[G.R. No. 9935. February 1, 1915.] applicable.

There is not the slightest intimation in the contract that the

YU TEK & CO., plaintiff-appellant, vs. BASILIO GONZALEZ, defendant- sugar was to be raised by the defendant. Parties are presumed to have
appellant. Beaumont, Tenney & Ferrier for plaintiff. Buencamino & reduced to writing all the essential conditions of their contract. While
Lontok for defendant. parol evidence is admissible in a variety of ways to explain the meaning
of written contracts, it cannot serve the purpose of incorporating into the
SYLLABUS contract additional contemporaneous conditions which are not
mentioned at all in the writing, unless there has been fraud or mistake.
1. EVIDENCE; PAROL EVIDENCE TO VARY TERMS OF WRITTEN In an early case this court declined to allow parol evidence showing that
INSTRUMENT. — A written contract provided that the defendant was to a party to a written contract was to become a partner in a firm instead of
sell to the plaintiff 600 piculs of sugar. The defendant sought to prove a creditor of the firm. (Pastor vs. Gaspar, 2 Phil. Rep., 592.) Again, in
by parol evidence that it was the understanding of the parties that the Eveland vs. Eastern Mining Co. (14 Phil. Rep., 509) a contract of
sugar was to be procured from the defendant's growing crop. There employment provided that the plaintiff should receive from the
was nothing in the writing which could be construed to limit the defendant a stipulated salary and expenses The defendant sought to
agreement to the defendant's own crop of sugar. Held, That the interpose as a defense to recovery that the payment of the salary was
evidence in question was incompetent as varying the terms of the contingent upon the plaintiff's employment redounding to the benefit of
writing. the defendant company. The contract contained no such condition and
2. SALES; REQUISITES OF CONTRACT; CONSIDERATION. — A the court declined to receive parol evidence thereof.
contract of sale is not perfected until the parties have agreed upon the In the case at bar, it is sought to show that the sugar was to be
price and the thing sold. A contract whereby a party obligates himself to obtained exclusively from the crop raised by the defendant. There is no
sell for a price a certain specified quantity of sugar of a given quality, clause in the written contract which even remotely suggests such a
without designating any particular lot of sugar, is not perfected until the condition. The defendant undertook to deliver a specified quantity of
quantity agreed upon has been selected and is capable of being sugar within a specified time. The contract placed no restriction upon
physically designated and distinguished from all other sugar. the defendant in the matter of obtaining the sugar. He was equally at
3. ID.; ID.; LOSS OF THE THING DUE. — Until thus segregated or liberty to purchase it on the market or raise it himself. It may be true that
appropriated, the vendee does not assume the risk of loss as provided defendant owned a plantation and expected to raise the sugar himself,
in article 1452 of the Civil Code. but he did not limit his obligation to his own crop of sugar. our
conclusion is that the condition which the defendant seeks to add to the
4. ID.; ID.; LIQUIDATE: DAMAGES. — The contract provided that upon contract by parol evidence cannot be considered. The rights of the
failure to make delivery within a specified time the vendor should pay parties must be determined by the writing itself.
the sum of P1,200 by way of indemnity for loss and damages. The
P1,200 were liquidated damages and must be enforced according to The second contention of the defendant arises from the first. He
the terms of the contract. assumes that the contract was limited to the sugar he might raise upon
his own plantation; that the contract represented a perfected sale; and
DECISION that by failure of his crop he was relieved from complying with his
undertaking by loss of the thing due. (Arts. 1452, 1096, and 1182, Civil
TRENT, J p: Code.) This argument is faulty in assuming that there was a perfected
sale. Article 1450 defines a perfected sale as follows:
The basis of this action is a written contract, Exhibit A, the pertinent
paragraphs of which follow: "The sale shall be perfected between vendor and vendee and
shall be binding on both of them, if they have agreed upon the
"1. That Mr. Basilio Gonzalez hereby acknowledges receipt of thing which is the object of the contract and upon the price,
the sum of P3,000 Philippine currency from Messrs. Yu Tek & even when neither has been delivered."
Co., and that in consideration of said sum he obligates himself Article 1452 reads: "The injury to or the profit of the thing sold
to deliver to the said Yu Tek & Co., 600 piculs of sugar of the shall, after the contract has been perfected. be governed by the
first and second grade, according to the result of the provisions of articles 1096 and 1182."
polarization, within the period of three months, beginning on the
1st day of January, 1912, and ending on the 31st day of March This court has consistently held that there is a perfected sale with
of the same year, 1912. regard to the "thing" whenever the article of sale has been physically
segregated from all other articles Thus, a particular tobacco factory with
"2. That the said Mr. Basilio Gonzalez obligates himself to its contents was held sold under a contract which did not provide for
deliver to the said Messrs. Yu Tek & Co. of this city the said either delivery of the price or of the thing until a future time.
600 piculs of sugar at any place within the said municipality of McCullough vs. Aenlle & Co. (3 Phil. Rep., 285). Quite similar was the
Santa Rosa which the said Messrs. Yu Tek & Co. or a recent case of Barretto vs. Santa Marina (26 Phil. Rep., 200) where
representative of the same may designate. specified shares of stock in a tobacco factory were held sold by a
"3. That in case the said Mr. Basilio Gonzales does not deliver contract which deferred delivery of both the price and the stock until the
to Messrs. Yu Tek & Co. the 600 piculs of sugar within the latter had been appraised by an inventory of the entire assets of the
period of three months, referred to in the second paragraph of company. In Borromeo vs. Franco (5 Phil. Rep., 49) a sale of a specific
this document, this contract will be rescinded and the said Mr. house was held perfected between the vendor and vendee, although
Basilio Gonzalez will then be obligated to return to the delivery of the price was withheld until the necessary documents of
Messrs. Yu Tek & Co. the P3,000 received and also the sum of ownership were prepared by the vendee. In Tan Leonco vs. Go Inqui (8
P1,200 by way of indemnity for loss and damages." Phil. Rep., 531) the plaintiff had delivered a quantity of hemp into the
warehouse of the defendant. The defendant drew a bill of exchange in
Plaintiff proved that no sugar had been delivered to it under this the sum of P800, representing the price which had been agreed upon
contract nor had it been able to recover the P3,000. Plaintiff for the hemp thus delivered. Prior to the presentation of the bill for
prayed for judgment for the P3,000 and in addition, for P1,200 payment, the hemp was destroyed. Whereupon, the defendant
under paragraph 4, supra. Judgment was rendered for P3,000 suspended payment of the bill. It was held that the hemp having been
only, and from this judgment both parties appealed. already delivered, the title had passed and the loss was the vendee's. It
is our purpose to distinguish the case at bar from all these cases.
The points raised by the defendant will be considered first. He alleges
that the court erred in refusing to permit parol evidence showing that In the case at bar the undertaking of the defendant was to sell to the
the parties intended that the sugar was to be secured from the crop plaintiff 600 piculs of sugar of the first and second classes. Was this an
which the defendant raised on his plantation, and that he was unable to agreement upon the "thing" which was the object of the contract within
fulfill the contract by reason of the almost total failure of his crop. This the meaning of article 1450, supra? Sugar is one of the staple
case appears to be one to which the rule which excludes parol commodities of this country. For the purpose of sale its bulk is weighed,
evidence to add to or vary the terms of a written contract is decidedly the customary unit of weight being denominated a ''picul.'' There was no
delivery under the contract. Now, if called upon to designate the article that it was still at the risk of the seller, and that the buyer was
sold, it is clear that the defendant could only say that it was "sugar." He entitled to recover the $3,000 paid on account of the price."
could only use this generic name for the thing sold. There was no
We conclude that the contract in the case at bar was merely an
"appropriation" of any particular lot of sugar. Neither party could point to
executory agreement; a promise of sale and not a sale. As there was
any specific quantity of sugar and say:
no perfected sale, it is clear that articles 1452, 1096, and 1182 are not
"This is the article which was the subject of our contract." How applicable. The defendant having defaulted in his engagement, the
different is this from the contracts discussed in the cases plaintiff is entitled to recover the P3,000 which it advanced to the
referred to above! In the McCullough case, for instance, the defendant, and this portion of the judgment appealed from must
tobacco factory which the parties dealt with was specifically therefore be affirmed.
pointed out and distinguished from all other tobacco factories.
The plaintiff has appealed from the judgment of the trial court on the
So, in the Barretto case, the particular shares of stock which
ground that it is entitled to recover the additional sum of P1,200 under
the parties desired to transfer were capable of designation. In
paragraph 4 of the contract. The court below held that this paragraph
the Tan Leonco case, where a quantity of hemp was the
was simply a limitation upon the amount of damages which could be
subject of the contract, it was shown that quantity had been
recovered and not liquidated damages as contemplated by the law. "It
deposited in a specific warehouse, and thus set apart and
also appears," said the lower court, "that in any event the defendant
distinguished from all other hemp.
was prevented from fulfilling the contract by the delivery of the sugar by
A number of cases have been decided in the State of Louisiana, where conditions over which he had no control, but these conditions were not
the civil law prevails, which confirm our position. Perhaps the latest is sufficient to absolve him from the obligation of returning the money
Witt Shoe Co. vs. Seegars & Co. (122 La., 145; 47 Sou., 444). In this which he received."
case a contract was entered into by a traveling salesman for a quantity
The above quoted portion of the trial court's opinion appears to be
of shoes, the sales having been made by sample. The court said of this
based upon the proposition that the sugar which was to be delivered by
contract:
the defendant was that which he expected to obtain from his own
"But it is wholly immaterial, for the purposes of the main hacienda and, as the dry weather destroyed his growing cane, he could
question, whether Mitchell was authorized to make a definite not comply with his part of the contract. As we have indicated, this view
contract of sale or not, since the only contract that he was in a is erroneous, as, under the contract, the defendant was not limited to
position to make was an agreement to sell or an executory his growing crop in order to make the delivery. He agreed to deliver the
contract of sale. He says that plaintiff sends out 375 samples of sugar and nothing is said in the contract about where he was to get it.
shoes, and as he was offering to sell by sample shoes, part of
which had not been manufactured and the rest of which were We think this is a clear case of liquidated damages. The contract plainly
incorporated in plaintiff's stock in Lynchburg, Va., it was states that if the defendant fails to deliver the 600 piculs of sugar within
impossible that he and Seegars & Co. should at that time have the time agreed on, the contract will be rescinded and he will be obliged
agreed upon the specific objects, the title to which was to pass, to return the P3,000 and pay the sum of P1,200 by way of indemnity for
and hence there could have been no sale. He and Seegars & loss and damages. There cannot be the slightest doubt about the
Co. might have agreed, and did (in effect) agree, that the meaning of this language or the intention of the parties. There is no
identification of the objects and their appropriation to the room for either interpretation or construction. Under the provisions of
contract necessary to make a sale should thereafter be made article 1255 of the Civil Code contracting parties are free to execute the
by the plaintiff, acting for itself and for Seegars & Co., and the contracts that they may consider suitable, provided they are not in
legend printed in red ink on plaintiff's billheads ("Our contravention of law, morals, or public order. In our opinion there is
responsibility ceases when we take transportation Co's. receipt nothing in the contract under consideration which is opposed to any of
'In good order") indicates plaintiff's idea of the moment at which these principles.
such identification and appropriation would become effective
The question presented was carefully considered in the case of For the foregoing reasons the judgment appealed from is modified by
State vs. Shields, et al. (110 La., 547, 34 Sou., 673) (in which it allowing the recovery of P1,200 under paragraph 4 of the contract. As
was absolutely necessary that it should be decided), and it was thus modified, the judgment appealed from i9 affirmed, without costs in
there held that in receiving an order for a quantity of goods, of a this instance.
kind and at a price agreed on, to be supplied from a general
stock, warehoused at another place, the agent receiving the
order merely enters into an executory contract for the sale of
the goods, which does not divest or transfer the title of any
determinate object, and which becomes effective for that
purpose only when specific goods are thereafter appropriated
to the contract; and, in the absence of a more specific
agreement on the subject, that such appropriation takes place
only when the goods as ordered are delivered to the public
carriers at the place from which they are to be shipped,
consigned to the person by whom the order is given, at which
time and place, therefore, the sale is perfected and the title
passes."

This case and State vs. Shields, referred to in the above

quotation are amply illustrative of the position taken by the
Louisiana court on the question before us. But we cannot
refrain from referring to the case of Larue & Prevost vs. Rugely,
Blair & Co. (10 La. Ann., 242) which is summarized by the court
itself in the Shields case as follows:
". . . It appears that the defendants had made a contract for the
sale, by weight, of a lot of cotton, had received $3,000 on
account of the price, and had given an order for its delivery,
which had been presented to the purchaser, and recognized by
the press in which the cotton was stored, but that the cotton
had been destroyed by fire before it was weighed. It was held
G.R. No. L-59534 May 10, 1990 In July, 1957, two (2) letters-agreements were executed between Gomez &
COMPAÑIA GENERAL DE TABACOS DE FILIPINAS, petitioner, Torres (represented by Francisco M. Gomez) on the one hand, and Theo H.
vs. COURT OF APPEALS, PHILIPPINE NATIONAL BANK and Davies & Co., Ltd. ("for itself and representing [or as authorized representative
DEVELOPMENT BANK OF THE PHILIPPINES, respondents. of) San Carlos Planters' Association"]), on the other, by virtue of which the
Siguion Reyna, Montecillo & Ongsiako for petitioner. Pelaez, Adriano & former sold to the latter a total of 18,000 piculs of the production allowance (or
Gregorio for respondents San Carlos Planters' Association & Theo Davis & sugar quota) of Plantation No. 30-15, to wit:
Co., Far East Ltd. et al.
1) On July 3, 1957: 8,250 piculs of "our ''A" quota and 1,750.00 piculs of our
NARVASA, J.: "B" quota corresponding to Plantation No. 30-15 of the Mindoro Mill
District which is duly registered in our name;" 9 and
The conflicting claims of the mortgagees of a sugar quota or production
allowance, on the one hand, and the mortgagors' subsequent vendees of the 2) on July 11, 1957: 6,600.00 piculs of "our "A" quota and 1,400.00 piculs of
same, on the other, are the subject of the petition for review on certiorari at our "B" quota . . ."
bar.
In the later agreement, Gomez & Torres guaranteed "that said 8,000.00 piculs
It appears that an unregistered partnership known as Gomez & Torres — of quotas as well as the 10,000.00 piculs sold to you on July 3, 1957, belong to
composed of Francisco M. Gomez and Hector Torres — was the "principal and us and are free from any lien or incumbrance whatsoever." 10
majority stockholder of the Philippine Milling Company, a domestic corporation
which owns and operates in the Mindoro Mill District a sugar mill where all the
The transferees presented the two (2) agreements for recording in the District
sugar cane planters of that mill district mill their sugar cane." 1 "Gomez & Office of the Sugar Quota Administration, on July 12, 1957. But the Sugar
Torres" was also "registered in the Sugar Quota Administration as the owner Quota Administration declined to give due course to the transfer until
and holder of the entire production allowance or quota appertaining to "necessary corrections" were made in the registration documents (known as
Plantation No. 30-15 of the Mindoro Mill District." 2
DTRs: "district transfer registries"), and "the written conformity of the PNB,"
secured. 11
As security for a loan of P2,000,000.00 obtained from the Rehabilitation
Finance Corporation (RFC), said Philippine Milling Company (thru its In a letter to the Philippine Mining Company dated September 10, 1957, the
president, Hector A. Torres), and the above mentioned Hector A. Torres and Administrator cited several reasons for his refusal: 12
Francisco Gomez, executed on August 7, 1950, a deed of mortgage
hypothecating to the RFC, particularly described real and personal property, 1. There is no signature nor initial of the Permit Agent assigned to your District.
"together with all the buildings and improvements now existing or which may
hereafter be constructed on the mortgaged property, all easements, sugar
quotas, agricultural or land indemnities, aids or subsidies and all other rights or 2. There is no distribution of coefficients in Columns F, I, and J in both of your
benefits annexed to or inherent therein, now existing or which may hereafter DTR's.
exist." 3
3. This Office received a letter from the Philippine National Bank advising this
The mortgagors above named also assigned to the RFC on August 16, 1950, Office that the allotments of Plantations Nos. 30-4, 30-8c, 30-9c, 30-14, 30-15
in a public instrument, 4 the sugar quota of the mill district aggregating no less and 30-16a are mortgaged to the PNB and to advise the PNB of any sale,
than 148,000 piculs and sugar warehouse receipts covering, the first 29,500 transfer or conveyance affecting the quota of the Philippine Milling Company,
piculs of sugar milled by the sugar central annually and such additional sugar Hector A. Torres and Francisco M. Gomez and to withhold the registration
as may be necessary to cover the annual amortization of the loan, taking into without the consent of the PNB.
consideration the fluctuating sugar prices, which assignments shall remain in
full force and effect as long as . . . (their) aforementioned loan has not been The letter of the PNB above referred to (par. 3) was that written by its Vice
settled in full." President, J.V. Buenaventura, dated September 4, 1957. 13

Some fifteen months later, or on November 2, 1951, the same mortgagors On October 2, 1957, San Carlos Planters' Association and Theo H. Davies Co.
executed in favor of the same mortgagee (the R.F.C) a second mortgage, this Ltd. submitted "two copies of the mill district coefficients and allowances of the
time as security for another loan of P1,860,000.00. The mortgage covered real 1957-1958 crop of the San Carlos Mill District." In response, the Sugar Quota
and/or personal properties listed in the deed, "together with all the buildings Administrator sent them a letter dated October 3, 1957 advising that it was
and improvements now existing or which may hereafter be constructed on the inappropriate for them to include "in said list, sugar allotments rights in the
mortgaged property, all easements, sugar quotas, agricultural or land quantity of 14,850 piculs for 'A' and 3,150 for 'B' purchased by San Carlos
indemnities, aids or subsidies, and all other rights or benefits annexed to or Milling Co., Ltd. from Mindoro Mill District," because "this purchase has not
inherent therein, now existing or which may hereafter exist . . . and also other been given due course by this office in view of the defects . . . (which) have not
assets acquired with the proceeds of such loan . . . " 5 yet been corrected." 14

The mortgagors also executed on November 2, 1951 an assignment in favor of The Governor of the RFC also wrote to the SQA, under date of October 9,
the RFC, like that of August 16, 1950, supra, respecting "its rights and interests 1957, informing it of the mortgage to it of the sugar quota in question
on all the sugar quota of the Mindoro Mill District aggregating no less than "aggregating no less than 148,000 piculs," and requesting "that no transfer or
148,000 piculs and additional sugar warehouse receipts covering the first conveyance affecting the said sugar quota rights of the Philippine Milling Co.
27,350 piculs of sugar milled by the sugar central annually, and such additional and Messrs. Hector A. Torres and Francisco Gomez that may have been
sugar may be necessary to cover the annual amortization on the loan, until the presented or . . . may be presented . . . be given due course without the written
full amount of the additional loan has been fully paid." 6 consent of this Corporation." 15

