G.R. No.

126236 January 26, 2007

DOMINGO REALTY, INC. and AYALA STEEL MANUFACTURING CO., INC., Petitioners,
vs.
COURT OF APPEALS and ANTONIO M. ACERO, Respondents.
D E C I S I O N
VELASCO, JR., J .:
Good judgment comes from experience, and often experience comes from bad judgment.
Rita Mae Brown
The Case
This Petition for Review on Certiorari, under Rule 45 of the Revised Rules of Court, seeks the
reversal of the October 31, 1995 Decision
1
of the Court of Appeals (CA) in CA-G.R. SP No. 33407,
entitled Antonio M. Acero v. Hon. Sofronio G. Sayo, et al., which annulled the December 7, 1987
Decision based on a Compromise Agreement among petitioner Domingo Realty, Inc. (Domingo
Realty), respondent Antonio M. Acero, and defendant Luis Recato Dy in Civil Case No. 9581-P
before the Pasay City Regional Trial Court (RTC), Branch CXI; and the August 28, 1996
Resolution
2
of the CA which denied petitioners Motion for Reconsideration of its October 31, 1995
Decision.
The Facts
On November 19, 1981, petitioner Domingo Realty filed its November 15, 1981 Complaint
3
with the
Pasay City RTC against Antonio M. Acero, who conducted business under the firm name A.M. Acero
Trading,
4
David Victorio, John Doe, and Peter Doe, for recovery of possession of three (3) parcels of
land located in Cupang, Muntinlupa, Metro Manila, covered by (1) Transfer Certificate of Title (TCT)
No. (75600) S-107639-Land Records of Rizal; (2) TCT No. (67006) S-107640-Land Records of
Rizal; and (3) TCT No. (67007) S-107643-Land Records of Rizal (the "subject properties"). The said
lots have an aggregate area of 26,705 square meters, more or less, on a portion of which Acero had
constructed a factory building for the manufacture of hollow blocks, as alleged by Domingo Realty.
On January 4, 1982, defendants Acero and Victorio filed their December 21, 1981 Answer
5
to the
Complaint in Civil Case No. 9581-P. Acero alleged that he merely leased the land from his co-
defendant David Victorio, who, in turn, claimed to own the property on which the hollow blocks
factory of Acero stood. In the Answer, Victorio assailed the validity of the TCTs of Domingo Realty,
alleging that the said TCTs emanated from spurious deeds of sale, and claimed that he and his
predecessors-in-interest had been in possession of the property for more than 70 years.
On December 3, 1987, Mariano Yu representing Domingo Realty, Luis Recato Dy
6
, and Antonio M.
Acero, all assisted by counsels, executed a Compromise Agreement, which contained the following
stipulations, to wit:
1. That defendants admit and recognize the ownership of the plaintiff over the property
subject of this case, covered by TCT No. S-107639 (75600), S-107643 (67007), and S-
107640 (67006) with a total area of 26,705 square meters;
2. That defendant Luis Recato Dy admits and recognizes that his title covered by TCT No.
108027 has been proven not to be genuine and that the area indicated therein is inside the
property of the plaintiff;
3. That defendant Acero admits that the property he is presently occupying by way of lease
is encroaching on a portion of the property of the plaintiff and assume[s] and undertakes to
vacate, remove and clear any and all structures erected inside the property of the plaintiff by
himself and other third parties, duly authorized and/or who have an existing agreement with
defendant Acero, and shall deliver said portion of the property of the plaintiff free and clear of
any unauthorized structures, shanties, occupants, squatters or lessees within a period of
sixty (60) days from date of signing of this compromise agreement. Should defendant Acero
fail in his obligation to vacate, remove and clear the structures erected inside the property of
the plaintiff within the period of 60 days afore-mentioned, plaintiff shall be entitled to a writ of
execution for the immediate demolition or removal of said structure to fully implement this
agreement; and ejectment of all squatters and occupants and lessees, including the
dependents to fully implement this agreement;
4. That plaintiff admits and recognizes that defendant Luis Recato Dy bought and occupied
the property in good faith and for value whereas defendant Acero leased the portion of said
property likewise in good faith and for value hereby waives absolutely and unconditionally all
claims including attorneys fees against both defendants in all cases pending in any court
whether by virtue of any judgment or under the present complaint and undertake to withdraw
and/or move to dismiss the same under the spirit of this agreement;
5. That defendants likewise waive all claims for damages including attorneys fees against
the plaintiff;
6. That plaintiff acknowledges the benefit done by defendant Luis Recato Dy on the property
by incurring expenses in protecting and preserving the property by way of construction of
perimeter fence and maintaining a caretaker therein and plaintiff has agreed to pay Luis
Recato Dy the amount of P100,000.00 upon approval of this agreement by this Honorable
Court.
7

Acting on the Compromise Agreement, the Pasay City RTC rendered the December 7, 1987
Decision which adopted the aforequoted six (6) stipulations and approved the Compromise
Agreement.
To implement the said Decision, Domingo Realty filed its January 21, 1988 Motion
8
asking the trial
court for permission to conduct a re-survey of the subject properties, which was granted in the
January 22, 1988 Order.
9

On February 2, 1988, respondent Acero filed his January 29, 1988 Motion to Nullify the Compromise
Agreement,
10
claiming that the January 22, 1988 Order authorizing the survey plan of petitioner
Domingo Realty as the basis of a resurvey would violate the Compromise Agreement since the
whole area he occupied would be adjudged as owned by the realty firm.
On March 18, 1988, Acero filed a Motion to Resurvey,
11
whereby it was alleged that the parties
agreed to have the disputed lots re-surveyed by the Bureau of Lands. Thus, the trial court issued the
March 21, 1988 Order
12
directing the Director of Lands to conduct a re-survey of the subject
properties.
In his June 9, 1989 Report, Elpidio T. De Lara, Chief of the Technical Services Division of the Lands
Management Section of the National Capital Region - Department of Environment and Natural
Resources, submitted to the trial court Verification Survey Plan No. Vs-13-000135. In the said
Verification Survey Plan, petitioners TCTs covered the entire land occupied by the respondents
hollow block factory.
13

On April 10, 1990, petitioner Ayala Steel Manufacturing Co., Inc. (Ayala Steel) filed its March 30,
1990 Motion for Substitution alleging that it had purchased the subject lots, attaching to the motion
TCT Nos. 152528, 152529, and 152530 all in its name, as proof of purchase.
14

The said motion was opposed by Acero claiming that "this case has already been terminated in
accordance with the compromise agreement of the parties, hence, substitution will no longer be
necessary and justified under the circumstances."
15
The motion was not resolved which explains why
both transferor Domingo Realty and transferee Ayala Steel are co-petitioners in the instant petition.
In its December 28, 1990 Order,
16
the trial court directed Acero to conduct his own re-survey of the
lots based on the technical description appearing in the TCTs of Domingo Realty and to have the re-
survey plans approved by the Bureau of Lands. The Order resulted from Aceros contention that he
occupied only 2,000 square meters of petitioners property.
Acero employed the services of Engr. Eligio L. Cruz who came up with Verification Survey Plan No.
Vs-13-000185. However, when the said Verification Survey Plan was presented to the Bureau of
Lands for approval, it was rejected because Engr. Cruz failed to comply with the requirements of the
Bureau.
17

On April 8, 1991, petitioners filed a Manifestation with Motion praying for the denial of respondents
Motion to Nullify the Compromise Agreement and for the approval of Verification Survey Plan No.
Vs-13-000135 prepared by Engr. Lara of the Bureau of Lands. The Pasay City RTC issued the
December 6, 1991 Order
18
denying respondent Aceros Motion to Nullify the Compromise
Agreement. As a consequence, petitioners filed a Motion for Execution on December 10, 1991.
19

On January 6, 1992, respondent filed an undated Manifestation
20
claiming, among others, that it was
on record that the Compromise Agreement was only as to a portion of the land being occupied by
respondent, which is about 2,000 square meters, more or less. He reiterated the same contentions
in his December 21, 1991 Manifestation.
21

On January 13, 1992, respondent filed a Motion to Modify Order Dated 6 December 91,
22
claiming
that the said Order modified the Compromise Agreement considering that it allegedly involved only
1,357 square meters and not the entire lot;
23
and if not amended, the Order would deviate from the
principle that "no man shall enrich himself at the expense of the other."
In its January 15, 1992 Order,
24
the trial court approved the issuance of a Writ of Execution to
enforce the December 7, 1987 Decision. On February 3, 1992, respondent Acero subsequently filed
a Motion for Reconsideration
25
of the January 15, 1992 Order arguing that the Order was premature
and that Verification Survey Plan No. Vs-13-000135 violated the Compromise Agreement.
On January 18, 1992, the Pasay City Hall was gutted by fire, destroying the records of the lower
court, including those of this case. Thus, after reconstituting the records, the trial court issued the
October 6, 1992 Order,
26
reiterating its January 15, 1992 Order and ordering the issuance of a Writ of
Execution.
On October 23, 1992, respondent filed a Manifestation and Compliance,
27
alleging that Verification
Survey Plan No. Vs-13-000185 had been approved by the Regional Director of the DENR; thus, he
moved for the annulment of the October 6, 1992 Order granting the Writ of Execution in favor of
petitioners.
Given the conflicting Verification Survey Plans of the parties, the trial court issued the October 11,
1993 Order
28
requiring the Bureau of Lands Director to determine which of the two survey plans was
correct.
Subsequently, Regional Technical Director Eriberto V. Almazan of the Land Registration Authority
issued the November 24, 1993 Order
29
cancelling Verification Survey Plan No. Vs-13-000185,
submitted by Engineer Eligio Cruz, who was hired by respondent Acero, and declared Verification
Survey Plan No. Vs-13-000135, submitted by Engineer Lara of the Bureau of Lands, as the correct
Plan.
Thereafter, petitioners filed their January 12, 1994 Ex-parte Manifestation with Motion,
30
praying for
the implementation of the Writ of Execution against the disputed lands, which was granted in the
January 12, 1994 Order.
31

Respondents Motion for Reconsideration
32
of the January 12, 1994 Order was denied in the
February 1, 1994 Order
33
of the Pasay City RTC.
Aggrieved, respondent Acero filed before the CA his February 23, 1994 Petition for Certiorari and
Mandamus with Urgent Prayer for Issuance of a Temporary Restraining Order,
34
under Rule 65 of
the Rules of Court, against petitioners and Judge Sofronio G. Sayo as presiding judge of the lower
court. In the petition, respondent sought to nullify and set aside the RTC Orders dated December 6,
1991, January 15, 1992, October 6, 1992, January 12, 1994, and February 1, 1994, all of which
pertain to the execution of the December 7, 1987 Decision on the Compromise Agreement.
Significantly, respondent did not seek the annulment of said judgment but merely reiterated the issue
that under the Compromise Agreement, he would only be vacating a portion of the property he was
occupying.
The Ruling of the Court of Appeals
On October 31, 1995, the CA promulgated the assailed Decision, the fallo of which reads:
IN VIEW OF THE FOREGOING, the petition for certiorari is GRANTED and the Orders of
respondent court dated December 6, 1991, January 15, 1992, October 6, 1992, and January 12,
1994, and February 1, 1994 are SET ASIDE. In the interest of justice, and consistent with the views
expressed by this Court, the Compromise Judgment dated December 7, 1987 of respondent court is
likewise SET ASIDE. Respondent Court is likewise directed to proceed with the hearing of Civil Case
No. 9581-P on the merits and determine, once and for all, the respective proprietary rights of the
litigants thereto.
SO ORDERED.
35

In discarding the December 7, 1987 Decision based on the Compromise Agreement, the appellate
court ratiocinated that David Victorio, the alleged lessor of Acero, was not a party to the Compromise
Agreement; thus, there would always remain the probability that he might eventually resurface and
assail the Compromise Agreement, giving rise to another suit. Moreover, the CA found the
Compromise Agreement vague, not having stipulated a mutually agreed upon surveyor, "who would
survey the properties using as a basis, survey plans acceptable to both, and to thereafter submit a
report to the court."
36

Likewise, the CA sustained Aceros belief that he would only have to vacate a portion of the property
he was presently occupying, which was tantamount to a mistake that served as basis for the
nullification of the Compromise Agreement entered into.
On January 17, 1996, petitioners filed a Motion for Reconsideration
37
of the adverse Decision, which
was consequently rejected in the CAs August 28, 1996 Resolution.
Thus, the instant petition is in our hands.
The Issues
The issues as stated in the petition are as follows:
1. The respondent Court of Appeals erred in nullifying and setting aside judgment on
Compromise Agreement and the Compromise Agreement itself as well as the subsequent
orders of the court a quo though there is no motion to set aside the judgment on the
Compromise Agreement before the court a quo on the ground of fraud, mistake or duress;
2. The respondent Court of Appeals erred in nullifying and setting aside the judgment on
Compromise Agreement and the Compromise Agreement itself as well as the subsequent
Orders of the Court of quo [sic] though in the Petition for Certiorari and Mandamus before
respondent Court of Appeals, private respondent argued that judgment on Compromise
Agreement is final, executory, immutable and unalterable;
3. The respondent Court of Appeals erred in nullifying and setting aside Judgment on
Compromise Agreement and the Compromise Agreement itself as well as the subsequent
Orders of the Court a quo based on fraud or mistake though said issues were not raised
before the Court a quo, and no evidence was introduced to substantiate fraud or mistake
before the court a quo;
4. The respondent Court of Appeals erred when it ruled that the non-inclusion of one of the
parties in this case, and the vagueness of the Compromise Agreement are grounds to nullify
and set aside the Compromise Agreement; and
5. The respondent Court of Appeals erred when it entertained the Petition for Certiorari and
Mandamus though it was filed beyond reasonable time if not barred by laches.
38

Restated, the issues are:
I.
WHETHER THE PETITION BEFORE THE COURT OF APPEALS WAS FILED OUT OF TIME OR
BARRED BY LACHES;
II.
WHETHER THE NON-INCLUSION OF DAVID VICTORIO WOULD NULLIFY THE COMPROMISE
AGREEMENT;
III.
WHETHER THE JUDGMENT ON COMPROMISE AGREEMENT SHOULD BE SET ASIDE ON THE
GROUND OF VAGUENESS; AND
IV.
WHETHER THE JUDGMENT ON COMPROMISE AGREEMENT SHOULD BE SET ASIDE ON THE
GROUND OF MISTAKE.
The Courts Ruling
The petition is meritorious.
The preliminary issue involves the query of what proper remedy is available to a party who believes
that his consent in a compromise agreement was vitiated by mistake upon which a judgment was
rendered by a court of law.
There is no question that a contract where the consent is given through mistake, violence,
intimidation, undue influence, or fraud is voidable under Article 1330 of the Civil Code. If the contract
assumes the form of a Compromise Agreement between the parties in a civil case, then a judgment
rendered on the basis of such covenant is final, unappealable, and immediately executory. If one of
the parties claims that his consent was obtained through fraud, mistake, or duress, he must file a
motion with the trial court that approved the compromise agreement to reconsider the judgment and
nullify or set aside said contract on any of the said grounds for annulment of contract within 15 days
from notice of judgment. Under Rule 37, said party can either file a motion for new trial or
reconsideration. A party can file a motion for new trial based on fraud, accident or mistake,
excusable negligence, or newly discovered evidence.
On the other hand, a party may decide to seek the recall or modification of the judgment by means
of a motion for reconsideration on the ground that "the decision or final order is contrary to law" if the
consent was procured through fraud, mistake, or duress. Thus, the motion for a new trial or motion
for reconsideration is the readily available remedy for a party to challenge a judgment if the 15-day
period from receipt of judgment for taking an appeal has not yet expired. This motion is the most
plain, speedy, and adequate remedy in law to assail a judgment based on a compromise agreement
which, even if it is immediately executory, can still be annulled for vices of consent or forgery.
39

Prior to the effectivity of the 1997 Rules of Civil Procedure on July 1, 1997, an order denying a
motion for new trial or reconsideration was not appealable since the judgment in the case is not yet
final. The remedy is to appeal from the challenged decision and the denial of the motion for
reconsideration or new trial is assigned as an error in the appeal.
40
Under the present [1997] Rules
of Civil Procedure, the same rule was maintained that the order denying said motion is still
unappealable and the rule is still to appeal from the judgment and not from the order rejecting the
motion for reconsideration/new trial.
If the 15-day period for taking an appeal has lapsed, then the aggrieved party can avail of Rule 38 by
filing a petition for relief from judgment which should be done within 60 days after the petitioner
learns of the judgment, but not more than six (6) months after such judgment or final order was
entered. Prior to the effectivity of the 1997 Rules of Civil Procedure in 1997, if the court denies the
petition under Rule 38, the remedy is to appeal from the order of denial and not from the judgment
since said decision has already become final and already unappealable.
41
However, in the appeal
from said order, the appellant may likewise assail the judgment. Under the 1997 Rules of Civil
Procedure, the aggrieved party can no longer appeal from the order denying the petition since this is
proscribed under Section 1 of Rule 41. The remedy of the party is to file a special civil action for
certiorari under Rule 65 from the order rejecting the petition for relief from judgment.
The records of the case reveal the following:
1. December 3, 1987 the parties signed the Compromise Agreement;
2. December 7, 1987 a decision/judgment was rendered based on the December 3, 1987
Compromise Agreement;
3. February 2, 1988 Acero filed a Motion to Nullify the Compromise Agreement;
4. December 6, 1991 the trial court denied Aceros Motion to Nullify the Compromise
Agreement;
5. December 11, 1991 defendant Acero received the December 6, 1991 Order which
denied said motion;
42

6. December 26, 1991 the 15-day period to appeal to the CA expired by the failure of
defendant Acero to file an appeal with said appellate court;
7. January 15, 1992 the trial court issued the Order which granted petitioners motion for
the issuance of a Writ of Execution;
8. October 6, 1992 the trial court reiterated its January 15, 1992 Order directing the
issuance of a Writ of Execution after the records of the case were lost in a fire that gutted the
Pasay City Hall;
9. January 12, 1994 the trial court issued the Order which directed the implementation of
the Writ of Execution prayed for by petitioners;
10. February 1, 1994 the trial court issued the Order which denied respondents Motion for
Reconsideration of its January 12, 1994 Order; and
11. April 4, 1994 Acero filed with the CA a petition for certiorari in CA-G.R. SP No. 33407
entitled Antonio M. Acero v. Domingo Realty, Inc., et al.
In his undated Manifestation, respondent Acero admitted having received a copy of the December 7,
1987 Decision on December 11, 1987. However, it was only on February 2, 1988 when he filed a
Motion to Nullify the Compromise Agreement which was discarded for lack of merit by the trial court
on December 6, 1991. If the Motion to Nullify the Compromise Agreement is treated as a motion for
reconsideration and/or for new trial, then Acero should have filed an appeal from the December 7,
1987 Decision and assigned as error the December 6, 1991 Order denying said motion pursuant to
the rules existing prior to the 1997 Rules of Civil Procedure. He failed to file such appeal but instead
filed a petition for certiorari under Rule 65 with the CA on April 4, 1994. This is prejudicial to
respondent Acero as the special civil action of certiorari is not the proper remedy. If the aggrieved
party does not interpose a timely appeal from the adverse decision, a special civil action for certiorari
is not available as a substitute for a lost appeal.
43

What respondent Acero should have done was to file a petition for relief from judgment when he
became aware that he lost his right of appeal on December 26, 1991. Even with this approach,
defendant Acero was also remiss.
In sum, the petition for certiorari instituted by respondent Acero with the CA is a wrong remedy; a
simple appeal to the CA would have sufficed. Since the certiorari action is an improper legal action,
the petition should have been rejected outright by the CA.
Assuming arguendo that a petition for certiorari with the CA is the appropriate remedy, still, said
petition was filed out of time.
The petition before the CA was filed prior to the effectivity of the 1997 Rules of Court when there
was still no prescribed period within which to file said petition, unlike in the present Section 4 of Rule
65 wherein a Petition for Certiorari and Mandamus must be filed within 60 days from notice of the
judgment, final order, or resolution appealed from, or of the denial of the petitioners motion for new
trial or reconsideration after notice of judgment.
Section 4, Rule 65 previously read:
Section 4. Where petition filed.The petition may be filed in the Supreme Court, or, if it relates to
the acts or omissions of an inferior court, or of a corporation, board or officer or person, in a Court of
First Instance having jurisdiction thereof. It may also be filed in the Court of Appeals if it is in aid of
its appellate jurisdiction.
Petitions for certiorari under Rules 43, 44 and 45 shall be filed with the Supreme Court.
Before the 1997 Rules of Civil Procedure became effective on July 1, 1997, the yardstick to
determine the timeliness of a petition for certiorari under Rule 65 was the reasonableness of the time
that had elapsed from receipt of notice of the assailed order/s of the trial court up to the filing of the
appeal with the CA.
44
In a number of cases, the Court ruled that reasonable time can be pegged at
three (3) months.
45

In the present case, the Order denying the Motion to Nullify the Compromise Agreement was issued
on December 6, 1991. The petition for certiorari was filed on April 4, 1994. The period of two (2)
years and four (4) months cannot be considered fair and reasonable. With respect to the January 15,
1992 Order granting the writ of execution and the October 6, 1992 Order directing the issuance of
the writ, it is evident that the petition before the CA was filed more than three (3) months after the
receipt by respondent Acero of said orders and the filing of the petition is likewise unreasonably
delayed.
On the second issue, petitioners assail the ruling of the appellate court that David Victorio who is
claimed to be the lessor of Acero, and who is impleaded as a defendant in Civil Case No. 9581-P,
was not made a party to the Compromise Agreement and hence, he may later "assail the
compromise agreement as not binding upon him, thereby giving rise to another suit."
46

We find merit in petitioners position.
The CA was unable to cite a law or jurisprudence that supports the annulment of a compromise
agreement if one of the parties in a case is not included in the settlement. The only legal effect of the
non-inclusion of a party in a compromise agreement is that said party cannot be bound by the terms
of the agreement. The Compromise Agreement shall however be "valid and binding as to the parties
who signed thereto."
47

The issue of ownership between petitioners and David Victorio can be threshed out by the trial court
in Civil Case No. 9581-P. The proper thing to do is to remand the case for continuation of the
proceedings between petitioners and defendant David Victorio but not to annul the partial judgment
between petitioners and respondent Acero which has been pending execution for 20 years.
With regard to the third issue, petitioners assail the ruling of the CA that the Compromise Agreement
is vague as there is still a need to determine the exact metes and bounds of the encroachment on
the petitioners lot.
The object of a contract, in order to be considered as "certain," need not specify such object with
absolute certainty. It is enough that the object is determinable in order for it to be considered as
"certain." Article 1349 of the Civil Code provides:
Article 1349. The object of every contract must be determinate as to its kind. The fact that the
quantity is not determinate shall not be an obstacle to the existence of the contract, provided it is
possible to determine the same, without the need of a new contract between the parties.
In the instant case, the title over the subject property contains a technical description that provides
the metes and bounds of the property of petitioners. Such technical description is the final
determinant of the extent of the property of petitioners. Thus, the area of petitioners property is
determinable based on the technical descriptions contained in the TCTs.
Notably, the determination made by the Bureau of Landsthat Verification Survey Plan No. Vs-13-
000135 is the correct Planis controlling and shall prevail over Verification Survey Plan No. Vs-13-
000185 submitted by Acero. Findings of fact by administrative agencies, having acquired expertise
in their field of specialization, must be given great weight by this Court.
48
Even if the exact area of
encroachment is not specified in the agreement, it can still be determined from the technical
description of the title of plaintiff which defendant Acero admitted to be correct. Thus, the object of
the Compromise Agreement is considered determinate and specific.
Moreover, "vagueness" is defined in Blacks Law Dictionary as: "indefinite, uncertain; not susceptible
of being understood."
A perusal of the entire Compromise Agreement will negate any contention that there is vagueness in
its provisions. It must be remembered that in the interpretation of contracts, an instrument must be
construed so as to give effect to all the provisions of these contracts.
49
Thus, the Compromise
Agreement must be considered as a whole.
The alleged vagueness revolves around the term "portion" in paragraph three (3) of the Compromise
Agreement,
50
taken together with paragraph one (1) which we quote:
1. That defendants admit and recognize the ownership of the plaintiff over the property subject of
this case, covered by TCT No. S-107639 (75600), S-107643 (67007), and S-107640 (67006) with a
total area of 26,705 square meters;
x x x x
3. That defendant Acero admits that the property he is presently occupying by way of lease is
encroaching on a portion of the property of the plaintiff and assume and undertakes to vacate,
remove and clear any and all structures erected inside the property of the plaintiff by himself and
other third parties, duly authorized and/or who have an existing agreement with defendant Acero,
and shall deliver said portion of the property of the plaintiff free and clear of any unauthorized
structures, shanties, occupants, squatters or lessees within a period of sixty (60) days from date of
signing of this compromise agreement. Should defendant Acero fail in his obligation to vacate,
remove and clear the structures erected inside the property of the plaintiff within the period of 60
days afore-mentioned, plaintiff shall be entitled to a writ of execution for the immediate demolition or
removal of said structure to fully implement this agreement; and ejectment of all squatters and
occupants and lessees, including the dependents to fully implement this agreement. (Emphasis
supplied.)
Respondent harps on their contention that the term "portion" in paragraph 3 of the Compromise
Agreement refers to the property which they are occupying. Respondents interpretation of
paragraph 3 of the Compromise Agreement is mistaken as it is anchored on his belief that the
encroachment on the property of petitioners is only a portion and not the entire lot he is occupying.
This is apparent from his Supplement to his Petition for Certiorari and Mandamus where he
explained:
Petitioner [Acero] entered into this agreement because of his well-founded belief and conviction
that a portion of the property he is occupying encroaches only a portion of the property of private
respondent. In fine, only a portion of the property petitioner is occupying (not all of it) encroaches on
a portion of the property of private respondent.
51

This contention is incorrect. The agreement is clear that respondent Acero admitted that "the
property he is presently occupying by way of lease is encroaching on a portion of the property of the
plaintiff." Thus, whether it is only a portion or the entire lot Acero is leasing that will be affected by
the agreement is of no importance. What controls is the encroachment on the lot of petitioner
Domingo Realty regardless of whether the entire lot or only a portion occupied by Acero will be
covered by the encroachment.
While it may be the honest belief of respondent Acero that only a portion of the lot he is occupying
encroaches on the 26,705-square meter lot of petitioner Domingo Realty and later, Ayala Steel, the
Court finds that the true and real agreement between the parties is that any encroachment by
respondent Acero on the lot of petitioners will be surrendered to the latter. This is apparent from the
undertaking in paragraph 3 that defendant Acero "undertakes to vacate, remove and clear any and
all structures erected inside the property of the plaintiff." This prestation results from the admission
against the interest of respondent Acero that he "admits and recognizes the ownership of the plaintiff
(Domingo Realty)" over the subject lot. The controlling word therefore is "encroachment"whether it
involves a portion of or the entire lot claimed by defendant David Victorio. To reiterate, the word
"portion" refers to petitioners lot and not that of Aceros. Contrary to the disposition of the CA, we
rule that the terms of the Compromise Agreement are clear and leave no doubt upon the intent of
the parties that respondent Acero will vacate, remove, and clear any and all structures erected inside
petitioners property, the ownership of which is not denied by him. The literal meaning of the
stipulations in the Compromise Agreement will control under Article 1370 of the Civil Code. Thus, the
alleged vagueness in the object of the agreement cannot be made an excuse for its nullification.
Finally, with regard to the fourth issue, petitioners question the finding of the CA that the compromise
judgment can be set aside on the ground of mistake under Article 2038 of the Civil Code, because
respondent Acero gave his consent to the Compromise Agreement in good faith that he would only
vacate a portion of his lot in favor of petitioner Domingo Realty.
We rule otherwise.
Articles 2038 and 1330 of the Civil Code allow a party to a contract, on the ground of mistake, to
nullify a compromise agreement, viz:
Article 2038. A compromise in which there is mistake, fraud, violence, intimidation, undue influence,
or falsity of documents, is subject to the provisions of Article 1330 of this Code.
Article 1330. A contract where the consent is given through mistake, violence, intimidation, undue
influence, or fraud is voidable (emphasis supplied).
"Mistake" has been defined as a "misunderstanding of the meaning or implication of something" or
"a wrong action or statement proceeding from a faulty judgment x x x."
52

Article 1333 of the Civil Code of the Philippines however states that "there is no mistake if the party
alleging it knew the doubt, contingency or risk affecting the object of the contract."
Under this provision of law, it is presumed that the parties to a contract know and understand the
import of their agreement. Thus, civil law expert Arturo M. Tolentino opined that:
To invalidate consent, the error must be excusable. It must be real error, and not one that could
have been avoided by the party alleging it. The error must arise from facts unknown to him. He
cannot allege an error which refers to a fact known to him, or which he should have known by
ordinary diligent examination of the facts. An error so patent and obvious that nobody could have
made it, or one which could have been avoided by ordinary prudence, cannot be invoked by the one
who made it in order to annul his contract. A mistake that is caused by manifest negligence cannot
invalidate a juridical act.
53
(Emphasis supplied.)
Prior to the execution of the Compromise Agreement, respondent Acero was already aware of the
technical description of the titled lots of petitioner Domingo Realty and more so, of the boundaries
and area of the lot he leased from David Victorio. Before consenting to the agreement, he could
have simply hired a geodetic engineer to conduct a verification survey and determine the actual
encroachment of the area he was leasing on the titled lot of petitioner Domingo Realty. Had he
undertaken such a precautionary measure, he would have known that the entire area he was
occupying intruded into the titled lot of petitioners and possibly, he would not have signed the
agreement.
In this factual milieu, respondent Acero could have easily averted the alleged mistake in the contract;
but through palpable neglect, he failed to undertake the measures expected of a person of ordinary
prudence. Without doubt, this kind of mistake cannot be resorted to by respondent Acero as a
ground to nullify an otherwise clear, legal, and valid agreement, even though the document may
become adverse and even ruinous to his business.
Moreover, respondent failed to state in the Compromise Agreement that he intended to vacate only
a portion of the property he was leasing. Such provision being beneficial to respondent, he, in the
exercise of the proper diligence required, should have made sure that such matter was specified in
the Compromise Agreement. Respondent Aceros failure to have the said stipulation incorporated in
the Compromise Agreement is negligence on his part and insufficient to abrogate said agreement.
In Torres v. Court of Appeals,
54
which was also cited in LL and Company Development and Agro-
Industrial Corporation v. Huang Chao Chun,
55
it was held that:
Under Article 1315 of the Civil Code, contracts bind the parties not only to what has been expressly
stipulated, but also to all necessary consequences thereof, as follows:
ART. 1315. Contracts are perfected by mere consent, and from that moment the parties are bound
not only to the fulfillment of what has been expressly stipulated but also to all the consequences
which, according to their nature, may be in keeping with good faith, usage and law.
It is undisputed that petitioners are educated and are thus presumed to have understood the terms
of the contract they voluntarily signed. If it was not in consonance with their expectations, they
should have objected to it and insisted on the provisions they wanted.
Courts are not authorized to extricate parties from the necessary consequences of their acts, and
the fact that the contractual stipulations may turn out to be financially disadvantageous will not
relieve parties thereto of their obligations. They cannot now disavow the relationship formed from
such agreement due to their supposed misunderstanding of its terms.
The mere fact that the Compromise Agreement favors one party does not render it invalid. We ruled
in Amarante v. Court of Appeals that:
Compromises are generally to be favored and cannot be set aside if the parties acted in good faith
and made reciprocal concessions to each other in order to terminate a case. This holds true even if
all the gains appear to be on one side and all the sacrifices on the other (emphasis supplied).
56

One final note. While the Court can commiserate with respondent Acero in his sad plight,
nonetheless we have no power to make or alter contracts in order to save him from the adverse
stipulations in the Compromise Agreement. Hopefully this case will serve as a precaution to
prospective parties to a contract involving titled lands for them to exercise the diligence of a
reasonably prudent person by undertaking measures to ensure the legality of the title and the
accurate metes and bounds of the lot embraced in the title. It is advisable that such parties (1) verify
the origin, history, authenticity, and validity of the title with the Office of the Register of Deeds and
the Land Registration Authority; (2) engage the services of a competent and reliable geodetic
engineer to verify the boundary, metes, and bounds of the lot subject of said title based on the
technical description in the said title and the approved survey plan in the Land Management Bureau;
(3) conduct an actual ocular inspection of the lot; (4) inquire from the owners and possessors of
adjoining lots with respect to the true and legal ownership of the lot in question; (5) put up signs that
said lot is being purchased, leased, or encumbered; and (6) undertake such other measures to make
the general public aware that said lot will be subject to alienation, lease, or encumbrance by the
parties. Respondent Acero, for all his woes, may have a legal recourse against lessor David Victorio
who inveigled him to lease the lot which turned out to be owned by another.
WHEREFORE, the petition is hereby GRANTED and the assailed Decision and Resolution of the CA
are REVERSED. The questioned Orders of the Pasay City RTC dated December 6, 1991, January
15, 1992, October 6, 1992, January 12, 1994, and February 1, 1994, including the Decision dated
December 7, 1987, are AFFIRMED. The case is remanded to the Pasay RTC, Branch III for further
proceedings with respect to petitioner Domingo Realtys November 15, 1981 Complaint
57
against
one of the defendants, David Victorio. No costs.
SO ORDERED.
AURORA FE B. CAMACHO, G.R. No. 127520
Petitioner,

Present:

YNARES-SANTIAGO, J.,
- versus - Chairperson,
AUSTRIA-MARTINEZ,
CALLEJO, SR., and
CHICO-NAZARIO, JJ.

COURT OF APPEALS and
ANGELINO BANZON,
Respondents.
Promulgated:

February 9, 2007

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


D E C I S I O N

CALLEJO, SR., J .:


This is a Petition for Review on Certiorari of the Decision
[1]
of the Court of Appeals (CA)
in CA-G.R. CV No. 41268 affirming with modification the Decision
[2]
of the Regional Trial Court
(RTC) of Balanga, Bataan, Branch 1.


The Antecedents

Camacho was the owner of Lot 261, a 7.5-hectare parcel of land situated in
Balanga, Bataan and covered by Transfer Certificate of Title No. T-10,185.

On July 14, 1968, Camacho and respondent Atty. Angelino Banzon entered into a
contract for legal services denominated as a Contract of Attorneys Fee.
[3]
The agreement is
worded as follows:

KNOW ALL MEN BY THESE PRESENTS:

That we, Aurora B. Camacho, widow, of legal age and resident of
Balanga, Bataan, and Angelino M. Banzon, have agreed on the following:

That I, Aurora B. Camacho is the registered owner of Lot No. 261
Balanga Cadastre, has secured the legal services of Atty. Angelino M. Banzon to
perform the following:

1. To negotiate with the Municipal Government of
Balanga so that the above-mentioned lot shall be the site of the
proposed Balanga Public Market;

2. To sell 1200 sq. m. for the sum of TWENTY- FOUR
THOUSAND PESOS (P24,000.00) right at the Market Site;

3. And to perform all the legal phase incidental to this
work.

That for and in consideration of this undertaking, I bind myself to pay Atty.
Angelino M. Banzon FIVE THOUSAND SQUARE METERS (5000) of the said
lot, for which in no case I shall not be responsible for payment of income taxes in
relation hereto, this area located also at market site.

That I, Angelino M. Banzon, is willing to undertake the above-enumerated
undertaking.

WITNESS our hands this 14 of July, 1968, in Balanga, Bataan.

(Signed) (Signed)
ANGELINO M. BANZON AURORA B. CAMACHO


Pursuant to the agreement, Atty. Banzon, on even date, sent a letter-proposal
[4]
to the
municipal council offering three sites for the proposed public market which included Lot 261. Still
on the same date, Camacho executed a Special Power of Attorney
[5]
giving Atty. Banzon the
authority to execute and sign for her behalf a Deed of Donation transferring a
17,000-sq-m portion of Lot 261 to the municipal government of Balanga, Bataan. The Deed of
Donation was executed, which was later accepted by the local government unit in Municipal
Resolution No. 127.
[6]


Silvestre Tuazon had been an agricultural tenant in Lot 261 since World War II.
On August 22, 1968, Tuazon and Camacho entered into an Agreement with Voluntary
Surrender
[7]
where Tuazon voluntarily surrendered his right as a tenant of the
landholding. Despite the agreement, however, Tuazon plowed a portion of the lot and
planted palay without Camachos consent. Since Tuazon refused to vacate the premises,
Camacho and the Municipality of Balanga, through then Acting Mayor Victor Y. Baluyot, filed a
complaint
[8]
for forcible entry on November 18, 1969 before the Municipal Trial Court (MTC) of
Balanga, Bataan. The complaint was docketed as Civil Case No. 424. The case was eventually
decided in favor of the plaintiffs and Tuazon was ordered to vacate the lot. On appeal to the
RTC, trial de novo ensued, in view of the absence of the transcript of stenographic notes of the
proceedings before the MTC. The RTC issued a preliminary mandatory injunction ordering
Tuazon to discontinue entering the subject premises until further orders of the court.
[9]


On September 1, 1973, the plaintiffs, through Atty. Banzon, and Tuazon entered into an
Agreement to Stay Court Order.
[10]
Under the agreement, Tuazon was allowed to cultivate
specific portions of the property as indicated in a sketch plan which the parties prepared, and to
use the markets water supply to irrigate his plants within the lot subject to the markets
preferential rights. The parties also contracted that the agreement shall in no way affect the
merits of Civil Case No. 3512 and CAR Case No. 520-B73; and that no part shall be construed
as impliedly creating new tenancy relationship.

On December 6, 1973, Camacho filed a Manifestation
[11]
in Civil Case No. 3512
declaring that she had terminated the services of Atty. Banzon and had retained the services of
new counsel, Atty. Victor De La Serna.

On December 17, 1973, Atty. Banzon filed a Complaint-in-Intervention
[12]
in Civil Case No.
3512. He alleged that Camacho had engaged his services as counsel in CAR Case No. 59 B65
(where a favorable decision was rendered) and in Civil Case No. 3512. Under the Contract of
Attorneys Fee which they had both signed, Camacho would compensate him with a 5,000-sq-m
portion of Lot 261 in case he succeeds in negotiating with the Municipality of Balanga in
transferring the projected new public market which had been set for construction at the Doa
Francisca Subdivision, all legal requirements having been approved by a municipal resolution,
the Development Bank of the Philippines, and the National Urban Planning Commission. Atty.
Banzon further claimed that as a consequence of the seven cases filed by/against Camacho,
she further bound herself orally to give him a 1,000-sq-m portion ofLot 261 as attorneys fee. He
had also acquired from Camacho by purchase an 80-sq-m portion of the subject lot as
evidenced by a Provisional Deed of Sale
[13]
and from third parties an 800-sq-m portion. He
further declared that his requests for Camacho to deliver the portions of the subject lot remained
unheeded, and that of the seven cases
[14]
he had handled for Camacho, four had been decided
in her favor while three are pending. Atty. Banzon thus prayed for the following relief:

1. Ordering the ejectment of Defendant Silvestre Tuazon, in so far as
(6880) square meters is concerned, INTERVENORS claim over Lot 261;

2. The First Cause of Action, ordering the Plaintiff Aurora B. Camacho to
deliver (5000) square meters as per Annex A; EIGHTY square meters as per
Annex C; EIGHT HUNDRED (800) square meters which the
INTERVENOR purchased from third parties;

3. On the Second Cause of Action, ordering the Plaintiff Aurora B.
Camacho to pay the sum of P8,820.00, corresponding to the lease rental of
(5880) square meters a month, counted from July, 1973, until the same is
delivered to the INTERVENOR;

4. On the Third Cause of Action, ordering the Plaintiff Aurora B.
Camacho to deliver (1000) square meters, as attorneys fee in handling seven (7)
cases;

5. Ordering the Plaintiff Aurora B. Camacho and Defendant
Silvestre Tuazon to pay jointly and severally, the sum of P5,000.00 for attorneys
fee for legal services to the INTERVENOR; cost and litigation expenses of
P1,000. until the case is terminated.

6. To grant such relief, just and equitable in the premises.
[15]



Camacho opposed
[16]
Atty. Banzons motion on the ground that the admission of the
complaint-in-intervention would merely serve to delay the case. She also claimed that his
interest could be fully ventilated in a separate case for recovery of property or for damages.

On April 5, 1974, the RTC granted
[17]
the motion and subsequently admitted the
complaint-in-intervention.

On December 31, 1973, Atty. Banzon and Tuazon entered into the following amicable
settlement:

1. That for and in consideration of the sum of TWO THOUSAND PESOS
(P2,000.00), Philippine currency, which have been received from the
INTERVENOR and acknowledged to have been received by the Defendant
Silvestre Tuazon, the latter hereby acknowledges, waives his defenses against
the claim of the INTERVENOR ANGELINO M. BANZON over a portion of Lot No.
261, portion of the lot in question, to the extent of SIX THOUSAND EIGHT
HUNDRED EIGHTY (6880) SQUARE METERS as claimed and contained in the
COMPLAINT IN INTERVENTION and to give effect to this AMICABLE
SETTLEMENT hereby surrenders the actual possession of the said portion,
subject to the approval of this Hon. Court, in favor of the INTERVENOR;

2. That the herein parties to this AMICABLE SETTLEMENT waive and
renounce whatever rights or claims, including future claims that each may have
against each other;

3. That the parties herein bind themselves to comply with the conditions
of the foregoing settlement;

4. That the foregoing AMICABLE SETTLEMENT was realized and
achieved between the herein parties, thru the prior intercession of the
Defendants counsel Atty. Narciso V. Cruz, Jr.

WHEREFORE, it is respectfully prayed that the foregoing AMICABLE
SETTLEMENT be approved and made as the basis of this Hon. Courts decision
between the herein INTERVENOR and DEFENDANT Silvestre Tuazon.
[18]



In Answer
[19]
to the complaint-in-intervention, Camacho denied that she solicited the
services of Atty. Banzon to facilitate the transfer of the site of the proposed public market; in
fact, it was Atty. Banzon who approached and convinced her to donate a portion of the lot to
the municipality of Balanga. He assured her that the municipality of Balanga planned to relocate
the public market and was scouting for a new location. He also told her that her lot appeared to
be the most ideal location, and that he would take care of all the legal problems.

Camacho admitted, however, that she signed the Contract of Attorneys Fee but only
upon the request of Atty. Banzon. He told her that the document would be shown to the
municipal councilors for formalitys sake to prove his authority to act for and in behalf of
Camacho. It was never intended to bind her to pay attorneys fees.
[20]
She further denied that
she agreed to give to Atty. Banzon 1,000 sq m for handling the seven cases; they never
discussed attorneys fees. The cases stemmed from his assurance that he would take care of
any legal problem resulting from the donation of her property. She was not even a party in some
of the cases cited by Atty. Banzon.
[21]
Lastly, she denied that he had made demands to deliver
the mentioned portions of the property.
[22]


In his Reply,
[23]
Atty. Banzon countered that the Balanga Municipal Council Resolution No.
128 transferring the market site to Camachos property was enacted precisely because of his
letter-proposal
[24]
to the municipal council.

On August 14, 1977, Camacho and Tuazon entered into a Compromise
Agreement,
[25]
whereby Camacho agreed to transfer a 1,000-sq-m portion of Lot 261-B in favor
of Tuazon; for his part, Tuazon moved to dismiss Civil Case No. 3805 and to remove all the
improvements outside the portion of the property which Camacho had agreed to convey to him.
Thus, the RTC rendered a partial decision
[26]
approving the compromise agreement.

On September 12, 1978, Camacho filed a Motion to Dismiss
[27]
the Complaint-in-
Intervention filed by Atty. Banzon on the ground that the jurisdiction of the court to try the case
ceased to exist because the principal action had been terminated. The RTC denied the motion
in its Order
[28]
dated March 16, 1979. It held that Atty. Banzon had an interest over the subject
property which he had to protect and that the compromise agreement between Camacho and
Tuazon did not include him. Moreover, the dismissal of the intervention would not achieve its
purpose of avoiding multiplicity of suits. The propriety of the denial of Camachos motion to
dismiss was finally settled by this Court in Camacho v. Court of Appeals
[29]
where this Court
affirmed the denial of the motion.
After trial on the merits, the RTC rendered a Decision
[30]
on September 1, 1992 in favor of
Atty. Banzon. The fallo reads:

ACCORDINGLY, judgment is hereby rendered:

1. Ordering plaintiff Aurora B. Camacho under the Contract of Attorneys
Fees, [to deliver] 5000 square meters of the subject landholding,Lot 261-B-1,
covered by Transfer Certificate of Title No. T-76357, or any other derivative
sublots of the original Lot 261-B;

2. Declaring the dismissal of said intervenor from the case at bar as
unjustified;

3. Ordering said plaintiff to pay and deliver to said intervenor 1000 square
meters of the property in question, Lot 261-B-1 or any other derivative sublots of
the original Lot 261-B in case of deficiency, for legal services rendered in seven
(7) cases;

4. Directing said plaintiff to deliver to said intervenor, under a Provisional
Deed of Sale, 80 square meters of the subject property, Lot 261-B-1 or any other
derivative sublots of the original Lot 261 in case of deficiency, after payment of
the balance of the purchase price;

5. Ordering said plaintiff to execute the corresponding Deed of Sale in
favor of said intervenor for the aforesaid 80 square meters;

6. Condemning said plaintiff to pay moral damages to said intervenor in
the amount of P100,000.00; attorneys fees in the sum ofP30,000.00; and the
costs of the suit.

SO ORDERED.
[31]



According to the RTC, Camacho had indeed read the contract and freely affixed her
signature thereon. Applying the provisions of Section 7 (now section 9), Rule 130
[32]
of the Rules
of Court, it concluded that the terms of the contract were embodied in the document itself.
Moreover, Camacho did not bother to pay for all the other cases being handled by Atty. Banzon
because she knew that she had agreed already to pay attorneys fees. The court likewise found
that applying the provisions of Sections 24
[33]
and 26,
[34]
Rule 138 of the Rules of Court, the area
of the lot agreed upon as attorneys fees appears to be a reasonable compensation for his
services. Since Atty. Banzon handled other cases subsequent to the execution of the contract
of attorneys fees, the additional 1,000-sq-m lot which the parties had orally agreed upon is
proper. The RTC declared that Atty. Banzon was entitled to be compensated based
on quantum meruit since his dismissal from the present case was unjustified. It also held that
Camacho was obliged to execute the necessary public instrument covering the 80-sq-m portion
of the lot which she had sold to Atty. Banzon. It went further and awarded moral damages to
Atty. Banzon on account of the mental anguish and besmirched reputation he had suffered.

On October 8, 1992, Atty. Banzon filed a Motion for Execution Pending
Appeal.
[35]
Camacho, on the other hand, filed a Notice of Appeal. Atty. Banzon filed a motion to
dismiss on the ground that since the case originated from the municipal court, it should be
assailed via petition for review. On November 20, 1992, the court issued an Order
[36]
denying
the motion for execution pending appeal for failure to state good reasons therefor. It likewise
granted the notice of appeal on the ground that the complaint-in-intervention originated from the
RTC and not from the MTC; under the factual backdrop of the case, ordinary appeal is proper.
On appeal to the CA, Camacho raised the following errors:

I.
THE LOWER COURT ERRED IN ALLOWING JUDGE ABRAHAM VERA TO
SIGN THE DECISION IN THE INSTANT CASE, CONSIDERING THAT JUDGE
VERA HAD LONG CEASED TO BE THE JUDGE OF THAT COURT AND WAS
THE PRESIDING JUDGE OF BRANCH 90 OF THE REGIONAL TRIAL COURT
OF QUEZON CITY WHEN THE INSTANT DECISION WAS SIGNED
ON SEPTEMBER 1, 1992.

II.
THE LOWER COURT ERRED IN UPHOLDING THE VALIDITY AND DUE
EXECUTION OF CONTRACT EXH. C AND IN ORDERING PLAINTIFF TO
DELIVER TO INTERVENOR 5,000 SQUARE METERS OF LOT 261-B-1, T.C.T.
T-76357, CONSIDERING THAT THIS LOT IS NOT SPECIFIED IN EXH. C.

III.
THE LOWER COURT ERRED IN DECLARING THAT INTERVENORS
DISCHARGE AS PLAINTIFFS COUNSEL IN THE CASE AT BAR WAS
UNJUSTIFIED, IN AWARDING INTERVENOR MORAL DAMAGES, AND IN
DISMISSING PLAINTIFFS COUNTERCLAIMS.

IV.
THE LOWER COURT ERRED IN AWARDING INTERVENOR 1,000 SQUARE
METERS OF PLAINTIFFS LAND FOR HIS HANDLING OF ALLEGED SEVEN
CASES.

V.
THE LOWER COURT ERRED IN ORDERING PLAINTIFF TO EXECUTE A
FINAL DEED OF SALE FOR 80 SQUARE METERS OUT OF LOT 261-B-1,
CONSIDERING THAT LOT 261-B-1 IS NOT SPECIFIED IN THE PROVISIONAL
DEED OF SALE.
[37]



On October 29, 1996, the CA rendered a decision
[38]
affirming with modification the
RTC ruling. The fallo reads:

WHEREFORE, foregoing considered, the appealed decision is hereby
AFFIRMED with modification requiring plaintiff Camacho to DELIVER 5,000
sq.m. and 1,000 sq. m. of Lot 261-B-1 to Intervenor as his attorneys fee and 80
sq. m. also from Lot 261 subject to the conditions embodied under no. 4 of the
dispositive portion of the assailed decision all within thirty (30) days from the
finality of this decision.

SO ORDERED.
[39]



The CA held that all the elements of a valid contract were present: Camacho (a dentistry
graduate and an experienced businesswoman conversant in English) cannot plead that she did
not understand the undertaking she had entered into; the object of the contract is certain since
the genus of the object was expressed although there was no determination of the individual
specie; and the cause of the obligation to negotiate and offer a site where the public market
will be constructed is not unlawful and cannot be considered as influence peddling. As to the
alleged violation of the terms of the special power of attorney, the court held that Camacho was
estopped from claiming damages by reason thereof.

