LIMKETKAI SONS MILLING, INC., petitioner, vs.COURT OF APPEALS, BANK OF THE PHILIPPINE ISLANDS and NATIONAL BOOK STORE, respondents.

 

MELO, J.:

The issue in the petition before us is whether or not there was a perfected contract between petitioner Limketkai Sons Milling, Inc. and respondent Bank of the Philippine Islands (BPI) covering the sale of a parcel of land, approximately 3.3 hectares in area, and located in Barrio Bagong Ilog, Pasig City, Metro Manila.

Branch 151 of the Regional Trial Court of the National Capital Judicial Region stationed in Pasig ruled that there was a perfected contract of sale between petitioner and BPI. It stated that there was mutual consent between the parties; the subject matter is definite; and the consideration was determined. It concluded that all the elements of a consensual contract are attendant. It ordered the cancellation of a sale effected by BPI to respondent National Book Store (NBS) while the case was pending and the nullification of a title issued in favor of said respondent NBS.

Upon elevation of the case to the Court of Appeals, it was held that no contract of sale was perfected because there was no concurrence of the three requisites enumerated in Article 1318 of the Civil Code. The decision of the trial court was reversed and the complaint dismissed.

Hence, the instant petition.

Shorn of the interpretations given to the acts of those who participated in the disputed sale, the findings of facts of the trial

court and the Court of Appeals narrate basically the same events and occurrences. The records show that on May 14, 1976, Philippine Remnants Co., Inc. constituted BPI as its trustee to manage, administer, and sell its real estate property. One such piece of property placed under trust was the disputed lot, a 33,056-square meter lot at Barrio Bagong Ilog, Pasig, Metro Manila covered by Transfer Certificate of Title No. 493122.

On June 23, 1988, Pedro Revilla, Jr., a licensed real estate broker was given formal authority by BPI to sell the lot for P1,000.00 per square meter. This arrangement was concurred in by the owners of the Philippine Remnants.

Broker Revilla contacted Alfonso Lim of petitioner company who agreed to buy the land. On July 8, 1988, petitioner's officials and Revilla were given permission by Rolando V. Aromin, BPI Assistant Vice-President, to enter and view the property they were buying.

On July 9, 1988, Revilla formally informed BPI that he had procured a buyer, herein petitioner. On July 11, 1988, petitioner's officials, Alfonso Lim and Albino Limketkai, went to BPI to confirm the sale. They were entertained by Vice-President Merlin Albano and Asst. Vice-President Aromin. Petitioner asked that the price of P1,000.00 per square meter be reduced to P900.00 while Albano stated the price to be P1,100.00. The parties finally agreed that the lot would be sold at P1,000.00 per square meter to be paid in cash. Since the authority to sell was on a first come, first served and non-exclusive basis, it may be mentioned at this juncture that there is no dispute over petitioner's being the first comer and the buyer to be first served.

Notwithstanding the final agreement to pay P1,000.00 per square meter on a cash basis, Alfonso Lim asked if it was possible to pay on terms. The bank officials stated that there was no harm in trying to ask for payment on terms because in previous

transactions, the same had been allowed. It was the understanding, however, that should the term payment be disapproved, then the price shall be paid in cash.

It was Albano who dictated the terms under which the installment payment may be approved, and acting thereon, Alfonso Lim, on the same date, July 11, 1988, wrote BPI through Merlin Albano embodying the payment initially of 10% and the remaining 90% within a period of 90 days.

Two or three days later, petitioner learned that its offer to pay on terms had been frozen. Alfonso Lim went to BPI on July 18, 1988 and tendered the full payment of P33,056,000.00 to Albano. The payment was refused because Albano stated that the authority to sell that particular piece of property in Pasig had been withdrawn from his unit. The same check was tendered to BPI Vice-President Nelson Bona who also refused to receive payment.

An action for specific performance with damages was thereupon filed on August 25, 1988 by petitioner against BPI. In the course of the trial, BPI informed the trial court that it had sold the property under litigation to NBS on July 14, 1989. The complaint was thus amended to include NBS.

On June 10, 1991, the trial court rendered judgment in the case as follows:

WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendants Bank of the Philippine Islands and National Book Store, Inc.: —

1. Declaring the Deed of Sale of the property covered by T.C.T. No. 493122 in the name of the Bank of the Philippine Islands, situated in Barrio Bagong Ilog, Pasig, Metro Manila, in favor of National Book Store, Inc., null and void;

2. Ordering the Register of Deeds of the Province of Rizal to cancel the Transfer Certificate of Title which may have been issued in favor of National Book Store, Inc. by virtue of the aforementioned Deed of Sale dated July 14, 1989;

3. Ordering defendant BPI, upon receipt by it from plaintiff of the sum of P33,056,000.00, to execute a Deed of Sale in favor of plaintiff of the aforementioned property at the price of P1,000.00 per square meter; in default thereof, the Clerk of this Court is directed to execute the said deed;

4. Ordering the Register of Deeds of Pasig, upon registration of the said deed, whether executed by defendant BPI or the Clerk of Court and payment of the corresponding fees and charges, to cancel said T.C.T. No. 493122 and to issue, in lieu thereof, another transfer certificate of title in the name of plaintiff;

5. Ordering defendants BPI and National Book Store, Inc. to pay, jointly and severally, to the plaintiff the sums of P10,000,000.00 as actual and consequential damages and P150,000.00 as attorney's fees and litigation expenses, both with interest at 12% per annum from date hereof;

6. On the cross-claim of defendant bank against National Book Store, ordering the latter to indemnify the former of whatever amounts BPI shall have paid to the plaintiff by reason hereof; and

7. Dismissing the counterclaims of the defendants against the plaintiff and National Book Store's cross-claim against defendant bank.

Costs against defendants.

(pp. 44-45, Rollo.)

As earlier intimated, upon the decision being appealed, the Court of Appeals (Buena [P], Rasul, and Mabutas,JJ.), on August 12, 1994, reversed the trial court's decision and dismissed petitioner's complaint for specific performance and damages.

The issues raised by the parties revolve around the following four questions:

(1) Was there a meeting of the minds between petitioner Limketkai and respondent BPI as to the subject matter of the contract and the cause of the obligation?

(2) Were the bank officials involved in the transaction authorized by BPI to enter into the questioned contract?

(3) Is there competent and admissible evidence to support the alleged meeting of the minds?

(4) Was the sale of the disputed land to the NBS during the pendency of trial effected in good faith?

There is no dispute in regard to the following: (a) that BPI as trustee of the property of Philippine Remnant Co. authorized a licensed broker, Pedro Revilla, to sell the lot for P1,000.00 per square meter; (b) that Philippine Remnants confirmed the authority to sell of Revilla and the price at which he may sell the lot; (c) that petitioner and Revilla agreed on the former buying the property; (d) that BPI Assistant Vice-President Rolando V. Aromin allowed the broker and the buyer to inspect the property; and (e) that BPI was formally informed about the broker having procured a buyer.

The controversy revolves around the interpretation or the significance of the happenings or events at this point.

Petitioner states that the contract to sell and to buy was perfected on July 11, 1988 when its top officials and broker Revilla finalized the details with BPI Vice-Presidents Merlin Albano and Rolando V. Aromin at the BPI offices.

Respondents, however, contend that what transpired on this date were part of continuing negotiations to buy the land and not the perfection of the sale. The arguments of respondents center on two propositions — (1) Vice-Presidents Aromin and Albano had no authority to bind BPI on this particular transaction and (2) the subsequent attempts of petitioner to pay under terms instead of full payment in cash constitutes a counter-offer which negates the existence of a perfected contract.

The alleged lack of authority of the bank officials acting in behalf of BPI is not sustained by the record.

At the start of the transactions, broker Revilla by himself already had full authority to sell the disputed lot. Exhibit B dated June 23, 1988 states, "this will serve as your authority to sell on an as is, where is basis the property located at Pasig Blvd., Bagong Ilog . . . ." We agree with Revilla's testimony that the authority given to him was to sell and not merely to look for a buyer, as contended by respondents.

Revilla testified that at the time he perfected the agreement to sell the litigated property, he was acting for and in behalf of the BPI as if he were the Bank itself. This notwithstanding and to firm up the sale of the land, Revilla saw it fit to bring BPI officials into the transaction. If BPI could give the authority to sell to a licensed broker, we see no reason to doubt the authority to sell of the two BPI Vice-Presidents whose precise job in the Bank was to manage and administer real estate property.

Respondent BPI alleges that sales of trust property need the approval of a Trust Committee made up of top bank officials. It appears from the record that this trust committee meets rather infrequently and it does not have to pass on regular transactions.

Rolando Aromin was BPI Assistant Vice-President and Trust Officer. He directly supervised the BPI Real Property Management Unit. He had been in the Real Estate Division since 1985 and was the head supervising officer of real estate matters. Aromin had been with the BPI Trust Department since 1968 and had been involved in the handling of properties of beneficial owners since 1975 (tsn., December 3, 1990, p. 5).

Exhibit 10 of BPI, the February 15, 1989 letter from Senior Vice-President Edmundo Barcelon, while purporting to inform Aromin of his poor performance, is an admission of BPI that Aromin was in charge of Torrens titles, lease contracts, problems of tenants, insurance policies, installment receivables, management fees, quitclaims, and other matters involving real estate transactions. His immediate superior, Vice-President Merlin Albano had been with the Real Estate Division for only one week but he was present and joined in the discussions with petitioner.

There is nothing to show that Alfonso Lim and Albino Limketkai knew Aromin before the incident. Revilla brought the brothers directly to Aromin upon entering the BPI premises. Aromin acted in a perfectly natural manner on the transaction before him with not the slightest indication that he was acting ultra vires. This shows that BPI held Aromin out to the public as the officer routinely handling real estate transactions and, as Trust Officer, entering into contracts to sell trust properties.

Respondents state and the record shows that the authority to buy and sell this particular trust property was later withdrawn from Trust Officer Aromin and his entire unit. If Aromin did not have

any authority to act as alleged, there was no need to withdraw authority which he never possessed.

Petitioner points to Areola vs. Court of Appeals (236 SCRA 643 [1994]) which cited Prudential Bank vs. Court of Appeals (22 SCRA 350 [1993]), which in turn relied upon McIntosh vs. Dakota Trust Co. (52 ND 752, 204 NW 818, 40 ALR 1021), to wit:

Accordingly a banking corporation is liable to innocent third persons where the representation is made in the course of its business by an agent acting within the general scope of his authority even though, in the particular case, the agent is secretly abusing his authority and attempting to perpetrate a fraud upon his principal or some other person for his own ultimate benefit.

(at pp. 652-653.)

In the present case, the position and title of Aromin alone, not to mention the testimony and documentary evidence about his work, leave no doubt that he had full authority to act for BPI in the questioned transaction. There is no allegation of fraud, nor is there the least indication that Aromin was acting for his own ultimate benefit. BPI later dismissed Aromin because it appeared that a top official of the bank was personally interested in the sale of the Pasig property and did not like Aromin's testimony. Aromin was charged with poor performance but his dismissal was only sometime after he testified in court. More than two long years after the disputed transaction, he was still Assistant Vice-President of BPI.

The records show that the letter of instruction dated June 14, 1988 from the owner of Philippine Remnants Co. regarding the sale of the firm's property was addressed to Aromin. The P1,000.00 figure on the first page of broker Revilla's authority to

sell was changed to P1,100.00 by Aromin. The price was later brought down again to P1,000.00, also by Aromin. The permission given to petitioner to view the lot was signed by Aromin and honored by the BPI guards. The letter dated July 9, 1988 from broker Revilla informing BPI that he had a buyer was addressed to Aromin. The conference on July 11, 1988 when the contract was perfected was with Aromin and Vice-President Albano. Albano and Aromin were the ones who assured petitioner Limketkai's officers that term payment was possible. It was Aromin who called up Miguel Bicharra of Philippine Remnants to state that the BPI rejected payment on terms and it was to Aromin that Philippine Remnants gave the go signal to proceed with the cash sale. Everything in the record points to the full authority of Aromin to bind the bank, except for the self-serving memoranda or letters later produced by BPI that Aromin was an inefficient and undesirable officer and who, in fact, was dismissed after he testified in this case. But, of course, Aromin's alleged inefficiency is not proof that he was not fully clothed with authority to bind BPI.

Respondents' second contention is that there was no perfected contract because petitioner's request to pay on terms constituted a counter-offer and that negotiations were still in progress at that point.

