Sales I. Introduction 1. Coronel v. CA (GR 103577, 7 October 1996) Coronel v. CA [G.R. No. 103577. October 7, 1996.] Third division, Melo (J): 3 co ncur, 1 took no part. Facts: On 19 January 1985, Romulo Coronel, et al. executed a document entitled Receipt of Down Payment in favor of Ramona Patricia Alcaraz f or P50,000 downpayment of the total amount of P1.24M as purchase price for an in herited house and lot (TCT 119627, Registry of Deeds of Quezon City), promising to execute a deed of absolute sale of said property as soon as such has been tra nsferred in their name. The balance of P1.19M is due upon the execution of said deed. On the same date, Concepcion D. Alcaraz, mother of Ramona, paid the down p ayment of P50,000.00. On 6 February 1985, the property originally registered in the name of the Coronels' father was transferred in their names (TCT 327043). Howe ver, on 18 February 1985, the Coronels sold the property to Catalina B. Mabanag for P1,580,000.00 after the latter has paid P300,000.00. For this reason, Corone ls canceled and rescinded the contract with Alcaraz by depositing the down payme nt in the bank in trust for Alcaraz. On 22 February 1985, Alcaraz filed a compla int for specific performance against the Coronels and caused the annotation of a notice of lis pendens at the back of TCT 327403. On 2 April 1985, Mabanag cause d the annotation of a notice of adverse claim covering the same property with th e Registry of Deeds of Quezon City. On 25 April 1985, the Coronels executed a De ed of Absolute Sale over the subject property in favor of Mabanag. On 5 June 198 5, a new title over the subject property was issued in the name of Mabanag under TCT 351582. In the course of the proceedings, the parties agreed to submit the case for decision solely on the basis of documentary exhibits. Upon submission o f their respective memoranda and the corresponding comment or reply thereto, and on 1 March 1989, judgment was handed down in favor of the plaintiffs, ordering the defendant to execute a deed of absolute sale of the land covered by TCT 3274 03 and canceling TCT 331582 and declaring the latter without force and effect. C laims for damages by plaintiffs and counterclaims by the defendants and interven ors were dismissed. A motion for reconsideration was thereafter filed, which was denied. Petitioners interposed an appeal, but on 16 December 1991, the CA rende red its decision fully agreeing with the trial court. Hence, the instant petitio n. The Supreme Court dismissed the petition and affirmed the appealed judgment. 1. Receipt of downpayment a binding contract; Meeting of the minds The document embodied the binding contract between Ramona Patricia Alcaraz and the heirs of C onstancio P. Coronel, pertaining to a particular house and lot covered by TCT 11 9627, as defined in Article 1305 of the Civil Code of the Philippines. 2. Defini tion of contract of sale The Civil Code defines a contract of sale, in Article 1 458, as one of the contracting parties obligates himself to transfer the ownershi p of and to deliver a determinate thing, and the other to pay therefor a price c ertain in money or its equivalent. Sale, thus, by its very nature a consensual co ntract because it is perfected by mere consent. 3. Elements of contract of sale; Contract to sell not contract of sale due to the lack of first element; Distinc tion necessary when property is sold to a third person The essential elements of a contract of sale are (a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price; (b) Determinate subject matter; a nd (c) Price certain in money or its equivalent. A Contract to Sell may not be c onsidered as a Contract of Sale because the first essential element is lacking. It is essential to distinguish between a contract to sell and a conditional cont ract 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. 4. Contract to sell: Seller agrees to sell property when purchase price is delivered to him; seller reserves transfer of title until fulfillment of suspensive condition (pa yment) In a contract to sell, the prospective seller explicitly reserves the tra nsfer of title to the prospective buyer, meaning, the prospective seller does no t as yet agree or consent to transfer ownership of the property subject of the c ontract to sell until the happening of an event, which for present purposes take n to be the full payment of the purchase price. What the seller agrees or Page 1 of 87

obliges himself to do is to fulfill his promise to sell the subject property whe n the entire amount of the purchase price is delivered to him. In other words th e 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, own ership is retained by the prospective seller without further remedies by the pro spective buyer. 5. Contract to sell: failure to deliver payment is not a breach but event preventing vendor to convey title; obligation demandable upon full pay ment of price; promise binding if supported by payment distinct from the price W hen a contract is a contract to sell where the ownership or title is retained by the seller and is not to pass until the full payment of the price, such payment being a positive suspensive condition and failure of which is not a breach, cas ual or serious, but simply an event that prevented the obligation of the vendor to convey title from acquiring binding force (Roque v. Lapuz). Upon the fulfillm ent of the suspensive condition which is the full payment of the purchase price, the prospective seller's 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 (A promise to buy and sell a determinate thing fo r 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 promi ssor if the promise is supported by a consideration distinct from the price. 6. Contract to sell defined A contract to sell be defined as a bilateral contract w hereby the prospective seller, while expressly reserving the ownership of the su bject 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. 7. Co ntract to sell not a conditional contract of sale (existence of first element) A contract to sell may not even be considered as a conditional contract of sale w here the seller may likewise reserve title to the property subject of the sale u ntil the fulfillment of a suspensive condition, because in a conditional contrac t of sale, the first element of consent is present, although it is conditioned u pon the happening of a contingent event which may or may not occur. 8. Condition al contract of sale: if suspensive condition not fulfilled, pefection abated; if fulfilled, contract of sale perfected and ownership automatically transfers to buyer If the suspensive condition is not fulfilled, the perfection of the contra ct of sale is completely abated (cf. Homesite and Housing Corp. vs. Court of App eals, 133 SCRA 777 [1984]). However, if the suspensive condition is fulfilled, t he contract of sale is thereby perfected, such that if there had already been pr evious delivery of the property subject of the sale to the buyer, ownership ther eto automatically transfers to the buyer by operation of law without any further act having to be performed by the seller. 9. Contract to sell: if suspensive co ndition fulfilled, seller has still to convey title even if property is previous ly delivered In a contract to sell, upon the fulfillment of the suspensive condi tion which is the full payment of the purchase price, ownership will not automat ically transfer to the buyer although the property may have been previously deli vered to him. The prospective seller still has to convey title to the prospectiv e buyer by entering into a contract of absolute sale. 10. Contract to sell: ther e is no double sale; if property sold to another, the seller may be sued for dam ages In a contract to sell, there being no previous sale of the property, a thir d person buying such property despite the fulfillment of the suspensive conditio n 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 reconv eyance of the property. There is no double sale in such case. Title to the prope rty will transfer to the buyer after registration because there is no defect in the owner-seller's title per se, but the latter, of course, may be sued for damage s by the intending buyer. 11. Conditional contract of sale: sale becomes absolut e upon fulfillment of condition; if property sold to another, first buyer may se ek reconveyance In a conditional contract of sale, upon the fulfillment of the s uspensive condition, the sale becomes absolute and this will definitely affect t he seller's title thereto. In fact, if there had been previous delivery of the sub ject property, the seller's ownership or title to the property is automatically tr

ansferred to the buyer such that, the seller will no longer have any title to tr ansfer 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 seller's title, or at least was charged with the obligation to disc over such defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first buyer's title. In case a title is issued to the second buyer, th e first buyer may seek reconveyance of the property subject of the sale. Page 2 of 87

12. Interpretation of contracts, natural and meaning of words unless technical m eaning was intended It is a canon in the interpretation of contracts that the wo rds used therein should be given their natural and ordinary meaning unless a tec hnical meaning was intended (Tan vs. Court of Appeals, 212 SCRA 586 [1992]). 13. Document entitled Receipt of Down Payment indicates Conditional Contract of Sale and not contract to sell The agreement could not have been a contract to sell be cause the sellers made no express reservation of ownership or title to the subje ct parcel of land. Furthermore, the circumstance which prevented the parties fro m 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 t he purchase price. Under the established facts and circumstances of the case, ha d 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 hav e been executed and consummated right there and then. Moreover, unlike in a cont ract to sell, petitioners did not merely promise to sell the property to private respondent upon the fulfillment of the suspensive condition. On the contrary, h aving already agreed to sell the subject property, they undertook to have the ce rtificate of title changed to their names and immediately thereafter, to execute the written deed of absolute sale. What is clearly established by the plain lan guage of the subject document is that when the said Receipt of Down Payment was pr epared and signed by petitioners, the parties had agreed to a conditional contra ct of sale, consummation of which is subject only to the successful transfer of the certificate of title from the name of petitioners' father to their names. The suspensive condition was fulfilled on 6 February 1985 and thus, the conditional contract of sale between the parties became obligatory, the only act required fo r the consummation thereof being the delivery of the property by means of the ex ecution of the deed of absolute sale in a public instrument, which petitioners u nequivocally committed themselves to do as evidenced by the Receipt of Down Payme nt. 14. Article 1475 and 1181 applies to present case; Perfection of a contract o f sale and Conditional obligation based on the happening of the event Article 14 75 of the New Civil Code provides that the contract of sale is perfected at the m oment there is a meeting of minds upon the thing which is the object of the cont ract and upon the price. From that moment, the parties may reciprocally demand pe rformance, subject to the provisions of the law governing the form of contracts. Article 1181 of the same code provides that in conditional obligations, the acqu isition of rights, as well as the extinguishment or loss of those already acquir ed, shall depend upon the happening of the event which constitutes the condition . In the present case, since the condition contemplated by the parties which is t he issuance of a certificate of title in petitioners' names was fulfilled on 6 Feb ruary 1985, the respective obligations of the parties under the contract of sale became mutually demandable, i.e. the sellers were obliged to present the TCT al ready in their names to he buyer, and to immediately execute the deed of absolut e sale, while the buyer on her part, was obliged to forthwith pay the balance of the purchase price amounting to P1,190,000.00. 15. Condition deemed fulfilled w hen obligor voluntary prevents its fulfillment; Condition fulfilled, such fact c ontrolling over hypothetical arguments Article 1186 provides that the condition s hall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. T hus, in the present case, the petitioners having recognized that they entered in to a contract of sale subject to a suspensive condition, as evidenced in the fir st paragraph in page 9 of their petition, cannot now contend that there could ha ve been no perfected contract of sale had the petitioners not complied with the condition of first transferring the title of the property under their names. It should be stressed and emphasized that the condition was fulfilled on 6 February 1985, when TCT 327403 was issued in petitioners' name, and such fact is more cont rolling than mere hypothetical arguments. 16. Retroactivity of conditional oblig ation to day of constitution of obligation Article 1187 provides that 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 o f the condition that has been complied with. In the present case, the rights and

