Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No.

126454 November 26, 2004

BIBLE BAPTIST CHURCH and PASTOR REUBEN BELMONTE, petitioners, vs. COURT OF APPEALS and MR. & MRS. ELMER TITO MEDINA VILLANUEVA, respondents.

DECISION AZCUNA, J.: This petition for review on certiorari seeks to annul the Decision1 dated August 7, 1996, of the Court of Appeals in CA-G.R. CV No. 45956, and its Resolution2 dated September 12, 1996, denying reconsideration of the decision. In the questioned issuances, the Court of Appeals affirmed the Decision3 dated June 8, 1993, of the Regional Trial Court of Manila, Branch 3, in Civil Case No. 9055437. The antecedents are: On June 7, 1985, the Bible Baptist Church (petitioner Baptist Church) entered into a contract of lease 4 with Mr. & Mrs. Elmer Tito Medina Villanueva (respondent spouses Villanueva). The latter are the registered owners of a property located at No. 2436 (formerly 2424) Leon Guinto St., Malate, Manila. The pertinent stipulations in the lease contract were: 1. That the LESSOR lets and leases to the LESSEE a store space known as 2424 Leon Guinto Sr. St., Malate, Manila, of which property the LESSOR is the registered owner in accordance with the Land Registration Act. 2. That the lease shall take effect on June 7, 1985 and shall be for the period of Fifteen (15) years. 3. That LESSEE shall pay the LESSOR within five (5) days of each calendar month, beginning Twelve (12) months from the date of this agreement, a monthly rental of Ten Thousand Pesos (P10,000.00) Philippine Currency, plus 10% escalation clause per year starting on June 7, 1988. 4. That upon signing of the LEASE AGREEMENT, the LESSEE shall pay the sum of Eighty Four Thousand Pesos (P84,000.00) Philippine Currency. Said sum is to be paid directly to the Rural Bank, Valenzuela, Bulacan for the purpose of redemption of said property which is mortgaged by the LESSOR. 5. That the title will remain in the safe keeping of the Bible Baptist Church, Malate, Metro Manila until the expiration of the lease agreement or the leased premises be purchased by the LESSEE, whichever comes first. In the event that the said title will be lost or destroyed while in the possession of the LESSEE, the LESSEE agrees to pay all costs involved for the re-issuance of the title. 6. That the leased premises may be renovated by the LESSEE, to the satisfaction of the LESSEE to be fit and usable as a Church. 7. That the LESSOR will remove all other tenants from the leased premises no later than March 15, 1986. It is further agreed that if those tenants are not vacated by June 1, 1986, the rental will be lowered by the sum of Three Thousand Pesos (P3,000.00) per month until said tenants have left the leased premises. 8. That the LESSEE has the option to buy the leased premises during the Fifteen (15) years of the lease. If the LESSEE decides to purchase the premises the terms will be: A) A selling Price of One Million Eight Hundred Thousand Pesos (P1.8 million), Philippine Currency. B) A down payment agreed upon by both parties. C) The balance of the selling price may be paid at the rate of One Hundred Twenty Thousand Pesos (P120,000.00), Philippine Currency, per year. x x x.5

The foregoing stipulations of the lease contract are the subject of the present controversy. Although the same lease contract resulted in several cases6 filed between the same parties herein, petitioner submits, for this Court's review, only the following errors allegedly committed by the Court of Appeals: a) Respondent Court of Appeals erred in finding that the option to buy granted the petitioner Baptist Church under its contract of lease with the Villanuevas did not have a consideration and, therefore, did not bind the latter; b) [R]espondent court again also erred in finding that the option to buy did not have a fixed price agreed upon by the parties for the purchase of the property; and c) [F]inally, respondent court erred in not awarding petitioners Baptist Church and its pastor attorney's fees.7 In sum, this Court has three issues to resolve: 1) Whether or not the option to buy given to the Baptist Church is founded upon a consideration; 2) Whether or not by the terms of the lease agreement, a price certain for the purchase of the land had been fixed; and 3) Whether or not the Baptist Church is entitled to an award for attorney's fees. The stipulation in the lease contract which purportedly gives the lessee an option to buy the leased premises at any time within the duration of the lease, is found in paragraph 8 of the lease contract, viz: 8. That the LESSEE has the option to buy the leased premises during the Fifteen (15) years of the lease. If the LESSEE decides to purchase the premises the terms will be: A) A selling Price of One Million Eight Hundred Thousand Pesos (P1.8 million), Philippine Currency. B) A down payment agreed upon by both parties. C) The balance of the selling price may be paid at the rate of One Hundred Twenty Thousand Pesos (P120,000.00), Philippine Currency, per year. Under Article 1479 of the Civil Code, it is provided: 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. The second paragraph of Article 1479 provides for the definition and consequent rights and obligations under an option contract. For an option contract to be valid and enforceable against the promissor, there must be a separate and distinct consideration that supports it. In this case, petitioner Baptist Church seeks to buy the leased premises from the spouses Villanueva, under the option given to them. Petitioners claim that the Baptist Church "agreed to advance the large amount needed for the rescue of the property but, in exchange, it asked the Villanuevas to grant it a long term lease and an option to buy the property for P1.8 million." 8 They argue that the consideration supporting the option was their agreement to pay off the Villanueva's P84,000 loan with the bank, thereby freeing the subject property from the mortgage encumbrance. They state further that the Baptist Church would not have agreed to advance such a large amount as it did to rescue the property from bank foreclosure had it not been given an enforceable option to buy that went with the lease agreement. In the petition, the Baptist Church states that "[t]rue, the Baptist Church did not pay a separate and specific sum of money to cover the option alone. But the P84,000 it paid the Villanuevas in advance should be deemed consideration for the one contract they entered into the lease with option to buy."9 They rely on the case ofTeodoro v. Court of Appeals10 to support their stand. This Court finds no merit in these contentions. First, petitioners cannot insist that the P84,000 they paid in order to release the Villanuevas' property from the mortgage should be deemed the separate consideration to support the contract of option. It must be pointed out that said amount was in fact apportioned into monthly rentals spread over a period of one year, at P7,000 per month. Thus, for the entire period of June 1985 to May 1986, petitioner Baptist Church's monthly rent had already been paid for, such that it only again commenced paying the rentals in June 1986. This is shown by the testimony of petitioner Pastor Belmonte where he states that the P84,000 was advance rental equivalent to monthly rent of P7,000 for one year, such that for the entire year from 1985 to 1986 the Baptist Church did not pay monthly rent. 11 This Court agrees with respondents that the amount of P84,000 has been fully exhausted and utilized by their occupation of the premises and there is no separate consideration to speak of which could support the option. 12

Second, petitioners' reliance on the case of Teodoro v. Court of Appeals 13 is misplaced. The facts of the Teodoro case reveal that therein respondent Ariola was the registered lessee of a property owned by the Manila Railroad Co. She entered into an agreement whereby she allowed Teodoro to occupy a portion of the rented property and gave Teodoro an option to buy the same, should Manila Railroad Co. decide to sell the property to Ariola. In addition, Teodoro, who was occupying only a portion of the subject rented property, also undertook to pay the Manila Railroad Co., the full amount of the rent supposed to be paid by the registered lessor Ariola. Consequently, unlike this case, Teodoro paid over and above the amount due for her own occupation of a portion of the property. That amount, which should have been paid by Ariola as lessor, and for her own occupation of the property, was deemed by the Court as sufficient consideration for the option to buy which Ariola gave to Teodoro upon Ariola's acquiring the property. Hence, in Teodoro, this Court was able to find that a separate consideration supported the option contract and thus, its enforcement may be demanded. Petitioners, therefore, cannot rely on Teodoro, for the case even supports the respondents' stand that a consideration that is separate and distinct from the purchase price is required to support an option contract. Petitioners further insist that a consideration need not be a separate sum of money. They posit that their act of advancing the money to "rescue" the property from mortgage and impending foreclosure, should be enough consideration to support the option. In Villamor v. Court of Appeals,14 this Court defined consideration as "the why of the contracts, the essential reason which moves the contracting parties to enter into the contract."15 This definition illustrates that the consideration contemplated to support an option contract need not be monetary. Actual cash need not be exchanged for the option. However, by the very nature of an option contract, as defined in Article 1479, the same is an onerous contract for which the consideration must be something of value, although its kind may vary. Specifically, in Villamor v. Court of Appeals,16 half of a parcel of land was sold to the spouses Villamor for P70 per square meter, an amount much higher than the reasonable prevailing price. Thereafter, a deed of option was executed whereby the sellers undertook to sell the other half to the same spouses. It was stated in the deed that the only reason the spouses bought the first half of the parcel of land at a much higher price, was the undertaking of the sellers to sell the second half of the land, also at the same price. This Court held that the cause or consideration for the option, on the part of the spouses-buyers, was the undertaking of the sellers to sell the other half of the property. On the part of the sellers, the consideration supporting the option was the much higher amount at which the buyers agreed to buy the property. It was explicit from the deed therein that for the parties, this was the consideration for their entering into the contract. It can be seen that the Court found that the buyer/optionee had parted with something of value, which was the amount he paid over and above the actual prevailing price of the land. Such amount, different from the price of the land subject of the option, was deemed sufficient and distinct consideration supporting the option contract. Moreover, the parties stated the same in their contract. Villamor is distinct from the present case because, First, this Court cannot find that petitioner Baptist Church parted with anything of value, aside from the amount of P84,000 which was in fact eventually utilized as rental payments. Second, there is no document that contains an agreement between the parties that petitioner Baptist Church's supposed rescue of the mortgaged property was the consideration which the parties contemplated in support of the option clause in the contract. As previously stated, the amount advanced had been fully utilized as rental payments over a period of one year. While the Villanuevas may have them to thank for extending the payment at a time of need, this is not the separate consideration contemplated by law. Noting that the option clause was part of a lease contract, this Court looked into its previous ruling in the early case of Vda. De Quirino v. Palarca,17 where the Court did say that "in reciprocal contracts, like the one in question, 18 the obligation or promise of each party is the consideration for that of the other."19 However, it must be noted that in that case, it was also expressly stated in the deed that should there be failure to exercise the option to buy the property, the optionee undertakes to sell the building and/or improvements he has made on the premises. In addition, the optionee had also been paying an amount of rent that was quite high and in fact turned out to be too burdensome that there was a subsequent agreement to reduce said rentals. The Court found that "the amount of rentals agreed upon x x x which amount turned out to be so burdensome upon the lessee, that the lessor agreed, five years later, to reduce it as well as the building and/or improvements contemplated to be constructed and/or introduced by the lessee, were, undoubtedly, part of the consideration for his option to purchase the leased premises." 20 Again, this Court notes that the parties therein clearly stipulated in their contract that there was an undertaking on the part of the optionee to sell the improvements made on the property if the option was not exercised. Such is a valuable consideration that could support the option contract. Moreover, there was the excessive rental payments that the optionee paid for five years, which the Court also took into account in deciding that there was a separate consideration supporting the option. To summarize the rules, an option contract needs to be supported by a separate consideration. The consideration need not be monetary but could consist of other things or undertakings. However, if the consideration is not monetary, these must be things or undertakings of value, in view of the onerous nature of the contract of option. Furthermore, when a consideration for an option contract is not monetary, said consideration must be clearly specified as such in the option contract or clause.

