Contracts - Last Set of Cases 2016

8/19/2019 Contracts - Last Set of Cases 2016

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G.R. No. 128120 October 20, 2004

SWEDISH MATCH, AB,

vs.

COURT OF AEA!S, A!S MANAGEMENT " DE#E!OMENT CORORATION $%&

ANTONIO '. !ITON(UA,respondents.

D E C I S I O N

TINGA, J.:

Petitioners seek a reversal of the twin Orders1 of the Court of Appeals dated 15 November

19962 and 31 anuar! 199"#3 in CA$%.&. C' No. 35((6# entitled ) ALS Management et al., v.

Swedish Match, AB et al.) *he appellate +ourt overturned the trial +ourt,s Order - dismissin

the respondents, +omplaint for spe+i/+ performan+e and remanded the +ase to the trial

+ourt for further pro+eedins.

0wedish at+h A hereinafter 0A4 is a +orporation oranied under the laws of 0wedennot doin business in the Philippines. 0A# however# had three subsidiar! +orporations in

the Philippines# all oranied under Philippine laws# to wit Phim+o 7ndustries# 7n+. Phim+o4#

Provident *ree 8arms# 7n+.# and **:;ouie Phils.4# 7n+.

0ometime in 19((# 0*&A# the then parent +ompan! of 0A# de+ided to sell 0A of

0weden and the latter,s worldwide mat+h# lihter and shavin produ+ts operation to

defaults in the loan +ovenants of 0N' with its s!ndi+ate of lenders. *he other

move was to sell at on+e or in one pa+kae all the 0N' +ompanies worldwide whi+h were

enaed in mat+h and lihter operations thru a lobal deal hereinafter# lobal deal4.


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7n his letter dated 3 November 19(9# ;itonua submitted to 0A a /rm o>er to bu! all of

the latter,s shares in Phim+o and all of Phim+o,s shares in Provident *ree 8arm# 7n+. and

**:;ouie Phils.4# 7n+. for the sum ofP"5B#BBB#BBB.BB.5

*hrouh its Chief er was below their e=pe+tations but ured them to undertake

a +omprehensive review and anal!sis of the value and pro/t potentials of the Phim+o shares#

with the assuran+e that respondents would eno! a +ertain priorit! althouh several parties

had indi+ated their interest to bu! the shares.6

*hereafter# an e=+hane of +orresponden+e ensued between petitioners and respondents

reardin the proe+ted sale of the Phim+o shares. 7n his letter dated 21 a! 199B# ;itonua

o>ered to bu! the disputed shares# e=+ludin the lihter division for F0G3B.6 million# whi+h

per another letter of the same date was in+reased to F0G36 million. " ;itonua stressed that

the bid amount +ould be adusted sube+t to availabilit! of additional information and audit

veri/+ation of the +ompan! /nan+es.

&espondin to ;itonua,s o>er# &ossi sent his letter dated 11 une 199B# informin the former

that A;0 should undertake a due dilien+e pro+ess or pre$a+?uisition audit and review of the

draft +ontra+t for the at+h and 8orestr! a+tivities of Phim+o at A;0, +onvenien+e. However#

&ossi made it +lear that at the +ompletion of the due dilien+e pro+ess# A;0 should submit

its /nal o>er in F0 dollar terms not later than 3B une 199B# for the shares of 0A

+orrespondin to ninet!$si= per+ent 96I4 of the at+h and 8orestr! a+tivities of Phim+o.

&ossi added that in +ase the )lobal deal) presentl! under neotiation for the 0wedish at+h

;ihts %roup would materialie# 0A would reimburse up to F0G2B#BBB.BB of A;0, +osts

related to the due dilien+e pro+ess.(

;itonua in a letter dated 1( une 199B# e=pressed disappointment at the apparent +hane in0A,s approa+h to the biddin pro+ess. He pointed out that in their - une 199B meetin#

he was advised that one /nal bidder would be sele+ted from amon the four +ontendin

roups as of that date and that the de+ision would be made b! 6 une 199B. He +riti+ied

0A,s de+ision to a++ept a new bidder who was not amon those who parti+ipated in the

25 a! 199B biddin. He informed &ossi that it ma! not be possible for them to submit their

/nal bid on 3B une 199B# +itin the advi+e to him of the auditin /rm that the /nan+ial

statements would not be +ompleted until the end of ul!. ;itonua added that he would

indi+ate in their /nal o>er more spe+i/+ details of the pa!ment me+hani+s and +onsider the

possibilit! of sinin a +onditional sale at that time.9

*wo da!s prior to the deadline for submission of the /nal bid# ;itonua aain advised &ossi

that the! would be unable to submit the /nal o>er b! 3B une 199B# +onsiderin that the

a+?uisition audit of Phim+o and the review of the draft areements had not !et been

+ompleted. He said# however# that the! would be able to /nalie their bid on 1" ul! 199B

and that in +ase their bid would turn out better than an! other proponent# the! would remit

pa!ment within ten 1B4 da!s from the e=e+ution of the +ontra+ts.1B


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petitioners.1" &espondents added that 0A,s refusal to +onsummate the perfe+ted sale of

the Phim+o shares amounted to an abuse of riht and +onstituted +ondu+t whi+h is +ontrar!

to law# morals# ood +ustoms and publi+ poli+!.1(

&espondents pra!ed that petitioners be enoined from sellin or transferrin the Phim+o

shares# or otherwise implementin the sale or transfer thereof# in favor of an! person or

entit! other than respondents# and that an! su+h sale to third parties be annulled and set

aside. &espondents also asked that petitioners be ordered to e=e+ute all do+uments or

instruments and perform all a+ts ne+essar! to +onsummate the sales areement in their

favor.

*raversin the +omplaint# petitioners alleed that respondents have no +ause of a+tion#

+ontendin that no perfe+ted +ontra+t# whether verbal or written# e=isted between them.

Petitioners added that respondents, +ause of a+tion# if an!# was barred b! the 0tatute of

8rauds sin+e there was no written instrument or do+ument eviden+in the alleed sale of the

Phim+o shares to respondents.

Petitioners /led a motion for a preliminar! hearin of their defense of bar b! the 0tatute of8rauds# whi+h the trial +ourt ranted. oth parties areed to adopt as their eviden+e in

support of or aainst the motion to dismiss# as the +ase ma! be# the eviden+e whi+h the!

addu+ed in support of their respe+tive positions on the writ of preliminar! inun+tion

in+ident.

7n its Order dated 1" April 1991# the &*C dismissed respondents, +omplaint.19 7t ruled that

there was no perfe+ted +ontra+t of sale between petitioners and respondents. *he +ourt

a quo said that the letter dated 11 une 199B# relied upon b! respondents# showed that

petitioners did not a++ept the bid o>er of respondents as the letter was a mere invitation for

respondents to +ondu+t a due dilien+e pro+ess or pre$a+?uisition audit of Phim+o,s mat+h

and forestr! operations to enable them to submit their /nal o>er on 3B une 199B. Assuminthat respondent,s bid was favored b! an oral a++eptan+e made in private b! oE+ers of

0A# the trial +ourt noted# su+h a++eptan+e was merel! preparator! to a formal a++eptan+e

b! the 0A@the a++eptan+e that would eventuall! lead to the e=e+ution and sinin of the

+ontra+t of sale. oreover# the +ourt noted that respondents failed to submit their /nal bid

on the deadline set b! petitioners.

&espondents appealed to the Court of Appeals# assinin the followin errors

A. *H< *&7A; CF&*


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LA&&AN*


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sube+t shares to them was perfe+ted as shown b! the followin +ir+umstan+es# namel!

petitioners assured them that should the! in+rease their bid# the sale would be awarded to

them and that the! did in fa+t in+rease their previous bid of F0G3B.6 million to F0G36

million petitioners orall! a++epted their revised o>er and the a++eptan+e was rela!ed to

them b! &ene Dion petitioners dire+ted them to pro+eed with the a+?uisition audit and to

submit a +omfort letter from the Fnited Co+onut Planters, ank FCP4 petitioner

+orporation +on/rmed its previous verbal a++eptan+e of their o>er in a letter dated 11 une

199B with the prior approval of petitioners# respondents enaed the servi+es of ;a!a#

anabat# 0alado Co.# an independent auditin /rm# to immediatel! pro+eed with the

a+?uisition audit and# petitioner +orporation reiterated its +ommitment to be bound b! the

result of the a+?uisition audit and

promised to reimburse respondents, +ost to the e=tent of F0G2B#BBB.BB. All these in+idents#

a++ordin to respondents# overwhelminl! prove that the +ontra+t of sale of the Phim+o

shares was perfe+ted.

8urther# respondents arued that there was partial performan+e of the perfe+ted +ontra+t on

their part. *he! alleed that with the prior approval of petitioners# the! enaed the servi+esof ;a!a# anabat# 0alado Co. to +ondu+t the a+?uisition audit. *he! averred that

petitioners areed to be bound b! the results of the audit and o>ered to reimburse the +osts

thereof to the e=tent of F0G2B#BBB.BB. &espondents added that in +omplian+e with their

obliations under the +ontra+t# the! have submitted a +omfort letter from FCP to show

petitioners that the bank was willin to /nan+e the a+?uisition of the Phim+o shares.21

*he basi+ issues to be resolved are 14 whether the appellate +ourt erred in reversin the

trial +ourt,s de+ision dismissin the +omplaint for bein unenfor+eable under the 0tatute of

8rauds and 24 whether there was a perfe+ted +ontra+t of sale between petitioners and

respondents with respe+t to the Phim+o shares.

