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Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-116650 May 23, 1995
TOYOTA SHAW, INC., petitioner,
vs.
COURT OF APPEALS and LUNA L. SOSA, respondents.
DAVIDE, JR., J.:
At the heart of the present controversy is the document marked Exhibit "A" 1
for the
private respondent,which was signed by a sales representative of Toyota Shaw, Inc.
named Popong Bernardo. The document reads as follows:
AGREEMENTS BETWEEN MR. SOSA
& POPONG BERNARDO OF TOYOTA
SHAW, INC.
1. all necessary documents will be submitted to TOYOTA SHAW,
INC. (POPONG BERNARDO) a week after, upon arrival of Mr.
Sosa from the Province (Marinduque) where the unit will be used
on the 19th of June.
2. the downpayment of P100,000.00 will be paid by Mr. Sosa on
June 15, 1989.

2. 2
3. the TOYOTA SHAW, INC. LITE ACE yellow, will be pick-up [sic]
and released by TOYOTA SHAW, INC. on the 17th of June at 10
a.m..
Was this document, executed and signed by the petitioner's sales representative, a
perfected contract of sale, binding upon the petitioner, breach of which would entitle
the private respondentto damages and attorney's fees? The trial court and the Court
of Appeals took the affirmative view. The petitioner disagrees. Hence, this petition for
review oncertiorari.
The antecedents as disclosed in the decisions of both the trial court and the Court of
Appeals, as well as in the pleadings of petitioner Toyota Shaw, Inc.
(hereinafter Toyota) and respondent Luna L. Sosa (hereinafter Sosa) are as follows.
Sometime in June of 1989, Luna L. Sosa wanted to purchase a Toyota Lite Ace. It
was then a seller's market and Sosa had difficulty finding a dealer with an available
unit for sale. But upon contacting Toyota Shaw, Inc., he was told that there was an
available unit. So on 14 June 1989, Sosa and his son, Gilbert, went to the Toyota
office at Shaw Boulevard, Pasig, Metro Manila. There they met Popong Bernardo, a
sales representative of Toyota.
Sosa emphasized to Bernardo that he needed the Lite Ace not later than 17 June
1989 because he,his family, and abalikbayan guest would use it on 18 June 1989 to
go to Marinduque, his home province, where he would celebrate his birthday on the
19th of June. He added that if he does not arrive in his hometown with the new car,
he would become a "laughing stock." Bernardo assured Sosa that a unit would be
ready for pick up at 10:00 a.m. on 17 June 1989. Bernardo then signed the
aforequoted "Agreements Between Mr. Sosa & Popong Bernardo of Toyota Shaw,
Inc." It was also agreed upon by the parties that the balance of the purchase price
would be paid by credit financing through B.A. Finance, and for this Gilbert, on behalf
of his father, signed the documents of Toyota and B.A. Finance pertaining to the
application for financing.
The next day, 15 June 1989, Sosa and Gilbert went to Toyota to deliver the
downpaymentofP100,000.00. They met Bernardo who then accomplished a printed
Vehicle Sales Proposal (VSP) No. 928, 2
on which Gilbert signed under the
subheading CONFORME. This document shows that the customer's name is "MR.
LUNA SOSA" with home address at No. 2316 Guijo Street, United Parañaque II; that
the model series of the vehicle is a "Lite Ace 1500" described as "4 Dr minibus"; that
payment is by "installment," to be financed by "B.A.," 3
with the initial cash outlay of
P100,000.00 broken down as follows:
a) downpayment — P 53,148.00
b) insurance — P 13,970.00
c) BLT registration fee — P 1,067.00
CHMO fee — P 2,715.00
service fee — P 500.00
accessories — P 29,000.00
and that the "BALANCE TO BE FINANCED" is "P274,137.00." The spaces provided
for "Delivery Terms" were not filled-up. It also contains the following pertinent
provisions:
CONDITIONS OF SALES
1. This sale is subject to availability of unit.
2. Stated Price is subject to change without prior notice, Price
prevailing and in effect at time of selling will apply. . . .
Rodrigo Quirante,the Sales Supervisor of Bernardo, checked and approved the VSP.
On 17 June 1989, at around 9:30 a.m., Bernardo called Gilbert to inform him that the
vehicle would notbe ready for pick up at 10:00 a.m. as previously agreed upon but at
2:00 p.m. that same day. At 2:00 p.m., Sosa and Gilbert met Bernardo at the latter's
office. According to Sosa, Bernardo informed them that the Lite Ace was being
readied for delivery. After waiting for about an hour, Bernardo told them that the car
could not be delivered because "nasulot ang unit ng ibang malakas."
Toyota contends, however, that the Lite Ace was not delivered to Sosa because of
the disapproval by B.A. Finance of the credit financing application of Sosa. It further
alleged that a particular unit had already been reserved and earmarked for Sosa but
could not be released due to the uncertainty of payment of the balance of the
purchase price. Toyota then gave Sosa the option to purchase the unit by paying the
full purchase price in cash but Sosa refused.
After it became clear that the Lite Ace would notbe delivered to him, Sosa asked that
his downpayment be refunded. Toyota did so on the very same day by issuing a Far
EastBank check for the full amountof P100,000.00, 4
the receiptof which was shown
by a check voucher of Toyota,5
which Sosa signed with the reservation, "without
prejudice to our future claims for damages."
Thereafter, Sosa sent two letters to Toyota. In the first letter, dated 27 June 1989 and
signed by him, he demanded the refund, within five days from receipt, of the
downpayment of P100,000.00 plus interest from the time he paid it and the payment
of damages with a warning that in case of Toyota's failure to do so he would be
constrained to take legal action. 6
The second, dated 4 November 1989 and signed
by M. O. Caballes,Sosa's counsel,demanded one million pesos representing interest
and damages,again,with a warning that legal action would be taken if payment was

3. 3
not made within three days. 7
Toyota's counsel answered through a letter dated 27
November 1989 8
refusing to accede to the demands of Sosa. But even before this
answer was made and received by Sosa, the latter filed on 20 November 1989 with
Branch 38 of the Regional Trial Court (RTC) of Marinduque a complaint against
Toyota for damages under Articles 19 and 21 of the Civil Code in the total amount of
P1,230,000.00. 9
He alleges, inter alia, that:
9. As a result of defendant's failure and/or refusal to deliver the
vehicle to plaintiff, plaintiff suffered embarrassment, humiliation,
ridicule, mental anguish and sleepless nights because: (i) he and
his family were constrained to take the public transportation from
Manila to Lucena City on their way to Marinduque; (ii) his
balikbayan-guestcanceled his scheduled firstvisitto Marinduque in
order to avoid the inconvenience of taking public transportation;
and (iii) his relatives, friends, neighbors and other provincemates,
continuously irked him about "his Brand-New Toyota Lite Ace —
that never was." Under the circumstances, defendant should be
made liable to the plaintifffor moral damages in the amount of One
Million Pesos (P1,000,000.00). 10
In its answer to the complaint,Toyota alleged that no sale was entered into between it
and Sosa, that Bernardo had no authority to sign Exhibit "A" for and in its behalf, and
that Bernardo signed Exhibit "A" in his personal capacity. As special and affirmative
defenses, it alleged that: the VSP did not state date of delivery; Sosa had not
completed the documents required by the financing company, and as a m atter of
policy, the vehicle could not and would not be released prior to full compliance with
financing requirements, submission of all documents, and execution of the sales
agreement/invoice; the P100,000.00 was returned to and received by Sosa; the
venue was improperlylaid;and Sosa did not have a sufficientcause of action against
it. It also interposed compulsory counterclaims.
After trial on the issues agreed upon during the pre-trial session, 11
the trial court
rendered on 18 February 1992 a decision in favor of Sosa. 12
It ruled that Exhibit "A,"
the "AGREEMENTS BETWEEN MR. SOSA AND POPONG BERNARDO," was a
valid perfected contract of sale between Sosa and Toyota which bound Toyota to
deliver the vehicle to Sosa, and further agreed with Sosa that Toyota acted in bad
faith in selling to another the unit already reserved for him.
As to Toyota's contention that Bernardo had no authority to bind it through Exhibit "A,"
the trial court held that the extent of Bernardo's authority "was not made known to
plaintiff," for as testified to by Quirante, "they do not volunteer any information as to
the company's sales policy and guidelines because they are internal
matters." 13
Moreover, "[f]rom the beginning ofthe transaction up to its consummation
when the downpayment was made by the plaintiff, the defendants had made known
to the plaintiff the impression that Popong Bernardo is an authorized sales executive
as it permitted the latter to do acts within the scope of an apparent authority holding
him out to the public as possessing power to do these acts." 14
Bernardo then "was an
agent of the defendant Toyota Shaw, Inc. and hence bound the defendants." 15
The court further declared that "Luna Sosa proved his social standing in the
community and suffered besmirched reputation, wounded feelings and sleepless
nights for which he ought to be compensated." 16
Accordingly, it disposed as follows:
WHEREFORE, viewed from the above findings,judgmentis hereby
rendered in favor of the plaintiff and against the defendant:
1. ordering the defendant to pay to the plaintiff
the sum of P75,000.00 for moral damages;
2. ordering the defendant to pay the plaintiff the
sum of P10,000.00 for exemplary damages;
3. ordering the defendant to pay the sum of
P30,000.00 attorney's fees plus P2,000.00
lawyer's transportation fare per trip in attending to
the hearing of this case;
4. ordering the defendant to pay the plaintiff the
sum of P2,000.00 transportation fare per trip of
the plaintiff in attending the hearing of this case;
and
5. ordering the defendant to pay the cost of suit.
SO ORDERED.
Dissatisfied with the trial court's judgment, Toyota appealed to the Court of Appeals.
The case was docketed as CA-G.R. CV No. 40043.In its decision promulgated on 29
July 1994,17
the Court of Appeals affirmed in toto the appealed decision.
Toyota now comes before this Courtvia this petition and raises the core issue stated
at the beginning ofthe ponenciaand also the following related issues: (a) whether or
not the standard VSP was the true and documented understanding of the parties
which would have led to the ultimate contractof sale,(b) whether or not Sosa has any
legal and demandable right to the delivery of the vehicle despite the non-payment of
the consideration and the non-approval of his credit application by B.A. Finance, (c)
whether or not Toyota acted in good faith when it did not release the vehicle to Sosa,
and (d) whether or not Toyota may be held liable for damages.
We find merit in the petition.
Neither logic nor recourse to one's imagination can lead to the conclusion that Exhibit
"A" is a perfected contract of sale.