This Court also notes that in the present case both the Regional Trial Court and the Court of Appeals agree that the option was not founded upon a separate and distinct consideration and that, hence, respondents Villanuevas cannot be compelled to sell their property to petitioner Baptist Church. The Regional Trial Court found that "[a]ll payments made under the contract of lease were for rentals. No money [was] ever exchanged for and in consideration of the option." Hence, the Regional Trial Court found the action of the Baptist Church to be "premature and without basis to compel the defendant to sell the leased premises." The Regional Trial Court consequently ruled: WHEREFORE, judgment is rendered: 1) Denying plaintiffs' application for writ of injunction; 2) That defendant cannot be compelled to sell to plaintiffs the leased premises in accordance with par. 8 of the contract of lease; 3) Defendant is hereby ordered to reimburse plaintiffs the sum of P15, 919.75 plus 12% interest representing real estate taxes, plaintiffs paid the City Treasurer's Office of Manila; 4) Declaring that plaintiff made a valid and legal consignation to the Court of the initial amount of P18,634.00 for the month of November and December 1990 and every month thereafter. All other claims of the plaintiffs are hereby dismissed for lack of merit. No pronouncement as to costs. SO ORDERED. 21 On appeal, the Court of Appeals agreed with the Regional Trial Court and found that the option to buy the leased premises was not binding upon the Villanuevas for non-compliance with Article 1479. It found that said option was not supported by a consideration as "no money was ever really exchanged for and in consideration of the option." In addition, the appellate court determined that in the instant case, "the price for the object is not yet certain." Thus, the Court of Appeals affirmed the Regional Trial Court decision and dismissed the appeal for lack of merit.22 Having found that the option to buy granted to the petitioner Baptist Church was not founded upon a separate consideration, and hence, not enforceable against respondents, this Court finds no need to discuss whether a price certain had been fixed as the purchase price. Anent the claim for attorney's fees, it is stipulated in paragraph 13 of the lease agreement that in the event of failure of either of the parties to comply with any of the conditions of the agreement, the aggrieved party can collect reasonable attorney's fees. 23 In view of this Court's finding that the option contract is not enforceable for being without consideration, the respondents Villanueva spouses' refusal to comply with it cannot be the basis of a claim for attorney's fees. Hence, this Court agrees with as the Court of Appeals, which affirmed the findings of the Regional Trial Court, that such claim is to be dismissed for lack of factual and legal basis. WHEREFORE, the Decision and Resolution of the Court of Appeals subject of the petition are hereby AFFIRMED. No costs. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 167884 January 20, 2009

ENRICO S. EULOGIO, Petitioner, vs. SPOUSES CLEMENTE APELES1 and LUZ APELES, Respondents. DECISION CHICO-NAZARIO, J.: Petitioner Enrico S. Eulogio (Enrico) filed this instant Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court assailing the Decision2 dated 20 December 2004 of the Court of Appeals in CA-G.R. CV No. 76933 which reversed the Decision3 dated 8 October 2002 of the Regional Trial Court (RTC) of Quezon City, Branch 215, in Civil Case No. Q-99-36834. The RTC directed respondents, spouses Clemente and Luz Apeles (spouses Apeles) to execute a Deed of Sale over a piece of real property in favor of Enrico after the latters payment of full consideration therefor. The factual and procedural antecedents of the present case are as follows: The real property in question consists of a house and lot situated at No. 87 Timog Avenue, Quezon City (subject property). The lot has an area of 360.60 square meters, covered by Transfer Certificate of Title No. 253990 issued by the Registry of Deeds of Quezon City in the names of the spouses Apeles.4 In 1979, the spouses Apeles leased the subject property to Arturo Eulogio (Arturo), Enricos father. Upon Arturos death, his son Enrico succeeded as lessor of the subject property. Enrico used the subject property as his residence and place of business. Enrico was engaged in the business of buying and selling imported cars. 5 On 6 January 1987, the spouses Apeles and Enrico allegedly entered into a Contract of Lease 6 with Option to Purchase involving the subject property. According to the said lease contract, Luz Apeles was authorized to enter into the same as the attorney-in-fact of her husband, Clemente, pursuant to a Special Power of Attorney executed by the latter in favor of the former on 24 January 1979. The contract purportedly afforded Enrico, before the expiration of the three-year lease period, the option to purchase the subject property for a price not exceedingP1.5 Million. The pertinent provisions of the Contract of Lease are reproduced below: 3. That this Contract shall be effective commencing from January 26, 1987 and shall remain valid and binding for THREE (3) YEARS from the said date. The LESSOR hereby gives the LESSEE under this Contract of Lease the right and option to buy the subject house and lot within the said 3-year lease period. 4. That the purchase price or total consideration of the house and lot subject of this Contract of Lease shall, should the LESSEE exercise his option to buy it on or before the expiration of the 3-year lease period, be fixed or agreed upon by the LESSOR and the LESSEE, Provided, that the said purchase price, as it is hereby agreed, shall not be more than ONE MILLION FIVE HUNDRED THOUSAND PESOS (P1,500,000.00) and, provided further, that the monthly rentals paid by the LESSEE to the LESSOR during the 3-year lease period shall form part of or be deducted from the purchase price or total consideration as may hereafter be mutually fixed or agreed upon by the LESSOR and the LESSEE. 5. That if the LESSEE shall give oral or written notice to the LESSOR on or before the expiry date of the 3-year lease period stipulated herein of his desire to exercise his option to buy or purchase the house and lot herein leased, the LESSOR upon receipt of the purchase price/total consideration as fixed or agreed upon less the total amount of monthly rentals paid the LESSEE during the 3-year lease period shall execute the appropriate Deed to SELL, TRANSFER and CONVEY the house and lot subject of this Contract in favor of the LESSEE, his heirs, successors and assigns, together with all the fixtures and accessories therein, free from all liens and encumbrances. Before the expiration of the three-year lease period provided in the lease contract, Enrico exercised his option to purchase the subject property by communicating verbally and in writing to Luz his willingness to pay the agreed purchase price, but the spouses Apeles supposedly ignored Enricos manifestation. This prompted Enrico to seek recourse from the barangay for the enforcement of his right to purchase the subject property, but despite several notices, the spouses Apeles failed to appear before the barangay for settlement proceedings. Hence, thebarangay issued to Enrico a Certificate to File Action.7

In a letter dated 26 January 1997 to Enrico, the spouses Apeles demanded that he pay his rental arrears from January 1991 to December 1996 and he vacate the subject property since it would be needed by the spouses Apeles themselves. Without heeding the demand of the spouses Apeles, Enrico instituted on 23 February 1999 a Complaint for Specific Performance with Damages against the spouses Apeles before the RTC, docketed as Civil Case No. Q-99-36834. Enricos cause of action is founded on paragraph 5 of the Contract of Lease with Option to Purchase vesting him with the right to acquire ownership of the subject property after paying the agreed amount of consideration. Following the pre-trial conference, trial on the merits ensued before the RTC. Enrico himself testified as the sole witness for his side. He narrated that he and Luz entered into the Contract of Lease with Option to Purchase on 26 January 1987, with Luz signing the said Contract at Enricos office in Timog Avenue, Quezon City. The Contract was notarized on the same day as evidenced by the Certification on the Notary Publics Report issued by the Clerk of Court of the RTC of Manila.8 On the other hand, the spouses Apeles denied that Luz signed the Contract of Lease with Option to Purchase, and posited that Luzs signature thereon was a forgery. To buttress their contention, the spouses Apeles offered as evidence Luzs Philippine Passport which showed that on 26 January 1987, the date when Luz allegedly signed the said Contract, she was in the United States of America. The spouses Apeles likewise presented several official documents bearing her genuine signatures to reveal their remarkable discrepancy from the signature appearing in the disputed lease contract. The spouses Apeles maintained that they did not intend to sell the subject property.9 After the spouses Apeles established by documentary evidence that Luz was not in the country at the time the Contract of Lease with Option to Purchase was executed, Enrico, in rebuttal, retracted his prior declaration that the said Contract was signed by Luz on 26 January 1996. Instead, Enrico averred that Luz signed the Contract after she arrived in the Philippines on 30 May 1987. Enrico further related that after Luz signed the lease contract, she took it with her for notarization, and by the time the document was returned to him, it was already notarized.10 On 8 October 2002, the RTC rendered a Decision in Civil Case No. Q-99-36834 in favor of Enrico. Since none of the parties presented a handwriting expert, the RTC relied on its own examination of the specimen signatures submitted to resolve the issue of forgery. The RTC found striking similarity between Luzs genuine signatures in the documents presented by the spouses Apeles themselves and her purportedly forged signature in the Contract of Lease with Option to Purchase. Absent any finding of forgery, the RTC bound the parties to the clear and unequivocal stipulations they made in the lease contract. Accordingly, the RTC ordered the spouses Apeles to execute a Deed of Sale in favor of Enrico upon the latters payment of the agreed amount of considerati on. Thefallo of the RTC Decision reads: WHEREFORE, this Court finds [Enricos] complaint to be substantiated by preponderance of evidence and accordingly orders (1) [The spouses Apeles] to comply with the provisions of the Contract of Lease with Option to Purchase; and upon payment of total consideration as stipulated in the said CONTRACT for [the spouses Apeles] to execute a Deed of Absolute Sale in favor of [Enrico], over the parcel of land and the improvements existing thereon located at No. 87 Timog Avenue, Quezon City. (2) [The spouses Apeles] to pay [Enrico] moral and exemplary damages in the respective amounts ofP100,000.00 and P50,000.00. (3) [The spouses Apeles] to pay attorneys fees of P50,000.00 and costs of the suit.11 The spouses Apeles challenged the adverse RTC Decision before the Court of Appeals and urged the appellate court to nullify the assailed Contract of Lease with Option to Purchase since Luzs signature thereon was clearly a forgery. The spouses Apeles argued that it was physically impossible for Luz to sign the said Contract on 26 January 1987 since she was not in the Philippines on that date and returned five months thereafter. The spouses Apeles called attention t o Enricos inconsistent declarations as to material details involving the execution of the lease contract, thereby casting doubt on Enricos credibility, as well as on the presu med regularity of the contract as a notarized document. On 20 December 2004, the Court of Appeals rendered a Decision in CA-G.R. CV No. 76933 granting the appeal of the spouses Apeles and overturning the judgment of the RTC. In arriving at its assailed decision, the appellate court noted that the Notary Public did not observe utmost care in certifying the due execution of the Contract of Lease with Option to Purchase. The Court of Appeals chose not to accord the disputed Contract full faith and credence. The Court of Appeals held, thus: WHEREFORE, the foregoing premises considered, the appealed decision dated October 8, 2002 of the Regional Trial Court of Quezon City, Branch 215 in Civil Case No. Q-99-36834 for specific performance with damages is hereby REVERSED and a new is one entered dismissing [Enricos] complaint.12

