Republic of the PhilippinesSUPREME COURT

ManilaFIRST DIVISION

 G.R. No. 118114 December 7, 1995TEODORO ACAP, petitioner, vs.COURT OF APPEALS and EDY DE LOS REYES, respondents. PADILLA, J.:This is a petition for review on certiorari of the decision 1 of the Court of Appeals, 2nd Division, in CA-G.R. No. 36177, which affirmed the decision 2 of the Regional Trial Court of Himamaylan, Negros Occidental holding that private respondent Edy de los Reyes had acquired ownership of Lot No. 1130 of the Cadastral Survey of Hinigaran, Negros Occidental based on a document entitled "Declaration of Heirship and Waiver of Rights", and ordering the dispossession of petitioner as leasehold tenant of the land for failure to pay rentals.The facts of the case are as follows:The title to Lot No. 1130 of the Cadastral Survey of Hinigaran, Negros Occidental was evidenced by OCT No. R-12179. The lot has an area of 13,720 sq. meters. The 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.The evidence before the court a quo established that since 1960, petitioner Teodoro Acap had been the tenant of a portion of the said land, covering an area of nine thousand five hundred (9,500) meters. When ownership was transferred in 1975 by Felixberto to Cosme Pido, Acap continued to be the registered tenant thereof and religiously paid his leasehold rentals to Pido and thereafter, upon Pido's death, to his widow Laurenciana.The controversy began when Pido died intestate and on 27 November 1981, his surviving heirs executed a notarized document denominated as "Declaration of Heirship and Waiver of Rights of Lot No. 1130 Hinigaran Cadastre," wherein they declared; to quote its pertinent portions, that:

. . . Cosme Pido died in the Municipality of Hinigaran, Negros Occidental, he died intestate and without any known debts and obligations which the said parcel of land is (sic) held liable.

That Cosme Pido was survived by his/her legitimate heirs, namely: LAURENCIANA PIDO, wife, ELY, ERVIN, ELMER, and ELECHOR all surnamed PIDO; children;That invoking the provision of Section 1, Rule 74 of the Rules of Court, the above-mentioned heirs do hereby declare unto [sic] ourselves the only heirs of the late Cosme Pido and that we hereby adjudicate unto ourselves the above-mentioned parcel of land in equal shares.Now, therefore, We LAURENCIANA 3, ELY, ELMER, ERVIN and ELECHOR all surnamed PIDO, do hereby waive, quitclaim all our rights, interests and participation over the said parcel of land in favor of EDY DE LOS REYES, of legal age, (f)ilipino, married to VIRGINIA DE LOS REYES, and resident of Hinigaran, Negros Occidental, Philippines. . . . 4 (Emphasis supplied)

The document was signed by all of Pido's heirs. Private respondent Edy de los Reyes did not sign said document.It will be noted that at the time of Cosme 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 Rights in his favor, private respondent Edy de los Reyes filed the same with the Registry of Deeds as part of a notice of an adverse claimagainst the original certificate of title.Thereafter, private respondent sought for petitioner (Acap) to personally inform him that he (Edy) had become the new owner of the land and that the lease rentals thereon should be paid to him. Private respondent further alleged that he and petitioner entered into an oral lease agreement wherein petitioner agreed to pay ten (10) cavans of palay per annum as lease rental. In 1982, petitioner allegedly complied with said obligation. In 1983, however, petitioner refused to pay any further lease rentals on the land, prompting private respondent to seek the assistance of the then Ministry of Agrarian Reform (MAR) in Hinigaran, Negros Occidental. The MAR invited petitioner to a conference scheduled on 13 October 1983. Petitioner did not attend the conference but sent his wife instead to the conference. During the meeting, an officer of the Ministry informed Acap's wife about private respondent's ownership of the said land but she stated that she and her husband (Teodoro) did not recognize private respondent's claim of ownership over the land.On 28 April 1988, after the lapse of four (4) years, private respondent filed a complaint for recovery of possession and damages against petitioner, alleging in the main that as his leasehold tenant, petitioner refused and failed to pay the agreed annual rental of ten (10) cavans of palay despite repeated demands.

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During the trial before the court a quo, petitioner reiterated his refusal to recognize private respondent's ownership over the subject land. He averred that he continues to recognize Cosme Pido as the owner of the said land, and having been a registered tenant therein since 1960, he never reneged on his rental obligations. When Pido died, he continued to pay rentals to Pido's widow. When the latter left for abroad, she instructed him to stay in the landholding and to pay the accumulated rentals upon her demand or return from abroad.Petitioner further claimed before the trial court that he had no knowledge about any transfer or sale of the lot to private respondent in 1981 and even the following year after Laurenciana's departure for abroad. He denied having entered into a verbal lease tenancy contract with private respondent and that assuming that the said lot was indeed sold to private respondent without his knowledge, R.A. 3844, as amended, grants him the right to redeem the same at a reasonable price. Petitioner also bewailed private respondent's ejectment action as a violation of his right to security of tenure under P.D. 27.On 20 August 1991, the lower court rendered a decision in favor of private respondent, the dispositive part of which reads:

WHEREFORE, premises considered, the Court renders judgment in favor of the plaintiff, Edy de los Reyes, and against the defendant, Teodoro Acap, ordering the following, to wit:1. Declaring forfeiture of defendant's preferred right to issuance of a Certificate of Land Transfer under Presidential Decree No. 27 and his farmholdings;2. Ordering the defendant Teodoro Acap to deliver possession of said farm to plaintiff, and;3. Ordering the defendant 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. 5

In arriving at the above-mentioned judgment, the trial court stated that the evidence had established that the subject land was "sold" by the heirs of Cosme Pido to private respondent. This is clear from the following disquisitions contained in the trial court's six (6) page decision:

There is no doubt that defendant is a registered tenant of Cosme Pido. However, when the latter died their tenancy relations changed since ownership of said land was passed on to his heirs who, by executing a Deed of Sale, which defendant admitted in his affidavit, likewise passed on their ownership of Lot 1130 to herein plaintiff (private respondent). As owner hereof, plaintiff has the right to demand payment of rental and the tenant is obligated to pay rentals due from the time demand is made. . . . 6

xxx xxx xxxCertainly, the sale of the Pido family of Lot 1130 to herein plaintiff does not of itself extinguish the relationship. There was only a change of the personality of the lessor in the person of herein plaintiff Edy de los Reyes who being the purchaser or transferee, assumes the rights and obligations of the former landowner to the tenant Teodoro Acap, herein defendant. 7

Aggrieved, petitioner appealed to the Court of Appeals, imputing error to the lower court when it ruled that private respondent acquired ownership of Lot No. 1130 and that he, as tenant, should pay rentals to private respondent and that failing to pay the same from 1983 to 1987, his right to a certificate of land transfer under P.D. 27 was deemed forfeited.The Court of Appeals brushed aside petitioner's argument that the Declaration of Heirship and Waiver of Rights (Exhibit "D"), the document relied upon by private respondent to prove his ownership to the lot, was excluded by the lower court in its order dated 27 August 1990. The order indeed noted that the document was not identified by Cosme Pido's heirs and was not registered with the Registry of Deeds of Negros Occidental. According to respondent court, however, since the Declaration of Heirship and Waiver of Rights appears to have been duly notarized, no further proof of its due execution was necessary. Like the trial court, respondent court was also convinced that the said document stands as prima facie proof of appellee's (private respondent's) ownership of the land in dispute.With respect to its non-registration, respondent court noted that petitioner had actual knowledge of the subjectsale of the land in dispute to private respondent because as early as 1983, he (petitioner) already knew of private respondent's claim over the said land but which he thereafter denied, and that in 1982, he (petitioner) actually paid rent to private respondent. Otherwise stated, respondent court considered this fact of rental payment in 1982 as estoppel on petitioner's part to thereafter refute private respondent's claim of ownership over the said land. Under these circumstances, respondent court ruled that indeed there was deliberate refusal by petitioner to pay rent for a continued period of five years that merited forfeiture of his otherwise preferred right to the issuance of a certificate of land transfer.In the present petition, petitioner impugns the decision of the Court of Appeals as not in accord with the law and evidence when it rules that private respondent acquired ownership of Lot No. 1130 through the aforementioned Declaration of Heirship and Waiver of Rights.Hence, the issues to be resolved presently are the following:

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1. WHETHER OR NOT THE SUBJECT DECLARATION OF HEIRSHIP AND WAIVER OF RIGHTS IS A RECOGNIZED MODE OF ACQUIRING OWNERSHIP BY PRIVATE RESPONDENT OVER THE LOT IN QUESTION.2. WHETHER OR NOT THE SAID DOCUMENT CAN BE CONSIDERED A DEED OF SALE IN FAVOR OF PRIVATE RESPONDENT OF THE LOT IN QUESTION.

Petitioner argues that the Regional Trial Court, in its order dated 7 August 1990, explicitly excluded the document marked as Exhibit "D" (Declaration of Heirship, etc.) as private respondent's evidence because it was not registered with the Registry of Deeds and was not identified by anyone of the heirs of Cosme Pido. The Court of Appeals, however, held the same to be admissible, it being a notarized document, hence, a prima facie proof of private respondents' ownership of the lot to which it refers.Petitioner points out that the Declaration of Heirship and Waiver of Rights is not one of the recognized modes of acquiring ownership under Article 712 of the Civil Code. Neither can the same be considered a deed of sale so as to transfer ownership of the land to private respondent because no consideration is stated in the contract (assuming it is a contract or deed of sale).Private respondent defends the decision of respondent Court of Appeals as in accord with the evidence and the law. He posits that while it may indeed be true that the trial court excluded his Exhibit "D" which is the Declaration of Heirship and Waiver of Rights as part of his evidence, the trial court declared him nonetheless owner of the subject lot based on other evidence adduced during the trial, namely, the notice of adverse claim (Exhibit "E") duly registered by him with the Registry of Deeds, which contains the questioned Declaration of Heirship and Waiver of Rights as an integral part thereof.We find the petition impressed with merit.In the first place, an asserted right or claim to ownership or a real right over a thing arising 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 fulfilling certain conditions imposed by law. Hence, ownership and real rights are acquired only pursuant to a legal mode or process. While title is the juridical justification, mode is the actual process of acquisition or transfer of ownership over a thing in question. 8

Under Article 712 of the Civil Code, the modes of acquiring ownership are generally classified into two (2) classes, namely, the original mode (i.e., through occupation, acquisitive prescription, law or intellectual creation) and thederivative mode (i.e., through

succession mortis causa or tradition as a result of certain contracts, such as sale, barter, donation, assignment or mutuum).In the case at bench, the trial court was obviously confused as to the nature and effect of the Declaration of Heirship and Waiver of Rights, equating the same with a contract (deed) of sale. They are not the same.In a Contract of Sale, one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other party to pay a price certain in money or its equivalent. 9

Upon 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 intestate 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 under Rule 74 of the Rules of Court. 10

Hence, 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. 11 The second is, technically speaking, a mode of extinction of ownership where there is an abdication or intentional relinquishment of a known right with knowledge of its existence and intention to relinquish it, in favor of other persons who are co-heirs in the succession. 12Private respondent, being then a stranger to the 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, 13 or a donation, 14 or any other derivative mode of acquiring ownership.Quite surprisingly, both the trial court and public respondent Court of Appeals concluded that a "sale" transpired between Cosme Pido's heirs and private respondent and that petitioner acquired actual knowledge of said sale when he was summoned by the Ministry of Agrarian Reform to discuss private respondent's claim over the lot in question. This conclusion has no basis both in fact and in law.On record, Exhibit "D", which is the "Declaration of Heirship and Waiver of Rights" was excluded by the trial court in its order dated 27 August 1990 because the document was neither registered with the Registry of Deeds nor identified by the heirs of Cosme Pido. There is no showing that private respondent had the same document attached to or made part of the record. What the trial court admitted was Annex "E", a notice of adverse claim filed with the Registry of Deeds which contained the Declaration of Heirship with Waiver of rights and was annotated at the back of the Original Certificate of Title to the land in question.A notice of adverse claim, by its nature, does not however prove private respondent's ownership over the tenanted lot. "A notice of adverse claim is nothing but a notice of a claim adverse to the registered owner,

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the validity of which is yet to be established in court at some future date, and is no better than a notice of lis pendens which is a notice of a case already pending in court." 15

It is to be noted that while the existence of said adverse claim was duly proven, there is no evidence whatsoever that a deed of sale was executed between Cosme Pido's heirs and private respondent transferring the rights of Pido's heirs to the land in favor of private respondent. Private respondent's right or interest therefore in the tenanted lot remains an adverse claim which cannot by itself be sufficient to cancel the OCT to the land and title the same in private respondent's name.

Consequently, while the transaction between Pido's heirs and private respondent may be binding on both parties, the right of petitioner as a registered tenant to the land cannot be perfunctorily forfeited on a mere allegation of private respondent's ownership without the corresponding proof thereof.

Petitioner had been a registered tenant in the subject land since 1960 and religiously paid lease rentals thereon. In his mind, he continued to be the registered tenant of Cosme Pido and his family (after Pido's death), even if in 1982, private respondent allegedly informed petitioner that he had become the new owner of the land.Under the circumstances, petitioner may have, in good faith, assumed such statement of private respondent to be true and may have in fact delivered 10 cavans of palay as annual rental for 1982 to private respondent. But in 1983, it is clear that petitioner had misgivings over private respondent's claim of ownership over the said land because in the October 1983 MAR conference, his wife Laurenciana categorically denied all of private respondent's allegations. In fact, petitioner even secured a certificate from the MAR dated 9 May 1988 to the effect that he continued to be the registered tenant of Cosme Pido and not of private respondent. The reason is that private respondent never registered the Declaration of Heirship with Waiver of Rights with the Registry of Deeds or with the MAR. Instead, he (private respondent) sought to do indirectly what could not be done directly,i.e., file a notice of adverse claim on the said lot to establish ownership thereover.It stands to reason, therefore, to hold that there was no unjustified or deliberate refusal by petitioner to pay the lease rentals or amortizations to the landowner/agricultural lessor which, in this case, private respondent failed to establish in his favor by clear and convincing evidence. 16

Consequently, the sanction of forfeiture of his preferred right to be issued a Certificate of Land Transfer under P.D. 27 and to the possession of his farmholdings should not be applied against petitioners, since

private respondent has not established a cause of action for recovery of possession against petitioner.WHEREFORE, premises considered, the Court hereby GRANTS the petition and the decision of the Court of Appeals dated 1 May 1994 which affirmed the decision of the RTC of Himamaylan, Negros Occidental dated 20 August 1991 is hereby SET ASIDE. The private respondent's complaint for recovery of possession and damages against petitioner Acap is hereby DISMISSED 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.SO ORDERED.Davide, Jr., Bellosillo, Kapunan and Hermosisima, Jr., JJ., concur.Footnotes

1 Penned by Purisima, J., Chairman, with Isnani, J. and Ibay-Somera, J. concurring.2 Penned by Executive Judge Jose Aguirre, Jr.3 The RTC decision used the name Luzviminda. The CA used the name Laudenciana.4 Annex A, Petition; Rollo, p. 14.5 Annex "D", Petition Rollo, p. 29.6 Ibid., p. 27.7 Ibid., p. 28.8 Reyes, An Outline of Philippine Civil Law, Vol. II p. 20.9 Article 1458, Civil Code.10 Paulmitos v. CA, G.R. No. 61584, Nov. 25, 1992, 215 SCRA 867, 868; Uberas v. CFI of Negros, G.R. No. 4248, October 30, 1978, 86 SCRA 145, 147; Abrasia v. Carian, G.R. No. 9510, October 31, 1957.11 See Aguirre v. Atienza, G.R. No. L-10665, Aug. 30, 1958; Mari v. Bonilla, G.R. No. 852, March 19, 1949; Robles v. CA, 647494 83 SCRA 181, 182, May 15, 1978.12 See Borromeo Herrera v. Borromeo, G.R. No. L-41171, July 23, 1987, 152 SCRA 171.13 See note 10 - supra.14 Osorio v. Osorio and Ynchausti Steamship Co. No. 16544, March 20, 1921.15 Somes v. Government of the Philippines, No. 42754, October 30, 1935.62 Phil. 432.16 See Laureto v. CA, G.R. No. 95838, August 7, 1992, 212 SCRA 397. Cuno v. CA, G.R. L-62985, April 2, 1984, 128 SCRA 567.

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THIRD DIVISION[G.R. No. 103577. October 7, 1996]

ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL, ANNABELLE C. GONZALES (for herself and on behalf of Floraida C. Tupper, as attorney-in-fact), CIELITO A. CORONEL, FLORAIDA A. ALMONTE, and CATALINA BALAIS MABANAG, petitioners, vs. THE COURT OF APPEALS, CONCEPCION D. ALCARAZ and RAMONA PATRICIA ALCARAZ, assisted by GLORIA F. NOEL as attorney-in-fact, respondents.

D E C I S I O NMELO, J.:

The petition before us has its roots in a complaint for specific performance to compel herein petitioners (except the last named, Catalina Balais Mabanag) to consummate the sale of a parcel of land with its improvements located along Roosevelt Avenue in Quezon City entered into by the parties sometime in January 1985 for the price of P1,240,000.00.

The undisputed facts of the case were summarized by respondent court in this wise:On January 19, 1985, defendants-appellants Romulo Coronel, et. al. (hereinafter referred to as Coronels) executed a document entitled Receipt of Down Payment (Exh. A) in favor of plaintiff Ramona Patricia Alcaraz (hereinafter referred to as Ramona) which is reproduced hereunder:

RECEIPT OF DOWN PAYMENTP1,240,000.00 - Total amount

50,000.00 - Down payment------------------------------------------

P1,190,000.00 - BalanceReceived from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand Pesos purchase price of our inherited house and lot, covered by TCT No. 119627 of the Registry of Deeds of Quezon City, in the total amount of P1,240,000.00.We bind ourselves to effect the transfer in our names from our deceased father, Constancio P. Coronel, the transfer certificate of title immediately upon receipt of the down payment above-stated.On our presentation of the TCT already in or name, We will immediately execute the deed of absolute sale of said property and Miss Ramona Patricia Alcaraz shall immediately pay the balance of theP1,190,000.00.Clearly, the conditions appurtenant to the sale are the following:1. Ramona will make a down payment of Fifty Thousand (P50,000.00) pesos upon execution of the document aforestated;

2. The Coronels will cause the transfer in their names of the title of the property registered in the name of their deceased father upon receipt of the Fifty Thousand (P50,000.00) Pesos down payment;3. Upon the transfer in their names of the subject property, the Coronels will execute the deed of absolute sale in favor of Ramona and the latter will pay the former the whole balance of One Million One Hundred Ninety Thousand (P1,190,000.00) Pesos.On the same date (January 15, 1985), plaintiff-appellee Concepcion D. Alcaraz (hereinafter referred to as Concepcion), mother of Ramona, paid the down payment of Fifty Thousand (P50,000.00) Pesos (Exh. B, Exh. 2).On February 6, 1985, the property originally registered in the name of the Coronels father was transferred in their names under TCT No. 327043 (Exh. D; Exh 4)On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to intervenor-appellant Catalina B. Mabanag (hereinafter referred to as Catalina) for One Million Five Hundred Eighty Thousand (P1,580,000.00) Pesos after the latter has paid Three Hundred Thousand (P300,000.00) Pesos (Exhs. F-3; Exh. 6-C)For this reason, Coronels canceled and rescinded the contract (Exh. A) with Ramona by depositing the down payment paid by Concepcion in the bank in trust for Ramona Patricia Alcaraz.On February 22, 1985, Concepcion, et. al., filed a complaint for a specific performance against the Coronels and caused the annotation of a notice of lis pendens at the back of TCT No. 327403 (Exh. E; Exh. 5).On April 2, 1985, Catalina caused the annotation of a notice of adverse claim covering the same property with the Registry of Deeds of Quezon City (Exh. F; Exh. 6).On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject property in favor of Catalina (Exh. G; Exh. 7).On June 5, 1985, a new title over the subject property was issued in the name of Catalina under TCT No. 351582 (Exh. H; Exh. 8).