*he 0tatute of 8rauds embodied in Arti+le 1-B3# pararaph 24# of the Civil Code22 re?uires

+ertain +ontra+ts enumerated therein to be eviden+ed b! some note or memorandum in

order to be enfor+eable. *he term )0tatute of 8rauds) is des+riptive of statutes whi+h re?uire

+ertain +lasses of +ontra+ts to be in writin. *he 0tatute does not deprive the parties of the

riht to +ontra+t with respe+t to the matters therein involved# but merel! reulates the

formalities

of the +ontra+t ne+essar! to render it enfor+eable.23 e+t of non$+omplian+e with the re?uirement of the

0tatute is simpl! that no a+tion +an be enfor+ed unless the re?uirement is +omplied

with.25 Clearl!# the form re?uired is for evidentiar! purposes onl!. Hen+e# if the parties permit


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a +ontra+t to be proved# without an! obe+tion# it is then ust as bindin as if the 0tatute has

been +omplied with.26

*he purpose of the 0tatute is to prevent fraud and perur! in the enfor+ement of obliations

dependin for their eviden+e on the unassisted memor! of witnesses# b! re?uirin +ertain

enumerated +ontra+ts and transa+tions to be eviden+ed b! a writin sined b! the part! to

be +hared.2"

However# for a note or memorandum to satisf! the 0tatute# it must be +omplete in itself and

+annot rest partl! in writin and partl! in parol. *he note or memorandum must +ontain the

names of the parties# the terms and +onditions of the +ontra+t# and a des+ription of the

propert! suE+ient to render it +apable of identi/+ation.2( 0u+h note or memorandum must

+ontain the essential elements of the +ontra+t e=pressed with +ertaint! that ma! be

as+ertained from the note or memorandum itself# or some other writin to whi+h it refers or

within whi+h it is +onne+ted# without resortin to parol eviden+e.29

Contrar! to the Court of Appeals, +on+lusion# the e=+hane of +orresponden+e between the

parties hardl! +onstitutes the note or memorandum within the +onte=t of Arti+le 1-B3 of theCivil Code. &ossi,s letter dated 11 une 199B# heavil! relied upon b! respondents# is not

+omplete in itself. 8irst# it does not indi+ate at what pri+e the shares were bein sold. 7n

pararaph 54 of the letter# respondents were supposed to submit their /nal o>er in F.0.

dollar terms# at that after the +ompletion of the due dilien+e pro+ess. *he pararaph

undoubtedl! proves that there was as !et no de/nite areement as to the pri+e. 0e+ond# the

letter does not state the mode of pa!ment of the pri+e. 7n fa+t# ;itonua was supposed to

indi+ate in his /nal o>er how and where pa!ment for the shares was planned to be made.3B


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7n eneral# +ontra+ts undero three distin+t staes# to wit neotiation perfe+tion or birth

and +onsummation. Neotiation beins from the time the prospe+tive +ontra+tin parties

manifest their interest in the +ontra+t and ends at the moment of areement of the parties.

Perfe+tion or birth of the +ontra+t takes pla+e when the parties aree upon the essential

elements of the +ontra+t. Consummation o++urs when the parties ful/ll or perform the terms

areed upon in the +ontra+t# +ulminatin in the e=tinuishment thereof.3"

A neotiation is formall! initiated b! an o>er. A perfe+ted promise merel! tends to insure

and pave the wa! for the +elebration of a future +ontra+t. An imperfe+t promise

policitacion4# on the other hand# is a mere una++epted o>er.3( Publi+ advertisements or

soli+itations and the like are ordinaril! +onstrued as mere invitations to make o>ers or onl!

as proposals. At an! time prior to the perfe+tion of the +ontra+t# either neotiatin part!

ma! stop the neotiation.39 *he o>er# at this stae# ma! be withdrawn the withdrawal is

e>e+tive immediatel! after its manifestation# su+h as b! its mailin and not ne+essaril!

when the o>eree learns of the withdrawal.-B

An o>er would re?uire# amon other thins# a +lear +ertaint! on both the obe+t and the

+ause or +onsideration of the envisioned +ontra+t. Consent in a +ontra+t of sale should bemanifested b! the meetin of the o>er and the a++eptan+e upon the thin and the +ause

whi+h are to +onstitute the +ontra+t. *he o>er must be +ertain and the a++eptan+e absolute.

A ?uali/ed a++eptan+e +onstitutes a +ounter$o>er.-1

Ouite obviousl!# ;itonua,s letter dated 21 a! 199B# proposin the a+?uisition of the

Phim+o shares for F0G36 million was merel! an o>er. *his o>er# however# in ;itonua,s own

words# )is understood to be sube+t to adustment on the basis of an audit of the assets#

liabilities and net worth of Phim+o and its subsidiaries and on the /nal neotiation between

ourselves.)-2

Las the o>er +ertain enouh to satisf! the re?uirements of the 0tatute of 8rauds De/nitel!not.

;itonua repeatedl! stressed in his letters that the! would not be able to submit their /nal

bid b! 3B une 199B.-3Lith indubitable in+onsisten+!# respondents later +laimed that for all

intents and purposes# the F0G36 million was their /nal bid. 7f this were so# it would be inane

for ;itonua to state# as he did# in his letter dated 2( une 199B that the! would be in a

position to submit their /nal bid onl! on 1" ul! 199B. *he la+k of a de/nite o>er on the part

of respondents +ould not possibl! serve as the basis of their +laim that the sale of the

Phim+o shares in their favor was perfe+ted# for one essential element of a +ontra+t of sale

was obviousl! wantin@the pri+e +ertain in mone! or its e?uivalent. *he pri+e must be

+ertain# otherwise there is no true +onsent between the parties.-- *here +an be no sale

without a pri+e.-5 Ouite re+entl!# this Court reiterated the lon$standin do+trine that the

manner of pa!ment of the pur+hase pri+e is an essential element before a valid and bindin

+ontra+t of sale +an e=ist sin+e the areement on the manner of pa!ment oes into the pri+e

su+h that a

disareement on the manner of pa!ment is tantamount to a failure to aree on the pri+e.-6


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%rantin arguendo# that the amount of F0G36 million was a de/nite o>er# it would remain as

a mere o>er in the absen+e of eviden+e of its a++eptan+e. *o produ+e a +ontra+t# there must

be a++eptan+e# whi+h ma! be e=press or implied# but it must not ?ualif! the terms of the

o>er.-" *he a++eptan+e of an o>er must be un?uali/ed and absolute to perfe+t the

+ontra+t.-( 7n other words# it must be identi+al in all respe+ts with that of the o>er so as to

produ+e +onsent or meetin of the minds.-9

&espondents, attempt to prove the alleed verbal a++eptan+e of their F0G36 million bid

be+omes futile in the fa+e of the overwhelmin eviden+e on re+ord that there was in the /rst

pla+e no meetin of the minds with respe+t to the pri+e. 7t is dramati+all! +lear that the

F0G36 million was not the a+tual pri+e areed upon but merel! a preliminar! o>er whi+h

was sube+t to adustment after the +on+lusion of the audit of the +ompan! /nan+es.

&espondents, failure to submit their /nal bid on the deadline set b! petitioners prevented

the perfe+tion of the +ontra+t of sale. 7t was not perfe+ted due to the absen+e of one

essential element whi+h was the pri+e +ertain in mone! or its e?uivalent.

At an! rate# from the pro+edural stand point# the +ontinuin obe+tions raised b! petitioners

to the admission of parol eviden+e5B on the alleed verbal a++eptan+e of the o>er renderedan! eviden+e of a++eptan+e inadmissible.

&espondents, plea of partial performan+e should likewise fail. *he a+?uisition audit and

submission of a +omfort letter# even if +onsidered toether# failed to prove the perfe+tion of

the +ontra+t. Ouite the +ontrar!# the! indi+ated that the sale was far from +on+luded.

&espondents +ondu+ted the audit as part of the due dilien+e pro+ess to help them arrive at

and make their /nal o>er. n the other hand# the submission of the +omfort letter was

merel! a uarantee that respondents had the /nan+ial +apa+it! to pa! the pri+e in the event

that their bid was a++epted b! petitioners.

*he 0tatute of 8rauds is appli+able onl! to +ontra+ts whi+h are e=e+utor! and not to thosewhi+h have been +onsummated either totall! or partiall!.51 7f a +ontra+t has been totall! or

partiall! performed# the e=+lusion of parol eviden+e would promote fraud or bad faith# for it

would enable the defendant to keep the bene/ts alread! derived b! him from the

transa+tion in litiation# and at the same time# evade the obliations# responsibilities or

liabilities assumed or +ontra+ted b! him thereb!.52 *his rule# however# is predi+ated on the

fa+t of rati/+ation of the +ontra+t within the meanin of Arti+le 1-B5 of the Civil Code either

14 b! failure to obe+t to the presentation of oral eviden+e to prove the same# or 24 b! the

a++eptan+e of bene/ts under them. 7n the instant +ase# respondents failed to prove that

there was partial performan+e of the +ontra+t within the purview of the 0tatute.

&espondents insist that even on the assumption that the 0tatute of 8rauds is appli+able in

this +ase# the trial +ourt erred in dismissin the +omplaint altoether. *he! point out that the

+omplaint presents several +auses of a+tion.

A +lose e=amination of the +omplaint reveals that it allees two distin+t +auses of a+tion# the

/rst is for spe+i/+ performan+e53 premised on the e=isten+e of the +ontra+t of sale# while the

other is solel! for damaes# predi+ated on the purported dilator! maneuvers e=e+uted b!

the Phim+o manaement.5-


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Lith respe+t to the /rst +ause of a+tion for spe+i/+ performan+e# apart from petitioners,

alleed refusal to honor the +ontra+t of sale@whi+h has never been perfe+ted in the /rst

pla+e@respondents made a number of averments in their +omplaint all in support of said

+ause of a+tion. &espondents

+laimed that petitioners were uilt! of promissor! estoppel#55 warrant! brea+hes56 and

tortious +ondu+t5" in refusin to honor the alleed +ontra+t of sale. *hese averments are

predi+ated on or at least interwoven with the e=isten+e or perfe+tion of the +ontra+t of sale.

As there was no su+h perfe+ted +ontra+t# the trial +ourt properl! ree+ted the averments in

+onun+tion with the dismissal of the +omplaint for spe+i/+ performan+e.

However# respondents, se+ond +ause of a+tion due to the alleed mali+ious and deliberate

dela! of the Phim+o manaement in the deliver! of do+uments ne+essar! for the +ompletion

of the audit on time# not bein based on the e=isten+e of the +ontra+t of sale# +ould stand

independentl! of the a+tion for spe+i/+ performan+e and should not be deemed barred b!

the dismissal of the +ause of a+tion predi+ated on the failed +ontra+t. 7f substantiated# this

+ause of a+tion would entitle respondents to the re+over! of damaes aainst the oE+ers of

the +orporation responsible for the a+ts +omplained of.

