G.R. No.

166190 September 20, 2006

HEIRS OF VENANCIO BAJENTING

vs.
ROMEO F. BAEZ, SPOUSES ALFAFARA

Facts:

Venancio Bajenting applied for a free patent over a parcel of land, Lot 23 (Sgs. 546 D), Davao Cadastre, located in
Langub, Davao City, with an area of 104,140 square meters. In the meantime, Venancio planted fruit trees in the
property3 such as mango, lanzones, coconut and santol. He and his wife, Felisa Bajenting, along with their children,
also resided in a house which stood on the property. 4

On February 1974, Venancio died intestate. 5 His application for a free patent was thereafter approved, and a Free
Patent was issued in his favor. On February 1976, the Register of Deeds issued Original Certificate of Title over the
property in the name of "Venancio Bajenting, married to Felisa Sultan." 6 Selecio Bajenting continued cultivating the
land.7

The Sangguniang Panglunsod approved City Ordinance declaring the properties in Langub as a low density
residential zone.8

Felisa and the other heirs of Venancio (Heirs, for brevity), 9 executed an Extrajudicial Settlement with Deed of
Absolute Sale over Lot 23. They alleged therein that when Venancio died intestate, they had agreed to adjudicate
unto themselves as heirs of the deceased the aforesaid property, as follows:

TO: FELISA S. BAJENTING, One half (1/2) share of the whole of Oct. No. P-5677, as her conjugal share; and
the remaining one-half (1/2) of OCT No. P-5677.

TO: FELISA S. BAJENTING, MARGARITA BAJENTING, FRANCISCA BAJENTING, SILVERIO BAJENTING

(Deceased) represented by his wife and children: Teresita Apas-Bajenting, Renato Bajenting, Gilbert
Bajenting, Criselda Bejenting, Imelda Bajenting, Venancio Bajenting and Elizalde Bajenting; MAXIMA
BAJENTING (Deceased) represented by her husband, Francisco Malda, and children: Lee B. Malda,
Angelina B. Malda, Milagros B. Malda, Editha B. Malda and Susana B. Malda; BENEDICTINA BAJENTING,
ARSENIA BAJENTING; and CELECISO BAJENTING, in equal share pro-indiviso. 10

In the same deed, a 50,000 square meter portion of the property was sold to the spouses Sonia Luz Alfafara; and
the 54,140 square meter portion to Engr. Romeo F. Baez. The share of Felisa was included in the portion sold to
Engr. Baez.11 However, the deed was not notarized; neither was the sale approved by the Secretary of
Environment and Natural Resources. In the Agreement/Receipt executed by Felisa Bajenting and Romeo Baez, the
parties declared that the price of property was P500,000.00; P350,000.00 was paid by the vendees, the balance
of P150,000.00 to be due and payable at the residence of the vendors. 12 The owner's duplicate of title was turned
over to the vendees. However, the deed was not filed with the Office of the Register of Deeds.

The Heirs, including Felisa, tried to repurchase the property as provided under Section 119 of CA No. 141, but
Romeo Baez and Sonia Alfafara did not allow them to exercise their right.

On May 1995, the Heirs, through Venencio Bajenting, filed a Complaint for recovery of title against Romeo Baez
and the spouses Alfafara in the Office of the Barangay Captain. When no settlement was reached, the Heirs filed a
complaint for Quieting of Title, Repurchase of Property, Recovery of Title plus Damages with the Regional Trial
Court, claiming that they had tried to repurchase the property from the defendants and that the latter had ignored
the summons from the Barangay Captain for an amicable settlement of the case. They prayed that after due
proceedings, judgment be rendered in their favor:

WHEREFORE, PREMISES CONSIDERED, it is prayed of this Honorable Court that after hearing, judgment be
rendered in favor of plaintiffs and against herein defendants, by quieting and removing any cloud on the
Original Certificate of Title No. P-5677, Free Patent No. 577244, of the Registry of Deeds of Davao City, and
thereafter ordering the defendants to:

a) Return the owner's duplicate copy of Original Certificate of Title No. P-5677, Free Patent No. 577244 to
plaintiff forthwith;

b) Vacate the premises including those who are acting for and in their behalf; and,

IN THE ALTERNATIVE, should the defendants prove their superior right over the subject property (i.e.,
sale) as against the herein plaintiffs that they be ordered to resell back the said property to the plaintiffs
consonant to the provision of Sec. 119, C.A. No. 141.

the Heirs filed an Amended Complaint, alleging the following:

5.The afore-described real property was sold to defendants for a consideration of Five Hundred Thousand
(P500,000.00) Pesos and several months thereafter, the owner's duplicate copy Original Certificate of Title
No. P-5677, Free Patent No. 577244, was handed to them and, thereafter, their representative occupied
the area. x x x

6. Defendants paid only the sum of THREE HUNDRED FIFTY THOUSAND (P350,000.00) but did not pay the
remaining purchase price in the amount of ONE HUNDRED FIFTY THOUSAND ( P150,000.00) PESOS. x x x

7. The aforedescribed property sold to defendants, being a Free Patent, can be repurchased within five (5)
years from date of conveyance (1993) by the applicant, his widow, or legal heirs pursuant to Sec. 119,
Commonwealth Act No. 141:

"That every conveyance of land acquired under the free patent provisions, when proper, shall be
the subject to repurchase by the applicant, his widow, or legal heirs, within a period of five (5)
years from the date of the conveyance; (Underscoring supplied). 14

xxxx

13. Herein Plaintiffs have tendered the amount of THREE HUNDRED FIFTY THOUSAND ( P350,000.00) as
repurchase price with the Office of the Clerk of Court. 15

The Heirs deposited the amount of P350,000.00 with the Clerk of Court, and an official receipt was issued therefor.

