Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-10141 January 31, 1958

REPUBLIC OF THE PHILIPPINES, petitioner,

vs.
PHILIPPINE RESOURCES DEVELOPMENT CORPORATION and the COURT OF
APPEALS, respondents.

Office of the Solicitor General Ambrosio Padilla, and Solicitor Frine C. Zaballero for
petitioner.
Vicente L. Santiago for respondent Corporation.

PADILLA, J.:

This is a petition under Rule 46 to review a judgment rendered by the Court of

Appeals,in CA-GR No. 15767-R, Philippine Resources Development Corporation vs.
The Hon. Judge Magno Gatmaitan et al.

The findings of the Court of Appeals are, as follows.

It appears that on May 6, 1955, the Republic of the Philippines in representation

of the Bureau of Prisons instituted against Macario Apostol and the Empire
Insurance Co. a complaint docketed as Civil Case No. 26166 of the Court of First
instance of Manila. The complaint alleges as the first cause of action, that
defendant Apostol submitted the highest bid the amount P450.00 per ton for the
purchase of 100 tons of Palawan Almaciga from the Bureau of Prisons; that a
contract therefor was drawn and by virtue of which, Apostol obtained goods from
the Bureau of Prisons valued P15,878.59; that of said account, Apostol paid only
P691.10 leaving a balane obligation of P15,187.49. The complaint further averes,
as second cause of action, that Apostol submitted the best bid with the Bureau of
Prisons for the purchase of three million board feet of logs at P88.00 per 1,000
board feet; that a contract was executed between the Director of Prisons and
Apostol pursuant to which contract Apostol obtained deliveries of logs valued at
P65.830.00, and that Apostol failed to pay a balance account Of P18,827.57. All
told, for the total demand set forth in complaint against Apostol is for P34,015.06
with legal interests thereon from January 8, 1952. The Empire lnsurance
Company was included in the complaint having executed a performance bond of
P10,000.00 in favor of Apostol.

In his answer, Apostol interposed payment as a defense and sought the

dismissal of the complaint.
 On July 19, 1955, the Philippine Resources Development Corporation moved to
intervene, appending to its motion, the complaint in the intervention of even date.
The complaint recites that for sometime prior to Apostol's transactions the
corporate had some goods deposited in a warehouse at 1201 Herran, Manila;
that Apostol, then the president of the corporation but without the knowledge or
consent of the stockholders thereof, disposed of said goods by delivering the
same to the Bureau of Prisons of in an attempt to settle his personal debts with
the latter entity; that upon discovery of Apodol's act, the corporation took steps to
recover said goods by demanding from the Bureau of Prisons the return thereof;
and that upon the refusal of the Bureau to return said goods, the corporation
sought leave to intervene in Civil Case No. 26166.

As aforestated, His Honor denied the motion for intervention and thereby issued
an order to this effect on July 23, 1955. A motion for the reconsideration of said
order was filed by the movant corporation and the same was likewise denied by
His Honor on August 18, 1955 . . . (Annex L.).

On 3 September 1955, in a petition for a writ of certiorari filed in the Court of Appeals,
the herein respondent corporation prayed for the setting aside of the order of the Court
of First Instance that had denied the admission of its complaint-in-intervention and for
an order directing the latter Court to allow the herein respondent corporation to
intervene in the action (Annex G). On 12 December 1955 the Court of Appeals set aside
the order denying the motion to intervene and ordered the respondent court to admit the
herein respondent corporation's complaint-in-intervention with costs against Macario
Apostol.

On 9 January 1956 the Republic of the Philippines filed this petition in this Court for the
purpose stated at the beginning of this opinion.

The Goverment contends that the intervenor has no legal interest in the matter in
litigation, because the action brought in the Court of First Instance of Manila against
Macario Apostol and the Empire Insurance Company (Civil Case No. 26166, Annex A)
is just for the collection from the defendant Apostol of a sum of money, the unpaid
balance of the purchase price of logs and almaciga bought by him from the Bureau of
Prisons, whereas the intervenor seeks to recover ownership and possession of G. I.
sheets, black sheets, M. S. plates, round bars and G. I. pipes that it claims its owns-an
intervention which would change a personal action into one ad rem and would unduly
delay the disposition of the case.

The Court of Appeals held that:

Petitioner ardently claims that the reason behind its motion to intervene is the
desire to protect its rights and interests over some materials purportedly
belonging to it; that said material were unauthorizedly and illegally assigned and
delivered to the Bureau of Prisons by petitioning corporation's president Macario
Apostol in payment of the latter's personal accounts with the said entity; and that
the Bureau of Prisons refused to return said materials despite petitioner's
demands to do so.

Petitioner refers to the particulars recited in Apostol's answer dated July 12, 1955
to the effect that Apostol had paid unto the Bureau of Prisons his accounts
covered, among others, by BPPO 1077 for the sum of P4,638.40 and BPPO
1549 for the amount of P4,398.54. Petitioner moreover, points to the State of
Paid and Unpaid accounts of Apostol dated January 16, 1954 prepared by the
accounting of officer of the Bureau of Prisons (Annex B. Complaint in
Intervention), wherein it appears that the aforementioned accounts covered
respectively by BPPO Nos. 1077 for 892 pieces of GI sheets and 1549 for 399
pieces of GI pipes in the total sum of P9,036.94 have not been credited to
Apostol's account in view of lack of supporting papers; and that according to the
reply letter of the Undersecretary of Justice, said GI sheets and pipes were
delivered by Macario Apostol to the Bureau of Prisons allegedly in Apostol's
capacity as owner and that the black iron sheets were delivered by Apostol as
President of the petitioner corporation.

Respondents, on the other hand, assert that the subject matter of the original
litigation is a sum of money allegedly due to the Bureau of Prisons from Macario
Apostol and not the goods or the materials reportedly turned over by Apostol as
payment of his private debts to the Bureau of Prisons and the recovery of which
is sought by the petitioner; and that for this reason, petitioner has no legal
interest in the very subject matter in litigation as to entitle it to intervene.

We find no merit in respondents' contention. It is true that the very subject matter
of the original case is a sum of money. But it is likewise true as borne out by the
records, that the materials purportedly belonging to the petitioner corporation
have been assessed and evaluated and their price equivalent in terms of money
have been determined; and that said materials for whatever price they have been
assigned by defendant now respondent Apostol as tokens of payment of his
private debts with the Bureau of Prisons. In view of these considerations, it
becomes enormously plain in the event the respondent judge decides to credit
Macario Apostol with the value of the goods delivered by the latter to the Bureau
of Prisons, the petitioner corporation stands to be adversely affected by such
judgment. The conclusion, therefore, is inescapable that the petitioner possesses
a legal interest in the matter in litigation and that such interest is of an actual,
material, direct and immediate nature as to entitle petitioner to intervene.

xxx xxx xxx

Section 3 of Rule 13 of the Rules of Court endows the lower Court with discretion
to allow or disapprove the motion for intrvention (Santarromana et al. vs. Barrios,
63 Phil. 456); and that in the exercise of such discretion, the court shall consider
whether or not the intervention will unduly delay or prejudice the adjudicatio of
the rights of the original parties and whether or not the intervenors the rights may
 be fully protected in a separate proceeding. The petitioner in the instant case
positively authorized to a separate action against any of all the respondents. But
considering that the resolution of the issues raised in and enjoined by the
pleadings in the main case, would virtally affect the rights not only the original
parties but also of the berein petitioner: that far from unduly delaying or
prejudicing the adjudication of the rights of the original parties or bringing about
confusion in the original case, the adnission of the complaint in intervention
would help clarify the vital issue of the true and real ownership of the materials
involved, besides preventing an abhorrent munltiplicity of suit, we believe that the
motion to intervene should be given due to cause.

We find no reason for disturbing the foregoing pronouncements. The Government

argues that "Price . . . is always paid in terms of money and the supposed payment
beeing in kind, it is no payment at all, "citing Article 1458 of the new Civil Code.
However, the same Article provides that the purschaser may pay "a price certain in
money or its equivalent," which means that they meant of the price need not be in
money. Whether the G.I. sheets, black sheets, M. S. Plates, round bars and G. I. pipes
claimed by the respondent corporation to belong to it and delivered to the Bureau of
Prison by Macario Apostol in payment of his account is sufficient payment therefore, is
for the court to pass upon and decide after hearing all the parties in the case. Should
the trial court hold that it is as to credit Apostol with the value or price of the materials
delivered by him, certainly the herein respondent corporation would be affected
adversely if its claim of ownership of such sheets, plates, bars and pipes is true.

The Government reiterates in its original stand that counsel appearing for the
respondent corporation has no authority to represent it or/and sue in its behalf, the
Court of Appeals held that:

Respondents aver also that petitioner lacks legal capacity to sue and that its
counsel is acting merely in an individual capacity without the benefit of the
corporate act authorizing him to bring sue. In this connection, respondents
invoked among others section 20 of Rule 127 which provision, in our opinion,
squarely disproves their claim as by virtue thereof, the authority of petitioner's
counsel is pressumed. Withal, the claim of the counsel for the petitioner that a
resolution to proceed against Apostol, had been unanonimously adopted by the
stockholders of the corporation, has not been refuted.

Evidently, petitioner is a duly organized corporation with offices at the Samanillo

Building and that as such, it is endowed with a personality distinct and separate
from that of its president or stockholders. It has the right to bring suit to safeguard
its interests and ordinarily, such right is exercised at the instance of the
president. However, under the circumstance now obtaining, such right properly
devolves upon the other officers of the corporations as said right is sought to be
exercised against the president himself who is the very object of the intended
suit.
The power of a corporation to sue and be sued in any court 1 is lodged in the board of
directors which exercises it corporater powers,2 and not in the president, as contended
by the Government. The "motion for admission of complaint in intervention" (Annex C)
and the "complaint in intervention" attached thereto, signed by counsel and filed in the
Court of First Instance begin with the following statement: "COMES NOW the above-
name Intervenor, by its undersigned counsel, . . . , "and underneath his typewritten
name is affixed the description" Counsel for the Intervenor." As counsels authority to
appeal for the respondent corporation was newer questioned in the Court of First
Instance, it is to be pressumed that he was properly authorized to file the complaint in
intervention and appeal for his client.1 It was only in the Court of Appeals where his
authority to appear was questioned. As the Court of Appeals was satisfied that counsel
was duly authorized by his client to file the complaint does in intervention and to appear
in its behalf, hte resolution of the Court of Appeals on this point should not be disturbed.

