner filed in the same cadastral proceedings a Petition for Registration of Document Under Presidential Decree (P.D.) 1529[7] in order that a certificate of title be issued in her name, covering the whole Lot No. 11909. In the petition, petitioner alleged that the tenor of the instrument of sale indicated that the sale was for a lump sum or cuerpo cierto, in which case, the vendor was bound to deliver all that was included within said boundaries even when it exceeded the area specified in the contract. Respondents opposed, on the main ground that only 4,000 sq m of Lot No. 11909 was sold to petitioner. They claimed that the sale was not for a cuerpo cierto. They moved for the outright dismissal of the petition on grounds of prescription and lack of jurisdiction. After trial on the merits, the court found that petitioner had established a clear and positive right to Lot No. 11909. The intended sale between the parties was for a lump sum, since there was no evidence presented that the property was sold for a price per unit. It was apparent that the subject matter of the sale was the parcel of land, known as Cadastral Lot No. 11909, and not only a portion thereof.[8] Thus, on August 2, 1993, the court a quo rendered its decision with the following dispositive portion: WHEREFORE, premises considered, the petition is hereby granted and judgment is hereby rendered in favor of herein petitioner. The of Deeds of the City of Cebu is hereby ordered and directed to effect the registration in his office of the Deed of Absolute Sale between Spouses Antonio Caballero and Leonarda Caballero and Petitioner, Carmen del Prado dated June 11, 1990 covering Lot No. 11909 after payment of all fees prescribed by law. Additionally, the of Deeds of the City of Cebu is hereby ordered to cancel Original Certificate No. 1305 in the name of Antonio Caballero and Leonarda Caballero and the Transfer Certificate of Title be issued in the name of Petitioner Carmen del Prado covering the entire parcel of land known as Cadastral Lot No. 11909.[9] An appeal was duly filed. On September 26, 2000, the CA promulgated the assailed decision, reversing and setting aside the decision of the RTC. The CA no longer touched on the character of the sale, because it found that petitioner availed herself of an improper remedy. The petition for registration of document is not one of the remedies provided under P.D. No. 1529, after the original registration has been effected. Thus, the CA ruled that the lower court committed an error when it assumed jurisdiction over the petition, which prayed for a remedy not sanctioned under the Property Registration Decree. Accordingly, the CA disposed, as follows: IN VIEW OF ALL THE FOREGOING, the appealed decision is REVERSED and SET ASIDE and a new one entered dismissing the petition for lack of jurisdiction. No pronouncement as to costs.[10] Aggrieved, petitioner filed the instant petition, raising the following issues:

9 I. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE ERROR IN MAKING FINDINGS OF FACT CONTRARY TO THAT OF THE TRIAL COURT[;] II. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE ERROR IN FAILING TO RULE THAT THE SALE OF THE LOT IS FOR A LUMP SUM OR CUERPO CIERTO[;] III. WHETHER OR NOT THE COURT A QUO HAS JURISDICTION OVER THE PETITION FOR REGISTRATION OF THE DEED OF ABSOLUTE SALE DATED 11 JUNE 1990 EXECUTED BETWEEN HEREIN PETITIONER AND RESPONDENTS[.][11] The core issue in this case is whether or not the sale of the land was for a lump sum or not. Petitioner asserts that the plain language of the Deed of Sale shows that it is a sale of a real estate for a lump sum, governed under Article 1542 of the Civil Code.[12] In the contract, it was stated that the land contains an area of 4,000 sq m more or less, bounded on the North by Lot No. 11903, on the East by Lot No. 11908, on the South by Lot Nos. 11858 & 11912, and on the West by Lot No. 11910. When the OCT was issued, the area of Lot No. 11909 was declared to be 14,475 sq m, with an excess of 10,475 sq m. In accordance with Article 1542, respondents are, therefore, duty-bound to deliver the whole area within the boundaries stated, without any corresponding increase in the price. Thus, petitioner concludes that she is entitled to have the certificate of title, covering the whole Lot No. 11909, which was originally issued in the names of respondents, transferred to her name. We do not agree. In Esguerra v. Trinidad,[13] the Court had occasion to discuss the matter of sales involving real estates. The Courts pronouncement is quite instructive: In sales involving real estate, the parties may choose between two types of pricing agreement: a unit price contract wherein the purchase price is determined by way of reference to a stated rate per unit area (e.g., P1,000 per square meter), or a lump sum contract which states a full purchase price for an immovable the area of which may be declared based on the estimate or where both the area and boundaries are stated (e.g., P1 million for 1,000 square meters, etc.). In Rudolf Lietz, Inc. v. Court of Appeals (478 SCRA 451), the Court discussed the distinction:

In a unit price contract, the statement of area of immovable is not conclusive and the price may be reduced or increased depending on the area actually delivered. If the vendor delivers less than the area agreed upon, the vendee may oblige the vendor to deliver all that may be stated in the contract or demand for the proportionate reduction of the purchase price if delivery is not possible. If the vendor delivers more than the area stated in the contract, the vendee has the option to accept only the amount agreed upon or to accept the whole area, provided he pays for the additional area at the contract rate. xxxx In the case where the area of an immovable is stated in the contract based on an estimate, the actual area delivered may not measure up exactly with the area stated in the contract. According to Article 1542 of the Civil Code, in the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of measure or number, there shall be no increase or decrease of the price, although there be a greater or less areas or number than that stated in the contract. . . . xxxx Where both the area and the boundaries of the immovable are declared, the area covered within the boundaries of the immovable prevails over the stated area. In cases of conflict between areas and boundaries, it is the latter which should prevail. What really defines a piece of ground is not the area, calculated with more or less certainty, mentioned in its description, but the boundaries therein laid down, as enclosing the land and indicating its limits. In a contract of sale of land in a mass, it is well established that the specific boundaries stated in the contract must control over any statement with respect to the area contained within its boundaries. It is not of vital consequence that a deed or contract of sale of

10 land should disclose the area with mathematical accuracy. It is sufficient if its extent is objectively indicated with sufficient precision to enable one to identify it. An error as to the superficial area is immaterial. Thus, the obligation of the vendor is to deliver everything within the boundaries, inasmuch as it is the entirety thereof that distinguishes the determinate object. [14] The Court, however, clarified that the rule laid down in Article 1542 is not hard and fast and its of an exception. It held: A caveat is in order, however. The use of more or less or similar words in designating quantity covers only a reasonable excess or deficiency. A vendee of land sold in gross or with the description more or less with reference to its area does not thereby ipso facto take all risk of quantity in the land.. Numerical data are not of course the sole gauge of unreasonableness of the excess or deficiency in area. Courts must consider a host of other factors. In one case (see Roble v. Arbasa, 414 Phil. 343 [2001]), the Court found substantial discrepancy in area due to contemporaneous circumstances. Citing change in the physical nature of the property, it was therein established that the excess area at the southern portion was a product of reclamation, which explained why the lands technical description in the deed of sale indicated the seashore as its southern boundary, hence, the inclusion of the reclaimed area was declared unreasonable.[15] In the instant case, the deed of sale is not one of a unit price contract. The parties agreed on the purchase price of P40,000.00 for a predetermined area of 4,000 sq m, more or less, bounded on the North by Lot No. 11903, on the East by Lot No. 11908, on the South by Lot Nos. 11858 & 11912, and on the West by Lot No. 11910. In a contract of sale of land in a mass, the specific boundaries stated in the contract must control over any other statement, with respect to the area contained within its boundaries.[16] Blacks Law Dictionary[17] defines the phrase more or less to mean: About; substantially; or approximately; implying that both parties assume the risk of any ordinary discrepancy. The words are intended to cover slight or unimportant inaccuracies in quantity, Carter v. Finch, 186 Ark. 954, 57 S.W.2d 408; and are ordinarily to be interpreted as taking care of unsubstantial differences or differences of small importance compared to the whole number of items transferred. Clearly, the discrepancy of 10,475 sq m cannot be considered a slight difference in quantity. The difference in the area is obviously sizeable and too substantial to be overlooked. It is not a reasonable excess or deficiency that should be deemed included in the deed of sale. We take exception to the avowed rule that this Court is not a trier of facts. After an assiduous scrutiny of the records, we lend credence to respondents claim that they intended to sell only 4,000 sq m of the whole Lot No. 11909, contrary to the findings of the lower court. The records reveal that when the parties made an ocular inspection, petitioner specifically pointed to that portion of the lot, which she preferred to purchase, since there were mango trees planted and a deep well thereon. After the sale, respondents delivered and segregated the area of 4,000 sq m in favor of petitioner by fencing off the area of 10,475 sq m belonging to them.[18] Contracts are the law between the contracting parties. Sale, by its very nature, is a consensual contract, because it is perfected by mere consent. The essential elements of a contract of sale are the following: (a) consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price; (b) determinate subject matter; and (c) price certain in money or its equivalent. All these elements are present in the instant case.[19] More importantly, we find no reversible error in the decision of the CA. Petitioners recourse, by filing the petition for registration in the same cadastral case, was improper. It is a fundamental principle in land registration that a certificate of title serves as evidence of an indefeasible and incontrovertible title to the property in favor of the person whose name appears therein. Such indefeasibility commences after one year from the date of entry of the decree of registration.[20] Inasmuch as the petition for registration of document did not interrupt the running of the period to file the appropriate petition for review and considering that the prescribed one-year period had long since expired, the decree of registration, as well as the certificate of title issued in favor of respondents, had become incontrovertible.[21] WHEREFORE, the petition is DENIED.

11 SO ORDERED.

G.R. No. L-59266

February 29, 1988

SILVESTRE DIGNOS and ISABEL LUMUNGSOD, petitioners, vs. HON. COURT OF APPEALS and ATILANO G. JABIL, respondents. BIDIN, J.: This is a petition for review on certiorari seeking the reversal of the: (1) Decision * of the 9th Division, Court of Appeals dated July 31,1981, affirming with modification the Decision, dated August 25, 1972 of the Court of First Instance ** of Cebu in civil Case No. 23-L entitled Atilano G. Jabil vs. Silvestre T. Dignos and Isabela Lumungsod de Dignos and Panfilo Jabalde, as Attorney-in-Fact of Luciano Cabigas and Jovita L. de Cabigas; and (2) its Resolution dated December 16, 1981, denying defendant-appellant's (Petitioner's) motion for reconsideration, for lack of merit. The undisputed facts as found by the Court of Appeals are as follows: The Dignos spouses were owners of a parcel of land, known as Lot No. 3453, of the cadastral survey of Opon, Lapu-Lapu City. On June 7, 1965, appellants (petitioners) Dignos spouses sold the said parcel of land to plaintiff-appellant (respondent Atilano J. Jabil) for the sum of P28,000.00, payable in two installments, with an assumption of indebtedness with the First Insular Bank of Cebu in the sum of P12,000.00, which was paid and acknowledged by the vendors in the deed of sale (Exh. C) executed in favor of plaintiff-appellant, and the next installment in the sum of P4,000.00 to be paid on or before September 15, 1965. On November 25, 1965, the Dignos spouses sold the same land in favor of defendants spouses, Luciano Cabigas and Jovita L. De Cabigas, who were then U.S. citizens, for the price of P35,000.00. A deed of absolute sale (Exh. J, also marked Exh. 3) was executed by the Dignos spouses in favor of the Cabigas spouses, and which was ed in the Office of the of Deeds pursuant to the provisions of Act No. 3344. As the Dignos spouses refused to accept from plaintiff-appellant the balance of the purchase price of the land, and as plaintiff- appellant discovered the second sale made by defendants-appellants to the Cabigas spouses, plaintiff-appellant brought the present suit. (Rollo, pp. 27-28) After due trial, the Court of first Instance of Cebu rendered its Decision on August 25,1972, the decretal portion of which reads: WHEREFORE, the Court hereby declares the deed of sale executed on November 25, 1965 by defendant Isabela L. de Dignos in favor of defendant Luciano Cabigas, a citizen of the United States of America, null and void ab initio, and the deed of sale executed by defendants Silvestre T. Dignos and Isabela Lumungsod de Dignos not rescinded. Consequently, the plaintiff Atilano G. Jabil is hereby ordered to pay the sum, of Sixteen Thousand Pesos (P16,000.00) to the defendantsspouses upon the execution of the Deed of absolute Sale of Lot No. 3453, Opon Cadastre and when the decision of this case becomes final and executory.

The plaintiff Atilano G. Jabil is ordered to reimburse the defendants Luciano Cabigas and Jovita L. de Cabigas, through their attorney-in-fact, Panfilo Jabalde, reasonable amount corresponding to the expenses or costs of the hollow block fence, so far constructed. It is further ordered that defendants-spouses Silvestre T. Dignos and Isabela Lumungsod de Dignos should return to defendants-spouses Luciano Cabigas and Jovita L. de Cabigas the sum of P35,000.00, as equity demands that nobody shall enrich himself at the expense of another. The writ of preliminary injunction issued on September 23, 1966, automatically becomes permanent in virtue of this decision.

12 With costs against the defendants. From the foregoing, the plaintiff (respondent herein) and defendants-spouss (petitioners herein) appealed to the Court of Appeals, which appeal was docketed therein as CA-G.R. No. 54393-R, "Atilano G. Jabil v. Silvestre T. Dignos, et al." On July 31, 1981, the Court of Appeals affirmed the decision of the lower court except as to the portion ordering Jabil to pay for the expenses incurred by the Cabigas spouses for the building of a fence upon the land in question. The disposive portion of said decision of the Court of Appeals reads: IN VIEW OF THE FOREGOING CONSIDERATIONS, except as to the modification of the judgment as pertains to plaintiffappellant above indicated, the judgment appealed from is hereby AFFIRMED in all other respects. With costs against defendants-appellants. SO ORDERED. Judgment MODIFIED. A motion for reconsideration of said decision was filed by the defendants- appellants (petitioners) Dignos spouses, but on December 16, 1981, a resolution was issued by the Court of Appeals denying the motion for lack of merit. Hence, this petition. In the resolution of February 10, 1982, the Second Division of this Court denied the petition for lack of merit. A motion for reconsideration of said resolution was filed on March 16, 1982. In the resolution dated April 26,1982, respondents were required to comment thereon, which comment was filed on May 11, 1982 and a reply thereto was filed on July 26, 1982 in compliance with the resolution of June 16,1 982. On August 9,1982, acting on the motion for reconsideration and on all subsequent pleadings filed, this Court resolved to reconsider its resolution of February 10, 1982 and to give due course to the instant petition. On September 6, 1982, respondents filed a reder to reply of petitioners which was noted on the resolution of September 20, 1982. Petitioners raised the following assignment of errors: I THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW IN GROSSLY, INCORRECTLY INTERPRETING THE OF THE CONTRACT, EXHIBIT C, HOLDING IT AS AN ABSOLUTE SALE, EFFECTIVE TO TRANSFER OWNERSHIP OVER THE PROPERTY IN QUESTION TO THE RESPONDENT AND NOT MERELY A CONTRACT TO SELL OR PROMISE TO SELL; THE COURT ALSO ERRED IN MISAPPLYING ARTICLE 1371 AS WARRANTING READING OF THE AGREEMENT, EXHIBIT C, AS ONE OF ABSOLUTE SALE, DESPITE THE CLARITY OF THE THEREOF SHOWING IT IS A CONTRACT OF PROMISE TO SELL. II THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN INCORRECTLY APPLYING AND OR IN MISAPPLYING ARTICLE 1592 OF THE NEW CIVIL CODE AS WARRANTING THE ERRONEOUS CONCLUSION THAT THE NOTICE OF RESCISSION, EXHIBIT G, IS INEFFECTIVE SINCE IT HAS NOT BEEN JUDICIALLY DEMANDED NOR IS IT A NOTARIAL ACT. III THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN REJECTING THE APPLICABILITY OF ARTICLES 2208,2217 and 2219 OF THE NEW CIVIL CODE AND ESTABLISHED JURISPRUDENCE AS TO WARRANT THE AWARD OF DAMAGES AND ATTORNEY'S FEES TO PETITIONERS. IV

13 PLAINTIFF'S COMPLAINT FOR SPECIFIC PERFORMANCE SHOULD HAVE BEEN DISMISSED, HE HAVING COME TO COURT WITH UNCLEAN HANDS. V BY AND LARGE, THE COURT OF APPEALS COMMITTED AN ERROR IN AFFIRMING WITH MODIFICATION THE DECISION OF THE TRIAL COURT DUE TO GRAVE MISINTERPRETATION, MISAPPLICATION AND MISAPPREHENSION OF THE OF THE QUESTIONED CONTRACT AND THE LAW APPLICABLE THERETO. The foregoing assignment of errors may be synthesized into two main issues, to wit: I.

Whether or not subject contract is a deed of absolute sale or a contract Lot sell.

II.

Whether or not there was a valid rescission thereof.

There is no merit in this petition. It is significant to note that this petition was denied by the Second Division of this Court in its Resolution dated February 1 0, 1 982 for lack of merit, but on motion for reconsideration and on the basis of all subsequent pleadings filed, the petition was given due course. I. The contract in question (Exhibit C) is a Deed of Sale, with the following conditions: 1. That Atilano G..Jabilis to pay the amount of Twelve Thousand Pesos P12,000.00) Phil. Philippine Currency as advance payment; 2. That Atilano G. Jabil is to assume the balance of Twelve Thousand Pesos (P12,000.00) Loan from the First Insular Bank of Cebu; 3. That Atilano G. Jabil is to pay the said spouses the balance of Four. Thousand Pesos (P4,000.00) on or before September 15,1965; 4.

That the said spouses agrees to defend the said Atilano G. Jabil from other claims on the said property;

5. That the spouses agrees to sign a final deed of absolute sale in favor of Atilano G. Jabil over the abovementioned property upon the payment of the balance of Four Thousand Pesos. (Original Record, pp. 10-11) In their motion for reconsideration, petitioners reiterated their contention that the Deed of Sale (Exhibit "C") is a mere contract to sell and not an absolute sale; that the same is subject to two (2) positive suspensive conditions, namely: the payment of the balance of P4,000.00 on or before September 15,1965 and the immediate assumption of the mortgage of P12,000.00 with the First Insular Bank of Cebu. It is further contended that in said contract, title or ownership over the property was expressly reserved in the vendor, the Dignos spouses until the suspensive condition of full and punctual payment of the balance of the purchase price shall have been met. So that there is no actual sale until full payment is made (Rollo, pp. 51-52). In bolstering their contention that Exhibit "C" is merely a contract to sell, petitioners aver that there is absolutely nothing in Exhibit "C" that indicates that the vendors thereby sell, convey or transfer their ownership to the alleged vendee. Petitioners insist that Exhibit "C" (or 6) is a private instrument and the absence of a formal deed of conveyance is a very strong indication that the parties did not intend "transfer of ownership and title but only a transfer after full payment" (Rollo, p. 52). Moreover, petitioners anchored their contention on the very and conditions of the contract, more particularly paragraph four which reads, "that said spouses has agreed to sell the herein mentioned property to Atilano G. Jabil ..." and condition number five which reads, "that the spouses agrees to sign a final deed of absolute sale over the mentioned property upon the payment of the balance of four thousand pesos."

14 Such contention is untenable. By and large, the issues in this case have already been settled by this Court in analogous cases. Thus, it has been held that a deed of sale is absolute in nature although denominated as a "Deed of Conditional Sale" where nowhere in the contract in question is a proviso or stipulation to the effect that title to the property sold is reserved in the vendor until full payment of the purchase price, nor is there a stipulation giving the vendor the right to unilaterally rescind the contract the moment the vendee fails to pay within a fixed period Taguba v. Vda. de Leon, 132 SCRA 722; Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., 86 SCRA 305). A careful examination of the contract shows that there is no such stipulation reserving the title of the property on the vendors nor does it give them the right to unilaterally rescind the contract upon non-payment of the balance thereof within a fixed period. On the contrary, all the elements of a valid contract of sale under Article 1458 of the Civil Code, are present, such as: (1) consent or meeting of the minds; (2) determinate subject matter; and (3) price certain in money or its equivalent. In addition, Article 1477 of the same Code provides that "The ownership of the thing sold shall be transferred to the vendee upon actual or constructive delivery thereof." As applied in the case of Froilan v. Pan Oriental Shipping Co., et al. (12 SCRA 276), this Court held that in the absence of stipulation to the contrary, the ownership of the thing sold es to the vendee upon actual or constructive delivery thereof. While it may be conceded that there was no constructive delivery of the land sold in the case at bar, as subject Deed of Sale is a private instrument, it is beyond question that there was actual delivery thereof. As found by the trial court, the Dignos spouses delivered the possession of the land in question to Jabil as early as March 27,1965 so that the latter constructed thereon Sally's Beach Resort also known as Jabil's Beach Resort in March, 1965; Mactan White Beach Resort on January 15,1966 and Bevirlyn's Beach Resort on September 1, 1965. Such facts were itted by petitioner spouses (Decision, Civil Case No. 23-L; Record on Appeal, p. 108). Moreover, the Court of Appeals in its resolution dated December 16,1981 found that the acts of petitioners, contemporaneous with the contract, clearly show that an absolute deed of sale was intended by the parties and not a contract to sell. 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. II. Petitioners claim that when they sold the land to the Cabigas spouses, the contract of sale was already rescinded.

Applying the rationale of the case of Taguba v. Vda. de Leon (supra) which is on all fours with the case at bar, the contract of sale being absolute in nature is governed by Article 1592 of the Civil Code. It is undisputed that petitioners never notified private respondents Jabil by notarial act that they were rescinding the contract, and neither did they file a suit in court to rescind the sale. The most that they were able to show is a letter of Cipriano Amistad who, claiming to be an emissary of Jabil, informed the Dignos spouses not to go to the house of Jabil because the latter had no money and further advised petitioners to sell the land in litigation to another party (Record on Appeal, p. 23). As correctly found by the Court of Appeals, there is no showing that Amistad was properly authorized by Jabil to make such extra-judicial rescission for the latter who, on the contrary, vigorously denied having sent Amistad to tell petitioners that he was already waiving his rights to the land in question. Under Article 1358 of the Civil Code, it is required that acts and contracts which have for their object the extinguishment of real rights over immovable property must appear in a public document. Petitioners laid considerable emphasis on the fact that private respondent Jabil had no money on the stipulated date of payment on September 15,1965 and was able to raise the necessary amount only by mid-October 1965.

