Sales and Lease Cases.pdf

CASES IN SALES (SECOND YEAR – SECOND SEMESTER)

Republic of the Philippines SUPREME COURT Manila

power transformer from David. For this reason, its General Manager, Engr. Reynaldo Rada (Engr. Rada), went to meet David in the latter’s office in Quezon City. David agreed to supply the power transformer provided that MOELCI would secure a board resolution because the item would still have to be imported.

THIRD DIVISION G.R. No. 194785

July 11, 2012

On June 8, 1992, Engr. Rada and Director Jose Jimenez (Jimenez), who was in-charge of procurement, returned to Manila and presented to David the requested board resolution which authorized the purchase of one 10 MVA power transformer. In turn, David presented his proposal for the acquisition of said transformer. This proposal was the same proposal that he would usually give to his clients.

VIRGILIO S. DAVID, Petitioner, vs. MISAMIS OCCIDENTAL II ELECTRIC COOPERATIVE, INC., Respondent. DECISION MENDOZA, J.:

After the reading of the proposal and the discussion of terms, David instructed his then secretary and bookkeeper, Ellen M. Wong, to type the names of Engr. Rada and Jimenez at the end of the proposal. Both signed the document under the word "conforme." The board resolution was thereafter attached to the proposal.

Before this Court is a petition for review under Rule 45 of the Rules of Court assailing the July 8, 2010 Decision1 of the Court of Appeals (CA), in CA-G.R. CR No. 91839, which affirmed the July 17, 2008 Decision2 of the Regional Trial Court, Branch VIII, Manila (RTC) in Civil Case No. 94-69402, an action for specific performance and damages.

As stated in the proposal, the subject transformer, together with the basic accessories, was valued at P5,200,000.00. It was also stipulated therein that 50% of the purchase price should be paid as downpayment and the remaining balance to be paid upon delivery. Freight handling, insurance, customs duties, and incidental expenses were for the account of the buyer.

The Facts: Petitioner Virgilio S. David (David) was the owner or proprietor of VSD Electric Sales, a company engaged in the business of supplying electrical hardware including transformers for rural electric cooperatives like respondent Misamis Occidental II Electric Cooperative, Inc. (MOELCI), with principal office located in Ozamis City.

The Board Resolution, on the other hand, stated that the purchase of the said transformer was to be financed through a loan from the National Electrification Administration (NEA). As there was no immediate action on the loan application, Engr. Rada returned to Manila in early December 1992 and requested David to deliver the

To solve its problem of power shortage affecting some areas within its coverage, MOELCI expressed its intention to purchase a 10 MVA

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transformer to them even without the required downpayment. David granted the request provided that MOELCI would pay interest at 24% per annum. Engr. Rada acquiesced to the condition. On December 17, 1992, the goods were shipped to Ozamiz City via William Lines. In the Bill of Lading, a sales invoice was included which stated the agreed interest rate of 24% per annum.

were regularly sent through the mails by the company and these were never disputed by MOELCI. On February 17, 1994, David filed a complaint for specific performance with damages with the RTC. In response, MOECLI moved for its dismissal on the ground that there was lack of cause of action as there was no contract of sale, to begin with, or in the alternative, the said contract was unenforceable under the Statute of Frauds. MOELCI argued that the quotation letter could not be considered a binding contract because there was nothing in the said document from which consent, on its part, to the terms and conditions proposed by David could be inferred. David knew that MOELCI’s assent could only be obtained upon the issuance of a purchase order in favor of the bidder chosen by the Canvass and Awards Committee.

When nothing was heard from MOELCI for sometime after the shipment, Emanuel Medina (Medina), David’s Marketing Manager, went to Ozamiz City to check on the shipment. Medina was able to confer with Engr. Rada who told him that the loan was not yet released and asked if it was possible to withdraw the shipped items. Medina agreed. When no payment was made after several months, Medina was constrained to send a demand letter, dated September 15, 1993, which MOELCI duly received. Engr. Rada replied in writing that the goods were still in the warehouse of William Lines again reiterating that the loan had not been approved by NEA. This prompted Medina to head back to Ozamiz City where he found out that the goods had already been released to MOELCI evidenced by the shipping company’s copy of the Bill of Lading which was stamped "Released," and with the notation that the arrastre charges in the amount of P5,095.60 had been paid. This was supported by a receipt of payment with the corresponding cargo delivery receipt issued by the Integrated Port Services of Ozamiz, Inc.

Eventually, pursuant to Rule 16, Section 5 of the Rules of Court, MOELCI filed its Motion for Preliminary Hearing of Affirmative Defenses and Deferment of the Pre-Trial Conference which was denied by the RTC to abbreviate proceedings and for the parties to proceed to trial and avoid piecemeal resolution of issues. The order denying its motion was raised with the CA, and then with this Court. Both courts sustained the RTC ruling. Trial ensued. By reason of MOELCI’s continued failure to appear despite notice, David was allowed to present his testimonial and documentary evidence ex parte, pursuant to Rule 18, Section 5 of the Rules. A Very Urgent Motion to Allow Defendant to Present Evidence was filed by MOELCI, but was denied.

Subsequently, demand letters were sent to MOELCI demanding the payment of the whole amount plus the balance of previous purchases of other electrical hardware. Aside from the formal demand letters, David added that several statements of accounts

In its July 17, 2008 Decision, the RTC dismissed the complaint. It found that although a contract of sale was perfected, it was not

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consummated because David failed to prove that there was indeed a delivery of the subject item and that MOELCI received it.3

The Court finds merit in the petition.

Aggrieved, David appealed his case to the CA.

On the issue as to whether or not there was a perfected contract of sale, this Court is required to delve into the evidence of the case. In a petition for review on certiorari under Rule 45 of the Rules of Court, the issues to be threshed out are generally questions of law only, and not of fact.

I.

On July 8, 2010, the CA affirmed the ruling of the RTC. In the assailed decision, the CA reasoned out that although David was correct in saying that MOELCI was deemed to have admitted the genuineness and due execution of the "quotation letter" (Exhibit A), wherein the signatures of the Chairman and the General Manager of MOELCI appeared, he failed to offer any textual support to his stand that it was a contract of sale instead of a mere price quotation agreed to by MOELCI representatives. On this score, the RTC erred in stating that a contract of sale was perfected between the parties despite the irregularities that tainted their transaction. Further, the fact that MOELCI’s representatives agreed to the terms embodied in the agreement would not preclude the finding that said contract was at best a mere contract to sell.

This was reiterated in the case of Buenaventura v. Pascual,5 where it was written: Time and again, this Court has stressed that its jurisdiction in a petition for review on certiorari under Rule 45 of the Rules of Court is limited to reviewing only errors of law, not of fact, unless the findings of fact complained of are devoid of support by the evidence on record, or the assailed judgment is based on the misapprehension of facts. The trial court, having heard the witnesses and observed their demeanor and manner of testifying, is in a better position to decide the question of their credibility. Hence, the findings of the trial court must be accorded the highest respect, even finality, by this Court.

A motion for reconsideration was filed by David but it was denied.4 Hence, this petition. Before this Court, David presents the following issues for consideration:

That being said, the Court is not unmindful, however, of the recognized exceptions well-entrenched in jurisprudence. It has always been stressed that when supported by substantial evidence, the findings of fact of the CA are conclusive and binding on the parties and are not reviewable by this Court, unless the case falls under any of the following recognized exceptions:

I. WHETHER OR NOT THERE WAS A PERFECTED CONTRACT OF SALE. II.

(1) When the conclusion is a finding grounded entirely on speculation, surmises and conjectures;

WHETHER OR NOT THERE WAS A DELIVERY THAT CONSUMMATED THE CONTRACT.

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(2) When the inference made is manifestly mistaken, absurd or impossible;

Be that as it may, it must be emphasized that the appellant failed to offer any textual support to his insistence that Exhibit "A" is a contract of sale instead of a mere price quotation conformed to by MOELCI representatives. To that extent, the trial court erred in laying down the premise that "indeed a contract of sale is perfected between the parties despite the irregularities attending the transaction." x x x

(3) Where there is a grave abuse of discretion: (4) When the judgment is based on a misapprehension of facts; (5) When the findings of fact are conflicting;

That representatives of MOELCI conformed to the terms embodied in the agreement does not preclude the finding that such contract is, at best, a mere contract to sell with stipulated costs quoted should it ultimately ripen into one of sale. The conditions upon which that development may occur may even be obvious from statements in the agreement itself, that go beyond just "captions." Thus, the appellant opens with, "WE are pleased to submit our quotation xxx." The purported contract also ends with. "Thank you for giving us the opportunity to quote on your requirements and we hope to receive your order soon" apparently referring to a purchase order which MOELCI contends to be a formal requirement for the entire transaction.8

(6) When the Court of Appeals, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both appellant and appellee; (7) When the findings are contrary to those of the trial court; (8) When the findings of fact are without citation of specific evidence on which the conclusions are based; (9) When the facts set forth in the petition as well as in the petitioner’s main and reply briefs are not disputed by the respondents; and (10) When the findings of fact of the Court of Appeals are premised on the supposed absence of evidence and contradicted by the evidence on record. 6 [Emphasis supplied]

In other words, the CA was of the position that Exhibit A was at best a contract to sell. A perusal of the records persuades the Court to hold otherwise.

In this case, the CA and the RTC reached different conclusions on the question of whether or not there was a perfected contract of sale. The RTC ruled that a contract of sale was perfected although the same was not consummated because David failed to show proof of delivery.7

The elements of a contract of sale are, to wit: 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.9 It is the absence of the first element which distinguishes a contract of sale from that of a contract to sell.

The CA was of the opposite view. The CA wrote:

In a contract to sell, the prospective seller explicitly reserves the

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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, such as, in most cases, 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 nonfulfillment 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.10

determine the kind of contract entered into by the parties.12 First, there was meeting of minds as to the transfer of ownership of the subject matter. The letter (Exhibit A), though appearing to be a mere price quotation/proposal, was not what it seemed. It contained terms and conditions, so that, by the fact that Jimenez, Chairman of the Committee on Management, and Engr. Rada, General Manager of MOELCI, had signed their names under the word "CONFORME," they, in effect, agreed with the terms and conditions with respect to the purchase of the subject 10 MVA Power Transformer. As correctly argued by David, if their purpose was merely to acknowledge the receipt of the proposal, they would not have signed their name under the word "CONFORME."

In a contract of sale, on the other hand, the title to the property passes to the vendee upon the delivery of the thing sold. Unlike in a contract to sell, 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. 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. The vendor loses ownership over the property and cannot recover it until and unless the contract is resolved or rescinded.11

Besides, the uncontroverted attending circumstances bolster the fact that there was consent or meeting of minds in the transfer of ownership. To begin with, a board resolution was issued authorizing the purchase of the subject power transformer. Next, armed with the said resolution, top officials of MOELCI visited David’s office in Quezon City three times to discuss the terms of the purchase. Then, when the loan that MOELCI was relying upon to finance the purchase was not forthcoming, MOELCI, through Engr. Rada, convinced David to do away with the 50% downpayment and deliver the unit so that it could already address its acute power shortage predicament, to which David acceded when it made the delivery, through the carrier William

An examination of the alleged contract to sell, "Exhibit A," despite its unconventional form, would show that said document, with all the stipulations therein and with the attendant circumstances surrounding it, was actually a Contract of Sale. The rule is that it is not the title of the contract, but its express terms or stipulations that

Lines, as evidenced by a bill of lading. Second, the document specified a determinate subject matter which was one (1) Unit of 10 MVA Power Transformer with corresponding KV Line Accessories. And third, the document stated categorically

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the price certain in money which was P5,200,000.00 for one (1) unit of 10 MVA Power Transformer and P2,169,500.00 for the KV Line Accessories.

