Article 1469- 1471

Development Bank of the Philippines vs. Moll

BARREDO, J.:p
Appeal from the decision of the Court of First Instance of Manila in its Civil Case No. 56037 sentencing
appellants to jointly and severally pay to the appellee Development Bank of the Philippines the sum of
P1,648,591.45, claimed by the said Bank to be the deficiency or unpaid balance of appellants' overdue
obligation under certain agricultural and industrial loans it had granted to appellants after applying to
the said loans the proceeds of the extrajudicial foreclosure and public auction sale of the properties
mortgaged to secure their payment, plus attorney's fees and costs.
It appears that on April 12, 1947 and December 15, 1947, the appellee Development Bank of the
Philippines (then known as the Rehabilitation Finance Corporation) granted agricultural loans in the
amounts of P120,000.00 and P22,000.00, respectively, in favor of one Sebastian Moll, Sr. who, to secure
the payment of said loans, mortgaged in favor of the appellee Bank fourteen (14) parcels of land
comprising the property known as "Hacienda Moll" covered by certificates of title and tax
declarations issued by the land registry of the province of Camarines Sur. Said Sebastian Moll, Sr. having
subsequently died, his heirs (appellants) executed on May 14, 1949 an extrajudicial partition of his
estate, including the properties above-mentioned, adjudicating the same to themselves, albeit binding
themselves, jointly and severally, to assume payment of the indebtedness of the deceased with the
appellee Bank; and starting from the said date, appellants themselves applied for and were granted by
the appellee Bank new and additional loans, to wit: May 14, 1949 an industrial loan of P150,000.00;
May 28, 1951 an additional agricultural loan of P100,000.00; and May 31, 1951 another industrial
loan of P580,000.00. The additional agricultural loan was granted by the appellee Bank on the security
of the same properties already mortgaged to the appellee Bank by appellants' predecessor in interest,
earlier stated; while the new industrial loans were secured by mortgages on machineries, equipment
and some other real estate.
Appellants thereafter failed to comply with the terms of the loan contracts as they fell due.
Consequently, the above-mentioned mortgages on their properties were extrajudicially foreclosed
under the provisions of Act 3135, as amended; and in the public auction sale thereof subsequently
conducted by the Provincial Sheriff of Camarines Sur on June 30, 1962, the 14 parcels of land mortgaged
to secure payment of the agricultural loans and the machineries, equipment and other real estate
mortgaged to secure payment of the industrial loans were awarded in favor of the appellee Bank as
the sole and highest bidder for the amounts of P176,174.50 and P19,750.00, respectively, which were
accordingly applied to the payment of the corresponding portions of the said loans.
As the proceeds of the foreclosure sales aforesaid were not sufficient to cover the loan indebtedness of
appellants, the appellee Bank then instituted the present case in the Court of First Instance of Manila on
January 23, 1964, for the purpose of recovering so the complaint alleges, the sums of P173,117.55, on
account of the agricultural loans, and P1,475,473.90, on account of the industrial loans, which it claims
to be the outstanding balances or deficiencies under the two types of loans obtained by appellants.
In their answer, appellants admit the existence of their indebtedness to the appellee Bank under the
loan contracts mentioned in the latter's complaint; but they deny and dispute, among others, the
deficiency claims of the appellee Bank, contending at the same time, by way of affirmative and special
defenses, that the extrajudicial foreclosure and public auction sales of the properties mortgaged had
been carried out by the sheriff irregularly and improperly in violation of the pertinent provisions of Rule
39 of the Rules of Court and had thus resulted in the sale for unconscionable prices of their mortgaged
properties which, according to appellants' own estimate, have a total actual value of not less than
P5,000,000.00.
It appears, further, that the corresponding deeds and certificates of sale issued in favor of the appellee
Bank in consequence of the disputed foreclosure proceeding and public auction sales were registered
with the Register of Deeds concerned only on November 11, 1964 and December 7, 1964 some ten
(10) months later than the commencement of the present action for collection of the deficiency claim of
the appellee Bank. .
After trial, the court below rendered the decision appealed from which, as stated earlier in the opening
paragraph hereof, sustains the above-mentioned deficiency claims of the appellee Development Bank of
the Philippines. .
In this appeal, appellants assail the said judgment thus: .
"I. THE HONORABLE COURT A QUO ERRED IN NOT SETTING ASIDE THE ALLEGED
AUCTION SALE ON JUNE 30,1962, OF THE MORTGAGED PROPERTIES BY THE
DEFENDANTS-APPELLANTS TO THE PLAINTIFF-APPELLEE, ON THE GROUND THAT THE
SELLING AUCTION PRICES OF SAID PROPERTIES WERE UNJUST, DISPROPORTIONATE AND
UNCONSCIONABLE IN THE LIGHT OF THE FAIR AND CURRENT MARKET VALUE OF THE
SAME PROPERTIES AT THE TIME OF SAID AUCTION SALE. .
"II. THE HONORABLE COURT A QUO ERRED IN NOT DISMISSING THE COMPLAINT AT BAR
FOR RECOVERY OF A DEFICIENCY CLAIM, ON THE GROUND THAT SAID COMPLAINT WAS
OR IS, PREMATURE, FOR THE REASON THAT IT HAD BEEN FILED DURING THE PERIOD OF
LEGAL REDEMPTION GRANTED BY LAW TO DEFENDANTS-APPELLANTS AS MORTGAGE-
DEBTORS." .
The thrust of appellants' argument in respect of the first assignment of error is to the effect that if in
1947 and 1951 when the agricultural and industrial loans herein involved were obtained by appellants,
the appellee Bank, after due inspection and appraisal of the securities they offered therefor, had
granted them a total agricultural loan of P242,000.00 upon the security of the 14 parcels of land they
mortgaged and a total industrial loan of P770,000.00 upon the security of other lands and machineries
and equipment they also mortgaged, hence, it is inconceivable that after the lapse of more than ten
years and the fast and steadily increasing real estate values these past years, the same properties would
command, in the extrajudicial foreclosure sales conducted by the provincial sheriff of Camarines Sur in
1962, only the measly sums of P176,174.50 and P19,750.00, respectively, considering that pursuant to
consistent banking practice, the aforesaid amounts of loans granted would represent only 60% of the
actual and current market value of the securities at the time of the grant of said loans. In short, it is the
position of appellants that the foreclosure sales aforesaid should be set aside because "the total auction
selling price of P195,924.50 for both the collateral securities to the agro-industrial loans, is so
inadequate, disproportionate and shocking to conscience." .
It does appear that the purchase prices in question are considerably out of proportion to the possible
actual market value of appellants' securities. Considering, however, that the impugned sales were made
subject to appellants' right of redemption, the following ruling in Ponce de Leon vs. Rehabilitation
Finance Corporation,
1
sufficiently disposes of their contention: .
In support of their second assignment of error, the Sorianos maintain that the sum of
P10,000.00, for which the Paraaque property was sold to the RFC, is ridiculously
inadequate, considering that said property had been assessed at P59,647.05. This
presense is devoid of merit, for said property was subject to redemption and:
... where there is the right to redeem ... inadequacy of price should not be material,
because the judgment debtor may re-acquire the property or else sell his right to
redeem and thus recover any loss he claims to have suffered by reason of the price
obtained at the execution sale (Barrozo vs. Macaraig, 83 Phil. 378, 381, Emphasis Ours.)
Then, again, as the trial court had correctly observed:
But, mere inadequacy of the price obtained at the sheriff's sale unless shocking to the
conscience will not be sufficient to set aside the sale if there is no showing that, in the
event of a regular sale, a better price can be obtained. The reason is that, generally, and,
in forced sales, low prices are usually offered (1 Moran's Rules of Court, 834-835).
Considering that in Gov't. of P.I. vs. Soriano, G.R. No. 32196, wherein property worth
P120,000.00 was sold for only P15,000.00, in Philippine National Bank vs. Gonzales, 45
Phil. 693, wherein property valued at P45,000.00 was sold for P15,000.00 and in Cu
Unjieng & Sons v. Mabalacat Sugar Co., 58 Phil. 439, property worth P300,000.00 to
P400,000.00 was sold for P177,000.00, the Court cannot consider the sale of the
Bacolod properties, the Taft Avenue house and lot and the Paraaque property of the
Sorianos null and void for having been sold at inadequate prices shocking to the
conscience and there being no showing that in the event of a resale, better prices can
be obtained.'
This ruling was reiterated in the more recent case of De Leon vs. Salvador, et al.,
2

... (w)hile in ordinary sales for reasons of equity a transaction may be invalidated on the
ground of inadequacy of price, or when such inadequacy shocks one's conscience as to
justify the courts to interfere, such does not follow when the law gives to the owner the
right to redeem, as when a sale is made at public auction, upon the theory that the
lesser the price the easier it is for the owner to effect the redemption. And so it was
aptly said: "When there is the right to redeem, inadequacy of price should not be
material, because the judgment debtor may reacquire the property or also sell his right
to redeem and thus recover the loss he claims to have suffered by reason of the price
obtained at the auction sale.
At this juncture, it may not be amiss to make it clear that appellants' period to redeem the properties
sold in the extrajudicial foreclosure sales in question is one year, "computed from the date of the
registration of the certificates of sales of the mortgaged properties," since registered lands are involved
in this case, and, as explained lately by this Court in Quimson, et al. vs. Philippine National Bank, 3 "this
Court has uniformly ruled that redemption from execution sales under ordinary judgments pursuant to
Section 30, Rule 39 of the Rules of Court should be made within twelve (12) months from the
registration of the same and We have uniformly applied the same rule to sales upon extrajudicial
foreclosure of registered lands.".
On the other hand, it may also be stressed that actions seeking to set aside auction sales do not toll the
running of the period of redemption; and this We have to emphasize now, if only to forestall the
possibility of the parties' coming up here in the future and praying for a definite ruling on the matter.
This question was resolved inSumerariz vs. Development Bank of the Philippines, L-23764, December 26,
1967, 21 SCRA 1374, thus: .
Under the second assignment of error, plaintiffs maintain that the period of one (1) year
to redeem the property in question was suspended by the institution of Case No. 29306
(commenced by Sumerariz and his wife against the DBP and the Sheriff of Manila to set
aside the foreclosure sale involved therein) on March 26, 1956, or three (3) days before
the expiration of said period. We have not found, however, any statute or decision in
support of this pretense. Moreover, up to now plaintiffs have not exercised the right of
redemption. Indeed, although they have intimated their wish to redeem the property in
question, they have not deposited the amount necessary therefor. It may not be amiss
to note that, unlike Section 30 of Rule 39 of the Rules of Court, which permits the
extension of the period of redemption of mortgaged properties, (Enage vs. Vda. e Hijas
de F. Escano, 38 Phil. 657) Section 3 of Commonwealth Act No. 459, in relation to
Section 9 of Republic Act No. 85, which governs the redemption of property mortgaged
to the Bank, does not contain a similar provision (Nepomuceno vs. Rehabilitation
Finance Corporation, L-14897, November 23, 1960). Again this question has been
definitely settled by the decision in the previous case declaring that plaintiffs' right of
redemption has already been extinguished in view of their failure to exercise it within
the statutory period.
Perforce then We must hold that the foreclosure sales here involved cannot be set aside on the ground,
vigorously alleged by appellants, that the prices obtained therein are grossly inadequate and
unconscionable. Corollarily, We do not deem it necessary to discuss further and rule upon appellants'
claim that the foreclosure sales referred to were improperly and irregularly conducted by the provincial
sheriff of Camarines Sur because the latter sold the mortgaged properties here involved in mass and
within a single day, although the record appears to be bereft of any concrete showing, other than
appellants' claim that better prices could had been obtained for the said mortgaged securities had the
above-mentioned provincial sheriff conducted the sales in question otherwise.
4

