Characteristics of Sale

LAW ON SALES PLM College of Law Alexis Dane B.
Flores
Atty. Relson P. Moral Characteristics of a Sale Block 2
 Santos vs. CA 337 SCRA 67
G.R. No. 120820 August 1, 2000
SPS. FORTUNATO SANTOS and ROSALINDA R SANTOS, petitioners,

vs.
COURT OF APPEALS, SPS. MARIANO R. CASEDA and CARMEN CASEDA, respondents.
QUISUMBING, J.:
For review on certiorari is the decision of the Court of Appeals, dated March 28, 1995, in CA-G.R.
CV No. 30955, which reversed and set aside the judgment of the Regional Trial Court of Makati,
Branch 133, in Civil Case No. 89-4759. Petitioners (the Santoses) were the owners of a house and
lot informally sold, with conditions, to herein private respondents (the Casedas). In the trial court, the
Casedas had complained that the Santoses refused to deliver said house and lot despite repeated
demands. The trial court dismissed the complaint for specific performance and damages, but in the
Court of Appeals, the dismissal was reversed, as follows:
"WHEREFORE, in view of the foregoing, the decision appealed from is hereby REVERSED
and SET ASIDE and a new one entered:
"1. GRANTING plaintiffs-appellants a period of NINETY (90) DAYS from the date of the
finality of judgment within which to pay the balance of the obligation in accordance with their
agreement;
"2. Ordering appellees to restore possession of the subject house and lot to the appellants
upon receipt of the full amount of the balance due on the purchase price; and
"3. No pronouncement as to costs.
"SO ORDERED." 1
The undisputed facts of this case are as follows:
The spouses Fortunato and Rosalinda Santos owned the house and lot consisting of 350 square
meters located at Lot 7, Block 8, Better Living Subdivision, Parañaque, Metro Manila, as evidenced
by TCT (S-11029) 28005 of the Register of Deeds of Parañaque. The land together with the house,
was mortgaged with the Rural Bank of Salinas, Inc., to secure a loan of P150,000.00 maturing on
June 16, 1987.
Sometime in 1984, Rosalinda Santos met Carmen Caseda, a fellow market vendor of hers in Pasay
City and soon became very good friends with her. The duo even became kumadres when Carmen
stood as a wedding sponsor of Rosalinda's nephew.
LAW ON SALES PLM College of Law Alexis Dane B. Flores
On June 16, 1984, the bank sent Rosalinda Santos a letter demanding payment of P16,915.84 in
unpaid interest and other charges. Since the Santos couple had no funds, Rosalinda offered to sell
the house and lot to Carmen. After inspecting the real property, Carmen and her husband agreed.
Sometime that month of June, Carmen and Rosalinda signed a document, which reads:
"Received the amount of P54,100.00 as a partial payment of Mrs. Carmen Caseda to the
(total) amount of 350,000.00 (house and lot) that is own (sic) by Mrs. Rosalinda R. Santos.
(Sgd.) Carmen H. Caseda
direct buyer
Mrs. Carmen Caseda
"(Sgd.) Rosalinda Del R. Santos
Owner
Mrs. Rosalinda R. Santos
House and Lot
Better Living Subd. Parañaque, Metro Manila
Section V Don Bosco St." 2
The other terms and conditions that the parties agreed upon were for the Caseda spouses to pay:
(1) the balance of the mortgage loan with the Rural bank amounting to P135,385.18; (2) the real
estate taxes; (3) the electric and water bills; and (4) the balance of the cash price to be paid not later
than June 16, 1987, which was the maturity date of the loan. 3
The Casedas gave an initial payment of P54,100.00 and immediately took possession of the
property, which they then leased out. They also paid in installments, P81,696.84 of the mortgage
loan. The Casedas, however, failed to pay the remaining balance of the loan because they suffered
bankruptcy in 1987. Notwithstanding the state of their finances, Carmen nonetheless paid in March
1990, the real estate taxes on the property for 1981-1984. She also settled the electric bills from
December 12, 1988 to July 12, 1989. All these payments were made in the name of Rosalinda
Santos.
In January 1989, the Santoses, seeing that the Casedas lacked the means to pay the remaining
installments and/or amortization of the loan, repossessed the property. The Santoses then collected
the rentals from the tenants.
In February 1989, Carmen Caseda sold her fishpond in Batangas. She then approached petitioners
and offered to pay the balance of the purchase price for the house and lot. The parties, however,
could not agree, and the deal could not push through because the Santoses wanted a higher price.
For understandably, the real estate boom in Metro Manila at this time, had considerably jacked up
realty values. On August 11, 1989, the Casedas filed Civil Case No. 89-4759, with the RTC of
Makati, to have the Santoses execute the final deed of conveyance over the property, or in default
thereof, to reimburse the amount of P180,000.00 paid in cash and P249,900.00 paid to the rural
bank, plus interest, as well as rentals for eight months amounting to P32,000.00, plus damages and
costs of suit.
1âwphi1.nêt
After trial on the merits, the lower court disposed of the case as follows:
"WHEREFORE, judgment is hereby ordered:
(a) dismissing plaintiff's (Casedas') complaint; and
(b) declaring the agreement; marked as Annex "C" of the complaint rescinded. Costs against
plaintiffs.
"SO ORDERED." 4
Said judgment of dismissal is mainly based on the trial court's finding that:
"Admittedly, the purchase price of the house and lot was P485,385.18, i.e. P350,000.00 as
cash payment and P135,385.18, assumption of mortgage. Of it plaintiffs [Casedas] paid the
following: (1) P54,100.00 down payment; and (2) P81,694.64 installment payments to the
bank on the loan (Exhs. E to E-19) or a total of P135,794.64. Thus, plaintiffs were short of
the purchase price. They cannot, therefore, demand specific performance." 5
The trial court further held that the Casedas were not entitled to reimbursement of payments already
made, reasoning that:
"As earlier mentioned, plaintiffs made a total payment of P135,794.64 out of the purchase
price of P485,385.18. The property was in plaintiffs' possession from June 1984 to January
1989 or a period of fifty-five months. During that time, plaintiffs leased the property. Carmen
said the property was rented for P25.00 a day or P750.00 a month at the start and in 1987 it
was increased to P2,000.00 and P4,000 a month. But the evidence is not precise when the
different amounts of rental took place. Be that as it may, fairness demands that plaintiffs
must pay defendants for the exercise of dominical rights over the property by renting it to
others. The amount of P2,000.00 a month would be reasonable based on the average of
P750.00, P2,000.00, P4,000.00 lease-rentals charged. Multiply P2,000 by 55 months, the
plaintiffs must pay defendants P110,000 for the use of the property. Deducting this amount
from the P135,794.64 payment of the plaintiffs on the property the difference is P25,794.64.
Should the plaintiffs be entitled to a reimbursement of this amount? The answer is in the
negative. Because of failure of plaintiffs to liquidated the mortgage loan on time, it had
ballooned from its original figure of P135,384.18 as of June 1984 to P337,280.78 as of

December 31, 1988. Defendants [Santoses] had to pay the last amount to the bank to save
the property from foreclosure. Logically, plaintiffs must share in the burden arising from their
failure to liquidate the loan per their contractual commitment. Hence, the amount of
P25,794.64 as their share in the defendants' damages in the form of increased loan-amount,
is reasonable." 6
On appeal, the appellate court, as earlier noted, reversed the lower court. The appellate court held
that rescission was not justified under the circumstances and allowed the Caseda spouses a period
of ninety days within which to pay the balance of the agreed purchase price.
Hence, this instant petition for review on certiorari filed by the Santoses.
Petitioners now submit the following issues for our consideration:
WHETHER OR NOT THE COURT OF APPEALS, HAS JURISDICTION TO DECIDE

PRIVATE RESPONDENT'S APPEAL INTERPOSING PURELY QUESTIONS OF LAW.
WHETHER THE SUBJECT TRANSACTION IS NOT A CONTRACT OF ABSOLUTE SALE

BUT A MERE ORAL CONTRACT TO SELL IN WHICH CASE JUDICIAL DEMAND FOR
RESCISSION (ART. 1592, CIVIL CODE) IS NOT APPLICABLE.
7
ASSUMING ARGUENDO THAT A JUDICIAL DEMAND FOR RESCISSION IS REQUIRED,

WHETHER PETITIONERS' DEMAND AND PRAYER FOR RESCISSION CONTAINED IN
THEIR ANSWER FILED BEFORE THE TRIAL SATISFIED THE SAID REQUIREMENT.
WHETHER OR NOT THE NON-PAYMENT OF MORE THAN HALF OF THE ENTIRE

PURCHASE PRICE INCLUDING THE NON-COMPLIANCE WITH THE STIPULATION TO
LIQUIDATE THE MORTGAGE LOAN ON TIME WHICH CAUSED GRAVE DAMAGE AND
PREJUDICE TO PETITIONERS, CONSTITUTE SUBSTANTIAL BREACH TO JUSTIFY
RESCISSION OF A CONTRACT TO SELL UNDER ARTICLE 1191 (CIVIL CODE). 8
On the first issue, petitioners argue that, since both the parties and the apellate court adopted the
findings of trial court, no questions of fact were raised before the Court of Appeals. According to
9
petitioners, CA-G.R. CV No. 30955, involved only pure questions of law. They aver that the court a
quo had no jurisdiction to hear, much less decide, CA-G.R. CV No. 30955, without running afoul of
Supreme Court Circular No. 290 (4) [c]. 10
There is a question of law in a given case when the doubt or difference arises as to how the law is
on a certain set of facts, and there is a question of fact when the doubt or difference arises as to the
truth or falsehood of the alleged facts. But we note that the first assignment of error submitted by
11
respondents for consideration by the appellate court dealt with the trial court's finding that herein
petitioners got back the property in question because respondents did not have the means to pay
the installments and/or amortization of the loan. The resolution of this question involved an
12
evaluation of proof, and not only a consideration of the applicable statutory and case laws. Clearly,
C.A.-G.R. CV No. 30955 did not involve pure questions of law, hence the Court of Appeals had
jurisdiction and there was no violation of our Circular No. 2-90.
Moreover, we find that petitioners took an active part in the proceedings before the Court of Appeals,
yet they did not raise there the issue of jurisdiction. They should have raised this issue at the earliest
opportunity before the Court of Appeals. A party taking part in the proceedings before the appellate
court and submitting his case for its decision ought not to later on attack the court's decision for want
of jurisdiction because the decision turns out to be adverse to him. 13
The second and third issues deal with the question: Did the Court of Appeals err in holding that a
judicial rescission of the agreement was necessary? In resolving both issues, we must first make a
preliminary determination of the nature of the contract in question: Was it a contract of sale, as
insisted by the respondents or a mere contract to sell, as contended by petitioners?
Petitioners argue that the transaction between them and respondents was a mere contract to sell,
and not a contract of sale, since the sole documentary evidence (Exh. D, receipt) referring to their
agreement clearly showed that they did not transfer ownership of the property in question
simultaneous with its delivery and hence remained its owners, pending fulfillment of the other
suspensive conditions, i.e. full payment of the balance of the purchase price and the loan
amortizations. Petitioners point to Manuel v. Rodriguez, 109 Phil. 1 (1960) and Luzon Brokerage
Co., Inc. v. Maritime Building Co., Inc., 43 SCRA 93 (1972), where he held that article 1592 of the
Civil Code is inapplicable to a contract to sell. They charge the court a quo with reversible error in
holding that petitioners should have judicially rescinded the agreement with respondents when the
latter failed to pay the amortizations on the bank loan.
Respondents insist that there was a perfected contract of sale, since upon their partial payment of
the purchase price, they immediately took possession of the property as vendees, and subsequently
leased it, thus exercising all the rights of ownership over the property. This showed that transfer of
ownership was simultaneous with the delivery of the realty sold, according to respondents.
It must be emphasized from the outset that a contract is what the law defines it to be, taking into
consideration its essential elements, and not what the contracting parties call it. Article 1458 of the
14 15
Civil Code defines a contract of sale. Note that the said article expressly obliges the vendor to
transfer the ownership of the thing sold as an essential element of a contract of sale. We have
16
carefully examined the contents of the unofficial receipt, Exh. D, with the terms and conditions
informally agreed upon by the parties, as well as the proofs submitted to support their respective
contentions. We are far from persuaded that there was a transfer of ownership simultaneously with
the delivery of the property purportedly sold. The records clearly show that, notwithstanding the fact
that the Casedas first took then lost possession of the disputed house and lot, the title to the
property, TCT No. 28005 (S-11029) issued by the Register of Deeds of Parañaque, has remained
always in the name of Rosalinda Santos. Note further that although the parties agreed that the
17
Casedas would assume the mortgage, all amortization payments made by Carmen Caseda to the
bank were in the name of Rosalinda Santos. We likewise find that the bank's cancellation and
18
discharge of mortgage dated January 20, 1990, was made in favor of Rosalinda Santos. The 19
foregoing circumstances categorically and clearly show that no valid transfer of ownership was made
by the Santoses to the Casedas. Absent this essential element, their agreement cannot be deemed
a contract of sale. We agree with petitioner's averment that the agreement between Rosalinda
Santos and Carmen Caseda is a contract to sell. In contracts to sell, ownership is reserved the by
the vendor and is not to pass until full payment of the purchase price. This we find fully applicable
and understandable in this case, given that the property involved is a titled realty under mortgage to
a bank and would require notarial and other formalities of law before transfer thereof could be validly
effected.
In view of our finding in the present case that the agreement between the parties is a contract to sell,
it follows that the appellate court erred when it decreed that a judicial rescission of said agreement
was necessary. This is because there was no rescission to speak of in the first place. As we earlier
pointed, in a contract to sell, title remains with the vendor and does not pass on to the vendee until
the purchase price is paid in full, Thus, in contract to sell, the payment of the purchase price is a
positive suspensive condition. Failure to pay the price agreed upon is not a mere breach, casual or
serious, but a situation that prevents the obligation of the vendor to convey title from acquiring an
obligatory force. This is entirely different from the situation in a contract of sale, where non-payment
20
of the price is a negative resolutory condition. The effects in law are not identical. In a contract of
sale, the vendor has lost ownership of the thing sold and cannot recover it, unless the contract of
sale is rescinded and set aside. In a contract to sell, however, the vendor remains the owner for as
21
long as the vendee has not complied fully with the condition of paying the purchase. If the vendor
should eject the vendee for failure to meet the condition precedent, he is enforcing the contract and
not rescinding it. When the petitioners in the instant case repossessed the disputed house and lot for
failure of private respondents to pay the purchase price in full, they were merely enforcing the
contract and not rescinding it. As petitioners correctly point out the Court of Appeals erred when it
ruled that petitioners should have judicially rescinded the contract pursuant to Articles 1592 and
1191 of the Civil Code. Article 1592 speaks of non-payment of the purchase price as a resolutory
condition. It does not apply to a contract to sell. As to Article 1191, it is subordinated to the
22
provisions of Article 1592 when applied to sales of immovable property. Neither provision is
23
applicable in the present case.
As to the last issue, we need not tarry to make a determination of whether the breach of contract by
private respondents is so substantial as to defeat the purpose of the parties in entering into the
agreement and thus entitle petitioners to rescission. Having ruled that there is no rescission to speak
of in this case, the question is moot.
WHEREFORE, the instant petition is GRANTED and the assailed decision of the Court of Appeals in
CA-G.R. CV No. 30955 is REVERSED and SET ASIDE. The judgment of the Regional Trial Court of
Makati, Branch 133, with respect to the DISMISSAL of the complaint in Civil Case No. 89-4759, is
hereby REINSTATED. No pronouncement as to costs. 1âwphi1.nêt
SO ORDERED.
Mendoza, Buena and De Leon, Jr., JJ ., concur.
Bellosillo, J ., on official leave.

 Lao vs. CA 275 SCRA 237
G.R. No. 119178 June 20, 1997
LINA LIM LAO, petitioner,

vs.
COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents.
PANGANIBAN, J.:
May an employee who, as part of her regular duties, signs blank corporate checks — with the name
of the payee and the amount drawn to be filled later by another signatory — and, therefore, does so
without actual knowledge of whether such checks are funded, be held criminally liable for violation of
Batas Pambansa Bilang 22 (B.P. 22), when checks so signed are dishonored due to insufficiency of
funds? Does a notice of dishonor sent to the main office of the corporation constitute a valid notice to
the said employee who holds office in a separate branch and who had no actual knowledge thereof?
In other words, is constructive knowledge of the corporation, but not of the signatory-employee,
sufficient?
These are the questions raised in the petition filed on March 21, 1995 assailing the Decision of
1
Respondent Court of Appeals promulgated on December 9, 1994 in CA-G.R. CR No. 14240

2
dismissing the appeal of petitioner and affirming the decision dated September 26, 1990 in Criminal
Case Nos. 84-26967 to 84-26969 of the Regional Trial Court of Manila, Branch 33. The dispositive
portion of the said RTC decision affirmed by the respondent appellate court reads: 3
WHEREFORE, after a careful consideration of the evidence presented by the

prosecution and that of the defense, the Court renders judgment as follows:
In Criminal Case No. 84-26969 where no evidence was presented by the prosecution
notwithstanding the fact that there was an agreement that the cases be tried jointly
and also the fact that the accused Lina Lim Lao was already arraigned, for failure of
the prosecution to adduce evidence against the accused, the Court hereby declares
her innocent of the crime charged and she is hereby acquitted with cost de oficio.
For Criminal Case No. 84-26967, the Court finds the accused Lina Lim Lao guilty
beyond reasonable doubt of the crime charged and is hereby sentenced to suffer the
penalty of ONE (1) YEAR imprisonment and to pay a fine of P150,000.00 without
subsidiary imprisonment in case of insolvency.
For Criminal Case No. 84-26968, the Court finds the accused Lina Lim Lao guilty
beyond reasonable doubt of the crime charged and is hereby sentenced to suffer the
penalty of ONE (1) YEAR imprisonment and to pay a fine of P150,000.00 without
subsidiary imprisonment in case of of (sic) insolvency.
For the two cases the accused is ordered to pay the cost of suit.
The cash bond put up by the accused for her provisional liberty in Criminal Case No.
84-26969 where she is declared acquitted is hereby ordered cancelled (sic).
With reference to the accused Teodulo Asprec who has remained at large, in order
that the cases as against him may not remain pending in the docket for an indefinite
period, let the same be archived without prejudice to its subsequent prosecution as
soon as said accused is finally apprehended.
Let a warrant issue for the arrest of the accused Teodulo Asprec which warrant need
not be returned to this Court until the accused is finally arrested.
SO ORDERED.
The Facts
Version of the Prosecution
The facts are not disputed. We thus lift them from the assailed Decision, as follows:
Appellant (and now Petitioner Lina Lim Lao) was a junior officer of Premiere
Investment House (Premiere) in its Binondo Branch. As such officer, she was
authorized to sign checks for and in behalf of the corporation (TSN, August 16, 1990,
p. 6). In the course of the business, she met complainant Father Artelijo Pelijo, the
provincial treasurer of the Society of the Divine Word through Mrs. Rosemarie
Lachenal, a trader for Premiere. Father Palijo was authorized to invest donations to
the society and had been investing the society's money with Premiere (TSN, June
23, 1987, pp. 5, 9-10). Father Palijo had invested a total of P514,484.04, as
evidenced by the Confirmation of Sale No. 82-6994 (Exh "A") dated July 8, 1993.
Father Palijo was also issued Traders Royal Bank (TRB) checks in payment of
interest, as follows:
Check Date Amount
299961 Oct. 7, 1993 (sic) P 150,000.00 (Exh. "B")
299962 Oct. 7, 1983 P 150,000.00 (Exh. "C")
323835 Oct. 7, 1983 P 26,010.73
All the checks were issued in favor of Artelijo A. Palijo and signed by appellant
(herein petitioner) and Teodulo Asprec, who was the head of operations. Further
evidence of the transaction was the acknowledgment of postdated checks dated July
8, 1983 (Exh. "D") and the cash disbursement voucher (Exh. "F", TSN, supra, at pp.
11-16).
When Father Palijo presented the checks for encashment, the same were
dishonored for the reason "Drawn Against Insufficient Funds" (DAIF). Father Palijo
immediately made demands on premiere to pay him the necessary amounts. He first
went to the Binondo Branch but was referred to the Cubao Main Branch where he
was able to talk with the President, Mr. Cariño. For his efforts, he was paid
P5,000.00. Since no other payments followed, Father Palijo wrote Premiere a formal
letter of demand Subsequently, Premiere was placed under receivership
(TSN, supra, at pp. 16-19). 4
Thereafter, on January 24, 1984, Private Complainant Palijo filed an affidavit-complaint against
Petitioner Lina Lim Lao and Teodulo Asprec for violation of B.P. 22. After preliminary
investigation, three Informations charging Lao and Asprec with the offense defined in the first
5
paragraph of Section 1, B.P. 22 were filed by Assistant Fiscal Felix S. Caballes before the trial court
on May 11, 1984, worded as follows:
6
1. In Criminal Case No. 84-26967:
That on or about October 7, 1983 in the City of Manila, Philippines, the said accused
did then and there wilfully and unlawfully draw and issue to Artelijo A. Palijo to apply
on account or for value a Traders Royal Bank Check No. 299962 for P150,000.00
payable to Fr. Artelijo A. Palijo dated October 7, 1983 well knowing that at the time of
issue he/she did not have sufficient funds in or credit with the drawee bank for full
payment of the said check upon its presentment as in fact the said check, when
presented within ninety (90) days from the date thereof, was dishonored by the
drawee bank for the reason: "Insufficient Funds"; that despite notice of such
dishonor, said accused failed to pay said Artelijo A. Palijo the amount of the said
check or to make arrangement for full payment of the same within five (5) banking
days from receipt of said notice.
CONTRARY TO LAW.
2. In Criminal Case No. 84-26968:
That on or about October 7, 1983 in the City of Manila, Philippines, the said accused
did then and there wilfully and unlawfully draw and issue to Artelijo A. Palijo to apply
on account or for value a Traders Royal Bank Check No. 299961 for P150,000.00
payable to Fr. Artelijo A. Palijo dated October 7, '83 well knowing that at the time of
issue he/she did not have sufficient funds in or credit with the drawee bank for full
payment of the said check upon its presentment as in fact the said check, when
presented within ninety (90) days from the date thereof, was dishonored by the
drawee bank for the reason: "Insufficient Funds"; that despite notice of such
dishonor, said accused failed to pay said Artelijo A. Palijo the amount of the said
check or to make arrangement for full payment of the same within five (5) banking
days from receipt of said notice.
CONTRARY TO LAW.
3. And finally in Criminal Case No. 84-26969:
That on or about July 8, 1983 in the City of Manila, Philippines, the said accused did
then and there wilfully and unlawfully draw and issue to Artelijo A. Palijo to apply on
account for value a Traders Royal Bank Check No. 323835 for P26,010.03 payable
to Fr. Artelijo A. Palijo dated October 7, 1983 well knowing that at the time of issue
he/she did not have sufficient funds in or credit with the drawee bank for full payment
of the said check upon its presentment as in fact the said check, when presented
within ninety (90) days from the date thereof, was dishonored by the drawee bank for
the reason: "Insufficient Funds"; that despite notice of such dishonor, said accused
failed to pay said Artelijo A. Palijo the amount of the said check or to make
arrangement for full payment of the same within five (5) banking days from receipt of
said notice.
CONTRARY TO LAW.
Upon being arraigned, petitioner assisted by counsel pleaded "not guilty." Asprec was not arrested;
he has remained at large since the trial, and even now on appeal.
After due trial, the Regional Trial Court convicted Petitioner Lina Lim Lao in Criminal Case Nos. 84-
26967 and 84-26968 but acquitted her in Criminal Case No. 84-26969. On appeal, the Court of
7
Appeals affirmed the decision of the trial court.
Version of the Defense
Petitioner aptly summarized her version of the facts of the case thus:
Petitioner Lina Lim Lao was, in 1983, an employee of Premiere Financing

Corporation (hereinafter referred to as the "Corporation"), a corporation engaged in
investment management, with principal business office at Miami, Cubao, Quezon
City. She was a junior officer at the corporation who was, however, assigned not at
its main branch but at the corporation's extension office in (Binondo) Manila.
(Ocampo, T . S. N ., 16 August 1990, p. 14)
In the regular course of her duties as a junior officer, she was required to co-sign
checks drawn against the account of the corporation. The other co-signor was her
head of office, Mr. Teodulo Asprec. Since part of her duties required her to be mostly
in the field and out of the office, it was normal procedure for her to sign the checks in
blank, that is, without the names of the payees, the amounts and the dates of
maturity. It was likewise Mr. Asprec, as head of office, who alone decided to whom
the checks were to be ultimately issued and delivered. (Lao, T . S. N., 28 September
1989, pp. 9-11, 17, 19.)
In signing the checks as part of her duties as junior officer of the corporation,
petitioner had no knowledge of the actual funds available in the corporate account.
(Lao, T . S. N., 28 September 1989, p. 21) The power, duty and responsibility of
monitoring and assessing the balances against the checks issued, and funding the
checks thus issued, devolved on the corporation's Treasury Department in its main
office in Cubao, Quezon City, headed then by the Treasurer, Ms. Veronilyn Ocampo.
(Ocampo, T . S. N., 19 July 1990, p. 4; Lao, T . S. N., 28 September 1989, pp. 21-
23) All bank statements regarding the corporate checking account were likewise sent
to the main branch in Cubao, Quezon City, and not in Binondo, Manila, where
petitioner was holding office. (Ocampo, T . S. N., 19 July 1990, p. 24; Marqueses,
T . S. N., 22 November 1988, p. 8)
The foregoing circumstances attended the issuance of the checks subject of the
instant prosecution.
The checks were issued to guarantee payment of investments placed by private

complainant Palijo with Premiere Financing Corporation. In his transactions with the
corporation, private complainant dealt exclusively with one Rosemarie Lachenal, a
trader connected with the corporation, and he never knew nor in any way dealt with
petitioner Lina Lim Lao at any time before or during the issuance of the delivery of
the checks. (Palijo, T . S. N., 23 June 1987, pp. 28-29, 32-34; Lao, T . S. N., 15 May
1990, p. 6; Ocampo, T . S. N., p. 5) Petitioner Lina Lim Lao was not in any way
involved in the transaction which led to the issuance of the checks.
When the checks were co-signed by petitioner, they were signed in advance and in
blank, delivered to the Head of Operations, Mr. Teodulo Asprec, who subsequently
filled in the names of the payee, the amounts and the corresponding dates of
maturity. After Mr. Asprec signed the checks, they were delivered to private
complainant Palijo. (Lao, T . S. N ., 28 September 1989, pp. 8-11, 17, 19; note also
that the trial court in its decision fully accepted the testimony of petitioner [Decision
of the Regional Trial Court, p. 12], and that the Court of Appeals affirmed said
decision in toto)
Petitioner Lina Lim Lao was not in any way involved in the completion, and the
subsequent delivery of the check to private complainant Palijo.
At the time petitioner signed the checks, she had no knowledge of the sufficiency or
insufficiency of the funds of the corporate account. (Lao, T . S. N ., 28 September
1989, p. 21) It was not within her powers, duties or responsibilities to monitor and
assess the balances against the issuance; much less was it within her (duties and
responsibilities) to make sure that the checks were funded. Premiere Financing
Corporation had a Treasury Department headed by a Treasurer, Ms. Veronilyn
Ocampo, which alone had access to information as to account balances and which
alone was responsible for funding the issued checks. (Ocampo, T . S. N ., 19 July
1990, p. 4; Lao, T . S. N ., 28 September 1990, p. 23) All statements of account
were sent to the Treasury Department located at the main office in Cubao, Quezon
City. Petitioner was holding office at the extension in Binondo Manila. (Lao, T . S. N.,
28 September 1989, p. 24-25) Petitioner Lina Lim Lao did not have knowledge of the
insufficiency of the funds in the corporate account against which the checks were
drawn.
When the checks were subsequently dishonored, private complainant sent a notice
of said dishonor to Premier Financing Corporation at its head office in Cubao,
Quezon City. (Please refer to Exh. "E"; Palijo, T . S. N., 23 June 1987, p. 51) Private
complainant did not send notice of dishonor to petitioner. (Palijo, T . S. N., 24 July
1987, p. 10) He did not follow up his investment with petitioner. (Id.) Private
complainant never contacted, never informed, and never talked with, petitioner after
the checks had bounced. (Id., at p. 29) Petitioner never had notice of the dishonor of
the checks subject of the instant prosecution.
The Treasurer of Premiere Financing Corporation, Ms. Veronilyn Ocampo testified

