Contracts - Last Set of Cases 2016
Transcript of Contracts - Last Set of Cases 2016
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G.R. No. 128120 October 20, 2004
SWEDISH MATCH, AB,
vs.
COURT OF AEA!S, A!S MANAGEMENT " DE#E!OMENT CORORATION $%&
ANTONIO '. !ITON(UA,respondents.
D E C I S I O N
TINGA, J.:
Petitioners seek a reversal of the twin Orders1 of the Court of Appeals dated 15 November
19962 and 31 anuar! 199"#3 in CA$%.&. C' No. 35((6# entitled ) ALS Management et al., v.
Swedish Match, AB et al.) *he appellate +ourt overturned the trial +ourt,s Order - dismissin
the respondents, +omplaint for spe+i/+ performan+e and remanded the +ase to the trial
+ourt for further pro+eedins.
0wedish at+h A hereinafter 0A4 is a +orporation oranied under the laws of 0wedennot doin business in the Philippines. 0A# however# had three subsidiar! +orporations in
the Philippines# all oranied under Philippine laws# to wit Phim+o 7ndustries# 7n+. Phim+o4#
Provident *ree 8arms# 7n+.# and **:;ouie Phils.4# 7n+.
0ometime in 19((# 0*&A# the then parent +ompan! of 0A# de+ided to sell 0A of
0weden and the latter,s worldwide mat+h# lihter and shavin produ+ts operation to
defaults in the loan +ovenants of 0N' with its s!ndi+ate of lenders. *he other
move was to sell at on+e or in one pa+kae all the 0N' +ompanies worldwide whi+h were
enaed in mat+h and lihter operations thru a lobal deal hereinafter# lobal deal4.
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7n his letter dated 3 November 19(9# ;itonua submitted to 0A a /rm o>er to bu! all of
the latter,s shares in Phim+o and all of Phim+o,s shares in Provident *ree 8arm# 7n+. and
**:;ouie Phils.4# 7n+. for the sum ofP"5B#BBB#BBB.BB.5
*hrouh its Chief er was below their e=pe+tations but ured them to undertake
a +omprehensive review and anal!sis of the value and pro/t potentials of the Phim+o shares#
with the assuran+e that respondents would eno! a +ertain priorit! althouh several parties
had indi+ated their interest to bu! the shares.6
*hereafter# an e=+hane of +orresponden+e ensued between petitioners and respondents
reardin the proe+ted sale of the Phim+o shares. 7n his letter dated 21 a! 199B# ;itonua
o>ered to bu! the disputed shares# e=+ludin the lihter division for F0G3B.6 million# whi+h
per another letter of the same date was in+reased to F0G36 million. " ;itonua stressed that
the bid amount +ould be adusted sube+t to availabilit! of additional information and audit
veri/+ation of the +ompan! /nan+es.
&espondin to ;itonua,s o>er# &ossi sent his letter dated 11 une 199B# informin the former
that A;0 should undertake a due dilien+e pro+ess or pre$a+?uisition audit and review of the
draft +ontra+t for the at+h and 8orestr! a+tivities of Phim+o at A;0, +onvenien+e. However#
&ossi made it +lear that at the +ompletion of the due dilien+e pro+ess# A;0 should submit
its /nal o>er in F0 dollar terms not later than 3B une 199B# for the shares of 0A
+orrespondin to ninet!$si= per+ent 96I4 of the at+h and 8orestr! a+tivities of Phim+o.
&ossi added that in +ase the )lobal deal) presentl! under neotiation for the 0wedish at+h
;ihts %roup would materialie# 0A would reimburse up to F0G2B#BBB.BB of A;0, +osts
related to the due dilien+e pro+ess.(
;itonua in a letter dated 1( une 199B# e=pressed disappointment at the apparent +hane in0A,s approa+h to the biddin pro+ess. He pointed out that in their - une 199B meetin#
he was advised that one /nal bidder would be sele+ted from amon the four +ontendin
roups as of that date and that the de+ision would be made b! 6 une 199B. He +riti+ied
0A,s de+ision to a++ept a new bidder who was not amon those who parti+ipated in the
25 a! 199B biddin. He informed &ossi that it ma! not be possible for them to submit their
/nal bid on 3B une 199B# +itin the advi+e to him of the auditin /rm that the /nan+ial
statements would not be +ompleted until the end of ul!. ;itonua added that he would
indi+ate in their /nal o>er more spe+i/+ details of the pa!ment me+hani+s and +onsider the
possibilit! of sinin a +onditional sale at that time.9
*wo da!s prior to the deadline for submission of the /nal bid# ;itonua aain advised &ossi
that the! would be unable to submit the /nal o>er b! 3B une 199B# +onsiderin that the
a+?uisition audit of Phim+o and the review of the draft areements had not !et been
+ompleted. He said# however# that the! would be able to /nalie their bid on 1" ul! 199B
and that in +ase their bid would turn out better than an! other proponent# the! would remit
pa!ment within ten 1B4 da!s from the e=e+ution of the +ontra+ts.1B
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petitioners.1" &espondents added that 0A,s refusal to +onsummate the perfe+ted sale of
the Phim+o shares amounted to an abuse of riht and +onstituted +ondu+t whi+h is +ontrar!
to law# morals# ood +ustoms and publi+ poli+!.1(
&espondents pra!ed that petitioners be enoined from sellin or transferrin the Phim+o
shares# or otherwise implementin the sale or transfer thereof# in favor of an! person or
entit! other than respondents# and that an! su+h sale to third parties be annulled and set
aside. &espondents also asked that petitioners be ordered to e=e+ute all do+uments or
instruments and perform all a+ts ne+essar! to +onsummate the sales areement in their
favor.
*raversin the +omplaint# petitioners alleed that respondents have no +ause of a+tion#
+ontendin that no perfe+ted +ontra+t# whether verbal or written# e=isted between them.
Petitioners added that respondents, +ause of a+tion# if an!# was barred b! the 0tatute of
8rauds sin+e there was no written instrument or do+ument eviden+in the alleed sale of the
Phim+o shares to respondents.
Petitioners /led a motion for a preliminar! hearin of their defense of bar b! the 0tatute of8rauds# whi+h the trial +ourt ranted. oth parties areed to adopt as their eviden+e in
support of or aainst the motion to dismiss# as the +ase ma! be# the eviden+e whi+h the!
addu+ed in support of their respe+tive positions on the writ of preliminar! inun+tion
in+ident.
7n its Order dated 1" April 1991# the &*C dismissed respondents, +omplaint.19 7t ruled that
there was no perfe+ted +ontra+t of sale between petitioners and respondents. *he +ourt
a quo said that the letter dated 11 une 199B# relied upon b! respondents# showed that
petitioners did not a++ept the bid o>er of respondents as the letter was a mere invitation for
respondents to +ondu+t a due dilien+e pro+ess or pre$a+?uisition audit of Phim+o,s mat+h
and forestr! operations to enable them to submit their /nal o>er on 3B une 199B. Assuminthat respondent,s bid was favored b! an oral a++eptan+e made in private b! oE+ers of
0A# the trial +ourt noted# su+h a++eptan+e was merel! preparator! to a formal a++eptan+e
b! the 0A@the a++eptan+e that would eventuall! lead to the e=e+ution and sinin of the
+ontra+t of sale. oreover# the +ourt noted that respondents failed to submit their /nal bid
on the deadline set b! petitioners.
&espondents appealed to the Court of Appeals# assinin the followin errors
A. *H< *&7A; CF&*
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LA&&AN*
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sube+t shares to them was perfe+ted as shown b! the followin +ir+umstan+es# namel!
petitioners assured them that should the! in+rease their bid# the sale would be awarded to
them and that the! did in fa+t in+rease their previous bid of F0G3B.6 million to F0G36
million petitioners orall! a++epted their revised o>er and the a++eptan+e was rela!ed to
them b! &ene Dion petitioners dire+ted them to pro+eed with the a+?uisition audit and to
submit a +omfort letter from the Fnited Co+onut Planters, ank FCP4 petitioner
+orporation +on/rmed its previous verbal a++eptan+e of their o>er in a letter dated 11 une
199B with the prior approval of petitioners# respondents enaed the servi+es of ;a!a#
anabat# 0alado Co.# an independent auditin /rm# to immediatel! pro+eed with the
a+?uisition audit and# petitioner +orporation reiterated its +ommitment to be bound b! the
result of the a+?uisition audit and
promised to reimburse respondents, +ost to the e=tent of F0G2B#BBB.BB. All these in+idents#
a++ordin to respondents# overwhelminl! prove that the +ontra+t of sale of the Phim+o
shares was perfe+ted.
8urther# respondents arued that there was partial performan+e of the perfe+ted +ontra+t on
their part. *he! alleed that with the prior approval of petitioners# the! enaed the servi+esof ;a!a# anabat# 0alado Co. to +ondu+t the a+?uisition audit. *he! averred that
petitioners areed to be bound b! the results of the audit and o>ered to reimburse the +osts
thereof to the e=tent of F0G2B#BBB.BB. &espondents added that in +omplian+e with their
obliations under the +ontra+t# the! have submitted a +omfort letter from FCP to show
petitioners that the bank was willin to /nan+e the a+?uisition of the Phim+o shares.21
*he basi+ issues to be resolved are 14 whether the appellate +ourt erred in reversin the
trial +ourt,s de+ision dismissin the +omplaint for bein unenfor+eable under the 0tatute of
8rauds and 24 whether there was a perfe+ted +ontra+t of sale between petitioners and
respondents with respe+t to the Phim+o shares.
