Case Analysis 4 Full Text

Case Analysis 4 (Full Text) G.R. No. L-18563

April 27, 1963

RADIOWEALTH, INC., plaintiff-appellant, vs. JOSE LAVIN, ET AL., defendants-appellees. Bausa, Ampil and Suarez for plaintiff-appellant. Aurelio Quitoriano for defendants-appellees. REYES, J.B.L., J.: There being no dispute as to the facts, the Court of Appeals certified this case to us for resolution of the question of law involved therein. The facts are stated in the resolution of certification. On 14 March 1958, the plaintiff filed a complaint in the Court of First Instance of Manila to recover from jointly and severally, the balance of the purchase price of a certain machinery, the interests thereon, liquidated damages, and attorney's fees. It appears that on 9 July 1958, at the City of Manila, bought from the plaintiff a model WD Howard Wet Paddy Rotavator, with its accessories, for P3,300.00, paying a down payment of P1,000.00. As stipulated, the balance which was secured by a chattel mortagage on the machinery, was payable in 12 monthly installments, the first payment of P191.67 to commence on 12 August 1956. The defendants also executed a promissory note evidencing the same account. It was, likewise, agreed that the said balance shall bear 8% interest per annum, and if not paid on the due dates, the same shall bear 12% interest per annum, aside from 20% for liquidated damages and another 20% for attorney's fees. The machinery was delivered to the defendants at their residence at Tupac, Narvacan, Ilocos Sur. The said defendants never paid any of the 12 installments, and all became due and payable. Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by this Honorable Court, without prejudice to the parties adducing other evidence to prove their case not covered by this stipulation of facts. 1äwphï1.ñët The defendants were declared in default for their failure to file an answer, and judgment was accordingly rendered against them.

However, they filed a petition for relief from judgment, and in the course of the hearing of this petition it was discovered that — long prior to the filing of the instant complaint on March 14, 1958, plaintiff firm had, on September 30, 1957, notified the Provincial Sheriff of Ilocos Sur including the defendants themselves of the firm's desire to foreclose the chattel mortgage constituted on the rotavator. The record reveals — and on this there appears no dispute either — that in consonance with plaintiff's notification to the sheriff of its desire to foreclose on the chattel the auction sale was scheduled on December 18, 1957; that pursuant to this request for foreclosure, Deputy Sheriff Anicoche went to Narvacan, Ilocos Sur, where he found defendant Jose Lavin and upon asking the latter for the mortgaged property, the same was pointed to by Lavin; that upon being informed by the deputy sheriff of the foreclosure of the chattel and of the deputy's intention to seize the same, Lavin offered no objection thereto; that despite such lack of objection of defendant Lavin to the foreclosure, the chattel could not be taken to Manila there being no truck to bring it; that it was understood between the sheriff and Lavin that the former would fetch a truck from Vigan to pick up the chattel from Narvacan to Manila. The record also reveals that upon reaching Vigan on December 17, 1957 (the day prior to the scheduled public sale) the deputy sheriff received a letter from plaintiff's counsel including a wire asking him (sheriff) to suspend the auction sale as the defendants-mortgagors had voluntarily agreed to surrender the chattel; that as a result of this communication, the provincial sheriff of Ilocos Sur suspended the foreclosure sale of the chattel which, incidentally, remains in the possession of defendant Lavin. The petition for relief was granted, and the case was set for hearing on the merits on 2 March 1959. The court — considered defendants' petition for relief as their answer to plaintiff's complaint. No further hearing was held, as the record discloses no transcript of notes taken; and the parties having ostensibly rested their case, His Honor rendered on April 8, 1959 the decision which is now the subject of this appeal, dismissing the case without prejudice to the presentation of the proper action to recover the chattel. The defendants do not controvert the facts, but state that the plaintiff can no longer sue on the balance of the purchase price because of its previous election of the remedy of foreclosure. The plaintiff, on the other hand, argues that it has not availed of the remedy of foreclosure since the foreclosure was not pushed through to its finality.

As defined by the Court of Appeals, the issue is "whether the plaintiff is precluded to press for collection of an account secured by a chattel mortgage, after it shall have informed the defendants of its intention to foreclose on the same mortgage and the voluntary acceptance of such step (foreclosure) by defendants-mortgagors". The contract being a sale of machinery payable in installments, the applicable provision of law is Article 1484 of the Civil Code, which gives the vendor the option to exercise any one of the alternative remedies therein mentioned: exact fulfillment of the obligation, cancel the sale, or foreclose the chattel mortgage. But the vendor-mortgagee in the present case desisted, on its own initiative, from consummating the auction sale, without gaining any advantage or benefit, and without causing any disadvantage or harm to the vendees-mortgagors. The least that could be said is that such desistance of the plaintiff from proceeding with the auction sale was a timely disavowal that cancelled and rendered useless its previous choice to foreclose; its acts, being extrajudicial, brought no trouble upon any court, and were harmless to the defendants. For this reason, the plaintiff can not be considered as having "exercised" (the code uses the word "exercise") the remedy of foreclosure because of its incomplete implementation, and, therefore, the plaintiff is not barred from suing on the unpaid account. While there are some American authorities holding that the mere initiation of proceedings constitutes a bind choice of remedies that precludes pursuit of alternative courses, others hold that no binding election occurs before a decision on the merits is had (18 Am. Jur. 143), or a detriment to the other party supervenes; and we think the latter to be the better rule, considering that the creditor, in desisting from a foreclosure of the chattel mortgage, and suing instead for the unpaid balance, does not assume really inconsistent positions, and considering further that detriment to the opposing party is a prerequisite to the operation of estoppel. PREMISES CONSIDERED, the decision of the court a quo is hereby set aside, and the case is ordered remanded to the said court for further proceedings in accordance with this opinion. Costs against the appellees. Bengzon, C.J., Bautista Angelo, Labrador, Concepcion, Barrera, Paredes, Dizon, Regala and Makalintal, JJ., concur. Padilla, J., took no part.

Case 2 G.R. No. L-14475

May 30, 1961

SOUTHERN MOTORS, INC., plaintiff-appellee, vs. ANGELO MOSCOSO, defendant-appellant. Diosdado Garingalao for plaintiff-appellee. Calixto Zaldivar for defendant-appellant. PAREDES, J.: The case was submitted on agreed statement of facts. On June 6, 1957, plaintiff-appellee Southern Motors, Inc. sold to defendant-appellant Angel Moscoso one Chevrolet truck, on installment basis, for P6,445.00. Upon making a down payment, the defendant executed a promissory note for the sum of P4,915.00, representing the unpaid balance of the purchase price (Annex A, complaint), to secure the payment of which, a chattel mortgage was constituted on the truck in favor of the plaintiff (Annex B). Of said account of P4,915.00, the defendant had paid a total of P550.00, of which P110.00 was applied to the interest up to August 15, 1957, and P400.00 to the principal, thus leaving an unpaid balance of P4,475.00. The defendant failed to pay 3 installments on the balance of the purchase price. On November 4, 1957, the plaintiff filed a complaint against the defendant, to recover the unpaid balance of the promissory note. Upon plaintiff's petition, embodied in the complaint, a writ of attachment was issued by the lower court on the properties Of the defendant. Pursuant thereto, the said Chevrolet truck, and a house and lot belonging to defendant, were attached by the Sheriff of San Jose, Antique, where defendant was residing on November 25, 1957, and said truck was brought to the plaintiff's compound in Iloilo City, for safe keeping. After attachment and before the trial of the case on the merits, acting upon the plaintiff's motion dated December 23, 1957, for the immediate sale of the mortgaged truck, the Provincial Sheriff of Iloilo on January 2, 1958, sold the truck at public auction in which plaintiff itself was the only bidder for P1,000.00. The case had not been set for hearing, then.

The trial court on March 27, 1958, condemned the defendant to pay the plaintiff the amount of P4,475.00 with interest at the rate of 12% per annum from August 16, 1957, until fully paid, plus 10% thereof as attorneys fees and costs against which defendant interposed the present appeal, contending that the trial court erred — (1) In not finding that the attachment caused to be levied on the truck and its immediate sale at public auction, was tantamount to the foreclosure of the chattel mortgage on said truck; and (2) In rendering judgment in favor of the plaintiff-appellee. Both parties agreed that the case is governed by Article 1484 of the new Civil Case, which provides: — ART. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies: (1) Exact fulfillment of the obligation, should the vendee fail to pay; . (2) Cancel the sale, should the vendee's failure to pay cover two or more installments; (3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. While the appellee claims that in filing the complaint, demanding payment of the unpaid balance of the purchase price, it has availed of the first remedy provided in said article i.e. to exact fulfillment of the obligation (specific performance); the appellant, on the other hand, contends that appellee had availed itself of the third remedy viz, the foreclosure of the chattel mortgage on the truck. The appellant argues that considering history of the law, the circumstances leading to its enactment, the evil that the law was intended to correct and the remedy afforded (Art. 1454-A of the old Civil Code; Act No. 4122; Bachrach Motor Co. vs. Reyes, 62 Phil. 461, 466-469); that the appellee did not content itself by waiting for the judgment on the complaint and then executed the judgment which might be rendered in its favor, against the properties of the appellant; that the appellee obtained a preliminary attachment on the subject of the chattel mortgage itself and caused said truck to be sold at public

auction petition, in which he was bidder for P1,000.00; the result of which, was similar to what would have happened, had it foreclosed the mortgage pursuant to the provisions of Sec. 14 of Act No. 1508 (Chattel Mortgage Law) the said appellee had availed itself of the third remedy aforequoted. In other words, appellant submits that the matter should be looked at, not by the allegations in the complaint, but by the very effect and result of the procedural steps taken and that appellee tried to camouflage its acts by filing a complaint purportedly to exact the fulfillment of an obligation petition, in an attempt to circumvent the provisions of Article 1484 of the new Civil Code. Appellant concludes that under his theory, a deficiency judgment would be without legal basis. We do not share the views of the appellant on this matter. Manifestly, the appellee had chosen the first remedy. The complaint is an ordinary civil action for recovery of the remaining unpaid balance due on the promissory note. The plaintiff had not adopted the procedure or methods outlined by Sec. 14 of the Chattel Mortgage Law but those prescribed for ordinary civil actions, under the Rules of Court. Had appellee elected the foreclosure, it would not have instituted this case in court; it would not have caused the chattel to be attached under Rule 59, and had it sold at public auction, in the manner prescribed by Rule 39. That the herein appellee did not intend to foreclose the mortgage truck, is further evinced by the fact that it had also attached the house and lot of the appellant at San Jose, Antique. In the case of Southern Motors, Inc. vs. Magbanua, G.R. No. L-8578, Oct. 29, 1956, we held: By praying that the defendant be ordered to pay it the sum of P4,690.00 together with the stipulated interest of 12% per annum from 17 March 1954 until fully paid, plus 10% of the total amount due as attorney's fees and cost of collection, the plaintiff elected to exact the fulfillment of the obligation, and not to foreclose the mortgage on the truck. Otherwise, it would not have gone to court to collect the amount as prayed for in the complaint. Had it elected to foreclose the mortgage on the truck, all the plaintiff had to do was to cause the truck to be sold at public auction pursuant to section 14 of the Chattel Mortgage Law. The fact that aside from the mortgaged truck, another Chevrolet truck and two parcels of land belonging to the defendant were attached, shows that the plaintiff did not intend to foreclose the mortgage. As the plaintiff has chosen to exact the fulfillment of the defendant's obligation, the former may enforce execution of the judgment rendered in its favor on the personal and real property of the latter not exempt from execution sufficient to satisfy the judgment. That part of the

judgment against the properties of the defendant except the mortgaged truck and discharging the writ of attachment on his other properties is erroneous. We perceive nothing unlawful or irregular in appellee's act of attaching the mortgaged truck itself. Since herein appellee has chosen to exact the fulfillment of the appellant's obligation, it may enforce execution of the judgment that may be favorably rendered hereon, on all personal and real properties of the latter not exempt from execution sufficient to satisfy such judgment. It should be noted that a house and lot at San Jose, Antique were also attached. No one can successfully contest that the attachment was merely an incident to an ordinary civil action. (Sections 1 & 11, Rule 59; Sec. 16, Rule 39). The mortgage creditor may recover judgment on the mortgage debt and cause an execution on the mortgaged property and may cause an attachment to be issued and levied on such property, upon beginning his civil action (Tizon vs. Valdez, 48 Phil. 910-911). IN VIEW HEREOF, the judgment appealed from hereby is affirmed, with costs against the defendant-appellant. [G.R. No. 103577. October 7, 1996] ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL, ANNABELLE C. GONZALES (for herself and on behalf of Floraida C. Tupper, as attorney-in-fact), CIELITO A. CORONEL, FLORAIDA A. ALMONTE, and CATALINA BALAIS MABANAG, petitioners, vs. THE COURT OF APPEALS, CONCEPCION D. ALCARAZ and RAMONA PATRICIA ALCARAZ, assisted by GLORIA F. NOEL as attorney-in-fact, respondents. DECISION MELO, J.: The petition before us has its roots in a complaint for specific performance to compel herein petitioners (except the last named, Catalina Balais Mabanag) to consummate the sale of a parcel of land with its improvements located along Roosevelt Avenue in Quezon City entered into by the parties sometime in January 1985 for the price of P1,240,000.00. The undisputed facts of the case were summarized by respondent court in this wise: On January 19, 1985, defendants-appellants Romulo Coronel, et. al. (hereinafter referred to as Coronels) executed a document entitled Receipt of Down Payment (Exh. A) in favor of plaintiff Ramona Patricia

Alcaraz (hereinafter referred to as Ramona) which is reproduced hereunder: RECEIPT OF DOWN PAYMENT P1,240,000.00 - Total amount 50,000.00 - Down payment -----------------------------------------P1,190,000.00 - Balance Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand Pesos purchase price of our inherited house and lot, covered by TCT No. 119627 of the Registry of Deeds of Quezon City, in the total amount of P1,240,000.00. We bind ourselves to effect the transfer in our names from our deceased father, Constancio P. Coronel, the transfer certificate of title immediately upon receipt of the down payment above-stated. On our presentation of the TCT already in or name, We will immediately execute the deed of absolute sale of said property and Miss Ramona Patricia Alcaraz shall immediately pay the balance of the P1,190,000.00. Clearly, the conditions appurtenant to the sale are the following: 1. Ramona will make a down payment of Fifty Thousand (P50,000.00) pesos upon execution of the document aforestated; 2. The Coronels will cause the transfer in their names of the title of the property registered in the name of their deceased father upon receipt of the Fifty Thousand (P50,000.00) Pesos down payment; 3. Upon the transfer in their names of the subject property, the Coronels will execute the deed of absolute sale in favor of Ramona and the latter will pay the former the whole balance of One Million One Hundred Ninety Thousand (P1,190,000.00) Pesos. On the same date (January 15, 1985), plaintiff-appellee Concepcion D. Alcaraz (hereinafter referred to as Concepcion), mother of Ramona, paid the down payment of Fifty Thousand (P50,000.00) Pesos (Exh. B, Exh. 2).

