Sales First Batch Cases

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SALES FIRST BATCH CASES1415 1ST SEM

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THIRD DIVISION

G.R. No. 170479 February 18, 2008

ANDRE T. ALMOCERA,petitioner,vs.JOHNNY ONG,respondent.

D E C I S I O N

CHICO-NAZARIO,J.:

Before Us is a Petition for Review on Certiorariunder Rule 45 of the 1997 Rules of CivilProcedure which seeks to set aside the Decision1of the Court of Appeals dated 18 July2005 in CA-G.R. CV No. 75610 affirming in toto the Decision2of Branch 11 of the

Regional Trial Court (RTC) of Cebu City in Civil Case No. CEB-23687 and itsResolution3dated 16 November 2005 denying petitioners motion for reconsideration.The RTC decision found petitioner Andre T. Almocera, Chairman and Chief ExecutiveOfficer of First Builder Multi-Purpose Cooperative (FBMC), solidarily liable with FMBCfor damages.

Stripped of non-essentials, the respective versions of the parties have been summarizedby the Court of Appeals as follows:

Plaintiff Johnny Ong tried to acquire from the defendants a "townhome"

described as Unit No. 4 of Atrium Townhomes in Cebu City. As reflected in aContract to Sell, the selling price of the unit was P3,400,000.00 pesos, for a lot

area of eighty-eight (88) square meters with a three-storey building. Out of thepurchase price, plaintiff was able to pay the amount of P1,060,000.00. Prior to the

full payment of this amount, plaintiff claims that defendants Andre Almoceraand First Builders fraudulently concealed the fact that before and at the time ofthe perfection of the aforesaid contract to sell, the property was alreadymortgaged to and encumbered with the Land Bank of the Philippines (LBP). Inaddition, the construction of the house has long been delayed and remainsunfinished. On March 13, 1999, Lot 4-a covered by TCT No. 148818, covering theunit was advertised in a local tabloid for public auction for foreclosure ofmortgage. It is the assertion of the plaintiff that had it not for the fraudulentconcealment of the mortgage and encumbrance by defendants, he would havenot entered into the contract to sell.

On the other hand, defendants assert that on March 20, 1995, First BuildersMulti-purpose Coop. Inc., borrowed money in the amount of P500,000.00 from

Tommy Ong, plaintiffs brother. This amount was used to finance thedocumentation requirements of the LBP for the funding of the Atrium TownHomes. This loan will be applied in payment of one (1) town house unit whichTommy Ong may eventually purchase from the project. When the project was

under way, Tommy Ong wanted to buy another townhouse for his brother,Johnny Ong, plaintiff herein, which then, the amount of P150,000.00 was given as

additional partial payment. However, the particular unit was not yet identified.It was only on January 10, 1997 that Tommy Ong identified Unit No. 4 plaintiffschosen unit and again tendered P350,000.00 as his third partial payment. When

the contract to sell for Unit 4 was being drafted, Tommy Ong requested thatanother contract to sell covering Unit 5 be made so as to give Johnny Onganother option to choose whichever unit he might decide to have. When theconstruction was already in full blast, defendants were informed by Tommy Ongthat their final choice was Unit 5. It was only upon knowing that the defendants

will be selling Unit 4 to some other persons for P4million that plaintiff changed

his choice from Unit 5 to Unit 4.4
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In trying to recover the amount he paid as down payment for the townhouse unit,respondent Johnny Ong filed a complaint for Damages before the RTC of Cebu City,docketed as Civil Case No. CEB-23687, against defendants Andre T. Almocera andFBMC alleging that defendants were guilty of fraudulent concealment and breach of

contract when they sold to him a townhouse unit without divulging that the same, atthe time of the perfection of their contract, was already mortgaged with the Land Bankof the Philippines (LBP), with the latter causing the foreclosure of the mortgage and theeventual sale of the townhouse unit to a third person.

In their Answer, defendants denied liability claiming that the foreclosure of themortgage on the townhouse unit was caused by the failure of complainant Johnny Ongto pay the balance of the price of said townhouse unit.

After the pre-trial conference was terminated, trial on the merits ensued. Respondentand his brother, Thomas Y. Ong, took the witness stand. For defendants, petitioner

testified.

In a Decision dated 20 May 2002, the RTC disposed of the case in this manner:

WHEREFORE, in view of all the foregoing premises, judgment is herebyrendered in this case in favor of the plaintiff and against the defendants:

(a) Ordering the defendants to solidarily pay to the plaintiff the sumof P1,060,000.00, together with a legal interest thereon at 6% per annum from

April 21, 1999 until its full payment before finality of the judgment. Thereafter, if

the amount adjudged remains unpaid, the interest rate shall be 12% per annumcomputed from the time when the judgment becomes final and executory untilfully satisfied;

(b) Ordering the defendants to solidarily pay to the plaintiff the sumof P100,000.00 as moral damages, the sum of P50,000.00 as attorneys fee and the

sum of P15,619.80 as expenses of litigation; and

(c) Ordering the defendants to pay the cost of this suit.5

The trial court ruled against defendants for not acting in good faith and for notcomplying with their obligations under their contract with respondent. In the Contractto Sell6involving Unit 4 of the Atrium Townhomes, defendants agreed to sell saidtownhouse to respondent for P3,400,000.00. The down payment wasP1,000,000.00, while

the balance of P2,400,000.00 was to be paid in full upon completion, delivery and

acceptance of the townhouse. Under the contract which was signed on 10 January 1997,defendants agreed to complete and convey to respondent the unit within six monthsfrom the signing thereof.

The trial court found that respondent was able to make a down payment or partialpayment of P1,060,000.00 and that the defendants failed to complete the construction of,

as well as deliver to respondent, the townhouse within six months from the signing ofthe contract. Moreover, respondent was not informed by the defendants at the time ofthe perfection of their contract that the subject townhouse was already mortgaged toLBP. The mortgage was foreclosed by the LBP and the townhouse was eventually soldat public auction. It said that defendants were guilty of fraud in their dealing withrespondent because the mortgage was not disclosed to respondent when the contractwas perfected. There was also non-compliance with their obligations under the contractwhen they failed to complete and deliver the townhouse unit at the agreed time. On thepart of respondent, the trial court declared he was justified in suspending furtherpayments to the defendants and was entitled to the return of the down payment.
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Aggrieved, defendants appealed the decision to the Court of Appeals assigning thefollowing as errors:

1. THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFF HAS A

VALID CAUSE OF ACTION FOR DAMAGES AGAINST DEFENDANT(S).

2. THE LOWER COURT ERRED IN HOLDING THAT DEFENDANT ANDRE T.ALMOCERA IS SOLIDARILY LIABLE WITH THE COOPERATIVE FOR THEDAMAGES TO THE PLAINTIFF.7

The Court of Appeals ruled that the defendants incurred delay when they failed todeliver the townhouse unit to the respondent within six months from the signing of thecontract to sell. It agreed with the finding of the trial court that the nonpayment of thebalance of P2.4M by respondent to defendants was proper in light of such delay and the

fact that the property subject of the case was foreclosed and auctioned. It added that the

trial court did not err in giving credence to respondents assertion that had he knownbeforehand that the unit was used as collateral with the LBP, he would not haveproceeded in buying the townhouse. Like the trial court, the Court of Appeals gave noweight to defendants argument that had respondent paid the balance of the purchaseprice of the townhouse, the mortgage could have been released. It explained:

We cannot find fault with the choice of plaintiff not to further dole out money fora property that in all events, would never be his. Moreover, defendants could, ifthey were really desirous of satisfying their obligation, demanded that plaintiffpay the outstanding balance based on their contract. This they had not done. We

can fairly surmise that defendants could not comply with their obligationthemselves, because as testified to by Mr. Almocera, they already signified toLBP that they cannot pay their outstanding loan obligations resulting to theforeclosure of the townhouse.8

Moreover, as to the issue of petitioners solidary liability, it said that this issue wasbelatedly raised and cannot be treated for the first time on appeal.

