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Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-22487

May 21, 1969

ASUNCION ATILANO, CRISTINA ATILANO, ROSARIO ATILANO, assisted by their respective husbands, HILARIO ROMANO,
FELIPE BERNARDO, and MAXIMO LACANDALO, ISABEL ATILANO and GREGORIO ATILANO, plaintiffs-appellees,
vs.
LADISLAO ATILANO and GREGORIO M. ATILANO, defendants-appellants.
Climaco and Azcarraga for plaintiff-appellee.
T. de los Santos for defendants-appellants.
MAKALINTAL, J.:
In 1916 Eulogio Atilano I acquired, by purchase from one Gerardo Villanueva, lot No. 535 of the then municipality of Zamboanga
cadastre. The vendee thereafter obtained transfer certificate of title No. 1134 in his name. In 1920 he had the land subdivided into
five parts, identified as lots Nos. 535-A, 535-B, 535-C, 535-D and 535-E, respectively. On May 18 of the same year, after the
subdivision had been effected, Eulogio Atilano I, for the sum of P150.00, executed a deed of sale covering lot No. 535-E in favor of
his brother Eulogio Atilano II, who thereupon obtained transfer certificate of title No. 3129 in his name. Three other portions, namely
lots Nos. 535-B, 535-C and 535-D, were likewise sold to other persons, the original owner, Eulogio Atilano I, retaining for himself
only the remaining portion of the land, presumably covered by the title to lot No. 535-A. Upon his death the title to this lot passed to
Ladislao Atilano, defendant in this case, in whose name the corresponding certificate (No. T-5056) was issued.
On December 6, 1952, Eulogio Atilano II having become a widower upon the death of his wife Luisa Bautista, he and his children
obtained transfer certificate of title No. 4889 over lot No. 535-E in their names as co-owners. Then, on July 16, 1959, desiring to put
an end to the co-ownership, they had the land resurveyed so that it could properly be subdivided; and it was then discovered that
the land they were actually occupying on the strength of the deed of sale executed in 1920 was lot No. 535-A and not lot 535-E, as
referred to in the deed, while the land which remained in the possession of the vendor, Eulogio Atilano I, and which passed to his
successor, defendant Ladislao Atilano, was lot No. 535-E and not lot No. 535-A.
On January 25, 1960, the heirs of Eulogio Atilano II, who was by then also deceased, filed the present action in the Court of First
Instance of Zamboanga, alleging, inter alia, that they had offered to surrender to the defendants the possession of lot No. 535-A
and demanded in return the possession of lot No. 535-E, but that the defendants had refused to accept the exchange. The plaintiffs'
insistence is quite understandable, since lot No. 535-E has an area of 2,612 square meters, as compared to the 1,808 squaremeter area of lot No. 535-A.
In their answer to the complaint the defendants alleged that the reference to lot No. 535-E in the deed of sale of May 18, 1920 was
an involuntary error; that the intention of the parties to that sale was to convey the lot correctly identified as lot No. 535-A; that since
1916, when he acquired the entirety of lot No. 535, and up to the time of his death, Eulogio Atilano I had been possessing and had
his house on the portion designated as lot No. 535-E, after which he was succeeded in such possession by the defendants herein;
and that as a matter of fact Eulogio Atilano I even increased the area under his possession when on June 11, 1920 he bought a
portion of an adjoining lot, No. 536, from its owner Fruto del Carpio. On the basis of the foregoing allegations the defendants
interposed a counterclaim, praying that the plaintiffs be ordered to execute in their favor the corresponding deed of transfer with
respect to lot No. 535-E.
The trial court rendered judgment for the plaintiffs on the sole ground that since the property was registered under the Land
Registration Act the defendants could not acquire it through prescription. There can be, of course, no dispute as to the correctness
of this legal proposition; but the defendants, aside from alleging adverse possession in their answer and counterclaim, also alleged
error in the deed of sale of May 18, 1920, thus: "Eulogio Atilano 1.o, por equivocacion o error involuntario, cedio y traspaso a su
hermano Eulogio Atilano 2.do el lote No. 535-E en vez del Lote No. 535-A."lawphi1.et
SUBJECT MATTER OF SALE (1459-1465)

The logic and common sense of the situation lean heavily in favor of the defendants' contention. When one sells or buys real
property a piece of land, for example one sells or buys the property as he sees it, in its actual setting and by its physical
metes and bounds, and not by the mere lot number assigned to it in the certificate of title. In the particular case before us, the
portion correctly referred to as lot No. 535-A was already in the possession of the vendee, Eulogio Atilano II, who had constructed
his residence therein, even before the sale in his favor even before the subdivision of the entire lot No. 535 at the instance of its
owner, Eulogio Atillano I. In like manner the latter had his house on the portion correctly identified, after the subdivision, as lot No.
535-E, even adding to the area thereof by purchasing a portion of an adjoining property belonging to a different owner. The two
brothers continued in possession of the respective portions the rest of their lives, obviously ignorant of the initial mistake in the
designation of the lot subject of the 1920 until 1959, when the mistake was discovered for the first time.
The real issue here is not adverse possession, but the real intention of the parties to that sale. From all the facts and circumstances
we are convinced that the object thereof, as intended and understood by the parties, was that specific portion where the vendee
was then already residing, where he reconstructed his house at the end of the war, and where his heirs, the plaintiffs herein,
continued to reside thereafter: namely, lot No. 535-A; and that its designation as lot No. 535-E in the deed of sale was simple
mistake in the drafting of the document. The mistake did not vitiate the consent of the parties, or affect the validity and binding
effect of the contract between them. The new Civil Code provides a remedy for such a situation by means of reformation of the
instrument. This remedy is available when, there having been a meeting of the funds 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 on
accident (Art. 1359, et seq.) In this case, the deed of sale executed in 1920 need no longer reformed. The parties have retained
possession of their respective properties conformably to the real intention of the parties to that sale, and all they should do is to
execute mutual deeds of conveyance.
WHEREFORE, the judgment appealed from is reversed. The plaintiffs are ordered to execute a deed of conveyance of lot No. 535E in favor of the defendants, and the latter in turn, are ordered to execute a similar document, covering lot No. 595-A, in favor of the
plaintiffs. Costs against the latter.
Reyes, J.B.L., Dizon, Zaldivar, Sanchez, Fernando and Capistrano, JJ., concur.
Teehankee and Barredo, JJ., took no part.
Concepcion C.J., and Castro, J., are on leave.

SUBJECT MATTER OF SALE (1459-1465)

Atilano vs. Atilano [GR No. L-22487 May 21, 1969]


