2. BOSTON BANK OF THE G. R. No. 158149

PHILIPPINES, (formerly BANK

OF COMMERCE),

Petitioner, Present:

PANGANIBAN, J., Chairperson,

YNARES-SANTIAGO,

AUSTRIA-MARTINEZ,

- versus - CALLEJO, SR., and

CHICO-NAZARIO, JJ.

PERLA P. MANALO and CARLOS

MANALO, JR.,

Promulgated:

Respondents. February 9, 2006

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

D E C I S I O N

CALLEJO, SR., J.:

Before us is a Petition for Review on Certiorari of the Decision[1] of the Court of

Appeals (CA) in CA-G.R. CV No. 47458 affirming, on appeal, the Decision[2] of

the Regional Trial Court (RTC) of Quezon City, Branch 98, in Civil Case No. Q-

89-3905.

The Antecedents

The Xavierville Estate, Inc. (XEI) was the owner of parcels of land in Quezon

City, known as the Xavierville Estate Subdivision, with an area of 42 hectares. XEI

caused the subdivision of the property into residential lots, which was then offered

for sale to individual lot buyers.[3]

On September 8, 1967, XEI, through its General Manager, Antonio Ramos,

as vendor, and The Overseas Bank of Manila (OBM), as vendee, executed a Deed

of Sale of Real Estate over some residential lots in the subdivision, including Lot

1, Block 2, with an area of 907.5 square meters, and Lot 2, Block 2, with an area of

832.80 square meters. The transaction was subject to the approval of the Board of

Directors of OBM, and was covered by real estate mortgages in favor of the

Philippine National Bank as security for its account amounting to P5,187,000.00,

and the Central Bank of the Philippines as security for advances amounting

toP22,185,193.74.[4] Nevertheless, XEI continued selling the residential lots in the

subdivision as agent of OBM.[5]

Sometime in 1972, then XEI president Emerito Ramos, Jr. contracted the

services of Engr. Carlos Manalo, Jr. who was in business of drilling deep water

wells and installing pumps under the business name Hurricane Commercial, Inc.

For P34,887.66, Manalo, Jr. installed a water pump at Ramos residence at the

corner of Aurora Boulevard and Katipunan Avenue, Quezon City. Manalo, Jr. then

proposed to XEI, through Ramos, to purchase a lot in the Xavierville subdivision,

and offered as part of the downpayment the P34,887.66 Ramos owed him. XEI,

through Ramos, agreed. In a letter dated February 8, 1972, Ramos requested

Manalo, Jr. to choose which lots he wanted to buy so that the price of the lots and

the terms of payment could be fixed and incorporated in the conditional

sale.[6] Manalo, Jr. met with Ramos and informed him that he and his wife Perla

had chosen Lots 1 and 2 of Block 2 with a total area of 1,740.3 square meters.

In a letter dated August 22, 1972 to Perla Manalo, Ramos confirmed the

reservation of the lots. He also pegged the price of the lots at P200.00 per square

meter, or a total of P348,060.00, with a 20% down payment of the purchase price

amounting toP69,612.00 less the P34,887.66 owing from Ramos, payable on or

before December 31, 1972; the corresponding Contract of Conditional Sale would

then be signed on or before the same date, but if the selling operations of XEI

resumed after December 31, 1972, the balance of the downpayment would fall due

then, and the spouses would sign the aforesaid contract within five (5) days from

receipt of the notice of resumption of such selling operations. It was also stated in

the letter that, in the meantime, the spouses may introduce improvements thereon

subject to the rules and regulations imposed by XEI in the subdivision. Perla

Manalo conformed to the letter agreement.[7]

The spouses Manalo took possession of the property on September 2, 1972,

constructed a house thereon, and installed a fence around the perimeter of the lots.

In the meantime, many of the lot buyers refused to pay their monthly

installments until they were assured that they would be issued Torrens titles over

the lots they had purchased.[8] The spouses Manalo were notified of the resumption

of the selling operations of XEI.[9] However, they did not pay the balance of the

downpayment on the lots because Ramos failed to prepare a contract of conditional

sale and transmit the same to Manalo for their signature. On August 14, 1973,

Perla Manalo went to the XEI office and requested that the payment of the amount

representing the balance of the downpayment be deferred, which, however, XEI

rejected. On August 10,

1973, XEI furnished her with a statement of their account as of July 31, 1973,

showing that they had a balance of P34,724.34 on the downpayment of the two lots

after deducting the account of Ramos, plus P3,819.68[10] interest thereon from

September 1, 1972 to July 31, 1973, and that the interests on the unpaid balance of

the purchase price of P278,448.00 from September 1, 1972 to July 31, 1973

amounted to P30,629.28.[11] The spouses were informed that they were being billed

for said unpaid interests.[12]

On January 25, 1974, the spouses Manalo received another statement of

account from XEI, inclusive of interests on the purchase price of the lots.[13] In a

letter dated April 6, 1974 to XEI, Manalo, Jr. stated they had not yet received the

notice of resumption of Leis selling operations, and that there had been no

arrangement on the payment of interests; hence, they should not be charged with

interest on the balance of the downpayment on the property.[14] Further, they

demanded that a deed of conditional sale over the two lots be transmitted to them

for their signatures. However, XEI ignored the demands. Consequently, the

spouses refused to pay the balance of the downpayment of the purchase price.[15]

Sometime in June 1976, Manalo, Jr. constructed a business sign in the

sidewalk near his house. In a letter dated June 17, 1976, XEI informed Manalo, Jr.

that business signs were not allowed along the sidewalk. It demanded that he

remove the same, on the ground, among others, that the sidewalk was not part of

the land which he had purchased on installment basis from XEI.[16]Manalo, Jr. did

not respond. XEI reiterated its demand on September 15, 1977.[17]

Subsequently, XEI turned over its selling operations to OBM, including the

receivables for lots already contracted and those yet to be sold.[18] On December 8,

1977, OBM warned Manalo, Jr., that putting up of a business sign is specifically

prohibited by their contract of conditional sale and that his failure to comply with

its demand would impel it to avail of the remedies as provided in their contract of

conditional sale.[19]

Meanwhile, on December 5, 1979, the Register of Deeds issued Transfer

Certificate of Title (TCT) No. T-265822 over Lot 1, Block 2, and TCT No. T-

265823 over Lot 2, Block 2, in favor of the OBM.[20] The lien in favor of the

Central Bank of thePhilippines was annotated at the dorsal portion of said title,

which was later cancelled on August 4, 1980.[21]

Subsequently, the Commercial Bank of Manila (CBM) acquired the

Xavierville Estate from OBM. CBM wrote Edilberto Ng, the president of

Xavierville Homeowners Association that, as of January 31, 1983, Manalo, Jr. was

one of the lot buyers in the subdivision.[22] CBM reiterated in its letter to Ng that,

as of January 24, 1984, Manalo was a homeowner in the subdivision.[23]

In a letter dated August 5, 1986, the CBM requested Perla Manalo to stop

any on-going construction on the property since it (CBM) was the owner of the lot

and she had no permission for such construction.[24] She agreed to have a

conference meeting with CBM officers where she informed them that her husband

had a contract with OBM, through XEI, to purchase the property. When asked to

prove her claim, she promised to send the documents to CBM. However, she failed

to do so.[25] On September 5, 1986, CBM reiterated its demand that it be furnished

with the documents promised,[26] but Perla Manalo did not respond.

On July 27, 1987, CBM filed a complaint[27] for unlawful detainer against

the spouses with the Metropolitan Trial Court of Quezon City. The case was

docketed as Civil Case No. 51618. CBM claimed that the spouses had been

unlawfully occupying the property without its consent and that despite its

demands, they refused to vacate the property. The latter alleged that they, as

vendors, and XEI, as vendee, had a contract of sale over the lots which had not yet

been rescinded.[28]

While the case was pending, the spouses Manalo wrote CBM to offer an

amicable settlement, promising to abide by the purchase price of the property

(P313,172.34), per agreement with XEI, through Ramos. However, on July 28,

1988, CBM wrote the spouses, through counsel, proposing that the price

of P1,500.00 per square meter of the property was a reasonable starting point for

negotiation of the settlement.[29] The spouses rejected the counter

proposal,[30] emphasizing that they would abide by their original agreement with

XEI. CBM moved to withdraw its complaint[31] because of the issues raised.[32]

In the meantime, the CBM was renamed the Boston Bank of

the Philippines. After CBM filed its complaint against the spouses Manalo, the

latter filed a complaint for specific performance and damages against the bank

before the Regional Trial Court (RTC) of Quezon City on October 31, 1989.