On February 6, 1985, the property originally registered in the name of the Coronels father was transferred in their names under TCT No. 327043 (Exh. D; Exh 4) On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to intervenor-appellant Catalina B. Mabanag (hereinafter referred to as Catalina) for One Million Five Hundred Eighty Thousand (P1,580,000.00) Pesos after the latter has paid Three Hundred Thousand (P300,000.00) Pesos (Exhs. F-3; Exh. 6-C) For this reason, Coronels canceled and rescinded the contract (Exh. A) with Ramona by depositing the down payment paid by Concepcion in the bank in trust for Ramona Patricia Alcaraz. On February 22, 1985, Concepcion, et. al., filed a complaint for a specific performance against the Coronels and caused the annotation of a notice of lis pendens at the back of TCT No. 327403 (Exh. E; Exh. 5). On April 2, 1985, Catalina caused the annotation of a notice of adverse claim covering the same property with the Registry of Deeds of Quezon City (Exh. F; Exh. 6). On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject property in favor of Catalina (Exh. G; Exh. 7). On June 5, 1985, a new title over the subject property was issued in the name of Catalina under TCT No. 351582 (Exh. H; Exh. 8). (Rollo, pp. 134-136) In the course of the proceedings before the trial court (Branch 83, RTC, Quezon City) the parties agreed to submit the case for decision solely on the basis of documentary exhibits. Thus, plaintiffs therein (now private respondents) proffered their documentary evidence accordingly marked as Exhibits A through J, inclusive of their corresponding submarkings. Adopting these same exhibits as their own, then defendants (now petitioners) accordingly offered and marked them as Exhibits 1 through 10, likewise inclusive of their corresponding submarkings. Upon motion of the parties, the trial court gave them thirty (30) days within which to simultaneously submit their respective memoranda, and an additional 15 days within which to submit their corresponding comment or reply thereto, after which, the case would be deemed submitted for resolution.

On April 14, 1988, the case was submitted for resolution before Judge Reynaldo Roura, who was then temporarily detailed to preside over Branch 82 of the RTC of Quezon City. On March 1, 1989, judgment was handed down by Judge Roura from his regular bench at Macabebe, Pampanga for the Quezon City branch, disposing as follows: WHEREFORE, judgment for specific performance is hereby rendered ordering defendant to execute in favor of plaintiffs a deed of absolute sale covering that parcel of land embraced in and covered by Transfer Certificate of Title No. 327403 (now TCT No. 331582) of the Registry of Deeds for Quezon City, together with all the improvements existing thereon free from all liens and encumbrances, and once accomplished, to immediately deliver the said document of sale to plaintiffs and upon receipt thereof, the plaintiffs are ordered to pay defendants the whole balance of the purchase price amounting to P1,190,000.00 in cash. Transfer Certificate of Title No. 331582 of the Registry of Deeds for Quezon City in the name of intervenor is hereby canceled and declared to be without force and effect. Defendants and intervenor and all other persons claiming under them are hereby ordered to vacate the subject property and deliver possession thereof to plaintiffs. Plaintiffs claim for damages and attorneys fees, as well as the counterclaims of defendants and intervenors are hereby dismissed. No pronouncement as to costs. So Ordered. Macabebe, Pampanga for Quezon City, March 1, 1989. (Rollo, p. 106) A motion for reconsideration was filed by petitioners before the new presiding judge of the Quezon City RTC but the same was denied by Judge Estrella T. Estrada, thusly: The prayer contained in the instant motion, i.e., to annul the decision and to render anew decision by the undersigned Presiding Judge should be denied for the following reasons: (1) The instant case became submitted for decision as of April 14, 1988 when the parties terminated the presentation of their respective documentary evidence and when the Presiding Judge at that time was Judge Reynaldo Roura. The fact that they were allowed to file memoranda at some future date did not change the fact that the hearing of the case was terminated before Judge Roura and therefore the same should be submitted to him for decision; (2) When the defendants and intervenor did not object to the authority of Judge Reynaldo Roura to decide the case prior to the

rendition of the decision, when they met for the first time before the undersigned Presiding Judge at the hearing of a pending incident in Civil Case No. Q-46145 on November 11, 1988, they were deemed to have acquiesced thereto and they are now estopped from questioning said authority of Judge Roura after they received the decision in question which happens to be adverse to them; (3) While it is true that Judge Reynaldo Roura was merely a Judge-on-detail at this Branch of the Court, he was in all respects the Presiding Judge with full authority to act on any pending incident submitted before this Court during his incumbency. When he returned to his Official Station at Macabebe, Pampanga, he did not lose his authority to decide or resolve cases submitted to him for decision or resolution because he continued as Judge of the Regional Trial Court and is of co-equal rank with the undersigned Presiding Judge. The standing rule and supported by jurisprudence is that a Judge to whom a case is submitted for decision has the authority to decide the case notwithstanding his transfer to another branch or region of the same court (Sec. 9, Rule 135, Rule of Court). Coming now to the twin prayer for reconsideration of the Decision dated March 1, 1989 rendered in the instant case, resolution of which now pertains to the undersigned Presiding Judge, after a meticulous examination of the documentary evidence presented by the parties, she is convinced that the Decision of March 1, 1989 is supported by evidence and, therefore, should not be disturbed. IN VIEW OF THE FOREGOING, the Motion for Reconsideration and/or to Annul Decision and Render Anew Decision by the Incumbent Presiding Judge dated March 20, 1989 is hereby DENIED. SO ORDERED. Quezon City, Philippines, July 12, 1989. (Rollo, pp. 108-109) Petitioners thereupon interposed an appeal, but on December 16, 1991, the Court of Appeals (Buena, Gonzaga-Reyes, Abad-Santos (P), JJ.) rendered its decision fully agreeing with the trial court. Hence, the instant petition which was filed on March 5, 1992. The last pleading, private respondents Reply Memorandum, was filed on September 15, 1993. The case was, however, re-raffled to undersigned ponente only on August 28, 1996, due to the voluntary inhibition of the Justice to whom the case was last assigned.

While we deem it necessary to introduce certain refinements in the disquisition of respondent court in the affirmance of the trial courts decision, we definitely find the instant petition bereft of merit. The heart of the controversy which is the ultimate key in the resolution of the other issues in the case at bar is the precise determination of the legal significance of the document entitled Receipt of Down Payment which was offered in evidence by both parties. There is no dispute as to the fact that the said document embodied the binding contract between Ramona Patricia Alcaraz on the one hand, and the heirs of Constancio P. Coronel on the other, pertaining to a particular house and lot covered by TCT No. 119627, as defined in Article 1305 of the Civil Code of the Philippines which reads as follows: Art. 1305. A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. While, it is the position of private respondents that the Receipt of Down Payment embodied a perfected contract of sale, which perforce, they seek to enforce by means of an action for specific performance, petitioners on their part insist that what the document signified was a mere executory contract to sell, subject to certain suspensive conditions, and because of the absence of Ramona P. Alcaraz, who left for the United States of America, said contract could not possibly ripen into a contract of absolute sale. Plainly, such variance in the contending parties contention is brought about by the way each interprets the terms and/or conditions set forth in said private instrument. Withal, based on whatever relevant and admissible evidence may be available on record, this Court, as were the courts below, is now called upon to adjudge what the real intent of the parties was at the time the said document was executed. The Civil Code defines a contract of sale, thus: Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The essential elements of a contract of sale are the following:

a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price; b) Determinate subject matter; and c) Price certain in money or its equivalent. Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the first essential element is lacking. In a contract to sell, the prospective seller explicitly reserves the transfer of title to the prospective buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership of the property subject of the contract to sell until the happening of an event, which for present purposes we shall take as the full payment of the purchase price. What the seller agrees or obliges himself to do is to fulfill his promise to sell the subject property when the entire amount of the purchase price is delivered to him. In other words the full payment of the purchase price partakes of a suspensive condition, the non-fulfillment of which prevents the obligation to sell from arising and thus, ownership is retained by the prospective seller without further remedies by the prospective buyer. In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court had occasion to rule: Hence, We hold that the contract between the petitioner and the respondent was a contract to sell where the ownership or title is retained by the seller and is not to pass until the full payment of the price, such payment being a positive suspensive condition and failure of which is not a breach, casual or serious, but simply an event that prevented the obligation of the vendor to convey title from acquiring binding force. Stated positively, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, the prospective sellers obligation to sell the subject property by entering into a contract of sale with the prospective buyer becomes demandable as provided in Article 1479 of the Civil Code which states: Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor of the promise is supported by a consideration distinct from the price. A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the

subject property despite delivery thereof to the prospective buyer, binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase price. A contract to sell as defined hereinabove, may not even be considered as a conditional contract of sale where the seller may likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition, because in a conditional contract of sale, the first element of consent is present, although it is conditioned upon the happening of a contingent event which may or may not occur. If the suspensive condition is not fulfilled, the perfection of the contract of sale is completely abated (cf. Homesite and Housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). However, 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. In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, 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. It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases where the subject property is sold by the owner not to the party the seller contracted with, but to a third person, as in the case at bench. In a contract to sell, there being no previous sale of the property, a third person buying such property despite the fulfillment of the suspensive condition such as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the property. There is no double sale in such case. Title to the property will transfer to the buyer after registration because there is no defect in the owner-sellers title per se, but the latter, of course, may be sued for damages by the intending buyer. In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale becomes absolute and this will definitely affect the sellers title thereto. In fact, if there had been previous delivery of the subject property, the sellers ownership or title to the property is automatically transferred to the buyer such that, the seller will no longer have any title to transfer to any third person. Applying

Article 1544 of the Civil Code, such second buyer of the property who may have had actual or constructive knowledge of such defect in the sellers title, or at least was charged with the obligation to discover such defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first buyers title. In case a title is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the sale. With the above postulates as guidelines, we now proceed to the task of deciphering the real nature of the contract entered into by petitioners and private respondents. It is a canon in the interpretation of contracts that the words used therein should be given their natural and ordinary meaning unless a technical meaning was intended (Tan vs. Court of Appeals, 212 SCRA 586 [1992]). Thus, when petitioners declared in the said Receipt of Down Payment that they -Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand Pesos purchase price of our inherited house and lot, covered by TCT No. 1199627 of the Registry of Deeds of Quezon City, in the total amount of P1,240,000.00. without any reservation of title until full payment of the entire purchase price, the natural and ordinary idea conveyed is that they sold their property. When the Receipt of Down payment is considered in its entirety, it becomes more manifest that there was a clear intent on the part of petitioners to transfer title to the buyer, but since the transfer certificate of title was still in the name of petitioners father, they could not fully effect such transfer although the buyer was then willing and able to immediately pay the purchase price. Therefore, petitionerssellers undertook upon receipt of the down payment from private respondent Ramona P. Alcaraz, to cause the issuance of a new certificate of title in their names from that of their father, after which, they promised to present said title, now in their names, to the latter and to execute the deed of absolute sale whereupon, the latter shall, in turn, pay the entire balance of the purchase price. The agreement could not have been a contract to sell because the sellers herein made no express reservation of ownership or title to the subject parcel of land. Furthermore, the circumstance which prevented the parties from entering into an absolute contract of sale pertained to the sellers themselves (the certificate of title was not in their names) and not the full payment of the purchase price. Under the established

facts and circumstances of the case, the Court may safely presume that, had the certificate of title been in the names of petitioners-sellers at that time, there would have been no reason why an absolute contract of sale could not have been executed and consummated right there and then. Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely promise to sell the property to private respondent upon the fulfillment of the suspensive condition. On the contrary, having already agreed to sell the subject property, they undertook to have the certificate of title change to their names and immediately thereafter, to execute the written deed of absolute sale. Thus, the parties did not merely enter into a contract to sell where the sellers, after compliance by the buyer with certain terms and conditions, promised to sell the property to the latter. What may be perceived from the respective undertakings of the parties to the contract is that petitioners had already agreed to sell the house and lot they inherited from their father, completely willing to transfer ownership of the subject house and lot to the buyer if the documents were then in order. It just so happened, however, that the transfer certificate of title was then still in the name of their father. It was more expedient to first effect the change in the certificate of title so as to bear their names. That is why they undertook to cause the issuance of a new transfer of the certificate of title in their names upon receipt of the down payment in the amount of P50,000.00. As soon as the new certificate of title is issued in their names, petitioners were committed to immediately execute the deed of absolute sale. Only then will the obligation of the buyer to pay the remainder of the purchase price arise. There is no doubt that unlike in a contract to sell which is most commonly entered into so as to protect the seller against a buyer who intends to buy the property in installment by withholding ownership over the property until the buyer effects full payment therefor, in the contract entered into in the case at bar, the sellers were the ones who were unable to enter into a contract of absolute sale by reason of the fact that the certificate of title to the property was still in the name of their father. It was the sellers in this case who, as it were, had the impediment which prevented, so to speak, the execution of an contract of absolute sale. What is clearly established by the plain language of the subject document is that when the said Receipt of Down Payment was prepared and signed by petitioners Romulo A. Coronel, et. al., the parties had agreed to a conditional contract of sale, consummation of

which is subject only to the successful transfer of the certificate of title from the name of petitioners father, Constancio P. Coronel, to their names. The Court significantly notes that this suspensive condition was, in fact, fulfilled on February 6, 1985 (Exh. D; Exh. 4). Thus, on said date, the conditional contract of sale between petitioners and private respondent Ramona P. Alcaraz became obligatory, the only act required for the consummation thereof being the delivery of the property by means of the execution of the deed of absolute sale in a public instrument, which petitioners unequivocally committed themselves to do as evidenced by the Receipt of Down Payment. Article 1475, in correlation with Article 1181, both of the Civil Code, plainly applies to the case at bench. Thus, Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts. Art. 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition. Since the condition contemplated by the parties which is the issuance of a certificate of title in petitioners names was fulfilled on February 6, 1985, the respective obligations of the parties under the contract of sale became mutually demandable, that is, petitioners, as sellers, were obliged to present the transfer certificate of title already in their names to private respondent Ramona P. Alcaraz, the buyer, and to immediately execute the deed of absolute sale, while the buyer on her part, was obliged to forthwith pay the balance of the purchase price amounting to P1,190,000.00. It is also significant to note that in the first paragraph in page 9 of their petition, petitioners conclusively admitted that: 3. The petitioners-sellers Coronel bound themselves to effect the transfer in our names from our deceased father Constancio P. Coronel, the transfer certificate of title immediately upon receipt of the downpayment above-stated". The sale was still subject to this suspensive condition. (Emphasis supplied.)