15 It has been ruled, however, that "where time is not of the essence of the agreement, a slight delay on the part of one party in the performance of his obligation is not a sufficient ground for the rescission of the agreement" (Taguba v. Vda. de Leon, supra). Considering that private respondent has only a balance of P4,000.00 and was delayed in payment only for one month, equity and justice mandate as in the aforecited case that Jabil be given an additional period within which to complete payment of the purchase price. WHEREFORE, the petition filed is hereby Dismissed for lack of merit and the assailed decision of the Court of Appeals is Affirmed in toto. SO ORDERED. G.R. No. 103577 October 7, 1996 ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL, ANNABELLE C. GONZALES (for herself and on behalf of Floraida C. Tupper, as attorney-in-fact), CIELITO A. CORONEL, FLORAIDA A. ALMONTE, and CATALINA BALAIS MABANAG, petitioners, vs. THE COURT OF APPEALS, CONCEPCION D. ALCARAZ and RAMONA PATRICIA ALCARAZ, assisted by GLORIA F. NOEL as attorney-in-fact, respondents. DECISION MELO, J.: The petition before us has its roots in a complaint for specific performance to compel herein petitioners (except the last named, Catalina Balais Mabanag) to consummate the sale of a parcel of land with its improvements located along Roosevelt Avenue in Quezon City entered into by the parties sometime in January 1985 for the price of P1,240,000.00. The undisputed facts of the case were summarized by respondent court in this wise: On January 19, 1985, defendants-appellants Romulo Coronel, et. al. (hereinafter referred to as Coronels) executed a document entitled Receipt of Down Payment (Exh. A) in favor of plaintiff Ramona Patricia Alcaraz (hereinafter referred to as Ramona) which is reproduced hereunder: RECEIPT OF DOWN PAYMENT P1,240,000.00 - Total amount 50,000.00 - Down payment -----------------------------------------P1,190,000.00 - Balance Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand Pesos purchase price of our inherited house and lot, covered by TCT No. 119627 of the Registry of Deeds of Quezon City, in the total amount of P1,240,000.00. We bind ourselves to effect the transfer in our names from our deceased father, Constancio P. Coronel, the transfer certificate of title immediately upon receipt of the down payment above-stated. On our presentation of the TCT already in or name, We will immediately execute the deed of absolute sale of said property and Miss Ramona Patricia Alcaraz shall immediately pay the balance of the P1,190,000.00. Clearly, the conditions appurtenant to the sale are the following: 1. Ramona will make a down payment of Fifty Thousand (P50,000.00) pesos upon execution of the document aforestated;

16 2. The Coronels will cause the transfer in their names of the title of the property ed in the name of their deceased father upon receipt of the Fifty Thousand (P50,000.00) Pesos down payment; 3. Upon the transfer in their names of the subject property, the Coronels will execute the deed of absolute sale in favor of Ramona and the latter will pay the former the whole balance of One Million One Hundred Ninety Thousand (P1,190,000.00) Pesos. On the same date (January 15, 1985), plaintiff-appellee Concepcion D. Alcaraz (hereinafter referred to as Concepcion), mother of Ramona, paid the down payment of Fifty Thousand (P50,000.00) Pesos (Exh. B, Exh. 2). On February 6, 1985, the property originally ed in the name of the Coronels father was transferred in their names under TCT No. 327043 (Exh. D; Exh 4) On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to intervenor-appellant Catalina B. Mabanag (hereinafter referred to as Catalina) for One Million Five Hundred Eighty Thousand (P1,580,000.00) Pesos after the latter has paid Three Hundred Thousand (P300,000.00) Pesos (Exhs. F-3; Exh. 6-C) For this reason, Coronels canceled and rescinded the contract (Exh. A) with Ramona by depositing the down payment paid by Concepcion in the bank in trust for Ramona Patricia Alcaraz. On February 22, 1985, Concepcion, et. al., filed a complaint for a specific performance against the Coronels and caused the annotation of a notice of lis pendens at the back of TCT No. 327403 (Exh. E; Exh. 5). On April 2, 1985, Catalina caused the annotation of a notice of adverse claim covering the same property with the Registry of Deeds of Quezon City (Exh. F; Exh. 6). On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject property in favor of Catalina (Exh. G; Exh. 7). On June 5, 1985, a new title over the subject property was issued in the name of Catalina under TCT No. 351582 (Exh. H; Exh. 8). (Rollo, pp. 134-136) In the course of the proceedings before the trial court (Branch 83, RTC, Quezon City) the parties agreed to submit the case for decision solely on the basis of documentary exhibits. Thus, plaintiffs therein (now private respondents) proffered their documentary evidence accordingly marked as Exhibits A through J, inclusive of their corresponding submarkings. Adopting these same exhibits as their own, then defendants (now petitioners) accordingly offered and marked them as Exhibits 1 through 10, likewise inclusive of their corresponding submarkings. Upon motion of the parties, the trial court gave them thirty (30) days within which to simultaneously submit their respective memoranda, and an additional 15 days within which to submit their corresponding comment or reply thereto, after which, the case would be deemed submitted for resolution. On April 14, 1988, the case was submitted for resolution before Judge Reynaldo Roura, who was then temporarily detailed to preside over Branch 82 of the RTC of Quezon City. On March 1, 1989, judgment was handed down by Judge Roura from his regular bench at Macabebe, Pampanga for the Quezon City branch, disposing as follows: WHEREFORE, judgment for specific performance is hereby rendered ordering defendant to execute in favor of plaintiffs a deed of absolute sale covering that parcel of land embraced in and covered by Transfer Certificate of Title No. 327403 (now TCT No. 331582) of the Registry of Deeds for Quezon City, together with all the improvements existing thereon free from all liens and encumbrances, and once accomplished, to immediately deliver the said document of sale to plaintiffs and upon receipt thereof, the plaintiffs are ordered to pay defendants the whole balance of the purchase price amounting to P1,190,000.00 in cash. Transfer Certificate of Title No. 331582 of the Registry of Deeds for Quezon City in the name of intervenor is hereby canceled and declared to be without force and effect. Defendants and intervenor and all other persons claiming under them are hereby ordered to vacate the subject property and deliver possession thereof to

17 plaintiffs. Plaintiffs claim for damages and attorneys fees, as well as the counterclaims of defendants and intervenors are hereby dismissed. No pronouncement as to costs. So Ordered. Macabebe, Pampanga for Quezon City, March 1, 1989. (Rollo, p. 106) A motion for reconsideration was filed by petitioners before the new presiding judge of the Quezon City RTC but the same was denied by Judge Estrella T. Estrada, thusly: The prayer contained in the instant motion, i.e., to annul the decision and to render anew decision by the undersigned Presiding Judge should be denied for the following reasons: (1) The instant case became submitted for decision as of April 14, 1988 when the parties terminated the presentation of their respective documentary evidence and when the Presiding Judge at that time was Judge Reynaldo Roura. The fact that they were allowed to file memoranda at some future date did not change the fact that the hearing of the case was terminated before Judge Roura and therefore the same should be submitted to him for decision; (2) When the defendants and intervenor did not object to the authority of Judge Reynaldo Roura to decide the case prior to the rendition of the decision, when they met for the first time before the undersigned Presiding Judge at the hearing of a pending incident in Civil Case No. Q-46145 on November 11, 1988, they were deemed to have acquiesced thereto and they are now estopped from questioning said authority of Judge Roura after they received the decision in question which happens to be adverse to them; (3) While it is true that Judge Reynaldo Roura was merely a Judge-on-detail at this Branch of the Court, he was in all respects the Presiding Judge with full authority to act on any pending incident submitted before this Court during his incumbency. When he returned to his Official Station at Macabebe, Pampanga, he did not lose his authority to decide or resolve cases submitted to him for decision or resolution because he continued as Judge of the Regional Trial Court and is of co-equal rank with the undersigned Presiding Judge. The standing rule and ed by jurisprudence is that a Judge to whom a case is submitted for decision has the authority to decide the case notwithstanding his transfer to another branch or region of the same court (Sec. 9, Rule 135, Rule of Court). Coming now to the twin prayer for reconsideration of the Decision dated March 1, 1989 rendered in the instant case, resolution of which now pertains to the undersigned Presiding Judge, after a meticulous examination of the documentary evidence presented by the parties, she is convinced that the Decision of March 1, 1989 is ed by evidence and, therefore, should not be disturbed. IN VIEW OF THE FOREGOING, the Motion for Reconsideration and/or to Annul Decision and Render Anew Decision by the Incumbent Presiding Judge dated March 20, 1989 is hereby DENIED. SO ORDERED. Quezon City, Philippines, July 12, 1989. (Rollo, pp. 108-109) Petitioners thereupon interposed an appeal, but on December 16, 1991, the Court of Appeals (Buena, Gonzaga-Reyes, Abad-Santos (P), JJ.) rendered its decision fully agreeing with the trial court. Hence, the instant petition which was filed on March 5, 1992. The last pleading, private respondents Reply Memorandum, was filed on September 15, 1993. The case was, however, re-raffled to undersigned ponente only on August 28, 1996, due to the voluntary inhibition of the Justice to whom the case was last assigned. While we deem it necessary to introduce certain refinements in the disquisition of respondent court in the affirmance of the trial courts decision, we definitely find the instant petition bereft of merit.

18 The heart of the controversy which is the ultimate key in the resolution of the other issues in the case at bar is the precise determination of the legal significance of the document entitled Receipt of Down Payment which was offered in evidence by both parties. There is no dispute as to the fact that the said document embodied the binding contract between Ramona Patricia Alcaraz on the one hand, and the heirs of Constancio P. Coronel on the other, pertaining to a particular house and lot covered by TCT No. 119627, as defined in Article 1305 of the Civil Code of the Philippines which reads as follows: Art. 1305. A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. While, it is the position of private respondents that the Receipt of Down Payment embodied a perfected contract of sale, which perforce, they seek to enforce by means of an action for specific performance, petitioners on their part insist that what the document signified was a mere executory contract to sell, subject to certain suspensive conditions, and because of the absence of Ramona P. Alcaraz, who left for the United States of America, said contract could not possibly ripen into a contract of absolute sale. Plainly, such variance in the contending parties contention is brought about by the way each interprets the and/or conditions set forth in said private instrument. Withal, based on whatever relevant and issible evidence may be available on record, this Court, as were the courts below, is now called upon to adjudge what the real intent of the parties was at the time the said document was executed. The Civil Code defines a contract of sale, thus: Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The essential elements of a contract of sale are the following: a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price; b) Determinate subject matter; and c) Price certain in money or its equivalent. Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the first essential element is lacking. In a contract to sell, the prospective seller explicitly reserves the transfer of title to the prospective buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership of the property subject of the contract to sell until the happening of an event, which for present purposes we shall take as the full payment of the purchase price. What the seller agrees or obliges himself to do is to fulfill his promise to sell the subject property when the entire amount of the purchase price is delivered to him. In other words the full payment of the purchase price partakes of a suspensive condition, the non-fulfillment of which prevents the obligation to sell from arising and thus, ownership is retained by the prospective seller without further remedies by the prospective buyer. In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court had occasion to rule: Hence, We hold that the contract between the petitioner and the respondent was a contract to sell where the ownership or title is retained by the seller and is not to until the full payment of the price, such payment being a positive suspensive condition and failure of which is not a breach, casual or serious, but simply an event that prevented the obligation of the vendor to convey title from acquiring binding force. Stated positively, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, the prospective sellers obligation to sell the subject property by entering into a contract of sale with the prospective buyer becomes demandable as provided in Article 1479 of the Civil Code which states: Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor of the promise is ed by a consideration distinct from the price.

19 A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase price. A contract to sell as defined hereinabove, may not even be considered as a conditional contract of sale where the seller may likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition, because in a conditional contract of sale, the first element of consent is present, although it is conditioned upon the happening of a contingent event which may or may not occur. If the suspensive condition is not fulfilled, the perfection of the contract of sale is completely abated (cf. Homesite and Housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). However, if the suspensive condition is fulfilled, the contract of sale is thereby perfected, such that if there had already been previous delivery of the property subject of the sale to the buyer, ownership thereto automatically transfers to the buyer by operation of law without any further act having to be performed by the seller. In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, ownership will not automatically transfer to the buyer although the property may have been previously delivered to him. The prospective seller still has to convey title to the prospective buyer by entering into a contract of absolute sale. It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases where the subject property is sold by the owner not to the party the seller contracted with, but to a third person, as in the case at bench. In a contract to sell, there being no previous sale of the property, a third person buying such property despite the fulfillment of the suspensive condition such as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the property. There is no double sale in such case. Title to the property will transfer to the buyer after registration because there is no defect in the ownersellers title per se, but the latter, of course, may be sued for damages by the intending buyer. In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale becomes absolute and this will definitely affect the sellers title thereto. In fact, if there had been previous delivery of the subject property, the sellers ownership or title to the property is automatically transferred to the buyer such that, the seller will no longer have any title to transfer to any third person. Applying Article 1544 of the Civil Code, such second buyer of the property who may have had actual or constructive knowledge of such defect in the sellers title, or at least was charged with the obligation to discover such defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first buyers title. In case a title is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the sale. With the above postulates as guidelines, we now proceed to the task of deciphering the real nature of the contract entered into by petitioners and private respondents. It is a canon in the interpretation of contracts that the words used therein should be given their natural and ordinary meaning unless a technical meaning was intended (Tan vs. Court of Appeals, 212 SCRA 586 [1992]). Thus, when petitioners declared in the said Receipt of Down Payment that they -Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand Pesos purchase price of our inherited house and lot, covered by TCT No. 1199627 of the Registry of Deeds of Quezon City, in the total amount of P1,240,000.00. without any reservation of title until full payment of the entire purchase price, the natural and ordinary idea conveyed is that they sold their property. When the Receipt of Down payment is considered in its entirety, it becomes more manifest that there was a clear intent on the part of petitioners to transfer title to the buyer, but since the transfer certificate of title was still in the name of petitioners father, they could not fully effect such transfer although the buyer was then willing and able to immediately pay the purchase price. Therefore, petitioners-sellers undertook upon receipt of the down payment from private respondent Ramona P. Alcaraz, to cause the issuance of a new certificate of title in their names from that of their father, after which,

20 they promised to present said title, now in their names, to the latter and to execute the deed of absolute sale whereupon, the latter shall, in turn, pay the entire balance of the purchase price. The agreement could not have been a contract to sell because the sellers herein made no express reservation of ownership or title to the subject parcel of land. Furthermore, the circumstance which prevented the parties from entering into an absolute contract of sale pertained to the sellers themselves (the certificate of title was not in their names) and not the full payment of the purchase price. Under the established facts and circumstances of the case, the Court may safely presume that, had the certificate of title been in the names of petitioners-sellers at that time, there would have been no reason why an absolute contract of sale could not have been executed and consummated right there and then. Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely promise to sell the property to private respondent upon the fulfillment of the suspensive condition. On the contrary, having already agreed to sell the subject property, they undertook to have the certificate of title change to their names and immediately thereafter, to execute the written deed of absolute sale. Thus, the parties did not merely enter into a contract to sell where the sellers, after compliance by the buyer with certain and conditions, promised to sell the property to the latter. What may be perceived from the respective undertakings of the parties to the contract is that petitioners had already agreed to sell the house and lot they inherited from their father, completely willing to transfer ownership of the subject house and lot to the buyer if the documents were then in order. It just so happened, however, that the transfer certificate of title was then still in the name of their father. It was more expedient to first effect the change in the certificate of title so as to bear their names. That is why they undertook to cause the issuance of a new transfer of the certificate of title in their names upon receipt of the down payment in the amount of P50,000.00. As soon as the new certificate of title is issued in their names, petitioners were committed to immediately execute the deed of absolute sale. Only then will the obligation of the buyer to pay the remainder of the purchase price arise. There is no doubt that unlike in a contract to sell which is most commonly entered into so as to protect the seller against a buyer who intends to buy the property in installment by withholding ownership over the property until the buyer effects full payment therefor, in the contract entered into in the case at bar, the sellers were the ones who were unable to enter into a contract of absolute sale by reason of the fact that the certificate of title to the property was still in the name of their father. It was the sellers in this case who, as it were, had the impediment which prevented, so to speak, the execution of an contract of absolute sale. What is clearly established by the plain language of the subject document is that when the said Receipt of Down Payment was prepared and signed by petitioners Romulo A. Coronel, et. al., the parties had agreed to a conditional contract of sale, consummation of which is subject only to the successful transfer of the certificate of title from the name of petitioners father, Constancio P. Coronel, to their names. The Court significantly notes that this suspensive condition was, in fact, fulfilled on February 6, 1985 (Exh. D; Exh. 4). Thus, on said date, the conditional contract of sale between petitioners and private respondent Ramona P. Alcaraz became obligatory, the only act required for the consummation thereof being the delivery of the property by means of the execution of the deed of absolute sale in a public instrument, which petitioners unequivocally committed themselves to do as evidenced by the Receipt of Down Payment. Article 1475, in correlation with Article 1181, both of the Civil Code, plainly applies to the case at bench. Thus, Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts. Art. 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition.

21 Since the condition contemplated by the parties which is the issuance of a certificate of title in petitioners names was fulfilled on February 6, 1985, the respective obligations of the parties under the contract of sale became mutually demandable, that is, petitioners, as sellers, were obliged to present the transfer certificate of title already in their names to private respondent Ramona P. Alcaraz, the buyer, and to immediately execute the deed of absolute sale, while the buyer on her part, was obliged to forthwith pay the balance of the purchase price amounting to P1,190,000.00. It is also significant to note that in the first paragraph in page 9 of their petition, petitioners conclusively itted that: 3. The petitioners-sellers Coronel bound themselves to effect the transfer in our names from our deceased father Constancio P. Coronel, the transfer certificate of title immediately upon receipt of the downpayment above-stated". The sale was still subject to this suspensive condition. (Emphasis supplied.) (Rollo, p. 16) Petitioners themselves recognized that they entered into a contract of sale subject to a suspensive condition. Only, they contend, continuing in the same paragraph, that: . . . Had petitioners-sellers not complied with this condition of first transferring the title to the property under their names, there could be no perfected contract of sale. (Emphasis supplied.) (Ibid.) not aware that they have set their own trap for themselves, for Article 1186 of the Civil Code expressly provides that: Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. Besides, it should be stressed and emphasized that what is more controlling than these mere hypothetical arguments is the fact that the condition herein referred to was actually and indisputably fulfilled on February 6, 1985, when a new title was issued in the names of petitioners as evidenced by TCT No. 327403 (Exh. D; Exh. 4). The inevitable conclusion is that on January 19, 1985, as evidenced by the document denominated as Receipt of Down Payment (Exh. A; Exh. 1), the parties entered into a contract of sale subject to the suspensive condition that the sellers shall effect the issuance of new certificate title from that of their fathers name to their names and that, on February 6, 1985, this condition was fulfilled (Exh. D; Exh. 4). We, therefore, hold that, in accordance with Article 1187 which pertinently provides Art. 1187. The effects of conditional obligation to give, once the condition has been fulfilled, shall retroact to the day of the constitution of the obligation . . . In obligations to do or not to do, the courts shall determine, in each case, the retroactive effect of the condition that has been complied with. the rights and obligations of the parties with respect to the perfected contract of sale became mutually due and demandable as of the time of fulfillment or occurrence of the suspensive condition on February 6, 1985. As of that point in time, reciprocal obligations of both seller and buyer arose. Petitioners also argue there could been no perfected contract on January 19, 1985 because they were then not yet the absolute owners of the inherited property. We cannot sustain this argument. Article 774 of the Civil Code defines Succession as a mode of transferring ownership as follows: Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and obligations to the extent and value of the inheritance of a person are transmitted through his death to another or others by his will or by operation of law.

22 Petitioners-sellers in the case at bar being the sons and daughters of the decedent Constancio P. Coronel are compulsory heirs who were called to succession by operation of law. Thus, at the point their father drew his last breath, petitioners stepped into his shoes insofar as the subject property is concerned, such that any rights or obligations pertaining thereto became binding and enforceable upon them. It is expressly provided that rights to the succession are transmitted from the moment of death of the decedent (Article 777, Civil Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]). Be it also noted that petitioners claim that succession may not be declared unless the creditors have been paid is rendered moot by the fact that they were able to effect the transfer of the title to the property from the decedents name to their names on February 6, 1985. Aside from this, petitioners are precluded from raising their supposed lack of capacity to enter into an agreement at that time and they cannot be allowed to now take a posture contrary to that which they took when they entered into the agreement with private respondent Ramona P. Alcaraz. The Civil Code expressly states that: Art. 1431. Through estoppel an ission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon. Having represented themselves as the true owners of the subject property at the time of sale, petitioners cannot claim now that they were not yet the absolute owners thereof at that time. Petitioners also contend that although there was in fact a perfected contract of sale between them and Ramona P. Alcaraz, the latter breach her reciprocal obligation when she rendered impossible the consummation thereof by going to the United States of America, without leaving her address, telephone number, and Special Power of Attorney (Paragraphs 14 and 15, Answer with Compulsory Counterclaim to the Amended Complaint, p. 2; Rollo, p. 43), for which reason, so petitioners conclude, they were correct in unilaterally rescinding the contract of sale. We do not agree with petitioners that there was a valid rescission of the contract of sale in the instant case. We note that these supposed grounds for petitioners rescission, are mere allegations found only in their responsive pleadings, which by express provision of the rules, are deemed controverted even if no reply is filed by the plaintiffs (Sec. 11, Rule 6, Revised Rules of Court). The records are absolutely bereft of any ing evidence to substantiate petitioners allegations. We have stressed time and again that allegations must be proven by sufficient evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882 [1961]; Recaro vs. Embisan, 2 SCRA 598 [1961]). Mere allegation is not an evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]). Even assuming arguendo that Ramona P. Alcaraz was in the United States of America on February 6, 1985, we cannot justify petitioners-sellers act of unilaterally and extrajudicially rescinding the contract of sale, there being no express stipulation authorizing the sellers to extrajudicially rescind the contract of sale. (cf. Dignos vs. CA, 158 SCRA 375 [1988]; Taguba vs. Vda. De Leon, 132 SCRA 722 [1984]) Moreover, petitioners are estopped from raising the alleged absence of Ramona P. Alcaraz because although the evidence on record shows that the sale was in the name of Ramona P. Alcaraz as the buyer, the sellers had been dealing with Concepcion D. Alcaraz, Ramonas mother, who had acted for and in behalf of her daughter, if not also in her own behalf. Indeed, the down payment was made by Concepcion D. Alcaraz with her own personal Check (Exh. B; Exh. 2) for and in behalf of Ramona P. Alcaraz. There is no evidence showing that petitioners ever questioned Concepcions authority to represent Ramona P. Alcaraz when they accepted her personal check. Neither did they raise any objection as regards payment being effected by a third person. Accordingly, as far as petitioners are concerned, the physical absence of Ramona P. Alcaraz is not a ground to rescind the contract of sale. Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her obligation to pay the full purchase price is concerned. Petitioners who are precluded from setting up the defense of the physical absence of Ramona P. Alcaraz as above-explained offered no proof whatsoever to show that they actually presented the new transfer certificate of title in their names and signified their willingness and readiness to execute the deed of absolute sale in accordance with their agreement. Ramonas corresponding obligation to pay the balance of the purchase price in the amount of P1,190,000.00 (as buyer) never became due and demandable and, therefore, she cannot be deemed to have been in default.