Asst. Vice-President Aromin was subpoenaed as a hostile witness for petitioner during trial. Among his statements is one to the effect that —

. . . Mr. Lim offered to buy the property at P900.00 per square meter while Mr. Albano counter-offered to sell the property at P1,100.00 per square meter but after the usual haggling, we finally agreed to sell the property at the price of P1,000.00 per square meter . . .

(tsn, 12-3-90, p. 17; Emphasis supplied.)

Asked if there was a meeting of the minds between the buyer and the bank in respect to the price of P1,000.00 per square meter, Aromin answered:

Yes, sir, as far as my evaluation there was a meeting of the minds as far as the price is concerned, sir.

(ibid, p. 17.)

The requirements in the payment of the purchase price on terms instead of cash were suggested by BPI Vice-President Albano. Since the authority given to broker Revilla specified cash payment, the possibility of paying on terms was referred to the Trust Committee but with the mutual agreement that "if the proposed payment on terms will not be approved by our Trust Committee, Limketkai should pay in cash . . . the amount was no longer subject to the approval or disapproval of the Committee, it is only on the terms." (ibid, p. 19). This is incontrovertibly established in the following testimony of Aromin:

A. After you were able to agree on the price of P1,000.00/sq. m., since the letter or authority says the payment must be in cash basis, what transpired later on?

B. After we have agreed on the price, the Lim brothers inquired on how to go about submitting the covering proposal if they will be allowed to pay on terms. They requested us to give them a guide on how to prepare the corresponding letter of proposal. I recall that, upon the request of Mr. Albino Limketkai, we dictated a guide on how to word a written firm offer that was to be submitted by Mr. Lim to the bank setting out the terms of payment but with the mutual

agreement that if his proposed payment on terms will not be approved by our trust committee, Limketkai should pay the price in cash.

Q And did buyer Limketkai agree to pay in cash in case the offer of terms will be cash (disapproved).

A Yes, sir.

Q At the start, did they show their willingness to pay in cash?

A Yes, sir.

Q You said that the agreement on terms was to be submitted to the trust committee for approval, are you telling the Court that what was to be approved by the trust committee was the provision on the payment on terms?

A Yes, sir.

Q So the amount was no longer subject to the approval or disapproval of the committee, it is only on the terms?

A Yes, sir.

(tsn, Dec. 3, 1990, pp. 18-19; Emphasis supplied.)

The record shows that if payment was in cash, either broker Revilla or Aromin had full authority. But because petitioner took advantage of the suggestion of Vice-President Albano, the matter was sent to higher officials. Immediately upon learning that payment on terms was frozen and/or denied, Limketkai exercised

his right within the period given to him and tendered payment in full. The BPI rejected the payment.

In its Comment and Memorandum, respondent NBS cites Ang Yu Asuncion vs. Court of Appeals (238 SCRA 602 [1994]) to bolster its case. Contrarywise, it would seem that the legal principles found in said case strengthen and support petitioner's submission that the contract was perfected upon the meeting of the minds of the parties.

The negotiation or preparation stage started with the authority given by Philippine Remnants to BPI to sell the lot, followed by (a) the authority given by BPI and confirmed by Philippine Remnants to broker Revilla to sell the property, (b) the offer to sell to Limketkai, (c) the inspection of the property and finally (d) the negotiations with Aromin and Albano at the BPI offices.

The perfection of the contract took place when Aromin and Albano, acting for BPI, agreed to sell and Alfonso Lim with Albino Limketkai, acting for petitioner Limketkai, agreed to buy the disputed lot at P1,000.00 per square meter. Aside from this there was the earlier agreement between petitioner and the authorized broker. There was a concurrence of offer and acceptance, on the object, and on the cause thereof.

The phases that a contract goes through may be summarized as follows:

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 (Toyota Shaw, Inc. vs. Court of Appeals, G.R. No. 116650, May 23, 1995).

But in more graphic prose, we turn to Ang Yu Asuncion, per Justice Vitug:

. . . 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). Theperfection 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 orcommodatum, 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 consummation begins 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.

(238 SCRA 602; 611 [1994].)

In Villonco Realty Company vs. Bormaheco (65 SCRA 352 [1975]), bearing factual antecendents similar to this case, the Court, through Justice Aquino (later to be Chief Justice), quoting authorities, upheld the perfection of the contract of sale thusly:

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. 1475, Ibid.)

xxx xxx xxx

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 (Art. 1319, Civil Code). "An acceptance may be express or implied." (Art. 1320, Civil Code).

xxx xxx xxx

It is true that an acceptance may contain a request for certain changes in the terms of the offer and yet be a binding acceptance. "So long as it is clear that the meaning of the acceptance is positively and unequivocally to accept the offer, whether such request is granted or not, a contract is formed." (Stuart vs.

Franklin Life Ins. Co., 105 Fed. 2nd 965, citing Sec. 79, Williston on Contracts).

xxx xxx xxx

. . . the vendor's change in a phrase of the offer to purchase, which change does not essentially change the terms of the offer, does not amount to a rejection of the offer and the tender or a counter-offer. (Stuart vs. Franklin Life Ins. Co., supra.)

(at pp. 362-363; 365-366.)

In the case at bench, the allegation of NBS that there was no concurrence of the offer and acceptance upon the cause of the contract is belied by the testimony of the very BPI official with whom the contract was perfected. Aromin and Albano concluded the sale for BPI. The fact that the deed of sale still had to be signed and notarized does not mean that no contract had already been perfected. A sale of land is valid regardless of the form it may have been entered into (Claudel vs. Court of Appeals, 199 SCRA 113, 119 [1991]). The requisite form under Article 1458 of the Civil Code is merely for greater efficacy or convenience and the failure to comply therewith does not affect the validity and binding effect of the act between the parties (Vitug, Compendium of Civil Law and Jurisprudence, 1993 Revised Edition, p. 552). If the law requires a document or other special form, as in the sale of real property, the contracting parties may compel each other to observe that form, once the contract has been perfected. Their right may be exercised simultaneously with action upon the contract (Article 1359, Civil Code).

Regarding the admissibility and competence of the evidence adduced by petitioner, respondent Court of Appeals ruled that because the sale involved real property, the statute of frauds is applicable.

In any event, petitioner cites Abrenica vs. Gonda (34 Phil. 739 [1916]) wherein it was held that contracts infringing the Statute of Frauds are ratified when the defense fails to object, or asks questions on cross-examination. The succinct words of Justice Araullo still ring in judicial cadence:

As no timely objection or protest was made to the admission of the testimony of the plaintiff with respect to the contract; and as the motion to strike out said evidence came too late; and, furthermore, as the defendants themselves, by the cross-questions put by their counsel to the witnesses in respect to said contract, tacitly waived their right to have it stricken out, that evidence, therefore, cannot be considered either inadmissible or illegal, and court, far from having erred in taking it into consideration and basing his judgment thereon, notwithstanding the fact that it was ordered to be stricken out during the trial, merely corrected the error he committed in ordering it to be so stricken out and complied with the rules of procedure hereinbefore cited.

(at p. 748.)

In the instant case, counsel for respondents cross-examined petitioner's witnesses at length on the contract itself, the purchase price, the tender of cash payment, the authority of Aromin and Revilla, and other details of the litigated contract. Under the Abrenica rule (reiterated in a number of cases, among them Talosig vs. Vda. de Nieba 43 SCRA 472 [1972]), even assuming that parol evidence was initially inadmissible, the same became competent and admissible because of the cross-examination, which elicited evidence proving the evidence of a perfected contract. The cross-examination on the contract is deemed a waiver of the defense of the Statute of Frauds (Vitug,

Compendium of Civil Law and Jurisprudence, 1993 Revised Edition, supra, p. 563).

The reason for the rule is that as pointed out in Abrenica "if the answers of those witnesses were stricken out, the cross-examination could have no object whatsoever, and if the questions were put to the witnesses and answered by them, they could only be taken into account by connecting them with the answers given by those witnesses on direct examination" (pp. 747-748).

Moreover, under Article 1403 of the Civil Code, an exception to the unenforceability of contracts pursuant to the Statute of Frauds is the existence of a written note or memorandum evidencing the contract. The memorandum may be found in several writings, not necessarily in one document. The memorandum or memoranda is/are written evidence that such a contract was entered into.

We cite the findings of the trial court on this matter:

In accordance with the provisions of Art. 1403 of the Civil Code, the existence of a written contract of the sale is not necessary so long as the agreement to sell real property is evidenced by a written note or memorandum, embodying the essentials of the contract and signed by the party charged or his agent. Thus, it has been held:

The Statute of Frauds, embodied in Article 1403 of the Civil Code of the Philippines,does not require that the contract itself be written. The plain test of Article 1403, Paragraph (2) is clear that a written note or memorandum, embodying the essentials of the contract and signed by the party charged, or his agent suffices to make the verbal

agreement enforceable, taking it out of the operation of the statute. (Emphasis supplied)

xxx xxx xxx

In the case at bar, the complaint in its paragraph 3 pleads that the deal had been closed by letter and telegram (Record on Appeal, p. 2), and the letter referred to was evidently the one copy of which was appended as Exhibit A to plaintiffs opposition to the motion to dismiss. The letter, transcribed above in part, together with the one marked as Appendix B, constitute an adequate memorandum of the transaction. They are signed by the defendant-appellant; refer to the property sold as a Lot in Puerto Princesa, Palawan, covered by T.C.T. No. 62, give its area as 1,825 square meters and the purchase price of four (P4.00) pesos per square meter payable in cash. We have in them, therefore, all the essential terms of the contract and they satisfy the requirements of the Statute of Frauds.

(Footnote 26, Paredes vs. Espino, 22 SCRA 1000 [1968]).

While there is no written contract of sale of the Pasig property executed by BPI in favor of plaintiff, there are abundant notes and memoranda extant in the records of this case evidencing the elements of a perfected contract. There is Exhibit P, the letter of Kenneth Richard Awad addressed to Roland Aromin, authorizing the sale of the subject property at the price of P1,000.00 per square meter giving 2% commission to

the broker and instructing that the sale be on cash basis. Concomitantly, on the basis of the instruction of Mr. Awad, (Exh. P), an authority to sell, (Exh. B) was issued by BPI to Pedro Revilla, Jr., representing Assetrade Co., authorizing the latter to sell the property at the initial quoted price of P1,000.00 per square meter which was altered on an unaccepted offer by Technoland. After the letter authority was issued to Mr. Revilla, a letter authority was signed by Mr. Aromin allowing the buyer to enter the premises of the property to inspect the same (Exh. C). On July 9, 1988, Pedro Revilla, Jr., acting as agent of BPI, wrote a letter to BPI informing it that he had procured a buyer in the name of Limketkai Sons Milling, Inc. with offices at Limketkai Bldg., Greenhills, San Juan, Metro Manila, represented by its Exec. Vice-President, Alfonso Lim (Exh. D). On July 11, 1988, the plaintiff, through Alfonso Lim, wrote a letter to the bank, through Merlin Albano, confirming their transaction regarding the purchase of the subject property (Exh. E). On July 18, 1988, the plaintiff tendered upon the officials of the bank a check for P33,056,000.00 covered by Check No. CA510883, dated July 18, 1988. On July 1, 1988, Alfonso Zamora instructed Mr. Aromin in a letter to resubmit new offers only if there is no transaction closed with Assetrade Co. (Exh. S). Combining all these notes and memoranda, the Court is convinced of the existence of perfected contract of sale. Aptly, the Supreme Court, citing American cases with approval, held:

No particular form of language or instrument is necessary to constitute a memorandum or note in writing under the statute of frauds; any document or writing, formal or informal, written either for the purpose of furnishing

evidence of the contract or for another purpose, which satisfies all the requirements of the statute as to contents and signature, as discussed respectively infra secs. 178-200, and infra secs. 201-205, is a sufficient memorandum or note. A memorandum may be written as well with lead pencil as with pen and ink. It may also be filled in on a printed form. (37 C.J.S., 653-654).

The note or memorandum required by the statute of frauds need not be contained in a single document, nor, when contained in two or more papers, need each paper be sufficient as to contents and signature to satisfy the statute. Two or more writings properly connected may be considered together, matters missing or uncertain in one may be supplied or rendered certain by another, and their sufficiency will depend on whether, taken together, they meet the requirements of the statute as to contents and the requirements of the statutes as to signature, as considered respectively infra secs. 179-200 and secs. 201-215.

(pp. 460-463, Original RTC Record).

The credibility of witnesses is also decisive in this case. The trial court directly observed the demeanor and manner of testifying of the witnesses while the Court of Appeals relied merely on the transcript of stenographic notes.