(Rollo, pp. 134-136)In the course of the proceedings before the trial court (Branch 83,

RTC, Quezon City) the parties agreed to submit the case for decision solely on the basis of documentary exhibits.Thus, plaintiffs therein (now private respondents) proffered their documentary evidence accordingly marked as Exhibits A through J, inclusive of their corresponding submarkings. Adopting these same exhibits as their own, then defendants (now petitioners) accordingly offered and marked them as Exhibits 1 through 10, likewise inclusive of their corresponding submarkings.Upon motion of the parties, the trial court gave them thirty (30) days within which to simultaneously submit their respective memoranda, and an additional 15 days within which to submit their

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corresponding comment or reply thereto, after which, the case would be deemed submitted for resolution.

On April 14, 1988, the case was submitted for resolution before Judge Reynaldo Roura, who was then temporarily detailed to preside over Branch 82 of the RTC of Quezon City. OnMarch 1, 1989, judgment was handed down by Judge Roura from his regular bench at Macabebe, Pampanga for the Quezon City branch, disposing as follows:WHEREFORE, judgment for specific performance is hereby rendered ordering defendant to execute in favor of plaintiffs a deed of absolute sale covering that parcel of land embraced in and covered by Transfer Certificate of Title No. 327403 (now TCT No. 331582) of the Registry of Deeds for Quezon City, together with all the improvements existing thereon free from all liens and encumbrances, and once accomplished, to immediately deliver the said document of sale to plaintiffs and upon receipt thereof, the plaintiffs are ordered to pay defendants the whole balance of the purchase price amounting toP1,190,000.00 in cash. Transfer Certificate of Title No. 331582 of the Registry of Deeds for Quezon City in the name of intervenor is hereby canceled and declared to be without force and effect. Defendants and intervenor and all other persons claiming under them are hereby ordered to vacate the subject property and deliver possession thereof to plaintiffs. Plaintiffs claim for damages and attorneys fees, as well as the counterclaims of defendants and intervenors are hereby dismissed.

No pronouncement as to costs.So Ordered.

Macabebe, Pampanga for Quezon City, March 1, 1989.(Rollo, p. 106)

A motion for reconsideration was filed by petitioners before the new presiding judge of the Quezon City RTC but the same was denied by Judge Estrella T. Estrada, thusly:The prayer contained in the instant motion, i.e., to annul the decision and to render anew decision by the undersigned Presiding Judge should be denied for the following reasons: (1) The instant case became submitted for decision as of April 14, 1988 when the parties terminated the presentation of their respective documentary evidence and when the Presiding Judge at that time was Judge Reynaldo Roura. The fact that they were allowed to file memoranda at some future date did not change the fact that the hearing of the case was terminated before Judge Roura and therefore the same should be submitted to him for decision; (2) When the defendants and intervenor did not object to the authority of Judge Reynaldo Roura to decide the case prior to the rendition of the decision, when they met for the first time before the undersigned Presiding Judge at the hearing of a pending incident in Civil Case No. Q-46145 on November 11, 1988, they were deemed to have

acquiesced thereto and they are now estopped from questioning said authority of Judge Roura after they received the decision in question which happens to be adverse to them; (3) While it is true that Judge Reynaldo Roura was merely a Judge-on-detail at this Branch of the Court, he was in all respects the Presiding Judge with full authority to act on any pending incident submitted before this Court during his incumbency. When he returned to his Official Station at Macabebe, Pampanga, he did not lose his authority to decide or resolve cases submitted to him for decision or resolution because he continued as Judge of the Regional Trial Court and is of co-equal rank with the undersigned Presiding Judge. The standing rule and supported by jurisprudence is that a Judge to whom a case is submitted for decision has the authority to decide the case notwithstanding his transfer to another branch or region of the same court (Sec. 9, Rule 135, Rule of Court).Coming now to the twin prayer for reconsideration of the Decision dated March 1, 1989 rendered in the instant case, resolution of which now pertains to the undersigned Presiding Judge, after a meticulous examination of the documentary evidence presented by the parties, she is convinced that the Decision of March 1, 1989 is supported by evidence and, therefore, should not be disturbed.IN VIEW OF THE FOREGOING, the Motion for Reconsideration and/or to Annul Decision and Render Anew Decision by the Incumbent Presiding Judge dated March 20, 1989 is hereby DENIED.SO ORDERED.Quezon City, Philippines, July 12, 1989.

(Rollo, pp. 108-109)Petitioners thereupon interposed an appeal, but on December 16,

1991, the Court of Appeals (Buena, Gonzaga-Reyes, Abad-Santos (P), JJ.) rendered its decision fully agreeing with the trial court.

Hence, the instant petition which was filed on March 5, 1992. The last pleading, private respondents Reply Memorandum, was filed on September 15, 1993. The case was, however, re-raffled to undersigned ponente only on August 28, 1996, due to the voluntary inhibition of the Justice to whom the case was last assigned.

While we deem it necessary to introduce certain refinements in the disquisition of respondent court in the affirmance of the trial courts decision, we definitely find the instant petition bereft of merit.

The heart of the controversy which is the ultimate key in the resolution of the other issues in the case at bar is the precise determination of the legal significance of the document entitled Receipt of Down Payment which was offered in evidence by both parties. There is no dispute as to the fact that the said document embodied the binding contract between Ramona Patricia Alcaraz on the one hand, and

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the heirs of Constancio P. Coronel on the other, pertaining to a particular house and lot covered by TCT No. 119627, as defined in Article 1305 of the Civil Code of the Philippines which reads as follows:Art. 1305. A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service.

While, it is the position of private respondents that the Receipt of Down Payment embodied a perfected contract of sale, which perforce, they seek to enforce by means of an action for specific performance, petitioners on their part insist that what the document signified was a mere executory contract to sell, subject to certain suspensive conditions, and because of the absence of Ramona P. Alcaraz, who left for the United States of America, said contract could not possibly ripen into a contract of absolute sale.

Plainly, such variance in the contending parties contention is brought about by the way each interprets the terms and/or conditions set forth in said private instrument. Withal, based on whatever relevant and admissible evidence may be available on record, this Court, as were the courts below, is now called upon to adjudge what the real intent of the parties was at the time the said document was executed.

The Civil Code defines a contract of sale, thus:Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.

Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The essential elements of a contract of sale are the following:a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price;b) Determinate subject matter; andc) Price certain in money or its equivalent.

Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the first essential element is lacking. In a contract to sell, the prospective seller explicitly reserves the transfer of title to the prospective buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership of the property subject of the contract to sell until the happening of an event, which for present purposes we shall take as the full payment of the purchase price. What the seller agrees or obliges himself to do is to fulfill his promise to sell the subject property when the entire amount of the purchase price is delivered to him. In other words the full payment of the purchase price partakes of a suspensive condition, the non-fulfillment of which prevents the obligation to sell from arising and thus, ownership is retained by the

prospective seller without further remedies by the prospective buyer. In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court had occasion to rule:Hence, We hold that the contract between the petitioner and the respondent was a contract to sell where the ownership or title is retained by the seller and is not to pass until the full payment of the price, such payment being a positive suspensive condition and failure of which is not a breach, casual or serious, but simply an event that prevented the obligation of the vendor to convey title from acquiring binding force.

Stated positively, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, the prospective sellers obligation to sell the subject property by entering into a contract of sale with the prospective buyer becomes demandable as provided in Article 1479 of the Civil Code which states:Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor of the promise is supported by a consideration distinct from the price.

A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase price.

A contract to sell as defined hereinabove, may not even be considered as a conditional contract of sale where the seller may likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition, because in a conditional contract of sale, the first element of consent is present, although it is conditioned upon the happening of a contingent event which may or may not occur. If the suspensive condition is not fulfilled, the perfection of the contract of sale is completely abated (cf. Homesite and Housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). However, if the suspensive condition is fulfilled, the contract of sale is thereby perfected, such that if there had already been previous delivery of the property subject of the sale to the buyer, ownership thereto automatically transfers to the buyer by operation of law without any further act having to be performed by the seller.

In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, ownership will not automatically transfer to the buyer although the property may have been previously delivered to him. The prospective seller still has to

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convey title to the prospective buyer by entering into a contract of absolute sale.

It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases where the subject property is sold by the owner not to the party the seller contracted with, but to a third person, as in the case at bench. In a contract to sell, there being no previous sale of the property, a third person buying such property despite the fulfillment of the suspensive condition such as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the property. There is no double sale in such case. Title to the property will transfer to the buyer after registration because there is no defect in the owner-sellers title per se, but the latter, of course, may be sued for damages by the intending buyer.

In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale becomes absolute and this will definitely affect the sellers title thereto. In fact, if there had been previous delivery of the subject property, the sellers ownership or title to the property is automatically transferred to the buyer such that, the seller will no longer have any title to transfer to any third person. Applying Article 1544 of the Civil Code, such second buyer of the property who may have had actual or constructive knowledge of such defect in the sellers title, or at least was charged with the obligation to discover such defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first buyers title. In case a title is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the sale.

With the above postulates as guidelines, we now proceed to the task of deciphering the real nature of the contract entered into by petitioners and private respondents.

It is a canon in the interpretation of contracts that the words used therein should be given their natural and ordinary meaning unless a technical meaning was intended (Tan vs. Court of Appeals, 212 SCRA 586 [1992]). Thus, when petitioners declared in the said Receipt of Down Payment that they --Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand Pesos purchase price of our inherited house and lot, covered by TCT No. 1199627 of the Registry of Deeds of Quezon City, in the total amount of P1,240,000.00.without any reservation of title until full payment of the entire purchase price, the natural and ordinary idea conveyed is that they sold their property.

When the Receipt of Down payment is considered in its entirety, it becomes more manifest that there was a clear intent on the part of petitioners to transfer title to the buyer, but since the transfer certificate

of title was still in the name of petitioners father, they could not fully effect such transfer although the buyer was then willing and able to immediately pay the purchase price. Therefore, petitioners-sellers undertook upon receipt of the down payment from private respondent Ramona P. Alcaraz, to cause the issuance of a new certificate of title in their names from that of their father, after which, they promised to present said title, now in their names, to the latter and to execute the deed of absolute sale whereupon, the latter shall, in turn, pay the entire balance of the purchase price.

The agreement could not have been a contract to sell because the sellers herein made no express reservation of ownership or title to the subject parcel of land. Furthermore, the circumstance which prevented the parties from entering into an absolute contract of sale pertained to the sellers themselves (the certificate of title was not in their names) and not the full payment of the purchase price. Under the established facts and circumstances of the case, the Court may safely presume that, had the certificate of title been in the names of petitioners-sellers at that time, there would have been no reason why an absolute contract of sale could not have been executed and consummated right there and then.

Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely promise to sell the property to private respondent upon the fulfillment of the suspensive condition. On the contrary, having already agreed to sell the subject property, they undertook to have the certificate of title change to their names and immediately thereafter, to execute the written deed of absolute sale.

Thus, the parties did not merely enter into a contract to sell where the sellers, after compliance by the buyer with certain terms and conditions, promised to sell the property to the latter.What may be perceived from the respective undertakings of the parties to the contract is that petitioners had already agreed to sell the house and lot they inherited from their father, completely willing to transfer ownership of the subject house and lot to the buyer if the documents were then in order. It just so happened, however, that the transfer certificate of title was then still in the name of their father. It was more expedient to first effect the change in the certificate of title so as to bear their names. That is why they undertook to cause the issuance of a new transfer of the certificate of title in their names upon receipt of the down payment in the amount of P50,000.00. As soon as the new certificate of title is issued in their names, petitioners were committed to immediately execute the deed of absolute sale. Only then will the obligation of the buyer to pay the remainder of the purchase price arise.

There is no doubt that unlike in a contract to sell which is most commonly entered into so as to protect the seller against a buyer who intends to buy the property in installment by withholding ownership over

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the property until the buyer effects full payment therefor, in the contract entered into in the case at bar, the sellers were the ones who were unable to enter into a contract of absolute sale by reason of the fact that the certificate of title to the property was still in the name of their father. It was the sellers in this case who, as it were, had the impediment which prevented, so to speak, the execution of an contract of absolute sale.

What is clearly established by the plain language of the subject document is that when the said Receipt of Down Payment was prepared and signed by petitioners Romulo A. Coronel,et. al., the parties had agreed to a conditional contract of sale, consummation of which is subject only to the successful transfer of the certificate of title from the name of petitioners father, Constancio P. Coronel, to their names.

The Court significantly notes that this suspensive condition was, in fact, fulfilled on February 6, 1985 (Exh. D; Exh. 4). Thus, on said date, the conditional contract of sale between petitioners and private respondent Ramona P. Alcaraz became obligatory, the only act required for the consummation thereof being the delivery of the property by means of the execution of the deed of absolute sale in a public instrument, which petitioners unequivocally committed themselves to do as evidenced by the Receipt of Down Payment.

Article 1475, in correlation with Article 1181, both of the Civil Code, plainly applies to the case at bench. Thus,Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price.From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts.Art. 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition.

Since the condition contemplated by the parties which is the issuance of a certificate of title in petitioners names was fulfilled on February 6, 1985, the respective obligations of the parties under the contract of sale became mutually demandable, that is, petitioners, as sellers, were obliged to present the transfer certificate of title already in their names to private respondent Ramona P. Alcaraz, the buyer, and to immediately execute the deed of absolute sale, while the buyer on her part, was obliged to forthwith pay the balance of the purchase price amounting to P1,190,000.00.

It is also significant to note that in the first paragraph in page 9 of their petition, petitioners conclusively admitted that:

3. The petitioners-sellers Coronel bound themselves to effect the transfer in our names from our deceased father

Constancio P. Coronel, the transfer certificate of title immediately upon receipt of the downpayment above-stated". The sale was still subject to this suspensive condition. (Emphasis supplied.)

(Rollo, p. 16)Petitioners themselves recognized that they entered into a contract

of sale subject to a suspensive condition. Only, they contend, continuing in the same paragraph, that:. . . Had petitioners-sellers not complied with this condition of first transferring the title to the property under their names, there could be no perfected contract of sale. (Emphasis supplied.)

(Ibid.)not aware that they have set their own trap for themselves, for Article 1186 of the Civil Code expressly provides that:Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.

Besides, it should be stressed and emphasized that what is more controlling than these mere hypothetical arguments is the fact that the condition herein referred to was actually and indisputably fulfilled on February 6, 1985, when a new title was issued in the names of petitioners as evidenced by TCT No. 327403 (Exh. D; Exh. 4).

The inevitable conclusion is that on January 19, 1985, as evidenced by the document denominated as Receipt of Down Payment (Exh. A; Exh. 1), the parties entered into a contract of sale subject to the suspensive condition that the sellers shall effect the issuance of new certificate title from that of their fathers name to their names and that, on February 6, 1985, this condition was fulfilled (Exh. D; Exh. 4).

We, therefore, hold that, in accordance with Article 1187 which pertinently provides -Art. 1187. The effects of conditional obligation to give, once the condition has been fulfilled, shall retroact to the day of the constitution of the obligation . . .In obligations to do or not to do, the courts shall determine, in each case, the retroactive effect of the condition that has been complied with.the rights and obligations of the parties with respect to the perfected contract of sale became mutually due and demandable as of the time of fulfillment or occurrence of the suspensive condition on February 6, 1985. As of that point in time, reciprocal obligations of both seller and buyer arose.

Petitioners also argue there could been no perfected contract on January 19, 1985 because they were then not yet the absolute owners of the inherited property.

We cannot sustain this argument.

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Article 774 of the Civil Code defines Succession as a mode of transferring ownership as follows:Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and obligations to the extent and value of the inheritance of a person are transmitted through his death to another or others by his will or by operation of law.

Petitioners-sellers in the case at bar being the sons and daughters of the decedent Constancio P. Coronel are compulsory heirs who were called to succession by operation of law.Thus, at the point their father drew his last breath, petitioners stepped into his shoes insofar as the subject property is concerned, such that any rights or obligations pertaining thereto became binding and enforceable upon them. It is expressly provided that rights to the succession are transmitted from the moment of death of the decedent (Article 777, Civil Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]).

Be it also noted that petitioners claim that succession may not be declared unless the creditors have been paid is rendered moot by the fact that they were able to effect the transfer of the title to the property from the decedents name to their names on February 6, 1985.

Aside from this, petitioners are precluded from raising their supposed lack of capacity to enter into an agreement at that time and they cannot be allowed to now take a posture contrary to that which they took when they entered into the agreement with private respondent Ramona P. Alcaraz. The Civil Code expressly states that:Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon.Having represented themselves as the true owners of the subject property at the time of sale, petitioners cannot claim now that they were not yet the absolute owners thereof at that time.

Petitioners also contend that although there was in fact a perfected contract of sale between them and Ramona P. Alcaraz, the latter breach her reciprocal obligation when she rendered impossible the consummation thereof by going to the United States of America, without leaving her address, telephone number, and Special Power of Attorney (Paragraphs 14 and 15, Answer with Compulsory Counterclaim to the Amended Complaint, p. 2; Rollo, p. 43), for which reason, so petitioners conclude, they were correct in unilaterally rescinding the contract of sale.

We do not agree with petitioners that there was a valid rescission of the contract of sale in the instant case. We note that these supposed grounds for petitioners rescission, are mere allegations found only in their responsive pleadings, which by express provision of the rules, are deemed controverted even if no reply is filed by the plaintiffs (Sec. 11,

Rule 6, Revised Rules of Court). The records are absolutely bereft of any supporting evidence to substantiate petitioners allegations. We have stressed time and again that allegations must be proven by sufficient evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882 [1961]; Recaro vs. Embisan, 2 SCRA 598 [1961]). Mere allegation is not an evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]).

Even assuming arguendo that Ramona P. Alcaraz was in the United States of America on February 6, 1985, we cannot justify petitioners-sellers act of unilaterally and extrajudicially rescinding the contract of sale, there being no express stipulation authorizing the sellers to extrajudicially rescind the contract of sale. (cf. Dignos vs. CA, 158 SCRA 375 [1988]; Taguba vs. Vda. De Leon, 132 SCRA 722 [1984])

Moreover, petitioners are estopped from raising the alleged absence of Ramona P. Alcaraz because although the evidence on record shows that the sale was in the name of Ramona P. Alcaraz as the buyer, the sellers had been dealing with Concepcion D. Alcaraz, Ramonas mother, who had acted for and in behalf of her daughter, if not also in her own behalf. Indeed, the down payment was made by Concepcion D. Alcaraz with her own personal Check (Exh. B; Exh. 2) for and in behalf of Ramona P. Alcaraz. There is no evidence showing that petitioners ever questioned Concepcions authority to represent Ramona P. Alcaraz when they accepted her personal check. Neither did they raise any objection as regards payment being effected by a third person. Accordingly, as far as petitioners are concerned, the physical absence of Ramona P. Alcaraz is not a ground to rescind the contract of sale.

Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her obligation to pay the full purchase price is concerned. Petitioners who are precluded from setting up the defense of the physical absence of Ramona P. Alcaraz as above-explained offered no proof whatsoever to show that they actually presented the new transfer certificate of title in their names and signified their willingness and readiness to execute the deed of absolute sale in accordance with their agreement. Ramonas corresponding obligation to pay the balance of the purchase price in the amount of P1,190,000.00 (as buyer) never became due and demandable and, therefore, she cannot be deemed to have been in default.