23 Article 1169 of the Civil Code defines when a party in a contract involving reciprocal obligations may be considered in default, to wit: Art. 1169. Those obliged to deliver or to do something, incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. xxx In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfill his obligation, delay by the other begins. (Emphasis supplied.) There is thus neither factual nor legal basis to rescind the contract of sale between petitioners and respondents. With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag, gave rise to a case of double sale where Article 1544 of the Civil Code will apply, to wit: Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof to the person who presents the oldest title, provided there is good faith. The record of the case shows that the Deed of Absolute Sale dated April 25, 1985 as proof of the second contract of sale was ed with the Registry of Deeds of Quezon City giving rise to the issuance of a new certificate of title in the name of Catalina B. Mabanag on June 5, 1985. Thus, the second paragraph of Article 1544 shall apply. The above-cited provision on double sale presumes title or ownership to to the buyer, the exceptions being: (a) when the second buyer, in good faith, s the sale ahead of the first buyer, and (b) should there be no inscription by either of the two buyers, when the second buyer, in good faith, acquires possession of the property ahead of the first buyer. Unless, the second buyer satisfies these requirements, title or ownership will not transfer to him to the prejudice of the first buyer. In his commentaries on the Civil Code, an accepted authority on the subject, now a distinguished member of the Court, Justice Jose C. Vitug, explains: The governing principle is prius tempore, potior jure (first in time, stronger in right). Knowledge by the first buyer of the second sale cannot defeat the first buyers rights except when the second buyer first s in good faith the second sale (Olivares vs. Gonzales, 159 SCRA 33). Conversely, knowledge gained by the second buyer of the first sale defeats his rights even if he is first to , since knowledge taints his registration with bad faith (see also Astorga vs. Court of Appeals, G.R. No. 58530, 26 December 1984). In Cruz vs. Cabana (G.R. No. 56232, 22 June 1984, 129 SCRA 656), it was held that it is essential, to merit the protection of Art. 1544, second paragraph, that the second realty buyer must act in good faith in ing his deed of sale (citing Carbonell vs. Court of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R. No. 95843, 02 September 1992). (J. Vitug, Compendium of Civil Law and Jurisprudence, 1993 Edition, p. 604). Petitioners point out that the notice of lis pendens in the case at bar was annotated on the title of the subject property only on February 22, 1985, whereas, the second sale between petitioners Coronels and petitioner Mabanag was supposedly perfected prior thereto or on February 18, 1985. The idea conveyed is that at the time petitioner Mabanag, the second buyer, bought the property under a clean title, she was unaware of any adverse claim or previous sale, for which reason she is a buyer in good faith. We are not persuaded by such argument.

24 In a case of double sale, what finds relevance and materiality is not whether or not the second buyer in good faith but whether or not said second buyer s such second sale in good faith, that is, without knowledge of any defect in the title of the property sold. As clearly borne out by the evidence in this case, petitioner Mabanag could not have in good faith, ed the sale entered into on February 18, 1985 because as early as February 22, 1985, a notice of lis pendens had been annotated on the transfer certificate of title in the names of petitioners, whereas petitioner Mabanag ed the said sale sometime in April, 1985. At the time of registration, therefore, petitioner Mabanag knew that the same property had already been previously sold to private respondents, or, at least, she was charged with knowledge that a previous buyer is claiming title to the same property. Petitioner Mabanag cannot close her eyes to the defect in petitioners title to the property at the time of the registration of the property. This Court had occasions to rule that: If a vendee in a double sale s the sale after he has acquired knowledge that there was a previous sale of the same property to a third party or that another person claims said property in a previous sale, the registration will constitute a registration in bad faith and will not confer upon him any right. (Salvoro vs. Tanega, 87 SCRA 349 [1978]; citing Palarca vs. Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43 Phil. 554; Fernandez vs. Mercader, 43 Phil. 581.) Thus, the sale of the subject parcel of land between petitioners and Ramona P. Alcaraz, perfected on February 6, 1985, prior to that between petitioners and Catalina B. Mabanag on February 18, 1985, was correctly upheld by both the courts below. Although there may be ample indications that there was in fact an agency between Ramona as principal and Concepcion, her mother, as agent insofar as the subject contract of sale is concerned, the issue of whether or not Concepcion was also acting in her own behalf as a co-buyer is not squarely raised in the instant petition, nor in such assumption disputed between mother and daughter. Thus, We will not touch this issue and no longer disturb the lower courts ruling on this point. WHEREFORE, premises considered, the instant petition is hereby DISMISSED and the appealed judgment AFFIRMED. SO ORDERED. Narvasa, C.J. (Chairman), Davide, Jr., and Francisco, JJ., concur. Panganiban, J., no part. G.R. No. 123672 December 14, 2005 FERNANDO CARRASCOSO, JR., Petitioner, vs.THE HONORABLE COURT OF APPEALS, LAURO LEVISTE, as Director and Minority Stockholder and On Behalf of Other Stockholders of El Dorado Plantation, Inc. and EL DORADO PLANTATION, INC., represented by one of its minority stockholders, Lauro P. Leviste, Respondents G.R. No. 164489 PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, Petitioner, vs. LAURO LEVISTE, as Director and Minority Stockholder and On Behalf of Other Stockholders of El Dorado Plantation, Inc., EL DORADO PLANTATION, INC., represented by Minority Stockholder, Lauro P. Leviste, and FERNANDO CARRASCOSO, JR., Respondents. DECISION CARPIO MORALES, J.: El Dorado Plantation, Inc. (El Dorado) was the ed owner of a parcel of land (the property) with an area of approximately 1,825 hectares covered by Transfer Certificate of Title (TCT) No. T-931 situated in Sablayan, Occidental Mindoro.

25 On February 15, 1972, at a special meeting of El Dorado’s Board of Directors, a Resolution2 was ed authorizing Feliciano Leviste, then President of El Dorado, to negotiate the sale of the property and sign all documents and contracts bearing thereon. On March 23, 1972, by a Deed of Sale of Real Property,3 El Dorado, through Feliciano Leviste, sold the property to Fernando O. Carrascoso, Jr. (Carrascoso). The pertinent provisions of the Deed of Sale read: NOW, THEREFORE, for and in consideration of the sum of ONE MILLION EIGHT HUNDRED THOUSAND (1,800,000.00) PESOS, Philippine Currency, the Vendor hereby sells, cedes, and transfer (sic) unto the herein VENDEE, his heirs, successors and assigns, the above-described property subject to the following and consitions (sic): 1. Of the said sum of P1,800,000.00 which constitutes the full consideration of this sale, P290,000.00 shall be paid, as it is hereby paid, to the Philippines (sic) National Bank, thereby effecting the release and cancellation fo (sic) the present mortgage over the above-described property. 2. That the sum of P210,000.00 shall be paid, as it is hereby paid by the VENDEE to the VENDOR, receipt of which amount is hereby acknowledged by the VENDOR. 3. The remaining balance of P1,300,000.00 plus interest thereon at the rate of 10% per annum shall be paid by the VENDEE to the VENDOR within a period of three (3) years, as follows:

(a) One (1) year from the date of the g of this agreement, the VENDEE shall pay to the VENDOR the sum of FIVE HUNDRED NINETEEN THOUSAND EIGHT HUNDRED THIRTY THREE & 33/100 (P519,833.33) PESOS. (b) Two (2) years from the date of g of this agreement, the VENDEE shall pay to the VENDOR the sum of FIVE HUNDRED NINETTEN (sic) THOUSAND EIGHT HUNDRED AND THIRTY-THREE & 33/100 (P519,833.33) PESOS. (c) Three (3) years from the date of g of this agreement, the VENDEE shall pay to the VENDOR the sum of FIVE Hundred NINETEEN THOUSAND EIGHT HUNDRED AND THIRTY-THREE & 33/100 (P519,833.33) PESOS. 4. The title of the property, subject of this agreement, shall and be transferred to the VENDEE who shall have full authority to the same and obtain the corresponding transfer certificate of title in his name. xxx 6. THE VENDOR certifies and warrants that the property above-described is not being cultivated by any tenant and is therefore not covered by the provisions of the Land Reform Code. If, therefore, the VENDEE becomes liable under the said law, the VENDOR shall reimburse the VENDEE for all expenses and damages he may incur thereon.4 (Underscoring supplied) From the above-quoted provisions of the Deed of Sale, Carrascoso was to pay the full amount of the purchase price on March 23, 1975. On even date, the Board of Directors of El Dorado ed a Resolution reading: "RESOLVED that by reason of the sale of that parcel of land covered by TCT No. T-93 to Dr. FERNANDO O. CARRASCOSO, JR., the corporation interposes no objection to the property being mortgage (sic) by Dr. FERNANDO O. CARRASCOSO, JR. to any bank of his choice as long as the balance on the Deed of Sale shall be recognized by Dr. FERNANDO O. CARRASCOSO, JR.; "RESOLVED, FURTHER, that the corporation authorizes the prefered (sic) claim on the property to be subordinated to any mortgage that may be constituted by Dr. FERNANDO O. CARRASCOSO, JR.;

26 "RESOLVED, FINALLY, that in case of any mortgage on the property, the corporation waives the preference of any vendor’s lien on the property."5 (Emphasis and underscoring supplied) Feliciano Leviste also executed the following affidavit on the same day: 1. That by reason of the sale of that parcel of land covered by Transfer Certificate of Title T-93 as evidenced by the Deed of Sale attached hereto as Annex "A" and made an integral part hereof, the El Dorado Plantation, Inc. has no objection to the aforementioned property being mortgaged by Dr. Fernando O. Carrascoso, Jr. to any bank of his choice, as long as the payment of the balance due the El Dorado Plantation, Inc. under the Deed of Sale, Annex "A" hereof, shall be recognized by the vendee therein, Dr. Fernando O. Carrascoso, Jr. though subordinated to the preferred claim of the mortgagee bank. 2. That in case of any mortgage on the property, the vendor hereby waives the preference of any vendor’s lien on the property, subject matter of the deed of sale. 3. That this affidavit is being executed to avoid any question on the authority of Dr. Fernando O. Carrascoso, Jr. to mortgage the property subject of the Deed of Sale, Annex "A" hereof, where the purchase price provided therein has not been fully paid. 4. That this affidavit has been executed pursuant to a board resolution of El Dorado Plantation, Inc.6 (Emphasis and underscoring supplied) On the following day, March 24, 1972, Carrascoso and his wife Marlene executed a Real Estate Mortgage7 over the property in favor of Home Savings Bank (HSB) to secure a loan in the amount of ₱1,000,000.00. Of this amount, ₱290,000.00 was paid to Philippine National Bank to release the mortgage priorly constituted on the property and ₱210,000.00 was paid to El Dorado pursuant to above-quoted paragraph Nos. 1 and 2 of the and conditions of the Deed of Sale.8 The March 23, 1972 Deed of Sale of Real Property was ed and annotated on El Dorado’s TCT No. T-93 as Entry No. 152409 on April 5, 1972. On even date, TCT No. T-93 covering the property was cancelled and TCT No. T-605510 was in its stead issued by the Registry of Deeds of Occidental Mindoro in the name of Carrascoso on which the real estate mortgage in favor of HSB was annotated as Entry No. 15242.11 On May 18, 1972, the real estate mortgage in favor of HSB was amended to include an additional three year loan of ₱70,000.00 as requested by the spouses Carrascoso.12 The Amendment of Real Estate Mortgage was also annotated on TCT No. T-6055 as Entry No. 15486 on May 24, 1972.13 The 3-year period for Carrascoso to fully pay for the property on March 23, 1975 ed without him having complied therewith. In the meantime, on July 11, 1975, Carrascoso and the Philippine Long Distance Telephone Company (PLDT), through its President Ramon Cojuangco, executed an Agreement to Buy and Sell14 whereby the former agreed to sell 1,000 hectares of the property to the latter at a consideration of ₱3,000.00 per hectare or a total of ₱3,000,000.00. The July 11, 1975 Agreement to Buy and Sell was not ed and annotated on Carrascoso’s TCT No. T-6055. Lauro Leviste (Lauro), a stockholder and member of the Board of Directors of El Dorado, through his counsel, Atty. Benjamin Aquino, by letter15 dated December 27, 1976, called the attention of the Board to Carrascoso’s failure to pay the balance of the purchase price of the property amounting to ₱1,300,000.00. And Lauro’s lawyer manifested that:

Because of the default for a long time of Mr. Carrascoso to pay the balance of the consideration of the sale, Don Lauro Leviste, in his behalf and in behalf of the other shareholders similarly situated like him, want a rescission of the sale made by the El Dorado Plantation, Inc. to Mr. Carrascoso. He desires that the Board of Directors take the corresponding action for rescission.16

27 Lauro’s desire to rescind the sale was reiterated in two other letters17 addressed to the Board dated January 20, 1977 and March 3, 1977. Jose P. Leviste, as President of El Dorado, later sent a letter of February 21, 197718 to Carrascoso informing him that in view of his failure to pay the balance of the purchase price of the property, El Dorado was seeking the rescission of the March 23, 1972 Deed of Sale of Real Property. The pertinent portions of the letter read: xxx I regret to inform you that the balance of P1,300,000.00 and the interest thereon have long been due and payable, although you have mortgaged said property with the Home Savings Bank for P1,000,000.00 on March 24, 1972, which was subsequently increased to P1,070,000.00 on May 18, 1972. You very well know that the El Dorado Plantation, Inc., is a close family corporation, owned exclusively by the of the Leviste family and I am one of the co-owners of the land. As nothing appears to have been done on your part after our numerous requests for payment of the said amount of P1,300,000.00 and the interest of 10% per annum due thereon, please be advised that we would like to rescind the contract of sale of the land.19 (Underscoring supplied) Jose Leviste, by letter20 dated March 10, 1977, informed Lauro’s counsel Atty. Aquino of his (Jose’s) February 21, 1977 letter to Carrascoso, he lamenting that "Carrascoso has not deemed it fit to give [his] letter the courtesy of a reply" and advis[ing] that some of the Directors of [El Dorado] could not see their way clear in complying with the demands of your client [Lauro] and have failed to reach a consensus to bring the corresponding action for rescission of the contract against . . . Carrascoso."21 Lauro and El Dorado finally filed on March 15, 1977 a complaint22 for rescission of the March 23, 1972 Deed of Sale of Real Property between El Dorado and Carrascoso with damages before the Court of First Instance (CFI) of Occidental Mindoro, docketed as Civil Case No. R-226. Lauro and El Dorado also sought the cancellation of TCT No. T-6055 in the name of Carrascoso and the revival of TCT No. T-93 in the name of El Dorado, free from any liens and encumbrances. Furthermore, the two prayed for the issuance of an order for Carrascoso to: (1) reconvey the property to El Dorado upon return to him of ₱500,000.00, (2) secure a discharge of the real estate mortgage constituted on the property from HSB, (3) submit an ing of the fruits of the property from March 23, 1972 up to the return of possession of the land to El Dorado, (4) turn over said fruits or the equivalent value thereof to El Dorado and (5) pay the amount of ₱100,000.00 for attorney’s fees and other damages.23

Also on March 15, 1977, Lauro and El Dorado caused to be annotated on TCT No. T-6055 a Notice of Lis Pendens, inscribed as Entry No. 39737.24 In the meantime, Carrascoso, as vendor and PLDT, as vendee forged on April 6, 1977 a Deed of Absolute Sale25 over the 1,000 hectare portion of the property subject of their July 11, 1975 Agreement to Buy and Sell. The pertinent portions of the Deed are as follows: WHEREAS, the VENDOR and the VENDEE entered into an agreement To Buy and Sell on July 11, 1975, which is made a part hereof by reference; WHEREAS, the VENDOR and the VENDEE are now decided to execute the Deed of Absolute Sale referred to in the aforementioned agreement to Buy and Sell; WHEREFORE, for and in consideration of the foregoing premises and the hereunder stated, the VENDOR and the VENDEE have agreed as follows: 1. For and in consideration of the sum of THREE MILLION PESOS (P3,000,000.00), Philippine currency, of which ONE HUNDRED TWENTY THOUSAND PESOS P120,000.00 have (sic) already been received by the VENDOR, the VENDOR

28 hereby sells, transfers and conveys unto the VENDEE one thousand hectares (1,000 has.) of his parcel of land covered by T.C.T. No. T-6055 of the Registry of Deeds of Mindoro, delineated as Lot No. 3-B-1 in the subdivision survey plan xxx 2. The VENDEE shall pay to the VENDOR upon the g of this agreement, the sum of TWO MILLION FIVE HUNDRED THOUSAND PESOS (P2,500,000.00) in the following manner: a) The sum of TWO MILLION THREE HUNDRED THOUSAND PESOS (P2,300,000.00) to Home Savings Bank in full payment of the VENDOR’s mortgaged obligation therewith; b) The sum of TWO HUNDRED THOUSAND PESOS (P200,000.00) to VENDOR; The remaining balance of the purchase price in the sum of THREE HUNDRED EIGHTY THOUSAND PESOS (P380,000.00), less such expenses which may be advanced by the VENDEE but which are for the of the VENDOR under Paragraph 6 of the Agreement to Buy and Sell, shall be paid by the VENDEE to the VENDOR upon issuance of title to the VENDEE.26 (Underscoring supplied) In turn, PLDT, by Deed of Absolute Sale27 dated May 30, 1977, conveyed the aforesaid 1,000 hectare portion of the property to its subsidiary, PLDT Agricultural Corporation (PLDTAC), for a consideration of ₱3,000,000.00, the amount of ₱2,620,000.00 of which was payable to PLDT upon g of said Deed, and ₱380,000.00 to Carrascoso upon issuance of title to PLDTAC. In the meantime, on October 19, 1977, the El Dorado Board of Directors, by a special meeting,28 adopted and approved a Resolution ratifying and conferring "the prosecution of Civil Case No. R-226 of the Court of First Instance of Occidental Mindoro, entitled ‘Lauro P. Leviste vs. Fernando Carascoso (sic), etc.’ initiated by stockholder Mr. Lauro P. Leviste."29 In his Answer with Compulsory Counterclaim,30 Carrascoso alleged that: (1) he had not paid his remaining ₱1,300,000.00 obligation under the March 23, 1972 Deed of Sale of Real Property in view of the extensions of time to comply therewith granted him by El Dorado; (2) the complaint suffered from fatal defects, there being no showing of compliance with the condition precedent of exhaustion of intra-corporate remedies and the requirement that a derivative suit instituted by a complaining stockholder be verified under oath; (3) El Dorado committed a gross misrepresentation when it warranted that the property was not being cultivated by any tenant to take it out of the coverage of the Land Reform Code; and (4) he suffered damages due to the premature filing of the complaint for which Lauro and El Dorado must be held liable. On February 21, 1978, the April 6, 1977 and May 30, 1977 Deeds of Absolute Sale and the respective Articles of Incorporation of PLDT and PLDTAC were annotated on TCT No. T-6055 as Entry Nos. 24770,31 42774,32 4276933 and 24772,34 respectively. On even date, Carrascoso’s TCT No. T-6055 was cancelled and TCT No. T-1248035 covering the 1,000 hectare portion of the property was issued in the name of PLDTAC. The March 15, 1977 Notice of Lis Pendens was carried over to TCT No. T-12480. On July 31, 1978, PLDT and PLDTAC filed an Urgent Motion for Intervention36 which was granted by the trial court by Order37 of September 7, 1978. PLDT and PLDTAC thereupon filed their Answer In Intervention with Compulsory Counterclaim and Crossclaim38 against Carrascoso on November 13, 1978, alleging that: (1) when Carrascoso executed the April 6, 1977 Deed of Absolute Sale in favor of PLDT, PLDT was not aware of any litigation involving the 1,000 hectare portion of the property or of any flaw in his title, (2) PLDT is a purchaser in good faith and for value; (3) when PLDT executed the May 30, 1977 Deed of Absolute Sale in favor of PLDTAC, they had no knowledge of any pending litigation over the property and neither were they aware that a notice of lis pendens had been annotated on Carrascoso’s title; and (4) Lauro and El Dorado knew of the sale by Carrascoso to PLDT and PLDT’s actual possession of the 1,000 hectare portion of the property since June 30, 1975 and of its exercise of exclusive rights of ownership thereon through agricultural development.39 By Decision40 of January 28, 1991, Branch 45 of the San Jose Occidental Mindoro Regional Trial Court to which the CFI has been renamed, dismissed the complaint on the ground of prematurity, disposing as follows, quoted verbatim: WHEREFORE, in view of all the foregoing considerations, judgment is hereby rendered:

29 1. Dismissing the plaintiffs’ complaint against the defendant on the ground of prematurity; 2. Ordering the plaintiffs to pay to the defendant the sum of P2,980,000.00 as actual and compensatory damages, as well as the sum of P100,000.00 as and for attorneys fees; provided, however, that the aforesaid amounts must first be set off from the latter’s unpaid balance to the former; 3. Dismissing the defendants-intervenors’ counterclaim and cross-claim; and

4. Ordering the plaintiffs to pay to (sic) the costs of suit. SO ORDERED.41 (Underscoring supplied) Carrascoso, PLDT and PLDTAC filed their respective appeals to the Court of Appeals. By Decision42 of January 31, 1996, the appellate court reversed the decision of the trial court, disposing as follows, quoted verbatim: WHEREFORE, not being meritorious, PLDT’s/PLDTAC’s appeal is hereby DISMISSED and finding El Dorado’s appeal to be impressed with merit, We REVERSE the appealed Decision and render the following judgment: 1. The Deed of Sale of Real Property (Exhibit C) is hereby rescinded and TCT No. T-12480 (Exhibit Q) is cancelled while TCT No. T-93 (Exhibit A), is reactivated. 2. Fernando Carrascoso, Jr. is commanded to: 2.1. return the possession of the 825 [hectare-] remaining portion of the land to El Dorado Plantation, Inc. without prejudice to the landholdings of legitimate tenants thereon; 2.2. return the net fruits of the land to El Dorado Plantation, Inc. from March 23, 1972 to July 11, 1975, and of the 825hectare-remaining portion minus the tenants’ landholdings, from July 11, 1975 up to its delivery to El Dorado Plantation, Inc. including whatever he may have received from the tenants if any by way of compensation under the Operation Land Transfer or under any other pertinent agrarian law; 2.3 Pay El Dorado Plantation, Inc. an attorney’s fee of P20,000.00 and litigation expenses of P30,000.00; 2.4 Return to Philippine Long Distance Telephone Company/PLDT Agricultural Corporation P3,000,000.00 plus legal interest from April 6, 1977 until fully paid; 3. PLDT Agricultural Corporation is ordered to surrender the possession of the 1000-hectare Farm to El Dorado Plantation, Inc.; 4. El Dorado Plantation, Inc. is directed to return the P500,000.00 to Fernando Carrascoso, Jr. plus legal interest from March 23, 1972 until fully paid. The performance of this obligation will however await the full compliance by Fernando Carrascoso, Jr. of his obligation to for and deliver the net fruits of the land mentioned above to El Dorado Plantation, Inc. 5. To comply with paragraph 2.2 herein, Carrascoso is directed to submit in (sic) the court a quo a full ing of the fruits of the land during the period mentioned above for the latter’s approval, after which the net fruits shall be delivered to El Dorado, Plantation, Inc.

6. El Dorado Plantation, Inc. should inform Philippine Long Distance Telephone Co. and PLDT Agricultural Corporation in writing within ten (10) days after finality of this decision regarding the exercise of its option under Art. 448 of the Civil Code.