*he 0tatute of 8rauds embodied in Arti+le 1-B3# pararaph 24# of the Civil Code22 re?uires
+ertain +ontra+ts enumerated therein to be eviden+ed b! some note or memorandum in
order to be enfor+eable. *he term )0tatute of 8rauds) is des+riptive of statutes whi+h re?uire
+ertain +lasses of +ontra+ts to be in writin. *he 0tatute does not deprive the parties of the
riht to +ontra+t with respe+t to the matters therein involved# but merel! reulates the
formalities
of the +ontra+t ne+essar! to render it enfor+eable.23 e+t of non$+omplian+e with the re?uirement of the
0tatute is simpl! that no a+tion +an be enfor+ed unless the re?uirement is +omplied
with.25 Clearl!# the form re?uired is for evidentiar! purposes onl!. Hen+e# if the parties permit
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a +ontra+t to be proved# without an! obe+tion# it is then ust as bindin as if the 0tatute has
been +omplied with.26
*he purpose of the 0tatute is to prevent fraud and perur! in the enfor+ement of obliations
dependin for their eviden+e on the unassisted memor! of witnesses# b! re?uirin +ertain
enumerated +ontra+ts and transa+tions to be eviden+ed b! a writin sined b! the part! to
be +hared.2"
However# for a note or memorandum to satisf! the 0tatute# it must be +omplete in itself and
+annot rest partl! in writin and partl! in parol. *he note or memorandum must +ontain the
names of the parties# the terms and +onditions of the +ontra+t# and a des+ription of the
propert! suE+ient to render it +apable of identi/+ation.2( 0u+h note or memorandum must
+ontain the essential elements of the +ontra+t e=pressed with +ertaint! that ma! be
as+ertained from the note or memorandum itself# or some other writin to whi+h it refers or
within whi+h it is +onne+ted# without resortin to parol eviden+e.29
Contrar! to the Court of Appeals, +on+lusion# the e=+hane of +orresponden+e between the
parties hardl! +onstitutes the note or memorandum within the +onte=t of Arti+le 1-B3 of theCivil Code. &ossi,s letter dated 11 une 199B# heavil! relied upon b! respondents# is not
+omplete in itself. 8irst# it does not indi+ate at what pri+e the shares were bein sold. 7n
pararaph 54 of the letter# respondents were supposed to submit their /nal o>er in F.0.
dollar terms# at that after the +ompletion of the due dilien+e pro+ess. *he pararaph
undoubtedl! proves that there was as !et no de/nite areement as to the pri+e. 0e+ond# the
letter does not state the mode of pa!ment of the pri+e. 7n fa+t# ;itonua was supposed to
indi+ate in his /nal o>er how and where pa!ment for the shares was planned to be made.3B
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7n eneral# +ontra+ts undero three distin+t staes# to wit neotiation perfe+tion or birth
and +onsummation. Neotiation beins from the time the prospe+tive +ontra+tin parties
manifest their interest in the +ontra+t and ends at the moment of areement of the parties.
Perfe+tion or birth of the +ontra+t takes pla+e when the parties aree upon the essential
elements of the +ontra+t. Consummation o++urs when the parties ful/ll or perform the terms
areed upon in the +ontra+t# +ulminatin in the e=tinuishment thereof.3"
A neotiation is formall! initiated b! an o>er. A perfe+ted promise merel! tends to insure
and pave the wa! for the +elebration of a future +ontra+t. An imperfe+t promise
policitacion4# on the other hand# is a mere una++epted o>er.3( Publi+ advertisements or
soli+itations and the like are ordinaril! +onstrued as mere invitations to make o>ers or onl!
as proposals. At an! time prior to the perfe+tion of the +ontra+t# either neotiatin part!
ma! stop the neotiation.39 *he o>er# at this stae# ma! be withdrawn the withdrawal is
e>e+tive immediatel! after its manifestation# su+h as b! its mailin and not ne+essaril!
when the o>eree learns of the withdrawal.-B
An o>er would re?uire# amon other thins# a +lear +ertaint! on both the obe+t and the
+ause or +onsideration of the envisioned +ontra+t. Consent in a +ontra+t of sale should bemanifested b! the meetin of the o>er and the a++eptan+e upon the thin and the +ause
whi+h are to +onstitute the +ontra+t. *he o>er must be +ertain and the a++eptan+e absolute.
A ?uali/ed a++eptan+e +onstitutes a +ounter$o>er.-1
Ouite obviousl!# ;itonua,s letter dated 21 a! 199B# proposin the a+?uisition of the
Phim+o shares for F0G36 million was merel! an o>er. *his o>er# however# in ;itonua,s own
words# )is understood to be sube+t to adustment on the basis of an audit of the assets#
liabilities and net worth of Phim+o and its subsidiaries and on the /nal neotiation between
ourselves.)-2
Las the o>er +ertain enouh to satisf! the re?uirements of the 0tatute of 8rauds De/nitel!not.
;itonua repeatedl! stressed in his letters that the! would not be able to submit their /nal
bid b! 3B une 199B.-3Lith indubitable in+onsisten+!# respondents later +laimed that for all
intents and purposes# the F0G36 million was their /nal bid. 7f this were so# it would be inane
for ;itonua to state# as he did# in his letter dated 2( une 199B that the! would be in a
position to submit their /nal bid onl! on 1" ul! 199B. *he la+k of a de/nite o>er on the part
of respondents +ould not possibl! serve as the basis of their +laim that the sale of the
Phim+o shares in their favor was perfe+ted# for one essential element of a +ontra+t of sale
was obviousl! wantin@the pri+e +ertain in mone! or its e?uivalent. *he pri+e must be
+ertain# otherwise there is no true +onsent between the parties.-- *here +an be no sale
without a pri+e.-5 Ouite re+entl!# this Court reiterated the lon$standin do+trine that the
manner of pa!ment of the pur+hase pri+e is an essential element before a valid and bindin
+ontra+t of sale +an e=ist sin+e the areement on the manner of pa!ment oes into the pri+e
su+h that a
disareement on the manner of pa!ment is tantamount to a failure to aree on the pri+e.-6
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%rantin arguendo# that the amount of F0G36 million was a de/nite o>er# it would remain as
a mere o>er in the absen+e of eviden+e of its a++eptan+e. *o produ+e a +ontra+t# there must
be a++eptan+e# whi+h ma! be e=press or implied# but it must not ?ualif! the terms of the
o>er.-" *he a++eptan+e of an o>er must be un?uali/ed and absolute to perfe+t the
+ontra+t.-( 7n other words# it must be identi+al in all respe+ts with that of the o>er so as to
produ+e +onsent or meetin of the minds.-9
&espondents, attempt to prove the alleed verbal a++eptan+e of their F0G36 million bid
be+omes futile in the fa+e of the overwhelmin eviden+e on re+ord that there was in the /rst
pla+e no meetin of the minds with respe+t to the pri+e. 7t is dramati+all! +lear that the
F0G36 million was not the a+tual pri+e areed upon but merel! a preliminar! o>er whi+h
was sube+t to adustment after the +on+lusion of the audit of the +ompan! /nan+es.
&espondents, failure to submit their /nal bid on the deadline set b! petitioners prevented
the perfe+tion of the +ontra+t of sale. 7t was not perfe+ted due to the absen+e of one
essential element whi+h was the pri+e +ertain in mone! or its e?uivalent.
At an! rate# from the pro+edural stand point# the +ontinuin obe+tions raised b! petitioners
to the admission of parol eviden+e5B on the alleed verbal a++eptan+e of the o>er renderedan! eviden+e of a++eptan+e inadmissible.
&espondents, plea of partial performan+e should likewise fail. *he a+?uisition audit and
submission of a +omfort letter# even if +onsidered toether# failed to prove the perfe+tion of
the +ontra+t. Ouite the +ontrar!# the! indi+ated that the sale was far from +on+luded.
&espondents +ondu+ted the audit as part of the due dilien+e pro+ess to help them arrive at
and make their /nal o>er. n the other hand# the submission of the +omfort letter was
merel! a uarantee that respondents had the /nan+ial +apa+it! to pa! the pri+e in the event
that their bid was a++epted b! petitioners.
*he 0tatute of 8rauds is appli+able onl! to +ontra+ts whi+h are e=e+utor! and not to thosewhi+h have been +onsummated either totall! or partiall!.51 7f a +ontra+t has been totall! or
partiall! performed# the e=+lusion of parol eviden+e would promote fraud or bad faith# for it
would enable the defendant to keep the bene/ts alread! derived b! him from the
transa+tion in litiation# and at the same time# evade the obliations# responsibilities or
liabilities assumed or +ontra+ted b! him thereb!.52 *his rule# however# is predi+ated on the
fa+t of rati/+ation of the +ontra+t within the meanin of Arti+le 1-B5 of the Civil Code either
14 b! failure to obe+t to the presentation of oral eviden+e to prove the same# or 24 b! the
a++eptan+e of bene/ts under them. 7n the instant +ase# respondents failed to prove that
there was partial performan+e of the +ontra+t within the purview of the 0tatute.
&espondents insist that even on the assumption that the 0tatute of 8rauds is appli+able in
this +ase# the trial +ourt erred in dismissin the +omplaint altoether. *he! point out that the
+omplaint presents several +auses of a+tion.
A +lose e=amination of the +omplaint reveals that it allees two distin+t +auses of a+tion# the
/rst is for spe+i/+ performan+e53 premised on the e=isten+e of the +ontra+t of sale# while the
other is solel! for damaes# predi+ated on the purported dilator! maneuvers e=e+uted b!
the Phim+o manaement.5-
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Lith respe+t to the /rst +ause of a+tion for spe+i/+ performan+e# apart from petitioners,
alleed refusal to honor the +ontra+t of sale@whi+h has never been perfe+ted in the /rst
pla+e@respondents made a number of averments in their +omplaint all in support of said
+ause of a+tion. &espondents
+laimed that petitioners were uilt! of promissor! estoppel#55 warrant! brea+hes56 and
tortious +ondu+t5" in refusin to honor the alleed +ontra+t of sale. *hese averments are
predi+ated on or at least interwoven with the e=isten+e or perfe+tion of the +ontra+t of sale.
As there was no su+h perfe+ted +ontra+t# the trial +ourt properl! ree+ted the averments in
+onun+tion with the dismissal of the +omplaint for spe+i/+ performan+e.