Granting that counsel has not been actually authorized by the board of directors to
appear for and in behalf of the respondent corporation, the fact that counsel is the
secretary treasurer of the respondent corporation and member of the board of directors;
and that the other members of the board, namely, Macario Apostol, the president, and
his wife Pacita R. Apostol, who shuold normally initiate the action to protect the
corporate properties and in interest are the ones to be adversely affected thereby, a
single stockholder under such circumstances may sue in behalf of the
corporation.2 Counsel as a stockholder and director of the respondent corporation may
sue in its behalf and file the complaint in intervention in the proper court.

The judgment under review is affirmed, without pronouncements as to costs.

Bengzon, Paras, C.J., Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion,
Reyes, J.B.L., Endencia, and Felix, JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-27289 April 15, 1985

JUAN AGUINALDO, Substituted by MARINA and PRIMITIVO

AGUINALDO, plaintiffs-appellants,
vs.
JOSE ESTEBAN and FRANCISCA SARMIENTO, defendants-appellees.

Crisostomo M. Diokno for plaintiff-appellants.

Andres Franco for defendants-appellees.

RELOVA, J.:

In Civil Case No. 6977, the Court of First Instance of Rizal declared the contract,
entitled: "Sanglaan ng Isang Lupa na Patuluyan Ipaaari," valid and binding contract of
sale and dismissed the complaint as well as the counterclaim with costs against the
plaintiff. From said judgment of the lower court, appeal was taken to this Court, "the
same involving, as it does, a question of law." (p. 25, Rollo)

Plaintiff Juan Aguinaldo in his complaint alleged, among others, that on June 23, 1958,
defendants, through fraud, deceit and misrepresentations and exercising undue
pressure, influence and advantage, procured the thumbmark of Jose Aguinaldo, father
of plaintiff, to be affixed on subject contract; that defendants caused the cancellation of
Tax Declaration No. 4004, Rizal (1948) in the name of Jose Aguinaldo and the issuance
in lieu thereof of Tax Declaration No. 10725-Rizal in the names of defendant spouses;
that the document in question on which Jose Aguinaldo affixed his thumbmark is not
true and genuine, as the thumbmark appearing thereon is a forgery; that it contains
terms and conditions which partake the nature of "pacto comisario" which render same
null and void; that it does not fix a period for the payment of the loan nor does it state
the duration of the mortgage; that plaintiff is the sole successor-in-interest and legal heir
of Jose Aguinaldo who died intestate in October 1960; that defendants having no right
to win and possess the property in question are withholding the possession thereof from
plaintiff and consequently deprived plaintiff of the fruits of said property; and that by
reason of the willfull and malevolent acts of defendants, plaintiff suffered moral and
actual damages in the amount of P4,000.00.

In their answer, defendants claim absolute ownership of subject property upon the
death of Jose Aguinaldo in October 1960 on the theory that the document in
controversy is one of sale and not one of mortgage.
The parties, through their respective counsels, agreed to submit the case for decision
solely on whether the contract in question, Annex "A" of the complaint, is one of
mortgage or of sale.

When plaintiff Juan Aguinaldo died intestate on August 6, 1965, his heirs, namely:
Marina and Primitivo, both surnamed Aguinaldo, petitioned the trial court that they be
substituted as party plaintiffs in lieu of their deceased father.

It is the position of plaintiffs-appellants that the document in question, Annex "A" of the
complaint, is null and void because it contains stipulations which partake of the nature
of "pacto comisario." On the other hand, the defendants contend that the contract is a
valid sale and, as such, it passed the title to them.

Hereunder is the contract in question:

SANGLAAN NG ISANG LUPA-CANAVERAL NA PATULOYAN IPAAARI

HAYAG SA SINO MAN MAKAKABASA:

Na, ako JOSE AGUINALDO, Pilipino, balo, may karampatan gulang, tubo
at naninirahan sa Bo. Bambang, Tagig, Rizal, Kapuluan Pilipinas, sa
pamamagitan nito ay

ISINASAYSAY KO AT PINAGTITIBAY:

1. Na, sarili at tunay kong pagaari dahil sa ipinagkaloob sa akin ng aking

amain Martin Concepcion (patay) ang isang parcelang lupa-canaveral, at
ang lupang ito ay napagkikilala at nauligiran ng mga pagaaring lupa ng
mga kahangganan kagaya ng mga sumusunod:

Isang parcelang lupa-canaveral na nasa pook ng Bo.

Bambang, Tagig, Rizal, at siyang lupang nakatala sa Tax
Declaration No. 4004-Rizal (1948), sa Tanggapan ng
Tasador ng lupa sa lalawigan ng RizaL Pasig, RizaL at valor
ameliarado ng P70.00 at napaloob sa mga pagaaring lupa
ng mga kahangganan kagaya ng mga sumusunod: Sa
Norte, Antonio Silvestre at Pedro Sarmiento; sa Este, Don-
lingo Luga; sa Sur, Dionisio Dionisio at Pedro Sarmiento, at
sa Weste, Tomas Cruz

2. Na, alang-alang sa halagang LIMANG DAAN AT APATNAPUNG PISO

(P540.00), salaping Pilipino na sa kasalukuyan ay ating ginagamit, ay
natanggap ko na, sa hindi biglaan kung hindi LIMANGPUNG SENTIMOS
(P0.50) lamang araw-araw magbuhat pa nuong Marzo 26, 1955, at ang
kabuuang halaga ng halagang nabanggit sa itaas nito, sa oras na ito, ay
kusang loob kong tinanggap sa magasawang JOSE ESTEBAN at
FRANCISCA SARMIENTO, mga Pilipino, may karampatan gulang,
naninirahan at may padalahan sulat sa Bo. Bambang, Tagig, Rizal, ay
ISINASANGLA AT PATULOYAN IPAARI KO sa nasabing magasawa ang
lupang nobanggit ko sa itaas, sa aming mga kasunduan kagaya ng mga
sumusunod:

NA AKO, JOSE AGUINALDO AY PAKAKANIN HABANG

NABUBUHAY NG MAGASAWANG JOSE ESTEBAN AT
FRANCISCA SARMIENTO, 0 NG KANILANG KAHALILI AT
TAGAPAGMANA, AT BILANG KABAYARAN NAMAN SA
HALAGANG LIMANG DAAN AT APATNAPUNG PISO
(P540.00) AT PAGPAPAKAIN SA AKIN NG
MAGASAWANG JOSE ESTEBAN AT FRANCISCA
SARMIENTO, ORAS NA AKO AY MAMATAY SILA (JOSE
ESTEBAN AT FRANCISCA SARMIENTO) NA ANG
LUBOSAN MAGMAMAYARI NG AKING LUPANG
ISINANGLANG ITO SA KANILA, SAPAGKAT ANG LAHAT
NG AKING KARAPATAN SA LUPA, NGAYON PA AY
IPINAGKAKALOOB KO SA KANILA SA ILALIM NG
KASUNDUAN.

3. Na, ang lupa-canaveral na isinasangla ko sa pamamagitan ng

kasulatan ito na ipaaring patuluyan ay pinamomosiyonan ng mag-
asawang Jose Esteban at Francisco Sarmiento, nuong pang Marzo 26,
1955.

4. Na, ang lupang akin binabanggit sa kasulatan ito, ay hindi ko

ipinagkakautang sa kanino man tao, na maliban sa magasawang Jose
Esteban at Francisca Samiento.

5. Na, ang lupa kong ito na siyang nakatala sa Tax Declaration No. 4004-
Rizal (1948), ay hindi nakatala sa bisa ng Batas Blg. 496 o maging sa
Hipotecaria Espanola, at napagkasunduan ang kasulatan ito, ay nais
ipatala sa bisa ng Batas Blg. 3344, at sinusugan.

SA KATUNAYAN NG LAHAT KONG IPINAHAYAG SA DOKUMENTONG

ITO, ay inilagda ko ang aking pangalan at apelyedo dito sa Lunsod ng
Maynila, Pilipinas, ngayong ika ______ ng Hunyo 1958, sa harap ng
dalawang saksi.

(Thumbmark)
JOSE AGUINALDO
Nagsangla

SUMASANGAYON SA MGA ALITUNTUNIN:

 (Sgd.) JOSE ESTEBAN
Pinagsanglaan

(Sgd.) FRANCISCA
SARMIENTO
Pinagsanglaan

MGA SAKSI:

(Sgd.) Illegible (Sgd.) Eugenia S. Relon

ACKNOWLEDGMENT

(pp. 7-1 0, Record on Appeal)

There is merit in the appeal.

On the issue as to whether or not the subject contract is one of sale or of mortgage, an
inquiry into the surrounding facts would disclose the intention of the parties and thereby
determine the truth of plaintiff-appellant's allegation that his father, Jose Aguinaldo, was
misled into affixing his thumbmark on the said contract.

Plaintiff-appellant, Juan Aguinaldo, is the son of Jose and it is indeed intriguing why
defendants-appellees, who are not related at all to the old man, would give him fifty
centavos (P0.50) everyday beginning May 26, 1955. The contract in question was
executed in June 1958, or after three (3) years from the time the daffy amount of half-a-
peso was given the old man. Thereafter, the defendants-appellees' saw to it that the
recipient of the money would execute the contract, entitled: ."Sanglaan ng isang lupang-
canaveral na Patuluyang Ipaaari. "

It is significant to note that herein plaintiff-appellant was not even a witness in the
document when his father who is of low intelligence, illiterate and could not even sign
his name, affixed his thumbmark in the document in question. It would appear that the
execution of the contract was made behind his back and/or without giving notice to him.
Stated differently, if the transaction was on the level, why was not plaintiff-appellant
asked to sign as a witness to the document. It may be true that the contract was read to
the old man but it is doubtful if he understood the meaning of its contents. The contract
was so written that anyone could believe he was only giving his property by way of
mortgage, not as a sale. For instance, in paragraph 2 thereof, it reads "... ay isinasangla
at patuloyan ipaaari ko sa nasabing magasawa ang lupang nabanggit ko sa itaas, ... ."
In some Tagalog provinces the word "Sangla" means "Bilihan Mabibiling Muli" or "Pacto
de Retro." By this contract, the vendee-a-retro takes possession of the property as
owner until the same is repurchased or redeemed. On the other hand, mortgage is
understood as "Prenda."
In the case at bar, defendants-appellees took possession of the property on March 26,
1955 when they started giving Jose Aguinaldo the fifty centavos (P0.50) a day. It would
appear then that the money which he has been receiving from the Estebans come from
his own property. In effect, there was no consideration for the transfer of the property-be
it sale, mortgage or Pacto Comisario.

WHEREFORE, the decision of the trial court, dated August 16, 1966, is REVERSED
and the contract "Sanglaan ng Isang Lupa-Canaveral na Patuluyan Ipaaari" is declared
null and void, and the deceased plaintiff Juan Aguinaldo is declared as the true and
lawful owner of subject property.