Anent appellants' second assignment of error to the effect that the present case was prematurely
instituted on the ground that an action for recovery of an alleged deficiency claim cannot be legally
entertained during the period of redemption, appellants argue in their brief (pp. 16-18), as follows: .
In the case at bar, the suit to recover deficiency claim was instituted on January 23,
1964, (page 1 Record on Appeal), but, the Certificate of Sale by the Provincial Sheriff of
Camarines Sur in connection with the auction sale of the collateral securities on the
industrial loans was registered in the Office of the Register of Deeds of said province on
November 11, 1964, and, the Certificate of Sale of said provincial sheriff in connection
with the auction sale of the collateral securities on the agricultural loans, was registered
in the same office on December 7, 1964. Therefore, the present action for recovery of
deficiency claim was filed even before the registration of both Certificates of Sale, as
shown by Exhibit '2' for appellants (pp. 33-34, Record on Appeal). As the running of the
period of one year of the right of redemption commenced from the date and/or dates of
registration of the Certificate of Sale, it is too clear and unassailable that the filing of the
case at bar on January 23, 1964, was improper and premature. For indeed, the filing of a
suit for recovery of a deficiency claim before the commencement or, during the period
of the right of redemption, constitutes a clever anticipation that the auction sale arising
from the effects of extrajudicial foreclosure had been conducted with all the earmarks
of validity, even if it were not. Suppose an auction sale were declared illegal due to
irregularities and violation of the mandate of the law, what would be the effect of such
pronouncement in an action for deficiency claim when such action has no legal basis? If
a suit for recovery of a deficiency judgment or deficiency claim is a legal consequence of
an auction sale arising from judicial or extrajudicial foreclosure, then such suit should
await for the expiration period of the right of redemption within which period, precisely,
the redemptioner may ordinarily institute an action to assail the manner with which the
auction sale was conducted. ... .
In the case of Philippine Bank of Commerce vs. De Vera,
5
We held: .
"A reading of the provisions of Act No. 3135, as amended (re extrajudicial foreclosure) discloses nothing,
it is true, as to the mortgagee's right to recover such deficiency. But neither do we find any provision
thereunder which expressly or impliedly prohibits such recovery. .
Article 2131 of the new Civil Code, on the contrary, expressly provides that "The form,
extent and consequences of a mortgage, both as to its constitution, modification and
extinguishment, and as to other matters not included in this Chapter, shall be governed
by the provisions of the Mortgage Law and of the Land Registration Law." Under the
Mortgage Law, which is still in force, the mortgagee has the right to claim for the
deficiency resulting from the price obtained in the sale of the real property at public
auction and the outstanding obligation at the time of the foreclosure proceedings. (See
Soriano vs. Enriquez, 24 Phil. 584; Banco de Islas Filipinas v. Concepcion e Hijos, 53 Phil.
86; Banco Nacional v. Barreto, 53 Phil. 101). Under the Rules of Court (Sec. 6, Rule 70),
"Upon the sale of any real property, under an order for a sale to satisfy a mortgage or
other incumbrance thereon, if there be a balance due to the plaintiff after applying the
proceeds of the sale, the court, upon motion, should render a judgment against the
defendant for any such balance for which, by the record of the case, he may be
personally liable to the plaintiff,... ." It is true that this refers to a judicial foreclosure, but
the underlying principle is the same, that the mortgage is but a security and not a
satisfaction of indebtedness. ... .
Under the provisions of section 6 of Rule 70 now section 6 of Rule 68 of the revised Rules of Court
above-cited, it is expressly provided that "if there be a balance due to the plaintiff after applying the
proceeds of the sale, the court, upon motion, shall render judgment against the defendant for any such
balance for which, by the record of the case, he may be personally liable to the plaintiff, upon which
execution may issue immediately if the balance is all due at the time of the rendition of the judgment."
Said provisions are equivalent to those of section 260 of the old Code of Civil Procedure, under which it
was held in a case,
6
"that in order that a decree for any balance for which the mortgagor may be
personally liable to the mortgagee may be issued, it is necessary that the sale of the mortgaged real
property has been made according to the decree for said sale to satisfy the judgment; that there has
remained a balance due the mortgagee after applying the proceeds of the sale to the debt; (and) that
the mortgagee presents a motion for the issuance of a decree for said balance", while in another case, 7
it was said that "Section 260 requires the rendition and entry of a judgment for the deficiency against
the defendant, who shall be personally liable to the plaintiff, and execution may issue on said judgment
at once." We believe it is apparent from the provisions and decisions above-quoted that once the
auction sale of the mortgaged property is effected and the resulting deficiency in the mortgage debt is
ascertained, the mortgagee-creditor is then and there entitled to secure a deficiency judgment which
may immediately be executed, whether or not the mortgagor is still entitled to redeem the property
sold. We hold then that appellants' right to redeem their auctioned properties could not be a bar to the
present action of appellee to recover the deficiencies which it claims to have resulted after applying the
proceeds of the foreclosure sales here involved in payment of appellants' mortgage debt. .
WHEREFORE, the decision appealed from is affirmed, with costs against appellants.
Topacio v CA
PARAS, J.:
This is an appeal by way of certiorari from the decision
1
in CA G.R. CV 23258 which reversed the
decision
2
of the Regional Trial Court, Branch 98, Quezon City in Civil Case No. 51954.
On March 9, 1988, the parties submitted the following stipulation of facts:
1. The parties admit the personal and corporate circumstances of each other as found in
the complaint.
2. The spouses Juan P. de Villa, Jr. and Rosalia de Villa, parents-in-law of the plaintiff,
were the former owners of Lot No. 13, Block 21-A, covered by TCT No. 280808 of the
Registry of Deeds of Quezon City. This property was previously mortgaged to the Ayala
Investment and Development Corporation to secure an obligation of P500,000.00. For
failure of the said mortgagors to pay upon maturity, the mortgage was foreclosed and
consequently, defendant acquired the property as highest bidder in the auction sale,
following the foreclosure. No redemption having been exercised by the mortgagors, the
defendant was able to consolidate its title over the property.
3. Plaintiff, who lives with his in-laws, negotiated to purchase the property from
defendant. He first made an offer on August 9, 1985 (Annex A, complaint) for
P900,000.00 but defendant asked plaintiff to improve his offer. Subsequently, the
plaintiff and Mr. Manuel Ablan, then Manager of the Loans Adjustment and Special
Asset Department of the defendant arrived at P1,250,000.00 as the purchase price, with
30% downpayment, and the balance, payable in cash, upon execution of the Deed of
Sale. Plaintiff confirmed his offer in his letter to the defendant dated November 27,
1985 (Annex B, complaint; Annex, 1, Answer), with his check payment of P375,000.00.
4. Defendant received plaintiff's initial payment of P375,000.00 on November 28, 1985,
for which a receipt was issued under defendant's Official Receipt No. 112375 (Annex C,
Complaint).
5. On December 4, 1985, defendant wrote to the plaintiff, informing him of the terms
and conditions of the sale, as approved by the management of defendant, which,
among other things, gives plaintiff up to January 4, 1986 within which to pay the balance
of P875,000.00 (Annex D, Complaint, Annex 2, Answer).
6. Plaintiff asked for extensions within which to pay the balance. The first was made on
January 8, 1986 (Annex 3, Answer), another on April 22, 1986 (Annex 4, Answer).
Defendant agreed to extend the payment up to June 30, 1986, in accordance with
defendant's letter dated May 5, 1986, requiring plaintiff, in addition, to pay interest at
24% per annum on the unpaid balance (Annex 5, Answer).
7. Plaintiff, not having been able to meet defendant's deadline (June 30, 1986),
defendant wrote a letter to plaintiff dated September 6, 1986 (Annex 6, Answer)
declaring itself (defendant) free to sell the property to other buyers and informing
plaintiff that he could already claim his initial payment of P375,000.00
8. In response, plaintiff, in its letter dated October 22, 1986 (Annex 7, Answer), asked for
an extension of another six (6) months, within which to pay the balance of P875,000.00.
Defendant denied plaintiff's request and asked plaintiff to get back his P375,000.00, in
defendant's letter to plaintiff dated November 7, 1986 (Annex 8, Answer).
9. On January 5, 1987, defendant wrote plaintiff, reiterating its request that plaintiff get
back his P375,000.00 (Annex 9, Answer) and on February 12, 1987 (Annex E, Complaint,
Annex 10, Answer), defendant mailed to plaintiff a cashier's check for P375,000.00,
payable to him. Plaintiff replied in March 6, 1987 (Annex F, Complaint, Annex 11,
Answer), declining acceptance of the P375,000.00 and insisting therein the defendant
allow plaintiff to pay the balance of P875,000.00.
10. Subsequently, defendant informed plaintiff that the property is being sold for
P1,600.00, in its Answer. Plaintiff then wrote on April 1, 1987 to Mr. Xavier Loinaz of
defendant (Annex 13, Answer) asking that original price of P1,250,000.00 be
maintained. Defendant again wrote to plaintiff on May 29, 1987 (Annex 14, Answer)
reiterating its position that defendant was willing to sell at P1,600,000.00.
11. Plaintiff, in its letter to defendant dated July 21, 1987, (Annex G, Complaint, Annex
15, Answer), returned the cashier's check earlier issued by defendant in favor of
plaintiff. Defendant acknowledged receipt of said letter but declined to take back the
said check as expressed in defendant's letter of the same date (Annex 16, Answer).
12. The cashier's check of P375,000.00 payable to plaintiff remains uncashed to date
and is still in the hands of the plaintiff, after defendant refused to accept its return.
13. Plaintiff admits that Annexes 1 to 16 attached to the Answer are true and faithful
copies of the originals. Defendant likewise admits that Annexes A to G attached to the
complaint are true and faithful copies of the originals. Said Annexes are hereby adopted
by the parties as part of this Stipulation of Facts and may be received in evidence
without further authentication or identification. (Rollo, pp. 21-24)
On the basis of the foregoing stipulation, the trial court rendered judgment in favor of the petitioner,
finding that there is a perfected contract of sale which is still enforceable because the respondent failed
to rescind either by judicial or notarial rescission.
The dispositive portion of the trial court's decision is quoted hereunder:
Samakatwid, iginagawad ng hukumang ito ang pasiya para sa nagsasakdal at ipinag-
uutos sa ipinagsakdal na BPI Investment Corporation na tanggapin mula sa nagsasakdal.
Una Ang tsekeng P375,000.00 bilang paunang bayad na tatlumpung porsiento ng
buong halaga.
Pangalawa Ang hulihang P875,000.00 na may kalakip na interes na labindalawang
(12%) porsiento simula sa ika-lima ng Oktubre, 1987 hanggang mabayaran ito;
Pangatlo At isagawa ng nasasakdal na BPI Investment Corporation ang pagsasalin ng
ari-arian na nabanggit sa dakong itaas sa pamamagitan ng isang bilihan tuluyan sa
kapakanan ng nasasakdal na si Lino Topacio at kanyang may-bahay.
Ang gastos ay dapat bayaran ng ipinagsasakdal.
IPINAG-UUTOS. (Rollo, p. 24)
The Court of Appeals, on appeal, reversed the trial court's decision stating that the letter dated
December 4, 1985, sent by BPI to the petitioner reveals that the contract entered into by them is a
contract to sell, not a contract of sale.
The letter of December 4, 1985 is hereby quoted as follows:
We are pleased to inform you that the managament has approved for the sale for the
above property to you under the following terms and conditions:
1. Selling price of P1,250,000.00 is on CASH basis;
2. Execution of a Deed of Absolute Sale;
3. All expenses relative to the sale/transfer of title shall be for the account of the buyer;
4. Eviction of tenants, if any, shall be for the account of the buyer;
5. Sale of the property is on as-is where-is basis.
If you are agreeable to the foregoing, kindly indicate your conformity by signing on the
space provided below and return the copies to us together with your balance of
P875,000.00. The validity of the above approval is good up to January 4, 1986. (Rollo,
pp. 7-8)
The petition is impressed with merit.
The payment by petitioner of P375,000.00 on November 28, 1991 which respondent accepted, and for
which an official receipt was issued, the body of which hereby quoted:
Partial payment for the purchase of real property, formerly owned by Juan de Villa.
P
3
7
5
,
0
0
0
.
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was the operative act that gave rise to a perfected contract of sale between the parties. Article
1482 of the Civil Code provides:
Art. 1482. Whenever earnest money is given in a contract of sale, it shall be considered
as part of the price and as proof of the perfection of the contract.
Earnest money is something of value to show that the buyer was really in earnest, and given to
the seller to bind the bargain. Under the Civil Code, earnest money is considered part of the
purchase price and as proof of the perfection of the contract. The P375,000.00 given by the
petitioner representing 30% of the purchase price is earnest money.
Furthermore, Article 1475 of the Civil Code states:
Art. 1475. The contract of sale 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.
From the moment, the parties may reciprocally demand performance, subject to the
provisions of the law governing the form of contracts.
Based on the aforecited article, the parties have agreed on the object of the contract which is
the house and lot located at No. 32 Whitefield St., White Plains, Quezon City and even before
November 27, 1985, (the date petitioner sent his letter together with the 30% downpayment),
the parties have agreed on the price which is P1,250,000.00.
Nowhere in the transaction indicates that BPI reserved its title property nor did it provide for any
automatic rescission in case of default. So when petitioner failed to pay the balance of P875,000.00
despite several extensions given by private respondent, the latter could not validly rescind the contract
without complying with the provision of Article 1592 or Article 1191 on notarial or judicial rescission
respectively. The ruling in Taguba v. Vda. de Leon, 132 SCRA 722 applies in the case at bar, to wit:
Considering, therefore the nature of the transaction between petitioner Taguba and
private respondent, which We affirm and sustain to be a contract of sale, absolute in
nature the applicable provisions of Article 1592 of the New Civil Code which states:
Art. 1592. 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 notarial act. After the demand the court may not grant him a new
term.
In the case at bar, it is undisputed that the petitioner Taguba never notified private
respondent by notarial act that he was rescinding the contract, and neither had he filed
suit in suit court to rescind the sale.
Respondent cannot just consider the sale cancelled by simply returning the downpayment which
petitioner refused to accept.
WHEREFORE, the appealed decision of the Court of Appeals is hereby REVERSED and SET ASIDE and the
decision of the Regional Trial Court of Quezon City, Branch 89, dated April 10, 1989 is AFFIRMED with
costs against respondent.
SO ORDERED.
Facts:

