Sales Cases July 12 Full Text
Transcript of Sales Cases July 12 Full Text
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SALES CASES JULY 12, 2014
1. Yu Tek v. Gonzales
Republic of the Philippines
SUPREME COURTManila
EN BANC
G.R. No. L-9935 February 1, 1915
YU TEK and CO.,plaintiff-appellant,vs.
BASILIO GONZALES,defendant-appellant.
Beaumont, Tenney and Ferrier for plaintiff.
Buencamino and Lontok for defendant.
TRENT, J.:
The basis of this action is a written contract, Exhibit A, the
pertinent paragraphs of which follow:
1. That Mr. Basilio Gonzalez hereby acknowledges receipt ofthe sum of P3,000 Philippine currency from Messrs. Yu Tek
and Co., and that in consideration of said sum be obligates
himself to deliver to the said Yu Tek and Co., 600 piculs of
sugar of the first and second grade, according to the result of
the polarization, within the period of three months, beginning
on the 1st day of January, 1912, and ending on the 31st day of
March of the same year, 1912.
2. That the said Mr. Basilio Gonzales obligates himself to
deliver to the said Messrs. Yu Tek and Co., of this city the said
600 piculs of sugar at any place within the said municipality of
Santa Rosa which the said Messrs. Yu Tek and Co., or a
representative of the same may designate.
3. That in case the said Mr. Basilio Gonzales does not deliver
to Messrs. Yu Tek and Co. the 600 piculs of sugar within the
period of three months, referred to in the second paragraph of
this document, this contract will be rescinded and the said Mr.
Basilio Gonzales will then be obligated to return to Messrs. Yu
Tek and Co. the P3,000 received and also the sum of P1,200
by way of indemnity for loss and damages.
Plaintiff proved that no sugar had been delivered to it under
this contract nor had it been able to recover the P3,000.
Plaintiff prayed for judgment for the P3,000 and, in addition, for
P1,200 under paragraph 4, supra. Judgment was rendered forP3,000 only, and from this judgment both parties appealed.
The points raised by the defendant will be considered first. He
alleges that the court erred in refusing to permit parol evidence
showing that the parties intended that the sugar was to be
secured from the crop which the defendant raised on his
plantation, and that he was unable to fulfill the contract by
reason of the almost total failure of his crop. This case appears
to be one to which the rule which excludes parol evidence to
add to or vary the terms of a written contract is decidedly
applicable. There is not the slightest intimation in the contract
that the sugar was to be raised by the defendant. Parties are
presumed to have reduced to writing all the essentia
conditions of their contract. While parol evidence is admissible
in a variety of ways to explain the meaning of written contracts
it cannot serve the purpose of incorporating into the contrac
additional contemporaneous conditions which are no
mentioned at all in the writing, unless there has been fraud or
mistake. In an early case this court declined to allow paro
evidence showing that a party to a written contract was to
become a partner in a firm instead of a creditor of the firm.(Pastor vs.Gaspar, 2 Phil. Rep., 592.) Again, in
Eveland vs.Eastern Mining Co. (14 Phil. Rep., 509) a contract
of employment provided that the plaintiff should receive from
the defendant a stipulated salary and expenses. The defendan
sought to interpose as a defense to recovery that the paymen
of the salary was contingent upon the plaintiff's employmen
redounding to the benefit of the defendant company. The
contract contained no such condition and the court declined to
receive parol evidence thereof.
In the case at bar, it is sought to show that the sugar was to be
obtained exclusively from the crop raised by the defendant
There is no clause in the written contract which even remotelysuggests such a condition. The defendant undertook to deliver
a specified quantity of sugar within a specified time. The
contract placed no restriction upon the defendant in the matter
of obtaining the sugar. He was equally at liberty to purchase i
on the market or raise it himself. It may be true that defendan
owned a plantation and expected to raise the sugar himself
but he did not limit his obligation to his own crop of sugar. Our
conclusion is that the condition which the defendant seeks to
add to the contract by parol evidence cannot be considered
The rights of the parties must be determined by the writing
itself.
The second contention of the defendant arises from the firstHe assumes that the contract was limited to the sugar he migh
raise upon his own plantation; that the contract represented a
perfected sale; and that by failure of his crop he was relieved
from complying with his undertaking by loss of the thing due
(Arts. 1452, 1096, and 1182, Civil Code.) This argument is
faulty in assuming that there was a perfected sale. Article 1450
defines a perfected sale as follows:
The sale shall be perfected between vendor and vendee and
shall be binding on both of them, if they have agreed upon the
thing which is the object of the contract and upon the price,
even when neither has been delivered.
Article 1452 reads: "The injury to or the profit of the thing sold
shall, after the contract has been perfected, be governed by
the provisions of articles 1096 and 1182."
This court has consistently held that there is a perfected sale
with regard to the "thing" whenever the article of sale has been
physically segregated from all other articles Thus, a particular
tobacco factory with its contents was held sold under a
contract which did not provide for either delivery of the price or
of the thing until a future time. McCullough vs.Aenlle and Co
(3 Phil. Rep., 295). Quite similar was the recent case
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of Barretto vs. Santa Marina(26 Phil. Rep., 200) where
specified shares of stock in a tobacco factory were held sold by
a contract which deferred delivery of both the price and the
stock until the latter had been appraised by an inventory of the
entire assets of the company. In Borromeo vs. Franco(5 Phil.
Rep., 49) a sale of a specific house was held perfected
between the vendor and vendee, although the delivery of the
price was withheld until the necessary documents of ownership
were prepared by the vendee. In Tan Leonco vs. Go Inqui(8
Phil. Rep., 531) the plaintiff had delivered a quantity of hempinto the warehouse of the defendant. The defendant drew a bill
of exchange in the sum of P800, representing the price which
had been agreed upon for the hemp thus delivered. Prior to the
presentation of the bill for payment, the hemp was destroyed.
Whereupon, the defendant suspended payment of the bill. It
was held that the hemp having been already delivered, the title
had passed and the loss was the vendee's. It is our purpose to
distinguish the case at bar from all these cases.
In the case at bar the undertaking of the defendant was to sell
to the plaintiff 600 piculs of sugar of the first and second
classes. Was this an agreement upon the "thing" which was
the object of the contract within the meaning of article1450, supra? Sugar is one of the staple commodities of this
country. For the purpose of sale its bulk is weighed, the
customary unit of weight being denominated a "picul." There
was no delivery under the contract. Now, if called upon to
designate the article sold, it is clear that the defendant could
only say that it was "sugar." He could only use this generic
name for the thing sold. There was no "appropriation" of any
particular lot of sugar. Neither party could point to any specific
quantity of sugar and say: "This is the article which was the
subject of our contract." How different is this from the contracts
discussed in the cases referred to above! In the McCullough
case, for instance, the tobacco factory which the parties dealt
with was specifically pointed out and distinguished from all
other tobacco factories. So, in the Barretto case, the particular
shares of stock which the parties desired to transfer were
capable of designation. In the Tan Leonco case, where a
quantity of hemp was the subject of the contract, it was shown
that that quantity had been deposited in a specific warehouse,
and thus set apart and distinguished from all other hemp.
A number of cases have been decided in the State of
Louisiana, where the civil law prevails, which confirm our
position. Perhaps the latest is Witt Shoe Co. vs.Seegars and
Co. (122 La., 145; 47 Sou., 444). In this case a contract was
entered into by a traveling salesman for a quantity of shoes,
the sales having been made by sample. The court said of this
contract:
But it is wholly immaterial, for the purpose of the main
question, whether Mitchell was authorized to make a definite
contract of sale or not, since the only contract that he was in a
position to make was an agreement to sell or an executory
contract of sale. He says that plaintiff sends out 375 samples
of shoes, and as he was offering to sell by sample shoes, part
of which had not been manufactured and the rest of which
were incorporated in plaintiff's stock in Lynchburg, Va., it was
impossible that he and Seegars and Co. should at that time
have agreed upon the specific objects, the title to which was to
pass, and hence there could have been no sale. He and
Seegars and Co. might have agreed, and did (in effect ) agree
that the identification of the objects and their appropriation to
the contract necessary to make a sale should thereafter be
made by the plaintiff, acting for itself and for Seegars and Co.
and the legend printed in red ink on plaintiff's billheads ("Our
responsibility ceases when we take transportation Co's. receipt
`In good order'" indicates plaintiff's idea of the moment at whichsuch identification and appropriation would become effective
The question presented was carefully considered in the case o
State vs.Shields, et al. (110 La., 547, 34 Sou., 673) (in which it
was absolutely necessary that it should be decided), and it was
there held that in receiving an order for a quantity of goods, o
a kind and at a price agreed on, to be supplied from a genera
stock, warehoused at another place, the agent receiving the
order merely enters into an executory contract for the sale of
the goods, which does not divest or transfer the title of any
determinate object, and which becomes effective for tha
purpose only when specific goods are thereafter appropriated
to the contract; and, in the absence of a more specific
agreement on the subject, that such appropriated takes place
only when the goods as ordered are delivered to the public
carriers at the place from which they are to be shipped
consigned to the person by whom the order is given, at which
time and place, therefore, the sale is perfected and the title
passes.