Enricos Motion for Reconsideration was denied by the Court of Appeals in a Resolution13 dated 25 April 2005. Enrico is presently before this Court seeking the reversal of the unfavorable judgment of the Court of Appeals, assigning the following errors thereto: I. THE COURT OF APPEALS COMMITTED (sic) REVERSIBLE ERROR WHEN IT BRUSHED ASIDE THE RULING OF THE COURT A QUO UPHOLDING THE VALIDITY OF THE CONTRACT OF LEASE WITH OPTION TO PURCHASE AND IN LIEU THEREOF RULED THAT THE SAID CONTRACT OF LEASE WAS A FORGERY AND THUS, NULL AND VOID. II. THE COURT OF APPEALS COMMITTED (sic) REVERSIBLE ERROR WHEN CONTRARY TO THE FINDINGS OF THE COURT A QUO IT RULED THAT THE DEFENSE OF FORGERY WAS SUBSTANTIALLY AND CONVINCINGLY PROVEN BY COMPETENT EVIDENCE. Simply, Enrico faults the Court of Appeals for disturbing the factual findings of the RTC in disregard of the legal aphorism that the factual findings of the trial court should be accorded great weight and respect on appeal. We do not agree. Enricos insistence on the infallibility of the findings of the RTC seriously impairs the discretion o f the appellate tribunal to make independent determination of the merits of the case appealed before it. Certainly, the Court of Appeals cannot swallow hook, line, and sinker the factual conclusions of the trial court without crippling the very office of review. Although we have indeed held that the factual findings of the trial courts are to be accorded great weight and respect, they are not absolutely conclusive upon the appellate court.14 The reliance of appellate tribunals on the factual findings of the trial court is based on the postulate that the latter had firsthand opportunity to hear the witnesses and to observe their conduct and demeanor during the proceedings. However, when such findings are not anchored on their credibility and their testimonies, but on the assessment of documents that are available to appellate magistrates and subject to their scrutiny, reliance on the trial court finds no application.15 Moreover, appeal by writ of error to the Court of Appeals under Rule 41 of the Revised Rules of Court, the parties may raise both questions of fact and/or of law. In fact, it is imperative for the Court of Appeals to review the findings of fact made by the trial court. The Court of Appeals even has the power to try cases and conduct hearings, receive evidence and perform any and all acts necessary to resolve factual issues raised in cases falling within its original and appellate jurisdiction. 16 Enrico assiduously prays before this Court to sustain the validity of the Contract of Lease with Option to Purchase. Enrico asserts that the said Contract was voluntarily entered into and signed by Luz who had it notarized herself. The spouses Apeles should be obliged to respect the terms of the agreement, and not be allowed to renege on their commitment thereunder and frustrate the sanctity of contracts. Again, we are not persuaded. We agree with the Court of Appeals that in ruling out forgery, the RTC heavily relied on the testimony proffered by Enrico during the trial, ignoring blatant contradictions that destroy his credibility and the veracity of his claims. On direct examination, Enrico testified that Luz signed the Contract of Lease with Option to Purchase on 26 January 1987 in his presence,17 but he recanted his testimony on the matter after the spouses Apeles established by clear and convincing evidence that Luz was not in the Philippines on that date.18 In rebuttal, Enrico made a complete turnabout and claimed that Luz signed the Contract in question on 30 May 1987 after her arrival in the country. 19 The inconsistencies in Enricos version of events have seriously impaired the probative value of his testimony and cast serious doubt on his credibility. His contradictory statements on important details simply eroded the integrity of his testimony. While it is true that a notarized document carries the evidentiary weight conferred upon it with respect to its due execution, and has in its favor the presumption of regularity, this presumption, however, is not absolute. It may be rebutted by clear and convincing evidence to the contrary.20 Enrico himself admitted that Luz took the document and had it notarized without his presence. Such fact alone overcomes the presumption of regularity since a notary public is enjoined not to notarize a document unless the persons who signed the same are the very same persons who executed and personally appeared before the said notary public to attest to the contents and truth of what are stated therein. Although there is no direct evidence to prove forgery, preponderance of evidence inarguably favors the spouses Apeles. In civil cases, the party having the burden of proof must establish his case by a preponderance of evidence. Preponderance of evidence is the weight, credit, and value of the aggregate evidence on either side and is usually considered to be synonymous with the term "greater weight of the evidence" or "greater weight of the credible evidence." Preponderance of evidence is a phrase which, in the

last analysis, means probability of the truth. It is evidence which is more convincing to the court as worthier of belief than that which is offered in opposition thereto.21 In the case at bar, the spouses Apeles were able to overcome the burden of proof and prove by preponderant evidence in disputing the authenticity and due execution of the Contract of Lease with Option to Purchase. In contrast, Enrico seemed to rely only on his own self-serving declarations, without asserting any proof of corroborating testimony or circumstantial evidence to buttress his claim. Even assuming for the sake of argument that we agree with Enrico that Luz voluntarily entered into the Contract of Lease with Option to Purchase and personally affixed her signature to the said document, the provision on the option to purchase the subject property incorporated in said Contract still remains unenforceable. There is no dispute that what Enrico sought to enforce in Civil Case No. Q-99-36834 was his purported right to acquire ownership of the subject property in the exercise of his option to purchase the same under the Contract of Lease with Option to Purchase. He ultimately wants to compel the spouses Apeles to already execute the Deed of Sale over the subject property in his favor. An option is a contract by which the owner of the property agrees with another person that the latter shall have the right to buy the formers property at a fixed price within a certain time. It is a condition offered or contract by which the owner stipulates with another that the latter shall have the right to buy the property at a fixed price within a certain time, or under, or in compliance with certain terms and conditions; or which gives to the owner of the property the right to sell or demand a sale. 22 An option is not of itself a purchase, but merely secures the privilege to buy. It is not a sale of property but a sale of the right to purchase. It is simply a contract by which the owner of the property agrees with another person that he shall have the right to buy his property at a fixed price within a certain time. He does not sell his land; he does not then agree to sell it; but he does sell something, i.e., the right or privilege to buy at the election or option of the other party. Its distinguishing characteristic is that it imposes no binding obligation on the person holding the option, aside from the consideration for the offer. 23 It is also sometimes called an "unaccepted offer" and is sanctioned by Article 1479 of the Civil Code: 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. The second paragraph of Article 1479 provides for the definition and consequent rights and obligations under an option contract. For an option contract to be valid and enforceable against the promissor, there must be a separate and distinct consideration that supports it.24 In the landmark case of Southwestern Sugar and Molasses Company v. Atlantic Gulf and Pacific Co., 25 we declared that for an option contract to bind the promissor, it must be supported by consideration: 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 a 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. Here it is not disputed that the option is without consideration. It can therefore be withdrawn notwithstanding the acceptance made of it by appellee. (Emphasis supplied.) The doctrine requiring the payment of consideration in an option contract enunciated in Southwestern Sugar is resonated in subsequent cases and remains controlling to this day. Without consideration that is separate and distinct from the purchase price, an option contract cannot be enforced; that holds true even if the unilateral promise is already accepted by the optionee. The consideration is "the why of the contracts, the essential reason which moves the contracting parties to enter into the contract." This definition illustrates that the consideration contemplated to support an option contract need not be monetary. Actual cash need not be exchanged for the option. However, by the very nature of an option contract, as defined in Article 1479, the same is an onerous contract for which the consideration must be something of value, although its kind may vary. 26 We have painstakingly examined the Contract of Lease with Option to Purchase, as well as the pleadings submitted by the parties, and their testimonies in open court, for any direct evidence or evidence aliunde to prove the existence of consideration for the option contract, but we have found none. The only consideration agreed upon by the parties in the said Contract is the supposed purchase price for the subject property in the amount not exceeding P1.5 Million, which could not be deemed to be the same consideration for the option contract since the law and jurisprudence explicitly dictate that for the option contract to be valid, it must be supported by a consideration separate and distinct from the price.

In Bible Baptist Church v. Court of Appeals,27 we stressed that an option contract needs to be supported by a separate consideration. The consideration need not be monetary but could consist of other things or undertakings. However, if the consideration is not monetary, these must be things or undertakings of value, in view of the onerous nature of the option contract. Furthermore, when a consideration for an option contract is not monetary, said consideration must be clearly specified as such in the option contract or clause. In the present case, it is indubitable that no consideration was given by Enrico to the spouses Apeles for the option contract. The absence of monetary or any material consideration keeps this Court from enforcing the rights of the parties under said option contract. WHEREFORE, in view of the foregoing, the instant Petition is DENIED. The Decision dated 20 December 2004 and Resolution dated 25 April 2005 of the Court of Appeals in CA-G.R. CV No. 76933 are hereby AFFIRMED. No costs. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 137552 June 16, 2000

ROBERTO Z. LAFORTEZA, GONZALO Z. LAFORTEZA, MICHAEL Z. LAFORTEZA, DENNIS Z. LAFORTEZA, and LEA Z. LAFORTEZA, petitioners, vs. ALONZO MACHUCA, respondent. GONZAGA-REYES, J.: This Petition for Review on Certiorari seeks the reversal of the Decision of the Court of Appeals 1 in CA G.R. CV No. 147457 entitled "ALONZO MACHUCA versus ROBERTO Z. LAFORTEZA, GONZALO Z. LAFORTEZA, LEA ZULUETA-LAFORTEZA, MICHAEL Z. LAFORTEZA, and DENNIS Z. LAFORTEZA". The following facts as found by the Court of Appeals are undisputed: The property involved consists of a house and lot located at No. 7757 Sherwood Street, Marcelo Green Village, Paraaque, Metro Manila, covered by Transfer Certificate of Title (TCT) No. (220656) 8941 of the Registered of Deeds of Paraaque (Exhibit "D", Plaintiff, record, pp. 331-332). The subject property is registered in the name of the late Francisco Q. Laforteza, although it is conjugal in nature (Exhibit "8", Defendants, record pp. 331-386). On August 2, 1988, defendant Lea Zulueta-Laforteza executed a Special Power of Attorney in favor of defendants Roberto Z. Laforteza and Gonzalo Z. Laforteza, Jr., appointing both as her Attorney-in-fact authorizing them jointly to sell the subject property and sign any document for the settlement of the estate of the late Francisco Q. Laforteza (Exh. "A", Plaintiff, record, pp. 323-325). Likewise on the same day, defendant Michael Z. Laforteza executed a Special Power of Attorney in favor of defendants Roberto Z. Laforteza and Gonzalo Laforteza, Jr., likewise, granting the same authority (Exh. "B", record, pp. 326-328) Both agency instruments contained a provision that in any document or paper to exercise authority granted, the signature of both attorneysin-fact must be affixed. On October 27, 1988, defendant Dennis Z. Laforteza executed a Special Power of Attorney in favor of defendant Roberto Z. Laforteza for the purpose of selling the subject property (Exh. "C", Plaintiff, record, pp. 329-330). A year later, on October 30, 1989, Dennis Z. Laforteza executed another Special Power of Attorney in favor of defendants Roberto Z. Laforteza and Gonzalo Laforteza, Jr. naming both attorneys-in-fact for the purpose of selling the subject property and signing any document for the settlement of the estate of the late Francisco Q. Laforteza. The subsequent agency instrument (Exh, "2", record, pp. 371-373) contained similar provisions that both attorneys-in-fact should sign any document or paper executed in the exercise of their authority.1wphi1.nt In the exercise of the above authority, on January 20, 1989, the heirs of the late Francisco Q. Laforteza represented by Roberto Z. Laforteza and Gonzalo Z. Laforteza, Jr. entered into a Memorandum of Agreement (Contract to Sell) with the plaintiff 2 over the subject property for the sum of SIX HUNDRED THIRTY THOUSAND PESOS (P630,000.00) payable as follows: (a) P30,000.00 as earnest money, to be forfeited in favor of the defendants if the sale is not effected due to the fault of the plaintiff; (b) P600,000.00 upon issuance of the new certificate of title in the name of the late Francisco Q. Laforteza and upon execution of an extra-judicial settlement of the decedent's estate with sale in favor of the plaintiff (Par. 2, Exh. "E", record, pp. 335-336). Significantly, the fourth paragraph of the Memorandum of Agreement (Contract to Sell) dated January 20, 1989 (Exh. "E", supra.) contained a provision as follows: . . . . Upon issuance by the proper Court of the new title, the BUYER-LESSEE shall be notified in writing and said BUYER-LESSEE shall have thirty (30) days to produce the balance of P600,000.00 which shall be paid to the SELLER-LESSORS upon the execution of the Extrajudicial Settlement with sale.