The defendants averred, that: (1) the plaintiffs, who did not sign the Extrajudicial Settlement and Deed of Absolute
Sale, were not heirs of Venancio Bajenting; (2) it was only Venencio Bajenting, Jr. who wanted to repurchase the
property for and in behalf of a "speculator" i.e., for the sole use and enjoyment of the interested buyer and not for
cultivation of the heirs of the deceased homesteader; and (3) the Heirs have not tendered any amount to perfect
their repurchase of the property. They alleged, by way of Compulsory Counterclaim, that:

13. The parties herein have entered into an Extrajudicial Settlement of Estate with Deed of Absolute Sale
to evidence their agreement over the land in question. However, such deed has not yet been notarized.
 Pursuant to Art. 1357 in relation to Art. 1358 (1) of the Civil Code, defendants may require plaintiffs to
deliver the proper document in the proper form to evidence the conveyance of the property subject of
this case and sufficient to effect the transfer of title to the same in favor of defendants; 17

The case was referred to the Barangay Captain and the Lupon Tagapamayapa for a possible settlement, to no
avail.20

The Heirs presented Vicente Ravino, the husband of Benedicta Bajenting, one of the daughters of Venancio and
Felisa. He testified that Felisa had died intestate on January 1996. 21 For a period of two years, he had been
demanding that the vendee pay the balance of the purchase price, P150,000.00, but the latter failed to pay the
amount. The Heirs authorized Venencio Bajenting22 to represent them for the purpose of repurchasing the property
from the defendants.

The defendants adduced evidence that the Sangguniang Panglunsod approved Ordinance No. 4042, Series of 1996,
classifying the properties in Langub as part of a low density property zone. 23 Such properties were primarily
intended for housing development with at least 20 dwelling units per hectare density and below per hectare. 24They
pointed out that under Presidential Decree (P.D.) No. 957, the lots could be used as first class residential. The City
Planning Office and the Regional Development Council had, likewise, recommended to the National Economic
Development Authority the plan to establish an astrodome, a government center to house government agencies,
as well as the construction of a circumferential road; however, no money had yet been appropriated to implement
the said plans.25

Anne Reyes, a real estate agent, testified that, Venencio Bajenting and Margarita Bajenting-Reusora, another heir,
asked her to help them sell the property for P350,000.00. To enable her to offer the property for sale, the
Bajentings entrusted to her a copy of the owner's duplicate of OCT No. P-5677, Tax Declaration, Tax Clearance and a
Certificate from the City Assessor.26However, she failed to sell the property. In December 1995, Margarita saw her
again and asked her to return the said documents because she (Margarita) wanted to sell the property
for P10,000,000.00. Margarita told her that the property had been earlier sold for a cheaper price, but she was
requested to accompany any prospective buyers willing to pay P10,000,000.00 to Venencio Bajenting who had a
special power of attorney to sell the property in behalf of the Heirs. 27 After her meeting with Margarita, nothing
happened. On cross-examination, Anne admitted that she had no written authority to sell the property. 28 In
December 1995, she inquired from Engr. Baez if he was willing to resell the property to the heirs of Venancio
Bajenting.29 In February 1996, Engr. Baez, accompanied by Atty. Susan Cariaga, saw her (Anne) and asked if the
Bajentings were indeed going to repurchase the property; she answered in the affirmative and volunteered to
testify.30

Ermelinda Oyco testified that during the proceedings of the case in the Office of the Barangay Captain, Margarita
told her and her sister that the Bajentings were going to repurchase the property and would resell the same. She
told Margarita that she had a prospective buyer, but withheld the person's identity. Margarita told her that the
Bajentings would sell the property for P10,000,000.00. Venencio Bajenting confirmed the price and told her that
she would receive a 3% commission if she succeeded in selling the property. 31 On cross-examination, she declared
that she was invited to testify for Engr. Baez and that she agreed because she pitied him.

On rebuttal, Venencio Bajenting testified and declared that he did not meet Oyco and her mother and that they
had no interest to sell the property.32

Before she could testify, Margarita Reusora died on August 24, 1997. 33

On March 1, 2002, the trial court rendered judgment in favor of the Heirs.
The RTC ruled that while there is evidence that first-class subdivisions are being developed in the vicinity, no
budget had been appropriated for the plans to construct the government center and the sports complex. However,
it declared that the defendants failed to present any evidence that the plaintiffs were repurchasing the property for
and in behalf of a financier.

The defendants maintained that the Heirs were exercising their right to repurchase the property for commercial
purposes, not for the purpose of using the property for their family home. They asserted that the property is
surrounded by first-class subdivisions and is classified as a low-density residential zone.