Post under case digests, Civil Law at Saturday, March 03, 2012 Posted by Schizophrenic Mind
Facts: In 1916, Atilano I acquired lot No. 535 by purchase. In 1920, he had the land subdivided into five parts, identified as lots
Nos. 535-A, 535-B, 535-C, 535-D and 535-E, respectively. After the subdivision had been effected, Atilano I executed a deed of sale
covering lot No. 535-E in favor of his brother Atilano II. Three other portions, namely, lots Nos. 535-B, 535-C, and 535-D, were
likewise sold to other persons. Atilano I retained for himself the remaining portions of the land, presumably covered by the title to lot
No. 535-A. upon his death, the title to this lot passed to Ladislao, in whose name the corresponding certificate was issued.
On 1959, Atilano II and his children had the land resurveyed so that it could be properly subdivided. However, they discovered that
the land they were actually occupying on the strength of the deed of sale was lot No. 353-A and not lot 535-E, while the land which
remained in the possession of Atilano I, and which was passed to Ladislao was lot No. 353-E and not lot No. 535-A.
On 1960, the heirs of Atilano II alleging, inter alia, that they offered to surrender to the possession of lot No. 535-A and demanded in
return the possession of lot No. 535-E, but the defendants refused to accept the exchange. The plaintiffs' insistence is quite
understandable, since lot No. 535-E has an area of 2,612 square meters as compared to the 1,808 square-meter area of lot No.
535-A.
In their answer to the complaint, the defendants alleged that the reference to lot No. 535-E in the deed of sale was an involuntary
error; that the intention of the parties to that sale was to convey the lot correctly identified as lot No. 535-A. On the basis of the
foregoing allegations the defendants interposed a counterclaim, praying that the plaintiffs be ordered to execute in their favor the
corresponding deed of transfer with respect to Lot No. 535-E.
The trial court rendered judgment in favor of the plaintiffs.
Issue: Whether or not there has been a valid sale in view of the real intention of the parties.
Held: From the facts and circumstances, the object is lot No. 535-A and its designation as lot No. 535-E in the deed of sale was a
simple mistake in the drafting of the document. The mistake did not vitiate the consent of the parties, or affect the validity and
binding effect of the contract between them. The new Civil Code provides a remedy by means of reformation of the instrument. This
remedy is available 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
In this case, the deed of sale executed in 1920 need no longer be reformed. The parties have retained possession of their
respective properties conformably to the real intention of the parties to that sale, and all they should do is to execute mutual deed of
conveyance.
Therefore, the judgment appealed from is reversed. The plaintiffs are ordered to execute a deed of conveyance of lot No. 535-E in
favor of the defendants, and the latter, in turn, are ordered to execute a similar document, covering lot No. 535-A, in favor of the
plaintiffs. Costs against the latter.

SUBJECT MATTER OF SALE (1459-1465)

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. L-24732

April 30, 1968

PIO SIAN MELLIZA, petitioner,


vs.
CITY OF ILOILO, UNIVERSITY OF THE PHILIPPINES and THE COURT APPEALS, respondents.
Cornelio P. Ravena for petitioner.
Office of the Solicitor General for respondents.
BENGZON, J.P., J.:
Juliana Melliza during her lifetime owned, among other properties, three parcels of residential land in Iloilo City registered in her
name under Original Certificate of Title No. 3462. Said parcels of land were known as Lots Nos. 2, 5 and 1214. The total area of Lot
No. 1214 was 29,073 square meters.
On November 27, 1931 she donated to the then Municipality of Iloilo, 9,000 square meters of Lot 1214, to serve as site for the
municipal hall. 1 The donation was however revoked by the parties for the reason that the area donated was found inadequate to
meet the requirements of the development plan of the municipality, the so-called "Arellano Plan". 2
Subsequently, Lot No. 1214 was divided by Certeza Surveying Co., Inc. into Lots 1214-A and 1214-B. And still later, Lot 1214-B was
further divided into Lots 1214-B-1, Lot 1214-B-2 and Lot 1214-B-3. As approved by the Bureau of Lands, Lot 1214-B-1 with 4,562
square meters, became known as Lot 1214-B; Lot 1214-B-2, with 6,653 square meters, was designated as Lot 1214-C; and Lot
1214-B-13, with 4,135 square meters, became Lot 1214-D.
On November 15, 1932 Juliana Melliza executed an instrument without any caption containing the following:
Que en consideracion a la suma total de SEIS MIL CUATRO CIENTOS VEINTIDOS PESOS (P6,422.00), moneda filipina que por
la presente declaro haber recibido a mi entera satisfaccion del Gobierno Municipal de Iloilo, cedo y traspaso en venta real y
difinitiva a dicho Gobierno Municipal de Iloilo los lotes y porciones de los mismos que a continuacion se especifican a saber: el lote
No. 5 en toda su extension; una porcion de 7669 metros cuadrados del lote No. 2, cuya porcion esta designada como sub-lotes
Nos. 2-B y 2-C del piano de subdivision de dichos lotes preparado por la Certeza Surveying Co., Inc., y una porcion de 10,788
metros cuadrados del lote No. 1214 cuya porcion esta designada como sub-lotes Nos. 1214-B-2 y 1214-B-3 del mismo plano de
subdivision.
Asimismo nago constar que la cesion y traspaso que ariba se mencionan es de venta difinitiva, y que para la mejor identificacion
de los lotes y porciones de los mismos que son objeto de la presente, hago constar que dichos lotes y porciones son los que
necesita el Gobierno Municipal de Iloilo para la construccion de avenidas, parques y City Hall site del Municipal Government Center
de iloilo, segun el plano Arellano.
On January 14, 1938 Juliana Melliza sold her remaining interest in Lot 1214 to Remedios Sian Villanueva who thereafter obtained
her own registered title thereto, under Transfer Certificate of Title No. 18178. Remedios in turn on November 4, 1946 transferred
her rights to said portion of land to Pio Sian Melliza, who obtained Transfer Certificate of Title No. 2492 thereover in his name.
Annotated at the back of Pio Sian Melliza's title certificate was the following:
... (a) that a portion of 10,788 square meters of Lot 1214 now designated as Lots Nos. 1214-B-2 and 1214-B-3 of the subdivision
plan belongs to the Municipality of Iloilo as per instrument dated November 15, 1932....
SUBJECT MATTER OF SALE (1459-1465)

On August 24, 1949 the City of Iloilo, which succeeded to the Municipality of Iloilo, donated the city hall site together with the
building thereon, to the University of the Philippines (Iloilo branch). The site donated consisted of Lots Nos. 1214-B, 1214-C and
1214-D, with a total area of 15,350 square meters, more or less.
Sometime in 1952, the University of the Philippines enclosed the site donated with a wire fence. Pio Sian Melliza thereupon made
representations, thru his lawyer, with the city authorities for payment of the value of the lot (Lot 1214-B). No recovery was obtained,
because as alleged by plaintiff, the City did not have funds (p. 9, Appellant's Brief.)
The University of the Philippines, meanwhile, obtained Transfer Certificate of Title No. 7152 covering the three lots, Nos. 1214-B,
1214-C and 1214-D.
On December 10, 1955 Pio Sian Melliza filed an action in the Court of First Instance of Iloilo against Iloilo City and the University of
the Philippines for recovery of Lot 1214-B or of its value.
The defendants answered, contending that Lot 1214-B was included in the public instrument executed by Juliana Melliza in favor of
Iloilo municipality in 1932. After stipulation of facts and trial, the Court of First Instance rendered its decision on August 15, 1957,
dismissing the complaint. Said court ruled that the instrument executed by Juliana Melliza in favor of Iloilo municipality included in
the conveyance Lot 1214-B. In support of this conclusion, it referred to the portion of the instrument stating:
Asimismo hago constar que la cesion y traspaso que arriba se mencionan es de venta difinitiva, y que para la major identificacion
de los lotes y porciones de los mismos que son objeto de la presente, hago constar que dichos lotes y porciones son los que
necesita el Gobierno municipal de Iloilo para la construccion de avenidas, parques y City Hall site del Municipal Government Center
de Iloilo, segun el plano Arellano.
and ruled that this meant that Juliana Melliza not only sold Lots 1214-C and 1214-D but also such other portions of lots as were
necessary for the municipal hall site, such as Lot 1214-B. And thus it held that Iloilo City had the right to donate Lot 1214-B to the
U.P.
Pio Sian Melliza appealed to the Court of Appeals. In its decision on May 19, 1965, the Court of Appeals affirmed the interpretation
of the Court of First Instance, that the portion of Lot 1214 sold by Juliana Melliza was not limited to the 10,788 square meters
specifically mentioned but included whatever was needed for the construction of avenues, parks and the city hall site. Nonetheless,
it ordered the remand of the case for reception of evidence to determine the area actually taken by Iloilo City for the construction of
avenues, parks and for city hall site.
The present appeal therefrom was then taken to Us by Pio Sian Melliza. Appellant maintains that the public instrument is clear that
only Lots Nos. 1214-C and 1214-D with a total area of 10,788 square meters were the portions of Lot 1214 included in the sale; that
the purpose of the second paragraph, relied upon for a contrary interpretation, was only to better identify the lots sold and none
other; and that to follow the interpretation accorded the deed of sale by the Court of Appeals and the Court of First Instance would
render the contract invalid because the law requires as an essential element of sale, a "determinate" object (Art. 1445, now 1448,
Civil Code).
Appellees, on the other hand, contend that the present appeal improperly raises only questions of fact. And, further, they argue that
the parties to the document in question really intended to include Lot 1214-B therein, as shown by the silence of the vendor after
Iloilo City exercised ownership thereover; that not to include it would have been absurd, because said lot is contiguous to the others
admittedly included in the conveyance, lying directly in front of the city hall, separating that building from Lots 1214-C and 1214-D,
which were included therein. And, finally, appellees argue that the sale's object was determinate, because it could be ascertained,
at the time of the execution of the contract, what lots were needed by Iloilo municipality for avenues, parks and city hall site
"according to the Arellano Plan", since the Arellano plan was then already in existence.
The appeal before Us calls for the interpretation of the public instrument dated November 15, 1932. And interpretation of such
contract involves a question of law, since the contract is in the nature of law as between the parties and their successors-in-interest.
At the outset, it is well to mark that the issue is whether or not the conveyance by Juliana Melliza to Iloilo municipality included that
portion of Lot 1214 known as Lot 1214-B. If not, then the same was included, in the instrument subsequently executed by Juliana
SUBJECT MATTER OF SALE (1459-1465)