that it was the head office in Cubao, Quezon City, which received notice of dishonor
of the bounced checks. (Ocampo, T . S. N ., 19 July 1990 pp. 7-8) The dishonor of
the check came in the wake of the assassination of the late Sen. Benigno Aquino, as
a consequence of which event a majority of the corporation's clients pre-terminated
their investments. A period of extreme illiquidity and financial distress followed, which
ultimately led to the corporation's being placed under receivership by the Securities
and Exchange Commission. (Ocampo, T . S. N ., 16 August 1990, p. 8,
19; Lao, T . S. N ., 28 September 1989, pp. 25-26; Please refer also to Exhibit
"1", the order of receivership issued by the Securities and Exchange Commission)
Despite the Treasury Department's and (Ms. Ocampo's) knowledge of the dishonor
of the checks, however, the main office in Cubao, Quezon City never informed
petitioner Lina Lim Lao or anybody in the Binondo office for that matter. (Ocampo,
T .S. N ., 16 August 1990, pp. 9-10) In her testimony, she justified her omission by
saying that the checks were actually the responsibility of the main office
(Ocampo, T . S. N ., 19 July 1990, p. 6) and that, at that time of panic withdrawals
and massive pre-termination of clients' investments, it was futile to inform the
Binondo office since the main office was strapped for cash and in deep financial
distress. (Id., at pp. 7-9) Moreover, the confusion which came in the wake of the
Aquino assassination and the consequent panic withdrawals caused them to lose
direct communication with the Binondo office. (Ocampo, T . S. N ., 16 August 1990,
p. 9-10)
As a result of the financial crisis and distress, the Securities and Exchange
Commission placed Premier Financing Corporation under receivership, appointing a
rehabilitation receiver for the purpose of settling claims against the corporation. (Exh.
"1") As he himself admits, private complainant filed a claim for the payment of the
bounced check before and even after the corporation had been placed under
receivership. (Palijo, T . S. N ., 24 July 1987, p. 10-17) A check was prepared by the
receiver in favor of the private complainant but the same was not claimed by him.
(Lao, T . S. N ., 15 May 1990, p. 18)
Private complainant then filed the instant criminal action. On 26 September 1990, the
Regional Trial Court of Manila, Branch 33, rendered a decision convicting petitioner,
and sentencing the latter to suffer the aggregate penalty of two (2) years and to pay
a fine in the total amount of P300,000.00. On appeal, the Court of Appeals affirmed
said decision. Hence, this petition for review. 8
The Issue
In the main, petitioner contends that the public respondent committed a reversible error in
concluding that lack of actual knowledge of insufficiency of funds was not a defense in a prosecution
for violation of B.P. 22. Additionally, the petitioner argues that the notice of dishonor sent to the main
office of the corporation, and not to petitioner herself who holds office in that corporation's branch
office, does not constitute the notice mandated in Section 2 of BP 22; thus, there can be no prima
facie presumption that she had knowledge of the insufficiency of funds.
The Court's Ruling
The petition is meritorious.
Strict Interpretation of Penal Statutes
It is well-settled in this jurisdiction that penal statutes are strictly construed against the state and
liberally for the accused, so much so that the scope of a penal statute cannot be extended by good
intention, implication, or even equity consideration. Thus, for Petitioner Lina Lim Lao's acts to be
penalized under the Bouncing Checks Law or B.P. 22, "they must come clearly within both the spirit
and the letter of the statute."
9
The salient portions of B.P. 22 read:
Sec. 1. Checks without sufficient funds. — Any person who makes or draws and
issues any check to apply on account or for value, knowing at the time of issue that
he does not have sufficient funds in or credit with the drawee bank for the payment of
such check in full upon its presentment, which check is subsequently dishonored by
the drawee bank for insufficiency of funds or credit or would have been dishonored
for the same reason had not the drawer, without any valid reason, ordered the bank
to stop payment, shall be punished by imprisonment of not less than thirty days but
not more than one (1) year or by a fine of not less than but not more than double the
amount of the check which fine shall in no case exceed Two hundred thousand
pesos, or both such fine and imprisonment at the discretion of the court.
The same penalty shall be imposed upon any person who having sufficient funds in
or credit with the drawee bank when he makes or draws and issues a check, shall fail
to keep sufficient funds or to maintain a credit or to cover the full amount of the check
if presented within a period of ninety (90) days from the date appearing thereon, for
which reason it is dishonored by the drawee bank.
Where the check is drawn by a corporation, company or entity, the person or persons
who actually signed the check in behalf of such drawer shall be liable under this Act.
Sec. 2. Evidence of knowledge of insufficient funds. — The making, drawing and

issuance of a check payment of which is refused by the drawee because of
insufficient funds in or credit with such bank, when presented within ninety (90) days
from the date of the check, shall be prima facie evidence of knowledge of such
insufficiency of funds or credit unless such maker or drawer pays the holder thereof
the amount due thereon, or makes arrangements for payment in full by the drawee of
such check within five (5) banking days after receiving notice that such check has not
been paid by the drawee.
This Court listed the elements of the offense penalized under B.P. 22, as follows: "(1) the making,
drawing and issuance of any check to apply to account or for value; (2) the knowledge of the maker,
drawer or issuer that at the time of issue he does not have sufficient funds in or credit with the
drawee bank for the payment of such check in full upon its presentment; and (3) subsequent
dishonor of the check by the drawee bank for insufficiency of funds or credit or dishonor for the same
reason had not the drawer, without any valid cause, ordered the bank to stop payment." 10
Justice Luis B. Reyes, an eminent authority in criminal law, also enumerated the elements of the
offense defined in the first paragraph of Section 1 of B.P. 22, thus:
1. That a person makes or draws and issues any check.
2. That the check is made or drawn and issued to apply on account or for value.
3. That the person who makes or draws and issues the check knows at the time of
issue that he does not have sufficient funds in or credit with the drawee bank for the
payment of such check in full upon its presentment.
4. That the check is subsequently dishonored by the drawee bank for insufficiency of
funds or credit, or would have been dishonored for the same reason had not the
drawer, without any valid reason, ordered the bank to stop payment. 11
Crux of the Petition
Petitioner raised as defense before the Court of Appeals her lack of actual knowledge of the
insufficiency of funds at the time of the issuance of the checks, and lack of personal notice of
dishonor to her. The respondent appellate court, however, affirmed the RTC decision, reasoning that
"the maker's knowledge of the insufficiency of funds is legally presumed from the dishonor of his
checks for insufficiency of funds. (People vs. Laggui, 171 SCRA 305; Nieras vs. Hon. Auxencio C.
Dacuycuy, 181 SCRA 1)" The Court of Appeals also stated that "her alleged lack of knowledge or
12
intent to issue a bum check would not exculpate her from any responsibility under B.P. Blg. 22, since
the act of making and issuing a worthless check is a malum prohibitum." In the words of the
13
Solicitor General, "(s)uch alleged lack of knowledge is not material for petitioner's liability under B.P.
Blg. 22."
14
Lack of Actual Knowledge of Insufficiency of Funds
Knowledge of insufficiency of funds or credit in the drawee bank for

the payment of a check upon its presentment is an essential element of the offense. There is
15
a prima facie presumption of the existence of this element from the fact of drawing, issuing or
making a check, the payment of which was subsequently refused for insufficiency of funds. It is
important to stress, however, that this is not a conclusive presumption that forecloses or precludes
the presentation of evidence to the contrary.
In the present case, the fact alone that petitioner was a signatory to the checks that were
subsequently dishonored merely engenders the prima facie presumption that she knew of the
insufficiency of funds, but it does not render her automatically guilty under B.P. 22. The prosecution
has a duty to prove all the elements of the crime, including the acts that give rise to the prima
facie presumption; petitioner, on the other hand, has a right to rebut the prima
facie presumption. Therefore, if such knowledge of insufficiency of funds is proven to
16
be actually absent or non-existent, the accused should not be held liable for the offense defined
under the first paragraph of Section 1 of B.P. 22. Although the offense charged is a malum
prohibitum, the prosecution is not thereby excused from its responsibility of proving beyond
reasonable doubt all the elements of the offense, one of which is knowledge of the insufficiency of
funds.
After a thorough review of the case at bar, the Court finds that Petitioner Lina Lim Lao did not have
actual knowledge of the insufficiency of funds in the corporate accounts at the time she affixed her
signature to the checks involved in this case, at the time the same were issued, and even at the time
the checks were subsequently dishonored by the drawee bank.
The scope of petitioner's duties and responsibilities did not encompass the funding of the
corporation's checks; her duties were limited to the marketing department of the Binondo
branch. Under the organizational structure of Premiere Financing Corporation, funding of checks
17
was the sole responsibility of the Treasury Department. Veronilyn Ocampo, former Treasurer of
Premiere, testified thus:
Q Will you please tell us whose (sic) responsible for the funding of
checks in Premiere?
A The one in charge is the Treasury Division up to the Treasury

Disbursement and then they give it directly to Jose Cabacan,
President of Premiere. 18
Furthermore, the Regional Trial Court itself found that, since Petitioner Lina Lim Lao was often out in
the field taking charge of the marketing department of the Binondo branch, she signed the checks in
blank as to name of the payee and the amount to be drawn, and without knowledge of the
transaction for which they were issued. As a matter of company practice, her signature was
19
required in addition to that of Teodulo Asprec, who alone placed the name of the payee and the
amount to be drawn thereon. This is clear from her testimony:
q . . . Will you please or will you be able to tell us the condition of this
check when you signed this or when you first saw this check?
Witness
a I signed the check in blank. There were no payee. No amount, no

date, sir.
q Why did you sign this check in blank when there was no payee, no
amount and no date?
a It is in order to facilitate the transaction, sir.
x x x x x x x x x
COURT
(to witness)
q Is that your practice?
Witness
a Procedure, Your Honor.
COURT
That is quiet (sic) unusual. That is why I am asking that last question
if that is a practice of your office.
a As a co-signer, I sign first, sir.
q So the check cannot be encashed without your signature, co-

signature?
a Yes, sir.
Atty. Gonzales
(to witness)
q Now, you said that you sign first, after you sign, who signs the
check?
a Mr. Teodoro Asprec, sir.
q Is this Teodoro Asprec the same Teodoro Asprec, one of the

accused in all these cases?
a Yes, sir.
q Now, in the distribution or issuance of checks which according to

you, as a co-signee, you sign. Who determines to whom to issue or to
whom to pay the check after Teodoro Asprec signs the check?
Witness
a He is the one.
Atty. Gonzales
q Mr. Asprec is the one in-charge in . . . are you telling the Honorable
Court that it was Teodoro Asprec who determines to whom to issue
the check? Does he do that all the time?
Court
q Does he all the time?
(to witness)
a Yes, Your Honor.
q So the check can be negotiated? So, the check can be good only
upon his signing? Without his signing or signature the check cannot
be good?
a Yes, Your Honor.
Atty. Gonzales
(to witness)
q You made reference to a transaction which according to you, you

signed this check in order to facilitate the transaction . . . I withdraw
that question. I will reform.
COURT
(for clarification to witness)
Witness may answer.
q Only to facilitate your business transaction, so you signed the other

checks?
Witness
a Yes, Your Honor.
q So that when ever there is a transaction all is needed . . . all that is

needed is for the other co-signee to sign?
a Yes, Your Honor.
COURT
(To counsel)
Proceed.
Atty. Gonzales
(to witness)
q Why is it necessary for you to sign?
a Because most of the time I am out in the field in the afternoon, so,
in order to facilitate the transaction I sign so if I am not around they
can issue the check. 20
Petitioner did not have any knowledge either of the identity of the payee or the transaction which
gave rise to the issuance of the checks. It was her co-signatory, Teodulo Asprec, who alone filled in
the blanks, completed and issued the checks. That Petitioner Lina Lim Lao did not have any
knowledge or connection with the checks' payee, Artelijo Palijo, is clearly evident even from the
latter's testimony, viz.:
ATTY. GONZALES:
Q When did you come to know the accused Lina Lim Lao?
A I cannot remember the exact date because in their office Binondo,

—
COURT: (before witness could finish)
Q More or less?
A It must have been late 1983.
ATTY. GONZALES:
Q And that must or that was after the transactions involving alleged
checks marked in evidence as Exhibits B and C?
A After the transactions.
Q And that was also before the transaction involving that confirmation
of sale marked in evidence as Exhibit A?
A It was also.
Q And so you came to know the accused Lina Lim Lao when all
those transactions were already consummated?
A Yes, sir.
Q And there has never been any occasion where you transacted with
accused Lina Lim Lao, is that correct?
A None, sir, there was no occasion.
Q And your coming to know Lina Lim Lao the accused in these cases
was by chance when you happened to drop by in the office at
Binondo of the Premier Finance Corporation, is that what you mean?
A Yes, sir.
Q You indicated to the Court that you were introduced to the accused
Lina Lim Lao, is that correct?
A I was introduced.
x x x x x x x x x
Q After that plain introduction there was nothing which transpired

between you and the accused Lina Lim Lao?
A There was none. 21
Since Petitioner Lina Lim Lao signed the checks without knowledge of the insufficiency of funds,
knowledge she was not expected or obliged to possess under the organizational structure of the
corporation, she may not be held liable under B.P. 22. For in the final analysis, penal statutes such
as B.P. 22 "must be construed with such strictness as to carefully safeguard the rights of the
defendant . . ." The element of knowledge of insufficiency of funds having been proven to be
22
absent, petitioner is therefore entitled to an acquittal.
This position finds support in Dingle vs. Intermediate Appellate Court where we stressed that
23
knowledge of insufficiency of funds at the time of the issuance of the check was an essential
requisite for the offense penalized under B.P. 22. In that case, the spouses Paz and Nestor Dingle
owned a family business known as "PMD Enterprises." Nestor transacted the sale of 400 tons of
silica sand to the buyer Ernesto Ang who paid for the same. Nestor failed to deliver. Thus, he issued
to Ernesto two checks, signed by him and his wife as authorized signatories for PMD Enterprises, to
represent the value of the undelivered silica sand. These checks were dishonored for having been
"drawn against insufficient funds." Nestor thereafter issued to Ernesto another check, signed by him
and his wife Paz, which was likewise subsequently dishonored. No payment was ever made; hence,
the spouses were charged with a violation of B.P. 22 before the trial court which found them both
guilty. Paz appealed the judgment to the then Intermediate Appellate Court which modified the same
by reducing the penalty of imprisonment to thirty days. Not satisfied, Paz filed an appeal to this Court
"insisting on her innocence" and "contending that she did not incur any criminal liability under B.P.
22 because she had no knowledge of the dishonor of the checks issued by her husband and, for that
matter, even the transaction of her husband with Ang." The Court ruled in Dingle as follows:
The Solicitor General in his Memorandum recommended that petitioner be acquitted

of the instant charge because from the testimony of the sole prosecution witness
Ernesto Ang, it was established that he dealt exclusively with Nestor Dingle.
Nowhere in his testimony is the name of Paz Dingle ever mentioned in connection
with the transaction and with the issuance of the check. In fact, Ang categorically
stated that it was Nestor Dingle who received his two (2) letters of demand. This
lends credence to the testimony of Paz Dingle that she signed the questioned checks
in blank together with her husband without any knowledge of its issuance, much less
of the transaction and the fact of dishonor.
In the case of Florentino Lozano vs. Hon. Martinez, promulgated December 18,

1986, it was held that an essential element of the offense is knowledge on the part of
the maker or drawer of the check of the insufficiency of his funds.
WHEREFORE, on reasonable doubt, the assailed decision of the Intermediate

Appellate Court (now the Court of Appeals) is hereby SET ASIDE and a new one is
hereby rendered ACQUITTING petitioner on reasonable doubt. 24
In rejecting the defense of herein petitioner and ruling that knowledge of the insufficiency of funds is
legally presumed from the dishonor of the checks for insufficiency of funds, Respondent Court of
Appeals cited People vs. Laggui and Nierras vs. Dacuycuy. These, however, are inapplicable
25 26
here. The accused in both cases issued personal — not corporate — checks and did not aver lack of
knowledge of insufficiency of funds or absence of personal notice of the check's dishonor.
Furthermore, in People vs. Laggui the Court ruled mainly on the adequacy of an information which
27
alleged lack of knowledge of insufficiency of funds at the time the check was issued and not at the
time of its presentment. On the other hand, the Court in Nierras vs. Dacuycuy held mainly that an
28
accused may be charged under B.P. 22 and Article 315 of the Revised Penal Code for the same act
of issuing a bouncing check.
The statement in the two cases — that mere issuance of a dishonored check gives rise to the
presumption of knowledge on the part of the drawer that he issued the same without funds — does
not support the CA Decision. As observed earlier, there is here only a prima facie presumption which
does not preclude the presentation of contrary evidence. On the contrary, People vs. Laggui clearly
spells out as an element of the offense the fact that the drawer must have knowledge of the
insufficiency of funds in, or of credit with, the drawee bank for the payment of the same in full on
presentment; hence, it even supports the petitioner's position.
Lack of Adequate Notice of Dishonor
There is another equally cogent reason for the acquittal of the accused. There can be no prima
facie evidence of knowledge of insufficiency of funds in the instant case because no notice of
dishonor was actually sent to or received by the petitioner.
The notice of dishonor may be sent by the offended party or the drawee bank. The trial court itself
found absent a personal notice of dishonor to Petitioner Lina Lim Lao by the drawee bank based on
the unrebutted testimony of Ocampo "(t)hat the checks bounced when presented with the drawee
bank but she did not inform anymore the Binondo branch and Lina Lim Lao as there was no need to
inform them as the corporation was in distress." The Court of Appeals affirmed this factual finding.
29
Pursuant to prevailing jurisprudence, this finding is binding on this Court. 30
Indeed, this factual matter is borne by the records. The records show that the notice of dishonor was
addressed to Premiere Financing Corporation and sent to its main office in Cubao, Quezon City.
Furthermore, the same had not been transmitted to Premiere's Binondo Office where petitioner had
been holding office.
Likewise no notice of dishonor from the offended party was actually sent to or received by Petitioner
Lao. Her testimony on this point is as follows:
Atty. Gonzales
q Will you please tell us if Father Artelejo Palejo (sic) ever notified
you of the bouncing of the check or the two (2) checks marked as
Exhibit "B" or "C" for the prosecution?
Witness
a No, sir.
q What do you mean no, sir?
a I was never given a notice. I was never given notice from Father
Palejo (sic).
COURT
(to witness)
q Notice of what?
a Of the bouncing check, Your Honor. 31
Because no notice of dishonor was actually sent to and received by the petitioner, the prima
facie presumption that she knew about the insufficiency of funds cannot apply. Section 2 of B.P. 22
clearly provides that this presumption arises not from the mere fact of drawing, making and issuing a
bum check; there must also be a showing that, within five banking days from receipt of the notice of
dishonor, such maker or drawer failed to pay the holder of the check the amount due thereon or to
make arrangement for its payment in full by the drawee of such check.
It has been observed that the State, under this statute, actually offers the violator "a compromise by
allowing him to perform some act which operates to preempt the criminal action, and if he opts to
perform it the action is abated." This was also compared "to certain laws allowing illegal
32
possessors of firearms a certain period of time to surrender the illegally possessed firearms to the
Government, without incurring any criminal liability." In this light, the full payment of the amount
33
appearing in the check within five banking days from notice of dishonor is a "complete
defense." The absence of a notice of dishonor necessarily deprives an accused an opportunity to
34
preclude a criminal prosecution. Accordingly, procedural due process clearly enjoins that a notice of
dishonor be actually served on petitioner. Petitioner has a right to demand — and the basic
postulates of fairness require — that the notice of dishonor be actually sent to and received by her to
afford her the opportunity to avert prosecution under B.P. 22.
In this light, the postulate of Respondent Court of Appeals that "(d)emand on the Corporation
constitutes demand on appellant (herein petitioner)," is erroneous. Premiere has no obligation to
35
forward the notice addressed to it to the employee concerned, especially because the corporation
itself incurs no criminal liability under B.P. 22 for the issuance of a bouncing check. Responsibility
under B.P. 22 is personal to the accused; hence, personal knowledge of the notice of dishonor is
necessary. Consequently, constructive notice to the corporation is not enough to satisfy due
process. Moreover, it is petitioner, as an officer of the corporation, who is the latter's agent for
purposes of receiving notices and other documents, and not the other way around. It is but axiomatic
that notice to the corporation, which has a personality distinct and separate from the petitioner, does
not constitute notice to the latter.
Epilogue
In granting this appeal, the Court is not unaware of B.P. 22's intent to inculcate public respect for and
trust in checks which, although not legal tender, are deemed convenient substitutes for currency.
B.P. 22 was intended by the legislature to enhance commercial and financial transactions in the
Philippines by penalizing makers and issuers of worthless checks. The public interest behind B.P. 22
is thus clearly palpable from its intended purpose. 36
At the same time, this Court deeply cherishes and is in fact bound by duty to protect our people's
constitutional rights to due process and to be presumed innocent until the contrary is
proven. These rights must be read into any interpretation and application of B.P. 22. Verily, the
37
public policy to uphold civil liberties embodied in the Bill of Rights necessarily outweighs the public
policy to build confidence in the issuance of checks. The first is a basic human right while the second
is only proprietary in nature. Important to remember also is B.P. 22's requirements that the check
38
issuer must know "at the time of issue that he does not have sufficient funds in or credit with the
drawee bank" and that he must receive "notice that such check has not been paid by the drawee."
Hence, B.P. 22 must not be applied in a manner which contravenes an accused's constitutional and
statutory rights.
There is also a social justice dimension in this case. Lina Lim Lao is only a minor employee who had
nothing to do with the issuance, funding and delivery of checks. Why she was required by her
employer to countersign checks escapes us. Her signature is completely unnecessary for it serves
no fathomable purpose at all in protecting the employer from unauthorized disbursements. Because
of the pendency of this case, Lina Lim Lao stood in jeopardy — for over a decade — of losing her
liberty and suffering the wrenching pain and loneliness of imprisonment, not to mention the stigma of
prosecution on her career and family life as a young mother, as well as the expenses, effort and
aches in defending her innocence. Upon the other hand, the senior official — Teodulo Asprec —
who appears responsible for the issuance, funding and delivery of the worthless checks has
escaped criminal prosecution simply because he could not be located by the authorities. The case
against him has been archived while the awesome prosecutory might of the government and the
knuckled ire of the private complainant were all focused on poor petitioner. Thus, this Court exhorts
the prosecutors and the police authorities concerned to exert their best to arrest and prosecute
Asprec so that justice in its pristine essence can be achieved in all fairness to the complainant, Fr.
Artelijo Palijo, and the People of the Philippines. By this Decision, the Court enjoins the Secretary of
Justice and the Secretary of Interior and Local Government to see that essential justice is done and
the real culprit(s) duly-prosecuted and punished.
WHEREFORE, the questioned Decision of the Court of Appeals affirming that of the Regional Trial
Court, is hereby REVERSED and SET ASIDE. Petitioner Lina Lim Lao is ACQUITTED. The Clerk of
Court is hereby ORDERED to furnish the Secretary of Justice and the Secretary of Interior and Local
Government with copies of this Decision. No costs.
SO ORDERED.
Narvasa, C.J., Davide, Jr. and Melo, JJ., concur.
Francisco, J., is on leave.

 Buenaventura vs. CA 416 SCRA 263
G.R. No. 126376 : November 20, 2003
SPOUSES BERNARDO BUENAVENTURA and CONSOLACION JOAQUIN, SPOUSES JUANITO

EDRA and NORA JOAQUIN, SPOUSES RUFINO VALDOZ and EMMA JOAQUIN, and NATIVIDAD
JOAQUIN, petitioners, vs. COURT OF APPEALS, SPOUSES LEONARDO JOAQUIN and
FELICIANA LANDRITO, SPOUSES FIDEL JOAQUIN and CONCHITA BERNARDO, SPOUSES
TOMAS JOAQUIN and SOLEDAD ALCORAN, SPOUSES ARTEMIO JOAQUIN and SOCORRO
ANGELES, SPOUSES ALEXANDER MENDOZA and CLARITA JOAQUIN, SPOUSES TELESFORO
CARREON and FELICITAS JOAQUIN, SPOUSES DANILO VALDOZ and FE JOAQUIN, and
SPOUSES GAVINO JOAQUIN and LEA ASIS, respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for review on certiorari1 to annul the Decision2 dated 26 June 1996 of the Court of
Appeals in CA-G.R. CV No. 41996. The Court of Appeals affirmed the Decision 3 dated 18 February
1993 rendered by Branch 65 of the Regional Trial Court of Makati (trial court) in Civil Case No. 89-
5174. The trial court dismissed the case after it found that the parties executed the Deeds of Sale for
valid consideration and that the plaintiffs did not have a cause of action against the defendants.
The Facts
The Court of Appeals summarized the facts of the case as follows:
Defendant spouses Leonardo Joaquin and Feliciana Landrito are the parents of plaintiffs Consolacion,
Nora, Emma and Natividad as well as of defendants Fidel, Tomas, Artemio, Clarita, Felicitas, Fe, and
Gavino, all surnamed JOAQUIN. The married Joaquin children are joined in this action by their
respective spouses.
Sought to be declared null and void ab initio are certain deeds of sale of real property executed by
defendant parents Leonardo Joaquin and Feliciana Landrito in favor of their co-defendant children and
the corresponding certificates of title issued in their names, to wit:
1. Deed of Absolute Sale covering Lot 168-C-7 of subdivision plan (LRC) Psd-256395 executed on 11
July 1978, in favor of defendant Felicitas Joaquin, for a consideration of P6,000.00 (Exh. C), pursuant
to which TCT No. [36113/T-172] was issued in her name (Exh. C-1);
2. Deed of Absolute Sale covering Lot 168-I-3 of subdivision plan (LRC) Psd-256394 executed on 7
June 1979, in favor of defendant Clarita Joaquin, for a consideration of P1[2],000.00 (Exh. D),
pursuant to which TCT No. S-109772 was issued in her name (Exh. D-1);
3 Deed of Absolute Sale covering Lot 168-I-1 of subdivision plan (LRC) Psd-256394 executed on 12
May 1988, in favor of defendant spouses Fidel Joaquin and Conchita Bernardo, for a consideration
of P54,[3]00.00 (Exh. E), pursuant to which TCT No. 155329 was issued to them (Exh. E-1);
4. Deed of Absolute Sale covering Lot 168-I-2 of subdivision plan (LRC) Psd-256394 executed on 12
May 1988, in favor of defendant spouses Artemio Joaquin and Socorro Angeles, for a consideration
of P[54,3]00.00 (Exh. F), pursuant to which TCT No. 155330 was issued to them (Exh. F-1); and
5. Absolute Sale of Real Property covering Lot 168-C-4 of subdivision plan (LRC) Psd-256395 executed
on 9 September 1988, in favor of Tomas Joaquin, for a consideration of P20,000.00 (Exh. G),
pursuant to which TCT No. 157203 was issued in her name (Exh. G-1).
[6. Deed of Absolute Sale covering Lot 168-C-1 of subdivision plan (LRC) Psd-256395 executed on 7
October 1988, in favor of Gavino Joaquin, for a consideration of P25,000.00 (Exh. K), pursuant to
which TCT No. 157779 was issued in his name (Exh. K-1).]
In seeking the declaration of nullity of the aforesaid deeds of sale and certificates of title, plaintiffs, in
their complaint, aver:
- XX-
The deeds of sale, Annexes C, D, E, F, and G, [and K] are simulated as they are, are NULL AND
VOID AB INITIO because
a) Firstly, there was no actual valid consideration for the deeds of sale xxx over the properties in litis;
b) Secondly, assuming that there was consideration in the sums reflected in the questioned deeds, the
properties are more than three-fold times more valuable than the measly sums appearing therein;
c) Thirdly, the deeds of sale do not reflect and express the true intent of the parties (vendors and
vendees); and
d) Fourthly, the purported sale of the properties in litis was the result of a deliberate conspiracy
designed to unjustly deprive the rest of the compulsory heirs (plaintiffs herein) of their legitime.
- XXI -
Necessarily, and as an inevitable consequence, Transfer Certificates of Title Nos. 36113/T-172, S-

109772, 155329, 155330, 157203 [and 157779] issued by the Registrar of Deeds over the properties
in litis xxx are NULL AND VOID AB INITIO.
Defendants, on the other hand aver (1) that plaintiffs do not have a cause of action against them as
well as the requisite standing and interest to assail their titles over the properties in litis; (2) that the
sales were with sufficient considerations and made by defendants parents voluntarily, in good faith,
and with full knowledge of the consequences of their deeds of sale; and (3) that the certificates of title
were issued with sufficient factual and legal basis. 4 (Emphasis in the original)
The Ruling of the Trial Court