On this score, it is clear that MOELCI agreed that the power transformer would be delivered and that the freight, handling, insurance, custom duties, and incidental expenses shall be shouldered by it.

In sum, since there was a meeting of the minds, there was consent on the part of David to transfer ownership of the power transformer to MOELCI in exchange for the price, thereby complying with the first element. Thus, the said document cannot just be considered a contract to sell but rather a perfected contract of sale.

On the basis of this express agreement, Article 1523 of the Civil Code becomes applicable.1âwphi1 It provides: Where, in pursuance of a contract of sale, the seller is authorized or required to send the goods to the buyer delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer is deemed to be a delivery of the goods to the buyer, except in the cases provided for in Article 1503, first, second and third paragraphs, or unless a contrary intent appears. (Emphasis supplied)

II. Now, the next question is, was there a delivery? MOELCI, in denying that the power transformer was delivered to it, argued that the Bill of Lading which David was relying upon was not conclusive. It argued that although the bill of lading was stamped "Released," there was nothing in it that indicated that said power transformer was indeed released to it or delivered to its possession. For this reason, it is its position that it is not liable to pay the purchase price of the 10 MVA power transformer.

Thus, the delivery made by David to William Lines, Inc., as evidenced by the Bill of Lading, was deemed to be a delivery to MOELCI. David was authorized to send the power transformer to the buyer pursuant to their agreement. When David sent the item through the carrier, it amounted to a delivery to MOELCI.

This Court is unable to agree with the CA that there was no delivery of the items. On the contrary, there was delivery and release.

Furthermore, in the case of Behn, Meyer & Co. (Ltd.) v. Yangco,14 it was pointed out that a specification in a contract relative to the payment of freight can be taken to indicate the intention of the parties with regard to the place of delivery. So that, if the buyer is to pay the freight, as in this case, it is reasonable to suppose that the subject of the sale is transferred to the buyer at the point of shipment. In other words, the title to the goods transfers to the buyer upon shipment or delivery to the carrier.

To begin with, among the terms and conditions of the proposal to which MOELCI agreed stated: 2. Delivery – Ninety (90) working days upon receipt of your purchase order and downpayment. C&F Manila, freight, handling, insurance, custom duties and incidental expenses shall be for the account of MOELCI II. 13(Emphasis supplied)

Of course, Article 1523 provides a mere presumption and in order to overcome said presumption, MOELCI should have presented

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evidence to the contrary. The burden of proof was shifted to MOELCI, who had to show that the rule under Article 1523 was not applicable. In this regard, however, MOELCI failed.

settled that the award of attorney's fees is the exception rather than the rule. Counsel's fees are not awarded every time a party prevails in a suit because of the policy that no premium should be placed on the right to litigate. Attorney's fees, as part of damages, are not necessarily equated to the amount paid by a litigant to a lawyer. In the ordinary sense, attorney's fees represent the reasonable compensation paid to a lawyer by his client for the legal services he has rendered to the latter; while in its extraordinary concept, they may be awarded by the court as indemnity for damages to be paid by the losing party to the prevailing party. Attorney's fees as part of damages are awarded only in the instances specified in Article 2208 of the Civil Code 17 which demands factual, legal, and equitable justification. Its basis cannot be left to speculation or conjecture. In this regard, none was proven.

There being delivery and release, said fact constitutes partial performance which takes the case out of the protection of the Statute of Frauds. It is elementary that the partial execution of a contract of sale takes the transaction out of the provisions of the Statute of Frauds so long as the essential requisites of consent of the contracting parties, object and cause of the obligation concur and are clearly established to be present.15 That being said, the Court now comes to David’s prayer that MOELCI be made to pay the total sum of P 5,472,722.27 plus the stipulated interest at 24% per annum from the filing of the complaint. Although the Court agrees that MOELCI should pay interest, the stipulated rate is, however, unconscionable and should be equitably reduced. While there is no question that parties to a loan agreement have wide latitude to stipulate on any interest rate in view of the Central Bank Circular No. 905 s. 1982 which suspended the Usury Law ceiling on interest effective January 1, 1983, it is also worth stressing that interest rates whenever unconscionable may still be reduced to a reasonable and fair level. There is nothing in the said circular which grants lenders carte blanche authority to raise interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their assets.16 Accordingly, the excessive interest of 24% per annum stipulated in the sales invoice should be reduced to 12% per annum.

Moreover, in the absence of stipulation, a winning party may be awarded attorney's fees only in case plaintiffs action or defendant's stand is so untenable as to amount to gross and evident bad faith.18 is MOELCI's case cannot be similarly classified. Also, David's claim for the balance of P73,059.76 plus the stipulated interest is denied for being unsubstantiated. WHEREFORE, the petition Is GRANTED. The July 8, 2010 Decision of the Court of Appeals Is REVERSED and SET ASIDE. Respondent Misamis Occidental II Electric Cooperative, Inc. is ordered to pay petitioner Virgilio S. David the total sum of P5,472,722.27 with interest at the rate of 12o/o per annum reckoned from the filing of the complaint until fully paid.

Indeed, David was compelled to file an action against MOELCI but this reason alone will not warrant an award of attorney’s fees. It is

SO ORDERED. JOSE CATRAL MENDOZA

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Associate Justice WE CONCUR:

Footnotes PRESBITERO J. VELASCO, JR. Associate Justice Chairperson

* Designated Acting Member in lieu of Associate Justice Roberto A. Abad, per Special Order No. 1244 dated June 26, 2012.

DIOSDADO M. PERALTA BIENVENIDO L. REYES* Associate Justice Associate Justice ESTELA M. PERLAS-BERNABE Associate Justice

1 Rollo, pp. 94-10 I. Penned by Associate Justice Apolinario D. Bruse las, Jr. and concurred in by Associate Justice Mario L. Guarifta III and Associate Justice Rodil V. Zalameda. 2 Id. at 65-77. Penned by Judge Felixberto T. Olalia, Jr.

ATT E STAT I O N

3 Id. at 74.

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

4 Id. at 125. 5 G.R. No. 168819, November 27, 2008, 572 SCRA 143, 157.

PRESBITERO J. VELASCO, JR. Associate Justice Chairperson, Third Division

6 Cirtek Employees Labor Union-Federation of Free Workers v. Cirtek Electronics, Inc., G.R. No. 190515, June 06, 2011, 650 SCRA 656, 660.

C E RT I F I CAT I O N

7 Rollo, p. 74.

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

8 Id. at 98-99. 9 Reyes v. Turapan, G.R. No. 188064, June 01, 2011, 650 SCRA 283, 297, citing Nabus v. Joaquin & Pacson, G.R. No. 161318, November 25, 2009, 605 SCRA 334, 348-353.

ANTONIO T. CARPIO Senior Associate Justice (Per Section 12, R.A. No. 296, The Judiciary Act of 1948, as amended)

10 Id. 11 Id. 12 Id.

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13 Records, p. 4. 14 38 Phil. 602, 605 (1918). 15 Dao Heng Bank, Inc. v. Spouses Laigo, G.R. No. 173856, November 20, 2008, 571 SCRA 434, 443. 16 Castro v. Tan, G.R. No. 168940, November 24, 2009, 605 SCRA 231, 237-238. 17 ld. at 455. 18 Benedicta v. Villajlores, G.R. No. 185020, October 6, 2010,632 SCRA 446,456.

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Republic of the Philippines SUPREME COURT Manila

to pay the consideration of twelve million pesos (P12,000,000.00) and assume the existing mortgage obligation on the said buses in favor of Phil. Hino Sales Corporation. Accordingly, R. Transport delivered to Macasaet two (2) passenger buses.

SECOND DIVISION G.R. No. 172446

Despite repeated demands, however, Macasaet failed to pay the stipulated purchase price. This prompted R. Transport to file a complaint seeking the issuance of a writ of replevin, praying for judgment declaring R. Transport as the lawful owner and possessor of the passenger buses and ordering Macasaet to remit the amount of P660,000.00 representing the income generated by the two buses from 16 October 1995 to 2 January 1996.6

October 10, 2007

ALEXANDER "ALEX" MACASAET, petitioner, vs. R. TRANSPORT CORPORATION, respondent. DECISION TINGA, J.:

Prior to the execution of the contract, "Special Trip Contract" was entered into by the parties on 8 October 1995.7 This contract stipulated that R. Transport would lease the four buses subject of the deed of sale to Macasaet for the sum ofP10,000.00 a day per bus or a total of P280,000.00 for the duration of one week, from 15-22 October 1995.8 Respondent's finance officer testified that the purpose of the contract was to support the delivery of the first two buses pending formal execution of the deed of sale.9

This petition seeks the reversal of the Decision1 of the Court of Appeals dated 5 October 2005 in CA G.R. CV No. 70585, as well as its Resolution2 dated 28 March 2006 denying petitioner's motion for reconsideration. First, the factual background. On 3 January 1996, a Complaint for Recovery of Possession and Damages3 was filed by herein respondent R. Transport Corporation against herein petitioner Alexander Macasaet before the Regional Trial Court (RTC) of Makati, Branch 147. The complaint alleged that R. Transport was a holder of Certificates of Public Convenience (CPC) to operate a public utility bus service within Metro Manila and the provinces whereas New Mindoro Transport Classic (NMTC), represented by petitioner, operates a transportation company in Oriental Mindoro. On 11 October 1995, and Macasaet entered into a "Deed of Sale with Assumption of Mortgage" (deed of sale)4 over four (4) passenger buses5 whereby Macasaet undertook

On 8 January 1996, on R. Transport's motion, the trial court issued a writ of seizure10 ordering the sheriff to take possession of the two buses in NMTC subject to R. Transport's filing of a bond in the amount of P12,000,000.00. The sheriff recovered the two buses and delivered them to R. Transport on 16 January 1996.11 For his defense, petitioner alleged that he had paid respondent the full consideration of P12,000,000.00 and had agreed to assume the mortgage obligation in favor of Phil. Hino Sales Corporation. He claimed ownership over the four passenger buses, including the two

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buses already delivered to him. He further contended that he had already remitted P120,000.00 to respondent as partial payment of the mortgage obligation. Petitioner admitted that he had been earning at least P7,000.00 per day on each of the buses.12 For his counterclaim, he prayed for the return of the bus units seized and the immediate delivery of the other two units, as well as for payment of damages.13

Dissatisfied with the RTC's refusal to award rentals, respondent filed a petition for review before the Court of Appeals asserting its right as an owner to the fruits of the two passenger buses, over the fruits thereof, i.e., the income derived from their use. The Court of Appeals, in its Decision dated 5 October 2005, sustained the trial court's finding that ownership over the passenger buses remained with respondent.

In its Decision14 dated 15 February 2001, the RTC upheld the right of respondent to possess the two buses but dismissed its claim for recovery of unpaid rentals for the use of the two buses. The dispositive portion of the decision reads as follows:

Unlike the RTC, the Court of Appeals ruled that the deed of sale was not perfected, thus, respondent retained ownership over the buses. It further ordered petitioner to remit the income from the passenger buses in the amount of P7,000.00 per day for the period between 16 October 1995 and 16 January 1996, deducting therefrom the amount of P120,000.00 which had already been remitted to respondent.18

WHEREFORE, in view of the foregoing, the Court hereby renders judgment in favor of the defendant and against plaintiff, dismissing the Complaint as regards the claim for recovery of the unpaid rentals of the two (2) passenger buses which were used by the defendant from October 16, 1995 until January 16, 1996 for lack of evidence.