30 SO ORDERED.43 (Underscoring supplied) PLDT and PLDTAC filed on February 22, 1996, a Motion for Reconsideration44 of the January 31, 1996 CA Decision, while Carrascoso went up this Court by filing on March 25, 1996 a petition for review,45 docketed as G.R. No. 123672, assailing the January 31, 1996 CA Decision and seeking the reinstatement of the January 28, 1991 Decision of the trial court except with respect to its finding that the acquisition of PLDT and PLDTAC of the 1,000 hectare portion of the property was subject to the notice of lis pendens. Lauro, in the meantime, died, hence, on April 16, 1996, a Motion for Substitution of Party46 was filed praying that his heirs, represented by Conrad C. Leviste, be substituted as respondents. The Motion was granted by Resolution47 of July 10, 1996. PLDT and PLDTAC filed their Comment48 to Carrascoso’s petition and prayed that judgment be rendered finding them to be purchasers in good faith to thus entitle them to possession and ownership of the 1,000 hectare portion of the property, together with all the improvements they built thereon. Reiterating that they were not purchasers pendente lite, they averred that El Dorado and Lauro had actual knowledge of their interests in the said portion of the property prior to the annotation of the notice of lis pendens to thereby render said notice ineffective. El Dorado and the heirs of Lauro, both represented by Conrad C. Leviste, also filed their Comment49 to Carrascoso’s petition, praying that it be dismissed for lack of merit and that paragraph 6 of the dispositive portion of the January 31, 1996 CA Decision be modified to read as follows: 6. El Dorado Plantation, Inc. should inform Philippine Long Distance Telephone Co. and PLDT Agricultural Corporation in writing within ten (10) days after finality of this decision regarding the exercise of its option under Arts. 449 and 450 of the Civil Code, without right to indemnity on the part of the latter should the former decide to keep the improvements under Article 449.50 (Underscoring supplied) Carrascoso filed on November 13, 1996 his Reply51 to the Comment of El Dorado and the heirs of Lauro. In the meantime, as the February 22, 1996 Motion for Reconsideration filed by PLDT and PLDTAC of the CA decision had remained unresolved, this Court, by Resolution52 of June 30, 2003, directed the appellate court to resolve the same. By Resolution53 of July 8, 2004, the CA denied PLDT and PLDTAC’s Motion for Reconsideration for lack of merit.

PLDT54 thereupon filed on September 2, 2004 a petition for review55 before this Court, docketed as G.R. No. 164489, seeking to reverse and set aside the January 31, 1996 Decision and the July 8, 2004 Resolution of the appellate court. It prayed that judgment be rendered upholding its right, interest and title to the 1,000 hectare portion of the property and that it and its successors-in-interest be declared owners and legal possessors thereof, together with all improvements built, sown and planted thereon. By Resolution56 of August 25, 2004, G.R. No. 164489 was consolidated with G.R. No. 123672. In his petition, Carrascoso faults the CA as follows: I THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION AND COMMITTED A MISTAKE OF LAW IN NOT DECLARING THAT THE ACTION FOR RESCISSION WAS PREMATURELY FILED. II THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION AND COMMITTED A MISTAKE OF LAW IN DISREGARDING THE CRUCIAL SIGNIFICANCE OF THE WARRANTY OF NON-TENANCY EXPRESSLY STIPULATED IN THE CONTRACT OF SALE.

31 III THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION IN REVERSING THE DECISION OF THE TRIAL COURT.57 (Underscoring supplied) PLDT, on the other hand, faults the CA as follows: I THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN HOLDING THAT PETITIONER AND PLTAC (sic) TOOK THEIR RIGHT, INTEREST AND TITLE TO THE FARM SUBJECT TO THE NOTICE OF LIS PENDENS, THE SAME IN DISREGARD OF THE PROTECTION ACCORDED THEM UNDER ARTICLES 1181 AND 1187 OF THE NEW CIVIL CODE. II THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN HOLDING THAT PETITIONER AND PLDTAC TOOK THEIR RIGHT, INTEREST AND TITLE TO THE FARM SUBJECT TO THE NOTICE OF LIS PENDENS, THE SAME IN DISREGARD OF THE LEGAL PRINCIPLE THAT RESPONDENTS EL DORADO ET AL.’s PRIOR, ACTUAL KNOWLEDGE OF PETITIONER PLDT’S AGREEMENT TO BUY AND SELL WITH RESPONDENT CARRASCOSO RESULTING IN THE DELIVERY TO, AND POSSESSION, OCCUPATION AND DEVELOPMENT BY, SAID PETITIONER OF THE FARM, IS EQUIVALENT TO REGISTRATION OF SUCH RIGHT, INTEREST AND TITLE AND, THEREFORE, A PRIOR REGISTRATION NOT AFFECTED BY THE LATER NOTICE OF LIS PENDENS.58 (Underscoring supplied)

Carrascoso posits that in the El Dorado Board Resolution and the Affidavit of Feliciano Leviste, both dated March 23, 1972, no objection was interposed to his mortgaging of the property to any bank provided that the balance of the purchase price of the property under the March 23, 1972 Deed of Sale of Real Property is recognized, hence, El Dorado could collect the unpaid balance of ₱1,300,000.00 only after the mortgage in favor of HSB is paid in full; and the filing of the complaint for rescission with damages on March 15, 1977 was premature as he fully paid his obligation to HSB only on April 5, 1977 as evidenced by the Cancellation of Mortgage59 signed by HSB President Gregorio B. Licaros. Carrascoso further posits that extensions of the period to pay El Dorado were verbally accorded him by El Dorado’s directors and officers, particularly Jose and Angel Leviste. Article 1191 of the Civil Code provides: Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period. This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with Articles 1385 and 1388 and the Mortgage Law. Reciprocal obligations are those which arise from the same cause, and in which each party is a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of the other.60 They are to be performed simultaneously such that the performance of one is conditioned upon the simultaneous fulfillment of the other.61 The right of rescission of a party to an obligation under Article 1191 is predicated on a breach of faith by the other party who violates the reciprocity between them.62

32 A contract of sale is a reciprocal obligation. The seller obligates itself to transfer the ownership of and deliver a determinate thing, and the buyer obligates itself to pay therefor a price certain in money or its equivalent.63 The nonpayment of the price by the buyer is a resolutory condition which extinguishes the transaction that for a time existed, and discharges the obligations created thereunder.64 Such failure to pay the price in the manner prescribed by the contract of sale entitles the unpaid seller to sue for collection or to rescind the contract.65 In the case at bar, El Dorado already performed its obligation through the execution of the March 23, 1972 Deed of Sale of Real Property which effectively transferred ownership of the property to Carrascoso. The latter, on the other hand, failed to perform his correlative obligation of paying in full the contract price in the manner and within the period agreed upon.

The of the Deed are clear and unequivocal: Carrascoso was to pay the balance of the purchase price of the property amounting to ₱1,300,000.00 plus interest thereon at the rate of 10% per annum within a period of three (3) years from the g of the contract on March 23, 1972. When Jose Leviste informed him that El Dorado was seeking rescission of the contract by letter of February 21, 1977, the period given to him within which to fully satisfy his obligation had long lapsed. The El Dorado Board Resolution and the Affidavit of Jose Leviste interposing no objection to Carrascoso’s mortgaging of the property to any bank did not have the effect of suspending the period to fully pay the purchase price, as expressly stipulated in the Deed, pending full payment of any mortgage obligation of Carrascoso. As the CA correctly found: The adverted resolution (Exhibit 2) does not say that the obligation of Carrascoso to pay the balance was extended. Neither can We see in it anything that can logically infer said accommodation. A partially unpaid seller can agree to the buyer’s mortgaging the subject of the sale without changing the time fixed for the payment of the balance of the price. The two agreements are not incompatible with each other such that when one is to be implemented, the other has to be suspended. In the case at bench, there was no impediment for Carrascoso to pay the balance of the price after mortgaging the land. Also, El Dorado’s subordinating its "preferred claim" or waiving its superior "vendor’s lien" over the land in favor of the mortgagee of said property only means that in a situation where the unpaid price of the Land and loan secured by the mortgage over the Land both become due and demandable, the mortgagee shall have precedence in going after the Land for the satisfaction of the loan. Such accommodations do not necessarily imply the modification of the period fixed in the contract of sale for the payment by Carrascoso of the balance. The palpable purpose of El Dorado in not raising any objection to Carrascoso’s mortgaging the land was to eliminate any legal impediment to such a contract. That was so succinctly expressed in the Affidavit (Exhibit 2-A) of President Feleciano (sic) Leviste. El Dorado’s yielding its "superior lien" over the land in favor of the mortgagee was plainly intended to overcome the natural reluctance of lending institutions to accept a land whose price has not yet been fully paid as collateral of a loan.66 (Underscoring supplied) Respecting Carrascoso’s insistence that he was granted verbal extensions within which to pay the balance of the purchase price of the property by El Dorado’s directors and officers Jose and Angel Leviste, this Court finds the same unsubstantiated by the evidence on record. It bears recalling that Jose Leviste wrote Carrascoso, by letter of February 21, 1977, calling his attention to his failure to comply, despite "numerous" requests, with his obligation to pay the amount of ₱1,300,000.00 and 10% annual interest thereon, and advising him that "we would like to rescind the contract of sale." This letter reiterated the term of payment agreed upon in the March 23, 1972 Deed of Sale of Real Property and Carrascosos’s non-compliance therewith. Carrascoso, harping on Jose Leviste’s March 10, 1977 letter to Lauro’s counsel wherein he (Jose Leviste) stated that "some of the Directors of the corporation could not see their way clear in complying with the demands of [Lauro] and have failed to reach a consensus to bring the corresponding action for rescission of the contract against Dr. Fernando

33 Carrascoso," argues that the extensions priorly given to him "no doubt lead to the logical conclusion on some of the directors’ inability to file suit against him."67 The argument is specious. As the CA found, even if some officers of El Dorado were initially reluctant to file suit against him, the same should not be interpreted to mean that this was brought about by a prior extension of the period to pay the balance of the purchase price of the property as such reluctance could have been due to a myriad of reasons totally unrelated to the period of payment of the balance. The bottomline however is, if El Dorado really intended to extend the period of payment of the balance there was absolutely no reason why it did not do it in writing in clear and unmistakable . That there is no such writing negates all the speculations of the court a quo and pretensions of Carrascoso. xxx The unalterable fact here remains that on March 23, 1973, with or without demand, the obligation of Carrascoso to pay P519,933.33 became due. The same was true on March 23, 1974 and on March 23, 1975 for equal amounts. Since he did not perform his obligation under the contract of sale, he, therefore, breached it. Having breached the contract, El Dorado’s cause of action for rescission of that contract arose.68 (Underscoring supplied) Carrascoso goes on to argue that the appellate court erred in ignoring the import of the warranty of non-tenancy expressly stipulated in the March 23, 1972 Deed of Sale of Real Property. He alleges that on March 8, 1972 or two weeks prior to the execution of the Deed of Sale, he discovered, while inspecting the property on board a helicopter, that there were people and cattle in the area; when he confronted El Dorado about it, he was told that the occupants were caretakers of cattle who would soon leave;69 four months after the execution of the Deed of Sale, upon inquiry with the Bureau of Lands and the Bureau of Soils, he was informed that there were people claiming to be tenants in certain portions of the property;70 and he thus brought the matter again to El Dorado which informed him that the occupants were not tenants but squatters.71 Carrascoso now alleges that as a result of what he concludes to be a breach of the warranty of non-tenancy committed by El Dorado, he incurred expenses in the amount of ₱2,890,000.00 for which he should be reimbursed, his unpaid obligation to El Dorado amounting to ₱1,300,000.00 to be deducted therefrom.72 The breach of an express warranty makes the seller liable for damages.73 The following requisites must be established in order that there be an express warranty in a contract of sale: (1) the express warranty must be an affirmation of fact or any promise by the seller relating to the subject matter of the sale; (2) the natural tendency of such affirmation or promise is to induce the buyer to purchase the thing; and (3) the buyer purchases the thing relying on such affirmation or promise thereon.74 Under the March 23, 1972 Deed of Sale of Real Property, El Dorado warranted that the property was not being cultivated by any tenant and was, and therefore, not covered by the provisions of the Land Reform Code. If Carrascoso would become liable under the said law, he would be reimbursed for all expenses and damages incurred thereon. Carrascoso claims to have incurred expenses in relocating persons found on the property four months after the execution of the Deed of Sale. Apart from such bare claim, the records are bereft of any proof that those persons were indeed tenants.75 The fact of tenancy76 not having been priorly established,77 El Dorado may not be held liable for actual damages. Carrascoso further argues that both the trial and appellate courts erred in holding that the sale of the 1,000 hectare portion of the property to PLDT, as well as its subsequent sale to PLDTAC, is subject to the March 15, 1977 Notice of Lis Pendens. PLDT additionally argues that the CA incorrectly ignored the Agreement to Buy and Sell which it entered into with Carrascoso on July 11, 1975, positing that the efficacy of its purchase from Carrascoso, upon his fulfillment of the condition it imposed resulting in its decision to formalize their transaction and execute the April 6, 1977 Deed of Sale, retroacted to July 11, 1975 or before the annotation of the Notice of Lis Pendens.78

34 The pertinent portions of the July 11, 1975 Agreement to Buy and Sell between PLDT and Carrascoso read: 2. That the VENDOR hereby agrees to sell to the VENDEE and the latter hereby agrees to purchase from the former, 1,000 hectares of the above-described parcel of land as shown in the map hereto attached as Annex "A" and made an integral part hereof and as hereafter to be more particularly determined by the survey to be conducted by Certeza & Co., at the purchase price of P3,000.00 per hectare or for a total consideration of Three Million Pesos (P3,000,000.00) payable in cash. 3. That this contract shall be considered rescinded and cancelled and of no further force and effect, upon failure of the VENDOR to clear the aforementioned 1,000 hectares of land of all the occupants therein located, within a period of one (1) year from the date of execution of this Agreement. However, the VENDEE shall have the option to extend the life of this Agreement by another six months, during which period the VENDEE shall definitely inform the VENDOR of its decision on whether or not to finalize the deed of absolute sale for the aforementioned 1,000 hectares of land. The VENDOR agrees that the amount of P500.00 per family within the aforementioned 1,000 hectares of land shall be spent by him for relocation purposes, which amount however shall be advanced by the VENDEE and which shall not exceed the total amount of P120,000.00, the same to be thereafter deducted by the VENDEE from the aforementioned purchase price of P3,000,000.00.

The aforementioned advance of P120,000.00 shall be remitted by the VENDEE to the VENDOR upon the g of this Agreement. xxx It is likewise further agreed that the VENDEE shall have the right to enter into any part of the aforementioned 1,000 hectares at any time within the period of this Agreement for purposes of commencing the development of the same. xxx 5. Title to the aforementioned land shall also be cleared of all liens or encumbrances and if there are any unpaid taxes, existing mortgages, liens and encumbrances on the land, the payments to be made by the VENDEE to the VENDOR of the purchase price shall first be applied to liquidate said mortgages, liens and/or encumbrances, such that said payments shall be made directly to the corresponding creditors. Thus, the balance of the purchase price will be paid to the VENDOR after the title to the land is cleared of all such liens and encumbrances. xxx 7. The VENDOR agrees that, during the existence of this Agreement and without the previous written permission from the VENDEE, he shall not sell, cede, assign and/or transfer the parcel of land subject of this Agreement.79 A notice of lis pendens is an announcement to the whole world that a particular real property is in litigation, and serves as a warning that one who acquires an interest over said property does so at his own risk, or that he gambles on the result of the litigation over said property.80 Once a notice of lis pendens has been duly ed, any cancellation or issuance of title over the land involved as well as any subsequent transaction affecting the same would have to be subject to the outcome of the suit. In other words, a purchaser who buys ed land with full notice of the fact that it is in litigation between the vendor and a third party stands in the shoes of his vendor and his title is subject to the incidents and result of the pending litigation.81 x x x Notice of lis pendens has been conceived and, more often than not, availed of, to protect the real rights of the registrant while the case involving such rights is pending resolution or decision. With the notice of lis pendens duly recorded, and while it remains uncancelled, the registrant could rest secure that he would not lose the property or any part of it during the litigation.

35 The filing of a notice of lis pendens in effect (1) keeps the subject matter of litigation within the power of the court until the entry of the final judgment so as to prevent the defeat of the latter by successive alienations; and (2) binds a purchaser of the land subject of the litigation to the judgment or decree that will be promulgated thereon whether such a purchaser is a bona fide purchaser or not; but (3) does not create a non-existent right or lien. The doctrine of lis pendens is founded upon reason of public policy and necessity, the purpose of which is to keep the subject matter of the litigation within the power of the court until the judgment or decree shall have been entered; otherwise by successive alienations pending the litigation, its judgment or decree shall be rendered abortive and impossible of execution. The doctrine of lis pendens is based on considerations of public policy and convenience, which forbid a litigant to give rights to others, pending the litigation, so as to affect the proceedings of the court then progressing to enforce those rights, the rule being necessary to the istration of justice in order that decisions in pending suits may be binding and may be given full effect, by keeping the subject matter in controversy within the power of the court until final adjudication, that there may be an end to litigation, and to preserve the property that the purpose of the pending suit may not be defeated by successive alienations and transfers of title.82 (Italics in the original) In ruling against PLDT and PLDTAC, the appellate court held: PLDT and PLDTAC argue that in reality the Farm was bought by the former on July 11, 1975 when Carrascoso and it entered into the Agreement to Buy and Sell (Exhibit 15). How can an agreement to buy and sell which is a preparatory contract be the same as a contract of sale which is a principal contract? If PLDT’s contention is correct that it bought the Farm on July 11, 1975, why did it buy the same property again on April 6, 1977? There is simply no way PLDT and PLDTAC can extricate themselves from the effects of said Notice of Lis Pendens. It is itted that PLDT took possession of the Farm on July 11, 1975 after the execution of the Agreement to Buy and Sell but it did so not as owner but as prospective buyer of the property. As prospective buyer which had actual on (sic) constructive notice of the lis pendens, why did it pursue and go through with the sale if it had not been willing to gamble with the result of this case?83 (Underscoring supplied) Further, in its July 8, 2004 Resolution, the CA held: PLDT cannot shield itself from the notice of lis pendens because all that it had at the time of its inscription was an Agreement to Buy and Sell with CARRASCOSO, which in effect is a mere contract to sell that did not to it the ownership of the property. xxx Ownership was retained by CARRASCOSO which EL DORADO may very well recover through its action for rescission. xxx PLDT’s possession at the time the notice of lis pendens was ed not being a legal possession based on ownership but a mere possession in fact and the Agreement to Buy and Sell under which it supposedly took possession not being ed, it is not protected from an adverse judgment that may be rendered in the case subject of the notice of lis pendens.84 (Underscoring supplied)

In a contract of sale, the title es to the vendee upon the delivery of the thing sold; whereas in a contract to sell, ownership is not transferred upon delivery of the property but upon full payment of the purchase price.85 In the former, the vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded; whereas in the latter, title is retained by the vendor until the full payment of the price, such payment being a positive suspensive condition and failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective.86 PLDT argues that the July 11, 1975 Agreement to Buy and Sell is a conditional contract of sale, thus calling for the application of Articles 118187 and 118788 of the Civil Code as held in Coronel v. Court of Appeals.89

36 The Court is not persuaded. For in a conditional contract of sale, if the suspensive condition is fulfilled, the contract of sale is thereby perfected, such that if there had already been previous delivery of the property subject of the sale to the buyer, ownership thereto automatically transfers to the buyer by operation of law without any further act having to be performed by the seller.90 Whereas in a contract to sell, upon fulfillment of the suspensive condition, ownership will not automatically transfer to the buyer although the property may have been previously delivered to him. The prospective seller still has to convey title to the prospective buyer by entering into a contract of absolute sale.91 A perusal of the contract92 adverted to in Coronel reveals marked differences from the Agreement to Buy and Sell in the case at bar. In the Coronel contract, there was a clear intent on the part of the therein petitioners-sellers to transfer title to the therein respondent-buyer. In the July 11, 1975 Agreement to Buy and Sell, PLDT still had to "definitely inform Carrascoso of its decision on whether or not to finalize the deed of absolute sale for the 1,000 hectare portion of the property," such that in the April 6, 1977 Deed of Absolute Sale subsequently executed, the parties declared that they "are now decided to execute" such deed, indicating that the Agreement to Buy and Sell was, as the appellate court held, merely a preparatory contract in the nature of a contract to sell. In fact, the parties even had to stipulate in the said Agreement to Buy and Sell that Carrascoso, "during the existence of the Agreement, shall not sell, cede, assign and/or transfer the parcel of land," which provision this Court has held to be a typical characteristic of a contract to sell.93 Being a contract to sell, what was vested by the July 11, 1975 Agreement to Buy and Sell to PLDT was merely the beneficial title to the 1,000 hectare portion of the property. The right of Daniel Jovellanos to the property under the contract [to sell] with Philamlife was merely an inchoate and expectant right which would ripen into a vested right only upon his acquisition of ownership which, as aforestated, was contingent upon his full payment of the rentals and compliance with all his contractual obligations thereunder. A vested right is an immediate fixed right of present and future enjoyment. It is to be distinguished from a right that is expectant or contingent. It is a right which is fixed, unalterable, absolute, complete and unconditional to the exercise of which no obstacle exists, and which is perfect in itself and not dependent upon a contingency. Thus, for a property right to be vested, there must be a transition from the potential or contingent to the actual, and the proprietary interest must have attached to a thing; it must have become fixed or established and is no longer open to doubt or controversy.94 (Underscoring supplied) In the case at bar, the July 11, 1975 Agreement to Buy and Sell was not ed, which act of registration is the operative act to convey and affect the land. An agreement to sell is a voluntary instrument as it is a willful act of the ed owner. As such voluntary instrument, Section 50 of Act No. 496 [now Section 51 of PD 1529] expressly provides that the act of registration shall be the operative act to convey and affect the land. And Section 55 of the same Act [now Section 53 of PD 1529] requires the presentation of the owner’s duplicate certificate of title for the registration of any deed or voluntary instrument. As the agreement to sell involves an interest less than an estate in fee simple, the same should have been ed by filing it with the of Deeds who, in turn, makes a brief memorandum thereof upon the original and owner’s duplicate certificate of title. The reason for requiring the production of the owner’s duplicate certificate in the registration of a voluntary instrument is that, being a willful act of the ed owner, it is to be presumed that he is interested in ing the instrument and would willingly surrender, present or produce his duplicate certificate of title to the of Deeds in order to accomplish such registration. However, where the owner refuses to surrender the duplicate certificate for the annotation of the voluntary instrument, the grantee may file with the of Deeds a statement setting forth his adverse claim, as provided for in Section 110 of Act No. 496. xxx95 (Underscoring supplied) In Valley Golf Club, Inc. v. Salas,96 where a Deed of Absolute Sale covering a parcel of land was executed prior to the annotation of a notice of lis pendens by the original owner thereof but which Deed was ed after such annotation, this Court held: The advance payment of P15,000.00 by the CLUB on October 18, 1960 to ROMERO, and the additional payment by the CLUB of P54,887.50 as full payment of the purchase price on October 26, 1960, also to ROMERO, cannot be held to be the dates of sale such as to precede the annotation of the adverse claim by the SISTERS on October 25, 1960 and the lis

