G.R. No. L-41847 December 12, 1986

CATALINO LEABRES, petitioner, vs.COURT OF APPEALS and MANOTOK REALTY, INC., respondents.

Magtanggol C. Gunigundo for petitioner.

Marcelo de Guzman for respondents.

 

PARAS, J.:

Before Us is a Petition for certiorari to review the decision of the Court of Appeals which is quoted hereunder:

In Civil Case No. 64434, the Court of First Instance of Manila made the following quoted decision:

(1) Upon defendant's counterclaim, ordering plaintiff Catalino Leabres to vacate and/or surrender possession to defendant Manotok Realty, Inc. the parcel of land subject matter of the complaint described in paragraph 3 thereof and described in the Bill of Particulars dated March 4, 1966;

(2) To pay defendant the sum of P81.00 per month from March 20, 1959, up to the time he actually vacates and/or surrenders possession of the said parcel of land to the defendant Manotok Realty, Inc., and

(3) To pay attorney's fees to the defendant in the amount of P700.00 and pay the costs. (Decision, R.A., pp. 54-55).

The facts of this case may be briefly stated as follows:

Clara Tambunting de Legarda died testate on April 22, 1950. Among the properties left by the deceased is the "Legarda Tambunting Subdivision" located on Rizal Avenue Extension, City of Manila, containing an area of 80,238.90 sq. m., covered by Transfer Certificates of Title No. 62042; 45142; 45149; 49578; 40957 and 59585. Shortly after the death of said deceased, plaintiff Catalino Leabres bought, on a partial payment of Pl,000.00 a portion (No. VIII, Lot No. 1) of the Subdivision from surviving husband Vicente J. Legarda who acted as special administrator, the deed or receipt of said sale appearing to be dated May 2, 1950 (Annex "A"). Upon petition of Vicente L. Legarda, who later was appointed a regular administrator together with Pacifica Price and Augusto Tambunting on August 28, 1950, the Probate Court of Manila in the Special Proceedings No. 10808) over the testate estate of said Clara Tambunting, authorized through its order of November 21, 1951 the sale of the property.

In the meantime, Vicente L. Legarda was relieved as a regular Administrator and the Philippine Trust Co. which took over as such administrator advertised the sale of the subdivision which includes the lot subject matter herein, in the issues of August 26 and 27, September 2 and 3, and 15 and 17, 1956 of the Manila Times and Daily Mirror. In the aforesaid Special Proceedings No. 10808, no adverse claim or interest over the subdivision or any portion thereof was ever presented by any person, and in the sale that followed, the Manotok Realty, Inc. emerged the successful bidder at the

price of P840,000.00. By order of the Probate Court, the Philippine Trust Co. executed the Deed of Absolute Sale of the subdivision dated January 7, 1959 in favor of the Manotok Realty, Inc. which deed was judicially approved on March 20, 1959, and recorded immediately in the proper Register of Deeds which issued the corresponding Certificates of Title to the Manotok Realty, Inc., the defendant appellee herein.

A complaint dated February 8, 1966, was filed by herein plaintiff, which seeks, among other things, for the quieting of title over the lot subject matter herein, for continuing possession thereof, and for damages. In the scheduled hearing of the case, plaintiff Catalino Leabres failed to appear although he was duly notified, and so the trial Court, in its order dated September 14, 1967, dismissed the complaint (Annex "E"). <äre||anº•1àw> In another order of dismissal was amended as to make the same refer only to plaintiff's complaint and the counter claim of the defendant was reinstated and as the evidence thereof was already adduced when defendant presented its evidence in three other cases pending in the same Court, said counterclaim was also considered submitted for resolution. The motion for reconsideration dated January 22, 1968 (Annex " I "), was filed by plaintiff, and an opposition thereto dated January 25, 1968, was likewise filed by defendant but the Court a quo dismissed said motion in its order dated January 12, 1970 (Annex "K"), "for lack of merits" (pp. 71-72, Record on Appeal).

Appealing the decision of the lower Court, plaintiff-appellant advances the following assignment of errors:

I

THE LOWER COURT ERRED IN DENYING THE MOTION FOR RECONSIDERATION, DATED OCTOBER 9, 1967, THUS DEPRIVING THE PLAINTIFF-APPELLANT HIS DAY IN COURT.

II

THE LOWER COURT ERRED IN ORDERING THE PLAINTIFF-APPELLANT CATALINO LEABRES TO VACATE AND/OR SURRENDER THE POSSESSION OF THE LOT SUBJECT MATTER OF THE COMPLAINT TO DEFENDANT-APPELLEE.

III

THE LOWER COURT ERRED IN ORDERING THE PLAINTIFF-APPELLANT TO PAY DEFENDANT-APPELLEE THE SUM OF P 81.00 PER MONTH FROM MARCH 20, 1969, UP TO THE TIME HE ACTUALLY VACATE THE PARCEL OF LAND. (Appellant's Brief, p. 7)

In the First Assigned Error, it is contended that the denial of his Motion for Reconsideration dated October 9, 1967, the plaintiff-appellant was not accorded his day in Court.

The rule governing dismissal of actions for failure to prosecute is provided for in Section 3, Rule 17 of the Rules of Court, as follows:

If the plaintiff fails to appear at the time of the trial, or to prosecute his action for an unreasonable length of time, or to comply with these rules or any order of the Court, the action may be dismissed upon motion of the defendant or upon the Court's own motion. This dismissal shall have the effect of an adjudication upon the merits, unless otherwise provided by the Court.

Under the afore-cited section, it is discretionary on the part of the Court to dismiss an action for failure to prosecute, and its action will not be reversed upon appeal in the absence of abuse. The burden of showing abuse of this discretion is upon the appellant since every presumption is toward the correctness of the Court's action (Smith, Bell & Co., et al vs. American Pres. Lines, Ltd., and Manila Terminal Co., No. L-5304, April 30, 1954; Adorable vs. Bonifacio, G. R. No. L-0698, April 22, 1959); Flores vs. Phil. Alien Property Administration, G.R. No. L-12741, April 27, 1960). By the doctrine laid down in these cases, and by the provisions of Section 5, Rules 131 of the Rules of Court, particularly paragraphs (m) and (o) which respectively presume the regularity of official performance and the passing upon by the Court over all issues within a case, it matters not if the Court dismissing the action for failure to prosecute assigns any special reason for its action or not. We take note of the fact that the Order declaring appellant in default was handed down on September 14, 1967. Appellant took no steps to have this Order set aside. It was only on January 22, 1968, after he was furnished a copy of the Court's decision dated December 9, 1967 or about four months later that he attached this Order and the decision of the Court. Appellant slept on his rights-if he had any. He had a chance to have his day in Court but he passed it off. Four months later he alleges that sudden illness had prevented him. We feel appellant took a long time too-long in fact-to inform the Court of his sudden illness. This sudden illness that according to him prevented him from coming to Court, and the time it took him to tell the Court about it, is familiar to the forum as an oft repeated excuse to justify indifference on the part of litigants or outright negligence of those who represent them which subserves the interests of justice. In the instant case, not only did the appellant wantonly pass off his chance to have a day in Court but he has also failed to give a convincing, just and valid reason for the new hearing he seeks. The trial court found it so; We find it so. The trial Court in refusing to give appellant a new trial does not appear to have abused his discretion as to justify our intervention.

The Second and Third Assignments of Error are hereby jointly treated in our discussion since the third is but a consequence of the second.

It is argued that had the trial Court reconsidered its order dated September 14, 1967 dismissing the complaint for failure to prosecute, plaintiff-appellant might have proved that he owns the lot subjectmatter of the case, citing the receipt (Annex A) in his favor; that he has introduced improvements and erected a house thereon made of strong materials; that appellee's adverse interest over the property was secured in bad faith since he had prior knowledge and notice of appellant's physical possession or acquisition of the same; that due to said bad faith appellant has suffered damages, and that for all the foregoing, the judgment should be reversed and equitable relief be given in his favor.

As above stated, the Legarda-Tambunting Subdivision which includes the lot subject matter of the instant case, is covered by Torrens Certificates of Title. Appellant anchors his claim on the receipt (Annex "A") dated May 2, 1950, which he claims as evidence of the sale of said lot in his favor. Admittedly, however, Catalino Leabres has not registered his supposed interest over the lot in the records of the Register of Deeds, nor did he present his claim for probate in the testate proceedings over the estate of the owner of said subdivision, in spite of the notices advertised in the papers. (Saldana vs. Phil. Trust Co., et al.; Manotok Realty, Inc., supra).

On the other hand, defendant-appellee, Manotok Realty, Inc., bought the whole subdivision which includes the subject matter herein by order and with approval of the Probate Court and upon said approval, the Deed of Absolute Sale in favor of appellee was immediately registered with the proper Register of Deeds. Manotok Realty, Inc. has therefore the better right over the lot in question because in cases of lands registered under the Torrens Law, adverse interests not therein annotated which are without the previous knowledge by third parties do not bind the latter. As to the improvement which appellant claims to have introduced on the lot, purchase of registered lands for

value and in good faith hold the same free from all liens and encumbrances except those noted on the titles of said land and those burdens imposed by law. (Sec. 39, Act. 496). <äre||anº•1àw> An occupant of a land, or a purchaser thereof from a person other than the registered owner, cannot claim good faith so as to be entitled to retention of the parcels occupied by him until reimbursement of the value of the improvements he introduced thereon, because he is charged with notice of the existence of the owner's certificate of title (J.M. Tuason & Co. vs. Lecardo, et al., CA-G.R. No. 25477-R, July 24, 1962; J.M. Tuason & Co., Inc. vs. Manuel Abundo, CA-G.R. No. 29701-R, November 18, 1968).

Appellant has not convinced the trial Court that appellee acted in bad faith in the acquisition of the property due to the latter's knowledge of a previous acquisition by the former, and neither are we impressed by the claim. The purchaser of a registered land has to rely on the certificate of title thereof. The good faith of appellee coming from the knowledge that the certificate of title covering the entire subdivision contain no notation as to appellant's interest, and the fact that the records of these eases like Probate Proceedings Case No. 10808, do not show the existence of appellant's claim, strongly support the correctness of the lower Court's decision

WHEREFORE, in view of the foregoing, we find no reason to amend or set aside the decision appealed from, as regards to plaintiff-appellant Catalino Leabres. We therefore affirm the same, with costs against appellant. (pp. 33-38, Rollo)

Petitioner now comes to us with the following issues:

(1) Whether or not the petitioner was denied his day in court and deprived of due process of law.

(2) Whether or not the petitioner had to submit his receipt to the probate court in order that his right over the parcel of land in dispute could be recognized valid and binding and conclusive against the Manotok Realty, Inc.

(3) Whether or not the petitioner could be considered as a possessor in good faith and in the concept of owner. (p. 11, Rollo)

Petitioner's contention that he was denied his day in court holds no water. Petitioner does not deny the fact that he failed to appear on the date set for hearing on September 14, 1967 and as a consequence of his non-appearance, the order of dismissal was issued, as provided for by Section 3, Rule 17 of the Revised Rules of Court.

Moreover, as pointed out by private respondent in its brief, the hearing on June 11, 1967 was not ex parte. Petitioner was represented by his counsel on said date, and therefore, petitioner was given his day in Court.

The main objection of the petition in the lower court's proceeding is the reception of respondent's evidence without declaring petitioner in default. We find that there was no necessity to declare petitioner in default since he had filed his answer to the counterclaim of respondent.

Petitioner anchors his main arguments on the receipt (Exh. 1) dated May 2, 1950, as a basis of a valid sale. An examination of the receipt reveals that the same can neither be regarded as a contract of sale or a promise to sell. There was merely an acknowledgment of the sum of One Thousand Pesos (P1,000.00). There was no agreement as to the total purchase price of the land nor to the monthly installment to be paid by the petitioner. The requisites of a valid Contract of Sale namely 1) consent or meeting of the minds of the parties; 2) determinate subject matter; 3) price certain in

money or its equivalent-are lacking in said receipt and therefore the "sale" is not valid nor enforceable. Furthermore, it is a fact that Dona Clara Tambunting died on April 22, 1950. Her estate was thereafter under custodia legis of the Probate Court which appointed Don Vicente Legarda as Special Administrator on August 28, 1950. Don Vicente Legarda entered into said sale in his own personal-capacity and without court approval, consequently, said sale cannot bind the estate of Clara Tambunting. Petitioner should have submitted the receipt of alleged sale to the Probate Court for its approval of the transactions. Thus, the respondent Court did not err in holding that the petitioner should have submitted his receipt to the probate court in order that his right over the subject land could be recognized-assuming of course that the receipt could be regarded as sufficient proof.

Anent his possession of the land, petitioner cannot be deemed a possessor in good faith in view of the registration of the ownership of the land. To consider petitioner in good faith would be to put a premium on his own gross negligence. The Court resolved to DENY the petition for lack of merit and to AFFIRM the assailed judgment.

Feria (Chairman), Fernan, Alampay and Gutierrez, Jr., JJ., concur.

G.R. No. L-8506             August 31, 1956

CELESTINO CO & COMPANY, petitioner, vs.COLLECTOR OF INTERNAL REVENUE, respondent.

Office of the Solicitor General Ambrosio Padilla, Fisrt Assistant Solicitor General Guillermo E. Torres and Solicitor Federico V. Sian for respondent.

BENGZON, J.:

Appeal from a decision of the Court of Tax Appeals.

Celestino Co & Company is a duly registered general copartnership doing business under the trade name of "Oriental Sash Factory". From 1946 to 1951 it paid percentage taxes of 7 per cent on the gross receipts of its sash, door and window factory, in accordance with section one hundred eighty-six of the National Revenue Code imposing taxes on sale of manufactured articles. However in 1952 it began to claim liability only to the contractor's 3 per cent tax (instead of 7 per cent) under section 191 of the same Code; and having failed to convince the Bureau of Internal Revenue, it brought the matter to the Court of Tax Appeals, where it also failed. Said the Court:

To support his contention that his client is an ordinary contractor . . . counsel presented . . . duplicate copies of letters, sketches of doors and windows and price quotations supposedly sent by the manager of the Oriental Sash Factory to four customers who allegedly made special orders to doors and window from the said factory. The conclusion that counsel would like us to deduce from these few exhibits is that the Oriental Sash Factory does not manufacture ready-made doors, sash and windows for the public but only upon special order of its select customers. . . . I cannot believe that petitioner company would take, as in fact it has taken, all the trouble and expense of registering a special trade name for its sash business and then orders company stationery carrying the bold print "Oriental Sash Factory (Celestino Co & Company, Prop.) 926 Raon St. Quiapo, Manila, Tel. No. 33076, Manufacturers of all kinds of doors, windows, sashes, furniture, etc. used season-dried and kiln-dried lumber, of the best quality workmanships" solely for the purpose of supplying the needs for doors, windows and sash of its special and limited customers. One ill note that petitioner has chosen for its tradename and has offered itself to the public as a "Factory", which means it is out to do business, in its chosen lines on a big scale. As a general rule, sash factories receive orders for doors and windows of special design only in particular cases but the bulk of their sales is derived from a ready-made doors and windows of standard sizes for the average home. Moreover, as shown from the investigation of petitioner's book of accounts, during the period from January 1, 1952 to September 30, 1952, it sold sash, doors and windows worth P188,754.69. I find it difficult to believe that this amount which runs to six figures was derived by petitioner entirely from its few customers who made special orders for these items.

Even if we were to believe petitioner's claim that it does not manufacture ready-made sash, doors and windows for the public and that it makes these articles only special order of its customers, that does not make it a contractor within the purview of section 191 of the national Internal Revenue Code. there are no less than fifty occupations enumerated in the aforesaid section of the national Internal Revenue Code subject to percentage tax and after reading carefully each and every one of them, we cannot find under which the business of manufacturing sash, doors and windows upon special order of customers fall under the

category of "road, building, navigation, artesian well, water workers and other construction work contractors" are those who alter or repair buildings, structures, streets, highways, sewers, street railways railroads logging roads, electric lines or power lines, and includes any other work for the construction, altering or repairing for which machinery driven by mechanical power is used. (Payton vs. City of Anadardo 64 P. 2d 878, 880, 179 Okl. 68).

Having thus eliminated the feasibility off taxing petitioner as a contractor under 191 of the national Internal Revenue Code, this leaves us to decide the remaining issue whether or not petitioner could be taxed with lesser strain and more accuracy as seller of its manufactured articles under section 186 of the same code, as the respondent Collector of Internal Revenue has in fact been doing the Oriental Sash Factory was established in 1946.

The percentage tax imposed in section 191 of our Tax Code is generally a tax on the sales of services, in contradiction with the tax imposed in section 186 of the same Code which is a tax on the original sales of articles by the manufacturer, producer or importer. (Formilleza's Commentaries and Jurisprudence on the National Internal Revenue Code, Vol. II, p. 744). The fact that the articles sold are manufactured by the seller does not exchange the contract from the purview of section 186 of the National Internal Revenue Code as a sale of articles.

There was a strong dissent; but upon careful consideration of the whole matter are inclines to accept the above statement of the facts and the law. The important thing to remember is that Celestino Co & Company habitually makes sash, windows and doors, as it has represented in its stationery and advertisements to the public. That it "manufactures" the same is practically admitted by appellant itself. The fact that windows and doors are made by it only when customers place their orders, does not alter the nature of the establishment, for it is obvious that it only accepted such orders as called for the employment of such material-moulding, frames, panels-as it ordinarily manufactured or was in a position habitually to manufacture.

Perhaps the following paragraph represents in brief the appellant's position in this Court:

Since the petitioner, by clear proof of facts not disputed by the respondent, manufacturers sash, windows and doors only for special customers and upon their special orders and in accordance with the desired specifications of the persons ordering the same and not for the general market: since the doors ordered by Don Toribio Teodoro & Sons, Inc., for instance, are not in existence and which never would have existed but for the order of the party desiring it; and since petitioner's contractual relation with his customers is that of a contract for a piece of work or since petitioner is engaged in the sale of services, it follows that the petitioner should be taxed under section 191 of the Tax Code and NOT under section 185 of the same Code." (Appellant's brief, p. 11-12).

But the argument rests on a false foundation. Any builder or homeowner, with sufficient money, may order windows or doors of the kind manufactured by this appellant. Therefore it is not true that it serves special customers only or confines its services to them alone. And anyone who sees, and likes, the doors ordered by Don Toribio Teodoro & Sons Inc. may purchase from appellant doors of the same kind, provided he pays the price. Surely, the appellant will not refuse, for it can easily duplicate or even mass-produce the same doors-it is mechanically equipped to do so.

That the doors and windows must meet desired specifications is neither here nor there. If these specifications do not happen to be of the kind habitually manufactured by appellant — special forms for sash, mouldings of panels — it would not accept the order — and no sale is made. If they do, the transaction would be no different from a purchasers of manufactured goods held is stock for sale; they are bought because they meet the specifications desired by the purchaser.

Nobody will say that when a sawmill cuts lumber in accordance with the peculiar specifications of a customer-sizes not previously held in stock for sale to the public-it thereby becomes an employee or servant of the customer,1 not the seller of lumber. The same consideration applies to this sash manufacturer.

The Oriental Sash Factory does nothing more than sell the goods that it mass-produces or habitually makes; sash, panels, mouldings, frames, cutting them to such sizes and combining them in such forms as its customers may desire.

On the other hand, petitioner's idea of being a contractor doing construction jobs is untenable. Nobody would regard the doing of two window panels a construction work in common parlance.2

Appellant invokes Article 1467 of the New Civil Code to bolster its contention that in filing orders for windows and doors according to specifications, it did not sell, but merely contracted for particular pieces of work or "merely sold its services".

Said article reads as follows:

A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general market, it is contract for a piece of work.

It is at once apparent that the Oriental Sash Factory did not merely sell its services to Don Toribio Teodoro & Co. (To take one instance) because it also sold the materials. The truth of the matter is that it sold materials ordinarily manufactured by it — sash, panels, mouldings — to Teodoro & Co., although in such form or combination as suited the fancy of the purchaser. Such new form does not divest the Oriental Sash Factory of its character as manufacturer. Neither does it take the transaction out of the category of sales under Article 1467 above quoted, because although the Factory does not, in the ordinary course of its business, manufacture and keep on stockdoors of the kind sold to Teodoro, it could stock and/or probably had in stock the sash, mouldings and panels it used therefor (some of them at least).

In our opinion when this Factory accepts a job that requires the use of extraordinary or additional equipment, or involves services not generally performed by it-it thereby contracts for a piece of work — filing special orders within the meaning of Article 1467. The orders herein exhibited were not shown to be special. They were merely orders for work — nothing is shown to call them special requiring extraordinary service of the factory.

The thought occurs to us that if, as alleged-all the work of appellant is only to fill orders previously made, such orders should not be called special work, but regular work. Would a factory do business performing only special, extraordinary or peculiar merchandise?

Anyway, supposing for the moment that the transactions were not sales, they were neither lease of services nor contract jobs by a contractor. But as the doors and windows had been admittedly "manufactured" by the Oriental Sash Factory, such transactions could be, and should be taxed as "transfers" thereof under section 186 of the National Revenue Code.

The appealed decision is consequently affirmed. So ordered.

Paras, C. J., Padilla, Montemayor, Bautista Angelo, Concepcion, Reyes, J. B. L., and Felix, JJ., concur.

G.R. No. L-54908 January 22, 1990

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.MITSUBISHI METAL CORPORATION, ATLAS CONSOLIDATED MINING AND DEVELOPMENT CORPORATION and the COURT OF TAX APPEALS, respondents.

G.R. No. 80041 January 22, 1990

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.MITSUBISHI METAL CORPORATION, ATLAS CONSOLIDATED MINING AND DEVELOPMENT CORPORATION and the COURT OF TAX APPEALS, respondents.

Gadioma Law Offices for respondents.

 

REGALADO, J.:

These cases, involving the same issue being contested by the same parties and having originated from the same factual antecedents generating the claims for tax credit of private respondents, the same were consolidated by resolution of this Court dated May 31, 1989 and are jointly decided herein.

The records reflect that on April 17, 1970, Atlas Consolidated Mining and Development Corporation (hereinafter, Atlas) entered into a Loan and Sales Contract with Mitsubishi Metal Corporation (Mitsubishi, for brevity), a Japanese corporation licensed to engage in business in the Philippines, for purposes of the projected expansion of the productive capacity of the former's mines in Toledo, Cebu. Under said contract, Mitsubishi agreed to extend a loan to Atlas 'in the amount of $20,000,000.00, United States currency, for the installation of a new concentrator for copper production. Atlas, in turn undertook to sell to Mitsubishi all the copper concentrates produced from said machine for a period of fifteen (15) years. It was contemplated that $9,000,000.00 of said loan was to be used for the purchase of the concentrator machinery from Japan. 1

Mitsubishi thereafter applied for a loan with the Export-Import Bank of Japan (Eximbank for short) obviously for purposes of its obligation under said contract. Its loan application was approved on May 26, 1970 in the sum of ¥4,320,000,000.00, at about the same time as the approval of its loan for ¥2,880,000,000.00 from a consortium of Japanese banks. The total amount of both loans is equivalent to $20,000,000.00 in United States currency at the then prevailing exchange rate. The records in the Bureau of Internal Revenue show that the approval of the loan by Eximbank to Mitsubishi was subject to the condition that Mitsubishi would use the amount as a loan to Atlas and as a consideration for importing copper concentrates from Atlas, and that Mitsubishi had to pay back the total amount of loan by September 30, 1981. 2

Pursuant to the contract between Atlas and Mitsubishi, interest payments were made by the former to the latter totalling P13,143,966.79 for the years 1974 and 1975. The corresponding 15% tax thereon in the amount of P1,971,595.01 was withheld pursuant to Section 24 (b) (1) and Section 53 (b) (2) of the National Internal Revenue Code, as amended by Presidential Decree No. 131, and duly remitted to the Government. 3

On March 5, 1976, private respondents filed a claim for tax credit requesting that the sum of P1,971,595.01 be applied against their existing and future tax liabilities. Parenthetically, it was later noted by respondent Court of Tax Appeals in its decision that on August 27, 1976, Mitsubishi executed a waiver and disclaimer of its interest in the claim for tax credit in favor ofAtlas. 4

The petitioner not having acted on the claim for tax credit, on April 23, 1976 private respondents filed a petition for review with respondent court, docketed therein as CTA Case No. 2801. 5 The petition was grounded on the claim that Mitsubishi was a mere agent of Eximbank, which is a financing institution owned, controlled and financed by the Japanese Government. Such governmental status of Eximbank, if it may be so called, is the basis for private repondents' claim for exemption from paying the tax on the interest payments on the loan as earlier stated. It was further claimed that the interest payments on the loan from the consortium of Japanese banks were likewise exempt because said loan supposedly came from or were financed by Eximbank. The provision of the National Internal Revenue Code relied upon is Section 29 (b) (7) (A), 6 which excludes from gross income:

(A) Income received from their investments in the Philippines in loans, stocks, bonds or other domestic securities, or from interest on their deposits in banks in the Philippines by (1) foreign governments, (2) financing institutions owned, controlled, or enjoying refinancing from them, and (3) international or regional financing institutions established by governments.

Petitioner filed an answer on July 9, 1976. The case was set for hearing on April 6, 1977 but was later reset upon manifestation of petitioner that the claim for tax credit of the alleged erroneous payment was still being reviewed by the Appellate Division of the Bureau of Internal Revenue. The records show that on November 16, 1976, the said division recommended to petitioner the approval of private respondent's claim. However, before action could be taken thereon, respondent court scheduled the case for hearing on September 30, 1977, during which trial private respondents presented their evidence while petitioner submitted his case on the basis of the records of the Bureau of Internal Revenue and the pleadings. 7

On April 18, 1980, respondent court promulgated its decision ordering petitioner to grant a tax credit in favor of Atlas in the amount of P1,971,595.01. Interestingly, the tax court held that petitioner admitted the material averments of private respondents when he supposedly prayed "for judgment on the pleadings without off-spring proof as to the truth of his allegations." 8 Furthermore, the court declared that all papers and documents pertaining to the loan of ¥4,320,000,000.00 obtained by Mitsubishi from Eximbank show that this was the same amount given to Atlas. It also observed that the money for the loans from the consortium of private Japanese banks in the sum of ¥2,880,000,000.00 "originated" from Eximbank. From these, respondent court concluded that the ultimate creditor of Atlas was Eximbank with Mitsubishi acting as a mere "arranger or conduit through which the loans flowed from the creditor Export-Import Bank of Japan to the debtor Atlas Consolidated Mining & Development Corporation." 9

A motion for reconsideration having been denied on August 20, 1980, petitioner interposed an appeal to this Court, docketed herein as G.R. No. 54908.

While CTA Case No. 2801 was still pending before the tax court, the corresponding 15% tax on the amount of P439,167.95 on the P2,927,789.06 interest payments for the years 1977 and 1978 was withheld and remitted to the Government. Atlas again filed a claim for tax credit with the petitioner, repeating the same basis for exemption.

On June 25, 1979, Mitsubishi and Atlas filed a petition for review with the Court of Tax Appeals docketed as CTA Case No. 3015. Petitioner filed his answer thereto on August 14, 1979, and, in a

letter to private respondents dated November 12, 1979, denied said claim for tax credit for lack of factual or legal basis. 10

On January 15, 1981, relying on its prior ruling in CTA Case No. 2801, respondent court rendered judgment ordering the petitioner to credit Atlas the aforesaid amount of tax paid. A motion for reconsideration, filed on March 10, 1981, was denied by respondent court in a resolution dated September 7, 1987. A notice of appeal was filed on September 22, 1987 by petitioner with respondent court and a petition for review was filed with this Court on December 19, 1987. Said later case is now before us as G.R. No. 80041 and is consolidated with G.R. No. 54908.

The principal issue in both petitions is whether or not the interest income from the loans extended to Atlas by Mitsubishi is excludible from gross income taxation pursuant to Section 29 b) (7) (A) of the tax code and, therefore, exempt from withholding tax. Apropos  thereto, the focal question is whether or not Mitsubishi is a mere conduit of Eximbank which will then be considered as the creditor whose investments in the Philippines on loans are exempt from taxes under the code.

Prefatorily, it must be noted that respondent court erred in holding in CTA Case No. 2801 that petitioner should be deemed to have admitted the allegations of the private respondents when it submitted the case on the basis of the pleadings and records of the bureau. There is nothing to indicate such admission on the part of petitioner nor can we accept respondent court's pronouncement that petitioner did not offer to prove the truth of its allegations. The records of the Bureau of Internal Revenue relevant to the case were duly submitted and admitted as petitioner's supporting evidence. Additionally, a hearing was conducted, with presentation of evidence, and the findings of respondent court were based not only on the pleadings but on the evidence adduced by the parties. There could, therefore, not have been a judgment on the pleadings, with the theorized admissions imputed to petitioner, as mistakenly held by respondent court.

Time and again, we have ruled that findings of fact of the Court of Tax Appeals are entitled to the highest respect and can only be disturbed on appeal if they are not supported by substantial evidence or if there is a showing of gross error or abuse on the part of the tax court. 11 Thus, ordinarily, we could give due consideration to the holding of respondent court that Mitsubishi is a mere agent of Eximbank. Compelling circumstances obtaining and proven in these cases, however, warrant a departure from said general rule since we are convinced that there is a misapprehension of facts on the part of the tax court to the extent that its conclusions are speculative in nature.

The loan and sales contract between Mitsubishi and Atlas does not contain any direct or inferential reference to Eximbank whatsoever. The agreement is strictly between Mitsubishi as creditor in the contract of loan and Atlas as the seller of the copper concentrates. From the categorical language used in the document, one prestation was in consideration of the other. The specific terms and the reciprocal nature of their obligations make it implausible, if not vacuous to give credit to the cavalier assertion that Mitsubishi was a mere agent in said transaction.

Surely, Eximbank had nothing to do with the sale of the copper concentrates since all that Mitsubishi stated in its loan application with the former was that the amount being procured would be used as a loan to and in consideration for importing copper concentrates from Atlas. 12 Such an innocuous statement of purpose could not have been intended for, nor could it legally constitute, a contract of agency. If that had been the purpose as respondent court believes, said corporations would have specifically so stated, especially considering their experience and expertise in financial transactions, not to speak of the amount involved and its purchasing value in 1970.

A thorough analysis of the factual and legal ambience of these cases impels us to give weight to the following arguments of petitioner:

The nature of the above contract shows that the same is not just a simple contract of loan. It is not a mere creditor-debtor relationship. It is more of a reciprocal obligation between ATLAS and MITSUBISHI where the latter shall provide the funds in the installation of a new concentrator at the former's Toledo mines in Cebu, while ATLAS in consideration of which, shall sell to MITSUBISHI, for a term of 15 years, the entire copper concentrate that will be produced by the installed concentrator.

Suffice it to say, the selling of the copper concentrate to MITSUBISHI within the specified term was the consideration of the granting of the amount of $20 million to ATLAS. MITSUBISHI, in order to fulfill its part of the contract, had to obtain funds. Hence, it had to secure a loan or loans from other sources. And from what sources, it is immaterial as far as ATLAS in concerned. In this case, MITSUBISHI obtained the $20 million from the EXIMBANK, of Japan and the consortium of Japanese banks financed through the EXIMBANK, of Japan.

When MITSUBISHI therefore secured such loans, it was in its own independent capacity as a private entity and not as a conduit of the consortium of Japanese banks or the EXIMBANK of Japan. While the loans were secured by MITSUBISHI primarily "as a loan to and in consideration for importing copper concentrates from ATLAS," the fact remains that it was a loan by EXIMBANK of Japan to MITSUBISHI and not to ATLAS.

Thus, the transaction between MITSUBISHI and EXIMBANK of Japan was a distinct and separate contract from that entered into by MITSUBISHI and ATLAS. Surely, in the latter contract, it is not EXIMBANK, that was intended to be benefited. It is MITSUBISHI which stood to profit. Besides, the Loan and Sales Contract cannot be any clearer. The only signatories to the same were MITSUBISHI and ATLAS. Nowhere in the contract can it be inferred that MITSUBISHI acted for and in behalf of EXIMBANK, of Japan nor of any entity, private or public, for that matter.

Corollary to this, it may well be stated that in this jurisdiction, well-settled is the rule that when a contract of loan is completed, the money ceases to be the property of the former owner and becomes the sole property of the obligor (Tolentino and Manio vs. Gonzales Sy, 50 Phil. 558).

In the case at bar, when MITSUBISHI obtained the loan of $20 million from EXIMBANK, of Japan, said amount ceased to be the property of the bank and became the property of MITSUBISHI.

The conclusion is indubitable; MITSUBISHI, and NOT EXIMBANK, is the sole creditor of ATLAS, the former being the owner of the $20 million upon completion of its loan contract with EXIMBANK of Japan.

The interest income of the loan paid by ATLAS to MITSUBISHI is therefore entirely different from the interest income paid by MITSUBISHI to EXIMBANK, of Japan. What was the subject of the 15% withholding tax is not the interest income paid by MITSUBISHI to EXIMBANK, but the interest income earned by MITSUBISHI from the loan to ATLAS. . . . 13

To repeat, the contract between Eximbank and Mitsubishi is entirely different. It is complete in itself, does not appear to be suppletory or collateral to another contract and is, therefore, not to be distorted by other considerations aliunde. The application for the loan was approved on May 20,

1970, or more than a month after the contract between Mitsubishi and Atlas was entered into on April 17, 1970. It is true that under the contract of loan with Eximbank, Mitsubishi agreed to use the amount as a loan to and in consideration for importing copper concentrates from Atlas, but all that this proves is the justification for the loan as represented by Mitsubishi, a standard banking practice for evaluating the prospects of due repayment. There is nothing wrong with such stipulation as the parties in a contract are free to agree on such lawful terms and conditions as they see fit. Limiting the disbursement of the amount borrowed to a certain person or to a certain purpose is not unusual, especially in the case of Eximbank which, aside from protecting its financial exposure, must see to it that the same are in line with the provisions and objectives of its charter.