However# respondents, se+ond +ause of a+tion due to the alleed mali+ious and deliberate
dela! of the Phim+o manaement in the deliver! of do+uments ne+essar! for the +ompletion
of the audit on time# not bein based on the e=isten+e of the +ontra+t of sale# +ould stand
independentl! of the a+tion for spe+i/+ performan+e and should not be deemed barred b!
the dismissal of the +ause of a+tion predi+ated on the failed +ontra+t. 7f substantiated# this
+ause of a+tion would entitle respondents to the re+over! of damaes aainst the oE+ers of
the +orporation responsible for the a+ts +omplained of.
*hus# the Court +annot forthwith order dismissal of the +omplaint without a>ordin
respondents an opportunit! to substantiate their alleations with respe+t to its +ause of
a+tion for damaes aainst the oE+ers of Phim+o based on the latter,s alleed self$servin
dilator! maneuvers.
WHEREFORE, the petition is in part GRANTED. *he appealed Decision is
hereb! MODIFIED insofar as it de+lared the areement between the parties enfor+eable
under the
0tatute of 8rauds. *he +omplaint before the trial +ourt is ordered DISMISSED insofar as the+ause of a+tion for spe+i/+
performan+e is +on+erned. *he +ase is ordered REMANDED to the trial +ourt for further
pro+eedins with respe+t to the +ause of a+tion for damaes as above spe+i/ed.
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G.R. No. 1)421* (+%e 08, 200
SOUSES MARIO AND E!I-ABETH TORCUATOR, petitioners#
vs.
SOUSES REMEGIO AND G!ORIA BERNABE $%& SOUSES DIOSDADO $%& !OURDES
SA!#ADOR,respondents.
D < C 7 0 7 N
TINGA, J.:
7n the instant Petition#1 spouses ario and
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7rrevo+able 0pe+ial Power of Attorne! e+ted.
0ubseu?entl!# the ernabes sold the sube+t land to ;eonardo Aneles# a brother$in$law
s4# the +omplaint /led b! the plainti> spouses is dismissed. 0in+e the plainti> a+ted
with sin+erit! and without dela! in assertin what the! believed to be their preroatives# i.e.#without an! mali+e or desire to take advantae of another# the +ounter$+laim interposed b!
the ernabes aainst the *or+uator spouses is similarl! dismissed.
akati# etro$anila# Auust 2B# 1991.5
*he Court of Appeals dismissed the appeal# rulin that the sale between the ernabes and
the *or+uators was tainted with serious irreularities and bad faith. *he appellate +ourt
areed with the trial +ourt,s +on+lusion that the parties entered into the +ontra+t with the
intention of renein on the stipulation disallowin the sale or transfer of va+ant lots in A!ala
Alaban 'illae.
7t also ruled that the parties deprived the overnment of ta=es when the! made it appear
that the propert! was sold dire+tl! b! the 0alvadors to the *or+uators. 0in+e there were
a+tuall! two sales# i.e.# the /rst sale between the 0alvadors and the ernabes and the
se+ond between the ernabes and *or+uators# ta=es should have been paid for both
transfers.6
*he Court of Appeals denied petitioners, motion for re+onsideration in its #esolution" dated
une 15# 199(.
Petitioners then /led the instant petition# averrin that the appellate +ourt erred in
dismissin their appeal on the strenth of issues whi+h were neither pleaded nor proved.
*he +onditions alleedl! imposed b! A!ala Corporation on the sale of lots in A!ala Alaban
'illae were )a4 that the lot$bu!er shall deposit with A!ala Corporation a +ash bond
about P1"#BBB.BB for the 0alvadors4 whi+h shall be refunded to him if he builds a residen+e
thereon within two 24 !ears of pur+hase# otherwise the deposit shall be forfeited b4
ar+hite+tural plans for an! improvement shall be approved b! A!ala Corporation and +4 no
lot ma! be resold b! the bu!er unless a residential house has been +onstru+ted thereon
A!ala Corporation keeps the *orrens title in their sic4 possession.4)(
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A++ordin to petitioners# the stipulation prohibitin the sale of va+ant lots in A!ala Alaban
'illae# adverted to b! the appellate +ourt in its de+ision as eviden+e that the sale between
the ernabes and the *or+uators was tainted with serious irreularities# was never presented
or o>ered in eviden+e b! an! of the parties. Lithout su+h stipulation havin been presented#
marked and o>ered in eviden+e# the trial +ourt and the appellate +ourt should not have
+onsidered the same.
*he appellate +ourt alleedl! also erred in de+larin that the +ontra+t of sale sube+t of the
+ase is void# as it was intended to deprive the overnment of revenue sin+e the matter of
ta=es was not even mentioned in the appealed de+ision of the trial +ourt.
8urther# petitioners assert that the +ontra+t was a perfe+ted +ontra+t of sale not a mere
+ontra+t to sell. *he trial +ourt thus erred in de+larin that the +ontra+t was void due onl! to
petitioners, failure to deliver the areed +onsideration. ;ikewise# the fa+t that the +ontra+t
+alls for the pa!ment of the areed pur+hase pri+e in Fnited 0tates Dollars does not result in
the +ontra+t bein void. *he most that +ould be demanded# in a++ordan+e with
urispruden+e# is to pa! the obliation in Philippine +urren+!.
Petitioners also dispute the trial +ourt,s /ndin that the! did not su>er an! real damae as a
result of the transa+tion. n the +ontrar!# the! +laim that respondents, refusal to transfer
the propert! +aused them a+tual and moral damaes.
&espondents /led their Comment$Opposition %&o the Petition 'or Certiorari(9 dated November
-# 199( +ounterin that petitioners knew of the +ondition prohibitin the sale of va+ant lots
in A!ala Alaban 'illae as the same was annotated on the title of the propert! whi+h was
submitted and adopted b! both parties as their eviden+e. *he fa+t that the areement
re?uired petitioners to +onstru+t a house in the name of the 0alvadors shows that petitioners
themselves knew of the +ondition and a+knowleded its validit!.
As reards petitioners, +ontention that the Court of Appeals should not have ruled on the
matter of ta=es due the overnment# respondents assert that the appellate +ourt has the
power to review the entire +ase to determine the validit! of the udment of the lower +ourt.
*hus# it ma! review even matters whi+h were not raised on appeal.
&espondents refer to the +ir+umstan+es surroundin the transa+tion as proof that the parties
entered into a mere +ontra+t to sell and not a +ontra+t of sale. Alleedl!# the memorandum
+ontainin the areement of the parties merel! used the term )o>er.) *he pa!ment of the
pur+hase pri+e was ostensibl! a +ondition sine qua non to the e=e+ution of the deed of sale
in favor of petitioners# espe+iall! sin+e the ernabes +ame to the Philippines with the
e=press purpose of sellin the propert! and were leavin for the Fnited 0tates as soon as
the! were paid. oreover# petitioners were re?uired to +onstru+t a residential house on the
propert! before it +ould be sold to them in a++ordan+e with the +ondition imposed b! A!ala
Corporation.
8urther# respondents maintain that the transa+tion was not +onsummated due to the fault of
petitioners who failed not onl! to prepare the ne+essar! do+umentation but also to pa! the
pur+hase pri+e for the propert!. *he! also arue that the spe+ial power of attorne! e=e+uted
b! the 0alvadors in favor of petitioners merel! ranted the latter the riht to +onstru+t a
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residential house on the propert! in the name of the 0alvadors. *he oriinal do+ument was
not even iven to the *or+uators pre+isel! be+ause the! have not paid the pur+hase pri+e.
Petitioners /led a #epl) 1B dated anuar! 2B# 1999 in reiteration of their aruments.
7n the #esolution11 dated 8ebruar! 1B# 1999# the parties were re?uired to /le their respe+tive
memoranda. A++ordinl!# petitioners /led their Memorandum12 on April 19# 1999. n the
other hand# in view of respondents, disappearan+e without noti+e# the Court resolved to
dispense with their memorandum.13
*he trial +ourt denied petitioners, +omplaint on three 34 rounds# namel! 14 the alleed
nullit! of the +ontra+t between the parties as it violated A!ala Corporation,s +ondition that
the +onstru+tion of a house is a prere?uisite to an! sale of lots in A!ala Alaban 'illae 24
non$pa!ment of the pur+hase pri+e and 34 the nullit! of the +ontra+t as it +alled for
pa!ment in Fnited 0tates Dollars. *o these reasons# the Court of Appeals added a fourth
basis for den!in petitioners, appeal and that is the alleed nullit! of the areement
be+ause it deprived the overnment of ta=es.
An anal!sis of the fa+ts obtainin in this +ase leads us to aErm the assailed de+isions
althouh from a slihtl! di>erent but related thrust.
;et us bein b! +hara+teriin the areement entered into b! the parties# i.e.# whether the
areement is a +ontra+t to sell as the trial +ourt ruled# or a +ontra+t of sale as petitioners
insist.
*he di>eren+es between a +ontra+t to sell and a +ontra+t of sale are well$settled in
urispruden+e. As earl! as 1951# we held that in a +ontra+t of sale# title passes to the bu!er
upon deliver! of the thin sold# while in a +ontra+t to sell# ownership is reserved in the seller
and is not to pass until the full pa!ment of the pur+hase pri+e is made. 7n the /rst +ase# non$pa!ment of the pri+e is a neative resolutor! +ondition in the se+ond +ase# full pa!ment is a
positive suspensive +ondition. ein +ontraries# their e>e+t in law +annot be identi+al. 7n the
/rst +ase# the vendor has lost and +annot re+over the ownership of the land sold until and
unless the +ontra+t of sale is itself resolved and set aside. 7n the se+ond +ase# however# the
title remains in the vendor if the vendee does not +ompl! with the +ondition pre+edent of
makin pa!ment at the time spe+i/ed in the +ontra+t.1-
7n other words# in a +ontra+t to sell# ownership is retained b! the seller and is not to pass to
the bu!er until full pa!ment of the pri+e or the ful/llment of some other +onditions either of
whi+h is a future and un+ertain event the non$happenin of whi+h is not a brea+h# +asual or
serious# but simpl! an event that prevents the obliation of the vendor to +onve! title from
a+?uirin bindin for+e.15
Le have +arefull! e=amined the areement between the parties and are far from persuaded
that it was a +ontra+t of sale.