Melliza of her remaining interest in Lot 1214 to Remedios Sian Villanueva, who in turn sold what she thereunder had acquired, to
Pio Sian Melliza. It should be stressed, also, that the sale to Remedios Sian Villanueva from which Pio Sian Melliza derived title
did not specifically designate Lot 1214-B, but only such portions of Lot 1214 as were not included in the previous sale to Iloilo
municipality (Stipulation of Facts, par. 5, Record on Appeal, p. 23). And thus, if said Lot 1214-B had been included in the prior
conveyance to Iloilo municipality, then it was excluded from the sale to Remedios Sian Villanueva and, later, to Pio Sian Melliza.
The point at issue here is then the true intention of the parties as to the object of the public instrument Exhibit "D". Said issue
revolves on the paragraph of the public instrument aforequoted and its purpose, i.e., whether it was intended merely to further
describe the lots already specifically mentioned, or whether it was intended to cover other lots not yet specifically mentioned.
First of all, there is no question that the paramount intention of the parties was to provide Iloilo municipality with lots sufficient or
adequate in area for the construction of the Iloilo City hall site, with its avenues and parks. For this matter, a previous donation for
this purpose between the same parties was revoked by them, because of inadequacy of the area of the lot donated.
Secondly, reading the public instrument in toto, with special reference to the paragraphs describing the lots included in the sale,
shows that said instrument describes four parcels of land by their lot numbers and area; and then it goes on to further describe, not
only those lots already mentioned, but the lots object of the sale, by stating that said lots are the ones needed for the construction of
the city hall site, avenues and parks according to the Arellano plan. If the parties intended merely to cover the specified lots Lots
2, 5, 1214-C and 1214-D, there would scarcely have been any need for the next paragraph, since these lots are already plainly and
very clearly described by their respective lot number and area. Said next paragraph does not really add to the clear description that
was already given to them in the previous one.
It is therefore the more reasonable interpretation, to view it as describing those other portions of land contiguous to the lots
aforementioned that, by reference to the Arellano plan, will be found needed for the purpose at hand, the construction of the city hall
site.
Appellant however challenges this view on the ground that the description of said other lots in the aforequoted second paragraph of
the public instrument would thereby be legally insufficient, because the object would allegedly not be determinate as required by
law.
Such contention fails on several counts. The requirement of the law that a sale must have for its object a determinate thing, is
fulfilled as long as, at the time the contract is entered into, the object of the sale is capable of being made determinate without the
necessity of a new or further agreement between the parties (Art. 1273, old Civil Code; Art. 1460, New Civil Code). The specific
mention of some of the lots plus the statement that the lots object of the sale are the ones needed for city hall site, avenues and
parks, according to the Arellano plan, sufficiently provides a basis, as of the time of the execution of the contract, for rendering
determinate said lots without the need of a new and further agreement of the parties.
The Arellano plan was in existence as early as 1928. As stated, the previous donation of land for city hall site on November 27,
1931 was revoked on March 6, 1932 for being inadequate in area under said Arellano plan. Appellant claims that although said plan
existed, its metes and bounds were not fixed until 1935, and thus it could not be a basis for determining the lots sold on November
15, 1932. Appellant however fails to consider that thearea needed under that plan for city hall site was then already known; that the
specific mention of some of the lots covered by the sale in effect fixed the corresponding location of the city hall site under the plan;
that, therefore, considering the said lots specifically mentioned in the public instrument Exhibit "D", and the projected city hall site,
with its area, as then shown in the Arellano plan (Exhibit 2), it could be determined which, and how much of the portions of land
contiguous to those specifically named, were needed for the construction of the city hall site.
And, moreover, there is no question either that Lot 1214-B is contiguous to Lots 1214-C and 1214-D, admittedly covered by the
public instrument. It is stipulated that, after execution of the contract Exhibit "D", the Municipality of Iloilo possessed it together with
the other lots sold. It sits practically in the heart of the city hall site. Furthermore, Pio Sian Melliza, from the stipulation of facts, was
the notary public of the public instrument. As such, he was aware of its terms. Said instrument was also registered with the Register
of Deeds and such registration was annotated at the back of the corresponding title certificate of Juliana Melliza. From these
stipulated facts, it can be inferred that Pio Sian Melliza knew of the aforesaid terms of the instrument or is chargeable with
knowledge of them; that knowing so, he should have examined the Arellano plan in relation to the public instrument Exhibit "D";
that, furthermore, he should have taken notice of the possession first by the Municipality of Iloilo, then by the City of Iloilo and later
SUBJECT MATTER OF SALE (1459-1465)

by the University of the Philippines of Lot 1214-B as part of the city hall site conveyed under that public instrument, and raised
proper objections thereto if it was his position that the same was not included in the same. The fact remains that, instead, for twenty
long years, Pio Sian Melliza and his predecessors-in-interest, did not object to said possession, nor exercise any act of possession
over Lot 1214-B. Applying, therefore, principles of civil law, as well as laches, estoppel, and equity, said lot must necessarily be
deemed included in the conveyance in favor of Iloilo municipality, now Iloilo City.
WHEREFORE, the decision appealed from is affirmed insofar as it affirms that of the Court of First Instance, and the complaint in
this case is dismissed. No costs. So ordered.
Reyes, J.B.L., Actg. C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur.
Concepcion , C.J., is on leave.