On January 20, 1989, plaintiff paid the earnest money of THIRTY THOUSAND PESOS (P30,000.00), plus rentals for the subject property (Exh. "F", Plaintiff, record, p. 339). On September 18, 1998 3, defendant heirs, through their counsel wrote a letter (Exh. 1, Defendants, record, p. 370) to the plaintiff furnishing the latter a copy of the reconstituted title to the subject property, advising him that he had thirty (3) days to produce the balance of SIX HUNDRED PESOS (sic) (P600,000.00) under the Memorandum of Agreement which plaintiff received on the same date. On October 18, 1989, plaintiff sent the defendant heirs a letter requesting for an extension of the THIRTY (30) DAYS deadline up to November 15, 1989 within which to produce the balance of SIX HUNDRED THOUSAND PESOS (P600,000.00) (Exh. "G", Plaintiff, record, pp. 341-342). Defendant Roberto Z. Laforteza, assisted by his counsel Atty. Romeo L. Gutierrez, signed his conformity to the plaintiff's letter request (Exh. "G-1 and "G-2", Plaintiff, record, p. 342). The extension, however, does not appear to have been approved by Gonzalo Z. Laforteza, the second attorney-in-fact as his conformity does not appear to have been secured. On November 15, 1989, plaintiff informed the defendant heirs, through defendant Roberto Z. Laforteza, that he already had the balance of SIX HUNDRED THOUSAND PESOS (P600,000.00) covered by United Coconut Planters Bank Manager's Check No. 000814 dated November 15, 1989 (TSN, August 25, 1992, p. 11; Exhs. "H", record, pp. 343-344; "M", records p. 350; and "N", record, p. 351). However, the defendants, refused to accept the balance (TSN, August 24, 1992, p. 14; Exhs. "M-1", Plaintiff, record, p. 350; and "N-1", Plaintiff, record, p. 351). Defendant Roberto Z. Laforteza had told him that the subject property was no longer for sale (TSN, October 20, 1992, p. 19; Exh. "J", record, p. 347). On November 20, 1998 4, defendants informed plaintiff that they were canceling the Memorandum of Agreement (Contract to Sell) in view of the plaintiff's failure to comply with his contractual obligations (Exh. "3"). Thereafter, plaintiff reiterated his request to tender payment of the balance of SIX HUNDRED THOUSAND PESOS (P600,000.00). Defendants, however, insisted on the rescission of the Memorandum of Agreement. Thereafter, plaintiff filed the instant action for specific performance. The lower court rendered judgment on July 6, 1994 in favor of the plaintiff, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered in favor of plaintiff Alonzo Machuca and against the defendant heirs of the late Francisco Q. Laforteza, ordering the said defendants. (a) To accept the balance of P600,000.00 as full payment of the consideration for the purchase of the house and lot located at No. 7757 Sherwood Street, Marcelo Green Village, Paraaque, Metro Manila, covered by Transfer Certificate of Title No. (220656) 8941 of the Registry of Deeds of Rizal Paraaque, Branch; (b) To execute a registrable deed of absolute sale over the subject property in favor of the plaintiff; (c) Jointly and severally to pay the plaintiff the sum of P20,000.00 as attorney's fees plus cost of suit. SO ORDERED. (Rollo, pp. 74-75). 5 Petitioners appealed to the Court of Appeals, which affirmed with modification the decision of the lower court; the dispositive portion of the Decision reads: WHEREFORE, the questioned decision of the lower court is hereby AFFIRMED with the MODIFICATION that defendant heirs Lea Zulueta-Laforteza, Michael Z. Laforteza, Dennis Z. Laforteza and Roberto Z. Laforteza including Gonzalo Z. Laforteza, Jr. are hereby ordered to pay jointly and severally the sum of FIFTY THOUSAND PESOS (P50,000.00) as moral damages. SO ORDERED. 6 Motion for Reconsideration was denied but the Decision was modified so as to absolve Gonzalo Z. Laforteza, Jr. from liability for the payment of moral damages. 7 Hence this petition wherein the petitioners raise the following issues: I. WHETHER THE TRIAL AND APPELLATE COURTS CORRECTLY CONSTRUED THE MEMORANDUM OF AGREEMENT AS IMPOSING RECIPROCAL OBLIGATIONS. II. WHETHER THE COURTS A QUO CORRECTLY RULED THAT RESCISSION WILL NOT LIE IN THE INSTANT CASE. III. WHETHER THE RESPONDENT IS UNDER ESTOPPEL FROM RAISING THE ALLEGED DEFECT IN THE SPECIAL POWER OF ATTORNEY DATED 30 OCTOBER 1989 EXECUTED BY DENNIS LAFORTEZA.

IV. SUPPOSING EX GRATIA ARGUMENTI THE MEMORANDUM OF AGREEMENT IMPOSES RECIPROCAL OBLIGATIONS, WHETHER THE PETITIONERS MAY BE COMPELLED TO SELL THE SUBJECT PROPERTY WHEN THE RESPONDENT FAILED TO MAKE A JUDICIAL CONSIGNATION OF THE PURCHASE PRICE? V. WHETHER THE PETITIONERS ARE IN BAD FAITH SO TO AS MAKE THEM LIABLE FOR MORAL DAMAGES? 8 The petitioners contend that the Memorandum of Agreement is merely a lease agreement with "option to purchase". As it was merely an option, it only gave the respondent a right to purchase the subject property within a limited period without imposing upon them any obligation to purchase it. Since the respondent's tender of payment was made after the lapse of the option agreement, his tender did not give rise to the perfection of a contract of sale. It is further maintained by the petitioners that the Court of Appeals erred in ruling that rescission of the contract was already out of the question. Rescission implies that a contract of sale was perfected unlike the Memorandum of Agreement in question which as previously stated is allegedly only an option contract. Petitioner adds that at most, the Memorandum of Agreement (Contract to Sell) is a mere contract to sell, as indicated in its title. The obligation of the petitioners to sell the property to the respondent was conditioned upon the issuance of a new certificate of title and the execution of the extrajudicial partition with sale and payment of the P600,000.00. This is why possession of the subject property was not delivered to the respondent as the owner of the property but only as the lessee thereof. And the failure of the respondent to pay the purchase price in full prevented the petitioners' obligation to convey title from acquiring obligatory force. Petitioners also allege that assuming for the sake of argument that a contract of sale was indeed perfected, the Court of Appeals still erred in holding that respondent's failure to pay the purchase price of P600,000.00 was only a "slight or casual breach". The petitioners also claim that the Court of Appeals erred in ruling that they were not ready to comply with their obligation to execute the extrajudicial settlement. The Power of Attorney to execute a Deed of Sale made by Dennis Z. Laforteza was sufficient and necessarily included the power to execute an extrajudicial settlement. At any rate, the respondent is estopped from claiming that the petitioners were not ready to comply with their obligation for he acknowledged the petitioners' ability to do so when he requested for an extension of time within which to pay the purchase price. Had he truly believed that the petitioners were not ready, he would not have needed to ask for said extension. Finally, the petitioners allege that the respondent's uncorroborated testimony that third persons offered a higher price for the property is hearsay and should not be given any evidentiary weight. Thus, the order of the lower court awarding moral damages was without any legal basis. The appeal is bereft of merit. A perusal of the Memorandum Agreement shows that the transaction between the petitioners and the respondent was one of sale and lease. The terms of the agreement read: 1. For and in consideration of the sum of PESOS: SIX HUNDRED THIRTY THOUSAND (P630,000.00) payable in a manner herein below indicated, SELLER-LESSOR hereby agree to sell unto BUYER-LESSEE the property described in the first WHEREAS of this Agreement within six (6) months from the execution date hereof, or upon issuance by the Court of a new owner's certificate of title and the execution of extrajudicial partition with sale of the estate of Francisco Laforteza, whichever is earlier; 2. The above-mentioned sum of PESOS: SIX HUNDRED THIRTY THOUSAND (P630,000.00) shall be paid in the following manner: P30,000.00 as earnest money and as consideration for this Agreement, which amount shall be forfeited in favor of SELLER-LESSORS if the sale is not effected because of the fault or option of BUYER-LESSEE; P600,000.00 upon the issuance of the new certificate of title in the name of the late Francisco Laforteza and upon the execution of an Extrajudicial Settlement of his estate with sale in favor of BUYER-LESSEE free from lien or any encumbrances. 3. Parties reasonably estimate that the issuance of a new title in place of the lost one, as well as the execution of extrajudicial settlement of estate with sale to herein BUYER-LESSEE will be completed within six (6) months from the execution of this Agreement. It is therefore agreed that during the six months period, BUYER-LESSEE will be leasing the subject property for six months period at the monthly rate of PESOS: THREE THOUSAND FIVE HUNDRED (P3,500.00). Provided however, that if the issuance of new title and the execution of Extrajudicial Partition is completed

prior to the expiration of the six months period, BUYER-LESSEE shall only be liable for rentals for the corresponding period commencing from his occupancy of the premises to the execution and completion of the Extrajudicial Settlement of the estate, provided further that if after the expiration of six (6) months, the lost title is not yet replaced and the extra judicial partition is not executed, BUYER-LESSEE shall no longer be required to pay rentals and shall continue to occupy, and use the premises until subject condition is complied by SELLER-LESSOR; 4. It is hereby agreed that within reasonable time from the execution of this Agreement and the payment by BUYERLESSEE of the amount of P30,000.00 as herein above provided, SELLER-LESSORS shall immediately file the corresponding petition for the issuance of a new title in lieu of the lost one in the proper Courts. Upon issuance by the proper Courts of the new title, the BUYER-LESSEE shall have thirty (30) days to produce the balance of P600,000.00 which shall be paid to the SELLER-LESSORS upon the execution of the Extrajudicial Settlement with sale. 9 A contract of sale is a consensual contract and is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price. 10 From that moment the parties may reciprocally demand performance subject to the provisions of the law governing the form of contracts. 11The elements of a valid contract of sale under Article 1458 of the Civil Code are (1) consent or meeting of the minds; (2) determinate subject matter and (3) price certain money or its equivalent. 12 In the case at bench, there was a perfected agreement between the petitioners and the respondent whereby the petitioners obligated themselves to transfer the ownership of and deliver the house and lot located at 7757 Sherwood St., Marcelo Green Village, Paraaque and the respondent to pay the price amounting to six hundred thousand pesos (P600,000.00). All the elements of a contract of sale were thus present. However, the balance of the purchase price was to be paid only upon the issuance of the new certificate of title in lieu of the one in the name of the late Francisco Laforteza and upon the execution of an extrajudicial settlement of his estate. Prior to the issuance of the "reconstituted" title, the respondent was already placed in possession of the house and lot as lessee thereof for six months at a monthly rate of three thousand five hundred pesos (P3,500.00). It was stipulated that should the issuance of the new title and the execution of the extrajudicial settlement be completed prior to expiration of the six-month period, the respondent would be liable only for the rentals pertaining to the period commencing from the date of the execution of the agreement up to the execution of the extrajudicial settlement. It was also expressly stipulated that if after the expiration of the six month period, the lost title was not yet replaced and the extrajudicial partition was not yet executed, the respondent would no longer be required to pay rentals and would continue to occupy and use the premises until the subject condition was complied with the petitioners. The six-month period during which the respondent would be in possession of the property as lessee, was clearly not a period within which to exercise an option. An option is a contract granting a privilege to buy or sell within an agreed time and at a determined price. An option contract is a separate and distinct contract from that which the parties may enter into upon the consummation of the option. 13 An option must be supported by consideration.14 An option contract is governed by the second paragraph of Article 1479 of the Civil Code 15, which reads: 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. In the present case, the six-month period merely delayed the demandability of the contract of sale and did not determine its perfection for after the expiration of the six-month period, there was an absolute obligation on the part of the petitioners and the respondent to comply with the terms of the sale. The parties made a "reasonable estimate" that the reconstitution the lost title of the house and lot would take approximately six months and thus presumed that after six months, both parties would be able to comply with what was reciprocally incumbent upon them. The fact that after the expiration of the six-month period, the respondent would retain possession of the house and lot without need of paying rentals for the use therefor, clearly indicated that the parties contemplated that ownership over the property would already be transferred by that time. The issuance of the new certificate of title in the name of the late Francisco Laforteza and the execution of an extrajudicial settlement of his estate was not a condition which determined the perfection of the contract of sale. Petitioners' contention that since the condition was not met, they no longer had an obligation to proceed with the sale of the house and lot is unconvincing. The petitioners fail to distinguish between a condition imposed upon the perfection of the contract and a condition imposed on the performance of an obligation. Failure to comply with the first condition results in the failure of a contract, while the failure to comply with the second condition only gives the other party the option either to refuse to proceed with the sale or to waive the condition. Thus, Art. 1545 of the Civil Code states: Art. 1545. Where the obligation of either party to a contract of sale is subject to any condition which is not performed, such party may refuse to proceed with the contract or he may waive performance of the condition. If the other party has promised that the condition should happen or be performed, such first mentioned party may also treat the nonperformance of the condition as a breach of warranty.