Respondents postulate that Mitsubishi had to be a conduit because Eximbank's charter prevents it from making loans except to Japanese individuals and corporations. We are not impressed. Not only is there a failure to establish such submission by adequate evidence but it posits the unfair and unexplained imputation that, for reasons subject only of surmise, said financing institution would deliberately circumvent its own charter to accommodate an alien borrower through a manipulated subterfuge, but with it as a principal and the real obligee.

The allegation that the interest paid by Atlas was remitted in full by Mitsubishi to Eximbank, assuming the truth thereof, is too tenuous and conjectural to support the proposition that Mitsubishi is a mere conduit. Furthermore, the remittance of the interest payments may also be logically viewed as an arrangement in paying Mitsubishi's obligation to Eximbank. Whatever arrangement was agreed upon by Eximbank and Mitsubishi as to the manner or procedure for the payment of the latter's obligation is their own concern. It should also be noted that Eximbank's loan to Mitsubishi imposes interest at the rate of 75% per annum, while Mitsubishis contract with Atlas merely states that the "interest on the amount of the loan shall be the actual cost beginning from and including other dates of releases against loan." 14

It is too settled a rule in this jurisdiction, as to dispense with the need for citations, that laws granting exemption from tax are construed strictissimi juris against the taxpayer and liberally in favor of the taxing power. Taxation is the rule and exemption is the exception. The burden of proof rests upon the party claiming exemption to prove that it is in fact covered by the exemption so claimed, which onus petitioners have failed to discharge. Significantly, private respondents are not even among the entities which, under Section 29 (b) (7) (A) of the tax code, are entitled to exemption and which should indispensably be the party in interest in this case.

Definitely, the taxability of a party cannot be blandly glossed over on the basis of a supposed "broad, pragmatic analysis" alone without substantial supportive evidence, lest governmental operations suffer due to diminution of much needed funds. Nor can we close this discussion without taking cognizance of petitioner's warning, of pervasive relevance at this time, that while international comity is invoked in this case on the nebulous representation that the funds involved in the loans are those of a foreign government, scrupulous care must be taken to avoid opening the floodgates to the violation of our tax laws. Otherwise, the mere expedient of having a Philippine corporation enter into a contract for loans or other domestic securities with private foreign entities, which in turn will negotiate independently with their governments, could be availed of to take advantage of the tax exemption law under discussion.

WHEREFORE, the decisions of the Court of Tax Appeals in CTA Cases Nos. 2801 and 3015, dated April 18, 1980 and January 15, 1981, respectively, are hereby REVERSED and SET ASIDE.

SO ORDERED.

Melencio-Herrera, Paras, Padilla and Sarmiento, JJ., concur.

G.R. No. L-11491            August 23, 1918

ANDRES QUIROGA, plaintiff-appellant, vs.PARSONS HARDWARE CO., defendant-appellee.

Alfredo Chicote, Jose Arnaiz and Pascual B. Azanza for appellant. Crossfield & O'Brien for appellee.

AVANCEÑA, J.:

On January 24, 1911, in this city of manila, a contract in the following tenor was entered into by and between the plaintiff, as party of the first part, and J. Parsons (to whose rights and obligations the present defendant later subrogated itself), as party of the second part:

CONTRACT EXECUTED BY AND BETWEEN ANDRES QUIROGA AND J. PARSONS, BOTH MERCHANTS ESTABLISHED IN MANILA, FOR THE EXCLUSIVE SALE OF "QUIROGA" BEDS IN THE VISAYAN ISLANDS.

ARTICLE 1. Don Andres Quiroga grants the exclusive right to sell his beds in the Visayan Islands to J. Parsons under the following conditions:

(A) Mr. Quiroga shall furnish beds of his manufacture to Mr. Parsons for the latter's establishment in Iloilo, and shall invoice them at the same price he has fixed for sales, in Manila, and, in the invoices, shall make and allowance of a discount of 25 per cent of the invoiced prices, as commission on the sale; and Mr. Parsons shall order the beds by the dozen, whether of the same or of different styles.

(B) Mr. Parsons binds himself to pay Mr. Quiroga for the beds received, within a period of sixty days from the date of their shipment.

(C) The expenses for transportation and shipment shall be borne by M. Quiroga, and the freight, insurance, and cost of unloading from the vessel at the point where the beds are received, shall be paid by Mr. Parsons.

(D) If, before an invoice falls due, Mr. Quiroga should request its payment, said payment when made shall be considered as a prompt payment, and as such a deduction of 2 per cent shall be made from the amount of the invoice.

The same discount shall be made on the amount of any invoice which Mr. Parsons may deem convenient to pay in cash.

(E) Mr. Quiroga binds himself to give notice at least fifteen days before hand of any alteration in price which he may plan to make in respect to his beds, and agrees that if on the date when such alteration takes effect he should have any order pending to be served to Mr. Parsons, such order shall enjoy the advantage of the alteration if the price thereby be lowered, but shall not be affected by said alteration if the price thereby be increased, for, in this latter case, Mr. Quiroga assumed the obligation to invoice the beds at the price at which the order was given.

(F) Mr. Parsons binds himself not to sell any other kind except the "Quiroga" beds.

ART. 2. In compensation for the expenses of advertisement which, for the benefit of both contracting parties, Mr. Parsons may find himself obliged to make, Mr. Quiroga assumes the obligation to offer and give the preference to Mr. Parsons in case anyone should apply for the exclusive agency for any island not comprised with the Visayan group.

ART. 3. Mr. Parsons may sell, or establish branches of his agency for the sale of "Quiroga" beds in all the towns of the Archipelago where there are no exclusive agents, and shall immediately report such action to Mr. Quiroga for his approval.

ART. 4. This contract is made for an unlimited period, and may be terminated by either of the contracting parties on a previous notice of ninety days to the other party.

Of the three causes of action alleged by the plaintiff in his complaint, only two of them constitute the subject matter of this appeal and both substantially amount to the averment that the defendant violated the following obligations: not to sell the beds at higher prices than those of the invoices; to have an open establishment in Iloilo; itself to conduct the agency; to keep the beds on public exhibition, and to pay for the advertisement expenses for the same; and to order the beds by the dozen and in no other manner. As may be seen, with the exception of the obligation on the part of the defendant to order the beds by the dozen and in no other manner, none of the obligations imputed to the defendant in the two causes of action are expressly set forth in the contract. But the plaintiff alleged that the defendant was his agent for the sale of his beds in Iloilo, and that said obligations are implied in a contract of commercial agency. The whole question, therefore, reduced itself to a determination as to whether the defendant, by reason of the contract hereinbefore transcribed, was a purchaser or an agent of the plaintiff for the sale of his beds.

In order to classify a contract, due regard must be given to its essential clauses. In the contract in question, what was essential, as constituting its cause and subject matter, is that the plaintiff was to furnish the defendant with the beds which the latter might order, at the price stipulated, and that the defendant was to pay the price in the manner stipulated. The price agreed upon was the one determined by the plaintiff for the sale of these beds in Manila, with a discount of from 20 to 25 per cent, according to their class. Payment was to be made at the end of sixty days, or before, at the plaintiff's request, or in cash, if the defendant so preferred, and in these last two cases an additional discount was to be allowed for prompt payment. These are precisely the essential features of a contract of purchase and sale. There was the obligation on the part of the plaintiff to supply the beds, and, on the part of the defendant, to pay their price. These features exclude the legal conception of an agency or order to sell whereby the mandatory or agent received the thing to sell it, and does not pay its price, but delivers to the principal the price he obtains from the sale of the thing to a third person, and if he does not succeed in selling it, he returns it. By virtue of the contract between the plaintiff and the defendant, the latter, on receiving the beds, was necessarily obliged to pay their price within the term fixed, without any other consideration and regardless as to whether he had or had not sold the beds.

It would be enough to hold, as we do, that the contract by and between the defendant and the plaintiff is one of purchase and sale, in order to show that it was not one made on the basis of a commission on sales, as the plaintiff claims it was, for these contracts are incompatible with each other. But, besides, examining the clauses of this contract, none of them is found that substantially supports the plaintiff's contention. Not a single one of these clauses necessarily conveys the idea of an agency. The words commission on sales used in clause (A) of article 1 mean nothing else, as stated in the contract itself, than a mere discount on the invoice price. The word agency, also used in articles 2 and 3, only expresses that the defendant was the only one that could sell the plaintiff's

beds in the Visayan Islands. With regard to the remaining clauses, the least that can be said is that they are not incompatible with the contract of purchase and sale.

The plaintiff calls attention to the testimony of Ernesto Vidal, a former vice-president of the defendant corporation and who established and managed the latter's business in Iloilo. It appears that this witness, prior to the time of his testimony, had serious trouble with the defendant, had maintained a civil suit against it, and had even accused one of its partners, Guillermo Parsons, of falsification. He testified that it was he who drafted the contract Exhibit A, and, when questioned as to what was his purpose in contracting with the plaintiff, replied that it was to be an agent for his beds and to collect a commission on sales. However, according to the defendant's evidence, it was Mariano Lopez Santos, a director of the corporation, who prepared Exhibit A. But, even supposing that Ernesto Vidal has stated the truth, his statement as to what was his idea in contracting with the plaintiff is of no importance, inasmuch as the agreements contained in Exhibit A which he claims to have drafted, constitute, as we have said, a contract of purchase and sale, and not one of commercial agency. This only means that Ernesto Vidal was mistaken in his classification of the contract. But it must be understood that a contract is what the law defines it to be, and not what it is called by the contracting parties.

The plaintiff also endeavored to prove that the defendant had returned beds that it could not sell; that, without previous notice, it forwarded to the defendant the beds that it wanted; and that the defendant received its commission for the beds sold by the plaintiff directly to persons in Iloilo. But all this, at the most only shows that, on the part of both of them, there was mutual tolerance in the performance of the contract in disregard of its terms; and it gives no right to have the contract considered, not as the parties stipulated it, but as they performed it. Only the acts of the contracting parties, subsequent to, and in connection with, the execution of the contract, must be considered for the purpose of interpreting the contract, when such interpretation is necessary, but not when, as in the instant case, its essential agreements are clearly set forth and plainly show that the contract belongs to a certain kind and not to another. Furthermore, the return made was of certain brass beds, and was not effected in exchange for the price paid for them, but was for other beds of another kind; and for the letter Exhibit L-1, requested the plaintiff's prior consent with respect to said beds, which shows that it was not considered that the defendant had a right, by virtue of the contract, to make this return. As regards the shipment of beds without previous notice, it is insinuated in the record that these brass beds were precisely the ones so shipped, and that, for this very reason, the plaintiff agreed to their return. And with respect to the so-called commissions, we have said that they merely constituted a discount on the invoice price, and the reason for applying this benefit to the beds sold directly by the plaintiff to persons in Iloilo was because, as the defendant obligated itself in the contract to incur the expenses of advertisement of the plaintiff's beds, such sales were to be considered as a result of that advertisement.

In respect to the defendant's obligation to order by the dozen, the only one expressly imposed by the contract, the effect of its breach would only entitle the plaintiff to disregard the orders which the defendant might place under other conditions; but if the plaintiff consents to fill them, he waives his right and cannot complain for having acted thus at his own free will.

For the foregoing reasons, we are of opinion that the contract by and between the plaintiff and the defendant was one of purchase and sale, and that the obligations the breach of which is alleged as a cause of action are not imposed upon the defendant, either by agreement or by law.

The judgment appealed from is affirmed, with costs against the appellant. So ordered.

Arellano, C.J., Torres, Johnson, Street and Malcolm, JJ., concur.

G.R. No. L-47538             June 20, 1941

GONZALO PUYAT & SONS, INC., petitioner, vs.ARCO AMUSEMENT COMPANY (formerly known as Teatro Arco), respondent.

Feria & Lao for petitioner.J. W. Ferrier and Daniel Me. Gomez for respondent.

LAUREL, J.:

This is a petition for the issuance of a writ of certiorari to the Court of Appeals for the purpose of reviewing its Amusement Company (formerly known as Teatro Arco), plaintiff-appellant, vs. Gonzalo Puyat and Sons. Inc., defendant-appellee."

It appears that the respondent herein brought an action against the herein petitioner in the Court of First Instance of Manila to secure a reimbursement of certain amounts allegedly overpaid by it on account of the purchase price of sound reproducing equipment and machinery ordered by the petitioner from the Starr Piano Company of Richmond, Indiana, U.S.A. The facts of the case as found by the trial court and confirmed by the appellate court, which are admitted by the respondent, are as follows:

In the year 1929, the "Teatro Arco", a corporation duly organized under the laws of the Philippine Islands, with its office in Manila, was engaged in the business of operating cinematographs. In 1930, its name was changed to Arco Amusement Company. C. S. Salmon was the president, while A. B. Coulette was the business manager. About the same time, Gonzalo Puyat & Sons, Inc., another corporation doing business in the Philippine Islands, with office in Manila, in addition to its other business, was acting as exclusive agents in the Philippines for the Starr Piano Company of Richmond, Indiana, U.S. A. It would seem that this last company dealt in cinematographer equipment and machinery, and the Arco Amusement Company desiring to equipt its cinematograph with sound reproducing devices, approached Gonzalo Puyat & Sons, Inc., thru its then president and acting manager, Gil Puyat, and an employee named Santos. After some negotiations, it was agreed between the parties, that is to say, Salmon and Coulette on one side, representing the plaintiff, and Gil Puyat on the other, representing the defendant, that the latter would, on behalf of the plaintiff, order sound reproducing equipment from the Starr Piano Company and that the plaintiff would pay the defendant, in addition to the price of the equipment, a 10 per cent commission, plus all expenses, such as, freight, insurance, banking charges, cables, etc. At the expense of the plaintiff, the defendant sent a cable, Exhibit "3", to the Starr Piano Company, inquiring about the equipment desired and making the said company to quote its price without discount. A reply was received by Gonzalo Puyat & Sons, Inc., with the price, evidently the list price of $1,700 f.o.b. factory Richmond, Indiana. The defendant did not show the plaintiff the cable of inquiry nor the reply but merely informed the plaintiff of the price of $1,700. Being agreeable to this price, the plaintiff, by means of Exhibit "1", which is a letter signed by C. S. Salmon dated November 19, 1929, formally authorized the order. The equipment arrived about the end of the year 1929, and upon delivery of the same to the plaintiff and the presentation of necessary papers, the price of $1.700, plus the 10 per cent commission agreed upon and plus all the expenses and charges, was duly paid by the plaintiff to the defendant.

Sometime the following year, and after some negotiations between the same parties, plaintiff and defendants, another order for sound reproducing equipment was placed by the plaintiff with the defendant, on the same terms as the first order. This agreement or order was confirmed by the plaintiff by its letter Exhibit "2", without date, that is to say, that the plaintiff would pay for the equipment the amount of $1,600, which was supposed to be the price quoted by the Starr Piano Company, plus 10 per cent commission, plus all expenses incurred. The equipment under the second order arrived in due time, and the defendant was duly paid the price of $1,600 with its 10 per cent commission, and $160, for all expenses and charges. This amount of $160 does not represent actual out-of-pocket expenses paid by the defendant, but a mere flat charge and rough estimate made by the defendant equivalent to 10 per cent of the price of $1,600 of the equipment.

About three years later, in connection with a civil case in Vigan, filed by one Fidel Reyes against the defendant herein Gonzalo Puyat & Sons, Inc., the officials of the Arco Amusement Company discovered that the price quoted to them by the defendant with regard to their two orders mentioned was not the net price but rather the list price, and that the defendants had obtained a discount from the Starr Piano Company. Moreover, by reading reviews and literature on prices of machinery and cinematograph equipment, said officials of the plaintiff were convinced that the prices charged them by the defendant were much too high including the charges for out-of-pocket expense. For these reasons, they sought to obtain a reduction from the defendant or rather a reimbursement, and failing in this they brought the present action.

The trial court held that the contract between the petitioner and the respondent was one of outright purchase and sale, and absolved that petitioner from the complaint. The appellate court, however, — by a division of four, with one justice dissenting — held that the relation between petitioner and respondent was that of agent and principal, the petitioner acting as agent of the respondent in the purchase of the equipment in question, and sentenced the petitioner to pay the respondent alleged overpayments in the total sum of $1,335.52 or P2,671.04, together with legal interest thereon from the date of the filing of the complaint until said amount is fully paid, as well as to pay the costs of the suit in both instances. The appellate court further argued that even if the contract between the petitioner and the respondent was one of purchase and sale, the petitioner was guilty of fraud in concealing the true price and hence would still be liable to reimburse the respondent for the overpayments made by the latter.

The petitioner now claims that the following errors have been incurred by the appellate court:

I. El Tribunal de Apelaciones incurrio en error de derecho al declarar que, segun hechos, entre la recurrente y la recurrida existia una relacion implicita de mandataria a mandante en la transaccion de que se trata, en vez de la de vendedora a compradora como ha declarado el Juzgado de Primera Instncia de Manila, presidido entonces por el hoy Magistrado Honorable Marcelino Montemayor.

II. El Tribunal de Apelaciones incurrio en error de derecho al declarar que, suponiendo que dicha relacion fuerra de vendedora a compradora, la recurrente obtuvo, mediante dolo, el consentimiento de la recurrida en cuanto al precio de $1,700 y $1,600 de las maquinarias y equipos en cuestion, y condenar a la recurrente ha obtenido de la Starr Piano Company of Richmond, Indiana.

We sustain the theory of the trial court that the contract between the petitioner and the respondent was one of purchase and sale, and not one of agency, for the reasons now to be stated.

In the first place, the contract is the law between the parties and should include all the things they are supposed to have been agreed upon. What does not appear on the face of the contract should be regarded merely as "dealer's" or "trader's talk", which can not bind either party. (Nolbrook v. Conner, 56 So., 576, 11 Am. Rep., 212; Bank v. Brosscell, 120 III., 161; Bank v. Palmer, 47 III., 92; Hosser v. Copper, 8 Allen, 334; Doles v. Merrill, 173 Mass., 411.) The letters, Exhibits 1 and 2, by which the respondent accepted the prices of $1,700 and $1,600, respectively, for the sound reproducing equipment subject of its contract with the petitioner, are clear in their terms and admit no other interpretation that the respondent in question at the prices indicated which are fixed and determinate. The respondent admitted in its complaint filed with the Court of First Instance of Manila that the petitioner agreed to sell to it the first sound reproducing equipment and machinery. The third paragraph of the respondent's cause of action states:

3. That on or about November 19, 1929, the herein plaintiff (respondent) and defendant (petitioner) entered into an agreement, under and by virtue of which the herein defendant was to secure from the United States, and sell and deliver to the herein plaintiff, certain sound reproducing equipment and machinery, for which the said defendant, under and by virtue of said agreement, was to receive the actual cost price plus ten per cent (10%), and was also to be reimbursed for all out of pocket expenses in connection with the purchase and delivery of such equipment, such as costs of telegrams, freight, and similar expenses. (Emphasis ours.)

We agree with the trial judge that "whatever unforseen events might have taken place unfavorable to the defendant (petitioner), such as change in prices, mistake in their quotation, loss of the goods not covered by insurance or failure of the Starr Piano Company to properly fill the orders as per specifications, the plaintiff (respondent) might still legally hold the defendant (petitioner) to the prices fixed of $1,700 and $1,600." This is incompatible with the pretended relation of agency between the petitioner and the respondent, because in agency, the agent is exempted from all liability in the discharge of his commission provided he acts in accordance with the instructions received from his principal (section 254, Code of Commerce), and the principal must indemnify the agent for all damages which the latter may incur in carrying out the agency without fault or imprudence on his part (article 1729, Civil Code).

While the latters, Exhibits 1 and 2, state that the petitioner was to receive ten per cent (10%) commission, this does not necessarily make the petitioner an agent of the respondent, as this provision is only an additional price which the respondent bound itself to pay, and which stipulation is not incompatible with the contract of purchase and sale. (See Quiroga vs. Parsons Hardware Co., 38 Phil., 501.)

In the second place, to hold the petitioner an agent of the respondent in the purchase of equipment and machinery from the Starr Piano Company of Richmond, Indiana, is incompatible with the admitted fact that the petitioner is the exclusive agent of the same company in the Philippines. It is out of the ordinary for one to be the agent of both the vendor and the purchaser. The facts and circumstances indicated do not point to anything but plain ordinary transaction where the respondent enters into a contract of purchase and sale with the petitioner, the latter as exclusive agent of the Starr Piano Company in the United States.

It follows that the petitioner as vendor is not bound to reimburse the respondent as vendee for any difference between the cost price and the sales price which represents the profit realized by the vendor out of the transaction. This is the very essence of commerce without which merchants or middleman would not exist.

The respondents contends that it merely agreed to pay the cost price as distinguished from the list price, plus ten per cent (10%) commission and all out-of-pocket expenses incurred by the petitioner. The distinction which the respondents seeks to draw between the cost price and the list price we consider to be spacious. It is to be observed that the twenty-five per cent (25%) discount granted by the Starr piano Company to the petitioner is available only to the latter as the former's exclusive agent in the Philippines. The respondent could not have secured this discount from the Starr Piano Company and neither was the petitioner willing to waive that discount in favor of the respondent. As a matter of fact, no reason is advanced by the respondent why the petitioner should waive the 25 per cent discount granted it by the Starr Piano Company in exchange for the 10 percent commission offered by the respondent. Moreover, the petitioner was not duty bound to reveal the private arrangement it had with the Starr Piano Company relative to such discount to its prospective customers, and the respondent was not even aware of such an arrangement. The respondent, therefore, could not have offered to pay a 10 per cent commission to the petitioner provided it was given the benefit of the 25 per cent discount enjoyed by the petitioner. It is well known that local dealers acting as agents of foreign manufacturers, aside from obtaining a discount from the home office, sometimes add to the list price when they resell to local purchasers. It was apparently to guard against an exhorbitant additional price that the respondent sought to limit it to 10 per cent, and the respondent is estopped from questioning that additional price. If the respondent later on discovers itself at the short end of a bad bargain, it alone must bear the blame, and it cannot rescind the contract, much less compel a reimbursement of the excess price, on that ground alone. The respondent could not secure equipment and machinery manufactured by the Starr Piano Company except from the petitioner alone; it willingly paid the price quoted; it received the equipment and machinery as represented; and that was the end of the matter as far as the respondent was concerned. The fact that the petitioner obtained more or less profit than the respondent calculated before entering into the contract or reducing the price agreed upon between the petitioner and the respondent. Not every concealment is fraud; and short of fraud, it were better that, within certain limits, business acumen permit of the loosening of the sleeves and of the sharpening of the intellect of men and women in the business world.

The writ of certiorari should be, as it is hereby, granted. The decision of the appellate court is accordingly reversed and the petitioner is absolved from the respondent's complaint in G. R. No. 1023, entitled "Arco Amusement Company (formerly known as Teatro Arco), plaintiff-appellant, vs. Gonzalo Puyat & Sons, Inc., defendants-appellee," without pronouncement regarding costs. So ordered.

Avanceña, C.J., Diaz, Moran and Horrilleno, JJ., concur.

G.R. No. 109125 December 2, 1994

ANG YU ASUNCION, ARTHUR GO AND KEH TIONG, petitioners, vs.THE HON. COURT OF APPEALS and BUEN REALTY DEVELOPMENT CORPORATION, respondents.

Antonio M. Albano for petitioners.

Umali, Soriano & Associates for private respondent.

 

VITUG, J.:

Assailed, in this petition for review, is the decision of the Court of Appeals, dated 04 December 1991, in CA-G.R. SP No. 26345 setting aside and declaring without force and effect the orders of execution of the trial court, dated 30 August 1991 and 27 September 1991, in Civil Case No. 87-41058.

The antecedents are recited in good detail by the appellate court thusly:

On July 29, 1987 a Second Amended Complaint for Specific Performance was filed by Ang Yu Asuncion and Keh Tiong, et al., against Bobby Cu Unjieng, Rose Cu Unjieng and Jose Tan before the Regional Trial Court, Branch 31, Manila in Civil Case No. 87-41058, alleging, among others, that plaintiffs are tenants or lessees of residential and commercial spaces owned by defendants described as Nos. 630-638 Ongpin Street, Binondo, Manila; that they have occupied said spaces since 1935 and have been religiously paying the rental and complying with all the conditions of the lease contract; that on several occasions before October 9, 1986, defendants informed plaintiffs that they are offering to sell the premises and are giving them priority to acquire the same; that during the negotiations, Bobby Cu Unjieng offered a price of P6-million while plaintiffs made a counter offer of P5-million; that plaintiffs thereafter asked the defendants to put their offer in writing to which request defendants acceded; that in reply to defendant's letter, plaintiffs wrote them on October 24, 1986 asking that they specify the terms and conditions of the offer to sell; that when plaintiffs did not receive any reply, they sent another letter dated January 28, 1987 with the same request; that since defendants failed to specify the terms and conditions of the offer to sell and because of information received that defendants were about to sell the property, plaintiffs were compelled to file the complaint to compel defendants to sell the property to them.

Defendants filed their answer denying the material allegations of the complaint and interposing a special defense of lack of cause of action.

After the issues were joined, defendants filed a motion for summary judgment which was granted by the lower court. The trial court found that defendants' offer to sell was never accepted by the plaintiffs for the reason that the parties did not agree upon the terms and conditions of the proposed sale, hence, there was no contract of sale at all. Nonetheless, the lower court ruled that should the defendants subsequently offer

their property for sale at a price of P11-million or below, plaintiffs will have the right of first refusal. Thus the dispositive portion of the decision states:

WHEREFORE, judgment is hereby rendered in favor of the defendants and against the plaintiffs summarily dismissing the complaint subject to the aforementioned condition that if the defendants subsequently decide to offer their property for sale for a purchase price of Eleven Million Pesos or lower, then the plaintiffs has the option to purchase the property or of first refusal, otherwise, defendants need not offer the property to the plaintiffs if the purchase price is higher than Eleven Million Pesos.

SO ORDERED.

Aggrieved by the decision, plaintiffs appealed to this Court inCA-G.R. CV No. 21123. In a decision promulgated on September 21, 1990 (penned by Justice Segundino G. Chua and concurred in by Justices Vicente V. Mendoza and Fernando A. Santiago), this Court affirmed with modification the lower court's judgment, holding:

In resume, there was no meeting of the minds between the parties concerning the sale of the property. Absent such requirement, the claim for specific performance will not lie. Appellants' demand for actual, moral and exemplary damages will likewise fail as there exists no justifiable ground for its award. Summary judgment for defendants was properly granted. Courts may render summary judgment when there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law (Garcia vs. Court of Appeals, 176 SCRA 815). All requisites obtaining, the decision of the court a quo  is legally justifiable.

WHEREFORE, finding the appeal unmeritorious, the judgment appealed from is hereby AFFIRMED, but subject to the following modification: The court a quo in the aforestated decision gave the plaintiffs-appellants the right of first refusal only if the property is sold for a purchase price of Eleven Million pesos or lower; however, considering the mercurial and uncertain forces in our market economy today. We find no reason not to grant the same right of first refusal to herein appellants in the event that the subject property is sold for a price in excess of Eleven Million pesos. No pronouncement as to costs.

SO ORDERED.

The decision of this Court was brought to the Supreme Court by petition for review on certiorari. The Supreme Court denied the appeal on May 6, 1991 "for insufficiency in form and substances" (Annex H, Petition).

On November 15, 1990, while CA-G.R. CV No. 21123 was pending consideration by this Court, the Cu Unjieng spouses executed a Deed of Sale (Annex D, Petition) transferring the property in question to herein petitioner Buen Realty and Development Corporation, subject to the following terms and conditions:

1. That for and in consideration of the sum of FIFTEEN MILLION PESOS (P15,000,000.00), receipt of which in full is hereby acknowledged, the VENDORS hereby sells, transfers and conveys for and in favor of the VENDEE, his heirs, executors, administrators or assigns, the above-described property with all the improvements found therein including all the rights and interest in the said property free from all liens and encumbrances of whatever nature, except the pending ejectment proceeding;

2. That the VENDEE shall pay the Documentary Stamp Tax, registration fees for the transfer of title in his favor and other expenses incidental to the sale of above-described property including capital gains tax and accrued real estate taxes.

As a consequence of the sale, TCT No. 105254/T-881 in the name of the Cu Unjieng spouses was cancelled and, in lieu thereof, TCT No. 195816 was issued in the name of petitioner on December 3, 1990.

On July 1, 1991, petitioner as the new owner of the subject property wrote a letter to the lessees demanding that the latter vacate the premises.

On July 16, 1991, the lessees wrote a reply to petitioner stating that petitioner brought the property subject to the notice of  lis pendens regarding Civil Case No. 87-41058 annotated on TCT No. 105254/T-881 in the name of the Cu Unjiengs.

The lessees filed a Motion for Execution dated August 27, 1991 of the Decision in Civil Case No. 87-41058 as modified by the Court of Appeals in CA-G.R. CV No. 21123.

On August 30, 1991, respondent Judge issued an order (Annex A, Petition) quoted as follows:

Presented before the Court is a Motion for Execution filed by plaintiff represented by Atty. Antonio Albano. Both defendants Bobby Cu Unjieng and Rose Cu Unjieng represented by Atty. Vicente Sison and Atty. Anacleto Magno respectively were duly notified in today's consideration of the motion as evidenced by the rubber stamp and signatures upon the copy of the Motion for Execution.

The gist of the motion is that the Decision of the Court dated September 21, 1990 as modified by the Court of Appeals in its decision in CA G.R. CV-21123, and elevated to the Supreme Court upon the petition for review and that the same was denied by the highest tribunal in its resolution dated May 6, 1991 in G.R. No.L-97276, had now become final and executory. As a consequence, there was an Entry of Judgment by the Supreme Court as of June 6, 1991, stating that the aforesaid modified decision had already become final and executory.

It is the observation of the Court that this property in dispute was the subject of theNotice of Lis Pendens and that the modified decision of this Court promulgated by the Court of Appeals which had become

final to the effect that should the defendants decide to offer the property for sale for a price of P11 Million or lower, and considering the mercurial and uncertain forces in our market economy today, the same right of first refusal to herein plaintiffs/appellants in the event that the subject property is sold for a price in excess of Eleven Million pesos or more.

WHEREFORE, defendants are hereby ordered to execute the necessary Deed of Sale of the property in litigation in favor of plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the consideration of P15 Million pesos in recognition of plaintiffs' right of first refusal and that a new Transfer Certificate of Title be issued in favor of the buyer.

All previous transactions involving the same property notwithstanding the issuance of another title to Buen Realty Corporation, is hereby set aside as having been executed in bad faith.

SO ORDERED.

On September 22, 1991 respondent Judge issued another order, the dispositive portion of which reads:

WHEREFORE, let there be Writ of Execution issue in the above-entitled case directing the Deputy Sheriff Ramon Enriquez of this Court to implement said Writ of Execution ordering the defendants among others to comply with the aforesaid Order of this Court within a period of one (1) week from receipt of this Order and for defendants to execute the necessary Deed of Sale of the property in litigation in favor of the plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the consideration of P15,000,000.00 and ordering the Register of Deeds of the City of Manila, to cancel and set aside the title already issued in favor of Buen Realty Corporation which was previously executed between the latter and defendants and to register the new title in favor of the aforesaid plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go.

SO ORDERED.

On the same day, September 27, 1991 the corresponding writ of execution (Annex C, Petition) was issued. 1

On 04 December 1991, the appellate court, on appeal to it by private respondent, set aside and declared without force and effect the above questioned orders of the court a quo.

In this petition for review on certiorari, petitioners contend that Buen Realty can be held bound by the writ of execution by virtue of the notice of lis pendens, carried over on TCT No. 195816 issued in the name of Buen Realty, at the time of the latter's purchase of the property on 15 November 1991 from the Cu Unjiengs.

We affirm the decision of the appellate court.

A not too recent development in real estate transactions is the adoption of such arrangements as the right of first refusal, a purchase option and a contract to sell. For ready reference, we might point out some fundamental precepts that may find some relevance to this discussion.

An obligation is a juridical necessity to give, to do or not to do (Art. 1156, Civil Code). The obligation is constituted upon the concurrence of the essential elements thereof, viz: (a) The vinculum juris or  juridical tie which is the efficient cause established by the various sources of obligations (law, contracts, quasi-contracts, delicts and quasi-delicts); (b) the object which is the prestation or conduct; required to be observed (to give, to do or not to do); and (c) the subject-persons who, viewed from the demandability of the obligation, are the active (obligee) and the passive (obligor) subjects.

Among the sources of an obligation is a contract (Art. 1157, Civil Code), which 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 (Art. 1305, Civil Code). 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 (perfected). The perfection of the contract takes place upon the concurrence of the essential elements thereof. A contract which is consensual as to perfection is so established upon a mere meeting of minds, i.e., the concurrence of offer and acceptance, on the object and on the cause thereof. A contract which requires, in addition to the above, the delivery of the object of the agreement, as in a pledge or commodatum, is commonly referred to as a real contract. In a solemn contract, compliance with certain formalities prescribed by law, such as in a donation of real property, is essential in order to make the act valid, the prescribed form being thereby an essential element thereof. The stage ofconsummation begins when the parties perform their respective undertakings under the contract culminating in the extinguishment thereof.

Until the contract is perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation. In sales, particularly, to which the topic for discussion about the case at bench belongs, the contract is perfected when a person, called the seller, obligates himself, for a price certain, to deliver and to transfer ownership of a thing or right to another, called the buyer, over which the latter agrees. Article 1458 of the Civil Code provides:

Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.

A contract of sale may be absolute or conditional.

