Art. 1347, par.

2- No contract may be entered into upon future inheritance

45. Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 104482 January 22, 1996

BELINDA TAÑEDO, for herself and in representation of her brothers and sisters, and TEOFILA
CORPUZ TAÑEDO, representing her minor daughter VERNA TAÑEDO, petitioners,
vs.
THE COURT OF APPEALS, SPOUSES RICARDO M. TAÑEDO AND TERESITA BARERA
TAÑEDO, respondents.

DECISION

PANGANIBAN, J.:

Is a sale of future inheritance valid? In multiple sales of the same real property, who has preference in
ownership? What is the probative value of the lower court's finding of good faith in registration of such
sales in the registry of property? These are the main questions raised in this Petition for review
on certiorari under Rule 45 of the Rules of Court to set aside and reverse the Decision 1 of the Court of
Appeals2 in CA-G.R. CV NO. 24987 promulgated on September 26, 1991 affirming the decision of the
Regional Trial Court, Branch 63, Third Judicial Region, Tarlac, Tarlac in Civil Case No. 6328, and its
Resolution denying reconsideration thereof, promulgated on May 27, 1992.

By the Court's Resolution on October 25, 1995, this case (along with several others) was transferred
from the First to the Third Division and after due deliberation, the Court assigned it to the
undersigned ponente for the writing of this Decision.

The Facts

On October 20, 1962, Lazardo Tañedo executed a notarized deed of absolute sale in favor of his
eldest brother, Ricardo Tañedo, and the latter's wife, Teresita Barera, private respondents herein,
whereby he conveyed to the latter in consideration of P1,500.00, "one hectare of whatever share I
shall have over Lot No. 191 of the cadastral survey of Gerona, Province of Tarlac and covered by
Title T-13829 of the Register of Deeds of Tarlac", the said property being his "future inheritance" from
his parents (Exh. 1). Upon the death of his father Matias, Lazaro executed an "Affidavit of Conformity"
dated February 28, 1980 (Exh. 3) to "re-affirm, respect, acknowledge and validate the sale I made in
1962." On January 13, 1981, Lazaro executed another notarized deed of sale in favor of private
respondents covering his "undivided ONE TWELVE (1/12) of a parcel of land known as Lot 191 . . . "
(Exh. 4). He acknowledged therein his receipt of P10,000.00 as consideration therefor. In February
1981, Ricardo learned that Lazaro sold the same property to his children, petitioners herein, through
a deed of sale dated December 29, 1980 (Exh. E). On June 7, 1982, private respondents recorded
the Deed of Sale (Exh. 4) in their favor in the Registry of Deeds and the corresponding entry was
made in Transfer Certificate of Title No. 166451 (Exh. 5).

Petitioners on July 16, 1982 filed a complaint for rescission (plus damages) of the deeds of sale
executed by Lazaro in favor of private respondents covering the property inherited by Lazaro from his
father.

Petitioners claimed that their father, Lazaro, executed an "Absolute Deed of Sale" dated December
29, 1980 (Exit. E). Conveying to his ten children his allotted portion tinder the extrajudicial partition
executed by the heirs of Matias, which deed included the land in litigation (Lot 191).

Petitioners also presented in evidence: (1) a private writing purportedly prepared and signed by
Matias dated December 28, 1978, stating that it was his desire that whatever inheritance Lazaro
would receive from him should be given to his (Lazaro's) children (Exh. A); (2) a typewritten document
dated March 10, 1979 signed by Lazaro in the presence of two witnesses, wherein he confirmed that
he would voluntarily abide by the wishes of his father, Matias, to give to his (Lazaro's) children all the

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property he would inherit from the latter (Exh. B); and (3) a letter dated January 1, 1980 of Lazaro to
his daughter, Carmela, stating that his share in the extrajudicial settlement of the estate of his father
was intended for his children, petitioners herein (Exh. C).

Private respondents, however presented in evidence a "Deed of Revocation of a Deed of Sale" dated
March 12, 1981 (Exh. 6), wherein Lazaro revoked the sale in favor of petitioners for the reason that it
was "simulated or fictitious without any consideration whatsoever".

Shortly after the case a quo was filed, Lazaro executed a sworn statement (Exh. G) which virtually
repudiated the contents of the Deed of Revocation of a Deed of Sale (Exh. 6) and the Deed of Sale
(Exh. 4) in favor of private respondents. However, Lazaro testified that he sold the property to
Ricardo, and that it was a lawyer who induced him to execute a deed of sale in favor of his children
after giving him five pesos (P5.00) to buy a "drink" (TSN September 18, 1985, pp. 204-205).

The trial court decided in favor of private respondents, holding that petitioners failed "to adduce a
proponderance of evidence to support (their) claim." On appeal, the Court of Appeals affirmed the
decision of the trial court, ruling that the Deed of Sale dated January 13, 1981 (Exh. 9) was valid and
that its registration in good faith vested title in said respondents.

The Issues

Petitioners raised the following "errors" in the respondent Court, which they also now allege in the
instant Petition:

I. The trial court erred in concluding that the Contract of Sale of October 20, 1962 (Exhibit 7,
Answer) is merely voidable or annulable and not void ab initio pursuant to paragraph 2 of
Article 1347 of the New Civil Code involving as it does a "future inheritance".

II. The trial court erred in holding that defendants-appellees acted in good faith in registering
the deed of sale of January 13, 1981 (Exhibit 9) with the Register of Deeds of Tarlac and
therefore ownership of the land in question passed on to defendants-appellees.

III. The trial court erred in ignoring and failing to consider the testimonial and documentary
evidence of plaintiffs-appellants which clearly established by preponderance of evidence that
they are indeed the legitimate and lawful owners of the property in question.

IV. The decision is contrary to law and the facts of the case and the conclusions drawn from
the established facts are illogical and off-tangent.

From the foregoing, the issues may be restated as follows:

1. Is the sale of a future inheritance valid?

2. Was the subsequent execution on January 13, 1981 (and registration with the Registry of
Property) of a deed of sale covering the same property to the same buyers valid?

3. May this Court review the findings of the respondent Court (a) holding that the buyers acted
in good faith in registering the said subsequent deed of sale and (b) in "failing to consider
petitioners' evidence"? Are the conclusions of the respondent Court "illogical and off-tangent"?

The Court's Ruling

At the outset, let it be clear that the "errors" which are reviewable by this Court in this petition for
review on certiorari are only those allegedly committed by the respondent Court of Appeals and not
directly those of the trial court, which is not a party here. The "assignment of errors" in the petition
quoted above are therefore totally misplaced, and for that reason, the petition should be dismissed.
But in order to give the parties substantial justice we have decided to delve into the issues as above
re-stated. The errors attributed by petitioners to the latter (trial) court will be discussed only insofar as
they are relevant to the appellate court's assailed Decision and Resolution.

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The sale made in 1962 involving future inheritance is not really at issue here. In context, the assailed
Decision conceded "it may be legally correct that a contract of sale of anticipated future inheritance is
null and void."3

But to remove all doubts, we hereby categorically rule that, pursuant to Article 1347 of the Civil Code,
"(n)o contract may be entered into upon a future inheritance except in cases expressly authorized by
law."

Consequently, said contract made in 1962 is not valid and cannot be the source of any right nor the
creator of any obligation between the parties.

Hence, the "affidavit of conformity" dated February 28, 1980, insofar as it sought to validate or ratify
the 1962 sale, is also useless and, in the words of the respondent Court, "suffers from the same
infirmity." Even private respondents in their memorandum4 concede this.

However, the documents that are critical to the resolution of this case are: (a) the deed of sale of
January 13, 1981 in favor of private respondents covering Lazaro's undivided inheritance of one-
twelfth (1/12) share in Lot No. 191, which was subsequently registered on June 7, 1982; and (b) the
deed of sale dated December 29, 1980 in favor of petitioners covering the same property. These two
documents were executed after the death of Matias (and his spouse) and after a deed of extra-judicial
settlement of his (Matias') estate was executed, thus vesting in Lazaro actual title over said property.
In other words, these dispositions, though conflicting, were no longer infected with the infirmities of
the 1962 sale.

Petitioners contend that what was sold on January 13, 1981 was only one-half hectare out of Lot No.
191, citing as authority the trial court's decision. As earlier pointed out, what is on review in these
proceedings by this Court is the Court of Appeals' decision — which correctly identified the subject
matter of the January 13, 1981 sale to be the entire undivided 1/12 share of Lazaro in Lot No. 191
and which is the same property disposed of on December 29, 1980 in favor of petitioners.

Critical in determining which of these two deeds should be given effect is the registration of the sale in
favor of private respondents with the register of deeds on June 7, 1982.

Article 1544 of the Civil Code governs the preferential rights of vendees in cases of multiple sales, as
follows:

Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it should
be movable property.

Should it be immovable property, the ownership shall belong to the person acquiring it who in
good faith first recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith was
first in the possession; and, in the absence thereof, to the person who presents the oldest title,
provided there is good faith.

The property in question is land, an immovable, and following the above-quoted law, ownership shall
belong to the buyer who in good faith registers it first in the registry of property. Thus, although the
deed of sale in favor of private respondents was later than the one in favor of petitioners, ownership
would vest in the former because of the undisputed fact of registration. On the other hand, petitioners
have not registered the sale to them at all.

Petitioners contend that they were in possession of the property and that private respondents never
took possession thereof. As between two purchasers, the one who registered the sale in his favor has
a preferred right over the other who has not registered his title, even if the latter is in actual
possession of the immovable property.5

As to third issue, while petitioners conceded the fact of registration, they nevertheless contended that
it was done in bad faith. On this issue, the respondent Court ruled;

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 Under the second assignment of error, plaintiffs-appellants contend that defendants-appellees
acted in bad faith when they registered the Deed of Sale in their favor as appellee Ricardo
already knew of the execution of the deed of sale in favor of the plaintiffs; appellants cite the
testimony of plaintiff Belinda Tañedo to the effect that defendant Ricardo Tañedo called her up
on January 4 or 5, 1981 to tell her that he was already the owner of the land in question "but
the contract of sale between our father and us were (sic) already consumated" (pp. 9-10, tsn,
January 6, 1984). This testimony is obviously self-serving, and because it was a telephone
conversation, the deed of sale dated December 29, 1980 was not shown; Belinda merely told
her uncle that there was already a document showing that plaintiffs are the owners (p. 80).
Ricardo Tañedo controverted this and testified that he learned for the first time of the deed of
sale executed by Lazaro in favor of his children "about a month or sometime in February 1981"
(p. 111, tsn, Nov. 28, 1984). . . .6

The respondent Court, reviewing the trial court's findings, refused to overturn the latter's assessment
of the testimonial evidence, as follows;

We are not prepared to set aside the finding of the lower court upholding Ricardo Tañedo's
testimony, as it involves a matter of credibility of witnesses which the trial judge, who presided
at the hearing, was in a better position to resolve. (Court of Appeals' Decision, p. 6.)

In this connection, we note the tenacious allegations made by petitioners, both in their basic petition
and in their memorandum, as follows:

1. The respondent Court allegedly ignored the claimed fact that respondent Ricardo "by fraud
and deceit and with foreknowledge" that the property in question had already been sold to
petitioners, made Lazaro execute the deed of January 13, 1981;

2. There is allegedly adequate evidence to show that only 1/2 of the purchase price of
P10,000.00 was paid at the time of the execution of the deed of sale, contrary to the written
acknowledgment, thus showing bad faith;

3. There is allegedly sufficient evidence showing that the deed of revocation of the sale in favor
of petitioners "was tainted with fraud or deceit."

4. There is allegedly enough evidence to show that private respondents "took undue
advantage over the weakness and unschooled and pitiful situation of Lazaro Tañedo . . ." and
that respondent Ricardo Tañedo "exercised moral ascendancy over his younger brother he
being the eldest brother and who reached fourth year college of law and at one time a former
Vice-Governor of Tarlac, while his younger brother only attained first year high school . . . ;

5. The respondent Court erred in not giving credence to petitioners' evidence, especially
Lazaro Tañedo's Sinumpaang Salaysay dated July 27, 1982 stating that Ricardo Tañedo
deceived the former in executing the deed of sale in favor of private respondents.

To be sure, there are indeed many conflicting documents and testimonies as well as arguments over
their probative value and significance. Suffice it to say, however, that all the above contentions
involve questions of fact, appreciation of evidence and credibility of witnesses, which are not proper in
this review. It is well-settled that the Supreme Court is not a trier of facts. In petitions for review under
Rule 45 of the Revised Rules of Court, only questions of law may be raised and passed upon. Absent
any whimsical or capricious exercise of judgment, and unless the lack of any basis for the
conclusions made by the lower courts be amply demonstrated, the Supreme Court will not disturb
their findings. At most, it appears that petitioners have shown that their evidence was not believed by
both the trial and the appellate courts, and that the said courts tended to give more credence to the
evidence presented by private respondents. But this in itself is not a reason for setting aside such
findings. We are far from convinced that both courts gravely abused their respective authorities and
judicial prerogatives.

As held in the recent case of Chua Tiong Tay vs. Court of Appeals and Goldrock Construction and
Development Corp.7

The Court has consistently held that the factual findings of the trial court, as well as the Court of
Appeals, are final and conclusive and may not be reviewed on appeal. Among the exceptional

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circumstances where a reassessment of facts found by the lower courts is allowed are when the
conclusion is a finding grounded entirely on speculation, surmises or conjectures; when the inference
made is manifestly absurd, mistaken or impossible; when there is grave abuse of discretion in the
appreciation of facts; when the judgment is premised on a misapprehension of facts; when the
findings went beyond the issues of the case and the same are contrary to the admissions of both
appellant and appellee. After a careful study of the case at bench, we find none of the above grounds
present to justify the re-evaluation of the findings of fact made by the courts below.

In the same vein, the ruling in the recent case of South Sea Surety and Insurance Company,
Inc. vs. Hon. Court of Appeals, et al.8 is equally applicable to the present case:

We see no valid reason to discard the factual conclusions of the appellate court. . . . (I)t is not
the function of this Court to assess and evaluate all over again the evidence, testimonial and
documentary, adduced by the parties, particularly where, such as here, the findings of both the
trial court and the appellate court on the matter coincide. (emphasis supplied)

WHEREFORE, the petition is DENIED and the assailed Decision of the Court of Appeals is
AFFIRMED. No Costs.

SO ORDERED.

Narvasa, C.J., Davide, Jr., Melo and Francisco, JJ., concur.

Art. 1349- Object of every contract must be determinate as to its kind

46. Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 74470 March 8, 1989

NATIONAL GRAINS AUTHORITY and WILLLAM CABAL, petitioners

vs.
THE INTERMEDIATE APPELLATE COURT and LEON SORIANO, respondents.

Cordoba, Zapanta, Rola & Garcia for petitioner National Grains Authority.

Plaridel Mar Israel for respondent Leon Soriano.

MEDIALDEA, J.:

This is a petition for review of the decision (pp. 9-21, Rollo) of the Intermediate Appellate Court (now
Court of Appeals) dated December 23, 1985 in A.C. G.R. CV No. 03812 entitled, "Leon Soriano,
Plaintiff- Appellee versus National Grains Authority and William Cabal, Defendants Appellants", which
affirmed the decision of the Court of First Instance of Cagayan, in Civil Case No. 2754 and its
resolution (p. 28, Rollo) dated April 17, 1986 which denied the Motion for Reconsideration filed
therein.

The antecedent facts of the instant case are as follows:

Petitioner National Grains Authority (now National Food Authority, NFA for short) is a government
agency created under Presidential Decree No. 4. One of its incidental functions is the buying of palay
grains from qualified farmers.

On August 23, 1979, private respondent Leon Soriano offered to sell palay grains to the NFA, through
William Cabal, the Provincial Manager of NFA stationed at Tuguegarao, Cagayan. He submitted the
documents required by the NFA for pre-qualifying as a seller, namely: (1) Farmer's Information Sheet
accomplished by Soriano and certified by a Bureau of Agricultural Extension (BAEX) technician,

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Napoleon Callangan, (2) Xerox copies of four (4) tax declarations of the riceland leased to him and
copies of the lease contract between him and Judge Concepcion Salud, and (3) his Residence Tax
Certificate. Private respondent Soriano's documents were processed and accordingly, he was given a
quota of 2,640 cavans of palay. The quota noted in the Farmer's Information Sheet represented the
maximum number of cavans of palay that Soriano may sell to the NFA.

In the afternoon of August 23, 1979 and on the following day, August 24, 1979, Soriano delivered 630
cavans of palay. The palay delivered during these two days were not rebagged, classified and
weighed. when Soriano demanded payment of the 630 cavans of palay, he was informed that its
payment will be held in abeyance since Mr. Cabal was still investigating on an information he
received that Soriano was not a bona tide farmer and the palay delivered by him was not produced
from his farmland but was taken from the warehouse of a rice trader, Ben de Guzman. On August 28,
1979, Cabal wrote Soriano advising him to withdraw from the NFA warehouse the 630 cavans
Soriano delivered stating that NFA cannot legally accept the said delivery on the basis of the
subsequent certification of the BAEX technician, Napoleon Callangan that Soriano is not a bona fide
farmer.

Instead of withdrawing the 630 cavans of palay, private respondent Soriano insisted that the palay
grains delivered be paid. He then filed a complaint for specific performance and/or collection of
money with damages on November 2, 1979, against the National Food Authority and Mr. William
Cabal, Provincial Manager of NFA with the Court of First Instance of Tuguegarao, and docketed as
Civil Case No. 2754.

Meanwhile, by agreement of the parties and upon order of the trial court, the 630 cavans of palay in
question were withdrawn from the warehouse of NFA. An inventory was made by the sheriff as
representative of the Court, a representative of Soriano and a representative of NFA (p. 13, Rollo).

On September 30, 1982, the trial court rendered judgment ordering petitioner National Food
Authority, its officers and agents to pay respondent Soriano (as plaintiff in Civil Case No. 2754) the
amount of P 47,250.00 representing the unpaid price of the 630 cavans of palay plus legal interest
thereof (p. 1-2, CA Decision). The dispositive portion reads as follows:

WHEREFORE, the Court renders judgment in favor of the plaintiff and against the
defendants National Grains Authority, and William Cabal and hereby orders:

1. The National Grains Authority, now the National Food Authority, its officers and
agents, and Mr. William Cabal, the Provincial Manager of the National Grains Authority
at the time of the filing of this case, assigned at Tuguegarao, Cagayan, whomsoever is
his successors, to pay to the plaintiff Leon T. Soriano, the amount of P47,250.00,
representing the unpaid price of the palay deliveries made by the plaintiff to the
defendants consisting of 630 cavans at the rate Pl.50 per kilo of 50 kilos per cavan of
palay;

2. That the defendants National Grains Authority, now National Food Authority, its
officer and/or agents, and Mr. William Cabal, the Provincial Manager of the National
Grains Authority, at the time of the filing of this case assigned at Tuguegarao, Cagayan
or whomsoever is his successors, are likewise ordered to pay the plaintiff Leon T.
Soriano, the legal interest at the rate of TWELVE (12%) percent per annum, of the
amount of P 47,250.00 from the filing of the complaint on November 20, 1979, up to the
final payment of the price of P 47,250.00;

3. That the defendants National Grains Authority, now National Food Authority, or their
agents and duly authorized representatives can now withdraw the total number of bags
(630 bags with an excess of 13 bags) now on deposit in the bonded warehouse of Eng.
Ben de Guzman at Tuguegarao, Cagayan pursuant to the order of this court, and as
appearing in the written inventory dated October 10, 1980, (Exhibit F for the plaintiff and
Exhibit 20 for the defendants) upon payment of the price of P 47,250.00 and TWELVE
PERCENT (12%) legal interest to the plaintiff,

4. That the counterclaim of the defendants is hereby dismissed;

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 5. That there is no pronouncement as to the award of moral and exemplary damages
and attorney's fees; and

6. That there is no pronouncement as to costs.

SO ORDERED (pp. 9-10, Rollo)

Petitioners' motion for reconsideration of the decision was denied on December 6, 1982.

Petitioners' appealed the trial court's decision to the Intermediate Appellate Court. In a decision
promulgated on December 23, 1986 (pp. 9-21, Rollo) the then Intermediate Appellate Court upheld
the findings of the trial court and affirmed the decision ordering NFA and its officers to pay Soriano
the price of the 630 cavans of rice plus interest. Petitioners' motion for reconsideration of the
appellate court's decision was denied in a resolution dated April 17, 1986 (p. 28, Rollo).

Hence, this petition for review filed by the National Food Authority and Mr. William Cabal on May 15,
1986 assailing the decision of the Intermediate Appellate Court on the sole issue of whether or not
there was a contract of sale in the case at bar.

Petitioners contend that the 630 cavans of palay delivered by Soriano on August 23, 1979 was made
only for purposes of having it offered for sale. Further, petitioners stated that the procedure then
prevailing in matters of palay procurement from qualified farmers were: firstly, there is a rebagging
wherein the palay is transferred from a private sack of a farmer to the NFA sack; secondly, after the
rebagging has been undertaken, classification of the palay is made to determine its variety; thirdly,
after the determination of its variety and convinced that it passed the quality standard, the same will
be weighed to determine the number of kilos; and finally, it will be piled inside the warehouse after the
preparation of the Warehouse Stock Receipt (WSP) indicating therein the number of kilos, the variety
and the number of bags. Under this procedure, rebagging is the initial operative act signifying
acceptance, and acceptance will be considered complete only after the preparation of the Warehouse
Stock Receipt (WSR). When the 630 cavans of palay were brought by Soriano to the Carig
warehouse of NFA they were only offered for sale. Since the same were not rebagged, classified and
weighed in accordance with the palay procurement program of NFA, there was no acceptance of the
offer which, to petitioners' mind is a clear case of solicitation or an unaccepted offer to sell.

The petition is not impressed with merit.

Article 1458 of the Civil Code of the Philippines defines sale as a contract whereby one of the
contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing,
and the other party to pay therefore a price certain in money or its equivalent. A contract, on the other
hand, is a meeting of minds between two (2) persons whereby one binds himself, with respect to the
other, to give something or to render some service (Art. 1305, Civil Code of the Philippines). The
essential requisites of contracts are: (1) consent of the contracting parties, (2) object certain which is
the subject matter of the contract, and (3) cause of the obligation which is established (Art. 1318, Civil
Code of the Philippines.

In the case at bar, Soriano initially offered to sell palay grains produced in his farmland to NFA. When
the latter accepted the offer by noting in Soriano's Farmer's Information Sheet a quota of 2,640
cavans, there was already a meeting of the minds between the parties. The object of the contract,
being the palay grains produced in Soriano's farmland and the NFA was to pay the same depending
upon its quality. The fact that the exact number of cavans of palay to be delivered has not been
determined does not affect the perfection of the contract. Article 1349 of the New Civil Code provides:
". . .. The fact that the quantity is not determinate shall not be an obstacle to the existence of the
contract, provided it is possible to determine the same, without the need of a new contract between
the parties." In this case, there was no need for NFA and Soriano to enter into a new contract to
determine the exact number of cavans of palay to be sold. Soriano can deliver so much of his
produce as long as it does not exceed 2,640 cavans.