Article 1169 of the Civil Code defines when a party in a contract involving reciprocal obligations may be considered in default, to wit:Art. 1169. Those obliged to deliver or to do something, incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation.

x x xIn reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with

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what is incumbent upon him. From the moment one of the parties fulfill his obligation, delay by the other begins. (Emphasis supplied.)

There is thus neither factual nor legal basis to rescind the contract of sale between petitioners and respondents.

With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag, gave rise to a case of double sale where Article 1544 of the Civil Code will apply, to wit:Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property.Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property.Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof to the person who presents the oldest title, provided there is good faith.

The record of the case shows that the Deed of Absolute Sale dated April 25, 1985 as proof of the second contract of sale was registered with the Registry of Deeds of Quezon City giving rise to the issuance of a new certificate of title in the name of Catalina B. Mabanag on June 5, 1985. Thus, the second paragraph of Article 1544 shall apply.

The above-cited provision on double sale presumes title or ownership to pass to the buyer, the exceptions being: (a) when the second buyer, in good faith, registers the sale ahead of the first buyer, and (b) should there be no inscription by either of the two buyers, when the second buyer, in good faith, acquires possession of the property ahead of the first buyer. Unless, the second buyer satisfies these requirements, title or ownership will not transfer to him to the prejudice of the first buyer.

In his commentaries on the Civil Code, an accepted authority on the subject, now a distinguished member of the Court, Justice Jose C. Vitug, explains:The governing principle is prius tempore, potior jure (first in time, stronger in right). Knowledge by the first buyer of the second sale cannot defeat the first buyers rights except when the second buyer first registers in good faith the second sale (Olivares vs. Gonzales, 159 SCRA 33). Conversely, knowledge gained by the second buyer of the first sale defeats his rights even if he is first to register, since knowledge taints his registration with bad faith (see also Astorga vs. Court of Appeals, G.R. No. 58530, 26 December 1984). In Cruz vs. Cabana (G.R. No. 56232, 22 June 1984, 129 SCRA 656), it was held that it is essential, to merit the protection of Art. 1544, second paragraph, that the second realty buyer must act in good faith in registering his deed of sale

(citing Carbonell vs. Court of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R. No. 95843, 02 September 1992).(J. Vitug, Compendium of Civil Law and Jurisprudence, 1993 Edition,

p. 604).Petitioners point out that the notice of lis pendens in the case at bar

was annotated on the title of the subject property only on February 22, 1985, whereas, the second sale between petitioners Coronels and petitioner Mabanag was supposedly perfected prior thereto or on February 18, 1985. The idea conveyed is that at the time petitioner Mabanag, the second buyer, bought the property under a clean title, she was unaware of any adverse claim or previous sale, for which reason she is a buyer in good faith.

We are not persuaded by such argument.In a case of double sale, what finds relevance and materiality is not

whether or not the second buyer in good faith but whether or not said second buyer registers such second sale in good faith, that is, without knowledge of any defect in the title of the property sold.

As clearly borne out by the evidence in this case, petitioner Mabanag could not have in good faith, registered the sale entered into on February 18, 1985 because as early as February 22, 1985, a notice of lis pendens had been annotated on the transfer certificate of title in the names of petitioners, whereas petitioner Mabanag registered the said sale sometime in April, 1985. At the time of registration, therefore, petitioner Mabanag knew that the same property had already been previously sold to private respondents, or, at least, she was charged with knowledge that a previous buyer is claiming title to the same property. Petitioner Mabanag cannot close her eyes to the defect in petitioners title to the property at the time of the registration of the property.

This Court had occasions to rule that:If a vendee in a double sale registers the sale after he has acquired knowledge that there was a previous sale of the same property to a third party or that another person claims said property in a previous sale, the registration will constitute a registration in bad faith and will not confer upon him any right. (Salvoro vs. Tanega, 87 SCRA 349 [1978]; citing Palarca vs. Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43 Phil. 554; Fernandez vs. Mercader, 43 Phil. 581.)

Thus, the sale of the subject parcel of land between petitioners and Ramona P. Alcaraz, perfected on February 6, 1985, prior to that between petitioners and Catalina B. Mabanag on February 18, 1985, was correctly upheld by both the courts below.

Although there may be ample indications that there was in fact an agency between Ramona as principal and Concepcion, her mother, as agent insofar as the subject contract of sale is concerned, the issue of

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whether or not Concepcion was also acting in her own behalf as a co-buyer is not squarely raised in the instant petition, nor in such assumption disputed between mother and daughter. Thus, We will not touch this issue and no longer disturb the lower courts ruling on this point.

WHEREFORE, premises considered, the instant petition is hereby DISMISSED and the appealed judgment AFFIRMED.

SO ORDERED.Narvasa, C.J. (Chairman), Davide, Jr., and Francisco, JJ., concur.Panganiban, J., no part.

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CO   v.    COURT OF APPEALS312 SCRA 528

Facts:            Plaintiff Adoracion Custodio entered into a verbal contract with defendants’ spouses Co for the purchase of the latter’s house and lot located at Alabang, Metro Manila at the agreed purchase price of $100,000.00 payable in two payments $40,000.00 in Dec. 4, 1984 and the balance of $60,000.00 on January 5, 1985. A week thereafter, plaintiff paid defendants the amount of $1,000.00 and Php40,000.00 as earnest money. On January 25, 1985, although the period of payment had already expired, plaintiff paid to defendants the sum of $30,000.00 as partial payment. On March 15, 1985, defendants demanded from plaintiff payment of the balance of purchase price but to no avail. On Aug. 8, 1986, defendants informed plaintiff that she lost her option to purchase the property and that her other rights to the property including payments already made are forfeited. On Sept. 5, 1986, plaintiff informed defendants that she is now ready to pay the remaining balance but was ignored by the latter. Plaintiff then filed an action for rescission.            The lower court ruled that the earnest money is forfeited. It also ordered defendants to remit to plaintiff the peso equivalent of $30,000.00 representing the partial payment of purchase price. Defendants appealed arguing that plaintiff had already lost her right on option to purchase and that her failure to exercise said option resulted in forfeiture of any amounts paid.

Issue:            Whether or not there is a perfected contract of sale and whether defendants can unilaterally and extra-judicially rescind said contract of sale.

Held:            A contract of sale is a consensual contract and is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price. Earnest money given in sale transaction is considered part of the purchase price and proof of the perfection of the sale.            In the absence of an express stipulation authorizing the sellers to extra-judicially rescind the contract of sale, the defendants cannot unilaterally and extra-judicially rescind the contract of sale. Despite the fact that plaintiff’s failure to pay the amounts of $40,000.00 and $60,000.00 on or before Dec. 4, 1984 and January 5, 1985, respectively, was a breach of her obligation under Article 1191 of the Civil Code, the

defendants did not sue for either specific performance or rescission of the contract. The defendants were of the mistaken belief that plaintiff had lost her “option” over the property when she failed to pay the remaining balance. 

 SUFFICIENCY OF CONSIDERATION IN CONTRACT OF SALE

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.R. No. , Aguinaldo v. Esteban and Sarmiento, 135 SCRA 645Republic of the Philippines

SUPREME COURTManila

FIRST DIVISIONDECISION

April 15, 1985G.R. No. L-27289JUAN AGUINALDO, Substituted by MARINA and PRIMITIVO AGUINALDO, plaintiffs-appellants,vs.JOSE ESTEBAN and FRANCISCA SARMIENTO, defendants-appellees.Crisostomo M. Diokno for plaintiff-appellants. Andres Franco for defendants-appellees.RELOVA, J.:In Civil Case No. 6977, the Court of First Instance of Rizal declared the contract, entitled: "Sanglaan ng Isang Lupa na Patuluyan Ipaaari," valid and binding contract of sale and dismissed the complaint as well as the counterclaim with costs against the plaintiff. From said judgment of the lower court, appeal was taken to this Court, "the same involving, as it does, a question of law." (p. 25, Rollo)Plaintiff Juan Aguinaldo in his complaint alleged, among others, that on June 23, 1958, defendants, through fraud, deceit and misrepresentations and exercising undue pressure, influence and advantage, procured the thumbmark of Jose Aguinaldo, father of plaintiff, to be affixed on subject contract; that defendants caused the cancellation of Tax Declaration No. 4004, Rizal (1948) in the name of Jose Aguinaldo and the issuance in lieu thereof of Tax Declaration No. 10725-Rizal in the names of defendant spouses; that the document in question on which Jose Aguinaldo affixed his thumbmark is not true and genuine, as the thumbmark appearing thereon is a forgery; that it contains terms and conditions which partake the nature of "pacto comisario" which render same null and void; that it does not fix a period for the payment of the loan nor does it state the duration of the mortgage; that plaintiff is the sole successor-in-interest and legal heir of Jose Aguinaldo who died intestate in October 1960; that defendants having no right to win and possess the property in question are withholding the possession thereof from plaintiff and consequently deprived plaintiff of the fruits of said property; and that by reason of the willfull and malevolent acts of defendants, plaintiff suffered moral and actual damages in the amount of P4,000.00.In their answer, defendants claim absolute ownership of subject property upon the death of Jose Aguinaldo in October 1960 on the

theory that the document in controversy is one of sale and not one of mortgage.The parties, through their respective counsels, agreed to submit the case for decision solely on whether the contract in question, Annex "A" of the complaint, is one of mortgage or of sale.When plaintiff Juan Aguinaldo died intestate on August 6, 1965, his heirs, namely: Marina and Primitivo, both surnamed Aguinaldo, petitioned the trial court that they be substituted as party plaintiffs in lieu of their deceased father.It is the position of plaintiffs-appellants that the document in question, Annex "A" of the complaint, is null and void because it contains stipulations which partake of the nature of "pacto comisario." On the other hand, the defendants contend that the contract is a valid sale and, as such, it passed the title to them.Hereunder is the contract in question:

SANGLAAN NG ISANG LUPA-CANAVERAL NA PATULOYAN IPAAARIHAYAG SA SINO MAN MAKAKABASA:Na, ako JOSE AGUINALDO, Pilipino, balo, may karampatan gulang, tubo at naninirahan sa Bo. Bambang, Tagig, Rizal, Kapuluan Pilipinas, sa pamamagitan nito ayISINASAYSAY KO AT PINAGTITIBAY:1. Na, sarili at tunay kong pagaari dahil sa ipinagkaloob sa akin ng aking amain Martin Concepcion (patay) ang isang parcelang lupa-canaveral, at ang lupang ito ay napagkikilala at nauligiran ng mga pagaaring lupa ng mga kahangganan kagaya ng mga sumusunod:Isang parcelang lupa-canaveral na nasa pook ng Bo. Bambang, Tagig, Rizal, at siyang lupang nakatala sa Tax Declaration No. 4004-Rizal (1948), sa Tanggapan ng Tasador ng lupa sa lalawigan ng RizaL Pasig, RizaL at valor ameliarado ng P70.00 at napaloob sa mga pagaaring lupa ng mga kahangganan kagaya ng mga sumusunod: Sa Norte, Antonio Silvestre at Pedro Sarmiento; sa Este, Don-lingo Luga; sa Sur, Dionisio Dionisio at Pedro Sarmiento, at sa Weste, Tomas Cruz2. Na, alang-alang sa halagang LIMANG DAAN AT APATNAPUNG PISO (P540.00), salaping Pilipino na sa kasalukuyan ay ating ginagamit, ay natanggap ko na, sa hindi biglaan kung hindi LIMANGPUNG SENTIMOS (P0.50) lamang araw-araw magbuhat pa nuong Marzo 26, 1955, at ang kabuuang halaga ng halagang nabanggit sa itaas nito, sa oras na ito, ay kusang loob kong tinanggap sa magasawang JOSE ESTEBAN at FRANCISCA SARMIENTO, mga Pilipino, may karampatan gulang, naninirahan at may padalahan sulat sa Bo. Bambang, Tagig, Rizal, ay ISINASANGLA AT PATULOYAN IPAARI KO sa nasabing magasawa ang lupang nobanggit ko sa itaas, sa aming mga kasunduan kagaya ng mga sumusunod:

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NA AKO, JOSE AGUINALDO AY PAKAKANIN HABANG NABUBUHAY NG MAGASAWANG JOSE ESTEBAN AT FRANCISCA SARMIENTO, 0 NG KANILANG KAHALILI AT TAGAPAGMANA, AT BILANG KABAYARAN NAMAN SA HALAGANG LIMANG DAAN AT APATNAPUNG PISO (P540.00) AT PAGPAPAKAIN SA AKIN NG MAGASAWANG JOSE ESTEBAN AT FRANCISCA SARMIENTO, ORAS NA AKO AY MAMATAY SILA (JOSE ESTEBAN AT FRANCISCA SARMIENTO) NA ANG LUBOSAN MAGMAMAYARI NG AKING LUPANG ISINANGLANG ITO SA KANILA, SAPAGKAT ANG LAHAT NG AKING KARAPATAN SA LUPA, NGAYON PA AY IPINAGKAKALOOB KO SA KANILA SA ILALIM NG KASUNDUAN.3. Na, ang lupa-canaveral na isinasangla ko sa pamamagitan ng kasulatan ito na ipaaring patuluyan ay pinamomosiyonan ng mag-asawang Jose Esteban at Francisco Sarmiento, nuong pang Marzo 26, 1955.4. Na, ang lupang akin binabanggit sa kasulatan ito, ay hindi ko ipinagkakautang sa kanino man tao, na maliban sa magasawang Jose Esteban at Francisca Samiento.5. Na, ang lupa kong ito na siyang nakatala sa Tax Declaration No. 4004-Rizal (1948), ay hindi nakatala sa bisa ng Batas Blg. 496 o maging sa Hipotecaria Espanola, at napagkasunduan ang kasulatan ito, ay nais ipatala sa bisa ng Batas Blg. 3344, at sinusugan.SA KATUNAYAN NG LAHAT KONG IPINAHAYAG SA DOKUMENTONG ITO, ay inilagda ko ang aking pangalan at apelyedo dito sa Lunsod ng Maynila, Pilipinas, ngayong ika ______ ng Hunyo 1958, sa harap ng dalawang saksi.(Thumbmark)JOSE AGUINALDONagsanglaSUMASANGAYON SA MGA ALITUNTUNIN:(Sgd.) JOSE ESTEBANPinagsanglaan(Sgd.) FRANCISCA SARMIENTOPinagsanglaanMGA SAKSI:(Sgd.) Illegible(Sgd.) Eugenia S. RelonACKNOWLEDGMENT(pp. 7-1 0, Record on Appeal)There is merit in the appeal.On the issue as to whether or not the subject contract is one of sale or of mortgage, an inquiry into the surrounding facts would disclose the intention of the parties and thereby determine the truth of plaintiff-appellant's allegation that his father, Jose Aguinaldo, was misled into affixing his thumbmark on the said contract.

Plaintiff-appellant, Juan Aguinaldo, is the son of Jose and it is indeed intriguing why defendants-appellees, who are not related at all to the old man, would give him fifty centavos (P0.50) everyday beginning May 26, 1955. The contract in question was executed in June 1958, or after three (3) years from the time the daffy amount of half-a-peso was given the old man. Thereafter, the defendants-appellees' saw to it that the recipient of the money would execute the contract, entitled: "Sanglaan ng isang lupang-canaveral na Patuluyang Ipaaari."It is significant to note that herein plaintiff-appellant was not even a witness in the document when his father who is of low intelligence, illiterate and could not even sign his name, affixed his thumbmark in the document in question. It would appear that the execution of the contract was made behind his back and/or without giving notice to him. Stated differently, if the transaction was on the level, why was not plaintiff-appellant asked to sign as a witness to the document. It may be true that the contract was read to the old man but it is doubtful if he understood the meaning of its contents. The contract was so written that anyone could believe he was only giving his property by way of mortgage, not as a sale. For instance, in paragraph 2 thereof, it reads "... ay isinasangla at patuloyan ipaaari ko sa nasabing magasawa ang lupang nabanggit ko sa itaas, ... ." In some Tagalog provinces the word "Sangla" means "Bilihan Mabibiling Muli" or "Pacto de Retro." By this contract, the vendee-a-retro takes possession of the property as owner until the same is repurchased or redeemed. On the other hand, mortgage is understood as "Prenda."In the case at bar, defendants-appellees took possession of the property on March 26, 1955 when they started giving Jose Aguinaldo the fifty centavos (P0.50) a day. It would appear then that the money which he has been receiving from the Estebans come from his own property. In effect, there was no consideration for the transfer of the property-be it sale, mortgage or Pacto Comisario.WHEREFORE, the decision of the trial court, dated August 16, 1966, is REVERSED and the contract "Sanglaan ng Isang Lupa-Canaveral na Patuluyan Ipaaari" is declared null and void, and the deceased plaintiff Juan Aguinaldo is declared as the true and lawful owner of subject property.Further, defendants-appellees are hereby ordered to transfer and deliver the possession of subject property to the said deceased plaintiff Juan Aguinaldo's heirs, Marina Aguinaldo and Primitive Aguinaldo, who substituted him as plaintiffs in this case and/or their respective heirs and successors; and the Provincial Assessor of Rizal is directed to cancel Tax Declaration No. 10725 (Rizal) in the name of defendants-appellees, Jose Esteban and Francisco Sarmiento, and in lieu thereof issue another in

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the name of the deceased plaintiff Juan Aguinaldo's heirs, Marina Aguinaldo and Primitivo Aguinaldo.SO ORDERED.Teehankee (Chairman), Plana, Gutierrez, Jr., De la Fuente and Alampay, JJ., concur.

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Republic of the PhilippinesSUPREME COURT

ManilaSPECIAL FIRST DIVISION

G.R. No. 122544            January 28, 2003REGINA P. DIZON, AMPARO D. BARTOLOME, FIDELINA D. BALZA, ESTER ABAD DIZON and JOSEPH ANTHONY DIZON, RAYMUND A. DIZON, GERARD A. DIZON and JOSE A. DIZON, JR., petitioners, vs.COURT OF APPEALS and OVERLAND EXPRESS LINES, INC., respondents.x---------------------------------------------------------xG.R. No. 124741 January 28, 2003REGINA P. DIZON, AMPARO D. BARTOLOME, FIDELINA D. BALZA, ESTER ABAD DIZON and JOSEPH ANTHONY DIZON, RAYMUND A. DIZON, GERARD A. DIZON and JOSE A. DIZON, JR., petitioners, vs.COURT OF APPEALS HON. MAXIMIANO C. ASUNCION and OVERLAND EXPRESS LINES, INC., respondents.

R E S O L U T I O NYNARES-SANTIAGO, J.:On January 28, 1999, this Court rendered judgment in these consolidated cases as follows:

WHEREFORE, in view of the foregoing, both petitions are GRANTED. The decision dated March 29, 1994 and the resolution dated October 19, 1995 in CA-G.R. CV Nos. 25153-54, as well as the decision dated December 11, 1995 and the resolution dated April 23, 1997 in CA-G.R. SP No. 33113 of the Court of Appeals are hereby REVERSED and SET ASIDE.Let the records of this case be remanded to the trial court for immediate execution of the judgment dated November 22, 1982 in Civil Case No. VIII-29155 of the then City Court (now Metropolitan Trial Court) of Quezon City, Branch III as affirmed in the decision dated September 26, 1984 of the then Intermediate Appellate Court (now Court of Appeals) and in the resolution dated June 19, 1985 of this Court.However, petitioners are ordered to REFUND to private respondent the amount of P300,000.00 which they received through Alice A. Dizon on June 20, 1975.SO ORDERED.