When the sale is not absolute but conditional, such as in a "Contract to Sell" where invariably the ownership of the thing sold is retained until the fulfillment of a positive suspensive condition (normally, the full payment of the purchase price), the breach of the condition will prevent the obligation to convey title from acquiring an obligatory force. 2 In Dignos vs. Court of Appeals  (158 SCRA 375), we have said that, although denominated a "Deed of Conditional Sale," a sale is still absolute where the contract is devoid of any proviso  that title is reserved or the right to unilaterally rescind is stipulated, e.g., until or unless the price is paid. Ownership will then be transferred to the buyer upon actual or constructive delivery (e.g., by the execution of a public document) of the property sold. Where the condition is imposed upon the perfection of the contract itself, the failure of the condition would prevent such perfection. 3 If the condition is imposed on the obligation of a party which is not fulfilled, the other party may either waive the condition or refuse to proceed with the sale (Art. 1545, Civil Code).  4

An unconditional mutual promise  to buy and sell, as long as the object is made determinate and the price is fixed, can be obligatory on the parties, and compliance therewith may accordingly be exacted. 5

An accepted unilateral promise which specifies  the thing to be sold and the price to be paid, when coupled with a valuable consideration distinct and separate from the price, is what may properly be termed a perfected contract of option. This contract is legally binding, and in sales, it conforms with the second paragraph of Article 1479 of the Civil Code, viz:

Art. 1479. . . .

An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price. (1451a) 6

Observe, however, that the option is not the contract of sale itself. 7 The optionee has the right, but not the obligation, to buy. Once the option is exercised timely, i.e., the offer is accepted before a breach of the option, a bilateral promise to sell and to buy ensues and both parties are then reciprocally bound to comply with their respective undertakings. 8

Let us elucidate a little. A negotiation is formally initiated by an offer. An imperfect promise (policitacion) is merely an offer. Public advertisements or solicitations and the like are ordinarily construed as mere invitations to make offers or only as proposals. These relations, until a contract is perfected, are not considered binding commitments. Thus, at any time prior to the perfection of the contract, either negotiating party may stop the negotiation. The offer, at this stage, may be withdrawn; the withdrawal is effective immediately after its manifestation, such as by its mailing and not necessarily when the offeree learns of the withdrawal (Laudico vs. Arias, 43 Phil. 270). Where a period is given to the offeree within which to accept the offer, the following rules generally govern:

(1) If the period is not itself founded upon or supported by a consideration, the offeror is still free and has the right to withdraw the offer before its acceptance, or, if an acceptance has been made, before the offeror's coming to know of such fact, by communicating that withdrawal to the offeree (see Art. 1324, Civil Code; see also Atkins, Kroll & Co. vs. Cua, 102 Phil. 948, holding that this rule is applicable to a unilateral promise to sell under Art. 1479, modifying the previous decision in South Western Sugar vs. Atlantic Gulf, 97 Phil. 249; see also Art. 1319, Civil Code; Rural Bank of Parañaque, Inc., vs. Remolado, 135 SCRA 409; Sanchez vs. Rigos, 45 SCRA 368). The right to withdraw, however, must not be exercised whimsically or arbitrarily; otherwise, it could give rise to a damage claim under Article 19 of the Civil Code which ordains that "every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith."

(2) If the period has a separate consideration, a contract of "option" is deemed perfected, and it would be a breach of that contract to withdraw the offer during the agreed period. The option, however, is an independent contract by itself, and it is to be distinguished from the projected main agreement (subject matter of the option) which is obviously yet to be concluded. If, in fact, the optioner-offeror withdraws the offer before its acceptance(exercise of the option) by the optionee-offeree, the latter may not sue for specific performance on the proposed contract ("object" of the option) since it has failed to reach its own stage of perfection. The optioner-offeror, however, renders himself liable for damages for breach of the option. In these cases, care should be taken of the real nature of the consideration given, for if, in fact, it has been intended to be part of the consideration for the main contract with a right of withdrawal on the part of the optionee, the main contract could

be deemed perfected; a similar instance would be an "earnest money" in a contract of sale that can evidence its perfection (Art. 1482, Civil Code).

In the law on sales, the so-called "right of first refusal" is an innovative juridical relation. Needless to point out, it cannot be deemed a perfected contract of sale under Article 1458 of the Civil Code. Neither can the right of first refusal, understood in its normal concept, per se be brought within the purview of an option under the second paragraph of Article 1479, aforequoted, or possibly of an offer under Article 1319 9 of the same Code. An option or an offer would require, among other things,  10 a clear certainty on both the object and the cause or consideration of the envisioned contract. In a right of first refusal, while the object might be made determinate, the exercise of the right, however, would be dependent not only on the grantor's eventual intention to enter into a binding juridical relation with another but also on terms, including the price, that obviously are yet to be later firmed up. Prior thereto, it can at best be so described as merely belonging to a class of preparatory juridical relations governed not by contracts (since the essential elements to establish the vinculum juris would still be indefinite and inconclusive) but by, among other laws of general application, the pertinent scattered provisions of the Civil Code on human conduct.

Even on the premise that such right of first refusal has been decreed under a final judgment, like here, its breach cannot justify correspondingly an issuance of a writ of execution under a judgment that merely recognizes its existence, nor would it sanction an action for specific performance without thereby negating the indispensable element of consensuality in the perfection of contracts. 11 It is not to say, however, that the right of first refusal would be inconsequential for, such as already intimated above, an unjustified disregard thereof, given, for instance, the circumstances expressed in Article 19  12 of the Civil Code, can warrant a recovery for damages.

The final judgment in Civil Case No. 87-41058, it must be stressed, has merely accorded a "right of first refusal" in favor of petitioners. The consequence of such a declaration entails no more than what has heretofore been said. In fine, if, as it is here so conveyed to us, petitioners are aggrieved by the failure of private respondents to honor the right of first refusal, the remedy is not a writ of execution on the judgment, since there is none to execute, but an action for damages in a proper forum for the purpose.

Furthermore, whether private respondent Buen Realty Development Corporation, the alleged purchaser of the property, has acted in good faith or bad faith and whether or not it should, in any case, be considered bound to respect the registration of the lis pendens  in Civil Case No. 87-41058 are matters that must be independently addressed in appropriate proceedings. Buen Realty, not having been impleaded in Civil Case No. 87-41058, cannot be held subject to the writ of execution issued by respondent Judge, let alone ousted from the ownership and possession of the property, without first being duly afforded its day in court.

We are also unable to agree with petitioners that the Court of Appeals has erred in holding that the writ of execution varies the terms of the judgment in Civil Case No. 87-41058, later affirmed in CA-G.R. CV-21123. The Court of Appeals, in this regard, has observed:

Finally, the questioned writ of execution is in variance with the decision of the trial court as modified by this Court. As already stated, there was nothing in said decision 13 that decreed the execution of a deed of sale between the Cu Unjiengs and respondent lessees, or the fixing of the price of the sale, or the cancellation of title in the name of petitioner (Limpin vs. IAC, 147 SCRA 516; Pamantasan ng Lungsod ng Maynila vs. IAC, 143 SCRA 311; De Guzman vs. CA, 137 SCRA 730; Pastor vs. CA, 122 SCRA 885).

It is likewise quite obvious to us that the decision in Civil Case No. 87-41058 could not have decreed at the time the execution of any deed of sale between the Cu Unjiengs and petitioners.

WHEREFORE, we UPHOLD the Court of Appeals in ultimately setting aside the questioned Orders, dated 30 August 1991 and 27 September 1991, of the court a quo. Costs against petitioners.

SO ORDERED.

Narvasa, C.J., Padilla, Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno and Mendoza, JJ., concur.

Kapunan, J., took no part.

Feliciano, J., is on leave.

 

G.R. No. 167213             October 31, 2006

DARREL CORDERO, EGMEDIO BAUTISTA, ROSEMAY BAUTISTA, MARION BAUTISTA, DANNY BOY CORDERO, LADYLYN CORDERO and BELEN CORDERO, petitioners, vs.F.S. MANAGEMENT & DEVELOPMENT CORPORATION, respondent.

D E C I S I O N

CARPIO MORALES, J.:

Assailed via petition for review are issuances of the Court of Appeals in CA-G.R. CV No. 66198, Decision1 dated April 29, 2004 which set aside the decision of Branch 260 of the Regional Trial Court (RTC) of Parañaque in Civil Case No. 97-067, and Resolution dated February 21, 2005 denying petitioners’ motion for reconsideration.

On or about October 27, 1994,2 petitioner Belen Cordero (Belen), in her own behalf and as attorney-in-fact of her co-petitioners Darrel Cordero, Egmedio Bautista, Rosemay Bautista, Marion Bautista, Danny Boy Cordero and Ladylyn Cordero, entered into a contract to sell3 with respondent, F.S. Management and Development Corporation, through its chairman Roberto P. Tolentino over five (5) parcels of land located in Nasugbu, Batangas described in and covered by TCT Nos. 62692, 62693, 62694, 62695 and 20987. The contract to sell contained the following terms and conditions:

1. That the BUYER will buy the whole lots above described from the OWNER consisting of 50 hectares more or less at P25/sq.m. or with a total price of P12,500,000.00;

2. That the BUYER will pay the OWNER the sum of P500,000.00 as earnest money which will entitle the latter to enter the property and relocate the same, construct the necessary paths and roads with the help of the necessary parties in the area;

3. The BUYER will pay the OWNER the sum of THREE MILLION FIVE HUNDRED THOUSAND PESOS ONLY (P3,500,000.00) on or before April 30, 1995 and the remaining balance will be paid within 18 mons. (sic) from the date of payment of P3.5 Million pesos in 6 equal quarterly payments or P1,411,000.00 every quarter;

4. The title will be transferred by the OWNER to the BUYER upon complete payment of the agreed purchase price. Provided that any obligation by the OWNER brought about by encumbrance or mortgage with any bank shall be settled by the OWNER or by the BUYER which shall be deducted the total purchase price;

5. Provided, the OWNER shall transfer the titles to the BUYER even before the complete payment if the BUYER can provide post dated checks which shall be in accordance with the time frame of payments as above stated and which shall be guaranteed by a reputable bank;

6. Upon the payment of the earnest money and the down payment of 3.5 Million pesos the BUYER can occupy and introduce improvements in the properties as owner while owner is guaranteeing that the properties will have no tenants or squatters in the properties and cooperate in the development of any project or exercise of ownerships by the BUYER;

7. Delay in the payment by the BUYER in the agreed due date will entitle the SELLER for the legal interest.4

Pursuant to the terms and conditions of the contract to sell, respondent paid earnest money in the amount ofP500,000 on October 27, 1994.5 She likewise paid P1,000,000 on June 30, 1995 and another P1,000,000 on July 6, 1995. No further payments were made thereafter.6

Petitioners thus sent respondent a demand letter dated November 28, 19967 informing her that they were revoking/canceling the contract to sell and were treating the payments already made as payment for damages suffered as a result of the breach of contract, and demanding the payment of the amount of P10 Million Pesos for actual damages suffered due to loss of income by reason thereof. Respondent ignored the demand, however.

Hence, on February 21, 1997, petitioner Belen, in her own behalf and as attorney-in-fact of her co-petitioners, filed before the RTC of Parañaque a complaint for rescission of contract with damages8 alleging that respondent failed to comply with its obligations under the contract to sell, specifically its obligation to pay the downpayment ofP3.5 Million by April 30, 1995, and the balance within 18 months thereafter; and that consequently petitioners are entitled to rescind the contract to sell as well as demand the payment of damages.

In its Answer,9 respondent alleged that petitioners have no cause of action considering that they were the first to violate the contract to sell by preventing access to the properties despite payment of P2.5 Million Pesos; petitioners prevented it from complying with its obligation to pay in full by refusing to execute the final contract of sale unless additional payment of legal interest is made; and petitioners’ refusal to execute the final contract of sale was due to the willingness of another buyer to pay a higher price.

In its Pre-trial Order10 of June 9, 1997, the trial court set the pre-trial conference on July 8, 1997 during which neither respondent’s representative nor its counsel failed to appear. And respondent did not submit a pre-trial brief, hence, it was declared as in default by the trial court which allowed the presentation of evidence ex parte by petitioners.11

Petitioners presented as witnesses petitioner Belen and one Ma. Cristina Cleofe. Belen testified on the execution of the contract to sell; the failure of respondent to make the necessary payments in compliance with the contract; the actual and moral damages sustained by petitioners as a result of the breach, including the lost opportunity to sell the properties for a higher price to another buyer, Ma. Cristina Cleofe; and the attorney’s fees incurred by petitioners as a result of the suit.12 Ma. Cristina Cleofe, on the other hand, testified on the offer she made to petitioners to buy the properties at P35.00/sq.m.13 which was, however, turned down in light of the contract to sell executed by petitioners in favor of the respondent.14

Respondent filed a motion to set aside the order of default15 which was denied by the trial court by Order dated September 12, 1997.16 Via petition for certiorari, respondent challenged the said order, but it was denied by the Court of Appeals.17

Meanwhile, the trial court issued its decision18 on November 18, 1997, finding for petitioners and ordering respondent to pay damages and attorney’s fees. The dispositive portion of the decision reads:

WHEREFORE, premises considered, the contract to sell between the Plaintiffs and the Defendant is herebydeclared as rescinded and the defendant is likewise ordered to pay the plaintiff:

(1) P4,500,000.00 computed as follows: P5,000,000.00 in actual damages and P2,000,000.00 in moral and exemplary damages, less defendant’s previous payment of P2,500,000.00 under the contract to sell; and

(2) P800,000.00 by way of attorney’s fees as well as the costs of suit.

SO ORDERED. (Underscoring supplied)

Before the Court of Appeals to which respondent appealed the trial court’s decision, it raised the following errors:

3.01. The Regional Trial Court erred when it awarded plaintiffs-appellees Five Million Pesos (P5,000,000.00) as actual damages. Corollary thereto, the Regional Trial Court erred in declaring defendant-appellant to have acted in wanton disregard of its obligations under the Contract to Sell.

3.02. The Regional Trial Court erred when it awarded plaintiffs-appellees Two Million Pesos (P2,000,000.00) as moral and exemplary damages.

3.03. The Regional Trial Court erred when it awarded plaintiffs-appellees Eight Hundred Thousand Pesos (P800,000.00) as attorney’s fees.19

In the assailed decision,20 the Court of Appeals set aside the contract to sell, it finding that petitioners’ obligation thereunder did not arise for failure of respondent to pay the full purchase price. It also set aside the award to petitioners of damages for not being duly proven. And it ordered petitioners to return "the amount received from [respondent]." Thus the dispositive portion of the appellate court’s decision reads:

WHEREFORE, the Decision dated 18 November 1997 of the Regional Trial Court, Branch 260 of Parañaque City in Civil Case No. 97-067 is hereby VACATED. A NEW DECISION is ENTERED ordering the SETTING-ASIDE of the Contract to Sell WITHOUT payment of damages. Plaintiffs-appellees are further ORDERED TO RETURN THE AMOUNTS RECEIVED from defendant-appellant. (Underscoring supplied)

SO ORDERED.

Their motion for reconsideration having been denied, petitioners filed the present petition for review which raises the following issues:

1. Whether the Court of Appeals erred in ruling on the nature of the contract despite the fact that it was not raised on appeal.

2. Whether or not a contract to sell may be subject to rescission under Article 1191 of the Civil Code.

3. Whether or not the Court of Appeals erred in setting aside the award of damages.

Petitioners contend that the Court of Appeals erred in ruling on the nature of the contract to sell and the propriety of the remedy of rescission under Article 1191 of the Civil Code, these matters not having been raised by respondents in the assigned errors. In any event, petitioners claim that the contract to sell involves reciprocal obligations, hence, it falls within the ambit of Article 1191.21

While a party is required to indicate in his brief an assignment of errors and only those assigned shall be considered by the appellate court in deciding the case, appellate courts have ample authority to rule on matters not assigned as errors in an appeal if these are indispensable or necessary to the just resolution of the pleaded issues.22 Thus this Court has allowed the consideration of other grounds or matters not raised or assigned as errors, to wit: 1) grounds affecting jurisdiction over the subject matter; 2) matters which are evidently plain or clerical errors within the contemplation of the law; 3) matters the consideration of which is necessary in arriving at a just decision and complete resolution of the case or to serve the interest of justice or to avoid dispensing piecemeal justice; 4) matters of record which were raised in the trial court and which have some bearing on the issue submitted which the parties failed to raise or which the lower court ignored; 5) matters closely related to an error assigned; and 6) matters upon which the determination of a question properly assigned is dependent.23

In the present case, the nature as well as the characteristics of a contract to sell is determinative of the propriety of the remedy of rescission and the award of damages. As will be discussed shortly, the trial court committed manifest error in applying Article 1191 of the Civil Code to the present case, a fundamental error which "lies at the base and foundation of the proceeding, affecting the judgment necessarily," or, as otherwise expressed, "such manifest error as when removed destroys the foundation of the judgment."24 Hence, the Court of Appeals correctly ruled on these matters even if they were not raised in the appeal briefs.

Under a contract to sell, the seller retains title to the thing to be sold until the purchaser fully pays the agreed purchase price. The full payment is a positive suspensive condition, the non-fulfillment of which is not a breach of contract but merely an event that prevents the seller from conveying title to the purchaser. The non-payment of the purchase price renders the contract to sell ineffective and without force and effect.25

Since the obligation of petitioners did not arise because of the failure of respondent to fully pay the purchase price, Article 1191 of the Civil Code would have no application.

Rayos v. Court of Appeals26 explained:

Construing the contracts together, it is evident that the parties executed a contract to sell and not a contract of sale. The petitioners retained ownership without further remedies by the respondents until the payment of the purchase price of the property in full. Such payment is a positive suspensive condition, failure of which is not really a breach, serious or otherwise, but an event that prevents the obligations of the petitioners to convey title from arising, in accordance with Article 1184 of the Civil Code. x x x

The non-fulfillment by the respondent of his obligation to pay, which is a suspensive condition to the obligation of the petitioners to sell and deliver the title to the property, rendered the contract to sell ineffective and without force and effect. The parties stand

as if the conditional obligation had never existed. Article 1191 of the New Civil Code will not apply because it presupposes an obligation already extant. There can be no rescission of an obligation that is still non-existing, the suspensive condition not having happened. [Emphasis and underscoring supplied; citations omitted]

The subject contract to sell clearly states that "title will be transferred by the owner (petitioners) to the buyer (respondent) upon complete payment of the agreed purchase price."27 Since respondent failed to fully pay the purchase price, petitioners’ obligation to convey title to the properties did not arise. While rescission does not apply in this case, petitioners may nevertheless cancel the contract to sell, their obligation not having arisen.28This brings this Court to Republic Act No. 6552 (THE REALTY INSTALLMENT BUYER PROTECTION ACT). InRamos v. Heruela29 this Court held:

Articles 1191 and 1592 of the Civil Code are applicable to contracts of sale. In contracts to sell, RA 6552 applies. In Rillo v. Court of Appeals,30 the Court declared:

x x x Known as the Maceda Law, R.A. No. 6552 recognizes in conditional sales of all kinds of real estate (industrial, commercial, residential) the right of the seller to cancel the contract upon non-payment of an installment by the buyer, which is simply an event that prevents the obligation of the vendor to convey title from acquiring binding force. It also provides the right of the buyer on installments in case he defaults in the payment of succeeding installments x x x. [Emphasis supplied]

The properties subject of the contract having been intended for commercial, and not for residential, purposes,31petitioners are entitled to retain the payments already made by respondent. RA 6552 expressly recognizes the vendor’s right to cancel contracts to sell on installment basis industrial and commercial properties with full retention of previous payments.32 But even assuming that the properties were not intended for commercial or industrial purpose, since respondent paid less than two years of installments, it is not entitled to any refund.33 It is on this score that a modification of the challenged issuances of the appellate court is in order.

Respecting petitioners’ claim for damages, failure to make full payment of the purchase price in a contract to sell is not really a breach, serious or otherwise, but, as priorly stated, an event that prevents the obligation of the vendor to convey title to the property from arising.34 Consequently, the award of damages is not warranted in this case.

With regard to attorney’s fees, Article 220835 of the Civil Code provides that subject to certain exceptions, attorney’s fees and expenses of litigation, other than judicial costs, cannot be recovered in the absence of stipulation. None of the enumerated exceptions in Article 2208 is present in this case. It bears stressing that the policy of the law is to put no premium on the right to litigate.36

WHEREFORE, the assailed Court of Appeals Decision dated April 29, 2004 and the Resolution dated February 21, 2005 in CA-G.R. CV No. 66198 are AFFIRMED with the MODIFICATION that petitioners are entitled to retain the payments already received from respondent.

SO ORDERED.

Quisumbing, J., Chairperson, Carpio, and Velasco, Jr., JJ., concur.Tinga, J., on leave.

[G.R. No. 137845. September 9, 2004]

ANGEL CLEMENO, JR., MALYN CLEMENO, and NILUS SACRAMENTO, petitioners, vs. ROMEO R. LOBREGAT, respondent.

D E C I S I O NCALLEJO, SR., J.:

This is a petition for review of the Decision [1] of the Court of Appeals in CA-G.R. CV No. 53655 reversing the decision of the Regional Trial Court of Quezon City, Branch 224, in Civil Case Nos. 92-12620 and 93-17268.

The Antecedents

The Spouses Nilus and Teresita Sacramento were the owners of a parcel of land covered by Transfer Certificate of Title (TCT) No. 158728 and the house constructed thereon located at No. 68 Madaling Araw Street, Teresa Heights Subdivision, Novaliches, Quezon City. The Spouses Sacramento mortgaged the property with the Social Security System (SSS) as security for their housing loan and, likewise, surrendered the owners and duplicate copies of the certificate of title. On September 2, 1980, the spouses executed a Deed of Sale with Assumption of Mortgage in favor of Maria Linda Clemeno and her husband Angel C. Clemeno, Jr., with the conformity of the SSS.[2] On March 6, 1981, the Register of Deeds issued TCT No. 277244 over the property in the name of the vendees, [3] who, in turn, executed a Real Estate Mortgage Contract over the property in favor of the SSS to secure the payment of the amount ofP22,900.00, the balance of the loan. [4] The Spouses Clemeno also surrendered the owners duplicate copy of the said title to the SSS. However, per the records of the SSS Loans Department, the vendors (the Spouses Sacramento) remained to be the debtors.

On July 1, 1992, respondent Romeo R. Lobregat, a lawyer and an Election Registrar in the Commission on Elections, filed a Complaint against the petitioners, the Spouses Clemeno, and Nilus Sacramento for breach of contract, specific performance with damages with the RTC of Quezon City. The case was docketed as Civil Case No. 92-12620 and raffled to Branch 100. On May 7, 1993, the trial court dismissed the case without prejudice for lack of interest on the part of the plaintiff to prosecute. [5] The petitioners, for their part, filed a Complaint against the respondent for recovery of possession of property with damages, docketed as Civil Case No. 93-17268 and raffled to Branch 93 of the court. In the meantime, the RTC, Branch 100 set aside its Order in

Civil Case No. 92-12620 and reinstated the case. The two (2) cases were then consolidated in the RTC, Branch 100.

The Evidence ofThe Respondent

On June 4, 1987, the respondent and petitioner Angel Clemeno, Jr., relatives by consanguinity, entered into a verbal contract of sale over the property covered by TCT No. 277244 under the following terms and conditions: (a) the respondent would pay the purchase price of the property in the amount of P270,000.00, inclusive of the balance of the loan of the petitioners, the Spouses Clemeno with the SSS [6] within two years from June 4, 1987;[7] (b) the respondent would pay the monthly amortizations of the vendors loan with the SSS; and (c) upon the payment of the purchase price of the property, the Spouses Clemeno would execute a deed of sale in favor of the respondent. [8] The respondent made a down payment ofP25,000.00 for which petitioner Clemeno, Jr. issued a receipt dated June 4, 1987. [9] He then made a partial payment of P5,000.00 to petitioner Clemeno, Jr. on July 8, 1987, [10] and another partial payment of P50,000.00 on February 9, 1988.[11] The respondent paid the realty taxes due on the property for 1987 and 1988.[12]

In the meantime, petitioner Clemeno, Jr. read a press release from the SSS in the newspapers allowing delinquent borrowers to restructure the balance of their loans as of March 31, 1988 with no arrearages on the balance of their account under certain terms and conditions.[13] On February 26, 1988, he paid the amount of P6,692.63 to the SSS, in partial payment of his loan account. [14] He also made a written request to the SSS for a restructuring of his loan.[15] Thereafter, the SSS Loans Collection Department issued on March 15, 1988, addressed to the borrower on record, that effective March 15, 1988, the monthly amortization on the loan was P841.84.[16] Petitioner Clemeno, Jr., as mortgagor, affixed his conformity thereto. [17] He then wrote a letter authorizing the respondent to pay the balance of his restructured loan with the SSS, which payments would be considered as partial payment of the house and lot. [18]Conformably, the respondent remitted to the SSS the monthly amortization payments for the account of petitioner Clemeno, Jr. However, the receipts issued by the SSS were in the name of petitioners Nilus Sacramento or Clemeno, Jr. [19]

The respondent made additional partial payments for the sale of the property to petitioner Clemeno, Jr. on January 17, 1989, and, March 20, 1989, in the total amount of P10,000.00.[20]He also continued remitting to the SSS the monthly amortizations due for the account of petitioner Clemeno, Jr.[21]

The respondent was able to secure a loan of P160,000.00 on April 1, 1989, which was more than sufficient to cover his balance of the purchase of the property. He then offered to pay the said balance to petitioner Clemeno, Jr., [22] but the latter told him to keep the money because the owners duplicate copy of the title was still with the SSS and to instead continue paying the monthly amortizations due. The respondent did so and made payments until March 1990. [23] He no longer paid after this date because the

SSS informed him that petitioner Clemeno, Jr. had already paid the balance of his account in full on March 23, 1990. Indeed, on May 9, 1990, the SSS had executed a Release of Real Estate Mortgage in favor of petitioner Clemeno, Jr. and released the owners duplicate of TCT No. 277244.[24]

The respondent offered to pay the balance of the purchase price of the property to petitioner Clemeno, Jr. and asked the latter to execute the deed of sale over the property and deliver the title over the property under his name, but petitioner Clemeno, Jr. refused to do so unless the respondent agreed to buy the property at the price prevailing in 1992. The respondent refused.

On June 12, 1992, the respondents counsel wrote petitioner Clemeno, Jr., informing the latter that he (the respondent) had already paid P113,049.96 of the purchase price of the property and that he was ready to pay the balance thereof in the amount of P156,970.04. He demanded that petitioner Clemeno, Jr. execute a deed of absolute sale over the property and deliver the title thereto in his name upon his receipt of the amount of P156,970.04.[25]

In his reply-letter, petitioner Clemeno, Jr. stated that he never sold the property to the respondent; that he merely tolerated the respondents possession of the property for one year or until 1987, after which the latter offered to buy the property, which offer was rejected; and that he instead consented to lease the property to the respondent. The petitioner also declared in the said letter that even if the respondent wanted to buy the property, the same was unenforceable as there was no document executed by them to evince the sale.[26]

In their Answer to the complaint, the petitioners alleged that they entered into a verbal lease-purchase agreement over the house and lot with the respondent under the following terms and conditions:

(a) The purchase price will be P270,000.00 to be paid in full not later than June 1, 1988;

(b) The rental is P1,500.00 a month, for the whole period from June 1987 to June 1, 1988;

(c) If the whole purchase price is not paid on the agreed date, the total amount equivalent to one-year rental shall be deducted from the amount already paid by the plaintiff, who shall peacefully vacate the premises and surrender possession of the house and lot to the defendants.

(d) The purchase price of P270,000.00 shall be payable: P90,000.00 upon taking possession of the property, P90,000.00 payable within six (6) months thereafter, and P90,000.00 not later than June 1, 1988.[27]

The petitioners further alleged that despite the respondents failure to comply with the conditions of their agreement, the latter was still granted an extension of until

September 1989 to pay the purchase price of the property, but managed to pay only P113,049.96, including the monthly amortizations of their loan account with the SSS and realty tax payments. The petitioners further alleged that the respondent even failed to pay any rental for the property from June 1987 to June 1, 1988. They posited that the contract between the parties was unenforceable under Article 1403(2) of the New Civil Code, and prayed that judgment be rendered in their favor as prayed for by them in their complaint in Civil Case No. 93-17268, thus:

WHEREFORE, it is most respectfully prayed that after due hearing, a decision in favor of plaintiff be rendered, ordering Defendant

(a) And all other persons claiming under him to vacate the premises located at 86 Madaling Araw St., Teresa Heights Subdivision, Novaliches, Quezon City;

(b) To pay plaintiff a balance of P64,349.14 for the use and occupancy of the premises until May 31, 1993, and at the rate of P3,628.80 a month from June 1, 1993 until the premises shall have been finally vacated;

(c) To pay P50,000.00 plus P2,000.00 per appearance as and for attorneys fees; and

(d) To pay the costs of suit.

Plaintiff further prays for such other relief reasonable and conscionable in the premises.[28]

The Evidence for thePetitioners

Petitioner Clemeno, Jr. and the respondent were townmates. Sometime in June 1987, petitioner Clemeno, Jr. agreed to sell the property for P270,000.00 payable in three (3) installments: (a) P90,000.00 upon the respondents taking possession of the property; (b) P90,000.00 payable within six (6) months thereafter; and (c) P90,000.00 not later than June 1, 1988. The respondent assured petitioner Clemeno, Jr. that there would be nothing to worry about the documentation of the sale; being a lawyer, he would take care of everything. However, the respondent failed to pay the balance of the purchase price of the property in the amount of P156,970.04 despite promises to do so.

On September 16, 1989, petitioner Clemeno, Jr. went to the respondents house to talk to him anew, but the latter was nowhere to be found. He made a typewritten letter to the respondent, stating that the latter had been given more than enough time to exercise the option to buy the property but failed to do so; hence, the offer was deemed

cancelled. The petitioner left the letter with the respondents daughter, Michelle Lobregat.

The trial court rendered judgment in favor of the petitioners, as follows:

Accordingly, therefore, the Court hereby renders judgment in favor of Angel Clemeno, [Jr.] as against Romeo Lobregat and orders the latter and other persons claiming under him to:

1. Vacate the premises located at No. 86 Madaling Araw Street, Teresa Heights Subdivision, Novaliches, Quezon City;

2. Pay Angel Clemeno, Jr. the amount of P64,349.14 for the use and occupancy of the premises until May 31, 1993 and at the rate of P3,628.80 a month from June 1, 1993 until the premises have been finally vacated;

3. Pay the amount of P50,000.00 as attorneys fees and other legal expenses, and

4. To pay the costs of suit.

IT IS SO ORDERED.[29]

The trial court ruled that since both the sale and lease agreements were not reduced to writing, both contracts were unenforceable under Article 1403(2) of the New Civil Code, and had decided the case based on justice and equity.

The respondent appealed the decision to the Court of Appeals and raised the following assignment of errors:

1. THE LOWER COURT, AFTER THE COMPLETE, MERITORIOUS AND WRITTEN PIECES OF EVIDENCE SUBMITTED BY PLAINTIFF-APPELLANT LOBREGAT, FAILED/REFUSED TO CONSIDER THE SAME. INSTEAD, DECIDED ONLY THE CASE OF ACCION PUBLICIANA FILED BY DEFENDANT-APPELLEE A. CLEMENO, JR.

2. THE LOWER COURT FAILED TO CONSIDER THAT RECEIPTS ARE NOT CONTRACT OF SALE BUT EVIDENCE FOR CONTRACT OF SALE AS EVEN NOTED BY THE LOWER COURT.

3. THAT THE LOWER COURT FAILED TO CONSIDER THAT THE PIECES OF EVIDENCE OF LOBREGAT CLEARLY SHOW THAT [THE] SALE WAS THE TRANSACTION BETWEEN HEREIN PARTIES AS ADMITTED BY DEFENDANT-APPELLEE A. CLEMENO, JR. (T.S.N., p. 16, Nov. 20, 1995) (T.S.N., pp. 26 & 27, April 19, 1996)

3. THAT THE HONORABLE LOWER COURT DISREGARDED ITS OWN RULING AS TO THE APPELLEES INTENTIONAL FAILURE TO FOLLOW/COMPLY WITH ITS ORDER DATED MAY 31, 1996.

4. THAT THE LOWER COURT FAILED TO CONSIDER THE DELIBERATE OMISSION OF DEFENDANTS-APPELLEES TO OBSERVE THE NON-FORUM SHOPPING REQUIREMENT.

5. THAT THE LOWER COURT MISAPPLIED THE PRINCIPLE OF STATUTE OF FRAUDS.[30]

On February 23, 1999, the Court of Appeals rendered judgment reversing the decision of the trial court. The fallo of the decision reads:

WHEREFORE, the decision appealed from is REVERSED, and judgment is hereby rendered:

1. In Civil Case No. Q-92-12620

(a) Ordering defendants-appellees to accept the remaining balance of the purchase price of the house and lot subject of sale in the amount of P156,109.00 and, thereafter, execute in favor of plaintiff-appellant the corresponding deed of sale or proper mode of conveyance; and

(b) Ordering defendants-appellees to pay, jointly and severally, plaintiff-appellant P50,000.00 by way of moral damages, P25,000.00 by way of exemplary damages, and P15,000.00 as attorneys fees.

2. In Civil Case No. Q-93-17268 dismissing the complaint therein.

Costs against defendants-appellees.

SO ORDERED.[31]

The Court of Appeals ruled that the contract entered into between the parties was a contract of sale, not a contract to sell. The appellate court also ruled that Article 1403(2) was not applicable because the contract was already partly performed, since partial payments had been made by the respondent as evidenced by receipts signed by the petitioners.