The CA likewise found the award of moral damages to be in order; that the discharge of
Atty. Banzon as counsel for Camacho was not justified and his discharge does not in any way
deprive him of his right to attorneys fees. Lastly, the CA held that the RTC erred in requiring
Camacho to deliver Lot 261-B-1, since Atty. Banzon cannot demand a portion of superior quality
in the same way that appellant cannot transfer an inferior quality.


On December 3, 1996, the CA issued a Resolution
[40]
instituting petitioner Aurora Fe
Camacho as substitute for the deceased Aurora B. Camacho.

Atty. Banzon filed a Motion for Partial Reconsideration of the CA Decision, as well as a
Motion to Declare Decision Final insofar as Camacho was concerned. On the other hand,
Camacho moved to cancel the notice of lis pendens. In the meantime, petitioner had filed the
petition before this Court. Thus, the CA no longer acted on the motions on the ground that it had
already lost jurisdiction over the case.
[41]


In the present petition, petitioner raises the following issues:

1. WHETHER OR NOT INTERVENOR CAN BE AWARDED A FAVORABLE
JUDGMENT DESPITE ABSENCE OF ANY FINDINGS OF FACT IN THE
DECISION WHICH SHOW THAT HE WAS ABLE TO PROVE THE (SIC) HIS
MATERIAL ALLEGATIONS UPON WHICH HE BASIS (SIC) HIS CLAIM UNDER
CONTRACT OF ATTORNEYS FEE, EXH. C, ESPECIALLY PAR. 7 OF THE
COMPLAINT-IN-INTERVENTION.

CAN THE BURDEN OF PROVING THE AND (SIC) DUE EXECUTION OF
CONTRACT EXH. C BE SHIFTED TO PLAINTIFF CAMACHO WITHOUT
VIOLATING SECT. 1, RULE 131, OF THE RULES OF COURT?

2. DID THE COURT OF APPEALS CORRECTLY APPLY THE PROVISION OF
ART. 1246 OF THE CIVIL CODE TO THE INSTANT CASE IN RULING THAT
CONTRACT EXH. C IS VALID AS TO OBJECT?

WILL THE DECISION REQUIRING THE DELIVERY OF 5,000 SQUARE
METERS OF LOT 261 BASED ON THE SAID ART. 1246, IN WHICH
INTERVENOR CANNOT DEMAND A THING OF SUPERIOR QUALITY AND
NEITHER CAN PLAINTIFF CAMACHO DELIVER A THING OF INFERIOR
QUALITY, BE SUSCEPTIBLE OF IMPLEMENTATION WITHOUT NEED OF A
NEW CONTRACT OR AGREEMENT BETWEEN THE PARTIES?

IF SO, WILL THAT NOT ALL THE MORE PROVE THAT TE OBJECT OF
CONTRACT EXH. C IS INDETERMINATE PURSUANT [TO] ART. 1349 OF
THE CIVIL CODE?

3. WHETHER OR NOT THE COURT OF APPEALS WAS IN A POSITION TO
PROCLAIM THE LEGALITY OR ILLEGALITY OF THE ALLEGED CONTRACT
WITHOUT FIRST REVEALING OR SETTING FORTH THE REAL NATURE OF
THIS OR THESE UNDERTAKINGS BASED ON THE ALLEGATIONS AND
TESTIMONIES OF INTERVENOR. HENCE, WHETHER OR NOT THE TWO
UNDERTAKINGS IN CONTRACT EXH. C ARE LAWFUL.

4. WHETHER OR NOT THE COURT OF APPEALS COMMIT A GRAVE ABUSE
OF DISCRETION BY TREATING LIKE A MATTER OUT OF RECORD THE
ALLEGED REASONS OF PLAINTIFF CAMACHO FOR DISMISSING
INTERVENOR AS HER COUNSEL IN THE CASE AT BAR, WHICH WERE
ENUMERATED AND DISCUSSED ON PAGES 42-60 OF HER APPELLANTS
BRIEF, ANNEX B, AND WHICH WERE PRINCIPALLY AND SPECIFICALLY
COVERED IN HER THIRD ASSIGNMENT OF ERRORS AND CONSIDERING
THAT ONE OF THESE ALLEGED REASONS ALSO CONSTITUTE PLAINTIFF
CAMACHOS COUNTERCLAIM FOR WHICH SHE IS SEEKING MORAL
DAMAGES OF P100,000.

DID NOT THE COURT OF APPEALS COMMIT GRAVE ABUSE OF
DISCRETION IN REPRESENTING PLAINTIFF CAMACHOS THIRD
ASSIGNED ERROR AS REFERRING MERELY TO THE ISSUE OF WHETHER
OR NOT THE AWARD OF MORAL DAMAGES TO INTERVENOR IS
JUSTIFIED.

WAS NOT PLAINTIFF CAMACHO THEREBY DEPRIVED OF HER
CONSTITUTIONAL RIGHT TO DUE PROCESS OF LAW?

5. WHETHER OR NOT THE AWARD OF 1,000 SQ. M. OF LOT 261
ATTORNEYS FEE FOR ALLEGED HANDLING OF SEVEN CASES HAS ANY
LEGAL BASIS CONSIDERING THAT THERE IS NO SHOWING IN THE
DECISION THAT THE ORAL CONTRACT ALLEGED BY INTERVENOR TO BE
THE BASIS OF THE SAID ATTORNEYS FEE WAS DULY POROVEN (SIC).
[42]



Petitioner argues that the findings of facts in the assailed decision are mere conclusions,
without citation of evidence to support them. She likewise avers that consent was not clearly
proven; the conclusion of the CA was based on the presumption that the document was read
prior to being signed. Petitioner insists that there is no object certain to speak of since the
exact location of the subject property cannot be determined; in short, the issue is not the quality
of the property but its identity. Petitioner further asserts that the cause of the contract pirating
of the municipalitys market project and ejecting the tenant to convert the property into a
commercial establishment is illegal. She further insists that respondent failed to accomplish
the twin objective of ejecting Silvestre Tuazon and converting the remaining land into a
commercial area; thus, he is not entitled to the 5,000-sq-m lot. She further contends that the CA
erred in awarding moral damages because respondent did not ask for it in his complaint-in-
intervention. Lastly, she asserts that the CA erred in affirming the award of the 1,000-sq-m lot
pursuant to a verbal contract between Camacho and respondent, especially considering the
prevailing jurisprudence against a lawyers acquisition of a clients lot in litigation without the
latters consent.

In his Comment,
[43]
respondent counters that the elements of a valid contract are present:
Camachos consent to the contract is evidenced by her signature which was in fact admitted by
the latter; that while it is true that the identity of the 5,000-sq-m portion of Lot 261 has not been
specified due to the absence of the necessary technical descriptions, it is capable of being
made determinate without the need of a new agreement between the parties; as to the validity
of the cause of the contract, the general principle of estoppel applies.

The Ruling of the Court

Article 1305 of the New Civil Code defines a contract as a meeting of minds between two
persons whereby one binds himself, with respect to the other, to give something or to render
some service. Contracts shall be obligatory in whatever form they may have been entered into,
provided all the essential requisites for their validity are present.
[44]


In general, there are three (3) essential requisites for a valid contract: (1) consent of the
contracting parties; (2) an object certain which is the subject of the contract; and (3)
the cause of the obligation which is established.
[45]


The first element
Consent of the contracting parties
Is shown by their signatures on the
Contract

Consent is manifested by the meeting of the offer and the acceptance upon the thing and
the cause which are to constitute the agreement.
[46]
In this case, Camacho admitted the
existence of the contract as well as the genuineness of her signature. However, she claimed
that she signed only upon the request of Atty. Banzon, who told her that the document would
only be shown to the municipal councilors (for formalitys sake) to prove his authority in her
behalf. It was never intended to bind her to pay him attorneys fees;
[47]
in short, petitioner insists
that Camacho had not given her consent to the contract.

We, however, do not agree. The contract between Camacho and respondent is
evidenced by a written document signed by both parties denominated as Contract of Attorneys
Fee. It is an established rule that written evidence is so much more certain and accurate than
that which rests in fleeting memory only; that it would be unsafe, when parties have expressed
the terms of their contract in writing, to admit weaker evidence to control and vary the stronger,
and to show that the parties intended a different contract from that expressed in the writing
signed by them.
[48]
Moreover, the moment a party affixes her signature thereon, he or she is
bound by all the terms stipulated therein and is open to all the legal obligations that may arise
from their breach.
[49]


In the instant case, Camacho voluntarily signed the document evidencing the
contract. Camachos claim that the document was intended only to show respondents authority
to represent her with respect to the transaction is flimsy, since a special power of attorney could
just as easily have accomplished that purpose. In fact, Camacho did execute a Special Power of
Attorney
[50]
after the Contract of Attorneys Fee was executed, and if Camacho were to be
believed, the Contract of Attorneys Fee should have been immediately canceled thereafter
since it was no longer needed. As correctly held by the CA, Camacho was an experienced
businesswoman, a dentistry graduate and is conversant in the English language. We note that
the words and phrases used in the Contract of Attorneys Fee are very simple and clear; thus,
she cannot plead that she did not understand the undertaking she had entered
into.
[51]
Considering that her undertaking was to part with a 5,000-sq-m portion of her property,
she should have been more vigilant in protecting her rights.
Even assuming that the contract did not reflect the true intention of the parties as to their
respective obligations, it is nevertheless binding. The existence of the written contract, coupled
with Camachos admission that the signature appearing thereon was hers, constitute ineluctable
evidence of her consent to the agreement. It cannot be overcome by mere denial and
allegations that they did not intend to be bound thereby. We also note that Camacho did not
avail of the remedy of reformation of the instrument in order to reflect what, according to her,
was the true agreement.

Camachos consent to the contract was further manifested in the following events that
transpired after the contract was executed: the execution of the agreement with voluntary
surrender signed by Tuazon; the execution of the Deed of Donation where Atty. Banzon was
authorized to sign the same on behalf of Camacho; and the sale of 1200 sq. m. portion of the
property right at the market site. In all these transactions, Atty. Banzon represented Camacho
pursuant to the Contract of Attorneys Fee.

The object of the contract
Is still certain despite the parties
Failure to indicate the specific
Portion of the property to be
Given as compensation for services

Articles 1349 and 1460 of the Civil Code provide the guidelines in determining whether or
not the object of the contract is certain:

Article 1349. The object of every contract must be determinate as to
its kind. The fact that the quantity is not determinate shall not be an obstacle to
the existence of the contract, provided it is possible to determine the same,
without the need of a new contract between the parties.

x x x x

Article 1460. A thing is determinate when it is particularly designated
and/or physically segregated from all others of the same class.

The requisite that a thing be determinate is satisfied if at the time the
contract is entered into, the thing is capable of being made determinate without
the necessity of a new or further agreement between the parties.

In this case, the object of the contract is the 5,000-sq-m portion of Lot 261, Balanga
Cadastre. The failure of the parties to state its exact location in the contract is of no moment;
this is a mere error occasioned by the parties failure to describe with particularity the subject
property, which does not indicate the absence of the principal object as to render the contract
void.
[52]
Since Camacho bound herself to deliver a portion of Lot 261 to Atty. Banzon, the
description of the property subject of the contract is sufficient to validate the same.

The Cause or Consideration
Of the contract is not illegal


In general, the cause is the why of the contract or the essential reason which moves the
contracting parties to enter into the contract.
[53]
For the cause to be valid, it must be lawful such
that it is not contrary to law, morals, good customs, public order or public policy.
[54]
Petitioner
insists that the cause of the subject contract is illegal. However, under the terms of the contract,
Atty. Banzon was obliged to negotiate with the municipal government of Balanga for the transfer
of the proposed new public market to Camachos property (Lot 261); to sell 1,200 square meters
right at the market site; and to take charge of the legal phases incidental to the transaction
which include the ejectment of persons unlawfully occupying the property (whether through
amicable settlement or court action), and the execution of the Deed of Donation and other
papers necessary to consummate the transaction. There was thus nothing wrong with the
services which respondent undertook to perform under the contract. They are not contrary to
law, morals, good customs, public order or public policy.

Petitioner argues that the cause of the contract is the pirating of the municipalitys
market project and ejecting the tenant to convert the property into a commercial establishment.
This is premised on the fact that the construction of the new public market atDoa Francisca
Subdivision had originally been approved by the municipal council of Balanga, the Development
Bank of thePhilippines, and the National Urban Planning Commission; and at the time the
contract was executed, Tuazon occupied the property. The records show, however, that the
municipal council was scouting for a new location because it had reservations regarding the site
of the proposed project. And while Lot 261 was considered to be the most ideal (because it
stands on higher ground and is not susceptible to flooding) it does not follow that respondent no
longer negotiated for and in Camachos behalf. There were other terms to be negotiated, such
as the mode of transfer (whether sale or donation); the titling of the property in the name of the
municipality; the terms of payment, if any; and such other legalities necessary to consummate
the transaction.

It must be stressed that Camacho was not deprived of any property right. The portions of
her property which she parted with (the 17,000-sq-m portion donated to the municipality; the
5,000-sq-m portion given to respondent as attorneys fees; and the 1,200-sq-m portion which
was sold) were either in exchange for services rendered or for monetary consideration. In fact,
all these transactions resulted in the increase in the economic value of her remaining properties.

Thus, the defense of the illegality of respondents undertaking is baseless. The municipal
council had the authority to choose the best site for its project. We also note that the market site
was transferred with the active participation of Camacho, who agreed to donate the 17,000-sq-
m portion of her property; the new public market was constructed and became operational; and
the sale of the 1,200-sq-m lot was consummated when Camacho executed the deeds
herself. Thus, petitioner cannot be allowed to evade the payment of Camachos liabilities under
the contract with respondent; a contrary conclusion would negate the rule of estoppel and unjust
enrichment.

As to the additional 1,000-sq-m-portion of Lot 261, however, we find and so hold that
respondent is not entitled thereto.

Indeed, it was sufficiently established that an attorney-client relationship existed between
Camacho and respondent and that the latter handled several other cases for his client. The
records show that the parties had agreed upon specific sums of money as attorneys fees for
the other cases:
Civil Case No. C-1773 P10,000.00
[55]

Civil Case No. 424 P1,000.00
[56]

CAR Case No. 278-B70 P2,000.00
[57]

CAR Case No. 520-B73 P5,000.00
[58]

Civil Case No. 3281 P5,000.00
[59]


This clearly negates respondents claim of an additional 1,000-sq-m share as
compensation for services rendered. Likewise, there being no evidence on respondents right
over the 800-sq-m allegedly purchased from third persons, he is likewise not entitled to this
portion of the property.

On the other hand, Camacho admitted in her Answer
[60]
to the Complaint-in-Intervention
that respondent had purchased from her an 80-sq-m portion of the property. Since she had
merely executed a Provisional Deed of Sale,
[61]
we agree with the RTC that respondent has the
right to require the execution of a public instrument evidencing the sale.

It must be understood that a retainer contract is the law that governs the relationship
between a client and a lawyer.
[62]
Unless expressly stipulated, rendition of professional services
by a lawyer is for a fee or compensation and is not gratuitous.
[63]
Whether the lawyers services
were solicited or they were offered to the client for his assistance, inasmuch as these services
were accepted and made use of by the latter, we must consider that there was a tacit and
mutual consent as to the rendition of the services, and thus gives
rise to the obligation upon the person benefited by the services to make compensation
therefor.
[64]
Lawyers are thus as much entitled to judicial protection against injustice on the part
of their clients as the clients are against abuses on the part of the counsel. The duty of the court
is not only to see that lawyers act in a proper and lawful manner, but also to see that lawyers
are paid their just and lawful fees.
[65]
If lawyers are entitled to fees even if there is no written
contract, with more reason that they are entitled thereto if their relationship is governed by a
written contract of attorneys fee.

In her fourth assigned error, petitioner claims that the CA failed to rule on the propriety of
the dismissal of respondent as Camachos counsel.

We do not agree. We uphold the following pronouncement of the CA on the matter:

In this case, the grounds relied upon by plaintiff Camacho as
justifications for the discharge of Intervenor are not sufficient to deprive the latter
of his attorneys fees.

Intervenor may see the case in an angle different from that seen by
plaintiff Camacho. The procedures adopted by Intervenor may not be what
plaintiff Camacho believes to be the best. But these do not in any way prove that
Intervenor was working to the prejudice of plaintiff Camacho.

Failure of plaintiff Camacho to prove that Intervenor intended to damage
her, We consider the charges of plaintiff Camacho as mere honest difference of
opinions.

As to the charge that Intervenor failed to account the money he collected
in behalf of plaintiff Camacho, the same is not supported by any
evidence. Suffice it to say that mere allegations cannot prove a claim.
[66]



The ruling of the CA on the award of moral damages is likewise in accordance with the
facts and established jurisprudence:

The act of plaintiff Camacho is a clear case of breach of contract. Worst,
when Intervenor demanded payment, plaintiff Camacho adopted all sorts of
strategies to delay payment. This case dragged on for twenty (20) years. And
until this time, plaintiff Camacho continues to unjustifiably refuse the payment of
the attorneys fees due to intervenor.

For these, one can readily imagine the worries and anxiety gone through
by Intervenor. Award of moral damages is but proper.

Moral damages may be granted if the party had proven that he suffered
mental anguish, serious anxiety and moral shock as a consequence of the act of
the other party. Moral damages can be awarded when a party acted in bad faith
as in this case by Camacho.
[67]



IN LIGHT OF ALL THE FOREGOING, the appealed decision is AFFIRMED with
the MODIFICATION that the award of a 1,000-square-meter portion of Lot 261 to respondent
Atty. Angelito Banzon as attorneys fees is DELETED.

SO ORDERED.
SPS. JORGE NAVARRA and CARMELITA
BERNARDO NAVARRA and RRRC
DEVELOPMENT CORPORATION,
Petitioners,


- versus -



PLANTERS DEVELOPMENT BANK and
ROBERTO GATCHALIAN REALTY, INC.,
Respondents.
G.R. No. 172674

Present:

PUNO, C.J., Chairperson,

*
SANDOVAL-GUTIERREZ,
CORONA,
AZCUNA and
GARCIA, JJ.

Promulgated:

July 12, 2007
x---------------------------------------------------------------------------------------x

D E C I S I O N

GARCIA, J .:

Assailed and sought to be set aside in this petition for review under Rule 45 of the Rules
of Court is the decision
[1]
datedSeptember 27, 2004 of the Court of Appeals (CA) in CA-G.R. CV
No. 50002, as reiterated in its resolution
[2]
dated May 8, 2006, denying reconsideration thereof.
The challenged decision reversed that of the Regional Trial Court (RTC) of Makati City, Branch
66, in its Civil Case No. 16917, an action for Specific Performance and Injunction thereat
commenced by the herein petitioners against the respondents. The Makati RTC ruled that a
perfected contract of sale existed in favor of Jorge Navarra and Carmelita Bernardo
Navarra (Navarras) over the properties involved in the suit and accordingly ordered Planters
Development Bank (Planters Bank) to execute the necessary deed of sale therefor. The CA
reversed that ruling. Hence, this recourse by the petitioners.

The facts:

The Navarras are the owners of five (5) parcels of land located at B.F. Homes,
Paraaque and covered by Transfer Certificates of Title (TCT) Nos. S-58017, S-58011, S-
51732, S-51733 and A-14574. All these five (5) parcels of land are the subject of this
controversy.

On July 5, 1982, the Navarras obtained a loan of P1,200,000.00 from Planters Bank
and, by way of security therefor, executed a deed of mortgage over their aforementioned five
(5) parcels of land. Unfortunately, the couple failed to pay their loan obligation. Hence, Planters
Bank foreclosed on the mortgage and the mortgaged assets were sold to it for P1,341,850.00, it
being the highest bidder in the auction sale conducted on May 16, 1984. The one-year
redemption period expired without the Navarras having redeemed the foreclosed properties.

On the other hand, co-petitioner RRRC Development Corporation (RRRC) is a real
estate company owned by the parents of Carmelita Bernardo Navarra. RRRC itself obtained a
loan from Planters Bank secured by a mortgage over another set of properties owned by RRRC.
The loan having been likewise unpaid, Planters Bank similarly foreclosed the mortgaged assets
of RRRC. Unlike the Navarras, however, RRRC was able to negotiate with the Bank for the
redemption of its foreclosed properties by way of a concession whereby the Bank allowed
RRRC to refer to it would-be buyers of the foreclosed RRRC properties who would remit their
payments directly to the Bank, which payments would then be considered as redemption price
for RRRC. Eventually, the foreclosed properties of RRRC were sold to third persons whose
payments therefor, directly made to the Bank, were in excess byP300,000.00 for the redemption
price.

In the meantime, Jorge Navarra sent a letter to Planters Bank, proposing to repurchase
the five (5) lots earlier auctioned to the Bank, with a request that he be given until August 31,
1985 to pay the down payment of P300,000.00. Dated July 18, 1985 and addressed to then
Planters Bank President Jesus Tambunting, the letter reads in full:

This will formalize my request for your kind consideration in allowing my
brother and me to buy back my house and lot and my restaurant building and lot
together with the adjacent road lot.

Since my brother, who is working in Saudi Arabia, has accepted this
arrangement only recently as a result of my urgent offer to him, perhaps it will be
safe for us to set August 31, 1985 as the last day for the payment of
a P300,000.00 downpayment. I hope you will grant us the opportunity to raise the
funds within this period, which includes an allowance for delays.

The purchase price, I understand, will be based on the redemption value
plus accrued interest at the prevailing rate up to the date of our sales contract.
Maybe you can give us a long term payment scheme on the basis of my brothers
annual savings of roughly US$30,000.00 everytime he comes home for his home
leave.

I realize that this is not a regular transaction but I am seeking your favor
to give me a chance to reserve whatever values I can still recover from the
properties and to avoid any legal complications that may arise as a consequence
of the total loss of the Balangay lot. I hope that you will extend to me your
favorable action on this grave matter.


In response, Planters Bank, thru its Vice-President Ma. Flordeliza Aguenza, wrote back
Navarra via a letter dated August 16, 1985, thus:

Regarding your letter dated July 18, 1985, requesting that we give up
to August 31, 1985 to buy back your house and lot and restaurant and building
subject to a P300,000.00 downpayment on the purchase price, please be
advised that the Collection Committee has agreed to your request.

Please see Mr. Rene Castillo, Head, Acquired Assets Unit, as soon as
possible for the details of the transaction so that they may work on the necessary
documentation.


Accordingly, Jorge Navarra went to the Office of Mr. Rene Castillo on August 20, 1985,
bringing with him a letter requesting that the excess payment of P300,000.00 in connection with
the redemption made by the RRRC be applied as down payment for the Navarras repurchase
of their foreclosed properties.

Because the amount of P300,000.00 was sourced from a different transaction between
RRRC and Planters Bank and involved different debtors, the Bank required Navarra to submit a
board resolution from RRRC authorizing him to negotiate for and its behalf and empowering him
to apply the excess amount of P300,000.00 in RRRCs redemption payment as down payment
for the repurchase of the Navarras foreclosed properties.

Meanwhile, titles to said properties were consolidated in the name of Planters Bank, and
on August 27, 1985, new certificates of title were issued in its name, to wit: TCT Nos. 97073,
97074, 97075, 97076 and 97077.

Then, on January 21, 1987, Planters Bank sent a letter to Jorge Navarra informing him
that it could not proceed with the documentation of the proposed repurchase of the foreclosed
properties on account of his non- compliance with the Banks request for the submission of the
needed board resolution of RRRC.

In his reply-letter of January 28, 1987, Navarra claimed having already delivered copies
of the required board resolution to the Bank. The Bank, however, did not receive said
copies. Thus, on February 19, 1987, the Bank sent a notice to the Navarrras demanding that
they surrender and vacate the properties in question for their failure to exercise their right of
redemption.

Such was the state of things when, on June 31, 1987, in the RTC of Makati City, the
Navarras filed their complaint for Specific Performance with Injunction against Planters Bank. In
their complaint docketed in said court as Civil Case No. 16917 and raffled to Branch 66 thereof,
the Navarras, as plaintiffs, alleged that a perfected contract of sale was made between them
and Planters Bank whereby they would repurchase the subject properties for P1,800,000.00
with a down payment of P300,000.00.

In its Answer, Planters Bank asserted that there was no perfected contract of sale
because the terms and conditions for the repurchase have not yet been agreed upon.

On September 9, 1988, a portion of the lot covered by TCT No. 97077 (formerly TCT No.
A-14574) was sold by Planters Bank to herein co-respondent Roberto Gatchalian Realty, Inc.
(Gatchalian Realty). Consequently, TCT No. 97077 was cancelled and TCT No. 12692 was
issued in the name of Gatchalian Realty. This prompted the Navarras to amend their complaint
by impleading Gatchalian Realty as additional defendant.

In a decision dated July 10, 1995, the trial court ruled that there was a perfected contract
of sale between the Navarras and Planters Bank, and accordingly rendered judgment as
follows:

WHEREFORE, in view of the foregoing, judgment is hereby rendered
ordering:

a) the cancellation of the Deed of Absolute Sale (Exh. 2) over
lot 4137-C between defendant Planters Development Bank and
defendant Roberto Gatchalian Realty Corporation (RGRI) with the
vendor bank refunding all the payments made by the vendee
RGRI without interest less the five percent (5%) brokers
commission:

b) the defendant Planters Development Bank to execute the
Deed of Absolute Sale over the lots covered by TCT Nos. 97073,
97074, 97075, 97076, and 97077 in favor of all the plaintiffs for a
consideration of ONE MILLION EIGHT HUNDRED THOUSAND
(P1,800,000.00) less the downpayment of P300,000.00 plus
interest at the rate of twenty five percent (25%) per year for five
(5) years to be paid in full upon the execution of the contract;

c) the defendant Planters Development Bank the amount of
TEN THOUSAND PESOS (P10,000.00) by way of attorneys fees.

d) No costs.

SO ORDERED.

Therefrom, Planters Bank and Gatchalian Realty separately went on appeal to the CA
whereat their appellate recourse were consolidated and docketed as CA-G.R. CV No. 50002.

As stated at the threshold hereof, the appellate court, in its decision of September 27,
2004, reversed that of the trial court and ruled that there was no perfected contract of sale
between the parties. Partly says the CA in its decision:

The Court cannot go along with the deduction of the trial court that the
response of Planters Bank was favorable to Jorge Navarras proposal and that
the P300,000.00 in its possession is a down payment and as such sufficient
bases to conclude that there was a valid and perfected contract of sale. Based
on the turn of events and the tenor of the communications between the offerors
and the creditor bank, it appears that there was not even a perfected contract to
sell, much less a perfected contract of sale.

Article 1319 cited by the trial court provides that the acceptance to an
offer must be absolute. Simply put, there must be unqualified acceptance and no
condition must tag along. But Jorge Navarra in trying to convince the bank to
agree, had himself laid out terms in offering (1) a downpayment of P300,000.00
and setting (2) as deadline August 31, 1985 for the payment thereof. Under these
terms and conditions the bank indeed accepted his offer, and these are
essentially the contents of Exhibits J and K.

But was there compliance? According to the evidence on file the
P300,000.00, if at all, was given beyond the agreed period. The court a quo
missed the fact that the said amount came from the excess of the proceeds of
the sale to the Pea spouses which Jorge Navarra made to appear was made
before the deadline he set of August 31, 1985. But this is athwart Exhibits M-1
and N, the Contract to Sell and the Deed of Sale between RRRC and the
Peas, for these were executed only on September 13, 1985 and October 7,
1985 respectively.

xxx xxx xxx

There were two separate and independent loans secured by distinct
mortgages on different lots and their only commonality is the relationship of the
Navarras and Bernardo families. It is thus difficult to conceive and to conclude
that such Byzantine arrangement was acquiesced to and provided for in that
single and simple letter of the bank.

With their motion for reconsideration having been denied by the CA in its resolution
of May 8, 2006, petitioners are now with this Court via this recourse on their submission that the
CA erred -
I

XXX IN CONCLUDING THAT THERE WAS NO PERFECTED
CONTRACT TO REPURCHASE THE FORECLOSED PROPERTIES BETWEEN
THE PETITIONERS AND THE PRIVATE RESPONDENT PLANTERS
DEVELOPMENT BANK, AS CORRECTLY FOUND BY THE TRIAL COURT.

II

XXX IN HOLDING THAT THE PARTIES NEVER GOT PAST THE
NEGOTIATION STAGE.

While the question raised is essentially one of fact, of which the Court normally eschews
from, yet, given the conflicting factual findings of the trial and appellate courts, the Court shall go
by the exception
[3]
to the general rule and proceed to make its own assessment of the evidence.

We DENY.

Petitioners contend that a perfected contract of sale came into being when respondent
Bank, thru a letter dated August 16, 1985, formally accepted the offer of the Navarras to
repurchase the subject properties.

In general, contracts undergo three distinct stages, to wit: negotiation, perfection or birth,
and consummation. Negotiationbegins from the time the prospective contracting parties
manifest their interest in the contract and ends at the moment of their agreement. Perfection or
birth of the contract takes place when the parties agree upon the essential elements of the
contract, i.e., consent, object and price. Consummation occurs when the parties fulfill or
perform the terms agreed upon in the contract, culminating in the extinguishment thereof.
[4]


A negotiation is formally initiated by an offer which should be certain with respect to both
the object and the cause or consideration of the envisioned contract. In order to produce a
contract, there must be acceptance, which may be express or implied, but it must not qualify the
terms of the offer. The acceptance of an offer must be unqualified and absolute to perfect the
contract. In other words, it must be identical in all respects with that of the offer so as to produce
consent or meeting of the minds.
[5]


Here, the Navarras assert that the following exchange of correspondence between them
and Planters Bank constitutes the offer and acceptance, thus:

Letter dated July 18, 1985 of Jorge Navarra:

This will formalize my request for your kind consideration in allowing my
brother and me to buy back my house and lot and my restaurant building and lot
together with the adjacent road lot.

Since my brother, who is working in Saudi Arabia, has accepted this
arrangement only recently as a result of my urgent offer to him, perhaps it will be
safe for us to set August 31, 1985 as the last day for the payment of
a P300,000.00 downpayment. I hope you will grant us the opportunity to raise the
funds within this period, which includes an allowance for delays.

The purchase price, I understand, will be based on the redemption value
plus accrued interest at the prevailing rate up to the date of our sales contract.
Maybe you can give us a long term payment scheme on the basis of my brothers
annual savings of roughly US$30,000.00 everytime he comes home for his home
leave.

I realize that this is not a regular transaction but I am seeking your favor
to give me a chance to reserve whatever values I can still recover from the
properties and to avoid any legal complications that may arise as a consequence
of the total loss of the Balangay lot. I hope that you will extend to me your
favorable action on this grave matter.

Letter dated August 16, 1985 of Planters Bank

Regarding your letter dated July 18, 1985, requesting that we give up
to August 31, 1985 to buy back your house and lot and restaurant and building
subject to a P300,000.00 downpayment on the purchase price, please be
advised that the Collection Committee has agreed to your request.

Please see Mr. Rene Castillo, Head, Acquired Assets Unit, as soon
as possible for the details of the transaction so that they may work on the
necessary documentation. (Emphasis ours)

Given the above, the basic question that comes to mind is: Was the offer certain and
the acceptance absolute enough so as to engender a meeting of the minds between the
parties? Definitely not.

While the foregoing letters indicate the amount of P300,000.00 as down payment, they
are, however, completely silent as to how the succeeding installment payments shall be made.
At most, the letters merely acknowledge that the down payment ofP300,000.00 was agreed
upon by the parties. However, this fact cannot lead to the conclusion that a contract of sale had
been perfected. Quite recently, this Court held that before a valid and binding contract of sale
can exist, the manner of payment of the purchase price must first be established since the
agreement on the manner of payment goes into the price such that a disagreement on the
manner of payment is tantamount to a failure to agree on the price.
[6]


Too, the Navarras letter/offer failed to specify a definite amount of the purchase price for
the sale/repurchase of the subject properties. It merely stated that the purchase price will be
based on the redemption value plus accrued interest at the prevailing rate up to the date of the
sales contract. The ambiguity of this statement only bolsters the uncertainty of the Navarras
so-called offer for it leaves much rooms for such questions, as: what is the redemption value?
what prevailing rate of interest shall be followed: is it the rate stipulated in the loan agreement or
the legal rate? when will the date of the contract of sale be based, shall it be upon the time of
the execution of the deed of sale or upon the time when the last installment payment shall have
been made? To our mind, these questions need first to be addressed, discussed and negotiated
upon by the parties before a definite purchase price can be arrived at.

Significantly, the Navarras wrote in the same letter the following:

Maybe you can give us a long-term payment scheme on the basis of my
brothers annual savings of roughly US$30,000.00 every time he comes home for
his home leave.

Again, the offer was not clear insofar as concerned the exact number of years that will
comprise the long-term payment scheme. As we see it, the absence of a stipulated period within
which the repurchase price shall be paid all the more adds to the indefiniteness of the Navarras
offer.

Clearly, then, the lack of a definite offer on the part of the spouses could not possibly
serve as the basis of their claim that the sale/repurchase of their foreclosed properties was
perfected. The reason is obvious: one essential element of a contract of sale is wanting: the
price certain. There can be no contract of sale unless the following elements concur: (a) consent
or meeting of the minds; (b) determinate subject matter; and (c) price certain in money or its
equivalent. Such contract is born or perfected from the moment there is a meeting of minds
upon the thing which is the object of the contract and upon the price.
[7]
Here, what is
dramatically clear is that there was no meeting of minds vis-a-vis the price, expressly or
impliedly, directly or indirectly.

Further, the tenor of Planters Banks letter-reply negates the contention of the Navarras
that the Bank fully accepted their offer. The letter specifically stated that there is a need to
negotiate on the other details of the transaction
[8]
before the sale may be formalized. Such
statement in the Banks letter clearly manifests lack of agreement between the parties as to the
terms of the purported contract of sale/repurchase, particularly the mode of payment of the
purchase price and the period for its payment. The law requires acceptance to be absolute and
unqualified. As it is, the Banks letter is not the kind which would constitute acceptance as
contemplated by law for it does not evince any categorical and unequivocal undertaking on the
part of the Bank to sell the subject properties to the Navarras.

The Navarras attempt to prove the existence of a perfected contract of sale all the more
becomes futile in the light of the evidence that there was in the first place no acceptance of their
offer. It should be noted that aside from their first letter dated July 18, 1985, the Navarras wrote
another letter dated August 20, 1985, this time requesting the Bank that the down payment
of P300,000.00 be instead taken from the excess payment made by the RRRC in redeeming its
own foreclosed properties. The very circumstance that the Navarras had to make this new
request is a clear indication that no definite agreement has yet been reached at that point. As
we see it, this request constitutes a new offer on the part of the Navarras, which offer was again
conditionally accepted by the Bank as in fact it even required the Navarras to submit a board
resolution of RRRC before it could proceed with the proposed sale/repurchase. The eventual
failure of the spouses to submit the required board resolution precludes the perfection of a
contract of sale/repurchase between the parties. As earlier mentioned, contracts are perfected
when there is concurrence of the parties wills, manifested by the acceptance by one of the offer
made by the other.
[9]
Here, there was no concurrence of the offer and acceptance as would
result in a perfected contract of sale.

Evidently, what transpired between the parties was only a prolonged negotiation to buy
and to sell, and, at the most, an offer and a counter-offer with no definite agreement having
been reached by them. With the hard reality that no perfected contract of sale/repurchase exists
in this case, any independent transaction between the Planters Bank and a third-party, like the
one involving the Gatchalian Realty, cannot be affected.

WHEREFORE, the petition is DENIED and the assailed decision and resolution of the
Court of Appeals are AFFIRMED.

No pronouncement as to costs.

SO ORDERED.
ALEXANDER ALEX MACASAET, G.R. No. 172446
Petitioner,
Present:

QUISUMBING, J.,
- versus - Chairperson,
CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.
R. TRANSPORT CORPORATION,
Respondent.
Promulgated:

October 10, 2007

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


D E C I S I O N

TINGA, J.:


This petition seeks the reversal of the Decision
[1]
of the Court of Appeals dated 5 October
2005 in CA G.R. CV No. 70585, as well as its Resolution
[2]
dated 28 March 2006 denying
petitioners motion for reconsideration.

First, the factual background.

On 3 January 1996, a Complaint for Recovery of Possession and Damages
[3]
was filed by
herein respondent R. Transport Corporation against herein petitioner Alexander Macasaet
before the Regional Trial Court (RTC) of Makati, Branch 147. The complaint alleged that R.
Transport was a holder of Certificates of Public Convenience (CPC) to operate a public utility
bus service within Metro Manila and the provinces whereas New Mindoro Transport Classic
(NMTC), represented by petitioner, operates a transportation company in Oriental Mindoro. On
11 October 1995, and Macasaet entered into a Deed of Sale with Assumption of Mortgage
(deed of sale)
[4]
over four (4) passenger buses
[5]
whereby Macasaet undertook to pay the
consideration of twelve million pesos (P12,000,000.00) and assume the existing mortgage
obligation on the said buses in favor of Phil. Hino Sales Corporation. Accordingly, R. Transport
delivered to Macasaet two (2) passenger buses.

Despite repeated demands, however, Macasaet failed to pay the stipulated purchase
price. This prompted R. Transport to file a complaint seeking the issuance of a writ of replevin,
praying for judgment declaring R. Transport as the lawful owner and possessor of the
passenger buses and ordering Macasaet to remit the amount of P660,000.00 representing the
income generated by the two buses from 16 October 1995 to 2 January 1996.
[6]


Prior to the execution of the contract, Special Trip Contract was entered into by the
parties on 8 October 1995.
[7]
This contract stipulated that R. Transport would lease the four
buses subject of the deed of sale to Macasaet for the sum of P10,000.00 a day per bus or a
total of P280,000.00 for the duration of one week, from 15-22 October 1995.
[8]
Respondents
finance officer testified that the purpose of the contract was to support the delivery of the first
two buses pending formal execution of the deed of sale.
[9]


On 8 January 1996, on R. Transports motion, the trial court issued a writ of
seizure
[10]
ordering the sheriff to take possession of the two buses in NMTC subject to R.
Transports filing of a bond in the amount of P12,000,000.00. The sheriff recovered the two
buses and delivered them to R. Transport on 16 January 1996.
[11]


For his defense, petitioner alleged that he had paid respondent the full consideration
of P12,000,000.00 and had agreed to assume the mortgage obligation in favor of Phil. Hino
Sales Corporation. He claimed ownership over the four passenger buses, including the two
buses already delivered to him. He further contended that he had already remitted P120,000.00
to respondent as partial payment of the mortgage obligation. Petitioner admitted that he had
been earning at least P7,000.00 per day on each of the buses.
[12]
For his counterclaim, he
prayed for the return of the bus units seized and the immediate delivery of the other two units,
as well as for payment of damages.
[13]


In its Decision
[14]
dated 15 February 2001, the RTC upheld the right of respondent to
possess the two buses but dismissed its claim for recovery of unpaid rentals for the use of the
two buses. The dispositive portion of the decision reads as follows:

WHEREFORE, in view of the foregoing, the Court hereby renders
judgment in favor of the defendant and against plaintiff, dismissing the Complaint
as regards the claim for recovery of the unpaid rentals of the two (2) passenger
buses which were used by the defendant from October 16, 1995 until January
16, 1996 for lack of evidence.
SO ORDERED.
[15]


The trial court observed that there was no basis for the payment of unpaid rentals
because respondent failed to formally offer in evidence the records of operational expenses
incurred by the buses delivered to petitioner and marked as Exhibits W, W-1 to W-
3.
[16]
The trial court did not bother to give a definitive ruling on the issues related to the
counterclaim for specific performance of the deed of sale on the ground that the issuance of a
writ of replevin effectively disposed of the cause of action in the principal complaint, which is
recovery of possession. The trial court was likewise silent with respect to the status of the deed
of sale.
[17]


Dissatisfied with the RTCs refusal to award rentals, respondent filed a petition for review
before the Court of Appeals asserting its right as an owner to the fruits of the two passenger
buses, over the fruits thereof, i.e., the income derived from their use. The Court of Appeals, in
its Decision dated 5 October 2005, sustained the trial courts finding that ownership over the
passenger buses remained with respondent.

Unlike the RTC, the Court of Appeals ruled that the deed of sale was not perfected, thus,
respondent retained ownership over the buses. It further ordered petitioner to remit the income
from the passenger buses in the amount of P7,000.00 per day for the period between 16
October 1995 and 16 January 1996, deducting therefrom the amount of P120,000.00 which had
already been remitted to respondent.
[18]


Macasaet filed a motion for reconsideration which the appellate court denied.

Hence, the instant petition raising this sole issue: Is Section 34 of Rule 132 of the Rules
of Court which states that the court shall consider no evidence which has not been formally
offered applicable in the case at bar?
[19]
However, other interrelated issues have to be looked
into to resolve the controversy.

Petitioner argues in the main that there was no legal and factual basis for the Court of
Appeals to order the remittance of income. He harps on the fact that there was no lease
agreement alleged in respondents complaint to support its claim for unpaid rentals. He
reiterates the trial courts finding that the exhibits tending to prove the rentals were not formally
offered in evidence. Moreover, no other competent evidence was presented to substantiate its
claim for unpaid rentals.
[20]
Respondent, in its comment, merely parrots the ruling of the Court
of Appeals, petitioner notes.
[21]


Crucial to the resolution of the case is the continuing efficacy of the deed of sale, which
in turn is the basis in determining the ownership of the buses. Respondent, on the other hand,
claims that the contract was never consummated for lack of consideration and because of the
subsequent disapproval of the security finance needed for petitioner to assume the mortgage
obligation. On the other hand, petitioner asserts ownership over the subject buses by virtue of
payment of the stipulated consideration for the sale.

The appellate court declared that the non-perfection of the deed of sale precluded
petitioner from possessing and enjoying the buses, including the income thereof. Explained the
appellate court:



True, the plaintiff-appellant and the defendant-appellee have no
agreement as to the payment of rentals for the subject passenger buses, since
what was actually agreed upon by the parties herein, was not the lease, but the
sale of the subject buses to the defendant-appellee in the amount
ofP12,000,000.00, with assumption of mortgage, as evidenced by the Deed of
Sale with Assumption of Mortgage.

It was pursuant to this Deed of Sale with Assumption of Mortgage that the
subject two passenger buses were delivered by the plaintiff-appellant to the
defendant-appellee in October,[sic] 1995. The said contract was the basis of the
defendant-appellees possession and enjoyment of the subject property, which
includes entitlement to the income thereof.

However, the aforementioned contract of sale has never been perfected.

Firstly, the court a quo found that no payment has been made by the
defendant-appellee, for otherwise, it could not have upheld the plaintiff-appellants
possession over the subject buses.
[22]



The Court of Appeals erred in stating that the deed of sale was not perfected, for it
was. There was no consummation, though. However, the rescission or resolution of the deed
of sale is in order.

The essential requisites of a contract under Article 1318 of the New Civil Code are: (1)
consent of the contracting parties; (2) object certain which is the subject matter of the contract;
and (3) cause of the obligation which is established. Thus, contracts, other than real contracts
are perfected by mere consent which is manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute the contract. Once perfected,
they bind other contracting parties and the obligations arising therefrom have the force of law
between the parties and should be complied with in good faith. The parties are bound not only
to the fulfillment of what has been expressly stipulated but also to the consequences which,
according to their nature, may be in keeping with good faith, usage and law.
[23]


Being a consensual contract, sale is perfected at the moment there is a meeting of
minds upon the thing which is the object of the contract and upon the price. From that moment,
the parties may reciprocally demand performance, subject to the provisions of the law governing
the form of contracts.
[24]
A perfected contract of sale imposes reciprocal obligations on the
parties whereby the vendor obligates himself to transfer the ownership of and to deliver a
determinate thing to the buyer who, in turn, is obligated to pay a price certain in money or its
equivalent.
[25]
Failure of either party to comply with his obligation entitles the other to rescission
as the power to rescind is implied in reciprocal obligations.
[26]


Applying these legal precepts to the case at bar, we hold that respondent has the right to
rescind or cancel the deed of sale in view of petitioners failure to pay the stipulated
consideration. Montecillo v. Reynes,
[27]
cited by the appellate court, is particularly instructive in
distinguishing the legal effects of failure to pay consideration and lack of consideration:

x x x Failure to pay the consideration is different from lack of
consideration. The former results in a right to demand the fulfillment or
cancellation of the obligation under an existing contract, while the latter prevents
the existence of a valid contract.

Where the deed of sale states that the purchase price has been paid but in
fact has never been paid, the deed of sale is null and void ab initiofor lack of
consideration. x x x
[28]



The Court of Appeals however failed to consider that in the instant case, there was failure on
the part of petitioner to pay the purchase price and to complete the assumption of
mortgage. The latter argued before the lower court that payment was in fact made and
counterclaimed for the immediate delivery of the two other passenger buses and payment of
damages.
[29]
However, this claim remained a claim and was not substantiated.

While the Court of Appeals relied on the text of the deed of sale which adverts to payment
of the purchase price,
[30]
the non-payment of the purchase price was no longer an issue at the
appellate level. Respondent presented strong evidence that petitioner did not pay the purchase
price, and that paved the way for the issuance of a writ of replevin. Petitioner did not challenge
the finding of the trial court before the Court of Appeals and this Court. He did not also
controvert the non-consummation of the assumption of mortgage at any level of the
proceedings.

Non-payment of the purchase price of property constitutes a very good reason to rescind
a sale for it violates the very essence of the contract of sale.
[31]
While it is preferable that
respondent instead should have filed an action to resolve or cancel the deed as the right to do
so must be invoked judicially,
[32]
this shortcoming was cured when the complaint itself made out
a case for rescission or resolution for failure of petitioner to comply with his obligation to pay the
full purchase price. The complaint relevantly alleged:

x x x x

3. (a) That on October 11, 1995, the plaintiff and the defendant entered
into and executed a Deed of Sale with Assumption of Mortgage with plaintiff as
Vendor and the defendant as Vendee covering four (4) units of passenger
airconditioned buses. x x x

3. (b) That the plaintiff and the defendant in said Deed of Sale with
Assumption of Mortgage x x x hereof agreed that the price of the sale of the
above-described motor vehicles is in the sum of PESOS TWELVE MILLION
(P12,000,000.00), Philippine Currency, with the stipulation that the defendant as
Vendee will assume the existing mortgage of the above-described motor vehicle
with PHIL. HINO SALES CORPORATION and consequently, will assume the
balance of the remaining obligation due to PHIL. HINO SALES
CORPORATION as agreed upon in the said Deed of Sale with Assumption of
Mortgage;

3. (c) That pursuant to said Deed of Sale with Assumption of Mortgage,
the plaintiff delivered to the defendant at Calapan, Oriental Mindoro, the first two
(2) motor vehicles x x x withholding the other two (2) passenger buses pending
the payment by the defendant to the plaintiff of the purchase price of the sale of
PESOS TWELVE MILLION (P12,000,000.00), Philippine currency and
assumption of mortgage by said defendant obligating himself to pay the
remaining balance of the obligation due to the PHIL. HINO SALES
CORPORATION constituted over the above-described motor vehicles;

3. (d) That inspite of repeated demands made by the plaintiff to the
defendant to pay the purchase price of the sale x x x the defendant, in evident
bad faith, refused and failed and continue to refuse and fail to pay the plaintiff the
purchase price of the said vehicles;

x x x x

4. b.) That the plaintiff-applicant is the owner of the two (2) buses claimed
as above-described and is entitled to the rightful possession thereof x x x

4. c.) That the above-described two (2) units of passenger buses are
wrongfully detained by the defendant pretending that he is the owner under the
Deed of Sale with Assumption of Mortgage which pretension is false because the
defendant has not paid the plaintiff any single centavo out of the PESOS
TWELVE MILLION (P12,000,000.00), Philippine currency, the purchase price of
the sale of the four (4) passenger buses,
[33]


x x x x


As previously noted, petitioner did not pay the full purchase price as stipulated in the
contract whereas respondent complied with its obligation when it delivered the two buses to
petitioner.

A necessary consequence of rescission is restitution with payment of damages. Article
1191 provides:
x x x x

The injured party may choose between the fulfillment and the rescission of
the obligation, with the payment of damages in either case. He may also seek
rescission, even after he has chosen fulfillment, if the latter should become
impossible.

x x x x

Also, corollary to the rescission of the contract of sale is the recovery of possession of
the object thereof. Thus, petitioners possession over the passenger buses became unlawful
when upon demand for return, he wrongfully retained possession over the same.

In ordering petitioner to remit to respondent the income derived from the passenger
buses, the appellate court ratiocinated thus:

Although the parties herein did not agree on the rentals for the use of the
property, the fact that the defendant-appellee was able to use the two passenger
buses for the months of October, [sic] 1995 to January, [sic] 1996, and has
derived income therefrom, was acknowledged by the court a quo and the
defendant-appellee himself.

Under such circumstances, it is but fair that the defendant-appellee be
made to pay reasonable rentals for the use of the two passenger buses from the
time that they were delivered, until they were seized from him. It would be
against the equitable proscription against unjust enrichment for the defendant-
appellee to keep the income from a property over which he has no legal right. It
would be unfair to excuse the defendant-appellee from the payment of
reasonable rentals because he enjoyed and made use of the subject passenger
buses. It is a basic rule in law that no one shall unjustly enrich himself at the
expense of another. Niguno non deue enriquecerse tortizamente condao de
otro.

Thus, a modification of the decision of the court a quo is in order.

In view of the plaintiff-appellants failure to substantiate its claim for the
unpaid rentals amounting to P660,000.00, we could not grant the same.

However, we deem it just for the defendant-appellee to remit the plaintiff-
appellant the income he derived from the subject passenger buses in the amount
of P7,000.00 per day within the period that they were in the defendant-appellants
possession, that is from October 16, 1997 to January 16, 1995, minus the
amount of P120,000.00 which the defendant-appellee already remitted to the
plaintiff-appellant.
[34]



It can be inferred from this decision that the appellate court did not consider petitioner
liable for the unpaid rentals when it noted that respondent had failed to support its claim over
it. Instead, it concluded that he was liable to respondent for damages, in the form of reasonable
rentals for the use of the passenger buses.