37 pendens on October 27, 1960. It is basic that it is the act of registration of the sale that is the operative act to convey and affect the land. That registration was not effected by the CLUB until December 4, 1963, or three (3) years after it had made full payment to ROMERO. xxx xxx As matters stand, therefore, in view of the prior annotations of the adverse claim and lis pendens, the CLUB must be legally held to have been aware of the flaws in the title. By virtue of the lis pendens, its acquisition of the property was subject to whatever judgment was to be rendered in Civil Case No. 6365. xxx The CLUB’s cause of action lies, not against the SISTERS, to whom the property had been adjudged by final judgment in Civil Case No. 6365, but against ROMERO who was found to have had no right to dispose of the land.97 (Underscoring supplied)

PLDT further argues that El Dorado’s prior, actual knowledge of the July 11, 1975 Agreement to Buy and Sell is equivalent to prior registration not affected by the Notice of Lis Pendens. As such, it concludes that it was not a purchaser pendente lite nor a purchaser in bad faith. PLDT anchors its argument on the testimony of Lauro and El Dorado’s counsel Atty. Aquino from which it infers that Atty. Aquino filed the complaint for rescission and caused the notice of lis pendens to be annotated on Carrascoso’s title only after reading newspaper reports on the sale to PLDT of the 1,000 hectare portion of the property. The pertinent portions of Atty. Aquino’s testimony are reproduced hereunder: Q: Do you know, Atty. Aquino, what you did after the filing of the complaint in the instant case of Dr. Carrascoso? A: Yes, I asked my associates to go to Mamburao and had the notice of Lis Pendens covering the property as a result of the filing of the instant complaint. Q: Do you know the notice of Lis Pendens? A: Yes, it is evidenced by a [Transfer] Certificate Copy of Title of Dr. Carrascoso entitled "Notice of Lis Pendens". Q: As a consequence of the filing of the complaint which was annotated, you have known that? A: Yes. xx Q: After the annotation of the notice of Lis Pendens, do you know, if any further transaction was held on the property? A: As we have read in the newspaper, that Dr. Carrascoso had sold the property in favor of the PLDT, Co. Q: And what did you do? A: We verified the portion of the property having recorded under entry No. 24770 xxx and we also discovered that the articles incorporated (sic) and other corporate matters had been organized and established of the PLDT, Co., and had been annotated. xxx Q: Do you know what happened to the property? A: It was sold by the PLDT to its sub-PLDT Agitating (sic) Co. when at that time there was already notice of Lis Pendens.

xxx

38 Q: In your testimony, you mentioned that you had come cross- (sic) reading the sale of the subject litigation (sic) between Dr. Fernando Carrascoso, the defendant herein and the PLDT, one of defendants-intervenor, may I say when? A: I cannot now, but it was in the newspaper where it was informed or mentioned of the sold property to PLDT. xxx Q: Will you tell to the Honorable Court what newspaper was that? A: Well, I cannot what is that newspaper. That is only a means of [confirming] the transaction. What was [confirmed] to us is whether there was really transaction (sic) and we found out that there was in the of Deeds and that was the reason why we obtained the case. Q: Well, may I say, is there any reason, the answer is immaterial. The question is as regard the matter of time when counsel is being able (sic) to read the newspaper allegedly (interrupted) xxx Q: The idea of the question, your Honor, is to establish and ask further the notice of [lis pendens] with regards (sic) to the transfer of property to PLDT, would have been accorded prior to the pendency of the case. xxx A: I cannot .98 PLDT also relies on the following testimony of Carrascoso: Q: You mentioned Doctor a while ago that you mentioned to the late Governor Feliciano Leviste regarding your transaction with the PLDT in relation to the subject property you allegedly mention (sic) your intention to sell with the PLDT? A: It was Dr. Jose Leviste and Dr. Angel Leviste that was constantly in touched (sic) with me with respect to my transaction with the PLDT, sir. Q: Any other officer of the corporation who knows with instruction aside from Dr. Angel Leviste and Dr. Jose Leviste? A: Yes, sir. It was Trinidad Andaya Leviste and Assemblyman Expedito Leviste. xxx

Q: What is the position of Mrs. Trinidad Andaya Leviste with the plaintiff-corporation? A: One of the stockholders and director of the plaintiff-corporation, sir. Q: Will you please tell us the other officers? A: Expedito Leviste, sir. A: Will you tell the position of Expedito Leviste? A: He was the corporate secretary, sir. Q: If you know, was Dr. Jose Leviste also a director at that time? A: Yes, sir.99

39 On the other hand, El Dorado asserts that it had no knowledge of the July 11, 1975 Agreement to Buy and Sell prior to the filing of the complaint for rescission against Carrascoso and the annotation of the notice of lis pendens on his title. It further asserts that it always acted in good faith: xxx The contract to sell between the Petitioner [Carrascoso] and PLDT was executed in July 11, 1975. There is no evidence that El Dorado was notified of this contract. The property is located in Mindoro, El Dorado is based in Manila. The land was planted to rice. This was not an unusual activity on the land, thus it could have been the Petitioner who was using the land. Not having been notified of this sale, El Dorado could not have stopped PLDT from developing the land. The absolute sale of the land to PLDT took place on April 6, 1977, or AFTER the filing of this case on March 15, 1977 and the annotation of a notice of lis pendens on March 16, 1977. Inspite of the notice of lis pendens, PLDT then PLDTAC persisted not only in buying the land but also in putting up improvements on the property such as buildings, roads, irrigation systems and drainage. This was done during the pendency of this case, where PLDT and PLDTAC actively participated as intervenors. They were not innocent bystanders. xxx100 This Court finds the above-quoted testimony of Atty. Aquino to be susceptible of conflicting interpretations. As such, it cannot be the basis for inferring that El Dorado knew of the July 11, 1975 Agreement to Buy and Sell prior to the annotation of the notice of lis pendens on Carrascoso’s title. Respecting Carrascoso’s allegation that some of the directors and officers of El Dorado had knowledge of his dealings with PLDT, it is true that knowledge of facts acquired or possessed by an officer or agent of a corporation in the course of his employment, and in relation to matters within the scope of his authority, is notice to the corporation, whether he communicates such knowledge or not.101 In the case at bar, however, apart from Carrascoso’s claim that he in fact notified several of the directors about his intention to sell the 1,000 hectare portion of the property to PLDT, no evidence was presented to substantiate his claim. Such self-serving, uncorroborated assertion is indubitably inadequate to prove that El Dorado had notice of the July 11, 1975 Agreement to Buy and Sell before the annotation of the notice of lis pendens on his title. PLDT is, of course, not without recourse. As held by the CA: Between Carrascoso and PLDT/PLDTAC, the former acted in bad faith while the latter acted in good faith. This is so because it was Carrascoso’s refusal to pay his just debt to El Dorado that caused PLDT/PLDTAC to suffer pecuniary losses. Therefore, Carrascoso should return to PLDT/PLDTAC the P3,000,000.00 price of the farm plus legal interest from receipt thereof until paid.102 (Underscoring supplied) The appellate court’s decision ordering the rescission of the March 23, 1972 Deed of Sale of Real Property between El Dorado and Carrascoso being in order, mutual restitution follows to put back the parties to their original situation prior to the consummation of the contract. The exercise of the power to rescind extinguishes the obligatory relation as if it had never been created, the extinction having a retroactive effect. The rescission is equivalent to invalidating and unmaking the juridical tie, leaving things in their status before the celebration of the contract. Where a contract is rescinded, it is the duty of the court to require both parties to surrender that which they have respectively received and to place each other as far as practicable in his original situation, the rescission has the effect of abrogating the contract in all parts.103 (Underscoring supplied) The April 6, 1977 and May 30, 1977 Deeds of Absolute Sale being subject to the notice of lis pendens, and as the Court affirms the declaration by the appellate court of the rescission of the Deed of Sale executed by El Dorado in favor of Carrascoso, possession of the 1,000 hectare portion of the property should be turned over by PLDT to El Dorado. As regards the improvements introduced by PLDT on the 1,000 hectare portion of the property, a distinction should be made between those which it built prior to the annotation of the notice of lis pendens and those which it introduced subsequent thereto. When a person builds in good faith on the land of another, Article 448 of the Civil Code governs:

40 Art. 448. The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in Articles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such a case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after the proper indemnity. The parties shall agree upon the of the lease and in case of disagreement, the court shall fix the thereof. The above provision covers cases in which the builders, sowers or planters believe themselves to be owners of the land or, at least, to have a claim of title thereto.104 Good faith is thus identified by the belief that the land is owned; or that by some title one has the right to build, plant, or sow thereon.105

The owner of the land on which anything has been built, sown or planted in good faith shall have the right to appropriate as his own the building, planting or sowing, after payment to the builder, planter or sower of the necessary and useful expenses,106 and in the proper case, expenses for pure luxury or mere pleasure.107 The owner of the land may also oblige the builder, planter or sower to purchase and pay the price of the land. If the owner chooses to sell his land, the builder, planter or sower must purchase the land, otherwise the owner may remove the improvements thereon. The builder, planter or sower, however, is not obliged to purchase the land if its value is considerably more than the building, planting or sowing. In such case, the builder, planter or sower must pay rent to the owner of the land. If the parties cannot come to over the conditions of the lease, the court must fix the thereof. The right to choose between appropriating the improvement or selling the land on which the improvement of the builder, planter or sower stands, is given to the owner of the land.108 On the other hand, when a person builds in bad faith on the land of another, Articles 449 and 450 govern: Art. 449. He who builds, plants or sows in bad faith on the land of another, loses what is built, planted or sown without right to indemnity. Art. 450. The owner of the land on which anything has been built, planted or sown in bad faith may demand the demolition of the work, or that the planting or sowing be removed, in order to replace things in their former condition at the expense of the person who built, planted or sowed; or he may compel the builder or planter to pay the price of the land, and the sower the proper rent. In the case at bar, it is undisputed that PLDT commenced construction of improvements on the 1,000 hectare portion of the property immediately after the execution of the July 11, 1975 Agreement to Buy and Sell with the full consent of Carrascoso.109 Thus, until March 15, 1977 when the Notice of Lis Pendens was annotated on Carrascoso’s TCT No. T6055, PLDT is deemed to have been in good faith in introducing improvements on the 1,000 hectare portion of the property. After March 15, 1977, however, PLDT could no longer invoke the rights of a builder in good faith. Should El Dorado then opt to appropriate the improvements made by PLDT on the 1,000 hectare portion of the property, it should only be made to pay for those improvements at the time good faith existed on the part of PLDT or until March 15, 1977,110 to be pegged at its current fair market value.111

The commencement of PLDT’s payment of reasonable rent should start on March 15, 1977 as well, to be paid until such time that the possession of the 1,000 hectare portion is delivered to El Dorado, subject to the reimbursement of expenses as aforestated, that is, if El Dorado opts to appropriate the improvements.112

41 If El Dorado opts for compulsory sale, however, the payment of rent should continue up to the actual transfer of ownership.113 WHEREFORE, the petitions are DENIED. The Decision dated January 13, 1996 and Resolution dated July 8, 2004 of the Court of Appeals are AFFIRMED with MODIFICATION in that 1) the Regional Trial Court of San Jose, Occidental Mindoro, Branch 45 is further directed to: a. determine the present fair price of the 1,000 hectare portion of the property and the amount of the expenses actually spent by PLDT for the improvements thereon as of March 15, 1977; b. include for determination the increase in value ("plus value") which the 1,000 hectare portion may have acquired by reason of the existence of the improvements built by PLDT before March 15, 1977 and the current fair market value of said improvements; 2. El Dorado is ordered to exercise its option under the law, whether to appropriate the improvements, or to oblige PLDT to pay the price of the land, and 3) PLDT shall pay El Dorado the amount of Two Thousand Pesos (₱2,000.00) per month as reasonable compensation for its occupancy of the 1,000 hectare portion of the property from the time that its good faith ceased to exist until such time that possession of the same is delivered to El Dorado, subject to the reimbursement of the aforesaid expenses in favor of PLDT or until such time that the payment of the purchase price of the 1,000 hectare portion is made by PLDT in favor of El Dorado in case the latter opts for its compulsory sale. Costs against petitioners. SO ORDERED.

G.R. No. 168646

January 12, 2011

LUZON DEVELOPMENT BANK, Petitioner, vs. ANGELES CATHERINE ENRIQUEZ, Respondent. G.R. No. 168666 DELTA DEVELOPMENT and MANAGEMENT SERVICES, INC., Petitioner, vs. ANGELES CATHERINE ENRIQUEZ and LUZON DEVELOPMENT BANK, Respondents. DECISION DEL CASTILLO, J.: The protection afforded to a subdivision lot buyer under Presidential Decree (PD) No. 957 or The Subdivision and Condominium Buyer’s Protective Decree will not be defeated by someone who is not an innocent purchaser for value. The lofty aspirations of PD 957 should be read in every provision of the statute, in every contract that undermines its objects, in every transaction which threatens its fruition. "For a statute derives its vitality from the purpose for which it is enacted and to construe it in a manner that disregards or defeats such purpose is to nullify or destroy the law."1 These cases involve the separate appeals of Luzon Development Bank2 (BANK) and Delta Development and Management Services, Inc.3 (DELTA) from the November 30, 2004 Decision of the Court of Appeals (CA), as well as its June 22, 2005 Resolution in CA-G.R. SP No. 81280. The dispositive portion of the assailed Decision reads: WHEREFORE, premises considered, the Decision dated June 17, 2003 and Resolution dated November 24, 2003 are AFFIRMED with [m]odification in so far as Delta Development and Management Services, Inc. is liable and directed to pay

42 petitioner Luzon Development Bank the value of the subject lot subject matter of the Contract to Sell between Delta Development and Management Services, Inc. and the private respondent [Catherine Angeles Enriquez]. SO ORDERED.4 Factual Antecedents The BANK is a domestic financial corporation that extends loans to subdivision developers/owners.5 Petitioner DELTA is a domestic corporation engaged in the business of developing and selling real estate properties, particularly Delta Homes I in Cavite. DELTA is owned by Ricardo De Leon (De Leon),6 who is the ed owner of a parcel of land covered by Transfer Certificate of Title (TCT) No. T-6371837 of the Registry of Deeds of the Province of Cavite, which corresponds to Lot 4 of Delta Homes I. Said Lot 4 is the subject matter of these cases. On July 3, 1995, De Leon and his spouse obtained a ₱4 million loan from the BANK for the express purpose of developing Delta Homes I.8 To secure the loan, the spouses De Leon executed in favor of the BANK a real estate mortgage (REM) on several of their properties,9 including Lot 4. Subsequently, this REM was amended10 by increasing the amount of the secured loan from ₱4 million to ₱8 million. Both the REM and the amendment were annotated on TCT No. T-637183.11 DELTA then obtained a Certificate of Registration12 and a License to Sell13 from the Housing and Land Use Regulatory Board (HLURB). Sometime in 1997, DELTA executed a Contract to Sell with respondent Angeles Catherine Enriquez (Enriquez)14 over the house and lot in Lot 4 for the purchase price of ₱614,950.00. Enriquez made a downpayment of ₱114,950.00. The Contract to Sell contained the following provisions: That the vendee/s offered to buy and the Owner agreed to sell the above-described property subject to the following and conditions to wit: xxxx 6. That the (sic) warning shall be served upon the Vendee/s for failure to pay x x x Provided, however, that for failure to pay three (3) successive monthly installment payments, the Owner may consider this Contract to Sell null and void ab initio without further proceedings or court action and all payments shall be forfeited in favor of the Owner as liquidated damages and expenses for documentations. x x x That upon full payment of the total consideration if payable in cash, the Owner shall execute a final deed of sale in favor of the Vendee/s. However, if the term of the contract is for a certain period of time, only upon full payment of the total consideration that a final deed of sale shall be executed by the Owner in favor of the Vendee/s.15 When DELTA defaulted on its loan obligation, the BANK, instead of foreclosing the REM, agreed to a dation in payment or a dacion en pago. The Deed of Assignment in Payment of Debt was executed on September 30, 1998 and stated that DELTA "assigns, transfers, and conveys and sets over [to] the assignee that real estate with the building and improvements existing thereon x x x in payment of the total obligation owing to [the Bank] x x x."16 Unknown to Enriquez, among the properties assigned to the BANK was the house and lot of Lot 4,17 which is the subject of her Contract to Sell with DELTA. The records do not bear out and the parties are silent on whether the BANK was able to transfer title to its name. It appears, however, that the dacion en pago was not annotated on the TCT of Lot 4.18 On November 18, 1999, Enriquez filed a complaint against DELTA and the BANK before the Region IV Office of the HLURB19 alleging that DELTA violated the of its License to Sell by: (a) selling the house and lots for a price

43 exceeding that prescribed in Batas Pambansa (BP) Bilang 220;20 and (b) failing to get a clearance for the mortgage from the HLURB. Enriquez sought a full refund of the ₱301,063.42 that she had already paid to DELTA, award of damages, and the imposition of istrative fines on DELTA and the BANK. In his June 1, 2000 Decision,21 HLURB Arbiter Atty. Raymundo A. Foronda upheld the validity of the purchase price, but ordered DELTA to accept payment of the balance of ₱108,013.36 from Enriquez, and (upon such payment) to deliver to Enriquez the title to the house and lot free from liens and encumbrances. The dispositive portion reads: WHEREFORE, premises considered, a decision is hereby rendered as follows: 1. Ordering [DELTA] to accept complainant[’]s payments in the amount of ₱108,013.36 representing her balance based on the maximum selling price of ₱375,000.00; 2. Upon full payment, ordering Delta to deliver the title in favor of the complainant free from any liens and encumbrances; 3. Ordering [DELTA] to pay complainant the amount of ₱50,000.00 as and by way of moral damages; 4. Ordering [DELTA] to pay complainant the amount of ₱50,000.00 as and by way of exemplary damages; 5. Ordering [DELTA] to pay complainant ₱10,000.00 as costs of suit; and 6. Respondent DELTA to pay istrative fine of ₱10,000.00[22] for violation of Section 18 of P.D. 957[23] and another ₱10,000.00 for violation of Section 22 of P.D. 957.[24 SO ORDERED.25 DELTA appealed the arbiter’s Decision to the HLURB Board of Commissioners.26 DELTA questioned the imposition of an istrative fine for its alleged violation of Section 18 of PD 957. It argued that clearance was not required for mortgages that were constituted on a subdivision project prior to registration. According to DELTA, it did not violate the of its license because it did not obtain a new mortgage over the subdivision project. It likewise assailed the award of moral and exemplary damages to Enriquez on the ground that the latter has no cause of action.27 Ruling of the Board of Commissioners (Board)28 The Board held that all developers should obtain a clearance for mortgage from the HLURB, regardless of the date when the mortgage was secured, because the law does not distinguish. Having violated this legal requirement, DELTA was held liable to pay the istrative fine. The Board upheld the validity of the contract to sell between DELTA and Enriquez despite the alleged violation of the price ceilings in BP 220. The Board held that DELTA and Enriquez were presumed to have had a meeting of the minds on the object of the sale and the purchase price. Absent any circumstance vitiating Enriquez’consent, she was presumed to have willingly and voluntarily agreed to the higher purchase price; hence, she was bound by the of the contract. The Board, however, deleted the arbiter’s award of damages to Enriquez on the ground that the latter was not free from liability herself, given that she was remiss in her monthly amortizations to DELTA. The dispositive portion of the Board’s Decision reads: Wherefore, in view of the foregoing, the Office below’s decision dated June 01, 2000 is hereby modified to read as follows:

44 1. Ordering [Enriquez] to pay [DELTA] the amount due from the time she suspended payment up to filing of the complaint with 12% interest thereon per annum; thereafter the provisions of the Contract to Sell shall apply until full payment is made; 2. Ordering [DELTA] to pay an [a]dministrative [f]ine of ₱10,000.00 for violation of its license to sell and for violation of Section 18 of P.D. 957. SO ORDERED. Quezon City.29 Enriquez moved for a reconsideration of the Board’s Decision30 upholding the contractual purchase price. She maintained that the price for Lot 4 should not exceed the price ceiling provided in BP 220.31lawph!l Finding Enriquez’s arguments as having already been ed upon in the decision, the Board denied reconsideration. The board, however, modified its decision, with respect to the period for the imposition of interest payments. The Board’s resolution32 reads: WHEREFORE, premises considered, to [sic] directive No. 1 of the dispositive portion of the decision of our decision [sic] is MODIFIED as follows: 1. Ordering complainant to pay respondent DELTA the amount due from the time she suspended (sic) at 12% interest per annum, reckoned from finality of this decision[,] thereafter the provisions of the Contract to Sell shall apply until full payment is made. In all other respects, the decision is AFFIRMED. SO ORDERED.33 Both Enriquez and the BANK appealed to the Office of the President (OP).34 The BANK disagreed with the ruling upholding Enriquez’s Contract to Sell; and insisted on its ownership over Lot 4. It argued that it has become impossible for DELTA to comply with the of the contract to sell and to deliver Lot 4’s title to Enriquez given that DELTA had already relinquished all its rights to Lot 4 in favor of the BANK35 via the dation in payment. Meanwhile, Enriquez insisted that the Board erred in not applying the ceiling price as prescribed in BP 220.36 Ruling of the Office of the President37 The OP adopted by reference the findings of fact and conclusions of law of the HLURB Decisions, which it affirmed in toto. Enriquez filed a motion for reconsideration, insisting that she was entitled to a reduction of the purchase price, in order to conform to the provisions of BP 220.38 The motion was denied for lack of merit.39 Only the BANK appealed the OP’s Decision to the CA.40 The BANK reiterated that DELTA can no longer deliver Lot 4 to Enriquez because DELTA had sold the same to the BANK by virtue of the dacion en pago.41 As an alternative argument, in case the appellate court should find that DELTA retained ownership over Lot 4 and could convey the same to Enriquez, the BANK prayed that its REM over Lot 4 be respected such that DELTA would have to redeem it first before it could convey the same to Enriquez in accordance with Section 2542 of PD 957.43 The BANK likewise sought an award of exemplary damages and attorney’s fees in its favor because of the baseless suit filed by Enriquez against it.44