Before the trial, the trial court ordered the dismissal of the case against defendant spouses Gavino
Joaquin and Lea Asis.5 Instead of filing an Answer with their co-defendants, Gavino Joaquin and Lea
Asis filed a Motion to Dismiss.6 In granting the dismissal to Gavino Joaquin and Lea Asis, the trial court
noted that compulsory heirs have the right to a legitime but such right is contingent since said right
commences only from the moment of death of the decedent pursuant to Article 777 of the Civil Code
of the Philippines.7
cräläwvirtualibräry
After trial, the trial court ruled in favor of the defendants and dismissed the complaint. The trial court
stated:
In the first place, the testimony of the defendants, particularly that of the xxx father will show that the
Deeds of Sale were all executed for valuable consideration. This assertion must prevail over the
negative allegation of plaintiffs.
And then there is the argument that plaintiffs do not have a valid cause of action against defendants
since there can be no legitime to speak of prior to the death of their parents. The court finds this
contention tenable. In determining the legitime, the value of the property left at the death of the
testator shall be considered (Art. 908 of the New Civil Code). Hence, the legitime of a compulsory heir
is computed as of the time of the death of the decedent. Plaintiffs therefore cannot claim an
impairment of their legitime while their parents live.
All the foregoing considered, this case is DISMISSED.
In order to preserve whatever is left of the ties that should bind families together, the counterclaim is
likewise DISMISSED.
No costs.
SO ORDERED.8
The Ruling of the Court of Appeals
The Court of Appeals affirmed the decision of the trial court. The appellate court ruled:
To the mind of the Court, appellants are skirting the real and decisive issue in this case, which is,
whether xxx they have a cause of action against appellees.
Upon this point, there is no question that plaintiffs-appellants, like their defendant brothers and
sisters, are compulsory heirs of defendant spouses, Leonardo Joaquin and Feliciana Landrito, who are
their parents. However, their right to the properties of their defendant parents, as compulsory heirs, is
merely inchoate and vests only upon the latters death. While still alive, defendant parents are free to
dispose of their properties, provided that such dispositions are not made in fraud of creditors.
Plaintiffs-appellants are definitely not parties to the deeds of sale in question. Neither do they claim to
be creditors of their defendant parents. Consequently, they cannot be considered as real parties in
interest to assail the validity of said deeds either for gross inadequacy or lack of consideration or for
failure to express the true intent of the parties. In point is the ruling of the Supreme Court in Velarde,
et al. vs. Paez, et al., 101 SCRA 376, thus:
The plaintiffs are not parties to the alleged deed of sale and are not principally or subsidiarily bound
thereby; hence, they have no legal capacity to challenge their validity.
Plaintiffs-appellants anchor their action on the supposed impairment of their legitime by the
dispositions made by their defendant parents in favor of their defendant brothers and sisters. But, as
correctly held by the court a quo, the legitime of a compulsory heir is computed as of the time of the
death of the decedent. Plaintiffs therefore cannot claim an impairment of their legitime while their
parents live.
With this posture taken by the Court, consideration of the errors assigned by plaintiffs-appellants is
inconsequential.
WHEREFORE, the decision appealed from is hereby AFFIRMED, with costs against plaintiffs-appellants.
SO ORDERED.9 cräläwvirtualibräry
Hence, the instant petition.
Issues
Petitioners assign the following as errors of the Court of Appeals:
1. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE IN QUESTION HAD NO
VALID CONSIDERATION.
2. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT EVEN ASSUMING THAT THERE WAS A
CONSIDERATION, THE SAME IS GROSSLY INADEQUATE.
3. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE DEEDS OF SALE DO NOT EXPRESS
THE TRUE INTENT OF THE PARTIES.
4. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE WAS PART AND PARCEL
OF A CONSPIRACY AIMED AT UNJUSTLY DEPRIVING THE REST OF THE CHILDREN OF THE SPOUSES
LEONARDO JOAQUIN AND FELICIANA LANDRITO OF THEIR INTEREST OVER THE SUBJECT
PROPERTIES.
5. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT PETITIONERS HAVE A GOOD, SUFFICIENT
AND VALID CAUSE OF ACTION AGAINST THE PRIVATE RESPONDENTS. 10
The Ruling of the Court
We find the petition without merit.
We will discuss petitioners legal interest over the properties subject of the Deeds of Sale before
discussing the issues on the purported lack of consideration and gross inadequacy of the prices of the
Deeds of Sale.
Whether Petitioners have a legal interest
over the properties subject of the Deeds of Sale
Petitioners Complaint betrays their motive for filing this case. In their Complaint, petitioners asserted
that the purported sale of the properties in litis was the result of a deliberate conspiracy designed to
unjustly deprive the rest of the compulsory heirs (plaintiffs herein) of their legitime. Petitioners
strategy was to have the Deeds of Sale declared void so that ownership of the lots would eventually
revert to their respondent parents. If their parents die still owning the lots, petitioners and their
respondent siblings will then co-own their parents estate by hereditary succession. 11 cräläwvirtualibräry
It is evident from the records that petitioners are interested in the properties subject of the Deeds of
Sale, but they have failed to show any legal right to the properties. The trial and appellate courts
should have dismissed the action for this reason alone. An action must be prosecuted in the name of
the real party-in-interest.12
[T]he question as to real party-in-interest is whether he is the party who would be benefitted or
injured by the judgment, or the party entitled to the avails of the suit.
xxx
In actions for the annulment of contracts, such as this action, the real parties are those who are
parties to the agreement or are bound either principally or subsidiarily or are prejudiced in their rights
with respect to one of the contracting parties and can show the detriment which would positively
result to them from the contract even though they did not intervene in it (Ibaez v. Hongkong &
Shanghai Bank, 22 Phil. 572 [1912]) xxx.
These are parties with a present substantial interest, as distinguished from a mere expectancy or
future, contingent, subordinate, or consequential interest. The phrase present substantial interest
more concretely is meant such interest of a party in the subject matter of the action as will entitle
him, under the substantive law, to recover if the evidence is sufficient, or that he has the legal title to
demand and the defendant will be protected in a payment to or recovery by him. 13 cräläwvirtualibräry
Petitioners do not have any legal interest over the properties subject of the Deeds of Sale. As the
appellate court stated, petitioners right to their parents properties is merely inchoate and vests only
upon their parents death. While still living, the parents of petitioners are free to dispose of their
properties. In their overzealousness to safeguard their future legitime, petitioners forget that
theoretically, the sale of the lots to their siblings does not affect the value of their parents estate.
While the sale of the lots reduced the estate, cash of equivalent value replaced the lots taken from the
estate.
Whether the Deeds of Sale are void
for lack of consideration
Petitioners assert that their respondent siblings did not actually pay the prices stated in the Deeds of
Sale to their respondent father. Thus, petitioners ask the court to declare the Deeds of Sale void.
A contract of sale is not a real contract, but a consensual contract. As a consensual contract, a
contract of sale becomes a binding and valid contract upon the meeting of the minds as to price. If
there is a meeting of the minds of the parties as to the price, the contract of sale is valid, despite the
manner of payment, or even the breach of that manner of payment. If the real price is not stated in
the contract, then the contract of sale is valid but subject to reformation. If there is no meeting of the
minds of the parties as to the price, because the price stipulated in the contract is simulated, then the
contract is void.14 Article 1471 of the Civil Code states that if the price in a contract of sale is
simulated, the sale is void.
It is not the act of payment of price that determines the validity of a contract of sale. Payment of the
price has nothing to do with the perfection of the contract. Payment of the price goes into the
performance of the contract. Failure to pay the consideration is different from lack of consideration.
The former results in a right to demand the fulfillment or cancellation of the obligation under an
existing valid contract while the latter prevents the existence of a valid contract. 15
Petitioners failed to show that the prices in the Deeds of Sale were absolutely simulated. To prove
simulation, petitioners presented Emma Joaquin Valdozs testimony stating that their father,
respondent Leonardo Joaquin, told her that he would transfer a lot to her through a deed of sale
without need for her payment of the purchase price. 16 The trial court did not find the allegation of
absolute simulation of price credible. Petitioners failure to prove absolute simulation of price is
magnified by their lack of knowledge of their respondent siblings financial capacity to buy the
questioned lots.17 On the other hand, the Deeds of Sale which petitioners presented as evidence
plainly showed the cost of each lot sold. Not only did respondents minds meet as to the purchase
price, but the real price was also stated in the Deeds of Sale. As of the filing of the complaint,
respondent siblings have also fully paid the price to their respondent father. 18
Whether the Deeds of Sale are void
for gross inadequacy of price
Petitioners ask that assuming that there is consideration, the same is grossly inadequate as to
invalidate the Deeds of Sale.
Articles 1355 of the Civil Code states:
Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a
contract, unless there has been fraud, mistake or undue influence. (Emphasis supplied)
Article 1470 of the Civil Code further provides:
Art. 1470. Gross inadequacy of price does not affect a contract of sale, except as may indicate
a defect in the consent, or that the parties really intended a donation or some other act or contract.
(Emphasis supplied)
Petitioners failed to prove any of the instances mentioned in Articles 1355 and 1470 of the Civil Code
which would invalidate, or even affect, the Deeds of Sale. Indeed, there is no requirement that the
price be equal to the exact value of the subject matter of sale. All the respondents believed that they
received the commutative value of what they gave. As we stated in Vales v. Villa:19 cräläwvirtualibräry
Courts cannot follow one every step of his life and extricate him from bad bargains, protect him from
unwise investments, relieve him from one-sided contracts, or annul the effects of foolish acts. Courts
cannot constitute themselves guardians of persons who are not legally incompetent. Courts operate
not because one person has been defeated or overcome by another, but because he has been
defeated or overcome illegally. Men may do foolish things, make ridiculous contracts, use miserable
judgment, and lose money by them indeed, all they have in the world; but not for that alone can the
law intervene and restore. There must be, in addition, a violation of the law, the commission of what
the law knows as an actionable wrong, before the courts are authorized to lay hold of the situation and
remedy it. (Emphasis in the original)
Moreover, the factual findings of the appellate court are conclusive on the parties and carry greater
weight when they coincide with the factual findings of the trial court. This Court will not weigh the
evidence all over again unless there has been a showing that the findings of the lower court are totally
devoid of support or are clearly erroneous so as to constitute serious abuse of discretion. 20 In the
instant case, the trial court found that the lots were sold for a valid consideration, and that the
defendant children actually paid the purchase price stipulated in their respective Deeds of Sale. Actual
payment of the purchase price by the buyer to the seller is a factual finding that is now conclusive
upon us.
WHEREFORE, we AFFIRM the decision of the Court of Appeals in toto.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Panganiban, Ynares-Santiago, and Azcuna, JJ., concur.
 Fule vs. CA 286 SCRA 698
G.R. No. 112212 March 2, 1998
GREGORIO FULE, petitioner,
vs.
COURT OF APPEALS, NINEVETCH CRUZ and JUAN
BELARMINO, respondents.
ROMERO, J.:
This petition for review on certiorari questions the affirmance by the Court of

Appeals of the decision 1 of the Regional Trial Court of San Pablo City, Branch 30,
dismissing the complaint that prayed for the nullification of a contract of sale of a
10-hectare property in Tanay, Rizal in consideration of the amount of P40,000.00
and a 2.5 carat emerald-cut diamond (Civil Case No. SP-2455). The lower court's
decision disposed of the case as follows:
WHEREFORE, premises considered, the Court hereby renders

judgment dismissing the complaint for lack of merit and ordering
plaintiff to pay:
1. Defendant Dra. Ninevetch M. Cruz the sum of P300,000.00 as and

for moral damages and the sum of P100,000.00 as and for exemplary
damages;
2. Defendant Atty. Juan Belarmino the sum of P250,000.00 as and for

moral damages and the sum of P150,000.00 as and for exemplary
damages;
3. Defendant Dra. Cruz and Atty. Belarmino the sum of P25,000.00

each as and for attorney's fees and litigation expenses; and
4. The costs of suit.
SO ORDERED.
As found by the Court of Appeals and the lower court, the antecedent facts of
this case are as follows:
Petitioner Gregorio Fule, a banker by profession and a jeweler at the same time,
acquired a 10-hectare property in Tanay, Rizal (hereinafter "Tanay property"),
covered by Transfer Certificate of Title No. 320725 which used to be under the
name of Fr. Antonio Jacobe. The latter had mortgaged it earlier to the Rural Bank
of Alaminos (the Bank), Laguna, Inc. to secure a loan in the amount of P10,000.00,
but the mortgage was later foreclosed and the property offered for public auction
upon his default.
In July 1984, petitioner, as corporate secretary of the bank, asked Remelia

Dichoso and Oliva Mendoza to look for a buyer who might be interested in the
Tanay property. The two found one in the person of herein private respondent Dr.
Ninevetch Cruz. It so happened that at the time, petitioner had shown interest in
buying a pair of emerald-cut diamond earrings owned by Dr. Cruz which he had seen
in January of the same year when his mother examined and appraised them as
genuine. Dr. Cruz, however, declined petitioner's offer to buy the jewelry for
P100,000.00. Petitioner then made another bid to buy them for US$6,000.00 at
the exchange rate of $1.00 to P25.00. At this point, petitioner inspected said
jewelry at the lobby of the Prudential Bank branch in San Pablo City and then made
a sketch thereof. Having sketched the jewelry for twenty to thirty minutes,
petitioner gave them back to Dr. Cruz who again refused to sell them since the
exchange rate of the peso at the time appreciated to P19.00 to a dollar.
Subsequently, however, negotiations for the barter of the jewelry and the Tanay
property ensued. Dr. Cruz requested herein private respondent Atty. Juan
Belarmino to check the property who, in turn, found out that no sale or barter was
feasible because the one-year period for redemption of the said property had not
yet expired at the time.
In an effort to cut through any legal impediment, petitioner executed on October

19, 1984, a deed of redemption on behalf of Fr. Jacobe purportedly in the amount
of P15,987.78, and on even date, Fr. Jacobe sold the property to petitioner for
P75,000.00. The haste with which the two deeds were executed is shown by the
fact that the deed of sale was notarized ahead of the deed of redemption. As Dr.
Cruz had already agreed to the proposed barter, petitioner went to Prudential
Bank once again to take a look at the jewelry.
In the afternoon of October 23, 1984, petitioner met Atty. Belarmino at the
latter's residence to prepare the documents of sale. 2 Dr. Cruz herself was not
around but Atty. Belarmino was aware that she and petitioner had previously
agreed to exchange a pair of emerald-cut diamond earrings for the Tanay property.
Atty. Belarmino accordingly caused the preparation of a deed of absolute sale while
petitioner and Dr. Cruz attended to the safekeeping of the jewelry.
The following day, petitioner, together with Dichoso and Mendoza, arrived at the
residence of Atty. Belarmino to finally execute a deed of absolute sale. Petitioner
signed the deed and gave Atty. Belarmino the amount of P13,700.00 for necessary
expenses in the transfer of title over the Tanay property. Petitioner also issued a
certification to the effect that the actual consideration of the sale was
P200,000.00 and not P80,000.00 as indicated in the deed of absolute sale. The
disparity between the actual contract price and the one indicated on the deed of
absolute sale was purportedly aimed at minimizing the amount of the capital gains
tax that petitioner would have to shoulder. Since the jewelry was appraised only at
P160,000.00, the parties agreed that the balance of P40,000.00 would just be paid
later in cash.
As pre-arranged, petitioner left Atty. Belarmino's residence with Dichoso and

Mendoza and headed for the bank, arriving there at past 5:00 p.m. Dr. Cruz also
arrived shortly thereafter, but the cashier who kept the other key to the deposit
box had already left the bank. Dr. Cruz and Dichoso, therefore, looked for said
cashier and found him having a haircut. As soon as his haircut was finished, the
cashier returned to the bank and arrived there at 5:48 p.m., ahead of Dr. Cruz and
Dichoso who arrived at 5:55 p.m. Dr. Cruz and the cashier then opened the safety
deposit box, the former retrieving a transparent plastic or cellophane bag with the
jewelry inside and handing over the same to petitioner. The latter took the jewelry
from the bag, went near the electric light at the bank's lobby, held the jewelry
against the light and examined it for ten to fifteen minutes. After a while, Dr.
Cruz asked, "Okay na ba iyan?" Petitioner expressed his satisfaction by nodding his
head.
For services rendered, petitioner paid the agents, Dichoso and Mendoza, the
amount of US$300.00 and some pieces of jewelry. He did not, however, give them
half of the pair of earrings in question which he had earlier promised.
Later, at about 8:00 o'clock in the evening of the same day, petitioner arrived at
the residence of Atty. Belarmino complaining that the jewelry given to him was
fake. He then used a tester to prove the alleged fakery. Meanwhile, at 8:30 p.m.,
Dichoso and Mendoza went to the residence of Dr. Cruz to borrow her car so that,
with Atty. Belarmino, they could register the Tanay property. After Dr. Cruz had
agreed to lend her car, Dichoso called up Atty. Belarmino. The latter, however,
instructed Dichoso to proceed immediately to his residence because petitioner was
there. Believing that petitioner had finally agreed to give them half of the pair of
earrings, Dichoso went posthaste to the residence of Atty. Belarmino only to find
petitioner already demonstrating with a tester that the earrings were fake.
Petitioner then accused Dichoso and Mendoza of deceiving him which they,
however, denied. They countered that petitioner could not have been fooled
because he had vast experience regarding jewelry. Petitioner nonetheless took
back the US$300.00 and jewelry he had given them.
Thereafter, the group decided to go to the house of a certain Macario Dimayuga, a

jeweler, to have the earrings tested. Dimayuga, after taking one look at the
earrings, immediately declared them counterfeit. At around 9:30 p.m., petitioner
went to one Atty. Reynaldo Alcantara residing at Lakeside Subdivision in San Pablo
City, complaining about the fake jewelry. Upon being advised by the latter,
petitioner reported the matter to the police station where Dichoso and Mendoza
likewise executed sworn statements.
On October 26, 1984, petitioner filed a complaint before the Regional Trial Court
of San Pablo City against private respondents praying, among other things, that the
contract of sale over the Tanay property be declared null and void on the ground of
fraud and deceit.
On October 30, 1984, the lower court issued a temporary restraining order
directing the Register of Deeds of Rizal to refrain from acting on the pertinent
documents involved in the transaction. On November 20, 1984, however, the same
court lifted its previous order and denied the prayer for a writ of preliminary
injunction.
After trial, the lower court rendered its decision on March 7, 1989. Confronting
the issue of whether or not the genuine pair of earrings used as consideration for
the sale was delivered by Dr. Cruz to petitioner, the lower court said:
The Court finds that the answer is definitely in the affirmative.

Indeed, Dra. Cruz delivered (the) subject jewelries ( sic) into the
hands of plaintiff who even raised the same nearer to the lights of
the lobby of the bank near the door. When asked by Dra. Cruz if
everything was in order, plaintiff even nodded his satisfaction
(Hearing of Feb. 24, 1988). At that instance, plaintiff did not protest,
complain or beg for additional time to examine further the jewelries
(sic). Being a professional banker and engaged in the jewelry business
plaintiff is conversant and competent to detect a fake diamond from
the real thing. Plaintiff was accorded the reasonable time and
opportunity to ascertain and inspect the jewelries ( sic) in accordance
with Article 1584 of the Civil Code. Plaintiff took delivery of the
subject jewelries (sic) before 6:00 p.m. of October 24, 1984. When
he went at 8:00 p.m. that same day to the residence of Atty.
Belarmino already with a tester complaining about some fake jewelries
(sic), there was already undue delay because of the lapse of a
considerable length of time since he got hold of subject jewelries
(sic). The lapse of two (2) hours more or less before plaintiff
complained is considered by the Court as unreasonable delay. 3
The lower court further ruled that all the elements of a valid contract under
Article 1458 of the Civil Code were present, namely: (a) consent or meeting of the
minds; (b) determinate subject matte r, and (c) price certain in money or its
equivalent. The same elements, according to the lower court, were present despite
the fact that the agreement between petitioner and Dr. Cruz was principally a
barter contract. The lower court explained thus:
. . . . Plaintiff's ownership over the Tanay property passed unto Dra.

Cruz upon the constructive delivery thereof by virtue of the Deed of
Absolute Sale (Exh. D). On the other hand, the ownership of Dra. Cruz
over the subject jewelries (sic) transferred to the plaintiff upon her
actual personal delivery to him at the lobby of the Prudential Bank. It
is expressly provided by law that the thing sold shall be understood as
delivered, when it is placed in the control and possession of the
vendee (Art. 1497, Civil Code; Kuenzle & Straff vs. Watson & Co. 13
Phil. 26). The ownership and/or title over the jewelries ( sic) was
transmitted immediately before 6:00 p.m. of October 24, 1984.
Plaintiff signified his approval by nodding his head. Delivery or
tradition, is one of the modes of acquiring ownership (Art. 712, Civil
Code).
Similarly, when Exhibit D was executed, it was equivalent to the

delivery of the Tanay property in favor of Dra. Cruz. The execution of
the public instrument (Exh. D) operates as a formal or symbolic
delivery of the Tanay property and authorizes the buyer, Dra. Cruz to
use the document as proof of ownership (Florendo v. Foz, 20 Phil.
399). More so, since Exhibit D does not contain any proviso or
stipulation to the effect that title to the property is reserved with
the vendor until full payment of the purchase price, nor is there a
stipulation giving the vendor the right to unilaterally rescind the
contract the moment the vendee fails to pay within a fixed period
(Taguba v. Vda. De Leon, 132 SCRA 722; Luzon Brokerage Co. Inc. vs.
Maritime Building Co. Inc. 86 SCRA 305; Froilan v. Pan Oriental
Shipping Co. et al. 12 SCRA 276). 4
Aside from concluding that the contract of barter or sale had in fact been
consummated when petitioner and Dr. Cruz parted ways at the bank, the trial court
likewise dwelt on the unexplained delay with which petitioner complained about the
alleged fakery. Thus:
. . . . Verily, plaintiff is already estopped to come back after the lapse

of considerable length of time to claim that what he got was fake. He
is a Business Management graduate of La Salle University, Class 1978-
79, a professional banker as well as a jeweler in his own right. Two
hours is more than enough time to make a switch of a Russian diamond
with the real diamond. It must be remembered that in July 1984
plaintiff made a sketch of the subject jewelries (sic) at the Prudential
Bank. Plaintiff had a tester at 8:00 p.m. at the residence of Atty.
Belarmino. Why then did he not bring it out when he was examining
the subject jewelries (sic) at about 6:00 p.m. in the bank's lobby?
Obviously, he had no need for it after being satisfied of the
genuineness of the subject jewelries ( sic). When Dra. Cruz and
plaintiff left the bank both of them had fully performed their
respective prestations. Once a contract is shown to have been
consummated or fully performed by the parties thereto, its existence
and binding effect can no longer be disputed. It is irrelevant and
immaterial to dispute the due execution of a contract if both of them
have in fact performed their obligations thereunder and their
respective signatures and those of their witnesses appear upon the
face of the document (Weldon Construction v. CA G.R. No. L-35721,
Oct. 12, 1987).5
Finally, in awarding damages to the defendants, the lower court remarked:

The Court finds that plaintiff acted in wanton bad faith. Exhibit 2-
Belarmino purports to show that the Tanay property is worth
P25,000.00. However, also on that same day it was executed, the
property's worth was magnified at P75,000.00 (Exh. 3-Belarmino).
How could in less than a day (Oct. 19, 1984) the value would ( sic) triple
under normal circumstances? Plaintiff, with the assistance of his
agents, was able to exchange the Tanay property which his bank
valued only at P25,000.00 in exchange for a genuine pair of emerald
cut diamond worth P200,000.00 belonging to Dra. Cruz. He also
retrieved the US$300.00 and jewelries ( sic) from his agents. But he
was not satisfied in being able to get subject jewelries for a song. He
had to file a malicious and unfounded case against Dra. Cruz and Atty.
Belarmino who are well known, respected and held in high esteem in
San Pablo City where everybody practically knows everybody. Plaintiff
came to Court with unclean hands dragging the defendants and soiling
their clean and good name in the process. Both of them are near the
twilight of their lives after maintaining and nurturing their good
reputation in the community only to be stunned with a court case.
Since the filing of this case on October 26, 1984 up to the present
they were living under a pall of doubt. Surely, this affected not only
their earning capacity in their practice of their respective
professions, but also they suffered besmirched reputations. Dra. Cruz
runs her own hospital and defendant Belarmino is a well respected
legal practitioner. The length of time this case dragged on during
which period their reputation were ( sic) tarnished and their names
maligned by the pendency of the case, the Court is of the belief that
some of the damages they prayed for in their answers to the
complaint are reasonably proportionate to the sufferings they
underwent (Art. 2219, New Civil Code). Moreover, because of the
falsity, malice and baseless nature of the complaint defendants were
compelled to litigate. Hence, the award of attorney's fees is
warranted under the circumstances (Art. 2208, New Civil Code). 6
From the trial court's adverse decision, petitioner elevated the matter to the
Court of Appeals. On October 20, 1992, the Court of Appeals, however, rendered a
decision 7 affirming in toto the lower court's decision. His motion for
reconsideration having been denied on October 19, 1993, petitioner now files the
instant petition alleging that:
I. THE TRIAL COURT ERRED IN DISMISSING PLAINTIFF'S

COMPLAINT AND IN HOLDING THAT THE PLAINTIFF ACTUALLY
RECEIVED A GENUINE PAIR OF EMERALD CUT DIAMOND
EARRING(S) FROM DEFENDANT CRUZ . . . ;
II. THE TRIAL COURT ERRED IN AWARDING MORAL AND

EXEMPLARY DAMAGES AND ATTORNEY'S FEES IN FAVOR OF
DEFENDANTS AND AGAINST THE PLAINTIFF IN THIS CASE; and
III. THE TRIAL, COURT ERRED IN NOT DECLARING THE DEED OF

