Leabres v. CA, et al.G.R. No. L-41847December 12, 19Paras, J.Facts: Clara Tambunting de Legarda died testate on April 22, 1950. Among the properties left bythe deceased is the Legarda Tambunting Subdivision. Shortly after the death of said deceased,plaintiff Catalino Leabres bought, on a partial payment of P1,000.00 a portion of the Subdivisionfrom surviving husband Vicente Legarda who acted as special administrator. Upon petition ofVicente Legarda, who later was appointed a regular administrator, the Probate Court of Manila,as regards the testate estate of said Clara Tambunting, authorized the sale of the entiresubdivision. Vicente Legarda was relieved as a regular administrator and the Philippine TrustCo. took over as such administrator. The Manotok Realty, Inc. emerged as the successful bidder.By order of the Probate Court, the Philippine Trust Co. executed the Deed of Absolute Sale ofthe subdivision in favor of the Manotok Realty, Inc. which deed was judicially approved andrecorded immediately in the proper Register of Deeds which issued the correspondingCertificates of Title to the Manotok Realty, Inc. Because of this, a complaint was filed byplaintiff Leabres, which seeks, among other things, for the quieting of title over the lot subjectmatter herein, for continuing possession thereof, and for damages.Issues: (1) whether or not the lower court erred in ordering the plaintiff-appellent Leabres tovacate and/or surrender the possession of the lot subject matter of the complaint to defendantappellee Manotok Realty, Inc.; (2) whether or not the petitioner had to submit his receipt to theprobate court in order that his right over the parcel of land in dispute could be recognized validand binding and conclusive against the Manotok Realty, Inc.Rulings: (1) No. The Legarda-Tambunting Subdivision is covered by Torrens Certificates ofTitle. Appellant anchors his claim on the receipt which he claims as evidence of the sale of saidlot in his favor. Admittedly, however, Leabres has not registered his supposed interest over thelot in the records of the Register of Deeds, nor did he present his claim for probate in the testateproceedings over the estate of the owner of said subdivision, in spite of the notices advertised inthe papers. On the other hand, defendant-appellee, Manotok Realty, Inc., bought the wholesubdivision which includes the subject matter herein by order and with approval of the ProbateCourt and upon said approval, the Deed of Absolute Sale in favor of appellee was immediatelyregistered with the proper Register of Deeds. Manotok Realty, Inc. has therefore the better rightover the lot in question

because in cases of lands registered under the Torrens Law, adverseinterests not therein annotated which are without the previous knowledge by third parties do notbind the latter. As to the improvement which appellant claims to have introduced on the lot,purchase of registered lands for value and in good faith hold the same free from all liens andencumbrances except those noted on the titles of said hand and those burdens imposed by law.An occupant of a land, or a purchaser thereof from a person other than the registered owner,cannot claim good faith so as to be entitled to retention of the parcels occupied by him untilreimbursement of the value of the improvements he introduced thereon, because he is chargedwith notice of the existence of the owner’s certificate of title.

Celestino Co & Company v. CIRFacts:

Celestino Co & Company is a general co-partnership registered under the trade name “Oriental Sash Factory”. From 1946 to 1951, it paid taxes equivalent to 7% on the gross receipts under Sec. 186 of the NIRC, which is a tax on the original sales of articles by manufacturer, producer or importer. However, in 1952 it began to claim only 3% tax under Sec. 191, which is a tax on sales of services. Petitioner claims that it does not manufacture ready-made doors, sash and windows for the public, but only upon special orders from the customers, hence, it is not engaged in manufacturing, but only in sales of services.

Issue:

Whether the petitioner company is engaged in manufacturing, or is merely a special service provider

Held:

Celestino Co & Company habitually makes sash, windows and doors, as it has represented in its stationery and advertisements to the public. That it "manufactures" the same is practically admitted by appellant itself. The fact that windows and doors are made by it only when customers place their orders, does not alter the nature of the establishment, for it is obvious that it only accepted such orders as called for the employment of such material-moulding, frames, panels-as it ordinarily manufactured or was in a position habitually to manufacture.

Any builder or homeowner, with sufficient money, may order windows or doors of the kind manufactured by this appellant. Therefore it is not true that it serves special customers only or confines its services to them alone. And anyone who sees, and likes, the doors ordered by Don Toribio Teodoro & Sons Inc. may purchase from appellant doors of the same kind, provided he pays the price. Surely, the appellant will not refuse, for it can easily duplicate or even mass-produce the same doors-it is mechanically equipped to do so.

The Oriental Sash Factory does nothing more than sell the goods that it mass-produces or habitually makes; sash, panels, mouldings, frames, cutting them to such sizes and combining them in such forms as its customers may desire. When this Factory accepts a job that requires the use of extraordinary or additional equipment, or involves services not generally performed by it-it thereby contracts for a piece of work filing

special orders within the meaning of Article 1467. The orders herein exhibited were not shown to be special. They were merely orders for work nothing is shown to call them special requiring extraordinary service of the factory.

Anyway, supposing for the moment that the transactions were not sales, they were neither lease of services nor contract jobs by a contractor. But as the doors and windows had been admittedly "manufactured" by the Oriental Sash Factory, such transactions could be, and should be taxed as "transfers" thereof under section 186 of the National Revenue Code.