The petitioners now come to this Court, contending that:

I

The Honorable Court of Appeals grossly erred in holding that the contract entered by the parties is a contract of sale and not a contract to sell. [32]

II

The Court of Appeals erred seriously when it held that Under Article 1356 of the Civil Code, contract shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present and that the contract of sale of a piece of land may be proved orally, totally ignoring the positive mandate of Article 1358 of the Civil Code, [33]

III

The Honorable Court of Appeals erred in holding that the Statute of Frauds cannot be raised as a defense against specific performance, there being partial performance of the down-payment and subsequent installments, even if short of the full price and after the expiry of the agreed dates of payment. [34]

The Court shall resolve these issues simultaneously as they are interrelated.

The petitioners posit that the respondent failed to prove the essential elements of a contract of sale over the subject property. They contend that the receipts wherein they acknowledged the receipt of the amounts therein specified do not conform to the legal requirements of a contract of sale, and cited the ruling of this Court in Manotok Realty, Inc. vs. Court of Appeal.[35] They also posit that even by his own admission, the respondent defaulted in the payment of the purchase price of the property; hence, they are not obliged to execute a deed of absolute sale over the property and deliver the title to him. The petitioners assert that even if they had entered into an agreement with the respondent, such agreement was a mere contract to sell, not a contract of sale. They further assert that even if, indeed, the parties had entered into a contract of sale, the same is unenforceable under paragraph 2, Article 1403 of the New Civil Code, which provides that such contract must be in writing; and Article 1358 of the New Civil Code which requires that such contract must appear in a public document.

On the other hand, the appellate court held that the petitioners and the respondent entered into a verbal contract of sale and not a contract to sell over the subject property, thus:

In the case at bench, Clemeno had agreed to sell his house and lot to Lobregat for a total consideration of P270,000.00 payable in installments within a period of two (2) years. The receipt, Exhibit A, is self-explanatory: it speaks of the receipt by Clemeno of the sum of P25,000.00 from Lobregat as advance payment of the subject house and lot, the total purchase price of which is P270,000.00. Significantly, upon his receipt of the advance payment, Clemeno delivered the possession of the premises to Lobregat who is now the present possessor thereof. Subsequent payments were made by Lobregat on the purchase price, all of which were duly receipted for by Clemeno. The receipts Exhibits A-1, A-2 and A-3, for example, speak uniformly of additional part payment for the house and lot subject of this case. Moreover, as suggested by Clemeno himself, Lobregat had been religiously remitting the monthly payments on Clemenos loan obligation with the SSS. Note, for instance, Exhibit A-4 one of the

many receipts of payment to SSS where it is indicated that the real estate loan is in the name of Angel C. Clemeno, Jr., as borrower, but bears the name of Romeo Lobregat, as payor, on behalf of Clemeno. It is as clear as sunlight that the parties had entered into a contract of sale and not merely a contract to sell. [36]

The petition has no merit.

We find and so hold that the contract between the parties was a perfected verbal contract of sale, not a contract to sell over the subject property, with the petitioner as vendor and the respondent as vendee. Sale is a consensual contract and is perfected by mere consent, which is manifested by a meeting of the minds as to the offer and acceptance thereof on three elements: subject matter, price and terms of payment of the price.[37] The petitioners sold their property to the respondent for P270,000.00, payable on installments, and upon the payment of the purchase price thereof, the petitioners were bound to execute a deed of sale in favor of the respondent and deliver to him the certificate of title over the property in his name. The parties later agreed for the respondent to assume the payment of the petitioners loan amortization to the SSS, which payments formed part of the purchase price of the property. The evidence shows that upon the payment made by the respondent of the amount of P27,000.00 on June 4, 1987, the petitioners vacated their house and delivered possession thereof to the respondent. Conformably to Article 1477 of the New Civil Code, the ownership of the property was transferred to the respondent upon such delivery. The petitioners cannot re-acquire ownership and recover possession thereof unless the contract is rescinded in accordance with law.[38] The failure of the respondent to complete the payment of the purchase price of the property within the stipulated period merely accorded the petitioners the option to rescind the contract of sale as provided for in Article 1592 of the New Civil Code.[39]

The contract entered into by the parties was not a contract to sell because there was no agreement for the petitioners to retain ownership over the property until after the respondent shall have paid the purchase price in full, nor an agreement reserving to the petitioners the right to unilaterally resolve the contract upon the buyers failure to pay within a fixed period.[40]Unlike in a contract of sale, the payment of the price is a positive suspensive condition in a contract to sell, failure of which is not a breach but an event that prevents the obligation of the vendor to convey the title from becoming effective. [41]

The fact that the receipts issued by the SSS evidencing the respondents remittances of the monthly amortization payments of the petitioners loan, and that the receipts issued to the respondent for the payment of realty taxes for 1987 and 1988 were in the name of Nilus Sacramento and/or the petitioner Clemeno, Jr., does not negate the fact of the transfer of the ownership over the property to the respondent on June 4, 1987. Moreover, the deed of sale over the property in favor of the respondent had not yet been executed by the petitioners. The Spouses Sacramento and later, the petitioners, were the borrowers, as per the records of the SSS.

The contract of sale of the parties is enforceable notwithstanding the fact that it was an oral agreement and not reduced in writing as required by Article 1403(2) of the New Civil Code, which reads:

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

(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases, an agreement hereafter made shall be unenforceable by action, unless the same, or some note or memorandum thereof, be in writing, and subscribed by the parties charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents:

(d) An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the buyer accepts and receives part of such goods and chattels, or the evidences, or some of them, of such things in action, or pay at the time some part of the purchase money: but when a sale is made by auction and entry is made by the auctioneer in his sales book, at the time of the sale, of the amount and kind of property sold, terms of sale, price, names of the purchasers and person on whose account the sale is made, it is a sufficient memorandum;

This is so because the provision applies only to executory, and not to completed, executed or partially executed contracts. [42] In this case, the contract of sale had been partially executed by the parties, with the transfer of the possession of the property to the respondent and the partial payments made by the latter of the purchase price thereof.

We agree with the petitioners contention that the respondent did not pay the total purchase price of the property within the stipulated period. Moreover, the respondent did not pay the balance of the purchase price of the property. However, such failure to pay on the part of the respondent was not because he could not pay, but because petitioner Angel Clemeno, Jr. told him not to do so. The latter instructed the respondent to continue paying the monthly amortizations due to the SSS on the loan. Unknown to the respondent, petitioner Angel Clemeno, Jr. wanted to increase the purchase price of the property at the prevailing market value in 1992, and not its value in 1987 when the contract of sale was perfected.

The petitioners failed to prove their claim that a lease purchase agreement over the property was entered into. Except for their bare claim, they failed to adduce a morsel of documentary evidence to prove the same. On the other hand, all the receipts issued by them on the partial payments made by the respondent were for the purchase price of the property, and not as rentals thereof.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs against the petitioners.

SO ORDERED.Puno, (Chairman), Tinga, and Chico-Nazario, JJ., concur.Austria-Martinez, J., on official leave.

G.R. No. 75111 November 21, 1991

MARGARITO ALMENDRA, DELIA ALMENDRA, BERNARDINA OJEDA and MELECIA CENO, petitioners, vs.THE HON. INTERMEDIATE APPELLATE COURT, ANGELES ALMENDRA, ROMAN ALMENDRA and MAGDALENO CENO, respondents.

Custodio P. Canete for petitioners.

Serafin P. Ramento and Leon T. Tumandao for private respondents.

 

FERNAN, C.J.:p

This is a petition for review on certiorari of the then Intermediate Appellate Court's decision and resolution denying the motion for reconsideration of said decision which upheld the validity of three (3) deeds of sale of real properties by a mother in favor of two of her children in total reversal of the decision the lower court.

The mother, Aleja Ceno, was first married to Juanso Yu Book with whom she had three children named Magdaleno, Melecia and Bernardina, all surnamed Ceno. Sometime in the 1920's, Juanso Yu Book took his family to China where he eventually died. Aleja and her daughter Bernardina later returned to the Philippines.

During said marriage, Aleja acquired a parcel of land which she declared in her name under Tax Declaration No. 11500. 1 After Juanso Yu Book's death, Bernardina filed against her mother a case for the partition of the said property in the then Court of First Instance of Leyte. 2 On August 17, 1970, the lower court 3 rendered a "supplemental decision" 4 finding that the said property had been subdivided into Lots Nos. 6354 (13,788 square meters), 6353 (16,604 square meters), 6352 (23,868 square meters) and 6366 (71,656 square meters). The dispositive portion of said decision reads:

IN VIEW OF THE FOREGOING, the Court hereby renders judgment:

1. Declaring plaintiff Bernardina C. Ojeda as owner and entitled to the possession of Lot No. 6354 as described in the sketch found on page 44 of the record;

2. Declaring said plaintiff as owner and entitled to the possession of Lot 6353 as described in the sketch, without prejudice to whatever may be the rights thereto of her sister Melecia Ceno who is said to be presently in China;

3. Declaring defendant Aleja C. Almendra as owner and entitled to the possession of Lot No. 6366 as described in the sketch found on page 44 of the record;

4. Declaring said defendant also as owner and entitled to the possession of Lot No. 6352 as described in the sketch, subject to whatever may be the rights thereto of her son Magdaleno Ceno who is said to be presently in China.

No special pronouncement as to costs, except that the fees of the commissioner shall be proportionately borne by the parties.

SO ORDERED.

Meanwhile, Aleja married Santiago Almendra with whom she had four children named Margarito, Angeles, Roman and Delia. During said marriage Aleja and Santiago acquired a 59,196-square-meter parcel of land in Cagbolo, Abuyog, Leyte. Original Certificate of Title No. 10094 was issued therefor in the name of Santiago Almendra married to Aleja Ceno and it was declared for tax purposes in his name. 5

In addition to said properties, Aleja inherited from her father, Juan Ceno, a 16,000-square-meter parcel of land also in Cagbolo. 6 For his part, her husband Santiago inherited from his mother Nicolasa Alvero, a 164-square-meter parcel of residential land located in Nalibunan, Abuyog, Leyte. 7

While Santiago was alive, he apportioned all these properties among Aleja's children in the Philippines, including Bernardina, who, in turn, shared the produce of the properties with their parents. After Santiago's death, Aleja sold to her daughter, Angeles Almendra, for P2,000 two parcels of land more particularly described in the deed of sale dated August 10, 1973, 8 as follows:

1. Half-portion, which pertains to me as my conjugal share, with my late husband Santiago Almendra of the land located at Bo. Cagbolo, under T/D No. 22234, covered by OCT No. P-10094 in name of Santiago Almendra; having an area of 5.9196 hectares; with boundaries specifically designated at the technical descriptions of the title thereof; and hence the half portion subject of sale shall have an area of more or less 2.9598 hectares; specifically designated in the sketch below marked as X: the hilly portion.

2. Half-portion of a parcel of land located at Bo. Cagbolo, Abuyog, Leyte under T/D No. 27190 in the name of Aleja Ceno; having an area of 1.6000 hectares bounded as follows to wit: N. Cagbolo creek; E. Leon Elmido; S. Magno Elmido and W., Higasan River, which portion shall have an area of more or less 8000 hec. (sic), and designated as X in the sketch below: 9

On December 26, 1973, Aleja sold to her son, Roman Almendra, also for P2,000 a parcel of land described in the deed of sale as located in Cagbulo (sic), Abuyog, Leyte "under T/D No. 11500 which cancelled T/D No. 9635; having an area of 6.6181 hec., assessed at P1,580.00 . . ." 10

On the same day, Aleja sold to Angeles and Roman again for P2,000 yet another parcel of land described in the deed of sale 11 as follows:

A parcel of land designated as Lot No. 6352 in the name of Melicia Ceno, under Project PLS-645, Abuyog, Leyte, which had been treated in the CIVIL CASE No. 4387, For PARTITION OF REAL PROPERTY, CFI-Leyte, Tacloban City, Branch 11; Bernardina Ojeda, Plaintiff, -vs.- Aleja C. Almendra, defendant, wherein said SUPPLEMENTAL DECISION, dated August 17th, 1970, in said case by Judge Jesus N. Borromeo:

PART OF THE DECISION, COMMISSIONER'S REPORT:

Par. 3) That the partition, plaintiff and defendant agreed to exchange the names or owners of Lot No. 6353 which is in the name of Magdaleno Ceno with Lot No. 6352 in the name of Melecia Ceno as appearing in the sketch, copy of the Public Land Subdivision of Abuyog, Leyte, under Project PLS-645 . . . .

DISPOSITIVE PORTION OF SAID DECISION:

Par. 4) Declaring said defendant (Aleja C. Almendra) also as owner and entitled to the possession of Lot No. 6352 as described in the sketch, subject to whatever may be the rights thereto of her son Magdaleno Ceno who is said to be presently in China.

Aleja died on May 7, 1975. On January 21, 1977 Margarito, Delia and Bernardina filed a complaint against Angeles and Roman for the annulment of the deeds of sale in their favor, partition of the properties subjects therein and accounting of their produce. 12 From China, their sister Melecia signed a special power of attorney in favor of Bernardina. Magdaleno, who was still in China, was impleaded as a defendant in the case and summons by publication was made on him. Later, the plaintiffs informed the court that they had received a document in Chinese characters which purportedly showed that Magdaleno had died. Said document, however, was not produced in court. Thereafter, Magdaleno was considered as in default without prejudice to the provisions of Section 4, Rule 18 of the Rules of Court which allows the court to decide a case wherein there several defendants upon the evidence submitted only by the answering defendants.

On April 30, 1981, the lower court rendered a decision 13 the dispositive portion of which states:

WHEREFORE, judgment is hereby rendered declaring the deeds of sale herein (Exhs."E", "F"and"H") to be simulated and therefore null and void; ordering the partition of the estate of the deceased Aleja Ceno among her heirs and assigns; appointing the Acting Clerk of Court, Atty. Cristina T. Pontejos, as commissioner, for the purpose of said partition, who is expected to proceed accordingly upon receipt of a copy of this decision; and to render her report on or before 30 days from said receipt. The expenses of the commissioner shall be borne proportionately by the parties herein.

SO ORDERED.

The defendants appealed to the then Intermediate Appellate Court which, on February 20, 1986 rendered a decision 14 finding that, in nullifying the deeds of sale in question, the lower court totally disregarded the testimony of the notary public confirming the authenticity of the signatures of Aleja on said deeds and the fact that Angeles and Roman actually paid their mother the amounts stipulated in the contracts. The appellate court also stated that the uniformity in the prices of the sale could not have nullified the sale because it had been duly proven that there was consideration and that Angeles and Roman could afford to pay the same. Hence, it upheld validity of the deeds of sale and ordered the partition of the "undisposed" properties left by Aleja and Santiago Almendra and, if an extrajudicial partition can be had, that it be made within a reasonable period of time after receipt of its decision.

The plaintiffs' motion for reconsideration having been denied, they filed the instant petition for review on certioraricontending principally that the appellate court erred in having sanctioned the sale of particular portions of yet undivided real properties.

While petitioners' contention is basically correct, we agree with the appellate court that there is no valid, legal and convincing reason for nullifying the questioned deeds of sale. Petitioner had not presented any strong, complete and conclusive proof to override the evidentiary value of the duly notarized deeds of sale. 15 Moreover, the testimony of the lawyer who notarized the deeds of sale that he saw not only Aleja signing and affixing her thumbmark on the questioned deeds but also Angeles and Aleja "counting money between them," 16 deserves more credence than the self-serving allegations of the petitioners. Such testimony is admissible as evidence without further proof of the due execution of the deeds in question and is conclusive as to the truthfulness of their contents in the absence of clear and convincing evidence to the contrary. 17

The petitioners' allegations that the deeds of sale were "obtained through fraud, undue influence and misrepresentation," and that there was a defect in the consent of Aleja in the execution of the documents because she was then residing with Angeles, 18 had not been fully substantiated. They failed to show that the uniform price of P2,000 in all the sales was grossly inadequate. It should be emphasized that the sales were effected between a mother and two of her children in which case filial love must be taken into account. 19

On the other hand, private respondents Angeles and Roman amply proved that they had the means to purchase the properties. Petitioner Margarito Almendra himself admitted that Angeles had a sari-sari store and was engaged in the business of buying and selling logs. 20 Roman was a policeman before he became an auto mechanic and his wife was a school teacher 21

The unquestionability of the due execution of the deeds of sale notwithstanding, the Court may not put an imprimatur on the intrinsic validity of all the sales. The August 10, 1973 sale to Angeles of one-half portion of the conjugal property covered by OCT No. P-10094 may only be considered valid as a sale of Aleja's one-half interesttherein. Aleja could not have sold particular hilly portion specified in the deed of sale in absence of proof that the conjugal partnership property had been partitioned after the death of Santiago. Before such partition, Aleja could not claim title to any definite portion of the property for all she had was an ideal or abstract quota or proportionate share in the entire property. 22

However, the sale of the one-half portion of the parcel of land covered by Tax Declaration No. 27190 is valid because the said property is paraphernal being Aleja's inheritance from her own father. 23

As regards the sale of the property covered by Tax Declaration No. 11500, we hold that, since the property had been found in Civil Case No. 4387 to have been subdivided, Aleja could not have intended the sale of the whole property covered by said tax declaration. She could exercise her right of ownership only over Lot No. 6366 which was unconditionally adjudicated to her in said case.

Lot No. 6352 was given to Aleja in Civil Case No. 4387 "subject to whatever may be the rights thereto of her son Magdaleno Ceno." A reading of the deed of Sale 24 covering parcel of land would show that the sale is subject to the condition stated above; hence, the rights of Magdaleno Ceno are amply protected. The rule on caveat emptor applies.

WHEREFORE, the decision of the then Intermediate Appellate Court is hereby affirmed subject to the modifications herein stated. The lower court is directed to facilitate with dispatch the preparation and approval of a project of partition of the properties considered unsold under this decision. No costs.

SO ORDERED.

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

G.R. No. 172986               October 2, 2009

ARNULFO A. AGUILAR, Petitioner, vs.COURT OF APPEALS, CIVIL SERVICE COMMISSION and COMMISSION ON ELECTIONS, Respondents.

D E C I S I O N

BRION, J.:

The present petition provides an occasion to revisit the doctrine that perfection of an appeal within the reglementary period is not only mandatory but also jurisdictional; failure to perfect the appeal renders the challenged decision final and executory, and deprives the appellate court or tribunal of the jurisdiction to entertain the appeal and to alter the final decision.

THE CASE

Before us is the petition for review on certiorari1 filed by petitioner Arnulfo A. Aguilar (petitioner) to reverse and set aside the decision2 dated September 23, 2004 and resolution3 dated June 1, 2006 of the Special Former Eighth Division of the Court of Appeals (CA) in CA-G.R. SP No. 68853 entitled "Arnulfo A. Aguilar v. Civil Service Commission and Commission on Elections."

FACTUAL BACKGROUND

The facts of the case, as gathered from the records, are briefly summarized below.

During the 1998 National and Local Elections, the petitioner, an Election Officer (EO) IV of the Commission on Elections (COMELEC)-Navotas, was designated as Acting EO and Chairman of the Municipal Board of Canvassers (MBC) of San Pedro, Laguna. His duties included the canvassing of election returns, the preparation of the certificates of canvass of votes, and the proclamation of the winning candidates.

At 6 o’clock in the evening of May 11, 1998, the MBC convened in the Session Hall of the Sangguniang Bayan, San Pedro, Laguna, to receive and tabulate the election returns and certificates of canvass. At about 1:30 a.m. of May 15, 1998, the MBC resolved to suspend its proceedings and to continue at 3:30 p.m. that same day. The petitioner failed to report back to his post when the MBC resumed the canvassing. The MBC eventually proclaimed the winners without the petitioner’s participation due to his absence.

On June 2, 1998, Geronima F. Abellera (Abellera) filed a letter-complaint4 against the petitioner. Abellera questioned the validity of the proclamation of the winning candidates, since the certificates of canvass and proclamation did not bear the signature of the petitioner as MBC Chairman.

On June 11, 1998, then COMELEC Executive Director Resurreccion Z. Borra directed5 the petitioner to explain in writing his alleged abandonment of position as Chairman of the MBC.

On June 16, 1998, the petitioner responded to the directive through a memorandum.6 He explained that he did not abandon his post, but he was absent due to illness and that he duly requested relief

from duty from the COMELEC Regional Director. The COMELEC en banc referred the case to its Law Department for appropriate action.7

On February 4, 1999, the petitioner was formally charged with Ignorance of the Law, Grave Misconduct, Neglect of Duty, Abandonment and Conduct Unbecoming a Public Officer Prejudicial to the Interest of Public Service for his failure to report back to his post as Chairman of the MBC.8 He was also preventively suspended for sixty (60) days pending investigation of the case.

In his formal answer dated March 12, 1999, the petitioner explained that his failure to return to his post was due to illness, physical exhaustion, and death threat from the militant group "Alex Boncayao Brigade" (ABB). The petitioner also waived his right to a formal investigation.

Despite the petitioner’s waiver, the COMELEC conducted a formal investigation.

THE COMELEC RULING

The COMELEC, through Resolution No. 99-1067 dated May 31, 1999, found the petitioner guilty of Abandonment, Neglect of Duty and Conduct Unbecoming a Public Officer, and imposed on him the penalty of suspension from the service for six (6) months.9

The petitioner received a copy of Resolution No. 99-1067 on August 26, 1999.10 On August 30, 1999, the petitioner moved, through a Memorandum, for the reconsideration of the COMELEC resolution and the lifting of his suspension,11 but the COMELEC denied the motion in Resolution No. 99-1805 dated October 11, 1999.12

Instead of filing an appeal with the Civil Service Commission (CSC), the petitioner sought, on November 26, 1999, the reconsideration of his suspension through another Memorandum, but the COMELEC denied the motion in Resolution No. 00-0215 dated January 27, 2000.13 The petitioner then filed an Urgent Motion for Reinvestigation, but the COMELEC likewise denied this motion under Resolution No. 00-0399 dated February 17, 2000.14

On April 28, 2000, the petitioner filed his Notice of Appeal together with his Appeal Memorandum with the CSC. The petitioner alleged that there was no substantial evidence to hold him liable for the offenses charged against him, and that there was failure to comply with the requirements of due process.

THE CSC RULING

On August 17, 2001, the CSC issued Resolution No. 011396 dismissing the petitioner’s appeal.15 The CSC found that the petitioner failed to provide evidentiary support for the reasons he gave for his failure to return to his post. The CSC noted that he failed to submit the required medical certificate showing that he was sick at that time, nor did he communicate with other members of the MBC when it resumed the canvassing in the afternoon of May 15, 1998 until the completion of the canvass on May 16, 1998. It also noted that the alleged ABB death threat did not exist, since the ABB letter simply warned the petitioner not to commit any irregularity that would impair the results of the election. The CSC found no merit in the claimed denial of due process, since the right to the assistance of counsel is not an indispensable requirement of due process, except during custodial investigation and during the trial of the accused.

The CSC, however, modified COMELEC Resolution No. 99-1067 by finding the petitioner guilty of Gross Neglect of Duty and Conduct Grossly Prejudicial to the Best Interest of the Service and

imposing on him the penalty of dismissal from the service. The CSC observed that the petitioner’s act of leaving his post as Election Officer and Chairman of the MBC was a serious breach that endangered the public welfare, at the same time that it prejudiced the public service; it affected the efficient canvassing of votes and put into question the legality of the winners’ proclamation.

The petitioner moved for a reconsideration of CSC Resolution No. 011396, but the CSC denied the motion in Resolution No. 2001516 dated January 3, 2002.

The petitioner then elevated his case to the CA through a petition for review under Rule 43 of the Rules of Court. He prayed that all the resolutions of the CSC and the COMELEC be set aside, and the penalty of dismissal imposed upon him be lifted for lack of factual and legal basis.

THE CA RULING

On September 23, 2004, the CA rendered a decision dismissing the petition on the ground that CSC Resolution No. 011396 had become final and executory without any timely motion for

reconsideration having been filed, and could therefore no longer be modified, altered or reversed. The appellate court found that the petitioner’s motion for reconsideration with the CSC was filed only

on October 1, 2001, more than 15 days from September 7, 2001, when the petitioner received a copy of CSC Resolution No. 011396.

The petitioner moved but failed to secure reconsideration of the CA decision; hence, he came to us through the present petition.

THE PETITION and THE PARTIES’ POSITIONS

The petitioner prays for judicial leniency because at stake is not only his employment with the COMELEC but also his means of livelihood. He contends that he filed his motion for reconsideration on September 25, 2001 as indicated by the date stamped on the motion, not October 1, 2001 as declared by the CA. He further argues that when he filed his motion for reconsideration on September 25, 2001 it was only one day late since the fifteen-day period from September 7, 2001, the day he received CSC Resolution No. 011396, fell on September 22, 2001, a Saturday, and he had until September 24, 2001, a Monday, to file his motion.

The petitioner maintains that he is not guilty of abandonment or neglect of duty because his inability to report back for the scheduled resumption of canvass was justified by sickness and death threats from the ABB. In addition, he claims that his request for temporary relief from duty was granted by Atty. Milagros Somera, COMELEC Regional Director for Region IV.

The respondents CSC and COMELEC, through the Office of the Solicitor General (OSG), counter-argue that the petition is defective in form and should be dismissed outright, since it improperly impleads the CA as party respondent in violation of Section 4 of Rule 45 of the Rules of Court. The OSG defends the decision of the CA to dismiss the petition by pointing out that the petitioner filed his motion for reconsideration of CSC Resolution No. 011396 beyond the fifteen-day reglementary period.

The OSG further submits that the CSC correctly found the petitioner guilty of Gross Neglect of Duty and Conduct Grossly Prejudicial to the Best Interest of the Service, and correctly imposed the penalty of dismissal from the service. It insists that the petitioner’s failure to perform his assigned duties and legal obligations prejudiced the public service because it hampered the smooth canvassing of votes and impaired the integrity of the results of the canvassing.

OUR RULING

We find the petition meritorious.

We deal first with the issue of form raised by the respondents.

Formal defects in petitions are given liberal treatment to dispose of cases on the merits rather than on a technicality

We agree with the OSG that the petition erroneously impleads the CA. The correct procedure, as required by Section 4, Rule 45 of the 1997 Rules of Court, is not to implead the lower court that rendered the assailed decision.17 However, inappropriately impleading the lower court as respondent in the petition for review on certiorari does not automatically mean the dismissal of the appeal; the rule merely authorizes the dismissal of the petition, as its violation is a mere formal defect,18 and even as such is not uncommon.19 In those cases we merely called the petitioners’ attention to the defect and proceeded to resolve the cases on their merits.

We find no reason why we should not afford the same liberal treatment to the present case. While, unquestionably, we have the discretion to dismiss the appeal for being defective, sound judicial policy dictates that cases are better disposed on the merits rather than on technicality, particularly when the latter approach may result in injustice.20 This is in accordance with Section 6, Rule 1 of the Rules of Court21 which encourages a reading of the procedural requirements in a manner that will help secure and not defeat the ends of justice.22

We now proceed to the main issue, which simply is, did the CA err in dismissing the petitioner’s petition for review before it for the late filing of the petitioner’s motion for reconsideration with the CSC?

We answer in the affirmative.

Finality of Judgment Due to the Failure to Seasonably File a Motion for Reconsideration

The CA erred in finding that the petitioner’s motion for reconsideration with the CSC was filed only on October 1, 2001, or nine (9) days beyond September 22, 2001 deadline. Our own examination of the records shows that the date of filing with the CSC was September 25, 2001, as indicated by date stamped on the motion.23 Since September 22, 2001 fell on a Saturday, the petitioner actually had until September 24, 2001, a Monday, to file the motion for reconsideration, pursuant to Section 1, Rule 22 of the Rules of Court.24 Thus, the petitioner was one day late when he filed his motion for reconsideration on September 25, 2001.

On this point, the CA conclusion is correct although it erroneously recognized October 1, 2001 as the date of filing of the motion. Whether with our count or with the CA’s, the same result is achieved; the motion was not filed on time, resulting in the finality of the judgment sought to be reconsidered.

Other Reasons for Finality; theDoctrine of Finality of Judgments

Even if we liberally treat the petitioner’s one-day tardiness in the filing of his motion for reconsideration, the COMELEC decision nevertheless lapsed into finality for reasons subsequent to the motion for reconsideration. Although the parties did not put these subsequent developments in

issue, we are not prevented from delving into these developments, since they affect the jurisdiction of the CSC to entertain the appeal.25

Jurisprudence teaches us that the perfection of an appeal within the statutory or reglementary period is not only mandatory, but also jurisdictional.26 This rule is founded upon the principle that the right to appeal is not part of due process of law but is a mere statutory privilege to be exercised only in the manner and in accordance with the provisions of the law.27 Failure to interpose a timely appeal (or a motion for reconsideration) renders the appealed decision, order or award final and executory and this deprives the appellate body of any jurisdiction to alter the final judgment,28 more so, to entertain the appeal.29

Rule III of CSC Resolution No. 991936,30 otherwise known as the Uniform Rules on Administrative Cases in the Civil Service (URACCS), provides the following remedies to a party adversely affected by the decision of the disciplining authority:

Section 38. Filing of Motion for Reconsideration. – The party adversely affected by the decision may file a motion for reconsideration with the disciplining authority who rendered the same within fifteen (15) days from receipt thereof.

x x x

Section 41. Limitation. – Only one motion for reconsideration shall be entertained.

x x x

Section 43. Filing of Appeals. – Decisions of heads of departments, agencies, provinces, cities, municipalities and other instrumentalities imposing a penalty exceeding thirty (30) days suspension or fine in an amount exceeding thirty days salary, may be appealed to the Commission Proper within a period of fifteen (15) days from receipt thereof. x x x (Emphasis supplied)

In the present case, the petitioner, instead of filing a proper appeal with the CSC, filed a second motion for reconsideration with the COMELEC on November 26, 1999 after the denial of his first motion for reconsideration in COMELEC Resolution No. 99-1805 dated October 11, 1999. The petitioner also subsequently filed an Urgent Motion for Reinvestigation. When the petitioner filed his Notice of Appeal with the CSC on April 28, 2000, more than six (6) months had lapsed, and the CSC should have forthwith denied his Notice of Appeal for non-compliance with Rule III of the URACCS. The petitioner's Notice of Appeal on April 28, 2000, having been filed beyond the fifteen-day reglementary period, did not toll COMELEC Resolution No. 99-1067 from becoming final and executory.

The settled and firmly established rule is that a decision that has acquired finality becomes immutable and unalterable. This quality of immutability precludes the modification of the judgment, even if the modification is meant to correct erroneous conclusions of fact and law. And this postulate holds true whether the modification is made by the court that rendered it or by the highest court in the land.31 The orderly administration of justice requires that, at the risk of occasional errors, the judgments/resolutions of a court must reach a point of finality set by the law. The noble purpose is to write finis to disputes once and for all. This is a fundamental principle in our justice system, without which no end to litigations will take place. Utmost respect and adherence to this principle must always be maintained by those who exercise the power of adjudication. Any act that violates such principle must immediately be struck down.32 Indeed, the principle of conclusiveness of prior adjudications is not confined in its operation to the judgments of courts, but extends as well to those of all other tribunals exercising adjudicatory powers.33

1avvphi1

Being an immutable decision, COMELEC Resolution No. 99-1067 may no longer be modified, altered or changed. CSC Resolution No. 011396 which modified a final and executory judgment is a void judgment. As such, it is not entitled to the respect accorded to a valid judgment, but may be entirely disregarded or declared inoperative by any tribunal in which effect is sought to be given to it. It is attended by none of the consequences of a valid adjudication.34 Thus, CSC Resolution No. 011396 finding the petitioner guilty of Gross Neglect of Duty and Conduct Grossly Prejudicial to the Best Interest of the Service, and the consequent penalty of dismissal from the service is rendered ineffectual. The petitioner is entitled to full backwages from the time he has duly served his six-month suspension under COMELEC Resolution No. 99-1067 until his actual reinstatement.

WHEREFORE, premises considered, we hereby REVERSE and SET ASIDE the Decision of the Court of Appeals in CA-G.R. SP No. 68853 dated September 23, 2004. CSC Resolution No. 011396 dated August 17, 2001, having been issued in violation of the rule on immutability of decisions, is ANNULLED and SET ASIDE. Petitioner Arnulfo F. Aguilar is hereby REINSTATED to his former position as Election Officer IV after having duly served his six-month suspension under COMELEC Resolution No. 99-1067 dated May 31, 1999. He is entitled to backwages from the time he completed service of his suspension until his actual reinstatement.

SO ORDERED.

ARTURO D. BRIONAssociate Justice

WE CONCUR:

REYNATO S. PUNOChief Justice

(On sabbatical leave)LEONARDO A. QUISUMBING*

Associate Justice

CONSUELO YNARES-SANTIAGOAssociate Justice

ANTONIO T. CARPIOAssociate Justice

RENATO C. CORONAAssociate Justice

CONCHITA CARPIO MORALESAssociate Justice

MINITA V. CHICO-NAZARIOAssociate Justice

PRESBITERO J. VELASCO, JR.Associate Justice

ANTONIO EDUARDO B. NACHURAAssociate Justice

TERESITA J. LEONARDO-DE CASTROAssociate Justice

DIOSDADO M. PERALTAAssociate Justice

LUCAS P. BERSAMINAssociate Justice

MARIANO C. DEL CASTILLOAssociate Justice

ROBERTO A. ABADAssociate Justice

C E R T I F I C A T I O N

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

REYNATO S. PUNOChief Justice

G.R. No. L-27406 May 31, 1979

ALEXANDER T. CASTRO, plaintiff-appellant, vs.LUIS ESCUTIN Administrator in Special Proceeding No. V-2033, defendant-appellee

Luis F de Castro & T R. Reyes & Associates and Pompeyo Diaz for appellant.

Venicio Escolin for appellee.