8irstl!# the areement imposed upon petitioners the obliation to full! pa! the areed
pur+hase pri+e for the propert!. *hat ownership shall not pass to petitioners until the! have
full! paid the pri+e is impli+it in the areement. Notabl!# respondent &emiio ernabe
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testi/ed# without obe+tion on the part of petitioners# that he spe+i/+all! informed
petitioners that the transa+tion should be +ompleted# i.e.# that he should re+eive the full
pa!ment for the propert!# before he left for the Fnited 0tates on +tober 1-# 19(6.16
oreover# the deed of sale would have been issued onl! upon full pa!ment of the pur+hase
pri+e# amon other thins. Petitioner ario *or+uator a+knowleded this fa+t when he
testi/ed that the deed of sale and oriinal spe+ial power of attorne! were onl! to be
delivered upon full pa!ment of the pur+hase pri+e.1"
As +orre+tl! observed b! the trial +ourt# the 0alvadors did not e=e+ute a deed of sale in favor
of petitioners# and instead e=e+uted a spe+ial power of attorne! authoriin the ernabes to
sell the propert! on their behalf# in order to a>ord the latter a measure of prote+tion that
would uarantee full pa!ment of the pur+hase pri+e before an! deed of sale in favor of
petitioners was e=e+uted.
&emarkabl!# the re+ords are bereft of an! indi+ation that petitioners ever attempted to
tender pa!ment or +onsin the pur+hase pri+e as re?uired b! law. *he Complaint 1( /led b!
petitioners makes no mention at all of a tender of pa!ment or +onsination havin beenmade# mu+h less that petitioners are willin and read! to pa! the pur+hase pri+e. Petitioners,
averments to the e>e+t that the! have suE+ient funds to pa! for the propert! and have
even applied for a teleraphi+ transfer from their bank a++ount to the ernabes, bank
a++ount# un+oupled with a+tual tender and +onsination# are utterl! self$ servin.
*he trial +ourt +orre+tl! noted that petitioners should have +onsined the amount due in
+ourt instead of merel! sendin respondents a letter e=pressin interest to push throuh
with the transa+tion. ere sendin of a letter b! the vendee e=pressin the intention to pa!
without the a++ompan!in pa!ment is not +onsidered a valid tender of pa!ment.
Consination of the amount due in +ourt is essential in order to e=tinuish the obliation to
pa! and oblie the vendor to +onve! title.
19
n this s+ore# even assumin that the areement was a +ontra+t of sale# respondents ma!
not be +ompelled to deliver the propert! and e=e+ute the deed of absolute sale. 7n +ases
su+h as the one before us# whi+h involve the performan+e of an obliation and not merel!
the e=er+ise of a privilee or riht# pa!ment ma! be e>e+ted not b! mere tender alone but
b! both tender and +onsination. *he rule is di>erent in +ases whi+h involve an e=er+ise of a
riht or privilee# su+h as in an option +ontra+t# leal redemption or sale with riht to
repur+hase# wherein mere tender of pa!ment would be suE+ient to preserve the riht or
privilee.2B Hen+e# absent a valid tender of pa!ment and +onsination# petitioners are
deemed to have failed to dis+hare their obliation to pa!.
0e+ondl!# the parties +learl! intended the +onstru+tion of a residential house on the propert!
as another suspensive +ondition whi+h had to be ful/lled. A!ala Corporation retained title to
the propert! and the 0alvador spouses were pre+luded from sellin it unless a residen+e had
been +onstru+ted thereon. *he A!ala stipulation was a pervasive# albeit unwritten# +ondition
in liht of whi+h the transa+tion in this +ase was neotiated. *he parties undoubtedl!
understood that the! had to +ontend with the A!ala stipulation whi+h is wh! the! resorted to
the e=e+ution of a spe+ial power of attorne! authoriin petitioners to +onstru+t a residential
buildin on the propert! in the name of the 0alvadors. Had the areement been a +ontra+t
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of sale as petitioners would impress upon the Court# the spe+ial power of attorne! would
have been entirel! unne+essar! as petitioners would have had the riht to +ompel the
0alvadors to transfer ownership to them.21
*hirdl!# there was neither a+tual nor +onstru+tive deliver! of the propert! to petitioners.
Apart from the fa+t that no publi+ do+ument eviden+in the sale was e=e+uted# whi+h would
have been +onsidered e?uivalent to deliver!# petitioners did not take a+tual# ph!si+al
possession of the propert!. *he spe+ial power of attorne!# whi+h petitioners +ount on as
eviden+e that the! took possession of the propert!# +an b! no means be interpreted as
deliver! or +onve!an+e of ownership over the propert!. *aken b! itself# in fa+t# the spe+ial
power of attorne! +an be interpreted as tied up with an! number of propert! arranements#
su+h as a +ontra+t of lease or a oint venture. *hat is wh! respondents# espe+iall! the
0alvadors# never intended to deliver the title to petitioners and +onformabl! with that the!
e=e+uted onl! a spe+ial power of attorne!. 7ndeed# +ontinuousl! loomin lare as an
essentialit! in their udment to dispose of their valuable propert! is the prior or
+ontemporaneous re+eipt of the +ommensurate pri+e therefor.
*his brins us to the appli+ation of the 0tatute of 8rauds. Arti+le 1-B3 of the Civil Codeprovides
Art. 1-B3. *he followin +ontra+ts are unenfor+eable unless the! are rati/ed
24 *hose that do not +ompl! with the 0tatute of 8rauds as set forth in this number. 7n the
followin +ases an areement hereafter made shall be unenfor+eable b! a+tion# unless the
same# or some note or memorandum thereof# be in writin# and subs+ribed b! the part!
+hared# or b! his aent eviden+e# therefore# of the areement +annot be re+eived without
the writin# or a se+ondar! eviden+e of its +ontents
e4 An areement for the leasin for a loner period than one !ear# or for the sale of realpropert! or an interest therein
*he term )0tatute of 8rauds) is des+riptive of statutes whi+h re?uire +ertain +lasses of
+ontra+ts# su+h as areements for the sale of real propert!# to be in writin. 7t does not
deprive the parties the riht to +ontra+t with respe+t to the matters therein involved# but
merel! reulates the formalities of the +ontra+t ne+essar! to render it enfor+eable. *he
purpose of the statute is to prevent fraud and perur! in the enfor+ement of obliations
dependin for their eviden+e on the unassisted memor! of witnesses b! re?uirin +ertain
enumerated +ontra+ts and transa+tions to be eviden+ed b! a writin sined b! the part! to
be +hared.22 *he written note or memorandum# as +ontemplated b! Arti+le 1-B3 of the Civil
Code# should embod! the essentials of the +ontra+t.23
7n the instant +ase# petitioners present as written eviden+e of the areement the spe+ial
power of attorne! e=e+uted in their favor b! the 0alvadors and the summar! of
areement2- alleedl! initialed b! respondent &emiio ernabe. *hese do+uments do not
suE+e as notes or memoranda as +ontemplated b! Arti+le 1-B3 of the Civil Code.
*he spe+ial power of attorne! does not +ontain the essential elements of the purported
+ontra+t and# more tellinl!# does not even refer to an! areement for the sale of the
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propert!. 7n an! +ase# it was rendered virtuall! inoperable as a +onse?uen+e of the
0alvadors, adamant refusal to part with their title to the propert!.
*he summar! of areement# on the other hand# is fatall! de/+ient in the fundamentals and
ambiuous in the rest of its terms. 8or one# it does not mention when the alleed
+onsideration should be paid and transfer of ownership e>e+ted. *he do+ument does not
even refer to a parti+ular propert! as the obe+t thereof. 8or another# it is un+lear whether
the supposed pur+hase pri+e is P6BB.BB# P59B.BB or P5"B.BB:s?uare meter. *he other
+onditions# su+h as pa!ment of do+umentar! stamp ta=es# +apital ains ta= and other
reistration e=penses# are likewise un+ertain.
Conformabl! with Arti+le 1-B525 of the Civil Code# however# respondents, a++eptan+e of the
areement foisted b! petitioners on them is deemed to have arisen from their failure to
obe+t to the testimon! of petitioner ario *or+uator on the matter26 and their +ross$
e=amination of said petitioner thereon.2"
e that as it ma!# +onsiderin our rulin that the areement was a +ontra+t to sell#
respondents were not oblied to +onve! title to the propert! before the happenin of two 24suspensive +onditions# namel! full pa!ment of the pur+hase pri+e and +onstru+tion of a
residen+e on the propert!. *he! were a+tin perfe+tl! within their riht when the!
+onsidered the areement +an+elled after unsu++essfull! demandin pa!ment from
petitioners.
*hat said# the ?uestion of whether the transa+tion violated the Fniform Curren+! A+t#
&epubli+ A+t No. 529# is alread! moot. *he +ontra+t havin been +an+elled# an! resolution
reardin the validit! of the stipulation re?uirin pa!ment of the pur+hase pri+e in forein
+urren+! would not serve an! further purpose.
Petitioners ne=t insist that the +ondition re?uirin the +onstru+tion of a house on an!residential lot lo+ated in A!ala Alaban 'illae before it +an be sold was never submitted in
eviden+e and was never testi/ed to b! an! of the witnesses presented durin the trial.
Hen+e# the trial +ourt and the Court of Appeals should not have used this as basis for its
denial of petitioners, +ause.
*his assertion# however# is +ompletel! untrue. Lhile the *ormal O+er o' vidence2( of
petitioners# respondents,O+er o' hi-its#29 and the *ormal O+er o' vidence %On
#e-uttal(3B of petitioners make no mention of an! stipulation prohibitin the sale of va+ant
lots in A!ala Alaban 'illae# respondents maintain that petitioners are full! aware of the
prohibition as the +onditions imposed b! A!ala Corporation on the sale of A!ala Alaban lots
are ins+ribed on the title of the propert! whi+h was submitted in eviden+e b! both parties.