CIR vs. Arnoldus Carpentry      Shop   

11072010

COMMISSIONER OF INTERNAL REVENUE vs. ARNOLDUS CARPENTRY SHOPG.R. No. 71122 March 25, 1988

Facts:

Arnoldus Carpentry Shop, Inc. is engaged in the business of preparing, processing, buying, selling, exporting, importing, manufacturing, trading and dealing in cabinet shop products, wood and metal home and office furniture, cabinets, doors, windows, etc. These furniture, cabinets and other woodwork were sold locally and exported abroad. For this business venture, private respondent kept samples or models of its woodwork on display from where its customers may refer to when placing their orders.

In March 1979, CIR conducted a investigation of the business tax liabilities of Arnoldus. It found out that it is a contractor and not a manufacturer. It was assessed of 3% contractor’s tax. Accdg to CIR, Arnoldus manufactures woodworks only upon previous order from supposed manufacturers and only in accordance with the latter’s own design, model number, color, etc. (The products are contracts for a piece of work.)

Arnoldus opposed contending that it is a manufacturer, hence entitled to tax exemption on its gross export sales under Section 202 (e) of the National Internal Revenue Code.

Issue:

1) WON Arnoldus is a manufacturer? YESa. Corrollarily, WON it is a contract of sale or contract for piece of work? Contract of SALE.

Held:

1)

Arnoldus is a “manufacturer” as defined in the Tax Code and not a “contractor” under Section 205(e) of the Tax Code.

2)

Accdg to CIR: the true test of whether or not the contract is a piece of work (and thus classifying private respondent as a contractor) or a contract of sale (which would classify private respondent as a manufacturer) is the mere existence of the product at the time of the perfection of the contract such that if the thing already exists, the contract is of sale, if not, it is work.

TRUE TEST whether or not it is contract of sale or for a piece of work:What determines whether the contract is one of work or of sale is whether the thing has been manufactured specially for the customer and upon his special order.” Thus, if the thing is specially done at the order of another, this is a contract for a piece of work. If, on the other hand, the thing is manufactured or procured for the general market in the ordinary course of one’s business, it is a contract of sale. The distinction between a contract of sale and one for work, labor and materials is tested by the inquiry whether the thing transferred is one not in existence and which never would have existed but for the order of the party desiring to acquire it, or a thing which would have existed and has been the subject of sale to some other persons even if the order had not been given. The mere fact that he did not have on hand a particular piece or pieces of furniture ordered does not make him a contractor only.

A contract for the delivery at a certain price of an article Which the vendor in the ordinary course of his business manufactures or procures for the – general market, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general market, it is a contract for a piece of work.

Arnoldus had a ready stock of its shop products for sale to its foreign and local buyers. As a matter of fact, the purchase orders from its foreign buyers showed that they ordered by referring to the models designed by petitioner. Even purchases by local buyers for television cabinets were by orders for existing models. Hence, it is a manufacturer. Furthermore, it is a contract of sale.

These products were for sale to the general public and not for special orders. Hence, being a manufacturer, Arnoldus is entitled to tax exemption under Sec 202 (d) and Sec 167 (d) & (e) of the Tax Code.

Quiroga vs. Parsons

Facts: A contract was entered into by and between Quiroga and Parsons for the

exclusive sale of Quiroga beds in the Visayan Islands. The tenor of said contractprovides that Quiroga shall furnish beds of his manufacture to Parsons for thelatter’s establishment in Iloilo, and shall invoice them at the same price he fixedfor sales in Manila, and in the invoices, shall make an allowance of a discount ascommission on the sales; and Parsons shall order the beds by the dozen,whether of the same or different styles. Parsons further binds himself to payQuiroga for the beds received within 60 days from the date of their shipment,and binds himself not to sell any other kind except Quiroga beds.

Quiroga contends that Parsons violated the following obligations: not to sell bedsat higher prices than those of the invoices, to have an open establishment inIloilo; to conduct the agency, to keep the beds on public exhibition, and to payfor the advertisement expenses for the same, and to order the beds by thedozen and in no other manner. He further alleged that Parsons was his agent forthe sale in Iloilo, and said obligations are implied in a contract of commercial agency.

Issue: WON Parsons, by reason of the contract, was a purchaser or an agent of

Quiroga.

Ruling: The contract entered into by the parties is one of a purchase and sale.

In the contract in question, what was essential, as constituting the cause andsubject matter, is that Quiroga was to furnish Parsons with beds which the lattermight order, at the price stipulated, and that Parsons was to pay the price in themanner stipulated. These features exclude the legal conception of an Agency orOrder to Sell, whereby the mandatory or agent received the thing to sell it, anddoes not pay its price, but delivers to the principal the price he obtains from

thesale of the thing to a third person, and if he does not succeed in selling it, hereturns it.

Gonzalo Puya and Sons vs. Arco Amusement

Facts: Gonzalo Puyat & Sons is the exclusive agent of Starr PianoCompany of Richmond, Indiana USA, in the Philippines. Teatro Arco, orArco Amusement Company, desiring to equip its cinematograph withsound reproducing devices, approached Puyat. It was agreed by theparties that Puyat would in behalf of Arco order equipment from StarrPiano and that Arco would pay Puyat in addition to price of the equipment, 10% commission plus all expenses such as freight,insurance, banking charges, cables, etc. Puyat informed Arco that theprice of the equipment was $1,700, to which Arco agreed. Later, asimilar arrangement was made by Arco for the purchase of similarequipment for $1,600 with 10% commission, with Puyat charging anadditional flat charge of $160 for all expenses and charges. 3 yearslater, Arco learned that the price quoted by Puyat on the 2 orders werenot the net price but the list price for the equipment. Arco filed acomplaint with the trial court (CFI) demanding reimbursement from said“overpriced” sales. The trial court ruled in favor of Puyat, but the Courtof Appeals reversed such decision and declared Puyat an agent of ArcoAmusement in the purchase of said equipment.