obligations of the parties with respect to the perfected contract of sale becam e mutually due and demandable as of the time of fulfillment or occurrence of the suspensive condition on 6 February 1985. As of that point in time, reciprocal o bligations of both seller and buyer arose. 17. Succession as a mode of transferr ing ownership Article 774 of the Civil Code defines Succession as a mode of tran sferring ownership, providing succession is a mode of acquisition by virtue of wh ich the property, rights and obligations to the extent and value of the inherita nce of a person are transmitted through his death to another or others by his wi ll or by operation of law. In the present case, petitioners-sellers being the son s and daughters of the decedent Constancio P. Coronel are compulsory heirs who w ere called to succession by operation of law. Thus, at the instance of their fat her's death, petitioners stepped into his shoes insofar as the subject property is concerned, such that any rights or obligations pertaining thereto became bindin g and enforceable upon them. It is expressly Page 3 of 87

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 [1 952]). 18. Estoppel, as to lack of capacity Article 1431 provides that through es toppel an admission or representation is rendered conclusive upon the person mak ing it, and cannot be denied or disproved as against the person relying thereon. In the present case, the petitioners, having represented themselves as the true owners of the subject property at the time of sale, cannot claim now that they w ere not yet the absolute owners thereof at the time they entered into agreement. 19. Mere allegation is not evidence The supposed grounds for petitioners' resciss ion, are mere allegations found only in their responsive pleadings, which by exp ress provision of the rules, are deemed controverted even if no reply is filed b y the plaintiffs (Sec. 11, Rule 6, Revised Rules of Court). The records are abso lutely bereft of any supporting evidence to substantiate petitioners' allegations. We have stressed time and again that allegations must be proven by sufficient e vidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882 [1961]; Recaro vs. Embisan, 2 SC RA 598 [1961]). Mere allegation is not an evidence (Lagasca vs. De Vera, 79 Phil . 376 [1947]). 20. No stipulation to authorize extrajudicial rescission of contr act of sale Even assuming arguendo that Ramona P. Alcaraz was in the United Stat es of America on 6 February 1985, petitioners-sellers' act of unilaterally and ext rajudicially rescinding the contract of sale cannot be justified as there was no express stipulation authorizing the sellers to extrajudicially rescind the cont ract of sale. (cf Dignos vs. CA, 158 SCRA 375 [1988]; Taguba vs. Vda. de Leon, 1 32 SCRA 722 [1984]) 21. Estoppel, acceptance of check from buyer's mother; buyer's a bsence not a ground for rescission Petitioners are estopped from raising the all eged 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, Ramona's mother, who had acted for and i n behalf of her daughter, if not also in her own behalf. Indeed, the down paymen t 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 petitione rs ever questioned Concepcion's authority to represent Ramona P. Alcaraz when they accepted her personal check. Neither did they raise any objection as regards pa yment being effected by a third person. Accordingly, as far as petitioners are c oncerned, the physical absence of Ramona P. Alcaraz is not a ground to rescind t he contract of sale. 22. Buyer not in default as there is no proof that seller p resented the TCT and signify their readiness to execute the deed of absolute sal e Article 1169 of the Civil Code defines when a party in a contract involving re ciprocal obligations may be considered in default. Said article provides that tho se obliged to deliver or to do something, incur in delay from the time the oblig ee judicially or extrajudicially demands from them the fulfillment of their obli gation. xxx In reciprocal obligations, neither party incurs in delay if the othe r does not comply or is not ready to comply in a proper manner with what is incu mbent upon him. From the moment one of the parties fulfill his obligation, delay by the other begins. In the present case, there is no proof offered whatsoever t o show that the seller 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. Ramona's corresponding oblig ation to pay the balance of the purchase price in the amount of P1,190,000.00 (a s buyer) never became due and demandable and, therefore, she cannot be deemed to have been in default. 23. Double sale; Article 1544, paragraph 2 applies in the present case Article 1544 of the Civil Code provides that If the same thing shou ld have been sold to different vendees, the ownership shall be transferred to th e person who may have first taken possession thereof in good faith, if it should be movable property. Should if be immovable property, the ownership shall belon g 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 there of to the person who presents the oldest title, provided there is good faith. In the present case, the record of the case shows that the Deed of Absolute Sale da ted 25 April 1985 as proof of the second contract of sale was registered with th

e Registry of Deeds of Quezon City giving rise to the issuance of a new certific ate of title in the name of Catalina B. Mabanag on 5 June 1985. Thus, the second paragraph of Article 1544 shall apply. 24. Double sale presumes title to pass t o first buyer, exceptions Page 4 of 87

Article 1544, the provision on double sale, presumes title or ownership to pass to the first buyer, the exceptions being: (a) when the second buyer, in good fai th, registers the sale ahead of the first buyer, and (b) should there be no insc ription by either of the two buyers, when the second buyer, in good faith, acqui res possession of the property ahead of the first buyer. Unless, the second buye r satisfies these requirements, title or ownership will not transfer to him to t he prejudice of the first buyer. 25. Prius tempore, potior jure (first in time, stronger in right); First to register in good faith The governing principle is p rius tempore, potior jure (first in time, stronger in right). Knowledge by the f irst buyer of the second sale cannot defeat the first buyer's rights except when t he second buyer first registers in good faith the second sale (Olivares vs. Gonz ales, 159 SCRA 33). Conversely, knowledge gained by the second buyer of the firs t sale defeats his rights even if he is first to register, since knowledge taint s his registration with bad faith (see also Astorga vs. Court of Appeals, G.R. N o. 58530, 26 December 1984). It was further held that it is essential, to merit the protection of Article 1544, second paragraph, that the second realty buyer m ust act in good faith in registering his deed of sale (Cruz v. Cabana, 129 SCRA 656, citing Carbonell vs. Court of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R. No. 95843, 02 September 1992). 26. Double sale; good faith in recording of secon d sale, not in buying In a case of double sale, what finds relevance and materia lity is not whether or not the second buyer was a buyer in good faith but whethe r or not said second buyer registers such second sale in good faith, that is, wi thout knowledge of any defect in the title of the property sold. In the present case, Mabanag could not have in good faith registered the sale entered into on 1 8 February 1985 because as early as 22 February 1985, a notice of lis pendens ha d been annotated on the TCT in the names of petitioners, whereas Mabanag registe red the said sale sometime in April 1985. At the time of registration, therefore , petitioner knew that the same property had already been previously sold to Cor onel, or, at least, she was charged with knowledge that a previous buyer is clai ming title to the same property. Mabanag thus cannot close her eyes to the defec t in petitioners' title to the property at the time of the registration of the pro perty. 27. Double sale; Bad faith in registration does not confer registrant any right If a vendee in a double sale registers the sale after he has acquired kno wledge that there was a previous sale of the same property to a third party or t hat another person claims said property in a previous sale, the registration wil l constitute a registration in bad faith and will not confer upon him any right. (Salvoro vs. Tanega, 87 SCRA 349 [1981];citing Palarca vs. Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43 Phil. 554; Fernandez vs. Mercader, 43 Phil. 581.) 28. Agency; The issue whether Concepcion, mother of Ramona, is an agent or a co-buyer is undisturbed Although there may be ample indications that there wa s in fact an agency between Ramona as principal and Concepcion, her mother, as a gent 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 squarel y raised in the instant petition, nor in such assumption disputed between mother and daughter. The Court did not touch this issue and did not disturb the lower courts' ruling on this point. 2. Romero v. CA (GR 107207, 23 November 1995) Romero v. CA [GR 107207, 23 November 1995] Third division, Vitug (J): 4 concur F acts: Virgilio R. Romero, a civil engineer, was engaged in the business of produ ction, manufacture and exportation of perlite filter aids, permalite insulation and process perlite ore. In 1988, Romero and his foreign partners decided to put up a central warehouse in Metro Manila on a land area of approximately 2,000 sq . m. The project was made known to several freelance real estate brokers. A day or so after the announcement, Alfonso Flores and his wife, accompanied by a brok er, offered a parcel of land measuring 1,952 sq. m. Located in Barangay San Dion isio, Paraaque, Metro Manila, the lot was covered by TCT 361402 in the name of En