Where the ownership in the things has not passed, the buyer may treat the fulfillment by the seller of his obligation to deliver the same as described and as warranted expressly or by implication in the contract of sale as a condition of the obligation of the buyer to perform his promise to accept and pay for the thing. 16 In the case at bar, there was already a perfected contract. The condition was imposed only on the performance of the obligations contained therein. Considering however that the title was eventually "reconstituted" and that the petitioners admit their ability to execute the extrajudicial settlement of their father's estate, the respondent had a right to demand fulfillment of the petitioners' obligation to deliver and transfer ownership of the house and lot. What further militates against petitioners' argument that they did not enter into a contract or sale is the fact that the respondent paid thirty thousand pesos (P30,000.00) as earnest money. Earnest money is something of value to show that the buyer was really in earnest, and given to the seller to bind the bargain.17 Whenever earnest money is given in a contract of sale, it is considered as part of the purchase price and proof of the perfection of the contract. 18 We do not subscribe to the petitioners' view that the Memorandum Agreement was a contract to sell. There is nothing contained in the Memorandum Agreement from which it can reasonably be deduced that the parties intended to enter into a contract to sell, i.e. one whereby the prospective seller would explicitly reserve the transfer of title to the prospective buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership of the property subject of the contract to sell until the full payment of the price, such payment being a positive suspensive condition, the failure of which is not considered a breach, casual or serious, but simply an event which prevented the obligation from acquiring any obligatory force. 19 There is clearly no express reservation of title made by the petitioners over the property, or any provision which would impose non-payment of the price as a condition for the contract's entering into force. Although the memorandum agreement was also denominated as a "Contract to Sell", we hold that the parties contemplated a contract of sale. A deed of sale is absolute in nature although denominated a conditional sale in the absence of a stipulation reserving title in the petitioners until full payment of the purchase price. 20 In such cases, ownership of the thing sold passes to the vendee upon actual or constructive delivery thereof. 21 The mere fact that the obligation of the respondent to pay the balance of the purchase price was made subject to the condition that the petitioners first deliver the reconstituted title of the house and lot does not make the contract a contract to sell for such condition is not inconsistent with a contract of sale. 22 The next issue to be addressed is whether the failure of the respondent to pay the balance of the purchase price within the period allowed is fatal to his right to enforce the agreement. We rule in the negative. Admittedly, the failure of the respondent to pay the balance of the purchase price was a breach of the contract and was a ground for rescission thereof. The extension of thirty (30) days allegedly granted to the respondent by Roberto Z. Laforteza (assisted by his counsel Attorney Romeo Gutierrez) was correctly found by the Court of Appeals to be ineffective inasmuch as the signature of Gonzalo Z. Laforteza did not appear thereon as required by the Special Powers of Attorney. 23 However, the evidence reveals that after the expiration of the six-month period provided for in the contract, the petitioners were not ready to comply with what was incumbent upon them, i.e. the delivery of the reconstituted title of the house and lot. It was only on September 18, 1989 or nearly eight months after the execution of the Memorandum of Agreement when the petitioners informed the respondent that they already had a copy of the reconstituted title and demanded the payment of the balance of the purchase price. The respondent could not therefore be considered in delay for in reciprocal obligations, neither party incurs in delay if the other party does not comply or is not ready to comply in a proper manner with what was incumbent upon him.24 Even assuming for the sake of argument that the petitioners were ready to comply with their obligation, we find that rescission of the contract will still not prosper. The rescission of a sale of an immovable property is specifically governed by Article 1592 of the New Civil Code, which reads: In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act. After the demand, the court may not grant him a new term. 25 It is not disputed that the petitioners did not make a judicial or notarial demand for rescission.1avvphi1 The November 20, 1989 letter of the petitioners informing the respondent of the automatic rescission of the agreement did not amount to a demand for rescission, as it was not notarized. 26 It was also made five days after the respondent's attempt to make the payment of the purchase price. This offer to pay prior to the demand for rescission is sufficient to defeat the petitioners' right under article 1592 of the Civil Code. 27 Besides, the Memorandum Agreement between the parties did not contain a clause expressly authorizing the automatic cancellation of the contract without court intervention in the event that the terms thereof were violated. A seller cannot unilaterally and extrajudicially rescind a contract or sale where there is no express stipulation authorizing him to extrajudicially rescind. 28 Neither was there a judicial demand for the rescission thereof. Thus, when the respondent filed his complaint for specific performance, the agreement was still in force inasmuch as the contract was not yet rescinded. At any rate, considering that the sixmonth period was merely an approximation of the time if would take to reconstitute the lost title and was not a condition imposed on the perfection of the contract and considering further that the delay in payment was only thirty days which was caused by the respondents justified but mistaken belief that an extension to pay was granted to him, we agree with the Court of Appeals that the

delay of one month in payment was a mere casual breach that would not entitle the respondents to rescind the contract. Rescission of a contract will not be permitted for a slight or casual breach, but only such substantial and fundamental breach as would defeat the very object of the parties in making the agreemant. 29 Petitioners' insistence that the respondent should have consignated the amount is not determinative of whether respondent's action for specific performance will lie. Petitioners themselves point out that the effect of cansignation is to extinguish the obligation. It releases the debtor from responsibility therefor. 30 The failure of the respondent to consignate the P600,000.00 is not tantamount to a breach of the contract for by the fact of tendering payment, he was willing and able to comply with his obligation. The Court of Appeals correctly found the petitioners guilty of bad faith and awarded moral damages to the respondent. As found by the said Court, the petitioners refused to comply with, their obligation for the reason that they were offered a higher price therefor and the respondent was even offered P100,000.00 by the petitioners' lawyer, Attorney Gutierrez, to relinquish his rights over the property. The award of moral damages is in accordance with Article 1191 31 of the Civil Code pursuant to Article 2220 which provides that moral damages may be awarded in case of breach of contract where the defendant acted in bad faith. The amount awarded depends on the discretion of the court based on the circumstances of each case. 32 Under the circumstances, the award given by the Court of Appeals amounting to P50,000.00 appears to us to be fair and reasonable. ACCORDINGLY, the decision of the Court of Appeals in CA G.R. CV No. 47457 is AFFIRMED and the instant petition is hereby DENIED. No pronouncement as to costs. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 135657 January 17, 2001 V. LAGON, petitioner,

JOSE vs. HOOVEN COMALCO INDUSTRIES, INC., respondent. BELLOSILLO, 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 P 69,329.00 with interest at twelve percent (12%) per annum computed from the filing of the complaint until fully paid, plus attorney's fees and costs,1as 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 to P117,329.00 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.1wphi1.nt 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 P 87,140.00. Deducting therefrom P 48,000.00 which Lagon paid in advance upon execution of their contracts with no further payments appearing to have been made thereafter, only P 39,140.00 remained

unpaid and where Lagon incurred in delay. The trial court also awarded HOOVEN P 3,255.00 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, and P30,000.00 as attorney's fees in addition to litigation expenses of P 45,534.50. According to the court a quo5 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 P 39,140.00 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.

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: One (1) set: Two (2) sets: One (1) set: One (1) set: One (1) set: One (1) set: 65" x 126-1/2" (w/ transom) 65" x 126-1/2" (w/ AC provision) 39-1/2" x 125-1/2" -do39-1/2" x 87" -do39-1/2" x 223" -do65" x 57-1/2" (w/ transom) 65" x 4" -doP42,530.00 "Hooven" Aluminum Entrances and Fixed Windows Anolok Finish, with 6.0 mm Bronzepane Tinted Glass One (1) set: Two (2) sets: 100-1/2" x 76-1/2", double sash, double acting swing door, with transom. 80" x 278", fixed panels 21,740.00

Both parties appealed to the Court of Appeals. In its Decision of 28 April One (1) set: 54 x 191 1997, the appellate court set aside the judgment of the trial One (1) set: 45 x 302 11,650.00 court and resolved the case in favor of HOOVEN. It held that 75,920.00 the trial court erred in relying solely on the results of the ocular Add: Delivery and Installation charge 7,500.00 inspection since the delivery and P83,420.00 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 "Hooven" Aluminum Sliding Windows Fabricated From SD-Sections, Anolok Finish, with 6.0 mm Bronzepane Tinted Glass 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 Aluminum straps stiffeners G.I. wire hangers Blind Rivets and Screws Labor charge P14,110.00 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 "A" Invoice No. 11094 dated 29 December 1982 Eighty Six (86) Pieces, 2.0 mm Hishilite 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 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 3.367m 1.00 3.188m m - do - with a/c provision P5,718.50 P3,440.00

Two (2) sets

- do - - do -

One (1) set

1.00 m 2.210 m 1.00 m 5.664 m 1.651m 1.461 m 1.651m 1.880 m 1.651m 1.524 m

- do - - do -

One (1) set

- do - - do -

One (1) set

- do - - do - with transom

One (1) set

- do - with transom

One (1) set

- 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. Fixed windows, Anolok finish.

Two (2) sets

2.032m 7.061 m .737 m 7.061 m 1.143m 4.851m

One (1) set

Aluminum tubulars with aluminum YP100 cladding, Anolok finish. Hooven aluminum sliding windows fabricated from SD sections, Anolok finish, with 6.0 mm Bronzepane tinted glass, with 1.88 m tubular posts. - do P75,291.83

One (1) set

One (1) set

1.143m 7.671m

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 2ndfloor 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 1261/2" 65" x 1261/2 39-1/2 125-1/2 39-1/2" 87" 39-1/2" 223" x with transom

One (1) set:

with provision - do -

AC

Two (2) sets:

One (1) set:

- do -

One (1) set:

- do -

One (1) set:

65" x 571/2" 65" x 74"

with transom

One (1) set:

- 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 fixed panels P21,740.00

Two (2) sets:

80" 278"

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: One (1) set: 45" x 191" 45" x 302" P11,650.00 7,500.00 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

Add: Delivery and Installation Less: 7% Discount

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 198310 sent to petitioner by respondent further betrays the falsity of its claims Dear Mr. Lagon: The bearer, Mr. Fermin Piero, 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 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 thebalance 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 theProposals 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. Comalco Industries, Inc.