Both deeds of (real estate and chattel) mortgages were registered in the On October 17, 1957, the San Carlos Milling Co. Ltd. and Theo H. Davies &
Register of Deeds of Occidental Mindoro on August 20, 1950 and November 9, Co. Far East Ltd. wrote to the SQA, in reply to the latter's communication of
1951, respectively. 7 October 3, 1957. Adverting to a letter of the Philippine Milling Co. "of Sept.
15th, 1957 and . . . memorandum enclosure of the same date addressed to the
Earlier, or on or about January 13, 1951, the real estate and personal property Phil. Milling Co., the transferor central, by Torres and Gomez, owners and
subject of the two (2) mortgages just described, were again mortgaged by sellers of the quota rights in question, " they demanded "that the transfer of
Philippine Milling Co., Francisco M. Gomez and Hector A. Torres, this time in said quotas be given effect immediately from Mindoro Plantation Audit 30-15 of
favor of the Philippine National Bank as collateral for a loan of P235,000.00. Torres and Gomez to Plantation Audit No. 38-E-24 of the San Carlos Mill
This real estate and chattel mortgage was amended on April 6, 1951 by District for account of the San Carlos Planters
increasing its consideration from P235,000.00 to P335,000.00, and still later, Association." 16
on January 18, 1952, by further increasing the consideration to
P1,405,0,00.00. 8 The original deed and its two (2) amendments were all
registered with the Register of Deeds of Occidental Mindoro.
The matter of registration remained in a state of flux until about a year later, or b. Order the defendants PLANTERS of the San Carlos Mill District and the
more precisely, August 5, 1958, when the Administrator ultimately authorized defendant San Carlos Planters' Ass'n to return and restore to the plaintiff PNB
the transfer. 17 the sugar quota in question;

c. Order the cancellation of the District Transfer Registry . . . (regarding the

On January 6 and 7, 1959, the San Carlos Planters' Association in turn
transfers to the defendants) and declare same of no force and effect.
executed sales of portions of the sugar quota of 18,000 piculs acquired by it in
favor of various individual sugar planters, all of which sales were recorded in
the San Carlos District Transfer Registry. 18 Then on January 16, 1959, San ON THE SECOND AND ALTERNATIVE CAUSE OF ACTION
Carlos effected a change in the Plantation Number of its remaining portion of
the sugar quota purchased by it (57.06 piculs of "A" quota and 12.12, piculs of a. Declare the plaintiff PNB owner of the sugar quota in question in the quantity
"B" quota) from No. 38-E-24 to No. 38-343. 19 equal to 14,850 piculs of "A" quota and 3,150 piculs of "B" quota presently
registered in the Sugar Quota Administration in the names of the defendants
PLANTERS and defendant San Carlos Planters' Assn. in the quantity and
Eventually, the Development Bank of the Philippines (formerly RFC) caused under the plantation numbers indicated in par. 3 of the First Cause of Action of
the extrajudicial foreclosure of its mortgages of August 7, 1950 and November this Complaint;
2, 1951 by the Provincial Sheriff of Occidental Mindoro. The foreclosure sale b. Declare the sale of the sugar quota in question made by defendant
was held on November 28, 1958. The DBP was the highest bidder. A TORRES & GOMEZ on July 3, 1957 and July 11, 1957 null and void;
certificate of sale was accordingly drawn up in its favor by the Sheriff on c. Declare the transfer of the sugar quota in question from the Mindoro Mill
January 19, 1959. 20 As might be expected, among the properties specified in District to the San Carlos Mill District null and void;
the certificate of sale, as having been sold to DBP, were. 21 d. Declare the subsequent transfer of the sugar quota in question made by
defendant San Carlos Planters' Assn. to the defendant PLANTERS of the San
All sugar quota rights of the Philippine Milling Company including those of Carlos Mill District null and void;
Spouses, Francisco M. Gomez and Francisca Villanueva and the Spouses, e. Order the said defendants PLANTERS and the defendant San Carlos
Hector A. Torres and Galinica Romano, as well as those of Gomez and Torres Planters' Assn. to return and restore to the plaintiff PNB the sugar quota in
partnership in the Mindoro Mill District aggregating to no less than 148,000 question; and
piculs of sugar, which are attached to any and or all parcels of land described f. Order the cancellation of the. District Transfer Registry, Annexes "F", "G",
above and mortgaged to the Rehabilitation Finance Corporation now "H", "I" and "J" and declare same of no force and effect.
Development Bank, of the Philippines as well as the said sugar central's share
in the above sugar and quota rights. ON THE THIRD CAUSE OF ACTION

a. Order the defendants TORRES & GOMEZ, Francisco Gomez, Hector A.

On June 17, 1960 — the one-year redemption period granted by law to the Torres, Conrado Manalansan, as Sugar Quota Administrator, Theo H. Davies
mortgagors, having expired without a redemption having been attempted, and & Co. Ltd. and the San Carlos Planters' Assn. to pay jointly and severally the
the DBP having consolidated its ownership over the real and personal property plaintiff PNB the sum of P50,400.00 as lost and/or unrealized rental of the
subject of the mortgage sale — the DBP executed a deed of sale in favor of sugar quota in question for the 1958-1959 crop year;
the PNB covering all the foreclosed property, for P5,147,309.07 and other b. Order the defendants TORRES & GOMEZ, Francisco Gomez, Hector A.
valuable consideration. 22 Torres, Conrado Manalansan, as Sugar Quota Administrator, Theo H. Davies
& Co. Ltd. and the San Carlos Planters' Assn. to pay jointly and severally the
Now, as regards the sugar quota in question, said deed stipulated inter plaintiff PNB the sum of P93,465.00 as unrealized profits on the sugar quota in
alia that: question in connection with the agreement for conversion for 1959-1960 crop
year;
c. Order the defendants TORRES & GOMEZ, Francisco Gomez, Hector A.
1) The "sugar quota rights pertaining to the Philippine Milling Company shall Torres, Conrado Manalansan, as Sugar Quota Administrator, Theo H. Davies
not be covered-by this agreement until after the expiration of the 1959-1960 & Co. Ltd. and the San Carlos Planters' Assn. to pay jointly and severally the
crop year, but in no case earlier than June 30, 1960;" 23 and plaintiff PNB the sum of P93,465.00 as unrealized profits on the sugar quota in
question in connection with the agreement for conversion entered with the
2) ". . . while the l8,000 piculs of "A" and "B" sugar are expressly excluded in BISCOM for the 1960-1961 crop year;
this Deed of Sale because of certain circumstances, the Vendee may,
however, take such action as it may deem proper in order to recover the said
18,000 piculs of "A" and "B" sugar quota and Vendor agrees to join such action d. Order the defendants TORRES & GOMEZ, Francisco Gomez, Hector A.
whenever requested by the Vendee, it being understood, however, that Vendor Torres, Conrado Manalansan, as Sugar Quota Administrator, Theo H. Davies
shall not in any way be responsible for said 18,000 piculs nor be liable for the & Co. Ltd., San Carlos Planters' Assn. and the defendants PLANTERS to pay
outcome of such action . . . 24 jointly and severally the Plaintiff PNB the sum of P9,000.00 annually for three
crop years beginning with the 1961-1962 as lost and/or unrealized rental of the
After about two (2) years, in March, 1962, PNB wrote to the San Carlos sugar quota in question.
Planters' Association and the planters to whom the latter had sold portions of
the 18,000 piculs of the sugar quota in question, supra, demanding the Plaintiff further pray for such other relief which this Honorable Court may deem
restoration and delivery to it (the PNB) of their respective portions of said just and proper to grant in the premises, with costs against the defendants.
quota. As already mentioned, 25 the 18,000 piculs consisted of 14,850 piculs of
'A' quota and 3,150 piculs of 'B' quota.
Answers were in due course filed by the several defendants. At the pre-trial,
the parties entered into a partial stipulation of facts which contained, in
When the latter failed to do so, the PNB together with the DBP brought suit in substance:
the Court of First Instance of Occidental Mindoro against Francisco M. Gomez
and Hector A. Torres and their spouses; the partnership of Gomez & Torres;
the Philippine Planters' Association; all the sugar planters to whom as 1) an admission of all the relevant documents appended to the complaint, as
aforementioned had been sold parts of the 18,000 piculs of the sugar quota in well as other documents, already above specified;
question; and the Sugar Quota Administration. 26 It set out three (3) causes of 2) an acknowledgment that the consideration fixed in the two (2) letters-
action in its complaint and prayed for judgment as follows: contracts between Gomez & Torres and Theo H. Davies & Co., Ltd. and the
San Carlos Planters' Association, dated July 3 and 11, 1957, 27 had been paid;
3) a statement that the transfer of a part of the sugar quota to Cia. General de
ON THE FIRST CAUSE OF ACTION Tabacos de Filipinos (TABACALERA) was for valid consideration, and was
accompanied by the usual warranty of the vendor's full right of disposition
a. Declare the plaintiff PNB owner of the sugar quota in question in the quantity thereof and of absence of any lien or encumbrance thereon; and
equal to 14,850 piculs of "A" quota and 3,150 piculs of "B" quota presently 4) a request that the court "take judicial notices of all executive orders,
registered in the Sugar Quota Administration in the names of the defendants circulars and regulations which are pertinent to sugar quotas or which are
PLANTERS and defendant San Carlos Planters' Ass'n in the quantity and otherwise in implementation of, or connected with, legislation on sugar trade
under the plantation numbers indicated in par. 3 of the First Cause of Action of and industry." 28
this Complaint;
Trial ensued after which judgment was rendered. The Trial Court's judgment, Company — was void, "(a)pproval or sanction of the Sugar Quota
rendered on April 8, 1968, 29 went against the plaintiffs. 30 It made the following Administration . . . (being) sorely and fatally lacking;"
explicit findings:
a) moreover, "the very terms of the deed of sale executed by the DBP in favor
of PNB on June 17, 1966 specifically and expressly excluded the 18,000 piculs
1. That while the defendants, Philippine Milling Company and Gomez and
in question;
Torres assigned the rights over the Sugar Quota to the R.F.C., said
assignment of rights, not having been duly registered in accordance with the
rules and regulations of the Sugar Quota Administration, did not effect third 2) even if the mortgage be accorded validity, it was "binding only as between
the mortgagors and the mortgagees and did not have any effect in third
parties who acquired said sugar quota in good faith and for value;
2. That the San Carlos Planters Association, the Theo H. Davies, the persons who subsequently acquired the same," because the mortgages had
TABACALERA and all the transferees had acquired the sugar quota in not yet been "duly registered with the Sugar Quota Administration" when
question legally and in good faith, hence, the plaintiff has no cause of action TABACALERA and others purchased parts of the quota in question from the
Philippine Planters' Association; indeed, the transferees from the latter had
against them; (and)
3. That nevertheless, a valid cause of action exists as against defendants "received the sanction and approval of the Sugar Quota Administrator;"
Francisco M. Gomez and Hector Torres on the basis of the mortgage and 3) the direction by the Court of Appeals for TABACALERA among others, to
reconvey the quota to the PNB is vague and indefinite since it does not state
assignment executed by them in favor of the Development Bank of the
the point of time to be considered in computing the value thereof; furthermore,
Philippines and the Philippine National Bank.
since it "benefited only to the extent of the . . . (precise quantity purchased by
And on said findings, the Court: it, out of the 18,000 piculs), it would be "clearly contrary to law and grossly
iniquitous" for it to be made solidarily liable for the value of the entire sugar
1) dismissed the case "as against the San Carlos (Planters') Association, Theo quota in question; and
H. Davies Co., Ltd., TABACALERA, the Sugar Quota Administrator and all the 4) if TABACALERA reconveys or pays the value of the sugar quota acquired
from San Carlos Planters' Association, the latter should, upon its implied and
other private defendants who are the transferees;" but
express warranty against eviction, reimburse it therefor.
2) ordered defendants 'Francisco M. Gomez and Hector Torres . . . to pay the
value of the 18,000 piculs of 'A' and 'B' sugar quota allowance in the amount of The argument that Theo H. Davies & Co., Ltd., San Carlos Planters'
P270,000.00 to the Philippine National Bank, plus interest at the legal rate from Association, and their privies and successors in interest like TABACALERA,
are purchasers in good faith of the sugar quota in question because they could
1958 up to the actual payment thereof and to pay the costs."
not he deemed to have prior knowledge of the encumbrances thereon, is
untenable.
PNB and Francisco Gomez appealed to the Court of Appeals. 31 The PNB
ascribed to the Trial Court the following errors to wit:
For one thing, as the Court of Appeals has pointed out, the intangible property
1) not finding that a valid mortgage was duly constituted also on the sugar that is the sugar quota in question should be considered as real property by
quota allowances in question with binding effect against third persons including destination, "an improvement attaching to the land entitled
the defendants-appellees; thereto." 34 Moreover, as is axiomatic, the recording in the Registry of Deeds of
2) not finding that the defendants-appellees had both actual and constructive a mortgage over lands and other immovables operates to charge "the whole
notice of the mortgage in favor of the Philippine National Bank and the world" with notice thereof. 35 The registration therefore of the mortgages
Development Bank of the Philippines which covered the sugar quota executed by the Philippine Milling Company, Hector A. Torres and Francisco
allowances; Gomez in favor of the RFC and later of the PNB, thus had the effect of
charging all persons, including Theo H. Davies & Co., Ltd., San Carlos
Planters' Association, and their privies and successors in interest, with notice
3) not finding that the PNB is the owner of the sugar quota allowance and in
not ordering the defendants-appellees to return or reconvey the said sugar of the encumbrance, not only over the lands belonging to the mortgagors but
quota allowances to the PNB. also of the sugar quotas as well as "all the buildings and improvements . . .
existing or which may hereafter be constructed on the mortgaged property, all;
elements,
The decision of the Court of Appeals 32 was rendered on October 30, . . . agricultural or land indemnities, aids or subsidies and all other rights or
1980. 33 It modified the Trial Court's judgment as follows: benefits annexed to or inherent therein, now existing or which may hereafter
exist." So, none of the parties in this case can plead lack of knowledge of the
IN VIEW OF THE FOREGOING CONSIDERATIONS, the judgment appealed mortgage lien over the sugar quota or production allowance.
from is hereby modified, in these aspects:
Even if the sugar quota is assumed to be personal, not raid property, and
1. declaring the Philippine National Bank the owner of the sugar quota or hence not embraced in the mortgage of the immovables created by the
production allowances in question; corresponding deeds, it would nevertheless still be covered by the chattel
mortgage created in and by the same deeds. Since, like the recording of a real
estate mortgage, registration of a chattel mortgage also puts all persons on
2. ordering the defendants-appellees (excepting the defendant-appellee notice of its existence, the legal situation would be exactly the same: the
Administrator of the Sugar Quota Office) to reconvey to plaintiff-appellant PNB, registration of the above described deeds of chattel (and real estate) mortgage
the said sugar quota or production allowance in question registered in their over the sugar quota, among other things, would also have charged all
names, or if the same can not now be legally done, directing the defendants- persons with notice thereof from the time of such registration. 36
appellees (excepting appellee Administrator of the Sugar Quota Office) to
jointly and severally pay to PNB the value of the sugar quota or production
allowance in question. Again, being themselves engaged and possessed of no little experience in the
sugar industry, said Theo H. Davies & Co., Ltd., San Carlos Planters'
The appealed judgment is hereby affirmed in all other respects. Association (and their own transferees) could not but have known, when
negotiations for their respective purchases of the sugar quota in question
From this judgment, the Compañia General de Tabacos (TABACALERA) has commenced, that the sugar quota they were dealing with had perforce to
appealed to this Court. Here it submits that said judgment should be reversed pertain to some specific sugar plantation or farm, i.e., Plantation 30-15 of the
on the basis of the following considerations, to wit: Mindoro Mill District. Sugar quota allocations do not have existence
independently of any particular tract of land. They are essentially ancillary, not
1) that sugar quotas are not "ordinary property . . . which may be appropriated, principal, assets, necessarily annexed to a specific sugar plantation or land,
transferred, conveyed and/or encumbered by the private grantee at his whim improvements "attaching to the land entitled thereto." 37 Hence, the very first
and discretion without the intervention of the State," it being "regulated inquiry in any negotiation affecting sugar quotas necessarily would have to do
property, the disposal or encumbrance of which is made subject to certain with the identification of the district, plantation or land to which the quotas
restrictions and regulations provided for by law;" hence, "any form of alienation appertain. No transaction can be had of sugar quotas in the abstract, without
thereof should be made subject to governmental regulations and should be reference whatsoever to any particular land. Indeed, any deed of conveyance
processed and approved by the implementing arm of the government, the of sugar quota would unavoidably have to describe the sugar plantation and
Sugar Quota Administration;" and the mortgage constituted over the sugar district to which it refers or relates. There can be no sale simply of sugar quota
quota in this case by the parties to whom the same had originally been of a certain number of piculs without specification of the land to which it
awarded — the partnership of Gomez and Torres or the Philippine Milling relates. Such a sale would be inconsistent with established usage, and would
be void for want of a determinate subject matter. 38 Theo H. Davies & Co., Ltd. For aught that appears on the record, it dealt separately and individually with
and San Carlos Planters' Association can not therefore plead ignorance of the its vendor. Its liability should indeed be limited to a return of the exact quantity
fact that the quota they were buying pertained to land belonging to the sellers, and quality of the sugar quota separately purchased by it, as indubitably
Plantation No. 30-15 of the Mindoro Mill District. appears on record, or the payment of the value thereof computed as of the
time that its obligation to return that quota was adjudged by the Court of
Appeals.
Furthermore, Theo H. Davies & Co., Ltd. and San Carlos Planters' Association
were obviously of the belief that a mortgage or sale of a sugar quota is void if
"(a)pproval or sanction of the Sugar Quota Administration . . . (is) lacking," this One final question remains to be resolved, that posed by TABACALERA, to
being in fact a proposition TABACALERA lays before this Court, although it wit: if it reconveys the sugar quota acquired from San Carlos Planters'
cites no particular authority for it and has thus failed to convince this Court of Association, or pays its value, should not it be reimbursed therefor by the
its validity. Be this as it may, it was with this proposition in mind that Theo H. latter, upon its implied and express warranty against eviction? The answer win
Davies & Co. Ltd. and San Carlos Planters' Association submitted the deed of have to be in the negative. They, vendor and vendee, are in pari delicto. At the
conveyance in their favor of the sugar quota in question, to the SQA, precisely time of the transaction between them they were well aware of the
to obtain the latter's approval of that transaction. That approval, as already encumbrance on the property dealt with, they had the common intention of
stated, was not given until a year later. But long before that approval, they negating the rights that they knew had earlier and properly been acquired by
were clearly and categorically informed that the sugar quota, subject of the the mortgagee of the property they were treating of; they were both
sale to them for which they were seeking approval by the SQA was already consequently acting in bad faith. The object or purpose of their contract was
mortgaged to the RFC and then to the PNB. Since good faith is obviously a "contrary to law, morals, good customs, public order or public policy." 39 The
state of the mind, and since — prior to the approval of the conveyance to them law says that in such a case, where "the unlawful or forbidden cause consists
of the sugar quota by the SQA which approval they thought to be essential for does not constitute a criminal offense, . . . and the fault is on the part of both
the validity of said conveyance-they came to know of the earlier encum brance contracting parties, neither may recover what he has given by virtue of the
thereof to other parties, it is not possible for them without, contradicting contract, or demand the performance of the other's undertaking." 40 No relief
themselves, to claim good faith in the transaction. can be granted to either party; the law will leave them where they are. 41

Turning now to TABACALERA and the other vendees of Theo H. Davies & Co. WHEREFORE, the challenged judgment of the Court of Appeals is hereby
Ltd. and San Carlos Planters' Association, it is self-evident that they are also AFFIRMED, with the modification that the liability of petitioner Compañia
quite familiar with sugar quotas, including the nature and process of General de Tabacos de Filipinas (TABACALERA) is limited to the return to the
transferring the same, these being an important factor in their operations and Philippine National Bank of the exact quantity and quality of the sugar quota
transactions. They therefore had to know that the sugar quotas they were purchased by it from the Philippine Planters Association and/or Theo H. Davies
purchasing had originally to be part and parcel of some sugar plantation. & Co., Ltd., as indubitably appears on record, or the payment of the value
Hence, apart from being charged with knowledge, as above discussed, of the thereof to said Philippine National Bank computed as of the time that its
mortgage of the land to which the sugar quota in question was an integrated obligation to return that quota was adjudged by the Court of Appeals.
adjunct — and that the mortgage extended to said sugar quotas like the
buildings and improvements thereon standing — it may reasonably be IT IS SO ORDERED.
assumed as a fact, too, that they inquired about and were duly informed of the
origin of, and immediately preceding transactions involving, the sugar quotas
they were acquiring.