In this regard, the court of origin had this to say:

Apart from weighing the merits of the evidence of the parties, the Court had occasion to observe the demeanor of the witnesses they presented. This is one important factor that inclined the Court to believe in the version given by the plaintiff because its witnesses, including hostile witness Roland V. Aromin, an assistant vice-president of the bank, were straightforward, candid and unhesitating in giving their respective testimonies. Upon the other hand, the witnesses of BPI were evasive, less than candid and hesitant in giving their answers to cross examination questions. Moreover, the witnesses for BPI and NBS contradicted each other. Fernando Sison III insisted that the authority to sell issued to Mr. Revilla was merely an evidence by which a broker may convince a prospective buyer that he had authority to offer the property mentioned therein for sale and did not bind the bank. On the contrary, Alfonso Zamora, a Senior Vice-President of the bank, admitted that the authority to sell issued to Mr. Pedro Revilla, Jr. was valid, effective and binding upon the bank being signed by two class "A" signatories and that the bank cannot back out from its commitment in the authority to sell to Mr. Revilla.

While Alfredo Ramos of NBS insisted that he did not know personally and was not acquainted with Edmundo Barcelon, the latter categorically admitted that Alfredo Ramos was his friend and that they have even discussed in one of the luncheon meetings the matter of the sale of the Pasig property to NBS. George Feliciano emphatically said that he was not a consultant of Mr. Ramos nor was he connected with him in any manner, but his calling card states that he was a consultant to the chairman of the Pacific Rim Export and Holdings Corp. whose chairman is Alfredo Ramos.

This deliberate act of Mr. Feliciano of concealing his being a consultant to Mr. Alfredo Ramos evidently was done by him to avoid possible implication that he committed some underhanded maneuvers in manipulating to have the subject property sold to NBS, instead of being sold to the plaintiff.

(pp. 454-455, Original RTC Record.)

On the matter of credibility of witnesses where the findings or conclusions of the Court of Appeals and the trial court are contrary to each other, the pronouncement of the Court in Serrano vs. Court of Appeals (196 SCRA 107 [1991]) bears stressing:

It is a settled principle of civil procedure that the conclusions of the trial court regarding the credibility of witnesses are entitled to great respect from the appellate courts because the trial court had an opportunity to observe the demeanor of witnesses while giving testimony which may indicate their candor or lack thereof. While the Supreme Court ordinarily does not rule on the issue of credibility of witnesses, that being a question of fact not properly raised in a petition under Rule 45, the Court has undertaken to do so in exceptional situations where, for instance, as here, the trial court and the Court of Appeals arrived at divergent conclusions on questions of fact and the credibility of witnesses.

(at p. 110.)

On the fourth question of whether or not NBS is an innocent purchaser for value, the record shows that it is not. It acted in bad faith.

Respondent NBS ignored the notice of lis pendens annotated on the title when it bought the lot. It was the willingness and design of NBS to buy property already sold to another party which led BPI to dishonor the contract with Limketkai.

Petitioner cites several badges of fraud indicating that BPI and NBS conspired to prevent petitioner from paying the agreed price and getting possession of the property:

1. The sale was supposed to be done through an authorized broker, but top officials of BPI personally and directly took over this particular sale when a close friend became interested.

2. BPI Senior Vice President Edmundo Barcelon admitted that NBS's President, Alfredo Ramos, was his friend; that they had lunch meetings before this incident and discussed NBS's purchase of the lot. Barcelon's father was a business associate of Ramos.

3. George Feliciano, in behalf of NBS, offered P5 million and later P7 million if petitioner would drop the case and give up the lot. Feliciano went to petitioner's office and haggled with Alfonso Lim but failed to convince him inspite of various and increasing offers.

4. In a place where big and permanent buildings abound, NBS had constructed only a warehouse marked by easy portability. The warehouse is bolted to its foundations and can easily be dismantled.

It is the very nature of the deed of absolute sale between BPI and NBS which, however, clearly negates any allegation of good faith on the part of the buyer. Instead of the vendee insisting that the vendor guarantee its title to the land and recognize the right of the vendee to proceed against the vendor if the title to the land turns out to be defective as when the land belongs to another person, the reverse is found in the deed of sale between BPI and NBS.

Any losses which NBS may incur in the event the title turns out to be vested in another person are to be borne by NBS alone. BPI is expressly freed under the contract from any recourse of NBS against it should BPI's title be found defective.

NBS, in its reply memorandum, does not refute or explain the above circumstance squarely. It simply cites the badges of fraud mentioned in Oria vs. McMicking (21 Phil. 243 [1912]) and argues that the enumeration there is exclusive. The decision in said case plainly states "the following are some of the circumstances attending sales which have been denominated by courts (as) badges of fraud." There are innumerable situations where fraud is manifested. One enumeration in a 1912 decision cannot possibly cover all indications of fraud from that time up to the present and into the future.

The Court of Appeals did not discuss the issue of damages. Petitioner cites the fee for filing the amended complaint to implead NBS, sheriffs fees, registration fees, plane fare and hotel expenses of Cebu-based counsel. Petitioner also claimed, and the trial court awarded, damages for the profits and opportunity losses caused to petitioner's business in the amount of P10,000,000.00.

We rule that the profits and the use of the land which were denied to petitioner because of the non-compliance or interference with a solemn obligation by respondents is somehow made up by the appreciation in land values in the meantime.

Prescinding from the above, we rule that there was a perfected contract between BPI and petitioner Limketkai; that the BPI officials who transacted with petitioner had full authority to bind the bank; that the evidence supporting the sale is competent and admissible; and that the sale of the lot to NBS during the trial of the case was characterized by bad faith.

WHEREFORE, the questioned judgment of the Court of Appeals is hereby REVERSED and SET ASIDE. The June 10, 1991 judgment of Branch 151 of the Regional Trial Court of The National Capital Judicial Region stationed in Pasig, Metro Manila is REINSTATED except for the award of Ten Million Pesos (P10,000,000.00) damages which is hereby DELETED.

SO ORDERED.

G.R. No. 109125 December 2, 1994

ANG 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 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

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 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 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.

NICOLAS SANCHEZ, plaintiff-appellee, vs.SEVERINA RIGOS, defendant-appellant.

Santiago F. Bautista for plaintiff-appellee.

Jesus G. Villamar for defendant-appellant.

 

CONCEPCION, C.J.:p

Appeal from a decision of the Court of First Instance of Nueva Ecija to the Court of Appeals, which certified the case to Us, upon the ground that it involves a question purely of law.

The record shows that, on April 3, 1961, plaintiff Nicolas Sanchez and defendant Severina Rigos executed an instrument entitled "Option to Purchase," whereby Mrs. Rigos "agreed, promised and committed ... to sell" to Sanchez the sum of P1,510.00, a parcel of land situated in the barrios of Abar and Sibot, municipality of San Jose, province of Nueva Ecija, and more particularly described in Transfer Certificate of Title No. NT-12528 of said province, within two (2) years from said date with the understanding that said option shall be deemed "terminated and elapsed," if "Sanchez shall fail to exercise his right to buy the property" within the stipulated period. Inasmuch as several tenders of payment of the sum of Pl,510.00, made by Sanchez within said period, were rejected by Mrs. Rigos, on March 12, 1963, the former deposited said amount with the Court of First Instance of Nueva Ecija and commenced against the latter the present action, for specific performance and damages.

After the filing of defendant's answer — admitting some allegations of the complaint, denying other allegations thereof, and alleging, as special defense, that the contract between the parties "is a unilateral promise to sell, and the same being unsupported by any valuable consideration, by force of the New Civil Code, is null and void" — on February 11, 1964, both parties, assisted by their respective counsel, jointly moved for a judgment on the pleadings. Accordingly, on February 28, 1964, the lower court rendered judgment for Sanchez, ordering Mrs. Rigos to accept the sum judicially consigned by him and to execute, in his favor, the requisite deed of conveyance. Mrs. Rigos was, likewise, sentenced to pay P200.00, as attorney's fees, and other costs. Hence, this appeal by Mrs. Rigos.

This case admittedly hinges on the proper application of Article 1479 of our Civil Code, which provides:

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 if the promise is supported by a consideration distinct from the price.

In his complaint, plaintiff alleges that, by virtue of the option under consideration, "defendant agreed and committed to sell" and "the plaintiff agreed and committed to buy" the land described in the option, copy of which was annexed to said pleading as Annex A thereof and is quoted on the margin. 1 Hence, plaintiff maintains that the promise contained in the contract is "reciprocally demandable," pursuant to the first paragraph of said Article 1479. Although defendant had really "agreed, promised and committed" herself to sell the land to the plaintiff, it is not true that the latter had, in turn, "agreed and committed himself " to buy said property. Said Annex A does not bear out plaintiff's allegation to this effect. What is more, since Annex A has been made "an integral part" of his complaint, the provisions of said instrument form part "and parcel" 2 of said pleading.

The option did not impose upon plaintiff the obligation to purchase defendant's property. Annex A is not a "contract to buy and sell." It merely granted plaintiff an "option" to buy. And both parties so understood it, as indicated by the caption, "Option to Purchase," given by them to said instrument. Under the provisions thereof, the defendant "agreed, promised and committed" herself to sell the land therein described to the plaintiff for P1,510.00, but there is nothing in the contract to indicate that her aforementioned agreement, promise and undertaking is

supported by a consideration "distinct from the price" stipulated for the sale of the land.

Relying upon Article 1354 of our Civil Code, the lower court presumed the existence of said consideration, and this would seem to be the main factor that influenced its decision in plaintiff's favor. It should be noted, however, that:

(1) Article 1354 applies to contracts in general, whereas the second paragraph of Article 1479 refers to "sales" in particular, and, more specifically, to "an accepted unilateral promise to buy or to sell." In other words, Article 1479 is controlling in the case at bar.

(2) In order that said unilateral promise may be "binding upon the promisor, Article 1479 requires the concurrence of a condition, namely, that the promise be "supported by a consideration distinct from the price." Accordingly, the promisee can not compel the promisor to comply with the promise, unless the former establishes the existence of said distinct consideration. In other words, the promisee has the burden of proving such consideration. Plaintiff herein has not even alleged the existence thereof in his complaint.

(3) Upon the other hand, defendant explicitly averred in her answer, and pleaded as a special defense, the absence of said consideration for her promise to sell and, by joining in the petition for a judgment on the pleadings, plaintiff has impliedly admitted the truth of said averment in defendant's answer. Indeed as early as March 14, 1908, it had been held, in Bauermann v. Casas, 3 that:

One who prays for judgment on the pleadings without offering proof as to the truth of his own allegations, and without giving the opposing party an opportunity to introduce evidence, must be understood to admit the

truth of all the material and relevant allegations of the opposing party, and to rest his motion for judgment on those allegations taken together with such of his own as are admitted in the pleadings. (La Yebana Company vs. Sevilla, 9 Phil. 210). (Emphasis supplied.)

This view was reiterated in Evangelista v. De la Rosa 4 and Mercy's Incorporated v. Herminia Verde. 5

Squarely in point is Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co., 6 from which We quote:

The main contention of appellant is that the option granted to appellee to sell to it barge No. 10 for the sum of P30,000 under the terms stated above has no legal effect because it is not supported by any consideration and in support thereof it invokes article 1479 of the new Civil Code. The article provides:

"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 sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a consideration distinct from the price."

On the other hand, Appellee contends that, even granting that the "offer of option" is not supported by any consideration, that option became binding on appellant when the appellee gave notice to it of its acceptance, and that having accepted it within the period of option, the offer can no longer be withdrawn and in any event such withdrawal is ineffective. In

support this contention, appellee invokes article 1324 of the Civil Code which provides:

"ART. 1324. When the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn any time before acceptance by communicating such withdrawal, except when the option is founded upon consideration as something paid or promised."

There is no question that under article 1479 of the new Civil Code "an option to sell," or "a promise to buy or to sell," as used in said article, to be valid must be "supported by a consideration distinct from the price." This is clearly inferred from the context of said article that a unilateral promise to buy or to sell, even if accepted, is only binding if supported by consideration. In other words, "an accepted unilateral promise can only have a binding effect if supported by a consideration which means that the option can still be withdrawn, even if accepted, if the same is not supported by any consideration. It is not disputed that the option is without consideration. It can therefore be withdrawn notwithstanding the acceptance of it by appellee.

It is true that under article 1324 of the new Civil Code, the general rule regarding offer and acceptance is that, when the offerer gives to the offeree a certain period to accept, "the offer may be withdrawn at any time before acceptance" except when the option is founded upon consideration, but this general rule must be interpreted as modified by the provision of article 1479 above referred to, which applies to "a promise to buy and

sell" specifically. As already stated, this rule requires that a promise to sell to be valid must be supported by a consideration distinct from the price.