Private respondent filed a Motion for Reconsideration, Second Motion for Reconsideration, and Motion to Suspend Procedural Rules in the Higher Interest of Substantial Justice, all of which have been denied by this

Court. This notwithstanding, the cases were set for oral argument on March 21, 2001, on the following issues:

1. WHETHER THERE ARE CIRCUMSTANCES THAT WOULD JUSTIFY SUSPENSION OF THE RULES OF COURT;2. WHETHER THE SUM OF P300,000.00 RECEIVED BY ALICE DIZON FROM PRIVATE RESPONDENT WAS INTENDED AS PARTIAL PAYMENT OF THE PURCHASE PRICE OF THE PROPERTY, OR AS PAYMENT OF BACK RENTALS ON THE PROPERTY;3. WHETHER ALICE DIZON WAS AUTHORIZED TO RECEIVE THE SUM OF P300,000.00 ON BEHALF OF PETITIONERS;4. (A) IF SO, WHETHER PETITIONERS ARE ESTOPPED FROM QUESTIONING THE BELATED EXERCISE BY PRIVATE RESPONDENT OF ITS OPTION TO BUY WHEN THEY ACCEPTED THE SAID PARTIAL PAYMENT;(B) IF SO, WHETHER ALICE DIZON CAN VALIDLY BIND PETITIONERS IN THE ABSENCE OF A WRITTEN POWER OF ATTORNEY;5. (A) WHETHER THERE WAS A PERFECTED CONTRACT OF SALE BETWEEN THE PARTIES;(B) WHETHER THERE WAS A CONTRACT OF SALE AT LEAST WITH RESPECT TO THE SHARES OF FIDELA AND ALICE DIZON; AND6. WHETHER PRIVATE RESPONDENT'S ACTION FOR SPECIFIC PERFORMANCE HAS PRESCRIBED.

In order to resolve the first issue, it is necessary to pass upon the other questions which relate to the merits of the case. It is only where there exist strong compelling reasons, such as serving the ends of justice and preventing a miscarriage thereof, that this Court can suspend the rules.1

After reviewing the records, we find that, despite all of private respondent's protestations, there is absolutely no written proof of Alice Dizon's authority to bind petitioners. First of all, she was not even a co-owner of the property. Neither was she empowered by the co-owners to act on their behalf.The acceptance of the amount of P300,000.00, purportedly as partial payment of the purchase price of the land, was an act integral to the sale of the land. As a matter of fact, private respondent invokes such receipt of payment as giving rise to a perfected contract of sale. In this connection, Article 1874 of the Civil Code is explicit that: "When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void."

When the sale of a piece of land or any interest thereon is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void. Thus the authority of an agent to execute a contract for the sale of real estate must be

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conferred in writing and must give him specific authority, either to conduct the general business of the principal or to execute a binding contract containing terms and conditions which are in the contract he did execute. A special power of attorney is necessary to enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration. The express mandate required by law to enable an appointee of an agency (couched) in general terms to sell must be one that expressly mentions a sale or that includes a sale as a necessary ingredient of the act mentioned. For the principal to confer the right upon an agent to sell real estate, a power of attorney must so express the powers of the agent in clear and unmistakable language. When there is any reasonable doubt that the language so used conveys such power, no such construction shall be given the document.2

It necessarily follows, therefore, that petitioners cannot be deemed to have received partial payment of the supposed purchase price for the land through Alice Dizon. It cannot even be said that Alice Dizon's acceptance of the money bound at least the share of Fidela Dizon, in the absence of a written power of attorney from the latter. It should be borne in mind that the Receipt dated June 20, 1975, while made out in the name of Fidela Dizon, was signed by Alice Dizon alone.Moreover, there could not have been a perfected contract of sale. As we held in our Decision dated January 28, 1999, the implied renewal of the contract of lease between the parties affected only those terms and conditions which are germane to the lessee's right of continued enjoyment of the property. The option to purchase afforded private respondent expired after the one-year period granted in the contract. Otherwise stated, the implied renewal of the lease did not include the option to purchase. We see no reason to disturb our ruling on this point, viz:

In this case, there was a contract of lease for one (1) year with option to purchase. The contract of lease expired without the private respondent, as lessee, purchasing the property but remained in possession thereof. Hence, there was an implicit renewal of the contract of lease on a monthly basis. The other terms of the original contract of lease which are revived in the implied new lease under Article 1670 of the New Civil Code are only those terms which are germane to the lessee's right of continued enjoyment of the property leased. Therefore, an implied new lease does not ipso facto carry with it any implied revival of private respondent's option to purchase (as lessee thereof) the leased premises. The provision entitling the lessee the option to purchase the leased premises is not deemed

incorporated in the impliedly renewed contract because it is alien to the possession of the lessee. Private respondent's right to exercise the option to purchase expired with the termination of the original contract of lease for one year. The rationale of this Court is that:

"This is a reasonable construction of the provision, which is based on the presumption that when the lessor allows the lessee to continue enjoying possession of the property for fifteen days after the expiration of the contract he is willing that such enjoyment shall be for the entire period corresponding to the rent which is customarily paid — in this case up to the end of the month because the rent was paid monthly. Necessarily, if the presumed will of the parties refers to the enjoyment of possession the presumption covers the other terms of the contract related to such possession, such as the amount of rental, the date when it must be paid, the care of the property, the responsibility for repairs, etc. But no such presumption may be indulged in with respect to special agreements which by nature are foreign to the right of occupancy or enjoyment inherent in a contract of lease."3

There being no merit in the arguments advanced by private respondent, there is no need to suspend the Rules of Court and to admit the motion for reconsideration. While it is within the power of the Court to suspend its own rules, or to except a particular case from its operation, whenever the interest of justice require it, however, the movant must show strong compelling reasons such as serving the ends of justice and preventing a grave miscarriage thereof,4 none of which obtains in this case.Litigation must end sometime and somewhere. An effective and efficient administration of justice requires that, once a judgment has become final, the winning party be not, through a mere subterfuge, deprived of the fruits of the verdict. Courts must, therefore, guard against any scheme calculated to bring about that result. Constituted as they are to put an end to controversies, courts should frown upon any attempt to prolong them.5

ACCORDINGLY, the Motion to Suspend Procedural Rules in the Higher Interest of Substantial Justice filed by private respondent is DENIED WITH FINALITY. No further pleadings will be entertained in these cases.SO ORDERED.Davide, Jr., C .J ., see separate opinion.Puno, J., concur.

Separate Opinions

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DAVIDE, JR., C.J., concurring:After a meticulous evaluation of the antecedent facts in these cases I respectfully submit that private respondent's submission that the sum of P3,000 was intended as partial payment of the purchase price; it was received by Alice Dizon for and in behalf of Fidela Dizon, mother of petitioners; and that Fidela Dizon ratified the at of Alice by accepting the cashier's check representing that consideration drawn in favor of Fidela Dizon, and in encashing it. Neither Alice nor Fidela returned the money.Therefore, there was indeed, a perfected sale in favor of private respondent of, at the very least, the rights, shares and participation in the property in question to private respondent. Hence, private respondent became a co-owner of the property as regards Fidela's co-owner.That private respondent exercised its option to buy beyond the term of the original terms of the lease contract is then rendered academic. For, by accepting the P300,000 as partial payment of the land in question and using it for her own benefit and advantages Fidela effectively estopped herself from insisting or a technicality.I therefore vote to grant, pro hac vice, the second motion for reconsideration and to modify the decision by now declaring that Fidela Dizon is bound by the perfected sale to private respondent of, at least, her rights, participation, or share in the property in question.

Footnotes1 Public Estates Authority v. Yujuico, et al., G.R. No. 140486, February 6, 2001.2 Cosmic Lumber Corp. v. Court of Appeals, 265 SCRA 168, 176 (1996].3 Dizon, et al. v. Court of Appeals, et al., 302 SCRA 288, 300-301 [1999], citing Dizon v. Magsaysay, 57 SCRA 250, 254 [1974].4 Equitable-PCI Bank v. Ku, G.R. No. 142950 March 26, 2001.5 Vda. de Cochingyan, et al. v. Court of Appeals, et al., G.R. No. 116092, June 29, 2001.

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Republic of the PhilippinesSUPREME COURT

ManilaSECOND DIVISION

G.R. No. L-41847 December 12, 1986CATALINO LEABRES, petitioner, vs.COURT OF APPEALS and MANOTOK REALTY, INC., respondents.Magtanggol C. Gunigundo for petitioner.Marcelo de Guzman for respondents. PARAS, J.:Before Us is a Petition for certiorari to review the decision of the Court of Appeals which is quoted hereunder:In Civil Case No. 64434, the Court of First Instance of Manila made the following quoted decision:

(1) Upon defendant's counterclaim, ordering plaintiff Catalino Leabres to vacate and/or surrender possession to defendant Manotok Realty, Inc. the parcel of land subject matter of the complaint described in paragraph 3 thereof and described in the Bill of Particulars dated March 4, 1966;(2) To pay defendant the sum of P81.00 per month from March 20, 1959, up to the time he actually vacates and/or surrenders possession of the said parcel of land to the defendant Manotok Realty, Inc., and(3) To pay attorney's fees to the defendant in the amount of P700.00 and pay the costs. (Decision, R.A., pp. 54-55).

The facts of this case may be briefly stated as follows:Clara Tambunting de Legarda died testate on April 22, 1950. Among the properties left by the deceased is the "Legarda Tambunting Subdivision" located on Rizal Avenue Extension, City of Manila, containing an area of 80,238.90 sq. m., covered by Transfer Certificates of Title No. 62042; 45142; 45149; 49578; 40957 and 59585. Shortly after the death of said deceased, plaintiff Catalino Leabres bought, on a partial payment of Pl,000.00 a portion (No. VIII, Lot No. 1) of the Subdivision from surviving husband Vicente J. Legarda who acted as special administrator, the deed or receipt of said sale appearing to be dated May 2, 1950 (Annex "A"). Upon petition of Vicente L. Legarda, who later was appointed a regular administrator together with Pacifica Price and Augusto Tambunting on August 28, 1950, the Probate Court of Manila in the Special Proceedings No. 10808) over the testate estate of said Clara Tambunting, authorized through its order of November 21, 1951 the sale of the property.In the meantime, Vicente L. Legarda was relieved as a regular Administrator and the Philippine Trust Co. which took over as such

administrator advertised the sale of the subdivision which includes the lot subject matter herein, in the issues of August 26 and 27, September 2 and 3, and 15 and 17, 1956 of the Manila Times and Daily Mirror. In the aforesaid Special Proceedings No. 10808, no adverse claim or interest over the subdivision or any portion thereof was ever presented by any person, and in the sale that followed, the Manotok Realty, Inc. emerged the successful bidder at the price of P840,000.00. By order of the Probate Court, the Philippine Trust Co. executed the Deed of Absolute Sale of the subdivision dated January 7, 1959 in favor of the Manotok Realty, Inc. which deed was judicially approved on March 20, 1959, and recorded immediately in the proper Register of Deeds which issued the corresponding Certificates of Title to the Manotok Realty, Inc., the defendant appellee herein.A complaint dated February 8, 1966, was filed by herein plaintiff, which seeks, among other things, for the quieting of title over the lot subject matter herein, for continuing possession thereof, and for damages. In the scheduled hearing of the case, plaintiff Catalino Leabres failed to appear although he was duly notified, and so the trial Court, in its order dated September 14, 1967, dismissed the complaint (Annex "E").<äre||anº•1àw> In another order of dismissal was amended as to make the same refer only to plaintiff's complaint and the counter claim of the defendant was reinstated and as the evidence thereof was already adduced when defendant presented its evidence in three other cases pending in the same Court, said counterclaim was also considered submitted for resolution. The motion for reconsideration dated January 22, 1968 (Annex " I "), was filed by plaintiff, and an opposition thereto dated January 25, 1968, was likewise filed by defendant but the Court a quo dismissed said motion in its order dated January 12, 1970 (Annex "K"), "for lack of merits" (pp. 71-72, Record on Appeal).Appealing the decision of the lower Court, plaintiff-appellant advances the following assignment of errors:

ITHE LOWER COURT ERRED IN DENYING THE MOTION FOR RECONSIDERATION, DATED OCTOBER 9, 1967, THUS DEPRIVING THE PLAINTIFF-APPELLANT HIS DAY IN COURT.IITHE LOWER COURT ERRED IN ORDERING THE PLAINTIFF-APPELLANT CATALINO LEABRES TO VACATE AND/OR SURRENDER THE POSSESSION OF THE LOT SUBJECT MATTER OF THE COMPLAINT TO DEFENDANT-APPELLEE.IIITHE LOWER COURT ERRED IN ORDERING THE PLAINTIFF-APPELLANT TO PAY DEFENDANT-APPELLEE THE SUM OF P 81.00

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PER MONTH FROM MARCH 20, 1969, UP TO THE TIME HE ACTUALLY VACATE THE PARCEL OF LAND. (Appellant's Brief, p. 7)

In the First Assigned Error, it is contended that the denial of his Motion for Reconsideration dated October 9, 1967, the plaintiff-appellant was not accorded his day in Court.The rule governing dismissal of actions for failure to prosecute is provided for in Section 3, Rule 17 of the Rules of Court, as follows:If the plaintiff fails to appear at the time of the trial, or to prosecute his action for an unreasonable length of time, or to comply with these rules or any order of the Court, the action may be dismissed upon motion of the defendant or upon the Court's own motion. This dismissal shall have the effect of an adjudication upon the merits, unless otherwise provided by the Court.Under the afore-cited section, it is discretionary on the part of the Court to dismiss an action for failure to prosecute, and its action will not be reversed upon appeal in the absence of abuse. The burden of showing abuse of this discretion is upon the appellant since every presumption is toward the correctness of the Court's action (Smith, Bell & Co., et al vs. American Pres. Lines, Ltd., and Manila Terminal Co., No. L-5304, April 30, 1954; Adorable vs. Bonifacio, G. R. No. L-0698, April 22, 1959); Flores vs. Phil. Alien Property Administration, G.R. No. L-12741, April 27, 1960). By the doctrine laid down in these cases, and by the provisions of Section 5, Rules 131 of the Rules of Court, particularly paragraphs (m) and (o) which respectively presume the regularity of official performance and the passing upon by the Court over all issues within a case, it matters not if the Court dismissing the action for failure to prosecute assigns any special reason for its action or not. We take note of the fact that the Order declaring appellant in default was handed down on September 14, 1967. Appellant took no steps to have this Order set aside. It was only on January 22, 1968, after he was furnished a copy of the Court's decision dated December 9, 1967 or about four months later that he attached this Order and the decision of the Court. Appellant slept on his rights-if he had any. He had a chance to have his day in Court but he passed it off. Four months later he alleges that sudden illness had prevented him. We feel appellant took a long time too-long in fact-to inform the Court of his sudden illness. This sudden illness that according to him prevented him from coming to Court, and the time it took him to tell the Court about it, is familiar to the forum as an oft repeated excuse to justify indifference on the part of litigants or outright negligence of those who represent them which subserves the interests of justice. In the instant case, not only did the appellant wantonly pass off his chance to have a day in Court but he has also failed to give a convincing, just and valid reason for the new hearing he seeks. The trial court found it so; We find it so. The trial Court in refusing

to give appellant a new trial does not appear to have abused his discretion as to justify our intervention.The Second and Third Assignments of Error are hereby jointly treated in our discussion since the third is but a consequence of the second.It is argued that had the trial Court reconsidered its order dated September 14, 1967 dismissing the complaint for failure to prosecute, plaintiff-appellant might have proved that he owns the lot subjectmatter of the case, citing the receipt (Annex A) in his favor; that he has introduced improvements and erected a house thereon made of strong materials; that appellee's adverse interest over the property was secured in bad faith since he had prior knowledge and notice of appellant's physical possession or acquisition of the same; that due to said bad faith appellant has suffered damages, and that for all the foregoing, the judgment should be reversed and equitable relief be given in his favor.As above stated, the Legarda-Tambunting Subdivision which includes the lot subject matter of the instant case, is covered by Torrens Certificates of Title. Appellant anchors his claim on the receipt (Annex "A") dated May 2, 1950, which he claims as evidence of the sale of said lot in his favor. Admittedly, however, Catalino Leabres has not registered his supposed interest over the lot in the records of the Register of Deeds, nor did he present his claim for probate in the testate proceedings over the estate of the owner of said subdivision, in spite of the notices advertised in the papers. (Saldana vs. Phil. Trust Co., et al.; Manotok Realty, Inc., supra).On the other hand, defendant-appellee, Manotok Realty, Inc., bought the whole subdivision which includes the subject matter herein by order and with approval of the Probate Court and upon said approval, the Deed of Absolute Sale in favor of appellee was immediately registered with the proper Register of Deeds. Manotok Realty, Inc. has therefore the better right over the lot in question because in cases of lands registered under the Torrens Law, adverse interests not therein annotated which are without the previous knowledge by third parties do not bind the latter. As to the improvement which appellant claims to have introduced on the lot, purchase of registered lands for value and in good faith hold the same free from all liens and encumbrances except those noted on the titles of said land and those burdens imposed by law. (Sec. 39, Act. 496).<äre||anº•1àw> An occupant of a land, or a purchaser thereof from a person other than the registered owner, cannot claim good faith so as to be entitled to retention of the parcels occupied by him until reimbursement of the value of the improvements he introduced thereon, because he is charged with notice of the existence of the owner's certificate of title (J.M. Tuason & Co. vs. Lecardo, et al., CA-G.R. No.

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25477-R, July 24, 1962; J.M. Tuason & Co., Inc. vs. Manuel Abundo, CA-G.R. No. 29701-R, November 18, 1968).Appellant has not convinced the trial Court that appellee acted in bad faith in the acquisition of the property due to the latter's knowledge of a previous acquisition by the former, and neither are we impressed by the claim. The purchaser of a registered land has to rely on the certificate of title thereof. The good faith of appellee coming from the knowledge that the certificate of title covering the entire subdivision contain no notation as to appellant's interest, and the fact that the records of these eases like Probate Proceedings Case No. 10808, do not show the existence of appellant's claim, strongly support the correctness of the lower Court's decisionWHEREFORE, in view of the foregoing, we find no reason to amend or set aside the decision appealed from, as regards to plaintiff-appellant Catalino Leabres. We therefore affirm the same, with costs against appellant. (pp. 33-38, Rollo)Petitioner now comes to us with the following issues:

(1) Whether or not the petitioner was denied his day in court and deprived of due process of law.(2) Whether or not the petitioner had to submit his receipt to the probate court in order that his right over the parcel of land in dispute could be recognized valid and binding and conclusive against the Manotok Realty, Inc.(3) Whether or not the petitioner could be considered as a possessor in good faith and in the concept of owner. (p. 11, Rollo)

Petitioner's contention that he was denied his day in court holds no water. Petitioner does not deny the fact that he failed to appear on the date set for hearing on September 14, 1967 and as a consequence of his non-appearance, the order of dismissal was issued, as provided for by Section 3, Rule 17 of the Revised Rules of Court.Moreover, as pointed out by private respondent in its brief, the hearing on June 11, 1967 was not ex parte. Petitioner was represented by his counsel on said date, and therefore, petitioner was given his day in Court.The main objection of the petition in the lower court's proceeding is the reception of respondent's evidence without declaring petitioner in default. We find that there was no necessity to declare petitioner in default since he had filed his answer to the counterclaim of respondent.Petitioner anchors his main arguments on the receipt (Exh. 1) dated May 2, 1950, as a basis of a valid sale. An examination of the receipt reveals that the same can neither be regarded as a contract of sale or a promise to sell. There was merely an acknowledgment of the sum of One Thousand Pesos (P1,000.00). There was no agreement as to the total purchase price of the land nor to the monthly installment to be paid by

the petitioner. The requisites of a valid Contract of Sale namely 1) consent or meeting of the minds of the parties; 2) determinate subject matter; 3) price certain in money or its equivalent-are lacking in said receipt and therefore the "sale" is not valid nor enforceable. Furthermore, it is a fact that Dona Clara Tambunting died on April 22, 1950. Her estate was thereafter under custodia legis of the Probate Court which appointed Don Vicente Legarda as Special Administrator on August 28, 1950. Don Vicente Legarda entered into said sale in his own personal-capacity and without court approval, consequently, said sale cannot bind the estate of Clara Tambunting. Petitioner should have submitted the receipt of alleged sale to the Probate Court for its approval of the transactions. Thus, the respondent Court did not err in holding that the petitioner should have submitted his receipt to the probate court in order that his right over the subject land could be recognized-assuming of course that the receipt could be regarded as sufficient proof.Anent his possession of the land, petitioner cannot be deemed a possessor in good faith in view of the registration of the ownership of the land. To consider petitioner in good faith would be to put a premium on his own gross negligence. The Court resolved to DENY the petition for lack of merit and to AFFIRM the assailed judgment.