In its memorandum (pp. 66-71, Rollo) dated December 4, 1986, petitioners further contend that there
was no contract of sale because of the absence of an essential requisite in contracts, namely,
consent. It cited Section 1319 of the Civil Code which states: "Consent is manifested by the meeting
of the offer and the acceptance of the thing and the cause which are to constitute the contract. ... "

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Following this line, petitioners contend that there was no consent because there was no acceptance
of the 630 cavans of palay in question.

The above contention of petitioner is not correct Sale is a consensual contract, " ... , there is
perfection when there is consent upon the subject matter and price, even if neither is delivered."
(Obana vs. C.A., L-36249, March 29, 1985, 135 SCRA 557, 560) This is provided by Article 1475 of
the Civil Code which states:

Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds
upon the thing which is the object of the contract and upon the price.

xxx

The acceptance referred to which determines consent is the acceptance of the offer of one party by
the other and not of the goods delivered as contended by petitioners.

From the moment the contract of sale is perfected, it is incumbent upon the parties to comply with
their mutual obligations or "the parties may reciprocally demand performance" thereof. (Article 1475,
Civil Code, 2nd par.).

The reason why NFA initially refused acceptance of the 630 cavans of palay delivered by Soriano is
that it (NFA) cannot legally accept the said delivery because Soriano is allegedly not a bona fide
farmer. The trial court and the appellate court found that Soriano was a bona fide farmer and
therefore, he was qualified to sell palay grains to NFA.

Both courts likewise agree that NFA's refusal to accept was without just cause. The above factual
findings which are supported by the record should not be disturbed on appeal.

ACCORDINGLY, the instant petition for review is DISMISSED. The assailed decision of the then
Intermediate Appellate Court (now Court of Appeals) is affirmed. No costs.

SO ORDERED.

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

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-24732 April 30, 1968

PIO SIAN MELLIZA, petitioner,

vs.
CITY OF ILOILO, UNIVERSITY OF THE PHILIPPINES and THE COURT APPEALS, respondents.

Cornelio P. Ravena for petitioner.

Office of the Solicitor General for respondents.

BENGZON, J.P., J.:

Juliana Melliza during her lifetime owned, among other properties, three parcels of residential land in
Iloilo City registered in her name under Original Certificate of Title No. 3462. Said parcels of land
were known as Lots Nos. 2, 5 and 1214. The total area of Lot No. 1214 was 29,073 square meters.

On November 27, 1931 she donated to the then Municipality of Iloilo, 9,000 square meters of Lot
1214, to serve as site for the municipal hall. 1 The donation was however revoked by the parties for
the reason that the area donated was found inadequate to meet the requirements of the development
plan of the municipality, the so-called "Arellano Plan". 2

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Subsequently, Lot No. 1214 was divided by Certeza Surveying Co., Inc. into Lots 1214-A and 1214-B.
And still later, Lot 1214-B was further divided into Lots 1214-B-1, Lot 1214-B-2 and Lot 1214-B-3. As
approved by the Bureau of Lands, Lot 1214-B-1 with 4,562 square meters, became known as Lot
1214-B; Lot 1214-B-2, with 6,653 square meters, was designated as Lot 1214-C; and Lot 1214-B-13,
with 4,135 square meters, became Lot 1214-D.

On November 15, 1932 Juliana Melliza executed an instrument without any caption containing the
following:

Que en consideracion a la suma total de SEIS MIL CUATRO CIENTOS VEINTIDOS PESOS
(P6,422.00), moneda filipina que por la presente declaro haber recibido a mi entera
satisfaccion del Gobierno Municipal de Iloilo, cedo y traspaso en venta real y difinitiva a dicho
Gobierno Municipal de Iloilo los lotes y porciones de los mismos que a continuacion se
especifican a saber: el lote No. 5 en toda su extension; una porcion de 7669 metros cuadrados
del lote No. 2, cuya porcion esta designada como sub-lotes Nos. 2-B y 2-C del piano de
subdivision de dichos lotes preparado por la Certeza Surveying Co., Inc., y una porcion de
10,788 metros cuadrados del lote No. 1214 — cuya porcion esta designada como sub-lotes
Nos. 1214-B-2 y 1214-B-3 del mismo plano de subdivision.

Asimismo nago constar que la cesion y traspaso que ariba se mencionan es de venta
difinitiva, y que para la mejor identificacion de los lotes y porciones de los mismos que son
objeto de la presente, hago constar que dichos lotes y porciones son los que necesita el
Gobierno Municipal de Iloilo para la construccion de avenidas, parques y City Hall site del
Municipal Government Center de iloilo, segun el plano Arellano.

On January 14, 1938 Juliana Melliza sold her remaining interest in Lot 1214 to Remedios Sian
Villanueva who thereafter obtained her own registered title thereto, under Transfer Certificate of Title
No. 18178. Remedios in turn on November 4, 1946 transferred her rights to said portion of land to Pio
Sian Melliza, who obtained Transfer Certificate of Title No. 2492 thereover in his name. Annotated at
the back of Pio Sian Melliza's title certificate was the following:

... (a) that a portion of 10,788 square meters of Lot 1214 now designated as Lots Nos. 1214-B-
2 and 1214-B-3 of the subdivision plan belongs to the Municipality of Iloilo as per instrument
dated November 15, 1932....

On August 24, 1949 the City of Iloilo, which succeeded to the Municipality of Iloilo, donated the city
hall site together with the building thereon, to the University of the Philippines (Iloilo branch). The site
donated consisted of Lots Nos. 1214-B, 1214-C and 1214-D, with a total area of 15,350 square
meters, more or less.

Sometime in 1952, the University of the Philippines enclosed the site donated with a wire fence. Pio
Sian Melliza thereupon made representations, thru his lawyer, with the city authorities for payment of
the value of the lot (Lot 1214-B). No recovery was obtained, because as alleged by plaintiff, the City
did not have funds (p. 9, Appellant's Brief.)

The University of the Philippines, meanwhile, obtained Transfer Certificate of Title No. 7152 covering
the three lots, Nos. 1214-B, 1214-C and 1214-D.

On December 10, 1955 Pio Sian Melliza filed an action in the Court of First Instance of Iloilo against
Iloilo City and the University of the Philippines for recovery of Lot 1214-B or of its value.

The defendants answered, contending that Lot 1214-B was included in the public instrument
executed by Juliana Melliza in favor of Iloilo municipality in 1932. After stipulation of facts and trial,
the Court of First Instance rendered its decision on August 15, 1957, dismissing the complaint. Said
court ruled that the instrument executed by Juliana Melliza in favor of Iloilo municipality included in
the conveyance Lot 1214-B. In support of this conclusion, it referred to the portion of the instrument
stating:

Asimismo hago constar que la cesion y traspaso que arriba se mencionan es de venta
difinitiva, y que para la major identificacion de los lotes y porciones de los mismos que son
objeto de la presente, hago constar que dichos lotes y porciones son los que necesita el

9|Page
 Gobierno municipal de Iloilo para la construccion de avenidas, parques y City Hall site del
Municipal Government Center de Iloilo, segun el plano Arellano.

and ruled that this meant that Juliana Melliza not only sold Lots 1214-C and 1214-D but also such
other portions of lots as were necessary for the municipal hall site, such as Lot 1214-B. And thus it
held that Iloilo City had the right to donate Lot 1214-B to the U.P.

Pio Sian Melliza appealed to the Court of Appeals. In its decision on May 19, 1965, the Court of
Appeals affirmed the interpretation of the Court of First Instance, that the portion of Lot 1214 sold by
Juliana Melliza was not limited to the 10,788 square meters specifically mentioned but included
whatever was needed for the construction of avenues, parks and the city hall site. Nonetheless, it
ordered the remand of the case for reception of evidence to determine the area actually taken by
Iloilo City for the construction of avenues, parks and for city hall site.

The present appeal therefrom was then taken to Us by Pio Sian Melliza. Appellant maintains that the
public instrument is clear that only Lots Nos. 1214-C and 1214-D with a total area of 10,788 square
meters were the portions of Lot 1214 included in the sale; that the purpose of the second paragraph,
relied upon for a contrary interpretation, was only to better identify the lots sold and none other; and
that to follow the interpretation accorded the deed of sale by the Court of Appeals and the Court of
First Instance would render the contract invalid because the law requires as an essential element of
sale, a "determinate" object (Art. 1445, now 1448, Civil Code).

Appellees, on the other hand, contend that the present appeal improperly raises only questions of
fact. And, further, they argue that the parties to the document in question really intended to include
Lot 1214-B therein, as shown by the silence of the vendor after Iloilo City exercised ownership
thereover; that not to include it would have been absurd, because said lot is contiguous to the others
admittedly included in the conveyance, lying directly in front of the city hall, separating that building
from Lots 1214-C and 1214-D, which were included therein. And, finally, appellees argue that the
sale's object was determinate, because it could be ascertained, at the time of the execution of the
contract, what lots were needed by Iloilo municipality for avenues, parks and city hall site "according
to the Arellano Plan", since the Arellano plan was then already in existence.

The appeal before Us calls for the interpretation of the public instrument dated November 15, 1932.
And interpretation of such contract involves a question of law, since the contract is in the nature of
law as between the parties and their successors-in-interest.

At the outset, it is well to mark that the issue is whether or not the conveyance by Juliana Melliza to
Iloilo municipality included that portion of Lot 1214 known as Lot 1214-B. If not, then the same was
included, in the instrument subsequently executed by Juliana Melliza of her remaining interest in Lot
1214 to Remedios Sian Villanueva, who in turn sold what she thereunder had acquired, to Pio Sian
Melliza. It should be stressed, also, that the sale to Remedios Sian Villanueva — from which Pio Sian
Melliza derived title — did not specifically designate Lot 1214-B, but only such portions of Lot 1214 as
were not included in the previous sale to Iloilo municipality (Stipulation of Facts, par. 5, Record on
Appeal, p. 23). And thus, if said Lot 1214-B had been included in the prior conveyance to Iloilo
municipality, then it was excluded from the sale to Remedios Sian Villanueva and, later, to Pio Sian
Melliza.

The point at issue here is then the true intention of the parties as to the object of the public instrument
Exhibit "D". Said issue revolves on the paragraph of the public instrument aforequoted and its
purpose, i.e., whether it was intended merely to further describe the lots already specifically
mentioned, or whether it was intended to cover other lots not yet specifically mentioned.

First of all, there is no question that the paramount intention of the parties was to provide Iloilo
municipality with lots sufficient or adequate in area for the construction of the Iloilo City hall site, with
its avenues and parks. For this matter, a previous donation for this purpose between the same parties
was revoked by them, because of inadequacy of the area of the lot donated.

Secondly, reading the public instrument in toto, with special reference to the paragraphs describing
the lots included in the sale, shows that said instrument describes four parcels of land by their lot
numbers and area; and then it goes on to further describe, not only those lots already mentioned, but
the lots object of the sale, by stating that said lots are the ones needed for the construction of the city
hall site, avenues and parks according to the Arellano plan. If the parties intended merely to cover the

10 | P a g e
specified lots — Lots 2, 5, 1214-C and 1214-D, there would scarcely have been any need for the next
paragraph, since these lots are already plainly and very clearly described by their respective lot
number and area. Said next paragraph does not really add to the clear description that was already
given to them in the previous one.

It is therefore the more reasonable interpretation, to view it as describing those other portions of land
contiguous to the lots aforementioned that, by reference to the Arellano plan, will be found needed for
the purpose at hand, the construction of the city hall site.

Appellant however challenges this view on the ground that the description of said other lots in the
aforequoted second paragraph of the public instrument would thereby be legally insufficient, because
the object would allegedly not be determinate as required by law.

Such contention fails on several counts. The requirement of the law that a sale must have for its
object a determinate thing, is fulfilled as long as, at the time the contract is entered into, the object of
the sale is capable of being made determinate without the necessity of a new or further agreement
between the parties (Art. 1273, old Civil Code; Art. 1460, New Civil Code). The specific mention of
some of the lots plus the statement that the lots object of the sale are the ones needed for city hall
site, avenues and parks, according to the Arellano plan, sufficiently provides a basis, as of the time of
the execution of the contract, for rendering determinate said lots without the need of a new and
further agreement of the parties.

The Arellano plan was in existence as early as 1928. As stated, the previous donation of land for city
hall site on November 27, 1931 was revoked on March 6, 1932 for being inadequate in area under
said Arellano plan. Appellant claims that although said plan existed, its metes and bounds were not
fixed until 1935, and thus it could not be a basis for determining the lots sold on November 15, 1932.
Appellant however fails to consider that the area needed under that plan for city hall site was then
already known; that the specific mention of some of the lots covered by the sale in effect fixed the
corresponding location of the city hall site under the plan; that, therefore, considering the said lots
specifically mentioned in the public instrument Exhibit "D", and the projected city hall site, with its
area, as then shown in the Arellano plan (Exhibit 2), it could be determined which, and how much of
the portions of land contiguous to those specifically named, were needed for the construction of the
city hall site.

And, moreover, there is no question either that Lot 1214-B is contiguous to Lots 1214-C and 1214-D,
admittedly covered by the public instrument. It is stipulated that, after execution of the contract Exhibit
"D", the Municipality of Iloilo possessed it together with the other lots sold. It sits practically in the
heart of the city hall site. Furthermore, Pio Sian Melliza, from the stipulation of facts, was the notary
public of the public instrument. As such, he was aware of its terms. Said instrument was also
registered with the Register of Deeds and such registration was annotated at the back of the
corresponding title certificate of Juliana Melliza. From these stipulated facts, it can be inferred that Pio
Sian Melliza knew of the aforesaid terms of the instrument or is chargeable with knowledge of them;
that knowing so, he should have examined the Arellano plan in relation to the public instrument
Exhibit "D"; that, furthermore, he should have taken notice of the possession first by the Municipality
of Iloilo, then by the City of Iloilo and later by the University of the Philippines of Lot 1214-B as part of
the city hall site conveyed under that public instrument, and raised proper objections thereto if it was
his position that the same was not included in the same. The fact remains that, instead, for twenty
long years, Pio Sian Melliza and his predecessors-in-interest, did not object to said possession, nor
exercise any act of possession over Lot 1214-B. Applying, therefore, principles of civil law, as well as
laches, estoppel, and equity, said lot must necessarily be deemed included in the conveyance in
favor of Iloilo municipality, now Iloilo City.

WHEREFORE, the decision appealed from is affirmed insofar as it affirms that of the Court of First
Instance, and the complaint in this case is dismissed. No costs. So ordered.

Reyes, J.B.L., Actg. C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ.,
concur.
Concepcion , C.J., is on leave.

Republic of the Philippines

SUPREME COURT
Manila

11 | P a g e
 SECOND DIVISION

G.R. No. 135634 May 31, 2000

HEIRS OF JUAN SAN ANDRES (VICTOR S. ZIGA) and SALVACION S. TRIA, petitioners,
vs.
VICENTE RODRIGUEZ, respondent.

MENDOZA, J.:

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, Naga City, Branch 19, in Civil Case No. 87-1335, as well as the
appellate court's resolution denying reconsideration.

The antecedent facts are as follows:

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, consisting of 345 square meters, to respondent
Vicente S. Rodriguez for P2,415.00. The sale is evidenced by a Deed of Sale. 2

Upon the death of Juan San Andres on May 5, 1965, Ramon San Andres was appointed judicial
administrator of the decedent's estate in Special Proceedings No. R-21, RTC, Branch 19, Naga City.
Ramon San Andres engaged the services of a geodetic engineer, Jose 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 respondent. From the result of the survey, it was found that respondent had
enlarged the area which he purchased from the late Juan San Andres by 509 square meters. 3

Accordingly, the judicial administrator sent a letter, 4 dated July 27, 1987, to respondent demanding
that the latter vacate the portion allegedly encroached by him. However, respondent refused to do so,
claiming he had purchased the same from the late Juan San Andres. Thereafter, on November 24,
1987, the judicial administrator brought an action, in behalf of the estate of Juan San Andres, for
recovery of possession of the 509-square meter lot.

In his Re-amended Answer filed on February 6, 1989, respondent alleged that apart from the 345-
square meter lot which had been sold to him by 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 meters,
with both parties treating the two lots as one whole parcel with a total area of 854 square meters.
Respondent alleged that the full payment of the 509-square meter lot would be effected within five (5)
years from the execution of a formal deed of sale after a survey is conducted over said property. He
further alleged that with the consent of the former owner, Juan San Andres, he took possession of the
same and introduced improvements thereon as early as 1964.

As proof of the sale to him of 509 square meters, respondent attached to his answer a receipt (Exh.
2) 5 signed by the late Juan San Andres, which reads in full as follows:

Received from Vicente Rodriguez the sum of Five Hundred (P500.00) Pesos
representing an advance payment for a residential lot adjoining his previously paid lot
on three sides excepting on the frontage with the agreed price of Fifteen (15.00) Pesos
per square meter and the payment of the full consideration based on a survey shall be
due and payable in five (5) years period from the execution of the formal deed of sale;
and it is agreed that the expenses of survey and its approval by the Bureau of Lands
shall be borne by Mr. Rodriguez.

Naga City, September 29, 1964.

(Sgd.)

JUAN R. SAN
ANDRES

12 | P a g e
 Vendor

Noted:

(Sgd.)

VICENTE RODRIGUEZ

Vendee

Respondent also attached to his answer a letter of judicial administrator Ramon San Andres
(Exh. 3), 6asking payment of the balance of the purchase price. The letter reads:

Dear Inting,

Please accommodate my request for Three Hundred (P300.00) Pesos as I am in need

of funds as I intimated to you the other day.

We will just adjust it with whatever balance you have payable to the subdivision.

Thanks.

Sincerely,

(Sgd.)

RAMON SAN ANDRES

Vicente Rodriguez

Penafrancia Subdivision, Naga

City

P.S.

You can let bearer Enrique del Castillo sign for the amount.

Received One Hundred Only

(Sgd.)

RAMON SAN ANDRES

3/30/66

Respondent deposited in court the balance of the purchase price amounting to P7,035.00 for the
aforesaid 509-square meter lot.

While the proceedings were pending, judicial administrator Ramon San Andres died and was
substituted by his son Ricardo San Andres. On the other band, respondent Vicente Rodriguez died
on August 15, 1989 and was substituted by his heirs. 7

Petitioner, as plaintiff, presented two witnesses. The first witness, Engr. Jose Peñero, 8 testified that
based on his survey conducted sometime between 1982 and 1985, respondent had enlarged the
area which he purchased from the late Juan San Andres by 509 square meters belonging to the
latter's estate. According to Peñero, the titled property (Exh. A-5) of respondent was enclosed with a
fence with metal holes and barbed wire, while the expanded area was fenced with barbed wire and
bamboo and light materials.

The second witness, Ricardo San Andres, 9 administrator of the estate, testified that respondent had
not filed any claim before Special 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 former administrator,
13 | P a g e
Ramon San Andres. Finally, he declared that the expanded portion occupied by the family of
respondent is now enclosed with barbed wire fence unlike before where it was found without fence.

On the other hand, Bibiana B. Rodriguez, 10 widow of respondent Vicente Rodriguez, testified that
they had purchased the subject lot from Juan San Andres, who was their compadre, on September
29, 1964, at P15.00 per square meter. According to her, they gave P500.00 to the late Juan San
Andres who later affixed his signature to Exhibit 2. She added 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 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 B. Rodriquez stated that they had been in
possession of the 509-square meter lot since 1964 when the late Juan San Andres signed the
receipt. (Exh. 2) Lastly, she testified that they did not know at that time the exact area sold to them
because they were told that the same would be known after the survey of the subject lot.

On September 20, 1994, the trial court 11 rendered judgment in favor of petitioner. It ruled that there
was no contract of sale to speak of for lack of a valid object because there was no sufficient indication
in Exhibit 2 to identify the property subject of the sale, hence, the need to execute a new contract.

Respondent appealed to the Court of Appeals, which on April 21, 1998 rendered a decision reversing
the decision of the trial court. The appellate court held that the object of the contract was
determinable, and that there was a conditional sale with the balance of the purchase price payable
within five years from the execution of the deed of sale. The dispositive portion of its decision's reads:

IN VIEW OF ALL THE FOREGOING, the judgment appealed from is hereby

REVERSED and SET ASIDE and a new one entered DISMISSING the complaint and
rendering judgment against the plaintiff-appellee:

1. to accept the P7,035.00 representing the balance of the purchase price of the portion
and which is deposited in court under Official Receipt No. 105754 (page 122, Records);

2. to execute the formal deed of sale over the said 509 square meter portion of Lot
1914-B-2 in favor of appellant Vicente Rodriguez;

3. to pay the defendant-appellant the amount of P50,000.00 as damages and

P10,000.00 attorney's fees as stipulated by them during the trial of this case; and

4. to pay the costs of the suit.

SO ORDERED.

Hence, this petition. Petitioner assigns the following errors as having been allegedly committed by the
trial court:

I. THE HON. COURT OF APPEALS ERRED IN HOLDING THAT THE

DOCUMENT (EXHIBIT "2") IS A CONTRACT TO SELL DESPITE ITS
LACKING ONE OF THE ESSENTIAL ELEMENTS OF A CONTRACT,
NAMELY, OBJECT CERTAIN AND SUFFICIENTLY DESCRIBED.

II. THE HON. COURT OF APPEALS ERRED IN HOLDING THAT

PETITIONER IS OBLIGED TO HONOR THE PURPORTED CONTRACT
TO SELL DESPITE NON-FULFILLMENT BY RESPONDENT OF THE
CONDITION THEREIN OF PAYMENT OF THE BALANCE OF THE
PURCHASE PRICE.

III. THE HON. COURT OF APPEALS ERRED IN HOLDING THAT

CONSIGNATION WAS VALID DESPITE NON-COMPLIANCE WITH THE
MANDATORY REQUIREMENTS THEREOF.

IV. THE HON. COURT OF APPEALS ERRED IN HOLDING THAT

LACHES AND PRESCRIPTION DO NOT APPLY TO RESPONDENT
WHO SOUGHT INDIRECTLY TO ENFORCE THE PURPORTED
CONTRACT AFTER THE LAPSE OF 24 YEARS.

14 | P a g e
The petition has no merit.

First. Art. 1458 of the Civil Code provides:

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

A contract of sale may be absolute or conditional.

As thus defined, the essential elements of sale are the following:

a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange
for the price;

b) Determinate subject matter; and,

c) Price certain in money or its equivalent. 12

As shown in the receipt, dated September 29, 1964, the late Juan San Andres received P500.00 from
respondent as "advance payment for the residential lot adjoining his previously paid lot on three sides
excepting on the frontage; the agreed purchase price was P15.00 per square meter; and the full
amount of the purchase price was to be based on the results of a survey and would be due and
payable in five (5) years from the execution of a deed of sale.