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. 1wphi1.nt 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. QUIONES: 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. QUIONES: 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 (2) Items under Exh. "B," consisting of 23 light boxes at P40.00 each (3) Third, fourth and fifth items under the first heading of Exh. "C-2" which on the basis of their

P 680.00

3,220.00

14,176.65

measurements constitute only 1/3 of the total costs of materials listed therein (4) Items under the second heading of Exh. "C2" (5) Items under Exhs. "D" and "D-1" (6) Items under Exh. "E-1" 14,110.00 Less: Stipulated 7% discount 21,740.00

4,860.00 P58,786.65 4,408.99 P54,377.66

Less: Advance payment made by petitioner to Hooven Comalco Unpaid Balance of petitioner

48,000.00

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 of P50,000.00 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.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 119255 April 9, 2003

TOMAS K. CHUA, petitioner, vs. COURT OF APPEALS and ENCARNACION VALDES-CHOY, respondents. CARPIO, J.: The Case This is a petition for review on certiorari seeking to reverse the decision1 of the Court of Appeals in an action for specific performance2 filed in the Regional Trial Court3 by petitioner Tomas K. Chua ("Chua") against respondent Encarnacion Valdes-Choy ("Valdes-Choy"). Chua sought to compel Valdes-Choy to consummate the sale of her paraphernal house and lot in Makati City. The Court of Appeals reversed the decision4 rendered by the trial court in favor of Chua. The Facts Valdes-Choy advertised for sale her paraphernal house and lot ("Property") with an area of 718 square meters located at No. 40 Tampingco Street corner Hidalgo Street, San Lorenzo Village, Makati City. The Property is covered by Transfer Certificate of Title No. 162955 ("TCT") issued by the Register of Deeds of Makati City in the name of Valdes-Choy. Chua responded to the advertisement. After several meetings, Chua and Valdes-Choy agreed on a purchase price of P10,800,000.00 payable in cash. On 30 June 1989, Valdes-Choy received from Chua a check for P100,000.00. The receipt ("Receipt") evidencing the transaction, signed by Valdes-Choy as seller, and Chua as buyer, reads: 30 June 1989

RECEIPT RECEIVED from MR. TOMAS K. CHUA PBCom Check No. 206011 in the amount of ONE HUNDRED THOUSAND PESOS ONLY (P100,000.00) as EARNEST MONEY for the sale of the property located at 40 Tampingco cor. Hidalgo, San Lorenzo Village, Makati, Metro Manila (Area : 718 sq. meters). The balance of TEN MILLION SEVEN HUNDRED THOUSAND (P10,700,000.00) is payable on or before 15 5July 1989. Capital Gains Tax for the account of the seller. Failure to pay balance on or before 15 July 1989 forfeits the earnest money. This provided that all papers are in proper order.6 CONFORME: ENCARNACION Seller TOMAS Buyer x x x.7 In the morning of 13 July 1989, Chua secured from Philippine Bank of Commerce ("PBCom") a manager's check for P480,000.00. Strangely, after securing the manager's check, Chua immediately gave PBCom a verbal stop payment order claiming that this manager's check for P480,000.00 "was lost and/or misplaced." 8 On the same day, after receipt of Chua's verbal order, PBCom Assistant VicePresident Julie C. Pe notified in writing9 the PBCom Operations Group of Chua's stop payment order. In the afternoon of 13 July 1989, Chua and Valdes-Choy met with their respective counsels to execute the necessary documents and arrange the payments.10 Valdes-Choy as vendor and Chua as vendee signed two Deeds of Absolute Sale ("Deeds of Sale"). K. CHUA VALDES

The first Deed of Sale covered the house and lot for the purchase price of P8,000,000.00. 11 The second Deed of Sale covered the furnishings, fixtures and movable properties contained in the house for the purchase price of P2,800,000.00. 12 The parties also computed the capital gains tax to amount to P485,000.00. On 14 July 1989, the parties met again at the office of Valdes-Choy's counsel. Chua handed to Valdes-Choy the PBCom manager's check for P485,000.00 so Valdes-Choy could pay the capital gains tax as she did not have sufficient funds to pay the tax. ValdesChoy issued a receipt showing that Chua had a remaining balance of P10,215,000.00 after deducting the advances made by Chua. This receipt reads: July 14, 1989

Received from MR. TOMAS K. CHUA PBCom. Check No. 325851 in the amount of FOUR HUNDRED EIGHTY FIVE THOUSAND PESOS ONLY (P485,000.00) as Partial Payment for the sale of the property located at 40 Tampingco Cor. Hidalgo St., San Lorenzo Village, Makati, Metro Manila (Area 718 sq. meters), covered by TCT No. 162955 of the Registry of Deeds of Makati, Metro Manila. The total purchase price of the above-mentioned property is TEN MILLION EIGHT HUNDRED THOUSAND PESOS only, broken down as follows: SELLING PRICE EARNEST MONEY PARTIAL PAYMENT BALANCE DUE ENCARNACION VALDEZ-CHOY TO P10,215,000.00 80,000.00 P10,295,000.00 x x x.13 On the same day, 14 July 1989, Valdes-Choy, accompanied by Chua, deposited the P485,000.00 manager's check to her account with Traders Royal Bank. She then purchased a Traders Royal Bank manager's check for P480,000.00 payable to the Commissioner of Internal Revenue for the capital gains tax. Valdes-Choy and Chua returned to the office of Valdes-Choy's counsel and handed the Traders Royal Bank check to the counsel who undertook to pay the capital gains tax. It was then also that Chua showed to Valdes-Choy a PBCom manager's check for P10,215,000.00 representing the balance of the purchase price. Chua, however, did not give this PBCom manager's check to Valdes-Choy because the TCT was still registered in the name of ValdesChoy. Chua required that the Property be registered first in his name before he would turn over the check to Valdes-Choy. This angered Valdes-Choy who tore up the Deeds of Sale, claiming that what Chua required was not part of their agreement. 14 On the same day, 14 July 1989, Chua confirmed his stop payment order by submitting to PBCom an affidavit of loss 15 of the PBCom Manager's Check for P480,000.00. PBCom Assistant Vice-President Pe, however, testified that the manager's check was nevertheless honored because Chua subsequently verbally advised the bank that he was lifting the stop-payment order due to his "special arrangement" with the bank.16 On 15 July 1989, the deadline for the payment of the balance of the purchase price, Valdes-Choy suggested to her counsel that to break the impasse Chua should deposit in escrow the P10,215,000.00 balance. 17 Upon such deposit, Valdes-Choy was willing to cause the issuance of a new TCT in the name of Chua even without receiving the balance of the purchase price. Valdes-Choy believed this was the only way she could protect herself if the certificate of title is transferred in the name of the buyer before she is fully paid. Valdes-Choy's counsel promised to relay her suggestion to Chua and his counsel, but nothing came out of it. On 17 July 1989, Chua filed a complaint for specific performance against Valdes-Choy which the trial court dismissed on 22 November 1989. On 29 November 1989, Chua re-filed his complaint for specific performance with damages. After trial in due course, the trial court rendered judgment in favor of Chua, the dispositive portion of which reads: Applying the provisions of Article 1191 of the new Civil Code, since this is an action for specific performance where the plaintiff, as vendee, wants to pursue the sale, and in order that the fears of the defendant may be allayed and still have the sale materialize, judgment is hereby rendered: P100,000.00 485,000.00 585,000.00 P10,800,000.00

PLUS P80,000.00 for documentary stamps paid in advance by seller

I. 1. Ordering the defendant to deliver to the Court not later than five (5) days from finality of this decision: a. the owner's duplicate copy of TCT No. 162955 registered in her name; b. the covering tax declaration and the latest tax receipt evidencing payment of real estate taxes; c. the two deeds of sale prepared by Atty. Mark Bocobo on July 13, 1989, duly executed by defendant in favor of the plaintiff, whether notarized or not; and 2. Within five (5) days from compliance by the defendant of the above, ordering the plaintiff to deliver to the Branch Clerk of Court of this Court the sum of P10,295,000.00 representing the balance of the consideration (with the sum of P80,000.00 for stamps already included); 3. Ordering the Branch Clerk of this Court or her duly authorized representative: a. to make representations with the BIR for the payment of capital gains tax for the sale of the house and lot (not to include the fixtures) and to pay the same from the funds deposited with her; b. to present the deed of sale executed in favor of the plaintiff, together with the owner's duplicate copy of TCT No. 162955, real estate tax receipt and proof of payment of capital gains tax, to the Makati Register of Deeds; c. to pay the required registration fees and stamps (if not yet advanced by the defendant) and if needed update the real estate taxes all to be taken from the funds deposited with her; and d. surrender to the plaintiff the new Torrens title over the property; 4. Should the defendant fail or refuse to surrender the two deeds of sale over the property and the fixtures that were prepared by Atty. Mark Bocobo and executed by the parties, the Branch Clerk of Court of this Court is hereby authorized and empowered to prepare, sign and execute the said deeds of sale for and in behalf of the defendant; 5. Ordering the defendant to pay to the plaintiff; a. the sum of P100,000.00 representing moral and compensatory damages for the plaintiff; and b. the sum of P50,000.00 as reimbursement for plaintiff's attorney's fees and cost of litigation. 6. Authorizing the Branch Clerk of Court of this Court to release to the plaintiff, to be taken from the funds said plaintiff has deposited with the Court, the amounts covered at paragraph 5 above; 7. Ordering the release of the P10,295,000.00 to the defendant after deducting therefrom the following amounts: a. the capital gains tax paid to the BIR; b. the expenses incurred in the registration of the sale, updating of real estate taxes, and transfer of title; and c. the amounts paid under this judgment to the plaintiff. 8. Ordering the defendant to surrender to the plaintiff or his representatives the premises with the furnishings intact within seventy-two (72) hours from receipt of the proceeds of the sale; 9. No interest is imposed on the payment to be made by the plaintiff because he had always been ready to pay the balance and the premises had been used or occupied by the defendant for the duration of this case. II. In the event that specific performance cannot be done for reasons or causes not attributable to the plaintiff, judgment is hereby rendered ordering the defendant: 1. To refund to the plaintiff the earnest money in the sum of P100,000.00, with interest at the legal rate from June 30, 1989 until fully paid;

