G.R. No.

178610

November 17, 2010

HONGKONG AND SHANGHAI BANKING CORP., LTD. STAFF RETIREMENT

PLAN, Retirement Trust Fund, Inc.) Petitioner,
vs.
SPOUSES BIENVENIDO AND EDITHA BROQUEZA, Respondents.
DECISION

Because of their dismissal, petitioners were not able to pay the monthly
amortizations of their respective loans. Thus, respondent HSBCL-SRP considered the
accounts of petitioners delinquent. Demands to pay the respective obligations were
made upon petitioners, but they failed to pay.6
HSBCL-SRP, acting through its Board of Trustees and represented by Alejandro L.
Custodio, filed Civil Case No. 52400 against the spouses Broqueza on 31 July 1996.
On 19 September 1996, HSBCL-SRP filed Civil Case No. 52911 against Gerong. Both
suits were civil actions for recovery and collection of sums of money.

CARPIO, J.:

The Metropolitan Trial Courts Ruling

1

G.R. No. 178610 is a petition for review assailing the Decision promulgated on 30
March 2006 by the Court of Appeals (CA) in CA-G.R. SP No. 62685. The appellate
court granted the petition filed by Fe Gerong (Gerong) and Spouses Bienvenido and
Editha Broqueza (spouses Broqueza) and dismissed the consolidated complaints
filed by Hongkong and Shanghai Banking Corporation, Ltd. - Staff Retirement Plan
(HSBCL-SRP) for recovery of sum of money. The appellate court reversed and set
aside the Decision3 of Branch 139 of the Regional Trial Court of Makati City (RTC) in
Civil Case No. 00-787 dated 11 December 2000, as well as its Order 4 dated 5
September 2000. The RTCs decision affirmed the Decision 5 dated 28 December
1999 of Branch 61 of the Metropolitan Trial Court (MeTC) of Makati City in Civil Case
No. 52400 for Recovery of a Sum of Money.
The Facts
The appellate court narrated the facts as follows:
Petitioners Gerong and [Editha] Broqueza (defendants below) are employees of
Hongkong and Shanghai Banking Corporation (HSBC). They are also members of
respondent Hongkong Shanghai Banking Corporation, Ltd. Staff Retirement Plan
(HSBCL-SRP, plaintiff below). The HSBCL-SRP is a retirement plan established by
HSBC through its Board of Trustees for the benefit of the employees.
On October 1, 1990, petitioner [Editha] Broqueza obtained a car loan in the amount
of Php175,000.00. On December 12, 1991, she again applied and was granted an
appliance loan in the amount of Php24,000.00. On the other hand, petitioner Gerong
applied and was granted an emergency loan in the amount of Php35,780.00 on June
2, 1993. These loans are paid through automatic salary deduction.

On 28 December 1999, the MeTC promulgated its Decision 7 in favor of HSBCL-SRP.

The MeTC ruled that the nature of HSBCL-SRPs demands for payment is civil and
has no connection to the ongoing labor dispute. Gerong and Editha Broquezas
termination from employment resulted in the loss of continued benefits under their
retirement plans. Thus, the loans secured by their future retirement benefits to
which they are no longer entitled are reduced to unsecured and pure civil
obligations. As unsecured and pure obligations, the loans are immediately
demandable.
The dispositive portion of the MeTCs decision reads:
WHEREFORE, premises considered and in view of the foregoing, the Court finds that
the plaintiff was able to prove by a preponderance of evidence the existence and
immediate demandability of the defendants loan obligations as judgment is hereby
rendered in favor of the plaintiff and against the defendants in both cases, ordering
the latter:
1. In Civil Case No. 52400, to pay the amount of Php116,740.00 at six
percent interest per annum from the time of demand and in Civil Case No.
52911, to pay the amount of Php25,344.12 at six percent per annum from
the time of the filing of these cases, until the amount is fully paid;
2. To pay the amount of Php20,000.00 each as reasonable attorneys fees;
3. Cost of suit.
SO ORDERED.8

Meanwhile [in 1993], a labor dispute arose between HSBC and its employees.
Majority of HSBCs employees were terminated, among whom are petitioners Editha
Broqueza and Fe Gerong. The employees then filed an illegal dismissal case before
the National Labor Relations Commission (NLRC) against HSBC. The legality or
illegality of such termination is now pending before this appellate Court in CA G.R.
CV No. 56797, entitledHongkong Shanghai Banking Corp. Employees Union, et al.
vs. National Labor Relations Commission, et al.

Gerong and the spouses Broqueza filed a joint appeal of the MeTCs decision before
the RTC. Gerongs case was docketed Civil Case No. 00-786, while the spouses
Broquezas case was docketed as Civil Case No. 00-787.
The Regional Trial Courts Ruling

The RTC initially denied the joint appeal because of the belated filing of Gerong and
the spouses Broquezas memorandum. The RTC later reconsidered the order of
denial and resolved the issues in the interest of justice.
On 11 December 2000, the RTC affirmed the MeTCs decision in toto. 9
The RTC ruled that Gerong and Editha Broquezas termination from employment
disqualified them from availing of benefits under their retirement plans. As a
consequence, there is no longer any security for the loans. HSBCL-SRP has a legal
right to demand immediate settlement of the unpaid balance because of Gerong and
Editha Broquezas continued default in payment and their failure to provide new
security for their loans. Moreover, the absence of a period within which to pay the
loan allows HSBCL-SRP to demand immediate payment. The loan obligations are
considered pure obligations, the fulfillment of which are demandable at once.

I. The Court of Appeals has decided a question of substance in a way not in

accord with law and applicable decisions of this Honorable Court; and
II. The Court of Appeals has departed from the accepted and usual course
of judicial proceedings in reversing the decision of the Regional Trial Court
and the Metropolitan Trial Court.14
The Courts Ruling
The petition is meritorious. We agree with the rulings of the MeTC and the RTC.
The Promissory Notes uniformly provide:
PROMISSORY NOTE

Gerong and the spouses Broqueza then filed a Petition for Review under Rule 42
before the CA.
The Ruling of the Court of Appeals
On 30 March 2006, the CA rendered its Decision10 which reversed the 11 December
2000 Decision of the RTC. The CA ruled that the HSBCL-SRPs complaints for
recovery of sum of money against Gerong and the spouses Broqueza are premature
as the loan obligations have not yet matured. Thus, no cause of action accrued in
favor of HSBCL-SRP. The dispositive portion of the appellate courts Decision reads
as follows:

P_____ Makati, M.M. ____ 19__

FOR VALUE RECEIVED, I/WE _____ jointly and severally promise to pay to THE HSBC
RETIREMENT PLAN (hereinafter called the "PLAN") at its office in the Municipality of
Makati, Metro Manila, on or before until fully paid the sum of PESOS ___ (P___)
Philippine Currency without discount, with interest from date hereof at the rate
of Six per cent (6%) per annum, payable monthly.
I/WE agree that the PLAN may, upon written notice, increase the interest rate
stipulated in this note at any time depending on prevailing conditions.

WHEREFORE, the assailed Decision of the RTC is REVERSED and SET ASIDE. A new
one is hereby rendered DISMISSING the consolidated complaints for recovery of sum
of money.

I/WE hereby expressly consent to any extensions or renewals hereof for a portion or
whole of the principal without notice to the other(s), and in such a case our liability
shall remain joint and several.1avvphi1

SO ORDERED.11

In case collection is made by or through an attorney, I/WE jointly and severally agree
to pay ten percent (10%) of the amount due on this note (but in no case less than
P200.00) as and for attorneys fees in addition to expenses and costs of suit.

HSBCL-SRP filed a motion for reconsideration which the CA denied for lack of merit
in its Resolution12promulgated on 19 June 2007.
On 6 August 2007, HSBCL-SRP filed a manifestation withdrawing the petition against
Gerong because she already settled her obligations. In a Resolution 13 of this Court
dated 10 September 2007, this Court treated the manifestation as a motion to
withdraw the petition against Gerong, granted the motion, and considered the case
against Gerong closed and terminated.
Issues

In case of judicial execution, I/WE hereby jointly and severally waive our rights under
the provisions of Rule 39, Section 12 of the Rules of Court.15
In ruling for HSBCL-SRP, we apply the first paragraph of Article 1179 of the Civil
Code:
Art. 1179. Every obligation whose performance does not depend upon a future or
uncertain event, or upon a past event unknown to the parties, is demandable at
once.

HSBCL-SRP enumerated the following grounds to support its Petition:

x x x. (Emphasis supplied.)

We affirm the findings of the MeTC and the RTC that there is no date of payment
indicated in the Promissory Notes. The RTC is correct in ruling that since the
Promissory Notes do not contain a period, HSBCL-SRP has the right to demand
immediate payment. Article 1179 of the Civil Code applies. The spouses Broquezas
obligation to pay HSBCL-SRP is a pure obligation. The fact that HSBCL-SRP was
content with the prior monthly check-off from Editha Broquezas salary is of no
moment. Once Editha Broqueza defaulted in her monthly payment, HSBCL-SRP
made a demand to enforce a pure obligation.
In their Answer, the spouses Broqueza admitted that prior to Editha Broquezas
dismissal from HSBC in December 1993, she "religiously paid the loan amortizations,
which HSBC collected through payroll check-off."16A definite amount is paid to
HSBCL-SRP on a specific date. Editha Broqueza authorized HSBCL-SRP to make
deductions from her payroll until her loans are fully paid. Editha Broqueza, however,
defaulted in her monthly loan payment due to her dismissal. Despite the spouses
Broquezas protestations, the payroll deduction is merely a convenient mode of
payment and not the sole source of payment for the loans. HSBCL-SRP never agreed
that the loans will be paid only through salary deductions. Neither did HSBCL-SRP
agree that if Editha Broqueza ceases to be an employee of HSBC, her obligation to
pay the loans will be suspended. HSBCL-SRP can immediately demand payment of
the loans at anytime because the obligation to pay has no period. Moreover, the
spouses Broqueza have already incurred in default in paying the monthly
installments.
Finally, the enforcement of a loan agreement involves "debtor-creditor relations
founded on contract and does not in any way concern employee relations. As such it
should be enforced through a separate civil action in the regular courts and not
before the Labor Arbiter."17
WHEREFORE, we GRANT the petition. The Decision of the Court of Appeals in CA-G.R.
SP No. 62685 promulgated on 30 March 2006 is REVERSED and SET ASIDE. The
decision of Branch 139 of the Regional Trial Court of Makati City in Civil Case No. 00787, as well as the decision of Branch 61 of the Metropolitan Trial Court of Makati
City in Civil Case No. 52400 against the spouses Bienvenido and Editha Broqueza,
are AFFIRMED. Costs against respondents.
SO ORDERED.

G.R. No. 118180 September 20, 1996

DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,
vs.
COURT OF APPEALS, Sps. NORMY D. CARPIO and CARMEN ORQUISA; Sps.
ROLANDO D. CARPIO and RAFAELA VILLANUEVA; Sps. ELISEO D. CARPIO
and ANUNCIACION del ROSARIO; LUZ C. REYES, MARIO C. REYES, JULIET
REYES-RUBIN, respondents.

PADILLA, J.:
This is a petitioner for review on certiorari under Rule 45 of the Rules of Court which
seeks to set aside the decision 1 of the Court of Appeals (CA) dated 28 February 1994
in CA-G.R. CV No. 37158, as well as the resolution dated 11 August 1994 denying
petitioner's motion for reconsideration.
The facts are undisputed:
Private respondents were the original owner of a parcel of agricultural land covered
by TCT No T-1432, situated in Barrio Capucao, Ozamis City, with an area of 113,695
square meters, more or less.
On 30 May 1977, Private respondents mortgaged said land to petitioner. When
private respondents defaulted on their obligation, petitioner foreclosed the
mortgage on the land and emerged as sole bidder in the ensuing auction sale.
Consequently. Transfer Certificate of Title No. T-10913 was eventually issued in
petitioner's name.
On 6 April 1984 petitioner and private respondents entered into a Deed of
Conditional Sale wherein petitioner agreed to reconvey the foreclosed property to
private respondents.
The pertinent stipulations of the Deed provided that:
WHEREAS, the VENDOR acquired a parcel of land in an auction
sale by the City Sheriff of Ozamiz City, pursuant to Act 3135, As
amended, and subject to the redemption period pursuant to CA
141, described as follows:
xxx xxx xxx
WHEREAS, the VENDEES offered to repurchase and the VENDOR
agreed to sell the above-described property, subject to the terms
and stipulations as hereinafter stipulated, for the sum of SEVENTY
THREE THOUSAND SEVEN HUNDRED ONLY (P73,700.00), with a
down payment of P8,900.00 and the balance of P64,800 shall be
payable in six (6) years on equal quarterly amortization plan at
18% interest per annum. The first quarterly amortization of
P4,470.36 shall be payable three months from the date of the
execution of the documents and all subsequent amortization shall
be due and payable every quarter thereafter.
xxx xxx xxx

That, upon completion of the payment herein stipulated and

agreed, the Vendor agrees to deliver to the Vendee/s(,) his heirs,
administrators and assigns(,) a good and sufficient deed of
conveyance covering the property, subject matter of this deed of
conditional sale, in accordance with the provision of law. (Exh. "A",
p. 5, Records) 2
On 6 April 1990, upon completing the payment of the full repurchase price, private
respondents demanded from petitioner the execution of a Deed of Conveyance in
their favor.
Petitioner then informed private respondents that the prestation to execute and
deliver a deed of conveyance in their favor had become legally impossible in view of
Sec. 6 of Rep. Act 6657 (the Comprehensive Agrarian Reform Law or CARL) approved
10 June 1988, and Sec. 1 of E.O. 407 issued 10 June 1990.
Aggrieved, private respondents filed a complaint for specific performance with
damages against petitioner before the Regional Trial Court of Ozamis City, Branch
XV. During the pre-trial court narrowed down the issue to whether or not Sec. 6 of
the CARL (Rep. Act 6657) had rendered legally impossible compliance by petitioner
with its obligation to execute a deed of conveyance of the subject land in favor of
private respondents. The trial court ordered both parties to file their separate
memorandum and deemed the case submitted for decision thereafter.
On 30 January 1992, the trial court rendered judgment, the dispositive part of which
reads:
WHEREFORE, judgment is rendered ordering defendant to execute
and deliver unto plaintiffs a deed of final sale of there land subject
of their deed of conditional sale Lot 5259-A, to pay plaintiffs
P10,000.00 as nominal damages, P5,000.00 as attorney's fees,
P3,000.00 as litis expenses and costs. 3
The trial court held that petitioner interpreted the fourth paragraph of Sec. 6, Rep.
Act 6657 literally in conjunction with Sec. 1 of E. O. 407.
The fourth paragraph of Sec. 6, Rep. Act 6657 states that:
Upon the effectivity of this Act, any sale, disposition, lease,
management contract or transfer of possession of private lands
executed by the original landowner in violation of this act shall be
null and void; Provided, however, that those executed prior to this
act shall be valid only when registered with the Registers of Deeds
after the effectivity of this Act. Thereafter, all Registers of Deeds
shall inform the DAR WITHIN 320 days of any transaction involving
agricultural lands in excess of five hectares.

while Sec. 1 of E.O. 407 states that:

Sec. 1. All government instrumentalities but not limited to . . .
financial institutions such as the DBP . . . shall immediately
execute deeds of transfer in favor of the Republic of the
Philippines as represented by the Department of Agrarian Reform
and surrender to the latter department all land holdings suitable
for agriculture.
The court a quo noted that Sec 6 of Rep. Act 6657, taken in its entirety, is a
provision dealing primarily with retention limits in agricultural land allowed the
landowner and his family and that the fourth paragraph, which nullifies any sale . . .
by the original landowner in violation of the Act, does not cover the sale by
petitioner (not the original land owner) to private respondents.
On the other hand, according to the trial court, E.O. 407 took effect on June 1990.
But private respondents completed of the price for the property, object of the
conditional sale, as early as 6 April 1990. Hence, with the fulfillment of the condition
for the sale, the land covered thereby, was detached from the mass of foreclosed
properties held by DBP, and, therefore, fell beyond the ambit or reach of E.O. 407.
Dissatisfied, petitioner appealed to the Court of Appeals (CA), still insisting that its
obligation to execute a Deed of Sale in favor of private respondents had become a
legal impossibility and that the non-impairment clause of the Constitution must yield
to the demands of police power.
On 28 February 1994, the CA rendered judgment dismissing petitioner's appeal on
the basis of the following disquisitions:
It is a rule that if the obligation depends upon a suspensive
condition, the demandability as well as the acquisition or
effectivity of the rights arising from the obligation is suspended
pending the happening or fulfillment of the fact or event which
constitutes the condition. Once the event which constitutes the
condition is fulfilled resulting in the effectivity of the obligation, its
effects retroact to the moment when the essential elements which
gave birth to the obligation have taken place (8 Manresa, 5th Ed.
Bk. 1, pa. 33). Applying this precept to the case, the full payment
by the appellee on April 6, 1990 retracts to the time the contract
of conditional sale was executed on April 6, 1984. From that time,
all elements of the contract of sale were present. Consequently,
the contract of sale was perfected. As such, the said sale does not
come under the coverage of R.A. 6657.
It is likewise interesting to note that despite the mandate of Sec.
1, R.A. 6657, appellant continued to accept the payments made by
the appellant until it was fully paid on April 6, 1990. All that the
appellant has to do now is to execute the final deed of sale in

favor of the appellee. To follow the line of argument of the

appellant would only result in an unconscionable injury to the
appellee. Obligations arising from contracts have the force of law
between the contracting parties and should be complied with in
good faith (Flavio Macasaet & Associates, Inc. vs. Commission on
Audit, 173 SCRA 352).
Going now to E.O. 407, We hold that the same can neither affect
appellant's obligation under the deed of conditional sale. Under
the said law, appellant is required to transfer to the Republic of the
Philippines "all lands foreclosed" effective June 10, 1990. Under
the facts obtaining, the subject property has ceased to belong to
the mass of foreclosed property failing within the reach of said law.
As earlier explained, the property has already been sold to herein
appellees even before the said E.O. has been enacted. On this
same reason, We therefore need not delve on the applicability of
DBP Circular No. 11. 4
In the present petitioner for review on certiorari, petitioner still insists on its position
that Rep. Act 6657, E.O. 407 and DBP Circular No.11 rendered its obligation to
execute a Deed of Sale to private respondents "a legal impossibility." 5 Petitioner also
questions the award of attorney's fees, nominal damages, and cost in favor of
private respondents, as not in accord with law and the evidence. 6

More specifically, petitioner cannot invoke the last paragraph of Sec. 6 of Rep. Act
6657 to set aside its obligations already existing prior to its enactment. In the first
place, said last paragraph clearly deals with "any sale, lease, management contract
or transfer or possession of private lands executed by the original landowner." The
original owner in this case is not the petitioner but the private respondents
Petitioner acquired the land through foreclosure proceedings but agreed thereafter
to reconvey it to private respondents, albeit conditionally.
As earlier stated, Sec. 6 of Rep. Act 6657 in its entirety deals with retention limits
allowed by law to small landowners. Since the property here involved is more or less
ten (10) hectares, it is then within the jurisdiction of the Department of Agrarian
Reform (DAR) to determine whether or not the property can be subjected to agrarian
reform. But this necessitates an entirely differently proceeding.
The CARL (Rep. Act 6657) was not intended to take away property without due
process of law. Nor is it intended to impair the obligation of contracts. In the same
manner must E.O. 407 be regarded. It was enacted two (2) months after private
respondents had legally fulfilled the condition in the contract of conditional sale by
the payment of all installment on their due dates. These laws cannot have
retroactive effect unless there is an express provision in them to that effect. 8
As to petitioner's contention, however, that the CA erred in affirming the trial court's
decision awarding nominal damages, and attorney's fees to private respondents, we
rule in favor of petitioner.