SUBJECT MATTER OF SALE (1459-1465)

Republic of the Philippines


SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 74470 March 8, 1989
NATIONAL GRAINS AUTHORITY and WILLLAM CABAL, petitioners
vs.
THE INTERMEDIATE APPELLATE COURT and LEON SORIANO, respondents.
Cordoba, Zapanta, Rola & Garcia for petitioner National Grains Authority.
Plaridel Mar Israel for respondent Leon Soriano.
MEDIALDEA, J.:
This is a petition for review of the decision (pp. 9-21, Rollo) of the Intermediate Appellate Court (now Court of Appeals) dated
December 23, 1985 in A.C. G.R. CV No. 03812 entitled, "Leon Soriano, Plaintiff- Appellee versus National Grains Authority and
William Cabal, Defendants Appellants", which affirmed the decision of the Court of First Instance of Cagayan, in Civil Case No.
2754 and its resolution (p. 28, Rollo) dated April 17, 1986 which denied the Motion for Reconsideration filed therein.
The antecedent facts of the instant case are as follows:
Petitioner National Grains Authority (now National Food Authority, NFA for short) is a government agency created under Presidential
Decree No. 4. One of its incidental functions is the buying of palay grains from qualified farmers.
On August 23, 1979, private respondent Leon Soriano offered to sell palay grains to the NFA, through William Cabal, the Provincial
Manager of NFA stationed at Tuguegarao, Cagayan. He submitted the documents required by the NFA for pre-qualifying as a seller,
namely: (1) Farmer's Information Sheet accomplished by Soriano and certified by a Bureau of Agricultural Extension (BAEX)
technician, Napoleon Callangan, (2) Xerox copies of four (4) tax declarations of the riceland leased to him and copies of the lease
contract between him and Judge Concepcion Salud, and (3) his Residence Tax Certificate. Private respondent Soriano's documents
were processed and accordingly, he was given a quota of 2,640 cavans of palay. The quota noted in the Farmer's Information Sheet
represented the maximum number of cavans of palay that Soriano may sell to the NFA.
In the afternoon of August 23, 1979 and on the following day, August 24, 1979, Soriano delivered 630 cavans of palay. The palay
delivered during these two days were not rebagged, classified and weighed. when Soriano demanded payment of the 630 cavans
of palay, he was informed that its payment will be held in abeyance since Mr. Cabal was still investigating on an information he
received that Soriano was not a bona tide farmer and the palay delivered by him was not produced from his farmland but was taken
from the warehouse of a rice trader, Ben de Guzman. On August 28, 1979, Cabal wrote Soriano advising him to withdraw from the
NFA warehouse the 630 cavans Soriano delivered stating that NFA cannot legally accept the said delivery on the basis of the
subsequent certification of the BAEX technician, Napoleon Callangan that Soriano is not a bona fide farmer.
Instead of withdrawing the 630 cavans of palay, private respondent Soriano insisted that the palay grains delivered be paid. He then
filed a complaint for specific performance and/or collection of money with damages on November 2, 1979, against the National
Food Authority and Mr. William Cabal, Provincial Manager of NFA with the Court of First Instance of Tuguegarao, and docketed as
Civil Case No. 2754.
Meanwhile, by agreement of the parties and upon order of the trial court, the 630 cavans of palay in question were withdrawn from
the warehouse of NFA. An inventory was made by the sheriff as representative of the Court, a representative of Soriano and a
representative of NFA (p. 13, Rollo).
SUBJECT MATTER OF SALE (1459-1465)

On September 30, 1982, the trial court rendered judgment ordering petitioner National Food Authority, its officers and agents to pay
respondent Soriano (as plaintiff in Civil Case No. 2754) the amount of P 47,250.00 representing the unpaid price of the 630 cavans
of palay plus legal interest thereof (p. 1-2, CA Decision). The dispositive portion reads as follows:
WHEREFORE, the Court renders judgment in favor of the plaintiff and against the defendants National Grains Authority, and
William Cabal and hereby orders:
1. The National Grains Authority, now the National Food Authority, its officers and agents, and Mr. William Cabal, the Provincial
Manager of the National Grains Authority at the time of the filing of this case, assigned at Tuguegarao, Cagayan, whomsoever is his
successors, to pay to the plaintiff Leon T. Soriano, the amount of P47,250.00, representing the unpaid price of the palay deliveries
made by the plaintiff to the defendants consisting of 630 cavans at the rate Pl.50 per kilo of 50 kilos per cavan of palay;
2. That the defendants National Grains Authority, now National Food Authority, its officer and/or agents, and Mr. William Cabal, the
Provincial Manager of the National Grains Authority, at the time of the filing of this case assigned at Tuguegarao, Cagayan or
whomsoever is his successors, are likewise ordered to pay the plaintiff Leon T. Soriano, the legal interest at the rate of TWELVE
(12%) percent per annum, of the amount of P 47,250.00 from the filing of the complaint on November 20, 1979, up to the final
payment of the price of P 47,250.00;
3. That the defendants National Grains Authority, now National Food Authority, or their agents and duly authorized representatives
can now withdraw the total number of bags (630 bags with an excess of 13 bags) now on deposit in the bonded warehouse of Eng.
Ben de Guzman at Tuguegarao, Cagayan pursuant to the order of this court, and as appearing in the written inventory dated
October 10, 1980, (Exhibit F for the plaintiff and Exhibit 20 for the defendants) upon payment of the price of P 47,250.00 and
TWELVE PERCENT (12%) legal interest to the plaintiff,
4. That the counterclaim of the defendants is hereby dismissed;
5. That there is no pronouncement as to the award of moral and exemplary damages and attorney's fees; and
6. That there is no pronouncement as to costs.
SO ORDERED (pp. 9-10, Rollo)
Petitioners' motion for reconsideration of the decision was denied on December 6, 1982.
Petitioners' appealed the trial court's decision to the Intermediate Appellate Court. In a decision promulgated on December 23, 1986
(pp. 9-21, Rollo) the then Intermediate Appellate Court upheld the findings of the trial court and affirmed the decision ordering NFA
and its officers to pay Soriano the price of the 630 cavans of rice plus interest. Petitioners' motion for reconsideration of the
appellate court's decision was denied in a resolution dated April 17, 1986 (p. 28, Rollo).
Hence, this petition for review filed by the National Food Authority and Mr. William Cabal on May 15, 1986 assailing the decision of
the Intermediate Appellate Court on the sole issue of whether or not there was a contract of sale in the case at bar.
Petitioners contend that the 630 cavans of palay delivered by Soriano on August 23, 1979 was made only for purposes of having it
offered for sale. Further, petitioners stated that the procedure then prevailing in matters of palay procurement from qualified farmers
were: firstly, there is a rebagging wherein the palay is transferred from a private sack of a farmer to the NFA sack; secondly, after
the rebagging has been undertaken, classification of the palay is made to determine its variety; thirdly, after the determination of its
variety and convinced that it passed the quality standard, the same will be weighed to determine the number of kilos; and finally, it
will be piled inside the warehouse after the preparation of the Warehouse Stock Receipt (WSP) indicating therein the number of
kilos, the variety and the number of bags. Under this procedure, rebagging is the initial operative act signifying acceptance, and
acceptance will be considered complete only after the preparation of the Warehouse Stock Receipt (WSR). When the 630 cavans
of palay were brought by Soriano to the Carig warehouse of NFA they were only offered for sale. Since the same were not
rebagged, classified and weighed in accordance with the palay procurement program of NFA, there was no acceptance of the offer
which, to petitioners' mind is a clear case of solicitation or an unaccepted offer to sell.
SUBJECT MATTER OF SALE (1459-1465)

The petition is not impressed with merit.