This case and State vs.Shields, referred to in the above
quotation are amply illustrative of the position taken by the
Louisiana court on the question before us. But we canno
refrain from referring to the case of Larue and
Prevost vs.Rugely, Blair and Co. (10 La. Ann., 242) which is
summarized by the court itself in the Shields case as follows:
. . . It appears that the defendants had made a contract for the
sale, by weight, of a lot of cotton, had received $3,000 on
account of the price, and had given an order for its delivery
which had been presented to the purchaser, and recognized by
the press in which the cotton was stored, but that the cotton
had been destroyed by fire before it was weighed. It was held
that it was still at the risk of the seller, and that the buyer was
entitled to recover the $3,000 paid on account of the price.
We conclude that the contract in the case at bar was merely an
executory agreement; a promise of sale and not a sale. A
there was no perfected sale, it is clear that articles 1452, 1096
and 1182 are not applicable. The defendant having defaultedin his engagement, the plaintiff is entitled to recover the P3,000
which it advanced to the defendant, and this portion of the
judgment appealed from must therefore be affirmed.
The plaintiff has appealed from the judgment of the trial cour
on the ground that it is entitled to recover the additional sum o
P1,200 under paragraph 4 of the contract. The court below
held that this paragraph was simply a limitation upon the
amount of damages which could be recovered and no
liquidated damages as contemplated by the law. "It also
appears," said the lower court, "that in any event the defendan
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was prevented from fulfilling the contract by the delivery of the
sugar by condition over which he had no control, but these
conditions were not sufficient to absolve him from the
obligation of returning the money which he received."
The above quoted portion of the trial court's opinion appears to
be based upon the proposition that the sugar which was to be
delivered by the defendant was that which he expected to
obtain from his own hacienda and, as the dry weather
destroyed his growing cane, he could not comply with his partof the contract. As we have indicated, this view is erroneous,
as, under the contract, the defendant was not limited to his
growth crop in order to make the delivery. He agreed to deliver
the sugar and nothing is said in the contract about where he
was to get it.
We think is a clear case of liquidated damages. The contract
plainly states that if the defendant fails to deliver the 600 piculs
of sugar within the time agreed on, the contract will be
rescinded and he will be obliged to return the P3,000 and pay
the sum of P1,200 by way of indemnity for loss and damages.
There cannot be the slightest doubt about the meaning of this
language or the intention of the parties. There is no room foreither interpretation or construction. Under the provisions of
article 1255 of the Civil Code contracting parties are free to
execute the contracts that they may consider suitable, provided
they are not in contravention of law, morals, or public order. In
our opinion there is nothing in the contract under consideration
which is opposed to any of these principles.
For the foregoing reasons the judgment appealed from is
modified by allowing the recovery of P1,200 under paragraph 4
of the contract. As thus modified, the judgment appealed from
is affirmed, without costs in this instance.
Arellano, C.J., Torres, Carson and Araullo, JJ.,concur.Johnson, J.,dissents.
2. Compania General v. CA
Republic of the Philippines
SUPREME COURTManila
FIRST DIVISION
G.R. No. L-59534 May 10, 1990
COMPAIA GENERAL DE TABACOS DEFILIPINAS, petitioner,
vs.
COURT OF APPEALS, PHILIPPINE NATIONAL BANK andDEVELOPMENT BANK OF THE PHILIPPINES,respondents.
Siguion Reyna, Montecillo & Ongsiako for petitioner.
Pelaez, Adriano & Gregorio for respondents San Carlos
Planters' Association & Theo Davis & Co., Far East Ltd. et al.
NARVASA, J.:
The conflicting claims of the mortgagees of a sugar quota or
production allowance, on the one hand, and the mortgagors
subsequent vendees of the same, on the other, are the subjecof the petition for review on certiorariat bar.
It appears that an unregistered partnership known as Gomez &
Torres composed of Francisco M. Gomez and Hecto
Torres was the "principal and majority stockholder of the
Philippine Milling Company, a domestic corporation which
owns and operates in the Mindoro Mill District a sugar mil
where all the sugar cane planters of that mill district mill their
sugar cane." 1"Gomez & Torres" was also "registered in theSugar Quota Administration as the owner and holder of the
entire production allowance or quota appertaining to Plantation
No. 30-15 of the Mindoro Mill District."2
As security for a loan of P2,000,000.00 obtained from the
Rehabilitation Finance Corporation (RFC), said Philippine
Milling Company (thru its president, Hector A. Torres), and the
above mentioned Hector A. Torres and Francisco Gomez
executed on August 7, 1950, a deed of mortgage
hypothecating to the RFC, particularly described real and
personal property, "together with all the buildings and
improvements now existing or which may hereafter be
constructed on the mortgaged property, all easements, suga
quotas, agricultural or land indemnities, aids or subsidies and
all other rights or benefits annexed to or inherent therein, now
existing or which may hereafter exist."3
The mortgagors above named also assigned to the RFC on
August 16, 1950, in a public instrument,4the sugar quota o
the mill district aggregating no less than 148,000 piculsand
sugar warehouse receipts covering, the first 29,500 piculs of
sugar milled by the sugar central annually and such additiona
sugar as may be necessary to cover the annual amortization o
the loan, taking into consideration the fluctuating sugar prices
which assignments shall remain in full force and effect as long
as . . . (their) aforementioned loan has not been settled in full."
Some fifteen months later, or on November 2, 1951, the same
mortgagors executed in favor of the same mortgagee (the
R.F.C) a second mortgage, this time as security for anotheloan of P1,860,000.00. The mortgage covered real and/o
personal properties listed in the deed, "together with all the
buildings and improvements now existing or which may
hereafter be constructed on the mortgaged property, al
easements, sugar quotas, agricultural or land indemnities, aids
or subsidies, and all other rights or benefits annexed to o
inherent therein, now existing or which may hereafter exist . .
and also other assets acquired with the proceeds of such loan
. . "5
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The mortgagors also executed on November 2, 1951 an
assignment in favor of the RFC, like that of August 16,
1950, supra, respecting "its rights and interests on all the sugar
quota of the Mindoro Mill District aggregating no less than
148,000 piculs and additional sugar warehouse receipts
covering the first 27,350 piculs of sugar milled by the sugar
central annually, and such additional sugar may be necessary
to cover the annual amortization on the loan, until the full
amount of the additional loan has been fully paid."6
Both deeds of (real estate and chattel) mortgages were
registered in the Register of Deeds of Occidental Mindoro on
August 20, 1950 and November 9, 1951, respectively. 7
Earlier, or on or about January 13, 1951, the real estate and
personal property subject of the two (2) mortgages just
described, were again mortgaged by Philippine Milling Co.,
Francisco M. Gomez and Hector A. Torres, this time in favor of
the Philippine National Bank as collateral for a loan of
P235,000.00. This real estate and chattel mortgage was
amended on April 6, 1951 by increasing its consideration from
P235,000.00 to P335,000.00, and still later, on January 18,
1952, by further increasing the consideration toP1,405,0,00.00. 8The original deed and its two (2)
amendments were all registered with the Register of Deeds of
Occidental Mindoro.
In July, 1957, two (2) letters-agreements were executed
between Gomez & Torres (represented by Francisco M.