Issue: Whether the agreement made between Puyat and Arco

Amusement is that of purchase and sale or that of agency.

Held: Gonzalo Puyat & Sons cannot be the agent of Arco Amusement inthe purchase of equipment from Starr Piano Company as Puyat & Sonsis already the exclusive agent of Starr Piano in the Philippines. Puyatcannot be the agent of both vendor and purchaser. The fact that acommission was offered to the other does not necessarily mean that thelatter has become the agent of the former, as this was only anadditional price which Arco bound itself to pay and which is notincompatible with the contract of purchase and sale. Puyat is not boundto reimburse the profit acquired in the transaction, as this is the veryessence of

commerce involving middlemen and merchants. The contractis the law between the parties. What does not appear on the face of thecontract should be regarded as “dealer’s or trader’s talk” which cannotbind either party. Not every concealment is fraud, short of fraud, andsuch as that in this case, is considered as business acumen.

Dignos vs. Court of Appeals, and Jabil 158 SCRA 378 February 1988

FACTS:

In July 1965, herein petitioners Silvestre T. Dignos and Isabela Lumungsod de Dignos (spouses Dignos) sold their parcel of land in Opon, Lapu–Lapu to herein private respondent Antonio Jabil for the sum of P28,000 payable for two installments, with an assumption of indebtedness with the First Insular Bank of Cebu in the sum of P12,000 and the next installment of P4,000 to be paid in September 1965. In November 1965, the spouses Dignos sold the same parcel of land for P35,000 to defendants Luciano Cabigas and Jovita L. de Cabigas (spouses Cabigas) who were then US citizens, and executed in their favor an Absolute Deed of Sale duly registered in the Office of the Register of Deeds.

Upon discovery of the 2nd sale of the subject land, Jabil filed the case at bar in the CFI of Cebu which rendered its Decision in August 1975 declaring the 2nd sale to the spouses Cabigas null and void ab initio and the 1st sale to Jabil not rescinded. The CFI of Cebu also ordered Jabil to pay the remaining P16,000 to the spouses Dignos and to reimburse the spouses Cabigas a reasonable amount corresponding the expenses in the construction of hollow block fences in the said parcel of land. The spouses Dignos were also ordered to return the P35,000 to the spouses Cabigas.

Both Jabil and the spouses Dignos appealed to the Court of Appeals, which affirmed in July 1981 the CFI of Cebu’s Decision except for the part of Jabil paying the expenses of the spouses Cabigas for building a fence. The spouses Dignos contested that the contract between them and Jabil was merely a contract to sell

and not a deed of sale.

ISSUE:

Is the contract between the parties a contract of sale or a contract to sell?

COURT RULING:

The Supreme Court affirmed the Decision of the Court of Appeals saying stated that all the elements of a valid contract of sale are present in the document and that the spouses Dignos had no right to sell the land in question because an actual delivery of its possession has already been made in favor of Jabil as early as March 1965. It was also found that the spouses Dignos never notified Jabil by notarial act that they were rescinding the contract, and neither did they file a suit in court to rescind the sale. There is no showing that Jabil properly authorized a certain Cipriano Amistad to tell petitioners that he was already waiving his rights to the land in question.

SECOND DIVISION

[G.R. No. 135528.  July 14, 2004]

SPOUSES ORLANDO A. RAYOS and MERCEDES T. RAYOS, petitioners, vs. THE COURT OF APPEALS and SPOUSES ROGELIO and VENUS MIRANDA, respondents.

D E C I S I O N

CALLEJO, SR., J.:

This is a petition for review on certiorari of the Decision[1] of the Court of Appeals[2] in CA-G.R. CV No. 46727 which affirmed the Decision [3] of the Regional Trial Court of Makati, Branch 62, in Civil Case No. 15639 for specific performance and damages, and Civil Case No. 15984 for sum of money and damages.

The two (2) cases stemmed from the following antecedent facts:

On December 24, 1985, petitioner Orlando A. Rayos, a practicing lawyer, and his wife, petitioner Mercedes T. Rayos, secured a short-term loan from the Philippine Savings Bank (PSB) payable within a period of one (1) year in quarterly installments of P29,190.28, the first quarterly payment to start on March 24, 1986.  The loan was evidenced by a promissory note which the petitioners executed on December 24, 1985.[4] To secure the payment of the loan, the petitioners-spouses executed, on the same date, a Real Estate Mortgage over their property covered by Transfer Certificate of Title (TCT) No. 100156 located in Las Piñas, Metro Manila.[5]

On December 26, 1985, the petitioners, as vendors, and the respondents, Spouses Miranda, as vendees, executed a Deed of Sale with Assumption of Mortgage over the subject property for the price of P214,000.00.  However, on January 29, 1986, the petitioners-spouses, likewise, executed a Contract to Sell the said property in favor of the respondents for P250,000.00 with the following condition:

3.  That upon full payment of the consideration hereof, the SELLER shall execute a Deed of Absolute Sale in favor of the BUYER that the payment of capital gains tax shall be for the account of the SELLER and that documentary stamps, transfer tax, registration expenses for the transfer of title including the notarization and preparation of this Contract and subsequent documents if any are to be executed, real estate taxes

from January 1, 1986 and other miscellaneous expenses shall be for the account of the BUYER; the SELLER hereby represents that all association dues has been paid but that subsequent to the execution of this Contract the payment of the same shall devolve upon the BUYER.[6]

The petitioners obliged themselves to execute a deed of absolute sale over the property in favor of the respondents upon the full payment of the purchase price thereof.