riqueta Chua Vda. de Ongsiong. Romero visited the property and, except for the p resence of squatters in the area, he found the place suitable for a central ware house. Later, the Flores spouses called on Romero with a proposal that should he advance the amount of P50,000.00 which could be used in taking up an ejectment case against the squatters, Ongsiong would agree to sell the property for only P 800.00 per sq. m. Romero expressed his concurrence. On 09 June 1988, a contract, denominated Deed of Conditional Sale, was executed between Romero and Ongsiong. F lores, in behalf of Ongsiong, forthwith received and acknowledge a check for P50 ,000.00 from Romero. Pursuant to this agreement, Ongsiong filed a complaint for ejectment (Civil Case 7579) against Melchor Musa and 29 other squatter families with the MTC Paraaque. A few months later, or on 21 February 1989, judgment was r endered ordering the Page 5 of 87

defendants to vacate the premises. The decision was handed down beyond the 60-da y period (expiring 09 August 1988) stipulated in the contract. The writ of execu tion of the judgment was issued, still later, on 30 March 1989. In a letter, dat ed 07 April 1989, Ongsiong sought to return the P50,000.00 she received from Rom ero since, she said, she could not get rid of the squatters on the lot. Atty. Serg io A.F. Apostol, counsel for Romero, refused the tender, citing the favorable de cision and the writ of execution issued pursuant thereto, and expressed Romero's w illingness to underwrite the expenses for the execution of the judgment and ejec tment of the occupants chargeable to the purchase price of the land. Meanwhile, the Presidential Commission for the Urban Poor (PCUD), through its Regional Direct or for Luzon (Viloria), asked the MTC Paraaque for a grace period of 45 days from 21 April 1989 within which to relocate and transfer the squatter families. Acti ng favorably on the request, the court suspended the enforcement of the writ of execution accordingly. On 08 June 1989, Atty. Apostol reminded Ongsiong on the e xpiry of the 45-day grace period and reiterated his client's willingness to underw rite the expenses for the execution of the judgment and ejectment of the occupan ts. On 19 June 1989, Atty. Joaquin Yuseco, Jr., counsel for Ongsion, advised Att y. Apostol that the Deed of Conditional Sale had been rendered null and void by virtue of his client's failure to evict the squatters from the premises within the agreed 60-day period. He added that private respondent had decided to retain the property. Meanwhile, on 25 August 1989, the MTC issued an alias writ of executio n in Civil Case 7579 on motion of Ongsiong but the squatters apparently still st ayed on. On 27 June 1989, Ongsiong prompted by Romero's continued refusal to accep t the return of the P50,000.00 advance payment, filed with the RTC Makati (Branc h 133, Civil Case 89-4394) for a rescission of the deed of conditional sale, plus damages, and for the consignation of P50,000.00 cash. On 26 June 1990, the RTC r endered decision holding that Ongsiong had no right to rescind the contract sinc e it was she who violated her obligation to eject the squatters from the subject property and that Romero, being the injured party, was the party who could, under Article 1191 of the Civil Code, rescind the agreement. The lower court, thus di smissed the complaint and ordered Ongsiong to eject or cause the ejectment of th e squatters from the property and to execute the absolute deed of conveyance upo n payment of the full purchase price by Romero. Ongsiong appealed to the Court o f Appeals. On 29 May 1992, the appellate court rendered its decision, reversed a nd set aside the decision appealed from and entered another declaring he contrac t of conditional sale of 9 June 1988 cancelled and ordering Romero to accept the return of the downpayment in the amount of P50,000 deposited with the trial cou rt; without pronouncement as to cost. Failing to obtain a reconsideration, Romer o filed his petition for review on certiorari before the Supreme Court. The Supr eme Court reversed and set aside the questioned decision of the Court of Appeals , and entered another ordering Romero to pay Ongsiong the balance of the purchas e price and the latter to execute the deed of absolute sale in favor of petition er; without costs. 1. Perfected contract of sale, absolute or conditional A perf ected contract of sale may either be absolute or conditional depending on whethe r the agreement is devoid of, or subject to, any condition imposed on the passin g of title of the thing to be conveyed or on the obligation of party thereto. Wh en ownership is retained until the fulfillment of a positive condition the breac h of the condition will simply prevent the duty to convey title from acquiring a n obligatory force. If the condition is imposed on an obligation of a party whic h is not complied with, the other party may either refuse to proceed or waive sa id condition (Art. 1545, Civil Code). Where, of course, the condition is imposed upon the perfection of the contract itself, the failure of such condition would prevent the juridical relation itself from coming into existence. 2. Real chara cter of a contract, substance more significant than title given to it by parties In determining the real character of the contract, the title given to it by the parties is not as much as significant as its substance. For example, a deed of sale, although denominated as a deed of conditional sale, may be treated as abso lute in nature, if title to the property sold is not reserved in the vendor or i f the vendor is not granted the right to unilaterally rescind the contract predi cated on the fulfillment or non-fulfillment, as the case may be, of the prescrib

ed condition. 3. Condition in the context of a perfected contract of sale The te rm condition in the context of a perfected contract of sale pertains, in reality, to the compliance by one party of an undertaking the fulfillment of which would beckon, in turn, the demandability of the reciprocal prestation of the other par ty. The reciprocal obligations referred to would normally be, in the case of ven dee, the payment of the agreed purchase price and, Page 6 of 87

in the case of the vendor, the fulfillment of certain express warranties (which, in the present case is the timely eviction of the squatters on the property). 4 . Perfection of a sale; Parties bound to fulfill what is expressly stipulated an d all consequences in keeping with good faith, usage and law A sale is at once p erfected where a person (the seller) obligates himself, for a price certain, to deliver and to transfer ownership of a specified thing or right to another (the buyer) over which the latter agrees. From the moment the contract is perfected, the parties are bound not only to the fulfillment of what has been expressly sti pulated but also to all the consequences which, according to their nature, may b e in keeping with good faith, usage and law. In the present cas, under the agree ment, Ongsiong is obligated to evict the squatters on the property. The ejectmen t of the squatters is a condition the operative act of which sets into motion th e period of compliance by Romero of his own obligation, i.e., to pay the balance of the purchase price. 5. Options available under Article 1545 belongs to injur ed party Ongsiong's failure to remove the squatters from the property within the sti pulated period gives Romero the right to either refuse to proceed with the agree ment or waive that condition in consonance with Article 1545 of the Civil Code. This option clearly belongs to petitioner (Romero) and not to private respondent (Ongsiong). In contracts of sale particularly, Article 1545 of the Civil Code a llows the obligee to choose between proceeding with the agreement or waiving the performance of the condition. Evidently, Romero has waived the performance of t he condition imposed on Ongsiong to free the property from squatters. 6. Potesta tive condition is mixed, and not dependent on the sole will of the debtor; If co ndition is imposed on the fulfillment of the obligation and not the birth thereo f, only the condition is avoided and does not affect obligation itself The under taking required of private respondent does not constitute a potestative condition dependent solely on his will that might, otherwise, be void in accordance with A rticle 1182 of the Civil Code but a mixed condition dependent not on the will of th e vendor alone but also of third persons like the squatters and government agenc ies and personnel concerned. However, where the so-called potestative condition is imposed not on the birth of the obligation but on its fulfillment, only the cond ition is avoided, leaving unaffected obligation itself. 7. Rescission by non-inj ured party not warranted; Article 1191 The right of resolution of a party to an obligation under Article 1191 of the Civil Code is predicated on a breach of fai th by the other party violates the reciprocity between them. In the present case , Ongsiong's action for rescission was not warranted as she was not the injured pa rty. It was Ongsiong who has failed in her obligation under the contract. Romero did not breach the agreement. He has agreed, in fact, to shoulder the expenses of the execution of the judgment in the ejectment case and to make arrangement w ith the sheriff to effect such execution. Parenthetically, this offer to pay, hi ring been made prior to the demand for rescission, assuming for the sake of argu ment that such a demand is proper under Article 1592 of the Civil Code, would li kewise suffice to defeat Ongsiong's prerogative to rescind thereunder. 8. Petition er, opting to proceed with sale, may not demand the reimbursement of the advance payment When petitioner having opted to proceed with the sale, neither may peti tioner demand its reimbursement from private respondent. Further, private respon dent may not subject it to forfeiture. 3. Fule v. CA (GR 112212, 2 March 1998) Fule v. CA [G.R. No. 112212. March 2, 1998.] Third division, Romero (J): 3 concu r Facts: Fr. Antonio Jacobe initially mortgage a 10-hectare property in Tanay, R izal (covered by TCT 320725) to the Rural Bank of Alaminos, Laguna to secure a l oan in the amount of P10,000. Said mortgage was later foreclosed and the propert y offered for public auction upon his default. In June 1984, Gregorio Fule, as c orporate secretary of the bank, asked Remelia Dichoso and Olivia Mendoza to look for a buyer who might be interested in the Tanay property. The two found one in the person of Ninevetch Cruz. It so happened that in January of said year, Greg