We are not oblivious of the existence of American authorities which hold that an offer, once accepted, cannot be withdrawn, regardless of whether it is supported or not by a consideration (12 Am. Jur. 528). These authorities, we note, uphold the general rule applicable to offer and acceptance as contained in our new Civil Code. But we are prevented from applying them in view of the specific provision embodied in article 1479. While under the "offer of option" in question appellant has assumed a clear obligation to sell its barge to appellee and the option has been exercised in accordance with its terms, and there appears to be no valid or justifiable reason for appellant to withdraw its offer, this Court cannot adopt a different attitude because the law on the matter is clear. Our imperative duty is to apply it unless modified by Congress.

However, this Court itself, in the case of Atkins, Kroll and Co., Inc. v. Cua Hian Tek, 8 decided later thatSouthwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co., 9 saw no distinction between Articles 1324 and 1479 of the Civil Code and applied the former where a unilateral promise to sell similar to the one sued upon here was involved, treating such promise as an option which, although not binding as a contract in itself for lack of a separate consideration, nevertheless generated a bilateral contract of purchase and sale upon acceptance. Speaking through Associate Justice, later Chief Justice, Cesar Bengzon, this Court said:

Furthermore, an option is unilateral: a promise to sell at the price fixed whenever the offeree should decide to exercise his option within the specified time. After accepting the promise and before he exercises his option, the holder of the option is not bound to buy. He is free either to buy or not to buy later. In this case, however, upon accepting herein petitioner's offer a bilateral promise to sell and to buy ensued, and the respondent ipso facto assumed the obligation of a purchaser. He did not just get the right subsequently to buy or not to buy. It was not a mere option then; it was a bilateral contract of sale.

Lastly, even supposing that Exh. A granted an option which is not binding for lack of consideration, the authorities hold that:

"If the option is given without a consideration, it is a mere offer of a contract of sale, which is not binding until accepted. If, however, acceptance is made before a withdrawal, it constitutes a binding contract of sale, even though the option was not supported by a sufficient consideration. ... . (77 Corpus Juris Secundum, p. 652. See also 27 Ruling Case Law 339 and cases cited.)

"It can be taken for granted, as contended by the defendant, that the option contract was not valid for lack of consideration. But it was, at least, an offer to sell, which was accepted by letter, and of the acceptance the offerer had knowledge before said offer was withdrawn. The concurrence of both acts — the offer and the acceptance — could at all

events have generated a contract, if none there was before (arts. 1254 and 1262 of the Civil Code)." (Zayco vs. Serra, 44 Phil. 331.)

In other words, since there may be no valid contract without a cause or consideration, the promisor is not bound by his promise and may, accordingly, withdraw it. Pending notice of its withdrawal, his accepted promise partakes, however, of the nature of an offer to sell which, if accepted, results in a perfected contract of sale.

This view has the advantage of avoiding a conflict between Articles 1324 — on the general principles on contracts — and 1479 — on sales — of the Civil Code, in line with the cardinal rule of statutory construction that, in construing different provisions of one and the same law or code, such interpretation should be favored as will reconcile or harmonize said provisions and avoid a conflict between the same. Indeed, the presumption is that, in the process of drafting the Code, its author has maintained a consistent philosophy or position. Moreover, the decision in Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co., 10 holding that Art. 1324 is modifiedby Art. 1479 of the Civil Code, in effect, considers the latter as an exception to the former, and exceptions are not favored, unless the intention to the contrary is clear, and it is not so, insofar as said two (2) articles are concerned. What is more, the reference, in both the second paragraph of Art. 1479 and Art. 1324, to an option or promise supported by or founded upon a consideration, strongly suggests that the two (2) provisions intended to enforce or implement the same principle.

Upon mature deliberation, the Court is of the considered opinion that it should, as it hereby reiterates the doctrine laid down in the Atkins, Kroll & Co. case, and that, insofar as inconsistent

therewith, the view adhered to in theSouthwestern Sugar & Molasses Co. case should be deemed abandoned or modified.

WHEREFORE, the decision appealed from is hereby affirmed, with costs against defendant-appellant Severina Rigos. It is so ordered.

G.R. No. 97442 June 30, 1994

PILAR T. OCAMPO, petitioner, vs.COURT OF APPEALS and MAGDALENA S. VILLARUZ, respondents.

Esteban C. Manuel for petitioner.

Nery D. Duremdes for private respondent.

 

BELLOSILLO, J.:

Two (2) documents, an "Agreement to Sell Real Property" and a "Contract to Sell," covering the same parcel of land were executed by a seller in favor of two (2) different buyers. Both buyers now assert against each other a better title to the property.

In dispute is an 18,260-square meter lot in the Poblacion of Tigbauan, Iloilo, described in Plan Psu-223696, L.R.C. Case No. N-675, L.R.C. Record No. N-38846, and registered under Original Certificate of Title No. 0-7743 in the name of seller Severino Tolosa. On 20 August 1974, Tolosa mortgaged the land to the Philippine Veterans Bank and had the encumbrance annotated on his certificate of title under Entry No. 238353.

On 17 March 1975, Tolosa and Pilar T. Ocampo, the latter being then represented by Teresa T. Borres, 1 entered into a contract whereby Tolosa undertook to sell the same parcel of land to Ocampo not later than 15 May 1975 for P22,000.00, P1,000.00 of which was paid upon execution thereof. 2

On 21 April 1975, the parties entered into an "Agreement to Sell Real Property" 3 whereby Tolosa "sells, cedes and transfers" the land to Ocampo in consideration of P25,000.00, P12,500.00 of which was paid upon signing of the deed and the balance to be due within six (6) months thereafter. Paragraph 4 of the contract provides that "immediately upon complete payment of the purchase price . . . by the VENDEE, the VENDOR . . . agrees to execute and deliver unto the VENDEE whatever pertinent document or documents necessary to implement this sale and to transfer title to the VENDEE."

Before the six-month period to complete the payment of the purchase price expired, Ocampo paid but only the total of P16,700.00. 4 Nevertheless Tolosa accepted her subsequent late payments amounting to P3,900.00. 5Meanwhile, the subject property was involved in a boundary dispute. 6

On 6 June 1976, upon learning of the mortgage lien, Ocampo caused her adverse claim to be annotated on Tolosa’s certificate of title as Entry No. 279936.

In his letter to Ocampo dated 15 March 1977, Tolosa sought the cancellation of Ocampo’s adverse claim and presented her with two options, namely, a refund of payments made, or a share from the net proceeds if sold to a third party. 7 On even date, Ocampo through counsel wrote Tolosa expressing her readiness to pay the balance of the purchase price, which was P5,400.00, should Tolosa be ready to deliver to her the deed of absolute sale and the owner’s duplicate of OCT No. 0-7743 for purposes of registration. 8

On 3 June 1977, Tolosa and Magdalena S. Villaruz executed a "Contract to Sell" 9 whereby Tolosa "sells, cedes, transfers, and conveys" to Villaruz the same land in consideration of P94,300.00. The amount of P15,000.00 was to be paid upon execution and the balance upon cancellation of all liens and encumbrances from the certificate of title. The contract stipulated the immediate conveyance of the physical possession of the land to Villaruz, although no deed of definite sale would be delivered to her unless the price was fully paid. The contract noted the supposed judicial termination of the boundary dispute over the land.

On 19 July 1977, Tolosa wrote Ocampo offering to reimburse her what she paid provided she would sign a document canceling her adverse claim. 10 Failing to convince Ocampo, Tolosa filed a petition in the Court of First Instance of Iloilo to cancel the adverse claim of Ocampo. On 30 July 1977, Judge Ricardo M. Ilarde denied the petition. 11 On 4 August 1977, another adverse claim was caused to be annotated by Ocampo on OCT No. 0-7743 under Entry No. 302257. 12

On 7 October 1977, Tolosa filed an action for "Breach of Contract, Damages and Quieting of Title" against Teresa Borres. 13 Borres claimed in her answer that she was merely the agent of Ocampo who was the real party in interest. Borres however died so that the trial court, on 2 July 1979, ordered her substitution by defendant Ocampo. Magdalena S. Villaruz, then claiming to have already bought the land, intervened in the case.

On 9 October 1979, during the pendency of Civil Case No. 12163, Tolosa succeeded in securing from another branch of the court the cancellation of the adverse claims of Ocampo without notice to her. 14 This paved the way for the registration on 23 November 1979 of the contract of sale of Villaruz dated 8 August 1979 and the subsequent issuance of Transfer Certificate of Title No. T-

100021 in her name which canceled the Original Certificate of Title No. 0-7743 of Tolosa.

On 13 October 1981, Ocampo filed a third-party complaint against Villaruz. 15

On 7 January 1988, Judge Julian Y. Ereño of the Regional Trial Court of Iloilo, Branch 27, rendered a decision in Civil Case No. 12163 dismissing the complaint of Tolosa as well as the complaint in intervention of Villaruz —

1. Declaring the contract to sell executed between plaintiff Severino Tolosa and third-party defendant Magdalena Villaruz as null and void as well as the Transfer of Certificate of Title issued in connection therewith, if any;

2. Ordering plaintiff Tolosa to execute the corresponding deed of sale in favor of third-party plaintiff Pilar T. Ocampo over the lot in litigation upon the latter’s payment of the balance of P4,400.00;

3. Ordering plaintiff Tolosa to vacate and deliver possession of the lot in question to Pilar T. Ocampo;

4. Ordering plaintiff to pay Pilar T. Ocampo P10,000.00 as attorney’s fees, P30,000.00 as moral damages, P2,000.00 as litigation expenses, and costs.

Her motion for reconsideration having been denied on 26 March 1988, Villaruz appealed to the Court of Appeals. On 11 October 1990, the 16th Division of the Court of Appeals, 16 in CA-G.R. No. 18428, reversed and set aside the trial court’s decision —

1. Declaring Magdalena S. Villaruz the absolute owner of the parcel of land covered by TCT No. T-100021 of the Register of Deeds of Iloilo;

2. Ordering the Register of Deeds of Iloilo to annotate at the back of TCT No. T-100021 the adverse claims filed by Pilar Ocampo under Entry No. 279936 and 302257 found in OCT No. 0-7743; and

3. Ordering the parties to pay proportionate costs.

The appellate court upheld the sale in favor of Villaruz on the theory that the 21 April 1975 agreement of Tolosa and Ocampo was merely a contract to sell. It claimed that in the absence of a deed of absolute sale in favor of Ocampo, in relation to par. 4 of the contract, Tolosa retained ownership over the land and validly conveyed the same to Villaruz.

The agreement between Tolosa and Ocampo dated 21 April 1975 although titled "Agreement to Sell Real Property" was a perfected contract of absolute sale wherein Tolosa forthwith sold, ceded and transferred the land to Ocampo. It provided "[T]hat for and in consideration of the sum of TWENTY-FIVE THOUSAND PESOS (P25,000.00), Philippine Currency, to be paid by the VENDEE unto the VENDOR, the latter hereby SELLS, CEDES and TRANSFERS in favor of the former — her heirs and assigns, the above-described parcel of land, free from all liens and encumbrances."

In Dignos v. CA, 17 we laid down the criteria that:

. . . a deed of sale is absolute in nature although denominated as a "Deed of Conditional Sale" where nowhere in the contract in question is a proviso or stipulation to the effect that title to the property sold is reserved in the vendor until full payment of the purchase price, nor is there a stipulation giving the vendor the right to unilaterally rescind the contract the moment the vendee fails to pay within a fixed period (Taguba v. Vda. de Leon, 132 SCRA 722; Luzon

Brokerage Co., Inc. v. Maritime Building Co., Inc., 86 SCRA 305).

The conditions mentioned in Dignos, reiterating Taguba and Luzon Brokerage Co., Inc., were not found in the subject contract to indicate that it was indeed a mere contract to sell or a deed of conditional sale. Contrary to the interpretation of the appellate court, we find nothing significant about par. 4 of the contract which provides that —

. . . immediately upon complete payment of the purchase price herein by the VENDEE, the VENDOR hereby agrees to execute and deliver unto the VENDEE whatever pertinent document or documents necessary to implement this sale and to transfer title to the VENDEE.