On 18 July 2005, the Court of Appeals denied the appeal and affirmed in totothedecision of the trial court. The dispositive portion of the decision reads:

IN LIGHT OF ALL THE FOREGOING,this appeal is DENIED.The assaileddecision of the Regional Trial Court, Branch 11, Cebu City in Civil Case No. CEB-23687 is AFFIRMEDin toto.9

In a Resolution dated 16 November 2005, the Court of Appeals denied defendantsmotion for reconsideration.

Petitioner is now before us pleading his case via a Petition for Reviewon Certiorariunder Rule 45 of the 1997 Rules of Civil Procedure. The petition raises thefollowing issues:

I. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDINGTHAT DEFENDANT HAS INCURRED DELAY.

II. THE HONORABLE COURT OF APPEALS GRAVELY ERRED INSUSTAINING RESPONDENTS REFUSAL TO PAY THE BALANCE OF THEPURCHASE PRICE.

III. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDINGTHAT DEFENDANT ANDRE T. ALMOCERA IS SOLIDARILY LIABLE WITH

THE DEFENDANT COOPERATIVE FOR DAMAGES TO PLAINTIFF.10
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It cannot be disputed that the contract entered into by the parties was a contract to sell.The contract was denominated as such and it contained the provision that the unit shallbe conveyed by way of an Absolute Deed of Sale, together with the attendantdocuments of Ownership the Transfer Certificate of Title and Certificate of Occupancy

and that the balance of the contract price shall be paid upon the completion anddelivery of the unit, as well as the acceptance thereof by respondent. All these clearlyindicate that ownership of the townhouse has not passed to respondent.

In Serrano v. Caguiat,11we explained:

A contract to sell is akin to a conditional sale where the efficacy or obligatoryforce of the vendors obligation to transfer title is subordinated to the happeningof a future and uncertain event, so that if the suspensive condition does not takeplace, the parties would stand as if the conditional obligation had never existed.The suspensive condition is commonly full payment of the purchase price.

The differences between a contract to sell and a contract of sale are well-settled injurisprudence. As early as 1951, in Sing Yee v. Santos[47 O.G. 6372 (1951)], weheld that:

"x x x [a] distinction must be made between a contract of sale in which titlepasses to the buyer upon delivery of the thing sold and a contract to sell xx x where by agreement the ownership is reserved in the seller and is notto pass until the full payment of the purchase price is made. In the firstcase, non-payment of the price is a negative resolutory condition; in the

second case, full payment is a positive suspensive condition. Beingcontraries, their effect in law cannot be identical. In the first case, thevendor has lost and cannot recover the ownership of the land sold untiland unless the contract of sale is itself resolved and set aside. In thesecond case, however, the title remains in the vendor if the vendee doesnot comply with the condition precedent of making payment at the timespecified in the contract."

In other words, in a contract to sell, ownership is retained by the sellerand is not to pass to the buyer until full payment of the price.

The Contract to Sell entered into by the parties contains the following pertinentprovisions:

4. TERMS OF PAYMENT:

4a. ONE MILLION PESOS (P1,000,000.00) is hereby acknowledged as

Downpayment for the above-mentioned Contract Price.

4b. The Balance, in the amount of TWO MILLION FOUR HUNDRED PESOS(P2,400,000.00) shall be paid thru financing Institution facilitated by the SELLER,

preferably Landbank of the Philippines (LBP).

Upon completion, delivery and acceptance of the BUYER of the Townhouse Unit,the BUYER shall have paid the Contract Price in full to the SELLER.

x x x x

6. COMPLETION DATES OF THE TOWNHOUSE UNIT:

The unit shall be completed and conveyed by way of an Absolute Deed of Sale

together with the attendant documents of Ownership in the name of the BUYER
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the Transfer Certificate of Title and Certificate of Occupancy within a period ofsix (6) months from the signing of Contract to Sell.12

From the foregoing provisions, it is clear that petitioner and FBMC had the obligation to

complete the townhouse unit within six months from the signing of the contract. Uponcompliance therewith, the obligation of respondent to pay the balance of P2,400,000.00

arises. Upon payment thereof, the townhouse shall be delivered and conveyed torespondent upon the execution of the Absolute Deed of Sale and other relevantdocuments.

The evidence adduced shows that petitioner and FBMC failed to fulfill their obligation -- to complete and deliver the townhouse within the six-month period. With petitionerand FBMCs non-fulfillment of their obligation, respondent refused to pay the balanceof the contract price. Respondent does not ask that ownership of the townhouse betransferred to him, but merely asks that the amount or down payment he had made be

returned to him.

Article 1169 of the Civil Code reads:

Art. 1169. Those obliged to deliver or to do something incur in delay from thetime the obligee judicially or extrajudicially demands from them the fulfillmentof their obligation.

However, the demand by the creditor shall not be necessary in order that delaymay exist:

(1) When the obligation or the law expressly so declares; or

(2) When from the nature and the circumstances of the obligation it appears thatthe designation of the time when the thing is to be delivered or the service is tobe rendered was a controlling motive for the establishment of the contract; or

(3) When demand would be useless, as when the obligor has rendered it beyondhis power to perform.

In reciprocal obligations, neither party incurs in delay if the other does not

comply or is not ready to comply in a proper manner with what is incumbentupon him. From the moment one of the parties fulfills his obligation, delay bythe other begins.

The contract subject of this case contains reciprocal obligations which were to befulfilled by the parties, i.e., to complete and deliver the townhouse within six monthsfrom the execution of the contract to sell on the part of petitioner and FBMC, and to paythe balance of the contract price upon completion and delivery of the townhouse on thepart of the respondent.

In the case at bar, the obligation of petitioner and FBMC which is to complete anddeliver the townhouse unit within the prescribed period, is determinative of therespondents obligation to pay the balance of the contract price. With their failure tofulfill their obligation as stipulated in the contract, they incurred delay and are liable fordamages.13They cannot insist that respondent comply with his obligation. Where one ofthe parties to a contract did not perform the undertaking to which he was bound by theterms of the agreement to perform, he is not entitled to insist upon the performance ofthe other party.14

On the first assigned error, petitioner insists there was no delay when the townhouse

unit was not completed within six months from the signing of the contract inasmuch asthe mere lapse of the stipulated six (6) month period is not by itself enough to constitute
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delay on his part and that of FBMC, since the law requires that there must either bejudicial or extrajudicial demand to fulfill an obligation so that the obligor may bedeclared in default. He argues there was no evidence introduced showing that a priordemand was made by respondent before the original action was instituted in the trial

court.

We do not agree.

Demand is not necessary in the instant case. Demand by the respondent would beuseless because the impossibility of complying with their (petitioner and FBMC)obligation was due to their fault. If only they paid their loans with the LBP, themortgage on the subject townhouse would not have been foreclosed and thereafter soldto a third person.

Anent the second assigned error, petitioner argues that if there was any delay, the same

was incurred by respondent because he refused to pay the balance of the contract price.

We find his argument specious.

As above-discussed, the obligation of respondent to pay the balance of the contractprice was conditioned on petitioner and FBMCs performance of their obligation.Considering that the latter did not comply with their obligation to complete and deliverthe townhouse unit within the period agreed upon, respondent could not have incurreddelay. For failure of one party to assume and perform the obligation imposed on him,the other party does not incur delay.15

Under the circumstances obtaining in this case, we find that respondent is justified inrefusing to pay the balance of the contract price. He was never in possession of thetownhouse unit and he can no longer be its owner since ownership thereof has beentransferred to a third person who was not a party to the proceedings below. It wouldsimply be the height of inequity if we are to require respondent to pay the balance ofthe contract price. To allow this would result in the unjust enrichment of petitioner andFBMC. The fundamental doctrine of unjust enrichment is the transfer of value withoutjust cause or consideration. The elements of this doctrine which are present in this caseare: enrichment on the part of the defendant; impoverishment on the part of theplaintiff; and lack of cause. The main objective is to prevent one to enrich himself at theexpense of another. It is commonly accepted that this doctrine simply means a personshall not be allowed to profit or enrich himself inequitably at another's expense.16Hence,to allow petitioner and FBMC keep the down payment made by respondent amountingto P1,060,000.00 would result in their unjust enrichment at the expense of the

respondent. Thus, said amount should be returned.