4. 4
Article 1458 of the Civil Code defines a contract of sale as follows:
Art. 1458. By the contract of sale one of the contracting parties
obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain in
money or its equivalent.
A contract of sale may be absolute or conditional.
and Article 1475 specifically provides when it is deemed perfected:
Art. 1475.The contract of sale is perfected at the momentthere is a
meeting of minds upon the thing which is the object of the contract
and upon the price.
From that moment, the parties may reciprocally demand
performance, subject to the provisions of the law governing the
form of contracts.
What is clear from Exhibit "A" is not what the trial court and the Court of Appeals
appear to see. It is not a contract of sale. No obligation on the part of Toyota to
transfer ownership ofa determinate thing to Sosa and no correlative obligation on the
part of the latter to pay therefor a price certain appears therein. The provision on the
downpayment of P100,000.00 made no specific reference to a sale of a vehicle. If it
was intended for a contract of sale, it could only refer to a sale on installment basis,
as the VSP executed the following day confirmed. But nothing was mentioned about
the full purchase price and the manner the installments were to be paid.
This Court had already ruled that a definite agreement on the manner of payment of
the price is an essential element in the formation of a binding and enforceable
contract of sale. 18
This is so because the agreement as to the manner of payment
goes into the price such that a disagreementon the manner of payment is tantamount
to a failure to agree on the price.Definiteness as to the price is an essential element
of a binding agreement to sell personal property. 19
Moreover, Exhibit "A" shows the absence ofa meeting of minds between Toyota and
Sosa. For one thing, Sosa did not even sign it. For another, Sosa was well aware
from its title, written in bold letters, viz.,
AGREEMENTS BETWEEN MR. SOSA &
POPONG BERNARDO OF TOYOTA SHAW,
INC.
that he was not dealing with Toyota but with Popong Bernardo and that the latter did
not misrepresent that he had the authority to sell any Toyota vehicle. He knew that
Bernardo was only a sales representative of Toyota and hence a mere agent of the
latter. It was incumbent upon Sosa to act with ordinary prudence and reasonable
diligence to know the extent of Bernardo's authority as an
agent20
in respect of contracts to sell Toyota's vehicles. A person dealing with an
agent is put upon inquiry and must discover upon his peril the authority of the
agent.21
At the most, Exhibit "A" may be considered as part of the initial phase of the
generation or negotiation stage of a contract of sale. There are three stages in the
contract of sale, namely:
(a) preparation, conception, or generation, which is the period of
negotiation and bargaining, ending at the moment of agreement of
the parties;
(b) perfection or birth of the contract, which is the momentwhen the
parties come to agree on the terms of the contract; and
(c) consummation or death, which is the fulfillment or performance
of the terms agreed upon in the contract. 22
The second phase of the generation or negotiation stage in this case was the
execution of the VSP. It must be emphasized that thereunder, the downpayment of
the purchase price was P53,148.00 while the balance to be paid on installment
should be financed by B.A. Finance Corporation. It is, of course, to be assumed that
B.A. Finance Corp. was acceptable to Toyota, otherwise itshould nothave mentioned
B.A. Finance in the VSP.
Financing companies are defined in Section 3(a) of R.A. No. 5980, as amended by
P.D. No. 1454 and P.D. No. 1793, as "corporations or partnerships, except those
regulated by the Central Bank of the Philippines,the Insurance Commission and the
Cooperatives Administration Office, which are primarily organized for the purpose of
extending credit facilities to consumers and to industrial, commercial, or agricultural
enterprises, either by discounting or factoring commercial papers or accounts
receivables, or by buying and selling contracts, leases, chattel mortgages, or other
evidence of indebtedness, or by leasing of motor vehicles, heavy equipment and
industrial machinery,business and office machines and equipment, appliances and
other movable property." 23
Accordingly, in a sale on installmentbasis which is financed by a financing company,
three parties are thus involved: the buyer who executes a note or notes for the unpaid
balance of the price of the thing purchased on installment,the seller who assigns the
notes or discounts them with a financing company, and the financing company which
is subrogated in the place of the seller, as the creditor of the installment
buyer. 24
Since B.A. Finance did not approve Sosa's application, there was then no
meeting of minds on the sale on installment basis.

5. 5
We are inclined to believe Toyota's version that B.A. Finance disapproved Sosa's
application for which reason it suggested to Sosa that he pay the full purchase price.
When the latter refused, Toyota cancelled the VSP and returned to him his
P100,000.00. Sosa's version that the VSP was cancelled because, according to
Bernardo, the vehicle was delivered to another who was "mas malakas" does not
inspire belief and was obviously a delayed afterthought. It is claimed that Bernardo
said, "Pasensiya kayo, nasulot ang unit ng ibang malakas," while the Sosas had
already been waiting for an hour for the delivery of the vehicle in the afternoon of 17
June 1989. However, in paragraph 7 of his complaint, Sosa solemnly states:
On June 17, 1989 at around 9:30 o'clock in the morning,
defendant's sales representative, Mr. Popong Bernardo, called
plaintiff's house and informed the plaintiff's son that the vehicle will
not be ready for pick-up at 10:00 a.m. of June 17, 1989 but at 2:00
p.m. of that day instead. Plaintiff and his son went to defendant's
office on June 17 1989 at 2:00 p.m. in order to pick-up the vehicle
but the defendant for reasons known only to its representatives,
refused and/or failed to release the vehicle to the plaintiff. Plaintiff
demanded for an explanation, but nothing was given; . . .
(Emphasis supplied). 25
The VSP was a mere proposal which was aborted in lieu of subsequent events. It
follows that the VSP created no demandable right in favor of Sosa for the delivery of
the vehicle to him,and its non-delivery did not cause any legally indemnifiable injury.
The award then of moral and exemplary damages and attorney's fees and costs of
suitis withoutlegal basis.Besides, the only ground upon which Sosa claimed moral
damages is that since it was known to his friends, townmates, and relatives that he
was buying a Toyota Lite Ace which they expected to see on his birthday, he suffered
humiliation, shame, and sleepless nights when the van was not delivered. The van
became the subject matter of talks during his celebration that he may not have paid
for it, and this created an impression againsthis business standing and reputation. At
the bottom of this claim is nothing but misplaced pride and ego. He should not have
announced his plan to buy a Toyota Lite Ace knowing that he mightnotbe able to pay
the full purchase price. It was he who brought embarrassment upon himself by
bragging about a thing which he did not own yet.
Since Sosa is not entitled to moral damages and there being no award for temperate,
liquidated, or compensatory damages, he is likewise not entitled to exemplary
damages.Under Article 2229 of the Civil Code, exemplary or corrective damages are
imposed by way of example or correction for the public good, in addition to moral,
temperate, liquidated, or compensatory damages.
Also, it is settled that for attorney's fees to be granted,the court mustexplicitly state in
the body of the decision, and not only in the dispositive portion thereof, the legal
reason for the award of attorney's fees. 26
No such explicit determination thereon was
made in the body of the decision of the trial court. No reason thus exists for such an
award.
WHEREFORE, the instant petition is GRANTED. The challenged decision of the
Court of Appeals in CA-G.R. CV NO. 40043 as well as that of Branch 38 of the
Regional Trial Courtof Marinduque in Civil Case No. 89-14 are REVERSED and SET
ASIDE and the complaint in Civil Case No. 89-14 is DISMISSED. The counterclaim
therein is likewise DISMISSED.
No pronouncement as to costs.
SO ORDERED.
THIRD DIVISION
[G.R. No. 138018. July 26, 2002]
RIDO MONTECILLO, petitioner, vs. IGNACIA REYNES and SPOUSES
REDEMPTOR and ELISA ABUCAY, respondents.
D E C I S I O N
CARPIO, J.:
The Case
On March 24, 1993, the Regional Trial Court of Cebu City, Branch 18, rendered
a Decision[1]
declaring the deed of sale of a parcel of land in favor of petitioner null
and void ab initio. The Court of Appeals,[2]
in its July 16, 1998 Decision[3]
as well as
its February 11, 1999 Order[4]
denying petitioner’s Motion for Reconsideration,
affirmed the trial court’s decision in toto. Before this Court now is a Petition for
Review on Certiorari[5]
assailing the Court of Appeals’ decision and order.
The Facts
Respondents Ignacia Reynes (“Reynes” for brevity) and Spouses Abucay
(“Abucay Spouses” for brevity) filed on June 20, 1984 a complaint for Declaration of

6. 6
Nullity and Quieting of Title against petitioner Rido Montecillo (“Montecillo” for
brevity). Reynes asserted that she is the owner of a lot situated in Mabolo, Cebu
City, covered by Transfer Certificate of Title No. 74196 and containing an area of 448
square meters (“Mabolo Lot” for brevity). In 1981,Reynes sold 185 square meters of
the Mabolo Lot to the Abucay Spouses who built a residential house on the lot they
bought.
Reynes alleged further that on March 1, 1984 she signed a Deed of Sale of the
Mabolo Lot in favor of Montecillo (“Montecillo’s Deed of Sale” for brevity). Reynes,
being illiterate,[6]
signed by affixing her thumb-mark[7]
on the document. Montecillo
promised to pay the agreed P47,000.00 purchase price within one month from the
signing of the Deed of Sale. Montecillo’s Deed of Sale states as follows:
“That I, IGNACIA T. REYNES, of legal age, Filipino,widow,with residence and postal
address at Mabolo, Cebu City, Philippines, for and in consideration of FORTY
SEVEN THOUSAND (P47,000.00) PESOS, Philippine Currency, to me in hand
paid by RIDO MONTECILLO, of legal age, Filipino, married, with residence and
postal address at Mabolo, Cebu City, Philippines, the receipt hereof is hereby
acknowledged, have sold, transferred, and conveyed, unto RIDO MONTECILLO, his
heirs, executors, administrators, and assigns, forever, a parcel of land together with
the improvements thereon, situated at Mabolo, Cebu City, Philippines, free from all
liens and encumbrances, and more particularly described as follows:
A parcel of land (Lot 203-B-2-B of the subdivision plan Psd-07-01-00 2370, being a
portion of Lot 203-B-2, described on plan (LRC) Psd-76821, L.R.C. (GLRO) Record
No. 5988), situated in the Barrio of Mabolo, City of Cebu. Bounded on the SE., along
line 1-2 by Lot 206; on the SW., along line 2-3, by Lot 202, both of Banilad Estate; on
the NW., along line 4-5, by Lot 203-B-2-A of the subdivision of Four Hundred Forty
Eight (448) square meters, more or less.
of which I am the absolute owner in accordance with the provisions of the Land
Registration Act, my title being evidenced by Transfer Certificate of Title No. 74196 of
the Registry of Deeds of the City of Cebu, Philippines. That This Land Is Not
Tenanted and Does Not Fall Under the Purview of P.D. 27.”[8]
(Emphasis supplied)
Reynes further alleged that Montecillo failed to pay the purchase price after the
lapse of the one-month period, prompting Reynes to demand from Montecillo the
return of the Deed of Sale. Since Montecillo refused to return the Deed of
Sale,[9]
Reynes executed a document unilaterally revoking the sale and gave a copy
of the document to Montecillo.
Subsequently, on May 23, 1984 Reynes signed a Deed of Sale transferring to
the Abucay Spouses the entire Mabolo Lot, at the same time confirming the previous
sale in 1981 of a 185-square meter portion of the lot. This Deed of Sale states:
“I, IGNACIA T. REYNES, of legal age, Filipino, widow and resident of Mabolo, Cebu
City, do hereby confirm the sale of a portion of Lot No. 74196 to an extent of 185
square meters to Spouses Redemptor Abucay and Elisa Abucay covered by Deed
per Doc. No. 47, Page No. 9, Book No. V, Series of 1981 of notarial register of
Benedicto Alo, of which spouses is now in occupation;
That for and in consideration of the total sum of FIFTY THOUSAND (P50,000)
PESOS, Philippine Currency, received in full and receipt whereof is herein
acknowledged from SPOUSES REDEMPTOR ABUCAY and ELISA ABUCAY, do
hereby in these presents, SELL, TRANSFER and CONVEY absolutely unto said
Spouses Redemptor Abucay and Elisa Abucay, their heirs,assigns and successors-
in-interest the whole parcel of land together with improvements thereon and more
particularly described as follows:
TCT No. 74196
A parcel of land (Lot 203-B-2-B of the subdivision plan psd-07-01-002370, being a
portion of Lot 203-B-2, described on plan (LRC) Psd 76821,LRC (GLRO) Record No.
5988) situated in Mabolo, Cebu City, along Arcilla Street, containing an area of total
FOUR HUNDRED FORTY EIGHT (448) Square meters.
of which I am the absolute owner thereof free from all liens and encumbrances and
warrantthe same againstclaim ofthird persons and other deeds affecting said parcel
of land other than that to the said spouses and inconsistenthereto is declared without
any effect.
In witness whereof, I hereunto signed this 23rd
day of May, 1984 in Cebu City,
Philippines.” [10]
Reynes and the Abucay Spouses alleged that on June 18, 1984 they received
information that the Register of Deeds of Cebu City issued Certificate of Title No.
90805 in the name of Montecillo for the Mabolo Lot.
Reynes and the Abucay Spouses argued that “for lack of consideration there
(was) no meeting of the minds”[11]
between Reynes and Montecillo. Thus, the trial
court should declare null and void ab initio Montecillo’s Deed of Sale, and order the
cancellation of Certificate of Title No. 90805 in the name of Montecillo.
In his Answer, Montecillo, a bank executive with a B.S. Commerce
degree,[12]
claimed he was a buyer in good faith and had actually paid the P47,000.00
consideration stated in his Deed of Sale. Montecillo, however, admitted he still owed
Reynes a balance of P10,000.00. He also alleged that he paid P50,000.00 for the
release of the chattel mortgage which he argued constituted a lien on the Mabolo
Lot. He further alleged that he paid for the real property tax as well as the capital
gains tax on the sale of the Mabolo Lot.
In their Reply, Reynes and the Abucay Spouses contended that Montecillo did
not have authority to discharge the chattel mortgage,especially after Reynes revoked
Montecillo’s Deed of Sale and gave the mortgagee a copy of the document of
revocation. Reynes and the Abucay Spouses claimed that Montecillo secured the
release of the chattel mortgage through machination. They further asserted that