Respondent Rogelio Miranda filed an application dated May 4, 1986 with the PSB to secure the approval of his assumption of the petitioners’ obligation on the loan, and appended thereto a General Information sheet.[7] Respondent Rogelio Miranda stated therein that he was the Acting Municipal Treasurer of Las Piñas and had an unpaid account with the Manila Banking Corporation in the amount of P18,777.31.  The PSB disapproved his application.  Nevertheless, respondent Rogelio Miranda paid the first quarterly installment on the petitioners’ loan on March 21, 1986 in the amount of P29,190.28.  The said amount was paid for the account of the petitioners.  Respondent Rogelio Miranda, likewise, paid the second quarterly installment in the amount ofP29,459.00 on June 23, 1986, also for the account of the petitioners.[8]

In the meantime, respondent Rogelio Miranda secured the services of petitioner Orlando Rayos as his counsel in a suit he filed against the Manila Banking Corporation, relative to a loan from the bank in the amount of P100,000.00.  Both parties agreed to the payment of attorney’s fees, as follows:

Our agreement is as follows:

1.      You will pay me P700.00 as filing fee and other miscellaneous expenses which I personally received from you this morning;

2.      Award to you of any amount in terms of moral, exemplary or actual and other forms of damages shall accrue to you in the amount of 70% thereof;

3.      30% of the award to you in the concept of No. 2 hereof shall pertain to me as my contingent fee;

4.      All attorney’s fees that the court shall award to me or by the management of TMBC if they agree to extrajudicially settle shall pertain exclusively to me;

5.      Execution of judgment expenses shall be for your account;

6.      Should the case be appealed, my contingent fee shall increase by 10% if the appeal is to the Intermediate Appellate Court on questions of

facts and law, and if appealed from there to the Supreme Court, then another 10% shall accrue to me.[9]

On May 14, 1986, petitioner Orlando Rayos filed respondent Rogelio Miranda’s complaint against the bank with the Regional Trial Court of Makati, docketed as Civil Case No. 13670.[10] In the meantime, the latter paid the third quarterly installment on the PSB loan account amounting to P29,215.66, for which the bank issued a receipt for the account of the petitioners.

The parties executed a Compromise Agreement in Civil Case No. 13670 in which they agreed that each party shall pay for the respective fees of their respective counsels.[11] The trial court rendered judgment on October 23, 1986 based on the said compromise agreement.[12] Petitioner Orlando Rayos demanded the payment of attorney’s fees in the amount of P5,631.93, but respondent Rogelio Miranda refused to pay.

On November 12, 1986, petitioner Orlando Rayos wrote to respondent Rogelio Miranda and enclosed a copy of his motion in Civil Case No. 13670 for the annotation of his attorney’s lien at the dorsal portion of the latter’s title used as security for the loan with the Manila Banking Corporation.[13] The respondent opposed the motion, claiming that the petitioner agreed to render professional services on a contingent basis.[14]

Petitioner Orlando Rayos again wrote respondent Rogelio Miranda on November 30, 1986, reminding the latter of the last quarterly payment of his loan with the PSB.  He also advised the respondent to thereafter request the bank for the cancellation of the mortgage on his property and to receive the owner’s duplicate of his title over the same.  Petitioner Orlando Rayos also wrote that their dispute over his attorney’s fees in Civil Case No. 13670 should be treated differently.[15]

Petitioner Orlando Rayos then received a Letter dated November 27, 1986 from the PSB, reminding him that his loan with the bank would mature on December 24, 1986, and that it expected him to pay his loan on or before the said date. [16] Fearing that the respondents would not be able to pay the amount due, petitioner Orlando Rayos paid P27,981.41[17] to the bank on December 12, 1986, leaving the balance of P1,048.04.  In a Letter dated December 18, 1986, the petitioner advised the PSB not to turn over to the respondents the owner’s duplicate of the title over the subject property, even if the latter paid the last quarterly installment on the loan, as they had not assumed the payment of the same.[18]

On December 24, 1986, respondent Rogelio Miranda arrived at the PSB to pay the last installment on the petitioners’ loan in the amount of P29,223.67.  He informed the bank that the petitioners had executed a deed of sale with assumption of mortgage in their favor, and that he was paying the balance of the loan, conformably to said deed.  On the other hand, the bank informed the respondent that it was not bound by said deed, and showed petitioner Orlando Rayos’ Letter dated December 18, 1986.  The respondent was also informed that the petitioners had earlier paid the amount of P27,981.41 on the loan.  The bank refused respondent Rogelio Miranda’s offer to pay the loan, and confirmed its refusal in a Letter dated December 24, 1986. [19]