The plaintiffs alleged therein that they had always been ready, able and

willing to pay the installments on the lots sold to them by the defendants remote

predecessor-in-interest, as might be or stipulated in the contract of sale, but no

contract was forthcoming; they constructed their house worth P2,000,000.00 on the

property in good faith; Manalo, Jr., informed the defendant, through its counsel, on

October 15, 1988 that he would abide by the terms and conditions of his original

agreement with the defendants predecessor-in-interest; during the hearing of the

ejectment case on October 16, 1988, they offered to pay P313,172.34 representing

the balance on the purchase price of said lots; such tender of payment was rejected,

so that the subject lots could be sold at considerably higher prices to third parties.

Plaintiffs further alleged that upon payment of the P313,172.34, they were

entitled to the execution and delivery of a Deed of Absolute Sale covering the

subject lots, sufficient in form and substance to transfer title thereto free and clear

of any and all liens and encumbrances of whatever kind and nature.[33] The

plaintiffs prayed that, after due hearing, judgment be rendered in their favor, to wit:

WHEREFORE, it is respectfully prayed that after due hearing:

(a) The defendant should be ordered to execute and deliver a

Deed of Absolute Sale over subject lots in favor of the plaintiffs after

payment of the sum of P313,172.34, sufficient in form and substance

to transfer to them titles thereto free and clear of any and all liens and

encumbrances of whatever kind or nature;

(b) The defendant should be held liable for moral and

exemplary damages in the amounts of P300,000.00 and P30,000.00,

respectively, for not promptly executing and delivering to plaintiff the

necessary Contract of Sale, notwithstanding repeated demands

therefor and for having been constrained to engage the services of

undersigned counsel for which they agreed to pay attorneys fees in the

sum of P50,000.00 to enforce their rights in the premises and

appearance fee of P500.00;

(c) And for such other and further relief as may be just and

equitable in the premises.[34]

In its Answer to the complaint, the defendant interposed the following

affirmative defenses: (a) plaintiffs had no cause of action against it because the

August 22, 1972 letter agreement between XEI and the plaintiffs was not binding

on it; and (b) it had no record of any contract to sell executed by it or its

predecessor, or of any statement of accounts from its predecessors, or records of

payments of the plaintiffs or of any documents which entitled them to the

possession of the lots.[35] The defendant, likewise, interposed counterclaims for

damages and attorneys fees and prayed for the eviction of the plaintiffs from the

property.[36]

Meanwhile, in a letter dated January 25, 1993, plaintiffs, through counsel,

proposed an amicable settlement of the case by paying P942,648.70, representing

the balance of the purchase price of the two lots based on the current market

value.[37] However, the defendant rejected the same and insisted that for the smaller

lot, they pay P4,500,000.00, the current market value of the property.[38] The

defendant insisted that it owned the property since there was no contract or

agreement between it and the plaintiffs relative thereto.

During the trial, the plaintiffs adduced in evidence the separate Contracts of

Conditional Sale executed between XEI and Alberto Soller;[39] Alfredo

Aguila,[40] and Dra. Elena Santos-Roque[41] to prove that XEI continued selling

residential lots in the subdivision as agent of OBM after the latter had acquired the

said lots.

For its part, defendant presented in evidence the letter dated August 22,

1972, where XEI proposed to sell the two lots subject to two suspensive

conditions: the payment of the balance of the downpayment of the property, and

the execution of the corresponding contract of conditional sale. Since plaintiffs

failed to pay, OBM consequently refused to execute the corresponding contract of

conditional sale and forfeited the P34,877.66 downpayment for the two lots, but

did not notify them of said forfeiture.[42] It alleged that OBM considered the lots

unsold because the titles thereto bore no annotation that they had been sold under a

contract of conditional sale, and the plaintiffs were not notified of XEIs resumption

of its selling operations.

On May 2, 1994, the RTC rendered judgment in favor of the plaintiffs and

against the defendant. The fallo of the decision reads:

WHEREFORE, judgment is hereby rendered in favor of the

plaintiffs and against the defendant

(a) Ordering the latter to execute and deliver a Deed of

Absolute Sale over Lot 1 and 2, Block 2 of the Xavierville Estate

Subdivision after payment of the sum of P942,978.70 sufficient in

form and substance to transfer to them titles thereto free from any and

all liens and encumbrances of whatever kind and nature.

(b) Ordering the defendant to pay moral and exemplary

damages in the amount of P150,000.00; and

(c) To pay attorneys fees in the sum of P50,000.00 and to pay

the costs.

SO ORDERED.[43]

The trial court ruled that under the August 22, 1972 letter agreement of XEI and

the plaintiffs, the parties had a complete contract to sell over the lots, and that they

had already partially consummated the same. It declared that the failure of the

defendant to notify the plaintiffs of the resumption of its selling operations and to

execute a deed of conditional sale did not prevent the defendants obligation to

convey titles to the lots from acquiring binding effect. Consequently, the plaintiffs

had a cause of action to compel the defendant to execute a deed of sale over the

lots in their favor.

Boston Bank appealed the decision to the CA, alleging that the lower court

erred in (a) not concluding that the letter of XEI to the spouses Manalo, was at

most a mere contract to sell subject to suspensive conditions, i.e., the payment of

the balance of the downpayment on the property and the execution of a deed of

conditional sale (which were not complied with); and (b) in awarding moral and

exemplary damages to the spouses Manalo despite the absence of testimony

providing facts to justify such awards.[44]

On September 30, 2002, the CA rendered a decision affirming that of the

RTC with modification. The fallo reads:

WHEREFORE, the appealed decision is AFFIRMED with

MODIFICATIONS that (a) the figure P942,978.70 appearing [in] par.

(a) of the dispositive portion thereof is changed to P313,172.34 plus

interest thereon at the rate of 12% per annum from September 1,

1972until fully paid and (b) the award of moral and exemplary

damages and attorneys fees in favor of plaintiffs-appellees is

DELETED.

SO ORDERED.[45]

The appellate court sustained the ruling of the RTC that the appellant and the

appellees had executed a Contract to Sell over the two lots but declared that the

balance of the purchase price of the property amounting to P278,448.00 was

payable in fixed amounts, inclusive of pre-computed interests, from delivery of the

possession of the property to the appellees on a monthly basis for 120 months,

based on the deeds of conditional sale executed by XEI in favor of other lot

buyers.[46] The CA also declared that, while XEI must have resumed its selling

operations before the end of 1972 and the downpayment on the property remained

unpaid as of December 31, 1972, absent a written notice of cancellation of the

contract to sell from the bank or notarial demand therefor as required by Republic

Act No. 6552, the spouses had, at the very least, a 60-day grace period from

January 1, 1973 within which to pay the same.

Boston Bank filed a motion for the reconsideration of the decision alleging

that there was no perfected contract to sell the two lots, as there was no agreement

between XEI and the respondents on the manner of payment as well as the other

terms and conditions of the sale. It further averred that its claim for recovery of

possession of the aforesaid lots in its Memorandum datedFebruary 28, 1994 filed

before the trial court constituted a judicial demand for rescission that satisfied the

requirements of the New Civil Code. However, the appellate court denied the

motion.

Boston Bank, now petitioner, filed the instant petition for review

on certiorari assailing the CA rulings. It maintains that, as held by the CA, the

records do not reflect any schedule of payment of the 80% balance of the purchase

price, or P278,448.00. Petitioner insists that unless the parties had agreed on the

manner of payment of the principal amount, including the other terms and

conditions of the contract, there would be no existing contract of sale or contract to

sell.[47] Petitioner avers that the letter agreement to respondent spouses dated

August 22, 1972 merely confirmed their reservation for the purchase of Lot Nos. 1

and 2, consisting of 1,740.3 square meters, more or less, at the price of P200.00 per

square meter (or P348,060.00), the amount of the downpayment thereon and the

application of the P34,887.00 due from Ramos as part of such downpayment.

Petitioner asserts that there is no factual basis for the CA ruling that the

terms and conditions relating to the payment of the balance of the purchase price of

the property (as agreed upon by XEI and other lot buyers in the same subdivision)

were also applicable to the contract entered into between the petitioner and the

respondents. It insists that such a ruling is contrary to law, as it is tantamount to

compelling the parties to agree to something that was not even discussed, thus,

violating their freedom to contract. Besides, the situation of the respondents cannot

be equated with those of the other lot buyers, as, for one thing, the respondents

made a partial payment on the downpayment for the two lots even before the

execution of any contract of conditional sale.

Petitioner posits that, even on the assumption that there was a perfected

contract to sell between the parties, nevertheless, it cannot be compelled to convey

the property to the respondents because the latter failed to pay the balance of the

downpayment of the property, as well as the balance of 80% of the purchase price,

thus resulting in the extinction of its obligation to convey title to the lots to the

respondents.

Another egregious error of the CA, petitioner avers, is the application of

Republic Act No. 6552. It insists that such law applies only to a perfected

agreement or perfected contract to sell, not in this case where the downpayment on

the purchase price of the property was not completely paid, and no installment

payments were made by the buyers.