45 Ruling of the Court of Appeals45 The CA ruled against the validity of the dacion en pago executed in favor of the BANK on the ground that DELTA had earlier relinquished its ownership over Lot 4 in favor of Enriquez via the Contract to Sell.46 Since the dacion en pago is invalid with respect to Lot 4, the appellate court held that DELTA remained indebted to the BANK to the extent of Lot 4’s value. Thus, the CA ordered DELTA to pay the corresponding value of Lot 4 to the BANK.47 The CA also rejected the BANK’s argument that, before DELTA can deliver the title to Lot 4 to Enriquez, DELTA should first redeem the mortgaged property from the BANK. The CA held that the BANK does not have a first lien on Lot 4 because its real estate mortgage over the same had already been extinguished by the dacion en pago. Without a mortgage, the BANK cannot require DELTA to redeem Lot 4 prior to delivery of title to Enriquez.48 The CA denied the BANK’s prayer for the award of exemplary damages and attorney’s fees for lack of factual and legal basis.49 Both DELTA50 and the BANK51 moved for a reconsideration of the CA’s Decision, but both were denied.52 Hence, these separate petitions of the BANK and DELTA. Petitioner Delta’s arguments53 DELTA assails the CA Decision for holding that DELTA conveyed its ownership over Lot 4 to Enriquez via the Contract to Sell. DELTA points out that the Contract to Sell contained a condition that ownership shall only be transferred to Enriquez upon the latter’s full payment of the purchase price to DELTA. Since Enriquez has yet to comply with this suspensive condition, ownership is retained by DELTA.54 As the owner of Lot 4, DELTA had every right to enter into a dation in payment to extinguish its loan obligation to the BANK. The BANK’s acceptance of the assignment, without any reservation or exception, resulted in the extinguishment of the entire loan obligation; hence, DELTA has no more obligation to pay the value of Enriquez’s house and lot to the BANK.55 DELTA prays for the reinstatement of the OP Decision. The BANK’s arguments56 Echoing the argument of DELTA, the BANK argues that the Contract to Sell did not involve a conveyance of DELTA’s ownership over Lot 4 to Enriquez. The Contract to Sell expressly provides that DELTA retained ownership over Lot 4 until Enriquez paid the full purchase price. Since Enriquez has not yet made such full payment, DELTA retained ownership over Lot 4 and could validly convey the same to the BANK via dacion en pago.57 Should the dacion en pago over Lot 4 be invalidated and the property ordered to be delivered to Enriquez, the BANK contends that DELTA should pay the corresponding value of Lot 4 to the BANK. It maintains that the loan obligation extinguished by the dacion en pago only extends to the value of the properties delivered; if Lot 4 cannot be delivered to the BANK, then the loan obligation of DELTA remains to the extent of Lot 4’s value.58 The BANK prays to be declared the rightful owner of the subject house and lot and asks for an award of exemplary damages and attorney’s fees. Enriquez’s waiver Enriquez did not file comments59 or memoranda in both cases; instead, she manifested that she will just await the outcome of the case.60

46 Issues The following are the issues raised by the two petitions: 1. Whether the Contract to Sell conveys ownership; 2. Whether the dacion en pago extinguished the loan obligation, such that DELTA has no more obligations to the BANK; 3. Whether the BANK is entitled to damages and attorney’s fees for being compelled to litigate; and 4. What is the effect of Enriquez’s failure to appeal the OP’s Decision regarding her obligation to pay the balance on the purchase price. Our Ruling Mortgage contract void As the HLURB Arbiter and Board of Commissioners both found, DELTA violated Section 18 of PD 957 in mortgaging the properties in Delta Homes I (including Lot 4) to the BANK without prior clearance from the HLURB. This point need not be belabored since the parties have chosen not to appeal the istrative fine imposed on DELTA for violation of Section 18. This violation of Section 18 renders the mortgage executed by DELTA void. We have held before that "a mortgage contract executed in breach of Section 18 of [PD 957] is null and void."61 Considering that "PD 957 aims to protect innocent subdivision lot and condominium unit buyers against fraudulent real estate practices," we have construed Section 18 thereof as "prohibitory and acts committed contrary to it are void."62 Because of the nullity of the mortgage, neither DELTA nor the BANK could assert any right arising therefrom. The BANK’s loan of ₱8 million to DELTA has effectively become unsecured due to the nullity of the mortgage. The said loan, however, was eventually settled by the two contracting parties via a dation in payment. In the appealed Decision, the CA invalidated this dation in payment on the ground that DELTA, by previously entering into a Contract to Sell, had already conveyed its ownership over Lot 4 to Enriquez and could no longer convey the same to the BANK. This is error, prescinding from a wrong understanding of the nature of a contract to sell. Contract to sell does not transfer ownership Both parties are correct in arguing that the Contract to Sell executed by DELTA in favor of Enriquez did not transfer ownership over Lot 4 to Enriquez. A contract to sell is one where the prospective seller reserves the transfer of title to the prospective buyer until the happening of an event, such as full payment of the purchase price. What the seller obliges himself to do is to sell the subject property only when the entire amount of the purchase price has already been delivered to him. "In other words, the full payment of the purchase price partakes of a suspensive condition, the nonfulfillment of which prevents the obligation to sell from arising and thus, ownership is retained by the prospective seller without further remedies by the prospective buyer."63 It does not, by itself, transfer ownership to the buyer.64 In the instant case, there is nothing in the provisions of the contract entered into by DELTA and Enriquez that would exempt it from the general definition of a contract to sell. The thereof provide for the reservation of DELTA’s ownership until full payment of the purchase price; such that DELTA even reserved the right to unilaterally void the contract should Enriquez fail to pay three successive monthly amortizations.

47 Since the Contract to Sell did not transfer ownership of Lot 4 to Enriquez, said ownership remained with DELTA. DELTA could then validly transfer such ownership (as it did) to another person (the BANK). However, the transferee BANK is bound by the Contract to Sell and has to respect Enriquez’s rights thereunder. This is because the Contract to Sell, involving a subdivision lot, is covered and protected by PD 957. One of the protections afforded by PD 957 to buyers such as Enriquez is the right to have her contract to sell ed with the of Deeds in order to make it binding on third parties. Thus, Section 17 of PD 957 provides: Section 17. Registration. All contracts to sell, deeds of sale, and other similar instruments relative to the sale or conveyance of the subdivision lots and condominium units, whether or not the purchase price is paid in full, shall be ed by the seller in the Office of the of Deeds of the province or city where the property is situated. x x x x (Emphasis supplied.) The purpose of registration is to protect the buyers from any future unscrupulous transactions involving the object of the sale or contract to sell, whether the purchase price therefor has been fully paid or not. Registration of the sale or contract to sell makes it binding on third parties; it serves as a notice to the whole world that the property is subject to the prior right of the buyer of the property (under a contract to sell or an absolute sale), and anyone who wishes to deal with the said property will be held bound by such prior right. While DELTA, in the instant case, failed to Enriquez’s Contract to Sell with the of Deeds, this failure will not prejudice Enriquez or relieve the BANK from its obligation to respect Enriquez’s Contract to Sell. Despite the nonregistration, the BANK cannot be considered, under the circumstances, an innocent purchaser for value of Lot 4 when it accepted the latter (together with other assigned properties) as payment for DELTA’s obligation. The BANK was well aware that the assigned properties, including Lot 4, were subdivision lots and therefore within the purview of PD 957. It knew that the loaned amounts were to be used for the development of DELTA’s subdivision project, for this was indicated in the corresponding promissory notes. The technical description of Lot 4 indicates its location, which can easily be determined as included within the subdivision development. Under these circumstances, the BANK knew or should have known of the possibility and risk that the assigned properties were already covered by existing contracts to sell in favor of subdivision lot buyers. As observed by the Court in another case involving a bank regarding a subdivision lot that was already subject of a contract to sell with a third party: [The Bank] should have considered that it was dealing with a property subject of a real estate development project. A reasonable person, particularly a financial institution x x x, should have been aware that, to finance the project, funds other than those obtained from the loan could have been used to serve the purpose, albeit partially. Hence, there was a need to whether any part of the property was already intended to be the subject of any other contract involving buyers or potential buyers. In granting the loan, [the Bank] should not have been content merely with a clean title, considering the presence of circumstances indicating the need for a thorough investigation of the existence of buyers x x x. Wanting in care and prudence, the [Bank] cannot be deemed to be an innocent mortgagee. x x x65 Further, as an entity engaged in the banking business, the BANK is required to observe more care and prudence when dealing with ed properties. The Court cannot accept that the BANK was unaware of the Contract to Sell existing in favor of Enriquez. In Keppel Bank Philippines, Inc. v. Adao,66 we held that a bank dealing with a property that is already subject of a contract to sell and is protected by the provisions of PD 957, is bound by the contract to sell (even if the contract to sell in that case was not ed). In the Court’s words: It is true that persons dealing with ed property can rely solely on the certificate of title and need not go beyond it. However, x x x, this rule does not apply to banks. Banks are required to exercise more care and prudence than private individuals in dealing even with ed properties for their business is affected with public interest. As master of its

48 business, petitioner should have sent its representatives to check the assigned properties before g the compromise agreement and it would have discovered that respondent was already occupying one of the condominium units and that a contract to sell existed between [the vendee] and [the developer]. In our view, petitioner was not a purchaser in good faith and we are constrained to rule that petitioner is bound by the contract to sell.67 Bound by the of the Contract to Sell, the BANK is obliged to respect the same and honor the payments already made by Enriquez for the purchase price of Lot 4. Thus, the BANK can only collect the balance of the purchase price from Enriquez and has the obligation, upon full payment, to deliver to Enriquez a clean title over the subject property.68 Dacion en pago extinguished the loan obligation The BANK then posits that, if title to Lot 4 is ordered delivered to Enriquez, DELTA has the obligation to pay the BANK the corresponding value of Lot 4. According to the BANK, the dation in payment extinguished the loan only to the extent of the value of the thing delivered. Since Lot 4 would have no value to the BANK if it will be delivered to Enriquez, DELTA would remain indebted to that extent. We are not persuaded. Like in all contracts, the intention of the parties to the dation in payment is paramount and controlling. The contractual intention determines whether the property subject of the dation will be considered as the full equivalent of the debt and will therefore serve as full satisfaction for the debt. "The dation in payment extinguishes the obligation to the extent of the value of the thing delivered, either as agreed upon by the parties or as may be proved, unless the parties by agreement, express or implied, or by their silence, consider the thing as equivalent to the obligation, in which case the obligation is totally extinguished."69 In the case at bar, the Dacion en Pago executed by DELTA and the BANK indicates a clear intention by the parties that the assigned properties would serve as full payment for DELTA’s entire obligation: KNOW ALL MEN BY THESE PRESENTS: This instrument, made and executed by and between: xxxx THAT, the ASSIGNOR acknowledges to be justly indebted to the ASSIGNEE in the sum of ELEVEN MILLION EIGHT HUNDRED SEVENTY-EIGHT THOUSAND EIGHT HUNDRED PESOS (₱11,878,800.00), Philippine Currency as of August 25, 1998. Therefore, by virtue of this instrument, ASSIGNOR hereby ASSIGNS, TRANSFERS, and CONVEYS AND SETS OVER [TO] the ASSIGNEE that real estate with the building and improvements existing thereon, more particularly described as follows: xxxx of which the ASSIGNOR is the ed owner being evidenced by TCT No. x x x issued by the Registry of Deeds of Trece Martires City. THAT, the ASSIGNEE does hereby accept this ASSIGNMENT IN PAYMENT OF THE TOTAL OBLIGATION owing to him by the ASSIGNOR as above-stated;70 Without any reservation or condition, the Dacion stated that the assigned properties served as full payment of DELTA’s "total obligation" to the BANK. The BANK accepted said properties as equivalent of the loaned amount and as full satisfaction of DELTA’s debt. The BANK cannot complain if, as it turned out, some of those assigned properties (such as Lot 4) are covered by existing contracts to sell. As noted earlier, the BANK knew that the assigned properties were

49 subdivision lots and covered by PD 957. It was aware of the nature of DELTA’s business, of the location of the assigned properties within DELTA’s subdivision development, and the possibility that some of the properties may be subjects of existing contracts to sell which enjoy protection under PD 957. Banks dealing with subdivision properties are expected to conduct a thorough due diligence review to discover the status of the properties they deal with. It may thus be said that the BANK, in accepting the assigned properties as full payment of DELTA’s "total obligation," has assumed the risk that some of the assigned properties (such as Lot 4) are covered by contracts to sell which it is bound to honor under PD 957. A dacion en pago is governed by the law of sales.71 Contracts of sale come with warranties, either express (if explicitly stipulated by the parties) or implied (under Article 1547 et seq. of the Civil Code). In this case, however, the BANK does not even point to any breach of warranty by DELTA in connection with the Dation in Payment. To be sure, the Dation in Payment has no express warranties relating to existing contracts to sell over the assigned properties. As to the implied warranty in case of eviction, it is waivable72 and cannot be invoked if the buyer knew of the risks or danger of eviction and assumed its consequences.73 As we have noted earlier, the BANK, in accepting the assigned properties as full payment of DELTA’s "total obligation," has assumed the risk that some of the assigned properties are covered by contracts to sell which must be honored under PD 957. Award of damages There is nothing on record that warrants the award of exemplary damages74 as well as attorney’s fees75 in favor of the BANK. Balance to be paid by Enriquez As already mentioned, the Contract to Sell in favor of Enriquez must be respected by the BANK.1avvphi1 Upon Enriquez’s full payment of the balance of the purchase price, the BANK is bound to deliver the title over Lot 4 to her. As to the amount of the balance which Enriquez must pay, we adopt the OP’s ruling thereon which sustained the amount stipulated in the Contract to Sell. We will not review Enriquez’s initial claims about the supposed violation of the price ceiling in BP 220, since this issue was no longer pursued by the parties, not even by Enriquez, who chose not to file the required pleadings76 before the Court. The parties were informed in the Court’s September 5, 2007 Resolution that issues that are not included in their memoranda shall be deemed waived or abandoned. Since Enriquez did not file a memorandum in either petition, she is deemed to have waived the said issue. WHEREFORE, premises considered, the appealed November 30, 2004 Decision of the Court of Appeals, as well as its June 22, 2005 Resolution in CA-G.R. SP No. 81280 are hereby AFFIRMED with the MODIFICATIONS that Delta Development and Management Services, Inc. is NOT LIABLE TO PAY Luzon Development Bank the value of the subject lot; and respondent Angeles Catherine Enriquez is ordered to PAY the balance of the purchase price and the interests accruing thereon, as decreed by the Court of Appeals, to the Luzon Development Bank, instead of Delta Development and Management Services, Inc., within thirty (30) days from finality of this Decision. The Luzon Development Bank is ordered to DELIVER a CLEAN TITLE to Angeles Catherine Enriquez upon the latter’s full payment of the balance of the purchase price and the accrued interests. SO ORDERED. DOMINGO CARABEO, Petitioner,- versus - SPOUSES NORBERTO and SUSAN DINGCO, Respondents. G.R. No. 190823 April 4, 2011 DECISION

50 CARPIO MORALES, J.: On July 10, 1990, Domingo Carabeo (petitioner) entered into a contract denominated as Kasunduan sa Bilihan ng Karapatan sa Lupa[1] (kasunduan) with Spouses Norberto and Susan Dingco (respondents) whereby petitioner agreed to sell his rights over a 648 square meter parcel of uned land situated in Purok III, Tugatog, Orani, Bataan to respondents for P38,000. Respondents tendered their initial payment of P10,000 upon g of the contract, the remaining balance to be paid on September 1990. Respondents were later to claim that when they were about to hand in the balance of the purchase price, petitioner requested them to keep it first as he was yet to settle an on-going squabble over the land. Nevertheless, respondents gave petitioner small sums of money from time to time which totaled P9,100, on petitioners request according to them; due to respondents inability to pay the amount of the remaining balance in full, according to petitioner. By respondents claim, despite the alleged problem over the land, they insisted on petitioners acceptance of the remaining balance of P18,900 but petitioner remained firm in his refusal, proffering as reason therefor that he would the land first. Sometime in 1994, respondents learned that the alleged problem over the land had been settled and that petitioner had caused its registration in his name on December 21, 1993 under Transfer Certificate of Title No. 161806. They thereupon offered to pay the balance but petitioner declined, drawing them to file a complaint before the Katarungan Pambarangay. No settlement was reached, however, hence, respondent filed a complaint for specific performance before the Regional Trial Court (RTC) of Balanga, Bataan. Petitioner countered in his Answer to the Complaint that the sale was void for lack of object certain, the kasunduan not having specified the metes and bounds of the land. In any event, petitioner alleged that if the validity of the kasunduan is upheld, respondents failure to comply with their reciprocal obligation to pay the balance of the purchase price would render the action premature. For, contrary to respondents claim, petitioner maintained that they failed to pay the balance of P28,000 on September 1990 to thus constrain him to accept installment payments totaling P9,100. After the case was submitted for decision or on January 31, 2001,[2] petitioner ed away. The records do not show that petitioners counsel informed Branch 1 of the Bataan RTC, where the complaint was lodged, of his death and that proper substitution was effected in accordance with Section 16, Rule 3, Rules of Court.[3] By Decision of February 25, 2001,[4] the trial court ruled in favor of respondents, disposing as follows: WHEREFORE, premises considered, judgment is hereby rendered ordering: 1. The defendant to sell his right over 648 square meters of land pursuant to the contract dated July 10, 1990 by executing a Deed of Sale thereof after the payment of P18,900 by the plaintiffs; 2.

The defendant to pay the costs of the suit.

SO ORDERED.[5] Petitioners counsel filed a Notice of Appeal on March 20, 2001. By the herein challenged Decision dated July 20, 2009,[6] the Court of Appeals affirmed that of the trial court.

51 Petitioners motion for reconsideration having been denied by Resolution of January 8, 2010, the present petition for review was filed by Antonio Carabeo, petitioners son,[7] faulting the appellate court: (A) in holding that the element of a contract, i.e., an object certain is present in this case. (B) in considering it unfair to expect respondents who are not lawyers to make judicial consignation after herein petitioner allegedly refused to accept payment of the balance of the purchase price. (C) in upholding the validity of the contract, Kasunduan sa Bilihan ng Karapatan sa Lupa, despite the lack of spousal consent, (underscoring supplied) and proffering that (D) [t]he death of herein petitioner causes the dismissal of the action filed by respondents; respondents cause of action being an action in personam. (underscoring supplied) The petition fails. The pertinent portion of the kasunduan reads:[8] xxxx Na ako ay may isang partial na lupa na matatagpuan sa Purok 111, Tugatog, Orani Bataan, na may sukat na 27 x 24 metro kuwadrado, ang nasabing lupa ay may sakop na dalawang punong santol at isang punong mangga, kayat ako ay nakipagkasundo sa mag-asawang Norby Dingco at Susan Dingco na ipagbili sa kanila ang karapatan ng nasabing lupa sa halagang P38,000.00. x x x x (underscoring supplied) That the kasunduan did not specify the technical boundaries of the property did not render the sale a nullity. The requirement that a sale must have for its object a determinate thing is satisfied as long as, at the time the contract is entered into, the object of the sale is capable of being made determinate without the necessity of a new or further agreement between the parties.[9] As the above-quoted portion of the kasunduan shows, there is no doubt that the object of the sale is determinate. Clutching at straws, petitioner proffers lack of spousal consent. This was raised only on appeal, hence, will not be considered, in the present case, in the interest of fair play, justice and due process.[10] Respecting the argument that petitioners death rendered respondents complaint against him dismissible, Bonilla v. Barcena[11] enlightens: The question as to whether an action survives or not depends on the nature of the action and the damage sued for. In the causes of action which survive, the wrong complained [of] affects primarily and principally property and property rights, the injuries to the person being merely incidental, while in the causes of action which do not survive, the injury

52 complained of is to the person, the property and rights of property affected being incidental. (emphasis and underscoring supplied) In the present case, respondents are pursuing a property right arising from the kasunduan, whereas petitioner is invoking nullity of the kasunduan to protect his proprietary interest. Assuming arguendo, however, that the kasunduan is deemed void, there is a corollary obligation of petitioner to return the money paid by respondents, and since the action involves property rights,[12] it survives. It bears noting that trial on the merits was already concluded before petitioner died. Since the trial court was not informed of petitioners death, it may not be faulted for proceeding to render judgment without ordering his substitution. Its judgment is thus valid and binding upon petitioners legal representatives or successors-in-interest, insofar as his interest in the property subject of the action is concerned.[13] In another vein, the death of a client immediately divests the counsel of authority.[14] Thus, in filing a Notice of Appeal, petitioners counsel of record had no personality to act on behalf of the already deceased client who, it bears reiteration, had not been substituted as a party after his death. The trial courts decision had thereby become final and executory, no appeal having been perfected. WHEREFORE, the petition is DENIED. SO ORDERED.

G.R. No. 74470 March 8, 1989 NATIONAL GRAINS AUTHORITY and WILLLAM CABAL, petitioners vs. THE INTERMEDIATE APPELLATE COURT and LEON SORIANO, respondents MEDIALDEA, J.: This is a petition for review of the decision (pp. 9-21, Rollo) of the Intermediate Appellate Court (now Court of Appeals) dated December 23, 1985 in A.C. G.R. CV No. 03812 entitled, "Leon Soriano, Plaintiff- Appellee versus National Grains Authority and William Cabal, Defendants Appellants", which affirmed the decision of the Court of First Instance of Cagayan, in Civil Case No. 2754 and its resolution (p. 28, Rollo) dated April 17, 1986 which denied the Motion for Reconsideration filed therein. The antecedent facts of the instant case are as follows: Petitioner National Grains Authority (now National Food Authority, NFA for short) is a government agency created under Presidential Decree No. 4. One of its incidental functions is the buying of palay grains from qualified farmers. On August 23, 1979, private respondent Leon Soriano offered to sell palay grains to the NFA, through William Cabal, the Provincial Manager of NFA stationed at Tuguegarao, Cagayan. He submitted the documents required by the NFA for prequalifying as a seller, namely: (1) Farmer's Information Sheet accomplished by Soriano and certified by a Bureau of Agricultural Extension (BAEX) technician, Napoleon Callangan, (2) Xerox copies of four (4) tax declarations of the riceland leased to him and copies of the lease contract between him and Judge Concepcion Salud, and (3) his Residence Tax Certificate. Private respondent Soriano's documents were processed and accordingly, he was given a quota of 2,640

53 cavans of palay. The quota noted in the Farmer's Information Sheet represented the maximum number of cavans of palay that Soriano may sell to the NFA. In the afternoon of August 23, 1979 and on the following day, August 24, 1979, Soriano delivered 630 cavans of palay. The palay delivered during these two days were not rebagged, classified and weighed. when Soriano demanded payment of the 630 cavans of palay, he was informed that its payment will be held in abeyance since Mr. Cabal was still investigating on an information he received that Soriano was not a bona tide farmer and the palay delivered by him was not produced from his farmland but was taken from the warehouse of a rice trader, Ben de Guzman. On August 28, 1979, Cabal wrote Soriano advising him to withdraw from the NFA warehouse the 630 cavans Soriano delivered stating that NFA cannot legally accept the said delivery on the basis of the subsequent certification of the BAEX technician, Napoleon Callangan that Soriano is not a bona fide farmer. Instead of withdrawing the 630 cavans of palay, private respondent Soriano insisted that the palay grains delivered be paid. He then filed a complaint for specific performance and/or collection of money with damages on November 2, 1979, against the National Food Authority and Mr. William Cabal, Provincial Manager of NFA with the Court of First Instance of Tuguegarao, and docketed as Civil Case No. 2754. Meanwhile, by agreement of the parties and upon order of the trial court, the 630 cavans of palay in question were withdrawn from the warehouse of NFA. An inventory was made by the sheriff as representative of the Court, a representative of Soriano and a representative of NFA (p. 13, Rollo). On September 30, 1982, the trial court rendered judgment ordering petitioner National Food Authority, its officers and agents to pay respondent Soriano (as plaintiff in Civil Case No. 2754) the amount of P 47,250.00 representing the unpaid price of the 630 cavans of palay plus legal interest thereof (p. 1-2, CA Decision). The dispositive portion reads as follows: WHEREFORE, the Court renders judgment in favor of the plaintiff and against the defendants National Grains Authority, and William Cabal and hereby orders: 1. The National Grains Authority, now the National Food Authority, its officers and agents, and Mr. William Cabal, the Provincial Manager of the National Grains Authority at the time of the filing of this case, assigned at Tuguegarao, Cagayan, whomsoever is his successors, to pay to the plaintiff Leon T. Soriano, the amount of P47,250.00, representing the unpaid price of the palay deliveries made by the plaintiff to the defendants consisting of 630 cavans at the rate Pl.50 per kilo of 50 kilos per cavan of palay; 2. That the defendants National Grains Authority, now National Food Authority, its officer and/or agents, and Mr. William Cabal, the Provincial Manager of the National Grains Authority, at the time of the filing of this case assigned at Tuguegarao, Cagayan or whomsoever is his successors, are likewise ordered to pay the plaintiff Leon T. Soriano, the legal interest at the rate of TWELVE (12%) percent per annum, of the amount of P 47,250.00 from the filing of the complaint on November 20, 1979, up to the final payment of the price of P 47,250.00; 3. That the defendants National Grains Authority, now National Food Authority, or their agents and duly authorized representatives can now withdraw the total number of bags (630 bags with an excess of 13 bags) now on deposit in the bonded warehouse of Eng. Ben de Guzman at Tuguegarao, Cagayan pursuant to the order of this court, and as appearing in the written inventory dated October 10, 1980, (Exhibit F for the plaintiff and Exhibit 20 for the defendants) upon payment of the price of P 47,250.00 and TWELVE PERCENT (12%) legal interest to the plaintiff, 4.