Article 1458 of the Civil Code of the Philippines defines sale as a contract whereby one of the contracting parties obligates himself
to transfer the ownership of and to deliver a determinate thing, and the other party to pay therefore a price certain in money or its
equivalent. A contract, on the other hand, is a meeting of minds between two (2) persons whereby one binds himself, with respect to
the other, to give something or to render some service (Art. 1305, Civil Code of the Philippines). The essential requisites of
contracts 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 (Art. 1318, Civil Code of the Philippines.
In the case at bar, Soriano initially offered to sell palay grains produced in his farmland to NFA. When the latter accepted the offer
by noting in Soriano's Farmer's Information Sheet a quota of 2,640 cavans, there was already a meeting of the minds between the
parties. The object of the contract, being the palay grains produced in Soriano's farmland and the NFA was to pay the same
depending upon its quality. The fact that the exact number of cavans of palay to be delivered has not been determined does not
affect the perfection of the contract. Article 1349 of the New Civil Code provides: ". . .. 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 this case, there was no need for NFA and Soriano to enter into a new contract to determine the
exact number of cavans of palay to be sold. Soriano can deliver so much of his produce as long as it does not exceed 2,640
cavans.
In its memorandum (pp. 66-71, Rollo) dated December 4, 1986, petitioners further contend that there was no contract of sale
because of the absence of an essential requisite in contracts, namely, consent. It cited Section 1319 of the Civil Code which states:
"Consent is manifested by the meeting of the offer and the acceptance of the thing and the cause which are to constitute the
contract. ... " Following this line, petitioners contend that there was no consent because there was no acceptance of the 630 cavans
of palay in question.
The above contention of petitioner is not correct Sale is a consensual contract, " ... , there is perfection when there is consent upon
the subject matter and price, even if neither is delivered." (Obana vs. C.A., L-36249, March 29, 1985, 135 SCRA 557, 560) This is
provided by Article 1475 of the Civil Code which states:
Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the
contract and upon the price.
xxx
The acceptance referred to which determines consent is the acceptance of the offer of one party by the other and not of the goods
delivered as contended by petitioners.
From the moment the contract of sale is perfected, it is incumbent upon the parties to comply with their mutual obligations or "the
parties may reciprocally demand performance" thereof. (Article 1475, Civil Code, 2nd par.).
The reason why NFA initially refused acceptance of the 630 cavans of palay delivered by Soriano is that it (NFA) cannot legally
accept the said delivery because Soriano is allegedly not a bona fide farmer. The trial court and the appellate court found that
Soriano was a bona fide farmer and therefore, he was qualified to sell palay grains to NFA.
Both courts likewise agree that NFA's refusal to accept was without just cause. The above factual findings which are supported by
the record should not be disturbed on appeal.
ACCORDINGLY, the instant petition for review is DISMISSED. The assailed decision of the then Intermediate Appellate Court (now
Court of Appeals) is affirmed. No costs.
SO ORDERED.
Narvasa, Cruz, Gancayco and Grio-Aquino, JJ., concur.
SUBJECT MATTER OF SALE (1459-1465)

10

Republic of the Philippines


SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 105387 November 11, 1993
JOHANNES SCHUBACK & SONS PHILIPPINE TRADING CORPORATION, petitioner,
vs.
THE HON. COURT OF APPEALS, RAMON SAN JOSE, JR., doing business under the name and style "PHILIPPINE SJ
INDUSTRIAL TRADING," respondents.
Hernandez, Velicaria, Vibar & Santiago for petitioner.
Ernesto M. Tomaneng for private respondent.
ROMERO, J.:
In this petition for review on certiorari, petitioner questions the reversal by the Court of Appeals 1 of the trial court's ruling that a
contract of sale had been perfected between petitioner and private respondent over bus spare parts.
The facts as quoted from the decision of the Court of Appeals are as follows:
Sometime in 1981, defendant 2 established contact with plaintiff 3 through the Philippine Consulate General in Hamburg, West
Germany, because he wanted to purchase MAN bus spare parts from Germany. Plaintiff communicated with its trading partner.
Johannes Schuback and Sohne Handelsgesellschaft m.b.n. & Co. (Schuback Hamburg) regarding the spare parts defendant
wanted to order.
On October 16, 1981, defendant submitted to plaintiff a list of the parts (Exhibit B) he wanted to purchase with specific part numbers
and description. Plaintiff referred the list to Schuback Hamburg for quotations. Upon receipt of the quotations, plaintiff sent to
defendant a letter dated 25 November, 1981 (Exh. C) enclosing its offer on the items listed by defendant.
On December 4, 1981, defendant informed plaintiff that he preferred genuine to replacement parts, and requested that he be given
15% on all items (Exh. D).
On December 17, 1981, plaintiff submitted its formal offer (Exh. E) containing the item number, quantity, part number, description,
unit price and total to defendant. On December, 24, 1981, defendant informed plaintiff of his desire to avail of the prices of the parts
at that time and enclosed Purchase Order No. 0101 dated 14 December 1981 (Exh. F to F-4). Said Purchase Order contained the
item number, part number and description. Defendant promised to submit the quantity per unit he wanted to order on December 28
or 29 (Exh. F).
On December 29, 1981, defendant personally submitted the quantities he wanted to Mr. Dieter Reichert, General Manager of
plaintiff, at the latter's residence (t.s.n., 13 December, 1984, p. 36). The quantities were written in ink by defendant in the same
Purchase Order previously submitted. At the bottom of said Purchase Order, defendant wrote in ink above his signature: "NOTE:
Above P.O. will include a 3% discount. The above will serve as our initial P.O." (Exhs. G to G-3-a).
Plaintiff immediately ordered the items needed by defendant from Schuback Hamburg to enable defendant to avail of the old prices.
Schuback Hamburg in turn ordered (Order No. 12204) the items from NDK, a supplier of MAN spare parts in West Germany. On
January 4, 1982, Schuback Hamburg sent plaintiff a proforma invoice (Exhs. N-1 to N-3) to be used by defendant in applying for a
letter of credit. Said invoice required that the letter of credit be opened in favor of Schuback Hamburg. Defendant acknowledged
receipt of the invoice (t.s.n., 19 December 1984, p. 40).
SUBJECT MATTER OF SALE (1459-1465)

11

An order confirmation (Exhs. I, I-1) was later sent by Schuback Hamburg to plaintiff which was forwarded to and received by
defendant on February 3, 1981 (t.s.n., 13 Dec. 1984, p. 42).
On February 16, 1982, plaintiff reminded defendant to open the letter of credit to avoid delay in shipment and payment of interest
(Exh. J). Defendant replied, mentioning, among others, the difficulty he was encountering in securing: the required dollar allocations
and applying for the letter of credit, procuring a loan and looking for a partner-financier, and of finding ways 'to proceed with our
orders" (Exh. K).
In the meantime, Schuback Hamburg received invoices from, NDK for partial deliveries on Order No.12204 (Direct Interrogatories.,
07 Oct, 1985, p. 3). Schuback Hamburg paid NDK. The latter confirmed receipt of payments made on February 16, 1984 (Exh.CDeposition).
On October 18, 1982, Plaintiff again reminded defendant of his order and advised that the case may be endorsed to its lawyers
(Exh. L). Defendant replied that he did not make any valid Purchase Order and that there was no definite contract between him and
plaintiff (Exh. M). Plaintiff sent a rejoinder explaining that there is a valid Purchase Order and suggesting that defendant either
proceed with the order and open a letter of credit or cancel the order and pay the cancellation fee of 30% of F.O.B. value, or plaintiff
will endorse the case to its lawyers (Exh. N).
Schuback Hamburg issued a Statement of Account (Exh. P) to plaintiff enclosing therewith Debit Note (Exh. O) charging plaintiff
30% cancellation fee, storage and interest charges in the total amount of DM 51,917.81. Said amount was deducted from plaintiff's
account with Schuback Hamburg (Direct Interrogatories, 07 October, 1985).
Demand letters sent to defendant by plaintiff's counsel dated March 22, 1983 and June 9, 1983 were to no avail (Exhs R and S).
Consequently, petitioner filed a complaint for recovery of actual or compensatory damages, unearned profits, interest, attorney's
fees and costs against private respondent.
In its decision dated June 13, 1988, the trial court 4 ruled in favor of petitioner by ordering private respondent to pay petitioner,
among others, actual compensatory damages in the amount of DM 51,917.81, unearned profits in the amount of DM 14,061.07, or
their peso equivalent.
Thereafter, private respondent elevated his case before the Court of Appeals. On February 18, 1992, the appellate court reversed
the decision of the trial court and dismissed the complaint of petitioner. It ruled that there was no perfection of contract since there
was no meeting of the minds as to the price between the last week of December 1981 and the first week of January 1982.
The issue posed for resolution is whether or not a contract of sale has been perfected between the parties.
We reverse the decision of the Court of Appeals and reinstate the decision of the trial court. It bears emphasizing that a "contract of
sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the
price. . . . " 5
Article 1319 of the Civil Code states: "Consent is manifested by the meeting of the offer and acceptance upon the thing and the
cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance
constitutes a counter offer." The facts presented to us indicate that consent on both sides has been manifested.
The offer by petitioner was manifested on December 17, 1981 when petitioner submitted its proposal containing the item number,
quantity, part number, description, the unit price and total to private respondent. On December 24, 1981, private respondent
informed petitioner of his desire to avail of the prices of the parts at that time and simultaneously enclosed its Purchase Order No.
0l01 dated December 14, 1981. At this stage, a meeting of the minds between vendor and vendee has occurred, the object of the
contract: being the spare parts and the consideration, the price stated in petitioner's offer dated December 17, 1981 and accepted
by the respondent on December 24,1981.