Petitioner contends, however, that the "property subject of the sale was not described with sufficient
certainty such that there is a necessity of another agreement between the parties to finally ascertain
the identity; size and purchase price of the property which is the object of the alleged sale." 1 He
argues that the "quantity of the object is not determinate as in fact a survey is needed to determine its
exact size and the full purchase price therefor" 14 In support of his contention, petitioner cites the
following provisions of the Civil Code:

Art. 1349. The object of every contract must be determinate as to its kind. The fact that
the quantity is not determinable shall not be an obstacle to the existence of a contract,
provided it is possible to determine the same without the need of a new contract
between the parties.

Art. 1460. . . . The requisite that a thing be determinate is satisfied if at the time the
contract is entered into, the thing is capable of being made determinate without the
necessity of a new and further agreement between the parties.

Petitioner's contention is without merit. There is no dispute that respondent purchased a portion of Lot
1914-B-2 consisting of 345 square 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 receipt as the
"previously paid lot." Since the lot subsequently sold to respondent is said to adjoin the "previously
paid lot" on three sides thereof, the subject lot is capable of being determined without the need of any
new contract. The fact that the exact area of these adjoining residential lots is subject to the result of
a survey does not detract from the fact that they are determinate or determinable. As the Court of
Appeals explained: 15

Concomitantly, the object of the sale is certain and determinate. Under Article 1460 of
the New Civil Code, a thing sold is determinate if at the time the contract is entered into,
the thing is capable of being determinate without necessity of a new or further
agreement between the parties. Here, this definition finds realization.

Appellee's Exhibit "A" (page 4, Records) affirmingly shows that the original 345 sq. m.
portion earlier sold lies at the middle of Lot 1914-B-2 surrounded by the remaining
portion of the said Lot 1914-B-2 on three (3) sides, in the east, in the west and in the
north. The northern boundary is a 12 meter road. Conclusively, therefore, this is the only
remaining 509 sq. m. portion of Lot 1914-B-2 surrounding the 345 sq. m. lot initially
purchased by Rodriguez. It is quite difined, determinate and certain. Withal, this is the
same portion adjunctively occupied and possessed by Rodriguez since September 29,

15 | P a g e
 1964, unperturbed by anyone for over twenty (20) years until appellee instituted this
suit.

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 virtue of which the late Juan San Andres undertook to transfer
ownership of and to deliver a determinate thing for a price certain in money. As Art. 1475 of the Civil
Code provides:

The contract of sale is perfected at the moment there is a meeting of minds upon the
thing which is the object of the contract and upon the price. . . .

That the contract of sale is perfected was confirmed by the former administrator of the estates,
Ramon San Andres, who wrote a letter to respondent on March 30, 1966 asking for P300.00 as
partial payment for the subject lot. As the Court of Appeals observed:

Without any doubt, the receipt profoundly speaks of a meeting of the mind between San
Andres and Rodriguez for the sale of the property adjoining the 345 square meter
portion previously sold to Rodriguez on its three (3) sides excepting the frontage. The
price is certain, which is P15.00 per square meter. Evidently, this is a perfected contract
of sale on a deferred payment of the purchase price. All the pre-requisite elements for a
valid purchase transaction are present. Sale does not require any formal document for
its existence and validity. And delivery of possession of land sold is a consummation of
the sale (Galar vs. Husain, 20 SCRA 186 [1967]). A private deed of sale is a valid
contract between the parties (Carbonell v. CA, 69 SCRA 99 [1976]).

In the same vein, after the late Juan R. San Andres received the P500.00 downpayment
on March 30, 1966, Ramon R. San Andres wrote a letter to Rodriguez and received
from Rodriguez the amount of P100.00 (although P300.00 was being requested)
deductible from the purchase price of the subject portion. Enrique del Castillo, Ramon's
authorized agent, correspondingly signed the receipt for the P100.00. Surely, this is
explicitly a veritable proof of he sale over the remaining portion of Lot 1914-B-2 and a
confirmation by Ramon San Andres of the existence thereof. 16

There is a need, however, to clarify what the Court of Appeals said is a conditional contract of sale.
Apparently, the appellate court considered as a "condition" the stipulation of the parties that the full
consideration, based on a survey of the lot, would be due and payable within five (5) years from the
execution of a formal deed of sale. It is evident from the stipulations in the receipt that the vendor
Juan San Andres sold the residential lot in question to respondent and undertook to transfer the
ownership thereof to respondent without any qualification, reservation or condition. In Ang Yu
Asuncion v. Court of Appeals, 17 we held:

In Dignos v. Court of Appeals (158 SCRA 375), we have said that, although
denominated a "Deed of Conditional Sale," a sale is still absolute where the contract is
devoid of any proviso that title is reserved or the right to unilaterally rescind is
stipulated, e.g., until or unless the price is paid. Ownership will then be transferred to
the buyer upon actual or constructive delivery (e.g., by the execution of a public
document) of the property sold. Where the condition is imposed upon the perfection of
the contract itself, the failure of the condition would prevent such perfection. If the
condition is imposed on the obligation of a party which is not fulfilled, the other party
may either waive the condition or refuse to proceed with the sale. (Art. 1545, Civil
Code).

Thus, in. one case, when the sellers declared in a "Receipt of Down Payment" that they received an
amount as purchase price for a house and lot without any reservation of title until full payment of the
entire purchase price, the implication was that they sold their property. 18 In People's Industrial
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.

16 | P a g e
Applying these principles to this case, it cannot be gainsaid that the contract of sale between the
parties is absolute, not conditional. There is no reservation of ownership nor a stipulation providing for
a unilateral rescission by either party. In fact, the sale was consummated upon the delivery of the lot
to respondent. 20 Thus, Art. 1477 provides that the ownership of the thing sold shall be transferred to
the vendee upon the actual or constructive delivery thereof.

The stipulation that the "payment of the full consideration based on a survey shall be due and
payable in five (5) years from the execution of a formal deed of sale" is not a condition which affects
the efficacy of the contract of sale. It merely provides the manner by which the full consideration is to
be computed and the time within which the same is to be paid. But it does not affect in any manner
the effectivity of the contract. Consequently, the contention that the absence of a formal deed of sale
stipulated in the receipt prevents the happening of a sale has no merit.

Second. With respect to the contention that the Court of Appeals erred in upholding the validity of a
consignation of P7,035.00 representing the balance of the purchase price of the lot, nowhere in the
decision of the appellate court is there any mention of consignation. Under Art. 1257 of this Civil
Code, consignation is proper only in cases where an existing obligation is due. In this case, however,
the contracting parties agreed that full payment of purchase price shall be due and payable within five
(5) years from the execution of a formal deed of sale. At the time respondent deposited the amount of
P7,035.00 in the court, no formal deed of sale had yet been executed by the parties, and, therefore,
the five-year period during which the purchase price should be paid had not commenced. In short, the
purchase price was not yet due and payable.

This is not to say, however, that the deposit of the purchase price in the court is erroneous. The Court
of Appeals correctly ordered the execution of a deed of sale and petitioners to accept the amount
deposited by respondent.

Third. The claim of petitioners that the price of P7,035.00 is iniquitous is untenable. The amount is
based on the agreement of the parties as evidenced by the receipt (Exh. 2). Time and again, we have
stressed the rule that a contract is the law between the parties, and courts have no choice but to
enforce such contract so long as they are not contrary to law, morals, good customs or public policy.
Otherwise, court would be interfering with the freedom of contract of the parties. Simply put, courts
cannot stipulate for the parties nor amend the latter's agreement, for to do so would be to alter 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.

Fourth. Finally, petitioners argue that respondent is barred by prescription and laches from enforcing
the contract. This contention is likewise untenable. 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 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 deemed it appropriate to deposit the balance of the purchase price in
court. Accordingly, Art. 1144 of the Civil Code has no application to the instant case. 21 Considering
that a survey of the lot has already been conducted and approved by the Bureau of Lands,
respondent's heirs, assign or successors-in-interest should reimburse the expenses incurred by
herein petitioners, pursuant to the provisions of the contract.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with the modification that
respondent is ORDERED to reimburse petitioners for the expenses of the survey.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 108169 August 25, 1999

SPOUSES VENANCIO DAVID and PATRICIA MIRANDA DAVID and FLORENCIA VENTURA
VDA. DE BASCO,petitioners,

17 | P a g e
vs.
ALEJANDRO and GUADALUPE TIONGSON, respondents.

PARDO, J.:

Before the Court is a petition for review on certiorari of the decision of the Court of Appeals 1 modifying
that of the trial court2 in an action for specific performance with damages filed by petitioners against
respondents.

The facts are as follows:

On February 23, 1989, three sets of plaintiffs, namely, spouses Feliciano and Macaria Ventura,
spouses Venancio and Patricia David and Florencia Ventura Vda. de Basco, filed with the Regional
Trial Court, San Fernando, Pampanga, a complaint for specific performance with damages, against
private respondents spouses Alejandro and Guadalupe Tiongson, alleging that the latter sold to them
lots located in Cabalantian, Bacolor, Pampanga, as follows:

(a) a parcel of residential land with an area of 300 square meters (sq. m.), more or less, for a
total purchase price of P16,500.00, sold to spouses Feliciano and Macaria Ventura;

(b) a parcel of land consisting of 308 sq.m., more or less, which is a portion of Lot No. 1547-G-
2-G covered by TCT No. 187751-R, for a total consideration of P15,000.00, sold to spouses
Venancio and Patricia M. David;

(c) two parcels of land with a total area of 169 sq. m., 109 sq. m., which is a portion of Lot No.
1547-G-2-G and a 60 sq. m., which is part of a lot covered by TCT No. 200835-R, for a total
consideration of P10,400.00, sold to Florencia Ventura Vda. de Basco.

The parties expressly agreed that as soon as the plaintiffs fully paid the purchase price on their
respective lots, respondents would execute an individual deed of absolute sale and cause the
issuance of the corresponding certificate of title in plaintiffs' favor.

Spouses Ventura immediately took possession of the lot, erected their house thereon and fenced the
perimeters. As of October 28, 1985, the Venturas had fully paid the price of their lot, evidenced by a
certification3 issued by Alejandro Tiongson. Sometime in November 1985, the Venturas demanded
the execution of a deed of sale and the issuance of the corresponding certificate of title, but the latter
refused to issue the same.

Spouses David claimed that, as agreed by the parties, the P15,000.00 purchase price would be paid
as follows: P3,800.00, as downpayment and a monthly amortization of P365.00, starting on March 8,
1983, until fully paid. On October 31, 1985, the Davids had paid a total of P15,050.00, evidenced by
the receipts issued by Alejandro Tiongson. 4 On the first week of November 1985, the Davids
demanded the execution of a deed of sale and the issuance of the corresponding certificate of title,
but respondents refused. Unlike the Venturas, they were not able to take possession of the property.

Plaintiff Florencia Ventura Vda. de Basco averred that she bought two parcels of land, a 109 sq. m.
lot and a 60 sq. m. lot, for P6,425.00 and P6,500.00, respectively. As of February 6, 1984, Florencia
had paid P12,945.00 for the two lots, evidenced by receipts issued by Alejandro
Tiongson.5 Sometime in March 1984, she demanded the execution of the deeds of sale and issuance
of the corresponding certificates of title over the lots. However, respondents failed to comply with their
obligation.

After no settlement was reached at the barangay level, on February 23, 1989, plaintiffs filed a
complaint with the Regional Trial Court, San Fernando, Pampanga, for specific performance with
damages. On April 18, 1989, upon motion of the plaintiffs, respondents Tiongsons were declared in
default for failure to file their answer, despite the fifteen (15) days extension granted by the trial
court.1âwphi1.nêt

On June 14, 1989, the trial court rendered a decision, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and
against the defendants:

18 | P a g e
 1) Ordering the defendants to execute the deeds of absolute sale covering the lots
respectively sold to plaintiffs and to cause the issuance of the title covering the
aforesaid lots at their own expense;

2) Ordering the defendants to pay unto the plaintiffs P15,000.00 as moral damages.

Defendants are likewise ordered to pay the costs of suit.6

Respondents Tiongsons appealed the decision to the Court of Appeals. They claimed that their failure
to file an answer in due time amounted to excusable negligence. 7 They contended that the plaintiffs
had not fully paid the agreed price of P120 per sq. m. They argued that the Venturas were still in
arrears for P30,000.00, the Davids for P21,000.00 and Florencia for P9,880.00. Hence, the deeds of
sale and certificates of title were not issued.

On October 19, 1992, the Court of Appeals 8 modified the trial court's decision. Although it blamed
respondents for their failure to file an answer in due time, it held that there was no perfected contracts
of sale entered into by the Davids and Florencia Vda. de Basco with respondents. However, the Court
of Appeals upheld the sale involving the Venturas and ordered respondents to execute a deed of sale
and cause the issuance of the corresponding certificate of title in Venturas' favor.

With respect to spouses David, the Court of Appeals said that there was no agreement as to the
price, as well as the manner and time of payment of the installments. It held that Patricia David's
testimony regarding the price, P15,000.00, payable in monthly installments of P365.00, contradicted a
receipt stating: ". . . the balance to be paid on installment to be agreed upon later on." 9 The appellate
court referred to another receipt10 wherein only P300.00 was paid but with the following statement —
"Subject to further discussion later on." It stated that there was no agreement as to the price, since it
was subject to further discussion by the parties. It held that the P115.00 overpayment 11 illustrate the
lack of an agreed price. The receipts failed to state the total purchase price or prove that full payment
was made. Thus, there was no meeting of minds regarding the price. Consequently, there was no
perfected contract of sale.

In ruling against the Davids, the Court of Appeals applied the doctrine in Yuvienco v. Dacuycuy12 that
in sale of real property on installments, the statute of frauds read together with the requirements of
Article 1475, must be understood and applied in the sense that the payment on installments must be
in the requisite form of a note or memorandum. In other words, there must be a note or memorandum
evidencing the agreement to pay on installment, otherwise, the contract is unenforceable under the
statute of frauds. In the instant case, the agreement to pay in installment was not reduced in writing.

As regards Florencia Ventura Vda. de Basco, the Court of Appeals ruled that there was no meeting of
the minds with regard to both object and consideration of the contract. It held that the 109 sq. m. lot
could not be specifically determined or identified by the parties.

As to the sixty (60) sq. m. lot, the Court of Appeals held that the object was not determinate nor
determinable. Assuming arguendo that the lot was determinate or determinable, the Court of Appeals
held that there was no purchase price agreed upon. The receipts indicated a price of P70.00 per sq.
m., or a total of P4,200.00. However, Florencia paid P6,500.00 for the lot. The discrepancy between
Florencia's claim of full payment and the last receipt 13 stating that only a partial payment was made,
bolstered the finding that there was no agreed price.

The Court of Appeals, however, upheld the contract of sale with respect to the spouses Ventura. It
held that the Venturas had fully paid for the lot, evidenced by the certification issued by Alejandro
Tiongson. There was also actual delivery when the Venturas took possession, erected their house
thereon and fenced the perimeters.

The Court of Appeals decreed as follows:

PREMISES CONSIDERED, the appealed decision is hereby MODIFIED. The contracts of sale
not having been perfected between plaintiff-appellee spouses Venancio and Patricia M. David,
and plaintiff-appellee Florencia Ventura Vda. de Basco (vendees) and defendant-appellants
Alejandro and Guadalupe D. Tiongson (vendors), hence, inefficacious, the former's action for
specific performance must fail, but defendants-appellants must return to plaintiffs-appellees
spouses Venancio and Patricia David the amount of fifteen thousand one hundred fifteen

19 | P a g e
 pesos (P15,115.00) and to plaintiff-appellee Florencia Ventura Vda. de Basco, the amount of
twelve thousand nine hundred twenty five pesos (P12,925.00) with legal interest from the time
of the filing of the complaint until the return of the said amounts.

As to plaintiff-appellee spouses Feliciano and Macaria Ventura, the decision of the court a
quo is AFFIRMED. We hereby order: (a) Plaintiff-appellee spouses Feliciano and Macaria
Ventura to have the lot purchased by them segregated by a licensed surveyor from the rest of
the Lot 8 described in TCT No. 200835-R and to have the corresponding subdivision plan, duly
approved by the Land Registration Authority, submitted to the court of origin for approval; (b)
the defendants-appellants Alejandro and Guadalupe D. Tiongson to be divested of their title to
the lot purchased under Rule 39, Section 10, Rules of Court; and (c) the Register of Deeds of
Pampanga to cancel TCT No. 200835-R and issue, in lieu thereof, one title to the names of
Feliciano and Macaria Ventura for the lot they purchased another title in the names of
Alejandro and Guadalupe D. Tiongson.

In the light of the above, moral damages in the amount of three thousand pesos (P3,000.00) to
be paid to plaintiffs-appellees Feliciano and Macaria Ventura by defendant-appellant spouses
Tiongson is considered fair and reasonable. Without costs.14

On November 6, 1992, Venancio and Patricia M. David and Florencia Ventura Vda. de Basco filed a
motion for reconsideration of the foregoing decision. On December 11, 1992, the Court of Appeals
denied the motion.15

Hence, this petition for review.

We shall discuss the sales transactions between petitioners and respondents in seriatim.

As to the Spouses Venancio and Patricia David

Petitioners Davids contend that there was an implied agreement on the price and manner of
installment payments. The receipts issued by respondents and Patricia David's testimony clearly
indicate the agreement.

We disagree with the finding of the Court of Appeals that there was no agreement as to the price of
the lots. The Court of Appeals relied heavily on the receipts issued by Alejandro Tiongson. However,
Patricia David testified that there was an agreement to purchase the lot for P15,000.00, payable as
follows: P3,800.00 as down payment, with P385.00 monthly installments thereafter. 16 The
respondents failed to rebut such declaration, as the default order rendered them without personality
to adduce evidence in their behalf.

However, in the brief filed with the appellate court, the Tiongsons alleged that the agreed price
was P120.00 per sq. m. Hence, they are now estopped to deny the existence of an agreed
price. The question to be determined should not be whether there was an agreed price, but
what that agreed price was, whether for a total of P15,000.00, as claimed by the Davids or
P120.00 per sq. m., as alleged by respondents. The sellers could not render invalid a
perfected contract of sale by merely contradicting the buyers' allegation regarding the price,
and subsequently raising the lack of agreement as to the price.

It is a fact that for three consecutive years, the Davids had religiously paid P385.00 as monthly
installments, until it amounted to P15,050.00, including the downpayment. As to the first installment
receipt, wherein only P300.00 was paid and a notation was written, to wit — "Subject to further
discussion later on," Patricia David explained that what was subject to further discussion was not the
total purchase price, but only the P65.00 underpayment.

The Court of Appeals held that the P115.00 overpayment confirmed the lack of agreement as to the
price. However, the receipts showed that Davids paid only P15,050.00. It perplexes this Court how
the appellate court came up with the P15,115.00 figure. At any rate, an overpayment of P50.00, as in
this case, does not negate the existence of an agreed purchase price. Instead, this entitles the buyer
to claim reimbursement of any overpayment made.

20 | P a g e
Furthermore, the Court of Appeals erred in applying the statute of frauds. The rule presupposes the
existence of a perfected contract and requires only that a note or memorandum be executed in order
to compel judicial enforcement thereof.17

At any rate, we rule that there was a perfected contract. However, the statute of frauds is
inapplicable. The rule is settled that the statute of frauds applies only to executory and not to
completed, executed, or partially executed contracts. 18 In the case of spouses David, the payments
made rendered the sales contract beyond the ambit of the statute of frauds.

The Court of Appeals erred in concluding that there was no perfected contract of sale. However, in
view of the stipulation of the parties that the deed of sale and corresponding certificate of title would
be issued after full payment, then, they had entered into a contract to sell and not a contract of sale. 19

As to Florencia Ventura Vda. de Basco

Petitioner Florencia Ventura Vda. de Basco contends that the receipts described the two (2) lots that
she bought. The receipts also indicated the price of each lot, to wit, P6,425.00 for the 109 sq. m. lot,
and P6,500.00 for the 60 sq. m. lot.

As regards the 109 sq. m. lot, Florencia presented the following receipts as evidence of full payment:

Received from Mrs. Florencia Ventura-Basco of Cabalantian, Bacolor Pampanga, the sum of
FIVE HUNDRED PESOS (P500.00), Philippine Currency, as additional partial payment on the
parcel of land located at Cabalantian, Bacolor Pampanga, being the portion of Lot 1547-G-2-G
of Psd-03-004803.

It is understood that this lot is the portion formerly earmarked for Mrs. Rosita Ventura-Muslan
wherein she already paid the sum of P1,500.00; hence, by agreement of Mrs. Basco and Mrs.
Muslan, who are sisters, the sum of P1,500.00 are applied herein as additional payment for
and in behalf of Mrs. Basco, thereby making the total payments made by Mrs. Basco to said lot
in the sum of P2,000.00, as of this date.

San Fernando, Pampanga, June 4, 1983.

(signed)

C O N F O R M E:

ALEJANDRO C. TIONGSON
(signed)

FLORENCIA VENTURA-BASCO
(signed)

ROSITA VENTURA-MUSLAN20

Received from Mrs. Florencia Ventura-Basco of Cabalantian, Bacolor Pampanga, the sum of FOUR
THOUSAND FOUR HUNDRED TWENTY FIVE PESOS (P4,425.00), Philippine Currency,
representing the last and full payment on the purchase price of Lot 1547-G-2-G-2, Plan Psd-03-
05957, located at Cabalantian, Bacolor Pampanga, with an area of 109 square meters, more or less,
as regards the sum of P3,625 and the sum of P800.00 applied for the payment of the segregation
survey of said lot.

Title over this lot shall be issued upon the survey and segregation of the additional portion which Mrs.
Florencia V. Basco is also buying to be taken from Lot 1547-G-2-G-I, wherein the said portion of said
Lot 1547-G-2-G-2 shall be consolidated into one lot only at the expense of the buyer.

San Fernando, Pampanga, September 1, 1983.

C O N F O R M E: FOR ALEJANDRO TIONGSON

Seller

21 | P a g e
 (signed) By: (signed)
FLORENCIA VENTURA-BASCO PORFIRIO C. PINEDA
Buyer21

According to the Court of Appeals, the object is neither determinate nor determinable. It held that the
receipts described two different lots, one described as Psd-03-004803, while the other as Psd-03-
05957. It stated that the discrepancy showed there was no meeting of the minds as regards the
object of the contract.

We disagree. We find that the 109 sq. m. lot was adequately described in the receipt, or at least, can
be easily determinable. The receipt issued on June 4, 1983 stated that the lot being purchased by
Florencia was the one earlier earmarked for her sister, Rosita Muslan. Thus, the subject lot is
determinable. Any mistake in the designation of the lot does not vitiate the consent of the parties or
affect the validity and binding effect of the contract of sale. 22The receipt issued on September 1, 1983
clearly described the lot area as 109 sq. m. It also showed that Florencia had fully paid the purchase
price.