What is worse is the fact that petitioner and FBMC intentionally failed to informrespondent that the subject townhouse which he was going to purchase was alreadymortgaged to LBP at the time of the perfection of their contract. This deliberatewithholding by petitioner and FBMC of the mortgage constitutes fraud and bad faith.

The trial court had this say:

In the light of the foregoing environmental circumstances and milieu, therefore,it appears that the defendants are guilty of fraud in dealing with the plaintiff.They performed voluntary and willful acts which prevent the normal realizationof the prestation, knowing the effects which naturally and necessarily arise fromsuch acts. Their acts import a dishonest purpose or some moral obliquity andconscious doing of a wrong. The said acts certainly gtive rise to liability fordamages (8 Manresa 72; Borrell-Macia 26-27; 3 Camus 34; OLeary v. Macondray& Company, 454 Phil. 812; Heredia v. Salinas, 10 Phil. 157). Article 1170 of the

New Civil Code of the Philippines provides expressly that "those who in the
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performance of their obligations are guilty of fraud and those who in anymanner contravene the tenor thereof are liable for damages.17

On the last assigned error, petitioner contends that he should not be held solidarily

liable with defendant FBMC, because the latter is a separate and distinct entity which isthe seller of the subject townhouse. He claims that he, as Chairman and Chief ExecutiveOfficer of FBMC, cannot be held liable because his representing FBMC in its dealings isa corporate act for which only FBMC should be held liable.

This issue of piercing the veil of corporate fiction was never raised before the trial court.The same was raised for the first time before the Court of Appeals which ruled that itwas too late in the day to raise the same. The Court of Appeals declared:

In the case below, the pleadings and the evidence of the defendants are one andthe same and never had it made to appear that Almocera is a person distinct and

separate from the other defendant. In fine, we cannot treat this error for the firsttime on appeal. We cannot in good conscience, let the defendant Almocera raisethe issue of piercing the veil of corporate fiction just because of the adversedecision against him. x x x.18

To allow petitioner to pursue such a defense would undermine basic considerations ofdue process. Points of law, theories, issues and arguments not brought to the attentionof the trial court will not be and ought not to be considered by a reviewing court, asthese cannot be raised for the first time on appeal. It would be unfair to the adverseparty who would have no opportunity to present further evidence material to the new

theory not ventilated before the trial court.19

As to the award of damages granted by the trial court, and affirmed by the Court ofAppeals, we find the same to be proper and reasonable under the circumstances.

WHEREFORE,the petition is DENIED.The Decision of the Court of Appeals dated 18July 2005 in CA-G.R. CV No. 75610 is AFFIRMED.Costs against the petitioner.

SO ORDERED.

MINITA V. CHICO-NAZARIOAssociate Justice
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G.R. No. 124045 May 21, 1998

SPOUSES VIVENCIO BABASA and ELENA CANTOSBABASA, petitioners,vs.COURT OF APPEALS, TABANGAO REALTY, INC., and SHELL GASPHILIPPINES, INC., respondents.

BELLOSILLO,J.:

On 11 April 1981 El contract of "Conditional Sale of Registered Lands" wasexecuted between the spouses Vivencio and Elena Babasa as vendors andTabangao Realty, Inc. (TABANGAO) as vendee over three (3) parcels ofland, Lots Nos. 17827-A, 17827-B and 17827-C, situated in Brgy. Libjo,Batangas City. Since the certificates of title over the lots were in the name ofthird persons who had already executed deeds of reconveyance anddisclaimer in favor of the BABASAS, it was agreed that the total purchaseprice of P2,121,920.00 would be paid in the following manner: P300,000.00

upon signing of the contract, and P1,821,920.00 upon presentation by theBABASAS of transfer certificates of titles in their name, free from all liensand encumbrances, and delivery of registerable documents of sale in favorof TABANGAO within twenty (20) months from the signing of the contract . Inthe meantime, the retained balance of the purchase price would earninterest at seventeen percent (17%) per annum or P20,648.43 monthlypayable to the BABASAS until 31 December 1982. It was expresslystipulated that TABANGAO would have the absolute and unconditionalright to take immediate possession of the lots as well as introduce any

improvement thereon.

On 18 May 1981 TABANGAO leased the lots to Shell Gas Philippines, Inc.(SHELL), which immediately started the construction thereon of aLiquefied Petroleum Gas Terminal Project, an approved zone exportenterprise of the Export Processing Zone. TABANGAO is the real estatearm of SHELL.

The parties substantially complied with the terms of the contract.

TABANGAO paid the first installment of P300,000.00 to the BABASASwhile the latter delivered actual possession of the lots to the former. Inaddition, TABANGAO paid P379,625.00 to the tenants of the lots asdisturbance compensation and as payment for existing crops as well asP334,700.00 to the owners of the houses standing thereon in addition togranting them residential lots with the total area of 2,800 square meters.TABANGAO likewise paid the stipulated monthly interest for the 20-month period amounting to P408,580.80. Meanwhile, the BABASAS filedCivil Case No. 5191and Petition No. 3732for the transfer of titles of the lots

in their name.


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However, two (2) days prior to the expiration of the 20-month period,specifically on 31 December 1982, the BABASAS asked TABANGAO for anindefinite extension within which to deliver clean titles over the lots. Theyasked that TABANGAO continue paying the monthly interest of P20,648.43

starting January 1983 on the ground that Civil Case No. 519 and PetitionNo. 373 had not yet been resolved with finality in their favor. TABANGAOrefused the request. In retaliation the BABASAS executed a notarizedunilateral rescission dated 28 February 1983 to which TABANGAOresponded by reminding the BABASAS that they were the ones who didnot comply with their contractual obligation to deliver clean titles withinthe stipulated 20-month period, hence, had no right to rescind theircontract. The BABASAS insisted on the unilateral rescission and demandedthat SHELL vacate the lots.

On 19 July 1983 TABANGAO instituted an action for specific performancewith damages in the Regional Trial Court of Batangas City to compel thespouses to comply with their obligation to deliver clean titles over theproperties.3TABANGAO alleged that the BABASAS were already in aposition to secure clean certificates of title and execute registerabledocuments of sale since execution of judgment pending appeal had alreadybeen granted in their favor in Civil Case No. 519, while an order directing

reconstitution of the original copies of TCT Nos. T-32565, T-32566 and T-32567 covering the lots had been issued in Petition No. 373. The BABASASmoved to dismiss the complaint on the ground that their contract withTABANGAO became null and void with the expiration of the 20-monthperiod given them within which to deliver clean certificates of title. SHELLentered the dispute as intervenor praying that its lease over the premisesbe respected by the BABASAS.

Despite the pendency of the case the BABASAS put up several structures

within the area in litigation to impede the movements of persons andvehicles therein, laid claim to twelve (12) heads of cattle belonging tointervenor SHELL and threatened to collect levy from all buyers ofliquefied petroleum gas (LPG) for their alleged use of the BABASA estatein their business transactions with intervenor SHELL. As a result, SHELLapplied for and was granted on 10 April 1990 a temporary restrainingorder against the Babasa spouses and anyone acting for and in their behalfupon filing of a P2-million bond.4

Eventually, judgment was rendered in favor of TABANGAO andSHELL.5The court a quo ruled that the 20-month period stipulated in thecontract was never meant to be its term such that upon its expiration therespective obligations of the parties would be extinguished. On thecontrary, the expiration thereof merely gave rise to the right ofTABANGAO to either rescind the contract or to demand that theBABASAS comply with their contractual obligation to deliver to it cleantitles and registerable documents of sale. The notarial rescission executedby the BABASAS was declared void and of no legal effect

xxx xxx xxx


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1. The unilateral rescission of contract, dated February 28, 1983,executed by the defendant-spouses is null and void, withoutany legal force and effect on the agreement dated April 11,1981, executed between the plaintiff and the defendant-spouses;