SALE OF THE TANAY PROPERTY (EXH. "D") AS NULL AND VOID
OR IN NOT ANNULLING THE SAME, AND IN FAILING TO GRANT
REASONABLE DAMAGES IN FAVOR OF THE PLAINTIFF. 8
As to the first allegation, the Court observes that petitioner is essentially raising a
factual issue as it invites us to examine and weigh anew the facts regarding the
genuineness of the earrings bartered in exchange for the Tanay property. This, of
course, we cannot do without unduly transcending the limits of our review power in
petitions of this nature which are confined merely to pure questions of law. We
accord, as a general rule, conclusiveness to a lower court's findings of fact unless
it is shown, inter alia, that: (1) the conclusion is a finding grounded on speculations,
surmises or conjectures; (2) the inference is manifestly mistaken, absurd and
impossible; (3) when there is a grave abuse of discretion; (4) when the judgment is
based on a misapprehension of facts; (5) when the findings of fact are conflicting;
and (6) when the Court of Appeals, in making its findings, went beyond the issues
of the case and the same is contrary to the admission of both parties. 9 We find
nothing, however, that warrants the application of any of these exceptions.
Consequently, this Court upholds the appellate court's findings of fact especially
because these concur with those of the trial court which, upon a thorough scrutiny
of the records, are firmly grounded on evidence presented at the trial. 10 To
reiterate, this Court's jurisdiction is only limited to reviewing errors of law in
the absence of any showing that the findings complained of are totally devoid
of support in the record or that they are glaringly erroneous as to constitute
serious abuse of discretion. 11
Nonetheless, this Court has to closely delve into petitioner's allegation that
the lower court's decision of March 7, 1989 is a "ready-made" one because it
was handed down a day after the last date of the trial of the
case. 12 Petitioner, in this regard, finds it incredible that Judge J. Ausberto
Jaramillo was able to write a 12-page single-spaced decision, type it and
release it on March 7, 1989, less than a day after the last hearing on March
6, 1989. He stressed that Judge Jaramillo replaced Judge Salvador de
Guzman and heard only his rebuttal testimony.
This allegation is obviously no more than a desperate effort on the part of

petitioner to disparage the lower court's findings of fact in order to convince
this Court to review the same. It is noteworthy that Atty. Belarmino clarified
that Judge Jaramillo had issued the first order in the case as early as March
9, 1987 or two years before the rendition of the decision. In fact, Atty.
Belarmino terminated presentation of evidence on October 13, 1987, while Dr.
Cruz finished hers on February 4, 1989, or more than a month prior to the
rendition of the judgment. The March 6, 1989 hearing was conducted solely
for the presentation of petitioner's rebuttal testimony. 13 In other words,
Judge Jaramillo had ample time to study the case and write the decision
because the rebuttal evidence would only serve to confirm or verify the facts
already presented by the parties.
The Court finds nothing anomalous in the said situation. No proof has been
adduced that Judge Jaramillo was motivated by a malicious or sinister intent
in disposing of the case with dispatch. Neither is there proof that someone
else wrote the decision for him. The immediate rendition of the decision was
no more than Judge Jaramillo's compliance with his duty as a judge to "dispose
of the court's business promptly and decide cases within the required
periods." 14 The two-year period within which Judge Jaramillo handled the
case provided him with all the time to study it and even write down its facts
as soon as these were presented to court. In fact, this Court does not see
anything wrong in the practice of writing a decision days before the scheduled
promulgation of judgment and leaving the dispositive portion for typing at a
time close to the date of promulgation, provided that no malice or any
wrongful conduct attends its adoption. 15 The practice serves the dual
purposes of safeguarding the confidentiality of draft decisions and rendering
decisions with promptness. Neither can Judge Jaramillo be made
administratively answerable for the immediate rendition of the decision. The
acts of a judge which pertain to his judicial functions are not subject to
disciplinary power unless they are committed with fraud, dishonesty,
corruption or bad faith. 16 Hence, in the absence of sufficient proof to the
contrary, Judge Jaramillo is presumed to have performed his job in
accordance with law and should instead be commended for his close attention
to duty.
Having disposed of petitioner's first contention, we now come to the core issue
of this petition which is whether the Court of Appeals erred in upholding the
validity of the contract of barter or sale under the circumstances of this
case.
The Civil Code provides that contracts are perfected by mere consent. From
this moment, the parties are bound not only to the fulfillment of what has
been expressly stipulated but also to all the consequences which, according to
their nature, may be in keeping with good faith, usage and law. 17 A contract
of sale is perfected at the moment there is a meeting of the minds upon the
thing which is the object of the contract and upon the price. 18 Being
consensual, a contract of sale has the force of law between the contracting
parties and they are expected to abide in good faith by their respective
contractual commitments. Article 1358 of the Civil Code which requires the
embodiment of certain contracts in a public instrument, is only for
convenience, 19 and registration of the instrument only adversely affects third

parties. 20 Formal requirements are, therefore, for the benefit of third
parties. Non-compliance therewith does not adversely affect the validity of
the contract nor the contractual rights and obligations of the parties
thereunder.
It is evident from the facts of the case that there was a meeting of the
minds between petitioner and Dr. Cruz. As such, they are bound by the
contract unless there are reasons or circumstances that warrant its
nullification. Hence, the problem that should be addressed in this case is
whether or not under the facts duly established herein, the contract can be
voided in accordance with law so as to compel the parties to restore to each
other the things that have been the subject of the contract with their fruits,
and the price with interest.21
Contracts that are voidable or annullable, even though there may have been no
damage to the contracting parties are: (1) those where one of the parties is
incapable of giving consent to a contract; and (2) those where the consent is
vitiated by mistake, violence, intimidation, undue influence or
fraud. Accordingly, petitioner now stresses before this Court that he
22
entered into the contract in the belief that the pair of emerald-cut diamond
earrings was genuine. On the pretext that those pieces of jewelry turned out
to be counterfeit, however, petitioner subsequently sought the nullification of
said contract on the ground that it was, in fact, "tainted with fraud" 23 such
that his consent was vitiated.
There is fraud when, through the insidious words or machinations of one of

the contracting parties, the other is induced to enter into a contract which,
without them, he would not have agreed to. 24 The records, however, are bare
of any evidence manifesting that private respondents employed such insidious
words or machinations to entice petitioner into entering the contract of
barter. Neither is there any evidence showing that Dr. Cruz induced petitioner
to sell his Tanay property or that she cajoled him to take the earrings in
exchange for said property. On the contrary, Dr. Cruz did not initially accede
to petitioner's proposal to buy the said jewelry. Rather, it appears that it

was petitioner, through his agents, who led Dr. Cruz to believe that the Tanay
property was worth exchanging for her jewelry as he represented that its
value was P400,000.00 or more than double that of the jewelry which was
valued only at P160,000.00. If indeed petitioner's property was truly worth
that much, it was certainly contrary to the nature of a businessman-banker
like him to have parted with his real estate for half its price. In short, it was
in fact petitioner who resorted to machinations to convince Dr. Cruz to
exchange her jewelry for the Tanay property.
Moreover, petitioner did not clearly allege mistake as a ground for nullification
of the contract of sale. Even assuming that he did, petitioner cannot
successfully invoke the same. To invalidate a contract, mistake must "refer to
the substance of the thing that is the object of the contract, or to those
conditions which have principally moved one or both parties to enter into the
contract." 25 An example of mistake as to the object of the contract is the
substitution of a specific thing contemplated by the parties with another. 26 In
his allegations in the complaint, petitioner insinuated that an inferior one or
one that had only Russian diamonds was substituted for the jewelry he wanted
to exchange with his 10-hectare land. He, however, failed to prove the fact
that prior to the delivery of the jewelry to him, private respondents
endeavored to make such substitution.
Likewise, the facts as proven do not support the allegation that petitioner
himself could be excused for the "mistake." On account of his work as a
banker-jeweler, it can be rightfully assumed that he was an expert on
matters regarding gems. He had the intellectual capacity and the business
acumen as a banker to take precautionary measures to avert such a mistake,
considering the value of both the jewelry and his land. The fact that he had
seen the jewelry before October 24, 1984 should not have precluded him from
having its genuineness tested in the presence of Dr. Cruz. Had he done so, he
could have avoided the present situation that he himself brought about.
Indeed, the finger of suspicion of switching the genuine jewelry for a fake
inevitably points to him. Such a mistake caused by manifest negligence cannot
invalidate a juridical act. 27 As the Civil Code provides, "(t)here is no mistake

if the party alleging it knew the doubt, contingency or risk affecting the
object of the contract."28
Furthermore, petitioner was afforded the reasonable opportunity required in

Article 1584 of the Civil Code within which to examine the jewelry as he in
fact accepted them when asked by Dr. Cruz if he was satisfied with the
same. 29 By taking the jewelry outside the bank, petitioner executed an act
which was more consistent with his exercise of ownership over it. This gains
credence when it is borne in mind that he himself had earlier delivered the
Tanay property to Dr. Cruz by affixing his signature to the contract of sale.
That after two hours he later claimed that the jewelry was not the one he
intended in exchange for his Tanay property, could not sever the juridical tie
that now bound him and Dr. Cruz. The nature and value of the thing he had
taken preclude its return after that supervening period within which anything
could have happened, not excluding the alteration of the jewelry or its being
switched with an inferior kind.
Both the trial and appellate courts, therefore, correctly ruled that there
were no legal bases for the nullification of the contract of sale. Ownership
over the parcel of land and the pair of emerald-cut diamond earrings had been
transferred to Dr. Cruz and petitioner, respectively, upon the actual and
constructive delivery thereof. 30 Said contract of sale being absolute in
nature, title passed to the vendee upon delivery of the thing sold since there
was no stipulation in the contract that title to the property sold has been
reserved in the seller until full payment of the price or that the vendor has
the right to unilaterally resolve the contract the moment the buyer fails to
pay within a fixed period. 31 Such stipulations are not manifest in the contract
of sale.
While it is true that the amount of P40,000.00 forming part of the

consideration was still payable to petitioner, its nonpayment by Dr. Cruz is not
a sufficient cause to invalidate the contract or bar the transfer of ownership
and possession of the things exchanged considering the fact that their
contract is silent as to when it becomes due and demandable. 32
Neither may such failure to pay the balance of the purchase price result in
the payment of interest thereon. Article 1589 of the Civil Code prescribes the
payment of interest by the vendee "for the period between the delivery of
the thing and the payment of the price" in the following cases:
(1) Should it have been so stipulated;
(2) Should the thing sold and delivered produce fruits or income;
(3) Should he be in default, from the time of judicial or

extrajudicial demand for the payment of the price.
Not one of these cases obtains here. This case should, of course, be
distinguished from De la Cruz v. Legaspi, 33 where the court held that
failure to pay the consideration after the notarization of the contract
as previously promised resulted in the vendee's liability for payment of
interest. In the case at bar, there is no stipulation for the payment of
interest in the contract of sale nor proof that the Tanay property
produced fruits or income. Neither did petitioner demand payment of
the price as in fact he filed an action to nullify the contract of sale.
All told, petitioner appears to have elevated this case to this Court for the
principal reason of mitigating the amount of damages awarded to both private
respondents which petitioner considers as "exorbitant." He contends that
private respondents do not deserve at all the award of damages. In fact, he
pleads for the total deletion of the award as regards private respondent
Belarmino whom he considers a mere "nominal party" because "no specific claim
for damages against him" was alleged in the complaint. When he filed the
case, all that petitioner wanted was that Atty. Belarmino should return to him
the owner's duplicate copy of TCT No. 320725, the deed of sale executed by
Fr. Antonio Jacobe, the deed of redemption and the check alloted for
expenses. Petitioner alleges further that Atty. Belarmino should not have
delivered all those documents to Dr. Cruz because as the "lawyer for both the
seller and the buyer in the sale contract, he should have protected the rights
of both parties." Moreover, petitioner asserts that there was no firm basis
for damages except for Atty. Belarmino's uncorroborated testimony. 34
Moral and exemplary damages may be awarded without proof of pecuniary

loss. In awarding such damages, the court shall take into account the
circumstances obtaining in the case said assess damages according to its
discretion.35 To warrant the award of damages, it must be shown that the
person to whom these are awarded has sustained injury. He must likewise
establish sufficient data upon which the court can properly base its estimate
of the amount of damages. 36 Statements of facts should establish such data
rather than mere conclusions or opinions of witnesses. 37 Thus:
. . . . For moral damages to be awarded, it is essential that the

claimant must have satisfactorily proved during the trial the
existence of the factual basis of the damages and its causal
connection with the adverse party's acts. If the court has no
proof or evidence upon which the claim for moral damages could be
based, such indemnity could not be outrightly awarded. The same
holds true with respect to the award of exemplary damages where
it must be shown that the party acted in a wanton, oppressive or
malevolent manner. 38
In this regard, the lower court appeared to have awarded damages on a

ground analogous to malicious prosecution under Article 2219 (8) of the Civil
Code 39 as shown by (1) petitioner's "wanton bad faith" in bloating the value of
the Tanay property which he exchanged for "a genuine pair of emerald-cut
diamond worth P200,00.00;" and (2) his filing of a "malicious and unfounded
case" against private respondents who were "well known, respected and held in
high esteem in San Pablo City where everybody practically knows everybody"
and whose good names in the "twilight of their lives" were soiled by
petitioner's coming to court with "unclean hands," thereby affecting their
earning capacity in the exercise of their respective professions and

besmirching their reputation.
For its part, the Court of Appeals affirmed the award of damages to private
respondents for these reasons:
The malice with which Fule filed this case is apparent. Having
taken possession of the genuine jewelry of Dra. Cruz, Fule now
wishes to return a fake jewelry to Dra. Cruz and, more than that,
get back the real property, which his bank owns. Fule has
obtained a genuine jewelry which he could sell anytime, anywhere
and to anybody, without the same being traced to the original
owner for practically nothing. This is plain and simple, unjust
enrichment.40
While, as a rule, moral damages cannot be recovered from a person who has
filed a complaint against another in good faith because it is not sound policy to
place a penalty on the right to litigate, 41 the same, however, cannot apply in
the case at bar. The factual findings of the courts a quo to the effect that
petitioner filed this case because he was the victim of fraud; that he could
not have been such a victim because he should have examined the jewelry in
question before accepting delivery thereof, considering his exposure to the
banking and jewelry businesses; and that he filed the action for the
nullification of the contract of sale with unclean hands, all deserve full faith
and credit to support the conclusion that petitioner was motivated more by ill
will than a sincere attempt to protect his rights in commencing suit against
respondents.
As pointed out earlier, a closer scrutiny of the chain of events immediately

prior to and on October 24, 1984 itself would amply demonstrate that
petitioner was not simply negligent in failing to exercise due diligence to assure
himself that what he was taking in exchange for his property were genuine
diamonds. He had rather placed himself in a situation from which it
preponderantly appears that his seeming ignorance was actually just a ruse.
Indeed, he had unnecessarily dragged respondents to face the travails of

litigation in speculating at the possible favorable outcome of his complaint
when he should have realized that his supposed predicament was his own
making. We, therefore, see here no semblance of an honest and sincere belief
on his part that he was swindled by respondents which would entitle him to
redress in court. It must be noted that before petitioner was able to convince
Dr. Cruz to exchange her jewelry for the Tanay property, petitioner took
pains to thoroughly examine said jewelry, even going to the extent of
sketching their appearance. Why at the precise moment when he was about to
take physical possession thereof he failed to exert extra efforts to check
their genuineness despite the large consideration involved has never been
explained at all by petitioner. His acts thus failed to accord with what an
ordinary prudent man would have done in the same situation. Being an
experienced banker and a businessman himself who deliberately skirted a legal
impediment in the sale of the Tanay property and to minimize the capital gains
tax for its exchange, it was actually gross recklessness for him to have
merely conducted a cursory examination of the jewelry when every opportunity
for doing so was not denied him. Apparently, he carried on his person a tester
which he later used to prove the alleged fakery but which he did not use at
the time when it was most needed. Furthermore, it took him two more hours
of unexplained delay before he complained that the jewelry he received were
counterfeit. Hence, we stated earlier that anything could have happened
during all the time that petitioner was in complete possession and control of
the jewelry, including the possibility of substituting them with fake ones,
against which respondents would have a great deal of difficulty defending
themselves. The truth is that petitioner even failed to successfully prove
during trial that the jewelry he received from Dr. Cruz were not genuine. Add
to that the fact that he had been shrewd enough to bloat the Tanay
property's price only a few days after he purchased it at a much lower value.
Thus, it is our considered view that if this slew of circumstances were
connected, like pieces of fabric sewn into a quilt, they would sufficiently
demonstrate that his acts were not merely negligent but rather studied and
deliberate.
We do not have here, therefore, a situation where petitioner's complaint was

simply found later to be based on an erroneous ground which, under settled
jurisprudence, would not have been a reason for awarding moral and exemplary
damages. 42 Instead, the cause of action of the instant case appears to have
been contrived by petitioner himself. In other words, he was placed in a
situation where he could not honestly evaluate whether his cause of action has
a semblance of merit, such that it would require the expertise of the courts
to put it to a test. His insistent pursuit of such case then coupled with
circumstances showing that he himself was guilty in bringing about the
supposed wrongdoing on which he anchored his cause of action would render
him answerable for all damages the defendant may suffer because of it. This
is precisely what took place in the petition at bar and we find no cogent
reason to disturb the findings of the courts below that respondents in this
case suffered considerable damages due to petitioner's unwarranted action.
WHEREFORE, the decision of the Court of Appeals dated October 20, 1992 is
hereby AFFIRMED in toto. Dr. Cruz, however, is ordered to pay petitioner
the balance of the purchase price of P40,000.00 within ten (10) days from
the finality of this decision. Costs against petitioner.
SO ORDERED.
Narvasa, C.J., Kapunan and Purisima, JJ., concur.
 Binan Steel Corp. vs. CA 391 SCRA 90

[G.R. No. 142013. October 15, 2002.]
BIÑAN STEEL CORPORATION, Petitioner, v. HON. COURT OF APPEALS, MYLENE

C. GARCIA and MYLA C. GARCIA, Respondents.
[G.R. No. 148430. October 15, 2002.]
MYLENE C. GARCIA and MYLA C. GARCIA, Petitioners, v. HON. ENRICO A.

LANZANAS, Presiding Judge, RTC, Branch 7, Manila and RUFO J. BERNARDO,
Sheriff-In-Charge, for the Ex-Officio Sheriff of Manila, Respondents.
DECISION
CORONA, J.:
Before us are two consolidated petitions: (1) G.R. No. 142013, a special civil action
for certiorari and mandamus seeking to annul and set aside the Resolutions 1 of the
Court of Appeals dated October 21, 1999 and January 31, 2000, denying petitioner
Biñan Steel Corporation’s motion for intervention and motion for reconsideration, and
(2) G.R. No. 148430, seeking to set aside the decision 2 and resolution of the Court of
Appeals dated February 10, 2000 and May 31, 2001, respectively, dismissing the
petition of petitioners Mylene C. Garcia and Myla C. Garcia for violating the rules on
forum-shopping. chanrob1es virtua1 1aw 1ibrary
Stripped of the non-essentials, the facts of the case are as follows: chanrob1es virtual 1aw library
On July 22, 1998, Biñan Steel Corporation (BSC) filed with the Regional Trial Court of
Manila a complaint against Joenas Metal Corporation and spouses Ng Ley Huat and
Leticia Dy Ng (the spouses Ng) for collection of a sum of money with damages,
docketed as Civil Case No. 98-89831.
On July 24, 1998, the trial court 3 issued a Writ of Preliminary Attachment after BSC
filed an attachment bond. Pursuant thereto, on July 27, 1998, the sheriff of Branch 7 of
the RTC of Manila, Manuelito P. Viloria, levied on the property registered in the names
of the spouses Ng and covered by TCT No. 11387 of the Registry of Deeds of Quezon
City. This property under preliminary attachment was in fact mortgaged to the Far East
Bank and Trust Company (FEBTC), now Bank of the Philippine Islands (BPI), and
consisted of a 268-square-meter lot located at 14 Tulip Road, Gardenville Town and
Country Homes, Congressional Avenue, Project 8, Quezon City.
On August 5, 1998, a sheriff’s return was filed by Viloria, stating that, as of that date,
summons was not served upon the defendant spouses Ng because they could not be
located. BSC caused the filing of a motion to serve the summons by publication which
was granted. Summons by publication thereafter ensued.
In the meantime, defendant-spouses Ng sold the property to petitioners (in G.R. No.
148430) Mylene and Myla Garcia by means of a deed of sale dated June 29, 1998. Said
transaction was registered only about a month-and-a-half later, on August 12, 1998,
after the mortgagee FEBTC gave its approval to the sale. On August 19, 1998, TCT No.
11387 in the name of the spouses Ng was cancelled and, in lieu thereof, TCT No.
194226 in the names of Mylene and Myla Garcia was issued. The annotation of the
preliminary attachment made earlier on July 27, 1998 by sheriff Viloria on the old title,
TCT No. 11387, was transferred to TCT No. 194226.
On August 28, 1998, the Garcias filed a complaint-in-intervention in Civil Case No. 98-
89831 pending at Branch 7 of the Manila RTC, alleging that they were the registered
owners of the property covered by TCT No. 194226 which was the subject of BSC’s writ
of preliminary attachment. Said complaint-in-intervention was denied by the trial court
for lack of merit. chanrob1es virtua1 1aw 1ibrary
On April 14, 1999, the trial court rendered judgment by default in favor of BSC, the
dispositive portion of which was: chanrob1es virtual 1aw library
WHEREFORE, decision is hereby rendered in favor of plaintiff Biñan Steel Corporation,

and against defendants Joenas Metal Corporation, Ng Ley Huat and Leticia Dy Ng,
ordering the latter to jointly and severally: chanrob1es virtual 1aw library
1. pay the plaintiff the amount of FIVE MILLION EIGHT HUNDRED FIFTY SIX THOUSAND
PESOS (P5,856,000.00) as actual damages;
2. pay the plaintiff the amount of ONE MILLION PESOS (P1,000,000.00) as and for
consequential damages;
3. pay the plaintiff the amount equivalent to 25% of the total amount due the plaintiff
from the defendant as and for attorney’s fees; and
4. to pay the costs of suit.
SO ORDERED. 4
On June 14, 1999, a Notice of Sale of Execution on Real Property was issued by
respondent sheriff Rufo J. Bernardo. It scheduled the public auction of the property on
July 7, 1999.
Meanwhile, on February 18, 1999, in view of the dismissal of their complaint-in-

intervention, the Garcias filed an action against BSC, sheriff Manuelito P. Viloria, the
Register of Deeds of Quezon City and FEBTC (now BPI) for cancellation of the notice of
levy annotated on TCT No. 194226 before Branch 98 of the Regional Trial Court of
Quezon City, 5 docketed as Civil Case No. 99-36804. The Garcias claimed that they
were the registered owners of the property in dispute, having acquired the same on
June 29, 1998 by means of a deed of sale with assumption of mortgage from spouses
Ng Ley Huat and Leticia Dy Ng.
In said case in the Quezon City RTC, the Garcias were able to secure a temporary
restraining order enjoining sheriff Rufo J. Bernardo or any person acting in his behalf
from continuing with the public auction sale of the subject property initially scheduled
on July 7, 1999. This TRO was disregarded by the Manila RTC.
Acting on the ex-parte manifestation with motion to proceed with the execution sale
filed by BSC, Judge Enrico Lanzanas of Branch 7, RTC, Manila affirmed, on July 8, 1999,
his previous order and directed the public auction of the attached property, unless
otherwise enjoined by the Court of Appeals or this Court. Thereafter, the public auction
was rescheduled from July 7, 1999 to August 6, 1999.
On August 4, 1999, the Garcias filed another case with the Court of Appeals for the
issuance of a writ of preliminary injunction with prayer for temporary restraining order
which sought to perpetually enjoin Judge Lanzanas and sheriff Bernardo from
proceeding with the public auction on August 6, 1999. Their petition did not implead
BSC as private Respondent. chanrob1es virtua1 1aw 1ibrary
In a resolution dated August 5, 1999, the Third Division of the Court of Appeals 6
temporarily restrained public respondents Judge Lanzanas and Bernardo from
proceeding with the public auction of the subject property. Hence, the scheduled public
sale on August 6, 1999 did not transpire. This prompted petitioner BSC to file a motion
for intervention on August 16, 1999, praying that it be allowed to intervene and be
heard in the case as private respondent, and to comment and oppose the petition filed
by the Garcias. Likewise, said motion sought to oppose the prayer for preliminary
injunction with urgent request for the issuance of the temporary restraining order.
On October 21, 1999, the First Division of the Court of Appeals, in its resolution, 7
denied BSC’s motion for intervention on the ground that its rights could be protected in
a separate proceeding, particularly in the cancellation case filed by the Garcias. BSC’s
motion for reconsideration was likewise denied on January 31, 2000. Thus, on March
13, 2000, BSC filed with this Court a special civil action for certiorari and mandamus,
docketed as G.R. No. 142013, seeking to annul and set aside the Resolutions of the
Court of Appeals dated October 21, 1999 and January 31, 2000. BSC is invoking the
following issues: chanrob1es virtual 1aw library
I
THE RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF

DISCRETION TANTAMOUNT TO LACK OR EXCESS OF JURISDICTION IN DENYING
PETITIONER’S MOTION FOR INTERVENTION FOR BEING IMPROPER AS INTERVENOR’S
RIGHTS MAY BE PROTECTED IN A SEPARATE PROCEEDING IN CIVIL CASE NO. 99-
36804 OF THE RTC, BRANCH 98, QUEZON CITY, FOR CANCELLATION OF THE NOTICE
OF LEVY ANNOTATED ON TCT NO. 194226.
II
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION

TANTAMOUNT TO LACK OR EXCESS OF JURISDICTION IN HOLDING THAT TO
ENTERTAIN PETITIONER’S INTERVENTION WOULD NECESSARY (SIC) PRE-EMPT THE
ADJUDICATION OF ISSUES IN CIVIL CASE NO. 99-36804 BECAUSE EVIDENCE AND
COUNTER-EVIDENCE WILL BE PRODUCED BY THE PARTIES IN THE INJUNCTION SUIT,
AND THIS WILL UNDULY DELAY OR PREJUDICE THE ADJUDICATION OF THE RIGHTS OF
THE PRINCIPAL PARTIES.
III
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION

TANTAMOUNT TO LACK OR EXCESS OF JURISDICTION IN RULING THAT THE
ALLOWANCE OR DISALLOWANCE OF A MOTION TO INTERVENE IS ADDRESSED TO THE
SOUND DISCRETION OF THE COURT, OVERLOOKING THE FACT THAT IN THE INSTANT
CASE, THE APPELLATE COURT DID NOT EXERCISE WISELY ITS SOUND DISCRETION
WHEN IT DENIED PETITIONER’S MOTION FOR INTERVENTION. chanrob1es virtua1 1aw 1ibrary
Similarly, the Fifteenth Division of the Court of Appeals, in its decision 8 dated February
10, 2000, dismissed the petition of the Garcias for violating the rules on forum-
shopping. It denied their motion for reconsideration on May 31, 2001.
The Garcias thus filed with this Court a petition for review on certiorari, docketed as
G.R. No. 148430, seeking to set aside the February 10, 2000 decision of the Court of
Appeals as well as its resolution dated May 31, 2001 denying their motion for
reconsideration, raising the following errors: chanrob1es virtual 1aw library
WHETHER OR NOT PETITIONERS WERE GUILTY OF VIOLATING THE RULES ON FORUM-

SHOPPING.
II
WHETHER OR NOT PETITIONERS ARE ENTITLED TO THE ISSUANCE OF A WRIT OF

INJUNCTION.
Subsequently, G.R. No. 142013 and G.R. No. 148430 were consolidated pursuant to
this Court’s Resolution dated February 27, 2002.
In the meantime, on August 4, 2001, the Garcias were again served by the sheriff of
the Manila RTC with a notice of sale of execution of the disputed property scheduled for
August 7, 2001. Because no TRO was issued by this Court, the public auction ordered
by the Manila RTC was held as scheduled and the property was awarded to BSC as the
highest bidder.
On August 15, 2001, a little too late, this Court 9 issued the TRO sought by the Garcias
in a resolution which partially stated that:
chanrob1es virtual 1aw library
Acting on the Petitioners’ Urgent Motion for the Issuance of a temporary restraining
order and/or writ of preliminary injunction dated August 6, 2001, praying that public
respondents be enjoined from proceeding with the conduct of the public auction sale
involving Petitioners’ property, registered under TCT No. 194226 of the Registry of
Deeds of Quezon City, the Court Resolved to ISSUE the TEMPORARY RESTRAINING
ORDER prayed for, effective immediately until further orders from this Court. 10
A year after the public auction, on August 6, 2002, the Garcias, fearful of the impending
consolidation of title in favor of BSC, filed before this Court an urgent ex parte motion
for the issuance of an order maintaining the status quo ante. They wanted to prevent
the consolidation of the title and possession by BSC until such time as the rights and
interests of both sets of petitioners in the two cases before us shall have been
determined and finally resolved.
Acting on the said motion, on August 9, 2002, the Court 11 resolved to grant the
motion and directed the parties to maintain the status quo as of August 6, 2002. chanrob1es virtua1 1aw 1ibrary
Going over the merits of the petitions, the Court deems it essential to resolve two
pivotal issues: (1) who, between BSC and the Garcias, has a better right to the
disputed property, and (2) whether the Garcias violated the rule against forum-
shopping.
It should be noted that, at the time of the attachment of the property on July 27, 1998,
the spouses Ng were still the registered owners of said property. It should also be
observed that the preliminary attachment in favor of petitioner BSC was annotated and
recorded in the Registry of Deeds of Quezon City on July 27, 1998 in accordance with
the provisions of the Property Registration Decree (PD 1529). This annotation produced
all the effects which the law gives to its registration or inscription. 12
This Court has always held that attachment is a proceeding in rem. It is against the
particular property, enforceable against the whole world. The attaching creditor
acquires a specific lien on the attached property which ripens into a judgment against
the res when the order of sale is made. Such a proceeding in effect means that the
property attached is an indebted thing and a virtual condemnation of it to pay the
owner’s debt. 13 This doctrine was validated by this Court in the more recent case of
Republic v. Saludares 14 : chanrob1es virtual 1aw library
x x x
The law does not provide the length of time an attachment lien shall continue after the
rendition of the judgment, and it must therefore necessarily continue until the debt is
paid, or sale is had under execution issued on the judgment, or until the judgment is
satisfied, or the attachment discharged or vacated in some manner provided by law.
Thus, if the property attached is subsequently sold, the purchaser of the attached
property acquires it subject to an attachment legally and validly levied thereon.
x x x
In the instant case, the records reveal that the levy on attachment covering the subject
property was annotated on TCT No. 11387 on July 27, 1998. The deed of sale executed
on June 29, 1998 in favor of the Garcias was approved by FEBTC only on August 12,
1998 which was also the date when the sale was registered. From the foregoing, it can
be seen that, when the Garcias purchased the property in question, it was already
under a duly registered preliminary attachment. In other words, there was already
notice to said purchasers (and the whole world) of the impending acquisition by BSC, as
the judgment creditor, of a legal lien on the title of the Ng spouses as judgment debtors
— in case BSC won its case in the Manila RTC.
The Garcias claim they acquired the subject property by means of a deed of sale with
assumption of mortgage dated June 29, 1998, meaning, they purchased the property
ahead of the inscription of the levy on attachment thereon on July 27, 1998. But, even
if consensual, not all contracts of sale become automatically and immediately effective.
15 In Ramos v. Court of Appeals 16 we held: chanrob1es virtual 1aw library
In sales with assumption of mortgage, the assumption of mortgage is a condition