orio Fule, also a jeweler, has shown interest in buying a pair of emerald-cut di amond earrings owned by Dr. Cruz. Dr. Cruz has declined Fule's offer to buy said j ewelry for P100,000; and a subsequent bid by Fule to buy them for US$6,000 at $1 to P25 while making a sketch of said jewelry during an inspection at the lobby of Prudential Bank (the latter instance was declined, since the exchange rate ap preciated to P19 per dollar). Subsequently, however, negotiations for the barter of the jewelry and the Tanay property ensued. Atty. Belarmino was requested by Dr. Cruz Page 7 of 87

to check the property and found out that no sale or barter was feasible as the 1 -year period of redemption has not expired. In an effort to cut through any lega l impediment, Fule executed on 19 October 1984, a deed of redemption on behalf o f Fr. Jacobe purportedly in the amount of P15,987.78, and on even date, Fr. Jaco be sold the property to Fule for P75,000.00. The haste with which the two deeds were executed is shown by the fact that the deed of sale was notarized ahead of the deed of redemption. As Dr. Cruz had already agreed to the proposed barter, F ule went to Prudential Bank to take a look at the jewelry. On 23 October 1984, F ule met Atty. Belarmino at the latter's residence to prepare the documents of sale . Atty. Belarmino accordingly caused the preparation of a deed of absolute sale while Fule and Dr. Cruz attended to the safekeeping of the jewelry. The followin g day, Fule, together with Dichoso and Mendoza, arrived at the residence of Atty . Belarmino to finally execute a deed of absolute sale. Fule signed the deed and gave Atty. Belarmino the amount of P13,700.00 for necessary expenses in the tra nsfer of title over the Tanay property; and issued a certification to the effect that the actual consideration of the sale was P200,000.00 and not P80,000.00 as indicated in the deed of absolute sale (the disparity purportedly aimed at mini mizing the amount of the capital gains tax that Fule would have to shoulder). Si nce the jewelry was appraised only at P160,000.00, the parties agreed that the b alance of P40,000.00 would just be paid later in cash. Thereafter, at the bank, as prearranged, Dr. Cruz and the cashier opened the safety deposit box, and deli vered the contents thereof to Fule. Fule inspected the jewelry, near the electri c light at the bank's lobby, for 10-15 minutes. Fule expressed his satisfaction by nodding his head when asked by Dr. Cruz if the jewelry was okay. For services r endered, Fule paid the agents, Dichoso and Mendoza, the amount of US$300.00 and some pieces of jewelry. He did not, however, give them half of the pair of earri ngs in question, which he had earlier promised. Later in the evening, Fule arriv ed at the residence of Atty. Belarmino complaining that the jewelry given him wa s fake. Dichoso, who borrowed the car of Dr. Cruz, called up Atty. Belarmino. In formed that Fule was at the lawyer's house, went there posthaste thinking that Ful e had finally agreed to give them half of the pair of earrings, only to find Ful e demonstrating with a tester that the earrings were fake. Fule then accused Dic hoso and Mendoza of deceiving him which they, however, denied. They countered th at Fule could not have been fooled because he had vast experience regarding jewe lry. Fule nonetheless took back the US$300.00 and jewelry he had given them. The reafter, the group decided to go to the house of a certain Macario Dimayuga, a j eweler, to have the earrings tested. Dimayuga, after taking one look at the earr ings, immediately declared them counterfeit. At around 9:30 p.m., Fule went to o ne Atty. Reynaldo Alcantara residing at Lakeside Subdivision in San Pablo City, complaining about the fake jewelry. Upon being advised by the latter, Fule repor ted the matter to the police station where Dichoso and Mendoza likewise executed sworn statements. On 26 October 1984, Fule filed a complaint before the RTC San Pablo City against private respondents praying, among other things, that the co ntract of sale over the Tanay property be declared null and void on the ground o f fraud and deceit. On 30 October 1984, the lower court issued a temporary restr aining order directing the Register of Deeds of Rizal to refrain from acting on the pertinent documents involved in the transaction. On 20 November 1984, howeve r, the same court lifted its previous order and denied the prayer for a writ of preliminary injunction. After trial, the lower court rendered its decision on 7 March 1989; holding that the genuine pair of earrings used as consideration for the sale was delivered by Dr. Cruz to Fule, that the contract was valid even if the agreement between the parties was principally a barter contract, that the ag reement has been consummated at the time the principal parties parted ways at th e bank, and that damages are due to the defendants. From the trial court's adverse decision, petitioner elevated the matter to the Court of Appeals. On 20 October 1992, the Court of Appeals, however, rendered a decision affirming in toto the lower court's decision. His motion for reconsideration having been denied on 19 Oc tober 1993. Hence, the petition for review on certiorari. The Supreme Court affi rmed in toto the decision of the Court of Appeals, but ordered Dr. Cruz to pay F ule the balance of the purchase price of P40,000 within 10 days from the finalit

y of the decision; with costs against petitioner. 1. New factual issues cannot b e examined as it unduly transcends the limits of the Supreme Court's review power The Supreme Court cannot entertain a factual issue, and thus examine and weigh a new the facts regarding the genuineness of the earrings bartered in exchange for the Tanay property, as this would unduly transcend the limits of the Court's revi ew power in petitions of this nature which are confined merely to pure questions of law. As a general rule, the Supreme Court accords conclusiveness to a lower court's findings of fact unless it is shown, inter alia, that: (1) the conclusion is a finding grounded on speculations, surmises or conjectures; (2) the inferenc e is manifestly mistaken, absurd and impossible; (3) when there is a grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5 ) when the findings of fact are conflicting; and (6) when the Court of Appeals, in making its findings, went beyond the issues of the case and the same is contr ary to the admission of both parties. To reiterate, the Supreme Court's jurisdicti on is only limited to reviewing errors of law in the absence of any showing that the findings complained of are totally devoid of support in the record or that they are glaringly erroneous as to constitute serious abuse of discretion. 2. Im mediate rendition of decision not anomalous No proof has been adduced that Judge Jaramillo was motivated by a malicious or sinister intent in disposing of the c ase with dispatch. Neither is there proof that someone else wrote the decision f or him. The immediate rendition of the decision was no Page 8 of 87

more than Judge Jaramillo's compliance with his duty as a judge to dispose of the c ourt's business promptly and decide cases within the required periods. The two-year period within which Judge Jaramillo handled the case provided him with all the time to study it and even write down its facts as soon as these were presented t o court. In fact, the Supreme Court does not see anything wrong in the practice of writing a decision days before the scheduled promulgation of judgment and lea ving the dispositive portion for typing at a time close to the date of promulgat ion, provided that no malice or any wrongful conduct attends its adoption. The p ractice serves the dual purposes of safeguarding the confidentiality of draft de cisions and rendering decisions with promptness. Neither can Judge Jaramillo be made administratively answerable for the immediate rendition of the decision. Th e acts of a judge which pertain to his judicial functions are not subject to dis ciplinary power unless they are committed with fraud, dishonesty, corruption or bad faith. Hence, in the absence of sufficient proof to the contrary, Judge Jara millo is presumed to have performed his job in accordance with law and should in stead be commended for his close attention to duty. 3. Contract perfected by mer e consent, binds parties to stipulation and all the consequences; Contract of sa le perfected upon meeting of minds upon the thing object of the contract and upo n price; Embodiment of contract in public instrument only for convenience, and r egistration only to affect third parties; Lack of formal requirements does not i nvalidate the contract The Civil Code provides that contracts are perfected by m ere consent. From this moment, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, a ccording to their nature, may be in keeping with good faith, usage and law. A co ntract of sale is perfected at the moment there is a meeting of the minds upon t he thing which is the object of the contract and upon the price. Being consensua l, a contract of sale has the force of law between the contracting parties and t hey are expected to abide in good faith by their respective contractual commitme nts. Article 1358 of the Civil Code which requires the embodiment of certain con tracts in a public instrument, is only for convenience, and registration of the instrument only adversely affects third parties. Formal requirements are, theref ore, for the benefit of third parties. Non-compliance therewith does not adverse ly affect the validity of the contract nor the contractual rights and obligation s of the parties thereunder. 4. Voidable or annullable contracts Contracts that are voidable or annullable, even though there may have been no damage to the con tracting parties are: (1) those where one of the parties is incapable of giving consent to a contract; and (2) those where the consent is vitiated by mistake, v iolence, intimidation, undue influence or fraud. The contract can be voided in a ccordance with law so as to compel the parties to restore to each other the thin gs that have been the subject of the contract with their fruits, and the price w ith interest. 5. Fraud; No inducement made by the private respondents There is f raud when, through the 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 the present case, the records, are bare of any evid ence manifesting that private respondents employed such insidious words or machi nations to entice petitioner into entering the contract of barter. Neither is th ere any evidence showing that Dr. Cruz induced petitioner to sell his Tanay prop erty or that she cajoled him to take the earrings in exchange for said property. On the contrary, Dr. Cruz did not initially accede to petitioner's proposal to bu y the said jewelry. Rather, it appears that it was petitioner, through his agent s, who led Dr. Cruz to believe that the Tanay property was worth exchanging for her jewelry as he represented that its value was P400,000.00 or more than double that of the jewelry which was valued only at P160,000.00. If indeed petitioner's property was truly worth that much, it was certainly contrary to the nature of a businessman-banker like him to have parted with his real estate for half its pr ice. In short, it was in fact petitioner who resorted to machinations to convinc e Dr. Cruz to exchange her jewelry for the Tanay property. 7. Mistake; Mistake c aused by manifest negligence cannot invalidate a judicial act To invalidate a co ntract, mistake must refer to the substance of the thing that is the object of th e contract, or to those conditions which have principally moved one or both part