Hence, the instant Petition for Review on Certiorari, where petitioners allege that the CA erred in disregarding the
findings of the trial court based on the evidence on record in applying the Santana case, and in not resolving the
issue of respondents' failure to pay the balance of the purchase price of the property.

They insist that the factual backdrop in Santana is substantially different from that in this case. The speculative
purpose ascribed to them may as well apply to respondents, who refused to resell the property to petitioner,
knowing that the value of the property had considerably increased. As between the petitioners and the
respondents, the law should be applied in their favor, being the heirs of the beneficiaries under Commonwealth Act
141, as amended.

The petitioners aver that respondents failed to prove with clear and convincing evidence that they were exercising
their right to repurchase the property only for the purpose of reselling the same at a higher price, thereby
rendering nugatory Section 119 of Commonwealth Act 141. The collective testimonies of Reyes and Oyco were
hearsay and inadmissible in evidence under the dead man's statute, Margarita Reusora having died on August 24,
1997 before the witnesses had even testified.

Worse, petitioners aver, the CA ignored the fact that respondents had not paid them the balance of the purchase
price of the property worth P150,000.00; thus, they would have to file a separate suit to collect the amount.

Respondents aver that only petitioner Venencio Bajenting signed the verification and certification of non-forum
shopping in the petition. Petitioners failed to attach any power of attorney authorizing Venencio Bajenting to sign
the Verification and Certification Against Forum Shopping for and in their behalf. As found by the CA, the
testimonies of Reyes and Oyco were credible and deserving of full probative weight. Indeed, their testimonies are
buttressed by the trial court's Order dated January 19, 1998. They add that the findings of the CA are binding on
this Court, and that the dead man's statute does not apply to the testimonies of Reyes and Oyco, being as they
were, mere witnesses not parties to the case.

Issues: (a) whether or not petitioners complied with the rule on verification and certification against forum
shopping; (b) whether petitioners are entitled to repurchase the property from respondents; and (c) whether
petitioners are obliged to execute a notarized deed of absolute sale over the property.

The petition has no merit.

On the first issue, the Court notes that, of the 23 petitioners, only petitioner Venencio Bajenting signed the
Verification and Certification of Non-Forum Shopping. Petitioners did not append to their petition a special power
of attorney authorizing petitioner Venencio Bajenting to sign the Certification for and in their behalf. The rule is
that the certification of non-forum shopping must be signed by all the petitioners or plaintiffs and the signing by
only one of them is not sufficient.

In the present case, we find and so rule that petitioners substantially complied with the Rules of Court. Petitioners,
as heirs of the spouses Venancio and Felisa Bajenting (the patentees), sought to exercise their right under Section
119, Act 141 to repurchase the property within the statutory period therefor. Petitioner Venencio Bajenting was
empowered to act for and in their behalf before the Barangay Captain and in the RTC for the enforcement of their
right as such heirs. Petitioners have not filed any action against respondents in another court or tribunal involving
the same issues and property.

We note that the Secretary of Agriculture and Natural Resources had not approved the sale of the property (by the
heirs of the patentee) to respondents. It bears stressing that Free Patent No. 577244 which was granted in favor of
Venancio Bajenting on December 18, 1975 is subject to the following conditions therein:

VENANCIO BAJENTING, Filipino, of legal age, married to Felisa Sultan, and residing in Langub, Ma-a, Davao
City the tract of land above-described.

the land hereby acquired shall be inalienable and shall not be subject to encumbrance for a period of five
(5) years from the date of this patent, and shall not be liable for the satisfaction of any debt contracted
prior to the expiration of said period; that every conveyance of land acquired under the free patent
provisions, when proper, shall be subject to repurchase by the applicant, his widow, or legal heirs, within a
period of five years from the date of the conveyance; that it shall not be encumbered, alienated, or
transferred to any person, not qualified to acquire lands of the public domain under said Commonwealth
Act No. 141, as amended;

OCT No. P-5677 was issued to and in the name of Venancio Bajenting over the property on February 6, 1976. The
25-year period provided in Section 118 of the law was to expire on February 6, 2001. However, in May 1999, Felisa
Bajenting and her children sold the property to respondents without the approval of the Secretary of Environment
and Natural Resources (formerly the Department of Agriculture and Natural Resources). There is no showing in the
records that the Secretary of Environment and Natural Resources had approved the sale.

The failure of the vendors to secure the approval of the Secretary of the DENR does not, ipso facto, make the sale
void. The approval may be secured later, producing the effect of ratifying and adopting the transaction as if the sale
had been previously authorized. The approval of the sale subsequent thereto would have the effect of the
Secretary's ratification and adoption as if the sale had been previously authorized. 47 The Secretary may disapprove
the sale on legal grounds.

The second issue is factual because it involves the determination of petitioners' intention to repurchase the
property to enable them to amass a hefty net profit of P9,635,000.00 from its resale to a third party, and not for
the purpose of preserving the same for themselves and their families' use as envisioned in Com. Act No. 141, as
amended.

To ensure the attainment of said objectives, the law gives the patentee, his widow or his legal heirs the right to
repurchase the property within five years from date of the sale. However, the patentee, his widow or legal heirs
should not be allowed to take advantage of the salutary policy of the law to enable them to recover the land only
to dispose of it again to amass a hefty profit to themselves.