We rule in favor of private respondents.

In conditional obligations, the acquisition of rights, as well as the extinguishment or
loss of those already acquired, shall depend upon the happening of the event which
constitutes the condition. 7
The deed of conditional sale between petitioner and private respondents was
executed on 6 April 1984. Private respondents had religiously paid the agreed
installments on the property until they completed payment on 6 April 1990.
Petitioner, in fact, allowed private respondents to fulfill the condition of effecting full
payment, and invoked Section 6 of Rep. Act 6657 only after private respondents,
having fully paid the repurchase price, demanded the execution of a Deed of Sale in
their favor.
It will be noted that Rep. Act 6657 was enacted on 10 June 1988. Following
petitioner's argument in this case, its prestation to execute the deed of sale was
rendered legally impossible by Section 6 said law. In other words, the deed of
conditional sale was extinguished by a supervening event, giving rise to an
impossibility of performance.
We reject petitioner's contention as we rule as the trial court and CA have
correctly ruled that neither Sec. 6 of Rep. Act 6657 nor Sec. 1 of E.O. 407 was
intended to impair the obligation of contract petitioner had much earlier concluded
with private respondents.

It appears that the core issue in this case, being a pure question of law, did not
reach the trial stage as the case was submitted for decision after pre-trial.
The award of attorney's fees under Article 2208 of the Civil Code is more of an
exception to the general rule that it is not sound policy to place a penalty on the
right to litigate. While judicial discretion in the award of attorney's fees is not
entirely left out, the same, as a rule, must have a factual, legal or equitable
justification. The matter cannot and should not be left to speculation and
conjecture. 9
As aptly stated in the Mirasol case:
. . . The matter of attorney's fees cannot be touched once and only
in the dispositive portion of the decision. The text itself must
expressly state the reason why attorney's fees are being awarded.
The court, after reading through the text of the appealed decision,
finds the same bereft of any findings of fact and law to justify the
award of attorney's fees. The matter of such fees was touched but
once and appears only in the dispositive portion of the decision.
Simply put, the text of the decision did not state the reason why
attorney's fees are being awarded, and for this reason, the Court
finds it necessary to disallow the same for being conjectural. 10

While DBP committed egregious error in interpreting Sec. 6 of RA 6657, the same is
not equivalent to gross and evident bad faith when it refused to execute the deed of
sale in favor of private respondents.
For the same reasons stated above, the award of nominal damages in the amount of
P10,000.00 should also be deleted.
The amount of P3,000.00 as litigation expenses and cost against petitioner must
remain.
WHEREFORE, premises considered, the petition is hereby DENIED, and the decision
of the CA is hereby AFFIRMED, for lack of any reversible error, with the
MODIFICATION that attorney's fees and nominal damages awarded to private
respondent are hereby DELETED.

G.R. No. 165116

August 4, 2009

MARIA SOLEDAD TOMIMBANG, Petitioner, vs. ATTY. JOSE

TOMIMBANG, Respondent.
DECISION
DEL CASTILLO, J.:
This resolves the petition for review on certiorari under Rule 45 of the Rules of Court,
praying that the Decision1dated July 1, 2004 and Resolution2 dated August 31, 2004
promulgated by the Court of Appeals (CA), be reversed and set aside.
The antecedent facts are as follows.
Petitioner and respondent are siblings. Their parents donated to petitioner an eightdoor apartment located at 149 Santolan Road, Murphy, Quezon City, with the
condition that during the parents' lifetime, they shall retain control over the property
and petitioner shall be the administrator thereof.
In 1995, petitioner applied for a loan from PAG-IBIG Fund to finance the renovations
on Unit H, of said apartment which she intended to use as her residence. Petitioner
failed to obtain a loan from PAG-IBIG Fund, hence, respondent offered to extend a
credit line to petitioner on the following conditions: (1) petitioner shall keep a record
of all the advances; (2) petitioner shall start paying the loan upon the completion of
the renovation; (3) upon completion of the renovation, a loan and mortgage
agreement based on the amount of the advances made shall be executed by
petitioner and respondent; and (4) the loan agreement shall contain comfortable
terms and conditions which petitioner could have obtained from PAG-IBIG. 3

Petitioner accepted respondent's offer of a credit line and work on the apartment
units began. Renovations on Units B to G were completed, and the work has just
started on Unit A when an altercation broke out between herein parties. In view of
said conflict, respondent and petitioner, along with some family members, held a
meeting in the house of their brother Genaro sometime in the second quarter of
1997. Respondent and petitioner entered into a new agreement whereby petitioner
was to start making monthly payments on her loan. Upon respondent's demand,
petitioner turned over to respondent all the records of the cash advances for the
renovations. Subsequently, or from June to October of 1997, petitioner made
monthly payments of P18,700.00, or a total of P93,500.00. Petitioner never denied
the fact that she started making such monthly payments.
In October of 1997, a quarrel also occurred between respondent and another sister,
Maricion, who was then defending the actions of petitioner. Because of said incident,
they had a hearing at the Barangay. At said hearing, respondent had the occasion to
remind petitioner of her monthly payment. Petitioner allegedly answered,
"Kalimutan mo na ang pera mo wala tayong pinirmahan. Hindi ako natatakot sa 'yo!"
Thereafter, petitioner left Unit H and could no longer be found. Petitioner being the
owner of the apartments, renovations on Unit A were discontinued when her
whereabouts could not be located. She also stopped making monthly payments and
ignored the demand letter dated December 2, 1997 sent by respondent's counsel.
On February 2, 1998, respondent filed a Complaint against petitioner, demanding
the latter to pay the former the net amount of P3,989,802.25 plus interest of 12%
per annum from date of default.
At the pre-trial conference, the issues were narrowed down as follows:
1. Whether or not a loan was duly constituted between the plaintiff and the
defendant in connection with the improvements or renovations on
apartment units A-H, which is in the name of the defendant [herein
petitioner];
2. Assuming that such a loan was duly constituted in favor of plaintiff
[herein respondent], whether or not the same is already due and payable;
3. Assuming that said loan is already due and demandable, whether or not
it is to be paid out of the rental proceeds from the apartment units
mentioned, presuming that such issue was raised in the Answer of the
Defendant;
4. Assuming that the said loan was duly constituted in favor of plaintiff
[herein respondent], whether or not it is in the amount of P3,909,802.20
and whether or not it will earn legal interest at the rate of 12% per annum,
compounded, as provided in Article 2212 of the Civil Code of the
Philippines, from the date of the extrajudicial demand; and

5. Whether or not the plaintiff [herein respondent] is entitled to the reliefs

prayed for in his Complaint or whether or not it is the defendant [herein
petitioner] who is entitled to the reliefs prayed for in her Answer with
Counterclaim.4
On November 15, 2002, the Regional Trial Court (RTC) of Quezon City, Branch 82,
rendered a Decision,5 the dispositive portion of which reads as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
plaintiff and against the defendant ordering the latter to pay the former the
following:
1. The sum of P3,989,802.25 with interest thereon at the legal rate of 12%
per annum computed from the date of default until the whole obligation is
fully paid;
2. The sum of P50,000.00 as and by way of attorney's fees; and
3. The cost of suit.
SO ORDERED.6
Petitioner appealed the foregoing RTC Decision to the CA, but on July 1, 2004, the
Court of Appeals promulgated its Decision affirming in toto said RTC judgment. A
motion for reconsideration of the CA Decision was denied per Resolution dated
August 31, 2004.
Hence, this petition where petitioner alleges that:
I.
THE COURT OF APPEALS ACTED NOT IN ACCORD WITH LAW AND
APPLICABLE JURISPRUDENCE OF THE SUPREME COURT WHEN IT AFFIRMED
THE LOWER COURT'S FINDING THAT THE LOAN BETWEEN PETITIONER AND
RESPONDENT IS ALREADY DUE AND DEMANDABLE.
II.
THE COURT OF APPEALS ERRED BY DEPARTING FROM THE ACCEPTED AND
USUAL COURSE OF JUDICIAL PROCEEDINGS OF AFFIRMING THE DUE AND
DEMANDABILITY OF THE LOAN CONTRARY TO THE EVIDENCE PRESENTED IN
THE LOWER COURT AND SANCTIONING SUCH DEPARTURE BY THE LOWER
COURT IN THE INSTANT CASE.
III.

THE COURT OF APPEALS ERRED FROM THE ACCEPTED AND USUAL COURSE
OF JUDICIAL PROCEEDINGS OF AFFIRMING THE AWARD OF ATTORNEY'S
FEES TO THE RESPONDENT WITHOUT ANY BASIS AND SANCTIONING SUCH
DEPARTURE BY THE LOWER COURT IN THE INSTANT CASE.7
The main issues in this case boil down to (1) whether petitioner's obligation is due
and demandable; (2) whether respondent is entitled to attorney's fees; and (3)
whether interest should be imposed on petitioner's indebtedness and, if in the
affirmative, at what rate.
Petitioner does not deny that she obtained a loan from respondent. She, however,
contends that the loan is not yet due and demandable because the suspensive
condition the completion of the renovation of the apartment units - has not yet
been fulfilled. She also assails the award of attorney's fees to respondent as
baseless.
For his part, respondent admits that initially, they agreed that payment of the loan
shall be made upon completion of the renovations. However, respondent claims that
during their meeting with some family members in the house of their brother Genaro
sometime in the second quarter of 1997, he and petitioner entered into a new
agreement whereby petitioner was to start making monthly payments on her loan,
which she did from June to October of 1997. In respondent's view, there was a
novation of the original agreement, and under the terms of their new agreement,
petitioner's obligation was already due and demandable.
Respondent also maintains that when petitioner disappeared from the family
compound without leaving information as to where she could be found, making it
impossible to continue the renovations, petitioner thereby prevented the fulfillment
of said condition. He claims that Article 1186 of the Civil Code, which provides that
"the condition shall be deemed fulfilled when the obligor voluntarily prevents its
fulfillment," is applicable to this case.
In his Comment to the present petition, respondent raised for the first time, the
issue that the loan contract between him and petitioner is actually one with a
period, not one with a suspensive condition. In his view, when petitioner began to
make partial payments on the loan, the latter waived the benefit of the term,
making the loan immediately demandable.
Respondent also believes that he is entitled to attorney's fees, as petitioner
allegedly showed bad faith by absconding and compelling him to litigate.
The Court finds the petition unmeritorious.
It is undisputed that herein parties entered into a valid loan contract. The only
question is, has petitioner's obligation become due and demandable? The Court
resolves the question in the affirmative.

The evidence on record clearly shows that after renovation of seven out of the eight
apartment units had been completed, petitioner and respondent agreed that the
former shall already start making monthly payments on the loan even if renovation
on the last unit (Unit A) was still pending. Genaro Tomimbang, the younger brother
of herein parties, testified that a meeting was held among petitioner, respondent,
himself and their eldest sister Maricion, sometime during the first or second quarter
of 1997, wherein respondent demanded payment of the loan, and petitioner agreed
to pay. Indeed, petitioner began to make monthly payments from June to October of
1997 totalling P93,500.00.8 In fact, petitioner even admitted in her Answer with
Counterclaim that she had "started to make payments to plaintiff [herein
respondent] as the same was in accord with her commitment to pay whenever she
was able; x x x ."9
Evidently, by virtue of the subsequent agreement, the parties mutually dispensed
with the condition that petitioner shall only begin paying after the completion of all
renovations. There was, in effect, a modificatory or partial novation, of petitioner's
obligation. Article 1291 of the Civil Code provides, thus:
Art. 1291. Obligations may be modified by:
(1) Changing their object or principal conditions;
(2) Substituting the person of the debtor;
(3) Subrogating a third person in the rights of the creditor. (Emphasis
supplied)
In Iloilo Traders Finance, Inc. v. Heirs of Sps. Soriano,10 the Court expounded on the
nature of novation, to wit:
Novation may either be extinctive or modificatory, much being dependent on the
nature of the change and the intention of the parties. Extinctive novation is never
presumed; there must be an express intention to novate; x x x .
An extinctive novation would thus have the twin effects of, first, extinguishing an
existing obligation and, second, creating a new one in its stead. This kind of
novation presupposes a confluence of four essential requisites: (1) a previous valid
obligation; (2) an agreement of all parties concerned to a new contract; (3) the
extinguishment of the old obligation; and (4) the birth of a new valid
obligation. Novation is merely modificatory where the change brought about by any
subsequent agreement is merely incidental to the main obligation (e.g., a change in
interest rates or an extension of time to pay); in this instance, the new agreement
will not have the effect of extinguishing the first but would merely supplement it or
supplant some but not all of its provisions.11
In Ong v. Bogalbal,12 the Court also stated, thus:

x x x the effect of novation may be partial or total. There is partial novation when
there is only a modification or change in some principal conditions of the obligation.
It is total, when the obligation is completely extinguished. Also, the term principal
conditions in Article 1291 should be construed to include a change in the period to
comply with the obligation. Such a change in the period would only be a partial
novation since the period merely affects the performance, not the creation of the
obligation.13
As can be gleaned from the foregoing, the aforementioned four essential elements
and the requirement that there be total incompatibility between the old and new
obligation, apply only to extinctive novation. In partial novation, only the terms and
conditions of the obligation are altered, thus, the main obligation is not changed and
it remains in force.
Petitioner stated in her Answer with Counterclaim 14 that she agreed and complied
with respondent's demand for her to begin paying her loan, since she believed this
was in accordance with her commitment to pay whenever she was able. Her partial
performance of her obligation is unmistakable proof that indeed the original
agreement between her and respondent had been novated by the deletion of the
condition that payments shall be made only after completion of renovations. Hence,
by her very own admission and partial performance of her obligation, there can be
no other conclusion but that under the novated agreement, petitioner's obligation is
already due and demandable.
With the foregoing finding that petitioner's obligation is due and demandable, there
is no longer any need to discuss whether petitioner's disappearance from the family
compound prevented the fulfillment of the original condition, necessitating
application of Article 1186 of the Civil Code, or whether the obligation is one with a
condition or a period.1awphil
As to attorney's fees, however, the award therefor cannot be allowed by the Court. It
is an oft-repeated rule that the trial court is required to state the factual, legal or
equitable justification for awarding attorney's fees. 15 The Court explained in Buing
v. Santos,16 to wit:
x x x While Article 2208 of the Civil Code allows attorney's fees to be awarded if the
claimant is compelled to litigate with third persons or to incur expenses to protect
his interest by reason of an unjustified act or omission of the party from whom it is
sought, there must be a showing that the losing party acted willfully or in bad faith
and practically compelled the claimant to litigate and incur litigation expenses. In
view of the declared policy of the law that awards of attorney's fees are the
exception rather than the rule, it is necessary for the trial court to make express
findings of facts and law that would bring the case within the exception and justify
the grant of such award. x x x.
Thus, the matter of attorney's fees cannot be touched upon only in the dispositive
portion of the decision. The text itself must state the reasons why attorney's fees are
being awarded. x x x 17

In the above-quoted case, there was a finding that defendants therein had no
intention of fulfilling their obligation in complete disregard of the plaintiffs right, and
yet, the Court did not deem this as sufficient justification for the award of attorney's
fees. Verily, in the present case, where it is understandable that some
misunderstanding could arise as to when the obligation was indeed due and
demandable, the Court must likewise disallow the award of attorney's fees.
We now come to a discussion of whether interest should be imposed on petitioner's
indebtedness. In Royal Cargo Corp. v. DFS Sports Unlimited, Inc.,18 the Court
reiterated the settled rule on imposition of interest, thus:
As to computation of legal interest, the seminal ruling in Eastern Shipping Lines, Inc.
v. Court of Appeals controls, to wit:
_ftnx x x x
II. With regard particularly to an award of interest in the concept of actual and
compensatory damages, the rate of interest, as well as the accrual thereof, is
imposed, as follows:
1. When an obligation is breached, and it consists in the payment of a sum
of money, i.e., a loan or forbearance of money, the interest due should be
that which may have been stipulated in writing. Furthermore, the interest
due shall itself earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 12% per annum to
be computed from default, i.e., from judicial or extrajudicial demand under
and subject to the provisions of Article 1169 of the Civil Code.

The foregoing rule on legal interest was explained in Sunga-Chan v. Court of

Appeals,19 in this wise:
Eastern Shipping Lines, Inc. synthesized the rules on the imposition of interest, if
proper, and the applicable rate, as follows: The 12% per annum rate under CB
Circular No. 416 shall apply only to loans or forbearance of money, goods, or credits,
as well as to judgments involving such loan or forbearance of money, goods, or
credit, while the 6% per annum under Art. 2209 of the Civil Code applies "when the
transaction involves the payment of indemnities in the concept of damage arising
from the breach or a delay in the performance of obligations in general," with the
application of both rates reckoned "from the time the complaint was filed until the
[adjudged] amount is fully paid." In either instance, the reckoning period for the
commencement of the running of the legal interest shall be subject to the condition
"that the courts are vested with discretion, depending on the equities of each case,
on the award of interest." 20
In accordance with the above ruling, since the obligation in this case involves a loan
and there is no stipulation in writing as to interest due, the rate of interest shall be
12% per annum computed from the date of extrajudicial demand.
IN VIEW OF THE FOREGOING, the petition is AFFIRMED with the MODIFICATION that
the award for attorney's fees is DELETED.
SO ORDERED.

EN BANC
2. When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damages awarded may be imposed
at the discretion of the court at the rate of 6% per annum. No interest,
however, shall be adjudged on unliquidated claims or damages except
when or until the demand can be established with reasonable certainty.
Accordingly, where the demand is established with reasonable certainty,
the interest shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code), but when such certainty cannot be so
reasonably established at the time the demand is made, the interest shall
begin to run only from the date the judgment of the court is made (at which
time the quantification of damages may be deemed to have been
reasonably ascertained). The actual base for the computation of legal
interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final
and executory, the rate of legal interest, whether the case falls under
paragraph 1 or paragraph 2, above, 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.

G.R. No. L-5003

June 27, 1953

NAZARIO TRILLANA, administrator-appellee, vs. QUEZON COLLEGE,

INC., claimant-appellant.
Singson, Barnes, Yap and Blanco for appellant.
Delgado, Flores & Macapagal for appellee.
PARAS, J.:
Damasa Crisostomo sent the following letter to the Board of Trustees of the Quezon
College:

June 1, 1948

The BOARD OF TRUSTEES

Quezon College
Manila
Gentlemen:
Please enter my subscription to dalawang daan (200) shares of your capital
stock with a par value of P100 each. Enclosed you will find (Babayaran kong
lahat pagkatapos na ako ay makapag-pahuli ng isda) pesos as my initial
payment and the balance payable in accordance with law and the rules and
regulations of the Quezon College. I hereby agree to shoulder the expenses
connected with said shares of stock. I further submit myself to all lawful
demands, decisions or directives of the Board of Trustees of the Quezon
College and all its duly constituted officers or authorities (ang nasa itaas ay
binasa at ipinaliwanag sa akin sa wikang tagalog na aking nalalaman).