(Rollo, p. 16) Petitioners themselves recognized that they entered into a contract of sale subject to a suspensive condition. Only, they contend, continuing in the same paragraph, that: . . . Had petitioners-sellers not complied with this condition of first transferring the title to the property under their names, there could be no perfected contract of sale. (Emphasis supplied.) (Ibid.) not aware that they have set their own trap for themselves, for Article 1186 of the Civil Code expressly provides that: Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. Besides, it should be stressed and emphasized that what is more controlling than these mere hypothetical arguments is the fact that the condition herein referred to was actually and indisputably fulfilled on February 6, 1985, when a new title was issued in the names of petitioners as evidenced by TCT No. 327403 (Exh. D; Exh. 4). The inevitable conclusion is that on January 19, 1985, as evidenced by the document denominated as Receipt of Down Payment (Exh. A; Exh. 1), the parties entered into a contract of sale subject to the suspensive condition that the sellers shall effect the issuance of new certificate title from that of their fathers name to their names and that, on February 6, 1985, this condition was fulfilled (Exh. D; Exh. 4). We, therefore, hold that, in accordance with Article 1187 which pertinently provides Art. 1187. The effects of conditional obligation to give, once the condition has been fulfilled, shall retroact to the day of the constitution of the obligation . . . In obligations to do or not to do, the courts shall determine, in each case, the retroactive effect of the condition that has been complied with. the rights and obligations of the parties with respect to the perfected contract of sale became mutually due and demandable as of the time of fulfillment or occurrence of the suspensive condition on February 6,

1985. As of that point in time, reciprocal obligations of both seller and buyer arose. Petitioners also argue there could been no perfected contract on January 19, 1985 because they were then not yet the absolute owners of the inherited property. We cannot sustain this argument. Article 774 of the Civil Code defines Succession as a mode of transferring ownership as follows: Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and obligations to the extent and value of the inheritance of a person are transmitted through his death to another or others by his will or by operation of law. Petitioners-sellers in the case at bar being the sons and daughters of the decedent Constancio P. Coronel are compulsory heirs who were called to succession by operation of law. Thus, at the point their father drew his last breath, petitioners stepped into his shoes insofar as the subject property is concerned, such that any rights or obligations pertaining thereto became binding and enforceable upon them. It is expressly provided that rights to the succession are transmitted from the moment of death of the decedent (Article 777, Civil Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]). Be it also noted that petitioners claim that succession may not be declared unless the creditors have been paid is rendered moot by the fact that they were able to effect the transfer of the title to the property from the decedents name to their names on February 6, 1985. Aside from this, petitioners are precluded from raising their supposed lack of capacity to enter into an agreement at that time and they cannot be allowed to now take a posture contrary to that which they took when they entered into the agreement with private respondent Ramona P. Alcaraz. The Civil Code expressly states that: Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon. Having represented themselves as the true owners of the subject property at the time of sale, petitioners cannot claim now that they were not yet the absolute owners thereof at that time.

Petitioners also contend that although there was in fact a perfected contract of sale between them and Ramona P. Alcaraz, the latter breach her reciprocal obligation when she rendered impossible the consummation thereof by going to the United States of America, without leaving her address, telephone number, and Special Power of Attorney (Paragraphs 14 and 15, Answer with Compulsory Counterclaim to the Amended Complaint, p. 2; Rollo, p. 43), for which reason, so petitioners conclude, they were correct in unilaterally rescinding the contract of sale. We do not agree with petitioners that there was a valid rescission of the contract of sale in the instant case. We note that these supposed grounds for petitioners rescission, are mere allegations found only in their responsive pleadings, which by express provision of the rules, are deemed controverted even if no reply is filed by the plaintiffs (Sec. 11, Rule 6, Revised Rules of Court). The records are absolutely bereft of any supporting evidence to substantiate petitioners allegations. We have stressed time and again that allegations must be proven by sufficient evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882 [1961]; Recaro vs. Embisan, 2 SCRA 598 [1961]). Mere allegation is not an evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]). Even assuming arguendo that Ramona P. Alcaraz was in the United States of America on February 6, 1985, we cannot justify petitionerssellers act of unilaterally and extrajudicially rescinding the contract of sale, there being no express stipulation authorizing the sellers to extrajudicially rescind the contract of sale. (cf. Dignos vs. CA, 158 SCRA 375 [1988]; Taguba vs. Vda. De Leon, 132 SCRA 722 [1984]) Moreover, petitioners are estopped from raising the alleged absence of Ramona P. Alcaraz because although the evidence on record shows that the sale was in the name of Ramona P. Alcaraz as the buyer, the sellers had been dealing with Concepcion D. Alcaraz, Ramonas mother, who had acted for and in behalf of her daughter, if not also in her own behalf. Indeed, the down payment was made by Concepcion D. Alcaraz with her own personal Check (Exh. B; Exh. 2) for and in behalf of Ramona P. Alcaraz. There is no evidence showing that petitioners ever questioned Concepcions authority to represent Ramona P. Alcaraz when they accepted her personal check. Neither did they raise any objection as regards payment being effected by a third person. Accordingly, as far as petitioners are concerned, the physical absence of Ramona P. Alcaraz is not a ground to rescind the contract of sale. Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her obligation to pay the full purchase price is concerned. Petitioners who are precluded from setting up the defense of the

physical absence of Ramona P. Alcaraz as above-explained offered no proof whatsoever to show that they actually presented the new transfer certificate of title in their names and signified their willingness and readiness to execute the deed of absolute sale in accordance with their agreement. Ramonas corresponding obligation to pay the balance of the purchase price in the amount of P1,190,000.00 (as buyer) never became due and demandable and, therefore, she cannot be deemed to have been in default. Article 1169 of the Civil Code defines when a party in a contract involving reciprocal obligations may be considered in default, to wit: Art. 1169. Those obliged to deliver or to do something, incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. xxx In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfill his obligation, delay by the other begins. (Emphasis supplied.) There is thus neither factual nor legal basis to rescind the contract of sale between petitioners and respondents. With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag, gave rise to a case of double sale where Article 1544 of the Civil Code will apply, to wit: Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof to the person who presents the oldest title, provided there is good faith. The record of the case shows that the Deed of Absolute Sale dated April 25, 1985 as proof of the second contract of sale was registered

with the Registry of Deeds of Quezon City giving rise to the issuance of a new certificate of title in the name of Catalina B. Mabanag on June 5, 1985. Thus, the second paragraph of Article 1544 shall apply. The above-cited provision on double sale presumes title or ownership to pass to the buyer, the exceptions being: (a) when the second buyer, in good faith, registers the sale ahead of the first buyer, and (b) should there be no inscription by either of the two buyers, when the second buyer, in good faith, acquires possession of the property ahead of the first buyer. Unless, the second buyer satisfies these requirements, title or ownership will not transfer to him to the prejudice of the first buyer. In his commentaries on the Civil Code, an accepted authority on the subject, now a distinguished member of the Court, Justice Jose C. Vitug, explains: The governing principle is prius tempore, potior jure (first in time, stronger in right). Knowledge by the first buyer of the second sale cannot defeat the first buyers rights except when the second buyer first registers in good faith the second sale (Olivares vs. Gonzales, 159 SCRA 33). Conversely, knowledge gained by the second buyer of the first sale defeats his rights even if he is first to register, since knowledge taints his registration with bad faith (see also Astorga vs. Court of Appeals, G.R. No. 58530, 26 December 1984). In Cruz vs. Cabana (G.R. No. 56232, 22 June 1984, 129 SCRA 656), it was held that it is essential, to merit the protection of Art. 1544, second paragraph, that the second realty buyer must act in good faith in registering his deed of sale (citing Carbonell vs. Court of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R. No. 95843, 02 September 1992). (J. Vitug, Compendium of Civil Law and Jurisprudence, 1993 Edition, p. 604). Petitioners point out that the notice of lis pendens in the case at bar was annotated on the title of the subject property only on February 22, 1985, whereas, the second sale between petitioners Coronels and petitioner Mabanag was supposedly perfected prior thereto or on February 18, 1985. The idea conveyed is that at the time petitioner Mabanag, the second buyer, bought the property under a clean title, she was unaware of any adverse claim or previous sale, for which reason she is a buyer in good faith. We are not persuaded by such argument. In a case of double sale, what finds relevance and materiality is not whether or not the second buyer in good faith but whether or not said

second buyer registers such second sale in good faith, that is, without knowledge of any defect in the title of the property sold. As clearly borne out by the evidence in this case, petitioner Mabanag could not have in good faith, registered the sale entered into on February 18, 1985 because as early as February 22, 1985, a notice of lis pendens had been annotated on the transfer certificate of title in the names of petitioners, whereas petitioner Mabanag registered the said sale sometime in April, 1985. At the time of registration, therefore, petitioner Mabanag knew that the same property had already been previously sold to private respondents, or, at least, she was charged with knowledge that a previous buyer is claiming title to the same property. Petitioner Mabanag cannot close her eyes to the defect in petitioners title to the property at the time of the registration of the property. This Court had occasions to rule that: If a vendee in a double sale registers the sale after he has acquired knowledge that there was a previous sale of the same property to a third party or that another person claims said property in a previous sale, the registration will constitute a registration in bad faith and will not confer upon him any right. (Salvoro vs. Tanega, 87 SCRA 349 [1978]; citing Palarca vs. Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43 Phil. 554; Fernandez vs. Mercader, 43 Phil. 581.) Thus, the sale of the subject parcel of land between petitioners and Ramona P. Alcaraz, perfected on February 6, 1985, prior to that between petitioners and Catalina B. Mabanag on February 18, 1985, was correctly upheld by both the courts below. Although there may be ample indications that there was in fact an agency between Ramona as principal and Concepcion, her mother, as agent insofar as the subject contract of sale is concerned, the issue of whether or not Concepcion was also acting in her own behalf as a cobuyer is not squarely raised in the instant petition, nor in such assumption disputed between mother and daughter. Thus, We will not touch this issue and no longer disturb the lower courts ruling on this point. WHEREFORE, premises considered, the instant petition is hereby DISMISSED and the appealed judgment AFFIRMED.

Case No. 4

G.R. No. L-15620

September 30, 1963

ANTONIO M. PATERNO, ET AL., petitioners, vs. JOSE V. SALUD, respondent Montenegro, Madayag and Viola for petitioners. Laurel Law Offices for respondent.

BAUTISTA ANGELO, J.: Antonio Paterno and his sister Margarita Paterno Vda. de Javier brought on November 8, 1952 before the Court of First Instance of Batangas an action to recover from Jose V. Salud a parcel of land containing an area of 5 hectares situated in San Juan de Bolbok, Batangas, as well as the value of the crops harvested therefrom since 1950 and damages. Defendant claims to be the owner of the land which plaintiffs seek to recover having been in adverse possession thereof since 1890 and having registered it in his name Registration Case No. 23 of the same court on April 16, 1940 for which he obtained a torrens title. By way of counterclaim, defendant seeks in turn to recover plaintiffs a strip of land with an area of 1-1/2 hectares also situated in the same municipality. On May 31, 1954, after the reception of the evidence the court a quo rendered judgment ordering defends reconvey to plaintiffs the land mentioned in their complaint free from any lien or incumbrance, to pay P2,000.00 as moral damages, P224.00 as Actual damages and P2,000.00 as attorney's fees, plus costs of suit. The court dismissed defendant's counterclaim. When the case was taken to the Court of Appeals, decision was reversed. The court not only dismissed plaintiffs' complaint but ordered them to reconvey to defend the land subject-matter of his counterclaim consisting 1-1/2 hectares, with costs. Plaintiffs interposed the present petition for review. It appears from plaintiffs' evidence that on March 1912, Jose T. Paterno, as administrator of the estate Maximino Molo Agustin Paterno, acquired at an auction sale certain parcels of land that were levied in execution belonging to Esteban de Villa, among others, one of following description: "No. 5, Terreno en dicho barrio Libato, de 1200 metros

cuadrados de superficie, lindante al Norte rio Lawaye; al Este Francisco Marasigan; al Sur estero Lapa; y al Oeste Benedicto de Villa." From 1915 to 1927 Paterno leased this parcel of land together with the other parcels acquired at the auction sale to Esteban de Villa and Pia de Villa. In 1924, Paterno desiring have all the lands so acquired registered under the Registration Act, ordered their survey as described in the tax declarations and in the notice of sale, and it was discovered that the area of parcel No. 5 was not 1,200 sq. m. as described therein but 30.5285 hectares. In March, 1926, Paterno sought the registration of lands acquired in the auction sale in the name of estate of Maximino Molo Agustin Paterno but parcel 5 was not included because its plan had not yet been a proved when the petition for registration was filed. In 1927, all these lands were adjudicated to Concepcion Paterno Vda. de Padilla, daughter of the late Maximino Molo Agustin Paterno as her share in the estate. In that year, the lease of the lands to the De Villas was not renewed and so their possession was returned to the Paternos who appointed Felix Lontok as their overseer. Sometime thereafter, apparently acceding to the plea of the De Villas, Concepcion Paterno agreed to retain only the eastern portion of the land, with an area of 5 hectares, leaving the rest with an area of 25 hectares to be subdivided between the De Villas. In 1943, Concepcion Paterno died leaving all the lands she owned in Batangas, including the one in question, to plaintiffs as her heirs. Hence, from 1927, when the lease to the De Villas was terminated, to 1949, plaintiffs had been in possession of the lot with an area of 5 hectares first thru their overseer Felix Lontok, who later became himself its lessee. In 1950, however, defendant wrested the possession of the land in question from plaintiffs in the manner they explained during the trial of the case. Thus, according to plaintiffs, defendant secured in 1931 a plan for the land in question which was approved by the Bureau of Lands. In 1946, he declared this property for taxation under Tax Declaration No. 2209. This was later cancelled by Tax Declaration No. 4410 with the excuse that it was a correction of Tax Declaration No. 19566. In 1947, defendant filed a petition for registration of the land omitting to mention therein the claims of Jose T. Paterno and Concepcion Paterno although in the plan on which his petition for registration was based it was stated that the land described therein was identical to, that surveyed for Concepcion Paterno and was part of a much larger tract of land surveyed for Jose T. Paterno. Defendant was ordered to amend his petition by including these two as claimants. This he did but he gave their addresses as San Juan, Batangas, although he knew they never