The spouses De Villa (parents-in-law of Topacio) were the former owners of a lot in QC. It was previously
mortgaged to Ayala Investment and Development Corp to secure an obligation of P500k. For failure to
pay, the mortgage was foreclosed and consequently, BPI acquired the property as highest bidder.


Topacio wanted to buy the property. He made an offer for P900k, but was asked to improve it. Together,
they arrived at P1.25M as the purchase price, with 30% downpayment and the balance payable in cash
upon execution of the Deed of Sale.


Topacio paid the initial payment of P375k.


BPI wrote to Topacio and informed him that he had until January 4, 1986 to pay the balance of P875k.
He asked for extensions. BPI agreed to extend up to June 30.


Topacio was unable to meet the deadline, so BPI wrote a letter to Topacio, where BPI declared himself
free to sell the property to other buyers and that Topacio could claim his initial payment of P375k.


Topacio merely asked for more extensions. While BPI kept telling Topacio that he could
claim the P375k back (in the form of a cashiers check), Topacio declined. But BPI mailed
the check to him. The check remained with Topacio, uncashed.


BPI then told Topacio that the property would be sold for P1.6M instead, so Topacio reminded him of
the original agreement (P1.25M), but BPI refused.


RTC: In favor of Topacio, finding that there is a perfected contract of sale which is still enforceable
because BPI did not rescind either by judicial or notarial rescission.


CA: Reversed. The contract is a contract to sell, not a contract of sale.
Issue: Contract to sell or contract of sale? Held: Contract of sale.


The payment by Topacio of P375k was the operative act that gave rise to a perfect contract of sale. It is
considered earnest money (something of value to show that the buyer was really in earnest, and given
to the seller to bind the bargain). It is considered part of the purchase price and proof of the perfection
of the contract.


The parties agreed on the object (house and lot in White Plains), and the price and the manner of
payment.


Nowhere in the transaction indicates that BPI reserved its title on the property, nor did it provide for any
automatic rescission in case of default. So whenTopacio failed to pay the balance of P875k despite
several extensions, BPI could not validly rescind the contract w/o complying with the provision of Art
1592 or Art 1191 on notarial or judicial rescission respectively.


Labagala v. CA (see prior Digest)

Buenaventura v. CA

FACTS:

Defendant spouses Leonardo Joaquin and Feliciana Landrito are parents of co-defendants Fidel,
Tomas, Artemio, Clarita, Felicitas, Fe, and Gavino.

They are also the parents of plaintiffs Consolacion, Nora, Emma, and Natividad.

A deed of sale was executed by the defendant spouses in favor of their co-
defendant children.

However, such deed of sale is sought to be declared null and void by the plaintiffs.

Plaintiffs argue that: 1) Ther e was no act ual c ons i der at i on 2) Even as s umi ng t her e
was cons i der at i on, t he pr oper t i es ar e mor e t han 3 - f ol dtimes more valuable than the
measly sums appearing therein. 3) The sale was the result of a deliberate conspiracy to unjustly deprive
the rest of the compulsory heirs of their legitime.

ISSUE : I. W/N the Deeds of Sale are void for lack of consideration

HELD: DEED OF SALE VALID.
A contract of sale is not a real contract, but a consensual contract. As a consensual
contract, a contract of sale becomes a binding and valid contract upon the meeting of the
minds as to price. If there is a meeting of the minds of the parties as to the price, the
contract of sale is valid, despite the manner of payment, or even the breach of that manner of
payment. It is not the act of payment of price that determines the validity of a contract of
sale. Payment of the price has nothing to do with the perfection of the contract. Failure to
pay the consideration is different from lack of consideration.
Petitioners do not have any legal interest over the properties. Their rights over
theproperties are merely inchoate and vests only upon their parents death.

Philippine Free Press, Inc. v.CA

GARCIA, J.:

In this petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Philippine
Free Press, Inc. seeks the reversal of the Decision
[1]
dated February 25, 1998 of the Court of Appeals
(CA) in CA-GR CV No. 52660, affirming, with modification, an earlier decision of the Regional Trial Court
at Makati, Branch 146, in an action for annulment of deeds of sale thereat instituted by petitioner
against the Presidential Commission for Good
Government (PCGG) and the herein private respondent, Liwayway Publishing, Inc.

As found by the appellate court in the decision under review, the facts are:


xxx [Petitioner] . . . is a domestic corporation engaged in the publication of
Philippine Free Press Magazine, one of the . . . widely circulated political magazines in
the Philippines. Due to its wide circulation, the publication of the Free Press magazine
enabled [petitioner] to attain considerable prestige prior to the declaration of Martial
Law as well as to achieve a high profit margin. . . .

Sometime in . . . 1963, [petitioner] purchased a parcel of land situated at No.
2249, Pasong Tamo Street, Makati which had an area of 5,000 square meters as
evidenced by . . . (TCT) No. 109767 issued by the Register of Deeds of Makati (Exh. Z).
Upon taking possession of the subject land, [petitioner] constructed an office
building thereon to house its various machineries, equipment, office furniture and
fixture. [Petitioner] thereafter made the subject building its main office . . . .

During the 1965 presidential elections, [petitioner] supported the late President
Diosdado Macapagal against then Senate President Ferdinand Marcos. Upon the
election of the late President Ferdinand Marcos in 1965 and prior to the imposition of
Martial law on September 21, 1972, [petitioner] printed numerous articles highly critical
of the Marcos administration, exposing the corruption and abuses of the regime.
The [petitioner] likewise ran a series of articles exposing the plan of the Marcoses
to impose a dictatorship in the guise of Martial Law . . . .

In the evening of September 20, 1972, soldiers surrounded the Free Press
Building, forced out its employees at gunpoint and padlocked the said establishment.
The soldier in charge of the military contingent then informed Teodoro Locsin, Jr., the
son of Teodoro Locsin, Sr., the President of [petitioner], that Martial Law had been
declared and that they were instructed by the late President Marcos to take over the
building and to close the printing press. xxx.

On September 21, 1972 . . ., Teodoro Locsin, Sr. was arrested [and] . . . . was
brought to Camp Crame and was subsequently transferred to the maximum security
bloc at Fort Bonifacio.

Sometime in December, 1972, Locsin, Sr. was informed . . . that no charges were
to be filed against him and that he was to be provisionally released subject to the
following conditions, to wit: (1) he remained (sic) under city arrest; xxx (5) he was not
to publish the Philippine Free Press nor was he to do, say or write anything critical of the
Marcos administration . . . .

Consequently, the publication of the Philippine Free Press ceased. The subject
building remained padlocked and under heavy military guard (TSB, 27 May 1993,
pp. 51-52; stipulated). The cessation of the publication of the ... magazine led to the
financial ruin of [petitioner] . . . . *Petitioners+ situation was further aggravated when
its employees demanded the payment of separation pay as a result of the
cessation of its operations. *Petitioners+ minority stockholders, furthermore, made
demands that Locsin, Sr. buy out their shares. xxx.