Despite petitioners, remonstration that the ins+riptions on the title are )hardl! leible#)31 we
are in+lined to ive +reden+e to respondents, a++ount. 7t is ?uite implausible that a law!er
su+h as petitioner ario *or+uator would not take the pre+aution of +he+kin the oriinal title
of the propert! with the &eistr! of Deeds to as+ertain whether there are annotations
therein that would preudi+e his position.
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ore importantl!# petitioner ario *or+uator himself testi/ed on the e=isten+e of the
+ondition prohibitin the sale of va+ant lots in A!ala Alaban 'illae# vi
A**K. . D< D70# &.
O $r. witness aside from this summar! of areement whi+h has been marked as
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$ r. Litness# this letter appears to be# does it +ontain an! date Can !ou tell this Court wh!
this do+ument does not +ontain the date
A**K. A. A%N
$ 7n+ompetent# !our Honor# be+ause he was not the one who made that do+ument.
CF&*
$ ;et him e=plain.
A**K. A%N
$ Kes# !our Honor.
A**K. . D< D70# &.
$ e+ause# !our Honor# tere / $ re+/ree%t b3 A3$$ Cor5or$t/o% t$t %o ot or
5ro5ert3 $3 be tr$%6erre& +%t/ tere / $ co5ete b+/&/%7 or tr+ct+re b+/t
o% te ot $%& o $t I $ +55oe& to 7et o%3 6ro Mr. S$9$&or, $/&e 6ro
te &ee& o6 $bo+te $e, / ere3 $ 5ec/$ 5oer o6 $ttor%e3 to $+tor/:e e
to co%tr+ct 3 o+e /% te ot $%& +5o% co5et/o% o6 te o+e t$t / te
t/e t$t I o+& be $oe& b3 A3$$ Cor5or$t/o% to tr$%6er te 5ro5ert3 /% 3
%$e. *herefore# the letter re?uestin A!ala Corporation to release the title in the name of
r. 0alvador to was deliberatel! undated be+ause it would be onl! dated when 7 +ompleted
the house.32 Q
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o++asion
A $ Kes# sir.
O $ ! whom
A $ r. *or+uator prepared some do+uments for me to sin.
O $ And do !ou re+all what was that do+uments
A $ Kes# sir. r. *or+uator prepared a do+uments for +an+ellation
of the deed of sale of r. 0alvador to &emiio ernabe# and +an+ellation also of the
irrevo+able power of attorne! of 0alvador to ernabe# and power of attorne! of 0alvador
authoriin &emiio ernabe to sell the propert! and power of attorne! of 0alvador iven to
r. *or+uator.3-
Petitioners therefore +annot fein inoran+e of the +ondition imposed b! A!ala Corporation.
Le do not aree# however# with the trial +ourt and appellate +ourt,s rulin that the
transa+tion between the parties was void for bein +ontrar! to ood +ustoms and morals.35
7n order to de+lare the areement void for bein +ontrar! to ood +ustoms and morals# it
must /rst be shown that the obe+t# +ause or purpose thereof +ontravenes the enerall!
a++epted prin+iples of moralit! whi+h have re+eived some kind of so+ial and pra+ti+al
+on/rmation.36
Le are not in+lined to rule that the transa+tion in this +ase o>ended ood +ustoms and
morals. 7t should be emphasied that the pros+ription imposed b! A!ala Corporation was onthe resale of the propert! without a residential house havin been +onstru+ted thereon. *he
+ondition did not re?uire that the oriinal lot bu!er should himself +onstru+t a residential
house on the propert!# onl! that the oriinal bu!er ma! not resell a va+ant lot. 7n view of our
/ndin that the areement between the parties was a mere +ontra+t to sell# no violation of
the +ondition ma! be inferred from the transa+tion as no transfer of ownership was made. 7n
fa+t# the areement in this +ase that petitioners will +onstru+t a residential house on the
propert! in the name of the 0alvadors who retained ownership of the propert! until the
ful/llment of the twin +onditions of pa!ment and +onstru+tion of a residen+e4 was a+tuall! in
+omplian+e with or obeisan+e to the +ondition.
8inall!# the issue of whether the areement violated the law as it deprived the overnment
of +apital ains ta= is wholl! irrelevant. Capital ains ta=es# after all# are onl! imposed on
ains presumed to have been realied from sales# e=+hanes or dispositions of propert!.
Havin de+lared that the +ontra+t to sell in this +ase was aborted b! petitioners, failure to
+ompl! with the twin suspensive +onditions of full pa!ment and +onstru+tion of a residen+e#
the obliation to pa! ta=es never arose. Hen+e# an! error the appellate +ourt ma! have
+ommitted when it passed upon the issue of ta=es despite the fa+t that no eviden+e on the
matter was pleaded# addu+ed or proved is rather inno+uous and does not warrant reversal of
the de+isions under review.
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WHEREFORE# the instant petition is D
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a+aria was widowed and she +ontra+ted a se+ond marriae with &oberto &omero &omero4whi+h bore no issue.
&omero died on 8ebruar! 2(# 196(#1 leavin three adoinin residential lots lo+ated at0ampalo+# anila.
7n a Deed of
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Durin the penden+! of the +ase or on une "# 19(9# a+aria,s son 8elipe e=e+uted a Laiver$AEdavit6 waivin his )share) in the propert! sube+t of litiation in favor of his +o$heirs.
After trial# the trial +ourt# ran+h 31 &*C of anila# rendered a de+ision of ul! 19#1991" +reditin the version of the defendants in this wise# ?uoted ver-atim
*he defendant %reorio Averia# 0r. had established that he had paid plainti> DominoAveria P1B#BBB.BB althouh denied b! the latter but Domino Averia did not den!re+eivin the amount of P5#BBB.BB on ul! 1B# 19(3 iven b! %reorio Averia,s wifeAri/na. A++ordin to the testimon! of defendant,s witness# plainti> Domino Averiasold on ul! 1B# 19(3 his inheritan+e share in the propert! Q+onsistin of aR house andlot lo+ated at "25 Domino Averiadid not tell his brothers and sisters that he had alread! sold his 1:6 share of theinheritan+e althouh verball! in favor of %reorio Averia and his wife.
7n the liht of the foreoin# the Court# after a +ir+umspe+t assessment of the eviden+epresented b! both parties# hereb! de+lares# that defendant %reorio Averia then a maor ofpoli+e pre+in+t in akati was the person responsible for the e=penses in litiation in CivilCase No. "9955# involvin the propert! and their mother had indeed awarded him with Tportion of the propert! and that Domino Averia sold 1:6 of QhisR share of the remainin Tportion of the propert! to defendant %reorio. Fnders+orin supplied4
A++ordinl!# the trial +ourt disposed as follows# ?uoted ver-atim
LH
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ROERT< IN FA#OR OF DEFENDANT=AE!!EE GREGORIO A#ERIA($appellant Domino Averia are unenfor+eable as the re?uirements under the 0tatuteof 8rauds have not been +omplied with. Arti+le 1-B3# 2e4 of the New Civil Code ise=pli+it
Art. 1-B3. *he followin +ontra+ts are unenfor+eable# unless the! are rati/ed
14 = = =
24 *hose that do not +ompl! with the 0tatute of 8rauds as set forth in thisnumber. 7n the followin +ases an areement thereafter made shallbe unenfor+eable b! a+tion# unless the same# or some note or memorandumthereof# be in writin and subs+ribed b! the part! +hared# or b! this aenteviden+e# therefore# of the areement +annot be re+eived without the writin#or a se+ondar! eviden+e of its +ontents
a4 = = =
b4 = = =
e4 an areement for the leasin for a loner period than one !ear# or forthe sale of real propert! or of an interest therein
f4 = = =)
*he two 24 transa+tions in ?uestion bein areements for the sale of real propert! orof an interest therein are in +lear +ontravention of the pres+ription that it must be inwritin and subs+ribed b! the part! +hared or b! an aent thereof. Hen+e# thestron insisten+e b! defendants$appellees on the verbal +onve!an+es +annot bemade the basis for the alleed ownership over the undivided interests +laimed b!%reorio Averia.
*he parol eviden+e upon whi+h the trial +ourt an+hored its award in favor ofdefendant$appellee %reorio Averia is irreular as su+h kind of eviden+e is fore+losedb! Arti+le 1-B3 of the Civil Code that no eviden+e of the alleed areements +an bere+eived without the writin of se+ondar! eviden+e whi+h embodies the sale of thereal propert!. *he introdu+tion of the testimonies of %reorio Averia,s witnesseswere t/e3 obecte& to b! plainti>s$appellants. 0in+e the testimonies ofdefendants$appellees, witnesses are inadmissible# then su+h e=+lusion has pulled theru under the assailed de+ision of the trial +ourt and it has no more le to stand on.
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7n the vain attempt to salvae the situation# defendants$appellees however aruethat the Arti+le 1-B3 or the 0tatute of 8rauds does not appl! be+ause the same onl!refers to purel! e=e+utor! +ontra+ts and not to partiall! or +ompletel! e=e+uted+ontra+ts.
*his +ontention is untenable. 7t was not ampl! demonstrated how su+h alleed
transfers were e=e+uted sin+e plainti>s$appellants have 9/7oro+3 obecte& andopposed the +laims of ownership b! defendants$appellees. He who asserts a fa+t orthe aErmative of an issue has the burden of provin it. Defendants$appelleesmiserabl! failed in this respe+t.
Lhile this Court +annot dis+ount the fa+t that either defendant$appellee %reorioAveria or plainti>$appellant Domino Averia ma! have valid +laims aainst the estateof a+aria 8ran+si+o# su+h matter +an best be threshed out in the pro+eedins forpartition before the +ourt a ?uo bearin in mind that su+h partition is sube+t to thepa!ment of the debts of the de+eased under Arti+le 1B"( of the Civil Code.9Citationsomitted e+t the partition of the sube+tpropert! or if not# possible# sell the entire lot and distribute the pro+eeds of the salebased on e?ual shares amon the +hildren of the late a+aria 8ran+is+o after debts of the said de+eased are paid or settled pursuant to Arti+le 1B"( of the CivilCode.1BFnders+orin supplied4
%reorio and 0!lvanna,s motion for re+onsideration havin been denied b! the appellate+ourt# the! loded the Petition for &eview on Certiorari at bar upon the followin assinmentof errors
7. *H< CF&* 8 APP
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Petitioners thus +on+lude that respondents waived an! obe+tion to the admission of paroleviden+e# hen+e# it is admissible and enfor+eable1- followin Arti+le 1-B515 of the CivilCode.16
*he Court /nds for petitioner.