Petitioner also faults the CA for declaring that petitioner failed to serve a

notice on the respondents of cancellation or rescission of the contract to sell, or

notarial demand therefor. Petitioner insists that its August 5, 1986 letter requiring

respondents to vacate the property and its complaint for ejectment in Civil Case

No. 51618 filed in the Metropolitan Trial Court amounted to the requisite demand

for a rescission of the contract to sell. Moreover, the action of the respondents

below was barred by laches because despite demands, they failed to pay the

balance of the purchase price of the lots (let alone the downpayment) for a

considerable number of years.

For their part, respondents assert that as long as there is a meeting of the

minds of the parties to a contract of sale as to the price, the contract is valid despite

the parties failure to agree on the manner of payment. In such a situation, the

balance of the purchase price would be payable on demand, conformably to Article

1169 of the New Civil Code. They insist that the law does not require a party to

agree on the manner of payment of the purchase price as a prerequisite to a valid

contract to sell. The respondents cite the ruling of this Court in Buenaventura v.

Court of Appeals[48] to support their submission.

They argue that even if the manner and timeline for the payment of the

balance of the purchase price of the property is an essential requisite of a contract

to sell, nevertheless, as shown by their letter agreement of August 22, 1972 with

the OBM, through XEI and the other letters to them, an agreement was reached as

to the manner of payment of the balance of the purchase price. They point out that

such letters referred to the terms of the

terms of the deeds of conditional sale executed by XEI in favor of the other lot

buyers in the subdivision, which contained uniform terms of 120 equal monthly

installments (excluding the downpayment, but inclusive of pre-computed

interests). The respondents assert that XEI was a real estate broker and knew that

the contracts involving residential lots in the subdivision contained uniform terms

as to the manner and timeline of the payment of the purchase price of said lots.

Respondents further posit that the terms and conditions to be incorporated in

the corresponding contract of conditional sale to be executed by the parties would

be the same as those contained in the contracts of conditional sale executed by lot

buyers in the subdivision. After all, they maintain, the contents of the

corresponding contract of conditional sale referred to in the August 22, 1972 letter

agreement envisaged those contained in the contracts of conditional sale that XEI

and other lot buyers executed. Respondents cite the ruling of this Court in Mitsui

Bussan Kaisha v. Manila E.R.R. & L. Co.[49]

The respondents aver that the issues raised by the petitioner are factual,

inappropriate in a petition for review on certiorariunder Rule 45 of the Rules of

Court. They assert that petitioner adopted a theory in litigating the case in the trial

court, but changed the same on appeal before the CA, and again in this Court. They

argue that the petitioner is estopped from adopting a new theory contrary to those it

had adopted in the trial and appellate courts. Moreover, the existence of a contract

of conditional sale was admitted in the letters of XEI and OBM. They aver that

they became owners of the lots upon delivery to them by XEI.

The issues for resolution are the following: (1) whether the factual issues

raised by the petitioner are proper; (2) whether petitioner or its predecessors-in-

interest, the XEI or the OBM, as seller, and the respondents, as buyers, forged a

perfect contract to sell over the property; (3) whether

petitioner is estopped from contending that no such contract was forged by the

parties; and (4) whether respondents has a cause of action against the petitioner for

specific performance.

The rule is that before this Court, only legal issues may be raised in a

petition for review on certiorari. The reason is that this Court is not a trier of facts,

and is not to review and calibrate the evidence on record. Moreover, the findings of

facts of the trial court, as affirmed on appeal by the Court of Appeals, are

conclusive on this Court unless the case falls under any of the following

exceptions:

(1) when the conclusion is a finding grounded entirely on

speculations, surmises and conjectures; (2) when the inference made

is manifestly mistaken, absurd or impossible; (3) where there is a

grave abuse of discretion; (4) when the judgment is based on a

misapprehension of facts; (5) when the findings of fact are conflicting;

(6) when the Court of Appeals, in making its findings went beyond

the issues of the case and the same is contrary to the admissions of

both appellant and appellee; (7) when the findings are contrary to

those of the trial court; (8) when the findings of fact are conclusions

without citation of specific evidence on which they are based; (9)

when the facts set forth in the petition as well as in the petitioners

main and reply briefs are not disputed by the respondents; and (10)

when the findings of fact of the Court of Appeals are premised on the

supposed absence of evidence and contradicted by the evidence on

record.[50]

We have reviewed the records and we find that, indeed, the ruling of the

appellate court dismissing petitioners appeal is contrary to law and is not supported

by evidence. A careful examination of the factual backdrop of the case, as well as

the antecedental proceedings constrains us to hold that petitioner is not barred from

asserting that XEI or OBM, on one hand, and the respondents, on the other, failed

to forge a perfected contract to sell the subject lots.

It must be stressed that the Court may consider an issue not raised during the

trial when there is plain error.[51] Although a factual issue was not raised in the trial

court, such issue may still be considered and resolved by the Court in the interest

of substantial justice, if it finds that to do so is necessary to arrive at a just

decision,[52] or when an issue is closely related to an issue raised in the trial court

and the Court of Appeals and is necessary for a just and complete resolution of the

case.[53] When the trial court decides a case in favor of a party on certain grounds,

the Court may base its decision upon some other points, which the trial court or

appellate court ignored or erroneously decided in favor of a party.[54]

In this case, the issue of whether XEI had agreed to allow the respondents to

pay the purchase price of the property was raised by the parties. The trial court

ruled that the parties had perfected a contract to sell, as against petitioners claim

that no such contract existed. However, in resolving the issue of whether the

petitioner was obliged to sell the property to the respondents, while the CA

declared that XEI or OBM and the respondents failed to agree on the schedule of

payment of the balance of the purchase price of the property, it ruled that XEI and

the respondents had forged a contract to sell; hence, petitioner is entitled to

ventilate the issue before this Court.

We agree with petitioners contention that, for a perfected contract of sale or

contract to sell to exist in law, there must be an agreement of the parties, not only

on the price of the property sold, but also on the manner the price is to be paid by

the vendee.

Under Article 1458 of the New Civil Code, in a contract of sale, whether

absolute or conditional, one of the contracting parties obliges himself to transfer

the ownership of and deliver a determinate thing, and the other to pay therefor a

price certain in money or its equivalent. A contract of sale is perfected at the

moment there is a meeting of the minds upon the thing which is the object of the

contract and the price. From the averment of perfection, the parties are bound, not

only to the fulfillment of what has been

expressly stipulated, but also to all the consequences which, according to their

nature, may be in keeping with good faith, usage and law.[55] On the other hand,

when the contract of sale or to sell is not perfected, it cannot, as an independent

source of obligation, serve as a binding juridical relation between the parties.[56]

A definite agreement as to the price is an essential element of a binding

agreement to sell personal or real property because it seriously affects the rights

and obligations of the parties. Price is an essential element in the formation of a

binding and enforceable contract of sale. The fixing of the price can never be left

to the decision of one of the contracting parties. But a price fixed by one of the

contracting parties, if accepted by the other, gives rise to a perfected sale.[57]

It is not enough for the parties to agree on the price of the property. The

parties must also agree on the manner of payment of the price of the property to

give rise to a binding and enforceable contract of sale or contract to sell. This is so

because the agreement as to the manner of payment goes into the price, such that a

disagreement on the manner of payment is tantamount to a failure to agree on the

price.[58]

In a contract to sell property by installments, it is not enough that the parties agree

on the price as well as the amount of downpayment. The parties must, likewise,

agree on the manner of payment of the balance of the purchase price and on the

other terms and conditions relative to the sale. Even if the buyer makes a

downpayment or portion thereof, such payment cannot be considered as sufficient

proof of the perfection of any purchase and sale between the parties. Indeed, this

Court ruled in Velasco v. Court of Appeals[59] that:

It is not difficult to glean from the aforequoted averments that

the petitioners themselves admit that they and the respondent still had

to meet and agree on how and when the down-payment and the

installment payments were to be paid. Such being the situation, it

cannot, therefore, be said that a definite and firm sales agreement

between the parties had been perfected over the lot in question.

Indeed, this Court has already ruled before that a definite agreement

on the manner of payment of the purchase price is an essential

element in the formation of a binding and enforceable contract of sale.