However, with respect to the amount of damages, we differ from the award of the
appellate court. Settled is the rule that actual damages must be proved with reasonable degree
of certainty. A party is entitled only up to such compensation for the pecuniary loss that he has
duly proven. It cannot be presumed. Absent proof of the amount of actual damages sustained,
the court cannot rely on speculations, conjectures, or guesswork as to the fact and amount of
damages, but must depend upon competent proof that they have been suffered by the injured
party and on the best obtainable evidence of the actual amount thereof.
[35]


The appellate court arrived at the amount of P7,000.00 per day as income for the use of
the two passenger buses due to respondent on the basis of the allegations in the answer of
petitioner.
[36]
The award cannot be sustained because no evidence was produced to support
this averment made by petitioner. Petitioner did not present any record or journal that would
have evidenced the earnings of the passenger buses for said period. Bare allegations would
not suffice.

Since the amount of damages awarded by the Court of Appeals was founded merely on
speculations, we turn to the provisions of the Special Trip Contract. In said contract, the rental
is fixed at P10,000.00 per day for each bus. This duly executed contract was presented,
marked and formally offered in evidence. The fact that Macasaet voluntarily signed the contract
evinced his acquiescence to its terms, particularly the amount of rentals. Therefore, the amount
of P1,460,000.00 is deemed reasonable compensation for the use of the passenger buses,
computed as follows:

Amt of rentals per bus: P10,000.00
x No. of buses: 2
__________
Amt of rentals per day: P 20,000.00
x No. of days (16 Oct-2 Jan) 79
____________
P1,580,000.00
- Payment by Macasaet 120,000.00
____________
TOTAL P1,460,000.00


Since the amount awarded as damages in the form of reasonable rentals is more than
the amount of rentals specified in the complaint, additional filing fees corresponding to the
difference between the amount prayed for in the complaint and the award based on the
evidence should be assessed as a lien on the judgment, as mandated by Section 2, Rule 141 of
the Rules of Court, to wit:




SEC. 2. Fees in lien. Where the court in its final judgment awards a
claim not alleged, or a relief different from, or more than that claimed in the
pleading, the party concerned shall pay the additional fees which shall constitute a
lien on the judgment in satisfaction of said lien. The clerk of court shall assess
and collect the corresponding fees.
[37]



WHEREFORE, the petition is DENIED. However, the decision of the Court of Appeals is
MODIFIED in that petitioner is ORDERED to pay respondent damages in the form of
reasonable rentals in the amount of P1,460,000.00 with interest at 12% per annum from the
finality of this decision, with a lien thereon corresponding to the additional filing fees adverted to
above. The Clerk of Court of the Regional Trial Court of Makati is directed to assess and collect
the additional filing fees.

SO ORDERED.
G.R. No. 156364 September 3, 2007
JACOBUS BERNHARD HULST, petitioner,
vs.
PR BUILDERS, INC., respondent.
D E C I S I O N
AUSTRIA-MARTINEZ, J .:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court
assailing the Decision
1
dated October 30, 2002 of the Court of Appeals (CA) in CA-G.R. SP No.
60981.
The facts:
Jacobus Bernhard Hulst (petitioner) and his spouse Ida Johanna Hulst-Van Ijzeren (Ida), Dutch
nationals, entered into a Contract to Sell with PR Builders, Inc. (respondent), for the purchase of a
210-sq m residential unit in respondent's townhouse project in Barangay Niyugan, Laurel, Batangas.
When respondent failed to comply with its verbal promise to complete the project by June 1995, the
spouses Hulst filed before the Housing and Land Use Regulatory Board (HLURB) a complaint for
rescission of contract with interest, damages and attorney's fees, docketed as HLRB Case No. IV6-
071196-0618.
On April 22, 1997, HLURB Arbiter Ma. Perpetua Y. Aquino (HLURB Arbiter) rendered a Decision
2
in
favor of spouses Hulst, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
complainant, rescinding the Contract to Sell and ordering respondent to:
1) Reimburse complainant the sum of P3,187,500.00, representing the purchase price paid
by the complainants to P.R. Builders, plus interest thereon at the rate of twelve percent
(12%) per annum from the time complaint was filed;
2) Pay complainant the sum of P297,000.00 as actual damages;
3) Pay complainant the sum of P100,000.00 by way of moral damages;
4) Pay complainant the sum of P150,000.00 as exemplary damages;
5) P50,000.00 as attorney's fees and for other litigation expenses; and
6) Cost of suit.
SO ORDERED.
3

Meanwhile, spouses Hulst divorced. Ida assigned her rights over the purchased property to
petitioner.
4
From then on, petitioner alone pursued the case.
On August 21, 1997, the HLURB Arbiter issued a Writ of Execution addressed to the Ex-Officio
Sheriff of the Regional Trial Court of Tanauan, Batangas directing the latter to execute its judgment.
5

On April 13, 1998, the Ex-Officio Sheriff proceeded to implement the Writ of Execution. However,
upon complaint of respondent with the CA on a Petition for Certiorari and Prohibition, the levy made
by the Sheriff was set aside, requiring the Sheriff to levy first on respondent's personal
properties.
6
Sheriff Jaime B. Ozaeta (Sheriff) tried to implement the writ as directed but the writ was
returned unsatisfied.
7

On January 26, 1999, upon petitioner's motion, the HLURB Arbiter issued an Alias Writ of
Execution.
8

On March 23, 1999, the Sheriff levied on respondent's 15 parcels of land covered by 13 Transfer
Certificates of Title (TCT)
9
in Barangay Niyugan, Laurel, Batangas.
10

In a Notice of Sale dated March 27, 2000, the Sheriff set the public auction of the levied properties
on April 28, 2000 at 10:00 a.m..
11

Two days before the scheduled public auction or on April 26, 2000, respondent filed an Urgent
Motion to Quash Writ of Levy with the HLURB on the ground that the Sheriff made an overlevy since
the aggregate appraised value of the levied properties at P6,500.00 per sq m is P83,616,000.00,
based on the Appraisal Report
12
of Henry Hunter Bayne Co., Inc. dated December 11, 1996, which is
over and above the judgment award.
13

At 10:15 a.m. of the scheduled auction date of April 28, 2000, respondent's counsel objected to the
conduct of the public auction on the ground that respondent's Urgent Motion to Quash Writ of Levy
was pending resolution. Absent any restraining order from the HLURB, the Sheriff proceeded to sell
the 15 parcels of land. Holly Properties Realty Corporation was the winning bidder for all 15 parcels
of land for the total amount of P5,450,653.33. The sum of P5,313,040.00 was turned over to the
petitioner in satisfaction of the judgment award after deducting the legal fees.
14

At 4:15 p.m. of the same day, while the Sheriff was at the HLURB office to remit the legal fees
relative to the auction sale and to submit the Certificates of Sale
15
for the signature of HLURB
Director Belen G. Ceniza (HLURB Director), he received the Order dated April 28, 2000 issued by
the HLURB Arbiter to suspend the proceedings on the matter.
16

Four months later, or on August 28, 2000, the HLURB Arbiter and HLURB Director issued an Order
setting aside the sheriff's levy on respondent's real properties,
17
reasoning as follows:
While we are not making a ruling that the fair market value of the levied properties is
PhP6,500.00 per square meter (or an aggregate value of PhP83,616,000.00) as indicated in
the Hunter Baynes Appraisal Report, we definitely cannot agree with the position of the
Complainants and the Sheriff that the aggregate value of the 12,864.00-square meter levied
properties is only around PhP6,000,000.00. The disparity between the two valuations are
[sic] so egregious that the Sheriff should have looked into the matter first before proceeding
with the execution sale of the said properties, especially when the auction sale proceedings
was seasonably objected by Respondent's counsel, Atty. Noel Mingoa. However, instead of
resolving first the objection timely posed by Atty. Mingoa, Sheriff Ozaete totally disregarded
the objection raised and, posthaste, issued the corresponding Certificate of Sale even prior
to the payment of the legal fees (pars. 7 & 8, Sheriff's Return).
While we agree with the Complainants that what is material in an execution sale proceeding
is the amount for which the properties were bidded and sold during the public auction and
that, mere inadequacy of the price is not a sufficient ground to annul the sale, the court is
justified to intervene where the inadequacy of the price shocks the conscience (Barrozo vs.
Macaraeg, 83 Phil. 378). The difference between PhP83,616,000.00 and Php6,000,000.00 is
PhP77,616,000.00 and it definitely invites our attention to look into the proceedings had
especially so when there was only one bidder, the HOLLY PROPERTIES REALTY
CORPORATION represented by Ma, Chandra Cacho (par. 7, Sheriff's Return) and the
auction sale proceedings was timely objected by Respondent's counsel (par. 6, Sheriff's
Return) due to the pendency of the Urgent Motion to Quash the Writ of Levy which was filed
prior to the execution sale.
Besides, what is at issue is not the value of the subject properties as determined
during the auction sale, but the determination of the value of the properties levied
upon by the Sheriff taking into consideration Section 9(b) of the 1997 Rules of Civil
Procedure x x x.
x x x x
It is very clear from the foregoing that, even during levy, the Sheriff has to consider the fair
market value of the properties levied upon to determine whether they are sufficient to satisfy
the judgment, and any levy in excess of the judgment award is void (Buan v. Court of
Appeals, 235 SCRA 424).
x x x x
18
(Emphasis supplied).
The dispositive portion of the Order reads:
WHEREFORE, the levy on the subject properties made by the Ex-Officio Sheriff of the RTC
of Tanauan, Batangas, is hereby SET ASIDE and the said Sheriff is hereby directed to levy
instead Respondent's real properties that are reasonably sufficient to enforce its final and
executory judgment, this time, taking into consideration not only the value of the properties
as indicated in their respective tax declarations, but also all the other determinants at arriving
at a fair market value, namely: the cost of acquisition, the current value of like properties, its
actual or potential uses, and in the particular case of lands, their size, shape or location, and
the tax declarations thereon.
SO ORDERED.
19

A motion for reconsideration being a prohibited pleading under Section 1(h), Rule IV of the 1996
HLURB Rules and Procedure, petitioner filed a Petition for Certiorari and Prohibition with the CA on
September 27, 2000.
On October 30, 2002, the CA rendered herein assailed Decision
20
dismissing the petition. The CA
held that petitioner's insistence that Barrozo v. Macaraeg
21
does not apply since said case stated
that "when there is a right to redeem inadequacy of price should not be material" holds no water as
what is obtaining in this case is not "mere inadequacy," but an inadequacy that shocks the senses;
that Buan v. Court of Appeals
22
properly applies since the questioned levy covered 15 parcels of land
posited to have an aggregate value of P83,616,000.00 which shockingly exceeded the judgment
debt of only around P6,000,000.00.
Without filing a motion for reconsideration,
23
petitioner took the present recourse on the sole ground
that:
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE
ARBITER'S ORDER SETTING ASIDE THE LEVY MADE BY THE SHERIFF ON THE
SUBJECT PROPERTIES.
24

Before resolving the question whether the CA erred in affirming the Order of the HLURB setting
aside the levy made by the sheriff, it behooves this Court to address a matter of public and national
importance which completely escaped the attention of the HLURB Arbiter and the CA: petitioner and
his wife are foreign nationals who are disqualified under the Constitution from owning real property in
their names.
Section 7 of Article XII of the 1987 Constitution provides:
Sec. 7. Save in cases of hereditary succession, no private lands shall be transferred or
conveyed except to individuals, corporations, or associations qualified to acquire or
hold lands of the public domain. (Emphasis supplied).
The capacity to acquire private land is made dependent upon the capacity to acquire or hold lands of
the public domain. Private land may be transferred or conveyed only to individuals or entities
"qualified to acquire lands of the public domain." The 1987 Constitution reserved the right to
participate in the disposition, exploitation, development and utilization of lands of the public domain
for Filipino citizens
25
or corporations at least 60 percent of the capital of which is owned by
Filipinos.
26
Aliens, whether individuals or corporations, have been disqualified from acquiring public
lands; hence, they have also been disqualified from acquiring private lands.
27

Since petitioner and his wife, being Dutch nationals, are proscribed under the Constitution from
acquiring and owning real property, it is unequivocal that the Contract to Sell entered into by
petitioner together with his wife and respondent is void. Under Article 1409 (1) and (7) of the Civil
Code, all contracts whose cause, object or purpose is contrary to law or public policy and those
expressly prohibited or declared void by law are inexistent and void from the beginning. Article 1410
of the same Code provides that the action or defense for the declaration of the inexistence of a
contract does not prescribe. A void contract is equivalent to nothing; it produces no civil effect.
28
It
does not create, modify or extinguish a juridical relation.
29

Generally, parties to a void agreement cannot expect the aid of the law; the courts leave them as
they are, because they are deemed in pari delicto or "in equal fault."
30
In pari delicto is "a universal
doctrine which holds that no action arises, in equity or at law, from an illegal contract; no suit can be
maintained for its specific performance, or to recover the property agreed to be sold or delivered, or
the money agreed to be paid, or damages for its violation; and where the parties are in pari delicto,
no affirmative relief of any kind will be given to one against the other."
31

This rule, however, is subject to exceptions
32
that permit the return of that which may have been
given under a void contract to: (a) the innocent party (Arts. 1411-1412, Civil Code);
33
(b) the debtor
who pays usurious interest (Art. 1413, Civil Code);
34
(c) the party repudiating the void contract
before the illegal purpose is accomplished or before damage is caused to a third person and
if public interest is subserved by allowing recovery (Art. 1414, Civil Code);
35
(d) the
incapacitated party if the interest of justice so demands (Art. 1415, Civil Code);
36
(e) the party for
whose protection the prohibition by law is intended if the agreement is not illegal per se but merely
prohibited and if public policy would be enhanced by permitting recovery (Art. 1416, Civil
Code);
37
and (f) the party for whose benefit the law has been intended such as in price ceiling laws
(Art. 1417, Civil Code)
38
and labor laws (Arts. 1418-1419, Civil Code).
39

It is significant to note that the agreement executed by the parties in this case is a Contract to Sell
and not a contract of sale. A distinction between the two is material in the determination of when
ownership is deemed to have been transferred to the buyer or vendee and, ultimately, the resolution
of the question on whether the constitutional proscription has been breached.
In a contract of sale, the title passes to the buyer upon the delivery of the thing sold. The vendor has
lost and cannot recover the ownership of the property until and unless the contract of sale is itself
resolved and set aside.
40
On the other hand, a contract to sell is akin to a conditional sale where the
efficacy or obligatory force of the vendor's 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.
41
In other words, in a contract to sell,
the prospective seller agrees to transfer ownership of the property to the buyer upon the happening
of an event, which normally is the full payment of the purchase price. But even upon the fulfillment of
the suspensive condition, ownership does not automatically transfer to the buyer. The prospective
seller still has to convey title to the prospective buyer by executing a contract of absolute sale.
42

Since the contract involved here is a Contract to Sell, ownership has not yet transferred to the
petitioner when he filed the suit for rescission. While the intent to circumvent the constitutional
proscription on aliens owning real property was evident by virtue of the execution of the Contract to
Sell, such violation of the law did not materialize because petitioner caused the rescission of the
contract before the execution of the final deed transferring ownership.
Thus, exception (c) finds application in this case. Under Article 1414, one who repudiates the
agreement and demands his money before the illegal act has taken place is entitled to recover.
Petitioner is therefore entitled to recover what he has paid, although the basis of his claim for
rescission, which was granted by the HLURB, was not the fact that he is not allowed to acquire
private land under the Philippine Constitution. But petitioner is entitled to the recovery only of the
amount of P3,187,500.00, representing the purchase price paid to respondent. No damages may be
recovered on the basis of a void contract; being nonexistent, the agreement produces no juridical tie
between the parties involved.
43
Further, petitioner is not entitled to actual as well as interests
thereon,
44
moral and exemplary damages and attorney's fees.
The Court takes into consideration the fact that the HLURB Decision dated April 22, 1997 has long
been final and executory. Nothing is more settled in the law than that a decision that has acquired
finality becomes immutable and unalterable and may no longer be modified in any respect even if
the modification is meant to correct erroneous conclusions of fact or law and whether it was made by
the court that rendered it or by the highest court of the land.
45
The only recognized exceptions to the
general rule are the correction of clerical errors, the so-called nunc pro tunc entries which cause no
prejudice to any party, void judgments, and whenever circumstances transpire after the finality of the
decision rendering its execution unjust and inequitable.
46
None of the exceptions is present in this
case. The HLURB decision cannot be considered a void judgment, as it was rendered by a tribunal
with jurisdiction over the subject matter of the complaint.
47

Ineluctably, the HLURB Decision resulted in the unjust enrichment of petitioner at the expense of
respondent. Petitioner received more than what he is entitled to recover under the circumstances.
Article 22 of the Civil Code which embodies the maxim, nemo ex alterius incommode debet
lecupletari (no man ought to be made rich out of another's injury), states:
Art. 22. Every person who through an act of performance by another, or any other means,
acquires or comes into possession of something at the expense of the latter without just or
legal ground, shall return the same to him.
The above-quoted article is part of the chapter of the Civil Code on Human Relations, the provisions
of which were formulated as basic principles to be observed for the rightful relationship between
human beings and for the stability of the social order; designed to indicate certain norms that spring
from the fountain of good conscience; guides for human conduct that should run as golden threads
through society to the end that law may approach its supreme ideal which is the sway and
dominance of justice.
48
There is unjust enrichment when a person unjustly retains a benefit at the
loss of another, or when a person retains money or property of another against the fundamental
principles of justice, equity and good conscience.
49

A sense of justice and fairness demands that petitioner should not be allowed to benefit from his act
of entering into a contract to sell that violates the constitutional proscription.
This is not a case of equity overruling or supplanting a positive provision of law or judicial rule.
Rather, equity is exercised in this case "as the complement of legal jurisdiction [that] seeks to reach
and to complete justice where courts of law, through the inflexibility of their rules and want of power
to adapt their judgments to the special circumstances of cases, are incompetent to do so."
50

The purpose of the exercise of equity jurisdiction in this case is to prevent unjust enrichment and to
ensure restitution. Equity jurisdiction aims to do complete justice in cases where a court of law is
unable to adapt its judgments to the special circumstances of a case because of the inflexibility of its
statutory or legal jurisdiction.
51

The sheriff delivered to petitioner the amount of P5,313,040.00 representing the net proceeds
(bidded amount isP5,450,653.33) of the auction sale after deducting the legal fees in the amount
of P137,613.33.
52
Petitioner is only entitled to P3,187,500.00, the amount of the purchase price of
the real property paid by petitioner to respondent under the Contract to Sell. Thus, the Court in the
exercise of its equity jurisdiction may validly order petitioner to return the excess amount
of P2,125,540.00.
The Court shall now proceed to resolve the single issue raised in the present petition: whether the
CA seriously erred in affirming the HLURB Order setting aside the levy made by the Sheriff on the
subject properties.
Petitioner avers that the HLURB Arbiter and Director had no factual basis for pegging the fair market
value of the levied properties at P6,500.00 per sq m or P83,616,000.00; that reliance on the
appraisal report was misplaced since the appraisal was based on the value of land in neighboring
developed subdivisions and on the assumption that the residential unit appraised had already been
built; that the Sheriff need not determine the fair market value of the subject properties before
levying on the same since what is material is the amount for which the properties were bidded and
sold during the public auction; that the pendency of any motion is not a valid ground for the Sheriff to
suspend the execution proceedings and, by itself, does not have the effect of restraining the Sheriff
from proceeding with the execution.
Respondent, on the other hand, contends that while it is true that the HLURB Arbiter and Director did
not categorically state the exact value of the levied properties, said properties cannot just amount
to P6,000,000.00; that the HLURB Arbiter and Director correctly held that the value indicated in the
tax declaration is not the sole determinant of the value of the property.
The petition is impressed with merit.
If the judgment is for money, the sheriff or other authorized officer must execute the same pursuant
to the provisions of Section 9, Rule 39 of the Revised Rules of Court, viz:
Sec. 9. Execution of judgments for money, how enforced.
(a) Immediate payment on demand. - The officer shall enforce an execution of a judgment for
money by demanding from the judgment obligor the immediate payment of the full amount
stated in the writ of execution and all lawful fees. x x x
(b) Satisfaction by levy. - If the judgment obligor cannot pay all or part of the obligation in
cash, certified bank check or other mode of payment acceptable to the judgment obligee, the
officer shall levy upon the properties of the judgment obligor of every kind and nature
whatsoever which may be disposed of for value and not otherwise exempt from
execution, giving the latter the option to immediately choose which property or part thereof
may be levied upon, sufficient to satisfy the judgment. If the judgment obligor does not
exercise the option, the officer shall first levy on the personal properties, if any, and then on
the real properties if the personal properties are insufficient to answer for the judgment.
The sheriff shall sell only a sufficient portion of the personal or real property of the
judgment obligor which has been levied upon.
When there is more property of the judgment obligor than is sufficient to satisfy the
judgment and lawful fees, he must sell only so much of the personal or real property
as is sufficient to satisfy the judgment and lawful fees.
Real property, stocks, shares, debts, credits, and other personal property, or any interest in
either real or personal property, may be levied upon in like manner and with like effect as
under a writ of attachment (Emphasis supplied).
53

Thus, under Rule 39, in executing a money judgment against the property of the judgment debtor,
the sheriff shall levy on all property belonging to the judgment debtor as is amply sufficient to satisfy
the judgment and costs, and sell the same paying to the judgment creditor so much of the proceeds
as will satisfy the amount of the judgment debt and costs. Any excess in the proceeds shall be
delivered to the judgment debtor unless otherwise directed by the judgment or order of the court.
54

Clearly, there are two stages in the execution of money judgments. First, the levy and then the
execution sale.
Levy has been defined as the act or acts by which an officer sets apart or appropriates a part or the
whole of a judgment debtor's property for the purpose of satisfying the command of the writ of
execution.
55
The object of a levy is to take property into the custody of the law, and thereby render it
liable to the lien of the execution, and put it out of the power of the judgment debtor to divert it to any
other use or purpose.
56

On the other hand, an execution sale is a sale by a sheriff or other ministerial officer under the
authority of a writ of execution of the levied property of the debtor.
57

In the present case, the HLURB Arbiter and Director gravely abused their discretion in setting aside
the levy conducted by the Sheriff for the reason that the auction sale conducted by the sheriff
rendered moot and academic the motion to quash the levy. The HLURB Arbiter lost jurisdiction to act
on the motion to quash the levy by virtue of the consummation of the auction sale. Absent any order
from the HLURB suspending the auction sale, the sheriff rightfully proceeded with the auction sale.
The winning bidder had already paid the winning bid. The legal fees had already been remitted to
the HLURB. The judgment award had already been turned over to the judgment creditor. What was
left to be done was only the issuance of the corresponding certificates of sale to the winning bidder.
In fact, only the signature of the HLURB Director for that purpose was needed
58
a purely ministerial
act.
A purely ministerial act or duty is one which an officer or tribunal performs in a given state of facts, in
a prescribed manner, in obedience to the mandate of a legal authority, without regard for or the
exercise of his own judgment upon the propriety or impropriety of the act done. If the law imposes a
duty upon a public officer and gives him the right to decide how or when the duty shall be performed,
such duty is discretionary and not ministerial. The duty is ministerial only when the discharge of the
same requires neither the exercise of official discretion nor judgment.
59
In the present case, all the
requirements of auction sale under the Rules have been fully complied with to warrant the issuance
of the corresponding certificates of sale.
And even if the Court should go into the merits of the assailed Order, the petition is meritorious on
the following grounds:
Firstly, the reliance of the HLURB Arbiter and Director, as well as the CA, on Barrozo v.
Macaraeg
60
and Buan v. Court of Appeals
61
is misplaced.
The HLURB and the CA misconstrued the Court's pronouncements in Barrozo. Barrozo involved a
judgment debtor who wanted to repurchase properties sold at execution beyond the one-year
redemption period. The statement of the Court in Barrozo, that "only where such inadequacy shocks
the conscience the courts will intervene," is at best a mere obiter dictum. This declaration should be
taken in the context of the other declarations of the Court in Barrozo, to wit:
Another point raised by appellant is that the price paid at the auction sale was so inadequate
as to shock the conscience of the court. Supposing that this issue is open even after the one-
year period has expired and after the properties have passed into the hands of third persons
who may have paid a price higher than the auction sale money, the first thing to consider is
that the stipulation contains no statement of the reasonable value of the properties; and
although defendant' answer avers that the assessed value wasP3,960 it also avers that their
real market value was P2,000 only. Anyway, mere inadequacy of price which was the
complaint' allegation is not sufficient ground to annul the sale. It is only where such
inadequacy shocks the conscience that the courts will intervene. x x x Another
consideration is that the assessed value being P3,960 and the purchase price being in
effect P1,864 (P464 sale price plus P1,400 mortgage lien which had to be discharged) the
conscience is not shocked upon examining the prices paid in the sales in National Bank v.
Gonzales, 45 Phil., 693 and Guerrero v. Guerrero, 57 Phil., 445, sales which were left
undisturbed by this Court.
Furthermore, where there is the right to redeem as in this case 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.
x x x x (Emphasis supplied).
62

In other words, gross inadequacy of price does not nullify an execution sale. In an ordinary sale, for
reason 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 the owner the right to redeem as when a sale is made at public auction,
63
upon
the theory that the lesser the price, the easier it is for the owner to effect redemption.
64
When there is
a 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.
65
Thus, respondent stood to gain
rather than be harmed by the low sale value of the auctioned properties because it possesses the
right of redemption. More importantly, the subject matter in Barrozo is the auction sale, not the levy
made by the Sheriff.
The Court does not sanction the piecemeal interpretation of a decision. To get the true intent and
meaning of a decision, no specific portion thereof should be isolated and resorted to, but the
decision must be considered in its entirety.
66

As regards Buan, it is cast under an entirely different factual milieu. It involved the levy on two
parcels of land owned by the judgment debtor; and the sale at public auction of one was sufficient to
fully satisfy the judgment, such that the levy and attempted execution of the second parcel of land
was declared void for being in excess of and beyond the original judgment award granted in favor of
the judgment creditor.
In the present case, the Sheriff complied with the mandate of Section 9, Rule 39 of the Revised
Rules of Court, to "sell only a sufficient portion" of the levied properties "as is sufficient to satisfy the
judgment and the lawful fees." Each of the 15 levied properties was successively bidded upon and
sold, one after the other until the judgment debt and the lawful fees were fully satisfied. Holly
Properties Realty Corporation successively bidded upon and bought each of the levied properties for
the total amount of P5,450,653.33 in full satisfaction of the judgment award and legal fees.
67

Secondly, the Rules of Court do not require that the value of the property levied be exactly the same
as the judgment debt; it can be less or more than the amount of debt. This is the contingency
addressed by Section 9, Rule 39 of the Rules of Court. In the levy of property, the Sheriff does not
determine the exact valuation of the levied property. Under Section 9, Rule 39, in conjunction with
Section 7, Rule 57 of the Rules of Court, the sheriff is required to do only two specific things to effect
a levy upon a realty: (a) file with the register of deeds a copy of the order of execution, together with
the description of the levied property and notice of execution; and (b) leave with the occupant of the
property copy of the same order, description and notice.
68
Records do not show that respondent
alleged non-compliance by the Sheriff of said requisites.
Thirdly, in determining what amount of property is sufficient out of which to secure satisfaction of the
execution, the Sheriff is left to his own judgment. He may exercise a reasonable discretion, and must
exercise the care which a reasonably prudent person would exercise under like conditions and
circumstances, endeavoring on the one hand to obtain sufficient property to satisfy the purposes of
the writ, and on the other hand not to make an unreasonable and unnecessary levy.
69
Because it is
impossible to know the precise quantity of land or other property necessary to satisfy an execution,
the Sheriff should be allowed a reasonable margin between the value of the property levied upon
and the amount of the execution; the fact that the Sheriff levies upon a little more than is necessary
to satisfy the execution does not render his actions improper.
70
Section 9, Rule 39, provides
adequate safeguards against excessive levying. The Sheriff is mandated to sell so much only of
such real property as is sufficient to satisfy the judgment and lawful fees.
In the absence of a restraining order, no error, much less abuse of discretion, can be imputed to the
Sheriff in proceeding with the auction sale despite the pending motion to quash the levy filed by the
respondents with the HLURB. It is elementary that sheriffs, as officers charged with the delicate task
of the enforcement and/or implementation of judgments, must, in the absence of a restraining order,
act with considerable dispatch so as not to unduly delay the administration of justice; otherwise, the
decisions, orders, or other processes of the courts of justice and the like would be futile.
71
It is not
within the jurisdiction of the Sheriff to consider, much less resolve, respondent's objection to the
continuation of the conduct of the auction sale. The Sheriff has no authority, on his own, to suspend
the auction sale. His duty being ministerial, he has no discretion to postpone the conduct of the
auction sale.
Finally, one who attacks a levy on the ground of excessiveness carries the burden of sustaining that
contention.
72
In the determination of whether a levy of execution is excessive, it is proper to take into
consideration encumbrances upon the property, as well as the fact that a forced sale usually results
in a sacrifice; that is, the price demanded for the property upon a private sale is not the standard for
determining the excessiveness of the levy.
73

Here, the HLURB Arbiter and Director had no sufficient factual basis to determine the value of the
levied property. Respondent only submitted an Appraisal Report, based merely on surmises. The
Report was based on the projected value of the townhouse project after it shall have been fully
developed, that is, on the assumption that the residential units appraised had already been built. The
Appraiser in fact made this qualification in its Appraisal Report: "[t]he property subject of this
appraisal has not been constructed. The basis of the appraiser is on the existing model
units."
74
Since it is undisputed that the townhouse project did not push through, the projected value
did not become a reality. Thus, the appraisal value cannot be equated with the fair market value.
The Appraisal Report is not the best proof to accurately show the value of the levied properties as it
is clearly self-serving.
Therefore, the Order dated August 28, 2000 of HLURB Arbiter Aquino and Director Ceniza in HLRB
Case No. IV6-071196-0618 which set aside the sheriff's levy on respondent's real properties, was
clearly issued with grave abuse of discretion. The CA erred in affirming said Order.
WHEREFORE, the instant petition is GRANTED. The Decision dated October 30, 2002 of the Court
of Appeals in CA-G.R. SP No. 60981 is REVERSED and SET ASIDE. The Order dated August 28,
2000 of HLURB Arbiter Ma. Perpetua Y. Aquino and Director Belen G. Ceniza in HLRB Case No.
IV6-071196-0618 is declared NULL andVOID. HLURB Arbiter Aquino and Director Ceniza are
directed to issue the corresponding certificates of sale in favor of the winning bidder, Holly Properties
Realty Corporation. Petitioner is ordered to return to respondent the amount of P2,125,540.00,
without interest, in excess of the proceeds of the auction sale delivered to petitioner. After the finality
of herein judgment, the amount of P2,125,540.00 shall earn 6% interest until fully paid.
SO ORDERED.
HADJA FATIMA GAGUIL MAGOYAG,
joined by her husband, HADJI HASAN
MADLAWI MAGOYAG,
Petitioners,



- versus -



HADJI ABUBACAR MARUHOM,
Respondent.

G.R. No. 179743

Present:

CARPIO, J.
Chairperson,
NACHURA,
PERALTA,
ABAD, and
CATRAL MENDOZA, JJ.

Promulgated:

August 2, 2010

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


DECISION

NACHURA, J .:



Hadja Fatima Gaguil Magoyag and her husband Hadji Hasan Madlawi Magoyag
(petitioners), appeal by certiorari under Rule 45 of the Rules of Court the April 28, 2006
Decision
[1]
of the Court of Appeals (CA) in CA-G.R. CV No. 75765, and the August 28, 2007
Resolution
[2]
denying its reconsideration.

The antecedents:

On December 20, 1982, respondent Hadji Abubacar Maruhom (respondent) was awarded
a market stall at the Reclamation Area by the Islamic City of Marawi.
[3]


On December 1, 1985, respondent orally sold his stall to petitioner for P20,000.00. Later,
on December 10, 1985, respondent executed a Deed of Assignment,
[4]
confirming the oral sale;
assigning, selling, transferring, and conveying his market stall to petitioners for a consideration
of P20,000.00. In the same Deed of Assignment, petitioners leased the subject stall to
respondent for a monthly rental of P250.00, beginning December 1, 1985, renewable every year
at the option of petitioners. Respondent undertook to pay in advance the rentals for six months
amounting to P1,500.00 on or before December 1, 1985.

Respondent religiously paid the monthly rentals of P250.00, which was increased
to P300.00 on December 1, 1988; and toP400.00 beginning December 1, 1991. However,
on June 1, 1993, respondent simply stopped paying the rentals. Respondent promised to settle
his unpaid account, but he failed to make good his promise. Petitioner then demanded that
respondent vacate the property, but the demand just fell on deaf ears.

Accordingly, on August 22, 1994, petitioners filed a complaint
[5]
for recovery of possession
and damages, with prayer for issuance of a temporary restraining order (TRO), with the
Regional Trial Court (RTC) of Marawi City.

In his Answer,
[6]
respondent admitted selling the subject stall for P20,000.00 to
petitioners, but averred that the sale was with right to repurchase; and on condition that he
would remain in possession of the subject stall as long as he wants. He signed the Deed of
Assignment on petitioners assurance that the conditions they earlier agreed upon were
contained in the deed. Being illiterate, he just relied on petitioners assurances. Respondent
denied that he refused to pay the agreed monthly rentals; alleging that petitioners were the ones
who refused to receive the rental payments and instead demanded payment
of P150,000.00. The Deed of Assignment, he added, failed to express the true intent and
agreement of the parties; and his signature thereon was procured by fraud, deceit, and
misrepresentation; hence, void ab initio. Respondent further averred that the complaint failed to
state a cause of action, as petitioners failed to comply with the provisions of Presidential Decree
(P.D.) No. 1508, or the Katarungang Pambarangay Law,and the Local Government Code of
1991. He also assailed the jurisdiction of the RTC over the complaint, claiming the jurisdiction
falls with the Municipal Trial Court (MTC). Finally, he averred that the complaint lacked the
required verification and certification against forum shopping. Respondent, therefore, prayed for
the dismissal of the complaint.

On June 10, 2002, the RTC rendered a Decision,
[7]
viz.:

After a careful examination of the foregoing facts and pieces of evidence
as presented by the parties, this court is convinced that [petitioners] spouses has
(sic) proved and duly established that indeed [respondent] have (sic) agreed to
sell to [petitioners] spouses whatever rights that he has over the disputed
stall. Their transaction was even admitted by the [respondent] when he signed
the acknowledgment receipt (Exhs. B & B-1) for P20,000.00 which is the
agreed purchase price and the notarized Deed of Assignment (Exh. A to A-
6). [Respondent], however, claimed that the contents of the Deed of Assignment
was (sic) not even read & translated to him, he being illiterate (sic).

The transaction was further supported by [respondents] counter-offer to
buy the stall for P80,000.00 (Exh. D) and the acknowledgment receipts of
[respondent] on the payment of rentals to the [petitioners] (Exhs. H to H-6,
Exh(s). I-1 to I-6 and Exh(s) J to J-3.

The only evidence presented by the [respondent] is his lone testimony
and Exh. 1 awarding [the] subject stall by the City Government to him.

The [respondent] did not present any evidence on his alleged ownership
over [the] subject stall except a certification (Exh. 1) datedDecember 20,
1982 from the City Government awarding [the] same to him and subject even to
the condition that he cannot sell, donate or otherwise alienate the same without
the consent of the City Government.

It appears therefore that [the] subject stall is owned by the City
Government of Marawi and that [respondent] cannot even sell or dispose of the
same.

Not being the owner, the principle NEMO DAT QUOD NON HABET which
means ONE CANNOT GIVE WHAT ONE DOES NOT HAVE squarely applies in
this case.

At most, what [respondent] can sell is whatever rights that he has over
the disputed stalls like his continued possession over the same for his business
purposes. This is what [petitioner-spouses] acquired in the interest of justice.
[8]


The RTC disposed, thus:

WHEREFORE, judgment is hereby rendered in favor of [petitioner-
spouses] and against the [respondent] as follows:

1. Whatever rights that [respondent] Hadji Abubacar Maruhom has over
stall No. CTD 1583 as described in the complaint as lessee or grantee or even as
the alleged owner are hereby transferred to [petitioner-spouses] Hadji Fatima
Gaguil Magoyag and Hadji Hasan Madlawi Mangoyag. Said [respondent] is
ordered to vacate the stall in favor of [petitioners];

2. Ordering [respondent] to pay unto petitioner the following:

(a) The unpaid rentals from June 1, 1993 up to May 31, 2002 at Three
Hundred Pesos (P300.00) a month or a total of P24,900.00;

(b) Ten Thousand (P10,000.00) pesos moral and [e]xemplary
[d]amages;

(c) Twenty Thousand (P20,000.00) pesos Attorneys fees.

SO ORDERED.
[9]


Respondent appealed to the CA faulting the RTC for not dismissing the complaint. He
argued that the complaint was filed in brazen violation of Supreme Court Circular No. 04-94 and
the Rules of Court requiring a certification of non-forum shopping. He added that the subject
stall is owned by the City Government of Marawi that cannot be leased or alienated. The Deed
of Assignmentthat he executed in favor of the petitioners is, therefore, null and void. He urged
the CA to apply the civil law rule on pari delicto.

On April 28, 2006, the CA rendered the assailed Decision reversing the RTC. The
decretal portion of the CA Decision reads:

WHEREFORE, the assailed decision of the Regional Trial Court is
hereby REVERSED AND SET ASIDE and another one entered declaring the
Deed of Assignment dated December 10, 1985 void and [of] no effect and
ordering [respondent] to pay the loan amount ofP20,000.00 plus P250.00 as
monthly interest thereon from the date of demand or August 1, 1994 until the
same shall have been fully paid. No pronouncement as to costs.

SO ORDERED.
[10]


Petitioners filed a motion for reconsideration, but the CA denied it on August 28, 2007.
[11]


Hence, this appeal by petitioners, ascribing reversible error on the part of the CA for
reversing the RTC. Specifically, they argue that the CA erred in declaring that the transaction
they had with respondent was a loan with mortgage; and invalidating the Deed of
Assignment. They insist that respondent already transferred his entire interest over the subject
stall in their favor. Thus, they are entitled to the possession of the property.

In declaring the transaction as loan with mortgage, the CA explains in this wise:

x x x [t]he evidence overwhelmingly showed that the real intention of the
[respondent] was to have the subject market stall mortgaged, in order to secure
the payment of the loan of P20,000.00 from [petitioners]. There was no genuine
intention on his part to sell the property. In fact, even after the execution of the
Deed of Assignment, [respondent] remained in possession of the said property
and paid religiously the so-called monthly rentals in the amount of two hundred
fifty (P250.00) which, in reality, was the amount they had agreed upon as interest
on the loan. For these reasons, We find and so hold that the purported
assignment was really meant to be a contract of loan in the amount
of P20,000.00 with interest thereon at the rate of P250.00 per month. The
property was intended to serve as a collateral for the loan. It is firmly ensconced
in jurisprudence that neither clarity of contract terms nor explicitness of the name
given to it can bar Us from determining the true intent of the parties.

x x x x
[12]


We find the finding of the CA contrary to the evidence on record, if not outright
preposterous.

The Deed of Assignment
[13]
reads in full:

DEED OF ASSIGNMENT

KNOW ALL MEN BY THESE PRESENTS:


This DEED OF ASSIGNMENT made and executed by and between:

The FIRST PARTY: Hadji Abubacar Maruhom, of legal age, married,
businessman by occupation and a resident of Marawi City

-and-

The SECOND PARTY: Hadji Fatima Gaguil-Magoyag, also of legal age,
married and a government employee with postal address at Moriatao Balindong,
Taraka, Lanao del Sur

W I T N E S S E T H

That for and in consideration of the sum of TWENTY THOUSAND
PESOS: (P20,000.00), Philippine Currency which amount has been paid by the
Second Party and receipt hereof has been acknowledge[d] by the First Party, the
said First [P]arty does hereby assign, [sell] transfer and convey unto the Second
Party that certain two-storey Market Stall No. CTD 1583 situated in the
Reclamation Area, Marawi City which is made of cement, and lumber and more
particularly described as follows:

Stall No. - - - - - - - - - - - - - - - - - - CTD 1583
Length - - - - - - - - - - - - - - - - - - - - 3 meters
Width - - - - - - - - - - - - - - - - - - - - 2 meters
Adjacent Stall Owner - - - - - - - - - - Rakim Bayabao
Fronting - - - - - - - - - - - - - - - - - - Hadji Cosain Saripada
Back - - - - - - - - - - - - - - - - - - - - - Hadji Alawi Pacati

of which market stall the First Party is the registered holder/owner under the
following terms and conditions:

1. The FIRST PARTY is authorize[d] and empower[ed] to continue
engaging in business in his own sole account on the said stall N[o]. CTD 1583 on
a monthly rental of TWO HUNDRED FIFTY PESOS: (P250.00) to be paid by said
FIRST PARTY to SECOND PARTY six months in advance the monthly rental to
start on December 1, 1985 renewable every year at the option of the SECOND
PARTY.

2. The FIRST PARTY agrees to pay the SECOND PARTY the first six-
month advance rental in the amount of One Thousand Five Hundred
Pesos: (P1,500.00) on or before December 1, 1985, [a]nd the succeeding
monthly rental shall always be payable six-month[s] in advance on a progressive
rate reckoned from the future rental of adjoining stall holder/owner.

3. The FIRST PARTY shall not directly or indirectly lease, assign or
mortgage or [in] any way encumber said Market Stall N[o]. 1583 or any portion
thereof without the written permission of the Second Party; any contract or
agreement made in violation thereof shall be null and void.

4. The FIRST PARTY shall turnover the Market Stall No. CTD 1583 to
the SECOND PARTY should the FIRST PARTY decide to abandon the said
Market Stall No. CTD 1583;

5. All repairs within the premises shall be at the sole account and
expense of the FIRST PARTY without right to reimbursement.

6. The FIRST PARTY shall use the said Market Stall No. 1583
exclusively for business and shall not bring into the said stall any inflammable or
explosive goods or materials nor any article which may expose the said stall from
fire or increase the fire hazard.

7. That all charges for water, light, gas, telephone within the stall shall be
at the sole account of the FIRST without right to reimbursement;

8. The FIRST PARTY shall be responsible for the payment of all taxes
on the said [S]tall No. CTD 1583 and the compliance of all laws, ordinances and
regulations or order of the National or City Government authorities arising from or
requiring the use, occupation and utilization of the said Market Stall No. CTD
1583. Failure to comply with said laws, ordinances, regulations or order shall be
at the exclusive risk and expense of the FIRST PARTY.

By no stretch of imagination can we construe the provisions of the Deed of Assignment as
a contract of loan with mortgage. Crystal clear in the Deed of Assignment are unambiguous
provisions that respondent assigned, sold, transferred, and conveyed the subject market stall to
petitioners. Nowhere in the Deed does it say that respondent obtained a loan of P20,000.00,
and mortgaged the subject stall as security.

The most fundamental rule in the interpretation of contracts is that, if the terms are clear
and leave no doubt as to the intention of the contracting parties, the literal meaning of the
contract provisions shall control.
[14]
Its meaning should be determined without reference to
extrinsic facts or aids. The intention of the parties must be gathered from that language, and
from that language alone. Stated differently, where the language of a written contract is clear
and unambiguous, the contract must be taken to mean that which, on its face, it purports to
mean, unless some good reason can be assigned to show that the words should be understood
in a different sense. Courts cannot make for the parties better or more equitable agreements
than they themselves have been satisfied to make, or rewrite contracts because they operate
harshly or inequitably as to one of the parties, or alter them for the benefit of one party and to
the detriment of the other, or by construction, relieve one of the parties from the terms which he
voluntarily consented to, or impose on him those which he did not.
[15]


That respondent sold the subject stall for P20,000.00 to petitioners was admitted by
respondent in his Answer,
[16]
although he averred that the sale was with a right to
repurchase. Even the testimony
[17]
of respondent points to no other transaction than a sale in
favor of petitioners. The CA, therefore, committed a serious blunder in making a new contract
for the parties, and declaring the Deed of Assignment as a contract of loan with mortgage.

Indubitably, the transaction between petitioners and respondent was a sale. As such,
under ordinary circumstances, petitioners could recover possession of the property from
respondent. Unfortunately in this case, the Court cannot grant petitioners the relief that they are
praying for recovery of possession of the subject stall.

The records show that Market Stall No. CTD 1583 is owned by the City Government of
Marawi. Indeed, the RTC and the CA correctly held that it was the City Government of Marawi,
not respondent, that owned Market Stall No. CTD 1583. Respondent, as a mere grantee of the
subject stall, was prohibited from selling, donating, or otherwise alienating the same without the
consent of the City Government; violation of the condition shall automatically render the sale,
donation, or alienation null and void.
[18]
Thus, we sustain the CA in declaring the Deed of
Assignment null and void, but we cannot abide by the CAs final disposition.

A void contract is equivalent to nothing; it produces no civil effect. It does not create,
modify, or extinguish a juridical relation. Parties to a void agreement cannot expect the aid of
the law; the courts leave them as they are, because they are deemed inpari delicto or in equal
fault.
[19]
To this rule, however, there are exceptions that permit the return of that which may
have been given under a void contract. One of the exceptions is found in Article 1412 of the
Civil Code, which states:


Art. 1412. If the act in which the unlawful or forbidden cause consists does
not constitute a criminal offense, the following rules shall be observed:

(1) When the fault is on the part of both contracting parties, neither may
recover what he has given by virtue of the contract, or demand the
performance of the other's undertaking;

(2) When only one of the contracting parties is at fault, he cannot
recover what he has given by reason of the contract, or ask for the
fulfillment of what has been promised him. The other, who is not at fault,
may demand the return of what he has given without any obligation to
comply with his promise.

Respondent was well aware that as mere grantee of the subject stall, he cannot sell it
without the consent of the City Government of Marawi. Yet, he sold the same to
petitioners. The records, however, are bereft of any allegation and proof that petitioners had
actual knowledge of the status of respondents ownership of the subject stall. Petitioners can,
therefore, recover the amount they had given under the contract.

In Cavite Development Bank v. Spouses Lim,
[20]
and Castillo, et al. v. Abalayan,
[21]
we
held that in case of a void sale, the seller has no right whatsoever to keep the money paid by
virtue thereof, and should refund it, with interest at the legal rate, computed from the date of
filing of the complaint until fully paid. Petitioners can, therefore, recover the amount
of P20,000.00 from respondent with interest at 6% per annum from the time of the filing of the
complaint until the finality of this Decision, and 12% per annum thereafter until full payment.

WHEREFORE, the petition is PARTLY GRANTED. The April 28, 2006 Decision
and August 28, 2007 Resolution of the Court of Appeals in CA G.R. CV No. 75765
are AFFIRMED with MODIFICATION. The Deed of Assignment dated December 10, 1985 is
declared VOID AB INITIO. Respondent Hadji Abubacar Maruhom is ordered to return to
petitioners Hadja Fatima Gaguil Magoyag and Hadji Hasan Madlawi Magoyag the amount
of P20,000.00 with interest at 6% per annum from the time of the filing of the complaint until the
finality of this Decision and 12% per annum thereafter until full payment.
No pronouncement as to costs.


SO ORDERED.
THE HEIRS OF MARCELINO G.R. No. 169454
DORONIO, NAMELY: REGINA
AND FLORA, BOTH SURNAMED
DORONIO, Present:
Petitioners,
YNARES-SANTIAGO, J.,
Chairperson,
- versus - AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
HEIRS OF FORTUNATO REYES, JJ.
DORONIO, NAMELY: TRINIDAD
ROSALINA DORONIO-BALMES,
MODING DORONIO, FLORENTINA
DORONIO, AND ANICETA Promulgated:
ALCANTARA-MANALO,
Respondents. December 27, 2007
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

D E C I S I O N


REYES, R.T., J .:

For Our review on certiorari is the Decision
[1]
of the Court of Appeals (CA) reversing
that
[2]
of the Regional Trial Court (RTC), Branch 45, Anonas, Urdaneta City, Pangasinan, in an
action for reconveyance and damages. The CA declared respondents as rightful owners of
one-half of the subject property and directed petitioners to execute a registerable document
conveying the same to respondents.


The Facts

Spouses Simeon Doronio and Cornelia Gante, now both deceased, were the registered
owners of a parcel of land located atBarangay Cabalitaan, Asingan, Pangasinan covered by
Original Certificate of Title (OCT) No. 352.
[3]
The courts below described it as follows:

Un terreno (Lote 1018), situada en el municipio de Asingan, Linda por el
NE; con propriedad de Gabriel Bernardino; con el SE con propriedad de Zacarias
Najorda y Alejandro Najorda; por el SO con propriedad de Geminiano Mendoza y
por el NO con el camino para Villasis; midiendo una extension superficial mil
ciento cincuenta y dos metros cuadrados.
[4]


The spouses had children but the records fail to disclose their number. It is clear,
however, that Marcelino Doronio and Fortunato Doronio, now both deceased, were among them
and that the parties in this case are their heirs. Petitioners are the heirs ofMarcelino Doronio,
while respondents are the heirs of Fortunato Doronio.

On April 24, 1919, a private deed of donation propter nuptias
[5]
was executed by
spouses Simeon Doronio and Cornelia Gante in favor of Marcelino Doronio and the latters wife,
Veronica Pico. One of the properties subject of said deed of donation is the one that it
described as follows:

Fourth A piece of residential land located in the barrio of Cabalitian but
we did not measure it, the area is bounded on the north by Gabriel
Bernardino; on the east by Fortunato Doronio; on the south by Geminiano
Mendoza and on the west by a road to Villasis. Constructed on said land is a
house of light materials also a part of the dowry. Value 200.00.
[6]




It appears that the property described in the deed of donation is the one covered by OCT
No. 352. However, there is a significant discrepancy with respect to the identity of the owner of
adjacent property at the eastern side. Based on OCT No. 352, the adjacent owners are
Zacarias Najorda and Alejandro Najorda, whereas based on the deed of donation, the owner of
the adjacent property is Fortunato Doronio. Furthermore, said deed of donation remained a
private document as it was never notarized.
[7]


Both parties have been occupying the subject land for several decades
[8]
although they
have different theories regarding its present ownership. According to petitioners, they are now
the owners of the entire property in view of the private deed of donationpropter nuptias in favor
of their predecessors, Marcelino Doronio and Veronica Pico.