ies to enter into the contract. An example of mistake as to the object of the con tract is the substitution of a specific thing contemplated by the parties with a nother. In the present case, the petitioner failed to prove the fact that prior to the delivery of the jewelry to him, private respondents endeavored to make su ch substitution of an inferior one or one with Russian diamonds for the jewelry he wanted to exchange with his 10-hectare land. Further, on account of his work as a banker-jeweler, it can be rightfully assumed that he was an expert on matte rs regarding gems. He had the intellectual capacity and the business acumen as a banker to take precautionary measures to avert such a mistake, considering the value of both the jewelry and his land. A mistake caused by manifest negligence cannot invalidate a juridical act. As the Civil Code provides, (t)here is no mist ake if the party alleging it knew the doubt, contingency or risk affecting the o bject of the contract. 8. Contract of sale absolute if no stipulation that title to property is reserved to seller until full payment; Ownership transferred upon actual or constructive delivery Page 9 of 87

A contract of sale being absolute in nature, title passed to the vendee upon del ivery of the thing sold since there was no stipulation in the contract that titl e to the property sold has been reserved in the seller until full payment of the price or that the vendor has the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period. Such stipulations are not manifest in the contract of sale. In the present case, both the trial and appell ate courts, therefore, correctly ruled that there were no legal bases for the nu llification of the contract of sale. Ownership over the parcel of land and the p air of emerald-cut diamond earrings had been transferred to Dr. Cruz and Fule, r espectively, upon the actual and constructive delivery thereof. 9. Contract sile nt when balance is due and demandable; non-payment does not invalidate the contr act While it is true that the amount of P40,000.00 forming part of the considera tion was still payable to Fule, its nonpayment by Dr. Cruz is not a sufficient c ause to invalidate the contract or bar the transfer of ownership and possession of the things exchanged considering the fact that their contract is silent as to when it becomes due and demandable. 10 No interest due if it is not stipulated Failure to pay the balance of the purchase price does not result in the payment of interest thereon. Article 1589 of the Civil Code prescribes the payment of in terest by the vendee for the period between the delivery of the thing and the pay ment of the price in cases (1) Should it have been so stipulated; (2) Should the t hing sold and delivered produce fruits or income; (3) Should he be in default, f rom the time of judicial or extrajudicial demand for the payment of the price. 11 . Case distinguished from de la Cruz v Legaspi The present case should be distin guished from De la Cruz v. Legaspi, where the court held that failure to pay the consideration after the notarization of the contract as previously promised res ulted in the vendee's liability for payment of interest. In the present, there is no stipulation for the payment of interest in the contract of sale nor proof tha t the Tanay property produced fruits or income. Neither did petitioner demand pa yment of the price as in fact he filed an action to nullify the contract of sale . 12 Award of moral and exemplary damages Moral and exemplary damages may be awa rded without proof of pecuniary loss. In awarding such damages, the court shall take into account the circumstances obtaining in the case and assess damages acc ording to its discretion. To warrant the award of damages, it must be shown that the person to whom these are awarded has sustained injury. He must likewise est ablish sufficient data upon which the court can properly base its estimate of th e amount of damages. Statements of facts should establish such data rather than mere conclusions or opinions of witnesses. Thus, for moral damages to be awarded , it is essential that the claimant must have satisfactorily proved during the t rial the existence of the factual basis of the damages and its causal connection with the adverse party's acts. If the court has no proof or evidence upon which t he claim for moral damages could be based, such indemnity could not be outrightl y awarded. The same holds true with respect to the award of exemplary damages wh ere it must be shown that the party acted in a wanton, oppressive or malevolent manner. 13. Rule that moral damages cannot be recovered from person who filed a complaint does not apply in present case While, as a rule, moral damages cannot be recovered from a person who has filed a complaint against another in good fai th because it is not sound policy to place a penalty on the right to litigate, t he same, however, cannot apply in the present case. This is not a situation wher e petitioner's complaint was simply found later to be based on an erroneous ground which, under settled jurisprudence, would not have been a reason for awarding m oral and exemplary damages. Instead, the cause of action of the instant case app ears to have been contrived by petitioner himself. The factual findings of the c ourts a quo to the effect that petitioner filed this case because he was the vic tim of fraud; that he could not have been such a victim because he should have e xamined the jewelry in question before accepting delivery thereof, considering h is exposure to the banking and jewelry businesses; and that he filed the action for the nullification of the contract of sale with unclean hands, all deserve fu ll faith and credit to support the conclusion that petitioner was motivated more by ill will than a sincere attempt to protect his rights in commencing suit aga inst respondents. It must be noted that before petitioner was able to convince D

r. Cruz to exchange her jewelry for the Tanay property, petitioner took pains to thoroughly examine said jewelry, even going to the extent of sketching their ap pearance. Why at the precise moment when he was about to take physical possessio n thereof he failed to exert extra efforts to check their genuineness despite th e large consideration involved has never been explained at all by petitioner. Hi s acts thus failed to accord with what an ordinary prudent man would have done i n the same situation. 4. Ong v. CA (GR 97347, 6 July 1999) Ong v. CA [G.R. No. 97347. July 6, 1999.] First division, Ynares-Santiago (J): 4 concur Facts: On 10 May 1983, Jaime Ong and spouses Miguel and Alejandra Robles executed an Agreement of Purchase and Sale respecting 2 parcels of land situated at Barrio Puri, San Antonio, Quezon (agricultural including rice mill, piggery) for P2M (initial Page 10 of 87