lived there. No copy of the petition was served on their overseer Felix Lontok. The petition was heard without opposition, and on April 16, 1948 the court issued a decree In favor of defendant over the land in question. In 1950, armed with this decree, defendant wrested the possession of the land from plaintiffs and reaped the harvest there from of some 20 to 25 cavanes of palay since that year. In the meantime, defendant mortgaged the land to Philippine National Bank. Attempts were made to settle the controversy amicably, and when this Proved in the present action was taken by the plaintiffs. Plaintiffs' theory, therefore, may be stated as follows: The land in question was originally a portion of a bigger parcel of land whose area was found to be 30.5285 hectares which was purchased by Jose T. Paterno, as administrator of the estate of Maximino Molo Agustin Paterno at an auction sale involving the properties of Esteban Villa. This land was later adjudicated to Concepcion Paterno Vda. de Padilla, who, upon her death, bequeathed it, together with other lands, to plaintiffs. Defendant's evidence, on the other hand, discloses on June 25, 1881 Baltazar de Villa owned, among a parcel of land of the following description: "La tercera partida de candidad de unos veinte cavanes aproximados de semilla de palay, cuyos confines, al Este las tierras de Da Antonia de Villa, al Oeste las de Don Vicente de Villa, al Norte el Rio denominado Lawaye, y al Sur las tierras de Dña. Paula de Mercado con riachuelo denominado Lapa en Medio," (Possessory informacion Exhibit 6-a.) Baltazar de Villa is the father of Esteban de Villa and de Villa, while Pia de Villa is the mother of Jose V. Salud, defendant herein. In 1912, Jose T. Paterno, as administrator of the estate of Maximino Molo Agustin Paterno, bought at an auction sale certain lands belonging to Esteban de Villa pursuant to a levy in execution issued to enforce a judgment obtained against Esteban de Villa. Among the lands so purchased was one described as follows: "No. 5. Terreno en dicho barrio de Libato, de 1200 metros cuadrados de superficie, lindante al Norte rio Lawaye; al Este Francisco Marasigan; al Sur estero Lapa; y al Oeste Benedicto de Villa.".1awphîl.nèt After Pia de Villa acquired the parcel of land covered by the possessory information Exhibit 6-A from her father Baltazar, she immediately entered into its possession with the exception of some portions thereof which she later sold, and continued in said possession until her death. Of said land, Pia donated a portion containing 12 hectares to Vicente de Villa; sold another containing 8 hectares to Antonio Adapon; and a portion thereof situated on the eastern portion part containing an area of 5 hectares was transmitted by succession to her son Jose V. Salud.

On April 16, 1948, defendant Salud sought the registration of this parcel of land, together with others that belonged to him, for which he secured a torrens title in the manner outlined elsewhere in this decision. We may, therefore, say that defendant's theory is as follows: Neither the land in question, nor the larger tract of land containing 30.5285 hectares of which it was originally a part, was included in the auction in 1912 of the properties of Esteban de Villa, and so none was transmitted by plaintiffs' predecessor-in-interest to Concepcion Vda. de Padilla, nor devised or transmitted by the, latter to plaintiffs. Plaintiffs failed to identify the parcel of land which they claim to be their own. The land in question belonged to defendant's mother Pia de Villa, from whom he derived his title. And the land which properly belong to plaintiffs is the strip of 1,200 sq. m. on the eastern edge of another property belonging to defendant which was used by the Paternos as a road to the provincial highway, which land was the one bought at the auction sale in 1912. Predicated upon the evidence presented by both parties in relation to the issues raised by them, the Court of Appeals reached the following conclusion:. After a careful perusal of the proofs of record, we are of the firm belief that the land in question and the bigger Parcel of 30.5285 hectares of which it was originally a part, were not included in the auction in 1912 of the properties of Esteban de Villa; that these lands were not transmitted by Maximino Molo Agustin Paterno to Concepcion P. de Padilla; that the land in question was not devised or transmitted by Concepcion de Padilla to plaintiffs; and that plaintiffs failed to identify conclusively the land in question over which they claim ownership; that the land in question belonged to defendant's mother Pia de Villa, from whom he derived his title; and that plaintiffs' land is the strip of 1,200 square meters used by them as a road from other property belonging to them, to the Provincial highway. The evidence of record fully justifies the above finding. It appears that among the lands bought by the administrator of the estate of Maximino Molo Agustin Pat at the auction sale of the properties of Esteban de Villa which was of particular interest in this case is the described in the notice of sale as follows. "No. 5. Terreno en dicho barrio de Libato, de 1200 metros cuadrados superficie, lindante al Norte rio Lawaya; al Este Francisco Marasigan; al Sur estero Lapa; y al Oeste Benedicto de Villa." This land only carries an area of 1,200 sq. m. There is nothing to show that this forms part an original parcel of land containing an area of 30.528 hectares which in 1912 also belonged to Esteban de Villa. The

only thing that plaintiffs claim to bolster up their contention is that when this parcel of land was survey in 1924, together with other parcels of land bought in auction sale, as a preparatory step for their registration under the Land Registration Act, it was discovered the parcel No. 5, which was sold to them by the sheriff in 1912, had an area of not only 1,200 sq. m. but 30.528 hectares, which claim certainly is untenable because a piece of land having an area of 1,200 sq. m. cannot be said be identical to one having an area of 30.5285 hectares which is more than 250 times bigger. Contrary to plaintiffs' contention, the boundaries of the two properties are not also the same. The identical and natural boundaries are only on the north and south Lawaye river on the north and Lapa creek on the south; there being no natural boundaries on the east and west, as there are on the sides merely names of adjoining owners. There is no evidence that these adjoining owners do not own other land which adjoin other properties of Esteban de Villa al these rivers. This great difference in area was not satisfactorily explained. While there are authorities that uphold the proposition that in identifying a particular piece of land its boundaries and not the area are the main factors to be considered,1 however, this only holds true when the boundaries given are, sufficiently certain and the identity of the land proved by the boundaries clearly indicates that an erroneous statement concerning the area can be disregarded or ignored. Otherwise, the area stated in the document should be followed.2 Thus, in a case where a petitioner claimed in his application to be entitled to the registration of a parcel of land whose area after the survey turned out to be 626 hectares while the grant given to him only mentions 92 hectares, the court rejected the claim after laying down the following principle: "While the proposition of law laid down by the court below may be true to the effect that natural boundaries will prevail over area, yet when the land sought to be registered is almost seven times as much as that described in the deed, the evidence as to natural boundaries must be very clear and convincing before that rule can be applied."3 (Emphasis supplied) Plaintiffs' contention was, therefore, properly rejected by the Court of Appeals it appearing that it is only on the north and south sides of the property in question where the natural boundaries are identical because on the east and west there are no natural boundaries but only the names of adjoining owners who were not shown not to own other properties adjoining those of Esteban de Villa. The discrepancy in the measurement of the two pieces of land is so great that there could hardly be any room to suppose that a 30hectare land area might have been wrongly or inaccurately estimated to be only 1,200 sq. m.

Another factor that argues against plaintiffs' claim is the fact that the inventory and partition of the estate of Maximino Molo Agustin Paterno does not show that the land in question was ever transmitted to Concepcion Paterno Vda. de Padilla, plaintiffs' predecessor-in-interest. Nor does the inventory of the estate of the late Concepcion Paterno de Padilla, which includes all her real properties in Batangas, makes any mention of the property in question. For this reason, the Court of Appeals could bring its mind to conform to the claim of plaintiffs the land in question is the one included in the action sale held in 1912 of the properties of Esteban de Villa and which was later handed down to them by their predecessor-in-interest Concepcion Paterno Vda. de Padilla, as may be seen from the following comment:. ... Moreover, the inventory and partition of the estate of Maximino Molo Agustin Paterno, shows that the property in question was never transmitted to said Concepcion de Padilla (Exhibits HH-1 & HH-39). The inventory of Concepcion de Padilla's estate, which included all her real properties in tangos, failed to mention the property in question. (Exhibit 3). The inventory mentioned properties of various areas, registered under the Torrens system in the name of Concepcion Paterno; and the property in question was not then registered under the Torrens system. It was shown that this inventory was presented by her administratrix before the probate court and the same was approved by said court, without the objection of the plaintiffs, notwithstanding their awareness of the pendency of the administration proceedings. Again, in the project of partition Concepcion de Padilla's estate (Exhibit 4), wherein various properties in Batangas were adjudicated to the plaintiffs, the property in question was not included. It is worthy to note that plaintiffs, the administratrix and other instituted heirs, signed the said project of partition, which was presented to and approved by the court (Exhibit 5). Again, it is conceded that the project was denominated "partial" project of partition. But this does not refer to any undiscovered "residuary estate" in Batangas, not adjudicated to the plaintiffs, but the interest and participation of the deceased testatrix on the properties under administration in cases Nos. 46058 to 46063, CFI of Manila - to the testate estate of Concepcion's husband Narciso Padilla (Exh. 4 clause 11). They do not refer to the properties of Concepcion de Padilla in Batangas, for as far her Batangas properties are concerned, the project of partition was complete. In fact, answering the question "Are you sure that all properties within the jurisdiction of the province of Batangas, left by your aunt Concepcion Paterno Vda. de Padilla were enumerated in that inventory?", plaintiff Antonio Paterno said: "Yes" (t.s.n. p. 117 March 19, 1953), which inventory heretofore stated, does not include the property in question (Exhibit 3). If, as alleged by plaintiff Antonio Paterno, early as 1929 or 1930, he already knew of his

aunt Concepcion's desire to have all her Batangas properties registered, it not satisfactorily explained why he or his aunt had not commenced registration proceedings of the land under consideration, notwithstanding the fact that he received the plan, surveyor's certificate and technical description of the land (Exhibits B, B-1 and B2), after the death of his aunt in 1943 and that the property was allegedly adjudicated to him in 1946. This coupled with the other facts and factors heretofore discussed, can only, mean that plaintiffs did not acquire the land in question from their aunt Concepcion de Padilla. Plaintiffs tried to trace the history of the land in question thru an elaborate exposition of the chain of tax declarations covering it since 1923, but this cannot help them any as long as the fundamental question relative to the identity of the land is not resolved. And here, as we have said, this is not the case. The lower court emphasized the circumstance that the Tax Declaration No. 8100 in the name of Pia de Villa (Exhibit KK-8) which superseded Exhibit KK-7 was cancelled in 1922 by Tax Declaration No. 8388 in the name of Jose T. Paterno. But it should be noted that said Tax Declaration No. 8388 was in the following year 1923 cancelled partially by Tax Declaration No. 8624 in the name of Pia de Villa, which declares an area of 25.6876 hectares and by Tax Declaration No. 8623 in the name of Jose T. Paterno which declares an area of 1,200 sq. m., assessed at P30.00, and for which the tax paid was only P0.26. The position of plaintiffs is rendered more doubtful by the fact that Pia de Villa and not Esteban de Villa was the declared owner in 1918 of the large tract of land of which the 5 hectares in question forms part as shown by the very diagram made by plaintiffs. This can only mean that after the auction sale in 1912, Pia de Villa was the owner of the entire property in 1918, and that what was sold to Jose T. Paterno was in fact another land of 1,200 sq. m. owned by Esteban de Villa. On the other hand, defendant has proven that the property in question belonged to his mother Pia de Villa from whom he derived his title. The original parcel of land described in the possessory information title Exhibit 6-a was inherited by Pia de Villa upon the death of her father Baltazar de Villa. Pia's ownership was even admitted by Plaintiffs. Pia commenced possession of said land and continued therein until her death except with regard to certain portions which he disposed of to wit: by donation to Vicente de Villa (1-1/2 hectares), by sale to Bonifacio Hernandez (5 hectares), and by mortgage to one Adapon (8 hectares), thereby leaving her five hectares on easternmost portion to her son Jose V. Salud which is land in question. She declared said piece of land in name for taxation purposes and as early as 1914 she paid the taxes thereon. Even when she was still alive Pia already adjudicated said property to her son, defendant herein, although she

continued possessing and administer it. Plaintiffs' claim that the land in question was mortgaged to the Paternos by the De Villa family who owed some money to Maximino Molo Agustin Paterno whose mortgage was foreclosed and the property sold at public auction cannot be entertained, for the evidence reveals that it was Esteban de Villa alone, and not Pia de Villa, again whom the execution was levied upon and that the property sold were those of Esteban de Villa which, already stated, do not include the property in question. We believe, however, that the Court of Appeals erred in declaring defendant owner of the parcel of land claimed in his counterclaim. The evidence shows that plaintiff predecessor-in-interest Concepcion Paterno Vda. de Villa secured in 1928 Original Certificate of Title No. 49 over a parcel of land of which the land involved here was a part. This parcel of land was originally acquired by the Paternos in 1912. This was leased to Esteban Villa and Pia de Villa from 1917 to 1925; surveyed Jose T. Paterno on September 25, 1924; was the subject of petition for registration by the Paternos in 1926, due notice of which was given to the De Villas, and upon the death of Concepcion Paterno Vda. de Padilla, it was transmitted to plaintiffs by succession. Since the land in question was registered in the name of the Paternos in 1928 and it was only on November 19, 1952, date of defendant' answer, that he sought its reconveyance to him, that title became indefeasible under Section 38, Act No. 496, a amended by Act No. 3630. Here there is no proof of irregularity in the issuance of the title, nor in the proceeding incident thereto, nor is there any claim that fraud intervened in the issuance of said title. Even then, the period of one year within which intrinsic fraud can be claimed has long expired. This land should, therefore, be adjudicated to plaintiffs. WHEREFORE, the decision appealed from is modified in the sense that the land claimed in the complaint belongs to defendant and therefore the complaint should be dismissed. With regard to defendant's counterclaim, the land therein claimed should be adjudicated to plaintiffs. No costs. Bengzon. C.J., Concepcion, Barrera, Dizon, Regala and Makalintal, JJ., concur. Padilla, Labrador, Reyes, J.B.L., and Paredes, JJ., took no part. Case 5 G.R. No. L-43683

July 16, 1937

MACONDRAY AND CO., INC., plaintiff-appellant,

vs. URBANO EUSTAQUIO, defendant-appellee. Jose Agbulos for appellant. Urbano Eustaquio in his own behalf. IMPERIAL, J.: This is an appeal taken by the plaintiff corporation from the judgment of the Court of First Instance of Manila dismissing its complaint, without costs. The plaintiff brought the action against the defendant to obtain the possession of an automobile mortgaged by the latter, and to recover the balance owing upon a note executed by him, the interest thereon, attorney's fees, expenses of collection, and the costs. The defendant was duly summoned, but he failed to appear or file his answer, wherefore he was declared in default and the appealed judgment was rendered accordingly. The plaintiff sold the defendant a De Soto car, Sedan, for the price of which, P595, he executed in its favor the note of May 22, 1934. Under this note, the defendant undertook to pay the car in twelve monthly installments, with 12 percent interest per annum, and likewise agreed that, should he fail to pay any monthly installment together with interest, the remaining installment would become due and payable, and the defendant shall pay 20 per cent upon the principal owning as attorney's fees, expenses of collection which the plaintiff might incur, and the costs. To guarantee the performance of his obligation under the note, the defendant on the same date mortgaged the purchased car in favor of the plaintiff, and bound himself under the same conditions stipulated in the note relative to the monthly installments, interest, attorney's fees, expenses of collection, and costs. The mortgage deed was registered on June 11, 1934, in the office of the register of deeds of the Province of Rizal. On the 22d of the same month, the defendant paid P43.75 upon the first installment, and thereafter failed to pay any of the remaining installments. In accordance with the terms of the mortgage, the plaintiff called upon the sheriff to take possession of the car, but the defendant refused to yield possession thereof, whereupon, the plaintiff brought the replevin sought and thereby succeeded in getting possession of the car. The car was sold at public auction to the plaintiff for P250, the latter incurring legal expenses in the amount of P10.68, According to the liquidation filed by the plaintiff, the defendant was still indebted in the amount of P342.20, interest at 12 per cent from November 20, 1934, P110.25 as attorney's fees, and the costs.