7. 7
Montecillo took advantage of the real property taxes paid by the Abucay Spouses and
surreptitiously caused the transfer of the title to the Mabolo Lot in his name.
During pre-trial, Montecillo claimed that the consideration for the sale of the
Mabolo Lot was the amount he paid to Cebu Ice and Cold Storage Corporation
(“Cebu Ice Storage” for brevity) for the mortgage debt of Bienvenido Jayag (“Jayag”
for brevity). Montecillo argued that the release ofthe mortgage was necess ary since
the mortgage constituted a lien on the Mabolo Lot.
Reynes,however, stated that she had nothing to do with Jayag’s mortgage debt
except that the house mortgaged by Jayag stood on a portion of the Mabolo
Lot. Reynes further stated that the payment by Montecillo to release the mortgage on
Jayag’s house is a matter between Montecillo and Jayag. The mortgage on the
house, being a chattel mortgage, could not be interpreted in any way as an
encumbrance on the Mabolo Lot. Reynes further claimed thatthe mortgage debt had
long prescribed since the P47,000.00 mortgage debt was due for payment on
January 30, 1967.
The trial court rendered a decision on March 24, 1993 declaring the Deed of
Sale to Montecillo null and void. The trial court ordered the cancellation of
Montecillo’s Transfer Certificate of Title No. 90805 and the issuance of a new
certificate of title in favor of the Abucay Spouses. The trial court found that
Montecillo’s Deed of Sale had no cause or consideration because Montecillo never
paid Reynes the P47,000.00 purchase price, contrary to what is stated in the Deed of
Sale that Reynes received the purchase price. The trial court ruled that Montecillo’s
Deed of Sale produced no effect whatsoever for want of consideration. The
dispositive portion of the trial court’s decision reads as follows:
“WHEREFORE, in view of the foregoing consideration, judgment is hereby rendered
declaring the deed of sale in favor of defendant null and void and of no force and
effect thereby ordering the cancellation of Transfer Certificate of Title No. 90805 of
the Register of Deeds of Cebu City and to declare plaintiff Spouses Redemptor and
Elisa Abucay as rightful vendees and Transfer Certificate of Title to the property
subjectmatter of the suitissued in their names.The defendants are further directed to
pay moral damages in the sum of P20,000.00 and attorney’s fees in the sum
of P2,000.00 plus cost of the suit.
xxx”
Not satisfied with the trial court’s Decision,Montecillo appealed the same to the
Court of Appeals.
Ruling of the Court of Appeals
The appellate courtaffirmed the Decision ofthe trial court in toto and dismissed
the appeal[13]
on the ground that Montecillo’s Deed of Sale is void for lack of
consideration. The appellate court also denied Montecillo’s Motion for
Reconsideration[14]
on the ground that it raised no new arguments.
Still dissatisfied, Montecillo filed the present petition for review on certiorari.
The Issues
Montecillo raises the following issues:
1. “Was there an agreement between Reynes and Montecillo that the
stated consideration of P47,000.00 in the Deed of Sale be paid to Cebu
Ice and Cold Storage to secure the release of the Transfer Certificate
of Title?”
2. “If there was none, is the Deed of Sale void from the beginning or
simply rescissible?”[15]
The Ruling of the Court
The petition is devoid of merit.
First issue: manner of payment of the P47,000.00 purchase price.
Montecillo’s Deed of Sale does not state that the P47,000.00 purchase price
should be paid by Montecillo to Cebu Ice Storage. Montecillo failed to adduce any
evidence before the trial court showing thatReynes had agreed, verbally or in writing,
that the P47,000.00 purchase price should be paid to Cebu Ice Storage. Absent any
evidence showing that Reynes had agreed to the payment of the purchase price to
any other party, the payment to be effective must be made to Reynes, the vendor in
the sale. Article 1240 of the Civil Code provides as follows:
“Payment shall be made to the person in whose favor the obligation has been
constituted, or his successor in interest, or any person authorized to receive it.”
Thus, Montecillo’s payment to Cebu Ice Storage is not the payment that would
extinguish[16]
Montecillo’s obligation to Reynes under the Deed of Sale.
It militates against common sense for Reynes to sell her Mabolo Lot
for P47,000.00 if this entire amount would only go to Cebu Ice Storage, leaving not a
single centavo to her for giving up ownership of a valuable property. This incredible
allegation ofMontecillo becomes even more absurd when one considers that Reynes

8. 8
did not benefit, directly or indirectly, from the payment of the P47,000.00 to Cebu Ice
Storage.
The trial court found that Reynes had nothing to do with Jayag’s mortgage debt
with Cebu Ice Storage. The trial court made the following findings of fact:
“x x x. Plaintiff Ignacia Reynes was not a party to nor privy of the obligation in favor of
the Cebu Ice and Cold Storage Corporation, the obligation being exclusively of
Bienvenido Jayag and wife who mortgaged their residential house constructed on the
land subject matter of the complaint. The payment by the defendant to release the
residential house from the mortgage is a matter between him and Jayag and cannot
by implication or deception be made to appear as an encumbrance upon the land.”[17]
Thus,Montecillo’s paymentto Jayag’s creditor could not possiblyredound to the
benefit[18] of Reynes. We find no reason to disturb the factual findings of the trial
court. In petitions for review on certiorari as a mode of appeal under Rule 45, as in
the instant case, a petitioner can raise only questions of law.[19]
This Court is not the
proper venue to consider a factual issue as it is not a trier of facts.
Second issue: whether the Deed of Sale is void ab initio or only rescissible.
Under Article 1318 of the Civil Code, “[T]here is no contract unless the following
requisites concur: (1) Consent of the contracting parties; (2) Object certain which is
the subject matter of the contract; (3) Cause of the obligation which is established.”
Article 1352 of the Civil Code also provides that “[C]ontracts without cause x x x
produce no effect whatsoever.”
Montecillo argues that his Deed of Sale has all the requisites of a valid
contract. Montecillo points out that he agreed to purchase, and Reynes agreed to
sell, the Mabolo Lot at the price ofP47,000.00. Thus, the three requisites for a valid
contract concur: consent,objectcertain and consideration. Montecillo asserts there is
no lack of consideration that would prevent the existence of a valid contract. Rather,
there is only non-payment of the consideration within the period agreed upon for
payment.
Montecillo argues there is only a breach of his obligation to pay the full purchase
price on time. Such breach merely gives Reynes a right to ask for specific
performance, or for annulment of the obligation to sell the Mabolo Lot. Montecillo
maintains that in reciprocal obligations, the injured party can choose between
fulfillment and rescission,[20]
or more properly cancellation, of the obligation under
Article 1191[21] of the Civil Code. This Article also provides that the “court shall
decree the rescission claimed,unless there be just cause authorizing the fixing of the
period.” Montecillo claims that because Reynes failed to make a demand for
payment, and instead unilaterally revoked Montecillo’s Deed of Sale, the court has a
just cause to fix the period for payment of the balance of the purchase price.
These arguments are not persuasive.
Montecillo’s Deed of Sale states that Montecillo paid, and Reynes received,
the P47,000.00 purchase price on March 1, 1984, the date of signing of the Deed of
Sale. This is clear from the following provision of the Deed of Sale:
“That I, IGNACIA T. REYNES, x x x for and in consideration of FORTY SEVEN
THOUSAND (P47,000.00) PESOS, Philippine Currency, to me in hand paid by
RIDO MONTECILLO xxx, receipt of which is hereby acknowledged, have sold,
transferred, and conveyed, unto RIDO MONTECILLO, x x x a parcel of land x x x.”
On its face, Montecillo’s Deed of Absolute Sale[22]
appears supported by a
valuable consideration. However, based on the evidence presented by both Reynes
and Montecillo, the trial court found that Montecillo never paid to Reynes,and Reynes
never received from Montecillo, the P47,000.00 purchase price. There was
indisputablya total absence ofconsideration contraryto whatis stated in Montecillo’s
Deed of Sale. As pointed out by the trial court –
“From the allegations in the pleadings of both parties and the oral and documentary
evidence adduced during the trial, the court is convinced that the Deed of Sale
(Exhibits “1” and “1-A”) executed by plaintiff Ignacia Reynes acknowledged before
Notary Public Ponciano Alvinio is devoid of any consideration. Plaintiff Ignacia
Reynes through the representation ofBaudillo Baladjay had executed a Deed of Sale
in favor of defendanton the promise thatthe consideration should be paid within one
(1) month from the execution of the Deed of Sale. However, after the lapse of said
period, defendant failed to pay even a single centavo of the consideration. The
answer ofthe defendant did not allege clearly why no consideration was paid by him
except for the allegation that he had a balance of only P10,000.00. It turned out
during the pre-trial that what the defendant considered as the consideration was the
amount which he paid for the obligation of Bienvenido Jayag with the Cebu Ice and
Cold Storage Corporation over which plaintiff Ignacia Reynes did not have a part
except that the subject of the mortgage was constructed on the parcel of land in
question.PlaintiffIgnacia Reynes was not a party to nor privy of the obligation in favor
of the Cebu Ice and Cold Storage Corporation, the obligation being exclusively of
Bienvenido Jayag and wife who mortgaged their residential house constructed on the
land subject matter of the complaint. The payment by the defendant to release the
residential house from the mortgage is a matter between him and Jayag and cannot
by implication or deception be made to appear as an encumbrance upon the land. “[23]
Factual findings of the trial court are binding on us, especially if the Court of
Appeals affirms such findings.[24]
We do not disturb such findings unless the evidence
on record clearly does not support such findings or such findings are based on a
patent misunderstanding of facts,[25]
which is not the case here. Thus, we find no
reason to deviate from the findings of both the trial and appellate courts that no valid
consideration supported Montecillo’s Deed of Sale.
This is not merely a case of failure to pay the purchase price, as Montecillo
claims,which can only amountto a breach of obligation with rescission as the proper
remedy. What we have here is a purported contract that lacks a cause - one of the
three essential requisites of a valid contract. Failure to pay the consideration is