On separate occasions in 1973, Locsin, Sr. was approached by the late Atty.
Crispin Baizas with offers from then President Marcos for the acquisition of the
[petitioner]. However, Locsin, Sr. refused the offer stating that [petitioner] was not for
sale (TSN, 2 May 1988, pp. 8-9, 40; 27 May 1993, pp. 66-67).

A few months later, the late Secretary Guillermo De Vega approached Locsin, Sr.
reiterating Marcoss offer to purchase the name and the assets of the
[petitioner].xxx

Sometime during the middle of 1973, Locsin, Sr. was contacted by Brig. Gen.
Hans Menzi, the former aide-de-camp of then President Marcos concerning the sale
of the [petitioner]. Locsin, Sr. requested that the meeting be held inside the [petitioner]
Building and this was arranged by Menzi (TSN, 27 May 1993, pp. 69-70). During the said
meeting, Menzi once more reiterated Marcoss offer to purchase both the name and the
assets of *petitioner+ adding that Marcos cannot be denied (TSN, 27 May 1993, p. 71).
Locsin, Sr. refused but Menzi insisted that he had no choice but to sell. Locsin, Sr. then
made a counteroffer that he will sell the land, the building and all the machineries
and equipment therein but he will be allowed to keep the name of the [petitioner].
Menzi promised to clear the matter with then President Marcos (TSN, 27 May 1993,
p. 72). Menzi thereafter contacted Locsin, Sr. and informed him that President Marcos
was amenable to his counteroffer and is offering the purchase price of Five Million
Seven Hundred Fifty Thousand (P5, 750,000.00) Pesos for the land, the building, the
machineries, the office furnishing and the fixtures of the *petitioner+ on a take-it-or-
leave-it basis (TSN, 2 May 1988, pp.42-43; 27 May 1993, p. 88).

On August 22, 1973, Menzi tendered to Locsin, Sr. a check for One Million (P1,
000,000.00) Pesos downpayment for the sale, . . . Locsin, Sr. accepted the check, subject
to the condition that he will refund the same in case the sale will not push through.
(Exh. 7).

On August 23, 1973, the Board of Directors of [petitioner] held a meeting and
reluctantly passed a resolution authorizing Locsin, Sr. to sell the assets of the
*petitioner+ to Menzi minus the name Philippine Free Press (Exhs. A-1 and 1; TSN, 27
May 1993, pp. 73-76).

On October 23, 1973, the parties [petitioner, as vendor and private respondent,
represented by B/Gen. Menzi, as vendee] met . . . and executed two (2) notarized Deeds
of Sale covering the land, building and the machineries of the [petitioner]. Menzi paid
the balance of the purchase price in the amount of . . . (P4,750,000.00) Pesos (Exhs. A
and (; B and 10;TSN, 27 May 1993, pp. 81-82; 3 June 1993, p. 89).

Locsin, Sr. thereafter used the proceeds of the sale to pay the separation pay of
*petitioners+ employees, buy out the shares of the minority stockholders as well as to
settle all its obligations.

On February 26, 1987, [petitioner] filed a complaint for Annulment of Sale against
[respondent] Liwayway and the PCGG before the Regional Trail Court of Makati, Branch
146 on the grounds of vitiated consent and gross inadequacy of purchase price. On
motion of defendant PCGG, the complaint against it was dismissed on October 22, 1987.
(Words in bracket and underscoring added)



In a decision dated October 31, 1995,
[2]
the trial court dismissed petitioners complaint and granted
private respondents counterclaim, to wit:

WHEREFORE, in view of all the foregoing premises, the herein complaint for
annulment of sales is hereby dismissed for lack of merit.

On [respondent] counterclaim, the court finds for [respondent] and against
[petitioner] for the recovery of attorneys fees already paid for at P1,945,395.98, plus a
further P316,405.00 remaining due and payable.

SO ORDERED. (Words in bracket added)


In time, petitioner appealed to the Court of Appeals (CA) whereat its appellate recourse was
docketed as CA-G.R. C.V. No. 52660.

As stated at the outset hereof, the appellate court, in a decision dated February 25, 1998, affirmed
with modification the appealed decision of the trial court, the modification consisting of the deletion of
the award of attorneys fees to private respondent, thus:

WHEREFORE, with the sole modification that the award of attorneys fees in favor
of [respondent] be deleted, the Decision appealed from is hereby AFFIRMED in all
respects.

SO ORDERED.


Hence, petitioners present recourse, urging the setting aside of the decision under review
which, to petitioner, decided questions of substance in a way not in accord with law and applicable
jurisprudence considering that the appellate court gravely erred:
I

xxx IN ITS MISAPPLICATION OF THE DECISIONS OF THE HONORABLE COURT THAT
RESULTED IN ITS ERRONEOUS CONCLUSION THAT PETITIONER'S CAUSE OF ACTION HAD
ALREADY PRESCRIBED.

II

xxx IN CONCLUDING THAT THE UNDISPUTED FACTS AND CIRCUMSTANCES PRECEDING
THE EXECUTION OF THE CONTRACTS OF SALE FOR THE PETITIONER'S PROPERTIES
DID NOT ESTABLISH THE FORCE, INTIMIDATION, DURESS AND UNDUE INFLUENCE
WHICH VITIATED PETITIONER'S CONSENT.

A. xxx IN CONSIDERING AS HEARSAY THE TESTIMONIAL EVIDENCE WHICH CLEARLY
ESTABLISHED THE THREATS MADE UPON PETITIONER AND THAT RESPONDENT
LIWAYWAY WILL BE USED AS THE CORPORATE VEHICLE FOR THE FORCED
ACQUISITION OF PETITIONER'S PROPERTIES.

B. xxx IN CONCLUDING THAT THE ACTS OF THEN PRESIDENT MARCOS DURING
MARTIAL LAW DID NOT CONSTITUTE THE FORCE, INTIMIDATION, DURESS AND
UNDUE INFLUENCE WHICH VITIATED PETITIONER'S CONSENT.

C. xxx IN RESOLVING THE INSTANT CASE ON THE BASIS OF MERE SURMISES AND
SPECULATIONS INSTEAD OF THE UNDISPUTED EVIDENCE ON RECORD.

III

xxx IN CONCLUDING THAT THE GROSSLY INADEQUATE PURCHASE PRICE FOR
PETITIONER'S PROPERTIES DOES NOT INDICATE THE VITIATION OF PETITIONER'S
CONSENT TO THE CONTRACTS OF SALE.

IV

xxx IN CONCLUDING THAT PETITIONER'S USE OF THE PROCEEDS OF THE SALE FOR ITS
SURVIVAL CONSTITUTE AN IMPLIED RATIFICATION [OF] THE CONTRACTS OF SALE.

V

xxx IN EXCLUDING PETITIONER'S EXHIBITS X-6 TO X-7 AND Y-3 (PROFFER) WHICH
ARE ADMISSIBLE EVIDENCE WHICH COMPETENTLY PROVE THAT THEN PRESIDENT
MARCOS OWNED PRIVATE RESPONDENT LIWAYWAY, WHICH WAS USED AS THE
CORPORATE VEHICLE FOR THE ACQUISITION OF PETITIONER'S PROPERTIES.


The petition lacks merit.

Petitioner starts off with its quest for the allowance of the instant recourse on the submission that
the martial law regime tolled the prescriptive period under Article 1391 of the Civil Code, which
pertinently reads:


Article 391. The action for annulment shall be brought within four years.

This period shall begin:

In cases of intimidation, violence or undue influence, from the time the defect of
the consent ceases.

xxx xxx xxx


It may be recalled that the separate deeds of sale
[3]
sought to be annulled under petitioners
basic complaint were both executed on October 23, 1973. Per the appellate court, citing Development
Bank of the Philippines [DBP] vs. Pundogar
[4]
, the 4-year prescriptive period for the annulment of the
aforesaid deeds ended in late 1977, doubtless suggesting that petitioners right to seek such
annulment accrued four (4) years earlier, a starting time-point corresponding, more or less, to the
date of the conveying deed, i.e., October 23, 1973. Petitioner contends, however, that the 4-year
prescriptive period could not have commenced to run on October 23, 1973, martial law being then in
full swing. Plodding on, petitioner avers that the continuing threats on the life of Mr. Teodoro
Locsin, Sr. and his family and other menacing effects of martial law which should be considered
as force majeure - ceased only after the February 25, 1986 People Power uprising.

Petitioner instituted its complaint for annulment of contracts on February 26, 1987. The
question that now comes to the fore is: Did the 4-year prescriptive period start to run in late
October 1973, as postulated in the decision subject of review, or on February 25, 1986, as petitioner
argues, on the theory that martial law has the effects of a force majeure
[5]
, which, in turn, works to
suspend the running of the prescriptive period for the main case filed with the trial court.

Petitioner presently faults the Court of Appeals for its misapplication of the doctrinal rule laid down
in DBP vs. Pundogar
[6]
where this Court, citing and quoting excerpts from the ruling in Tan vs. Court of
Appeals
[7]
, as reiterated in National Development Company vs. Court of Appeals,
[8]
wrote

We can not accept the petitioners contention that the period during which
authoritarian rule was in force had interrupted prescription and that the same began to
run only on February 25, 1986, when the Aquino government took power. It is true that
under Article 1154 [of the Civil Code] xxx fortuitous events have the effect of tolling the
period of prescription. However, we can not say, as a universal rule, that the period
from September 21, 1972 through February 25, 1986 involves a force majeure. Plainly,
we can not box in the "dictatorial" period within the term without distinction, and
without, by necessity, suspending all liabilities, however demandable, incurred during
that period, including perhaps those ordered by this Court to be paid. While this Court is
cognizant of acts of the last regime, especially political acts, that might have indeed
precluded the enforcement of liability against that regime and/or its minions, the Court
is not inclined to make quite a sweeping pronouncement, . . . . It is our opinion that
claims should be taken on a case-to-case basis. This selective rule is compelled, among
others, by the fact that not all those imprisoned or detained by the past dictatorship
were true political oppositionists, or, for that matter, innocent of any crime or
wrongdoing. Indeed, not a few of them were manipulators and scoundrels. [Italization
in the original; Underscoring and words in bracket added]



According to petitioner, the appellate court misappreciated and thus misapplied the correct
thrust of the Tan case, as reiterated in DBP which, per petitioners own formulation, is the
following:
[9]


The prevailing rule, therefore, is that on a case-to-case basis, the Martial Law
regime may be treated as force majeure that suspends the running of the applicable
prescriptive period provided that it is established that the party invoking the imposition
of Martial Law as a force majeure are true oppositionists during the Martial Law regime
and that said party was so circumstanced that is was impossible for said party to
commence, continue or to even resist an action during the dictatorial regime.
(Emphasis and underscoring in the original)


We are not persuaded.