Macasaet filed a motion for reconsideration which the appellate court denied. Hence, the instant petition raising this sole issue: Is Section 34 of Rule 132 of the Rules of Court which states that "the court shall consider no evidence which has not been formally offered" applicable in the case at bar?19 However, other interrelated issues have to be looked into to resolve the controversy.

SO ORDERED. 15 The trial court observed that there was no basis for the payment of unpaid rentals because respondent failed to formally offer in evidence the records of operational expenses incurred by the buses delivered to petitioner and marked as Exhibits "W," "W-1" to "W3."16 The trial court did not bother to give a definitive ruling on the issues related to the counterclaim for specific performance of the deed of sale on the ground that the issuance of a writ of replevin effectively disposed of the cause of action in the principal complaint, which is recovery of possession. The trial court was likewise silent with respect to the status of the deed of sale.17

Petitioner argues in the main that there was no legal and factual basis for the Court of Appeals to order the remittance of income. He harps on the fact that there was no lease agreement alleged in respondent's complaint to support its claim for unpaid rentals. He reiterates the trial court's finding that the exhibits tending to prove the rentals were not formally offered in evidence. Moreover, no other competent evidence was presented to substantiate its claim for unpaid rentals.20Respondent, in its comment, merely parrots the

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ruling of the Court of Appeals, petitioner notes.21

Firstly, the court a quo found that no payment has been made by the defendant-appellee, for otherwise, it could not have upheld the plaintiff-appellant's possession over the subject buses.22

Crucial to the resolution of the case is the continuing efficacy of the deed of sale, which in turn is the basis in determining the ownership of the buses. Respondent, on the other hand, claims that the contract was never consummated for lack of consideration and because of the subsequent disapproval of the security finance needed for petitioner to assume the mortgage obligation. On the other hand, petitioner asserts ownership over the subject buses by virtue of payment of the stipulated consideration for the sale.

The Court of Appeals erred in stating that the deed of sale was not perfected, for it was. There was no consummation, though. However, the rescission or resolution of the deed of sale is in order. The essential requisites of a contract under Article 1318 of the New Civil Code are: (1) consent of the contracting parties; (2) object certain which is the subject matter of the contract; and (3) cause of the obligation which is established. Thus, contracts, other than real contracts are perfected by mere consent which is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. Once perfected, they bind other contracting parties and the obligations arising therefrom have the force of law between the parties and should be complied with in good faith. The parties are bound not only to the fulfillment of what has been expressly stipulated but also to the consequences which, according to their nature, may be in keeping with good faith, usage and law.23

The appellate court declared that the non-perfection of the deed of sale precluded petitioner from possessing and enjoying the buses, including the income thereof. Explained the appellate court: True, the plaintiff-appellant and the defendant-appellee have no agreement as to the payment of rentals for the subject passenger buses, since what was actually agreed upon by the parties herein, was not the lease, but the sale of the subject buses to the defendant-appellee in the amount of P12,000,000.00, with assumption of mortgage, as evidenced by the Deed of Sale with Assumption of Mortgage.

Being a consensual contract, 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.24 A perfected contract of sale imposes reciprocal obligations on the parties whereby the vendor obligates himself to transfer the ownership of and to deliver a determinate thing to the buyer who, in turn, is obligated to pay a price certain in

It was pursuant to this Deed of Sale with Assumption of Mortgage that the subject two passenger buses were delivered by the plaintiff-appellant to the defendant-appellee in October,[sic] 1995. The said contract was the basis of the defendant-appellee's possession and enjoyment of the subject property, which includes entitlement to the income thereof. However, the aforementioned contract of sale has never been perfected.

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money or its equivalent.25 Failure of either party to comply with his obligation entitles the other to rescission as the power to rescind is implied in reciprocal obligations.26

purchase price, and that paved the way for the issuance of a writ of replevin. Petitioner did not challenge the finding of the trial court before the Court of Appeals and this Court. He did not also controvert the non-consummation of the assumption of mortgage at any level of the proceedings.

Applying these legal precepts to the case at bar, we hold that respondent has the right to rescind or cancel the deed of sale in view of petitioner's failure to pay the stipulated consideration. Montecillo v. Reynes,27 cited by the appellate court, is particularly instructive in distinguishing the legal effects of "failure to pay consideration" and "lack of consideration:"

Non-payment of the purchase price of property constitutes a very good reason to rescind a sale for it violates the very essence of the contract of sale.31 While it is preferable that respondent instead should have filed an action to resolve or cancel the deed as the right to do so must be invoked judicially,32 this shortcoming was cured when the complaint itself made out a case for rescission or resolution for failure of petitioner to comply with his obligation to pay the full purchase price. The complaint relevantly alleged:

x x x Failure to pay the consideration is different from lack of consideration. The former results in a right to demand the fulfillment or cancellation of the obligation under an existing contract, while the latter prevents the existence of a valid contract.

xxxx

Where the deed of sale states that the purchase price has been paid but in fact has never been paid, the deed of sale is null and void ab initio for lack of consideration. x x x 28

3. (a) That on October 11, 1995, the plaintiff and the defendant entered into and executed a Deed of Sale with Assumption of Mortgage with plaintiff as Vendor and the defendant as Vendee covering four (4) units of passenger airconditioned buses. x x x

The Court of Appeals however failed to consider that in the instant case, there was failure on the part of petitioner to pay the purchase price and to complete the assumption of mortgage. The latter argued before the lower court that payment was in fact made and counterclaimed for the immediate delivery of the two other passenger buses and payment of damages.29 However, this claim remained a claim and was not substantiated.

3. (b) That the plaintiff and the defendant in said Deed of Sale with Assumption of Mortgage x x x hereof agreed that the price of the sale of the above-described motor vehicles is in the sum of PESOS TWELVE MILLION (P12,000,000.00), Philippine Currency, with the stipulation that the defendant as Vendee will assume the existing mortgage of the above-described motor vehicle with PHIL. HINO SALES CORPORATION and consequently, will assume the balance of the remaining obligation due to PHIL.

While the Court of Appeals relied on the text of the deed of sale which adverts to payment of the purchase price,30 the non-payment of the purchase price was no longer an issue at the appellate level. Respondent presented strong evidence that petitioner did not pay the

13

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HINO SALES CORPORATION as agreed upon in the said Deed of Sale with Assumption of Mortgage;

currency, the purchase price of the sale of the four (4) passenger buses,33

3. (c) That pursuant to said Deed of Sale with Assumption of Mortgage, the plaintiff delivered to the defendant at Calapan, Oriental Mindoro, the first two (2) motor vehicles x x x withholding the other two (2) passenger buses pending the payment by the defendant to the plaintiff of the purchase price of the sale of PESOS TWELVE MILLION (P12,000,000.00), Philippine currency and assumption of mortgage by said defendant obligating himself to pay the remaining balance of the obligation due to the PHIL. HINO SALES CORPORATION constituted over the abovedescribed motor vehicles;

xxxx As previously noted, petitioner did not pay the full purchase price as stipulated in the contract whereas respondent complied with its obligation when it delivered the two buses to petitioner. A necessary consequence of rescission is restitution with payment of damages. Article 1191 provides: xxxx The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.

3. (d) That inspite of repeated demands made by the plaintiff to the defendant to pay the purchase price of the sale x x x the defendant, in evident bad faith, refused and failed and continue to refuse and fail to pay the plaintiff the purchase price of the said vehicles;

xxxx Also, corollary to the rescission of the contract of sale is the recovery of possession of the object thereof. Thus, petitioner's possession over the passenger buses became unlawful when upon demand for return, he wrongfully retained possession over the same.

xxxx 4. b.) That the plaintiff-applicant is the owner of the two (2) buses claimed as above-described and is entitled to the rightful possession thereof x x x

In ordering petitioner to remit to respondent the income derived from the passenger buses, the appellate court ratiocinated thus: Although the parties herein did not agree on the rentals for the use of the property, the fact that the defendant-appellee was able to use the two passenger buses for the months of October, [sic] 1995 to January, [sic] 1996, and has derived income therefrom, was acknowledged by the court a quo and the defendant-appellee himself.

4. c.) That the above-described two (2) units of passenger buses are wrongfully detained by the defendant pretending that he is the owner under the Deed of Sale with Assumption of Mortgage which pretension is false because the defendant has not paid the plaintiff any single centavo out of the PESOS TWELVE MILLION (P12,000,000.00), Philippine

14

CASES IN SALES (SECOND YEAR – SECOND SEMESTER)

Under such circumstances, it is but fair that the defendantappellee be made to pay reasonable rentals for the use of the two passenger buses from the time that they were delivered, until they were seized from him. It would be against the equitable proscription against unjust enrichment for the defendant-appellee to keep the income from a property over which he has no legal right. It would be unfair to excuse the defendant-appellee from the payment of reasonable rentals because he enjoyed and made use of the subject passenger buses. It is a basic rule in law that no one shall unjustly enrich himself at the expense of another. Niguno non deue enriquecerse tortizamente condaño de otro.

concluded that he was liable to respondent for damages, in the form of reasonable rentals for the use of the passenger buses.

Thus, a modification of the decision of the court a quo is in order.

The appellate court arrived at the amount of P7,000.00 per day as income for the use of the two passenger buses due to respondent on the basis of the allegations in the answer of petitioner.36 The award cannot be sustained because no evidence was produced to support this averment made by petitioner. Petitioner did not present any record or journal that would have evidenced the earnings of the passenger buses for said period. Bare allegations would not suffice.

However, with respect to the amount of damages, we differ from the award of the appellate court. Settled is the rule that actual damages must be proved with reasonable degree of certainty. A party is entitled only up to such compensation for the pecuniary loss that he has duly proven. It cannot be presumed. Absent proof of the amount of actual damages sustained, the court cannot rely on speculations, conjectures, or guesswork as to the fact and amount of damages, but must depend upon competent proof that they have been suffered by the injured party and on the best obtainable evidence of the actual amount thereof.35

In view of the plaintiff-appellant's failure to substantiate its claim for the unpaid rentals amounting to P660,000.00, we could not grant the same. However, we deem it just for the defendant-appellee to remit the plaintiff-appellant the income he derived from the subject passenger buses in the amount of P7,000.00 per day within the period that they were in the defendant-appellant's possession, that is from October 16, 1997 to January 16, 1995, minus the amount of P120,000.00 which the defendant-appellee already remitted to the plaintiffappellant.34

Since the amount of damages awarded by the Court of Appeals was founded merely on speculations, we turn to the provisions of the Special Trip Contract. In said contract, the rental is fixed at P10,000.00 per day for each bus. This duly executed contract was presented, marked and formally offered in evidence. The fact that Macasaet voluntarily signed the contract evinced his acquiescence to its terms, particularly the amount of rentals. Therefore, the amount of P1,460,000.00 is deemed reasonable compensation for the use of the passenger buses, computed as follows:

It can be inferred from this decision that the appellate court did not consider petitioner liable for the unpaid rentals when it noted that respondent had failed to support its claim over it. Instead, it

15

CASES IN SALES (SECOND YEAR – SECOND SEMESTER)

Amt of rentals per bus: x No. of buses:

P10,000.00 2

Amt of rentals per day: x No. of days (16 Oct-2 Jan)

P 20,000.00 79

amount of P1,460,000.00 with interest at 12% per annum from finality of this decision, with a lien thereon corresponding to additional filing fees adverted to above. The Clerk of Court of Regional Trial Court of Makati is directed to assess and collect additional filing fees. SO ORDERED.

P1,580,000.00 - Payment by Macasaet TOTAL

the the the the

Quisumbing, Carpio, Carpio-Morales, Velasco, Jr., JJ., concur.