precedent to the seller’s consent and therefore, without approval of the mortgagee, the
sale is not perfected. chanrob1es virtua1 1aw 1ibrary
Apart therefrom, notwithstanding the approval of the sale by mortgagee FEBTC (BPI),
there was yet another step the Garcias had to take and it was the registration of the
sale from the Ngs to them. Insofar as third persons are concerned, what validly
transfers or conveys a person’s interest in real property is the registration of the deed.
17
Thus, when the Garcias bought the property on June 29, 1998, it was, at that point, no
more than a private transaction between them and the Ngs. It needed to be registered
before it could become binding on all third parties, including BSC. It turned out that the
Garcias registered it only on August 12, 1998, after FEBTC (now BPI) approved the
sale. It was too late by then because, on July 27, 1998, the levy in favor of BSC,
pursuant to the preliminary attachment ordered by the Manila RTC, had already been
annotated on the original title on file with the Registry of Deeds. This registration of
levy (or notice, in layman’s language) now became binding on the whole world,
including the Garcias. The rights which had already accrued in favor of BSC by virtue of
the levy on attachment over the property were never adversely affected by the
unregistered transfer from the spouses Ng to the Garcias.
We sympathize with the Garcias but, had they only bothered to check first with the
Register of Deeds of Quezon City before buying the property — as a prudent buyer
would have done — they would have seen the warning about BSC’s superior rights over
it. This alone should have been sufficient reason for them to back out of the deal.
It is doctrinal that a levy on attachment, duly registered, has preference over a prior
unregistered sale and, even if the prior unregistered sale is subsequently registered
before the sale on execution but after the levy is made, the validity of the execution
sale should be upheld because it retroacts to the date of levy. The priority enjoyed by
the levy on attachment extends, with full force and effect, to the buyer at the auction
sale conducted by virtue of such levy. 18 The sale between the spouses Ng and the
Garcias was undoubtedly a valid transaction between them. However, in view of the
prior levy on attachment on the same property, the Garcias took the property subject
to the attachment. The Garcias, in buying registered land, stood exactly in the shoes of
their vendors, the Ngs, and their title ipso facto became subject to the incidents or
results of the pending litigation 19 between the Ngs and BSC.
Even the alleged lack of actual and personal knowledge of the existence of the levy on
attachment over the subject property by the Garcias cannot be sustained by this Court
on the ground that one who deals with registered land is charged with notice of the
burdens on the property which are duly noted on the certificate of title. On this specific
point, we are concerned not with actual or personal knowledge but constructive notice
through registration in the Registry of Deeds. Otherwise stated, what we should follow
is the annotation (or lack thereof) on the original title on file with the Registry of Deeds,
not on the duplicate title in the hands of the private parties.chanrob1es virtua1 1aw 1ibrary
When a conveyance has been properly recorded, such record is constructive notice of
its contents and all interests, legal and equitable, included therein. Under the rule on
notice, it is presumed that the purchaser has examined every instrument on record
affecting the title. Such presumption is irrefutable and cannot be overcome by any
claim of innocence or good faith. Therefore, such presumption cannot be defeated by
proof of lack of knowledge of what the public record contains any more than one may
be permitted to show that he was ignorant of the provisions of the law. The rule that all
persons must take notice of the facts which the public record contains is a rule of law.
The rule must be absolute. Any variation would lead to endless confusion and useless
litigation. 20 Otherwise, the very purpose and object of the law requiring public
registration would be for naught.
Pertinent to the matter at hand is Article 1544 of the New Civil Code which provides: chanrob1es virtual 1aw library
If the same thing should have been sold to different vendees, . . . should it be
immovable property, the ownership shall belong to the person acquiring it who in good
faith first recorded it in the Registry of Property. . . .
Because of the principle of constructive notice to the whole world, one who deals with
registered property which is the subject of an annotated levy on attachment cannot
invoke the rights of a purchaser in good faith. As between two purchasers, the one who
registers the sale in his favor has a preferred right over the other who has not
registered his title even if the latter is in actual possession of the immovable property.
21 And, as between two purchasers who both registered the respective sales in their
favor, the one who registered his sale ahead of the other would have better rights than
the other who registered later.
Applying said provision of the law and settled jurisprudence to the instant case, when
the disputed property was consequently sold on execution to BSC, this auction sale
retroacted to the date of inscription of BSC’s notice of attachment on July 27, 1998. The
earlier registration thus gave BSC superior and preferential rights over the attached
property as against the Garcias who registered their purchase of the property at a later
date. 22 Notably, the Garcias were not purchasers for value in view of the fact that they
acquired the property in payment of the loan earlier obtained from them by the spouses
Ng. 23
All told, the purchaser of a property subject to an attachment legally and validly levied
thereon is merely subrogated to the rights of the vendor and acquires the property
subject to the rights of the attachment creditor. An attaching creditor who registers the
order of attachment and the sale by public auction of the property to him as the highest
bidder acquires a superior title to the property as against a vendee who previously
bought the same property from the registered owner but failed to register his deed of
sale. 24
Petitioners Garcias failed to show that BSC acted in bad faith which would have
impelled this Court to rule otherwise.
The foregoing considerations show that the Garcias are not entitled to the issuance of a
writ of preliminary injunction from this Court. For the issuance of the writ to be proper,
it must be shown that the invasion of the right sought to be protected is material and
substantial, that the right of the Garcias is clear and unmistakable and that there is an
urgent and paramount necessity for the writ to prevent serious damage. 25 Such
requirements are all wanting in the case at bar. Thus, in view of the clear and
unmistakable absence of any legal basis for the issuance thereof, the same must be
denied. cralaw : red
On the second question — whether the Garcias violated the rule against forum-
shopping — we answer in the affirmative.
The Court of Appeals, in dismissing the Garcias’ petition on the ground of forum-
shopping, explained: chanrob1es virtual 1aw library
A party is guilty of forum-shopping where he repetitively availed of several judicial

remedies in different courts, simultaneously or successively, all substantially founded
on the same transactions and the same essential facts and circumstances, and all
raising substantially the same issues either pending in, or already resolved adversely by
some other court (Gatmaytan v. Court of Appeals, 267 SCRA 487).
The test to determine whether a party violated the rule against forum-shopping is
where the elements of litis pendentia are present or where a final judgment in one case
will amount to res judicata in another (Solid Homes, Inc. v. Court of Appeals, 271 SCRA
157).
What is truly important to consider in determining whether forum-shopping exists or

not is the vexation caused the courts and parties-litigants by a party who asks different
courts and/or administrative agencies to rule on the same or related causes and/or
grant the same or substantially the same reliefs, in the process creating possibility of
conflicting decisions being rendered by the different fora upon the same issues
(Golangco v. Court of Appeals, 283 SCRA 493).
The above jurisprudence instructs us the various indicia of forum-shopping. The more
important of these are: when the final judgment in one case will amount to res judicata
in another, or where the cases filed are substantially founded on the same transactions
and the same essential facts and circumstances, or raising substantially the same
issues, or more importantly, where there exists the possibility of conflicting decisions
being rendered by different fora upon the same issues.
If we take a look closely on the instant Petition for Injunction, forum-shopping is

evident. In Civil Case No. 99-36804 raffled to Branch 98 of RTC-Quezon City,
petitioners therein prayed for the cancellation of the notice of levy in their title. They
are claiming that the controverted property is owned by them such that the respondent
therein has no right to levy on their property, petitioners not being the respondent’s
debtor. In the present petition, petitioners seek that the scheduled auction sale of the
same property be perpetually enjoined, claiming that the property is owned by them
and that the same is erroneously made to answer for liability not owing by them.
Ultimately, the two actions involve the same essential facts and circumstances, and are
raising the same issues.chanrob1es virtua1 1aw 1ibrary
. . . The propriety of the issuance of injunction would depend on the finding that the
petitioners have a clear legal right over the property — a right in esse or the existence
of a right to be protected. Thus, this court must make a categorical finding of fact. This
very same issue of fact — who as between the two contending parties have a better
right to the property — is the very issue presented before the RTC of Quezon City.
Clearly therefore, this Court and that of RTC-Quezon City are called upon to decide on
the same issues based on the same essential facts and circumstances. Hence, the
possibility of these two courts rendering or coming up with different or conflicting
decisions is very much real. Needless to say, the decision in one case would constitute
res judicata in the other. The instant petition for injunction obviously violates the rule
on forum-shopping.
We agree with the Court of Appeals.
As clearly demonstrated, the willful attempt by the Garcias to obtain a preliminary

injunction in another court (the Court of Appeals) after they filed a case seeking the
same relief from the original court (the Quezon City RTC) constitutes grave abuse of the
judicial process. Such contemptuous act is penalized by the summary dismissal of both
actions as mandated by paragraph 17 of the Interim Rules and Guidelines issued by this
Court on January 11, 1983 and Supreme Court Circular No. 28-91, to wit: chanrob1es virtual 1aw library
x x x
SUBJECT: ADDITIONAL REQUISITES FOR PETITIONS FILED WITH THE SUPREME COURT
AND THE COURT OF APPEALS TO PREVENT FORUM-SHOPPING OR MULTIPLE FILING OF
PETITIONS AND COMPLAINTS.
The attention of the Court has been called to the filing of multiple petitions and
complaints involving the same issues in the Supreme Court, the Court of Appeals or
different Divisions thereof, or any other tribunal or agency, with the result that said
tribunals or agency have to resolve the same issues.
x x x
3. Penalties.
(a) Any violation of this Circular shall be a cause for the summary dismissal of the
multiple petition or complaint;
x x x
In Bugnay Construction & Development Corporation v. Laron, 26 we declared: chanrob1es virtual 1aw library
Forum-shopping, an act of malpractice, is proscribed and condemned as trifling with the

courts and abusing their processes. It is improper conduct that degrades the
administration of justice. The rule has been formalized in Paragraph 17 of the Interim
Rules and Guidelines issued by this Court of January 11, 1983, in connection with the
implementation of the Judiciary Reorganization Act . . . The Rule ordains that (a)
violation of the rule shall constitute a contempt of court and shall be a cause for the
summary dismissal of both petitions, without prejudice to the taking of appropriate
action against the counsel or party concerned. chanrob1es virtua1 1aw 1ibrary
The rule against forum-shopping has been further strengthened by the issuance of
Supreme Court Administrative Circular No. 04-94. Said circular formally established the
rule that the deliberate filing of multiple complaints to obtain favorable action
constitutes forum-shopping and shall be a ground for summary dismissal thereof.
Accordingly, the Garcias cannot pursue simultaneous remedies in two different fora.
This is a practice which degrades the judicial process, messes up the orderly rules of
procedure and is vexatious and unfair to the other party in the case.
We rule therefore that the execution sale in favor of BSC was superior to the sale of the
same property by the Ngs to the Garcias on August 12, 1998. The right of petitioner
BSC to the ownership and possession of the property, the surrender of the owner’s
duplicate copy of TCT No. 194226 covering the subject property for inscription of the
certificate of sale, the cancellation of TCT No. 194226 and the issuance of a new title in
favor of BSC, is affirmed without prejudice to the right of the Garcias to seek
reimbursement from the spouses Ng.
In view of our disposition of the first issue resulting in the denial of the Garcias’
petition, the petition of BSC praying that it be allowed to intervene therein has been
rendered moot. The Court thus finds it unnecessary to discuss it.
WHEREFORE, the petitions are DENIED. The Resolution dated August 9, 2002 issued by
this Court directing the parties to maintain the status quo as of August 6, 2002 is
hereby lifted and set aside. The Registry of Deeds of Quezon City is hereby ordered to
cancel TCT No. 194226 in the names of Myla and Mylene Garcia and issue a new title in
favor of BSC without further delay. chanrob1es virtua1 1aw 1ibrary
SO ORDERED.
Puno and Panganiban, JJ., concur.
 National Housing Authority vs. Grace Baptist Church 424 SCRA 147
G.R. No. 156437 March 1, 2004
NATIONAL HOUSING AUTHORITY, petitioner,

vs.
GRACE BAPTIST CHURCH and the COURT OF APPEALS, respondents.
DECISION
YNARES-SANTIAGO, J.:
This is a petition for review under Rule 45 of the Rules of Court, seeking to reverse the Decision of
the Court of Appeals dated February 26, 2001,1 and its Resolution dated November 8, 2002, 2 which
modified the decision of the Regional Trial Court of Quezon City, Branch 90, dated February 25,
1997.3
On June 13, 1986, respondent Grace Baptist Church (hereinafter, the Church) wrote a letter to
petitioner National Housing Authority (NHA), manifesting its interest in acquiring Lots 4 and 17 of the
General Mariano Alvarez Resettlement Project in Cavite. 4 In its letter-reply dated July 9, 1986,
petitioner informed respondent:
In reference to your request letter dated 13 June 1986, regarding your application for Lots 4
and 17, Block C-3-CL, we are glad to inform you that your request was granted and you may
now visit our Project Office at General Mariano Alvarez for processing of your application to
purchase said lots.
We hereby advise you also that prior to approval of such application and in accordance with our
existing policies and guidelines, your other accounts with us shall be maintained in good standing. 5
Respondent entered into possession of the lots and introduced improvements thereon. 6
On February 22, 1991, the NHA’s Board of Directors passed Resolution No. 2126, approving the
sale of the subject lots to respondent Church at the price of P700.00 per square meter, or a total
price of P430,500.00.7 The Church was duly informed of this Resolution through a letter sent by the
NHA.8
On April 8, 1991, the Church tendered to the NHA a manager’s check in the amount of P55,350.00,
purportedly in full payment of the subject properties. 9 The Church insisted that this was the price
quoted to them by the NHA Field Office, as shown by an unsigned piece of paper with a handwritten
computation scribbled thereon. 10 Petitioner NHA returned the check, stating that the amount was
insufficient considering that the price of the properties have changed. The Church made several
demands on the NHA to accept their tender of payment, but the latter refused. Thus, the Church
instituted a complaint for specific performance and damages against the NHA with the Regional Trial
Court of Quezon City,11 where it was docketed as Civil Case No. Q-91-9148.
On February 25, 1997, the trial court rendered its decision, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. Ordering the defendant to reimburse to the plaintiff the amount of P4,290.00

representing the overpayment made for Lots 1, 2, 3, 18, 19 and 20;
2. Declaring that there was no perfected contract of sale with respect to Lots 4 and
17 and ordering the plaintiff to return possession of the property to the defendant and
to pay the latter reasonable rental for the use of the property at P200.00 per month
computed from the time it took possession thereof until finally vacated. Costs against
defendant.
SO ORDERED.12
On appeal, the Court of Appeals, affirmed the trial court’s finding that there was indeed no contract
of sale between the parties. However, petitioner was ordered to execute the sale of the lots to Grace
Baptist Church at the price of P700.00 per square meter, with 6% interest per annum from March
1991. The dispositive portion of the Court of Appeals’ decision, dated February 26, 2001, reads:
WHEREFORE, the appealed Decision is hereby AFFIRMED with the MODIFICATION that
defendant-appellee NHA is hereby ordered to sell to plaintiff-appellant Grace Baptist Church
Lots 4 and 17 at the price of P700.00 per square meter, or a total cost P430,000.00 with 6%
interest per annum from March, 1991 until full payment in cash.
SO ORDERED.13
The appellate court ruled that the NHA’s Resolution No. 2126, which earlier approved the sale of the
subject lots to Grace Baptist Church at the price of P700.00 per square meter, has not been revoked
at any time and was therefore still in effect. As a result, the NHA was estopped from fixing a different
price for the subject properties. Considering further that the Church had been occupying the subject
lots and even introduced improvements thereon, the Court of Appeals ruled that, in the interest of
equity, it should be allowed to purchase the subject properties. 14
Petitioner NHA filed a Motion for Reconsideration which was denied in a Resolution dated November
8, 2002. Hence, the instant petition for review on the sole issue of: Can the NHA be compelled to sell
the subject lots to Grace Baptist Church in the absence of any perfected contract of sale between
the parties?
Petitioner submits that the Court cannot compel it to sell the subject property to Grace Baptist
Church without violating its freedom to contract.15 Moreover, it contends that equity should be applied
only in the absence of any law governing the relationship between the parties, and that the law on
sales and the law on contracts in general apply to the present case. 16
We find merit in petitioner’s submission.
Petitioner NHA is not estopped from selling the subject lots at a price equal to their fair market value,
even if it failed to expressly revoke Resolution No. 2126. It is, after all, hornbook law that the
principle of estoppel does not operate against the Government for the act of its agents, 17 or, as in this
case, their inaction.
On the application of equity, it appears that the crux of the controversy involves the characterization
of equity in the context of contract law. Preliminarily, we reiterate that this Court, while aware of its
equity jurisdiction, is first and foremost, a court of law. While equity might tilt on the side of one party,
the same cannot be enforced so as to overrule positive provisions of law in favor of the other. 18 Thus,
before we can pass upon the propriety of an application of equitable principles in the case at bar, we
must first determine whether or not positive provisions of law govern.
It is a fundamental rule that contracts, once perfected, bind both contracting parties, and obligations
arising therefrom have the force of law between the parties and should be complied with in good
faith.19 However, it must be understood that contracts are not the only source of law that govern the
rights and obligations between the parties. More specifically, no contractual stipulation may
contradict law, morals, good customs, public order or public policy.20 Verily, the mere inexistence of a
contract, which would ordinarily serve as the law between the parties, does not automatically
authorize disposing of a controversy based on equitable principles alone. Notwithstanding the
absence of a perfected contract between the parties, their relationship may be governed by other
existing laws which provide for their reciprocal rights and obligations.
It must be remembered that contracts in which the Government is a party are subject to the same
rules of contract law which govern the validity and sufficiency of contract between individuals. All the
essential elements and characteristics of a contract in general must be present in order to create a
binding and enforceable Government contract.21
It appearing that there is no dispute that this case involves an unperfected contract, the Civil Law
principles governing contracts should apply. In Vda. de Urbano v. Government Service Insurance
System,22 it was ruled that a qualified acceptance constitutes a counter-offer as expressly stated by
Article 1319 of the Civil Code. In said case, petitioners offered to redeem mortgaged property and
requested for an extension of the period of redemption. However, the offer was not accepted by the
GSIS. Instead, it made a counter-offer, which petitioners did not accept. Petitioners again offer to
pay the redemption price on staggered basis. In deciding said case, it was held that when there is
absolutely no acceptance of an offer or if the offer is expressly rejected, there is no meeting of the
minds. Since petitioners’ offer was denied twice by GSIS, it was held that there was clearly no
meeting of the minds and, thus, no perfected contract. All that is established was a counter-offer. 23
In the case at bar, the offer of the NHA to sell the subject property, as embodied in Resolution No.
2126, was similarly not accepted by the respondent. 24 Thus, the alleged contract involved in this
case should be more accurately denominated as inexistent. There being no concurrence of the offer
and acceptance, it did not pass the stage of generation to the point of perfection. 25 As such, it is
without force and effect from the very beginning or from its incipiency, as if it had never been entered
into, and hence, cannot be validated either by lapse of time or ratification. 26 Equity can not give
validity to a void contract,27 and this rule should apply with equal force to inexistent contracts.
We note from the records, however, that the Church, despite knowledge that its intended contract of
sale with the NHA had not been perfected, proceeded to introduce improvements on the disputed
land. On the other hand, the NHA knowingly granted the Church temporary use of the subject
properties and did not prevent the Church from making improvements thereon. Thus, the Church
and the NHA, who both acted in bad faith, shall be treated as if they were both in good faith. 28 In this
connection, Article 448 of the Civil Code provides:
The owner of the land on which anything has been built, sown or planted in good faith, shall
have the right to appropriate as his own the works, sowing or planting, after payment of the
indemnity provided for in articles 546 and 548, or to oblige the one who built or planted to
pay the price of the land, and the one who sowed, the proper rent. However, the builder or
planter cannot be obliged to buy the land and if its value is considerably more than that of
the building or trees. In such case, he shall pay reasonable rent, if the owner of the land
does not choose to appropriate the building or trees after proper indemnity. The parties shall
agree upon the terms of the lease and in case of disagreement, the court shall fix the terms
thereof.
Pursuant to our ruling in Depra v. Dumlao, 29 there is a need to remand this case to the trial court,
which shall conduct the appropriate proceedings to assess the respective values of the
improvements and of the land, as well as the amounts of reasonable rentals and indemnity, fix the
terms of the lease if the parties so agree, and to determine other matters necessary for the proper
application of Article 448, in relation to Articles 546 and 548, of the Civil Code.
WHEREFORE, in view of the foregoing, the petition is GRANTED. The Court of Appeals’ Decision
dated February 26, 2001 and Resolution dated November 8, 2002 are REVERSED and SET ASIDE.
The Decision of the Regional Trial Court of Quezon City-Branch 90, dated February 25, 1997, is
REINSTATED. This case is REMANDED to the Regional Trial Court of Quezon City, Branch 90, for
further proceedings consistent with Articles 448 and 546 of the Civil Code.
No costs.
SO ORDERED.
Davide, Jr., C.J., Carpio, and Azcuna, JJ., concur.

Panganiban, J., on official leave.
 Congregation of the Religious of the Virgin Mary vs. Orola 553 SCRA 578
G.R. No. 169790 April 30, 2008

CONGREGATION OF THE RELIGIOUS OF THE VIRGIN MARY and/or THE
SUPERIOR GENERAL OF THE RELIGIOUS OF THE VIRGIN MARY, represented by
The REVEREND MOTHER MA. CLARITA BALLEQUE, petitioner,
vs.
EMILIO Q. OROLA, JOSEPHINE FATIMA LASERNA OROLA, MYRNA ANGELINE
LASERNA OROLA, MANUEL LASERNA OROLA, MARJORIE MELBA LASERNA
OROLA & ANTONIO LASERNA OROLA, respondents.
DECISION
NACHURA, J.:
Challenged in this petition for review on certiorari is the Court of Appeals (CA)
Decision1 in CA-G.R. CV. No. 71406 which modified the Regional Trial Court (RTC)
Decision2 in Civil Case No. V-7382 ordering the rescission of the contract of sale
between the parties in an action for Specific Performance or Rescission with Damages
filed by respondents Emilio, Josephine Fatima Laserna, Myrna Angeline Laserna, Manuel
Laserna, Marjorie Melba Laserna, & Antonio Laserna, all surnamed Orola, (respondents)
against petitioner Congregation of the Religious of the Virgin Mary (RVM). 3
The undisputed facts, as found by the CA and adopted by RVM in its petition, follow.
Sometime in April 1999, [petitioner] Religious of the Virgin Mary (RVM for brevity),
acting through its local unit and specifically through Sr. Fe Enhenco, local Superior of
the St. Mary’s Academy of Capiz and [respondents] met to discuss the sale of the
latter’s property adjacent to St. Mary’s Academy. Said property is denominated as Lot
159-B-2 and was still registered in the name of [respondents’] predecessor-in-interest,
Manuel Laserna.
In May of 1999, [respondent] Josephine Orola went to Manila to see the Mother
Superior General of the RVM, in the person of Very Reverend Mother Ma. Clarita
Balleque [VRM Balleque] regarding the sale of the property subject of this instant case.
A contract to sell dated June 2, 1999 made out in the names of herein [petitioner] and
[respondents] as parties to the agreement was presented in evidence pegging the total
consideration of the property at P5,555,000.00 with 10% of the total consideration
payable upon the execution of the contract, and which was already signed by all the
[respondents] and Sr. Ma. Fe Enhenco, R.V.M. [Sr. Enhenco] as witness.
On June 7, 1999, [respondents] Josephine Orola and Antonio Orola acknowledged

receipt of RCBC Check No. 0005188 dated June 7, 1999 bearing the amount
of P555,500.00 as 10% down payment for Lot 159-B-2 from the RVM Congregation (St.
Mary’s Academy of Cadiz [SMAC]) with the "conforme" signed by Sister Fe Enginco
(sic), Mother Superior, SMAC.
[Respondents] executed an extrajudicial settlement of the estate of Trinidad Andrada
Laserna dated June 21, 1999 adjudicating unto themselves, in pro indiviso shares, Lot
159-B-2, and which paved the transfer of said lot into their names under Transfer
Certificate of Title No. T-39194 with an entry date of August 13, 1999. 4
Thereafter, respondents, armed with an undated Deed of Absolute Sale which they had
signed, forthwith scheduled a meeting with VRM Balleque at the RVM Headquarters in
Quezon City to finalize the sale, specifically, to obtain payment of the remaining
balance of the purchase price in the amount of P4,999,500.00. However, VRM Balleque
did not meet with respondents. Succeeding attempts by respondents to schedule an
appointment with VRM Balleque in order to conclude the sale were likewise rebuffed.
In an exchange of correspondence between the parties’ respective counsels, RVM
denied respondents’ demand for payment because: (1) the purported Contract to Sell
was merely signed by Sr. Enhenco as witness, and not by VRM Balleque, head of the
corporation sole; and (2) as discussed by counsels in their phone conversations, RVM
will only be in a financial position to pay the balance of the purchase price in two years
time. Thus, respondents filed with the RTC a complaint with alternative causes of action
of specific performance or rescission.
After trial, the RTC ruled that there was indeed a perfected contract of sale between the
parties, and granted respondents’ prayer for rescission thereof. It disposed of the case,
to wit:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
[respondents] and against the [petitioner].
1. Dismissing the counterclaim;
2. Ordering the rescission of the Contract to Sell, Exh. "E".
3. Ordering the forfeiture of the downpayment of P555,500 in favor of the
[respondents];
4. Ordering [petitioner] corporation sole, the Superior General of the Religious of the
Virgin Mary, to pay [respondents]:
a. P50,000.00 as exemplary damages;
b. P50,000.00 as attorney’s fees.
5. Costs against the [petitioner].
Dissatisfied, both parties filed their respective Notices of Appeal. The CA dismissed the
respondents’ appeal because of their failure to file an Appeal Brief. However, RVM’s
appeal, where respondents accordingly filed an Appellee’s Brief, continued.
Subsequently, the CA rendered judgment setting aside the RTC Decision, to wit:
WHEREFORE, with all the foregoing, the decision of the Regional Trial Court, Branch
15, Roxas City dated March 1, 2001 in [C]ivil [C]ase [N]o. V-7382 for Specific
Performance or Rescission with Damages is hereby SET ASIDE and a new one entered
GRANTING [respondents’] action for specific performance. [Petitioner RVM] [is] hereby
ordered to pay [respondents] immediately the balance of the total consideration for the
subject property in the amount of P4,999,500.00 with interest of 6% per annum
computed from June 7, 2000 or one year from the downpayment of the 10% of the
total consideration until such time when the whole obligation has been fully satisfied. In
the same way, [respondents] herein are ordered to immediately deliver the title of the
property and to execute the necessary documents required for the sale as soon as all
requirements aforecited have been complied by [RVM]. Parties are further ordered to
abide by their reciprocal obligations in good faith.
All other claims and counterclaims are hereby dismissed for lack of factual and legal
basis.
No pronouncement as to cost.
In modifying the RTC Decision, the CA, albeit sustaining the trial court’s finding on the
existence of a perfected contract of sale between the parties, noted that the records
and evidence adduced did not preponderate for either party on the manner of effecting
payment for the subject property. In short, the CA was unable to determine from the
records if the balance of the purchase price was due in two (2) years, as claimed by
RVM, or, upon transfer of title to the property in the names of respondents, as they
averred. Thus, the CA applied Articles 1383 5 and 13846 of the Civil Code which
pronounce rescission as a subsidiary remedy covering only the damages caused.
The appellate court then resolved the matter in favor of the greatest reciprocity of
interest pursuant to Article 13787 of the Civil Code. It found that the 2-year period to
purchase the property, which RVM insisted on, had been mooted considering the time
elapsed from the commencement of this case. Thus, the CA ordered payment of the
balance of the purchase price with 6% interest per annum computed from June 7, 2000
until complete satisfaction thereof.
Hence, this recourse.
RVM postulates that the order to pay interest is inconsistent with the professed
adherence by the CA to the greatest reciprocity of interest between the parties. Since
mutual restitution cannot be had when the CA set aside the rescission of the contract of
sale and granted the prayer for specific performance, RVM argues that the respondents
should pay rentals for the years they continued to occupy, possess, and failed to turn
over to RVM the subject property.
Effectively, the only issue for our resolution is whether RVM is liable for interest on the
balance of the purchase price.
At the outset, we must distinguish between an action for rescission as mapped out in
Article 1191 of the Civil Code and that provided by Article 1381 of the same Code. The
articles read:
Art. 1191. The power to rescind obligations is impled in reciprocal ones, in case one of
the obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the
obligation, with the payment of damages in either case. He may also seek rescission,
even after he has chosen fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing the
fixing of a period.
This is understood to be without prejudice to the rights of third persons who have
acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage Law.
Art. 1381. The following contracts are rescissible:
(1) Those which are entered into by guardians whenever the wards whom they
represent suffer lesion by more than one fourth of the value of the things which are the
object thereof;
(2) Those agreed upon in representation of absentees, if the latter suffer the lesion
state in the preceding number;
(3) Those undertaken in fraud of creditors when the latter cannot in any other manner
collect the claims due them;
(4) Those which refer to things under litigation if they have been entered into by the
defendant without the knowledge and approval of the litigants or of competent judicial
authority;
(5) All other contracts specially declared by law to be subject to rescission.
Article 1191, as presently worded, speaks of the remedy of rescission in reciprocal
obligations within the context of Article 1124 of the Old Civil Code which uses the term
"resolution." The remedy of resolution applies only to reciprocal obligations 8 such that a
party’s breach thereof partakes of a tacit resolutory condition which entitles the injured
party to rescission. The present article, as in the Old Civil Code, contemplates
alternative remedies for the injured party who is granted the option to pursue, as
principal actions, either a rescission or specific performance of the obligation, with
payment of damages in each case. On the other hand, rescission under Article 1381 of
the Civil Code, taken from Article 1291 of the Old Civil Code, is a subsidiary action, and
is not based on a party’s breach of obligation.
The esteemed Mr. Justice J.B.L. Reyes, ingeniously cuts through the distinction in his
concurring opinion in Universal Food Corporation v. CA:9
I concur with the opinion penned by Mr. Justice Fred Ruiz Castro, but I would like to
add that the argument of petitioner, that the rescission demanded by the respondent-
appellee, Magdalo Francisco, should be denied because under Article 1383 of the Civil
Code of the Philippines[,] rescission can not be demanded except when the party
suffering damage has no other legal means to obtain reparation, is predicated on a
failure to distinguish between a rescission for breach of contract under Article 1191 of
the Civil Code and a rescission by reason of lesión or economic prejudice, under Article
1381, et seq. The rescission on account of breach of stipulations is not predicated on
injury to economic interests of the party plaintiff but on the breach of faith by the
defendant, that violates the reciprocity between the parties. It is not a subsidiary
action, and Article 1191 may be scanned without disclosing anywhere that the action
for rescission thereunder is subordinated to anything other than the culpable breach of
his obligations by the defendant. This rescission is a principal action retaliatory in
character, it being unjust that a party be held bound to fulfill his promises when the
other violates his. As expressed in the old Latin aphorism: "Non servanti fidem, non est
fides servanda." Hence, the reparation of damages for the breach is purely secondary.
On the contrary, in the rescission by reason of lesión or economic prejudice, the cause
of action is subordinated to the existence of that prejudice, because it is the raison d’
etre as well as the measure of the right to rescind. Hence, where the defendant makes
good the damages caused, the action cannot be maintained or continued, as expressly
provided in Articles 1383 and 1384. But the operation of these two articles is limited to
the cases of rescission for lesión enumerated in Article 1381 of the Civil Code of the
Philippines, and does not apply to cases under Article 1191.
It is probable that the petitioner’s confusion arose from the defective technique of the
new Code that terms both instances as "rescission" without distinctions between them;
unlike the previous Spanish Civil Code of 1889, that differentiated "resolution" for
breach of stipulations from "rescission" by reason of lesión or damage. But the
terminological vagueness does not justify confusing one case with the other,
considering the patent difference in causes and results of either action.
In the case at bench, although the CA upheld the RTC’s finding of a perfected contract
of sale between the parties, the former disagreed with the latter that fraud and bad
faith were attendant in the sale transaction. The appellate court, after failing to
ascertain the parties’ actual intention on the terms of payment for the sale, proceeded
to apply Articles 1383 and 1384 of the Civil Code declaring rescission as a subsidiary
remedy that may be availed of only when the injured party has no other legal means to
obtain reparation for the damage caused. In addition, considering the absence of fraud
and bad faith, the CA felt compelled to arrive at a resolution most equitable for the
parties. The CA’s most equitable resolution granted respondents’ prayer for specific
performance of the sale and ordered RVM to pay the remaining balance of the purchase
price, plus interest. It set aside and deleted the RTC’s order forfeiting the downpayment
of P555,500.00 in favor of, and payment of exemplary damages, attorney’s fees and
costs of suit to, respondents.
Nonetheless, RVM is displeased. It strenuously objects to the CA’s imposition of
interest. RVM latches on to the CA’s characterization of its resolution as most equitable
which, allegedly, is not embodied in the dispositive portion of the decision ordering the
payment of interest. RVM is of the view that since the CA decreed specific performance
of the contract without a finding of bad faith by either party, and respondents retained
possession of the subject property for the duration of the litigation, the imposition of
interest is not keeping with equity without simultaneously requiring respondents to pay
rentals for their continued and uninterrupted stay thereon. In all, RVM phrases the
issue in metaphysical terms, i.e., the most equitable solution.
We completely disagree. The law, as applied to this factual milieu, leaves no room for
equivocation. Thus, we are not wont to apply equity in this instance.
As uniformly found by the lower courts, we likewise find that there was a perfected
contract of sale between the parties. A contract of sale carries the correlative duty of
the seller to deliver the property and the obligation of the buyer to pay the agreed
price.10 As there was already a binding contract of sale between the parties, RVM had
the corresponding obligation to pay the remaining balance of the purchase price upon
the issuance of the title in the name of respondents. The supposed 2-year period within
which to pay the balance did not affect the nature of the agreement as a perfected
contract of sale.11 In fact, we note that this 2-year period is neither reflected in any of
the drafts to the contract,12 nor in the acknowledgment receipt of the downpayment
executed by respondents Josephine and Antonio with the conformity of Sr.