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THIRD DIVISION[G.R. No. 109355. October 29, 1999]

SERAFIN MODINA, petitioner vs. COURT OF APPEALS AND ERNESTO HONTARCIEGO, PAUL FIGUEROA, TEODORO HIPALLA AND RAMON CHIANG, MERLINDA CHIANG, respondents.

D E C I S I O NPURISIMA, J.:

At bar is a Petition for Review on Certiorari assailing the decision of the Court of Appeals in CA - G.R. CV No. 26051 affirming the decision of the trial court in the case, entitled Serafin Modina vs Ernesto Hontarciego, Paulino Figueroa and Ramon Chiang vs Merlinda Plana Chiang, intervenors, which declared as void and inexistent the deed of definite sale dated December 17, 1975 as well as the Certificates of Title Nos. T-86912, T-86913, T-86914 in the name of Ramon Chiang.

The facts that matter are as follows:The parcels of land in question are those under the name of Ramon

Chiang (hereinafter referred to as CHIANG ) covered by TCT Nos. T-86912, T-86913, and T-86914. He theorized that subject properties were sold to him by his wife, Merlinda Plana Chiang (hereinafter referred to as MERLINDA), as evidenced by a Deed of Absolute Sale dated December 17, 1975,[1] and were subsequently sold by CHIANG to the petitioner Serafin Modina (MODINA), as shown by the Deeds of Sale, dated August 3, 1979 and August 24, 1979, respectively.

MODINA brought a Complaint for Recovery of Possession with Damages against the private respondents, Ernesto Hontarciego, Paul Figueroa and Teodoro Hipalla, docketed as Civil Case No. 13935 before the Regional Trial Court of Iloilo City.

Upon learning the institution of the said case, MERLINDA presented a Complaint-in-intervention, seeking the declaration of nullity of the Deed of Sale between her husband and MODINA on the ground that the titles of the parcels of land in dispute were never legally transferred to her husband. Fraudulent acts were allegedly employed by him to obtain a Torrens Title in his favor. However, she confirmed the validity of the lease contracts with the other private respondents.

MERLINDA also admitted that the said parcels of land were those ordered sold by Branch 2 of the then Court of First Instance of Iloilo in Special Proceeding No. 2469 in Intestate Estate of Nelson Plana where she was appointed as the administratix, being the widow of the deceased, her first husband. An Authority to Sell was issued by the said Probate Court for the sale of the same properties.[2]

After due hearing, the Trial Court decided in favor of MERLINDA, disposing thus:

WHEREFORE, judgment is hereby rendered (1) declaring as void and inexistent the sale of Lots 10063, 10088, 10085 and 10089 of the Cadastral Survey of Sta. Barbara by Merlinda Plana in favor of Ramon Chiang as evidenced by the deed of definite sale dated December 17, 1975 (Exhibits H; 3-Chiang; 9 Intervenor) as well as the Certificates of Title Nos. T-86912, T-86913, T-86914 and T-86915 in the name of Ramon Chiang; (2) declaring as void and inexistent the sale of the same properties by Ramon Chiang in favor of Serafin Modina as evidenced by the deeds of sale (Exhibits A, B, 6 Chiang and 7 Chiang) dated August 3, and 24, 1979, as well as. Certificates of Title Nos. T-102631, 102630, 102632 and 102890 in the name of Serafin Modina; (3) ordering the Register of Deeds of Iloilo to cancel said certificates of title in the names of Ramon Chiang and Serafin Modina and to reinstate the Certificates of Title Nos. T-57960, T-57962, T-57963 and T-57864 in the name of Nelson Plana; (4) ordering Serafin Modina to vacate and restore possession of the lots in question to Merlinda Plana Chiang; (5) ordering Ramon Chiang to restitute and pay to Serafin Modina the sum of P145,800.00 and; (6) ordering Serafin Modina to pay Ernesto Hontarciego the sum of P44,500.00 as actual and compensatory damages plus the sum of P5,000.00, for and as attorneys fees, with costs in favor of said defendants against the plaintiff.

On appeal, the Court of Appeals affirmed the aforesaid decision in toto.

Dissatisfied therewith, petitioner found his way to this Court via the present Petition for Review under Rule 45 seeking to set aside the assailed decision of the Court of Appeals.

Raised for resolution here are: (1) whether the sale of subject lots should be nullified, (2) whether petitioner was not a purchaser in good faith, (3) whether the decision of the trial court was tainted with excess of jurisdiction; and (4) whether or not only three-fourths of subject lots should be returned to the private respondent.

Anent the first issue, petitioner theorizes that the sale in question is null and void for being violative of Article 1490[3] of the New Civil Code prohibiting sales between spouses. Consequently, what is applicable is Article 1412[4] supra on the principle of in pari delicto, which leaves both guilty parties where they are, and keeps undisturbed the rights of third persons to whom the lots involved were sold; petitioner stressed.

Petitioner anchors his submission on the following statements of the Trial Court which the Court of Appeals upheld, to wit:Furthermore, under Art. 1490, husband and wife are prohibited to sell properties to each other. And where, as in this case, the sale is inexistent for lack of consideration, the principle of in pari delicto non oritur actio does not apply. (Vasquez vs Porta, 98 Phil 490). (Emphasis ours) Thus, Art. 1490 provides:

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Art. 1490. The husband and the wife cannot sell property to each other, except:(1) when a separation of property was agreed upon in the marriage settlements; or(2) when there has been a judicial separation of property under Art. 191.The exception to the rule laid down in Art. 1490 of the New Civil Code not having existed with respect to the property relations of Ramon Chiang and Merlinda Plana Chiang, the sale by the latter in favor of the former of the properties in question is invalid for being prohibited by law. Not being the owner of subject properties, Ramon Chiang could not have validly sold the same to plaintiff Serafin Modina. The sale by Ramon Chiang in favor of Serafin Modina is, likewise, void and inexistent.

xxx xxx xxx[5]

The Court of Appeals, on the other hand, adopted the following findings a quo: that there is no sufficient evidence establishing fault on the part of MERLINDA, and therefore, the principle of in pari delicto is inapplicable and the sale was void for want of consideration. In effect, MERLINDA can recover the lots sold by her husband to petitioner MODINA. However, the Court of Appeals ruled that the sale was void for violating Article 1490 of the Civil Code, which prohibits sales between spouses.

The principle of in pari delicto non oritur actio[6] denies all recovery to the guilty parties inter se. It applies to cases where the nullity arises from the illegality of the consideration or the purpose of the contract.[7] When two persons are equally at fault, the law does not relieve them. The exception to this general rule is when the principle is invoked with respect to inexistent contracts.[8]

In the petition under consideration, the Trial Court found that subject Deed of Sale was a nullity for lack of any consideration.[9] This finding duly supported by evidence was affirmed by the Court of Appeals. Well-settled is the rule that this Court will not disturb such finding absent any evidence to the contrary.[10]

Under Article 1409[11] of the New Civil Code, enumerating void contracts, a contract without consideration is one such void contract. One of the characteristics of a void or inexistent contract is that it produces no effect. So also, inexistent contracts can be invoked by any person whenever juridical effects founded thereon are asserted against him. A transferor can recover the object of such contract byaccion reivindicatoria and any possessor may refuse to deliver it to the transferee, who cannot enforce the transfer.[12]

Thus, petitioners insistence that MERLINDA cannot attack subject contract of sale as she was a guilty party thereto is equally unavailing.

But the pivot of inquiry here is whether MERLINDA is barred by the principle of in pari delicto from questioning subject Deed of Sale.

It bears emphasizing that as the contracts under controversy are inexistent contracts within legal contemplation, Articles 1411 and 1412 of the New Civil Code are inapplicable. In pari delicto doctrine applies only to contracts with illegal consideration or subject matter, whether the attendant facts constitute an offense or misdemeanor or whether the consideration involved is merely rendered illegal.[13]

The statement below that it is likewise null and void for being violative of Article 1490 should just be treated as a surplusage or an obiter dictum on the part of the Trial Court as the issue of whether the parcels of land in dispute are conjugal in nature or they fall under the exceptions provided for by law, was neither raised nor litigated upon before the lower Court. Whether the said lots were ganancial properties was never brought to the fore by the parties and it is too late to do so now.

Futhermore, if this line of argument be followed, the Trial Court could not have declared subject contract as null and void because only the heirs and the creditors can question its nullity and not the spouses themselves who executed the contract with full knowledge of the prohibition.[14]

Records show that in the complaint-in-intervention of MERLINDA, she did not aver the same as a ground to nullify subject Deed of Sale. In fact, she denied the existence of the Deed of Sale in favor of her husband. In the said Complaint, her allegations referred to the want of consideration of such Deed of Sale. She did not put up the defense under Article 1490, to nullify her sale to her husband CHIANG because such a defense would be inconsistent with her claim that the same sale was inexistent.

The Trial Court debunked petitioners theory that MERLINDA intentionally gave away the bulk of her and her late husbands estate to defendant CHIANG as his exclusive property, for want of evidentiary anchor. They insist on the Deed of Sale wherein MERLINDA made the misrepresentation that she was a widow and CHIANG was single, when at the time of execution thereof, they were in fact already married. Petitioner insists that this document conclusively established bad faith on the part of MERLINDA and therefore, the principle of in pari delicto should have been applied.

These issues are factual in nature and it is not for this Court to appreciate and evaluate the pieces of evidence introduced below. An appellate court defers to the factual findings of the Trial Court, unless petitioner can show a glaring mistake in the appreciation of relevant evidence.

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Since one of the characteristics of a void or inexistent contract is that it does not produce any effect, MERLINDA can recover the property from petitioner who never acquired title thereover.

As to the second issue, petitioner stresses that his title should have been respected since he is a purchaser in good faith and for value. The Court of Appeals, however, opined that he (petitioner) is not a purchaser in good faith. It found that there were circumstances known to MODINA which rendered their transaction fraudulent under the attendant circumstances.

As a general rule, in a sale under the Torrens system, a void title cannot give rise to a valid title. The exception is when the sale of a person with a void title is to a third person who purchased it for value and in good faith.

A purchaser in good faith is one who buys the property of another without notice that some other person has a right to or interest in such property and pays a full and fair price at the time of the purchase or before he has notice of the claim or interest of some other person in the property.

In the case under scrutiny, petitioner cannot claim that he was a purchaser in good faith. There are circumstances which are indicia of bad faith on his part, to wit: (1) He asked his nephew, Placido Matta, to investigate the origin of the property and the latter learned that the same formed part of the properties of MERLINDAs first husband; (2) that the said sale was between the spouses; (3) that when the property was inspected, MODINA met all the lessees who informed that subject lands belong to MERLINDA and they had no knowledge that the same lots were sold to the husband.

It is a well-settled rule that a purchaser cannot close his eyes to facts which would put a reasonable man upon his guard to make the necessary inquiries, and then claim that he acted in good faith. His mere refusal to believe that such defect exists, or his wilful closing of his eyes to the possibility of the existence of a defect in his vendors title, will not make him an innocent purchaser for value, if it afterwards develops that the title was in fact defective, and it appears that he had such notice of the defect as would have led to its discovery had he acted with that measure of precaution which may reasonably be required of a prudent man in a like situation.[15]

Thus, petitioner cannot claim that the sale between him and MODINA falls under the exception provided for by law.

With regard to the third issue posed by petitioner - whether the Trial Courts decision allowing recovery on the part of Merlinda Chiang of subject properties was void - petitioners contention is untennable. It is theorized that as the sale by MERLINDA was by virtue of an Order to Sell issued in the Intestate Estate Proceedings of her late husband, Nelson

Plana - to allow recovery will defeat the said order of the Probate Court. Petitioner equated the aforesaid Order to Sell as a judgment, which another court in a regular proceeding has no jurisdiction to reverse.

Petitioner is under the mistaken impression that as the Order to Sell had become a judgment in itself as to the validity of the sale of the properties involved, any question as to its nullity should have been brought before the Court of Appeals on appeal when the said Order was issued.

It is a well-settled rule that a Court of First Instance (now Regional Trial Court) has jurisdiction over a case brought to rescind a sale made upon prior authority of a Probate Court. This does not constitute an interference or review of the order of a co-equal Court since the Probate Court has no jurisdiction over the question of title to subject properties. Consequently, a separate action may be brought to determine the question of ownership.[16]

Lastly, on the issue of whether only three-fourths of the property in question should have been returned to MERLINDA, petitioners stance is equally unsustainable. It is a settled doctrine that an issue which was neither averred in the Complaint nor raised during the trial before the lower court cannot be raised for the first time on appeal, as such a recourse would be offensive to the basic rules of fair play, justice, and due process.[17]

The issue of whether only three-fourths of subject property will be returned was never an issue before the lower court and therefore, the petitioner cannot do it now. A final word. In a Petition for Review, only questions of law may be raised. It is perceived by the Court that what petitioner is trying to, albeit subtly, is for the Court to examine the probative value or evidentiary weight of the evidence presented below[18] The Court cannot do that unless the appreciation of the pieces of evidence on hand is glaringly erroneous. But this is where petitioner utterly failed.

WHEREFORE, the Petition is DENIED and the decision of the Court of Appeals, dated September 30, 1992, in CA-G.R. CV No. 26051 AFFIRMED. No pronouncement as to costs.

SO ORDERED.Melo, (Chairman), and Gonzaga Reyes, JJ., concur.Vitug, and Panganiban, JJ., in the result.

[1] Rollo, p. 17[2] Rollo, p. 143

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[3] Art. 1490. The husband and the wife cannot sell property to each other, except:(1) when a separation of property was agreed upon in the marriage settlements; or(2) when there has been a judicial separation of property under Art. 191.[4] Art. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed:(1) When the fault is on the part of the both contracting parties, neither may recover what he has given by virtue of the contract, or demand the performance of the others undertaking;(2) When only one of the contracting parties is at fault, he cannot recover what he has given by reason of the contract, or ask for the fulfillment of what has been promised him. The other, who is not at fault, may demand the return of what he has given without any obligation to comply with his promise.[5] Rollo, pp. 33-34.[6] Art. 1411. When the nullity proceeds from the illegality of the cause or object of the contract, and the act constitutes a criminal offense, both parties being in pari delicto, they shall have no action against each other, and both shall be prosecuted. Moreover, the provisions of the Penal Code relative to the disposal of the effects or instruments of a crime shall be applicable to the things or the price of the contract.This rule shall be applicable when only one of the parties is guilty; but the innocent one may claim what he has given, and shall not be bound to comply with his promise.[7] Gustilo vs. Maravilla, 48 Phil 442, 449-450.[8] Gonzales vs. Trinidad , 67 Phil 682 (1939).[9] Rollo, p. 33.[10] Cayabyab vs. Intermediate Appellate Court, 232 SCRA 1.[11] Art. 1409. The following contracts are inexistent and void from the beginning:(1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy;(2) Those which are absolutely simulated and fictitious;(3) Those whose cause or object did not exist at the time of the transaction;(4) Those whose object is outside the commerce of men;(5) Those which contemplate an impossible service;(6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained;(7) Those expressly prohibited or declared void by law.These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived.

[12] Ibid, p. 632.[13] ibid, p. 683.[14] Tolentino, Arturo M. Civil Code of the Philippines, Vol. V., page 39, 1997 Edition.[15] Leung Yee vs. Frank L. Strong Machinery Co., 37 Phil 644; RFC vs. Javillanar, 107 Phil. 664; Manacop, Jr. vs. Cansino, 111 Phil 166; Egao vs. Court of Appeals, 174 SCRA 484.

Phases/Stages in a contract of sale1. Limketkai Sons vs. CA, 250 SCRA 523Facts: Respondent BPI engaged the services of a real estate broker Mr. Pedro Revilla, Jr. granting the latter authority todispose or contract a sale for the formers property with Philippine Remnants Co. Inc. as a grantor. Pedro Padilla Jr. sent aletter to the respondent that the former had found a prospective buyer herein Petitioner. Petitioner showed interest topurchase the property of the respondent by writing them a proposal letter. The proposal was rejected by therespondent for it did not conform to their terms. Further negotiations through a letter were contracted by the petitionerbut still respondent did not agree with the former. Thereafter petitioner filed a case alleging that the contract of salewas already perfected but the court ruled in favor of the respondents. Hence, this motion of appeal for specificperformance.Issue: Whether or not a contract of sale of the subject parcel of land existed between the petitioner and respondent?Ruling: The court ruled that the contention of the petitioner is untenable. The exhibits presented did not in any wayreveal a perfection of a contract of sale between the parties. Article 1475 of the New Civil Code specifically provideswhen a contract of sale is perfected.“ART. 1475. The contract of sale is perfected at the moment there is meeting of minds upon the thing which is the objectof the contract and upon the price.Petitioner’s exhibits did not establish any definitive agreement or meeting of the minds between the concerned partiesas regards the price orterm of payment. Instead, what merely appears therefrom is respondent BPI’s repeated rejectionof the petitioner’s proposal to buy the property at P1,000/ sq.m. Also, Art. 1319 did not show in the exhibits presented. The article provides that for a contract of sale to be valid, theoffer must be certain and acceptance absolute.Further, there can be no valid contract because it was not in accordance with the provisions of the statute of

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frauds.Paragraph 2 (e) of Art. 1403 of the statute of frauds provides that for a contract of lease for a period more than oneyear, or for the sale of real property or of an interest therein to be valid, it should be ratified and in a written document.

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Republic of the PhilippinesSUPREME COURT

ManilaFIRST DIVISION

 G.R. No. 125531 February 12, 1997JOVAN LAND, petitioner, vs.COURT OF APPEALS and EUGENIO QUESADA INC., respondents. HERMOSISIMA, JR., J.:This is a petition for review on certiorari to reverse and set aside the decision of the Court of Appeals in C.A.-G.R. CV No. 47515.Petitioner Jovan Land, Inc. is a corporation engaged in the real estate business. Its President and Chairman of the Board of Directors is one Joseph Sy.Private respondent Eugenio Quesada is the owner of the Q Building located on an 801 sq. m. lot at the corner of Mayhaligue Street and Rizal Avenue, Sta. Cruz, Manila. The property is covered by TCT No. 77796 of the Registry of Deeds of Manila.Petitioner learned from co-petitioner Consolacion P. Mendoza that private respondent was selling the aforesaid Mayhaligue property. Thus, petitioner through Joseph Sy made a written offer, dated July 27, 1987 for P10.25 million. This first offer was not accepted by Conrado Quesada, the General Manager of private respondent. Joseph Sy sent a second written offer dated July 31, 1989 for the same price but inclusive of an undertaking to pay the documentary stamp tax, transfer tax, registration fees and notarial charges. Check No. 247048, dated July 31, 1989, for one million pesos drawn against the Philippine Commercial and Industrial Bank (PCIB) was enclosed therewith as earnest money. This second offer, with earnest money, was again rejected by Conrado Quesada. Undaunted, Joseph Sy, on August 10, 1989, sent a third written offer for twelve million pesos with a similar check for one million pesos as earnest money. Annotated on this third letter-offer was the phrase "Received original, 9-4-89" beside which appears the signature of Conrado Quesada.On the basis of this annotation which petitioner insists is the proof that there already exists a valid, perfected agreement to sell the Mayhaligue property, petitioner filed with the trial court, a complaint for specific performance and collection of sum of money with damages. However, the trial court held that:

. . . the business encounters between Joseph Sy and Conrado Quesada had not passed the negotiation stage relating to the intended sale by the defendant corporation

of the property in question. . . . As the court finds, there is nothing in the record to point that a contract was ever perfected. In fact, there is nothing in writing which is indispensably necessary in order that the perfected contract could be enforced under the Statute of Frauds. 1

Since the trial court dismissed petitioner's complaint for lack of cause of action, petitioner appealed 2 to respondent Court of Appeals before which it assigned the following errors:

1. The Court a quo failed to appreciate that there was already a perfected contract of sale between Jovan Land, Inc. and the private respondent];2. The Court a quo erred in its conclusion that there was no implied acceptance of the offer by appellants to appellee [private respondent];3. The Court a quo was in error where it concluded that the contract of sale was unenforceable;4. The Court a quo failed to rule that appellant [petitioner] Mendoza is entitled to her broker's commission. 3

Respondent court placed petitioner to task on their assignment of errors and concluded that not any of them justifies a reversal of the trial court decision.We agree.In the case of Ang Yu Asuncion v. Court of Appeals, 4 we held that:

. . . [A] contract (Art. 1157, Civil Code), . . . is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. . . . A contract undergoes various stages that include its negotiation or preparation, its perfection and, finally, its consummation. Negotiation covers the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is concluded . . . . The perfection of the contract takes place upon the concurrence of the essential elements thereof.