Further, defendants-appellees are hereby ordered to transfer and deliver the

possession of subject property to the said deceased plaintiff Juan Aguinaldo's heirs,
Marina Aguinaldo and Primitive Aguinaldo, who substituted him as plaintiffs in this case
and/or their respective heirs and successors; and the Provincial Assessor of Rizal is
directed to cancel Tax Declaration No. 10725 (Rizal) in the name of defendants-
appellees, Jose Esteban and Francisco Sarmiento, and in lieu thereof issue another in
the name of the deceased plaintiff Juan Aguinaldo's heirs, Marina Aguinaldo and
Primitivo Aguinaldo.

SO ORDERED.

Teehankee (Chairman), Plana, Gutierrez, Jr., De la Fuente and Alampay, JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-41847 December 12, 1986

CATALINO LEABRES, petitioner,

vs.
COURT OF APPEALS and MANOTOK REALTY, INC., respondents.

Magtanggol C. Gunigundo for petitioner.

Marcelo de Guzman for respondents.

PARAS, J.:

Before Us is a Petition for certiorari to review the decision of the Court of Appeals which
is quoted hereunder:

In Civil Case No. 64434, the Court of First Instance of Manila made the following quoted
decision:

(1) Upon defendant's counterclaim, ordering plaintiff Catalino Leabres to vacate

and/or surrender possession to defendant Manotok Realty, Inc. the parcel of land
subject matter of the complaint described in paragraph 3 thereof and described in
the Bill of Particulars dated March 4, 1966;

(2) To pay defendant the sum of P81.00 per month from March 20, 1959, up to
the time he actually vacates and/or surrenders possession of the said parcel of
land to the defendant Manotok Realty, Inc., and

(3) To pay attorney's fees to the defendant in the amount of P700.00 and pay the
costs. (Decision, R.A., pp. 54-55).

The facts of this case may be briefly stated as follows:

Clara Tambunting de Legarda died testate on April 22, 1950. Among the properties left
by the deceased is the "Legarda Tambunting Subdivision" located on Rizal Avenue
Extension, City of Manila, containing an area of 80,238.90 sq. m., covered by Transfer
Certificates of Title No. 62042; 45142; 45149; 49578; 40957 and 59585. Shortly after
the death of said deceased, plaintiff Catalino Leabres bought, on a partial payment of
Pl,000.00 a portion (No. VIII, Lot No. 1) of the Subdivision from surviving husband
Vicente J. Legarda who acted as special administrator, the deed or receipt of said sale
appearing to be dated May 2, 1950 (Annex "A"). Upon petition of Vicente L. Legarda,
who later was appointed a regular administrator together with Pacifica Price and
Augusto Tambunting on August 28, 1950, the Probate Court of Manila in the Special
Proceedings No. 10808) over the testate estate of said Clara Tambunting, authorized
through its order of November 21, 1951 the sale of the property.

In the meantime, Vicente L. Legarda was relieved as a regular Administrator and the
Philippine Trust Co. which took over as such administrator advertised the sale of the
subdivision which includes the lot subject matter herein, in the issues of August 26 and
27, September 2 and 3, and 15 and 17, 1956 of the Manila Times and Daily Mirror. In
the aforesaid Special Proceedings No. 10808, no adverse claim or interest over the
subdivision or any portion thereof was ever presented by any person, and in the sale
that followed, the Manotok Realty, Inc. emerged the successful bidder at the price of
P840,000.00. By order of the Probate Court, the Philippine Trust Co. executed the Deed
of Absolute Sale of the subdivision dated January 7, 1959 in favor of the Manotok
Realty, Inc. which deed was judicially approved on March 20, 1959, and recorded
immediately in the proper Register of Deeds which issued the corresponding
Certificates of Title to the Manotok Realty, Inc., the defendant appellee herein.

A complaint dated February 8, 1966, was filed by herein plaintiff, which seeks, among
other things, for the quieting of title over the lot subject matter herein, for continuing
possession thereof, and for damages. In the scheduled hearing of the case, plaintiff
Catalino Leabres failed to appear although he was duly notified, and so the trial Court,
in its order dated September 14, 1967, dismissed the complaint (Annex
"E").<äre||anº•1àw> In another order of dismissal was amended as to make the same
refer only to plaintiff's complaint and the counter claim of the defendant was reinstated
and as the evidence thereof was already adduced when defendant presented its
evidence in three other cases pending in the same Court, said counterclaim was also
considered submitted for resolution. The motion for reconsideration dated January 22,
1968 (Annex " I "), was filed by plaintiff, and an opposition thereto dated January 25,
1968, was likewise filed by defendant but the Court a quo dismissed said motion in its
order dated January 12, 1970 (Annex "K"), "for lack of merits" (pp. 71-72, Record on
Appeal).

Appealing the decision of the lower Court, plaintiff-appellant advances the following
assignment of errors:

THE LOWER COURT ERRED IN DENYING THE MOTION FOR

RECONSIDERATION, DATED OCTOBER 9, 1967, THUS DEPRIVING THE
PLAINTIFF-APPELLANT HIS DAY IN COURT.

II
 THE LOWER COURT ERRED IN ORDERING THE PLAINTIFF-APPELLANT
CATALINO LEABRES TO VACATE AND/OR SURRENDER THE POSSESSION
OF THE LOT SUBJECT MATTER OF THE COMPLAINT TO DEFENDANT-
APPELLEE.

III

THE LOWER COURT ERRED IN ORDERING THE PLAINTIFF-APPELLANT TO

PAY DEFENDANT-APPELLEE THE SUM OF P 81.00 PER MONTH FROM
MARCH 20, 1969, UP TO THE TIME HE ACTUALLY VACATE THE PARCEL
OF LAND. (Appellant's Brief, p. 7)

In the First Assigned Error, it is contended that the denial of his Motion for
Reconsideration dated October 9, 1967, the plaintiff-appellant was not accorded his day
in Court.

The rule governing dismissal of actions for failure to prosecute is provided for in Section
3, Rule 17 of the Rules of Court, as follows:

If the plaintiff fails to appear at the time of the trial, or to prosecute his action for an
unreasonable length of time, or to comply with these rules or any order of the Court, the
action may be dismissed upon motion of the defendant or upon the Court's own motion.
This dismissal shall have the effect of an adjudication upon the merits, unless otherwise
provided by the Court.

Under the afore-cited section, it is discretionary on the part of the Court to dismiss an
action for failure to prosecute, and its action will not be reversed upon appeal in the
absence of abuse. The burden of showing abuse of this discretion is upon the appellant
since every presumption is toward the correctness of the Court's action (Smith, Bell &
Co., et al vs. American Pres. Lines, Ltd., and Manila Terminal Co., No. L-5304, April 30,
1954; Adorable vs. Bonifacio, G. R. No. L-0698, April 22, 1959); Flores vs. Phil. Alien
Property Administration, G.R. No. L-12741, April 27, 1960). By the doctrine laid down in
these cases, and by the provisions of Section 5, Rules 131 of the Rules of Court,
particularly paragraphs (m) and (o) which respectively presume the regularity of official
performance and the passing upon by the Court over all issues within a case, it matters
not if the Court dismissing the action for failure to prosecute assigns any special reason
for its action or not. We take note of the fact that the Order declaring appellant in default
was handed down on September 14, 1967. Appellant took no steps to have this Order
set aside. It was only on January 22, 1968, after he was furnished a copy of the Court's
decision dated December 9, 1967 or about four months later that he attached this Order
and the decision of the Court. Appellant slept on his rights-if he had any. He had a
chance to have his day in Court but he passed it off. Four months later he alleges that
sudden illness had prevented him. We feel appellant took a long time too-long in fact-to
inform the Court of his sudden illness. This sudden illness that according to him
prevented him from coming to Court, and the time it took him to tell the Court about it, is
familiar to the forum as an oft repeated excuse to justify indifference on the part of
litigants or outright negligence of those who represent them which subserves the
interests of justice. In the instant case, not only did the appellant wantonly pass off his
chance to have a day in Court but he has also failed to give a convincing, just and valid
reason for the new hearing he seeks. The trial court found it so; We find it so. The trial
Court in refusing to give appellant a new trial does not appear to have abused his
discretion as to justify our intervention.

The Second and Third Assignments of Error are hereby jointly treated in our discussion
since the third is but a consequence of the second.

It is argued that had the trial Court reconsidered its order dated September 14, 1967
dismissing the complaint for failure to prosecute, plaintiff-appellant might have proved
that he owns the lot subjectmatter of the case, citing the receipt (Annex A) in his favor;
that he has introduced improvements and erected a house thereon made of strong
materials; that appellee's adverse interest over the property was secured in bad faith
since he had prior knowledge and notice of appellant's physical possession or
acquisition of the same; that due to said bad faith appellant has suffered damages, and
that for all the foregoing, the judgment should be reversed and equitable relief be given
in his favor.

As above stated, the Legarda-Tambunting Subdivision which includes the lot subject
matter of the instant case, is covered by Torrens Certificates of Title. Appellant anchors
his claim on the receipt (Annex "A") dated May 2, 1950, which he claims as evidence of
the sale of said lot in his favor. Admittedly, however, Catalino Leabres has not
registered his supposed interest over the lot in the records of the Register of Deeds, nor
did he present his claim for probate in the testate proceedings over the estate of the
owner of said subdivision, in spite of the notices advertised in the papers. (Saldana vs.
Phil. Trust Co., et al.; Manotok Realty, Inc., supra).

On the other hand, defendant-appellee, Manotok Realty, Inc., bought the whole
subdivision which includes the subject matter herein by order and with approval of the
Probate Court and upon said approval, the Deed of Absolute Sale in favor of appellee
was immediately registered with the proper Register of Deeds. Manotok Realty, Inc. has
therefore the better right over the lot in question because in cases of lands registered
under the Torrens Law, adverse interests not therein annotated which are without the
previous knowledge by third parties do not bind the latter. As to the improvement which
appellant claims to have introduced on the lot, purchase of registered lands for value
and in good faith hold the same free from all liens and encumbrances except those
noted on the titles of said land and those burdens imposed by law. (Sec. 39, Act.
496).<äre||anº•1àw> An occupant of a land, or a purchaser thereof from a person other
than the registered owner, cannot claim good faith so as to be entitled to retention of the
parcels occupied by him until reimbursement of the value of the improvements he
introduced thereon, because he is charged with notice of the existence of the owner's
certificate of title (J.M. Tuason & Co. vs. Lecardo, et al., CA-G.R. No. 25477-R, July 24,
1962; J.M. Tuason & Co., Inc. vs. Manuel Abundo, CA-G.R. No. 29701-R, November
18, 1968).
Appellant has not convinced the trial Court that appellee acted in bad faith in the
acquisition of the property due to the latter's knowledge of a previous acquisition by the
former, and neither are we impressed by the claim. The purchaser of a registered land
has to rely on the certificate of title thereof. The good faith of appellee coming from the
knowledge that the certificate of title covering the entire subdivision contain no notation
as to appellant's interest, and the fact that the records of these eases like Probate
Proceedings Case No. 10808, do not show the existence of appellant's claim, strongly
support the correctness of the lower Court's decision

WHEREFORE, in view of the foregoing, we find no reason to amend or set aside the
decision appealed from, as regards to plaintiff-appellant Catalino Leabres. We therefore
affirm the same, with costs against appellant. (pp. 33-38, Rollo)

Petitioner now comes to us with the following issues:

(1) Whether or not the petitioner was denied his day in court and deprived of due
process of law.