The fact, therefore, that the petitioners delivered to the respondent the

sum of P10,000.00 as part of the downpayment that they had to pay

cannot be considered as sufficient proof of the perfection of any

purchase and sale agreement between the parties herein under article

1482 of the New Civil Code, as the petitioners themselves admit that

some essential matter the terms of payment still had to be mutually

covenanted.[60]

We agree with the contention of the petitioner that, as held by the CA, there

is no showing, in the records, of the schedule of payment of the balance of the

purchase price on the property amounting to P278,448.00. We have meticulously

reviewed the records, including Ramos February 8, 1972 and August 22, 1972

letters to respondents,[61] and find that said parties confined themselves to agreeing

on the price of the property (P348,060.00), the 20% downpayment of the purchase

price (P69,612.00), and credited respondents for the P34,887.00 owing from

Ramos as part of the 20% downpayment. The timeline for the payment of the

balance of the downpayment (P34,724.34) was also agreed upon, that is, on or

before XEI resumed its selling operations, on or before December 31, 1972, or

within five (5) days from written notice of such resumption of selling operations.

The parties had also agreed to incorporate all the terms and conditions relating to

the sale, inclusive of the terms of payment of the balance of the purchase price and

the other substantial terms and conditions in the corresponding contract of

conditional sale, to be later signed by the parties, simultaneously with respondents

settlement of the balance of the downpayment.

The February 8, 1972 letter of XEI reads:

Mr. Carlos T. Manalo, Jr.

Hurricane Rotary Well Drilling

Rizal Avenue Ext.,Caloocan City

Dear Mr. Manalo:

We agree with your verbal offer to exchange the proceeds of

your contract with us to form as a down payment for a lot in our

Xavierville Estate Subdivision.

Please let us know your choice lot so that we can fix the price

and terms of payment in our conditional sale.

Sincerely yours,

XAVIERVILLE ESTATE, INC.

(Signed)

EMERITO B. RAMOS, JR.

President

CONFORME:

(Signed)

CARLOS T. MANALO, JR.

Hurricane Rotary Well Drilling[62]

The August 22, 1972 letter agreement of XEI and the respondents reads:

Mrs. Perla P. Manalo

1548 Rizal Avenue Extension

Caloocan City

Dear Mrs. Manalo:

This is to confirm your reservation of Lot Nos. 1 and 2; Block 2 of our

consolidation-subdivision plan as amended, consisting of 1,740.3

square meters more or less, at the price of P200.00 per square meter or

a total price of P348,060.00.

It is agreed that as soon as we resume selling operations, you must pay

a down payment of 20% of the purchase price of the said lots and sign

the corresponding Contract of Conditional Sale, on or before

December 31, 1972, provided, however, that if we resume selling after

December 31, 1972, then you must pay the aforementioned down

payment and sign the aforesaid contract within five (5) days from

your receipt of our notice of resumption of selling operations.

In the meanwhile, you may introduce such improvements on the said

lots as you may desire, subject to the rules and regulations of the

subdivision.

If the above terms and conditions are acceptable to you, please signify

your conformity by signing on the space herein below provided.

Thank you.

Very truly yours,

XAVIERVILLE ESTATE, INC. CONFORME:

By:

(Signed) (Signed)

EMERITO B. RAMOS, JR. PERLA P. MANALO

President Buyer[63]

Based on these two letters, the determination of the terms of payment of

the P278,448.00 had yet to be agreed upon on or before December 31, 1972, or

even afterwards, when the parties sign the corresponding contract of conditional

sale.

Jurisprudence is that if a material element of a contemplated contract is left

for future negotiations, the same is too indefinite to be enforceable.[64] And when

an essential element of a contract is reserved for future agreement of the parties, no

legal obligation arises until such future agreement is concluded.[65]

So long as an essential element entering into the proposed obligation of

either of the parties remains to be determined by an agreement which they are to

make, the contract is incomplete and unenforceable.[66] The reason is that such a

contract is lacking in the necessary qualities of definiteness, certainty and

mutuality.[67]

There is no evidence on record to prove that XEI or OBM and the

respondents had agreed, after December 31, 1972, on the terms of payment of the

balance of the purchase price of the property and the other substantial terms and

conditions relative to the sale. Indeed, the parties are in agreement that there had

been no contract of conditional sale ever executed by XEI, OBM or petitioner, as

vendor, and the respondents, as vendees.[68]

The ruling of this Court in Buenaventura v. Court of Appeals has no bearing

in this case because the issue of the manner of payment of the purchase price of the

property was not raised therein.

We reject the submission of respondents that they and Ramos had intended

to incorporate the terms of payment contained in the three contracts of conditional

sale executed by XEI and other lot buyers in the corresponding contract of

conditional sale, which would later be signed by them.[69] We have meticulously

reviewed the respondents complaint and find no such allegation therein.[70] Indeed,

respondents merely alleged in their complaint that they were bound to pay the

balance of the purchase price of the property in installments. When respondent

Manalo, Jr. testified, he was never asked, on direct examination or even on cross-

examination, whether the terms of payment of the balance of the purchase price of

the lots under the contracts of conditional sale executed by XEI and other lot

buyers would form part of the corresponding contract of conditional sale to be

signed by them simultaneously with the payment of the balance of the

downpayment on the purchase price.

We note that, in its letter to the respondents dated June 17, 1976, or almost

three years from the execution by the parties of their August 22, 1972 letter

agreement, XEI stated, in part, that respondents had purchased the property on

installment basis.[71]However, in the said letter, XEI failed to state a specific

amount for each installment, and whether such payments were to be made

monthly, semi-annually, or annually. Also, respondents, as plaintiffs below, failed

to adduce a shred of evidence to prove that they were obliged to pay

the P278,448.00 monthly, semi-annually or annually. The allegation that the

payment of the P278,448.00 was to be paid in installments is, thus, vague and

indefinite. Case law is that, for a contract to be enforceable, its terms must be

certain and explicit, not vague or indefinite.[72]

There is no factual and legal basis for the CA ruling that, based on the terms

of payment of the balance of the purchase price of the lots under the contracts of

conditional sale executed by XEI and the other lot buyers, respondents were

obliged to pay theP278,448.00 with pre-computed interest of 12% per annum in

120-month installments. As gleaned from the ruling of the appellate court, it failed

to justify its use of the terms of payment under the three contracts of conditional

sale as basis for such ruling, to wit:

On the other hand, the records do not disclose the schedule of

payment of the purchase price, net of the downpayment. Considering,

however, the Contracts of Conditional Sale (Exhs. N, O and P)

entered into by XEI with other lot buyers, it would appear that the

subdivision lots sold by XEI, under contracts to sell, were payable in

120 equal monthly installments (exclusive of the downpayment but

including pre-computed interests) commencing on delivery of the lot

to the buyer.[73]

By its ruling, the CA unilaterally supplied an essential element to the letter

agreement of XEI and the respondents. Courts should not undertake to make a

contract for the parties, nor can it enforce one, the terms of which are in

doubt.[74] Indeed, the Court emphasized in Chua v. Court of Appeals[75] that it is not

the province of a court to alter a contract by construction or to make a new contract

for the parties; its duty is confined to the interpretation of the one which they have

made for themselves, without regard to its wisdom or folly, as the court cannot

supply material stipulations or read into contract words which it does not contain.

Respondents, as plaintiffs below, failed to allege in their complaint that the

terms of payment of the P278,448.00 to be incorporated in the corresponding

contract of conditional sale were those contained in the contracts of conditional

sale executed by XEI and Soller, Aguila and Roque.[76] They likewise failed to

prove such allegation in this Court.

The bare fact that other lot buyers were allowed to pay the balance of the

purchase price of lots purchased by them in 120 or 180 monthly installments does

not constitute evidence that XEI also agreed to give the respondents the same mode

and timeline of payment of the P278,448.00.

Under Section 34, Rule 130 of the Revised Rules of Court, evidence that one

did a certain thing at one time is not admissible to prove that he did the same or

similar thing at another time, although such evidence may be received to prove

habit, usage, pattern of conduct or the intent of the parties.

Similar acts as evidence. Evidence that one did or did not do a

certain thing at one time is not admissible to prove that he did or did

not do the same or a similar thing at another time; but it may be

received to prove a specific intent or knowledge, identity, plan,

system, scheme, habit, custom or usage, and the like.

However, respondents failed to allege and prove, in the trial court, that, as a

matter of business usage, habit or pattern of conduct, XEI granted all lot buyers the

right to pay the balance of the purchase price in installments of 120 months of

fixed amounts with pre-computed interests, and that XEI and the respondents had

intended to adopt such terms of payment relative to the sale of the two lots in

question. Indeed, respondents adduced in evidence the three contracts of

conditional sale executed by XEI and other lot buyers merely to prove that XEI

continued to sell lots in the subdivision as sales agent of OBM after it acquired said

lots, not to prove usage, habit or pattern of conduct on the part of XEI to

require all lot buyers in the subdivision to pay the balance of the purchase price of

said lots in 120 months. It further failed to prive that the trial court admitted the

said deeds[77] as part of the testimony of respondent Manalo, Jr.[78]

Habit, custom, usage or pattern of conduct must be proved like any other

facts. Courts must contend with the caveat that, before they admit evidence of

usage, of habit or pattern of conduct, the offering party must establish the degree of

specificity and frequency of uniform response that ensures more than a mere

tendency to act in a given manner but rather, conduct that is semi-automatic in

nature. The offering party must allege and prove specific, repetitive conduct that

might constitute evidence of habit.The examples offered in evidence to prove

habit, or pattern of evidence must be numerous enough to base on inference of

systematic conduct. Mere similarity of contracts does not present the kind of

sufficiently similar circumstances to outweigh the danger of prejudice and

confusion.