Gomez) on the one hand, and Theo H. Davies & Co., Ltd. ("for
itself and representing [or as authorized representative of) San
Carlos Planters' Association"]), on the other, by virtue of which
the former sold to the latter a total of 18,000 piculs of the
production allowance (or sugar quota) of Plantation No. 30-15,
to wit:
1) On July 3, 1957: 8,250 piculs of "our ''A" quota and 1,750.00
piculs of our "B" quota corresponding to Plantation No . 30-15
of the Mindoro Mill District which is duly registered in our
name;" 9and
2) on July 11, 1957: 6,600.00 piculs of "our "A" quota and
1,400.00 piculs of our "B" quota . . ."
In the later agreement, Gomez & Torres guaranteed "that said
8,000.00 piculs of quotas as well as the 10,000.00 piculs sold
to you on July 3, 1957, belong to us and are free from any lien
or incumbrance whatsoever."10
The transferees presented the two (2) agreements for
recording in the District Office of the Sugar Quota
Administration, on July 12, 1957. But the Sugar Quota
Administration declined to give due course to the transfer until
"necessary corrections" were made in the registration
documents (known as DTRs: "district transfer registries"), and
"the written conformity of the PNB," secured.11
In a letter to the Philippine Mining Company dated September
10, 1957, the Administrator cited several reasons for his
refusal:12
1. There is no signature nor initial of the Permit Agent assigned
to your District.
2. There is no distribution of coefficients in Columns F, I, and J
in both of your DTR's.
3. This Office received a letter from the Philippine Nationa
Bank advising this Office that the allotments of Plantations
Nos. 30-4, 30-8c, 30-9c, 30-14, 30-15 and 30-16a are
mortgaged to the PNB and to advise the PNB of any saletransfer or conveyance affecting the quota of the Philippine
Milling Company, Hector A. Torres and Francisco M. Gomez
and to withhold the registration without the consent of the PNB
The letter of the PNB above referred to (par. 3) was that written
by its Vice President, J.V. Buenaventura, dated September 4
1957. 13
On October 2, 1957, San Carlos Planters' Association and
Theo H. Davies Co. Ltd. submitted "two copies of the mil
district coefficients and allowances of the 1957-1958 crop o
the San Carlos Mill District." In response, the Sugar Quota
Administrator sent them a letter dated October 3, 1957advising that it was inappropriate for them to include "in said
list, sugar allotments rights in the quantity of 14,850 piculs for
'A' and 3,150 for 'B' purchased by San Carlos Milling Co., Ltd
from Mindoro Mill District," because "this purchase has no
been given due course by this office in view of the defects . . .
(which) have not yet been corrected."14
The Governor of the RFC also wrote to the SQA, under date of
October 9, 1957, informing it of the mortgage to it of the sugar
quota in question "aggregating no less than 148,000 piculs,"
and requesting "that no transfer or conveyance affecting the
said sugar quota rights of the Philippine Milling Co. and
Messrs. Hector A. Torres and Francisco Gomez that may havebeen presented or . . . may be presented . . . be given due
course without the written consent of this Corporation." 15
On October 17, 1957, the San Carlos Milling Co. Ltd. and Theo
H. Davies & Co. Far East Ltd. wrote to the SQA, in reply to the
latter's communication of October 3, 1957. Adverting to a letter
of the Philippine Milling Co. "of Sept. 15th, 1957 and . .
memorandum enclosure of the same date addressed to the
Phil. Milling Co., the transferor central, by Torres and Gomez
owners and sellers of the quota rights in question, " they
demanded "that the transfer of said quotas be given effect
immediately from Mindoro Plantation Audit 30-15 of Torres and
Gomez to Plantation Audit No. 38-E-24 of the San Carlos MilDistrict for account of the San Carlos Planters
Association." 16
The matter of registration remained in a state of flux until about
a year later, or more precisely, August 5, 1958, when the
Administrator ultimately authorized the transfer.17
On January 6 and 7, 1959, the San Carlos Planters
Association in turn executed sales of portions of the suga
quota of 18,000 piculs acquired by it in favor of various
individual sugar planters, all of which sales were recorded in
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the San Carlos District Transfer Registry.18Then on January
16, 1959, San Carlos effected a change in the Plantation
Number of its remaining portion of the sugar quota purchased
by it (57.06 piculs of "A" quota and 12.12, piculs of "B" quota)
from No. 38-E-24 to No. 38-343. 19
Eventually, the Development Bank of the Philippines (formerly
RFC) caused the extrajudicial foreclosure of its mortgages of
August 7, 1950 and November 2, 1951 by the Provincial Sheriff
of Occidental Mindoro. The foreclosure sale was held onNovember 28, 1958. The DBP was the highest bidder. A
certificate of sale was accordingly drawn up in its favor by the
Sheriff on January 19, 1959. 20As might be expected, amongthe properties specified in the certificate of sale, as having
been sold to DBP, were. 21
All sugar quota rights of the Philippine Milling Company
including those of Spouses, Francisco M. Gomez and
Francisca Villanueva and the Spouses, Hector A. Torres and
Galinica Romano, as well as those of Gomez and Torres
partnership in the Mindoro Mill District aggregating to no less
than 148,000 piculs of sugar, which are attached to any and or
all parcels of land described aboveand mortgaged to theRehabilitation Finance Corporation now Development Bank, of
the Philippines as well as the said sugar central's share in the
above sugar and quota rights.
On June 17, 1960 the one-year redemption period granted
by law to the mortgagors, having expired without a redemption
having been attempted, and the DBP having consolidated its
ownership over the real and personal property subject of the
mortgage sale the DBP executed a deed of sale in favor of
the PNB covering all the foreclosed property, for
P5,147,309.07 and other valuable consideration.22
Now, as regards the sugar quota in question, said deedstipulated inter alia that:
1) The "sugar quota rights pertaining to the Philippine Milling
Company shall not be covered-by this agreement until after the
expiration of the 1959-1960 crop year, but in no case earlier
than June 30, 1960;" 23and
2) ". . . while the l8,000 piculs of "A" and "B" sugar
are expressly excluded in this Deed of Sale because of certain
circumstances, the Vendee may, however, take such action as
it may deem proper in order to recover the said 18,000 piculs
of "A" and "B" sugar quotaand Vendor agrees to join such
action whenever requested by the Vendee, it beingunderstood, however, that Vendor shall not in any way be
responsible for said 18,000 piculs nor be liable for the outcome
of such action . . .24
After about two (2) years, in March, 1962, PNB wrote to the
San Carlos Planters' Association and the planters to whom the
latter had sold portions of the 18,000 piculs of the sugar quota
in question, supra, demanding the restoration and delivery to it
(the PNB) of their respective portions of said quota. As already
mentioned,25the 18,000 piculs consisted of 14,850 piculs of
'A' quota and 3,150 piculs of 'B' quota.
When the latter failed to do so, the PNB together with the DBP
brought suit in the Court of First Instance of Occidenta
Mindoro against Francisco M. Gomez and Hector A. Torres
and their spouses; the partnership of Gomez & Torres; the
Philippine Planters' Association; all the sugar planters to whom
as aforementioned had been sold parts of the 18,000 piculs o
the sugar quota in question; and the Sugar Quota
Administration.26It set out three (3) causes of action in its
complaint and prayed for judgment as follows:
ON THE FIRST CAUSE OF ACTION
a. Declare the plaintiff PNB owner of the sugar quota in
question in the quantity equal to 14,850 piculs of "A" quota and
3,150 piculs of "B" quota presently registered in the Sugar
Quota Administration in the names of the defendants
PLANTERS and defendant San Carlos Planters' Ass'n in the
quantity and under the plantation numbers indicated in par. 3
of the First Cause of Action of this Complaint;
b. Order the defendants PLANTERS of the San Carlos Mil
District and the defendant San Carlos Planters' Ass'n to return
and restore to the plaintiff PNB the sugar quota in question;
c. Order the cancellation of the District Transfer Registry . .
(regarding the transfers to the defendants) and declare same
of no force and effect.
ON THE SECOND AND ALTERNATIVE CAUSE OF ACTION
a. Declare the plaintiff PNB owner of the sugar quota in
question in the quantity equal to 14,850 piculs of "A" quota and
3,150 piculs of "B" quota presently registered in the Sugar
Quota Administration in the names of the defendants
PLANTERS and defendant San Carlos Planters' Assn. in the
quantity and under the plantation numbers indicated in par. 3of the First Cause of Action of this Complaint;
b. Declare the sale of the sugar quota in question made by
defendant TORRES & GOMEZ on July 3, 1957 and July 11
1957 null and void;
c. Declare the transfer of the sugar quota in question from the
Mindoro Mill District to the San Carlos Mill District null and
void;
d. Declare the subsequent transfer of the sugar quota in
question made by defendant San Carlos Planters' Assn. to the
defendant PLANTERS of the San Carlos Mill District null and
void;
e. Order the said defendants PLANTERS and the defendan
San Carlos Planters' Assn. to return and restore to the plaintif
PNB the sugar quota in question; and
f. Order the cancellation of the. District Transfer Registry
Annexes "F", "G", "H", "I" and "J" and declare same of no force
and effect.