They should therefore all be regarded as buyers in bad faith — the original
vendees of Gomez and Torres and the Philippine Milling Company (i.e., the
Philippine Planters Association and Theo H. Davies & Co. Ltd.) as well as the
latter's own vendees (TABACALERA, et al.). The Court of Appeals was thus
quite correct in "ordering the defendants-appellees (excepting the defendant-
appellee Administrator of the Sugar Quota Office) to reconvey to plaintiff-
appellant PNB, the said sugar quota or production allowance in question
registered in their names, or if the same can not now be legally done, directing
the defendants-appellees (excepting appellee Administrator of the Sugar
Quota Office) to jointly and severally pay to PNB the value of the sugar quota
or production allowance in question."

The fact that "the very terms of the deed of sale executed by the DBP in favor
of PNB on June 17, 1966 specifically and expressly excluded the 18,000 piculs
in question," of which TABACALERA would make capital, is of no moment. As
also held by the Court of Appeals, the exclusion is more apparent than real. It
is true that the deed of June 17, 1966 does provide that "the 18,000 piculs of
'A' and 'B' sugar are expressly excluded . . . because of certain
circumstances." It is however pointed out that "the Vendee may . . . take such
action as it may deem proper in order to recover the said 18, 000 piculs of 'A'
and 'B' sugar quota and Vendor agrees to join such action whenever requested
by the Vendee." The clear implication is that notwithstanding those "certain
circumstances" causing the exclusion of the 18,000 piculs, there was an
express assertion that a right to recover the same existed in favor of the
vendor and/or its vendee; a declaration, in other words, that the sugar quota of
18,000 piculs rightfully belonged to the vendor and, by the sale, to the vendee.
The ambivalent stipulation, in the mind of the Court of Appeals, merely
evidenced the DBP's intention not be rendered liable to PNB on any warranty
of legal title considering that the quota had in point of fact already been sold to
third persons before foreclosure; the ostensible exclusion of the 18,000 piculs
was a mere cautionary proviso. This Court agrees, after undertaking a review
and analysis of the relevant facts.

However, TABACALERA's argument that it should not be made solidarily liable

for the value of the entire sugar quota in question, because it benefited only to
the extent of the precise quantity purchased by it, out of the 18,000 piculs is
well taken. It does not appear that it acted in concert with the other vendees in
the acquisition of all the 18,000 piculs comprising the sugar quota in question.
[G.R. No. 135634. May 31, 2000.] Court of Appeals explained: Concomitantly, the object of the sale is certain
HEIRS OF JUAN SAN ANDRES (VICTOR S. ZIGA) and SALVACION S. and determinate. Under Article 1460 of the New Civil Code, a thing sold is
TRIA, petitioners, vs. VICENTE RODRIGUEZ, respondent. Antonio determinate if at the time the contract is entered into, the thing is
S. Tria for petitioners. Simando & Villanueva for respondent. capable of being determinate without necessity of a new or further
agreement between the parties. Here, this definition finds realization. . . .
SYNOPSIS Thus, all of the essential elements of a contract of sale are present, i.e.,
that there was a meeting of the minds between the parties, by
Juan San Andres was the registered owner of Lot 1914-B-2 situated in virtue of which the late Juan San Andres undertook to transfer
Liboton, Naga City. On September 28, 1964, he sold a portion thereof, ownership of and to deliver a determinate thing for a price certain in
consisting of 345 square meters to respondent Vicente Rodriguez for money. As Art. 1475 of the Civil Code provides: The contract of sale is
P2,415.00. A Deed of Sale evidenced the sale. Upon the perfected at the moment there is a meeting ofminds upon the thing, which
death of Juan San Andres on May 5, 1985, Ramon San Andres was is the object of the contract, and upon the price . . .
appointed judicial administrator of the decedent's estate. A sketch
plan of the 345-square meter lot sold to respondent was prepared and 3. ID.; ID.; ID.; ABSOLUTE WHEN THERE IS NO
from there it was found that respondent had enlarged the area, which he RESERVATION OF OWNERSHIP NOR STIPULATION PROVIDING FOR
purchased, by 509 square meters. Accordingly, the judicial administrator A UNILATERAL RESCISSION BY EITHER PARTY; CASE AT BAR. —
sent a letter to respondent demanding that the latter vacate the portion In Ang Yu Asuncion v. Court of Appeals, [238 SCRA 602, 612 (1994)] the
allegedly encroached by him. Thereafter, the judicial administrator brought Court held: In Dignos v. Court of Appeals (158 SCRA 375), it was said
an action, in behalf of the estate of Juan San Andres, for that, although denominated a "Deed of Conditional Sale," a sale is still
recovery of possession of the 509-square meter lot. Respondent alleged absolute where the contract is devoid of any proviso that title is reserved
that apart from the 345-square meter lot which had been sold to him by or the right to unilaterally rescind is stipulated, e.g., until or unless the
Juan San Andres, the latter likewise sold to him the following day the price is paid. Ownership will then be transferred to the buyer upon actual
remaining portionof the lot consisting of 509 square meters, with both or constructive delivery (e.g., by the execution of a public document) of the
parties treating the two lots as one whole parcel with a total area of 854 property sold. Where the condition is imposed upon the perfection of the
square meters. As proof of the sale to him of 509 square meters, contract itself, the failure of the condition would prevent such perfection. If
respondent attached to his answer a receipt signed by the late the condition is imposed on the obligation of a party, which is not fulfilled,
Juan San Andres. Respondent also attached to his answer a the other party may either waive the condition or refuse to proceed with
letter of judicial administrator Ramon San Andres asking payment of the the sale. (Art. 1545, Civil Code) Thus, in one case, when the sellers
balance of the purchase price. On September 20, 1994, the trial court declared in a "Receipt of Down Payment" that they received an amount as
rendered judgment in favor of petitioner. It ruled that there was no purchase price for a house and lot without any reservation of title until full
contract of sale to speak of for lack of a valid object because there was no payment of the entire purchase price, the implication was that they sold
sufficient indication in the receipt presented to identify the property their property. In People's Industrial and Commercial
subject of the sale, hence, the need to execute a new contract. Corporation v. Court of Appeals, [281 SCRA 206 (1997)] it was stated: A
Respondent appealed to the Court of Appeals (CA). The CA reversed the deed of sale is considered absolute in nature where there is neither a
decision of the trial court. The appellate court held that the object of the stipulation in the deed that title to the property sold is reserved in the seller
contract was determinable, and that there was conditional sale with the until full payment of the price, nor one giving the vendor the right to
balance of the purchase price payable within five years from the unilaterally resolve the contract the moment the buyer fails to pay within a
execution of the deed of sale. Hence, this petition. fixed period. Applying these principles to this case, it cannot be gainsaid
that the contract of sale between the parties is absolute, not conditional.
The Supreme Court ruled that since the lot subsequently sold to There is no reservation of ownership nor a stipulation providing for a
respondent was said to adjoin the "previously paid lot" on three sides unilateral rescission by either party. In fact, the sale was consummated
thereof, the subject lot was capable of being determined without the upon the delivery of the lot to respondent. Thus, Art. 1477 provides that
need of any new contract. Thus, all of the essential elements of a the ownership of the thing sold shall be transferred to the vendee upon the
contract of sale were present, i.e. that there was a meeting of the minds actual or constructive delivery thereof. The stipulation that the
between the parties, by virtue of which the late "payment of the full consideration based on a survey shall be due and
Juan San Andres undertook to transfer ownership of and to deliver a payable in five (5) years from the execution of a formal deed of sale" is not
determinate thing for a price certain in money. The perfected a condition which affects the efficacy of the contract of sale. It merely
contract of sale was confirmed by the former administrator of the estate, provides the manner by which the full consideration is to be computed and
who wrote a letter to respondent asking P300.00 as partial payment for the the time within which the same is to be paid. But it does not affect in any
subject lot. It cannot be gainsaid that the contract of sale between the manner the effectivity of the contract. Consequently, the contention that
parties was absolute, not conditional. There was no the absence of a formal deed of sale stipulated in the receipt prevents the
reservation of ownership nor a stipulation providing for a unilateral happening of a sale has no merit.
rescission by either party. The decision of the Court ofAppeals was
affirmed with the modification that respondent was ordered to reimburse 4. ID.; OBLIGATIONS; CONSIGNATION; PROPER ONLY IN CASES
petitioners for the expenses of the survey. SEAHID WHERE AN EXISTING OBLIGATION IS DUE; ABSENCE THEREOF IN
CASE AT BAR. — Under Art. 1257 of this Civil Code, consignation is
SYLLABUS proper only in cases where an existing obligation is due. In this case,
however, the contracting parties agreed that full payment of purchase
1. CIVIL LAW; SPECIAL CONTRACTS; SALES; DEFINED; ELEMENTS
price shall be due and payable within five (5) years from the execution of a
THEREOF. — Art. 1458 of the Civil Code provides: By the contract of sale
formal deed of sale. At the time respondent deposited the
one ofthe contracting parties obligates himself to transfer the
amount of P7,035.00 in the court, no formal deed of sale had yet been
ownership of and to deliver a determinate thing, and the other to pay
executed by the parties, and, therefore, the-five-year period during which
therefor a price certain in money or its equivalent. A contract of sale may
the purchase price should be paid had not commenced. In short, the
be absolute or conditional. As thus defined, the essential elements of sale
purchase price was not yet due and payable. This is not to say, however,
are the following: a) Consent or meeting of the minds, that is, consent to
that the deposit of the purchase price in the court is erroneous. The
transfer ownership in exchange for the price; b) Determinate subject
Court of Appeals correctly ordered the execution of a deed of sale and
matter; and, c) Price certain in money or its equivalent.
petitioners to accept the amount deposited by respondent.
2. ID.; ID.; ID.; ID.; ID.; PRESENT WHEN THE OBJECT OF SALE IS
5. ID.; CONTRACTS; NATURE THEREOF. — A contract is the law
CERTAIN AND DETERMINATE; CASE AT BAR. — Since the lot
between the parties, and courts have no choice but to enforce such
subsequently sold to respondent is said to adjoin the "previously paid lot"
contract so long as they are not contrary to law, morals, good customs or
on three sides thereof, the subject lot is capable of being determined
public policy. Otherwise, courts would be interfering with the
without the need of any new contract. The fact that the exact area of these
freedom of contract of the parties. Simply put, courts cannot stipulate for
adjoining residential lots is subject to the result of a survey does not
the parties nor amend the latter's agreement, for to do so would be to alter
detract from the fact that they are determinate or determinable. As the
the real intentions of the contracting parties when the contrary
function of courts is to give force and effect to the intentions of the parties. Naga City, September 29, 1964.

6. ID.; PRESCRIPTION OF ACTIONS; NOT APPLICABLE IN CASE AT (Sgd.)

BAR. — Petitioners argue that respondent is barred by prescription and JUAN R. SAN ANDRES
laches from enforcing the contract. This contention is likewise untenable. Vendor
The contract of sale in this case is perfected, and the delivery of the
subject lot to respondent effectively transferred ownership to him. For this Noted:
reason, respondent seeks to comply with his obligation to pay the full
purchase price, but because the deed of sale is yet to be executed, he (Sgd.)
deemed it appropriate to deposit the balance of the purchase price in VICENTE RODRIGUEZ
court. Accordingly, Art. 1144 of the Civil Code has no application to the Vendee
instant case. Considering that a survey of the lot has already been
Respondent also attached to his answer a letter of judicial administrator
conducted and approved by the Bureau of Lands, respondent's heirs,
Ramon San Andres (Exh. 3), 6 asking payment of the balance of the
assigns or successors-in-interest should reimburse the expenses incurred
purchase price. The letter reads:
by herein petitioners, pursuant to the provisions of the contract.
Dear Inting,
DECISION
Please accommodate my request for Three Hundred (P300.00)
MENDOZA, J p: Pesos as I am in need of funds as I intimated to you the other
day.
This is a petition for review on certiorari of the decision of the
Court of Appeals 1 reversing the decision of the Regional Trial Court, We will just adjust it with whatever balance you have payable to
Naga City, Branch 19, in Civil Case No. 87-1335, as well as the appellate the subdivision.
court's resolution denying reconsideration. cdrep
Thanks.
The antecedent facts are as follows:
Sincerely,
Juan San Andres was the registered owner of Lot No. 1914-B-2 situated in
Liboton, Naga City. On September 28, 1964, he sold a portion thereof, (Sgd.)
consisting of 345 square meters, to respondent Vicente S. Rodriguez for RAMON SAN ANDRES
P2,415.00. The sale is evidenced by a Deed of Sale. 2
Vicente Rodriguez
Upon the death of Juan San Andres on May 5, 1965, Penafrancia Subdivision, Naga City
Ramon San Andres was appointed judicial administrator of the decedent's
estate in Special Proceedings No. R-21, RTC, Branch 19, Naga City. P.S.
Ramon San Andres engaged the services of a geodetic engineer, Jose
You can let bearer Enrique del Castillo sign for the amount.
Peñero, to prepare a consolidated plan (Exh. A) of the estate. Engineer
Peñero also prepared a sketch plan of the 345-square meter lot sold to Received One Hundred Only
respondent. From the result of the survey, it was found that respondent
had enlarged the area which he purchased from the late (Sgd.)
Juan San Andres by 509 square meters. 3 RAMON SAN ANDRES
3/30/66
Accordingly, the judicial administrator sent a letter, 4 dated July 27, 1987,
to respondent demanding that the latter vacate the portion allegedly Respondent deposited in court the balance of the purchase
encroached by him. However, respondent refused to do so, claiming he price amounting to P7,035.00 for the aforesaid 509-square
had purchased the same from the late Juan San Andres. Thereafter, on meter lot.
November 24, 1987, the judicial administrator brought an action, in
behalf of the estate of Juan San Andres, for recovery of possession of the While the proceedings were pending, judicial administrator
509-square meter lot. Ramon San Andres died and was substituted by his son
Ricardo San Andres. On the other hand, respondent
In his Re-amended Answer filed on February 6, 1989, respondent alleged Vicente Rodriguez died on August 15, 1989 and was substituted by
that apart from the 345-square meter lot which had been sold to him by his heirs. 7 cdasia
Juan San Andres on September 28, 1964, the latter likewise sold to him
the following day the remaining portion of the lot consisting of 509 square Petitioner, as plaintiff, presented two witnesses. The first witness, Engr.
meters, with both parties treating the two lots as one whole parcel with a Jose Peñero, 8 testified that based on his survey conducted sometime
total area of 854 square meters. Respondent alleged that the full between 1982 and 1985, respondent had enlarged the area which he
payment of the 509-square meter lot would be effected within five (5) purchased from the late Juan San Andres by 509 square meters belonging
years from the execution of a formal deed of sale after a survey is to the latter's estate. According to Peñero, the titled property (Exh. A-
conducted over said property. He further alleged that with the 5) of respondent was enclosed with a fence with metal holes and barbed
consent of the former owner, Juan San Andres, he took possession of the wire, while the expanded area was fenced with barbed wire and bamboo
same and introduced improvements thereon as early as 1964. cdrep and light materials.