I. The plaintiff's first assignment of error is addressed to the appealed judgment in so far as it applied Act No. 4122 and dismissed the complaint, notwithstanding the fact that the defendant waived his rights under said law by not making any appearance, by having been declared in default, by not interposing any special defense, and not asking for any positive relief. Under section 128 of our Civil Procedure, the judgment by default against a defendant who has neither appeared nor filed his answer does not imply a waiver of right except that of being heard and of presenting evidence in his favor. It does not imply admission by the defendant of the facts and causes of action of the plaintiff, because the codal section requires the latter to adduce his evidence in support of his allegation as an indispensable condition before final judgment could be given in his favor. Nor could it be interpreted as an admission by the defendant that the plaintiff's causes of action find support in the law or that latter is entitled to the relief prayed for. (Chaffin vs. Mac Fadden, 41 Ark., 42; Johnson vs. Peirce, 12 Ark., 599; Mayden vs. Johnson, 59 Ga., 105; Peo. vs. Rust, 292 Ill., 412; Madison County vs. Smith, 95 Ill., 328; Keen vs. Krempel, 166 Ill. A., 253.) For these reason, we hold that the defendant did not waive the applicant by the court of Act No. 4122, and that the first assignment of error is untenable. II. The plaintiff contends in its second assignment of error that Act No. 4122 is invalid because it takes property without due process of law, denies the equal protection of the laws, and impairs the obligations of contract, thereby violating the provisions of section 3 of the Act of the United States Congress of August 29, 1916, known as the Jones Law. This is not the first time that the constitutionality of the said law has been impugned for like reasons. In Manila Trading and Supply Co. vs. Reyes (64 Phil. 461), the validity of the said law was already passed upon when it was questioned for the same reason here advanced. In resolving the question in favor of the validity of the law, we then held: "2. Liberty of contract, class legislation, and equal protection of the laws. — The question of the validity of an act is solely one of constitutional power. Questions of expediency, of motive or of results are irrelevant. Nevertheless it is not improper to inquire as to the occasion for the enactment of a law. The legislative purpose thus disclosed can then serve as a fit background for constitution inquiry. Judge Moran in fact instances had the following to say relative to the reason for the enactment of Act No. 4122: "Act No. 4122 aims to correct a social and economic evil, the inordinate love for luxury of those who, without sufficient means, purchase

personal effects, and the ruinous practice of some commercial houses of purchasing back the goods sold for a nominal price besides keeping a part of the price already paid and collecting the balance, with stipulated interest, costs, and attorney's fees. For instance, a company sells a truck for P6,500. The purchaser makes a down payment of P500, the balance to be paid in twenty-four equal installments of P250 each. Pursuant to the practice before the enactment of Act No. 4122, if the purchaser fails to pay the first two installments, the company takes possession of the truck and has it sold at public auction at which sale it purchases the truck for a nominal price, at most P500, without prejudice to its right to collect the balance of P5,500, plus interest, costs. and attorney's fees. As a consequence, the vendor does not only recover the goods sold, used hardly two months perhaps with only slight wear and tear, but also collects the entire stipulated purchase price, probably swelled up fifty per cent including interest, costs, and attorney's fees. This practice is worse than usurious in many instances. And although, of course, the purchaser must suffer the consequences of his imprudence and lack of foresight, the chastisement must not be to the extent of ruining him completely and, on the other hand, enriching the vendor in a manner which shocks the conscience. The object of the law is highly commendable. As to whether or not the means employed to do away with the evil above mentioned are arbitrary will be presently set out." In a case which reached this court, Mr. Justice Goddard, interpreting Act No. 4122, made the following observations: "Undoubtedly the principal object of the above amendment was to remedy the abuses committed in connection with the foreclosure of chattel mortgages. This amendment prevents mortgagees from seizing the mortgaged property, buying it at foreclosure sale for a low price and then bringing suit against the mortgagor for a deficiency judgment. The almost invariable result of this procedure was that the mortgagor found himself minus the property and still owing practically the full amount of his original indebtedness. Under this amendment the vendor of personal property, the purchase price of which is payable in installments, has the right to cancel the sale or foreclose the mortgage if one has been given on the property. Whichever right the vendor elects he need not return to the purchaser the amount of the full installment already paid, "if there be an agreement to that effect." Furthermore, if the vendor avails himself of the right from foreclose the mortgage this amendment prohibits him from bringing an action against the purchaser for the unpaid balance." "In other words, under this amendment, in all proceedings for the foreclosure of chattel mortgages, executed on chattels which have

been sold on the installment plan, the mortgagee is limited to the property included in the mortgage" (Bachrach Motor Co. vs. Millan [1935]. 61 Phil., 409.). Public policy having thus had in view the objects just outlined, we should next examine the law to determine if notwithstanding that policy, it violates any of the constitutional principles dealing with the three general subjects here to be considered. In an effort to enlighten us, our attention has been directed to certain authorities, principally one coming from the state of Washington and another from the State of Oregon. For reason which will soon appear we do not think that either decision is controlling. In 1897, an Act was passed in the State of Washington which provided "that in all proceedings for the foreclosure of mortgages hereafter executed or on judgments rendered upon the debt thereby secured the mortgagee or assignee shall be limited to the property included in the mortgage." It was held by a divided court of three to two that the statute since limiting the right to enforce a debt secured by mortgage to the property mortgaged whether realty or chattles, was an undue restraint upon the liberty of a citizen to contract with respect to his property right. But as is readily apparent, the Washington law and the Philippine law are radically different in phraseology and in effect. (Dennis vs. Moses [1898], 40 L. R. A., 302.) In Oregon, in a decision of a later date, an Act abolishing deficiency judgment upon the foreclosure of mortgages to secure the unpaid balance of the purchase price of real property was unanimously sustained by the Supreme Court of that State. The importance of the subject matter in that jurisdiction was revealed by the fact that four separate opinions were prepared by the justices participating, in one of which Mr. Justice Johns, shortly thereafter to become a member of this court, concurred. However, it is but fair state that one of the reasons prompting the court to uphold the law was the financial depression which had prevailed in that State. While in the Philippines the court take judicial notice of the stringency of finance that presses upon the people we have no reason to believe that this was the reason which motivated the enactment of Act 4122. (Wright vs. Wimberley [1919], 184 Pac., 740.) While we are on the subject of the authority, we may state that we have examined all of those obtainable, including some of recent date but have not been enlightened very much because as just indicated, they concerned different state of facts and different laws. We gain the most help from the case of Bronzon vs. Kinzie ([1843], 1 How., 311),

decided by the Supreme Court of the United State. It had under consideration a law passed in the State of Illinois, which provide that the equitable estate of the mortgagor should not be extinguished for twelve months after sale on decree, and which prevented any sale of the mortgaged property unless two-thirds of the amount at which the property had been valued by appraisers should be bid therefor. The court, by Mr. Chief Justice Taney declared: "Mortgages made since the passage of these laws must undoubtedly be governed by them; for every State has power to describe the legal and equitable obligation of a contract to be made and executed within it jurisdiction. It may exempt any property it thinks proper from sale for the payment of a debt; and may imposed such conditions and restriction upon the creditor as its judgment and policy may dictate. And all future contracts would be subject to such provisions; and they would be obligatory upon the parties in the provisions; and they would be obligatory upon the parties in the courts of the United States, as well as in those of the state." As we understand it, parties have no vested right in particular remedies or modes of procedure, and the legislature may change existing remedies or modes of procedure without impairing the obligation of contracts, provided an efficacious remedy for enforcement. But changes in the remedies available for the enforcement of a mortgage may not, even when public policy is invoked as an excuse, be pressed so far as to cut down the security of a mortgage without moderation or reason or in a spirit of oppression. (Brotherhood of American Yeoman vs. Manz [1922], 206 Pac., 403; Oshkosh Waterworks Co. vs. Oshkosh [1908], 187 U. S., 437; W. B. Worthen Co. vs. Kavanaugh [1935], 79 U. S. Supreme Court Advance Opinions, 638.) In the Philippines, the Chattel Mortgage Law did not expressly provide for a deficiency judgment upon the foreclosure of a mortgage. Indeed, it required decisions of this court to authorize such a procedure. (Bank of the Philippine Island vs. Olutanga Lumber Co., [1924], 47 Phil., 20; Manila Trading and Supply Co. vs. Tamaraw Plantation Co., supra.) But the practice became universal enactment regarding procedure. To a certain extent the Legislature has now disauthorized this practice, but has left a sufficient remedy remaining. Three remedies are available to the vendor who has sold personal property on the installment plan. (1) He may elect to exact the fulfillment of the obligation. (Bachrach Motor Co. vs. Milan, supra.) (2) If the vendee shall have failed to pay two or more installments, the vendor may cancel the sale. (3) If the vendee shall have failed to pay two or more installments, the vendor may foreclose the mortgage, if

one has been given on the property. The basis of the first option is the Civil Code. The basis of the last two option is Act No. 4122, amendatory of the Civil Code. And the proviso to the right to foreclose is, that if the vendor has chosen this remedy, he shall have no further action against the purchaser for the recovery of any unpaid balance owing by the same. In other words, as we see it, the Act does no more than qualify the remedy. Most constitutional issues are determined by the court's approach to them. The proper approach in cases of this character should be to resolve all presumptions in favor of the validity of an act in the absence of a clear conflict between it and the constitution. All doubts should be resolved in its favor. The controlling purpose of Act No. 4122 is revealed to be to close the door to abuses committed in connection with the foreclosure of chattel mortgages when sales were payable in installments. The public policy, obvious from the statute, was defined and established by legislative authority. It is for the courts to perpetuate it. We are of the opinion that the Legislative may change judicial methods and remedies for the enforcement of contracts, as it has done by the enactment of Act No. 4122, without unduly interfering with the obligation of the contract, without sanctioning class legislation, and without a denial of the equal protection of the laws. We rule that Act No. 4122 is valid and enforceable. As a consequence, the errors assigned by the appellant are overruled, and the judgment affirmed, the costs of this instance to be taxed against the losing party. In his brief counsel for the plaintiff advances no new arguments which have not already been considered in the Reyes case, and we see no reason for reaching a different conclusion now. The law seeks to remedy an evil which the Legislature wished to suppress; this legislative body has power to promulgate the law; the law does not completely deprive vendors on the installment basis of a remedy, but requires them to elect among three alternative remedies; the law, on the other hand, does not completely exonerate the purchasers, but only limits their liabilities and, finally, there is no vested right when a procedural law is involved, wherefore the Legislature could enact Act No. 4122 without violating the aforesaid organic law. III. In its last assignment of error plaintiff contends that, even granting that Act No. 4122 is valid, the court should have ordered the defendant to pay at least the stipulated interest, attorney's fees, and the costs. This question involves the interpretation of the pertinent portion of the law, reading: "However, if the vendor has chosen to foreclose the

mortgage he shall have no further action against the purchaser for the recovery of any unpaid balance owing by the same, and any agreement to the contrary shall be null and void." This paragraph, as its language shows, refers to the mortgage contract executed by the parties, whereby the purchaser mortgages the chattel sold to him on the installment basis in order to guarantee the payment of its price, and the words "any unpaid balance" should be interpreted as having reference to the deficiency judgment to which the mortgagee may be entitled where, after the mortgaged chattel is sold at public auction, the proceeds obtained therefrom are insufficient to cover the full amount of the secured obligations which, in the case at bar as shown by the note and by the mortgage deed, include interest on the principal, attorney's fees, expenses of collection, and the costs. The fundamental rule which should govern the interpretation of laws is to ascertain the intention and meaning of the Legislature and to give effect thereto. (Sec. 288, Code of Civil Procedure; U. S. vs. Toribio, 15 Phil., 85; U. S. vs. Navarro, 19 Phil., 134; De Jesus vs. City of Manila, 29 Phil., 73; Borromeo vs. Mariano, 41 Phil., 322; People vs. Concepcion, 44 Phil., 126.) Were it the intention of the Legislature to limit its meaning to the unpaid balance of the principal, it would have so stated. We hold, therefore, that the assignment of error is untenable. In view of the foregoing, the appealed judgment is affirmed, with the costs of this instance to the plaintiff and appellant. So ordered. Avanceña, C.J., Villa-Real, Abad Santos, Diaz, Laurel and Concepcion, JJ., concur.