ON THE THIRD CAUSE OF ACTION
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a. Order the defendants TORRES & GOMEZ, Francisco
Gomez, Hector A. Torres, Conrado Manalansan, as Sugar
Quota Administrator, Theo H. Davies & Co. Ltd. and the San
Carlos Planters' Assn. to pay jointly and severally the plaintiff
PNB the sum of P50,400.00 as lost and/or unrealized rental of
the sugar quota in question for the 1958-1959 crop year;
b. Order the defendants TORRES & GOMEZ, Francisco
Gomez, Hector A. Torres, Conrado Manalansan, as Sugar
Quota Administrator, Theo H. Davies & Co. Ltd. and the SanCarlos Planters' Assn. to pay jointly and severally the plaintiff
PNB the sum of P93,465.00 as unrealized profits on the sugar
quota in question in connection with the agreement for
conversion for 1959-1960 crop year;
c. Order the defendants TORRES & GOMEZ, Francisco
Gomez, Hector A. Torres, Conrado Manalansan, as Sugar
Quota Administrator, Theo H. Davies & Co. Ltd. and the San
Carlos Planters' Assn. to pay jointly and severally the plaintiff
PNB the sum of P93,465.00 as unrealized profits on the sugar
quota in question in connection with the agreement for
conversion entered with the BISCOM for the 1960-1961 crop
year;
d. Order the defendants TORRES & GOMEZ, Francisco
Gomez, Hector A. Torres, Conrado Manalansan, as Sugar
Quota Administrator, Theo H. Davies & Co. Ltd., San Carlos
Planters' Assn. and the defendants PLANTERS to pay jointly
and severally the Plaintiff PNB the sum of P9,000.00 annually
for three crop years beginning with the 1961-1962 as lost
and/or unrealized rental of the sugar quota in question.
Plaintiff further pray for such other relief which this Honorable
Court may deem just and proper to grant in the premises, with
costs against the defendants.
Answers were in due course filed by the several defendants. At
the pre-trial, the parties entered into a partial stipulation of facts
which contained, in substance:
1) an admission of all the relevant documents appended to the
complaint, as well as other documents, already above
specified;
2) an acknowledgment that the consideration fixed in the two
(2) letters-contracts between Gomez & Torres and Theo H.
Davies & Co., Ltd. and the San Carlos Planters' Association,
dated July 3 and 11, 1957, 27had been paid;
3) a statement that the transfer of a part of the sugar quota to
Cia. General de Tabacos de Filipinos (TABACALERA) was for
valid consideration, and was accompanied by the usual
warranty of the vendor's full right of disposition thereof and of
absence of any lien or encumbrance thereon; and
4) a request that the court "take judicial notices of all executive
orders, circulars and regulations which are pertinent to sugar
quotas or which are otherwise in implementation of, or
connected with, legislation on sugar trade and industry."28
Trial ensued after which judgment was rendered. The Tria
Court's judgment, rendered on April 8, 1968,29went agains
the plaintiffs. 30It made the following explicit findings:
1. That while the defendants, Philippine Milling Company and
Gomez and Torres assigned the rights over the Sugar Quota to
the R.F.C., said assignment of rights, not having been duly
registered in accordance with the rules and regulations of the
Sugar Quota Administration, did not effect third parties who
acquired said sugar quota in good faith and for value;
2. That the San Carlos Planters Association, the Theo H
Davies, the TABACALERA and all the transferees had
acquired the sugar quota in question legally and in good faith
hence, the plaintiff has no cause of action against them; (and)
3. That nevertheless, a valid cause of action exists as against
defendants Francisco M. Gomez and Hector Torres on the
basis of the mortgage and assignment executed by them in
favor of the Development Bank of the Philippines and the
Philippine National Bank.
And on said findings, the Court:
1) dismissed the case "as against the San Carlos (Planters')
Association, Theo H. Davies Co., Ltd., TABACALERA, the
Sugar Quota Administrator and all the other private defendants
who are the transferees;" but
2) ordered defendants 'Francisco M. Gomez and Hector Torres
. . . to pay the value of the 18,000 piculs of 'A' and 'B' sugar
quota allowance in the amount of P270,000.00 to the
Philippine National Bank, plus interest at the legal rate from
1958 up to the actual payment thereof and to pay the costs."
PNB and Francisco Gomez appealed to the Court o
Appeals. 31The PNB ascribed to the Trial Court the followingerrors to wit:
1) not finding that a valid mortgage was duly constituted also
on the sugar quota allowances in question with binding effect
against third persons including the defendants-appellees;
2) not finding that the defendants-appellees had both actua
and constructive notice of the mortgage in favor of the
Philippine National Bank and the Development Bank of the
Philippines which covered the sugar quota allowances;
3) not finding that the PNB is the owner of the sugar quota
allowance and in not ordering the defendants-appellees toreturn or reconvey the said sugar quota allowances to the
PNB.
The decision of the Court of Appeals32
was rendered on
October 30, 1980.33
It modified the Trial Court's judgment as
follows:
IN VIEW OF THE FOREGOING CONSIDERATIONS, the
judgment appealed from is hereby modified, in these aspects:
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1. declaring the Philippine National Bank the owner of the
sugar quota or production allowances in question;
2. ordering the defendants-appellees (excepting the defendant-
appellee Administrator of the Sugar Quota Office) to reconvey
to plaintiff-appellant PNB, the said sugar quota or production
allowance in question registered in their names, or if the same
can not now be legally done, directing the defendants-
appellees (excepting appellee Administrator of the Sugar
Quota Office) to jointly and severally pay to PNB the value ofthe sugar quota or production allowance in question.
The appealed judgment is hereby affirmed in all other respects.
From this judgment, the Compaia General de Tabacos
(TABACALERA) has appealed to this Court. Here it submits
that said judgment should be reversed on the basis of the
following considerations, to wit:
1) that sugar quotas are not "ordinary property . . . which may
be appropriated, transferred, conveyed and/or encumbered by
the private grantee at his whim and discretion without the
intervention of the State," it being "regulated property, thedisposal or encumbrance of which is made subject to certain
restrictions and regulations provided for by law;" hence, "any
form of alienation thereof should be made subject to
governmental regulations and should be processed and
approved by the implementing arm of the government, the
Sugar Quota Administration;" and the mortgage constituted
over the sugar quota in this case by the parties to whom the
same had originally been awarded the partnership of
Gomez and Torres or the Philippine Milling Company was
void, "(a)pproval or sanction of the Sugar Quota Administration
. . . (being) sorely and fatally lacking;"
a) moreover, "the very terms of the deed of sale executed bythe DBP in favor of PNB on June 17, 1966 specifically and
expressly excluded the 18,000 piculs in question;
2) even if the mortgage be accorded validity, it was "binding
only as between the mortgagors and the mortgagees and did
not have any effect in third persons who subsequently acquired
the same," because the mortgages had not yet been "duly
registered with the Sugar Quota Administration" when
TABACALERA and others purchased parts of the quota in
question from the Philippine Planters' Association; indeed, the
transferees from the latter had "received the sanction and
approval of the Sugar Quota Administrator;"
3) the direction by the Court of Appeals for TABACALERA
among others, to reconvey the quota to the PNB is vague and
indefinite since it does not state the point of time to be
considered in computing the value thereof; furthermore, since it
"benefited only to the extent of the . . . (precise quantity
purchased by it, out of the 18,000 piculs), it would be "clearly
contrary to law and grossly iniquitous" for it to be made
solidarily liable for the value of the entire sugar quota in
question; and
4) if TABACALERA reconveys or pays the value of the suga
quota acquired from San Carlos Planters' Association, the
latter should, upon its implied and express warranty agains
eviction, reimburse it therefor.
The argument that Theo H. Davies & Co., Ltd., San Carlos
Planters' Association, and their privies and successors in
interest like TABACALERA, are purchasers in good faith of the
sugar quota in question because they could not he deemed to
have prior knowledge of the encumbrances thereon, isuntenable.