120,000.00

Footnotes 1 Rollo, pp. 26-35. Penned by Associate Justice Amelita G. Tolentino, and concurred in by Associate Justices Eliezer R. De los Santos and Vicente S. E. Veloso.

P1,460,000.00

Since the amount awarded as damages in the form of reasonable rentals is more than the amount of rentals specified in the complaint, additional filing fees corresponding to the difference between the amount prayed for in the complaint and the award based on the evidence should be assessed as a lien on the judgment, as mandated by Section 2, Rule 141 of the Rules of Court, to wit:

2 Id. at 6. 3 Id. at 1-9. 4 Records, Vol. II, p. 334. 5 Records, Vol. 1, p. 2. Hino EK100-305604, Hino EK100305607, Hino EK100-305632, and Hino EK100-305903.

SEC. 2. Fees in lien. — Where the court in its final judgment awards a claim not alleged, or a relief different from, or more than that claimed in the pleading, the party concerned shall pay the additional fees which shall constitute a lien on the judgment in satisfaction of said lien. The clerk of court shall assess and collect the corresponding fees.37

6 Id. at 9. 7 TSN, 11 September 1996, p. 20. 8 Records, Vol. II, p. 359. 9 TSN, 11 September 1996, p. 21.

WHEREFORE, the petition is DENIED. However, the decision of the Court of Appeals is MODIFIED in that petitioner is ORDERED to pay respondent damages in the form of reasonable rentals in the

10 Records, Vol. I, p. 44. 11 Id. at 46.

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CASES IN SALES (SECOND YEAR – SECOND SEMESTER)

12 Rollo, pp. 56-57.

(1993), p. 498.

13 Records, Vol. I, p. 61.

27 G.R. No. 138018, 26 July 2002.

14 Records, Vol. II, p. 528.

28 Id. at 469.

15 Id. at 528.

29 Records, Vol. I, p. 65.

16 Id.

30 Records, Vol. II, p. 334.

17 Id. at 526-527.

31 Palma Gil v. Court of Appeals, 457 Phil. 804, 828 (2003).

18 Rollo, p. 35.

32 Civil Code, Art. 1191, par. 3.

19 Id. at 19.

33 Records, Vol. I, pp. 2-6.

20 Id. at 19-20.

34 Rollo, p. 33-34.

21 Id. at 47-54. 23 Manila Metal Container Corporation v. PNB, G.R. No. 166862, 20 December 2006, 511 SCRA 444, 463-464, citing Gomez v. Court of Appeals, 395 Phil. 115, 125-126 (2000) and Article 1315 of the New Civil Code.

35 Saguid v. Security Finance, Inc., G.R. No. 159467, 9 December 2005, 477 SCRA 256, 275 citing Sabio v. International Corporate Bank, Inc., G.R. No. 132709, 04 September 2001, 364 SCRA 385; Padillo v. Court of Appeals, G.R. No. 117907, 29 November 2001, 371 SCRA 27; and Manufacturers Building, Inc. v. Court of Appeals,G.R. No. 116847, 16 March 2001, 354 SCRA 521.

24 Civil Code, Art. 1475.

36 Records, Vol. I, p. 57.

25 Civil Code , Art. 1458.

37 Nestle Phils. v. FY Sons, Incorporated., G.R. No. 150780, 5 May 2006, 489 SCRA 624, 634, citing Benguet Electric Cooperative, Inc. v. Court of Appeals, 378 Phil. 1137, 11501151 (1999), citing Ayala Corporation v. Madayag, G.R. No. 88421, 30 January 1990, 181 SCRA 687; Ng Soon v. Alday, G.R. No. 85879, 29 September 1989, 178 SCRA 221.

22 Id. at 31-32.

26 Civil Code , Art. 1191, as differentiated from rescission of rescissible contracts under Art. 1380. In rescission under Art. 1191, the only ground is failure of one of the parties with comply with what is incumbent upon him, while in rescission under Article 1380, there are several grounds such as lesion, fraud and others expressly specified by law. See Jurado, Comments and Jurisprudence on Obligations and Contracts

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Republic of the Philippines SUPREME COURT

"2. Ordering appellees to restore possession of the subject house and lot to the appellants upon receipt of the full amount of the balance due on the purchase price; and

SECOND DIVISION G.R. No. 120820

"3. No pronouncement as to costs.

August 1, 2000

"SO ORDERED."1

SPS. FORTUNATO SANTOS and ROSALINDA R SANTOS, petitioners, vs. COURT OF APPEALS, SPS. MARIANO R. CASEDA and CARMEN CASEDA, respondents.

The undisputed facts of this case are as follows: The spouses Fortunato and Rosalinda Santos owned the house and lot consisting of 350 square meters located at Lot 7, Block 8, Better Living Subdivision, Parañaque, Metro Manila, as evidenced by TCT (S-11029) 28005 of the Register of Deeds of Parañaque. The land together with the house, was mortgaged with the Rural Bank of Salinas, Inc., to secure a loan of P150,000.00 maturing on June 16, 1987.

QUISUMBING, J.: For review on certiorari is the decision of the Court of Appeals, dated March 28, 1995, in CA-G.R. CV No. 30955, which reversed and set aside the judgment of the Regional Trial Court of Makati, Branch 133, in Civil Case No. 89-4759. Petitioners (the Santoses) were the owners of a house and lot informally sold, with conditions, to herein private respondents (the Casedas). In the trial court, the Casedas had complained that the Santoses refused to deliver said house and lot despite repeated demands. The trial court dismissed the complaint for specific performance and damages, but in the Court of Appeals, the dismissal was reversed, as follows:

Sometime in 1984, Rosalinda Santos met Carmen Caseda, a fellow market vendor of hers in Pasay City and soon became very good friends with her. The duo even became kumadres when Carmen stood as a wedding sponsor of Rosalinda's nephew. On June 16, 1984, the bank sent Rosalinda Santos a letter demanding payment of P16,915.84 in unpaid interest and other charges. Since the Santos couple had no funds, Rosalinda offered to sell the house and lot to Carmen. After inspecting the real property, Carmen and her husband agreed.

"WHEREFORE, in view of the foregoing, the decision appealed from is hereby REVERSED and SET ASIDE and a new one entered:

Sometime that month of June, Carmen and Rosalinda signed a document, which reads:

"1. GRANTING plaintiffs-appellants a period of NINETY (90) DAYS from the date of the finality of judgment within which to pay the balance of the obligation in accordance with their agreement;

"Received the amount of P54,100.00 as a partial payment of Mrs. Carmen Caseda to the (total) amount of 350,000.00

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CASES IN SALES (SECOND YEAR – SECOND SEMESTER)

(house and lot) that is own (sic) by Mrs. Rosalinda R. Santos.

In January 1989, the Santoses, seeing that the Casedas lacked the means to pay the remaining installments and/or amortization of the loan, repossessed the property. The Santoses then collected the rentals from the tenants.

(Sgd.) Carmen H. Caseda direct buyer Mrs. Carmen Caseda

In February 1989, Carmen Caseda sold her fishpond in Batangas. She then approached petitioners and offered to pay the balance of the purchase price for the house and lot. The parties, however, could not agree, and the deal could not push through because the Santoses wanted a higher price. For understandably, the real estate boom in Metro Manila at this time, had considerably jacked up realty values. On August 11, 1989, the Casedas filed Civil Case No. 89-4759, with the RTC of Makati, to have the Santoses execute the final deed of conveyance over the property, or in default thereof, to reimburse the amount of P180,000.00 paid in cash and P249,900.00 paid to the rural bank, plus interest, as well as rentals for eight months amounting to P32,000.00, plus damages and costs of suit.1âwphi1.nêt

"(Sgd.) Rosalinda Del R. Santos Owner Mrs. Rosalinda R. Santos House and Lot Better Living Subd. Parañaque, Metro Manila Section V Don Bosco St."2 The other terms and conditions that the parties agreed upon were for the Caseda spouses to pay: (1) the balance of the mortgage loan with the Rural bank amounting to P135,385.18; (2) the real estate taxes; (3) the electric and water bills; and (4) the balance of the cash price to be paid not later than June 16, 1987, which was the maturity date of the loan.3

After trial on the merits, the lower court disposed of the case as follows: "WHEREFORE, judgment is hereby ordered:

The Casedas gave an initial payment of P54,100.00 and immediately took possession of the property, which they then leased out. They also paid in installments, P81,696.84 of the mortgage loan. The Casedas, however, failed to pay the remaining balance of the loan because they suffered bankruptcy in 1987. Notwithstanding the state of their finances, Carmen nonetheless paid in March 1990, the real estate taxes on the property for 1981-1984. She also settled the electric bills from December 12, 1988 to July 12, 1989. All these payments were made in the name of Rosalinda Santos.

(a) dismissing plaintiff's (Casedas') complaint; and (b) declaring the agreement; marked as Annex "C" of the complaint rescinded. Costs against plaintiffs. "SO ORDERED."4 Said judgment of dismissal is mainly based on the trial court's finding that:

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"Admittedly, the purchase price of the house and lot was P485,385.18, i.e. P350,000.00 as cash payment and P135,385.18, assumption of mortgage. Of it plaintiffs [Casedas] paid the following: (1) P54,100.00 down payment; and (2) P81,694.64 installment payments to the bank on the loan (Exhs. E to E-19) or a total of P135,794.64. Thus, plaintiffs were short of the purchase price. They cannot, therefore, demand specific performance."5

negative. Because of failure of plaintiffs to liquidated the mortgage loan on time, it had ballooned from its original figure of P135,384.18 as of June 1984 to P337,280.78 as of December 31, 1988. Defendants [Santoses] had to pay the last amount to the bank to save the property from foreclosure. Logically, plaintiffs must share in the burden arising from their failure to liquidate the loan per their contractual commitment. Hence, the amount of P25,794.64 as their share in the defendants' damages in the form of increased loan-amount, is reasonable."6

The trial court further held that the Casedas were not entitled to reimbursement of payments already made, reasoning that:

On appeal, the appellate court, as earlier noted, reversed the lower court. The appellate court held that rescission was not justified under the circumstances and allowed the Caseda spouses a period of ninety days within which to pay the balance of the agreed purchase price.

"As earlier mentioned, plaintiffs made a total payment of P135,794.64 out of the purchase price of P485,385.18. The property was in plaintiffs' possession from June 1984 to January 1989 or a period of fifty-five months. During that time, plaintiffs leased the property. Carmen said the property was rented for P25.00 a day or P750.00 a month at the start and in 1987 it was increased to P2,000.00 and P4,000 a month. But the evidence is not precise when the different amounts of rental took place. Be that as it may, fairness demands that plaintiffs must pay defendants for the exercise of dominical rights over the property by renting it to others. The amount of P2,000.00 a month would be reasonable based on the average of P750.00, P2,000.00, P4,000.00 lease-rentals charged. Multiply P2,000 by 55 months, the plaintiffs must pay defendants P110,000 for the use of the property. Deducting this amount from the P135,794.64 payment of the plaintiffs on the property the difference is P25,794.64. Should the plaintiffs be entitled to a reimbursement of this amount? The answer is in the

Hence, this instant petition for review on certiorari filed by the Santoses. Petitioners now submit the following issues for our consideration: WHETHER OR NOT THE COURT OF APPEALS, HAS JURISDICTION TO DECIDE PRIVATE RESPONDENT'S APPEAL INTERPOSING PURELY QUESTIONS OF LAW. WHETHER THE SUBJECT TRANSACTION IS NOT A CONTRACT OF ABSOLUTE SALE BUT A MERE ORAL CONTRACT TO SELL IN WHICH CASE JUDICIAL DEMAND FOR RESCISSION (ART. 1592,7 CIVIL CODE) IS NOT APPLICABLE. ASSUMING ARGUENDO THAT A JUDICIAL DEMAND FOR RESCISSION IS REQUIRED, WHETHER

20

CASES IN SALES (SECOND YEAR – SECOND SEMESTER)

PETITIONERS' DEMAND AND PRAYER FOR RESCISSION CONTAINED IN THEIR ANSWER FILED BEFORE THE TRIAL SATISFIED THE SAID REQUIREMENT.

of the loan.12 The resolution of this question involved an evaluation of proof, and not only a consideration of the applicable statutory and case laws. Clearly, C.A.-G.R. CV No. 30955 did not involve pure questions of law, hence the Court of Appeals had jurisdiction and there was no violation of our Circular No. 2-90.