payment of P600,000 broken into P103,499.91 directly paid to seller on 22 March 1983 and P496,500.09 directly paid to BPI to answer for part of seller's loan with the bank; and balance of 1.4M to be paid in 4 equal quarterly installments of P 350,000 the first of which due and demandable on 15 June 1983); binding themselv es that upon the payment of the total purchase price the seller delivers a good and sufficient deed of sale and conveyance for the parcels of land free and clea r from liens and encumbrances, that seller delivers, surrenders and transfers th e parcels of land including all improvements thereon and to transfer the operati ons of the piggery and rice mill to the buyer; and that all payments due and dem andable under the contract effected in the residence of the seller unless otherw ise designated by the parties in writing. On 15 May 1983, Ong took possession of the subject parcels of land together with the piggery, building, ricemill, resi dential house and other improvements thereon. Pursuant to the contract, Ong paid the spouses the sum of P103,499.91 2 by depositing it with the UUCPB. Subsequen tly, Ong deposited sums of money with the BPI, in accordance with their stipulat ion that petitioner pay the loan of the spouses with BPI. To answer for his bala nce of P 1.4M, Ong issued 4 post-dated Metro Bank checks payable to the spouses in the amount of P350,000.00 each (Check 137708-157711). When presented for paym ent, however, the checks were dishonored due to insufficient funds. Ong promised to replace the checks but failed to do so. To make matters worse, out of the P4 96,500.00 loan of the spouses with BPI, which ong, as per agreement, should have paid, Ong only managed to dole out no more than P393,679.60. When the bank thre atened to foreclose the spouses' mortgage, they sold 3 transformers of the rice mi ll worth P51,411.00 to pay off their outstanding obligation with said bank, with the knowledge and conformity of Ong. Ong, in return, voluntarily gave the spous es authority to operate the rice mill. He, however, continued to be in possessio n of the two parcels of land while the spouses were forced to use the rice mill for residential purposes. On 2 August 1985, the spouses, through counsel, sent O ng a demand letter asking for the return of the properties. Their demand was lef t unheeded, so, on 2 September 1985, they filed with the RTC Lucena City, Branch 60, a complaint for rescission of contract and recovery of properties with dama ges. Later, while the case was still pending with the trial court, Ong introduce d major improvements on the subject properties by constructing a complete fence made of hollow blocks and expanding the piggery. These prompted the spouses to a sk for a writ of preliminary injunction; which the trial court granted, and thus enjoined Ong from introducing improvements on the properties except for repairs . On 1 June 1989, the trial court rendered a decision in favor of the spouses: o rdering the contract entered into by the parties set aside, ordering the deliver y of the parcels of land and the improvements thereon to the spouses, ordering t he return of the sum of P497,179.51 to Ong by the spouses, ordering Ong to pay t he spouses P100,000 for exemplary damages and P20,000 as attorney's fees and litig ation expenses. From this decision, petitioner appealed to the Court of Appeals, which affirmed the decision of the RTC but deleted the award of exemplary damag es. In affirming the decision of the trial court, the Court of Appeals noted tha t the failure of petitioner to completely pay the purchase price is a substantia l breach of his obligation which entitles the private respondents to rescind the ir contract under Article 1191 of the New Civil Code. Hence, the petition for re view on certiorari. The Supreme Court affirmed the decision rendered by the Cour t of Appeals with the modification that the spouses are ordered to return to Ong the sum P48,680.00 in addition to the amounts already awarded; with costs again st petitioner Ong. 1. Reevaluation of evidence not the function of the Supreme C ourt It is not the function of the Supreme Court to assess and evaluate all over again the evidence, testimonial and documentary, adduced by the parties to an a ppeal, particularly where the findings of both the trial court and the appellate court on the matter coincide. There is no cogent reason shown that would justif y the court to discard the factual findings of the two courts below and to super impose its own. 2. Rescission as a remedy to secure the reparation of damages ca used by a contract; Article 1380 Rescission, as contemplated in Articles 1380, e t seq., of the New Civil Code, is a remedy granted by law to the contracting par ties and even to third persons, to secure the reparation of damages caused to th

em by a contract, even if this should be valid, by restoration of things to thei r condition at the moment prior to the celebration of the contract. It implies a contract, which even if initially valid, produces a lesion or a pecuniary damag e to someone. 3. Rescission applicable to reciprocal obligations under Article 1 191 Article 1191 of the New Civil Code refers to rescission applicable to recipr ocal obligations. Reciprocal obligations are those which arise from the same cau se, and in which each party is a debtor and a creditor of the other, such that t he obligation of one is dependent upon the obligation of the other. They are to be performed simultaneously such that the performance of one is conditioned upon the simultaneous fulfillment of the other. 4. Rescission of reciprocal obligati ons under Article 1191 distinguished from rescission of contract under Article 1 383 Rescission of reciprocal obligations under Article 1191 of the New Civil Cod e should be distinguished from rescission of contracts under Article 1383. Altho ugh both presuppose contracts validly entered into and subsisting and both requi re mutual restitution when proper, they are not entirely identical. While Articl e 1191 uses the term rescission, the original term which was used in the old Civil Code, from which the article was based, was resolution. Resolution is a principal action which is based on breach Page 11 of 87

of a party, while rescission under Article 1383 is a subsidiary action limited t o cases of rescission for lesion under Article 1381 of the New Civil Code. 5. Re scissible contract under Article 1381 Article 1381 of the New Civil Code enumera tes rescissible contracts as (1) those which are entered into by guardians whenev er the wards whom they represent suffer lesion by more than one fourth of the va lue of the things which are the object thereof; (2) those agreed upon in represe ntation of absentees, if the latter suffer the lesion stated in the preceding nu mber; (3) those undertaken in fraud of creditors when the latter cannot in any m anner collect the claims due them; (4) those which refer to things under litigat ion if they have been entered into by the defendant without the knowledge and ap proval of the litigants or of competent judicial authority; (5) all other contra cts specially declared by law to be subject to rescission. In the present case, t he contract entered into by the parties obviously does not fall under any of tho se mentioned by Article 1381. Consequently, Article 1383 is inapplicable. 6. Con tract to sell distinguished from contract of sale In a contract of sale, the tit le to the property passes to the vendee upon the delivery of the thing sold; whi le in a contract to sell, ownership is, by agreement, reserved in the vendor and is not to pass to the vendee until full payment of the purchase price. In a con tract to sell, the payment of the purchase price is a positive suspensive condit ion, the failure of which is not a breach, casual or serious, but a situation th at prevents the obligation of the vendor to convey title from acquiring an oblig atory force. 7. Agreement of Purchase and Sale is in the nature of contract to sel l A careful reading of the parties' Agreement of Purchase and Sale shows that it is in the nature of a contract to sell. The spouses bound themselves to deliver a d eed of absolute sale and clean title covering the two parcels of land upon full payment by the buyer of the purchase price of P2M. This promise to sell was subj ect to the fulfillment of the suspensive condition of full payment of the purcha se price by the Ong. The non-fulfillment of the condition of full payment render ed the contract to sell ineffective and without force and effect. It must be str essed that the breach contemplated in Article 1191 of the New Civil Code is the obligor's failure to comply with an obligation already extant, not a failure of a condition to render binding that obligation. Failure to pay, in this instance, i s not even a breach but merely an event which prevents the vendor's obligation to convey title from acquiring binding force. Hence, the agreement of the parties t he present case may be set aside, but not because of a breach on the part of Ong for failure to complete payment of the purchase price. Rather, his failure to d o so brought about a situation which prevented the obligation of the spouses to convey title from acquiring an obligatory force. 8. Contract was not novated as to the manner and time of payment; Novation not presumed Article 1292 of the New Civil Code states that, In order that an obligation may be extinguished by anoth er which substitutes the same, it is imperative that it be so declared in unequi vocal terms, or that the old and the new obligations be on every point incompati ble with each other. Novation is never presumed, it must be proven as a fact eith er by express stipulation of the parties or by implication derived from an irrec oncilable incompatibility between the old and the new obligation. In the present case, the parties never even intended to novate their previous agreement. It is true that Ong paid the spouses small sums of money amounting to P48,680.00, in contravention of the manner of payment stipulated in their contract. These insta llments were, however, objected to by the spouses, and ong replied that these re presented the interest of the principal amount which he owed them. Records furth er show that Ong agreed to the sale of MERALCO transformers by the spousess to p ay for the balance of their subsisting loan with BPI. Although the parties agree d to credit the proceeds from the sale of the transformers to petitioner's obligat ion, he was supposed to reimburse the same later to respondent spouses. This can only mean that there was never an intention on the part of either of the partie s to novate petitioner's manner of payment. 9. Requisites of novation In order for novation to take place, the concurrence of the following requisites is indispen sable: (1) there must be a previous valid obligation; (2) there must be an agree ment of the parties concerned to a new contract; (3) there must be the extinguis hment of the old contract; and (4) there must be the validity of the new contrac

t. In the present case, the requisites are not found. The subsequent acts of the parties hardly demonstrate their intent to dissolve the old obligation as a con sideration for the emergence of the new one. Novation is never presumed, there m ust be an express intention to novate. 10. Builder in bad faith As regards the i mprovements introduced by Ong to the premises and for which he claims reimbursem ent, the Court found no reason to depart from the ruling of the trial court and the appellate court that petitioner is a builder in bad faith. He introduced the improvements on the premises knowing fully well that he has not paid the consid eration of the contract in full and over the vigorous objections of respondent s pouses. Moreover, Ong introduced major improvements on the premises even while t he case against him was pending before the trial court. Page 12 of 87