For one thing, as the Court of Appeals has pointed out, the
intangible property that is the sugar quota in question should
be considered as real property by destination, "an
improvement attaching to the land entitled
thereto." 34Moreover, as is axiomatic, the recording in theRegistry of Deeds of a mortgage over lands and othe
immovables operates to charge "the whole world" with notice
thereof.35The registration therefore of the mortgages
executed by the Philippine Milling Company, Hector A. Torres
and Francisco Gomez in favor of the RFC and later of the
PNB, thus had the effect of charging all persons, includingTheo H. Davies & Co., Ltd., San Carlos Planters' Association
and their privies and successors in interest, with notice of the
encumbrance, not only over the lands belonging to the
mortgagors but also of the sugar quotas as well as "all the
buildings and improvements . . . existing or which may
hereafter be constructed on the mortgaged property, all
elements,
. . . agricultural or land indemnities, aids or subsidies and al
other rights or benefits annexed to or inherent therein, now
existing or which may hereafter exist." So, none of the parties
in this case can plead lack of knowledge of the mortgage lien
over the sugar quota or production allowance.
Even if the sugar quota is assumed to be personal, not raid
property, and hence not embraced in the mortgage of the
immovables created by the corresponding deeds, it would
nevertheless still be covered by the chattel mortgage created
in and by the same deeds. Since, like the recording of a rea
estate mortgage, registration of a chattel mortgage also puts al
persons on notice of its existence, the legal situation would be
exactly the same: the registration of the above described
deeds of chattel (and real estate) mortgage over the suga
quota, among other things, would also have charged al
persons with notice thereof from the time of such
registration.36
Again, being themselves engaged and possessed of no little
experience in the sugar industry, said Theo H. Davies & Co.
Ltd., San Carlos Planters' Association (and their own
transferees) could not but have known, when negotiations fo
their respective purchases of the sugar quota in question
commenced, that the sugar quota they were dealing with had
perforce to pertain to some specific sugar plantation o
farm, i.e., Plantation 30-15 of the Mindoro Mill District. Sugar
quota allocations do not have existence independently of any
particular tract of land. They are essentially ancillary, no
principal, assets, necessarily annexed to a specific sugar
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plantation or land, improvements "attaching to the land entitled
thereto."37Hence, the very first inquiry in any negotiation
affecting sugar quotas necessarily would have to do with the
identification of the district, plantation or land to which the
quotas appertain. No transaction can be had of sugar quotas in
the abstract, without reference whatsoever to any particular
land. Indeed, any deed of conveyance of sugar quota would
unavoidably have to describe the sugar plantation and district
to which it refers or relates. There can be no sale simply of
sugar quota of a certain number of piculs without specificationof the land to which it relates. Such a sale would be
inconsistent with established usage, and would be void for
want of a determinate subject matter.38Theo H. Davies & Co.,
Ltd. and San Carlos Planters' Association can not therefore
plead ignorance of the fact that the quota they were buying
pertained to land belonging to the sellers, Plantation No. 30-15
of the Mindoro Mill District.
Furthermore, Theo H. Davies & Co., Ltd. and San Carlos
Planters' Association were obviously of the belief that a
mortgage or sale of a sugar quota is void if "(a)pproval or
sanction of the Sugar Quota Administration . . . (is) lacking,"
this being in fact a proposition TABACALERA lays before thisCourt, although it cites no particular authority for it and has
thus failed to convince this Court of its validity. Be this as it
may, it was with this proposition in mind that Theo H. Davies &
Co. Ltd. and San Carlos Planters' Association submitted the
deed of conveyance in their favor of the sugar quota in
question, to the SQA, precisely to obtain the latter's approval of
that transaction. That approval, as already stated, was not
given until a year later. But long before that approval, they
were clearly and categorically informed that the sugar quota,
subject of the sale to them for which they were seeking
approval by the SQA was already mortgaged to the RFC and
then to the PNB. Since good faith is obviously a state of the
mind, and since prior to the approval of the conveyance to
them of the sugar quota by the SQA which approval they
thought to be essential for the validity of said conveyance-they
came to know of the earlier encum brance thereof to other
parties, it is not possible for them without, contradicting
themselves, to claim good faith in the transaction.
Turning now to TABACALERA and the other vendees of Theo
H. Davies & Co. Ltd. and San Carlos Planters' Association, it is
self-evident that they are also quite familiar with sugar quotas,
including the nature and process of transferring the same,
these being an important factor in their operations and
transactions. They therefore had to know that the sugar quotas
they were purchasing had originally to be part and parcel of
some sugar plantation. Hence, apart from being charged with
knowledge, as above discussed, of the mortgage of the land to
which the sugar quota in question was an integrated adjunct
and that the mortgage extended to said sugar quotas like the
buildings and improvements thereon standing it may
reasonably be assumed as a fact, too, that they inquired about
and were duly informed of the origin of, and immediately
preceding transactions involving, the sugar quotas they were
acquiring.
They should therefore all be regarded as buyers in bad faith
the original vendees of Gomez and Torres and the Philippine
Milling Company (i.e., the Philippine Planters Association and
Theo H. Davies & Co. Ltd.) as well as the latter's own vendees
(TABACALERA, et al.). The Court of Appeals was thus quite
correct in "ordering the defendants-appellees (excepting the
defendant-appellee Administrator of the Sugar Quota Office) to
reconvey to plaintiff-appellant PNB, the said sugar quota or
production allowance in question registered in their names, o
if the same can not now be legally done, directing thedefendants-appellees (excepting appellee Administrator of the
Sugar Quota Office) to jointly and severally pay to PNB the
value of the sugar quota or production allowance in question."
The fact that "the very terms of the deed of sale executed by
the DBP in favor of PNB on June 17, 1966 specifically and
expressly excluded the 18,000 piculs in question," of which
TABACALERA would make capital, is of no moment. As also
held by the Court of Appeals, the exclusion is more apparen
than real. It is true that the deed of June 17, 1966 does provide
that "the 18,000 piculs of 'A' and 'B' sugar are expressly
excluded . . . because of certain circumstances." It is however
pointed out that "the Vendee may . . . take such action as imay deem proper in order to recover the said 18, 000 piculs of
'A' and 'B' sugar quota and Vendor agrees to join such action
whenever requested by the Vendee." The clear implication is
that notwithstanding those "certain circumstances" causing the
exclusion of the 18,000 piculs, there was an express assertion
that a right to recover the same existed in favor of the vendo
and/or its vendee; a declaration, in other words, that the sugar
quota of 18,000 piculs rightfully belonged to the vendor and, by
the sale, to the vendee. The ambivalent stipulation, in the mind
of the Court of Appeals, merely evidenced the DBP's intention
not be rendered liable to PNB on any warranty of legal title
considering that the quota had in point of fact already been
sold to third persons before foreclosure; the ostensible
exclusion of the 18,000 piculs was a mere cautionary proviso
This Court agrees, after undertaking a review and analysis of
the relevant facts.
However, TABACALERA's argument that it should not be
made solidarily liable for the value of the entire sugar quota in
question, because it benefited only to the extent of the precise
quantity purchased by it, out of the 18,000 piculs is well taken
It does not appear that it acted in concert with the othe
vendees in the acquisition of all the 18,000 piculs comprising
the sugar quota in question. For aught that appears on the
record, it dealt separately and individually with its vendor. Its
liability should indeed be limited to a return of the exac
quantity and quality of the sugar quota separately purchased
by it, as indubitably appears on record, or the payment of the
value thereof computed as of the time that its obligation to
return that quota was adjudged by the Court of Appeals.
One final question remains to be resolved, that posed by
TABACALERA, to wit: if it reconveys the sugar quota acquired
from San Carlos Planters' Association, or pays its value
should not it be reimbursed therefor by the latter, upon its
implied and express warranty against eviction? The answe
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win have to be in the negative. They, vendor and vendee, are
inpari delicto. At the time of the transaction between them they
were well aware of the encumbrance on the property dealt
with, they had the common intention of negating the rights that
they knew had earlier and properly been acquired by the
mortgagee of the property they were treating of; they were both
consequently acting in bad faith. The object or purpose of their
contract was "contrary to law, morals, good customs, public
order or public policy."39The law says that in such a case,
where "the unlawful or forbidden cause consists does notconstitute a criminal offense, . . . and the fault is on the part of
both contracting parties, neither may recover what he has
given by virtue of the contract, or demand the performance of
the other's undertaking." 40No relief can be granted to eitherparty; the law will leave them where they are.