 

ABAD SANTOS, J:

This is an appeal from the decision of the Court of First Instance, Branch I, of Capiz in Civil Case No. V-2681, for recovery of property, consisting of 30 parcels of land and of unpaid rentals for their cultivation.

Plaintiff-appellant Alexander Castro is the adopted son of the late Father Eduardo N. Castro, parish priest of Tanjay Negros Oriental. Defendant-appellee Luis Escutin is one of the heirs, and the administrator of the testate estate, of the late Nicanor Escutin, who died in 1955. Upon Nicanor's death, Special Proceedings No. V-2033 over his testate estate was filed in the Court of First Instance, Branch 11. In the special proceedings, defendant-appellee Luis Escutin, in his capacity as Administrator, returned an inventory; plaintiff-appellant Alexander Castro filed a motion to exclude the subject 30 parcels of land from this inventory on the ground that they are his properties. Before this motion could be resolved in Branch II, the complaint in this case was filed in Branch 1. Accordingly, the presiding judge in Branch II entered an order in Special Proceedings No. V-2033, holding in abeyance his resolution of the motion, pending final determination of the civil action in Branch 1. The decision rendered on 7 July 1966 by the court a quo dismissed the complaint, with costs against the plaintiff. Hence, this appeal.

The Supreme Court took cognizance of the appeal because the value of the property involved is in excess of TWO HUNDRED THOUSAND PESOS (P2000,000.00), Philippine currency. Plaintiff-appellant Alexander T. Castro executed a subscribed verification stating that in his complaint, he claims ownership of the 30 parcels of land which his predecessor-in-interest, the late Father Castro, allegedly purchased in the sum of SIXTY NINE THOUSAND THREE HUNDRED PESOS (P69,300.00). He further stated that the 30 lots contain a total area of 141 hectares more or less, most of which are ricelands very near the poblacion of Dao, Capiz, and the rest of which are lands in the poblacion  itself. He also stated that at the rate of P1,400.00 per hectare, the ricelands near the poblacion of Dao are worth at least P182,000.00. This amount, added to the amount representing the value of the lands in the poblacion,  total TWO HUNDRED FOUR THOUSAND PESOS (P204,000.00), an aggregate value which he considers to be conservative. (Record on Appeal, pp. 127-130).

It appears that the late Nicanor Escutin was a sugar planter who owned Hacienda Escutin in Lacaron, Dao, Capiz. For financing, he turned to the Asturias Sugar Central Inc. at Dumalag, Capiz, which extended him a running account. Unfortunately, financial reverses visited the hacienda, provoking from Asturias a threat to foreclose the pending mortgage (See Exhibit 2). This was no idle threat, for Asturias had previously foreclosed the mortgages on the haciendas of two other millers. If the threat was carried out, foreclosure would mean losing not only the hacienda, but also the other

Escutin properties by means of a deficiency judgment. Nicanor decided to seek the advice of a close family friend and lawyer, Gervasio Diaz. He recommended that they should simulate an encumbrance on Nicanor's properties not directly involved with Asturias, to stave off attachment or execution for the satisfaction of a possible deficiency judgment.

In this simulated encumbrance, the role of creditor was played by Father Eduardo N. Castro Nicanor's close boyhood friend and schoolmate. Father Castro was godfather to Nicanor's eldest son, the defendant-appellee. Father Castro also solemnized the second marriage of Nicanor. He stayed with Nicanor when he was assigned as parish priest of Dao.

Gervasio prepared a deed of mortgage on Nicanor's 30 parcels of land in favor of Father Castro. This contract, styled Escritura de Prestamo con Hipoteca " (E Exhibit A) appears to have been executed on 5 June 1932 in Ayuquitan (now Amlan Negros Oriental, "for the consideration of a loan of P63,000.00, with interest at 10% per annum," to be paid on or before 30 December 1944. The contract was accompanied by a counter-receipt (contra recibo) by the mortgagee, acknowledging payment of the redemption price stipulated in the contract of mortgage See Exhibit 13). After the mortgage contract and counter-receipt were signed, Father Castro sent the mortgage contract to Notary Public Pedro Bandoquillo for acknowledgment.

Nicanor's financial problems did not lighten; in fact they deteriorated, and Asturias required him to sign a promissory note. At this occasion, the threat of foreclosure was reiterated, and this prompted Nicanor to seek further legal advice from Gervacio To fortify Nicanor's position, Gervacio drafted a deed of sale, styled "Escritura de Venta Definitive" (Exhibit B). It appears to have been executed on 27 July 1933 at Tanjay Negros Oriental, and stipulated that Nicanor sold, conveyed, and transferred all the parcels of land described in Exhibit A in favor of Father Castro for the sum of P63,000.00 plus P6,300.00, representing the unpaid interest of 10% per annum, as stipulated in the aforementioned Exhibit A, or at the total price of P69,300.00. The deed of sale had a built-in agreement of lease in favor of Nicanor at P1,000.00 yearly for all of the same properties described in Exhibit A. Nicanor and Father Castro signed the deed of sale with the built-in lease agreement, and the corresponding counter-receipt.

Defendant-appellee introduced evidence to show that despite the deed of sale, Nicanor continued to possess and enjoy, and exercise acts of ownership over, all the properties. After Nicanor's death, these properties were partitioned and distributed to his heirs who, at the time this civil action was filed in 1963, had been individually in possession of their respective shares since 1956 (Exhibits 8, 8-A, 8- B and 8-C). Defendant-appellee's evidence also shows that the properties remained registered in Nicanor's name. The tax declarations were in his name; he paid the taxes in his own capacity, and not as agent for another. After his death, his children paid the taxes. Neither Nicanor nor his surviving heirs ever paid the interest stipulated in the contract of mortgage, nor the yearly rental stipulated in the deed of sale.

At the pre-trial conference, the parties admitted the genuineness and due execution, both of the contract of mortgage, and of the deed of definite sale with the built-in lease contract. Therefore, the only issue left was whether the two contracts, which are onerous in character, were executed for consideration and therefore valid, as claimed by plaintiff-appellant; or were simulated and therefore void, as claimed by defendant-appellee. This remains the issue on appeal.

To resolve the issue, we start with the legal presumption that there was a sufficient consideration for a written contract. (Rules of Court, Rule 131, Section 5, paragraph r At the outset, then, the regular presumption weights the case in favor of plaintiff-appellant, and imposes the burden of proof on the defendant-appellant, since the burden of proof lies on the party who would be defeated if no evidence were given on either side. (Rules of Court, Rule 131, Section 1). However, granting that

even private transactions are to be presumed fair and regular, the presumption is only prima facie, and must yield to evidence. Genato v. de Lorenzo, L-24983, 20 May 1968; 23 SCRA 618).

The cumulative effect of the evidence presented by the defendant-appellee is to Identify certain badges of fraud that attach themselves to both contracts under consideration. Neither Nicanor nor his successors-in-interest ever paid interest or rentals, pursuant to the provisions of the two instruments. Their possession of all the lands was peaceful, adverse, and continuous, and they exclusively enjoyed its fruits. The certificate of title covering the lands remained in Nicanor's name, and it was he who declared them for taxation purposes and paid the taxes, a duty assumed by his heirs after his death.

More startling to the dispassionate mind is the incongruence between the income supposed to be earned by the property under the deed of mortgage on the one hand, and the income supposed to be earned under the deed of sale on the other hand. Under the deed of mortgage, Father Castro apparently was to earn P6,300.00 yearly, representing the interest at 10% per annum on the principal loan. But under the deed of sale, Father Castro apparently was to earn only P1,000.00 yearly, representing the payment for the lease. It thus appears that when Father Castro extended a loan secured by the mortgage, he stood to earn more by way of interest payments, than when he bought the land outright and then leased it out. Such an obvious discrepancy would not escape the notice of a reasonable man, and can only be explained as a grave symptom of simulation. Moreover, the late Father Castro took no step whatsoever to assume ownership over the land, such as demanding payment for interest or rentals. This failure to take exclusive possession of the property allegedly sold to him is a clear badge of fraud [See Oria vs. McMicking 21 Phil. 243 (1912)].

The plaintiff-appellant implicitly admits as much, for in the lower court, he argued that this case should be subsumed under the principle of In pari delicto non oritur action (Record on Appeal, page 121). However, to the general rule that when two persons are equally at fault, the law will not relieve them, the Supreme Court has laid down an exception, by deciding that rule does not apply to an inexistent contract [Gonzales vs. Trinidad, 67 Phil. 682 (1939)]. Moreover, the intent to defraud, which was the animus of the two simulated contracts, was never effectuated For the finances of the Hacienda Escutin subsequently took a turn for the better, and Asturias abandoned the threat to foreclose the mortgage on the hacienda.

Another token of fraud is the relationship between Nicanor and Father Castro, the ostensible mortgagee-vendee. It has been observed that fraud is generally accompanied by a secret trust, and that, as in this case, the ostensible debtor selects a person in whom he can repose trust and confidence. [See Ford v. Chelf, 112 Vd. 98, 102, 70 S.E. 500, cited in Garcia, et al. v. Bituin, etc. et al., CA G.R. No. 12297-R, 55 O.G. 1785 (1958)]. Nicanor and Father Castro were bosom friends with a long history of trust and intimacy. The element of trust is further accentuated by the execution between them, in addition to the two instruments in question, of two secret documents known as the counter-receipt (contra recibo).

Thus, in their totality defendant-appellee's proof is sufficiently weighty to overthrow the legal presumption of sufficient consideration. Badges of fraud, when clear and unmistakable, will serve to destroy the camouflage of validity. Indeed, we find overwhelming proof that the instruments in question were without consideration and fraudulent, executed merely to lend color of authenticity to what was calculated as Nicanor's would be status of insolvency. Since both the mortgage and the sale were fictitious and simulated, they were void ab initio  [New Civil Code, Art. 1409. See Mapalo v. Mapalo, L-21489 & L-21628, 19 May 1966; 17 SCRA 114; Vda. de Rodriguez v. Rodriguez, L-23002, 31 July 1967; 20 SCRA 908].

In the contemplation of law, it is as if they never were, with the result that the lands covered by the instruments remain under the ownership of the alleged mortgagor-vendor, Nicanor Escutin, and his successors-in-interest.

WHEREFORE, the judgment of dismissal is hereby affirmed. Without costs.

SO ORDERED.

Antonio (Actg. Chairman),* Aquino, Santos and De Castro,** JJ., concur.

G.R. No. 148516               December 27, 2007

MANUEL LUIS SANCHEZ Petitioner, vs.MAPALAD REALTY CORPORATION, Respondent.

D E C I S I O N

REYES, J.:

KAPAG ang isang kasunduan ng bilihan ay may kaakibat na pandaraya at napatunayang huwad, ang bumili ay walang nakamit na titulo ng pag-aari. Ang bentahan ng apat na parsela ng mamahaling lupa sa Roxas Boulevard na isinuko ng dating kasamahan ng Pangulong Marcos sa pamahalaang Aquino ay nagtataglay ng mga palatandaan ng isang malakihang pandaraya na isinagawa mismo ng mga taong hinirang ng Presidential Commission on Good Government (PCGG) upang pangalagaan ang pag-aari ng isang na-sequester na kumpanya.

Ang mga ito ay dapat ibalik sa pamahalaan hanggang di pa tiyak ang tunay na may-ari. Hindi kanais-nais na nagpakahirap ang PCGG sa pagbawi ng nasabing pag-aari para lamang mawala ito dahil sa manipulasyon ng isang di mapagkakatiwalaang opisyal.

Where a deed of sale was attended by fraud and proved to be fictitious, the buyer acquired no title to the subject property. The sale of four parcels of prime land along Roxas Boulevard surrendered by a former associate of President Marcos to the Aquino government bears the earmarks of a grand scam perpetrated by the very same persons appointed by the Presidential Commission on Good Government (PCGG) to safeguard the assets of the sequestered companies.1

They must be restored to the custody of the government until their true owner is finally determined. It would be odious to have the PCGG work so hard to recover them only to have them lost due to manipulation of an unscrupulous official.

This petition for review on certiorari seeks a reversal of the Decision2 of the Court of Appeals (CA) which reversed and set aside that3 of the Regional Trial Court (RTC), Branch 135, Makati City in an action for annulment of deed of sale and reconveyance4 filed by respondent Mapalad Realty Corporation (Mapalad, for brevity).

Petitioner Manuel Luis Sanchez, who bought the properties during the pendency of the case at the trial court, intervened in the appeal before the CA.

The Facts

The facts, as gleaned from the records, are as follows:

Respondent Mapalad was the registered owner of four (4) parcels of land located along Roxas Boulevard, Baclaran, Parañaque. The properties, covered by Transfer Certificates of Title (TCT) Nos. S-81403, S-81404, S-81405 and S-81406 have a total land area of 4,038 square meters.5

On March 21, 1986, shortly after the February 1986 EDSA Revolution, Jose Y. Campos executed an affidavit6admitting, among others, that Mapalad was one of the companies he held in trust for former

President Ferdinand E. Marcos. Campos turned over all assets, properties, records and documents pertaining to Mapalad to the new administration led by then President Corazon C. Aquino.

On March 23, 1986, the PCGG issued writs of sequestration for Mapalad and all its properties.7

On August 2, 1992, the PCGG appointed Rolando E. Josef as Vice President/Treasurer and General Manager of Mapalad. He immediately conducted an inventory of the assets of the corporation. This was when it was discovered that four (4) TCTs were missing, namely, TCT Nos. S-81403, S-81404, S-81405, and S-81406.

Josef inquired on the whereabouts of these missing TCTs from Luis R. Narciso, an employee of Port Center Development Corporation, a sister company of Mapalad. Josef was informed that Mapalad’s former director and general manager, Felicito L. Manalili (GM Manalili) took the said missing TCTs sometime in July 1992.

On September 8, 1992, Narciso executed an affidavit8 stating that the missing TCTs were taken from him by GM Manalili.

Josef personally talked to GM Manalili to inquire about what happened to the titles he took from Narciso. GM Manalili promised to return the titles as soon as he found them. He never did, despite repeated demands on him.

On November 16, 1992, Felimon Oliquiano, Jr., president of Nordelak Development Corporation (Nordelak, for brevity), filed a notice of adverse claim9 over the subject properties based on a deed of sale purportedly executed on November 2, 1989 by Miguel Magsaysay in his capacity as president and board chairman of Mapalad, selling the four lots to Nordelak for the total purchase price of P20,190,000.00. This deed of sale was notarized by Elpidio T. Clemente as Document No. 121, Page 26, Book No. 82 Series of 1989.10

Josef notified the Register of Deeds (RD) of Parañaque by three successive letters dated November 18, December 7 and 8, 1992 that the owner’s duplicate copies of four (4) TCTs in the name of Mapalad were missing, and requested the RD not to entertain any transaction, particularly any attempt to transfer ownership thereof, or annotate any encumbrance or lien of any kind on these four TCTs.

Since Josef’s letters to the RD were not verified, the RD instructed him to submit a verified petition or cancellation of adverse claim; Josef complied.

On December 22, 1992, Mapalad filed with the RD a verified petition for cancellation of adverse claim annotated on its titles by Nordelak.11 The petition also included a notice of loss of the owners’ duplicate copies of the TCTs concerned. This was annotated on the titles as Entry No. 154431 on the next day.

On January 14, 1993, Mapalad discovered, after verification with the records of the RD, that its titles to the four (4) properties were cancelled as early as December 22, 1992. In lieu of them, TCT Nos. 68493, 68494, 68495, and 68496 in the name of Nordelak were issued12 by virtue of another deed of sale also dated November 2, 1989 and purportedly signed by the same Miguel Magsaysay in his capacity as president and chairman of the board of Mapalad.

Although this document was also notarized by the same Elpidio T. Clemente, bearing the same Document No. 121, Page 26, Book No. 82, Series of 1989, the amount indicated in this deed of sale

as total purchase price wasP7,268,400.00 instead of P20,190,000.00 as earlier annotated in the title per the adverse claim on November 16, 1992. In other words, there were two deeds of absolute sale, bearing the same dates, involving the same parties, the same parcel of land, and notarized by the same Notary Public under identical notarial entries, with different considerations or purchase price.

Way back October 13, 1978, A. Magsaysay, Inc., a corporation controlled by Miguel Magsaysay, acquired ownership of all shares of stock of Mapalad.13

On December 3, 1982, however, A. Magsaysay, Inc. sold all its shares to Novo Properties, Inc.14 Miguel Magsaysay also sold his one and only share to Novo Properties, Inc., thus completely terminating any and all rights or interest he used to have over the properties of Mapalad.

Immediately upon learning of the cancellation of Mapalad’s four TCTs, Josef conferred with Miguel Magsaysay to find out whether the latter indeed signed the purported deeds of absolute sale both dated November 2, 1989.

Magsaysay denied having signed those deeds.

On January 19, 1993, the PCGG asked the Parañaque RD to immediately recall, revoke and cancel the four (4) titles that were issued in favor of Nordelak.15

On January 22, 1993, the PCGG issued a writ of injunction, enjoining and restraining the Parañaque RD from entertaining and processing any document or transaction relative to the titles in the name of Nordelak. This PCGG injunction was annotated on the titles as Entry No. 93-14786.

On January 25, 1993, the RD in turn requested Nordelak to surrender the titles issued in its name, but Nordelak refused to comply.

On February 3, 1993, Mapalad commenced, before the RTC, Makati City, the present action for annulment of deed of sale and reconveyance of title with damages against Nordelak, that is now the subject of this petition.

Mapalad’s complaint alleged that: (a) the deed of sale is falsified and a forgery; (b) defendant Felicito L. Manalili16conspired and confederated with the other defendants to defraud Mapalad by fabricating a fictitious, spurious and falsified deed of sale; and (c) there is another deed of absolute sale with the same date of November 2, 1989 and also bearing the purported signature of Miguel Magsaysay, but the two deeds of sale differ in the amounts of consideration, one for P20,190,000.00 and the other for P7,268,400.00, which was used in the transfer of Mapalad’s titles in favor of Nordelak.

Mapalad prayed for judgment: (a) declaring the two (2) deeds of absolute sale null and void; (b) ordering Nordelak to reconvey the four (4) parcels of land in favor of Mapalad; (c) ordering the Register of Deeds to cancel TCT Nos. 68493, 68494, 68495, and 68496, and in lieu thereof, to issue replacement titles in the name of Mapalad; and (d) ordering Nordelak to pay exemplary damages, attorney’s fees and costs of suit.

On February 22, 1993, a notice of lis pendens was annotated as Entry No. 93-91718 on the TCTs in Nordelak’s name.17

On March 4, 1993, the RD, through the Office of the Solicitor General, filed its answer alleging that when the requirements of registration are complied with, the duty of the register of deeds becomes simply ministerial.

On April 26, 1993, Nordelak and its president, Oliquiano filed their answer with special and affirmative defenses, alleging that Nordelak is a buyer in good faith, and that it never dealt with defendant Manalili in the purchase of the subject properties.

Defendant Manalili, however, failed to file any answer within the reglementary period. The RTC declared him in default despite Section 14, Rule 18 of the Rules of Court stating that "when a complaint states a common cause of action against several defendants, some of whom answer, and the others fail to do so, the court shall try the case against all upon the answers thus filed and render judgment upon the evidence presented x x x."

On October 24, 1994, while the case was still pending before the RTC, Nordelak sold the subject properties forP50,000,000.00 to a certain Manuel Luis S. Sanchez, now petitioner before Us.

RTC Judgment

On December 6, 1994, ruling that Mapalad failed to adduce positive proof of forgery, the RTC upheld the validity of the deed of absolute sale as a notarial document and rendered judgment18 with the following fallo:

WHEREFORE, premises considered, for failure of plaintiff to establish preponderance of evidence to support its herein Complaint, the above-entitled case is ordered DISMISSED for lack of cause of action and for being without merit.

On the other hand, judgment is hereby rendered in favor of defendants against the plaintiff by way of counterclaim, for the latter to pay actual and compensatory damages in favor of private defendants (excluding public defendant Register of deeds of Parañaque herein represented by the Office of the Solicitor General) the sum of P50,000.00; attorney’s fees in the sum of P30,000.00; and the costs of the proceedings.

Furthermore, Entry No. 15431 re a Verified Petition for cancellation of the adverse claim annotated at the back of TCT Nos. S-81403, S-81404, S-81405, and S-81406, (Exhs. "O," "P," "Q," and "R") filed by Rolando E. Josef, V/P-General Manager of Mapalad Realty Corporation inscribed on December 17, 1992 is ordered CANCELLED.

SO ORDERED.19

On December 19, 1994, upon Nordelak’s manifestation, the RTC issued a Supplemental Decision cancelling the notice of lis pendens annotated as Entry No. 93-91718 at the back of Nordelak’s TCTs Nos. 68493, 68494, 68495, and 68496, and also lifting the restraining order issued by the PCGG annotated on the said titles as Entry No. 93-14786.

On December 29, 1994 and January 2, 1995, Mapalad filed a motion for reconsideration and supplemental motion for reconsideration, respectively, to which an opposition was filed by Nordelak on January 13, 1995.

On January 2, 1995, the RTC issued an order denying the twin motions for reconsideration. Mapalad then seasonably appealed to the CA.

Having previously bought the properties from Nordelak during the pendency of the case with the RTC, petitioner Sanchez moved to be joined with Nordelak as party defendant-appellee before the CA. The CA granted the motion to intervene.

CA Disposition

Finding merit in the appeal, the CA disposed of it, as follows:

WHEREFORE, premises considered, the assailed decision is REVERSED and SET ASIDE and a new one entered ̶

1. DECLARING as null and void the deed of absolute sale dated 02 November 1989 executed by and between Mapalad Realty Corporation and Nordelak Development Corporation;

2. DECLARING as null and void the deed of absolute sale dated 24 October 1994 executed by and between Nordelak Development Corporation and Manuel Luis S. Sanchez;

3. ORDERING the Register of Deeds of Parañaque to cancel TCT Nos. 68493, 68494, 68495, and 68496 and in lieu thereof, to issue new certificates of title covering the subject properties in the name of Mapalad Realty Corporation.

Further, appellee Nordelak is ordered to pay appellant P100,000.00 as attorney’s fees.

SO ORDERED.20

This ruling was arrived at after the CA’s re-evaluation of the entire records, finding clear evidence of fraud in obtaining the certificates of title over the disputed properties, to wit:

First. Miguel A. Magsaysay was no longer appellant Mapalad’s President and Chairman of the Board when the subject deed of absolute sale was executed on 02 November 1989. The evidence shows that by virtue of a Deed of Sale of Shares of Stock dated 03 December 1982, Miguel Magsaysay ceded and sold his one and only share of stock in Mapalad Realty Corporation in favor of Novo Properties, Inc. x x x. And in his testimony, Miguel Magsaysay denied having affixed his signature on the questioned deed of sale and categorically stated that he ceased to be connected with appellant Mapalad after the sale of his share in 1982.

x x x x

Second. The Deed of Absolute Sale indicating a consideration of P7,268,400.00, which was the basis for the issuance of Transfer Certificates of Title Nos. 68493, 68494, 68495, and 68496 in the name of appellee Nordelak is dated 02 November 1989 but was only registered more than three (3) years later. This bolsters the testimony of Luis R. Narciso that the owner’s duplicate original of appellant Mapalad’s titles were taken from him by defendant Felicito Manalili in July 1992 and were never returned. Obviously, Manalili got the titles for the purpose of registering the fictitious deed of absolute sale because under the Property Registration Decree (P.D. 1529), no voluntary instrument shall be registered by the Register of Deeds unless the owner’s duplicate is presented with the instrument of transfer.

Third. Atty. Elpidio T. Clemente, the Notary Public who notarized the questioned Deed of Absolute Sale, did not submit a copy of said deed in the Notarial Section of the Regional Trial Court of Manila.

x x x x

x x x. As pointed out by appellant Mapalad in its brief, the notary public notarized two separate deeds of sale "referring to the same parcels of land on the very same day, and made only one and the same entry for the two documents in his notarial registry. In fact, NOT ONE witness was ever presented by defendants-appellees to explain these highly anomalous documentations.

Fourth. There was no consideration for the deed of sale. On this point, Rolando Josef testified that appellant Mapalad did not receive any amount with respect to the alleged transaction involving the sale of its properties. This was not disputed by the appellees. Since the alleged consideration is in the millions of pesos, it can be assumed that payment was made by check. It was easy enough for appellee Nordelak to have presented the cancelled check. Its failure to do so speaks volumes of truth of Josef’s testimony. x x x.

Fifth. In the questioned deed of sale, Nordelak was represented by one Felimon R. Oliquiano, Jr., in his capacity as President of the corporation. Thus, he was in the best position to testify on the validity of the questioned deed of sale and categorically state that it was Magsaysay who signed the deed of sale and refute Magsaysay’s testimony. But he was never presented and the failure to present him was never explained. In fact, no one was presented to testify having negotiated with and concluded the transaction with Magsaysay or that he personally saw Magsaysay sign the deed of sale. Defendant-appellee Nordelak presented only two witnesses both of whom were not connected Nordelak and, in fact, did not know Mapalad.

x x x x

We therefore find that the execution of the deed of absolute sale was attended by fraud, hence, a nullity. Thus, appellee Nordelak never acquired title over the subject properties. And given the evidence on record, We are left to wonder in no small measure how the court a quo could have upheld the validity of the questioned deed of sale. The transaction has all the earmarks of a grand scam perpetrated by the very same persons appointed by PCGG to safeguard the assets of sequestered companies.21

The CA further ruled that petitioner Sanchez, who was a transferee pendente lite, was not a buyer in good faith, having purchased the property with an annotation of a notice of lis pendens.

Without prior motion for reconsideration of the CA decision, intervenor-appellee Sanchez elevated the case to Us, raising the following assignment of errors:

I

CONTRARY TO THE EXPRESS FINDINGS OF THE TRIAL COURT THAT THE QUESTIONED DEED OF SALE IS GENUINE, VALID AND SUBSISTING, THE COURT OF APPEALS RULED THAT THERE WAS FRAUD ON THE PART OF NORDELAK IN OBTAINING THE CERTIFICATES OF TITLES OVER THE DISPUTED PROPERTY, AND CONSEQUENTLY THE QUESTIONED DEED IS FICTITIOUS.

II

COROLLARILY, CONTRARY TO THE EXPRESS FINDINGS OF THE TRIAL COURT THAT NORDELAK IS A BUYER IN GOOD FAITH AND FOR VALUE,   THE COURT OF APPEALS RULED OTHERWISE. (Underscoring supplied)

Issues

Two critical issues are plainly posed for our determination. First, on whether or not there was a valid sale between Mapalad and Nordelak. Second, whether or not petitioner Sanchez acquired valid title over the properties as innocent purchaser for value despite a defect in Nordelak’s title.

A procedural issue was raised by the Solicitor General in his Comment, too: whether or not petitioner may raise questions of fact in the present petition.

We shall resolve them in the reverse order, dealing with the procedural ahead of the substantive question.

Our Ruling

I. The case falls within the exception to the rule that factual issues may not be entertained by this Court.

In petitions for review on certiorari such as in the present case, the findings of fact of the CA are generally conclusive on this Court, save for the following admitted exceptions:

(1) the factual findings of the Court of Appeals and the trial court are contradictory;

(2) the findings are grounded entirely on speculation, surmises or conjectures;

(3) the inference made by the Court of Appeals from its findings of fact is mainly mistaken, absurd or impossible;

(4) there is grave abuse of discretion in the appreciation of facts;

(5) the appellate court, in making its findings, goes beyond the issues of the case and such findings are contrary to the admissions of both appellant and appellee;

(6) the judgment of the Court of Appeals is premised on a misapprehension of facts;

(7) the Court of Appeals fails to notice certain relevant facts which, if properly considered, will justify a different conclusion; and

(8) the findings of fact of the Court of Appeals are contrary to those of the trial court or are mere conclusions without citation of specific evidence, or where the facts set forth by the petitioner are not disputed by respondent, or where the findings of fact of the Court of Appeals are premised on the absence of evidence but are contradicted by the evidence on record.22

We note that the basis for the trial court’s disposition in favor of Nordelak is Mapalad’s apparent failure to adduce sufficient evidence to prove that Miguel Magsaysay’s signatures on the two deeds of sale by Mapalad in favor of Nordelak were forged.

The CA, however, went beyond the mere determination of whether the signatures of Miguel Magsaysay were forged or not. It looked into the validity of the deed of absolute sale as a whole, based on the testimonies of Miguel Magsaysay himself, quoted in its decision, as follows:

Atty Calabio: x x x I am showing to you this Deed of Absolute Sale marked as Exhibit "D," there is here appearing on page 3 above the typewritten name Miguel A. Magsaysay, is this your signature?

A: No, definitely not, so far away from my signature, not even in forgery; and besides I am not the president when it was sold already.

Q: So on the date herein November 2, 1989, you were no longer president, Sir?

A: No, I have nothing to do with them, of the corporation, after the sale in 1982.

Atty. Calabio: Likewise, showing to you the Deed of Absolute Sale, also dated November 2, 1989, previously marked as Exhibit "F," specifically on page 3, Sir, there is a signature also above the typewritten name, Miguel Magsaysay?

A: Definitely, this is not my signature, and besides I am not the president anymore. It looks exactly like the other one.

Atty. Calabio: Which for purposes of identification, Your Honor, may I respectfully request that his also be encircled and marked as Exhibit "F-1"?23

Aside from categorically denying under oath that the signatures appearing on the deeds of absolute sale were his, witness Miguel Magsaysay gave another reason why it was impossible for those signatures to be his. According to him, he was no longer connected in any way whatsoever with Mapalad, when it supposedly sold the properties. He divested himself of all his interests in Mapalad way back in 1982. There was no reason for him to sign the subject deeds of absolute sale as president and chairman of the board of Mapalad in 1989. This was another basis for Mapalad to convince the appellate court that the signatures purporting to be those of Magsaysay on the questioned deeds of sale were not written by him.

We sustain the CA finding and conclusion.

While there have been guidelines cited in the petition24 used by this Court in determining what constitutes sufficient proof to establish whether a signature was forged, it does not preclude a party from adducing other possible proofs to establish whether a particular signature is genuine or not.

In the case at bench, not only did Magsaysay disown the signatures appearing on the deed of sale, he cited a valid legal reason for him not to have signed such document at all. He had no more power and authority to sign for and in behalf of Mapalad because as early as 1982, he had already divested himself of all his interests in said corporation. His testimonies in this case constitute sufficient basis for the Court to conclude that the signatures appearing on the two deeds of sale (Exhibits "D" and "F") were not his signatures.

This factual determination on the genuineness or forgery of the signatures purporting to be those of Miguel Magsaysay on the subject deeds of sale is most crucial. When compared with this one, all other factual issues raised in the petition become immaterial, such as: whether the owner’s duplicate copies of the TCT were voluntarily delivered to, or surreptitiously taken from Mapalad’s custodian of such documents; whether the deeds of sale were in fact notarized by Atty. Elpidio Clemente considering that these documents do not exist in the archives or files in the notarial registry; or even whether there were two or only one document purporting to be the deed of absolute sale dated November 2, 1989.

There is, therefore, no cogent reason for this Court to delve further into these other factual matters.

II. There can be no valid contract of sale between Mapalad and Nordelak.

A contract is defined as a juridical convention manifested in legal form, by virtue of which one or more persons bind themselves in favor of another, or others, or reciprocally, to the fulfillment of a prestation to give, to do, or not to do. There can be no contract unless the following concur: (a) consent of the contracting parties; (b) object certain which is the subject matter of the contract; (c) cause of the obligation which is established.25

Specifically, by the contract of sale, one of the contracting parties obligates himself to transfer ownership of and to deliver a determinate thing and the other party to pay therefor a price certain in money or its equivalent.26

The essential requisites of a valid contract of sale are:

(1) Consent of the contracting parties by virtue of which the vendor obligates himself to transfer ownership of and to deliver a determinate thing, and the vendee obligates himself to pay therefor a price certain in money or its equivalent.

(2) Object certain which is the subject matter of the contract. The object must be licit and at the same time determinate or, at least, capable of being made determinate without the necessity of a new or further agreement between the parties.

(3) Cause of the obligation which is established. The cause as far as the vendor is concerned is the acquisition of the price certain in money or its equivalent, which the cause as far as the vendee is concerned is the acquisition of the thing which is the object of the contract.27

Contracts of sale are perfected by mere consent, which is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract.28

Consent may be given only by a person with the legal capacity to give consent. In the case of juridical persons such as corporations like Mapalad, consent may only be granted through its officers who have been duly authorized by its board of directors.29

In the present case, consent was purportedly given by Miguel Magsaysay, the person who signed for and in behalf of Mapalad in the deed of absolute sale dated November 2, 1989. However, as he categorically stated on the witness stand during trial, he was no longer connected with Mapalad on the said date because he already divested all his interests in said corporation as early as 1982. Even assuming, for the sake of argument, that the signatures purporting to be his were genuine, it would still be voidable for lack of authority resulting in his incapacity to give consent for and in behalf of the corporation.

On this score, the contract of sale may be annulled for lack of consent on the part of Mapalad.

The CA also noted that the alleged contract of sale on November 2, 1989 had no consideration. There was no payment effected by Nordelak for this transaction. Josef testified that no funds were infused into Mapalad’s coffers on account of this transaction. This testimony remained uncontroverted. In fact, the CA further noted that Nordelak could have easily produced the cancelled check before the trial court, if there was any. Again, Nordelak did not.

The third element for a valid contract of sale is likewise lacking.

Lack of consideration makes a contract of sale fictitious. A fictitious sale is void ab initio.30

The alleged deed of absolute sale dated November 2, 1989 notwithstanding, the contract of sale between Mapalad and Nordelak is not only voidable on account of lack of valid consent on the part of the purported seller, but also void ab initio for being fictitious on account of lack of consideration.