9. 9
different from lack of consideration. The former results in a right to demand the
fulfillmentor cancellation ofthe obligation under an existing valid contract[26]
while the
latter prevents the existence of a valid contract
Where the deed of sale states that the purchase price has been paid but in fact
has never been paid, the deed of sale is null and void ab initio for lack of
consideration. This has been the well-settled rule as early as Ocejo Perez & Co. v.
Flores,[27]
a 1920 case. As subsequently explained in Mapalo v. Mapalo[28]
–
“In our view, therefore, the ruling of this Court in Ocejo Perez & Co. vs. Flores, 40
Phil. 921, is squarely applicable herein. In that case we ruled that a contract of
purchase and sale is null and void and produces no effect whatsoever where the
same is without cause or consideration in that the purchase price which appears
thereon as paid has in fact never been paid by the purchaser to the vendor.”
The Court reiterated this rule in Vda. De Catindig v. Heirs of Catalina
Roque,[29]
to wit –
“The Appellate Court’s finding that the price was not paid or that the statement in the
supposed contracts of sale (Exh. 6 to 26) as to the payment of the price was
simulated fortifies the view that the alleged sales were void. “If the price is simulated,
the sale is void . . .” (Art. 1471, Civil Code)
A contract of sale is void and produces no effect whatsoever where the price, which
appears thereon as paid, has in fact never been paid by the purchaser to the vendor
(Ocejo, Perez & Co. vs. Flores and Bas, 40 Phil. 921; Mapalo vs. Mapalo, L-21489,
May 19, 1966, 64 O.G. 331, 17 SCRA 114, 122). Such a sale is non-existent
(Borromeo vs. Borromeo, 98 Phil. 432) or cannot be considered consummated
(Cruzado vs. Bustos and Escaler, 34 Phil. 17; Garanciang vs. Garanciang, L-22351,
May 21, 1969, 28 SCRA 229).”
Applying this well-entrenched doctrine to the instant case, we rule that Montecillo’s
Deed of Sale is null and void ab initio for lack of consideration.
Montecillo asserts thatthe only issue in controversy is “the mode and/or manner
of payment and/or whether or not payment has been made.”[30]
Montecillo implies that
the mode or manner of payment is separate from the consideration and does not
affect the validity of the contract. In the recent case of San Miguel Properties
Philippines, Inc. v. Huang,[31] we ruled that –
“In Navarro v. Sugar Producers Cooperative Marketing Association, Inc. (1 SCRA
1181 [1961]), we laid down the rule that the manner of payment of the purchase
price is an essential element before a valid and binding contract of sale can
exist. Although the Civil Code does not expressly state that the minds of the parties
mustalso meeton the terms or manner of payment of the price, the same is needed,
otherwise there is no sale. As held in Toyota Shaw, Inc. v. Court of Appeals (244
SCRA 320 [1995]), agreement on the manner of payment goes into the price such
that a disagreement on the manner of payment is tantamount to a failure to
agree on the price.” (Emphasis supplied)
One of the three essential requisites of a valid contract is consent of the parties
on the objectand cause of the contract. In a contract of sale,the parties must agree
not only on the price, but also on the manner of payment of the price. An agreement
on the price but a disagreement on the manner of its payment will not result in
consent, thus preventing the existence of a valid contract for lack of consent. This
lack of consent is separate and distinct from lack of consideration where the
contract states that the price has been paid when in fact it has never been paid.
Reynes expected Montecillo to pay him directly the P47,000.00 purchase price
within one month after the signing of the Deed of Sale. On the other hand, Montecillo
thoughtthat his agreementwith Reynes required him to pay the P47,000.00 purchase
price to Cebu Ice Storage to settle Jayag’s mortgage debt. Montecillo also
acknowledged a balance of P10,000.00 in favor of Reynes although this amount is
not stated in Montecillo’s Deed of Sale. Thus, there was no consent, or meeting of
the minds, between Reynes and Montecillo on the manner of payment. This
prevented the existence of a valid contract because of lack of consent.
In summary,Montecillo’s Deed of Sale is null and void ab initio not only for lack
of consideration, but also for lack of consent. The cancellation of TCT No. 90805 in
the name of Montecillo is in order as there was no valid contract transferring
ownership of the Mabolo Lot from Reynes to Montecillo.
WHEREFORE, the petition is DENIED and the assailed Decision dated July 16,
1998 of the Court of Appeals in CA-G.R. CV No. 41349 is AFFIRMED. Costs against
petitioner.
SO ORDERED.
Puno, (Chairman), Panganiban, and Sandoval-Gutierrez, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-27829 August 19, 1988
PHILIPPINE VIRGINIA TOBACCO ADMINISTRATION, petitioner,
vs.
HON. WALFRIDO DE LOS ANGELES, Judge of the Court of First Instance of
Rizal, Branch IV (Quezon City) and TIMOTEO A. SEVILLA, doing business under
the name and style of PHILIPPINE ASSOCIATED RESOURCES and
PRUDENTIAL BANK AND TRUST COMPANY, respondents.

10. 10
Lorenzo F. Miravite for respondent Timoteo Sevilla.
Ferrer & Ranada Law Office for respondent Prudential Bank & Trust Co.
PARAS, J.:
In these petition and supplemental petition for Certiorari, Prohibition and mandamus
with Preliminary Injunction, petitioner Philippine Virginia Tobacco Administration
seeks to annul and setaside the following Orders ofrespondentJudge of the Court of
First Instance of Rizal, Branch IV (Quezon City) in Civil Case No. Q-10351 and prays
that the Writ of Preliminary Injunction (that may be) issued by this Court enjoining
enforcement of the aforesaid Orders be made permanent. (Petition, Rollo, pp. 1-9)
They are:
The Order of July 17, 1967:
AS PRAYED FOR, the Prudential Bank & Trust Company is hereby
directed to release and deliver to the herein plaintiff, Timoteo A.
Sevilla, the amount of P800,000.00 in its custody representing the
marginal depositofthe Letters of Credit which said bank has issued
in favor of the defendant, upon filing by the plaintiff of a bond in the
um of P800,000.00, to answer for whatever damage that the
defendant PVTA and the Prudential Bank & Trust Company may
suffer by reason of this order. (Annex "A," Rollo, p. 12)
The Order of November 3,1967:
IN VIEW OF THE FOREGOING, the petition under consideration is
granted, as follows: (a) the defendant PVTA is hereby ordered to
issue the corresponding certificate of Authority to the plaintiff,
allowing him to export the remaining balance of his tobacco quota
at the current world market price and to make the corresponding
import of American high-grade tobacco; (b) the defendant PVTA is
hereby restrained from issuing any Certificate of Authority to export
or import to any persons and/or entities while the right of the
plaintiff to the balance of his quota remains valid, effective and in
force; and (c) defendant PVTA is hereby enjoined from opening
public bidding to sell its Virginia leaf tobacco during the effectivity of
its contract with the plaintiff.
xxx xxx xxx
In order to protect the defendant from whatever damage it may
sustain byvirtue of this order, the plaintiff is hereby directed to file a
bond in the sum of P20,000.00. (Annex "K," Rollo, pp. 4-5)
The Order of March 16, 1968:
WHEREFORE, the motion for reconsideration of the defendant
against the order of November 3, 1967 is hereby DENIED. (Annex
"M," Rollo, P. 196)
The facts of the case are as follows:
Respondent Timoteo Sevilla, proprietor and General Manager of the Philippine
Associated Resources (PAR) together with two other entities,namely,the Nationwide
Agro-Industrial Development Corp. and the Consolidated Agro-Producers Inc. were
awarded in a public bidding the right to import Virginia leaf tobacco for blending
purposes and exportation by them of PVTA and farmer's low-grade tobacco at a rate
of one (1) kilo of imported tobacco for every nine (9) kilos of leaf tobacco actually
exported. Subsequently, the other two entities assigned their rights to PVTA and
respondent remained the only private entity accorded the privilege.
The contract entered into between the petitioner and respondent Sevilla was for the
importation of85 million kilos ofVirginia leaf tobacco and a counterpart exportation of
2.53 million kilos of PVTA and 5.1 million kilos of farmer's and/or PVTA at P3.00 a
kilo. (Annex "A," p. 55 and Annex "B," Rollo, p. 59) In accordance with their contract
respondentSevilla purchased from petitioner and actuallyexported 2,101.470 kilos of
tobacco, paying the PVTA the sum of P2,482,938.50 and leaving a balance of
P3,713,908.91. Before respondent Sevilla could import the counterpart blending
Virginia tobacco, amounting to 525,560 kilos,Republic Act No. 4155 was passed and
took effect on June 20, 1 964, authorizing the PVTA to grant import privileges at the
ratio of 4 to 1 instead of 9 to 1 and to dispose of all its tobacco stock at the best price
available.
Thus, on September 14, 1965 subject contract which was already amended on
December 14, 1963 because of the prevailing export or world market price under
which respondent will be exporting at a loss, (Complaint, Rollo, p. 3) was further
amended to grant respondent the privileges under aforesaid law, subject to the
following conditions:(1) that on the 2,101.470 kilos already purchased, and exported,
the purchase price ofabout P3.00 a kilo was maintained; (2) that the unpaid balance
of P3,713,908.91 was to be liquidated by paying PVTA the sum of P4.00 for every kilo
of imported Virginia blending tobacco and; (3) that respondent Sevilla would open an
irrevocable letter of credit No. 6232 with the Prudential Bank and Trust Co. in favor of
the PVTA to secure the payment of said balance,drawable upon the release from the
Bureau of Customs of the imported Virginia blending tobacco.
While respondentwas trying to negotiate the reduction of the procurement cost of the
2,101.479 kilos of PVTA tobacco already exported which attempt was denied by