SUBJECT MATTER OF SALE (1459-1465)

12

Although said purchase order did not contain the quantity he wanted to order, private respondent made good, his promise to
communicate the same on December 29, 1981. At this juncture, it should be pointed out that private respondent was already in the
process of executing the agreement previously reached between the parties.
Below Exh. G-3, marked as Exhibit G-3-A, there appears this statement made by private respondent: "Note. above P.O. will include
a 3% discount. The above will serve as our initial P.O." This notation on the purchase order was another indication of acceptance on
the part of the vendee, for by requesting a 3% discount, he implicitly accepted the price as first offered by the vendor. The
immediate acceptance by the vendee of the offer was impelled by the fact that on January 1, 1982, prices would go up, as in fact,
the petitioner informed him that there would be a 7% increase, effective January 1982. On the other hand, concurrence by the
vendor with the said discount requested by the vendee was manifested when petitioner immediately ordered the items needed by
private respondent from Schuback Hamburg which in turn ordered from NDK, a supplier of MAN spare parts in West Germany.
When petitioner forwarded its purchase order to NDK, the price was still pegged at the old one. Thus, the pronouncement of the
Court Appeals that there as no confirmed price on or about the last week of December 1981 and/or the first week of January 1982
was erroneous.
While we agree with the trial court's conclusion that indeed a perfection of contract was reached between the parties, we differ as to
the exact date when it occurred, for perfection took place, not on December 29, 1981. Although the quantity to be ordered was
made determinate only on December 29, 1981, quantity is immaterial in the perfection of a sales contract. What is of importance is
the meeting of the minds as to the object and cause, which from the facts disclosed, show that as of December 24, 1981, these
essential elements had already occurred.
On the part of the buyer, the situation reveals that private respondent failed to open an irrevocable letter of credit without recourse
in favor of Johannes Schuback of Hamburg, Germany. This omission, however. does not prevent the perfection of the contract
between the parties, for the opening of the letter of credit is not to be deemed a suspensive condition. The facts herein do not show
that petitioner reserved title to the goods until private respondent had opened a letter of credit. Petitioner, in the course of its
dealings with private respondent, did not incorporate any provision declaring their contract of sale without effect until after the
fulfillment of the act of opening a letter of credit.
The opening of a etter of credit in favor of a vendor is only a mode of payment. It is not among the essential requirements of a
contract of sale enumerated in Article 1305 and 1474 of the Civil Code, the absence of any of which will prevent the perfection of
the contract from taking place.
To adopt the Court of Appeals' ruling that the contract of sale was dependent on the opening of a letter of credit would be untenable
from a pragmatic point of view because private respondent would not be able to avail of the old prices which were open to him only
for a limited period of time. This explains why private respondent immediately placed the order with petitioner which, in turn
promptly contacted its trading partner in Germany. As succinctly stated by petitioner, "it would have been impossible for respondent
to avail of the said old prices since the perfection of the contract would arise much later, or after the end of the year 1981, or when
he finally opens the letter of credit." 6
WHEREFORE, the petition is GRANTED and the decision of the trial court dated June 13, 1988 is REINSTATED with modification.
SO ORDERED.
Feliciano, Bidin, Melo and Vitug, JJ., concur.

SUBJECT MATTER OF SALE (1459-1465)

13

THIRD DIVISION
[G.R. No. 116635. July 24, 1997]
CONCHITA NOOL and GAUDENCIO ALMOJERA, petitioner, vs. COURT OF APPEALS, ANACLETO NOOL and EMILIA
NEBRE, respondents.
DECISION
PANGANIBAN, J.:
A contract of repurchase arising out of a contract of sale where the seller did not have any title to the property sold is not
valid. Since nothing was sold, then there is also nothing to repurchase.

Statement of the Case


This postulate is explained by this Court as it resolves this petition for review on certiorari assailing the January 20, 1993
Decision[1] of Respondent Court of Appeals[2] in CA-G.R. CV No. 36473, affirming the decision [3] of the trial court[4] which disposed as
follows:[5]
WHEREFORE, judgment is hereby rendered dismissing the complaint for no cause of action, and hereby:
1. Declaring the private writing, Exhibit C, to be an option to sell, not binding and considered validly
withdrawn by the defendants for want of consideration;
2. Ordering the plaintiffs to return to the defendants the sum of P30,000.00 plus interest thereon at the
legal rate, from the time of filing of defendants counterclaim until the same is fully paid;
3. Ordering the plaintiffs to deliver peaceful possession of the two hectares mentioned in paragraph 7 of
the complaint and in paragraph 31 of defendants answer (counterclaim);
4. Ordering the plaintiffs to pay reasonable rents on said two hectares at P5,000.00 per annum or
at P2,500.00 per cropping from the time of judicial demand mentioned in paragraph 2 of the
dispositive portion of this decision, until the said two hectares shall have been delivered to the
defendants; and
5. To pay the costs.
SO ORDERED.

The Antecedent Facts


The facts, which appear undisputed by the parties, are narrated by the Court of Appeals as follows:
Two (2) parcels of land are in dispute and litigated upon here. The first has an area of 1 hectare . It was formerly owned
by Victorino Nool and covered by Transfer Certificate of Title No. T-74950.With an area of 3.0880 hectares, the other
parcel was previously owned by Francisco Nool under Transfer Certificate of Title No. T-100945. Both parcels are
situated in San Manuel, Isabela. The plaintiff spouses, Conchita Nool and Gaudencio Almojera, now the appellants, seek
recovery of the aforementioned parcels of land from the defendants, Anacleto Nool, a younger brother of Conchita, and
Emilia Nebre, now the appellees.
In their complaint, plaintiff-appellants alleged inter alia that they are the owners of subject parcels of land, and they bought the same
from Conchitas other brothers, Victorino Nool and Francisco Nool; that as plaintiffs were in dire need of money, they obtained a loan
from the Iligan Branch of the Development Bank of the Philippines, in Ilagan, Isabela, secured by a real estate mortgage on said
parcels of land, which were still registered in the names of Victorino Nool and Francisco Nool, at the time, and for the failure of
plaintiffs to pay the said loan, including interest and surcharges, totaling P56,000.00, the mortgage was foreclosed; that within the
SUBJECT MATTER OF SALE (1459-1465)