7ndeed# e=+ept for the testimon! of petitioner %reorio bearin on the verbal sale to him b!a+aria of the propert!# the testimonies of petitioners, witnesses 0!lvanna 'erara Clutarioand 8lora ;aaro &ivera bearin on the same matter were not obe+ted to b! respondents.
ust as the testimonies of %reorio# r. and 'eroni+a autista bearin on the re+eipt b!respondent Domino on ul! 23# 19(3 from %reorio,s wife of P5#BBB.BB representin partialpa!ment of the P1B#BBB.BB valuation of his Domino,s4 1:6 share in the propert!# and ofthetestimon! of 8elimon Daondon bearin on the re+eipt b! Domino of P5#BBB.BB from%reorio were not obe+ted to. 8ollowin Arti+le 1-B5 of the Civil Code#1" the +ontra+ts whi+hinfrined the 0tatute of 8rauds were rati/ed b! the failure to obe+t to the presentation ofparol eviden+e# hen+e# enfor+eable.
A&*7C;< 1-B3. *he followin +ontra+ts are unenfor+eable# unless the! are rati/ed
= = =
24 *hose that do not +ompl! with the 0tatute of 8rauds as set forth in this number. I%te 6oo/%7 c$e $% $7reee%t ere$6ter $&e $ be +%e%6orce$be b3$ct/o%, +%e te $e, or oe %ote or eor$%&+ tereo6, be /%r/t/%7, $%& +bcr/be& b3 te 5$rt3 c$r7e&, or b3 / $7e%t e9/&e%ce,tere6ore, o6 te $7reee%t c$%%ot be rece/9e& /to+t te r/t/%7, or $eco%&$r3 e9/&e%ce o6 /t co%te%t
= = =
e4 An areement for the leasin for a loner period than one !ear# or 6or te
$e o6 re$ 5ro5ert3 or o6 $% /%teret tere/%
= = =
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fa+t whi+h is redu+ed to a minimum in e=e+uted +ontra+ts be+ause the intention ofthe parties be+omes apparent b! their e=e+ution# and e=e+ution +on+ludes# in most+ases# the rihts of the parties. Hoe9er /t / %ot e%o+7 6or $ 5$rt3 to $e7e5$rt/$ 5er6or$%ce/% or&er to re%&er te St$t+te o6 Fr$+& /%$55/c$be+c 5$rt/$ 5er6or$%ce +t be &+3 5ro9e&. B+t %e/ter / +c 5$rt3re+/re& to et$b/ +c 5$rt/$ 5er6or$%ce b3 &oc+e%t$r3 5roo6
be6ore e co+& $9e te o55ort+%/t3 to /%tro&+ce or$ tet/o%3 o% tetr$%$ct/o%. Te 5$rt/$ 5er6or$%ce $3 be 5ro9e& b3 e/ter&oc+e%t$r3 or or$ e9/&e%ce.19
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O Lhat is the name of !our randfather whom !ou said whose death anniversar!!ou are then +elebratin on that date
A &oberto &omero# sir.
O Lhat a+tuall! !ou were doin that time 53B
A Le had a atherin and merienda in re+olle+tion of the +elebration si+4 of thedeath of m! randfather# sir.
O Lhen !ou said !ou were eatin then# where were !ou eatin then
A 7t was beside m! randmother.
O Lhere
A At the dinin room# sir.
O 0o !ou were sittin at the dinin table all of !ou
A Kes# sir the others were a little bit near the table.
O Lho were seated in the dinin table
A *he 0pouses %reorio and Aripina# m! sister eth and m! +ousins and m! ;olaa+aria.
O Lhen !ou were then seated in takin that inatan as !ou stated what transpired
A 0omebod! +alled up and the one who +alled up was the 0e+retar! of a law!er and
the! were askin for Qpa!ment ofR e=penses in +onne+tion with . . . QCriminal Case No."9955R.
O Kou said that it was Aripina who was the one who answered that telephone +all.After answerin it# what did she sa! to an!one seated in that table
A Aripina said if %reorio has some mone!# he will pa! them but %reorio said hewill be responsible for the e=penses.
O Did !ou +ome to know how mu+h was amount bein asked
A P5BB.BB# sir.
O Lhat else happened after %reorio said that he would answer for the e=penses tobe sent to the law!er
A ! ;ola said that she was embarrassed and ashameQdR be+ause at that time shedQidR not have an! mone! and it was the +ouple who was takin the e=penses of the+ase.
O Lhen !ou said );ola#) !ou are referrin to a+aria Averia
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A Kes# sir.
O Lhat else transpired
A e+ause of her embarrassment# she told Qthem thatR one half 1:24 of the Houseand ;ot will be iven to the +ouple to +over the e=penses of the +ase.
A**K. D7N%
O *o whom did !our randmother sa! this
A Lell# she said that to %reorio and Aripina and %reorio told her# if that is what!ou wish# 7 will aree to !our proposal.
O Lhat was the repl! of !our rand mother
A ! ;ola told %reorio that sin+e !ou aree# !ou better prepare all the do+umentsand we will make read! the do+uments for the division or partition.
O Do !ou know what House and ;ot one half 1:24 of whi+h !our rand mother wasiven si+4 to !our Fn+le and Auntie . . .
A 0he is referrin to the House and ;ot where 7 used to live before.
O Kou are referrin to the House and ;ot lo+ated at "25
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7n sum# not onl! did petitioners, witnesses prove# b! their testimonies# the forin of the+ontra+ts of sale or assinment. *he! proved the full performan+e or e=e+ution of the+ontra+ts as well.
WHEREFORE# the petition is hereb! %&AN*
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n a! 1# 1993# 0ulpi+ia e=e+uted a deed of sale2 over the propert! in favor of respondents,
father %o!anko. 7n turn# %o!anko e=e+uted on +tober 12# 1993 a deed of sale3 over the
propert! in favor of his +ommon$law$wife$herein petitioner aria . Chin. *ransfer
Certi/+ate of *itle *C*4 No. 13(-B5 was thus issued in petitioner,s name.
After %o!anko,s death on ar+h 11# 1996# respondents dis+overed that ownership of the
propert! had alread! been transferred in the name of petitioner. &espondents thereupon had
the purported sinature of their father in the deed of sale veri/ed b! the Philippine National
Poli+e Crime ;aborator! whi+h found the same to be a forer!.-
&espondents thus /led with the &eional *rial Court of Cebu Cit! a +omplaint for re+over! of
propert! and damaes aainst petitioner# pra!in for the nulli/+ation of the deed of sale and
of *C* No. 13(-B5 and the issuan+e of a new one in favor of their father %o!anko.
7n defense# petitioner +laimed that she is the a+tual owner of the propert! as it was she who
provided its pur+hase pri+e. *o disprove that %o!anko,s sinature in the ?uestioned deed of
sale is a forer!# she presented as witness the notar! publi+ who testi/ed that %o!anko
appeared and sined the do+ument in his presen+e.
! De+ision of +tober 16# 199(#5 the trial +ourt dismissed the +omplaint aainst petitioner#
the pertinent portions of whi+h de+ision read
*here is no valid and suE+ient round to de+lare the sale as null and void# /+titious and
simulated. *he sinature on the ?uestioned Deed of 0ale is enuine. *he testimon! of Att!.
0alvador arrameda who de+lared in +ourt that oseph %o!anko# 0r. and aria Chin
toether with their witnesses appeared before him for notariation of Deed of 0ale in
?uestion is more reliable than the +onSi+tin testimonies of the two do+ument e=aminers.
Defendant aria Chin asserted that the Deed of 0ale e=e+uted b! oseph %o!anko# 0r. in
her favor is valid and enuine. *he sinature of oseph %o!anko# 0r. in the ?uestioned Deedof Absolute 0ale is enuine as it was dul! e=e+uted and sined b! oseph %o!anko# 0r.
himself.
*he par+el of lands known as ;ot No. 6 whi+h is souht to be re+overed in this +ase +ould
never be +onsidered as the +onual propert! of the oriinal 0pouses oseph C. %o!anko and
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proverbial virtualit! of a *orrens title# it has been repeatedl! held that# unless bad faith +an
be established on the part of the person appearin as owner on the +erti/+ate of title# there
is no other owner than that in whose favor it has been issued. A *orrens title is not sube+t to
+ollateral atta+k. 7t is a well$known do+trine that a *orrens title# as a rule# is irrevo+able and
indefeasible# and the dut! of the +ourt is to see to it that this title is maintained and
respe+ted unless +hallened in a dire+t pro+eedins QsicR.6Citations omitted unders+orin
supplied4
efore the Court of Appeals where respondents appealed# the! arued that the trial +ourt
erred
1. . . . when it dismissed the +omplaint a ?uo . . . # in e>e+t# sustainin the sale of the
sube+t propert! between oseph# 0r. and the defendant$appellee# despite the
proliferation in the re+ords and admissions b! both parties that defendant$appellee
was the )mistress) or )+ommon$law wife) of oseph# 0r..
2. . . . when it dismissed the +omplaint a ?uo . . . # in e>e+t# sustainin the sale of the
sube+t propert! between oseph# 0r. and the defendant$appellee# despite the fa+tthat the marriae of oseph# 0r. and
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Le therefore /nd that the +ontra+t of sale in favor of the defendant$appellant aria Chin
was null and void for bein +ontrar! to morals and publi+ poli+!. *he purported sale# havin
been made b! oseph 0r. in favor of his +on+ubine# undermines the stabilit! of the famil!# a
basi+ so+ial institution whi+h publi+ poli+! viilantl! prote+ts. 8urthermore# the law
emphati+all! prohibits spouses from sellin propert! to ea+h other# sube+t to +ertain
e=+eptions. And this is so be+ause transfers or +onve!an+es between spouses# if allowed
durin the marriae would destro! the s!stem of +onual partnership# a basi+ poli+! in +ivil
law. *he prohibition was desined to prevent the e=er+ise of undue inSuen+e b! one spouse
over the other and is likewise appli+able even to +ommon$law relationships otherwise# )the
+ondition of those who in+urred uilt would turn out to be better than those in leal
union.9 Fnders+orin supplied4
Hen+e# the present petition# petitioners aruin that the appellate +ourt ravel! erred in
7.