WHETHER OR NOT THE NON-PAYMENT OF MORE THAN HALF OF THE ENTIRE PURCHASE PRICE INCLUDING THE NON-COMPLIANCE WITH THE STIPULATION TO LIQUIDATE THE MORTGAGE LOAN ON TIME WHICH CAUSED GRAVE DAMAGE AND PREJUDICE TO PETITIONERS, CONSTITUTE SUBSTANTIAL BREACH TO JUSTIFY RESCISSION OF A CONTRACT TO SELL UNDER ARTICLE 1191 8 (CIVIL CODE).

Moreover, we find that petitioners took an active part in the proceedings before the Court of Appeals, yet they did not raise there the issue of jurisdiction. They should have raised this issue at the earliest opportunity before the Court of Appeals. A party taking part in the proceedings before the appellate court and submitting his case for its decision ought not to later on attack the court's decision for want of jurisdiction because the decision turns out to be adverse to him.13

On the first issue, petitioners argue that, since both the parties and the apellate court adopted the findings of trial court,9 no questions of fact were raised before the Court of Appeals. According to petitioners, CA-G.R. CV No. 30955, involved only pure questions of law. They aver that the court a quo had no jurisdiction to hear, much less decide, CA-G.R. CV No. 30955, without running afoul of Supreme Court Circular No. 290 (4) [c].10

The second and third issues deal with the question: Did the Court of Appeals err in holding that a judicial rescission of the agreement was necessary? In resolving both issues, we must first make a preliminary determination of the nature of the contract in question: Was it a contract of sale, as insisted by the respondents or a mere contract to sell, as contended by petitioners? Petitioners argue that the transaction between them and respondents was a mere contract to sell, and not a contract of sale, since the sole documentary evidence (Exh. D, receipt) referring to their agreement clearly showed that they did not transfer ownership of the property in question simultaneous with its delivery and hence remained its owners, pending fulfillment of the other suspensive conditions, i.e. full payment of the balance of the purchase price and the loan amortizations. Petitioners point to Manuel v. Rodriguez, 109 Phil. 1 (1960) and Luzon Brokerage Co., Inc. v. Maritime Building Co.,

There is a question of law in a given case when the doubt or difference arises as to how the law is on a certain set of facts, and there is a question of fact when the doubt or difference arises as to the truth or falsehood of the alleged facts.11 But we note that the first assignment of error submitted by respondents for consideration by the appellate court dealt with the trial court's finding that herein petitioners got back the property in question because respondents did not have the means to pay the installments and/or amortization

21

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Inc., 43 SCRA 93 (1972), where he held that article 1592 of the Civil Code is inapplicable to a contract to sell. They charge the court a quo with reversible error in holding that petitioners should have judicially rescinded the agreement with respondents when the latter failed to pay the amortizations on the bank loan.

Rosalinda Santos.18 We likewise find that the bank's cancellation and discharge of mortgage dated January 20, 1990, was made in favor of Rosalinda Santos.19 The foregoing circumstances categorically and clearly show that no valid transfer of ownership was made by the Santoses to the Casedas. Absent this essential element, their agreement cannot be deemed a contract of sale. We agree with petitioner's averment that the agreement between Rosalinda Santos and Carmen Caseda is a contract to sell. In contracts to sell, ownership is reserved the by the vendor and is not to pass until full payment of the purchase price. This we find fully applicable and understandable in this case, given that the property involved is a titled realty under mortgage to a bank and would require notarial and other formalities of law before transfer thereof could be validly effected.

Respondents insist that there was a perfected contract of sale, since upon their partial payment of the purchase price, they immediately took possession of the property as vendees, and subsequently leased it, thus exercising all the rights of ownership over the property. This showed that transfer of ownership was simultaneous with the delivery of the realty sold, according to respondents. It must be emphasized from the outset that a contract is what the law defines it to be, taking into consideration its essential elements, and not what the contracting parties call it.14 Article 145815 of the Civil Code defines a contract of sale. Note that the said article expressly obliges the vendor to transfer the ownership of the thing sold as an essential element of a contract of sale.16 We have carefully examined the contents of the unofficial receipt, Exh. D, with the terms and conditions informally agreed upon by the parties, as well as the proofs submitted to support their respective contentions. We are far from persuaded that there was a transfer of ownership simultaneously with the delivery of the property purportedly sold. The records clearly show that, notwithstanding the fact that the Casedas first took then lost possession of the disputed house and lot, the title to the property, TCT No. 28005 (S-11029) issued by the Register of Deeds of Parañaque, has remained always in the name of Rosalinda Santos.17 Note further that although the parties agreed that the Casedas would assume the mortgage, all amortization payments made by Carmen Caseda to the bank were in the name of

In view of our finding in the present case that the agreement between the parties is a contract to sell, it follows that the appellate court erred when it decreed that a judicial rescission of said agreement was necessary. This is because there was no rescission to speak of in the first place. As we earlier pointed, in a contract to sell, title remains with the vendor and does not pass on to the vendee until the purchase price is paid in full, Thus, in contract to sell, the payment of the purchase price is a positive suspensive condition. Failure to pay the price agreed upon is not a mere breach, casual or serious, but a situation that prevents the obligation of the vendor to convey title from acquiring an obligatory force.20 This is entirely different from the situation in a contract of sale, where non-payment of the price is a negative resolutory condition. The effects in law are not identical. In a contract of sale, the vendor has lost ownership of the thing sold and cannot recover it, unless the contract of sale is

22

CASES IN SALES (SECOND YEAR – SECOND SEMESTER)

rescinded and set aside.21 In a contract to sell, however, the vendor remains the owner for as long as the vendee has not complied fully with the condition of paying the purchase. If the vendor should eject the vendee for failure to meet the condition precedent, he is enforcing the contract and not rescinding it. When the petitioners in the instant case repossessed the disputed house and lot for failure of private respondents to pay the purchase price in full, they were merely enforcing the contract and not rescinding it. As petitioners correctly point out the Court of Appeals erred when it ruled that petitioners should have judicially rescinded the contract pursuant to Articles 1592 and 1191 of the Civil Code. Article 1592 speaks of non-payment of the purchase price as a resolutory condition. It does not apply to a contract to sell.22 As to Article 1191, it is subordinated to the provisions of Article 1592 when applied to sales of immovable property.23 Neither provision is applicable in the present case.

SO ORDERED. Mendoza, Buena and De Leon, Jr., JJ ., concur. Bellosillo, J ., on official leave. Footnotes: 1 Rollo, pp. 77-78. 2 Exhibit "D," Records, p. 119. 3 Id. at 215. 4 Rollo, p. 109. 5 Rollo, p. 107. 6 Rollo, p. 108. 7 "ART. 1592. In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act. After the demand, the court may not grant him a new term."

As to the last issue, we need not tarry to make a determination of whether the breach of contract by private respondents is so substantial as to defeat the purpose of the parties in entering into the agreement and thus entitle petitioners to rescission. Having ruled that there is no rescission to speak of in this case, the question is moot. WHEREFORE, the instant petition is GRANTED and the assailed decision of the Court of Appeals in CA-G.R. CV No. 30955 is REVERSED and SET ASIDE. The judgment of the Regional Trial Court of Makati, Branch 133, with respect to theDISMISSAL of the complaint in Civil Case No. 89-4759, is hereby REINSTATED. No pronouncement as to costs.1âwphi1.nêt

8 "ART. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. "The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages

23

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in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.

13 Tijam v. Sibonghanoy, 23 SCRA 29, 35-36 (1968).

"The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.

15 "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

14 Quiroga v. Parsons Hardware Co., 38 Phil. 501 (1918).

"This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with articles 1385 and 1338 and the Mortgage Law."

"A contract of sale may be absolute or conditional."

9 Rollo, p. 13.

16 Schmid & Oberly, Inc. v. RJL Martinez Fishing Corp., 166 SCRA 493, 501 (1988) citing Commissioner of Internal Revenue v. Constantino, 31 SCRA 779, 785 (1970); Ker & Co., Ltd., v. Lingad, 38 SCRA 524, 530 (1971) citing Salisbury v. Brooks, 94 SE 117 (1917).

10 "4. Erroneous Appeals. — An appeal taken to either the Supreme Court or the Court of Appeals by the wrong or inappropriate mode shall be dismissed. xxx

xxx

xxx

[c] Raising issues purely of law in the Court of Appeals, or appeal by wrong mode. — If an appeal under Rule 41 is taken from the Regional Trial Court to the Court of Appeals and therein the appellant raises only questions of law, the appeal shall be dismissed, issues purely of law not being reviewable by said Court. So, too, if an appeal is attempted from the judgment rendered by a Regional Trial Court in the exercise of its appellate jurisdiction by notice of appeal, instead of by petition for review, the appeal is inefficacious and should be dismissed."

17 Exhibit "A", Records, pp. 112-115.

11 Dela Torre v. Pepsi Cola Products Phils., Inc., 298 SCRA 363, 373 (1998); Commissioner of Internal Revenue v. Court of Appeals, 298 SCRA 83, 91 (1998).

22 Luzon Brokerage Co, Inc. v. Maritime Building Co., Inc., 43 SCRA 93, 104 (1972).

18 Exhibit "E", Id. p. 120; Exhibits "E-1" to "E-17", Id. pp. 121-129. 19 Exhibit "3", Id. at 164. 20 Ong v. Court of Appeals, 310 SCRA 1, 10 (1999) citing Agustin v. Court of Appeals, 186 SCRA 375 (1990);Roque v. Lapuz, 96 SCRA 741 (1980), Manuel v. Rodriguez, 109 Phil. 1 (1960). 21 TOLENTINO, V CIVIL CODE 24 (1992)

12 CA Rollo, p. 27.

24

23 Villaruel v. Tan King, 43 Phil. 251, 255 (1922).

CASES IN SALES (SECOND YEAR – SECOND SEMESTER)

Republic of the Philippines SUPREME COURT Manila

Engineer Peñero also prepared a sketch plan of the 345-square meter lot sold to respondent. From the result of the survey, it was found that respondent had enlarged the area which he purchased from the late Juan San Andres by 509 square meters. 3

SECOND DIVISION

Accordingly, the judicial administrator sent a letter, 4 dated July 27, 1987, to respondent demanding that the latter vacate the portion allegedly encroached by him. However, respondent refused to do so, claiming he had purchased the same from the late Juan San Andres. Thereafter, on November 24, 1987, the judicial administrator brought an action, in behalf of the estate of Juan San Andres, for recovery of possession of the 509-square meter lot.

G.R. No. 135634 May 31, 2000 HEIRS OF JUAN SAN ANDRES (VICTOR S. ZIGA) and SALVACION S. TRIA, petitioners, vs. VICENTE RODRIGUEZ, respondent.