41
WHEREFORE, the challenged judgment of the Court of
Appeals is hereby AFFIRMED, with the modification that the
liability of petitioner Compaia General de Tabacos de
Filipinas (TABACALERA) is limited to the return to the
Philippine National Bank of the exact quantity and quality of the
sugar quota purchased by it from the Philippine Planters
Association and/or Theo H. Davies & Co., Ltd., as indubitablyappears on record, or the payment of the value thereof to said
Philippine National Bank computed as of the time that its
obligation to return that quota was adjudged by the Court of
Appeals.
IT IS SO ORDERED.
Grio-Aquino and Medialdea, JJ., concur.
Cruz, J., took no part.
Gancayno, J., is on leave.
3. Heirs of San Andres v. Rodriguez
Republic of the Philippines
SUPREME COURTManila
SECOND DIVISION
G.R. No. 135634 May 31, 2000
HEIRS OF JUAN SAN ANDRES (VICTOR S. ZIGA) andSALVACION S. TRIA,petitioners,
vs.
VICENTE RODRIGUEZ,respondent.
MENDOZA, J.:
This is a petition for review on certiorari of the decision of the
Court of Appeals1reversing the decision of the Regional Trial
Court, Naga City, Branch 19, in Civil Case No. 87-1335, as
well as the appellate court's resolution denying
reconsideration.
The antecedent facts are as follows:
Juan San Andres was the registered owner of Lot No. 1914-B
2 situated in Liboton, Naga City. On September 28, 1964, he
sold a portion thereof, consisting of 345 square meters, to
respondent Vicente S. Rodriguez for P2,415.00. The sale isevidenced by a Deed of Sale.
2
Upon the death of Juan San Andres on May 5, 1965, Ramon
San Andres was appointed judicial administrator of the
decedent's estate in Special Proceedings No. R-21, RTC
Branch 19, Naga City. Ramon San Andres engaged the
services of a geodetic engineer, Jose Peero, to prepare a
consolidated plan (Exh. A) of the estate. Engineer Peero also
prepared a sketch plan of the 345-square meter lot sold to
respondent. From the result of the survey, it was found that
respondent had enlarged the area which he purchased from
the late Juan San Andres by 509 square meters.3
Accordingly, the judicial administrator sent a letter,4dated July
27, 1987, to respondent demanding that the latter vacate the
portion allegedly encroached by him. However, responden
refused to do so, claiming he had purchased the same from
the late Juan San Andres. Thereafter, on November 24, 1987
the judicial administrator brought an action, in behalf of the
estate of Juan San Andres, for recovery of possession of the
509-square meter lot.
In his Re-amended Answer filed on February 6, 1989
respondent alleged that apart from the 345-square meter lo
which had been sold to him by Juan San Andres on Septembe
28, 1964, the latter likewise sold to him the following day theremaining portion of the lot consisting of 509 square meters
with both parties treating the two lots as one whole parcel with
a total area of 854 square meters. Respondent alleged that the
full payment of the 509-square meter lot would be effected
within five (5) years from the execution of a formal deed of sale
after a survey is conducted over said property. He further
alleged that with the consent of the former owner, Juan San
Andres, he took possession of the same and introduced
improvements thereon as early as 1964.
As proof of the sale to him of 509 square meters, responden
attached to his answer a receipt (Exh. 2)5signed by the late
Juan San Andres, which reads in full as follows:
Received from Vicente Rodriguez the sum of Five Hundred
(P500.00) Pesos representing an advance payment for a
residential lot adjoining his previously paid lot on three sides
excepting on the frontage with the agreed price of Fifteen
(15.00) Pesos per square meter and the payment of the ful
consideration based on a survey shall be due and payable in
five (5) years period from the execution of the formal deed of
sale; and it is agreed that the expenses of survey and its
approval by the Bureau of Lands shall be borne by Mr
Rodriguez.
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Naga City, September 29, 1964.
(Sgd.)
JUAN R. SAN ANDRES
Vendor
Noted:
(Sgd.)
VICENTE RODRIGUEZ
Vendee
Respondent also attached to his answer a letter of judicial
administrator Ramon San Andres (Exh. 3),6asking payment of
the balance of the purchase price. The letter reads:
Dear Inting,
Please accommodate my request for Three Hundred (P300.00)
Pesos as I am in need of funds as I intimated to you the otherday.
We will just adjust it with whatever balance you have payable
to the subdivision.
Thanks.
Sincerely,
(Sgd.)
RAMON SAN ANDRES
Vicente Rodriguez
Penafrancia Subdivision, Naga City
P.S.
You can let bearer Enrique del Castillo sign for the amount.
Received One Hundred Only
(Sgd.)
RAMON SAN ANDRES
3/30/66
Respondent deposited in court the balance of the purchase
price amounting to P7,035.00 for the aforesaid 509-square
meter lot.
While the proceedings were pending, judicial administrator
Ramon San Andres died and was substituted by his son
Ricardo San Andres. On the other band, respondent Vicente
Rodriguez died on August 15, 1989 and was substituted by his
heirs.7
Petitioner, as plaintiff, presented two witnesses. The firs
witness, Engr. Jose Peero,8testified that based on his survey
conducted sometime between 1982 and 1985, respondent had
enlarged the area which he purchased from the late Juan San
Andres by 509 square meters belonging to the latter's estate
According to Peero, the titled property (Exh. A-5) o
respondent was enclosed with a fence with metal holes and
barbed wire, while the expanded area was fenced with barbed
wire and bamboo and light materials.
The second witness, Ricardo San Andres,9administrator o
the estate, testified that respondent had not filed any claim
before Special Proceedings No. R-21 and denied knowledge of
Exhibits 2 and 3. However, he recognized the signature in
Exhibit 3 as similar to that of the former administrator, Ramon
San Andres. Finally, he declared that the expanded portion
occupied by the family of respondent is now enclosed with
barbed wire fence unlike before where it was found without
fence.
On the other hand, Bibiana B. Rodriguez,10
widow o
respondent Vicente Rodriguez, testified that they had
purchased the subject lot from Juan San Andres, who wastheir compadre, on September 29, 1964, at P15.00 per square
meter. According to her, they gave P500.00 to the late Juan
San Andres who later affixed his signature to Exhibit 2. She
added that on March 30, 1966; Ramon San Andres wrote them
a letter asking for P300.00 as partial payment for the subjec
lot, but they were able to give him only P100.00. She added
that they had paid the total purchase price of P7,035.00 on
November 21, 1988 by depositing it in court. Bibiana B
Rodriquez stated that they had been in possession of the 509-
square meter lot since 1964 when the late Juan San Andres
signed the receipt. (Exh. 2) Lastly, she testified that they did
not know at that time the exact area sold to them because they
were told that the same would be known after the survey of thesubject lot.
On September 20, 1994, the trial court11
rendered judgment in
favor of petitioner. It ruled that there was no contract of sale to
speak of for lack of a valid object because there was no
sufficient indication in Exhibit 2 to identify the property subject
of the sale, hence, the need to execute a new contract.
Respondent appealed to the Court of Appeals, which on Apri
21, 1998 rendered a decision reversing the decision of the tria
court. The appellate court held that the object of the contrac
was determinable, and that there was a conditional sale with
the balance of the purchase price payable within five yearsfrom the execution of the deed of sale. The dispositive portion
of its decision's reads:
IN VIEW OF ALL THE FOREGOING, the judgment appealed
from is hereby REVERSED and SET ASIDE and a new one
entered DISMISSING the complaint and rendering judgmen
against the plaintiff-appellee:
1. to accept the P7,035.00 representing the balance of the
purchase price of the portion and which is deposited in cour
under Official Receipt No. 105754 (page 122, Records);
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2. to execute the formal deed of sale over the said 509 square
meter portion of Lot 1914-B-2 in favor of appellant Vicente
Rodriguez;
3. to pay the defendant-appellant the amount of P50,000.00 as
damages and P10,000.00 attorney's fees as stipulated by them
during the trial of this case; and
4. to pay the costs of the suit.
SO ORDERED.