Despite a void sale between Mapalad and Nordelak, may petitioner still claim valid title to the subject properties?

III. Petitioner as transferee pendente lite merely steps into the shoes of his predecessor-in-interest who had no valid title.

As We have said, Nordelak did not acquire ownership or title over the four properties subject of this case because the contract of sale between Mapalad and Nordelak was not only voidable but also void ab inito. Not having any title to the property, Nordelak had nothing to transfer to petitioner Sanchez.

Nemo dat non quod habet. Hindi maibibigay ng isang tao ang hindi kanya. No one can give what he does not have.

Petitioner acquired the property subject of litigation during the pendency of the case in the trial court. It is undisputed that notices of lis pendens were annotated on the TCTs in Nordelak’s name covering the subject properties as Entry No. 93-91718.

In Lim v. Vera Cruz,31 this Court explained:

Lis pendens is a Latin term which literally means a pending suit. Notice of lis pendens is filed for the purpose of warning all persons that the title to certain property is in litigation and that if they purchase the same, they are in danger of being bound by an adverse judgment. The notice is, therefore, intended to be a warning to the whole world that one who buys the property does so at his own risk. This is necessary in order to save innocent third persons from any involvement in any future litigation concerning the property.

By virtue of the notice of lis pendens annotated on the four TCTs in this case, petitioner had notice that the property he was intending to buy is under litigation. He is, therefore, a transferee pendente lite who, as held by this Court in Voluntad v. Dizon,32 stands exactly in the shoes of the transferor and is bound by any judgment or decree which may be rendered for or against the transferor.

Under the circumstances petitioner cannot acquire any better right than his predecessor, Nordelak.1âwphi1 No river or stream can rise higher than its source. Walang ilog o batis na ang taas ay higit sa kanyang pinagmulan.There is thus no question that a judgment of reconveyance can be legally enforced by Mapalad against petitioner as transferee pendente lite of Nordelak.

The four parcels of land surrendered by former Marcos associate Jose Y. Campos and sequestered by the PCGG must eventually be returned to their rightful owners. If forfeiture proceedings in the Marcos ill-gotten wealth cases prosper, and these properties are finally shown to form part of such ill-gotten wealth, these properties should go to the Filipino people. If they are not ill-gotten, they should be turned over to the Marcoses. But definitely, these properties cannot be transferred to Nordelak nor to petitioner Manuel Luis Sanchez.

WHEREFORE, the petition is hereby DENIED and the appealed Court of Appeals decision AFFIRMED in toto.

SO ORDERED.

RUBEN T. REYESAssociate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGOAssociate Justice

Chairperson

MA. ALICIA AUSTRIA-MARTINEZAssociate Justice

MINITA V. CHICO-NAZARIOAssociate Justice

ANTONIO EDUARDO B. NACHURAAssociate Justice

A T T E S T A T I O N

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

CONSUELO YNARES-SANTIAGOAssociate JusticeChairperson

C E R T I F I C A T I O N

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

REYNATO S. PUNOChief Justice

G.R. No. 2869            March 25, 1907

MATEO CARIÑO, petitioner-appellant, vs.THE INSULAR GOVERNMENT, respondent-appellee.

Coudert Brothers for appellant.Office of the Solicitor-General Araneta for appellee.

ARELLANO, C.J.:

Mateo Cariño, the appellant herein, on the 23d of February, 1904, filed his petition in the Court of Land Registration praying that there be granted to him title to a parcel of land consisting of 40 hectares, 1 are, and 13 centares, and situated in the town of Baguio, Province of Benguet, together with a house erected thereon and constructed of wood and roofed with rimo, and bounded as follows: On the north, in lines running 1,048 metes and 20 decimeters with the lands of Sepa Cariño, H. Phelps Whitmarsh, and Calsi; on the east, in lines running 991 meters and 50 decimeters with the land of Kuidno, Esteban Gonzales, and of the Civil Government; on the south, in lines of 115 meters and 60 decimeters, with the lands of Talaca; and on the west, in lines running 982 meters and 20 decimeters, with the lands of Sisco Cariño and Mayengmeng.

By order of the court the hearing of this petition, No. 561, and that of Antonio Rebollo and Vicente Valpiedad filed under No. 834, were heard together for the reason that the latter petition claimed a small portion of land included in the parcel set out in the former petition.

The Insular Government opposed the granting of these petitions, alleging that the whole parcel of land is public property of the Government and that the same was never acquired in any manner or through any title of egresionfrom the State.

After trial, and the hearing of documentary and oral proof, the court of Land Registration rendered its judgment in these terms:

Therefore the court finds that Cariño and his predecessors have not possessed exclusively and adversely any part of the said property prior to the date on which Cariño constructed the house now there — that is to say, for the years 1897 and 1898, and Cariño held possession for some years afterwards of but a part of the property to which he claims title. Both petitions are dismissed and the property in question is adjudged to be public land. (Bill of exceptions, p. 15.)

The conclusions arrived at the set forth in definite terms in the decision of the court below are the following:

From the testimony given by Cariño as well as from that of several of the witnesses for the Government it is deduced, that in or about the year 1884 Cariño erected and utilized as a domicile a house on the property situated to the north of that property now in question, property which, according to the plan attached toexpediente No. 561, appears to be property belonging to Donaldson Sim; that during the year 1893 Cariño sold said house to one Cristobal Ramos, who in turn sold the same to Donaldson Sim, moving to and living on the adjoining property, which appears on the plan aforesaid to be the property of H. Phelps

Whitmarsh, a place where the father and the grandfather of his wife, that is to say, Ortega and Minse, had lived . . ..

In or about the years 1898 Cariño abandoned the property of Whitmarsh and located on the property described in the plan attached to expediente No. 561, having constructed a house thereon in which he now lives, and which house is situated in the center of the property, as is indicated on the plan; and since which time he has undoubtedly occupied some portion of the property now claimed by him. (Bill of exceptions, pp. 11 and 12.)

1. Therefore it is evident that this court can not decree the registration of all of the superficial extension of the land described in the petition and as appears on the plan filed herein, such extension containing 40 hectares, 1 are, and 13 centares, inasmuch as the documentary evidence accompanying the petition is conclusive proof against the petitioners; this documentary proof consists of a possessory information under date of March 7, 1901, and registered on the 11th day of the same month and year; and, according to such possessory information, the land therein described contains an extension of only 28 hectares limited by "the country road to the barrio of Pias," a road appearing on the plan now presented and cutting the land, as might be said, in half, or running through its center from north to south, a considerable extension of land remaining on the other side of the said road, the west side, and which could not have been included in the possessory information mentioned.

2. As has been shown during the trial of this case, this land, of which mention is made in said possessory information, and upon which is situated the house now actually occupied by the petitioner, all of which is set forth as argument as to the possession in the judgment, is "used for pasture and sowing," and belongs to the class called public lands.

3. Under the express provisions of law, a parcel of land, being of common origin, presumptively belonged to the State during its sovereignty, and, in order to perfect the legitimate acquisition of such land by private persons, it was necessary that the possession of the same pass from the State. And there is no evidence or proof of title ofegresion of this land from the domain of the Spanish Government, nor is there any possessory information equivalent to title by composicion or under agreement. 4, The possessory information filed herein is not the title to property authorized in substitution for that of adjustment by the royal decree of February 13, 1894, this being the last law or legal disposition of the former sovereignty applicable to the present subject-matter of common lands: First, for the reason that the land referred to herein is not covered nor does it come within any one of the three conditions required by article 19 of the said royal decree, to wit, that the land has been in an uninterrupted state of cultivation during a period of six years last past; or that the same has been possessed without interruption during a period of twelve years and has been in a state of cultivation up to the date of the information and during the three years immediately preceding such information; or that such land had been possessed openly without interruption during a period of thirty or more years, notwithstanding the land had not been cultivated; nor is it necessary to refer to the testimony given by the two witnesses to the possessory information for the following reason: Second, because the possessory information authorized by said royal decree or last legal disposition of the Spanish Government, as title or for the purpose of acquiring actual proprietary right, equivalent to that of adjustment with the Spanish Government and required and necessary at all times until the publication of said royal decree was limited in time to one year, in accordance with article 21, which is as follows: " A period of one year, not to be extended, is allowed to verify the possessory informations which are referred to in articles 19 and 20. After the expiration of this period of the right of the cultivators and persons in possession to obtain gratuitous title thereto lapses and the land together with full possession reverts to the state, or, as the case may be, to the community, and the said possessors and cultivators or their assigns would simply have rights under universal or general title of average in the event that the land is sold within a period of five years immediately following

the cancellation. The possessors not included under this chapter can only acquire by time the ownership and title to unappropriated or royal lands in accordance with common law."

5. In accordance with the preceding provisions, the right that remained to Cariño, if it be certain that he was the true possessor of the land in question, was the right of average in case the Government or State could have sold the same within the period of five years immediately following for example, if the denouncement of purchase had been carried out by Felipe Zafra or any other person, as appears from the record of the trial of the case. Aside from this right, in such event, his possession as attested in the possessory information herein could not, in accordance with common law, go to show any right of ownership until after the expiration of twenty years from the expiration of twenty years from the verification and registry of the same in conformity with the provisions of article 393 of the Mortgage Law and other conditions prescribe by this law.

6. The right of possession in accordance with common law — that is to say, civil law — remains at all times subordinate to the Spanish administrative law, inasmuch as it could only be of force when pertaining to royaltransferable or alienable lands, which condition and the determination thereof is reversed to the government, which classified and designated the royal alienable lands for the purpose of distinguishing them from those lands strictly public, and from forestry lands which could at no time pass to private ownership nor be acquired through time even after the said royal decree of February 13, 1894.

7. The advent of the new sovereignty necessarily brought a new method of dealing with lands and particularly as to the classification and manner of transfer and acquisition of royal or common lands then appropriated, which were thenceforth merely called public lands, the alienation of which was reserved to the Government, in accordance with section 12 and 13 of the act of Congress of July 1, 1902,1 and in conformity with other laws enacted under this act of Congress by the Philippine Commission prescribing rules for the execution thereof, one of which is Act No. 648,2 herein mentioned by the petitioner, in connection with Act No. 627,3 which appears to be the law upon which the petition herein is founded.

8. Section 6 of Act No. 627 admits prescription, in accordance with the provisions contained in Act No. 190, as a basis for obtaining the right of ownership. "The petitioners claims title under the period of prescription of ten years established by that act, as well as by reason of his occupancy and use thereof from time immemorial." (Allegation 1.) But said act admits such prescription for the purpose of obtaining title and ownership to lands "not exceeding more that sixteen hectares in extent." (Sec. 6 of said act.) The land claimed by Cariño is 40 hectares in extent, if we take into consideration his petition, or an extension of 28 hectares, according to the possessory information, the only thing that can be considered. Therefore, it follows that the judgment denying the petition herein and now appealed from was strictly in accordance with the law invoked herein.

9. And of the 28 hectares of land as set out in the possessory information, one part of same, according to the testimony of Cariño, belongs to Vicente Valpiedad, the extent of which is not determined. From all of which it follows that the precise extent has not been determined in the trial of this case on which judgment might be based in the event that the judgment and title be declared in favor of the petitioner, Mateo Cariño. And we should not lose sight of the fact that, considering the intention of Congress in granting ownership and title to 16 hectares, that Mateo Cariño and his children have already exceeded such amount in various acquirements of lands, all of which is shown in different cases decided by the said Court of Land Registration, donations or gifts of land that could only have been made efficacious as to the conveyance thereof with the assistance of these new laws.

By reason of the findings set forth it is clearly seen that the court below did not err:

1. In finding that Mateo Cariño and those from whom he claims his right had not possessed and claimed as owners the lands in question since time immemorial;

2. In finding that the land in question did not belong to the petitioner, but that, on the contrary, it was the property of the Government. (Allegation 21.)

Wherefore, the judgment appealed from is affirmed with the costs of this instance against the appellant. After the expiration of twenty days from the notification of this decision let judgment be entered in accordance herewith, and ten days thereafter let the case be remanded to the court from whence it came for proper action. So ordered.

Torres, Mapa, Willard, and Tracey, JJ., concur.Johnson, J., reserves his vote.

 SECOND DIVISION

 RURAL BANK OF ANDA, INC.,Petitioner,  - versus -     ROMAN CATHOLICARCHBISHOP OF LINGAYEN-DAGUPAN,

Respondent.

  G.R. No. 155051 Present: QUISUMBING, J.,Chairperson,CARPIO,CARPIO MORALES,TINGA, andVELASCO, JR., JJ.   Promulgated:  May 29, 2007

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

D E C I S I O N CARPIO, J.: 

The Case This is a petition for review[1] of the Decision[2] dated 15 October 2001 and the Resolution dated 23 August 2002 of the Court of Appeals in CA-G.R. CV No. 66478.  

 The Facts

 

The lot in dispute, Cadastral Lot 736 (Lot 736), is located in the Poblacion of Binmaley, Pangasinan. Lot 736 has a total area of about 1,300 square meters and is part of Lot 3. Cadastral Lot 737 and Lot 739 also form part of Lot 3. Cadastral Lot 737 is known as Imeldas Park, while on Lot 739 is a waiting shed for commuters. Lot 3 is bounded on the north by Lot 1 of Plan II-5201-A and on the south by the national road. In front of Lot 736 is the building of Mary Help of Christians Seminary (seminary) which is on Lot 1. Lot 1 of Plan II-5201-A, which adjoins Lot 3 on the north, is titled in the name of respondent Roman Catholic Archbishop of Lingayen (respondent) under Transfer Certificate of Title No. 6375 (TCT 6375). An annotation on TCT 6375 states that the ownership of Lot 3 is being claimed by both respondent and the Municipality of Binmaley. In 1958, the Rector of the seminary ordered the construction of the fence separating Lot 736 from the national road to prevent the caretelas from parking because the smell of horse manure was already bothering the priests living in the seminary.[3] The concrete fence enclosing Lot 736 has openings in the east, west, and center and has no gate. People can pass through Lot 736 at any time of the day.[4]

 On 22 December 1997, the Sangguniang Bayan of Binmaley, Pangasinan, passed and approved Resolution Nos. 104[5] and 105.[6] Resolution No. 104 converted Lot 736 from an institutional lot to a commercial lot. Resolution No. 105 authorized the municipal mayor to enter into a contract of lease for 25 years with the Rural Bank of Anda over a portion of Lot 736 with an area of 252 square meters.[7]

 In December 1997, Fr. Arenos, the director of the seminary, discovered that a sawali fence was being constructed enclosing a portion of Lot 736. In January 1998, the Municipal Mayor of Binmaley, Rolando Domalanta (Mayor Domalanta), came to the seminary to discuss the situation. Mayor Domalanta and Fr. Arenos agreed that the construction of the building for the Rural Bank of Anda should be stopped. On 24 March 1998, respondent requested Mayor Domalanta to remove the sawali fence and restore the concrete fence. On 20 May 1998, Mayor Domalanta informed

respondentthat the construction of the building of the Rural Bank of Anda would resume but that he was willing to discuss with respondent to resolve the problem concerning Lot 736. On 1 June 1998, respondent filed a complaint for Abatement of Illegal Constructions, Injunction and Damages with Writ of Preliminary Injunction in the Regional Trial Court of Lingayen, Pangasinan. On 24 August 1998, the trial court ordered the issuance of a writ of preliminary injunction. On 4 January 2000, the trial court rendered a decision, the dispositive portion of which reads: 

WHEREFORE, in the light of the foregoing, judgment is hereby rendered in favor of the plaintiff [Roman Catholic Archbishop of Lingayen-Dagupan]: 

1.      Making the writ of preliminary injunction permanent;  

2.      Ordering the defendants to cause to be restored the concrete wall with iron railings, to cause to be removed the sawali fence, both at the expense of the defendants, jointly and severally, and 

3.      Condemning the defendants to pay jointly and severally, to the plaintiff the amount of P25,000.00 as litigation expenses, attorneys fees in the amount of P50,000.00 and the costs of this suit.

SO ORDERED.[8]

  

On appeal, the Court of Appeals affirmed the decision with the modification that the awards of litigation expenses, attorneys fees, and costs should be deleted. The Court of Appeals subsequently denied the motion for reconsideration of the Municipality of Binmaley and the Rural Bank of Anda.

 

 The Ruling of the Trial Court

The trial court found that Lot 736 is not covered by any Torrens title either in the name of respondent or in the name of the Municipality of Binmaley. The trial court held that Lot736 is public in nature. Since Lot 736 is property of public dominion, it is outside the commerce of man. Thus, the Sangguniang Bayan of Binmaley, Pangasinan exceeded its authority when it adopted Resolution Nos. 104 and 105 converting Lot 736 from an institutional lot to a commercial lot and authorizing the municipal mayor to enter into a contract of lease for 25 years with the Rural Bank of Anda over a 252 square meter portion of Lot 736 .

  

The Ruling of the Court of Appeals The Court of Appeals agreed with the trial court that Lot 736 is property of public dominion and is used by the public as a pathway. Respondent and the Municipality of Binmaley are mere claimants with no sufficient evidence to prove their ownership of Lot 736. The Court of Appeals held that property of public dominion is intended for the common welfare and cannot be the object of appropriation either by the state or by private persons. Since Lot 736 is for public use, it is a property of public dominion and it is not susceptible of private ownership. Thus, Resolution Nos. 104 and 105 are void for being enacted beyond the powers of the Sangguniang Bayan of Binmaley. The contract of lease between the Municipality of Binmaley and the Rural Bank of Anda is therefore void. The Court of Appeals also ruled that since neither the respondent nor the Municipality of Binmaley owns Lot 736, there is no basis for the monetary awards granted by the trial court.

  

The IssueThe issue in this case is whether Resolution Nos. 104 and 105 of the Sangguniang Bayan of Binmaley are valid.

 The Ruling of the Court

 The petition has no merit. 

Both respondent and the Municipality of Binmaley admit that they do not have title over Lot 736. The Assistant Chief of the Aggregate Survey Section of the Land Management Services in Region I testified that no document of ownership for Lot 736 was ever presented to their office.[9]

 Respondent claims Lot 736 based on its alleged open, continuous, adverse, and uninterrupted possession of Lot 736. However, the records reveal otherwise. Even the witnesses for respondent testified that Lot 736 was used by the people as pathway, parking space, and playground.[10]

 On the other hand, the Municipality of Binmaley alleged that it is the sole claimant of Lot 736 based on the Property Identification Map, Tax Mapping Control Roll of the Municipality of Binmaley, and the Lot Data Computation in the name of the Municipality of Binmaley. However, these documents merely show that the Municipality of Binmaley is a mere claimant of Lot 736. In fact, the chief of Survey Division of the Department of Environment and Natural Resources, San Fernando City, La Union testified that the cadastral survey[11] of Lot 736, which was surveyed for the Municipality of Binmaley in 1989, had not been approved.[12] The cadastral survey was based on the Lot Data Computation[13] of Lot 736 which was likewise contracted by the Municipality of Binmaley in 1989. The records show that Lot 736 is used as a pathway going to the school, the seminary, or the church, which are all located on lots adjoined to Lot 736. [14] Lot 736 was also used for parking and playground.[15] In other words, Lot 736 was used by the public in general. Both respondent and the Municipality of Binmaley failed to prove their right over Lot 736. Since Lot 736 has never been acquired by anyone through purchase or grant or any other mode of acquisition, Lot 736 remains part of the public domain and is owned by the state. As held in Hong Hok v. David:[16]

 

There being no evidence whatever that the property in question was ever acquired by the applicants or their ancestors either by composition title from the Spanish Government or by possessory information title or by any other means for the acquisition of public lands, the property must be held to be public domain. For it is well settled that no public land can be

acquired by private persons without any grant, express or implied, from the government. It is indispensable then that there be a showing of a title from the state or any other mode of acquisition recognized by law. The most recent restatement of the doctrine, found in an opinion of Justice J.B.L. Reyes follows: The applicant, having failed to establish his right or title over the northern portion of Lot No. 463 involved in the present controversy, and there being no showing that the same has been acquired by any private person from the Government, either by purchase or by grant, the property is and remains part of the public domain.

  This is in accordance with the Regalian doctrine which holds that the state owns all lands and waters of the public domain.[17] Thus, under Article XII, Section 2 of the Constitution: All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the state. Municipal corporations cannot appropriate to themselves public or government lands without prior grant from the government.[18] Since Lot 736 is owned by the state, the Sangguniang Bayan of Binmaley exceeded its authority in passing Resolution Nos. 104 and 105. Thus, Resolution Nos. 104 and 105 are void and consequently, the contract of lease between the Municipality of Binmaley and the Rural Bank of Anda over a portion of Lot 736 is also void.   WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 15 October 2001 and the Resolution dated 23 August 2002 of the Court of Appeals. 

SO ORDERED.

  

ANTONIO T. CARPIOAssociate Justice

   

WE CONCUR:

 

 

 

LEONARDO A. QUISUMBING

Associate Justice

Chairperson

 

 

CONCHITA CARPIO MORALES DANTE O. TINGA

Associate Justice Associate Justice

 

 

PRESBITERO J. VELASCO, JR.

Associate Justice

 

 

 

 

ATTESTATIONI attest that the conclusions in the above Decision had been reached in consultation

before the case was assigned to the writer of the opinion of the Courts Division.

 

 

LEONARDO A. QUISUMBING

Associate Justice

Chairperson

 CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division

Chairpersons Attestation, I certify that the conclusions in the above Decision had

been reached in consultation before the case was assigned to the writer of the

opinion of the Courts Division.

 

 

 REYNATO S. PUNOChief Justice 

 

 

 

G.R. No. 171631               November 15, 2010

REPUBLIC OF THE PHILIPPINES, Petitioner, vs.AVELINO R. DELA PAZ, ARSENIO R. DELA PAZ, JOSE R. DELA PAZ, and GLICERIO R. DELA PAZ, represented by JOSE R. DELA PAZ, Respondents.

D E C I S I O N

PERALTA, J.:

Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to set aside the Decision1 of the Court of Appeals (CA), dated February 15, 2006, in CA-G.R. CV No. 84206, which affirmed the Decision2 of the Regional Trial Court (RTC) of Pasig City, Branch 167, in LRC Case No. N-11514, granting respondents’ application for registration and confirmation of title over a parcel of land located in Barangay Ibayo, Napindan, Taguig, Metro Manila.

The factual milieu of this case is as follows:

On November 13, 2003, respondents Avelino R. dela Paz, Arsenio R. dela Paz, Jose R. dela Paz, and Glicerio R. dela Paz, represented by Jose R. dela Paz (Jose), filed with the RTC of Pasig City an application for registration of land3 under Presidential Decree No. 1529 (PD 1529) otherwise known as the Property Registration Decree. The application covered a parcel of land with an area of 25,825 square meters, situated at Ibayo, Napindan, Taguig, Metro Manila, described under survey Plan Ccn-00-000084, (Conversion Consolidated plan of Lot Nos. 3212 and 3234, MCADM 590-D, Taguig Cadastral Mapping). Together with their application for registration, respondents submitted the following documents: (1) Special power of attorney showing that the respondents authorized Jose dela Paz to file the application; (2) Conversion Consolidated plan of Lot Nos. 3212 and 3234, MCADM 590-D, Taguig Cadastral Mapping (Ccn-00-000084) with the annotation that the survey is inside L.C. Map No. 2623 Proj. No. 27-B classified as alienable/disposable by the Bureau of Forest Development, Quezon City on January 03, 1968; (3) Technical Descriptions of Ccn-00-000084; (4) Geodetic Engineer's Certificate; (5) Tax Declaration No. FL-018-01466; (6) Salaysay ng Pagkakaloob dated June 18, 1987; (7) Sinumpaang Pahayag sa Paglilipat sa Sarili ng mga Pagaari ng Namatay dated March 10, 1979; (8) Certification that the subject lots are not covered by any land patent or any public land appilcation; and (9) Certification by the Office of the Treasurer, Municipality of Taguig, Metro Manila, that the tax on the real property for the year 2003 has been paid.

Respondents alleged that they acquired the subject property, which is an agricultural land, by virtue of Salaysay ng Pagkakaloob4 dated June 18, 1987, executed by their parents Zosimo dela Paz and Ester dela Paz (Zosimo and Ester), who earlier acquired the said property from their deceased parent Alejandro dela Paz (Alejandro) by virtue of a "Sinumpaang Pahayag sa Paglilipat sa Sarili ng mga Pag-aari ng Namatay5 dated March 10, 1979. In their application, respondents claimed that they are co-owners of the subject parcel of land and they have been in continuous, uninterrupted, open, public, adverse possession of the same, in the concept of owner since they acquired it in 1987. Respondents further averred that by way of tacking of possession, they, through their predecessors-in-interest have been in open, public, adverse, continuous, and uninterrupted possession of the same, in the concept of an owner even before June 12, 1945, or for a period of more than fifty (50) years since the filing of the application of registration with the trial court. They maintained that the subject property is classified as alienable and disposable land of the public domain.

The case was set for initial hearing on April 30, 2004. On said date, respondents presented documentary evidence to prove compliance with the jurisdictional requirements of the law.

Petitioner Republic of the Philippines (Republic), through the Office of the Solicitor General (OSG), opposed the application for registration on the following grounds, among others: (1) that neither the applicants nor their predecessors-in-interest have been in open, continuous, exclusive and notorious possession and occupation of the land in question for a period of not less than thirty (30) years; (2) that the muniments of title, and/or the tax declarations and tax payments receipts of applicants, if any, attached to or alleged in the application, do not constitute competent and sufficient evidence of bona fide acquisition of the land applied for; and (3) that the parcel of land applied for is a portion of public domain belonging to the Republic not subject to private appropriation. Except for the Republic, there was no other oppositor to the application.

On May 5, 2004, the trial court issued an Order of General Default6 against the whole world except as against the Republic. Thereafter, respondents presented their evidence in support of their application.

In its Decision dated November 17, 2004, the RTC granted respondents' application for registration of the subject property. The dispositive portion of the decision states:

WHEREFORE, affirming the order of general default hereto entered, judgment is hereby rendered AFFIRMING and CONFIRMING the title of AVELINO R. DELA PAZ, Arsenio R. dela Paz, Jose R. dela Paz and Glicerio R. dela Paz, all married and residents of and with postal address at No. 65 Ibayo, Napindan, Taguig, Metro Manila, over a parcel of land described and bounded under Plan Ccn-00-000084 (consolidation of Lots No. 3212 and 3234, Mcadm-590-D, Taguig, Cadastral Mapping, containing Twenty-Five Thousand Eight Hundred Twenty-Five (25,825) Square Meters, more or less, situated at Barangay Ibayo, Napindan, Taguig, Metro Manila, under the operation of P.D. 1529, otherwise known as the Property Registration Decree.

After the decision shall have been become final and executory and, upon payment of all taxes and other charges due on the land, the order for the issuance of a decree of registration shall be accordingly undertaken.

SO ORDERED.7

Aggrieved by the Decision, petitioner filed a Notice of Appeal.8 The CA, in its Decision dated February 15, 2006, dismissed the appeal and affirmed the decision of the RTC. The CA ruled that respondents were able to show that they have been in continuous, open, exclusive and notorious possession of the subject property through themselves and their predecessors-in-interest. The CA found that respondents acquired the subject land from their predecessors-in-interest, who have been in actual, continuous, uninterrupted, public and adverse possession in the concept of an owner since time immemorial. The CA, likewise, held that respondents were able to present sufficient evidence to establish that the subject property is part of the alienable and disposable lands of the public domain. Hence, the instant petition raising the following grounds:

I

THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURT'S ORDER GRANTING RESPONDENTS' APPLICATION FOR REGISTRATION OF THE SUBJECT LOT CONSIDERING THAT THE EVIDENCE ON RECORD FAILED TO ESTABLISH THAT RESPONDENTS HAVE BEEN IN OPEN, CONTINUOUS, EXCLUSIVE AND NOTORIOUS POSSESSION OF THE SUBJECT LOT IN THE CONCEPT OF AN OWNER.

II

THE COURT OF APPEALS ERRED IN ORDERING THE REGISTRATION OF THE SUBJECT LOT IN RESPONDENTS' NAME CONSIDERING THAT NO EVIDENCE WAS FORMALLY OFFERED TO PROVE THAT THE SAME IS WITHIN THE ALIENABLE AND DISPOSABLE AREA OF THE PUBLIC DOMAIN.9

In its Memorandum, petitioner claims that the CA's findings that respondents and their predecessors-in-interest have been in open, uninterrupted, public, and adverse possession in the concept of

owners, for more than fifty years or even before June 12, 1945, was unsubstantiated. Respondents failed to show actual or constructive possession and occupation over the subject land in the concept of an owner. Respondents also failed to establish that the subject property is within the alienable and

disposable portion of the public domain. The subject property remained to be owned by the State under the Regalian Doctrine.

In their Memorandum, respondents alleged that they were able to present evidence of specific acts of ownership showing open, notorious, continuous and adverse possession and occupation in the concept of an owner of the subject land. To prove their continuous and uninterrupted possession of the subject land, they presented several tax declarations, dated 1949, 1966, 1974, 1979, 1980, 1985, 1991, 1994 and 2000, issued in the name of their predecessors-in-interest. In addition, respondents presented a tax clearance issued by the Treasurer's Office of the City of Taguig to show that they are up to date in their payment of real property taxes. Respondents maintain that the annotations appearing on the survey plan of the subject land serves as sufficient proof that the land is within the alienable and disposable portion of the public domain. Finally, respondents assert that the issues raised by the petitioner are questions of fact which the Court should not consider in a petition for review under Rule 45.

The petition is meritorious.

In petitions for review on certiorari under Rule 45 of the Revised Rules of Court, this Court is limited to reviewing only errors of law, not of fact, unless the factual findings complained of are devoid of support by the evidence on record, or the assailed judgment is based on a misapprehension of facts.10 It is not the function of this Court to analyze or weigh evidence all over again, unless there is a showing that the findings of the lower court are totally devoid of support or are glaringly erroneous as to constitute palpable error or grave abuse of discretion.11

In the present case, the records do not support the findings made by the CA that the subject land is part of the alienable and disposable portion of the public domain.

Section 14 (1) of PD 1529, otherwise known as the Property Registration Decree provides:

SEC. 14. Who may apply. - The following persons may file in the proper Court of First Instance an application for registration of title to land, whether personally or through their duly authorized representatives:

(1) Those who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive and notorious possession and occupation of alienable and disposable lands of the public domain under a bona fide claim of ownership since June 12, 1945, or earlier.

From the foregoing, respondents need to prove that (1) the land forms part of the alienable and disposable land of the public domain; and (2) they, by themselves or through their predecessors-in-

interest, have been in open, continuous, exclusive, and notorious possession and occupation of the subject land under a bona fide claim of ownership from June 12, 1945 or earlier.12 These the respondents must prove by no less than clear, positive and convincing evidence.13

Under the Regalian doctrine, which is embodied in our Constitution, all lands of the public domain belong to the State, which is the source of any asserted right to any ownership of land. All lands not appearing to be clearly within private ownership are presumed to belong to the State. Accordingly, public lands not shown to have been reclassified or released as alienable agricultural land, or alienated to a private person by the State, remain part of the inalienable public domain.14 The burden of proof in overcoming the presumption of State ownership of the lands of the public domain is on the person applying for registration (or claiming ownership), who must prove that the land subject of the application is alienable or disposable. To overcome this presumption, incontrovertible evidence must be established that the land subject of the application (or claim) is alienable or disposable.15

To support its contention that the land subject of the application for registration is alienable, respondents presented survey Plan Ccn-00-00008416 (Conversion Consolidated plan of Lot Nos. 3212 & 3234, MCADM 590-D, Taguig Cadastral Mapping) prepared by Geodetic Engineer Arnaldo C. Torres with the following annotation:

This survey is inside L.C. Map No. 2623 Proj. No. 27-B clasified as alienable/disposable by the Bureau of Forest Development, Quezon City on Jan. 03, 1968.

Respondents' reliance on the afore-mentioned annotation is misplaced.

In Republic v. Sarmiento,17 the Court ruled that the notation of the surveyor-geodetic engineer on the blue print copy of the conversion and subdivision plan approved by the Department of Environment and Natural Resources (DENR) Center, that "this survey is inside the alienable and disposable area, Project No. 27-B. L.C. Map No. 2623, certified on January 3, 1968 by the Bureau of Forestry," is insufficient and does not constitute incontrovertible evidence to overcome the presumption that the land remains part of the inalienable public domain.

Further, in Republic v. Tri-plus Corporation,18 the Court held that:

In the present case, the only evidence to prove the character of the subject lands as required by law is the notation appearing in the Advance Plan stating in effect that the said properties are alienable and disposable. However, this is hardly the kind of proof required by law. To prove that the land subject of an application for registration is alienable, an applicant must establish the existence of a positive act of the government, such as a presidential proclamation or an executive order, an administrative action, investigation reports of Bureau of Lands investigators, and a legislative act or statute. The applicant may also secure a certification from the Government that the lands applied for are alienable and disposable. In the case at bar, while the Advance Plan bearing the notation was certified by the Lands Management Services of the DENR, the certification refers only to the technical correctness of the survey plotted in the said plan and has nothing to do whatsoever with the nature and character of the property surveyed. Respondents failed to submit a certification from the proper government agency to prove that the lands subject for registration are indeed alienable and disposable.

Furthermore, in Republic of the Philippines v. Rosila Roche,19 the Court held that the applicant bears the burden of proving the status of the land. In this connection, the Court has held that he must present a certificate of land classification status issued by the Community Environment and Natural Resources Office (CENRO), or the Provincial Environment and Natural Resources Office (PENRO) of the DENR. He must also prove that the DENR Secretary had approved the land classification and

released the land as alienable and disposable, and that it is within the approved area per verification through survey by the CENRO or PENRO. Further, the applicant must present a copy of the original classification approved by the DENR Secretary and certified as true copy by the legal custodian of the official records. These facts must be established by the applicant to prove that the land is alienable and disposable.