(2) Whether or not the petitioner had to submit his receipt to the probate court in
order that his right over the parcel of land in dispute could be recognized valid
and binding and conclusive against the Manotok Realty, Inc.

(3) Whether or not the petitioner could be considered as a possessor in good

faith and in the concept of owner. (p. 11, Rollo)

Petitioner's contention that he was denied his day in court holds no water. Petitioner
does not deny the fact that he failed to appear on the date set for hearing on September
14, 1967 and as a consequence of his non-appearance, the order of dismissal was
issued, as provided for by Section 3, Rule 17 of the Revised Rules of Court.

Moreover, as pointed out by private respondent in its brief, the hearing on June 11,
1967 was not ex parte. Petitioner was represented by his counsel on said date, and
therefore, petitioner was given his day in Court.

The main objection of the petition in the lower court's proceeding is the reception of
respondent's evidence without declaring petitioner in default. We find that there was no
necessity to declare petitioner in default since he had filed his answer to the
counterclaim of respondent.

Petitioner anchors his main arguments on the receipt (Exh. 1) dated May 2, 1950, as a
basis of a valid sale. An examination of the receipt reveals that the same can neither be
regarded as a contract of sale or a promise to sell. There was merely an
acknowledgment of the sum of One Thousand Pesos (P1,000.00). There was no
agreement as to the total purchase price of the land nor to the monthly installment to be
paid by the petitioner. The requisites of a valid Contract of Sale namely 1) consent or
meeting of the minds of the parties; 2) determinate subject matter; 3) price certain in
money or its equivalent-are lacking in said receipt and therefore the "sale" is not valid
nor enforceable. Furthermore, it is a fact that Dona Clara Tambunting died on April 22,
1950. Her estate was thereafter under custodia legis of the Probate Court which
appointed Don Vicente Legarda as Special Administrator on August 28, 1950. Don
Vicente Legarda entered into said sale in his own personal-capacity and without court
approval, consequently, said sale cannot bind the estate of Clara Tambunting.
Petitioner should have submitted the receipt of alleged sale to the Probate Court for its
approval of the transactions. Thus, the respondent Court did not err in holding that the
petitioner should have submitted his receipt to the probate court in order that his right
over the subject land could be recognized-assuming of course that the receipt could be
regarded as sufficient proof.

Anent his possession of the land, petitioner cannot be deemed a possessor in good
faith in view of the registration of the ownership of the land. To consider petitioner in
good faith would be to put a premium on his own gross negligence. The Court resolved
to DENY the petition for lack of merit and to AFFIRM the assailed judgment.

Feria (Chairman), Fernan, Alampay and Gutierrez, Jr., JJ., concur.

 Republic of the Philippines

SUPREME COURT

Manila

EN BANC

G.R. No. L-12183 May 29, 1959

SIXTO CELESTINO, Petitioner-Appellant, vs. AUDITOR GENERAL OF THE

PHILIPPINES, and THE CHIEF OF STAFF, ARMED FORCES OF THE
PHILIPPINES, respondents-appellees.

Fidel N. Vivar for petitioner.

Assistant Solicitor General Jose P. Alejandro, Solicitor Dominador L. Quiroz, Angel S.
Salcedo, Vicente E. Escutin and Martin P. Reyes for respondents.

MONTEMAYOR, J.: chanrobles virtual law library

This is an appeal from the decision of the Auditor General denying the claim of
petitioner for the payment of 7,926 boxes of ordinance items and 20 radial engines
withdrawn by the Armed Forces of the Philippines (AFP) from Ordinance Sub-Depot No.
6, located at Isaac Peral, Manila.chanroblesvirtualawlibrary chanrobles virtual law library

Under the Roxas-Vegelback Agreement signed in Manila on September 11, 1946,, and
approved by the Philippine Government by virtue of Republic Act No. 33, vast amounts
of property, especially war materials, which had been declared surplus to the needs of
the Government of the United States of America and which were found necessary for
the reconstruction and rehabilitation of the Philippines, were transferred to the Philippine
Government, and the President of the Philippines was authorized to administer said
surplus property and to sell or dispose of so much of the same as may not be needed
by the Government, its subdivisions, and
instrumentalities.chanroblesvirtualawlibrary chanrobles virtual law library

Part of said surplus property was the fixed installations and movable goods located at
Ordinance Sub-Depot No. 6, Isaac Peral, Manila. It was the intention and policy of the
Government to first satisfy and meet the needs of its agencies and instrumentalities,
such as the Armed forces of the Philippines, before disposing of said surplus property.
And, so on October 6, 1948, the defunct Government Enterprises Council (GEC)
approved and turned over to the AFP, all combat materials located in said depot.
Subsequently, on February 6 to 25, 1949, the property in said depot was placed on
negotiated offers. In said offers, the following clause was specifically inserted:

Excluded: All combat materials (military weapons, gun parts and accessories) that may
be found.
Pursuant to said clause, representatives of the AFP were authorized by the Chairman of
the surplus Property Commission (SPC) on March 18, 1949 to earmark and take
delivery by means of memorandum receipts all such combat materials as they needed
from said depot, in addition to military weapons, gun parts, and accessories; and on
March 25, 1949, the SPC Chairman ordered the said depot closed for customers'
inspection until the AFP had completed withdrawal of combat materials located therein.
Two months later, or on May 3, 1949, the AFP was requested by the SPC to issue a
certificate of release for the said depot in order to facilitate the early liquidation and
disposition of the remaining contents thereof. However, the AFP representatives found
that about 70% of the items located at the depot fell under the category of combat
materials; that the ear-marking and withdrawal of the same would require a longer
period of time; and so, the then Chief of the Ordnance Service, Col. Benjamin C.
Molina, informed the SPC in his 5th indorsement dated May 5, 1949, that the AFP
would offer no objection to the release of Sub-depot No. 6, subject to the condition
imposed in the 2nd indorsement dated March 24, 1949, namely:

. . . the AFP retains the exclusive right to screen all the items as soon as the buyers
hauling them from the depot. The AFP representative will require the buyer to open the
boxes and inspect the contents before they are hauled from the depot. Any combat
material which is found to be within the AFP requirements and which may be
considered dangerous to public safety will be segregated by the AFP. (Emphasis
supplied; Exhibit N, Annex A)

Thereafter, or on July 12, 1949, the Control Committee of the GEC, upon
recommendation of the SPC, approved the negotiated sale of the remaining fixed
installations and movable property located at Ordinance Sub-Depot No. 6, Isaac Peral,
Manila, to the Fil-American Irregular Troops, represented by petitioner Sixto Celestino
for the sum of P42,000, plus compensating tax, or a total of P44,100. After the approval
of the negotiated sale, Invoice No. 10644, dated July 15, 1949, covering the property
sold was issued to the vendee, and possession of the depot was delivered to it under
Tally-out Sheet, dated August 26, 1949.chanroblesvirtualawlibrary chanrobles virtual
law library

In this connection, it should be stated that before the sale, the condition imposed by Col.
Benjamin C. Molina, contained in his indorsement of March 24, 1949, as already
reproduced, was called to the attention of Celestino, representative of the vendee, and
he signified his written conformity thereto in the very same 5th indorsement, as follows:

We hereby agree to the condition set in the 5th indorsement above by Benjamin C.
Molina dated May 5, 1949.

FIL-AMERICAN TROOP DIVISION

By: (Sgd) MAJOR BONIFACIO CASTILLEJOS
(Sgd.) SIXTO CELESTINO
Furthermore, the sales Invoice No. 10644 (Exh. T. Annex A), evidencing the sale to
petitioner contained this clause:

Excluded: All combat materials (military weapons, gun parts and accessories) that may
be found.

This same clause also appears in the Tally-Out Sheet, (Exh. W, Annex A) signed by
petitioner, evidencing the delivery to petitioner of the installations and articles found
therein.chanroblesvirtualawlibrary chanrobles virtual law library

About three months after the sale of the depot in question or on October 19 to
December 6, 1949, authorized representatives of the Ordinance Service, AFP, withdrew
certain items therefrom, among them, 7,926 boxes of ordinance materials and 20 radial
engines. Petitioner demanded payment for the same, but the AFP refused to pay on the
ground that ownership over said materials never passed to the petitioner, the same
having been expressly excluded from the sale. Petitioner appealed to the Secretary of
National Defense who affirmed the stand taken by the AFP; thereupon petitioner took
the case to the President of the Philippines who, on December 7, 1951, denied
petitioner's claim. A motion for reconsideration was equally denied on April 28, 1955.
Petitioner requested the President to give his consent was referred to the Secretary of
Justice for comment. In view of the recommendation of the Secretary of Justice that the
provisions of Commonwealth Act No. 327 be brought to the attention of the petitioner,
the latter filed his claim with the Auditor General on June 21, 1955. After due hearing
the Auditor General on February 6, 1957, rendered a decision disallowing the claim.
Petitioner is now appealing from said denial to us.chanroblesvirtualawlibrary chanrobles
virtual law library

Pending appeal in this Court and before the parties had filed their briefs, the Solicitor
General filed a motion to dismiss the appeal, claiming that the same was perfected
beyond the 30-day period prescribed by law for the reason that a copy of the Auditor
General's decision was received by the petitioner on February 12, 1957 and the notice
of appeal was filed with the Auditor General only on March 27, 1957, while the petition
for review was filed with us on March 28, 1957. By resolution of May 29, 1957, said
motion to dismiss the appeal was denied. The said resolution was presumably based on
the fact that the petitioner's motion for reconsideration of the Auditor Generals decision
suspended the running of the period for appeal. The Solicitor General in his brief
reiterates his motion for dismissal of the appeal, contending that a motion or petition for
reconsideration of the Auditor General's decision does not suspend the running of the
period for appeal; and in support of his contention, he cites I Moran, Rules of Court,
1952 Ed., p. 949, citing the case of Jalandoni vs. Sison, G.R. No. 48884. Unless we set
aside our resolution of May 29, 1957, denying the motion to dismiss the appeal which
we see no reason or occasion for doing, the present appeal stands. And because of the
view we take of this case and the conclusion which we have arrived at, the result would
be the same. However, for the satisfaction of counsel for the Government, we wish to
say that in the relatively recent case of Pedro M. Libuet vs. The Auditor General, G.R.
No. L-10160, June 28, 1957, the same legal point was involved, and even this case of
Jalandoni vs. Sison was cited. There we decided that a petition for reconsideration of
the decision of the Auditor General suspends the running of the period for perfecting an
appeal. Through Mr. Justice Labrador, we said:

A point raised by the company is that the appeal is late, because petitioner had filed a
motion for reconsideration of the decision of the Auditor General, and such motion does
not suspend the period for perfecting an appeal to this Court. A decision of this Court
(Jalandoni vs. Sison, G.R. No. 48884) cited in I Moran's Comments on the Rules of
Court p. 949, has been cited by the respondent in support of the argument. We have
tried to check up the supposed source of the supposed ruling but have not been able to
find that the ruling has been laid down by us. On the other hand, we find that in
proceeding before the courts as well as in the those before administrative officials, the
constant practice has been to permit motions for reconsiderations and to deduct the
time used in the consideration thereof from the period for perfecting an appeal. We have
found no reason for deviating from this practice in matters coming from the Auditor
General; as a matter of fact the practice is in consonance with the principle of
exhaustion of administrative remedies. The claim of the respondent that the appeal was
perfected out of time can not, therefore, be sustained.