Very respectfully,
(Sgd.) DAMASA CRISOSTOMO
Signature of subscriber

Nilagdaan sa aming harapan:

JOSE CRISOSTOMO
EDUARDO CRISOSTOMO
Damasa Crisostomo died on October 26, 1948. As no payment appears to have been
made on the subscription mentioned in the foregoing letter, the Quezon College, Inc.
presented a claim before the Court of First Instance of Bulacan in her testate
proceeding, for the collection of the sum of P20,000, representing the value of the
subscription to the capital stock of the Quezon College, Inc. This claim was opposed
by the administrator of the estate, and the Court of First Instance of Bulacan, after
hearing issued an order dismissing the claim of the Quezon College, Inc. on the
ground that the subscription in question was neither registered in nor authorized by
the Securities and Exchange Commission. From this order the Quezon College, Inc.
has appealed.

kong lahat pagkatapos na ako ay makapagpahuli ng isda." There is nothing in the

record to show that the Quezon College, Inc. accepted the term of payment
suggested by Damasa Crisostomo, or that if there was any acceptance the same
came to her knowledge during her lifetime. As the application of Damasa Crisostomo
is obviously at variance with the terms evidenced in the form letter issued by the
Quezon College, Inc., there was absolute necessity on the part of the College to
express its agreement to Damasa's offer in order to bind the latter. Conversely, said
acceptance was essential, because it would be unfair to immediately obligate the
Quezon College, Inc. under Damasa's promise to pay the price of the subscription
after she had caused fish to be caught. In other words, the relation between Damasa
Crisostomo and the Quezon College, Inc. had only thus reached the preliminary
stage whereby the latter offered its stock for subscription on the terms stated in the
form letter, and Damasa applied for subscription fixing her own plan of payment,
a relation, in the absence as in the present case of acceptance by the Quezon
College, Inc. of the counter offer of Damasa Crisostomo, that had not ripened into an
enforceable contract.
Indeed, the need for express acceptance on the part of the Quezon College, Inc.
becomes the more imperative, in view of the proposal of Damasa Crisostomo to pay
the value of the subscription after she has harvested fish, a condition obviously
dependent upon her sole will and, therefore, facultative in nature, rendering the
obligation void, under article 1115 of the old Civil Code which provides as follows: "If
the fulfillment of the condition should depend upon the exclusive will of the debtor,
the conditional obligation shall be void. If it should depend upon chance, or upon the
will of a third person, the obligation shall produce all its effects in accordance with
the provisions of this code." It cannot be argued that the condition solely is void,
because it would have served to create the obligation to pay, unlike a case,
exemplified by Osmea vs. Rama (14 Phil., 99), wherein only the potestative
condition was held void because it referred merely to the fulfillment of an already
existing indebtedness.
In the case of Taylor vs. Uy Tieng Piao, et al. (43 Phil., 873, 879), this Court already
held that "a condition, facultative as to the debtor, is obnoxious to the first sentence
contained in article 1115 and renders the whole obligation void."
Wherefore, the appealed order is affirmed, and it is so ordered with costs against
appellant.
EN BANC

It is not necessary for us to discuss at length appellant's various assignments of

error relating to the propriety of the ground relief upon by the trial court, since, as
pointed out in the brief for the administrator and appellee, there are other decisive
considerations which, though not touched by the lower court, amply sustained the
appealed order.

G.R. No. 83851. March 3, 1993.

It appears that the application sent by Damasa Crisostomo to the Quezon College,
Inc. was written on a general form indicating that an applicant will enclose an
amount as initial payment and will pay the balance in accordance with law and the
regulations of the College. On the other hand, in the letter actually sent by Damasa
Crisostomo, the latter (who requested that her subscription for 200 shares be
entered) not only did not enclose any initial payment but stated that "babayaran

Saleto J. Erames and Edilberto V. Logronio for petitioners.

VISAYAN SAWMILL COMPANY, INC., and ANG TAY, petitioners, vs. THE
HONORABLE COURT OF APPEALS and RJH TRADING, represented by RAMON
J. HIBIONADA, proprietor, respondents.

Eugenio O. Original for private respondent.

SYLLABUS
1. CIVIL LAW; CONTRACT TO SELL; EFFECT OF VENDEE'S FAILURE TO COMPLY WITH
POSITIVE SUSPENSIVE CONDITION; CASE AT BAR. The petitioner corporation's
obligation to sell is unequivocally subject to a positive suspensive condition, i.e., the
private respondent's opening, making or indorsing of an irrevocable and
unconditional letter of credit. The former agreed to deliver the scrap iron only upon
payment of the purchase price by means of an irrevocable and unconditional letter
of credit. Otherwise stated, the contract is not one of sale where the buyer acquired
ownership over the property subject to the resolutory condition that the purchase
price would be paid after delivery. Thus, there was to be no actual sale until the
opening, making or indorsing of the irrevocable and unconditional letter of credit.
Since what obtains in the case at bar is a mere promise to sell, the failure of the
private respondent to comply with the positive suspensive condition cannot even be
considered a breach casual or serious but simply an event that prevented the
obligation of petitioner corporation to convey title from acquiring binding force. In
Luzon Brokerage Co., Inc. vs. Maritime Building Co., Inc., this Court stated: ". . . The
upshot of all these stipulations is that in seeking the ouster of Maritime for failure to
pay the price as agreed upon, Myers was not rescinding (or more properly, resolving)
the contract, but precisely enforcing it according to its express terms. In its suit
Myers was not seeking restitution to it of the ownership of the thing sold (since it
was never disposed of), such restoration being the logical consequence of the
fulfillment of a resolutory condition, express or implied (Article 1190); neither was it
seeking a declaration that its obligation to sell was extinguished. What it sought was
a judicial declaration that because the suspensive condition (full and punctual
payment) had not been fulfilled, its obligation to sell to Maritime never arose or
never became effective and, therefore, it (Myers) was entitled to repossess the
property object of the contract, possession being a mere incident to its right of
ownership. It is elementary that, as stated by Castan, -- 'b) Si la condicion
suspensiva llega a faltar, la obligacion se tiene por no existente, y el acreedor pierde
todo derecho, incluso el de utilizar las medidas conservativas.'(3 Castan, Derecho
Civil, 7a Ed., p. 107). (Also Puig Pea, Der. Civ., T. IV (1), p. 113).'"
2. ID.; ID.; ID.; RESCISSION. The obligation of the petitioner corporation to sell did
not arise; it therefore cannot be compelled by specific performance to comply with
its prestation. In short, Article 1191 of the Civil Code does not apply; on the contrary,
pursuant to Article 1597 of the Civil Code, the petitioner corporation may totally
rescind, as it did in this case, the contract. Said Article provides: "ART. 1597. Where
the goods have not been delivered to the buyer, and the buyer has repudiated the
contract of sale, or has manifested his inability to perform his obligations,
thereunder, or has committed a breach thereof, the seller may totally rescind the
contract of sale by giving notice of his election so to do to the buyer."
3. ID.; ID.; IN CASE AT BAR, VENDOR'S CONSENT TO DIGGING UP AND GATHERING
OF SCRAP IRON NOT CONSTRUED AS DELIVERY THEREOF; REASONS THEREFOR.
Paragraph 6 of the Complaint reads: "6. That on May 17, 1983 Plaintiff with the
consent of defendant Ang Tay sent his men to the stockyard of Visayan Sawmill Co.,
Inc. at Cawitan, Sta. Catalina, Negros Oriental to dig and gather the scrap iron and
stock the same for weighing." This permission or consent can, by no stretch of the
imagination, be construed as delivery of the scrap iron in the sense that, as held by
the public respondent, citing Article 1497 of the Civil Code, petitioners placed the
private respondent in control and possession thereof. In the first place, said Article
1497 falls under the Chapter Obligations of the Vendor, which is found in Title VI

(Sales), Book IV of the Civil Code. As such, therefore, the obligation imposed therein
is premised on an existing obligation to deliver the subject of the contract. In the
instant case, in view of the private respondent's failure to comply with the positive
suspensive condition earlier discussed, such an obligation had not yet arisen. In the
second place, it was a mere accommodation to expedite the weighing and hauling of
the iron in the event that the sale would materialize. The private respondent was not
thereby placed in possession of and control over the scrap iron. Thirdly, We cannot
even assume the conversion of the initial contract or promise to sell into a contract
of sale by the petitioner corporation's alleged implied delivery of the scrap iron
because its action and conduct in the premises do not support this conclusion.
Indeed, petitioners demanded the fulfillment of the suspensive condition and
eventually cancelled the contract.
4. ID.; CONTRACTS; DAMAGES; MORAL DAMAGES; PURPOSE OF AWARD THEREOF;
EXEMPLARY DAMAGES. In contracts, such as in the instant case, moral damages
may be recovered if defendants acted fraudulently and in bad faith, while exemplary
damages may only be awarded if defendants acted in a wanton, fraudulent,
reckless, oppressive or malevolent manner. In the instant case, the refusal of the
petitioners to deliver the scrap iron was founded on the non-fulfillment by the
private respondent of a suspensive condition. It cannot, therefore, be said that the
herein petitioners had acted fraudulently and in bad faith or in a wanton, reckless,
oppressive or malevolent manner. What this Court stated in Inhelder Corp. vs. Court
of Appeals needs to be stressed anew: "At this juncture, it may not be amiss to
remind Trial Courts to guard against the award of exhorbitant (sic) damages that are
way out of proportion to the environmental circumstances of a case and which, time
and again, this Court has reduced or eliminated. Judicial discretion granted to the
Courts in the assessment of damages must always be exercised with balanced
restraint and measured objectivity." For, indeed, moral damages are emphatically
not intended to enrich a complainant at the expense of the defendant. They are
awarded only to enable the injured party to obtain means, diversion or amusements
that will serve to obviate the moral suffering he has undergone, by reason of the
defendant's culpable action. Its award is aimed at the restoration, within the limits of
the possible, of the spiritual status quo ante, and it must be proportional to the
suffering inflicted.
ROMERO, J., dissenting:
1. CIVIL LAW; CONTRACT OF SALE; DEFINED; WHEN PERFECTED; CASE AT BAR.
Article 1458 of the Civil Code has this definition: "By a contract of sale, one of the
contracting parties obligates himself to transfer the ownership of and to deliver a
determinate thing and the other to pay therefor a price certain in money or its
equivalent." Article 1475 gives the significance of this mutual undertaking of the
parties, thus: "The contract of sale is perfected at the moment there is a meeting of
minds upon the thing which is the object of the contract and upon the price. From
that moment, the parties may reciprocally demand performance, subject to the
provisions of the law governing the form of contracts." Thus, when the parties
entered into the contract entitled "Purchase and Sale of Scrap Iron" on May 1, 1983,
the contract reached the stage of perfection, there being a meeting of the' minds
upon the object which is the subject matter of the contract and the price which is
the consideration. Applying Article 1475 of the Civil Code, from that moment, the
parties may reciprocally demand performance of the obligations incumbent upon
them, i.e., delivery by the vendor and payment by the vendee.
2. ID.; ID.; DELIVERY; HOW ACCOMPLISHED; CASE AT BAR. From the time the
seller gave access to the buyer to enter his premises, manifesting no objection

thereto but even sending 18 or 20 people to start the operation, he has placed the
goods in the control and possession of the vendee and delivery is effected. For
according to Article 1497, "The thing sold shall be understood as delivered when it is
placed in the control and possession of the vendee." Such action or real delivery
(traditio) is the act that transfers ownership. Under Article 1496 of the Civil Code,
"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."
3. ID.; ID.; PROVISION IN CONTRACT REGARDING MODE OF PAYMENT NOT ESSENTIAL
REQUISITE THEREOF; WHEN PROVISION CONSIDERED A SUSPENSIVE CONDITION.
a provision in the contract regarding the mode of payment, like the requirement for
the opening of the Letter of Credit in this case, is not among the essential
requirements of a contract of sale enumerated in Articles 1305 and 1474, the
absence of any of which will prevent the perfection of the contract from happening.
Likewise, it must be emphasized that not every provision regarding payment should
automatically be classified as a suspensive condition. To do so would change the
nature of most contracts of sale into contracts to sell. For a provision in the contract
regarding the payment of the price to be considered a suspensive condition, the
parties must have made this clear in certain and unambiguous terms, such as for
instance, by reserving or withholding title to the goods until full payment by the
buyer. This was a pivotal circumstance in the Luzon Brokerage case where the
contract in question was replete with very explicit provisions such as the following:
"Title to the properties subject of this contract remains with the Vendor and shall
pass to, and be transferred in the name of the Vendee only upon complete payment
of the full price . . .;" 10 the Vendor (Myers) will execute and deliver to the Vendee a
definite and absolute Deed of Sale upon full payment of the Vendee . . .; and "should
the Vendee fail to pay any of the monthly installments, when due, or otherwise fail
to comply with any of the terms and conditions herein stipulated, then this Deed of
Conditional Sale shall automatically and without any further formality, become null
and void." It is apparent from a careful reading of Luzon Brokerage, as well as the
cases which preceded it and the subsequent ones applying its doctrines, that the
mere insertion of the price and the mode of payment among the terms and
conditions of the agreement will not necessarily make it a contract to sell. The
phrase in the contract "on the following terms and conditions" is standard form
which is not to be construed as imposing a condition, whether suspensive or
resolutory, in the sense of the happening of a future and uncertain event upon which
an obligation is made to depend. There must be a manifest understanding that the
agreement is in what may be referred to as "suspended animation" pending
compliance with provisions regarding payment. The reservation of title to the object
of the contract in the seller is one such manifestation. Hence, it has been decided in
the case of Dignos v. Court of Appeals that, absent a proviso in the contract that the
title to the property is reserved in the vendor until full payment of the purchase
price or a stipulation giving the vendor the right to unilaterally rescind the contract
the moment the vendee fails to pay within the fixed period, the transaction is an
absolute contract of sale and not a contract to sell.
4. ID.; ID.; CONTRACT OF SALE DISTINGUISHED FROM CONTRACT TO SELL; EFFECT
OF NON-PAYMENT OF PURCHASE PRICE; EFFECT OF DELIVERY ON OWNERSHIP OF
OBJECT OF CONTRACT. In a contract of sale, the non-payment of the price is a
resolutory condition which extinguishes the transaction that, for a time, existed and
discharges the obligations created thereunder. On the other hand, "the parties may
stipulate that ownership in the thing shall not pass to the purchaser until he has fully
paid the price." In such a contract to sell, the full payment of the price is a positive
suspensive condition, such that in the event of non-payment, the obligation of the

seller to deliver and transfer ownership never arises. Stated differently, in a contract
to sell, ownership is not transferred upon delivery of property but upon full payment
of the purchase price. Consequently, in a contract of sale, after delivery of the object
of the contract has been made, the seller loses ownership and cannot recover the
same unless the contract is rescinded. But in the contract to sell, the seller retains
ownership and the buyer's failure to pay cannot even be considered a breach,
whether casual or substantial, but an event that prevented the seller's duty to
transfer title to the object of the contract.
5. ID.; ID.; CASE OF SYCIP V. NATIONAL COCONUT CORPORATION, ET AL., G.R. NO. L6618, APRIL 28, 1956, DISTINGUISHED FROM CASE AT BAR. Worthy of mention
before concluding is Sycip v. National Coconut Corporation, et al. since, like this
case, it involves a failure to open on time the Letter of Credit required by the seller.
In Sycip, after the buyer offered to buy 2,000 tons of copra, the seller sent a
telegram dated December 19, 1946 to the buyer accepting the offer but on
condition that the latter opens a Letter of Credit within 48 hours. It was not until
December 26, 1946, however, that the Letter of Credit was opened. The Court,
speaking through Justice Bengzon, held that because of the delay in the opening of
the Letter of Credit; the seller was not obliged to deliver the goods. Two factors
distinguish Sycip from the case at bar. First, while there has already been a
perfected contract of sale in the instant case, the parties in Sycip were still
undergoing the negotiation process. The seller's qualified acceptance in Sycip
served as a counter offer which prevented the contract from being perfected. Only
an absolute and unqualified acceptance of a definite offer manifests the consent
necessary to perfect a contract. Second, the Court found in Sycip that time was of
the essence for the seller who was anxious to sell to other buyers should the offeror
fail to open the Letter of Credit within the stipulated time. In contrast, there are no
indicia in this case that can lead one to conclude that time was of the essence for
petitioner as would make the eleven-day delay a fundamental breach of the
contract.
6. ID.; OBLIGATIONS AND CONTRACTS; RESCISSION UNDER ARTICLE 1191 OF THE
CIVIL CODE; WHEN PROPER; DELAY IN PAYMENT FOR TWENTY DAYS NOT
CONSIDERED A SUBSTANTIAL BREACH OF CONTRACT; CASE AT BAR. The right to
rescind pursuant to Article 1191 is not absolute. Rescission will not be permitted for
slight or casual breach of the contract. Here, petitioners claim that the breach is so
substantial as to justify rescission . . . I am not convinced that the circumstances
may be characterized as so substantial and fundamental as to defeat the object of
the parties in making the agreement. None of the alleged defects in the Letter of
Credit would serve to defeat the object of the parties. It is to be stressed that the
purpose of the opening of a Letter of Credit is to effect payment. The abovementioned factors could not have prevented such payment. It is also significant to
note that petitioners sent a telegram to private respondents on May 23, 1983
cancelling the contract. This was before they had even received on May 26, 1983
the notice from the bank about the opening of the Letter of Credit. How could they
have made a judgment on the materiality of the provisions of the Letter of Credit for
purposes of rescinding the contract even before setting eyes on said document? To
be sure, in the contract, the private respondents were supposed to open the Letter
of Credit on May 15, 1983 but, it was not until May 26, 1983 or eleven (11) days
later that they did so. Is the eleven-day delay a substantial breach of the contract as
could justify the rescission of the contract? In Song Fo and Co. v. Hawaiian-Philippine
Co., it was held that a delay in payment for twenty (20) days was not a violation of
an essential condition of the contract which would warrant rescission for nonperformance. In the instant case, the contract is bereft of any suggestion that time
was of the essence. On the contrary, it is noted that petitioners allowed private
respondents' men to dig and remove the scrap iron located in petitioners' premises

between May 17, 1983 until May 30, 1983 or beyond the May 15, 1983 deadline for
the opening of the Letter of Credit. Hence, in the absence of any indication that the
time was of the essence, the eleven-day delay must be deemed a casual breach
which cannot justify a rescission.
DECISION

On May 24, 1983, plaintiff-appellee informed defendants-appellants by telegram that

the letter of credit was opened May 12, 1983 at the Bank of the Philippine Islands
main office in Ayala, but then (sic) the transmittal was delayed.
On May 26, 1983, defendants-appellants received a letter advice from the
Dumaguete City Branch of the Bank of the Philippine Islands dated May 26, 1983,
the content of which is quited (sic) as follows:

DAVIDE, JR., J p:
By this petition for review under Rule 45 of the Rules of Court, petitioners urge this
Court to set aside the decision of public respondent Court of Appeals in C.A.-G.R. CV
No. 08807, 1 promulgated on 16 March 1988, which affirmed with modification, in
respect to the moral damages, the decision of the Regional Trial Court (RTC) of Iloilo
in Civil Case No. 15128, an action for specific performance and damages, filed by
the herein private respondent against the petitioners. The dispositive portion of the
trial court's decision reads as follows:
"IN VIEW OF THE ABOVE FINDINGS, judgment is hereby rendered in favor of plaintiff
and against the defendants ordering the latter to pay jointly and severally plaintiff,
to wit:
1) The sum of Thirty-Four Thousand Five Hundred Eighty Three and 16/100
(P34,583.16), as actual damages;
2) The sum of One Hundred Thousand (P100,000.00) Pesos, as moral damages;
3) The sum of Ten Thousand (P10,000.00) Pesos, as exemplary damages;
4) The sum of TWENTY Five Thousand (P25,000.00) Pesos, as attorney's fees; and

'Please be advised that we have received today cable advise from our Head Office
which reads as follows:
'Open today our irrevocable Domestic Letter of Credit No. 01456-d fot (sic)
P250,000.00 favor ANG TAY c/o Visayan Sawmill Co., Inc. Dumaguete City, Negros
Oriental Account of ARMACO-MARSTEEL ALLOY CORPORATION 2nd Floor Alpap 1
Bldg., 140 Alfaro stp (sic) Salcedo Village, Makati, Metro Manila Shipments of about
500 MT of assorted steel scrap marine/heavy equipment expiring on July 24, 1983
without recourse at sight draft drawn on Armaco Marsteel Alloy Corporation
accompanied by the following documents: Certificate of Acceptance by ArmacoMarsteel Alloy Corporation shipment from Dumaguete City to buyer's warehouse
partial shipment allowed/transhipment (sic) not allowed'.
For your information'.
On July 19, 1983, plaintiff-appellee sent a series of telegrams stating that the case
filed against him by Pursuelo had been dismissed and demanding that defendantsappellants comply with the deed of sale, otherwise a case will be filed against them.
In reply to those telegrams, defendants-appellants' lawyer, on July 20, 1983
informed plaintiff-appellee's lawyer that defendant-appellant corporation is unwilling
to continue with the sale due to plaintiff-appellee's failure to comply with essential
pre-conditions of the contract.

