[G.R. No. 145842, June 27, 2008] EDSA SHANGRI-LA HOTEL AND RESORT, INC., RUFO B. COLAYCO, RUFINO L. SAMANIEGO, KUOK KHOON CHEN, AND KUOK KHOON TSEN, PETITIONERS, VS. BF CORPORATION RESPONDENT. G.R. NO. 145873 CYNTHIA ROXAS-DEL CASTILLO, PETITIONER, VS. BF CORPORATION, RESPONDENT. DECISION VELASCO JR., J.: Before us are these two (2) consolidated petitions for review under Rule 45 to nullify certain issuances of the Court of Appeals (CA). In the first petition, docketed as G.R. No. 145842, petitioners Edsa Shangri-la Hotel and Resort, Inc. (ESHRI), Rufo B. Colayco, Rufino L. Samaniego, Kuok Khoon Chen, and Kuok Khoon Tsen assail the Decision[1] dated November 12, 1999 of the CA in CA-G.R. CV No. 57399, affirming the Decision[2] dated September 23, 1996 of the Regional Trial Court (RTC), Branch 162 in Pasig City in Civil Case No. 63435 that ordered them to pay jointly and severally respondent BF Corporation (BF) a sum of money with interests and damages. They also assail the CA Resolution dated October 25, 2000 which, apart from setting aside an earlier Resolution[3] of August 13, 1999 granting ESHRI's application for restitution and damages against bond, affirmed the aforesaid September 23, 1996 RTC Decision. In the second petition, docketed as G.R. No. 145873, petitioner Cynthia Roxas-del Castillo also assails the aforementioned CA Decision of November 12, 1999 insofar at it adjudged her jointly and severally liable with ESHRI, et al. to pay the monetary award decreed in the RTC Decision. Both petitions stemmed from a construction contract denominated as Agreement for the Execution of Builder's Work for the EDSA Shangri-la Hotel Project[4] that ESHRI and BF executed for the construction of the EDSA Shangri-la Hotel starting May 1, 1991. Among other things, the contract stipulated for the payment of the contract price on the basis of the work accomplished as described in the monthly progress billings. Under this arrangement, BF shall submit a monthly progress billing to ESHRI which would then re-measure the work accomplished and prepare a Progress Payment Certificate for that month's progress billing.[5] In a memorandum-letter dated August 16, 1991 to BF, ESHRI laid out the collection procedure BF was to follow, to wit: (1) submission of the progress billing to ESHRI's Engineering Department; (2) following-up of the preparation of the Progress Payment Certificate with the Head of the Quantity Surveying Department; and (3) following-up of the release of the payment with one Evelyn San Pascual. BF adhered to the procedures agreed upon in all its billings for the period from May 1, 1991 to June 30, 1992, submitting for the purpose the required Builders Work Summary, the monthly progress billings, including an evaluation of the work in accordance with the Project Manager's Instructions (PMIs) and the detailed valuations contained in the Work Variation Orders (WVOs) for final re-measurement under the PMIs. BF said that the values of the WVOs were contained in the progress billings under the section "Change Orders."[6] From May 1, 1991 to June 30, 1992, BF submitted a total of 19 progress billings following the procedure agreed upon. Based on Progress Billing Nos. 1 to 13, ESHRI paid BF PhP 86,501,834.05.[7] According to BF, however, ESHRI, for Progress Billing Nos. 14 to 19, did not re-measure the work done, did not prepare the Progress Payment Certificates, let alone remit payment for the inclusive periods covered. In this regard, BF claimed having been misled into working continuously on the project by ESHRI which gave the assurance about the Progress Payment Certificates already being processed. After several futile attempts to collect the unpaid billings, BF filed, on July 26, 1993, before the RTC a suit for a sum of money and damages. In its defense, ESHRI claimed having overpaid BF for Progress Billing Nos. 1 to 13 and, by way of

1

counterclaim with damages, asked that BF be ordered to refund the excess payments. ESHRI also charged BF with incurring delay and turning up with inferior work accomplishment. The RTC found for BF On September 23, 1996, the RTC, on the main finding that BF, as plaintiff a quo, is entitled to the payment of its claim covered by Progress Billing Nos. 14 to 19 and to the retention money corresponding to Progress Billing Nos. 1 to 11, with interest in both instances, rendered judgment for BF. The fallo of the RTC Decision reads: WHEREFORE, defendants [EHSRI], Ru[f]o B. Colayco, Rufino L. Samaniego, Cynthia del Castillo, Kuok Khoon Chen, and Kuok Khoon Tsen, are jointly and severally hereby ordered to: 1. Pay plaintiff the sum of P24,780,490.00 representing unpaid construction work accomplishments under plaintiff's Progress Billings Nos. 14-19; 2. Return to plaintiff the retention sum of P5,810,000.00; 3. Pay legal interest on the amount of P24,780,490.80 representing the construction work accomplishments under Progress Billings Nos. 14-19 and on the amount of P5,810,000.00 representing the retention sum from date of demand until their full Payment; 4. Pay plaintiff P1,000,000.00 as moral damages, P1,000,000.00 as exemplary damages, P1,000,000.00 as attorney's fees, and cost of the suit.[8] According to the RTC, ESHRI's refusal to pay BF's valid claims constituted evident bad faith entitling BF to moral damages and attorney's fees. ESHRI subsequently moved for reconsideration, but the motion was denied by the RTC, prompting ESHRI to appeal to the CA in CA-G.R. CV No. 57399. Pending the resolution of CA-G.R. CV No. 57399, the following events and/or incidents transpired: (1) The trial court, by Order dated January 21, 1997, granted BF's motion for execution pending appeal. ESHRI assailed this order before the CA via a petition for certiorari, docketed as CA-G.R. SP No. 43187.[9] Meanwhile, the branch sheriff garnished from ESHRI's bank account in the Philippine National Bank (PNB) the amount of PhP 35 million. (2) On March 7, 1997, the CA issued in CA-G.R. SP No. 43187 a writ of preliminary injunction enjoining the trial court from carrying out its January 21, 1997 Order upon ESHRI's posting of a PhP 1 million bond. In a supplemental resolution issued on the same day, the CA issued a writ of preliminary mandatory injunction directing the trial court judge and/or his branch sheriff acting under him (a) to lift all the garnishments and levy made under the enjoined order of execution pending appeal; (b) to immediately return the garnished deposits to PNB instead of delivering the same to ESHRI; and (c) if the garnished deposits have been delivered to BF, the latter shall return the same to ESHRI's deposit account. (3) By a Decision dated June 30, 1997 in CA-G.R. SP No. 43187, the CA set aside the trial court's January 21, 1997 Order. The CA would later deny BF's motion for reconsideration. (4) Aggrieved, BF filed before this Court a petition for review of the CA Decision, docketed as G.R. No. 132655.[10] On August 11, 1998, the Court affirmed the assailed decision of the CA with the modification that the recovery of ESHRI's garnished deposits shall be against BF's bond.[11] We denied the motions for reconsideration of ESHRI and BF. (5) Forthwith, ESHRI filed, and the CA by Resolution of August 13, 1999 granted, an application for restitution or damages against BF's bond. Consequently, BF and Stronghold Insurance Co., Inc., the bonding company, filed separate motions for reconsideration. On November 12, 1999, in CA-G.R. CV No. 57399, the CA rendered a Decision resolving (1) the aforesaid motions of BF and its surety and (2) herein petitioners' appeal from the trial court's Decision dated September 23, 1996. This November 12, 1999 Decision, finding for BF and now assailed in these separate recourses, dispositively reads:

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WHEREFORE, premises considered, the decision appealed from isAFFIRMED in toto. This Court's Resolution dated 13 August 1999 is reconsidered and set aside, and defendants-appellants' application for restitution is denied for lack of merit. SO ORDERED.[12] The CA predicated its ruling on the interplay of two main reasons. First, the issues the parties raised in their respective briefs were, for the most part, factual and evidentiary. Thus, there is no reason to disturb the case disposition of the RTC, inclusive of its award of damages and attorney's fees and the reasons underpinning the award. Second, BF had sufficiently established its case by preponderance of evidence. Part of what it had sufficiently proven relates to ESHRI being remiss in its obligation to re-measure BF's later work accomplishments and pay the same. On the other hand, ESHRI had failed to prove the basis of its disclaimer from liability, such as its allegation on the defective work accomplished by BF. Apropos ESHRI's entitlement to the remedy of restitution or reparation arising from the execution of the RTC Decision pending appeal, the CA held that such remedy may peremptorily be allowed only if the executed judgment is reversed, a situation not obtaining in this case. Following the denial by the CA, per its Resolution[13] dated October 25, 2000, of their motion for reconsideration, petitioners are now before the Court, petitioner del Castillo opting, however, to file a separate recourse. G.R. No. 145842 In G.R. No. 145842, petitioners ESHRI, et al. raise the following issues for our consideration: I. Whether or not the [CA] committed grave abuse of discretion in disregarding issues of law raised by petitioners in their appeal [particularly in admitting in evidence photocopies of Progress Billing Nos. 14 to 19, PMIs and WVOs]. Whether or not the [CA] committed grave abuse of discretion in not holding respondent guilty of delay in the performance of its obligations and, hence, liable for liquidated damages [in view that respondent is guilty of delay and that its works were defective]. Whether or not the [CA] committed grave abuse of discretion in finding petitioners guilty of malice and evidence bad faith, and in awarding moral and exemplary damages and attorney's fees to respondent. Whether or not the [CA] erred in setting aside its Resolution dated August 13, 2000.[14]

II.

III.

IV.

The petition has no merit. Prefatorily, it should be stressed that the second and third issues tendered relate to the correctness of the CA's factual determinations, specifically on whether or not BF was in delay and had come up with defective works, and whether or not petitioners were guilty of malice and bad faith. It is basic that in an appeal by certiorari under Rule 45, only questions of law may be presented by the parties and reviewed by the Court.[15] Just as basic is the rule that factual findings of the CA, affirmatory of that of the trial court, are final and conclusive on the Court and may not be reviewed on appeal, except for the most compelling of reasons, such as when: (1) the conclusion is grounded on speculations, surmises, or conjectures; (2) the inference is manifestly mistaken, absurd, or impossible; (3) there is grave abuse of discretion; (4) the judgment is based on a misapprehension of facts; (5) the findings of fact are conflicting; (6) such findings are contrary to the admissions of both parties; and (7) the CA manifestly overlooked certain relevant evidence and undisputed facts, that, if properly considered, would justify a different conclusion.[16] In our review of this case, we find that none of the above exceptions obtains. Accordingly, the factual findings of the trial court, as affirmed by the CA, that there was delay on the part of ESHRI, that there was no proof that BF's work was defective, and that petitioners were guilty of malice and bad faith, ought to be affirmed. Admissibility of Photocopies of Progress Billing Nos. 14 to 19, PMIs and WVOs Petitioners fault the CA, and necessarily the trial court, on the matter of the admission in evidence of the photocopies of Progress Billing Nos. 14 to 19 and the complementing PMIs and the WVOs.

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According to petitioners, BF, before being allowed to adduce in evidence the photocopies adverted to, ought to have laid the basis for the presentation of the photocopies as secondary evidence, conformably to the best evidence rule. Respondent BF, on the other hand, avers having complied with the laying-the-basis requirement. Defending the action of the courts below in admitting into evidence the photocopies of the documents aforementioned, BF explained that it could not present the original of the documents since they were in the possession of ESHRI which refused to hand them over to BF despite requests. We agree with BF. The only actual rule that the term "best evidence" denotes is the rule requiring that the original of a writing must, as a general proposition, be produced[17] and secondary evidence of its contents is not admissible except where the original cannot be had. Rule 130, Section 3 of the Rules of Court enunciates the best evidence rule: SEC. 3. Original document must be produced; exceptions. - When the subject of inquiry is the contents of a document, no evidence shall be admissible other than the original document itself, except in the following cases: (a) When the original has been lost or destroyed, or cannot be produced in court, without bad faith on the part of the offeror; (b) When the original is in the custody or under the control of the party against whom the evidence is offered, and the latter fails to produce it after reasonable notice; (Emphasis added.) Complementing the above provision is Sec. 6 of Rule 130, which reads: SEC. 6. When original document is in adverse party's custody or control.- If the document is in the custody or under control of the adverse party, he must have reasonable notice to produce it. If after such notice and after satisfactory proof of its existence, he fails to produce the document, secondary evidence may be presented as in the case of loss. Secondary evidence of the contents of a written instrument or document refers to evidence other than the original instrument or document itself.[18] A party may present secondary evidence of the contents of a writing not only when the original is lost or destroyed, but also when it is in the custody or under the control of the adverse party. In either instance, however, certain explanations must be given before a party can resort to secondary evidence. In our view, the trial court correctly allowed the presentation of the photocopied documents in question as secondary evidence. Any suggestion that BF failed to lay the required basis for presenting the photocopies of Progress Billing Nos. 14 to 19 instead of their originals has to be dismissed. The stenographic notes of the following exchanges between Atty. Andres and Atty. Autea, counsel for BF and ESHRI, respectively, reveal that BF had complied with the requirements: ATTY. ANDRES: During the previous hearing of this case, your Honor, likewise, the witness testified that certain exhibits namely, the Progress Payment Certificates and the Progress Billings the originals of these documents were transmitted to ESHRI, all the originals are in the possession of ESHRI since these are internal documents and I am referring specifically to the Progress Payment Certificates. We requested your Honor, that in order that plaintiff [BF] be allowed to present secondary original, that opposing counsel first be given opportunity to present the originals which are in their possession. May we know if they have brought the originals and whether they will present the originals in court, Your Honor. (Emphasis added.) ATTY. AUTEA: We have already informed our client about the situation, your Honor, that it has been claimed by plaintiff that some of the originals are in their possession and our client assured that, they will try to check. Unfortunately, we have not heard from our client, Your Honor. Four factual premises are readily deducible from the above exchanges, to wit: (1) the existence of the original documents which ESHRI had possession of; (2) a request was made on ESHRI to produce the documents; (3) ESHRI was afforded sufficient time to produce them; and (4) ESHRI was not inclined to produce them. Clearly, the circumstances obtaining in this case fall under the exception under Sec. 3(b) of Rule 130. In other words, the conditions sine qua non for the presentation and reception of the photocopies of the original document as secondary evidence have been met. These are: (1) there

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is proof of the original document's execution or existence; (2) there is proof of the cause of the original document's unavailability; and (3) the offeror is in good faith.[19] While perhaps not on all fours because it involved a check, what the Court said in Magdayao v. People, is very much apt, thus: x x x To warrant the admissibility of secondary evidence when the original of a writing is in the custody or control of the adverse party, Section 6 of Rule 130 provides that the adverse party must be given reasonable notice, that he fails or refuses to produce the same in court and that the offeror offers satisfactory proof of its existence. xxxx The mere fact that the original of the writing is in the custody or control of the party against whom it is offered does not warrant the admission of secondary evidence. The offeror must prove that he has done all in his power to secure the best evidence by giving notice to the said party to produce the document. The notice may be in the form of a motion for the production of the original or made in open court in the presence of the adverse party or via a subpoena duces tecum, provided that the party in custody of the original has sufficient time to produce the same.When such party has the original of the writing and does not voluntarily offer to produce it or refuses to produce it, secondary evidence may be admitted.[20] (Emphasis supplied.) On the Restitution of the Garnished Funds We now come to the propriety of the restitution of the garnished funds. As petitioners maintain, the CA effectively, but erroneously, prevented restitution of ESHRI's improperly garnished funds when it nullified its own August 13, 1999 Resolution in CA-G.R. SP No. 43187. In this regard, petitioners invite attention to the fact that the restitution of the funds was in accordance with this Court's final and already executory decision in G.R. No. 132655, implying that ESHRI should be restored to its own funds without awaiting the final outcome of the main case. For ease of reference, we reproduce what the appellate court pertinently wrote in its Resolution of August 13, 1999: BASED ON THE FOREGOING, the Application (for Restitution/Damages against Bond for Execution Pending Appeal) dated May 12, 1999 filed by [ESHRI] is GRANTED. Accordingly, the surety of [BF], STRONGHOLD Insurance Co., Inc., is ORDERED to PAY the sum of [PhP 35 million] to [ESHRI] under its SICI Bond. x x x In the event that the bond shall turn out to be insufficient or the surety (STRONGHOLD) cannot be made liable under its bond, [BF], being jointly and severally liable under the bond is ORDERED to RETURN the amount of [PhP 35 million] representing the garnished deposits of the bank account maintained by [ESHRI] with the [PNB] Shangri-la Plaza Branch, Mandaluyong City. Otherwise, this Court shall cause the implementation of the Writ of Execution dated April 24, 1998 issued in Civil Case No. 63435 against both [BF], and/or its surety, STRONGHOLD, in case they should fail to comply with these directives. SO ORDERED.[21] Petitioners' contention on the restitution angle has no merit, for, as may be recalled, the CA, simultaneously with the nullification and setting aside of its August 13, 1999 Resolution, affirmed, via its assailed November 12, 1999 Decision, the RTC Decision of September 23, 1996, the execution pending appeal of which spawned another dispute between the parties. And as may be recalled further, the appellate court nullified its August 13, 1999 Resolution on the basis of Sec. 5, Rule 39, which provides: Sec. 5. Effect of reversal of executed judgment. - Where the executed judgment is reversed totally or partially, or annulled, on appeal or otherwise, the trial court may, on motion, issue such orders of restitution or reparation of damages as equity and justice may warrant under the circumstances. On the strength of the aforequoted provision, the appellate court correctly dismissed ESHRI's claim for restitution of its garnished deposits, the executed appealed RTC Decision in Civil Case No. 63435 having in fact been upheld in toto. It is true that the Court's Decision of August 11, 1998 in G.R. No. 132655 recognized the validity of the issuance of the desired restitution order. It bears to emphasize, however, that the CA had since then decided CA-G.R. CV No. 57399, the main case,on the merits when it affirmed the underlying RTC Decision in Civil Case No. 63435. This CA Decision on the original and main case effectively rendered our decision on the incidental procedural matter on restitution moot and academic. Allowing restitution at this point would not serve any purpose, but only prolong an already protracted litigation. G.R. No. 145873

5

Petitioner Roxas-del Castillo, in her separate petition, excepts from the CA Decision affirming, in its entirety, the RTC Decision holding her, with the other individual petitioners in G.R. No. 145842, who were members of the Board of Directors of ESHRI, jointly and severally liable with ESHRI for the judgment award. She presently contends: I. The [CA] erred in not declaring that the decision of the trial court adjudging petitioner personally liable to respondent void for not stating the factual and legal basis for such award. The [CA] erred in not ruling that as former Director, Petitioner cannot be held personally liable for any alleged breach of a contract entered into by the corporation. The [cA] erred in not ruling that respondent is not entitled to an award of moral damages. The [CA] erred in holding petitioner personally liable to respondent for exemplary damages. The [CA] erred in not ruling that respondent is not entitled to any award of attorney's fees.[22]

II.

III. IV. V.

First off, Roxas-del Castillo submits that the RTC decision in question violated the requirements of due process and of Sec. 14, Article VII of the Constitution that states, "No decision shall be rendered by any court without expressing therein clearly and distinctly the facts and the law on which it is based." Roxas-del Castillo's threshold posture is correct. Indeed, the RTC decision in question, as couched, does not provide the factual or legal basis for holding her personally liable under the premises. In fact, only in the dispositive portion of the decision did her solidary liability crop up. And save for her inclusion as party defendant in the underlying complaint, no reference is made in other pleadings thus filed as to her liability. The Court notes that the appellate court, by its affirmatory ruling, effectively recognized the applicability of the doctrine on piercing the veil of the separate corporate identity. Under the circumstances of this case, we cannot allow such application. A corporation, upon coming to existence, is invested by law with a personality separate and distinct from those of the persons composing it. Ownership by a single or a small group of stockholders of nearly all of the capital stock of the corporation is not, without more, sufficient to disregard the fiction of separate corporate personality.[23] Thus, obligations incurred by corporate officers, acting as corporate agents, are not theirs but direct accountabilities of the corporation they represent. Solidary liability on the part of corporate officers may at times attach, but only under exceptional circumstances, such as when they act with malice or in bad faith.[24] Also, in appropriate cases, the veil of corporate fiction shall be disregarded when the separate juridical personality of a corporation is abused or used to commit fraud and perpetrate a social injustice, or used as a vehicle to evade obligations.[25]In this case, no act of malice or like dishonest purpose is ascribed on petitioner Roxas-del Castillo as to warrant the lifting of the corporate veil. The above conclusion would still hold even if petitioner Roxas-del Castillo, at the time ESHRI defaulted in paying BF's monthly progress bill, was still a director, for, before she could be held personally liable as corporate director, it must be shown that she acted in a manner and under the circumstances contemplated in Sec. 31 of the Corporation Code, which reads: Section 31. Directors or trustees who willfully or knowingly vote for or assent to patently unlawful acts of the corporation or acquire any pecuniary interest in conflict with their duty as such directors or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons. (Emphasis ours.) We do not find anything in the testimony of one Crispin Balingit to indicate that Roxas-del Castillo made any misrepresentation respecting the payment of the bills in question. Balingit, in fact, testified that the submitted but unpaid billings were still being evaluated. Further, in the said testimony, in no instance was bad faith imputed on Roxas-del Castillo. Not lost on the Court are some material dates. As it were, the controversy between the principal parties started in July 1992 when Roxas-del Castillo no longer sat in the ESHRI Board, a reality BF does not appear to dispute. In fine, she no longer had any participation in ESHRI's corporate affairs when what basically is the ESHRI-BF dispute erupted. Familiar and fundamental is the rule that

6

contracts are binding only among parties to an agreement. Art. 1311 of the Civil Code is clear on this point: Article 1311. Contracts take effect only between the parties, their assigns and heirs, except in cases where the rights and obligations are not transmissible by their nature, or by stipulation or by provision of law. In the instant case, Roxas-del Castillo could not plausibly be held liable for breaches of contract committed by ESHRI nor for the alleged wrongdoings of its governing board or corporate officers occurring after she severed official ties with the hotel management. Given the foregoing perspective, the other issues raised by Roxas-del Castillo as to her liability for moral and exemplary damages and attorney's fees are now moot and academic. And her other arguments insofar they indirectly impact on the liability of ESHRI need not detain us any longer for we have sufficiently passed upon those concerns in our review of G.R. No. 145842. WHEREFORE, the petition in G.R. No. 145842 is DISMISSED, while the petition in G.R. No. 145873 is GRANTED. Accordingly, the appealed Decision dated November 12, 1999 of the CA in CA-G.R. CV No. 57399 is AFFIRMED with MODIFICATION that the petitioner in G.R. No. 145873, Cynthia Roxas-del Castillo, is absolved from any liability decreed in the RTC Decision dated September 23, 1996 in Civil Case No. 63435, as affirmed by the CA. SO ORDERED.

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G.R. NO. 144435

February 6, 2007

GUILLERMINA BALUYUT, Petitioner, vs. EULOGIO POBLETE, SALUD POBLETE and THE HON.COURT OF APPEALS, Respondents. DECISION AUSTRIA-MARTINEZ, J.: Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to reverse the 1 2 Decision of the Court of Appeals (CA) dated December 21, 1999 and its Resolution of August 4, 2000 in CAG.R. CV No. 51534. The assailed CA Decision affirmed the Decision of the Regional Trial Court (RTC) of Pasig, Branch 167 which dismissed herein petitioners Complaint in Civil Case No. 52268, while the questioned Resolution denied petitioners Motion for Reconsideration. The facts of the case are as follows: On July 20, 1981, herein petitioner, Guillermina Baluyut (Baluyut), loaned from the spouses Eulogio and Salud Poblete the sum of P850,000.00. As evidence of her indebtedness, Baluyut signed, on even date, a promissory note for the amount borrowed3 . Under the promissory note, the loan shall mature in one month. To secure the payment of her obligation, she conveyed to the Poblete spouses, by way of a real estate mortgage contract, a house and lot she owns, covered by Transfer Certificate of Title (TCT) No. 137129 and located in Barrio Mapuntod, then Municipality of Mandaluyong, Province of Rizal.4 Upon maturity of the loan, Baluyut failed to pay her indebtedness. The Poblete spouses subsequently decided to extrajudicially foreclose the real estate mortgage. On August 27, 1982, the mortgaged property was sold on auction by the Provincial Sheriff of Rizal to the Poblete spouses who were the highest bidders, as evidenced by a Certificate of Sale issued pursuant 5 thereto. Baluyut failed to redeem the subject property within the period required by law prompting Eulogio 6 Poblete to execute an Affidavit of Consolidation of Title. Subsequently, TCT No. 43445 was issued in the name of Eulogio and the heirs of Salud, who in the meantime, died.7 However, Baluyut remained in possession of the subject property and refused to vacate the same. Hence, Eulogio and the heirs of Salud filed a Petition for the issuance of a writ of possession with the RTC of Pasig. The case was docketed as Case No. R-3457. Subsequently, the trial court issued an order granting the writ of possession. However, before Eulogio and the heirs of Salud could take possession of the property, Baluyut filed an action for annulment of mortgage, extrajudicial foreclosure and sale of the subject property, as well as cancellation of the title issued in the name of Eulogio and the heirs of Salud, plus damages. The case was docketed as Civil Case No. 52268 and was subsequently consolidated with Case No. R-3457. In the meantime, Eulogio died and was substituted by his heirs. After trial on the merits, the trial court issued a Decision on September 13, 1995 dismissing Baluyuts complaint.8 Aggrieved by the trial courts Decision, herein petitioner filed an appeal with the CA. On December 21, 1999, the CA promulgated the presently assailed Decision affirming the judgment of the trial court.9 Petitioner filed a Motion for Reconsideration but the same was denied in a Resolution issued by the CA on August 10 4, 2000. Hence, the present petition with the following assignment of errors: I The decision and the resolution are both palpably infirm in holding that no prior demand to pay is necessary for a loan to mature when there is conflict between the date of maturity of the loan as stated in the Deed of Real Estate Mortgage and the Promissory Note on the one hand and the real date of its maturity on the other. II The decision and the resolution are both palpably infirm in holding that the sheriff who conducted the foreclosure proceedings should be presumed to have regularly performed his duty in conducting the foreclosure proceedings despite the inability of the Office of the Provincial Sheriff who had been ordered by the trial court to produce the records of the foreclosure in question and show that there was compliance with the required posting of notices in three public places and with the required publication for three consecutive weeks in a newspaper of general circulation.

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III That the Decision and Resolution are legally infirm in holding that because the Petitioner-Appellant failed to invoke her right to be sent an Assessment Notice by the highest bidder thirty days before the expiration of the right of legal redemption during the trial and on appeal, it should be deemed that she had waived her right to this benefit under the law despite a clear showing that the said mandatory requirement should have been strictly observed before title could be consolidated in favor of the highest bidder as provided for in the certificate of sale issued by the sheriff.11 In her first assigned error, petitioner contends that herein private respondents witness, a certain Atty. Edwina Mendoza, is a competent witness and that her testimony, that the maturity of the loan is one year, is acceptable proof of the existence of collateral agreements which were entered into by the parties who executed the Promissory Note and the Real Estate Mortgage prior, contemporaneous and subsequent to the execution of these documents. Petitioner also argues that the issue of the real date of the maturity of the loan can be settled only by a formal letter of demand indicating the sum due and the specific date of payment which is the duty of the private respondents to give; that absent said letter of demand, the loan may not be considered to have matured; that, as a consequence, the property given as a collateral may not be foreclosed and the subsequent consolidation of title over the subject property should be annulled. Petitioner further contends that even if the issue on the term of the loan was first brought up in petitioners Addendum to the Motion for Reconsideration filed with the CA, the appellate court may still properly consider this issue in the interest of justice and equity considering that this is a matter of record and has some bearing on the other issues submitted for resolution. Anent her second assignment of error, petitioner contends that the CA erred in relying on the rule on presumption of regularity in the sheriffs performance of his duties relative to the foreclosure of the questioned property absent any evidence presented by petitioner to prove that the sheriff failed to comply with the legal requirements in the sale of the foreclosed properties. Petitioner argues that under the law, the sheriff is required to submit an Affidavit of Posting of Notices to the clerk of court and to the judge before he is allowed to schedule an auction sale. However, per letter from the Office of the Clerk of Court, there are no records of the foreclosure proceedings involving the subject property. Based on this premise, petitioner concludes that since the existence of these documents is supposed to be in the custody of the sheriffs office and that the private respondents are supposed to have copies of these documents, being the ones who prosecuted the foreclosure proceedings, petitioners contention that there was non-compliance with the legal requirements for the validity of the foreclosure proceedings partakes of a negative allegation which she need not prove. Petitioner argues that in the absence of documents evidencing the foreclosure proceedings over the subject property, the lower court should have acted judiciously by annulling the foreclosure and ordering the repeat of the proceedings. As to her third assigned error, petitioner asserts that despite the fact that she is entitled under the law to an Assessment Notice or Notice of Redemption coming from the highest bidder 30 days before the expiration of the period to redeem apprising her of the principal amount, the interest, taxes and other lawful fees due in case she opts to exercise her right of redemption, she did not receive any notice of this kind. Petitioner contends that her right to this notice is not subject to waiver and that her failure to invoke the same during trial and on appeal does not preclude her from invoking such right in her motion for reconsideration filed with the CA and in the present petition. In their Motion to Dismiss, which the Court treated as their comment on the petition, private respondents contend that the petition should be dismissed on the ground that no question of law was raised therein. Private respondents argue that the issue as to the supposed conflict between the date of maturity of the loan as stated in the Deed of Real Estate Mortgage and the Promissory Note, on one hand, and the real date of maturity as agreed upon by the parties, on the other, as well as the question of whether or not the sheriff who conducted the foreclosure proceedings involving the subject property complied with the legal requirements of posting and publication are questions of fact which are not proper subjects of a petition for review on certiorari. Furthermore, private respondents also assert in their Memorandum that the questions of fact being raised by petitioner had already been ruled upon by the RTC and the CA in favor of private respondents; that the findings of fact of the RTC and the CA are binding on this Court. The Court finds the petition without merit. Petitioner admits that the issue regarding the date of maturity of the loan which she incurred from the Poblete spouses was first brought up only in her Addendum to the Motion for Reconsideration filed before the CA. In an effort to clothe her argument with merit, petitioner contends that the CA should have properly considered this issue in the interest of justice and equity. The Court is not persuaded. It is settled that an issue not raised during trial could not be raised for the first time on appeal as to do so would be offensive to the basic rules of fair play, justice, and due process.12Contrary to petitioners contention, it would be the height of injustice if the CA allowed her to raise an issue at a very late stage of the proceedings. It would be unfair to the adverse party who would have no opportunity to present evidence in contra to the new theory, which it could have done had it been aware of it at the time of the hearing before the trial court.13 It is true that this rule admits of exceptions as in cases of lack of jurisdiction, where the lower court committed plain error, where there are jurisprudential developments affecting the issues, or when the issues raised present a matter of public policy.14 However, the Court finds that none of these exceptions are present in the instant case. In addition, the issue regarding the date of maturity of the loan is factual and settled is the rule that only questions of law may be raised in a petition for review on certiorari under Rule 45 of the Rules of Court, as the Supreme Court is not a trier of facts.15 It is not the function of this Court to review, examine and evaluate or weigh the

9

probative value of the evidence presented.16 While there are also exceptions to this rule such as when the factual findings of the trial court and the CA are contradictory; when the inference made by the CA is manifestly mistaken or absurd; when the judgment of the CA is premised on its misapprehension of facts; and, when the CA failed to resolve relevant facts which, if properly considered, would justify a modification or reversal of the decision of the 17 appellate court, this Court finds that the present case does not fall under any of these exceptions. Even if petitioner had properly raised the issue regarding the real date of maturity of the loan, it is a long-held cardinal rule that when the terms of an agreement are reduced to writing, it is deemed to contain all the terms agreed upon and no evidence of such terms can be admitted other than the contents of the agreement itself.18 In the present case, the promissory note and the real estate mortgage are the law between petitioner and private respondents. It is not disputed that under the Promissory Note dated July 20, 1981, the loan shall mature in one month from date of the said Promissory Note. Petitioner makes much of the testimony of Atty. Edwina Mendoza that the maturity of the loan which petitioner incurred is one year. However, evidence of a prior or contemporaneous verbal agreement is generally not admissible to vary, contradict or defeat the operation of a valid contract.19 While parol evidence is admissible to explain the meaning of written contracts, it cannot serve the purpose of incorporating into the contract additional contemporaneous conditions which are not mentioned at all in writing, unless there has been fraud or 20 mistake. In the instant case, aside from the testimony of Atty. Mendoza, no other evidence was presented to prove that the real date of maturity of the loan is one year. In fact there was not even any allegation in the Complaint and in the Memorandum filed by petitioner with the trial court to the effect that there has been fraud or mistake as to the date of the loans maturity as contained in the Promissory Note of July 20, 1981. Moreover, during her cross-examination, petitioner herself never claimed that the loan shall mature in one year despite being questioned regarding its maturity. She testified thus: Q You said that you borrowed P850,000.00 to [sic] Mrs. Poblete, is that correct? A Yes sir. Q In fact, you signed a Real Estate Mortgage marked as Exhibit "B"? A Yes sir. Q When you signed this Deed of Real Estate Mortgage, you also signed a Promisory [sic] Note, is that correct? RECORD: Witness did not answer. Q Did you sign or not a Promisory [sic] note in relation to this Real Estate Mortgage. A I dont remember sir. Q You dont remember. I am showing to you a Promisory Note with your signature, did you not sign this dated July 20, 1981? A Yes sir. Q Now, according to this Promisory [sic] Note, the loan is for one (1) month from July 20, 1981, did you pay for that loan on its maturity date? A I did not sir. Q Up to now, you have not paid that loan? A I have not sir. Q What happen [sic] to the mortgage when you did not paid [sic] that loan from one (1) month after July 20, 1981? A None sir.21

In sum, petitioner failed to present clear and convincing evidence to prove her allegation that the real agreement of the parties is for the loan to mature in one year. As to the second assigned error, the prevailing jurisprudence is that foreclosure proceedings have in their favor the presumption of regularity and the burden of evidence to rebut the same is on the petitioner.22 Moreover, the Court agrees with the CA that a mortgagor who alleges absence of a requisite has the burden of establishing that fact.23Petitioner failed in this respect as she did not present any evidence to prove her allegations. Moreover, the fact that the records of the foreclosure proceedings involving the subject property could not be found does not necessarily mean that the legal requirements of posting and publication had not been complied

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with. Private respondents were able to present the Affidavit of Publication24 executed by the publisher of Nuevo 25 Horizonte, a newspaper of general circulation, together with a clipping of the published notice attached thereto, to prove that notices of the sale of the subject property were validly published in accordance with law. The affidavit of publication executed by the publisher of a newspaper stating therein that said newspaper is of general circulation and that the requisite notice of foreclosure sale was published in said paper in accordance with law 26 constitutes prima facieevidence of compliance with the required publication. As to the alleged lack of posting of the notices of sale in at least three public places, herein petitioner failed to discharge her burden of proving by convincing evidence her allegation that there was actually no compliance with the posting requirement. Hence, in the absence of contrary evidence, the presumption prevails that the sheriff 27 performed his official duty of posting the notices of sale. The Courts ruling in Olizon v. Court of Appeals, insofar as posting and publication requirements in mortgage foreclosure sales are concerned, is instructive: We take judicial notice of the fact that newspaper publications have more far-reaching effects than posting on bulletin boards in public places. There is a greater probability that an announcement or notice published in a newspaper of general circulation, which is distributed nationwide, shall have a readership of more people than that posted in a public bulletin board, no matter how strategic its location may be, which caters only to a limited few. Hence, the publication of the notice of sale in [a] newspaper of general circulation alone is more than sufficient compliance with the notice-posting requirement of the law. By such publication, a reasonably wide publicity had been effected such that those interested might attend the public sale, and the purpose of the law had been thereby subserved. The object of a notice of sale is to inform the public of the nature and condition of the property to be sold, and of the time, place and terms of the sale. Notices are given for the purpose of securing bidders and to prevent a sacrifice of the property. If these objects are attained, immaterial errors and mistakes will not affect the sufficiency of the notice; but if mistakes or omissions occur in the notices of sale, which are calculated to deter or mislead bidders, to depreciate the value of the property, or to prevent it from bringing a fair price, such mistakes or omissions will be fatal to the validity of the notice, and also to the sale made pursuant thereto. In the instant case, the aforesaid objective was attained since there was sufficient publicity of the sale through the newspaper publication. There is completely no showing that the property was sold for a price far below its value as to insinuate any bad faith, nor was there any showing or even an intimation of collusion between the sheriff who conducted the sale and respondent bank. This being so, the alleged non-compliance with the posting requirement, even if true, will not justify the setting aside of the 29 sale. 1awphi1.net In the present case, there was sufficient evidence to prove that notices of the foreclosure sale of the subject property were published in accordance with law and that there was no allegation, much less proof, that the property was sold for a price which is considerably lower than its value as to show collusion between the sheriff and herein private respondents. Hence, even granting that the sheriff failed to post the notices of foreclosure in at least three public places, such failure, pursuant to Olizon, is not a sufficient basis in nullifying the auction sale and the subsequent issuance of title in favor of private respondents. As to petitioners argument that the sheriff in charge of the auction sale is required to execute an affidavit of posting of notices, the Court agrees with private respondents contention that petitioners reliance on the provisions of Section 5, Republic Act (R.A.) No. 720, as amended by R.A. No. 593930 , as well as on the cases of Roxas v. Court of Appeals,31 Pulido v. Court of Appeals32 and Tambunting v. Court of Appeals,33 is misplaced as the said provision of law refers specifically and exclusively to the foreclosure of mortgages covering loans granted by rural banks. In the present case, the contracts of loan and mortgage are between private individuals. The governing law, insofar as the extrajudicial foreclosure proceedings are concerned, is Act No. 3135, as amended by Act No. 4118.34 Section 3 of the said law reads as follows: Sec. 3. Notice shall be given by posting notices of the sale for not less than twenty days in at least three public places of the municipality or city where the property is situated and if such property is worth more than four hundred pesos, such notice shall also be published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality or city. Unlike in the amended provisions of Section 5, R.A. No. 720, nowhere in the above-quoted provision of Act No. 3135, as amended, or in any Section thereof, is it required that the sheriff must execute an affidavit to prove that he published notices of foreclosure in accordance with the requirements of law. As to the last assigned error, suffice it to say that the Court agrees with the findings of the CA that the issue regarding petitioners right to receive an Assessment Notice or Notice of Redemption from private respondents as the highest bidders during the auction sale was raised only in her Addendum to Motion for Reconsideration of the Decision of the CA. The Court reiterates the rule that points of law, theories, issues and arguments not brought to the attention of the lower court need not be, and ordinarily will not be, considered by a reviewing court, as these cannot be raised for the first time on appeal.35 Moreover, like the issue regarding the date of maturity of the loan, the question of whether or not petitioner received a copy of an Assessment Notice or Notice of Redemption from private respondents is also factual. As28

11

earlier explained, questions of fact are not proper subjects of appeal by certiorari under Rule 45 of the Rules of Court as this mode of appeal is confined to questions of law.36 Besides, there is nothing under Act No. 3135 which requires the highest bidder or purchaser to furnish the mortgagor or redemptioner an Assessment Notice or Notice of Redemption prior to the expiration of the period of redemption. Even the pertinent provisions of Section 30, Rule 3937 of the old Rules of Court, which are the rules applicable in the present case, do not require that the mortgagor or redemptioner be furnished by the purchaser notice of any assessments or taxes which the latter may have paid after the purchase of the auctioned property, thus: Sec. 30. Time and manner of, and amounts payable on, successive redemptions, notice to be given and filed. The judgment debtor or redemptioner may redeem the property from the purchaser at any time within twelve (12) months after the sale, on paying the purchaser the amount of his purchase with one per centum per month interest thereon in addition, up to the time of redemption, together with the amount of any assessments or taxes which the purchaser may have paid thereon after purchase and interest on such last named amount at the same rate; and if the purchaser be also a creditor having a prior lien to that of the redemptioner, other than the judgment under which such purchase was made, and the amount of such other lien, with interest. Property so redeemed may again be redeemed within sixty (60) days after the last redemption upon payment of the sum paid on the last redemption, with two per centum thereon in addition, and the amount of any assessments or taxes which the last redemptioner may have paid thereon after redemption by him, with interest of such last-named amount, and in addition, the amount of any liens held by said last redemptioner prior to his own, with interest. The property may be again, and as often as a redemptioner is so disposed, redeemed from any previous redemptioner within sixty (60) days after the last redemption, on paying the sum paid on the last previous redemption, with two per centum thereon in addition, and the amounts of any assessments or taxes which the last previous redemptioner paid after the redemption thereon, with interest thereon, and the amount of any liens held by the last redemptioner prior to his own, with interest. Written notice of any redemption must be given to the officer who made the sale and a duplicate filed with the Registrar of Deeds of the province, and if any assessment of taxes are paid by the redemptioner or if he has or acquires any lien other than that upon which the redemption was made, notice thereof must in like manner be given to the officer and filed with the Registrar of Deeds; if such notice be not filed, the property may be redeemed without paying such assessments, taxes, or liens. (emphasis supplied) Hence, even granting, for the sake of argument, that private respondents failed to comply with the directive in the Certificate of Sale issued by the Ex-Officio Provincial Sheriff of Rizal and the Deputy Sheriff In-Charge by giving a copy of statements of the amount of assessments or taxes which they may have paid on account of the purchase of the subject property, such failure would not invalidate the auction sale and the subsequent transfer of title over the subject property in their favor. It bears to note that the purpose for requiring the purchaser to furnish copies of the amounts of assessments or taxes which he may have paid is to inform the mortgagor or redemptioner of the actual amount which he should pay in case he chooses to exercise his right of redemption. If no such notice is given, the only effect is that the property may be redeemed without paying such assessments or taxes.38 In fact, it would have been beneficial on the part of herein petitioner if private respondents failed to submit to the office of the sheriff and furnish her a copy of the statements of the taxes and assessments they paid because in such a case petitioner would have been excused from reimbursing such assessments and taxes if she redeemed the property. The fact remains, however, that petitioner failed to redeem the subject property. WHEREFORE, the instant petition is DENIED and the assailed Decision and Resolution of the Court of Appeals areAFFIRMED in toto.Costs against petitioner.SO ORDERED.

12

G.R. No. 90369 October 31, 1990 FLORENTINO CRUZ AND LINA CRUZ, petitioners, vs. THE HONORABLE COURT OF APPEALS AND GOVERNMENT SERVICE INSURANCE SYSTEM, respondents. Isidro D. Amoroso for petitioners.

GANCAYCO, J.: The enforceability of a deed of sale with assumption of mortgage of property encumbered to the Government Service Insurance System (GSIS), entered into without the previous consent of the latter, is the center of controversy in this petition. On May 22,1970, petitioners bought a parcel of land with an area of approximately 250 square meters from the spouses Oscar and Eva De los Reyes, registered owners thereof, under Transfer Certificate of Title (TCT) No. 135319 issued by the Register of Deeds of Quezon City. At the time of the sale of the property, it was mortgaged to the GSIS for P20,000.00 which obligation petitioners assumed. The mortgage contract of the De los Reyes spouses with the GSIS stipulates that "the mortgagor shall not sell, dispose of, mortgage nor in any manner encumber the mortgaged property without the prior consent of the 1 mortgagee. Petitioner Florentino Cruz went to the Real Estate Department of the GSIS to secure its approval. He was interviewed by one Mr. Tobias Jaylo to whom he left a copy of the deed of sale with assumption of mortgage, 2 and his letter request that he be allowed to assume the mortgage obligation of the De los Reyes spouses. After two weeks he returned to Mr. Jaylo only to be informed that the records of the transaction with the De los Reyes spouses could not be found, hence, his request could not be acted upon. As his follow-up proved fruitless, he left the matter to Mr. Jaylo. On March 12, 1974, petitioner Florentino Cruz wrote to the GSIS wherein petitioner asked for the status of the loan and for a notification as to arrearages, if any, for liquidation. The GSIS denied having received this letter. In the meanwhile, the amortization of the De los Reyes spouses fell due and the GSIS demanded payment. When the arrearages remained unpaid, the GSIS applied for extrajudicial foreclosure of the property. The foreclosure proceeding was actually held on September 29, 1978. After the one-year period of redemption expired, the GSIS consolidated its ownership and TCT No. 281934 was issued in its favor on September 25, 1981. On September 17, 1982, the GSIS wrote a letter to petitioner Florentino Cruz and informed him that he was given the opportunity to repurchase the property for P70,000.00 and to pay the monthly rental of P600.00 beginning September 1978 until the corresponding contract of sale shall have been made in favor of petitioners. Petitioner rejected the offer and insisted that he be allowed to liquidate the mortgage indebtedness on the property as of May 20, 1979. 3 Hence, the Cruz spouses filed a complaint for annulment of foreclosure, reconveyance and damages in the Regional Trial Court of Quezon City. On August 14, 1984, the Regional Trial Court rendered its decision dismissing the complaint with costs de oficio. Petitioners appealed to the Court of Appeals wherein in due course a decision was rendered on September 25, 1989 affirming the appealed decision with costs against petitioners. Now come the petitioners with the herein petition for review on certiorari raising the sole issue of whether or not the respondent Court of Appeals committed errors of law in affirming the order of dismissal issued by the lower court. The petition is devoid of merit. In the first place, there can be no question that petitioners purchased the property in question from the De los Reyes spouses by virtue of a deed of sale with assumption of mortgage of the property without the previous consent of the respondent GSIS. Petitioners thereby took a calculated risk knowing as they did that under the mortgage contract of the De los Reyes spouses with the GSIS, its previous consent must be secured in transactions of this nature. When petitioners brought this action to question the validity of the extrajudicial

13

foreclosure sale of the property, the burden was on them to prove their allegations. Unfortunately, petitioners failed to discharge their burden. In the second place, the contention of petitioners, to the effect that the said foreclosure proceeded without their knowledge or prior notice to them and that this invalidated the foreclosure proceeding, is untenable. Since there is no privity of contract between the petitioners and the GSIS, the latter had no legal duty to notify the petitioners of the said foreclosure proceeding. Moreover, the prior publication of the subject extrajudicial foreclosure sale in a newspaper of general circulation operates as a constructive notice to the whole world, including petitioners, of the sale. In the third place, there is no provision of law which requires that when said extrajudicial sale is conducted special notice to petitioners as alleged successors-in-interest of the mortgagors should be made. Section 3 of Act No. 3135 governing extrajudicial foreclosure sales provides as follows: Sec. 3. Notice shall be given by notices of the sale for not less than twenty days in at least three public places of the municipality or city where the property is situated, and if such property is worth more than four hundred pesos, such notice shall also be published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality or city. The foregoing provision of law does not require any particular notice to the mortgagors much less to their alleged successors-in-interest like the petitioners herein. In the fourth place, the court a quo correctly observed that petitioners have not established a cause of action against the respondent GSIS as its previous written approval of the deed of sale with assumption of mortgage had not been secured by the petitioners. While it is true that the petitioners attempted to secure such approval subsequently by submitting a copy of the deed to the GSIS through one Mr. Jaylo, the fact remains that the approval sought had not been granted. In the fifth place, the Court takes note of the fact that while petitioners appear to have purchased the property in 1970, they took no positive steps to pay the mortgage obligation in the amount of P20,000.00 to the respondent GSIS except through its letter dated March 12, 1974 receipt of which is even denied by the GSIS. They knew that the mortgage obligation they assumed is to be paid in monthly amortizations. They should have paid the same as stipulated but they failed to do so. Thus, they have only themselves to blame. Moreover, even after the property was foreclosed and its ownership was consolidated in the name of the respondent GSIS, in a letter to petitioners dated September 7, 1982, the GSIS nevertheless gave them the opportunity to redeem the property for P70,000.00 plus an amount corresponding to reasonable rentals therefrom. However, petitioners rejected this opportunity and instead insisted that they be allowed to liquidate the mortgage indebtedness of the property. Lastly, the petitioners appeal that on the basis of equity they should be allowed to redeem the property by liquidating the mortgage indebtedness thereof. The Court finds no cogent basis to grant this. As earlier stated petitioners took the risk of entering into a deed of sale with assumption of mortgage to the property without securing the prior consent of the respondent GSIS. Besides, petitioners did not pay the amortization due to stave off a foreclosure. The recourse of the petitioners, if at all, the should be against the De los Reyes spouses and not against GSIS. WHEREFORE, the petition is DISMISSED without pronouncement as to costs. SO ORDERED.

14

G.R. No. L-18077 RODRIGO ENRIQUEZ, ET AL., plaintiffs-appellants, vs. SOCORRO A. RAMOS, defendant-appellee. Gelacio L. Dimaano for plaintiffs-appellants. Vicente K. Aranda for defendant-appellee. , J.: This is an action for foreclosure of a real estate mortgage. It is alleged that on November 24, 1958 defendant purchased from plaintiffs 20 parcels of land located in Quezon City and covered by transfer certificates of title for the amount of P235,056.00 of which only the amount of P35,056.00 was paid on the date of sale, the balance of P200,000.00 being payable within two years from the date of sale, with 6% interest per annum during the first year, and the remainder to draw 12% interest per annum if paid thereafter, provided that at least P100,000.00 should be paid during the first year, otherwise the whole unpaid balance would become immediately demandable; that to secure the payment of the balance of P200,000.00 defendant executed a mortgage in favor of plaintiffs upon the 20 parcels of land sold and on a half interest over a parcel of land in Bulacan which was embodied in the same deed of sale; that said deed of sale with mortgage was registered in the Offices of the Registers of Deeds of Quezon City and Pampanga; and that as defendant broke certain stipulations contained in said deed of sale with mortgage, plaintiffs instituted the present foreclosure proceedings. Defendant set up as affirmative defense that the contract mentioned in the complaint does not express the true agreement of the parties because certain important conditions agreed upon were not included therein by the counsel who prepared the contract; that the stipulation that was omitted from the contract was the promise assumed by plaintiffs that they would construct roads in the lands which were to be subdivided for sale on or before January, 1959; that said condition was not placed in the contract because, according to plaintiffs' counsel, it was a superfluity, inasmuch as there is an ordinance in Quezon City which requires the construction of roads in a subdivision before lots therein could be sold; and that, upon the suggestion of plaintiff's counsel, their promise to construct the roads was not included in the contract because the ordinance was deemed part of the contract. Defendant further claims that the true purchase price of the sale was not P235,056.00 but only P185,000.00, the difference of P50,000.00 being the voluntary contribution of defendant to the cost of the construction of the roads which plaintiffs assumed to do as abovementioned. After the reception of the evidence, the trial court sustained the contention of defendant and dismissed the complaint on the ground that the action of plaintiffs was premature. It found that plaintiffs really assumed the construction of the roads as a condition precedent to the fulfillment of the obligation stipulated in the contract on the part of defendant, and since the same has not been undertaken, plaintiffs have no cause of action. In due time, plaintiffs have appealed JpPz6FXN. The evidence of record discloses the following facts: On November 6, 1966, plaintiffs entered into a contract of conditional sale with one Pedro del Rosario covering a parcel of land in Quezon City described in Transfer Certificate of Title No. 1148 which has a total area of 77,772 square meters in consideration of a purchase price of P10.00 per square meter. To guarantee the performance of the conditions stipulated therein a performance bond in the amount of P100,000.00 was executed by Pedro del Rosario. Del Rosario was given possession of the land for development as a subdivision at his expense. He undertook to pay for the subdivision survey, the construction of roads, the installation of light and water, and the income tax plaintiffs may be required to pay arising from the transaction, in consideration of which Del Rosario was allowed to buy the property for P600,000.00 within a period of two years from November 6, 1956 with the condition that, upon his failure to pay said price when due, all the improvements introduced by him would automatically

15

become part of the property without any right on his part to reimbursement and the conditional sale would be rescinded. Unable to pay the consideration of P600,000.00 as agreed upon, and in order to avoid court litigation, plaintiffs and Del Rosario, together with defendant Socorro A. Ramos, who turned out to be a partner of the latter, entered into a contract of rescission on November 24, 1958. To release the performance bond and to enable defendant to pay some of the lots for her own purposes, plaintiffs allowed defendant to buy 20 of the lots herein involved at the rate of P16.00 per square meter on condition that she will assume the payment of P50,000.00 as her share in the construction of roads and other improvements required in the subdivision. This situation led to the execution of the contract of sale Exhibit A subject of the present foreclosure proceedings. The main issues closed in this appeal are: (1) Is the purchase price of the 20 lots bought by defendant from plaintiffs the sum of P185,000.00, as claimed by defendant, or P235.056.00, as claimed by plaintiffs?; and (2) Was an oral agreement, coetaneous to the execution of the contract of sale, entered into between the parties to the effect that plaintiffs would undertake the construction of the roads on the lots sold before defendant could be required to comply with her financial obligation? Defendant contends that the contract of sale Exhibit A does not express the true agreement of the parties because certain important conditions agreed upon were not included therein by plaintiffs' counsel among which is the promise assumed by plaintiffs that they would undertake to construct the roads that may be required in the subdivision subject sale of the sale on or before January, 1959; that said condition was not placed in the contract because plaintiffs' counsel said that it was a superfluity inasmuch as there was then in Quezon City an ordinance which requires the construction of road in a subdivision before the lots therein could be sold; and that, upon the suggestion of plaintiffs' counsel, such commitment was not included in the contract because the ordinance aforesaid was already deemed to be part of the contract. Plaintiffs, on the other hand, dispute the above contention arguing that there was no such oral agreement or understanding because all that was agreed upon between the parties was already expressed and included in the contract of sale Exhibit A executed between the parties, and since defendant failed to pay the balance of her obligation within the period stipulated the whole obligation became due and demandable thus giving plaintiffs the right to foreclose the mortgage in accordance with law. After considering and evaluating the evidence submitted by both parties, the court a quo found defendant's contention well-taken, thereby concluding that the action of plaintiffs was premature. In reaching this conclusion; the court a quo made the following comment: . . . The Court is of the opinion that the construction of the roads was a condition precedent to the enforcement of the terms of Exhibit A, particularly the foreclosure of mortgage, for the reason that the subdivision regulations of Quezon City requires, as a matter of law, that the sellers of lands therein to be converted into subdivision lots must construct the roads in said subdivision before the lots could be sold. This requirement must have been uppermost in the mind of the parties in this case which led to the execution of the so-called 'Explanation' (Exhibit 3) wherein it is stated that the sum of P50,000.00 was a contribution of the herein defendant for the construction of the roads which the plaintiffs would undertake 'in accordance with the provisions of the City Ordinance of Quezon City' (Exhibit 3). It is to be noted that Exhibit 3 was executed on November 24, 1958, the very day when Exhibit A was also executed. Exhibit 3 also proves that the purchase price is not, as appearing in the deed of sale with mortgage Exhibit A, actually P235,000.00 but only P185,000.00 which would approximately be the price of the entire area of the land sold at the rate of P16.00 per square meter. We find no error in the conclusion reached by the court a quo for indeed that is the condition to be expected by a person who desires to purchase a big parcel of land for purposes of subdivision. In a subdivision the main improvement to be undertaken before it could be sold to the public is feeder roads as otherwise it would be inaccessible and valueless and would offer no attraction to the buying public. And so it is correct to presume was the court a quo did, that when the sale in question was being negotiated the construction of roads in the prospective subdivision must have been uppermost in the mind of defendant for her purpose in purchasing the property was to

16

develop it into a subdivision. That such requirement was uppermost in the mind of defendant is proven by the execution by the plaintiffs of the so-called "Explanation" (Exhibit 3) on the very day the deed of sale was executed wherein it was stated that the sum of P50,000.00 was advanced by defendant as her contribution to the construction of the roads which plaintiffs assumed to undertake "in accordance with the provisions of the City Ordinance of Quezon City." It is to be noted that said document specifically states that the amount of P50,000.00 should be deducted from the purchase price of P235,056.00 appearing in the deed of sale, and this is a clear indication that the real purchase price is only P185,000.00 as claimed by defendant, which would approximately be the price of the entire area of the land at the rate of P16.00 per square meter. A circumstance which lends cogency to defendant's claim that the commitment of plaintiffs to construct roads was not inserted in the contract because of the insurance made by their counsel that it would be a superfluity is the fact that in Quezon City there was really an ordinance which requires the construction of roads it subdivision before lots therein could be sold, and considering that this assurance came from the very counsel who prepared the document who even intimated that ordinance was deemed part of the contract, defendant must have agreed to the omission relying on the good faith plaintiffs and their counsel. At any rate, the execute of the document Exhibit 3 clarifies whatever doubt may have existed with regard to the true terms of the agreement on the matter. It is argued that the court a quo erred in allowing presentation of parole evidence to prove that a conteporaneous oral agreement was also reached between parties relative to the construction of the roads for same is in violation of our rule which provides that when the terms of an agreement had been reduced to writing it is to be considered as containing all that has been agreed upon and that no evidence other than the terms there can be admitted between the parties (Section 22, Rule 123). This rule, however, only holds true if there is allegation that the agreement does not express the intent of the parties. If there is and this claim is in issue in the pleadings, the same may be the subject parole evidence (Idem.). The fact that such failure has been put in issue in this case is patent in the answer wherein defendant has specifically pleaded that the contract of sale in question does not express the true intent of the parties with regard to the construction of the roads. It appearing that plaintiffs have failed to comply with the condition precedent relative to the construction of the roads in the subdivision in question, it follows that their action is premature as found by the court a quo. The failure of defendant to pay the realty and income taxes as agreed upon, as well as to register the mortgage with respect to the Bulacan property, aside from being minor matters, appear sufficiently explained in the brief of defendant-appellee. WHEREFORE, the decision appealed from is affirmed, with costs against appellants. Bengzon, C.J., Padilla, Labrador, Reyes, J.B.L., Paredes, Dizon and Makalintal, JJ., concur. Regala, J., took no part. .

17

G.R. No. 11346 ESPIRIDIONA CANUTO, plaintiff-appellee, vs. JUAN MARIANO, defendant-appellant. Alfredo Chicote, Jose Arnaiz and Pascual B. Azanza for appellant. Alfonso E. Mendoza for appellee. CARSON, J.: This is an appeal from a judgment of the Court of First Instance of Manila, providing for the execution of a deed evidencing the repurchase by the plaintiff of a parcel of land from the defendant, upon the payment by the former of the sum of P360. On December 4, 1913, the plaintiff executed a deed of sale of the parcel of land described in the complaint, to the defendant, for the sum of P360, reserving the right to repurchase the land for that amount within one year from the date of the deed of sale. The redemption period having elapsed, and the plaintiff having failed to exercise her right to repurchase within that period, the defendant set up a claim of absolute ownership to the land, notwithstanding the insistent demand of the plaintiff that she be permitted to exercise her reserved right of repurchase in accordance with an alleged oral agreement for the extension of the r redemption period down to the end of the month of December, 1914. She claims that on the second day of December, 1914, two days before the expiration of the original redemption period, she asked the defendant for an extension of time for the repurchase of the land and that upon her promise to make the repurchase during the month of December, 1914, the defendant agreed to extend the redemption set out in the written contract, to the end of that month; that after the expiration of the original redemption period, she thought to make the repurchase in accordance with the agreement as to the extension of the time therefor; but the defendant failed to appear at the time and place agreed upon for the payment of the purchase price and has refused since that time to execute a deed of resale, or to reserve the purchase price agreed upon, despite the plaintiff's repeated demands and tender of the purchase price. The plaintiff testified that on the morning of December the second, 1914, while she was washing clothes near a well, the defendant passed by; that she seized the opportunity to beg an extension of time in which to repurchase the land, promising the defendant that she would borrow the money and make payment if he would extend the redemption period until the end of the month; that after some demur the defendant agreed to allow her the whole of the month of December in which to redeem the land; that the following Sunday she went to the house of the defendant and that he promised to meet her at the house of Mercado, an attorney, at 4 o'clock of the next day, there to receive the purchase price and execute the necessary documents evidencing the transaction; that she took the money to the lawyer's office at the time appointed, and waited there until dark, but that the defendant failed to meet his engagement; that she then went to his house, but was told that he was not at home; and that since that time defendant has refused to carry out his oral agreement, claiming that the redemption period set out in the original deed of sale expired on the fourth day of December, 1914, and that she had no right to repurchase the land after that date. Severino Pascual, who was present when the oral agreement to extend the time for the repurchase of the land was made, corroborated her testimony in this regard, and we find nothing in the record which would justify us in disturbing the findings of the trial judge who accepted her testimony as a substantially true account of all that occurred, and declined to believe the conflicting testimony of the defendant which he characterized as vague and incredible. The defendant having extended the time within which the plaintiff could repurchase the land on condition that she would find the money and make repurchase within the extended period, it is clear that he cannot be permitted to repudiate his promise, it appearing that the plaintiff stood ready to make the payment within the extended period, and was only prevented from doing so by the conduct of the defendant himself. (Villegas vs. Capistrano, 9 Phil. Rep., 416; Fructo vs. Fuentes, 15 Phil. Rep., 362; Retes vs. Suelto, 20 Phil. Rep., 394; Rosales vs. Reyes and Ordoveza, 25 Phil. Rep., 495.) The contention that the plaintiff should not be permitted to alter, vary, or contradict the terms of the written instrument by the introduction of oral evidence is manifestly untenable under the circumstances of the case, as will readily appear from the following citation from 17 Cyc., p. 734, and numerous cases cited in support of the doctrine: The rule forbidding the admission of parol or extrinsic evidence to alter, vary, or contradict a written instrument does not apply so as to prohibit the establishment by parol of an agreement between the parties to a writing, entered into subsequent to the time when the written instrument was executed, notwithstanding such agreement may have the effect of adding to, changing,

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modifying, or even altogether abrogating the contract of the parties as evidenced by the writing; for the parol evidence does not in any way deny that the original agreement of the parties was that which the writing purports to express, but merely goes to show that the parties have exercised their right to change or abrogate the same, or to make a new and independent contract. It makes no difference how soon after the execution of the written contract the parol one was made. If it was in fact subsequent and is otherwise unobjectionable it may be proved and enforced. The contention that the plaintiff lost her right to redeem because she failed to make judicial deposit of the purchase price when the defendant declined to receive it, is not entitled to serious consideration in view of the repeated decisions of this court to the contrary collated and discussed in the case ofRosales vs. Reyes and Ordoveza (25 Phil. Rep., 495). In that case and in the cases cited therein we declared that the settled rule in this jurisdiction is that a bona fide offer or tender of the price agreed upon for the repurchase is sufficient to preserve the rights of the party making it, without the necessity of making judicial deposit, if the offer or tender is refused; and in the case of Fructo vs. Fuentes (15 Phil. Rep., 362) we said that in such cases when diligent effort is made by the vendor of the land to exercise the right to repurchase reserved by him in his deed of sale "and fails by reason of circumstances over which he has no control, we are of the opinion and so hold that he does not lose his right to repurchase on the day of maturity." We conclude that the judgment entered in the court below should be affirmed with costs of this instance against the appellant. So ordered. Arellano, C.J., Street, Malcolm, Avancea, and Fisher, JJ., concur. Torres and Araullo, JJ., concur in the result Uh0AJR7CRC. Johnson, J., did not sign. .

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G.R. No. L-9935 YU TEK and CO., plaintiff-appellant, vs. BASILIO GONZALES, defendant-appellant. Beaumont, Tenney and Ferrier for plaintiff. Buencamino and Lontok for defendant. TRENT, J.: The basis of this action is a written contract, Exhibit A, the pertinent paragraphs of which follow: 1. That Mr. Basilio Gonzalez hereby acknowledges receipt of the sum of P3,000 Philippine currency from Messrs. Yu Tek and Co., and that in consideration of said sum be obligates himself to deliver to the said Yu Tek and Co., 600 piculs of sugar of the first and second grade, according to the result of the polarization, within the period of three months, beginning on the 1st day of January, 1912, and ending on the 31st day of March of the same year, 1912. 2. That the said Mr. Basilio Gonzales obligates himself to deliver to the said Messrs. Yu Tek and Co., of this city the said 600 piculs of sugar at any place within the said municipality of Santa Rosa which the said Messrs. Yu Tek and Co., or a representative of the same may designate. 3. That in case the said Mr. Basilio Gonzales does not deliver to Messrs. Yu Tek and Co. the 600 piculs of sugar within the period of three months, referred to in the second paragraph of this document, this contract will be rescinded and the said Mr. Basilio Gonzales will then be obligated to return to Messrs. Yu Tek and Co. the P3,000 received and also the sum of P1,200 by way of indemnity for loss and damages. Plaintiff proved that no sugar had been delivered to it under this contract nor had it been able to recover the P3,000. Plaintiff prayed for judgment for the P3,000 and, in addition, for P1,200 under paragraph 4, supra. Judgment was rendered for P3,000 only, and from this judgment both parties appealed. The points raised by the defendant will be considered first. He alleges that the court erred in refusing to permit parol evidence showing that the parties intended that the sugar was to be secured from the crop which the defendant raised on his plantation, and that he was unable to fulfill the contract by reason of the almost total failure of his crop. This case appears to be one to which the rule which excludes parol evidence to add to or vary the terms of a written contract is decidedly applicable. There is not the slightest intimation in the contract that the sugar was to be raised by the defendant. Parties are presumed to have reduced to writing all the essential conditions of their contract. While parol evidence is admissible in a variety of ways to explain the meaning of written contracts, it cannot serve the purpose of incorporating into the contract additional contemporaneous conditions which are not mentioned at all in the writing, unless there has been fraud or mistake. In an early case this court declined to allow parol evidence showing that a party to a written contract was to become a partner in a firm instead of a creditor of the firm. (Pastor vs. Gaspar, 2 Phil. Rep., 592.) Again, in Eveland vs. Eastern Mining Co. (14 Phil. Rep., 509) a contract of employment provided that the plaintiff should receive from the defendant a stipulated salary and expenses. The defendant sought to interpose as a defense to recovery that the payment of the salary was contingent upon the plaintiff's employment redounding to the benefit of the defendant company. The contract contained no such condition and the court declined to receive parol evidence thereof. In the case at bar, it is sought to show that the sugar was to be obtained exclusively from the crop raised by the defendant. There is no clause in the written contract which even remotely suggests such a condition. The defendant undertook to deliver a specified quantity of sugar within a specified time. The contract placed no restriction upon the defendant in the matter of obtaining the sugar. He was equally at liberty to purchase it on the market or raise it himself. It may be true that defendant owned a plantation and expected to raise the sugar himself, but he did not limit his obligation to his own crop of sugar. Our conclusion is that the condition which the defendant seeks to add to the contract by parol evidence cannot be considered. The rights of the parties must be determined by the writing itself.

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The second contention of the defendant arises from the first. He assumes that the contract was limited to the sugar he might raise upon his own plantation; that the contract represented a perfected sale; and that by failure of his crop he was relieved from complying with his undertaking by loss of the thing due. (Arts. 1452, 1096, and 1182, Civil Code.) This argument is faulty in assuming that there was a perfected sale. Article 1450 defines a perfected sale as follows: The sale shall be perfected between vendor and vendee and shall be binding on both of them, if they have agreed upon the thing which is the object of the contract and upon the price, even when neither has been delivered. Article 1452 reads: "The injury to or the profit of the thing sold shall, after the contract has been perfected, be governed by the provisions of articles 1096 and 1182." This court has consistently held that there is a perfected sale with regard to the "thing" whenever the article of sale has been physically segregated from all other articles Thus, a particular tobacco factory with its contents was held sold under a contract which did not provide for either delivery of the price or of the thing until a future time. McCullough vs. Aenlle and Co. (3 Phil. Rep., 295). Quite similar was the recent case of Barretto vs. Santa Marina (26 Phil. Rep., 200) where specified shares of stock in a tobacco factory were held sold by a contract which deferred delivery of both the price and the stock until the latter had been appraised by an inventory of the entire assets of the company. In Borromeo vs. Franco (5 Phil. Rep., 49) a sale of a specific house was held perfected between the vendor and vendee, although the delivery of the price was withheld until the necessary documents of ownership were prepared by the vendee. In Tan Leonco vs. Go Inqui (8 Phil. Rep., 531) the plaintiff had delivered a quantity of hemp into the warehouse of the defendant. The defendant drew a bill of exchange in the sum of P800, representing the price which had been agreed upon for the hemp thus delivered. Prior to the presentation of the bill for payment, the hemp was destroyed. Whereupon, the defendant suspended payment of the bill. It was held that the hemp having been already delivered, the title had passed and the loss was the vendee's. It is our purpose to distinguish the case at bar from all these cases. In the case at bar the undertaking of the defendant was to sell to the plaintiff 600 piculs of sugar of the first and second classes. Was this an agreement upon the "thing" which was the object of the contract within the meaning of article 1450, supra? Sugar is one of the staple commodities of this country. For the purpose of sale its bulk is weighed, the customary unit of weight being denominated a "picul." There was no delivery under the contract. Now, if called upon to designate the article sold, it is clear that the defendant could only say that it was "sugar." He could only use this generic name for the thing sold. There was no "appropriation" of any particular lot of sugar. Neither party could point to any specific quantity of sugar and say: "This is the article which was the subject of our contract." How different is this from the contracts discussed in the cases referred to above! In the McCullough case, for instance, the tobacco factory which the parties dealt with was specifically pointed out and distinguished from all other tobacco factories. So, in the Barretto case, the particular shares of stock which the parties desired to transfer were capable of designation. In the Tan Leonco case, where a quantity of hemp was the subject of the contract, it was shown that that quantity had been deposited in a specific warehouse, and thus set apart and distinguished from all other hemp RLpgy. A number of cases have been decided in the State of Louisiana, where the civil law prevails, which confirm our position. Perhaps the latest is Witt Shoe Co. vs. Seegars and Co. (122 La., 145; 47 Sou., 444). In this case a contract was entered into by a traveling salesman for a quantity of shoes, the sales having been made by sample. The court said of this contract: But it is wholly immaterial, for the purpose of the main question, whether Mitchell was authorized to make a definite contract of sale or not, since the only contract that he was in a position to make was an agreement to sell or an executory contract of sale. He says that plaintiff sends out 375 samples of shoes, and as he was offering to sell by sample shoes, part of which had not been manufactured and the rest of which were incorporated in plaintiff's stock in Lynchburg, Va., it was impossible that he and Seegars and Co. should at that time have agreed upon the specific objects, the title to which was to pass, and hence there could have been no sale. He and Seegars and Co. might have agreed, and did (in effect ) agree, that the identification of the objects and their appropriation to the contract necessary to make a sale should thereafter be made by the plaintiff, acting for itself and for Seegars and Co., and the legend printed in red ink on plaintiff's billheads ("Our responsibility ceases when we take transportation Co's. receipt `In good order'" indicates plaintiff's idea of the moment at which such identification and appropriation would become effective. The question presented was carefully considered in the