It strains credulity to believe that petitioner found it impossible to commence and succeed in an
annulment suit during the entire stretch of the dictatorial regime. The Court can grant that Mr. Locsin,
Sr. and petitioner were, in the context of DBP and Tan, true oppositionists during the period of
material law. Petitioner, however, has failed to convincingly prove that Mr. Locsin, Sr., as its then
President, and/or its governing board, were so circumstanced that it was well-nigh impossible for
him/them to successfully institute an action during the martial law years. Petitioner cannot plausibly
feign ignorance of the fact that shortly after his arrest in the evening of September 20, 1972, Mr. Locsin,
Sr., together with several other journalists
[10]
, dared to file suits against powerful figures of the
dictatorial regime and veritably challenged the legality of the declaration of martial law. Docketed in this
Court as GR No. L-35538, the case, after its consolidation with eight (8) other petitions against the
martial law regime, is now memorialized in books of jurisprudence and cited in legal publications and
case studies as Aquino vs. Enrile.
[11]


Incidentally, Mr. Locsin Sr., as gathered from the ponencia of then Chief Justice Querube Makalintal
in Aquino, was released from detention notwithstanding his refusal to withdraw from his petition in said
case. Judging from the actuations of Mr. Locsin, Sr. during the onset of martial law regime and
immediately thereafter, any suggestion that intimidation or duress forcibly stayed his hands during the
dark days of martial law to seek judicial assistance must be rejected.
[12]


Given the foregoing perspective, the Court is not prepared to disturb the ensuing ruling of the
appellate court on the effects of martial law on petitioners right of action:

In their testimonies before the trial court, both Locsin, Sr. and Locsin, Jr. claimed
that they had not filed suit to recover the properties until 1987 as they could not expect
justice to be done because according to them, Marcos controlled every part of the
government, including the courts, (TSN, 2 May 1988, pp. 23-24; 27 May 1993, p. 121).
While that situation may have obtained during the early years of the martial law
administration, We could not agree with the proposition that it remained consistently
unchanged until 1986, a span of fourteen (14) years. The unfolding of subsequent
events would show that while dissent was momentarily stifled, it was not totally
silenced. On the contrary, it steadily simmered and smoldered beneath the political
surface and culminated in that groundswell of popular protest which swept the
dictatorship from power.
[13]


The judiciary too, as an institution, was no ivory tower so detached from the ever
changing political climate. While it was not totally impervious to the influence of the
dictatorships political power, it was not hamstrung as to render it inutile to perform its
functions normally. To say that the Judiciary was not able to render justice to the
persons who sought redress before it . . . during the Martial Law years is a sweeping
and unwarranted generalization as well as an unfounded indictment. The Judiciary, . .
. did not lack in gallant jurists and magistrates who refused to be cowed into silence by
the Marcos administration. Be that as it may, the Locsins mistrust of the courts and of
judicial processes is no excuse for their non-observance of the prescriptive period set
down by law.


Corollary to the presented issue of prescription of action for annulment of contract voidable on
account of defect of consent
[14]
is the question of whether or not duress, intimidation or undue
influence vitiated the petitioners consent to the subject contracts of sale. Petitioner delves at length on
the vitiation issue and, relative thereto, ascribes the following errors to the appellate court: first, in
considering as hearsay the testimonial evidence that may prove the element of "threat" against
petitioner or Mr. Locsin, Sr., and the dictatorial regime's use of private respondent as a corporate
vehicle for forcibly acquiring petitioners properties; second, in concluding that the acts of then
President Marcos during the martial law years did not have a consent-vitiating effect on petitioner;
and third, in resolving the case on the basis of mere surmises and speculations.


The evidence referred to as hearsay pertains mainly to the testimonies of Messrs. Locsin, Sr. and
Teodoro Locsin, Jr. (the Locsins, collectively), which, in gist, established the following facts: 1) the widely
circulated Free Press magazine, which, prior to the declaration of Martial Law, took the strongest critical
stand against the Marcos administration, was closed down on the eve of such declaration, which closure
eventually drove petitioner to financial ruin; 2) upon Marcos orders, Mr. Locsin, Sr. was arrested and
detained for over 2 months without charges and, together with his family, was threatened with
execution; 3) Mr. Locsin, Sr. was provisionally released on the condition that he refrains from
reopening Free Press and writing anything critical of the Marcos administration; and 4) Mr. Locsin, Sr.
and his family remained fearful of reprisals from Marcos until the 1986 EDSA Revolution.

Per the Locsins, it was amidst the foregoing circumstances that petitioners property in question
was sold to private respondent, represented by Gen. Menzi, who, before the sale, allegedly applied the
squeeze on Mr. Locsin, Sr. thru the medium of the Marcos cannot be denied and *you] have no choice
but to sell line.

The appellate court, in rejecting petitioners above posture of vitiation of consent, observed:

It was under the above-enumerated circumstances that the late Hans Menzi,
allegedly acting on behalf of the late President Marcos, made his offer to purchase the
Free Press. It must be noted, however, that the testimonies of Locsin, Sr. and Locsin, Jr.
regarding Menzis alleged implied threat that Marcos cannot be denied and that
*respondent+ was to be the corporate vehicle for Marcoss takeover of the Free Press is
hearsay as Menzi already passed away and is no longer in a position to defend himself;
the same can be said of the offers to purchase made by Atty. Crispin Baizas and
Secretary Guillermo de Vega who are also both dead. It is clear from the provisions of
Section 36, Rule 130 of the 1989 Revised Rules on Evidence that any evidence, . . . is
hearsay if its probative value is not based on the personal knowledge of the witness but
on the knowledge of some other person not on the witness stand. Consequently,
hearsay evidence, whether objected to or not, has no probative value unless the
proponent can show that the evidence falls within the exceptions to the hearsay
evidence rule (Citations omitted)


The appellate courts disposition on the vitiation-of-consent angle and the ratio therefor
commends itself for concurrence.

Jurisprudence instructs that evidence of statement made or a testimony is hearsay if offered
against a party who has no opportunity to cross-examine the witness. Hearsay evidence is excluded
precisely because the party against whom it is presented is deprived of or is bereft of opportunity to
cross-examine the persons to whom the statements or writings are attributed.
[15]
And there can be no
quibbling that because death has supervened, the late Gen Menzi, like the other purported Marcos
subalterns, Messrs. Baizas and De Vega, cannot cross-examine the Locsins for the threatening
statements allegedly made by them for the late President.

Like the Court of Appeals, we are not unmindful of the exception to the hearsay rule provided in
Section 38, Rule 130 of the Rules of Court, which reads:


SEC. 38. Declaration against interest. The declaration made by a person
deceased or unable to testify, against the interest of the declarant, if the fact asserted in
the declaration was at the time it was made so far contrary to the declarant's own
interest, that a reasonable man in his position would not have made the declaration
unless he believed it to be true, may be received in evidence against himself or his
successors-in-interest and against third persons.


However, in assessing the probative value of Gen. Menzis supposed declaration against
interest, i.e., that he was acting for the late President Marcos when he purportedly coerced Mr. Locsin,
Sr. to sell the Free Press property, we are loathed to give it the evidentiary weight petitioner endeavors
to impress upon us. For, the Locsins can hardly be considered as disinterested witnesses. They are likely
to gain the most from the annulment of the subject contracts. Moreover, allegations of duress or
coercion should, like fraud, be viewed with utmost caution. They should not be laid lightly at the door of
men whose lips had been sealed by death.
[16]
Francisco explains why:

*I+t has been said that of all evidence, the narration of a witness of his conversation
with a dead person is esteemed in justice the weakest. One reason for its unreliability
is that the alleged declarant can not recall to the witness the circumstances under which
his statement were made. The temptation and opportunity for fraud in such cases also
operate against the testimony. Testimony to statements of a deceased person, at least
where proof of them will prejudice his estate, is regarded as an unsafe foundation for
judicial action except in so far as such evidence is borne out by what is natural and
probable under the circumstances taken in connection with actual known facts. And a
court should be very slow to act upon the statement of one of the parties to a supposed
agreement after the death of the other party; such corroborative evidence should be
adduced as to satisfy the court of the truth of the story which is to benefit materially the
person telling it.
[17]



Excepting, petitioner insists that the testimonies of its witnesses the Locsins - are not hearsay
because:

In this regard, hearsay evidence has been defined as the evidence not of what
the witness knows himself but of what he has heard from others. xxx Thus, the mere
fact that the other parties to the conversations testified to by the witness are already
deceased does [not] render such testimony inadmissible for being hearsay.
[18]


xxx xxx xxx

The testimonies of Teodoro Locsin, Sr. and Teodoro Locsin, Jr. that the late
Atty. Baizas, Gen. Menzi and Secretary de Vega stated that they were representing
Marcos, that Marcos cannot be denied, and the fact that Gen. Menzi stated that
private respondent Liwayway was to be the corporate vehicle for the then President
Marcos' take-over of petitioner Free Press are not hearsay. Teodoro Locsin, Sr. and
Teodoro Locsin, Jr. were in fact testifying to matters of their own personal knowledge
because they were either parties to the said conversation or were present at the
time the said statements were made.
[19]



Again, we disagree.


Even if petitioner succeeds in halving its testimonial evidence, one-half purporting to quote
the words of a live witness and the other half purporting to quote what the live witness heard from
one already dead, the other pertaining to the dead shall nevertheless remain hearsay in character.

The all too familiar rule is that a witness can testify only to those facts which he knows of his own
knowledge.
[20]
There can be no quibbling that petitioners witnesses cannot testify respecting what
President Marcos said to Gen. Menzi about the acquisition of petitioners newspaper, if any there be,
precisely because none of said witnesses ever had an opportunity to hear what the two talked about.

Neither may petitioner circumvent the hearsay rule by invoking the exception under the
declaration-against-interest rule. In context, the only declaration supposedly made by Gen. Menzi
which can conceivably be labeled as adverse to his interest could be that he was acting in behalf of
Marcos in offering to acquire the physical assets of petitioner. Far from making a statement contrary to
his own interest, a declaration conveying the notion that the declarant possessed the authority to
speak and to act for the President of the Republic can hardly be considered as a declaration against
interest.

Petitioner next assails the Court of Appeals on its conclusion that Martial Law is not per se a
consent-vitiating phenomenon. Wrote the appellate court:
[21]


In other words, the act of the ruling power, in this case the martial law
administration, was not an act of mere trespass but a trespass in law - not
a perturbacion de mero hecho but apertubacion de derecho - justified as it is by an act of
government in legitimate self-defense (IFC Leasing & Acceptance
Corporation v. Sarmiento Distributors Corporation, , citingCaltex (Phils.) v. Reyes, 84
Phil. 654 [1949]. Consequently, the act of the Philippine Government in declaring
martial law can not be considered as an act of intimidation of a third person who did not
take part in the contract (Article 1336, Civil Code). It is, therefore, incumbent on
[petitioner] to present clear and convincing evidence showing that the late President
Marcos, acting through the late Hans Menzi, abused his martial law powers by forcing
plaintiff-appellant to sell its assets. In view of the largely hearsay nature of appellants
evidence on this point, appellants cause must fall.