In this case, based on the pleadings of the parties and the evidence on record, petitioners, through Venencio
Bajenting and Margarita Reusora, sought to repurchase the property only for the purpose of reselling the same
for P10,000,000.00 and in the process, amass a net profit amounting toP9,650,000.00.

The lack of documentary evidence proving that plaintiffs constituted Reyes and Oyco as agents for the sale
of the subject property merely shows that Reyes and Oyco were not constituted as agents in accordance
with the specific form prescribed by law. It does not, however, render their testimonies improbable nor
does it have any tendency to lessen the credibility of their testimonies respecting the fact sought to be
proven. What is material and should have been considered by the trial court were the assertions of Reyes
and Oyco stating that plaintiff made negotiations for them to find a buyer for the subject property since it
 would prove that plaintiffs want to repurchase the subject property only in order to resell it to another at
a higher price.

The testimony of plaintiff Venencio Bajenting denying the claim of Reyes and Oyco cannot be given much
weight and credence. Being one who has a direct interest in the case, Venencio Bajenting necessarily has a
motive for coloring his testimony. Besides, apart from his denials, his testimony is uncorroborated. In
contrast, there is no evidence that Reyes and Oyco were actuated by any ill motive in testifying against
plaintiffs. In fact, their testimonies even show that their mother is a relative of plaintiffs.

The profit motivation behind the instant complaint for repurchase is further shown by plaintiffs'
declaration in their Opposition to defendants' motion for reconsideration, that "the Three Hundred Fifty
Thousand (P350,000.00) Pesos given for the ten-hectare land would be too small for defendant to own the
property." Evidently, it is the same profit motivation that impelled plaintiffs to agree to a settlement during
the early stages of the proceedings before the trial court. In the Manifestation filed by plaintiffs on
February 4, 1998, plaintiffs expressed their agreement to a settlement but only if defendants pay them an
additional purchase price of Five Million Pesos (PhP5,000,000.00) or if the subject property were to be
sold to an interested buyer for no less than the said amount with 80% of the proceeds going to the
plaintiffs and offering 20% thereof to defendant.

We note that petitioner Venencio Bajenting is merely a mechanic. He had not explained to the trial court how he
and his co-heirs were able to produce P350,000.00 in 1996 and deposit the same with the Clerk of Court when they
filed their amended complaint. There is no evidence on record that petitioners were financially capable to produce
the amount in 1996, considering that they had to sell the property for P500,000.00 three years earlier. The
foregoing circumstances buttress the contention of respondents that petitioners, through Venencio Bajenting,
sought to repurchase the property for no other purpose than to generate a hefty profit of P9,650,000.00.

Contrary to the allegations of petitioners, the collective testimonies of Reyes and Oyco are admissible in evidence
despite the fact that when they testified, Margarita Reusora was already dead.

Reyes and Oyco were mere witnesses for respondents, not parties in the courta quo, nor assignors of any of the
parties in whose behalf the case was prosecuted. Their testimonies were presented only to prove that the
petitioners intended to repurchase the property for profit, and not for the purpose of preserving it for their and
their families' use and enjoyment.56

As in Santana, the property in this case was no longer agricultural but residential and commercial, in the midst of
several high-class residential subdivisions. The government had planned to construct in the vicinity a
circumferential road, a government center and an astrodome. As in Santana, petitioners, through counsel, declared
their willingness to settle the case for the amount of P5,000,000.00 and the sale of the property to a third party.
The money which petitioners were to use to repurchase the property was not theirs, but the money of petitioner
Venencio Bajenting's employer.

First. The decision of the trial court ordering petitioner to execute a deed of sale over the property in favor of
respondent is grounded on the fact that his record on appeal of petitioner, as appellant, does not contain sufficient
relevant data showing that the appeal was filed on time;

On the third issue, we agree with respondents' contention that petitioners are obliged to execute a notarized deed
of absolute sale over the property upon payment of the P150,000.00 balance of the purchase price of the property.
A contract of sale is a consensual contract. Upon the perfection of the contract, the parties may reciprocally
demand performance. The vendee may compel transfer of ownership of the object of the sale, and the vendor may
require the vendee to pay the thing sold. In this case, the balance of the purchase price of the property was due on
or before December 31, 1993.
G.R. No. 170479

ANDRE T. ALMOCERA, PETITIONER, VS. JOHNNY ONG, RESPONDENT.

Facts:

Plaintiff Johnny Ong tried to acquire from the defendants a townhome described as Unit No. 4 of Atrium
Townhomes in Cebu City. As reflected in a Contract to Sell, the selling price of the unit was P3,400,000.00 pesos, for
a lot area of eighty-eight (88) square meters with a three-storey building. Out of the purchase price, plaintiff was
able to pay the amount of P1,060,000.00. Prior to the full payment, plaintiff claims that defendants Andre
Almocera and First Builders fraudulently concealed the fact that before and at the time of the perfection of the
contract to sell, the property was already mortgaged to and encumbered with the Land Bank of the Philippines
(LBP). In addition, the construction of the house has long been delayed and remains unfinished. On March 13, 1999,
Lot 4-a covered by TCT No. 148818, covering the unit was advertised in a local tabloid for public auction for
foreclosure of mortgage. It is the assertion of the plaintiff that had it not for the fraudulent concealment of the
mortgage and encumbrance by defendants, he would have not entered into the contract to sell.