5) The sum of Five Thousand (P5,000.00) Pesos as actual litis expenses." 2

The public respondent reduced the amount of moral damages to P25,000.00.
The antecedent facts, summarized by the public respondent, are as follows:
"On May 1, 1983, herein plaintiff-appellee and defendants-appellants entered into a
sale involving scrap iron located at the stockyard of defendant-appellant corporation
at Cawitan, Sta. Catalina, Negros Oriental, subject to the condition that plaintiffappellee will open a letter of credit in the amount of P250,000.00 in favor of
defendant-appellant corporation on or before May 15, 1983. This is evidenced by a
contract entitled `Purchase and Sale of Scrap Iron' duly signed by both parties.
On May 17, 1983, plaintiff-appellee through his man (sic), started to dig and gather
and (sic) scrap iron at the defendant-appellant's (sic) premises, proceeding with
such endeavor until May 30 when defendants-appellants allegedly directed plaintiffappellee's men to desist from pursuing the work in view of an alleged case filed
against plaintiff-appellee by a certain Alberto Pursuelo. This, however, is denied by
defendants-appellants who allege that on May 23, 1983, they sent a telegram to
plaintiff-appellee cancelling the contract of sale because of failure of the latter to
comply with the conditions thereof.

On July 29, 1983, plaintiff-appellee filed the complaint below with a petition for
preliminary attachment. The writ of attachment was returned unserved because the
defendant-appellant corporation was no longer in operation and also because the
scrap iron as well as other pieces of machinery can no longer be found on the
premises of the corporation." 3
In his complaint, private respondent prayed for judgment ordering the petitioner
corporation to comply with the contract by delivering to him the scrap iron subject
thereof; he further sought an award of actual, moral and exemplary damages,
attorney's fees and the costs of the suit. 4
In their Answer with Counterclaim, 5 petitioners insisted that the cancellation of the
contract was justified because of private respondent's non-compliance with essential
pre-conditions, among which is the opening of an irrevocable and unconditional
letter of credit not later than 15 May 1983.
During the pre-trial of the case on 30 April 1984, the parties defined the issues to be
resolved; these issues were subsequently embodied in the pre-trial order, to wit:

"1. Was the contract entitled Purchase and Sale of Scrap Iron, dated May 1, 1983
executed by the parties cancelled and terminated before the Complaint was filed by
anyone of the parties; if so, what are the grounds and reasons relied upon by the
cancelling parties; and were the reasons or grounds for cancelling valid and
justified?
2. Are the parties entitled to damages they respectively claim under the pleadings?"
6
On 29 November 1985, the trial court rendered its judgment, the dispositive portion
of which was quoted earlier.
Petitioners appealed from said decision to the Court of Appeals which docketed the
same as C.A.-G.R. CV No. 08807. In their Brief, petitioners, by way of assigned
errors, alleged that the trial court erred:
"1. In finding that there was delivery of the scrap iron subject of the sale;
2. In not finding that plaintiff had not complied with the conditions in the contract of
sale;
3. In finding that defendants-appellants were not justified in cancelling the sale;
4. In awarding damages to the plaintiff as against the defendants-appellants;

On the second and third assignments of error, defendants-appellants argue that

under Articles 1593 and 1597 of the Civil Code, automatic rescission may take place
by a mere notice to the buyer if the latter committed a breach of the contract of
sale.
Even if one were to grant that there was a breach of the contract by the buyer,
automatic rescission cannot take place because, as already (sic) stated, delivery had
already been made. And, in cases where there has already been delivery, the
intervention of the court is necessary to annul the contract.
As the lower court aptly stated:
'Respecting these allegations of the contending parties, while it is true that Article
1593 of the New Civil Code provides that with respect to movable property, the
rescission of the sale shall of right take place in the interest of the vendor, if the
vendee fails to tender the price at the time or period fixed or agreed, however,
automatic rescission is not allowed if the object sold has been delivered to the buyer
(Guevarra vs. Pascual, 13 Phil. 311; Escueta vs. Pando, 76 Phil 256), the action being
one to rescind judicially and where (sic) Article 1191, supra, thereby applies. There
being already an implied delivery of the items, subject matter of the contract
between the parties in this case, the defendant having surrendered the premises
where the scraps (sic) were found for plaintiff's men to dig and gather, as in fact
they had dug and gathered, this Court finds the mere notice of resolution by the
defendants untenable and not conclusive on the rights of the plaintiff (Ocejo Perez
vs. Int. Bank, 37 Phi. 631). Likewise, as early as in the case of Song Fo vs. Hawaiian
Philippine Company, it has been ruled that rescission cannot be sanctioned for a
slight or casual breach (47 Phil. 821).'

5. In not awarding damages to defendants-appellants." 7

Public respondent disposed of these assigned errors in this wise:
"On the first error assigned, defendants-appellants argue that there was no delivery
because the purchase document states that the seller agreed to sell and the buyer
agreed to buy 'an undetermined quantity of scrap iron and junk which the seller will
identify and designate.' Thus, it is contended, since no identification and designation
was made, there could be no delivery. In addition, defendants-appellants maintain
that their obligation to deliver cannot be completed until they furnish the cargo
trucks to haul the weighed materials to the wharf.
The arguments are untenable. Article 1497 of the Civil Code states:
'The thing sold shall be understood as delivered when it is placed in the control and
possession of the vendee.'
In the case at bar, control and possession over the subject matter of the contract
was given to plaintiff-appellee, the buyer, when the defendants-appellants as the
sellers allowed the buyer and his men to enter the corporation's premises and to
dig-up the scrap iron. The pieces of scrap iron then (sic) placed at the disposal of the
buyer. Delivery was therefore complete. The identification and designation by the
seller does not complete delivery.

In the case of Angeles vs. Calasanz (135 (1935) SCRA 323), the Supreme Court
ruled:
'Article 1191 is explicit. In reciprocal obligations, either party has the right to rescind
the contract upon failure of the other to perform the obligation assumed thereunder.
Of course, it must be understood that the right of a party in treating a contract as
cancelled or resolved on account of infractions by the other contracting party must
be made known to the other and is always provisional, being ever subject to scrutiny
and review by the proper court.'
Thus, rescission in cases falling under Article 1191 of the Civil Code is always subject
to review by the courts and cannot be considered final.
In the case at bar, the trial court ruled that rescission is improper because the
breach was very slight and the delay in opening the letter of credit was only 11
days.
'Where time is not of the essence of the agreement, a slight delay by one party in
the performance of his obligation is not a sufficient ground for rescission of the
agreement. Equity and justice mandates (sic) that the vendor be given additional
(sic) period to complete payment of the purchase price.' (Taguda vs. Vda. de Leon,
132 SCRA (1984), 722).'

There is no need to discuss the fourth and fifth assigned errors since these are
merely corollary to the first three assigned errors." 8
Their motion to reconsider the said decision having been denied by public
respondent in its Resolution of 4 May 1988, 9 petitioners filed this petition
reiterating the abovementioned assignment of errors.

In the agreement in question, entitled PURCHASE AND SALE OF SCRAP IRON, 12 the
seller bound and promised itself to sell the scrap iron upon the fulfillment by the
private respondent of his obligation to make or indorse an irrevocable and
unconditional letter of credit in payment of the purchase price. Its principal
stipulation reads, to wit:
xxx xxx xxx

There is merit in the instant petition.

"Witnesseth:
Both the trial court and the public respondent erred in the appreciation of the nature
of the transaction between the petitioner corporation and the private respondent. To
this Court's mind, what obtains in the case at bar is a mere contract to sell or
promise to sell, and not a contract of sale.
The trial court assumed that the transaction is a contract of sale and, influenced by
its view that there was an "implied delivery" of the object of the agreement,
concluded that Article 1593 of the Civil Code was inapplicable; citing Guevarra vs.
Pascual 10 and Escueta vs. Pando, 11 it ruled that rescission under Article 1191 of
the Civil Code could only be done judicially. The trial court further classified the
breach committed by the private respondent as slight or casual, foreclosing,
thereby, petitioners' right to rescind the agreement.
Article 1593 of the Civil Code provides:
"ARTICLE 1593. With respect to movable property, the rescission of the sale shall of
right take place in the interest of the vendor, if the vendee, upon the expiration of
the period fixed for the delivery of the thing, should not have appeared to receive it,
or, having appeared, he should not have tendered the price at the same time, unless
a longer period has been stipulated for its payment."
Article 1191 provides:
"ARTICLE 1191. The power to rescind obligations is implied in reciprocal ones, in
case one of the obligors should not comply with what is incumbent upon him.
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.
The court shall decree the rescission claimed, unless there be just cause authorizing
the fixing of a period."
xxx xxx xxx
Sustaining the trial court on the issue of delivery, public respondent cites Article
1497 of the Civil Code which provides:
"ARTICLE 1497. The thing sold shall be understood as delivered, when it is placed in
the control and possession of the vendee."

That the SELLER agrees to sell, and the BUYER agrees to buy, an undetermined
quantity of scrap iron and junk which the SELLER will identify and designate now at
Cawitan, Sta. Catalina, Negros Oriental, at the price of FIFTY CENTAVOS (P0.50) per
kilo on the following terms and conditions:
1. Weighing shall be done in the premises of the SELLER at Cawitan, Sta. Catalina,
Neg. Oriental.
2. To cover payment of the purchase price, BUYER will open, make or indorse an
irrevocable and unconditional letter of credit not later than May 15, 1983 at the
Consolidated Bank and Trust Company, Dumaguete City, Branch, in favor of the
SELLER in the sum of TWO HUNDRED AND FIFTY THOUSAND PESOS (P250,000.00),
Philippine Currency.
3. The SELLER will furnish the BUYER free of charge at least three (3) cargo trucks
with drivers, to haul the weighed materials from Cawitan to the TSMC wharf at Sta.
Catalina for loading on BUYER's barge. All expenses for labor, loading and unloading
shall be for the account of the BUYER.
4. SELLER shall be entitled to a deduction of three percent (3%) per ton as rust
allowance." (Emphasis supplied).
The petitioner corporation's obligation to sell is unequivocally subject to a positive
suspensive condition, i.e., the private respondent's opening, making or indorsing of
an irrevocable and unconditional letter of credit. The former agreed to deliver the
scrap iron only upon payment of the purchase price by means of an irrevocable and
unconditional letter of credit. Otherwise stated, the contract is not one of sale where
the buyer acquired ownership over the property subject to the resolutory condition
that the purchase price would be paid after delivery. Thus, there was to be no actual
sale until the opening, making or indorsing of the irrevocable and unconditional
letter of credit. Since what obtains in the case at bar is a mere promise to sell, the
failure of the private respondent to comply with the positive suspensive condition
cannot even be considered a breach casual or serious but simply an event that
prevented the obligation of petitioner corporation to convey title from acquiring
binding force. In Luzon Brokerage Co., Inc. vs. Maritime Building Co., Inc., 13 this
Court stated:
" . . . The upshot of all these stipulations is that in seeking the ouster of Maritime for
failure to pay the price as agreed upon, Myers was not rescinding (or more properly,
resolving) the contract, but precisely enforcing it according to its express terms. In
its suit Myers was not seeking restitution to it of the ownership of the thing sold
(since it was never disposed of), such restoration being the logical consequence of
the fulfillment of a resolutory condition, express or implied (article 1190); neither

was it seeking a declaration that its obligation to sell was extinguished. What it
sought was a judicial declaration that because the suspensive condition (full and
punctual payment) had not been fulfilled, its obligation to sell to Maritime never
arose or never became effective and, therefore, it (Myers) was entitled to repossess
the property object of the contract, possession being a mere incident to its right of
ownership. It is elementary that, as stated by Castan,
'b) Si la condicion suspensiva llega a faltar, la obligacion se tiene por no existente, y
el acreedor pierde todo derecho, incluso el de utilizar las medidas conservativas.' (3
Cast n, Derecho Civil, 7a Ed., p. 107). (Also Puig Pea, Der. Civ., T. IV (1), p. 113)'."
In the instant case, not only did the private respondent fail to open, make or indorse
an irrevocable and unconditional letter of credit on or before 15 May 1983 despite
his earlier representation in his 24 May 1983 telegram that he had opened one on
12 May 1983, the letter of advice received by the petitioner corporation on 26 May
1983 from the Bank of the Philippine Islands Dumaguete City branch explicitly
makes reference to the opening on that date of a letter of credit in favor of
petitioner Ang Tay c/o Visayan Sawmill Co. Inc., drawn without recourse on ARMACOMARSTEEL ALLOY CORPORATION and set to expire on 24 July 1983, which is
indisputably not in accordance with the stipulation in the contract signed by the
parties on at least three (3) counts: (1) it was not opened, made or indorsed by the
private respondent, but by a corporation which is not a party to the contract; (2) it
was not opened with the bank agreed upon; and (3) it is not irrevocable and
unconditional, for it is without recourse, it is set to expire on a specific date and it
stipulates certain conditions with respect to shipment. In all probability, private
respondent may have sold the subject scrap iron to ARMACO-MARSTEEL ALLOY
CORPORATION, or otherwise assigned to it the contract with the petitioners. Private
respondent's complaint fails to disclose the sudden entry into the picture of this
corporation.
Consequently, the obligation of the petitioner corporation to sell did not arise; it
therefore cannot be compelled by specific performance to comply with its prestation.
In short, Article 1191 of the Civil Code does not apply; on the contrary, pursuant to
Article 1597 of the Civil Code, the petitioner corporation may totally rescind, as it did
in this case, the contract. Said Article provides:
"ARTICLE 1597. Where the goods have not been delivered to the buyer, and the
buyer has repudiated the contract of sale, or has manifested his inability to perform
his obligations, thereunder, or has committed a breach thereof, the seller may
totally rescind the contract of sale by giving notice of his election so to do to the
buyer."
The trial court ruled, however, and the public respondent was in agreement, that
there had been an implied delivery in this case of the subject scrap iron because on
17 May 1983, private respondent's men started digging up and gathering scrap iron
within the petitioner's premises. The entry of these men was upon the private
respondent's request. Paragraph 6 of the Complaint reads:
"6. That on May 17, 1983 Plaintiff with the consent of defendant Ang Tay sent his
men to the stockyard of Visayan Sawmill Co., Inc. at Cawitan, Sta. Catalina, Negros
Oriental to dig and gather the scrap iron and stock the same for weighing." 14
This permission or consent can, by no stretch of the imagination, be construed as
delivery of the scrap iron in the sense that, as held by the public respondent, citing

Article 1497 of the Civil Code, petitioners placed the private respondent in control
and possession thereof. In the first place, said Article 1497 falls under the Chapter
15 Obligations of the Vendor, which is found in Title VI (Sales), Book IV of the Civil
Code. As such, therefore, the obligation imposed therein is premised on an existing
obligation to deliver the subject of the contract. In the instant case, in view of the
private respondent's failure to comply with the positive suspensive condition earlier
discussed, such an obligation had not yet arisen. In the second place, it was a mere
accommodation to expedite the weighing and hauling of the iron in the event that
the sale would materialize. The private respondent was not thereby placed in
possession of and control over the scrap iron. Thirdly, We cannot even assume the
conversion of the initial contract or promise to sell into a contract of sale by the
petitioner corporation's alleged implied delivery of the scrap iron because its action
and conduct in the premises do not support this conclusion. Indeed, petitioners
demanded the fulfillment of the suspensive condition and eventually cancelled the
contract.
All told, Civil Case No. 15128 filed before the trial court was nothing more than the
private respondent's preemptive action to beat the petitioners to the draw.
One last point. This Court notes the palpably excessive and unconscionable moral
and exemplary damages awarded by the trial court to the private respondent
despite a clear absence of any legal and factual basis therefor. In contracts, such as
in the instant case, moral damages may be recovered if defendants acted
fraudulently and in bad faith, 16 while exemplary damages may only be awarded if
defendants acted in a wanton, fraudulent, reckless, oppressive or malevolent
manner. 17 In the instant case, the refusal of the petitioners to deliver the scrap iron
was founded on the non-fulfillment by the private respondent of a suspensive
condition. It cannot, therefore, be said that the herein petitioners had acted
fraudulently and in bad faith or in a wanton, reckless, oppressive or malevolent
manner. What this Court stated in Inhelder Corp. vs. Court of Appeals 18 needs to be
stressed anew:
"At this juncture, it may not be amiss to remind Trial Courts to guard against the
award of exhorbitant (sic) damages that are way out of proportion to the
environmental circumstances of a case and which, time and again, this Court has
reduced or eliminated. Judicial discretion granted to the Courts in the assessment of
damages must always be exercised with balanced restraint and measured
objectivity."
For, indeed, moral damages are emphatically not intended to enrich a complainant
at the expense of the defendant. They are awarded only to enable the injured party
to obtain means, diversion or amusements that will serve to obviate the moral
suffering he has undergone, by reason of the defendant's culpable action. Its award
is aimed at the restoration, within the limits of the possible, of the spiritual status
quo ante, and it must be proportional to the suffering inflicted. 19
WHEREFORE, the instant petition is GRANTED. The decision of public respondent
Court of Appeals in C.A.-G.R. CV No. 08807 is REVERSED and Civil Case No. 15128 of
the Regional Trial Court of Iloilo is ordered DISMISSED.

THIRD DIVISION

G.R. No. 170405

February 2, 2010

RAYMUNDO S. DE LEON, Petitioner, vs. BENITA T. ONG.