Moreover, it is a fundamental principle that before contract of sale can be valid, the following elements must be present, viz: (a) consent or meeting of the minds; (b) determinate subject matter; (3) price certain in money or its equivalent. Until the contract of sale is perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation between the parties.In the case at bench, petitioner, anchors its main argument on the annotation on its third letter-offer of the phrase "Received original, 9-4-89," beside which appears the signature of Conrado Quesada. It also contends that the said annotation is evidence to show that there was already a perfected agreement to sell as respondent can be said to have

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accepted petitioner's payment in the form of a check which was enclosed in the third letter.However, as correctly elucidated by the Court of Appeals:

Sy insisted in his testimony that this offer of P12M was accepted by Conrado Quesada but there is nothing written or documentary to show that such offer was accepted by Conrado Quesada. While Sy claimed that the acceptance could be gleaned from the notation in the third written offer, the court is not impressed thereon however because the notation merely states as follows: "Received Original, (S) — Conrado Quesada" and below this signature is "9-4-89". As explained by Conrado Quesada in his testimony what was received by him was the original of the written offer.The court cannot believe that this notation marked as Exhibit D-2 would signify the acceptance of the offer. Neither does it signify, as Sy had testified that the check was duly received on said date. If this were true Sy, who appears to be an intelligent businessman could have easily asked Conrado Quesada to indicate on Exhibit D the alleged fact of acceptance of said check. And better still, Sy could have asked Quesada the acceptance in writing separate of the written offer if indeed there was an agreement as to the price of the proposed sale of the property in question. 5

Clearly then, a punctilious examination of the receipt reveals that the same can neither be regarded as a contract of sale nor a promise to sell. Such an annotation by Conrado Quesada amounts to neither a written nor an implied acceptance of the offer of Joseph Sy. It is merely a memorandum of the receipt by the former of the latter's offer. The requisites of a valid contract of sale are lacking in said receipt and therefore the "sale" is neither valid nor enforceable.Although there was a series of communications through letter-offers and rejections as evident from the facts of this case, still it is undeniable that no written agreement was reached between petitioner and private respondent with regard to the sale of the realty. Hence, the alleged transaction is unenforceable as the requirements under the Statute of Frauds have not been complied with. Under the said provision, an agreement for the sale of real property or of an interest therein, to be enforceable, must be in writing and subscribed by the party charged or by an agent thereof.Petitioner also asseverates that the failure of Conrado Quesada to return the check for one million pesos, translates to implied acceptance of its third letter-offer. It, however, does not rebut the finding of the trial court

that private respondent was returning the check but petitioner refused to accept the same and that when Conrado Quesada subsequently sent it back to petitioner through registered mail, the latter failed to claim its mail from the post office.Finally, we fittingly apply here the oft-repeated doctrine that the factual findings of the trial court, especially as regards the credibility of witnesses, are conclusive upon this court, unless the case falls under the jurisprudentially established exceptions. But this is a case that tenders no exceptional circumstance; rather, we find the observations of the trial court to be legally sound and valid:

. . . Joseph Sy's testimony is not impressive because of several inconsistencies herein pointed out. On the matter of earnest money, the same appears to be the idea solely of the [petitioner], assuming that he had intended to bind the [petitioner] corporation. In the written second offer . . . he had stated that the check of P1M had been enclosed (attached) therewith. The same check . . . was again mentioned to be enclosed (attached) in the third written offer under date August 10, 1989 . . . . Sy testified in his direct examination that he had personally given this check to Conrado Quesada. But on cross examination, he reversed himself by saying that the check was given thru his [co-petitioner] Mendoza. Examining the third written offer, it appears that when it was first typewritten, this P11M was noted to have been corrected, and that as per his testimony, Sy had increased it to P12M. This is the reason according to Sy why there was a superimposition of the number "12" over the number "11" to mean P12M as the revised consideration for the sale of the property in question. 6

Respondent court thus concluded that:. . . [since] the matter of evaluation of the credibility of witness[es] is addressed to the trial court and unless clearly contrary to the records before Us, the findings of the said court are entitled to great respondent on appeal, . . . it was Joseph Sy's idea to offer the earnest money, and the evidence to show that Joseph Sy accepted the same, is wanting. . . . 7

and accordingly affirmed the trial court judgment appealed from.As shown elucidated above, we agree with the findings and conclusions of the trial court and the respondent court. Neither has petitioner posited any new issues in the instant petition that warrant the further exercise by this court of its review powers.WHEREFORE, premises considered, this petition is DENIED.

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Costs against petitioner.Padilla, Bellosillo, Vitug and Kapunan, JJ., concur.Footnotes

1 As quoted in the Decision of the Court of Appeals dated June 28, 1996, pp. 3-4, Rollo, pp. 9-10.2 Appeal was docketed as CA-G.R CV No. 47515 and raffled to the Eleventh Division with members: Associate Justices Minerva P. Gonzaga-Reyes, Ramon U. Mabutas, Jr. and Salvador J. Valdez, Jr.3 Decision of the Court of Appeals, supra, p. 4, Rollo. p. 10.4 238 SCRA 602 (1994).5 Rollo, p. 55.6 Id., p. 7, Rollo, p. 13.7 Id., p. 9, Rollo, p. 15.

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Republic of the PhilippinesSUPREME COURT

ManilaFIRST DIVISION

 G.R. No. L-116650 May 23, 1995TOYOTA SHAW, INC., petitioner, vs.COURT OF APPEALS and LUNA L. SOSA, respondents. DAVIDE, JR., J.:At the heart of the present controversy is the document marked Exhibit "A" 1 for the private respondent, which was signed by a sales representative of Toyota Shaw, Inc. named Popong Bernardo. The document reads as follows:4 June 1989

AGREEMENTS BETWEEN MR. SOSA& POPONG BERNARDO OF TOYOTA

SHAW, INC.1. all necessary documents will be submitted to TOYOTA SHAW, INC. (POPONG BERNARDO) a week after, upon arrival of Mr. Sosa from the Province (Marinduque) where the unit will be used on the 19th of June.2. the downpayment of P100,000.00 will be paid by Mr. Sosa on June 15, 1989.3. the TOYOTA SHAW, INC. LITE ACE yellow, will be pick-up [sic] and released by TOYOTA SHAW, INC. on the 17th of June at 10 a.m.

Was this document, executed and signed by the petitioner's sales representative, a perfected contract of sale, binding upon the petitioner, breach of which would entitle the private respondent to damages and attorney's fees? The trial court and the Court of Appeals took the affirmative view. The petitioner disagrees. Hence, this petition for review oncertiorari.The antecedents as disclosed in the decisions of both the trial court and the Court of Appeals, as well as in the pleadings of petitioner Toyota Shaw, Inc. (hereinafter Toyota) and respondent Luna L. Sosa (hereinafter Sosa) are as follows. Sometime in June of 1989, Luna L. Sosa wanted to purchase a Toyota Lite Ace. It was then a seller's market and Sosa had difficulty finding a dealer with an available unit for sale. But upon contacting Toyota Shaw, Inc., he was told that there was an available unit. So on 14 June 1989, Sosa and his son, Gilbert, went to the Toyota office at Shaw Boulevard, Pasig, Metro Manila. There they met Popong Bernardo, a sales representative of Toyota.

Sosa emphasized to Bernardo that he needed the Lite Ace not later than 17 June 1989 because he, his family, and abalikbayan guest would use it on 18 June 1989 to go to Marinduque, his home province, where he would celebrate his birthday on the 19th of June. He added that if he does not arrive in his hometown with the new car, he would become a "laughing stock." Bernardo assured Sosa that a unit would be ready for pick up at 10:00 a.m. on 17 June 1989. Bernardo then signed the aforequoted "Agreements Between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc." It was also agreed upon by the parties that the balance of the purchase price would be paid by credit financing through B.A. Finance, and for this Gilbert, on behalf of his father, signed the documents of Toyota and B.A. Finance pertaining to the application for financing.The next day, 15 June 1989, Sosa and Gilbert went to Toyota to deliver the downpayment of P100,000.00. They met Bernardo who then accomplished a printed Vehicle Sales Proposal (VSP) No. 928, 2 on which Gilbert signed under the subheading CONFORME. This document shows that the customer's name is "MR. LUNA SOSA" with home address at No. 2316 Guijo Street, United Parañaque II; that the model series of the vehicle is a "Lite Ace 1500" described as "4 Dr minibus"; that payment is by "installment," to be financed by "B.A.," 3 with the initial cash outlay of P100,000.00 broken down as follows:

a) downpayment — P 53,148.00

b) insurance — P 13,970.00

c) BLT registration fee — P 1,067.00

CHMO fee — P 2,715.00

service fee — P 500.00

accessories — P 29,000.00 and that the "BALANCE TO BE FINANCED" is "P274,137.00." The spaces provided for "Delivery Terms" were not filled-up. It also contains the following pertinent provisions:

CONDITIONS OF SALES1. This sale is subject to availability of unit.2. Stated Price is subject to change without prior notice, Price prevailing and in effect at time of selling will apply. . . .

Rodrigo Quirante, the Sales Supervisor of Bernardo, checked and approved the VSP.On 17 June 1989, at around 9:30 a.m., Bernardo called Gilbert to inform him that the vehicle would not be ready for pick up at 10:00 a.m. as previously agreed upon but at 2:00 p.m. that same day. At 2:00 p.m., Sosa and Gilbert met Bernardo at the latter's office. According to Sosa,

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Bernardo informed them that the Lite Ace was being readied for delivery. After waiting for about an hour, Bernardo told them that the car could not be delivered because "nasulot ang unit ng ibang malakas."Toyota contends, however, that the Lite Ace was not delivered to Sosa because of the disapproval by B.A. Finance of the credit financing application of Sosa. It further alleged that a particular unit had already been reserved and earmarked for Sosa but could not be released due to the uncertainty of payment of the balance of the purchase price. Toyota then gave Sosa the option to purchase the unit by paying the full purchase price in cash but Sosa refused.After it became clear that the Lite Ace would not be delivered to him, Sosa asked that his downpayment be refunded. Toyota did so on the very same day by issuing a Far East Bank check for the full amount of P100,000.00, 4 the receipt of which was shown by a check voucher of Toyota, 5 which Sosa signed with the reservation, "without prejudice to our future claims for damages."Thereafter, Sosa sent two letters to Toyota. In the first letter, dated 27 June 1989 and signed by him, he demanded the refund, within five days from receipt, of the downpayment of P100,000.00 plus interest from the time he paid it and the payment of damages with a warning that in case of Toyota's failure to do so he would be constrained to take legal action. 6 The second, dated 4 November 1989 and signed by M. O. Caballes, Sosa's counsel, demanded one million pesos representing interest and damages, again, with a warning that legal action would be taken if payment was not made within three days. 7 Toyota's counsel answered through a letter dated 27 November 1989 8 refusing to accede to the demands of Sosa. But even before this answer was made and received by Sosa, the latter filed on 20 November 1989 with Branch 38 of the Regional Trial Court (RTC) of Marinduque a complaint against Toyota for damages under Articles 19 and 21 of the Civil Code in the total amount of P1,230,000.00. 9 He alleges, inter alia, that:

9. As a result of defendant's failure and/or refusal to deliver the vehicle to plaintiff, plaintiff suffered embarrassment, humiliation, ridicule, mental anguish and sleepless nights because: (i) he and his family were constrained to take the public transportation from Manila to Lucena City on their way to Marinduque; (ii) his balikbayan-guest canceled his scheduled first visit to Marinduque in order to avoid the inconvenience of taking public transportation; and (iii) his relatives, friends, neighbors and other provincemates, continuously irked him about "his Brand-New Toyota Lite Ace — that never was." Under the circumstances, defendant should be

made liable to the plaintiff for moral damages in the amount of One Million Pesos (P1,000,000.00). 10

In its answer to the complaint, Toyota alleged that no sale was entered into between it and Sosa, that Bernardo had no authority to sign Exhibit "A" for and in its behalf, and that Bernardo signed Exhibit "A" in his personal capacity. As special and affirmative defenses, it alleged that: the VSP did not state date of delivery; Sosa had not completed the documents required by the financing company, and as a matter of policy, the vehicle could not and would not be released prior to full compliance with financing requirements, submission of all documents, and execution of the sales agreement/invoice; the P100,000.00 was returned to and received by Sosa; the venue was improperly laid; and Sosa did not have a sufficient cause of action against it. It also interposed compulsory counterclaims.After trial on the issues agreed upon during the pre-trial session, 11 the trial court rendered on 18 February 1992 a decision in favor of Sosa. 12 It ruled that Exhibit "A," the "AGREEMENTS BETWEEN MR. SOSA AND POPONG BERNARDO," was a valid perfected contract of sale between Sosa and Toyota which bound Toyota to deliver the vehicle to Sosa, and further agreed with Sosa that Toyota acted in bad faith in selling to another the unit already reserved for him.As to Toyota's contention that Bernardo had no authority to bind it through Exhibit "A," the trial court held that the extent of Bernardo's authority "was not made known to plaintiff," for as testified to by Quirante, "they do not volunteer any information as to the company's sales policy and guidelines because they are internal matters." 13 Moreover, "[f]rom the beginning of the transaction up to its consummation when the downpayment was made by the plaintiff, the defendants had made known to the plaintiff the impression that Popong Bernardo is an authorized sales executive as it permitted the latter to do acts within the scope of an apparent authority holding him out to the public as possessing power to do these acts." 14Bernardo then "was an agent of the defendant Toyota Shaw, Inc. and hence bound the defendants." 15

The court further declared that "Luna Sosa proved his social standing in the community and suffered besmirched reputation, wounded feelings and sleepless nights for which he ought to be compensated." 16 Accordingly, it disposed as follows:

WHEREFORE, viewed from the above findings, judgment is hereby rendered in favor of the plaintiff and against the defendant:

1. ordering the defendant to pay to the plaintiff the sum of P75,000.00 for moral damages;

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2. ordering the defendant to pay the plaintiff the sum of P10,000.00 for exemplary damages;3. ordering the defendant to pay the sum of P30,000.00 attorney's fees plus P2,000.00 lawyer's transportation fare per trip in attending to the hearing of this case;4. ordering the defendant to pay the plaintiff the sum of P2,000.00 transportation fare per trip of the plaintiff in attending the hearing of this case; and5. ordering the defendant to pay the cost of suit.

SO ORDERED.Dissatisfied with the trial court's judgment, Toyota appealed to the Court of Appeals. The case was docketed as CA-G.R. CV No. 40043. In its decision promulgated on 29 July 1994, 17 the Court of Appeals affirmed in toto the appealed decision.Toyota now comes before this Court via this petition and raises the core issue stated at the beginning of the ponenciaand also the following related issues: (a) whether or not the standard VSP was the true and documented understanding of the parties which would have led to the ultimate contract of sale, (b) whether or not Sosa has any legal and demandable right to the delivery of the vehicle despite the non-payment of the consideration and the non-approval of his credit application by B.A. Finance, (c) whether or not Toyota acted in good faith when it did not release the vehicle to Sosa, and (d) whether or not Toyota may be held liable for damages.We find merit in the petition.Neither logic nor recourse to one's imagination can lead to the conclusion that Exhibit "A" is a perfected contract of sale.Article 1458 of the Civil Code defines a contract of sale as follows:

Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.A contract of sale may be absolute or conditional.

and Article 1475 specifically provides when it is deemed perfected:Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price.From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts.