14

period of redemption, plaintiffs contacted defendant Anacleto Nool for the latter to redeem the foreclosed properties from DBP,
which the latter did; and as a result, the titles of the two (2) parcels of land in question were transferred to Anacleto Nool; that as
part of their arrangement or understanding, Anacleto Nool agreed to buy from the plaintiff Conchita Nool the two (2) parcels of land
under controversy, for a total price of P100,000.00, P30,000.00 of which price was paid to Conchita, and upon payment of the
balance of P14,000.00, plaintiffs were to regain possession of the two (2) hectares of land, which amounts defendants failed to pay,
and the same day the said arrangement[6] was made; another covenant[7] was entered into by the parties, whereby defendants
agreed to return to plaintiffs the lands in question, at anytime the latter have the necessary amount; that plaintiffs asked the
defendants to return the same but despite the intervention of the Barangay Captain of their place, defendants refused to return the
said parcels of land to plaintiffs; thereby impelling them (plaintiffs) to come to court for relief.
In their answer defendants-appellees theorized that they acquired the lands in question from the Development Bank of
the Philippines, through negotiated sale, and were misled by plaintiffs when defendant Anacleto Nool signed the private
writing agreeing to return subject lands when plaintiffs have the money to redeem the same; defendant Anacleto having
been made to believe, then, that his sister, Conchita, still had the right to redeem the said properties.
The pivot of inquiry here, as aptly observed below, is the nature and significance of the private document, marked Exhibit
D for plaintiffs, which document has not been denied by the defendants, as defendants even averred in their Answer that
they gave an advance payment of P30,000.00 therefor, and acknowledged that they had a balance of P14,000.00 to
complete their payment. On this crucial issue, the lower court adjudged the said private writing (Exhibit D) as an option to
sell not binding upon and considered the same validly withdrawn by defendants for want of consideration; and decided
the case in the manner abovementioned.
There is no quibble over the fact that the two (2) parcels of land in dispute were mortgaged to the Development Bank of the
Philippines, to secure a loan obtained by plaintiffs from DBP (Ilagan Branch), Ilagan, Isabela. For the non-payment of said loan, the
mortgage was foreclosed and in the process, ownership of the mortgaged lands was consolidated in DBP (Exhibits 3 and 4 for
defendants). After DBP became the absolute owner of the two parcels of land, defendants negotiated with DBP and succeeded in
buying the same. By virtue of such sale by DBP in favor of defendants, the titles of DBP were cancelled and corresponding Transfer
Certificates of Title (Annexes C and D to the complaint) issued to the dependants.[8]
It should be stressed that Manuel S. Mallorca, authorized officer of DBP, certified that the one-year redemption period was
from March 16, 1982 up to March 15, 1983 and that the Mortgagors right of redemption was not exercised within this period.
[9]
Hence, DBP became the absolute owner of said parcels of land for which it was issued new certificates of title, both entered on
May 23, 1983 by the Registry of Deeds for the Province of Isabela. [10] About two years thereafter, on April 1, 1985, DBP entered into
a Deed of Conditional Sale[11] involving the same parcels of land with Private Respondent Anacleto Nool as vendee. Subsequently,
the latter was issued new certificates of title on February 8, 1988.[12]
The Court of Appeals ruled:[13]
WHEREFORE, finding no reversible error infirming it, the appealed Judgment is hereby AFFIRMED in toto. No
pronouncement as to costs.

The Issues
Petitioners impute to Respondent Court the following alleged errors:
1. The Honorable Court of Appeals, Second Division has misapplied the legal import or meaning of Exhibit C in a
way contrary to law and existing jurisprudence in stating that it has no binding effect between the parties and
considered validly withdrawn by defendants-appellees for want of consideration.
2. The Honorable Court of Appeals, Second Division has miserably failed to give legal significance to the actual
possession and cultivation and appropriating exclusively the palay harvest of the two (2) hectares land pending the
payment of the remaining balance of fourteen thousand pesos (P14,000.00) by defendants-appellees as indicated
in Exhibit C.

SUBJECT MATTER OF SALE (1459-1465)

15

3. The Honorable Court of Appeals has seriously erred in affirming the decision of the lower court by awarding the
payment of rents per annum and the return of P30,000.00 and not allowing the plaintiffs-appellants to re-acquire the four
(4) hectares, more or less upon payment of one hundred thousand pesos (P100,000.00) as shown in Exhibit D.[14]

The Courts Ruling


The petition is bereft of merit.

First Issue: Are Exhibits C and D Valid and Enforceable?


The petitioner-spouses plead for the enforcement of their agreement with private respondents as contained in Exhibits C and
D, and seek damages for the latters alleged breach thereof. In Exhibit C, which was a private handwritten document labeled by the
parties as Resibo ti Katulagan or Receipt of Agreement, the petitioners appear to have sold to private respondents the parcels of
land in controversy covered by TCT No. T-74950 and TCT No. T-100945. On the other hand, Exhibit D, which was also a private
handwritten document in Ilocano and labeled as Kasuratan, private respondents agreed that Conchita Nool can acquire back or
repurchase later on said land when she has the money.[15]
In seeking to enforce her alleged right to repurchase the parcels of land, Conchita (joined by her co-petitioner-husband)
invokes Article 1370 of the Civil Code which mandates that (i)f the terms of a contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulation shall control. Hence, petitioners contend that the Court of
Appeals erred in affirming the trial courts finding and conclusion that said Exhibits C and D were not merely voidable but utterly void
and inexistent.
We cannot sustain petitioners view. Article 1370 of the Civil Code is applicable only to valid and enforceable contracts. The
Regional Trial Court and the Court of Appeals ruled that the principal contract of sale contained in Exhibit C and the auxilliary
contract of repurchase in Exhibit D are both void. This conclusion of the two lower courts appears to find support in Dignos vs.
Court of Appeals,[16] where the Court held:
Be that as it may, it is evident that when petitioners sold said land to the Cabigas spouses, they were no longer owners of
the same and the sale is null and void.
In the present case, it is clear that the sellers no longer had any title to the parcels of land at the time of sale. Since Exhibit D,
the alleged contract of repurchase, was dependent on the validity of Exhibit C, it is itself void. A void contract cannot give rise to a
valid one.[17] Verily, Article 1422 of the Civil Code provides that (a) contract which is the direct result of a previous illegal contract, is
also void and inexistent.
We should however add that Dignos did not cite its basis for ruling that a sale is null and void where the sellers were no longer
the owners of the property. Such a situation (where the sellers were no longer owners) does not appear to be one of the void
contracts enumerated in Article 1409 of the Civil Code. [18] Moreover, the Civil Code[19] itself recognizes a sale where the goods are to
be acquired x x x by the seller after the perfection of the contract of sale, clearly implying that a sale is possible even if the seller
was not the owner at the time of sale, provided he acquires title to the property later on.
In the present case however, it is likewise clear that the sellers can no longer deliver the object of the sale to the buyers, as
the buyers themselves have already acquired title and delivery thereof from the rightful owner, the DBP. Thus, such contract may be
deemed to be inoperative[20] and may thus fall, by analogy, under item no. 5 of Article 1409 of the Civil Code:Those which
contemplate an impossible service. Article 1459 of the Civil Code provides that the vendor must have a right to transfer the
ownership thereof [object of the sale] at the time it is delivered. Here, delivery of ownership is no longer possible. It has become
impossible.
Furthermore, Article 1505 of the Civil Code provides that where goods are sold by a person who is not the owner thereof, and
who does not sell them under authority or with consent of the owner, the buyer acquires no better title to the goods than the seller
had, unless the owner of the goods is by his conduct precluded from denying the sellers authority to sell. Here, there is no
allegation at all that petitioners were authorized by DBP to sell the property to the private respondents. Jurisprudence, on the other
hand, teaches us that a person can sell only what he owns or is authorized to sell; the buyer can as a consequence acquire no
SUBJECT MATTER OF SALE (1459-1465)

16

more than what the seller can legally transfer. [21] No one can give what he does not have neno dat quod non habet. On the other
hand, Exhibit D presupposes that petitioners could repurchase the property that they sold to private respondents. As petitioners
sold nothing, it follows that they can also repurchase nothing. Nothing sold, nothing to repurchase. In this light, the contract of
repurchase is also inoperative and by the same analogy, void.