In determining whether the examples are numerous enough, and sufficiently

regular, the key criteria are adequacy of sampling and uniformity of response.

After all, habit means a course of behavior of a person regularly represented in like

circumstances.[79] It is only when examples offered to establish pattern of conduct

or habit are numerous enough to lose an inference of systematic conduct that

examples are admissible. The key criteria are adequacy of sampling and uniformity

of response or ratio of reaction to situations.[80]

There are cases where the course of dealings to be followed is defined by the

usage of a particular trade or market or profession. As expostulated by Justice

Benjamin Cardozo of the United States Supreme Court: Life casts the moulds of

conduct, which will someday become fixed as law. Law preserves the moulds

which have taken form and shape from life.[81] Usage furnishes a standard for the

measurement of many of the rights and acts of men.[82] It is also well-settled that

parties who contract on a subject matter concerning which known usage prevail,

incorporate such usage by implication into their agreement, if nothing is said to be

contrary.[83]

However, the respondents inexplicably failed to adduce sufficient competent

evidence to prove usage, habit or pattern of conduct of XEI to justify the use of the

terms of payment in the contracts of the other lot buyers, and thus grant

respondents the right to pay the P278,448.00 in 120 months, presumably because

of respondents belief that the manner of payment of the said amount is not an

essential element of a contract to sell. There is no evidence that XEI or OBM and

all the lot buyers in the subdivision, including lot buyers who pay part of the

downpayment of the property purchased by them in the form of service, had

executed contracts of conditional sale containing uniform terms and conditions.

Moreover, under the terms of the contracts of conditional sale executed by XEI and

three lot buyers in the subdivision, XEI agreed to grant 120 months within which

to pay the balance of the purchase price to two of them, but granted one 180

months to do so.[84] There is no evidence on record that XEI granted the same right

to buyers of two or more lots.

Irrefragably, under Article 1469 of the New Civil Code, the price of the

property sold may be considered certain if it be so with reference to another thing

certain. It is sufficient if it can be determined by the stipulations of the contract

made by the parties thereto[85] or by reference to an agreement incorporated in the

contract of sale or contract to sell or if it is capable of being ascertained with

certainty in said contract;[86] or if the contract contains express or implied

provisions by which it may be rendered certain;[87] or if it provides some method or

criterion by which it can be definitely ascertained.[88] As this Court held

in Villaraza v. Court of Appeals,[89] the price is considered certain if, by its terms,

the contract furnishes a basis or measure for ascertaining the amount agreed upon.

We have carefully reviewed the August 22, 1972 letter agreement of the

parties and find no direct or implied reference to the manner and schedule of

payment of the balance of the purchase price of the lots covered by the deeds of

conditional sale executed by XEI and that of the other lot buyers[90] as basis for or

mode of determination of the schedule of the payment by the respondents of

the P278,448.00.

The ruling of this Court in Mitsui Bussan Kaisha v. Manila Electric

Railroad and Light Company[91] is not applicable in this case because the basic

price fixed in the contract was P9.45 per long ton, but it was stipulated that the

price was subject to modification in proportion to variations in calories and ash

content, and not otherwise. In this case, the parties did not fix in their letters-

agreement, any method or mode of determining the terms of payment of the

balance of the purchase price of the property amounting to P278,448.00.

It bears stressing that the respondents failed and refused to pay the balance

of the downpayment and of the purchase price of the property amounting

to P278,448.00 despite notice to them of the resumption by XEI of its selling

operations. The respondents enjoyed possession of the property without paying a

centavo. On the other hand, XEI and OBM failed and refused to transmit a contract

of conditional sale to the respondents. The respondents could have at least

consigned the balance of the downpayment after notice of the resumption of the

selling operations of XEI and filed an action to compel XEI or OBM to transmit to

them the said contract; however, they failed to do so.

As a consequence, respondents and XEI (or OBM for that matter) failed to

forge a perfected contract to sell the two lots; hence, respondents have no cause of

action for specific performance against petitioner. Republic Act No. 6552 applies

only to a perfected contract to sell and not to a contract with no binding and

enforceable effect.

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The

Decision of the Court of Appeals in CA-G.R. CV No. 47458

is REVERSED and SET ASIDE. The Regional Trial Court of Quezon City,

Branch 98 is ordered to dismiss the complaint. Costs against the respondents.

SO ORDERED.

4. REPUBLIC OF THE PHILIPPINES, petitioner, vs. PHILIPPINE RESOURCES DEVELOPMENT CORPORATION and the COURT OF APPEALS, respondents.

Office of the Solicitor General Ambrosio Padilla, and Solicitor Frine C. Zaballero for petitioner. Vicente L. Santiago for respondent Corporation.

PADILLA, J.:

This is a petition under Rule 46 to review a judgment rendered by the Court of Appeals,in CA-GR No. 15767-R, Philippine Resources Development Corporation vs. The Hon. Judge Magno Gatmaitan et al.

The findings of the Court of Appeals are, as follows.

It appears that on May 6, 1955, the Republic of the Philippines in representation of the Bureau of Prisons instituted against Macario Apostol and the Empire Insurance Co. a complaint docketed as Civil Case No. 26166 of the Court of First instance of Manila. The complaint alleges as the first cause of action, that defendant Apostol submitted the highest bid the amount P450.00 per ton for the purchase of 100 tons of Palawan Almaciga from the Bureau of Prisons; that a contract therefor was drawn and by virtue of which, Apostol obtained goods from the Bureau of Prisons valued P15,878.59; that of said account, Apostol paid only P691.10 leaving a balane obligation of P15,187.49. The complaint further averes, as second cause of action, that Apostol submitted the best bid with the Bureau of Prisons for the purchase of three million board feet of logs

at P88.00 per 1,000 board feet; that a contract was executed between the Director of Prisons and Apostol pursuant to which contract Apostol obtained deliveries of logs valued at P65.830.00, and that Apostol failed to pay a balance account Of P18,827.57. All told, for the total demand set forth in complaint against Apostol is for P34,015.06 with legal interests thereon from January 8, 1952. The Empire lnsurance Company was included in the complaint having executed a performance bond of P10,000.00 in favor of Apostol.

In his answer, Apostol interposed payment as a defense and sought the dismissal of the complaint.

On July 19, 1955, the Philippine Resources Development Corporation moved to intervene, appending to its motion, the complaint in the intervention of even date. The complaint recites that for sometime prior to Apostol's transactions the corporate had some goods deposited in a warehouse at 1201 Herran, Manila; that Apostol, then the president of the corporation but without the knowledge or consent of the stockholders thereof, disposed of said goods by delivering the same to the Bureau of Prisons of in an attempt to settle his personal debts with the latter entity; that upon discovery of Apodol's act, the corporation took steps to recover said goods by demanding from the Bureau of Prisons the return thereof; and that upon the refusal of the Bureau to return said goods, the corporation sought leave to intervene in Civil Case No. 26166.

As aforestated, His Honor denied the motion for intervention and thereby issued an order to this effect on July 23, 1955. A motion for the reconsideration of said order was filed by the movant corporation and the same was likewise denied by His Honor on August 18, 1955 . . . (Annex L.).

On 3 September 1955, in a petition for a writ of certiorari filed in the Court of Appeals, the herein respondent corporation prayed for the setting aside of the order of the Court of First Instance that had denied the admission of its complaint-in-intervention and for an order directing the latter Court to allow the herein respondent corporation to intervene in the action (Annex G). On 12 December 1955 the Court of Appeals set aside the order denying the motion to intervene and ordered the respondent court to admit

the herein respondent corporation's complaint-in-intervention with costs against Macario Apostol.

On 9 January 1956 the Republic of the Philippines filed this petition in this Court for the purpose stated at the beginning of this opinion.

The Goverment contends that the intervenor has no legal interest in the matter in litigation, because the action brought in the Court of First Instance of Manila against Macario Apostol and the Empire Insurance Company (Civil Case No. 26166, Annex A) is just for the collection from the defendant Apostol of a sum of money, the unpaid balance of the purchase price of logs and almaciga bought by him from the Bureau of Prisons, whereas the intervenor seeks to recover ownership and possession of G. I. sheets, black sheets, M. S. plates, round bars and G. I. pipes that it claims its owns-an intervention which would change a personal action into one ad rem and would unduly delay the disposition of the case.