Respondents, on the other hand, claim that only half of the property was actually
incorporated in the said deed of donation because it stated that Fortunato Doronio, instead of
Zacarias Najorda and Alejandro Najorda, is the owner of the adjacent property at the eastern
side. Respondents posit that the donors respected and segregated the possession of Fortunato
Doronio of the eastern half of the land. They are the ones who have been possessing said land
occupied by their predecessor, Fortunato Doronio.

Eager to obtain the entire property, the heirs of Marcelino Doronio and Veronica Pico
filed, on January 11, 1993, before theRTC in Urdaneta, Pangasinan a petition For the
Registration of a Private Deed of Donation
[9]
docketed as Petition Case No. U-920. No
respondents were named in the said petition
[10]
although notices of hearing were posted on the
bulletin boards ofBarangay Cabalitaan, Municipalities of Asingan and Lingayen.
[11]



During the hearings, no one interposed an objection to the petition.
[12]
After
the RTC ordered a general default,
[13]
the petition was eventually granted on September 22,
1993. This led to the registration of the deed of donation, cancellation of OCT No. 352 and
issuance of a new Transfer Certificate of Title (TCT) No. 44481 in the names of Marcelino
Doronio and Veronica Pico.
[14]
Thus, the entire property was titled in the names of petitioners
predecessors.

On April 28, 1994, the heirs of Fortunato Doronio filed a pleading before the RTC in the
form of a petition in the same Petition Case No. U-920. The petition was for the reconsideration
of the decision of the RTC that ordered the registration of the subject deed of donation. It was
prayed in the petition that an order be issued declaring null and void the registration of the
private deed of donation and that TCT No. 44481 be cancelled. However, the petition was
dismissed on May 13, 1994 on the ground that the decision in Petition Case No. U-920 had
already become final as it was not appealed.

Determined to remain in their possessed property, respondent heirs of Fortunato
Doronio (as plaintiffs) filed an action for reconveyance and damages with prayer for preliminary
injunction
[15]
against petitioner heirs of Marcelino Doronio (as defendants) before the RTC,
Branch 45, Anonas, Urdaneta City, Pangasinan. Respondents contended, among others, that
the subject land is different from what was donated as the descriptions of the property under
OCT No. 352 and under the private deed of donation were different. They posited that spouses
Simeon Doronio and Cornelia Gante intended to donate only one-half of the property.

During the pre-trial conference, the parties stipulated, among others, that the property
was originally covered by OCT No. 352 which was cancelled by TCT No. 44481. They also
agreed that the issues are: (1) whether or not there was a variation in the description of the
property subject of the private deed of donation and OCT No. 352; (2) whether or not
respondents had acquired one-half of the property covered by OCT No. 352 by acquisitive
prescription; (3) whether or not the transfer of the whole property covered by OCT No. 352 on
the basis of the registration of the private deed of donation notwithstanding the discrepancy in
the description is valid; (4) whether or not respondents are entitled to damages; and (5)
whether or not TCT No. 44481 is valid.
[16]


RTC Decision

After due proceedings, the RTC ruled in favor of petitioner heirs of Marcelino Doronio
(defendants). It concluded that the parties admitted the identity of the land which they all
occupy;
[17]
that a title once registered under the torrens system cannot be defeated by adverse,
open and notorious possession or by prescription;
[18]
that the deed of donation in consideration
of the marriage of the parents of petitioners is valid, hence, it led to the eventual issuance
of TCT No. 44481 in the names of said parents;
[19]
and that respondent heirs of Fortunato
Doronio (plaintiffs) are not entitled to damages as they are not the rightful owners of the portion
of the property they are claiming.
[20]


The RTC disposed of the case, thus:

WHEREFORE, premises considered, the Court hereby renders judgment
DISMISSING the herein Complaint filed by plaintiffs against defendants.
[21]




Disagreeing with the judgment of the RTC, respondents appealed to the CA. They
argued that the trial court erred in not finding that respondents predecessor-in-interest acquired
one-half of the property covered by OCT No. 352 by tradition and/or intestate succession; that
the deed of donation dated April 26, 1919 was null and void; that assuming that the deed of
donation was valid, only one-half of the property was actually donated to Marcelino Doronio and
Veronica Pico; and that respondents acquired ownership of the other half portion of the property
by acquisitive prescription.
[22]


CA Disposition

In a Decision dated January 26, 2005, the CA reversed the RTC decision with the
following disposition:

WHEREFORE, the assailed Decision dated June 28, 2002 is
REVERSED and SET ASIDE. Declaring the appellants as rightful owners of
one-half of the property now covered by TCT No. 44481, the appellees are
hereby directed to execute a registerable document conveying the same to
appellants.

SO ORDERED.
[23]


The appellate court determined that (t)he intention to donate half of the disputed
property to appellees predecessors can be gleaned from the disparity of technical descriptions
appearing in the title (OCT No. 352) of spouses Simeon Doronio and Cornelia Gante and in the
deed of donation propter nuptias executed on April 24, 1919 in favor of appellees
predecessors.
[24]


The CA based its conclusion on the disparity of the following technical descriptions of
the property under OCT No. 352 and the deed of donation, to wit:

The court below described the property covered by OCT No. 352 as
follows:

Un terreno (Lote 1018), situada en el municipio de
Asingan, Linda por el NE; con propriedad de Gabriel Bernardino;
con el SE con propriedad de Zacarias Najorda y Alejandro
Najorda; por el SO con propriedad de Geminiano Mendoza y por
el NO con el camino para Villasis; midiendo una extension
superficial mil ciento cincuenta y dos metros cuadrados.

On the other hand, the property donated to appellees predecessors was
described in the deed of donation as:

Fourth A piece of residential land located in the barrio of
Cabalitian but we did not measure it, the area is bounded on the
north by Gabriel Bernardino; on the east by Fortunato Doronio;
on the south by Geminiano Mendoza and on the west by a road to
Villasis. Constructed on said land is a house of light materials
also a part of the dowry. Value 200.00.
[25]
(Emphasis ours)

Taking note that the boundaries of the lot donated to Marcelino Doronio and Veronica
Pico differ from the boundaries of the land owned by spouses Simeon Doronio and Cornelia
Gante, the CA concluded that spouses Simeon Doronio and Cornelia Gante donated only half
of the property covered by OCT No. 352.
[26]


Regarding the allegation of petitioners that OCT No. 352 is inadmissible in evidence, the
CA pointed out that, while the OCT is written in the Spanish language, this document already
forms part of the records of this case for failure of appellees to interpose a timely objection when
it was offered as evidence in the proceedings a quo. It is a well-settled rule that any objection to
the admissibility of such evidence not raised will be considered waived and said evidence will
have to form part of the records of the case as competent and admitted evidence.
[27]


The CA likewise ruled that the donation of the entire property in favor of petitioners
predecessors is invalid on the ground that it impairs the legitime of respondents predecessor,
Fortunato Doronio. On this aspect, the CA reasoned out:

Moreover, We find the donation of the entire property in favor of
appellees predecessors invalid as it impairs the legitime of appellants
predecessor. Article 961 of the Civil Code is explicit. In default of testamentary
heirs, the law vests the inheritance, x x x, in the legitimate x x x relatives of the
deceased, x x x. As Spouses Simeon Doronio and Cornelia Gante died
intestate, their property shall pass to their lawful heirs, namely: Fortunato and
Marcelino Doronio. Donating the entire property to Marcelino Doronio and
Veronica Pico and excluding another heir, Fortunato, tantamounts to divesting
the latter of his rightful share in his parents inheritance. Besides, a persons
prerogative to make donations is subject to certain limitations, one of which is
that he cannot give by donation more than what he can give by will (Article 752,
Civil Code). If he does, so much of what is donated as exceeds what he can give
by will is deemed inofficious and the donation is reducible to the extent of such
excess.
[28]


Petitioners were not pleased with the decision of the CA. Hence, this petition under Rule
45.

Issues

Petitioners now contend that the CA erred in:

1. DECLARING ADMISSIBILITY OF THE ORIGINAL CERTIFICATE OF
TITLE NO. 352 DESPITE OF LACK OF TRANSLATION THEREOF.

2. (RULING THAT) ONLY HALF OF THE DISPUTED PROPERTY WAS
DONATED TO THE PREDECESSORS-IN-INTEREST OF THE HEREIN
APPELLANTS.

3. (ITS) DECLARATION THAT THE DONATION PROPTER NUPTIAS IS
INNOFICIOUS, IS PREMATURE, AND THUS IT IS
ILLEGAL AND UNPROCEDURAL.
[29]


Our Ruling

OCT No. 352 in Spanish Although Not
Translated into English or Filipino Is
Admissible For Lack of Timely Objection

Petitioners fault the CA for admitting OCT No. 352 in evidence on the ground that it is
written in Spanish language. They posit that (d)ocumentary evidence in an unofficial language
shall not be admitted as evidence, unless accompanied with a translation into English or
Filipino.
[30]


The argument is untenable. The requirement that documents written in an unofficial
language must be accompanied with a translation in English or Filipino as a prerequisite for its
admission in evidence must be insisted upon by the parties at the trial to enable the court,
where a translation has been impugned as incorrect, to decide the issue.
[31]
Where such
document, not so accompanied with a translation in English or Filipino, is offered in evidence
and not objected to, either by the parties or the court, it must be presumed that the language in
which the document is written is understood by all, and the document is admissible in
evidence.
[32]


Moreover, Section 36, Rule 132 of the Revised Rules of Evidence provides:

SECTION 36. Objection. Objection to evidence offered orally must be
made immediately after the offer is made.

Objection to a question propounded in the course of the oral examination
of a witness shall be made as soon as the grounds therefor shall become
reasonably apparent.

An offer of evidence in writing shall be objected to within three (3)
days after notice of the offer unless a different period is allowed by the
court.

In any case, the grounds for the objections must be specified. (Emphasis
ours)

Since petitioners did not object to the offer of said documentary evidence on time, it is
now too late in the day for them to question its admissibility. The rule is that evidence not
objected may be deemed admitted and may be validly considered by the court in arriving at its
judgment.
[33]
This is true even if by its nature, the evidence is inadmissible and would have
surely been rejected if it had been challenged at the proper time.
[34]


As a matter of fact, instead of objecting, petitioners admitted the contents of Exhibit A,
that is, OCT No. 352 in their comment
[35]
on respondents formal offer of documentary
evidence. In the said comment, petitioners alleged, among others, that Exhibits A, B, C, D, E,
F and G, are admitted but not for the purpose they are offered because these exhibits being
public and official documents are the best evidence of that they contain and not for what a
party would like it to prove.
[36]
Said evidence was admitted by the RTC.
[37]
Once admitted
without objection, even though not admissible under an objection, We are not inclined now to
reject it.
[38]
Consequently, the evidence that was not objected to became property of the case,
and all parties to the case are considered amenable to any favorable or unfavorable effects
resulting from the said evidence.
[39]


Issues on Impairment of Legitime
Should Be Threshed Out in a Special
Proceeding, Not in Civil Action for
Reconveyance and Damages

On the other hand, petitioners are correct in alleging that the issue regarding the
impairment of legitime of Fortunato Doronio must be resolved in an action for the settlement of
estates of spouses Simeon Doronio and Cornelia Gante. It may not be passed upon in an
action for reconveyance and damages. A probate court, in the exercise of its limited jurisdiction,
is the best forum to ventilate and adjudge the issue of impairment of legitime as well as other
related matters involving the settlement of estate.
[40]


An action for reconveyance with damages is a civil action, whereas matters relating to
settlement of the estate of a deceased person such as advancement of property made by the
decedent, partake of the nature of a special proceeding. Special proceedings require the
application of specific rules as provided for in the Rules of Court.
[41]


As explained by the Court in Natcher v. Court of Appeals:
[42]


Section 3, Rule 1 of the 1997 Rules of Civil Procedure defines civil action
and special proceedings, in this wise:

x x x a) A civil action is one by which a party sues another
for the enforcement or protection of a right, or the prevention or
redress of a wrong.

A civil action may either be ordinary or special. Both are
governed by the rules for ordinary civil actions, subject to specific
rules prescribed for a special civil action.

x x x x

c) A special proceeding is a remedy by which a party
seeks to establish a status, a right or a particular fact.

As could be gleaned from the foregoing, there lies a marked distinction
between an action and a special proceeding. An action is a formal demand of
ones right in a court of justice in the manner prescribed by the court or by the
law. It is the method of applying legal remedies according to definite established
rules. The term special proceeding may be defined as an application or
proceeding to establish the status or right of a party, or a particular fact. Usually,
in special proceedings, no formal pleadings are required unless the statute
expressly so provides. In special proceedings, the remedy is granted generally
upon an application or motion.

Citing American Jurisprudence, a noted authority in Remedial Law
expounds further:

It may accordingly be stated generally that actions include
those proceedings which are instituted and prosecuted according
to the ordinary rules and provisions relating to actions at law or
suits in equity, and that special proceedings include those
proceedings which are not ordinary in this sense, but is instituted
and prosecuted according to some special mode as in the case of
proceedings commenced without summons and prosecuted
without regular pleadings, which are characteristics of ordinary
actions x x x. A special proceeding must therefore be in the
nature of a distinct and independent proceeding for particular
relief, such as may be instituted independently of a pending
action, by petition or motion upon notice.

Applying these principles, an action for reconveyance and annulment of
title with damages is a civil action, whereas matters relating to settlement of the
estate of a deceased person such as advancement of property made by the
decedent, partake of the nature of a special proceeding, which concomitantly
requires the application of specific rules as provided for in the Rules of Court.

Clearly, matters which involve settlement and distribution of the estate of
the decedent fall within the exclusive province of the probate court in the exercise
of its limited jurisdiction.

Thus, under Section 2, Rule 90 of the Rules of Court, questions as to
advancement made or alleged to have been made by the deceased to any heir
may be heard and determined by the court having jurisdiction of the estate
proceedings, and the final order of the court thereon shall be binding on the
person raising the questions and on the heir.

While it may be true that the Rules used the word may, it is nevertheless
clear that the same provision contemplates a probate court when it speaks of the
court having jurisdiction of the estate proceedings.

Corollarily, the Regional Trial Court in the instant case, acting in its
general jurisdiction, is devoid of authority to render an adjudication and resolve
the issue of advancement of the real property in favor of herein petitioner
Natcher, inasmuch as Civil Case No. 71075 for reconveyance and annulment of
title with damages is not, to our mind, the proper vehicle to thresh out said
question. Moreover, under the present circumstances, theRTC of Manila, Branch
55, was not properly constituted as a probate court so as to validly pass upon the
question of advancement made by the decedent Graciano Del Rosario to his
wife, herein petitioner Natcher.

We likewise find merit in petitioners contention that before any conclusion about the
legal share due to a compulsory heir may be reached, it is necessary that certain steps be taken
first.
[43]
The net estate of the decedent must be ascertained, by deducting all payable
obligations and charges from the value of the property owned by the deceased at the time of his
death; then, all donations subject to collation would be added to it. With the partible estate thus
determined, the legitime of the compulsory heir or heirs can be established; and only then can it
be ascertained whether or not a donation had prejudiced the legitimes.
[44]


Declaration of Validity of Donation
Can Be Challenged by an Interested
Party Not Impleaded in Petition for
Quieting of Title or Declaratory Relief
or Where There is No Res Judicata.
Moreover, This Court Can Consider
a Factual Matter or Unassigned Error
in the Interest of Substantial Justice.

Nevertheless, petitioners cannot preclude the determination of validity of the deed of
donation on the ground that (1) it has been impliedly admitted by respondents; (2) it has already
been determined with finality by the RTC in Petition Case No. U-920; or (3) the only issue in an
action for reconveyance is who has a better right over the land.
[45]


The validity of the private deed of donation propter nuptias in favor of petitioners
predecessors was one of the issues in this case before the lower courts. The pre-trial
order
[46]
of the RTC stated that one of the issues before it is (w)hether or not the transfer of the
whole property covered by OCT No. 352 on the basis of the private deed of donation
notwithstanding the discrepancy in the description is valid. Before the CA, one of the errors
assigned by respondents is that THE TRIAL COURT ERRED IN NOT FINDING THAT THE
PRIVATE DEED OF DONATION DATED APRIL 26, 1919 WAS NULL AND VOID.
[47]


The issue of the validity of donation is likewise brought to Us by petitioners as they
stated in their Memorandum
[48]
that one of the issues to be resolved is regarding the alleged fact
that THE HONORABLE COURT OF APPEALS ERRED IN FINDING THE DONATION
INVALID. We are thus poised to inspect the deed of donation and to determine its validity.

We cannot agree with petitioners contention that respondents may no longer question the
validity of the deed of donation on the ground that they already impliedly admitted it. Under the
provisions of the Civil Code, a void contract is inexistent from the beginning. The right to set up
the defense of its illegality cannot be waived.
[49]
The right to set up the nullity of a void or non-
existent contract is not limited to the parties as in the case of annullable or voidable contracts; it
is extended to third persons who are directly affected by the contract.
[50]


Consequently, although respondents are not parties in the deed of donation, they can
set up its nullity because they are directly affected by the same.
[51]
The subject of the deed
being the land they are occupying, its enforcement will definitely affect them.

Petitioners cannot also use the finality of the RTC decision in Petition Case No. U-
920
[52]
as a shield against the verification of the validity of the deed of donation. According to
petitioners, the said final decision is one for quieting of title.
[53]
In other words, it is a case for
declaratory relief under Rule 64 (now Rule 63) of the Rules of Court, which provides:

SECTION 1. Who may file petition. Any person interested under a
deed, will, contract or other written instrument, or whose rights are affected by a
statute, executive order or regulation, or ordinance, may, before breach or
violation thereof, bring an action to determine any question of construction or
validity arising under the instrument or statute and for a declaration of his rights
or duties thereunder.





An action for the reformation of an instrument, to quiet title to real
property or remove clouds therefrom, or to consolidate ownership under
Article 1607 of the Civil Code, may be brought under this rule.

SECTION 2. Parties. All persons shall be made parties who have
or claim any interest which would be affected by the declaration; and no
declaration shall, except as otherwise provided in these rules, prejudice the
rights of persons not parties to the action. (Emphasis ours)

However, respondents were not made parties in the said Petition Case No. U-
920. Worse, instead of issuing summons to interested parties, the RTC merely allowed the
posting of notices on the bulletin boards of Barangay Cabalitaan, Municipalities of Asingan and
Lingayen, Pangasinan. As pointed out by the CA, citing the ruling of the RTC:

x x x In the said case or Petition No. U-920, notices were posted on the
bulletin boards of barangay Cabalitaan, Municipalities of Asingan and Lingayen,
Pangasinan, so that there was a notice to the whole world and during the initial
hearing and/or hearings, no one interposed objection thereto.
[54]


Suits to quiet title are not technically suits in rem, nor are they, strictly speaking, in
personam, but being against the person in respect of the res, these proceedings are
characterized as quasi in rem.
[55]
The judgment in such proceedings is conclusive only between
the parties.
[56]
Thus, respondents are not bound by the decision in Petition Case No. U-920 as
they were not made parties in the said case.

The rules on quieting of title
[57]
expressly provide that any declaration in a suit to quiet
title shall not prejudice persons who are not parties to the action.



That respondents filed a subsequent pleading
[58]
in the same Petition Case No. U-920
after the decision there had become final did not change the fact that said decision became final
without their being impleaded in the case. Said subsequent pleading was dismissed on the
ground of finality of the decision.
[59]


Thus, the RTC totally failed to give respondents their day in court. As a result, they
cannot be bound by its orders. Generally accepted is the principle that no man shall be affected
by any proceeding to which he is a stranger, and strangers to a case are not bound by judgment
rendered by the court.
[60]


Moreover, for the principle of res judicata to apply, the following must be present: (1) a
decision on the merits; (2) by a court of competent jurisdiction; (3) the decision is final; and (4)
the two actions involve identical parties, subject matter and causes of action.
[61]
The fourth
element is not present in this case. The parties are not identical because respondents were not
impleaded in Petition Case No. U-920. While the subject matter may be the same property
covered by OCT No. 352, the causes of action are different. Petition Case No. U-920 is an
action for declaratory relief while the case below is for recovery of property.

We are not persuaded by petitioners posture that the only issue in this action for
reconveyance is who has a better right over the land; and that the validity of the deed of
donation is beside the point.
[62]
It is precisely the validity and enforceability of the deed of
donation that is the determining factor in resolving the issue of who has a better right over the
property. Moreover, notwithstanding procedural lapses as to the appropriateness of the
remedies prayed for in the petition filed before Us, this Court can brush aside the technicalities
in the interest of justice. In some instances, this Court even suspended its own rules and
excepted a case from their operation whenever the higher interests of justice so demanded.
[63]


Moreover, although respondents did not directly raise the issue of validity of the deed of
donation at the commencement of the case before the trial court, it was stipulated
[64]
by the
parties during the pre-trial conference. In any event, this Court has authority to inquire into any
question necessary in arriving at a just decision of a case before it.
[65]
Though not specifically
questioned by the parties, additional issues may also be included, if deemed important for
substantial justice to be rendered.
[66]


Furthermore, this Court has held that although a factual issue is not squarely raised
below, still in the interest of substantial justice, this Court is not prevented from considering a
pivotal factual matter. The Supreme Court is clothed with ample authority to review palpable
errors not assigned as such if it finds that their consideration is necessary in arriving at a just
decision.
[67]


A rudimentary doctrine on appealed cases is that this Court is clothed with ample
authority to review matters, even if they are not assigned as errors on appeal, if it finds that their
consideration is necessary at arriving at a just decision of the case.
[68]
Also, an unassigned
error closely related to an error properly assigned or upon which the determination of the
question raised by the error properly assigned is dependent, will be considered by the appellate
court notwithstanding the failure to assign it as an error.
[69]


Donation Propter Nuptias of Real
Property Made in a Private Instrument
Before the New Civil Code Took Effect
on August 30, 1950 is Void

We now focus on the crux of the petition, which is the validity of the deed of donation. It
is settled that only laws existing at the time of the execution of a contract are applicable to it and
not the later statutes, unless the latter are specifically intended to have retroactive
effect.
[70]
Accordingly, the Old Civil Code applies in this case as the donation propter
nuptias was executed in 1919, while the New Civil Code took effect only on August 30, 1950.

Under the Old Civil Code, donations propter nuptias must be made in a public instrument
in which the property donated must be specifically described.
[71]
Article 1328 of the Old Civil
Code provides that gifts propter nuptias are governed by the rules established in Title 2 of Book
3 of the same Code. Article 633 of that title provides that the gift of real property, in order to be
valid, must appear in a public document.
[72]
It is settled that a donation of real estate propter
nuptias is void unless made by public instrument.
[73]


In the instant case, the donation propter nuptias did not become valid. Neither did it
create any right because it was not made in a public instrument.
[74]
Hence, it conveyed no title
to the land in question to petitioners predecessors.

Logically, then, the cancellation of OCT No. 352 and the issuance of a new TCT No.
44481 in favor of petitioners predecessors have no legal basis. The title to the subject property
should, therefore, be restored to its original owners under OCT No. 352.

Direct reconveyance to any of the parties is not possible as it has not yet been
determined in a proper proceeding who among the heirs of spouses Simeon Doronio and
Cornelia Gante is entitled to it. It is still unproven whether or not the parties are the only ones
entitled to the properties of spouses Simeon Doronio and Cornelia Gante. As earlier intimated,
there are still things to be done before the legal share of all the heirs can be properly
adjudicated.
[75]


Titled Property Cannot Be Acquired
By Another By Adverse Possession
or Extinctive Prescription

Likewise, the claim of respondents that they became owners of the property by
acquisitive prescription has no merit. Truth to tell, respondents cannot successfully invoke the
argument of extinctive prescription. They cannot be deemed the owners by acquisitive
prescription of the portion of the property they have been possessing. The reason is that the
property was covered by OCT No. 352. A title once registered under the torrens system cannot
be defeated even by adverse, open and notorious possession; neither can it be defeated by
prescription.
[76]
It is notice to the whole world and as such all persons are bound by it and no
one can plead ignorance of the registration.
[77]


The torrens system is intended to guarantee the integrity and conclusiveness of the
certificate of registration, but it cannot be used for the perpetration of fraud against the real
owner of the registered land.
[78]
The system merely confirms ownership and does not create
it. Certainly, it cannot be used to divest the lawful owner of his title for the purpose of
transferring it to another who has not acquired it by any of the modes allowed or recognized by
law. It cannot be used to protect a usurper from the true owner, nor can it be used as a shield
for the commission of fraud; neither does it permit one to enrich himself at the expense of
another.
[79]
Where such an illegal transfer is made, as in the case at bar, the law presumes that
no registration has been made and so retains title in the real owner of the land.
[80]


Although We confirm here the invalidity of the deed of donation and of its
resulting TCT No. 44481, the controversy between the parties is yet to be fully settled. The
issues as to who truly are the present owners of the property and what is the extent of their
ownership remain unresolved. The same may be properly threshed out in the settlement of the
estates of the registered owners of the property, namely: spouses Simeon Doronio and Cornelia
Gante.

WHEREFORE, the appealed Decision is REVERSED AND SET ASIDE. A new one is
entered:

(1) Declaring the private deed of donation propter nuptias in favor of petitioners
predecessors NULL AND VOID; and
(2) Ordering the Register of Deeds of Pangasinan to:

(a) CANCEL Transfer Certificate of Title No. 44481 in the names of
Marcelino Doronio and Veronica Pico; and

(b) RESTORE Original Certificate of Title No. 352 in the names of its
original owners, spouses Simeon Doronio and Cornelia Gante.

SO ORDERED.
ADELAIDA AMADO AND THE HEIRS
AND/OR ESTATE OF THE LATE JUDGE
NOE AMADO,
Petitioners,




- versus -


G. R. No. 171401

Present:

YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.


RENATO SALVADOR,
Respondent .

Promulgated:

December 13, 2007
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x


D E C I S I O N


CHICO-NAZARIO, J.:


This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing
the Decision dated 25 August 2005rendered by the Court of Appeals in CA-G.R. CV No.
71816.
[1]
In reversing the Decision,
[2]
dated 28 November 2000, of the Regional Trial Court
(RTC), Branch 76, of San Mateo, Rizal, the Court of Appeals declared that the late
Judge Noe Amado (JudgeAmado), the petitioners predecessor-in-interest, already sold the
subject property to respondent, Renato Salvador (Salvador).

Petitioners are the heirs of the late Judge Amado, who was the owner of a parcel of land
situated at Barangay Burgos, Rodriguez, Rizal, with an area of 5,928 square meters.
[3]
The
property subject of the present controversy is a portion thereof, consisting of 1,106 square
meters and registered under Original Certificate of Title (OCT) No. N-191954-A with the Registry
of Deeds of Rizal
[4]
in the name of Judge Amado.

Salvador alleges that in or around September 1979, Judge Amado agreed to sell to him
the subject property for P60.00 per square meter, or in the total sum of P66,360.00, payable in
cash or construction materials which would be delivered to Judge Amado, or to whomsoever the
latter wished during his lifetime.
[5]
Salvador though failed to state the terms of payment, such as
the period within which the payment was supposed to be completed, or how much of the
payment should be made in cash. In view of the sale in his favor, Salvador undertook the
transfer and relocation of about five squatter families residing on the subject
property. Thereafter, Judge Amado allowed Salvador to take possession of the subject property
and to build thereon a residential structure, office, warehouse, perimeter fence and a deep well
pump.
[6]
Salvador claims that by October 1980, he had already given JudgeAmado total cash
advances of P30,310.93 and delivered construction materials amounting to P36,904.45, the
total of which exceeded the agreed price for the subject property.
[7]


According to the petitioners, on the other hand, Judge Amado let Salvador use the
subject property, upon the request of the latters father and grandfather, who were
Judge Amados friends. Salvador used the subject property for his business of manufacturing
hollow blocks.
[8]


The petitioners maintain that the cash advances and the various construction materials
were received by Judge Amado fromSalvador in connection with a loan agreement, and not as
payment for the sale of the subject property. Petitioners offered in evidence a loan agreement
executed on 15 August 1980 wherein Salvador and Judge Amado and their respective spouses
appeared as co-borrowers with Capitol City Development Bank as lender. The property
belonging to Judge Amado was used as collateral, whileSalvador undertook the obligation to
construct a perimeter fence over Judge Amados land covered by OCT No. N-191954-A and to
deliver hollow blocks to Judge Amados son, Valeriano Amado. Petitioners aver
that Salvador and Judge Amado agreed to divide the proceeds of the loan among
themselves. Since the bank delivered the proceeds of the loan to Salvador,
Judge Amados share in the proceeds were paid to him in several installments, some of which
Salvador alleged were payments for the sale of the subject property.
[9]


Petitioners assert that when Salvadors business folded up, he failed to pay his share of
the monthly amortization of the loan with the bank. Judge Amado paid the loan to prevent the
foreclosure of his mortgaged property. Salvador also allowed his brotherLamberto Salvador to
occupy the premises without the consent of Judge Amado.
[10]


On 4 November 1983, Judge Amado sent a demand letter to Salvador directing the latter
to vacate the subject property,
[11]
which Salvador merely ignored.
[12]


Judge Amado filed an ejectment suit against Salvador before the Municipal Trial Court
(MTC) of Rodriguez, Rizal, docketed as Civil Case No. 700. During the hearing before the
MTC, Salvador and his brother, Lamberto Salvador, defendants therein, stated in their Answer
with Counterclaim that a balance of P4,040.62 from the purchase price of the subject property
was left unpaid due to the failure of Judge Amado to execute and deliver a deed of sale.
[13]
In a
Decision dated 16 July 1990, the MTC dismissed theejectment suit on the ground of lack of
jurisdiction because of Salvadors claim of ownership over the subject property.
[14]
The case
was appealed to the RTC and docketed as Civil Case No. 704. The RTC affirmed the dismissal
of Judge Amados ejectmentsuit by the MTC based on lack of jurisdiction.
[15]


On 22 August 1996, Salvador filed before the RTC Civil Case No. 1252, an action for
specific performance with damages against the petitioners.
[16]
As evidence that the sale of the
subject property was perfected between Judge Amado and himself,Salvador presented a note
written by Judge Amado, which reads
[17]
:

San Mateo
October 1, 1980
Dear Reny,

Meron naniningil sa akin ng P500.00 kayat ako ay bigyan ng ganoong hala
ga ngayon.

Hindi ko nilagdaan iyong papel na dala ni Kapitan Maeng at ito ay nasa aki
n pa.

Saka ko na ibabalik iyon pa
gang aking plano ay napaayos ko na. Ang lupa ay gagawin kong dalawang lote.

Ako,
Noe Amado


Salvador also offered in evidence the testimony of Ismael Angeles to prove that
Judge Amado agreed to sell the subject property to him.

To prove that he paid the purchase price, Salvador submitted the following documents
showing he paid cash and delivered construction materials to Judge Amado: (1) a statement of
account of cash advances made from 1 September 1979 to 23 September 1980 in the total
amount of P30,310.93
[18]
; (2) statements of account of construction materials delivered from 23
August 1979 to 20 October 1979 with a total cost of P17,656.85, from 26 December 1979 to 25
August 1980 with a total cost of P1,711.20, and from 26 August 1980 to 24 September 1980
with a total cost of P10,447.40
[19]
; (3) Invoice No. 50 dated 8 December 1980 for construction
materials worth P924.00
[20]
; and (4) delivery receipts of construction materials from 21
November 1979 to 6 January 1981 with a total cost of P1,665.00.
[21]


The RTC dismissed Salvadors complaint in Civil Case No. 1252. The trial court
observed that it was not indicated in the documentary evidence presented by Salvador that the
money and construction materials were intended as payment for the subject property. It gave
little probative value to tax declarations in the name of Salvador since they referred to the
improvements on the land and not the land itself. The testimonial evidence given
by Ismael Angeles was considered insufficient to prove the fact of sale because the witness
failed to categorically state that a sale transaction had taken place between Salvador and
Judge Amado. Moreover, the RTC held that Salvador was disqualified under the Dead Mans
Statute
[22]
from testifying on any matter of fact involving a transaction between him and
Judge Amado which occurred before the death of the latter.
[23]


Salvador appealed the Decision of the RTC in Civil Case No. 1252 before the Court of
Appeals.

In reversing the decision of the RTC of San Mateo, the Court of Appeals found
that Salvador paid for the subject land with cash advances and construction materials, since
petitioners failed to present any evidence showing that the construction
materialsSalvador delivered to Judge Amado had been paid for. It construed as adequate proof
of the sale the handwritten note of JudgeAmado wherein the latter promised to sign an
unidentified deed after the subdivision of an unnamed property, in light of IsmaelAngeles
testimony that Judge Amado had promised to sign a deed of sale over the subject property in
favor of Salvador. According to the appellate court, the testimony of Salvador was not barred by
Section 23, Rule 130 of the Rules of Court, also known as the Dead Mans Statute, and was,
therefore, admissible because the petitioners filed a counterclaim against Salvador. It also gave
great weight to the tax declarations presented by Salvador and his efforts to relocate the five
squatter families which previously resided on the subject property as proof of ownership. Lastly,
the Court of Appeals awarded Salvador P100,000.00 as moral damages andP100,000.00 as
exemplary damages. The dispositive part of the said Decision reads:

1. Ordering [herein petitioners] to execute a Deed of Sale in favor of [herein
respondent Salvador] covering the parcel of land with an area of 1,106 square
meters located at 18 Amado-Liamzon Street, Brgy. Burgos, Rodriguez, Rizal which
is a portion of the 5,928 square meter parcel of land in the name of
Judge Noe Amado, married to Adelaida A. Amado in the Registration Book as
Original Certificate of Title No. ON-191954-A of the Register of Deeds
of Rizal, Marikina Branch;

2. Ordering the [petitioners] to deliver to [Salvador] the Original Certificate of Title
No. ON-191954-A of the Register of Deeds of Rizal, MarikinaBranch, bearing page
number 54-A, Book A-6, and execute receipts and other documents which may be
necessary for the registration and titling of the parcel of land in [Salvador]s name;
and

3. Ordering the [petitioners] to pay [Salvador] P100,000.00 as moral
damages, P100,000.00 as exemplary damages, and costs of suits.
[24]



Hence, the present petition. Petitioners rely on the following grounds:
[25]


I

THE COURT A QUO ERRED ON A QUESTION OF LAW IN REVERSING THE
TRIAL COURTS DECISION AND HOLDING THAT RESPONDENT HAS
SUCCESSFULLY DISCHARGED THE BURDEN OF EVIDENCE THAT THERE
WAS A SALE OF LOT, THE CONSIDERATION OF WHICH WAS TO BE PAID
IN CASH AND CONSTRUCTION MATERIALS

II

THE COURT A QUO ERRED ON A QUESTION OF LAW IN HOLDING THAT
RESPONDENT WAS NOT DISQUALIFIED TO TESTIFY UNDER THE DEAD
MANS STATUTE AS PROVIDED IN SECTION 23, RULE 130 OF THE RULES
OF COURT

III

THE COURT A QUO ERRED ON A QUESTION OF LAW IN RULING THAT
PETITIONERS ARE LIABLE FOR MORAL OR EXEMPLARY DAMAGES IN THE
TOTAL AMOUNT OF P200,000.00
[26]



The petition at bar is meritorious.

The main controversy in the petition is whether or not there was a perfected contract of
sale of the subject property. In resolving this issue, this Court would necessarily re-examine the
factual findings of the Court of Appeals, as well as the contrary findings of the trial court. It is a
recognized principle that while this Court is not a trier of facts and does not normally embark on
the evaluation of evidence adduced during trial, this rule allows exceptions,
[27]
such as when the
findings of the trial court and the Court of Appeals are conflicting or contradictory.
[28]


A contract of sale is perfected by mere consent, upon a meeting of the minds in the
offer and the acceptance thereof based on subject matter, price and terms of payment.
[29]
Until
the contract of sale is perfected, it cannot, as an independent source of obligation, serve as a
binding juridical relation between the parties.
[30]


Consent is essential for the existence of a contract, and where it is absent, the contract
is non-existent. Consent in contracts presupposes the following requisites: (1) it should be
intelligent or with an exact notion of the matter to which it refers; (2) it should be free; and (3) it
should be spontaneous.
[31]
Moreover, a definite agreement on the manner of payment of the
price is an essential element in the formation of a binding and enforceable contract of
sale.
[32]
This is so because the agreement as to the manner of payment goes into the price
such that a disagreement on the manner of payment is tantamount to a failure to agree on the
price or consideration.
[33]


In the present case, Salvador fails to allege the manner of payment of the purchase
price on which the parties should have agreed. No period was set within which the payment
must be made. Of the purchase price of P66,360.00, which the parties purportedly agreed
upon, the amount which should be paid in cash and the amount for construction materials was
not determined. This means that the parties had no exact notion of the consideration for the
contract to which they supposedly gave their consent. Thus, such failure is fatal to Salvadors
claim that a sale had been agreed upon by the parties.

Furthermore, after carefully examining the records, serious doubts became apparent as
to whether cash advances and deliveries of construction materials evidenced by numerous
statements of accounts and delivery receipts were actually intended as payment for the land.

First of all, the statements of accounts and the delivery receipts do not indicate that the
construction materials or the cash advances were made in connection with the sale of the
subject property. Any doubt as to the real meaning of the contract must be resolved against the
person who drafted the instrument and is responsible for the ambiguity
thereof.
[34]
Since Salvador prepared these statements of accounts and therefore caused the
ambiguity, he cannot benefit from the resulting ambiguity. Salvador is hardly an ignorant and
illiterate person; rather, he is a businessman engaged in manufacturing and distributing
construction materials and operates no less than two branches. It should have been noted in
the statement of accounts, or even in another document, that the cash advances and deliveries
of construction materials were made in connection with a transaction as important as a sale of
land. As they are, the statements of accounts and especially the straightforward delivery
receipts are insufficient proof that Judge Amado sold his property to Salvador.

Secondly, one of the delivery receipts presented by Salvador as Annex I of his
Complaint in RTC Civil Case No. 1252 was partially paid.
[35]
If Judge Amado had already
agreed that the construction materials delivered to him and his family constituted the payment
for the subject property, the act of partially paying for construction materials would be
incongruous to such intention.

Thirdly, Salvador himself gave conflicting statements on whether he has completed
payment. Among the findings of fact made by the MTC in its Decision dated 16 July 1990 in
Civil Case No. 700, based on the very statements made by the Salvador brothers in their
Answer with Counterclaim, was that Salvador paid Judge Amado P62,319.38 in cash and
construction materials for the subject property, and a balance of P4,040.62 was left unpaid due
to the failure of Judge Amado to execute and deliver the deed of sale.
[36]
However, in the
proceedings before the RTC in Civil Case No. 1252, Salvador claimed that he paid
Judge Amado P67,215.38 in cash and construction materials, which was more than the
purchase price of P66,360.00 upon which they agreed.
[37]


Lastly, Salvador again contradicts himself as to the date he supposedly completed the
payments for the subject property. In his Complaint in Civil Case No. 1252, he alleges that
by October 1980, he had already fully paid Judge Amado P67,215.38 in cash and construction
materials.
[38]
Yet in the same pleading, he included 11 separate deliveries of construction
materials made from 8 December 1980 to 6 January 1981 as evidence of payment.
[39]


This Court cannot presume the existence of a sale of land, absent any direct proof of
it. The construction of the terms of a contract, which would amount to impairment or loss of
rights, is not favored. Conservation and preservation, not waiver or abandonment or forfeiture
of a right, is the rule.
[40]
While it is apparent that Salvador paid cash advances and delivered
construction materials to Judge Amado, this fact alone does not attest to the existence of a sale
of land. In truth, the inconsistent statements made by Salvador regarding the amount paid to
Judge Amado, the date when he was supposed to have completed the payment, and the
dissimilarity between the price allegedly agreed upon and the amount supposedly paid show the
absence of a uniform intention to apply these cash advances and construction materials as
payment for the purchase of the subject property. Absent any tangible connection with the sale
of land, these transactions stand by themselves as loans and purchases of construction
materials.

Other than the statements of accounts and delivery receipts scrutinized above, the other
pieces of evidence that Salvadoroffered are similarly inadequate to establish his allegation of a
perfected sale.

Salvador presented as evidence of a perfected sale a handwritten note dated 1 October
1980 as Annex GG of the Complaint dated 16 August 1996, written by Judge Amado, wherein
the latter asked Salvador for P500.00. In the same note, Judge Amadoinformed Salvador that
he had not yet signed an unidentified document, which he promised to sign after his plan to
divide a certain parcel of land was completed.
[41]
This note is not conclusive proof of the
existence of a perfected sale. What this note proves is that Judge Amado was hesitant to sign
the unidentified document and was still waiting for the completion of his plan to divide the land
referred to in the note. To say that the document is the deed of sale and the land is the subject
property claimed by Salvador would be based on pure surmise and conjecture without a more
specific reference to them in the note. Moreover, the P500.00 which JudgeAmado was
demanding from Salvador could not have been payment pursuant to the purported sale of the
subject property. The list of cash advances, which were supposedly part of the payment for the
subject property, made by Salvador to Judge Amado from 1 September 1979 to 23 September
1980 and attached as Annex D of his Complaint in Civil Case No. 1252, did not include
theP500.00 which Judge Amado demanded from Salvador on 1 October 1980.

The testimony of Ismael Angeles is likewise insufficient to support the allegation that
Judge Amado agreed to sell the subject property to Salvador. The factual findings of the trial
court, especially as regards the credibility of witnesses, are conclusive upon this court.
[42]
The
findings of fact and assessment of credibility of witnesses is a matter best left to the trial court
because of its unique position of having observed that elusive and incommunicable evidence of
the witnesses deportment on the stand while testifying, which opportunity is denied to the
appellate courts. Only the trial judge can observe the furtive glance, blush of conscious shame,
hesitation, flippant or sneering tone, calmness, sigh or the scant or full realization of an oath--all
of which are useful for an accurate determination of a witness honesty and sincerity.
[43]
Thus,
the assessment by the RTC of Angeles testimony, which it deemed insufficient, is entitled to
great respect:

Moreover, [herein respondent Salvador]s corroborative testimonial
evidence, that is, the testimony of one Ismael Angeles, is likewise deemed
insufficient as even that witness failed to categorically state any sale transaction of
the lot between [respondent] Salvador and the late Judge Amado, as in fact, Mr.
Angeles manifested uncertainty when he said siguro nagkaroon sila ng bilihan.


The findings of the trial court are well supported by the records of this case. At the time
that Judge Amado and Salvadorallegedly entered into the sale agreement, Ismael Angeles
testified that I was inside the house, but I did not hear their conversation because I was far from
them.
[44]


Even if Ismael Angeles testimony was given full credence, it would still be insufficient to
establish that a sale agreement was perfected between Salvador and Judge Amado. His
testimony that Judge Amado ordered the preparation of the deed of sale only proves that
Judge Amado and Salvador were in the process of negotiating the sale of the subject property,
not that they had already set and agreed to the terms and conditions of the sale.
[45]
In
fact, Ismael Angeles testimony that Judge Amado refused to sign the contract reinforces the
fact that the latter had not consented to the sale of the subject property.
[46]


In addition, Salvadors act of relocating the squatter families formerly residing on the
subject property
[47]
is not substantial proof of ownership. Such act is only consistent with the
petitioners allegations that Salvador was allowed to use the subject property for his business,
and it would redound to his benefit to relocate the squatters previously occupying it.

From the evidence presented, an agreement of sale of the subject property between him
and Judge Amado had not yet reached the stage of perfection. The stages of a contract are,
thus, explained:

A contract undergoes various stages that include its negotiation or
preparation, its perfection and, finally, its consummation. Negotiationcovers the
period from the time the prospective contracting parties indicate interest in the
contract to the time the contract is concluded (perfected). The perfection of the
contract takes place upon the concurrence of the essential elements thereof. A
contract which is consensual as to perfection is so established upon a mere
meeting of the minds, i.e. the concurrence of offer and acceptance, on the object
and on the cause thereof. x x x. The stage of consummation begins when the
parties perform their respective undertakings under the contract culminating in the
extinguishment thereof.

Until the contract is perfected, it cannot, as an independent source of
obligation, serve as a binding juridical relation. In sales, particularly, to which the
topic for discussion about the case at bench belongs, the contract is perfected
when a person, called the seller, obligates himself, for a price certain, to deliver
and to transfer ownership of a thing or right to another, called the buyer, over which
the latter agrees.
[48]



In the present case, the terms of payment have not even been alleged. No positive proof
was adduced that Judge Amado had fully accepted Salvadors sketchy proposal. Even if the
handwritten note actually referred to the subject property, it merely points to the fact that the
parties were, at best, negotiating a contract of sale. At the time it was written, on 1 October
1980, Judge Amado had not expressed his unconditional acceptance of Salvadors offer. He
merely expressed that he was considering the sale of the subject property, but it was
nevertheless clear that he still was unprepared to sign the contract. Salvador himself admitted
before the MTC in Civil Case No. 700 that the sale agreement did not push through as he
testified that I considered that dead investment because our sale did not materialize because
he always made promises.
[49]


Absent the valid sale agreement between Salvador and Judge Amado,
the formers possession of the subject property hinges on the permission and goodwill of
Judge Amado and the petitioners, as his successors-in-interest. In the demand letter dated 4
November 1983, Judge Amado had already directed Salvador to vacate the subject
property. Thus, there is no more basis forSalvador and his brother, Lamberto Salvador, to
retain possession over it, and such possession must now be fully surrendered to the petitioners.

The Court of Appeals imposed moral damages and exemplary damages in view of the
petitioners refusal to execute a Deed of Sale and the social humiliation suffered
by Salvador due to his ouster from the property.
[50]
Since petitioners had no demandable
obligation to deliver the subject property, the award of moral and exemplary damages, as well
as cost of suit, in favor of Salvador is without legal basis.

Moral damages may be recovered if they were the proximate result of defendants
wrongful acts or omissions.
[51]
Two elements are required. First, the act or omission must be
the proximate result of the physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation and similar
injury. Second, the act must be wrongful.
[52]
In this case, petitioners were not under any
obligation to execute a Deed of Sale or guarantee Salvadors possession of the
property. Absent any wrongful act which may be attributed to petitioners, an award of moral
damages is inappropriate.

The award of exemplary damages is also improper. Exemplary damages are awarded
only when a wrongful act is accompanied by bad faith or when the guilty party acted in a
wanton, fraudulent, reckless or malevolent manner.
[53]
Moreover, where a party is not entitled to
actual or moral damages, an award of exemplary damages is likewise baseless.
[54]
As this
Court has found, petitioners refusal to turn over the subject property to Salvador is justified and
cannot be the basis for the award of exemplary damages.

IN VIEW OF THE FOREGOING, the instant Petition is GRANTED and the assailed
Decision of the Court of Appeals in CA-G.R. No. 71816, promulgated on 25 August 2005,
is REVERSED AND SET ASIDE. The Order dated 28 November 2000 of the Rizal RTC
is REINSTATED. Renato Salvador and Lamberto Salvador are ordered to vacate the subject
property.

SO ORDERED.
MANUEL LUIS SANCHEZ
Petitioner,





- versus -






MAPALAD REALTY CORPORATION,
Respondent.
G.R. No. 148516


Present:

YNARES-SANTIAGO,J.,
Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.


Promulgated:

December 27, 2007

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

D E C I S I O N

REYES, J .:


KAPAG ang isang kasunduan ng bilihan ay
may kaakibat na pandaraya at napatunayang huwad, ang bumili aywalang nakamit na titu
lo ng pag-
aari. Ang bentahan ng apat na parsela ng mamahaling lupa sa Roxas Boulevard naisinuk
o ng dating kasamahan ng Pangulong Marcos sa pamahalaang Aquino ay nagtataglay ng
mga palatandaan ngisang malakihang pandaraya na isinagawa mismo ng mga taong hini
rang ng Presidential Commission on Good Government
(PCGG) upang pangalagaan ang pag-aari ng isang na-sequester na kumpanya.

Ang mga ito ay dapat ibalik sa pamahalaan hanggang di pa tiyak ang tunay na ma
y-ari. Hindi kanais-nais nanagpakahirap ang PCGG sa pagbawi ng nasabing pag-
aari para lamang mawala ito dahil sa manipulasyon ng isang dimapagkakatiwalaang opis
yal.

Where a deed of sale was attended by fraud and proved to be fictitious, the buyer
acquired no title to the subject property. The sale of four parcels of prime land along Roxas
Boulevard surrendered by a former associate of President Marcos to the Aquino government
bears the earmarks of a grand scam perpetrated by the very same persons appointed by the
Presidential Commission on Good Government (PCGG) to safeguard the assets of the
sequestered companies.
[1]


They must be restored to the custody of the government until their true owner is finally
determined. It would be odious to have the PCGG work so hard to recover them only to have
them lost due to manipulation of an unscrupulous official.

This petition for review on certiorari seeks a reversal of the Decision
[2]
of the Court of
Appeals (CA) which reversed and set aside that
[3]
of the Regional Trial Court (RTC), Branch
135, Makati City in an action for annulment of deed of sale and reconveyance
[4]
filed by
respondent Mapalad Realty Corporation (Mapalad, for brevity).

Petitioner Manuel Luis Sanchez, who bought the properties during the pendency of the
case at the trial court, intervened in the appeal before the CA.

The Facts

The facts, as gleaned from the records, are as follows:

Respondent Mapalad was the registered owner of four (4) parcels of land located
along Roxas Boulevard, Baclaran, Paraaque. The properties, covered by Transfer
Certificates of Title (TCT) Nos. S-81403, S-81404, S-81405 and S-81406 have a total
land area of 4,038 square meters.
[5]


On March 21, 1986, shortly after the February 1986 EDSA Revolution, Jose Y. Campos
executed an affidavit
[6]
admitting, among others, that Mapalad was one of the companies he
held in trust for former President Ferdinand E. Marcos. Campos turned over all assets,
properties, records and documents pertaining to Mapalad to the new administration led by then
President Corazon C. Aquino.