On even date, respondent Rogelio Miranda wrote the PSB, tendering the amount of P29,223.67 and enclosed Interbank Check No. 01193344 payable to PSB.[20] Thereafter, on December 29, 1986, the petitioners paid the balance of their loan with the bank in the amount of P1,081.39 and were issued a receipt therefor.[21] On January 2, 1987, the PSB wrote respondent Rogelio Miranda that it was returning his check. [22]

On January 2, 1987, respondent Rogelio Miranda filed a complaint against the petitioners and the PSB for damages with a prayer for a writ of preliminary attachment with the RTC of Makati. The case was docketed as Civil Case No. 15639 and raffled to Branch 61 of the court.  The respondent alleged inter alia that the petitioners and the PSB conspired to prevent him from paying the last quarterly payment of the petitioners’ loan with the bank, despite the existence of the deed of sale with assumption of mortgage executed by him and the petitioners, and in refusing to turn over the owner’s duplicate of TCT No. 100156, thereby preventing the transfer of the title to the property in his name.  Respondent Rogelio Miranda prayed that:

WHEREFORE, it is respectfully prayed that judgment be rendered in favor of plaintiff and against defendants, ordering the latter, jointly and severally, as follows:

(a)     To pay to plaintiff the sum of P267,197.33, with legal interest from date of demand, as actual or compensatory damages representing the unreturned price of the land;

(b)     To pay to plaintiff the sum of P500,000.00 as consequential damages;

(c)     To pay to plaintiff the sum of P1,000,000.00 as moral damages;

(d)     To pay to plaintiff the sum of P100,000.00 as exemplary damages by way of example or correction for the public good;

(e)     To pay to plaintiff the sum of P100,000.00 for and as attorney’s fees;

(f)      To pay for the costs of suit; and

(g)     That a Writ of Attachment be issued against the properties of defendant Rayos spouses as security for the satisfaction of any judgment that may be recovered.

PLAINTIFF FURTHER PRAYS for such other remedies and relief as are just or equitable in the premises.[23]

The trial court granted the respondent’s plea for a writ of preliminary attachment on a bond of P260,000.00.  After posting the requisite bond, the respondent also filed a criminal complaint against petitioner Orlando Rayos for estafa with the Office of the Provincial Prosecutor of Makati, docketed as I.S. No. 87-150.  He, likewise, filed a

complaint for disbarment in this Court against petitioner Orlando Rayos, docketed as Administrative Case No. 2974.  Unaware of the said complaint, the petitioner wrote the respondent on January 3, 1986 that as soon as his payment to the PSB of P29,223.67 was refunded, the owner’s duplicate of the title would be released to him. [24] On January 5, 1986, petitioner Orlando Rayos wrote respondent Rogelio Miranda, reiterating that he would release the title in exchange for his cash settlement of P29,421.41.[25] The respondent failed to respond.

In the meantime, the PSB executed on January 8, 1987 a Release of Real Estate Mortgage in favor of the petitioners,[26] and released the owner’s duplicate of title of TCT No. 100156.[27] On January 17, 1987, petitioner Orlando Rayos wrote respondent Rogelio Miranda, reiterating his stance in his Letters of January 3 and 5, 1987.

In the meantime, the petitioners received the complaint in Civil Case No. 15639 and filed their Answer with Counterclaim in which they alleged that:

14. That plaintiff has no cause of action against defendants Rayos, the latter are willing to deliver the title sought by plaintiff under the terms set out in their letters dated January 3, 5, 17, and 20, hereto marked as Annexes “1,” “1-A,” “1-B” and “1-C;”[28]

Petitioner Orlando Rayos filed a complaint on February 1, 1987 against respondent Rogelio Miranda with the Regional Trial Court of Makati, docketed as Civil Case No. 15984 for Specific Performance with Damages for the collection of the amount of P29,223.67 which he had paid to the PSB on  December 12 and 19, 1986, and his attorney’s fees in Civil Case No. 13670.  The trial court consolidated the cases in Branch 62 of the RTC.

Respondent Rogelio Miranda filed an Amended Complaint in Civil Case No. 15639 for specific performance with damages, impleading the officers of the PSB as parties-defendants.  He alleged that of the purchase price of the property of P214,000.00, he had paid the entirety thereof to the petitioners, and that petitioner Orlando Rayos acted unethically in trying to collectP5,631.93 from him as his attorney’s fees in Civil Case No. 13670, and in having such claim annotated at the dorsal portion of his title over the property he mortgaged to the Manila Banking Corporation.

Respondent Rogelio Miranda prayed that, after due proceedings, judgment be rendered in his favor, thus:

WHEREFORE, it is respectfully prayed that judgment be rendered in favor of plaintiff and against defendants, as follows:

(a) Ordering defendants spouses Orlando A. Rayos and Mercedes T. Rayos to deliver forthwith to plaintiff the Owner’s Duplicate of Transfer Certificate of Title No. 100156, Registry of Deeds for Pasay City;

(b) Ordering defendants, jointly and severally, to pay to plaintiff the sum of P1,000,000.00 as moral damages;

(c) Ordering defendants, jointly and severally, to pay to plaintiff the sum of P867,197.33 as exemplary damages by way of example or correction for the public good;

(d) Ordering defendants, jointly and severally, to pay to plaintiff the sum of P100,000.00 for and as attorney’s fees;

(e) Ordering defendants, jointly, to pay the costs of suit; and

(f) Ordering the issuance of a Writ of Attachment against the properties of defendants Rayos spouses as security for the satisfaction of any judgment that may be recovered.