Hence, this petition. Petitioner assigns the following errors as
having been allegedly committed by the trial court:
I. THE HON. COURT OF APPEALS ERRED IN HOLDING
THAT THE DOCUMENT (EXHIBIT "2") IS A CONTRACT TO
SELL DESPITE ITS LACKING ONE OF THE ESSENTIAL
ELEMENTS OF A CONTRACT, NAMELY, OBJECT CERTAIN
AND SUFFICIENTLY DESCRIBED.
II. THE HON. COURT OF APPEALS ERRED IN HOLDING
THAT PETITIONER IS OBLIGED TO HONOR THE
PURPORTED CONTRACT TO SELL DESPITE NON-
FULFILLMENT BY RESPONDENT OF THE CONDITION
THEREIN OF PAYMENT OF THE BALANCE OF THE
PURCHASE PRICE.
III. THE HON. COURT OF APPEALS ERRED IN HOLDING
THAT CONSIGNATION WAS VALID DESPITE NON-
COMPLIANCE WITH THE MANDATORY REQUIREMENTS
THEREOF.
IV. THE HON. COURT OF APPEALS ERRED IN HOLDING
THAT LACHES AND PRESCRIPTION DO NOT APPLY TO
RESPONDENT WHO SOUGHT INDIRECTLY TO ENFORCE
THE PURPORTED CONTRACT AFTER THE LAPSE OF 24
YEARS.
The petition has no merit.
First. Art. 1458 of the Civil Code provides:
By the contract of sale one of the contracting parties obligates
himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain
in money or its equivalent.
A contract of sale may be absolute or conditional.
As thus defined, the essential elements of sale are the
following:
a) Consent or meeting of the minds, that is, consent to transfer
ownership in exchange for the price;
b) Determinate subject matter; and,
c) Price certain in money or its equivalent.12
As shown in the receipt, dated September 29, 1964, the late
Juan San Andres received P500.00 from respondent as
"advance payment for the residential lot adjoining his
previously paid lot on three sides excepting on the frontage
the agreed purchase price was P15.00 per square meter; and
the full amount of the purchase price was to be based on the
results of a survey and would be due and payable in five (5)
years from the execution of a deed of sale.
Petitioner contends, however, that the "property subject of the
sale was not described with sufficient certainty such that there
is a necessity of another agreement between the parties tofinally ascertain the identity; size and purchase price of the
property which is the object of the alleged sale."1He argues
that the "quantity of the object is not determinate as in fact a
survey is needed to determine its exact size and the ful
purchase price therefor"14
In support of his contention
petitioner cites the following provisions of the Civil Code:
Art. 1349. The object of every contract must be determinate as
to its kind. The fact that the quantity is not determinable shal
not be an obstacle to the existence of a contract, provided it is
possible to determine the same without the need of a new
contract between the parties.
Art. 1460. . . . The requisite that a thing be determinate is
satisfied if at the time the contract is entered into, the thing is
capable of being made determinate without the necessity of a
new and further agreement between the parties.
Petitioner's contention is without merit. There is no dispute tha
respondent purchased a portion of Lot 1914-B-2 consisting o
345 square meters. This portion is located in the middle of Lo
1914-B-2, which has a total area of 854 square meters, and is
clearly what was referred to in the receipt as the "previously
paid lot." Since the lot subsequently sold to respondent is said
to adjoin the "previously paid lot" on three sides thereof, the
subject lot is capable of being determined without the need ofany new contract. The fact that the exact area of these
adjoining residential lots is subject to the result of a survey
does not detract from the fact that they are determinate or
determinable. As the Court of Appeals explained:15
Concomitantly, the object of the sale is certain and
determinate. Under Article 1460 of the New Civil Code, a thing
sold is determinate if at the time the contract is entered into
the thing is capable of being determinate without necessity of a
new or further agreement between the parties. Here, this
definition finds realization.
Appellee's Exhibit "A" (page 4, Records) affirmingly shows thathe original 345 sq. m. portion earlier sold lies at the middle o
Lot 1914-B-2 surrounded by the remaining portion of the said
Lot 1914-B-2 on three (3) sides, in the east, in the west and in
the north. The northern boundary is a 12 meter road
Conclusively, therefore, this is the only remaining 509 sq. m
portion of Lot 1914-B-2 surrounding the 345 sq. m. lot initially
purchased by Rodriguez. It is quite difined, determinate and
certain. Withal, this is the same portion adjunctively occupied
and possessed by Rodriguez since September 29, 1964
unperturbed by anyone for over twenty (20) years unti
appellee instituted this suit.
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Thus, all of the essential elements of a contract of sale are
present, i.e., that there was a meeting of the minds between
the parties, by virtue of which the late Juan San Andres
undertook to transfer ownership of and to deliver a determinate
thing for a price certain in money. As Art. 1475 of the Civil
Code provides:
The contract of sale is perfected at the moment there is a
meeting of minds upon the thing which is the object of the
contract and upon the price. . . .
That the contract of sale is perfected was confirmed by the
former administrator of the estates, Ramon San Andres, who
wrote a letter to respondent on March 30, 1966 asking for
P300.00 as partial payment for the subject lot. As the Court of
Appeals observed:
Without any doubt, the receipt profoundly speaks of a meeting
of the mind between San Andres and Rodriguez for the sale of
the property adjoining the 345 square meter portion previously
sold to Rodriguez on its three (3) sides excepting the frontage.
The price is certain, which is P15.00 per square meter.
Evidently, this is a perfected contract of sale on a deferredpayment of the purchase price. All the pre-requisite elements
for a valid purchase transaction are present. Sale does not
require any formal document for its existence and validity. And
delivery of possession of land sold is a consummation of the
sale (Galar vs. Husain, 20 SCRA 186 [1967]). A private deed
of sale is a valid contract between the parties (Carbonell v. CA,
69 SCRA 99 [1976]).
In the same vein, after the late Juan R. San Andres received
the P500.00 downpayment on March 30, 1966, Ramon R. San
Andres wrote a letter to Rodriguez and received from
Rodriguez the amount of P100.00 (although P300.00 was
being requested) deductible from the purchase price of thesubject portion. Enrique del Castillo, Ramon's authorized
agent, correspondingly signed the receipt for the P100.00.
Surely, this is explicitly a veritable proof of he sale over the
remaining portion of Lot 1914-B-2 and a confirmation by
Ramon San Andres of the existence thereof.16
There is a need, however, to clarify what the Court of Appeals
said is a conditional contract of sale. Apparently, the appellate
court considered as a "condition" the stipulation of the parties
that the full consideration, based on a survey of the lot, would
be due and payable within five (5) years from the execution of
a formal deed of sale. It is evident from the stipulations in the
receipt that the vendor Juan San Andres sold the residential lotin question to respondent and undertook to transfer the
ownership thereof to respondent without any qualification,
reservation or condition. InAng Yu Asuncion v. Court of
Appeals,17
we held:
In Dignos v. Court of Appeals (158 SCRA 375), we have said
that, although denominated a "Deed of Conditional Sale," a
sale is still absolute where the contract is devoid of
anyproviso that title is reserved or the right to unilaterally
rescind is stipulated, e.g., until or unless the price is paid.
Ownership will then be transferred to the buyer upon actual or
constructive delivery (e.g., by the execution of a public
document) of the property sold. Where the condition is
imposed upon the perfection of the contract itself, the failure of
the condition would prevent such perfection. If the condition is
imposed on the obligation of a party which is not fulfilled, the
other party may either waive the condition or refuse to proceed
with the sale. (Art. 1545, Civil Code).
Thus, in. one case, when the sellers declared in a "Receipt of
Down Payment" that they received an amount as purchaseprice for a house and lot without any reservation of title until ful
payment of the entire purchase price, the implication was tha
they sold their property.18
In People's Industrial Commercia
Corporation v. Court of Appeals,19
it was stated:
A deed of sale is considered absolute in nature where there is
neither a stipulation in the deed that title to the property sold is
reserved in the seller until full payment of the price, nor one
giving the vendor the right to unilaterally resolve the contract
the moment the buyer fails to pay within a fixed period.
Applying these principles to this case, it cannot be gainsaid
that the contract of sale between the parties is absolute, noconditional. There is no reservation of ownership nor a
stipulation providing for a unilateral rescission by either party
In fact, the sale was consummated upon the delivery of the lo
to respondent.20
Thus, Art. 1477 provides that the ownership
of the thing sold shall be transferred to the vendee upon the
actual or constructive delivery thereof.