Case 6 G.R. No. 193787

April 7, 2014

SPOUSES JOSE C. ROQUE AND BEATRIZ DELA CRUZ ROQUE, with deceased Jose C. Roque represented by his substitute heir JOVETTE ROQUE-LIBREA, Petitioners, vs. MA. PAMELA P. AGUADO, FRUCTUOSO C. SABUG, JR., NATIONAL COUNCIL OF CHURCHES IN THE PHILIPPINES (NCCP), represented by its Secretary General SHARON ROSE JOY RUIZ-DUREMDES, LAND BANK OF THE PHILIPPINES (LBP), represented by Branch Manager EVELYN M. MONTERO, ATTY. MARIO S.P. DIAZ, in his Official Capacity as Register of Deeds for Rizal, Morong Branch, and CECILIO U. PULAN, in his Official Capacity as Sheriff, Office of the Clerk of Court, Regional Trial Court, Binangonan, Rizal, Respondents.

DECISION PERLAS-BERNABE, J.: Assailed in this petition for review on certiorari1 are the Decision2 dated May 12, 2010 and the Resolution3 dated September 15, 2010 of the Court of Appeals (CA) in CA G.R. CV No. 92113 which affirmed the Decision4 dated July 8, 2008 of the Regional Trial Court of Binangonan, Rizal, Branch 69 (RTC) that dismissed Civil Case Nos. 03-022 and 05003 for reconveyance, annulment of sale, deed of real estate mortgage, foreclosure and certificate of sale, and damages. The Facts The property subject of this case is a parcel of land with an area of 20,862 square meters (sq. m.), located in Sitio Tagpos, Barangay Tayuman, Binangonan, Rizal, known as Lot 18089.5 On July 21, 1977, petitioners-spouses Jose C. Roque and Beatriz dela Cruz Roque (Sps. Roque) and the original owners of the then unregistered Lot 18089 – namely, Velia R. Rivero (Rivero), Magdalena Aguilar, Angela Gonzales, Herminia R. Bernardo, Antonio Rivero, Araceli R. Victa, Leonor R. Topacio, and Augusto Rivero (Rivero, et al.) – executed a Deed of Conditional Sale of Real Property6 (1977 Deed of Conditional Sale) over a 1,231-sq. m. portion of Lot 18089 (subject portion) for a consideration of P30,775.00. The parties agreed that Sps. Roque shall make an initial payment of P15,387.50 upon signing, while the remaining balance of the purchase price shall be payable upon the registration of Lot 18089, as well as the segregation and the concomitant issuance of a separate title over the subject portion in their names. After the deed’s execution, Sps. Roque took possession and introduced improvements on the subject portion which they utilized as a balut factory.7 On August 12, 1991, Fructuoso Sabug, Jr. (Sabug, Jr.), former Treasurer of the National Council of Churches in the Philippines (NCCP), applied for a free patent over the entire Lot 18089 and was eventually issued Original Certificate of Title (OCT) No. M-59558 in his name on October 21, 1991. On June 24, 1993, Sabug, Jr. and Rivero, in her personal capacity and in representation of Rivero, et al., executed a Joint Affidavit9 (1993 Joint Affidavit), acknowledging that the subject portion belongs to Sps. Roque and expressed their willingness to segregate the same from the entire area of Lot 18089.

On December 8, 1999, however, Sabug, Jr., through a Deed of Absolute Sale10 (1999 Deed of Absolute Sale), sold Lot 18089 to one Ma. Pamela P. Aguado (Aguado) for P2,500,000.00, who, in turn, caused the cancellation of OCT No. M-5955 and the issuance of Transfer Certificate of Title (TCT) No. M-96692 dated December 17, 199911 in her name. Thereafter, Aguado obtained an P8,000,000.00 loan from the Land Bank of the Philippines (Land Bank) secured by a mortgage over Lot 18089.12 When she failed to pay her loan obligation, Land Bank commenced extra-judicial foreclosure proceedings and eventually tendered the highest bid in the auction sale. Upon Aguado’s failure to redeem the subject property, Land Bank consolidated its ownership, and TCT No. M-11589513 was issued in its name on July 21, 2003.14 On June 16, 2003, Sps. Roque filed a complaint15 for reconveyance, annulment of sale, deed of real estate mortgage, foreclosure, and certificate of sale, and damages before the RTC, docketed as Civil Case No. 03-022, against Aguado, Sabug, Jr., NCCP, Land Bank, the Register of Deeds of Morong, Rizal, and Sheriff Cecilio U. Pulan, seeking to be declared as the true owners of the subject portion which had been erroneously included in the sale between Aguado and Sabug, Jr., and, subsequently, the mortgage to Land Bank, both covering Lot 18089 in its entirety. In defense, NCCP and Sabug, Jr. denied any knowledge of the 1977 Deed of Conditional Sale through which the subject portion had been purportedly conveyed to Sps. Roque.16 For her part, Aguado raised the defense of an innocent purchaser for value as she allegedly derived her title (through the 1999 Deed of Absolute Sale) from Sabug, Jr., the registered owner in OCT No. M-5955, covering Lot 18089, which certificate of title at the time of sale was free from any lien and/or encumbrances. She also claimed that Sps. Roque’s cause of action had already prescribed because their adverse claim was made only on April 21, 2003, or four (4) years from the date OCT No. M-5955 was issued in Sabug, Jr.’s name on December 17, 1999.17 On the other hand, Land Bank averred that it had no knowledge of Sps. Roque’s claim relative to the subject portion, considering that at the time the loan was taken out, Lot 18089 in its entirety was registered in Aguado’s name and no lien and/or encumbrance was annotated on her certificate of title.18 Meanwhile, on January 18, 2005, NCCP filed a separate complaint19 also for declaration of nullity of documents and certificates of title and

damages, docketed as Civil Case No. 05-003. It claimed to be the real owner of Lot 18089 which it supposedly acquired from Sabug, Jr. through an oral contract of sale20 in the early part of 1998, followed by the execution of a Deed of Absolute Sale on December 2, 1998 (1998 Deed of Absolute Sale).21 NCCP also alleged that in October of the same year, it entered into a Joint Venture Agreement (JVA) with Pilipinas Norin Construction Development Corporation (PNCDC), a company owned by Aguado’s parents, for the development of its real properties, including Lot 18089, into a subdivision project, and as such, turned over its copy of OCT No. M-5955 to PNCDC.22 Upon knowledge of the purported sale of Lot 18089 to Aguado, Sabug, Jr. denied the transaction and alleged forgery. Claiming that the Aguados23 and PNCDC conspired to defraud NCCP, it prayed that PNCDC’s corporate veil be pierced and that the Aguados be ordered to pay the amount of ₱38,092,002.00 representing the unrealized profit from the JVA.24 Moreover, NCCP averred that Land Bank failed to exercise the diligence required to ascertain the true owners of Lot 18089. Hence, it further prayed that: (a) all acts of ownership and dominion over Lot 18089 that the bank might have done or caused to be done be declared null and void; (b) it be declared the true and real owners of Lot 18089; and (c) the Register of Deeds of Morong, Rizal be ordered to cancel any and all certificates of title covering the lot, and a new one be issued in its name.25 In its answer, Land Bank reiterated its stance that Lot 18089 was used as collateral for the P8,000,000.00 loan obtained by the Countryside Rural Bank, Aguado, and one Bella Palasaga. There being no lien and/ or encumbrance annotated on its certificate of title, i.e., TCT No. M-115895, it cannot be held liable for NCCP’s claims. Thus, it prayed for the dismissal of NCCP’s complaint.26 On September 7, 2005, Civil Case Nos. 02-022 and 05-003 were ordered consolidated.27 The RTC Ruling After due proceedings, the RTC rendered a Decision28 dated July 8, 2008, dismissing the complaints of Sps. Roque and NCCP. With respect to Sps. Roque’s complaint, the RTC found that the latter failed to establish their ownership over the subject portion, considering the following: (a) the supposed owners-vendors, i.e., Rivero, et al., who executed the 1977 Deed of Conditional Sale, had no proof of their title over Lot 18089; (b) the 1977 Deed of Conditional Sale was not registered with the Office of the Register of Deeds;29 (c) the 1977 Deed of Conditional Sale is neither a deed of conveyance nor a transfer document, as it only gives the holder the right to compel the supposed vendors to execute a deed of absolute sale upon full payment of the

consideration; (d) neither Sps. Roque nor the alleged owners-vendors, i.e., Rivero, et al., have paid real property taxes in relation to Lot 18089; and (e) Sps. Roque’s occupation of the subject portion did not ripen into ownership that can be considered superior to the ownership of Land Bank.30 Moreover, the RTC ruled that Sps. Roque’s action for reconveyance had already prescribed, having been filed ten (10) years after the issuance of OCT No. M-5955.31 On the other hand, regarding NCCP’s complaint, the RTC observed that while it anchored its claim of ownership over Lot 18089 on the 1998 Deed of Absolute Sale, the said deed was not annotated on OCT No. M5955. Neither was any certificate of title issued in its name nor did it take possession of Lot 18089 or paid the real property taxes therefor. Hence, NCCP’s claim cannot prevail against Land Bank’s title, which was adjudged by the RTC as an innocent purchaser for value. Also, the RTC disregarded NCCP’s allegation that the signature of Sabug, Jr. on the 1999 Deed of Absolute Sale in favor of Aguado was forged because his signatures on both instruments bear semblances of similarity and appear genuine. Besides, the examiner from the National Bureau of Investigation, who purportedly found that Sabug, Jr.’s signature thereon was spurious leading to the dismissal of a criminal case against him, was not presented as a witness in the civil action.32 Finally, the RTC denied the parties’ respective claims for damages.33 The CA Ruling On appeal, the Court of Appeals (CA) affirmed the foregoing RTC findings in a Decision34 dated May 12, 2010. While Land Bank was not regarded as a mortgagee/purchaser in good faith with respect to the subject portion considering Sps. Roque’s possession thereof,35 the CA did not order its reconveyance or segregation in the latter’s favor because of Sps. Roque’s failure to pay the remaining balance of the purchase price. Hence, it only directed Land Bank to respect Sps. Roque’s possession with the option to appropriate the improvements introduced thereon upon payment of compensation.36 As regards NCCP, the CA found that it failed to establish its right over Lot 18089 for the following reasons: (a) the sale to it of the lot by Sabug, Jr. was never registered; and (b) there is no showing that it was in possession of Lot 18089 or any portion thereof from 1998. Thus, as far as NCCP is concerned, Land Bank is a mortgagee/purchaser in good faith.37

Aggrieved, both Sps. Roque38 and NCCP39 moved for reconsideration but were denied by the CA in a Resolution40 dated September 15, 2010, prompting them to seek further recourse before the Court. The Issue Before the Court The central issue in this case is whether or not the CA erred in not ordering the reconveyance of the subject portion in Sps. Roque’s favor. Sps. Roque maintain that the CA erred in not declaring them as the lawful owners of the subject portion despite having possessed the same since the execution of the 1977 Deed of Conditional Sale, sufficient for acquisitive prescription to set in in their favor.41 To bolster their claim, they also point to the 1993 Joint Affidavit whereby Sabug, Jr. and Rivero acknowledged their ownership thereof.42 Being the first purchasers and in actual possession of the disputed portion, they assert that they have a better right over the 1,231- sq. m. portion of Lot 18089 and, hence, cannot be ousted therefrom by Land Bank, which was adjudged as a ortgagee/purchaser in bad faith, pursuant to Article 1544 of the Civil Code.43 In opposition, Land Bank espouses that the instant petition should be dismissed for raising questions of fact, in violation of the proscription under Rule 45 of the Rules of Court which allows only pure questions of law to be raised.44 Moreover, it denied that ownership over the subject portion had been acquired by Sps. Roque who admittedly failed to pay the remaining balance of the purchase price.45 Besides, Land Bank points out that Sps. Roque’s action for reconveyance had already prescribed.46 Instead of traversing the arguments of Sps. Roque, NCCP, in its Comment47 dated December 19, 2011, advanced its own case, arguing that the CA erred in holding that it failed to establish its claimed ownership over Lot 18089 in its entirety. Incidentally, NCCP’s appeal from the CA Decision dated May 12, 2010 was already denied by the Court,48 and hence, will no longer be dealt with in this case. The Court’s Ruling The petition lacks merit. The essence of an action for reconveyance is to seek the transfer of the property which was wrongfully or erroneously registered in another person’s name to its rightful owner or to one with a better right.49 Thus, it is incumbent upon the aggrieved party to show that he has a legal claim on the property superior to that of the registered owner and

that the property has not yet passed to the hands of an innocent purchaser for value.50 Sps. Roque claim that the subject portion covered by the 1977 Deed of Conditional Sale between them and Rivero, et al. was wrongfully included in the certificates of title covering Lot 18089, and, hence, must be segregated therefrom and their ownership thereof be confirmed. The salient portions of the said deed state: DEED OF CONDITIONAL SALE OF REAL PROPERTY KNOW ALL MEN BY THESE PRESENTS: xxxx That for and in consideration of the sum of THIRTY THOUSAND SEVEN HUNDRED SEVENTY FIVE PESOS (P30,775.00), Philippine Currency, payable in the manner hereinbelow specified, the VENDORS do hereby sell, transfer and convey unto the VENDEE, or their heirs, executors, administrators, or assignors, that unsegregated portion of the above lot, x x x. That the aforesaid amount shall be paid in two installments, the first installment which is in the amount of __________ (P15,387.50) and the balance in the amount of __________ (P15,387.50), shall be paid as soon as the described portion of the property shall have been registered under the Land Registration Act and a Certificate of Title issued accordingly; That as soon as the total amount of the property has been paid and the Certificate of Title has been issued, an absolute deed of sale shall be executed accordingly; x x x x51 Examining its provisions, the Court finds that the stipulation abovehighlighted shows that the 1977 Deed of Conditional Sale is actually in the nature of a contract to sell and not one of sale contrary to Sps. Roque’s belief.52 In this relation, it has been consistently ruled that where the seller promises to execute a deed of absolute sale upon the completion by the buyer of the payment of the purchase price, the contract is only a contract to sell even if their agreement is denominated as a Deed of Conditional Sale,53 as in this case. This treatment stems from the legal characterization of a contract to sell, that is, a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the subject property despite

delivery thereof to the prospective buyer, binds himself to sell the subject property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, such as, the full payment of the purchase price.54 Elsewise stated, in a contract to sell, ownership is retained by the vendor and is not to pass to the vendee until full payment of the purchase price.55 Explaining the subject matter further, the Court, in Ursal v. CA,56 held that: [I]n contracts to sell the obligation of the seller to sell becomes demandable only upon the happening of the suspensive condition, that is, the full payment of the purchase price by the buyer. It is only upon the existence of the contract of sale that the seller becomes obligated to transfer the ownership of the thing sold to the buyer. Prior to the existence of the contract of sale, the seller is not obligated to transfer the ownership to the buyer, even if there is a contract to sell between them. Here, it is undisputed that Sps. Roque have not paid the final installment of the purchase price.57 As such, the condition which would have triggered the parties’ obligation to enter into and thereby perfect a contract of sale in order to effectively transfer the ownership of the subject portion from the sellers (i.e., Rivero et al.) to the buyers (Sps. Roque) cannot be deemed to have been fulfilled. Consequently, the latter cannot validly claim ownership over the subject portion even if they had made an initial payment and even took possession of the same.58 The Court further notes that Sps. Roque did not even take any active steps to protect their claim over the disputed portion. This remains evident from the following circumstances appearing on record: (a) the 1977 Deed of Conditional Sale was never registered; (b) they did not seek the actual/physical segregation of the disputed portion despite their knowledge of the fact that, as early as 1993, the entire Lot 18089 was registered in Sabug, Jr.’s name under OCT No. M-5955; and (c) while they signified their willingness to pay the balance of the purchase price,59 Sps. Roque neither compelled Rivero et al., and/or Sabug, Jr. to accept the same nor did they consign any amount to the court, the proper application of which would have effectively fulfilled their obligation to pay the purchase price.60 Instead, Sps. Roque waited 26 years, reckoned from the execution of the 1977 Deed of Conditional Sale, to institute an action for reconveyance (in 2003), and only after Lot 18089 was sold to Land Bank in the foreclosure sale and title thereto was consolidated in its name. Thus, in view of the foregoing, Sabug, Jr. – as the registered owner of Lot 18089 borne by the grant of his free patent application – could validly convey said property in its entirety to Aguado who, in turn, mortgaged the same to Land Bank.