Paragraph 4 pertains to the undertaking of the seller to execute and deliver to the buyer any document deemed necessary by law to implement the sale and transfer title since the parties were unsure of what documents were pertinent. If the intent was for the seller to retain ownership and possession of the land through non-delivery of certain documents unless the price be fully paid, par. 4 alone should be inutile; it should have been complemented with a proviso that the sale would not be implemented nor the title considered transferred unless another document specifically for said purpose be first executed and delivered to the buyer. In this regard, no right to retain ownership and possession of the land pending full payment of the price can be inferred from the fact that no delivery was made to Ocampo. 18

The failure of the buyer to pay the price in full within a fixed period does not, by itself, bar the transfer of the ownership or possession, 19 much less dissolve the contract of sale. We held in De la Cruz v. Legaspi: 20

. . . they err in the assertion that as plaintiff failed to pay the price after the execution of the document of sale as agreed previously, the contract became null and void for lack of consideration. It cannot be denied that when the document was signed the cause or consideration existed: P450. The document specifically said so; and such was undoubtedly the agreement. Subsequent non-payment of the price at the time agreed upon did not convert the contract into one without cause or consideration: a nudum pactum (Levy vs. Johnson, 4 Phil. 650; Puato vs. Mendoza, 64 Phil. 457). The situation was rather one in which there is failure to pay the consideration, with its resultant consequences. In other words, when after the notarization of the contract, plaintiff failed to hand the money to defendants, as he previously promised, there was default on his part at most, and defendants’ right was to demand interest — legal interest — for the delay, pursuant to article 1501 (3) of the Civil Code 21 (Villaruel vs. Tan King, 43 Phil. 251), or to demand rescission in court. (Escueta vs. Pardo, 42 Off. Gaz. 2759; Cortes vs. Bibaño, 41 Phil. 298.) Such failure, however, did not ipso facto resolve the contract, no stipulation to that effect having been alleged (Cf. Warner Barnes & Co. vs. Inza, 43 Phil. 505). Neither was there any agreement nor allegation that payment on time was essential (Cf. Abella vs. Francisco, 55 Phil. 477; Berg vs. Magdalena Estate, 92 Phil. 110).

Under Art. 1592 of the Civil Code, the failure of Ocampo to complete her payment of the purchase price within the stipulated period merely accorded Tolosa the option to rescind the contract of sale upon judicial or notarial demand. 22

However, the letter of 2 August 1977 claimed to have been sent by Tolosa to Ocampo rescinding the contract of sale 23 was defective because it was not notarized 24 and, more importantly, it was not proven to have been received by Ocampo. 25

Likewise, Civil Case No. 12163 could not be considered a judicial demand under Art. 1592 of the Civil Code because it did not pray for the rescission of the contract. Although the complaint sought the cancellation of Ocampo’s adverse claim on Tolosa’s OCT and for the refund of the payments made, these could not be equivalent to a rescission. In other words, seeking discharge from contractual obligations and an offer for restitution is not the same as abrogation of the contract. To rescind is "[t]o declare a contract void in its inception and to put an end to it as though it never were." 26 It is "[n]ot merely to terminate it and release parties from further obligations to each other but to abrogate it from the beginning and restore parties to relative positions which they would have occupied had no contract ever been made." 27

Even assuming arguendo that Civil Case No. 12163 was a valid judicial demand, rescission is not granted as a matter of course. Before Civil Case No. 12163 was filed on 7 October 1977, Ocampo not only paid Tolosa a total of P20,600.00 but also discharged Tolosa’s mortgage debt in the amount of P4,453.41. Had not Tolosa ordered the Philippine Veterans Bank to return the mortgage debt payment by Ocampo, 28 the purchase price would have been deemed fully paid.

If only to accentuate her intention to make good her contractual obligations, Ocampo offered to pay the balance of the purchase price in her letter of 15 March 1977 or more than four months before Tolosa allegedly wrote his letter of rescission on 2 August 1977, and more than six months before the filing of Civil Case No. 12163 on 7 October 1977. This offer to pay prior to the demand for rescission is sufficient to defeat Tolosa’s prerogative under Art. 1592 of the Civil Code.

Tolosa, on the other hand, is now precluded from raising the issue of late payments. His unqualified acceptance of payments after the six-month period expired constitutes waiver of the period and, hence, of the ground to rescind under Art. 1592.

In any case, however, the breach on the part of Ocampo was only slight if not outweighed by the bad faith of Tolosa in reneging in his own prestations, hence, judicial rescission of the contract cannot be justified. Angeles v. Calasanz 29 is apropos —

The right to rescind the contract for non-performance of one of its stipulations . . . is not absolute. InUniversal Food Corp. v. Court of Appeals (33 SCRA 1) the Court stated: The general rule is that rescission of a contract will not be permitted for a slight or casual breach, but only for such substantial and fundamental breach as would defeat the very object of the parties in making the agreement (Song Fo & Co. v. Hawaiian-Philippine Co.,

47 Phil., 821, 827). The question of whether a breach of a contract is substantial depends upon the attendant circumstances (Corpus v. Hon. Alikpala, et al., L-23707 & L-23720, Jan. 17, 1968) . . .

The defendants-appellants state that the plaintiffs-appellees violated Section two of the contract to sell . . . because they failed to pay the August installment, despite demand, for more than four (4) months.

The breach of the contract adverted to by the defendants-appellants is so slight and casual when we consider that apart from the initial downpayment of P392.00 the plaintiffs-appellees had already paid the monthly installments for a period of almost nine (9) years. In other words, in only a short time, the entire obligation would have been paid. Furthermore, although the principal obligation was only P3920.00 excluding the 7 percent interest, the plaintiffs-appellees had already paid an aggregate amount of P4,533.38. To sanction the rescission made by the defendants-appellants will work injustice to the plaintiffs-appellees (See J.M. Tuazon and Co., Inc. v. Javier, 31 SCRA 829). It would unjustly enrich the defendants-appellants.

Article 1234 of the Civil Code which provides that "[I]f the obligation has been substantially performed in good faith, the obligator may recover as though there had been a strict and complete fulfillment, less damages suffered by the obligee," also militates against the unilateral act of the defendants-appellants in canceling the contract.

. . . We agree with the plaintiffs-appellees that when the defendants-appellants, instead of availing of their right to rescind, have accepted and received delayed

payments of installments, though the plaintiffs-appellees have been in arrears beyond the grace period mentioned in paragraph 6 of the contract, the defendants-appellants have waived and are now estopped from exercising their alleged right of rescission. In De Guzman v. Guieb (48 SCRA 68), we held . . . But defendants do not deny that in spite of the long arrearages, neither they nor their predecessor . . . even took steps to cancel the option or to eject the appellees from the home-lot in question. On the contrary, it is admitted that the delayed payments were received without protest or qualification. . . . Under these circumstances, We cannot but agree with the lower court that at the time appellees exercised their option, appellants had already forfeited their right to invoke the above-quoted provision regarding the nullifying effect of the non-payment of six-months rentals by appellees by their having accepted without qualification on July 21, 1964 the full payment by appellees of all their arrearages.

While the contract dated 3 June 1977 in favor of Villaruz is also a contract of sale, that of Ocampo dated 21 April 1975 should prevail pursuant to Art. 1544 of the Civil code on double sales. 30 While Villaruz may have registered his contract or came into possession ahead of Ocampo, Villaruz was never in good faith.

Since Ocampo had her adverse claim annotated on Tolosa’s OCT on 6 June 1976, Villaruz could not profess innocence thereof when she signed her contract on 3 June 1977; in fact, her full payment of the purchase price was made dependent, among others, on the cancelation of this claim. Moreover, Villaruz admitted having been informed by Tolosa of the first sale to Ocampo while still negotiating to buy the land. 31 Knowledge of the

foregoing should have impelled Villaruz to investigate the circumstances of the annotation since this is equivalent to registration of Ocampo’s contract of sale as against Villaruz. In sum, Ocampo having the older title in good faith and considering that personal knowledge thereof by Villaruz constitutes registration as against the latter, Ocampo should be considered the preferred buyer.

Incidentally, the stipulation in the contract of Villaruz conveying the land in her favor bows to Tolosa’s admission at the witness stand on 15 May 1980 that he never actually delivered the possession of the property to anyone. 32

From the foregoing, although the decision of the trial court ordering Tolosa to execute another deed of sale in favor of Ocampo already became final as against him for failing to appeal therefrom, there is no more need for it. For practical purposes, it is enough that we order Villaruz to reconvey the property to Ocampo.

WHEREFORE, the decision of the Court of Appeals is REVERSED and SET ASIDE and the decision dated 7 January 1988 of the Regional Trial Court of Iloilo, Branch 27, in Civil Case No. 12163 is REINSTATED, with the modification that respondent Magdalena S. Villaruz is directed to reconvey the subject land now covered by TCT No. T-100021 in her name to petitioner Pilar T. Ocampo, without prejudice to Severino Tolosa collecting from petitioner Pilar T. Ocampo the balance of the purchase price of P4,400.00 which nevertheless may be deducted from the monetary awards made by the trial court in favor of petitioner Ocampo.

SO ORDERED.

SPOUSES ADIEL DE LA CENA and CARIDAD AREVALO DE LA CENA,                             Petitioners,                      - versus -   

       G.R. No. 160805        Present:        QUISUMBING, J., Chairperson,       CARPIO,       CARPIO MORALES,       TINGA, and       VELASCO, JR., JJ. 

SPOUSES JOSE BRIONES and HERMINIA LLEDO BRIONES,                             Respondents.

        Promulgated:         November 24, 2006

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

QUISUMBING, J.:

For review on certiorari are the Decision[1] dated November 25, 2002 of the

Court of Appeals in CA-G.R. CV No. 43335, and its Resolution dated October 16,

2003, denying the motion for reconsideration.  The appellate court reversed the

decision dated July 27, 1993 of the Regional Trial Court of Legazpi City, Branch

6, in Civil Case No. 8248 for quieting of title, recovery of possession and damages.

 

The facts are as follows:

 

Involved in this case is a six-meter by nine-meter portion of a 1,011-square

meter lot located at Bagumbayan, Daraga, Albay.  The whole lot is now registered

under Transfer Certificate of Title (TCT) No. T-54600 in the name of petitioners,

spouses Adiel de la Cena and Caridad Arevalo de la Cena (the de la Cenas).[2]  It

was previously owned by the spouses Antonio and Josefa Arevalo (the Arevalos),

parents of petitioner Caridad Arevalo de la Cena.

 

Sometime in 1969, the respondents, spouses Jose and

Herminia Briones (the Brioneses), rented from the Arevalos, a house constructed

on the contested portion of the aforementioned lot.  Five months later, respondents

bought the house.  Then on January 31, 1977, respondents also bought the

contested portion of said lot from the Arevalos. They

paid P1,260 as downpayment.[3]

 

Unknown to the Brioneses, the whole lot had been mortgaged by the

Arevalos to Albay Development Bank.  On April 24, 1979, TCT No. T-54600 was

issued to petitioners, who paid an unspecified amount to the Arevalos for the

whole lot and P9,000 to the bank representing the balance of the loan obtained by

the Arevalos.[4]

 

Thereafter, petitioners de la Cenas demanded that

respondents Brioneses vacate the contested portion.  When respondents refused

and after a barangay conciliation failed, petitioners filed before

the Regional Trial Court of Legazpi City a complaint for quieting of title, recovery

of possession, and damages against respondents.

 

The trial court decided in favor of petitioners de la Cenas, disposing of the

case as follows:

WHEREFORE, premises considered, decision is hereby rendered:

1)      Declaring the claim of ownership of defendants [respondents herein] upon the property in question based upon exhibit “1” as invalid and ineffec[t]ive and is prejudicial to the title of the plaintiffs [petitioners herein] and casting a cloud upon said title which cloud is hereby ordered removed and the plaintiffs’ title hereby ordered quieted.

2)      The plaintiffs are hereby ordered to pay the defendants P35,952.93 as reimbursement for the value of the expenses incurred by the defendants in renovating or repairs inuring to plaintiffs benefits.

3)      Within thirty (30) days from the payment of the aforesaid P35,952.93 by the plaintiffs to the defendants, the defendants shall vacate the property in question leaving the house behind.

4)      Costs against both plaintiffs and defendants.

SO ORDERED.[5]

          While the trial court found that there was a perfected contract of sale of the

contested portion between respondents Brioneses and the Arevalos, it said that the

sale did not bind petitioners de la Cenas because, (1) the acknowledgment

receipt[6] issued by the Arevalos of the downpayment of respondents was not a

public document under Article 1358 (1)[7] of the Civil Code; and (2) the sale was

unregistered.  The trial court further noted that petitioners de la Cenas were

unaware of the previous sale of the contested portion to

the Brioneses.  Nonetheless, it faulted petitioners de la Cenas for not ascertaining

the nature of respondents Brioneses’ possession of the contested portion, since the

former were aware that the Brioneses had purchased the house that stood thereon.