11. 11
petitioner and also by the Office of the President, petitioner prepared two drafts to be
drawn against said letter of credit for amounts which have already become due and
demandable. Respondent then filed a complaint for damages with preliminary
injunction against the petitioner in the amount of P5,000,000.00. Petitioner filed an
answer with counterclaim, admitting the execution of the contract. It alleged however
that respondent,violated the terms thereofby causing the issuance of the preliminary
injunction to prevent the former from drawing from the letter of credit for amounts due
and payable and thus caused petitioner additional damage of 6% per annum.
A writ of preliminary injunction was issued by respondent judge enjoining petitioner
from drawing against the letter of credit. On motion of respondent, Sevilla, the lower
court dismissed the complainton April 19, 1967 withoutprejudice and lifted the writ of
preliminaryinjunction butpetitioner's motion for reconsideration was granted on June
5,1967 and the Order of April 19,1967 was set aside. On July 1, 1967 Sevilla filed an
urgent motion for reconsideration of the Order of June 5, 1967 praying that the Order
of dismissal be reinstated. But pending the resolution of respondent's motion and
without notice to the petitioner, respondent judge issued the assailed Order of July
17, 1967 directing the Prudential Bank & Trust Co. to make the questioned release of
funds from the Letter of Credit. Before petitioner could file a motion for
reconsideration of said order, respondent Sevilla was able to secure the releaseof
P300,000.00 and the rest of the amount. Hence this petition, followed by the
supplemental petition when respondent filed with the lower court an urgent ex-parte
petition for the issuance of preliminary mandatory and preventive injunction which
was granted in the resolution of respondent Judge on November 3, 1967, above
quoted. On March 16, 1968, respondent Judge denied petitioner's motion for
reconsideration. (Supp. Petition, Rollo, pp. 128- 130)
Pursuant to the resolution of July 21, 1967, the Supreme Court required respondent
to file an answer to the petition within 10 days from notice thereof and upon
petitioner's posting a bond of fifty thousand pesos (P50,000.00), a writ of preliminary
mandatory injunction was issued enjoining respondent Judge from enforcing and
implementing his Order of July 17,1967 and private respondents Sevilla and
Prudential Bank and Trust Co. from complying with and implementing said order. The
writ further provides that in the event that the said order had already been complied
with and implemented,said respondents are ordered to return and make available the
amounts that might have been released and taken delivery of by respondent Sevilla.
(Rollo, pp. 16-17)
In its answer, respondent bank explained that when it received the Order of the
Supreme Courtto stop the release of P800,000.00 it had already released the same
in obedience to ailieged earlier Order of the lower Court which was reiterated with
ailieged admonition in a subsequent Order. (Annex "C," Rollo, pp. 37-38) A
Manifestation to that effect has already been filed c,irrency respondent bank (Rollo,
pp. 19-20) which was noted c,irrency this Court in the resolution of August 1, 1967, a
copy of which was sent to the Secretary of Justice. (Rollo, p. 30)
Before respondent Sevilla could file his answer, petitioner filed a motion to declare
him and respondent bank in contempt of court for having failed to comply with the
resolution to this court of July 21, 1967 to the effect that the assailed order has
already been implemented but respondents failed to return and make available the
amounts that had been released and taken delivery of by respondent Sevilla. (Rollo,
pp. 100-102)
In his answer to the petition, respondentSevilla claims thatpetitioner demanded from
him a much higher price for Grades D and E tobacco than from the other awardees;
that petitioner violated its contract by granting indiscriminately to numerous buyers
the right to export and import tobacco while his agreement is being implemented,
thereby depriving respondent of his exclusive right to import the Virginia leaf tobacco
for blending purposes and that respondent Judge did not abuse his discretion in
ordering the release ofthe amount of P800,000.00 from the Letter of Credit, upon his
posting a bond for the same amount. He argued further that the granting of said
preliminaryinjunction is within the sound discretion of the court with or without notice
to the adverse party when the facts and the law are clear as in the instant case. He
insists that petitioner caretaker.2 claim from him a price higher than the other
awardees and thatpetitioner has no more right to the sum in controversy as the latter
has alreadybeen overpaid when computed not at the price of tobacco provided in the
contract which is inequitable and therefore null and void but at the price fixed for the
other awardees. (Answer of Sevilla, Rollo, pp. 105-111)
In its Answer to the Motion for Contempt,respondentbank reiterates its allegations in
the Manifestation and Answer which it filed in this case. (Rollo, pp. 113-114)
In his answer, (Rollo, pp. 118-119) to petitioner's motion to declare him in contempt,
respondent Sevilla explains that when he received a copy of the Order of this Court,
he had already disbursed the whole amountwithdrawn,to settle his huge obligations.
Later he filed a supplemental answer in compliance with the resolution ofthis Court of
September 15,1967 requiring him to state in detail the amounts allegedly disbursed
c,irrency him out of the withdrawn funds. (Rollo, pp. 121-123)
Pursuant to the resolution of the Supreme Court on April 25, 1968, a Writ of
Preliminary Injunction was issued upon posting of a surety bond in the amount of
twenty thousand pesos (P20,000.00) restraining respondent Judge from enforcing
and implementing his orders of November 3, 1967 and March 16, 1968 in Civil Case
No. Q-10351 of the Court of First Instance of Rizal (Quezon City).
RespondentSevilla filed an answer to the supplemental petition (Rollo, pp. 216-221)
and so did respondent bank (Rollo, p. 225). Thereafter, all the parties filed their
respective memoranda (Memo for Petitioners, Rollo, pp. 230-244 for Resp. Bank, pp.
246-247;and for Respondents,Rollo,pp.252-257).Petitioners filed a rejoinder (rollo,
pp. 259-262) and respondent Sevilla filed an Amended Reply Memorandum (Rollo,
pp. 266274). Thereafter the case was submitted for decision:' in September, 1968
(Rollo, p. 264).
Petitioner has raised the following issues:

12. 12
1. RespondentJudge acted withoutor in excess of jurisdiction or with grave abuse of
discretion when he issued the Order of July 17, 1967, for the following reasons: (a)
the letter of credit issued by respondent bank is irrevocable; (b) said Order was
issued withoutnotice and (c) said order disturbed the status quo of the parties and is
tantamount to prejudicing the case on the merits. (Rollo, pp. 7-9)
2. RespondentJudge likewise acted without or in excess of jurisdiction or with grave
abuse of discretion when he issued the Order of November 3, 1967 which has
exceeded the proper scope and function of a Writ of PreliminaryInjunction which is to
preserve the status quo and caretaker.2 therefore assume without hearing on the
merits,that the award granted to respondentis exclusive;that the action is for specific
performance a d that the contract is still in force; that the conditions of the contract
have already been complied with to entitle the party to the issuance of the
corresponding Certificate ofAuthority to importAmerican high grade tobacco; that the
contract is still existing; that the parties have already agreed that the balance of the
quota of respondentwill be sold at current world market price and that petitioner has
been overpaid.
3. The alleged damages suffered and to be suffered by respondent Sevilla are not
irreparable,thus lacking in one essential prerequisite to be established before a Writ
of PreliminaryInjunction maybe issued.The alleged damages to be suffered are loss
of expected profits which can be measured and therefore reparable.
4. Petitioner will suffer greater damaaes than those alleged by respondent if the
injunction is not dissolved. Petitioner stands to lose warehousing storage and
servicing fees amounting to P4,704.236.00 yearly or P392,019.66 monthly, not to
mention the loss of opportunity to take advantage of any beneficial change in the
price of tobacco.
5. The bond fixed by the lower court, in the amount of P20,000.00 is grossly
inadequate, (Rollo, pp. 128-151)
The petition is impressed with merit.
In issuing the Order of July 17, 1967, respondent Judge violated the irrevocability of
the letter of credit issued by respondent Bank in favor of petitioner. An irrevocable
letter of credit caretaker.2 during its lifetime be cancelled or modified Without the
express permission of the beneficiary (Miranda and Garrovilla, Principles of Money
Creditand Banking,Revised Edition, p. 291). Consequently, if the finding agricul- the
trial on the merits is that respondent Sevilla has ailieged unpaid balance due the
petitioner, such unpaid obligation would be unsecured.
In the issuance ofthe aforesaid Order, respondentJudge likewise violated: Section 4
of Rule 15 of the Relatiom, Rules of Court which requires that notice of a motion be
served by the applicantto all parties concerned atleastthree days before the hearing
thereof; Section 5 of the same Rule which provides thatthe notice shall be directed to
the parties concerned; and shall state the time and place for the hearing of the
motion; and Section 6 of the same Rule which requires proof of service of the notice
thereof, except when the Court is satisfied that the rights of the adverse party or
parties are not affected, (Sunga vs. Lacson,L-26055,April 29, 1968, 23 SCRA 393) A
motion which does not meet the requirements of Sections 4 and 5 of Rule 15 of the
Relatiom, Rules of Court is considered a worthless piece of paper which the Clerk
has no right to receiver and the respondent court a quo he has no authority to act
thereon. (Vda. de A. Zarias v. Maddela, 38 SCRA 35; Cledera v. Sarn-j-iento, 39
SCRA 552; and Sacdalan v. Bautista, 56 SCRA 175). The three-day notice required
by law in the filing of a motion is intended not for the movant's benefit but to avoid
surprises upon the opposite party and to give the latter time to study and meet the
arguments of the motion. (J.M. Tuason and Co., Inc. v. Magdangal, L-1 5539. 4
SCRA 84).
More specifically, Section 5 of Rule 58 requires notice to the defendant before a
preliminaryinjunction is granted unless it shall appear from facts shown bv affidavits
or by the verified complaintthatgreat or irreparable injury would result to the applyin-
before the matter can be heard on notice. Once the application is filed with the Judge,
the latter must cause ailieged Order to be served on the defendant, requiring him to
show cause at a given time and place why the injunction should not be granted. The
hearing is essential to the legality of the issuance of a preliminary injunction. It is
ailieged abuse ofdiscretion on the part of the court to issue ailieged injunction without
hearing the parties and receiving evidence thereon (Associated Watchmen and
Security Union, et al. v. United States Lines, et al., 101 Phil. 896).
In the issuance of the Order of November 3, 1967, with notice and hearing
notwithstanding the discretionary power of the trial court to Issue a preliminary
mandatoryinjunction is notabsolute as the issuance ofthe writ is the exception rather
than the rule.The party appropriate for it mustshow a clear legal right the violation of
which is so recent as to make its vindication an urgent one (Police Commission v.
Bello,37 SCRA 230).It -is granted only on a showing that (a) the invasion of the right
is material and substantial;(b) the rightof the complainantis clear and unmistakable;
and (c) there is ailieged urgent and permanent necessity for the writ to prevent
serious decision ( Pelejo v. Court of Appeals, 117 SCRA 665). In fact, it has always
been said that it is improper to issue a writ of preliminarymandatoryinjunction prior to
the final hearing except in cases of extreme urgency, where the right of petitioner to
the writ is very clear; where considerations of relative inconvenience bear strongly in
complainant's favor; where there is a willful and unlawful invasion of plaintiffs right
against his protest and remonstrance the injury being a contributing one, and there
the effect of the mandatory injunctions is rather to re-establish and maintain a pre-
existing continuing relation between the parties, recently and arbitrarily interrupted
c,irrency the defendant,than to establish a new relation (Alvaro v. Zapata, 11 8 SCRA
722; Lemi v. Valencia,February 28, 1963,7 SCRA 469; Com.of Customs v. Cloribel,
L-20266, January 31, 1967,19 SCRA 234.
In the case at bar there appears no urgency for the issuance of the writs of
preliminary mandatory injunctions in the Orders of July 17, 1967 and November 3,
1967; much less was there a clear legal right of respondent Sevilla that has been
violated by petitioner. Indeed, it was ailieged abuse of discretion on the part of