As proof of the sale to him of 509 square meters, respondent attached to The second witness, Ricardo San Andres, 9 administrator of the estate,
his answer a receipt (Exh. 2) 5 signed by the late Juan San Andres, which testified that respondent had not filed any claim before Special
reads in full as follows: Proceedings No. R-21 and denied knowledge of Exhibits 2 and 3.
However, he recognized the signature in Exhibit 3 as similar to that of the
Received from Vicente Rodriguez the sum of Five Hundred former administrator, RamonSan Andres. Finally, he declared that the
(P500.00) Pesos representing an advance payment for a expanded portion occupied by the family of respondent is now enclosed
residential lot adjoining his previously paid lot on three sides with barbed wire fence unlike before where it was found without fence.
excepting on the frontage with the agreed price of Fifteen
(15.00) Pesos per square meter and the payment of the full On the other hand, Bibiana B. Rodriguez, 10 widow of respondent
consideration based on a survey shall be due and payable in Vicente Rodriguez, testified that they had purchased the subject lot from
five (5) years period from the execution of the formal Juan SanAndres, who was their compadre, on September 29, 1964, at
deed of sale; and it is agreed that the expenses of survey and P15.00 per square meter. According to her, they gave P500.00 to the late
its approval by the Bureau of Lands shall be borne by Juan San Andres who later affixed his signature to Exhibit 2. She added
Mr. Rodriguez. that on March 30, 1966, Ramon San Andres wrote them a letter asking for
P300.00 as partial payment for the subject lot, but they were able to give A contract of sale may be absolute or conditional.
him only P100.00. She added that they had paid the total purchase
price of P7,035.00 on November 21, 1988 by depositing it in court. Bibiana As thus defined, the essential elements of sale are the following:
B. Rodriguez stated that they had been in possession of the 509-square
a) Consent or meeting of the minds, that is, consent to transfer
meter lot since 1964 when the late Juan San Andressigned the receipt.
ownership in exchange for the price;
(Exh. 2) Lastly, she testified that they did not know at that time the exact
b) Determinate subject matter; and,
area sold to them because they were told that the same would be known
c) Price certain in money or its equivalent. 12
after the survey of the subject lot.
As shown in the receipt, dated September 29, 1964, the late
On September 20, 1994, the trial court 11 rendered judgment in
Juan San Andres received P500.00 from respondent as "advance
favor of petitioner. It ruled that there was no contract of sale to speak of for
payment for theresidential lot adjoining his previously paid lot on three
lack of a valid object because there was no sufficient indication in Exhibit 2
sides excepting on the frontage"; the agreed purchase price was P15.00
to identify the property subject of the sale, hence, the need to execute a
per square meter; and the full amount of the purchase price was to be
new contract. cda
based on the results of a survey and would be due and payable in five (5)
Respondent appealed to the Court of Appeals, which on April 21, 1998 years from the execution of a deed ofsale. prcd
rendered a decision reversing the decision of the trial court. The appellate
Petitioner contends, however, that the "property subject of the sale was
court held that the object of the contract was determinable, and that there
not described with sufficient certainty such that there is a
was a conditional sale with the balance of the purchase price payable
necessity ofanother agreement between the parties to finally ascertain the
within five years from the execution of the deed of sale. The dispositive
identity, size and purchase price of the property which is the object of the
portion of its decision's reads:
alleged sale." 13He argues that the "quantity of the object is not
IN VIEW OF ALL THE FOREGOING, the judgment appealed determinate as in fact a survey is needed to determine its exact size and
from is hereby REVERSED and SET ASIDE and a new one the full purchase price therefor." 14In support of his contention, petitioner
entered DISMISSING the complaint and rendering judgment cites the following provisions of the Civil Code:
against the plaintiff-appellee:
ARTICLE 1349. The object of every contract must be
1. to accept the P7,035.00 representing the balance of the determinate as to its kind. The fact that the quantity is not
purchase price of the portion and which is deposited in court determinable shall not be an obstacle to the existence of a
under Official Receipt No. 105754 (page 122, Records); contract, provided it is possible to determine the same without
the need of a new contract between the parties.
2. to execute the formal deed of sale over the said 509 square
ARTICLE 1460. . . . The requisite that a thing be determinate is
meter portion of Lot 1914-B-2 in favor of appellant
satisfied if at the time the contract is entered into, the thing is
Vicente Rodriguez;
capable of being made determinate without the necessity of a
3. to pay the defendant-appellant the amount of P50,000.00 as new and further agreement between the parties.
damages and P10,000.00 attorney's fees as stipulated by them
Petitioner's contention is without merit. There is no dispute that
during the trialof this case; and
respondent purchased a portion of Lot 1914-B-2 consisting of 345 square
4. to pay the costs of the suit. meters. This portion is located in the middle of Lot 1914-B-2, which has a
total area of 854 square meters, and is clearly what was referred to in the
SO ORDERED. receipt as the "previously paid lot." Since the lot subsequently sold to
respondent is said to adjoin the "previously paid lot" on three sides
Hence, this petition. Petitioner assigns the following errors as having been thereof, the subject lot is capable of being determined without the
allegedly committed by the trial court: LexLib need of any new contract. The fact that the exact area of these adjoining
residential lots is subject to the result ofa survey does not detract from the
I. THE HON. COURT OF APPEALS ERRED IN HOLDING
fact that they are determinate or determinable. As the Court of Appeals
THAT THE DOCUMENT (EXHIBIT "2") IS A CONTRACT TO
explained: 15 cdrep
SELL DESPITE ITS LACKING ONE OF THE ESSENTIAL
ELEMENTS OF A CONTRACT, NAMELY, OBJECT CERTAIN Concomitantly, the object of the sale is certain and
AND SUFFICIENTLY DESCRIBED. determinate. Under Article 1460 of the New Civil Code, a thing
sold is determinate if at the time the contract is entered into, the
II. THE HON. COURT OF APPEALS ERRED IN HOLDING
thing is capable of being determinate without necessity of a
THAT PETITIONER IS OBLIGED TO HONOR THE
new or further agreement between the parties. Here, this
PURPORTED CONTRACT TO SELL DESPITE NON-
definition finds realizatlon.
FULFILLMENT BY RESPONDENT OF THE CONDITION
THEREIN OF PAYMENT OF THE BALANCE OF THE Appellee's Exhibit "A" (page 4, Records) affirmingly shows that
PURCHASE PRICE. the original 345 sq. m. portion earlier sold lies at the
middle of Lot 1914-B-2 surrounded by the remaining
III. THE HON. COURT OF APPEALS ERRED IN HOLDING
portion of the said Lot 1914-B-2 on three (3) sides, in the east,
THAT CONSIGNATION WAS VALID DESPITE NON-
in the west and in the north. The northern boundary is a 12
COMPLIANCE WITH THE MANDATORY REQUIREMENTS
meter road. Conclusively, therefore, this is the only remaining
THEREOF.
509 sq. m. portion of Lot 1914-B-2 surrounding the 345 sq. m.
IV. THE HON. COURT OF APPEALS ERRED IN HOLDING lot initially purchased byRodriguez. It is quite defined,
THAT LACHES AND PRESCRIPTION DO NOT APPLY TO determinate and certain. Withal, this is the same portion
RESPONDENT WHO SOUGHT INDIRECTLY TO ENFORCE adjunctively occupied and possessed by Rodriguez since
THE PURPORTED CONTRACT AFTER THE LAPSE OF 24 September 29, 1964, unperturbed by anyone for over twenty
YEARS. (20) years until appellee instituted this suit.

The petition has no merit. Thus, all of the essential elements of a contract of sale are
present, i.e., that there was a meeting of the minds between the parties,
First. Art. 1458 of the Civil Code provides: by virtue of which the late Juan San Andres undertook to transfer
ownership of and to deliver a determinate thing for a price certain in
By the contract of sale one of the contracting parties obligates money. As Art. 1475 of the Civil Code provides:
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.
The contract of sale is perfected at the moment there is a Applying these principles to this case, it cannot be gainsaid that the
meeting of minds upon the thing which is the object of the contract of sale between the parties is absolute, not conditional. There is
contract and upon the price . . . . no reservation of ownership nor a stipulation providing for a unilateral
rescission by either party. In fact, the sale was consummated upon the
That the contract of sale is perfected was confirmed by the former delivery of the lot to respondent. 20 Thus, Art. 1477 provides that the
administrator of the estates, Ramon San Andres, who wrote a letter to ownership of the thing sold shall be transferred to the vendee upon the
respondent on March 30, 1966 asking for P300.00 as partial payment for actual or constructive delivery thereof. prcd
the subject lot. As the Court of Appeals observed: cdrep
The stipulation that the "payment of the full consideration based on a
Without any doubt, the receipt profoundly speaks of a survey shall be due and payable in five (5) years from the execution of a
meeting of the mind between San Andres and Rodriguez for formal deed of sale" is not a condition which affects the efficacy of the
the sale of the property adjoining the 345 square meter portion contract of sale. It merely provides the manner by which the full
previously sold to Rodriguez on its three (3) sides excepting the consideration is to be computed and the time within which the same is to
frontage. The price is certain, which is P15.00 per square be paid. But it does not affect in any manner the effectivity of the contract.
meter. Evidently, this is a perfected contract of sale on a Consequently, the contention that the absence of a formal deed of sale
deferred payment of the purchase price. All the pre-requisite stipulated in the receipt prevents the happening of a sale has no merit.
elements for a valid purchase transaction are present. Sale
does not require any formal document for its existence and Second. With respect to the contention that the Court of Appeals erred in
validity. And delivery of possession of land sold is a upholding the validity of a consignation of P7,035.00 representing the
consummation of the sale (Galar vs. Husain, 20 SCRA 186 balance of the purchase price of the lot, nowhere in the decision of the
[1967]). A private deed of sale is a valid contract between the appellate court is there any mention of consignation. Under Art.
parties (Carbonell v. CA, 69 SCRA 99 [1976]). 1257 of this Civil Code, consignation is proper only in cases where an
existing obligation is due. In this case, however, the contracting parties
In the same vein, after the late Juan R. San Andres received agreed that full payment ofpurchase price shall be due and payable within
the P500.00 downpayment on March 30, 1966, Ramon five (5) years from the execution of a formal deed of sale. At the time
R. San Andres wrote a letter toRodriguez and received respondent deposited the amount ofP7,035.00 in the court, no formal
from Rodriguez the amount of P100.00 (although P300.00 was deed of sale had yet been executed by the parties, and, therefore, the five-
being requested) deductible from the purchase price of the year period during which the purchase price should be paid had not
subject portion. Enrique del Castillo, Ramon's authorized agent, commenced. In short, the purchase price was not yet due and payable.
correspondingly signed the receipt for the P100.00. Surely, this
is explicitly a veritable proof of the sale over the remaining This is not to say, however, that the deposit of the purchase price in the
portion of Lot 1914-B-2 and a confirmation by court is erroneous. The Court of Appeals correctly ordered the
Ramon San Andres of the existence thereof. 16 execution of a deed of sale and petitioners to accept the amount deposited
by respondent.
There is a need, however, to clarify what the Court of Appeals
Third. The claim of petitioners that the price of P7,035.00 is iniquitous is
said is a conditional contract of sale. Apparently, the appellate
untenable. The amount is based on the agreement of the parties as
court considered as a "condition" the stipulation of the parties
evidenced by the receipt (Exh. 2). Time and again, we have stressed the
that the full consideration, based on a survey of the lot, would
rule that a contract is the law between the parties, and courts have no
be due and payable within five (5) years from the execution of a
choice but to enforce such contract so long as they are not contrary to law,
formal deed of sale. It is evident from the stipulations in the
morals, good customs or public policy. Otherwise, courts would be
receipt that the vendor Juan San Andres sold the residential lot
interfering with the freedom of contract of the parties. Simply put, courts
in question to respondent and undertook to transfer the
cannot stipulate for the parties nor amend the latter's agreement, for to do
ownership thereof to respondent without any qualification,
so would be to alter the real intentions of the contracting parties when the
reservation or condition. In Ang Yu Asuncion v.
contrary function of courts is to give force and effect to the intentions of the
Courtof Appeals, 17 we held:
parties.
In Dignos v. Court of Appeals (158 SCRA 375), we have said
Fourth. Finally, petitioners argue that respondent is barred by prescription
that, although denominated a "Deed of Conditional Sale," a
and laches from enforcing the contract. This contention is likewise
sale is still absolute where the contract is
untenable. The contract of sale in this case is perfected, and the
devoid of any proviso that title is reserved or the right to
delivery of the subject lot to respondent effectively transferred ownership
unilaterally rescind is stipulated, e.g., until or unless the price is
to him. For this reason, respondent seeks to comply with his obligation to
paid. Ownership will then be transferred to the buyer upon
pay the full purchase price, but because the deed of sale is yet to be
actual or constructive delivery (e.g., by the execution of a public
executed, he deemed it appropriate to deposit the balance of the purchase
document) of the property sold. Where the condition is imposed
price in court. Accordingly, Art. 1144 of the Civil Code has no application
upon the perfection of the contract itself, the failure of the
to the instant case. 21Considering that a survey of the lot has already
condition would prevent such perfection. If the condition is
been conducted and approved by the Bureau of Lands,
imposed on the obligation of a party which is not fulfilled, the
respondent's heirs, assigns or successors-in-interest should reimburse the
other party may either waive the condition or refuse to proceed
expenses incurred by herein petitioners, pursuant to the provisions of the
with the sale. (Art. 1545, Civil Code).
contract. LLjur
Thus, in one case, when the sellers declared in a WHEREFORE, the decision of the Court of Appeals is AFFIRMED with the
"Receipt of Down Payment" that they received an amount as modification that respondent is ORDERED to reimburse petitioners for the
purchase price for a house and lot without any expenses of the survey.
reservation of title until full payment of the entire purchase
price, the implication was that they sold their property. 18 In SO ORDERED.
People's Industrial and Commercial
Corporation v. Court of Appeals, 19 it was stated:

A deed of sale is considered absolute in nature where there is

neither a stipulation in the deed that title to the property sold is
reserved in the seller until full payment of the price, nor one
giving the vendor the right to unilaterally resolve the contract
the moment the buyer fails to pay within a fixed period.
[G.R. No. L-36902. January 30, 1982.] pending crops which have potential existence may be the subject matter of
LUIS PICHEL, petitioner, vs. PRUDENCIO ALONZO, respondent. sale.
Flavio G. Macaso for petitioner. Reynaldo Santos for respondent.
4. ID.; CONTRACTS; SALE; DISTINGUISHED FROM CONTRACT OF
SYNOPSIS LEASE. — The essential difference between a contract of sale and lease
of things is that the delivery of the thing sold transfers ownership, while in
Respondent was awarded a parcel of land by the government under lease no such transfer of ownership results as the rights of the lease are
Republic Act No. 477. The award was cancelled by the Board of limited to the use and enjoyment of the thing leased.
Liquidators on January 27, 1965, but no reversion proceedings were
thereafter instituted, as in fact, respondent's right to the land was 5. ID.; ID.; ID.; ID.; DOCUMENT IN CASE AT BAR CANNOT BE
reinstated in 1972. On August 14, 1968, however, respondent and his CONSTRUED AS A LEASE CONTRACT. — The contract was clearly a
wife, in consideration of P4,200.00, had executed a Deed of Sale in favor "sale of the coconut fruits." The vendor sold, transferred and conveyed "by
of petitioner of all the fruits which may be harvested from the coconut trees way of absolute sale, all the coconut fruits of his land," thereby divesting
in the said land for the period covering September 15, 1968 to January 1, himself of all ownership or dominion over the fruits during the seven-year
1976. After reinstatement of respondent's right to the land in 1972, he filed period. The possession and enjoyment of the coconut trees cannot be said
an action to annul the Deed of Sale. The lower court, construing the to be the possession and enjoyment of the land itself because these rights
contract in question as a contract of lease of the land itself, held, that the are distinct and separate from each other, the first pertaining to the
contract was null and void for being violative of Section 8, Republic Act accessory or improvements (coconut trees) while the second, to the
No. 477, which prohibits the alienation or encumbrance of the land or the principal (the land). A transfer of the accessory or improvement is not a
improvement thereon within the period prescribed therein. transfer of the principal. It is the other way around, the accessory follows
the principal. Hence, the sale of the nuts cannot be interpreted nor
On review, the Supreme Court, after clarifying the matter that respondent construed to be a lease of the trees, much less extended further to include
has not been divested of whatever rights he may have over the property the lease of the land itself.
granted to him by virtue of Republic Act No. 477 after cancellation of the
award by the Board of Liquidators since no reversion proceedings have 6. ADMINISTRATIVE LAW; REPUBLIC ACT 477; ALIENATION OR
been instituted by the State, ruled that it was error for the lower court to DISPOSITION OF FRUITS OF THE LAND NOT PROHIBITED THEREBY.
construe or interpret the subject Deed of Sale since a perusal of the deed — Under Section 8 of R.A. 477, the grantee of a parcel of land is not
fails to disclose any ambiguity or absurdity in its provisions; that there is no prohibited from alienating or disposing of the natural and/or industrial fruits
doubt that the real intention of the contracting parties is of the fruits of the of the land awarded to him. What the law expressly disallows is the
coconut trees and not the lease of the land itself; and that the prohibition encumbrance or alienation of the land itself for of any of the permanent
against the alienation or encumbrance of the land and/or improvements improvements thereon.
therein awarded pursuant to Republic Act No. 477 does not include
7. CIVIL LAW; PROPERTY; PERMANENT IMPROVEMENTS, DEFINED.
alienation or encumbrance of natural and/or industrial fruits derived
— Permanent improvements on a parcel of land are things incorporated or
therefrom.
attached to the property in a fixed manner, or sown on the land which is
Judgment reversed characterized by fixity, immutability or immovability. Houses, buildings,
machinery, animal houses, trees and plants would fall under the category
SYLLABUS of permanent improvements.