With respect to the sixty (60) sq. m. lot, Florencia presented the following receipts to prove full
payment:

Received from Mrs. Florencia Basco of Cabalantian, Bacolor, Pampanga, the sum of THREE
THOUSAND PESOS (P3,000.00), Philippine Currency, as partial and down payment on the
purchase price of the additional portion adjacent to Lot 1547-G-2-G. The price on this portion
shall be computed at P70.00 per square meter, and said portion shall be determined later as to
its area, but in no case shall it be extended farther than the gate opening at Juan Cunanan's
lot and the acacia tree on the north.

San Fernando, Pampanga, November 8, 1983.

(signed)

ALEJANDRO TIONGSON
Seller

xxx xxx xxx

Received from Mrs. Florencia Basco of Cabalantian, Bacolor, Pampanga, the sum of ONE
THOUSAND PESOS (P1,000.00), Philippine Currency, as partial and down payment on a
portion of Lot 1547-G-2-I, which is a portion of Lot 6 of the provisional plan with marking of Lot
35 on the sketch plan. The price shall be computed at P70.00 per square meter. The final area
shall be determined in the final survey to be conducted.

This portion shall be across the road opposite the portion of same lot purchased by Macaria
Ventura.

San Fernando, Pampanga, November 8, 1983.

(signed)

ALEJANDRO TIONGSON
Seller

xxx xxx xxx

Received from Mrs. Florencia Basco of Cabalantian, Bacolor, Pampanga, the sum of TWO
THOUSAND FIVE HUNDRED PESOS (P2,500.00), to be applied as partial payment on the
purchase price of Lots 8-A (60 square meters), computed at P70.00 and Lot 6-U (338 square
meters), computed at P70.00 per square meter.

San Fernando, Pampanga, February 6, 1984.

(signed)
22 | P a g e
 ALEJANDRO TIONGSON
Seller23

Regarding this lot, we find that there was also a perfected contract of sale. In fact, in the last receipt
the parties agreed on the specific lot area. This suffices to identify the specific lot involved. It was
unnecessary for the parties to enter into another agreement to determine the exact property bought.
What remained to be done was the actual segregation of the 60 square meters.

Furthermore, the parties agreed on the price. The receipts clearly indicate the price as P70.00 per sq.
m., hence the total price should be P4,200.00. However, Florencia paid P6,500.00 for the lot. Hence,
there was even an overpayment of P2,300.00.

WHEREFORE, we REVERSE and SET ASIDE the decision of the Court of Appeals in CA — G.R. CV
No. 24667. In lieu thereof, we render judgment ordering the respondents Tiongsons to execute deeds
of absolute sale covering the following lots respectively sold to petitioners, and cause the issuance of
the corresponding certificates of title, to wit:

1. 300 sq. m. lot sold to spouses Venancio and Patricia David;

2. 109 sq. m. lot sold to Florencia Ventura Vda. de Basco.

With respect to the 60 sq. m. lot sold to Florencia Ventura Vda. de Basco, respondent Tiongson is
ordered to cause the segregation of the lot, and thereafter, to execute a deed of absolute sale to
Florencia Ventura Vda. de Basco and cause the issuance of a certificate of title thereto.

We delete the award for moral damages, for lack of basis.1âwphi1.nêt

No costs.

SO ORDERED.

Art. 1352 – Contracts without or with unlawful cause

50. Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-14997 February 16, 1920

TEODORO VELEZ, ET AL., plaintiffs-appellants,

vs.
SALOMON RAMAS, ET AL., defendants-appellees.

Del Rosario and Del Rosario for appellants.

Block, Johnston and Greenbaum for appellees.

STREET, J.:

This action was instituted in the Court of First Instance of the Province of Cebu by the plaintiff,
Teodoro Velez, and his wife, Hermenegilda Chiong Veloso, to recover of the defendants, Salomon
Ramas and Roberto Quirante, a sum of money evidenced by a written obligation signed by said
defendants under date of July 30, 1917, wherein they acknowledged themselves to be jointly and
severally bound for the payment to the plaintiff of the sum of P2,303,60. It is admitted that the
defendant Ramas had paid P300 upon said obligation prior to the institution of the suit, leaving a
balance due of P2,003.60. Salomon Ramas answered the complaint, admitting in effect the facts
alleged therein, and stating as his sole ground of defense that the alleged contract was illegal on its
face. This defendant further interposed a counterclaim, seeking to recover the P300 which he had
already paid. The defendant Roberto Quirante did not appear, and no defense was made for him.
When the case was submitted for decision the trial court sustained the defense, absolved both the
defendants from the complaint and gave judgment upon the counterclaim in favor of Salomon Ramas

23 | P a g e
jointly and severally against the plaintiffs for the sum of P300, with interest at the legal rate from the
date the answer was filed. From this judgment the plaintiffs appealed.

It appears in evidence that the defendant Roberto Quirante is the father of Restituta Quirante, who in
turn is the wife of the defendant Salomon Ramas. Prior to July 30, 1917, the plaintiffs, Teodoro Velez
and wife, were the owners of a pawnshop and had employed Restituta Quirante in some capacity or
other therein. While thus employed, Restituta Quirante abstracted various sums of money belonging
to the plaintiffs, amounting altogether to P2,303.60, under conditions which supposedly constituted
the offense of estafa. When this fact was discovered by the plaintiffs they threatened to prosecute
her, and in order to prevent his eventuality the contract in question was executed by the defendants.

The preliminary recitals and the principal obligatory clause of this contract are expressed in the
following terms:

Whereas, it was discovered that Restituta Quirante, being an employee of Teodoro Velez and
Hermenegilda Ch. Veloso, has illegally abstracted various sums of money entrusted to her for
safe-keeping, amounting altogether to P2,303.60 (two thousand three hundred and three
pesos and sixty centavos).

Whereas, in order to prevent said woman from being brought before the courts for the unlawful
act she has executed, the persons subscribing this document have guaranteed to the said
Teodoro Velez and Hermenegilda Ch. Veloso the payment of the aforesaid sum plus an
interest of 12 per cent per annum until fully paid.

Whereas, by virtue of the foregoing obligation, said Velez and Hermenegilda Ch. Veloso agree
to suspend the action they intend to bring against Restituta Quirante.

Therefore, we Salomon Ramos and Roberto Quirante, the first a resident of the city of Cebu
and the second of the municipality of Dumanjug of the same province, jointly and severally
bind ourselves to pay Teodoro Velez and Hermenegilda Ch. Veloso the aforementioned sum
of two thousand three hundred pesos and sixty centavos (P2,303.60) with interest.

We are of the opinion that the trial court was correct in the conclusion that an action cannot be
maintained upon this contract. The preliminary recitals clearly disclose the fact that the purpose of the
contracting parties was to prevent a prosecution for crime; and the injured parties, on their part, agree
to suspend the criminal proceedings which they had intended to promote. As regards the defendant
Roberto Quirante there was absolutely no other motive for making the contract than a desire to
prevent the prosecution of his daughter; and the only consideration in the legal sense for his promise
to pay was the engagement of the plaintiffs whereby they bound themselves to suspend criminal
proceedings. As regards the defendant Salomon Ramas, it might be supposed that the act of his wife,
Restituta Quirante, in embezzling the money of her employers created a civil debt which was binding
on him as a member of the community partnership and that he at any rate would be liable for that
money without reference to the contract. But that liability cannot be enforced in an action to which the
wife is not a party. It results that, even as against Ramas, this case must be decided on the question
of the legality, or illegality, of the contract sued on.

In our opinion the consideration for this agreement is clearly illicit, which fact is apparent on the face
of the contract; and the case is accordingly governed by article 1275 of the Civil Code.

There has been no period since contract law reach the stage of consciousness, when the maxim ex
turpi causa non oritur actio was not recognized. A contract based upon an unlawful consideration or
designed to promote an unlawful object is an always has been void ad initio by the common law, by
the civil law, moral law, and all laws whatsoever (Collins vs. Bantern, 2 Wils. C. Pl., 341.) It is
immaterial whether the illegal character of the contract is revealed in the matter of the consideration,
in the promise as expressed in the agreement, or in the purpose which the agreement, though legal in
expression, is intended to accomplish. if the illegality lurks in any element, or even subsists
exclusively in the purpose of the parties, it is fatal to the validity of the contract. (Manresa, Codigo
Civil, 2d ed., vol. 8, p. 685.)

By the universal consensus of judicial opinion in all ages it has been considered contrary to public
policy to allow parties to make agreements designed to prevent or stifle prosecutions for crime, It is
self-evident that the law cannot sanction an engagement which is subversive of the law itself or which

24 | P a g e
tends to weaken the foundations of human society. The machinery for the administration of justice
cannot be used to promote an unlawful purpose.

The case of Arroyo vs. Berwin (36 Phil. Rep., 386), would seem to be conclusive, as it is based upon
the doctrine above announced, and we see no just basis for discriminating between the facts there
involved and those here presented.

It seems to us that an arguable question might have been raised as to the propriety of allowing
Salomon Ramas to recover the P300 which he had in fact paid upon the contract in question; but the
point has not been made the subject of any assignment of error in this Court and must be passed
without discussion.

The action of the trial court in absolving the defendant Roberto Quirante, although he had made no
defense, was correct and is worthy of some comment as embodying a point of practice which should
be called to the attention of courts and practitioners. The rule is this: Where a complaint states a
common cause of action against several defendants and some appear to defend the case on the
merits while others make default, the defense interposed by those who appear to litigate the case
insures to the benefit of those who fail to appear; and if the court finds that a good defense has been
made, all of the defendants must be absolved. The proper mode of proceeding where a complaint
states a common cause of action against several defendants, and one of them makes default, is
simply to enter a formal default order against him, and proceed with the cause upon the answers of
the others. The defaulting defendant merely loses his standing in court, he not being entitled to the
service of notices in the cause, nor to appear in the suit in any way. He cannot adduce evidence; nor
can he be heard at the final hearing. If the case is finally decided in the plaintiff's favor, a final decree
is then entered against all the defendants; but if the suit should be decided against the plaintiff, the
action will be dismissed as to all the defendants alike. (Frow vs. De la Vega, 15 Wall., 552; 21 L. ed.,
60.)

For the reasons stated the judgment must be affirmed; and it is so ordered, with costs against the
appellants.

Arellano, C.J., Johnson, Malcolm and Avanceña, JJ., concur.

Separate Opinions

TORRES, J., dissenting:

The undersigned regrets that he has to dissent from the respectable opinion of the majority of this
court, affirming the judgment appealed from by accepting the stand taken by the trial judge.

Be it noted in the first place that the document marked as Exhibit A does not disclose nor express a
contract entered into between Restituta Quirante's father and husband, Roberto Quirante and
Salomon Ramas respectively, as parties to the first part, and the spouses Teodoro Velez and
Hermenegilda Ch. Veloso, as parties to the second part. The content of the document is an open and
spontaneous statement made by the aforesaid interested parties recognizing the crime committed by
the daughter and wife of those subscribing it to the damage and prejudice of the spouses Velez and
Veloso and an express acknowledgment of the amount defrauded or embezzled by the latter's
unfaithful employee, Restituta Quirante. As between the parties to said document, there has been no
agreement or stipulation to prevent the prosecution and punishment of a crime. The only fault which
might be imputed to the defrauded party is the fact of having accepted said document as sufficient
security for the payment and indemnification of the lump sum of which they were unlawfully deprived.

However, the aggrieved spouses not being lawyers, the foregoing fault cannot give rise to the fact
that, after having been the victims of the bad faith of their employee, they still find themselves obliged
to lose the money embezzled simply because of a certain species of complicity with the embezzler's
father and husband to the end of rendering her unpunished for the criminal act she has committed
against the offended spouses.

25 | P a g e
The presumption of complicity or of being an accessory to a crime cannot be born from the fact that
the offended spouses received, kept in their possession and made use of the aforesaid document
marked as Exhibit A, which was written by the persons executing it without the least intervention on
the part of said spouses whose signatures do not appear signed thereto and who neither put anything
concerning their part therein nor committed any act preventing the persecution of the crime. Teodoro
Velez and his wife did not file any complaint or information accusing the embezzler, because they are
not in duty bound to denounce her before the courts conscious as they are of the vexations and
difficulties commonly suffered by the offended parties in criminal prosecutions and because perhaps
moved with pity, they have remained satisfied with the doubtful promise that they would be paid of the
lump sum they have lost.

The case decided in Arroyo vs. Berwin (36 Phil. Rep., 386) is not applicable to the instant case, for
the reason that the complaining witness Arroyo took part in the suspension of a criminal cause
already instituted and managed to dismiss the prosecution already brought before the courts. The
complaining witness, by virtue of an entirely illegal agreement with the person charged with the theft,
directly aided in the definite suspension of the criminal prosecution, a case entirely distinct from the
instant one.

The mere fact that the offended party, Velez and Veloso, received the document aforesaid (written
and signed by those interested to save from a criminal prosecution the embezzler who
misappropriated a lump sum of money belonging to the spouses aforesaid) and did not complain of
said crime, does not constitute a burden or a fact prejudicial to their rights, at least, to recover the
amount embezzled, nor does it justify the fact (inaccurately taken for granted) that they have entered
into a contract with the embezzler's father and husband in order to prevent said embezzler from being
duly prosecuted and punished.

By prescinding from the criminal action which they had the right to institute, the spouses Velez and
Veloso could have only chosen to enforce the civil action, and they did not immediately make use of it
because they were deluded by the offer of the aforementioned persons who guaranteed the payment
of the lump amount embezzled. And when they institute the civil action for the recovery of said
amount, they did it not only by virtue of the offer of the aforementioned father and husband of the
embezzler in the document aforesaid, but also by virtue, and as a result of the crime of which the
offended spouses have been the victim, inasmuch as in accordance with article 17 of the Penal Code
"every person criminally liable for a felony or misdemeanor is also civilly liable." Therefore, the
aggrieved persons have the right to ask for the compliance of the civil liability comprising: restitution,
reparation of the damage caused and indemnification for consequential damages.

It is true that a felon's accessories referred to in article 16 of the Penal Code are exempted from the
penalties of the crime they shall have committed. But when the embezzler's father and husband bind
themselves to reimburse the indemnify the amount embezzled to the aggrieved party, it is not just that
the former be exempted and be discharged from the civil liability which they have contracted on the
pretext that their promise to pay the sum embezzled has been given with the object of preventing the
prosecution of their relative who was the author of the crime of estafa. In whatever way they would
have desired to be legally bound by their agreement, they should be so bound in favor of the
legitimate and offended creditors who are not interested in the impunity of the criminal but in the
recovery of the amount embezzled.

The interest of the persons subscribing the document Exhibit A is undoubtedly very clear as the
content of said document shows; but in no way does it appear therein that the poor victims of
the estafa have agreed to the impunity of the embezzler.

Nor could they be blamed for not having filed their complaint for said crime and for having contended
themselves with trying to collect and bringing an action for the recovery of the lump sum they have
lost.

Because article 1275 of the Civil Code so declares, the undersigned agrees that contracts without
consideration or with an illicit consideration which is contrary to law or morality produce no effect
whatsoever. And as the spouses Velez and Veloso did not enter into a contract with Restituta
Quirante's father and husband with such consideration — as is proved by the document itself, for the
only thing they did as offended parties is to refrain from complaining of the crime — and as by not
complaining of said crime they did not incur any responsibility nor did they lose their right to recover
the sum embezzled, it is therefore indubitable that they retain the right to ask before the courts of

26 | P a g e
justice for the payment of the amount embezzled from those who guaranteed said payment and
bound themselves to do so.

For the foregoing reasons, it is proper, in the opinion of the undersigned, that the judgment appealed
from be reversed and that the plaintiffs be sentenced to pay the amount mentioned in the complaint
as they spontaneously bound themselves, without any special finding as to the costs.

51. THIRD DIVISION

[G.R. No. 134559. December 9, 1999]

ANTONIA TORRES, assisted by her husband, ANGELO TORRES; and EMETERIA

BARING, petitioners, vs. COURT OF APPEALS and MANUEL TORRES, respondents.

DECISION
PANGANIBAN, J.:

Courts may not extricate parties from the necessary consequences of their acts. That the terms of
a contract turn out to be financially disadvantageous to them will not relieve them of their obligations
therein. The lack of an inventory of real property will not ipso facto release the contracting partners
from their respective obligations to each other arising from acts executed in accordance with their
agreement.

The Case

The Petition for Review on Certiorari before us assails the March 5, 1998 Decision [1] Second
Division of the Court of Appeals[2] (CA) in CA-GR CV No. 42378 and its June 25, 1998 Resolution
denying reconsideration. The assailed Decision affirmed the ruling of the Regional Trial Court (RTC)
of Cebu City in Civil Case No. R-21208, which disposed as follows:

WHEREFORE, for all the foregoing considerations, the Court, finding for the defendant and against
the plaintiffs, orders the dismissal of the plaintiffs complaint. The counterclaims of the defendant are
likewise ordered dismissed. No pronouncement as to costs.[3]

The Facts

Sisters Antonia Torres and Emeteria Baring, herein petitioners, entered into a "joint venture
agreement" with Respondent Manuel Torres for the development of a parcel of land into a
subdivision. Pursuant to the contract, they executed a Deed of Sale covering the said parcel of land in
favor of respondent, who then had it registered in his name. By mortgaging the property, respondent
obtained from Equitable Bank a loan of P40,000 which, under the Joint Venture Agreement, was to
be used for the development of the subdivision. [4] All three of them also agreed to share the proceeds
from the sale of the subdivided lots.
The project did not push through, and the land was subsequently foreclosed by the bank.
According to petitioners, the project failed because of respondents lack of funds or means and
skills. They add that respondent used the loan not for the development of the subdivision, but in
furtherance of his own company, Universal Umbrella Company.
On the other hand, respondent alleged that he used the loan to implement the Agreement. With
the said amount, he was able to effect the survey and the subdivision of the lots. He secured the
Lapu Lapu City Councils approval of the subdivision project which he advertised in a local
newspaper. He also caused the construction of roads, curbs and gutters. Likewise, he entered into a
contract with an engineering firm for the building of sixty low-cost housing units and actually even set
up a model house on one of the subdivision lots. He did all of these for a total expense of P85,000.

27 | P a g e
 Respondent claimed that the subdivision project failed, however, because petitioners and their
relatives had separately caused the annotations of adverse claims on the title to the land, which
eventually scared away prospective buyers. Despite his requests, petitioners refused to cause the
clearing of the claims, thereby forcing him to give up on the project.[5]
Subsequently, petitioners filed a criminal case for estafa against respondent and his wife, who
were however acquitted. Thereafter, they filed the present civil case which, upon respondent's
motion, was later dismissed by the trial court in an Order dated September 6, 1982. On appeal,
however, the appellate court remanded the case for further proceedings. Thereafter, the RTC issued
its assailed Decision, which, as earlier stated, was affirmed by the CA.
Hence, this Petition.[6]

Ruling of the Court of Appeals

In affirming the trial court, the Court of Appeals held that petitioners and respondent had formed a
partnership for the development of the subdivision. Thus, they must bear the loss suffered by the
partnership in the same proportion as their share in the profits stipulated in the contract. Disagreeing
with the trial courts pronouncement that losses as well as profits in a joint venture should be
distributed equally,[7] the CA invoked Article 1797 of the Civil Code which provides:

Article 1797 - The losses and profits shall be distributed in conformity with the agreement. If only the
share of each partner in the profits has been agreed upon, the share of each in the losses shall be in
the same proportion.

The CA elucidated further:

In the absence of stipulation, the share of each partner in the profits and losses shall be in proportion
to what he may have contributed, but the industrial partner shall not be liable for the losses. As for the
profits, the industrial partner shall receive such share as may be just and equitable under the
circumstances. If besides his services he has contributed capital, he shall also receive a share in the
profits in proportion to his capital.

The Issue

Petitioners impute to the Court of Appeals the following error:

x x x [The] Court of Appeals erred in concluding that the transaction x x x between the petitioners and
respondent was that of a joint venture/partnership, ignoring outright the provision of Article 1769, and
other related provisions of the Civil Code of the Philippines.[8]

The Courts Ruling

The Petition is bereft of merit.

Main Issue: Existence of a Partnership

Petitioners deny having formed a partnership with respondent. They contend that the Joint
Venture Agreement and the earlier Deed of Sale, both of which were the bases of the appellate
courts finding of a partnership, were void.
In the same breath, however, they assert that under those very same contracts, respondent is
liable for his failure to implement the project. Because the agreement entitled them to receive 60
percent of the proceeds from the sale of the subdivision lots, they pray that respondent pay them
damages equivalent to 60 percent of the value of the property.[9]
The pertinent portions of the Joint Venture Agreement read as follows:

28 | P a g e
KNOW ALL MEN BY THESE PRESENTS:

This AGREEMENT, is made and entered into at Cebu City, Philippines, this 5th day of March, 1969,
by and between MR. MANUEL R. TORRES, x x x the FIRST PARTY, likewise, MRS. ANTONIA B.
TORRES, and MISS EMETERIA BARING, x x x the SECOND PARTY:

W I T N E S S E T H:

That, whereas, the SECOND PARTY, voluntarily offered the FIRST PARTY, this property located at
Lapu-Lapu City, Island of Mactan, under Lot No. 1368 covering TCT No. T-0184 with a total area of
17,009 square meters, to be sub-divided by the FIRST PARTY;

Whereas, the FIRST PARTY had given the SECOND PARTY, the sum of: TWENTY THOUSAND
(P20,000.00) Pesos, Philippine Currency, upon the execution of this contract for the property
entrusted by the SECOND PARTY, for sub-division projects and development purposes;

NOW THEREFORE, for and in consideration of the above covenants and promises herein contained
the respective parties hereto do hereby stipulate and agree as follows:

ONE: That the SECOND PARTY signed an absolute Deed of Sale x x x dated March 5, 1969, in the
amount of TWENTY FIVE THOUSAND FIVE HUNDRED THIRTEEN & FIFTY CTVS. (P25,513.50)
Philippine Currency, for 1,700 square meters at ONE [PESO] & FIFTY CTVS. (P1.50) Philippine
Currency, in favor of the FIRST PARTY, but the SECOND PARTY did not actually receive the
payment.

SECOND: That the SECOND PARTY, had received from the FIRST PARTY, the necessary amount
of TWENTY THOUSAND (P20,000.00) pesos, Philippine currency, for their personal obligations and
this particular amount will serve as an advance payment from the FIRST PARTY for the property
mentioned to be sub-divided and to be deducted from the sales.

THIRD: That the FIRST PARTY, will not collect from the SECOND PARTY, the interest and the
principal amount involving the amount of TWENTY THOUSAND (P20,000.00) Pesos, Philippine
Currency, until the sub-division project is terminated and ready for sale to any interested parties, and
the amount of TWENTY THOUSAND (P20,000.00) pesos, Philippine currency, will be deducted
accordingly.

FOURTH: That all general expense[s] and all cost[s] involved in the sub-division project should be
paid by the FIRST PARTY, exclusively and all the expenses will not be deducted from the sales after
the development of the sub-division project.

FIFTH: That the sales of the sub-divided lots will be divided into SIXTY PERCENTUM 60% for the
SECOND PARTY and FORTY PERCENTUM 40% for the FIRST PARTY, and additional profits or
whatever income deriving from the sales will be divided equally according to the x x x percentage
[agreed upon] by both parties.