In his Re-amended Answer filed on February 6, 1989, respondent alleged that apart from the 345-square meter lot which had been sold to him by Juan San Andres on September 28, 1964, the latter likewise sold to him the following day the remaining portion of the lot consisting of 509 square meters, with both parties treating the two lots as one whole parcel with a total area of 854 square meters. Respondent alleged that the full payment of the 509-square meter lot would be effected within five (5) years from the execution of a formal deed of sale after a survey is conducted over said property. He further alleged that with the consent of the former owner, Juan San Andres, he took possession of the same and introduced improvements thereon as early as 1964.

MENDOZA, J.: This is a petition for review on certiorari of the decision of the Court of Appeals 1 reversing the decision of the Regional Trial Court, Naga City, Branch 19, in Civil Case No. 87-1335, as well as the appellate court's resolution denying reconsideration. The antecedent facts are as follows: Juan San Andres was the registered owner of Lot No. 1914-B-2 situated in Liboton, Naga City. On September 28, 1964, he sold a portion thereof, consisting of 345 square meters, to respondent Vicente S. Rodriguez for P2,415.00. The sale is evidenced by a Deed of Sale. 2

As proof of the sale to him of 509 square meters, respondent attached to his answer a receipt (Exh. 2) 5 signed by the late Juan San Andres, which reads in full as follows:

Upon the death of Juan San Andres on May 5, 1965, Ramon San Andres was appointed judicial administrator of the decedent's estate in Special Proceedings No. R-21, RTC, Branch 19, Naga City. Ramon San Andres engaged the services of a geodetic engineer, Jose Peñero, to prepare a consolidated plan (Exh. A) of the estate.

Received from Vicente Rodriguez the sum of Five Hundred (P500.00) Pesos representing an advance

25

CASES IN SALES (SECOND YEAR – SECOND SEMESTER)

payment for a residential lot adjoining his previously paid lot on three sides excepting on the frontage with the agreed price of Fifteen (15.00) Pesos per square meter and the payment of the full consideration based on a survey shall be due and payable in five (5) years period from the execution of the formal deed of sale; and it is agreed that the expenses of survey and its approval by the Bureau of Lands shall be borne by Mr. Rodriguez.

payable to the subdivision. Thanks. Sincerely, (Sgd.) RAMON SAN ANDRES Vicente Rodriguez Penafrancia Subdivision, Naga City

Naga City, September 29, 1964.

P.S.

(Sgd.)

You can let bearer Enrique del Castillo sign for the amount.

JUAN R. SAN ANDRES Vendor

Received One Hundred Only

Noted:

(Sgd.)

(Sgd.) RAMON ANDRES

VICENTE RODRIGUEZ Vendee

SAN

3/30/66

Respondent also attached to his answer a letter of judicial administrator Ramon San Andres (Exh. 3), 6 asking payment of the balance of the purchase price. The letter reads:

Respondent deposited in court the balance of the purchase price amounting to P7,035.00 for the aforesaid 509-square meter lot. While the proceedings were pending, judicial administrator Ramon San Andres died and was substituted by his son Ricardo San Andres. On the other band, respondent Vicente Rodriguez died on August 15, 1989 and was substituted by his heirs. 7

Dear Inting, Please accommodate my request for Three Hundred (P300.00) Pesos as I am in need of funds as I intimated to you the other day.

Petitioner, as plaintiff, presented two witnesses. The first witness,

We will just adjust it with whatever balance you have

26

CASES IN SALES (SECOND YEAR – SECOND SEMESTER)

Engr. Jose Peñero, 8 testified that based on his survey conducted sometime between 1982 and 1985, respondent had enlarged the area which he purchased from the late Juan San Andres by 509 square meters belonging to the latter's estate. According to Peñero, the titled property (Exh. A-5) of respondent was enclosed with a fence with metal holes and barbed wire, while the expanded area was fenced with barbed wire and bamboo and light materials.

known after the survey of the subject lot. On September 20, 1994, the trial court 11 rendered judgment in favor of petitioner. It ruled that there was no contract of sale to speak of for lack of a valid object because there was no sufficient indication in Exhibit 2 to identify the property subject of the sale, hence, the need to execute a new contract. Respondent appealed to the Court of Appeals, which on April 21, 1998 rendered a decision reversing the decision of the trial court. The appellate court held that the object of the contract was determinable, and that there was a conditional sale with the balance of the purchase price payable within five years from the execution of the deed of sale. The dispositive portion of its decision's reads:

The second witness, Ricardo San Andres, 9 administrator of the estate, testified that respondent had not filed any claim before Special Proceedings No. R-21 and denied knowledge of Exhibits 2 and 3. However, he recognized the signature in Exhibit 3 as similar to that of the former administrator, Ramon San Andres. Finally, he declared that the expanded portion occupied by the family of respondent is now enclosed with barbed wire fence unlike before where it was found without fence.

IN VIEW OF ALL THE FOREGOING, the judgment appealed from is hereby REVERSED and SET ASIDE and a new one entered DISMISSING the complaint and rendering judgment against the plaintiff-appellee:

On the other hand, Bibiana B. Rodriguez, 10 widow of respondent Vicente Rodriguez, testified that they had purchased the subject lot from Juan San Andres, who was their compadre, on September 29, 1964, at P15.00 per square meter. According to her, they gave P500.00 to the late Juan San Andres who later affixed his signature to Exhibit 2. She added that on March 30, 1966; Ramon San Andres wrote them a letter asking for P300.00 as partial payment for the subject lot, but they were able to give him only P100.00. She added that they had paid the total purchase price of P7,035.00 on November 21, 1988 by depositing it in court. Bibiana B. Rodriquez stated that they had been in possession of the 509-square meter lot since 1964 when the late Juan San Andres signed the receipt. (Exh. 2) Lastly, she testified that they did not know at that time the exact area sold to them because they were told that the same would be

1. to accept the P7,035.00 representing the balance of the purchase price of the portion and which is deposited in court under Official Receipt No. 105754 (page 122, Records); 2. to execute the formal deed of sale over the said 509 square meter portion of Lot 1914-B-2 in favor of appellant Vicente Rodriguez; 3. to pay the defendant-appellant the amount of P50,000.00 as damages and P10,000.00 attorney's fees as stipulated by them during the trial of this case;

27

CASES IN SALES (SECOND YEAR – SECOND SEMESTER)

and

DESPITE NON-COMPLIANCE WITH THE MANDATORY REQUIREMENTS THEREOF.

4. to pay the costs of the suit. SO ORDERED.

IV. THE HON. COURT OF APPEALS ERRED IN HOLDING THAT LACHES AND PRESCRIPTION DO NOT APPLY TO RESPONDENT WHO SOUGHT INDIRECTLY TO ENFORCE THE PURPORTED CONTRACT AFTER THE LAPSE OF 24 YEARS.

Hence, this petition. Petitioner assigns the following errors as having been allegedly committed by the trial court: I. THE HON. COURT OF APPEALS ERRED IN HOLDING THAT THE DOCUMENT (EXHIBIT "2") IS A CONTRACT TO SELL DESPITE ITS LACKING ONE OF THE ESSENTIAL ELEMENTS OF A CONTRACT, NAMELY, OBJECT CERTAIN AND SUFFICIENTLY DESCRIBED.

The petition has no merit. First. Art. 1458 of the Civil Code provides: 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.

II. THE HON. COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER IS OBLIGED TO HONOR THE PURPORTED CONTRACT TO SELL DESPITE NON-FULFILLMENT BY RESPONDENT OF THE CONDITION THEREIN OF PAYMENT OF THE BALANCE OF THE PURCHASE PRICE.

As thus defined, the essential elements of sale are the following:

III. THE HON. COURT OF APPEALS ERRED IN HOLDING THAT CONSIGNATION WAS VALID

As shown in the receipt, dated September 29, 1964, the late Juan San Andres received P500.00 from respondent as "advance payment

A contract of sale may be absolute or conditional. 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. 12

28

CASES IN SALES (SECOND YEAR – SECOND SEMESTER)

for the residential lot adjoining his previously paid lot on three sides excepting on the frontage; the agreed purchase price was P15.00 per square meter; and the full amount of the purchase price was to be based on the results of a survey and would be due and payable in five (5) years from the execution of a deed of sale.

which has a total area of 854 square meters, and is clearly what was referred to in the receipt as the "previously paid lot." Since the lot subsequently sold to respondent is said to adjoin the "previously paid lot" on three sides thereof, the subject lot is capable of being determined without the need of any new contract. The fact that the exact area of these adjoining residential lots is subject to the result of a survey does not detract from the fact that they are determinate or determinable. As the Court of Appeals explained: 15

Petitioner contends, however, that the "property subject of the sale was not described with sufficient certainty such that there is a necessity of another agreement between the parties to finally ascertain the identity; size and purchase price of the property which is the object of the alleged sale." 1 He argues that the "quantity of the object is not determinate as in fact a survey is needed to determine its exact size and the full purchase price therefor" 14 In support of his contention, petitioner cites the following provisions of the Civil Code:

Concomitantly, the object of the sale is certain and determinate. Under Article 1460 of the New Civil Code, a thing sold is determinate if at the time the contract is entered into, the thing is capable of being determinate without necessity of a new or further agreement between the parties. Here, this definition finds realization.

Art. 1349. The object of every contract must be determinate as to its kind. The fact that the quantity is not determinable shall not be an obstacle to the existence of a contract, provided it is possible to determine the same without the need of a new contract between the parties.

Appellee's Exhibit "A" (page 4, Records) affirmingly shows that the original 345 sq. m. portion earlier sold lies at the middle of Lot 1914-B-2 surrounded by the remaining portion of the said Lot 1914-B-2 on three (3) sides, in the east, in the west and in the north. The northern boundary is a 12 meter road. Conclusively, therefore, this is the only remaining 509 sq. m. portion of Lot 1914-B-2 surrounding the 345 sq. m. lot initially purchased by Rodriguez. It is quite difined, determinate and certain. Withal, this is the same portion adjunctively occupied and possessed by Rodriguez since September 29, 1964, unperturbed by anyone for over twenty (20) years until appellee instituted this suit.

Art. 1460. . . . The requisite that a thing be determinate is satisfied if at the time the contract is entered into, the thing is capable of being made determinate without the necessity of a new and further agreement between the parties. Petitioner's contention is without merit. There is no dispute that respondent purchased a portion of Lot 1914-B-2 consisting of 345 square meters. This portion is located in the middle of Lot 1914-B-2,

29

CASES IN SALES (SECOND YEAR – SECOND SEMESTER)

Thus, all of the essential elements of a contract of sale are present, i.e., that there was a meeting of the minds between the parties, by virtue of which the late Juan San Andres undertook to transfer ownership of and to deliver a determinate thing for a price certain in money. As Art. 1475 of the Civil Code provides:

received the P500.00 downpayment on March 30, 1966, Ramon R. San Andres wrote a letter to Rodriguez and received from Rodriguez the amount of P100.00 (although P300.00 was being requested) deductible from the purchase price of the subject portion. Enrique del Castillo, Ramon's authorized agent, correspondingly signed the receipt for the P100.00. Surely, this is explicitly a veritable proof of he sale over the remaining portion of Lot 1914-B-2 and a confirmation by Ramon San Andres of the existence thereof. 16

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. . . . That the contract of sale is perfected was confirmed by the former administrator of the estates, Ramon San Andres, who wrote a letter to respondent on March 30, 1966 asking for P300.00 as partial payment for the subject lot. As the Court of Appeals observed:

There is a need, however, to clarify what the Court of Appeals said is a conditional contract of sale. Apparently, the appellate court considered as a "condition" the stipulation of the parties that the full consideration, based on a survey of the lot, would be due and payable within five (5) years from the execution of a formal deed of sale. It is evident from the stipulations in the receipt that the vendor Juan San Andres sold the residential lot in question to respondent and undertook to transfer the ownership thereof to respondent without any qualification, reservation or condition. In Ang Yu Asuncion v.Court of Appeals, 17 we held:

Without any doubt, the receipt profoundly speaks of a meeting of the mind between San Andres and Rodriguez for the sale of the property adjoining the 345 square meter portion previously sold to Rodriguez on its three (3) sides excepting the frontage. The price is certain, which is P15.00 per square meter. Evidently, this is a perfected contract of sale on a deferred payment of the purchase price. All the pre-requisite elements for a valid purchase transaction are present. Sale does not require any formal document for its existence and validity. And delivery of possession of land sold is a consummation of the sale (Galar vs. Husain, 20 SCRA 186 [1967]). A private deed of sale is a valid contract between the parties (Carbonell v. CA, 69 SCRA 99 [1976]).