According to petitioner, the reasoning of the appellate court is "flawed" because:
[22]


It is implicit from the foregoing reasoning of the Court of Appeals that it treated
the forced closure of the petitioner's printing press, the arrest and incarceration without
charges of Teodoro Locsin, Sr., the threats that he will be shot and the threats that other
members of his family will be arrested as legal acts done by a dictator under the Martial
Law regime. The same flawed reasoning led the Court of Appeals to the erroneous
conclusion that such acts do not constitute force, intimidation, duress and undue
influence that vitiated petitioner's consent to the Contracts of Sale.

The contention is a rehash of petitioners bid to impute on private respondent acts of force and
intimidation that were made to bear on petitioner or Mr. Locsin, Sr. during the early years of martial
law. It failed to take stock of a very plausible situation depicted in the appellate courts decision which
supports its case disposition on the issue respecting vitiation. Wrote that court:

Even assuming that the late president Marcos is indeed the owner of
[respondent], it does not necessarily follow that he, acting through the late Hans Menzi,
abused his power by resorting to intimidation and undue influence to coerce the Locsins
into selling the assets of Free Press to them (sic).

It is an equally plausible scenario that Menzi convinced the Locsins to sell the
assets of the Free Press without resorting to threats or moral coercion by simply
pointing out to them the hard fact that the Free Press was in dire financial straits after
the declaration of Martial Law and was being sued by its former employees, minority
stockholders and creditors. Given such a state of affairs, the Locsins had no choice but
to sell their assets.
[23]



Petitioner laments that the scenario depicted in the immediately preceding quotation as a case of a
court resorting to mere surmises and speculations,


[24]
oblivious that petitioner itself can only offer, as
counterpoint, also mere surmises and speculations, such as its claim about Eugenio Lopez Sr. and
Imelda R. Marcos offering enticing amounts to buy Free Press.
[25]


It bears stressing at this point that even after the imposition of martial law, petitioner, represented
by Mr. Locsin, Sr., appeared to have dared the ire of the powers-that-be. He did not succumb to, but in
fact spurned offers to buy, lock-stock-and-barrel, the Free Press magazine, dispatching Marcos
emissaries with what amounts to a curt Free Press is not for sale. This reality argues against
petitioners thesis about vitiation of its contracting mind, and, to be sure, belying the notion that Martial
Law worked as a Sword of Damocles that reduced petitioner or Mr. Locsin, Sr. into being a mere
automaton. The following excerpt from the Court of Appeals decision is self-explanatory:
[26]


Noteworthy is the fact that although the threat of arrest hung over his head like
the Sword of Damocles, Locsin Sr. was still able to reject the offers of Atty. Baizas and
Secretary De Vega, both of whom were supposedly acting on behalf of the late
President Marcos, without being subjected to reprisals. In fact, the Locsins testified that
the initial offer of Menzi was rejected even though it was supposedly accompanied by
the threat that Marcos cannot be denied. Locsin, Sr. was, moreover, even able to
secure a compromise that only the assets of the Free Press will be sold. It is, therefore,
quite possible that plaintiff-appellants financial condition, albeit caused by the
declaration of Martial Law, was a major factor in influencing Locsin, Sr. to accept
Menzis offer. It is not farfetched to consider that Locsin, Sr. would have eventually
proceeded with the sale even in the absence of the alleged intimidation and undue
influence because of the absence of other buyers.


Petitioners third assigned error centers on the gross inadequacy of the purchase price, referring to
the amount of P5,775,000.00 private respondent paid for the property in question. To petitioner, the
amount thus paid does not even approximate the actual market value of the assets and
properties,
[27]
and is very much less than the P18 Million offered by Eugenio Lopez.
[28]
Accordingly,
petitioner urges the striking down, as erroneous, the ruling of the Court of Appeals on purchase price
inadequacy, stating in this regard as follows:
[29]


Furthermore, the Court of Appeals in determining the adequacy of the price for
the properties and assets of petitioner Free Press relied heavily on the claim that the
audited financial statements for the years 1971 and 1972 stated that the book value of
the land is set at Two Hundred Thirty-Seven Thousand Five Hundred Pesos
(P237,500.00). However, the Court of Appeals' reliance on the book value of said assets
is clearly misplaced. It should be noted that the book value of fixed assets bears very
little correlation with the actual market value of an asset. (Emphasis and underscoring
in the original).


With the view we take of the matter, the book or actual market value of the property at the time
of sale is presently of little moment. For, petitioner is effectively precluded, by force of the principle
of estoppel ,
[30]
from cavalierly disregarding with impunity its own books of account in which the
property in question is assigned a value less than what was paid therefor. And, in line with the rule on
the quantum of evidence required in civil cases, neither can we cavalierly brush aside private
respondents evidence, cited with approval by the appellate court, that tends to prove that-
[31]


xxx the net book value of the Properties was actually only P994,723.66 as
appearing in Free Press's Balance Sheet as of November 30, 1972 (marked as Exh. 13
and Exh. V), which was duly audited by SyCip, Gorres, and Velayo, thus clearly showing
that Free Press actually realized a hefty profit of P4,755,276.34 from the sale to
Liwayway.


Lest it be overlooked, gross inadequacy of the purchase price does not, as a matter of civil law, per
se affect a contract of sale. Article 1470 of the Civil Code says so. It reads:

Article 1470. Gross inadequacy of price does not affect a contract of sale, except
as it may indicate a defect in the consent, or that the parties really intended a donation
or some other act or contract.


Following the aforequoted codal provision, it behooves petitioner to first prove a defect in the
consent, failing which its case for annulment contract of sale on ground gross inadequacy of price
must fall. The categorical conclusion of the Court of Appeals, confirmatory of that of the trial court, is
that the price paid for the Free Press office building, and other physical assets is not unreasonable
to justify the nullification of the sale. This factual determination, predicated as it were on offered
evidence, notably petitioners Balance Sheet as of November 30, 1972 (Exh. 13), must be accorded
great weight if not finality.
[32]


In the light of the foregoing disquisition, the question of whether or not petitioners undisputed
utilization of the proceeds of the sale constitutes, within the purview of Article 1393 of the Civil
Code,
[33]
implied ratification of the contracts of sale need not detain us long. Suffice it to state in this
regard that the ruling of the Court of Appeals on the matter is well-taken. Wrote the appellate court:
[34]


In the case at bench, Free Presss own witnesses admitted that the proceeds of
the 1973 sale were used to settle the claims of its employees, redeem the shares of its
stockholders and finance the companys entry into money-market shareholdings and
fishpond business activities (TSN, 2 May 1988, pp. 16, 42-45). It need not be
overemphasized that by using the proceeds in this manner, Free Press only too clearly
confirmed the voluntaries of its consent and ratified the sale. Needless to state, such
ratification cleanses the assailed contract from any alleged defects from the moment it
was constituted (Art. 1396, Civil Code).


Petitioners posture that its use of the proceeds of the sale does not translate to tacit
ratification of what it viewed as voidable contracts of sale, such use being a matter of *its financial+
survival,
[35]
is untenable. As couched, Article 1393 of the Civil Code is concerned only with the act
which passes for ratification of contract, not the reason which actuated the ratifying person to act
the way he did. Ubi lex non distinguit nec nos distinguere debemus. When the law does not
distinguish, neither should we.
[36]


Finally, petitioner would fault the Court of Appeals for excluding Exhibits X-6 to X-7 and Y-3
(proffer). These excluded documents which were apparently found in the presidential palace or
turned over by the US Government to the PCGG, consist of, among others, what appears to be private
respondents Certificate of Stock for 24,502 shares in the name of Gen. Menzi, but endorsed in blank.
The proffer was evidently intended to show that then President Marcos owned private respondent,
Liwayway Publishing Inc. Said exhibits are of little relevance to the resolution of the main issue
tendered in this case. Whether or not the contracts of sale in question are voidable is the issue, not the
ownership of Liwayway Publishing, Inc.

WHEREFORE, the petition is DENIED, and the challenged decision of the Court of
Appeals AFFIRMED.

Costs against petitioner.

SO ORDERED.


FACTS:
Petitioner, thru Teodoro Locsin, Sr., filed a case of Annulment of Sale of its building, lot and printing
machineries during the regime of Martial Law to private respondent then represented by late B/Gen.
Menzi on February 26, 1987. Petitioner contends that there was vitiated consent and gross inadequacy
of purchase price during its sale on October 23, 1973. The trial court dismissed petitioners complaint
and granted private respondents counterclaim. It was elevated to the Court of Appeals but was also
dismissed for lack of merit.
ISSUE:
Whether or not the action for annulment has already prescribed.
RULING:
YES. Article 391 of the Civil Code pertinently reads The action for annulment shall be brought within
four years. This period shall begin: In cases of intimidation, violence or undue influence, from the time
the defect of consent ceases x x x.
*The Supreme Court+ can not accept the petitioners contention that the period during which
authoritarian rule was in force had interrupted prescription and that the same began to run only on
February 25, 1986, when the Aquino government took power. It is true that under Article 1154 [of the
Civil Code] xxx fortuitous events have the effect of tolling the period of prescription. However, [the
Supreme Court] can not say, as a universal rule, that the period from September 21, 1972 through
February 25, 1986 involves a force majeure. Plainly, *the Supreme Court+ can not box in the dictatorial
period within the term without distinction, and without, by necessity, suspending all liabilities, however
demandable, incurred during that period, including perhaps those ordered by this Court to be paid.


Spouses Serrano and Herrera v. CA

Facts:
Petitioners are registered owners of a lot located in Las Pias. On March 23, 1900, respondent
offered to buy the lot and petitioners agreed to sell it at 1,500 per square meter. Respondent then
gave 100,000 as partial payment.
A few days after, respondent, through his counsel, wrote petitioners informing them of his
readiness to pay the balance of the contract price and requesting them to prepare the Deed of Sale.
Petitioners, through counsel, informed respondent in a letter that Amparo Herrera would be
leaving for abroad on or before April 15, 1990 and they are canceling the transaction and that
respondent may recover the earnest money (100,000) anytime. Petitioners also wrote him stating that
they already delivered a managers check to his counsel in said amount.
Respondent thus filed a complaint for specific performance and damages with the RTC of
Makati.
Issue: Whether or not there was a contract of sale.
Ruling:
The transaction was a contract to sell.

When petitioners declared in the Receipt for Partial Payment that they

RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE HUNDRED THOUSAND
PESOS AS PARTIAL PAYMENT OF OUR LOT SITUATED IN LAS PIAS
MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR BEFORE
MARCH 23, 1990, AND THAT WE WILL EXECUTE AND SIGN THE FINAL DEED OF SALE ON THIS DATE.
there can be no other interpretation than that they agreed to a conditional contract of sale,
consummation of which is subject only to the full payment of the purchase price.
A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the
vendors obligation to transfer title is subordinated to the happening of a future and uncertain event, so
that if the suspensive condition does not take place, the parties would stand as if the conditional
obligation had never existed. The suspensive condition is commonly full payment of the purchase price.
In this case, the Receipt for Partial Payment shows that the true agreement between the
parties is a contract to sell.
First, ownership over the property was retained by petitioners and was not to pass to
respondent until full payment of the purchase price. Second, the agreement between the parties was
not embodied in a deed of sale. 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. Third, petitioners retained possession of the certificate of title of the lot.
It is true that Article 1482 provides that whenever 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 earnest money forms part of the consideration only if the sale is consummated
upon full payment of the purchase price.
Clearly, respondent cannot compel petitioners to transfer ownership of the property to him.
Ting Ho v. Teng Gui


PUNO, C.J.:

This is a Petition for Review on Certiorari
[1]
assailing the Decision
[2]
of the Court of Appeals (CA)
in CA-G.R. CV No. 42993 which reversed and set aside the Decision of the Regional Trial Court (RTC) of
Olongapo City, Branch 74, in Civil Case No. 558-0-88.