SIXTH: That the intended sub-division project of the property involved will start the work and all
improvements upon the adjacent lots will be negotiated in both parties['] favor and all sales shall [be]
decided by both parties.

SEVENTH: That the SECOND PARTIES, should be given an option to get back the property
mentioned provided the amount of TWENTY THOUSAND (P20,000.00) Pesos, Philippine Currency,
borrowed by the SECOND PARTY, will be paid in full to the FIRST PARTY, including all necessary
improvements spent by the FIRST PARTY, and the FIRST PARTY will be given a grace period to
turnover the property mentioned above.

That this AGREEMENT shall be binding and obligatory to the parties who executed same freely and
voluntarily for the uses and purposes therein stated.[10]

A reading of the terms embodied in the Agreement indubitably shows the existence of a
partnership pursuant to Article 1767 of the Civil Code, which provides:

29 | P a g e
ART. 1767. By the contract of partnership two or more persons bind themselves to contribute money,
property, or industry to a common fund, with the intention of dividing the profits among themselves.

Under the above-quoted Agreement, petitioners would contribute property to the partnership in
the form of land which was to be developed into a subdivision; while respondent would give, in
addition to his industry, the amount needed for general expenses and other costs. Furthermore, the
income from the said project would be divided according to the stipulated percentage. Clearly, the
contract manifested the intention of the parties to form a partnership. [11]
It should be stressed that the parties implemented the contract. Thus, petitioners transferred the
title to the land to facilitate its use in the name of the respondent. On the other hand, respondent
caused the subject land to be mortgaged, the proceeds of which were used for the survey and the
subdivision of the land. As noted earlier, he developed the roads, the curbs and the gutters of the
subdivision and entered into a contract to construct low-cost housing units on the property.
Respondents actions clearly belie petitioners contention that he made no contribution to the
partnership. Under Article 1767 of the Civil Code, a partner may contribute not only money or
property, but also industry.

Petitioners Bound by Terms of Contract

Under Article 1315 of the Civil Code, contracts bind the parties not only to what has been
expressly stipulated, but also to all necessary consequences thereof, as follows:

ART. 1315. Contracts are perfected by mere consent, and from that moment the parties are bound
not only to the fulfillment of what has been expressly stipulated but also to all the consequences
which, according to their nature, may be in keeping with good faith, usage and law.

It is undisputed that petitioners are educated and are thus presumed to have understood the
terms of the contract they voluntarily signed. If it was not in consonance with their expectations, they
should have objected to it and insisted on the provisions they wanted.
Courts are not authorized to extricate parties from the necessary consequences of their acts, and
the fact that the contractual stipulations may turn out to be financially disadvantageous will not relieve
parties thereto of their obligations. They cannot now disavow the relationship formed from such
agreement due to their supposed misunderstanding of its terms.

Alleged Nullity of the Partnership Agreement

Petitioners argue that the Joint Venture Agreement is void under Article 1773 of the Civil Code,
which provides:

ART. 1773. A contract of partnership is void, whenever immovable property is contributed thereto, if
an inventory of said property is not made, signed by the parties, and attached to the public
instrument.

They contend that since the parties did not make, sign or attach to the public instrument an
inventory of the real property contributed, the partnership is void.
We clarify. First, Article 1773 was intended primarily to protect third persons. Thus, the eminent
Arturo M. Tolentino states that under the aforecited provision which is a complement of Article 1771,
[12]
the execution of a public instrument would be useless if there is no inventory of the property
contributed, because without its designation and description, they cannot be subject to inscription in
the Registry of Property, and their contribution cannot prejudice third persons. This will result in fraud
to those who contract with the partnership in the belief [in] the efficacy of the guaranty in which the
immovables may consist. Thus, the contract is declared void by the law when no such inventory is
made. The case at bar does not involve third parties who may be prejudiced.
Second, petitioners themselves invoke the allegedly void contract as basis for their claim that
respondent should pay them 60 percent of the value of the property. [13]They cannot in one breath
deny the contract and in another recognize it, depending on what momentarily suits their

30 | P a g e
purpose. Parties cannot adopt inconsistent positions in regard to a contract and courts will not
tolerate, much less approve, such practice.
In short, the alleged nullity of the partnership will not prevent courts from considering the Joint
Venture Agreement an ordinary contract from which the parties rights and obligations to each other
may be inferred and enforced.

Partnership Agreement Not the Result of an Earlier Illegal Contract

Petitioners also contend that the Joint Venture Agreement is void under Article 1422 [14] of the Civil
Code, because it is the direct result of an earlier illegal contract, which was for the sale of the land
without valid consideration.
This argument is puerile. The Joint Venture Agreement clearly states that the consideration for
the sale was the expectation of profits from the subdivision project. Its first stipulation states that
petitioners did not actually receive payment for the parcel of land sold to respondent. Consideration,
more properly denominated as cause, can take different forms, such as the prestation or promise of a
thing or service by another.[15]
In this case, the cause of the contract of sale consisted not in the stated peso value of the land,
but in the expectation of profits from the subdivision project, for which the land was intended to be
used. As explained by the trial court, the land was in effect given to the partnership as [petitioners]
participation therein. x x x There was therefore a consideration for the sale, the [petitioners] acting
in the expectation that, should the venture come into fruition, they [would] get sixty percent of the net
profits.

Liability of the Parties

Claiming that respondent was solely responsible for the failure of the subdivision project,
petitioners maintain that he should be made to pay damages equivalent to 60 percent of the value of
the property, which was their share in the profits under the Joint Venture Agreement.
We are not persuaded. True, the Court of Appeals held that petitioners acts were not the cause of
the failure of the project.[16] But it also ruled that neither was respondent responsible therefor. [17] In
imputing the blame solely to him, petitioners failed to give any reason why we should disregard the
factual findings of the appellate court relieving him of fault. Verily, factual issues cannot be resolved in
a petition for review under Rule 45, as in this case. Petitioners have not alleged, not to say shown,
that their Petition constitutes one of the exceptions to this doctrine. [18] Accordingly, we find no
reversible error in the CA's ruling that petitioners are not entitled to damages.
WHEREFORE, the Petition is hereby DENIED and the challenged Decision AFFIRMED. Costs
against petitioners.
SO ORDERED.

Art. 1354- Presumption of the existence and lawfulness of a cause

52. Republic of the Philippines

Supreme Court
Manila
SECOND DIVISION
CARMELA BROBIO MANGAHAS, G.R. No. 183852
Petitioner,
Present:

CORONA, C.J.,*
CARPIO,
- versus - Chairperson,
NACHURA,
LEONARDO-DE CASTRO,**and
MENDOZA, JJ.

31 | P a g e
 EUFROCINA A. BROBIO, Promulgated:
Respondent.
October 20, 2010

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

RESOLUTION

NACHURA, J.:

This petition for review on certiorari seeks to set aside the Court of Appeals (CA)
Decision[1] dated February 21, 2008, which dismissed petitioners action to enforce payment of a
promissory note issued by respondent, and Resolution[2] dated July 9, 2008, which denied petitioners
motion for reconsideration.
The case arose from the following facts:

On January 10, 2002, Pacifico S. Brobio (Pacifico) died intestate, leaving three parcels of land. He
was survived by his wife, respondent Eufrocina A. Brobio, and four legitimate and three illegitimate
children; petitioner Carmela Brobio Mangahas is one of the illegitimate children.
On May 12, 2002, the heirs of the deceased executed a Deed of Extrajudicial Settlement of Estate of
the Late Pacifico Brobio with Waiver. In the Deed, petitioner and Pacificos other children, in
consideration of their love and affection for respondent and the sum of P150,000.00, waived and
ceded their respective shares over the three parcels of land in favor of respondent. According to
petitioner, respondent promised to give her an additional amount for her share in her fathers estate.
Thus, after the signing of the Deed, petitioner demanded from respondent the promised additional
amount, but respondent refused to pay, claiming that she had no more money.[3]

A year later, while processing her tax obligations with the Bureau of Internal Revenue (BIR),
respondent was required to submit an original copy of the Deed. Left with no more original copy of the
Deed, respondent summoned petitioner to her office on May 31, 2003 and asked her to countersign a
copy of the Deed. Petitioner refused to countersign the document, demanding that respondent first
give her the additional amount that she promised. Considering the value of the three parcels of land
(which she claimed to be worth P20M), petitioner asked for P1M, but respondent begged her to lower
the amount. Petitioner agreed to lower it to P600,000.00. Because respondent did not have the
money at that time and petitioner refused to countersign the Deed without any assurance that the
amount would be paid, respondent executed a promissory note. Petitioner agreed to sign the Deed
when respondent signed the promissory note which read

31 May 2003

This is to promise that I will give a Financial Assistance to CARMELA B. MANGAHAS

the amount of P600,000.00 Six Hundred Thousand only on June 15, 2003.

(SGD)
EUFROCINA A. BROBIO[4]

32 | P a g e
When the promissory note fell due, respondent failed and refused to pay despite demand. Petitioner
made several more demands upon respondent but the latter kept on insisting that she had no money.

On January 28, 2004, petitioner filed a Complaint for Specific Performance with Damages [5] against
respondent, alleging in part

2. That plaintiff and defendant are legal heirs of the deceased, Pacifico S. Brobio[,] who
died intestate and leaving without a will, on January 10, 2002, but leaving several
real and personal properties (bank deposits), and some of which were the subject of
the extra-judicial settlement among them, compulsory heirs of the deceased,
Pacifico Brobio. x x x.

3. That in consideration of the said waiver of the plaintiff over the listed properties in the
extra-judicial settlement, plaintiff received the sum of P150,000.00, and the
defendant executed a Promissory Note on June 15, 2003, further committing herself
to give plaintiff a financial assistance in the amount of P600,000.00. x x x.

4. That on its due date, June 15, 2003, defendant failed to make good of her promise of
delivering to the plaintiff the sum of P600,000.00 pursuant to her Promissory Note
dated May 31, 2003, and despite repeated demands, defendant had maliciously and
capriciously refused to deliver to the plaintiff the amount [of] P600,000.00, and the
last of which demands was on October 29, 2003. x x x.[6]

In her Answer with Compulsory Counterclaim, [7] respondent admitted that she signed the promissory
note but claimed that she was forced to do so. She also claimed that the undertaking was not
supported by any consideration. More specifically, she contended that

10. Defendant was practically held hostage by the demand of the plaintiff. At that time,
defendant was so much pressured and was in [a] hurry to submit the documents to the
Bureau of Internal Revenue because of the deadline set and for fear of possible penalty
if not complied with. Defendant pleaded understanding but plaintiff was adamant. Her
hand could only move in exchange for 1 million pesos.
11. Defendant, out of pressure and confused disposition, was constrained to make a
promissory note in a reduced amount in favor of the plaintiff. The circumstances in the
execution of the promissory note were obviously attended by involuntariness and the
same was issued without consideration at all or for illegal consideration.[8]

On May 15, 2006, the Regional Trial Court (RTC) rendered a decision in favor of petitioner. The RTC
found that the alleged pressure and confused disposition experienced by respondent and the
circumstances that led to the execution of the promissory note do not constitute undue influence as
would vitiate respondents consent thereto. On the contrary, the RTC observed that

It is clear from all the foregoing that it is the defendant who took improper advantage of the
plaintiffs trust and confidence in her by resorting to a worthless written promise, which
she was intent on reneging. On the other hand, plaintiff did not perform an unlawful
conduct when she insisted on a written commitment from the defendant, as embodied in
the promissory note in question, before affixing her signature that was asked of her by
the defendant because, as already mentioned, that was the only opportunity available to
her or which suddenly and unexpectedly presented itself to her in order to press her
demand upon the defendant to satisfy the correct amount of consideration due to her. In
other words, as the defendant had repeatedly rebuffed her plea for additional
consideration by claiming lack of money, it is only natural for the plaintiff to seize the
unexpected opportunity that suddenly presented itself in order to compel the defendant
to give to her [what is] due [her]. And by executing the promissory note which the
defendant had no intention of honoring, as testified to by her, the defendant clearly

33 | P a g e
 acted in bad faith and took advantage of the trust and confidence that plaintiff had
reposed in her.[9]

The RTC also brushed aside respondents claim that the promissory note was not supported by
valuable consideration. The court maintained that the promissory note was an additional
consideration for the waiver of petitioners share in the three properties in favor of respondent. Its
conclusion was bolstered by the fact that the promissory note was executed after negotiation and
haggling between the parties. The dispositive portion of the RTC decision reads:
WHEREFORE, judgment is hereby rendered as follows:

1. Ordering the defendant to pay to plaintiff the sum of Six Hundred Thousand
Pesos (P600,000.00) which she committed to pay to plaintiff under the
promissory note in question, plus interest thereon at the rate of 12% per
annum computed from the date of the filing of the complaint;

2. Ordering the defendant to pay to plaintiff the sum of P50,000.00 as

attorneys fees; and

3. Ordering the defendant to pay to plaintiff the costs of this suit.

SO ORDERED.[10]

On February 21, 2008, the CA reversed the RTC decision and dismissed the complaint. [11] The CA
found that there was a complete absence of consideration in the execution of the promissory note,
which made it inexistent and without any legal force and effect. The court noted that financial
assistance was not the real reason why respondent executed the promissory note, but only to secure
petitioners signature. The CA held that the waiver of petitioners share in the three properties, as
expressed in the deed of extrajudicial settlement, may not be considered as the consideration of the
promissory note, considering that petitioner signed the Deed way back in 2002 and she had already
received the consideration of P150,000.00 for signing the same. The CA went on to hold that if
petitioner disagreed with the amount she received, then she should have filed an action for partition.

Further, the CA found that intimidation attended the signing of the promissory note.
Respondent needed the Deed countersigned by petitioner in order to comply with a BIR requirement;
and, with petitioners refusal to sign the said document, respondent was forced to sign the promissory
note to assure petitioner that the money promised to her would be paid.

Petitioner moved for the reconsideration of the CA Decision. In a Resolution dated July 9, 2008, the
CA denied petitioners motion.[12]

In this petition for review, petitioner raises the following issues:

1. The Honorable Court of Appeals erred in the appreciation of the facts of this case
when it found that intimidation attended the execution of the promissory note subject
of this case.

2. The Honorable Court of Appeals erred when it found that the promissory note was
without consideration.

3. The Honorable Court of Appeals erred when it stated that petitioner should have
filed [an action] for partition instead of a case for specific performance.[13]

34 | P a g e
The petition is meritorious.

Contracts are voidable where consent thereto is given through mistake, violence, intimidation,
undue influence, or fraud. In determining whether consent is vitiated by any of these circumstances,
courts are given a wide latitude in weighing the facts or circumstances in a given case and in deciding
in favor of what they believe actually occurred, considering the age, physical infirmity, intelligence,
relationship, and conduct of the parties at the time of the execution of the contract and subsequent
thereto, irrespective of whether the contract is in a public or private writing. [14]

Nowhere is it alleged that mistake, violence, fraud, or intimidation attended the execution of the
promissory note. Still, respondent insists that she was forced into signing the promissory note
because petitioner would not sign the document required by the BIR. In one case, the Court in
characterizing a similar argument by respondents therein held that such allegation is tantamount to
saying that the other party exerted undue influence upon them. However, the Court said that the fact
that respondents were forced to sign the documents does not amount to vitiated consent. [15]

There is undue influence when a person takes improper advantage of his power over the will of
another, depriving the latter of a reasonable freedom of choice. [16] For undue influence to be present,
the influence exerted must have so overpowered or subjugated the mind of a contracting party as to
destroy his free agency, making him express the will of another rather than his own.[17]

Respondent may have desperately needed petitioners signature on the Deed, but there is no showing
that she was deprived of free agency when she signed the promissory note. Being forced into a
situation does not amount to vitiated consent where it is not shown that the party is deprived of free
will and choice. Respondent still had a choice: she could have refused to execute the promissory note
and resorted to judicial means to obtain petitioners signature. Instead, respondent chose to execute
the promissory note to obtain petitioners signature, thereby agreeing to pay the amount demanded by
petitioner.

The fact that respondent may have felt compelled, under the circumstances, to execute the
promissory note will not negate the voluntariness of the act. As rightly observed by the trial court, the
execution of the promissory note in the amount of P600,000.00 was, in fact, the product of a
negotiation between the parties. Respondent herself testified that she bargained with petitioner to
lower the amount:

ATTY. VILLEGAS:
Q And is it not that there was even a bargaining from P1-M to P600,000.00 before you
prepare[d] and [sign[ed] that promissory note marked as Exhibit C?
A Yes, sir.

Q And in fact, you were the one [who] personally wrote the amount of P600,000.00 only
as indicated in the said promissory note?
A Yes, sir.

COURT:

Q So, just to clarify. Carmela was asking an additional amount of P1-M for her to sign
this document but you negotiated with her and asked that it be lowered
to P600,000.00 to which she agreed, is that correct?
A Yes, Your Honor. Napilitan na po ako.

35 | P a g e
 Q But you negotiated and asked for its reduction from P1-M to P600,000.00?
A Yes, Your Honor.[18]

Contrary to the CAs findings, the situation did not amount to intimidation that vitiated consent. There
is intimidation when one of the contracting parties is compelled to give his consent by a reasonable
and well-grounded fear of an imminent and grave evil upon his person or property, or upon the
person or property of his spouse, descendants, or ascendants. [19] Certainly, the payment of penalties
for delayed payment of taxes would not qualify as a reasonable and well-grounded fear of an
imminent and grave evil.

We join the RTC in holding that courts will not set aside contracts merely because solicitation,
importunity, argument, persuasion, or appeal to affection was used to obtain the consent of the other
party. Influence obtained by persuasion or argument or by appeal to affection is not prohibited either
in law or morals and is not obnoxious even in courts of equity.[20]

On the issue that the promissory note is void for not being supported by a consideration, we likewise
disagree with the CA.

A contract is presumed to be supported by cause or consideration. [21] The presumption that a

contract has sufficient consideration cannot be overthrown by a mere assertion that it has no
consideration. To overcome the presumption, the alleged lack of consideration must be shown by
preponderance of evidence.[22] The burden to prove lack of consideration rests upon whoever alleges
it, which, in the present case, is respondent.

Respondent failed to prove that the promissory note was not supported by any consideration.
From her testimony and her assertions in the pleadings, it is clear that the promissory note was
issued for a cause or consideration, which, at the very least, was petitioners signature on the
document.

It may very well be argued that if such was the consideration, it was inadequate. Nonetheless,
even if the consideration is inadequate, the contract would not be invalidated, unless there has been
fraud, mistake, or undue influence.[23] As previously stated, none of these grounds had been proven
present in this case.

The foregoing discussion renders the final issue insignificant. Be that as it may, we would like
to state that the remedy suggested by the CA is not the proper one under the circumstances. An
action for partition implies that the property is still owned in common. [24] Considering that the heirs had
already executed a deed of extrajudicial settlement and waived their shares in favor of respondent,
the properties are no longer under a state of co-ownership; there is nothing more to be partitioned, as
ownership had already been merged in one person.

WHEREFORE, premises considered, the CA Decision dated February 21, 2008 and its
Resolution dated July 9, 2008 are REVERSED and SET ASIDE. The RTC decision dated May 15,
2006 is REINSTATED.

SO ORDERED.
53. Republic of the Philippines

36 | P a g e
 Supreme Court
Manila

SECOND DIVISION

PENTACAPITAL INVESTMENT G.R. No. 171736

CORPORATION,
Petitioner,

- versus -

MAKILITO B. MAHINAY,
Respondent.
x--------------------------------------------------x

PENTACAPITAL INVESTMENT G.R. No. 181482

CORPORATION,
Petitioner, Present:

CARPIO, J.,
Chairperson,
NACHURA,
- versus - PERALTA,
ABAD, and
MENDOZA, JJ.

Promulgated:
MAKILITO B. MAHINAY,
Respondent. July 5, 2010

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

DECISION

NACHURA, J.:

Before us are two consolidated petitions for review on certiorari under Rule 45 of the Rules of Court
filed by petitioner Pentacapital Investment Corporation. In G.R. No. 171736, petitioner assails the
Court of Appeals (CA) Decision[1] dated December 20, 2005 and Resolution[2] dated March 1, 2006 in
CA-G.R. SP No. 74851; while in G.R. No. 181482, it assails the CA Decision [3] dated October 4,
2007 and Resolution[4]dated January 21, 2008 in CA-G.R. CV No. 86939.

The Facts

Petitioner filed a complaint for a sum of money against respondent Makilito Mahinay based on two
separate loans obtained by the latter, amounting to P1,520,000.00 and P416,800.00, or a total
amount of P1,936,800.00. These loans were evidenced by two promissory notes[5] dated February 23,
1996. Despite repeated demands, respondent failed to pay the loans, hence, the complaint. [6]

In his Answer with Compulsory Counterclaim, [7] respondent claimed that petitioner had no cause of
action because the promissory notes on which its complaint was based were subject to a condition

37 | P a g e
that did not occur.[8] While admitting that he indeed signed the promissory notes, he insisted that he
never took out a loan and that the notes were not intended to be evidences of indebtedness. [9] By way
of counterclaim, respondent prayed for the payment of moral and exemplary damages plus attorneys
fees.[10]

Respondent explained that he was the counsel of Ciudad Real Development Inc. (CRDI). In 1994,
Pentacapital Realty Corporation (Pentacapital Realty) offered to buy parcels of land known as the
Molino Properties, owned by CRDI, located in Molino, Bacoor, Cavite. The Molino Properties, with a
total area of 127,708 square meters, were sold at P400.00 per sq m. As the Molino Properties were
the subject of a pending case, Pentacapital Realty paid only the down payment amounting
to P12,000,000.00. CRDI allegedly instructed Pentacapital Realty to pay the formers creditors,
including respondent who thus received a check worth P1,715,156.90.[11] It was further agreed that
the balance would be payable upon the submission of an Entry of Judgment showing that the case
involving the Molino Properties had been decided in favor of CRDI.[12]

Respondent, Pentacapital Realty and CRDI allegedly agreed that respondent had a charging
lien equivalent to 20% of the total consideration of the sale in the amount of P10,277,040.00. Pending
the submission of the Entry of Judgment and as a sign of good faith, respondent purportedly returned
the P1,715,156.90 check to Pentacapital Realty. However, the Molino Properties continued to be
haunted by the seemingly interminable court actions initiated by different parties which thus
prevented respondent from collecting his commission.

On motion[13] of respondent, the Regional Trial Court (RTC) allowed him to file a Third Party
Complaint[14] against CRDI, subject to the payment of docket fees.[15]

Admittedly, respondent earlier instituted an action for Specific Performance against

Pentacapital Realty before the RTC of Cebu City, Branch 57, praying for the payment of his
commission on the sale of the Molino Properties. [16] In an Amended Complaint,[17] respondent referred
to the action he instituted as one of Preliminary Mandatory Injunction instead of Specific
Performance. Acting on Pentacapital Realtys Motion to Dismiss, the RTC dismissed the case for lack
of cause of action.[18] The dismissal became final and executory.