*hus# the Court +annot forthwith order dismissal of the +omplaint without a>ordin

respondents an opportunit! to substantiate their alleations with respe+t to its +ause of

a+tion for damaes aainst the oE+ers of Phim+o based on the latter,s alleed self$servin

dilator! maneuvers.

WHEREFORE, the petition is in part GRANTED. *he appealed Decision is

hereb! MODIFIED insofar as it de+lared the areement between the parties enfor+eable

under the

0tatute of 8rauds. *he +omplaint before the trial +ourt is ordered DISMISSED insofar as the+ause of a+tion for spe+i/+

performan+e is +on+erned. *he +ase is ordered REMANDED to the trial +ourt for further

pro+eedins with respe+t to the +ause of a+tion for damaes as above spe+i/ed.


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G.R. No. 1)421* (+%e 08, 200

SOUSES MARIO AND E!I-ABETH TORCUATOR, petitioners#

vs.

SOUSES REMEGIO AND G!ORIA BERNABE $%& SOUSES DIOSDADO $%& !OURDES

SA!#ADOR,respondents.

D < C 7 0 7 N

TINGA, J.:

7n the instant Petition#1 spouses ario and


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7rrevo+able 0pe+ial Power of Attorne! e+ted.

0ubseu?entl!# the ernabes sold the sube+t land to ;eonardo Aneles# a brother$in$law

s4# the +omplaint /led b! the plainti> spouses is dismissed. 0in+e the plainti> a+ted

with sin+erit! and without dela! in assertin what the! believed to be their preroatives# i.e.#without an! mali+e or desire to take advantae of another# the +ounter$+laim interposed b!

the ernabes aainst the *or+uator spouses is similarl! dismissed.

akati# etro$anila# Auust 2B# 1991.5

*he Court of Appeals dismissed the appeal# rulin that the sale between the ernabes and

the *or+uators was tainted with serious irreularities and bad faith. *he appellate +ourt

areed with the trial +ourt,s +on+lusion that the parties entered into the +ontra+t with the

intention of renein on the stipulation disallowin the sale or transfer of va+ant lots in A!ala

Alaban 'illae.

7t also ruled that the parties deprived the overnment of ta=es when the! made it appear

that the propert! was sold dire+tl! b! the 0alvadors to the *or+uators. 0in+e there were

a+tuall! two sales# i.e.# the /rst sale between the 0alvadors and the ernabes and the

se+ond between the ernabes and *or+uators# ta=es should have been paid for both

transfers.6

*he Court of Appeals denied petitioners, motion for re+onsideration in its #esolution" dated

une 15# 199(.

Petitioners then /led the instant petition# averrin that the appellate +ourt erred in

dismissin their appeal on the strenth of issues whi+h were neither pleaded nor proved.

*he +onditions alleedl! imposed b! A!ala Corporation on the sale of lots in A!ala Alaban

'illae were )a4 that the lot$bu!er shall deposit with A!ala Corporation a +ash bond

about P1"#BBB.BB for the 0alvadors4 whi+h shall be refunded to him if he builds a residen+e

thereon within two 24 !ears of pur+hase# otherwise the deposit shall be forfeited b4

ar+hite+tural plans for an! improvement shall be approved b! A!ala Corporation and +4 no

lot ma! be resold b! the bu!er unless a residential house has been +onstru+ted thereon

A!ala Corporation keeps the *orrens title in their sic4 possession.4)(

http://www.lawphil.net/judjuris/juri2005/jun2005/gr_134219_2005.html#fnt5http://www.lawphil.net/judjuris/juri2005/jun2005/gr_134219_2005.html#fnt6http://www.lawphil.net/judjuris/juri2005/jun2005/gr_134219_2005.html#fnt7http://www.lawphil.net/judjuris/juri2005/jun2005/gr_134219_2005.html#fnt8http://www.lawphil.net/judjuris/juri2005/jun2005/gr_134219_2005.html#fnt5http://www.lawphil.net/judjuris/juri2005/jun2005/gr_134219_2005.html#fnt6http://www.lawphil.net/judjuris/juri2005/jun2005/gr_134219_2005.html#fnt7http://www.lawphil.net/judjuris/juri2005/jun2005/gr_134219_2005.html#fnt8


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A++ordin to petitioners# the stipulation prohibitin the sale of va+ant lots in A!ala Alaban

'illae# adverted to b! the appellate +ourt in its de+ision as eviden+e that the sale between

the ernabes and the *or+uators was tainted with serious irreularities# was never presented

or o>ered in eviden+e b! an! of the parties. Lithout su+h stipulation havin been presented#

marked and o>ered in eviden+e# the trial +ourt and the appellate +ourt should not have

+onsidered the same.

*he appellate +ourt alleedl! also erred in de+larin that the +ontra+t of sale sube+t of the

+ase is void# as it was intended to deprive the overnment of revenue sin+e the matter of

ta=es was not even mentioned in the appealed de+ision of the trial +ourt.

8urther# petitioners assert that the +ontra+t was a perfe+ted +ontra+t of sale not a mere

+ontra+t to sell. *he trial +ourt thus erred in de+larin that the +ontra+t was void due onl! to

petitioners, failure to deliver the areed +onsideration. ;ikewise# the fa+t that the +ontra+t

+alls for the pa!ment of the areed pur+hase pri+e in Fnited 0tates Dollars does not result in

the +ontra+t bein void. *he most that +ould be demanded# in a++ordan+e with

urispruden+e# is to pa! the obliation in Philippine +urren+!.

Petitioners also dispute the trial +ourt,s /ndin that the! did not su>er an! real damae as a

result of the transa+tion. n the +ontrar!# the! +laim that respondents, refusal to transfer

the propert! +aused them a+tual and moral damaes.

&espondents /led their Comment$Opposition %&o the Petition 'or Certiorari(9 dated November

-# 199( +ounterin that petitioners knew of the +ondition prohibitin the sale of va+ant lots

in A!ala Alaban 'illae as the same was annotated on the title of the propert! whi+h was

submitted and adopted b! both parties as their eviden+e. *he fa+t that the areement

re?uired petitioners to +onstru+t a house in the name of the 0alvadors shows that petitioners

themselves knew of the +ondition and a+knowleded its validit!.

As reards petitioners, +ontention that the Court of Appeals should not have ruled on the

matter of ta=es due the overnment# respondents assert that the appellate +ourt has the

power to review the entire +ase to determine the validit! of the udment of the lower +ourt.

*hus# it ma! review even matters whi+h were not raised on appeal.

&espondents refer to the +ir+umstan+es surroundin the transa+tion as proof that the parties

entered into a mere +ontra+t to sell and not a +ontra+t of sale. Alleedl!# the memorandum

+ontainin the areement of the parties merel! used the term )o>er.) *he pa!ment of the

pur+hase pri+e was ostensibl! a +ondition sine qua non to the e=e+ution of the deed of sale

in favor of petitioners# espe+iall! sin+e the ernabes +ame to the Philippines with the

e=press purpose of sellin the propert! and were leavin for the Fnited 0tates as soon as

the! were paid. oreover# petitioners were re?uired to +onstru+t a residential house on the

propert! before it +ould be sold to them in a++ordan+e with the +ondition imposed b! A!ala

Corporation.

8urther# respondents maintain that the transa+tion was not +onsummated due to the fault of

petitioners who failed not onl! to prepare the ne+essar! do+umentation but also to pa! the

pur+hase pri+e for the propert!. *he! also arue that the spe+ial power of attorne! e=e+uted

b! the 0alvadors in favor of petitioners merel! ranted the latter the riht to +onstru+t a

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residential house on the propert! in the name of the 0alvadors. *he oriinal do+ument was

not even iven to the *or+uators pre+isel! be+ause the! have not paid the pur+hase pri+e.

Petitioners /led a #epl) 1B dated anuar! 2B# 1999 in reiteration of their aruments.

7n the #esolution11 dated 8ebruar! 1B# 1999# the parties were re?uired to /le their respe+tive

memoranda. A++ordinl!# petitioners /led their Memorandum12 on April 19# 1999. n the

other hand# in view of respondents, disappearan+e without noti+e# the Court resolved to

dispense with their memorandum.13

*he trial +ourt denied petitioners, +omplaint on three 34 rounds# namel! 14 the alleed

nullit! of the +ontra+t between the parties as it violated A!ala Corporation,s +ondition that

the +onstru+tion of a house is a prere?uisite to an! sale of lots in A!ala Alaban 'illae 24

non$pa!ment of the pur+hase pri+e and 34 the nullit! of the +ontra+t as it +alled for

pa!ment in Fnited 0tates Dollars. *o these reasons# the Court of Appeals added a fourth

basis for den!in petitioners, appeal and that is the alleed nullit! of the areement

be+ause it deprived the overnment of ta=es.

An anal!sis of the fa+ts obtainin in this +ase leads us to aErm the assailed de+isions

althouh from a slihtl! di>erent but related thrust.

;et us bein b! +hara+teriin the areement entered into b! the parties# i.e.# whether the

areement is a +ontra+t to sell as the trial +ourt ruled# or a +ontra+t of sale as petitioners

insist.

*he di>eren+es between a +ontra+t to sell and a +ontra+t of sale are well$settled in

urispruden+e. As earl! as 1951# we held that in a +ontra+t of sale# title passes to the bu!er

upon deliver! of the thin sold# while in a +ontra+t to sell# ownership is reserved in the seller

and is not to pass until the full pa!ment of the pur+hase pri+e is made. 7n the /rst +ase# non$pa!ment of the pri+e is a neative resolutor! +ondition in the se+ond +ase# full pa!ment is a

positive suspensive +ondition. ein +ontraries# their e>e+t in law +annot be identi+al. 7n the

/rst +ase# the vendor has lost and +annot re+over the ownership of the land sold until and

unless the +ontra+t of sale is itself resolved and set aside. 7n the se+ond +ase# however# the

title remains in the vendor if the vendee does not +ompl! with the +ondition pre+edent of

makin pa!ment at the time spe+i/ed in the +ontra+t.1-

7n other words# in a +ontra+t to sell# ownership is retained b! the seller and is not to pass to

the bu!er until full pa!ment of the pri+e or the ful/llment of some other +onditions either of

whi+h is a future and un+ertain event the non$happenin of whi+h is not a brea+h# +asual or

serious# but simpl! an event that prevents the obliation of the vendor to +onve! title from

a+?uirin bindin for+e.15

Le have +arefull! e=amined the areement between the parties and are far from persuaded

that it was a +ontra+t of sale.