That the counterclaim of the defendants is hereby dismissed;

5.

That there is no pronouncement as to the award of moral and exemplary damages and attorney's fees; and

54 6.

That there is no pronouncement as to costs.

SO ORDERED (pp. 9-10, Rollo) Petitioners' motion for reconsideration of the decision was denied on December 6, 1982. Petitioners' appealed the trial court's decision to the Intermediate Appellate Court. In a decision promulgated on December 23, 1986 (pp. 9-21, Rollo) the then Intermediate Appellate Court upheld the findings of the trial court and affirmed the decision ordering NFA and its officers to pay Soriano the price of the 630 cavans of rice plus interest. Petitioners' motion for reconsideration of the appellate court's decision was denied in a resolution dated April 17, 1986 (p. 28, Rollo). Hence, this petition for review filed by the National Food Authority and Mr. William Cabal on May 15, 1986 assailing the decision of the Intermediate Appellate Court on the sole issue of whether or not there was a contract of sale in the case at bar. Petitioners contend that the 630 cavans of palay delivered by Soriano on August 23, 1979 was made only for purposes of having it offered for sale. Further, petitioners stated that the procedure then prevailing in matters of palay procurement from qualified farmers were: firstly, there is a rebagging wherein the palay is transferred from a private sack of a farmer to the NFA sack; secondly, after the rebagging has been undertaken, classification of the palay is made to determine its variety; thirdly, after the determination of its variety and convinced that it ed the quality standard, the same will be weighed to determine the number of kilos; and finally, it will be piled inside the warehouse after the preparation of the Warehouse Stock Receipt (WSP) indicating therein the number of kilos, the variety and the number of bags. Under this procedure, rebagging is the initial operative act signifying acceptance, and acceptance will be considered complete only after the preparation of the Warehouse Stock Receipt (WSR). When the 630 cavans of palay were brought by Soriano to the Carig warehouse of NFA they were only offered for sale. Since the same were not rebagged, classified and weighed in accordance with the palay procurement program of NFA, there was no acceptance of the offer which, to petitioners' mind is a clear case of solicitation or an unaccepted offer to sell. The petition is not impressed with merit. Article 1458 of the Civil Code of the Philippines defines sale as a contract whereby one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other party to pay therefore a price certain in money or its equivalent. A contract, on the other hand, is a meeting of minds between two (2) persons whereby one binds himself, with respect to the other, to give something or to render some service (Art. 1305, Civil Code of the Philippines). The essential requisites of contracts are: (1) consent of the contracting parties, (2) object certain which is the subject matter of the contract, and (3) cause of the obligation which is established (Art. 1318, Civil Code of the Philippines. In the case at bar, Soriano initially offered to sell palay grains produced in his farmland to NFA. When the latter accepted the offer by noting in Soriano's Farmer's Information Sheet a quota of 2,640 cavans, there was already a meeting of the minds between the parties. The object of the contract, being the palay grains produced in Soriano's farmland and the NFA was to pay the same depending upon its quality. The fact that the exact number of cavans of palay to be delivered has not been determined does not affect the perfection of the contract. Article 1349 of the New Civil Code provides: ". . .. The fact that the quantity is not determinate shall not be an obstacle to the existence of the contract, provided it is possible to determine the same, without the need of a new contract between the parties." In this case, there was no need for NFA and Soriano to enter into a new contract to determine the exact number of cavans of palay to be sold. Soriano can deliver so much of his produce as long as it does not exceed 2,640 cavans.

55 In its memorandum (pp. 66-71, Rollo) dated December 4, 1986, petitioners further contend that there was no contract of sale because of the absence of an essential requisite in contracts, namely, consent. It cited Section 1319 of the Civil Code which states: "Consent is manifested by the meeting of the offer and the acceptance of the thing and the cause which are to constitute the contract. ... " Following this line, petitioners contend that there was no consent because there was no acceptance of the 630 cavans of palay in question. The above contention of petitioner is not correct Sale is a consensual contract, " ... , there is perfection when there is consent upon the subject matter and price, even if neither is delivered." (Obana vs. C.A., L-36249, March 29, 1985, 135 SCRA 557, 560) This is provided by Article 1475 of the Civil Code which states: Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. xxx The acceptance referred to which determines consent is the acceptance of the offer of one party by the other and not of the goods delivered as contended by petitioners. From the moment the contract of sale is perfected, it is incumbent upon the parties to comply with their mutual obligations or "the parties may reciprocally demand performance" thereof. (Article 1475, Civil Code, 2nd par.). The reason why NFA initially refused acceptance of the 630 cavans of palay delivered by Soriano is that it (NFA) cannot legally accept the said delivery because Soriano is allegedly not a bona fide farmer. The trial court and the appellate court found that Soriano was a bona fide farmer and therefore, he was qualified to sell palay grains to NFA. Both courts likewise agree that NFA's refusal to accept was without just cause. The above factual findings which are ed by the record should not be disturbed on appeal. ACCORDINGLY, the instant petition for review is DISMISSED. The assailed decision of the then Intermediate Appellate Court (now Court of Appeals) is affirmed. No costs. SO ORDERED. Narvasa, Cruz, Gancayco and Griño-Aquino, JJ., concur.

G.R. No. 74553 June 8, 1989 SERVICEWIDE SPECIALISTS, INCORPORATED, petitioner, vs. THE HONORABLE INTERMEDIATE APPELLATE COURT, GALICANO SITON AND JUDGE JUSTINIANO DE DUMO respondents. MEDIALDEA, J.: This is a petition for review on certiorari of a decision of the Intermediate Appellate Court (now Court of Appeals) in ACG.R. CV No. 03876 affirming in toto the decision of the Regional Trial Court of Manila in Civil Case No. 82-4364 entitled, "Servicewide Specialists, Inc. vs. Galicano Siton and John Doe." The antecedent facts in this case as found by the lower court are as follows:

56 The private respondent Galicano Siton purchased from Car Traders Philippines, Inc. a vehicle described as Mitsubishi Celeste two-door with air-conditioning, Engine 2M-62799, Serial No. A73-2652 and paid P 25,000.00 as downpayment of the price. The remaining balance of P 68,400.00, includes not only the remaining principal obligation but also advance interests and s for motor vehicle insurance policies. On August 14, 1979, Siton executed a promissory note in favor of Car Traders Philippines, Inc. expressly stipulating that the face value of the note which is P 68,400. 00, shall "be payable, without need of notice of demand, in installments of the amounts following and at the dates hereinafter set forth, to wit: P 1,900.00 monthly for 36 months due and payable on the 14th day of each month starting September 14, 1979, thru and inclusive of August 14, 1982" (p. 84, Rollo). There are additional stipulations in the Promissory Note consisting of, among others: 1

Interest at the rate of 14% per annum to be added on each unpaid installment from maturity;

2 If default is made in the payment of any of the installments or interest thereon, the total principal sum then remaining unpaid, together with accrued interest thereon shall at once become due and demandable;

3 In case of default, and attorney's services are availed of, there shall be added a sum equal to 25% of the total sum due thereon to cover attorney's fees, aside from expenses of collection and legal costs (p. 84, Rollo). As further security, Siton executed a Chattel Mortgage over the subject motor vehicle in favor of Car Traders Philippines, Inc. (pp. 85-88, Rollo). The Chattel Mortgage Contract provides additional stipulations, such as: a) the waiver by the mortgagor of his rights under Art. 1252 of the Civil Code to designate the application of his payments and authorize the mortgagee or its assigns to apply such payments to either his promissory note or to any of his existing obligations to the mortgagee or its assigns at the latter's discretion; and b) concerning the insurance of the subject motor vehicle, the mortgagor is under obligation to secure the necessary policy in an amount not less than the outstanding balance of the mortgage obligation and that loss thereof shall be made payable to the mortgagee or its assigns as its interest may appear, with the further obligation of the mortgagor to deliver the policy to the mortgagee. The mortgagor further agrees that in default of his effecting or renewing the insurance and delivering the policy as endorsed to the mortgagee within five (5) days after the execution of the mortgage or the expiry date of the insurance, the mortgagee may, at his option but without any obligation to do so, effect such insurance or obtain such renewal for the of the mortgagor. The credit covered by the promissory note and chattel mortgage executed by respondent Galicano Siton was first assigned by Car Traders Philippines, Inc. in favor of Filinvest Credit Corporation. Subsequently, Filinvest Credit Corporation likewise reassigned said credit in favor of petitioner Servicewide Specialists, Inc. and respondent Siton was advised of this second assignment. Alleging that Siton failed to pay the part of the installment which fell due on November 2, 1981 as well as the subsequent installments which fell due on December 2, 1981 and January 2, 1982, respectively, the petitioner filed this action against Galicano Siton and "John Doe." The relief sought by the plaintiff is a Writ of Replevin over subject motor vehicle or, in the alternative, for a sum of money of P 20,319.42 plus interest thereon at the rate of 14% per annum from January 11, 1982 until fully paid; and in either case, for defendants to pay certain sum of money for attorney's fees, liquidated damages, bonding fees and other expenses incurred in the seizure of the motor vehicle plus costs of suit.

57 After the service of summons, Justiniano de Dumo, identifying himself as the "John Doe" in the Complaint, inasmuch as he is in possession of the subject vehicle, filed his Answer with Counterclaim and with Opposition to the prayer for a Writ of Replevin. Said defendant, alleged the fact that he has bought the motor vehicle from Galicano Siton on November 24, 1979; that as such successor, he stepped into the rights and obligations of the seller; that he has religiously paid the installments as stipulated upon in the promissory note. He also manifested that the Answer he has filed in his behalf should likewise serve as a responsive pleading for his co-defendant Galicano Siton. On January 12, 1984, the Regional Trial Court rendered a decision, the dispositive portion of which states: WHEREFORE, judgment is hereby rendered as follows: 1.

Denying the issuance of a Writ of Replevin in this case;

2. Ordering defendants to pay tly and severally, the plaintiff, the remaining balance on the motor vehicle reckoned as of January 25, 1982, without additional interest and charges, and the same to be paid by installments, per the of the Promissory Note, payable on the 14th day of each month starting the month after this Decision shall have become final, until the full payment of the remaining obligation; 3. The Chattel Mortgage contract is deemed to cover the obligation petition stated in par. 2, supra, without prejudice to the parties, including defendant de Dumo, to now execute a new promissory note and/or chattel mortgage contract; 4. Ordering defendants to pay, tly and severally, the sum of another P 3,859.90 to the plaintiff by way of refunding the payments in the past on insurance policies over subject car; 5.

Each party shall bear his own expenses and attorney's fees; and

6. The claim of one party against the other(s) for damages, and vice-versa are hereby denied and dismissed. There is no pronouncement as to costs. SO ORDERED. (pp. 95-96, Rollo) Not satisfied with the decision of the trial court, the petitioner appealed to the Intermediate Appellate Court. On April 25, 1986, the respondent Appellate Court rendered judgment affirming in toto the decision of the trial court. The dispositive portion of the judgment states: WHEREFORE, the appealed judgment is in full accord with the evidence and the law is hereby therefore affirmed in all its parts. Costs against plaintiff-appellant. SO ORDERED. (p. 42, Rollo). Hence, the instant petition was filed, praying for a reversal of the above-mentioned decision in favor of private respondents, with the petitioner asg the following errors: 2.1 The Honorable Respondent, the Intermediate Appellate Court erred and gravely abused its discretion in concluding that there was a valid sale of the mortgaged vehicle between Siton and De Dumo;

58 2.2 The Honorable Respondent, the Intermediate Appellate Court erred and gravely abused its discretion in holding that the petitioner (plaintiff) and its predecessors-in-interest are bound by the questionable and invalid unnotarized Deed of Sale between Siton and De Dumo, even as neither petitioner (plaintiff) nor its predecessors-in-interest had knowledge nor had they given their written or verbal consent thereto; 2.3 The Honorable Respondent, the Intermediate Appellate Court erred and gravely abused its discretion in ruling that the mortgagee (petitioner) has the obligation to make demands to De Dumo for payment on the Promissory Note when De Dumo is not privy thereto; 2.4 The Honorable Respondent, the Intermediate Appellate Court erred and acted with grave abuse of discretion in refusing to issue the Writ of Replevin despite due compliance by petitioner of the requirements of Rule 60, Sections 1 and 2 of REVISED RULES OF COURT; 2.5 The Honorable Respondent, the Intermediate Appellate Court acted with grave abuse of discretion in ruling that petitioner (creditor-mortgagee) is obliged to inform respondent De Dumo (not privy to the mortgage) to submit the insurance policy over the mortgaged "res" and to demand the payor-third-party (De Dumo) to redeem his rubber check; (pp. 4-5, Rollo). In its first assigned error, petitioner alleges that the sale of the mortgaged vehicle between the mortgagor Siton and De Dumo was void, as the sale is prohibited under the provisions of the Deed of Chattel Mortgage, the Chattel Mortgage Act (Act 1508) and the Revised Penal Code. The Deed of Chattel Mortgage executed by the petitioner and Siton stipulates: The Mortgagor shall not sell, mortgage or in any other way, encumber or dispose of the property herein mortgaged without the previous written consent of the Mortgagee. (p. 85, Rollo). The rule is settled that the chattel mortgagor continues to be the owner of the property, and therefore, has the power to alienate the same; however, he is obliged under pain of penal liability, to secure the written consent of the mortgagee. (Francisco, Vicente, Jr., Revised Rules of Court in the Philippines, (1972), Volume IV-B Part I, p. 525). Thus, the instruments of mortgage are binding, while they subsist, not only upon the parties executing them but also upon those who later, by purchase or otherwise, acquire the properties referred to therein. The absence of the written consent of the mortgagee to the sale of the mortgaged property in favor of a third person, therefore, affects not the validity of the sale but only the penal liability of the mortgagor under the Revised Penal Code and the binding effect of such sale on the mortgagee under the Deed of Chattel Mortgage. Anent its second, third and fifth assigned errors, petitioner submits that it is not bound by the deed of sale made by Siton in favor of De Dumo, as neither petitioner nor its predecessor has given their written or verbal consent thereto pursuant to the Deed of Chattel Mortgage. On this matter, the appellate court upheld the findings of the trial court, as follows, to wit: The first issue is whether or not the sale and transfer of the motor vehicle, subject matter of the chattel mortgage, made by Siton in favor of Atty. de Dumo is illegal and violative of the Chattel Mortgage Law. The supposition is that if it were illegal, then plaintiff has all the right to file this action and to foreclose on the chattel mortgage. Both defendants testified that, before the projected sale, they went to a certain. Atty. Villa of Filinvest Credit Corporation advising the latter of the intended sale and transfer. Defendants were accordingly advised that the verbal information given to the corporation would suffice, and that it would be tedious and impractical to effect a change of transfer of ownership as that would require a new credit investigation as to the capacity and worthiness of Atty. De Dumo, being the new debtor. The further suggestion given by Atty. Villa is that the should be maintained in the name of Galicano Siton. Plaintiff claims

59 that it and its predecessor had never been notified of the sale much less were they notified in writing as required by the contract. On this particular issue, it would really appear that, since the transfer, it was Atty. de Dumo who had been paying said , almost invariably with his personal checks. In fact, one of the checks that supposedly bounced, marked Exhibit J and the relative receipt as Exhibit 16, was Atty. de Dumo's personal check. Note that plaintiff has been accepting such payments by defendant de Dumo. It would appear, therefore, that there was an implied acceptance by the plaintiff and its predecessor of the transfer. Another reasonable conclusion is that, while there was failure on the part of defendants to comply strictly and literaly with their contract, there was substantial compliance therewith. (pp. 92-93, Rollo) We agree with the aforequoted findings and conclusions of the lower court which were affirmed on appeal by the Court of Appeals. The conclusions and findings of facts by the trial court are entitled to great weight and will not be disturbed on appeal unless for strong and cogent reasons because the trial court is in a better position to examine real evidence as well as to observe the demeanor of witnesses while testifying on the case. (Macua vs. Intermediate Appellate Court, No. L-70810, October 26, 1987,155 SCRA 29) There is no dispute that the Deed of Chattel Mortgage executed between Siton and the petitioner requires the written consent of the latter as mortgagee in the sale or transfer of the mortgaged vehicle. We cannot ignore the findings, however, that before the sale, prompt inquiries were made by private respondents with Filinvest Credit Corporation regarding any possible future sale of the mortgaged property; and that it was upon the advice of the company's credit lawyer that such a verbal notice is sufficient and that it would be convenient if the would remain in the name of the mortgagor Siton. Even the personal checks of de Dumo were accepted by petitioner as payment of some of the installments under the promissory note (p. 92, Rollo). If it is true that petitioner has not acquiesced in the sale, then, it should have inquired as to why de Dumo's checks were being used to pay Siton's obligations. Based on the foregoing circumstances, the petitioner is bound by its predecessor company's representations. This is based on the doctrine of estoppel, through which, "an ission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon" (Art. 1431, Civil Code). Like the related principles of volenti non lit injuria (consent to injury), waiver and acquiescence, estoppel finds its origin generally in the equitable notion that one may not change his position, and profit from his own wrongdoing when he has caused another to rely on his former representations (Sy vs. Central Bank, No. L-41480, April 30, 1976, 70 SCRA 570). Further, it is worthy to note that despite the arguments of petitioner that it is not bound by the sale of the vehicle to de Dumo, and that the latter is a stranger to the transaction between Filinvest and Siton, nevertheless, it itted de Dumo's obligation as purchaser of the property when it named the latter as one of the defendants in the lower court. Petitioner even manifested in its prayer in the appellant's brief and in the petition before Us, that de Dumo be ordered to pay petitioner, tly and severally with Siton the unpaid balance on the promissory note (pp. 32 and 72, Rollo). In the fourth assigned error by petitioner, the latter claims that the appellate court gravely erred in upholding the trial court's refusal to issue that Writ of Replevin despite compliance with the requirements of the Rules. This contention is devoid of merit. Article 1484 of the New Civil Code prescribes three remedies which a vendor may pursue in a contract of sale of personal property the price of which is payable in installments, to wit: 1) to exact fulfillment of the obligation; 2) cancel the sale; and 3) foreclose the mortgage on the thing sold. These remedies are alternative and the vendor cannot avail of them at the same time.

60 It is clear from the prayer of petitioner in its brief on appeal to the appellate court that it had chosen the remedy of fulfillment when it asked the appellate court to order private respondents to pay the remaining unpaid sums under the promissory note (p. 31, Rollo). By having done so, it has deemed waived the third remedy of foreclosure, and it cannot therefore ask at the same time for a Writ of Replevin as preparatory remedy to foreclosure of mortgage. In a similar case, where the vendor filed an action containing three remedies: to collect the purchase price; to seize the property purchased by suing for replevin and to foreclose the mortgage executed thereon, We held that such a scheme is not only irregular but is a flagrant circumvention of the prohibition of the law (Luneta Motor Company vs. Dimagiba No. L-17061, December 30, 1961, 3 SCRA 884). Finally, the petitioner argues that the judgment of the appellate court was not in accordance with its own findings and those of the trial court showing private respondents' default in the payment of three monthly installments as a result of the dishonor of three checks issued as payments; and that as a consequence thereof, the full amount of the unpaid balance under the promissory note became due and demandable pursuant to the of the promissory note. This contention is impressed with merit. The findings of the trial court on this issue, which were affirmed by the appellate court, state, as follows: The second point of issue is whether or not defendants were in arrears when the complaint was filed on January 25, 1982. Plaintiff claims that there were three payments by checks made by defendants, which are ineffective (Art. 1249, Civil Code) as said checks bounced for insufficient finding. .... The debtor/obligor is allegedly obliged, as per the Chattel Mortgage Contract, to have the motor vehicle insured and, failing which, the creditor may insure the same for the of the debtor. Such payments, therefore, together with the value of the three checks that had been dishonored, are the reasons for defendants' delinquency. On defendant's part, more particularly Atty. de Dumo's, they submit that there was no delinquency as, in fact, defendants have receipts to evidence payment for the months of November 1981 (Exhibit 18 dated November 3, 1981), December 1981 (Exhibit 17 dated December 2, 1981), and January, 1982 (Exhibit 30, dated January 5, 1982).

On cross-examination, Atty. de Dumo itted that really one of his checks (Exhibit J) was dishonored. There is no evidence on way [or] the other whether said check was replaced subsequently with a good one. Likewise, there is no clarification in the record as to whether the two other dishonored checks had been replaced. As to the insurance policies, defendants claimed on the witness stand that they were the ones who had the vehicle insured, for, otherwise, defendant de Dumo could not have ed the motor vehicle for the years 1980 up to 1982. Defendants further contend that they complied with their undertaking by notifying verbally the creditor of that fact. There is no denying the fact however, that the insurance policies obtained were not endorsed, much less surrendered, to the plaintiff; in fact such policies were not shown in court to evidence the proper indorsement of the policies in favor of the creditor. (pp. 9394, Rollo). (Emphasis supplied) It is evident from the foregoing findings that the checks issued by the defendants as payment for the installments for November and December, 1981 and January, 1982 were dishonored and were not shown to have been replaced. The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed. (Art. 1249, Civil Code). When the existence of the debt is fully established by the evidence contained in the record, the burden of proving that it has been extinguished by payment devolves upon the debtor who offers such a defense to the claim of the creditor. (Chua Chienco vs. Vargas, 11 Phil. 219). In the absence of any showing that the aforestated checks were replaced and subsequently cashed, We can only infer that the monthly installments for November, 1981, December, 1981 and January, 1982 have not been paid. In view of the

61 above, it is not correct for the appellate court to ignore the evidence on record showing the default of private respondents in their obligations. The fact that Siton and de Dumo were not advised or notified of their failure to comply with their obligations under the note and under the Deed of Chattel Mortgage is of no importance. Article 1169 of the Civil Code provides: Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. However, the demand by the creditor shall not be necessary in order that delay may exist: 1.