2. To refund to the plaintiff the sum of P485,000.00 with interest at the legal rate from July 14, 1989 until fully paid; 3. To pay to the plaintiff the sum of P700,000.00 in the concept of moral damages and the additional sum of P300,000.00 in the concept of exemplary damages; and 4. To pay to the plaintiff the sum of P100,000.00 as reimbursement of attorney's fees and cost of litigation. SO ORDERED.18 Valdes-Choy appealed to the Court of Appeals which reversed the decision of the trial court. The Court of Appeals handed down a new judgment, disposing as follows: WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE, and another one is rendered: (1) Dismissing Civil Case No. 89-5772; (2) Declaring the amount of P100,000.00, representing earnest money as forfeited in favor of defendantappellant; (3) Ordering defendant-appellant to return/refund the amount of P485,000.00 to plaintiff-appellee without interest; (4) Dismissing defendant-appellant's compulsory counter-claim; and (5) Ordering the plaintiff-appellee to pay the costs.19 Hence, the instant petition. The Trial Court's Ruling The trial court found that the transaction reached an impasse when Valdes-Choy wanted to be first paid the full consideration before a new TCT covering the Property is issued in the name of Chua. On the other hand, Chua did not want to pay the consideration in full unless a new TCT is first issued in his name. The trial court faulted Valdes-Choy for this impasse. The trial court held that the parties entered into a contract to sell on 30 June 1989, as evidenced by the Receipt for the P100,000.00 earnest money. The trial court pointed out that the contract to sell was subject to the following conditions: (1) the balance of P10,700,000.00 was payable not later than 15 July 1989; (2) Valdes-Choy may stay in the Property until 13 August 1989; and (3) all papers must be "in proper order" before full payment is made. The trial court held that Chua complied with the terms of the contract to sell. Chua showed that he was prepared to pay ValdesChoy the consideration in full on 13 July 1989, two days before the deadline of 15 July 1989. Chua even added P80,000.00 for the documentary stamp tax. He purchased from PBCom two manager's checks both payable to Valdes-Choy. The first check for P485,000.00 was to pay the capital gains tax. The second check for P10,215,000.00 was to pay the balance of the purchase price. The trial court was convinced that Chua demonstrated his capacity and readiness to pay the balance on 13 July 1989 with the production of the PBCom manager's check for P10,215,000.00. On the other hand, the trial court found that Valdes-Choy did not perform her correlative obligation under the contract to sell to put all the papers in order. The trial court noted that as of 14 July 1989, the capital gains tax had not been paid because Valdes-Choy's counsel who was suppose to pay the tax did not do so. The trial court declared that Valdes-Choy was in a position to deliver only the owner's duplicate copy of the TCT, the signed Deeds of Sale, the tax declarations, and the latest realty tax receipt. The trial court concluded that these documents were all useless without the Bureau of Internal Revenue receipt evidencing full payment of the capital gains tax which is a pre-requisite to the issuance of a new certificate of title in Chua's name. The trial court held that Chua's non-payment of the balance of P10,215,000.00 on the agreed date was due to Valdes-Choy's fault. The Court of Appeals' Ruling In reversing the trial court, the Court of Appeals ruled that Chua's stance to pay the full consideration only after the Property is registered in his name was not the agreement of the parties. The Court of Appeals noted that there is a whale of difference between the phrases "all papers are in proper order" as written on the Receipt, and "transfer of title" as demanded by Chua.

Contrary to the findings of the trial court, the Court of Appeals found that all the papers were in order and that Chua had no valid reason not to pay on the agreed date. Valdes-Choy was in a position to deliver the owner's duplicate copy of the TCT, the signed Deeds of Sale, the tax declarations, and the latest realty tax receipt. The Property was also free from all liens and encumbrances. The Court of Appeals declared that the trial court erred in considering Chua's showing to Valdes-Choy of the PBCom manager's check for P10,215,000.00 as compliance with Chua's obligation to pay on or before 15 July 1989. The Court of Appeals pointed out that Chua did not want to give up the check unless "the property was already in his name." 20 Although Chua demonstrated his capacity to pay, this could not be equated with actual payment which he refused to do. The Court of Appeals did not consider the non-payment of the capital gains tax as failure by Valdes-Choy to put the papers "in proper order." The Court of Appeals explained that the payment of the capital gains tax has no bearing on the validity of the Deeds of Sale. It is only after the deeds are signed and notarized can the final computation and payment of the capital gains tax be made. The Issues In his Memorandum, Chua raises the following issues: 1. WHETHER THERE IS A PERFECTED CONTRACT OF SALE OF IMMOVABLE PROPERTY; 2. WHETHER VALDES-CHOY MAY RESCIND THE CONTRACT IN CONTROVERSY WITHOUT OBSERVING THE PROVISIONS OF ARTICLE 1592 OF THE NEW CIVIL CODE; 3. WHETHER THE WITHHOLDING OF PAYMENT OF THE BALANCE OF THE PURCHASE PRICE ON THE PART OF CHUA (AS VENDEE) WAS JUSTIFIED BY THE CIRCUMSTANCES OBTAINING AND MAY NOT BE RAISED AS GROUND FOR THE AUTOMATIC RESCISSION OF THE CONTRACT OF SALE; 4. WHETHER THERE IS LEGAL AND FACTUAL BASIS FOR THE COURT OF APPEALS TO DECLARE THE "EARNEST MONEY" IN THE AMOUNT OF P100,000.00 AS FORFEITED IN FAVOR OF VALDES-CHOY; 5. WHETHER THE TRIAL COURT'S JUDGMENT IS IN ACCORD WITH LAW, REASON AND EQUITY DESERVING OF BEING REINSTATED AND AFFIRMED.21 The issues for our resolution are: (a) whether the transaction between Chua and Valdes-Choy is a perfected contract of sale or a mere contract to sell, and (b) whether Chua can compel Valdes-Choy to cause the issuance of a new TCT in Chua's name even before payment of the full purchase price. The Court's Ruling The petition is bereft of merit. There is no dispute that Valdes-Choy is the absolute owner of the Property which is registered in her name under TCT No.162955, free from all liens and encumbrances. She was ready, able and willing to deliver to Chua the owner's duplicate copy of the TCT, the signed Deeds of Sale, the tax declarations, and the latest realty tax receipt. There is also no dispute that on 13 July 1989, ValdesChoy received PBCom Check No. 206011 for P100,000.00 as earnest money from Chua. Likewise, there is no controversy that the Receipt for the P100,000.00 earnest money embodied the terms of the binding contract between Valdes-Choy and Chua. Further, there is no controversy that as embodied in the Receipt, Valdes-Choy and Chua agreed on the following terms: (1) the balance of P10,215,000.00 is payable on or before 15 July 1989; (2) the capital gains tax is for the account of Valdes-Choy; and (3) if Chua fails to pay the balance of P10,215,000.00 on or before 15 July 1989, Valdes-Choy has the right to forfeit the earnest money, provided that "all papers are in proper order." On 13 July 1989, Chua gave Valdes-Choy the PBCom manager's check for P485,000.00 to pay the capital gains tax. Both the trial and appellate courts found that the balance of P10,215,000.00 was not actually paid to Valdes-Choy on the agreed date. On 13 July 1989, Chua did show to Valdes-Choy the PBCom manager's check for P10,215,000.00, with Valdes-Choy as payee. However, Chua refused to give this check to Valdes-Choy until a new TCT covering the Property is registered in Chua's name. Or, as the trial court put it, until there is proof of payment of the capital gains tax which is a pre-requisite to the issuance of a new certificate of title. First and Second Issues: Contract of Sale or Contract to Sell?

Chua has consistently characterized his agreement with Valdez-Choy, as evidenced by the Receipt, as a contract to sell and not a contract of sale. This has been Chua's persistent contention in his pleadings before the trial and appellate courts. Chua now pleads for the first time that there is a perfected contract of sale rather than a contract to sell. He contends that there was no reservation in the contract of sale that Valdes-Choy shall retain title to the Property until after the sale. There was no agreement for an automatic rescission of the contract in case of Chua's default. He argues for the first time that his payment of earnest money and its acceptance by Valdes-Choy precludes the latter from rejecting the binding effect of the contract of sale. Thus, Chua claims that Valdes-Choy may not validly rescind the contract of sale without following Article 159222 of the Civil Code which requires demand, either judicially or by notarial act, before rescission may take place. Chua's new theory is not well taken in light of well-settled jurisprudence. An issue not raised in the court below cannot be raised for the first time on appeal, as this is offensive to the basic rules of fair play, justice and due process. 23 In addition, when a party deliberately adopts a certain theory, and the case is tried and decided on that theory in the court below, the party will not be permitted to change his theory on appeal. To permit him to change his theory will be unfair to the adverse party. 24 Nevertheless, in order to put to rest all doubts on the matter, we hold that the agreement between Chua and Valdes-Choy, as evidenced by the Receipt, is a contract to sell and not a contract of sale. The distinction between a contract of sale and contract to sell is well-settled: In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold; in a contract to sell, ownership is, by agreement, reserved in the vendor and is not to pass to the vendee until full payment of the purchase price. Otherwise stated, in a contract of sale, the vendor loses ownership over the property and cannot recover it until and unless the contract is resolved or rescinded; whereas, in a contract to sell, title is retained by the vendor until full payment of the price. In the latter contract, payment of the price is a positive suspensive condition, failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective. 25 A perusal of the Receipt shows that the true agreement between the parties was a contract to sell. Ownership over the Property was retained by Valdes-Choy and was not to pass to Chua until full payment of the purchase price. First, the Receipt provides that the earnest money shall be forfeited in case the buyer fails to pay the balance of the purchase price on or before 15 July 1989. In such event, Valdes-Choy can sell the Property to other interested parties. There is in effect a right reserved in favor of Valdes-Choy not to push through with the sale upon Chua's failure to remit the balance of the purchase price before the deadline. This is in the nature of a stipulation reserving ownership in the seller until full payment of the purchase price. This is also similar to giving the seller the right to rescind unilaterally the contract the moment the buyer fails to pay within a fixed period.26 Second, the agreement between Chua and Valdes-Choy was embodied in a receipt rather than in a deed of sale, ownership not having passed between them. The signing of the Deeds of Sale came later when Valdes-Choy was under the impression that Chua was about to pay the balance of the purchase price. The absence of a formal deed of conveyance is a strong indication that the parties did not intend immediate transfer of ownership, but only a transfer after full payment of the purchase price.27 Third, Valdes-Choy retained possession of the certificate of title and all other documents relative to the sale. When Chua refused to pay Valdes-Choy the balance of the purchase price, Valdes-Choy also refused to turn-over to Chua these documents.28 These are additional proof that the agreement did not transfer to Chua, either by actual or constructive delivery, ownership of the Property.29 It is true that Article 1482 of the Civil Code provides that "[W]henever earnest money is given in a contract of sale, it shall be considered as part of the price and proof of the perfection of the contract." However, this article speaks of earnest money given in a contract of sale. In this case, the earnest money was given in a contract to sell. The Receipt evidencing the contract to sell stipulates that the earnest money is a forfeitable deposit, to be forfeited if the sale is not consummated should Chua fail to pay the balance of the purchase price. The earnest money forms part of the consideration only if the sale is consummated upon full payment of the purchase price. If there is a contract of sale, Valdes-Choy should have the right to compel Chua to pay the balance of the purchase price. Chua, however, has the right to walk away from the transaction, with no obligation to pay the balance, although he will forfeit the earnest money. Clearly, there is no contract of sale. The earnest money was given in a contract to sell, and thus Article 1482, which speaks of a contract of sale, is not applicable. Since the agreement between Valdes-Choy and Chua is a mere contract to sell, the full payment of the purchase price partakes of a suspensive condition. The non-fulfillment of the condition prevents the obligation to sell from arising and ownership is retained by the seller without further remedies by the buyer.30 Article 1592 of the Civil Code permits the buyer to pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by notarial act. However, Article 1592 does not apply to a contract to sell where the seller reserves the ownership until full payment of the price. 31 Third and Fourth Issues: Withholding Balance of the Purchase Price and Forfeiture of the Earnest Money of Payment of the