          Upon respondents’ appeal, the Court of Appeals reversed the trial court’s

decision.  Thus,

WHEREFORE, the appeal is GRANTED.  The assailed decision is REVERSED and SET ASIDE.  The parties shall, at their expense share and share alike, cause a SURVEY to determine their respective portions of Lot No. 2 consistent with this decision.  Thereafter, in accordance with the said survey, the Register of Deeds of Albay shall ISSUE a new transfer certificate of title to defendants-appellants [respondents herein] for the portion pertaining to them, while the remaining portion of Lot No. 2 shall continue to pertain to plaintiffs-appellees [petitioners herein] under their TCT No. T-54600.

SO ORDERED.[8]

          The appellate court similarly held that there was a perfected contract of sale

of the contested portion based on the receipt acknowledging the downpayment.[9]  The appellate court found that the sale had been consummated and it took note

of respondents’ full payment of the purchase price of P6,000 on installment basis,

as testified to by respondent Herminia Briones.[10]  The appellate court also

concluded that petitioner Caridad Arevalo de la Cena had known of the sale of the

house and the contested portion to respondents.  Thus, the appellate court ruled that

even if petitioners were first to register the sale, their registration was tainted with

bad faith.

 

          The appellate court denied petitioners’ motion for reconsideration.

 

          Hence, the instant petition raising the following issues:

1.      WHETHER OR NOT THERE EXISTED A PERFECTED CONTRACT OF SALE BETWEEN PETITIONERS’ PREDECESSORS-IN-INTEREST, THE AREVALO SPOUSES AND THE RESPONDENTS; AND

2.      ASSUMING THAT THERE WAS SUCH A PERFECTED CONTRACT OF SALE, WHETHER OR NOT THE PETITIONERS HAD KNOWLEDGE THEREOF PRIOR TO THE REGISTRATION OF THE PROPERTY IN THEIR NAMES.[11]

          We will resolve the issues in the order presented.  Petitioners contend that

the Court of Appeals erred in ruling that there was a perfected contract of sale

based on the receipt acknowledging the downpayment.  Petitioners also contend

that the receipt neither stated the portion sold, nor the price, nor the buyer.  They

aver that there had yet been no meeting of the minds upon the object of the

contract and the price.

 

          Respondents counter that a contract of sale is perfected by mere agreement

of the parties; even without the receipt acknowledging the downpayment, there

could still be a perfected contract of sale.

 

At this juncture, we note that petitioners did not appeal the trial court’s

finding that there was a perfected contract of sale of the contested portion to

respondents.  By not appealing, petitioners are deemed to have accepted the trial

court’s factual findings and conclusions of law on this matter.[12]

 

In addition, a contract of sale is perfected by mere consent, upon a meeting

of the minds on the object of the contract and the price.[13]  When the Arevalos

accepted theP1,260 as downpayment, they had agreed to the sale of the contested

portion to respondents.  In fact, the contract of sale had already been

consummated.  Hence, its enforcement cannot be barred by the Statute of Frauds,

which applies only to an executory agreement.[14]

 

We note that the Arevalos delivered the contested portion to respondents; the

respondents had paid the P1,260 as downpayment; the downpayment was received;

the respondents had paid on installment the balance of the full purchase price

of P6,000;[15] some installments were paid weekly as demanded by the Arevalos

who did not issue receipts;[16] P400 owed by the Arevalos to respondent

Herminia Briones’s mother, was also used to offset the price;[17] respondents paid

the last installment in 1980;[18] and respondents continued their actual

possession.  Moreover, ownership of the thing sold was transferred to the buyer

upon actual or constructive delivery.[19]

 

Petitioners also contend that the Court of Appeals erred in concluding that

they knew of the sale between the Arevalos and respondents.  They insist that they

had no knowledge of the sale of the contested portion to respondents.  Hence, they

claim they were buyers in good faith who had also in good faith first registered the

sale.

 

In a double sale of immovable property, as in this case, ownership belongs

to the person who in good faith first recorded it in the registry of property. [20]  The

requirement is two-fold: acquisition in good faith and registration in good

faith.  But here, petitioners failed to show that they were in good faith because as

second buyers they were not ignorant of the first sale to respondents from the time

petitioners acquired the whole lot until the title was transferred to them.[21]

 

The records reveal that petitioner Caridad Arevalo de la Cena had testified

on direct examination that at the time they acquired the whole lot from

her parents, respondents were already staying on the contested portion, thus:

q          Now, at the time you acquired the property way back in 1979 were the [respondents] already staying in the property in question?

a          Yes, sir, they were already staying in the property.[22]

(Emphasis supplied.)

Further, Caridad knew of respondents’ claim that they bought the house

from the former’s parents.  She also knew that respondents renovated the house

after they bought it, as revealed by the testimony of Caridad on additional direct

examination:

q          [Do] you have any knowledge when the [respondents] started renovating the house?

 a          It was long time but the renovation was gradual.  They

have started the renovation when they allegedly purchased it.[23]  (Emphasis supplied.)

          The records also reveal that Caridad testified on cross-examination that she

talked to respondents only after herein petitioners had bought the whole lot, to wit:

q          I am asking you whether you talked to [respondents] when you bought the property?

 a          I talked to them after we purchased the property.

[24]  (Emphasis supplied.)

Thus, Caridad’s testimony belie petitioners’ contention that their

“knowledge of respondents’ claims over the [contested] portion arose only after,

not before, the lot had been titled or registered in their name” or “only after the

demand to vacate was received by”[25] respondents.  On direct examination,

Caridad testified:

q          Did [respondents] comply with your demands? a          They did not.

q          Why? Do you know the reason why they refused? a          I have been hearing stories because they have been

telling people that they have already purchased the property.

q          When was that[?]  When did you learn of such allegation of the [respondents]?

 a          Even before we asked them to vacate we have been

hearing stories already.[26]  (Emphasis supplied.)

          Patently, petitioners made no efforts to clarify the true nature of respondents’

possession, despite knowing of the latter’s claim of ownership and actual, visible

and public possession of the contested portion.  One who buys real property in

actual possession of another should at least inquire as to the right of the ones in

possession.  Absent such inquiry, petitioners cannot be regarded as bona fide

buyers as against respondents, the ones in possession of the contested portion.[27]  The rule is that if a buyer 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 on him any right.[28]

 

          WHEREFORE, the petition is DENIED for lack of merit.  Petitioners

are ORDERED to reconvey to respondents the six-meter by nine-meter contested

portion of the lot covered by Transfer Certificate of Title No. T-54600.  Thereafter,

the Register of Deeds of Albay shall issue the corresponding transfer certificate of

title of the reconveyed portion.  All expenses for the purpose shall be shared

equally by the parties.  The remaining area covered by TCT No. T-54600 shall

remain with petitioners.

 

          Costs against petitioners.

 

          SO ORDERED.

JOSE V. LAGON, petitioner, vs. HOOVEN COMALCO INDUSTRIES, INC., respondent.

D E C I S I O NBELLOSILLO, J.:

This petition for review on certiorari seeks to set aside the Decision of the Court of Appeals of 28 April 1997 which in turn set aside the decision of the Regional Trial Court of Davao City and ordered petitioner Jose V. Lagon to pay respondent Hooven Comalco Industries, Inc. (HOOVEN) the amount of P69,329.00 with interest at twelve percent (12%) per annum computed from the filing of the complaint until fully paid, plus attorney’s fees and costs,[1] as well as the Resolution of the appellate court denying reconsideration thereof.[2]

Petitioner Jose V. Lagon is a businessman and owner of a commercial building in Tacurong, Sultan Kudarat.  Respondent HOOVEN on the other hand is a domestic corporation known to be the biggest manufacturer and installer of aluminum materials in the country with branch office at E. Quirino Avenue, Davao City.

Sometime in April 1981 Lagon and HOOVEN entered into two (2) contracts, both denominated Proposal,  whereby for a total consideration of P104,870.00 HOOVEN agreed to sell and install various aluminum materials in Lagon’s commercial building in Tacurong, Sultan Kudarat.[3] Upon execution of the contracts, Lagon paid HOOVEN P48,00.00 in advance.[4]

On 24 February 1987 respondent HOOVEN commenced an action for sum of money with damages and attorney’s fees against petitioner Lagon before the Regional Trial Court of Davao City.  HOOVEN alleged in its complaint that on different occasions, it delivered and installed several construction materials in the commercial building of Lagon pursuant to their contracts; that the total cost of the labor and materials amounted toP117,329.00 out of which P69,329.00 remained unpaid even after the completion of the project; and, despite repeated demands, Lagon failed and refused to liquidate his indebtedness.  HOOVEN also prayed for attorney’s fees and litigation expenses, and in support thereof, presented its OIC, Alberto Villanueva, and its employee, Ernesto Argente, and other witnesses, as well as several documentary evidence consisting mainly of the two (2) proposals, invoices and delivery receipts.

Lagon, in his answer, denied liability and averred that HOOVEN was the party guilty of breach of contract by failing to deliver and install some of the materials specified in the proposals; that as a consequence he was compelled to procure the undelivered materials from other sources; that as regards the materials duly delivered and installed by HOOVEN, they were fully paid.  He counterclaimed for actual, moral, exemplary, temperate and nominal damages, as well as for attorney’s fees and expenses of litigation.

On 9 October 1987, upon request of both parties, the trial court conducted an ocular inspection of Lagon’s commercial building to determine whether the items alleged in the complaint and appearing in the invoices and delivery receipts had been delivered and installed on the premises.  The result of the ocular inspection was -

1) with respect to the items covered by Exhibit “A” and submarkings that there are only seventeen (17) light diffusers, 13 in the ceiling of the ground and 4 on the mezzanine (Ocular Inspection, TSN, pp. 5 to 6); 2) on Exhibit “B” and submarkings, there are only twenty-three (23) light aluminum boxes, 14 aluminum boxes in the ceiling of the mezzanine and 9 on the ceiling of the ground floor (Ocular Inspection, TSN, p. 7); 3) on Exhibit “C-1,” the items are missing in the area where they were supposed to be installed; 4) on Exhibit “C-2,” admitted by defendant Lagon when he stated that “I will admit that these were installed by the plaintiff but I do not know

exactly the materials, but I really accept that these were installed sometime in 1981, before the occupation of the DBP.  But I have paid that already in 1981.  I could not identify the materials delivered in 1981 because I do not know the exact names of those materials.” (Ocular Inspection, TSN, p. 12); 5) on Exhibit “C-2,” the glasses are not tinted but plain white; on Exhibit “C-3,” the materials cannot be formed (sic) in the place where they are supposed to be (Ocular Inspection, TSN, p.7); 6) Exhibit “D” and “D-1,” that the materials were supplied by plaintiff but they did not install them.  It was the defendant who caused the installation thereof (Ocular Inspection, TSN, p. 13.); and 7) Exhibit “E-1,” as NU- Main and Cross-Runners and supplied by plaintiff but plaintiff did not install.  They had it installed (Ocular Inspection, TSN, p. 14).