1. ADMINISTRATIVE LAW; REPUBLIC ACT NO. 477; EFFECT OF 8. ID.; ID.; ID.; COCONUT FRUITS ARE NATURAL OR INDUSTRIAL
CANCELLATION OF AWARD. — A cancellation of an award granted FRUITS. — While coconut trees are permanent improvements of a land,
pursuant to the provisions of RA 477 does not automatically divest the their nuts are natural or industrial fruits which are meant to be gathered or
awardee of his rights to the land. Until and unless an appropriate severed from the trees, to be used, enjoyed, sold or otherwise disposed of
proceeding for reversion is instituted by the State, and its reacquisition of by the owner of the land. Herein respondents as the grantee of Lot No. 21
the ownership and possession of the land decreed by a competent court, from the Government, had the right and prerogative to sell the coconut
the grantee can not be said to have been divested of whatever right he fruits of the trees growing on the property.
may have over the property.
9. ADMINISTRATIVE LAW; REPUBLIC ACT NO. 477; PURPOSE OF
2. CIVIL LAW; CONTRACTS; RULE ON INTERPRETATION THEREOF; THE LAW, NOT VIOLATED WHEN GRANTEE SELLS PRODUCE OF
CASE AT BAR. — Construction or interpretation of the document in LAND. — By virtue of RA. No. 477, bona fide occupants, veterans,
question is not called for. A perusal of the deed fails to disclose any members of guerrilla organizations and other qualified persons were given
ambiguity or obscurity in its provisions, nor is there doubt as to the real the opportunity to acquire government lands by purchase, taking into
intention of the contracting parties. The terms of the agreement are clear account their limited means. It was intended for these persons to make
and unequivocal, hence the literal and plain meaning thereof should be good and productive use of the lands awarded to them, not only to enable
observed. Such is the mandate of the Civil Code of the Philippines. them to improve their standard of living, but likewise to help provide for the
Pursuant to the provision of Article 1370 thereof, the first and fundamental annual payments to the Government of the purchase price of the lots
duty of the courts is the application of the contract according to its express awarded to them. Section 8 was included, as stated by the Court a quo, to
terms, interpretation being resorted to only when such literal application is protect the grantees "from themselves and the incursions of opportunists
impossible. Simply and directly stated, the "Deed of Sale" dated August who prey on their misery and poverty." It is there to insure that the
14, 1968 is precisely what it purports to be. It is a document evidencing grantees themselves benefit from their respective lots, to the exclusion of
the agreement of herein parties for the sale of coconut fruits of Lot No. 21, other persons. The purpose of the law is not violated when a grantee sells
and not for the lease of the land itself as found by the lower Court. In clear the produce or fruits of his land. On the contrary, the aim of the law is
and express terms, the document defines the object of the contract thus: thereby achieved, for the grantee is encouraged and induced to be more
"the herein sale of the coconut fruits are for all the fruits on the industrious and productive, thus making it possible for him and his family
aforementioned parcel of land during the years . . ." from SEPTEMBER to be economically self-sufficient and to lead a respectable life. At the
15, 1968; up to JANUARY 1, 1976." same time, the Government is assured of payment on the annual
installments on the land.
3. ID.; ID.; SALE; ESSENTIAL ELEMENTS; FUTURE CROPS, VALID
SUBJECT MATTER; CASE AT BAR. — The document in question 10. CIVIL LAW; CONTRACTS; RECEIPT OF CONSIDERATION
expresses a valid contract of sale. It has the essential elements of a PRECLUDES SELLER TO IMPUGN CONTRACT. — The respondent-
contract of sale as defined under Article 1458 of the New Civil Code. The grantee, after having received the consideration for the sale of his coconut
subject matter of the contract of sale in question are the fruits of the fruits, can not be allowed to impugn the validity of contracts he entered
coconut trees on the land during the years from September 15, 1968 up to into, to the prejudice of petitioner who contracted in good faith and for
January 1, 1976, which subject matter is a determinate thing. Under Article consideration.
1461 of the New Civil Code, things having a potential existence may be
the object of the contract of sale. And in Sibal vs. Valdez, 50 Phil. 512,
11. LEGAL ETHICS; ATTORNEY'S FEES; LEGAL GROUNDS FOR "Considering the foregoing, two issues appear posed
RECOVERY THEREOF. — Article 2208 of the New Civil Code by the complaint and the answer which must needs be
enumerates the legal grounds which justify or warrant the grant of tested in the crucible of a trial on the merits, and they
attorney's fees. None of the said grounds exists to entitle respondent to are:
recover attorney's fees in the case at bar.
"First. — Whether or not defendant actually paid to
plaintiff the full sum of P4,200.00 upon execution of the
DECISION
deed of sale.
GUERRERO, J p: "Second. — Is the deed of sale, Exhibit 'A', the
prohibited encumbrance contemplated in Section 8 of
This is a petition to review on certiorari the decision of the Court of First Republic Act No. 477?" 2
Instance of Basilan City dated January 5, 1973 in Civil Case No. 820
entitled "Prudencio Alonzo, plaintiff, vs. Luis Pichel, defendant." Anent the first issue, counsel for plaintiff Alonzo subsequently
"stipulated and agreed that his client .. admits full payment thereof by
This case originated in the lower Court as an action for the annulment of a defendant." 3 The remaining issue being one of law, the Court below
"Deed of Sale" dated August 14, 1968 and executed by Prudencio Alonzo, considered the case submitted for summary judgment on the basis of
as vendor, in favor of Luis Pichel, as vendee, involving property awarded the pleadings of the parties, and the admission of facts and
to the former by the Philippine Government under Republic Act No. 477. documentary evidence presented at the pre-trial conference.
Pertinent portions of the document sued upon read as follows: The lower court rendered its decision now under review, holding that
"That the VENDOR for and in consideration of the sum of although the agreement in question is denominated by the parties as a
FOUR THOUSAND TWO HUNDRED PESOS (P4,200.00), deed of sale of fruits of the coconut trees found in the vendor's land, it
Philippine Currency, in hand paid by the VENDEE to the entire actually is, for all legal intents and purposes, a contract of lease of the land
satisfaction of the VENDOR, the VENDOR hereby sells, itself. According to the Court:
transfers, and conveys, by way of absolute sale, all the coconut ". . . the sale aforestated has given defendant complete control
fruits of his coconut land, designated as Lot No. 21 — and enjoyment of the improvements of the land. That the
Subdivision Plan No. Psd-32465, situated at Balactasan contract is consensual; that its purpose is to allow the
Plantation, Lamitan, Basilan City, Philippines; enjoyment or use of a thing; that it is onerous because rent or
price certain is stipulated; and that the enjoyment or use of the
"That for the herein sale of the coconut fruits are for all the thing certain is stipulated to be for a certain and definite period
fruits on the aforementioned parcel of land presently found of time, are characteristics which admit of no other conclusion..
therein as well as for future fruits to be produced on the said The provisions of the contract itself and its characteristics
parcel of land during the years period; which shall commence govern its nature." 4 The Court, therefore, concluded that the
to run as of SEPTEMBER 15, 1968; up to JANUARY 1, 1976 deed of sale in question is an encumbrance prohibited by
(sic); Republic Act No. 477 which provides thus:
"That the delivery of the subject matter of the Deed of Sale "Sec. 8. Except in favor of the Government or any of its
shall be from time to time and at the expense of the VENDEE branches, units, or institutions, land acquired under the
who shall do the harvesting and gathering of the fruits; provisions of this Act or any permanent improvements thereon
shall not be subject to encumbrance or alienation from the date
"That the Vendor's right, title, interest and participation herein of the award of the land or the improvements thereon and for a
conveyed is of his own exclusive and absolute property, free term of ten years from and after the date of issuance of the
from any liens and encumbrances and he warrants to the certificate of title, nor shall they become liable to the
Vendee good title thereto and to defend the same against any satisfaction of any debt contracted prior to the expiration of
and all claims of all persons whomsoever." 1 such period.
After the pre-trial conference, the Court a quo issued an Order "Any occupant or applicant of lands under this Act who
dated November 9, 1972 which in part reads thus: LLphil transfers whatever rights he has acquired on said lands and/or
"The following facts are admitted by the parties: on the improvements thereon before the date of the award or
signature of the contract of sale, shall not be entitled to apply
"Plaintiff Prudencio Alonzo was awarded by the Government for another piece of agricultural land or urban, homesite or
that parcel of land designated as Lot No. 21 of Subdivision Plan residential lot, as the case may be, from the National Abaca
Psd-32465 of Balactasan, Lamitan, Basilan City in accordance and Other Fibers Corporation; and such transfer shall be
with Republic Act No. 477. The award was cancelled by the considered null and void." 5
Board of Liquidators on January 27, 1965 on the ground that,
previous thereto, plaintiff was proved to have alienated the land The dispositive portion of the lower Court's decision states:
to another, in violation of law. In 1972, plaintiff's rights to the
land were reinstated. "WHEREFORE, it is the judgment of this Court that the deed of
sale, exhibit 'A', should be, as it is, hereby declared null and
"On August 14, 1968, plaintiff and his wife sold to defendant all void; that plaintiff be, as he is, ordered to pay back to defendant
the fruits of the coconut trees which may be harvested in the the consideration of the sale in the sum of P4,200.00 the same
land in question for the period, September 15, 1968 to January to bear legal interest from the date of the filing of the complaint
1, 1976, in consideration of P4,200.00. Even as of the date of until paid; that defendant shall pay to the plaintiff the sum of
sale, however, the land was still under lease to one, Ramon P500.00 as attorney's fees.
Sua, and it was the agreement that part of the consideration of Costs against the defendant." 6
the sale, in the sum of P3,650.00, was to be paid by defendant
directly to Ramon Sua so as to release the land from the Before going into the issues raised by the instant Petition, the matter of
clutches of the latter. Pending said payment plaintiff refused to whether, under the admitted facts of this case, the respondent had the
allow the defendant to make any harvest. right or authority to execute the "Deed of Sale" in 1968, his award over Lot
No. 21 having been cancelled previously by the Board of Liquidators on
"In July 1972, defendant for the first time since the execution of January 27, 1965, must be clarified. The case in point is Ras vs.
the deed of sale in his favor, caused the harvest of the fruit of Sua 7 wherein it was categorically stated by this Court that a cancellation
the coconut trees in the land. of an award granted pursuant to the provisions of Republic Act No. 477
does not automatically divest the awardee of his rights to the land. Such
xxx xxx xxx
cancellation does not result in the immediate reversion of the property document in question expresses a valid contract of sale. It has the
subject of the award, to the State. Speaking through Mr. Justice J.B.L. essential elements of a contract of sale as defined under Article 1458 of
Reyes, this Court ruled that "until and unless an appropriate proceeding the New Civil Code which provides thus:
for reversion is instituted by the State, and its reacquisition of the
ownership and possession of the land decreed by a competent court, the "Art. 1458. By the contract of sale one of the contracting parties obligates
grantee cannot be said to have been divested of whatever right that he himself to transfer the ownership of and to deliver a determinate thing, and
may have over the same property." 8 the other to pay therefor a price certain in money or its equivalent.

There is nothing in the record to show that at any time after the supposed A contract of sale may be absolute or conditional."
cancellation of herein respondent's award on January 27, 1965, reversion
The subject matter of the contract of sale in question are the fruits of the
proceedings against Lot No. 21 were instituted by the State. Instead, the
coconut trees on the land during the years from September 15, 1968 up to
admitted fact is that the award was reinstated in 1972. Applying the
January 1, 1976, which subject matter is a determinate thing. Under Article
doctrine announced in the above-cited Ras case, therefore, herein
1461 of the New Civil Code, things having a potential existence may be
respondent is not deemed to have lost any of his rights as grantee of Lot
the object of the contract of sale. And in Sibal vs. Valdez, 50 Phil. 512,
No. 21 under Republic Act No. 477 during the period material to the case
pending crops which have potential existence may be the subject matter of
at bar, i.e., from the cancellation of the award in 1965 to its reinstatement
sale. Here, the Supreme Court, citing Mechem on Sales and American
in 1972. Within said period, respondent could exercise all the rights
cases said:
pertaining to a grantee with respect to Lot No. 21. cdrep
"Mr. Mechem says that a valid sale may be made of a thing,
This brings Us to the issues raised by the instant Petition. In his Brief,
which though not yet actually in existence, is reasonably certain
petitioner contends that the lower Court erred:
to come into existence as the natural increment or usual
1. In resorting to construction and interpretation of the deed of incident of something already in existence, and then belonging
sale in question where the terms thereof are clear and to the vendor, and the title will vest in the buyer the moment the
unambiguous and leave no doubt as to the intention of the thing comes into existence. Emerson vs. European Railway
parties; Co., 67 Me., 387; Cutting vs. Packers Exchange, 21 Am. St.
2. In declaring — granting without admitting that an Rep., 63) Things of this nature are said to have a potential
interpretation is necessary — the deed of sale in question to be existence. A man may sell property of which he is potentially
a contract of lease over the land itself where the respondent and not actually possessed. He may make a valid sale of the
himself waived and abandoned his claim that said deed did not wine that a vineyard is expected to produce; or the grain a
express the true agreement of the parties, and on the contrary, fieldmay grow in a given time; or the milk a cow may yield
respondent admitted at the pre-trial that his agreement with during the coming year; or the wool that shall thereafter grow
petitioner was one of sale of the fruits of the coconut trees on upon sheep; or what may be taken at the next case of a
the land; fisherman's net; or fruits to grow; or young animals not yet in
3. In deciding a question which was not in issue when it existence; or the good will of a trade and the like. The thing
declared the deed of sale in question to be a contract of lease sold, however, must be specific and identified. They must be
over Lot 21; also owned at the time by the vendor (Hull vs.Hull, 48 Conn.,
4. In declaring furthermore the deed of sale in question to be a 250; 40 Am. Rep., 165)" pp. 522-523).
contract of lease over the land itself on the basis of facts which
were not proved in evidence; We do not agree with the trial court that the contract executed
5. In not holding that the deed of sale, Exhibit "A" and "2", by and between the parties is "actually a contract of lease of
expresses a valid contract of sale; the land and the coconut trees there" (CFI Decision, p. 62,
6. In not deciding squarely and to the point the issue as to Records). The Court's holding that the contract in question fits
whether or not the deed of sale in question is an encumbrance the definition of a lease of things wherein one of the parties
on the land and its improvements prohibited by Section 8 of binds himself to give to another the enjoyment or use of a thing
Republic Act 477; and for a price certain and for a period which may be definite or
7. In awarding respondent attorney's fees even granting, indefinite (Art. 1643, Civil Code of the Philippines) is erroneous.
without admitting, that the deed of sale in question is violative The essential difference between a contract of sale and a lease
of Section 8 of Republic Act 477. of things is that the delivery of the thing sold transfers
ownership, while in lease no such transfer of ownership results
The first five assigned errors are interrelated, hence, We shall consider as the rights of the lessee are limited to the use and enjoyment
them together. To begin with, We agree with petitioner that construction or of the thing leased.
interpretation of the document in question is not called for. A perusal of the
deed fails to disclose any ambiguity or obscurity in its provisions, nor is In Rodriguez vs. Borromeo, 43 Phil. 479, 490, the Supreme Court held:
there doubt as to the real intention of the contracting parties. The terms of
"Since according to Article 1543 of the same Code the contract
the agreement are clear and unequivocal, hence the literal and plain
of lease is defined as the giving or the concession of the
meaning thereof should be observed. Such is the mandate of the Civil
enjoyment or use of a thing for a specified time and fixed price,
Code of the Philippines which provides that:
and since such contract is a form of enjoyment of the property,
"Art. 1370. If the terms of a contract are clear and leave no it is evident that it must be regarded as one of the means of
doubt upon the intention of the contracting parties, the literal enjoyment referred to in said Article 398, inasmuch as the
meaning of its stipulation shall control. . . . " terms enjoyment, use, and benefit involve the same and
analogous meaning relative to the general utility of which a
Pursuant to the afore-quoted legal provision, the first and fundamental given thing is capable." (104 Jurisprudencia Civil, 443).
duty of the courts is the application of the contract according to its express
terms, interpretation being resorted to only when such literal application is In concluding that the possession and enjoyment of the coconut trees can
impossible. 9 therefore be said to be the possession and enjoyment of the land itself
because the defendant-lessee in order to enjoy his right under the
Simply and directly stated, the "Deed of Sale" dated August 14, 1968 is contract, he actually takes possession of the land, at least during harvest
precisely what it purports to be. It is a document evidencing the agreement time, gathers all of the fruits of the coconut trees in the land, and gains
of herein parties for the sale of coconut fruits of Lot No. 21, and not for exclusive use thereof without the interference or intervention of the
the lease of the land itself as found by the lower Court. In clear and plaintiff-lessor such that said plaintiff-lessor is excluded in fact from the
express terms, the document defines the object of the contract thus: "the land during the period aforesaid, the trial court erred. The contract was
herein sale of coconut fruits are for all the fruits on the aforementioned clearly a "sale of the coconut fruits." The vendor sold, transferred and
parcel of land during the years .. (from) SEPTEMBER 15, 1968; up to conveyed "by way of absolute sale, all the coconut fruits of his land,"
JANUARY 1, 1976." Moreover, as petitioner correctly asserts, the thereby divesting himself of all ownership or dominion over the fruits
during the seven-year period. The possession and enjoyment of the upon, such award having been apparently based on the erroneous finding
coconut trees cannot be said to be the possession and enjoyment of the and conclusion that the contract at bar is one of lease. We shall limit
land itself because these rights are distinct and separate from each other, Ourselves to the question of whether or not in accordance with Our ruling
the first pertaining to the accessory or improvements (coconut trees) while in this case, respondent is entitled to an award of attorney's fees. The Civil
the second, to the principal (the land). A transfer of the accessory or Code provides that:
improvement is not a transfer of the principal. It is the other way around,
the accessory follows the principal. Hence, the sale of the nuts cannot be "Art. 2208. In the absence of stipulation, attorney's fees and
interpreted nor construed to be a lease of the trees, much less extended expenses of litigation, other than judicial costs, cannot be
further to include the lease of the land itself. recovered, except:

The real and pivotal issue of this case which is taken up in the petitioner's (1) When exemplary damages are awarded;
sixth assignment of error and as already stated above, refers to the validity (2) When the defendant's act or omission has compelled the
of the "Deed of Sale", as such contract of sale, vis-a-vis the provisions of plaintiff to litigate with third persons or to incur expenses to
Sec. 8, R.A. No. 477. The lower Court did not rule on this question, having protect his interest;
reached the conclusion that the contract at bar was one of lease. It was (3) In criminal cases of malicious prosecution against the
from the context of a lease contract that the Court below determined the plaintiff;
applicability of Sec. 8, R.A. No. 477, to the instant case. (4) In case of a clearly unfounded civil action or proceeding
against the plaintiff;
Resolving now this principal issue, We find after a close and careful (5) Where the defendant acted in gross and evident bad faith in
examination of the terms of the first paragraph of Section 8 hereinabove refusing to satisfy the plaintiff's plainly valid, just and
quoted, that the grantee of a parcel of land under R.A. No. 477 is not demandable claim;
prohibited from alienating or disposing of the natural and/or industrial fruits (6) In actions for legal support;
of the land awarded to him. What the law expressly disallows is the (7) In actions for the recovery of wages of household helpers,
encumbrance or alienation of the land itself or any of the permanent laborers and skilled workers;
improvements thereon. Permanent improvements on a parcel of land are (8) In actions for indemnity under workmen's compensation and
things incorporated or attached to the property in a fixed manner, naturally employer's liability laws;
or artificially. They include whatever is built, planted or sown on the land (9) In a separate civil action to recover civil liability arising from
which is characterized by fixity, immutability or immovability. Houses, a crime;
buildings, machinery, animal houses, trees and plants would fall under the (10) When at least double judicial costs are awarded;
category of permanent improvements, the alienation or encumbrance of (11) In any other case where the court deems it just and
which is prohibited by R.A. No. 477. While coconut trees are permanent equitable that attorney's fees and expenses of litigation should
improvements of a land, their nuts are natural or industrial fruits which are be recovered.
meant to be gathered or severed from the trees, to be used, enjoyed, sold
or otherwise disposed of by the owner of the land. Herein respondents, as In all cases, the attorney's fees and expenses of litigation must
the grantee of Lot No. 21 from the Government, had the right and be reasonable."
prerogative to sell the coconut fruits of the trees growing on the property.
We find that none of the legal grounds enumerated above exists to
By virtue of R.A. No. 477, bona fide occupants, veterans, members of justify or warrant the grant of attorney's fees to herein respondent.
guerilla organizations and other qualified persons were given the IN VIEW OF THE FOREGOING, the judgment of the lower Court is hereby
opportunity to acquire government lands by purchase, taking into account set aside and another one is entered dismissing the Complaint. Without
their limited means. It was intended for these persons to make good and costs.
productive use of the lands awarded to them, not only to enable them to
improve their standard of living, but likewise to help provide for the annual SO ORDERED.
payments to the Government of the purchase price of the lots awarded to
them. Section 8 was included, as stated by the Court a quo, to protect the
grantees "from themselves and the incursions of opportunists who prey on
their misery and poverty." It is there to insure that the grantees themselves
benefit from their respective lots, to the exclusion of other persons.