8irstl!# the areement imposed upon petitioners the obliation to full! pa! the areed

pur+hase pri+e for the propert!. *hat ownership shall not pass to petitioners until the! have

full! paid the pri+e is impli+it in the areement. Notabl!# respondent &emiio ernabe

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testi/ed# without obe+tion on the part of petitioners# that he spe+i/+all! informed

petitioners that the transa+tion should be +ompleted# i.e.# that he should re+eive the full

pa!ment for the propert!# before he left for the Fnited 0tates on +tober 1-# 19(6.16

oreover# the deed of sale would have been issued onl! upon full pa!ment of the pur+hase

pri+e# amon other thins. Petitioner ario *or+uator a+knowleded this fa+t when he

testi/ed that the deed of sale and oriinal spe+ial power of attorne! were onl! to be

delivered upon full pa!ment of the pur+hase pri+e.1"

As +orre+tl! observed b! the trial +ourt# the 0alvadors did not e=e+ute a deed of sale in favor

of petitioners# and instead e=e+uted a spe+ial power of attorne! authoriin the ernabes to

sell the propert! on their behalf# in order to a>ord the latter a measure of prote+tion that

would uarantee full pa!ment of the pur+hase pri+e before an! deed of sale in favor of

petitioners was e=e+uted.

&emarkabl!# the re+ords are bereft of an! indi+ation that petitioners ever attempted to

tender pa!ment or +onsin the pur+hase pri+e as re?uired b! law. *he Complaint 1( /led b!

petitioners makes no mention at all of a tender of pa!ment or +onsination havin beenmade# mu+h less that petitioners are willin and read! to pa! the pur+hase pri+e. Petitioners,

averments to the e>e+t that the! have suE+ient funds to pa! for the propert! and have

even applied for a teleraphi+ transfer from their bank a++ount to the ernabes, bank

a++ount# un+oupled with a+tual tender and +onsination# are utterl! self$ servin.

*he trial +ourt +orre+tl! noted that petitioners should have +onsined the amount due in

+ourt instead of merel! sendin respondents a letter e=pressin interest to push throuh

with the transa+tion. ere sendin of a letter b! the vendee e=pressin the intention to pa!

without the a++ompan!in pa!ment is not +onsidered a valid tender of pa!ment.

Consination of the amount due in +ourt is essential in order to e=tinuish the obliation to

pa! and oblie the vendor to +onve! title.

19

n this s+ore# even assumin that the areement was a +ontra+t of sale# respondents ma!

not be +ompelled to deliver the propert! and e=e+ute the deed of absolute sale. 7n +ases

su+h as the one before us# whi+h involve the performan+e of an obliation and not merel!

the e=er+ise of a privilee or riht# pa!ment ma! be e>e+ted not b! mere tender alone but

b! both tender and +onsination. *he rule is di>erent in +ases whi+h involve an e=er+ise of a

riht or privilee# su+h as in an option +ontra+t# leal redemption or sale with riht to

repur+hase# wherein mere tender of pa!ment would be suE+ient to preserve the riht or

privilee.2B Hen+e# absent a valid tender of pa!ment and +onsination# petitioners are

deemed to have failed to dis+hare their obliation to pa!.

0e+ondl!# the parties +learl! intended the +onstru+tion of a residential house on the propert!

as another suspensive +ondition whi+h had to be ful/lled. A!ala Corporation retained title to

the propert! and the 0alvador spouses were pre+luded from sellin it unless a residen+e had

been +onstru+ted thereon. *he A!ala stipulation was a pervasive# albeit unwritten# +ondition

in liht of whi+h the transa+tion in this +ase was neotiated. *he parties undoubtedl!

understood that the! had to +ontend with the A!ala stipulation whi+h is wh! the! resorted to

the e=e+ution of a spe+ial power of attorne! authoriin petitioners to +onstru+t a residential

buildin on the propert! in the name of the 0alvadors. Had the areement been a +ontra+t

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of sale as petitioners would impress upon the Court# the spe+ial power of attorne! would

have been entirel! unne+essar! as petitioners would have had the riht to +ompel the

0alvadors to transfer ownership to them.21

*hirdl!# there was neither a+tual nor +onstru+tive deliver! of the propert! to petitioners.

Apart from the fa+t that no publi+ do+ument eviden+in the sale was e=e+uted# whi+h would

have been +onsidered e?uivalent to deliver!# petitioners did not take a+tual# ph!si+al

possession of the propert!. *he spe+ial power of attorne!# whi+h petitioners +ount on as

eviden+e that the! took possession of the propert!# +an b! no means be interpreted as

deliver! or +onve!an+e of ownership over the propert!. *aken b! itself# in fa+t# the spe+ial

power of attorne! +an be interpreted as tied up with an! number of propert! arranements#

su+h as a +ontra+t of lease or a oint venture. *hat is wh! respondents# espe+iall! the

0alvadors# never intended to deliver the title to petitioners and +onformabl! with that the!

e=e+uted onl! a spe+ial power of attorne!. 7ndeed# +ontinuousl! loomin lare as an

essentialit! in their udment to dispose of their valuable propert! is the prior or

+ontemporaneous re+eipt of the +ommensurate pri+e therefor.

*his brins us to the appli+ation of the 0tatute of 8rauds. Arti+le 1-B3 of the Civil Codeprovides

Art. 1-B3. *he followin +ontra+ts are unenfor+eable unless the! are rati/ed

24 *hose that do not +ompl! with the 0tatute of 8rauds as set forth in this number. 7n the

followin +ases an areement hereafter made shall be unenfor+eable b! a+tion# unless the

same# or some note or memorandum thereof# be in writin# and subs+ribed b! the part!

+hared# or b! his aent eviden+e# therefore# of the areement +annot be re+eived without

the writin# or a se+ondar! eviden+e of its +ontents

e4 An areement for the leasin for a loner period than one !ear# or for the sale of realpropert! or an interest therein

*he term )0tatute of 8rauds) is des+riptive of statutes whi+h re?uire +ertain +lasses of

+ontra+ts# su+h as areements for the sale of real propert!# to be in writin. 7t does not

deprive the parties the riht to +ontra+t with respe+t to the matters therein involved# but

merel! reulates the formalities of the +ontra+t ne+essar! to render it enfor+eable. *he

purpose of the statute is to prevent fraud and perur! in the enfor+ement of obliations

dependin for their eviden+e on the unassisted memor! of witnesses b! re?uirin +ertain

enumerated +ontra+ts and transa+tions to be eviden+ed b! a writin sined b! the part! to

be +hared.22 *he written note or memorandum# as +ontemplated b! Arti+le 1-B3 of the Civil

Code# should embod! the essentials of the +ontra+t.23

7n the instant +ase# petitioners present as written eviden+e of the areement the spe+ial

power of attorne! e=e+uted in their favor b! the 0alvadors and the summar! of

areement2- alleedl! initialed b! respondent &emiio ernabe. *hese do+uments do not

suE+e as notes or memoranda as +ontemplated b! Arti+le 1-B3 of the Civil Code.

*he spe+ial power of attorne! does not +ontain the essential elements of the purported

+ontra+t and# more tellinl!# does not even refer to an! areement for the sale of the

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propert!. 7n an! +ase# it was rendered virtuall! inoperable as a +onse?uen+e of the

0alvadors, adamant refusal to part with their title to the propert!.

*he summar! of areement# on the other hand# is fatall! de/+ient in the fundamentals and

ambiuous in the rest of its terms. 8or one# it does not mention when the alleed

+onsideration should be paid and transfer of ownership e>e+ted. *he do+ument does not

even refer to a parti+ular propert! as the obe+t thereof. 8or another# it is un+lear whether

the supposed pur+hase pri+e is P6BB.BB# P59B.BB or P5"B.BB:s?uare meter. *he other

+onditions# su+h as pa!ment of do+umentar! stamp ta=es# +apital ains ta= and other

reistration e=penses# are likewise un+ertain.

Conformabl! with Arti+le 1-B525 of the Civil Code# however# respondents, a++eptan+e of the

areement foisted b! petitioners on them is deemed to have arisen from their failure to

obe+t to the testimon! of petitioner ario *or+uator on the matter26 and their +ross$

e=amination of said petitioner thereon.2"

e that as it ma!# +onsiderin our rulin that the areement was a +ontra+t to sell#

respondents were not oblied to +onve! title to the propert! before the happenin of two 24suspensive +onditions# namel! full pa!ment of the pur+hase pri+e and +onstru+tion of a

residen+e on the propert!. *he! were a+tin perfe+tl! within their riht when the!

+onsidered the areement +an+elled after unsu++essfull! demandin pa!ment from

petitioners.

*hat said# the ?uestion of whether the transa+tion violated the Fniform Curren+! A+t#

&epubli+ A+t No. 529# is alread! moot. *he +ontra+t havin been +an+elled# an! resolution

reardin the validit! of the stipulation re?uirin pa!ment of the pur+hase pri+e in forein

+urren+! would not serve an! further purpose.

Petitioners ne=t insist that the +ondition re?uirin the +onstru+tion of a house on an!residential lot lo+ated in A!ala Alaban 'illae before it +an be sold was never submitted in

eviden+e and was never testi/ed to b! an! of the witnesses presented durin the trial.

Hen+e# the trial +ourt and the Court of Appeals should not have used this as basis for its

denial of petitioners, +ause.

*his assertion# however# is +ompletel! untrue. Lhile the *ormal O+er o' vidence2( of

petitioners# respondents,O+er o' hi-its#29 and the *ormal O+er o' vidence %On

#e-uttal(3B of petitioners make no mention of an! stipulation prohibitin the sale of va+ant

lots in A!ala Alaban 'illae# respondents maintain that petitioners are full! aware of the

prohibition as the +onditions imposed b! A!ala Corporation on the sale of A!ala Alaban lots

are ins+ribed on the title of the propert! whi+h was submitted in eviden+e b! both parties.