11. Deletion of award of exemplary damages correct The award of exemplary damage s was correctly deleted by the Court of Appeals inasmuch as no moral, temperate, liquidated or compensatory damages in addition to exemplary damages were awarde d. 5. Gaite v. Fonacier (GR L-11827, 31 July 1961) Gaite v. Fonacier [G.R. No. L-11827. July 31, 1961.] En Banc, Reyes JBL (J): 9 c oncur Facts: Isabelo Fonacier was the owner and/or holder of 11 iron lode minera l claims (Dawahan Group), situated in Jose Panganiban, Camarines Norte. By a Deed of Assignment dated 29 September 1952, Fonacier constituted and appointed Fernan do A. Gaite as his true and lawful attorney-in-fact to enter into a contract wit h any individual or juridical person for the exploration and development of the mining claims on a royalty basis of not less than P0.50 per ton of ore that migh t be extracted therefrom. On 19 March 1954, Gaite in turn executed a general ass ignment conveying the development and exploitation of said mining claims unto th e Larap Iron Mines, owned solely by him. Thereafter Gaite embarked upon the deve lopment and exploitation of the mining claims, opening and paving roads within a nd outside their boundaries, making other improvements and installing facilities therein for use in the development of the mines, and in time extracted therefro m what he claimed and estimated to be approximately 24,000 metric tons of iron o re. For some reason or another, Isabelo Fonacier decided to revoke the authority granted by him to Gaite, and Gaite assented thereto subject to certain conditio ns. As a result, a document entitled Revocation of Power of Attorney and Contract was executed on 8 December 1954, wherein Gaite transferred to Fonacier, for the consideration of P20,000, plus 10% of the royalties that Fonacier would receive from the mining claims, all his rights and interests on all the roads, improveme nts, and facilities in or outside said claims, the right to use the business nam e Larap Iron Mines and its goodwill, and all the records and documents relative to the mines. In the same document, Gaite transferred to Fonacier all his rights a nd interests over the 24,000 tons of iron ore, more or less that the former had al ready extracted from the mineral claims, in consideration of the sum of P75,000, P10,000, of which was paid upon the signing of the agreement, and the balance t o be paid out of the first letter of credit covering the first shipment of iron ores or the first amount derived from the local sale of iron ore made by the Lar ap Mines & Smelting Co. To secure the payment of the balance, Fonacier promised to execute in favor of Gaite a surety bond; delivered on 8 December 1954 with Fo nacier as principal and the Larap Mines and Smelting Co. and its stockholders as sureties. A second bond was executed by the parties to the first bond, on the s ame day, with the Far Eastern Surety and Insurance Co. as additional surety, but it provided that the liability of the surety company would attach only when the re had been an actual sale of iron ore by the Larap Mines & Smelting Co. for an amount of not less than P65,000. Both bond were attached and made integral parts of the Revocation of Power of Attorney and Contract. On the same day that Fonacie r revoked the power of attorney, Fonacier entered into a Contract of Mining Opera tion with Larap Mines and Smelting Co., Inc. to grant it the right to develop, ex ploit, and explore the mining claims, together with the improvements therein and the use of the name Larap Iron Mines and its goodwill, in consideration of certai n royalties. Fonacier likewise transferred, in the same document, the complete t itle to the approximately 24,000 tons of iron ore which he acquired from Gaite, to the Larap Mines & Smelting Co., in consideration for the signing by the compa ny and its stockholders of the surety bonds delivered by Fonacier to Gaite. On 8 December 1955, the bond with respect to the Far Eastern Surety and Insurance Co mpany expired with no sale of the approximately 24,000 tons of iron ore, nor had the 65,000 balance of the price of said ore been paid to Gaite by Fonacier and his sureties. Whereupon, Gaite demanded from Fonacier and his sureties payment o f said amount. When Fonacier and his sureties failed to pay as demanded by Gaite , the latter filed a complaint against them in the CFI Manila (Civil Case 29310)

for the payment of the P65,000 balance of the price of the ore, consequential d amages, and attorney's fees. Judgment was, accordingly, rendered in favor of plain tiff Gaite ordering defendants to pay him, jointly and severally, P65,000 with i nterest at 6% per annum from 9 December 1955 until full payment, plus costs. Fro m this judgment, defendants jointly appealed to the Supreme Court as the claims involved aggregate to more than P200,000. The Supreme Court affirmed the decisio n appealed from, with costs against appellants. 1. Shipment or local sale of ore not a condition precedent but a suspensive period or term The shipment or local sale of the iron ore is not a condition precedent (or suspensive) to the paymen t of the balance of P65,000, but was only a suspensive period or term. What char acterizes a conditional obligation is the fact that its efficacy or obligatory f orce (as distinguished from its demandability) is subordinated to the happening of a future and uncertain event; so that if the suspensive condition does not ta ke place, the parties would stand as if the conditional obligation had never exi sted. 2. The words of the contract express no contingency in the buyer's obligatio n to pay. The contract stipulates that the balance of Sixty-Five Thousand Pesos ( P65,000) will be paid out of the first letter of credit Page 13 of 87

covering the first shipment of iron ore . . . etc. There is no uncertainty that t he payment will have to be made sooner or later; what is undetermined is merely the exact date at which it will be made. By the very terms of the contract, ther efore, the existence of the obligation to pay is recognized; only its maturity o r demandability is deferred. 3. Contract of sale commutative and onerous; Each p arty assume correlative obligation and anticipate performance from the other A c ontract of sale is normally commutative and onerous: not only does each one of t he parties assume a correlative obligation (the seller to deliver and transfer o wnership of the thing sold and the buyer to pay the price), but each party antic ipates performance by the other from the very start. While in a sale the obligat ion of one party can be lawfully subordinated to an uncertain event, so that the other understands that he assumes the risk of receiving nothing for what he giv es (as in the case of a sale of hopes or expectations, emptio spei), it is not i n the usual course of business to do so; hence, the contingent character of the obligation must clearly appear. In the present case, nothing is found in the rec ord to evidence that Gaite desired or assumed to run the risk of losing his righ ts over the ore without getting paid for it, or that Fonacier understood that Ga ite assumed any such risk. The fact that appellants did put up such bonds indica tes that they admitted the definite existence of their obligation to pay the bal ance of P65,000. 4. To consider sale as a condition precedent leaves the payment at the discretion o fthe debtor To subordinate the obligation to pay the remain ing P65,000 to the sale or shipment of the ore as a condition precedent, would b e tantamount to leaving the payment at the discretion of the debtor, for the sal e or shipment could not be made unless the appellants took steps to sell the ore . Appellants would thus be able to postpone payment indefinitely. Such construct ion of the contract should be avoided. 5. Interpretation incline in favor of the greatest reciprocity of interests Assuming that there could be doubt whether by t he wording of the contract the parties intended a suspensive condition or a susp ensive period (dies ad quem) for the payment of the P65,000, the rules of interp retation would incline the scales in favor of the greatest reciprocity of interes ts, since sale is essentially onerous. The Civil Code of the Philippines, Article 1378, paragraph 1, in fine, provides if the contract is onerous, the doubt shall be settled in favor of the greatest reciprocity of interests and there can be no question that greater reciprocity obtains if the buyer's obligation is deemed to be actually existing, with only its maturity (due date) postponed or deferred, t han if such obligation were viewed as non-existent or not binding until the ore was sold. 6. Sale of ore to Fonacier was a sale on credit, not an aleatory contr act The sale of the ore to Fonacier was a sale on credit, and not an aleatory co ntract where the transferor, Gaite, would assume the risk of not being paid at a ll; and that the previous sale or shipment of the ore was not a suspensive condi tion for the payment of the balance of the agreed price, but was intended merely to fix the future date of the payment. 7. Non-renewal of bond impaired the secu rities given to the creditor Appellants have forfeited the right to compel Gaite to wait for the sale of the ore before receiving payment of the balance of P65, 000, because of their failure to renew the bond of the Far Eastern Surety Compan y or else replace it with an equivalent guarantee. The expiration of the bonding company's undertaking on 8 December 1955 substantially reduced the security of th e vendor's rights as creditor for the unpaid P65,000, a security that Gaite consid ered essential and upon which he had insisted when he executed the deed of sale of the ore to Fonacier. The case squarely comes under paragraphs 2 and 3 of Arti cle 1198 of the Civil Code of the Philippines which provides (2) When he does not furnish to the creditor the guaranties or securities which he has promised. (3) When by his own acts he has impaired said guaranties or securities after their establishment, and when through fortuitous event they disappear, unless he immed iately gives new ones equally satisfactory. Appellants' failure to renew or extend the surety company's bond upon its expiration plainly impaired the securities give n to the creditor (appellee Gaite), unless immediately renewed or replaced. 8. N o waiver intended by creditor Gaite's acceptance of the surety company's bond with f ull knowledge that on its face it would automatically expire within one year was not a waiver of its renewal after the expiration date. No such waiver could hav

e been intended, for Gaite stood to lose and had nothing to gain thereby; and if there was any, it could be rationally explained only if the appellants had agre ed to sell the ore and pay Gaite before the surety company's bond expired on 8 Dec ember 1955. But in the latter case the defendantsappellants' obligation to pay bec ame absolute after 1 year from the transfer of the ore to Fonacier by virtue of the deed. Page 14 of 87