The purpose of the law is not violated when a grantee sells the produce or
fruits of his land. On the contrary, the aim of the law is thereby achieved,
for the grantee is encouraged and induced to be more industrious and
productive, thus making it possible for him and his family to be
economically self-sufficient and to lead a respectable life. At the same
time, the Government is assured of payment on the annual installments on
the land. We agree with herein petitioner that it could not have been the
intention of the legislature to prohibit the grantee from selling the natural
and industrial fruits of his land, for otherwise, it would lead to an absurd
situation wherein the grantee would not be able to receive and enjoy the
fruits of the property in the real and complete sense. Cdpr

Respondent through counsel, in his Answer to the Petition contends that

even granting arguendo that he executed a deed of sale of the coconut
fruits, he has the "privilege to change his mind and claim it as (an) implied
lease," and he has the "legitimate right" to file an action for annulment
"which no law can stop." He claims it is his "sole construction of the
meaning of the transaction that should prevail and not petitioner
(sic)." 10 Respondent's counsel either mis-applies the law or is trying too
hard and going too far to defend his client's hopeless cause. Suffice it to
say that respondent-grantee, after having received the consideration for
the sale of his coconut fruits, cannot be allowed to impugn the validity of
the contracts he entered into, to the prejudice of petitioner who contracted
in good faith and for a consideration.

The issue raised by the seventh assignment of error as to the propriety of

the award of attorney's fees made by the lower Court need not be passed
[G.R. No. 80298. April 26, 1990.] more deplorably. Questions like the one at bar are decided not by
EDCA PUBLISHING & DISTRIBUTING CORP., petitioner, vs. THE policemen but by judges and with the use not of brute force but of lawful
SPOUSES LEONOR and GERARDO SANTOS, doing business writs.
under the name and style of "SANTOS BOOKSTORE," and THE
COURT OF APPEALS, respondents. Emiliano S. Samson, R. Now to the merits.
Balderrama-Samson, Mary Anne B. Samson for petitioner.
It is the contention of the petitioner that the private respondents have not
Cendaña, Santos, Delmundo & Cendaña for private respondents.
established their ownership of the disputed books because they have not
even produced a receipt to prove they had bought the stock. This is
DECISION
unacceptable. Precisely, the first sentence of Article 559 provides that "the
CRUZ, J p: possession of movable property acquired in good faith is equivalent to a
title," thus dispensing with further proof.
The case before us calls for the interpretation of Article 559 of the Civil The argument that the private respondents did not acquire the books in
Code and raises the particular question of when a person may be deemed good faith has been dismissed by the lower courts, and we agree.
to have been "unlawfully deprived" of movable property in the hands of Leonor Santosfirst ascertained the ownership of the books from
another. The article runs in full as follows: the EDCA invoice showing that they had been sold to Cruz, who said he
was selling them for a discount because he was in financial need. Private
ART. 559. The possession of movable property acquired in
respondents are in the business of buying and selling books and often
good faith is equivalent to a title. Nevertheless, one who has
deal with hard-up sellers who urgently have to part with their books at
lost any movable or has been unlawfully deprived thereof, may
recover it from the person in possession of the same. reduced prices. To Leonor Santos, Cruz must have been only one of the
many such sellers she was accustomed to dealing with. It is hardly bad
If the possessor of a movable lost or of which the owner has faith for any one in the business of buying and selling books to buy them
at a discount and resell them for a profit.
been unlawfully deprived has acquired it in good faith at a
public sale, the owner cannot obtain its return without But the real issue here is whether the petitioner has been unlawfully
reimbursing the price paid therefor. deprived of the books because the check issued by the impostor in
payment therefor was dishonored.
The movable property in this case consists of books, which
were bought from the petitioner by an impostor who sold it to In its extended memorandum, EDCA cites numerous cases holding that
the private respondents. Ownership of the books was the owner who has been unlawfully deprived of personal property is
recognized in the private respondents by the Municipal Trial entitled to its recovery except only where the property was purchased at a
Court, 1 which was sustained by the Regional Trial public sale, in which event its return is subject to reimbursement of the
Court, 2 which was in turn sustained by the Court of purchase price. The petitioner is begging the question. It is putting the cart
Appeals. 3 The petitioner asks us to declare that all these before the horse. Unlike in the cases invoked, it has yet to be established
courts have erred and should be reversed. in the case at bar thatEDCA has been unlawfully deprived of the books.
This case arose when on October 5, 1981, a person identifying The petitioner argues that it was, because the impostor acquired no title to
himself as Professor Jose Cruz placed an order by telephone the books that he could have validly transferred to the private
with the petitioner company for 406 books, payable on respondents. Its reason is that as the payment check bounced for lack of
delivery. 4 EDCA prepared the corresponding invoice and funds, there was a failure of consideration that nullified the contract of sale
delivered the books as ordered, for which Cruz issued a between it and Cruz.
personal check covering the purchase price of P8,995.65. 5 On
October 7, 1981, Cruz sold 120 of the books to private The contract of sale is consensual and is perfected once agreement is
respondent Leonor Santoswho, after verifying the seller's reached between the parties on the subject matter and the consideration.
ownership from the invoice he showed her, paid him According to the Civil Code: cdll
P1,700.00. 6
ART. 1475. The contract of sale is perfected at the moment
Meanwhile, EDCA having become suspicious over a second order placed there is a meeting of minds upon the thing which is the object
by Cruz even before clearing of his first check, made inquiries with the De of the contract and upon the price.
la Salle College where he had claimed to be a dean and was informed that
there was no such person in its employ. Further verification revealed that From that moment, the parties may reciprocally demand
Cruz had no more account or deposit with the Philippine Amanah Bank, performance, subject to the provisions of the law governing the
against which he had drawn the payment check. 7 EDCA then went to the form of contracts.
police, which set a trap and arrested Cruz on October 7, 1981. xxx xxx xxx
Investigation disclosed his real name as Tomas de la Peña and his sale of
120 of the books he had ordered fromEDCA to the private respondents. 8 ART. 1477. The owner ship of the thing sold shall be
transferred to the vendee upon the actual or constructive
On the night of the same date, EDCA sought the assistance of the police delivery thereof.
in Precinct 5 at the UN Avenue, which forced their way into the store of the
private respondents and threatened Leonor Santos with prosecution for ART. 1478. The parties may stipulate that ownership in the
buying stolen property. They seized the 120 books without warrant, thing shall not pass to the purchaser until he has fully paid the
loading them in a van belonging to EDCA, and thereafter turned them over price.
to the petitioner. 9
It is clear from the above provisions, particularly the last one quoted, that
Protesting this high-handed action, the private respondents sued for ownership in the thing sold shall not pass to the buyer until full payment of
recovery of the books after demand for their return was rejected by EDCA. the purchase price only if there is a stipulation to that effect. Otherwise,
A writ of preliminary attachment was issued and the petitioner, after initial the rule is that such ownership shall pass from the vendor to the vendee
refusal, finally surrendered the books to the private respondents. 10 As upon the actual or constructive delivery of the thing sold even if the
previously stated, the petitioner was successively rebuffed in the three purchase price has not yet been paid.
courts below and now hopes to secure relief from us.
Non-payment only creates a right to demand payment or to rescind the
To begin with, the Court expresses its disapproval of the arbitrary action of contract, or to criminal prosecution in the case of bouncing checks. But
the petitioner in taking the law into its own hands and forcibly recovering absent the stipulation above noted, delivery of the thing sold will effectively
the disputed books from the private respondents. The circumstance that it transfer ownership to the buyer who can in turn transfer it to another.
did so with the assistance of the police, which should have been the first to
uphold legal and peaceful processes, has compounded the wrong even
In Asiatic Commercial Corporation v. Ang, 11 the plaintiff sold some property from him would have to surrender it to another person claiming to
cosmetics to Francisco Ang, who in turn sold them to Tan Sit Bin. Asiatic be the original owner who had not yet been paid the purchase price
not having been paid by Ang, it sued for the recovery of the articles from therefor. The buyer in the second sale would be left holding the bag, so to
Tan, who claimed he had validly bought them from Ang, paying for the speak, and would be compelled to return the thing bought by him in good
same in cash. Finding that there was no conspiracy between Tan and Ang faith without even the right to reimbursement of the amount he had paid
to deceive Asiatic, the Court of Appeals declared: for it.

Yet the defendant invoked Article 464 12 of the Civil Code It bears repeating that in the case before us, Leonor Santos took care to
providing, among other things that "one who has been ascertain first that the books belonged to Cruz before she agreed to
unlawfully deprived of personal property may recover it from purchase them. The EDCA invoice Cruz showed her assured her that the
any person possessing it." We do not believe that the plaintiff books had been paid for on delivery. By contrast, EDCA was less than
has been unlawfully deprived of the cartons of Gloco Tonic cautious — in fact, too trusting — in dealing with the impostor. Although it
within the scope of this legal provision. It has voluntarily parted had never transacted with him before, it readily delivered the books he had
with them pursuant to a contract of purchase and sale. The ordered (by telephone) and as readily accepted his personal check in
circumstance that the price was not subsequently paid did not payment. It did not verify his identity although it was easy enough to do
render illegal a transaction which was valid and legal at the this. It did not wait to clear the check of this unknown drawer. Worse, it
beginning. LLjur indicated in the sales invoice issued to him, by the printed terms thereon,
that the books had been paid for on delivery, thereby vesting ownership in
In Tagatac v. Jimenez, 13 the plaintiff sold her car to Feist, who sold it to the buyer. Cdpr
Sanchez, who sold it to Jimenez. When the payment check issued to
Tagatac by Feist was dishonored, the plaintiff sued to recover the vehicle Surely, the private respondent did not have to go beyond that invoice to
from Jimenez on the ground that she had been unlawfully deprived of it by satisfy herself that the books being offered for sale by Cruz belonged to
reason of Feist's deception. In ruling for Jimenez, the Court of Appeals him; yet she did. Although the title of Cruz was presumed under Article
held: 559 by his mere possession of the books, these being movable property,
Leonor Santosnevertheless demanded more proof before deciding to buy
The point of inquiry is whether plaintiff-appellant Trinidad C. them.
Tagatac has been unlawfully deprived of her car. At first blush,
it would seem that she was unlawfully deprived thereof, It would certainly be unfair now to make the private respondents bear the
considering that she was induced to part with it by reason of prejudice sustained by EDCA as a result of its own negligence. We cannot
the chicanery practiced on her by Warner L. Feist. Certainly, see the justice in transferring EDCA's loss to the Santoses who had acted
swindling, like robbery, is an illegal method of deprivation of in good faith, and with proper care, when they bought the books from
property. In a manner of speaking, plaintiff-appellant was Cruz.
"illegally deprived" of her car, for the way by which Warner L.
Feist induced her to part with it is illegal and is punished by law. While we sympathize with the petitioner for its plight, it is clear that its
But does this "unlawful deprivation" come within the scope of remedy is not against the private respondents but against Tomas de la
Article 559 of the New Civil Code? Peña, who has apparently caused all this trouble. The private respondents
have themselves been unduly inconvenienced, and for merely transacting
xxx xxx xxx a customary deal not really unusual in their kind of business. It is they and
not EDCA who have a right to complain.
. . . The fraud and deceit practiced by Warner L. Feist earmarks
WHEREFORE, the challenged decision is AFFIRMED and the petition is
this sale as a voidable contract (Article 1390 N.C.C.). Being a
DENIED, with costs against the petitioner.
voidable contract, it is susceptible of either ratification or
annulment. If the contract is ratified, the action to annul it is
extinguished (Article 1392, N.C.C.) and the contract is cleansed
from all its defects (Article 1396, N.C.C.); if the contract is
annulled, the contracting parties are restored to their respective
situations before the contract and mutual restitution follows as
a consequence (Article 1398, N.C.C.).

However, as long as no action is taken by the party entitled,

either that of annulment or of ratification, the contract of sale
remains valid and binding. When plaintiff-appellant Trinidad C.
Tagatac delivered the car to Feist by virtue of said voidable
contract of sale, the title to the car passed to Feist. Of course,
the title that Feist acquired was defective and voidable.
Nevertheless, at the time he sold the car to Felix Sanchez, his
title thereto had not been avoided and he therefore conferred a
good title on the latter, provided he bought the car in good faith,
for value and without notice of the defect in Feist's title (Article
1506, N.C.C.). There being no proof on record that Felix
Sanchez acted in bad faith, it is safe to assume that he acted in
good faith.

The above rulings are sound doctrine and reflect our own
interpretation of Article 559 as applied to the case before us.