Besides, as aptly observed by the RTC, Sps. Roque failed to establish that the parties who sold the property to them, i.e., Rivero, et al., were indeed its true and lawful owners.61 In fine, Sps. Roque failed to establish any superior right over the subject portion as against the registered owner of Lot 18089, i.e., Land Bank, thereby warranting the dismissal of their reconveyance action, without prejudice to their right to seek damages against the vendors, i.e., Rivero et al.62 As applied in the case of Coronel v. CA:63 It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases where the subject property is sold by the owner not to the party the seller contracted with, but to a third person, as in the case at bench. In a contract to sell, there being no previous sale of the property, a third person buying such property despite the fulfilment of the suspensive condition such as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the property. There is no double sale in such case.1âwphi1 Title to the property will transfer to the buyer after registration because there is no defect in the owner-seller’s title per se, but the latter, of course, may be sued for damages by the intending buyer. (Emphasis supplied) On the matter of double sales, suffice it to state that Sps. Roque’s reliance64 on Article 154465 of the Civil Code has been misplaced since the contract they base their claim of ownership on is, as earlier stated, a contract to sell, and not one of sale. In Cheng v. Genato,66 the Court stated the circumstances which must concur in order to determine the applicability of Article 1544, none of which are obtaining in this case, viz.: (a) The two (or more) sales transactions in issue must pertain to exactly the same subject matter, and must be valid sales transactions; (b) The two (or more) buyers at odds over the rightful ownership of the subject matter must each represent conflicting interests; and (c) The two (or more) buyers at odds over the rightful ownership of the subject matter must each have bought from the same seller. Finally, regarding Sps. Roque’s claims of acquisitive prescription and reimbursement for the value of the improvements they have introduced on the subject property,67 it is keenly observed that none of the arguments therefor were raised before the trial court or the CA.68 Accordingly, the Court applies the well-settled rule that litigants

cannot raise an issue for the first time on appeal as this would contravene the basic rules of fair play and justice. In any event, such claims appear to involve questions of fact which are generally prohibited under a Rule 45 petition.69 With the conclusions herein reached, the Court need not belabor on the other points raised by the parties, and ultimately finds it proper to proceed with the denial of the petition. WHEREFORE, the petition is DENIED. The Decision dated May 12, 2010 and the Resolution dated September 15, 2010 of the Court of Appeals in CAG.R. CV No. 92113 are hereby AFFIRMED. Case No. 7 [G.R. No. 152219. October 25, 2004] NUTRIMIX FEEDS CORPORATION, petitioner, vs. COURT OF APPEALS and SPOUSES EFREN AND MAURA EVANGELISTA, respondents. DECISION CALLEJO, SR., J.: For review on certiorari is the Decision[1] of the Court of Appeals in CAG.R. CV No. 59615 modifying, on appeal, the Joint Decision[2] of the Regional Trial Court of Malolos, Bulacan, Branch 9, in Civil Case No. 1026-M-93[3] for sum of money and damages with prayer for issuance of writ of preliminary attachment, and Civil Case No. 49-M-94[4] for damages. The trial court dismissed the complaint of the respondents, ordering them to pay the petitioner the unpaid value of the assorted animal feeds delivered to the former by the latter, with legal interest thereon from the filing of the complaint, including attorneys fees. The Factual Antecedents On April 5, 1993, the Spouses Efren and Maura Evangelista, the respondents herein, started to directly procure various kinds of animal feeds from petitioner Nutrimix Feeds Corporation. The petitioner gave the respondents a credit period of thirty to forty-five days to postdate checks to be issued in payment for the delivery of the feeds. The accommodation was made apparently because of the company presidents close friendship with Eugenio Evangelista, the brother of respondent Efren Evangelista. The various animal feeds were paid and covered by checks with due dates from July 1993 to September 1993. Initially, the respondents were good paying customers. In some instances, however, they failed to issue checks despite the deliveries

of animal feeds which were appropriately covered by sales invoices. Consequently, the respondents incurred an aggregate unsettled account with the petitioner in the amount of P766,151.00. The breakdown of the unpaid obligation is as follows: Sales Invoice Number Date Amount 21334 June 23, 1993 P 7,260.00 21420 June 26, 1993 6,990.00 21437 June 28, 1993 41,510.00 21722 July 12, 1993 45,185.00 22048 July 26, 1993 44,540.00 22054 July 27, 1993 45,246.00 22186 August 2, 1993 84,900.00 Total: P275,631.00 ========= Bank Check Number Due Date Amount United Coconut Planters Bank BTS052084 July 30, 1993 P 47,760.00 -do- BTS052087 July 30, 1993 131,340.00 -do- BTS052091 July 30, 1993 59,700.00 -do- BTS062721 August 4, 1993 47,860.00 -do- BTS062720 August 5, 1993 43,780.00 -do- BTS062774 August 6, 1993 15,000.00 -do- BTS062748 September 11, 1993 47,180.00 -do- BTS062763 September 11, 1993 48,440.00 -do- BTS062766 September 18, 1993 49,460.00 Total: P490,520.00 ========= When the above-mentioned checks were deposited at the petitioners depository bank, the same were, consequently, dishonored because respondent Maura Evangelista had already closed her account. The petitioner made several demands for the respondents to settle their unpaid obligation, but the latter failed and refused to pay their remaining balance with the petitioner. On December 15, 1993, the petitioner filed with the Regional Trial Court of Malolos, Bulacan, a complaint, docketed as Civil Case No. 1026-M-93, against the respondents for sum of money and damages with a prayer for issuance of writ of preliminary attachment. In their answer with counterclaim, the respondents admitted their unpaid obligation but impugned their liability to the petitioner. They asserted that the nine checks issued by respondent Maura Evangelista were made to guarantee the payment of the purchases, which was previously determined to be procured from the expected proceeds in the sale of their broilers and hogs. They contended that inasmuch as the sudden and massive death of their animals was caused by the

contaminated products of the petitioner, the nonpayment of their obligation was based on a just and legal ground. On January 19, 1994, the respondents also lodged a complaint for damages against the petitioner, docketed as Civil Case No. 49-M-94, for the untimely and unforeseen death of their animals supposedly effected by the adulterated animal feeds the petitioner sold to them. Within the period to file an answer, the petitioner moved to dismiss the respondents complaint on the ground of litis pendentia. The trial court denied the same in a Resolution[5] dated April 26, 1994, and ordered the consolidation of the case with Civil Case No. 1026-M-93. On May 13, 1994, the petitioner filed its Answer with Counterclaim, alleging that the death of the respondents animals was due to the widespread pestilence in their farm. The petitioner, likewise, maintained that it received information that the respondents were in an unstable financial condition and even sold their animals to settle their obligations from other enraged and insistent creditors. It, moreover, theorized that it was the respondents who mixed poison to its feeds to make it appear that the feeds were contaminated. A joint trial thereafter ensued. During the hearing, the petitioner presented Rufino Arenas, Nutrimix Assistant Manager, as its lone witness. He testified that on the first week of August 1993, Nutrimix President Efren Bartolome met the respondents to discuss the possible settlement of their unpaid account. The said respondents still pleaded to the petitioner to continue to supply them with animal feeds because their livestock were supposedly suffering from a disease.[6] For her part, respondent Maura Evangelista testified that as direct buyers of animal feeds from the petitioner, Mr. Bartolome, the company president, gave them a discount of P12.00 per bag and a credit term of forty-five to seventy-five days.[7] For the operation of the respondents poultry and piggery farm, the assorted animal feeds sold by the petitioner were delivered in their residence and stored in an adjacent bodega made of concrete wall and galvanized iron sheet roofing with monolithic flooring.[8] It appears that in the morning of July 26, 1993, three various kinds of animal feeds, numbering 130 bags, were delivered to the residence of the respondents in Sta. Rosa, Marilao, Bulacan. The deliveries came at about 10:00 a.m. and were fed to the animals at approximately 1:30 p.m. at the respondents farm in Balasing, Sta. Maria, Bulacan. At about 8:30 p.m., respondent Maura Evangelista received a radio message from a worker in her farm, warning her that the chickens were dying at

rapid intervals. When the respondents arrived at their farm, they witnessed the death of 18,000 broilers, averaging 1.7 kilos in weight, approximately forty-one to forty-five days old. The broilers then had a prevailing market price of P46.00 per kilo.[9] On July 27, 1993, the respondents received another delivery of 160 bags of animal feeds from the petitioner, some of which were distributed to the contract growers of the respondents. At that time, respondent Maura Evangelista requested the representative of the petitioner to notify Mr. Bartolome of the fact that their broilers died after having been fed with the animal feeds delivered by the petitioner the previous day. She, likewise, asked that a technician or veterinarian be sent to oversee the untoward occurrence. Nevertheless, the various feeds delivered on that day were still fed to the animals. On July 27, 1993, the witness recounted that all of the chickens and hogs died.[10] Efren Evangelista suffered from a heart attack and was hospitalized as a consequence of the massive death of their animals in the farm. On August 2, 1993, another set of animal feeds were delivered to the respondents, but the same were not returned as the latter were not yet cognizant of the fact that the cause of the death of their animals was the polluted feeds of the petitioner.[11] When respondent Maura Evangelista eventually met with Mr. Bartolome on an undisclosed date, she attributed the improbable incident to the animal feeds supplied by the petitioner, and asked Mr. Bartolome for indemnity for the massive death of her livestock. Mr. Bartolome disavowed liability thereon and, thereafter, filed a case against the respondents.[12] After the meeting with Mr. Bartolome, respondent Maura Evangelista requested Dr. Rolando Sanchez, a veterinarian, to conduct an inspection in the respondents poultry. On October 20, 1993, the respondents took ample amounts remaining from the feeds sold by the petitioner and furnished the same to various government agencies for laboratory examination. Dr. Juliana G. Garcia, a doctor of veterinary medicine and the Supervising Agriculturist of the Bureau of Animal Industry, testified that on October 20, 1993, sample feeds for chickens contained in a pail were presented to her for examination by respondent Efren Evangelista and a certain veterinarian.[13] The Clinical Laboratory Report revealed that the feeds were negative of salmonella[14] and that the very high aflatoxin level[15] found therein would not cause instantaneous death if taken orally by birds.

Dr. Rodrigo Diaz, the veterinarian who accompanied Efren at the Bureau of Animal Industry, testified that sometime in October 1993, Efren sought for his advice regarding the death of the respondents chickens. He suggested that the remaining feeds from their warehouse be brought to a laboratory for examination. The witness claimed that the feeds brought to the laboratory came from one bag of sealed Nutrimix feeds which was covered with a sack. Dr. Florencio Isagani S. Medina III, Chief Scientist Research Specialist of the Philippine Nuclear Research Institute, informed the trial court that respondent Maura Evangelista and Dr. Garcia brought sample feeds and four live and healthy chickens to him for laboratory examination. In his Cytogenetic Analysis,[16] Dr. Medina reported that he divided the chickens into two categories, which he separately fed at 6:00 a.m. with the animal feeds of a different commercial brand and with the sample feeds supposedly supplied by the petitioner. At noon of the same day, one of the chickens which had been fed with the Nutrimix feeds died, and a second chicken died at 5:45 p.m. of the same day. Samples of blood and bone marrow were taken for chromosome analysis, which showed pulverized chromosomes both from bone marrow and blood chromosomes. On cross-examination, the witness admitted that the feeds brought to him were merely placed in a small unmarked plastic bag and that he had no way of ascertaining whether the feeds were indeed manufactured by the petitioner. Another witness for the respondents, Aida Viloria Magsipoc, Forensic Chemist III of the Forensic Chemist Division of the National Bureau of Investigation, affirmed that she performed a chemical analysis[17] of the animal feeds, submitted to her by respondent Maura Evangelista and Dr. Garcia in a sealed plastic bag, to determine the presence of poison in the said specimen. The witness verified that the sample feeds yielded positive results to the tests for COUMATETRALYL Compound, [18] the active component of RACUMIN, a brand name for a commercially known rat poison.[19] According to the witness, the presence of the compound in the chicken feeds would be fatal to internal organs of the chickens, as it would give a delayed blood clotting effect and eventually lead to internal hemorrhage, culminating in their inevitable death. Paz Austria, the Chief of the Pesticide Analytical Section of the Bureau of Plants Industry, conducted a laboratory examination to determine the presence of pesticide residue in the animal feeds submitted by respondent Maura Evangelista and Dr. Garcia. The tests disclosed that no pesticide residue was detected in the samples received[20] but it was discovered that the animal feeds were positive for Warfarin, a

rodenticide (anticoagulant), which is the chemical family of Coumarin. [21] After due consideration of the evidence presented, the trial court ruled in favor of the petitioner. The dispositive portion of the decision reads: WHEREFORE, in light of the evidence on record and the laws/jurisprudence applicable thereon, judgment is hereby rendered: 1) in Civil Case No. 1026-M-93, ordering defendant spouses Efren and Maura Evangelista to pay unto plaintiff Nutrimix Feeds Corporation the amount of P766,151.00 representing the unpaid value of assorted animal feeds delivered by the latter to and received by the former, with legal interest thereon from the filing of the complaint on December 15, 1993 until the same shall have been paid in full, and the amount of P50,000.00 as attorneys fees. Costs against the aforenamed defendants; and 2) dismissing the complaint as well as counterclaims in Civil Case No. 49-M-94 for inadequacy of evidence to sustain the same. No pronouncement as to costs. SO ORDERED.[22] In finding for the petitioner, the trial court ratiocinated as follows: On the strength of the foregoing disquisition, the Court cannot sustain the Evangelistas contention that Nutrimix is liable under Articles 1561 and 1566 of the Civil Code governing hidden defects of commodities sold. As already explained, the Court is predisposed to believe that the subject feeds were contaminated sometime between their storage at the bodega of the Evangelistas and their consumption by the poultry and hogs fed therewith, and that the contamination was perpetrated by unidentified or unidentifiable ill-meaning mischief-maker(s) over whom Nutrimix had no control in whichever way. All told, the Court finds and so holds that for inadequacy of proof to the contrary, Nutrimix was not responsible at all for the contamination or poisoning of the feeds supplied by it to the Evangelistas which precipitated the mass death of the latters chickens and hogs. By no means and under no circumstance, therefore, may Nutrimix be held liable for the sundry damages prayed for by the Evangelistas in their complaint in Civil Case No. 49-M-94 and answer in Civil Case No. 1026M-93. In fine, Civil Case No. 49-M-94 deserves dismissal.