On March 23, 1986, the PCGG issued writs of sequestration for Mapalad and all its
properties.
[7]


On August 2, 1992, the PCGG appointed Rolando E. Josef as Vice
President/Treasurer and General Manager of Mapalad. He immediately conducted an
inventory of the assets of the corporation. This was when it was discovered that four (4) TCTs
were missing, namely, TCT Nos. S-81403, S-81404, S-81405, and S-81406.

Josef inquired on the whereabouts of these missing TCTs from Luis R. Narciso,
an employee of Port Center Development Corporation, a sister company of Mapalad. Josef was
informed that Mapalads former director and general manager, Felicito L. Manalili (GM Manalili)
took the said missing TCTs sometime in July 1992.

On September 8, 1992, Narciso executed an affidavit
[8]
stating that the missing TCTs
were taken from him by GM Manalili.

Josef personally talked to GM Manalili to inquire about what happened to the titles he
took from Narciso. GM Manalili promised to return the titles as soon as he found them. He
never did, despite repeated demands on him.

On November 16, 1992, Felimon Oliquiano, Jr., president of Nordelak Development
Corporation (Nordelak, for brevity), filed a notice of adverse claim
[9]
over the subject properties
based on a deed of sale purportedly executed on November 2, 1989 by Miguel Magsaysay in
his capacity as president and board chairman of Mapalad, selling the four lots to Nordelak for
the total purchase price of P20,190,000.00. This deed of sale was notarized by Elpidio
T. Clemente as Document No. 121, Page 26, BookNo. 82 Series of 1989.
[10]

Josef notified the Register of Deeds (RD) of Paraaque by three successive letters
dated November 18, December 7 and 8, 1992 that the owners duplicate copies of four (4) TCTs
in the name of Mapalad were missing, and requested the RD not to entertain any transaction,
particularly any attempt to transfer ownership thereof, or annotate any encumbrance or lien of
any kind on these four TCTs.

Since Josefs letters to the RD were not verified, the RD instructed him to submit a
verified petition or cancellation of adverse claim; Josef complied.

On December 22, 1992, Mapalad filed with the RD a verified petition for cancellation of
adverse claim annotated on its titles by Nordelak.
[11]
The petition also included a notice of loss
of the owners duplicate copies of the TCTs concerned. This was annotated on the titles as
Entry No. 154431 on the next day.

On January 14, 1993, Mapalad discovered, after verification with the records of the RD,
that its titles to the four (4) properties were cancelled as early as December 22, 1992. In lieu of
them, TCT Nos. 68493, 68494, 68495, and 68496 in the name of Nordelak were issued
[12]
by
virtue of another deed of sale also dated November 2, 1989 and purportedly signed by the same
Miguel Magsaysay in his capacity as president and chairman of the board of Mapalad.

Although this document was also notarized by the same Elpidio T. Clemente, bearing
the same Document No. 121, Page 26, Book No. 82, Series of 1989, the amount indicated in
this deed of sale as total purchase price was P7,268,400.00 instead ofP20,190,000.00 as earlier
annotated in the title per the adverse claim on November 16, 1992. In other words, there were
two deeds of absolute sale, bearing the same dates, involving the same parties, the same
parcel of land, and notarized by the same Notary Public under identical notarial entries, with
different considerations or purchase price.

Way back October 13, 1978, A. Magsaysay, Inc., a corporation controlled by Miguel
Magsaysay, acquired ownership of all shares of stock of Mapalad.
[13]


On December 3, 1982, however, A. Magsaysay, Inc. sold all its shares to Novo
Properties, Inc.
[14]
Miguel Magsaysay also sold his one and only share to Novo Properties, Inc.,
thus completely terminating any and all rights or interest he used to have over the properties of
Mapalad.

Immediately upon learning of the cancellation of Mapalads four TCTs, Josef conferred
with Miguel Magsaysay to find out whether the latter indeed signed the purported deeds of
absolute sale both dated November 2, 1989.

Magsaysay denied having signed those deeds.

On January 19, 1993, the PCGG asked the Paraaque RD to immediately recall, revoke
and cancel the four (4) titles that were issued in favor of Nordelak.
[15]


On January 22, 1993, the PCGG issued a writ of injunction, enjoining and restraining
the Paraaque RD from entertaining and processing any document or transaction relative to the
titles in the name of Nordelak. This PCGG injunction was annotated on the titles as Entry No.
93-14786.

On January 25, 1993, the RD in turn requested Nordelak to surrender the titles issued in
its name, but Nordelak refused to comply.

On February 3, 1993, Mapalad commenced, before the RTC, Makati City, the present
action for annulment of deed of sale and reconveyance of title with damages against Nordelak,
that is now the subject of this petition.

Mapalads complaint alleged that: (a) the deed of sale is falsified and a forgery; (b)
defendant Felicito L. Manalili
[16]
conspired and confederated with the other defendants to
defraud Mapalad by fabricating a fictitious, spurious and falsified deed of sale; and (c) there is
another deed of absolute sale with the same date of November 2, 1989 and also bearing the
purported signature of Miguel Magsaysay, but the two deeds of sale differ in the amounts of
consideration, one for P20,190,000.00 and the other forP7,268,400.00, which was used in the
transfer of Mapalads titles in favor of Nordelak.

Mapalad prayed for judgment: (a) declaring the two (2) deeds of absolute sale null and
void; (b) ordering Nordelak to reconvey the four (4) parcels of land in favor of Mapalad; (c)
ordering the Register of Deeds to cancel TCT Nos. 68493, 68494, 68495, and 68496, and in
lieu thereof, to issue replacement titles in the name of Mapalad; and (d) ordering Nordelak to
pay exemplary damages, attorneys fees and costs of suit.
On February 22, 1993, a notice of lis pendens was annotated as Entry No. 93-91718 on
the TCTs in Nordelaks name.
[17]


On March 4, 1993, the RD, through the Office of the Solicitor General, filed its answer
alleging that when the requirements of registration are complied with, the duty of the register of
deeds becomes simply ministerial.

On April 26, 1993, Nordelak and its president, Oliquiano filed their answer with special
and affirmative defenses, alleging that Nordelak is a buyer in good faith, and that it never dealt
with defendant Manalili in the purchase of the subject properties.

Defendant Manalili, however, failed to file any answer within the reglementary period.
The RTC declared him in default despite Section 14, Rule 18 of the Rules of Court stating that
when a complaint states a common cause of action against several defendants, some of whom
answer, and the others fail to do so, the court shall try the case against all upon the answers
thus filed and render judgment upon the evidence presented x x x.

On October 24, 1994, while the case was still pending before the RTC, Nordelak sold
the subject properties forP50,000,000.00 to a certain Manuel Luis S. Sanchez, now petitioner
before Us.

RTC Judgment

On December 6, 1994, ruling that Mapalad failed to adduce positive proof of forgery,
the RTC upheld the validity of the deed of absolute sale as a notarial document and rendered
judgment
[18]
with the following fallo:

WHEREFORE, premises considered, for failure of plaintiff to establish
preponderance of evidence to support its herein Complaint, the above-entitled
case is ordered DISMISSED for lack of cause of action and for being without
merit.

On the other hand, judgment is hereby rendered in favor of defendants
against the plaintiff by way of counterclaim, for the latter to pay actual and
compensatory damages in favor of private defendants (excluding public
defendant Register of deeds of Paraaque herein represented by the Office of
the Solicitor General) the sum of P50,000.00; attorneys fees in the sum
of P30,000.00; and the costs of the proceedings.

Furthermore, Entry No. 15431 re a Verified Petition for cancellation of the
adverse claim annotated at the back of TCT Nos. S-81403, S-81404, S-81405,
and S-81406, (Exhs. O, P, Q, and R) filed by Rolando E. Josef, V/P-
General Manager of Mapalad Realty Corporation inscribed on December 17,
1992 is ordered CANCELLED.

SO ORDERED.
[19]



On December 19, 1994, upon Nordelaks manifestation, the RTC issued a Supplemental
Decision cancelling the notice of lis pendens annotated as Entry No. 93-91718 at the back of
Nordelaks TCTs Nos. 68493, 68494, 68495, and 68496, and also lifting the restraining
order issued by the PCGG annotated on the said titles as Entry No. 93-14786.

On December 29, 1994 and January 2, 1995, Mapalad filed a motion for reconsideration
and supplemental motion for reconsideration, respectively, to which an opposition was filed by
Nordelak on January 13, 1995.

On January 2, 1995, the RTC issued an order denying the twin motions for
reconsideration. Mapalad then seasonably appealed to the CA.

Having previously bought the properties from Nordelak during the pendency of the case
with the RTC, petitioner Sanchez moved to be joined with Nordelak as party defendant-appellee
before the CA. The CA granted the motion to intervene.

CA Disposition

Finding merit in the appeal, the CA disposed of it, as follows:

WHEREFORE, premises considered, the assailed decision
is REVERSED and SET ASIDE and a new one entered

1. DECLARING as null and void the deed of absolute sale dated 02
November 1989 executed by and between Mapalad Realty
Corporation and Nordelak Development Corporation;
2. DECLARING as null and void the deed of absolute sale dated 24
October 1994 executed by and between Nordelak Development
Corporation and Manuel Luis S. Sanchez;
3. ORDERING the Register of Deeds of Paraaque to cancel TCT
Nos. 68493, 68494, 68495, and 68496 and in lieu thereof, to issue
new certificates of title covering the subject properties in the name of
Mapalad Realty Corporation.
Further, appellee Nordelak is ordered to pay appellant P100,000.00 as
attorneys fees.
SO ORDERED.
[20]


This ruling was arrived at after the CAs re-evaluation of the entire records, finding clear
evidence of fraud in obtaining the certificates of title over the disputed properties, to wit:
First. Miguel A. Magsaysay was no longer appellant Mapalads President
and Chairman of the Board when the subject deed of absolute sale was executed
on 02 November 1989. The evidence shows that by virtue of a Deed of Sale of
Shares of Stock dated 03 December 1982, Miguel Magsaysay ceded and sold
his one and only share of stock in Mapalad Realty Corporation in favor of Novo
Properties, Inc. x x x. And in his testimony, Miguel Magsaysay denied having
affixed his signature on the questioned deed of sale and categorically stated that
he ceased to be connected with appellant Mapalad after the sale of his share in
1982.

x x x x

Second. The Deed of Absolute Sale indicating a consideration
of P7,268,400.00, which was the basis for the issuance of Transfer Certificates of
Title Nos. 68493, 68494, 68495, and 68496 in the name of appellee Nordelak is
dated 02 November 1989 but was only registered more than three (3) years
later. This bolsters the testimony of Luis R. Narciso that the owners duplicate
original of appellant Mapalads titles were taken from him by defendant Felicito
Manalili in July 1992 and were never returned. Obviously, Manalili got the titles
for the purpose of registering the fictitious deed of absolute sale because under
the Property Registration Decree (P.D. 1529), no voluntary instrument shall be
registered by the Register of Deeds unless the owners duplicate is presented
with the instrument of transfer.

Third. Atty. Elpidio T. Clemente, the Notary Public who notarized the
questioned Deed of Absolute Sale, did not submit a copy of said deed in the
Notarial Section of the Regional Trial Court of Manila.

x x x x

x x x. As pointed out by appellant Mapalad in its brief, the notary public
notarized two separate deeds of sale referring to the same parcels of land on
the very same day, and made only one and the same entry for the two
documents in his notarial registry. In fact, NOT ONE witness was ever presented
by defendants-appellees to explain these highly anomalous documentations.

Fourth. There was no consideration for the deed of sale. On this point,
Rolando Josef testified that appellant Mapalad did not receive any amount with
respect to the alleged transaction involving the sale of its properties. This was
not disputed by the appellees. Since the alleged consideration is in the millions
of pesos, it can be assumed that payment was made by check. It was easy
enough for appellee Nordelak to have presented the cancelled check. Its failure
to do so speaks volumes of truth of Josefs testimony. x x x.

Fifth. In the questioned deed of sale, Nordelak was represented by one
Felimon R. Oliquiano, Jr., in his capacity as President of the corporation. Thus,
he was in the best position to testify on the validity of the questioned deed of sale
and categorically state that it was Magsaysay who signed the deed of sale and
refute Magsaysays testimony. But he was never presented and the failure to
present him was never explained. In fact, no one was presented to testify having
negotiated with and concluded the transaction with Magsaysay or that he
personally saw Magsaysay sign the deed of sale. Defendant-
appellee Nordelak presented only two witnesses both of whom were not
connected Nordelak and, in fact, did not know Mapalad.

x x x x

We therefore find that the execution of the deed of absolute sale was
attended by fraud, hence, a nullity. Thus, appellee Nordelak never acquired title
over the subject properties. And given the evidence on record, We are left to
wonder in no small measure how the court a quo could have upheld the validity
of the questioned deed of sale. The transaction has all the earmarks of a grand
scam perpetrated by the very same persons appointed by PCGG to safeguard
the assets of sequestered companies.
[21]


The CA further ruled that petitioner Sanchez, who was a transferee pendente lite, was
not a buyer in good faith, having purchased the property with an annotation of a notice of lis
pendens.

Without prior motion for reconsideration of the CA decision, intervenor-appellee Sanchez
elevated the case to Us, raising the following assignment of errors:

I

CONTRARY TO THE EXPRESS FINDINGS OF THE TRIAL COURT THAT THE
QUESTIONED DEED OF SALE IS GENUINE, VALID AND SUBSISTING, THE
COURT OF APPEALS RULED THAT THERE WAS FRAUD ON THE PART OF
NORDELAK IN OBTAINING THE CERTIFICATES OF TITLES OVER THE
DISPUTED PROPERTY, AND CONSEQUENTLY THE QUESTIONED DEED IS
FICTITIOUS.

II

COROLLARILY, CONTRARY TO THE EXPRESS FINDINGS OF THE TRIAL
COURT THAT NORDELAK IS A BUYER IN GOOD FAITH AND FOR
VALUE, THE COURT OF APPEALS RULED OTHERWISE. (Underscoring
supplied)



Issues

Two critical issues are plainly posed for our determination. First, on whether or not there
was a valid sale between Mapalad and Nordelak. Second, whether or not petitioner Sanchez
acquired valid title over the properties as innocent purchaser for value despite a defect in
Nordelaks title.

A procedural issue was raised by the Solicitor General in his Comment, too: whether or
not petitioner may raise questions of fact in the present petition.

We shall resolve them in the reverse order, dealing with the procedural ahead of the
substantive question.

Our Ruling

I. The case falls within the exception to the
rule that factual issues may not be
entertained by this Court.

In petitions for review on certiorari such as in the present case, the findings of fact of the
CA are generally conclusive on this Court, save for the following admitted exceptions:

(1) the factual findings of the Court of Appeals and the trial court are
contradictory;

(2) the findings are grounded entirely on speculation, surmises or
conjectures;

(3) the inference made by the Court of Appeals from its findings of fact is
mainly mistaken, absurd or impossible;


(4) there is grave abuse of discretion in the appreciation of facts;

(5) the appellate court, in making its findings, goes beyond the issues of
the case and such findings are contrary to the admissions of both
appellant and appellee;

(6) the judgment of the Court of Appeals is premised on a
misapprehension of facts;

(7) the Court of Appeals fails to notice certain relevant facts which, if
properly considered, will justify a different conclusion; and

(8) the findings of fact of the Court of Appeals are contrary to those of the
trial court or are mere conclusions without citation of specific evidence, or
where the facts set forth by the petitioner are not disputed by respondent,
or where the findings of fact of the Court of Appeals are premised on the
absence of evidence but are contradicted by the evidence on record.
[22]


We note that the basis for the trial courts disposition in favor of Nordelak is Mapalads
apparent failure to adduce sufficient evidence to prove that Miguel Magsaysays signatures on
the two deeds of sale by Mapalad in favor of Nordelak were forged.

The CA, however, went beyond the mere determination of whether the signatures of
Miguel Magsaysay were forged or not. It looked into the validity of the deed of absolute sale as
a whole, based on the testimonies of Miguel Magsaysay himself, quoted in its decision, as
follows:

Atty Calabio: x x x I am showing to you this Deed of Absolute Sale
marked as Exhibit D, there is here appearing on page 3 above the typewritten
name Miguel A. Magsaysay, is this your signature?

A: No, definitely not, so far away from my signature, not even in
forgery; and besides I am not the president when it was sold already.

Q: So on the date herein November 2, 1989, you were no longer
president, Sir?

A: No, I have nothing to do with them, of the corporation, after the
sale in 1982.

Atty. Calabio: Likewise, showing to you the Deed of Absolute Sale, also
dated November 2, 1989, previously marked as Exhibit F, specifically on page
3, Sir, there is a signature also above the typewritten name, Miguel Magsaysay?

A: Definitely, this is not my signature, and besides I am not the
president anymore. It looks exactly like the other one.

Atty. Calabio: Which for purposes of identification, Your Honor, may I
respectfully request that his also be encircled and marked as Exhibit F-1?
[23]


Aside from categorically denying under oath that the signatures appearing on the deeds
of absolute sale were his, witness Miguel Magsaysay gave another reason why it was
impossible for those signatures to be his. According to him, he was no longer connected in any
way whatsoever with Mapalad, when it supposedly sold the properties. He divested himself of
all his interests in Mapalad way back in 1982. There was no reason for him to sign the subject
deeds of absolute sale as president and chairman of the board of Mapalad in 1989. This was
another basis for Mapalad to convince the appellate court that the signatures purporting to be
those of Magsaysay on the questioned deeds of sale were not written by him.

We sustain the CA finding and conclusion.

While there have been guidelines cited in the petition
[24]
used by this Court in
determining what constitutes sufficient proof to establish whether a signature was forged, it does
not preclude a party from adducing other possible proofs to establish whether a particular
signature is genuine or not.
In the case at bench, not only did Magsaysay disown the signatures appearing on the
deed of sale, he cited a valid legal reason for him not to have signed such document at all. He
had no more power and authority to sign for and in behalf of Mapalad because as early as 1982,
he had already divested himself of all his interests in said corporation. His testimonies in this
case constitute sufficient basis for the Court to conclude that the signatures appearing on the
two deeds of sale (Exhibits D and F) were not his signatures.

This factual determination on the genuineness or forgery of the signatures purporting to
be those of Miguel Magsaysay on the subject deeds of sale is most crucial. When compared
with this one, all other factual issues raised in the petition become immaterial, such as: whether
the owners duplicate copies of the TCT were voluntarily delivered to, or surreptitiously taken
from Mapalads custodian of such documents; whether the deeds of sale were in fact notarized
by Atty. Elpidio Clemente considering that these documents do not exist in the archives or files
in the notarial registry; or even whether there were two or only one document purporting to be
the deed of absolute sale dated November 2, 1989.

There is, therefore, no cogent reason for this Court to delve further into these other
factual matters.


II. There can be no valid contract of sale
between Mapalad and Nordelak.

A contract is defined as a juridical convention manifested in legal form, by virtue of which
one or more persons bind themselves in favor of another, or others, or reciprocally, to the
fulfillment of a prestation to give, to do, or not to do. There can be no contract unless the
following concur: (a) consent of the contracting parties; (b) object certain which is the subject
matter of the contract; (c) cause of the obligation which is established.
[25]


Specifically, by the contract of sale, one of the contracting parties obligates himself to
transfer ownership of and to deliver a determinate thing and the other party to pay therefor a
price certain in money or its equivalent.
[26]


The essential requisites of a valid contract of sale are:

(1) Consent of the contracting parties by virtue of which the vendor obligates
himself to transfer ownership of and to deliver a determinate thing, and the vendee obligates
himself to pay therefor a price certain in money or its equivalent.

(2) Object certain which is the subject matter of the contract. The object must
be licit and at the same time determinate or, at least, capable of being made determinate
without the necessity of a new or further agreement between the parties.

(3) Cause of the obligation which is established. The cause as far as the vendor
is concerned is the acquisition of the price certain in money or its equivalent, which the cause as
far as the vendee is concerned is the acquisition of the thing which is the object of the
contract.
[27]


Contracts of sale are perfected by mere consent, which is manifested by the meeting of
the offer and the acceptance upon the thing and the cause which are to constitute the
contract.
[28]


Consent may be given only by a person with the legal capacity to give consent. In the
case of juridical persons such as corporations like Mapalad, consent may only be granted
through its officers who have been duly authorized by its board of directors.
[29]


In the present case, consent was purportedly given by Miguel Magsaysay, the person
who signed for and in behalf of Mapalad in the deed of absolute sale dated November 2, 1989.
However, as he categorically stated on the witness stand during trial, he was no longer
connected with Mapalad on the said date because he already divested all his interests in said
corporation as early as 1982. Even assuming, for the sake of argument, that the signatures
purporting to be his were genuine, it would still be voidable for lack of authority resulting in his
incapacity to give consent for and in behalf of the corporation.

On this score, the contract of sale may be annulled for lack of consent on the part of
Mapalad.

The CA also noted that the alleged contract of sale on November 2, 1989 had no
consideration. There was no payment effected by Nordelak for this transaction. Josef testified
that no funds were infused into Mapalads coffers on account of this transaction. This testimony
remained uncontroverted. In fact, the CA further noted that Nordelak could have easily
produced the cancelled check before the trial court, if there was any. Again, Nordelak did not.

The third element for a valid contract of sale is likewise lacking.

Lack of consideration makes a contract of sale fictitious. A fictitious sale is
void ab initio.
[30]


The alleged deed of absolute sale dated November 2, 1989 notwithstanding, the
contract of sale between Mapalad and Nordelak is not only voidable on account of lack of valid
consent on the part of the purported seller, but also void ab initio for being fictitious on account
of lack of consideration.

Despite a void sale between Mapalad and Nordelak, may petitioner still claim valid title
to the subject properties?


III. Petitioner as
transferee pendente lite merely steps
into the shoes of his predecessor-in-
interest who had no valid title.

As We have said, Nordelak did not acquire ownership or title over the four properties
subject of this case because the contract of sale between Mapalad and Nordelak was not only
voidable but also void ab inito. Not having any title to the property, Nordelak had nothing to
transfer to petitioner Sanchez.

Nemo dat non quod habet. Hindi maibibigay ng isang tao ang hindi kanya. No one
can give what he does not have.

Petitioner acquired the property subject of litigation during the pendency of the case in
the trial court. It is undisputed that notices of lis pendens were annotated on the TCTs in
Nordelaks name covering the subject properties as Entry No. 93-91718.

In Lim v. Vera Cruz,
[31]
this Court explained:

Lis pendens is a Latin term which literally means a pending
suit. Notice of lis pendens is filed for the purpose of warning all persons that the
title to certain property is in litigation and that if they purchase the same, they are
in danger of being bound by an adverse judgment. The notice is, therefore,
intended to be a warning to the whole world that one who buys the property does
so at his own risk. This is necessary in order to save innocent third persons from
any involvement in any future litigation concerning the property.


By virtue of the notice of lis pendens annotated on the four TCTs in this case, petitioner
had notice that the property he was intending to buy is under litigation. He is, therefore, a
transferee pendente lite who, as held by this Court in Voluntad v. Dizon,
[32]
stands exactly in the
shoes of the transferor and is bound by any judgment or decree which may be rendered for or
against the transferor.

Under the circumstances petitioner cannot acquire any better right than his predecessor,
Nordelak. No river or stream can rise higher than its source. Walang ilog o batis na ang taas
ay higit sa kanyang pinagmulan. There is thus no question that a judgment of reconveyance
can be legally enforced by Mapalad against petitioner as transferee pendente lite of Nordelak.
The four parcels of land surrendered by former Marcos associate Jose Y. Campos and
sequestered by the PCGG must eventually be returned to their rightful owners. If forfeiture
proceedings in the Marcos ill-gotten wealth cases prosper, and these properties are finally
shown to form part of such ill-gotten wealth, these properties should go to the Filipino people. If
they are not ill-gotten, they should be turned over to the Marcoses. But definitely, these
properties cannot be transferred to Nordelak nor to petitioner Manuel Luis Sanchez.

WHEREFORE, the petition is hereby DENIED and the appealed Court of Appeals
decision AFFIRMED in toto.

SO ORDERED.
G.R. No. 183852 October 20, 2010
CARMELA BROBIO MANGAHAS, Petitioner,
vs.
EUFROCINA A. BROBIO, Respondent.
R E S O L U T I O N
NACHURA, J .:
This petition for review on certiorari seeks to set aside the Court of Appeals (CA) Decision
1
dated
February 21, 2008, which dismissed petitioners action to enforce payment of a promissory note
issued by respondent, and Resolution
2
dated July 9, 2008, which denied petitioners motion for
reconsideration.
The case arose from the following facts:
On January 10, 2002, Pacifico S. Brobio (Pacifico) died intestate, leaving three parcels of land. He
was survived by his wife, respondent Eufrocina A. Brobio, and four legitimate and three illegitimate
children; petitioner Carmela Brobio Mangahas is one of the illegitimate children.
On May 12, 2002, the heirs of the deceased executed a Deed of Extrajudicial Settlement of Estate of
the Late Pacifico Brobio with Waiver. In the Deed, petitioner and Pacificos other children, in
consideration of their love and affection for respondent and the sum of P150,000.00, waived and
ceded their respective shares over the three parcels of land in favor of respondent. According to
petitioner, respondent promised to give her an additional amount for her share in her fathers estate.
Thus, after the signing of the Deed, petitioner demanded from respondent the promised additional
amount, but respondent refused to pay, claiming that she had no more money.
3

A year later, while processing her tax obligations with the Bureau of Internal Revenue (BIR),
respondent was required to submit an original copy of the Deed. Left with no more original copy of
the Deed, respondent summoned petitioner to her office on May 31, 2003 and asked her to
countersign a copy of the Deed. Petitioner refused to countersign the document, demanding that
respondent first give her the additional amount that she promised. Considering the value of the three
parcels of land (which she claimed to be worth P20M), petitioner asked for P1M, but respondent
begged her to lower the amount. Petitioner agreed to lower it to P600,000.00. Because respondent
did not have the money at that time and petitioner refused to countersign the Deed without any
assurance that the amount would be paid, respondent executed a promissory note. Petitioner
agreed to sign the Deed when respondent signed the promissory note which read
31 May 2003
This is to promise that I will give a Financial Assistance to CARMELA B. MANGAHAS the amount
of P600,000.00 Six Hundred Thousand only on June 15, 2003.
(SGD)
EUFROCINA A. BROBIO
4

When the promissory note fell due, respondent failed and refused to pay despite demand. Petitioner
made several more demands upon respondent but the latter kept on insisting that she had no
money.
On January 28, 2004, petitioner filed a Complaint for Specific Performance with Damages
5
against
respondent, alleging in part
2. That plaintiff and defendant are legal heirs of the deceased, Pacifico S. Brobio[,] who died
intestate and leaving without a will, on January 10, 2002, but leaving several real and
personal properties (bank deposits), and some of which were the subject of the extra-judicial
settlement among them, compulsory heirs of the deceased, Pacifico Brobio. x x x.
3. That in consideration of the said waiver of the plaintiff over the listed properties in the
extra-judicial settlement, plaintiff received the sum of P150,000.00, and the defendant
executed a "Promissory Note" on June 15, 2003, further committing herself to give plaintiff a
financial assistance in the amount ofP600,000.00. x x x.
4. That on its due date, June 15, 2003, defendant failed to make good of her promise of
delivering to the plaintiff the sum of P600,000.00 pursuant to her "Promissory Note" dated
May 31, 2003, and despite repeated demands, defendant had maliciously and capriciously
refused to deliver to the plaintiff the amount [of] P600,000.00, and the last of which demands
was on October 29, 2003. x x x.
6

In her Answer with Compulsory Counterclaim,
7
respondent admitted that she signed the promissory
note but claimed that she was forced to do so. She also claimed that the undertaking was not
supported by any consideration. More specifically, she contended that
10. Defendant was practically held "hostage" by the demand of the plaintiff. At that time,
defendant was so much pressured and was in [a] hurry to submit the documents to the
Bureau of Internal Revenue because of the deadline set and for fear of possible penalty if not
complied with. Defendant pleaded understanding but plaintiff was adamant. Her hand could
only move in exchange for 1 million pesos.
11. Defendant, out of pressure and confused disposition, was constrained to make a
promissory note in a reduced amount in favor of the plaintiff. The circumstances in the
execution of the promissory note were obviously attended by involuntariness and the same
was issued without consideration at all or for illegal consideration.
8

On May 15, 2006, the Regional Trial Court (RTC) rendered a decision in favor of petitioner. The RTC
found that the alleged "pressure and confused disposition" experienced by respondent and the
circumstances that led to the execution of the promissory note do not constitute undue influence as
would vitiate respondents consent thereto. On the contrary, the RTC observed that
It is clear from all the foregoing that it is the defendant who took improper advantage of the plaintiffs
trust and confidence in her by resorting to a worthless written promise, which she was intent on
reneging. On the other hand, plaintiff did not perform an unlawful conduct when she insisted on a
written commitment from the defendant, as embodied in the promissory note in question, before
affixing her signature that was asked of her by the defendant because, as already mentioned, that
was the only opportunity available to her or which suddenly and unexpectedly presented itself to her
in order to press her demand upon the defendant to satisfy the correct amount of consideration due
to her. In other words, as the defendant had repeatedly rebuffed her plea for additional consideration
by claiming lack of money, it is only natural for the plaintiff to seize the unexpected opportunity that
suddenly presented itself in order to compel the defendant to give to her [what is] due [her]. And by
executing the promissory note which the defendant had no intention of honoring, as testified to by
her, the defendant clearly acted in bad faith and took advantage of the trust and confidence that
plaintiff had reposed in her.
9

The RTC also brushed aside respondents claim that the promissory note was not supported by
valuable consideration. The court maintained that the promissory note was an additional
consideration for the waiver of petitioners share in the three properties in favor of respondent. Its
conclusion was bolstered by the fact that the promissory note was executed after negotiation and
haggling between the parties. The dispositive portion of the RTC decision reads:
WHEREFORE, judgment is hereby rendered as follows:
1. Ordering the defendant to pay to plaintiff the sum of Six Hundred Thousand Pesos
(P600,000.00) which she committed to pay to plaintiff under the promissory note in question,
plus interest thereon at the rate of 12% per annum computed from the date of the filing of the
complaint;
2. Ordering the defendant to pay to plaintiff the sum of P50,000.00 as attorneys fees; and
3. Ordering the defendant to pay to plaintiff the costs of this suit.
SO ORDERED.
10

On February 21, 2008, the CA reversed the RTC decision and dismissed the complaint.
11
The CA
found that there was a complete absence of consideration in the execution of the promissory note,
which made it inexistent and without any legal force and effect. The court noted that "financial
assistance" was not the real reason why respondent executed the promissory note, but only to
secure petitioners signature. The CA held that the waiver of petitioners share in the three
properties, as expressed in the deed of extrajudicial settlement, may not be considered as the
consideration of the promissory note, considering that petitioner signed the Deed way back in 2002
and she had already received the consideration of P150,000.00 for signing the same. The CA went
on to hold that if petitioner disagreed with the amount she received, then she should have filed an
action for partition.
Further, the CA found that intimidation attended the signing of the promissory note. Respondent
needed the Deed countersigned by petitioner in order to comply with a BIR requirement; and, with
petitioners refusal to sign the said document, respondent was forced to sign the promissory note to
assure petitioner that the money promised to her would be paid.
Petitioner moved for the reconsideration of the CA Decision. In a Resolution dated July 9, 2008, the
CA denied petitioners motion.
12

In this petition for review, petitioner raises the following issues:
1. The Honorable Court of Appeals erred in the appreciation of the facts of this case when it
found that intimidation attended the execution of the promissory note subject of this case.
2. The Honorable Court of Appeals erred when it found that the promissory note was without
consideration.
3. The Honorable Court of Appeals erred when it stated that petitioner should have filed [an
action] for partition instead of a case for specific performance.
13

The petition is meritorious.
Contracts are voidable where consent thereto is given through mistake, violence, intimidation, undue
influence, or fraud. In determining whether consent is vitiated by any of these circumstances, courts
are given a wide latitude in weighing the facts or circumstances in a given case and in deciding in
favor of what they believe actually occurred, considering the age, physical infirmity, intelligence,
relationship, and conduct of the parties at the time of the execution of the contract and subsequent
thereto, irrespective of whether the contract is in a public or private writing.
14

Nowhere is it alleged that mistake, violence, fraud, or intimidation attended the execution of the
promissory note. Still, respondent insists that she was "forced" into signing the promissory note
because petitioner would not sign the document required by the BIR. In one case, the Court in
characterizing a similar argument by respondents therein held that such allegation is tantamount to
saying that the other party exerted undue influence upon them. However, the Court said that the fact
that respondents were "forced" to sign the documents does not amount to vitiated consent.
15

There is undue influence when a person takes improper advantage of his power over the will of
another, depriving the latter of a reasonable freedom of choice.
16
For undue influence to be present,
the influence exerted must have so overpowered or subjugated the mind of a contracting party as to
destroy his free agency, making him express the will of another rather than his own.
17

Respondent may have desperately needed petitioners signature on the Deed, but there is no
showing that she was deprived of free agency when she signed the promissory note. Being forced
into a situation does not amount to vitiated consent where it is not shown that the party is deprived of
free will and choice. Respondent still had a choice: she could have refused to execute the
promissory note and resorted to judicial means to obtain petitioners signature. Instead, respondent
chose to execute the promissory note to obtain petitioners signature, thereby agreeing to pay the
amount demanded by petitioner.
The fact that respondent may have felt compelled, under the circumstances, to execute the
promissory note will not negate the voluntariness of the act. As rightly observed by the trial court, the
execution of the promissory note in the amount of P600,000.00 was, in fact, the product of a
negotiation between the parties. Respondent herself testified that she bargained with petitioner to
lower the amount:
ATTY. VILLEGAS:
Q And is it not that there was even a bargaining from P1-M to P600,000.00 before you
prepare[d] and [sign[ed] that promissory note marked as Exhibit "C"?
A Yes, sir.
Q And in fact, you were the one [who] personally wrote the amount of P600,000.00 only as
indicated in the said promissory note?
A Yes, sir.
COURT:
Q So, just to clarify. Carmela was asking an additional amount of P1-M for her to sign this
document but you negotiated with her and asked that it be lowered to P600,000.00 to which
she agreed, is that correct?
A Yes, Your Honor. Napilitan na po ako.
Q But you negotiated and asked for its reduction from P1-M to P600,000.00?
A Yes, Your Honor.
18

Contrary to the CAs findings, the situation did not amount to intimidation that vitiated
consent.1awphil There is intimidation when one of the contracting parties is compelled to give his consent
by a reasonable and well-grounded fear of an imminent and grave evil upon his person or property,
or upon the person or property of his spouse, descendants, or ascendants.
19
Certainly, the payment
of penalties for delayed payment of taxes would not qualify as a "reasonable and well-grounded fear
of an imminent and grave evil."
We join the RTC in holding that courts will not set aside contracts merely because solicitation,
importunity, argument, persuasion, or appeal to affection was used to obtain the consent of the other
party. Influence obtained by persuasion or argument or by appeal to affection is not prohibited either
in law or morals and is not obnoxious even in courts of equity.
20

On the issue that the promissory note is void for not being supported by a consideration, we likewise
disagree with the CA.
A contract is presumed to be supported by cause or consideration.
21
The presumption that a contract
has sufficient consideration cannot be overthrown by a mere assertion that it has no consideration.
To overcome the presumption, the alleged lack of consideration must be shown by preponderance
of evidence.
22
The burden to prove lack of consideration rests upon whoever alleges it, which, in the
present case, is respondent.
Respondent failed to prove that the promissory note was not supported by any consideration. From
her testimony and her assertions in the pleadings, it is clear that the promissory note was issued for
a cause or consideration, which, at the very least, was petitioners signature on the document.1avvphi 1
It may very well be argued that if such was the consideration, it was inadequate. Nonetheless, even
if the consideration is inadequate, the contract would not be invalidated, unless there has been
fraud, mistake, or undue influence.
23
As previously stated, none of these grounds had been proven
present in this case.
The foregoing discussion renders the final issue insignificant. Be that as it may, we would like to
state that the remedy suggested by the CA is not the proper one under the circumstances. An action
for partition implies that the property is still owned in common.
24
Considering that the heirs had
already executed a deed of extrajudicial settlement and waived their shares in favor of respondent,
the properties are no longer under a state of co-ownership; there is nothing more to be partitioned,
as ownership had already been merged in one person.
WHEREFORE, premises considered, the CA Decision dated February 21, 2008 and its Resolution
dated July 9, 2008 are REVERSED and SET ASIDE. The RTC decision dated May 15, 2006 is
REINSTATED.
SO ORDERED.
ICELET LALICON and G.R. No. 185440
VICELEN LALICON,
Petitioners, Present:

CARPIO,
*
J.,
VELASCO, JR., Chairperson,
- versus - ABAD,
MENDOZA, and
SERENO,
**
JJ.
NATIONAL HOUSING AUTHORITY,
Respondent. Promulgated:

July 13, 2011
x --------------------------------------------------------------------------------------- x

DECISION

ABAD, J .:


This case is about (a) the right of the National Housing Authority to seek annulment of
sales made by housing beneficiaries of lands they bought from it within the prohibited period
and (b) the distinction between actions for rescission instituted under Article 1191 of the Civil
Code and those instituted under Article 1381 of the same code.

The Facts and the Case

On November 25, 1980 the National Housing Authority (NHA) executed a Deed of Sale
with Mortgage over a Quezon City lot
[1]
in favor of the spouses Isidro and Flaviana Alfaro (the
Alfaros). In due time, the Quezon City Registry of Deeds issued Transfer Certificate of Title
(TCT) 277321 in the name of the Alfaros. The deed of sale provided, among others, that the
Alfaros could sell the land within five years from the date of its release from mortgage without
NHAs prior written consent. Thus:

x x x. 5. Except by hereditary succession, the lot herein sold and
conveyed, or any part thereof, cannot be alienated, transferred or encumbered
within five (5) years from the date of release of herein mortgage without the
prior written consent and authority from the VENDOR-MORTGAGEE (NHA). x x
x.
[2]
(Emphasis supplied)

The mortgage and the restriction on sale were annotated on the Alfaros title on April 14,
1981.

About nine years later or on November 30, 1990, while the mortgage on the land
subsisted, the Alfaros sold the same to their son, Victor Alfaro, who had taken in a common-law
wife, Cecilia, with whom he had two daughters, petitioners Vicelet and Vicelen Lalicon (the
Lalicons). Cecilia, who had the means, had a house built on the property and paid for the
amortizations. After full payment of the loan or on March 21, 1991 the NHA released the
mortgage. Six days later or on March 27 Victor transferred ownership of the land to his
illegitimate daughters.

About four and a half years after the release of the mortgage or on October 4, 1995,
Victor registered the November 30, 1990 sale of the land in his favor, resulting in the
cancellation of his parents title. The register of deeds issued TCT 140646 in Victors name. On
December 14, 1995 Victor mortgaged the land to Marcela Lao Chua, Rosa Sy, Amparo Ong,
and Ida See. Subsequently, on February 14, 1997 Victor sold the property to Chua, one of the
mortgagees, resulting in the cancellation of his TCT 140646 and the issuance of TCT N-172342
in Chuas name.

A year later or on April 10, 1998 the NHA instituted a case before the Quezon City
Regional Trial Court (RTC) for the annulment of the NHAs 1980 sale of the land to the Alfaros,
the latters 1990 sale of the land to their son Victor, and the subsequent sale of the same to
Chua, made in violation of NHA rules and regulations.

On February 12, 2004 the RTC rendered a decision in the case. It ruled that, although
the Alfaros clearly violated the five-year prohibition, the NHA could no longer rescind its sale to
them since its right to do so had already prescribed, applying Article 1389 of the New Civil
Code. The NHA and the Lalicons, who intervened, filed their respective appeals to the Court of
Appeals (CA).

On August 1, 2008 the CA reversed the RTC decision and found the NHA entitled to
rescission. The CA declared TCT 277321 in the name of the Alfaros and all subsequent titles
and deeds of sale null and void. It ordered Chua to reconvey the subject land to the NHA but
the latter must pay the Lalicons the full amount of their amortization, plus interest, and the value
of the improvements they constructed on the property.

The Issues Presented

The issues in this case are:

1. Whether or not the CA erred in holding that the Alfaros violated their contract with
the NHA;

2. Whether or not the NHAs right to rescind has prescribed; and

3. Whether or not the subsequent buyers of the land acted in good faith and their
rights, therefore, cannot be affected by the rescission.

The Rulings of the Court

First. The contract between the NHA and the Alfaros forbade the latter from selling the
land within five years from the date of the release of the mortgage in their favor.
[3]
But the
Alfaros sold the property to Victor on November 30, 1990 even before the NHA could release
the mortgage in their favor on March 21, 1991. Clearly, the Alfaros violated the five-year
restriction, thus entitling the NHA to rescind the contract.

The Lalicons contend, however, that the Alfaros did not violate the five-year restriction
against resale since what the contract between the parties barred was a transfer of the property
within five years from the release of the mortgage, not a transfer of the same prior to such
release.

But the Lalicons are trying to be clever. The restriction clause is more of a condition on
the sale of the property to the Alfaros rather than a condition on the mortgage constituted on
it. Indeed, the prohibition against resale remained even after the land had been released from
the mortgage. The five-year restriction against resale, counted from the release of the property
from the NHA mortgage, measures out the desired hold that the government felt it needed to
ensure that its objective of providing cheap housing for the homeless is not defeated by wily
entrepreneurs.

The Lalicons claim that the NHA unreasonably ignored their letters that asked for consent
to the resale of the subject property. They also claim that their failure to get NHAs prior written
consent was not such a substantial breach that warranted rescission.

But the NHA had no obligation to grant the Lalicons request for exemption from the five-
year restriction as to warrant their proceeding with the sale when such consent was not
immediately forthcoming. And the resale without the NHAs consent is a substantial
breach. The essence of the governments socialized housing program is to preserve the
beneficiarys ownerships for a reasonable length of time, here at least within five years from the
time he acquired it free from any encumbrance.

Second. Invoking the RTC ruling, the Lalicons claim that under Article 1389 of the Civil
Code the action to claim rescission must be commenced within four years from the time of the
commission of the cause for it.

But an action for rescission can proceed from either Article 1191 or Article 1381. It has
been held that Article 1191 speaks of rescission in reciprocal obligations within the context of
Article 1124 of the Old Civil Code which uses the term resolution. Resolution applies only to
reciprocal obligations

such that a breach on the part of one party constitutes an implied
resolutory condition which entitles the other party to rescission. Resolution grants the injured
party the option to pursue, as principal actions, either a rescission or specific performance of the
obligation, with payment of damages in either case.

Rescission under Article 1381, on the other hand, was taken from Article 1291 of the Old
Civil Code, which is a subsidiary action, not based on a partys breach of obligation.
[4]
The four-
year prescriptive period provided in Article 1389 applies to rescissions under Article 1381.
.
Here, the NHA sought annulment of the Alfaros sale to Victor because they violated the
five-year restriction against such sale provided in their contract. Thus, the CA correctly ruled
that such violation comes under Article 1191 where the applicable prescriptive period is that
provided in Article 1144 which is 10 years from the time the right of action accrues. The NHAs
right of action accrued on February 18, 1992 when it learned of the Alfaros forbidden sale of the
property to Victor. Since the NHA filed its action for annulment of sale on April 10, 1998, it did
so well within the 10-year prescriptive period.

Third. The Court also agrees with the CA that the Lalicons and Chua were not buyers in
good faith. Since the five-year prohibition against alienation without the NHAs written consent
was annotated on the propertys title, the Lalicons very well knew that the Alfaros sale of the
property to their father, Victor, even before the release of the mortgage violated that prohibition.

As regards Chua, she and a few others with her took the property by way of mortgage
from Victor in 1995, well within the prohibited period. Chua knew, therefore, based on the
annotated restriction on the property, that Victor had no right to mortgage the property to her
group considering that the Alfaros could not yet sell the same to him without the NHAs
consent. Consequently, although Victor later sold the property to Chua after the five-year
restriction had lapsed, Chua cannot claim lack of awareness of the illegality of Victors
acquisition of the property from the Alfaros.

Lastly, since mutual restitution is required in cases involving rescission under Article
1191,
[5]
the NHA must return the full amount of the amortizations it received for the property,
plus the value of the improvements introduced on the same, with 6% interestper annum from
the time of the finality of this judgment. The Court will no longer dwell on the matter as to who
has a better right to receive the amount from the NHA: the Lalicons, who paid the amortizations
and occupied the property, or Chua, who bought the subject lot from Victor and obtained for
herself a title to the same, as this matter was not raised as one of the issues in this
case. Chuas appeal to the Court in a separate case
[6]
having been denied due course and NHA
failing to file its own petition for review, the CA decision ordering the restitution in favor of the
Lalicons has now become final and binding against them.

WHEREFORE, the Court AFFIRMS the Decision of the Court of Appeals in CA-G.R. CV
82298 dated August 1, 2008.

SO ORDERED.
INTERNATIONAL CONTAINER G.R. No. 161539
TERMINAL SERVICES, INC.,
Petitioner, Present:

YNARES-SANTIAGO, J.,
Chairperson,
- versus - AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.
FGU INSURANCE
CORPORATION, Promulgated:
Respondent. June 27, 2008
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

D E C I S I O N

AUSTRIA-MARTINEZ, J .:

In a Decision dated July 1, 1999 in Civil Case No. 95-73532, the Regional Trial Court (RTC) of
Manila, Branch 30, ordered International Container Terminal Services, Inc. (petitioner) to pay FGU
Insurance Corporation (respondent) the following sums: (1) P1,875,068.88 with 12% interest per annum
from January 3, 1995 until fully paid; (2) P50,000.00 as attorney's fees; and (3) P10,000.00 as litigation
expenses.
[1]


Petitioner's liability arose from a lost shipment of 14 Cardboards 400 kgs. of Silver Nitrate 63.53
FCT Analytically Pure (purity 99.98 PCT), shipped by Hapag-Lloyd AG through the
vessel Hannover Express from Hamburg, Germany on July 10, 1994, with Manila, Philippines as the port
of discharge, and Republic Asahi Glass Corporation (RAGC) as consignee. Said shipment was insured by
FGU Insurance Corporation (FGU). When RAGC's customs broker, Desma Cargo Handlers, Inc., was
claiming the shipment, petitioner, which was the arrastrecontractor, could not find it in its storage area. At
the behest of petitioner, the National Bureau of Investigation (NBI) conducted an investigation. The
AAREMA Marine and Cargo Surveyors, Inc. also conducted an inquiry. Both found that the shipment was
lost while in the custody and responsibility of petitioner.

As insurer, FGU paid RAGC the amount of P1,835,068.88 on January 3, 1995.
[2]
In turn, FGU
sought reimbursement from petitioner, but the latter refused. This constrained FGU to file with the RTC of
Manila Civil Case No. 95-73532 for a sum of money.

After trial, the RTC rendered its Decision dated July 1, 1999 finding petitioner liable.

Petitioner appealed to the Court of Appeals (CA), which, in the assailed Decision
[3]
dated October
22, 2003, affirmed the RTC Decision. Petitioner filed a motion for reconsideration which the CA denied in
its Resolution dated January 8, 2004.
[4]


Hence, the present petition for review on certiorari under Rule 45 of the Rules of Court, with the
following assignment of errors:

1. THE COURT OF APPEALS SERIOUSLY ERRED IN FAILING TO APPLY THE
LIMITATION OF LIABILITY OF P3,5000 PER PACKAGE WHICH LIMITS
PETITIONER'S LIABILITY, IF ANY, TO A TOTAL OF ONLY P49,000.00
PURSUANT TO PPA ADMINISTRATIVE ORDER NO. 10-81.
2. THE COURT OF APPEALS SERIOUSLY ERRED IN UPHOLDING THE MARINE
OPEN POLICY DESPITE THE FACT THAT THE SAME WAS NO LONGER IN
FORCE AT THE TIME THE SHIPMENT WAS LOADED ON BOARD THE
CARRYING VESSEL.
3. THE COURT OF APPEALS SERIOUSLY ERRED IN FAILING TO DISMISS THE
COMPLAINT ON THE GROUND OF RESPONDENT'S FAILURE TO OFFER THE
INSURANCE POLICY IN EVIDENCE PURSUANT TO THIS HONORABLE
COURT'S DECISION IN HOME INSURANCE CORPORATION VS. COURT OF
APPEALS (225 SCRA 411) AND THE FAIRLY RECENT DECISION IN WALLEM
PHILIPPINES SHIPPING, INC. AND SEACOAST MARITIME CORP.
VS. PRUDENTIAL GUARANTEE AND ASSURANCE, INC. AND COURT OF
APPEALS, G.R. NO. 152158, 07 FEBRUARY 2003.
4. ASSUMING ARGUENDO THAT PETITIONER IS LIABLE, THE COURT OF
APPEALS SERIOUSLY ERRED IN AFFIRMING THE AWARD OF 12% INTEREST
DESPITE THE FACT THAT THE OBLIGATION PURPORTEDLY BREACHED
DOES NOT CONSTITUTE A LOAN OF FORBEARANCE OF MONEY AND
DESPITE THE CLEAR GUIDELINES SET FORTH BY THIS HONORABLE COURT
IN EASTERN SHIPPING LINES, INC. VS. COURT OF APPEALS. (234 SCRA 78).
[5]


The rule in our jurisdiction is that only questions of law may be entertained by this Court in a petition
for review on certiorari. This rule, however, is not ironclad and admits certain exceptions, such as when (1)
the conclusion is grounded on speculations, surmises or conjectures; (2) the inference is manifestly
mistaken, absurd or impossible; (3) there is grave abuse of discretion; (4) the judgment is based on a
misapprehension of facts; (5) the findings of fact are conflicting; (6) there is no citation of specific evidence
on which the factual findings are based; (7) the findings of absence of facts are contradicted by the
presence of evidence on record; (8) the findings of the CA are contrary to those of the trial court; (9) the CA
manifestly overlooked certain relevant and undisputed facts that, if properly considered, would justify a
different conclusion; (10) the findings of the CA are beyond the issues of the case; and (11) such findings
are contrary to the

admissions of both parties.
[6]
In the present case, there is nothing on record which will show that it falls
within the exceptions. Hence, the petition must be denied.