13. 13
respondent Judge to order the dissolution of the letter of credit on the basis of
assumptions that cannot be established except by a hearing on the merits nor was
there a showing that R.A. 4155 applies retroactively to respondent in this case,
modifying his importation / exportation contract with petitioner. Furthermore, a writ of
preliminary injunction's enjoining any withdrawal from Letter of Credit 6232 would
have been sufficient to protect the rights of respondent Sevilla should the finding be
that he has no more unpaid obligations to petitioner.
Similarly,there is meritin petitioner's contention that the question of exclusiveness of
the award is ailieged issue raised by the pleadings and therefore a matter of
controversy, hence a preliminary mandatory injunction directing petitioner to issue
respondent Sevilla a certificate of authority to import Virginia leaf tobacco and at the
same time restraining petitioner from issuing a similar certificate of authority to others
is premature and improper.
The sole objectof a preliminaryinjunction is to preserve the status quo until the merit
can be heard. It is the last actual peaceable uncontested status which precedes the
pending controversy (Rodulfo v. Alfonso, L-144, 76 Phil. 225), in the instant case,
before the Case No. Q-10351 was filed in the Court of First Instance of Rizal.
Consequently,instead of operating to preserve the status quo until the parties' rights
can be fairly and fully investigated and determined (De los Reyes v. Elepano, et al.,
93 Phil. 239), the Orders of July 17, 1966 and March 3, 1967 serve to disturb the
status quo.
Injury is considered irreparable if it is of such constant and frequent recurrence that
no fair or reasonable redress can be had therefor in a court of law (Allundorff v.
Abrahanson,38 Phil. 585) or where there is no standard c,irrency which their amount
can be measured with reasonable accuracy, that is, it is not susceptible of
mathematical computation (SSC v. Bayona, et al., L-13555, May 30, 1962).
Any alleged damage suffered or might possibly be suffered by respondent Sevilla
refers to expected profits and claimed by him in this complaint as damages in the
amount of FIVE Million Pesos (P5,000,000.00), a damage that can be measured,
susceptible ofmathematical computation,notirreparable,nor do they necessitate the
issuance of the Order of November 3, 1967.
Conversely, there is truth in petitioner's claim that it will suffer greater damage than
that suffered by respondent Sevilla if the Order of November 3, 1967 is not annulled.
Petitioner's stock if not made available to other parties will require warehouse storage
and servicing fees in the amountof P4,704,236.00 yearly or more than P9,000.000.00
in two years time.
Parenthetically, the alleged insufficiency of a bond fixed by the Court is not by itself
ailieged adequate reason for the annulmentofthe three assailed Orders. The filing of
ailieged insufficient or defective bond does not dissolve absolutely and
unconditionally ailieged injunction. The remedy in a proper case is to order party to
file a sufficient bond (Municipality of La Trinidad v. CFI of Baguio - Benguet, Br. I, 123
SCRA 81). However, in the instant case this remedy is not sufficient to cure the
defects already adverted to.
PREMISES CONSIDERED, the petition is given due course and the assailed Orders
of July 17, 1967 and November 3, 1967 and March 16, 1968 are ANNULLED and
SET ASIDE; and the preliminary injunctions issued c,irrency this Court should
continue until the termination of Case No. Q-10351 on the merits.
SO ORDERED,
THIRD DIVISION
[G.R. No. 111743. October 8, 1999]
VISITACION GABELO, ERLINDA ABELLA, PETRA PEREZ, ERLINDA
TRAQUENA, BEN CARDINAL, EDUARDO TRAQUENA, LEOPOLDO
TRAQUENA, MARIFE TUBALAS, ULYSIS MATEO, JOCELYN
FERNANDEZ, ALFONSO PLACIDO, LEONARDO TRAQUENA, SUSAN
RENDON AND MATEO TRINIDAD, petitioners, vs. COURT OF
APPEALS, URSULA MAGLENTE, CONSOLACION BERJA, MERCEDITA
FERRER, THELMA ABELLA, ANTONIO NGO, and PHILIPPINE REALTY
CORPORATION, respondents.
D E C I S I O N
PURISIMA, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of
Court, of the decision of the Court of Appeals, dated April 29, 1993, in CA-G.R. CV
No. 33178,affirming the decision of the Regional Trial Court of Manila, Branch 38, in
Civil Case No.89-48057,entitled “Philippine Realty Corporation vs. Ursula Maglente,
et al.”, declaring the defendants (herein respondents) as the rightful party to purchase
the land under controversy, and ordering the plaintiff, Philippine Realty Corporation
(PRC, for brevity), to execute the corresponding Contract of Sale/Contract to Sell in
favor of the defendants aforenamed.
The antecedent facts culminating in the filing of the present petition are as
follows:
On January 15, 1986, Philippine RealtyCorporation,owner ofa parcel of land at
400 Solana Street, Intramuros, Manila, with an area of 675.80 square meters, and
covered by Transfer Certificate of Title No. 43989, entered into a Contract of Lease
thereover with the herein private respondent, Ursula Maglente. The lease was for a

14. 14
period of three (3) years at a monthly rental of P3,000.00 during the first
year, P3,189.78 per month in the second year and P3,374.00 monthly for the third
year. The lease contract stipulated:
“12. That the LESSOR shall have the right to sell any part of the entire leased land
for any amount or consideration it deems convenient, subject to the condition,
however, that the LESSEE shall be notified about it sixty (60) days in advance; that
the LESSEE shall be given the first priority to buy it; and in the event that the
LESSEE cannot afford to buy, the final buyer shall respect this lease for the duration
of the same, except in cases of exproriation.”
It also prohibited the lessee to “cede, transfer, mortgage, sublease or in any manner
encumber the whole or part of the leased land and its improvements or its rights as
LESSEE of the leased land, without the previous consent in writing of the LESSOR
contained in a public instrument.”
However, after the execution of the lease agreement, respondent Maglente
started leasing portions ofthe leased area to the herein petitioners,Visitacion Gabelo,
Erlinda Abella, Petra Perez, Erlinda Traquena, Ben Cardinal, Eduardo Traquena,
Leopoldo Traquena, Marife Tubalas, Ulysis Mateo, Jocelyn Fernandez, Alfonso
Placido, Leonardo Traquena, Susan Rendon and Mateo Trinidad, who erected their
respective houses thereon.
On March 9, 1987, when the lease contract was about to expire, the Philippine
Realty Corporation, through its Junior Trust and Property Officers, Mr. Leandro
Buguis and Mr. Florentino B. Rosario, sent a written offer to sell subject properties to
respondent Ursula Maglente. The said letter stated:
“We wish to inform you that the Archdiocese of Manila has now decided to open for
sale the properties it own (sic) in the District of Intramuros, Manila. However, before
we acccept offers from other parties we are of course giving the first priority to our
tenants or lessees of Intramuros lots.”
Responding to such written offer, Maglente wrote a letter, dated February 2,
1988, to the Roman Catholic Archbishop of Manila manifesting an intention to
exercise her right of first priority to purchase the property as stipulated in the lease
contract.
On February 15, 1988,a Memorandum on the offer of Maglente to purchase the
property was prepared and presented to Msgr. Domingo Cirilos, president of
Philippine Realty Corporation, at the offered price ofP1,800.00 per square meter or
for a total amount of P1,216,440.00, with a downpayment of P100,000.00; the
balance of the purchase price payable within ten (10) years with interest at the rate of
eighteen (18%) percent per annum. Msgr. Cirilos found the offer acceptable and
approved the same.
On May 11, 1988, Maglente gave a partial downpaym ent of P25,000.00 and
additional P25,000.00 on May 20, 1988. In a letter, dated January 28, 1989,
Maglente informed the said corporation that there were other persons who were her
co-buyers, actually occupying the premises, namely: Consolacion Berja, Mercedita
Ferrer, Thelma Abella and Antonio Ngo within their respective areas of 100, 50, 60
and 400 square meters.
On January 30, 1989 Maglente paid her back rentals of P60,642.16
and P50,000.00 more, to complete her downpayment of P100,000.00.
On February 1989,Philippine RealtyCorporation (PRC) received copy of a letter
sent by the herein petitioners to the Archbishop of Manila, Jaime Cardinal Sin,
expressing their desire to purchase the portions of subject property on which they
have been staying for a long time. And so, PRC met with the petitioners who
apprised the corporation of their being actual occupants of the leased premises and
of the impending demolition of their houses which Maglente threatened to
cause. Petitioners then asked PRC to prevent the demolition of their houses which
might result in trouble and violence.
On February 23, 1989,in order to resolve which group has the right to purchase
subjectproperty as between the petitioners/sublessees of Maglente, and respondent
Maglente, and her co-buyers, PRC brought a Complaint in Interpleader against the
herein petitioners and private respondents, docketed as Civil Case No. 89-48057
before Branch 38 of the Regional Trial Court of Manila.
On March 11, 1991, after trial on the merits, the lower court of origin rendered
judgment in favor of respondent Maglente and her group, disposing thus:
“WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. Declaring the defendants Ursula Maglente, Consolacion Berja,
Mercedita Ferrer, Thelma Abella and Antonio Ngo as the rightful party
to purchase the land in controversy; and
2. Ordering plaintiff Philippine Realty Corporation to execute the
corresponding contract of sale/contract to sell in favor of the
defendants aforementioned in accordance with this Decision within
thirty (30) days from notice thereof.”
Dissatisfied with the aforesaid decision below, the Gabelo group (petitioners
here) appealed to the Court of Appeals, which affirmed the disposition of the trial
court appealed from.
Undaunted, petitioners found their way to this Court via the present petition,
assigning as sole error the ruling of the Court of Appeals upholding the right of the
private respondents, Consolacion Berja and Antonio Ngo, to purchase subject
property.
Petitioners theorize that they are tenants of Ursula Maglente on the land in
dispute, which they are occupying, and as such actual occupants they have the
preferential right to purchase the portions of land respectively occupied by them; that
the private respondents,Thelma Abella and Antonio Ngo,have never been occupants
of the contested lot, and that, as defined in the Pre-trial Order[1]
issued below, the
issue for resolution should have been limited to whether or not Berja and Ngo actually

15. 15
occupied the premises in question because occupation thereon is the basis of the
right to purchase subject area.
Petitioners’ contention is untenable. There is no legal basis for the assertion by
petitioners that as actual occupants of the said property, they have the right of first
priority to purchase the same.
As regards the freedom of contract, it signifies or implies the rightto choose with
whom to contract. PRC is thus free to offer its subject property for sale to any
interested person. It is not duty bound to sell the same to the petitioners simply
because the latter were in actual occupation of the property absent any prior
agreementvesting in them as occupants the right of first priority to buy, as in the case
of respondent Maglente. As a matter of fact, because it (PRC) contracted only with
respondent Maglente, it could even evict the petitioners from the premises occupied
by them considering that the sublease contract between petitioners and Maglente
was inked without the prior consent in writing of PRC, as required under the lease
contract. Thus, although the other private respondents were not parties to the lease
contract between PRC and Maglente, the former could freely enter into a contract
with them.
So also, the contract of sale having been perfected, the parties thereto are
already bound thereby and petitioners can no longer assert their right to buy. It is
well-settled that a contract of sale is perfected the moment there is a meeting of the
minds ofthe contracting parties upon the thing which is the object of the contract and
upon the price.[2]
From the time a party accepts the other party’s offer to sell within the
stipulated period without qualification, a contract of sale is deemed perfected.[3]
In the case under consideration, the contract of sale was already perfected -
PRC offered the subjectlot for sale to respondentMaglente and her group through its
Junior Trust and Property Officers. Respondent Maglente and her group accepted
such offer through a letter addressed to the Roman Catholic Archbishop of Manila,
dated February 2, 1988, manifesting their intention to purchase the property as
provided for under the lease contract. Thus, there was already an offer and
acceptance giving rise to a valid contract. As a matter of fact, respondents have
already completed payment of their downpayment of P100,000.00. Therefore, as
borne by evidence on record, the requisites under Article 1318 of the Civil Code[4]
for
a perfected contract have been met.
Anent petitioners’ submission thatthe sale has not been perfected because the
parties have not affixed their signatures thereto, suffice it to state that under the law,
the meeting ofthe minds between the parties gives rise to a binding contractalthough
they have not affixed their signatures to its written form.[5]
WHEREFORE, the petition is hereby DENIED for lack of merit and the decision
of the Court of Appeals in CA-G.R. CV No. 33178 AFFIRMED. No pronouncementas
to costs.
SO ORDERED.
SECOND DIVISION
HEIRS OF CAYETANO PANGAN and
CONSUELO PANGAN,*
Petitioners,
- versus -
SPOUSES ROGELIO PERRERAS and
PRISCILLA PERRERAS,
Respondents.
G.R. No. 157374
Present:
QUISUMBING, J., Chairperson,
CARPIO-MORALES,
BRION,
DEL CASTILLO, and
ABAD, JJ.
Promulgated:
August 27, 2009
x ------------------------------------------------------------------------------------------x
D E C I S I O N
BRION, J.:
The heirs[1]
of spouses Cayetano and Consuelo Pangan (petitioners-heirs) seek
the reversal of the Court of Appeals’ (CA) decision[2]
of June 26, 2002, as well its
resolution of February 20, 2003, in CA-G.R. CV Case No. 56590 through the
presentpetition for review on certiorari.[3]
The CA decision affirmed the Regional Trial
Court’s (RTC) ruling[4] which granted the complaint for specific performance filed by
spouses Rogelio and Priscilla Perreras (respondents) against the petitioners-heirs,
and dismissed the complaint for consignation instituted by Consuelo Pangan
(Consuelo) against the respondents.
THE FACTUAL ANTECEDENTS
The spouses Pangan were the owners of the lot and two-door apartment
(subject properties) located at 1142 Casañas St., Sampaloc, Manila.[5]
On June 2,
1989,Consuelo agreed to sell to the respondents the subject properties for the price