In due course the trial court rendered a decision partly on the basis of the result of the ocular inspection finding that the total actual deliveries and installations made by HOOVEN cost P87,140.00.  Deducting therefromP48,000.00 which Lagon paid in advance upon execution of their contracts with no further payments appearing to have been made thereafter, only P39,140.00 remained unpaid and where Lagon incurred in delay.  The trial court also awarded HOOVEN P3,255.00 as attorney’s fees, but sustained Lagon’s counterclaims and awarded him P26,120.00 as actual damages representing the value of the undelivered and uninstalled materials, andP30,000.00 as attorney’s fees in addition to litigation expenses of P45,534.50.  According to the court a quo[5]–

As a result of the partial breach of contract on plaintiff's (Hooven Comalco) part, the defendant is entitled to actual damages only to the extent of the undelivered materials and undone labor or to the amount of P26,120.00. This P26,120.00 will be partially offsetted (sic) to the P39,140.00 unpaid balance of the defendant (Lagon), so that the difference that remain (sic) payable to plaintiff is P13,020.00.  Evidence is insufficient to show that bad faith existed in the filing of the instant complaint for collection against the defendant.  Plaintiff's obstinate conduct in prosecuting its claim spending for litigation expenses and for its lawyers negate the existence of bad faith. The fact alone that the findings of fact show an unpaid account of the defendant is proof that the complaint is not completely unfounded though evidence shows also that plaintiff is guilty of partial breach of contract by reason of failure to completely deliver and install the materials defendant ordered pursuant to the contract so that plaintiff is liable for damages.  As plaintiff acted in good faith in the filing of the instant complaint in the belief that it has a valid cause of action against the defendant to enforce its claim, engaging a lawyer to prosecute it, plaintiff is entitled to a reasonable attorney’s fees equivalent to 25% of the collectible amount of P13,020.00 or the amount of P3,225.00.  Defendant's claim of attorney’s fees in the amount of P152,629.15 is in the opinion of the court clearly unreasonable and unconscionable considering the nature of the action and the amount involved. The court has the power to reduce it to render it reasonable and conscionable whether the contract for

attorney's fees is written or oral.  The attorney’s fees is fixed at P30,000.00.  The defendant presented evidence of litigation expenses incurred in the course of the trial for plane fare of its lawyer in coming to Davao City from Manila from 1987 up to July 1990 in the total amount of P34,730.50 as evidenced by Exhibit “11” to “11-E.” The records show that the defendant’s counsel came to Davao City from Manila to attend eleven (11) hearings of the case and the plane fare from 1987 up to August, 1989 is P2,524.50 and from August 1989 to June 1990 is P3,007.50.  Hotel expenses of defendant’s counsel at the Maguindanao Hotel where he was billeted everytime he came to Davao City to attend the trial amounted to P11,824.00 as evidenced by Exhibit “17,” the certification issued by the said hotel management.  So that the total amount of the actual damage suffered by defendant is P45,534.50.  Said amount of P45,534.50 is partially offsetted (sic) by the amount of P13,020.00 representing the unpaid obligation of the defendant to the plaintiff so that the plaintiff is still liable to pay the defendant the difference in the amount of P32,514.50.

Both parties appealed to the Court of Appeals.  In its Decision of 28 April 1997, the appellate court set aside the judgment of the trial court and resolved the case in favor of HOOVEN.  It held that the trial court erred in relying solely on the results of the ocular inspection since the delivery and installation of the materials in question started as early as 1981, while the ocular inspection was conducted only in 1987 or six (6) years later, after the entire mezzanine was altered and the whole building renovated.  The appellate court also stressed that the testimonies of HOOVEN's witnesses were straightforward, categorical and supported by documentary evidence of the disputed transactions, and that all Lagon could offer was a mere denial, uncorroborated and self-serving statements regarding his transactions with HOOVEN.  The decretal portion of the assailed decision of the Court of Appeals reads -

ACCORDINGLY, finding the decision of August 26, 1991 appealed from afflicted by reversible errors, the same is hereby SET ASIDE, and a new one entered ordering the defendant-appellant (Lagon) to pay plaintiff-appellant (Hooven Comalco):

The amount of P69,329.00 plus interest of 12% per annum computed from the date of the filing of the complaint, until fully paid.

Fifteen percent (15%) of the amount due, as and by way of attorney’s fees.

Defendant-appellant to pay costs.

Petitioner's motion for reconsideration having been denied he now hopes to secure relief from this Court by contending that:  (a) The Court of Appeals erred in holding that the trial court could not rely on the results of the ocular inspection conducted on his commercial building in Tacurong, Sultan Kudarat; and, (b) The assailed decision of the appellate court is based on speculations and contrary to the evidence adduced during the trial.

The arguments in the petition ultimately boil down to the sole issue of whether all the materials specified in the contracts had been delivered and installed by respondent in petitioner’s commercial building in Tacurong, Sultan Kudarat.  The question is basically factual involving as it does an evaluation of the conflicting evidence presented by the contending parties, including the existence and relevance of specific surrounding circumstances, to determine the truth or falsity of alleged facts.

While factual issues are not within the province of this Court, as it is not a trier of facts and is not required to examine or contrast the oral and documentary evidence de novo,[6] nevertheless, the Court has the authority to review and, in proper cases, reverse the factual findings of lower courts in these instances:  (a) when the findings of fact of the trial court are in conflict with those of the appellate court; (b) when the judgment of the appellate court is based on  misapprehension of facts; and, (c) when the appellate court manifestly overlooked certain relevant facts which, if properly considered, would justify a different conclusion.[7] This case falls squarely within the foregoing exceptions.

Before delving into the merits of this case, we find it necessary to describe and detail the nature and contents of the vital documentary exhibits upon which respondent HOOVEN based its claims, thus -

Exhibit “F” -  Undated Proposal:

I. For the supply of materials and installation of suspended aluminum ceiling runners:

Area: 2,290 sq. ft.

Materials:  NU- Main & Cross runners

                 NU-5 Perimeter mouldings

                 G.I. wire hangers

                Aluminum straps stiffeners

                Blind Rivets and Screws                    P14,110.00

                Labor charge                                         4,230.00

                                                                                                      18,440.00

II. One (1) set: 65 x 68 YP aluminum cladding         1,150.00

                                                                                                    P19,590.00

Delivery and Installation charge                              1,860.00

                                                                                                P21,450.00

Exhibit “F-1” – Proposal dated 3 April 1981

“Hooven” Aluminum Casement Windows Anolok Finish Manually Operated, with 6.0 mm Bronzepane Tinted Glass

Five (5) sets:  65”         x   126-1/2” (w/ transom)

One (1) set:    65”         x   126-1/2” (w/ AC provision)

Two (2) sets:  39-1/2”  x   125-1/2”     -do-

One (1) set:    39-1/2”  x    87”             -do-

One (1) set:    39-1/2”  x    223”           -do-

One (1) set:    65”        x    57-1/2”   (w/ transom)

One (1) set:    65”        x    4”               -do-

“Hooven” Aluminum Entrances and Fixed Windows Anolok Finish, with 6.0 mm Bronzepane Tinted Glass

One (1) set: 100-1/2” x 76-1/2”, double sash, double acting swing door, with transom.

Two (2) sets: 80” x 278”, fixed panels             21,740.00

“Hooven” Aluminum Sliding Windows Fabricated From SD-Sections, Anolok Finish, with 6.0 mm Bronzepane Tinted Glass

One (1) set:     54 x 191

One (1) set:     45 x 302                                     11,650.00

   75,920.00

Add: Delivery and Installation charge                   7,500.00

                                                                                                 P83,420.00

Exhibit “A” – Invoice No. 11094 dated 29 December 1982

Eighty Six (86) Pieces, 2.0 mm Hishilite                P3,440.00

Diffusers

Exhibit “B” – Invoice No. 11095 dated 29 December 1982

Forty-Three Pieces: For the Supply and

Installation of Light Boxes Fabricated from

GA. 032 Aluminum Plain Sheet

Delivery and Installers’ subsistence                           P5,718.50

Exhibit “C” – Invoice No. 14349 dated 29 December 1984

Five (5) sets 1.651m 3.213m Hooven Aluminum Casement windows, Anolok finish, manually operated with 6.0 Bronzepane tinted glass.

One (1) set 1.651 m 3.367m      - do - with a/c provision

Two (2) sets 1.00 m 3.188m      - do -        - do -

One (1) set    1.00 m 2.210 m    - do -        - do -

One (1) set    1.00 m 5.664 m    - do -        - do -

One (1) set    1.651m 1.461 m   - do -        - do - with transom

One (1) set    1.651m 1.880 m   - do -                  with transom

One (1) set    1.651m 1.524 m   - do -        - do -

One (1) set    2.553m 1.943 m     Hooven aluminum double sash, double acting swing door, with transom, with  6.0 mm Bronze-pane tinted glass.

Two (2) sets 2.032m 7.061 m      Fixed windows, Anolok finish.

One (1) set    .737 m 7.061 m     Aluminum tubulars with aluminum YP-100 cladding, Anolok finish.

One (1) set   1.143m  4.851m     Hooven aluminum sliding windows fabricated from SD sections, Anolok finish, with 6.0 mm Bronzepane tinted glass, with 1.88 m tubular posts.

One (1) set 1.143m 7.671m         - do -                     P75,291.83

                                                                   4% tax                         3,011.67

                                                                                                             78,303.50

                                                             Delivery & Subs.            7,500.00

                                                                                                           P85,803.50

Exhibit “D” – Invoice No. 14265 dated 29 September 1984

For the supply of materials and installation of aluminum stucco embossed sheet on spiral staircase                                                              P5,310.00

Exhibit “E” – Invoice No. 14264  dated 29 November 1984

For the supply of materials and installation of suspended aluminum ceiling system.

Materials: NU-4 main and cross runners

               NU-5 perimeter mouldings

               GI wire hangers

               Alum strap stiffeners

              Blind rivets and screws                          P17,057.00

Exhibit “A-1” – Delivery Receipt dated 9 June 1981

Twenty (20) pieces Light boxes fabricated from aluminum sheets

Forty (40) pieces 2.0 mm x 24” x 24” Hishilite Diffusers

Lump sum cost including discount and Delivery and

Installer Subsistence

                                                                                                                      P4,340.00

Exhibit “A-2” – Delivery Receipt dated 8 August 1981

Twenty (20) pieces Light boxes fabricated from .032” aluminum plain sheet

Twenty Seven (27) 2.0 mm x 24” x 24” Hishilite Diffusers

Add: Delivery & Installers Subsistence                             P180.00

Exhibit “A-3” – Delivery Receipt, dated 8 December 1981

19 pcs. 2.0 mm x 2” x2” Hishilite Diffusers                        P40.00

Exhibit “B-1” – Delivery Receipt dated 25 June 1981

Additional three (3) pcs. Light boxes fabricated from .032 Aluminum sheets

                                                                                                                         P140.00

Exhibit “C-1” – Delivery Receipt dated 25 August 1983

To change alum tubular frames for sliding windows (item 10 & 11) from 45” L x to 94” x 74.”

To change width of one (1) set: item 1 from 126-1/2 to 132-1/2.

To add: one (1) set 65”H x 60” aluminum casement windows with 6.0 mm tinted glass.

To extend alum tubulars of fixed windows on 2nd floor by 29”L and installation of YP-aluminum cladding                                                     P8,640.00

Exhibit “C-2” – Delivery Receipt dated 25 August 1983

Hooven Alum Casement Windows Anolok Finish Manually Operated with 6.0 mm Bronzepane Tinted Glass:

Five (5) sets:  65”       x   126-1/2”   with transom

One (1) set:    65”       x   126-1/2     with AC provision

Two (2) sets:  39-1/2  x   125-1/2        - do -

One (1) set:    39-1/2” x   87”             - do -

One (1) set:    39-1/2” x   223”           - do -

One (1) set:    65”       x   57-1/2”      with transom

One (1) set:    65”       x   74”             - do -

                                                                                                                    P42,530.00

Hooven Alum Entrances & Fixed Windows Anolok Finish with 6.0 mm Bronzepane Tinted Glass:

One (1) set: 100-1/2 x 76-1/2, double sash, double acting swing door, with transom

Two (2) sets: 80” x 278” fixed panels                                      P21,740.00

Exhibit “C-3” – Delivery Receipt dated 25 August 1983

Hoven Alum Sliding Windows Fabricated from SD Sections Anolok Finish with 6.0 mm Bronzepane Tinted Glass:

One (1) set: 45” x 191”

One (1) set: 45” x 302”                                                         P11,650.00

Add: Delivery and Installation                                       7,500.00

Less: 7% Discount                                                                         6,256.50

                                                                                                                         P77,163.50

Exhibit “D-1” – Delivery Receipt  dated 25 August 1983

For the supply of materials and installation of aluminum stucco embossed sheet on spiral staircase: One (1) set 32” H x 304” WL    P5,310.00

Exhibit “E-1” – Delivery Receipt dated 25 August 1983

NU- main and cross runners

NU-5 Perimeter mouldings

G.I. Wire Hangers

Aluminum straps stiffeners

Blind rivets and screws                                                               P17,057.00

We have carefully and diligently considered the foregoing exhibits and we are fully convinced that the mass of documentary evidence adduced by respondent suffers from patent irregularities and material inconsistencies on their faces, raising serious questions requiring cogent explanations.  These flaws inevitably deplete the weight of its evidence, with the result that for lack of the requisite quantum of evidence, respondent dismally failed in the lower court to discharge its burden necessary to prevail in this case.

Firstly, the quantity of materials and the amounts stated in the delivery receipts do not tally with those in the invoices covering them, notwithstanding that, according to HOOVEN OIC Alberto Villanueva, the invoices were based merely on the delivery receipts.[8] For instance, only eleven (11) items were listed in Exhs. "C-2" and "C-3" with a total worth of P77,163.50.  But in Exh. "C," which was the invoice for Exhs. "C-2" and "C-3," there were thirteen (13) items enumerated for a total worth of P85,803.50.  If Exh. "C" is supposed to be based on Exhs. "C-2" and "C-3," we cannot understand the apparent discrepancy in the items listed in those documents when they all referred to the same materials.