Actual delivery of the books having been made, Cruz acquired ownership
over the books which he could then validly transfer to the private
respondents. The fact that he had not yet paid for them to EDCA was a
matter between him and EDCA and did not impair the title acquired by the
private respondents to the books.
One may well imagine the adverse consequences if the phrase "unlawfully
deprived" were to be interpreted in the manner suggested by the
petitioner. A person relying on the seller's title who buys a movable
[G.R. No. 126444. December 4, 1998.] ground of non-ownership on the part of the seller at the time of its
ALFONSO QUIJADA, CRESENTE QUIJADA, REYNELDA QUIJADA, perfection: hence, the sale is still valid.
DEMETRIO QUIJADA, ELIUTERIA QUIJADA, EULALIO QUIJADA, and
WARLITO QUIJADA, petitioners, vs. COURT OF APPEALS, 6. ID.; ID,; CONSUMMATION THEREOF OCCURS UPON THE
REGALADO MONDEJAR, RODULFO GOLORAN, ALBERTO ASIS, CONSTRUCTIVE OR ACTUAL DELIVERY OF THE SUBJECT MATTER
SEGUNDINO RAS, ERNESTO GOLORAN, CELSO ABISO, FERNANDO TO THE BUYER; CASE AT BAR. — The consummation, however, of the
BAUTISTA, ANTONIO MACASERO, and NESTOR perfected contract is another matter. It occurs upon the constructive or
MAGUINSAY, respondents. actual delivery of the subject matter to the buyer when the seller of her
successors-in-interest subsequently acquires ownership thereof. Such
SYLLABUS circumstance happened in this case when petitioners — who are
Trinidad Quijada's heirs and successors-in-interest — became the
1. CIVIL LAW; DONATION; DONATION WITH A RESOLUTORY owners of the subject property upon the reversion of the ownership of the
CONDITION; IF PERFECTED, DONEE BECOMES THE land to them. Consequently, ownership is transferred to respondent
OWNER OF THE PROPERTY DONATED NOTWITHSTANDING THE Mondejar and those who claim their right from him. Article 1434 ofthe New
CONDITION IMPOSED. — When the Municipality's acceptance of the Civil Code supports the ruling that the seller's "title passes by
donation was made known to the donor, the former became the new operation of law to the buyer." This rule applies not only when the subject
owner of the donated property — donation being a mode of acquiring and matter ofthe contract of sale is goods, but also to other kinds of property,
transmitting ownership — notwithstanding the condition imposed by the including real property. CADHcI
donee. The donation is perfected once the acceptance by the donee is
made known to the donor. Accordingly, ownership is immediately 7. ID.; DONATION; DONOR MAY IMPOSE ONLY REASONABLE AND
transferred to the latter and that ownership will only revert to the donor if JUST CONDITIONS THEREON. — Nowhere in Article 1409 (4) is it
the resolutory condition is not fulfilled. aSATHE provided that the properties of a municipality, whether it be those for public
use or its patrimonial property are outside the commerce of men. Besides,
2. ID.; ID.; ID.; NON-FULFILLMENT THEREOF, WHEN BROUGHT TO the lots in this case were conditionally owned by the municipality. To rule
THE KNOWLEDGE OF THE DONOR AUTOMATICALLY REVERTS that the donated properties are outside the commerce of men would
OWNERSHIP OFTHE PROPERTY DONATED AS PROVIDED. — Since render nugatory the unchallenged reasonableness and justness of the
no period was imposed by the donor on when must comply with the condition which the donor has the right to impose as owner thereof.
condition, the latter remains the owner so long as he has tried to comply Moreover, the objects referred to as outsides the commerce of men are
with the condition within a reasonable period. Such period, however, those which cannot be appropriated, such as the open seas and the
became irrelevant herein when the donee-Municipality manifested through heavenly bodies.
a resolution that it cannot comply with the condition of building a school
and the same was made known to the donor. Only then — when the non- 8. ID.; DAMAGES; ATTORNEY'S FEES, LITIGATION EXPENSES AND
fulfillment of the resolutory condition was brought to the donor's MORAL DAMAGES CANNOT BE RECOVERED IN THE CASE AT BAR.
knowledge — that ownership of the donated property reverted to the donor — With respect to the trial court's award of attorney's fees, litigation
as provided in the automatic reversion clause of the deed of donation. expenses and moral damages, there is neither factual nor legal basis
thereof. Attorney's fees and expenses of litigation cannot, following the
3. ID.; ID.; ID.; DONOR'S INCHOATE INTEREST IN THE DONATED general rule in Article 2208 of the New Civil Code, be recovered in this
PROPERTY MAY BE THE SUBJECT OF CONTRACTS INCLUDING A case, there being no stipulation to that effect and the case does not fall
CONTRACT OFSALE. — The donor may have an inchoate interest in the under any of the exceptions. It cannot be said that private respondents
donated property during the time that ownership of the land has not had compelled petitioners to litigate with third persons. Neither can it be
reverted to her. Such inchoate interest may be the subject of contracts ruled that the former acted in "gross and evident bad faith" in refusing to
including a contract of sale. satisfy the latter's claims considering that private respondents were under
an honest belief that they have legal right over the property by virtue of the
4. ID.; LACHES; IS NEGLIGENCE OR OMISSION TO ASSERT A RIGHT deed of sale. Moral damages cannot likewise be justified as one of the
WITHIN A REASONABLE TIME GIVING RISE TO A PRESUMPTION circumstances enumerated under Article 2219 and 2220 of the New Civil
THAT THE PARTY ENTITLED TO ASSERT IT EITHER HAS Code concur in this case. CITaSA
ABANDONED OR DECLINED TO ASSERT IT; CASE AT BAR. — As to
laches, petitioner's action is not yet barred thereby. Laches presupposes DECISION
failure or neglect for an unreasonable and unexplained length of time, to
do that which, by exercising due diligence, could or should have been MARTINEZ, J p:
done earlier; "it is negligence or omission to assert a right within a
reasonable time, thus, giving rise to a presumption that the party entitled Petitioners, as heirs of the late Trinidad Quijada, filed a complaint against
to assert it either has abandoned or declined to assert it." Petitioners' private respondents for quieting of title, recovery of possession and
cause of action to quiet title commenced only when the property reverted ownership of parcels of land with claim for attorney's fees and damages.
to the donor and/or his successors-in-interest in 1987. Certainly, when the The suit was premised on the following facts found by
suit was initiated the following year, it cannot be said that petitioners had the Court of Appeals, which is materially the same as that found by the
slept on their rights for a long time. The 1960's sales made by trial court: prcd
Trinidad Quijada cannot be the reckoning point as to when petitioners'
cause of action arose. They had no interest over the property at the time "Plaintiffs-appellees (petitioners) are the children of the late
except under the deed of donation to which private respondents were not Trinidad Corvera Vda. de Quijada. Trinidad was one of the
privy. Moreover, petitioners had previously filed an ejectment suit against heirs of the late Pedro Corvera and inherited from the latter the
private respondents only that it did not prosper on a technicality. two-hectare parcel of land subject of the case, situated in the
barrio of San Agustin, Talacogon, Agusan del Sur. On April 5,
5. ID.; SALE; A CONSENSUAL CONTRACT PERFECTED BY MERE 1956, Trinidad Quijada together with her sisters Leonila
CONSENT; OWNERSHIP BY THE SELLER OF THE THING SOLD IS Corvera Vda. de Sequeña and Paz Corvera Cabiltes and
NOT AN ELEMENT OFPERFECTION. — Sale, being a consensual brother Epapiadito Corvera executed a conditional
contract, is perfecting by mere consent, which is manifested the moment deed of donation (Exh. C) of the two-hectare parcel of land
there is a meeting of the minds as to the offer and acceptance thereof on subject of the case in favor of the Municipality of Talacogon,
three (3) elements; subject matter, price and terms of payment of the the condition being that the parcel of land shall be used solely
price. Ownership by the seller on the thing sold at the time of the and exclusively as part of the campus of the proposed
perfection of the contract of sale is not an element for its perfection. What provincial high school in Talacogon. Apparently, Trinidad
the law requires is that the seller has the right to transfer ownership at the remained in possession of the parcel of land despite the
time the thing sold is delivered. Perfection per se does not transfer donation. On July 29, 1962, Trinidad sold one (1) hectare of the
ownership which occurs upon the actual or constructive delivery of the subject parcel of land to defendant-appellant Regalado
thing sold. A perfected contract of sale cannot be challenged on the Mondejar (Exh. 1). Subsequently, Trinidad verbally sold the
remaining one (1) hectare to defendant-appellant (respondent) On appeal, the Court of Appeals reversed and set aside the
Regalado Mondejar without the benefit of a written deed of sale judgment a quo 3 ruling that the sale made by Trinidad Quijada to
and evidenced solely by receipts of payment. In 1980, the respondent Mondejar was valid as the former retained an inchoate interest
heirs ofTrinidad, who at that time was already dead, filed a on the lots by virtue of the automatic reversion clause in the
complaint for forcible entry (Exh. E) against defendant- deed of donation. 4 Thereafter, petitioners filed a motion for
appellant (respondent) Regalado Mondejar, which complaint reconsideration. When the CA denied their motion, 5 petitioners instituted
was, however, dismissed for failure to prosecute (Exh. F). In a petition for review to this Court arguing principally that the sale of the
1987, the proposed provincial high school having failed to subject property made by Trinidad Quijada to respondent Mondejar is
materialize, the Sangguniang Bayan of the void, considering that at that time, ownership was already transferred to
municipality of Talacogon enacted a resolution reverting the the Municipality of Talacogon. On the contrary, private respondents
two (2) hectares of land donated back to the donors (Exh. D). contend that the sale was valid, that they are buyers in good faith, and that
In the meantime, defendant-appellant (respondent) Regalado petitioners' case is barred by laches. 6
Mondejar sold portions of the land to defendants-appellants
(respondents) Fernando Bautista (Exh. 5), Rodolfo Goloran We affirm the decision of the respondent court. cdlex
(Exh. 6), Efren Guden (Exh. 7) and Ernesto Goloran (Exh. 8).
The donation made on April 5, 1956 by Trinidad Quijada and her brother
and sisters 7 was subject to the condition that the donated property shall
"On July 5, 1988, plaintiffs-appellees (petitioners) filed this
be "used solely and exclusively as a part of the campus of the proposed
action against defendants-appellants (respondents). In the
Provincial High School in Talacogon." 8 The donation further provides that
complaint, plaintiffs-appellees (petitioners) alleged that their
should "the proposed Provincial High School be discontinued or if the
deceased mother never sold, conveyed, transferred or
same shall be opened but for some reason or another, the same may in
disposed of the property in question to any person or entity
the future be closed" the donated property shall automatically revert to the
much less to Regalado Mondejar save the donation made to
donor. 9 Such condition, not being contrary to law, morals, good customs,
the Municipality of Talacogon in 1956; that at the time of the
public order or public policy was validly imposed in the donation. 10
alleged sale to Regalado Mondejar by Trinidad Quijada, the
land still belongs to the Municipality of Talacogon, hence, the When the Municipality's acceptance of the donation was made known to
supposed sale is null and void. the donor, the former became the new owner of the donated property —
donation being a mode of acquiring and transmitting ownership 11 —
"Defendants-appellants (respondents), on the other hand, in notwithstanding the condition imposed by the donee. The donation is
their answer claimed that the land in dispute was sold to perfected once the acceptance by the donee is made known to the
Regalado Mondejar, the one (1) hectare on July 29, 1962, and donor. 12 Accordingly, ownership is immediately transferred to the latter
the remaining one (1) hectare on installment basis until fully and that ownership will only revert to the donor if the resolutory condition
paid. As affirmative and/or special defense, defendants- is not fulfilled.
appellants (respondents) alleged that plaintiffs' action is barred
by laches or has prescribed. Cdphil In this case, that resolutory condition is the construction of the school. It
has been ruled that when a person donates land to another on the
"The court a quo rendered judgment in favor of plaintiffs- condition that the latter would build upon the land a school, the condition
appellees (petitioners): firstly because 'Trinidad Quijada had no imposed is not a condition precedent or a suspensive condition but a
legal title or right to sell the land to defendant Mondejar in resolutory one. 13Thus, at the time of the sales made in 1962 towards
1962, 1966, 1967 and 1968, the same not being hers to 1968, the alleged seller (Trinidad) could not have sold the lots since she
dispose of because ownership belongs to the had earlier transferred ownership thereof by virtue of the deed of donation.
Municipality ofTalacogon' (Decision, p. 4; Rollo, p. 39) and, So long as the resolutory condition subsists and is capable of fulfillment,
secondly, that the deed of sale executed by Trinidad Quijada in the donation remains effective and the donee continues to be the owner
favor of Mondejar did not carry with it the conformity and subject only to the rights of the donor or his successors-in-interest under
acquiescence of her children, more so that she was already 63 the deed of donation. Since no period was imposed by the donor on when
years old at the time, and a widow (Decision, p. 6; Rollo, p. must the donee comply with the condition, the latter remains the owner so
41)." 1 long as he has tried to comply with the condition within a reasonable
period. Such period, however, became irrelevant herein when the donee-
The dispositive portion of the trial court's decision reads: Municipality manifested through a resolution that it cannot comply with the
condition of building a school and the same was made known to the
"WHEREFORE, viewed from the above perceptions, the
donor. Only then — when the non-fulfillment of the resolutory condition
scale of justice having tilted in favor of the plaintiffs, judgment
was brought to the donor's knowledge — that ownership of the donated
is, as it is hereby rendered:
property reverted to the donor as provided in the automatic reversion
1). ordering the Defendants to return and vacate the two (2) clause of the deed of donation.
hectares of land to Plaintiffs as described in Tax Declaration
The donor may have an inchoate interest in the donated property during
No. 1209 in the nameof Trinidad Quijada;
the time that ownership of the land has not reverted to her. Such inchoate
2) ordering any person acting in Defendants' behalf to vacate
interest may be the subject of contracts including a contract of sale. In this
and restore the peaceful possession of the land in question to
case, however, what the donor sold was the land itself which she no
Plaintiffs;
longer owns. It would have been different if the donor-seller sold her
3) ordering the cancellation of the Deed of Sale executed by
interests over the property under the deed of donation which is subject to
the late Trinidad Quijada in favor of Defendant Regalado
the possibility ofreversion of ownership arising from the non-
Mondejar as well as the Deeds of Sale/Relinquishments
fulfillment of the resolutory condition.
executed by Mondejar in favor of the other Defendants;
4) ordering Defendants to remove their improvements As to laches, petitioners' action is not yet barred thereby. Laches
constructed on the questioned lot; presupposes failure or neglect for an unreasonable and unexplained
5) ordering the Defendants to pay Plaintiffs, jointly and length of time, to do that which, by exercising due diligence, could or
severally, the amount of P10,000.00 representing attorney's should have been done earlier; 14 "it is negligence or omission to assert a
fees; right within a reasonable time, thus, giving rise to a presumption that the
6) ordering Defendants to pays the amount of P8,000.00 as party entitled to assert it either has abandoned or declined to assert
expenses of litigation; and it." 15 Its essential elements of: prLL
7) ordering Defendants to pay the sum of P30,000.00
representing moral damages. a.) Conduct on the part of the defendant, or of one under whom
he claims, giving rise to the situation complained of;
SO ORDERED." 2 b.) Delay in asserting complainant's right after he had
knowledge of the defendant's conduct and after he has an an honest belief that they have a legal right over the property by
opportunity to sue; virtue of the deed of sale. Moral damages cannot likewise be justified as
none of the circumstances enumerated under Articles
c.) Lack of knowledge or notice on the part of the defendant 2219 27 and 2220 28 of the New Civil Code concur in this case.
that the complainant would assert the right on which he bases
his suit; and, WHEREFORE, by virtue of the foregoing, the assailed
d.) Injury or prejudice to the defendant in the event relief is decision of the Court of Appeals is AFFIRMED.
accorded to the complainant." 16
SO ORDERED.
are absent in this case. Petitioners' cause of action to quiet title
commenced only when the property reverted to the donor
and/or his successors-in-interest in 1987. Certainly, when the
suit was initiated the following year, it cannot be said that
petitioners had slept on their rights for a long time. The 1960's
sales made by Trinidad Quijada cannot be the reckoning point
as to when petitioners' cause of action arose. They had no
interest over the property at that time except under the
deed of donation to which private respondents were not privy.
Moreover, petitioners had previously filed an ejectment suit
against private respondents only that it did not prosper on a
technicality.

Be that at it may, there is one thing which militates against the

claim of petitioners. Sale, being a consensual contract, is
perfected by mere consent, which is manifested the moment
there is a meeting of the minds 17 as to the offer and
acceptance thereof on three (3) elements: subject matter, price
and terms of payment of the price. 18 Ownership by the seller
on the thing sold at the time of the perfection of the
contract of sale is not an element for its perfection. What the
law requires is that the seller has the right to transfer ownership
at the time the thing sold is delivered. 19 Perfection per
se does not transfer ownership which occurs upon the actual or
constructive delivery of the thing sold. 20 A perfected
contract of sale cannot be challenged on the ground of non-
ownership on the part of the seller at the time of its perfection;
hence, the sale is still valid.
The consummation, however, of the perfected contract is another matter.
It occurs upon the constructive or actual delivery of the subject matter to
the buyer when the seller or her successors-in-interest subsequently
acquires ownership thereof. Such circumstance happened in this case
when petitioners — who are Trinidad Quijada's heirs and successors-in-
interest — became the owners of the subject property upon the
reversion of the ownership of the land to them. Consequently, ownership
is transferred to respondent Mondejar and those who claim their right from
him. Article 1434 ofthe New Civil Code supports the ruling that the seller's
"title passes by operation of law to the buyer." 21 This rule applies not only
when the subject matterof the contract of sale is goods, 22 but also to
other kinds of property, including real property. 23
There is also no merit in petitioners' contention that since the lots were
owned by the municipality at the time of the sale, they were outside the
commerce of men under Article 1409 (4) of the NCC; 24 thus, the contract
involving the same is inexistent and void from the beginning. However,
nowhere in Article 1409 (4) is it provided that the properties of a
municipality, whether it be those for public use or its patrimonial
property 25 are outside the commerce of men. Besides, the lots in this
case were conditionally owned by the municipality. To rule that the
donated properties are outside the commerce of men would render
nugatory the unchallenged reasonableness and justness of the condition
which the donor has the right to impose as owner thereof. Moreover, the
objects referred to as outsides the commerce of man are those which
cannot be appropriated, such as the open seas and the heavenly
bodies. cdtai

With respect to the trial court's award of attorney's fees, litigation

expenses and moral damages, there is neither factual nor legal basis
thereof. Attorney's fees and expenses of litigation cannot, following the
general rule in Article 2208 of the New Civil Code, be recovered in this
case, there being no stipulation to that effect and the case does not fall
under any of the exceptions. 26 It cannot be said that private respondents
had compelled petitioners to litigate with third persons. Neither can it be
ruled that the former acted in "gross and evident bad faith" in refusing to
satisfy the latter's claims considering that private respondents were under
[G.R. Nos. 68843-44. September 2, 1991.] This is a petition for review on certiorari of the decision of
MARIQUITA O. SUMAYA and LAGUNA AGRO-INDUSTRIAL COCONUT the Intermediate Appellate Court (now Court of Appeals) in C.A. G.R. No.
COOPERATIVE, INC., petitioners, vs. THE CV-01292-93, which affirmed the decision of the Court of First Instance
HON. INTERMEDIATEAPPELLATE COURT, and AMADEO, SANCHO, (now Regional Trial Court) of Laguna in the consolidated cases in Civil
DONATO, LUIS, ERASTO, LUISA, JOSE and DOLORES, all surnamed Case No. SC-956 1 and Civil Case No. SC-957. 2
BALANTAKBO,respondents. Ceriaco A. Sumaya for petitioners. Tomas P.
Añonuevo for private respondents. The parties entered into a stipulation of facts in the court a quo, which is
summarized as follows: cdrep
SYLLABUS
Raul Balantakbo inherited from two (2) different ascendants the two (2) sets
1. CIVIL LAW; LAND REGISTRATION; VOLUNTARY AND INVOLUNTARY of properties subject of this case: 1) A one-third (1/3) interest, pro-indiviso in
REGISTRATION; EFFECT OF ENTRY IN THE DAY BOOK WITHOUT a parcel of land situated in Dita, Lilio (Liliw) Laguna and described in
NOTING ON THE CERTIFICATE OF TITLE. — In the case of Bass v. De la paragraph 7 of the complaint in Civil Case No. SC-956 from his father Jose,
Rama, 73 Phil. 682, 685, the rule was laid down that the mere entry of a Sr., who died on January 28, 1945; and 2) A one-seventh (1/7) interest pro-
document in the day book without noting it on the certificate of title is not indiviso in ten (10) parcels of registered lands described in paragraph 6 of
sufficient registration. However, that ruling was superseded by the holding the complaint in Civil Case No. SC-957 from his maternal grandmother,
in the later six cases of Levin v. Bass, 91 Phil. 420. As explained in Luisa Bautista, who died on November 3, 1950.
Garcia v. C.A., et al., G.R. Nos. L-48971 and 49011, January 20, 1980, 95
SCRA 380, 388, which is the prevailing doctrine in this jurisdiction. "That On June 13, 1952, Raul died intestate, single, without any issue, and
ruling was superseded by the holding in the later six cases of Levin v. Bass, leaving only his mother, Consuelo Joaquin Vda. de Balantakbo, as his sole
91 Phil. 420, where a distinction was made between voluntary and surviving heir to the real properties above-mentioned.
involuntary registration, such as the registration of an attachment, levy upon
execution, notice of lis pendens, and the like. In case of involuntary On November 3, 1952, Consuelo adjudicated unto herself the above
registration, an entry thereof in the day book is a sufficient notice to all described properties in an Affidavit entitled "Caudal Herederario del finado
persons even if the owner's duplicate certificate of title is not presented to Raul Balantakbo" which provided, among others:
the register of deeds. "On the other hand, according to the said cases of
Levin v. Bass, in case of voluntary registration of documents an innocent "I.Que de mi legitimo matrimonio con mi difunto esposo, Jose Balantakbo,
purchaser for value of registered land becomes the registered owner, and, he tenido varios hijos, entre ellos si difunto hijo, llamado Raul Balantakbo.
in contemplation of law the holder of a certificate of title, the moment he
presents and files a duly notarized and valid deed of sale and the same is "II.Que mi referido hijo Raul Balantakbo, fallencio el 13 de Junio de 1952,
entered in the day book and at the same time he surrenders or presents the en la Ciudad de Pasay, durante su minoria de edad sin dejar testamento
owner's duplicate certificate of title covering the land sold and pays the alguno."
registration fees, because what remains to be done lies not within his power
to perform. The register of deeds is duty bound to perform it." (See "III.Que el finado Raul Balantakbo al morir no ha dejado descendiente
Potenciano v. Dineros, 97 Phil. 196). alguno.