Enhenco.13 In any event, we agree with the CA’s observation that the 2-year period to
effect payment has been mooted by the lapse of time.
However, the CA mistakenly applied Articles 1383 and 1384 of the Civil Code to this
case because respondents’ cause of action against RVM is predicated on Article 1191 of
the same code for breach of the reciprocal obligation. It is evident from the allegations
in respondents’ Complaint14 that the instant case does not fall within the enumerated
instances in Article 1381 of the Civil Code. Certainly, the Complaint did not pray for
rescission of the contract based on economic prejudice.
Moreover, contrary to the CA’s finding that the evidence did not preponderate for either
party, the records reveal, as embodied in the trial court’s exhaustive disquisition, that
RVM committed a breach of the obligation when it suddenly refused to execute and sign
the agreement and pay the balance of the purchase price.15 Thus, when RVM refused to
pay the balance and thereby breached the contract, respondents rightfully availed of
the alternative remedies provided in Article 1191. Accordingly, respondents are entitled
to damages regardless of whichever relief, rescission or specific performance, would be
granted by the lower courts.16
Yet, RVM stubbornly argues that given the CA’s factual finding on the absence of fraud
or bad faith by either party, its order to pay interest is inequitable.
The argument is untenable. The absence of fraud and bad faith by RVM
notwithstanding, it is liable to respondents for interest. In ruling out fraud and bad
faith, the CA correspondingly ordered the fulfillment of the obligation and deleted the
RTC’s order of forfeiture of the downpayment along with payment of exemplary
damages, attorney’s fees and costs of suit. But RVM’s contention disregards the
common finding by the lower courts of a perfected contract of sale. As previously
adverted to, RVM breached this contract of sale by refusing to pay the balance of the
purchase price despite the transfer to respondents’ names of the title to the property.
The 2-year period RVM relies on had long passed and expired, yet, it still failed to pay.
It did not even attempt to pay respondents the balance of the purchase price after the
case was filed, to amicably end this litigation. In fine, despite a clear cut equitable
decision by the CA, RVM refused to lay the matter to rest by complying with its
obligation and paying the balance of the agreed price for the property.
Lastly, to obviate confusion, the clear language of Article 1191 mandates that damages
shall be awarded in either case of fulfillment or rescission of the obligation. 17 In this
regard, Article 2210 of the Civil Code is explicit that "interest may, in the discretion of
the court, be allowed upon damages awarded for breach of contract." The ineluctable
conclusion is that the CA correctly imposed interest on the remaining balance of the
purchase price to cover the damages caused the respondents by RVM’s breach.
WHEREFORE, premises considered, the petition is DENIED. The order granting
specific performance and payment of the balance of the purchase price plus six percent
(6%) interest per annum from June 7, 2000 until complete satisfaction is
hereby AFFIRMED. Costs against petitioner.
SO ORDERED.
ANTONIO EDUARDO B. NACHURA

Associate Justice
WE CONCUR:
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson
MA. ALICIA AUSTRIA- MINITA V. CHICO-NAZARIO

MARTINEZ Associate Justice
Associate Justice
RUBEN T. REYES
Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Court’s Division.
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s
Attestation, I certify that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the Court’s
Division.
REYNATO S. PUNO
Chief Justice
 Carrascoso vs. CA, 477 SCRA 666
G.R. No. 123672 December 14, 2005
FERNANDO CARRASCOSO, JR., Petitioner,

vs.
THE HONORABLE COURT OF APPEALS, LAURO LEVISTE, as Director and Minority
Stockholder and On Behalf of Other Stockholders of El Dorado Plantation, Inc. and EL
DORADO PLANTATION, INC., represented by one of its minority stockholders, Lauro P.
Leviste, Respondents
x---------------------------------------x
G.R. No. 164489
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, Petitioner,

vs.
LAURO LEVISTE, as Director and Minority Stockholder and On Behalf of Other Stockholders
of El Dorado Plantation, Inc., EL DORADO PLANTATION, INC., represented by Minority
Stockholder, Lauro P. Leviste, and FERNANDO CARRASCOSO, JR., Respondents.
DECISION
CARPIO MORALES, J.:
El Dorado Plantation, Inc. (El Dorado) was the registered owner of a parcel of land (the property)
with an area of approximately 1,825 hectares covered by Transfer Certificate of Title (TCT) No. T-
93 situated in Sablayan, Occidental Mindoro.
1
On February 15, 1972, at a special meeting of El Dorado’s Board of Directors, a Resolution was2
passed authorizing Feliciano Leviste, then President of El Dorado, to negotiate the sale of the
property and sign all documents and contracts bearing thereon.
On March 23, 1972, by a Deed of Sale of Real Property, El Dorado, through Feliciano Leviste, sold
3
the property to Fernando O. Carrascoso, Jr. (Carrascoso).
The pertinent provisions of the Deed of Sale read:
NOW, THEREFORE, for and in consideration of the sum of ONE MILLION EIGHT HUNDRED
THOUSAND (1,800,000.00) PESOS, Philippine Currency, the Vendor hereby sells, cedes, and
transfer (sic) unto the herein VENDEE, his heirs, successors and assigns, the above-described
property subject to the following terms and consitions (sic):
1. Of the said sum of P1,800,000.00 which constitutes the full consideration of this
sale, P290,000.00 shall be paid, as it is hereby paid, to the Philippines (sic) National Bank, thereby
effecting the release and cancellation fo (sic) the present mortgage over the above-described
property.
2. That the sum of P210,000.00 shall be paid, as it is hereby paid by the VENDEE to the VENDOR,
receipt of which amount is hereby acknowledged by the VENDOR.
3. The remaining balance of P1,300,000.00 plus interest thereon at the rate of 10% per annum shall
be paid by the VENDEE to the VENDOR within a period of three (3) years, as follows:
(a) One (1) year from the date of the signing of this agreement, the VENDEE shall pay to the
VENDOR the sum of FIVE HUNDRED NINETEEN THOUSAND EIGHT HUNDRED THIRTY THREE
& 33/100 (P519,833.33) PESOS.
(b) Two (2) years from the date of signing of this agreement, the VENDEE shall pay to the VENDOR
the sum of FIVE HUNDRED NINETTEN (sic) THOUSAND EIGHT HUNDRED AND THIRTY-THREE
& 33/100 (P519,833.33) PESOS.
(c) Three (3) years from the date of signing of this agreement, the VENDEE shall pay to the
VENDOR the sum of FIVE Hundred NINETEEN THOUSAND EIGHT HUNDRED AND THIRTY-
THREE & 33/100 (P519,833.33) PESOS.
4. The title of the property, subject of this agreement, shall pass and be transferred to the VENDEE
who shall have full authority to register the same and obtain the corresponding transfer certificate of
title in his name.
xxx
6. THE VENDOR certifies and warrants that the property above-described is not being cultivated by
any tenant and is therefore not covered by the provisions of the Land Reform Code. If, therefore, the
VENDEE becomes liable under the said law, the VENDOR shall reimburse the VENDEE for all
expenses and damages he may incur thereon. (Underscoring supplied)
4
From the above-quoted provisions of the Deed of Sale, Carrascoso was to pay the full amount of the
purchase price on March 23, 1975.
On even date, the Board of Directors of El Dorado passed a Resolution reading:
"RESOLVED that by reason of the sale of that parcel of land covered by TCT No. T-93 to Dr.
FERNANDO O. CARRASCOSO, JR., the corporation interposes no objection to the property
being mortgage (sic) by Dr. FERNANDO O. CARRASCOSO, JR. to any bank of his choice as
long as the balance on the Deed of Sale shall be recognized by Dr. FERNANDO O.
CARRASCOSO, JR.;
"RESOLVED, FURTHER, that the corporation authorizes the prefered (sic) claim on the property to
be subordinated to any mortgage that may be constituted by Dr. FERNANDO O. CARRASCOSO,
JR.;
"RESOLVED, FINALLY, that in case of any mortgage on the property, the corporation waives the
preference of any vendor’s lien on the property." (Emphasis and underscoring supplied)
5
Feliciano Leviste also executed the following affidavit on the same day:
1. That by reason of the sale of that parcel of land covered by Transfer Certificate of Title T-93 as
evidenced by the Deed of Sale attached hereto as Annex "A" and made an integral part hereof, the
El Dorado Plantation, Inc. has no objection to the aforementioned property being mortgaged by
Dr. Fernando O. Carrascoso, Jr. to any bank of his choice, as long as the payment of the
balance due the El Dorado Plantation, Inc. under the Deed of Sale, Annex "A" hereof, shall be
recognized by the vendee therein, Dr. Fernando O. Carrascoso, Jr. though subordinated to the
preferred claim of the mortgagee bank.
2. That in case of any mortgage on the property, the vendor hereby waives the preference of any
vendor’s lien on the property, subject matter of the deed of sale.
3. That this affidavit is being executed to avoid any question on the authority of Dr. Fernando O.
Carrascoso, Jr. to mortgage the property subject of the Deed of Sale, Annex "A" hereof, where the
purchase price provided therein has not been fully paid.
4. That this affidavit has been executed pursuant to a board resolution of El Dorado Plantation,
Inc. (Emphasis and underscoring supplied)
6
On the following day, March 24, 1972, Carrascoso and his wife Marlene executed a Real Estate
Mortgage over the property in favor of Home Savings Bank (HSB) to secure a loan in the amount of
7
₱1,000,000.00. Of this amount, ₱290,000.00 was paid to Philippine National Bank to release the
mortgage priorly constituted on the property and ₱210,000.00 was paid to El Dorado pursuant to
above-quoted paragraph Nos. 1 and 2 of the terms and conditions of the Deed of Sale. 8
The March 23, 1972 Deed of Sale of Real Property was registered and annotated on El Dorado’s
TCT No. T-93 as Entry No. 15240 on April 5, 1972. On even date, TCT No. T-93 covering the
9
property was cancelled and TCT No. T-6055 was in its stead issued by the Registry of Deeds of
10
Occidental Mindoro in the name of Carrascoso on which the real estate mortgage in favor of HSB
was annotated as Entry No. 15242. 11
On May 18, 1972, the real estate mortgage in favor of HSB was amended to include an additional
three year loan of ₱70,000.00 as requested by the spouses Carrascoso. The Amendment of Real
12
Estate Mortgage was also annotated on TCT No. T-6055 as Entry No. 15486 on May 24, 1972. 13
The 3-year period for Carrascoso to fully pay for the property on March 23, 1975 passed without him
having complied therewith.
In the meantime, on July 11, 1975, Carrascoso and the Philippine Long Distance Telephone
Company (PLDT), through its President Ramon Cojuangco, executed an Agreement to Buy and
Sell whereby the former agreed to sell 1,000 hectares of the property to the latter at a consideration
14
of ₱3,000.00 per hectare or a total of ₱3,000,000.00.
The July 11, 1975 Agreement to Buy and Sell was not registered and annotated on Carrascoso’s
TCT No. T-6055.
Lauro Leviste (Lauro), a stockholder and member of the Board of Directors of El Dorado, through his
counsel, Atty. Benjamin Aquino, by letter dated December 27, 1976, called the attention of the
15
Board to Carrascoso’s failure to pay the balance of the purchase price of the property amounting to
₱1,300,000.00. And Lauro’s lawyer manifested that:
Because of the default for a long time of Mr. Carrascoso to pay the balance of the consideration of
the sale, Don Lauro Leviste, in his behalf and in behalf of the other shareholders similarly situated
like him, want a rescission of the sale made by the El Dorado Plantation, Inc. to Mr. Carrascoso. He
desires that the Board of Directors take the corresponding action for rescission. 16
Lauro’s desire to rescind the sale was reiterated in two other letters addressed to the Board dated
17
January 20, 1977 and March 3, 1977.
Jose P. Leviste, as President of El Dorado, later sent a letter of February 21, 1977 to Carrascoso
18
informing him that in view of his failure to pay the balance of the purchase price of the property, El
Dorado was seeking the rescission of the March 23, 1972 Deed of Sale of Real Property.
The pertinent portions of the letter read:
xxx
I regret to inform you that the balance of P1,300,000.00 and the interest thereon have long been due
and payable, although you have mortgaged said property with the Home Savings Bank for
P1,000,000.00 on March 24, 1972, which was subsequently increased to P1,070,000.00 on May 18,
1972.
You very well know that the El Dorado Plantation, Inc., is a close family corporation, owned
exclusively by the members of the Leviste family and I am one of the co-owners of the land. As
nothing appears to have been done on your part after our numerous requests for payment of the
said amount of P1,300,000.00 and the interest of 10% per annum due thereon, please be advised
that we would like to rescind the contract of sale of the land. (Underscoring supplied)
19
Jose Leviste, by letter dated March 10, 1977, informed Lauro’s counsel Atty. Aquino of his (Jose’s)
20
February 21, 1977 letter to Carrascoso, he lamenting that "Carrascoso has not deemed it fit to give
[his] letter the courtesy of a reply" and advis[ing] that some of the Directors of [El Dorado] could not
see their way clear in complying with the demands of your client [Lauro] and have failed to reach a
consensus to bring the corresponding action for rescission of the contract against . . . Carrascoso." 21
Lauro and El Dorado finally filed on March 15, 1977 a complaint for rescission of the March 23,
22
1972 Deed of Sale of Real Property between El Dorado and Carrascoso with damages before the
Court of First Instance (CFI) of Occidental Mindoro, docketed as Civil Case No. R-226.
Lauro and El Dorado also sought the cancellation of TCT No. T-6055 in the name of Carrascoso and
the revival of TCT No. T-93 in the name of El Dorado, free from any liens and encumbrances.
Furthermore, the two prayed for the issuance of an order for Carrascoso to: (1) reconvey the
property to El Dorado upon return to him of ₱500,000.00, (2) secure a discharge of the real estate
mortgage constituted on the property from HSB, (3) submit an accounting of the fruits of the property
from March 23, 1972 up to the return of possession of the land to El Dorado, (4) turn over said fruits
or the equivalent value thereof to El Dorado and (5) pay the amount of ₱100,000.00 for attorney’s
fees and other damages. 23
Also on March 15, 1977, Lauro and El Dorado caused to be annotated on TCT No. T-6055 a Notice
of Lis Pendens, inscribed as Entry No. 39737. 24
In the meantime, Carrascoso, as vendor and PLDT, as vendee forged on April 6, 1977 a Deed of
Absolute Sale over the 1,000 hectare portion of the property subject of their July 11, 1975
25
Agreement to Buy and Sell. The pertinent portions of the Deed are as follows:
WHEREAS, the VENDOR and the VENDEE entered into an agreement To Buy and Sell on July 11,
1975, which is made a part hereof by reference;
WHEREAS, the VENDOR and the VENDEE are now decided to execute the Deed of Absolute
Sale referred to in the aforementioned agreement to Buy and Sell;
WHEREFORE, for and in consideration of the foregoing premises and the terms hereunder stated,
the VENDOR and the VENDEE have agreed as follows:
1. For and in consideration of the sum of THREE MILLION PESOS (P3,000,000.00), Philippine
currency, of which ONE HUNDRED TWENTY THOUSAND PESOS P120,000.00 have (sic) already
been received by the VENDOR, the VENDOR hereby sells, transfers and conveys unto the
VENDEE one thousand hectares (1,000 has.) of his parcel of land covered by T.C.T. No. T-6055 of
the Registry of Deeds of Mindoro, delineated as Lot No. 3-B-1 in the subdivision survey plan xxx
2. The VENDEE shall pay to the VENDOR upon the signing of this agreement, the sum of TWO
MILLION FIVE HUNDRED THOUSAND PESOS (P2,500,000.00) in the following manner:
a) The sum of TWO MILLION THREE HUNDRED THOUSAND PESOS (P2,300,000.00) to Home
Savings Bank in full payment of the VENDOR’s mortgaged obligation therewith;
b) The sum of TWO HUNDRED THOUSAND PESOS (P200,000.00) to VENDOR;
The remaining balance of the purchase price in the sum of THREE HUNDRED EIGHTY
THOUSAND PESOS (P380,000.00), less such expenses which may be advanced by the VENDEE
but which are for the account of the VENDOR under Paragraph 6 of the Agreement to Buy and Sell,
shall be paid by the VENDEE to the VENDOR upon issuance of title to the VENDEE. (Underscoring
26
supplied)
In turn, PLDT, by Deed of Absolute Sale dated May 30, 1977, conveyed the aforesaid 1,000 hectare
27
portion of the property to its subsidiary, PLDT Agricultural Corporation (PLDTAC), for a consideration
of ₱3,000,000.00, the amount of ₱2,620,000.00 of which was payable to PLDT upon signing of said
Deed, and ₱380,000.00 to Carrascoso upon issuance of title to PLDTAC.
In the meantime, on October 19, 1977, the El Dorado Board of Directors, by a special
meeting, adopted and approved a Resolution ratifying and conferring "the prosecution of Civil Case
28
No. R-226 of the Court of First Instance of Occidental Mindoro, entitled ‘Lauro P. Leviste vs.
Fernando Carascoso (sic), etc.’ initiated by stockholder Mr. Lauro P. Leviste."
29
In his Answer with Compulsory Counterclaim, Carrascoso alleged that: (1) he had not paid his
30
remaining ₱1,300,000.00 obligation under the March 23, 1972 Deed of Sale of Real Property in view
of the extensions of time to comply therewith granted him by El Dorado; (2) the complaint suffered
from fatal defects, there being no showing of compliance with the condition precedent of exhaustion
of intra-corporate remedies and the requirement that a derivative suit instituted by a complaining
stockholder be verified under oath; (3) El Dorado committed a gross misrepresentation when it
warranted that the property was not being cultivated by any tenant to take it out of the coverage of
the Land Reform Code; and (4) he suffered damages due to the premature filing of the complaint for
which Lauro and El Dorado must be held liable.
On February 21, 1978, the April 6, 1977 and May 30, 1977 Deeds of Absolute Sale and the
respective Articles of Incorporation of PLDT and PLDTAC were annotated on TCT No. T-6055 as
Entry Nos. 24770, 42774, 42769 and 24772, respectively. On even date, Carrascoso’s TCT No. T-
31 32 33 34
6055 was cancelled and TCT No. T-12480 covering the 1,000 hectare portion of the property was
35
issued in the name of PLDTAC. The March 15, 1977 Notice of Lis Pendens was carried over to TCT
No. T-12480.
On July 31, 1978, PLDT and PLDTAC filed an Urgent Motion for Intervention which was granted by
36
the trial court by Order of September 7, 1978.

37
PLDT and PLDTAC thereupon filed their Answer In Intervention with Compulsory Counterclaim and
Crossclaim against Carrascoso on November 13, 1978, alleging that: (1) when Carrascoso
38
executed the April 6, 1977 Deed of Absolute Sale in favor of PLDT, PLDT was not aware of any
litigation involving the 1,000 hectare portion of the property or of any flaw in his title, (2) PLDT is a
purchaser in good faith and for value; (3) when PLDT executed the May 30, 1977 Deed of Absolute
Sale in favor of PLDTAC, they had no knowledge of any pending litigation over the property and
neither were they aware that a notice of lis pendens had been annotated on Carrascoso’s title; and
(4) Lauro and El Dorado knew of the sale by Carrascoso to PLDT and PLDT’s actual possession of
the 1,000 hectare portion of the property since June 30, 1975 and of its exercise of exclusive rights
of ownership thereon through agricultural development. 39
By Decision of January 28, 1991, Branch 45 of the San Jose Occidental Mindoro Regional Trial
40
Court to which the CFI has been renamed, dismissed the complaint on the ground of prematurity,
disposing as follows, quoted verbatim:
WHEREFORE, in view of all the foregoing considerations, judgment is hereby rendered:
1. Dismissing the plaintiffs’ complaint against the defendant on the ground of prematurity;
2. Ordering the plaintiffs to pay to the defendant the sum of P2,980,000.00 as actual and

compensatory damages, as well as the sum of P100,000.00 as and for attorneys fees; provided,
however, that the aforesaid amounts must first be set off from the latter’s unpaid balance to the
former;
3. Dismissing the defendants-intervenors’ counterclaim and cross-claim; and
4. Ordering the plaintiffs to pay to (sic) the costs of suit.
SO ORDERED. (Underscoring supplied)

41
Carrascoso, PLDT and PLDTAC filed their respective appeals to the Court of Appeals.
By Decision of January 31, 1996, the appellate court reversed the decision of the trial court,
42
disposing as follows, quoted verbatim:
WHEREFORE, not being meritorious, PLDT’s/PLDTAC’s appeal is hereby DISMISSED and finding

El Dorado’s appeal to be impressed with merit, We REVERSE the appealed Decision and render the
following judgment:
1. The Deed of Sale of Real Property (Exhibit C) is hereby rescinded and TCT No. T-12480 (Exhibit
Q) is cancelled while TCT No. T-93 (Exhibit A), is reactivated.
2. Fernando Carrascoso, Jr. is commanded to:
2.1. return the possession of the 825 [hectare-] remaining portion of the land to El Dorado Plantation,
Inc. without prejudice to the landholdings of legitimate tenants thereon;
2.2. return the net fruits of the land to El Dorado Plantation, Inc. from March 23, 1972 to July 11,
1975, and of the 825-hectare-remaining portion minus the tenants’ landholdings, from July 11, 1975
up to its delivery to El Dorado Plantation, Inc. including whatever he may have received from the
tenants if any by way of compensation under the Operation Land Transfer or under any other
pertinent agrarian law;
2.3 Pay El Dorado Plantation, Inc. an attorney’s fee of P20,000.00 and litigation expenses of
P30,000.00;
2.4 Return to Philippine Long Distance Telephone Company/PLDT Agricultural Corporation

P3,000,000.00 plus legal interest from April 6, 1977 until fully paid;
3. PLDT Agricultural Corporation is ordered to surrender the possession of the 1000-hectare Farm to
El Dorado Plantation, Inc.;
4. El Dorado Plantation, Inc. is directed to return the P500,000.00 to Fernando Carrascoso, Jr. plus
legal interest from March 23, 1972 until fully paid. The performance of this obligation will however
await the full compliance by Fernando Carrascoso, Jr. of his obligation to account for and deliver the
net fruits of the land mentioned above to El Dorado Plantation, Inc.
5. To comply with paragraph 2.2 herein, Carrascoso is directed to submit in (sic) the court a quo a
full accounting of the fruits of the land during the period mentioned above for the latter’s approval,
after which the net fruits shall be delivered to El Dorado, Plantation, Inc.
6. El Dorado Plantation, Inc. should inform Philippine Long Distance Telephone Co. and PLDT
Agricultural Corporation in writing within ten (10) days after finality of this decision regarding the
exercise of its option under Art. 448 of the Civil Code.
SO ORDERED. (Underscoring supplied)

43
PLDT and PLDTAC filed on February 22, 1996, a Motion for Reconsideration of the January 31,
44
1996 CA Decision, while Carrascoso went up this Court by filing on March 25, 1996 a petition for
review, docketed as G.R. No. 123672, assailing the January 31, 1996 CA Decision and seeking the
45
reinstatement of the January 28, 1991 Decision of the trial court except with respect to its finding that
the acquisition of PLDT and PLDTAC of the 1,000 hectare portion of the property was subject to the
notice of lis pendens.
Lauro, in the meantime, died, hence, on April 16, 1996, a Motion for Substitution of Party was filed
46
praying that his heirs, represented by Conrad C. Leviste, be substituted as respondents. The Motion
was granted by Resolution of July 10, 1996.
47
PLDT and PLDTAC filed their Comment to Carrascoso’s petition and prayed that judgment be
48
rendered finding them to be purchasers in good faith to thus entitle them to possession and
ownership of the 1,000 hectare portion of the property, together with all the improvements they built
thereon. Reiterating that they were not purchasers pendente lite, they averred that El Dorado and
Lauro had actual knowledge of their interests in the said portion of the property prior to the
annotation of the notice of lis pendens to thereby render said notice ineffective.
El Dorado and the heirs of Lauro, both represented by Conrad C. Leviste, also filed their
Comment to Carrascoso’s petition, praying that it be dismissed for lack of merit and that paragraph
49
6 of the dispositive portion of the January 31, 1996 CA Decision be modified to read as follows:
6. El Dorado Plantation, Inc. should inform Philippine Long Distance Telephone Co. and PLDT
Agricultural Corporation in writing within ten (10) days after finality of this decision regarding
the exercise of its option under Arts. 449 and 450 of the Civil Code, without right to indemnity on the
part of the latter should the former decide to keep the improvements under Article
449. (Underscoring supplied)
50
Carrascoso filed on November 13, 1996 his Reply to the Comment of El Dorado and the heirs of
51
Lauro.
In the meantime, as the February 22, 1996 Motion for Reconsideration filed by PLDT and PLDTAC
of the CA decision had remained unresolved, this Court, by Resolution of June 30, 2003, directed
52
the appellate court to resolve the same.
By Resolution of July 8, 2004, the CA denied PLDT and PLDTAC’s Motion for Reconsideration for
53
lack of merit.
PLDT thereupon filed on September 2, 2004 a petition for review before this Court, docketed as
54 55
G.R. No. 164489, seeking to reverse and set aside the January 31, 1996 Decision and the July 8,
2004 Resolution of the appellate court. It prayed that judgment be rendered upholding its right,
interest and title to the 1,000 hectare portion of the property and that it and its successors-in-interest
be declared owners and legal possessors thereof, together with all improvements built, sown and
planted thereon.
By Resolution of August 25, 2004, G.R. No. 164489 was consolidated with G.R. No. 123672.
56
In his petition, Carrascoso faults the CA as follows:
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION AND COMMITTED
A MISTAKE OF LAW IN NOT DECLARING THAT THE ACTION FOR RESCISSION WAS
PREMATURELY FILED.
II
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION AND COMMITTED
A MISTAKE OF LAW IN DISREGARDING THE CRUCIAL SIGNIFICANCE OF THE WARRANTY
OF NON-TENANCY EXPRESSLY STIPULATED IN THE CONTRACT OF SALE.
III
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION IN REVERSING THE
DECISION OF THE TRIAL COURT. (Underscoring supplied)
57
PLDT, on the other hand, faults the CA as follows:
THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN HOLDING THAT