2. The lease contract, dated May 18, 1981, executed by theplaintiff in favor of the intervenor is deemed legally binding onthe defendant-spouses insofar as it affects the three lots subjectof this case;

3. The defendant-spouses Vivencio Babasa and Elena Cantosare hereby ordered to deliver to the plaintiff Tabangao Realty,Inc., clean transfer certificates of title in their name and execute

all the necessary deeds and documents necessary for theRegister of Deeds of Batangas City to facilitate the issuance ofTransfer Certificates of Title in the name of plaintiff, TabangaoRealty, Inc. In the event the defendant-spouses fail to do so, theRegister of Deeds of Batangas City is hereby directed to cancelthe present transfer certificates of title over the three lotscovered by the Conditional Sale of Registered Lands executedby and between plaintiff, Tabangao Realty, Inc., and thedefendant-spouses Vivencio Babasa and Elena Cantos-Babasaon April 11, 1981, upon presentation of credible proof that saiddefendant-spouses have received full payment for the lots orpayment thereof duly consigned to the Court for the account ofthe defendant-spouses;

4. Plaintiff Tabangao Realty, Inc., is directed to pay thedefendant-spouses Vivencio Babasa and Elena Cantos-Babasathe remaining balance of P1,821,920.00 out of the full purchaseprice for these three lots enumerated in the agreement datedApril 11, 1981 plus interest thereon of 17%per annumorP20,648.43 a month compounded annually beginning January1983 until fully paid;

5. The Order dated April 10, 1990 issued in favor of theintervenor enjoining and restraining defendant-spousesVivencio Babasa and Elena Cantos-Babasa and/or anyoneacting for and in their behalf from putting up any structure onthe three lots or interfering in any way in the activities of theintervenor, its employees and agents, is made permanent, andthe bond posted by the intervenor cancelled; and,

6. Defendant-spouses Vivencio Babasa and Elena Cantos-Babasa shall pay the costs of this proceeding as well as thepremium the intervenor may have paid in the posting of theP2,000,000.00 bond for the issuance of the restraining order ofApril 10, 1990. 6


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The BABASAS appealed to the Court of Appeals 7which on 29 February1996 affirmed the decision of the trial court rejecting the contention of theBABASAS that the contract of 11 April 1981 was one of lease, not ofsale;8and described it instead as one of absolute sale though denominated

"conditional." However, compounded interest was ordered paid from 19July 1983 only, the date of filing of the complaint, not from January 1983 asdecreed by the trial court.

The BABASAS now come to us reiterating their contention that the contractof 11 April 1981 was in reality a contract of lease, not of sale; but evenassuming that it was indeed a sale, its nature was conditionalonly, theefficacy of which was extinguished upon the non-happening of thecondition, i.e., non-delivery of clean certificates of title and registerabledocuments of sale in favor of TABANGAO within twenty (20) months fromthe signing of the contract.

We find no merit in the petition. Respondent appellate court has correctlyconcluded that the allegation of petitioners that the contract of 11 April1981 is one of lease, not of sale, is simply incredible. First, the contract isreplete with terms and stipulations clearly indicative of a contract of sale.Thus, the opening whereas clause states that the parties desire and mutually"agreed on the sale and purchase of the . . . three parcels of land;" theBABASAS were described as the "vendors" while TABANGAO as the"vendee" from the beginning of the contract to its end; the amount ofP2,121,920.00 was stated as thepurchaseprice of the lots; TABANGAO, asvendee, was granted absolute and unconditional right to take immediatepossession of the premises while the BABASAS, as vendors, warrantedsuch peaceful possessionforever; TABANGAO was to shoulder the capitalgains tax, and; lastly, the BABASAS were expected to execute a Final Deed ofAbsolute Sale in favor of TABANGAO necessary for the issuance of transfer

certificates of titlethe moment they were able to secure clean certificates oftitle in their name. Hence, with all the foregoing, we cannot give credenceto the claim of petitioners that subject contract was one of lease simplybecause the word "ownership" was never mentioned therein. Besides, ascorrectly pointed out by respondent court, the BABASAS did not object tothe terms and stipulations employed in the contract at the time of itsexecution when they could have easily done so considering that they werethen ably assisted by their counsel, Atty. Edgardo M. Carreon, whose legaltraining negates their pretended ignorance on the matter. Hence, it is too

late for petitioners to insist that the contract is not what they intended it tobe.

But the BABASAS lament that they never intended to sell their ancestrallots but were merely forced to do so when TABANGAO dangled the threatof expropriation by the government (through the Export Processing ZoneAuthority) in the event voluntary negotiations failed. Although a cause tocommiserate with petitioners may be perceived, it is not enough to providethem with an avenue to escape contractual obligations validly entered into.

We have already held that contracts are valid even though one of the


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parties entered into it against his own wish and desire, or even against hisbetter judgment.9Besides, a threat of eminent domain proceedings by thegovernment cannot be legally classified as the kind of imminent, seriousand wrongful injury to a contracting party as to vitiate his

consent. 10Private landowners ought to realize, and eventually accept, thatproperty rights must yield to the valid exercise by the state of its all-important power of eminent domain.11

Finally, petitioners contend that ownership over the three (3) lots wasnever transferred to TABANGAO and that the contract of 11 April 1981was rendered lifeless when the 20-month period stipulated therein expiredwithout them being able to deliver clean certificates of title to TABANGAOthrough no fault of their own. Consequently, their unilateral rescissiondated 28 February 1983 should have been upheld as valid.

We disagree. Although denominated "Conditional Sale of RegisteredLands," we hold, as did respondent court, that the 11 April 1981 betweenpetitioners and respondent TABANGAO is one of absolute sale. Asidefrom the terms and stipulations used therein indicating such kind of sale,there is absolutely no proviso reserving title in the BABASAS until fullpayment of the purchase price, nor any stipulation giving them the right tounilaterally rescind the contract in case of non-payment. A deed of sale isabsolute in nature although denominated a "conditional sale" absent suchstipulations.12In such cases, ownership of the thing sold passes to thevendee upon the constructive or actual delivery thereof. 13 In the instantcase, ownership over Lots Nos. 17827-A, 17827-B and 17827-C passed toTABANGAO both by constructive and actual delivery. Constructivedelivery was accomplished upon the execution of the contract of 11 April1981 without any reservation of title on the part of the BABASAS whileactual delivery was made when TABANGAO took unconditional

possession of the lots and leased them to its associate company SHELLwhich constructed its multi-million peso LPG Project thereon. 14

We do not agree with petitioners that their contract with TABANGAO lostits efficacy when the 20-month period stipulated therein expired withoutpetitioners being able to deliver clean certificates of title such thatTABANGAO may no longer demand performance of their obligation.In Romero v. Court of Appeals15and Lim v. Court of Appeals 16the Courtdistinguished between a condition imposed on the perfection of a contract

and a condition imposed merely on the performance of an obligation.While failure to comply with the first condition results in the failure of acontract, failure to comply with the second merely gives the other party theoption to either refuse to proceed with the sale or to waive the condition. 17

Here, a perfected contract of absolute sale exists between the BABASASand TABANGAO when they agreed on the sale of a determinate subjectmatter, i.e., Lots No. 17827-A, 17827-B and 17827-C, and the price certaintherefor without any condition or reservation of title on the part of the

BABASAS. However, the obligation of TABANGAO as vendee to paythefull amount of the purchase price was made subject to the condition


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that petitioners first deliver the clean titles over the lots within twenty (20)months from the signing of the contract. If petitioners succeed in deliveringthe titles within the stipulated 20-month period, they would getP1,821,920.00 representing the entire balance of the purchase price retained

by TABANGAO. Otherwise, the deed of sale itself provides that

. . . upon the expiration of the 20-month period from the signingof the contract the Vendee is hereby authorized to settle out ofthe balance retained by the Vendee all legally valid and existingobligations on the properties. . . and whatever balance remaining after said settlement shallbe paid to the Vendor.