With the dismissal of the aforesaid case, respondent filed a Motion to Permit Supplemental
Compulsory Counterclaim.[19] In addition to the damages that respondent prayed for in his compulsory
counterclaim, he sought the payment of his commission amounting to P10,316,640.00, plus interest
at the rate of 16% per annum, as well as attorneys fees equivalent to 12% of his principal claim.
[20]
Respondent claimed that Pentacapital Realty is a 100% subsidiary of petitioner. Thus, although
petitioner did not directly participate in the transaction between Pentacapital Realty, CRDI and
respondent, the latters claim against petitioner was based on the doctrine of piercing the veil of
corporate fiction.Simply stated, respondent alleged that petitioner and Pentacapital Realty are one
and the same entity belonging to the Pentacapital Group of Companies.[21]

Over the opposition of petitioner, the RTC, in an Order [22] dated August 22, 2002, allowed the
filing of the supplemental counterclaim. Aggrieved, petitioner sought recourse in the CA through a
special
civil action for certiorari, seeking to reverse and set aside the RTC Order. The case was docketed as
CA-G.R. SP No. 74851. On December 20, 2005, the CA rendered the assailed Decision dismissing
38 | P a g e
the petition.[23] The appellate court sustained the allowance of the supplemental compulsory
counterclaim based on the allegations in respondents pleading. The CA further concluded that there
was a logical relationship between the claims of petitioner in its complaint and those of respondent in
his supplemental compulsory counterclaim. The CA declared that it was inconsequential that
respondent did not clearly allege the facts required to pierce the corporate separateness of petitioner
and its subsidiary, the Pentacapital Realty.[24]

Petitioner now comes before us in G.R. No. 171736, raising the following issues:

A.

WHETHER RESPONDENT MAHINAY IS BARRED FROM ASSERTING THE CLAIM

CONTAINED IN HIS SUPPLEMENTAL COMPULSORY COUNTERCLAIM ON THE
GROUNDS OF (1) RES JUDICATA, (2) WILLFUL AND DELIBERATE FORUM
SHOPPING, AND (3) FAILURE TO INTERPOSE SUCH CLAIM ON TIME PURSUANT
TO SECTION 2 OF RULE 9 OF THE RULES OF COURT;

B.

WHETHER RESPONDENT MAHINAYS SUPPLEMENTAL COMPULSORY

COUNTERCLAIM IS ACTUALLY A THIRD-PARTY COMPLAINT AGAINST
PENTACAPITAL REALTY, THE INTRODUCTION OF WHICH REQUIRES THE
PAYMENT OF THE NECESSARY DOCKET FEES;

C.

ASSUMING FOR THE SAKE OF PURE ARGUMENT THAT IT IS PROPER TO

PIERCE THE CORPORATE VEIL AND TO ALLOW RESPONDENT MAHINAY TO
LODGE A SUPPLEMENTAL COMPULSORY COUNTERCLAIM AGAINST HEREIN
PETITIONER PENTACAPITAL INVESTMENT FOR AN ALLEGED OBLIGATION OF
ITS SUBSIDIARY, PENTACAPITAL REALTY, ON THE THEORY THAT THEY ARE
ONE AND THE SAME COMPANY, WHETHER PENTACAPITAL REALTY SHOULD
HAVE AT LEAST BEEN MADE A PARTY TO THE CASE AS RULED BY THIS
HONORABLE COURT IN FILMERCO COMMERCIAL CO., INC. VS. INTERMEDIATE
APPELLATE COURT;

D.

WHETHER RESPONDENT MAHINAY SHOULD BE ALLOWED TO PRESENT

EVIDENCE ON HIS SO-CALLED SUPPLEMENTAL COMPULSORY COUNTERCLAIM
INASMUCH AS (1) RESPONDENT MAHINAYS PLEADINGS ARE BEREFT OF ANY
ALLEGATIONS TO BUTTRESS THE MERGING OF PENTACAPITAL REALTY AND
PENTACAPITAL INVESTMENT INTO ONE ENTITY AND THE CONSEQUENT
IMPUTATION ON THE LATTER OF THE FORMERS SUPPOSED LIABILITY ON
RESPONDENT MAHINAYS SUPPLEMENTAL COMPULSORY COUNTERCLAIM,
AND (2) THE INCIDENTS ALLEGEDLY PERTAINING TO, AND WHICH WOULD
THEREBY SUPPORT, THE PIERCING OF CORPORATE VEIL ARE NOT
EVIDENTIARY MATTERS MATERIAL TO THE PROCEEDINGS BEFORE THE
COURT A QUO CONSIDERING THAT THE SAME ARE BEYOND THE SCOPE OF
THE PLEADINGS;

E.

WHETHER THE DOCTRINE OF PIERCING THE CORPORATE VEIL MAY BE

INVOKED AND APPLIED IN ORDER TO EVADE AN OBLIGATION AND FACILITATE
PROCEDURAL WRONGDOING; AND

F.

39 | P a g e
 WHETHER PETITIONER PENTACAPITAL INVESTMENT COMMITTED FORUM
SHOPPING WHEN IT FILED THE PRESENT PETITION DURING THE PENDENCY
OF THE MOTION FOR RECONSIDERATION IT FILED BEFORE THE COURT A
QUO AND, SUBSEQUENTLY, OF THE APPEAL BEFORE THE COURT OF APPEALS
TO QUESTION THE JUDGMENT OF THE COURT A QUO.[25]

There being no writ of injunction or Temporary Restraining Order (TRO), the proceedings
before the RTC continued and respondent was allowed to present his evidence on his supplemental
compulsory counterclaim. After trial on the merits, the RTC rendered a decision [26] dated March 20,
2006, the dispositive portion of which reads:

WHEREFORE, PREMISES CONSIDERED, plaintiffs complaint is hereby

ordered dismissed for lack of merit. This court, instead, finds that defendant was able to
prove by a clear preponderance of evidence his cause of action against plaintiff as to
defendants compulsory and supplemental counterclaims. That, therefore, this court
hereby orders the plaintiff to pay unto defendant the following sums, to wit:

1. P1,715,156.90 representing the amount plaintiff is obligated to pay defendant

as provided for in the deed of sale and the supplemental agreement, plus interest
at the rate of 16% per annum, to be computed from September 23, 1998 until the
said amount shall have been fully paid;

2. Php 10,316,640.00 representing defendants share of the proceeds of the sale

of the Molino property (defendants charging lien) plus interest at the rate of 16%
per annum, to be computed from September 23, 1998 until the said amount
shall have been fully paid;

3. Php 50,000.00 as attorneys fees based on quantum meruit;

4. Php 50,000.00 litigation expenses, plus costs of suit.

This court finds it unnecessary to rule on the third party complaint, the relief
prayed for therein being dependent on the possible award by this court of the relief of
plaintiffs complaint.[27]

On appeal, the CA, in CA-G.R. CV No. 86939, affirmed in toto the above decision. The CA
found no basis for petitioner to collect the amount demanded, there being no perfected contract of
loan for lack of consideration.[28] As to respondents supplemental compulsory counterclaim, quoting
the findings of the RTC, the appellate court held that respondent was able to prove by preponderance
of evidence that it was the intent of Pentacapital Group of Companies and CRDI to give
him P10,316,640.00 and P1,715,156.90.[29] The CA likewise affirmed the award of interest at the rate
of 16% per annum, plus damages.[30]

Unsatisfied, petitioner moved for reconsideration of the aforesaid Decision, but it was denied in
a Resolution[31] dated January 21, 2008. Hence, the present petition in G.R. No. 181482, anchored on
the following arguments:

A.
Considering that the inferences made in the present case are manifestly absurd,
mistaken or impossible, and are even contrary to the admissions of respondent
Mahinay, and inasmuch as the judgment is premised on a misapprehension of facts,
this Honorable Court may validly take cognizance of the errors relative to the findings of
fact of both the Honorable Court of Appeals and the court a quo.

B.

40 | P a g e
Respondent Mahinay is liable to petitioner PentaCapital Investment for the
PhP1,936,800.00 loaned to him as well as for damages and attorneys fees.

1.
The Honorable Court of Appeals erred in concluding that respondent
Mahinay failed to receive the money he borrowed when there is not even
any dispute as to the fact that respondent Mahinay did indeed receive the
PhP1,936,800.00 from petitioner PentaCapital Investment.

2.
The Promissory Notes executed by respondent Mahinay are valid
instruments and are binding upon him.

C.
Petitioner PentaCapital Investment cannot be held liable on the supposed supplemental
compulsory counterclaim of respondent Mahinay.

1.
The findings of fact as well as the conclusions arrived at by the Court of
Appeals in its decision were based on mistaken assumptions and on
erroneous appreciation of the evidence on record.

2.
There is no evidence on record to support the merging of PentaCapital
Realty and petitioner PentaCapital Investment into one entity and the
consequent imputation on the latter of the formers supposed liability on
respondent Mahinays supplemental compulsory counterclaim.

3.
Inasmuch as the claim of respondent Mahinay is supposedly against
PentaCapital Realty, and considering that petitioner PentaCapital
Investment is a separate, distinct entity from PentaCapital Realty, the
latter should have been impleaded as it is an indispensable party.

D.
Assuming for the sake of pure argument that it is proper to disregard the corporate
fiction and to consider herein petitioner PentaCapital Investment and its subsidiary,
PentaCapital Realty, as one and the same entity, respondent Mahinays supplemental
compulsory counterclaim must still necessarily fail.

1.
The cause of action of respondent Mahinay, as contained in his
supplemental compulsory counterclaim, is already barred by a prior
judgment (res judicata).

2.
Considering that the dismissal on the merits by the RTC Cebu of
respondent Mahinays complaint against PentaCapital Realty for attorneys
fees has attained finality, respondent Mahinay committed a willful act of
forum shopping when he interposed the exact same claim in the
proceedings a quo as a supposed supplemental compulsory counterclaim
against what he claims to be one and the same company.

3.
Respondent Mahinays supplemental compulsory counterclaim is actually
a third party complaint against PentaCapital Realty; the filing thereof
therefore requires the payment of the necessary docket fees.

E.
The doctrine of piercing the corporate veil is an equitable remedy which cannot and
should not be invoked, much less applied, in order to evade an obligation and facilitate
procedural wrongdoing.[32]

41 | P a g e
 Simply put, the issues for resolution are: 1) whether the admission of respondents
supplemental compulsory counterclaim is proper; 2) whether respondents counterclaim is barred
by res judicata; and (3) whether petitioner is guilty of forum-shopping.

The Courts Ruling

Admission of Respondents
Supplemental Compulsory Counterclaim

The pertinent provision of the Rules of Court is Section 6 of Rule 10, which reads:

Sec. 6. Supplemental pleadings. Upon motion of a party, the court may, upon
reasonable notice and upon such terms as are just, permit him to serve a supplemental
pleading setting forth transactions, occurrences or events which have happened since
the date of the pleading sought to be supplemented. The adverse party may plead
thereto within ten (10) days from notice of the order admitting the supplemental
pleading.

As a general rule, leave will be granted to a party who desires to file a supplemental pleading
that alleges any material fact which happened or came within the partys knowledge after the original
pleading was filed, such being the office of a supplemental pleading. The application of the rule would
ensure that the entire controversy might be settled in one action, avoid unnecessary repetition of
effort and unwarranted expense of litigants, broaden the scope of the issues in an action owing to the
light thrown on it by facts, events and occurrences which have accrued after the filing of the original
pleading, and bring into record the facts enlarging or charging the kind of relief to which plaintiff is
entitled. It is the policy of the law to grant relief as far as possible for wrongs complained of, growing
out of the same transaction and thus put an end to litigation.[33]

In his Motion to Permit Supplemental Compulsory Counterclaim, respondent admitted that, in

his Answer with Compulsory Counterclaim, he claimed that, as one of the corporations composing the
Pentacapital Group of Companies, petitioner is liable to him for P10,316,640.00, representing 20%
attorneys fees and share in the proceeds of the sale transaction between Pentacapital Realty and
CRDI. In the same pleading, he further admitted that he did not include this amount in his compulsory
counterclaim because he had earlier commenced another action for the collection of the same
amount against Pentacapital Realty before the RTC of Cebu. With the dismissal of the RTC-Cebu
case, there was no more legal impediment for respondent to file the supplemental counterclaim.

Moreover, in his Answer with Compulsory Counterclaim, respondent already alleged that he
demanded from Pentacapital Group of Companies to which petitioner supposedly belongs, the
payment of his 20% commission. This, in fact, was what prompted respondent to file a complaint
before the RTC-Cebu for preliminary mandatory injunction for the release of the said amount.

Given these premises, it is obvious that the alleged obligation of petitioner already existed and
was known to respondent at the time of the filing of his Answer with Counterclaim. He should have
demanded payment of his commission and share in the proceeds of the sale in that Answer with
Compulsory Counterclaim, but he did not. He is, therefore, proscribed from incorporating the same
and making such demand via a supplemental pleading. The supplemental pleading must be based on
42 | P a g e
matters arising subsequent to the filing of the original pleading related to the claim or defense
presented therein, and founded on the same cause of action. [34] Supplemental pleadings must state
transactions, occurrences or events which took place since the time the pleading sought to be
supplemented was filed.[35]

Even on the merits of the case, for reasons that will be discussed below, respondents
counterclaim is doomed to fail.

Petitioners Complaint
In its complaint for sum of money, petitioner prayed that respondent be ordered to pay his
obligation amounting to P1,936,800.00 plus interest and penalty charges, and attorneys fees. This
obligation was evidenced by two promissory notes executed by respondent. Respondent, however,
denied liability on the ground that his obligation was subject to a condition that did not occur. He
explained that the promissory notes were dependent upon the happening of a remote event that the
parties tried to anticipate at the time they transacted with each other, and the event did not happen.
[36]
He further insisted that he did not receive the proceeds of the loan.

To ascertain whether or not respondent is bound by the promissory notes, it must be

established that all the elements of a contract of loan are present. Like any other contract, a contract
of loan is subject to the rules governing the requisites and validity of contracts in general. It is
elementary in this jurisdiction that what determines the validity of a contract, in general, is the
presence of the following elements: (1) consent of the contracting parties; (2) object certain which is
the subject matter of the contract; and (3) cause of the obligation which is established. [37]

In this case, respondent denied liability on the ground that the promissory notes lacked
consideration as he did not receive the proceeds of the loan.

We cannot sustain his contention.

Under Article 1354 of the Civil Code, it is presumed that consideration exists and is lawful unless the
debtor proves the contrary.[38] Moreover, under Section 3, Rule 131 of the Rules of Court, the
following are disputable presumptions: (1) private transactions have been fair and regular; (2) the
ordinary course of business has been followed; and (3) there was sufficient consideration for a
contract.[39] A presumption may operate against an adversary who has not introduced proof to rebut it.
The effect of a legal presumption upon a burden of proof is to create the necessity of presenting
evidence to meet the legal presumption or the prima facie case created thereby, and which, if no
proof to the contrary is presented and offered, will prevail. The burden of proof remains where it is,
but by the presumption, the one who has that burden is relieved for the time being from introducing
evidence in support of the averment, because the presumption stands in the place of evidence unless
rebutted.[40]

In the present case, as proof of his claim of lack of consideration, respondent denied under oath that
he owed petitioner a single centavo. He added that he did not apply for a loan and that when he
signed the promissory notes, they were all blank forms and all the blank spaces were to be filled up
only if the sale transaction over the subject properties would not push through because of a possible
adverse decision in the civil cases involving them (the properties). He thus posits that since the sale
pushed through, the promissory notes did not become effective.

43 | P a g e
Contrary to the conclusions of the RTC and the CA, we find such proof insufficient to overcome the
presumption of consideration. The presumption that a contract has sufficient consideration cannot be
overthrown by the bare, uncorroborated and self-serving assertion of respondent that it has no
consideration.[41] The alleged lack of consideration must be shown by preponderance of evidence.[42]

As it now appears, the promissory notes clearly stated that respondent promised to pay
petitioner P1,520,000.00 and P416,800.00, plus interests and penalty charges, a year after their
execution. Nowhere in the notes was it stated that they were subject to a condition. As correctly
observed by petitioner, respondent is not only a lawyer but a law professor as well. He is, therefore,
legally presumed not only to exercise vigilance over his concerns but, more importantly, to know the
legal and binding effects of promissory notes and the intricacies involving the execution of negotiable
instruments including the need to execute an agreement to document extraneous collateral
conditions and/or agreements, if truly there were such.[43] This militates against respondents claim
that there was indeed such an agreement. Thus, the promissory notes should be accepted as they
appear on their face.

Respondents liability is not negated by the fact that he has uncollected commissions from the sale of
the Molino properties. As the records of the case show, at the time of the execution of the promissory
notes, the Molino properties were subject of various court actions commenced by different parties.
Thus, the sale of the properties and, consequently, the payment of respondents commissions were
put on hold. The non-payment of his commissions could very well be the reason why he obtained a
loan from petitioner.

In Sierra v. Court of Appeals,[44] we held that:

A promissory note is a solemn acknowledgment of a debt and a formal

commitment to repay it on the date and under the conditions agreed upon by the
borrower and the lender. A person who signs such an instrument is bound to honor it as
a legitimate obligation duly assumed by him through the signature he affixes thereto as
a token of his good faith. If he reneges on his promise without cause, he forfeits the
sympathy and assistance of this Court and deserves instead its sharp repudiation.

Aside from the payment of the principal obligation of P1,936,800.00, the parties agreed that
respondent pay interest at the rate of 25% from February 17, 1997 until fully paid. Such rate,
however, is excessive and thus, void. Since the stipulation on the interest rate is void, it is as if there
was no express contract thereon. To be sure, courts may reduce the interest rate as reason and
equity demand.[45] In this case, 12% interest is reasonable.

The promissory notes likewise required the payment of a penalty charge of 3% per month or
36% per annum. We find such rates unconscionable. This Court has recognized a penalty clause as
an accessory obligation which the parties attach to a principal obligation for the purpose of ensuring
the performance thereof by imposing on the debtor a special prestation (generally consisting of the
payment of a sum of money) in case the obligation is not fulfilled or is irregularly or inadequately
fulfilled.[46] However, a penalty charge of 3% per month is unconscionable; [47] hence, we reduce it to
1% per month or 12% per annum, pursuant to Article 1229 of the Civil Code which states:

Art. 1229. The judge shall equitably reduce the penalty when the principal obligation has
been partly or irregularly complied with by the debtor. Even if there has been no
44 | P a g e
 performance, the penalty may also be reduced by the courts if it is iniquitous or
unconscionable.[48]

Lastly, respondent promised to pay 25% of his outstanding obligations as attorneys fees in case of
non-payment thereof. Attorneys fees here are in the nature of liquidated damages. As long as said
stipulation does not contravene law, morals, or public order, it is strictly binding upon respondent.
Nonetheless, courts are empowered to reduce such rate if the same is iniquitous or unconscionable
pursuant to the above-quoted provision.[49] This sentiment is echoed in Article 2227 of the Civil Code,
to wit:

Art. 2227. Liquidated damages, whether intended as an indemnity or a penalty, shall be

equitably reduced if they are iniquitous or unconscionable.

Hence, we reduce the stipulated attorneys fees from 25% to 10%.[50]

Respondents Counterclaim and Supplemental Counterclaim

The RTC, affirmed by the CA, granted respondents counterclaims as it applied the doctrine of
piercing the veil of corporate fiction. It is undisputed that the parties to the contract of sale of the
subject properties are Pentacapital Realty as the buyer, CRDI as the seller, and respondent as the
agent of CRDI. Respondent insisted, and the RTC and the CA agreed, that petitioner, as the parent
company of Pentacapital Realty, was aware of the sale transaction, and that it was the former who
paid the consideration of the sale. Hence, they concluded that the two corporations should be treated
as one entity.
Petitioner assails the CA Decision sustaining the grant of respondents counterclaim and
supplemental counterclaim on the following grounds: first, respondents claims are barred by res
judicata, the same having been adjudicated with finality by the RTC-Cebu in Civil Case No. CEB-
25032; second, piercing the veil of corporate fiction is without basis; third, the case is dismissible for
failure to implead Pentacapital Realty as indispensable party; and last, respondents supplemental
counterclaim is actually a third party complaint against Pentacapital Realty, the filing thereof requires
the payment of the necessary docket fees.

Petitioners contentions are meritorious.

Res judicata means a matter adjudged; a thing judicially acted upon or decided; a thing or matter
settled by judgment. It lays the rule that an existing final judgment or decree rendered on the merits,
without fraud or collusion, by a court of competent jurisdiction, upon any matter within its jurisdiction,
is conclusive of the rights of the parties or their privies, in all other actions or suits in the same or any
other judicial tribunal of concurrent jurisdiction on the points and matters in issue in the first suit. [51]

The requisites of res judicata are:

(1) The former judgment or order must be final;

(2) It must be a judgment on the merits;

(3) It must have been rendered by a court having jurisdiction over the
subject matter and the parties; and

45 | P a g e
 (4) There must be between the first and second actions, identity of parties,
subject matter, and cause of action.[52]
These requisites are present in the instant case. It is undisputed that respondent instituted an
action for Preliminary Mandatory Injunction against Pentacapital Realty, before the RTC of Cebu City,
docketed as Civil Case No. CEB-25032. On motion of Pentacapital Realty, in an Order dated August
15, 2001, the court dismissed the complaint on two grounds: 1) non-payment of the correct filing fee
considering that the complaint was actually a collection of sum of money although denominated as
Preliminary Mandatory Injunction; and 2) lack of cause of action. The court treated the complaint as a
collection suit because respondent was seeking the payment of his unpaid commission or share in
the proceeds of the sale of the Molino Properties. Additionally, the RTC found that respondent had no
cause of action against Pentacapital Realty, there being no privity of contract between them. Lastly,
the court held that it was CRDI which agreed that 20% of the total consideration of the sale be paid
and delivered to respondent.[53] Instead of assailing the said Order, respondent filed his supplemental
compulsory counterclaim, demanding again the payment of his commission, this time, against
petitioner in the instant case. The Order, therefore, became final and executory.

Respondents supplemental counterclaim against petitioner is anchored on the doctrine of

piercing the veil of corporate fiction. Obviously, after the dismissal of his complaint before the RTC-
Cebu, he now proceeds
against petitioner, through a counterclaim, on the basis of the same cause of action. Thus, if we
follow respondents contention that petitioner and Pentacapital Realty are one and the same entity,
the latter being a subsidiary of the former, respondent is barred from instituting the present case
based on the principle of bar by prior judgment. The RTC-Cebu already made a definitive conclusion
that Pentacapital Realty is not a privy to the contract between respondent and CRDI. It also
categorically stated that it was CRDI which agreed to pay respondents commission equivalent to 20%
of the proceeds of the sale. With these findings, and considering that petitioners alleged liability stems
from its supposed relation with Pentacapital Realty, logic dictates that the findings of the RTC-Cebu,
which had become final and executory, should bind petitioner.