What is clear from Exhibit "A" is not what the trial court and the Court of Appeals appear to see. It is not a contract of sale. No obligation on the part of Toyota to transfer ownership of a determinate thing to Sosa and no correlative obligation on the part of the latter to pay therefor a price certain appears therein. The provision on the downpayment of P100,000.00 made no specific reference to a sale of a vehicle. If it was intended for a contract of sale, it could only refer to a sale on installment basis, as the VSP executed the following day confirmed. But nothing was mentioned about the full purchase price and the manner the installments were to be paid.This Court had already ruled that a definite agreement on the manner of payment of the price is an essential element in the formation of a binding and enforceable contract of sale. 18 This is so because the agreement as to the manner of payment goes into the price such that a disagreement on the manner of payment is tantamount to a failure to agree on the price. Definiteness as to the price is an essential element of a binding agreement to sell personal property. 19

Moreover, Exhibit "A" shows the absence of a meeting of minds between Toyota and Sosa. For one thing, Sosa did not even sign it. For another, Sosa was well aware from its title, written in bold letters, viz.,

AGREEMENTS BETWEEN MR. SOSA & POPONG BERNARDO OF TOYOTA SHAW, INC.

that he was not dealing with Toyota but with Popong Bernardo and that the latter did not misrepresent that he had the authority to sell any Toyota vehicle. He knew that Bernardo was only a sales representative of Toyota and hence a mere agent of the latter. It was incumbent upon Sosa to act with ordinary prudence and reasonable diligence to know the extent of Bernardo's authority as anagent 20 in respect of contracts to sell Toyota's vehicles. A person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. 21

At the most, Exhibit "A" may be considered as part of the initial phase of the generation or negotiation stage of a contract of sale. There are three stages in the contract of sale, namely:

(a) preparation, conception, or generation, which is the period of negotiation and bargaining, ending at the moment of agreement of the parties;(b) perfection or birth of the contract, which is the moment when the parties come to agree on the terms of the contract; and(c) consummation or death, which is the fulfillment or performance of the terms agreed upon in the contract. 22

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The second phase of the generation or negotiation stage in this case was the execution of the VSP. It must be emphasized that thereunder, the downpayment of the purchase price was P53,148.00 while the balance to be paid on installment should be financed by B.A. Finance Corporation. It is, of course, to be assumed that B.A. Finance Corp. was acceptable to Toyota, otherwise it should not have mentioned B.A. Finance in the VSP.Financing companies are defined in Section 3(a) of R.A. No. 5980, as amended by P.D. No. 1454 and P.D. No. 1793, as "corporations or partnerships, except those regulated by the Central Bank of the Philippines, the Insurance Commission and the Cooperatives Administration Office, which are primarily organized for the purpose of extending credit facilities to consumers and to industrial, commercial, or agricultural enterprises, either by discounting or factoring commercial papers or accounts receivables, or by buying and selling contracts, leases, chattel mortgages, or other evidence of indebtedness, or by leasing of motor vehicles, heavy equipment and industrial machinery, business and office machines and equipment, appliances and other movable property." 23

Accordingly, in a sale on installment basis which is financed by a financing company, three parties are thus involved: the buyer who executes a note or notes for the unpaid balance of the price of the thing purchased on installment, the seller who assigns the notes or discounts them with a financing company, and the financing company which is subrogated in the place of the seller, as the creditor of the installment buyer. 24 Since B.A. Finance did not approve Sosa's application, there was then no meeting of minds on the sale on installment basis.We are inclined to believe Toyota's version that B.A. Finance disapproved Sosa's application for which reason it suggested to Sosa that he pay the full purchase price. When the latter refused, Toyota cancelled the VSP and returned to him his P100,000.00. Sosa's version that the VSP was cancelled because, according to Bernardo, the vehicle was delivered to another who was "mas malakas" does not inspire belief and was obviously a delayed afterthought. It is claimed that Bernardo said, "Pasensiya kayo, nasulot ang unit ng ibang malakas," while the Sosas had already been waiting for an hour for the delivery of the vehicle in the afternoon of 17 June 1989. However, in paragraph 7 of his complaint, Sosa solemnly states:

On June 17, 1989 at around 9:30 o'clock in the morning, defendant's sales representative, Mr. Popong Bernardo, called plaintiff's house and informed the plaintiff's son that the vehicle will not be ready for pick-up at 10:00 a.m. of June 17, 1989 but at 2:00 p.m. of that day instead. Plaintiff and his son went to defendant's office on

June 17 1989 at 2:00 p.m. in order to pick-up the vehicle but the defendant for reasons known only to its representatives, refused and/or failed to release the vehicle to the plaintiff. Plaintiff demanded for an explanation, but nothing was given; . . . (Emphasis supplied). 25

The VSP was a mere proposal which was aborted in lieu of subsequent events. It follows that the VSP created no demandable right in favor of Sosa for the delivery of the vehicle to him, and its non-delivery did not cause any legally indemnifiable injury.The award then of moral and exemplary damages and attorney's fees and costs of suit is without legal basis. Besides, the only ground upon which Sosa claimed moral damages is that since it was known to his friends, townmates, and relatives that he was buying a Toyota Lite Ace which they expected to see on his birthday, he suffered humiliation, shame, and sleepless nights when the van was not delivered. The van became the subject matter of talks during his celebration that he may not have paid for it, and this created an impression against his business standing and reputation. At the bottom of this claim is nothing but misplaced pride and ego. He should not have announced his plan to buy a Toyota Lite Ace knowing that he might not be able to pay the full purchase price. It was he who brought embarrassment upon himself by bragging about a thing which he did not own yet.Since Sosa is not entitled to moral damages and there being no award for temperate, liquidated, or compensatory damages, he is likewise not entitled to exemplary damages. Under Article 2229 of the Civil Code, exemplary or corrective damages are imposed by way of example or correction for the public good, in addition to moral, temperate, liquidated, or compensatory damages.Also, it is settled that for attorney's fees to be granted, the court must explicitly state in the body of the decision, and not only in the dispositive portion thereof, the legal reason for the award of attorney's fees. 26 No such explicit determination thereon was made in the body of the decision of the trial court. No reason thus exists for such an award.WHEREFORE, the instant petition is GRANTED. The challenged decision of the Court of Appeals in CA-G.R. CV NO. 40043 as well as that of Branch 38 of the Regional Trial Court of Marinduque in Civil Case No. 89-14 are REVERSED and SET ASIDE and the complaint in Civil Case No. 89-14 is DISMISSED. The counterclaim therein is likewise DISMISSED.No pronouncement as to costs.SO ORDERED.Padilla, Bellosillo and Kapunan, JJ., concur.Quiason, J., is on leave. 

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Footnotes1 Annex "A" of Complaint in Civil Case No. 89-14 of Branch 38 of the Regional Trial Court of Marinduque;Rollo, 70.2 Annex of Answer in Civil Case No. 89-14; Rollo, 82; Annex "E" of Petition; Rollo, 85.3 Referring to B.A. Finance.4 Exhibit "3," Annex "G" of Petition; Rollo, 86.5 Exhibit "4," Annex "H" of Petition; Rollo, 87.6 Annex "C" of Complaint in Civil Case No. 89-14; Id., 71-72. This downpayment had already been refunded and received by Sosa himself as shown by the Check Voucher, Exhibit "4."7 Annex "C-1," Id.; Id., 73-74.8 Annex "I" of Petition; Id., 88-89.9 Annex "B," Id.; Id., 64-69.10 Rollo 67.11 Id., 83-84.12 Id., 90-108. Per Judge Romulo A. Lopez.13 Rollo, 104.14 Id.15 Id.16 Id., 107.17 Annex "A" of Petition; Rollo, 45-62. Per Tayao-Jaguros, L., J., with Elbinias, J. and Salas, B., JJ., concurring.18 Velasco vs. Court of Appeals, 51 SCRA 439 [1973], citing Navarro vs. Sugar Producers Cooperative Marketing Association, 1 SCRA 1180 [1961].19 67 Am Jur 2d Sales § 105 [1973].20 See Harry Keeler Electric Co. vs. Rodriguez, 44 Phil. 19 [1922]; B.A. Finance Corp. vs. Court of Appeals, 211 SCRA 112 [1992].21 Cruz vs. Court of Appeals, 201 SCRA 495 [1991]; Pineda vs. Court of Appeals, 226 SCRA 754 [1993].22 ARTURO M. TOLENTINO, Commentaries and Jurisprudence on the Civil Code of the Philippines, vol. 4, 1985 ed., 411; EDGARDO L. PARAS, Civil Code of the Philippines Annotated, vol. 4, 1989 ed., 490.23 See Beltran vs. PAIC Finance Corp., 209 SCRA 105 [1992].24 International Harvester MacLeod, Inc. vs Medina, 183 SCRA 485 [1990].25 Rollo, 66.

26 See Central Azucarera de Bais vs. Court of Appeals, 188 SCRA 328 [1990]; Koa vs. Court of Appeals, 219 SCRA 541 [1993]; Scott Consultants & Resource Development Corp. vs. Court of Appeals, G.R. No. 112916, 16 March 1995.

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Republic of the PhilippinesSUPREME COURT

ManilaEN BANC

 G.R. No. 109125 December 2, 1994ANG YU ASUNCION, ARTHUR GO AND KEH TIONG, petitioners, vs.THE HON. COURT OF APPEALS and BUEN REALTY DEVELOPMENT CORPORATION, respondents.Antonio M. Albano for petitioners.Umali, Soriano & Associates for private respondent. VITUG, J.:Assailed, in this petition for review, is the decision of the Court of Appeals, dated 04 December 1991, in CA-G.R. SP No. 26345 setting aside and declaring without force and effect the orders of execution of the trial court, dated 30 August 1991 and 27 September 1991, in Civil Case No. 87-41058.The antecedents are recited in good detail by the appellate court thusly:

On July 29, 1987 a Second Amended Complaint for Specific Performance was filed by Ang Yu Asuncion and Keh Tiong, et al., against Bobby Cu Unjieng, Rose Cu Unjieng and Jose Tan before the Regional Trial Court, Branch 31, Manila in Civil Case No. 87-41058, alleging, among others, that plaintiffs are tenants or lessees of residential and commercial spaces owned by defendants described as Nos. 630-638 Ongpin Street, Binondo, Manila; that they have occupied said spaces since 1935 and have been religiously paying the rental and complying with all the conditions of the lease contract; that on several occasions before October 9, 1986, defendants informed plaintiffs that they are offering to sell the premises and are giving them priority to acquire the same; that during the negotiations, Bobby Cu Unjieng offered a price of P6-million while plaintiffs made a counter offer of P5-million; that plaintiffs thereafter asked the defendants to put their offer in writing to which request defendants acceded; that in reply to defendant's letter, plaintiffs wrote them on October 24, 1986 asking that they specify the terms and conditions of the offer to sell; that when plaintiffs did not receive any reply, they sent another letter dated January 28, 1987 with the same request; that since defendants failed to specify the terms

and conditions of the offer to sell and because of information received that defendants were about to sell the property, plaintiffs were compelled to file the complaint to compel defendants to sell the property to them.Defendants filed their answer denying the material allegations of the complaint and interposing a special defense of lack of cause of action.After the issues were joined, defendants filed a motion for summary judgment which was granted by the lower court. The trial court found that defendants' offer to sell was never accepted by the plaintiffs for the reason that the parties did not agree upon the terms and conditions of the proposed sale, hence, there was no contract of sale at all. Nonetheless, the lower court ruled that should the defendants subsequently offer their property for sale at a price of P11-million or below, plaintiffs will have the right of first refusal. Thus the dispositive portion of the decision states:

WHEREFORE, judgment is hereby rendered in favor of the defendants and against the plaintiffs summarily dismissing the complaint subject to the aforementioned condition that if the defendants subsequently decide to offer their property for sale for a purchase price of Eleven Million Pesos or lower, then the plaintiffs has the option to purchase the property or of first refusal, otherwise, defendants need not offer the property to the plaintiffs if the purchase price is higher than Eleven Million Pesos.SO ORDERED.

Aggrieved by the decision, plaintiffs appealed to this Court inCA-G.R. CV No. 21123. In a decision promulgated on September 21, 1990 (penned by Justice Segundino G. Chua and concurred in by Justices Vicente V. Mendoza and Fernando A. Santiago), this Court affirmed with modification the lower court's judgment, holding:

In resume, there was no meeting of the minds between the parties concerning the sale of the property. Absent such requirement, the claim for specific

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performance will not lie. Appellants' demand for actual, moral and exemplary damages will likewise fail as there exists no justifiable ground for its award. Summary judgment for defendants was properly granted. Courts may render summary judgment when there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law (Garcia vs. Court of Appeals, 176 SCRA 815). All requisites obtaining, the decision of the court a quo is legally justifiable.WHEREFORE, finding the appeal unmeritorious, the judgment appealed from is hereby AFFIRMED, but subject to the following modification: The court a quo in the aforestated decision gave the plaintiffs-appellants the right of first refusal only if the property is sold for a purchase price of Eleven Million pesos or lower; however, considering the mercurial and uncertain forces in our market economy today. We find no reason not to grant the same right of first refusal to herein appellants in the event that the subject property is sold for a price in excess of Eleven Million pesos. No pronouncement as to costs.SO ORDERED.

The decision of this Court was brought to the Supreme Court by petition for review on certiorari. The Supreme Court denied the appeal on May 6, 1991 "for insufficiency in form and substances" (Annex H, Petition).On November 15, 1990, while CA-G.R. CV No. 21123 was pending consideration by this Court, the Cu Unjieng spouses executed a Deed of Sale (Annex D, Petition) transferring the property in question to herein petitioner Buen Realty and Development Corporation, subject to the following terms and conditions:

1. That for and in consideration of the sum of FIFTEEN MILLION PESOS (P15,000,000.00), receipt of which in full is hereby acknowledged, the VENDORS hereby sells, transfers and conveys for and in favor of the VENDEE, his heirs, executors,

administrators or assigns, the above-described property with all the improvements found therein including all the rights and interest in the said property free from all liens and encumbrances of whatever nature, except the pending ejectment proceeding;2. That the VENDEE shall pay the Documentary Stamp Tax, registration fees for the transfer of title in his favor and other expenses incidental to the sale of above-described property including capital gains tax and accrued real estate taxes.

As a consequence of the sale, TCT No. 105254/T-881 in the name of the Cu Unjieng spouses was cancelled and, in lieu thereof, TCT No. 195816 was issued in the name of petitioner on December 3, 1990.On July 1, 1991, petitioner as the new owner of the subject property wrote a letter to the lessees demanding that the latter vacate the premises.On July 16, 1991, the lessees wrote a reply to petitioner stating that petitioner brought the property subject to the notice of lis pendens regarding Civil Case No. 87-41058 annotated on TCT No. 105254/T-881 in the name of the Cu Unjiengs.The lessees filed a Motion for Execution dated August 27, 1991 of the Decision in Civil Case No. 87-41058 as modified by the Court of Appeals in CA-G.R. CV No. 21123.On August 30, 1991, respondent Judge issued an order (Annex A, Petition) quoted as follows:

Presented before the Court is a Motion for Execution filed by plaintiff represented by Atty. Antonio Albano. Both defendants Bobby Cu Unjieng and Rose Cu Unjieng represented by Atty. Vicente Sison and Atty. Anacleto Magno respectively were duly notified in today's consideration of the motion as evidenced by the rubber stamp and signatures upon the copy of the Motion for Execution.The gist of the motion is that the Decision of the Court dated September 21, 1990 as modified by the Court of Appeals in its decision in CA G.R. CV-21123, and elevated

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to the Supreme Court upon the petition for review and that the same was denied by the highest tribunal in its resolution dated May 6, 1991 in G.R. No.L-97276, had now become final and executory. As a consequence, there was an Entry of Judgment by the Supreme Court as of June 6, 1991, stating that the aforesaid modified decision had already become final and executory.It is the observation of the Court that this property in dispute was the subject of theNotice of Lis Pendens and that the modified decision of this Court promulgated by the Court of Appeals which had become final to the effect that should the defendants decide to offer the property for sale for a price of P11 Million or lower, and considering the mercurial and uncertain forces in our market economy today, the same right of first refusal to herein plaintiffs/appellants in the event that the subject property is sold for a price in excess of Eleven Million pesos or more.WHEREFORE, defendants are hereby ordered to execute the necessary Deed of Sale of the property in litigation in favor of plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the consideration of P15 Million pesos in recognition of plaintiffs' right of first refusal and that a new Transfer Certificate of Title be issued in favor of the buyer.All previous transactions involving the same property notwithstanding the issuance of another title to Buen Realty Corporation, is hereby set aside as having been executed in bad faith.SO ORDERED.

On September 22, 1991 respondent Judge issued another order, the dispositive portion of which reads:

WHEREFORE, let there be Writ of Execution issue in the above-entitled case directing the Deputy Sheriff Ramon Enriquez of this

Court to implement said Writ of Execution ordering the defendants among others to comply with the aforesaid Order of this Court within a period of one (1) week from receipt of this Order and for defendants to execute the necessary Deed of Sale of the property in litigation in favor of the plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the consideration of P15,000,000.00 and ordering the Register of Deeds of the City of Manila, to cancel and set aside the title already issued in favor of Buen Realty Corporation which was previously executed between the latter and defendants and to register the new title in favor of the aforesaid plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go.SO ORDERED.

On the same day, September 27, 1991 the corresponding writ of execution (Annex C, Petition) was issued. 1

On 04 December 1991, the appellate court, on appeal to it by private respondent, set aside and declared without force and effect the above questioned orders of the court a quo.In this petition for review on certiorari, petitioners contend that Buen Realty can be held bound by the writ of execution by virtue of the notice of lis pendens, carried over on TCT No. 195816 issued in the name of Buen Realty, at the time of the latter's purchase of the property on 15 November 1991 from the Cu Unjiengs.We affirm the decision of the appellate court.A not too recent development in real estate transactions is the adoption of such arrangements as the right of first refusal, a purchase option and a contract to sell. For ready reference, we might point out some fundamental precepts that may find some relevance to this discussion.An obligation is a juridical necessity to give, to do or not to do (Art. 1156, Civil Code). The obligation is constituted upon the concurrence of the essential elements thereof, viz: (a) The vinculum juris or juridical tie which is the efficient cause established by the various sources of obligations (law, contracts, quasi-contracts, delicts and quasi-delicts); (b) the object which is the prestation or conduct; required to be observed (to give, to do or not to do); and (c) the subject-persons who, viewed from the demandability of the obligation, are the active (obligee) and the passive (obligor) subjects.Among the sources of an obligation is a contract (Art. 1157, Civil Code), which is a meeting of minds between two persons whereby one binds

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himself, with respect to the other, to give something or to render some service (Art. 1305, Civil Code). A contract undergoes various stages that include its negotiation or preparation, its perfection and, finally, its consummation. Negotiation covers the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is concluded (perfected). The perfection of the contract takes place upon the concurrence of the essential elements thereof. A contract which is consensual as to perfection is so established upon a mere meeting of minds, i.e., the concurrence of offer and acceptance, on the object and on the cause thereof. A contract which requires, in addition to the above, the delivery of the object of the agreement, as in a pledge or commodatum, is commonly referred to as a real contract. In a solemn contract, compliance with certain formalities prescribed by law, such as in a donation of real property, is essential in order to make the act valid, the prescribed form being thereby an essential element thereof. The stage of consummationbegins when the parties perform their respective undertakings under the contract culminating in the extinguishment thereof.Until the contract is perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation. In sales, particularly, to which the topic for discussion about the case at bench belongs, the contract is perfected when a person, called the seller, obligates himself, for a price certain, to deliver and to transfer ownership of a thing or right to another, called the buyer, over which the latter agrees. Article 1458 of the Civil Code provides:

Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.A contract of sale may be absolute or conditional.