Clearly then, the BABASAS' act of unilaterally rescinding their contractwith TABANGAO is unwarranted. Even without the abovequotedstipulation in the deed, the failure of petitioners to deliver clean titleswithin twenty (20) months from the signing of the contract merely givesTABANGAO the option to either refuse to proceed with the sale or towaive the condition in consonance with Art. 1545 of the New CivilCode. 18Besides, it would be the height of inequity to allow the BABASASto rescind their contract of sale with TABANGAO by invoking as a groundtherefor their own failure to deliver the titles over the lots within thestipulated period.

WHEREFORE, the petition is DENIED. The appealed decision of the Courtof Appeals in CA-G.R. CV No. 39554 affirming that of the Regional TrialCourt of Batangas City, Br. 4, is AFFIRMED. No costs.

SO ORDERED.

Davide, Jr., Vitug, Panganiban and Quisumbing, JJ., concur.


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G.R. No. 138018 July 26, 2002

RIDO MONTECILLO, petitioner,vs.

IGNACIA REYNES and SPOUSES REDEMPTOR and ELISAABUCAY, respondents.

CARPIO, J.:

The Case

On March 24, 1993, the Regional Trial Court of Cebu City, Branch 18,rendered a Decision1declaring the deed of sale of a parcel of land in favor

of petitioner null and void ab initio. The Court of Appeals,2

in its July 16,1998 Decision3as well as its February 11, 1999 Order4denying petitionersMotion for Reconsideration, affirmed the trial courts decision in toto.Before this Court now is a Petition for Review on Certiorari5assailing theCourt of Appeals decision and order.

The Facts

Respondents Ignacia Reynes ("Reynes" for brevity) and Spouses Abucay("Abucay Spouses" for brevity) filed on June 20, 1984 a complaint forDeclaration of Nullity and Quieting of Title against petitioner RidoMontecillo ("Montecillo" for brevity). Reynes asserted that she is the ownerof a lot situated in Mabolo, Cebu City, covered by Transfer Certificate ofTitle No. 74196 and containing an area of 448 square meters ("Mabolo Lot"for brevity). In 1981, Reynes sold 185 square meters of the Mabolo Lot tothe Abucay Spouses who built a residential house on the lot they bought.

Reynes alleged further that on March 1, 1984 she signed a Deed of Sale ofthe Mabolo Lot in favor of Montecillo ("Montecillos Deed of Sale" forbrevity). Reynes, being illiterate,6 signed by affixing her thumb-mark7onthe document. Montecillo promised to pay the agreed P47,000.00 purchase

price within one month from the signing of the Deed of Sale. MontecillosDeed of Sale states as follows:

"That I, IGNACIA T. REYNES, of legal age, Filipino, widow, withresidence and postal address at Mabolo, Cebu City, Philippines,forand in consideration of FORTY SEVEN THOUSAND (P47,000.00)

PESOS, Philippine Currency, to me in hand paid by RIDOMONTECILLO, of legal age, Filipino, married, with residence andpostal address at Mabolo, Cebu City, Philippines, the receipt hereof ishereby acknowledged, have sold, transferred, and conveyed, untoRIDO MONTECILLO, his heirs, executors, administrators, andassigns, forever, a parcel of land together with the improvementsthereon, situated at Mabolo, Cebu City, Philippines, free from allliens and encumbrances, and more particularly described as follows:

A parcel of land (Lot 203-B-2-B of the subdivision plan Psd-07-01-00 2370, being a portion of Lot 203-B-2, described on plan


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(LRC) Psd-76821, L.R.C. (GLRO) Record No. 5988), situated inthe Barrio of Mabolo, City of Cebu. Bounded on the SE., alongline 1-2 by Lot 206; on the SW., along line 2-3, by Lot 202, bothof Banilad Estate; on the NW., along line 4-5, by Lot 203-B-2-A

of the subdivision of Four Hundred Forty Eight (448) squaremeters, more or less.

of which I am the absolute owner in accordance with the provisionsof the Land Registration Act, my title being evidenced by TransferCertificate of Title No. 74196 of the Registry of Deeds of the City ofCebu, Philippines. That This Land Is Not Tenanted and Does Not FallUnder the Purview of P.D. 27."8(Emphasis supplied)

Reynes further alleged that Montecillo failed to pay the purchase price afterthe lapse of the one-month period, prompting Reynes to demand fromMontecillo the return of the Deed of Sale. Since Montecillo refused toreturn the Deed of Sale,9Reynes executed a document unilaterallyrevoking the sale and gave a copy of the document to Montecillo.

Subsequently, on May 23, 1984 Reynes signed a Deed of Sale transferring tothe Abucay Spouses the entire Mabolo Lot, at the same time confirming theprevious sale in 1981 of a 185-square meter portion of the lot. This Deed of

Sale states:

"I, IGNACIA T. REYNES, of legal age, Filipino, widow and residentof Mabolo, Cebu City, do hereby confirm the sale of a portion of LotNo. 74196 to an extent of 185 square meters to Spouses RedemptorAbucay and Elisa Abucay covered by Deed per Doc. No. 47, Page No.9, Book No. V, Series of 1981 of notarial register of Benedicto Alo, ofwhich spouses is now in occupation;

That for and in consideration of the total sum of FIFTY THOUSAND(P50,000) PESOS, Philippine Currency, received in full and receipt

whereof is herein acknowledged from SPOUSES REDEMPTORABUCAY and ELISA ABUCAY, do hereby in these presents, SELL,TRANSFER and CONVEY absolutely unto said Spouses RedemptorAbucay and Elisa Abucay, their heirs, assigns and successors-in-interest the whole parcel of land together with improvements thereonand more particularly described as follows:

TCT No. 74196

A parcel of land (Lot 203-B-2-B of the subdivision plan psd-07-01-002370, being a portion of Lot 203-B-2, described on plan(LRC) Psd 76821, LRC (GLRO) Record No. 5988) situated inMabolo, Cebu City, along Arcilla Street, containing an area oftotal FOUR HUNDRED FORTY EIGHT (448) Square meters.

of which I am the absolute owner thereof free from all liens and

encumbrances and warrant the same against claim of third persons


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and other deeds affecting said parcel of land other than that to thesaid spouses and inconsistent hereto is declared without any effect.

In witness whereof, I hereunto signed this 23rdday of May, 1984 in

Cebu City, Philippines."10

Reynes and the Abucay Spouses alleged that on June 18, 1984 they receivedinformation that the Register of Deeds of Cebu City issued Certificate ofTitle No. 90805 in the name of Montecillo for the Mabolo Lot.

Reynes and the Abucay Spouses argued that "for lack of considerationthere (was) no meeting of the minds"11between Reynes and Montecillo.Thus, the trial court should declare null and void ab initioMontecillos

Deed of Sale, and order the cancellation of Certificate of Title No. 90805 inthe name of Montecillo.

In his Answer, Montecillo, a bank executive with a B.S. Commercedegree,12claimed he was a buyer in good faith and had actually paidthe P47,000.00 consideration stated in his Deed of Sale. Montecillo,

however, admitted he still owed Reynes a balance of P10,000.00. He also

alleged that he paid P50,000.00 for the release of the chattel mortgage

which he argued constituted a lien on the Mabolo Lot. He further alleged

that he paid for the real property tax as well as the capital gains tax on thesale of the Mabolo Lot.

In their Reply, Reynes and the Abucay Spouses contended that Montecillodid not have authority to discharge the chattel mortgage, especially afterReynes revoked Montecillos Deed of Sale and gave the mortgagee a copyof the document of revocation. Reynes and the Abucay Spouses claimedthat Montecillo secured the release of the chattel mortgage throughmachination. They further asserted that Montecillo took advantage of the

real property taxes paid by the Abucay Spouses and surreptitiously causedthe transfer of the title to the Mabolo Lot in his name.

During pre-trial, Montecillo claimed that the consideration for the sale ofthe Mabolo Lot was the amount he paid to Cebu Ice and Cold StorageCorporation ("Cebu Ice Storage" for brevity) for the mortgage debt ofBienvenido Jayag ("Jayag" for brevity). Montecillo argued that the releaseof the mortgage was necessary since the mortgage constituted a lien on theMabolo Lot.