Despite petitioners, remonstration that the ins+riptions on the title are )hardl! leible#)31 we

are in+lined to ive +reden+e to respondents, a++ount. 7t is ?uite implausible that a law!er

su+h as petitioner ario *or+uator would not take the pre+aution of +he+kin the oriinal title

of the propert! with the &eistr! of Deeds to as+ertain whether there are annotations

therein that would preudi+e his position.

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ore importantl!# petitioner ario *or+uator himself testi/ed on the e=isten+e of the

+ondition prohibitin the sale of va+ant lots in A!ala Alaban 'illae# vi

A**K. . D< D70# &.

O $r. witness aside from this summar! of areement whi+h has been marked as


19/65

$ r. Litness# this letter appears to be# does it +ontain an! date Can !ou tell this Court wh!

this do+ument does not +ontain the date

A**K. A. A%N

$ 7n+ompetent# !our Honor# be+ause he was not the one who made that do+ument.

CF&*

$ ;et him e=plain.

A**K. A%N

$ Kes# !our Honor.

A**K. . D< D70# &.

$ e+ause# !our Honor# tere / $ re+/ree%t b3 A3$$ Cor5or$t/o% t$t %o ot or

5ro5ert3 $3 be tr$%6erre& +%t/ tere / $ co5ete b+/&/%7 or tr+ct+re b+/t

o% te ot $%& o $t I $ +55oe& to 7et o%3 6ro Mr. S$9$&or, $/&e 6ro

te &ee& o6 $bo+te $e, / ere3 $ 5ec/$ 5oer o6 $ttor%e3 to $+tor/:e e

to co%tr+ct 3 o+e /% te ot $%& +5o% co5et/o% o6 te o+e t$t / te

t/e t$t I o+& be $oe& b3 A3$$ Cor5or$t/o% to tr$%6er te 5ro5ert3 /% 3

%$e. *herefore# the letter re?uestin A!ala Corporation to release the title in the name of

r. 0alvador to was deliberatel! undated be+ause it would be onl! dated when 7 +ompleted

the house.32 Q


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o++asion

A $ Kes# sir.

O $ ! whom

A $ r. *or+uator prepared some do+uments for me to sin.

O $ And do !ou re+all what was that do+uments

A $ Kes# sir. r. *or+uator prepared a do+uments for +an+ellation

of the deed of sale of r. 0alvador to &emiio ernabe# and +an+ellation also of the

irrevo+able power of attorne! of 0alvador to ernabe# and power of attorne! of 0alvador

authoriin &emiio ernabe to sell the propert! and power of attorne! of 0alvador iven to

r. *or+uator.3-

Petitioners therefore +annot fein inoran+e of the +ondition imposed b! A!ala Corporation.

Le do not aree# however# with the trial +ourt and appellate +ourt,s rulin that the

transa+tion between the parties was void for bein +ontrar! to ood +ustoms and morals.35

7n order to de+lare the areement void for bein +ontrar! to ood +ustoms and morals# it

must /rst be shown that the obe+t# +ause or purpose thereof +ontravenes the enerall!

a++epted prin+iples of moralit! whi+h have re+eived some kind of so+ial and pra+ti+al

+on/rmation.36

Le are not in+lined to rule that the transa+tion in this +ase o>ended ood +ustoms and

morals. 7t should be emphasied that the pros+ription imposed b! A!ala Corporation was onthe resale of the propert! without a residential house havin been +onstru+ted thereon. *he

+ondition did not re?uire that the oriinal lot bu!er should himself +onstru+t a residential

house on the propert!# onl! that the oriinal bu!er ma! not resell a va+ant lot. 7n view of our

/ndin that the areement between the parties was a mere +ontra+t to sell# no violation of

the +ondition ma! be inferred from the transa+tion as no transfer of ownership was made. 7n

fa+t# the areement in this +ase that petitioners will +onstru+t a residential house on the

propert! in the name of the 0alvadors who retained ownership of the propert! until the

ful/llment of the twin +onditions of pa!ment and +onstru+tion of a residen+e4 was a+tuall! in

+omplian+e with or obeisan+e to the +ondition.

8inall!# the issue of whether the areement violated the law as it deprived the overnment

of +apital ains ta= is wholl! irrelevant. Capital ains ta=es# after all# are onl! imposed on

ains presumed to have been realied from sales# e=+hanes or dispositions of propert!.

Havin de+lared that the +ontra+t to sell in this +ase was aborted b! petitioners, failure to

+ompl! with the twin suspensive +onditions of full pa!ment and +onstru+tion of a residen+e#

the obliation to pa! ta=es never arose. Hen+e# an! error the appellate +ourt ma! have

+ommitted when it passed upon the issue of ta=es despite the fa+t that no eviden+e on the

matter was pleaded# addu+ed or proved is rather inno+uous and does not warrant reversal of

the de+isions under review.

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WHEREFORE# the instant petition is D


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a+aria was widowed and she +ontra+ted a se+ond marriae with &oberto &omero &omero4whi+h bore no issue.

&omero died on 8ebruar! 2(# 196(#1 leavin three adoinin residential lots lo+ated at0ampalo+# anila.

7n a Deed of


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Durin the penden+! of the +ase or on une "# 19(9# a+aria,s son 8elipe e=e+uted a Laiver$AEdavit6 waivin his )share) in the propert! sube+t of litiation in favor of his +o$heirs.

After trial# the trial +ourt# ran+h 31 &*C of anila# rendered a de+ision of ul! 19#1991" +reditin the version of the defendants in this wise# ?uoted ver-atim

*he defendant %reorio Averia# 0r. had established that he had paid plainti> DominoAveria P1B#BBB.BB althouh denied b! the latter but Domino Averia did not den!re+eivin the amount of P5#BBB.BB on ul! 1B# 19(3 iven b! %reorio Averia,s wifeAri/na. A++ordin to the testimon! of defendant,s witness# plainti> Domino Averiasold on ul! 1B# 19(3 his inheritan+e share in the propert! Q+onsistin of aR house andlot lo+ated at "25 Domino Averiadid not tell his brothers and sisters that he had alread! sold his 1:6 share of theinheritan+e althouh verball! in favor of %reorio Averia and his wife.

7n the liht of the foreoin# the Court# after a +ir+umspe+t assessment of the eviden+epresented b! both parties# hereb! de+lares# that defendant %reorio Averia then a maor ofpoli+e pre+in+t in akati was the person responsible for the e=penses in litiation in CivilCase No. "9955# involvin the propert! and their mother had indeed awarded him with Tportion of the propert! and that Domino Averia sold 1:6 of QhisR share of the remainin Tportion of the propert! to defendant %reorio. Fnders+orin supplied4

A++ordinl!# the trial +ourt disposed as follows# ?uoted ver-atim

LH


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ROERT< IN FA#OR OF DEFENDANT=AE!!EE GREGORIO A#ERIA($appellant Domino Averia are unenfor+eable as the re?uirements under the 0tatuteof 8rauds have not been +omplied with. Arti+le 1-B3# 2e4 of the New Civil Code ise=pli+it

Art. 1-B3. *he followin +ontra+ts are unenfor+eable# unless the! are rati/ed

14 = = =

24 *hose that do not +ompl! with the 0tatute of 8rauds as set forth in thisnumber. 7n the followin +ases an areement thereafter made shallbe unenfor+eable b! a+tion# unless the same# or some note or memorandumthereof# be in writin and subs+ribed b! the part! +hared# or b! this aenteviden+e# therefore# of the areement +annot be re+eived without the writin#or a se+ondar! eviden+e of its +ontents

a4 = = =

b4 = = =

e4 an areement for the leasin for a loner period than one !ear# or forthe sale of real propert! or of an interest therein

f4 = = =)

*he two 24 transa+tions in ?uestion bein areements for the sale of real propert! orof an interest therein are in +lear +ontravention of the pres+ription that it must be inwritin and subs+ribed b! the part! +hared or b! an aent thereof. Hen+e# thestron insisten+e b! defendants$appellees on the verbal +onve!an+es +annot bemade the basis for the alleed ownership over the undivided interests +laimed b!%reorio Averia.

*he parol eviden+e upon whi+h the trial +ourt an+hored its award in favor ofdefendant$appellee %reorio Averia is irreular as su+h kind of eviden+e is fore+losedb! Arti+le 1-B3 of the Civil Code that no eviden+e of the alleed areements +an bere+eived without the writin of se+ondar! eviden+e whi+h embodies the sale of thereal propert!. *he introdu+tion of the testimonies of %reorio Averia,s witnesseswere t/e3 obecte& to b! plainti>s$appellants. 0in+e the testimonies ofdefendants$appellees, witnesses are inadmissible# then su+h e=+lusion has pulled theru under the assailed de+ision of the trial +ourt and it has no more le to stand on.

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7n the vain attempt to salvae the situation# defendants$appellees however aruethat the Arti+le 1-B3 or the 0tatute of 8rauds does not appl! be+ause the same onl!refers to purel! e=e+utor! +ontra+ts and not to partiall! or +ompletel! e=e+uted+ontra+ts.

*his +ontention is untenable. 7t was not ampl! demonstrated how su+h alleed

transfers were e=e+uted sin+e plainti>s$appellants have 9/7oro+3 obecte& andopposed the +laims of ownership b! defendants$appellees. He who asserts a fa+t orthe aErmative of an issue has the burden of provin it. Defendants$appelleesmiserabl! failed in this respe+t.