PLAINTIFF further prays for such other remedies and relief as are just or equitable in the premises.[29]

In the meantime, petitioner Orlando Rayos filed an Amended Complaint in Civil Case No. 15984 impleading his wife and that of respondent Rogelio Miranda as parties to the case.  On March 4, 1987, the trial court issued an Order granting the petitioners’ motion in Civil Case No. 15639 for the discharge of the attachment on their property.[30] The court also denied the respondents’ motion for reconsideration of the Order of the court.  The respondents, thereafter, filed a petition for review with the Court of Appeals for the nullification of the said Order.

On July 9, 1987, the public prosecutor dismissed the charge of estafa against petitioner Orlando Rayos.[31] The respondents appealed the resolution to the Department of Justice.

On May 26, 1987, the PSB and its officers filed their Answer in Civil Case No. 15639, and alleged the following by way of special and/or affirmative defenses, thus:

27.  The application for the plaintiff to assume the mortgage loan of the defendants Spouses Rayos was not approved, and it was NOT even recommended by the Marketing Group of defendant PSBank for approval by its Top Management, because the credit standing of the plaintiff was found out to be not good;

28.  The acceptance of the payments made by the plaintiff for three (3) amortizations on the loan of defendants Spouses Rayos was merely allowed upon the insistence of the plaintiff, which payments were duly and accordingly receipted, and said acceptance was in accordance with the terms of the Real Estate Mortgage executed by the defendants Spouses Rayos in favor of the defendant PSBank and is also allowed by law;[32]

The parties in Civil Case No. 15639 agreed to submit the case for the trial court’s decision on the basis of their pleadings and their respective affidavits.  In a Resolution dated July 26, 1988, then Undersecretary of Justice Silvestre Bello III affirmed the Public Prosecutor’s resolution in I.S. No. 87-150.[33]

On January 30, 1989, the petitioners sold the property to Spouses Mario and Enriqueta Ercia for P144,000.00.  The said spouses were not impleaded as parties-defendants in Civil Case No. 15639.  On May 18, 1989, the petitioners filed an amended complaint in Civil Case No. 15984, appending thereto a copy of the Contract to Sell in favor of the respondents.  The trial court admitted the said complaint.

On November 15, 1989, this Court rendered its Decision dismissing the complaint for disbarment against Rayos.[34]

On January 29, 1993, the trial court rendered judgment, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered, as follows:

I.  (a) In Civil Case No. 15639, this Court orders plaintiff Rogelio Miranda to refund to spouses Orlando and Mercedes T. Rayos the total sum of P29,069.45, Rayos paid to PS Bank as the last amortization and as release of mortgage fee, without any interest; and upon receipt of the sum of P29,069.45 from Rogelio Miranda, Spouses Orlando and Mercedes T. Rayos shall deliver to Rogelio Miranda Transfer Certificate of Title No. 100156 of the Registry of Deeds of Pasay City; and, deliver to Rogelio Miranda the possession of the parcel of land described in the said title;

(b) Dismissing the complaint for damages of Plaintiff Rogelio Miranda against Spouses Orlando and Remedios (sic) T. Rayos, Philippine Savings Bank, Jose Araullo, Cesar I. Valenzuela, Dionisio Hernandez, Nestor E. Valenzuela, Raul T. Totanes, and Belinda Lim, for insufficiency of evidence; while the counterclaims of PS Bank, Jose Araullo, Cesar Valenzuela, Dionisio Hernandez, Nestor E. Valenzuela, Raul Totanes, and Belinda Lim, are likewise dismissed for insufficiency of evidence.

(c) The counterclaims of Spouses Orlando and Mercedes T. Rayos will be treated in Civil Case No. 15984;

II. In Civil Case No. 15984, this Court orders Defendant Rogelio Miranda to pay to Plaintiff Orlando Rayos the sum of P4,133.19 at 12% interest per annum, from the date of the filing of the complaint on Feb. 11, 1987 until fully paid.

No costs in both cases.

SO ORDERED.[35]

The petitioners appealed the decision to the Court of Appeals contending that:

I.   THE COURT A QUO COMMITTED A GRAVE ERROR IN NOT FINDING THAT ROGELIO A. MIRANDA COMMITTED A BREACH OF CONTRACT IN NOT PAYING THE FULL CONTINGENT FEE OF 30% IN WRITING IN THE MANILABANK CASE AND BECAUSE OF THAT BREACH, HE CANNOT NOW DEMAND SPECIFIC PERFORMANCE AND THE COURT A QUO SHOULD HAVE LEFT THE PARTIES AS THEY ARE;

II.  THE COURT A QUO SIMILARLY COMMITTED AN ERROR IN NOT FINDING THAT THE DECISION IN “SEVA VS. ALFREDO BERWIN & CO. & MEDEL” IS APPLICABLE FOUR SQUARE WHEREBY HE WHO BREACHES HIS CONTRACT IS NOT ENTITLED TO SPECIFIC PERFORMANCE;[36]

On July 27, 1998, the Court of Appeals rendered judgment affirming with modification the decision of the RTC, thus:

WHEREFORE, premises considered, the appealed decision of the Regional Trial Court of Makati City, is hereby AFFIRMED, with the modification abovestated.[37]

The petitioners filed the instant petition, and ascribed the following errors on the appellate court:

I.   THE COURT OF APPEALS (CA) COMMITTED AN ERROR IN NOT FINDING THAT THE PRIVATE RESPONDENT MIRANDA COMMITTED THE FIRST BREACH FOR FAILURE TO ASSUME THE LOAN THUS HE FAILED TO SURROGATE (sic) HIMSELF TO PSB.