On the other hand, defendants assert that on March 20, 1995, First Builders Multi-purpose Coop. Inc., borrowed
money in the amount of P500,000.00 from Tommy Ong, plaintiffs brother. This amount was used to finance the
documentation requirements of the LBP for the funding of the Atrium Town Homes. This loan will be applied in
payment of one (1) town house unit which Tommy Ong may eventually purchase from the project. When the project
was under way, Tommy Ong wanted to buy another townhouse for his brother, Johnny Ong, plaintiff herein, which
then, the amount of P150,000.00 was given as additional partial payment. However, the particular unit was not yet
identified. It was only on January 10, 1997 that Tommy Ong identified Unit No. 4 plaintiffs chosen unit and again
tendered P350,000.00 as his third partial payment. When the contract to sell for Unit 4 was being drafted, Tommy
Ong requested that another contract to sell covering Unit 5 be made so as to give Johnny Ong another option to
choose whichever unit he might decide to have. When the construction was already in full blast, defendants were
informed by Tommy Ong that their final choice was Unit 5. It was only upon knowing that the defendants will be
selling Unit 4 to some other persons for P4million that plaintiff changed his choice from Unit 5 to Unit 4. [4]

In trying to recover the amount he paid as down payment for the townhouse unit, respondent Johnny Ong filed a
complaint for Damages against defendants Andre T. Almocera and FBMC alleging that defendants were guilty of
fraudulent concealment and breach of contract when they sold to him a townhouse unit without divulging that the
same, at the time of the perfection of their contract, was already mortgaged with the Land Bank of the Philippines
(LBP), with the latter causing the foreclosure of the mortgage and the eventual sale of the townhouse unit to a
third person.

Defendants denied liability claiming that the foreclosure of the mortgage on the townhouse unit was caused by the
failure of complainant Johnny Ong to pay the balance of the price of said townhouse unit.

The trial court ruled against defendants for not acting in good faith and for not complying with their obligations
under their contract with respondent. In the Contract to Sell [6]involving Unit 4 of the Atrium Townhomes,
defendants agreed to sell said townhouse to respondent for P3,400,000.00. The down payment was P1,000,000.00,
while the balance of P2,400,000.00 was to be paid in full upon completion, delivery and acceptance of the
townhouse. Under the contract which was signed on 10 January 1997, defendants agreed to complete and convey
to respondent the unit within six months from the signing thereof.

The trial court found that respondent was able to make a down payment or partial payment of P1,060,000.00 and
that the defendants failed to complete the construction of, as well as deliver to respondent, the townhouse within
six months from the signing of the contract. Moreover, respondent was not informed by the defendants at the time
of the perfection of their contract that the subject townhouse was already mortgaged to LBP. The mortgage was
foreclosed by the LBP and the townhouse was eventually sold at public auction. It said that defendants were guilty
of fraud in their dealing with respondent because the mortgage was not disclosed to respondent when the contract
was perfected. There was also non-compliance with their obligations under the contract when they failed to
complete and deliver the townhouse unit at the agreed time. On the part of respondent, the trial court declared he
was justified in suspending further payments to the defendants and was entitled to the return of the down
payment.

Petitioner is now before us pleading his case via a Petition for Review on Certiorari under Rule 45 of the 1997 Rules
of Civil Procedure. The petition raises the following issues:

1. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT DEFENDANT HAS
INCURRED DELAY.
2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN SUSTAINING RESPONDENTS REFUSAL
TO PAY THE BALANCE OF THE PURCHASE PRICE.

3. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT DEFENDANT ANDRE T.
ALMOCERA IS SOLIDARILY LIABLE WITH THE DEFENDANT COOPERATIVE FOR DAMAGES TO
PLAINTIFF.[10]

It cannot be disputed that the contract entered into by the parties was a contract to sell. The contract was
denominated as such and it contained the provision that the unit shall be conveyed by way of an Absolute Deed of
Sale, together with the attendant documents of Ownership the Transfer Certificate of Title and Certificate of
Occupancy and that the balance of the contract price shall be paid upon the completion and delivery of the
unit, as well as the acceptance thereof by respondent. All these clearly indicate that ownership of the townhouse
has not passed to respondent.

In other words, in a contract to sell, ownership is retained by the seller and is not to pass to the buyer until full
payment of the price.

The Contract to Sell entered into by the parties contains the following pertinent provisions:

4. TERMS OF PAYMENT:4a. ONE MILLION PESOS (P1,000,000.00) is hereby acknowledged as

Downpayment for the above-mentioned Contract Price.

4b. The Balance, in the amount of TWO MILLION FOUR HUNDRED PESOS (P2,400,000.00) shall be
paid thru financing Institution facilitated by the SELLER, preferably Landbank of the Philippines
(LBP).