The Court of Appeals held that:

Petitioner ardently claims that the reason behind its motion to intervene is the desire to protect its rights and interests over some materials purportedly belonging to it; that said material were unauthorizedly and illegally assigned and delivered to the Bureau of Prisons by petitioning corporation's president Macario Apostol in payment of the latter's personal accounts with the said entity; and that the Bureau of Prisons refused to return said materials despite petitioner's demands to do so.

Petitioner refers to the particulars recited in Apostol's answer dated July 12, 1955 to the effect that Apostol had paid unto the Bureau of Prisons his accounts covered, among others, by BPPO 1077 for the sum of P4,638.40 and BPPO 1549 for the amount of P4,398.54. Petitioner moreover, points to the State of Paid and Unpaid accounts of Apostol dated January 16, 1954 prepared by the accounting of officer of the Bureau of Prisons (Annex B. Complaint in Intervention), wherein it appears that the aforementioned accounts covered respectively by BPPO Nos. 1077 for 892 pieces of GI sheets and 1549 for 399 pieces of GI pipes in the total sum of P9,036.94 have not been credited to Apostol's account in view of lack of supporting papers; and that according to the reply letter of the Undersecretary of

Justice, said GI sheets and pipes were delivered by Macario Apostol to the Bureau of Prisons allegedly in Apostol's capacity as owner and that the black iron sheets were delivered by Apostol as President of the petitioner corporation.

Respondents, on the other hand, assert that the subject matter of the original litigation is a sum of money allegedly due to the Bureau of Prisons from Macario Apostol and not the goods or the materials reportedly turned over by Apostol as payment of his private debts to the Bureau of Prisons and the recovery of which is sought by the petitioner; and that for this reason, petitioner has no legal interest in the very subject matter in litigation as to entitle it to intervene.

We find no merit in respondents' contention. It is true that the very subject matter of the original case is a sum of money. But it is likewise true as borne out by the records, that the materials purportedly belonging to the petitioner corporation have been assessed and evaluated and their price equivalent in terms of money have been determined; and that said materials for whatever price they have been assigned by defendant now respondent Apostol as tokens of payment of his private debts with the Bureau of Prisons. In view of these considerations, it becomes enormously plain in the event the respondent judge decides to credit Macario Apostol with the value of the goods delivered by the latter to the Bureau of Prisons, the petitioner corporation stands to be adversely affected by such judgment. The conclusion, therefore, is inescapable that the petitioner possesses a legal interest in the matter in litigation and that such interest is of an actual, material, direct and immediate nature as to entitle petitioner to intervene.

x x x x x x x x x

Section 3 of Rule 13 of the Rules of Court endows the lower Court with discretion to allow or disapprove the motion for intrvention (Santarromana et al. vs. Barrios, 63 Phil. 456); and that in the exercise of such discretion, the court shall consider whether or not the intervention will unduly delay or prejudice the adjudicatio of the rights of the original parties and whether or not the intervenors the rights may be fully protected in a separate proceeding. The petitioner in the instant case positively authorized to a separate action against

any of all the respondents. But considering that the resolution of the issues raised in and enjoined by the pleadings in the main case, would virtally affect the rights not only the original parties but also of the berein petitioner: that far from unduly delaying or prejudicing the adjudication of the rights of the original parties or bringing about confusion in the original case, the adnission of the complaint in intervention would help clarify the vital issue of the true and real ownership of the materials involved, besides preventing an abhorrent munltiplicity of suit, we believe that the motion to intervene should be given due to cause.

We find no reason for disturbing the foregoing pronouncements. The Government argues that "Price . . . is always paid in terms of money and the supposed payment beeing in kind, it is no payment at all, "citing Article 1458 of the new Civil Code. However, the same Article provides that the purschaser may pay "a price certain in money orits equivalent," which means that they meant of the price need not be in money. Whether the G.I. sheets, black sheets, M. S. Plates, round bars and G. I. pipes claimed by the respondent corporation to belong to it and delivered to the Bureau of Prison by Macario Apostol in payment of his account is sufficient payment therefore, is for the court to pass upon and decide after hearing all the parties in the case. Should the trial court hold that it is as to credit Apostol with the value or price of the materials delivered by him, certainly the herein respondent corporation would be affected adversely if its claim of ownership of such sheets, plates, bars and pipes is true.

The Government reiterates in its original stand that counsel appearing for the respondent corporation has no authority to represent it or/and sue in its behalf, the Court of Appeals held that:

Respondents aver also that petitioner lacks legal capacity to sue and that its counsel is acting merely in an individual capacity without the benefit of the corporate act authorizing him to bring sue. In this connection, respondents invoked among others section 20 of Rule 127 which provision, in our opinion, squarely disproves their claim as by virtue thereof, the authority of petitioner's counsel is pressumed. Withal, the claim of the counsel for the petitioner that a resolution to proceed against Apostol, had been unanonimously adopted by the stockholders of the corporation, has not been refuted.

Evidently, petitioner is a duly organized corporation with offices at the Samanillo Building and that as such, it is endowed with a personality distinct and separate from that of its president or stockholders. It has the right to bring suit to safeguard its interests and ordinarily, such right is exercised at the instance of the president. However, under the circumstance now obtaining, such right properly devolves upon the other officers of the corporations as said right is sought to be exercised against the president himself who is the very object of the intended suit.

The power of a corporation to sue and be sued in any court1 is lodged in the board of directors which exercises it corporater powers,2 and not in the president, as contended by the Government. The "motion for admission of complaint in intervention" (Annex C) and the "complaint in intervention" attached thereto, signed by counsel and filed in the Court of First Instance begin with the following statement: "COMES NOW the above-name Intervenor, by its undersigned counsel, . . . , "and underneath his typewritten name is affixed the description" Counsel for the Intervenor." As counsels authority to appeal for the respondent corporation was newer questioned in the Court of First Instance, it is to be pressumed that he was properly authorized to file the complaint in intervention and appeal for his client.1 It was only in the Court of Appeals where his authority to appear was questioned. As the Court of Appeals was satisfied that counsel was duly authorized by his client to file the complaint does in intervention and to appear in its behalf, hte resolution of the Court of Appeals on this point should not be disturbed.

Granting that counsel has not been actually authorized by the board of directors to appear for and in behalf of the respondent corporation, the fact that counsel is the secretary treasurer of the respondent corporation and member of the board of directors; and that the other members of the board, namely, Macario Apostol, the president, and his wife Pacita R. Apostol, who shuold normally initiate the action to protect the corporate properties and in interest are the ones to be adversely affected thereby, a single stockholder under such circumstances may sue in behalf of the corporation.2 Counsel as a stockholder and director of the respondent corporation may sue in its behalf and file the complaint in intervention in the proper court.

The judgment under review is affirmed, without pronouncements as to costs

6. SPOUSES GODOFREDO & DOMINICA FLANCIA, petitioners, vs. COURT OF APPEALS & WILLIAM ONG GENATO, respondents.

D E C I S I O N

CORONA, J.:

Before us is a petition for review under Rule 45 of the Rules of Court, seeking to set aside the October 6, 2000 decision[1] of the Court of Appeals in CA-G.R. CV No. 56035.

The facts as outlined by the trial court[2] follow.

This is an action to declare null and void the mortgage executed by defendant

Oakland Development Resources Corp. xxx in favor of defendant William Ong

Genato over the house and lot plaintiffs spouses Godofredo and Dominica Flancia

purchased from defendant corporation.

In the complaint, plaintiffs allege that they purchased from defendant corporation a

parcel of land known as Lot 12, Blk. 3, Phase III-A containing an area of 128.75

square meters situated in Prater Village Subd. II located at Brgy. Old Balara,

Quezon City; that by virtue of the contract of sale, defendant corporation

authorized plaintiffs to transport all their personal belongings to their house at the

aforesaid lot; that on December 24, 1992, plaintiffs received a copy of the

execution foreclosing [the] mortgage issued by the RTC, Branch 98 ordering

defendant Sheriff Sula to sell at public auction several lots formerly owned by

defendant corporation including subject lot of plaintiffs; that the alleged mortgage

of subject lot is null and void as it is not authorized by plaintiffs pursuant to Art.

2085 of the Civil Code which requires that the mortgagor must be the absolute

owner of the mortgaged property; that as a consequence of the nullity of said

mortgage, the execution foreclosing [the] mortgage is likewise null and void; that

plaintiffs advised defendants to exclude subject lot from the auction sale but the

latter refused. Plaintiffs likewise prayed for damages in the sum of P50,000.00.

Defendant William Ong Genato filed a motion to dismiss the complaint which was

opposed by the plaintiffs and denied by the Court in its Order dated February 16,

1993.