On the basis of the facts of the case narrated by us, particularly those based on the
documents presented in evidence as exhibits, the case appears to us quite clear as to
require no extended discussion. From the very beginning, petitioner was given to
understand in clear and unmistakable terms, and he expressed his conformity thereto,
that all combat materials found in the depot were to be excluded from the sale. Those
materials were not only those that had been removed from the depot by the AFP before
the negotiated sale before the vendee took possession of the depot but also those
materials which were later removed by the AFP as being combat materials. As a matter
of fact the AFP, with the conformity of petitioner, has reserved the right to even open the
boxes and cases in which the materials were contained before they were hauled away
by the vendee in order to examine the contents and remove therefrom all combat
materials. In all probability, the reason why the vendee had agreed to this was the
relatively low price at which the sale was made: materials which had a procurement cost
of over a million pesos, sold at the price of about P44,000 including compensating tax.
In this connection, we reproduce with favor pertinent portions of the well written and
well-prepared decision of the Auditor General:

The records show that the original procurement cost of the depot in question was
P3,620,568.00 but inasmuch as 70% of the items therein were found to be combat
materials and reserved for the AFP, said procurement cost was revised and lowered (for
purposes of determining the selling price) to P1,086,170.00 which is approximately 30%
of the original procurement costs. It is noteworthy that the negotiated sale of said depot
to the claimant was deemed acceptable and same was awarded to him by the GEC
because his offer of P42,000.00 would yield a recovery of 3.86%. (Resolution of the
SPC chairman dated June 20, 1949, marked as Exhibit "R" and letter of the Chairman,
GEC, supra). By simple mathematical computation, we arrive at the incontrovertible fact
that the amount of P42,000.00 paid by the claimant is approximately 3.86% of
P1,086,170.00, the revised procurement costs representing 30% of the contents of the
depot. In other words, in determining whether the offer of the claimant would be a
satisfactory selling price of the depot in question the Surplus Property Commission took
into consideration the fact that 70% of the contents of the depot was already reserved
for the AFP and cannot be included in the sale. The inescapable inference flowing from
these circumstances is that during the negotiation of the sale it was understood and
believed by the parties that the Surplus Property Commission was selling and the
claimant was buying only non-combat materials which comprised more or less 30% of
the original contents of Ordnance Sub-Depot No. 6, because the combat materials or
the remaining 70% were already reserved for the
AFP.chanroblesvirtualawlibrary chanrobles virtual law library

Finally, it seems incredible that the Surplus Property Commission would sell the depot
in question for only P42,000.00 if it were its intention to include in such sale the
materials in question, for if we were to believe the claimant, said materials would
command a price of P2,919,600.00, the amount he is claiming from the AFP. Such a
deal would be patently unreasonable and against the provision of Republic Act No. 33
directing the Surplus Property Commission to sell or dispose of the surplus properties
under such terms and conditions as may be deemed advantageous (Sec. 2, supra).
Thus, the supreme Court in the similar case of Celestino M. Dizon vs. the Board of
Liquidators, Etc., (G.R. No. L-8416, February 17, 1956) stated:chanrobles virtual law
library

. . . . But what makes the claim of the plaintiff unconscionable and unreasonable is the
fact that said materials are worth more than P60,000.00, without including the other
machineries, or, if we are to believe what plaintiff himself said, they could have been
sold for P281,250.00, and yet he only paid for the whole deal paltry sum for P9,450.00.
Such a deal defies reason and common sense. We doubt if the officials in charge of
liquidating the surplus property would have countenanced such deal knowing it to be not
only unreasonable but in contravention of the purpose for which that property was
turned over to our Government.

As to the 7,926 boxes of ordnance materials, as shown by the tally sheets, they
contained among other things magazine accessories for carbines garands, grease
guns, Thompsons; brush bore; staff cleaning rods; assorted spare parts for carbines,
garands, grease guns; stock buts; sight launcher grenade; oil accessory for Cal. .30 M-I,
etc., articles, which were purely combat materials; and as to the 20 radial engines which
were used for tanks, we are convinced that they can be considered war materials. We
also reproduce pertinent portions of the decision of the Auditor General on this same
point:

The term "combat materials" as used in the aforestated conditions and in the Sales
Invoice (Exhibit "T") was given a definite meaning. It was deemed to include military
weapons, gun parts and accessories'. Guided by this concept, a perusal of the list
submitted (Annex B-3) by the claimant describing the ordinance items withdrawn by the
AFP, would readily show that said items fall within the category of combat materials
excluded from the sale. Likewise, the radial engines in question would fall within the
purview of combat contemplated in the contract of sale since as represented by the
AFP, and this has not been impugned by the claimant, they are spare parts of tanks.
One can hardly doubt that a tank is a military
weapon.chanroblesvirtualawlibrary chanrobles virtual law library

The claimant seems to rely on the information given to this Office of Senator Zulueta,
former Chairman of the Surplus Property Commission, to the effect that combat
materials are classified into essentially combat materials and non-essentially combat
materials and that what has been reserved for the AFP are only essentially combat
materials (t.s.n. Conference on April 17, 1956, pp. 9-11). With all due respect to the
Senator, and without necessarily holding that the materials in question are "non-
essentially combat materials". We cannot apply this classification to the instant case.
Apart from the fact that such classification is only his personal opinion-it is not backed
up by the authorities nor by existing rules and regulations of the Surplus Property
Commission, at the time-the stipulations in the award of sale and in the sale invoice of
what are deemed included in the phrase "combat materials" are quite clear and need no
further interpretation.

In view of the foregoing, the appealed decision of the Auditor General is hereby
affirmed, with costs.chanroblesvirtualawlibrary chanrobles virtual law library

Paras, C.J., Reyes, A., Labrador, Concepcion and Endencia, JJ.,concur.

 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-61623 December 26, 1984

PEOPLE'S HOMESITE & HOUSING CORPORATION, petitioner-appellant,

vs.
COURT OF APPEALS, RIZALINO L. MENDOZA and ADELAIDA R.
MENDOZA, respondents-appellees.

Manuel M. Lazaro, Pilipinas Arenas Laborte and Antonio M. Brillantes for petitioner
PHHC.

Tolentino, Cruz, Reyes, Lava and Manuel for private respondents.

AQUINO, J.:

The question in this case is whether the People's Homesite & Housing Corporation
bound itself to sell to the Mendoza spouses Lot 4 (Road) Pcs- 4564 of the revised
consolidation subdivision plan with an area of 2,6,08.7 (2,503.7) square meters located
at Diliman, Quezon City.

The PHHC board of directors on February 18, 1960 passed Resolution No. 513 wherein
it stated "that subject to the approval of the Quezon City Council of the above-
mentioned Consolidation Subdivision Plan, Lot 4. containing 4,182.2 square meters be,
as it is hereby awarded to Spouses Rizalino Mendoza and Adelaida Mendoza, at a price
of twenty-one pesos (P21.00) per square meter" and "that this award shall be subject to
the approval of the OEC (PHHC) Valuation Committee and higher authorities".

The city council disapproved the proposed consolidation subdivision plan on August 20,
1961 (Exh. 2). The said spouses were advised by registered mail of the disapproval of
the plan (Exh. 2-PHHC). Another subdivision plan was prepared and submitted to the
city council for approval. The revised plan, which included Lot 4, with a reduced area of
2,608.7, was approved by the city council on February 25, 1964 (Exh. H).

On April 26, 1965 the PHHC board of directors passed a resolution recalling all awards
of lots to persons who failed to pay the deposit or down payment for the lots awarded to
them (Exh. 5). The Mendozas never paid the price of the lot nor made the 20% initial
deposit.
On October 18, 1965 the PHHC board of directors passed Resolution No. 218,
withdrawing the tentative award of Lot 4 to the Mendoza -spouses under Resolution No.
513 and re-awarding said lot jointly and in equal shares to Miguela Sto. Domingo,
Enrique Esteban, Virgilio Pinzon, Leonardo Redublo and Jose Fernandez, subject to
existing PHHC rules and regulations. The prices would be the same as those of the
adjoining lots. The awardees were required to deposit an amount equivalent to 20% of
the total selling price (Exh. F).

The five awardees made the initial deposit. The corresponding deeds of sale were
executed in their favor. The subdivision of Lot 4 into five lots was approved by the city
council and the Bureau of Lands.

On March 16, 1966 the Mendoza spouses asked for reconsideration of the withdrawal
of the previous award to them of Lot 4 and for the cancellation of the re-award of said lot
to Sto. Domingo and four others. Before the request could be acted upon, the spouses
filed the instant action for specific performance and damages.

The trial court sustained the withdrawal of the award. The Mendozas appealed. The
Appellate Court reversed that decision and declared void the re-award of Lot 4 and the
deeds of sale and directed the PHHC to sell to the Mendozas Lot 4 with an area of
2,603.7 square meters at P21 a square meter and pay to them P4,000 as attorney's
fees and litigation expenses. The PHHC appealed to this Court.

The issue is whether there was a perfected sale of Lot 4, with the reduced area, to the
Mendozas which they can enforce against the PHHC by an action for specific
performance.

We hold that there was no perfected sale of Lot 4. It was conditionally or contingently
awarded to the Mendozas subject to the approval by the city council of the proposed
consolidation subdivision plan and the approval of the award by the valuation committee
and higher authorities.