Clearly, the surveyor's annotation presented by respondents is not the kind of proof required by law to prove that the subject land falls within the alienable and disposable zone. Respondents failed to submit a certification from the proper government agency to establish that the subject land are part of the alienable and disposable portion of the public domain. In the absence of incontrovertible evidence to prove that the subject property is already classified as alienable and disposable, we must consider the same as still inalienable public domain.20

Anent respondents’ possession and occupation of the subject property, a reading of the records failed to show that the respondents by themselves or through their predecessors-in-interest possessed and occupied the subject land since June 12, 1945 or earlier. 1avvphil

The evidence submitted by respondents to prove their possession and occupation over the subject property consists of the testimonies of Jose and Amado Geronimo (Amado), the tenant of the adjacent lot. However, their testimonies failed to establish respondents’ predecessors-in-interest' possession and occupation of subject property since June 12, 1945 or earlier. Jose, who was born on March 19, 1939,21 testified that since he attained the age of reason he already knew that the land subject of this case belonged to them.22 Amado testified that he was a tenant of the land adjacent to the subject property since 1950,23 and on about the same year, he knew that the respondents were occupying the subject land.24

Jose and Amado's testimonies consist merely of general statements with no specific details as to when respondents' predecessors-in-interest began actual occupancy of the land subject of this case. While Jose testified that the subject land was previously owned by their parents Zosimo and Ester, who earlier inherited the property from their parent Alejandro, no clear evidence was presented to show Alejandro's mode of acquisition of ownership and that he had been in possession of the same on or before June 12, 1945, the period of possession required by law. It is a rule that general statements that are mere conclusions of law and not factual proof of possession are unavailing and cannot suffice.25 An applicant in a land registration case cannot just harp on mere conclusions of law to embellish the application but must impress thereto the facts and circumstances evidencing the alleged ownership and possession of the land.26

Respondents’ earliest evidence can be traced back to a tax declaration issued in the name of their predecessors-in-interest only in the year 1949. At best, respondents can only prove possession since said date. What is required is open, exclusive, continuous and notorious possession by respondents and their predecessors-in-interest, under a bona fide claim of ownership, since June 12, 1945 or earlier.27 Respondents failed to explain why, despite their claim that their predecessors-in interest have possessed the subject properties in the concept of an owner even before June 12, 1945, it was only in 1949 that their predecessors-in-interest started to declare the same for purposes of taxation. Well settled is the rule that tax declarations and receipts are not conclusive evidence of ownership or of the right to possess land when not supported by any other evidence. The fact that the disputed property may have been declared for taxation purposes in the names of the applicants for registration or of their predecessors-in-interest does not necessarily prove ownership. They are merely indicia of a claim of ownership.28

The foregoing pieces of evidence, taken together, failed to paint a clear picture that respondents by themselves or through their predecessors-in-interest have been in open, exclusive, continuous and

notorious possession and occupation of the subject land, under a bona fide claim of ownership since June 12, 1945 or earlier.

Evidently, since respondents failed to prove that (1) the subject property was classified as part of the disposable and alienable land of the public domain; and (2) they and their predecessors-in-interest have been in open, continuous, exclusive, and notorious possession and occupation thereof under a bonafide claim of ownership since June 12, 1945 or earlier, their application for confirmation and registration of the subject property under PD 1529 should be denied.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals dated February 15, 2006, in CA-G.R. CV No. 84206, affirming the Decision of the Regional Trial Court of Pasig City, Branch 167, in LRC Case No. N-11514, is REVERSED and SET ASIDE. The application for registration and confirmation of title filed by respondents Avelino R. dela Paz, Arsenio R. dela Paz, Jose R. dela Paz, and Glicerio R. dela Paz, as represented by Jose R. dela Paz, over a parcel of land, with a total area of twenty-five thousand eight hundred twenty-five (25,825) square meters situated at Barangay Ibayo, Napindan, Taguig, Metro Manila, is DENIED.

SO ORDERED.

DIOSDADO M. PERALTAAssociate Justice

WE CONCUR:

ANTONIO T. CARPIOAssociate Justice

Chairperson

CONCHITA CARPIO-MORALES*

Associate JusticeROBERTO A. ABAD

Associate Justice

JOSE CATRAL MENDOZAAssociate Justice

A T T E S T A T I O N

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

ANTONIO T. CARPIOAssociate JusticeSecond Division, Chairperson

C E R T I F I C A T I O N

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

RENATO C. CORONAChief Justice

G.R. No. L-26862 March 30, 1970

REPUBLIC OF THE PHILIPPINES, plaintiff-appellant, vs.PHILIPPINE RABBIT BUS LINES, INC., defendant-appellee.

Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General Pacifico P. de Castro and Solicitor Enrique M. Reyes for plaintiff-appellant.

Angel A. Sison for defendant-appellee.

 

FERNANDO, J.:

The right of a holder of a backpay certificate to use the same in the payment of his taxes has been recognized by law.1 Necessarily, this Court, in Tirona v. Cudiamat,2 yielding obedience to such statutory prescription, saw nothing objectionable in a taxpayer taking advantage of such a provision. That much is clear; it is settled beyond doubt. What is involved in this appeal from a lower court decision of November 24, 1965, dismissing a complaint by plaintiff-appellant Republic of the Philippines, seeking the invalidation of the payment by defendant-appellee Philippine Rabbit Bus Lines, Inc. for the registration fees3 of its motor vehicles in the sum of P78,636.17, in the form of such negotiable backpay certificates of indebtedness, is the applicability of such a provision to such a situation. The lower court held that it did. The Republic of the Philippines appealed. While originally the matter was elevated to the Court of Appeals, it was certified to us, the decisive issue being one of law. The statute having restricted the privilege to the satisfaction of a tax, a liability for fees under the police power being thus excluded from its benefits, we cannot uphold the decision appealed from. We reverse.

The complaint of plaintiff-appellant Republic of the Philippines was filed on January 17, 1963 alleging that defendant-appellee, as the registered owner of two hundred thirty eight (238) motor vehicles, paid to the Motor Vehicles Office in Baguio the amount of P78,636.17, corresponding to the second installment of registration fees for 1959, not in cash but in the form of negotiable certificate of indebtedness, the defendant being merely an assignee and not the backpay holder itself. The complaint sought the payment of such amount with surcharges plus the legal rate of interest from the filing thereof and a declaration of the nullity of the use of such negotiable certificate of indebtedness to satisfy its obligation. The answer by defendant-appellee, filed on February 18, 1963, alleged that what it did was in accordance with law, both the Treasurer of the Philippines and the General Auditing Office having signified their conformity to such a mode of payment. It sought the dismissal of the complaint.

After noting the respective theories of both parties in its pleadings, the lower court, in its decision, stated that the issue before it "is whether or not the acceptance of the negotiable certificates of indebtedness tendered by defendant bus firms to and accepted by the Motor Vehicles Office of Baguio City and the corresponding issuance of official receipts therefor acknowledging such payment by said office is valid and binding on plaintiff Republic."4

In the decision now on appeal, the lower court, after referring to a documentary evidence introduced by plaintiff-appellant continued: "From the evidence adduced by defendant bus firm, it appears that as early as August 28, 1958, the National Treasurer upon whom devolves the function of administering the Back Pay Law (Republic Act 304 as amended by Republic Act Nos. 800 and 897), in his letter to the Chief of the Motor Vehicles Office who in turn quoted and circularized same in his

Circular No. 5 dated September 1, 1958, to draw the attention thereto of all Motor Vehicle Supervisors, Registrars and employees ..., had approved the acceptance of negotiable certificates of indebtedness in payment of registration fees of motor vehicles with the view that such certificates 'should be accorded with the same confidence by other governmental instrumentalities as other evidences of public debt, such as bonds and treasury certificates'. Significantly, the Auditor General concurred in the said view of the National Treasurer."5

The argument of plaintiff-appellant that only the holders of the backpay certificates themselves could apply the same to the payment of motor vehicle registration fees did not find favor with the lower court. Thus, "[Plaintiff] Republic urges that defendant bus firm being merely an assignee of the negotiable certificates of indebtedness in question, it could not use the same in payment of taxes. Such contention, this Court believes, runs counter to the recitals appearing on the said certificates which states that 'the Republic of the Philippines hereby acknowledges to (name) or assigns ...', legally allowing the assignment of backpay rights."6

It therefore, as above noted, rendered judgment in favor of defendant-appellee "upholding the validity and efficacy" of such payment made and dismissing the complaint. Hence this appeal which, on the decisive legal issue already set forth at the outset, we find meritorious.

1. If a registration fee were a tax, then what was done by defendant-appellee was strictly in accordance with law and its nullity, as sought by plaintiff-appellant Republic of the Philippines, cannot be decreed. But is it? The answer to that question is decisive of this controversy. A tax refers to a financial obligation imposed by a state on persons, whether natural or juridical, within its jurisdiction, for property owned, income earned, business or profession engaged in, or any such activity analogous in character for raising the necessary revenues to take care of the responsibilities of government.7 An often-quoted definition is that of Cooley: "Taxes are the enforced proportional contributions from persons and property levied by the state by virtue of its sovereignty for the support of government and for all public needs."8

As distinguished from other pecuniary burdens, the differentiating factor is that the purpose to be subserved is the raising of revenue. A tax then is neither a penalty that must be satisfied or a liability arising from contract.9 Much less can it be confused or identified with a license or a fee as a manifestation of an exercise of the police power. It has been settled law in this jurisdiction as far back as Cu Unjieng v. Potstone, decided in 1962, 10 that this broad and all-encompassing governmental competence to restrict rights of liberty and property carries with it the undeniable power to collect a regulatory fee. Unlike a tax, it has not for its object the raising of revenue but looks rather to the enactment of specific measures that govern the relations not only as between individuals but also as between private parties and the political society. To quote from Cooley anew: "Legislation for these purposes it would seem proper to look upon as being made in the exercise of that authority ... spoken of as the police power." 11

The registration fee which defendant-appellee had to pay was imposed by Section 8 of the Revised Motor Vehicle Law. 12 Its heading speaks of "registration fees." The term is repeated four times in the body thereof. Equally so, mention is made of the "fee for registration." 13 A subsection starts with a categorical statement "No fees shall be charged." 14 The conclusion is difficult to resist therefore that the Motor Vehicle Act requires the payment not of a tax but of a registration fee under the police power. Hence the inapplicability of the section relied upon by defendant-appellee under the Back Pay Law. It is not held liable for a tax but for a registration fee. It therefore cannot make use of a backpay certificate to meet such an obligation.

Any vestige of any doubt as to the correctness of the above conclusion should be dissipated by Republic Act No. 5448. 15 A special science fund was thereby created and its title expressly sets forth that a tax on privately-owned passenger automobiles, motorcycles and scooters was imposed. The rates thereof were provided for in its Section 3 which clearly specifies that "additional tax" was to be paid as distinguished from the registration fee under the Motor Vehicle Act. There cannot be any clearer expression therefore of the legislative will, even on the assumption that the earlier legislation could be stretching the point be susceptible of the interpretation that a tax rather than a fee was levied. What is thus most apparent is that where the legislative body relies on its authority to tax it expressly so states, and where it is enacting a regulatory measure, it is equally explicit.

It may further be stated that a statute is meaningful not only by what it includes but also by what it omits. What is left out is not devoid of significance. As observed by Frankfurter: "An omission at the

time of enactment, whether careless or calculated, cannot be judicially supplied however much later wisdom may recommend the inclusion. 16In the light of this consideration, the reversal of the appealed judgment is unavoidable.

2. In the brief for plaintiff-appellant Republic of the Philippines, filed by the then Solicitor General, now Justice Antonio P. Barredo, the principal error imputed to the trial court is its failure to hold that the Back Pay Law prohibits an assignee, as is defendant-appellee, from using certificates of indebtedness to pay their taxes. In view of the conclusion reached by us that the liability of defendant-appellee under the Motor Vehicle Act does not arise under the taxing power of the state, there is no need to pass upon this particular question.

3. The Republic of the Philippines, in its brief, likewise assigned as error the failure of the lower court to hold that estoppel does not lie against the government for mistakes committed by its agents. As could be discerned from an excerpt of the decision earlier referred to, the lower court was impressed by the fact that the national treasurer to whom it correctly referred as being vested with the function of administering the backpay law did in a communication to the Motor Vehicles Office approve the acceptance of negotiable certificate of indebtedness in payment of registration fees, a view with which the Auditor General was in concurrence. The appealed decision likewise noted: "By the testimonies of Pedro Flores, the then Registrar of the Motor Vehicles Office of Baguio City and Casiano Catbagan, the Cashier of the Bureau of Public Highways in the same city, defendant bus firm has undisputedly shown that, after the said certificates of indebtedness were properly indorsed in favor of the Motor Vehicles Office of Baguio City and accepted by the Bureau of Public Highways on May 29, 1959, it was duly and properly issued official receipts ... acknowledging full payment of its registration fees for the second installment of 1959 of its 238 vehicles, and that the Bureau of Public Highways, thru its collecting and disbursing officer, was validly and regularly authorized to receive such payment." 17

Thus did the lower court, as pointed out by the then Solicitor General, conclude that the government was bound by the mistaken interpretation arrived at by the national treasurer and the auditor general. It would consider estoppel as applicable. That is not the law. Estoppel does not lie. Such a principle dates back to Aguinaldo de Romero v. Director of Lands, 18 a 1919 decision. Insofar as the taxing power is concerned, Pineda v. Court of First Instance, a 1929 decision, speaks categorically: "The Government is never estopped by mistake or error on the part of its agents. It follows that, in so far as this record shows, the petitioners have not made it appear that the additional tax claimed by the Collector is not in fact due and collectible. The assessment of the tax by the Collector creates, it must be remembered, a charge that is at least prima facie valid." 19 That principle has since been subsequently followed. 20 While the question here is one of the collection of a regulatory fee under the police power, reliance on the above course of decisions is not inappropriate. There is nothing to stand in the way, therefore, of the collection of the registration fees from defendant-appellee.

WHEREFORE, the decision of November 24, 1965 is reversed and defendant-appellee ordered to pay the sum of P78,636.17. With costs against defendant-appellee.

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

Castro, J., concurs in the result.

Barredo, J., took no part.

G.R. No. L-45121             May 31, 1939

In the matter of the guardianship of the incompetent Eulalio Lopez. DEMETRIO GAMBOA, guardian-appellee, vs.SERAFIN GAMBOA, oppositor-appellant.

Norberto Romualdez and Severino and Henares for appellant.Jose M. Estacion for appellee.

DIAZ, J.:

The guardianship of the incompetent Eulalio Lopez has been the owner long before the year 1932 of the hacienda known as "Makamig", located in the municipality of Silay, Province of Occidental Negros, and formed by the lands identified in the cadastre of that municipality as lots Nos. 662 and 686. In 1934 it was leased for three years beginning with the 1932-1933 crop year to Glicerio Montinola.

As the guardianship was in need of funds to meet certain unpaid obligations, the guardian petitioned and obtained from the Court of First Instance of Occidental Negros which had control of the guardianship proceedings, authority to negotiate a loan which my need exceed P3,000, encumbering therefor by way of second mortgage the hacienda aforementioned which was at the time already subject to a previous one in favor of the spouses Albino Jison and Dolores Lopez de Jison.

Acting thereafter in accordance with the authority which had been granted him, the guardian obtained a loan of P2,500 from Serafin Gamboa, his own brother, the two agreeing that said loan would earn interest at 12 per cent per annum which would be payable within the period of two years to be counted from October 16, 1934. It was on this date just mentioned when the guardian executed the corresponding deed of second mortgage in favor of his aforesaid brother Serafin Gamboa. The Court of First Instance of Occidental Negros to which the deed referred to was presented one day after for its approval, approved it on October 20, 1934, and in doing so expressly authorized the guard — using its own words — "to give in lease the said hacienda Makamig to any person or entity which offers the best conditions, the deed which may be executed to be submitted to this court for proper action."

Five days later, the guardian leased the hacienda in question to Serafin Gamboa himself from whom he had obtained the loan of P2,500, the two agreeing at the time that the duration of the lease would be six years to begin from the 1936-1937 harvest that the rent would be 500 piculs of centrifugal sugar per year. This lease was set forth in a public instrument executed on October 25, 1934, which was not, however, presented for registration in the registry of property until July 23, 1935. In that deed the guardian authorized the lessee to take possession of the unoccupied portions of the hacienda beginning with the month of July, 1935.

Having been informed of the new lease, the prior lessee, Glicerio Montinola, filed with the court on November 21, 1934 a motion praying that he be allowed to continue leasing the hacienda for another three years, alleging that he had invested therein sufficient money to improve it and proposing conditions which, he believed, were better than those offered by Serafin Gamboa. To influence the court further in his favor, he made it understand that if the guardian had given the aforesaid new lease to Serafin Gamboa it was because the latter is the former's brother. On November 24, 1934 the guardian opposed Montinola's motion, contending that up to then Montinola

had not submitted to him any lease proposal; that if the one which he was contemplating to submit be at the same terms and conditions as his lease, under which he had would continue paying the same rent that he had been paying until then and which was much smaller than that offered by Serafin Gamboa, the guardianship would be greatly prejudiced; that Montinola had no reason to complain of having made improvements on the hacienda because he well knew from his very contract of lease that at the expiration of the time therein agreed upon, whatever improvement he might have introduced would pass to the ownership of the guardianship; that he owned rents in arrears in the amount of P4,181.81; that the offer of Serafin Gamboa which was already accepted, was also to give 12 per cent of the harvest, similar to what Montinola now offers the court; and that in addition to this fact, he bound himself to pay the corresponding realty tax on the hacienda. In reply to all the foregoing, Montinola absolutely denied it and added that he was ready to offer the same conditions as those of Serafin Gamboa. While the controversy was at this stage, Serafin Gamboa intervened, and in his complaint dated January 19, 1935 he prayed the court to confirm his right to lease the hacienda in question consideration of the fact that he had effectively helped the guardianship out of its difficulties, giving it a loan of P2,500, without which the Government, according to him, would have confiscated the hacienda by reason of delay in the payment of taxes owing by the guardianship. Things were in this state, when Gonzalo Junsay intervened in the case, offering to take the hacienda in lease for four years on August 14, 1935, but with the option of extending the lease for another three years, and binding himself to give 15½ per cent of the entire crop which he may raised on the hacienda, and to pay all the obligations which may encumber it, provided that whatever he may pay in this regard should be reimbursed him thereafter by the guardianship or by the legal representative of the incompetent Eulalio Lopez.

In view of the offers submitted by the three and by the three others who desired to hold in the lease the hacienda "Makamig", the guardian, wishing to show that he had no preference whatever either for his brother, Serafin Gamboa, or for any other, placed all of the aforesaid offers under the consideration of the court, although he recommended that the offer of Gonzalo Junsay be accepted for being the best in his opinion. Serafin Gamboa opposed the foregoing recommendation of the guardian, contending that the contract of lease he had entered into with the latter on October 25, 1934 was valid, efficacious and binding on the guardianship, for the reason that in leases the duration of which does not exceed six (6) years as in the one given to him, judicial approval is not indispensible for their validity.

The court resolving the question as presented by the guardian, Gonzalo Junsay and Serafin Gamboa, directed through its order of October 17, 1935 that the lease be awarded to Gonzalo Junsay; and it found at the same time that the contract of lease executed by the guardian in favor of Serafin Gamboa was invalid because it was not approved by it. It further directed through its order of November 7, 1935 that the portions of the hacienda in question of which Serafin Gamboa had taken possession by virtue of the terms of the contract of lease of October 25, 1934 referred to, should be by him delivered to the guardian under pain of contempt, within the non-extendible period of ten days.

From the two aforementioned orders dated October 17, and November 7, 1935, of the Court of First Instance of Occidental Negros, Serafin Gamboa took an appeal on the ground that said court committed the various errors which he assigns in his brief.

The questions raised by the appellant through the several errors which he attributes to the lower court in his brief, may be reduced to the following:

I. Is the contract of lease of the hacienda in question entered into between the guardian of the incompetent Eulalio Lopez and Serafin Gamboa on October 25, 1934, valid, efficacious and, therefore, binding on the parties by whom it was executed?

II. Upon the assumption that the contract referred to is invalid, could the lower court declare it to be so in these same guardianship proceedings without the prior and express institution of a separate case where a pronouncement to that effect may be made?

III. If the contract of lease of the hacienda under consideration between the guardian of the incompetent Lopez and the appellant is valid, could the lease proposal made afterwards by Gonzalo Junsay be accepted solely because it was apparently better than the appellants?

1. We must first of all observe that in the contract of lease between the guardian and Serafin Gamboa (Exhibit I) there is nothing stipulated with respect to the fact that the latter, as lessee, should advance the income or rent for three or more years, or that said contract should be recorded in the registry of property. All that appears in regard to this last point is an answer given by Serafin Gamboa to a question which had been put to him during the trial to show that the guardian had told him the following: "you just attend to the registration of this deed, and I shall take care of asking the approval of the court." This innocuous answer does not suggest that there had been in fact an agreement to have the contract of lease recorded in the registry of property. At most, it suggests that as part of prudence, Serafin Gamboa should have it inscribed, but without saying why and when he should do so. On the other hand, it does not appear that he (Serafin Gamboa) accepted the suggestion on that very occasion. It therefore cannot be said that he failed to comply with the indispensible requirement to record the contract in dispute to give it validity, for the reason that the contracts of lease which, by their very nature must be recorded, are only those covering immovable property which for a period longer than six years, or those in which the rents for three or more years may have been advanced, or those in which, none of the foregoing conditions being present, it has been expressly agreed by the parties that they should be recorded. (Art. 2 of the Mortgage Law.) Substantially this is also what the article 1548 of the Civil Code, which is of the following tenor, says:

No lease for a term of more than six years shall be made by the husband with respect to the property of his wife, by the father with respect to that of his children, by the guardian with respect to that of his minor ward, or in default of special power, by a manager of property." The quoted provisions authorize the statement that a contract of lease for a period of less than six years an without the other two conditions above-mentioned, is but a mere act of administration for whose validity judicial approval is not necessary. We so held in the cases of Tipton vs. Andueza (5 Phil., 477); Enriquez vs.A.S. Watson Co. (6 Phil., 84; 22 Phil., Rodriguez vs. Borromeo (43 Phil., 479); Tan Pho and Tan U vs. Nable Jose (49 Phi., 828); and Lichauco vs. Tan Pho (51 Phil., 862).

Nevertheless, even if it be conceded that inscription was an indispensible requirement in the contract at bar, said requirement is present and was complied with on July 23, 1935 when Serafin Gamboa presented said contract to the registrar of property for its annotation in the corresponding book. (Exhibits 2 and 1.)

Moreover, judicial approval was not necessary because the contract of lease in question was entered into precisely by virtue of the express authority which the court had granted to the guardian, through its aforementioned order of October 20, 1934. The phrase "the deed which may be executed to be submitted to this court for proper action", which was used in said order, does not mean that once the contract was formally effected there arose the duty to submit it to the court for its approval. That approval was not necessary not only for the reason already given, that is, that the contract had been expressly authorized; but also because the duration of the contract of lease was not more than six years. "For proper

action" means no more than that the deed or contract should be attached to the record for purposes of reference or information when necessary.

It is true that under the provisions of section 569 of Act No. 190, as amended by Act No. 2640, burdens or charges may not be made on property under guardianship without the knowledge and leave of the court. It is, however, likewise true that this is what has been done in the case at bar, inasmuch as the hacienda "Makamig" was leased to Serafin Gamboa precisely upon the express authority granted the guardian by the court. Besides, it is also a fact that nowhere in said law is it declared that after the performance of what has been authorized it should again be submitted to the court for its approval. The leasing of an immovable for six years or less is furthermore not a charge or burden, since the Civil Code considers only the lease for longer period to be so. For this reason, it is said in a resolution of the Department of Registries of Spain from which our Code is derived, that the recording of a contract of lease, which contains all the requirements of article 2 of the Mortgage Law, is a real burden whereby the owner of an estate limits, to be prejudice of the subsequent owners, the free exercise of one of the rights of dominion; and in another it is affirmed that the Mortgage Law has made into a truly real right the lease having all the necessary conditions for its inscription. (10 Manresa, Civil Code, 4th edition, p. 426.)

As the aforementioned section 569 of Act No. 190 has not amended articles 1548 and 1713 above-cited, of the Civil Code, which are in a way interrelated, as well as article 2 of the Spanish Mortgage Law, the only practical interpretation that may be given to said section (569 of Act No. 190) in referring to charges and burdens, is that leases of immovables for a period of less than six years are not thus considered.

Again, it is unnecessary to hold as without merit the guardian's other argument that the order of October 17, 1935 which finds the contract of lease in favor of Serafin Gamboa as illegal, and the lease granted to Gonzalo Junsay as valid, on the ground that the conditions offered by the latter are better, because in order to determine the question of whether or not said conditions are better than those proposed by Serafin Gamboa, the element of time or the occasion on which they were offered must be taken into account. Those of Junsay were offered on August 14, 1935, while the contract in favor of Serafin Gamboa was perfected on October 25, 1934. In such cases, the best offer is not that which contains better conditions, made after the occasion when it should have been made; but that given on that occasion, which is found to be advantageous after comparison with others made at the same time. Both offers, Serafin Gamboa's and Gonzalo Junsay's, and even those of others who also wanted to lease the hacienda "Makamig" should have been given on the same occasion, in order that one may be then able to determine, considering all the circumstances, which of them was the best. When Serafin Gamboa made his offer, no other outbid him.

In view of all the reasons made hereinbefore stated, we decide the first question in the affirmative; in other words, we hold valid, efficacious and binding upon the guardianship the contract of lease in favor of Serafin Gamboa.

2. We believe the lower court clearly erred in holding in these same guardianship proceedings, without a separate case having been commenced, that the contract of lease in question is void because it lacks judicial approval. Contracts are presumed valid until they are declared to be otherwise; and this can only be done by bringing an ordinary action in a separate case wherein the question may be determined because Chapter XXVII of Act No. 190 dealing with guardianships, does not confer authority on the court to concern itself therewith or, more exactly, to decide it. What has been held in the cases of Guzman vs. Anog and Anog (37 Phil., 61); Alafriz vs. Mina (28 Phil., 137); Llacer vs. Muñoz de Bustillo

and Achaval (12 Phil., 382); and Hagans vs. Wislizenus (42 Phil., 880), is, by reason of its close analogy to the case at bar, of great and timely application thereto.

3. Since the contract of lease entered into between the guardian and the appellant Serafin Gamboa is valid as we have held, it was improper to accept the offer of Gonzalo Junsay, which was only made nine months after said contract was perfected and more than one month after it was recorded in the registry of property. This is the more evident when it is remembered that the appellant was already then in possession of several portions of the leased hacienda, even if the fact that the contract was recorded in the registry of property, which adds weight to the contention of the appellant by virtue of sections 51 and 70 of Act No. 496, were disregarded.

4. The other questions are secondary importance and are furthermore a consequence of those already decided. No necessity exists for us to deal with them, for after all they do not and cannot change the conclusions herein set forth.

Wherefore, the orders appealed from are reversed, and the contract of lease in favor of the appellant is declared valid, efficacious and binding, with costs against the appellee. So ordered.

Villa-Real, Imperial, and Moran, JJ., concur.

Separate Opinions

CONCEPCION, J., dissenting:

I dissent from the foregoing decision on the ground that since the court ordered the guardian, upon authorizing him to lease the hacienda "Makamig", to submit to it the deed which may be executed "for proper action", and as the guardian failed to submit the deed of lease of the aforementioned hacienda which he executed in favor of Serafin Gamboa for a period of six years, said contract is void.

The authority granted the guardian to lease the hacienda "Makamig" to any person or entity which may offer the best conditions, imposed upon the guardian the duty to submit the deed for the approval of the court. This is what the words "for proper action", used in the order of the court, mean and they could not mean anything else.

The order of the court cannot be understood to say that upon the execution of the contract, the deed should be attached to the record of the guardianship proceedings, as the majority have understood it, for the reason that the mere attaching of the deed of lease to the record of the guardianship proceedings would fulfill no purpose or end.

The approval of the court was an indispensible requirement in this case in order that the contract of lease might have effect, for the simple reason that the guardian had not submitted to the court the terms or conditions under which he would lease the hacienda "Makamig". If this had been the case, there would certainly be no need for the approval of the court as long as the guardian kept himself, in the execution of the contract, within the terms and conditions which he should have submitted to the court.

Nevertheless, the authorization given by the court merely says that the guardian may lease the hacienda "Makamig" to any person or entity which may offer  the best conditions. It is not the guardian who should determine whether or not the conditions which an applicant for the lease may offer, are the best; but the court it self. And it cannot be said that the leasing of an immovable for a period of six years is a simple act of administration. It is not, in view of the circumstances of the case. The previous lease was only for three years. A lease for more than six years, recorded in the registry of property, is considered as an encumbrance; the lease in question is for six years so that it has reached the limit beyond which, the lease would b considered an encumbrance.

In the case at bar, however, whether or not the lease under consideration is an encumbrance is immaterial to the resolution of the question involved in this appeal. The fact is that the court required that the deed of lease be submitted to it for its approval, and this has not been complied with. Accordingly, the order of October 17, 1933 which found void the lease executed by the guardian in favor of Serafin Gamboa, was entirely justified.

I dissent likewise from the majority in so far as they hold that the court erred in finding the aforesaid contract void in these same guardianship proceedings, despite the fact that no separate case has been brought. I humbly believe that, if in the guardianship proceedings the court has jurisdiction to approve the contract of lease of the land belonging to the guardianship, it will also have the power to disapprove said contract. I am of the opinion that it would be against the law to hold that the jurisdiction of the court to declare void the contract of lease in question, the enforcement of which has not yet even begun, must have to depend upon the decision of another, or the same court, in a separate case through the bringing of a lawsuit for that purpose.

AVANCEÑA, C.J.:

I concur in this dissenting opinion.

LAUREL, J.:

I concur in the preceding dissenting opinion of Justice Concepcion

The Lawphil Project - Arellano Law Foundation

G. R. No. L-41001 September 30, 1976

MANILA LODGE NO. 761, BENEVOLENT AND PROTECTIVE ORDER OF THE ELKS, INC., petitioner, vs.THE HONORABLE COURT OF APPEALS, CITY OF MANILA, and TARLAC DEVELOPMENT CORPORATION,respondents.

No. L-41012 September 30, 1976

TARLAC DEVELOPMENT CORPORATION, petitioner, vs.HONORABLE COURT OF APPEALS, CITY OF MANILA, LODGE NO. 761, BENEVOLENT AND PROTECTIVE ORDER OF ELKS, INC., respondents.

 

CASTRO, C.J.:têñ.£îhqwâ£

STATEMENT OF THE CASE AND STATEMENTOF THE FACTS

These two cases are petitions on certiorari to review the decision dated June 30, 1975 of the Court of Appeals in CA-G.R. No. 51590-R entitled "Tarlac Development Corporation vs. City of Manila, and Manila Lodge No. 761, Benevolent and Protective Order of Elks, Inc.," affirming the trial court's finding in Civil Case No. 83009 that the property subject of the decision a quo  is a "public park or plaza."

On June 26, 1905 the Philippine Commission enacted Act No. l360 which authorized the City of Manila to reclaim a portion of Manila Bay. The reclaimed area was to form part of the Luneta extension. The Act provided that the reclaimed area "Shall be the property of the City of Manila" and that "the City of Manila is hereby authorized to set aside a tract of the reclaimed land formed by the Luneta extension x x x at the north end not to exceed five hundred feet by six hundred feet in size, for a hotel site, and to lease the same, with the approval of the Governor General, to a responsible person or corporation for a term not exceed ninety-nine years."

Subsequently, the Philippine Commission passed on May 18, 1907 Act No. 1657, amending Act No. 1360, so as to authorize the City of' Manila either to lease or to sell the portion set aside as a hotel site.

The total area reclaimed was a little over 25 hectares. The City of Manila applied for the registration of the reclaimed area, and on January 20, 1911, O.C.T. No. 1909 was issued in the name of the City of Manila. The title described the registered land as "un terreno conocido con el nombre de Luneta Extension, situato en el distrito de la Ermita x x x." The registration was "subject, however to such of the incumbrances mentioned in Article 39 of said law (Land Registration Act) as may be subsisting" and "sujeto a las disposiciones y condiciones impuestas en la Ley No. 1360; y sujeto tambein a los contratos de venta, celebrados y otorgados por la Ciudad de Manila a favor del Army and Navy Club y la Manila Lodge No. 761, Benevolent and Protective Order of Elks, fechados respectivamente, en 29 de Diciembre de 1908 y 16 de Enero de 1909." 1

On July 13, 1911 the City of Manila, affirming a prior sale dated January 16, 1909 cancelled 5,543.07 square meters of the reclaimed area to the Manila Lodge No. 761, Benevolent and Protective Order of Elks of the U.S.A. (BPOE, for short) on the basis of which TCT No. 2195 2 was issued to the latter over the Marcela de terreno que es parte de la Luneta Extension, Situada en el Distrito le la Ermita ... ." At the back of this title vas annotated document 4608/T-1635, which in part reads as follows: "que la citada Ciusdad de Manila tendra derecho a su opcion, de recomparar la expresada propiedad para fines publicos solamete in cualquier tiempo despues de cincuenta anos desde el 13 le Julio le 1911, precio de la misma propiedad, mas el valor que entonces tengan las mejoras."

For the remainder of the Luneta Extension, that is, after segregating therefrom the portion sold to the Manila Lodge No. 761, PBOE, a new Certificate of Title No. 2196 3 was issued on July 17, 1911 to the City of Manila.