It is well-settled that when material facts or questions in issue in a former action were
conclusively settled by a judgment rendered therein, such facts or questions constitute res
judicata and may not again be litigated in a subsequent action between the same parties or their
privies regardless of the form of the latter. [54] Absolute identity of parties is not required, and where a
shared identity of interest is shown by the identity of the relief sought by one person in a prior case
and the second person in a subsequent case, such was deemed sufficient. [55] There is identity of
parties not only when the parties in the cases are the same, but also between those in privity with
them.

No other procedural law principle is indeed more settled than that once a judgment becomes
final, it is no longer subject to change, revision, amendment, or reversal, except only for correction of
clerical errors, or the making of nunc pro tunc entries which cause no prejudice to any party, or where
the judgment itself is void. The underlying reason for the rule is two-fold: (1) to avoid delay in the
administration of justice and thus make orderly the discharge of judicial business; and (2) to put
judicial controversies to an end, at the risk of occasional errors, inasmuch as controversies cannot be
allowed to drag on indefinitely and the rights and obligations of every litigant must not hang in
suspense for an indefinite period of time.[56]

46 | P a g e
In view of the foregoing disquisitions, we find no necessity to discuss the other issues raised by
petitioner.
Forum Shopping

For his part, respondent adopts the conclusions made by the RTC and the CA in granting his
counterclaims. He adds that the petition should be dismissed on the ground of forum-shopping. He
argues that petitioner is guilty of forum-shopping by filing the petition for review (G.R. No. 181482),
assailing the CA Decision dated October 4, 2007, despite the pendency of G.R. No. 171736 assailing
the CA Decision dated December 20, 2005.

We do not agree with respondent.

Forum-shopping is the act of a litigant who repetitively availed of several judicial remedies in
different courts, simultaneously or successively, all substantially founded on the same transactions
and the same essential facts and circumstances, and all raising substantially the same issues, either
pending in or already resolved adversely by some other court, to increase his chances of obtaining a
favorable decision if not in one court, then in another.[57]

What is important in determining whether forum-shopping exists is the vexation caused the courts
and parties-litigants by a party who asks different courts and/or administrative agencies to rule on the
same or related causes and/or grant the same or substantially the same reliefs, in the process
creating the possibility of conflicting decisions being rendered by the different fora upon the same
issues.[58]

Forum-shopping can be committed in three ways: (1) by filing multiple cases based on the
same cause of action and with the same prayer, the previous case not having been resolved yet
(where the ground for dismissal is litis pendentia); (2) by filing multiple cases based on the same
cause of action and with the same prayer, the previous case having been finally resolved (where the
ground for dismissal is res judicata); and (3) by filing multiple cases based on the same cause of
action but with different prayers (splitting of causes of action, where the ground for dismissal is also
either litis pendentia or res judicata).[59]

More particularly, the elements of forum-shopping are: (a) identity of parties or at least such parties
that represent the same interests in both actions; (b) identity of rights asserted and reliefs prayed for,
the relief being founded on the same facts; (c) identity of the two preceding particulars, such that any
judgment rendered in the other action will, regardless of which party is successful, amount to res
judicata in the action under consideration.[60]

These elements are not present in this case. In G.R. No. 171736, petitioner assails the propriety of
the admission of respondents supplemental compulsory counterclaim; while in G.R. No. 181482,
petitioner assails the grant of respondents supplemental compulsory counterclaim. In other words, the
first case originated from an interlocutory order of the RTC, while the second case is an appeal from
the decision of the court on the merits of the case. There is, therefore, no forum-shopping for the
simple reason that the petition and the appeal involve two different and distinct issues.

WHEREFORE, premises considered, the petitions are hereby GRANTED. The Decisions and
Resolutions of the Court of Appeals dated December 20, 2005 and March 1, 2006, in CA-G.R. SP

47 | P a g e
No. 74851, and October 4, 2007 and January 21, 2008, in CA-G.R. CV No. 86939, are REVERSED
and SET ASIDE.

Respondent Makilito B. Mahinay is ordered to pay petitioner Pentacapital Investment

Corporation P1,936,800.00 plus 12% interest per annum, and 12% per annum penalty charge,
starting February 17, 1997. He

is likewise ordered to pay 10% of his outstanding obligation as attorneys fees. No pronouncement as
to costs.

SO ORDERED.

Art. 1355-Lesion or inadequacy of cause

54. IRST DIVISION

[G.R. No. 126376. November 20, 2003]

SPOUSES BERNARDO BUENAVENTURA and CONSOLACION JOAQUIN, SPOUSES JUANITO

EDRA and NORA JOAQUIN, SPOUSES RUFINO VALDOZ and EMMA JOAQUIN, and
NATIVIDAD JOAQUIN, petitioners, vs. COURT OF APPEALS, SPOUSES LEONARDO
JOAQUIN and FELICIANA LANDRITO, SPOUSES FIDEL JOAQUIN and CONCHITA
BERNARDO, SPOUSES TOMAS JOAQUIN and SOLEDAD ALCORAN, SPOUSES
ARTEMIO JOAQUIN and SOCORRO ANGELES, SPOUSES ALEXANDER MENDOZA and
CLARITA JOAQUIN, SPOUSES TELESFORO CARREON and FELICITAS JOAQUIN,
SPOUSES DANILO VALDOZ and FE JOAQUIN, and SPOUSES GAVINO JOAQUIN and
LEA ASIS, respondents.

DECISION
CARPIO, J.:

The Case

This is a petition for review on certiorari[1] to annul the Decision[2] dated 26 June 1996 of the Court
of Appeals in CA-G.R. CV No. 41996. The Court of Appeals affirmed the Decision[3] dated 18
February 1993 rendered by Branch 65 of the Regional Trial Court of Makati (trial court) in Civil Case
No. 89-5174. The trial court dismissed the case after it found that the parties executed the Deeds of
Sale for valid consideration and that the plaintiffs did not have a cause of action against the
defendants.

The Facts

The Court of Appeals summarized the facts of the case as follows:

Defendant spouses Leonardo Joaquin and Feliciana Landrito are the parents of plaintiffs
Consolacion, Nora, Emma and Natividad as well as of defendants Fidel, Tomas, Artemio, Clarita,
Felicitas, Fe, and Gavino, all surnamed JOAQUIN. The married Joaquin children are joined in this
action by their respective spouses.

Sought to be declared null and void ab initio are certain deeds of sale of real property executed by
defendant parents Leonardo Joaquin and Feliciana Landrito in favor of their co-defendant children
and the corresponding certificates of title issued in their names, to wit:
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 1. Deed of Absolute Sale covering Lot 168-C-7 of subdivision plan (LRC) Psd-256395
executed on 11 July 1978, in favor of defendant Felicitas Joaquin, for a consideration
of P6,000.00 (Exh. C), pursuant to which TCT No. [36113/T-172] was issued in her name
(Exh. C-1);
2. Deed of Absolute Sale covering Lot 168-I-3 of subdivision plan (LRC) Psd-256394
executed on 7 June 1979, in favor of defendant Clarita Joaquin, for a consideration
of P1[2],000.00 (Exh. D), pursuant to which TCT No. S-109772 was issued in her name
(Exh. D-1);
3 Deed of Absolute Sale covering Lot 168-I-1 of subdivision plan (LRC) Psd-256394
executed on 12 May 1988, in favor of defendant spouses Fidel Joaquin and Conchita
Bernardo, for a consideration of P54,[3]00.00 (Exh. E), pursuant to which TCT No. 155329
was issued to them (Exh. E-1);
4. Deed of Absolute Sale covering Lot 168-I-2 of subdivision plan (LRC) Psd-256394
executed on 12 May 1988, in favor of defendant spouses Artemio Joaquin and Socorro
Angeles, for a consideration of P[54,3]00.00 (Exh. F), pursuant to which TCT No. 155330
was issued to them (Exh. F-1); and
5. Absolute Sale of Real Property covering Lot 168-C-4 of subdivision plan (LRC) Psd-
256395 executed on 9 September 1988, in favor of Tomas Joaquin, for a consideration
of P20,000.00 (Exh. G), pursuant to which TCT No. 157203 was issued in her name (Exh.
G-1).
[6. Deed of Absolute Sale covering Lot 168-C-1 of subdivision plan (LRC) Psd-256395
executed on 7 October 1988, in favor of Gavino Joaquin, for a consideration of P25,000.00
(Exh. K), pursuant to which TCT No. 157779 was issued in his name (Exh. K-1).]

In seeking the declaration of nullity of the aforesaid deeds of sale and certificates of title, plaintiffs, in
their complaint, aver:

- XX-

The deeds of sale, Annexes C, D, E, F, and G, [and K] are simulated as they are, are NULL AND
VOID AB INITIO because

a) Firstly, there was no actual valid consideration for the deeds of sale xxx over the
properties in litis;

b) Secondly, assuming that there was consideration in the sums reflected in the questioned
deeds, the properties are more than three-fold times more valuable than the measly
sums appearing therein;

c) Thirdly, the deeds of sale do not reflect and express the true intent of the parties (vendors
and vendees); and

d) Fourthly, the purported sale of the properties in litis was the result of a deliberate
conspiracy designed to unjustly deprive the rest of the compulsory heirs (plaintiffs
herein) of their legitime.

- XXI -

Necessarily, and as an inevitable consequence, Transfer Certificates of Title Nos. 36113/T-172, S-

109772, 155329, 155330, 157203 [and 157779] issued by the Registrar of Deeds over the properties
in litis xxx are NULL AND VOID AB INITIO.

Defendants, on the other hand aver (1) that plaintiffs do not have a cause of action against them as
well as the requisite standing and interest to assail their titles over the properties in litis; (2) that the
sales were with sufficient considerations and made by defendants parents voluntarily, in good faith,
and with full knowledge of the consequences of their deeds of sale; and (3) that the certificates of title
were issued with sufficient factual and legal basis.[4] (Emphasis in the original)

49 | P a g e
 The Ruling of the Trial Court

Before the trial, the trial court ordered the dismissal of the case against defendant spouses
Gavino Joaquin and Lea Asis.[5] Instead of filing an Answer with their co-defendants, Gavino Joaquin
and Lea Asis filed a Motion to Dismiss. [6] In granting the dismissal to Gavino Joaquin and Lea Asis,
the trial court noted that compulsory heirs have the right to a legitime but such right is contingent
since said right commences only from the moment of death of the decedent pursuant to Article 777 of
the Civil Code of the Philippines.[7]
After trial, the trial court ruled in favor of the defendants and dismissed the complaint. The trial
court stated:

In the first place, the testimony of the defendants, particularly that of the xxx father will show that the
Deeds of Sale were all executed for valuable consideration. This assertion must prevail over the
negative allegation of plaintiffs.

And then there is the argument that plaintiffs do not have a valid cause of action against defendants
since there can be no legitime to speak of prior to the death of their parents. The court finds this
contention tenable. In determining the legitime, the value of the property left at the death of the
testator shall be considered (Art. 908 of the New Civil Code). Hence, the legitime of a compulsory heir
is computed as of the time of the death of the decedent. Plaintiffs therefore cannot claim an
impairment of their legitime while their parents live.

All the foregoing considered, this case is DISMISSED.

In order to preserve whatever is left of the ties that should bind families together, the counterclaim is
likewise DISMISSED.

No costs.

SO ORDERED.[8]

The Ruling of the Court of Appeals

The Court of Appeals affirmed the decision of the trial court. The appellate court ruled:

To the mind of the Court, appellants are skirting the real and decisive issue in this case, which is,
whether xxx they have a cause of action against appellees.

Upon this point, there is no question that plaintiffs-appellants, like their defendant brothers and
sisters, are compulsory heirs of defendant spouses, Leonardo Joaquin and Feliciana Landrito, who
are their parents. However, their right to the properties of their defendant parents, as compulsory
heirs, is merely inchoate and vests only upon the latters death. While still alive, defendant parents are
free to dispose of their properties, provided that such dispositions are not made in fraud of creditors.

Plaintiffs-appellants are definitely not parties to the deeds of sale in question. Neither do they claim to
be creditors of their defendant parents. Consequently, they cannot be considered as real parties in
interest to assail the validity of said deeds either for gross inadequacy or lack of consideration or for
failure to express the true intent of the parties. In point is the ruling of the Supreme Court in Velarde,
et al. vs. Paez, et al., 101 SCRA 376, thus:

The plaintiffs are not parties to the alleged deed of sale and are not principally or subsidiarily bound
thereby; hence, they have no legal capacity to challenge their validity.

Plaintiffs-appellants anchor their action on the supposed impairment of their legitime by the
dispositions made by their defendant parents in favor of their defendant brothers and sisters. But, as
correctly held by the court a quo, the legitime of a compulsory heir is computed as of the time of the
death of the decedent. Plaintiffs therefore cannot claim an impairment of their legitime while their
parents live.

50 | P a g e
With this posture taken by the Court, consideration of the errors assigned by plaintiffs-appellants is
inconsequential.

WHEREFORE, the decision appealed from is hereby AFFIRMED, with costs against plaintiffs-
appellants.

SO ORDERED.[9]

Hence, the instant petition.

Issues

Petitioners assign the following as errors of the Court of Appeals:

1. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE IN
QUESTION HAD NO VALID CONSIDERATION.
2. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT EVEN ASSUMING THAT
THERE WAS A CONSIDERATION, THE SAME IS GROSSLY INADEQUATE.
3. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE DEEDS OF SALE DO
NOT EXPRESS THE TRUE INTENT OF THE PARTIES.
4. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE WAS
PART AND PARCEL OF A CONSPIRACY AIMED AT UNJUSTLY DEPRIVING THE
REST OF THE CHILDREN OF THE SPOUSES LEONARDO JOAQUIN AND FELICIANA
LANDRITO OF THEIR INTEREST OVER THE SUBJECT PROPERTIES.
5. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT PETITIONERS HAVE A
GOOD, SUFFICIENT AND VALID CAUSE OF ACTION AGAINST THE PRIVATE
RESPONDENTS.[10]

The Ruling of the Court

We find the petition without merit.

We will discuss petitioners legal interest over the properties subject of the Deeds of Sale before
discussing the issues on the purported lack of consideration and gross inadequacy of the prices of
the Deeds of Sale.

Whether Petitioners have a legal interest

over the properties subject of the Deeds of Sale

Petitioners Complaint betrays their motive for filing this case. In their Complaint, petitioners
asserted that the purported sale of the properties in litiswas the result of a deliberate conspiracy
designed to unjustly deprive the rest of the compulsory heirs (plaintiffs herein) of their legitime.
Petitioners strategy was to have the Deeds of Sale declared void so that ownership of the lots would
eventually revert to their respondent parents. If their parents die still owning the lots, petitioners and
their respondent siblings will then co-own their parents estate by hereditary succession. [11]
It is evident from the records that petitioners are interested in the properties subject of the Deeds
of Sale, but they have failed to show any legal right to the properties. The trial and appellate courts
should have dismissed the action for this reason alone. An action must be prosecuted in the name of
the real party-in-interest.[12]

[T]he question as to real party-in-interest is whether he is the party who would be benefitted or injured
by the judgment, or the party entitled to the avails of the suit.

xxx

51 | P a g e
In actions for the annulment of contracts, such as this action, the real parties are those who are
parties to the agreement or are bound either principally or subsidiarily or are prejudiced in their rights
with respect to one of the contracting parties and can show the detriment which would positively
result to them from the contract even though they did not intervene in it (Ibaez v. Hongkong &
Shanghai Bank, 22 Phil. 572 [1912]) xxx.

These are parties with a present substantial interest, as distinguished from a mere expectancy or
future, contingent, subordinate, or consequential interest. The phrase present substantial interest
more concretely is meant such interest of a party in the subject matter of the action as will entitle him,
under the substantive law, to recover if the evidence is sufficient, or that he has the legal title to
demand and the defendant will be protected in a payment to or recovery by him.[13]

Petitioners do not have any legal interest over the properties subject of the Deeds of Sale. As the
appellate court stated, petitioners right to their parents properties is merely inchoate and vests only
upon their parents death. While still living, the parents of petitioners are free to dispose of their
properties. In their overzealousness to safeguard their future legitime, petitioners forget that
theoretically, the sale of the lots to their siblings does not affect the value of their parents
estate. While the sale of the lots reduced the estate, cash of equivalent value replaced the lots taken
from the estate.

Whether the Deeds of Sale are void

for lack of consideration

Petitioners assert that their respondent siblings did not actually pay the prices stated in the Deeds
of Sale to their respondent father. Thus, petitioners ask the court to declare the Deeds of Sale void.
A contract of sale is not a real contract, but a consensual contract. As a consensual contract, a
contract of sale becomes a binding and valid contract upon the meeting of the minds as to price. If
there is a meeting of the minds of the parties as to the price, the contract of sale is valid, despite the
manner of payment, or even the breach of that manner of payment. If the real price is not stated in
the contract, then the contract of sale is valid but subject to reformation. If there is no meeting of the
minds of the parties as to the price, because the price stipulated in the contract is simulated, then the
contract is void.[14] Article 1471 of the Civil Code states that if the price in a contract of sale is
simulated, the sale is void.
It is not the act of payment of price that determines the validity of a contract of sale. Payment of
the price has nothing to do with the perfection of the contract. Payment of the price goes into the
performance of the contract. Failure to pay the consideration is different from lack of
consideration. The former results in a right to demand the fulfillment or cancellation of the obligation
under an existing valid contract while the latter prevents the existence of a valid contract. [15]
Petitioners failed to show that the prices in the Deeds of Sale were absolutely simulated. To
prove simulation, petitioners presented Emma Joaquin Valdozs testimony stating that their father,
respondent Leonardo Joaquin, told her that he would transfer a lot to her through a deed of sale
without need for her payment of the purchase price. [16] The trial court did not find the allegation of
absolute simulation of price credible. Petitioners failure to prove absolute simulation of price is
magnified by their lack of knowledge of their respondent siblings financial capacity to buy the
questioned lots.[17] On the other hand, the Deeds of Sale which petitioners presented as evidence
plainly showed the cost of each lot sold. Not only did respondents minds meet as to the purchase
price, but the real price was also stated in the Deeds of Sale. As of the filing of the complaint,
respondent siblings have also fully paid the price to their respondent father.[18]

Whether the Deeds of Sale are void

for gross inadequacy of price

Petitioners ask that assuming that there is consideration, the same is grossly inadequate as to
invalidate the Deeds of Sale.
Articles 1355 of the Civil Code states:

52 | P a g e
Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a
contract, unless there has been fraud, mistake or undue influence.(Emphasis supplied)

Article 1470 of the Civil Code further provides:

Art. 1470. Gross inadequacy of price does not affect a contract of sale, except as may indicate a
defect in the consent, or that the parties really intended a donation or some other act or
contract. (Emphasis supplied)

Petitioners failed to prove any of the instances mentioned in Articles 1355 and 1470 of the Civil
Code which would invalidate, or even affect, the Deeds of Sale. Indeed, there is no requirement that
the price be equal to the exact value of the subject matter of sale. All the respondents believed that
they received the commutative value of what they gave. As we stated in Vales v. Villa:[19]

Courts cannot follow one every step of his life and extricate him from bad bargains, protect him from
unwise investments, relieve him from one-sided contracts, or annul the effects of foolish acts. Courts
cannot constitute themselves guardians of persons who are not legally incompetent. Courts operate
not because one person has been defeated or overcome by another, but because he has been
defeated or overcome illegally. Men may do foolish things, make ridiculous contracts, use miserable
judgment, and lose money by them indeed, all they have in the world; but not for that alone can the
law intervene and restore. There must be, in addition, a violation of the law, the commission of what
the law knows as an actionable wrong, before the courts are authorized to lay hold of the situation
and remedy it. (Emphasis in the original)

Moreover, the factual findings of the appellate court are conclusive on the parties and carry
greater weight when they coincide with the factual findings of the trial court. This Court will not weigh
the evidence all over again unless there has been a showing that the findings of the lower court are
totally devoid of support or are clearly erroneous so as to constitute serious abuse of discretion. [20] In
the instant case, the trial court found that the lots were sold for a valid consideration, and that the
defendant children actually paid the purchase price stipulated in their respective Deeds of
Sale. Actual payment of the purchase price by the buyer to the seller is a factual finding that is now
conclusive upon us.
WHEREFORE, we AFFIRM the decision of the Court of Appeals in toto.

Art. 1356- Form of Contracts

56. IRST DIVISION

[G.R. No. 132474. November 19, 1999]

RENATO CENIDO (deceased), represented by VICTORIA CENIDOSA, petitioner, vs. SPOUSES

AMADEO APACIONADO and HERMINIA STA. ANA, respondents.