Defendant Genato, then filed his answer averring that on May 19, 1989 co-

defendant Oakland Development Resources Corporation mortgaged to Genato two

(2) parcels of land covered by TCT Nos. 356315 and 366380 as security and

guaranty for the payment of a loan in the sum of P2,000,000.00; that it appears in

the complaint that the subject parcel of land is an unsubdivided portion of the

aforesaid TCT No. 366380 which covers an area of 4,334 square meters more or

less; that said real estate mortgage has been duly annotated at the back of TCT No.

366380 on May 22, 1989; that for non-payment of the loan of P2,000,000.00

defendant Genato filed an action for foreclosure of real estate mortgage against co-

defendant corporation; that after [trial], a decision was rendered by the Regional

Trial Court of Quezon City, Branch 98 against defendant corporation which

decision was affirmed by the Honorable Court of Appeals; that the decision of the

Court of Appeals has long become final and thus, the Regional Trial Court, Brach

98 of Quezon City issued an Order dated December 7, 1992 ordering defendant

Sheriff Ernesto Sula to cause the sale at public auction of the properties covered by

TCT No. 366380 for failure of defendant corporation to deposit in Court the

money judgment within ninety (90) days from receipt of the decision of the Court

of Appeals; that plaintiffs have no cause of action against defendant Genato; that

the alleged plaintiffs Contract to Sell does not appear to have been registered with

the Register of Deeds of Quezon City to affect defendant Genato and the latter is

thus not bound by the plaintiffs Contract to Sell; that the registered mortgage is

superior to plaintiffs alleged Contract to Sell and it is sufficient for defendant

Genato as mortgagee to know that the subject TCT No. 366380 was clean at the

time of the execution of the mortgage contract with defendant corporation and

defendant Genato is not bound to go beyond the title to look for flaws in the

mortgagors title; that plaintiffs alleged Contract to Sell is neither a mutual promise

to buy and sell nor a Contract of Sale. Ownership is retained by the seller,

regardless of delivery and is not to pass until full payment of the price; that

defendant Genato has not received any advice from plaintiffs to exclude the subject

lot from the auction sale, and by way of counterclaim, defendant Genato prays

for P150,000.00 moral damages and P20,000.00 for attorneys fees.

On the other hand, defendant Oakland Development Resources Corporation

likewise filed its answer and alleged that the complaint states no cause of action;

xxx Defendant corporation also prays for attorneys fees of P20,000.00 in its

counterclaim.[3]

After trial, the assisting judge[4] of the trial court rendered a decision dated August 16, 1996, the decretal portion of which provided:

Wherefore, premises considered, judgment is hereby rendered.

1) Ordering defendant Oakland Devt. Resources Corporation to pay plaintiffs:

a) the amount of P10,000.00 representing payment for the option to purchase lot;

b) the amount of P140,000.00 representing the first downpayment of the contract price;

c) the amount of P20,520.80 representing five monthly amortizations for February, March, April, May and June 1990;

d) the amount of P3,000.00 representing amortization for November 1990; all plus legal interest from the constitution of the mortgage up to the time the instant case was filed.

2) Ordering said defendant corporation to pay further to plaintiffs the sum of P30,000.00 for moral damages, P10,000.00 for exemplary damages and P20,000.00 for and as reasonable attorneys fees plus cost;

3) Dismissing defendant corporations counterclaim;

4) Dismissing defendant Genatos counterclaim.[5]

On motion for reconsideration, the regular presiding judge set aside the judgment of the assisting judge and rendered a new one on November 27, 1996, the decretal portion of which read:

WHEREFORE, premises considered, the Motion for Reconsideration is hereby

GRANTED. The decision dated August 16, 1996 is hereby set aside and a new one

entered in favor of the plaintiffs, declaring the subject mortgage and the

foreclosure proceedings held thereunder as null and void insofar as they affect the

superior right of the plaintiffs over the subject lot, and ordering as follows:

1. Defendant Oakland Development Resources to pay to plaintiffs the amount of P20,000.00 for litigation-related expenses;

2. Ordering defendant Sheriff Ernesto L. Sula to desist from conducting further proceedings in the extra-judicial foreclosure insofar as they affect the plaintiffs, or, in the event that title has been consolidated in the name of defendant William O. Genato, ordering said defendant to reconvey to

plaintiffs the title corresponding to Lot 12, Blk. 3, Phase III-A of Prater Village [Subd. II], located in Old Balara, Quezon City, containing an area of 128.75 square meters; and

3. Dismissing the counterclaims of defendants Oakland and Genato and with costs against them.[6]

On appeal, the Court of Appeals issued the assailed order:

Wherefore, foregoing premises considered, the appeal having merit in fact and in

law is hereby GRANTED and the decision of the Trial Court dated 27 November

1996 hereby SET ASIDE and REVERSED, and its judgment dated August 16,

1996 REINSTATED and AFFIRMED IN TOTO. No Costs.

SO ORDERED.[7]

Hence, this petition.

For resolution before us now are the following issues:

(1) whether or not the registered mortgage constituted over the property was valid;

(2) whether or not the registered mortgage was superior to the contract to sell; and

(3) whether or not the mortgagee was in good faith.

Under the Art. 2085 of the Civil Code, the essential requisites of a contract of mortgage are: (a) that it be constituted to secure the fulfillment of a principal obligation; (b) that the mortgagor be the absolute owner of the thing mortgaged; and (c) that the persons constituting the mortgage have the free disposal of their property, and in the absence thereof, that they be legally authorized for the purpose.

All these requirements are present in this case.

FIRST ISSUE: WAS THE REGISTERED MORTGAGE VALID?

As to the first essential requisite of a mortgage, it is undisputed that the mortgage was executed on May 15, 1989 as security for a loan obtained by Oakland from Genato.

As to the second and third requisites, we need to discuss the difference between a contract of sale and a contract to sell.

In a contract of sale, title to the property passes to the vendee upon the delivery of the thing sold; in a contract to sell, ownership is, by agreement, reserved by the vendor and is not to pass to the vendee until full payment of the purchase price.

Otherwise stated, in a contract of sale, the vendor loses ownership over the property and cannot recover it unless and until the contract is resolved or rescinded; in a contract to sell, title is retained by the vendor until full payment of the price.[8]

In the contract between petitioners and Oakland, aside from the fact that it was denominated as a contract to sell, the intention of Oakland not to transfer ownership to petitioners until full payment of the purchase price was very clear. Acts of ownership over the property were expressly withheld by Oakland from petitioner. All that was granted to them by the occupancy permit was the right to possess it.

Specifically, the contract between Oakland and petitioners stated:

xxx xxx xxx

7. That the BUYER/S may be allowed to enter into and take possession of the property upon issuance of Occupancy Permit by the OWNER/DEVELOPER exclusively, although title has not yet passed to the BUYER/S, in which case his possession shall be that of a possessor by mere tolerance Lessee, subject to certain restrictions contained in this deed.

xxx xxx xxx

13. That the BUYER/S cannot sell, mortgage, cede, transfer, assign or in any manner alienate or dispose of, in whole or in part, the rights acquired by and the obligations imposed on the BUYER/S by virtue of this contract, without the express written consent of the OWNER/DEVELOPER.

xxx xxx xxx

24. That this Contract to Sell shall not in any way [authorize] the BUYER/S to occupy the assigned house and lot to them.[9]

xxx xxx xxx

Clearly, when the property was mortgaged to Genato in May 1989, what was in effect between Oakland and petitioners was a contract to sell, not a contract of sale. Oakland retained absolute ownership over the property.

Ownership is the independent and general power of a person over a thing for purposes recognized by law and within the limits established thereby.[10] According to Art. 428 of the Civil Code, this means that:

The owner has the right to enjoy and dispose of a thing, without other limitations

than those established by law.

xxx xxx xxx

Aside from the jus utendi and the jus abutendi [11] inherent in the right to enjoy the thing, the right to dispose, or the jus disponendi, is the power of the owner to alienate, encumber, transform and even destroy the thing owned.[12]

Because Oakland retained all the foregoing rights as owner of the property, it was entitled absolutely to mortgage it to Genato. Hence, the mortgage was valid.

SECOND ISSUE: WAS THE REGISTERED MORTGAGE SUPERIOR TO THE CONTRACT TO SELL?

In their memorandum, petitioners cite our ruling in State

Investment House, Inc. v. Court of Appeals [13] to the effect that an unregistered sale is preferred over a registered mortgage over the same property. The citation is misplaced.

This Court in that case explained the rationale behind the rule:

The unrecorded sale between respondents-spouses and SOLID is preferred for the

reason that if the original owner xxx had parted with his ownership of the thing

sold then he no longer had ownership and free disposal of that thing as to be able to

mortgage it again.