Lhile this Court +annot dis+ount the fa+t that either defendant$appellee %reorioAveria or plainti>$appellant Domino Averia ma! have valid +laims aainst the estateof a+aria 8ran+si+o# su+h matter +an best be threshed out in the pro+eedins forpartition before the +ourt a ?uo bearin in mind that su+h partition is sube+t to thepa!ment of the debts of the de+eased under Arti+le 1B"( of the Civil Code.9Citationsomitted e+t the partition of the sube+tpropert! or if not# possible# sell the entire lot and distribute the pro+eeds of the salebased on e?ual shares amon the +hildren of the late a+aria 8ran+is+o after debts of the said de+eased are paid or settled pursuant to Arti+le 1B"( of the CivilCode.1BFnders+orin supplied4

%reorio and 0!lvanna,s motion for re+onsideration havin been denied b! the appellate+ourt# the! loded the Petition for &eview on Certiorari at bar upon the followin assinmentof errors

7. *H< CF&* 8 APP


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Petitioners thus +on+lude that respondents waived an! obe+tion to the admission of paroleviden+e# hen+e# it is admissible and enfor+eable1- followin Arti+le 1-B515 of the CivilCode.16

*he Court /nds for petitioner.

7ndeed# e=+ept for the testimon! of petitioner %reorio bearin on the verbal sale to him b!a+aria of the propert!# the testimonies of petitioners, witnesses 0!lvanna 'erara Clutarioand 8lora ;aaro &ivera bearin on the same matter were not obe+ted to b! respondents.

ust as the testimonies of %reorio# r. and 'eroni+a autista bearin on the re+eipt b!respondent Domino on ul! 23# 19(3 from %reorio,s wife of P5#BBB.BB representin partialpa!ment of the P1B#BBB.BB valuation of his Domino,s4 1:6 share in the propert!# and ofthetestimon! of 8elimon Daondon bearin on the re+eipt b! Domino of P5#BBB.BB from%reorio were not obe+ted to. 8ollowin Arti+le 1-B5 of the Civil Code#1" the +ontra+ts whi+hinfrined the 0tatute of 8rauds were rati/ed b! the failure to obe+t to the presentation ofparol eviden+e# hen+e# enfor+eable.

A&*7C;< 1-B3. *he followin +ontra+ts are unenfor+eable# unless the! are rati/ed

= = =

24 *hose that do not +ompl! with the 0tatute of 8rauds as set forth in this number. I%te 6oo/%7 c$e $% $7reee%t ere$6ter $&e $ be +%e%6orce$be b3$ct/o%, +%e te $e, or oe %ote or eor$%&+ tereo6, be /%r/t/%7, $%& +bcr/be& b3 te 5$rt3 c$r7e&, or b3 / $7e%t e9/&e%ce,tere6ore, o6 te $7reee%t c$%%ot be rece/9e& /to+t te r/t/%7, or $eco%&$r3 e9/&e%ce o6 /t co%te%t

= = =

e4 An areement for the leasin for a loner period than one !ear# or 6or te

$e o6 re$ 5ro5ert3 or o6 $% /%teret tere/%

= = =


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fa+t whi+h is redu+ed to a minimum in e=e+uted +ontra+ts be+ause the intention ofthe parties be+omes apparent b! their e=e+ution# and e=e+ution +on+ludes# in most+ases# the rihts of the parties. Hoe9er /t / %ot e%o+7 6or $ 5$rt3 to $e7e5$rt/$ 5er6or$%ce/% or&er to re%&er te St$t+te o6 Fr$+& /%$55/c$be+c 5$rt/$ 5er6or$%ce +t be &+3 5ro9e&. B+t %e/ter / +c 5$rt3re+/re& to et$b/ +c 5$rt/$ 5er6or$%ce b3 &oc+e%t$r3 5roo6

be6ore e co+& $9e te o55ort+%/t3 to /%tro&+ce or$ tet/o%3 o% tetr$%$ct/o%. Te 5$rt/$ 5er6or$%ce $3 be 5ro9e& b3 e/ter&oc+e%t$r3 or or$ e9/&e%ce.19


28/65

O Lhat is the name of !our randfather whom !ou said whose death anniversar!!ou are then +elebratin on that date

A &oberto &omero# sir.

O Lhat a+tuall! !ou were doin that time 53B

A Le had a atherin and merienda in re+olle+tion of the +elebration si+4 of thedeath of m! randfather# sir.

O Lhen !ou said !ou were eatin then# where were !ou eatin then

A 7t was beside m! randmother.

O Lhere

A At the dinin room# sir.

O 0o !ou were sittin at the dinin table all of !ou

A Kes# sir the others were a little bit near the table.

O Lho were seated in the dinin table

A *he 0pouses %reorio and Aripina# m! sister eth and m! +ousins and m! ;olaa+aria.

O Lhen !ou were then seated in takin that inatan as !ou stated what transpired

A 0omebod! +alled up and the one who +alled up was the 0e+retar! of a law!er and

the! were askin for Qpa!ment ofR e=penses in +onne+tion with . . . QCriminal Case No."9955R.

O Kou said that it was Aripina who was the one who answered that telephone +all.After answerin it# what did she sa! to an!one seated in that table

A Aripina said if %reorio has some mone!# he will pa! them but %reorio said hewill be responsible for the e=penses.

O Did !ou +ome to know how mu+h was amount bein asked

A P5BB.BB# sir.

O Lhat else happened after %reorio said that he would answer for the e=penses tobe sent to the law!er

A ! ;ola said that she was embarrassed and ashameQdR be+ause at that time shedQidR not have an! mone! and it was the +ouple who was takin the e=penses of the+ase.

O Lhen !ou said );ola#) !ou are referrin to a+aria Averia


29/65

A Kes# sir.

O Lhat else transpired

A e+ause of her embarrassment# she told Qthem thatR one half 1:24 of the Houseand ;ot will be iven to the +ouple to +over the e=penses of the +ase.

A**K. D7N%

O *o whom did !our randmother sa! this

A Lell# she said that to %reorio and Aripina and %reorio told her# if that is what!ou wish# 7 will aree to !our proposal.

O Lhat was the repl! of !our rand mother

A ! ;ola told %reorio that sin+e !ou aree# !ou better prepare all the do+umentsand we will make read! the do+uments for the division or partition.

O Do !ou know what House and ;ot one half 1:24 of whi+h !our rand mother wasiven si+4 to !our Fn+le and Auntie . . .

A 0he is referrin to the House and ;ot where 7 used to live before.

O Kou are referrin to the House and ;ot lo+ated at "25


30/65

7n sum# not onl! did petitioners, witnesses prove# b! their testimonies# the forin of the+ontra+ts of sale or assinment. *he! proved the full performan+e or e=e+ution of the+ontra+ts as well.

WHEREFORE# the petition is hereb! %&AN*


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n a! 1# 1993# 0ulpi+ia e=e+uted a deed of sale2 over the propert! in favor of respondents,

father %o!anko. 7n turn# %o!anko e=e+uted on +tober 12# 1993 a deed of sale3 over the

propert! in favor of his +ommon$law$wife$herein petitioner aria . Chin. *ransfer

Certi/+ate of *itle *C*4 No. 13(-B5 was thus issued in petitioner,s name.

After %o!anko,s death on ar+h 11# 1996# respondents dis+overed that ownership of the

propert! had alread! been transferred in the name of petitioner. &espondents thereupon had

the purported sinature of their father in the deed of sale veri/ed b! the Philippine National

Poli+e Crime ;aborator! whi+h found the same to be a forer!.-

&espondents thus /led with the &eional *rial Court of Cebu Cit! a +omplaint for re+over! of

propert! and damaes aainst petitioner# pra!in for the nulli/+ation of the deed of sale and

of *C* No. 13(-B5 and the issuan+e of a new one in favor of their father %o!anko.

7n defense# petitioner +laimed that she is the a+tual owner of the propert! as it was she who

provided its pur+hase pri+e. *o disprove that %o!anko,s sinature in the ?uestioned deed of

sale is a forer!# she presented as witness the notar! publi+ who testi/ed that %o!anko

appeared and sined the do+ument in his presen+e.

! De+ision of +tober 16# 199(#5 the trial +ourt dismissed the +omplaint aainst petitioner#

the pertinent portions of whi+h de+ision read

*here is no valid and suE+ient round to de+lare the sale as null and void# /+titious and

simulated. *he sinature on the ?uestioned Deed of 0ale is enuine. *he testimon! of Att!.

0alvador arrameda who de+lared in +ourt that oseph %o!anko# 0r. and aria Chin

toether with their witnesses appeared before him for notariation of Deed of 0ale in

?uestion is more reliable than the +onSi+tin testimonies of the two do+ument e=aminers.

Defendant aria Chin asserted that the Deed of 0ale e=e+uted b! oseph %o!anko# 0r. in

her favor is valid and enuine. *he sinature of oseph %o!anko# 0r. in the ?uestioned Deedof Absolute 0ale is enuine as it was dul! e=e+uted and sined b! oseph %o!anko# 0r.

himself.

*he par+el of lands known as ;ot No. 6 whi+h is souht to be re+overed in this +ase +ould

never be +onsidered as the +onual propert! of the oriinal 0pouses oseph C. %o!anko and


32/65

proverbial virtualit! of a *orrens title# it has been repeatedl! held that# unless bad faith +an

be established on the part of the person appearin as owner on the +erti/+ate of title# there

is no other owner than that in whose favor it has been issued. A *orrens title is not sube+t to

+ollateral atta+k. 7t is a well$known do+trine that a *orrens title# as a rule# is irrevo+able and

indefeasible# and the dut! of the +ourt is to see to it that this title is maintained and

respe+ted unless +hallened in a dire+t pro+eedins QsicR.6Citations omitted unders+orin

supplied4

efore the Court of Appeals where respondents appealed# the! arued that the trial +ourt

erred

1. . . . when it dismissed the +omplaint a ?uo . . . # in e>e+t# sustainin the sale of the

sube+t propert! between oseph# 0r. and the defendant$appellee# despite the

proliferation in the re+ords and admissions b! both parties that defendant$appellee

was the )mistress) or )+ommon$law wife) of oseph# 0r..