2. ID.; SUCCESSION; RESERVA TRONCAL; OBLIGATION OF THE "IV.Que soy la unica ascendiente superviviento de mi referido hijo
RESERVOR. — The obligation to reserve rests upon the reservor, Raul Balantakbo y por lo tanto su unica heredera formosa, legitima
Consuelo Joaquin vda. de Balantakbo as provided in Article 891 of the New y universal.
Civil Code on reserva troncal. Consistent with the rule in reserva
"V.Que el finado Raul Balantakbo murio sin dejar deuda alguna.
viudal where the person obliged to reserve (the widowed spouse) had the
obligation to annotate in the Registry of Property the reservable character of "VI.Que el finado al morir dejo propiedades consistentes en bienes
the property, inreserva troncal, the reservor (the ascendant who inherited inmuebles situados en la Provincia de Laguna.
from a descendant property which the latter inherited from another
ascendant) has the duty to reserve and therefore, the duty to annotate also. "VII.Que dichas propriedades fueron a su vez adquiridas por el
finado Raul Balantakbo per herencia de su difunto padre, Jose
3. ID.; ID.; ID.; RESERVABLE CHARACTER OF THE REAL PROPERTY Balantakbo, y de su tia abuela Luisa Bautista.
MUST BE ANNOTATED IN THE REGISTRY OF PROPERTY. — The
jurisprudential rule requiring annotation in the Registry of Property of the ". . ." (Rollo, p. 29).
right reserved in real property subject of reserva viudal insofar as it is
On December 21, 1959, Consuelo Joaquin vda de. Balantakbo sold the
applied to reserva troncal stays despite the abolition of reserva viudal in the
property described in Civil Case No. SC-956 to Mariquita H. Sumaya. The
New Civil Code. This rule is consistent with the rule provided in the second
sale was evidenced by a deed attached as Annex "C" to the complaint. The
paragraph of Section 51 of P.D. 1529, which provides that; "The act of
same property was subsequently sold by Mariquita Sumaya to Villa Honorio
registration shall be the operative act to convey or affect the land insofar as
Development Corporation, Inc., on December 30, 1963. On January 23,
third persons are concerned . . . ."
1967, Villa Honorio Development Corporation transferred and assigned its
rights over the property in favor of Agro-Industrial Coconut Cooperative, Inc.
4. ID.; ID.; ID.; ACTION FOR RECOVERY OF RESERVED PROPERTY;
The documents evidencing these transfers were registered in the Registry
PRESCRIPTIVE PERIOD. — The cause of action of the reservees did not
of Deeds of Laguna and the corresponding certificates of titles were issued.
commence upon the death of the propositus Raul Balantakbo on June 13,
The properties are presently in the name of Agro-Industrial Coconut
1952 but upon the death of the reservor Consuelo Vda. de Balantakbo on
Cooperative, Inc., 2/3 share and the remaining 1/3 share is in the name of
June 3, 1968. Relatives within the third degree in whose favor the right (or
Sancho Balantakbo. LLjur
property) is reserved have no title of ownership or of fee simple over the
reserved property during the lifetime of the reservor. Only when the reservor Also on December 30, 1963, Consuelo Joaquin vda. de Balantakbo sold the
should die before the reservees will the latter acquire the reserved property, properties described in the complaint in Civil Case No. SC-957 to Villa
thus creating a fee simple, and only then will they take their place in the Honorio Development Corporation, Inc. The latter in turn transferred and
succession of the descendant of whom they are relatives with in the third assigned all its rights to the properties in favor of Laguna Agro-Industrial
degree (See Velayo Bernardo v. Siojo, G.R. No. 36078, March 11, 1933, 58 Coconut Cooperative, Inc. which properties are presently in its possession.
Phil. 89). The reserva is extinguished upon the death of the reservor, as it
then becomes a right of full ownership on the part of the reservatarios, who The parties admit that the certificates of titles covering the above described
can bring a reivindicatory suit therefor. Nonetheless, this right if not properties do not contain any annotation of its reservable character.
exercised within the time for recovery may prescribe in ten (10) years under On June 3, 1968, Consuelo Joaquin vda. de Balantakbo died.
the old Code of Civil Procedure (see Carillo v. De Paz, G.R. No. L-22601,
October 28, 1966, 18 SCRA 467, 473) or in thirty years under Article 1141 On March 4, 1970, Amadeo, Sancho, Donato, Luis, and Erasto, all
of the New Civil Code. surnamed Balantakbo, brothers in full blood of Raul Balantakbo and Luisa,
Jose and Dolores, also all surnamed Balantakbo, surviving children of
DECISION deceased Jose Balantakbo, Jr., another brother of the first named
Balantakbos, filed the above mentioned civil cases to recover the properties
MEDIALDEA, J p: described in the respective complaints which they claimed were subject to
a reserva troncal in their favor.
The court a quo found that the two (2) cases varied only in the identity of the matter of Civil Case No. SC-957. The court a quo further ruled that said
subject matter of res involved, the transferees, the dates of the affidavit was, in its form, declaration and substance, a recording with the
conveyances but involve the same legal question of reserva troncal. Hence, Registry of Deeds of the reservable character of the properties. In Spanish
the consolidation of the two (2) cases. language, the affidavit clearly stated that the affiant, Consuelo, was a lone
ascendant and heir to Raul Balantakbo, her son, who died leaving
After trial, the court a quo rendered a joint decision in favor of the properties previously inherited from other ascendants and which properties
Balantakbos, the dispositive portion of which reads: were inventoried in the said affidavit.
"WHEREFORE, in both Civil Cases Nos. SC-956 and SC-957, It was admitted that the certificates of titles covering the properties in
judgment is hereby rendered in favor of the plaintiffs and against question show that they were free from any liens and encumbrances at the
the defendants, as follows: time of the sale. The fact remains however, that the affidavit of self-
"1.Ordering the defendant Laguna Agro-Industrial Coconut adjudication executed by Consuelo stating the source of the properties
Cooperative, Inc. to convey to the plaintiffs — thereby showing the reservable nature thereof was registered with the
Register of Deeds of Laguna, and this is sufficient notice to the whole world
"a.)In Civil Case No. SC-956 — the one-third (1/3) interest and in accordance with Section 52 of the Property Registration Decree (formerly
ownership, pro-indiviso, in and over the parcel of land described in Sec. 51 of R.A. 496) which provides: llcd
paragraph three (3) subparagraph 1, of pages one (1) and two (2)
"SEC. 52.CONSTRUCTIVE NOTICE UPON REGISTRATION . —
of this decision;
Every conveyance, mortgage, lease, lien attachment, order,
"b.)In Civil Case No. SC-957 — the one-seventh (1/7) interest and judgment, instrument or entry affecting registered land shall, if
ownership, pro-indiviso, in and over the ten (10) parcels of land registered, filed or entered in the Office of the Register of Deeds for
described in paragraph three (3), subparagraph 2, of pages two (2) the province or city where the land to which it relates lies, be
and three (3) of this decision; constructive notice to all persons from the time of such registering,
filing or entering."
"c.)The plaintiffs are to share equally in the real properties herein
ordered to be conveyed to them by the defendants with plaintiffs Thus, in Gatioan v. Gaffud, G.R. No. L-21953, March 28, 1969, 27 SCRA
Luisa, Jose and Dolores, all surnamed Balantakbo, receiving one- 706, 712-713, cited in People v. Reyes, G.R. Nos. 74226-27, July 27, 1989,
third (1/3) of the one share pertaining to the other plaintiffs who are 175 SCRA 597; Garcia v. CA and PNB v. CA, et al., G.R. Nos. L-48971 and
their uncles: L-40911, both dated January 22, 1980, 95 SCRA 380 and Legarda and
Prieto v. Saleeby, 31 Phil. 590, 600, We held:
"2.Ordering the Laguna Agro-Industrial Coconut Cooperative, Inc. "When a conveyance has been properly recorded such record is
to account for and pay to the plaintiffs the value of the produce constructive notice of its contents and all interests, legal and
from the properties herein ordered to be returned to the plaintiffs, equitable, included therein . . .
said accounting and payment of income being for the period from
January 3, 1968 until date of reconveyance of the properties herein "Under the rule of notice, it is presumed that the purchaser has
ordered: examined every instrument of record affecting the title. Such
"3.In each of Civil Cases Nos. SC-956 and SC-957, defendants are presumption is irrebuttable. He is charged with notice of every fact
to pay plaintiffs — shown by the record and is presumed to know every fact shown by
the record and is presumed to know every fact which an
"a.One Thousand (P1,000.00) Pesos in litigation expenses examination of the record would have disclosed. This presumption
"b.Two Thousand (P2,000.00) Pesos in attorney's fees. cannot be overcome by proof of innocence or good faith.
Otherwise, the very purpose and object of the law requiring a
"4.Defendants are to pay the costs in each of Civil Cases Nos. SC- record would be destroyed. Such presumption cannot be defeated
956 and 957. by proof of want of knowledge of what the record contains any
more than one may be permitted to show that he was ignorant of
". . ." (p. 46, Rollo).
the provisions of the law. The rule that all persons must take notice
This decision was appealed to the appellate court which affirmed the of the facts which the public record contains is a rule of law. The
decision of the court a quo in toto. The motion for reconsideration was rule must be absolute, any variation would lead to endless
denied (p. 65, Rollo) by the appellate court which found no cogent reason to confusion and useless litigation. . . ."
reverse the decision.
In the case of Bass v. De la Rama, 73 Phil. 682, 685, the rule was laid down
This petition before Us was filed on November 12, 1984 with the petitioners that the mere entry of a document in the day book without noting it on the
assigning the following errors allegedly committed by the appellatecourt: certificate of title is not sufficient registration. However, that ruling was
superseded by the holding in the later six cases of Levin v. Bass, 91 Phil.
I.The trial court erred in not finding defendants an (sic) innocent purchaser 420. As explained in Garcia v. C.A., et al., G.R. Nos. L-48971 and 49011,
for value and in good faith of the properties covered by certificates of title January 20, 1980, 95 SCRA 380, 388, which is the prevailing doctrine in this
subject of litigation. jurisdiction.
II.The trial court erred in finding it unnecessary to annotate the reservable "That ruling was superseded by the holding in the later six cases of
interest of the reservee in the properties covered by certificates of title Levin v. Bass, 91 Phil. 420, where a distinction was made between
subject of litigation. voluntary and involuntary registration, such as the registration of an
III.The trial court erred in finding that the cause of action of the plaintiffs attachment, levy upon execution, notice of lis pendens, and the
(private respondents) has not yet prescribed. like. In cases of involuntary registration, an entry thereof in the day
book is a sufficient notice to all persons even if the owner's
IV.The trial court erred in awarding moral and actual damages in favor of duplicate certificate of title is not presented to the register of deeds.
the plaintiffs by virtue of the institution of Civil Cases Nos. 956 and 957.
"On the other hand, according to the said cases of Levin v. Bass, in
Petitioners would want this Court to reverse the findings of the court a
case of voluntary registration of documents an innocent purchaser
quo, which the appellate court affirmed, that they were not innocent
for value of registered land becomes the registered owner, and, in
purchasers for value. According to petitioners, before they agreed to buy the
contemplation of law the holder of a certificate of title, the moment
properties from the reservor (also called reservista), Consuelo Joaquin vda.
he presents and files a duly notarized and valid deed of sale and
de Balantakbo, they first sought the legal advice of their family consultant
the same is entered in the day book and at the same time he
who found that there was no encumbrance nor any lien annotated on the
surrenders or presents the owner's duplicate certificate of title
certificate of title covering the properties.
covering the land sold and pays the registration fees, because
The court a quo found otherwise. Upon the death of the propositus, Raul what remains to be done lies not within his power to perform. The
Balantakbo, the reservista, Consuelo vda. de Balantakbo caused the register of deeds is duty bound to perform it." (See Potenciano v.
registration of an affidavit of self-adjudication of the estate of Raul, wherein Dineros, 97 Phil. 196).
it was clearly stated that the properties were inherited by Raul from his
father Jose, Sr., as regards the subject matter of Civil Case No. SC-956 and In this case, the affidavit of self-adjudication executed by Consuelo
from his maternal grandmother, Luisa Bautista, as regards the subject vda. de Balantakbo which contained a statement that the property
was inherited from a descendant, Raul, which has likewise the reservable character of a property subject of reserva viudal is applicable
inherited by the latter from another ascendant, was registered with to reserva troncal. (See also Edrozo v. Sablan, G.R. No. 6878, September
the Registry of Property. The failure of the Register of Deeds to 13, 1913, 25 Phil. 295).
annotate the reservable character of the property in the certificate
of title cannot be attributed to Consuelo. "Since these parcels of land have been legally transferred to third persons,
Vicente Galang has lost ownership thereof and cannot now register nor
Moreover, there is sufficient proof that the petitioners had actual knowledge record in the Registry of Deeds their reservable character; neither can he
of the reservable character of the properties before they bought the same effect the fee simple, which does not belong to him, to the damage of Juan
from Consuelo. This matter appeared in the deed of sale (Exhibit "C") Medina and Teodoro Jurado, who acquired the said land in good faith, free
executed by Consuelo in favor of Mariquita Sumaya, the first vendee of the of all incumbrances. An attempt was made to prove that when Juan Medina
property litigated in Civil Case No. SC-956, as follows: was advised not to buy the land he remarked, `Why, did he (Vicente
"xxx xxx xxx" Galang) not inherit it from his son?' Aside from the fact that it is not clear
whether this conservation took place in 1913 or 1914, that is, before or after
"That, I (Consuelo, vendor) on the absolute and exclusive owner of the sale, it does not signify that he had any knowledge of the reservation.
the one-third (1/3) portion of the above described parcel of land by This did not arise from the fact alone that Vicente Galang had inherited the
virtue of the Deed of Extra-Judicial Partition executed by the Heirs land from his son, but also from the fact that, by operation of law, the son
of the deceased Jose Balantakbo dated December 10, 1945 and had inherited it from his mother Rufina Dizon, which circumstance, so far as
said portion in accordance with the partition above-mentioned was the record shows, Juan Medina had not been aware of. We do not decide,
adjudicated to Raul Balantakbo, single, to (sic) whom I inherited however, whether or not Juan Medina and Teodoro Jurado are obliged to
after his death and this property is entirely free from any acknowledge the reservation and to note the same in their deeds, for the
encumbrance of any nature or kind whatsoever, . . . ." (p 42, Rollo) reason that there was no prayer to this effect in the complaint and no
question raised in regard thereto."
It was admitted though that as regards the properties litigated in Civil Case
SC-957, no such admission was made by Consuelo to put Villa Honorio Consistent with the rule in reserva viudal where the person obliged to
Development on notice of the reservable character of the properties. The reserve (the widowed spouse) had the obligation to annotate in the Registry
affidavit of self-adjudication executed by Consuelo and registered with the of Property the reservable character of the property, in reserva troncal, the
Registry would still be sufficient notice to bind them. prcd reservor (the ascendant who inherited from a descendant property which
the latter inherited from another descendant) has the duty to reserve and
Moreover, the court a quo found that the petitioners and private therefore, the duty to annotate also. prLL
respondents were long time acquaintances; that the Villa Honorio
Development Corporation and its successors, the Laguna Agro-Industrial The jurisprudential rule requiring annotation in the Registry of Property of
Coconut Cooperative Inc., are family corporations of the Sumayas and that the right reserved in real property subject of reserva viudal insofar as it is
the petitioners knew all along that the properties litigated in this case were applied to reserva troncal stays despite the abolition of reserva viudal in
inherited by Raul Balantakbo from his father and from his maternal the New Civil Code. This rule is consistent with the rule provided in
grandmother, and that Consuelo Vda. de Balantakbo inherited these thesecond paragraph of Section 51 of P.D. 1529, which provides that:
properties from his son Raul. "The act of registration shall be the operative act to convey or affect the
land insofar as third persons are concerned . . . ." (emphasis supplied).
The obligation to reserve rests upon the reservor, Consuelo Joaquin vda. de
Balantakbo. Article 891 of the New Civil Code on reserva troncalprovides: The properties involved in this case are already covered by a Torrens
title and unless the registration of the limitation is effected (either actual
"Art. 891.The ascendant who inherits from his descendant any or constructive), no third persons shall be prejudiced thereby.
property which the latter may have acquired by gratuitous title from
another ascendant or a brother or sister, is obliged to reserve such The respondent appellate court did not err in finding that the cause of
property as he may have acquired by operation of law for the action of the private respondents did not prescribe yet. The cause of
benefit of relatives who are within the third degree and who belong action of the reservees did not commence upon the death of the
to the line from which said property came." (emphasis supplied). propositus Raul Balantakbo on June 13, 1952 but upon the death of the
reservor Consuelo Vda. de Balantakbo on June 3, 1968. Relatives within
We do not agree, however, with the disposition of the appellate court that the third degree in whose favor the right (or property) is reserved have no
there is no need to register the reservable character of the property, if only title of ownership or of fee simple over the reserved property during the
for the protection of the reservees, against innocent third persons. This was lifetime of the reservor. Only when the reservor should die before the
suggested as early as the case of Director of Lands v. Aguas, G.R. No. reservees will the latter acquire the reserved property, thus creating a fee
42737, August 11, 1936, 63 Phil. 279. The main issue submitted for simple, and only then will they take their place in the succession of the
resolution therein was whether the reservation established by Article 811 descendant of whom they are relatives within the third degree
(now Art. 891 of the New Civil Code) of the Civil Code, for the benefit of the (See Velayo Bernardo v. Siojo, G.R. No. 36078, March 11, 1933, 58 Phil.
relatives within the third degree belonging to the line of the descendant from 89). The reserva is extinguished upon the death of the reservor, as it
whom the ascendant reservor received the property, should be understood then becomes a right of full ownership on the part of the reservatarios,
as made in favor of all the relatives within said degree and belonging to the who can bring a reivindicatory suit therefor. Nonetheless, this right if not
line above-mentioned, without distinction legitimate, natural and illegitimate exercised within the time for recovery may prescribe in ten (10) years
ones not having the legal status of natural children. However, in an obiter under the old Code of Civil Procedure (see Carillo v. De Paz, G.R. No. L-
dictum this Court stated therein: 22601, October 28, 1966, 18 SCRA 467, 473) or in thirty years
under Article 1141 of the New Civil Code. The actions for recovery of the
"The reservable character of a property is but a resolutory condition of the reserved property was brought by herein private respondents on March
ascendant reservor's right of ownership. If the condition is fulfilled, that is, if 4, 1970 or less than two (2) years from the death of the reservor.
upon the ascendant reservor's death there are relatives having the status Therefore, private respondents' cause of action has not prescribed yet.
provided in Article 811 (Art. 891, New Civil Code), the property passes, in
accordance with this special order of succession, to said relatives, or to the Finally, the award of one thousand pesos (P1,000.00) for actual litigation
nearest of kin among them, which question not being pertinent to this case, expenses and two thousand pesos (P2,000.00) for attorney's fees is
need not now be determined. But if this condition is not fulfilled, the property proper under Article 2208(2) of the New Civil Code. Private respondents
is released and will be adjudicated in accordance with the regular order of were compelled to go to court to recover what rightfully belongs to
succession. The fulfillment or non-fulfillment of the resolutory condition, the them. cdphil
efficacy or cessation of the reservation, the acquisition of rights or loss of ACCORDINGLY, the petition is DENIED. The questioned decision of
the vested ones, are phenomena which have nothing to do with whether the the Intermediate Appellate Court is AFFIRMED, except for the
reservation has been noted or not in the certificate of title to the modification on the necessity to annotate the reversible character of a
property. The purpose of the notation is nothing more than to afford to the property subject of reserva troncal.
persons entitled to the reservation, if any, due protection against any act of
the reservor, which may make it ineffective . . . ." (p. 292, ibid). SO ORDERED.
Likewise, in Dizon and Dizon v. Galang, G.R. No. 21344, January 14, 1926,
48 Phil. 601, 603, this Court ruled that the reservable character of a
property may be lost to innocent purchasers for value. Additionally, it was
ruled therein that the obligation imposed on a widowed spouse to annotate ||