In Dignos v. Court of Appeals (158 SCRA 375), we have said that, although denominated a "Deed of Conditional Sale," a sale is still absolute where the contract is devoid of any proviso that title is reserved or the right to unilaterally rescind is stipulated, e.g., until or unless the price is paid. Ownership will then be transferred to the buyer upon actual or constructive delivery (e.g., by the execution of a public document)

In the same vein, after the late Juan R. San Andres

30

CASES IN SALES (SECOND YEAR – SECOND SEMESTER)

of the property sold. Where the condition is imposed upon the perfection of the contract itself, the failure of the condition would prevent such perfection. If the condition is imposed on the obligation of a party which is not fulfilled, the other party may either waive the condition or refuse to proceed with the sale. (Art. 1545, Civil Code).

a survey shall be due and payable in five (5) years from the execution of a formal deed of sale" is not a condition which affects the efficacy of the contract of sale. It merely provides the manner by which the full consideration is to be computed and the time within which the same is to be paid. But it does not affect in any manner the effectivity of the contract. Consequently, the contention that the absence of a formal deed of sale stipulated in the receipt prevents the happening of a sale has no merit.

Thus, in. one case, when the sellers declared in a "Receipt of Down Payment" that they received an amount as purchase price for a house and lot without any reservation of title until full payment of the entire purchase price, the implication was that they sold their property. 18 In People's Industrial Commercial Corporation v. Court of Appeals, 19 it was stated:

Second. With respect to the contention that the Court of Appeals erred in upholding the validity of a consignation of P7,035.00 representing the balance of the purchase price of the lot, nowhere in the decision of the appellate court is there any mention of consignation. Under Art. 1257 of this Civil Code, consignation is proper only in cases where an existing obligation is due. In this case, however, the contracting parties agreed that full payment of purchase price shall be due and payable within five (5) years from the execution of a formal deed of sale. At the time respondent deposited the amount of P7,035.00 in the court, no formal deed of sale had yet been executed by the parties, and, therefore, the fiveyear period during which the purchase price should be paid had not commenced. In short, the purchase price was not yet due and payable.

A deed of sale is considered absolute in nature where there is neither a stipulation in the deed that title to the property sold is reserved in the seller until full payment of the price, nor one giving the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period. Applying these principles to this case, it cannot be gainsaid that the contract of sale between the parties is absolute, not conditional. There is no reservation of ownership nor a stipulation providing for a unilateral rescission by either party. In fact, the sale was consummated upon the delivery of the lot to respondent. 20 Thus, Art. 1477 provides that the ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof.

This is not to say, however, that the deposit of the purchase price in the court is erroneous. The Court of Appeals correctly ordered the execution of a deed of sale and petitioners to accept the amount deposited by respondent. Third. The claim of petitioners that the price of P7,035.00 is iniquitous is untenable. The amount is based on the agreement of the

The stipulation that the "payment of the full consideration based on

31

CASES IN SALES (SECOND YEAR – SECOND SEMESTER)

parties as evidenced by the receipt (Exh. 2). Time and again, we have stressed the rule that a contract is the law between the parties, and courts have no choice but to enforce such contract so long as they are not contrary to law, morals, good customs or public policy. Otherwise, court would be interfering with the freedom of contract of the parties. Simply put, courts cannot stipulate for the parties nor amend the latter's agreement, for to do so would be to alter the real intentions of the contracting parties when the contrary function of courts is to give force and effect to the intentions of the parties.

Quisumbing and De Leon, Jr., JJ., are on leave. Footnotes 1 Per Justice Conrado M. Vasquez and concurred in by Justices Fermin A. Martin, Jr. and Artemio S. Tuquero. 2 Records, p. 119. 3 TSN, pp. 1-23, April 5, 1993. 4 Records, p. 84. 5 Id., p. 120. 6 Id., p. 121.

Fourth. Finally, petitioners argue that respondent is barred by prescription and laches from enforcing the contract. This contention is likewise untenable. The contract of sale in this case is perfected, and the delivery of the subject lot to respondent effectively transferred ownership to him. For this reason, respondent seeks to comply with his obligation to pay the full purchase price, but because the deed of sale is yet to be executed, he deemed it appropriate to deposit the balance of the purchase price in court. Accordingly, Art. 1144 of the Civil Code has no application to the instant case. 21Considering that a survey of the lot has already been conducted and approved by the Bureau of Lands, respondent's heirs, assign or successors-in-interest should reimburse the expenses incurred by herein petitioners, pursuant to the provisions of the contract.

7 Id., p. 69. 8 TSN, pp. 1-23, April 5, 1993. 9 TSN, pp. 1-22, July 7, 1993. 10 TSN, pp. 1-33, April 13, 1994. 11 Presided over by Judge Gregorio E. Manio, Jr. 12 Jovan Land, Inc. v. Court of Appeals, 268 SCRA 160 (1997); Coronel v. Court of Appeals, 263 SCRA 15 (1996). 13 Rollo, p. 15. 14 Id., p. 16. 15 CA Decision, p. 5. 16 Id., pp. 5-6. 17 238 SCRA 602, 612 (1994). 18 Coronel v. Court of Appeals, 263 SCRA 15 (1996) 19 281 SCRA 206 (1997).

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with the modification that respondent is ORDERED to reimburse petitioners for the expenses of the survey.

20 Cf. Lim v. Court of Appeals, 263 SCRA 569 (1996). 21 See Bucton v. Gabar, 55 SCRA 499 (1974).

SO ORDERED. Bellosillo and Buena, JJ., concur.

32

CASES IN SALES (SECOND YEAR – SECOND SEMESTER)

Republic of the Philippines SUPREME COURT

On 27 January 1998, the spouses Ramos filed a complaint for Recovery of Ownership with Damages against the spouses Heruela. The case was docketed as Civil Case No. 98-060. The spouses Ramos allege that out of the P15,3004consideration for the sale of the land, the spouses Heruela paid only P4,000. The last installment that the spouses Heruela paid was on 18 December 1981. The spouses Ramos assert that the spouses Heruela’s unjust refusal to pay the balance of the purchase price caused the cancellation of the Deed of Conditional Sale. In June 1982, the spouses Ramos discovered that the spouses Heruela were already occupying a portion of the land. Cherry and Raymond Pallori ("spouses Pallori"), daughter and son-in-law, respectively, of the spouses Heruela, erected another house on the land. The spouses Heruela and the spouses Pallori refused to vacate the land despite demand by the spouses Ramos.

FIRST DIVISION G.R. No. 145330 October 14, 2005 SPOUSES GOMER and LEONOR RAMOS, Petitioners, vs. SPOUSES SANTIAGO and MINDA HERUELA, SPOUSES CHERRY and RAYMOND PALLORI, Respondents. DECISION CARPIO, J.: The Case Before the Court is a petition for review1 assailing the Decision2 dated 23 August 2000 and the Order dated 20 September 2000 of the Regional Trial Court ("trial court") of Misamis Oriental, Branch 21, in Civil Case No. 98-060. The trial court dismissed the plaintiffs’ action for recovery of ownership with damages.

The spouses Heruela allege that the contract is a sale on installment basis. They paid P2,000 as down payment and made the following installment payments:

The Antecedent Facts The spouses Gomer and Leonor Ramos ("spouses Ramos") own a parcel of land, consisting of 1,883 square meters, covered by Transfer Certificate of Title ("TCT") No. 16535 of the Register of Deeds of Cagayan de Oro City. On 18 February 1980, the spouses Ramos made an agreement with the spouses Santiago and Minda Heruela ("spouses Heruela")3 covering 306 square meters of the land ("land"). According to the spouses Ramos, the agreement is a contract of conditional sale. The spouses Heruela allege that the contract is a sale on installment basis.

33

31 March 1980

P200

2 May 1980

P400

(for April and May 1980)

20 June 1980

P200

(for June 1980)

8 October 1980

P500

(for July, August and part of September 1980)

5 March 1981

P400

(for October and November

CASES IN SALES (SECOND YEAR – SECOND SEMESTER)

Thousand and Three Hundred Pesos (P11,300.00).

1980) 18 December 1981

P300

Plaintiffs are further ordered to pay defendants the sum (for December 1980 and of part P20,000.00, as Attorney’s fees and P10,000.00 as litigation of January 1981) expenses. SO ORDERED.7

The spouses Heruela further allege that the 306 square meters specified in the contract was reduced to 282 square meters because upon subdivision of the land, 24 square meters became part of the road. The spouses Heruela claim that in March 1982, they expressed their willingness to pay the balance of P11,300 but the spouses Ramos refused their offer.

In an Order8 dated 20 September 2000, the trial court denied the spouses Ramos’ motion for reconsideration. Hence, this petition. The Issues The spouses Ramos raise the following issues:

The Ruling of the Trial Court

I. Whether RA 6552 is applicable to an absolute sale of land;

In its Decision5 dated 23 August 2000, the trial court ruled that the contract is a sale by installment. The trial court ruled that the spouses Ramos failed to comply with Section 4 of Republic Act No. 6552 ("RA 6552"),6 as follows:

II. Whether Articles 1191 and 1592 of the Civil Code are applicable to the present case; III. Whether the spouses Ramos have a right to cancel the sale;

SEC. 4. In case where less than two years of installments were paid, the seller shall give the buyer a grace period of not less than sixty days from the date the installment became due. If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act.

IV. Whether the spouses Heruela have a right to damages.9 The Ruling of the Court The petition is partly meritorious. The Agreement is a Contract to Sell In its Decision, the trial court ruled on whether the contract made by the parties is a conditional sale or a sale on installment. The spouses Ramos’ premise is that since the trial court ruled that the contract is a sale on installment, the trial court also in effect declared that the sale is an absolute sale. The spouses Ramos allege that RA 6552 is not applicable to an absolute sale.

The dispositive portion of the Decision reads: WHEREFORE, the complaint is hereby dismissed and plaintiff[s] are ordered to execute the corresponding Deed of Sale in favor of defendants after the latter have paid the remaining balance of Eleven

34

CASES IN SALES (SECOND YEAR – SECOND SEMESTER)

Article 1458 of the Civil Code provides that a contract of sale may be absolute or conditional. A contract of sale is absolute when title to the property passes to the vendee upon delivery of the thing sold.10 A deed of sale is absolute when there is no stipulation in the contract that title to the property remains with the seller until full payment of the purchase price.11 The sale is also absolute if there is no stipulation giving the vendor the right to cancel unilaterally the contract the moment the vendee fails to pay within a fixed period.12 In a conditional sale, as in a contract to sell, ownership remains with the vendor and does not pass to the vendee until full payment of the purchase price.13 The full payment of the purchase price partakes of a suspensive condition, and non-fulfillment of the condition prevents the obligation to sell from arising.14

contract, all the terms must be in writing, so that a contract partly in writing and partly oral is in legal effect an oral contract. The Court reiterated the Manuel ruling in Alfonso v. Court of Appeals:17 xxx In Manuel, "only the price and the terms of payment were in writing," but the most important matter in the controversy, the alleged transfer of title was never "reduced to any written document. ["] It was held that the contract should not be considered as a written but an oral one; not a sale but a promise to sell; and that "the absence of a formal deed of conveyance" was a strong indication "that the parties did not intend immediate transfer of title, but only a transfer after full payment of the price." Under these circumstances, the Court ruled Article 1504 of the Civil Code of 1889 (Art. 1592 of the present Code) to be inapplicable to the contract in controversy – a contract to sell or promise to sell – "where title remains with the vendor until fulfillment of a positive suspensive condition, such as full payment of the price x x [x].