Upon completion, delivery and acceptance of the BUYER of the Townhouse Unit, the BUYER shall
have paid the Contract Price in full to the SELLER.

xxxx

6. COMPLETION DATES OF THE TOWNHOUSE UNIT:The unit shall be completed and conveyed by
way of an Absolute Deed of Sale together with the attendant documents of Ownership in the
name of the BUYER the Transfer Certificate of Title and Certificate of Occupancy within a
period of six (6) months from the signing of Contract to Sell.[12]

From the foregoing provisions, it is clear that petitioner and FBMC had the obligation to complete the townhouse
unit within six months from the signing of the contract. Upon compliance therewith, the obligation of respondent
to pay the balance of P2,400,000.00 arises. Upon payment thereof, the townhouse shall be delivered and conveyed
to respondent upon the execution of the Absolute Deed of Sale and other relevant documents.
The evidence adduced shows that petitioner and FBMC failed to fulfill their obligation to complete and deliver
the townhouse within the six-month period. With petitioner and FBMCs non-fulfillment of their obligation,
respondent refused to pay the balance of the contract price. Respondent does not ask that ownership of the
townhouse be transferred to him, but merely asks that the amount or down payment he had made be returned to
him.

Article 1169 of the Civil Code reads:

Art. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or
extrajudicially demands from them the fulfillment of their obligation.

However, the demand by the creditor shall not be necessary in order that delay may exist:

(1) When the obligation or the law expressly so declares; or

(2) When from the nature and the circumstances of the obligation it appears that the designation of the time when
the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the
contract; or

(3) When demand would be useless, as when the obligor has rendered it beyond his power to perform.

In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a
proper manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation, delay
by the other begins.

The contract subject of this case contains reciprocal obligations which were to be fulfilled by the parties, i.e., to
complete and deliver the townhouse within six months from the execution of the contract to sell on the part of
petitioner and FBMC, and to pay the balance of the contract price upon completion and delivery of the townhouse
on the part of the respondent.

In the case at bar, the obligation of petitioner and FBMC which is to complete and deliver the townhouse unit
within the prescribed period, is determinative of the respondents obligation to pay the balance of the contract
price. With their failure to fulfill their obligation as stipulated in the contract, they incurred delay and are liable for
damages.[13] They cannot insist that respondent comply with his obligation. Where one of the parties to a contract
did not perform the undertaking to which he was bound by the terms of the agreement to perform, he is not
entitled to insist upon the performance of the other party. [14]

On the first assigned error, petitioner insists there was no delay when the townhouse unit was not completed
within six months from the signing of the contract inasmuch as the mere lapse of the stipulated six (6) month
period is not by itself enough to constitute delay on his part and that of FBMC, since the law requires that there
must either be judicial or extrajudicial demand to fulfill an obligation so that the obligor may be declared in default.
He argues there was no evidence introduced showing that a prior demand was made by respondent before the
original action was instituted in the trial court.

We do not agree.

Demand is not necessary in the instant case. Demand by the respondent would be useless because the
impossibility of complying with their (petitioner and FBMC) obligation was due to their fault. If only they paid their
loans with the LBP, the mortgage on the subject townhouse would not have been foreclosed and thereafter sold to
a third person.
Anent the second assigned error, petitioner argues that if there was any delay, the same was incurred by
respondent because he refused to pay the balance of the contract price.

We find his argument specious.

As above-discussed, the obligation of respondent to pay the balance of the contract price was conditioned on
petitioner and FBMCs performance of their obligation. Considering that the latter did not comply with their
obligation to complete and deliver the townhouse unit within the period agreed upon, respondent could not have
incurred delay. For failure of one party to assume and perform the obligation imposed on him, the other party does
not incur delay.[15]

Under the circumstances obtaining in this case, we find that respondent is justified in refusing to pay the balance of
the contract price. He was never in possession of the townhouse unit and he can no longer be its owner since
ownership thereof has been transferred to a third person who was not a party to the proceedings below. It would
simply be the height of inequity if we are to require respondent to pay the balance of the contract price. To allow
this would result in the unjust enrichment of petitioner and FBMC. The fundamental doctrine of unjust enrichment
is the transfer of value without just cause or consideration. The elements of this doctrine which are present in this
case are: enrichment on the part of the defendant; impoverishment on the part of the plaintiff; and lack of cause.
The main objective is to prevent one to enrich himself at the expense of another. It is commonly accepted that this
doctrine simply means a person shall not be allowed to profit or enrich himself inequitably at anothers expense.
[16]
Hence, to allow petitioner and FBMC keep the down payment made by respondent amounting to P1,060,000.00
would result in their unjust enrichment at the expense of the respondent.

What is worse is the fact that petitioner and FBMC intentionally failed to inform respondent that the subject
townhouse which he was going to purchase was already mortgaged to LBP at the time of the perfection of their
contract. This deliberate withholding by petitioner and FBMC of the mortgage constitutes fraud and bad faith.

On the last assigned error, petitioner contends that he should not be held solidarily liable with defendant FBMC,
because the latter is a separate and distinct entity which is the seller of the subject townhouse. He claims that he,
as Chairman and Chief Executive Officer of FBMC, cannot be held liable because his representing FBMC in its
dealings is a corporate act for which only FBMC should be held liable.

This issue of piercing the veil of corporate fiction was never raised before the trial court. The same was raised for
the first time before the Court of Appeals which ruled that it was too late in the day to raise the same. The Court of
Appeals declared:

In the case below, the pleadings and the evidence of the defendants are one and the same and never had it made
to appear that Almocera is a person distinct and separate from the other defendant. In fine, we cannot treat this
error for the first time on appeal. We cannot in good conscience, let the defendant Almocera raise the issue of
piercing the veil of corporate fiction just because of the adverse decision against him. x x x. [18]

G.R. No. 126083 July 12, 2006

ANTONIO R. CORTES (in his capacity as Administrator of the estate of Claro S. Cortes), petitioner,
vs.
HON. COURT OF APPEALS and VILLA ESPERANZA DEVELOPMENT CORPORATION, respondents.