PETITIONER AND PLTAC (sic) TOOK THEIR RIGHT, INTEREST AND TITLE TO THE FARM
SUBJECT TO THE NOTICE OF LIS PENDENS, THE SAME IN DISREGARD OF THE
PROTECTION ACCORDED THEM UNDER ARTICLES 1181 AND 1187 OF THE NEW CIVIL
CODE.
II
THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN HOLDING THAT

PETITIONER AND PLDTAC TOOK THEIR RIGHT, INTEREST AND TITLE TO THE FARM
SUBJECT TO THE NOTICE OF LIS PENDENS, THE SAME IN DISREGARD OF THE LEGAL
PRINCIPLE THAT RESPONDENTS EL DORADO ET AL.’s PRIOR, ACTUAL KNOWLEDGE OF
PETITIONER PLDT’S AGREEMENT TO BUY AND SELL WITH RESPONDENT CARRASCOSO
RESULTING IN THE DELIVERY TO, AND POSSESSION, OCCUPATION AND DEVELOPMENT
BY, SAID PETITIONER OF THE FARM, IS EQUIVALENT TO REGISTRATION OF SUCH RIGHT,
INTEREST AND TITLE AND, THEREFORE, A PRIOR REGISTRATION NOT AFFECTED BY THE
LATER NOTICE OF LIS PENDENS. (Underscoring supplied)
58
Carrascoso posits that in the El Dorado Board Resolution and the Affidavit of Feliciano Leviste, both
dated March 23, 1972, no objection was interposed to his mortgaging of the property to any bank
provided that the balance of the purchase price of the property under the March 23, 1972 Deed of
Sale of Real Property is recognized, hence, El Dorado could collect the unpaid balance of
₱1,300,000.00 only after the mortgage in favor of HSB is paid in full; and the filing of the complaint
for rescission with damages on March 15, 1977 was premature as he fully paid his obligation to HSB
only on April 5, 1977 as evidenced by the Cancellation of Mortgage signed by HSB President
59
Gregorio B. Licaros.
Carrascoso further posits that extensions of the period to pay El Dorado were verbally accorded him
by El Dorado’s directors and officers, particularly Jose and Angel Leviste.
Article 1191 of the Civil Code provides:

Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors
should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the obligation, with the
payment of damages in either case. He may also seek rescission, even after he has chosen
fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a
period.
This is understood to be without prejudice to the rights of third persons who have acquired the thing,
in accordance with Articles 1385 and 1388 and the Mortgage Law.
Reciprocal obligations are those which arise from the same cause, and in which each party is a
debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of
the other. They are to be performed simultaneously such that the performance of one is conditioned
60
upon the simultaneous fulfillment of the other.61
The right of rescission of a party to an obligation under Article 1191 is predicated on a breach of faith
by the other party who violates the reciprocity between them. 62
A contract of sale is a reciprocal obligation. The seller obligates itself to transfer the ownership of
and deliver a determinate thing, and the buyer obligates itself to pay therefor a price certain in
money or its equivalent. The non-payment of the price by the buyer is a resolutory condition which
63
extinguishes the transaction that for a time existed, and discharges the obligations created
thereunder. Such failure to pay the price in the manner prescribed by the contract of sale entitles
64
the unpaid seller to sue for collection or to rescind the contract. 65
In the case at bar, El Dorado already performed its obligation through the execution of the March 23,
1972 Deed of Sale of Real Property which effectively transferred ownership of the property to
Carrascoso. The latter, on the other hand, failed to perform his correlative obligation of paying in full
the contract price in the manner and within the period agreed upon.
The terms of the Deed are clear and unequivocal: Carrascoso was to pay the balance of the
purchase price of the property amounting to ₱1,300,000.00 plus interest thereon at the rate of 10%
per annum within a period of three (3) years from the signing of the contract on March 23, 1972.
When Jose Leviste informed him that El Dorado was seeking rescission of the contract by letter of
February 21, 1977, the period given to him within which to fully satisfy his obligation had long lapsed.
The El Dorado Board Resolution and the Affidavit of Jose Leviste interposing no objection to
Carrascoso’s mortgaging of the property to any bank did not have the effect of suspending the
period to fully pay the purchase price, as expressly stipulated in the Deed, pending full payment of
any mortgage obligation of Carrascoso.
As the CA correctly found:

The adverted resolution (Exhibit 2) does not say that the obligation of Carrascoso to pay the balance
was extended. Neither can We see in it anything that can logically infer said accommodation.
A partially unpaid seller can agree to the buyer’s mortgaging the subject of the sale without changing
the time fixed for the payment of the balance of the price. The two agreements are not incompatible
with each other such that when one is to be implemented, the other has to be suspended. In the
case at bench, there was no impediment for Carrascoso to pay the balance of the price after
mortgaging the land.
Also, El Dorado’s subordinating its "preferred claim" or waiving its superior "vendor’s lien" over the
land in favor of the mortgagee of said property only means that in a situation where the unpaid price
of the Land and loan secured by the mortgage over the Land both become due and demandable, the
mortgagee shall have precedence in going after the Land for the satisfaction of the loan. Such
accommodations do not necessarily imply the modification of the period fixed in the contract of sale
for the payment by Carrascoso of the balance.
The palpable purpose of El Dorado in not raising any objection to Carrascoso’s mortgaging the land
was to eliminate any legal impediment to such a contract. That was so succinctly expressed in the
Affidavit (Exhibit 2-A) of President Feleciano (sic) Leviste. El Dorado’s yielding its "superior lien" over
the land in favor of the mortgagee was plainly intended to overcome the natural reluctance of lending
institutions to accept a land whose price has not yet been fully paid as collateral of a
loan. (Underscoring supplied)
66
Respecting Carrascoso’s insistence that he was granted verbal extensions within which to pay the
balance of the purchase price of the property by El Dorado’s directors and officers Jose and Angel
Leviste, this Court finds the same unsubstantiated by the evidence on record.
It bears recalling that Jose Leviste wrote Carrascoso, by letter of February 21, 1977, calling his
attention to his failure to comply, despite "numerous" requests, with his obligation to pay the amount
of ₱1,300,000.00 and 10% annual interest thereon, and advising him that "we would like to rescind
the contract of sale." This letter reiterated the term of payment agreed upon in the March 23, 1972
Deed of Sale of Real Property and Carrascosos’s non-compliance therewith.
Carrascoso, harping on Jose Leviste’s March 10, 1977 letter to Lauro’s counsel wherein he (Jose
Leviste) stated that "some of the Directors of the corporation could not see their way clear in
complying with the demands of [Lauro] and have failed to reach a consensus to bring the
corresponding action for rescission of the contract against Dr. Fernando Carrascoso," argues that
the extensions priorly given to him "no doubt lead to the logical conclusion on some of the directors’
inability to file suit against him."
67
The argument is specious. As the CA found, even if some officers of El Dorado were initially
reluctant to file suit against him, the same should not be interpreted to mean that this was brought
about by a prior extension of the period to pay the balance of the purchase price of the property as
such reluctance could have been due to a myriad of reasons totally unrelated to the period of
payment of the balance.
The bottomline however is, if El Dorado really intended to extend the period of payment of the
balance there was absolutely no reason why it did not do it in writing in clear and unmistakable
terms. That there is no such writing negates all the speculations of the court a quo and pretensions
of Carrascoso.
xxx
The unalterable fact here remains that on March 23, 1973, with or without demand, the obligation of
Carrascoso to pay P519,933.33 became due. The same was true on March 23, 1974 and on March
23, 1975 for equal amounts. Since he did not perform his obligation under the contract of sale, he,
therefore, breached it. Having breached the contract, El Dorado’s cause of action for rescission of
that contract arose. (Underscoring supplied)
68
Carrascoso goes on to argue that the appellate court erred in ignoring the import of the warranty of
non-tenancy expressly stipulated in the March 23, 1972 Deed of Sale of Real Property. He alleges
that on March 8, 1972 or two weeks prior to the execution of the Deed of Sale, he discovered, while
inspecting the property on board a helicopter, that there were people and cattle in the area; when he
confronted El Dorado about it, he was told that the occupants were caretakers of cattle who would
soon leave; four months after the execution of the Deed of Sale, upon inquiry with the Bureau of
69
Lands and the Bureau of Soils, he was informed that there were people claiming to be tenants in
certain portions of the property; and he thus brought the matter again to El Dorado which informed
70
him that the occupants were not tenants but squatters. 71
Carrascoso now alleges that as a result of what he concludes to be a breach of the warranty of non-
tenancy committed by El Dorado, he incurred expenses in the amount of ₱2,890,000.00 for which he
should be reimbursed, his unpaid obligation to El Dorado amounting to ₱1,300,000.00 to be
deducted therefrom. 72
The breach of an express warranty makes the seller liable for damages. The following requisites
73
must be established in order that there be an express warranty in a contract of sale: (1) the express
warranty must be an affirmation of fact or any promise by the seller relating to the subject matter of
the sale; (2) the natural tendency of such affirmation or promise is to induce the buyer to purchase
the thing; and (3) the buyer purchases the thing relying on such affirmation or promise thereon. 74
Under the March 23, 1972 Deed of Sale of Real Property, El Dorado warranted that the property was
not being cultivated by any tenant and was, and therefore, not covered by the provisions of the Land
Reform Code. If Carrascoso would become liable under the said law, he would be reimbursed for all
expenses and damages incurred thereon.
Carrascoso claims to have incurred expenses in relocating persons found on the property four
months after the execution of the Deed of Sale. Apart from such bare claim, the records are bereft of
any proof that those persons were indeed tenants. The fact of tenancy not having been priorly
75 76
established, El Dorado may not be held liable for actual damages.

77
Carrascoso further argues that both the trial and appellate courts erred in holding that the sale of the
1,000 hectare portion of the property to PLDT, as well as its subsequent sale to PLDTAC, is subject
to the March 15, 1977 Notice of Lis Pendens.
PLDT additionally argues that the CA incorrectly ignored the Agreement to Buy and Sell which it
entered into with Carrascoso on July 11, 1975, positing that the efficacy of its purchase from
Carrascoso, upon his fulfillment of the condition it imposed resulting in its decision to formalize their
transaction and execute the April 6, 1977 Deed of Sale, retroacted to July 11, 1975 or before the
annotation of the Notice of Lis Pendens. 78
The pertinent portions of the July 11, 1975 Agreement to Buy and Sell between PLDT and
Carrascoso read:
2. That the VENDOR hereby agrees to sell to the VENDEE and the latter hereby agrees to purchase
from the former, 1,000 hectares of the above-described parcel of land as shown in the map hereto
attached as Annex "A" and made an integral part hereof and as hereafter to be more particularly
determined by the survey to be conducted by Certeza & Co., at the purchase price of P3,000.00 per
hectare or for a total consideration of Three Million Pesos (P3,000,000.00) payable in cash.
3. That this contract shall be considered rescinded and cancelled and of no further force and effect,
upon failure of the VENDOR to clear the aforementioned 1,000 hectares of land of all the occupants
therein located, within a period of one (1) year from the date of execution of this Agreement.
However, the VENDEE shall have the option to extend the life of this Agreement by another six
months, during which period the VENDEE shall definitely inform the VENDOR of its decision on
whether or not to finalize the deed of absolute sale for the aforementioned 1,000 hectares of land.
The VENDOR agrees that the amount of P500.00 per family within the aforementioned 1,000
hectares of land shall be spent by him for relocation purposes, which amount however shall be
advanced by the VENDEE and which shall not exceed the total amount of P120,000.00, the same to
be thereafter deducted by the VENDEE from the aforementioned purchase price of P3,000,000.00.
The aforementioned advance of P120,000.00 shall be remitted by the VENDEE to the VENDOR
upon the signing of this Agreement.
xxx
It is likewise further agreed that the VENDEE shall have the right to enter into any part of the
aforementioned 1,000 hectares at any time within the period of this Agreement for purposes of
commencing the development of the same.
xxx
5. Title to the aforementioned land shall also be cleared of all liens or encumbrances and if there are
any unpaid taxes, existing mortgages, liens and encumbrances on the land, the payments to be
made by the VENDEE to the VENDOR of the purchase price shall first be applied to liquidate said
mortgages, liens and/or encumbrances, such that said payments shall be made directly to the
corresponding creditors. Thus, the balance of the purchase price will be paid to the VENDOR after
the title to the land is cleared of all such liens and encumbrances.
xxx
7. The VENDOR agrees that, during the existence of this Agreement and without the previous
written permission from the VENDEE, he shall not sell, cede, assign and/or transfer the parcel of
land subject of this Agreement. 79
A notice of lis pendens is an announcement to the whole world that a particular real property is in
litigation, and serves as a warning that one who acquires an interest over said property does so at
his own risk, or that he gambles on the result of the litigation over said property.80
Once a notice of lis pendens has been duly registered, any cancellation or issuance of title over the
land involved as well as any subsequent transaction affecting the same would have to be subject to
the outcome of the suit. In other words, a purchaser who buys registered land with full notice of the
fact that it is in litigation between the vendor and a third party stands in the shoes of his vendor and
his title is subject to the incidents and result of the pending litigation.
81
x x x Notice of lis pendens has been conceived and, more often than not, availed of, to protect the
real rights of the registrant while the case involving such rights is pending resolution or decision.
With the notice of lis pendens duly recorded, and while it remains uncancelled, the registrant could
rest secure that he would not lose the property or any part of it during the litigation.
The filing of a notice of lis pendens in effect (1) keeps the subject matter of litigation within the power
of the court until the entry of the final judgment so as to prevent the defeat of the latter by successive
alienations; and (2) binds a purchaser of the land subject of the litigation to the judgment or decree
that will be promulgated thereon whether such a purchaser is a bona fide purchaser or not; but (3)
does not create a non-existent right or lien.
The doctrine of lis pendens is founded upon reason of public policy and necessity, the purpose of
which is to keep the subject matter of the litigation within the power of the court until the judgment or
decree shall have been entered; otherwise by successive alienations pending the litigation, its
judgment or decree shall be rendered abortive and impossible of execution. The doctrine of lis
pendens is based on considerations of public policy and convenience, which forbid a litigant to give
rights to others, pending the litigation, so as to affect the proceedings of the court then progressing
to enforce those rights, the rule being necessary to the administration of justice in order that
decisions in pending suits may be binding and may be given full effect, by keeping the subject matter
in controversy within the power of the court until final adjudication, that there may be an end to
litigation, and to preserve the property that the purpose of the pending suit may not be defeated by
successive alienations and transfers of title. (Italics in the original)
82
In ruling against PLDT and PLDTAC, the appellate court held:

PLDT and PLDTAC argue that in reality the Farm was bought by the former on July 11, 1975 when
Carrascoso and it entered into the Agreement to Buy and Sell (Exhibit 15). How can an agreement
to buy and sell which is a preparatory contract be the same as a contract of sale which is a principal
contract? If PLDT’s contention is correct that it bought the Farm on July 11, 1975, why did it buy the
same property again on April 6, 1977? There is simply no way PLDT and PLDTAC can extricate
themselves from the effects of said Notice of Lis Pendens. It is admitted that PLDT took possession
of the Farm on July 11, 1975 after the execution of the Agreement to Buy and Sell but it did so not
as owner but as prospective buyer of the property. As prospective buyer which had actual on (sic)
constructive notice of the lis pendens, why did it pursue and go through with the sale if it had not
been willing to gamble with the result of this case? (Underscoring supplied)
83
Further, in its July 8, 2004 Resolution, the CA held:
PLDT cannot shield itself from the notice of lis pendens because all that it had at the time of its
inscription was an Agreement to Buy and Sell with CARRASCOSO, which in effect is a mere
contract to sell that did not pass to it the ownership of the property.
xxx
Ownership was retained by CARRASCOSO which EL DORADO may very well recover through its
action for rescission.
xxx
PLDT’s possession at the time the notice of lis pendens was registered not being a legal possession
based on ownership but a mere possession in fact and the Agreement to Buy and Sell under which it
supposedly took possession not being registered, it is not protected from an adverse judgment that
may be rendered in the case subject of the notice of lis pendens. (Underscoring supplied)
84
In a contract of sale, the title passes to the vendee upon the delivery of the thing sold; whereas in a
contract to sell, ownership is not transferred upon delivery of the property but upon full payment of
the purchase price. In the former, the vendor has lost and cannot recover ownership until and
85
unless the contract is resolved or rescinded; whereas in the latter, title is retained by the vendor until
the full payment of the price, such payment being a positive suspensive condition and failure of
which is not a breach but an event that prevents the obligation of the vendor to convey title from
becoming effective. 86
PLDT argues that the July 11, 1975 Agreement to Buy and Sell is a conditional contract of sale, thus
calling for the application of Articles 1181 and 1187 of the Civil Code as held in Coronel v. Court of
87 88
Appeals. 89
The Court is not persuaded.
For in a conditional contract of sale, if the suspensive condition is fulfilled, the contract of sale is
thereby perfected, such that if there had already been previous delivery of the property subject of the
sale to the buyer, ownership thereto automatically transfers to the buyer by operation of law without
any further act having to be performed by the seller. Whereas in a contract to sell, upon fulfillment of
90
the suspensive condition, ownership will not automatically transfer to the buyer although the property
may have been previously delivered to him. The prospective seller still has to convey title to the
prospective buyer by entering into a contract of absolute sale. 91
A perusal of the contract adverted to in Coronel reveals marked differences from the Agreement to
92
Buy and Sell in the case at bar. In the Coronel contract, there was a clear intent on the part of the
therein petitioners-sellers to transfer title to the therein respondent-buyer. In the July 11, 1975
Agreement to Buy and Sell, PLDT still had to "definitely inform Carrascoso of its decision on whether
or not to finalize the deed of absolute sale for the 1,000 hectare portion of the property," such that in
the April 6, 1977 Deed of Absolute Sale subsequently executed, the parties declared that they "are
now decided to execute" such deed, indicating that the Agreement to Buy and Sell was, as the
appellate court held, merely a preparatory contract in the nature of a contract to sell. In fact, the
parties even had to stipulate in the said Agreement to Buy and Sell that Carrascoso, "during the
existence of the Agreement, shall not sell, cede, assign and/or transfer the parcel of land," which
provision this Court has held to be a typical characteristic of a contract to sell.
93
Being a contract to sell, what was vested by the July 11, 1975 Agreement to Buy and Sell to PLDT
was merely the beneficial title to the 1,000 hectare portion of the property.
The right of Daniel Jovellanos to the property under the contract [to sell] with Philamlife was merely
an inchoate and expectant right which would ripen into a vested right only upon his acquisition of
ownership which, as aforestated, was contingent upon his full payment of the rentals and
compliance with all his contractual obligations thereunder. A vested right is an immediate fixed right
of present and future enjoyment. It is to be distinguished from a right that is expectant or contingent.
It is a right which is fixed, unalterable, absolute, complete and unconditional to the exercise of which
no obstacle exists, and which is perfect in itself and not dependent upon a contingency. Thus, for a
property right to be vested, there must be a transition from the potential or contingent to the actual,
and the proprietary interest must have attached to a thing; it must have become fixed or established
and is no longer open to doubt or controversy. (Underscoring supplied)
94
In the case at bar, the July 11, 1975 Agreement to Buy and Sell was not registered, which act of
registration is the operative act to convey and affect the land.
An agreement to sell is a voluntary instrument as it is a willful act of the registered owner. As such
voluntary instrument, Section 50 of Act No. 496 [now Section 51 of PD 1529] expressly provides
that the act of registration shall be the operative act to convey and affect the land. And Section 55 of
the same Act [now Section 53 of PD 1529] requires the presentation of the owner’s duplicate
certificate of title for the registration of any deed or voluntary instrument. As the agreement to sell
involves an interest less than an estate in fee simple, the same should have been registered by filing
it with the Register of Deeds who, in turn, makes a brief memorandum thereof upon the original and
owner’s duplicate certificate of title. The reason for requiring the production of the owner’s duplicate
certificate in the registration of a voluntary instrument is that, being a willful act of the registered
owner, it is to be presumed that he is interested in registering the instrument and would willingly
surrender, present or produce his duplicate certificate of title to the Register of Deeds in order to
accomplish such registration. However, where the owner refuses to surrender the duplicate
certificate for the annotation of the voluntary instrument, the grantee may file with the Register of
Deeds a statement setting forth his adverse claim, as provided for in Section 110 of Act No. 496.
xxx (Underscoring supplied)
95
In Valley Golf Club, Inc. v. Salas, where a Deed of Absolute Sale covering a parcel of land was
96
executed prior to the annotation of a notice of lis pendens by the original owner thereof but which
Deed was registered after such annotation, this Court held:
The advance payment of P15,000.00 by the CLUB on October 18, 1960 to ROMERO, and the
additional payment by the CLUB of P54,887.50 as full payment of the purchase price on October 26,
1960, also to ROMERO, cannot be held to be the dates of sale such as to precede the annotation of
the adverse claim by the SISTERS on October 25, 1960 and the lis pendens on October 27, 1960. It
is basic that it is the act of registration of the sale that is the operative act to convey and affect the
land. That registration was not effected by the CLUB until December 4, 1963, or three (3) years after
it had made full payment to ROMERO. xxx
xxx
As matters stand, therefore, in view of the prior annotations of the adverse claim and lis pendens,
the CLUB must be legally held to have been aware of the flaws in the title. By virtue of the lis
pendens, its acquisition of the property was subject to whatever judgment was to be rendered in Civil
Case No. 6365. xxx The CLUB’s cause of action lies, not against the SISTERS, to whom the
property had been adjudged by final judgment in Civil Case No. 6365, but against ROMERO who
was found to have had no right to dispose of the land. (Underscoring supplied)
97
PLDT further argues that El Dorado’s prior, actual knowledge of the July 11, 1975 Agreement to Buy
and Sell is equivalent to prior registration not affected by the Notice of Lis Pendens. As such, it
concludes that it was not a purchaser pendente lite nor a purchaser in bad faith.
PLDT anchors its argument on the testimony of Lauro and El Dorado’s counsel Atty. Aquino from
which it infers that Atty. Aquino filed the complaint for rescission and caused the notice of lis
pendens to be annotated on Carrascoso’s title only after reading newspaper reports on the sale to
PLDT of the 1,000 hectare portion of the property.
The pertinent portions of Atty. Aquino’s testimony are reproduced hereunder:
Q: Do you know, Atty. Aquino, what you did after the filing of the complaint in the instant case of Dr.
Carrascoso?
A: Yes, I asked my associates to go to Mamburao and had the notice of Lis Pendens covering the
property as a result of the filing of the instant complaint.
Q: Do you know the notice of Lis Pendens?