DECISION

Subsequently, respondent learned that petitioner again sold the same properties to
one Leona Viloria after March 10, 1993 and changed the locks, rendering the keys he
gave her useless. Respondent thus proceeded to RSLAI to inquire about the credit
investigation. However, she was informed that petitioner had already paid the
amount due and had taken back the certificates of title.
Respondent persistently contacted petitioner but her efforts proved futile.

CORONA, J.:
On March 10, 1993, petitioner Raymundo S. de Leon sold three parcels of land 2 with
improvements situated in Antipolo, Rizal to respondent Benita T. Ong. As these
properties were mortgaged to Real Savings and Loan Association, Incorporated
(RSLAI), petitioner and respondent executed a notarized deed of absolute sale with
assumption of mortgage3 stating:
xxx

xxx

xxx

That for and in consideration of the sum of ONE MILLION ONE HUNDRED THOUSAND
PESOS (P1.1 million), Philippine currency, the receipt whereof is hereby
acknowledged from [RESPONDENT] to the entire satisfaction of
[PETITIONER], said [PETITIONER] does hereby sell, transfer and convey in a manner
absolute and irrevocable, unto said [RESPONDENT], his heirs and assigns that
certain real estate together with the buildings and other improvements existing
thereon, situated in [Barrio] Mayamot, Antipolo, Rizal under the following terms and
conditions:
1. That upon full payment of [respondent] of the amount of FOUR
HUNDRED FIFTEEN THOUSAND FIVE HUNDRED (P415,000), [petitioner] shall
execute and sign a deed of assumption of mortgage in favor of
[respondent] without any further cost whatsoever;
2. That [respondent] shall assume payment of the outstanding loan of SIX
HUNDRED EIGHTY FOUR THOUSAND FIVE HUNDRED PESOS (P684,500) with
REAL SAVINGS AND LOAN,4 Cainta, Rizal (emphasis supplied)
xxx

xxx

xxx

Pursuant to this deed, respondent gave petitioner P415,500 as partial payment.

Petitioner, on the other hand, handed the keys to the properties and wrote a letter
informing RSLAI of the sale and authorizing it to accept payment from respondent
and release the certificates of title.
Thereafter, respondent undertook repairs and made improvements on the
properties.5 Respondent likewise informed RSLAI of her agreement with petitioner for
her to assume petitioners outstanding loan. RSLAI required her to undergo credit
investigation.

On June 18, 1993, respondent filed a complaint for specific performance, declaration
of nullity of the second sale and damages6 against petitioner and Viloria in the
Regional Trial Court (RTC) of Antipolo, Rizal, Branch 74. She claimed that since
petitioner had previously sold the properties to her on March 10, 1993, he no longer
had the right to sell the same to Viloria. Thus, petitioner fraudulently deprived her of
the properties.
Petitioner, on the other hand, insisted that respondent did not have a cause of action
against him and consequently prayed for the dismissal of the complaint. He claimed
that since the transaction was subject to a condition (i.e., that RSLAI approve the
assumption of mortgage), they only entered into a contract to sell. Inasmuch as
respondent did apply for a loan from RSLAI, the condition did not arise.
Consequently, the sale was not perfected and he could freely dispose of the
properties. Furthermore, he made a counter-claim for damages as respondent filed
the complaint allegedly with gross and evident bad faith.
Because respondent was a licensed real estate broker, the RTC concluded that she
knew that the validity of the sale was subject to a condition. The perfection of a
contract of sale depended on RSLAIs approval of the assumption of mortgage. Since
RSLAI did not allow respondent to assume petitioners obligation, the RTC held that
the sale was never perfected.
In a decision dated August 27, 1999,7 the RTC dismissed the complaint for lack of
cause of action and ordered respondent to pay petitioner P100,000 moral
damages, P20,000 attorneys fees and the cost of suit.
Aggrieved, respondent appealed to the Court of Appeals (CA), 8 asserting that the
court a quo erred in dismissing the complaint.
The CA found that the March 10, 2003 contract executed by the parties did not
impose any condition on the sale and held that the parties entered into a contract of
sale. Consequently, because petitioner no longer owned the properties when he sold
them to Viloria, it declared the second sale void. Moreover, it found petitioner liable
for moral and exemplary damages for fraudulently depriving respondent of the
properties.
In a decision dated July 22, 2005,9 the CA upheld the sale to respondent and nullified
the sale to Viloria. It likewise ordered respondent to reimburse petitioner P715,250
(or the amount he paid to RSLAI). Petitioner, on the other hand, was ordered to

deliver the certificates of titles to respondent and pay her P50,000 moral damages
and P15,000 exemplary damages.

pertained to the performance of the contract, not the perfection thereof nor the
transfer of ownership.

Petitioner moved for reconsideration but it was denied in a resolution dated

November 11, 2005.10 Hence, this petition,11 with the sole issue being whether the
parties entered into a contract of sale or a contract to sell.

Settled is the rule that the seller is obliged to transfer title over the properties and
deliver the same to the buyer.18In this regard, Article 1498 of the Civil
Code19 provides that, as a rule, the execution of a notarized deed of sale is
equivalent to the delivery of a thing sold.

Petitioner insists that he entered into a contract to sell since the validity of the
transaction was subject to a suspensive condition, that is, the approval by RSLAI of
respondents assumption of mortgage. Because RSLAI did not allow respondent to
assume his (petitioners) obligation, the condition never materialized. Consequently,
there was no sale.
Respondent, on the other hand, asserts that they entered into a contract of sale as
petitioner already conveyed full ownership of the subject properties upon the
execution of the deed.
We modify the decision of the CA.
Contract of Sale or Contract to Sell?
The RTC and the CA had conflicting interpretations of the March 10, 1993 deed. The
RTC ruled that it was a contract to sell while the CA held that it was a contract of
sale.
In a contract of sale, the seller conveys ownership of the property to the buyer upon
the perfection of the contract. Should the buyer default in the payment of the
purchase price, the seller may either sue for the collection thereof or have the
contract judicially resolved and set aside. The non-payment of the price is therefore
a negative resolutory condition.12
On the other hand, a contract to sell is subject to a positive suspensive condition.
The buyer does not acquire ownership of the property until he fully pays the
purchase price. For this reason, if the buyer defaults in the payment thereof, the
seller can only sue for damages.13

In this instance, petitioner executed a notarized deed of absolute sale in favor of

respondent. Moreover, not only did petitioner turn over the keys to the properties to
respondent, he also authorized RSLAI to receive payment from respondent and
release his certificates of title to her. The totality of petitioners acts clearly indicates
that he had unqualifiedly delivered and transferred ownership of the properties to
respondent. Clearly, it was a contract of sale the parties entered into.
Furthermore, even assuming arguendo that the agreement of the parties was
subject to the condition that RSLAI had to approve the assumption of mortgage, the
said condition was considered fulfilled as petitioner prevented its fulfillment by
paying his outstanding obligation and taking back the certificates of title without
even notifying respondent. In this connection, Article 1186 of the Civil Code
provides:
Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily
prevents its fulfillment.
Void Sale Or Double Sale?
Petitioner sold the same properties to two buyers, first to respondent and then to
Viloria on two separate occasions.20 However, the second sale was not void for the
sole reason that petitioner had previously sold the same properties to respondent.
On this account, the CA erred.
This case involves a double sale as the disputed properties were sold validly on two
separate occasions by the same seller to the two different buyers in good faith.
Article 1544 of the Civil Code provides:

The deed executed by the parties (as previously quoted) stated that petitioner sold
the properties to respondent "in a manner absolute and irrevocable" for a sum
of P1.1 million.14 With regard to the manner of payment, it required respondent to
pay P415,500 in cash to petitioner upon the execution of the deed, with the
balance15payable directly to RSLAI (on behalf of petitioner) within a reasonable
time.16 Nothing in said instrument implied that petitioner reserved ownership of the
properties until the full payment of the purchase price. 17 On the contrary, the terms
and conditions of the deed only affected the manner of payment, not the immediate
transfer of ownership (upon the execution of the notarized contract) from petitioner
as seller to respondent as buyer. Otherwise stated, the said terms and conditions

Article 1544. If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first taken possession
thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring
it who in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in
good faith was first in the possession; and, in the absence thereof, to the person
who presents the oldest title, provided there is good faith. (emphasis supplied)

This provision clearly states that the rules on double or multiple sales apply only to
purchasers in good faith. Needless to say, it disqualifies any purchaser in bad faith.
A purchaser in good faith is one who buys the property of another without notice
that some other person has a right to, or an interest in, such property and pays a full
and fair price for the same at the time of such purchase, or before he has notice of
some other persons claim or interest in the property. 21 The law requires, on the part
of the buyer, lack of notice of a defect in the title of the seller and payment in full of
the fair price at the time of the sale or prior to having notice of any defect in the
sellers title.
Was respondent a purchaser in good faith? Yes.
Respondent purchased the properties, knowing they were encumbered only by the
mortgage to RSLAI. According to her agreement with petitioner, respondent had the
obligation to assume the balance of petitioners outstanding obligation to RSLAI.
Consequently, respondent informed RSLAI of the sale and of her assumption of
petitioners obligation. However, because petitioner surreptitiously paid his
outstanding obligation and took back her certificates of title, petitioner himself
rendered respondents obligation to assume petitioners indebtedness to RSLAI
impossible to perform.

this reason, respondent took actual possession and exercised control thereof by
making repairs and improvements thereon. Clearly, the sale was perfected and
consummated on March 10, 1993. Thus, respondent became the lawful owner of the
properties.
Nonetheless, while the condition as to the payment of the balance of the purchase
price was deemed fulfilled, respondents obligation to pay it subsisted. Otherwise,
she would be unjustly enriched at the expense of petitioner.
Therefore, respondent must pay petitioner P684,500, the amount stated in the deed.
This is because the provisions, terms and conditions of the contract constitute the
law between the parties. Moreover, the deed itself provided that the assumption of
mortgage "was without any further cost whatsoever." Petitioner, on the other hand,
must deliver the certificates of title to respondent. We likewise affirm the award of
damages.
WHEREFORE, the July 22, 2005 decision and November 11, 2005 resolution of the
Court of Appeals in CA-G.R. CV No. 59748 are
hereby AFFIRMED with MODIFICATION insofar as respondent Benita T. Ong is ordered
to pay petitioner Raymundo de Leon P684,500 representing the balance of the
purchase price as provided in their March 10, 1993 agreement.

Article 1266 of the Civil Code provides:

Costs against petitioner.

Article 1266. The debtor in obligations to do shall be released when the prestation
become legally or physically impossible without the fault of the obligor.

SO ORDERED.

Since respondents obligation to assume petitioners outstanding balance with RSLAI

became impossible without her fault, she was released from the said obligation.
Moreover, because petitioner himself willfully prevented the condition vis--vis the
payment of the remainder of the purchase price, the said condition is considered
fulfilled pursuant to Article 1186 of the Civil Code. For purposes, therefore, of
determining whether respondent was a purchaser in good faith, she is deemed to
have fully complied with the condition of the payment of the remainder of the
purchase price.
Respondent was not aware of any interest in or a claim on the properties other than
the mortgage to RSLAI which she undertook to assume. Moreover, Viloria bought the
properties from petitioner after the latter sold them to respondent. Respondent was
therefore a purchaser in good faith. Hence, the rules on double sale are applicable.
Article 1544 of the Civil Code provides that when neither buyer registered the sale of
the properties with the registrar of deeds, the one who took prior possession of the
properties shall be the lawful owner thereof.
In this instance, petitioner delivered the properties to respondent when he executed
the notarized deed22 and handed over to respondent the keys to the properties. For

G.R. No. L-3784

October 17, 1952

ERNEST BERG, plaintiff-appellee, vs. MAGDALENA ESTATE, INC., defendantappellant.

Claro M. Recto and Eusebio C. Encarnacion for appellant.
Alva Hill, Taada, Pelaez and Teehankee for appellee.
BAUTISTA ANGELO, J.:
This is an action for partition of the property known as Crystal Arcade situated in the
City of Manila.

The complaint avers that plaintiff and defendant are co-owners of said property, the
former being the owner of one-third interest and the latter of the remaining twothirds. The division is asked because plaintiff and defendant are unable to agree
upon the management of the property and upon the partition thereof.
Defendant answered setting up a special defense and a counterclaim. As a special
defense, defendant claims that on September 22, 1943, it sold to plaintiff one-third
of the property in litigation subject to the express condition that should either
vendor or vendee decide to sell his or its undivided share, the party selling would
grant to the other part first an irrevocable option to purchase the same at the
seller's price. It avers that on January 1946 plaintiff fixed the sum of P200,000 as the
price of said share and offered to sell it to defendant, which offer was accepted, and
for the payment of said price plaintiff gave defendant a period of time which,
including the extensions granted, would expire on May 31, 1947. Defendant claims
that, in spite of the acceptance of the offer, plaintiff refused to accept the payment
of the price, and for this refusal defendant suffered damages in the amount of
P100,000. For these reasons, defendant asks for specific performance.
Plaintiff filed a reply setting forth therein that the transaction referred to by the
defendant in its special defense relative to the property in litigation is not supported
by any note or memorandum subscribed by the parties, as in fact no such note or
memorandum has been made evidencing the transaction, for which reason, plaintiff
claims, this transaction falls under the statute of frauds and cannot form the basis of
the special defense invoked by the defendant.
After trial, at which the parties presented testimonial and documentary evidence,
the lower court found for the plaintiff holding that no agreement has been reached
between the parties relative to the purchase and sale of the property in question,
and, recognizing the right of plaintiff to demand partition under the provisions of
Rule 71 of the Rules of Court, it granted the relief prayed for in the complaint. Hence
this appeal.
The pivotal issue to be determined is whether an agreement to sell has actually
been reached between plaintiff and defendant of the share of the former in the
property in litigation for the sum of P200,000, as claimed by defendants, or whether
there have been merely negotiations between them which never ripened into an
agreement, as claimed by plaintiff. And in the determination of this issue, the
preliminary question to be threshed out is the point raised by plaintiff touching on
the evidence submitted by defendant in the light of the principle underlying the
statute of frauds.
It is an undisputed facts that since September 22, 1943, plaintiff and defendant were
co owners pro indiviso of the property known as Crystal Arcade in the proportion of
one-third interest belonging to the former and two-thirds to the latter. In the deed of
sale executed by the parties on said date, they stipulated that, should either of them
decide to sell his or her share, the other party will have an irrevocable option to
purchase it at the seller's price. Then a disagreement ensued between the parties as
to what really occurred concerning the deal.

Thus, while Berg claims that his negotiations with Hemady ended when an offer by
the latter to the former to buy his interest for the sum of P350,000, Hemady on the
other hand claims that Berg offered to sell it to him for P200,000 subject to the
condition that the necessary permit be obtained from the United States Treasury
Department.
It should be stated that, aside from the testimony of Berg and Hemady, no
document has been presented evidencing that alleged agreement to sell, and so
when defendant made attempts to prove, through the testimony of Hemady, that
plaintiff made an offer to sell his interest to defendant for the sum of P200,000, the
attempt met the vigorous opposition of plaintiff invoking the rule that such
agreement can only be established by a contract in writing, or by a note or
memorandum subscribed by the party sought to be charged, as prescribed by the
statute of frauds. It was then that defendant submitted in evidence exhibits "3" and
"4", contending that these documents, read in connection with the option to sell
embodied in exhibit "1", constitute a written proof contemplated by said statute. The
crux of this case, therefore, lies in the determination of whether said exhibits
partake of the nature of a note or memorandum within the purview of said statute as
contended by defendant.
It appears that right after the liberation of the Philippines, both Ernest Berg and K.H.
Hemady were accused of collaboration for which reason the Treasury Department of
the United States ordered the freezing of their properties under the law known as
Trading with the Enemy Act. Under the provisions of this Act both Berg and Hemady
could not sell or dispose of their properties without first securing the permit required
by it, and so to comply this requirement, both Berg and Hemady filed separately an
application with said Department for the purchase and sale of the property in
litigation. These applications are the ones marked as exhibits "3" and "4". In the
application exhibit "3", Ernest berg stated that he desires a license in order to sell
his interest in the Crystal Arcade, Escolta, Manila, for P200,000 in cash to Magdalena
Estate, Inc. asking at the same time for permission to place the amount in an
account in his name or in the name of the company he represents and to apply the
same from time to time to the payment of the obligations of Red Star Store Inc. In
the application exhibit "4", defendant in turn stated, through its president K. H.
Hemady, that it desires a license in order "to use a portion of the P400,000
requested as a loan from the National City Bank of New York, Manila, or from any
other bank in Manila, together with funds to be collected from old and new sales of
his real estate properties, for the purchase of the one-third (1/3) of the Crystal
Arcade property in the Escolta, Manila, belonging to Mr. Ernest Berg."
It is now defendant's position that if the option granted in exhibit "1" (deed of sale
containing the irrevocable option) is considered in relation to Berg's application
exhibit "3" and defendant's application exhibit "4", these documents constitute a
sufficient note or memorandum of the parties' alleged contract of purchase and sale
within the purview of the statute of frauds. This claim is disputed by Ernest Berg,
appellee herein. Which of these contentions is correct?
Before we proceed, it is important to state at this juncture some principles governing
the meaning, extent and scope of the rule underlying the statute of frauds relative

to the note or memorandum that may serve as proof to determine the existence of
an oral contract or agreement contemplated by it, and for our purpose, it suffices for
us to quote the following authorities:
No particular form of language or instrument is necessary to constitute a
memorandum or note in writing under the statute of frauds; any document
or writing, formal or informal, written either for the purpose of furnishing
evidence of the contract or for another purpose, which satisfies all the
requirements of the statute as to contents and signature, as discussed
respectively infra secs. 178-200, and infra secs. 201-215, is a sufficient
memorandum or note. A memorandum may be written as well as with lead
pencil as with pen and ink. It may also be filled in on a printed form (37
C.J.S., 653-654).
The note or memorandum required by the statute of fraud need not be
contained in a single document, nor, when contained in two or more
papers, need each paper to be sufficient as to contents and signature to
satisfy the statute. Two or more writings properly connected may be
considered together, matters missing or uncertain in one may be supplied
or rendered certain by another, and their sufficiency will depend on
whether, taken together, they meet the requirement of the statute as to
contents and the requirements of the statute as to signature, as considered
respectively infra secs. 179-200 and secs. 201-215.
Papers connected. The rule is frequently applied to two or more, or a
series of letters or telegrams, or letters and telegrams sufficiently
connected to allow their consideration together; but the rule is not confined
in its application to letters and telegrams; any other documents can be
read together when one refers to the other. Thus, the rule has been applied
so as to allow the consideration together, when properly connected, of a
letter and an order of court, a letter and order for goods, a letter and a
deposition, letters or telegrams and undelivered deeds, wills, corresponding
and related papers, a check and a letter, a receipt and a check, deeds and
a map, a memorandum of agreement and a deed, a memorandum of sale
and an abstract of title, a memorandum of sale and a will, a memorandum
of sale and a receipt, and a contract, deed and instruction to a depository in
escrow. The number of papers connected to make out a memorandum is
immaterial. (37 C.J.S. sec. 656-659).
Bearing in mind the foregoing rules, we are of the opinion that the applications
marked exhibits "3" and "4", whether considered separately or jointly, satisfy all the
requirements of the statute as to contents and signature and, as such, they
constitute sufficient proof to evidence the agreement in question. And we say so
because in both applications all the requirements of a contract are present, namely,
the parties, the price or consideration, and the subject-matter. In the application
exhibit "3", Ernest Berg appears as the seller and the Magdalena Estate Inc. as the
purchaser, the former's interest in the Crystal Arcade as the subject-matter, and the
sum of P200,000 as the consideration. As the application appears signed by Ernest
Berg, the party sought to be charged by the obligation. In other words, it can clearly