Facts:
For the purchase price of P3,700,000.00, the Corporation as buyer, and Cortes as seller, entered into a contract of
sale over the lots covered by Transfer Certificate of Title (TCT) No. 31113-A, TCT No. 31913-A and TCT No. 32013-A,
located at Baclaran, Paraaque, Metro Manila. On various dates in 1983, the Corporation advanced to Cortes the
total sum of P1,213,000.00. Sometime in September 1983, the parties executed a deed of absolute sale containing
the following terms:3

1. Upon execution of this instrument, the Vendee shall pay unto the Vendor sum of TWO MILLION AND
TWO HUNDRED THOUSAND (P2,200,000.00) less all advances paid by the Vendee to the Vendor in
connection with the sale;

2. The balance of ONE MILLION AND FIVE HUNDRED THOUSAND [P1,500,000.00] PESOS, shall be payable
within ONE (1) YEAR from date of execution of this instrument, payment of which shall be secured by an
irrevocable standby letter of credit to be issued by any reputable local banking institution acceptable to
the Vendor.

xxxx

4. All expense for the registration of this document with the Register of Deeds concerned, including the
transfer tax, shall be divided equally between the Vendor and the Vendee. Payment of the capital gains
shall be exclusively for the account of the Vendor; 5% commission of Marcosa Sanchez to be deducted
upon signing of sale.4

Said Deed was retained by Cortes for notarization.

On January 14, 1985, the Corporation filed the instant case 5 for specific performance seeking to compel Cortes to
deliver the TCTs and the original copy of the Deed of Absolute Sale. According to the Corporation, despite its
readiness and ability to pay the purchase price, Cortes refused delivery of the sought documents.

Cortes claimed that the owner's duplicate copy of the three TCTs were surrendered to the Corporation and it is the
latter which refused to pay in full the agreed down payment. He added that portion of the subject property is
occupied by his lessee who agreed to vacate the premises upon payment of disturbance fee. However, due to the
Corporation's failure to pay in full the sum of P2,200,000.00, he in turn failed to fully pay the disturbance fee of the
lessee who now refused to pay monthly rentals. He thus prayed that the Corporation be ordered to pay the
outstanding balance plus interest and in the alternative, to cancel the sale and forfeit the P1,213,000.00 partial
down payment, with damages in either case.

The trial court rendered a decision rescinding the sale and directed Cortes to return to the Corporation the amount
of P1,213,000.00, plus interest. It ruled that pursuant to the contract of the parties, the Corporation should have
fully paid the amount of P2,200,000.00 upon the execution of the contract. It stressed that such is the law between
the parties because the Corporation failed to present evidence that there was another agreement that modified
the terms of payment as stated in the contract. And, having failed to pay in full the amount of P2,200,000.00
despite Cortes' delivery of the Deed of Absolute Sale and the TCTs, rescission of the contract is proper.

In its motion for reconsideration, the Corporation contended that the trial court failed to consider their agreement
that it would pay the balance of the down payment when Cortes delivers the TCTs. The motion was, however,
denied by the trial court holding that the rescission should stand because the Corporation did not act on the offer
of Cortes' counsel to deliver the TCTs upon payment of the balance of the down payment.

On appeal, the Court of Appeals reversed the decision of the trial court and directed Cortes to execute a Deed of
Absolute Sale conveying the properties and to deliver the same to the Corporation together with the TCTs,
simultaneous with the Corporation's payment of the balance of the purchase price of P2,487,000.00. It found that
the parties agreed that the Corporation will fully pay the balance of the down payment upon Cortes' delivery of the
three TCTs to the Corporation. The records show that no such delivery was made, hence, the Corporation was not
remiss in the performance of its obligation and therefore justified in not paying the balance.

Issue: Whether there is delay in the performance of the parties' obligation that would justify the rescission of the
contract of sale. To resolve this issue, we must first determine the true agreement of the parties.

In the case at bar, the stipulation in the Deed of Absolute Sale was that the Corporation shall pay in full the
P2,200,000.00 down payment upon execution of the contract. However, as correctly noted by the Court of Appeals,
the transcript of stenographic notes reveal Cortes' admission that he agreed that the Corporation's full payment of
the sum of P2,200,000.00 would depend upon his delivery of the TCTs of the three lots. In fact, his main defense in
the Answer is that, he performed what is incumbent upon him by delivering to the Corporation the TCTs and the
carbon duplicate of the Deed of Absolute Sale, but the latter refused to pay in full the down payment. 11 Pertinent
portion of the transcript, reads:

[Q] Now, why did you deliver these three titles to the plaintiff despite the fact that it has not been paid in
full the agreed down payment?

A Well, the broker told me that the down payment will be given if I surrender the titles.

Q Do you mean to say that the plaintiff agreed to pay in full the down payment of P2,200,000.00 provided
you surrender or entrust to the plaintiff the titles?