. . . APP;K7N% *H< 0*A*< P;7CK N P&H77*7N A%A7N0* CN'
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A&*. 1-B9. *he followin +ontra+ts are ine=istent and void from the beinnin
14 *hose whose +ause# obe+t or purpose is +ontrar! to law# morals# ood +ustoms#
publi+ order or publi+ poli+!
24 *hose whi+h are absolutel! simulated or /+titious
34 *hose whose +ause or obe+t did not e=ist at the time of the transa+tion
-4 *hose whose obe+t is outside the +ommer+e of men
54 *hose whi+h +ontemplate an impossible servi+e
64 *hose where the intention of the parties relative to the prin+ipal obe+t of the
+ontra+t +annot be as+ertained
"4 *hose e=pressl! prohibited or de+lared void b! law.
*hese +ontra+ts +annot be rati/ed. Neither +an the riht to set up the defense of illealit! be
waived.
A&*7C;< 1-9B. *he husband and wife +annot sell propert! to ea+h other# e=+ept
14 Lhen a separation of propert! was areed upon in the marriae settlements or
24 Lhen there has been a udi+ial separation of propert! under Arti+le 191.
Fnders+orin supplied4
*he pros+ription aainst sale of propert! between spouses applies even to +ommon lawrelationships. 0o this Court ruled in Calimlim/Canullas v. 0on. *ortun, etc., et al.11
Anent the se+ond issue# we /nd that the +ontra+t of sale was null and void for bein +ontrar!
to morals and publi+ poli+!. Te $e $ $&e b3 $ +b$%& /% 6$9or o6 $
co%c+b/%e $6ter e $& $b$%&o%e& / 6$/3 $%& e6t te co%+7$ oe ere
/ /6e $%& c/&re% /9e& $%& 6ro e%ce te3 &er/9e& te/r +55ort. Te $e
$ +b9er/9e o6 te t$b//t3 o6 te 6$/3, $ b$/c oc/$ /%t/t+t/o% /c 5+b/c
5o/c3 cer/e $%& 5rotect.
Arti+le 1-B9 of the Civil Code states inter alia that +ontra+ts whose +ause# obe+t# or
purposes is +ontrar! to law# morals# ood +ustoms# publi+ order# or publi+ poli+!are void and ineistent from the ver! beinnin.
Arti+le 1352 also provides that )Contra+ts without +ause# or with unlaw'ul cause, produce
no e+ect whatsoever . *he +ause is unlawful if it is +ontrar! to law# morals# ood +ustoms#
publi+ order# or publi+ poli+!.)
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A&&/t/o%$3, te $ e5$t/c$3 5ro/b/t te 5o+e 6ro e/%7 5ro5ert3 to
e$c oter +bect to cert$/% ece5t/o%.1âwphi1 S//$r3, &o%$t/o% betee%
5o+e &+r/%7 $rr/$7e $re 5ro/b/te&. And this is so be+ause if transfers or
+onve!an+es between spouses were allowed durin marriae# that would destro! the s!stem
of +onual partnership# a basi+ poli+! in +ivil law. 7t was also desined to prevent the
e=er+ise of undue inSuen+e b! one spouse over the other# as well as to prote+t the
institution of marriae# whi+h is the +ornerstone of famil! law. Te 5ro/b/t/o% $553 to $
co+5e /9/%7 $ +b$%& $%& /6e /to+t be%et o6 $rr/$7e, oter/e, te
co%&/t/o% o6 toe o /%c+rre& 7+/t o+& t+r% o+t to be better t$% toe /%
e7$ +%/o%. *hose provisions are di+tated b! publi+ interest and their +riterion must be
imposed upon the will of the parties. . . .12 7tali+s in the oriinal emphasis and unders+orin
supplied4
As the +onve!an+e in ?uestion was made b! %o!anko in favor of his +ommon$ law$wife$
herein petitioner# it was null and void.
Petitioner,s arument that a trust relationship was +reated between %o!anko as trustee and
her as bene/+iar! as provided in Arti+les 1--( and 1-5B of the Civil Code whi+h read
A&*7C;< 1--(. *here is an implied trust when propert! is sold# and the leal estate is
ranted to one part! but the pri+e is paid b! another for the purpose of havin the bene/+ial
interest of the propert!. *he former is the trustee# while the latter is the bene/+iar!.
However# if the person to whom the title is +onve!ed is a +hild# leitimate or illeitimate# of
the one pa!in the pri+e of the sale# no trust is implied b! law# it bein disputabl! presumed
that there is a ift in favor of the +hild.
A&*7C;< 1-5B. 7f the pri+e of a sale of propert! is loaned or paid b! one person for the
bene/t of another and the +onve!an+e is made to the lender or pa!or to se+ure the pa!ment
of the debt# a trust arises b! operation of law in favor of the person to whom the mone! isloaned or for whom it is paid. *he latter ma! redeem the propert! and +ompel a +onve!an+e
thereof to him.
does not persuade.
8or petitioner,s testimon! that it was she who provided the pur+hase pri+e is
un+orroborated. *hat she ma! have been +onsidered the breadwinner of the famil! and that
there was proof that she earned a livin do not +on+lusivel! +lin+h her +laim.
As to the +hane of theor! b! respondents from forer! of their father,s sinature in the
deed of sale to sale +ontrar! to publi+ poli+!# it too does not persuade. %enerall!# a part! in
a litiation is not permitted to freel! and substantiall! +hane the theor! of his +ase so as
not to put the other part! to undue disadvantae b! not a++uratel! and timel! apprisin him
of what he is up aainst#13 and to ensure that the latter is iven the opportunit! durin trial
to refute all alleations aainst him b! presentin eviden+e to the +ontrar!. 7n the present
+ase# petitioner +annot be said to have been put to undue disadvantae and to have been
denied the +han+e to refute all the alleations aainst her. 8or the nulli/+ation of the sale is
an+hored on its illealit! per se# it bein violative of the above$+ited Arti+les 1352# 1-B9 and
1-9B of the Civil Code.
http://www.lawphil.net/judjuris/juri2006/nov2006/gr_165879_2006.html#fnt13http://www.lawphil.net/judjuris/juri2006/nov2006/gr_165879_2006.html#fnt13http://www.lawphil.net/judjuris/juri2006/nov2006/gr_165879_2006.html#fnt14http://www.lawphil.net/judjuris/juri2006/nov2006/gr_165879_2006.html#fnt13http://www.lawphil.net/judjuris/juri2006/nov2006/gr_165879_2006.html#fnt14
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manae all the piers in 0outh Harbor# anila. Co$petitioner
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parties +lose to President ar+os. *he part! +lose to President ar+os was later 7denti/ed as
Alfredo )eo) &omualde# the presidentUs brother$in$law.
After the transfer# a new roup reportedl! took over the a+tive +ontrol and manaement of
petitioner +ompan!. Petitioner &aon# was# however# retained as President# alleedl!
be+ause of his a++eptabilit! and rapport with the shippin lines# +ustoms brokers and the
unions# but without real powers as
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the +ompetent &*C and the leal remed! to be availed of b! Att!s. Durian and *uason# r. on
the matter of the dis+iplinar! a+tion taken aainst them.) pp. 1-"$1-(# &ollo4.
n the same da!# petitioners /led a third 7denti+al +omplaint before the &*C of anila#
do+keted as Civil Case No. (63"BB6. Fpon motion of the 0oli+itor$%eneral# this Court issued
on Auust 1-# 19(6 a temporar! restrainin order enoinin ude Al/n 0. 'i+en+io# &*C#
ran+h 5B# anila from a+tin on Civil Case No. (6$3"BB6 and the petitioners from
institutin further a+tion elsewhere without leave of +ourt. *he Cru# Aabin# Atiena and
Alda! ;aw 8irm and ude 'i+en+io were likewise re?uired to show +ause wh! the! should
not be severall! held in +ontempt of +ourt and:or be held administrativel! liable for
malpra+ti+e p. 233# &ollo4. oth +omplied with this resolution# as did Att!s. Durian and
*uason# r. with the resolution of ul! 31# 19(6 b! /lin a )Complian+e with Frent Plea for
7mmediate ;iftin of 0uspension) p. 15B# &ollo4.
eanwhile# on Auust 1(# 19(6# petitioners thru new +ounsel N. . Ouisumbin and
Asso+iates# /led a motion for re+onsideration of the resolution of Auust 1-# 19(6 and for
leave to /le suit whether in the 0upreme Court or an! +ourt for udi+ial review of PPAUs
+an+ellation of Petitioner e+tive immediatel!. p. -35$A# &ollo4.
Petitioners +ontend that the! were denied their riht to due pro+ess when respondent PPA
+an+elled the anaement Contra+t without prior hearin and investiation. 7n support of
this +ontention# the! advan+e the theor! that the manaement +ontra+t is not an ordinar!
+ommer+ial +ontra+t# but more in the nature of a fran+hise or li+ense# whi+h# in this +ase#
has been impressed with propert! rihts b! reason of the lenth of time petitioners have
been eno!in it# and hen+e +annot be +an+elled without a++ordin petitioners the
opportunit! to be heard on the alleed +omplaints and +ontra+t violations. As a +orollar!#
petitioners further assert that respondent PPA was not e=er+isin proprietar! fun+tions# i.e.#
as a part! to a +ontra+t e=er+isin its riht to res+ission or resolution when it +an+elled
petitionersU +ontra+t# but as a reulator! bod! e=er+isin adudi+ator! powers in /ndin and
+on+ludin that petitioner
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&aon# 7n+.# but to etro Port 0ervi+es# 7n+. that President ar+osU brother$in$
law# Alfredo Ueo) &omualde# admittedl! +ontrolled.