When the sale is not absolute but conditional, such as in a "Contract to Sell" where invariably the ownership of the thing sold is retained until the fulfillment of a positive suspensive condition (normally, the full payment of the purchase price), the breach of the condition will prevent the obligation to convey title from acquiring an obligatory force. 2 In Dignos vs. Court of Appeals (158 SCRA 375), we have said that, although denominated a "Deed of Conditional Sale," a sale is still absolute where the contract is devoid of any proviso that title is reserved or the right to unilaterally rescind is stipulated, e.g., until or unless the price is paid. Ownership will then be transferred to the buyer upon actual or constructive delivery (e.g., by the execution of a public document) of the property sold. Where the condition is imposed upon the perfection of the contract itself, the failure of the condition would prevent such perfection.3 If the condition is imposed on the obligation of

a party which is not fulfilled, the other party may either waive the condition or refuse to proceed with the sale (Art. 1545, Civil Code). 4

An unconditional mutual promise to buy and sell, as long as the object is made determinate and the price is fixed, can be obligatory on the parties, and compliance therewith may accordingly be exacted. 5

An accepted unilateral promise which specifies the thing to be sold and the price to be paid, when coupled with a valuable consideration distinct and separate from the price, is what may properly be termed a perfected contract ofoption. This contract is legally binding, and in sales, it conforms with the second paragraph of Article 1479 of the Civil Code, viz:

Art. 1479. . . .An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price. (1451a) 6

Observe, however, that the option is not the contract of sale itself. 7 The optionee has the right, but not the obligation, to buy. Once the option is exercised timely, i.e., the offer is accepted before a breach of the option, a bilateral promise to sell and to buy ensues and both parties are then reciprocally bound to comply with their respective undertakings. 8

Let us elucidate a little. A negotiation is formally initiated by an offer. An imperfect promise (policitacion) is merely an offer. Public advertisements or solicitations and the like are ordinarily construed as mere invitations to make offers or only as proposals. These relations, until a contract is perfected, are not considered binding commitments. Thus, at any time prior to the perfection of the contract, either negotiating party may stop the negotiation. The offer, at this stage, may be withdrawn; the withdrawal is effective immediately after its manifestation, such as by its mailing and not necessarily when the offeree learns of the withdrawal (Laudico vs. Arias, 43 Phil. 270). Where a period is given to the offeree within which to accept the offer, the following rules generally govern:(1) If the period is not itself founded upon or supported by a consideration, the offeror is still free and has the right to withdraw the offer before its acceptance, or, if an acceptance has been made, before the offeror's coming to know of such fact, by communicating that withdrawal to the offeree (see Art. 1324, Civil Code; see also Atkins, Kroll & Co. vs. Cua, 102 Phil. 948, holding that this rule is applicable to a unilateral promise to sell under Art. 1479, modifying the previous decision in South Western Sugar vs. Atlantic Gulf, 97 Phil. 249; see also Art. 1319, Civil Code; Rural Bank of Parañaque, Inc., vs. Remolado, 135 SCRA 409; Sanchez vs. Rigos, 45 SCRA 368). The right to withdraw, however, must not be exercised whimsically or arbitrarily; otherwise, it

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could give rise to a damage claim under Article 19 of the Civil Code which ordains that "every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith."(2) If the period has a separate consideration, a contract of "option" is deemed perfected, and it would be a breach of that contract to withdraw the offer during the agreed period. The option, however, is an independent contract by itself, and it is to be distinguished from the projected main agreement (subject matter of the option) which is obviously yet to be concluded. If, in fact, the optioner-offeror withdraws the offer before its acceptance (exercise of the option) by the optionee-offeree, the latter may not sue for specific performance on the proposed contract ("object" of the option) since it has failed to reach its own stage of perfection. The optioner-offeror, however, renders himself liable for damages for breach of the option. In these cases, care should be taken of the real nature of the consideration given, for if, in fact, it has been intended to be part of the consideration for the main contract with a right of withdrawal on the part of the optionee, the main contract could be deemed perfected; a similar instance would be an "earnest money" in a contract of sale that can evidence its perfection (Art. 1482, Civil Code).In the law on sales, the so-called "right of first refusal" is an innovative juridical relation. Needless to point out, it cannot be deemed a perfected contract of sale under Article 1458 of the Civil Code. Neither can the right of first refusal, understood in its normal concept, per se be brought within the purview of an option under the second paragraph of Article 1479, aforequoted, or possibly of an offer under Article 1319 9 of the same Code. An option or an offer would require, among other things, 10 a clear certainty on both the object and the cause or consideration of the envisioned contract. In a right of first refusal, while the object might be made determinate, the exercise of the right, however, would be dependent not only on the grantor's eventual intention to enter into a binding juridical relation with another but also on terms, including the price, that obviously are yet to be later firmed up. Prior thereto, it can at best be so described as merely belonging to a class of preparatory juridical relations governed not by contracts (since the essential elements to establish the vinculum juris would still be indefinite and inconclusive) but by, among other laws of general application, the pertinent scattered provisions of the Civil Code on human conduct.Even on the premise that such right of first refusal has been decreed under a final judgment, like here, its breach cannot justify correspondingly an issuance of a writ of execution under a judgment that merely recognizes its existence, nor would it sanction an action for specific performance without thereby negating the indispensable

element of consensuality in the perfection of contracts. 11 It is not to say, however, that the right of first refusal would be inconsequential for, such as already intimated above, an unjustified disregard thereof, given, for instance, the circumstances expressed in Article 19 12 of the Civil Code, can warrant a recovery for damages.The final judgment in Civil Case No. 87-41058, it must be stressed, has merely accorded a "right of first refusal" in favor of petitioners. The consequence of such a declaration entails no more than what has heretofore been said. In fine, if, as it is here so conveyed to us, petitioners are aggrieved by the failure of private respondents to honor the right of first refusal, the remedy is not a writ of execution on the judgment, since there is none to execute, but an action for damages in a proper forum for the purpose.Furthermore, whether private respondent Buen Realty Development Corporation, the alleged purchaser of the property, has acted in good faith or bad faith and whether or not it should, in any case, be considered bound to respect the registration of the lis pendens in Civil Case No. 87-41058 are matters that must be independently addressed in appropriate proceedings. Buen Realty, not having been impleaded in Civil Case No. 87-41058, cannot be held subject to the writ of execution issued by respondent Judge, let alone ousted from the ownership and possession of the property, without first being duly afforded its day in court.We are also unable to agree with petitioners that the Court of Appeals has erred in holding that the writ of execution varies the terms of the judgment in Civil Case No. 87-41058, later affirmed in CA-G.R. CV-21123. The Court of Appeals, in this regard, has observed:

Finally, the questioned writ of execution is in variance with the decision of the trial court as modified by this Court. As already stated, there was nothing in said decision 13 that decreed the execution of a deed of sale between the Cu Unjiengs and respondent lessees, or the fixing of the price of the sale, or the cancellation of title in the name of petitioner (Limpin vs. IAC, 147 SCRA 516; Pamantasan ng Lungsod ng Maynila vs. IAC, 143 SCRA 311; De Guzman vs. CA, 137 SCRA 730; Pastor vs. CA, 122 SCRA 885).

It is likewise quite obvious to us that the decision in Civil Case No. 87-41058 could not have decreed at the time the execution of any deed of sale between the Cu Unjiengs and petitioners.WHEREFORE, we UPHOLD the Court of Appeals in ultimately setting aside the questioned Orders, dated 30 August 1991 and 27 September 1991, of the court a quo. Costs against petitioners.SO ORDERED.

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Narvasa, C.J., Padilla, Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno and Mendoza, JJ., concur.Kapunan, J., took no part.Feliciano, J., is on leave. #Footnotes

1 Rollo, pp. 32-38.2 Roque vs. Lapuz, 96 SCRA 741; Agustin vs. CA, 186 SCRA 375.3 See People's Homesite and Housing Corp. vs. Court of Appeals, 133 SCRA 777.4 Delta Motor Corporation vs. Genuino, 170 SCRA 29.5 See Art. 1459; Atkins, Kroll and Co., Inc. vs. Cua Hian Tek, 102 Phil. 948.6 It is well to note that when the consideration given, for what otherwise would have been an option, partakes the nature in reality of a part payment of the purchase price (termed as "earnest money" and considered as an initial payment thereof), an actual contract of sale is deemed entered into and enforceable as such.7 Enriquez de la Cavada vs. Diaz, 37 Phil. 982.8 Atkins, Kroll & Co., Inc., vs. Cua Hian Tek, 102 Phil. 948.9 Article 1319, Civil Code, provides:Art. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer. (Emphasis supplied.)10 It is also essential for an option to be binding that valuable consideration distinct from the price should be given (see Montilla vs. Court of Appeals, 161 SCRA 167; Sps. Natino vs. IAC, 197 SCRA 323; Cronico vs. J.M. Tuason & Co., Inc., 78 SCRA 331).11 See Article 1315 and 1318, Civil Code; Madrigal & Co. vs. Stevenson & Co., 15 Phil. 38; Salonga vs. Ferrales, 105 SCRA 359).12 Art. 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith.13 The decision referred to reads:In resume, there was no meeting of the minds between the parties concerning the sale of the property. Absent such requirement, the claim for specific performance will

not lie. Appellants' demand for actual, moral and exemplary damages will likewise fail as there exists no justifiable ground for its award. Summary judgment for defendants was properly granted. Courts may render summary judgment when there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law (Garcia vs. Court of Appeals, 176 SCRA 815). All requisites obtaining, the decision of the court a quo is legally justifiable.WHEREFORE, finding the appeal unmeritorious, the judgment appealed from is hereby AFFIRMED, but subject to the following modification: The court a quo in the aforestated decision, gave the plaintiffs — considering the mercurial and uncertain forces in our market economy today. We find no reason not to grant the same right of first refusal to herein appellants in the event that the subject property is sold for a price in excess of Eleven Million pesos. No pronouncement as to costs.

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SECOND DIVISION[G.R. No. 137290. July 31, 2000]

SAN MIGUEL PROPERTIES PHILIPPINES, INC., petitioner, vs. SPOUSES ALFREDO HUANG and GRACE HUANG, respondents.

D E C I S I O NMENDOZA, J.:This is a petition for review of the decision,[1] dated April 8, 1997, of the Court of Appeals which reversed the decision of the Regional Trial Court, Branch 153, Pasig City dismissing the complaint brought by respondents against petitioner for enforcement of a contract of sale.The facts are not in dispute.Petitioner San Miguel Properties Philippines, Inc. is a domestic corporation engaged in the purchase and sale of real properties. Part of its inventory are two parcels of land totalling 1, 738 square meters at the corner of Meralco Avenue and General Capinpin Street, Barrio Oranbo, Pasig City, which are covered by TCT Nos. PT-82395 and PT-82396 of the Register of Deeds of Pasig City.On February 21, 1994, the properties were offered for sale for P52,140,000.00 in cash. The offer was made to Atty. Helena M. Dauz who was acting for respondent spouses as undisclosed principals. In a letter[2] dated March 24, 1994, Atty. Dauz signified her clients interest in purchasing the properties for the amount for which they were offered by petitioner, under the following terms: the sum of P500,000.00 would be given as earnest money and the balance would be paid in eight equal monthly installments from May to December, 1994. However, petitioner refused the counter-offer.On March 29, 1994, Atty. Dauz wrote another letter[3] proposing the following terms for the purchase of the properties, viz:

This is to express our interest to buy your-above-mentioned property with an area of 1, 738 sq. meters. For this purpose, we are enclosing herewith the sum of P1,000,000.00 representing earnest-deposit money, subject to the following conditions.1. We will be given the exclusive option to purchase the property within the 30 days from date of your acceptance of this offer.2. During said period, we will negotiate on the terms and conditions of the purchase; SMPPI will secure the necessary Management and Board approvals; and we initiate the documentation if there is mutual agreement between us.3. In the event that we do not come to an agreement on this transaction, the said amount of P1,000,000.00 shall be refundable to us in full upon demand. . . .

Isidro A. Sobrecarey, petitioners vice-president and operations manager for corporate real estate, indicated his conformity to the offer by affixing his signature to the letter and accepted the "earnest-deposit" of P1 million. Upon request of respondent spouses, Sobrecarey ordered the removal of the "FOR SALE" sign from the properties.Atty. Dauz and Sobrecarey then commenced negotiations. During their meeting on April 8, 1994, Sobrecarey informed Atty. Dauz that petitioner was willing to sell the subject properties on a 90-day term. Atty. Dauz countered with an offer of six months within which to pay.On April 14, 1994, the parties again met during which Sobrecarey informed Atty. Dauz that petitioner had not yet acted on her counter-offer. This prompted Atty. Dauz to propose a four-month period of amortization.On April 25, 1994, Atty. Dauz asked for an extension of 45 days from April 29, 1994 to June 13, 1994 within which to exercise her option to purchase the property, adding that within that period, "[we] hope to finalize [our] agreement on the matter."[4] Her request was granted.On July 7, 1994, petitioner, through its president and chief executive officer, Federico Gonzales, wrote Atty. Dauz informing her that because the parties failed to agree on the terms and conditions of the sale despite the extension granted by petitioner, the latter was returning the amount of P1 million given as "earnest-deposit."[5]

On July 20, 1994, respondent spouses, through counsel, wrote petitioner demanding the execution within five days of a deed of sale covering the properties. Respondents attempted to return the "earnest-deposit" but petitioner refused on the ground that respondents option to purchase had already expired.On August 16, 1994, respondent spouses filed a complaint for specific performance against petitioner before the Regional Trial Court, Branch 133, Pasig City where it was docketed as Civil Case No. 64660.Within the period for filing a responsive pleading, petitioner filed a motion to dismiss the complaint alleging that (1) the alleged "exclusive option" of respondent spouses lacked a consideration separate and distinct from the purchase price and was thus unenforceable and (2) the complaint did not allege a cause of action because there was no "meeting of the minds" between the parties and, therefore, no perfected contract of sale. The motion was opposed by respondents.On December 12, 1994, the trial court granted petitioners motion and dismissed the action. Respondents filed a motion for reconsideration, but it was denied by the trial court. They then appealed to the Court of Appeals which, on April 8, 1997, rendered a decision[6] reversing the judgment of the trial court. The appellate court held that all the requisites of a perfected contract of sale had been complied with as the offer made on March 29, 1994, in connection with which the earnest

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money in the amount of P1 million was tendered by respondents, had already been accepted by petitioner. The court cited Art. 1482 of the Civil Code which provides that "[w]henever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract." The fact the parties had not agreed on the mode of payment did not affect the contract as such is not an essential element for its validity. In addition, the court found that Sobrecarey had authority to act in behalf of petitioner for the sale of the properties.[7]

Petitioner moved for reconsideration of the trial courts decision, but its motion was denied. Hence, this petition.Petitioner contends that the Court of Appeals erred in finding that there was a perfected contract of sale between the parties because the March 29, 1994 letter of respondents, which petitioner accepted, merely resulted in an option contract, albeit it was unenforceable for lack of a distinct consideration. Petitioner argues that the absence of agreement as to the mode of payment was fatal to the perfection of the contract of sale. Petitioner also disputes the appellate courts ruling that Isidro A. Sobrecarey had authority to sell the subject real properties.[8]

Respondents were required to comment within ten (10) days from notice. However, despite 13 extensions totalling 142 days which the Court had given to them, respondents failed to file their comment. They were thus considered to have waived the filing of a comment.The petition is meritorious.In holding that there is a perfected contract of sale, the Court of Appeals relied on the following findings: (1) earnest money was allegedly given by respondents and accepted by petitioner through its vice-president and operations manager, Isidro A. Sobrecarey; and (2) the documentary evidence in the records show that there was a perfected contract of sale.With regard to the alleged payment and acceptance of earnest money, the Court holds that respondents did not give the P1 million as "earnest money" as provided by Art. 1482 of the Civil Code. They presented the amount merely as a deposit of what would eventually become the earnest money or downpayment should a contract of sale be made by them. The amount was thus given not as a part of the purchase price and as proof of the perfection of the contract of sale but only as a guarantee that respondents would not back out of the sale. Respondents in fact described the amount as an "earnest-deposit." In Spouses Doromal, Sr. v. Court of Appeals,[9] it was held:

. . . While the P5,000 might have indeed been paid to Carlos in October, 1967, there is nothing to show that the same was in the concept of the earnest money contemplated in Art. 1482 of the Civil Code, invoked by

petitioner, as signifying perfection of the sale. Viewed in the backdrop of the factual milieu thereof extant in the record, We are more inclined to believe that the said   P 5,000.00 were paid in the concept of earnest money as the term was understood under the Old Civil Code, that is, as a guarantee that the buyer would not back out, considering that it is not clear that there was already a definite agreement as to the price then and that petitioners were decided to buy 6/7 only of the property should respondent Javellana refuse to agree to part with her 1/7 share.[10]

In the present case, the P1 million "earnest-deposit" could not have been given as earnest money as contemplated in Art. 1482 because, at the time when petitioner accepted the terms of respondents offer of March 29, 1994, their contract had not yet been perfected. This is evident from the following conditions attached by respondents to their letter, to wit: (1) that they be given the exclusive option to purchase the property within 30 days from acceptance of the offer; (2) that during the option period, the parties would negotiate the terms and conditions of the purchase; and (3) petitioner would secure the necessary approvals while respondents would handle the documentation.The first condition for an option period of 30 days sufficiently shows that a sale was never perfected. As petitioner correctly points out, acceptance of this condition did not give rise to a perfected sale but merely to an option or an accepted unilateral promise on the part of respondents to buy the subject properties within 30 days from the date of acceptance of the offer. Such option giving respondents the exclusive right to buy the properties within the period agreed upon is separate and distinct from the contract of sale which the parties may enter.[11] All that respondents had was just the option to buy the properties which privilege was not, however, exercised by them because there was a failure to agree on the terms of payment. No contract of sale may thus be enforced by respondents.Furthermore, even the option secured by respondents from petitioner was fatally defective. Under the second paragraph of Art. 1479, an accepted unilateral promise to buy or sell a determinate thing for a price certain is binding upon the promisor only if the promise is supported by a distinct consideration. Consideration in an option contract may be anything of value, unlike in sale where it must be the price certain in money or its equivalent. There is no showing here of any consideration for the option. Lacking any proof of such consideration, the option is unenforceable.Equally compelling as proof of the absence of a perfected sale is the second condition that, during the option period, the parties would

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negotiate the terms and conditions of the purchase. The stages of a contract of sale are as follows: (1) negotiation, covering the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is perfected; (2) perfection, which takes place upon the concurrence of the essential elements of the sale which are the meeting of the minds of the parties as to the object of the contract and upon the price; and (3) consummation, which begins when the parties perform their respective undertakings under the contract of sale, culminating in the extinguishment thereof.[12] In the present case, the parties never got past the negotiation stage. The alleged "indubitable evidence"[13] of a perfected sale cited by the appellate court was nothing more than offers and counter-offers which did not amount to any final arrangement containing the essential elements of a contract of sale. While the parties already agreed on the real properties which were the objects of the sale and on the purchase price, the fact remains that they failed to arrive at mutually acceptable terms of payment, despite the 45-day extension given by petitioner.The appellate court opined that the failure to agree on the terms of payment was no bar to the perfection of the sale because Art. 1475 only requires agreement by the parties as to the price of the object. This is error. In Navarro v. Sugar Producers Cooperative Marketing Association, Inc.,[14] we laid down the rule that the manner of payment of the purchase price is an essential element before a valid and binding contract of sale can exist. Although the Civil Code does not expressly state that the minds of the parties must also meet on the terms or manner of payment of the price, the same is needed, otherwise there is no sale. As held in Toyota Shaw, Inc. v. Court of Appeals,[15] agreement on the manner of payment goes into the price such that a disagreement on the manner of payment is tantamount to a failure to agree on the price.[16] In Velasco v. Court of Appeals,[17] the parties to a proposed sale had already agreed on the object of sale and on the purchase price. By the buyers own admission, however, the parties still had to agree on how and when the downpayment and the installments were to be paid. It was held:

. . . Such being the situation, it can not, therefore, be said that a definite and firm sales agreement between the parties had been perfected over the lot in question. Indeed, this Court has already ruled before that a definite agreement on the manner of payment of the purchase price is an essential element in the formation of a binding and enforceable contract of sale. The fact, therefore, that the petitioners delivered to the respondent the sum of P10,000 as part of the down-payment that they had to pay cannot be considered as sufficient proof

of the perfection of any purchase and sale agreement between the parties herein under Art. 1482 of the new Civil Code, as the petitioners themselves admit that some essential matter - the terms of the payment - still had to be mutually covenanted.[18]

Thus, it is not the giving of earnest money, but the proof of the concurrence of all the essential elements of the contract of sale which establishes the existence of a perfected sale.In the absence of a perfected contract of sale, it is immaterial whether Isidro A. Sobrecarey had the authority to enter into a contract of sale in behalf of petitioner. This issue, therefore, needs no further discussion.WHEREFORE, the decision of the Court of Appeals is REVERSED and respondents complaint is DISMISSED.SO ORDERED.Quisumbing, Buena, and De Leon, Jr., JJ., concur.Bellosillo, (Chairman), J., on leave.

[1] Per Associate Justice Corona Ibay-Somera and concurred in by Justices Emeterio C. Cui and Salvador J. Valdez, Jr.[2] Annex D; Rollo, p. 99.[3] Annex E; Id., p. 100.[4] Annex F; Id., p. 102.[5] Annex I; Rollo, p. 107.[6] Rollo, pp. 38-61.[7] Id., pp. 48-60.[8] Petition, pp. 12-13; Rollo, pp. 14-15.[9] 66 SCRA 575 (1975)[10] Id., at 582. (Emphasis added)[11] Carceler v. Court of Appeals, 302 SCRA 718 (1999); Cavite Development Bank and Far East Bank and Trust Company v. Court of Appeals, G.R. No. 131679, Feb. 1, 2000.[12] Ang Yu Asuncion v. Court of Appeals, 238 SCRA 602 (1994)[13] The Court of Appeals enumerated these as follows: (1) Annex "A" which contains petitioners offer to sell the subject properties; (2) Annex "D," a letter dated March 24, 1994 through which respondent spouses, through Atty. Helena M. Dauz, signified their interest to buy the subject properties; and (3) Annex "E," another letter from respondent spouses dated March 29, 1994 through which respondents again expressed their interest to buy the subject properties subject to certain conditions.[14] 1 SCRA 1181 (1961)[15] 244 SCRA 320 (1995)

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[16] Id., p. 328.[17] 51 SCRA 439 (1973)[18] Id., p. 453. (Emphasis added)

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