The city council did not approve the subdivision plan. The Mendozas were advised in
1961 of the disapproval. In 1964, when the plan with the area of Lot 4 reduced to
2,608.7 square meters was approved, the Mendozas should have manifested in writing
their acceptance of the award for the purchase of Lot 4 just to show that they were still
interested in its purchase although the area was reduced and to obviate ally doubt on
the matter. They did not do so. The PHHC board of directors acted within its rights in
withdrawing the tentative award.

"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 law governing the form of
contracts." (Art. 1475, Civil Code).
"Son, sin embargo, excepcion a esta regla los casos en que por virtud de la voluntad de
las partes o de la ley, se celebra la venta bajo una condicion suspensiva, y en los
cuales no se perfecciona la venta hasta el cumplimiento de la condicion" (4 Castan
Tobenas, Derecho Civil Español 8th ed. p. 81).

"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. (Art. 1181, Civil Code). "Se llama suspensive la condicion de
la que depende la perfeccion, o sea el principio del contrato". (9 Giorgi, Teoria de las
Obligaciones, p. 57).

Under the facts of this case, we cannot say there was a meeting of minds on the
purchase of Lot 4 with an area of 2,608.7 square meters at P21 a square meter.

The case of Lapinig vs. Court of Appeals, 115 SCRA 213 is not in point because the
awardee in that case applied for the purchase of the lot, paid the 10% deposit and a
conditional contract to sell was executed in his favor. The PHHC could not re-award that
lot to another person.

WHEREFORE, the decision of the Appellate Court is reversed and set aside and the
judgment of the trial court is affirmed. No costs.

SO ORDERED.

Makasiar (Chairman), Concepcion, Jr., Abad Santos, Escolin and Cuevas, JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-54070 February 28, 1983

HEIRS OF ENRIQUE ZAMBALES and JOAQUINA ZAMBALES, petitioners,

vs.
COURT OF APPEALS, NIN BAY MINING CORPORATION, ANGELA C. PREYSLER
and JOAQUIN B. PREYSLER, respondents.

MELENCIO-HERRERA, J.:

The Decision of respondent Court of Appeals in the case entitled "Enrique Zambales
and Joaquina Zambales, Plaintiffs-appellees vs. Atty. Perfecto de los Reyes, Nin Bay
Mining Corporation and Joaquin B. Preysler, Defendants-appellants" (CA-G.R. No.
59386-R), setting aside the judgment of the Court of First Instance of Palawan in Civil
Case No. 678 for Annulment of a Deed of Sale with Recovery of Possession and
Ownership with Damages", is the subject of this Petition for Review on Certiorari.

Joaquin B. Preysler is now deceased and was substituted by Angela C. Preysler, his
widow.

Atty. Perfecto de los Reyes was originally a defendant in Civil Case No. 678 but he did
not appeal from the Decision of the lower Court.

The Zambales spouses (Zambaleses, for brevity) were the homestead patentees of a
parcel of land with an area of 17,8474 hectares situated in the Municipality of Del Pilar,
Roxas, Palawan, covered by Original Certificate of Title No. G 1193 of the Registry of
Deeds for the Province of Palawan, issued pursuant to Homestead Patent No. V-59502
dated September 6, 1955.

Claiming that the Nin Bay Mining Corporation (Corporation, for short) had removed
silica sand from their land and destroyed the plants and others improvements thereon,
the Zambaleses instituted, on November 10, 1958, Civil Case No. 316 before the Court
of First Instance of Palawan claiming damages in the total sum of P48,000.00.

The Corporation denied having caused any damages and claimed that it had excavated
and extracted silica sand only from its own mining claims and on which it had mining
lease contracts with the Philippine Government.
On October 29, 1959, the Zambaleses, duly assisted by their counsel, Atty. Perfecto de
los Reyes, and the Corporation, entered into a Compromise Agreement, the portions of
which, pertinent to this case, read:

1. DEFENDANT shall pay the PLAINTIFFS a rental of TWENTY (P20.00)

PESOS per hectare per year from September 9, 1955 to September 30,
1960, or a total rental price of ONE THOUSAND SEVEN HUNDRED
EIGHTY-FOUR PESOS AND SEVENTY- FOUR CENTAVOS (P1,784.74),
Philippine currency, in lieu of all damages...

2. The payment to the PLAINTIFFS of the above-mentioned rental price

shall be considered full, absolute and final payment and indemnity for all
the alleged damages to PLAINTIFFS' property and its improvements, or
any other actual, moral, exemplary or other damages that PLAINTIFFS
may have suffered or will suffer in connection with the mining operations
of DEFENDANT on the property in question, which property, by virtue of
the terms of this Agreement shall be used by DEFENDANT as occupant
thereof until September 30, 1960.

3. PLAINTIFFS hereby agree and bind themselves to sell, transfer and

convey, and DEFENDANT or its assigns, qualified to acquire or hold lands
of the public domain, hereby agrees to purchase and pay for, the
aforesaid property of the PLAINTIFFS, containing an area of 17.8474
hectares, situated in the Municipality of Del Pilar, Roxas, Palawan, and
covered by Original Certificate of Title No. G1193 of the Registry of Deeds
of Palawan, at the fixed selling price of FIVE HUNDRED (P500.00)
PESOS per hectare or a total purchase price of EIGHT THOUSAND NINE
HUNDRED TWENTY THREE PESOS and SEVENTY CENTAVOS
(P8,923.70), Philippine currency. The contract to purchase and sell herein
provided for, shall be reciprocally demandable and enforceable by the
parties hereto on September 10, 1960. PLAINTIFFS hereby irrevocably
constitute and appoint DEFENDANT, its successors and/or assigns their
true and lawful attorney-in-fact with full power and authority to sell, transfer
and convey on September 10, 1960 or at any time thereafter the whole or
any part of PLAINTIFFS' property hereinabove mentioned to the
DEFENDANT, its successors and/or assigns, or to any third party, and to
execute and deliver all instruments and documents whatsoever necessary
for the purpose, and all acts done and to be done by DEFENDANT, its
successors and/or assigns in conformity with the powers herein granted
are hereby ratified and confirmed by the PLAINTIFFS. ...

4. In consideration of the payment of the amount of P1,784.74 by

DEFENDANT, and of other good and valuable consideration,
PLAINTIFFS, jointly and severally, hereby forever release, fully and
completely, said DEFENDANT, its successors and/or assigns in interest,
from any and all liabilities, whether arising from past, present or future
 excavation or removal of silica sand from the property in question or
otherwise, and from all the other claims against the DEFENDANT
contained in their Complaint in Civil Case No. 316 of the Court of First
Instance of Palawan. 1

The Trial Court rendered judgment on October 29, 1959 based on the Compromise
Agreement. The document was duly annotated an OCT No. G - 1193 (Exhibit " A ") the
day after, or on October 30, 1959 (Exhibit " 10 A ").

On September 10, 1960, the Corporation, as attorney-in-fact for the Zambaleses, as

Vendors, sold the disputed property to Joaquin B. Preysler for the sum of P8,923.70
fixed in the Compromise Agreement (Exhibit " 11 "). Transfer Certificate of Title No. T-
970 was issued in the vendee's name on December 19, 1960 (Exhibit " 2 ").

The Deed of Sale to Preysler contained the following proviso:

The VENDORS hereby represent and warrant that the five-year restrictive
period on alienation of lands acquired under the homestead provisions of
Commonwealth Act No. 141, as amended, otherwise known as the Public
Land Act, has already expired, the date of issuance of the herein
homestead patent to the VENDORS as aforesaid being September 6,
1955 as shown in Original Certificate of Title No. G-1193.

On October 18, 1960, the Secretary of Agriculture and Natural Resources approved the
sale to Preysler of the subject property (Exhibit "13 ").

On. December 6, 1969, or ten (10) years after the Trial Court's Decision based on the
Compromise Agreement, and nine (9) years after the sale to Preysler, the Zambaleses
filed Civil Case No. 678 before the Court of First Instance of Palawan for "Annulment of
a Deed of Sale with Recovery of Possession and Ownership with Damages". They
contended that it was their lawyer who prevailed upon them to sign the Compromise
Agreement; that they are unschooled and did not understand the contents thereof; that
they were made to understand that they would receive the sum of P10,700.00, only as
payment for damages sustained by the land from 1955 to 1960; that through fraud,
deceit and manipulation by their lawyer and the Corporation, they were made to agree
to appoint the Corporation as their attorney-in-fact with full power and authority to sell;
that it was never their intention to sell the land; that in September 1969, they were
surprised to learn that the land was already titled in the name of Joaquin B. Preysler;
that the land was acquired and registered in the latter's name through fraud and deceit.
The Zambaleses then prayed that the deed of sale and the title in Preysler's name be
annulled on the ground of fraud and that the property be reconveyed to them.

In their Answer, the Corporation denied all allegations that the Zambaleses had signed
the Compromise Agreement without understanding the contents thereof, the truth being
that it was read to them by their counsel, Atty. Perfecto de los Reyes, who explained
thoroughly the full implication and legal consequence of each and every provision,
which was then submitted and approved by then Presiding Judge Juan L. Bocar; and
that the Corporation had sold the property to Preysler as a duly constituted attorney-in-
fact pursuant to the Compromise Agreement.

After trial, the lower Court rendered judgment in favor of the Zambaleses, the dispositive
part of which reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and

against the defendants as follows:

1) That the deed of sale executed by Nin Bay Mining Corporation through
its president, to Joaquin B. Preysler is hereby declared null and void;

2) That the defendant Joaquin B. Preysler is hereby ordered to reconvey

the land subject matter of this litigation to the plaintiffs;

3) That the defendants Nin Bay Mining Corporation and Joaquin B.

Preysler shall pay the plaintiffs the sum of P85,000.00 as actual damages
plus the legal rate of interest from September 30, 1960 up to the time the
amount is fully paid;

4) That the defendants to pay the sum of FIVE THOUSAND (P5,000.00)

PESOS as attorneys fees; and

5) The defendants to pay the costs.

On appeal by the Corporation, the Court of Appeals reversed the Trial Court, after
finding that the alleged fraud or misrepresentation in the execution of the Compromise
Agreement had not been substantiated by evidence.

The case is now before us on review.

The controversy revolves around the issue of due execution and validity of the
Compromise Agreement (Exhibit "8") dated October 29; 1959, and of the subsequent
Deed of Sale (Exhibit "11 "), dated 10 September 1960.

The general rule is that whoever alleges fraud or mistake must substantiate his
allegation, since the presumption is that a person takes ordinary care of his concerns
and that private transactions have been fair and regular. The rule admits of an
exception in Article 1332 of the Civil Code which provides:

When one of the parties is unable to read, or if the contract is in a

language not understood by him, and mistake or fraud is alleged, the
 person enforcing the contract must show that the terms thereof have been
fully explained to the former.