2. 0in+e the +an+elled +ontra+t was the fruit of +orruption in the ar+os
overnment# it is a nullit! and petitioners +annot sue for its enfor+ement
3. Lith his admission that he areed to front for &omualde with respe+t to
the latterUs illeal dealins with the Philippine Port Authorit!# &aon forfeits his
+laim as havin been a vi+tim of the ar+os rule
-. esides# sin+e petitioners themselves admit the e=isten+e of suE+ient
rounds for PPAUs +an+ellation of etro PortUs arrastre +ontra+t# the! +annot
+omplain
5. Fnder the +ir+umstan+es# respondent PPA was not re?uired to hear
petitioners prior to its +an+ellation of the +ontra+t
6. %iven the validit! of PPAUs +an+ellation of that +ontra+t and its takeover ofthe arrastre operations# the desination of respondent arina Port 0ervi+es#
7n+. to assist PPA in the operations is not for petitioner to ?uestion and#
". At all events# respondent A&7NA is ?uali/ed to handle the limited task PPA
assined to it. pp. 5-6$5-"# &ollo4
*he anaement Contra+t under +onsideration was e=e+uted b! and between petitioner
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'eril!# the transfer of the shares of sto+k of petitioner
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&espondent PPA is the overnment aen+! +hared with the spe+i/+ dut! of supervisin#
+ontrollin# reulatin# +onstru+tin# maintainin# operatin and providin su+h fa+ilities or
servi+es as are ne+essar! in the ports vested in# or belonin to it 0e+. 6# QiiR# P.D. (5"4. 7t
has the e=pertise to determine whether or not arina Port 0ervi+es 7n+. has the +apabilit! of
dis+harin the tasks assined to it as interim operator of arrastre servi+e in 0outh Harbor.
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SS. RE
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7n a letter of the same date# the Deput! 0heri> informed ; & Corporation of the pa!mentb! PLHA0 of the full redemption pri+e and advised it that it +an +laim the pa!ment uponsurrender of its ownerUs dupli+ate +erti/+ates of title. 10
n April 2# 19(1# the spouses ;itonua presented for reistration the Certi/+ate of&edemption issued in their favor to the &eister of Deeds of Oueon Cit!. *he Certi/+ate also
informed ; & Corporation of the fa+t of redemption and dire+ted the latter to surrender theownerUs dupli+ate +erti/+ates of title within /ve da!s. 11
n April 22# 19(1# ; & Corporation wrote a letter to the 0heri># +op! furnished to the&eister of Deeds# statin 14 that the sale of the mortaed properties to PLHA0 waswithout its +onsent# in +ontravention of pararaphs ( and 9 of their Deed of &eal
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14 whether or not pararaphs ( and 9 of the &eal
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notif!in the pur+haser or in+ludin him as a defendant. At the same time# the pur+haser ofthe mortaed propert! was deemed not to have lost his e?uitable riht of redemption.
7n Bonnevie v . Court o' Appeals# 28 where a similar provision appeared in the sube+t +ontra+tof mortae# the petitioners therein# to whom the mortaed propert! were sold without thewritten +onsent of the mortaee# were held as without the riht to redeem the said
propert!. No +onsent havin been se+ured from the mortaee to the sale with assumptionof mortae b! petitioners therein# the latter were not validl! substituted as debtors. 7t wasfurther held that sin+e their rihts were never re+orded# the mortaee was +hared withthe obliation to re+onie the riht of redemption onl! of the oriinal mortaors$vendors.Lithout dis+ussin the validit! of the stipulation in ?uestion# the same was# in e>e+t# upheld.
Aain# in Cru v . Court o' Appeals# 2* while a similar provision was re+onied and applied#no dis+ussion as to its validit! was made sin+e the same was not raised as an issue.
n the other hand# in &am-unting v . #eha-ilitation *inanceCorporation# )0 the validit! of a similar provision was spe+i/+all! raised and dis+ussed andfound as invalid. 7t was there ratio+inated that @
*o be sure# the deed of se+ond mortae e=e+uted b! the
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&e 'alidit! of redemption e>e+ted b! PLHA0 on the a++ount ofthe spouses ;itonua
Comin now to the issue of whether the redemption o>ered b! PLHA0 on a++ount of thespouses ;itonua is valid# we rule in the aErmative. *he sale b! the spouses ;itonua of themortaed properties to PLHA0 is valid. *herefore# PLHA0 stepped into the shoes of the
spouses ;itonua on a++ount of su+h sale and was in e>e+t# their su++essor$in$interest. Assu+h# it had the riht to redeem the propert! fore+losed b! ; & Corporation.Aain# &am-unting# supra# +lari/es that @
. . .. *he a+?uisition b! the Hernandees of the ered to redeem the sube+t properties seven "4months after the date of reistration of the fore+losure sale# well within the one !ear periodof redemption.
&e 'alidit! and enfor+eabilit! of stipulationrantin the mortaee the riht of /rst refusal
Lhile petitioners ?uestion the validit! of pararaph ( of their mortae +ontra+t# the!appear to be silent insofar as pararaph 9 thereof is +on+erned. 0aid pararaph 9 rantsupon ; & Corporation the riht of /rst refusal over the mortaed propert! in the eventthe mortaor de+ides to sell the same. Le see nothin wron in this provision. *he riht of/rst refusal has lon been re+onied as valid in our urisdi+tion. *he +onsideration for theloan$mortae in+ludes the +onsideration for the riht of /rst refusal. ; & Corporation is in
e>e+t statin that it +onsents to lend out mone! to the spouses ;itonua provided that in+ase the! de+ide to sell the propert! mortaed to it# then ; & Corporation shall be iventhe riht to mat+h the o>ered pur+hase pri+e and to bu! the propert! at that pri+e. *hus#while the spouses ;itonua had ever! riht to sell their mortaed propert! to PLHA0without se+urin the prior written +onsent of ; & Corporation# the! had the obliationunder pararaph 9# whi+h is a perfe+tl! valid provision# to notif! the latter of their intentionto sell the propert! and ive it priorit! over other bu!ers. 7t is onl! upon failure of ; &Corporation to e=er+ise its riht of /rst refusal +ould the spouses ;itonua validl! sell thesube+t properties to others# under the same terms and +onditions o>ered to ; &Corporation.
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Lhat then is the status of the sale made to PLHA0 in violation of ; & CorporationUs+ontra+tual riht of /rst refusal n this s+ore# we aree with the Amended De+ision of theCourt of Appeals that the sale made to PLHA0 is res+issible. *he +ase of uman, Bocaling4 Co. v . Bonnevie )) is instru+tive on this point @
*he respondent +ourt +orre+tl! held that the Contra+t of 0ale was not voidable
but res+issible. Fnder Arti+le 13(B to 13(134 of the Civil Code# a +ontra+totherwise valid ma! nonetheless be subse?uentl! res+inded b! reason ofinur! to third persons# like +reditors. &he status o' creditors could -e validl)accorded -) the Bonnevies 'or the) had su-stantial interest that were
pre3udiced -) the sale o' the su-3ect propert) to the Contract o' Lease.
A++ordin to *olentino# res+ission is a remed! ranted b! law to the+ontra+tin parties and even to third persons# to se+ure reparation fordamaes +aused to them b! a +ontra+t# even if this should be valid# b! meansof the restoration of thins to their +ondition at the moment prior to the+elebration of said +ontra+t. 7t is a relief allowed for one of the +ontra+tinparties and even third persons from all inur! and damae the +ontra+t ma!+ause# or to prote+t some in+ompatible and preferential riht +reated b! the
+ontra+t. &es+ission implies a +ontra+t whi+h# even if initiall! valid# produ+es alesion or pe+uniar! damae to someone that usti/es its invalidation forreasons of e?uit!.
emphasis# urs4
7t was then held that the Contra+t of 0ale there# whi+h violated the riht of /rst refusal# wasres+issible.
7n the +ase at bar# PLHA0 +annot +laim inoran+e of the riht of /rst refusal ranted to ; & Corporation over the sube+t properties sin+e the Deed of &eal eren+ebetween su+h pur+hase pri+e and the redemption pri+e of P2-9#91(.""# +omputed as ofAuust 13# 19(1# the e=piration of the one$!ear period to redeem. *hat it did not dul!e=er+ise its riht of /rst refusal at the opportune time +annot be taken aainst it# pre+isel!be+ause it was not noti/ed b! the spouses ;itonua of their intention to sell the sube+tpropert! and thereb!# to ive it priorit! over other bu!ers.
All thins +onsidered# what then are the relative rihts and obliations of the parties *ore+apitulate# the sale between the spouses ;itonua and PLHA0 is valid# notwithstandinthe absen+e of ; & CorporationUs prior written +onsent thereto. 7nasmu+h as the sale toPLHA0 was valid# its o>er to redeem and its tender of the redemption pri+e# as su++essor$in$interest of the spouses ;itonua# within the one$!ear period should have been a++epted asvalid b! the ; & Corporation. However# while the sale is# indeed# valid# the same isres+issible be+ause it inored ; & CorporationUs riht of /rst refusal.
8oreseein a possible res+ission of the sale# the spouses ;itonua +ontend that with therestoration of the oriinal status quo# with no sale havin been made# the! should now be
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allowed to redeem the sube+t properties# the period of redemption havin been suspendeddurin the period of litiation. 7n e>e+t# the spouses ;itonua want to retain ownership of thesame. Le +annot# however# san+tion this belated reversal of the spouses ;itonuaUs de+isionto sell. *o do so would a>ord them undue advantae on a++ount of the appre+iation of thevalue of the sube+t properties in the intervenin !ears when the! pre+isel! were the oneswho violated and inored the riht of /rst refusal of ; & Corporation over the same.
oreover# it must be stressed that in res+indin the sale made to PLHA0# the purpose is touphold and enfor+e the riht of /rst refusal of ; & Corporation.