Chua insists that he was ready to pay the balance of the purchase price but withheld payment because Valdes-Choy did not fulfill her contractual obligation to put all the papers in "proper order." Specifically, Chua claims that Valdes-Choy failed to show that the capital gains tax had been paid after he had advanced the money for its payment. For the same reason, he contends that ValdesChoy may not forfeit the earnest money even if he did not pay on time. There is a variance of interpretation on the phrase "all papers are in proper order" as written in the Receipt. There is no dispute though, that as long as the papers are "in proper order," Valdes-Choy has the right to forfeit the earnest money if Chua fails to pay the balance before the deadline. The trial court interpreted the phrase to include payment of the capital gains tax, with the Bureau of Internal Revenue receipt as proof of payment. The Court of Appeals held otherwise. We quote verbatim the ruling of the Court of Appeals on this matter: The trial court made much fuss in connection with the payment of the capital gains tax, of which Section 33 of the National Internal Revenue Code of 1977, is the governing provision insofar as its computation is concerned. The trial court failed to consider Section 34-(a) of the said Code, the last sentence of which provides, that "[t]he amount realized from the sale or other disposition of property shall be the sum of money received plus the fair market value of the property (other than money) received;" and that the computation of the capital gains tax can only be finally assessed by the Commission on Internal Revenue upon the presentation of the Deeds of Absolute Sale themselves, without which any premature computation of the capital gains tax becomes of no moment. At any rate, the computation and payment of the capital gains tax has no bearing insofar as the validity and effectiveness of the deeds of sale in question are concerned, because it is only after the contracts of sale are finally executed in due form and have been duly notarized that the final computation of the capital gains tax can follow as a matter of course. Indeed, exhibit D, the PBC Check No. 325851, dated July 13, 1989, in the amount of P485,000.00, which is considered as part of the consideration of the sale, was deposited in the name of appellant, from which she in turn, purchased the corresponding check in the amount representing the sum to be paid for capital gains tax and drawn in the name of the Commissioner of Internal Revenue, which then allayed any fear or doubt that that amount would not be paid to the Government after all. 32 We see no reason to disturb the ruling of the Court of Appeals. In a contract to sell, the obligation of the seller to sell becomes demandable only upon the happening of the suspensive condition. In this case, the suspensive condition is the full payment of the purchase price by Chua. Such full payment gives rise to Chua's right to demand the execution of the contract of sale. It is only upon the existence of the contract of sale that the seller becomes obligated to transfer the ownership of the thing sold to the buyer. Article 1458 of the Civil Code defines a contract of sale as follows: Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownershipof and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. x x x. (Emphasis supplied) Prior to the existence of the contract of sale, the seller is not obligated to transfer ownership to the buyer, even if there is a contract to sell between them. It is also upon the existence of the contract of sale that the buyer is obligated to pay the purchase price to the seller. Since the transfer of ownership is in exchange for the purchase price, these obligations must be simultaneously fulfilled at the time of the execution of the contract of sale, in the absence of a contrary stipulation. In a contract of sale, the obligations of the seller are specified in Article 1495 of the Civil Code, as follows: Art. 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which is the object of the sale. (Emphasis supplied) The obligation of the seller is to transfer to the buyer ownership of the thing sold. In the sale of real property, the seller is not obligated to transfer in the name of the buyer a new certificate of title, but rather to transfer ownership of the real property. There is a difference between transfer of the certificate of title in the name of the buyer, and transfer of ownership to the buyer. The buyer may become the owner of the real property even if the certificate of title is still registered in the name of the seller. As between the seller and buyer, ownership is transferred not by the issuance of a new certificate of title in the name of the buyer but by the execution of the instrument of sale in a public document. In a contract of sale, ownership is transferred upon delivery of the thing sold. As the noted civil law commentator Arturo M. Tolentino explains it, Delivery is not only a necessary condition for the enjoyment of the thing, but is a mode of acquiring dominion and determines the transmission of ownership, the birth of the real right. The delivery, therefore, made in any of the forms

provided in articles 1497 to 1505 signifies that the transmission of ownership from vendor to vendee has taken place . The delivery of the thing constitutes an indispensable requisite for the purpose of acquiring ownership. Our law does not admit the doctrine of transfer of property by mere consent; the ownership, the property right, is derived only from delivery of the thing. x x x.33 (Emphasis supplied) In a contract of sale of real property, delivery is effected when the instrument of sale is executed in a public document. When the deed of absolute sale is signed by the parties and notarized, then delivery of the real property is deemed made by the seller to the buyer. Article 1498 of the Civil Code provides that Art. 1498. When the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred. x x x. Similarly, in a contract to sell real property, once the seller is ready, able and willing to sign the deed of absolute sale before a notary public, the seller is in a position to transfer ownership of the real property to the buyer. At this point, the seller complies with his undertaking to sell the real property in accordance with the contract to sell, and to assume all the obligations of a vendor under a contract of sale pursuant to the relevant articles of the Civil Code. In a contract to sell, the seller is not obligated to transfer ownership to the buyer. Neither is the seller obligated to cause the issuance of a new certificate of title in the name of the buyer. However, the seller must put all his papers in proper order to the point that he is in a position to transfer ownership of the real property to the buyer upon the signing of the contract of sale. In the instant case, Valdes-Choy was in a position to comply with all her obligations as a seller under the contract to sell. First, she already signed the Deeds of Sale in the office of her counsel in the presence of the buyer. Second, she was prepared to turn-over the owner's duplicate of the TCT to the buyer, along with the tax declarations and latest realty tax receipt. Clearly, at this point Valdes-Choy was ready, able and willing to transfer ownership of the Property to the buyer as required by the contract to sell, and by Articles 1458 and 1495 of the Civil Code to consummate the contract of sale. Chua, however, refused to give to Valdes-Choy the PBCom manager's check for the balance of the purchase price. Chua imposed the condition that a new TCT should first be issued in his name, a condition that is found neither in the law nor in the contract to sell as evidenced by the Receipt. Thus, at this point Chua was not ready, able and willing to pay the full purchase price which is his obligation under the contract to sell. Chua was also not in a position to assume the principal obligation of a vendee in a contract of sale, which is also to pay the full purchase price at the agreed time. Article 1582 of the Civil Code provides that Art. 1582. The vendee is bound to accept delivery and to pay the price of the thing sold at the time and place stipulated in the contract. x x x. (Emphasis supplied) In this case, the contract to sell stipulated that Chua should pay the balance of the purchase price "on or before 15 July 1989." The signed Deeds of Sale also stipulated that the buyer shall pay the balance of the purchase price upon signing of the deeds. Thus, the Deeds of Sale, both signed by Chua, state as follows: Deed of Absolute Sale covering the lot: xxx For and in consideration of the sum of EIGHT MILLION PESOS (P8,000,000.00), Philippine Currency, receipt of which in full is hereby acknowledged by the VENDOR from the VENDEE, the VENDOR sells, transfers and conveys unto the VENDEE, his heirs, successors and assigns, the said parcel of land, together with the improvements existing thereon, free from all liens and encumbrances.34 (Emphasis supplied) Deed of Absolute Sale covering the furnishings: xxx For and in consideration of the sum of TWO MILLION EIGHT HUNDRED THOUSAND PESOS (P2,800,000.00), Philippine Currency, receipt of which in full is hereby acknowledged by the VENDOR from the VENDEE , the VENDOR sells, transfers and conveys unto the VENDEE, his heirs, successors and assigns, the said furnitures, fixtures and other movable properties thereon, free from all liens and encumbrances. 35 (Emphasis supplied)

However, on the agreed date, Chua refused to pay the balance of the purchase price as required by the contract to sell, the signed Deeds of Sale, and Article 1582 of the Civil Code. Chua was therefore in default and has only himself to blame for the rescission by Valdes-Choy of the contract to sell. Even if measured under existing usage or custom, Valdes-Choy had all her papers "in proper order." Article 1376 of the Civil Code provides that: Art. 1376. The usage or custom of the place shall be borne in mind in the interpretation of the ambiguities of a contract, and shall fill the omission of stipulations which are ordinarily established. Customarily, in the absence of a contrary agreement, the submission by an individual seller to the buyer of the following papers would complete a sale of real estate: (1) owner's duplicate copy of the Torrens title;36 (2) signed deed of absolute sale; (3) tax declaration; and (3) latest realty tax receipt. The buyer can retain the amount for the capital gains tax and pay it upon authority of the seller, or the seller can pay the tax, depending on the agreement of the parties. The buyer has more interest in having the capital gains tax paid immediately since this is a pre-requisite to the issuance of a new Torrens title in his name. Nevertheless, as far as the government is concerned, the capital gains tax remains a liability of the seller since it is a tax on the seller's gain from the sale of the real estate.Payment of the capital gains tax, however, is not a pre-requisite to the transfer of ownership to the buyer. The transfer of ownership takes effect upon the signing and notarization of the deed of absolute sale. The recording of the sale with the proper Registry of Deeds 37 and the transfer of the certificate of title in the name of the buyer are necessary only to bind third parties to the transfer of ownership.38 As between the seller and the buyer, the transfer of ownership takes effect upon the execution of a public instrument conveying the real estate. 39 Registration of the sale with the Registry of Deeds, or the issuance of a new certificate of title, does not confer ownership on the buyer. Such registration or issuance of a new certificate of title is not one of the modes of acquiring ownership. 40 In this case, Valdes-Choy was ready, able and willing to submit to Chua all the papers that customarily would complete the sale, and to pay as well the capital gains tax. On the other hand, Chua's condition that a new TCT be first issued in his name before he pays the balance of P10,215,000.00, representing 94.58% of the purchase price, is not customary in a sale of real estate. Such a condition, not specified in the contract to sell as evidenced by the Receipt, cannot be considered part of the "omissions of stipulations which are ordinarily established" by usage or custom. 41 What is increasingly becoming customary is to deposit in escrow the balance of the purchase price pending the issuance of a new certificate of title in the name of the buyer. Valdes-Choy suggested this solution but unfortunately, it drew no response from Chua. Chua had no reason to fear being swindled. Valdes-Choy was prepared to turn-over to him the owner's duplicate copy of the TCT, the signed Deeds of Sale, the tax declarations, and the latest realty tax receipt. There was no hindrance to paying the capital gains tax as Chua himself had advanced the money to pay the same and Valdes-Choy had procured a manager's check payable to the Bureau of Internal Revenue covering the amount. It was only a matter of time before the capital gains tax would be paid. Chua acted precipitately in filing the action for specific performance a mere two days after the deadline of 15 July 1989 when there was an impasse. While this case was dismissed on 22 November 1989, he did not waste any time in re-filing the same on 29 November 1989. Accordingly, since Chua refused to pay the consideration in full on the agreed date, which is a suspensive condition, Chua cannot compel Valdes-Choy to consummate the sale of the Property. Article 1181 of the Civil Code provides that ART. 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired shall depend upon the happening of the event which constitutes the condition. Chua acquired no right to compel Valdes-Choy to transfer ownership of the Property to him because the suspensive condition - the full payment of the purchase price - did not happen. There is no correlative obligation on the part of Valdes-Choy to transfer ownership of the Property to Chua. There is also no obligation on the part of Valdes-Choy to cause the issuance of a new TCT in the name of Chua since unless expressly stipulated, this is not one of the obligations of a vendor. WHEREFORE, the Decision of the Court of Appeals in CA-G.R. CV No. 37652 dated 23 February 1995 is AFFIRMED in toto. SO ORDERED.