Reynes, however, stated that she had nothing to do with Jayags mortgagedebt except that the house mortgaged by Jayag stood on a portion of theMabolo Lot. Reynes further stated that the payment by Montecillo torelease the mortgage on Jayags house is a matter between Montecillo and

Jayag. The mortgage on the house, being a chattel mortgage, could not beinterpreted in any way as an encumbrance on the Mabolo Lot. Reynesfurther claimed that the mortgage debt had long prescribed since theP47,000.00 mortgage debt was due for payment on January 30, 1967.


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The trial court rendered a decision on March 24, 1993 declaring the Deed ofSale to Montecillo null and void. The trial court ordered the cancellation ofMontecillos Transfer Certificate of Title No. 90805 and the issuance of anew certificate of title in favor of the Abucay Spouses. The trial court found

that Montecillos Deed of Sale had no cause or consideration becauseMontecillo never paid Reynes the P47,000.00 purchase price, contrary to

what is stated in the Deed of Sale that Reynes received the purchase price.The trial court ruled that Montecillos Deed of Sale produced no effectwhatsoever for want of consideration. The dispositive portion of the trialcourts decision reads as follows:

"WHEREFORE, in view of the foregoing consideration, judgment ishereby rendered declaring the deed of sale in favor of defendant nulland void and of no force and effect thereby ordering the cancellationof Transfer Certificate of Title No. 90805 of the Register of Deeds ofCebu City and to declare plaintiff Spouses Redemptor and ElisaAbucay as rightful vendees and Transfer Certificate of Title to theproperty subject matter of the suit issued in their names. Thedefendants are further directed to pay moral damages in the sumof P20,000.00 and attorneys fees in the sum ofP2,000.00 plus cost of

the suit.

xxx"

Not satisfied with the trial courts Decision, Montecillo appealed the sameto the Court of Appeals.

Ruling of the Court of Appeals

The appellate court affirmed the Decision of the trial court in totoanddismissed the appeal13on the ground that Montecillos Deed of Sale is void

for lack of consideration. The appellate court also denied MontecillosMotion for Reconsideration14on the ground that it raised no newarguments.

Still dissatisfied, Montecillo filed the present petition for review oncertiorari.

The Issues

Montecillo raises the following issues:1. "Was there an agreement between Reynes and Montecillo that thestated consideration of P47,000.00 in the Deed of Sale be paid to Cebu

Ice and Cold Storage to secure the release of the Transfer Certificateof Title?"

2. "If there was none, is the Deed of Sale void from the beginning orsimply rescissible?"15

The Ruling of the Court


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The petition is devoid of merit.

First issue: manner of payment of the P47,000.00 purchase price.

Montecillos Deed of Sale does not state that theP47,000.00 purchase price

should be paid by Montecillo to Cebu Ice Storage. Montecillo failed toadduce any evidence before the trial court showing that Reynes hadagreed, verbally or in writing, that the P47,000.00 purchase price should be

paid to Cebu Ice Storage. Absent any evidence showing that Reynes hadagreed to the payment of the purchase price to any other party, thepayment to be effective must be made to Reynes, the vendor in the sale.Article 1240 of the Civil Code provides as follows:

"Payment shall be made to the person in whose favor the obligationhas been constituted, or his successor in interest, or any personauthorized to receive it."

Thus, Montecillos payment to Cebu Ice Storage is not the payment thatwould extinguish16Montecillos obligation to Reynes under the Deed ofSale.

It militates against common sense for Reynes to sell her Mabolo Lot

for P47,000.00 if this entire amount would only go to Cebu Ice Storage,

leaving not a single centavo to her for giving up ownership of a valuableproperty. This incredible allegation of Montecillo becomes even moreabsurd when one considers that Reynes did not benefit, directly orindirectly, from the payment of the P47,000.00 to Cebu Ice Storage.

The trial court found that Reynes had nothing to do with Jayags mortgagedebt with Cebu Ice Storage. The trial court made the following findings offact:

"x x x. Plaintiff Ignacia Reynes was not a party to nor privy of theobligation in favor of the Cebu Ice and Cold Storage Corporation, theobligation being exclusively of Bienvenido Jayag and wife whomortgaged their residential house constructed on the land subjectmatter of the complaint. The payment by the defendant to release theresidential house from the mortgage is a matter between him and

Jayag and cannot by implication or deception be made to appear asan encumbrance upon the land."17

Thus, Montecillos payment to Jayags creditor could not possibly redoundto the benefit18of Reynes. We find no reason to disturb the factual findingsof the trial court. In petitions for review on certiorari as a mode of appealunder Rule 45, as in the instant case, a petitioner can raise only questions oflaw.19This Court is not the proper venue to consider a factual issue as it isnot a trier of facts.

Second issue: whether the Deed of Sale is void ab initio or only rescissible.


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Under Article 1318 of the Civil Code, "[T]here is no contract unless thefollowing requisites concur: (1) Consent of the contracting parties; (2)Object certain which is the subject matter of the contract; (3) Cause of theobligation which is established." Article 1352 of the Civil Code also

provides that "[C]ontracts without cause x x x produce no effectwhatsoever."

Montecillo argues that his Deed of Sale has all the requisites of a validcontract. Montecillo points out that he agreed to purchase, and Reynesagreed to sell, the Mabolo Lot at the price of P47,000.00. Thus, the three

requisites for a valid contract concur: consent, object certain andconsideration. Montecillo asserts there is no lack of consideration thatwould prevent the existence of a valid contract. Rather, there is only non-payment of the consideration within the period agreed upon for payment.

Montecillo argues there is only a breach of his obligation to pay the fullpurchase price on time. Such breach merely gives Reynes a right to ask forspecific performance, or for annulment of the obligation to sell the MaboloLot. Montecillo maintains that in reciprocal obligations, the injured partycan choose between fulfillment and rescission,20or more properlycancellation, of the obligation under Article 119121of the Civil Code. ThisArticle also provides that the "court shall decree the rescission claimed,unless there be just cause authorizing the fixing of the period." Montecilloclaims that because Reynes failed to make a demand for payment, andinstead unilaterally revoked Montecillos Deed of Sale, the court has a justcause to fix the period for payment of the balance of the purchase price.

These arguments are not persuasive.

Montecillos Deed ofSale states that Montecillo paid, and Reynes received,the P47,000.00 purchase price on March 1, 1984, the date of signing of the

Deed of Sale. This is clear from the following provision of the Deed of Sale:

"That I, IGNACIA T. REYNES, x x xfor and in consideration ofFORTY SEVEN THOUSAND (P47,000.00) PESOS, Philippine

Currency, to me in hand paid by RIDO MONTECILLO xxx, receipt ofwhich is hereby acknowledged,have sold, transferred, and conveyed,unto RIDO MONTECILLO, x x x a parcel of land x x x."

On its face, Montecillos Deed of Absolute Sale22appears supported by a

valuable consideration. However, based on the evidence presented by bothReynes and Montecillo, the trial court found that Montecillo never paid toReynes, and Reynes never received from Montecillo, the P47,000.00

purchase price. There was indisputably a total absence of considerationcontrary to what is stated in Montecillos Deed of Sale. As pointed out bythe trial court

"From the allegations in the pleadings of both parties and the oraland documentary evidence adduced during the trial, the court is

convinced that the Deed of Sale (Exhibits "1" and "1-A") executed by


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plaintiff Ignacia Reynes acknowledged before Notary PublicPonciano Alvinio is devoid of any consideration. Plaintiff IgnaciaReynes through the representation of Baudillo Baladjay had executeda Deed of Sale in favor of defendant on the promise that the

consideration should be paid within one (1) month from theexecution of the Deed of Sale. However, after the lapse of said period,defendant failed to pay even a single centavo of the consideration.The answer of the defendant did not allege clearly why noconsideration was paid by him except for the allegation that he had abalance of only P10,000.00. It turned out during the pre-trial that

what the defendant considered as the consideration was the amountwhich he paid for the obligation of Bienvenido Jayag with the CebuIce and Cold Storage Corporation over which plaintiff Ignacia Reynesdid not have a part except that the subject of the mortgage wasconstructed on the parcel of land in question. Plaintiff Ignacia Reyneswas not a party to nor privy of the obligation in favor of the Cebu Iceand Cold Storage Corporation, the obligation being exclusively ofBienvenido Jayag and wife who mortgaged their residential houseconstructed on the land subject matter of the complaint. The paymentby the defendant to release the residential house from the mortgageis a matter between him and Jayag and cannot by implication or

deception be made to appear as an encumbrance upon the land. "23

Factual findings of the trial court are binding on us, especially if the Courtof Appeals affirms such findings.24We do not disturb such findings unlessthe evidence on record clearly does not support such findings or suchfindings are based on a patent misunderstanding of facts,25which is not thecase here. Thus, we find no reason to deviate from the findings of both thetrial and appellate courts that no valid consideration supportedMontecillos Deed of Sale.