2. . . . when it dismissed the +omplaint a ?uo . . . # in e>e+t# sustainin the sale of the

sube+t propert! between oseph# 0r. and the defendant$appellee# despite the fa+tthat the marriae of oseph# 0r. and


33/65

Le therefore /nd that the +ontra+t of sale in favor of the defendant$appellant aria Chin

was null and void for bein +ontrar! to morals and publi+ poli+!. *he purported sale# havin

been made b! oseph 0r. in favor of his +on+ubine# undermines the stabilit! of the famil!# a

basi+ so+ial institution whi+h publi+ poli+! viilantl! prote+ts. 8urthermore# the law

emphati+all! prohibits spouses from sellin propert! to ea+h other# sube+t to +ertain

e=+eptions. And this is so be+ause transfers or +onve!an+es between spouses# if allowed

durin the marriae would destro! the s!stem of +onual partnership# a basi+ poli+! in +ivil

law. *he prohibition was desined to prevent the e=er+ise of undue inSuen+e b! one spouse

over the other and is likewise appli+able even to +ommon$law relationships otherwise# )the

+ondition of those who in+urred uilt would turn out to be better than those in leal

union.9 Fnders+orin supplied4

Hen+e# the present petition# petitioners aruin that the appellate +ourt ravel! erred in

7.

. . . APP;K7N% *H< 0*A*< P;7CK N P&H77*7N A%A7N0* CN'


34/65

A&*. 1-B9. *he followin +ontra+ts are ine=istent and void from the beinnin

14 *hose whose +ause# obe+t or purpose is +ontrar! to law# morals# ood +ustoms#

publi+ order or publi+ poli+!

24 *hose whi+h are absolutel! simulated or /+titious

34 *hose whose +ause or obe+t did not e=ist at the time of the transa+tion

-4 *hose whose obe+t is outside the +ommer+e of men

54 *hose whi+h +ontemplate an impossible servi+e

64 *hose where the intention of the parties relative to the prin+ipal obe+t of the

+ontra+t +annot be as+ertained

"4 *hose e=pressl! prohibited or de+lared void b! law.

*hese +ontra+ts +annot be rati/ed. Neither +an the riht to set up the defense of illealit! be

waived.

A&*7C;< 1-9B. *he husband and wife +annot sell propert! to ea+h other# e=+ept

14 Lhen a separation of propert! was areed upon in the marriae settlements or

24 Lhen there has been a udi+ial separation of propert! under Arti+le 191.

Fnders+orin supplied4

*he pros+ription aainst sale of propert! between spouses applies even to +ommon lawrelationships. 0o this Court ruled in Calimlim/Canullas v. 0on. *ortun, etc., et al.11

Anent the se+ond issue# we /nd that the +ontra+t of sale was null and void for bein +ontrar!

to morals and publi+ poli+!. Te $e $ $&e b3 $ +b$%& /% 6$9or o6 $

co%c+b/%e $6ter e $& $b$%&o%e& / 6$/3 $%& e6t te co%+7$ oe ere

/ /6e $%& c/&re% /9e& $%& 6ro e%ce te3 &er/9e& te/r +55ort. Te $e

$ +b9er/9e o6 te t$b//t3 o6 te 6$/3, $ b$/c oc/$ /%t/t+t/o% /c 5+b/c

5o/c3 cer/e $%& 5rotect.

Arti+le 1-B9 of the Civil Code states inter alia that +ontra+ts whose +ause# obe+t# or

purposes is +ontrar! to law# morals# ood +ustoms# publi+ order# or publi+ poli+!are void and ineistent from the ver! beinnin.

Arti+le 1352 also provides that )Contra+ts without +ause# or with unlaw'ul cause, produce

no e+ect whatsoever . *he +ause is unlawful if it is +ontrar! to law# morals# ood +ustoms#

publi+ order# or publi+ poli+!.)

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A&&/t/o%$3, te $ e5$t/c$3 5ro/b/t te 5o+e 6ro e/%7 5ro5ert3 to

e$c oter +bect to cert$/% ece5t/o%.1âwphi1 S//$r3, &o%$t/o% betee%

5o+e &+r/%7 $rr/$7e $re 5ro/b/te&. And this is so be+ause if transfers or

+onve!an+es between spouses were allowed durin marriae# that would destro! the s!stem

of +onual partnership# a basi+ poli+! in +ivil law. 7t was also desined to prevent the

e=er+ise of undue inSuen+e b! one spouse over the other# as well as to prote+t the

institution of marriae# whi+h is the +ornerstone of famil! law. Te 5ro/b/t/o% $553 to $

co+5e /9/%7 $ +b$%& $%& /6e /to+t be%et o6 $rr/$7e, oter/e, te

co%&/t/o% o6 toe o /%c+rre& 7+/t o+& t+r% o+t to be better t$% toe /%

e7$ +%/o%. *hose provisions are di+tated b! publi+ interest and their +riterion must be

imposed upon the will of the parties. . . .12 7tali+s in the oriinal emphasis and unders+orin

supplied4

As the +onve!an+e in ?uestion was made b! %o!anko in favor of his +ommon$ law$wife$

herein petitioner# it was null and void.

Petitioner,s arument that a trust relationship was +reated between %o!anko as trustee and

her as bene/+iar! as provided in Arti+les 1--( and 1-5B of the Civil Code whi+h read

A&*7C;< 1--(. *here is an implied trust when propert! is sold# and the leal estate is

ranted to one part! but the pri+e is paid b! another for the purpose of havin the bene/+ial

interest of the propert!. *he former is the trustee# while the latter is the bene/+iar!.

However# if the person to whom the title is +onve!ed is a +hild# leitimate or illeitimate# of

the one pa!in the pri+e of the sale# no trust is implied b! law# it bein disputabl! presumed

that there is a ift in favor of the +hild.

A&*7C;< 1-5B. 7f the pri+e of a sale of propert! is loaned or paid b! one person for the

bene/t of another and the +onve!an+e is made to the lender or pa!or to se+ure the pa!ment

of the debt# a trust arises b! operation of law in favor of the person to whom the mone! isloaned or for whom it is paid. *he latter ma! redeem the propert! and +ompel a +onve!an+e

thereof to him.

does not persuade.

8or petitioner,s testimon! that it was she who provided the pur+hase pri+e is

un+orroborated. *hat she ma! have been +onsidered the breadwinner of the famil! and that

there was proof that she earned a livin do not +on+lusivel! +lin+h her +laim.

As to the +hane of theor! b! respondents from forer! of their father,s sinature in the

deed of sale to sale +ontrar! to publi+ poli+!# it too does not persuade. %enerall!# a part! in

a litiation is not permitted to freel! and substantiall! +hane the theor! of his +ase so as

not to put the other part! to undue disadvantae b! not a++uratel! and timel! apprisin him

of what he is up aainst#13 and to ensure that the latter is iven the opportunit! durin trial

to refute all alleations aainst him b! presentin eviden+e to the +ontrar!. 7n the present

+ase# petitioner +annot be said to have been put to undue disadvantae and to have been

denied the +han+e to refute all the alleations aainst her. 8or the nulli/+ation of the sale is

an+hored on its illealit! per se# it bein violative of the above$+ited Arti+les 1352# 1-B9 and

1-9B of the Civil Code.

http://www.lawphil.net/judjuris/juri2006/nov2006/gr_165879_2006.html#fnt13http://www.lawphil.net/judjuris/juri2006/nov2006/gr_165879_2006.html#fnt13http://www.lawphil.net/judjuris/juri2006/nov2006/gr_165879_2006.html#fnt14http://www.lawphil.net/judjuris/juri2006/nov2006/gr_165879_2006.html#fnt13http://www.lawphil.net/judjuris/juri2006/nov2006/gr_165879_2006.html#fnt14


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manae all the piers in 0outh Harbor# anila. Co$petitioner


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parties +lose to President ar+os. *he part! +lose to President ar+os was later 7denti/ed as

Alfredo )eo) &omualde# the presidentUs brother$in$law.

After the transfer# a new roup reportedl! took over the a+tive +ontrol and manaement of

petitioner +ompan!. Petitioner &aon# was# however# retained as President# alleedl!

be+ause of his a++eptabilit! and rapport with the shippin lines# +ustoms brokers and the

unions# but without real powers as


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the +ompetent &*C and the leal remed! to be availed of b! Att!s. Durian and *uason# r. on

the matter of the dis+iplinar! a+tion taken aainst them.) pp. 1-"$1-(# &ollo4.

n the same da!# petitioners /led a third 7denti+al +omplaint before the &*C of anila#

do+keted as Civil Case No. (63"BB6. Fpon motion of the 0oli+itor$%eneral# this Court issued

on Auust 1-# 19(6 a temporar! restrainin order enoinin ude Al/n 0. 'i+en+io# &*C#

ran+h 5B# anila from a+tin on Civil Case No. (6$3"BB6 and the petitioners from

institutin further a+tion elsewhere without leave of +ourt. *he Cru# Aabin# Atiena and

Alda! ;aw 8irm and ude 'i+en+io were likewise re?uired to show +ause wh! the! should

not be severall! held in +ontempt of +ourt and:or be held administrativel! liable for

malpra+ti+e p. 233# &ollo4. oth +omplied with this resolution# as did Att!s. Durian and

*uason# r. with the resolution of ul! 31# 19(6 b! /lin a )Complian+e with Frent Plea for

7mmediate ;iftin of 0uspension) p. 15B# &ollo4.

eanwhile# on Auust 1(# 19(6# petitioners thru new +ounsel N. . Ouisumbin and

Asso+iates# /led a motion for re+onsideration of the resolution of Auust 1-# 19(6 and for

leave to /le suit whether in the 0upreme Court or an! +ourt for udi+ial review of PPAUs

+an+ellation of Petitioner e+tive immediatel!. p. -35$A# &ollo4.

Petitioners +ontend that the! were denied their riht to due pro+ess when respondent PPA

+an+elled the anaement Contra+t without prior hearin and investiation. 7n support of

this +ontention# the! advan+e the theor! that the manaement +ontra+t is not an ordinar!

+ommer+ial +ontra+t# but more in the nature of a fran+hise or li+ense# whi+h# in this +ase#

has been impressed with propert! rihts b! reason of the lenth of time petitioners have

been eno!in it# and hen+e +annot be +an+elled without a++ordin petitioners the

opportunit! to be heard on the alleed +omplaints and +ontra+t violations. As a +orollar!#

petitioners further assert that respondent PPA was not e=er+isin proprietar! fun+tions# i.e.#

as a part! to a +ontra+t e=er+isin its riht to res+ission or resolution when it +an+elled

petitionersU +ontra+t# but as a reulator! bod! e=er+isin adudi+ator! powers in /ndin and

+on+ludin that petitioner


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&aon# 7n+.# but to etro Port 0ervi+es# 7n+. that President ar+osU brother$in$

law# Alfredo Ueo) &omualde# admittedl! +ontrolled.