Secondly, the total value of the materials as reflected in all the invoices is P117,329.00 while under the delivery receipts it is only P112,870.50, or a difference of P4,458.00.  Moreover, the materials listed in the two (2) Proposals, upon which HOOVEN based its claims, is only for the total sum of P104,870.00.  Curiously then, why would the materials supposedly delivered by HOOVEN be more than what was contracted and purchased by Lagon?  This circumstance underscores the need to reexamine the strength, if not weakness, of respondent’s cause.

Thirdly, under the Proposals HOOVEN bound itself to invoice the materials "when complete and ready for shipment." Oddly, the records show that the invoices were prepared several years after the materials were allegedly delivered and installed completely on petitioner’s building.  Alberto Villanueva testified that their project with petitioner was completed sometime in August 1981 and that thereafter no further installation was done in the building. [9] But the disputed invoices marked Exhs. "A" and "B" were prepared only on 29 December 1982; Exhs. "C" and "D" were prepared only on 29 December 1984; and, Exh. "E" was prepared only on 29 November 1984.  As for the delivery receipts, Exhs. "C-1," "C-2," "C-3" and "E-1" were prepared only on 25 August 1983 or two (2) years after the completion of the project, while Exh. "A-3" was prepared only on 8 December 1981 or some four (4) months after the date of completion.

Even more strange is the fact that HOOVEN instituted the present action for collection of sum of money against Lagon only on 24 February 1987, or more than five (5) years after the supposed completion of the project.  Indeed, it is contrary to common experience that a creditor would take its own sweet time in collecting its credit, more so in this case when the amount involved is not miniscule but substantial.

Fourthly, the demand letter of 25 August 1983[10] sent to petitioner by respondent further betrays the falsity of its claims -

Dear Mr. Lagon:

The bearer, Mr. Fermin Piñero, is an authorized representative of this company.  He will arrange for your acceptance of the complete aluminum and glass installation we have undertaken for your building.  He has with him the delivery receipts for your signature so with a statement of account showing your balance.  Kindly favor us with a partial payment to cover our operation costs.  Also kindly relay to him all other installations you wish us to undertake.

Hoping for your favorable action, we shall remain.

                                                                                                                 Very Truly Yours,

                                                                                                                 Hooven Comalco Industries, Inc.

                                                                                                                 Davao Branch

                                                                                                                 (Sgd.) Alberto P. Villanueva

If, as claimed by HOOVEN, all the materials were completely delivered and installed in petitioner’s building as early as August 1981, why then would it demand partial payment only two (2) years later?  This circumstance is very significant especially considering that under the Proposals the terms of payment should be 50% down "and the balance to be paid in full" upon completion.  Moreover, it is surprising that the partial payment demanded was only "to cover operation costs." As correctly observed by petitioner, demand for payment of operation costs is typical of a still on-going project where the contractor needs funds to defray his expenses.  If there was complete installation, why would respondent demand payment for operation costs only?  Why not enforce the whole amount of indebtedness?  All these clearly suggest that there was no full and complete delivery and installation of materials ordered by petitioner.

Fifthly, all the delivery receipts did not appear to have been signed by petitioner or his duly authorized representative acknowledging receipt of the materials listed therein.  A closer examination of the receipts clearly showed that the deliveries were made to a certain Jose Rubin, claimed to be petitioner’s driver, Armando Lagon, and a certain bookkeeper.  Unfortunately for HOOVEN, the identities of these persons were never been established, and there is no way of determining now whether they were indeed authorized representatives of petitioner.  Paragraph 3 of each Proposal is explicit on this point -

3. x x x the seller’s responsibility ends with delivery of the merchandise to carrier in good condition, to buyer, or to buyer’s authorized "Receiver/Depository" named on the face of this proposal (underscoring supplied).

As above specifically stated, deliveries must be made to the buyer or his duly authorized representative named in the contracts.  In other words, unless the buyer specifically designated someone to receive the delivery of materials and his name is written on the Proposals opposite the words "Authorized Receiver/Depository," the seller is under obligation to deliver to the buyer only and to no other person; otherwise, the delivery would be invalid and the seller would not be discharged from liability.  In the present case, petitioner did not name any person in the Proposals who would receive the deliveries in his behalf, which meant that HOOVEN was bound to deliver exclusively to petitioner.

Sixthly, it is also obvious from the contested delivery receipts that some important details were not supplied or were left in blank, i.e., truck numbers, persons who delivered the materials, invoice and s. o. numbers.  The persons who delivered the materials were potential witnesses who could shed light on the circumstances surrounding the alleged deliveries of the materials to petitioner.  Moreover, it could have been easier for HOOVEN to pinpoint responsibility to any of its employees for the non-delivery of the materials.

We are not unaware of the slipshod manner of preparing receipts, order slips and invoices, which unfortunately has become a common business practice of traders and businessmen.  In most cases, these commercial forms are not always fully accomplished to contain all the necessary information describing the whole business transaction.  The sales clerks merely indicate a description and the price of each item sold without bothering to fill up all the available spaces in the particular receipt or invoice, and without proper regard for any legal repercussion for such neglect.  Certainly, it would not hurt if businessmen and traders would strive to make the receipts and invoices they issue complete, as far as practicable, in material particulars.  These documents are not mere scraps of paper bereft of probative value but vital pieces of evidence of commercial transactions.  They are written memorials of the details of the consummation of contracts.

Given this pathetic state of respondent's evidence, how could it be said that respondent had satisfactorily proved its case?  Essentially, respondent has the burden of establishing its affirmative allegations of complete delivery and installation of the materials, and petitioner’s failure to pay therefor.  In this regard, its evidence on its discharge of that duty is grossly anemic.  We emphasize that litigations cannot be properly resolved by suppositions, deductions, or even presumptions, with no basis in evidence, for the truth must have to be determined by the hard rules of admissibility and proof.

The Court of Appeals however faulted the trial court for supposedly relying solely on the results of the ocular inspection on the premises, which were not conclusive since the inspection was conducted several years after the disputed materials were allegedly installed therein.

We disagree.  The ocular inspection was made by the judge himself, at the request of both petitioner and respondent, for the exclusive purpose of determining whether the materials subject of this case were actually delivered and installed.  There is therefore no basis to give little evidentiary value on the results of the ocular inspection, as the Court of Appeals would, and charge the trial court with error for relying thereon.  It is now rather late for any of the parties to disclaim them, especially when they are not in his or its favor.  Furthermore, a cursory reading of the decision of the court a quo will at once show that it was not premised solely on the results of the ocular inspection but was likewise predicated on other evidence presented by the parties and well-considered facts and circumstances discussed by the trial court in its ratio decidendi.  We

cannot ignore the factual findings of the trial court, which must carry great weight in the evaluation of evidentiary facts, and in the absence of any indication showing grave error committed by trial court, the appellate court is bound to respect such findings of fact.

We hasten to add however that petitioner is not entirely free from any liability to respondent.  Petitioner admitted the delivery of materials under Exhs. "A" and its submarkings, "B" and its submarkings, "D," "D-1" and "E." With respect to Exh. "C-2," petitioner acknowledged his obligation under the first heading, Items Nos. 3, 4 and 5, and the second heading, and denied the rest.  Consequently, he should be made liable therefor in the total amount of P58,786.65.  From this amount, petitioner’s down payment of P48,000.00 should be deducted.

It is insisted by petitioner in his appeal brief filed before the Court of Appeals that the second item under the second heading of Exh. "C-2" should be excluded in the computation since he never admitted liability therefor.

We are not persuaded.  The transcript of stenographic notes shows that during the ocular inspection counsel for respondent manifested in effect that petitioner admitted the delivery and installation of the second item in his building, and petitioner did not interpose any objection to respondent's manifestation -

ATTY. QUIÑONES:  We would like to make of record that         defendant (Lagon) admits that plaintiff (Hooven Comalco) delivered and installed Item No. 1 under the second column of          Exhibit “C-2” which is the front door of the ground floor.

ATTY. RICO:  Defendant however adds that these were installed in 1981 and had already paid for the said item.

ATTY. QUIÑONES:  I would like to make of record also that defendant admits the delivery and installation of Item No. 2 under the second column of Exhibit “C-2” as having been delivered and installed by the plaintiff in 1981 with the qualification, however, that he had already paid the same.

COURT:  Are you stating that all these installed items on the ground floor were all paid by you?

MR. LAGON:  Yes, Your Honor.[11]

Petitioner cannot now be heard to complain against its inclusion in the computation of his liability since his silence virtually amounted to acquiescence.  The silence of one of the contracting parties and his failure to protest against the claims of the other party, when he is chargeable with the duty to do so, strongly suggest an admission of the veracity and validity of the other party’s claims.

In sum, petitioner’s total liability to respondent may be computed as follows:

(1)  Items under Exh. “A,” consisting of 17

light diffusers at P40.00 each                                         P  680.00

(2) Items under Exh. “B,” consisting of 23

light boxes at P40.00 each                                                            3,220.00

(3) Third, fourth and fifth items under the first

heading of Exh. "C-2" which on the basis of

their measurements constitute only  1/3  of

the total costs of materials listed therein                                    14,176.65

(4) Items under the second heading of

Exh. “C-2”                                                                 21,740.00

(5) Items under Exhs. “D” and “D-1”                             4,860.00

(6) Items under Exh. “E-1”                                                        14,110.00

                                                                                               P58,786.65

Less: Stipulated 7% discount                                                           4,408.99

                                                                                                                            P54,377.66

Less: Advance payment made by petitioner

to Hooven Comalco                                                                  48,000.00

Unpaid Balance of petitioner                                                 P6,377.66

Notwithstanding the breach of contract by respondent in failing to deliver and install in the premises of petitioner all the stipulated materials, we nevertheless accede to the right of respondent to recover the unpaid balance from petitioner for the materials actually delivered.

The next point of inquiry is the propriety of awarding damages, attorney’s fees and litigation expenses.

We are not in accord with the trial court’s ruling that petitioner is entitled to actual damages to the extent of the undelivered materials and undone labor in the amount of P26,120.00.  There is no proof that petitioner already paid for the value of the undelivered and uninstalled materials to respondent.  Therefore, petitioner may not be deemed to have suffered any such damage.  We have declared in no uncertain terms that actual or compensatory damages cannot be presumed but must be proved with reasonable degree of certainty.[12] A court cannot rely on speculations, conjectures or guesswork as to the fact of damage but must depend upon competent proof that they have indeed been suffered by the injured party and on the basis of the best evidence obtainable as to the actual amount thereof.[13] It must point out specific facts that could provide the gauge for measuring whatever compensatory or actual damages were borne.

But we agree with petitioner that he is entitled to moral damages.  HOOVEN's bad faith lies not so much on its breach of contract - as there was no showing that its failure to comply with its part of the bargain was motivated by ill will or done with fraudulent intent - but rather on its appalling temerity to sue petitioner for payment of an alleged unpaid balance of the purchase price notwithstanding knowledge of its failure to make complete delivery and installation of all the materials under their contracts.  It is immaterial that, after the trial, petitioner was found to be liable to respondent to the extent of P6,377.66.  Petitioner's right to withhold full payment of the purchase price prior to the delivery and installation of all the merchandise cannot be denied since under the contracts the balance of the purchase price became due and demandable only upon the completion of the project.  Consequently, the resulting social humiliation and damage to petitioner's reputation as a respected businessman in the community, occasioned by the filing of this suit provide sufficient grounds for the award ofP50,000.00 as moral damages.

Moreover, considering the fact that petitioner was drawn into this litigation by respondent and was compelled to hire an attorney to protect and defend his interest, and taking into account the work done by said attorney throughout the proceedings, as reflected in the record, we deem it just and equitable to award attorney's fees for petitioner in the amount of P30,000.00.[14] In addition, we agree with the trial court that petitioner is entitled to recover P46,554.50 as actual damages including litigation expenses as this amount is sufficiently supported by the evidence.[15]

WHEREFORE, the assailed Decision of the Court of Appeals dated 28 April 1997 is MODIFIED.  Petitioner Jose V. Lagon is ordered to pay respondent Hooven Comalco Industries, Inc., P6,377.66 representing the value of the unpaid materials admittedly delivered to him.  On the other hand, respondent is ordered to pay petitioner P50,000.00 as moral damages, P30,000.00 as attorney's fees and P46,554.50 as actual damages and litigation expenses.

SO ORDERED.