The instant case traces its origin to an action for partition filed by petitioners Felix Ting Ho, Jr.,
Merla Ting Ho Braden, Juana Ting Ho and Lydia Ting Ho Belenzo against their brother, respondent
Vicente Teng Gui, before the RTC, Branch 74 of Olongapo City. The controversy revolves around a parcel
of land, and the improvements established thereon, which, according to petitioners, should form part of
the estate of their deceased father, Felix Ting Ho, and should be partitioned equally among each of the
siblings.

In their complaint before the RTC, petitioners alleged that their father Felix Ting Ho died
intestate on June 26, 1970, and left upon his death an estate consisting of the following:
a) A commercial land consisting of 774 square meters, more or less, located at Nos. 16 and 18
Afable St., East Bajac-Bajac, Olongapo City, covered by Original Certificate of Title No. P-1064 and Tax
Declaration No. 002-2451;
b) A two-storey residential house on the aforesaid lot;
c) A two-storey commercial building, the first floor rented to different persons and the second
floor, Bonanza Hotel, operated by the defendant also located on the above described lot; and
d) A sari-sari store (formerly a bakery) also located on the above described lot.
[3]


According to petitioners, the said lot and properties were titled and tax declared under trust in the
name of respondent Vicente Teng Gui for the benefit of the deceased Felix Ting Ho who, being a Chinese
citizen, was then disqualified to own public lands in the Philippines; and that upon the death of Felix
Ting Ho, the respondent took possession of the same for his own exclusive use and benefit to their
exclusion and prejudice.
[4]


In his answer, the respondent countered that on October 11, 1958, Felix Ting Ho sold the
commercial and residential buildings to his sister-in-law, Victoria Cabasal, and the bakery to his brother-
in-law, Gregorio Fontela.
[5]
He alleged that he acquired said properties from the respective buyers
on October 28, 1961 and has since then been in possession of subject properties in the concept of an
owner; and that on January 24, 1978, Original Certificate of Title No. P-1064 covering the subject lot was
issued to him pursuant to a miscellaneous sales patent granted to him on January 3, 1978.
[6]


The undisputed facts as found by the trial court (RTC), and affirmed by the appellate court (CA),
are as follows:

[T]he plaintiffs and the defendant are all brothers and sisters, the defendant
being the oldest. They are the only legitimate children of the deceased Spouses Felix
Ting Ho and Leonila Cabasal. Felix Ting Ho died on June 26, 1970 while the wife Leonila
Cabasal died on December 7, 1978. The defendant Vicente Teng Gui is the oldest
among the children as he was born onApril 5, 1943. The father of the plaintiffs and the
defendant was a Chinese citizen although their mother was Filipino. That sometime in
1947, the father of the plaintiffs and defendant, Felix Ting Ho, who was already then
married to their mother Leonila Cabasal, occupied a parcel of land identified to (sic) as
Lot No. 18 Brill which was thereafter identified as Lot No. 16 situated at Afable Street,
East Bajac-Bajac, Olongapo City, by virtue of the permission granted him by the then
U.S. Naval Reservation Office, Olongapo, Zambales. The couple thereafter introduced
improvements on the land. They built a house of strong material at 16 Afable
Street which is a commercial and residential house and another building of strong
material at 18 Afable Streetwhich was a residential house and a bakery. The couple, as
well as their children, lived and resided in the said properties until their death. The
father, Felix Ting Ho had managed the bakery while the mother managed the sari-sari
store. Long before the death of Felix Ting Ho, who died on June 26, 1970, he executed
on October 11, 1958 a Deed of Absolute Sale of a house of strong material located
at 16 Afable Street, Olongapo, Zambales, specifically described in Tax Dec. No. 5432, in
favor of Victoria Cabasal his sister-in-law (Exh. C).This Deed of Sale cancelled the Tax
Dec. of Felix Ting Ho over the said building (Exh. C-1) and the building was registered in
the name of the buyer Victoria Cabasal, as per Tax Dec. No. 7579 (Exh. C-2). On the
same date, October 11, 1958 the said Felix Ting Ho also sold a building of strong
material located at 18 Afable Street, described in Tax Dec. No. 5982, in favor of
Gregorio Fontela, of legal age, an American citizen, married (Exh. D). This Deed of
Sale, in effect, cancelled Tax Dec. No. 5982 and the same was registered in the name of
the buyer Gregorio Fontela, as per Tax Dec. No. 7580 (Exh. D-2). In turn Victoria
Cabasal and her husband Gregorio Fontela sold to Vicente Teng Gui on October 28,
1961 the buildings which were bought by them from Felix Ting Ho and their tax
declarations for the building they bought (Exhs. C-2 and D-2) were accordingly
cancelled and the said buildings were registered in the name of the defendant Vicente
Teng Gui (Exhs. C-3 and D-3). On October 25, 1966 the father of the parties Felix Ting
Ho executed an Affidavit of Transfer, Relinquishment and Renouncement of Rights and
Interest including Improvements on Land in favor of his eldest son the defendant
Vicente Teng Gui. On the basis of the said document the defendant who then chose
Filipino citizenship filed a miscellaneous sales application with the Bureau of
Lands. Miscellaneous Sales Patent No. 7457 of the land which was then identified to
be Lot No. 418, Ts-308 consisting of 774 square meters was issued to the applicant
Vicente Teng Gui and accordingly on the 24
th
of January, 1978 Original Certificate of
Title No. P-1064 covering the lot in question was issued to the defendant Vicente Teng
Gui. Although the buildings and improvements on the land in question were sold by
Felix Ting Ho to Victoria Cabasal and Gregorio Fontela in 1958 and who in turn sold the
buildings to the defendant in 1961 the said Felix Ting Ho and his wife remained in
possession of the properties as Felix Ting Ho continued to manage the bakery while the
wife Leonila Cabasal continued to manage the sari-sari store. During all the time that
the alleged buildings were sold to the spouses Victoria Cabasal and Gregorio Fontela in
1958 and the subsequent sale of the same to the defendant Vicente Teng Gui in October
of 1961 the plaintiffs and the defendant continued to live and were under the custody
of their parents until their father Felix Ting Ho died in 1970 and their mother Leonila
Cabasal died in 1978.
[7]
(Emphasis supplied)

In light of these factual findings, the RTC found that Felix Ting Ho, being a Chinese citizen and
the father of the petitioners and respondent, resorted to a series of simulated transactions in order to
preserve the right to the lot and the properties thereon in the hands of the family. As stated by the trial
court:

After a serious consideration of the testimonies given by both one of the
plaintiffs and the defendant as well as the documentary exhibits presented in the case,
the Court is inclined to believe that Felix Ting Ho, the father of the plaintiffs and the
defendant, and the husband of Leonila Cabasal thought of preserving the properties in
question by transferring the said properties to his eldest son as he thought that he
cannot acquire the properties as he was a Chinese citizen. To transfer the
improvements on the land to his eldest son the defendant Vicente Teng Gui, he first
executed simulated Deeds of Sales in favor of the sister and brother-in-law of his wife in
1958 and after three (3) years it was made to appear that these vendees had sold the
improvements to the defendant Vicente Teng Gui who was then 18 years old. The Court
finds that these transaction (sic) were simulated and that no consideration was ever
paid by the vendees.

x x x x x x x x x

With regards (sic) to the transfer and relinquishment of Felix Ting Hos right to
the land in question in favor of the defendant, the Court believes, that although from
the face of the document it is stated in absolute terms that without any consideration
Felix Ting Ho was transferring and renouncing his right in favor of his son, the defendant
Vicente Teng Gui, still the Court believes that the transaction was one of implied trust
executed by Felix Ting Ho for the benefit of his family
[8]


Notwithstanding such findings, the RTC considered the Affidavit of Transfer, Relinquishment and
Renouncement of Rights and Interests over the land as a donation which was accepted by the donee,
the herein respondent. With respect to the properties in the lot, the trial court held that although the
sales were simulated, pursuant to Article 1471 of the New Civil Code
[9]
it can be assumed that the
intention of Felix Ting Ho in such transaction was to give and donate such properties to the
respondent. As a result, it awarded the entire conjugal share of Felix Ting Ho in the subject lot and
properties to the respondent and divided only the conjugal share of his wife among the siblings. The
dispositive portion of the RTC decision decreed:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against
the defendant as the Court orders the partition and the adjudication of the subject
properties, Lot 418, Ts-308, specifically described in original Certificate of Title No. P-
1064 and the residential and commercial houses standing on the lot specifically
described in Tax Decs. Nos. 9179 and 9180 in the name of Vicente Teng Gui in the
following manner, to wit: To the defendant Vicente Teng Gui is adjudicated an
undivided six-tenth (6/10) of the aforementioned properties and to each of the plaintiffs
Felix Ting Ho, Jr., Merla Ting-Ho Braden, Juana Ting and Lydia Ting Ho-Belenzo each an
undivided one-tenth (1/10) of the properties
[10]


From this decision, both parties interposed their respective appeals. The petitioners claimed that
the RTC erred in awarding respondent the entire conjugal share of their deceased father in the lot and
properties in question contrary to its own finding that an implied trust existed between the parties. The
respondent, on the other hand, asserted that the RTC erred in not ruling that the lot and properties do
not form part of the estate of Felix Ting Ho and are owned entirely by him.