be implied that between Ernest Berg and the Magdalena Estate Inc. there has been
a clear agreement to sell said property for P200,000. From the language of the
application no other logical conclusion can be drawn for if there has not been any
previous agreement between the parties it is fool hardly to suppose that Ernest Berg
would take the trouble of filling an application with the Treasury Department of the
United States to secure a license to sell the property. the claim of Ernest Berg that
the negotiations he had with the Hemady ended with an offer on his part to buy his
interest for P350,000 cannot be sustained, for if such is the case it is indeed hard to
comprehend why he should state in his application that he was selling the property
for P200,000. The fact that in the same application Berg also asked for license to
place the money in an account in his name, or in the name of the company he
represents, and to apply the same to the payment of the obligations of said
company is of no consequence, nor does it argue against the purpose of the
application, for that request only means that, should the sale be carried out, he
would deposit the money in the name of the company and later would apply it to the
payment of its obligations.
We do not agree with the claim that the application Exhibit "4" submitted by the
Magdalena Estate Inc. does not harmonize with the terms appearing in the
application Exhibit "3", for, contrary to the claim, those two applications, considered
together, harmonize and complement each other. And we say so because the
application Exhibit "4" states specifically that a portion of the sum of P400,000
which is desired to be raised as a loan will be used for the purchase of the one-third
interest of Ernest Berg, which portion undoubtedly refers to the sum of P200,000
mentioned in the application Exhibit "3". This can be plainly seen by harmonizing
together the two applications. As the rule well points out, the sufficiency of the two
documents will depend on whether, taken together, they meet the requirements of
the statute as to contents and as to signature, and here both requirements are met
because the two documents should be consider as a whole. Whether, therefore, we
consider the two applications jointly or separately, it is safe to state that they meet
the requirements of the principle underlying the statutes of frauds.
Let us now take the terms of the agreement to sell, considering that this has been
properly established to see if defendant has complied with them and can ask now
for specific performance. We have already seen that plaintiff agreed to sell to
defendant his undivided one-third interest in the property for the sum of P200,000.
The next question is: within what period shall this consideration be paid? Here are
two possible theories: one under application Exhibit "3" and the other application
Exhibit "4". If we follow the application Exhibit "3", it is clear that payment is to be
made in cash, or as soon as the license has been granted to effect the transaction.
This means that it shall be effected immediately upon obtaining the license, or
within a reasonable time thereafter. It is not disputed that this license was granted,
but we find that defendant failed to make good its offer within a reasonable time for
lack of money, it being a fact that defendant was only able to raise funds for that
purpose when it succeeded in selling a portion of its real estate to a foreign
corporation one year thereafter, or on March 14, 1947. It is true that, in its answer,
defendant claims that plaintiff granted to defendant an extension of time up to May
31, 1947, within which to realize the transaction, but this claim is not supported by

any proof. In the opinion of the Court, this delay has the effect of relieving plaintiff of
his obligation under the law (Articles 1124-1451, of the old Civil Code).
Supposing that the term of payment is, as contended by defendant, until defendant
has obtained the loan of P400,000 from the National City Bank of New York, or after
it has obtained funds from other sources (considering the terms of application
Exhibit "4") what is the legal effect of this alternative clause? Can it be considered a
term within the meaning of our old Civil Code? Let us analyze it. Under article 1125
of said code, obligations, for the fulfillment of which a day certain has been fixed,
shall be demandable only when the day arrives. A day certain is understood to be
that which must necessarily arrive, even though it is not known when. In order that
an obligation may be with a term, it is, therefore, necessary that it should arrive,
sooner or later; otherwise, if its arrival is uncertain, the obligation is conditional. To
constitute a term the period must end on a day certain.
Viewing in this light the clause on which defendant relies for the enforcement of its
right to buy the property, it would seem that it is not a term, but a condition.
Considering the first alternative, that is, until defendant shall have obtained a loan
from the National City Bank of New York, it is clear that the granting of such loans is
not definite and cannot be held to come within the terms "day certain" provided for
in the Civil code, for it may or it may not happen. As a matter of fact, the loan did
not materialize. And if we consider that the period given was until such time as
defendant could raise money from other sources, we also find it to be indefinite and
contingent and so it is also a condition and not a term within the meaning of the law.
In any event it is apparent that the fulfillment of the condition contained in this
second alternative is made to depend upon the defendant's exclusive will, and
viewed in this light, we are of the opinion that plaintiff's obligation to sell did not
arise, for, under Article 1115 of the old Civil Code, "when the fulfillment of the
condition depends upon the exclusive will of the debtor the conditional obligation
shall be void."
Having reached the foregoing conclusions, we find no legal way by which plaintiff
could be compelled to carry out the terms of his agreement to sell considering the
circumstances surrounding the transaction. To our mind, it is clear that there was an
agreement to sell between the parties under the terms appearing in the applications
Exhibit "3" and "4". But it also appears that the plaintiff has decided to agree to sell
his interest because of his need of money at the time. He needed it not only for his
immediate needs but to pay the obligations of his own company, the Red Star
Stores. Inc. At that time the values of real estate were fast moving. They were
growing up in a rapid fashion. Time element was then of the essence of every
transaction, and the parties knew it. When, therefore, more than a year had
transpired since the negotiations started and defendant failed to come across,
plaintiff changed his mind. The interest of defendant to purchase the share of
plaintiff in the property is understandable, not only because of the advisability to
consolidate its ownership in said property, but because it was a handsome
transaction with a brighter prospect in the future. But it is to be regretted that both
Berg and Hemady who were both experienced businessmen did not put the terms of
their agreement clearly in writing. Had they done so perhaps this case would have
been avoided.

Finding no error in the decision appealed from, the same is hereby affirmed, with
costs against appellant.

EN BANC
G.R. No. L-6648

July 25, 1955

VICTORIAS PLANTERS ASSOCIATION, INC., NORTH NEGROS PLANTERS

ASSOCIATION, INC., FERNANDO GONZAGA, JOSE GASTON and CESAR L.
LOPEZ, on their own behalf and on behalf of other sugar cane planters in
Manapla, Cadiz and Victorias Districts, petitioners-appellees,
vs.
VICTORIAS MILLING CO., INC., respondent-appellant.
Ross, Selph, Carrascoso and Janda for appellant.
Taada, Pelaez and Teehankee for appellees.
PADILLA, J.:
This is an action for declaratory judgment under Rule 66. The relief prayed for calls
for an interpretation of contracts entered into by and between the sugar cane
planters in the districts of Manapla, Cadiz and Victorias, Occidental Negros, and the
Victorias Milling Company, Inc. After issues had been joined the parties submitted
the case for judgment upon the testimony of Jesus Jose Ossorio and the following
stipulation of facts:
1. That petitioners Victorias Planters Association, Inc. and North
Negros Planters Association, Inc. are non-stock corporations duly
established and existing under and by virtue of the laws of the
Philippines, with main offices at Victorias, Negros Occidental, and
Manapla, Negros Occidental, respectively, and were organized by,
and are composed of, sugar cane planters in the districts of
Victorias, Manapla and Cadiz, respectively, having been
established principally as the representative entities of the
numerous sugar cane planters in said districts whose sugar cane
productions are milled by the respondent corporation, with the
main object of safeguarding their interests and of taking up with
the latter problems and questions which from time to time, may
come up between the said respondent corporation the said sugar
cane planters; the other petitioners are Filipinos, of legal age, and
together with numerous other sugar cane planters who own sugar
cane producing properties at Victorias, Manapla, and Cadiz
Districts, Negros Occidental, are bona fide officials and members
of either one of the two petitioner associations; that petitioner
Fernando Gonzaga is a resident of Victorias, Negros Occidental,
petitioner Jose Gaston is a resident of Victorias, Negros Occidental,
and petitioner Cesar L. Lopez is a resident of Bacolod City, Negros
Occidental; and that said petitioners bring this action for the
benefit and on behalf of all their fellow sugar cane planters,
owners of sugar cane producing lands in the said districts of
Victorias, Manapla, and Cadiz, whose sugar cane productions are

milled by respondent corporation, and who are so numerous that it

would be impractical to include them all as parties herein;

of the last World War II and 2 years of post-war reconstruction of

respondent's central at Victorias, Negros Occidental.

2. That respondent Victorias Milling Co., Inc. is a corporation

likewise duly organized and established under and by virtue of the
laws of the Philippines, with main offices at Ayala Building Manila,
where it may be served with summons;

5. That after the liberation, the North Negros Sugar Co., Inc. did
not reconstruct its destroyed central at Manapla, Negros
Occidental, and in 1946, it advised the North Negros Planters
Association, Inc. that it had made arrangements with the
respondent Victorias Milling Co., Inc. for said respondent
corporation to mill the sugar cane produced by the planters of
Manapla and Cadiz holding milling contracts with it. Thus, after the
war, all the sugar cane produced by the planters of petitioner
associations, in Manapla, Cadiz, as well as in Victorias, who held
milling contracts, were milled in only one central, that of the
respondent corporation at Victorias;

3. That at various dates, from the year 1917 to 1934, the sugar
cane planters pertaining to the districts of Manapla and Cadiz,
Negros Occidental, executed identical milling contracts, setting
forth the terms and conditions under which the sugar central
"North Negros Sugar Co. Inc." would mill the sugar produced by
the sugar cane planters of the Manapla and Cadiz districts;
A copy of the standard form of said milling contracts with North
Negros Sugar Co., Inc. is hereto attached and made an integral
part hereof as Annex "A.
As may be seen from the said standard form of milling contract,
Annex "A," the sugar cane planters of Manapla and Cadiz, Negros
Occidental had executed on November 17, 1916 with Miguel J.
Ossorio, a contract entitled "Contrato de la Central Azucarrera de
300 Toneladas," whereby said Miguel J. Ossorio was given a period
up to December 31, 1916 within which to make a study of and
decide whether he would construct a sugar central or mill with a
capacity of milling 300 tons of sugar cane every 24 hours and
setting forth the mutual obligations and undertakings of such
central and the planters and the terms and conditions under which
the sugar cane produced by said sugar can planters would be
milled in the event of the construction of such sugar central by
said Miguel J. Ossorio. Such central was in fact constructed by said
Miguel J. Ossorio in Manapla, Negros Occidental, through the North
Negros Sugar Co., Inc., where after the standard form of milling
contracts (Annex "A") were executed, as above stated.
The parties cannot stipulate as to the milling contracts executed
by the planters by Victorias, Negros Occidental, other than as
follows; a number of them executed such milling contracts with
the North Negros Sugar Co., Inc., as per the standard forms hereto
attached and made an integral part as Annexes "B" and "B-1,"
while a number of them executed milling contracts with the
Victorias Milling Co., Inc., which was likewise organized by Miguel J.
Ossorio and which had constructed another Central at Victorias,
Negros Occidental, as per the standard form hereto attached and
made an integral part hereof as Annex "C".
4. The North Negros Sugar Co., Inc. had its first molienda or milling
during the 1918-1919 crop year, and the Victorias Milling Co., had
its first molienda or milling during the 1921-1922 crop year.
Subsequent moliendas or millings took place every successive
crop year thereafter, except the 6-year period, comprising 4 years

6. Beginning with the year 1948, and in the following years, when
the planters-members of the North Negros Planters Association,
Inc. considered that the stipulated 30-year period of their milling
contracts executed in the year 1918 had already expired and
terminated in the crop year 1947-1948, and the planters-members
of the Victorias Planters Association, Inc. likewise considered the
stipulated 30-year period of their milling contracts, as having
likewise expired and terminated in the crop year 1948-1949, under
the pertinent provisions of the standard milling contract (Annex
"A") on the duration thereof, which provided in Par. 21 thereof as
follows:
(a) Que entregaran a la Central de la `North Negros Sugar Co.,
Inc.' o a la que se construya en Victorias por Don Miguel J. Ossorio
o sus cesionarios por espacio de treinta (30) aos desde la
primera molienda, la caa que produzcan sus respectivas
haciendas, obligandose ademas a sembrar anualmente con
caadulce por lo menos en tres quintas partes de su extension
total apropiado para caa, incluyendo en esta denominacion tanto
la siembra con puntas nuevas como el cultivo del retoo o calaanan y sujetando la siembra a las epocas convenientes
designadas por el comite de hacenderos a fin de poder
proporcionar caa a la Central de conformidad con las clausulas 17
y 18 de esta escritura.
xxx

xxx

xxx

(i) Los hacenderos' imponen sobre sus haciendas mencionadas y

citadas en esta escritura servidumbres voluntarias a favor de Don
Miguel J. Ossorio de sembrar caa por lo menos en tres quintas
partes (3/5) de su extension superficial y entregar la caa que
produzcan a Don Miguel J. Ossorio, de acuerdo con este contrato,
por espacio de treinta (30) aos, a contar un (1) ao desde la
fecha de la primera molienda. repeated representation were made
with respondent corporation for negotiations regarding the
execution of new milling contracts which would take into
consideration the charged circumstances presently prevailing in
the sugar industry as compared with those prevailing over 30
years ago and would provide for an increased participation in the
milled sugar for the benefit of the planters and their workers.

7. That notwithstanding these repeated representations made by

the herein petitioners with the respondent corporation for the
negotiation and execution of new milling contracts, the herein
respondent has refused and still refuses to accede to the same,
contending that under the provisions of the mining contract
(Annex "A".) "It is the view of the majority of the stockholderinvestors, that our contracts with the planters call for 30 years of
milling not 30 years in time" and that "as there was no milling
during 4 years of the recent war and two years of reconstruction,
when these six years are added on to the earliest of our contracts
in Manapla, the contracts by this view terminate in the autumn of
1952," and the "the contracts for the Victorias Planters would
terminate in 1957, and still later for those in the Cadiz districts,"
and that "apart from the contractual agreements, the Company
believes these war and reconstruction years accrue to it in equity.

planters from delivering sugar cane and the central from milling it. In order that the
central, the herein appellant, may be entitled to demand from the other parties the
fulfillment of their part in the contracts, the latter must have been able to perform it
but failed or refused to do so and not when they were prevented by force
majeure such as war. To require the planters to deliver the sugar cane which they
failed to deliver during the four years of the Japanese occupation and the two years
after liberation when the mill was being rebuilt is to demand from the obligors the
fulfillment of an obligation which was impossible of performance at the time it
became due. Nemo tenetur ad impossibilia. The obligee not being entitled to
demand from the obligors the performance of the latters' part of the contracts under
those circumstances cannot later on demand its fulfillment. The performance of
what the law has written off cannot be demanded and required. The prayer that the
plaintiffs be compelled to deliver sugar cane to the appellant for six more years to
make up for what they failed to deliver during those trying years, the fulfillment of
which was impossible, if granted, would in effect be an extension of the term of the
contracts entered into by and between the parties.

The trial court rendered judgment the dispositive part of which is

Wherefore, the Court renders judgment in favor of the petitioners
and against the respondent and declares that the milling contracts
executed between the sugar cane planters of Victorias, Manapla
and Cadiz, Negros Occidental, and the respondent corporation or
its predecessors-in-interest, the North Negros Sugar Co., Inc.,
expired and terminated upon the lapse of the therein stipulated
30-year period, and that respondent corporation is not entitled to
claim any extension of or addition to the said 30-year term or
period of said milling contracts by virtue of an equivalent to 6
years of the last war and reconstruction of its central, during which
there was no planting and/or milling.

In accord with the rule laid down in the case of Lacson vs. Diaz, 47 Off. Gaz., Supp.
No. 12, p. 337, where despite the fact that the lease contract stipulated seven sugar
crops and not seven crop years as the term thereof, we held that such stipulation
contemplated seven consecutive agricultural years and affirmed the judgment which
declared that the leasee was not entitled to an extension of the term of the lease for
the number of years the country was occupied by the Japanese Army during which
no sugar cane was planted2 we are of the opinion and so hold that the thirty-year
period stipulated in the contracts expired on the thirtieth agricultural year. The
period of six years four during the Japanese occupation when the appellant did
not operate its mill and the last two during which the appellant reconstructed its mill
cannot be deducted from the thirty-year period stipulated in the contracts.
The judgment appealed from is affirmed, with costs against the appellant.

From this judgment the respondent corporation has appealed.

The appellant contends that the term stipulated in the contracts is thirty milling
years and not thirty calendar years and postulates that the planters fulfill their
obligation the six installments of their indebtedness--which they failed to perform
during the six milling years from 1941-42 to 1946-47. The reason the planters failed
to deliver the sugar cane was the war or a fortuitious event. The appellant ceased to
run its mill due to the same cause.
Fortuitious event relieves the obligor from fulfilling a contractual obligation. 1 The fact
that the contracts make reference to "first milling" does not make the period of
thirty years one of thirty milling years. The term "first milling" used in the contracts
under consideration was for the purpose of reckoning the thirty-year period
stipulated therein. Even if the thirty-year period provided for in the contracts be
construed as milling years, the deduction or extension of six years would not be
justified. At most on the last year of the thirty-year period stipulated in the contracts
the delivery of sugar cane could be extended up to a time when all the amount of
sugar cane raised and harvested should have been delivered to the appellant's mill
as agreed upon. The seventh paragraph of Annex "C", not found in the earlier
contracts (Annexes "A", "B", and "B-1"), quoted by the appellant in its brief, where
the parties stipulated that in the event of flood, typhoon, earthquake, or other force
majeure, war, insurrection, civil commotion, organized strike, etc., the contract shall
be deemed suspended during said period, does not mean that the happening of any
of those events stops the running of the period agreed upon. It only relieves the
parties from the fulfillment of their respective obligations during that time the

Bengzon, Acting C. J., Montemayor, Reyes, A., Jugo, Bautista Angelo, Labrador,
Concepcion, and Reyes, J. B. L., JJ., concur.

Footnotes
1

Article 1105, old Civil Code; article 1174, new Civil Code.

Cf. Lo Ching vs. Court of Appeals, 46 Off. Gaz., Supp. No. 1, p.

399, 81 Phil., 601 and American Far Eastern School of
Aviation vs. Ayala y Cia., 89 Phil., 292.

The Lawphil Project - Arellano Law Foundation

SECOND DIVISION
[G.R. No. 113626. September 27, 2002.]