Petitioner posits that its liability for the lost shipment should be limited to P3,500.00 per package as
provided in Philippine Ports Authority Administrative Order No. 10-81 (PPA AO 10-81), under Article VI,
Section 6.01 of which provides:

Section 6.01. Responsibility and Liability for Losses and Damages; Exceptions -
The CONTRACTOR shall at its own expense handle all merchandise in all work
undertaken by it hereunder deligently [sic] and in a skillful, workman-like and efficient
manner; that the CONTRACTOR shall be solely responsible as an independent
CONTRACTOR, and hereby agrees to accept liability and to promptly pay to the shipping
company consignees, consignors or other interested party or parties for the loss, damage,
or non-delivery of cargoes to the extent of the actual invoice value of each package which
in no case shall be more than THREE THOUSAND FIVE HUNDRED PESOS
(P3,500.00) (for import cargo) x x x for each package unless the value of the cargo
importation is otherwise specified or manifested or communicated in writing
together with the declared bill of lading value and supported by a certified packing
list to the CONTRACTOR by the interested party or parties before the discharge
x x x of the goods, as well as all damage that may be suffered on account of loss,
damage, or destruction of any merchandise while in custody or under the control of the
CONTRACTOR in any pier, shed, warehouse facility or other designated place under the
supervision of the AUTHORITY x x x.
[7]
(Emphasis supplied)

The CA summarily ruled that PPA AO 10-81 is not applicable to this case without laying out the
reasons therefor.

PPA AO 10-81 is the management contract between by the Philippine Ports Authority and the
cargo handling services providers. InSumma Insurance Corporation v. Court of Appeals,
[8]
the Court ruled
that:

In the performance of its job, an arrastre operator is bound by the management
contract it had executed with the Bureau of Customs. However, a management contract,
which is a sort of a stipulation pour autrui within the meaning of Article 1311 of the Civil
Code, is also binding on a consignee because it is incorporated in the gate pass and
delivery receipt which must be presented by the consignee before delivery can be effected
to it. The insurer, as successor-in-interest of the consignee, is likewise bound by the
management contract. Indeed, upon taking delivery of the cargo, a consignee (and
necessarily its successor-in- interest) tacitly accepts the provisions of the management
contract, including those which are intended to limit the liability of one of the contracting
parties, the arrastre operator.

However, a consignee who does not avail of the services of the arrastre operator
is not bound by the management contract. Such an exception to the rule does not obtain
here as the consignee did in fact accept delivery of the cargo from the arrastre operator.
[9]


While it appears in the present case that the RAGC availed itself of petitioner's services and
therefore, PPA AO 10-81 should apply, the Court finds that the extent of petitioner's liability should cover
the actual value of the lost shipment and not the P3,500.00 limit per package as provided in said Order.

It is borne by the records that when Desma Cargo Handlers was negotiating for the discharge of the
shipment, it presented Hapag-Lloyd's Bill of Lading,
[10]
Degussa's Commercial Invoice, which indicates that
value of the shipment, including seafreight charges, was DM94.960,00 (CFR
Manila);
[11]
and Degussa's Packing List, which likewise notes that the value of the shipment was
DM94.960,00.
[12]
It is highly unlikely that petitioner was not made aware of the actual value of the shipment,
since it had to examine the pertinent documents for stripping purposes and, later on, for the discharge of
the shipment to the consignee or its representative. In fact, the NBI Report dated September 26, 1994 on
the investigation conducted by it regarding the loss of the shipment shows that
petitioner's Admeasurer Rosco Esquibal was shown the Bill of Lading by DesmaBrokerage's
representative, Rey Villanueva.
[13]
Esquibal also stated that another representative of Desma Brokerage,
Joey Laurente, went to their office and furnished him a copy of the processed papers of the fourteen
cartons of Asahi Glass cargoes.
[14]


By its own act of not charging the corresponding arrastre fees based on the value of the shipment
after it came to know of such declared value from the marine insurance policy, petitioner cannot escape
liability for the actual value of the shipment. The value of the merchandise or shipment may be declared or
stated not only in the bill of lading or shipping manifest, but also in other documents required by law before
the shipment is cleared from the piers.
[15]


Petitioner insists that Marine Open Policy No. MOP-12763 under which the shipment was insured
was no longer in force at the time it was loaded on board the Hannover Express on June 10, 1994, as
provided in the Endorsement portion of the policy, which states: IT IS HEREBY DECLARED AND
AGREED that effective June 10, 1994, this policy is deemed CANCELLED.
[16]
FGU, on the other hand,
insists that it was under Marine Risk Note No. 9798, which was executed on May 26, 1994, that said
shipment was covered.

It must be emphasized that a marine risk note is not an insurance policy. It is only an
acknowledgment or declaration of the insurer confirming the specific shipment covered by its marine open
policy, the evaluation of the cargo and the chargeable premium.
[17]
It is the marine open policy which is the
main insurance contract. In other words, the marine open policy is the blanket insurance to be undertaken
by FGU on all goods to be shipped by RAGC during the existence of the contract, while the marine risk
note specifies the particular goods/shipment insured by FGU on that specific transaction, including the sum
insured, the shipment particulars as well as the premium paid for such shipment. In any event, as it stands,
it is evident that even prior to the cancellation by FGU of Marine Open Policy No. MOP-12763 on June 10,
1994, it had already undertaken to insure the shipment of the 400 kgs. of silver nitrate, specially since
RAGC had already paid the premium on the insurance of said shipment.

Indeed, jurisprudence has it that the marine insurance policy needs to be presented in evidence
before the trial court or even belatedly before the appellate court. In Malayan Insurance Co., Inc. v. Regis
Brokerage Corp.,
[18]
the Court stated that the presentation of the marine insurance policy was necessary,
as the issues raised therein arose from the very existence of an insurance contract between Malayan
Insurance and its consignee, ABB Koppel, even prior to the loss of the shipment. In Wallem Philippines
Shipping, Inc. v. Prudential Guarantee and Assurance, Inc.,
[19]
the Court ruled that the insurance contract
must be presented in evidence in order to determine the extent of the coverage. This was also the ruling of
the Court in Home Insurance Corporation v. Court of Appeals.
[20]


However, as in every general rule, there are admitted exceptions. In Delsan Transport Lines, Inc. v.
Court of Appeals,
[21]
the Court stated that the presentation of the insurance policy was not fatal because
the loss of the cargo undoubtedly occurred while on board the petitioner's vessel, unlike in Home
Insurance in which the cargo passed through several stages with different parties and it could not be
determined when the damage to the cargo occurred, such that the insurer should be liable for it.
As in Delsan, there is no doubt that the loss of the cargo in the present case occurred while in
petitioner's custody. Moreover, there is no issue as regards the provisions of Marine Open Policy
No. MOP-12763, such that the presentation of the contract itself is necessary for perusal, not to mention
that its existence was already admitted by petitioner in open court.
[22]
And even though it was not offered in
evidence, it still can be considered by the court as long as they have been properly identified by testimony
duly recorded and they have themselves been incorporated in the records of the case.
[23]


Finally, petitioner questions the imposition of a 12% interest rate, instead of 6%, on its adjudged
liability. The ruling in Prudential Guarantee and Assurance Inc. v. Trans-Asia Shipping Lines, Inc.,
[24]
to wit:

This Court in Eastern Shipping Lines, Inc. v. Court of Appeals, inscribed the rule
of thumb in the application of interest to be imposed on obligations, regardless of their
source. Eastern emphasized beyond cavil that when the judgment of the court awarding a
sum of money becomes final and executory, the rate of legal interest, regardless of
whether the obligation involves a loan or forbearance of money, shall be 12% per annum
from such finality until its satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit.
We find application of the rule in the case at bar proper, thus, a rate of 12% per
annum from the finality of judgment until the full satisfaction thereof must be imposed on
the total amount of liability adjudged to PRUDENTIAL. It is clear that the interim period
from the finality of judgment until the satisfaction of the same is deemed equivalent
to a forbearance of credit, hence, the imposition of the aforesaid
interest.
[25]
(Emphasis supplied)

is instructive. The CA did not commit any error in applying the same.

The Court notes, however, an apparent clerical error made in the dispositive portion of the RTC
Decision. While it appears that FGU paid RAGC the amount of P1,835,068.88, as shown in the
Subrogation Receipt,
[26]
as prayed for in its Complaint,
[27]
the RTC awarded the sum
ofP1,875,068.88. Thus, a necessary modification should be made on this score.

WHEREFORE, the petition is DENIED. The Decision dated October 22, 2003 and Resolution
dated January 8, 2004 of the Court of Appeals are AFFIRMED, with the modification that the award in the
RTC Decision dated July 1, 1999 should be P1,835,068.88 instead ofP1,875,068.88.

Costs against petitioner.

SO ORDERED.
G.R. No. 132196 December 9, 2005
SPOUSES SEGUNDO RAMOS and FELISA VALDEZ, Petitioners,
vs.
HON. COURT OF APPEALS, LEILA VALDEZ-PASCUAL, ARACELI VALDEZ, GLICERIA
VALDEZ, JUANA VALDEZ, SIMEON VALDEZ, CONRADA VALDEZ, SEVERINO VALDEZ,
MARIO VALDEZ, ADORACION VALDEZ, JOSE VALDEZ, DIONISIA VALDEZ, DANILO VALDEZ,
SERAPIO VALDEZ, HELEN VALDEZ, PERLA VALDEZ, and DELIA VALDEZ, Respondents.
D E C I S I O N
CHICO-NAZARIO, J .:
This case presents a tangled tale involving the conflicting accounts of petitioners and private
respondents over a piece of land sold by Gregorio Valdez (private respondents father) to petitioners
in 1948 and which ostensibly became the subject of a compromise agreement in 1977.
Through the instant Petition for Review on certiorari, spouses Segundo Ramos and Felisa Valdez
seek the reversal of the Decision
1
of the Court of Appeals dated 31 July 1997 which reversed the
Decision
2
of the Regional Trial Court (RTC), Branch 48, Urdaneta, Pangasinan. The RTC decision
dismissed the case filed by private respondents for Quieting of Title, Ownership, Possession plus
Damages with prayer for Writ of Preliminary Injunction and adjudged petitioners as the lawful owners
of a piece of land, with an area of 3,036 square meters, and which forms part of a bigger tract of land
covered by Original Certificate of Title (OCT) No. 48824 of the Registry of Deeds of the Province of
Pangasinan in the name of Gregorio Valdez. Under review as well is the Court of Appeals
Resolution
3
dated 08 December 1997 denying petitioners motion for reconsideration.
Private respondents are the children
4
of Gregorio Valdez. In 1948, Gregorio Valdez sold the subject
land to petitioners. The absolute deed of sale was subsequently annotated at the back of OCT No.
48824 as Entry No. 377847. It is the contention of private respondents that as early as 1977,
petitioners no longer owned subject land as they had renounced their rights thereto as evidenced by
a compromise agreement dated 02 June 1977.
Sometime in 1991, Gregorio Valdez died. Private respondents allege that immediately after the
death of their father, petitioners disturbed their possession of subject land by cultivating the same
and by enclosing it with a fence. As petitioners did not heed their demands to vacate, they were
constrained to file a case for Quieting of Title, Ownership, Possession plus Damages with prayer for
Writ of Preliminary Injunction.
Petitioners, in their Answer with Counterclaim, maintain that they remain owners of the subject land
as the compromise agreement being relied upon by private respondents refers to another piece of
land. Thus, they argue that the compromise agreement constitutes a cloud on their title. They
prayed, among other things, for the quieting of their title and that they be adjudged lawful owners of
the subject land.
The trial court believed petitioners. It sided with petitioners by declaring them owners of the subject
land by virtue of the absolute deed of sale dated 06 January 1948. The dispositive portion of its
decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the defendants and
against the plaintiffs and declaring the defendants to be the lawful owners of the land in question.
5

The Court of Appeals reversed the trial courts ruling. It held that the land renounced by petitioners
was the subject land and that it was made in favor of Gregorio Valdez, thus:
WHEREFORE, premises considered the decision appealed from is hereby REVERSED and SET
ASIDE and another one entered declaring plaintiffs as owner of the land in question, and ordering
defendants-appellees to vacate the same. With costs against defendants-appellees.
Aggrieved by the aforecited ruling, and their motion for reconsideration having been denied by the
Court of Appeals, petitioners assert before us that
I.
THE HONORABLE COURT OF APPEALS ERRED IN REVERSING THE TRIAL COURTS
FINDINGS WHICH TOOK INTO ACCOUNT THE INTENTIONS OF THE PARTIES IN THE
COMPROMISE AGREEMENT IN QUESTION BY CONSIDERING CIRCUMSTANCES PREVIOUS
AND SIMULTANEOUS TO THE EXECUTION OF THE AGREEMENT.
II.
WHILE THE HONORABLE COURT OF APPEALS CORRECTLY STATED THE UNDERLYING
REASONS BEHIND THE EXECUTION OF THE COMPROMISE AGREEMENT IN QUESTION, IT
SERIOUSLY ERRED IN UPHOLDING THE VALIDITY OF THE COMPROMISE AGREEMENT
WITH RESPECT TO A THIRD PERSON WHO WAS A STRANGER THERETO AND INVOLVING A
PARCEL OF LAND WHICH IS FOREIGN TO THE DISPUTE IN THE LAND REGISTRATION CASE
THAT GAVE LIFE TO THE COMPROMISE AGREEMENT.
III.
THE HONORABLE COURT OF APPEALS ERRED IN REVERSING THE TRIAL COURTS
DECISION FINDING NO LEGAL AND FACTUAL BASES TO UPHOLD THE VALIDITY OF THE
ALLEGED RENUNCIATION OF PETITIONERS RIGHTS OVER THE NORTHERN PORTION OF
THE TITLED LAND IN QUESTION INSTEAD OF THE INTENDED SOUTHERN PORTION OF AN
UNTITILED LAND SUBJECT OF THE LRC.
6

In order to get to the bottom of this land dispute, the primary and most basic question that has to be
asked is this: Is the absolute deed of sale dated 06 January 1948 between petitioners and private
respondents predecessor-in-interest, Gregorio Valdez, annotated at the back of OCT No. 48824, a
cloud on such title that has to be removed under the grounds stated in the Civil Code?
Articles 476 and 478 of the Civil Code provide:
Art. 476. Whenever there is a cloud on title to real property or any interest therein, by reason of any
instrument, record, claim, encumbrance or proceeding which is apparently valid or effective but is in
truth and in fact invalid, ineffective, voidable, or unenforceable, and may be prejudicial to said title,
an action may be brought to remove such cloud or to quiet the title.
An action may also be brought to prevent a cloud from being cast upon title to real property or any
interest therein.
Art. 478. There may also be an action to quiet title or remove a cloud therefrom when the contract,
instrument or other obligation has been extinguished or has terminated, or has been barred by
extinctive prescription.
In herein case, private respondents, as plaintiffs in the case for quieting of title, allege that their
fathers obligation under the deed of absolute sale has been extinguished or has been terminated by
virtue of the compromise agreement dated 02 June 1977 whereby petitioners ostensibly renounced
their rights over the subject property. Petitioners, on the other hand, claim that the same
compromise agreement constitutes a cloud on their title.
The Compromise Agreement
7
states:
REPUBLIC OF THE PHILIPPINES
COURT OF FIRST INSTANCE OF PANGASINAN
THIRD JUDICIAL DISTRICT
9th Branch, Urdaneta
SEGUNDO RAMOS, ET AL.,
Applicants. LAND REG. CASE No. U-843
LRC Rec. No. N-48993
vs.
THE DIRECTOR OF LANDS, ET AL.,
Oppositors.
x----------------------------------------x
COMPROMISE AGREEMENT
COME NOW, the parties in the above-entitled case duly assisted by their respective counsels and to
this Honorable Court submit this compromise agreement, to wit:
1. That the oppositor Felipe Cabero hereby withdraw (sic) his opposition in the above-entitled case;
2. That the applicants Segundo Ramos and Felisa Valdez hereby also quitclaim and renounce
whatever rights in the document registered under entry No. 377847 annotated at the back of O.C.T.
No. 48824 of Gregorio Valdez;
3. That the parties hereby waive any claim for and against the other.
WHEREFORE, the parties should abide the foregoing compromise agreement and that each of them
shall respect the right of the other.
IN WITNESS WHEREOF, the parties duly assisted by their respective counsels set their hands this
2nd day of June, 1977, at Urdaneta, Pangasinan.
SEGUNDO RAMOS, FELISA VALDEZ
Applicant Applicant
FELIPE CABERO
Oppositor
ASSISTED BY:
ATTY. ELISEO E. VERSOZA ATTY. NICANOR CALDITO
Counsel for the Applicants Counsel for Oppositor
Soconi, Bugallon, Pang. Pozorrubio, Pang.
To get a proper grip of the controversial compromise agreement, a narration of the circumstances
surrounding its execution is in order.
The compromise agreement was entered into between petitioners and a certain Felipe Cabero in
connection with petitioners application for registration of a piece of untitled land adjacent to the
subject land filed with the Court of First Instance of Pangasinan in LRC Case No. U-843. This
untitled land was purchased by petitioners from a certain Alejandro Alcantara.
8
Apparently, Cabero
was the actual occupant of the southern portion of this land, thus, he opposed petitioners application
for registration. Petitioners explained that the southern portion occupied by Cabero was purchased
by Cabero from Gregorio Valdez who sold it by mistake as he (Valdez) thought that the land he was
selling was part of his titled land.
Petitioners version
To save himself from the quagmire he created, Gregorio Valdez entreated upon petitioners to give
up the southern portion of their untitled land in exchange for Caberos withdrawal of his opposition to
petitioners application for registration. Petitioners agreed. Thus, during the pendency of the land
registration proceedings, petitioners and Cabero entered into a compromise agreement. The
agreement was written in English. Its contents were not translated into Ilocano for petitioners but
they did not mind as they were represented by their counsel. The signatories to the said agreement
were petitioners, Cabero and their respective counsels. Petitioners, being unlettered, were not aware
that the property they were renouncing under the compromise agreement was the subject property
as, definitely, this was not their intention. Thus, they argued that the compromise agreement
contained a false cause and that they gave their consent thereto by mistake.
Private Respondents version
The compromise agreement categorically states that the property being renounced is the subject
property and that the same is made in favor of private respondents late father, Gregorio Valdez.
Gregorio Valdez was a party to said compromise agreement as his signature is also affixed thereto.
The decision of the trial court
As articulated earlier, the trial court ruled in favor of herein petitioners. It held:
After carefully perusing the records and the evidence adduced, this Court is left to resolve the issues
agreed upon by the parties as indicated in the pre-trial order.
However, before this Court could arrive at a proper solution of the issues, it is imperative to
determine the true intentions of the parties in the controversial compromise agreement (Exh. B) by
considering all the surrounding circumstances previous and simultaneous to the execution of the
same.
It is not disputed that the property in question with an area of 3,036 square metes on the northern
portion of a parcel of land was owned by the plaintiffs late father Gregorio Valdez covered by TCT
No. 48824 (Exh. A). Sometime in the year 1948, the late Gregorio Valdez sold the said property to
defendant-spouses Segundo Ramos and Felisa Valdez. That sale was annotated at the back of said
title as Entry No. 377847 (Exh. A-1).
Defendant Segundo Ramos also bought an untitled land from Alejandro Alcantara in 1945 evidenced
by a deed of absolute sale marked as Exhibit 6. When Segundo Ramos applied for registration of
title of the said land, Felipe Cabero opposed the same. During the pendency of the land registration
case, a compromise agreement (Exh. B) was concluded by the herein defendants as applicants and
oppositor Felipe Cabero.
The Court noted that the portion of land referred to in the said compromise agreement and to have
been renounced allegedly is the northern portion. This is clear in the Entry No. 377847 (Exh. A-1). In
contrast, what has been relinquished and renounced by Segundo Ramos was the southern portion
of the same land being occupied, at that time, by Felipe Cabero. It appears therefore, that there is a
different portion of land that was the real subject of renunciation other than that indicated in the
compromise agreement. Hence, such agreement expresses wrong intentions of the parties. The
mistake in the compromise agreement was recognized and admitted by plaintiff Lilia Valdez when
she testified as rebuttal witness, to wit:
"Q. According to Segundo Ramos there was no consideration whatsoever in favor of your father
Gregorio Valdez that the compromise agreement was executed, what can you say about that?
A. That is not true sir.
Q. What is the truth?
A. That is not true sir actually the compromise agreement was made to correct a mistake which was
committed because the deed of sale was executed covering the portion which was titled property
when it should pertain to the untitled property of Gregorio Valdez."
(TSN-Felix, 3-11-92, pp. 8-9)
The renunciation of the southern portion by Segundo Ramos, as he claimed, is inter-related to the
conflict of encroachment of ownership of the land between him and Felipe Cabero. It is unthinkable
and unusual for defendant-spouses to renounce the very portion of land they bought from late
Gregorio Valdez to the latter without any consideration at all.
Morever, a scrutiny of the compromise agreement reveals that the alleged renunciation was not
expressly made in favor of Gregorio Valdez and worst of all, the latter was never a party in the
registration case although his signature was affixed therein (Exh. B-1 and 1-a) without any
designation, nor reference to the land registration case. If ever there was a renunciation, it should be
in favor of Felipe Cabero because he was the oppositor, but he did not anymore pursue his
opposition.
In view of the foregoing findings, it could not be said that defendant-spouses did renounce the
property in question which is the northern portion to late Gregorio Valdez from whom they bought it.
9

The Ruling of the Court of Appeals
The reversal by the Court of Appeals of the afore-quoted decision was based on the following
ratiocination, to wit:
We agree with appellants contention that the identity of the land subject of the compromise
agreement vis--vis that covered by the Deed of Sale executed between Gregorio Valdez and
defendants-appellees is no longer open to question having been made the subject of pre-trial
stipulation (Pre-Trial Order dated November 19, 1991, supra). Moreover, the evidence presented
supports this contention.
As can be seen from the decision dated 19 March 1979 of the Court of First Instance of Pangasinan
in Land Registration Case No. U-843 Record No. N-48998 entitled Segundo Ramos, et al. vs. The
Director of Lands, et al. (Exh. "3", Folder of Exhibits, pp. 15-17) only Felipe Cabero and the Director
of Lands opposed defendants-appellees application for original registration. The subject of this land
registration case was that parcel of land previously owned by Alejandro Alcantara, situated at Barrio
Maambal, Municipality of Pozorrubio, Province of Pangasinan containing an area of 7,073 square
meters, more or less, and more particularly described in Plan Psu-1-002310. As indicated in the
aforesaid decision Felipe Cabero withdrew his opposition. The Decision however does not make any
reference to the Compromise Agreement executed in the same case two (2) years before, on June
2, 1977 marked as Exhibit "B" (Folder of Exhibits, p. 2).
In the Compromise Agreement (supra), the applicants in the land registration case, Segundo Ramos
and Felisa Valdez had expressed their renunciation of their rights "in the document registered under
Entry No. 377847 annotated at the back of O.C.T. No. 48824 of Gregorio Valdez". This entry is a
Deed of Absolute Sale (Exhibit "7") executed by Gregorio Valdez married to Maria Soriano in favor of
Segundo Ramos married to Felisa Valdez, the subject of which is a parcel of land consisting of
3,036 square meters of the northern portion of the land covered by OCT No. 48824 (Exhibit "A").
It is manifest from the foregoing that while the land registration case covered that parcel of land
purchased by appellees from Alejandro Alcantara, which was ultimately decreed in favor of
appellees in the Decision of the LRC marked Exhibit "3"; the Compromise Agreement wherein
appellees declared their renunciation/quitclaim of their rights referred to another parcel of land
consisting of 3,036 sq. m. that was the subject of a Deed of Absolute Sale executed by Gregorio
Valdez that was a part of, hence annotated on OCT No. 48824 registered in Valdez name, which
property had been earlier sold to the Spouses Ramos by Gregorio Valdez. The Spouses Ramos
renounced their rights over the latter property in the Compromise Agreement marked as Exhibit
"B"/"1" to effect the withdrawal of the opposition of Felipe Cabero to their application for registration
in the aforesaid LRC No. U-843 (TSN, February 17, 1992, pp. 9-11). Caberos opposition was
predicated on his perceived ownership of the southern portion of the land which was formerly owned
by Alejandro Alcantara that was the subject of the land registration proceedings. This southern
portion adjoins another (untitled) property of Gregorio Valdez (Exhibit "E", Folder of Exhibits p. 13).
This had been mistakenly sold by Valdez to Cabero in the belief that it belonged to him (Valdez).
When Valdez recognized his error, and by way of disentangling a conflict that he had caused,
Valdez persuaded Ramos to renounce his rights over the 3,036 sq. m. portion of his titled property,
and at the same time for Cabero to withdraw his opposition to the application by Spouses Ramos for
the registration in their name of the entire lot formerly belonging to Alejandro Alcantara. Conceivably,
Caberos withdrawal of his opposition along with his occupied southern portion of Alejandro
Alcantaras property, was to be exchanged with the 3,036 sq. m. portion renounced by Spouses
Ramos. In his testimony Segundo Ramos spoke of accommodating the entreaties of Gregorio
Valdez whom he called his "father in law" (TSN, February 17, 1992, p. 11).
As a consequence, applicants Spouses Segundo and Felisa Ramos in the LRC case, executed a
Compromise Agreement with Felipe Cabero witnessed by Gregorio Valdez that was meant to
renounce their (Ramos) claim or rights over that portion of the land which they had purchased from
Gregorio Valdez in exchange for the southern portion of the land that was being occupied by Felipe
Cabero. To repeat, Felipe Cabero had occupied the southern portion by virtue of a deed of sale from
Gregorio Valdez but Valdez actually had no right to sell this portion, it being owned by the adjoining
owner Alejandro Alcantara. This is shown by the fact that although the "Absolute Deed of Sale"
executed by Alejandro Alcantara in favor of Spouses Segundo Valdez conveyed only an area of
3,000 sq. m. (Exhibit "6", Folder of Exhibits, p. 37) the total area applied for and decreed by the Land
Registration Court in LRC No. U-843 in favor of applicant Spouses Segundo Ramos (Exhibit "3",
Folder of Exhibits, p. 15) had a total area of 7,073 sq. m. which fact was admitted by appellee
Segundo Ramos on re-cross (TSN, March 11, 1992, p. 3). On this point, Natalia Alcantara dela
Cruz, daughter of Alejandro Alcantara testified on rebuttal.
. . .
As already stated, the LRC Decision dated 19 March 1979 (Exhibit "3") did not take cognizance of
the Compromise Agreement dated 2 June 1977 although it noted that oppositor Felipe Cabero had
withdrawn his opposition to the application of Spouses Ramos in the LRC case (Exhibits 3-a-1,
Folder of Exhibits, p. 16). The simple explanation is that the Compromise Agreement referred to
another parcel of land that was not the subject of the land registration case. In withdrawing his
opposition, Felipe Cabero paved the way for Spouses Segundo Ramos to have the entire property of
Alejandro Alcantara registered in their names, and not just the 3,000 sq. m. that was the subject of
the deed of sale signed by Alcantara in their favor, marked Exhibit "6". Thus, Gregorio Valdez was
able to effect the solution to the imbroglio he had caused by selling to Felipe Cabero land that did
not belong to him but to the adjoining owner Alejandro Alcantara. This is shown by the testimony of
Lilia Valdez.
. . .
On the part of appellees, the loss of the 3,036 sq. m. portion was amply compensated by
approximately 4,000 sq. m. of the southern portion that had been occupied by Felipe Cabero but
which had been included in their land registration application. The evidence of the defendants-
appellees shows that "(b)ecause of his mistake, vendor Gregorio Valdez intervened and pleaded to
appellees to just relinquish the area he mistakenly sold to Cabero who in exchange was to withdraw
his opposition, hence the compromise agreement in question was drawn" (TSN, February 17, 1999,
p. 11; January 29 1992, pp. 8-10; Appellees Brief, p. 7). It is to be noted that Gregorio Valdez and
Felipe Cabero were closely associated and even shared the same counsel Atty. Nicanor Caldito who
notarized the Deed of Sale executed by Gregorio Valdez in favor of Segundo Ramos (Exhibits
"B"/"1" and "2"; Folder of Exhibits, pp. 2 and 14) and who later appeared as counsel for oppositor
Felipe Cabero in the land registration case. Although the withdrawal of opposition of Felipe Cabero
along with his occupation of the southern portion was successfully effected by the Compromise
Agreement, later events showed that Cabero was eventually removed from the picture of both
parcels of land. Evidence shows that Gregorio Valdez continued to occupy the renounced portion
until his death in 1991 (TSN, January 6, 1991, pp. 3-4; Pre-Trial Order, Record, p. 58). His
occupation evidences his continued dominion and exercise of ownership over the entire land
covered by OCT No. 48824.
10

To state the obvious, much ado has been made over the compromise agreement. After having
reviewed the records of the case, however, it has become even more obvious that private
respondents cannot assert any rights under said compromise agreement, thus, it cannot be used by
them to defeat petitioners claim over the subject land.
The compromise agreement, like any other contract, takes effect only between the parties, their
assigns and heirs.
11
In herein case, the parties to the compromise agreement were petitioners and
Felipe Cabero only as the same was executed by them in connection with LRC Case No. U-843
wherein petitioners were the applicants and Cabero the oppositor.
12
Gregorio Valdez, although he
was very much interested in the compromise agreement as the same would solve the problem he
created of selling to Cabero a piece of land not belonging to him, was not a party thereto. As
correctly pointed out by petitioners, his signature might have appeared in the compromise
agreement but it does not appear in what capacity he was signing. In juxtaposition, the compromise
agreement expressly states in what capacity the other signatories were signing. Thus, typewritten in
the agreement are the following entries:
SEGUNDO RAMOS, FELISA RAMOS
Applicant Applicant
FELIPE CABERO
Oppositor
ASSISTED BY:
ATTY. ELISEO E. VERSOZA ATTY. NICANOR CALDITO
Counsel for the Applicants Counsel for Oppositor
Soconi, Bugallon, Pang. Pozorrubio, Pang.
The persons whose names were typewritten on the compromise agreement signed above their
names. Gregorio Valdezs name, on the other hand, as well as the role he played in the execution of
the document, was not typewritten on the document. His signature, however, appears on the same
line as the phrase "assisted by" just above the signature of Atty. Caldito. Petitioner Segundo Ramos
swears that he did not see Gregorio Valdez sign the document at the time of the execution of the
same.
13
Witness for petitioners, Leonardo Quesora, who was present at the time of the execution of
the compromise agreement, likewise testified that he did not see Gregorio Valdez sign.
14
Moreover,
none of the private respondents or their witnesses testified as to having witnessed Gregorio Valdez
sign the compromise agreement.
It is axiomatic that a contract cannot be binding upon and cannot be enforced against one who is not
a party to it, even if he is aware of such contract and has acted with knowledge thereof.
15
A person
who is not a party to a compromise agreement cannot be affected by it.
16
This is already well-settled.
Thus, in Young v. Court of Appeals
17
we stressed:
The main issue in this case is whether or not petitioner can enforce a compromise agreement to
which she was not a party.
This issue has already been squarely settled by this Court in the negative in J.M. Tuason & Co., Inc.
v. Cadampog (7 SCRA 808 [1963]) where it was ruled that appellant is not entitled to enforce a
compromise agreement to which he was not a party and that as to its effect and scope, it has been
determined in the sense that its effectivity if at all, is limited to the parties thereto and those
mentioned in the exhibits (J.M. Tuason & Co., Inc. v. Aguirre, 7 SCRA 112 [1963]). It was reiterated
later that a compromise agreement cannot bind persons who are not parties thereto (Guerrero v.
C.A., 29 SCRA 791 [1969]).
Consequently, Gregorio Valdez not being a party to the compromise agreement, his heirs (private
respondents) cannot sue for its performance.
Be that as it may, private respondents additionally harp on the reference to their father made in the
body of the compromise agreement itself which they claim is proof of renunciation of subject land by
petitioners in favor of their father, to wit:
2. That the applicants Segundo Ramos and Felisa Valdez hereby also quitclaim and renounce
whatever rights in the document registered under entry No. 377847 annotated at the back of O.C.T.
No. 48824 of Gregorio Valdez;
Contrary to the position taken by private respondents, the reference to their father, Gregorio Valdez,
seems to us to be a mere description of the land being renounced. Nothing in the compromise
agreement would suggest that the renunciation of the subject land was to be made in Gregorio
Valdezs favor. Verily, for this Court to interpret the stipulation as conferring some right to a third
person (i.e., stipulation pour autrui), the following requisites must concur:
1. There must be a stipulation in favor of a third person;
2. The stipulation in favor of a third person should be a part, not the whole, of the contract;
3. The contracting parties must have clearly and deliberately conferred a favor upon a third person,
not a mere incidental benefit or interest;
4. The third person must have communicated his acceptance to the obligor before its revocation;
and
5. Neither of the contracting parties bears the legal representation or authorization of the third
party.
18

To constitute a valid stipulation pour autrie, it must be the purpose and intent of the stipulating
parties to benefit the third person, and it is not sufficient that the third person may be incidentally
benefited by the stipulation.
19
In herein case, from the testimony of petitioner Segundo Ramos who is
undoubtedly a party to the compromise agreement, and from the rest of the evidence on hand, any
benefit which accrued to private respondents father was merely incidental.
WHEREFORE, premises considered, the Decision of the Court of Appeals dated 31 July 1997 is
REVERSED and SET ASIDE. The Decision of the Regional Trial Court of Urdaneta, Pangasinan,
Branch 48, insofar as it dismissed the complaint filed by herein private respondents, is hereby
AFFIRMED. No costs.
SO ORDERED.
MULTI-VENTURES CAPITAL G.R. No. 157439
and MANAGEMENT
CORPORATION, Present:
Petitioner.
YNARES-SANTIAGO, J.,
- versus - Chairperson,
AUSTRIA-MARTINEZ,
STALWART MANAGEMENT CHICO-NAZARIO, and
SERVICES CORPORATION, NACHURA, JJ.
MARIAN G. TAJO, CESAR
TAJO and ARIANA GALANG, Promulgated:
Respondents
*
. July 4, 2007
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x


D E C I S I O N


AUSTRIA-MARTINEZ, J .:


The sole issue in this case is whether the contract entered into by Multi-Ventures Capital
and Management Corporation (petitioner) and Stalwart Management Services Corporation
(respondent) is one of loan or sale.

The facts are as follows:

On July 10, 1991, Multi-Ventures Capital and Management Corporation filed with the
Regional Trial Court (RTC) of Makati, Branch 134, a Complaint for Reformation of Instrument
with application for attachment against Stalwart Management Services Corporation and its
officers. Petitioner alleged that on January 11, 1991, respondent obtained from the former a
loan in the amount of P9,000,000.00, with interest, but for purposes of expediency, said
transaction was denominated as a sale whereby petitioner bought from respondent various
Land Bank bonds originally valued at P11,557,972.60 at discounted price, as shown in a
Confirmation of Agreement; that the bonds serve as a partial collateral for the payment of the
loan; that respondent and some of its officers, however, have plans of defrauding their creditors
by absconding and disposing of its properties, thus constraining petitioner to file the complaint
for reformation in order to express the true intent of the parties, i.e., that the ostensible sale of
the bonds is actually a loan agreement.
[1]


Respondent, together with its co-defendants, filed an Answer denying petitioner's
allegations and claiming, among others, that both petitioner and respondent are companies
engaged in dealing and trading government securities. According to respondent, the
transaction entered into on January 11, 1991 is really a purchase of Land Bank bonds, and
there is no mistake, fraud, inequitable conduct or accident in the preparation of the true
agreement of the parties such that reformation is called for.
[2]


After trial on the merits, the RTC rendered a Decision dated May 11, 1995, in favor of
petitioner. The dispositive portion of the RTC Decision reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and
against the defendant:

1. These instruments subject matter of this case are hereby
ordered REFORMED as Contract of Loan and not a Contract
of Sale.


2. To order the defendants, jointly and severally, to pay the
plaintiff the sum of P11,557,972.60 PESOS from June 11,
1992 as the date of maturity plus legal interest until fully paid;

3. To order defendants, jointly and severally, to pay the plaintiff
the sum of P100,000.00 PESOS by way of attorneys fees;

4. Ordering the dismissal of defendants counter-claim for being
devoid of legal merit; and

5. To order defendants' jointly and severally, to pay the costs of
suit.

SO ORDERED.
[3]


Dissatisfied, respondent and its officers appealed to the Court of Appeals (CA). In a
Decision dated February 24, 2003,
[4]
the CA sustained respondents position that the transaction
was, in fact, a sale; reversed the RTC Decision; and dismissed petitioners complaint and
respondents counterclaim.

Hence, the present Petition for Review on Certiorari predicated on the following grounds:

A. THAT DUE TO MISAPPRECIATION OF FACTS AND EVIDENCE, THE
COURT OF APPEALS ERRED IN REVERSING THE COURT A QUO'S
DECISION AND IN NOT DECLARING THAT THE INTENDED AND TRUE
TRANSACTION AGREED UPON AND ENTERED INTO BETWEEN MULTI-
VENTURES AND STALWART WAS THAT OF LOAN, NOT SALE OF LAND
BANK BONDS.

B. THAT THE COURT OF APPEALS ERRED IN NOT ORDERING THE
REFORMATION OF THE INSTRUMENT OSTENSIBLY APPEARING AS A
PURCHASE AND SALE WITH THE RIGHT TO REPURCHASE LAND
BANK BONDS SO AS TO REFLECT THE TRUE INTENTION AND
AGREEMENT OF PARTIES THAT THE TRANSACTION WAS THAT OF
LOAN OF P9 MILLION PAYABLE FOR A PERIOD OF ONE (1) YEAR,
JANUARY 11, 1992 IN THE AMOUNT OF P11,537,972.60 INCLUSIVE OF
INTEREST.
[5]


Ordinarily, the Court will not dwell on the issues raised in this petition as it pertains to
questions of fact, and under Rule 45 of the Rules of Court, only questions of law may be raised,
the reason being that this Court is not a trier of facts, and it is not for this Court to re-examine
and re-evaluate the evidence on record.
[6]
Considering, however, that the CA and the RTC
came up with divergent findings regarding the real nature of the transaction in question, the
Court is now constrained to review the evidence on record so as to resolve the conflict.
[7]


After a careful examination of the evidence on record, the Court sustains the CAs ruling
that the transaction between the parties was one of sale and not of loan.

An action for reformation of an instrument finds ground in Article 1359 of the Civil Code,
which provides:

ARTICLE 1359. When, there having been a meeting of the minds of the
parties to a contract, their true intention is not expressed in the instrument
purporting to embody the agreement, by reason of mistake, fraud, inequitable
conduct or accident, one of the parties may ask for the reformation of the
instrument to the end that such true intention may be expressed.

x x x x

Reformation is a remedy in equity, whereby a written instrument is made or construed so
as to express or conform to the real intention of the parties, where some error or mistake has
been committed. In granting reformation, the remedy in equity is not making a new contract for
the parties, but establishing and perpetuating the real contract between the parties which, under
the technical rules of law, could not be enforced but for such reformation.
[8]

In order that an action for reformation of instrument may prosper, the following requisites
must concur: (1) there must have been a meeting of the minds of the parties to the contract; (2)
the instrument does not express the true intention of the parties; and (3) the failure of the
instrument to express the true intention of the parties is due to mistake, fraud, inequitable
conduct or accident.
[9]


In the present case, there is no question that there was a meeting of the minds between
the parties. What remains to be resolved is whether the contract expressed their true intention;
and, if not, whether it was due to mistake, fraud, inequitable conduct or accident.

While intentions involve a state of mind which may sometimes be difficult to decipher,
subsequent and contemporaneous acts of the parties as well as the evidentiary facts as proved
and admitted can be reflective of ones intention.
[10]


The onus probandi is upon the party who insists that the contract should be
reformed.
[11]
Moreover, the presumption is that an instrument sets out the true agreement of the
parties thereto and that it was executed for valuable consideration.
[12]
Unfortunately, petitioner
was not able to overturn the presumption of validity of the contract and it also failed to discharge
the burden of proving that the true intention of the parties has not been expressed.

In support of its contention that the transaction is one of loan, petitioner relies principally
on the letter dated January 11, 1991, wherein respondent offered to purchase on January 10,
1992 the Land Bank bonds from petitioner for the total amount ofP11,557,972.60.
[13]
According
to petitioner, the amount borrowed by respondent was P9,000,000.00, with interest, or a total
ofP11,557,972.60, payable within one year.
[14]
Petitioner insists that the buy-back letter proves
that the transaction was indeed a loan, for if it was a sale, why would respondent buy back the
bonds in the same amount that was payable under their alleged loan agreement?
[15]


There is nothing on record, as well as in the buy-back letter, that clearly and convincingly
proves or substantiates petitioners contention that the real intent of the parties was to enter into
a loan agreement for the amount of P11,557,972.60, inclusive of interest. In fact, respondents
buy-back letter supports the finding that the agreement entered into by the parties was a sale
transaction. For if the bonds were only to serve as a collateral for the loan, why would
respondent offer to buy them back from petitioner if they were not sold in the first
place? Obviously, ownership of the bonds had been transferred from respondent to petitioner
on January 11, 1991; for if it were not so and the bonds were merely being held by petitioner as
a security for the payment of the alleged loan, then ownership would have remained with
respondent and there would have been no need to buy it back.

The Court agrees with and adopts the findings of the CA, thus:

The lower court, and the appellee, advance that it was highly improbable
that plaintiff would really purchase the Land Bank bonds for 9 million pesos,
when it would have called for only 6.5 million pesos if sold in the market. Aside
from such self-serving statements, however, there is no direct or substantial
proof that the bonds would have demanded a lower actual price when it was
sold. In any case, poor business decisions are not adequate grounds to nullify
the effects of a contract entered into in the course of business operations. x x x

Furthermore, the fact that the Confirmation of Agreement (Exhibit 1) and
offer to purchase by defendants (Exhibit B) were executed simultaneously and
delivered to the plaintiff, is not inconsistent with the conclusion that the contract
between the parties was truly a Sale. In order to hold that the parties' agreement
was really a loan, more concrete and convincing evidence must be
produced. x x x
[16]


In addition, and more significantly, what militates against petitioners argument that their
agreement was a loan is the fact that subsequent thereto, petitioner endorsed and transferred
the bonds to the AFP Mutual Benefits Association, Inc., as collateral for an
investment. Petitioner did not rebut or at the very least, offer a plausible explanation for said
transfer which is unmistakably an act of ownership. It sufficiently established the CA finding that
the transaction is one of sale, thus:

Aside from Exhibit 1, evidence on record, particularly Exhibits 8 to 9
show that the bonds were indeed delivered to the plaintiff pursuant to the
Contract of Sale. Furthermore, almost immediately after taking possession
of the subject bonds, plaintiff corporation through its Vice-President and
incorporator, Natividad Aureola, endorsed and transferred the same to the
AFP Mutual Benefits Association, Inc., as collateral for an investment made
by the latter. Such endorsement and transfer, to our mind, amount to an
act of ownership, which can only be made by one who owns a certain
property, and not by one who holds a property only as security for
loan. Defendants' position that it had sold the bonds to the plaintiff pursuant to
Exhibit 1 is thus fortified.
[17]


Finally, petitioner failed to show that mistake, fraud, inequitable conduct or accident
attended the execution of the agreement such that their true intention was not reflected. As
admitted by petitioner, the parties agreed to execute a purchase and sale agreement for
purposes of expediency and convenience.
[18]
Expediency and convenience, however, are not
grounds for the reformation of an instrument. As such, absent any proof of mistake, fraud,
inequitable conduct or accident, the Confirmation of Agreement datedJanuary 11, 1991 remains
the best evidence to ascertain the real intent of the parties.

The transaction of sale entered into by the parties on January 11, 1991 is accurately
expressed in the Confirmation of Agreement. Petitioner, therefore, has no cause of action for its
reformation.

WHEREFORE, the petition is DENIED for lack of merit.

Costs against petitioner.