On appeal, the CA reversed and set aside the decision of the RTC. The appellate court held that
the deceased Felix Ting Ho was never the owner and never claimed ownership of the subject lot since he
is disqualified under Philippine laws from owning public lands, and that respondent Vicente Teng Gui
was the rightful owner over said lot by virtue of Miscellaneous Sales Patent No. 7457 issued in his
favor, viz:

The deceased Felix Ting Ho, plaintiffs and defendants late father, was never the
owner of the subject lot, now identified as Lot No. 418, Ts-308 covered by OCT No. P-
1064 (Exh. A; Record, p. 104). As stated by Felix Ting Ho no less in the Affidavit of
Transfer, Relinquishment and Renouncement of Rights and Interest etc. (Exh. B:
Record, p. 107), executed on October 25, 1966 he, the late Felix Ting Ho, was merely a
possessor or occupant of the subject lot by virtue of a permission granted by the
then U.S. Naval Reservation Office, Olongapo, Zambales. The late Felix Ting Ho was
never the owner and never claimed ownership of the land. (Emphasis supplied)

The affidavit, Exhibit B, was subscribed and sworn to before a Land Investigator of
the Bureau of Lands and in the said affidavit, the late Felix Ting Ho expressly
acknowledged that because he is a Chinese citizen he is not qualified to purchase public
lands under Philippine laws for which reason he thereby transfers, relinquishes and
renounces all his rights and interests in the subject land, including all the improvements
thereon to his son, the defendant Vicente Teng Gui, who is of legal age, single, Filipino
citizen and qualified under the public land law to acquire lands.

x x x x x x x x x

Defendant Vicente Teng Gui acquired the subject land by sales patent or
purchase from the government and not from his father, the late Felix Ting Ho. It
cannot be said that he acquired or bought the land in trust for his father because on
December 5, 1977 when the subject land was sold to him by the government and on
January 3, 1978 when Miscellaneous Sales Patent No. 7457 was issued, the late Felix
Ting Ho was already dead, having died on June 6, 1970 (TSN, January 10, 1990, p. 4).
[11]


Regarding the properties erected over the said lot, the CA held that the finding that the sales of
the two-storey commercial and residential buildings and sari-sari store to Victoria Cabasal and Gregorio
Fontela and subsequently to respondent were without consideration and simulated is supported by
evidence, which clearly establishes that these properties should form part of the estate of the late
spouses Felix Ting Ho and Leonila Cabasal.

Thus, while the appellate court dismissed the complaint for partition with respect to the lot in
question, it awarded the petitioners a four-fifths (4/5) share of the subject properties erected on the
said lot. The dispositive portion of the CA ruling reads as follows:

WHEREFORE, premises considered, the decision appealed from is REVERSED and
SET ASIDE and NEW JUDGMENT rendered:

1. DISMISSING plaintiff-appellants complaint with respect to the subject parcel
of land, identified as Lot No. 418, Ts-308, covered by OCT No. P-1064, in the name of
plaintiff-appellants [should be defendant-appellant];

2. DECLARING that the two-storey commercial building, the two-storey residential
building and sari-sari store (formerly a bakery), all erected on the subject lot No. 418, Ts-
308, form part of the estate of the deceased spouses Felix Ting Ho and Leonila Cabasal,
and that plaintiff-appellants are entitled to four-fifths (4/5) thereof, the remaining one-
fifth (1/5) being the share of the defendant-appellant;

3. DIRECTING the court a quo to partition the said two-storey commercial
building, two-storey residential building and sari-sari store (formerly a bakery) in
accordance with Rule 69 of the Revised Rules of Court and pertinent provisions of the
Civil Code;

4. Let the records of this case be remanded to the court of origin for further
proceedings;

5. Let a copy of this decision be furnished the Office of the Solicitor General; and

6. There is no pronouncement as to costs.

SO ORDERED.
[12]


Both petitioners and respondent filed their respective motions for reconsideration from this
ruling, which were summarily denied by the CA in its Resolution
[13]
dated August 5, 1997. Hence, this
petition.

According to the petitioners, the CA erred in declaring that Lot No. 418, Ts-308 does not form
part of the estate of the deceased Felix Ting Ho and is owned alone by respondent. Respondent, on the
other hand, contends that he should be declared the sole owner not only of Lot No. 418, Ts-308 but also
of the properties erected thereon and that the CA erred in not dismissing the complaint for partition
with respect to the said properties.

The primary issue for consideration is whether both Lot No. 418, Ts-308 and the properties
erected thereon should be included in the estate of the deceased Felix Ting Ho.

We affirm the CA ruling.

With regard to Lot No. 418, Ts-308, Article XIII, Section 1 of the 1935 Constitution states:

Section 1. All agricultural timber, and mineral lands of the public domain,
waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy
and other natural resources of the Philippines belong to the State, and their
disposition, exploitation, development, or utilization shall be limited to citizens of the
Philippines or to corporations or associations at least sixty per centum of the capital of
which is owned by such citizens, subject to any existing right, grant, lease, or
concession at the time of the inauguration of the Government established under this
Constitution (Emphasis supplied)

Our fundamental law cannot be any clearer. The right to acquire lands of the public domain is
reserved for Filipino citizens or corporations at least sixty percent of the capital of which is owned by
Filipinos. Thus, in Krivenko v. Register of Deeds,
[14]
the Court enunciated that:

Perhaps the effect of our construction is to preclude aliens, admitted freely
into the Philippines from owning sites where they may build their homes. But if this is
the solemn mandate of the Constitution, we will not attempt to compromise it even in
the name of amity or equity. We are satisfied, however, that aliens are not completely
excluded by the Constitution from the use of lands for residential purposes. Since their
residence in the Philippines is temporary, they may be granted temporary rights such as
a lease contract which is not forbidden by the Constitution. Should they desire to
remain here forever and share our fortunes and misfortunes, Filipino citizenship is not
impossible to acquire.
[15]


In the present case, the father of petitioners and respondent was a Chinese citizen; therefore,
he was disqualified from acquiring and owning real property in thePhilippines. In fact, he was only
occupying the subject lot by virtue of the permission granted him by the then U.S. Naval Reservation
Office of Olongapo, Zambales. As correctly found by the CA, the deceased Felix Ting Ho was never the
owner of the subject lot in light of the constitutional proscription and the respondent did not at any
instance act as the dummy of his father.

On the other hand, the respondent became the owner of Lot No. 418, Ts-308 when he was
granted Miscellaneous Sales Patent No. 7457 on January 3, 1978, by the Secretary of Natural Resources
By Authority of the President of the Philippines, and when Original Certificate of Title No. P-1064 was
correspondingly issued in his name. The grant of the miscellaneous sales patent by the Secretary of
Natural Resources, and the corresponding issuance of the original certificate of title in his name, show
that the respondent possesses all the qualifications and none of the disqualifications to acquire
alienable and disposable lands of the public domain. These issuances bear the presumption of regularity
in their performance in the absence of evidence to the contrary.

Registration of grants and patents involving public lands is governed by Section 122 of Act No. 496,
which was subsequently amended by Section 103 of Presidential Decree No. 1529, viz:

Sec. 103. Certificate of title pursuant to patents.Whenever public land is by
the Government alienated, granted or conveyed to any person, the same shall be
brought forthwith under the operation of this Decree. It shall be the duty of the official
issuing the instrument of alienation, grant, patent or conveyance in behalf of the
Government to cause such instrument to be filed with the Register of Deeds of the
province or city where the land lies, and to be there registered like other deeds and
conveyance, whereupon a certificate of title shall be entered as in other cases of
registered land, and an owners duplicate issued to the grantee. The deeds, grant,
patent or instrument of conveyance from the Government to the grantee shall not take
effect as a conveyance or bind the land, but shall operate only as a contract between
the Government and the grantee and as evidence of authority to the Register of Deeds
to make registration. It is the act of registration that shall be the operative act to affect
and convey the land, and in all cases under this Decree registration shall be made in the
office of the Register of Deeds of the province or city where the land lies. The fees for
registration shall be paid by the grantee. After due registration and issuance of the
certificate of title, such land shall be deemed to be registered land to all intents and
purposes under this Decree.
[16]
(Emphasis supplied)


Under the law, a certificate of title issued pursuant to any grant or patent involving public land is
as conclusive and indefeasible as any other certificate of title issued to private lands in the ordinary or
cadastral registration proceeding. The effect of the registration of a patent and the issuance of a
certificate of title to the patentee is to vest in him an incontestable title to the land, in the same manner
as if ownership had been determined by final decree of the court, and the title so issued is absolutely
conclusive and indisputable, and is not subject to collateral attack.
[17]


Nonetheless, petitioners invoke equity considerations and claim that the ruling of the RTC that an
implied trust was created between respondent and their father with respect to the subject lot should be
upheld.

This contention must fail because the prohibition against an alien from owning lands of the public
domain is absolute and not even an implied trust can be permitted to arise on equity considerations.

In the case of Muller v. Muller,
[18]
wherein the respondent, a German national, was seeking
reimbursement of funds claimed by him to be given in trust to his petitioner wife, a Philippine citizen,
for the purchase of a property in Antipolo, the Court, in rejecting the claim, ruled that:

Respondent was aware of the constitutional prohibition and expressly admitted
his knowledge thereof to this Court. He declared that he had the Antipolo property
titled in the name of the petitioner because of the said prohibition. His attempt at
subsequently asserting or claiming a right on the said property cannot be sustained.

The Court of Appeals erred in holding that an implied trust was created and
resulted by operation of law in view of petitioner's marriage to respondent. Save for
the exception provided in cases of hereditary succession, respondent's disqualification
from owning lands in the Philippines is absolute. Not even an ownership in trust is
allowed.Besides, where the purchase is made in violation of an existing statute and in
evasion of its express provision, no trust can result in favor of the party who is guilty of
the fraud. To hold otherwise would allow circumvention of the constitutional
prohibition.

Invoking the principle that a court is not only a court of law but also a court of
equity, is likewise misplaced. It has been held that equity as a rule will follow the law
and will not permit that to be done indirectly which, because of public policy, cannot be
done directly...
[19]


Coming now to the issue of ownership of the properties erected on the subject lot, the Court
agrees with the finding of the trial court, as affirmed by the appellate court, that the series of
transactions resorted to by the deceased were simulated in order to preserve the properties in the
hands of the family. The records show that during all the time that the properties were allegedly sold to
the spouses Victoria Cabasal and Gregorio Fontela in 1958 and the subsequent sale of the same to
respondent in 1961, the petitioners and respondent, along with their parents, remained in possession
and continued to live in said properties.

However, the trial court concluded that:

In fairness to the defendant, although the Deeds of Sale executed by Felix Ting Ho
regarding the improvements in favor of Victoria Cabasal and Gregorio Fontela and the
subsequent transfer of the same by Gregorio Fontela and Victoria Cabasal to the
defendant are all simulated, yet, pursuant to Article 1471 of the New Civil Code it can
be assumed that the intention of Felix Ting Ho in such transaction was to give and
donate the improvements to his eldest son the defendant Vicente Teng Gui
[20]


Its finding was based on Article 1471 of the Civil Code, which provides that:

Art. 1471. If the price is simulated, the sale is void, but the act may be shown to
have been in reality a donation, or some other act or contract.
[21]


The Court holds that the reliance of the trial court on the provisions of Article 1471 of the Civil
Code to conclude that the simulated sales were a valid donation to the respondent is misplaced because
its finding was based on a mere assumption when the law requires positive proof.

The respondent was unable to show, and the records are bereft of any evidence, that the
simulated sales of the properties were intended by the deceased to be a donation to him. Thus, the
Court holds that the two-storey residential house, two-storey residential building and sari-sari store
form part of the estate of the late spouses Felix Ting Ho and Leonila Cabasal, entitling the petitioners to
a four-fifths (4/5) share thereof.

IN VIEW WHEREOF, the petition is DENIED. The assailed Decision dated December 27, 1996 of
the Court of Appeals in CA-G.R. CV No. 42993 is hereby AFFIRMED.

SO ORDERED.