State Investment House is completely inapplicable to the case at bar. A contract of sale and a contract to sell are worlds apart. State Investment

House clearly pertained to a contract of sale, not to a contract to sell which was what Oakland and petitioners had. In State Investment House, ownership had passed completely to the buyers and therefore, the former owner no longer had any legal right to mortgage the property, notwithstanding the fact that the new owner-buyers had not registered the sale. In the case before us, Oakland retained absolute ownership over the property under the contract to sell and therefore had every right to mortgage it.

In sum, we rule that Genatos registered mortgage was superior to petitioners contract to sell, subject to any liabilities Oakland may have incurred in favor of petitioners by irresponsibly mortgaging the property to Genato despite its commitments to petitioners under their contract to sell.

THIRD ISSUE: WAS THE MORTGAGE IN GOOD FAITH?

The third issue involves a factual matter which should not be raised in this petition. Only questions of law may be raised in a Rule 45 petition. This Court is not a trier of facts. The resolution of factual issues is the function of the lower courts. We therefore adopt the factual findings of the Court of Appeals and uphold the good faith of the mortgagee Genato.

RELIANCE ON WHAT APPEARS IN THE TITLE

Just as an innocent purchaser for value may rightfully rely on what appears in the certificate of title, a mortgagee has the right to rely on what appears in the title presented to him. In the absence of anything to arouse suspicion, he is under no obligation to look beyond the certificate and investigate the title of the mortgagor appearing on the face of the said certificate. [14]

We agree with the findings and conclusions of the trial court regarding the liabilities of Oakland in its August 16, 1996 decision, as affirmed by the Court of Appeals:

Anent [plaintiffs] prayer for damages, the Court finds that defendant corporation is

liable to return to plaintiffs all the installments/payments made by plaintiffs

consisting of the amount of P10,000.00 representing payment for the option to

purchase lot; the amount of P140,000.00 which was the first downpayment; the

sum of P20,520.80 representing five monthly amortizations for February, March,

April, May and June 1990 and the amount ofP3,000.00 representing amortization

for November 1990 plus legal interest from the time of the mortgage up to the time

this instant case was filed. Further, considering that defendant corporation

wantonly and fraudulently mortgaged the subject property without regard to

[plaintiffs] rights over the same, said defendant should pay plaintiffs moral

damages in the reasonable amount of P30,000.00. xxx Furthermore, since

defendant [corporations] acts have compelled the plaintiffs to litigate and incur

expenses to protect their interest, it should likewise be adjudged to pay plaintiffs

attorneys fees ofP20,000.00 under Article 2208 paragraph two (2) of the Civil

Code.[15]

WHEREFORE, the petition for review is hereby DENIED. The decision of the Court of Appeals reinstating the August 16, 1996 decision of the trial court is hereby AFFIRMED.

SO ORDERED.

8. JOVAN LAND, petitioner, vs. COURT OF APPEALS and EUGENIO QUESADA, INC., respondents.

D E C I S I O N

HERMOSISIMA, JR. J.:

This is a petition for review on certiorari to reverse and set aside the decision of the Court of Appeals in C.A.-G.R. CV No. 47515.

Petitioner Jovan Land, Inc. is a corporation engaged in the real estate business. Its President and Chairman of the Board of Directors is one Joseph Sy.

Private respondent Eugenio Quesada is the owner of the Q Building located on an 801 sq. m. lot at the corner of Mayhaligue Street and Rizal Avenue, Sta. Cruz, Manila. The property is covered by TCT No. 77796 of the Registry of Deeds of Manila.

Petitioner learned from co-petitioner Consolacion P. Mendoza that private respondent was selling the aforesaid Mayhaligue property.Thus, petitioner through Joseph Sy made a written offer, dated July 27, 1987 for P10.25 million. This first offer was not accepted by Conrado Quesada, the General Manager of private respondent. Joseph Sy sent a second

written offer dated July 31, 1989 for the same price but inclusive of an undertaking to pay the documentary stamp tax, transfer tax, registration fees and notarial charges. Check No. 247048, dated July 31, 1989, for one million pesos drawn against the Philippine Commercial and Industrial Bank (PCIB) was enclosed therewith as earnest money. This second offer, with earnest money, was again rejected by Conrado Quesada. Undaunted, Joseph Sy, on August 10, 1989, sent a third written offer for twelve million pesos with a similar check for one million pesos as earnest money. Annotated on this third letter-offer was the phrase "Received original, 9-4-89" beside which appears the signature of Conrado Quesada.

On the basis of this annotation which petitioner insists is the proof that there already exists a valid, perfected agreement to sell the Mayhaligue property, petitioner filed with the trial court, a complaint for specific performance and collection of sum of money with damages.However, the trial court held that:

"x x x the business encounters between Joseph Sy and Conrado Quesada

had not passed the negotiation stage relating to the intended sale by the

defendant corporation of the property in question. x x x As the court finds,

there is nothing in the record to point that a contract was ever perfected. In

fact, there is nothing in writing which is indispensably necessary in order

that the perfected contract could be enforced under the Statute of Frauds."[1]

Since the trial court dismissed petitioner's complaint for lack of cause of action, petitioner appealed[2] to respondent Court of Appeals before which it assigned the following errors:

"1. The Court a quo failed to appreciate that there was already a perfected

contract of sale between Jovan Land, Inc. and the private respondent];

2. The Court a quo erred in its conclusion that there was no implied

acceptance of the offer by appellants to appellee [private respondent];

3. The Court a quo was in error where it concluded that the contract of sale

was unenforceable;

4.The Court a quo failed to rule that appellant [petitioner] Mendoza is

entitled to her broker's commission."[3]

Respondent court placed petitioner to task on their assignment of errors and concluded that not any of them justifies a reversal of the trial court decision.

We agree.

In the case of Ang Yu Asuncion v. Court of Appeals,[4] we held that:

"xxx [A] contract (Art. 1157, Civil Code), x x x is a meeting of minds

between two persons whereby one binds himself, with respect to the other,

to give something or to render some service xxx. A contract undergoes

various stages that include its negotiation or preparation, its perfection and,

finally, its consummation. Negotiation covers the period from the time the

prospective contracting parties indicate interest in the contract to the time

the contract is concluded xxx. The perfection of the contract takes place

upon the concurrence of the essential elements thereof."

Moreover, it is a fundamental principle that before contract of sale can be valid, the following elements must be present, viz: (a) consent or meeting of the minds; (b) determinate subject matter; (3) price certain in money or its equivalent. Until the contract of sale is perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation between the parties.

In the case at bench, petitioner, anchors its main argument on the annotation on its third letter-offer of the phrase "Received original, 9-4-89," beside which appears the signature of Conrado Quesada. It also contends that the said annotation is evidence to show that there was already a perfected agreement to sell as respondent can be said to have accepted petitioner's payment in the form of a check which was enclosed in the third letter.

However, as correctly elucidated by the Court of Appeals:

"Sy insisted in his testimony that this offer of P12M was accepted by

Conrado Quesada but there is nothing written or documentary to show that

such offer was accepted by Conrado Quesada. While Sy claimed that the

acceptance could be gleaned from the notation in the third written offer, the

court is not impressed thereon however because the notation merely states

as follows: "Received Original, (S)-Conrado Quesada" and below this

signature is "9-4-89". As explained by Conrado Quesada in his testimony

what was received by him was the original of the written offer.

The court cannot believe that this notation marked as Exhibit D-2 would

signify the acceptance of the offer. Neither does it signify, as Sy had

testified that the check was duly received on said date. If this were true Sy,

who appears to be an intelligent businessman could have easily asked

Conrado Quesada to indicate on Exhibit D the alleged fact of acceptance of

said check. And better still, Sy could have asked Quesada the acceptance in

writing separate of the written offer if indeed there was an agreement as to

the price of the proposed sale of the property in question."[5]

Clearly then, a punctilious examination of the receipt reveals that the same can neither be regarded as a contract of sale nor a promise to sell. Such an annotation by Conrado Quesada amounts to neither a written nor an implied acceptance of the offer of Joseph Sy. It is merely a memorandum of the receipt by the former of the latter's offer. The requisites of a valid contract of sale are lacking in said receipt and therefore the "sale" is neither valid nor enforceable.

Although there was a series of communications through letter-offers and rejections as evident from the facts of this case, still it is undeniable that no written agreement was reached between petitioner and private respondent with regard to the sale of the realty. Hence, the alleged transaction is unenforceable as the requirements under the Statute of Frauds have not been complied with. Under the said provision, an agreement for the sale of real property or of an interest therein, to be enforceable, must be in writing and subscribed by the party charged or by an agent thereof

Petitioner also asseverates that the failure of Conrado Quesada to return the check for one million pesos, translates to implied acceptance of its third letter-offer. It, however, does not rebut the finding of the trial court that private respondent was returning the check but petitioner refused to accept the same and that when Conrado Quesada subsequently sent it back to petitioner through registered mail, the latter failed to claim its mail from the post office.

Finally, we fitting