Parenthetically, vis--vis the fulminations of the Evangelistas in this specific regard, the Court does not perceive any act or omission on the part of Nutrimix constitutive of abuse of rights as would render said corporation liable for damages under Arts. 19 and 21 of the Civil Code. The alleged callous attitude and lack of concern of Nutrimix have not been established with more definitiveness. As regards Civil Case No. 1026-M-93, on the other hand, the Court is perfectly convinced that the deliveries of animal feeds by Nutrimix to the Evangelistas constituted a simple contract of sale, albeit on a continuing basis and on terms or installment payments.[23] Undaunted, the respondents sought a review of the trial courts decision to the Court of Appeals (CA), principally arguing that the trial court erred in holding that they failed to prove that their broilers and hogs died as a result of consuming the petitioners feeds. On February 12, 2002, the CA modified the decision of the trial court. The fallo of the decision reads: WHEREFORE, premises considered, the appealed decision is hereby MODIFIED such that the complaint in Civil Case No. 1026-M-93 is DISMISSED for lack of merit. SO ORDERED.[24] In dismissing the complaint in Civil Case No. 1026-M-93, the CA ruled that the respondents were not obligated to pay their outstanding obligation to the petitioner in view of its breach of warranty against hidden defects. The CA gave much credence to the testimony of Dr. Rodrigo Diaz, who attested that the sample feeds distributed to the various governmental agencies for laboratory examination were taken from a sealed sack bearing the brand name Nutrimix. The CA further argued that the declarations of Dr. Diaz were not effectively impugned during cross-examination, nor was there any contrary evidence adduced to destroy his damning allegations. On March 7, 2002, the petitioner filed with this Court the instant petition for review on the sole ground that THE HONORABLE COURT OF APPEALS ERRED IN CONCLUDING THAT THE CLAIMS OF HEREIN PETITIONER FOR COLLECTION OF SUM OF MONEY AGAINST PRIVATE RESPONDENTS MUST BE DENIED BECAUSE OF HIDDEN DEFECTS. The Present Petition

The petitioner resolutely avers that the testimony of Dr. Diaz can hardly be considered as conclusive evidence of hidden defects that can be attributed to the petitioner. Parenthetically, the petitioner asserts, assuming that the sample feeds were taken from a sealed sack bearing the brand name Nutrimix, it cannot decisively be presumed that these were the same feeds brought to the respondents farm and given to their chickens and hogs for consumption. It is the contention of the respondents that the appellate court correctly ordered the dismissal of the complaint in Civil Case No. 1026M-93. They further add that there was sufficient basis for the CA to hold the petitioner guilty of breach of warranty thereby releasing the respondents from paying their outstanding obligation. The Ruling of the Court Oft repeated is the rule that the Supreme Court reviews only errors of law in petitions for review on certiorari under Rule 45. However, this rule is not absolute. The Court may review the factual findings of the CA should they be contrary to those of the trial court. Conformably, this Court may review findings of facts when the judgment of the CA is premised on a misapprehension of facts.[25] The threshold issue is whether or not there is sufficient evidence to hold the petitioner guilty of breach of warranty due to hidden defects. The petition is meritorious. The provisions on warranty against hidden defects are found in Articles 1561 and 1566 of the New Civil Code of the Philippines, which read as follows: Art. 1561. The vendor shall be responsible for warranty against hidden defects which the thing sold may have, should they render it unfit for the use for which it is intended, or should they diminish its fitness for such use to such an extent that, had the vendee been aware thereof, he would not have acquired it or would have given a lower price for it; but said vendor shall not be answerable for patent defects or those which may be visible, or for those which are not visible if the vendee is an expert who, by reason of his trade or profession, should have known them. Art. 1566. The vendor is responsible to the vendee for any hidden faults or defects in the thing sold, even though he was not aware thereof.

This provision shall not apply if the contrary has been stipulated, and the vendor was not aware of the hidden faults or defects in the thing sold. A hidden defect is one which is unknown or could not have been known to the vendee.[26] Under the law, the requisites to recover on account of hidden defects are as follows: (a) the defect must be hidden; (b) the defect must exist at the time the sale was made; (c) the defect must ordinarily have been excluded from the contract; (d) the defect, must be important (renders thing UNFIT or considerably decreases FITNESS); (e) the action must be instituted within the statute of limitations.[27] In the sale of animal feeds, there is an implied warranty that it is reasonably fit and suitable to be used for the purpose which both parties contemplated.[28] To be able to prove liability on the basis of breach of implied warranty, three things must be established by the respondents. The first is that they sustained injury because of the product; the second is that the injury occurred because the product was defective or unreasonably unsafe; and finally, the defect existed when the product left the hands of the petitioner.[29] A manufacturer or seller of a product cannot be held liable for any damage allegedly caused by the product in the absence of any proof that the product in question was defective.[30] The defect must be present upon the delivery or manufacture of the product;[31] or when the product left the sellers or manufacturers control;[32] or when the product was sold to the purchaser;[33] or the product must have reached the user or consumer without substantial change in the condition it was sold. Tracing the defect to the petitioner requires some evidence that there was no tampering with, or changing of the animal feeds. The nature of the animal feeds makes it necessarily difficult for the respondents to prove that the defect was existing when the product left the premises of the petitioner. A review of the facts of the case would reveal that the petitioner delivered the animal feeds, allegedly containing rat poison, on July 26, 1993; but it is astonishing that the respondents had the animal feeds examined only on October 20, 1993, or barely three months after their broilers and hogs had died. On cross-examination, respondent Maura Evangelista testified in this manner: Atty. Cruz:

Q Madam Witness, you said in the last hearing that believing that the 250 bags of feeds delivered to (sic) the Nutrimix Feeds Corporation on August 2, 1993 were poison (sic), allegedly your husband Efren Evangelista burned the same with the chicken[s], is that right? A Yes, Sir. Some, Sir. Q And is it not a fact, Madam Witness, that you did not, as according to you, used (sic) any of these deliveries made on August 2, 1993? A We were able to feed (sic) some of those deliveries because we did not know yet during that time that it is the cause of the death of our chicks (sic), Sir. Q But according to you, the previous deliveries were not used by you because you believe (sic) that they were poison (sic)? A Which previous deliveries, Sir[?] Q Those delivered on July 26 and 22 (sic), 1993? A Those were fed to the chickens, Sir. This is the cause of the death of the chickens. Q And you stated that this last delivery on August 2 were poison (sic) also and you did not use them, is that right? Atty. Roxas: That is misleading. Atty. Cruz: She stated that. Atty. Roxas: She said some were fed because they did not know yet of the poisoning. Court: And when the chickens died, they stopped naturally feeding it to the chickens. Atty. Cruz:

Q You mean to say, Madam Witness, that although you believe (sic) that the chickens were allegedly poisoned, you used the same for feeding your animals? A We did not know yet during that time that the feeds contained poison, only during that time when we learned about the same after the analysis. Q Therefore you have known only of the alleged poison in the Nutrimix Feeds only after you have caused the analysis of the same? A Yes, Sir. Q When was that, Madam Witness? A I cannot be sure about the exact time but it is within the months of October to November, Sir. Q So, before this analysis of about October and November, you were not aware that the feeds of Nutrimix Feeds Corporation were, according to you, with poison? A We did not know yet that it contained poison but we were sure that the feeds were the cause of the death of our animals.[34] We find it difficult to believe that the feeds delivered on July 26 and 27, 1993 and fed to the broilers and hogs contained poison at the time they reached the respondents. A difference of approximately three months enfeebles the respondents theory that the petitioner is guilty of breach of warranty by virtue of hidden defects. In a span of three months, the feeds could have already been contaminated by outside factors and subjected to many conditions unquestionably beyond the control of the petitioner. In fact, Dr. Garcia, one of the witnesses for the respondents, testified that the animal feeds submitted to her for laboratory examination contained very high level of aflatoxin, possibly caused by mold (aspergillus flavus).[35] We agree with the contention of the petitioner that there is no evidence on record to prove that the animal feeds taken to the various governmental agencies for laboratory examination were the same animal feeds given to the respondents broilers and hogs for their consumption. Moreover, Dr. Diaz even admitted that the feeds that were submitted for analysis came from a sealed bag. There is simply no evidence to show that the feeds given to the animals on July 26 and 27, 1993 were identical to those submitted to the expert witnesses in October 1993.

It bears stressing, too, that the chickens brought to the Philippine Nuclear Research Institute for laboratory tests were healthy animals, and were not the ones that were ostensibly poisoned. There was even no attempt to have the dead fowls examined. Neither was there any analysis of the stomach of the dead chickens to determine whether the petitioners feeds really caused their sudden death. Mere sickness and death of the chickens is not satisfactory evidence in itself to establish a prima facie case of breach of warranty.[36] Likewise, there was evidence tending to show that the respondents combined different kinds of animal feeds and that the mixture was given to the animals. Respondent Maura Evangelista testified that it was common practice among chicken and hog raisers to mix animal feeds. The testimonies of respondent Maura Evangelista may be thus summarized: Cross-Examination Atty. Cruz: Q Because, Madam Witness, you ordered chicken booster mash from Nutrimix Feeds Corporation because in July 1993 you were taking care of many chickens, as a matter of fact, majority of the chickens you were taking care [of] were chicks and not chickens which are marketable? A What I can remember was that I ordered chicken booster mash on that month of July 1993 because we have some chicks which have to be fed with chicken booster mash and I now remember that on the particular month of July 1993 we ordered several bags of chicken booster mash for the consumption also of our chicken in our other poultry and at the same time they were also used to be mixed with the feeds that were given to the hogs. Q You mean to say [that], as a practice, you are mixing chicken booster mash which is specifically made for chick feeds you are feeding the same to the hogs, is that what you want the Court to believe? A Yes, Sir, because when you mix chicken booster mash in the feeds of hogs there is a better result, Sir, in raising hogs.[37] Re-Direct Examination Atty. Roxas:

Q Now, you mentioned that shortly before July 26 and 27, 1993, various types of Nutrimix feeds were delivered to you like chicks booster mash, broiler starter mash and hog finisher or hog grower mash. What is the reason for simultaneous deliveries of various types of feeds? A Because we used to mix all those together in one feeding, Sir. Q And what is the reason for mixing the chick booster mash with broiler starter mash? A So that the chickens will get fat, Sir. Re-Cross Examination Atty. Cruz: Q Madam Witness, is it not a fact that the mixing of these feeds by you is your own concuction (sic) and without the advice of a veterinarian expert to do so? A That is common practice among raisers to mix two feeds, Sir. Q By yourself, Madam Witness, who advised you to do the mixing of these two types of feeds for feeding your chickens? A That is common practice of chicken raisers, Sir.[38] Even more surprising is the fact that during the meeting with Nutrimix President Mr. Bartolome, the respondents claimed that their animals were plagued by disease, and that they needed more time to settle their obligations with the petitioner. It was only after a few months that the respondents changed their justification for not paying their unsettled accounts, claiming anew that their animals were poisoned with the animal feeds supplied by the petitioner. The volte-face of the respondents deserves scant consideration for having been conjured as a mere afterthought. In essence, we hold that the respondents failed to prove that the petitioner is guilty of breach of warranty due to hidden defects. It is, likewise, rudimentary that common law places upon the buyer of the product the burden of proving that the seller of the product breached its warranty.[39] The bevy of expert evidence adduced by the respondents is too shaky and utterly insufficient to prove that the Nutrimix feeds caused the death of their animals. For these reasons, the expert testimonies lack probative weight. The respondents case of

breach of implied warranty was fundamentally based upon the circumstantial evidence that the chickens and hogs sickened, stunted, and died after eating Nutrimix feeds; but this was not enough to raise a reasonable supposition that the unwholesome feeds were the proximate cause of the death with that degree of certainty and probability required.[40] The rule is well-settled that if there be no evidence, or if evidence be so slight as not reasonably to warrant inference of the fact in issue or furnish more than materials for a mere conjecture, the court will not hesitate to strike down the evidence and rule in favor of the other party.[41] This rule is both fair and sound. Any other interpretation of the law would unloose the courts to meander aimlessly in the arena of speculation.[42] It must be stressed, however, that the remedy against violations of warranty against hidden defects is either to withdraw from the contract (accion redhibitoria) or to demand a proportionate reduction of the price (accion quanti minoris), with damages in either case.[43] In any case, the respondents have already admitted, both in their testimonies and pleadings submitted, that they are indeed indebted to the petitioner for the unpaid animal feeds delivered to them. For this reason alone, they should be held liable for their unsettled obligations to the petitioner. WHEREFORE, in light of all the foregoing, the petition is GRANTED. The assailed Decision of the Court of Appeals, dated February 12, 2002, is REVERSED and SET ASIDE. The Decision of the Regional Trial Court of Malolos, Bulacan, Branch 9, dated January 12, 1998, is REINSTATED. No costs. SO ORDERED. Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.