This is not merely a case of failure to pay the purchase price, as Montecilloclaims, which can only amount to a breach of obligation with rescission asthe proper remedy. What we have here is a purported contract that lacks acause - one of the three essential requisites of a valid contract. Failure topay the consideration is different from lack of consideration. The formerresults in a right to demand the fulfillment or cancellation of the obligationunder an existing valid contract26while the latter prevents the existence ofa valid contract

Where the deed of sale states that the purchase price has been paid but infact has never been paid, the deed of sale is null and void ab initiofor lackof consideration. This has been the well-settled rule as early as Ocejo Perez& Co. v. Flores,27a 1920 case. As subsequently explained inMapalo v.

Mapalo28

"In our view, therefore, the ruling of this Court in Ocejo Perez & Co.vs. Flores, 40 Phil. 921, is squarely applicable herein. In that case we

ruled that a contract of purchase and sale is null and void andproduces no effect whatsoever where the same is without cause or


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consideration in that the purchase price which appears thereon aspaid has in fact never been paid by the purchaser to the vendor."

The Court reiterated this rule in Vda. De Catindig v. Heirs of Catalina

Roque,29to wit

"The Appellate Courts finding that the price was not paid or that thestatement in the supposed contracts of sale (Exh. 6 to 26) as to thepayment of the price was simulated fortifies the view that the allegedsales were void. "If the price is simulated, the sale is void . . ." (Art.1471, Civil Code)

A contract of sale is void and produces no effect whatsoever where

the price, which appears thereon as paid, has in fact never been paidby the purchaser to the vendor (Ocejo, Perez & Co. vs. Flores and Bas,40 Phil. 921; Mapalo vs. Mapalo, L-21489, May 19, 1966, 64 O.G. 331,17 SCRA 114, 122). Such a sale is non-existent (Borromeo vs.Borromeo, 98 Phil. 432) or cannot be considered consummated(Cruzado vs. Bustos and Escaler, 34 Phil. 17; Garanciang vs.Garanciang, L-22351, May 21, 1969, 28 SCRA 229)."

Applying this well-entrenched doctrine to the instant case, we rule that

Montecillos Deed of Sale is null and voidab initiofor lack of consideration.

Montecillo asserts that the only issue in controversy is "the mode and/ormanner of payment and/or whether or not payment has beenmade."30Montecillo implies that the mode or manner of payment isseparate from the consideration and does not affect the validity of thecontract. In the recent case of San Miguel Properties Philippines, Inc. v.

Huang,31we ruled that

"In Navarro v. Sugar Producers Cooperative Marketing Association, Inc. (1SCRA 1181 [1961]), we laid down the rule that the manner ofpayment of the purchase price is an essential element before a validand binding contract of sale can exist.Although the Civil Code doesnot expressly state that the minds of the parties must also meet on theterms or manner of payment of the price, the same is needed,otherwise there is no sale. As held in Toyota Shaw, Inc. v. Court ofAppeals(244 SCRA 320 [1995]), agreement on the manner of paymentgoes into the price such that a disagreement on the manner of

payment is tantamount to a failure to agree on the price." (Emphasissupplied)

One of the three essential requisites of a valid contract is consent of theparties on the object and cause of the contract. In a contract of sale, theparties must agree not only on the price, but also on the manner ofpayment of the price. An agreement on the price but a disagreement on themanner of its payment will not result in consent, thus preventing theexistence of a valid contract for lack of consent. This lack of consent is


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separate and distinct from lack of considerationwhere the contract statesthat the price has been paid when in fact it has never been paid.

Reynes expected Montecillo to pay him directly the P47,000.00 purchase

price within one month after the signing of the Deed of Sale. On the otherhand, Montecillo thought that his agreement with Reynes required him topay the P47,000.00 purchase price to Cebu Ice Storage to settle Jayags

mortgage debt. Montecillo also acknowledged a balance of P10,000.00 in

favor of Reynes although this amount is not stated in Montecillos Deed ofSale. Thus, there was no consent, or meeting of the minds, between Reynesand Montecillo on the manner of payment. This prevented the existence ofa valid contract because of lack of consent.

In summary, Montecillos Deed of Sale is null and voidab initionot onlyfor lack of consideration, but also for lack of consent. The cancellation ofTCT No. 90805 in the name of Montecillo is in order as there was no validcontract transferring ownership of the Mabolo Lot from Reynes toMontecillo.

WHEREFORE, the petition is DENIED and the assailed Decision dated July16, 1998 of the Court of Appeals in CA-G.R. CV No. 41349 is AFFIRMED.Costs against petitioner.

SO ORDERED.

Puno, Panganiban, and Sandoval-Gutierrez, JJ., concur.


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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 Florida C. Tupper, asattorney-in-fact), CIELITO A. CORONEL, FLORAIDA A. ALMONTE, andCATALINA BALAIS MABANAG, petitioners,vs.THE COURT OF APPEALS, CONCEPCION D. ALCARAZ, and RAMONAPATRICIA ALCARAZ, assisted by GLORIA F. NOEL as attorney-in-fact, respondents.

MELO,J.:p

The petition before us has its roots in a complaint for specific performance to compelherein petitioners (except the last named, Catalina Balais Mabanag) to consummate thesale of a parcel of land with its improvements located along Roosevelt Avenue inQuezon City entered into by the parties sometime in January 1985 for the price ofP1,240,000.00.

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 RamonaPatricia Alcaraz (hereinafter referred to as Ramona) which is reproducedhereunder:

RECEIPT OF DOWN PAYMENT

P1,240,000.00 Total amount

50,000 Down paymentP1,190,000.00 Balance

Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City,the sum of Fifty Thousand Pesos purchase price of our inherited houseand lot, covered by TCT No. 119627 of the Registry of Deeds of QuezonCity, in the total amount of P1,240,000.00.

We bind ourselves to effect the transfer in our names from our deceasedfather, 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 immediatelyexecute the deed of absolute sale of said property and Miss RamonaPatricia Alcaraz shall immediately pay the balance of the P1,190,000.00.

Clearly, the conditions appurtenant to the sale are the following:

1. Ramona will make a down payment of Fifty Thousand (P50,000.00)Pesos upon execution of the document aforestated;


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2. The Coronels will cause the transfer in their names of the title of theproperty registered in the name of their deceased father upon receipt ofthe Fifty Thousand (P50,000.00) Pesos down payment;

3. Upon the transfer in their names of the subject property, the Coronelswill execute the deed of absolute sale in favor of Ramona and the latterwill pay the former the whole balance of One Million One HundredNinety 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, paidthe 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 TCTNo. 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 referredto 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 thebank in trust for Ramona Patricia Alcaraz.

On February 22, 1985, Concepcion, et al., filed a complaint for specificperformance against the Coronels and caused the annotation of a noticeof 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 adverseclaim covering the same property with the Registry of Deeds of QuezonCity (Exh. "F"; Exh. "6").

On April 25, 1985, the Coronels executed a Deed of Absolute Sale over thesubject property in favor of Catalina (Exh. "G"; Exh. "7").