Manila Lodge No. 761, BPOE, subsequently sold the said 5,543.07 square meters to the Elks Club, Inc., to which was issued TCT No. 67488. 4 The registered owner, "The Elks Club, Inc.," was later changed by court oder to "Manila Lodge No. 761, Benevolent and Protective Order of Elks, Inc."

In January 1963 the BPOE. petitioned the Court of First Instance of Manila, Branch IV, for the cancellation of the right of the City of Manila to repurchase the property This petition was granted on February 15, 1963.

On November 19, 1963 the BPOE sold for the sum of P4,700,000 the land together with all the improvements thereon to the Tarlac Development Corporation (TDC, for short) which paid P1,700.000 as down payment and mortgaged to the vendor the same realty to secure the payment of the balance to be paid in quarterly installments.5 At the time of the sale,, there was no annotation of any subsisting lien on the title to the property. On December 12, 1963 TCT No. 73444 was issued to TDC over the subject land still described as "UNA PARCELA DE TERRENO, que es parte de la Luneta Extension, situada en el Distrito de Ermita ... ."

In June 1964 the City of Manila filed with the Court of First Instance of Manila a petition for the reannotation of its right to repurchase; the court, after haering, issued an order, dated November 19, 1964, directing the Register of Deeds of the City of Manila to reannotate in toto  the entry regarind the right of the City of Manila to repurchase the property after fifty years. From this order TDC and BPOE appealed to this Court which on July 31, 1968 affirmed in G.R. Nos. L-24557 and L-24469 the trial court's order of reannotation, but reserved to TDC the right to bring another action for the clarification of its rights.

As a consequence of such reservation, TDC filed on April 28, 1971 against the City of Manila and the Manila Lodge No. 761, BPOE, a complaint, docketed as Civil Case No. 83009 of the Court of First Instance of Manila, containing three causes of action and praying -

a) On the first cause of action, that the plaintiff TDC be declared to have purchased the parcel of land now in question with the buildings and improvements thereon from the defendant BPOE for value and in good faith, and accordingly ordering the cancellation of Entry No. 4608/T-1635 on Transfer Certificate of Title No. 73444 in the name of the Plaintiff;

b) On the second cause of action, ordering the defendant City of Manila to pay the plaintiff TDC damages in the sum of note less than one hundred thousand pesos (P100,000.00);

c) On the third cause of action, reserving to the plaintiff TDC the right to recover from the defendant BPOE the amounts mentioned in par. XVI of the complaint in accordance with Art. 1555 of the Civil Code, in the remote event that the final judgment in this case should be that the parcel of land now in question is a public park; and

d) For costs, and for such other and further relief as the Court may deem just and equitable. 6

Therein defendant City of Manila, in its answer dated May 19, 1971, admitted all the facts alleged in the first cause of action except the allegation that TDC purchased said property "for value and in good faith," but denied for lack of knowledge or information the allegations in the second and third causes of action. As, special and affirmative defense, the City of Manila claimed that TDC was not a purchaser in good faith for it had actual notice of the City's right to repurchase which was annotated at the back of the title prior to its cancellation, and that, assuming arguendo  that TDC had no notice of the right to repurchase, it was, nevertheless, under obligation to investigate inasmuch as its title recites that the property is a part of the Luneta extension. 7

The Manila Lodge No. 761, BPOE, in its answer dated June 7, 1971, admitted having sold the land together with the improvements thereon for value to therein plaintiff which was in good faith, but denied for lack of knowledge as to their veracity the allegations under the second cause of action. It furthermore admitted that TDC had paid the quarterly installments until October l5, 1964 but claimed that the latter failed without justifiable cause to pay the subsequent installments. It also asserted that it was a seller for value in good faith without having misrepresented or concealed tacts relative to the title on the property. As counterclaim, Manila Lodge No. 761 (BPOE) sought to recover the balance of the purchase price plus interest and costs. 8

On June 15, 1971 TDC answered the aforesaid counterclaim, alleging that its refusal to make further payments was fully justified. 9

After due trial the court a quo rendered on July 14, 1972 its decision finding the subject land to be part of the "public park or plaza" and, therefore, part of the public domain. The court consequently declared that the sale of the subject land by the City of Manila to Manila Lodge No. 761, BPOE, was null and void; that plaintiff TDC was a purchaser thereof in g faith and for value from BPOE and can enforce its rights against the latter; and that BPOE is entitled to recover from the City of Manila whatever consideration it had 'paid the latter. 'The dispositive part of the decision reads: ñé+.£ªwph!1

WHEREFORE, the Court hereby declares that the parcel of land formerly covered by Transfer Certificate of Title Nos 2195 and 67488 in the name of BPOE and now by Transfer Certificate of Title No. 73444 in the name of Tarlac Development Corporation is a public' park or plaza, and, consequently, instant complaint is dimissed, without pronouncement as to costs.

In view of the reservation made by plaintiff Tarlac Development Corporation to recover from defendant BPOE the amounts mentioned in paragraph XVI of the complaint in accordance with Article 1555 of the Civil Code, the Court makes no pronouncement on this point. 10

From said decision the therein plaintiff TDC as well as the defendant Manila Lodge No. 761, BPOE, appealed to the Court of Appeals.

In its appeal docketed as CA-G.R. No. 51590-R, the Manila Lodge No. 761, BPOE, avers that the trial court committed the following errors, namely:

1. In holding that the property subject of the action is not patrimonial property of the City of Manila; and

2. In holding that the Tarlac Development Corporation may recover and enforce its right against the defendant BPOE. 11

The Tarlac Development Corporation, on the other hand, asserts that the trial court erred:

(1) In finding that the property in question is or was a public park and in consequently nullifying the sale thereof by the City of Manila to BPOE;

(2) In applying the cases of Municipality of Cavite vs. Rojas, 30 Phil. 602, and Government vs. Cabangis, 53 Phil. 112, to the case at bar; and

(3) In not holding that the plaintiff-appellant is entitled to ,recover damages from the defendant City of Manila. 12

Furthermore, TDC as appellee regarding the second assignment of error raised by BPOE, maintained that it can recover and enforce its rigth against BPOE in the event that the land in question is declared a public park or part thereof. 13

In its decision promulgated on June 30, 1975, the Court of Appeals concur ed in the findings and conclusions of the lower court upon the ground that they are supported by he evidence and are in accordance with law, and accordingly affirmed the lower court's judgment.

Hence, the present petitions for review on certiorari.

G.R. No. L-41001

The Manila Lodge No. 761, BPOE, contends, in its petition for review on certiorari docketed as G.R. No. L-41001, that the Court of Appeals erred in (1) disregarding the very enabling acts and/or statutes according to which the subject property was, and still is, patrimonial property of the City of Manila and could therefore be sold and/or disposed of like any other private property; and (2) in departing from the accepted and usual course of judicial proceedings when it simply made a general affirmance of the court a quo's  findings and conclusions without bothering to discuss or resolve several vital points stressed by the BPOE in its assigned errrors. 14

G.R. No. L-41012

The Tarlac Development Corporation, in its petition for review on certiorari docketed as G.R. No. L-41012, relies on the following grounds for the allowance of its petition:

1. that the Court of Appeals did not correctly interpret Act No. 1360, as amended by Act No. 1657, of the Philippine Commission; and

2. that the Court of Appeals has departed from the accepted and usual course of judicial proceedings in that it did not make its own findings but simply recited those of the lower court. 15

ISSUES AND ARGUMENTS

FIRST ISSUE

Upon the first issue, both petitioners claim that the property subject of the action, pursuant to the provisions of Act No. 1360, as amended by Act No. 1657, was patrimonial property of the City of Manila and not a park or plaza.

Arguments of Petitioners

In G.R. No. L-41001, the Manila Lodge No. 761, BPOE, admits that "there appears to be some logic in the conclusion" of the Court of Appeals that "neither Act No. 1360 nor Act No. 1657 could have meant to supply the City of Manila the authority to sell the subject property which is located at the south end not the north — of the reclaimed area." 16 It argues, however, that when Act No. 1360, as amended, authorized the City of Manila to undertake the construction of the Luneta extension by reclaimed land from the Manila Bay, and declared that the reclaimed land shall be the "property of the City of Manila," the State expressly granted the ownership thereof to the City of Manila which. consequently. could enter into transactions involving it; that upon the issuance of O.C.T. No. 1909, there could he no doubt that the reclaimed area owned by the City was its patrimonial property;" that the south end of the reclaimed area could not be for public use for. as argued by TDC a street, park or promenade can be property for public use pursuant to Article 344 of the Spanish Civil Code only when it has already been so constructed or laid out, and the subject land, at the time it was sold to the Elk's Club, was neither actually constructed as a street, park or promenade nor laid out as a street, park or promenade;" that even assuming that the subject property was at the beginning property of public dominion, it was subsequently converted into patrimonial property pursuant to Art. 422 of the Civil Code, inasmuch as it had never been used, red or utilized since it was reclaimed in 1905 for purpose other than this of an ordinary real estate for sale or lease; that the subject property had never been intended for public use, is further shown by the fact that it was neither included as a part of the Luneta Park under Plan No. 30 of the National Planning Commission nor considered a part of the Luneta National Park (now Rizal Park) by Proclamation No. 234 dated December 19, 1955 of President Ramon Magsaysay or by Proclamation Order No. 274 dated October 4, 1967 of President Ferdinand E. Marcos;" 19 that, such being the case, there is no reason why the subject property should -not be considered as having been converted into patrimonial property, pursuant to the ruling in Municipality vs. Roa 7 Phil. 20, inasmuch as the City of Manila has considered it as its patrimonial property not only bringing it under the operation of the Land Registration Act but also by disposing of it; 20 and that to consider now the subject property as a public plaza or park would not only impair the obligations of the parties to the contract of sale (rated July 13, 1911, but also authorize deprivation of property without due process of law. 21

G.R. No. L-410112

In L-41012, the petitioner TDC stresses that the principal issue is the interpretation of Act No. 1360, as amended by. Act No. 1657 of the Philippine Commission, 22 and avers that inasmuch as Section 6 of Act No. 1360, as amended by Act 1657, provided that the reclamation of the Luneta extension was to be paid for out of the funds of the City of Manila which was authorized to borrow P350,000 "to be expended in the construction of Luneta Extension," the reclaimed area became "public land" belonging to the City of Manila that spent for the reclamation, conformably to the holding in Cabangis,23 and consequently, said land was subject to sale and other disposition; that the Insular Government itself considered the reclaimed Luneta extension as patrimonial property subject to disposition as evidenced by the fact that See. 3 of Act 1360 declared that "the land hereby reclaimed shall be the property of the City of Manila;" that this property cannot be property for public use for according to Article 344 of the Civil Code, the character of property for public use can only attach to roads and squares that have already been constructed or at least laid out as such, which conditions did not obtain regarding the subject land, that Sec. 5 of Act 1360 authorized the City of Manila to lease the northern part of the reclaimed area for hotel purposes; that Act No. 1657 furthermore authorized the City of Manila to sell the same; 24 that the express statutory authority to lease or sell the northern part of the reclaimed area cannot be interpreted to mean that the remaining area could not be sold inasmuch as the purpose of the statute was not merely to confer authority to sell the northern portion but rather to limit the city's power of disposition thereof, to wit: to prevent disposition of the northern portion for any purpose other than for a hotel site that the northern

and southern ends of the reclaimed area cannot be considered as extension of the Luneta for they lie beyond the sides of the original Luneta when extended in the direction of the sea, and that is the reason why the law authorized the sale of the northern portion for hotel purposes, and, for the same reason, it is implied that the southern portion could likewise be disposed of.  26

TDC argues likewise that there are several items of uncontradicted circumstantial evidence which may serve as aids in construing the legislative intent and which demonstrate that the subject property is patrimonial in nature, to wit: (1) Exhibits "J" and "J-1", or Plan No. 30 of the National Planning Commission showing the Luneta and its vicinity, do not include the subject property as part of the Luneta Park; (2) Exhibit "K", which is the plan of the subject property covered by TCT No. 67488 of BPOE, prepared on November 11, 1963, indicates that said property is not a public park; (3) Exhibit "T", which is a certified copy of Proclamation No. 234 issued on December 15, 1955 is President Magsaysay, and Exhibit "U" which is Proclamation Order No. 273 issued on October 4, 1967 by President Marcos, do not include the subject property in the Luneta Park-, (4) Exhibit "W", which is the location plan of the Luneta National Park under Proclamations Nos. 234 and 273, further confirms that the subject property is not a public park; and (5) Exhibit "Y", which is a copy of O.C.T. No. 7333 in the name of the United States of America covering the land now occupied by the America covering the land now occupied by the American Embassy, the boundaries of which were delineated by the Philippine Legislature, states that the said land is bounded on the northwest by properties of the Army and Navy Club (Block No. 321) and the Elks Club (Block No. 321), and this circumstance shows that even the Philippine Legislature recognized the subject property as private property of the Elks Club. 27

TDC furthermore contends that the City of Manila is estopped from questioning the validity of the sale of the subject property that it executed on July 13, 1911 to the Manila Lodge No. 761, BPOE, for several reasons, namely: (1) the City's petition for the reannotation of Entry No. 4608/T-1635 was predicated on the validity of said sale; (2) when the property was bought by the petitioner TDC it was not a public plaza or park as testified to by both Pedro Cojuanco, treasurer of TDC, and the surveyor, Manuel Añoneuvo, according to whom the subject property was from all appearances private property as it was enclosed by fences; (3) the property in question was cadastrally surveyed and registered as property of the Elks Club, according to Manuel Anonuevo; (4) the property was never used as a public park, for, since the issuance of T.C.T. No. 2165 on July 17, 1911 in the name of the Manila Lodge NO. 761, the latter used it as private property, and as early as January 16, 1909 the City of Manila had already executed a deed of sale over the property in favor of the Manila Lodge No. 761; and (5) the City of Manila has not presented any evidence to show that the subject property has ever been proclaimed or used as a public park. 28

TDC, moreover, contends that Sec. 60 of Com. Act No. 141 cannot apply to the subject land, for Com. Act No. 141 took effect on December 1, 1936 and at that time the subject land was no longer part of the part of the public domain. 29

TDC also stresses that its rights as a purchaser in good faith cannot be disregarded, for the mere mention in the certificate of title that the lot it purchased was "part of the Luneta extension" was not a sufficient warning that tile title to the City of Manila was invalid; and that although the trial court, in its decision affirmed by the Court of Appeals, found the TDC -to has been an innocent purchaser for value, the court disregarded the petitioner's rights as such purchaser that relied on Torrens certificate of title. 30

The Court, continues the petitioner TDC erred in not holding that the latter is entitled to recover from the City of Manila damages in the amount of P100,000 caused by the City's petition for- reannotation of its right to repurchase.

DISCUSSION AND RESOLUTION OF FIRST ISSUE

It is a cardinal rule of statutory construction that courts must give effect to the general legislative intent that can be discovered from or is unraveled by the four corners of the statute, 31 and in order to discover said intent, the whole statute, and not only a particular provision thereof, should be considered. 32 It is, therefore, necessary to analyze all the provisions of Act No. 1360, as amended, in order to unravel the legislative intent.

Act No. 1360 which was enacted by the Philippine Commission on June 26, 1905, as amended by Act No. 1657 enacted on May 18, 1907, authorized the "construction of such rock and timber bulkheads or sea walls as may be necessary for the making of an extension to the Luneta" (Sec. 1 [a]), and the placing of the material dredged from the harbor of Manila "inside the bulkheads constructed to inclose the Luneta extension above referred to" (Sec. 1 [a]). It likewise provided that the plan of Architect D. H. Burnham as "a general outline for the extension and improvement of the Luneta in the City of Manila" be adopted; that "the reclamation from the Bay of Manila of the land included in said projected Luneta extension... is hereby authorized and the land thereby reclaimed shall be the property of the City of Manila" (Sec. 3); that "the City of Manila is hereby authorized to set aside a tract of the reclaimed land formed by the Luneta extension authorized by this Act at the worth end of said tract, not to exceed five hundred feet by six hundred feet in size, for a hotel site, and to lease the same with the approval of the Governor General, ... for a term not exceeding ninety-nine years; that "should the Municipal Board ... deem it advisable it is hereby authorized to advertise for sale to sell said tract of land ... ;" "that said tract shall be used for hotel purposes as herein prescribed, and shall not be devoted to any other purpose or object whatever;" "that should the grantee x x x fail to maintain on said tract a first-class hotel x x x then the title to said tract of land sold, conveyed, and transferred, and shall not be devoted to any other purpose or object whatever;" "that should the grantee x x x fail to maintain on said tract a first-class hotel x x x then the title to said tract of land sold, conveyed, and transferred to the grantee shall revert to the City of Manila, and said City of Manila shall thereupon become entitled to immediate possession of said tract of land" (Sec. 5); that the construction of the rock and timber bulkheads or sea wall "shall be paid for out of the funds of the City of Manila, but the area to be reclaimed by said proposed Luneta extension shall be filled, without cost to the City of Manila, with material dredged from Manila Bay at the expense of the Insular Government" (Sec. 6); and that "the City of Manila is hereby authorized to borrow from the Insular Government ... the sum of three hundred thousand pesos, to be expended in the construction of Luneta extension provided for by paragraph (a) of section one hereof" (Sec.7).

The grant made by Act No. 1360 of the reclaimed land to the City of Manila is a grant of "public" nature, the same having been made to a local political subdivision. Such grants have always been strictly construed against the grantee. 33 One compelling reason given for the strict interpretation of a public grant is that there is in such grant a gratuitous donation of, public money or resources which results in an unfair advantage to the grantee and for that reason, the grant should be narrowly restricted in favor of the public. 34 This reason for strict interpretation obtains relative to the aforesaid grant, for, although the City of Manila was to pay for the construction of such work and timber bulkheads or sea walls as may be necessary for the making of the Luneta extension, the area to be reclaimed would be filled at the expense of the Insular Government and without cost to the City of Manila, with material dredged from Manila Bay. Hence, the letter of the statute should be narrowed to exclude maters which if included would defeat the policy of the legislation.

The reclaimed area, an extension to the Luneta, is declared to be property of the City of Manila. Property, however, is either of public ownership or of private ownership. 35 What kind of property of the City is the reclaimed land? Is it of public ownership (dominion) or of private ownership?

We hold that it is of public dominion, intended for public use.

Firstly, if the reclaimed area was granted to the City of Manila as its patrimonial property, the City could, by virtue of its ownership, dispose of the whole reclaimed area without need of authorization  to do so from the lawmaking body. Thus Article 348 of the Civil Code of Spain provides that "ownership is the right to enjoy and dispose of a thing without further limitations than those established by law." 36 The right to dispose (jus disponendi) of one's property is an attribute of ownership. Act No. 1360, as amended, however, provides by necessary implication, that the City of Manila could not dispose of the reclaimed area without being authorized by the lawmaking body. Thus the statute provides that "the City of Manila is hereby authorized to set aside a tract ... at the north end, for a hotel site, and to lease the same ... should the municipal board ... deem it advisable, it is hereby authorized  ...to sell said tract of land ... " (Sec. 5). If the reclaimed area were patrimonial property of the City, the latter could dispose of it without need of the authorization provided by the statute, and the authorization to set aside ... lease ... or sell ... given by the statute would indeed be superfluous. To so construe the statute s to render the term "authorize," which is repeatedly used by the statute, superfluous would violate the elementary rule of legal hermeneutics that effect must be given to every word, clause, and sentence of the statute and that a statute should be so interpreted that no part thereof becomes inoperative or superfluous.37 To authorize means to empower, to give a right to act. 38 Act No. 1360 furthermore qualifies the verb it authorize" with the adverb "hereby," which means "by means of this statue or section," Hence without the authorization expressly given by Act No. 1360, the City of Manila could not lease or sell even the northern portion; much less could it dispose of the whole reclaimed area. Consequently, the reclaimed area was granted to the City of Manila, not as its patrimonial property. At most, only the northern portion reserved as a hotel site could be said to be patrimonial property for, by express statutory provision it could be disposed of, and the title  thereto would revert to the City should the grantee fail to comply with the terms provided by the statute.

TDC however, contends that the purpose of the authorization provided in Act No. 1360 to lease or sell was really to limit the City's power of disposition. To sustain such contention is to beg the question. If the purpose of the law was to limit the City's power of disposition then it is necessarily assumed that the City had already the power to dispose, for if such power did not exist, how could it be limited? It was precisely Act 1360 that gave the City the power to dispose for it was hereby authorized by lease of sale. Hence, the City of Manila had no power to dispose of the reclaimed land had such power not been granted by Act No. 1360, and the purpose of the authorization was to empower the city to sell or lease the northern part and not, as TDC claims, to limit only the power to dispose. Moreover, it is presumed that when the lawmaking body enacted the statute, it had full knowledge of prior and existing laws and legislation on the subject of the statute and acted in accordance or with respect thereto. 39 If by another previous law, the City of Manila could already dispose of the reclaimed area, which it could do if such area were given to it as its patrimonial property, would it then not be a superfluity for Act No. 1360 to authorize the City to dispose of the reclaimed land? Neither has petitioner TDC pointed to any other law that authorized the City to do so, nor have we come across any. What we do know is that if the reclaimed land were patrimonial property, there would be no need of giving special authorization to the City to dispose of it. Said authorization was given because the reclaimed land was not intended to be patrimonial property of the City of Manila, and without the express authorization to dispose of the northern portion, the City could not dispose of even that part.

Secondly, the reclaimed area is an "extension to the Luneta in the City of Manila." 40 If the reclaimed area is an extension of the Luneta, then it is of the same nature or character as the old Luneta. Anent this matter, it has been said that a power to extend (or continue an act or business) cannot authorize a transaction that is totally distinct. 41 It is not disputed that the old Luneta is a public park or plaza and it is so considered by Section 859 of the Revised Ordinances of the City of Manila. 42 Hence the "extension to the Luneta" must be also a public park or plaza and for public use.

TDC, however, contends that the subject property cannot be considered an extension of the old Luneta because it is outside of the limits of the old Luneta when extended to the sea. This is a strained interpretation of the term "extension," for an "extension," it has been held, "signifies enlargement in any direction — in length, breadth, or circumstance." 43

Thirdly, the reclaimed area was formerly a part of the manila Bay. A bay is nothing more than an inlet of the sea. Pursuant to Article 1 of the Law of Waters of 1866, bays, roadsteads, coast sea, inlets and shores are parts of the national domain open to public use. These are also property of public ownership devoted to public use, according to Article 339 of the Civil Code of Spain.

When the shore or part of the bay is reclaimed, it does not lose its character of being property for public use, according to Government of the Philippine Islands vs. Cabangis. 44 The predecessor of the claimants in this case was the owner of a big tract of land including the lots in question. From 1896 said land began to wear away due to the action of the waters of Manila Bay. In 1901 the lots in question became completely submerged in water in ordinary tides. It remained in such a state until 1912 when the Government undertook the dredging of the Vitas estuary and dumped the Sand and - silt from estuary on the low lands completely Submerged in water thereby gradually forming the lots in question. Tomas Cabangis took possession thereof as soon as they were reclaimed hence, the claimants, his successors in interest, claimed that the lots belonged to them. The trial court found for the claimants and the Government appealed. This Court held that when the lots became a part of the shore. As they remained in that condition until reclaimed by the filling done by the Government, they belonged to the public domain. for public use .4' Hence, a part of the shore, and for that purpose a part of the bay, did not lose its character of being for public use after it was reclaimed.

Fourthly, Act 1360, as amended, authorized the lease or sale of the northern portion of the reclaimed area as a hotel sites. The subject property is not that northern portion authorized to be leased or sold; the subject property is the southern portion. Hence, applying the rule of expresio unius est exlusio alterius, the City of Manila was not authorized to sell the subject property. The application of this principle of statutory construction becomes the more imperative in the case at bar inasmuch as not only must the public grant of the reclaimed area to the City of Manila be, as above stated, strictly construed against the City of Manila, but also because a grant of power to a municipal corporation, as happens in this case where the city is author ized to lease or sell the northern portion of the Luneta extension, is strictly limited to such as are expressly or impliedly authorized or necessarily incidental to the objectives of the corporation.

Fifthly, Article 344 of the Civil Code of Spain provides that to property of public use, in provinces and in towns, comprises the provincial and town roads, the squares streets fountains, and public waters the promenades, and public works of general service paid for by such towns or provinces." A park or plaza, such as the extension to the Luneta, is undoubtedly comprised in said article.

The petitioners, however, argue that, according to said Article 344, in order that the character of property for public use may be so attached to a plaza, the latter must be actually constructed or at least laid out as such, and since the subject property was not yet constructed as a plaza or at least laid out as a plaza when it was sold by the City, it could not be property for public use. It should be noted, however, that properties of provinces and towns for public use are governed by the same principles as properties of the same character belonging to the public domain. 46 In order to be property of public domain an intention to devote it to public use is sufficient. 47 The, petitioners' contention is refuted by Manresa himself who said, in his comments", on Article 344, that: ñé+.£ªwph!1

Las plazas, calles y paseos publicos correspondent sin duda aiguna aldominio publico municipal ), porque se hallan establecidos sobre suelo municipal y estan destinadas al uso de todos Laurent presenta tratando de las plazas, una question relativa a si deben conceptuarse como de dominio publico los lugares vacios libres, que se encuenttan en los Municipios rurales ... Laurent opina contra Pioudhon que toda vez que estan al servicio de todos pesos lugares, deben considerable publicos y de dominion publico. Realmente, pala decidir el punto, bastara siempre fijarse en el destino real y efectivo de los citados lugares, y si este destino entraña un uso comun de todos, no hay duda que son de dominio publico municipal si no patrimoniales.

It is not necessary, therefore, that a plaza be already constructed of- laid out as a plaza in order that it be considered property for public use. It is sufficient that it be intended to be such In the case at bar, it has been shown that the intention of the lawmaking body in giving to the City of Manila the extension to the Luneta was not a grant to it of patrimonial property but a grant for public use as a plaza.

We have demonstrated ad satietatem  that the Luneta extension as intended to be property of the City of Manila for public use. But, could not said property-later on be converted, as the petitioners contend, to patrimonial property? It could be. But this Court has already said, in Ignacio vs. The Director of Lands, 49 the executive and possibly the legislation department that has the authority and the power to make the declaration that said property, is no longer required for public use, and until such declaration i made the property must continue to form paint of the public domain. In the case at bar, there has been no such explicit or unequivocal declaration It should be noted, furthermore, anent this matter, that courts are undoubted v not. primarily called upon, and are not in a position, to determine whether any public land is still needed for the purposes specified in Article 4 of the Law of Waters .  50

Having disposed of the petitioners' principal arguments relative to the main issue, we now pass to the items of circumstantial evidence which TDC claims may serve as aids in construing the legislative intent in the enactment of Act No. 1360, as amended. It is noteworthy that all these items of alleged circumstantial evidence are acts far removed in time from the date of the enactment of Act No.1360 such that they cannot be considered contemporaneous with its enactment. Moreover, it is not farfetched that this mass of circumstantial evidence might have been influenced by the antecedent series of invalid acts, to wit: the City's having obtained over the reclaimed area OCT No. 1909 on January 20,1911; the sale made by the City of the subject property to Manila Lodge No. 761; and the issuance to the latter of T.C.T. No. 2195. It cannot gainsaid that if the subsequent acts constituting the circumstantial evidence have been base on, or at least influenced, by those antecedent invalid acts and Torrens titles S they can hardly be indicative of the intent of the lawmaking body in enacting Act No. 1360 and its amendatory act.

TDC claims that Exhs. "J," "J-l" "K," "T," "U," "W" and "Y" show that the subject property is not a park.

Exhibits "J" and "J-1," the "Luneta and vicinity showing proposed development" dated May 14, 1949, were prepared by the National Urban Planning Commission of the Office of the President. It cannot be reasonably expected that this plan for development of the Luneta should show that the subject property occupied by the ElksClub is a public park, for it was made 38 years after the sale to the Elks, and after T.C.T. No. 2195 had been issued to Elks. It is to be assumed that the Office of the President was cognizant of the Torrens title of BPOE. That the subject property was not included as a part of the Luneta only indicated that the National Urban Planning Commission that made the plan knew that the subject property was occupied by Elks and that Elks had a Torrens title thereto. But this in no way proves that the subject property was originally intended to be patrimonial property of the City of Manila or that the sale to Elks or that the Torrens-title of the latter is valid.

Exhibit "K" is the "Plan of land covered by T.C.T . No ----, as prepared for Tarlac Development Company." It was made on November 11, 1963 by Felipe F. Cruz, private land surveyor. This surveyor is admittedly a surveyor for TDC. 51 This plan cannot be expected to show that the subject property is a part of the Luneta Park, for he plan was made to show the lot that "was to be sold to petitioner." This plan must have also assumed the existence of a valid title to the land in favor of Elks.

Exhibits "T" and "U" are copies of Presidential Proclamations No. 234 issued on November 15, 1955 and No. 273 issued on October 4, 1967, respectively. The purpose of the said Proclamations was to reserve certain parcels of land situated in the District of Ermita, City of Manila, for park site

purposes. Assuming that the subject property is not within the boundaries of the reservation, this cannot be interpreted to mean that the subject property was not originally intended to be for public use or that it has ceased to be such. Conversely, had the subject property been included in the reservation, it would mean, if it really were private property, that the rights of the owners thereof would be extinguished, for the reservations was "subject to private rights, if any there be." That the subject property was not included in the reservation only indicates that the President knew of the existence of the Torrens titles mentioned above. The failure of the Proclamations to include the subject property in the reservation for park site could not change the character of the subject property as originally for public use and to form part of the Luneta Park. What has been said here applies to Exhibits "V", "V-1" to "V-3," and "W" which also refer to the area and location of the reservation for the Luneta Park.

Exhibit "Y" is a copy of O.C.T. No. 7333 dated November 13, 1935, covering the lot where now stands the American Embassy [Chancery]. It states that the property is "bounded ... on the Northwest by properties of Army and Navy Club (Block No.321) and Elks Club (Block No. 321)." Inasmuch as the said bounderies delineated by the Philippine Legislature in Act No. 4269, the petitioners contend that the Legislature recognized and conceded the existence of the Elks Club property as a primate property (the property in question) and not as a public park or plaza. This argument is non sequitur plain and simple Said Original Certificate of Title cannot be considered as an incontrovertible declaration that the Elks Club was in truth and in fact the owner of such boundary lot. Such mention as boundary owner is not a means of acquiring title nor can it validate a title that is null and void.

TDC finally claims that the City of Manila is estopped from questioning the validity of the sale it executed on July 13,'1911 conconveying the subject property to the Manila Lodge No. 761, BPOE. This contention cannot be seriously defended in the light of the doctrine repeatedly enunciated by this Court that the Government is never estopped by mistakes or errors on the pan of its agents, and estoppel does not apply to a municipal corporation to validate a contract that is prohibited by law or its against Republic policy, and the sale of July 13, 1911 executed by the City of Manila to Manila Lodge was certainly a contract prohibited by law. Moreover, estoppel cannot be urged even if the City of Manila accepted the benefits of such contract of sale and the Manila Lodge No. 761 had performed its part of the agreement, for to apply the doctrine of estoppel against the City of Manila in this case would be tantamount to enabling it to do indirectly what it could not do directly. 52

The sale of the subject property executed by the City of Manila to the Manila Lodge No. 761, BPOE, was void and inexistent for lack of subject matter. 53 It suffered from an incurable defect that could not be ratified either by lapse of time or by express ratification. The Manila Lodge No. 761 therefore acquired no right by virtue of the said sale. Hence to consider now the contract inexistent as it always has seen, cannot be, as claimed by the Manila Lodge No. 761, an impairment of the obligations of contracts, for there was it, contemplation of law, no contract at all.

The inexistence of said sale can be set up against anyone who asserts a right arising from it, not only against the first vendee, the Manila Lodge No. 761, BPOE, but also against all its suceessors, including the TDC which are not protected the doctrine of bona fide ii purchaser without notice, being claimed by the TDC does not apply where there is a total absence of title in the vendor, and the good faith of the purchaser TDC cannot create title where none exists. 55

The so-called sale of the subject property having been executed, the restoration or restitution of what has been given is order 56

SECOND ISSUE

The second ground alleged in support of the instant petitions for review on certiorari is that the Court of Appeals has departed from the accepted and usual course of judicial proceedings as to call for an exercise of the power of supervision. TDC in L-41012, argues that the respondent Court did not make its own findings but simply recited those of the lower court and made a general affirmance, contrary to the requirements of the Constitution; that the respondent Court made glaring and patent mistakes in recounting even the copied findings, palpably showing lack of deliberate consideration of the matters involved, as, for example, when said court said that Act No. 1657 authorized the City of Manila to set aside a portion of the reclaimed land "formed by the Luneta Extension of- to lease or sell the same for park purposes;" and that respondent Court. further more, did not resolve or dispose of any of the assigned errors contrary to the mandate of the Judiciary Act.. 57

The Manila Lodge No. 761, in L-41001, likewise alleges, as one of the reasons warranting review, that the Court of Appeals departed from the accepted and usual course of Judicial proceedings by simply making a general affirmance of the court a quo  findings without bothering to resolve several vital points mentioned by the BPOE in its assigned errors. 58

COMMENTS ON SECOND ISSUE

We have shown in our discussion of the first issue that the decision of the trial court is fully in accordance with law. To follows that when such decision was affirmed by the Court of Appeals, the affirmance was likewise in accordance with law. Hence, no useful purpose will be served in further discussing the second issue.

CONCLUSION

ACCORDINGLY, the petitions in both G.R. Nos. L-41001 and L-41012 are denied for lack of merit, and the decision of the Court of Appeals of June 30, 1975, is hereby affirmed, at petitioner's cost.

Makasiar, Munoz Palma and Martin, JJ., concur. 1äwphï1.ñët

Teehankee, concurs in the result which is wholly consistent with the basic rulings and jugdment of this Court in its decision of July 31, 1968.