SO ORDERED.
G.R. No. 171354 March 7, 2007
MARYLOU B. TOLENTINO, M.D., Petitioner,
vs.
COURT OF APPEALS and CITYTRUST BANKING CORPORATION, Respondents.
D E C I S I O N
YNARES-SANTIAGO, J .:
This Petition for Review on Certiorari
1
assails the October 28, 2005 Decision
2
of the Court of Appeals
in CA-G.R. CV. No. 83794, which reversed the April 22, 2004 Decision
3
of the Regional Trial Court of
Mandaluyong City, Branch 213 in Civil Case No. MC-00-1063, as well as the January 31, 2006
Resolution
4
denying petitioner's Motion for Reconsideration.
The antecedent facts are as follows:
In May 1996, petitioner Marylou B. Tolentino (Tolentino) applied for and was granted by private
respondent Citytrust Banking Corporation ("Citytrust," now Bank of the Philippine Islands) a
Business Credit Line Facility for P2,450,000
5
secured by a First Real Estate Mortgage
6
over her
property covered by Transfer Certificate of Title (TCT) No. 1933.
7

On July 16, 1998, Citytrust informed Tolentino that her credit line has expired thereby making her
P2,611,440.23 outstanding balance immediately due and demandable.
8
Tolentino failed to settle her
obligations thus her property was extrajudicially foreclosed and sold in a public auction, with Citytrust
as the highest bidder. On April 13, 1999, the Certificate of Sale was registered and duly annotated
on TCT No. 1933.
As of March 17, 2000, the "Statement of Account To Redeem"
9
sent by Citytrust showed petitioner's
outstanding obligation at P5,386,993.91. Petitioner asked for a re-computation and the deletion of
certain charges, such as the late payment charges, foreclosure expenses, attorney's fees, liquidated
damages, and interests, but was denied by Citytrust. As of April 10, 2000, petitioner's outstanding
balance amounted to P5,431,337.41.
On April 7, 2000, petitioner filed a Complaint for Judicial Redemption, Accounting and Damages,
with application for the issuance of a Temporary Restraining Order/Writ of Preliminary Injunction,
against Citytrust and the Register of Deeds of Mandaluyong City.
10
Petitioner alleged that the bank
unilaterally increased the interest charges in her credit line from 17.75% to 23.04%; that she was
forced to convert her existing Home Owners Credit Line into an Amortized Term Loan with interest of
19.50%;
11
that the bank cancelled her credit line when she refused the said conversion; that her
mortgaged property was foreclosed and sold at public auction but the bank did not remit the balance
of the proceeds of the foreclosure sale; and that the bank unjustifiably refused her request for
accounting and re-computation of the redemption amount.
In its Answer with Counterclaim,
12
Citytrust asserted that petitioner's credit line has a term of one
year and that upon the expiration of the said period, it may be cancelled and closed; that the
inclusion of late payment charges, foreclosure expense, attorney's fees, liquidated damages,
foreclosure fee, and interests in the redemption price was in accordance with the terms and
conditions of their loan and mortgage contracts; that the bid price was applied to the outstanding
obligations of petitioner; and that the Complaint of petitioner was merely dilatory and frivolous
considering that she has admitted having defaulted in the payment of her obligations.
Meanwhile, TCT No. 1933 was cancelled and a new title
13
was issued in favor of Citytrust. However,
petitioner was able to secure a writ of preliminary injunction,
14
which enjoined Citytrust from taking
possession, selling, and/or otherwise disposing of the foreclosed property.
After trial on the merits, the Regional Trial Court of Mandaluyong City, Branch 213, rendered
judgment upholding petitioner's right of redemption, but at the price computed by private respondent.
The dispositive portion of the Decision reads:
WHEREFORE, judgment is hereby rendered upholding the right of the herein plaintiff MARILOU
TOLENTINO to redeem the foreclosed property covered by Transfer Certificate of Title No. 1933 in
accordance however with the computation stated in the account to redeem as of April 10, 2000
issued by the defendant CITYTRUST BANKING CORPORATION (now FAMILY BANK) particularly
marked as Exhibit 10 for the Defendant.
SO ORDERED.
15

The trial court held that the filing of an action for judicial redemption by petitioner is equivalent to a
formal offer to redeem. Having exercised her right of legal redemption, petitioner should not be
barred from redeeming the property, but at the redemption price as computed by Citytrust pursuant
to the provisions of their loan agreement. The trial court held that petitioner cannot belatedly claim
that the loan agreement and mortgage contract are contracts of adhesion considering that she freely
and voluntarily executed the same, nor was she ignorant of the nature and provisions of the
agreements.
Both the petitioner and the bank appealed to the Court of Appeals, which rendered the assailed
Decision, the dispositive portion of which reads:
WHEREFORE, premises considered, the appeal of plaintiff is DISMISSED for lack of merit, while the
appeal of defendant Bank of the Philippine Islands is hereby GRANTED. The appealed Decision
dated April 22, 2004 of the Regional Trial Court of Mandaluyong City, Branch 213 is hereby
REVERSED and SET ASIDE. A new judgment is hereby entered DISMISSING the complaint in Civil
Case No. MC-00-1063.
With costs against the plaintiff-appellant.
SO ORDERED.
16

The Court of Appeals held that petitioner's act of filing an action for judicial redemption without
simultaneous consignation of redemption money was not valid. Having failed to exercise her right of
redemption within the one-year period provided by law, petitioner thus lost all her rights over the
foreclosed property. The appellate court noted that as early as March 17, 2000, Citytrust computed
the redemption price at P5,386,993.91; however, petitioner only offered to pay P3 million pesos,
without attempting to tender a single centavo to private respondent. Further, records show that when
asked during trial if she was prepared to tender the amount, petitioner replied in the negative.
Petitioner's motion for reconsideration was denied; hence, this petition.
Petitioner insists that the mortgage agreement is a contract of adhesion since it was solely prepared
by the bank and her only participation thereto was to affix her signature; that the 25% attorney's
fees, penalty, late payment charges, and liquidated damages are excessive and unconscionable;
that the capital gains tax should not have been added to the computation of the redemption price;
that the filing of the complaint for judicial redemption effectively tolled the running one-year
prescriptive period; that the consignation of the redemption price is only necessary if the redemption
suit was filed after the expiration of the redemption period; and that without admitting the loss of right
to redeem, the surplus of the proceeds of the foreclosure sale should have been returned to her.
The petition lacks merit.
A contract of adhesion is an agreement where one of the parties imposes a ready-made form of
contract which the other party may accept or reject, but which the latter cannot modify. One party
prepares the stipulation in the contract, while the other party merely affixes his signature or his
"adhesion" thereto giving no room for negotiation and depriving the latter of the opportunity to
bargain on equal footing.
17

It bears stressing that a contract of adhesion is just as binding as ordinary contracts. However, there
are instances when this Court has struck down such contract as void when the weaker party is
imposed upon in dealing with the dominant bargaining party and is reduced to the alternative of
taking it or leaving it, completely deprived of the opportunity to bargain on equal footing.
Nevertheless, a contract of adhesion is not invalid per se; it is not entirely prohibited. The one who
adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent.
18

Should there be any ambiguity in a contract of adhesion, such ambiguity is to be construed against
the party who prepared it. If, however, the stipulations are not obscure, but are clear and leave no
doubt on the intention of the parties, the literal meaning of its stipulations must be held controlling.
19

In the instant case, it has not been shown that petitioner signed the contracts through mistake,
violence, intimidation, undue influence, or fraud. Petitioner even admitted during trial that she was
not compelled to sign the contracts, nor was she totally ignorant of their nature, having been
engaged in business since 1984.
20
Petitioner only raised in issue the following stipulations before the
redemption period expired, to wit:
2. Loan Line - CityTrust shall make the Loan Line available to Client for a period of one (1) year
from the date of this Agreement subject to Section 19; xxx
19. Cancellation - (a) The Loan Line may be cancelled by either party upon thirty-day written notice
to the other party.
(b) CityTrust may shorten the period of availability of the Loan Line upon thirty-day written
notice to Client.
(c) Upon cancellation of the Loan Line or expiration of the period of availability of the Loan
Line, the Loan Account and CityTrust Business Credit Line Current Account shall be
automatically cancelled/closed and Client shall immediately pay the entire Outstanding
Balance. Client shall immediately surrender to CityTrust any and all unused CityTrust
Business Credit Line Check(s) as well as the ATM card issued to access the CityTrust
Business Credit Line Current Account.
7. Interest on Outstanding Balance - The Outstanding Balance shall earn simple interest,
computed daily, at such per annum rate for such interest period (of not less than 30 days) as shall
be determined in advance by CityTrust and advised initially through the Letter of Approval and
thereafter through the Statement of Loan Account. Interest shall be calculated on the basis of actual
number of days elapsed and a year of 360 days. Interest accrued shall be automatically debited by
the CityTrust against the Loan Account.
9. Penalty Charges - Failure to make the full remittance required to cover the Excess Availment
within fifteen (15) days from the date that the same is incurred shall subject the Excess Availment to
penalty charge. Failure to make the full remittance required to cover an Excess Availment within fifty-
nine (59) days from the date that the same is incurred shall subject the entire Outstanding Balance
to the aforesaid penalty charge. Penalty charges shall be imposed by CityTrust without prejudice to
Sections 7 (Interest on Outstanding Balance) and 15 [Events of Default].
The penalty charge shall be such per annum rate as shall be determined by CityTrust and advised
through the Statement of Loan Account and Demand Statement. Sail penalty charge shall be fixed
for thirty (30) days or such other period as may be determined by CityTrust and shall be
automatically debited against the Loan Account.
20. Collection/Attorney's Fees - in the event CityTrust is compelled to litigate or engage the
services of a lawyer or collection agent for collection or implementation of the terms of the
Agreements, Client shall pay attorney's fees in the sum equivalent to twenty-five (25%) percent of
the amount due but which attorney's fees shall in any case be not less than FIVE THOUSAND
PESOS (P5,000.00) plus costs of suit and other litigation expenses and, in addition, liquidated
damages in the sum equivalent to ten (10%) percent of the amount due but which liquidated
damages shall in any case be not less than ONE THOUSAND PESOS (P1,000.00).
21

We find the above-quoted provisions explicit and leave no room for construction. It is easily
understood, especially by a businesswoman like the petitioner. Thus, we agree with the conclusion
of the trial and appellate courts that no compelling reasons were presented to declare the subject
contractual documents as void contracts of adhesion.
22

Anent the legality of petitioner's judicial redemption and the bank's computation of the redemption
price, Section 6 of Act No. 3135,
23
as amended,
24
provides for the requisites for a valid redemption,
to wit:
SEC. 6. In all cases in which an extrajudicial sale is made under the special power hereinbefore
referred to, the debtor, his successors in interest or any judicial creditor or judgment creditor of said
debtor, or any person having a lien on the property subsequent to the mortgage or deed of trust
under which the property is sold, may redeem the same at any time within the term of one year from
and after the date of sale; and such redemption shall be governed by the provisions of sections four
hundred and sixty-four to four hundred and sixty-six, inclusive, of the Code of Civil Procedure,
insofar as these are not inconsistent with the provisions of this Act.
However, considering that private respondent is a banking institution, the determination of the
redemption price is governed by Section 78 of the General Banking Act,
25
as amended by
Presidential Decree No. 1828, which provides:
In the event of foreclosure, whether judicially or extrajudicially, of any mortgage on real estate which
is security for any loan granted before the passage of this Act or under the provisions of this Act, the
mortgagor or debtor whose real property has been sold at public auction, judicially or extrajudicially,
for the full or partial payment of an obligation to any bank, banking or credit institution, within the
purview of this Act shall have the right, within one year after the sale of the real estate as a result of
the foreclosure of the respective mortgage, to redeem the property by paying the amount fixed by
the court in the order of execution, or the amount due under the mortgage deed, as the case may
be, with interest thereon at the rate specified in the mortgage, and all the costs, and judicial and
other expenses incurred by the bank or institution concerned by reason of the execution and sale
and as a result of the custody of said property less the income received from the property.
Section 78 of the General Banking Act amended Section 6 of Act No. 3135 insofar as the
redemption price is concerned when the mortgagee is a bank or a banking or credit
institution.
26
Thus, the amount at which the foreclosed property is redeemable is the amount due
under the mortgage deed, or the outstanding obligation of the mortgagor plus interest and expenses
in accordance with Section 78 of the General Banking Act.
27

In Banco Filipino Savings and Mortgage Bank v. Court of Appeals,
28
we ruled that the redemptioner
should make an actual tender in good faith of the full amount of the purchase price, i.e., the amount
fixed by the court in the order of execution or the amount due under the mortgage deed, as the case
may be, with interest thereon at the rate specified in the mortgage, and all the costs, and judicial and
other expenses incurred by the bank or institution concerned by reason of the execution and sale
and as a result of the custody of said property less the income received from the property.
29

As correctly pointed out by the appellate court, the general rule in redemption is that it is not
sufficient that a person offering to redeem simply manifests his/her desire to do so. The statement of
intention must be accompanied by an actual and simultaneous tender of payment. This constitutes
the exercise of the right to repurchase. Bona fide redemption necessarily implies a reasonable and
valid tender of the entire purchase price, otherwise the rule on the redemption period fixed by law
can easily be circumvented.
30

Petitioner however claims, citing Banco Filipino Savings and Mortgage Bank v. Court of
Appeals
31
and Lee Chuy Realty Corporation v. Court of Appeals
32
that in case of disagreement over
the redemption price, the redemptioner may preserve his right of redemption through judicial action
which must be filed within the one-year period of redemption. The filing of a court action to enforce
redemption, being equivalent to a formal offer to redeem, would have the effect of preserving his
redemptive rights and "freezing" the expiration of the one-year period.
33
Bona fide tender of the
redemption price, within the prescribed period is only essential to preserve the right of redemption
for future enforcement beyond such period of redemption and within the period prescribed for the
action by the statute of limitations. Where the right to redeem is exercised through judicial action
within the reglementary period, the offer to redeem, accompanied by a bona fide tender of the
redemption price, while proper, may be unessential.
34

It should, however, be noted that in Hi-Yield Realty, Inc. v. Court of Appeals,
35
we held that the
action for judicial redemption should be filed on time and in good faith, the redemption price is finally
determined and paid within a reasonable time, and the rights of the parties are respected. Stated
otherwise, the foregoing interpretation has three critical dimensions: (1) timely redemption or
redemption by expiration date; (2) good faith as always, meaning, the filing of the action must have
been for the sole purpose of determining the redemption price and not to stretch the redemptive
period indefinitely; and (3) once the redemption price is determined within a reasonable time, the
redemptioner must make prompt payment in full.
36

The records show that the correct redemption price had been determined prior to the filing of the
complaint for judicial redemption. Petitioner had been furnished updated Statements of Account
specifying the redemption price even prior to the consolidation of the title of the foreclosed property
in the bank's name. The inclusion of late payment charges, foreclosure expense, attorney's fees,
liquidated damages, foreclosure fee, and interests therein was pursuant to the Loan Agreement.
Considering that the Loan Agreement was read and freely adhered to by petitioner, the stipulations
therein are binding on her.
37

Moreover, petitioner admitted during trial that she was not questioning the computation of the
redemption price, but she was requesting for a condonation of certain fees and charges.
Q. Now Madam Witness, during the last hearing, you were questioning the statement of account, the
computation, is that correct?
A. Yes, sir.
Q. In particular, you were questioning the attorney's fees of twenty five percent (25%), is that
correct?
A. Yes, sir.
Q. Did you not read the mortgage loan agreement, Madam Witness?
A. I know its [sic] there in the mortgage loan what I said is that I was requesting for a condonation.
Q. So, you are [sic] not questioning it?
A. Yes, sir.
Q. In your complaint there is an allegation that the computation has no basis, do you confirm that, do
you still maintain that?
A. Yes.
Q. Why do you say so?
A. I was just hoping that some of the items could be condone[d] because they were rather high,
although, normally, in the mortgage contract it is really stated that they charge twenty five percent for
attorney's fees, so I agreed with it.
Q. So, it is not your statement in your complaint that the computation has no basis, is not correct?
A. Yes, sir.
Q. So, the twenty five percent computation here has a basis, which is the mortgage loan agreement,
correct?
A. Yes, in your agreement.
Q. And in that agreement you have your signature therein?
A. Yes.
Q. And you have read that before signing it?
A. Yes, sir.
Q. So, also with this liquidated damages of ten percent (10%), there is a basis under the mortgage
loan agreement?
A. I'm not sure.
Q. I will show you again the mortgage loan agreement xxx.
x x x x
Q. Now, Ms. Witness, can you now say that this statement of account is with basis, accurate and
with basis [sic]?
A. It has a basis, based on your conditions as prepared by the bank.
Q. Which you have conform[ed] to?
A. Yes, I have to because I executed a loan.
Q. But the bank did not compel you to apply for a loan?
A. No, they did not compel me.
Q. And you are only asking this court to reduce?
A. Yes, if possible.
38
(Emphasis supplied)
The records also reveal that petitioner offered to redeem the foreclosed property for P3 million but
failed to tender or consign the same, to wit:
Q. Ms. Witness, you stated that based on your computation[,] the redemption price should be three
million pesos (P3,000,000.00) more or less?
A. More or less.
Q. Do you have this amount right now? Do you have this three million (P3M) more or less, do you
have this amount right now?
A. Not right now, but if we will be given a few days to produce it, we will give us [sic] that kind.
x x x x
Q. Did you tender this amount of three million pesos (P3M) more or less, to the bank?
A. No, because that is not the amount that they were asking for.
Q. Did you at least offer to pay this amount of three million pesos (P3M) more or less?
A. During the discussion with the manager, Ms. Lolita Carrido, I ask [sic] her if the deletion of the
said [sic] is possible but she said it's not possible.
x x x x
Q. Did you also consign with this amount of three million pesos (P3M) more or less?
A. No, sir.
39
Based on the foregoing, it is clear that petitioner did not file the instant case for judicial
redemption in good faith. It was not filed for the purpose of determining the correct redemption
price but to stretch the redemption period indefinitely, which is not allowed by law.
WHEREFORE, the instant Petition for Review on Certiorari is DENIED. The Decision of the
Court of Appeals in CA-G.R. CV. No. 83794 dismissing the complaint for judicial redemption for
lack of merit and the Resolution denying petitioner's motion for reconsideration are AFFIRMED.
SO ORDERED.
G.R. No. 178645 January 30, 2009
LINA PEALBER, Petitioner,
vs.
QUIRINO RAMOS, LETICIA PEALBER, and BARTEX INC., Respondents.
D E C I S I O N
CHICO-NAZARIO, J .:
Assailed in this Petition for Review on Certiorari under Rule 45 of the Rules of Court is the
Decision
1
dated 15 December 2006 of the Court of Appeals in CA-G.R. CV No. 69731. Said Decision
reversed and set aside the Decision
2
dated 19 January 2000 of the Regional Trial Court (RTC) of
Tuguegarao City, Branch 2, in Civil Case No. 3672, which declared petitioner Lina Pealber the
owner of the Bonifacio property subject of this case and ordered respondent spouses Quirino Ramos
and Leticia Pealber to reconvey the same to petitioner.
The factual and procedural antecedents of the case are set forth hereunder.
Petitioner is the mother of respondent Leticia and the mother-in-law of respondent Quirino, husband
of Leticia. Respondent Bartex, Inc., on the other hand, is a domestic corporation which bought from
respondent spouses Ramos one of the two properties involved in this case.
On 18 February 1987, petitioner filed before the RTC a Complaint for Declaration of Nullity of Deeds
and Titles, Reconveyance, Damages, [with] Application for a Writ of Preliminary Prohibitory
Injunction against the respondents.
3
It was docketed as Civil Case No. 3672.
First Cause of Action
Firstly, petitioner alleged in her Complaint that she was the owner of a parcel of land situated in
Ugac Norte, Tuguegarao, Cagayan, with an area of 1,457 sq.m. and covered by Transfer Certificate
of Title (TCT) No. T-43373
4
of the Register of Deeds for the Province of Cagayan, registered in
petitioners name. A residential house and a warehouse were constructed on the said parcel of land
which petitioner also claimed to own (the land and the improvements thereon shall be hereinafter
referred to as the Ugac properties). Petitioner averred that in the middle part of 1986, she
discovered that TCT No. T-43373 was cancelled on 13 May 1983 and TCT No. T-58043
5
was issued
in its stead in the name of respondent spouses Ramos. Upon verification, petitioner learned that the
basis for the cancellation of her title was a Deed of Donation of a Registered Land, Residential
House and Camarin,
6
which petitioner purportedly executed in favor of respondent spouses Ramos
on 27 April 1983. Petitioner insisted that her signature on the said Deed of Donation was a forgery
as she did not donate any property to respondent spouses Ramos. When petitioner confronted the
respondent spouses Ramos about the false donation, the latter pleaded that they would just pay for
the Ugac properties in the amount of P1 Million. Petitioner agreed to the proposition of the
respondent spouses Ramos.
Subsequently, around 10 January 1987,
7
petitioner found out that the respondent spouses Ramos
were selling the Ugac properties to respondent Bartex, Inc. Petitioner then sent her son, Johnson
Paredes (Johnson),
8
to caution respondent Bartex, Inc. that respondent spouses Ramos were not
the lawful owners of the said properties. Johnson was allegedly able to convey petitioners caveat to
a representative of respondent Bartex, Inc. Petitioner also warned respondent spouses Ramos not
to sell the Ugac properties anymore, otherwise, she would file the necessary action against them.
The respondent spouses Ramos then assured her that they would do no such thing. As a
precaution, petitioner executed an Affidavit of Adverse Claim over the Ugac Properties on 19
January 1987 and caused the same to be annotated on TCT No. T-58043 on the same day. Despite
petitioners warnings, respondent spouses Ramos still executed in favor of respondent Bartex, Inc. a
Deed of Absolute Sale
9
over the Ugac properties on 12 January 1987 for a total price
of P150,000.00. As a result, TCT No. T-58043 in the name of respondent spouses Ramos was
cancelled and TCT No. T-68825
10
in the name of respondent Bartex, Inc. was issued on 20 January
1987.
Petitioner contended that the Deed of Absolute Sale executed by respondent spouses Ramos in
favor of respondent Bartex, Inc. did not convey any valid title, not only because respondent Bartex,
Inc. was a buyer in bad faith, but also because respondent spouses Ramos did not own the Ugac
properties. Thus, petitioner prayed for the declaration of nullity of (1) the Deed of Donation of a
Registered Land, Residential House and Camarin purportedly executed by petitioner in favor
respondent spouses Ramos; (2) TCT No. T-58043, issued in the name of respondent spouses
Ramos; (3) the Deed of Absolute Sale executed by the respondent spouses Ramos in favor of
respondent Bartex, Inc.; and (4) TCT No. T-68825, issued in the name of respondent Bartex, Inc.
Should petitioners prayer not be granted, petitioner sought in the alternative that respondent
spouses Ramos be ordered to pay the assessed value of the Ugac properties, which was about P1.5
Million. Petitioner further prayed that TCT No. T-43373, in her name, be declared valid and active.
Second Cause of Action
Secondly, petitioner claimed that for many years prior to 1984, she operated a hardware store in a
building she owned along Bonifacio St., Tuguegarao, Cagayan. However, the commercial lot
(Bonifacio property) upon which the building stood is owned by and registered in the name of Maria
Mendoza (Mendoza), from whom petitioner rented the same.
On 22 March 1982, petitioner allowed respondent spouses Ramos to manage the hardware store.
Thereafter, in 1984, Mendoza put the Bonifacio property up for sale. As petitioner did not have
available cash to buy the property, she allegedly entered into a verbal agreement with respondent
spouses Ramos with the following terms:
[1.] The lot would be bought [by herein respondent spouses Ramos] for and in behalf of
[herein petitioner];
[2.] The consideration of P80,000.00 for said lot would be paid by [respondent spouses
Ramos] from the accumulated earnings of the store;
[3.] Since [respondent spouses Ramos] have the better credit standing, they would be made
to appear in the Deed of Sale as the vendees so that the title to be issued in their names
could be used by [them] to secure a loan with which to build a bigger building and expand
the business of [petitioner].
In accordance with the above agreement, respondent spouses Ramos allegedly entered into a
contract of sale
11
with Mendoza over the Bonifacio property,
12
and on 24 October 1984, TCT No. T-
62769
13
covering said property was issued in the names of respondent spouses Ramos.
On 20 September 1984, respondent spouses Ramos returned the management of the hardware
store to petitioner. On the bases of receipts and disbursements, petitioner asserted that the
Bonifacio property was fully paid out of the funds of the store and if respondent spouses Ramos had
given any amount for the purchase price of the said property, they had already sufficiently
reimbursed themselves from the funds of the store. Consequently, petitioner demanded from
respondent spouses Ramos the reconveyance of the title to the Bonifacio property to her but the
latter unjustifiably refused.
Petitioner insisted that respondent spouses Ramos were, in reality, mere trustees of the Bonifacio
property, thus, they were under a moral and legal obligation to reconvey title over the said property
to her. Petitioner, therefore, prayed that she be declared the owner of the Bonifacio property; TCT
No. T-62769, in the name of respondent spouses, be declared null and void; and the Register of
Deeds for the Province of Cagayan be directed to issue another title in her name.
On 2 March 1987, respondent spouses Ramos accordingly filed before the RTC their Answer
14
to
petitioners Complaint. As regards the first cause of action, respondent spouses Ramos alleged that
petitioner, together with her son, Johnson, and the latters wife, Maria Teresa Paredes, mortgaged
the Ugac properties to the Development Bank of the Philippines (DBP) on 19 August 1990 for the
amount of P150,000.00. When the mortgage was about to be foreclosed because of the failure of
petitioner to pay the mortgage debt, petitioner asked respondent spouses Ramos to redeem the
mortgaged property or pay her mortgage debt to DBP. In return, petitioner promised to cede, convey
and transfer full ownership of the Ugac properties to them. Respondent spouses Ramos paid the
mortgage debt and, in compliance with her promise, petitioner voluntarily transferred the Ugac
properties to the former by way of a Deed of Donation dated 27 April 1983. After accepting the
donation and having the Deed of Donation registered, TCT No. T- 58043 was issued to respondent
spouses Ramos and they then took actual and physical possession of the Ugac properties.
Respondent spouses Ramos asserted that petitioner had always been aware of their intention to sell
the Ugac properties as they posted placards thereon stating that the said properties were for sale.
Respondent spouses Ramos further averred that petitioner also knew that they finally sold the Ugac
properties to respondent Bartex, Inc. for P150,000.00. Thus, respondent spouses Ramos maintained
that petitioner was not entitled to any reimbursement for the Ugac properties.
With regard to petitioners second cause of action involving the Bonifacio property, respondent
spouses Ramos contended that they were given not only the management, but also the full
ownership of the hardware store by the petitioner, on the condition that the stocks and merchandise
of the store will be inventoried, and out of the proceeds of the sales thereof, respondent spouses
Ramos shall pay petitioners outstanding obligations and liabilities. After settling and paying the
obligations and liabilities of petitioner, respondent spouses Ramos bought the Bonifacio property
from Mendoza out of their own funds.
Lastly, even if petitioner and respondent spouses Ramos belonged to the same family, the spouses
Ramos faulted petitioner for failing to exert efforts to arrive at an amicable settlement of their dispute.
Hence, respondent spouses Ramos sought, by way of a counterclaim against petitioner, moral and
exemplary damages and attorneys fees, for allegedly filing a false, flimsy and frivolous complaint.
On 27 April 1987, respondent Bartex, Inc. filed before the RTC its own Answer to petitioners
Complaint, alleging, inter alia, that when a representative of the corporation inquired about the Ugac
properties for sale, respondent spouses Ramos presented their owners duplicate copy of TCT No.
T-58043, together with the tax declarations covering the parcel of land and the buildings thereon.
Respondent Bartex, Inc. even verified the title and tax declarations covering the Ugac properties with
the Register of Deeds and the Office of the Municipal Assessor as to any cloud, encumbrance or lien
on the properties, but none were found. Respondent spouses Ramos were then actually occupying
the Ugac properties and they only vacated the same after the consummation of the sale to
respondent Bartex, Inc. Respondent Bartex, Inc. claimed that the sale of the Ugac properties by
respondent spouses Ramos to the corporation was already consummated on 12 January 1987, and
the documents conveying the said properties were by then being processed for registration, when
petitioner caused the annotation of an adverse claim at the back of TCT No. T-58043 on 19 January
1987. As respondent Bartex, Inc. was never aware of any imperfection in the title of respondent
spouses Ramos over the Ugac properties, it claimed that it was an innocent purchaser in good faith.
Trial of the case thereafter ensued.
On 19 January 2000, the RTC promulgated its decision, ruling on petitioners first cause of action in
this wise:
On the first cause of action, the Court finds the testimony of [herein petitioner] Lina Penalber (sic)
denying her execution of the deed of donation over the Ugac property in favor of [herein respondent
spouses] Quirino Ramos and Leticia Penalber-Ramos (sic) insufficient to support the said cause of
action. A notarial document is, by law, entitled to full faith and credit upon its face (Arrieta v. Llosa,
282 SCRA 248) and a high degree of proof is needed to overthrow the presumption of truth in the
recitals contained in a public document executed with all legal formalities (People vs. Fabro, 277
SCRA 19). Hence, in order to contradict the facts contained in a notarial document and the
presumption of regularity in its favor, these (sic) must be evidence that is clear, convincing and more
than merely preponderant (Calahat vs. Intermediate Appellate Court, 241 SCRA 356). In the case at
bench, [petitioner] claims that she did not execute the deed of donation over the Ugac property in
favor of [respondent spouses Ramos]. Such denial, by itself, is not sufficient to overcome the
presumption of regularity of the notarial deed of donation and its entitlement to full faith and credit.
While it is true that, generally, the party who asserts the affirmative side of a proposition has the
burden of proof, which in this instance is (sic) the [respondent spouses Ramos] who are asserting
the validity of the deed of donation, [respondent spouses Ramos] can merely rely on the above-
stated presumption given to notarial documents and need not present any evidence to support their
claim of validity and due execution of the notarized deed of donation. On the other hand, [petitioner],
in addition to her allegation that she did not execute any such deed of donation in favor of
[respondent spouses Ramos] should have had her allegedly falsified signature on the deed of
donation examined by qualified handwriting experts to prove that, indeed, she did not execute the
same. Her failure to do so results in the failure of her cause.
15
(Emphasis ours.)
With respect to petitioners second cause of action, the RTC adjudged that:
On the second cause of action, the Court finds the evidence preponderantly in favor of the [herein
petitioner]. The evidence on record shows that when [petitioner] allowed [herein respondent spouses
Ramos] full management of the hardware store located on the Bonifacio property in March, 1982
(sic) an inventory of the stocks in trade in the said store was made showing stocks
worth P226,951.05
*
and when she got back the store from [respondent spouses Ramos] on
September 1984, another inventory was made [on] the stocks in trade in the said store showing,
stocks worth P110,005.88
*
or a difference of P116,946.17.
*
The only reason for an inventory having
been made when the hardware store was turned over to [respondent spouses Ramos] was, to the
mind of the Court, for the latter to account for the sales of such stocks. And to arrive at the net
amount due to [petitioner], all that is needed to be done is to deduct the value of the stocks present
at the store when management was returned to [petitioner] in September 1984 from the value of the
stocks found in the hardware store when said management was given to [respondent spouses
Ramos] in 1982. [Petitioner] claims that the purchase price for the Bonifacio property was to be
taken from the proceeds of sales from the hardware store which, as the evidence on record stands[,]
shows a balance in her favor of more than P116,000.00. [Respondent spouses Ramos] contend that
said amount was expended to pay off [petitioners] obligations to her suppliers. The record, however,
is totally silent on how much and when [respondent spouses Ramos] paid said alleged obligations of
[petitioner] or even who were the said suppliers thus paid. That [petitioner] and [respondent spouses
Ramos] agreed that the amount due [petitioner] from the proceeds of the sales of her stocks in the
hardware store would be applied to the purchase price of the Bonifacio property is supported by the
fact that [petitioner] did not ever ask for an accounting of said proceeds, despite the fact that as early
as September, 1984 (sic) she already knew that her stocks left by her in March, 1982 (sic) was
already sold by [respondent spouses Ramos] and that there was a difference of P116,000.00 plus
which was due to her.
16
(Emphasis ours.)
Thus, the RTC decreed:
WHEREFORE, in view of all the foregoing, judgment is hereby rendered:
1. Finding the evidence on record insufficient to prove the [herein petitioners] first cause of
action, and, hence, dismissing the same;
2. On the second cause of action, in favor of the [petitioner] and against the [herein
respondent spouses Ramos];
2.1 Declaring the [petitioner] the owner of Lot 2-B of subdivision plan PST-2-01-
019316 (sic) with an area of 195 square meters situated along Bonifacio Street,
Tuguegarao, Cagayan; and
2.2 Ordering the [respondent spouses Ramos] to reconvey to the [petitioner] the said
property (Bonifacio property).
With costs de oficio.
17
(Emphasis ours.)
On 22 February 2000, respondent spouses Ramos filed with the RTC a Motion for
Reconsideration
18
of the afore-mentioned decision, assailing the ruling of the RTC on petitioners
second cause of action on the ground that the alleged express trust created between them and
petitioner involving the Bonifacio property could not be proven by parol evidence. In an Order
19
dated
17 July 2000, the RTC denied respondent spouses Ramos Motion for Reconsideration for lack of
merit, ratiocinating that respondent spouses Ramos failed to interpose timely objections when
petitioner testified on their alleged verbal agreement regarding the purchase of the Bonifacio
property. As such, respondent spouses Ramos were deemed to have waived such objections, which
cannot be raised anymore in their Motion for Reconsideration. The RTC then reiterated its finding
that petitioners evidence clearly established her second cause of action. Additionally, the RTC held
that the requirement that the parties exert earnest efforts towards an amicable settlement of the
dispute had likewise been waived by the respondents as they filed no motion regarding the same
before the trial.
On 24 July 2000, respondent spouses Ramos elevated their case to the Court of Appeals, insofar as
the ruling of the RTC on petitioners second cause of action was concerned.
20
The appeal was
docketed as CA-G.R. CV No. 69731.
On 15 December 2006, the Court of Appeals rendered the assailed Decision in favor of respondent
spouses Ramos.
Finding merit in the appeal, the appellate court observed that the second cause of action involved
not only the petitioner and her daughter, but also her son-in-law, who was not covered by the term
"family relations" under Article 150
21
of the Family Code. Therefore, Article 151
22
of the Family Code,
requiring the exertion of earnest efforts toward a compromise, did not apply as the impediment
arising from the said provision was limited only to suits between members of the same family or
those encompassed in the term "family relations" under Article 150.
The Court of Appeals also declared that petitioner failed to prove her claim with the required
quantum of evidence. According to the Court of Appeals:
It appears that before management of the store was transferred to [herein respondent spouses
Ramos], a beginning inventory of the stocks of the hardware store was made by [herein petitioners]
other children showing stocks amounting to Php226,951.05. After management of the hardware
store was returned to [petitioner], a second inventory was made with stocks amounting to
Php110,004.88 showing a difference of Php116,946.15. Contrary, however, to the finding of the trial
court, We find that said inventory showing such difference is not conclusive proof to show that the
said amount was used to pay the purchase price of the subject lot. In fact, as testified by Johnson
Paredes, son of [petitioner] who made the computation on the alleged inventories, it is not known if
the goods, representing the amount of Php116,946.17, were actually sold or not. It may have been
taken without actually being sold.
It is a basic rule of evidence that bare allegations, unsubstantiated by evidence, are not equivalent to
proof. As between [petitioners] bare allegation of a verbal trust agreement, and the deed of absolute
sale between Maria Mendoza and [respondent spouses Ramos], the latter should prevail.
Although oral testimony is allowed to prove that a trust exists, contrary to the contention of
[respondent spouses Ramos], and the court may rely on parol evidence to arrive at a conclusion that
an express trust exists, what is crucial is the intention to create a trust. While oftentimes the intention
is manifested by the trustor in express or explicit language, such intention may be manifested by
inference from what the trustor has said or done, from the nature of the transaction, or from the
circumstances surrounding the creation of the purported trust.
However, an inference of the intention to create a trust, made from language, conduct or
circumstances, must be made with reasonable certainty. It cannot rest on vague, uncertain or
indefinite declarations. An inference of intention to create a trust, predicated only on circumstances,
can be made only where they admit of no other interpretation. Here, [petitioner] failed to establish
with reasonable certainty her claim that the purchase of the subject lot was pursuant to a verbal trust
agreement with [respondent spouses Ramos].
23
(Emphasis ours.)
Thus, the Court of Appeals disposed of the case as follows:
WHEREFORE, in view of the foregoing, the instant appeal is hereby GRANTED and the Decision
dated 19 January 2000 of the Regional Trial Court (RTC) of Tuguegarao City, Branch 2, with respect
to the second cause of action or the Bonifacio Property in Civil Case No. 3672 is hereby
REVERSED and SET ASIDE and a new one entered DISMISSING the second cause of action of
[herein petitioners] complaint.
24

On 12 January 2007, petitioner sought reconsideration
25
of the foregoing Decision, but it was denied
by the appellate court in a Resolution
26
dated 31 May 2007.
To have the ruling of the Court of Appeals overturned, petitioner brought her case before us through
the instant Petition, raising the following issues: (1) whether the existence of a trust agreement
between her and respondent spouses Ramos was clearly established, and (2) whether such trust
agreement was valid and enforceable.
At the outset, it is apparent that petitioner is raising questions of fact in the instant Petition. Be it
noted that in a petition for review under Rule 45 of the Rules of Court, only questions of law must be
entertained. A question of law arises when there is doubt as to what the law is on a certain state of
facts, while there is a question of fact when the doubt arises as to the truth or falsity of the alleged
facts.
27
When the doubt or difference arises as to the truth or falsehood of alleged facts or when the
query necessarily solicits calibration of the whole evidence considering mostly the credibility of
witnesses, existence and relevancy of specific surrounding circumstances, their relation to each
other and to the whole and probabilities of the situation, questions or errors of fact are raised.
28
The
rule that only questions of law may be raised in a petition for review under Rule 45, however, admits
of certain exceptions,
29
among which is when the findings of the trial court are grounded entirely on
speculation, surmise and conjecture. As will be discussed further, we find the afore-mentioned
exception to be applicable in the present Petition, thus, warranting a departure from the general rule.
In its technical legal sense, a trust is defined as the right, enforceable solely in equity, to the
beneficial enjoyment of property, the legal title to which is vested in another, but the word "trust" is
frequently employed to indicate duties, relations, and responsibilities which are not strictly technical
trusts.
30
A person who establishes a trust is called the trustor; one in whom confidence is reposed is
known as the trustee; and the person for whose benefit the trust has been created is referred to as
the beneficiary.
31
There is a fiduciary relation between the trustee and the beneficiary (cestui que
trust) as regards certain property, real, personal, money or choses in action.
32

Trusts are either express or implied. Express trusts are created by the intention of the trustor or of
the parties. Implied trusts come into being by operation of law.
33
Express trusts are those which are
created by the direct and positive acts of the parties, by some writing or deed, or will, or by words
either expressly or impliedly evincing an intention to create a trust.
34
No particular words are required
for the creation of an express trust, it being sufficient that a trust is clearly intended.
35
However, in
accordance with Article 1443 of the Civil Code, when an express trust concerns an immovable
property or any interest therein, the same may not be proved by parol or oral evidence.
36

In the instant case, petitioner maintains that she was able to prove the existence of a trust
agreement between her and respondent spouses Ramos. She calls attention to the fact that
respondent spouses Ramos could not account for the P116,946.15 difference in the beginning
inventory and the second inventory of the stocks of the hardware store, and they failed to present
proof to support their allegation that the amount was used to pay the other obligations of petitioner.
As respondent spouses Ramos never denied the existence of the P116,946.15 difference, petitioner
contends that they have the burden of proving where this amount had gone, if indeed they did not
use the same to buy the Bonifacio property. Petitioner asserts that given the respondent spouses
Ramos failure to discharge such burden, the only conclusion would be that they did use the amount
to purchase the Bonifacio property.
Petitioner further alleges that based on the verbal agreement between her and respondent spouses
Ramos, a trust agreement was created and that the same is valid and enforceable. Petitioner claims
that she is the trustor for it was she who entrusted the Bonifacio property to respondent spouses
Ramos as the trustees, with the condition that the same be used to secure a loan, the proceeds of
which would be used to build a bigger building to expand petitioners business. Petitioner maintains
that a trust agreement was clearly intended by the parties when petitioner left the management of
the hardware store to respondent spouses Ramos, with the agreement that the proceeds from the
sales from said store be used to buy the lot upon which the store stands. The respondent spouses
Ramos assumption of the management of the hardware store and their eventual purchase of the
Bonifacio property indubitably shows that respondent spouses Ramos honored their obligation under
the verbal agreement. Such being the case, it behooved for the respondent spouses Ramos to hold
the Bonifacio property for petitioners benefit.
Petitioners arguments fail to persuade.
It bears stressing that petitioner has the burden of proving her cause of action in the instant case
and she may not rely on the weakness of the defense of respondent spouses Ramos. Burden of
proof is the duty of any party to present evidence to establish his claim or defense by the amount of
evidence required by law, which is preponderance of evidence in civil cases. Preponderance of
evidence
37
is the weight, credit, and value of the aggregate evidence on either side and is usually
considered to be synonymous with the term "greater weight of the evidence" or "greater weight of
the credible evidence. It is evidence which is more convincing to the court as worthy of belief than
that which is offered in opposition thereto.
38
Therefore, the party, whether plaintiff or defendant, who
asserts the affirmative of the issue has the burden of proof to obtain a favorable judgment. For the
plaintiff, the burden of proof never parts.
39
For the defendant, an affirmative defense is one which is
not a denial of an essential ingredient in the plaintiffs cause of action, but one which, if established,
will be a good defense i.e., an avoidance of the claim.
40

From the allegations of the petitioners Complaint in Civil Case No. 3672, the alleged verbal trust
agreement between petitioner and respondent spouses Ramos is in the nature of an express trust
as petitioner explicitly agreed therein to allow the respondent spouses Ramos to acquire title to the
Bonifacio property in their names, but to hold the same property for petitioners benefit. Given that
the alleged trust concerns an immovable property, however, respondent spouses Ramos counter
that the same is unenforceable since the agreement was made verbally and no parol evidence may
be admitted to prove the existence of an express trust concerning an immovable property or any
interest therein.
On this score, we subscribe to the ruling of the RTC in its Order dated 17 July 2000 that said
spouses were deemed to have waived their objection to the parol evidence as they failed to timely
object when petitioner testified on the said verbal agreement. The requirement in Article 1443 that
the express trust concerning an immovable or an interest therein be in writing is merely for purposes
of proof, not for the validity of the trust agreement. Therefore, the said article is in the nature of a
statute of frauds. The term statute of frauds is descriptive of statutes which require certain classes of
contracts to be in writing. The statute does not deprive the parties of the right to contract with respect
to the matters therein involved, but merely regulates the formalities of the contract necessary to
render it enforceable.
41
The effect of non-compliance is simply that no action can be proved unless
the requirement is complied with. Oral evidence of the contract will be excluded upon timely
objection. But if the parties to the action, during the trial, make no objection to the admissibility of the
oral evidence to support the contract covered by the statute, and thereby permit such contract to be
proved orally, it will be just as binding upon the parties as if it had been reduced to writing.
42

Per petitioners testimony,
43
the Bonifacio property was offered for sale by its owner Mendoza.
Petitioner told respondent spouses Ramos that she was going to buy the lot, but the title to the same
will be in the latters names. The money from the hardware store managed by respondent spouses
Ramos shall be used to buy the Bonifacio property, which shall then be mortgaged by the
respondent spouses Ramos so that they could obtain a loan for building a bigger store. The
purchase price of P80,000.00 was paid for the Bonifacio property. On 20 September 1984, the
respondent spouses Ramos returned the management of the store to petitioner. Thereafter,
petitioner allowed her son Johnson to inventory the stocks of the store. Johnson found out that the
purchase price ofP80,000.00 for the Bonifacio property was already fully paid. When petitioner told
the respondent spouses Ramos to transfer the title to the Bonifacio property in her name, the
respondent spouses Ramos refused, thus, prompting petitioner to file a complaint against them.
Similarly, Johnson testified
44
that on 22 March 1982, petitioner turned over the management of the
hardware store to respondent spouses Ramos. During that time, an inventory
45
of the stocks of the
store was made and the total value of the said stocks were determined to be P226,951.05. When
respondent spouses Ramos returned the management of the store to petitioner on 20 September
1984, another inventory
46
of the stocks was made, with the total value of the stocks falling
to P110,004.88. The difference of P116,946.16 was attributed to the purchase of the Bonifacio
property by the respondent spouses Ramos using the profits from the sales of the store.
A careful perusal of the records of the case reveals that respondent spouses Ramos did indeed fail
to interpose their objections regarding the admissibility of the afore-mentioned testimonies when the
same were offered to prove the alleged verbal trust agreement between them and petitioner.
Consequently, these testimonies were rendered admissible in evidence. Nevertheless, while
admissibility of evidence is an affair of logic and law, determined as it is by its relevance and
competence, the weight to be given to such evidence, once admitted, still depends on judicial
evaluation.
47
Thus, despite the admissibility of the said testimonies, the Court holds that the same
carried little weight in proving the alleged verbal trust agreement between petitioner and respondent
spouses.
Petitioners allegations as to the existence of an express trust agreement with respondent spouses
Ramos, supported only by her own and her son Johnsons testimonies, do not hold water. As
correctly ruled by the Court of Appeals, a resulting difference of P116,946.15 in the beginning
inventory of the stocks of the hardware store (before management was transferred to respondent
spouses Ramos) and the second inventory thereof (after management was returned to petitioner),
by itself, is not conclusive proof that the said amount was used to pay the purchase price of the
Bonifacio property, such as would make it the property of petitioner held merely in trust by
respondent spouses Ramos. Such a conclusion adopted by the RTC is purely speculative and non
sequitur. The resulting difference in the two inventories might have been caused by other factors and
the same is capable of other interpretations (e. g., that the amount thereof may have been written off
as business losses due to a bad economic condition, or that the stocks of the store might have been
damaged or otherwise their purchase prices have increased dramatically, etc.), the exclusion of
which rested upon the shoulders of petitioner alone who has the burden of proof in the instant case.
This petitioner miserably failed to do. The fact that respondent spouses Ramos never denied
the P116,946.15 difference, or that they failed to present proof that they indeed used the said
amount to pay the other obligations and liabilities of petitioner is not sufficient to discharge
petitioners burden to prove the existence of the alleged express trust agreement.
WHEREFORE, premises considered, the instant Petition for Review on Certiorari under Rule 45 of
the Rules of Court is hereby DENIED. The assailed Decision of the Court of Appeals in CA-G.R. CV
No. 69731 dated 15 December 2006 is hereby AFFIRMED. Costs against petitioner.
SO ORDERED.
G.R. No. 169681 November 5, 2009
THE ESTATE OF PEDRO C. GONZALES and HEIRS OF PEDRO C. GONZALES, Petitioners,
vs.
THE HEIRS OF MARCOS PEREZ, Respondents.
D E C I S I O N
PERALTA, J .:
This resolves the instant Petition for Review on Certiorari under Rule 45 of the Rules of Court
praying for the nullification of the Decision
1
of the Court of Appeals (CA) dated April 25, 2005 in CA-
G.R. CV No. 60998 and its Resolution
2
dated September 14, 2005. The challenged Decision of the
CA reversed and set aside the judgment of the Regional Trial Court (RTC) of Marikina City, Branch
272 in Civil Case No. 94-57-MK while its assailed Resolution denied petitioners' motion for
reconsideration.
The antecedent facts are as follows:
The former Municipality of Marikina in the Province of Rizal (now City of Marikina, Metro Manila)
used to own a parcel of land located in Barrio Concepcion of the said municipality covered by
Original Certificate of Title (OCT) No. 629
3
of the Register of Deeds of Rizal. The said property was
subdivided into three (3) lots, namely, lots A, B and C, per subdivision plan (LRC) Psd-4571.
4

On January 14, 1966, the Municipal Council of Marikina passed Resolution No. 9, series of 1966
which authorized the sale through public bidding of Municipal Lots A and C.
On April 25, 1966, a public bidding was conducted wherein Pedro Gonzales was the highest bidder.
Two days thereafter, or on April 27, 1966, the Municipal Council of Marikina issued Resolution No.
75 accepting the bid of Pedro. Thereafter, a deed of sale was executed in favor of the latter which
was later forwarded to the Provincial Governor of Rizal for his approval. The Governor, however, did
not act upon the said deed.
Sometime in September 1966, Pedro sold to Marcos Perez a portion of Lot C, denominated as Lot
C-3, which contains an area of 375 square meters. The contract of sale was embodied in a Deed of
Sale
5
which, however, was not notarized. To segregate the subject property from the remaining
portions of Lot C, Marcos had the same surveyed wherein a technical description of the subject lot
was prepared by a surveyor.
6

Subsequently, Pedro and Marcos died.
On February 7, 1992, the Municipality of Marikina, through its then Mayor Rodolfo Valentino,
executed a Deed of Absolute Transfer of Real Property over Lots A and C in favor of the Estate of
Pedro C. Gonzales.
7
On June 25, 1992, Transfer Certificate of Title (TCT) No. 223361, covering Lot
C, was issued in the name of the said estate.
8

Subsequently, herein petitioners executed an extra-judicial partition wherein Lot C was subdivided
into three lots. As a result of the subdivision, new titles were issued wherein the 370-square-meter
portion of Lot C-3 is now denominated as Lot C-1 and is covered by TCT No. 244447
9
and the
remaining 5 square meters of the subject lot (Lot C-3) now forms a portion of another lot
denominated as Lot C-2 and is now covered by TCT No. 244448.
10

On October 1, 1992, herein respondents sent a demand letter to one of herein petitioners asking for
the reconveyance of the subject property.
11
However, petitioners refused to reconvey the said lot. As
a consequence, respondents filed an action for "Annulment and/or Rescission of Deed of Absolute
Transfer of Real Property x x x and for Reconveyance with Damages."
12

On February 2, 1998, the RTC rendered its Decision with the following dispositive portion:
WHEREFORE, foregoing premises, judgment is hereby rendered as follows:
1. DISMISSING the complaint subject of the case in caption for lack of merit;
2. DECLARING VALID both Transfer Certificates of Title Nos. 244447 and 244448 issued by
the Register of Deeds of Marikina;
3. DISMISSING the defendants' counterclaim.
No pronouncement as to costs.
SO ORDERED.
13

The RTC ruled that since the Deed of Sale executed between Pedro and Marcos was not notarized,
the same is considered void and of no effect. In addition, the trial court also held that Pedro became
the owner of the subject lot only on February 7, 1992; as such, he could not have lawfully transferred
ownership thereof to Marcos in 1966.
Herein respondents appealed the RTC Decision to the CA contending that the RTC erred in relying
only on Articles 1356 and 1358 of the Civil Code. Instead, respondents assert that the RTC should
also have applied the provisions of Articles 1357, 1403 (2), 1405 and 1406 of the same Code.
On April 25, 2005, the CA rendered its presently assailed Decision disposing as follows:
WHEREFORE, premises considered, the instant Appeal is hereby GRANTED and the assailed
Decision dated February 2, 1998 is REVERSED and SET ASIDE. TCT No. 244447 and partially,
TCT No. 244448, with respect to five (5) square meters, are declared NULL and VOID and
defendants-appellees are ordered to reconvey in favor of the plaintiffs-appellants the subject
property covered by said Transfer Certificates of Title (five square meters only with respect to TCT
No. 244448). The trial court's dismissal of defendants-appellees' counterclaim is,
however, AFFIRMED.
SO ORDERED.
14

The CA held that a sale of real property, though not consigned in a public instrument, is nevertheless
valid and binding among the parties and that the form required in Article 1358 of the Civil Code is not
essential to the validity or enforceability of the transactions but only for convenience.
Petitioners filed a motion for reconsideration, but the same was denied by the CA in its Resolution of
September 14, 2005 on the ground that the said motion was filed out of time.
Hence, the present petition with the following assignment of errors:
WITH DUE RESPECT TO THE HONORABLE COURT OF APPEALS, ITS FINDINGS OF FACT
RUN COUNTER TO THOSE OF THE TRIAL COURT, THUS, IT HAS DECIDED THE CASE IN A
WAY NOT IN ACCORD WITH LAW AND JURISPRUDENCE.
WITH DUE RESPECT, THE ALLEGED DEED OF SALE IS SUSPECT AND RIDDEN WITH
INCONSISTENCIES. IN FACT, THE LOWER COURT HELD THAT THE DEED OF SALE FAILED
TO MEET THE SOLEMNITY REQUIREMENTS PROVIDED UNDER THE LAW FOR ITS VALIDITY.
WITH DUE RESPECT, THE COURT OF APPEALS ERRED IN DISREGARDING THE FINDINGS
OF FACT AND THE APPLICATION OF LAW BY THE REGIONAL TRIAL COURT THAT UNDER
THE PURPORTED DEED OF SALE THE VENDOR COULD NOT HAVE TRANSFERRED
OWNERSHIP.
15

In their first and last assigned errors, petitioners contend that Marcos, who is respondents'
predecessor-in-interest, could not have legally bought the disputed parcel of land from petitioners'
predecessor-in-interest, Pedro, in September 1966 because, during that time, Pedro had not yet
acquired ownership of the subject lot. Petitioners' assertion is based on the premise that as of
February 29, 1968, the Deed of Sale between Pedro and the Municipality of Marikina was still
subject to approval by the Provincial Governor of Rizal, as required under Section 2196 of the
Revised Administrative Code. Considering that on the supposed date of sale in favor of Marcos, the
requisite approval of the Provincial Governor was not yet secured, petitioners conclude that Pedro
could not be considered as the owner of the subject property and, as such, he did not yet possess
the right to transfer ownership thereof and, thus, could not have lawfully sold the same to Marcos.
The Court does not agree.
Section 2196 of the Revised Administrative Code provides:
SECTION 2196. Execution of deeds. When the government of a municipality is a party to a deed
or an instrument which conveys real property or any interest therein or which creates a lien upon the
same, such deed or instrument shall be executed on behalf of the municipal government by the
mayor, upon resolution of the council, with the approval of the governor.
In Municipality of Camiling v. Lopez,
16
the Court found occasion to expound on the nature and effect
of the provincial governor's power to approve contracts entered into by a municipal government as
provided for under Section 2196 of the Revised Administrative Code. The Court held, thus:
x x x The approval by the provincial governor of contracts entered into and executed by a municipal
council, as required in [S]ection 2196 of the Revised Administrative Code, is part of the system of
supervision that the provincial government exercises over the municipal governments. It is not a
prohibition against municipal councils entering into contracts regarding municipal properties subject
of municipal administration or control. It does not deny the power, right or capacity of municipal
councils to enter into such contracts; such power or capacity is recognized. Only the exercise thereof
is subject to supervision by approval or disapproval, i.e., contracts entered in pursuance of the
power would ordinarily be approved if entered into in good faith and for the best interests of the
municipality; they would be denied approval if found illegal or unfavorable to public or municipal
interest. The absence of the approval, therefore, does not per se make the contracts null and
void.
17

This pronouncement was later reiterated in Pechueco Sons Company v. Provincial Board of
Antique,
18
where the Court ruled more emphatically that:
In other words, as regards the municipal transactions specified in Section 2196 of the Revised
Administrative Code, the Provincial Governor has two courses of action to take either to approve
or disapprove the same. And since absence of such approval does not necessarily render the
contract entered into by the municipality null and void, the transaction remains voidable until
such time when by subsequent unfavorable action of the governor, for reasons of public
interest, the contract is thereby invalidated.
19