JESPAJO REALTY CORPORATION, Petitioner, v. HON. COURT OF APPEALS, TAN

TE GUTIERREZ and CO TONG, Respondents.
DECISION

AUSTRIA-MARTINEZ, J.:

Before us is a petition for review on certiorari under Rule 45 of the Rules of Court
seeking to review and set aside the decision of the Court of Appeals promulgated on
January 26, 1994 in CA-G.R. SP No. 27312 1 which reversed the decision of the
Regional Trial Court in Civil Case No. 91-57757 2 and reinstated the Metropolitan
Trial Court rulings in Civil Case No. 134022-CV, entitled, "Jespajo Realty Corp.,
Plaintiff, v. Tan Te Gutierrez and Co Tong, Defendants." 3
The uncontroverted facts of the case as found by the Court of Appeals are as
follows:chanrob1es virtua1 1aw 1ibrary
"The subject of this controversy is an apartment building located at 619 Asuncion
Street, Binondo, Manila and owned by Jespajo Realty Corporation. On February 1,
1985, said corporation, represented by its President, Jesus L. Uy, entered into
separate contracts of lease with Tan Te Gutierrez and Co Tong. . . . Pursuant to the
contract, Tan Te occupied room No. 217 of the subject building at a monthly rent of
P847.00 while Co Teng occupied the Penthouse at a monthly rent of P910.00 . . . The
terms of the contract among others are the following:chanrob1es virtual 1aw library
`PERIOD OF LEASE The lease period shall be effective as of February 1, 1985 and
shall continue for an indefinite period provided the lessee is up-to-date in the
payment of his monthly rentals. The LESSEE may, at his option, terminate this
contract any time by giving sixty (60) days prior written notice of termination to the
LESSOR.
`However, violation of any of the terms and conditions of this contract shall be a
sufficient ground for termination thereof by the LESSOR.
x

`RENT INCREASE For the duration of this contract, the LESSEE agrees to an
automatic 20% yearly increase in the monthly rentals.
"Since the effectivity of the lease agreement on February 1985, the lessees
religiously paid their respective monthly rentals together with the 20% yearly
increased (sic) in the monthly rentals as stipulated in the contract. On January 2,
1990, the lessor corporation sent a written notice to the lessees informing them of
the formers intention to increase the monthly rentals on the occupied premises to
P3,500.00 monthly effective February 1, 1990. The lessees through its counsel in a
letter dated March 10, 1990 . . . manifested their opposition alleging that the same
is in contravention of the terms of the contract of lease as agreed upon. Due to the
opposition and the failure of the lessees to pay the increased monthly rentals in the
amount of P3,500.00, the lessor through its counsel in a letter dated April 10,
1990 . . . demanded that the lessees vacate the premises and pay the amount of
P7,000.00 corresponding to the months of February and March, 1990.
"The lessees exerted effort to pay the rentals due for the months of February and
March 1990 at the monthly rate stipulated in the contract but was refused by the

lessor so that on May 2, 1990, they instituted before the Metropolitan Trial Court of
Manila, Branch 16 a case for consignation . . .
"In the said complaint, plaintiffs alleged that the amount of P2,107.60 and P2,264.40
are the monthly rental obligations of Tan Te and Co Tong respectively. They sought to
consign with the court their monthly rental obligations at the rate above mentioned
for the months of February up to April 1990. Additionally, they prayed that the court
issue an order directing the defendant to honor the terms and conditions of the
lease.
"It is to be noted that on February 6, 1991, the trial judge in the consignation case
issued an order allowing the plaintiffs therein to deposit with the City Treasurer of
Manila the amount of P33,480.28 for Co Tong and the amount of P32,710.32 for Tan
Te Gutierrez representing their respective rentals for thirteen (13) months from
February, 1990 to January, 1991. This order however is without prejudice to the final
outcome of the case. Plaintiffs duly complied with the order as evidenced by an
official receipts (sic) . . . in the name of Tan Te Gutierrez and Co Tong, respectively,
issued by the City Treasurer on February 11, 1991.
"On November 15, 1990, or more than six (6) months from the filing of the case for
consignation, the lessor instituted an ejectment suit against the lessees before the
Metropolitan Trial Court of Manila Branch 20 . . . The court in its decision dated May
10, 1991 rendered a decision dismissing the ejectment suit for lack of merit. . ." 4
Portions of the MTC decision read:jgc:chanrobles.com.ph
"Furthermore, it appears that the plaintiff realizing that it had virtually surrendered
certain aspects of its rights of ownership over the subject premises in stipulating
that the lease shall continue for an indefinite period provided the LESSEE is up-todate in the payment of his monthly rentals, has raised the monthly rental to
P3,500.00 which is much higher than the correct rental in accordance with their
stipulated 20% automatic increase annually. This was done by the plaintiff
apparently in order to create an artificial cause of action, as when the LESSEES
would refuse, as in fact they refused, to pay the monthly rentals at the increase rate.
This pretext of the plaintiff cannot be countenanced by law.
"Anent the final issue as to whether or not the defendants are already in arrears in
the payment of rentals on the premises, it is noteworthy that the instant case for
Unlawful Detainer was filed by the plaintiff-LESSOR herein only on November 15,
1990, while the LESSEES consignation case against the LESSOR-plaintiff herein
based on the latters refusal to accept the rentals have been pending with Branch
XVI of this Court since May 2, 1990. And, in accordance with the consignation case,
the LESSEES, upon proper motion approved by the Court, deposited the amounts of
"P33,480.28 covered by O.R. No. B-578503 (for CO TONG) and P32,710.32 covered
by O.R. B-578502 (for TAN TE GUTIERREZ) both receipts dated February 11, 1991.
"IN VIEW OF THE FOREGOING, and after careful scrutiny of the entire record
including all documentary evidence adduced by both parties, this Court is of the
opinion and so holds that the plaintiff (Jespajo Realty Corporation) has failed to
establish its claims by preponderance of evidence.
"WHEREFORE, this case is hereby dismissed for utter lack of merit. The counterclaim
is likewise dismissed for lack of evidence to support the same. No pronouncement as
to costs.
"SO ORDERED." 5

Jespajo Realty Corporation then appealed to the Regional Trial Court which ruled in
its favor, thus:jgc:chanrobles.com.ph
"The Court is fully convinced that the sum demanded by appellant as increase in
appellees monthly rentals to the premises which they are renting from appellant is
very reasonable considering that the leased premises are located in the commercial
and business section of Manila in Binondo. It is also undisputed that appellant has a
24-hour security unit over the property as well as parking spaces and provisions for
electricity, water and telephone services.
"In the light of the foregoing, the Court is constrained to reverse the appealed
decision and hereby orders another judgment to be entered in favor of Appellant.
"WHEREFORE, PREMISES CONSIDERED, judgment is rendered as
follows:jgc:chanrobles.com.ph
"1. Reversing the decision of the court a quo insofar as it dismissed appellants
complaint;
"2. Declaring the termination or revocation [of the] lease contracts Annexes A and
A-1, Complaint executed between appellant and appellees;
"3. Ordering appellees, their heirs and all other persons acting for and in their behalf
to vacate and surrender immediately the lease premises to appellant;
"4. Adjudging appellees to pay unto appellant their rental arrearages of P57,426.45
for appellee (Tan Te Gutierrez) and P56,153.75 for appellee (Co Tong) as of April 30,
1991 and thereafter each appellee is ordered to pay also appellant the sum of
P3,500.00 every month starting May 1, 1991 until they shall have fully vacated and
surrendered the leased premises;
"5. Appellees are likewise adjudged to pay the sum of P10,000.00 as and for
attorneys fees, and
"6. The costs of suit.
"SO ORDERED." 6
However, said RTC decision was reversed by the Court of Appeals in the herein
assailed decision, portions of which read:jgc:chanrobles.com.ph
"Be that as it may, We find that it was the private respondent who, in fact, violated
the lease agreement by charging petitioners a monthly rental of P3,500.00, well in
excess of the rental stipulated in the lease contract. We see in the refusal of private
respondent to accept the rental being offered by petitioners, a scheme to place
petitioners in default of their rental payments. However, said scheme was waylaid
by petitioners consignation of the rentals due from them.
"In view of the foregoing discussion, We find no more necessity in discussing the last
two (2) errors raised in the petition. We likewise find that the respondent court
committed an error of fact and law in reversing the decision of the Metropolitan Trial
Court of Manila and in arriving at the decision under review.
"WHEREFORE, the decision under review is hereby REVERSED and SET ASIDE. The
decision dated May 10, 1991 of the Metropolitan Trial Court of Manila, Branch XX
which dismissed Civil Case No. 134022 CV for lack of merit is hereby REINSTATED.
No pronouncement as to costs.

"SO ORDERED." 7
Petitioner comes before this Court with the following questions:chanrob1es virtual
1aw library
"I
"WHEN THE PARTIES TO A CONTRACT OF LEASE STIPULATED FOR AN INDEFINITE
PERIOD AND SHALL CONTINUE FOR AS LONG AS THE LESSEE IS PAYING THE RENT, IS
THE SAID CONTRACT INTERMINABLE EVEN BY THE LESSOR?
"II
"WHEN THERE IS A DISAGREEMENT ON THE RENTALS TO BE PAID, SHOULD IT BE
RESOLVED IN A CONSIGNATION CASE OR IN AN EJECTMENT CASE?" 8
Petitioner claims that the contracts of lease entered into between the petitioner and
private respondents did not provide for a definite period, hence, Art. 1687 of the
New Civil Code applies. Said Article reads:jgc:chanrobles.com.ph
"Art. 1687. If the period for the lease has not been fixed, it is understood to be from
year to year, if the rent agreed upon is annual; from month to month, if it is monthly;
from week to week, if the rent is weekly; and from day to day, if the rent is to be
paid daily. However, even though a monthly rent is paid, and no period for the lease
has been set, the courts may fix a longer term for the lease after the lessee has
occupied the premises for over one year. If the rent is weekly, the courts may
likewise determine a longer period after the lessee has been in possession for over
six months. In case of daily rent, the courts may also fix a longer period after the
lessee has stayed in the place for over one month."cralaw virtua1aw library
Petitioner cited Yek Seng Co. v. Court of Appeals, 9 where this Court held that:"
[c]onformably, we hold that as the rental in the case at bar was paid monthly and
the term was not expressly agreed upon, the lease was understood under Article
1687 of the Civil Code to be terminable from month to month." 10
On the premise that the lease contract was effective on a monthly basis, petitioner
claims that the contract of lease with respondent has been terminated, without
being renewed, after respondents refused to comply with the increased monthly rate
of P3,500.00 and that this refusal even after receiving a notice of termination and a
final demand letter is a valid cause of action for unlawful detainer. 11
As to the second issue, petitioner argues that the Court of Appeals erred in ruling
that their allegation of respondents non-payment of rentals in the complaint for
ejectment was false. Petitioner insists that when it filed the case of ejectment,
private respondents had failed and refused to pay the demanded P3,500.00 monthly
rentals. Thus, petitioner correctly alleged non-payment of this rental as another
ground for ejectment aside from the basic allegation of termination of the lease
contract. Petitioner also contends that the issue of whether or not the P3,500.00
monthly rental should be the correct rental to be paid by the private respondents
cannot properly be determined in the consignation case earlier filed by private
respondents since the issue can be resolved only in the ejectment case. 12
Crucial in the resolution of this case is the construction of the lease agreement,
particularly the portion on the period of lease, which reads:jgc:chanrobles.com.ph

"PERIOD OF LEASE The lease period shall be effective as of February 1, 1985 and
shall continue for an indefinite period provided the lessee is up-to-date in the
payment of his monthly rentals. . ."cralaw virtua1aw library
Petitioner insists that the subject contract of lease did not provide for a definite
period hence it falls under the ambit of Art. 1687 of the NCC, making the agreement
effective on a month-to-month basis since rental payments are made monthly.
The Court of Appeals opined otherwise. It reasoned that the application of Art. 1687
in this case is misplaced because when there is a fixed period for the lease, whether
the period be definite or indefinite or when the period of the lease is expressly left to
the will of the lessee, Art. 1687 will not apply13 , citing Eleizagui v. Manila Lawn
Tennis Club, 2 Phil 309.
We agree with the ruling of the Court of Appeals. Art. 1687 finds no application in
the case at bar.
The lease contract between petitioner and respondents is with a period subject to a
resolutory condition. The wording of the agreement is unequivocal: "The lease
period . . . shall continue for an indefinite period provided the lessee is up-to-date in
the payment of his monthly rentals." The condition imposed in order that the
contract shall remain effective is that the lessee is up-to-date in his monthly
payments. It is undisputed that the lessees Gutierrez and Co Tong religiously paid
their rent at the increasing rate of 20% annually. The agreement between the lessor
and the lessees are therefore still subsisting, with the original terms and conditions
agreed upon, when the petitioner unilaterally increased the rental payment to more
than 20% or P3,500.00 a month.
Petitioner cites Puahay Lao v. Suarez 14 where it said that "the Court in the earlier
case of Singson v. Baldomar, 15 rejected the theory that a lease could continue for
an indefinite term so long as the lessee paid the rent, because then its continuance
and fulfillment would depend solely on the free and uncontrolled choice of the
tenant between continuing to pay rentals or not, thereby depriving the lessors of all
say in the matter as it would be contrary to the spirit of Article 1256 of the Old Civil
Code, now Article 1308 of the New Civil Code of the Philippines which provides that
validity or compliance of contracts can not be left to the will of one of the parties."
16
A review of the Puahay and Singson cases shows that the factual backgrounds
therein are not the same as in the case at bar. In those cases, the lessees were
actually in arrears with their rental payments. The Court, in the Puahay case, ruled
that the lessor had the right to terminate the lease under par. 3, Art. 1673 of the
Civil Code, declaring that the lessor may judicially eject the lessee for violation of
any of the conditions agreed upon in the contract. 17 In the case of Singson, the
lease contract was expressly on a month-to-month basis.
The contention of the petitioner that a provision in a contract that the lease period
shall subsist for an indefinite period provided the lessee is up-to-date in the
payment of his monthly rentals is contrary to Art. 1308 of the Civil Code is not
plausible. As expounded by the Court in the case of Philippine Banking Corporation
v. Lui She: 18
"We have had occasion to delineate the scope and application of article 1308 in the
early case of Taylor v. Uy Tieng Piao. 19 We said in that case:chanrob1es virtual 1aw
library

Article 1256 [now art. 1308] of the Civil Code in our opinion creates no impediment
to the insertion in a contract for personal service of a resolutory condition permitting
the cancellation of the contract by one of the parties. Such a stipulation, as can be
readily seen, does not make either the validity or the fulfillment of the contract
dependent upon the will of the party to whom is conceded the privilege of
cancellation; for where the contracting parties have agreed that such option shall
exist, the exercise of the option is as much in the fulfillment of the contract as any
other act which may have been the subject of agreement. . . 20"
Also held in the recent case of Allied Banking Corp. v. CA 21 where this Court upheld
the validity of a contract provision in favor of the lessee:jgc:chanrobles.com.ph
". . . Article 1308 of the Civil Code expresses what is known in law as the principle of
mutuality of contracts. . . . This binding effect of a contract on both parties is based
on the principle that the obligations arising from contracts have the force of law
between the contracting parties, and there must be mutuality between them based
essentially on their equality under which it is repugnant to have one party bound by
the contract while leaving the other free therefrom. The ultimate purpose is to
render void a contract containing a condition which makes its fulfillment dependent
solely upon the uncontrolled will of one of the contracting parties.
"An express agreement which gives the lessee the sole option to renew the lease is
frequent and subject to statutory restrictions, valid and binding on the parties. This
option, which is provided in the same lease agreement, is fundamentally part of the
consideration in the contract and is no different from any other provision of the lease
carrying an undertaking on the part of the lessor to act conditioned on the
performance by the lessee. . .
"The fact that such option is binding only on the lessor and can be exercised only by
the lessee does not render it void for lack of mutuality. After all, the lessor is free to
give or not to give the option to the lessee. And while the lessee has a right to elect
whether to continue with the lease or not, once he exercises his option to continue
and the lessor accepts, both parties are thereafter bound by the new lease
agreement. Their rights and obligations become mutually fixed, and the lessee is
entitled to retain possession of the property for the duration of the new lease, and
the lessor may hold him liable for the rent therefor. The lessee cannot thereafter
escape liability even if he should subsequently decide to abandon the premises.
Mutuality obtains in such a contract and equality exists between the lessor and the
lessee since they remain with the same faculties in respect to fulfillment. 22
(Emphasis supplied)
As correctly ruled by the MTC in its decision, the grant of benefit of the period in
favor of the lessee was given in exchange for no less than an automatic 20% yearly
increase in monthly rentals. This additional condition was not present in the Puahay
and Singson cases.
Moreover, the express provision in the lease agreement of the parties that violation
of any of the terms and conditions of the contract shall be sufficient ground for
termination thereof by the lessor, removes the contract from the application of
Article 1308.
Lastly, after having the lessees believe that their lease contract is one with an
indefinite period subject only to prompt payment of the monthly rentals by the
lessees, we agree with private respondents that the lessor is estopped from claiming
otherwise. 23
In the case of Opulencia v. Court of Appeals, 24 this Court held that petitioner is

estopped from backing out of her representations in the contract with respondent,
that is, she may not renege on her own acts and representations, to the prejudice of
the respondents who relied on them. We have held in a long line of cases that
neither the law nor the courts will extricate a party from an unwise or undesirable
contract he or she entered into with all the required formalities and will full
awareness of its consequences.25cralaw:red
Anent the second issue, we likewise hold that the contention of petitioner is without
merit. The Court of Appeals found that the petitioners allegation of respondents
non-payment is false. This is a finding of fact which we respect and uphold, absent
any showing of arbitrariness or grave abuse on the part of the court. Furthermore,
the statement of petitioner that the correct amount of rents cannot be considered in
a consignation case but only in the ejectment case is misleading because nowhere
in the decision of the appellate court did it state otherwise. This second issue is
clearly just a futile attempt to overthrow the appellate courts ruling.
Nevertheless, suffice it to be stated that under Article 1258 of the Civil Code which
provides:jgc:chanrobles.com.ph
"Art. 1258. Consignation shall be made by depositing the things due at the disposal
of judicial authority, before whom to tender of payment shall be proved, in a proper
case, and the announcement of the consignation in other cases.
"The consignation having been made, the interested parties shall also be notified
thereof." chanrob1es virtua1 1aw 1ibrary
the rationale for consignation is to avoid the performance of an obligation becoming
more onerous to the debtor by reason of causes not imputable to him. 26 Whether
or not petitioner has a cause of action to eject private respondents from the leased
premises due to refusal of the lessees to pay the increased monthly rentals had
been duly determined in the ejectment case by the Municipal Trial Court which was
correctly upheld by the Court of Appeals.
WHEREFORE, finding no error in the assailed decision, we DENY the petition for lack
of merit and AFFIRM the decision of the Court of Appeals.