The stipulation that the "payment of the full consideration
based on a survey shall be due and payable in five (5) years
from the execution of a formal deed of sale" is not a condition
which affects the efficacy of the contract of sale. It merely
provides the manner by which the full consideration is to be
computed and the time within which the same is to be paid. Butit does not affect in any manner the effectivity of the contract
Consequently, the contention that the absence of a forma
deed of sale stipulated in the receipt prevents the happening o
a sale has no merit.
Second. With respect to the contention that the Court o
Appeals erred in upholding the validity of a consignation o
P7,035.00 representing the balance of the purchase price o
the lot, nowhere in the decision of the appellate court is there
any mention of consignation. Under Art. 1257 of this Civi
Code, consignation is proper only in cases where an existing
obligation is due. In this case, however, the contracting parties
agreed that full payment of purchase price shall be due andpayable within five (5) years from the execution of a forma
deed of sale. At the time respondent deposited the amount of
P7,035.00 in the court, no formal deed of sale had yet been
executed by the parties, and, therefore, the five-year period
during which the purchase price should be paid had no
commenced. In short, the purchase price was not yet due and
payable.
This is not to say, however, that the deposit of the purchase
price in the court is erroneous. The Court of Appeals correctly
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ordered the execution of a deed of sale and petitioners to
accept the amount deposited by respondent.
Third. The claim of petitioners that the price of P7,035.00 is
iniquitous is untenable. The amount is based on the agreement
of the parties as evidenced by the receipt (Exh. 2). Time and
again, we have stressed the rule that a contract is the law
between the parties, and courts have no choice but to enforce
such contract so long as they are not contrary to law, morals,
good customs or public policy. Otherwise, court would beinterfering with the freedom of contract of the parties. Simply
put, courts cannot stipulate for the parties nor amend the
latter's agreement, for to do so would be to alter the real
intentions of the contracting parties when the contrary function
of courts is to give force and effect to the intentions of the
parties.
Fourth. Finally, petitioners argue that respondent is barred by
prescription and laches from enforcing the contract. This
contention is likewise untenable. The contract of sale in this
case is perfected, and the delivery of the subject lot to
respondent effectively transferred ownership to him. For this
reason, respondent seeks to comply with his obligation to paythe full purchase price, but because the deed of sale is yet to
be executed, he deemed it appropriate to deposit the balance
of the purchase price in court. Accordingly, Art. 1144 of the
Civil Code has no application to the instant
case.21
Considering that a survey of the lot has already been
conducted and approved by the Bureau of Lands, respondent's
heirs, assign or successors-in-interest should reimburse the
expenses incurred by herein petitioners, pursuant to the
provisions of the contract.
WHEREFORE, the decision of the Court of Appeals is
AFFIRMED with the modification that respondent is ORDERED
to reimburse petitioners for the expenses of the survey.
SO ORDERED.
Bellosillo and Buena, JJ., concur.
Quisumbing and De Leon, Jr., JJ., are on leave.
4. Pichel v. Alonzo
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-36902 January 30, 1982
LUIS PICHEL, petitioner,vs.
PRUDENCIO ALONZO, respondent.
GUERRERO, J.:
This is a petition to review on certiorari the decision of the
Court of First Instance of Basilan City dated January 5, 1973 in
Civil Case No. 820 entitled "Prudencio Alonzo, plaintiff, vs. Luis
Pichel, defendant."
This case originated in the lower Court as an action for the
annulment of a "Deed of Sale" dated August 14, 1968 and
executed by Prudencio Alonzo, as vendor, in favor of LuisPichel, as vendee, involving property awarded to the former by
the Philippine Government under Republic Act No. 477
Pertinent portions of the document sued upon read as follows:
That the VENDOR for and in consideration of the sum o
FOUR THOUSAND TWO HUNDRED PESOS (P4,200.00)
Philippine Currency, in hand paid by the VENDEE to the entire
satisfaction of the VENDOR, the VENDOR hereby sells
transfers, and conveys, by way of absolute sale, all the
coconut fruits of his coconut land, designated as Lot No. 21 -
Subdivision Plan No. Psd- 32465, situated at Balactasan
Plantation, Lamitan, Basilan City, Philippines;
That for the herein sale of the coconut fruits are for all the fruits
on the aforementioned parcel of land presently found therein
as well as for future fruits to be produced on the said parcel of
land during the years period; which shag commence to run as
of SEPTEMBER 15,1968; up to JANUARY 1, 1976 (sic);
That the delivery of the subject matter of the Deed of Sale shal
be from time to time and at the expense of the VENDEE who
shall do the harvesting and gathering of the fruits;
That the Vendor's right, title, interest and participation herein
conveyed is of his own exclusive and absolute property, free
from any liens and encumbrances and he warrants to theVendee good title thereto and to defend the same against any
and all claims of all persons whomsoever.1
After the pre-trial conference, the Court a quo issued an Orde
dated November 9, 1972 which in part read thus:
The following facts are admitted by the parties:
Plaintiff Prudencio Alonzo was awarded by the Governmen
that parcel of land designated as Lot No. 21 of Subdivision
Plan Psd 32465 of Balactasan, Lamitan, Basilan City in
accordance with Republic Act No. 477. The award was
cancelled by the Board of Liquidators on January 27, 1965 on
the ground that, previous thereto, plaintiff was proved to have
alienated the land to another, in violation of law. In 197 2
plaintiff's rights to the land were reinstated.
On August 14, 1968, plaintiff and his wife sold to defendant an
the fruits of the coconut trees which may be harvested in the
land in question for the period, September 15, 1968 to January
1, 1976, in consideration of P4,200.00. Even as of the date of
sale, however, the land was still under lease to one, Ramon
Sua, and it was the agreement that part of the consideration of
the sale, in the sum of P3,650.00, was to be paid by defendan
directly to Ramon Sua so as to release the land from the
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clutches of the latter. Pending said payment plaintiff refused to
snow the defendant to make any harvest.
In July 1972, defendant for the first time since the execution of
the deed of sale in his favor, caused the harvest of the fruit of
the coconut trees in the land.
xxx xxx xxx
Considering the foregoing, two issues appear posed by thecomplaint and the answer which must needs be tested in the
crucible of a trial on the merits, and they are:
First.Whether or nor defendant actually paid to plaintiff the
full sum of P4,200.00 upon execution of the deed of sale.
Second. Is the deed of sale, Exhibit 'A', the prohibited
encumbrance contemplated in Section 8 of Republic Act No.
477?2
Anent the first issue, counsel for plaintiff Alonzo subsequently
'stipulated and agreed that his client ... admits fun payment
thereof by defendant.3The remaining issue being one of law,
the Court below considered the case submitted for summary
judgment on the basis of the pleadings of the parties, and the
admission of facts and documentary evidence presented at the
pre-trial conference.
The lower court rendered its decision now under review,
holding that although the agreement in question is
denominated by the parties as a deed of sale of fruits of the
coconut trees found in the vendor's land, it actually is, for all
legal intents and purposes, a contract of lease of the land itself.
According to the Court:
... the sale aforestated has given defendant complete control
and enjoyment of the improvements of the land. That the
contract is consensual; that its purpose is to allow the
enjoyment or use of a thing; that it is onerous because rent or
price certain is stipulated; and that the enjoyment or use of the
thing certain is stipulated to be for a certain and definite period
of time, are characteristics which admit of no other conclusion.
... The provisions of the contract itself and its characteristics
govern its nature.4
The Court, therefore, concluded that the deed of sale in
question is an encumbrance prohibited by Republic Act No.
477 which provides thus:
Sec. 8. Except in favor of the Government or any of itsbranches, units, or institutions, land acquired under the
provisions of this Act or any permanent improvements thereon
shall not be thereon and for a term of ten years from and after
the date of issuance of the certificate of title, nor shall they
become liable to the satisfaction of any debt contracted prior to
the expiration of such period.
Any occupant or applicant of lands under this Act who transfers
whatever rights he has acquired on said lands and/or on the
improvements thereon before the date of the award or
signature of the contract of sale, shall not be entitled to apply
for another piece of agricultural land or urban, homesite or
residential lot, as the case may be, from the National Abaca
and Other Fibers Corporation; and such transfer shall be
considered null and void.5
The dispositive portion of the lower Court's decision states:
WHEREFORE, i