16. 16
of P540,000.00. On the same day, Consuelo received P20,000.00 from the
respondents as earnest money, evidenced by a receipt (June 2, 1989 receipt)[6]
that
also included the terms of the parties’ agreement.
Three days later, or on June 5, 1989, the parties agreed to increase the
purchase price from P540,000.00 to P580,000.00.
In compliance with the agreement, the respondents issued two Far East Bank
and Trust Company checks payable to Consuelo in the amounts of P200,000.00
andP250,000.00 on June 15, 1989. Consuelo, however, refused to accept the
checks. She justified her refusal by saying that her children (the petitioners -heirs) –
co-owners of the subject properties – did not want to sell the subject properties. For
the same reason, Consuelo offered to return the P20,000.00 earnest money she
received from the respondents, but the latter rejected it. Thus, Consuelo filed a
complaintfor consignation against the respondents on September 5, 1989, docketed
as Civil Case No. 89-50258, before the RTC of Manila, Branch 28.
The respondents,who insisted on enforcing the agreement, in turn instituted an
action for specific performance againstConsuelo before the same courton September
26, 1989. This case was docketed as Civil Case No. 89-50259. They sought to
compel Consuelo and the petitioners-heirs (who were subsequently impleaded as co-
defendants) to execute a Deed of Absolute Sale over the subject properties.
In her Answer, Consuelo claimed that she was justified in backing out from
the agreement on the ground that the sale was subject to the consent of the
petitioners-heirs who became co-owners of the property upon the death of her
husband, Cayetano. Since the petitioners-heirs disapproved of the sale, Consuelo
claimed that the contract became ineffective for lack of the requisite consent. She
nevertheless expressed her willingness to return the P20,000.00 earnest money she
received from the respondents.
The RTC ruled in the respondents’ favor; it upheld the existence of a perfected
contract of sale, at least insofar as the sale involved Consuelo’s conjugal and
hereditary shares in the subject properties. The trial court found that Consuelo’s
receipt of the P20,000.00 earnest money was an “eloquent manifestation of the
perfection of the contract.” Moreover, nothing in the June 2, 1989 receipt showed that
the agreement was conditioned on the consent of the petitioners -heirs. Even so, the
RTC declared that the sale is valid and can be enforced against Consuelo; as a co-
owner, she had full-ownership of the part pertaining to her share which she can
alienate,assign,or mortgage. The petitioners-heirs,however,could not be compelled
to transfer and deliver their shares in the subject properties, as they were not parties
to the agreement between Consuelo and the respondents. Thus, the trial court
ordered Consuelo to convey one-half (representing Consuelo’s conjugal share) plus
one-sixth (representing Consuelo’s hereditary share) of the subject properties, and to
pay P10,000.00 as attorney’s fees to the respondents. Corollarily, it dismissed
Consuelo’s consignation complaint.
Consuelo and the petitioners-heirs appealed the RTC decision to the CA
claiming that the trial court erred in not finding that the agreement was subject to a
suspensive condition – the consentof the petitioners-heirs to the agreement. The CA,
however, resolved to dismiss the appeal and, therefore, affirmed the RTC
decision. As the RTC did, the CA found that the payment and receipt of earnest
moneywas the operative act that gave rise to a perfected contract, and that there was
nothing in the parties’ agreement that would indicate that it was subject to a
suspensive condition. It declared:
Nowhere in the agreement of the parties, as contained in the June
2, 1989 receipt issued by [Consuelo] xxx, indicates that [Consuelo]
reserved titled on [sic] the property, nor does it contain any
provision subjecting the sale to a positive suspensive condition.

17. 17
Unconvinced by the correctness of both the RTC and the CA rulings, the
petitioners-heirs filed the present appeal by certiorari alleging reversible errors
committed by the appellate court.
THE PETITION
The petitioners-heirs primarily contest the finding that there was a perfected
contract executed by the parties. They allege that other than the finding that
Consuelo receivedP20,000.00 from the respondents as earnest money, no other
evidence supported the conclusion that there was a perfected contract between the
parties;they insistthat Consuelo specifically informed the respondents that the sale
still required the petitioners-heirs’ consent as co-owners. The refusal of the
petitioners-heirs to sell the subjectproperties purportedlyamounted to the absence of
the requisite element of consent.
Even assuming that the agreement amounted to a perfected contract, the
petitioners-heirs posed the question of the agreement’s proper characterization –
whether it is acontract of sale or a contract to sell. The petitioners-heirs posit that the
agreement involves a contract to sell, and the respondents’ belated payment of part
of the purchase price,i.e., one day after the June 14, 1989 due date, amounted to the
non-fulfillment of a positive suspensive condition that prevented the contract from
acquiring obligatory force. In support of this contention, the petitioners-heirs cite the
Court’s ruling in the case of Adelfa Rivera, et al. v. Fidela del Rosario, et al.:[7]
In a contract of sale, the title to the property passes to the
vendee upon the delivery of the thing sold; while in a contract to
sell,ownership is, by agreement, reserved in the vendor and is not
to pass to the vendee until full payment of the purchase price. In a
contract to sell, the payment of the purchase price is a positive
suspensive condition, the failure of which is not a breach,
casual or serious, but a situation that prevents the obligation
of the vendor to convey title from acquiring an obligatory
force.
[Rivera], however, failed to complete payment of the
second installment. The non-fulfillment of the condition rendered
the contract to sell ineffective and without force and
effect. [Emphasis in the original.]
From these contentions, we simplify the basic issues for resolution to three
questions:
1. Was there a perfected contract between the parties?
2. What is the nature of the contract between them? and
3. What is the effect of the respondents’ belated payment on their
contract?
THE COURT’S RULING
There was a perfected
contract between the parties
since all the essential
requisites of a contract were
present
Article 1318 of the Civil Code declares that no contract exists unless the
following requisites concur: (1) consent of the contracting parties; (2) object
certain which is the subject matter of the contract; and (3) cause of the obligation
established. Since the object of the parties’ agreementinvolves properties co-owned
by Consuelo and her children, the petitioners-heirs insist that their approval of the
sale initiated by their mother, Consuelo, was essential to its perfection. Accordingly,
their refusal amounted to the absence of the required element of consent.
That a thing is sold withoutthe consentof all the co-owners does not invalidate
the sale or render it void. Article 493 of the Civil Code[8]
recognizes the absolute right
of a co-owner to freely dispose ofhis pro indiviso share as well as the fruits and other
benefits arising from that share, independently of the other co-owners. Thus, when
Consuelo agreed to sell to the respondents the subject properties, what she in fact
sold was her undivided interest that, as quantified by the RTC, consisted of one-half

18. 18
interest, representing her conjugal share, and one-sixth interest, representing her
hereditary share.
The petitioners-heirs nevertheless argue that Consuelo’s consent was
predicated on their consent to the sale, and that their disapproval resulted in the
withdrawal of Consuelo’s consent. Yet, we find nothing in the parties’ agreement or
even conduct – save Consuelo’s self-serving testimony – that would indicate or from
which we can infer that Consuelo’s consent depended on her children’s approval of
the sale. The explicit terms of the June 8, 1989 receipt[9]
provide no occasion for any
reading that the agreementis subjectto the petitioners-heirs’ favorable consent to the
sale.
The presence of Consuelo’s consent and, corollarily, the existence of a
perfected contract between the parties are further evidenced by the payment and
receipt ofP20,000.00, an earnest money by the contracting parties’ common usage.
The law on sales, specifically Article 1482 of the Civil Code, provides that whenever
earnest money is given in a contract of sale, it shall be considered as part of
the price and proof of the perfection of the contract. Although the presumption is
not conclusive,as the parties maytreat the earnestmoneydifferently, there is nothing
alleged in the present case that would give rise to a contrary presumption. In cases
where the Court reached a conclusion contrary to the presumption declared in Article
1482, we found that the money initially paid was given to guarantee that the buyer
would not back out from the sale, considering that the parties to the sale have yet to
arrive at a definite agreement as to its terms – that is, a situation where the contract
has not yet been perfected.[10]
These situations do not obtain in the present case, as
neither of the parties claimed that the P20,000.00 was given merely as guarantee by
the respondents,as vendees,thatthey would not back out from the sale. As we have
pointed out, the terms of the parties’ agreement are clear and explicit; indeed, all the
essential elements of a perfected contract are present in this case. While the
respondents required that the occupants vacate the subject properties prior to the
paymentof the second installment,the stipulation does notaffect the perfection of the
contract, but only its execution.
In sum, the case contains no element, factual or legal, that negates the
existence of a perfected contract between the parties.
The characterization of the
contract can be considered
irrelevant in this case in light
of Article 1592 and the
Maceda Law, and the
petitioners-heirs’ payment
The petitioners-heirs posit that the proper characterization of the contract
entered into by the parties is significant in order to determine the effect of the
respondents’ breach of the contract (which purportedly consisted of a one-day delay
in the payment of part of the purchase price) and the remedies to which they, as the
non-defaulting party, are entitled.
The question of characterization of the contract involved here would
necessarily call for a thorough analysis of the parties’ agreement as embodied in
the June 2, 1989receipt, their contemporaneous acts, and the circumstances
surrounding the contract’s perfection and execution. Unfortunately, the lower
courts’ factual findings provide insufficient detail for the purpose. A stipulation
reserving ownership in the vendor until full payment of the price is, under case law,
typical in a contract to sell.[11]
In this case, the vendor made no reservation on the
ownership of the subject properties. From this perspective, the parties’ agreement
may be considered a contractof sale. On the other hand, jurisprudence has similarly
established that the need to execute a deed of absolute sale upon completion of
payment of the price generally indicates that it is a contract to sell, as it implies the
reservation of title in the vendor until the vendee has completed the payment of the
price. When the respondents instituted the action for specific performance before the