THIRD DIVISION
G.R. NO. 144435

February 6, 2007

GUILLERMINA BALUYUT, Petitioner,

vs.
EULOGIO POBLETE, SALUD POBLETE and THE HON.COURT OF
APPEALS, Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court seeking to reverse the Decision1 of the Court of Appeals (CA) dated December
21, 1999 and its Resolution2 of August 4, 2000 in CA-G.R. CV No. 51534. The assailed

CA Decision affirmed the Decision of the Regional Trial Court (RTC) of Pasig, Branch
167 which dismissed herein petitioners Complaint in Civil Case No. 52268, while the
questioned Resolution denied petitioners Motion for Reconsideration.
The facts of the case are as follows:
On July 20, 1981, herein petitioner, Guillermina Baluyut (Baluyut), loaned from the
spouses Eulogio and Salud Poblete the sum of P850,000.00. As evidence of her
indebtedness, Baluyut signed, on even date, a promissory note for the amount
borrowed3 . Under the promissory note, the loan shall mature in one month. To
secure the payment of her obligation, she conveyed to the Poblete spouses, by way
of a real estate mortgage contract, a house and lot she owns, covered by Transfer
Certificate of Title (TCT) No. 137129 and located in Barrio Mapuntod, then
Municipality of Mandaluyong, Province of Rizal.4 Upon maturity of the loan, Baluyut
failed to pay her indebtedness. The Poblete spouses subsequently decided to
extrajudicially foreclose the real estate mortgage. On August 27, 1982, the
mortgaged property was sold on auction by the Provincial Sheriff of Rizal to the
Poblete spouses who were the highest bidders, as evidenced by a Certificate of Sale
issued pursuant thereto.5 Baluyut failed to redeem the subject property within the
period required by law prompting Eulogio Poblete to execute an Affidavit of
Consolidation of Title.6 Subsequently, TCT No. 43445 was issued in the name of
Eulogio and the heirs of Salud, who in the meantime, died. 7 However, Baluyut
remained in possession of the subject property and refused to vacate the same.
Hence, Eulogio and the heirs of Salud filed a Petition for the issuance of a writ of
possession with the RTC of Pasig. The case was docketed as Case No. R-3457.
Subsequently, the trial court issued an order granting the writ of possession.
However, before Eulogio and the heirs of Salud could take possession of the
property, Baluyut filed an action for annulment of mortgage, extrajudicial foreclosure
and sale of the subject property, as well as cancellation of the title issued in the
name of Eulogio and the heirs of Salud, plus damages. The case was docketed as
Civil Case No. 52268 and was subsequently consolidated with Case No. R-3457. In
the meantime, Eulogio died and was substituted by his heirs. After trial on the
merits, the trial court issued a Decision on September 13, 1995 dismissing Baluyuts
complaint.8
Aggrieved by the trial courts Decision, herein petitioner filed an appeal with the CA.
On December 21, 1999, the CA promulgated the presently assailed Decision
affirming the judgment of the trial court.9
Petitioner filed a Motion for Reconsideration but the same was denied in a Resolution
issued by the CA on August 4, 2000.10
Hence, the present petition with the following assignment of errors:
I

The decision and the resolution are both palpably infirm in holding that no
prior demand to pay is necessary for a loan to mature when there is conflict
between the date of maturity of the loan as stated in the Deed of Real
Estate Mortgage and the Promissory Note on the one hand and the real
date of its maturity on the other.
II
The decision and the resolution are both palpably infirm in holding that the
sheriff who conducted the foreclosure proceedings should be presumed to
have regularly performed his duty in conducting the foreclosure
proceedings despite the inability of the Office of the Provincial Sheriff who
had been ordered by the trial court to produce the records of the
foreclosure in question and show that there was compliance with the
required posting of notices in three public places and with the required
publication for three consecutive weeks in a newspaper of general
circulation.
III
That the Decision and Resolution are legally infirm in holding that because
the Petitioner-Appellant failed to invoke her right to be sent an Assessment
Notice by the highest bidder thirty days before the expiration of the right of
legal redemption during the trial and on appeal, it should be deemed that
she had waived her right to this benefit under the law despite a clear
showing that the said mandatory requirement should have been strictly
observed before title could be consolidated in favor of the highest bidder as
provided for in the certificate of sale issued by the sheriff. 11
In her first assigned error, petitioner contends that herein private respondents
witness, a certain Atty. Edwina Mendoza, is a competent witness and that her
testimony, that the maturity of the loan is one year, is acceptable proof of the
existence of collateral agreements which were entered into by the parties who
executed the Promissory Note and the Real Estate Mortgage prior, contemporaneous
and subsequent to the execution of these documents. Petitioner also argues that the
issue of the real date of the maturity of the loan can be settled only by a formal
letter of demand indicating the sum due and the specific date of payment which is
the duty of the private respondents to give; that absent said letter of demand, the
loan may not be considered to have matured; that, as a consequence, the property
given as a collateral may not be foreclosed and the subsequent consolidation of title
over the subject property should be annulled. Petitioner further contends that even if
the issue on the term of the loan was first brought up in petitioners Addendum to
the Motion for Reconsideration filed with the CA, the appellate court may still
properly consider this issue in the interest of justice and equity considering that this
is a matter of record and has some bearing on the other issues submitted for
resolution.

Anent her second assignment of error, petitioner contends that the CA erred in
relying on the rule on presumption of regularity in the sheriffs performance of his
duties relative to the foreclosure of the questioned property absent any evidence
presented by petitioner to prove that the sheriff failed to comply with the legal
requirements in the sale of the foreclosed properties. Petitioner argues that under
the law, the sheriff is required to submit an Affidavit of Posting of Notices to the clerk
of court and to the judge before he is allowed to schedule an auction sale. However,
per letter from the Office of the Clerk of Court, there are no records of the
foreclosure proceedings involving the subject property. Based on this premise,
petitioner concludes that since the existence of these documents is supposed to be
in the custody of the sheriffs office and that the private respondents are supposed
to have copies of these documents, being the ones who prosecuted the foreclosure
proceedings, petitioners contention that there was non-compliance with the legal
requirements for the validity of the foreclosure proceedings partakes of a negative
allegation which she need not prove. Petitioner argues that in the absence of
documents evidencing the foreclosure proceedings over the subject property, the
lower court should have acted judiciously by annulling the foreclosure and ordering
the repeat of the proceedings.
As to her third assigned error, petitioner asserts that despite the fact that she is
entitled under the law to an Assessment Notice or Notice of Redemption coming
from the highest bidder 30 days before the expiration of the period to redeem
apprising her of the principal amount, the interest, taxes and other lawful fees due in
case she opts to exercise her right of redemption, she did not receive any notice of
this kind. Petitioner contends that her right to this notice is not subject to waiver and
that her failure to invoke the same during trial and on appeal does not preclude her
from invoking such right in her motion for reconsideration filed with the CA and in
the present petition.
In their Motion to Dismiss, which the Court treated as their comment on the petition,
private respondents contend that the petition should be dismissed on the ground
that no question of law was raised therein. Private respondents argue that the issue
as to the supposed conflict between the date of maturity of the loan as stated in the
Deed of Real Estate Mortgage and the Promissory Note, on one hand, and the real
date of maturity as agreed upon by the parties, on the other, as well as the question
of whether or not the sheriff who conducted the foreclosure proceedings involving
the subject property complied with the legal requirements of posting and publication
are questions of fact which are not proper subjects of a petition for review
on certiorari. Furthermore, private respondents also assert in their Memorandum
that the questions of fact being raised by petitioner had already been ruled upon by
the RTC and the CA in favor of private respondents; that the findings of fact of the
RTC and the CA are binding on this Court.
The Court finds the petition without merit.
Petitioner admits that the issue regarding the date of maturity of the loan which she
incurred from the Poblete spouses was first brought up only in her Addendum to the
Motion for Reconsideration filed before the CA. In an effort to clothe her argument
with merit, petitioner contends that the CA should have properly considered this

issue in the interest of justice and equity. The Court is not persuaded. It is settled
that an issue not raised during trial could not be raised for the first time on appeal
as to do so would be offensive to the basic rules of fair play, justice, and due
process.12 Contrary to petitioners contention, it would be the height of injustice if
the CA allowed her to raise an issue at a very late stage of the proceedings. It would
be unfair to the adverse party who would have no opportunity to present
evidence in contra to the new theory, which it could have done had it been aware of
it at the time of the hearing before the trial court. 13 It is true that this rule admits of
exceptions as in cases of lack of jurisdiction, where the lower court committed plain
error, where there are jurisprudential developments affecting the issues, or when the
issues raised present a matter of public policy. 14 However, the Court finds that none
of these exceptions are present in the instant case.

Moreover, during her cross-examination, petitioner herself never claimed that the
loan shall mature in one year despite being questioned regarding its maturity. She
testified thus:

In addition, the issue regarding the date of maturity of the loan is factual and settled
is the rule that only questions of law may be raised in a petition for review
on certiorari under Rule 45 of the Rules of Court, as the Supreme Court is not a trier
of facts.15 It is not the function of this Court to review, examine and evaluate or
weigh the probative value of the evidence presented.16 While there are also
exceptions to this rule such as when the factual findings of the trial court and the CA
are contradictory; when the inference made by the CA is manifestly mistaken or
absurd; when the judgment of the CA is premised on its misapprehension of facts;
and, when the CA failed to resolve relevant facts which, if properly considered,
would justify a modification or reversal of the decision of the appellate court, 17 this
Court finds that the present case does not fall under any of these exceptions.

Q When you signed this Deed of Real Estate Mortgage, you also signed a Promisory
[sic] Note, is that correct?

Even if petitioner had properly raised the issue regarding the real date of maturity of
the loan, it is a long-held cardinal rule that when the terms of an agreement are
reduced to writing, it is deemed to contain all the terms agreed upon and no
evidence of such terms can be admitted other than the contents of the agreement
itself.18 In the present case, the promissory note and the real estate mortgage are
the law between petitioner and private respondents. It is not disputed that under the
Promissory Note dated July 20, 1981, the loan shall mature in one month from date
of the said Promissory Note.
Petitioner makes much of the testimony of Atty. Edwina Mendoza that the maturity
of the loan which petitioner incurred is one year. However, evidence of a prior or
contemporaneous verbal agreement is generally not admissible to vary, contradict
or defeat the operation of a valid contract.19 While parol evidence is admissible to
explain the meaning of written contracts, it cannot serve the purpose of
incorporating into the contract additional contemporaneous conditions which are not
mentioned at all in writing, unless there has been fraud or mistake. 20In the instant
case, aside from the testimony of Atty. Mendoza, no other evidence was presented
to prove that the real date of maturity of the loan is one year. In fact there was not
even any allegation in the Complaint and in the Memorandum filed by petitioner
with the trial court to the effect that there has been fraud or mistake as to the date
of the loans maturity as contained in the Promissory Note of July 20, 1981.

Q You said that you borrowed P850,000.00 to [sic] Mrs. Poblete, is that correct?
A Yes sir.
Q In fact, you signed a Real Estate Mortgage marked as Exhibit "B"?
A Yes sir.

RECORD: Witness did not answer.

Q Did you sign or not a Promisory [sic] note in relation to this Real Estate Mortgage.
A I dont remember sir.
Q You dont remember. I am showing to you a Promisory Note with your signature,
did you not sign this dated July 20, 1981?
A Yes sir.
Q Now, according to this Promisory [sic] Note, the loan is for one (1) month from July
20, 1981, did you pay for that loan on its maturity date?
A I did not sir.
Q Up to now, you have not paid that loan?
A I have not sir.
Q What happen [sic] to the mortgage when you did not paid [sic] that loan from one
(1) month after July 20, 1981?
A None sir.21
In sum, petitioner failed to present clear and convincing evidence to prove her
allegation that the real agreement of the parties is for the loan to mature in one
year.

As to the second assigned error, the prevailing jurisprudence is that foreclosure

proceedings have in their favor the presumption of regularity and the burden of
evidence to rebut the same is on the petitioner.22 Moreover, the Court agrees with
the CA that a mortgagor who alleges absence of a requisite has the burden of
establishing that fact.23 Petitioner failed in this respect as she did not present any
evidence to prove her allegations.
Moreover, the fact that the records of the foreclosure proceedings involving the
subject property could not be found does not necessarily mean that the legal
requirements of posting and publication had not been complied with. Private
respondents were able to present the Affidavit of Publication 24 executed by the
publisher of Nuevo Horizonte, a newspaper of general circulation, together with a
clipping25 of the published notice attached thereto, to prove that notices of the sale
of the subject property were validly published in accordance with law. The affidavit
of publication executed by the publisher of a newspaper stating therein that said
newspaper is of general circulation and that the requisite notice of foreclosure sale
was published in said paper in accordance with law constitutes prima facie evidence
of compliance with the required publication.26
As to the alleged lack of posting of the notices of sale in at least three public places,
herein petitioner failed to discharge her burden of proving by convincing evidence
her allegation that there was actually no compliance with the posting requirement.
Hence, in the absence of contrary evidence, the presumption prevails that the
sheriff performed his official duty of posting the notices of sale. 27
The Courts ruling in Olizon v. Court of Appeals,28 insofar as posting and publication
requirements in mortgage foreclosure sales are concerned, is instructive:
We take judicial notice of the fact that newspaper publications have more farreaching effects than posting on bulletin boards in public places. There is a greater
probability that an announcement or notice published in a newspaper of general
circulation, which is distributed nationwide, shall have a readership of more people
than that posted in a public bulletin board, no matter how strategic its location may
be, which caters only to a limited few. Hence, the publication of the notice of sale in
[a] newspaper of general circulation alone is more than sufficient compliance with
the notice-posting requirement of the law. By such publication, a reasonably wide
publicity had been effected such that those interested might attend the public sale,
and the purpose of the law had been thereby subserved.
The object of a notice of sale is to inform the public of the nature and condition of
the property to be sold, and of the time, place and terms of the sale. Notices are
given for the purpose of securing bidders and to prevent a sacrifice of the property.
If these objects are attained, immaterial errors and mistakes will not affect the
sufficiency of the notice; but if mistakes or omissions occur in the notices of sale,
which are calculated to deter or mislead bidders, to depreciate the value of the
property, or to prevent it from bringing a fair price, such mistakes or omissions will
be fatal to the validity of the notice, and also to the sale made pursuant thereto.

In the instant case, the aforesaid objective was attained since there was sufficient
publicity of the sale through the newspaper publication. There is completely no
showing that the property was sold for a price far below its value as to insinuate any
bad faith, nor was there any showing or even an intimation of collusion between the
sheriff who conducted the sale and respondent bank. This being so, the alleged noncompliance with the posting requirement, even if true, will not justify the setting
aside of the sale.29 1awphi1.net
In the present case, there was sufficient evidence to prove that notices of the
foreclosure sale of the subject property were published in accordance with law and
that there was no allegation, much less proof, that the property was sold for a price
which is considerably lower than its value as to show collusion between the sheriff
and herein private respondents. Hence, even granting that the sheriff failed to post
the notices of foreclosure in at least three public places, such failure, pursuant
to Olizon, is not a sufficient basis in nullifying the auction sale and the subsequent
issuance of title in favor of private respondents.
As to petitioners argument that the sheriff in charge of the auction sale is required
to execute an affidavit of posting of notices, the Court agrees with private
respondents contention that petitioners reliance on the provisions of Section 5,
Republic Act (R.A.) No. 720, as amended by R.A. No. 5939 30 , as well as on the cases
ofRoxas v. Court of Appeals,31 Pulido v. Court of Appeals32 and Tambunting v. Court of
Appeals,33 is misplaced as the said provision of law refers specifically and exclusively
to the foreclosure of mortgages covering loans granted by rural banks. In the
present case, the contracts of loan and mortgage are between private individuals.
The governing law, insofar as the extrajudicial foreclosure proceedings are
concerned, is Act No. 3135, as amended by Act No. 4118.34 Section 3 of the said law
reads as follows:
Sec. 3. Notice shall be given by posting notices of the sale for not less than twenty
days in at least three public places of the municipality or city where the property is
situated and if such property is worth more than four hundred pesos, such notice
shall also be published once a week for at least three consecutive weeks in a
newspaper of general circulation in the municipality or city.
Unlike in the amended provisions of Section 5, R.A. No. 720, nowhere in the abovequoted provision of Act No. 3135, as amended, or in any Section thereof, is it
required that the sheriff must execute an affidavit to prove that he published notices
of foreclosure in accordance with the requirements of law.
As to the last assigned error, suffice it to say that the Court agrees with the findings
of the CA that the issue regarding petitioners right to receive an Assessment Notice
or Notice of Redemption from private respondents as the highest bidders during the
auction sale was raised only in her Addendum to Motion for Reconsideration of the
Decision of the CA. The Court reiterates the rule that points of law, theories, issues
and arguments not brought to the attention of the lower court need not be, and
ordinarily will not be, considered by a reviewing court, as these cannot be raised for
the first time on appeal.35

Moreover, like the issue regarding the date of maturity of the loan, the question of
whether or not petitioner received a copy of an Assessment Notice or Notice of
Redemption from private respondents is also factual. As earlier explained, questions
of fact are not proper subjects of appeal by certiorari under Rule 45 of the Rules of
Court as this mode of appeal is confined to questions of law. 36
Besides, there is nothing under Act No. 3135 which requires the highest bidder or
purchaser to furnish the mortgagor or redemptioner an Assessment Notice or Notice
of Redemption prior to the expiration of the period of redemption. Even the pertinent
provisions of Section 30, Rule 3937 of the old Rules of Court, which are the rules
applicable in the present case, do not require that the mortgagor or redemptioner be
furnished by the purchaser notice of any assessments or taxes which the latter may
have paid after the purchase of the auctioned property, thus:
Sec. 30. Time and manner of, and amounts payable on, successive redemptions,
notice to be given and filed. The judgment debtor or redemptioner may redeem
the property from the purchaser at any time within twelve (12) months after the
sale, on paying the purchaser the amount of his purchase with one per centum per
month interest thereon in addition, up to the time of redemption, together with the
amount of any assessments or taxes which the purchaser may have paid thereon
after purchase and interest on such last named amount at the same rate; and if the
purchaser be also a creditor having a prior lien to that of the redemptioner, other
than the judgment under which such purchase was made, and the amount of such
other lien, with interest. Property so redeemed may again be redeemed within sixty
(60) days after the last redemption upon payment of the sum paid on the last
redemption, with two per centum thereon in addition, and the amount of any
assessments or taxes which the last redemptioner may have paid thereon after
redemption by him, with interest of such last-named amount, and in addition, the
amount of any liens held by said last redemptioner prior to his own, with interest.
The property may be again, and as often as a redemptioner is so disposed,
redeemed from any previous redemptioner within sixty (60) days after the last
redemption, on paying the sum paid on the last previous redemption, with
two per centum thereon in addition, and the amounts of any assessments or taxes
which the last previous redemptioner paid after the redemption thereon, with
interest thereon, and the amount of any liens held by the last redemptioner prior to
his own, with interest.

Written notice of any redemption must be given to the officer who made the sale
and a duplicate filed with the Registrar of Deeds of the province, and if any
assessment of taxes are paid by the redemptioner or if he has or acquires any lien
other than that upon which the redemption was made, notice thereof must in like
manner be given to the officer and filed with the Registrar of Deeds; if such notice
be not filed, the property may be redeemed without paying such assessments,
taxes, or liens. (emphasis supplied)
Hence, even granting, for the sake of argument, that private respondents failed to
comply with the directive in the Certificate of Sale issued by the Ex-Officio Provincial
Sheriff of Rizal and the Deputy Sheriff In-Charge by giving a copy of statements of
the amount of assessments or taxes which they may have paid on account of the
purchase of the subject property, such failure would not invalidate the auction sale
and the subsequent transfer of title over the subject property in their favor.
It bears to note that the purpose for requiring the purchaser to furnish copies of the
amounts of assessments or taxes which he may have paid is to inform the
mortgagor or redemptioner of the actual amount which he should pay in case he
chooses to exercise his right of redemption. If no such notice is given, the only effect
is that the property may be redeemed without paying such assessments or
taxes.38 In fact, it would have been beneficial on the part of herein petitioner if
private respondents failed to submit to the office of the sheriff and furnish her a
copy of the statements of the taxes and assessments they paid because in such a
case petitioner would have been excused from reimbursing such assessments and
taxes if she redeemed the property. The fact remains, however, that petitioner failed
to redeem the subject property.
WHEREFORE, the instant petition is DENIED and the assailed Decision and Resolution
of the Court of Appeals are AFFIRMED in toto.
Costs against petitioner.
SO ORDERED.