When the obligation or the law expressly so declares;

xxx

xxx

xxx

The promissory note executed by Siton in favor of Car Traders Philippines, Inc. expressly stipulates that the unpaid balance shall be payable, without need of notice or demand, in fixed monthly installments; and that if default be made in the payment of any of the installments or interest thereon as and when the same becomes due and payable as specified above, the total principal sum then remaining unpaid, together with accrued interest thereon, shall at once become due and payable (p. 84, Rollo). The parties are bound by this agreement. In view of the foregoing, We find it correct to hold both the respondents Galicano Siton and Justiniano de Dumo liable for their obligations to petitioner herein. In the case at bar, the purchase of the car by respondent de Dumo from respondent Siton does not necessarily imply the extinguishment of the liability of the latter. Since it was neither established nor shown that Siton was released from responsibility under the promissory note, the same does not constitute novation by substitution of debtors under Article 1293 of the Civil Code. Likewise, the fact that petitioner company accepts payments from a third person like respondent de Dumo, who has assumed the obligation, will result merely to the addition of debtors and not novation. Hence, the creditor may therefore enforce the obligation against both debtors. (Straight vs. Hashell, 49 Phil. 614; Mata vs. Serra, 47 Phil. 464; McCullough vs. Veloso, 46 Phil. 1; Pacific Commercial vs. Sotto, 34 Phil. 237). If there is no agreement as to solidarity, the first and new debtors are considered obligated tly. (Lopez vs. Court of Appeals, et al., No. L-33157, June 29, 1982, 114 SCRA 671; Dungo vs. Lopena, et al., L-18377, December 29, 1962, 6 SCRA 1007). ACCORDINGLY, the petition is GRANTED and the assailed decision of the Court of Appeals dated April 25, 1986 is hereby REVERSED and SET ASIDE, and a new one entered, ordering the private respondents Galicano Siton and Justiniano de Dumo, tly to pay to petitioner Servicewide Specialists, Incorporated, the total sum of the remaining unpaid balance on the promissory note with interest thereon at fourteen percent per annum from January 25, 1982 until fully paid, as well as stipulated attorney's fees and liquidated damages; and to reimburse to petitioner the sum of P 3,859.90 for the payments on the insurance policies over the subject vehicle. Costs against private respondents. SO ORDERED. Narvasa, Cruz, Gancayco and Griño-Aquino, JJ., concur.

62 MAKATI SPORTS CLUB, INC., Petitioner, - versus - CECILE H. CHENG, MC FOODS, INC., and RAMON SABARRE, Respondents. G.R. No. 178523 June 16, 2010 DECISION NACHURA, J.: This is a petition for review on certiorari[1] under Rule 45 of the Rules of Court, assailing the Decision[2] dated June 25, 2007 of the Court of Appeals (CA) in CA-G.R. CV No. 80631, affirming the decision[3] dated August 20, 2003 of the Regional Trial Court (RTC), Branch 138, Makati City in Civil Case No. 01-837. The facts of the case, as narrated by the RTC and adopted by the CA, are as follows: On October 20, 1994, plaintiffs Board of Directors adopted a resolution (Exhibit 7) authorizing the sale of 19 unissued shares at a floor price of P400,000 and P450,000 per share for Class A and B, respectively. Defendant Cheng was a Treasurer and Director of plaintiff in 1985. On July 7, 1995, Hodreal expressed his interest to buy a share, for this purpose he sent the letter, Exhibit 13. In said letter, he requested that his name be included in the waiting list. It appears that sometime in November 1995, McFoods expressed interest in acquiring a share of the plaintiff, and one was acquired with the payment to the plaintiff by McFoods of P1,800,000 through Urban Bank (Exhibit 3). On December 15, 1995, the Deed of Absolute Sale, Exhibit 1, was executed by the plaintiff and McFoods Stock Certificate No. A 2243 was issued to McFoods on January 5, 1996. On December 27, 1995, McFoods sent a letter to the plaintiff giving advise (sic) of its offer to resell the share. It appears that while the sale between the plaintiff and McFoods was still under negotiations, there were negotiations between McFoods and Hodreal for the purchase by the latter of a share of the plaintiff. On November 24, 1995, Hodreal paid McFoods P1,400,000. Another payment of P1,400,000 was made by Hodreal to McFoods on December 27, 1995, to complete the purchase price of P2,800,000. On February 7, 1996, plaintiff was advised of the sale by McFoods to Hodreal of the share evidenced by Certificate No. 2243 for P2.8 Million. Upon request, a new certificate was issued. In 1997, an investigation was conducted and the committee held that there is prima facie evidence to show that defendant Cheng profited from the transaction because of her knowledge. xxx Plaintiffs evidence of fraud are [a] letter of Hodreal dated July 7, 1995 where he expressed interest in buying one (1) share from the plaintiff with the request that he be included in the waiting list of buyers; [b] declaration of Lolita Hodreal in her Affidavit that in October 1995, she talked to Cheng who assured her that there was one (1) available share at the price of P2,800,000. The purchase to be validated by paying 50% immediately and the balance after thirty (30) days; [c] Marian Punzalan, Head, hip Section of the plaintiff declared that she informed Cheng of the intention of Hodreal to purchase one (1) share and she gave to Cheng the telephone number of Hodreal; and [d] the authorization from Sabarre to claim the stock certificate.[4] Thus, petitioner sought judgment that would order respondents to pay the sum of P1,000,000.00, representing the amount allegedly defrauded, together with interest and damages.

63 After trial on the merits, the RTC rendered its August 20, 2003 decision, dismissing the complaint, including all counterclaims. Aggrieved, Makati Sports Club, Inc. (MSCI) appealed to the CA, arguing that the RTC erred in finding neither direct nor circumstantial evidence that Cecile H. Cheng (Cheng) had any fraudulent participation in the transaction between MSCI and Mc Foods, Inc. (Mc Foods), while it allegedly ignored MSCIs overwhelming evidence that Cheng and Mc Foods confabulated with one another at the expense of MSCI. After the submission of the parties respective briefs, the CA promulgated its assailed Decision, affirming the August 20, 2003 decision of the RTC. Hence, this petition anchored on the grounds that THE APPELLATE COURT ERRED IN UPHOLDING THE CONCLUSION OF THE TRIAL COURT THAT PETITIONER DID NOT PROFFER CLEAR AND CONVINCING EVIDENCE SHOWING THAT THE RESPONDENTS DEFRAUDED THE PETITIONER DESPITE OVERWHELMING EVIDENCE TO THE CONTRARY AS SHOWN BY THE FOLLOWING: (A) RESPONDENTS CHENG AND SABARRES OWN ISSIONS, MARIAN PUNZALANS AFFIDAVIT, AND OTHER PERTINENT DOCUMENTARY EVIDENCE ALL UNEQUIVOCALLY PROVE THAT RESPONDENT CHENG HAD INTIMATE PARTICIPATION IN THE SALE OF MSCIS UNISSUED CLASS A SHARE TO MC FOODS, INC. FOR THE CONSIDERATION OF ONE MILLION EIGHT HUNDRED THOUSAND PESOS (PHP1,800,000.00). (B) RESPONDENT CHENGS ISSIONS AND OTHER PERTINENT DOCUMENTARY EVIDENCE RELATED TO THE SALE OF MSCIS UNISSUED CLASS A SHARE TO RESPONDENT MC FOODS, INC. AND THE RESALE OF THE SAME TO SPOUSES HODREAL PROVE THAT THE SALE OF THE SAID UNISSUED SHARE TO MC FOODS, INC. AT ONE MILLION EIGHT HUNDRED THOUSAND PESOS (PHP1,800,000.00) WAS MADE WITH A VIEW TO RESELL THE SAME AT A PROFIT TO THE HODREAL SPOUSES AT THE AMOUNT OF TWO MILLION EIGHT HUNDRED PESOS (PHP2,800,000.00); THE RESALE OF THE SAID SHARE TO THE SPOUSES HODREAL OCCURRING EVEN BEFORE MC FOODS, INC. GAINED OWNERSHIP OVER THE SAID UNISSUED SHARE. (C) THE UTTER LACK OF DOCUMENTARY EVIDENCE SHOWING THAT MC FOODS, INC. EVINCED A DESIRE TO PURCHASE PETITIONERS UNISSUED SHARES CONCLUSIVELY PROVES THAT MC FOODS, INC. NEVER MADE ANY FORMAL OFFER TO BUY AN UNISSUED M[SC]I SHARE FROM PETITIONERS BOARD OF DIRECTORS AND/OR HIP COMMITTEE, COURSING THE SAID TRANSACTION CLANDESTINELY THROUGH RESPONDENT CHENG. (D) RESPONDENT CHENGS OWN ISSIONS INDUBITABLY PROVE THAT SHE DELIBERATELY CONCEALED THE FACT THAT THERE WERE OTHER UNISSUED M[SC]I SHARES AVAILABLE FOR PURCHASE BY THE SPOUSES HODREAL, CHOOSING INSTEAD TO BROKER THE RESALE OF THE SHARE PURCHASED BY MC FOODS, INC. FROM MSCI TO THE SPOUSES HODREAL AT THE PRICE OF TWO MILLION EIGHT HUNDRED THOUSAND PESOS (PHP2,800,000.00) TO THE DETRIMENT OF THE PETITIONER. (E) RESPONDENTS CHENG AND SABARRES ISSIONS, MSCIS BY-LAWS AND DOCUMENTARY EVIDENCE RELATING TO THE TWO IRREGULAR SALES TRANSACTIONS ALL POINT TO THE CONCLUSION THAT MC FOODS, INC. IN RESELLING ITS MSCI SHARE TO SPOUSES HODREAL FAILED TO GIVE MSCI A CREDIBLE OPPORTUNITY TO REPURCHASE THE SAME IN ACCORDANCE WITH SECTION 30 (E) OF MSCIS BY-LAWS. (F) RESPONDENT CHENGS OWN DOCUMENTARY EVIDENCE PROVES THAT RESPONDENTS FALSIFIED AN ENTRY IN MC FOODS, INC.S OFFER TO SELL ITS SHARE TO MSCI IN AN EFFORT TO COAT THE RESELLING OF THE SAID SHARE TO SPOUSES HODREAL WITH A SEMBLANCE OF REGULARITY[.]

64 (G) FINALLY, PERHAPS THE MOST OVERLOOKED MATTER BY THE TRIAL COURT AND THE APPELLATE COURT IS THE SINGULAR UNDENIABLE FACT THAT RESPONDENT CHENG DURING THE PERIOD IN WHICH THE ABOVE-MENTIONED TRANSACTIONS CAME INTO FRUITION WAS A MEMBER OF THE BOARD OF DIRECTORS AND THE TREASURER OF MSCI, THIS FACT ALONE TAINTS THE PARTICIPATION OF RESPONDENT CHENG IN THE SAID IRREGULAR TRANSACTIONS WITH BAD FAITH.[5] The petition should be denied. At the outset, we note that this recourse is a petition for review on certiorari under Rule 45 of the Rules of Court. Under Section 1 of the Rule, such a petition shall raise only questions of law which must be distinctly alleged in the appropriate pleading. In a case involving a question of law, the resolution of the issue must rest solely on what the law provides for a given set of facts drawn from the evidence presented. Stated differently, there should be nothing in dispute as to the state of facts; the issue to be resolved is merely the correctness of the conclusion drawn from the said facts. Once it is clear that the issue invites a review of the probative value of the evidence presented, the question posed is one of fact. If the query requires a reevaluation of the credibility of witnesses, or the existence or relevance of surrounding circumstances and their relation to each other, then the issue is necessarily factual.[6] A perusal of the assignment of errors and the discussion set forth by MSCI would readily show that the petition seeks a review of all the evidence presented before the RTC and reviewed by the CA; therefore, the issue is factual. Accordingly, the petition should be dismissed outright, especially considering that the very same factual circumstances in this petition have already been ruled upon by the CA. However, MSCI seeks to evade this rule that the findings of fact made by the trial court, particularly when affirmed by the appellate court, are entitled to great weight and even finality, claiming that its case falls under two of the wellrecognized exceptions, to wit: (1) that the judgment of the appellate court is premised on a misapprehension of facts or that it has failed to consider certain relevant facts which, if properly considered, will justify a different conclusion; and (2) that the findings of fact of the appellate court are ostensibly premised on the absence of evidence, but are contradicted by the evidence on record.[7] MSCI insists that Cheng, in collaboration with Mc Foods, committed fraud in transacting the transfers involving Stock Certificate No. A 2243 (Certificate A 2243) on of the following circumstances(1) on November 24, 1995, Joseph L. Hodreal (Hodreal) paid the first installment of P1,400,000.00 for the purchase of a Class A share in favor of Mc Foods;[8] (2) on November 28, 1995, Mc Foods deposited to MSCIs an Allied Banking Corporation managers check for the purchase of the same share in the amount of P1,800,000.00,[9] sans an official receipt from MSCI;[10] (3) on December 15, 1995, MSCI and Mc Foods executed a Deed of Sale for the purchase of a Class A share;[11] (4) on December 27, 1995, Hodreal paid the last installment of P1,400,000.00 to Mc Foods;[12] (5) on December 27, 1995, Mc Foods sent a letter to MSCI, offering to sell its purchased share of stock in the amount of P2,800,000.00;[13] (6) on January 5, 1996, Certificate A 2243 was issued to Mc Foods by MSCI;[14] and (7) on January 29, 1996, Mc Foods and Hodreal executed a Deed of Sale for the same share of stock.[15] Based on the above incidents, MSCI asserts that Mc Foods never intended to become a legitimate holder of its purchased Class A share but did so only for the purpose of realizing a profit in the amount of P1,000,000.00 at the expense of the former. MSCI further claims that Cheng confabulated with Mc Foods by providing it with an insiders information as to the status of the shares of stock of MSCI and even, allegedly with unusual interest, facilitated the transfer of ownership of the subject share of stock from Mc Foods to Hodreal, instead of an original, unissued share of stock. According to MSCI, Chengs fraudulent participation was clearly and overwhelmingly proven by the following circumstances: (1) sometime in October 1995, Lolita Hodreal, wife of Hodreal, talked to Cheng about the purchase of one

65 Class A share of stock and the latter assured her that there was already an available share for P2,800,000.00;[16] (2) the second installment payment of P1,400,000.00 of spouses Hodreal to Mc Foods was received by Cheng on the latters behalf;[17] (3) Marian N. Punzalan (Punzalan), head of MSCIs hip section, informed Cheng about Hodreals intention to purchase a share of stock and Cheng asked her if there was a quoted price for it, and for Hodreals number;[18] and (4) on January 29, 1996, Cheng claimed Certificate A 2243 on behalf of Mc Foods,[19] per letter of authority dated January 26, 1996, executed by Mc Foods in favor of Cheng.[20] The Court is not convinced. It is noteworthy that, as early as July 7, 1995, Hodreal already expressed to the MSCI hip Committee his intent to purchase one Class A share and even requested if he could be included in the waiting list of buyers. However, there is no evidence on record that the hip Committee acted on this letter by replying to Hodreal if there still were original, unissued shares then or if he would indeed be included in the waiting list[21] of buyers. All that Punzalan did was to inform Cheng of Hodreals intent and nothing more, even as Cheng asked for Hodreals number. It may also be observed that, although established by Punzalans affidavit that she informed Cheng about Hodreals desire to purchase a Class A share and that Cheng asked for Hodreals number, it is not clear when Punzalan relayed the information to Cheng or if Cheng indeed initiated with Hodreal to peddle Mc Foods purchased share. While Punzalan declared that, in December 1995, she received a Deed of Absolute Sale between MSCI and Mc Foods of a Class A share for P1,800,000.00 signed by Atty. Rico Domingo and Cheng, in their respective capacities as then President and Treasurer of MSCI, and by Ramon Sabarre, as President of Mc Foods, what she merely did was to inquire from her immediate superior Becky Pearanda what share to issue; and the latter, in turn, replied that it should be an original share. Thereafter, Punzalan prepared a letter, signed by then corporate secretary, Atty. Rafael Abiera, to be sent to MSCIs stock transfer agent for the issuance of the corresponding certificate of stock. Then, Certificate A 2243 was issued in favor of Mc Foods on January 5, 1996. Also in point are the powers and duties of the MSCIs hip Committee, viz.: SEC. 29. (a) The hip Committee shall process applications for hip; ascertain that the requirements for stock ownership, including citizenship, are complied with; submit to the Board its recommended on applicants for inclusion in the Waiting List; take charge of auction sales of shares of stock; and exercise such other powers and perform such other functions as may be authorized by the Board.[22] Charged with ascertaining the compliance of all the requirements for the purchase of MSCIs shares of stock, the hip Committee failed to question the alleged irregularities attending Mc Foods purchase of one Class A share at P1,800,000.00. If there was really any irregularity in the transaction, this inaction of the Management Committee belies MSCIs cry of foul play on Mc Foods purchase of the subject share of stock. In fact, the purchase price of P1,800,000.00 cannot be said to be detrimental to MSCI, considering that it is the same price paid for a Class A share in the last sale of an original share to Land Bank of the Philippines on September 25, 1995, and in the sale by Marina Properties Corporation to Xanland Properties, Inc. on October 23, 1995.[23] These circumstances have not been denied by MSCI. What is more, the purchase price of P1,800,000.00 is P1,400,000.00 more than the floor price set by the MSCI Board of Directors for a Class A share in its resolution dated October 20, 1994.[24] Further, considering that Mc Foods tendered its payment of P1,800,000.00 to MSCI on November 28, 1995, even assuming arguendo that it was driven solely by the intent to speculate on the price of the share of stock, it had all the right to negotiate and transact, at least on the anticipated and expected ownership of the share, with Hodreal.[25] In other words, there is nothing wrong with the fact that the first installment paid by Hodreal preceded the payment of Mc Foods for the same share of stock to MSCI because eventually Mc Foods became the owner of a Class A share covered by

66 Certificate A 2243. Upon payment by Mc Foods of P1,800,000.00 to MSCI and the execution of the Deed of Absolute Sale on December 15, 1995, it then had the right to demand the delivery of the stock certificate in its name. The right of a transferee to have stocks transferred to its name is an inherent right flowing from its ownership of the stocks.[26] It is MSCIs stance that Mc Foods violated Section 30(e) of MSCIs Amended By-Laws on its pre-emptive rights, which provides SEC. 30. x x x . (e) Sale of Shares of Stockholder. Where the ed owner of share of stock desires to sell his share of stock, he shall first offer the same in writing to the Club at fair market value and the club shall have thirty (30) days from receipt of written offer within which to purchase such share, and only if the club has excess revenues over expenses (unrestricted retained earning) and with the approval of two-thirds (2/3) vote of the Board of Directors. If the Club fails to purchase the share, the stockholder may dispose of the same to other persons who are qualified to own and hold shares in the club. If the share is not purchased at the price quoted by the stockholder and he reduces said price, then the Club shall have the same pre-emptive right subject to the same conditions for the same period of thirty (30) days. Any transfer of share, except by hereditary succession, made in violation of these conditions shall be null and void and shall not be recorded in the books of the Club. The share of stock so acquired shall be offered and sold by the Club to those in the Waiting List in the order that their names appear in such list, or in the absence of a Waiting List, to any applicant.[27] We disagree. Undeniably, on December 27, 1995, when Mc Foods offered for sale one Class A share of stock to MSCI for the price of P2,800,000.00 for the latter to exercise its pre-emptive right as required by Section 30(e) of MSCIs Amended By-Laws, it legally had the right to do so since it was already an owner of a Class A share by virtue of its payment on November 28, 1995, and the Deed of Absolute Share dated December 15, 1995, notwithstanding the fact that the stock certificate was issued only on January 5, 1996. A certificate of stock is the paper representative or tangible evidence of the stock itself and of the various interests therein. The certificate is not a stock in the corporation but is merely evidence of the holders interest and status in the corporation, his ownership of the share represented thereby. It is not in law the equivalent of such ownership. It expresses the contract between the corporation and the stockholder, but is not essential to the existence of a share of stock or the nature of the relation of shareholder to the corporation.[28] Therefore, Mc Foods properly complied with the requirement of Section 30(e) of the Amended By-Laws on MSCIs preemptive rights. Without doubt, MSCI failed to repurchase Mc Foods Class A share within the thirty (30) day pre-emptive period as provided by the Amended By-Laws. It was only on January 29, 1996, or 32 days after December 28, 1995, when MSCI received Mc Foods letter of offer to sell the share, that Mc Foods and Hodreal executed the Deed of Absolute Sale over the said share of stock. While Hodreal had the right to demand the immediate execution of the Deed of Absolute Sale after his full payment of Mc Foods Class A share, he did not do so. Perhaps, he wanted to wait for Mc Foods to first comply with the pre-emptive requirement as set forth in the Amended By-Laws. Neither can MSCI argue that Mc Foods was not yet a ed owner of the share of stock when the latter offered it for resale, in order to void the transfer from Mc Foods to Hodreal. The corporations obligation to is ministerial upon the buyers acquisition of ownership of the share of stock. The corporation, either by its board, its by-laws, or the act of its officers, cannot create restrictions in stock transfers.[29] Moreover, MSCIs ardent position that Cheng was in cahoots with Mc Foods in depriving it of selling an original, unissued Class A share of stock for P2,800,000.00 is not ed by the evidence on record. The mere fact that she performed

67 acts upon authority of Mc Foods, i.e., receiving the payments of Hodreal in her office and claiming the stock certificate on behalf of Mc Foods, do not by themselves, individually or taken together, show badges of fraud, since Mc Foods did acts well within its rights and there is no proof that Cheng personally profited from the assailed transaction. Even the statement of MSCI that Cheng doctored the books to give a semblance of regularity to the transfers involving the share of stock covered by Certificate A 2243 remains merely a plain statement not buttressed by convincing proof. Fraud is deemed to comprise anything calculated to deceive, including all acts, omissions, and concealment involving a breach of legal or equitable duty, trust or confidence justly reposed, resulting in the damage to another or by which an undue and unconscionable advantage is taken of another.[30] It is a question of fact that must be alleged and proved. It cannot be presumed and must be established by clear and convincing evidence, not by mere preponderance of evidence. [31] The party alleging the existence of fraud has the burden of proof.[32] On the basis of the above disquisitions, this Court finds that petitioner has failed to discharge this burden. No matter how strong the suspicion is on the part of petitioner, such suspicion does not translate into tangible evidence sufficient to nullify the assailed transactions involving the subject MSCI Class A share of stock. WHEREFORE, the petition is DENIED for lack of merit. The Decision dated June 25, 2007 of the Court of Appeals in CAG.R. CV No. 80631, affirming the decision dated August 20, 2003 of the Regional Trial Court, Branch 138, Makati City in Civil Case No. 01-837, is AFFIRMED. Costs against petitioner. SO ORDERED.