II.  THE CA COMMITTED AN ERROR IN FINDING THAT PETITIONERS PRE-EMPTED PRIVATE RESPONDENT MIRANDA IN DEPOSITING THE LAST AMORTIZATION WHEN MIRANDA HAD NO LEGAL STANDING WITH PSB DUE TO THE LATTER’S NON-APPROVAL OF THE ASSUMPTION OF THE LOAN.

III.  THE CA COMMITTED AN ERROR IN FINDING BOTH PARTIES GUILTY OF FIRST VIOLATING THE OBLIGATIONS INCUMBENT UPON THEM EVEN INFERRING THAT PETITIONERS COMMITTED THE BREACH FIRST BUT LATER CONCLUDING THAT THE BREACH WAS COMMITTED BY BOTH PARTIES. IT DID NOT MAKE A CORRECT ASSESSMENT OF WHO ACTUALLY COMMITTED THE FIRST BREACH.

IV. THE CA COMMITTED AN ERROR IN NOT ALLOWING THE OFFSET IF ITS DECISION STOOD OF THE AMOUNT OF P4,133.19 PLUS 12% INT. P.A. FROM THE FILING OF THE COMPLAINT (CV 15984), THUS, ENTIRELY DISREGARDING THE DECISION OF THE TRIAL COURT IN SAID CASE ALLOWING ONLY THE DECISION IN CV 15639.

V.  THE CA COMMITTED AN ERROR IN NOT APPLYING THE DECSION (sic) LAID DOWN IN “SEVA VS. ALFRED BERWIN & CO. AND MEDEL” THAT A PERSON HIMSELF AT FAULT CANNOT ENFORCE SPECIFIC PERFORMANCE.[38]

The petitioners assert that the Court of Appeals erred in not finding that the respondents first committed a breach of their contract to sell upon their failure to pay the amount due for the last quarterly installment of their loan from the PSB.  The petitioners

fault the Court of Appeals for not relying on the resolution of Undersecretary Silvestre Bello III affirming the dismissal of the criminal complaint for estafa in I.S. No. 87-150, as cited by this Court in its decision in Miranda v. Rayos,[39] where it was also held that petitioner Orlando Rayos paid the last quarterly installment because he thought that the respondents would not be able to pay the same.  The petitioners argue that they had no other alternative but to pay the last quarterly installment due on their loan with the PSB, considering that they received a demand letter from the bank on November 28, 1986, coupled by its denial of the respondents’ request to assume the payment of the loan.  They insist that they did not block the respondents’ payment of the balance of the loan with the bank.  The petitioners contend that even if the parties committed a breach of their respective obligations under the contract to sell, it behooved the Court of Appeals to apply Article 1192 of the Civil Code in the instant case, which reads:

… The power to rescind obligation is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.

The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case.  He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.

This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage Law.

The petition has no merit.

The assailed ruling of the Court of Appeals reads:

After due study, the Court finds that there was no basis in fact and law for the appellants to usurp the payment of the last amortization on the mortgage upon the parcel of land it had conveyed to the Mirandas.  Even if the appellants wanted to keep their good credit standing, they should not have preempted Miranda in paying the final amortization.  There is no sufficient showing that Miranda was in danger of defaulting on the said payment. In fact, it appears that he approached the bank to tender payment, but he was refused by the bank, because he was beaten to the draw, so to speak, by the appellants.  Appellants were able to do so because, for some reasons, the Mirandas’ assumption of the mortgage has not been approved by the bank.  In doing so, the appellants had unilaterally cancelled the deed of sale with assumption of mortgage, without the consent of the Mirandas.  This conduct by the appellants is, to say the least, injudicious as under Article 1308 of the Civil Code, contracts must bind both contracting parties and their validity or compliance cannot be left to the will of one of them.

Just as nobody can be forced to enter into a contract, in the same manner, once a contract is entered into, no party can renounce it unilaterally or without the consent of the other.  It is a general principle of law that no one may be permitted to change his mind or disavow and go back upon his own acts, or to proceed contrary thereto, to the prejudice of the other party.  In a regime of law and order, repudiation of an agreement validly entered into cannot be made without any ground or reason in law or in fact for such repudiation.

In the same way that the Rayos spouses must respect their contract with the Mirandas for the sale of real property and assumption of mortgage, Rogelio Miranda has to recognize his obligations under his agreement to pay contingent attorney’s fees to Orlando Rayos.[40]

The Court of Appeals erred in so ruling.