2. 0in+e the +an+elled +ontra+t was the fruit of +orruption in the ar+os

overnment# it is a nullit! and petitioners +annot sue for its enfor+ement

3. Lith his admission that he areed to front for &omualde with respe+t to

the latterUs illeal dealins with the Philippine Port Authorit!# &aon forfeits his

+laim as havin been a vi+tim of the ar+os rule

-. esides# sin+e petitioners themselves admit the e=isten+e of suE+ient

rounds for PPAUs +an+ellation of etro PortUs arrastre +ontra+t# the! +annot

+omplain

5. Fnder the +ir+umstan+es# respondent PPA was not re?uired to hear

petitioners prior to its +an+ellation of the +ontra+t

6. %iven the validit! of PPAUs +an+ellation of that +ontra+t and its takeover ofthe arrastre operations# the desination of respondent arina Port 0ervi+es#

7n+. to assist PPA in the operations is not for petitioner to ?uestion and#

". At all events# respondent A&7NA is ?uali/ed to handle the limited task PPA

assined to it. pp. 5-6$5-"# &ollo4

*he anaement Contra+t under +onsideration was e=e+uted b! and between petitioner


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'eril!# the transfer of the shares of sto+k of petitioner


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&espondent PPA is the overnment aen+! +hared with the spe+i/+ dut! of supervisin#

+ontrollin# reulatin# +onstru+tin# maintainin# operatin and providin su+h fa+ilities or

servi+es as are ne+essar! in the ports vested in# or belonin to it 0e+. 6# QiiR# P.D. (5"4. 7t

has the e=pertise to determine whether or not arina Port 0ervi+es 7n+. has the +apabilit! of

dis+harin the tasks assined to it as interim operator of arrastre servi+e in 0outh Harbor.


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SS. RE


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7n a letter of the same date# the Deput! 0heri> informed ; & Corporation of the pa!mentb! PLHA0 of the full redemption pri+e and advised it that it +an +laim the pa!ment uponsurrender of its ownerUs dupli+ate +erti/+ates of title. 10

n April 2# 19(1# the spouses ;itonua presented for reistration the Certi/+ate of&edemption issued in their favor to the &eister of Deeds of Oueon Cit!. *he Certi/+ate also

informed ; & Corporation of the fa+t of redemption and dire+ted the latter to surrender theownerUs dupli+ate +erti/+ates of title within /ve da!s. 11

n April 22# 19(1# ; & Corporation wrote a letter to the 0heri># +op! furnished to the&eister of Deeds# statin 14 that the sale of the mortaed properties to PLHA0 waswithout its +onsent# in +ontravention of pararaphs ( and 9 of their Deed of &eal


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14 whether or not pararaphs ( and 9 of the &eal


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notif!in the pur+haser or in+ludin him as a defendant. At the same time# the pur+haser ofthe mortaed propert! was deemed not to have lost his e?uitable riht of redemption.

7n Bonnevie v . Court o' Appeals# 28 where a similar provision appeared in the sube+t +ontra+tof mortae# the petitioners therein# to whom the mortaed propert! were sold without thewritten +onsent of the mortaee# were held as without the riht to redeem the said

propert!. No +onsent havin been se+ured from the mortaee to the sale with assumptionof mortae b! petitioners therein# the latter were not validl! substituted as debtors. 7t wasfurther held that sin+e their rihts were never re+orded# the mortaee was +hared withthe obliation to re+onie the riht of redemption onl! of the oriinal mortaors$vendors.Lithout dis+ussin the validit! of the stipulation in ?uestion# the same was# in e>e+t# upheld.

Aain# in Cru v . Court o' Appeals# 2* while a similar provision was re+onied and applied#no dis+ussion as to its validit! was made sin+e the same was not raised as an issue.

n the other hand# in &am-unting v . #eha-ilitation *inanceCorporation# )0 the validit! of a similar provision was spe+i/+all! raised and dis+ussed andfound as invalid. 7t was there ratio+inated that @

*o be sure# the deed of se+ond mortae e=e+uted b! the


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&e 'alidit! of redemption e>e+ted b! PLHA0 on the a++ount ofthe spouses ;itonua

Comin now to the issue of whether the redemption o>ered b! PLHA0 on a++ount of thespouses ;itonua is valid# we rule in the aErmative. *he sale b! the spouses ;itonua of themortaed properties to PLHA0 is valid. *herefore# PLHA0 stepped into the shoes of the

spouses ;itonua on a++ount of su+h sale and was in e>e+t# their su++essor$in$interest. Assu+h# it had the riht to redeem the propert! fore+losed b! ; & Corporation.Aain# &am-unting# supra# +lari/es that @

. . .. *he a+?uisition b! the Hernandees of the ered to redeem the sube+t properties seven "4months after the date of reistration of the fore+losure sale# well within the one !ear periodof redemption.

&e 'alidit! and enfor+eabilit! of stipulationrantin the mortaee the riht of /rst refusal

Lhile petitioners ?uestion the validit! of pararaph ( of their mortae +ontra+t# the!appear to be silent insofar as pararaph 9 thereof is +on+erned. 0aid pararaph 9 rantsupon ; & Corporation the riht of /rst refusal over the mortaed propert! in the eventthe mortaor de+ides to sell the same. Le see nothin wron in this provision. *he riht of/rst refusal has lon been re+onied as valid in our urisdi+tion. *he +onsideration for theloan$mortae in+ludes the +onsideration for the riht of /rst refusal. ; & Corporation is in

e>e+t statin that it +onsents to lend out mone! to the spouses ;itonua provided that in+ase the! de+ide to sell the propert! mortaed to it# then ; & Corporation shall be iventhe riht to mat+h the o>ered pur+hase pri+e and to bu! the propert! at that pri+e. *hus#while the spouses ;itonua had ever! riht to sell their mortaed propert! to PLHA0without se+urin the prior written +onsent of ; & Corporation# the! had the obliationunder pararaph 9# whi+h is a perfe+tl! valid provision# to notif! the latter of their intentionto sell the propert! and ive it priorit! over other bu!ers. 7t is onl! upon failure of ; &Corporation to e=er+ise its riht of /rst refusal +ould the spouses ;itonua validl! sell thesube+t properties to others# under the same terms and +onditions o>ered to ; &Corporation.


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Lhat then is the status of the sale made to PLHA0 in violation of ; & CorporationUs+ontra+tual riht of /rst refusal n this s+ore# we aree with the Amended De+ision of theCourt of Appeals that the sale made to PLHA0 is res+issible. *he +ase of uman, Bocaling4 Co. v . Bonnevie )) is instru+tive on this point @

*he respondent +ourt +orre+tl! held that the Contra+t of 0ale was not voidable

but res+issible. Fnder Arti+le 13(B to 13(134 of the Civil Code# a +ontra+totherwise valid ma! nonetheless be subse?uentl! res+inded b! reason ofinur! to third persons# like +reditors. &he status o' creditors could -e validl)accorded -) the Bonnevies 'or the) had su-stantial interest that were

pre3udiced -) the sale o' the su-3ect propert) to the Contract o' Lease.

A++ordin to *olentino# res+ission is a remed! ranted b! law to the+ontra+tin parties and even to third persons# to se+ure reparation fordamaes +aused to them b! a +ontra+t# even if this should be valid# b! meansof the restoration of thins to their +ondition at the moment prior to the+elebration of said +ontra+t. 7t is a relief allowed for one of the +ontra+tinparties and even third persons from all inur! and damae the +ontra+t ma!+ause# or to prote+t some in+ompatible and preferential riht +reated b! the

+ontra+t. &es+ission implies a +ontra+t whi+h# even if initiall! valid# produ+es alesion or pe+uniar! damae to someone that usti/es its invalidation forreasons of e?uit!.

emphasis# urs4

7t was then held that the Contra+t of 0ale there# whi+h violated the riht of /rst refusal# wasres+issible.

7n the +ase at bar# PLHA0 +annot +laim inoran+e of the riht of /rst refusal ranted to ; & Corporation over the sube+t properties sin+e the Deed of &eal eren+ebetween su+h pur+hase pri+e and the redemption pri+e of P2-9#91(.""# +omputed as ofAuust 13# 19(1# the e=piration of the one$!ear period to redeem. *hat it did not dul!e=er+ise its riht of /rst refusal at the opportune time +annot be taken aainst it# pre+isel!be+ause it was not noti/ed b! the spouses ;itonua of their intention to sell the sube+tpropert! and thereb!# to ive it priorit! over other bu!ers.

All thins +onsidered# what then are the relative rihts and obliations of the parties *ore+apitulate# the sale between the spouses ;itonua and PLHA0 is valid# notwithstandinthe absen+e of ; & CorporationUs prior written +onsent thereto. 7nasmu+h as the sale toPLHA0 was valid# its o>er to redeem and its tender of the redemption pri+e# as su++essor$in$interest of the spouses ;itonua# within the one$!ear period should have been a++epted asvalid b! the ; & Corporation. However# while the sale is# indeed# valid# the same isres+issible be+ause it inored ; & CorporationUs riht of /rst refusal.

8oreseein a possible res+ission of the sale# the spouses ;itonua +ontend that with therestoration of the oriinal status quo# with no sale havin been made# the! should now be


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allowed to redeem the sube+t properties# the period of redemption havin been suspendeddurin the period of litiation. 7n e>e+t# the spouses ;itonua want to retain ownership of thesame. Le +annot# however# san+tion this belated reversal of the spouses ;itonuaUs de+isionto sell. *o do so would a>ord them undue advantae on a++ount of the appre+iation of thevalue of the sube+t properties in the intervenin !ears when the! pre+isel! were the oneswho violated and inored the riht of /rst refusal of ; & Corporation over the same.

oreover# it must be stressed that in res+indin the sale made to PLHA0# the purpose is touphold and enfor+e the riht of /rst refusal of ; & Corporation.

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Contracts - Last Set of Cases 2016