It is clear from the above-quoted pronouncements of the Court that, pending approval or disapproval
by the Provincial Governor of a contract entered into by a municipality which falls under the
provisions of Section 2196 of the Revised Administrative Code, such contract is considered
voidable. In the instant case, there is no showing that the contract of sale entered into between
Pedro and the Municipality of Marikina was ever acted upon by the Provincial Governor. Hence,
consistent with the rulings enunciated above, the subject contract should be considered voidable.
Voidable or annullable contracts, before they are set aside, are existent, valid, and binding, and are
effective and obligatory between the parties.
20

In the present case, since the contract was never annulled or set aside, it had the effect of
transferring ownership of the subject property to Pedro. Having lawfully acquired ownership of Lots A
and C, Pedro, in turn, had the full capacity to transfer ownership of these parcels of land or parts
thereof, including the subject property which comprises a portion of Lot C.
It is wrong for petitioners to argue that it was only on June 25, 1992, when TCT No. 223361 covering
Lot C was issued in the name of the estate of Pedro, that he became the owner thereof.
Article 1496 of the Civil Code provides:
The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in
any of the ways specified in Articles 1497 to 1501, or in any other manner signifying an agreement
that the possession is transferred from the vendor to the vendee.
In conjunction with the above-stated provision, Article 1497 of the Civil Code states that:
The thing sold shall be understood as delivered when it is placed in the control and possession of
the vendee.
In the present case, there is no dispute that Pedro took control and possession of the said lot
immediately after his bid was accepted by the Municipal Government of Marikina. In fact, herein
petitioners, in their Answer with Compulsory Counterclaim admit that both Pedro and Marcos,
together with their respective heirs, were already occupying the subject property even before the
same was sold to Pedro and that, after buying the same, Pedro allowed Marcos and his family to
stay thereon.
21
This only shows that upon perfection of the contract of sale between the Municipality
of Marikina and Pedro, the latter acquired ownership of the subject property by means of delivery of
the same to him.
Hence, the issuance of TCT No. 223361, as well as the execution of the Deed of Absolute Transfer
of Real Property on February 7, 1992 by the Municipal Mayor of Marikina, could not be considered
as the operative acts which transferred ownership of Lot C to Pedro. Pedro already acquired
ownership of the subject property as early as 1966 when the same was delivered to him by the
Municipality of Marikina, and the execution of the Deed of Absolute Transfer of Real Property as well
as the consequent issuance of TCT No. 223316 are simply a confirmation of such ownership.1avvphi 1
It may not be amiss to point out at this juncture that the Deed of Absolute Transfer of Real Property
executed by the Mayor of Marikina was no longer subject to approval by the Provincial Governor of
Rizal because Marikina already became part of Metro Manila on November 7, 1975.
22
On December
8, 1996, Marikina became a chartered city.
23

In their second assignment of error, petitioners question the authenticity and due execution of the
Deed of Sale executed by Pedro in favor of Marcos. Petitioners also argue that even assuming that
Pedro actually executed the subject Deed of Sale, the same is not valid because it was not notarized
as required under the provisions of Articles 1403 and 1358 of the Civil Code.
The Court is not persuaded.
The RTC, in its abbreviated discussion of the questions raised before it, did not touch on the issue of
whether the Deed of Sale between Pedro and Marcos is authentic and duly executed. However, the
CA, in its presently assailed Decision, adequately discussed this issue and ruled as follows:
x x x In the present case, We are convinced that plaintiffs-appellants [herein respondents] have
substantially proven that Pedro, indeed, sold the subject property to Marcos for P9,378.75. The fact
that no receipt was presented to prove actual payment of consideration, in itself, the absence of
receipts, or any proof of consideration, would not be conclusive since consideration is always
presumed. Likewise, the categorical statement in the trial court of Manuel P. Bernardo, one of the
witnesses in the Deed of Sale, that he himself saw Pedro sign such Deed lends credence. This was
corroborated by another witness, Guillermo Flores. Although the defendants-appellees [herein
petitioners] are assailing the genuineness of the signatures of their parents on the said Deed, they
presented no evidence of the genuine signatures of their parents as would give this Court a chance
to scrutinize and compare it with the assailed signatures. Bare allegations, unsubstantiated by
evidence, are not equivalent to proof under our Rules.
24

In the instant petition, petitioners would have us review the factual determinations of the CA.
However, settled is the rule that the Court is not a trier of facts and only questions of law are the
proper subject of a petition for review on certiorari in this Court.
25
While there are exceptions to this
rule,
26
the Court finds that the instant case does not fall under any of them. Hence, the Court sees no
reason to disturb the findings of the CA, which are supported by evidence on record.
On the question of whether the subject Deed of Sale is invalid on the ground that it does not appear
in a public document, Article 1358 of the same Code enumerates the acts and contracts that should
be embodied in a public document, to wit:
Art. 1358. The following must appear in a public document:
(1) Acts and contracts which have for their object the creation, transmission,
modification or extinguishment of real rights over immovable property; sales of real
property or of an interest therein are governed by Articles 1403, No. 2 and 1405;
(2) The cession, repudiation or renunciation of hereditary rights or of those of the conjugal
partnership of gains;
(3) The power to administer property, or any other power which has for its object an act
appearing or which should appear in a public document, or should prejudice a third person;
and
(4) The cession of actions or rights proceeding from an act appearing in a public document.
All other contracts where the amount involved exceeds five hundred pesos must appear in writing,
even a private one. But sales of goods, chattels or things in action are governed by Articles 1403,
No. 2 and 1405.
On the other hand, pertinent portions of Article 1403 of the Civil Code provide as follows:
Art. 1403. The following contracts are unenforceable, unless they are ratified:
x x x x
(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following
cases an agreement hereafter made shall be unenforceable by action, unless the same, or
some note or memorandum thereof, be in writing, and subscribed by the party charged, or by
his agent; evidence, therefore, of the agreement cannot be received without the writing, or a
secondary evidence of its contents:
(a) An agreement that by its terms is not to be performed within a year from the making thereof;
x x x x
(e) An agreement for the leasing for a longer period than one year, or for the sale of real property
or of an interest therein; x x x
27

Under Article 1403(2), the sale of real property should be in writing and subscribed by the party
charged for it to be enforceable.
28
In the case before the Court, the Deed of Sale between Pedro and
Marcos is in writing and subscribed by Pedro and his wife Francisca; hence, it is enforceable under
the Statute of Frauds.
However, not having been subscribed and sworn to before a notary public, the Deed of Sale is not a
public document and, therefore, does not comply with Article 1358 of the Civil Code.
Nonetheless, it is a settled rule that the failure to observe the proper form prescribed by Article 1358
does not render the acts or contracts enumerated therein invalid. It has been uniformly held that the
form required under the said Article is not essential to the validity or enforceability of the transaction,
but merely for convenience.
29
The Court agrees with the CA in holding that a sale of real property,
though not consigned in a public instrument or formal writing, is, nevertheless, valid and binding
among the parties, for the time-honored rule is that even a verbal contract of sale of real estate
produces legal effects between the parties.
30
Stated differently, although a conveyance of land is not
made in a public document, it does not affect the validity of such conveyance. Article 1358 does not
require the accomplishment of the acts or contracts in a public instrument in order to validate the act
or contract but only to insure its efficacy.
31
Thus, based on the foregoing, the Court finds that the CA
did not err in ruling that the contract of sale between Pedro and Marcos is valid and binding.
WHEREFORE, the instant petition is DENIED. The assailed Decision and Resolution of the Court of
Appeals in CA-G.R. CV No. 60998 are AFFIRMED.
SO ORDERED.
THE MUNICIPALITY OF HAGONOY,
BULACAN, represented by the HON. FELIX
V. OPLE, Municipal Mayor, and FELIX V.
OPLE, in his personal capacity,
Petitioners,

- versus -

HON. SIMEON P. DUMDUM, JR., in his
capacity as the Presiding Judge of the
REGIONAL TRIAL COURT, BRANCH 7,
CEBU CITY; HON. CLERK OF COURT & EX-
OFFICIO SHERIFF of the REGIONAL TRIAL
COURT of CEBU CITY; HON. CLERK OF
COURT & EX-OFFICIO SHERIFF of the
REGIONAL TRIAL COURT of BULACAN and
his DEPUTIES; and EMILY ROSE GO KO
LIM CHAO, doing business under the name
and style KD SURPLUS,
Respondents.
G.R. No. 168289


Present:


CORONA, J., Chairperson,
VELASCO, JR.,
NACHURA,
PERALTA, and
MENDOZA, JJ.










Promulgated:

March 22, 2010
x-----------------------------------------------------------------------------------------x


D E C I S I O N

PERALTA, J .:


This is a Joint Petition
[1]
under Rule 45 of the Rules of Court brought by the Municipality
of Hagonoy, Bulacan and its former chief executive, Mayor Felix V. Ople in his official and
personal capacity, from the January 31, 2005 Decision
[2]
and the May 23, 2005 Resolution
[3]
of
the Court of Appeals in CA-G.R. SP No. 81888. The assailed decision affirmed the October 20,
2003Order
[4]
issued by the Regional Trial Court of Cebu City, Branch 7 in Civil Case No. CEB-
28587 denying petitioners motion to dismiss and motion to discharge/dissolve the writ of
preliminary attachment previously issued in the case. The assailed resolution denied
reconsideration.

The case stems from a Complaint
[5]
filed by herein private respondent Emily Rose Go Ko
Lim Chao against herein petitioners, the Municipality of Hagonoy, Bulacan and its chief
executive, Felix V. Ople (Ople) for collection of a sum of money and damages. It was alleged
that sometime in the middle of the year 2000, respondent, doing business as KD Surplus and as
such engaged in buying and selling surplus trucks, heavy equipment, machinery, spare parts
and related supplies, was contacted by petitioner Ople. Respondent had entered into an
agreement with petitioner municipality through Ople for the delivery of motor vehicles, which
supposedly were needed to carry out certain developmental undertakings in the
municipality. Respondent claimed that because of Oples earnest representation that funds had
already been allocated for the project, she agreed to deliver from her principal place of business
in Cebu City twenty-one motor vehicles whose value totaled P5,820,000.00. To prove this, she
attached to the complaint copies of the bills of lading showing that the items were consigned,
delivered to and received by petitioner municipality on different dates.
[6]
However, despite
having made several deliveries, Ople allegedly did not heed respondents claim for payment. As
of the filing of the complaint, the total obligation of petitioner had already
totaled P10,026,060.13 exclusive of penalties and damages. Thus, respondent prayed for full
payment of the said amount, with interest at not less than 2% per month, plus P500,000.00 as
damages for business losses, P500,000.00 as exemplary damages, attorneys fees
of P100,000.00 and the costs of the suit.

On February 13, 2003, the trial court issued an Order
[7]
granting respondents prayer for a
writ of preliminary attachment conditioned upon the posting of a bond equivalent to the amount
of the claim. On March 20, 2003, the trial court issued the Writ of Preliminary
Attachment
[8]
directing the sheriff to attach the estate, real and personal properties of
petitioners.

Instead of addressing private respondents allegations, petitioners filed a Motion to
Dismiss
[9]
on the ground that the claim on which the action had been brought was unenforceable
under the statute of frauds, pointing out that there was no written contract or document that
would evince the supposed agreement they entered into with respondent. They averred that
contracts of this nature, before being undertaken by the municipality, would ordinarily be subject
to several preconditions such as a public bidding and prior approval of the municipal council
which, in this case, did not obtain. From this, petitioners impress upon us the notion that no
contract was ever entered into by the local government with respondent.
[10]
To address the
claim that respondent had made the deliveries under the agreement, they advanced that the
bills of lading attached to the complaint were hardly probative, inasmuch as these documents
had been accomplished and handled exclusively by respondent herself as well as by her
employees and agents.
[11]


Petitioners also filed a Motion to Dissolve and/or Discharge the Writ of Preliminary
Attachment Already Issued,
[12]
invoking immunity of the state from suit, unenforceability of the
contract, and failure to substantiate the allegation of fraud.
[13]


On October 20, 2003, the trial court issued an Order
[14]
denying the two
motions. Petitioners moved for reconsideration, but they were denied in an
Order
[15]
dated December 29, 2003.

Believing that the trial court had committed grave abuse of discretion in issuing the two
orders, petitioners elevated the matter to the Court of Appeals via a petition for certiorari under
Rule 65. In it, they faulted the trial court for not dismissing the complaint despite the fact that
the alleged contract was unenforceable under the statute of frauds, as well as for ordering the
filing of an answer and in effect allowing private respondent to prove that she did make several
deliveries of the subject motor vehicles. Additionally, it was likewise asserted that the trial court
committed grave abuse of discretion in not discharging/dissolving the writ of preliminary
attachment, as prayed for in the motion, and in effect disregarding the rule that the local
government is immune from suit.

On January 31, 2005, following assessment of the parties arguments, the Court of
Appeals, finding no merit in the petition, upheld private respondents claim and affirmed the trial
courts order.
[16]
Petitioners moved for reconsideration, but the same was likewise denied for
lack of merit and for being a mere scrap of paper for having been filed by an unauthorized
counsel.
[17]
Hence, this petition.

In their present recourse, which raises no matter different from those passed upon by the
Court of Appeals, petitioners ascribe error to the Court of Appeals for dismissing their challenge
against the trial courts October 20 and December 29, 2003 Orders. Again, they reason that the
complaint should have been dismissed at the first instance based on unenforceability and that
the motion to dissolve/discharge the preliminary attachment should have been granted.
[18]


Commenting on the petition, private respondent notes that with respect to the Court of
Appeals denial of the certioraripetition, the same was rightly done, as the fact of delivery may
be properly and adequately addressed at the trial of the case on the merits; and that the
dissolution of the writ of preliminary attachment was not proper under the premises inasmuch as
the application for the writ sufficiently alleged fraud on the part of petitioners. In the same
breath, respondent laments that the denial of petitioners motion for reconsideration was rightly
done by the Court of Appeals, because it raised no new matter that had not yet been
addressed.
[19]


After the filing of the parties respective memoranda, the case was deemed submitted for
decision.

We now rule on the petition.

To begin with, the Statute of Frauds found in paragraph (2), Article 1403 of the Civil
Code,
[20]
requires for enforceability certain contracts enumerated therein to be evidenced by
some note or memorandum. The term Statute of Frauds is descriptive of statutes that require
certain classes of contracts to be in writing; and that do not deprive the parties of the right to
contract with respect to the matters therein involved, but merely regulate the formalities of the
contract necessary to render it enforceable.
[21]


In other words, the Statute of Frauds only lays down the method by which the
enumerated contracts may be proved. But it does not declare them invalid because they are
not reduced to writing inasmuch as, by law, contracts are obligatory in whatever form they may
have been entered into, provided all the essential requisites for their validity are present.
[22]
The
object is to prevent fraud and perjury in the enforcement of obligations depending, for evidence
thereof, on the unassisted memory of witnesses by requiring certain enumerated contracts and
transactions to be evidenced by a writing signed by the party to be charged.
[23]
The effect of
noncompliance with this requirement is simply that no action can be enforced under the given
contracts.
[24]
If an action is nevertheless filed in court, it shall warrant a dismissal under Section
1(i),
[25]
Rule 16 of the Rules of Court, unless there has been, among others, total or partial
performance of the obligation on the part of either party.
[26]


It has been private respondents consistent stand, since the inception of the instant case
that she has entered into a contract with petitioners. As far as she is concerned, she has
already performed her part of the obligation under the agreement by undertaking the delivery of
the 21 motor vehicles contracted for by Ople in the name of petitioner municipality. This claim is
well substantiated at least for the initial purpose of setting out a valid cause of action against
petitioners by copies of the bills of lading attached to the complaint, naming petitioner
municipality as consignee of the shipment. Petitioners have not at any time expressly denied
this allegation and, hence, the same is binding on the trial court for the purpose of ruling on the
motion to dismiss. In other words, since there exists an indication by way of allegation that
there has been performance of the obligation on the part of respondent, the case is excluded
from the coverage of the rule on dismissals based on unenforceability under the statute of
frauds, and either party may then enforce its claims against the other.

No other principle in remedial law is more settled than that when a motion to dismiss is
filed, the material allegations of the complaint are deemed to be hypothetically admitted.
[27]
This
hypothetical admission, according to Viewmaster Construction Corporation v.
Roxas
[28]
and Navoa v. Court of Appeals,
[29]
extends not only to the relevant and material facts
well pleaded in the complaint, but also to inferences that may be fairly deduced from
them. Thus, where it appears that the allegations in the complaint furnish sufficient basis on
which the complaint can be maintained, the same should not be dismissed regardless of the
defenses that may be raised by the defendants.
[30]
Stated differently, where the motion to
dismiss is predicated on grounds that are not indubitable, the better policy is to deny the motion
without prejudice to taking such measures as may be proper to assure that the ends of justice
may be served.
[31]


It is interesting to note at this point that in their bid to have the
case dismissed, petitioners theorize that there could not have been a contract by which the
municipality agreed to be bound, because it was not shown that there had been compliance with
the required bidding or that the municipal council had approved the contract. The argument is
flawed. By invoking unenforceability under the Statute of Frauds, petitioners are in effect
acknowledging the existence of a contract between them and private respondent only, the
said contract cannot be enforced by action for being non-compliant with the legal requisite that it
be reduced into writing. Suffice it to say that while this assertion might be a viable defense
against respondents claim, it is principally a matter of evidence that may be properly ventilated
at the trial of the case on the merits.

Verily, no grave abuse of discretion has been committed by the trial court in denying
petitioners motion to dismiss this case. The Court of Appeals is thus correct in affirming the
same.

We now address the question of whether there is a valid reason to deny petitioners
motion to discharge the writ of preliminary attachment.

Petitioners, advocating a negative stance on this issue, posit that as a municipal
corporation, the Municipality of Hagonoy is immune from suit, and that its properties are by law
exempt from execution and garnishment. Hence, they submit that not only was there an error
committed by the trial court in denying their motion to dissolve the writ of preliminary
attachment; they also advance that it should not have been issued in the first
place. Nevertheless, they believe that respondent has not been able to substantiate her
allegations of fraud necessary for the issuance of the writ.
[32]


Private respondent, for her part, counters that, contrary to petitioners claim, she has
amply discussed the basis for the issuance of the writ of preliminary attachment in her
affidavit; and that petitioners claim of immunity from suit is negated by Section 22 of the Local
Government Code, which vests municipal corporations with the power to sue and be
sued. Further, she contends that the arguments offered by petitioners against the writ of
preliminary attachment clearly touch on matters that when ruled upon in the hearing for the
motion to discharge, would amount to a trial of the case on the merits.
[33]


The general rule spelled out in Section 3, Article XVI of the Constitution is that the state
and its political subdivisions may not be sued without their consent. Otherwise put, they are
open to suit but only when they consent to it. Consent is implied when the government enters
into a business contract, as it then descends to the level of the other contracting party; or it may
be embodied in a general or special law
[34]
such as that found in Book I, Title I, Chapter 2,
Section 22 of the Local Government Code of 1991, which vests local government units with
certain corporate powers one of them is the power to sue and be sued.

Be that as it may, a difference lies between suability and liability. As held in City of
Caloocan v. Allarde,
[35]
where the suability of the state is conceded and by which liability is
ascertained judicially, the state is at liberty to determine for itself whether to satisfy the judgment
or not. Execution may not issue upon such judgment, because statutes waiving non-suability do
not authorize the seizure of property to satisfy judgments recovered from the action. These
statutes only convey an implication that the legislature will recognize such judgment as final and
make provisions for its full satisfaction. Thus, where consent to be sued is given by general or
special law, the implication thereof is limited only to the resultant verdict on the action before
execution of the judgment.
[36]


Traders Royal Bank v. Intermediate Appellate Court,
[37]
citing Commissioner of Public
Highways v. San Diego,
[38]
is instructive on this point. In that case which involved a suit on a
contract entered into by an entity supervised by the Office of the President, the Court held that
while the said entity opened itself to suit by entering into the subject contract with a private
entity; still, the trial court was in error in ordering the garnishment of its funds, which were public
in nature and, hence, beyond the reach of garnishment and attachment
proceedings. Accordingly, the Court ordered that the writ of preliminary attachment issued in
that case be lifted, and that the parties be allowed to prove their respective claims at the trial on
the merits. There, the Court highlighted the reason for the rule, to wit:

The universal rule that where the State gives its consent to be sued by
private parties either by general or special law, it may limit claimants action only
up to the completion of proceedings anterior to the stage of execution and that
the power of the Courts ends when the judgment is rendered, since government
funds and properties may not be seized under writs of execution or garnishment
to satisfy such judgments, is based on obvious considerations of public
policy. Disbursements of public funds must be covered by the corresponding
appropriations as required by law. The functions and public services rendered by
the State cannot be allowed to be paralyzed or disrupted by the diversion of
public funds from their legitimate and specific objects. x x x
[39]



With this in mind, the Court holds that the writ of preliminary attachment must be
dissolved and, indeed, it must not have been issued in the very first place. While there is merit
in private respondents position that she, by affidavit, was able to substantiate the allegation of
fraud in the same way that the fraud attributable to petitioners was sufficiently alleged in the
complaint and, hence, the issuance of the writ would have been justified. Still, the writ of
attachment in this case would only prove to be useless and unnecessary under the premises,
since the property of the municipality may not, in the event that respondents claim is validated,
be subjected to writs of execution and garnishment unless, of course, there has been a
corresponding appropriation provided by law.
[40]


Anent the other issues raised by petitioners relative to the denial of their motion to
dissolve the writ of attachment, i.e.,unenforceability of the contract and the veracity of private
respondents allegation of fraud, suffice it to say that these pertain to the merits of the main
action. Hence, these issues are not to be taken up in resolving the motion to discharge, lest we
run the risk of deciding or prejudging the main case and force a trial on the merits at this stage
of the proceedings.
[41]


There is one final concern raised by petitioners relative to the denial of their motion for
reconsideration. They complain that it was an error for the Court of Appeals to have denied the
motion on the ground that the same was filed by an unauthorized counsel and, hence, must be
treated as a mere scrap of paper.
[42]


It can be derived from the records that petitioner Ople, in his personal capacity, filed his
Rule 65 petition with the Court of Appeals through the representation of the law firm Chan
Robles & Associates. Later on, municipal legal officer Joselito Reyes, counsel for petitioner
Ople, in his official capacity and for petitioner municipality, filed with the Court of Appeals a
Manifestation with Entry of Appearance
[43]
to the effect that he, as counsel, was adopting all the
pleadings filed for and in behalf of [Oples personal representation] relative to this case.
[44]


It appears, however, that after the issuance of the Court of Appeals decision, only
Oples personal representation signed the motion for reconsideration. There is no showing that
the municipal legal officer made the same manifestation, as he previously did upon the filing of
the petition.
[45]
From this, the Court of Appeals concluded that it was as if petitioner municipality
and petitioner Ople, in his official capacity, had never moved for reconsideration of the assailed
decision, and adverts to the ruling in Ramos v. Court of Appeals
[46]
and Municipality of Pililla,
Rizal v. Court of Appeals
[47]
that only under well-defined exceptions may a private counsel be
engaged in lawsuits involving a municipality, none of which exceptions obtains in this case.
[48]


The Court of Appeals is mistaken. As can be seen from the manner in which the
Manifestation with Entry of Appearance is worded, it is clear that petitioner municipalitys legal
officer was intent on adopting, for both the municipality and Mayor Ople, not only
the certiorari petition filed with the Court of Appeals, but also all other pleadings that may be
filed thereafter by Oples personal representation, including the motion for reconsideration
subject of this case. In any event, however, the said motion for reconsideration would warrant
a denial, because there seems to be no matter raised therein that has not yet been previously
addressed in the assailed decision of the Court of Appeals as well as in the proceedings below,
and that would have otherwise warranted a different treatment of the issues involved.

WHEREFORE, the Petition is GRANTED IN PART. The January 31, 2005 Decision of
the Court of Appeals in CA-G.R. SP No. 81888 is AFFIRMED insofar as it affirmed the October
20, 2003 Decision of the Regional Trial Court of Cebu City, Branch 7 denying petitioners motion
to dismiss in Civil Case No. CEB-28587. The assailed decision is REVERSED insofar as it
affirmed the said trial courts denial of petitioners motion to discharge the writ of preliminary
attachment issued in that case. Accordingly, the August 4, 2003 Writ of Preliminary Attachment
issued in Civil Case No. CEB-28587 is ordered lifted.

SO ORDERED.
MACTAN-CEBU INTERNATIONAL
AIRPORT AUTHORITY and AIR
TRANSPORTATION OFFICE,
Petitioners,




- versus -




BERNARDO L. LOZADA, SR., and the
HEIRS OF ROSARIO MERCADO,
namely, VICENTE LOZADA, MARIO
M. LOZADA, MARCIA L. GODINEZ,
VIRGINIA L. FLORES, BERNARDO
LOZADA, JR., DOLORES GACASAN,
SOCORRO CAFARO and ROSARIO
LOZADA, represented by MARCIA
LOZADA GODINEZ,
Respondents.

G.R. No. 176625

Present:

PUNO, C.J.,
CARPIO,
CORONA,
CARPIO
MORALES, VELASCO,
JR.,
NACHURA, LEONARDO-
DE CASTRO,
BRION,
PERALTA,
*

BERSAMIN,
DEL CASTILLO,
ABAD,
VILLARAMA, JR.,
PEREZ, and
MENDOZA, JJ.

Promulgated:

February 25, 2010

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


DECISION

NACHURA, J .:


This is a petition for review on certiorari under Rule 45 of the Rules of Court, seeking to
reverse, annul, and set aside the Decision
[1]
dated February 28, 2006 and the
Resolution
[2]
dated February 7, 2007 of the Court of Appeals (CA) (Cebu City), Twentieth
Division, in CA-G.R. CV No. 65796.

The antecedent facts and proceedings are as follows:

Subject of this case is Lot No. 88-SWO-25042 (Lot No. 88), with an area of 1,017 square
meters, more or less, located in Lahug, Cebu City. Its original owner was Anastacio Deiparine
when the same was subject to expropriation proceedings, initiated by the Republic of the
Philippines (Republic), represented by the then Civil Aeronautics Administration (CAA), for the
expansion and improvement of the Lahug Airport. The case was filed with the then Court of
First Instance of Cebu, Third Branch, and docketed as Civil Case No. R-1881.

As early as 1947, the lots were already occupied by the U.S. Army. They were turned
over to the Surplus Property Commission, the Bureau of Aeronautics, the National Airport
Corporation and then to the CAA.

During the pendency of the expropriation proceedings, respondent Bernardo L. Lozada,
Sr. acquired Lot No. 88 from Deiparine. Consequently, Transfer Certificate of Title (TCT) No.
9045 was issued in Lozadas name.

On December 29, 1961, the trial court rendered judgment in favor of the Republic and
ordered the latter to pay Lozada the fair market value of Lot No. 88, adjudged at P3.00 per
square meter, with consequential damages by way of legal interest computed from November
16, 1947the time when the lot was first occupied by the airport. Lozada received the amount
of P3,018.00 by way of payment.

The affected landowners appealed. Pending appeal, the Air Transportation Office (ATO),
formerly CAA, proposed a compromise settlement whereby the owners of the lots affected by
the expropriation proceedings would either not appeal or withdraw their respective appeals in
consideration of a commitment that the expropriated lots would be resold at the price they were
expropriated in the event that the ATO would abandon the Lahug Airport, pursuant to an
established policy involving similar cases. Because of this promise, Lozada did not pursue his
appeal. Thereafter, Lot No. 88 was transferred and registered in the name of the Republic
under TCT No. 25057.

The projected improvement and expansion plan of the old Lahug Airport, however, was
not pursued.

Lozada, with the other landowners, contacted then CAA Director Vicente Rivera, Jr.,
requesting to repurchase the lots, as per previous agreement. The CAA replied that there might
still be a need for the Lahug Airport to be used as an emergency DC-3 airport. It reiterated,
however, the assurance that should this Office dispose and resell the properties which may be
found to be no longer necessary as an airport, then the policy of this Office is to give priority to
the former owners subject to the approval of the President.

On November 29, 1989, then President Corazon C. Aquino issued a Memorandum to the
Department of Transportation, directing the transfer of general aviation operations of
the Lahug Airport to the Mactan International Airport before the end of 1990 and, upon such
transfer, the closure of the Lahug Airport.

Sometime in 1990, the Congress of the Philippines passed Republic Act (R.A.) No. 6958,
entitled An Act Creating the Mactan-Cebu International Airport Authority, Transferring Existing
Assets of the Mactan International Airport and the Lahug Airport to the Authority, Vesting the
Authority with Power to Administer and Operate the Mactan International Airport and the Lahug
Airport, and For Other Purposes.

From the date of the institution of the expropriation proceedings up to the present, the
public purpose of the said expropriation (expansion of the airport) was never actually initiated,
realized, or implemented. Instead, the old airport was converted into a commercial
complex. Lot No. 88 became the site of a jail known as Bagong Buhay Rehabilitation Complex,
while a portion thereof was occupied by squatters.
[3]
The old airport was converted into what is
now known as the Ayala I.T. Park, a commercial area.

Thus, on June 4, 1996, petitioners initiated a complaint for the recovery of possession
and reconveyance of ownership of Lot No. 88. The case was docketed as Civil Case No. CEB-
18823 and was raffled to the Regional Trial Court (RTC), Branch 57, CebuCity. The complaint
substantially alleged as follows:

(a) Spouses Bernardo and Rosario Lozada were the registered owners of Lot
No. 88 covered by TCT No. 9045;

(b) In the early 1960s, the Republic sought to acquire by expropriation Lot No.
88, among others, in connection with its program for the improvement and
expansion of the Lahug Airport;

(c) A decision was rendered by the Court of First Instance in favor of the
Government and against the land owners, among whom was Bernardo
Lozada, Sr. appealed therefrom;

(d) During the pendency of the appeal, the parties entered into a compromise
settlement to the effect that the subject property would be resold to the
original owner at the same price when it was expropriated in the event that
the Government abandons the Lahug Airport;

(e) Title to Lot No. 88 was subsequently transferred to the Republic of
the Philippines (TCT No. 25057);

(f) The projected expansion and improvement of the Lahug Airport did not
materialize;

(g) Plaintiffs sought to repurchase their property from then CAA Director
Vicente Rivera. The latter replied by giving as assurance that priority would
be given to the previous owners, subject to the approval of the President,
should CAA decide to dispose of the properties;

(h) On November 29, 1989, then President Corazon C. Aquino, through a
Memorandum to the Department of Transportation and Communications
(DOTC), directed the transfer of general aviation operations at
the Lahug Airport to the Mactan-Cebu International Airport Authority;

(i) Since the public purpose for the expropriation no longer exists, the property
must be returned to the plaintiffs.
[4]



In their Answer, petitioners asked for the immediate dismissal of the complaint. They
specifically denied that the Government had made assurances to reconvey Lot No. 88 to
respondents in the event that the property would no longer be needed for airport
operations. Petitioners instead asserted that the judgment of condemnation was unconditional,
and respondents were, therefore, not entitled to recover the expropriated property
notwithstanding non-use or abandonment thereof.

After pretrial, but before trial on the merits, the parties stipulated on the following set of
facts:

(1) The lot involved is Lot No. 88-SWO-25042 of the Banilad Estate, situated in
the City of Cebu, containing an area of One Thousand Seventeen (1,017)
square meters, more or less;

(2) The property was expropriated among several other properties in Lahug in
favor of the Republic of the Philippines by virtue of a Decision dated
December 29, 1961 of the CFI of Cebu in Civil Case No. R-1881;

(3) The public purpose for which the property was expropriated was for the
purpose of the Lahug Airport;

(4) After the expansion, the property was transferred in the name of MCIAA;
[and]

(5) On November 29, 1989, then President Corazon C. Aquino directed the
Department of Transportation and Communication to transfer general
aviation operations of the Lahug Airport to the Mactan-Cebu International
Airport Authority and to close the Lahug Airport after such transfer[.]
[5]



During trial, respondents presented Bernardo Lozada, Sr. as their lone witness, while
petitioners presented their own witness, Mactan-Cebu International Airport Authority legal
assistant Michael Bacarisas.

On October 22, 1999, the RTC rendered its Decision, disposing as follows:

WHEREFORE, in the light of the foregoing, the Court hereby renders
judgment in favor of the plaintiffs, Bernardo L. Lozada, Sr., and the heirs of
Rosario Mercado, namely, Vicente M. Lozada, Marcia L. Godinez, Virginia L.
Flores, Bernardo M. Lozada, Jr., Dolores L. Gacasan, Socorro L. Cafaro and
Rosario M. Lozada, represented by their attorney-in-fact Marcia Lozada Godinez,
and against defendants Cebu-Mactan International Airport Authority (MCIAA) and
Air Transportation Office (ATO):

1. ordering MCIAA and ATO to restore to plaintiffs the possession and
ownership of their land, Lot No. 88 Psd-821 (SWO-23803), upon payment of the
expropriation price to plaintiffs; and

2. ordering the Register of Deeds to effect the transfer of the Certificate
of Title from defendant[s] to plaintiffs on Lot No. [88], cancelling TCT No. 20357
in the name of defendant MCIAA and to issue a new title on the same lot in the
name of Bernardo L. Lozada, Sr. and the heirs of Rosario Mercado, namely:
Vicente M. Lozada, Mario M. Lozada, Marcia L. Godinez, Virginia L. Flores,
Bernardo M. Lozada, Jr., Dolores L. Gacasan, Socorro L. Cafaro and Rosario M.
Lozada.

No pronouncement as to costs.

SO ORDERED.
[6]



Aggrieved, petitioners interposed an appeal to the CA. After the filing of the necessary
appellate briefs, the CA rendered its assailed Decision dated February 28, 2006, denying
petitioners appeal and affirming in toto the Decision of the RTC, Branch
57,Cebu City. Petitioners motion for reconsideration was, likewise, denied in the questioned
CA Resolution dated February 7, 2007.

Hence, this petition arguing that: (1) the respondents utterly failed to prove that there was
a repurchase agreement or compromise settlement between them and the Government; (2) the
judgment in Civil Case No. R-1881 was absolute and unconditional, giving title in fee simple to
the Republic; and (3) the respondents claim of verbal assurances from government officials
violates the Statute of Frauds.

The petition should be denied.

Petitioners anchor their claim to the controverted property on the supposition that the
Decision in the pertinent expropriation proceedings did not provide for the condition that should
the intended use of Lot No. 88 for the expansion of the Lahug Airport be aborted or abandoned,
the property would revert to respondents, being its former owners. Petitioners cite, in support of
this position, Fery v. Municipality of Cabanatuan,
[7]
which declared that the Government
acquires only such rights in expropriated parcels of land as may be allowed by the character of
its title over the properties

If x x x land is expropriated for a particular purpose, with the condition that when
that purpose is ended or abandoned the property shall return to its former owner,
then, of course, when the purpose is terminated or abandoned the former owner
reacquires the property so expropriated. If x x x land is expropriated for a public
street and the expropriation is granted upon condition that the city can only use it
for a public street, then, of course, when the city abandons its use as a public
street, it returns to the former owner, unless there is some statutory provision to
the contrary. x x x. If, upon the contrary, however, the decree of expropriation
gives to the entity a fee simple title, then, of course, the land becomes the
absolute property of the expropriator, whether it be the State, a province, or
municipality, and in that case the non-user does not have the effect of defeating
the title acquired by the expropriation proceedings. x x x.

When land has been acquired for public use in fee simple,
unconditionally, either by the exercise of eminent domain or by purchase, the
former owner retains no right in the land, and the public use may be abandoned,
or the land may be devoted to a different use, without any impairment of the
estate or title acquired, or any reversion to the former owner. x x x.
[8]



Contrary to the stance of petitioners, this Court had ruled otherwise in Heirs of Timoteo
Moreno and Maria Rotea v. Mactan-Cebu International Airport Authority,
[9]
thus

Moreover, respondent MCIAA has brought to our attention a significant
and telling portion in the Decision in Civil Case No. R-1881 validating our
discernment that the expropriation by the predecessors of respondent was
ordered under the running impression that Lahug Airportwould continue in
operation

As for the public purpose of the expropriation proceeding,
it cannot now be doubted. Although Mactan Airport is being
constructed, it does not take away the actual usefulness and
importance of the Lahug Airport: it is handling the air traffic both
civilian and military. From it aircrafts fly to Mindanao and Visayas
and pass thru it on their flights to the North and Manila. Then, no
evidence was adduced to show how soon is the Mactan Airport to
be placed in operation and whether the Lahug Airport will be
closed immediately thereafter. It is up to the other departments of
the Government to determine said matters. The Court cannot
substitute its judgment for those of the said departments or
agencies. In the absence of such showing, the Court will presume
that the Lahug Airport will continue to be in operation (emphasis
supplied).

While in the trial in Civil Case No. R-1881 [we] could have simply
acknowledged the presence of public purpose for the exercise of eminent domain
regardless of the survival of Lahug Airport, the trial court in its Decision chose not
to do so but instead prefixed its finding of public purpose upon its understanding
that Lahug Airport will continue to be in operation. Verily, these meaningful
statements in the body of the Decisionwarrant the conclusion that the
expropriated properties would remain to be so until it was confirmed
that Lahug Airport was no longer in operation. This inference further implies
two (2) things: (a) after the Lahug Airport ceased its undertaking as such and the
expropriated lots were not being used for any airport expansion project, the rights
vis--vis the expropriated Lots Nos. 916 and 920 as between the State and their
former owners, petitioners herein, must be equitably adjusted; and (b) the
foregoing unmistakable declarations in the body of the Decision should merge
with and become an intrinsic part of the fallo thereof which under the premises is
clearly inadequate since the dispositive portion is not in accord with the findings
as contained in the body thereof.
[10]



Indeed, the Decision in Civil Case No. R-1881 should be read in its entirety, wherein it is
apparent that the acquisition by the Republic of the expropriated lots was subject to the
condition that the Lahug Airport would continue its operation. The condition not having
materialized because the airport had been abandoned, the former owner should then be
allowed to reacquire the expropriated property.
[11]


On this note, we take this opportunity to revisit our ruling in Fery, which involved an
expropriation suit commenced upon parcels of land to be used as a site for a public
market. Instead of putting up a public market, respondent Cabanatuan constructed residential
houses for lease on the area. Claiming that the municipality lost its right to the property taken
since it did not pursue its public purpose, petitioner Juan Fery, the former owner of the lots
expropriated, sought to recover his properties. However, as he had admitted that, in 1915,
respondent Cabanatuan acquired a fee simple title to the lands in question, judgment was
rendered in favor of the municipality, following American jurisprudence, particularly City of Fort
Wayne v. Lake Shore & M.S. RY. Co.,
[12]
McConihay v. Theodore Wright,
[13]
and Reichling v.
Covington Lumber Co.,
[14]
all uniformly holding that the transfer to a third party of the
expropriated real property, which necessarily resulted in the abandonment of the particular
public purpose for which the property was taken, is not a ground for the recovery of the same by
its previous owner, the title of the expropriating agency being one of fee simple.

Obviously, Fery was not decided pursuant to our now sacredly held constitutional right
that private property shall not be taken for public use without just compensation.
[15]
It is well
settled that the taking of private property by the Governments power of eminent domain is
subject to two mandatory requirements: (1) that it is for a particular public purpose; and (2) that
just compensation be paid to the property owner. These requirements partake of the nature of
implied conditions that should be complied with to enable the condemnor to keep the property
expropriated.
[16]


More particularly, with respect to the element of public use, the expropriator should
commit to use the property pursuant to the purpose stated in the petition for expropriation filed,
failing which, it should file another petition for the new purpose. If not, it is then incumbent upon
the expropriator to return the said property to its private owner, if the latter desires to reacquire
the same. Otherwise, the judgment of expropriation suffers an intrinsic flaw, as it would lack one
indispensable element for the proper exercise of the power of eminent domain, namely, the
particular public purpose for which the property will be devoted. Accordingly, the private
property owner would be denied due process of law, and the judgment would violate the
property owners right to justice, fairness, and equity.

In light of these premises, we now expressly hold that the taking of private property,
consequent to the Governments exercise of its power of eminent domain, is always subject to
the condition that the property be devoted to the specific public purpose for which it was
taken. Corollarily, if this particular purpose or intent is not initiated or not at all pursued, and is
peremptorily abandoned, then the former owners, if they so desire, may seek the reversion of
the property, subject to the return of the amount of just compensation received. In such a case,
the exercise of the power of eminent domain has become improper for lack of the required
factual justification.
[17]


Even without the foregoing declaration, in the instant case, on the question of whether
respondents were able to establish the existence of an oral compromise agreement that entitled
them to repurchase Lot No. 88 should the operations of the Lahug Airport be abandoned, we
rule in the affirmative.

It bears stressing that both the RTC, Branch 57, Cebu and the CA have passed upon this
factual issue and have declared, in no uncertain terms, that a compromise agreement was, in
fact, entered into between the Government and respondents, with the former undertaking to
resell Lot No. 88 to the latter if the improvement and expansion of the Lahug Airport would not
be pursued. In affirming the factual finding of the RTC to this effect, the CA declared

Lozadas testimony is cogent. An octogenarian widower-retiree and a
resident of Moon Park, California since 1974, he testified that government
representatives verbally promised him and his late wife while the expropriation
proceedings were on-going that the government shall return the property if the
purpose for the expropriation no longer exists. This promise was made at the
premises of the airport. As far as he could remember, there were no
expropriation proceedings against his property in 1952 because the first notice of
expropriation he received was in 1962. Based on the promise, he did not hire a
lawyer. Lozada was firm that he was promised that the lot would be reverted to
him once the public use of the lot ceases. He made it clear that the verbal
promise was made in Lahug with other lot owners before the 1961 decision was
handed down, though he could not name the government representatives who
made the promise. It was just a verbal promise; nevertheless, it is binding. The
fact that he could not supply the necessary details for the establishment of his
assertions during cross-examination, but that When it will not be used as
intended, it will be returned back, we just believed in the government, does not
dismantle the credibility and truthfulness of his allegation. This Court notes that
he was 89 years old when he testified in November 1997 for an incident which
happened decades ago. Still, he is a competent witness capable of perceiving
and making his perception known. The minor lapses are immaterial. The
decision of the competency of a witness rests primarily with the trial judge and
must not be disturbed on appeal unless it is clear that it was erroneous. The
objection to his competency must be made before he has given any testimony or
as soon as the incompetency becomes apparent. Though Lozada is not part of
the compromise agreement,
[18]
he nevertheless adduced sufficient evidence to
support his claim.
[19]



As correctly found by the CA, unlike in Mactan Cebu International Airport Authority v.
Court of Appeals,
[20]
cited by petitioners, where respondent therein offered testimonies which
were hearsay in nature, the testimony of Lozada was based on personal knowledge as the
assurance from the government was personally made to him. His testimony on cross-
examination destroyed neither his credibility as a witness nor the truthfulness of his words.

Verily, factual findings of the trial court, especially when affirmed by the CA, are binding
and conclusive on this Court and may not be reviewed. A petition for certiorari under Rule 45 of
the Rules of Court contemplates only questions of law and not of fact.
[21]
Not one of the
exceptions to this rule is present in this case to warrant a reversal of such findings.

As regards the position of petitioners that respondents testimonial evidence violates the
Statute of Frauds, suffice it to state that the Statute of Frauds operates only with respect to
executory contracts, and does not apply to contracts which have been completely or partially
performed, the rationale thereof being as follows:

In executory contracts there is a wide field for fraud because unless they be in
writing there is no palpable evidence of the intention of the contracting
parties. The statute has precisely been enacted to prevent fraud. However, if a
contract has been totally or partially performed, the exclusion of parol evidence
would promote fraud or bad faith, for it would enable the defendant to keep the
benefits already delivered by him from the transaction in litigation, and, at the
same time, evade the obligations, responsibilities or liabilities assumed or
contracted by him thereby.
[22]



In this case, the Statute of Frauds, invoked by petitioners to bar the claim of respondents
for the reacquisition of Lot No. 88, cannot apply, the oral compromise settlement having been
partially performed. By reason of such assurance made in their favor, respondents relied on the
same by not pursuing their appeal before the CA. Moreover, contrary to the claim of petitioners,
the fact of Lozadas eventual conformity to the appraisal of Lot No. 88 and his seeking the
correction of a clerical error in the judgment as to the true area of Lot No. 88 do not conclusively
establish that respondents absolutely parted with their property. To our mind, these acts were
simply meant to cooperate with the government, particularly because of the oral promise made
to them.

The right of respondents to repurchase Lot No. 88 may be enforced based on a
constructive trust constituted on the property held by the government in favor of the former. On
this note, our ruling in Heirs of Timoteo Moreno is instructive, viz.:

Mactan-Cebu International Airport Authority is correct in stating that one
would not find an express statement in the Decision in Civil Case No. R-1881 to
the effect that the [condemned] lot would return to [the landowner] or that [the
landowner] had a right to repurchase the same if the purpose for which it was
expropriated is ended or abandoned or if the property was to be used other than
as the Lahug Airport. This omission notwithstanding, and while the inclusion of
this pronouncement in the judgment of condemnation would have been ideal,
such precision is not absolutely necessary nor is it fatal to the cause of
petitioners herein. No doubt, the return or repurchase of the condemned
properties of petitioners could be readily justified as the manifest legal effect or
consequence of the trial courts underlying presumption that Lahug Airport will
continue to be in operation when it granted the complaint for eminent domain
and the airport discontinued its activities.

The predicament of petitioners involves a constructive trust, one that is
akin to the implied trust referred to in Art. 1454 of the Civil Code, If an absolute
conveyance of property is made in order to secure the performance of an
obligation of the grantor toward the grantee, a trust by virtue of law is
established. If the fulfillment of the obligation is offered by the grantor when it
becomes due, he may demand the reconveyance of the property to him. In the
case at bar, petitioners conveyed Lots No. 916 and 920 to the government with
the latter obliging itself to use the realties for the expansion of Lahug Airport;
failing to keep its bargain, the government can be compelled by petitioners to
reconvey the parcels of land to them, otherwise, petitioners would be denied the
use of their properties upon a state of affairs that was not conceived nor
contemplated when the expropriation was authorized.

Although the symmetry between the instant case and the situation
contemplated by Art. 1454 is not perfect, the provision is undoubtedly
applicable. For, as explained by an expert on the law of trusts: The only
problem of great importance in the field of constructive trust is to decide whether
in the numerous and varying fact situations presented to the courts there is a
wrongful holding of property and hence a threatened unjust enrichment of the
defendant. Constructive trusts are fictions of equity which are bound by no
unyielding formula when they are used by courts as devices to remedy any
situation in which the holder of legal title may not in good conscience retain the
beneficial interest.

In constructive trusts, the arrangement is temporary and passive in which
the trustees sole duty is to transfer the title and possession over the property to
the plaintiff-beneficiary. Of course, the wronged party seeking the aid of a court
of equity in establishing a constructive trust must himself do equity. Accordingly,
the court will exercise its discretion in deciding what acts are required of the
plaintiff-beneficiary as conditions precedent to obtaining such decree and has the
obligation to reimburse the trustee the consideration received from the latter just
as the plaintiff-beneficiary would if he proceeded on the theory of rescission. In
the good judgment of the court, the trustee may also be paid the necessary
expenses he may have incurred in sustaining the property, his fixed costs for
improvements thereon, and the monetary value of his services in managing the
property to the extent that plaintiff-beneficiary will secure a benefit from his acts.

The rights and obligations between the constructive trustee and the
beneficiary, in this case, respondent MCIAA and petitioners over Lots Nos. 916
and 920, are echoed in Art. 1190 of the Civil Code, When the conditions have
for their purpose the extinguishment of an obligation to give, the parties, upon the
fulfillment of said conditions, shall return to each other what they have received x
x x In case of the loss, deterioration or improvement of the thing, the provisions
which, with respect to the debtor, are laid down in the preceding article shall be
applied to the party who is bound to return x x x.
[23]



On the matter of the repurchase price, while petitioners are obliged to reconvey Lot No.
88 to respondents, the latter must return to the former what they received as just compensation
for the expropriation of the property, plus legal interest to be computed from default, which in
this case runs from the time petitioners comply with their obligation to respondents.

Respondents must likewise pay petitioners the necessary expenses they may have
incurred in maintaining Lot No. 88, as well as the monetary value of their services in managing it
to the extent that respondents were benefited thereby.

Following Article 1187
[24]
of the Civil Code, petitioners may keep whatever income or fruits
they may have obtained from Lot No. 88, and respondents need not account for the interests
that the amounts they received as just compensation may have earned in the meantime.

In accordance with Article 1190
[25]
of the Civil Code vis--vis Article 1189, which provides
that (i)f a thing is improved by its nature, or by time, the improvement shall inure to the benefit
of the creditor x x x, respondents, as creditors, do not have to pay, as part of the process of
restitution, the appreciation in value of Lot No. 88, which is a natural consequence of nature and
time.
[26]


WHEREFORE, the petition is DENIED. The February 28, 2006 Decision of the Court of
Appeals, affirming the October 22, 1999 Decision of the Regional Trial Court, Branch 87, Cebu
City, and its February 7, 2007 Resolution are AFFIRMED withMODIFICATION as follows:

1. Respondents are ORDERED to return to petitioners the just compensation they
received for the expropriation of Lot No. 88, plus legal interest, in the case of default, to be
computed from the time petitioners comply with their obligation to reconvey Lot No. 88 to them;

2. Respondents are ORDERED to pay petitioners the necessary expenses the latter
incurred in maintaining Lot No. 88, plus the monetary value of their services to the extent that
respondents were benefited thereby;

3. Petitioners are ENTITLED to keep whatever fruits and income they may have
obtained from Lot No. 88; and

4. Respondents are also ENTITLED to keep whatever interests the amounts they
received as just compensation may have earned in the meantime, as well as the appreciation in
value of Lot No. 88, which is a natural consequence of nature and time;

In light of the foregoing modifications, the case is REMANDED to the Regional Trial
Court, Branch 57, Cebu City, only for the purpose of receiving evidence on the amounts that
respondents will have to pay petitioners in accordance with this Courts decision. No costs.

SO ORDERED.