For the proper application of said provision, it has first to be established convincingly
that the illiterate or the party at a disadvantage could not read or understand the
language in which the contract was written. 2 The evidence discloses that the spouses
Zambales are unschooled. They cannot read, speak, much less understand English or
write, except to sign their names. 3 The Zambaleses alleged in their Complaint that the
Compromise Agreement (Exhibit "8") was executed through fraud by the Corporation
and by their counsel Atty. Perfecto de los Reyes, whom they included as a defendant.
The burden of proof, therefore, shifted to the Corporation to show that the compromise
agreement had been fully explained to the plaintiffs.

In refuting the allegation that plaintiffs were misled into signing the compromise
agreement, their former counsel, Atty. Perfecto de los Reyes, and the notary, Atty.
Salomon Reyes, a lawyer for Nin Bay Mining Corporation, established that the terms
and conditions of the Compromise Agreement were thoroughly explained and fully
understood by the spouses Zambales in accordance with their proposal to sell the land
at P500.00 a hectare; that before the signing of the Compromise Agreement, the notary
requested Atty. de los Reyes to read and explain each and every provision to the
spouses, and with the help of Ricardo Nunala, Atty. de los Reyes did so in their dialect
(Cuyuno). Thereafter, the parties went to Judge Juan Bocar, who was assured that the
spouses Zambales understood and signed the Compromise Agreement. 4

We sustain the finding of the Court of Appeals that fraud and misrepresentation did not
vitiate petitioners' consent to the Agreement when it observed:

Taking into account the foregoing observations, this Court is not

convinced that indeed appellees were victims of a fraudulent scheme
employed upon them by their former counsel by reason of their alleged
illiteracy and ignorance. The evidence discloses that appellees, although
unschooled, are intelligent, well-informed and intelligent people. They are
not the kind of persons who could easily be fooled of their rights and
interests. Even as commented by the court a quo, which had a chance to
observe the demeanor of the witness, it had no observation that the
witness, Joaquina Zambales, is ignorant. As correctly observed by
appellants, appellees 'are political leaders and chief campaigners; they
speak in the platform during political rallies; and they are widely travelled'
(p. 28, Appellants' Brief). As a matter of fact they are knowledgeable of the
right connections in the government. They had approached former Sen.
Rogelio de la Rosa, no less, the congressman and the governor. Even the
lawyers they have retained previous to their present counsel are the
Padilla Law Office and the Diokno Law Office, It is common knowledge
that these law offices are among the established law offices in Manila. It is
far convincing that an ignorant couple would have knowledge of these law
firms. All these are obvious manifestations of their being well-informed and
 the way they have conducted their way of living apparently is inconsistent
with the plea of being illiterate and/or ignorant. They cannot capitalize on
the fact that they are uneducated only because they had no formal
schooling inasmuch as one's knowledge of the facts of life is not
dependent on whether one had formal schooling or not and it does not
necessarily follow always that if one is unschooled he is ignorant.

Furthermore, when plaintiffs-appellees signed the questioned compromise

agreement they were duly assisted and represented by their counsel, Atty.
de los Reyes. When Atty. de los Reyes testified in court he categorically
declared that it was to the best interest of his clients that they compromise
Civil Case No. 316. This declaration finds support in Joaquina Zambales'
testimony wherein she stated thus:

ATTY. SEMBRANO:

Q. Except for this present case, would you say to the Court
that Atty. de los Reyes extended to you legal assistance to
your satisfaction?

A. Yes, sir, he is good to us.

xxx xxx xxx

Q. So these people never gave their services to you?

A. Nobody was able to help us except Atty. de los Reyes.

(Tsn., pp. 29, 31 & 32, June 19, 1974)

... Thus, it having been established that appellees could not have been
misled by their former counsel into signing the compromise agreement
and taking into account the acts of the appellees and their children
subsequent to the execution of the compromise agreement perforce the
court a quo erred in not giving credence to the clear and convincing
testimonies of Atty. Perfecto de los Reyes and Atty. Salomon Reyes anent
the execution of the compromise agreement. 5

However, although we find that the Zambaleses were not misled into signing the
Compromise Agreement, we hold that there has been violation of the Public Land Act.
The evidence on record shows that the land in question was awarded t the Zambaleses
as a homestead on September 6, 1955 (Exhibit "A"). Before us, the Zambaleses now
argue that the Compromise Agreement executed on October 29, 1959 is in violation of
the Public Land Act, which prohibits alienation and encumbrance of a homestead lot
within five years from the issuance of the patent. 6
We sustain that contention. The fact that the issue was not raised in the Courts below is
not a deterrent factor considering that the question affects the validity of the agreement
between the parties. The Supreme Court has the authority to review matters even if
they are not assigned as errors in the appeal, if it is found that their consideration is
necessary in arriving at a just decision of the case. 7 Moreover, a party may change his
legal theory on appeal only when the factual bases thereof would not require
presentation of any further evidence by the adverse party in order to enable it to
properly meet the issue raised in the new theory. 8 In the case at bar it is indisputable
that Homestead Patent No. V-59502 was issued on September 6, 1955 as shown in
Original Certificate of Title No. 1193 (Exhibit "A ").

The sale of a homestead lot within the five-year prohibitory period is illegal and void.
The law does not distinguish between executory and consummated sales.

The law prohibiting any transfer or alienation of homestead land within five
years from the issuance of the patent does not distinguish between
executory and consummated sales; and it would hardly be in keeping with
the primordial aim of this prohibition to preserve and keep in the family of
the homesteader the piece of land that the state had gratuitously given to
them, to hold valid a homestead sale actually perfected during the period
of prohibition but with the execution of the formal deed of conveyance and
the delivery of possession of the land sold to the buyer deferred until after
the expiration of the prohibitory period, purposely to circumvent the very
law that prohibits and declares invalid such transaction to protect the
homesteader and his family. 9

In the compromise agreement executed between the parties, (1) the Zambaleses
promised to sell and the Corporation agreed to buy the disputed lot at P500.00 per
hectare, the contract to be reciprocally demandable and enforceable on September 10,
1960; and as a substitute procedure, (2) an irrevocable agency was constituted in favor
of the Corporation as attorney- in-fact to sell the land to any third person on September
10, 1960 or any time thereafter.

Clearly, the bilateral promise to buy and sell the homestead lot at a price certain, which
was reciprocally demandable 10, was entered into within the five-year prohibitory period
and is therefore, illegal and void. Further, the agency to sell the homestead lot to a third
party was coupled with an interest inasmuch as a bilateral contract was dependent on it
and was not revocable at will by any of the parties.11 To all intents and purposes,
therefore, there was an actual executory sale perfected during the period of prohibition
except that it was reciprocally demandable thereafter and the agency to sell to any third
party was deferred until after the expiration of the prohibitory period. That "rentals" were
ostensibly to be paid during the five-year prohibitory period, and the agency to sell
made effective only after the lapse of the said period, was merely a devise to
circumvent the prohibition.
To hold valid such an arrangement would be to throw the door wide open to all possible
subterfuges that persons interested in homesteads may devise to defeat the legal
prohibition against alienation within five years from the issuance of the patent.

We hold, therefore, that the bilateral promise to buy and sell, and the agency to sell,
entered into within five years from the date of the homestead patent, was in violation of
section 118 of the Public Land Law, although the executed sale was deferred until after
the expiration of the five-year- prohibitory period.

As the contract is void from the beginning, for being expressly prohibited by law 12 the
action for the declaration of its inexistence does not prescribe. 13 Being absolutely void,
it is entitled to no authority or respect, the sale may be impeached in a collateral
proceeding by any one with whose rights and interest it conflicts. There is no
presumption of its validity. 14 The approval of the sale by the Secretary of Agriculture
and Natural Resources after the lapse of five years from the date of the patent would
neither legalize the sale. 15

The homestead in question should be returned to the Zambaleses, petitioners herein,

who are, in turn, bound to restore to the Corporation the sum of P8,923.70 as the price
thereof. The actual damages awarded by the Trial Court of P85,000.00 have not been
adequately substantiated. Moreover, under the agreement, the total rental price of
P1,784.74 was intended to be "in lieu of all damages, or any other actual, moral,
exemplary or other damages.

This is without prejudice to the corresponding action on the part of the State for
reversion of the property and its improvements, if any, under Section 124 of the Public
Land Act. 16

WHEREFORE, the judgment under review is hereby REVERSED, and another one
entered (1) declaring null and void a) the bilateral promise to buy and sell entered into
between Enrique Zambales and Joaquina Zambales, on the one hand, and the Nin Bay
Mining Corporation on the other, and b) the sale executed by Nin Bay Mining
Corporation in favor of Joaquin B. Preysler; (2) ordering Angela C. Preysler to reconvey
the land subject matter of this litigation to petitioners upon refund by the latter to the Nin
Bay Mining Corporation of the sum of P8,923.70, all expenses for the reconveyance to
be borne by private respondents; (3) ordering Nin Bay Mining Corporation to pay rentals
to petitioners at the price of P20.00 per hectare per year from December 6, 1969, the
date of the institution of the Complaint, till the date that possession is turned over to
petitioners; and (4) ordering the Register of Deeds for the Province of Palawan to
cancel Transfer Certificate of Title No. T-970 of his Registry, and reissue to the Heirs of
Enrique Zambales and Joaquina Zambales the title to the homestead in question.

Let a copy of this Decision be served on the Solicitor General.

No costs.
SO ORDERED.

Teehankee (Chairman), Plana, Vasquez, Relova and Gutierrez, Jr., JJ., concur.

Footnotes

1 Annex "E ", pp. 88-90, Rollo.

2 Bunyi vs. Reyes, 39 SCRA 504 (1971).

3 T.s.n., February 23, 1972, p. 18; t.s.n., January 8, 1973, pp. 4,20 & 26; t.s.n., June
19, 1974, p.30.

4 T.s.n., July 28, 1975, pp. 23-27; Deposition of Atty. Salomon F. Reyes (Exhibit
"18"), pp. 27-33.

5 Pp. 61-63, Rollo.,

6 Sec. 118, Commonwealth Act No. 141, as amended.

7 Saura Import & Export Co., Inc. vs. Phil. International Surety Co., Inc., 8 SCRA 143
(1963); Miguel vs. Court of Appeals, 29 SCRA 760 (1969).

8 Lianga Lumber Company vs. Lianga Timber Co., Inc., 76 SCRA 197 (1977).

9 Manzano vs. Ocampo, 1 SCRA 691, 697 (1961).

10 Article 1479, Civil Code.

11 Article 1927, Ibid.

12 Article 1409, Ibid

13 Article 1410, Ibid

14 Inton vs. Quintana, 81 Phil. 97 (1948).

15 Santander vs. Villanueva, 103 Phil. 1 (1958); Cadiz vs. Nicolas, 102 Phil. 1032
(1958); cited in Manzano vs. Ocampo, 1 SCRA 691 (1961).