DECISION
PUNO, J.:

In this petition for review, petitioner Renato Cenido seeks to reverse and set aside the decision of
the Court of Appeals[1] in CA-G.R. CV No. 41011 which declared the private respondents as the
owners of a house and lot in Binangonan, Rizal.[2]
The antecedent facts are as follows:
On May 22, 1989, respondent spouses Amadeo Apacionado and Herminia Sta. Ana filed with the
Regional Trial Court, Branch 70, Rizal a complaint against petitioner Renato Cenido for Declaration of
Ownership, Nullity, with Damages.[3] The spouses alleged that: (1) they are the owners of a parcel of
unregistered land, 123 square meters in area and located at Rizal Street, Barrio Layunan,
Binangonan, Rizal, more particularly described as follows:

x x x that certain parcel of land located at Rizal, St., Layunan, Binangonan, Rizal, with an area of 123
square meters, more or less, bounded on the North by Gavino Aparato; on the East by Rizal St., on
the South by Tranquilino Manuzon; and on the West by Simplicio Aparato, and the residential house
standing thereon.[4]

53 | P a g e
(2) this house and lot were purchased by the spouses from its previous owner, Bonifacio Aparato,
now deceased, who lived under the spouses' care and protection for some twenty years prior to his
death; (3) while he was alive, Bonifacio Aparato mortgaged the said property twice, one to the Rural
Bank of Binangonan and the other to Linda C. Ynares, as security for loans obtained by him; (4) the
loans were paid off by the spouses thereby securing the release and cancellation of said mortgages;
(5) the spouses also paid and continue to pay the real estate taxes on the property; (6) from the time
of sale, they have been in open, public, continuous and uninterrupted possession of the property in
the concept of owners; (7) that on January 7, 1987, petitioner Renato Cenido, claiming to be the
owner of the subject house and lot, filed a complaint for ejectment against them with the Municipal
Trial Court, Branch 2, Binangonan, Rizal; (8) through fraudulent and unauthorized means, Cenido
was able to cause the issuance in his name of Tax Declaration No. 02-0368 over the subject
property, which fact the spouses learned only upon the filing of the ejectment case; (9) although the
ejectment case was dismissed by the Municipal Trial Court (MTC), Branch 2, the tax declaration in
Cenido's name was not cancelled and still subsisted; (10) the spouses have referred the matter to the
barangay for conciliation but Cenido unjustifiably refused to appear thereat. The spouses thus prayed
that:

WHEREFORE, it is respectfully prayed of the Honorable Court that judgment issue in the case:

1. Declaring them (plaintiffs) the true and absolute owners of the house and lot now covered by Tax
Declaration No. 02-0368;

2. Declaring Tax Declaration No. 02-0368 in the name of defendant Renato Cenido as null and void
and directing the Provincial Assessor of Rizal and the Municipal Assessor of Binangonan, Rizal to
register and to declare the house and lot covered by the same in their names (plaintiffs) for purposes
of taxation;

3. Ordering defendant to pay them in the least amount of P50,000.00 as and for moral damages
suffered;

4. Ordering defendant to pay them the amount of P10,000.00 as and for attorney's fees;

5. Ordering payment by defendant of exemplary damages in such amount which the Honorable Court
may deem just and equitable in the premises;

6. Ordering defendant to pay the costs of suit; and

Plaintiffs pray for such other and further relief which the Honorable Court may deem just and
equitable considering the foregoing premises.[5]

Petitioner Cenido answered claiming that: (1) he is the illegitimate son of Bonifacio Aparato, the
deceased owner of the subject property; (2) as Aparato's sole surviving heir, he became the owner of
the property as evidenced by the cancellation of Tax Declaration No. 02-0274 in Bonifacio's name
and the issuance of Tax Declaration No. 02-0368 in his name; (3) his ownership over the house and
lot was also confirmed in 1985 by the Municipal Trial Court, Branch 1, Binangonan in Case No. 2264
which adjudicated various claims involving the same subject property wherein plaintiffs were privy to
the said case; (4) that in said case, the Apacionado spouses participated in the execution of the
compromise agreement partitioning the deceased's estate among his heirs, which agreement was
adopted by the Municipal Trial Court as its judgment; (5) that the Apacionado spouses were allowed
to stay in his father's house temporarily; (6) the mortgages on the property were obtained by his
father upon request of the Apacionados who used the proceeds of the loans exclusively for
themselves; (7) the real estate taxes on the property were paid for by his father, the principal, and the
spouses were merely his agents; (8) the instrument attesting to the alleged sale of the house and lot
by Bonifacio Aparato to the spouses is not a public document; (8) petitioner Cenido was never
summoned to appear before the barangay for conciliation proceedings.[6]
Respondent spouses replied that: (1) Cenido is not the illegitimate son of Bonifacio, Cenido's
claim of paternity being spurious; (2) the ownership of the property was not the proper subject in Civil
Case No. 2264 before the MTC, Branch I, nor were the spouses parties in said case. [7]
The parties went to trial. Respondent spouses presented four (4) witnesses, namely, respondent
Herminia Sta. Ana Apacionado; Rolando Nieves, the barangay captain; Norberto Aparato, the son of
Gavino Aparato, Bonifacio's brother; and Carlos Inabayan, one of the two witnesses to the deed of

54 | P a g e
sale between Bonifacio Aparato and the spouses over the property. Petitioner Cenido presented only
himself as witness.
On March 30, 1993, the trial court rendered judgment. The court upheld petitioner Cenido's
ownership over the property by virtue of the recognition made by Bonifacio's then surviving brother,
Gavino, in the compromise judgment of the MTC. Concomitantly, the court also did not sustain the
deed of sale between Bonifacio and the spouses because it was neither notarized nor signed by
Bonifacio and was intrinsically defective. The court ordered thus:

WHEREFORE, in the light of the foregoing considerations, the Court believes that preponderance of
evidence is on the side of defendant and so the complaint could not be given due
course. Accordingly, the case is, as it should be, dismissed. No attorney's fees or damages is being
awarded as no evidence to this effect had been given by defendant. With costs against plaintiffs.

SO ORDERED.[8]

Respondent spouses appealed to the Court of Appeals. In a decision dated September 30, 1997,
the appellate court found the appeal meritorious and reversed the decision of the trial court. It held
that the recognition of Cenido's filiation by Gavino, Bonifacio's brother, did not comply with the
requirements of the Civil Code and the Family Code; that the deed between Bonifacio and
respondent spouses was a valid contract of sale over the property; and Cenido's failure to object to
the presentation of the deed before the trial court was a waiver of the defense of the Statute of
Frauds. The Court of Appeals disposed of as follows:

WHEREFORE, the appealed Decision is hereby REVERSED and SET ASIDE. Plaintiffs-Appellants
Spouses Amadeo Apacionado and Herminia Sta. Ana are declared owners of the subject house and
lot now covered by Tax Declaration No. 02-6368.[9]

Hence, this recourse. Petitioner Cenido alleges that:

1. The unsigned, unnotarized and highly doubtful private document designated as Pagpapatunay
which is solely relied upon by the respondents in support of their case is not sufficient to vest
ownership of and transfer the title, rights and interest over the subject property to the respondents.

x x x.

2. The Court of Appeals departed from the accepted and usual course of judicial proceedings in that it
ruled against the petitioner in view of the alleged weakness of his defense rather than evaluate the
case based on the strength of the respondents evidence, thereby necessitating this Honorable
Court's exercise of its power of supervision.[10]

Victoria Cenidosa, in representation of petitioner Cenido, has manifested, through counsel, that
petitioner died in September 1993; that on December 18, 1985, eight years before his death, Cenido
sold the subject house and lot to Maria D. Ojeda for the sum of P70,000.00; that Maria D. Ojeda is
now old and sickly, and is thus being represented in the instant case by her daughter, Victoria O.
Cenidosa.[11]
In the same vein, respondent Herminia Sta. Ana Apacionado also manifested that her husband,
Amadeo Apacionado, died on August 11, 1989. Amadeo is now being represented by his compulsory
heirs.[12]
Before ruling on petitioner's arguments, it is necessary to establish certain facts essential for a
proper adjudication of the case.
The records reveal that the late Bonifacio Aparato had two siblings-- a sister named Ursula and a
brother named Gavino.[13] Ursula died on March 1, 1979, [14]Bonifacio on January 3, 1982[15] and
Gavino, sometime after Bonifacio's death. Both Ursula and Bonifacio never married and died leaving
no legitimate offspring.Gavino's son, Norberto, however, testified that there was a fourth sibling, a
sister, who married but also died; as to when she died or whether she left any heirs, Norberto did not
know.[16] What is clear and undisputed is that Bonifacio was survived by Gavino who also left
legitimate heirs.
Both Bonifacio and Ursula lived in the subject property under the care and protection of the
Apacionados. Herminia Sta. Ana Apacionado started living with them in 1976. She took care of

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Bonifacio and Ursula, who died three years later. Herminia married Amado Apacionado, whose
paternal grandmother was a sister of Bonifacio. [17] Amadeo moved into Bonifacio's house and
assisted Herminia in taking care of the old man until his demise.
Shortly after Bonifacio's death, Civil Case No. 2264 was instituted by petitioner Cenido against
Gavino Aparato before the Municipal Trial Court, Branch 1, Binangonan. The records do not reveal
the nature of this action.[18] Nevertheless, three years after filing of the case, the parties entered into a
compromise agreement.The parties listed the properties of Bonifacio comprising two parcels of
land: one parcel was the residential house and lot in question and the other was registered
agricultural land with an area of 38,641 square meters; Gavino Aparato expressly recognized Renato
Cenido as the sole illegitimate son of his brother, likewise, Cenido recognized Gavino as the brother
of Bonifacio; as Bonifacio's heirs, they partitioned his estate among themselves, with the subject
property and three portions of the agricultural land as Cenido's share, and the remaining 15,309
square meters of the agricultural land as Gavino's; both parties agreed to share in the documentation,
registration and other expenses for the transfer of their shares. This compromise agreement was
adopted as the decision of the MTC on January 31, 1985.[19]
In the same year, petitioner Cenido obtained in his name Tax Declaration No. 02-6368 over the
subject property. Two years later, in January 1987, he filed an ejectment case against respondent
spouses who continued occupying the property in question. This case was dismissed.
Respondent spouses claim of ownership over the subject property is anchored on a one-page
typewritten document entitled Pagpapatunay, executed by Bonifacio Aparato. The Pagpapatunay
reads as follows:

PAGPAPATUNAY

DAPAT MALAMAN NG LAHAT:

Akong si BONIFACIO APARATO, binata, Pilipino, husto sa gulang, at kasalukuyang naninirahan sa

Layunan, Binangonan, Rizal, ay nagpapatunay nitong mga sumusunod:

Una: -- Na, ako ang siyang nagmamay-ari ng isang lagay na lupang SOLAR at Bahay Tirahan na
nakatirik sa nabanggit na solar na makikita sa lugar ng Rizal St., Layunan, Binangonan, Rizal;

Ikalawa: -- Na, sapagkat ang nagalaga sa akin hanggang sa ako'y tuluyang kunin ng Dakilang
Maykapal ay walang iba kungdi ang mag-asawang AMADEO APACIONADO at HERMINIA STA.
ANA APACIONADO;

Ikatlo: -- Na, pinatutunayan ko sa mga maykapangyarihan at kanginumang tao na ang nabanggit na

SOLAR at bahay tirahan ay ipinagbili ko sa nabanggit na mag-asawa sa halagang SAMPUNG
LIBONG (P10,000.00) PISO, bilang pakunsuwelo sa kanilang pagmamalasakit sa aking pagkatao at
kalalagayan;

Na, patunay na ito ay aking nilagdaan ng maliwanag ang aking isip at nalalaman ko ang lahat ng
nilalaman nito.

SA KATUNAYAN NG LAHAT, lumagda ako ng aking pangalan at apelyido ngayong ika-10 ng

Disyembre 1981, dito sa Layunan, Binangonan, Rizal.

(Thumbmarked)
BONIFACIO APARATO
Nagpatunay

NILAGDAAN SA HARAP NINA:

(SGD.) (SGD.)
Virgilio O. Cenido Carlos Inabayan
- Saksi - - Saksi -[20]
On its face, the document Pagpapatunay attests to the fact that Bonifacio Aparato was the owner
of the house and lot in Layunan, Rizal; that because the Apacionado spouses took care of him until
the time of his death, Bonifacio sold said property to them for the sum of P10,000.00; that he was
signing the same document with a clear mind and with full knowledge of its contents; and as proof

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thereof, he was affixing his signature on said document on the tenth day of December 1981 in
Layunan, Binangonan, Rizal. Bonifacio affixed his thumbmark on the space above his name; and this
was witnessed by Virgilio O. Cenido and Carlos Inabayan.
Petitioner Cenido disputes the authenticity and validity of the Pagpapatunay. He claims that it is
not a valid contract of sale and its genuineness is highly doubtful because: (1) it was not notarized
and is merely a private instrument; (2) it was not signed by the vendor, Bonifacio; (3) it was
improbable for Bonifacio to have executed the document and dictated the words lumagda ako ng
aking pangalan at apelyido because he was paralyzed and could no longer sign his name at that
time; and (4) the phrase ang nag-alaga sa akin hanggang sa ako'y tuluyang kunin ng Dakilang
Maykapal speaks of an already departed Bonifacio and could have been made only by persons other
than the dead man himself.[21]
To determine whether the Pagpapatunay is a valid contract of sale, it must contain the essential
requisites of contracts, viz: (1) consent of the contracting parties; (2) object certain which is the
subject matter of the contract; and (3) cause of the obligation which is established. [22]
The object of the Pagpapatunay is the house and lot. The consideration is P10,000.00 for the
services rendered to Aparato by respondent spouses. According to respondent Herminia Apacionado,
this P10,000.00 was not actually paid to Bonifacio because the amount merely quantified the services
they rendered to the old man. It was the care the spouses voluntarily gave that was the cause of the
sale.[23] The cause therefore was the service remunerated.[24]
Petitioner alleges that Bonifacio did not give his consent to the deed because he did not affix his
signature, but merely his thumbmark, on the document. Bonifacio was a literate person who could
legibly sign his full name, and his signature is evident in several documents such as his identification
card as member of the Anderson Fil-American Guerillas; [25] the Kasulatan ng Palasanglaan dated July
25, 1974 where he and his two other siblings mortgaged the subject property for P2,000.00 to one
Linda Y. Cenido;[26] Padagdag sa Sanglaan dated June 16, 1976;[27] and another Padagdag sa
Sanglaan dated March 2, 1979.[28]
Respondent Herminia Sta. Ana Apacionado testified that Bonifacio Aparato affixed his
thumbmark because he could no longer write at the time of execution of the document. The old man
was already 61 years of age and could not properly see with his eyes. He was stricken by illness a
month before and was paralyzed from the waist down. He could still speak, albeit in a garbled
manner, and be understood. The contents of the Pagpapatunay were actually dictated by him to one
Leticia Bandola who typed the same on a typewriter she brought to his house.[29]
That Bonifacio was alive at the time of execution of the contract and voluntarily gave his consent
to the instrument is supported by the testimony of Carlos Inabayan, the lessee of Bonifacio's billiard
hall at the ground floor of the subject property. Inabayan testified that on December 10, 1981, he was
summoned to go up to Bonifacio's house. There, he saw Bonifacio, respondent Apacionados, and a
woman and her husband. He was given a sheet of paper to read. He read the paper and understood
that it was a deed of sale of the house and lot executed by Bonifacio in favor of the
Apacionados. Thereafter, Bonifacio requested him to sign the document as witness.Reexamining the
Pagpapatunay, Inabayan saw that Bonifacio affixed his thumbmark on the space above his
name. Inabayan thus signed the document and returned to the billiard hall.[30]
Inabayan's testimony has not been rebutted by petitioner. Petitioner, through counsel, waived his
right to do so, finding no need to cross-examine the witness. [31] This waiver was granted by the court
in the order of September 23, 1992.[32]
One who alleges any defect or the lack of a valid consent to a contract must establish the same
by full, clear and convincing evidence, not merely by preponderance thereof. [33] Petitioner has not
alleged that the old man, by his physical or mental state, was incapacitated to give his consent at the
time of execution of the Pagpapatunay. Petitioner has not shown that Bonifacio was insane or
demented or a deaf-mute who did not know how to write. [34] Neither has petitioner claimed, at the very
least, that the consent of Bonifacio to the contract was vitiated by mistake, violence, intimidation,
undue influence or fraud.[35] If by assailing the intrinsic defects in the wordage of the Pagpapatunay
petitioner Cenido seeks to specifically allege the exercise of extrinsic fraud and undue influence on
the old man, these defects are not substantial as to render the entire contract void. There must be
clear and convincing evidence of what specific acts of undue influence [36] or fraud[37] were employed
by respondent spouses that gave rise to said defects. Absent such proof, Bonifacio's presumed
consent to the Pagpapatunay remains.

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 The Pagpapatunay, therefore, contains all the essential requisites of a contract. Its authenticity
and due execution have not been disproved either. The finding of the trial court that the document
was prepared by another person and the thumbmark of the dead Bonifacio was merely affixed to it is
pure conjecture. On the contrary, the testimonies of respondent Herminia Sta. Ana and Carlos
Inabayan prove that the document is authentic and was duly executed by Bonifacio himself.
The Pagpapatunay is undisputably a private document. And this fact does not detract from its
validity. The Civil Code, in Article 1356 provides:

Art. 1356. Contracts shall be obligatory, in whatever form they may have been entered into,
provided all the essential requisites for their validity are present.However, when the law
requires that a contract be in some form in order that it may be valid or enforceable, or that a
contract be proved in a certain way, that requirement is absolute and indispensable. In such
cases, the right of the parties stated in the following article cannot be exercised.

Generally, contracts are obligatory, in whatever form such contracts may have been entered into,
provided all the essential requisites for their validity are present. When, however, the law requires that
a contract be in some form for it to be valid or enforceable, that requirement must be complied with.
A certain form may be prescribed by law for any of the following purposes: for validity,
enforceability, or greater efficacy of the contract.[38] When the form required is for validity, its non-
observance renders the contract void and of no effect. [39] When the required form is for enforceability,
non-compliance therewith will not permit, upon the objection of a party, the contract, although
otherwise valid, to be proved or enforced by action. [40] Formalities intended for greater efficacy or
convenience or to bind third persons, if not done, would not adversely affect the validity or
enforceability of the contract between the contracting parties themselves.[41]
Article 1358 of the Civil Code requires that:

Art. 1358. The following must appear in a public document:

(1) Acts and contracts which have for their object the creation, transmission, modification or
extinguishment of real rights over immovable property; sales of real property or of an interest
therein are governed by Articles 1403, No. 2 and 1405;

(2) The cession, repudiation or renunciation of hereditary rights or of those of the conjugal partnership
of gains;

(3) The power to administer property, or any other power which has for its object an act appearing or
which should appear in a public document, or should prejudice a third person;

(4) The cession of actions or rights proceeding from an act appearing in a public document.

All other contracts where the amount involved exceeds five hundred pesos must appear in writing,
even a private one. But sales of goods, chattels or things in action are governed by Articles 1403, No.
2 and 1405.

Acts and contracts which create, transmit, modify or extinguish real rights over immovable property
should be embodied in a public document. Sales of real property are governed by the Statute of
Frauds which reads:

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

(1) x x x

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

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

58 | P a g e
 xxx

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

(3) x x x.

The sale of real property should be in writing and subscribed by the party charged for it to be
enforceable. The Pagpapatunay is in writing and subscribed by Bonifacio Aparato, the vendor; hence,
it is enforceable under the Statute of Frauds. Not having been subscribed and sworn to before a
notary public, however, the Pagpapatunay is not a public document, and therefore does not comply
with Article 1358, paragraph 1 of the Civil Code.
The requirement of a public document in Article 1358 is not for the validity of the instrument but
for its efficacy.[42] Although a conveyance of land is not made in a public document, it does not affect
the validity of such conveyance.[43] Article 1358 does not require the accomplishment of the acts or
contracts in a public instrument in order to validate the act or contract but only to insure its efficacy,
[44]
so that after the existence of said contract has been admitted, the party bound may be compelled
to execute the proper document.[45] This is clear from Article 1357, viz:

Art. 1357. If the law requires a document or other special form, as in the acts and contracts
enumerated in the following article [Article 1358], the contracting parties may compel each
other to observe that form, once the contract has been perfected. This right may be exercised
simultaneously with the action upon the contract.

The private conveyance of the house and lot is therefore valid between Bonifacio Aparato and
respondent spouses. The question of whether the Pagpapatunay is sufficient to transfer and
convey title to the land for purposes of original registration[46] or the issuance of a real estate tax
declaration in respondent spouses' names, as prayed for by respondent spouses, [47] is another matter
altogether.[48] For greater efficacy of the contract, convenience of the parties and to bind third persons,
respondent spouses have the right to compel the vendor or his heirs to execute the necessary
document to properly convey the property.[49]
Anent petitioner's second assigned error, the fact that the Court of Appeals sustained the validity
of the Pagpapatunay was not a conclusion that necessarily resulted from the weakness of petitioner's
claim of filiation to Bonifacio Aparato. Of and by itself, the Pagpapatunay is a valid contract of sale
between the parties and the Court of Appeals did not err in upholding its validity.
The issue of petitioner's paternity, however, is essential to determine whether Tax Declaration
No. 02-6368 in the name of petitioner Cenido should be nullified, as prayed for by respondent
spouses in their complaint.
Tax Declaration No. 02-6368[50] in petitioner Cenido's name was issued pursuant to the
compromise judgment of the MTC where Gavino Aparato, Bonifacio's brother, expressly recognized
petitioner Cenido as Bonifacio's sole illegitimate son. The compromise judgment was rendered in
1985, three years after Bonifacio's demise.
Under the Civil Code,[51] natural children and illegitimate children other than natural are entitled to
support and successional rights only when recognized or acknowledged by the putative parent.
[52]
Unless recognized, they have no rights whatsoever against their alleged parent or his estate. [53]
The filiation of illegitimate children may be proved by any of the forms of recognition of natural
children.[54] This recognition may be made in three ways:[55] (1) voluntarily, which must be express
such as that in a record of birth, a will, a statement before a court of record, or in any authentic
writing;[56] (2) legally, i.e., when a natural child is recognized, such recognition extends to his or her
brothers and sisters of the full blood;[57] and (3) judicially or compulsorily, which may be demanded by
the illegitimate child of his parents. [58] The action for compulsory recognition of the illegitimate child
must be brought during the lifetime of the presumed parents. This is explicitly provided in Article 285
of the Civil Code, viz:

Art. 285. The action for the recognition of natural children may be brought only during the lifetime of
the presumed parents, except in the following cases:

(1) If the father or mother died during the minority of the child, in which case the latter may file the
action before the expiration of four years from the attainment of his majority;

59 | P a g e
(2) If after the death of the father or of the mother a document should appear of which nothing had
been heard and in which either or both parents recognize the child.

In this case, the action must be commenced within four years from the finding of the document.

The illegitimate child can file an action for compulsory recognition only during the lifetime of the
presumed parent. After the parent's death, the child cannot bring such action, except, however, in
only two instances: one is when the supposed parent died during the minority of the child, and the
other is when after the death of the parent, a document should be discovered in which the parent
recognized the child as his. The action must be brought within four years from the attainment of
majority in the first case, and from the discovery of the document in the second case. The
requirement that the action be filed during the parent's lifetime is to prevent illegitimate children, on
account of strong temptations to large estates left by dead persons, to claim part of this estate without
giving the alleged parent personal opportunity to be heard. [59] It is vital that the parent be heard for
only the parent is in a position to reveal the true facts surrounding the claimant's conception. [60]
In the case at bar, petitioner Cenido did not present any record of birth, will or any authentic
writing to show he was voluntarily recognized by Bonifacio as his illegitimate son. In fact, petitioner
admitted on the witness stand that he had no document to prove Bonifacio's recognition, much less
his filiation.[61] The voluntary recognition of petitioner's filiation by Bonifacio's brother before the MTC
does not qualify as a statement in a court of record. Under the law, this statement must be made
personally by the parent himself or herself, not by any brother, sister or relative; after all, the concept
of recognition speaks of a voluntary declaration by the parent, or if the parent refuses, by judicial
authority, to establish the paternity or maternity of children born outside wedlock. [62]
The compromise judgment of the MTC does not qualify as a compulsory recognition of
petitioner. In the first place, when he filed this case against Gavino Aparato, petitioner was no longer
a minor. He was already pushing fifty years old.[63] Secondly, there is no allegation that after
Bonifacio's death, a document was discovered where Bonifacio recognized petitioner Cenido as his
son. Thirdly, there is nothing in the compromise judgment that indicates that the action before the
MTC was a settlement of Bonifacio's estate with a gross value not exceeding P20,000.00.
[64]
Definitely, the action could not have been for compulsory recognition because the MTC had no
jurisdiction over the subject matter.[65]
The Real Property Tax Code provides that real property tax be assessed in the name of the
person owning or administering the property on which the tax is levied. [66]Since petitioner Cenido has
not proven any successional or administrative rights to Bonifacio's estate, Tax Declaration No. 02-
6368 in Cenido's name must be declared null and void.
IN VIEW WHEREOF, the petition is denied and the Decision and Resolution of the Court of
Appeals in CA-G.R. CV No. 41011 are affirmed. Tax Declaration No. 02-6368 in the name of
petitioner Renato Cenido is declared null and void.
No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Kapunan, Pardo, and Ynares-Santiago, JJ., concur.

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