Contract of Repurchase
Dependent on Validity of Sale
As borne out by the evidence on record, the private respondents bought the two parcels of land directly from DBP on April 1,
1985 after discovering that petitioners did not own said property, the subject of Exhibits C and D executed on November 30,
1984. Petitioners, however, claim that they can exercise their alleged right to repurchase the property, after private respondents had
acquired the same from DBP.[22] We cannot accede to this, for it clearly contravenes the intention of the parties and the nature of
their agreement. Exhibit D reads:

WRITING
Nov. 30, 1984
That I, Anacleto Nool have bought from my sister Conchita Nool a land an area of four hectares (4 has.) in the value of
One Hundred Thousand (100,000.00) Pesos. It is our agreement as brother and sister that she can acquire back or
repurchase later on said land when she has the money. [Underscoring supplied]
As proof of this agreement we sign as brother and sister this written document this day of Nov. 30, 1984, at District 4, San
Manuel, Isabela.
Sgd ANACLETO NOOL
Anacleto Nool
Sgd Emilio Paron
Witness
Sgd Conchita Nool
Conchita Nool[23]
One repurchases only what one has previously sold. In other words, the right to repurchase presupposes a valid contract of
sale between the same parties. Undisputedly, private respondents acquired title to the property from DBP, and not from the
petitioners.
Assuming arguendo that Exhibit D is separate and distinct from Exhibit C and is not affected by the nullity of the latter, still
petitioners do not thereby acquire a right to repurchase the property. In that scenario, Exhibit D ceases to be a right to repurchase
ancillary and incidental to the contract of sale; rather, it becomes an accepted unilateral promise to sell. Article 1479 of the Civil
Code, however, provides that an accepted unilateral promise to buy or sell a determinate thing for a price certain is binding upon
the promissor if the promise is supported by a consideration distinct from the price. In the present case, the alleged written contract
of repurchase contained in Exhibit D is bereft of any consideration distinct from the price. Accordingly, as an independent contract, it
cannot bind private respondents. The ruling in Diamante vs. CA[24] supports this. In that case, the Court through Mr. Justice Hilario
G. Davide, Jr. explained:
Article 1601 of the Civil Code provides:
Conventional redemption shall take place when the vendor reserves the right to repurchase the thing sold, with
the obligation to comply with the provisions of article 1616 and other stipulations which may have been agreed
upon.
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In Villarica, et al. Vs. Court of Appeals, et al., decided on 29 November 1968, or barely seven (7) days before
the respondent Court promulgated its decisions in this case, this Court, interpreting the above Article, held:
The right of repurchase is not a right granted the vendor by the vendee in a subsequent instrument, but is a
right reserved by the vendor in the same instrument of sale as one of the stipulations of the contract. Once the
instrument of absolute sale is executed, the vendor can not longer reserve the right to repurchase, and any
right thereafter granted the vendor by the vendee in a separate instrument cannot be a right of repurchase but
some other right like the option to buy in the instant case. x x x.
In the earlier case of Ramos, et al. vs. Icasiano, et al., decided in 1927, this Court had already ruled that an
agreement to repurchase becomes a promise to sell when made after the sale, because when the sale is made
without such an agreement, the purchaser acquires the thing sold absolutely, and if he afterwards grants the
vendor the right to repurchase, it is a new contract entered into by the purchaser, as absolute owner already of
the object. In that case the vendor has nor reserved to himself the right to repurchase.
In Vda. De Cruzo, et al. vs. Carriaga, et al. this Court found another occasion to apply the foregoing principle.
Hence, the Option to Repurchase executed by private respondent in the present case, was merely a promise to sell,
which must be governed by Article 1479 of the Civil Code which reads as follows:
Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the
promissor if the promise is supported by a consideration distinct from the price.

Right to Repurchase Based on


Homestead or Trust Non-Existent
Petitioners also base their alleged right to repurchase on (1) Sec. 119 of the Public Land Act[25] and (2) an implied trust relation
as brother and sister.[26]
The Court notes that Victorino Nool and Francisco Nool mortgaged the land to DBP. The brothers, together with Conchita Nool
and Anacleto Nool, were all siblings and heirs qualified to repurchase the two parcels of land under Sec. 119 of the Public Land Act
which provides that (e)very conveyance of land acquired under the free patent or homestead provisions, when proper, shall be
subject to repurchase by the applicant, his widow or legal heirs, within a period of five years from the date of conveyance. Assuming
the applicability of this statutory provision to the case at bar, it is indisputable that Private Respondent Anacleto Nool already
repurchased from DBP the contested properties. Hence, there was no more right of repurchase that his sister Conchita or brothers
Victorino and Francisco could exercise. The properties were already owned by an heir of the homestead grantee and the rationale
of the of the provision to keep homestead lands within the family of the grantee was thus fulfilled.[27]
The claim of a trust relation is likewise without merit. The records show that private respondents did not purchase the
contested properties from DBP in trust for petitioners. The former, as previously mentioned, in fact bought the land from DBP upon
realization that the latter could not validly sell the same. Obviously, petitioners bought it for themselves. There is no evidence at all
in the records that they bought the land in trust for private respondents. The fact that Anacleto Nool was the younger brother of
Conchita Nool and that they signed a contract of repurchase, which as discussed earlier was void, does not prove the existence of
an implied trust in favor of petitioners.

Second Issue: No Estoppel in Impugning the


Validity of Void Contracts
Petitioners argue that when Anacleto Nool took the possession of the two hectares, more or less, and let the other two
hectares to be occupied and cultivated by plaintiffs-appellants, Anacleto Nool cannot later on disclaim the terms or contions (sic)
agreed upon and his actuation is within the ambit of estoppel x x x. [28] We disagree. The private respondents cannot be estopped
from raising the defense of nullity of contract, specially in this case where they acted in good faith, believing that indeed petitioners
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could sell the two parcels of land in question.Article 1410 of the Civil Code mandates that (t)he action or defense for the declaration
of the inexistence of a contract does not prescribe. It is well-settled doctrine that as between parties to a contract, validity cannot be
given to it by estoppel if it is prohibited by law or it is against public policy (19 Am. Jur. 802). It is not within the competence of any
citizen to barter away what public policy by law seeks to preserve. [29] Thus, it is immaterial that private respondents initially acted to
implement the contract of sale, believing in good faith that the same was valid.We stress that a contract void at inception cannot be
validated by ratification or prescription and certainly cannot be binding on or enforceable against private respondents.[30]

Third Issue: Return of P30,000.00 with Interest


and Payment of Rent
Petitioners further argue that it would be a miscarriage of justice to order them (1) to return the sum of P30,000.00 to private
respondents when allegedly it was Private Respondent Anacleto Nool who owed the former a balance of P14,000.00 and (2) to
order petitioners to pay rent when they were allowed to cultivate the said two hectares.[31]
We are not persuaded. Based on the previous discussion, the balance of P14,000.00 under the void contract of sale may not
be enforced. Petitioners are the ones who have an obligation to return what they unduly and improperly received by reason of the
invalid contract of sale. Since they cannot legally give title to what they sold, they cannot keep the money paid for the object of the
sale. It is basic that (e)very 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. [32] Thus, if a void contract
has already been performed, the restoration of what has been given is in order. [33] Corollarily and as aptly ordered by respondent
appellate court, interest thereon will run only from the time of private respondents demand for the return of this amount in their
counterclaim.[34] In the same vein, petitioners possession and cultivation of the two hectares are anchored on private respondents
tolerance. Clearly, the latters tolerance ceased upon their counterclaim and demand on the former to vacate. Hence, their right to
possess and cultivate the land ipso facto ceased.
WHEREFORE, the petition is DENIED and the assailed Decision of the Court of Appeals affirming that of the trial court is
hereby AFFIRMED.
SO ORDERED.
Narvasa, C.J., (Chairman), Davide, Jr., Melo, and Francisco, JJ., concur.

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