9. No short-delivery made by Gaite This is a case of a sale of a specific mass o f fungible goods for a single price or a lump sum, the quantity of 24,000 tons of iron ore, more or less, stated in the contract, being a mere estimate by the par ties of the total tonnage weight of the mass; and second, that the evidence show s that neither of the parties had actually measured or weighed the mass, so that they both tried to arrive at the total quantity by making an estimate of the vo lume thereof in cubic meters and then multiplying it by the estimated weight per ton of each cubic meter. The sale between the parties is a sale of a specific m ass of iron ore because no provision was made in their contract for the measurin g or weighing of the ore sold in order to complete or perfect the sale, nor was the price of P75,000 agreed upon by the parties based upon any such measurement (see Art. 1480, second par., New Civil Code). The subject-matter of the sale is, therefore, a determinate object, the mass, and not the actual number of units o r tons contained therein, so that all that was required of the seller Gaite was to deliver in good faith to his buyer all of the ore found in the mass, notwiths tanding that the quantity delivered is less than the amount estimated by them (M obile Machinery & Supply Co., Inc. vs. York Oilfield Salvage Co., Inc. 171 So. 8 72, applying art. 2459 of the Luisiana Civil Code). The contract expressly state d the amount to be 24,000 tons, more or less. Applying the tonnage factor provid ed by the chief of Mines and Metallurgical Division of the Bureau of Mines which was between 3 metric tons minimum to 5 metric tons maximum, which was near the 3.3 metric ton tonnage factor adopted by Engr. Gamatero (at the request of Krako wer, a stockholder of Larap), and if appellant's witness is correct in his estimat e of 6,609 cubic meters of ore, the product is 21,809.7 tons which is not far fr om the 24,000 tons estimate. (cf. Pine River Logging & Improvement Co. vs. U. S. , 186 U.S. 279, 46, L. Ed. 1164). Thus, there was no short-delivery as would ent itle appellants to the payment of damages, nor could Gaite have been guilty of a ny fraud in making any misrepresentation to appellants as to the total quantity of ore in the stockpiles of the mining claims in question since Gaite's estimate a ppears to be substantially correct. 6. Acap v. CA (GR 118114, 7 December 1995) Acap v. CA [G.R. No. 118114. December 7, 1995.] First Division, Padilla (J): 4 c oncur Facts: The title to Lot 1130 of the Cadastral Survey of Hinigaran, Negros Occidental was evidenced by OCT R-12179. The lot has an area of 13,720 sq. m. Th e title was issued and is registered in the name of spouses Santiago Vasquez and Lorenza Oruma. After both spouses died, their only son Felixberto inherited the lot. In 1975, Felixberto executed a duly notarized document entitled Declaration of Heirship and Deed of Absolute Sale in favor of Cosme Pido. Since 1960, Teodor o Acap had been the tenant of a portion of the said land, covering an area of 9, 500 sq. m. When ownership was transferred in 1975 by Felixberto to Cosme Pido, A cap continued to be the registered tenant thereof and religiously paid his lease hold rentals to Pido and thereafter, upon Pido's death, to his widow Laurenciana. The controversy began when Pido died interstate and on 27 November 1981, his sur viving heirs executed a notarized document denominated as Declaration of Heirship and Waiver of Rights of Lot 1130 Hinigaran Cadastre, wherein they declared to ha ve adjudicated upon themselves the parcel of land in equal share, and that they waive, quitclaim all right, interests and participation over the parcel of land in favor of Edy de los Reyes. The document was signed by all of Pido's heirs. Edy de los Reyes did not sign said document. It will be noted that at the time of Co sme Pido's death, title to the property continued to be registered in the name of the Vasquez spouses. Upon obtaining the Declaration of Heirship with Waiver of R ights in his favor, de los Reyes filed the same with the Registry of Deeds as pa rt of a notice of an adverse claim against the original certificate of title. Th ereafter, delos Reyes sought for Acap to personally inform him that he had becom e the new owner of the land and that the lease rentals thereon should be paid to him. Delos Reyes alleged that he and Acap entered into an oral lease agreement

wherein Acap agreed to pay 10 cavans of palay per annum as lease rental. In 1982 , Acap allegedly complied with said obligation. Page 15 of 87

In 1983, however, Acap refused to pay any further lease rentals on the land, pro mpting delos Reyes to seek the assistance of the then Ministry of Agrarian Refor m (MAR) in Hinigaran, Negros Occidental. The MAR invited Acap, who sent his wife , to a conference scheduled on 13 October 1983. The wife stated that the she and her husband did not recognize delos Reyes's claim of ownership over the land. On 28 April 1988, after the lapse of four (4) years, delos Reys field a complaint f or recovery of possession and damages against Acap, alleging that as his leaseho ld tenant, Acap refused and failed to pay the agreed annual rental of 10 cavans of palay despite repeated demands. On 20 August 1991, the lower court rendered a decision in favor of delos Reyes, ordering the forfeiture of Acap's preferred rig ht of a Certificae of Land Transfer under PD 27 and his farmholdings, the return of the farmland in Acap's possession to delos Reyes, and Acap to pay P5,000.00 as attorney's fees, the sum of P1,000.00 as expenses of litigation and the amount of P10,000.00 as actual damages. Aggrieved, petitioner appealed to the Court of Ap peals. Subsequently, the CA affirmed the lower court's decision, holding that de l os Reyes had acquired ownership of Lot No. 1130 of the Cadastral Survey of Hinig aran, Negros Occidental based on a document entitled Declaration of Heirship and Waiver of Rights, and ordering the dispossession of Acap as leasehold tenant of t he land for failure to pay rentals. Hence, the petition for review on certiorari . The Supreme Court granted the petition, set aside the decision of the RTC Negr os Occidental, dismissed the complaint for recovery of possession and damages ag ainst Acap for failure to properly state a cause of action, without prejudice to private respondent taking the proper legal steps to establish the legal mode by which he claims to have acquired ownership of the land in question. 1. Asserted right or claim to ownership not sufficient per se to give rise to ownership ove r the res An asserted right or claim to ownership or a real right over a thing a rising from a juridical act, however justified, is not per se sufficient to give rise to ownership over the res. That right or title must be completed by fulfil ling certain conditions imposed by law. Hence, ownership and real rights are acq uired only pursuant to a legal mode or process. While title is the juridical jus tification, mode is the actual process of acquisition transfer of ownership over a thing in question. 2. Classes of modes of acquiring ownership Under Article 7 12 of the Civil Code, the modes of acquiring ownership are generally classified into two (2) classes, namely, the original mode (i.e, through occupation, acquis itive prescription, law or intellectual creation) and the derivative mode (i.e., through succession mortis causa or tradition as a result of certain contracts, such as sale, barter, donation, assignment or mutuum). 3. Contract of Sale; Decla ration of Heirship and Waiver of Rights an extrajudicial settlement between heirs under Rule 74 of the Rules of Court In a Contract of Sale, one of the contracti ng parties obligates himself to transfer the ownership of and to deliver a deter minate thing, and the other party to pay a price certain in money or its equival ent. On the other hand, a declaration of heirship and waiver of rights operates as a public instrument when filed with the Registry of Deeds whereby the intesta te heirs adjudicate and divide the estate left by the decedent among themselves as they see fit. It is in effect an extrajudicial settlement between the heirs u nder Rule 74 of the Rules of Court. In the present case, the trial court erred i n equating the nature and effect of the Declaration of Heirship and Waiver of Ri ghts the same with a contract (deed) of sale. 4. Sale of hereditary rights and w aiver of hereditary rights distinguished There is a marked difference between a sale of hereditary rights and a waiver of hereditary rights. The first presumes the existence of a contract or deed of sale between the parties. The second is, technically speaking, a mode of extinction of ownership where there is an abdica tion or intentional relinquishment of a known right with knowledge of its existe nce and intention to relinquish it, in favor of other persons who are co-heirs i n the succession. In the present case, de los Reyes, being then a stranger to th e succession of Cosme Pido, cannot conclusively claim ownership over the subject lot on the sole basis of the waiver document which neither recites the elements of either a sale, or a donation, or any other derivative mode of acquiring owne rship. 5. Summon of Ministry of Agrarian Reform does not conclude actuality of s ale nor notice of such sale The conclusion, made by the trial and appellate cour

ts, that a sale transpired between Cosme Pido's heirs and de los Reyes and that Acap acquired actual knowledge of said sale when he was summoned by the Ministry of Agrarian Reform to discuss de los Reyes' claim over the lot in question, has no ba sis both in fact and in law. 6. A notice of adverse claim does not prove ownersh ip over the lot; Adverse claim not sufficient to cancel the certificate of tile and for another to be issued in his name A notice of adverse claim, by its natur e, does not however prove private respondent's ownership over the tenanted lot. A n otice of adverse claim is nothing but a notice of a claim adverse to the registe red owner, the validity of which is yet to be established in court at some futur e date, and is no better than a notice of lis pendens which is a notice of a cas e already pending Page 16 of 87

in court. In the present case, while the existence of said adverse claim was duly proven (thus being filed with the Registry of Deeds which contained the Declara tion of Heirship with Waiver of rights an was annotated at the back of the Origi nal Certificate of Title to the land in question), there is no evidence whatsoev er that a deed of sale was executed between Cosme Pido's heirs and de los Reyes tr ansferring the rights of the heirs to the land in favor of de los Reyes. De los Reyes' right or interest therefore in the tenanted lot remains an adverse claim wh ich cannot by itself be sufficient to cancel the OCT to the land and title to be issued in de los Reyes' name. 7. Transaction between heirs and de los Reyes bindi ng between parties, but cannot affect right of Acap to tenanted land without cor responding proof thereof While the transaction between Pido's heirs and de los Rey es may be binding on both parties, the right of Acap as a registered tenant to t he land cannot be perfunctorily forfeited on a mere allegation of de los Reyes' ow nership without the corresponding proof thereof. Acap had been a registered tena nt in the subject land since 1960 and religiously paid lease rentals thereon.