On June 5, 1985, a new title over the subject property was issued in thename 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) theparties agreed to submit the case for decision solely on the basis of documentary

exhibits. Thus, plaintiffs therein (now private respondents) proffered their documentaryevidence accordingly marked as Exhibits "A" through "J", inclusive of theircorresponding submarkings. Adopting these same exhibits as their own, thendefendants (now petitioners) accordingly offered and marked them as Exhibits "1"through "10", likewise inclusive of their corresponding submarkings. Upon motion ofthe parties, the trial court gave them thirty (30) days within which to simultaneouslysubmit their respective memoranda, and an additional 15 days within which to submittheir corresponding comment or reply thereof, after which, the case would be deemedsubmitted 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


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City. On March 1, 1989, judgment was handed down by Judge Roura from his regularbench 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 salecovering that parcel of land embraced in and covered by TransferCertificate of Title No. 327403 (now TCT No. 331582) of the Registry ofDeeds for Quezon City, together with all the improvements existingthereon free from all liens and encumbrances, and once accomplished, toimmediately deliver the said document of sale to plaintiffs and uponreceipt thereof, the said document of sale to plaintiffs and upon receiptthereof, the plaintiffs are ordered to pay defendants the whole balance ofthe purchase price amounting to P1,190,000.00 in cash. Transfer Certificateof Title No. 331582 of the Registry of Deeds for Quezon City in the nameof intervenor is hereby canceled and declared to be without force and

effect. Defendants and intervenor and all other persons claiming underthem are hereby ordered to vacate the subject property and deliverpossession thereof to plaintiffs. Plaintiffs' claim for damages andattorney's fees, as well as the counterclaims of defendants and intervenorsare 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 petitioner before the new presiding judge ofthe 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 andto render anew decision by the undersigned Presiding Judge should bedenied for the following reasons: (1) The instant case became submittedfor decision as of April 14, 1988 when the parties terminated thepresentation of their respective documentary evidence and when thePresiding Judge at that time was Judge Reynaldo Roura. The fact that theywere allowed to file memoranda at some future date did not change thefact that the hearing of the case was terminated before Judge Roura andtherefore the same should be submitted to him for decision; (2) When thedefendants and intervenor did not object to the authority of JudgeReynaldo Roura to decide the case prior to the rendition of the decision,when they met for the first time before the undersigned Presiding Judge atthe hearing of a pending incident in Civil Case No. Q-46145 on November11, 1988, they were deemed to have acquiesced thereto and they are now

estopped from questioning said authority of Judge Roura after theyreceived 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-detailat this Branch of the Court, he was in all respects the Presiding Judge withfull authority to act on any pending incident submitted before this Courtduring his incumbency. When he returned to his Official Station atMacabebe, Pampanga, he did not lose his authority to decide or resolvesuch cases submitted to him for decision or resolution because hecontinued as Judge of the Regional Trial Court and is of co-equal rankwith the undersigned Presiding Judge. The standing rule and supported

by jurisprudence is that a Judge to whom a case is submitted for decision


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has the authority to decide the case notwithstanding his transfer toanother branch or region of the same court (Sec. 9, Rule 135, Rule ofCourt).

Coming now to the twin prayer for reconsideration of the Decision datedMarch 1, 1989 rendered in the instant case, resolution of which nowpertains to the undersigned Presiding Judge, after a meticulousexamination of the documentary evidence presented by the parties, she isconvinced that the Decision of March 1, 1989 is supported by evidenceand, therefore, should not be disturbed.

IN VIEW OF THE FOREGOING, the "Motion for Reconsideration and/orto Annul Decision and Render Anew Decision by the Incumbent PresidingJudge" 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 ofAppeals (Buena, Gonzaga-Reyes, Abad Santos (P), JJ.) rendered its decision fullyagreeing with the trial court.

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

While we deem it necessary to introduce certain refinements in the disquisition ofrespondent court in the affirmance of the trial court's decision, we definitely find theinstant petition bereft of merit.

The heart of the controversy which is the ultimate key in the resolution of the otherissues 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 bothparties. There is no dispute as to the fact that said document embodied the bindingcontract between Ramona Patricia Alcaraz on the one hand, and the heirs of ConstancioP. 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 asfollows:

Art. 1305. A contract is a meeting of minds between two persons wherebyone binds himself, with respect to the other, to give something or torender 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 ofan action for specific performance, petitioners on their part insist that what thedocument signified was a mere executory contract to sell, subject to certain suspensiveconditions, and because of the absence of Ramona P. Alcaraz, who left for the UnitedStates of America, said contract could not possibly ripen into a contract absolute sale.

Plainly, such variance in the contending parties' contentions is brought about by theway 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


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record, this, Court, as were the courts below, is now called upon to adjudge what thereal 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 obligateshimself 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 ownershipin exchange for the price;

b) Determinate subject matter; and

c) Price certain in money or its equivalent.

Under this definition, a Contract to Sell may not be considered as a Contract of Salebecause the first essential element is lacking. In a contract to sell, the prospective sellerexplicity reserves the transfer of title to the prospective buyer, meaning, the prospectiveseller does not as yet agree or consent to transfer ownership of the property subject ofthe contract to sell until the happening of an event, which for present purposes we shalltake as the full payment of the purchase price. What the seller agrees or obliges himself

to do is to fulfill is promise to sell the subject property when the entire amount of thepurchase price is delivered to him. In other words the full payment of the purchaseprice partakes of a suspensive condition, the non-fulfillment of which prevents theobligation to sell from arising and thus, ownership is retained by the prospective sellerwithout 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 therespondent was a contract to sell where the ownership or title is retainedby the seller and is not to pass until the full payment of the price, suchpayment being a positive suspensive condition and failure of which is nota breach, casual or serious, but simply an event that prevented theobligation of the vendor to convey title from acquiring binding force.

Stated positively, upon the fulfillment of the suspensive condition which is the fullpayment of the purchase price, the prospective seller's obligation to sell the subjectproperty by entering into a contract of sale with the prospective buyer becomesdemandable 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 certainis reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate thing for aprice certain is binding upon the promissor if the promise is supported bya consideration distinct from the price.

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


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A contract to sell as defined hereinabove, may not even be considered as a conditionalcontract of sale where the seller may likewise reserve title to the property subject of thesale until the fulfillment of a suspensive condition, because in a conditional contract ofsale, 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 suspensivecondition 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 thatif there had already been previous delivery of the property subject of the sale to thebuyer, ownership thereto automatically transfers to the buyer by operation of lawwithout 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 fullpayment of the purchase price, ownership will not automatically transfer to the buyeralthough the property may have been previously delivered to him. The prospective

seller still has to convey title to the prospective buyer by entering into a contract ofabsolute sale.

It is essential to distinguish between a contract to sell and a conditional contract of salespecially in cases where the subject property is sold by the owner not to the party theseller 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 propertydespite the fulfillment of the suspensive condition such as the full payment of thepurchase price, for instance, cannot be deemed a buyer in bad faith and the prospectivebuyer 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 thereis no defect in the owner-seller's titleper se, but the latter, of course, may be used fordamages by the intending buyer.

In a conditional contract of sale, however, upon the fulfillment of the suspensivecondition, the sale becomes absolute and this will definitely affect the seller's titlethereto. In fact, if there had been previous delivery of the subject property, the seller'sownership 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 Article1544 of the Civil Code, such second buyer of the property who may have had actual or

constructive knowledge of such defect in the seller's title, or at least was charged withthe obligation to discover such defect, cannot be a registrant in good faith. Such secondbuyer cannot defeat the first buyer's title. In case a title is issued to the second buyer, thefirst 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 thereal 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 begiven 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 thesaid "Receipt of Down Payment" that they

Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City,the sum of Fifty Thousand Pesospurchase price of our inherited house and lot,covered by TCT No. 1199627 of the Registry of Deeds of Quezon City, inthe 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.


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When the "Receipt of Down Payment" is considered in its entirety, it becomes moremanifest that there was a clear intent on the part of petitioners to transfer title to thebuyer, but since the transfer certificate of title was still in the name of petitioner's 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 uponreceipt of the down payment from private respondent Ramona P. Alcaraz, to cause theissuance of a new certificate of title in their names from that of their father, after which,they promised

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