A: Yes, it is evidenced by a [Transfer] Certificate Copy of Title of Dr. Carrascoso entitled "Notice of
Lis Pendens".
Q: As a consequence of the filing of the complaint which was annotated, you have known that?
A: Yes.
xxx
Q: After the annotation of the notice of Lis Pendens, do you know, if any further transaction was held
on the property?
A: As we have read in the newspaper, that Dr. Carrascoso had sold the property in favor of the
PLDT, Co.
Q: And what did you do?
A: We verified the portion of the property having recorded under entry No. 24770 xxx and we also
discovered that the articles incorporated (sic) and other corporate matters had been organized and
established of the PLDT, Co., and had been annotated.
xxx
Q: Do you know what happened to the property?
A: It was sold by the PLDT to its sub-PLDT Agitating (sic) Co. when at that time there was already
notice of Lis Pendens.
xxx
Q: In your testimony, you mentioned that you had come cross- (sic) reading the sale of the subject
litigation (sic) between Dr. Fernando Carrascoso, the defendant herein and the PLDT, one of
defendants-intervenor, may I say when?
A: I cannot remember now, but it was in the newspaper where it was informed or mentioned of the
sold property to PLDT.
xxx
Q: Will you tell to the Honorable Court what newspaper was that?
A: Well, I cannot remember what is that newspaper. That is only a means of [confirming] the
transaction. What was [confirmed] to us is whether there was really transaction (sic) and we found
out that there was in the Register of Deeds and that was the reason why we obtained the case.
Q: Well, may I say, is there any reason, the answer is immaterial. The question is as regard the
matter of time when counsel is being able (sic) to read the newspaper allegedly (interrupted)
xxx
Q: The idea of the question, your Honor, is to establish and ask further the notice of [lis pendens]
with regards (sic) to the transfer of property to PLDT, would have been accorded prior to the
pendency of the case.
xxx
A: I cannot remember. 98
PLDT also relies on the following testimony of Carrascoso:
Q: You mentioned Doctor a while ago that you mentioned to the late Governor Feliciano Leviste
regarding your transaction with the PLDT in relation to the subject property you allegedly mention
(sic) your intention to sell with the PLDT?
A: It was Dr. Jose Leviste and Dr. Angel Leviste that was constantly in touched (sic) with me with
respect to my transaction with the PLDT, sir.
Q: Any other officer of the corporation who knows with instruction aside from Dr. Angel Leviste and
Dr. Jose Leviste?
A: Yes, sir. It was Trinidad Andaya Leviste and Assemblyman Expedito Leviste.
xxx
Q: What is the position of Mrs. Trinidad Andaya Leviste with the plaintiff-corporation?
A: One of the stockholders and director of the plaintiff-corporation, sir.
Q: Will you please tell us the other officers?
A: Expedito Leviste, sir.
A: Will you tell the position of Expedito Leviste?
A: He was the corporate secretary, sir.
Q: If you know, was Dr. Jose Leviste also a director at that time?
A: Yes, sir. 99
On the other hand, El Dorado asserts that it had no knowledge of the July 11, 1975 Agreement to
Buy and Sell prior to the filing of the complaint for rescission against Carrascoso and the annotation
of the notice of lis pendens on his title. It further asserts that it always acted in good faith:
xxx The contract to sell between the Petitioner [Carrascoso] and PLDT was executed in July 11,
1975. There is no evidence that El Dorado was notified of this contract. The property is located in
Mindoro, El Dorado is based in Manila. The land was planted to rice. This was not an unusual
activity on the land, thus it could have been the Petitioner who was using the land. Not having been
notified of this sale, El Dorado could not have stopped PLDT from developing the land.
The absolute sale of the land to PLDT took place on April 6, 1977, or AFTER the filing of this case
on March 15, 1977 and the annotation of a notice of lis pendens on March 16, 1977. Inspite of the
notice of lis pendens, PLDT then PLDTAC persisted not only in buying the land but also in putting up
improvements on the property such as buildings, roads, irrigation systems and drainage. This was
done during the pendency of this case, where PLDT and PLDTAC actively participated as
intervenors. They were not innocent bystanders. xxx 100
This Court finds the above-quoted testimony of Atty. Aquino to be susceptible of conflicting
interpretations. As such, it cannot be the basis for inferring that El Dorado knew of the July 11, 1975
Agreement to Buy and Sell prior to the annotation of the notice of lis pendens on Carrascoso’s title.
Respecting Carrascoso’s allegation that some of the directors and officers of El Dorado had
knowledge of his dealings with PLDT, it is true that knowledge of facts acquired or possessed by an
officer or agent of a corporation in the course of his employment, and in relation to matters within the
scope of his authority, is notice to the corporation, whether he communicates such knowledge or
not. In the case at bar, however, apart from Carrascoso’s claim that he in fact notified several of the
101
directors about his intention to sell the 1,000 hectare portion of the property to PLDT, no evidence
was presented to substantiate his claim. Such self-serving, uncorroborated assertion is indubitably
inadequate to prove that El Dorado had notice of the July 11, 1975 Agreement to Buy and Sell
before the annotation of the notice of lis pendens on his title.
PLDT is, of course, not without recourse. As held by the CA:
Between Carrascoso and PLDT/PLDTAC, the former acted in bad faith while the latter acted in good
faith. This is so because it was Carrascoso’s refusal to pay his just debt to El Dorado that caused
PLDT/PLDTAC to suffer pecuniary losses. Therefore, Carrascoso should return to PLDT/PLDTAC
the P3,000,000.00 price of the farm plus legal interest from receipt thereof until paid. (Underscoring
102
supplied)
The appellate court’s decision ordering the rescission of the March 23, 1972 Deed of Sale of Real
Property between El Dorado and Carrascoso being in order, mutual restitution follows to put back
the parties to their original situation prior to the consummation of the contract.
The exercise of the power to rescind extinguishes the obligatory relation as if it had never been
created, the extinction having a retroactive effect. The rescission is equivalent to invalidating and
unmaking the juridical tie, leaving things in their status before the celebration of the contract.
Where a contract is rescinded, it is the duty of the court to require both parties to surrender that
which they have respectively received and to place each other as far as practicable in his original
situation, the rescission has the effect of abrogating the contract in all parts. (Underscoring
103
supplied)
The April 6, 1977 and May 30, 1977 Deeds of Absolute Sale being subject to the notice of lis
pendens, and as the Court affirms the declaration by the appellate court of the rescission of the
Deed of Sale executed by El Dorado in favor of Carrascoso, possession of the 1,000 hectare portion
of the property should be turned over by PLDT to El Dorado.
As regards the improvements introduced by PLDT on the 1,000 hectare portion of the property, a
distinction should be made between those which it built prior to the annotation of the notice of lis
pendens and those which it introduced subsequent thereto.
When a person builds in good faith on the land of another, Article 448 of the Civil Code governs:
Art. 448. The owner of the land on which anything has been built, sown or planted in good faith, shall
have the right to appropriate as his own the works, sowing or planting, after payment of the
indemnity provided for in Articles 546 and 548, or to oblige the one who built or planted to pay the
price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be
obliged to buy the land if its value is considerably more than that of the building or trees. In such a
case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the
building or trees after the proper indemnity. The parties shall agree upon the terms of the lease and
in case of disagreement, the court shall fix the terms thereof.
The above provision covers cases in which the builders, sowers or planters believe themselves to be
owners of the land or, at least, to have a claim of title thereto. Good faith is thus identified by the
104
belief that the land is owned; or that by some title one has the right to build, plant, or sow thereon. 105
The owner of the land on which anything has been built, sown or planted in good faith shall have the
right to appropriate as his own the building, planting or sowing, after payment to the builder, planter
or sower of the necessary and useful expenses, and in the proper case, expenses for pure luxury or
106
mere pleasure. 107
The owner of the land may also oblige the builder, planter or sower to purchase and pay the price of
the land.
If the owner chooses to sell his land, the builder, planter or sower must purchase the land, otherwise
the owner may remove the improvements thereon. The builder, planter or sower, however, is not
obliged to purchase the land if its value is considerably more than the building, planting or sowing. In
such case, the builder, planter or sower must pay rent to the owner of the land.
If the parties cannot come to terms over the conditions of the lease, the court must fix the terms
thereof.
The right to choose between appropriating the improvement or selling the land on which the
improvement of the builder, planter or sower stands, is given to the owner of the land. 108
On the other hand, when a person builds in bad faith on the land of another, Articles 449 and 450
govern:
Art. 449. He who builds, plants or sows in bad faith on the land of another, loses what is built,
planted or sown without right to indemnity.
Art. 450. The owner of the land on which anything has been built, planted or sown in bad faith may
demand the demolition of the work, or that the planting or sowing be removed, in order to replace
things in their former condition at the expense of the person who built, planted or sowed; or he may
compel the builder or planter to pay the price of the land, and the sower the proper rent.
In the case at bar, it is undisputed that PLDT commenced construction of improvements on the
1,000 hectare portion of the property immediately after the execution of the July 11, 1975 Agreement
to Buy and Sell with the full consent of Carrascoso. Thus, until March 15, 1977 when the Notice
109
of Lis Pendens was annotated on Carrascoso’s TCT No. T-6055, PLDT is deemed to have been in
good faith in introducing improvements on the 1,000 hectare portion of the property.
After March 15, 1977, however, PLDT could no longer invoke the rights of a builder in good faith.
Should El Dorado then opt to appropriate the improvements made by PLDT on the 1,000 hectare
portion of the property, it should only be made to pay for those improvements at the time good faith
existed on the part of PLDT or until March 15, 1977, to be pegged at its current fair market value.
110 111
The commencement of PLDT’s payment of reasonable rent should start on March 15, 1977 as well,
to be paid until such time that the possession of the 1,000 hectare portion is delivered to El Dorado,
subject to the reimbursement of expenses as aforestated, that is, if El Dorado opts to appropriate the
improvements. 112
If El Dorado opts for compulsory sale, however, the payment of rent should continue up to the actual
transfer of ownership. 113
WHEREFORE, the petitions are DENIED. The Decision dated January 13, 1996 and Resolution
dated July 8, 2004 of the Court of Appeals are AFFIRMED with MODIFICATION in that
1) the Regional Trial Court of San Jose, Occidental Mindoro, Branch 45 is further directed to:
a. determine the present fair price of the 1,000 hectare portion of the property and the amount of the
expenses actually spent by PLDT for the improvements thereon as of March 15, 1977;
b. include for determination the increase in value ("plus value") which the 1,000 hectare portion may
have acquired by reason of the existence of the improvements built by PLDT before March 15, 1977
and the current fair market value of said improvements;
2. El Dorado is ordered to exercise its option under the law, whether to appropriate the
improvements, or to oblige PLDT to pay the price of the land, and
3) PLDT shall pay El Dorado the amount of Two Thousand Pesos (₱2,000.00) per month as
reasonable compensation for its occupancy of the 1,000 hectare portion of the property from the
time that its good faith ceased to exist until such time that possession of the same is delivered to El
Dorado, subject to the reimbursement of the aforesaid expenses in favor of PLDT or until such time
that the payment of the purchase price of the 1,000 hectare portion is made by PLDT in favor of El
Dorado in case the latter opts for its compulsory sale.
Costs against petitioners.
SO ORDERED.
CONCHITA CARPIO MORALES
Associate Justice
WE CONCUR:
 Gaite vs. Fonacier 2 SCRA 838
G.R. No. L-11827 July 31, 1961
FERNANDO A. GAITE, plaintiff-appellee,
vs.
ISABELO FONACIER, GEORGE KRAKOWER, LARAP MINES & SMELTING CO., INC.,
SEGUNDINA VIVAS, FRNACISCO DANTE, PACIFICO ESCANDOR and FERNANDO
TY, defendants-appellants.
Alejo Mabanag for plaintiff-appellee.

Simplicio U. Tapia, Antonio Barredo and Pedro Guevarra for defendants-appellants.
REYES, J.B.L., J.:
This appeal comes to us directly from the Court of First Instance because the claims involved
aggregate more than P200,000.00.
Defendant-appellant Isabelo Fonacier was the owner and/or holder, either by himself or in a
representative capacity, of 11 iron lode mineral claims, known as the Dawahan Group, situated in
the municipality of Jose Panganiban, province of Camarines Norte.
By a "Deed of Assignment" dated September 29, 1952(Exhibit "3"), Fonacier constituted and
appointed plaintiff-appellee Fernando A. Gaite as his true and lawful attorney-in-fact to enter into a
contract with any individual or juridical person for the exploration and development of the mining
claims aforementioned on a royalty basis of not less than P0.50 per ton of ore that might be
extracted therefrom. On March 19, 1954, Gaite in turn executed a general assignment (Record on
Appeal, pp. 17-19) conveying the development and exploitation of said mining claims into the Larap
Iron Mines, a single proprietorship owned solely by and belonging to him, on the same royalty basis
provided for in Exhibit "3". Thereafter, Gaite embarked upon the development and exploitation of the
mining claims in question, opening and paving roads within and outside their boundaries, making
other improvements and installing facilities therein for use in the development of the mines, and in
time extracted therefrom what he claim and estimated to be approximately 24,000 metric tons of iron
ore.
For some reason or another, Isabelo Fonacier decided to revoke the authority granted by him to
Gaite to exploit and develop the mining claims in question, and Gaite assented thereto subject to
certain conditions. As a result, a document entitled "Revocation of Power of Attorney and Contract"
was executed on December 8, 1954 (Exhibit "A"),wherein Gaite transferred to Fonacier, for the
consideration of P20,000.00, plus 10% of the royalties that Fonacier would receive from the mining
claims, all his rights and interests on all the roads, improvements, and facilities in or outside said
claims, the right to use the business name "Larap Iron Mines" and its goodwill, and all the records
and documents relative to the mines. In the same document, Gaite transferred to Fonacier all his
rights and interests over the "24,000 tons of iron ore, more or less" that the former had already
extracted from the mineral claims, in consideration of the sum of P75,000.00, P10,000.00 of which
was paid upon the signing of the agreement, and
b. The balance of SIXTY-FIVE THOUSAND PESOS (P65,000.00) will be paid from and out
of the first letter of credit covering the first shipment of iron ores and of the first amount
derived from the local sale of iron ore made by the Larap Mines & Smelting Co. Inc., its
assigns, administrators, or successors in interests.
To secure the payment of the said balance of P65,000.00, Fonacier promised to execute in favor of
Gaite a surety bond, and pursuant to the promise, Fonacier delivered to Gaite a surety bond dated
December 8, 1954 with himself (Fonacier) as principal and the Larap Mines and Smelting Co. and its
stockholders George Krakower, Segundina Vivas, Pacifico Escandor, Francisco Dante, and
Fernando Ty as sureties (Exhibit "A-1"). Gaite testified, however, that when this bond was presented
to him by Fonacier together with the "Revocation of Power of Attorney and Contract", Exhibit "A", on
December 8, 1954, he refused to sign said Exhibit "A" unless another bond under written by a
bonding company was put up by defendants to secure the payment of the P65,000.00 balance of
their price of the iron ore in the stockpiles in the mining claims. Hence, a second bond, also dated
December 8, 1954 (Exhibit "B"),was executed by the same parties to the first bond Exhibit "A-1", with
the Far Eastern Surety and Insurance Co. as additional surety, but it provided that the liability of the
surety company would attach only when there had been an actual sale of iron ore by the Larap
Mines & Smelting Co. for an amount of not less then P65,000.00, and that, furthermore, the liability
of said surety company would automatically expire on December 8, 1955. Both bonds were attached
to the "Revocation of Power of Attorney and Contract", Exhibit "A", and made integral parts thereof.
On the same day that Fonacier revoked the power of attorney he gave to Gaite and the two
executed and signed the "Revocation of Power of Attorney and Contract", Exhibit "A", Fonacier
entered into a "Contract of Mining Operation", ceding, transferring, and conveying unto the Larap
Mines and Smelting Co., Inc. the right to develop, exploit, and explore the mining claims in question,
together with the improvements therein and the use of the name "Larap Iron Mines" and its good will,
in consideration of certain royalties. Fonacier likewise transferred, in the same document, the
complete title to the approximately 24,000 tons of iron ore which he acquired from Gaite, to the
Larap & Smelting Co., in consideration for the signing by the company and its stockholders of the
surety bonds delivered by Fonacier to Gaite (Record on Appeal, pp. 82-94).
Up to December 8, 1955, when the bond Exhibit "B" expired with respect to the Far Eastern Surety
and Insurance Company, no sale of the approximately 24,000 tons of iron ore had been made by the
Larap Mines & Smelting Co., Inc., nor had the P65,000.00 balance of the price of said ore been paid
to Gaite by Fonacier and his sureties payment of said amount, on the theory that they had lost right
to make use of the period given them when their bond, Exhibit "B" automatically expired (Exhibits "C"
to "C-24"). And when Fonacier and his sureties failed to pay as demanded by Gaite, the latter filed
the present complaint against them in the Court of First Instance of Manila (Civil Case No. 29310) for
the payment of the P65,000.00 balance of the price of the ore, consequential damages, and
attorney's fees.
All the defendants except Francisco Dante set up the uniform defense that the obligation sued upon
by Gaite was subject to a condition that the amount of P65,000.00 would be payable out of the first
letter of credit covering the first shipment of iron ore and/or the first amount derived from the local
sale of the iron ore by the Larap Mines & Smelting Co., Inc.; that up to the time of the filing of the
complaint, no sale of the iron ore had been made, hence the condition had not yet been fulfilled; and
that consequently, the obligation was not yet due and demandable. Defendant Fonacier also
contended that only 7,573 tons of the estimated 24,000 tons of iron ore sold to him by Gaite was
actually delivered, and counterclaimed for more than P200,000.00 damages.
At the trial of the case, the parties agreed to limit the presentation of evidence to two issues:
(1) Whether or not the obligation of Fonacier and his sureties to pay Gaite P65,000.00 become due
and demandable when the defendants failed to renew the surety bond underwritten by the Far
Eastern Surety and Insurance Co., Inc. (Exhibit "B"), which expired on December 8, 1955; and
(2) Whether the estimated 24,000 tons of iron ore sold by plaintiff Gaite to defendant Fonacier were
actually in existence in the mining claims when these parties executed the "Revocation of Power of
Attorney and Contract", Exhibit "A."
On the first question, the lower court held that the obligation of the defendants to pay plaintiff the
P65,000.00 balance of the price of the approximately 24,000 tons of iron ore was one with a term:
i.e., that it would be paid upon the sale of sufficient iron ore by defendants, such sale to be effected
within one year or before December 8, 1955; that the giving of security was a condition precedent to
Gait's giving of credit to defendants; and that as the latter failed to put up a good and sufficient
security in lieu of the Far Eastern Surety bond (Exhibit "B") which expired on December 8, 1955, the
obligation became due and demandable under Article 1198 of the New Civil Code.
As to the second question, the lower court found that plaintiff Gaite did have approximately 24,000
tons of iron ore at the mining claims in question at the time of the execution of the contract Exhibit
"A."
Judgment was, accordingly, rendered in favor of plaintiff Gaite ordering defendants to pay him,
jointly and severally, P65,000.00 with interest at 6% per annum from December 9, 1955 until
payment, plus costs. From this judgment, defendants jointly appealed to this Court.
During the pendency of this appeal, several incidental motions were presented for resolution: a
motion to declare the appellants Larap Mines & Smelting Co., Inc. and George Krakower in
contempt, filed by appellant Fonacier, and two motions to dismiss the appeal as having become
academic and a motion for new trial and/or to take judicial notice of certain documents, filed by
appellee Gaite. The motion for contempt is unmeritorious because the main allegation therein that
the appellants Larap Mines & Smelting Co., Inc. and Krakower had sold the iron ore here in
question, which allegedly is "property in litigation", has not been substantiated; and even if true, does
not make these appellants guilty of contempt, because what is under litigation in this appeal is
appellee Gaite's right to the payment of the balance of the price of the ore, and not the iron ore itself.
As for the several motions presented by appellee Gaite, it is unnecessary to resolve these motions in
view of the results that we have reached in this case, which we shall hereafter discuss.
The main issues presented by appellants in this appeal are:
(1) that the lower court erred in holding that the obligation of appellant Fonacier to pay appellee
Gaite the P65,000.00 (balance of the price of the iron ore in question)is one with a period or term
and not one with a suspensive condition, and that the term expired on December 8, 1955; and
(2) that the lower court erred in not holding that there were only 10,954.5 tons in the stockpiles of
iron ore sold by appellee Gaite to appellant Fonacier.
The first issue involves an interpretation of the following provision in the contract Exhibit "A":
7. That Fernando Gaite or Larap Iron Mines hereby transfers to Isabelo F. Fonacier all his
rights and interests over the 24,000 tons of iron ore, more or less, above-referred to together
with all his rights and interests to operate the mine in consideration of the sum of SEVENTY-
FIVE THOUSAND PESOS (P75,000.00) which the latter binds to pay as follows:
a. TEN THOUSAND PESOS (P10,000.00) will be paid upon the signing of this agreement.
b. The balance of SIXTY-FIVE THOUSAND PESOS (P65,000.00)will be paid from and out of
the first letter of credit covering the first shipment of iron ore made by the Larap Mines &
Smelting Co., Inc., its assigns, administrators, or successors in interest.
We find the court below to be legally correct in holding that the shipment or local sale of the iron ore
is not a condition precedent (or suspensive) to the payment of the balance of P65,000.00, but was
only a suspensive period or term. What characterizes a conditional obligation is the fact that its
efficacy or obligatory force (as distinguished from its demandability) is subordinated to the
happening of a future and uncertain event; so that if the suspensive condition does not take place,
the parties would stand as if the conditional obligation had never existed. That the parties to the
contract Exhibit "A" did not intend any such state of things to prevail is supported by several
circumstances:
1) The words of the contract express no contingency in the buyer's obligation to pay: "The balance of
Sixty-Five Thousand Pesos (P65,000.00) will be paid out of the first letter of credit covering the first
shipment of iron ores . . ." etc. There is no uncertainty that the payment will have to be made sooner
or later; what is undetermined is merely the exact date at which it will be made. By the very terms of
the contract, therefore, the existence of the obligation to pay is recognized; only
its maturity or demandability is deferred.
2) A contract of sale is normally commutative and onerous: not only does each one of the parties
assume a correlative obligation (the seller to deliver and transfer ownership of the thing sold and the
buyer to pay the price),but each party anticipates performance by the other from the very start. While
in a sale the obligation of one party can be lawfully subordinated to an uncertain event, so that the
other understands that he assumes the risk of receiving nothing for what he gives (as in the case of
a sale of hopes or expectations, emptio spei), it is not in the usual course of business to do so;
hence, the contingent character of the obligation must clearly appear. Nothing is found in the record
to evidence that Gaite desired or assumed to run the risk of losing his right over the ore without
getting paid for it, or that Fonacier understood that Gaite assumed any such risk. This is proved by
the fact that Gaite insisted on a bond a to guarantee payment of the P65,000.00, an not only upon a
bond by Fonacier, the Larap Mines & Smelting Co., and the company's stockholders, but also on
one by a surety company; and the fact that appellants did put up such bonds indicates that they
admitted the definite existence of their obligation to pay the balance of P65,000.00.
3) To subordinate the obligation to pay the remaining P65,000.00 to the sale or shipment of the ore
as a condition precedent, would be tantamount to leaving the payment at the discretion of the
debtor, for the sale or shipment could not be made unless the appellants took steps to sell the ore.
Appellants would thus be able to postpone payment indefinitely. The desireability of avoiding such a
construction of the contract Exhibit "A" needs no stressing.
4) Assuming that there could be doubt whether by the wording of the contract the parties indented a
suspensive condition or a suspensive period (dies ad quem) for the payment of the P65,000.00, the
rules of interpretation would incline the scales in favor of "the greater reciprocity of interests", since
sale is essentially onerous. The Civil Code of the Philippines, Article 1378, paragraph 1, in fine,
provides:
If the contract is onerous, the doubt shall be settled in favor of the greatest reciprocity of
interests.
and there can be no question that greater reciprocity obtains if the buyer' obligation is deemed to be
actually existing, with only its maturity (due date) postponed or deferred, that if such obligation were
viewed as non-existent or not binding until the ore was sold.
The only rational view that can be taken is that the sale of the ore to Fonacier was a sale on credit,
and not an aleatory contract where the transferor, Gaite, would assume the risk of not being paid at
all; and that the previous sale or shipment of the ore was not a suspensive condition for the payment
of the balance of the agreed price, but was intended merely to fix the future date of the payment.
This issue settled, the next point of inquiry is whether appellants, Fonacier and his sureties, still have
the right to insist that Gaite should wait for the sale or shipment of the ore before receiving payment;
or, in other words, whether or not they are entitled to take full advantage of the period granted them
for making the payment.
We agree with the court below that the appellant have forfeited the right court below that the
appellants have forfeited the right to compel Gaite to wait for the sale of the ore before receiving
payment of the balance of P65,000.00, because of their failure to renew the bond of the Far Eastern
Surety Company or else replace it with an equivalent guarantee. The expiration of the bonding
company's undertaking on December 8, 1955 substantially reduced the security of the vendor's
rights as creditor for the unpaid P65,000.00, a security that Gaite considered essential and upon
which he had insisted when he executed the deed of sale of the ore to Fonacier (Exhibit "A"). The
case squarely comes under paragraphs 2 and 3 of Article 1198 of the Civil Code of the Philippines:
"ART. 1198. The debtor shall lose every right to make use of the period:
(1) . . .
(2) When he does not furnish to the creditor the guaranties or securities which he has
promised.
(3) When by his own acts he has impaired said guaranties or securities after their
establishment, and when through fortuitous event they disappear, unless he immediately
gives new ones equally satisfactory.
Appellants' failure to renew or extend the surety company's bond upon its expiration plainly impaired
the securities given to the creditor (appellee Gaite), unless immediately renewed or replaced.
There is no merit in appellants' argument that Gaite's acceptance of the surety company's bond with
full knowledge that on its face it would automatically expire within one year was a waiver of its
renewal after the expiration date. No such waiver could have been intended, for Gaite stood to lose
and had nothing to gain barely; and if there was any, it could be rationally explained only if the
appellants had agreed to sell the ore and pay Gaite before the surety company's bond expired on
December 8, 1955. But in the latter case the defendants-appellants' obligation to pay became
absolute after one year from the transfer of the ore to Fonacier by virtue of the deed Exhibit "A.".
All the alternatives, therefore, lead to the same result: that Gaite acted within his rights in demanding
payment and instituting this action one year from and after the contract (Exhibit "A") was executed,
either because the appellant debtors had impaired the securities originally given and thereby
forfeited any further time within which to pay; or because the term of payment was originally of no
more than one year, and the balance of P65,000.00 became due and payable thereafter.
Coming now to the second issue in this appeal, which is whether there were really 24,000 tons of
iron ore in the stockpiles sold by appellee Gaite to appellant Fonacier, and whether, if there had
been a short-delivery as claimed by appellants, they are entitled to the payment of damages, we
must, at the outset, stress two things: first, that this is a case of a sale of a specific mass of fungible
goods for a single price or a lump sum, the quantity of "24,000 tons of iron ore, more or less," stated
in the contract Exhibit "A," being a mere estimate by the parties of the total tonnage weight of the
mass; and second, that the evidence shows that neither of the parties had actually measured of
weighed the mass, so that they both tried to arrive at the total quantity by making an estimate of the
volume thereof in cubic meters and then multiplying it by the estimated weight per ton of each cubic
meter.
The sale between the parties is a sale of a specific mass or iron ore because no provision was made
in their contract for the measuring or weighing of the ore sold in order to complete or perfect the
sale, nor was the price of P75,000,00 agreed upon by the parties based upon any such
measurement.(see Art. 1480, second par., New Civil Code). The subject matter of the sale is,
therefore, a determinate object, the mass, and not the actual number of units or tons contained
therein, so that all that was required of the seller Gaite was to deliver in good faith to his buyer all of
the ore found in the mass, notwithstanding that the quantity delivered is less than the amount
estimated by them (Mobile Machinery & Supply Co., Inc. vs. York Oilfield Salvage Co., Inc. 171 So.
872, applying art. 2459 of the Louisiana Civil Code). There is no charge in this case that Gaite did
not deliver to appellants all the ore found in the stockpiles in the mining claims in questions; Gaite
had, therefore, complied with his promise to deliver, and appellants in turn are bound to pay the
lump price.
But assuming that plaintiff Gaite undertook to sell and appellants undertook to buy, not a definite
mass, but approximately 24,000 tons of ore, so that any substantial difference in this quantity
delivered would entitle the buyers to recover damages for the short-delivery, was there really a
short-delivery in this case?
We think not. As already stated, neither of the parties had actually measured or weighed the whole
mass of ore cubic meter by cubic meter, or ton by ton. Both parties predicate their respective claims
only upon an estimated number of cubic meters of ore multiplied by the average tonnage factor per
cubic meter.
Now, appellee Gaite asserts that there was a total of 7,375 cubic meters in the stockpiles of ore that
he sold to Fonacier, while appellants contend that by actual measurement, their witness Cirpriano
Manlañgit found the total volume of ore in the stockpiles to be only 6.609 cubic meters. As to the
average weight in tons per cubic meter, the parties are again in disagreement, with appellants
claiming the correct tonnage factor to be 2.18 tons to a cubic meter, while appellee Gaite claims that
the correct tonnage factor is about 3.7.
In the face of the conflict of evidence, we take as the most reliable estimate of the tonnage factor of
iron ore in this case to be that made by Leopoldo F. Abad, chief of the Mines and Metallurgical
Division of the Bureau of Mines, a government pensionado to the States and a mining engineering
graduate of the Universities of Nevada and California, with almost 22 years of experience in the
Bureau of Mines. This witness placed the tonnage factor of every cubic meter of iron ore at between
3 metric tons as minimum to 5 metric tons as maximum. This estimate, in turn, closely corresponds
to the average tonnage factor of 3.3 adopted in his corrected report (Exhibits "FF" and FF-1") by
engineer Nemesio Gamatero, who was sent by the Bureau of Mines to the mining claims involved at
the request of appellant Krakower, precisely to make an official estimate of the amount of iron ore in
Gaite's stockpiles after the dispute arose.
Even granting, then, that the estimate of 6,609 cubic meters of ore in the stockpiles made by
appellant's witness Cipriano Manlañgit is correct, if we multiply it by the average tonnage factor of
3.3 tons to a cubic meter, the product is 21,809.7 tons, which is not very far from the estimate of
24,000 tons made by appellee Gaite, considering that actual weighing of each unit of the mass was
practically impossible, so that a reasonable percentage of error should be allowed anyone making
an estimate of the exact quantity in tons found in the mass. It must not be forgotten that the contract
Exhibit "A" expressly stated the amount to be 24,000 tons, more or less. (ch. Pine River Logging &
Improvement Co. vs U.S., 279, 46 L. Ed. 1164).
There was, consequently, no short-delivery in this case as would entitle appellants to the payment of
damages, nor could Gaite have been guilty of any fraud in making any misrepresentation to
appellants as to the total quantity of ore in the stockpiles of the mining claims in question, as
charged by appellants, since Gaite's estimate appears to be substantially correct.
WHEREFORE, finding no error in the decision appealed from, we hereby affirm the same, with costs
against appellants.
Bengzon, C.J., Padilla, Labrador, Concepcion, Barrera, Paredes, Dizon, De Leon and Natividad,
JJ., concur.

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LAW ON SALES PLM College of Law Alexis Dane B.

Atty. Relson P. Moral Characteristics of a Sale Block 2

 Santos vs. CA 337 SCRA 67

G.R. No. 120820 August 1, 2000

SPS. FORTUNATO SANTOS and ROSALINDA R SANTOS, petitioners,

"3. No pronouncement as to costs.

The undisputed facts of this case are as follows:

Atty. Relson P. Moral Characteristics of a Sale Block 2

(Sgd.) Carmen H. Caseda

Mrs. Carmen Caseda

"(Sgd.) Rosalinda Del R. Santos

Mrs. Rosalinda R. Santos

House and Lot

Better Living Subd. Parañaque, Metro Manila

Section V Don Bosco St." 2

Atty. Relson P. Moral Characteristics of a Sale Block 2

"WHEREFORE, judgment is hereby ordered:

(a) dismissing plaintiff's (Casedas') complaint; and

Atty. Relson P. Moral Characteristics of a Sale Block 2

ballooned from its original figure of P135,384.18 as of June 1984 to P337,280.78 as of

Petitioners now submit the following issues for our consideration:

WHETHER OR NOT THE COURT OF APPEALS, HAS JURISDICTION TO DECIDE

WHETHER THE SUBJECT TRANSACTION IS NOT A CONTRACT OF ABSOLUTE SALE

ASSUMING ARGUENDO THAT A JUDICIAL DEMAND FOR RESCISSION IS REQUIRED,

WHETHER OR NOT THE NON-PAYMENT OF MORE THAN HALF OF THE ENTIRE

Atty. Relson P. Moral Characteristics of a Sale Block 2

Atty. Relson P. Moral Characteristics of a Sale Block 2

applicable in the present case.

Mendoza, Buena and De Leon, Jr., JJ ., concur.

Bellosillo, J ., on official leave.

Atty. Relson P. Moral Characteristics of a Sale Block 2

 Lao vs. CA 275 SCRA 237

G.R. No. 119178 June 20, 1997

LINA LIM LAO, petitioner,

Respondent Court of Appeals promulgated on December 9, 1994 in CA-G.R. CR No. 14240

WHEREFORE, after a careful consideration of the evidence presented by the

Atty. Relson P. Moral Characteristics of a Sale Block 2

Version of the Prosecution

Check Date Amount

299961 Oct. 7, 1993 (sic) P 150,000.00 (Exh. "B")

299962 Oct. 7, 1983 P 150,000.00 (Exh. "C")

323835 Oct. 7, 1983 P 26,010.73

Atty. Relson P. Moral Characteristics of a Sale Block 2

1. In Criminal Case No. 84-26967:

2. In Criminal Case No. 84-26968:

Atty. Relson P. Moral Characteristics of a Sale Block 2

3. And finally in Criminal Case No. 84-26969:

Appeals affirmed the decision of the trial court.

Version of the Defense

Petitioner Lina Lim Lao was, in 1983, an employee of Premiere Financing

Atty. Relson P. Moral Characteristics of a Sale Block 2

The checks were issued to guarantee payment of investments placed by private

Atty. Relson P. Moral Characteristics of a Sale Block 2

The Treasurer of Premiere Financing Corporation, Ms. Veronilyn Ocampo testified

Atty. Relson P. Moral Characteristics of a Sale Block 2

The Court's Ruling

The petition is meritorious.

Strict Interpretation of Penal Statutes

The salient portions of B.P. 22 read: