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G.R. No. 83992 January 27, 1993

RURAL BANK OF DAVAO CITY, INC. petitioner,vs.THE HONORABLE COURT OF APPEALS and GABRIEL

ABELLANO and FRANCISCO SEQUITAN, respondents.

DAVIDE, JR., J.:

Two (2) issues are presented for Our resolution in this petition forreview under Rule 45 of the Rules of Court, viz :(1) whether or notthe two-year redemption period fixed by the Rural Banks' Act 1 in aforeclosure sale of property acquired through a homestead patentsuperseded or repealed thefive-year repurchase period prescribed in Section 119 of the PublicLand Act 2 and (2) if it did not, whether, in the event of theexpropriation by the Government of the subject property duringthe redemption or repurchase period, a homesteader, whothereafter exercised his right to redeem or repurchase, is entitled

to the compensation for such expropriation less the redemption orrepurchase amount. The trial court ruled in the negative for thefirst issue and in the affirmative for the second. The respondentCourt of Appeals affirmed the trial court. Hence, We have theinstant petition seeking for a contrary ruling.

The undisputed facts generative of this controversy are as follows:

On 18 April 1978, private respondents Gabriel Abellano andFrancisca Sequitan obtained a loan in the amount of P45,000.00from the petitioner, a rural bank organized and existing under the

Rural Banks' Act. The terms thereof called for payment of the loanin two (2) equal installments on 21 October 1978 and 21 April1979.

As security for the loan, the private respondents mortgaged withthe petitioner a parcel of land, belonging to them, with an area of one (1) hectare, more or less, located at Matina, Davao City andcovered by Original Certificate of Title No. P-7392. The land wasacquired through a homestead patent.

On 1 July 1978, the National Housing Authority (NHA) filed with thethen Court of First Instance (CFI) of Davao City a complaint for theexpropriation of several parcels of land located in Davao City tocarry out its Slum Improvement and Resettlement Program; saidaction was directed against the private respondents, with respectto the mortgaged property, and fifteen (15) other persons. Thecase was docketed as Special Civil Case No. 11157 and was raffledoff to Branch II of said court. As mortgagee, the petitioner filed

therein a motion to intervene, which the court granted.

Upon arrival of the loan's maturity dates, private respondentsfailed to pay their obligation to the petitioner. The latter thereforecaused the extrajudicial foreclosure of the subject property inaccordance with Act No. 3135, as amended. During the foreclosuresale held on 9 November 1979, the petitioner submitted thehighest bid; consequently, the Deputy Sheriff executed in its favora certificate of sale for the total amount of P54,883.00 whichincluded the unpaid interest and other charges.

The certificate of sale was registered in the Registry of Deeds of Davao City on 7 December 1979. Private respondents, however,failed to redeem the foreclosed property within the period of two(2) years from the date of registration, or up to 7 December 1981,as provided for in Section 5 of the Rural Banks' Act. Despite suchfailure, the petitioner extended the period to October 1982. Theprivate respondents still failed to redeem the property. Petitionerthen asked for the consolidation of its title over the same. In duecourse, the private respondents' certificate of title was canceledand in lieu thereof, Transfer Certificate of Title No. T-92487 in thename of the petitioner was issued on 3 November 1982.

On 24 February 1983, Branch II of the CFI of Davao City issued anorder in Special Civil Case No. 11157 requiring the NHA to pay theamount of P85.00 per square meter for the properties sought to beexpropriated, which included the aforementioned foreclosedproperty. This amount was subsequently reduced to P49.00 persquare meter. Thus, the price to be paid for the foreclosedproperty was P490,000.00.

On 9 November 1983, private respondents notified the petitioner of their desire to repurchase the foreclosed property pursuant to



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Section 119 of the Public Land Act (C.A. No. 141). Rebuffed by thelatter, private respondents filed on 9 February 1984 with theRegional Trial Court (RTC) of Davao City a complaint forreconveyance of their foreclosed property under said Section 119.The case was docketed as Civil Case No. 16693 and was raffled off to Branch XIII of the said court.

In its Affirmative Defenses set up in the Answer to the complaint,

petitioner claimed that the private respondents' action will nolonger prosper because their right to repurchase had become mootand academic as the property could no longer be physically,materially and actually recovered or repurchased. This is sobecause no less than the sovereign state needed the same — pursuant to its socialized housing program under P.D. No. 875, asamended — to be divided into smaller lots for distribution to agreater number of recipients, and that "the right to repurchasecannot be exercised without the actual, material and physicalrecovery of the property itself, otherwise such an action, as theinstant action of the plaintiffs, is purely speculative, which our

Supreme Court, in a series of decisions, had frowned upon anddisallowed." 3

After the issues were joined, the trial court conducted a pre-trialconference on 3 May 1984. On the same date, it issued an orderrequiring the private respondents to deposit the sum of P54,883.00as repurchase price which they complied with.

On 2 July 1984, private respondents filed a Motion to Amend theComplaint and File Supplemental Pleading alleging therein, inter alia, that since "there is a seeming impossibility for the plaintiffs

now to reacquire the property by reason of the order of expropriation, justice also demands that the said amount of P490,000.00 must be given to the plaintiffs, in lieu of the propertyexpropriated." Despite the petitioner's opposition, the trial courtissued on 2 August 1984 an order granting the motion andadmitting the amended complaint.

The trial court decided the case on 1 February 1985 on the basis of the stipulation of facts submitted by the parties. The dispositiveportion of the decision reads:

WHEREFORE, decision is hereby rendered, declaringplaintiffs entitled to the price paid by the NationalHousing Authority for the property in question andordering the defendant:

1. To pay or remit the (sic) plaintiffs the sum of P435,117.00, the remaining balance of said price of the property paid by NHA after deducting the

obligation of plaintiffs in the sum of P54,883.00;

2. To pay plaintiff's interest on the P435,117.00 atthe rate defendant grants to its depositorcommencing on the date when defendant receivedthe sum of P490,000.00 from NHA in payment of theproperty in question until the whole obligation is fullypaid;

3. To pay plaintiffs the sum of P10,000.00 asattorney's fee plus costs.

SO ORDERED. 4

Petitioner seasonably appealed this decision to the thenIntermediate Appellate Court on both questions of fact and law.The case was docketed as CA-G.R. CV No. 07689.

On 30 March 1988, the respondent Court of Appeals, as thesuccessor of the Intermediate Appellate Court, promulgated,through a division of five (5) (Sixteenth Division), its decision inCA-G.R. No. 07689 affirming the decision of the trial court in Civil

Case No. 16693. 5

In affirming the trial court's decision, the respondent Court heldthat Section 5 of the Rural Banks' Act, as amended, did not reducethe period of redemption of homestead lands from the five (5)years prescribed in Section 119 of C.A. No. 141, as amended, totwo (2) years from the date of registration of the foreclosure saleas fixed in the former; in support of such conclusion, itsummoned Oliva vs. Lamadrid 6 wherein this Court, speakingthrough then Chief Justice Concepcion, held:



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It should be noted that the period of two (2) yearsgranted for the redemption of property foreclosedunder Section 5 of Republic Act No. 720, as amendedby Republic Act No. 2670, refers to lands"not covered by a Torrens Title, a homestead or freepatent," or to owners of lands "without torrens title,"who can "show five years or more of peaceful,continuous and uninterrupted possession thereof in

the concept of an owner, or of homesteads or freepatent lands pending the issuance of titles butalready approved," or of "lands pending homesteador free patent titles." Plaintiff, however, had, on theland in question, a free patent and a Torrenstitle, which were issued over 26 years prior to themortgage constituted in favor of the Bank .Accordingly, there is no conflict between Section 119of Commonwealth Act No. 141 and Section 5 of Republic Act. No. 720, as amended, and the periodof two (2) years prescribed in the latter is not

applicable to him.

Moreover, the legislative history of the bills whichlater became said Republic Act No. 2670, amendingRepublic Act No. 720, shows that the originalproposal was to give homesteaders or free patentholders a period of ten (10) years within which toredeem their property foreclosed by rural banks;that this proposal was eventually found to be unwise,because its effect would have been to dissuade ruralbanks from granting loans to homesteaders or freepatent holders — which were (sic) sought to beliberalized — said period of redemption being toolong, from the viewpoint of said banks; and that,consequently, the proposal was given up, with thespecific intent and understanding that homesteadersor holders of free patent (sic) would retain the rightto redeem within five (5) years from the conveyanceof their properties, as provided in the general law,that is to say the Public Land Act, or CommonwealthAct No. 141.

It is, therefore, our considered view that plaintiff herein has the right to repurchase the property inquestion within five (5) years from the date of theconveyance or foreclosure sale, or up to February 4,1966, and that having exercised such right andtendered payment long before the date lastmentioned, defendants herein are bound to reconveysaid property to him.

In said case, the mortgaged property involved was sold at a publicauction by the Sheriff on 4 February 1961.

Respondent Court further ruled that C.A. No. 141 is a special lawand must prevail. Thus:

Neither could it readily be concluded that the RuralBanks Act is a special law and that the Public Law(sic) Act is general. The Rural Bank Act deals with allkinds of land while the Public Land Act relates to a

specific class of properties.

In Cassion v. Banco Nacional Filipino, 89 Phil. 560,the sole question for decision is which of theconflicting provisions ought to prevail? Section 32and Section 6 of Act No. 2938, which amended ActNo. 2717 (sic) creating the Philippine National Bank,which allows the debtor only one year to redeemproperty sold under a mortgage foreclosure whether judicial or extra-judicial, or Section 117 of Act No.2874 known as the Public Land Act, as amended,

which provides that "every conveyance of landacquired under free (sic) patent or homesteadprovisions, when proper, shall be subject torepurchase by the applicant, his widow, or legal heirsfor a period of five years from the date of conveyance," the Supreme Court held:

Now then, it seems plain that Section32 of Act No. 2938 and Section 6 of Act No. 3135 are wider in scope ormore comprehensive than Section 117



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of Act No. 2874. They comprehend allkinds of property brought within therelations and circumstances providedthereby, while Section 117 of Act No.2874 relates to a specific class of property. Stated otherwise, theproperty on which the PhilippineNational Bank's Charter and Act No.

3135 are operative is any propertymortgaged to the Bank, whereas, asalready stated, Act No. 2874 by itsown terms is operative only on landsacquired under the free patent orhomestead provisions. Section 32 of Act No. 2938 and Section 6 of Act No.3l35 standing alone would includehomestead or free patented lands,while Section 117 of Act No. 2874would not embrace any property other

than that mentioned therein even if Acts Nos. 2938 and 3135 did not exist.To use the words of Act No. 190 andthe Rules of Court, Act No. 2874manifests "a particular intent," theintent to promote the spread of smallland ownership and the preservation of public land grants in the hands of theunderprivileged for whose benefit theyare specially intended and whosewelfare is a special concern of theState.

We therefore hold that Act No. 2874 iscontrolling, that homestead constitutean exception of Acts No. 2938 and3135, and that the appealed decisionshould be affirmed. It is so orderedwith costs against the appellant. (p.562)

The Homestead Act is a social legislation enacted forthe welfare and protection of the poor (Patricio vs.Bayog, 112 SCRA 42). A construction which wouldcarry into effect the evident policy of the law shouldbe adopted in favor of that interpretation whichwould defeat it. A decent respect for the policy of thelaw must save the Court from imputing to it a self defeating, if not disingeneous purpose (p. 65,

Agpalo, Supra).

Since the mortgaged property is a homesteadcovered by a Torrens Title, the five-year period of repurchase should be from the foreclosure sale onNovember 9, 1979 or up to November 9, 1984. NHAfiled the eminent domain proceedings on July 1,1978 while appellees were still the owners of theland. For this reason, they were the ones who weremade defendants therein. Although the land wasforeclosed and sold to the Rural Bank on November

9, 1979, the latter did not become the absoluteowner thereof. It never did. Under Section 119 of thePublic Land Law, plaintiff has up to November 9,1984 within which to repurchase the property. Thuson November 9, 1983 appellees notified appellantbank of their desire to repurchase said propertyunder Section 119, CA 141, but was (sic) refused.On February 9, 1984, appellees filed with theRegional Trial Court of Davao City, Branch XIII, anaction for reconveyance and on May 3, 1984, thelower court issued an order requiring appellees todeposit the amount of P54,883.00 as the amount of

repurchase price which was complied with by thelatter, well within the period of five years from thedate of foreclosure sale. 7

As to the fact that the land had already been expropriated by theNHA, the respondent Court observed that:

While it is true that the land in question has beenexpropriated by the NHA who paid the total amountof P490,000.00 as the just compensation for the



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taking of the property, it is but fair, fitting andproper, that this amount be paid to plaintiffs-appellees as the just compensation for theirproperty. To hand over this amount to the RuralBank would be to unjustly enrich the rural bank atthe expense of the plaintiffs who have less in life. 8

Its motion for reconsideration of the above decision having been

denied by the respondent Court in the Resolution of 17 May1988, 9 the petitioner availed of this recourse and reiterates thesame errors it had raised before the respondent Court, to wit:

1. THE LOWER COURT ERRED IN DECLARING THATPLAINTIFFS-APPELLEES ARE ENTITLED TO THEPRICE PAID BY THE NATIONAL HOUSING AUTHORITYFOR THE PROPERTY IN QUESTION AND INORDERING THE DEFENDANT-APPELLANT TO PAY ORREMIT TO PLAINTIFFS-APPELLEES THE SUM OFP435,117.00, THE REMAINING BALANCE OF SAID

PRICE OF THE PROPERTY PAID BY THE NATIONALHOUSING AUTHORITY AFTER DEDUCTING THEOBLIGATION OF PLAINTIFFS-APPELLEES IN THE SUMOF P54,883.00.

2. THE LOWER COURT ERRED IN NOT HOLDINGTHAT PLAINTIFFS-APPELLEES' RIGHT TOREPURCHASE UNDER SECTION 119 OFCOMMONWEALTH ACT NO. 141, AS AMENDED,OTHERWISE KNOWN AS THE PUBLIC LANDS (sic)ACT, IS ONLY LIMITED TO THE LAND ITSELF.

3. THE LOWER COURT ERRED IN NOT HOLDINGTHAT THE ACT OF PLAINTIFFS-APPELLEES INTRYING TO REPURCHASE THE PROPERTY INQUESTION, OR, IN THE ALTERNATIVE, IN TRYINGTO RECOVER THE PROCEEDS OF THE SALE OR PRICETHEREOF, IS PURELY SPECULATIVE IN NATURE.

4. THE LOWER COURT ERRED IN FINDINGDEFENDANT-APPELLANT LIABLE FOR INTEREST,ATTORNEY'S FEES AND COSTS. 10

which may be reduced to the two (2) principal issues adverted to inthe exordium of this ponencia.

After the filing of the private respondents' Comment to thepetition, the petitioner's reply thereto and the former's rejoinder tothe reply, this Court gave due course to the petition and requiredthe parties to submit their respective memoranda which theycomplied with.

The petition is devoid of any merit. Respondent Court of Appealscommitted no reversible error.

Section 119 of the Public Land Act (C.A. No. 141) provides:

Sec. 119. Every conveyance of land acquired underthe free patent or homestead provisions, whenproper, shall be subject to repurchase by theapplicant, his widow, or legal heirs, within a period of five years from the date of the conveyance. 11

The policy of homestead laws and the reason behind the foregoingprovision are expressed by this Court inPascua vs. Talens 12 in thiswise:

It is well-known that the homestead laws weredesigned to distribute disposable agricultural lots of the State to land-destitute citizens for their homeand cultivation. Pursuant to such benevolentintention the State prohibits the sale or encumbranceof the homestead (Section 116) within five years

after the grant of the patent. After that five-yearperiod the law impliedly permits alienation of thehomestead; but in line with the primordial purposeto favor the homesteader and his family the statuteprovides that such alienation or conveyance (Section117) shall be subject to the right of repurchase bythe homesteader, his widow or heirs within fiveyears. This Section 117 is undoubtedly acomplement of Section 116. It aims to preserve andkeep in the family of the homesteader that portion of public land which the State had gratuitously given to



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him. It would, therefore, be in keeping with thisfundamental idea to hold, as we hold, that the rightto repurchase exists not only when the originalhomesteader makes the conveyance, but also whenit is made by his widows or heirs. This construction isclearly deducible from the terms of the statute.

As pointedly stated earlier in Jocson vs. Soriano, 13 in connection

with homestead statutes:

Acts Nos. 1120 and 926 were patterned after thelaws granting homestead rights and specialprivileges under the laws of the United States andthe various states of the Union. The statutes of theUnited States as well as of the various states of theUnion contain provisions for the granting andprotection of homesteads. Their object is to providea home for each citizen of the Government, wherehis family may shelter and live beyond the reach of

financial misfortune, and to inculcate in individualsthose feelings of independence which are essential tothe maintenance of free institutions. Furthermore,the state itself is concerned that the citizens shall notbe divested of a means of support, and reduced topauperism. (Cook and Burgwall vs. McChristian, 4Cal., 24; Franklin vs. Coffee, 70 Am. Dec., 292;Richardson vs. Woodward, 104 Fed. Rep., 873; 2lCyc., 459).

The conservation of a family home is the purpose of

homestead laws. The policy of the state is to fosterfamilies as the factors of society, and thus promotegeneral welfare. The sentiment of patriotism andindependence, the spirit of free citizenship, thefeeling of interest in public affairs, are cultivated andfostered more readily when the citizen livespermanently in his own home, with a sense of itsprotection and durability. (Waples on Homestead and Exemptions, p. 3)

Because of such underlying policy and reason, the right torepurchase under Section 119 cannot be waived by the partyentitled thereto, and applies with equal force to both voluntary andinvoluntary conveyances. 14 And, as early as 1951, in Cassion vs.Banco Nacional Filipino, 15 this Court declared that such right isavailable in foreclosure sales of lands covered by a homestead orfree patent. Consistently therewith, We have ruled in a number of cases that said Section 119 prevails over statutes which provide for

a shorter period of redemption in extrajudicial foreclosure sales.We thus have consistent pronouncements in Paras vs. Court of Appeals, 16 Oliva vs. Lamadrid , 17 Belisario vs. Intermediate Appellate Court 18 and Philippine National Bank vs. De losReyes. 19These cases, with the exception of Oliva, involved thequestion of which between the five (5) year repurchase periodprovided in Section 119 of C.A. No. 141 20 or the one (1) yearredemption period under Act No. 3135 should prevail.While Oliva is the only case, among those cited, that involves theRural Banks' Act, the other cases reveal the clear intent of the lawon redemption in foreclosure sales of properties acquired under the

free patentor homestead statutes which have been mortgaged to banks orbanking institutions — i.e., to resolutely and unqualifiedly apply the5-year period provided for in Section 119 of C.A. No. 141 and, ascategorically stated inParas and Belisario, to reckon thecommencement of the said period from the expiration of the one-year period of redemption allowed in extrajudicial foreclosures. If such be the case in foreclosure sales of lands mortgaged to banksother than rural banks, then, by reason of the express policybehind the Rural Banks' Act, 21 and following the rationale of Ourruling in Oliva, it is with greater reason that the 2-year redemptionperiod in Section 5 of the Rural Banks' Act should yield to the

period prescribed in Section 119 of C.A. No. 141. Moreover, if thisCourt is to be consistent with Paras and Belisario, the 5-yearrepurchase period under C.A. No. 141 should begin to run onlyfrom the expiration of the 2-year period under the Rural Banks'Act. It may be observed in this connection thatOliva was decided in31 October 1967, before the Rural Banks' Act, as amended by R.A.No. 2670, was further amended by R.A. No. 5939. 22 As amendedby R.A. No. 2670, the pertinent portion of Section 5 only reads asfollows:



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Sec. 5. . . . Provided , That when a land not coveredby a Torrens Title, a homestead or free patent land isforeclosed, the homesteader or free patent holder,as well as their heirs shall have the right to redeemthe same within two years from the date of foreclosure: . . .

As amended later by R.A. No. 5939, it reads:

Sec. 5. . . . Provided , That when a homestead or freepatent land is foreclosed, the homesteader or freepatent holder, as well as their heirs shall have theright to redeem the same within two years from thedate of foreclosure in case of a land not covered by aTorrens title or two years from the date of theregistration of the foreclosure in the case of a landcovered by a Torrens title: . . . .

The amendment clarifies the rather vague language of Section 5 as

amended by R.A. No. 2670. The ambiguity lies in the fact thatalthough the latter seems to speak of three (3) classes of lands,namely (a) those not covered by a Torrens title, (b) homesteadlands and (c) free patent lands, the two-year redemption periodmay only be enjoyed by the homesteader, the free patent holder ortheir heirs. Moreover, the clause does not clarify whether theland not covered by a Torrens title refers to unregistered landmerely, or includes land acquired by a homestead or free patentnot yet issued certificates of title under the Torrens system. Asamended, however, by R.A. No. 5939, land acquired under the freepatent or homestead patent statutes may be redeemed within a

two-year period; however, the commencement of said period isreckoned from the date of foreclosure, if such land is not yetcovered by the Torrens title, or from the registration of theforeclosure — meaning, the certificate of sale — if it is alreadycovered by a Torrens title.

Thus, following the clear intent of Oliva, since private respondents'foreclosed property was acquired under the homestead laws, theyhad two (2) years from 7 December 1979 — when the certificate of sale was registered — or until 7 December 1981, within which toredeem the land. And, pursuant to Section 119 of C.A. No. 141,

they had five (5) years from 7 December 1981 within which torepurchase it. Since the private respondents' offer to repurchasewas made well within the said 5-year period, the two (2) courtsbelow correctly ruled in their favor.

Furthermore, We wish to stress here that We are unable to read inSection 5 of R.A. No. 720, as amended, any legislative intent tomodify or repeal Section 119 of the Public Land Act. Each speaks of

and deals with a different right. Specifically, the former merelyliberalizes the duration of an existing right of redemption inextrajudicial foreclosure sales by extending the period of one (1)year fixed in Act No. 3135, as amended by Act No. 4118, to two(2) years insofar as lands acquired under free patent andhomestead statutes are concerned. The second speaks of the right to repurchase and prescribes the period within which it may beexercised. These two (2) rights are by no means synonymous.Under Act No. 3135, the purchaser in a foreclosure sale has, duringthe redemption period, only an inchoate right and not the absoluteright to the property with all the accompanying incidents. 23 He

only becomes an absolute owner of the property if it is notredeemed during the redemption period. 24 Upon the other hand,the right to repurchase is based on the assumption that the personunder obligation to reconvey the property has the full title to theproperty because it was voluntarily conveyed to him or that he hadconsolidated his title thereto by reason of a redemptioner's failureto exercise his right of redemption. Thus, in Paras vs. Court of Appeals, 25 this Court, adverting to Gonzalez vs.Calimbas, 26 stated:

After a careful study of the point raised in thepresent appeal by certiorari , we agree with the Courtof Appeals that the five-year period within which ahomesteader or his widow or heirs may repurchase ahomestead sold at public auction or foreclosure saleunder Act 3135 as amended, begins not at the dateof the sale when merely a certificate is issued by theSheriff or other official, but rather on the day afterthe expiration of the period of repurchase, 27 whendeed of absolute sale is executed and the propertyformally transferred to the purchaser. As this Courtsaid in the case of Gonzales (sic) vs. Calimbas and



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Poblete, 51 Phil., 355, the certificate of sale issued tothe purchaser at an auction sale is intended to be amere memorandum of the purchase. It does nottransfer the property but merely identifies thepurchaser and the property, states the price paid andthe date when the right of redemption expires. Theeffective conveyance is made by the deed of absolute sale executed after the expiration of the

period of redemption.

As a consequence of the inchoate character of the right during theredemption period, Act No. 3135 allows the purchaser at theforeclosure sale to take possession of the property only upon thefiling of a bond in an amount equivalent to the use of the propertyfor a period of twelve (12) months, to indemnify the mortgagor incase it be shown that the sale was made without violating themortgage or without complying with the requirements of the Act.That bond is not required after the purchaser has consolidated histitle to the property following the mortgagor's failure to exercise

his right of redemption for in such a case, the former has becomethe absolute owner thereof. 28

Thus, the rules on redemption in the case of an extrajudicialforeclosure of land acquired under free patent or homesteadstatutes may be summarized as follows: If the land is mortgagedto a rural bank under R.A. No. 720, as amended, the mortgagormay redeem the property within two (2) years from the date of foreclosure or from the registration of the sheriff's certificate of sale at such foreclosure if the property is not covered or is covered,respectively, by a Torrens title. If the mortgagor fails to exercisesuch right, he or his heirs may still repurchase the property withinfive (5) years from the expiration of the two (2) year redemptionperiod pursuant to Section 119 of the Public Land Act (C.A. No.141). If the land is mortgaged to parties other than rural banks,the mortgagor may redeem the property within one (1) year fromthe registration of the certificate of sale pursuant to Act No. 3135.If he fails to do so, he or his heirs may repurchase the propertywithin five (5) years from the expiration of the redemption periodalso pursuant to Section 119 of the Public Land Act.

The expropriation of the land in question by the NHA is of nomoment. The expropriation case was begun before the foreclosuresale and was brought against the private respondents, amongother parties. The court's order for the payment of compensationwas entered and the compliance thereof by the NHA was madewithin the private respondents' 5-year repurchase period. Althoughthe petitioner had a Transfer Certificate of Title over the lot at thetime of payment, its right thereto was subject to the private

respondents' right to repurchase. Since the private respondentsseasonably exercised said right, the petitioner was under theobligation to restore to the former the compensation paid by theNHA, which in effect replaced or substituted for the land. Fromsuch amount should be subtracted, however, the repurchase price.The argument that the petitioner was under no obligation to deliverthe above portion of the compensation because the property wasacquired by the NHA and therefore it was legally impossible for theformer to convey the land to the private respondent, is withoutmerit. This is so because if, instead of having been expropriated,the land was sold to other parties, the private respondents could

still have repurchased the same from the subsequentvendees. 29 But since the land was expropriated by theGovernment, and the private respondents could no longerrepurchase the same, reason, justice and equity demand that theyreceive the compensation therefor less the amount adverted toabove, for such compensation merely substitutes for the land theyare entitled to.

WHEREFORE, the instant petition is DENIED, with costs againstpetitioner.

The decision is immediately executory.

SO ORDERED.

Gutierrez, Jr., Bidin, Romero and Melo, JJ., concur .

G.R. No. 86044 July 2, 1990

VICTORINO TORRES, petitioner,vs.LEON VENTURA, respondent.



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GANCAYCO, J.:

This nation has a wealth of laws on agrarian reform. Such lawswere enacted not only because of the constitutional mandateregarding the protection to labor and the promotion of social justice but also because of the realization that there is an urgentneed to do something in order to improve the lives of the vastnumber of poor farmers in our land.

Yet, despite such laws, it is a fact that the agrarian problems whichbeset our nation have remained unsolved. Majority of our farmersstill live a hand-to-mouth existence. The clamor for change has notdied down.

One need not go far in order to search for the reason behind this.We all know that our beautifully-worded agrarian laws have neverreally been effectively implemented. Unscrupulous individuals havefound various ways in order to get around the laws. Loopholes inthe law and the ignorance of the poor farmers have been taken

advantage of by them. Consequently, the farmers who areintended to be protected and uplifted by the said laws findthemselves back to where they started or even in a worse position.We must put a stop to this vicious cycle and the time to do it isnow.

This case serves to remind those who are involved in the executionof agrarian laws that it is the farmer-beneficiary's interest thatmust be primarily served. This also holds that agrarian laws are tobe liberally construed in favor of the farmer-beneficiary. Anyonewho wishes to contest the rights of the farmer to land given to him

by the government in accordance with our agrarian laws has theburden of proving that the farmer does not deserve thegovernment grant.

Posed before Us for resolution in this petition for reviewon certiorari is the question of to whom ownership and possessionof a certain landholding rightfully belongs: to petitioner who wasthe tiller of the land when Presidential Decree No. 27 waspromulgated, or to private respondent in whose favor petitionertransferred his rights over the land in consideration of P5,000.00.

The following facts can be gathered from the records of this case:

Petitioner was the leasehold tenant of a 4,000 square-meter parcelof land included in the Florencio Firme Estate and located atCaloocan, Cabatuan, Isabela. In 1972, when Presidential DecreeNo. 27 was signed into law, petitioner was the tiller of theaforementioned piece of land and was automatically deemed ownerof the property. Under Presidential Decree No. 27, any form of

transfer of those lands within the coverage of the law is prohibitedexcept as otherwise provided therein.

In 1978, urgently in need of money, petitioner was forced to enterinto what is called a "selda" agreement, with private respondent,wherein he transferred his rights of possession and enjoyment overthe landholding in question to the latter in consideration of a loanin the amount of P5,000.00 to be paid not earlier than 1980. Aspart of the agreement, petitioner signed an "Affidavit of Waiver"whereby he waived all his rights over the property in favor of private respondent. According to petitioner, it was also agreed

upon by them that upon the payment of the loaned amount,private respondent will deliver possession and enjoyment of theproperty back to petitioner.

Two years later or in 1980, petitioner offered to pay the loanedamount but private respondent asked for an extension of one moreyear to continue cultivating the land and enjoying its fruits.Because of this, the money being offered by petitioner to pay forthe loan was utilized for other purposes. In 1981, though petitionerreally wanted to get the property back, he could not do so becausehe lacked the necessary funds. It was only in 1985 when petitionerwas able to save enough money to make another offer but thistime private respondent categorically denied said offer and refusedto vacate the land.

Hence, petitioner filed a complaint with the barangay captain of Magsaysay, Cabatuan, Isabela stating therein that he mortgagedhis land to private respondent and that he already wanted toredeem it. On the scheduled date of hearing, private respondentfailed to appear.



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Upon the issuance by the barangay captain of a certificate to fileaction, petitioner filed a complaint with the Regional Trial Court of Cauayan, Isabela for the recovery of possession of the parcel of land in question. After due trial, the said court rendered a decisionin favor of petitioner with the following dispositive portion:

WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered:

(1) DECLARING the affidavit of waiver (Exh. 1)executed by the plaintiff waiving his right as aleasehold tenant to the defendant null and void;

(2) ORDERING the defendant, his agents, tenants orany person or persons acting on his behalf to deliverimmediately the possession of the land in question tothe plaintiff;

(3) DECLARING the loan of P5,000.00 received by

the plaintiff from the defendant in 1979 includinginterest thereon considered paid as of December 1,1983;

(4) ORDERING the defendant to pay the plaintiff total damages and in the amount of P5,200.00 up toDecember 1, 1986; and

(5) ORDERING the defendant to pay the plaintiff 6cavans of palay at 50 kilos per planting season fromDecember 1, 1986, or their equivalent at the NFA

price of P3.50 per kilo, until the possession of theland in question is delivered to the plaintiff. 1

On appeal to the Court of Appeals, the decision of the trialcourt was reversed. Hence, this petition for reviewon certiorari . 2

Taking into consideration the circumstances surrounding this caseand bearing in mind the constitutional mandate on the promotionof agrarian reform, We rule in favor of petitioner.

It is not disputed by private respondent that petitioner was in factthe tiller of the subject land when Presidential Decree No. 27 waspromulgated in 1972. As a consequence of the law, petitioner wasgranted the right to possess and enjoy the property for himself.

The conflict arose when petitioner, by force of circumstances,transferred possession of his land to private respondent inconsideration of a sum certain. As to what was actually the

contract that was entered upon is being contested by the twoparties herein. Petitioner has insisted from the very beginning thatthe agreement entered into between him and private respondentwas one of mortgage and that private respondent promised to giveback to him his landholding upon payment of the loaned amount.The stand of private respondent, on the other hand, is thatpetitioner relinquished all his rights over the property in his favor,as expressly written in the Affidavit of Waiver that petitionersigned.

In its decision, the trial court ruled in favor of petitioner having

found his version more convincing than that of private respondentwhose evasive attitude did not go unnoticed therein. The trial courtfurther ruled that the transfer of property from petitioner to privaterespondent is null and void for being violative of PresidentialDecree No. 27. The Court of Appeals, on the other hand, believedthat petitioner completely waived his rights over the land asevidenced by the Affidavit of Waiver he executed. According to theCourt of Appeals, the said Affidavit of Waiver is valid because atthe time of its execution, petitioner was not yet the owner of theland there having been no title issued to him yet. As such,continued the Court of Appeals, the Affidavit of Waiver did notviolate Presidential Decree No. 27. The Court of Appeals furtheradded that petitioner abandoned his landholding and receivedbenefits under the agreement, hence, should not be rewarded atthe expense of private respondent.

After a careful scrutiny of the two conflicting decisions and anexhaustive study of the laws and jurisprudence applicable to thiscase, We affirm the judgment of the trial court. First, of all, Wehave given much weight to the finding of the trial court that whatwas entered upon by the parties herein was a contract of mortgage. It need not be stressed that in the matter of credibility



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of witnesses, We rely heavily on the findings of the trial courtbecause it had the opportunity to meet them face to face. As thetrial court observed, petitioner's version is more convincingbecause of the apparent evasive attitude of private respondent ascompared to the candid testimony of the petitioner. 3

Indeed, We find it hard to believe that petitioner, who has beentilling the land in question for a long, long time would suddenly

lose interest in it and decide to leave it for good at a time when heknew that full ownership over the same was soon going to be in hishands. Furthermore, if the situation were otherwise, petitionerwould not have made repeated offers to pay for the amount heborrowed from private respondent and demand from the latter thepossession of the land. He would not have even thought of bringingan action for the recovery of the same if he honestly believed thathe had already given it up in favor of private respondent.Petitioner, or anyone in his right mind for that matter, would notwaste his time, effort and money, especially if he is poor, toprosecute an unworthy action. If at all, petitioner is an example of

a poor tenant farmer who, due to sheer poverty, was constrainedto mortgage his only land 4 to somebody else 5 — situation whichPresidential Decree No. 27 sought to prevent by providing anexplicit prohibition on transfers.

The above finding notwithstanding, and assuming that petitionerreally waived his tenancy rights in favor of private respondent, thiscase should still be resolved against private respondent. Thetransfer would still be void for being made in violation of Presidential Decree No. 27.

We shall now take a closer look at the law.

Presidential Decree No. 27 was signed into law in view of the factthat the old concept of land ownership by a few has spawned validand legitimate grievances that gave rise to violent conflict andsocial tension. 6 The law points out that reformation must startwith the emancipation of the tiller from the bondage of the soil. 7

The fundamental policy of the law is reflected in its title, to wit:PRESIDENTIAL DECREE NO. 27 — DECREEING THE EMANCIPATIONOF TENANT FROM THE BONDAGE OF THE SOIL, TRANSFERRING TO

THEM THE OWNERSHIP OF THE LAND THEY TILL AND PROVIDINGTHE INSTRUMENTS AND MECHANISM THEREFOR. This policy isintended to be given effect by the following provisions:

xxx xxx xxx

The tenant farmer, whether in land classified aslanded estate or not, shall be DEEMED OWNER of a

portion constituting a family size farm of five (5)hectares if not irrigated and three (3) hectares if irrigated; (Emphasis supplied).

xxx xxx xxx

TITLE TO LAND ACQUIRED PURSUANT TO THISDECREE OR THE LAND REFORM PROGRAM OF THEGOVERNMENT SHALL NOT BE TRANSFERABLE exceptby hereditary succession or to the Government inaccordance with the provisions of this Decree, the

Code of Agrarian Reforms and other existing lawsand regulations; (Emphasis supplied).

xxx xxx xxx 8

The law is clear and leaves no room for doubt. Upon thepromulgation of Presidential Decree No. 27 on October 21, 1972,petitioner was DEEMED OWNER of the land in question. As of thatdate, he was declared emancipated from the bondage of the soil.As such, he gained the rights to possess, cultivate, and enjoy thelandholding for himself. Those rights over that particular property

were granted by the government to him and to no other. To insurehis continued possession and enjoyment of the property, he couldnot, under the law, make any valid form of transfer except to thegovernment or by hereditary succession, to his successors.

Yet, it is a fact that despite the prohibition, many farmer-beneficiaries like petitioner herein were tempted to make use of their land to acquire much needed money. Hence, the then Ministryof Agrarian Reform issued the following Memorandum Circular:



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Despite the above prohibition, however, there arereports that many farmer-beneficiaries of PD 27havetransferred the ownership, rights, and/or possession of their farms/homelots to other personsor have surrendered the same to their formerlandowners. All these transactions/surrenders areviolative of PD 27 and therefore, null andvoid. 9 (Emphasis supplied.)

We do not agree with the Court of Appeals when it ruled thatpetitioner's land is not included in the legal prohibition sincepetitioner has not yet acquired absolute title to the land havingfailed to comply with all the conditions set forth by the law. Withregard to the legal prohibition, We hold that title refers not only tothat issued upon compliance by the tenant-farmer of the saidconditions but also includes those rights and interests that thetenant-farmer immediately acquired upon the promulgation of thelaw. To rule otherwise would make a tenant — farmer falling in thecategory of those who have not yet been issued a formal title to

the land they till — easy prey to those who would like to temptthem with cash in exchange for inchoate title over the same.Following this, absolute title over lands covered by PresidentialDecree No. 27 would end up in the name of persons who were notthe actual tillers when the law was promulgated.

Furthermore, the evidence on hand shows that Certificate of LandTransfer No. 096267 covering the land in question is in the nameof petitioner Victorino Torres. 10 This is admitted by privaterespondent. 11 In Gloria de Oliver vs. Sisenando Cruz, et al ., 12 theCourt of Appeals correctly ruled that:

The rights and interests covered by the Certificate of Land Transfer are beyond the commerce of man.They are not negotiable except when it is used bythe beneficiary as a collateral for a loan with therural bank for an agricultural production.

Having settled that the contract of transfer entered into betweenpetitioner and private respondent is void ab initio, We now go tothe issue of whether or not the principle of pari delicto 13 applies tothis case. We rule in the negative. Public policy and the policy of

the law must prevail. To hold otherwise will defeat the spirit andintent of Presidential Decree No. 27 and the tillers will never beemancipated from the bondage of the soil.

In Catalina de los Santos vs. Roman Catholic Church, 14 this Courtruled that the pari delicto doctrine is not applicable to a homesteadwhich has been illegally sold in violation of the homestead law. Oneof the reasons given by this Court for the ruling is that the policy of

the law is to give land to a family for home and cultivation.

In Acierto, et al . vs. De los Santos, et al ., 15 where the principlewas reiterated, this Court, through Justice Alex Reyes, made thefollowing pronouncement:

Appellants, however, contend that the voidingprovision of the Act may not be invoked in favor of plaintiffs as their predecessor in interest was in pari delicto, and that, since the same provision says theillegal sale shall have the effect of annulling the

grant and cause the reversion of the property and itsimprovements to the State, plaintiffs may no longerclaim the homestead. Similar contentions were madein the case of Catalina de los Santos vs. RomanCatholic Church of Midsayap et al., G.R. No.L-6088, decided February 25, 1954, but they werethere overruled, this Court holding that the pari delictodoctrine may not be invoked in a case of thiskind since it would run counter to an avowedfundamental policy of the State, that the forfeiture of the homestead is a matter between the State andthe grantee or his heirs, and that until the State hadtaken steps to annul the grant and asserts title tothe homestead the purchaser is, as against thevendor or his heirs "no more entitled to keep theland than any intruder. 16

The pronouncements in the two above-mentioned cases wereadopted by this Court in Angeles, et al . vs. Court of Appeals, et al ., 17 wherein We ruled that the sale of the homestead by thehomesteader is null and void and his heirs have the right torecover the homestead illegally disposed of.



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In view of all the foregoing, We hold that the contract, beingvoid ab initio, must be given no effect at all. The parties in thiscase are to be placed in status quo which was the conditionprevailing prior to the execution of the void contract.

WHEREFORE, the Decision of the Court of Appeals in CA-G.R. CVNo. 15482 is REVERSED AND SET ASIDE. The Decision of theRegional Trial Court of Cauayan, Isabela in Civil Case No. Br. XIX-

167 is hereby ordered REINSTATED. Costs against privaterespondent.

SO ORDERED.

Narvasa, C.J., Cruz, Griño-Aquino and Medialdea, JJ., concur.

G.R. No. L-48458 November 7, 1941

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee,vs.FIDEL FORTUNO, defendant-appellee.

Armando Magpayo for the appellant. Acting First Assistant Solicitor-General Amparo and Assistant Solicitor-General Kapunan, for the appellee.

MORAN, J.:

Defendant Fidel Fortuno rented from "El Hogar Filipino" a room inthe Crystal Arcade; and the rental having become due, he issued infavor of the latter a check for P60 drawn against the Bank of theCommonwealth. This check was, upon representation to the bankfor payment, dishonored for lack of funds. An informationfor estafawas presented against the defendant in the municipalcourt of Manila where, upon a plea of guilty, he was sentenced totwo months and one day of arresto mayor and to pay an indemnityof P60 with subsidiary imprisonment in case of insolvency.Defendant appealed to the Court of First Instance where, afterentering a plea of not guilty and thereafter substituting the samewith the plea of guilty, he was sentenced to the same penalty

imposed by the municipal court. Defendant interposed appeal fromthis judgment.

The issuance of a check with knowledge on the part of the drawerthat has no funds to cover its amount and without informing thepayee of such circumstance, does not constitute the crimeof estafa if the check was intended as payment of a pre-existingobligation, as in the instant case. The reason for this rule is that

deceit, to constitute estafa, should be the efficient cause of thedefraudation and as such should be prior to, simultaneous with, theact of fraud. (Cf. People vs. Liluis, 59 Phil., 339, 342;People vs. Quesada, 60 Phil., 515 520.)

Defendant's plea of guilty is of no moment. Such plea constitutes amere admission of the material allegations of the information butnot that the facts thus alleged constitute an offense.

Judgment is reversed and the defendant is hereby acquitted withcosts de oficio.

Abad Santos, Diaz, Horilleno, and Ozaeta, JJ., concur.

G.R. No. L-19012 October 30, 1967

VICTORIA JULIO, plaintiff-appellant,vs.EMILIANO DALANDAN and MARIA DALANDAN, defendants-appellees.

Pedro Magsalin and O.M. Herrera for plaintiff-appellant.Cornelio R. Magsarili for defendants-appellees.

SANCHEZ, J.:

Disputing the correctness of the lower court's order of April 29,1961 dismissing the complaint, plaintiff elevated the case1 to thisCourt on appeal.

Plaintiff's complaint — which defendants, by a motion to dismiss,successfully overturned in the court below — is planted upon a



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document Annex "A" of the complaint, labeled in the nationallanguage "SALAYSAY" (Statement). It was in the form of anaffidavit subscribed and sworn to by one Clemente Dalandan onSeptember 8, 1950. By the terms of this writing, ClementeDalandan, deceased father of defendants Emiliano and MariaDalandan, acknowledged that a four-hectare piece of riceland inLas acknowledged that a four-hectare piece of riceland in LasPiñas, Rizal belonging to Victoriana Dalandan, whose only child and

heir is plaintiff Victoria Julio, was posted as security for anobligation which he, Clemente Dalandan, assumed but, however,failed to fulfill. The result was that Victoriana's said land wasforeclosed. The key provisions of said document are:2

3. Na ang lupang palayang ito na pagaari ni VICTORIANADALANDAN at sa kasalukuyan ay walang ibangtagapagmana kung di si VICTORIA JULIO, ay napafianza saakin nuong bago pa dumating ang huling digmaan at dahilsa hindi ako nakatupad sa aking pananagutang nasasagutan ng bukid niyang ito ay naembargo ang nasabi

niyang lupa;

[That this riceland owned by VICTORIANA DALANDANwhose sole heir is VICTORIA JULIO was posted as securityfor an obligation assumed by me even before the outbreakof the last war and because I failed to fulfill the obligationsecured by her said farm the same was foreclosed;]

4. Na dahil dito ay ako samakatuwid ay nanagot sa kanya(VICTORIA JULIO), sa pagkakaembargo ng lupa niyangiyong kung kaya't nagkasundo kami na ako ay nanagot sakanya sa pagkaembargong iyon at ipinangako ko sa kanyana ang lupa niyang iyon na naembargo ng dahil sa akingpananagutan ay aking papalitan ng bukid din na maymahigit na APAT (4) na hectarea (o humigit kumulang saAPAT NA KABANG BINHI);

[That because of this, and as agreed upon between us, Iaccordingly held myself liable to Victoria Julio for theforeclosure of her said land, and I promised her that I wouldreplace her aforesaid land which was foreclosed because of my obligation with another farm of more than four; (4)

hectares, that is, one planted to four cavanes of seedlings,more or less;]

5. Na hindi maaring pilitin ang aking mga anak (EMILIANOAT MARIA DALANDAN), na hingin ang ani ng bukid nanabangit sa itaas ng salaysay na ito;

[That my children (EMILIANO AND MARIA DALANDAN) may

not be forced to give up the harvest of the farm hereinabove mentioned;]

6. Na hindi rin maaring hingin kaaggad sa lalong madalingpanahon ang kapalit ng bukid na may apat na kabang binhi;

[That neither may the land — which was exchanged for thefarm with four cavanes of seedlings — be demandedimmediately;]

Victoria Julio, in turn, joined Clemente Dalandan in the execution

of, and also swore to, the said document, in this wise:

Na, ako VICTORIA JULIO, na binabanggit sa itaas nito sasalaysay ni CLEMENTE DALANDAN, ay nagpapatunay natutoong lahat ang kanyang salaysay na iyon at tinatanggapko ang kanyang mga sinasabi.

[That I, VICTORIA JULIO, mentioned in the above statementof CLEMENTE DALANDAN, attest to the truth of, and accept,all that he stated therein.]

Back to the complaint herein. Plaintiff went on to aver that the landof Clemente Dalandan set forth in the document, Annex "A" of thecomplaint, referred to six small parcels described in paragraph 4thereof with a total area of barely two hectares — "the only landowned by Clemente Dalandan at the time of the execution of thedocument" — except fifty plots or "banigan" (saltbeds), which werepreviously conveyed to plaintiff's mother by mean of pacto deretro sale and title to which had already been vested in the latter;that after the death of Clemente Dalandan, plaintiff requested fromdefendants, Clemente's legitimate and surviving heirs whosucceeded in the possession of the land thus conveyed, to deliver



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the same to her; that defendants "insisted that according to theagreement", neither delivery of the land nor the fruits thereof couldimmediately be demanded, and that "plaintiff acceded to thiscontention of defendants and allowed them to continue to remainin possession" thereof; that demands have "been made upondefendants to fix the period within which they would deliver to theherein plaintiff the above-described parcels of land but defendantshave refused and until now still refuse to fix a specific time within

which they would deliver to plaintiff the aforementioned parcels of land." Predicated upon the foregoing allegations, plaintiff prayedfor judgment against defendants:

(a) Adjudging the herein plaintiff as owner of the landdescribed in paragraph 4 hereof;

(b) Fixing a time within which defendants should deliver thesaid parcels of land to the herein plaintiff as well as thefruits thereof;

(c) Adjudging that upon the expiration of the said timedefendants convey and deliver to the herein plaintiff thesaid parcels of land as well as the fruits thereof;

(d) Ordering the defendants to pay the plaintiff the sum of P2,000.00 as attorneys' fees;

(e) Ordering the defendants to pay the costs of the suit;and granting such other relief and remedy as may be justand equitable in the premises.

Defendants met the complaint with a motion to dismiss groundedon: (1) prescription of plaintiff's action; (2) pendency of anothersuit between the same parties for the same cause; and (3) releaseand/or abandonment of the claim set forth in plaintiff's complaint.

By its order of April 29, 1961, the lower court ruled that plaintiff'ssuit, viewed either as an action for specific performance or for thefixing of a term, had prescribed. Reason: the 10-year period fromthe date of the document had elapsed. The lower court found itunnecessary to pass upon the other grounds for the motion todismiss. Hence, this appeal.

1. The threshold problem, basic to an understand of the issuesherein involved, is the meaning to be attached to the documentnow under review. Undoubtedly, bad more felicitous terms beenemployed, the intention of the parties could easily be read.Unfortunately, ineptness of expression exacts of us an examinationof the document. Familiar rules of interpretation of documents tellus that in ascertaining the intention of the parties, the contentsthereof should not be interpreted piecemeal; all parts, provisions or

terms are to be considered; each paragraph clause or phrase mustbe read not in isolation, but in the light of the entire writing;doubtful ones should be given that sense which may result from allof them, considered as a whole. Such construction will be adoptedas will result from an overall view of the document itself.

It is, in this perspective that we now look into the writing.Adverting to paragraph 4 of the deed, defendants take the positionthat the deceased Clemente Dalandan simply "promised" toVictoria Julio a farm of about four hectares to replace the land of Victoriana Dalandan (mother of Victoria Julio) which was

foreclosed. But this view loses sight of the later provisions thereof.By paragraph 5, Clemente's children may not be forced to give upthe harvest of the farm mentioned in the deed. This was followedby paragraph 6 which states that Victoria Julio may notimmediately demand the substitute (kapalit) for the forfeited land.These last two statements in the deed express the dominantpurpose of the instrument. They convey the idea that the nakedownership of the land in substitution was, indeed, transferred toVictoria Julio. Else there would have been no sense in the provisothat the fruits as well as the physical possession of the land couldnot immediately be demanded by Victoria Julio from Clemente'schildren, the herein defendants. For, the right to demand fruits and

physical possession of property has been known to be attributes of ownership.

The disputed complaint in paragraphs 6 and 7 thereof, in essence,avers plaintiff's request for the delivery of the real property;defendants' answer that "according to the agreement" neither landnor fruits thereof could immediately be taken away from them, andplaintiff's conformity thereto; and plaintiff's demands that theperiod for delivery be fixed and defendants' refusal.



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The allegations of the complaint just noted carry us to anotheraspect of the document: defendants' rights over the land vis-a-visplaintiff's. What rights were transmitted to defendants by theirfather, Clemente Dalandan? Paragraphs 6 and 7 of the documentsupply the answer. They are usufructuaries for an undeterminedlength of time. For so long as that period has not been fixed andhas not elapsed, they hold the property. Theirs is to enjoy thefruits of the land and to hold the same as trustees of Victoria Julio.

And this because, by the deed, Clemente Dalandan divestedhimself of the ownership — qualified solely by withholdingenjoyment of the fruits and physical possession. In consequence,Clemente Dalandan cannot transmit to his heirs, the presentdefendants, such ownership.3 Nemo dat quod non habet . And then,the document is a declaration by Clemente Dalandan, nowdeceased, against his own proprietary interests. Such document isbinding upon his heirs.4

2. But, defendants aver that recognition of the trust may not beproved by evidence aliunde. They argue that by the express terms

of Article 1443 of the Civil Code, "[n]o express trusts concerning animmovable or any interest therein may be proved by parolevidence." This argument overlooks the fact that no oral evidenceis necessary. The express trust imposed upon defendants by theirpredecessor appears in the document itself. For, while it is truethat said deed did not in definitive words institute defendants astrustees, a duty is therein imposed upon them — when the propertime comes — to turn over both the fruits and the possession of the property to Victoria Julio. Not that this view is without statutorysupport. Article 1444 of the Civil Code states that: "No particularwords are required for the creation of an express trust, it beingsufficient that a trust is clearly intended." In reality, the

development of the trust as a method of disposition of property, so jurisprudence teaches, "seems in large part due to its freedomfrom formal requirements."5 This principle perhaps accounts for theprovisions in Article 1444 just quoted. For, "technical or particularforms of words or phrases are not essential to the manifestation of intention to create a trust or to the establishment thereof."6 Norwould the use of some such words as "trust" or "trustee" essentialto the constitution of a trust as we have held in Lorenzo vs.Posadas, 64 Phil. 353, 368. Conversely, the mere fact that theword "trust" or "trustee" was employed would not necessarilyprove an intention to create a trust. What is important is whether

the trustor manifested an intention to create the kind of relationship which in law is known as a trust. It is unimportant thatthe trustor should know that the relationship "which he intends tocreate is called a trust, and whether or not he knows the precisecharacteristics of the relationship which is called a trust."7 Here,that trust is effective as against defendants and in favor of thebeneficiary thereof, plaintiff Victoria Julio, who accepted it in thedocument itself.8

3. Plaintiff is not to be handicapped by a lack of a clear statementas to the actual description of the land referred to in the trustdeed, basis of plaintiff's cause of action. Obviously, the documentwas not prepared by a learned scrivener. It imperfectly speaks of a"farm of more than four (4) hectares." But averment in thecomplaint is not lacking to clear the uncertainty as to the identityof the land mentioned in that document. Plaintiff points out inparagraph 4 of her complaint that while said deed does notspecifically define its boundaries "the parties to the said documentactually refer" to the land which was "the only land owned by

Clemente Dalandan at the time of the execution" thereof, andwhich is set forth in small parcels under said paragraph. Thisallegation in the complaint does not add any new term orstipulation to the writing. Rather, it explains an obscurityoccasioned by lack of precision in a clumsily prepared document.Thus it is, that authorities are not wanting in support of the viewthat "in so far as the identity of land involved" in a trust isconcerned, "it has also been held that the writings, in beingconsidered for the purpose of satisfying the statute of frauds, areto be considered in their setting, and that parol evidence isadmissible to make clear the terms of a trust the existence of which is established by a writing, . . ."9

4. This case having been brought before us on a motion to dismiss,we need but stress that we are to be guided solely by theaverments of the complaint. So guided, we must say that there issufficient showing in the complaint that there is anacknowledgment on the part of defendants that they hold theproperty not as their own, but in trust. There is no statement in thecomplaint intimating disavowal of such trust; the complaint allegesrefusal to deliver possession. In the sense in which we understandthe complaint to be, it cannot be said that plaintiff's action to



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recover the property thus held in trust has prescribed. Given thefiduciary relation which according to the complaint is recognized bydefendants, the latter may not invoke the statute of limitations asa bar to plaintiff's action.10

5. Even on the assumption that defendants have not beenconstituted as trustees under the document in question, still wearrive at the same conclusion. For, plaintiff's action is aimed, by an

alleged owner of real property at recovery of possession thereof,conditioned upon the fixing of the period therefor. Since plaintiff claims ownership, possession, in the words of this Court "is a mereconsequence of ownership."11 It may not be said that plaintiff's suitis barred by the statute of limitations. She is protected by Article1141 of the Civil Code, which reads: "Real actions over immovablesprescribe after thirty years." We take this view for the obviousreason that defendants' motion to dismiss on this score is directedat the prescription of plaintiff's action — not on acquisitiveprescription.

6. Defendants in their brief draw attention, by way of counter-assignment of error, to their claim that this case should also bedismissed upon the ground that there exists another actionpending between the same parties for the same cause, and on thefurther ground of release and/or abandonment.

The facts bearing on this issue are: In Land Registration Case N-706, G.L.R.O. Record No. N-7014, Court of First Instance of Rizal,defendants are applicants. That case — so defendants aver — covers the very same land set forth in plaintiff's complaint. In theiropposition to that application, herein plaintiff prayed that the sameland — the subject of this suit — (covered by Plan PSU 129514) beregistered "in the names of the herein applicants and oppositorwith the specific mention therein that the herein oppositor ownsfifty salt beds therein and having an absolute right to the use of the depositories." Defendants argue that if plaintiff was the realowner of the entire area, opposition should have been presentedon the whole, not merely as to fifty salt beds.

Parenthetically, the question of ownership over the portion of fiftysalt beds had already been resolved by this Court in a decisionpromulgated on February 29, 1964 in L-19101 (Emiliano Dalandan

and Maria Dalandan, plaintiffs, vs. Victoria Julio, et al.,defendants). There, this Court affirmed the order dismissing thecomplaint filed by defendants herein, plaintiffs therein, for therepurchase of fifty salt beds which were the subject of a salewith pacto de retro executed on September 24, 1932 by ClementeDalandan in favor of Victoriana Dalandan, predecessor of plaintiff.

There is no point in the argument that an action is pending

between plaintiff and defendants. Because, with the exception of the fifty salt beds — which according to the complaint is notincluded in the deed — plaintiff filed no opposition to defendants'application for land registration. Failure to so object in reference tothe registration of a bigger portion of the land, simply means thatthere is no case between the parties in reference thereto in theland registration proceeding.

Not that plaintiff released or abandoned the claim to that biggerportion. For, there is an averment in the complaint that anagreement exists between plaintiff and defendants to defer delivery

thereof; and that defendants thereafter refused to fix the period forsuch delivery. So that, on the assumption that defendants shouldsucceed in obtaining title to the property in the land registrationcase, such would not bar Victoria Julio from requiring them toexecute a conveyance of the property in her favor, in the event she(plaintiff herein) prevails in the present case. And this, becausedefendants could here be declared as mere trustees of plaintiff, if the averments of the complaint are found to be true."12

For the reasons given, the order of the Court of First Instance of Rizal dated April 29, 1961 dismissing the complaint is herebyreversed and set aside, with instructions to remand the case to thecourt below for further proceedings.

Costs against defendants-appellees. So ordered.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P.,Zaldivar, Castro, Angeles and Fernando, JJ.,concur.

G.R. No. L-14714 April 30, 1960



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ARISTON ANDAYA, ET AL., plaintiffs-appellees,vs.DR. MELENCIO MANANSALA, defendant-appellant.

Constante R. Ayson for appellees. Jose V. Manansala for appellant.

REYES, J. B. L., J .:

Originally brought to the Court of Appeals, this appeal wasforwarded to us by said court because it raises only legalquestions.

There is no dispute as to the antecedents of the case, which thelower court found to be as follows:

On June 13, 1934, one Isidro Fenis sold the land in questionto Eustaquia Llanes, with right of repurchase within a periodof five years. After the expiry of said period, and without

repurchasing the said property, Isidro Fenis sold it again toMaria Viloria on January 13, 1944. Seven months later, oron August 21, 1914, Maria Viloria sold by way of sale withright to repurchase within a period of one year, the saidproperty together with another parcel of land to the hereindefendant Melencio Manansala. On August 1, 1946, uponthe expiry of the said period, Manansala registered with theRegister of Deeds an affidavit consolidating his title on theproperty. A year later, or on September 28, 1947, MariaViloria sold by way of absolute sale the same property toCiriaco Casiño, Fidela Valdez, and the plaintiff spouses

Ariston Andaya and Micaela Cabrito, for P4,800.00, whichdeed contained the following stipulation:

The following month, or on October 18, 1947, EustaquiaLlanes, instituted Civil case No. 399 to quiet title and torecover possession of said parcel from Ciriaco Casiño. Eightmonths later, or on June 9, 1949, a defendant MelencioManansala sold by way of absolute sale, the property inquestion to the spouses Ciriaco Casiño and Fidela Valdez,and the plaintiffs for P1,500.00, which deed contained thefollowing stipulation:

That from and after this date, the vendee herein named arethe lawful owners of the land herein sold which I warrant tobe free from all kinds of liens and encumbrances whateverand in case of eviction, I promise, agree and covenant toanswer to and for the vendee in the form and mannerprovided by law.

This document of conveyance was recorded in the Register

of Deeds under Act No. 3344, on June 9, 1948.

In the meantime, on September 28, 1948, EustaquiaLlanes, included as co-defendant in Civil Case No. 399,Melencio Manansala (Annex C), and on September 2, 1950,as additional defendants, Fidela Valdez and the spousesAriston Andaya and Micaela Cabrito (Annex D). The saiddefendant filed a joint answer to the second amendedcomplaint, claiming title on said property on the basis of theconveyance made in favor of Manansala, and from the latterto the other defendants. Judgment was rendered in that

case in favor of Eustaquia Llanes, and on October 17, 1955,the said judgment having become final, a writ of executionwas issued against Ciriaco Casino, Fidela Valdez, AristonAndaya and Micaela Cabrito. In the enforcement of saidwrit, the properties of Fidela Valdez were attached and soldat public auction to cover the damages, representing thevalue of the produce of the land, amounting to P676.00,costs of the suit in the amount of P33.20, or a total of P709.20 (Annex H-1).

On March 23, 1956, plaintiffs spouses Ariston Andaya and MicaelaCabrito commenced this case in the Court of First Instance of Ilocos Sur against defendant Melencio Manansala to recoverdamages suffered by them by reason of the latter's breach of hiswarranty of title or against eviction embodied in his sale of the landin question to plaintiffs. Defendant Manansala denied liability forthe damages claimed, and alleged that it was plaintiffs and theirco-purchasers who pleaded with him to sell said land to them at alow price after they had been sued by Eustaquia Llanes in CivilCase No. 399, considering that Manansala had registered the landin his name with the office of the Register of Deeds. After the casewas submitted for a summary judgment and the parties had



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agreed on a statement of facts, the lower court entered thefollowing decision:

Considering that the same land was already sold to theplaintiffs and their co-vendee, Ciriaco Casiño and FidelaValdez, it is obvious that their only purpose in acquiring thesame land from the defendant at the low price of P1,500.00was to enable them to register the prior deed of sale

executed by Maria Viloria. This is true, because the title of the defendant had already consolidated pursuant to Article1509 of the Spanish Civil Code as shown by an affidavit of the defendant registered with the Register of Deeds of thisprovince. This was clearly the understanding of the parties,and the plaintiffs apparently knew that the stipulation onwarranty in the deed was made pro forma and could nothave been intended, considering the above circumstancesfrom the fact that said property was then subject of apending litigation as an actual warranty on the title andpossession of the purchasers. This being so, it would beinequitable now to hold that the defendant is liable underthe provisions of Article 1555 of the new Civil Code or underAct 1478 of the Spanish Civil Code which is the law thatshould be applied, the said transaction being before August30, 1950.

In determining therefore the obligations of the defendant,those applicable to a vendor in cases of rescission of acontract should be applied.

WHEREFORE, the Court renders judgment sentencing thedefendant to return to the plaintiffs the sum of P750.00which represent one-half of the purchase price with interestat 6% from June 9, 1948 until fully paid, and to pay thecosts of this suit.

From the above decision, defendant Melencio Manansala appealed,claiming that after finding that he was not liable to plaintiffs-appellees for breach of warranty against eviction, the lower courterred in holding him liable as in rescission of sale and ordering himto return to plaintiffs-appellees the price of the land in questionwith interests.

There is merit in the appeal.

The vendor's liability for warranty against eviction in a contract of sale is waivable and may be renounced by the vendee (last par.,Art. 1475, Old Code; last par., Art. 1548, New). The contract of sale between herein appellant and the appellees included astipulation as to the warranty; but the lower court found that theparties understood that such stipulation was merely pro forma and

that the appellant vendor was not to be bound thereby, in view of the fact that the same land had been previously bought byappellees from Maria Viloria and that their only purpose in buyingthe same again from appellant was to enable them to register theirprior deed of sale; and the further fact that when the sale betweenappellant and appellee was made, the property was already thesubject of a pending litigation between appellees and oneEustaquia Llanes, who claimed its title and possession by virtue of an earlier sale from the original owner, and it was by final judgment in this litigation that appellees were evicted from andland. Not having appealed from the decision of the court below,appellees are bound by these findings, the implication of which isthat they not only renounced or waived the warranty againsteviction, but that they knew of the danger of eviction and assumedits consequences.

Now, according to Article 1477 of the old Code (the law applicablewhen the contract in this case was made),

When the vendee has waived the right to warranty in caseof eviction, and eviction shall occur, the vendor shall onlypay the price which the thing sold had at the time of theeviction, unless the vendee has made the waiver withknowledge of the danger of eviction and assumed itsconsequences. (Same as Art. 1554 of the new Code)

As already stated, appellees knew of the danger of eviction at thetime they purchased the land in question from appellant, andassumed its consequences. Therefore, the appellant is not evenobliged to restore to them the price of the land at the time of eviction, but is completely exempt from liability whatsoever.



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Neither may appellant be condemned to return the price receivedfrom appellees on the theory of rescission of their contract of sale,as held by the court below. In the first place, the remedy of rescission contemplates that the one demanding it is able to returnwhatever he has received under the contract; and when this cannot be done, rescission can not be carried out (Art. 1295, OldCode; Art. 1385, New). It is for this reason that the law on salesdoes not make rescission a remedy in case the vendee is totally

evicted from the thing sold, as in this case, for he can no longerrestore the thing to the vendor. It is only when the vendee loses "apart of the thing sold of such importance, in relation to the whole,that he would not have purchased it without said part" that he mayask for rescission, but he has "the obligation return the thingwithout other encumbrances than those which it had when heacquired it" (Art. 1479, old Code; 1556, New). In the second place,appellees, as already stated, assumed the risk of eviction, whichstops them from asking for rescission even were it possible forthem to restore what they had received under the contract.

On their part, appellees claim that in view of the eviction from theland in question, they are entitled to recover from appellant moreitems of damages under Article 1555 of the New Code than themere return of the price with interests as ordered by the trial court.The claim is untenable, not only because appellant, as we haveheld, is exempt from any liability for appellees eviction, but alsobecause not having appealed from the decision of the court below,appellees can not ask for a modification thereof or an award of damages not included therein (Davidvs. De la Cruz, 103 Phil., 380;54 Off. Gaz. [35] 8073; Pineda & Ampil Mfg. Co. vs. Bartolome, 95Phil., 930; Gorospe vs. Peñaflorida, 101 Phil., 886).

Wherefore, the decision appealed from is reversed and thecomplaint dismissed, with costs against appellees Ariston Andaya,et al.

Paras, C.J., Bengzon, Montemayor, Bautista Angelo, Labrador,Concepcion, Endencia and Gutierrez David, JJ.,concur.

G.R. No. L-17384 October 31, 1961

NESTOR RIGOR VDA. DE QUIAMBAO, ET AL., petitioners,vs.MANILA MOTOR COMPANY, INC., and the HON. COURT OFAPPEALS, respondents.

Manuel Y. Macias for petitioners.Ozaeta, Gibbs and Ozaeta for respondents.

REYES, J.B.L., J.:

This petition for certiorari brings to this Court for review thedecision of the Court of Appeals in its CA-G.R. No. 17031-R,reversing that of the Court of First Instance of Manila anddismissing petitioners' complaint.

The facts are not in dispute. On March 7, 1940, Gaudencio R.Quiambao, deceased husband of petitioner Nestora Rigor Vda. deQuiambao and father of the other petitioners, bought fromrespondent Manila Motor Company, Inc. one (1) Studebaker car on

the installment plan. Upon default in the payment of a number of installments, respondent company sued Gaudencio Quiambao inCivil Case No. 58084 of the Court of First Instance of Manila. OnDecember 4, 1940, judgment was entered in said case, awarding infavor of the plaintiff the sum of P3,054.32, with interest thereon at12% per annum, and P300.00 attorney's fees.

On July 14, 1941, the court issued a writ of execution directed tothe Provincial Sheriff of Tarlac, who thereupon levied on andattached two parcels of land covered by Transfer Certificate of TitleNo. 18390 of the Office of the Register of Deeds for Tarlac. On

August 27, 1941, Attorney Felix P. David, then counsel for theManila Motor Company, accompanied by the sheriff, personallyapprised Gaudencio Quiambao of the levy. The latter pleaded tohave the execution sale suspended and begged for time withinwhich to satisfy the judgment debt, proposing that in themeanwhile, he would surrender to the company the Studebakercar. This proposition was accepted, accordingly, GaudencioQuiambao delivered the car to the company, and Attorney Davidissued a receipt therefor that reads:



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August 27, 1941

Received from Mr. Gaudencio Quiambao, StudebakerPresident Sedan License No. 45-368 pending settlement of the judgment in Civil Case No. 58043 CFI Manila renderedin favor of Manila Motor Company.

DAVID AND ANGELESby (Sgd.) Felix P. David.

Attorneys for Manila Motor Company

On October 16, 1941, Gaudencio Quiambao remitted to thecompany, on account of the judgment, the sum of P500.00; he,however, failed to make further payments, thus leaving a balancestill unsettled of P1,952.47, with interest thereon at 12% per annum from March 6, 1940.

In the meantime, the Pacific war broke out, and when the Japaneseforces occupied the country shortly thereafter, the invaders seizedall the assets of the Manila Motor Company, Inc., as enemyproperty.

After the war, the company filed with the Philippine War DamageCommission, among other things, a claim for its mortgage lien onthe car of Gaudencio Quiambao and was awarded the sum of P780.47, P409.75 of which amount had already been paid.

On October 12, 1949, the company addressed a letter to

Gaudencio Quiambao asking him to fill a blank form relative to thelost car. Quiambao having since died, his widow, Nestora RigorVda. de Quiambao, returned the form with the statement that thequestioned car was surrendered to the company for storage. OnMay 18, 1953, a demand was made on the widow to settle thedeceased's unpaid accounts, but in view of her refusal, thecompany urged the Provincial Sheriff of Tarlac to carry out the pre-war writ of execution issued in Civil Case No. 58043. Although therecords of that case had been lost during the war, and have notbeen reconstituted, a copy of said writ of execution kept on file bythe provincial sheriff was saved. Accordingly, the latter advertised

for sale at public auction the properties levied upon. Notified of thesheriff's action, the heirs of the deceased Quiambao filed this suitto annul and set aside the writ of execution and to recoverdamages. Judgment was rendered by the Court of First Instance of Manila in favor of plaintiffs-petitioners, but on appeal to the Courtof Appeals, the decision was reversed and another entereddismissing the complaint. Hence, this appeal by writ of certiorari .

Briefly, the issues are:

(a) Did the delivery of the Studebaker car to respondent companyproduce the effect of rescinding or annulling the contract of salebetween the company and the deceased Gaudencio Quiambao andof barring the former from executing its pre-war judgment in CivilCase No. 58043?

(b) Did the payment to respondent company and the latter'sacceptance of war damage compensation for the lost car amount toa foreclosure of the mortgage covenated in its favor? and

(c) Was the pre-war judgment already prescribed taking intoaccount the moratorium laws?

Anent the first issue, petitioners, citing the case of H.E. HeacockCompany vs. Buntal Manufacturing Company, et al., 66 Phil. 245-246, maintain that the "taking of the automobile by respondentcompany from Gaudencio Quiambao ... amounted to a waiver of said company's right to execute its judgment in Civil Case No.58043 and clearly constituted a cancellation or rescission of thesale," which, under the first paragraph of Article 1454-A of the old

Civil Code

1

, then applicable, bars any further claim for unpaidinstallments. There is no merit in this claim. Unlike situation thatarose in the H.E. Heacock Company case wherein the vendordemanded the return of the thing sold and thereby indicated anunequivocal desire on its part to rescind its contract with thevendee, here it was the buyer (deceased Gaudencio Quiambao)who offered, indeed pleaded, to surrender his car only in order thathe might given more time within which to satisfy the judgmentdebt, and suspend the impending execution sale of the propertieslevied upon. The very receipt issued then by the company, andaccepted without objection by the deceased (Gaudencio



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Quiambao), indicated that the car was received "pendingsettlement of the judgment in Civil Case No. 58043." Othercircumstances that militate against petitioners' theory of rescissionor annulment of the contract of sale and waiver of the judgment of debt and, conversely, strengthen the proposition that the deliveryof the car to respondent company was merely to postpone thesatisfaction of the judgment amount, are that the deceased stillpaid the further sum of P500.00 on account of his indebtedness

about two months after the car was surrendered, and that despiterespondent company's acceptance of the car, the company maderepeated demands against the petitioners to settle the deceased'sunpaid accounts.

Since respondent company did not receive the car for the purposeof appropriating the same, but merely as security for the ultimatesatisfaction of its judgment credit, the situation underconsideration could not have amounted to a foreclosure of thechattel mortgage as petitioners imply.

Petitioners next argue that "the payment of war damagecompensation to respondent company . . . produced the same andequal legal effect as formal foreclosure," and in view of the secondparagraph of Article 1454-A2 of the Spanish Civil Code, the latter isnow precluded from claiming unpaid installments. We do not agree.Having been the party who was last in possession of the lost car,the company was well within its rights, or better still, underobligation, to protect the interest of the car owner, as well as itsown, by claiming, as it did, the corresponding war damagecompensation for the car. Such action of the company can notreasonably be construed as a constriction of its rights under thepre-war judgment.

Furthermore, in Manila Motor Company, Inc. vs. Fernandez , 52 Off.Gaz. No. 16, 6883, 6885, we held:

. . . At any rate, it is the actual sale of the mortgagedchattel in accordance with section 14 of Act No. 1508 thatwould bar the creditor (who chooses to foreclose) fromrecovering any unpaid balance (Pacific CommercialCompany vs. De la Rama, 72 Phil. 380).

But perhaps the best reason why respondent company may not beconstrued as having rescinded or cancelled the contract of sale orforeclosed the mortgage on the automobile in question is preciselybecause it brought suit for specific performance, and won, in thepre-war Civil Case No. 58043.

There is likewise no merit in the contention that the pre-war judgment had already prescribed. Said judgment was entered on

December 4, 1940, and on July 14, 1941, a writ of execution wasissued. Respondent company took no further step to enforce the judgment until May 19, 1954, on which date, respondent scheduledtwo (2) parcels of land owned by the petitioners for sale at publicauction pursuant to the writ of July 14, 1941. From the entry of the judgment to May 19, 1954, a period of 13 years, 5 months and 15days had elapsed. From this term we must deduct the periodcovered by the debt moratorium under Executive Order No. 32(which applied to all debts payable within the Philippines), from thetime the order took effect on March 10, 1945, until it was partiallylifted by Republic Act No. 342 on July 26, 1948.

Deducting the period during which Executive Order No. 32 was inforce, which is 3 years, 4 months and 16 days, from 13 years, 5months and 15 days, the period covered from the entry of the pre-war judgment to the time respondent company attempted to sellthe levied properties at auction, there is still left a period of 10years and 29 days. But as held in Talens vs. Chuakay & Co., G.R.No. L-10127, June 30, 1958, this Court may take judicial notice of the fact that regular courts in Luzon were closed for months duringthe early part of the Japanese occupation until they werereconstituted by order of the Chairman of the ExecutiveCommission on January 30, 1942.3 This interruption in the

functions of the courts has also been held to interrupt the runningof the prescriptive period (see also Palma vs. Celda, 81 Phil. 416).That being the case, respondent company could not be barred byprescription from proceeding with the execution sale pursuant tothe levy and writ of execution issued under the pre-war judgment,considering that even the minimum period of from December 8,1941, the outbreak of the Pacific War to January 30, 1942 isalready a term of one (1) month and 23 days.



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Petitioners raised the issue whether or not the pre-war writ of execution and levy may still be enforced by sale of the leviedproperty after the lapse of the five-year period within which a judgment may be executed by motion. On this point, this Court hasheld:

We are of the opinion that a valid execution issued and levymade within the period provided by law may be enforced by

a sale thereafter. . . . The sale of the property by the sheriff and the application of the proceeds are simply the carryingout of the writ of execution and levy which when issuedwere valid. This rests upon the principle that the levy is theessential act by which the property is set apart for thesatisfaction of the judgment and taken into custody of thelaw, and that after it has been taken from the defendant,his interest is limited to its application to the judgment,irrespective of the time when it may be sold (Southern Cal.L. Co. vs. Hotel Co., 94 Cal. 217, 222). (Government of P.I.vs. Echaus, 71 Phil. 318)..

The case of Ansaldo vs. Fidelity and Surety Company of thePhilippine Islands, G.R. No. L-2378, April 27, 1951, invoked by thepetitioners, is not in point, for there the judgment creditorattempted to carry out the writ of execution 10 years after entry of judgment. As correctly observed by the appellate court below, bothcited cases —

. . . affirm the fundamental principles that a valid judgmentmay be enforced by motion within five years after its entry,and by action after the lapse of said period but before thesame shall have been barred by any statute of limitations,and that a valid execution issued and levy made within thefive-year period after entry of the judgment may beenforced by sale of the property levied upon thereafter,provided the sale is made within ten years after the entry of the judgment.

The petitioners should, however, be credited the amount of P409.75 which the respondent Manila Motor Company actuallyreceived from the Philippine War Damage Commission on accountof the car of Gaudencio Quiambao that had been seized from it by

the enemy occupant during the war. This should reduce theprincipal amount still due the respondent from the petitioners tothe sum of P1,542.72.

IN VIEW OF ALL THE FOREGOING, the judgment of the Court of Appeals appealed from is affirmed, with costs against petitioners.

Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion,

Paredes, Dizon and De Leon, JJ., concur.Barrera, J., took no part.

Footnotes

1 The provision reads:

"In a contract for the sale of personal property payable in

installments, failure to pay two or more installments shallconfer upon the vendor the right to cancel the sale orforeclose the mortgage if one has been given on theproperty, without reimbursement to the purchaser of theinstallments already paid, if there be an agreement to thiseffect."

2 The paragraph reads:

"However, if the vendor has chosen to foreclose themortgage he shall have no further action against the

purchaser for the recovery of any unpaid balance owning bythe same, and any agreement to the contrary shall be nulland void."

3 In Alcantara vs. Chico, 49 O.G. 150, the Court of Appealsestimated that in Bulacan, courts were not opened fornearly five (5) months.

G.R. No. L-13435 July 27, 1960



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EUSEBIO MANUEL, plaintiff and appellant,vs.EULOGIO RODRIGUEZ, SR., ET AL., defendants and appellees.

Sumulong, Hialo and Vidanes for appellant.Generoso, Tolentino, Garcia and Cruz for appellee E. Rodriguez, Sr.Celestino L. de Dios for appellee Llanos Vda. de Landahl.

REYES, J.B.L., J .:

Eusebio Manuel appeals from the judgment of the Court of FirstInstance of Rizal, promulgated on October 31,1957, dismissing hiscomplaint.

Questions of law and of fact are involved, but the property beingworth over P2,000,000.00, the appeal was directly taken to thisCourt.

The complaint seeks to have plaintiff Eusebio Manuel declared

absolute owner of Lot 51, Plan Psu-32606, situated in San Mateo,Rizal; to compel defendants to execute a deed of absolute sale of said lot in favor of said plaintiff and to receive the unpaid balanceof the purchase price thereof; and to declare the subsequent salesof said lot null and void and to cancel the transfer certificates of title issued to the transferees. The cross-claim by defendantEulogio Rodriquez against his co-defendant Dolores Vda. deLandahl(as Administratrix of the intestate estate of JohnLandahl)having been dismissed, and there being no appealtherefrom, the facts pertaining thereto will be omitted.

It appears that Januaria Rodriguez was the original registeredowner of a big tract of land (part of which is the land in question),embraced by Transfer Certificate of Title No. 8821 of the Registerof Deeds of Rizal. In 1924, Januara Rodriguez ceded andtransferred said land to the Payatas Subdivision Inc., to beadministered by said firm, subdivided, sold, leased or otherwisedisposed of (Exhibit "A"-1). Defendant-appellee Eulogio Rodriguezwas then the Secretary-Treasurer of said Payatas Subdivision Inc.

Sometime in April, 1926, plaintiff-appellant offered to buy the lot inquestion (about 248,310 sq. meters in area).The Company agreed

to sell said lot (Lot 51) for P2,240 in cash, or by installments with10% interest (Exhibit "C"). Plaintiff-appellant made a counter-offerfor P2,000, which the Payatas Subdivision accepted, provided itwas paid in each (Exhibit "E"). Plaintiff-appellant wanted to pay ininstallments, and on August 2, 1926, the Company wrote him thatit was agreeable to a down-payment of P1,500, the balance to bepaid within 9 to 10 months without interest, or if the down-payment be less than P1,500, with interest at 10% on the balance

(Exhibit "F"). Plaintiff-appellant then requested that the down-payment be reduced to P1,300, and through the intercession of defendant-appellee Eulogio Rodriguez, Sr., who was plaintiff-appellant's friend, this was granted. After making the initialpayment of P1,300, a provisional receipt was issued, which, onAugust 25, 1926, was substituted by the official receipt sent byCasiano M. de Vera, the Company's bookkeeper (Exhibits "G" & "G"-1). Soon after, plaintiff-appellant was placed in the possessionof the lot.

It also appears that plaintiff-appellant did not make any paymentswithin the 9 to 10-month period mentioned in Exhibit "F", so thaton April 30, 1928, the Payatas Subdivision Inc. sent him a letterurging immediate payment of his unpaid account with theCompany, which, including interest, amounted to P819.23, andasking him to answer within 10 days (Exhibit "H"). Thereafter,plaintiff-appellant made another payment of P300 for which areceipt dated June 20, 1928 was issued to him (Exhibit "I"). So faras the record discloses, this appears to be the last payment madeby plaintiff-appellant on Lot 51, the property in question. On April24, 1929, the Payatas Subdivision Inc. sent plaintiff-appellant adetailed statement of his unpaid account which, including interestand taxes, amounted to P596.21, urging immediate payment

thereof, so that title could be transferred to him as per agreement,and requesting answer within 10 days (Exhibit "J"). Still, plaintiff-appellant did not pay his account, despite the fact that thereafter,on several occasions, the Company sent to his residence its actingsecretary, Conrado Vicente, to collect the balance.

Defendants-appellees advance the theory that in view of plaintiff-appellant's repeated default in paying his outstanding account, thePayatas Subdivision Inc. then considered his contract cancelled andextinguished, and the amounts already paid (P1,600), forfeited to



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the Company, the transaction being merely a contract to sell orpromise to sell; that sometime in 1939, the Payatas SubdivisionInc., having sold all its properties (except some properties it wasadministering for Januaria Rodriguez), was extrajudically dissolved,but its papers of dissolution were lost or destroyed during the war;that after said dissolution, all unsold properties belonging toJanuaria Rodriguez were returned to her.

Sometime in 1941, Januaria Rodriguez, who was the aunt of defendant-appellee Eulogio Rodriguez, sold several properties tothe latter, including Lot 51 in question, in consideration of themonthly advances, support, services, care, maintenance, medicalexpenses, etc. which she received from the said Eulogio Rodriguez(Exhibit "U").Pursuant to such sale, Transfer Certificate of Title No.44709 was issued to Eulogio Rodriguez, Sr. (Exhibit 21-a).

Likewise, it appears that on February 4, 1941, Eulogio Rodriguez,Sr., then Mayor of Manila, instructed his secretary to write plaintiff-appellant to urge him to pay his unsettled account with the Payatas

Subdivision, Inc. As per instructions, his secretary wrote plaintiff-appellant (Exhibit "O"). Still, there was no payment.

On August 5, 1944, Eulogio Rodriguez, Sr. sold Lot 51(amongothers) to John Landahl (represented in the transaction by CarlosLandahl as attorney-in-fact), for and in consideration of P157,192.80, in Japanese war notes (Exhibit 1-Landahl). The salewas duly registered and Transfer Certificate of Title No. 46521 wasissued in Landahl's name (Exhibit 3-Landahl).

On April 6, 1949, or just a little less than 23 years after the allegedsale to him of Lot 51 in 1926, plaintiff-appellant brought theinstant case, as aforesaid, to compel the execution of a formaldeed of conveyance in his favor covering the purported sale in1926; to compel receipt of the unpaid balance of the price whichplaintiff-appellant consigned in court; and to annul the subsequentsales to Eulogio Rodriguez and to John Landahl, and thecorresponding transfer certificates to title issued to them.

The decision of the trial court dismissing the complaint ispredicated on two main findings —

Firstly . — That the transaction in 1926 was mere contract to sell orpromise to sell of Lot 51 to plaintiff-appellant, the understandingbeing that upon failure to pay the installments as demanded, thevendor corporation had the right to consider the contract cancelledand the amounts already paid, forfeited.

Secondly . — That even under plaintiff-appellant's theory that hiscontract with defunct Payatas Subdivision Inc. was an absolute

sale, involving immediate transfer of ownership, his right of actionto compel the execution of a formal deed of conveyance hasprescribed, whether the contract is considered written or verbal(Sec. 43, pars. 1 & 2, Code of Civil Procedure, Act 190); moreover,the action is barred by laches.

The findings that the contract entered into 1926 was a merecontract to sell or promise to sell was predicted on the followingpremises:

1. The alleged contract of absolute sale was not reduced to a

formal deed of conveyance, much less registered, which is unlikelyif the contract had been an absolute sale, because plaintiff-appellant would have insisted that it be reduced to a publicdocument, the land being covered by a Torrens title.

2. It is highly improbable that the Payatas Subdivision Inc. wouldagree to an immediate transfer of ownership to plaintiff withoutany guaranty or security that the balance of the price would becompletely paid.

3. The statement in Exhibit "J", introduced by plaintiff as his

evidence, requesting payment of the balance "at ng kayo naman ymabigyan na ng katibayan, alinsunod sa pinagkayarian", confirmsthat the agreement between plaintiff and the company was thattitle would be transferred to plaintiff only upon full payment of theprice.

4. Plaintiff would not have waited for more than 20 years to filethis action to enforce the contract if this where an absolute sale,considering that the land being covered by a Torrens title, it waseasy for the vendor to resell or encumber the same property tosome other person on the basis of a clean title.



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5. The nature of the transaction as a mere contract to sell isestablished by the testimony of witnesses for defendants-appellees.

6. The dissolution of the Payatas Subdivision Inc. sometime in1939 must have been the reason which prompted the cancellationof plaintiff's contract, as it had to wind up all its affairs andconclude all pending business before dissolution.

7. It may be taken judicial notice of that it is a general practiceamong subdivision companies engaging in installment sales toplace the buyer immediately in possession after the down-payment, the company remaining owner of the property until fullpayment, at which time the deed of conveyance is then executed infavor of the buyer; and if the buyer defaults in paying theinstallments due, the corporation cancels the contracts and forfeitsthe amount already paid.

In his brief containing 20 assignments of error, plaintiff-appellant

insists that the contract in 1926 was not merely a contract to sellbut an absolute sale (Errors I-IV). He contends that contrary to thefinding of the lower court, the 1926 contract was not verbal butwritten, citing the series of communications between plaintiff-appellant and the Payatas Subdivision Inc., Exhibits "C" to "G"-1. Acareful examination of these exhibits, however, reveals thatExhibits "C" to "F" are mere bargaining negotiations that took placebefore the parties arrived at a full understanding, while Exhibits"G" and "G"-1 are mere receipts of payment; they fail to show thatthe parties had committed all the terms of their agreement towriting. Exhibit "C" merely offers to sell Lot 51 for P2,240, withinterest at 10% if it be by installments; Exhibit "D" offered to

reduce the total price for Lots 44 and 51 (early negotiation werefor 2 lots) to P2,955, and also referred to other matters concerningthe sale which should be discussed personally by the parties;Exhibit "E" accepts a previous counter-offer made by plaintiff-appellant to buy Lot 51 for P2,000, provided the payment was incash, and again referred to other matters regarding the sale whichshould be threshed out between the parties; Exhibits "F", aftermaking reference to the terms of payment desired by plaintiff-appellant, laid down the condition that if the first payment is atleast P1,500, the balance payable in 9 to 10 months would not

bear interest; and if the initial payment was less than P1,500, thebalance would bear interest at 10%; Exhibit "G" is a note byPayatas Inc. referring to the attached receipt, Exhibit "G-1"),covering the down-payment of P1,300 made by plaintiff-appellantfor Lot 51.

These letters shows that if at all, only the price and the terms of payments were in writing. The most important, the alleged transfer

of title, and the other matters alluded to in some of thecommunications, were not reduced to any written document. It isgenerally recognized that to be a written contract, all its termsmust be in writing; so that a contract partly in writing and partlyoral, is, in legal effect, an oral contract (Fey vs. Loose Wiles BiscuitCo., 75 P2d 810; Peifer vs. New Comer, et al., 157 NE 240; 12 Am.Jur. 550). Apart from whether the letters negotiating thetransaction could constitute a written contract of sale, the absenceof a formal deed of conveyance strongly indicates that the partiesdid not intend immediate transfer of title, but only a transfer afterfull payment of the price. As observed by the trial court, if thecontract were an absolute sale, it is unlikely that plaintiff-appellantwould not have insisted that the same be reduced to a publicdocument, considering that Lot 51 is covered by a Torrens title. Onthe other hand, it is unlikely for the Payatas Subdivision Inc. tohave agreed to an immediate transfer of ownership withoutguaranty of the balance being ever paid.

One other evidence of the true character of the transaction is thestatement contained in Exhibit "J" of the following tenor: "at ngkayo naman ay mabigyan na ng katibayan, alinsunod sapinagkayarian", strengthening the conclusion that what transpiredin 1926 was a mere contract to sell, transfer of title being

conditioned on full payment of the price. Plaintiff-appellant tries torefute this by citing El Banco Nacional Filipino vs. Ah Sing, 69 Phil.611, wherein the contract captioned "Promesa De Venta" was heldto be an absolute sale. Suffice it to say that comparison will nothold, because in the cited case, the contract was reduced to aformal deed conveyance and the court found that the parties hadagreed to and actually effectuated a delivery. In the instant case,there was a formal deed of conveyance, and, as the land is coveredby the Torrens title, there could be no delivery except by the act of registration of the deed or instrument.



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Adding to the pile of circumstances, the fact that plaintiff-appellantdid not file this action to enforce the contract until after more than20 years from the alleged absolute sale in 1926 induces no otherconclusion than that the transaction was a mere contract to sell,for it if were an absolute sale, it was unlikely for plaintiff-appellantto wait as long as he did before commencing the present action,considering that as the land was covered by a Torrens title, it couldhave been very easy for the Payatas Subdivision to dispose or

encumber the same to another party. Considering the steadyincrease in land values since 1926 (Martin vs. Martin,* 57 Off. Gaz.[9] 1589), plaintiff's laches and his neglect to comply with his ownobligations are powerful indicia against the merits of his caserendering his case highly inequitable.

The dissolution of the Payatas Subdivision Inc. sometime in 1939 issufficiently established by the evidence. The only argumentadvanced by plaintiff-appellant to show that it was not dissolved in1939 (Error I-IV; IX-X) is Exhibit "O", the letter written in 1941 bythe secretary of defendant-appellee Eulogio Rodriguez, asking forpayment of the balance of the price, wherein the statementappears "Sa utos ng pangasiwan ng Payatas Estate Subdivision . ..", from which it is supposed to be inferred that said corporationhad not yet been dissolved. However, in Exhibit "O" itself, thepayment was being asked to be made at the office of defendant-appellee Eulogio Rodriguez at the City Hall, showing that PayatasSubdivision no longer even had an office. Also significant is thecomputation of interest mentioned in Exhibit "O" which, accordingto said letter, accrued only up to January, 1939. All these, plus theother circumstances on record, give credence to defendant-appellees' contention that the corporation was really dissolved in1939.

Although this dissolution cannot be determinative of the characterof the sale in 1926 (as to whether conditional or absolute), it mustreally have been the occasion which prompted the termination of the contract, as the corporation had to wind up its affairs and closeall pending business. Plaintiff-appellant, however, argues (Errors I-IV; VI; VIII) that the Payatas Subdivision had no right to cancelthe contract, as there was no demand by suit or notarial act, asprovided by Article 1504 of the Old Code (Art. 1592, N. C. C.). Thisis without merit, because Article 1504 requiring demand by suit or

notarial act in case the vendor of realty wants to rescind, does notapply to a contract to sell or promise to sell, where title remainswith the vendor until fulfillment to a positive suspensive condition,such as full payment of the price (Caridad Estates vs. Santero, 71Phil., 114, 121; Albea vs. Inquimboy, 86 Phil., 476; 47 Off. Gaz.Supp. 12, p. 131; Jocson vs. Capitol Subdivision Inc. et al., L-6573, February 28, 1955; Mirandavs. Caridad Estates, L-2077 andAspuria vs. Caridad Estates, L-2121, October 3, 1950).

The contention of plaintiff-appellant that Payatas Subdivision Inc.had no right to cancel the contract as there was only a "casualbreach" is likewise untenable. In contracts to sell, where ownershipis retained by the seller and is not to pass until the full payment of the price, such payment, as we said, is a positive suspensivecondition, the failure of which is not a breach, casual or serious,but simply an event that prevented the obligation of the vendor toconvey title from acquiring binding force, in accordance with Article1117 of the Old Civil Code. To argue that there was only a casualbreach is to proceed from the assumption that the contract is oneof absolute sale, where non-payment is a resolutory condition,which is not the case.

Whether the trial court could take judicial notice of the allegedpractice in subdivision companies to retain ownership over landsthey contracted to sell, until full payment of the price, we find notnecessary to discuss. The circumstances shown by the trend of evidence, including the oral testimony of the witnesses fordefendant-appellees, more than convince this Court that thetransaction in 1926 was merely a contract to sell, subject to asuspensive condition that was terminated for the PayatasSubdivision Inc. before its dissolution, by reason of the non-

payment of the balance of the price.

It is contended (Error V) that the balance of the price was not dueand payable within the 9 to 10-month period mentioned in Exhibit"F". this Court had examined said letter, and finds nothing to justify such a strained conclusion. Reasonably interpreted, thepertinent portion merely stated that if the first payment is at leastP1,500, then, the balance will bear interest at 10%. In otherwords, the initial payment determines whether or not interest willbe paid, not the period within which the balance will fall due. The



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period here bears no relation to the amount to be initially paid. Atany rate, plaintiff-appellant was legally bound to pay the obligationdue upon judicial or extra-judicial demand (Art. 1100, Old CivilCode; Article 1169, N.C.C.); and it appears that demands weremade which plaintiff-appellant failed to heed.

Plaintiff-appellant next contends (Errors IX-XI) that when Exhibit"O" was sent by Clemente Felix, upon instructions of defendant-

appellee Eulogio Rodriguez, the latter was not yet the owner of Lot51 and the Payatas Subdivision Inc. had not yet been dissolved. Asearlier discussed, there is enough evidence that the company wasdissolved in 1939. As to whether or not Eulogio Rodriguez hadalready acquired Lot 51 when Exhibit "O" was sent to plaintiff-appellant, it would really seem that said Eulogio Rodriguez, as of that time, was not yet the owner of Lot 51, since Exhibit "O" isdated February 4, 1941 while Exhibit "U" (the deed of sale fromJanuaria Rodriguez to Eulogio Rodriguez) is dated December 26,1941. But this is not material, since it would merely show that, forwhomever Eulogio Rodriguez was acting, he still wanted to giveplaintiff-appellant a chance to own the land as a gesture of liberality. Anyway, appellant failed to take advantage of theproposal, and the same remains without binding effect.

Having lost all rights to the land, plaintiff-appellant has nopersonality to question the sales subsequently made to EulogioRodriguez, and later, to John Landhal. Hence, it becomes academicto discuss the assignments of error pertaining thereto (Errors VII,XII, XIII, XIV, XV, XVI), specially since there is no evidence thatLandhal was prevented from relying on the clear certificate of titlein the name of Rodriguez.

From a different perspective, there is yet another reason why thepurported sale to plaintiff-appellant could not have transferred titleto him, and could not have prevented the subsequent sale of theproperty to another party. The land in question being covered by aTorrens title, only the act of registration of the deed or instrumentcould effect transfer of ownership (Worcester vs. Ocampo, 34 Phil.646; Tuason vs. Raymundo, 28 Phil. 635; Buzon vs.Lichauco, 13Phil. 354). In the instant case, there is not even a deed orinstrument that could possibly be registered.

Having reached the conclusion that title to the disputed propertynever passed to plaintiff-appellant; that his failure to completepayment of the price and his laches in enforcing his rights render itinequitable to compel performance of the contract at the presenttime, we find it unnecessary to discuss the remaining errorsassigned in appellant's brief.

Equity would, of course, demand that, in the absence of

stipulation, the amounts paid by plaintiff be returned, since thepurpose for which he paid them was not attained; and it appears of record that such reimbursement was made as early as 1945(Exhibits 1 to 1-C).

In view of the foregoing, the judgment of the trial court is affirmed.Costs against plaintiff-appellant.

Bengzon, Montemayor, Bautista Angelo, Labrador, Concepcion,Barrera, and Gutierrez David, JJ., concur.

April 11, 1906

G.R. No. 2412

PEDRO ROMAN, plaintiff-appellant,

vs.

ANDRES GRIMALT, defendant-appellee.

Alberto Barretto, for appellant.

Chicote, Miranda and Sierra, for appellee.

TORRES, J.:

On July 2, 1904, counsel for Pedro Roman filed a complaint in the

Court of First Instance of this city against Andres Grimalt, praying

that judgment be entered in his favor and against the defendant

(1) for the purchase price of the schooner Santa Marina, to wit,

1,500 pesos or its equivalent in Philippine currency, payable by

installments in the manner stipulated; (2) for legal interest on the

installments due on the dates set forth in the complaint; (3) for



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costs of proceedings; and (4) for such other and further remedy as

might be considered just and equitable.

On October 24 of the same year the court made an order

sustaining the demurer filed by defendant to the complaint and

allowing plaintiff ten days within which to amend his complaint. To

this order the plaintiff duly excepted.

Counsel for plaintiff on November 5 amended his complaint and

alleged that between the 13th and the 23rd day of June, 1904,

both parties, through one Fernando Agustin Pastor, verbally agreed

upon the sale of the said schooner; that the defendant in a letter

dated June 23 had agreed to purchase the said schooner and of

offered to pay therefor in three installment of 500 pesos each, to

wit, on July 15, September 15, and November 15, adding in his

letter that if the plaintiff accepted the plan of payment suggested

by him the sale would become effective on the following day; that

plaintiff on or about the 24th of the same month had notified the

defendant through Agustin Pastor that he accepted the plan of

payment suggested by him and that from that date the vessel was

at his disposal, and offered to deliver the same at once to

defendant if he so desired; that the contract having been closed

and the vessel being ready for delivery to the purchaser, it was

sunk about 3 o’clock p. m., June 25, in the harbor of Manila and is

a total loss, as a result of a severe storm; and that on the 30th of

the same month demand was made upon the defendant for the

payment of the purchase price of the vessel in the manner

stipulated and defendant failed to pay. Plaintiff finally prayed that

judgment be rendered in accordance with the prayer of his

previous complaint.

Defendant in his answer asked that the complaint be dismissed

with costs to the plaintiff, alleging that on or about June 13 both

parties met in a public establishment of this city and the plaintiff

personally proposed to the defendant the sale of the said vessel,

the plaintiff stating that the vessel belonged to him and that it was

then in a sea worthy condition; that defendant accepted the offer

of sale on condition that the title papers were found to be

satisfactory, also that the vessel was in a seaworthy condition; that

both parties then called on Calixto Reyes, a notary public, who,

after examining the documents, informed them that they wereinsufficient to show the ownership of the vessel and to transfer title

thereto; that plaintiff then promised to perfect his title and about

June 23 called on defendant to close the sale, and the defendant

believing that plaintiff had perfected his title, wrote to him on the

23d of June and set the following day for the execution of the

contract, but, upon being informed that plaintiff had done nothing

to perfect his title, he insisted that he would buy the vessel only

when the title papers were perfected and the vessel duly inspected.

Defendant also denied the other allegations of the complaint

inconsistent with his own allegations and further denied the

statement contained in paragraph 4 of the complaint to the effect

that the contract was completed as to the vessel; that the

purchase price and method of payment had been agreed upon;

that the vessel was ready for delivery to the purchaser and that an

attempt had been made to deliver the same, but admitted,

however, the allegations contained in the last part of the said

paragraph.

The court below found that the parties had not arrived at a definite

understanding. We think that this finding is supported by the

evidence introduced at the trial.

A sale shall be considered perfected and binding as between

vendor and vendee when they have agreed as to the thing which is

the object of the contract and as to the price, even though neither

has been actually delivered. (Art. 1450 of the Civil Code.)



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Ownership is not considered transmitted until the property is

actually delivered and the purchaser has taken possession of the

value and paid the price agreed upon, in which case the sale is

considered perfected.

When the sale is made by means of a public instrument the

execution thereof shall be equivalent to the delivery of the thing

which is the object of the contract. (Art. 1462 of the Civil Code.)

Pedro Roman, the owner, and Andres Grimalt, the purchaser, had

been for several days negotiating for the purchase of the

schooner Santa Marina - from the 13th to the 23d of June, 1904.

They agreed upon the sale of the vessel for the sum of 1,500

pesos, payable in three installments, provided the title papers to

the vessel were in proper form. It is so stated in the letter written

by the purchaser to the owner on the 23rd of June.

The sale of the schooner was not perfected and the purchaser didnot consent to the execution of the deed of transfer for the reason

that the title of the vessel was in the name of one Paulina Giron

and not in the name of Pedro Roman, the alleged owner. Roman

promised, however, to perfect his title to the vessel, but he failed

to do so. The papers presented by him did not show that he was

the owner of the vessel.

If no contract of sale was actually executed by the parties the loss

of the vessel must be borne by its owner and not by a party whoonly intended to purchase it and who was unable to do so on

account of failure on the part of the owner to show proper title to

the vessel and thus enable them to draw up the contract of sale.

The vessel was sunk in the bay on the afternoon of the 25th of

June, 1904, during a severe storm and before the owner had

complied with the condition exacted by the proposed purchaser, to

wit, the production of the proper papers showing that the plaintiff

was in fact the owner of the vessel in question.

The defendant was under no obligation to pay the price of the

vessel, the purchase of which had not been concluded. The

conversations had between the parties and the letter written by

defendant to plaintiff did not establish a contract sufficient in itself

to create reciprocal rights between the parties.

It follows, therefore, that article 1452 of the Civil Code relative to

the injury or benefit of the thing sold after a contract has been

perfected and articles 1096 and 1182 of the same code relative to

the obligation to deliver a specified thing and the extinction of such

obligation when the thing is either lost or destroyed, are not

applicable to the case at bar.

The first paragraph of article 1460 of the Civil Code and section335 of the Code of Civil Procedure are not applicable. These

provisions contemplate the existence of a perfected contract which

can not, however, be enforced on account of the entire loss of the

thing or made the basis of an action in court through failure to

conform to the requisites provided by law.

The judgment of the court below is affirmed and the complaint is

dismissed with costs against the plaintiff. After the expiration of

twenty days from the date hereof let judgment be entered in

accordance herewith and ten days thereafter let the case beremanded to the Court of First Instance for proper action. So

ordered.

Arellano, C.J., Mapa, Johnson, Carson and Willard, JJ., concur.

G.R. No. L-28845 June 10, 1971

http://philippinelaw.info/statutes/acts/act190.html

http://philippinelaw.info/statutes/acts/act190.html



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TEODORA GONZALES BUNYI, petitioner,vs.SABINA REYES, LUZ JOAQUIN, ELVIRA JOAQUIN, ROSENDO

JOAQUIN, JR., LUALHATI JOAQUIN and LOIDA VIVO and theHONORABLE COURT OF APPEALS, respondents.

Luis Teodoro for petitioner.

Anonuevo, Baez & Vasquez for private respondents.

TEEHANKEE, J.:

Appeal for certiorari from a decision of the Court of Appeals.

Petitioner Teodora Gonzales Bunyi was the defendant in an actionfor reconveyance, on the ground of fraud, of a parcel of landcontaining 16 ares and 59 centares (Lot No. 1310 of the Friar

Lands Estate) situated in Taguig, Rizal, covered by TransferCertificate of Title No. 43437 issued in her name, filed by privaterespondents as plaintiff in the Court of First Instance of Rizal. 1

Respondents filed the suit on May 30, 1961 as heirs of the previousregistered owner of the land, Gil Joaquin, who had died on June 10,1950, leaving respondents as his heirs, namely, his survivingspouse, Sabina Reyes; his daughter, Luz Joaquin; and his minorgrandchildren, Elvira, Rosendo, Jr. and Lualhati, all surnamedJoaquin (children of a deceased son, Rosendo), and represented bytheir mother, Loida Vivo, as their guardian ad litem.

The main facts are undisputed. On September 24, 1935, GilJoaquin executed a deed of "Venita con Pacto de Retro", wherebyfor and in consideration of the sum of P100.00 paid to him. bypetitioner, he ceded and transferred to petitioner the land thentitled in his name, expressly excluding the house or houses builtthereon, with the right of repurchasing the same within two yearsthereafter, and assuming the payment of the land taxes andagreeing to pay an annual rental of P12.00 as lessee thereof duringthe stipulated period of redemption.

On July 5, 1941, after Gil Joaquin had failed to repurchase theland, petitioner executed an affidavit of consolidation of ownershipand Joaquin's title was accordingly cancelled and a new certificateof title issued on July 7, 1941 in petitioner's name.

The trial court, presided by the late Justice (then Judge) Angel H.Mojica, summarized the conflicting claims of the parties per theirtestimonial and documentary evidence, as follows:

Plaintiff, Sabina Reyes tried to establish that thedocument, Exhibit A-I, does not represent the trueintention and agreement of the parties thereto; thatthe contents thereof were not faithfully explained toher and her late husband; that in affixing herthumbmark to the document, she and her latehusband, Gil Joaquin, who signed the same, weremade to understand that they were merelymortgaging the land in question to the defendant assecurity for the sum of P100.00 which they borrowedfrom her; that the conditions stated in the documentabove-quoted are not true except that portion inletter (b) whereby her late husband agreed to pay anannual rent of P12.00, and the condition appearingin letter (c) whereby her late husband bound himself to pay the taxes for the land; that she had beenpaying interest every year to the defendant on thesum loaned; that since 1935 up to January 1961,she had been paying the taxes for the land declaredin the name of her husband under Tax DeclarationNo. 947 (Exh. B); that there are houses on the landin question and the owners thereof pay to her the

corresponding rents; and that she learned for thefirst time that the defendant was claiming ownershipof the land only in 1961 when the defendant causedit to be surveyed and so she consulted her presentcounsel.

The defendant, on the other hand, attempted toshow that she is the lawful owner of the land inquestion, having acquired same in virtue of theinstrument "Venta Con Pacto de Retro," Exhibit A-1,



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which Gil Joaquin executed in her favor onSeptember 24, 1935; that because of the failure of Gil Joaquin and his wife, Sabina Reyes, torepurchase the land within the period of two yearsand pay the rents as stipulated in the contract, shefiled an affidavit of consolidation of ownership and asa consequence thereof, Transfer Certificate of TitleNo. 43437 covering the land was issued on July 7,

1941, in her favor. She claimed that she had beenpaying the real estate taxes for the land as shown byher documents, Exhibits 3 and 4, and that the landhad been registered in her name for taxationpurposes since 1949 (Exh. 5). She further testifiedthat the notary public before whom Gil Joaquin andplaintiff Sabina Reyes acknowledged and ratified thedocument (Exh. A-I) in Biñan, Laguna, explained tothem the contents thereof; that Gil Joaquin had beenvice mayor of Muntinglupa and he spoke andunderstood Spanish; that she did not study in anyschool, although she was taught how to write her

name by her father so that she could vote; that herhusband who reached the second grade did notunderstand Spanish.

The trial court rendered judgment holding that the questioned deedspoke "in unequivocal terms of a sale and the conveyance of theland with the right to repurchase. In the face of its plain terms,there is nothing to justify our construing that contract as a meremortgage.

Passing upon the contrary claim of respondents, the trial court

found the uncorroborated and lone testimony of Sabina Reyes tobe inadequate and incredible: "(W)e find the uncorroboratedtestimony of plaintiff Sabina Reyes to the effect that she and herlate husband, Gil Joaquin, were induced to sign the original of saiddocument because of their belief that they were merely mortgagingthe land in question as security for the sum of P100.00 which theyborrowed from her to be incredible. Her lone and biased testimony is not sufficient to overcome the aforesaid document which is asale with Right to repurchase (venta con pacto de retro). Deeplyembedded in our jurisprudence is the rule that 'mere

preponderance of providence is not sufficient to overthrow acertificate of a notary public to the effect that a grantor executed acertain document and acknowledged the fact of its executionbefore him. To accomplish this result, the evidence must be soclear, strong and convince as to exclude all reasonable controversy as to the falsity of the certificate, and when the evidence isconflicting, the certificate will be upheld .' (Robinson vs. Villafuerte,18 Phil. 171; Jocson vs. Estacion, 60 Phil. 1055; V.L.J. 784;

Villafuerte vs. Reyes, et al., CA-G.R. No. 1637-R, Sept. 27, 1950).In this case we find that plaintiffs failed to produce 'clear strongand convincing evidence to overcome the positive value of saiddocument. Mere denials on the part of plaintiff Sabina Reyes cannot offset or defeat said notarial documents" 2

The trial court further ruled out the applicability of Articles 1602 to1605 of the Civil Code of the Philippines invoked by respondents aswarranting the construction of the contract as an "equitablemortgage", ruling that the applicable provisions were those of theold Civil Code then in force.

The trial court further found the belated claims of respondents tobe unsupported by the evidence, thus: "(I)t will be noted thatthe plaintiffs are attempting to defeat the effect of the deed of thelate Gil Joaquin, their predecessor in interest, twenty six yearsafter the execution of the instrument. After so long a period thecharges of fraud must be clearly and in controvertibly proved . It isour sense that the delay of plaintiffs in seeking relief in court'speaks against the probability of the wrong complainedof.' Plaintiff Sabina Reyes failed to produce any receipt tending to prove her claim that she had regularly paid the interests on thealleged 'loan' since 1935 up to the filing of the complaint. She

declared that she had religiously paid the taxes for the land, yet she failed to substantiate her testimony with the best evidence.The records show that she paid the real estate taxes for the years1949 to 1959 on December 22, 1960 only (Exhs. C and C-1), that is, five months before the filing of the complaint . Why the belatedpayment if she believes to be still the owner of the property?" 3

The trial court finally upheld petitioner's defense of laches andprescription on the basis of the following considerations: "(L)astly,it appears that Gil Joaquin who died on June 10, 1950 had been



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Vice Mayor of Muntinglupa, he spoke, and understood Spanish; it ishard to be that he signed the document, Exhibit A-1, without understanding its contents. If he were really defrauded why did henot exercise his right of action? Why did he not repurchase theland and/or file an action for annulment of the aforesaid document during his lifetime? And why did plaintiffs sleep on their rights untilMay 30, 1961, when they instituted this action? The delay in thecommencement of this action strongly casts a doubt in our mind as

to the verity of their complaint. It is our conviction that the actionhas already prescribed ." 4

Respondents appealed the trial court's decision to the Court of Appeals. The appellate court did not make any factual findings of its own, much less overturn those of the trial court.

It, however, pitted the lone testimony of petitioner as against thatof respondent Sabina Reyes, and declared that under Article 1332of the Philippine Civil Code, the burden was on petitioner as vendeea retro to show that the Joaquin spouses fully understood thecontents of the deed and that her "bare testimony" was notsufficient to discharge the burden. It held that petitioner hadconsolidated her ownership in a "surreptitious manner" and that"under the facts, defendant [petitioner] has not discharged theburden of proof, hence presumption of mistake, if not fraud, underthe law stands unrebutted and controlling" and that the consent tothe Joaquin spouses to the deed was therefore null and void, aswas the deed itself. It finally held the respondents' action to be"one for declaration of the inexistence of the contract which doesnot prescribe."

The appellate court therefore reversed the trial court's judgment

and granted the reconveyance of the land as prayed for inrespondents' complaint, per its following brief opinion:

Plaintiff Sabina Reyes having alleged and testifiedthat she and her late husband Gil Joaquinthumbmarked and signed the deed, Exhibit A, drawnon Spanish which they did not understand and thatthey were induced to sign the document onrepresentation of defendant that it was the deed of mortgage, the burden of proof is on the defendant to

allow pursuant to Article 1332 of the new civil code,that the Joaquin spouses fully understood thecontent thereof ... Only defendant testifies on thisscore. She declared pertinently that it is Gil Joaquin'who asked the preparation of that document,'Exhibit A: that after the document was prepared bythe notary public, the latter translated the contentsinto tagalog before it was signed by the Joaquin

spouses in Biñan, Laguna; that she did not have anyschooling, although her late husband reached sixthgrade: that the notary gave a copy of the deed tothe Joaquin spouses. Her bare testimony is notsufficient to establish by preponderance of evidencethat the Joaquin spouses fully know the contents of the document, Exhibit A, to be Sale with right torepurchase, especially considering the countervailingtestimony of plaintiff Sabina Reyes that she and herhusband did not understand Spanish, she beingilliterate and her husband having reached grade 3only, according to him; that they signed the deed in

Muntinglupa in the belief it was a deed of mortgageand that they did not appear before the notary publicin Biñan, Laguna. Moreover, plaintiffs' theory findsconfirmation in the surreptitious manner [that]defendant made and filed the affidavit of consolidation of ownership, Exhibit 2-A, and secureda new certificate of title in her name, Exhibit 1, onJuly 7, 1941, since the change in the status of theproperty was not reflected in the tax roll of themunicipality of Muntinglupa until August 28, 1961,as per annotation on TD 947, Exhibit D-1 when

plaintiffs TD was cancelled, and in defendant'sallowing plaintiffs to continue in possession of the lotafter 1941 despite said change in ownership. Underthe facts, defendant has not discharged the burdenof proof, hence, presumption of mistake, if not fraud,under the law stands unrebutted and controlling ....It follows that the consent of spouses Gil Joaquin andSabina Reyes to the document, Exhibit A, is null andvoid, and so is the contract .... The circumstancesthat Exhibit A is a public document executed prior tothe effectivity of the new Civil Code do not preclude



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the application of Article 1332 aforesaid ..., which isprocedural in nature, affecting burden of proof ...,there being no vested right in the rules of evidence....

Having found that the deed of sale, Exhibit A, nulland void, it follows that the present action may betreated as one for declaration of the inexistence of

the contract which does not prescribe ....

Petitioner in turn filed this appeal, which the Court findsmeritorious.

1. The appellate court's error was in applying Article 1332 of theNew Civil Code and declaring that thereunder petitioner had theburden which she failed to discharge as defendant — of showingthat the Joaquin spouses fully understood the contents of the"Venta con Pacto de Retro", when the pertinent factual basis forapplication of said Article 1332 had not been duly established.

Article 1332, which was designed for the protection of illiteratesand of a party to a contract who "is a disadvantage on account of his ignorance, mental weakness or other handicap," providesthat: 5

Art. 1332. When one of the parties is unable to read,or if the contract is in a language not understood byhim, and mistake or fraud is alleged, the personenforcing the contract must show that the termsthereof have been fully explained to theformer. (n)

For the proper application of said article to the case at bar, it hasfirst to be established convincingly by respondents that Gil Joaquincould not read or that the contract was written in a language notunderstood by him. This factual basis was far from shown. On thecontrary, the trial court duly found — and the appellate court madein contrary finding — that "Gil Joaquin, ... had been vice mayor of Muntinglupa; he spoke and understood Spanish; it is hard tobelieve that he signed the document Exhibit A-1 withoutunderstanding its contents." The appellate court still made mention

of another relevant factor testified to by petitioner — notmentioned by the trial court — that "it was Gil Joaquin who 'askedthe preparation of that document', Exhibit A, "by the notary public,who translated the contents into tagalog before the Joaquinspouses signed the same — which completely relieved petitioner of any burden of proof, since the further presumption arose that thedeed was prepared in accordance with Gil's understanding andinstructions, since he caused its preparation.

The trial court, therefore, properly ruled that it was respondents,as plaintiffs, who failed to overcome by clear, strong andconvincing evidence the positive value and effect of the notary'scertificate that the Joaquin spouses duly executed the "Venta conPacto de Retro" and acknowledged the fact of its execution of theirsworn and free will before him.

2. The appellate court merely concluded that petitioner hadconsolidated ownership of the land on July 7, 1941 in a"surreptitious manner" on the assumption, without reference to theevidence of record, that petitioner's ownership of the land was notreflected in the municipality's tax roll "until August 28, 1961, asper annotation on TD-947, Exhibit D-1, when plaintiffs' TD wascancelled and that petitioner "allowed plaintiffs to continue inPossession of the lot after 1941 despite said change of ownership."These assumptions of the appellate court are not supported by theevidence of record cited 'in the trial court's decision that petitioner"had been paying the real estate taxes for the land as shown byher documents, Exhibits 3 and 4, and that the land had beenregistered in her name for taxation purposes since 1949 (Exh. 5);"and that on the other hand, "Plaintiff Sabina Reyes failed toproduce any receipt tending to prove her claim that she had

regularly paid the interests and the alleged ̀ loan' since 1935 up tothe filing of the complaint. She declared that she had religiouslypaid the taxes for the land, yet she failed to substantiate hertestimony with the best evidence. The records show that she paidthe real estate taxes for the years 1949 to 1959 on December 22,1960 only (Exhs. C and C-1), that is, five months before the filingof the complaint." Petitioner's brief further cites as to the fact of possession that "it was admitted by Luz Joaquin herself (one of therespondents and daughter of Gil Joaquin) that after World War II,she removed her house from the same lot, (S. T. N. of August



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1962 p. 8 and S. T. N. of February 27, 1963, p. 2) while one of thedaughters of the petitioner, Fortunata Bunyi has a house on thesame lot since 1959 (S. T. N. of October 26, 1962, pp. 3 & 7)which was not even denied by the respondents," which citation of the record is not denied in respondent's brief.

3. The final error of the appellate court flowed from its erroneousconclusion that "the consent of spouses Gil Joaquin and Sabina

Reyes to the document, Exhibit A, is null and void," hence "itfollows that the present action may be treated as one fordeclaration of the inexistence of the contract which does notprescribe." The sale at bar is governed by the provisions of the oldcivil code, and as was appointed out by Mr. Justice Reyes in onecase 6, "(U)nder Article 1509 of the old Code, the vendeeirrevocably acquires ownership over the thing sold upon failure of the vendor to redeem — i.e. ownership is consolidated in thevendee by operation of law." The court's jurisprudence has beenuniform in support of petitioner's submittal that the rights vested inher as vendee under the provisions of the old Code could not beimpaired by the provisions of the new Civil Code which took effect

only in 1950. 7

On the question of prescription of action, the Court, per Mr. JusticeReyes, in Fernandez vs. Fernandez , 8 has held that "the right of action to question the nature of the original transaction as well asany action to recover the land, if any such rights ever existed, wereextinguished by prescription ten years after the appellantconsolidated his ownership in 1936." Respondents' right toquestion the nature of the deed and to seek reconveyance must beheld therefore to have prescribed in 1951, ten years afterpetitioner's consolidation of ownership of the land on July 7, 1941,

when a new certificate of title was issued in her favor and that of Gil Joaquin was cancelled, and the filing of the present actionalmost twenty years after such consolidation is barred byprescription.

ACCORDINGLY, the judgment of the Court of Appeals appealedfrom is hereby reversed and set aside. Without costs.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar,Fernando, Villamor and Makasiar, JJ., concur.

Castro, J., took no part.

Barredo, J., reserves his vote.

G.R. No. 140479 March 8, 2001

ROSENCOR DEVELOPMENT CORPORATION and RENE

JOAQUIN, petitioners,

vs.PATERNO INQUING, IRENE GUILLERMO, FEDERICO

BANTUGAN, FERNANDO MAGBANUA and LIZZATIANGCO, respondents.

GONZAGA-REYES, J.:

This is a petition for review on certiorari under Rule 45 of the Rulesof Court seeking reversal of the Decision1 of the Court of Appealsdated June 25, 1999 in CA-G.R. CV No. 53963. The Court of Appeals decision reversed and set aside the Decision2 dated May

13, 1996 of Branch 217 of the Regional Trial Court of Quezon Cityin Civil Case No. Q-93-18582.1âwphi1.nêt

The case was originally filed on December 10, 1993 by PaternoInquing, Irene Guillermo and Federico Bantugan, hereinrespondents, against Rosencor Development Corporation(hereinafter "Rosencor"), Rene Joaquin, and Eufrocina de Leon.Originally, the complaint was one for annulment of absolute deedof sale but was later amended to one for rescission of absolutedeed of sale. A complaint-for intervention was thereafter filed byrespondents Fernando Magbanua and Danna Lizza Tiangco. The

complaint-in-intervention was admitted by the trial court in anOrder dated May 4, 1994.3

The facts of the case, as stated by the trial court and adopted bythe appellate court, are as follows:

"This action was originally for the annulment of the Deed of Absolute Sale dated September 4, 1990 betweendefendants Rosencor and Eufrocina de Leon but lateramended (sic) praying for the rescission of the deed of sale.



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Plaintiffs and plaintiffs-intervenors averred that they are thelessees since 1971 of a two-story residential apartmentlocated at No. 150 Tomas Morato Ave., Quezon City coveredby TCT No. 96161 and owned by spouses Faustino andCresencia Tiangco. The lease was not covered by anycontract. The lessees were renting the premises then forP150.00 a month and were allegedly verbally granted bythe lessors the pre-emptive right to purchase the property if

ever they decide to sell the same.

Upon the death of the spouses Tiangcos in 1975, themanagement of the property was adjudicated to their heirswho were represented by Eufrocina de Leon. The lesseeswere allegedly promised the same pre-emptive right by theheirs of Tiangcos since the latter had knowledge that thisright was extended to the former by the late spousesTiangcos. The lessees continued to stay in the premises andallegedly spent their own money amounting fromP50,000.00 to P100,000.00 for its upkeep. These expenseswere never deducted from the rentals which already

increased to P1,000.00.

In June 1990, the lessees received a letter from Atty.Erlinda Aguila demanding that they vacate the premises sothat the demolition of the building be undertaken. Theyrefused to leave the premises. In that same month, de Leonrefused to accept the lessees’ rental payment claiming thatthey have run out of receipts and that a new collector hasbeen assigned to receive the payments. Thereafter, theyreceived a letter from Eufrocina de Leon offering to sell tothem the property they were leasing for P2,000,000.00.

xxx.

The lessees offered to buy the property from de Leon forthe amount of P1,000,000.00. De Leon told them that shewill be submitting the offer to the other heirs. Since then,no answer was given by de Leon as to their offer to buy theproperty. However, in November 1990, Rene Joaquin cameto the leased premises introducing himself as its new owner.

In January 1991, the lessees again received another letterfrom Atty. Aguila demanding that they vacate the premises.A month thereafter, the lessees received a letter from deLeon advising them that the heirs of the late spousesTiangcos have already sold the property to Rosencor. Thefollowing month Atty. Aguila wrote them another letterdemanding the rental payment and introducing herself ascounsel for Rosencor/Rene Joaquin, the new owners of the

premises.

The lessees requested from de Leon why she haddisregarded the pre-emptive right she and the late Tiangcoshave promised them. They also asked for a copy of thedeed of sale between her and the new owners thereof butshe refused to heed their request. In the same manner,when they asked Rene Joaquin a copy of the deed of sale,the latter turned down their request and instead Atty. Aguilawrote them several letters demanding that they vacate thepremises. The lessees offered to tender their rentalpayment to de Leon but she refused to accept the same.

In April 1992 before the demolition can be undertaken bythe Building Official, the barangay interceded between theparties herein after which Rosencor raised the issue as tothe rental payment of the premises. It was also at thisinstance that the lessees were furnished with a copy of theDeed of Sale and discovered that they were deceived by deLeon since the sale between her and Rene Joaquin/Rosencortook place in September 4, 1990 while de Leon made theoffer to them only in October 1990 or after the sale withRosencor had been consummated. The lessees also noted

that the property was sold only for P726,000.00.

The lessees offered to reimburse de Leon the selling price of P726,000.00 plus an additional P274,000.00 to completetheir P1,000.000.00 earlier offer. When their offer wasrefused, they filed the present action praying for thefollowing: a) rescission of the Deed of Absolute Salebetween de Leon and Rosencor dated September 4, 1990;b) the defendants Rosencor/Rene Joaquin be ordered toreconvey the property to de Leon; and c) de Leon be



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ordered to reimburse the plaintiffs for the repairs of theproperty, or apply the said amount as part of the price forthe purchase of the property in the sum of P100,000.00."4

After trial on the merits, the Regional Trial Court rendered aDecision5 dated May 13, 1996 dismissing the complaint. The trialcourt held that the right of redemption on which the complaint. Thetrial court held that the right of redemption on which the complaint

was based was merely an oral one and as such, is unenforceableunder the law. The dispositive portion of the May 13, 1996 Decisionis as follows:

"WHEREFORE, in view of the foregoing, the CourtDISMISSES the instant action. Plaintiffs and plaintiffs-intervenors are hereby ordered to pay their respectivemonthly rental of P1,000.00 per month reckoned from May1990 up to the time they leave the premises. No costs.

SO ORDERED."6

Not satisfied with the decision of the trial court, respondents hereinfiled a Notice of Appeal dated June 3, 1996. On the same date, thetrial court issued an Order for the elevation of the records of thecase to the Court of Appeals. On August 8, 1997, respondents filedtheir appellate brief before the Court of Appeals.

On June 25, 1999, the Court of Appeals rendered itsdecision7 reversing the decision of the trial court. The dispositiveportion of the June 25, 1999 decision is as follows:

"WHEREFORE, premises considered, the appealed decision(dated May 13, 1996) of the Regional Trial Court (Branch217) in Quezon City in Case No. Q-93-18582 is herebyREVERSED and SET ASIDE. In its stead, a new one isrendered ordering:

(1) The rescission of the Deed of Absolute Saleexecuted between the appellees on September 4,1990;

(2) The reconveyance of the subject premises toappellee Eufrocina de Leon;

(3) The heirs of Faustino and Crescencia Tiangco,thru appellee Eufrocina de Leon, to afford theappellants thirty days within which to exercise theirright of first refusal by paying the amount of ONEMILLION PESOS (P1,000,000.00) for the subject

property; and

(4) The appellants to, in turn, pay the appellees backrentals from May 1990 up to the time this decision ispromulgated.

No pronouncement as to costs.

SO ORDERED".8

Petitioners herein filed a Motion for Reconsideration of the decision

of the Court of Appeals but the same was denied in a Resolutiondated October 15, 1999.9

Hence, this petition for review on certiorari where petitionersRosencor Development Corporation and Rene Joaquin raise thefollowing assignment of errors10:

I.

THE COURT OF APPEALS GRAVELY ERRED WHEN ITORDERED THE RESCISSION OF THE ABSOLUTE DEED OF

SALE BETWEEN EUFROCINA DE LEON AND PETITIONERROSENCOR.

II.

THE COURT OF APPEALS COMMTITED MANIFEST ERROR INMANDATING THAT EUFROCINA DE LEON AFFORDRESPONDENTS THE OPPORTUNITY TO EXERCISE THEIRRIGHT OF FIRST REFUSAL.



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III.

THE COURT OF APPEALS GRIEVOUSLY ERRED INCONCLUDING THAT RESPONDENTS HAVE ESTABLISHEDTHEIR RIGHT OF FIRST REFUSAL DESPITE PETITIONERS’ RELIANCE ON THEIR DEFENSE BASED ON THE STATUTE OFFRAUDS.

Eufrocina de Leon, for herself and for the heirs of the spousesFaustino and Crescencia Tiangco, did not appeal the decision of theCourt of Appeals.

At the onset, we not that both the Court of Appeals and theRegional Trial Court relied on Article 1403 of the New Civil Code,more specifically the provisions on the statute of frauds, in comingout with their respective decisions. The trial court, in denying thepetition for reconveyance, held that right of first refusal relied uponby petitioners was not reduced to writing and as such, isunenforceable by virtue of the said article. The Court of Appeals,

on the other hand, also held that the statute of frauds governs the"right of first refusal" claimed by respondents. However, theappellate court ruled that respondents had duly proven the sameby reason of petitioners’ waiver of the protection of the statute byreason of their failure to object to the presentation of oral evidenceof the said right.

Both the appellate court and the trial court failed to discuss,however, the threshold issue of whether or not a right of firstrefusal is indeed covered by the provisions of the New Civil Codeon the statute of frauds. The resolution of the issue on theapplicability of the statute of frauds is important as it will

determine the type of evidence which may be considered by thetrial court as proof of the alleged right of first refusal.

The term "statute of frauds" is descriptive of statutes which requirecertain classes of contracts to be in writing. This statute does notdeprive the parties of the right to contract with respect to thematters therein involved, but merely regulates the formalities of the contract necessary to render it enforceable. Thus, they areincluded in the provisions of the New Civil Code regarding

unenforceable contracts, more particularly Art. 1403, paragraph 2.Said article provides, as follows:

"Art. 1403. The following contracts are unenforceable,unless they are ratified:

xxx

(2) Those that do not comply with the Statute of Frauds asset forth in this number. In the following cases anagreement hereafter made shall be unenforceable by action,unless the same, or some note or memorandum thereof, bein writing, and subscribed by the party charged, or by hisagent; evidence, therefore, of the agreement cannot bereceived without the writing, or a secondary evidence of itscontents:

a) An agreement that by its terms is not to beperformed within a year from the making thereof;

b) A special promise to answer for the debt, default,or miscarriage of another;

c) An agreement made in consideration of marriage,other than a mutual promise to marry;

d) An agreement for the sale of goods, chattels orthings in action, at a price not less than five hundredpesos, unless the buyer accept and receive part of such goods and chattels, or the evidences, or some

of them, of such things in action, or pay at the timesome part of the purchase money; but when a sale ismade by auction and entry is made by theauctioneer in his sales book, at the time of the sale,of the amount and kind of property sold, terms of sale, price, names of purchasers and person onwhose account the sale is made, it is a sufficientmemorandum;



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e) An agreement for the leasing of a longer periodthan one year, or for the sale of real property or of an interest therein;

f) A representation to the credit of a third person."

The purpose of the statute is to prevent fraud and perjury in theenforcement of obligations depending for their evidence on the

unassisted memory of witnesses by requiring certain enumeratedcontracts and transactions to be evidenced by a writing signed bythe party to be charged.11 Moreover, the statute of frauds refers tospecific kinds of transactions and cannot apply to any othertransaction that is not enumerated therein.12 The application of such statute presupposes the existence of a perfected contract.13

The question now is whether a "right of first refusal" is amongthose enumerated in the list of contracts covered by the Statute of Frauds. More specifically, is a right of first refusal akin to "anagreement for the leasing of a longer period than one year, or for

the sale of real property or of an interest therein" as contemplatedby Article 1403, par. 2(e) of the New Civil Code.

We have previously held that not all agreements "affecting land"must be put into writing to attain enforceability.14Thus, we haveheld that the setting up of boundaries,15 the oral partition of realproperty16, and an agreement creating a right of way17 are notcovered by the provisions of the statute of frauds. The reasonsimply is that these agreements are not among those enumeratedin Article 1403 of the New Civil Code.

A right of first refusal is not among those listed as unenforceableunder the statute of frauds. Furthermore, the application of Article1403, par. 2(e) of the New Civil Code presupposes the existence of a perfected, albeit unwritten, contract of sale.18 A right of firstrefusal, such as the one involved in the instant case, is not by anymeans a perfected contract of sale of real property. At best, it is acontractual grant, not of the sale of the real property involved, butof the right of first refusal over the property sought to be sold19.

It is thus evident that the statute of frauds does not contemplatecases involving a right of first refusal. As such, a right of first

refusal need not be written to be enforceable and may be provenby oral evidence.

The next question to be ascertained is whether or not respondentshave satisfactorily proven their right of first refusal over theproperty subject of the Deed of Absolute Sale dated September 4,1990 between petitioner Rosencor and Eufrocina de Leon.

On this point, we agree with the factual findings of the Court of Appeals that respondents have adequately proven the existence of their right of first refusal. Federico Bantugan, Irene Guillermo, andPaterno Inquing uniformly testified that they were promised by thelate spouses Faustino and Crescencia Tiangco and, later on, bytheir heirs a right of first refusal over the property they werecurrently leasing should they decide to sell the same. Moreover,respondents presented a letter20 dated October 9, 1990 whereEufrocina de Leon, the representative of the heirs of the spousesTiangco, informed them that they had received an offer to buy thedisputed property for P2,000,000.00 and offered to sell the sameto the respondents at the same price if they were interested.Verily, if Eufrocina de Leon did not recognize respondents’ right of first refusal over the property they were leasing, then she wouldnot have bothered to offer the property for sale to therespondents.

It must be noted that petitioners did not present evidence beforethe trial court contradicting the existence of the right of first refusalof respondents over the disputed property. They only presentedpetitioner Rene Joaquin, the vice-president of petitioner Rosencor,who admitted having no personal knowledge of the details of thesales transaction between Rosencor and the heirs of the spouses

Tiangco21. They also dispensed with the testimony of Eufrocina deLeon22 who could have denied the existence or knowledge of theright of first refusal. As such, there being no evidence to thecontrary, the right of first refusal claimed by respondents wassubstantially proven by respondents before the lower court.

Having ruled upon the question as to the existence of respondents’ right of first refusal, the next issue to be answered is whether ornot the Court of Appeals erred in ordering the rescission of theDeed of Absolute Sale dated September 4, 1990 between Rosencor



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and Eufrocina de Leon and in decreeing that the heirs of thespouses Tiangco should afford respondents the exercise of theirright of first refusal. In other words, may a contract of sale enteredinto in violation of a third party’s right of first refusal be rescindedin order that such third party can exercise said right?

The issue is not one of first impression.

In Guzman, Bocaling and Co, Inc. vs. Bonnevie23

, the Court upheldthe decision of a lower court ordering the rescission of a deed of sale which violated a right of first refusal granted to one of theparties therein. The Court held:

"xxx Contract of Sale was not voidable but rescissible.Under Article 1380 to 1381 (3) of the Civil Code, a contractotherwise valid may nonetheless be subsequently rescindedby reason of injury to third persons, like creditors. Thestatus of creditors could be validly accorded the Bonneviesfor they had substantial interests that were prejudiced bythe sale of the subject property to the petitioner withoutrecognizing their right of first priority under the Contract of Lease.

According to Tolentino, rescission is a remedy granted bylaw to the contracting parties and even to third persons, tosecure reparations for damages caused to them by acontract, even if this should be valid, by means of therestoration of things to their condition at the moment priorto the celebration of said contract. It is a relief allowed forthe protection of one of the contracting parties and eventhird persons from all injury and damage the contract may

cause, or to protect some incompatible and preferent rightcreated by the contract. Rescission implies a contract which,even if initially valid, produces a lesion or pecuniary damageto someone that justifies its invalidation for reasons of equity.

It is true that the acquisition by a third person of theproperty subject of the contract is an obstacle to the actionfor its rescission where it is shown that such third person isin lawful possession of the subject of the contract and that

he did not act in bad faith. However, this rule is notapplicable in the case before us because the petitioner isnot considered a third party in relation to the Contract of Sale nor may its possession of the subject property beregarded as acquired lawfully and in good faith.

Indeed, Guzman, Bocaling and Co. was the vendee in theContract of Sale. Moreover, the petitioner cannot be

deemed a purchaser in good faith for the record shows thatit categorically admitted that it was aware of the lease infavor of the Bonnevies, who were actually occupying thesubject property at the time it was sold to it. Although theoccupying the subject property at the time it was sold to it.Although the Contract of Lease was not annotated on thetransfer certificate of title in the name of the late JoseReynoso and Africa Reynoso, the petitioner cannot denyactual knowledge of such lease which was equivalent to andindeed more binding than presumed notice by registration.

A purchaser in good faith and for value is one who buys theproperty of another without notice that some other personhas a right to or interest in such property without and paysa full and fair price for the same at the time of suchpurchase or before he has notice of the claim or interest of some other person in the property. Good faith connotes anhonest intention to abstain from taking unconscientiousadvantage of another. Tested by these principles, thepetitioner cannot tenably claim to be a buyer in good faithas it had notice of the lease of the property by theBonnevies and such knowledge should have cautioned it tolook deeper into the agreement to determine if it involved

stipulations that would prejudice its own interests."

Subsequently24 in Equatorial Realty and Development, Inc. vs.Mayfair Theater, Inc.25, the Court, en banc , with three justicesdissenting,26 ordered the rescission of a contract entered into inviolation of a right of first refusal. Using the ruling in GuzmanBocaling & Co., Inc. vs. Bonnevie as basis, the Court decreed thatsince respondent therein had a right of first refusal over the saidproperty, it could only exercise the said right if the fraudulent saleis first set aside or rescinded. Thus:



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"What Carmelo and Mayfair agreed to, by executing the twolease contracts, was that Mayfair will have the right of firstrefusal in the event Carmelo sells the leased premises. It isundisputed that Carmelo did recognize this right of Mayfair,for it informed the latter of its intention to sell the saidproperty in 1974. There was an exchange of lettersevidencing the offer and counter-offers made by bothparties. Carmelo, however, did not pursue the exercise toits logical end. While it initially recognized Mayfair’s right of first refusal, Carmelo violated such right when withoutaffording its negotiations with Mayfair the full process toripen to at least an interface of a definite offer and apossible corresponding acceptance within the "30-dayexclusive option" time granted Mayfair, Carmelo abandonednegotiations, kept a low profile for some time, and thensold, without prior notice to Mayfair, the entire Claro M.Recto property to Equatorial.

Since Equatorial is a buyer in bad faith, this finding rendersthe sale to it of the property in question, rescissible. We

agree with respondent Appellate Court that the records bearout the fact that Equatorial was aware of the lease contractsbecause its lawyers had, prior to the sale, studied the saidcontracts. As such, Equatorial cannot tenably claim that tobe a purchaser in good faith, and, therefore, rescission lies.

X X X

As also earlier emphasized, the contract of sale betweenEquatorial and Carmelo is characterized by bad faith, sinceit was knowingly entered into in violation of the rights of

and to the prejudice of Mayfair. In fact, as correctlyobserved by the Court of Appeals, Equatorial admitted thatits lawyers had studied the contract or lease prior to thesale. Equatorial’s knowledge of the stipulations thereinshould have cautioned it to look further into the agreementto determine if it involved stipulations that would prejudiceits own interests.

Since Mayfair had a right of first refusal, it can exercise theright only if the fraudulent sale is first set aside or

rescinded. All of these matters are now before us and sothere should be no piecemeal determination of this case andleave festering sores to deteriorate into endless litigation.The facts of the case and considerations of justice andequity require that we order rescission here and now.Rescission is a relief allowed for the protection of one of thecontracting parties and even third persons from all injuryand damage the contract may cause or to protect someincompatible and preferred right by the contract. The sale of the subject real property should now be rescindedconsidering that Mayfair, which had substantial interest overthe subject property, was prejudiced by the sale of thesubject property to Equatorial without Carmelo conferring toMayfair every opportunity to negotiate within the 30-daystipulate periond.27

In Paranaque Kings Enterprises, Inc. vs. Court of Appeals,28 theCourt held that the allegations in a complaint showing violation of acontractual right of "first option or priority to buy the propertiessubject of the lease" constitute a valid cause of action enforceable

by an action for specific performance. Summarizing the rulings inthe two previously cited cases, the Court affirmed the nature of and concomitant rights and obligations of parties under a right of first refusal. Thus:

"We hold however, that in order to have full compliancewith the contractual right granting petitioner the first optionto purchase, the sale of the properties for the amount of P9,000,000.00, the price for which they were finally sold torespondent Raymundo, should have likewise been offered topetitioner.

The Court has made an extensive and lengthy discourse onthe concept of, and obligations under, a right of first refusalin the case of Guzman, Bocaling & Co. vs. Bonnevie. In thatcase, under a contract of lease, the lessees (Raul andChristopher Bonnevie) were given a "right of first priority"to purchase the leased property in case the lessor(Reynoso) decided to sell. The selling price quoted to theBonnevies was 600,000.00 to be fully paid in cash, less amortgage lien of P100,000.00. On the other hand, the



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selling price offered by Reynoso to and accepted by Guzmanwas only P400,000.00 of which P137,500.00 was to be paidin cash while the balance was to be paid only when theproperty was cleared of occupants. We held that even if theBonnevies could not buy it at the price quoted(P600,000.00), nonetheless, Reynoso could not sell it toanother for a lower price and under more favorable termsand conditions without first offering said favorable termsand price to the Bonnevies as well. Only if the Bonneviesfailed to exercise their right of first priority could Reynosothereafter lawfully sell the subject property to others, andonly under the same terms and conditions previouslyoffered to the Bonnevies.

X X X

This principle was reiterated in the very recent caseof Equatorial Realty vs. Mayfair Theater, Inc. which wasdecided en banc. This Court upheld the right of first refusalof the lessee Mayfair, and rescinded the sale of the propertyby the lessor Carmelo to Equatorial Realty "considering thatMayfair, which had substantial interest over the subjectproperty, was prejudiced by its sale to Equatorial withoutCarmelo conferring to Mayfair every opportunity tonegotiate within the 30-day stipulated period"

In that case, two contracts of lease between Carmelo andMayfair provided "that if the LESSOR should desire to sellthe leased premises, the LESSEE shall be given 30 daysexclusive option to purchase the same." Carmelo initiallyoffered to sell the leased property to Mayfair for six to

seven million pesos. Mayfair indicated interest in purchasingthe property though it invoked the 30-day period. Nothingwas heard thereafter from Carmelo. Four years later, thelatter sold its entire Recto Avenue property, including theleased premises, to Equatorial for P11,300,000.00 withoutpriorly informing Mayfair. The Court held that both Carmeloand Equatorial acted in bad faith: Carmelo or knowinglyviolating the right of first option of Mayfair, and Equatorialfor purchasing the property despite being aware of thecontract stipulation. In addition to rescission of the contract

of sale, the Court ordered Carmelo to allow Mayfair to buythe subject property at the same price of P11,300,000.00.

In the recent case of Litonjua vs L&R Corporation,29 the Court, alsociting the case of Guzman, Bocaling & Co. vs. Bonnevie, held thatthe sale made therein in violation of a right of first refusalembodied in a mortgage contract, was rescissible. Thus:

"While petitioners question the validity of paragraph 8 of their mortgage contract, they appear to be silent insofar asparagraph 9 thereof is concerned. Said paragraph 9 grantsupon L&R Corporation the right of first refusal over themortgaged property in the event the mortgagor decides tosell the same. We see nothing wrong in this provision. Theright of first refusal has long been recognized as valid in our jurisdiction. The consideration for the loan mortgageincludes the consideration for the right of first refusal. L&RCorporation is in effect stating that it consents to lend outmoney to the spouses Litonjua provided that in case theydecide to sell the property mortgaged to it, then L&RCorporation shall be given the right to match the offeredpurchase price and to buy the property at that price. Thus,while the spouses Litonjua had every right to sell theirmortgaged property to PWHAS without securing the priorwritten consent of L&R Corporation, they had the obligationunder paragraph 9, which is a perfectly valid provision, tonotify the latter of their intention to sell the property andgive it priority over other buyers. It is only upon the failureof L&R Corporation to exercise its right of first refusal couldthe spouses Litonjua validly sell the subject properties tothe others, under the same terms and conditions offered to

L&R Corporation.

What then is the status of the sale made to PWHAS inviolation of L & R Corporation’s contractual right of firstrefusal? On this score, we agree with the Amended Decisionof the Court of Appeals that the sale made to PWHAS isrescissible. The case of Guzman, Bocaling & Co. v.Bonnevie is instructive on this point.

X X X



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It was then held that the Contract of Sale there, whichviolated the right of first refusal, was rescissible.

In the case at bar, PWHAS cannot claim ignorance of theright of first refusal granted to L & R Corporation over thesubject properties since the Deed of Real Estate Mortgagecontaining such a provision was duly registered with theRegister of Deeds. As such, PWHAS is presumed to have

been notified thereof by registration, which equates tonotice to the whole world.

X X X

All things considered, what then are the relative rights andobligations of the parties? To recapitulate: the sale betweenthe spouses Litonjua and PWHAS is valid, notwithstandingthe absence of L & R Corporation’s prior written consentthereto. Inasmuch as the sale to PWHAS was valid, its offerto redeem and its tender of the redemption price, assuccessor-in-interest of the spouses Litonjua, within theone-year period should have been accepted as valid by theL & R Corporation. However, while the sale is, indeed, valid,the same is rescissible because it ignored L & RCorporation’s right of first refusal."

Thus, the prevailing doctrine, as enunciated in the cited cases, isthat a contract of sale entered into in violation of a right of firstrefusal of another person, while valid, is rescissible.

There is, however, a circumstance which prevents the applicationof this doctrine in the case at bench. In the cases cited above, theCourt ordered the rescission of sales made in violation of a right of first refusal precisely because the vendees therein could not haveacted in good faith as they were aware or should have been awareof the right of first refusal granted to another person by thevendors therein. The rationale for this is found in the provisions of the New Civil Code on rescissible contracts. Under Article 1381 of the New Civil Code, paragraph 3, a contract validly agreed uponmay be rescinded if it is "undertaken in fraud of creditors when thelatter cannot in any manner collect the claim due them." Moreover,under Article 1385, rescission shall not take place "when the things

which are the object of the contract are legally in the possession of third persons who did not act in bad faith."30

It must be borne in mind that, unlike the cases cited above, theright of first refusal involved in the instant case was an oral onegiven to respondents by the deceased spouses Tiangco andsubsequently recognized by their heirs. As such, in order to holdthat petitioners were in bad faith, there must be clear and

convincing proof that petitioners were made aware of the said rightof first refusal either by the respondents or by the heirs of thespouses Tiangco.

It is axiomatic that good faith is always presumed unless contraryevidence is adduced.31 A purchaser in good faith is one who buysthe property of another without notice that some other person hasa right or interest in such a property and pays a full and fair priceat the time of the purchase or before he has notice of the claim orinterest of some other person in the property.32 In this regard, therule on constructive notice would be inapplicable as it is undisputedthat the right of first refusal was an oral one and that the samewas never reduced to writing, much less registered with theRegistry of Deeds. In fact, even the lease contract by whichrespondents derive their right to possess the property involved wasan oral one.

On this point, we hold that the evidence on record fails to showthat petitioners acted in bad faith in entering into the deed of saleover the disputed property with the heirs of the spouses Tiangco.Respondents failed to present any evidence that prior to the sale of the property on September 4, 1990, petitioners were aware or hadnotice of the oral right of first refusal.

Respondents point to the letter dated June 1, 199033 as indicativeof petitioners’ knowledge of the said right. In this letter, a certainAtty. Erlinda Aguila demanded that respondent Irene Guillermovacate the structure they were occupying to make way for itsdemolition.

We fail to see how the letter could give rise to bad faith on the partof the petitioner. No mention is made of the right of first refusalgranted to respondents. The name of petitioner Rosencor or any of



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it officers did not appear on the letter and the letter did not statethat Atty. Aguila was writing in behalf of petitioner. In fact, Atty.Aguila stated during trial that she wrote the letter in behalf of theheirs of the spouses Tiangco. Moreover, even assuming that Atty.Aguila was indeed writing in behalf of petitioner Rosencor, there isno showing that Rosencor was aware at that time that such a rightof first refusal existed.

Neither was there any showing that after receipt of this June 1,1990 letter, respondents notified Rosencor or Atty. Aguila of theirright of first refusal over the property. Respondents did not try tocommunicate with Atty. Aguila and inform her about theirpreferential right over the disputed property. There is even noshowing that they contacted the heirs of the spouses Tiangco afterthey received this letter to remind them of their right over theproperty.

Respondents likewise point to the letter dated October 9, 1990 of Eufrocina de Leon, where she recognized the right of first refusal of respondents, as indicative of the bad faith of petitioners. We do notagree. Eufrocina de Leon wrote the letter on her own behalf andnot on behalf of petitioners and, as such, it only shows thatEufrocina de Leon was aware of the existence of the oral right of first refusal. It does not show that petitioners were likewise awareof the existence of the said right. Moreover, the letter was made amonth after the execution of the Deed of Absolute Sale onSeptember 4, 1990 between petitioner Rosencor and the heirs of the spouses Tiangco. There is no showing that prior to the date of the execution of the said Deed, petitioners were put on notice of the existence of the right of first refusal.

Clearly, if there was any indication of bad faith based onrespondents’ evidence, it would only be on the part of Eufrocina deLeon as she was aware of the right of first refusal of respondentsyet she still sold the disputed property to Rosencor. However, badfaith on the part of Eufrocina de Leon does not mean thatpetitioner Rosencor likewise acted in bad faith. There is no showingthat prior to the execution of the Deed of Absolute Sale, petitionerswere made aware or put on notice of the existence of the oral rightof first refusal. Thus, absent clear and convincing evidence to thecontrary, petitioner Rosencor will be presumed to have acted in

good faith in entering into the Deed of Absolute Sale over thedisputed property.

Considering that there is no showing of bad faith on the part of thepetitioners, the Court of Appeals thus erred in ordering therescission of the Deed of Absolute Sale dated September 4, 1990between petitioner Rosencor and the heirs of the spouses Tiangco.The acquisition by Rosencor of the property subject of the right of

first refusal is an obstacle to the action for its rescission where, asin this case, it was shown that Rosencor is in lawful possession of the subject of the contract and that it did not act in bad faith.34

This does not mean however that respondents are left without anyremedy for the unjustified violation of their right of first refusal.Their remedy however is not an action for the rescission of theDeed of Absolute Sale but an action for damages against the heirsof the spouses Tiangco for the unjustified disregard of their right of first refusal35.

WHEREFORE, premises considered, the decision of the Court of Appeals dated June 25, 1999 is REVERSED and SET ASIDE. TheDecision dated May 13, 1996 of the Quezon City Regional TrialCourt, Branch 217 is hereby REINSTATED insofar as it dismissesthe action for rescission of the Deed of Absolute Sale datedSeptember 4, 1990 and orders the payment of monthly rentals of P1,000.00 per month reckoned from May 1990 up to the timerespondents leave the premises.

SO ORDERED.

Melo, Vitug, Panganiban, and Sandoval-Gutierrez, JJ., concur.

G.R. No. L-45142 April 26, 1991

SIMPROSA VDA. DE ESPINA, RECAREDO ESPINA, TIMOTEO

ESPINA, CELIA ESPINA, GAUDIOSA ESPINA and NECIFORA

ESPINA, petitioners,vs.



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THE HON. OTILIO ABAYA and SOFIA ESPINA and JOSEESPINA, respondents.

Cipriano C. Alvizo, Sr. for private respondents.

MEDIALDEA, J.:p

This is a petition for certiorari with prayer for the issuance of a writof preliminary injunction seeking the nullification of the ordersissued by the respondent Judge Otilio Abaya, in his capacity as thepresiding judge of the Court of First Instance of Surigao del Sur,Branch II, Lianga, Surigao del Sur in Civil Case No. L-108, entitled"Simprosa Vda. de Espina, et. al. v. Sofia Espina, et. al." dated May9, 1975 dismissing the complaint for partition; July 25, 1975denying the motion for reconsideration; August 13, 1975 denyingthe second motion for reconsideration and March 15, 1976 denyingplaintiffs' notice of appeal.

The antecedent facts are as follows:

Marcos Espina died on February 14, 1953 and was survived by hisspouses, Simprosa Vda. de Espina and their children namely,Recaredo, Timoteo, Celia, Gaudiosa, Necifora, Sora and Jose, allsurnamed Espina. Decedent's estate comprises of four (4) parcelsof land located at the Municipality of Barobo Province of Surigao delSur.

On August 23, 1973 an action for partition of the aforementioned

parcels of land was filed by petitioners Simprosa and her childrenRecaredo, Timoteo, Celia, Gaudencia and Necifora.

The complaint alleges that parcel No. 1 is the exclusive property of the deceased, hence the same is owned in common by petitionersand private respondents in eight (8) equal parts, while the otherthree (3) parcels of land being conjugal properties, are also ownedin common, one-half (1/2) belongs to the widow Simprosa and theother half is owned by her and her children in eight (8) equal parts.

It also alleges that parcel No. 1 has been subdivided into two lots.Lot No. 994 PL8-44 is covered by Original Certificate of Title No.5570 in the name of one of the heirs, Sofia Espina, who acquiredthe title as a trustee for the beneficiaries or heirs of Marcos Espina,while lot No. 1329 PCS-44 is covered by Original Certificate of TitleNo. 3732 issued in the name of one of the heirs, Jose Espina astrustee for the heirs of Marcos Espina. Said parcel of land is in thepossession of petitioners and private respondents who have theirrespective houses thereon.

Simprosa presently occupies parcel No. 2 while parcel No. 3 isoccupied by Timoteo, although the same is actually titled in thename of Sofia. Parcel No. 4 is occupied by Recaredo.

Petitioners have several times demanded the partition of theaforementioned properties, but notwithstanding such demandsprivate respondents refused to accede.

Private respondents alleged in their answer that in or about April,1951, the late Marcos Espina and his widow, Simprosa, togetherwith their children made a temporary verbal division andassignment of shares among their children. After the death of Marcos, the temporary division was finalized by the heirs.Thereafter the heirs took immediate possession of their respectiveshares on April 20, 1952. Private respondents took actual physicalpossession of their respective shares including the portions cededto them by Simprosa upon their payment of P50.00 each perquarter starting April, 1952 until the latter's death pursuant totheir contract of procession The assignment of shares was asfollows:

(a) To the surviving spouses, (sic ) Simprosa Vda. deEspina, herein plaintiffs, one-half (1/2) of the parcelof land adjudicated to each of said plaintiffs-heirsand defendants;

(b) To each of the following compulsory heirs, to wit:

1. To Recaredo (sic ) Espina, one-half (1/2) portionwhich contains an area of one and three-fourths (13/4) hectares and which forms part of Parcel 4



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whose description is given in paragraph III of thecomplaint, the said Parcel IV has been in thepossession of both Recaredo Espina and plaintiff Simprosa Vda. de Espina from April 20, 1952 untilthe present time;

2. To Timoteo Espina, one half (1/2) portion whichcontains an area of not less than one-half (1/2)

hectare and which forms part of Parcel 3 whosedescription is given in paragraph III of the complaint,the said Parcel III was originally assigned by MarcosEspina who thereupon obtained an OriginalCertificate of Title in her (sic ) name but was finallyadjudicated to said Timoteo Espina in April, 1952,the other half (1/2) portion of which parcel III wasthe share of the surviving spouses (sic ), SimprosaVda. de Espina, and said Parcel III has been in thepossession of said Timoteo Espina and SimprosaVda. de Espina from April, 1952 until the presenttime as their share;

3. To Cecilia (sic ) Espina, Gaudiosa Espina andNecifora Espina, one-half (1/2) portion, share andshare alike which contains two (2) hectares andwhich forms part of Parcel II whose description isgiven in paragraph III of the complaint, the otherhalf (1/2) of said Parcel III (sic ) is the share of thesurviving spouses (sic ) Simprosa Vda. de Espina, andsaid Parcel III (sic ) has been in the possession of said Cecilia. (sic ) Espina, Gaudiosa Espina andNecifora Espina and Simprosa Vda. de Espina from

April, 1952 until the present time;

4. To Sofia Espina, one-half (1/2) portion of theparcel of land included in the deception of Parcel 1 inparagraph III of the complaint, the other half (1/2)of said parcel being the share of the survivingspouses (sic ) Simprosa Vda. de Espina and havingbeen ceded by said Simprosa Vda. de Espina to saidSofia Espina for a valuable consideration payablequarterly at the rate of P50.00 beginning April, 1952

until her death, and said Sofia Espina has beenregularly paying to said Simprosa Vda. de Espinaquarterly from April, 1952 the said amount of P50.00until the present time, and by virtue of saidagreement, Sofia Espina obtained Original Certificateof Title in her name of said parcel of land which isincluded in the description of said parcel 1, as herexclusive property;

5. To Jose Espina, one-half (1/2) portion of the otherparcel of land included in the description of Parcel 1in paragraph 1 of the complaint, the other half (1/2)of said parcel being the share of the survivingspouses (sic ) Simprosa Vda. de Espina and havingbeen coded (sic ) by said Simprosa Vda. de Espina tosaid Jose Espina for a valuable consideration payablequarterly at the rate of P50.00 beginning April, 1952until her death, and said Jose Espina has beenregularly quarterly paying to said Simprosa Vda. deEspina from April, 1952 until the present time, the

said amount of P50.00, and by virtue of saidagreement, Jose Espina obtained Original Certificateof Title in his name of said parcel of land which isincluded in the description of said Parcel 1 as hisexclusive property. (Rollo, pp. 27-28)

On February 13, 1974 private respondents filed a motion to dismissthe complaint alleging the following grounds, to wit:

I

THAT THE FACTS ALLEGED IN THE COMPLAINT FAILTO CONFER UPON THE COURT COMPLETE ANDLAWFUL JURISDICTION OVER THE CASE FOR NON-COMPLIANCE WITH THE CONDITION SINE QUA NONCONCERNING SUIT BETWEEN MEMBERS OF THESAME FAMILY.

xxx xxx xxx

II



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THAT THE CAUSE OF ACTION IS BARRED BY . . . .STATUTE OF LIMITATIONS.

xxx xxx xxx

III

THAT THE PLAINTIFFS HAS NO LEGAL CAPACITY TO

SUE, (Motion to Dismiss Complaint, pp. 1-5;Rollo,pp. 34-38)

xxx xxx xxx

On May 9, 1975 the trial court granted the motion and thereafterdismissed the complaint. On May 23, 1975 petitioners filed amotion for reconsideration on the following grounds, to wit:

1. THAT THE ORDER OF DISMISSAL HAS NO LEGALBASIS IN FACT AND IN LAW.

2. THAT THE STATUTE OF LIMITATIONS IS NOTAPPLICABLE IN THE CASE AT BAR. (Rollo, p. 50)

However, petitioners' motion was denied in an order dated July 23,1975. On August 11, 1975 petitioners filed another motion forreconsideration stressing that they were denied due process whentheir motion was not heard. Again said motion was denied onAugust 13, 1975.

Thereafter, petitioners filed their notice of appeal on September

11, 1975 and a motion for extension of time to file their Record onAppeal on September 18, 1975.

On March 15, 1976, the respondent judge disapproved petitioners'Record on Appeal and appeal bond on the ground that the notice of appeal was filed out of time. Hence, this petition. The petitionersraised four (,41) assignment of errors:

1. Whether or not an action for partition among co-heirs prescribes.

2. Whether or not an oral partition among co-heirs isvalid.

3. Whether or not a hearing on a motion forreconsideration is indispensable the lack of which is adeal of due process.

4. Whether or not the second motion for

reconsideration is pro forma Rollo, p. 10)

Petitioners maintain that the present action is not for reconveyancebut one for partition. Hence, the rule insisted by the privaterespondents on prescriptibility of an action for reconcileconveyance of real property based on an implied trust is notapplicable in the case at bar. In addition, petitioners, argue thatprivate respondents cannot set up the defense of prescription orlaches because their possession of the property no matter how longcannot ripen into ownership. (Memorandum for Petitioners, p. 7)

However, the private respondents stress that 'any supposed rightof the petitioners to demand a new division or partition of saidestate of Marcos Espina has long been barred by the Statute of Limitations and has long prescribed." (Memorandum for PrivateRespondents, p. 5)

The petitioners claim that the alleged oral partition is invalid andstrictly under the coverage of the statute of Frauds on twogrounds, to wit:

Firstly, parcel No. 1 being an exclusive property of the deceasedshould have been divided into eight (8) equal parts. Therefore,Simprosa . could only cede her share of the land which is 1/8portion thereof and cannot validly cede the shares of her thenminor children without being duly appointed as guardian.

Secondly, under Article 1358 of the New Civil Code, Simprosa couldnot have ceded her right and that of her other children except by apublic document. (Memorandum of Petitioners, pp. 8-9)



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On the other hand, private respondents insist that the oral partitionis valid and binding and does not fall under the coverage of theStatute of Frauds.

Petitioners claim that they were denied due process when themotion for reconsideration was denied without any hearing.

However, private respondents maintain that the hearing of a

motion for reconsideration in oral argument is a matter which restupon the sound discretion of the Court.

Finally, petitioners stress that the second motion forreconsideration is not pro forma, thus, it suspends the running of the period of appeal. Hence, the notice of appeal was timely filed.

On this point, private respondent maintain that the order of respondent judge dated March 1 5, 1976 disapproving petitioners'Record on Appeal and appeal bond may not properly be a subjectof a petition for certiorari . (Memorandum of Private Respondents,

p. 13)

We find the petition devoid of merit.

We already ruled in Lebrilla, et al . v . Intermediate AppellateCourt (G.R. No. 72623, December 18, 1989, 180 SCRA 188; 192)that an action for partition is imprescriptible. However, an actionfor partition among co-heirs ceases to be such, and becomes onefor title where the defendants allege exclusive ownership.

In the case at bar, the imprescriptibility of the action for partition

cannot be invoked because two of the co-heirs, namely privaterespondents Sora and Jose Espina possessed the property asexclusive owners and their possession for a period of twenty one(21) years is sufficient to acquire it by prescription. Hence, fromthe moment these co-heirs claim that they are the absolute andexclusive owners of the properties and deny the others any sharetherein, the question involved is no longer one of partition but of ownership.

Anent the issue of oral partition, We sustain the validity of saidpartition. "An agreement of partition may be made orally or in

writing. An oral agreement for the partition of the property ownedin common is valid and enforceable upon the parties. The Statuteof Frauds has no operation in this kind of agreements, for partitionis not a conveyance of property but simply a segregation anddesignation of the part of the property which belong to the co-owners." (Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines, Vol. II, 1983 Edition, 182-183 citing Hernandez v. Andal, et. al., G.R. No. L275, March 29,1957)

Time and again, the Court stresses that the hearing of a motion forreconsideration in oral argument is a matter which rests upon thesound discretion of the Court. Its refusal does not constitute adenial of due process in the absence of a showing of abuse of discretion. (see Philippine Manufacturing Co. v. Ang Bisig ng PMCet. al., 118 Phil. 431, 434)

The absence of a formal hearing on the petitioners' motion forreconsideration is thoroughly explained in the order of therespondent judge dated August 13, 1975, which is hereunder

quoted as follows:

When the court issued its order of June 5, 1975requiring counsel for defendants to answer plaintiffs'motion for reconsideration, the court opted toresolve plaintiffs' motion based on the pleadings of the parties, without further oral arguments. Thecourt considered the arguments of the parties statedin their pleadings as already sufficient to apprise thecourt of the issues involved in said motion.

Plaintiffs' allegation that the Clerk of Court failed tocalendar their motion for reconsideration for oralargument has not deprived the plaintiffs of anysubstantial right or his right to due process.

SO ORDERED. (Memorandum of PrivateRespondents, pp. 1213)

A cursory reading of the aforequoted order will show that there wasindeed no formal hearing on the motion for reconsideration. There



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is no question however, that the motion is grounded on the lack of basis in fact and in law of the order of dismissal and the existenceor lack of it is determined by a reference to the facts alleged in thechallenged pleading. The issue raised in the motion was fullydiscussed therein and in the opposition thereto. Under suchcircumstances, oral argument on the motion is reduced to anunnecessary ceremony and should be overlooked (see Ethel Case,et al. v. Jugo, 77 Phil. 517, 522).

We adhere to the findings of the trial court that the second motionfor reconsideration dated August 11, 1975 is pro forma, to it

The grounds stated in said motion being inreiteration of the same grounds alleged in his firstmotion, the same is pro-forma. (Order dated March15, 1976, p. 2, Rollo, p. 74)

xxx xxx xxx

Furthermore, the second motion for reconsiderationhas not stated new grounds considering that thealleged failure of the Clerk of Court to set plaintiffs'motion for reconsideration, although seemingly adifferent ground than those alleged in their firstmotion for reconsideration, is only incidental to theissues raised in their first motion for reconsideration,as it only refers to the right of plaintiffs' counsel toargue his motion in court just to amplify the samegrounds already deed by the court. (Ibid , p. 3,Rollo,p. 75)

Therefore, it is very evident that the second motion forreconsideration being pro-forma did not suspend the running of theperiod of appeal. Thus, the lower court committed no error when itheld that the notice of appeal was filed after the lapse of thirty five(35) days, which is clearly beyond the period of thirty (30) daysallowed by the rules.

Finally, it has been a basic rule that certiorari is not a substitute forappeal which had been lost. (see Edra v. Intermediate AppellateCourt, G.R. No. 75041, November 13, 1989, 179 SCRA 344) A

special civil action under Rule 65 of the Rules of Court will not be asubstitute or cure for failure to file a timely petition for reviewoncertiorari (appeal) under Rule 45 of the Rules of Court.(Escudero v. Dulay, G.R. No. 60578, February 23, 1988, 158 SCRA69, 77)

The application of the abovecited rule should be relaxed where it isshown that it will result in a manifest failure or miscarriage of

justice. (Ibid , p. 77) However, as emphasized earlier, the case atbar is totally devoid of merit, thus, the strict application of the saidfile will not in any way override sub-substantial justice.

Therefore, the delay of five (5) days in filing a notice of appeal anda motion for extension to file a record on appeal cannot be excusedon the basis of equity.

All premises considered, the Court is convinced that the acts of respondent judge, in dismissing the action for partition and insubsequently denying the motions for reconsideration of thepetitioners, does not amount to grave abuse of discretion.

ACCORDINGLY, the petition is DISMISSED.

SO ORDERED.

Narvasa, Cruz, Gancayco and Griño-Aquino, JJ., concur.

G.R. No. L-41132 April 27, 1988

VICTORINO HERNANDEZ, petitioner,vs.HONORABLE COURT OF APPEALS and SUBSTITUTED HEIRSOF REV. FR. LUCIO V. GARCIA (DECEASED).respondents.

NARVASA, J.:



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To those prevented by fraud from proving their title to land subjectof registration proceedings in another's name, the law affords theremedy of review of the decree of registration by petition in theland registration court within one year from its issuance of theorder. 1 This was the remedy availed of by Victorino Hernandez,but as he could convince neither the Court of First Instance of Rizalnor the Court of Appellants 2 of the merits of his petition, he failedin his bid to reopen and correct the decree in Land RegistrationCase No. N-2488 Fr. Lucio V. Garcia the absolute owner of threeparcels of land in Parañaque. 3 This Court however finds that uponthe recorded facts, the petitioner is entitled to the relief sought.

Fr. Garcia 4 applied in 1959 for the registration in his name of Lots1-A, 1-B, and 2 of Plan Psu-172410-B in Bo. San Dionisio,Parañaque. His property adjoined that of Hernandez, and sinceboth estates were once owned by one Andres SanBuenaventura, 5 no dividing boundaries existed thereon untilcadastral surveyors from the Bureau of Lands laid down officialmonuments to mark the separation of the lots. These monumentswere set along a line which the landowners had previously agreed

upon as representing the correct boundary between their estates.This was in 1956. 6

Unknown to Hernandez, the Advance Plan Psu-172410-B submittedin Fr. Garcia's behalf to the land registration court in 1959 included220 square meters of land now disputed — Lots ABC and 4057-A of Lot 1-B. This area fell beyond the stipulated boundaries of Fr.Garcia's land and encroached pro tanto on the land of Hernandez(on which, it should be mentioned, his tenants had been living formany years [decades, in fact] before the date of Fr. Garcia'sapplication). 7 Allegedly lulled into complacency by the recentness

of their agreement as to the limits of their respective properties,and confident that the visible landmarks installed by thegovernment surveyors precluded any overstepping of those limits,Hernandez proffered no opposition to Fr. Garcia's application,leaving the heirs of Andres San Buenaventura as the onlyoppositors thereto.

It was not until the court had already ordered the registration of the lots in Fr. Garcia's name that Hernandez discovered theanomaly in the application. He at once filed a petition for review of

the decree, but in view of the new trial ordered by the court uponmotion of the heirs-oppositors, the petition was dismissed on theground of prematurity. 8 The court thereafter adjudged Fr. Garciaas the owner of Lots 1-A and 2 and the heirs-oppositors as ownersof Lot 1-B.

On appeal, however, the Court of Appeals declared Fr. Garciaabsolute owner, by acquisitive prescription, of an the lots. This judgment became final on December 9, 1970; Decree No. 132620was issued by the CFI of Rizal, and the Register of Deeds issuedOCT No. 8664 in Fr. Garcia's name. 9

Hernandez promptly refiled his petition for the reopening of thedecree. He argued that the decree covered a substantial portion of his land to which Fr. Garcia could claim no title. He averred anewthat the Advance Plan supporting the application was "irregular,because it disregarded the existing Bureau of Lands monumentsdesignating the actual possessions of the petitioner and theapplicant" and "falsely designates (other) ... boundaries ... not actually marked by any ... monuments, thus fraudulently giving the

false impression to petitioner that no alteration has actually beenmade in originally agreed-upon boundaries in the course of thepreparation of (the) Plan." Thus having been "misled to believethat no encroachment has been made by applicant," and"conscious of the previous agreement and the fact that the Bureauof Lands monuments have not been altered." Hernandez had putup no objection to the application. 10

As stated at the outset, the trial court dismissed Hernandez'spetition, 11 and the appellate court gave his appeal shortshrift. 12 Both courts were of the view essentially that the evidence

did not bear out the claim of fraud; that under the Statute of Frauds, the parties' covenant as to their properties' metes andbounds was unenforceable since it was not reduced to writing; andthat Hernandez's parents and predecessors-in-interest, 13 Victorinoand Tranquilino, acquired title by purchase from San Buenaventurato only 516 square meters of land, which could not have includedthe disputed property. 14

Ordinarily, the Appellate Court's factual conclusions are notreviewable by this Court, 15 and since here those conclusions are



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decidedly adverse to Hernandez, the application of the rule shouldresult in a verdict against him. The rule admits of exceptions,however, as when facts of substance were overlooked by theappellate court which, if correctly considered, might have changedthe outcome of the case. 16

In this case there are several pivotal facts — about which there isno controversy whatever, it may be added — which clearly shouldhave been weighed by the court a quo in Hernandez's favor, butinexplicably were not. It is of record, to begin with, that concretemonuments or "majones" were laid out by government surveyorsin 1956 between the properties of Hernandez and Fr. Garcia.Hernandez avows that these structures were purposely installed tomark the limits of their estates; his opponents could only let thisstatement pass with telling silence. Neither did they seriouslydispute that these "mojones" were installed along the line agreedupon by the parties as marking their properties' boundaries. Allthey averred in their defense is that the agreement did not bindthem. Lastly, they freely conceded the presence of a fence alongthis line, but were quick to point out that they had merely

"permitted" Hernandez to put up this "temporary" structure "tostop the public (from) using ... this place as a common maddenshed." The excuse is lamentably feeble.

Hernandez argues that if indeed the Advance Plan, basis of Fr.Garcia's application, was prepared without regard to the boundaryindicated by the fence and the surveyors markers, and worse,"falsely designate(d) as boundaries the lines marked by ... cornersnot actually marked by any Bureau of Lands monuments" whichpurposely left the mistaken impression that the exact limits of theadjoining estates had been faithfully drawn, then he was truly a

victim of fraud, deftly cheated of the chance to vindicate his claimto the land. The respondents again did not care to refute thepremises on which the argument is predicated. In any event, theargument is entirely in accord with the evidence and the norms of logic.

Lastly, the Appellate Court may have been convinced of theimpossibility of the inclusion of the disputes lot in the 516 squaremeters stated as sold to Hernandez's parents in the deed of sale intheir favor, 17 but only because the Court missed sight of the fact

that the adjoining lots sold to the spouses and to Fr. Garcia wereunregistered and unsurveyed at the time of the transfer. Thisexplains the discrepancy between the area of the land purportedlyconveyed to the Hernandezes in the instrument (516 squaremeters) and the actual area falling within the boundaries describedin the same document, which, after the survey, was found to be716 square meters. The respondents cannot hold Hernandez to theapproximate area fixed in the deed and claim ownership over theexcess. All the land embraced within the stated boundaries wassold. 18 If the respondent insist on the figures named in the deedsof sale, then they themselves stand to lose 736 square meters of land. San Buenaventura had only sold 1,545 square meters to Fr.Garcia, 19 but the estate was later found to be actually 2,328square meters in area. 20

Given the weight they deserve, the recorded facts proveHernandez's entitlement to the relief sought. The respondents'reliance on the Statute of Frauds to secure a contrary judgment ismisplaced. The Statute of Frauds finds no application to this case.Not every agreement "affecting land" must be put in writing to

attain enforceability. Under the Statute of Frauds, Article 1403(2)(e) of the Civil Code, such formality is only required of contractsinvolving leases for longer than one year, or for the sale of realproperty or of an interest therein. Hernandez's testimony is thusadmissible to establish his agreement with Fr. Garcia as to theboundary of their estates. It is also to be noted that the presenceof Hernandez's tenants on the land within his side of the border,were this to be reckoned from the "mojones," further buttresseshis claim.

The foregoing considerations demonstrate more than adequately

that the inclusion of the 220-square-meter area in the OriginalCertificate of Title No. 8664 of the Register of Deeds of Rizal is nulland void.

ACCORDINGLY, the appealed decision of the Court of Appeals ishereby REVERSED and set aside and another one entered, orderingthe Register of Deeds of Rizal to register the 220 square meters inquestion in favor of petitioner Victorino Hernandez; and to cancelOriginal Certificate of Title No. 8664 and issue a new one in favor



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of the private respondents excluding said 220-square-meter areabelonging to the petitioner. No pronouncement as to costs.

SO ORDERED.

Cruz, Gancayco and Griño-Aquino, JJ., concur.

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