A Yes, sir.12

What further confirmed the agreement to deliver the TCTs is the testimony of Cortes that the title of the lots will be
transferred in the name of the Corporation upon full payment of the P2,200,000.00 down payment. Thus

ATTY. ANTARAN

Q Of course, you have it transferred in the name of the plaintiff, the title?

A Upon full payment.

xxxx

ATTY. SARTE

Q When you said upon full payment, are you referring to the agreed down payment of P2,200,000.00?

A Yes, sir.13

By agreeing to transfer title upon full payment of P2,200,000.00, Cortes' impliedly agreed to deliver the TCTs to the
Corporation in order to effect said transfer. Hence, the phrase "execution of this instrument" 14 as appearing in the
Deed of Absolute Sale, and which event would give rise to the Corporation's obligation to pay in full the amount of
P2,200,000.00, can not be construed as referring solely to the signing of the deed. The meaning of "execution" in
the instant case is not limited to the signing of a contract but includes as well the performance or implementation
or accomplishment of the parties' agreement.15 With the transfer of titles as the corresponding reciprocal
obligation of payment, Cortes' obligation is not only to affix his signature in the Deed, but to set into motion the
process that would facilitate the transfer of title of the lots, i.e., to have the Deed notarized and to surrender the
original copy thereof to the Corporation together with the TCTs.

Having established the true agreement of the parties, the Court must now determine whether Cortes delivered the
TCTs and the original Deed to the Corporation. The Court of Appeals found that Cortes never surrendered said
documents to the Corporation. Cortes testified that he delivered the same to Manny Sanchez, the son of the
broker, and that Manny told him that her mother, Marcosa Sanchez, delivered the same to the Corporation.

Q Do you have any proof to show that you have indeed surrendered these titles to the plaintiff?

A Yes, sir.

Q I am showing to you a receipt dated October 29, 1983, what relation has this receipt with that receipt
that you have mentioned?

A That is the receipt of the real estate broker when she received the titles.

Q On top of the printed name is Manny Sanchez, there is a signature, do you know who is that Manny
Sanchez?

A That is the son of the broker.

xxxx

Q May we know the full name of the real estate broker?

A Marcosa Sanchez

xxxx

Q Do you know if the broker or Marcosa Sanchez indeed delivered the titles to the plaintiff?

A That is what [s]he told me. She gave them to the plaintiff.

x x x x.16

ATTY. ANTARAN

Q Are you really sure that the title is in the hands of the plaintiff?

xxxx

Q It is in the hands of the broker but there is no showing that it is in the hands of the plaintiff?

A Yes, sir.

COURT

Q How do you know that it was delivered to the plaintiff by the son of the broker?
 A The broker told me that she delivered the title to the plaintiff.

ATTY. ANTARAN

Q Did she not show you any receipt that she delivered to [Mr.] Dragon 17 the title without any receipt?

A I have not seen any receipt.

Q So, therefore, you are not sure whether the title has been delivered to the plaintiff or not. It is only upon
the allegation of the broker?

A Yes, sir.18

However, Marcosa Sanchez's unrebutted testimony is that, she did not receive the TCTs. She also denied knowledge
of delivery thereof to her son, Manny, thus:

Q The defendant, Antonio Cortes testified during the hearing on March 11, 1986 that he allegedly gave
you the title to the property in question, is it true?

A I did not receive the title.

Q He likewise said that the title was delivered to your son, do you know about that?

A I do not know anything about that.19

What further strengthened the findings of the Court of Appeals that Cortes did not surrender the subject
documents was the offer of Cortes' counsel at the pre-trial to deliver the TCTs and the Deed of Absolute Sale if the
Corporation will pay the balance of the down payment. Indeed, if the said documents were already in the hands of
the Corporation, there was no need for Cortes' counsel to make such offer.

Since Cortes did not perform his obligation to have the Deed notarized and to surrender the same together with
the TCTs, the trial court erred in concluding that he performed his part in the contract of sale and that it is the
Corporation alone that was remiss in the performance of its obligation. Actually, both parties were in delay.
Considering that their obligation was reciprocal, performance thereof must be simultaneous. The mutual inaction
of Cortes and the Corporation therefore gave rise to a compensation morae or default on the part of both parties
because neither has completed their part in their reciprocal obligation. 20 Cortes is yet to deliver the original copy of
the notarized Deed and the TCTs, while the Corporation is yet to pay in full the agreed down payment of
P2,200,000.00. This mutual delay of the parties cancels out the effects of default, 21 such that it is as if no one is
guilty of delay.22

We find no merit in Cortes' contention that the failure of the Corporation to act on the proposed settlement at the
pre-trial must be construed against the latter. Cortes argued that with his counsel's offer to surrender the original
Deed and the TCTs, the Corporation should have consigned the balance of the down payment. This argument
would have been correct if Cortes actually surrendered the Deed and the TCTs to the Corporation. With such
delivery, the Corporation would have been placed in default if it chose not to pay in full the required down
payment. Under Article 1169 of the Civil Code, from the moment one of the parties fulfills his obligation, delay by
the other begins. Since Cortes did not perform his part, the provision of the contract requiring the Corporation to
pay in full the down payment never acquired obligatory force. Moreover, the Corporation could not be faulted for
not automatically heeding to the offer of Cortes.