19. 19
RTC, they prayed that Consuelo be ordered to execute a Deed of Absolute Sale; this
act may be taken to conclude that the parties only entered into a contract to sell.
Admittedly, the given facts, as found by the lower courts, and in the absence
of additional details, can be interpreted to support two conflicting conclusions. The
failure of the lower courts to pry into these matters may understandably be explained
by the issues raised before them, which did not require the additional details. Thus,
they found the question of the contract’s characterization immaterial in their
discussion ofthe facts and the law of the case. Besides, the petitioners-heirs raised
the question of the contract’s characterization and the effect of the breach for the first
time through the present Rule 45 petition.
Points of law, theories,issues and arguments not brought to the attention of
the lower court need not be, and ordinarily will not be, considered by the reviewing
court, as they cannot be raised for the first time at the appellate review stage. Basic
considerations of fairness and due process require this rule.[12]
At any rate, we do not find the question of characterization significant to fully
pass upon the question of default due to the respondents’ breach; ultimately, the
breach was cured and the contract revived by the respondents’ payment a day after
the due date.
In cases of breach due to nonpayment, the vendor may avail of the
remedy of rescission in a contract of sale. Nevertheless, the defaulting vendee
may defeat the vendor’s right to rescind the contract of sale if he pays the amount
due before he receives a demand for rescission, either judicially or by a notarial act,
from the vendor. This right is provided under Article 1592 of the Civil Code:
Article 1592. In the sale of immovable property, even
though it may have been stipulated that upon failure to pay the
price at the time agreed upon the rescission of the contract shall of
right take place, the vendee may pay, even after the expiration
of the period, as long as no demand for rescission of the
contract has been made upon him either judicially or by a
notarial act. After the demand, the court may not grant him a new
term. [Emphasis supplied.]
Nonpayment of the purchase price in contracts to sell, however, does
not constitute a breach;rather, nonpaymentis a condition thatprevents the obligation
from acquiring obligatory force and results in its cancellation. We stated in Ong v.
CA[13]
that:
In a contract to sell, the payment of the purchase price
is a positive suspensive condition, the failure of which is not a
breach, casual or serious, but a situation that prevents the
obligation of the vendor to convey title from acquiring
obligatory force. The non-fulfillment of the condition of full
payment rendered the contract to sell ineffective and without force
and effect. [Emphasis supplied.]
As in the rescission of a contract of sale for nonpayment of the price, the
defaulting vendee in a contract to sell may defeat the vendor’s right to cancel by
invoking the rights granted to him under Republic Act No. 6552 or the Realty
Installment Buyer Protection Act (also known as the Maceda Law); this law provides
for a 60-day grace period within which the defaulting vendee (who has paid less than
two years of installments) may still pay the installments due. Only after the lapse of
the grace period with continued nonpayment of the amounts due can the actual
cancellation of the contract take place. The pertinent provisions of the Maceda Law
provide:
xxxx
Section 2. It is hereby declared a public policy to protect
buyers of real estate on installmentpayments against onerous and
oppressive conditions.
Sec. 3. In all transactions or contracts involving the
sale or financing of real estate on installment payments,
including residential condominium apartments but excluding
industrial lots, commercial buildings and sales to tenants under
Republic Act Numbered Thirty-eighthundred forty-four as amended
by Republic Act Numbered Sixty-three hundred eighty-nine, where
the buyer has paid at least two years of installments, the buyer is

20. 20
entitled to the following rights in case he defaults in the payment of
succeeding installments:
xxxx
Section 4. In case where less than two years of
installments were paid, the seller shall give the buyer a grace
period of not less than 60 days from the date the installment
became due. If the buyer fails to pay the installments due at the
expiration of the grace period, the seller may cancel the contract
after thirty days from the receipt by the buyer of the notice of
cancellation or the demand for rescission of the contract by notarial
act. [Emphasis supplied.]
Significantly, the Court has consistently held that the Maceda Law covers not
only sales on installments of real estate, but also financing of such acquisition; its
Section 3 is comprehensive enough to include both contracts of sale and contracts to
sell,provided that the terms on paymentof the price require at leasttwo installments.
The contract entered into by the parties herein can very well fall under the Maceda
Law.
Based on the above discussion, we conclude that the respondents’ payment
on June 15, 1989 of the installment due on June 14, 1989 effectively defeated the
petitioners-heirs’ right to have the contract rescinded or cancelled. Whether the
parties’ agreement is characterized as one of sale or to sell is not relevant in light of
the respondents’ payment within the grace period provided under Article 1592 of the
Civil Code and Section 4 of the Maceda Law. The petitioners-heirs’ obligation to
accept the payment of the price and to convey Consuelo’s conjugal and hereditary
shares in the subject properties subsists.
WHEREFORE, we DENY the petitioners-heirs’ petition for review
on certiorari, and AFFIRM the decision of the Court of Appeals dated June 24, 2002
and its resolution dated February 20, 2003 in CA-G.R. CV Case No. 56590. Costs
against the petitioners-heirs.
SO ORDERED.
ARTURO D. BRION
Associate Justice
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-59266 February 29, 1988
SILVESTRE DIGNOS and ISABEL LUMUNGSOD, petitioners,
vs.
HON. COURT OF APPEALS and ATILANO G. JABIL, respondents.
BIDIN, J.:
This is a petition for review on certiorari seeking the reversal of the: (1) Decision * of
the 9th Division, Court of Appeals dated July 31,1981, affirming with modification the
Decision,dated August25, 1972 of the Court of First Instance ** of Cebu in civil Case
No. 23-L entitled Atilano G. Jabil vs. Silvestre T. Dignos and Isabela Lumungsod de
Dignos and Panfilo Jabalde, as Attorney-in-Fact of Luciano Cabigas and Jovita L. de
Cabigas; and (2) its Resolution dated December 16, 1981, denying defendant-
appellant's (Petitioner's) motion for reconsideration, for lack of merit.
The undisputed facts as found by the Court of Appeals are as follows:
The Dignos spouses were owners ofa parcel of land, known as Lot
No. 3453, of the cadastral survey of Opon, Lapu-Lapu City. On
June 7, 1965,appellants (petitioners) Dignos spouses sold the said
parcel of land to plaintiff-appellant (respondent Atilano J. Jabil) for
the sum of P28,000.00, payable in two installments, with an
assumption of indebtedness with the First Insular Bank of Cebu in
the sum of P12,000.00, which was paid and acknowledged by the
vendors in the deed of sale (Exh. C) executed in favor of plaintiff-
appellant, and the next installment in the sum of P4,000.00 to be
paid on or before September 15, 1965.
On November 25, 1965,the Dignos spouses sold the same land in
favor of defendants spouses, Luciano Cabigas and Jovita L. De
Cabigas, who were then U.S. citizens, for the price of P35,000.00.
A deed of absolute sale (Exh. J, also marked Exh. 3) was executed
by the Dignos spouses in favor of the Cabigas spouses, and which

21. 21
was registered in the Office of the Register of Deeds pursuant to
the provisions of Act No. 3344.
As the Dignos spouses refused to accept from plaintiff-appellantthe
balance of the purchase price ofthe land, and as plaintiff- appellant
discovered the second sale made by defendants-appellants to the
Cabigas spouses, plaintiff-appellant brought the present suit.
(Rollo, pp. 27-28)
After due trial, the Court of first Instance of Cebu rendered its Decision on August
25,1972, the decretal portion of which reads:
WHEREFORE, the Court hereby declares the deed of sale
executed on November 25,1965 by defendantIsabela L.de Dignos
in favor of defendant Luciano Cabigas, a citizen of the United
States of America, null and void ab initio, and the deed of sale
executed by defendants Silvestre T. Dignos and Isabela
Lumungsod de Dignos not rescinded. Consequently, the plaintiff
Atilano G. Jabil is hereby ordered to pay the sum, of Sixteen
Thousand Pesos (P16,000.00) to the defendants-spouses upon the
execution of the Deed of absolute Sale of Lot No. 3453, Opon
Cadastre and when the decision of this case becomes final and
executory.
The plaintiffAtilano G. Jabil is ordered to reimburse the defendants
Luciano Cabigas and Jovita L. de Cabigas, through their attorney-
in-fact, Panfilo Jabalde, reasonable amount corresponding to the
expenses or costs of the hollow block fence, so far constructed.
It is further ordered that defendants-spouses Silvestre T. Dignos
and Isabela Lumungsod de Dignos should return to defendants -
spouses Luciano Cabigas and Jovita L. de Cabigas the sum of
P35,000.00,as equity demands thatnobody shall enrich himself at
the expense of another.
The writ of preliminary injunction issued on September 23, 1966,
automatically becomes permanent in virtue of this decision.
With costs against the defendants.
From the foregoing, the plaintiff (respondent herein) and defendants-spouss
(petitioners herein) appealed to the Court of Appeals, which appeal was docketed
therein as CA-G.R. No. 54393-R, "Atilano G. Jabil v. Silvestre T. Dignos, et al."
On July 31, 1981,the Court of Appeals affirmed the decision ofthe lower court except
as to the portion ordering Jabil to pay for the expenses incurred by the Cabigas
spouses for the building ofa fence upon the land in question.The disposive portion of
said decision of the Court of Appeals reads:
IN VIEW OF THE FOREGOING CONSIDERATIONS, except as to
the modification of the judgment as pertains to plaintiff-appellant
above indicated,the judgmentappealed from is hereby AFFIRMED
in all other respects.
With costs against defendants-appellants.
SO ORDERED.
Judgment MODIFIED.
A motion for reconsideration ofsaid decision was filed by the defendants - appellants
(petitioners) Dignos spouses,buton December 16,1981, a resolution was issued by
the Court of Appeals denying the motion for lack of merit.
Hence, this petition.
In the resolution of February 10, 1982, the Second Division of this Court denied the
petition for lack of merit. A motion for reconsideration of said resolution was filed on
March 16, 1982. In the resolution dated April 26,1982, respondents were required to
commentthereon,which commentwas filed on May 11, 1982 and a reply thereto was
filed on July 26, 1982 in compliance with the resolution of June 16,1 982. On August
9,1982, acting on the motion for reconsideration and on all subsequent pleadings
filed, this Courtresolved to reconsider its resolution of February 10, 1982 and to give
due course to the instant petition. On September 6, 1982, respondents filed a
rejoinder to reply of petitioners which was noted on the resolution of September 20,
1982.
Petitioners raised the following assignment of errors:
I
THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW IN
GROSSLY, INCORRECTLY INTERPRETING THE TERMS OF THE CONTRACT,
EXHIBIT C, HOLDING IT AS AN ABSOLUTE SALE, EFFECTIVE TO TRANSFER
OWNERSHIP OVER THE PROPERTY IN QUESTION TO THE RESPONDENT AND
NOT MERELY A CONTRACT TO SELL OR PROMISE TO SELL; THE COURT
ALSO ERRED IN MISAPPLYING ARTICLE 1371 AS WARRANTING READING OF
THE AGREEMENT, EXHIBIT C, AS ONE OF ABSOLUTE SALE, DESPITE THE
CLARITY OF THE TERMS THEREOF SHOWING IT IS A CONTRACT OF PROMISE
TO SELL.