16 SEC. 124. Any acquisition, conveyance, alienation, transfer. or other contract

made or executed in violation of any of the provisions of sections one hundred and
eighteen, one hundred and twenty, one hundred and twenty-one, one hundred and
twenty-two, and one hundred and twenty- three of this Act shall be unlawful and null
and void from its execution and shau produce the effect of annulling and cancelling
the grant, title, patent, or permit originally issued, recognized or confirmed, actually or
presumptively, and cause the reversion of the property and its improvements to the
State.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-2934 November 29, 1951

SY KIONG, petitioner-appellee,
vs.
MARCELINO SARMIENTO, in his capacity as Treasurer of the City of
Manila, respondent-appellant.

Claro M. Recto for petitioner and appellee.

Assistant City Fiscal Arsenio Nañawa for respondent and appellant.

BAUTISTA ANGELO, J.:

This is an action for declaratory relief filed in the Court of First Instance of Manila for the
purpose of determining if petitioner is liable to pay the municipal license tax upon his
sales of flour to bakeries under Ordinance No. 2723 of the city of Manila, as amended.

Petitioner is the owner of a duly licensed grocery store located in the city of Manila and
an importer of flour who sells it either to bakeries or to retail dealers for the purposes of
resale. Sometime in September 1948, the Treasurer of the City of Manila assessed
against him the sum of P566.50 which, it is claimed, represents the alleged deficiency
municipal license tax due from him on his gross sales made to retail dealers for the
purposes of resale. Petitioner, instead of honoring the demand, filed the present action
for declaratory relief.

In his answer, respondent admitted all the factual allegations of the complaint, but
contended that the sales in question are sales at retail and in this sense are subject to
the provisions of Ordinance No. 2723, as amended. As the pleadings only raised
questions of law, the case was submitted for decision after the parties had submitted
their respective memoranda. And on March 4, 1949, the court rendered judgment
upholding the contention of the petitioner and declaring that he is not liable to pay the
tax question. From this decision respondent appealed.

The only issue involved in this appeal is whether the sales of flour made by petitioner to
bakeries to be manufactured into bread are retail or wholesale. If retail, they are subject
to tax; if wholesale, they are not.

In the case of City of Manila vs. Manila Blue Printing Co., 74 Phil. 317, this Court had
occasion to determine when a sale of commodity should be considered retail or
wholesale. It was there said that there are two criteria by which this can be determined.
"Only is by the quantity, whether small or large; and the other is by the nature of the
buyer, whether he is a consumer or a merchant who resells to a profit." The Court
followed the second criterion and held that it is the character of the purchaser and not
the quantity of the commodity sold that determines if the sale is wholesale or retail. If
the purchaser buys the commodity for his own consumption, the sale is considered
retail, irrespective of the quantity of the commodity sold. If the purchaser buys the
commodity for resale, the sale is deemed wholesale regardless of the quantity of the
transaction.

Now, having this criterion in mind, the next question to be determined is, is the sale of
flour to a bakery retail or wholesale? Is a bakery who purchases flour to be
manufactured into bread a consumer? Can a sale of flour to a bakery be considered
wholesale for the simple reason that the flour after its conversion into bread is resold to
the public? The answer to these question will depend largely upon the consideration
that may be given to the incidence touching on the manufacture of flour into bread
before it is resold to the public. This is the main point that should be determined in order
that we may have a basis for the determination of this novel controversy.

The Ordinance under which the municipal license tax in question has been assessed
does not contain any definition of what is retail gross sale. Said ordinance merely
provides that the retail gross sales of a grocery store shall be subject to a license fee to
be fixed by the City Treasurer in accordance with certain schedule therein specified, but
is silent as to what are considered "retail gross sales". The National Internal Revenue
Code does not also furnish any lead as regards the nature of a sale for purposes of
taxation. It does not give any definition nor pattern as to how a sale to a bakery or a
manufacturer should be considered. This is a loophole that our Congress has not
foreseen.

It is true that said Code gives the definition of a "manufacturer" and in so defining it
includes every person who manufactures by any of the processes therein specified
subject only to the limitation that the finished products shall be "for the purpose of their
sale or distribution to others and not for his own use or consumption" (Section 194 [x].);
but this definition in our opinion merely gives an idea of who are the persons who would
be considered manufacturers for purposes of paying the specific tax provided for
therein, and does not state when a manufacturer should be considered a retail dealer or
wholesale dealer of the raw materials he uses in the process of manufacture. It cannot
be denied that many materials or ingredients are used in the manufacture of a finished
product and the question whether the purchase of these materials for the purpose
intended is retail or wholesale is not clarified. We have failed to find any legal provision
in this jurisdiction that may be invoked to solve this important issue.

But we find one lead that may guide us in the case of Buenaventura vs. Collector of
Internal Revenue (50 Phil. 875) wherein a similar question was raised and decided. In
that case this Court ruled that the sale of fish to a hotel by a vendor in a public market
during certain period of time and for a certain value is a sale at retail and, therefore, is
subject to the retail sales tax law. And then the Court added: "even the isolated case of
those made to the Hotel de Francia cannot be considered as transactions for resale of
fish, because it has not been proved, nor is it probable, that said hotel, as such, cannot
be said or considered to be a reseller of fish". The implication of this ruling is that the
sale of fish to a hotel is retail even if the same is to be sold later in the form of food.

We believe this ruling to be in point and one of persuasive force in the present case in
the absence of any express provisions of law on the matter. The parallelism between
that case and the one we are considering is apparent. In one case, the fish is converted
into food through certain physical process, and, therefore, it suffers an alteration in form
before it is sold. In such case the fish is resold in different form. A similar situation
obtains in the case of a bakery. The flour is converted into a bread through a physical or
chemical process and later is sold to the public in the form of bread.

We have taken notice of the fact that in many states of the American Union, sales of
tangible property to manufacturers, producers or processors, or "sales of goods which
as ingredients or constituents go into and form part of tangible personal property sold by
the buyer are not taxable" as retail transactions because they are considered wholesale
transactions upon the theory that they have to be resold even in a different form or
condition. But we have noted that if these transactions are so treated it is not by judicial
interpretation but by express statutory provisions. As well stated by counsel for the
appellee, these transactions are considered wholesale either because they are so
declared by retail sales statutes of different American States, by administrative rules
and regulations promulgated thereunder, or by judicial decisions construing and
applying them. If there is an express provision of the law on the matter, there is no room
for judicial interpretation. Our duty is to apply the law. But, as we have already pointed
out, such is not the situation obtaining in the Philippines. Our law on the point is silent,
and being silent we do not feel justified to extend the force and effect of American
statutes to our jurisdiction. To do so would be to incorporate into our statutes some
legislative matter by judicial ruling which is certainly beyond our province to do.

The decision appealed from should be reversed, with costs against the appellee.

Paras, C.J., Feria, Pablo, Bengzon, Padilla, and Jugo JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-36098 January 21, 1983

ORTIGAS & COMPANY, LIMITED PARTNERSHIP, petitioner,

vs.
JUDGE JOSE B. HERRERA, respondent.

RESOLUTION

PER CURIAM:

G.R. No. L-36098 (Ortigas & Company, Limited Partnership vs. Judge Jose B. Herrera,
City Court of Manila, Branch II, and Emiliano Samson). – On August 14, 1969, petitioner
and private respondent entered into an agreement thereby for and in consideration of
P55,430.00, the former agreed to sell to the latter a parcel of land with a special
condition that should private respondent as purchaser complete the construction
including the painting of his residential house on said lot within two (2) years from
August 14, 1969, petitioner, as owner, has agreed to refund to private respondent the
amount of P10.00 per square meter. When the aforesaid special condition was fulfilled,
private respondent, on May 17, 1971 accordingly notified in writing the petitioner of the
same and requested for his refund amounting to P4,820.00.

Upon failure of petitioner to pay his obligation, private respondent on May 6, 1972 filed a
complaint for sum of money and damages with the City Court of Manila, Branch II,
against petitioner docketed as Civil Case No. 211673. A motion to dismiss was filed by
petitioner on grounds of lack of jurisdiction, failure of the complaint to state a cause of
action and improper avenue. City Court Judge Jose B. Herrera in his order dated June
27, 1972 held in abeyance the resolution on the motion until after the trial of the case on
the merits.

A reconsideration of the said order having been denied, petitioner on October 12, 1972
filed with the Court of First Instance of Manila Branch XXVII, a special civil action for
certiorari and prohibition with preliminary injunction docketed as Civil Case No. 88510.
A motion to dismiss was filed by private respondent, and on November 17, 1972, the
petition was dismissed on the ground that the claim of private respondent in his
complaint, being less than P10,000.00, is within the exclusive jurisdiction of the city
court.
Petitioner thus filed the present petition and argues among others that: (a) as
determined from the allegations of the complaint, the action is for specific performance
of contract; and (b) actions in which the subject of litigation is not capable of pecuniary
estimation such as complaints for specific performance of contract are exclusively
cognizable by the Court of First Instance. Hence, the decisive question to be resolved in
this present petition is whether or not the City Court of Manila, Branch II, has jurisdiction
over the complaint.

The action involved in this case is one for specific performance and not for a sum of
money and wherefore incapable of pecuniary estimation because what private
respondent seeks is the performance of petitioner's obligation under a written contract
to make a refund but under certain specific conditions still to be proven or established.
In a case for the recovery of a sum of money, as the collection of a debt, the claim is
considered capable of pecuniary estimation (Lapitan vs. Scandia Inc., 24 SCRA 479)
because the obligation to pay the debt is not conditioned upon any specific fact or
matter. But when a party to a contract has agreed to refund to the other party a sum of
money upon compliance by the latter of certain conditions and only upon compliance
therewith may what is legally due him under the written contract be demanded, the
action is one not capable of pecuniary estimation. The payment of a sum of money is
only incidental which can only be ordered after a determination of certain acts the
performance of which being the more basic issue to be inquired into.

Although private respondent's complaint in the court a quo is designated as one for a
sum of money and damages, an analysis of all the factual allegations of the complaint
patently shows that what private respondent seeks is the performance of petitioner's
obligation under the written contract to make the refund of the rate of P10.00 per square
meter or in the total amount of P4,820.00, but only after proof of having himself fulfilled
the conditions that will give rise to petitioner's obligation, a matter clearly incapable of
pecuniary estimation.

In view of the foregoing, the Court RESOLVED to reverse the order appealed from and
the complaint filed with the City Court of Manila, Branch II, docketed as Civil Case No.
211673 is hereby ordered dismissed for lack of jurisdiction.