In this case, the agreement of the parties is embodied in a one-page, handwritten document.15 The document does not contain the usual terms and conditions of a formal deed of sale. The original document, elevated to this Court as part of the Records, is torn in part. Only the words "LMENT BASIS" is legible on the title. The names and addresses of the parties and the identity of the property cannot be ascertained. The agreement only provides for the following terms of the sale:

The records show that the spouses Heruela did not immediately take actual, physical possession of the land. According to the spouses Ramos, in March 1981, they allowed the niece of the spouses Heruela to occupy a portion of the land. Indeed, the spouses Ramos alleged that they only discovered in June 1982 that the spouses Heruela were already occupying the land. In their answer to the complaint, the spouses Heruela and the spouses Pallori alleged that their occupation of the land is lawful because having made partial payments of the purchase price, "they already considered themselves owners" of the land.18 Clearly, there was no transfer of title to the spouses Heruela. The spouses Ramos retained their ownership of the land. This only shows that the parties did not intend the transfer of ownership until full payment of the purchase price.

TERM[S] OF SALE: PRICE PER SQM P50.00 X 306 SQM P 15,300.00 DOWN PAYMENT (TWO THOUSAND PESOS) – 2,000.00 BALANCE PAYABLE AT MINIMUM OF P200.00 P 13,300.00 PER MONTH UNTIL FULLY PAID ======= In Manuel v. Rodriguez, et al.,16 the Court ruled that to be a written

35

CASES IN SALES (SECOND YEAR – SECOND SEMESTER)

RA 6552 is the Applicable Law

extensions, if any.

The trial court did not err in applying RA 6552 to the present case.

(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty per cent of the total payments made and, after five years of installments, an additional five per cent every year but not to exceed ninety per cent of the total payments made: Provided, That the actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer.

Articles 119119 and 159220 of the Civil Code are applicable to contracts of sale. In contracts to sell, RA 6552 applies. InRillo v. Court of Appeals,21 the Court declared: xxx Known as the Maceda Law, R.A. No. 6552 recognizes in conditional sales of all kinds of real estate (industrial, commercial, residential) the right of the seller to cancel the contract upon nonpayment of an installment by the buyer, which is simply an event that prevents the obligation of the vendor to convey title from acquiring binding force. It also provides the right of the buyer on installments in case he defaults in the payment of succeeding installments xxx.

Down payments, deposits or options on the contract shall be included in the computation of the total number of installments made. Sec. 4. In case where less than two years of installments were paid, the seller shall give the buyer a grace period of not less than sixty days from the date the installment became due. If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act.

Sections 3 and 4 of RA 6552 provide: Sec. 3. In all transactions or contracts involving the sale or financing of real estate on installment payments, including residential condominium apartments but excluding industrial lots, commercial buildings and sales to tenants under Republic Act Numbered Thirtyeight hundred forty-four as amended by Republic Act Numbered Sixty-three hundred eighty-nine, where the buyer has paid at least two years of installments, the buyer is entitled to the following rights in case he defaults in the payment of succeeding installments:

In this case, the spouses Heruela paid less than two years of installments. Thus, Section 4 of RA 6552 applies. However, there was neither a notice of cancellation nor demand for rescission by notarial act to the spouses Heruela. In Olympia Housing, Inc. v. Panasiatic Travel Corp.,22 the Court ruled that the vendor could go to court to demand judicial rescission in lieu of a notarial act of rescission. However, an action for reconveyance is not an action for rescission. The Court explained in Olympia:

(a) To pay, without additional interest, the unpaid installments due within the total grace period earned by him, which is hereby fixed at the rate of one month grace period for every one year of installment payments made: Provided, That this right shall be exercised by the buyer only once in every five years of the life of the contract and its

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The action for reconveyance filed by petitioner was predicated on an assumption that its contract to sell executed in favor of respondent buyer had been validly cancelled or rescinded. The records would show that, indeed, no such cancellation took place at any time prior to the institution of the action for reconveyance. xxx

Article 2209 of the Civil Code,24 may award interest at the rate of 6% per annum on the amount of damages.25 The spouses Heruela have been enjoying the use of the land since 1982. In 1995, they allowed their daughter and son-in-law, the spouses Pallori, to construct a house on the land. Under the circumstances, the Court deems it proper to award interest at 6% per annum on the balance of the purchase price.

xxx xxx Not only is an action for reconveyance conceptually different from an action for rescission but that, also, the effects that flow from an affirmative judgment in either case would be materially dissimilar in various respects. The judicial resolution of a contract gives rise to mutual restitution which is not necessarily the situation that can arise in an action for reconveyance. Additionally, in an action for rescission (also often termed as resolution), unlike in an action for reconveyance predicated on an extrajudicial rescission (rescission by notarial act), the Court, instead of decreeing rescission, may authorize for a just cause the fixing of a period.23

The records do not show when the spouses Ramos made a demand from the spouses Heruela for payment of the balance of the purchase price. The complaint only alleged that the spouses Heruela’s "unjust refusal to pay in full the purchase price xxx has caused the Deed of Conditional Sale to be rescinded, revoked and annulled."26 The complaint did not specify when the spouses Ramos made the demand for payment. For purposes of computing the legal interest, the reckoning period should be the filing on 27 January 1998 of the complaint for reconveyance, which the spouses Ramos erroneously considered an action for rescission of the contract.

In the present case, there being no valid rescission of the contract to sell, the action for reconveyance is premature. Hence, the spouses Heruela have not lost the statutory grace period within which to pay. The trial court should have fixed the grace period to sixty days conformably with Section 4 of RA 6552.

The Court notes the reduction of the land area from 306 square meters to 282 square meters. Upon subdivision of the land, 24 square meters became part of the road. However, Santiago Heruela expressed his willingness to pay for the 306 square meters agreed upon despite the reduction of the land area.27 Thus, there is no dispute on the amount of the purchase price even with the reduction of the land area.

The spouses Heruela are not entirely fault-free. They have been remiss in performing their obligation. The trial court found that the spouses Heruela offered once to pay the balance of the purchase price. However, the spouses Heruela did not consign the payment during the pendency of the case. In the meanwhile, the spouses Heruela enjoyed the use of the land.

On the Award of Attorney’s Fees and Litigation Expenses The trial court ordered the spouses Ramos to pay the spouses Heruela and the spouses Pallori the amount of P20,000 as attorney’s fees and P10,000 as litigation expenses. Article 220828 of the Civil

For the breach of obligation, the court, in its discretion, and applying

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Code provides that subject to certain exceptions, attorney’s fees and expenses of litigation, other than judicial costs, cannot be recovered in the absence of stipulation. None of the enumerated exceptions applies to this case. Further, the policy of the law is to put no premium on the right to litigate.29 Hence, the award of attorney’s fees and litigation expenses should be deleted.

Associate Justice WE CONCUR: HILARIO G. DAVIDE, JR. Chief Justice Chairman

WHEREFORE, we AFFIRM the Decision dated 23 August 2000 of the Regional Trial Court of Misamis Oriental, Branch 21, dismissing the complaint for Recovery of Ownership with Damages, with the following MODIFICATION:

LEONARDO A. QUISUMBING, CONSUELO YNARESSANTIAGO Associate Justice Associate Justice

1. The spouses Heruela shall pay the spouses Ramos P11,300 as balance of the purchase price plus interest at 6% per annum from 27 January 1998. The spouses Heruela shall pay within 60 days from finality of this Decision;

ADOLFO S. AZCUNA

2. Upon payment, the spouses Ramos shall execute a deed of absolute sale of the land and deliver the certificate of title in favor of the spouses Heruela;

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

Associate Justice CERTIFICATION

3. In case of failure to thus pay within 60 days from finality of this Decision, the spouses Heruela and the spouses Pallori shall immediately vacate the premises without need of further demand, and the down payment and installment payments of P4,000 paid by the spouses Heruela shall constitute rental for the land;

HILARIO G. DAVIDE, JR. Chief Justice Footnotes

4. The award of P20,000 as attorney’s fees and P10,000 as litigation expenses in favor of the spouses Heruela and the spouses Pallori is deleted.

1 Under Rule 45 of the 1997 Rules of Civil Procedure. 2 Penned by Judge Arcadio D. Fabria.

SO ORDERED.

3 The spouses Ramos and the spouses Heruela are

ANTONIO T. CARPIO

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collectively referred to in this Decision as "the parties." 5 Rollo, pp. 15-24.

The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.

6 Otherwise known as the "Realty Installment Buyer Protection Act."

The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.

7 Rollo, pp. 23-24.

This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with Articles 1385 and 1388 and the Mortgage Law.

4 P50 per square meter.

8 Ibid., p. 25. 9 Ibid., p. 126.

20 Article 1592 provides:

10 Universal Robina Sugar Milling Corp. v. Heirs of Teves, 438 Phil. 26 (2002).

Art. 1592. In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act. After the demand, the court may not grant him a new term.

11 Adelfa Properties, Inc. v. CA, 310 Phil. 623 (1995). 12 Ibid. 13 Ibid. 14 Chua v. Court of Appeals, 449 Phil. 25 (2003). 15 Records, p. 178.

18 Records, p. 24.

21 G.R. No. 125347, 19 June 1997, 274 SCRA 461, citing the Resolution on Second Motion for Reconsideration, Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., No. L-25885, 16 November 1978, 86 SCRA 305.

19 Article 1191 provides:

22 443 Phil. 385 (2003).

Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.

23 Ibid.

16 109 Phil. 1 (1960). 17 G.R. No. 63745, 8 June 1990, 186 SCRA 400.

24 Article 2209 provides: Art. 2209. If the obligation consists in the payment of a sum

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of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum.

(6) In actions for legal support; (7) In actions for the recovery of wages of household helpers, laborers and skilled workers; (8) In actions for indemnity under workmen’s compensation and employer’s liability laws;

25 Consing v. Court of Appeals, G.R. No. 143584, 10 March 2004, 425 SCRA 192; Eastern Shipping Lines, Inc. v. Court of Appeals, G.R. No. 97412, 12 July 1994, 234 SCRA 78.

(9) In a separate civil action to recover civil liability arising from a crime;

26 Records, p. 4.

(10) When at least double judicial costs are awarded;

27 TSN, 8 February 2000, p. 20.

(11) In any other case where the court deems it just and equitable that attorney’s fees and expenses of litigation should be recovered.

28 Article 2208 provides: Art. 2208. In the absence of stipulation, attorney’s fees and expenses of litigation, other than judicial costs, cannot be recovered, except:

In all cases, the attorney’s fees and expenses of litigation must be reasonable. 29 Liu v. Loy, Jr., 453 Phil. 232 (2003).

(1) When exemplary damages are awarded; (2) When the defendant’s act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest; (3) In criminal cases of malicious prosecution against the plaintiff; (4) In case of a clearly unfounded civil action or proceeding against the plaintiff; (5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff’s plainly valid, just and demandable claim;

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