The findings and disquisitions of the Court of Appeals cannot prevail over our findings in Miranda v. Rayos,[41] a case which involves the same parties, and where we held that the petitioners cannot be faulted for paying the amortization due for the last quarterly installment on their loan with the PSB:

It is difficult to imagine that complainant would be so naïve as to be totally unaware of the provisions of the original contract between the PSB and the spouses Rayos.  He is a degree holder (A.B. Pre-Law and B.S.C.) and Acting Municipal Treasurer of Las Piñas.  In short, he is not an ordinary layman.  As a buyer with a knowledge of law, it was unnatural for him to read the provisions of the real estate mortgage wherein it is provided, among others, that the sale of the property covered by the mortgage does not in any manner relieve the mortgagor of his obligation but that “on the contrary, both the vendor and the vendee, or the party in whose favor the alienation or encumbrance is made shall be, jointly and severally, liable for said mortgage obligations.” There is every reason to believe that it was pursuant to the said provision in the real estate mortgage that complainant tried to assume the loan obligation of the Rayoses by filling up and submitted the loan application (page 30, records) sent by Orland Rayos.  By signing the loan application and the general information sheet (page 31, records) in connection with said application, complainant showed that he knew that there was a need to formally apply to the bank in order for him to assume the mortgage.

We find respondent spouses’ version that when complainant’s application to assume the mortgage loan was disapproved he begged that he be allowed to pay the quarterly amortization credible, owing to the fact that complainant made the payments for the account of the Rayoses.  Hence, complainant knew that since his application to the PSB was not approved, there was no substitution of parties and so he had to pay for the account of respondent spouses as shown by the receipts issued by the PSB.

As for the charge that Rayos paid the last installment to block complainant from getting the title and transferring the same to his name, respondents’ version is more satisfactory and convincing.  Respondent Orland Rayos paid the last amortization when it became apparent that complainant would not be able to give the payment on the due date as he was still trying to sell his Lancer car.  Even if complainant was able to pay the last installment of the mortgage loan, the title would not be released to him as he knew very well that his application to assume the mortgage was disapproved and he had no personality as far as PSB was concerned.[42]

Contrary to the ruling of the Court of Appeals, the petitioners did not unilaterally cancel their contract to sell with the respondents when they paid the total amount of P29,062.80 to the PSB in December 1986. [43] In fact, the petitioners wrote the respondents on January 3, 5 and 17, 1987, that they were ready to execute the deed of absolute sale and turn over the owner’s duplicate of TCT No. 100156 upon the respondents’ remittance of the amount of P29,223.67.  The petitioners reiterated the same stance in their Answer with Counterclaim in Civil Case No. 15639.  The petitioners cannot, likewise, be faulted for refusing to execute a deed of absolute sale over the property in favor of the respondents, and in refusing to turn over the owner’s duplicate of TCT No. 100156 unless the respondents refunded the said amount.  The respondents were obliged under the contract to sell to pay the said amount to the PSB as part of the purchase price of the property.  On the other hand, it cannot be argued by the petitioners that the respondents committed a breach of their obligation when they refused to refund the said amount.

It bears stressing that the petitioners and the respondents executed two interrelated contracts, viz: the Deed of Sale with Assumption of Mortgage dated December 26, 1985, and the Contract to Sell dated January 29, 1986.  To determine the intention of the parties, the two contracts must be read and interpreted together. [44] Under the two contracts, the petitioners bound and obliged themselves to execute a deed of absolute sale over the property and transfer title thereon to the respondents after the payment of the full purchase price of the property, inclusive of the quarterly installments due on the petitioners’ loan with the PSB:

3.  That upon full payment of the consideration hereof, the SELLER shall execute a Deed of Absolute Sale in favor of the BUYER that the payment of capital gains tax shall be for the account of the SELLER and that documentary stamps, transfer tax, registration expenses for the transfer of title including the notarization and preparation of this Contract and subsequent documents if any are to be executed, real estate taxes from January 1, 1986 and other miscellaneous expenses shall be for the account of the BUYER; the SELLER hereby represents that all association dues has been paid but that subsequent to the execution of this Contract the payment of the same shall devolve upon the BUYER.[45]

Construing the contracts together, it is evident that the parties executed a contract to sell and not a contract of sale.  The petitioners retained ownership without further

remedies by the respondents[46] until the payment of the purchase price of the property in full.  Such payment is a positive suspensive condition, failure of which is not really a breach, serious or otherwise, but an event that prevents the obligation of the petitioners to convey title from arising, in accordance with Article 1184 of the Civil Code.[47] In Lacanilao v. Court of Appeals,[48] we held that:

It is well established that where the seller promised to execute a deed of absolute sale upon completion of payment of the purchase price by the buyer, the agreement is a contract to sell.  In contracts to sell, where ownership is retained by the seller until payment of the price in full, such payment is a positive suspensive condition, failure of which is not really a breach but an event that prevents the obligation of the vendor to convey title in accordance with Article 1184 of the Civil Code.

The non-fulfillment by the respondent of his obligation to pay, which is a suspensive condition to the obligation of the petitioners to sell and deliver the title to the property, rendered the contract to sell ineffective and without force and effect. [49] The parties stand as if the conditional obligation had never existed.  Article 1191 of the New Civil Code will not apply because it presupposes an obligation already extant.[50] There can be no rescission of an obligation that is still non-existing, the suspensive condition not having happened.[51]

However, the respondents may reinstate the contract to sell by paying the P29,223.67, and the petitioners may agree thereto and accept the respondents’ late payment.[52] In this case, the petitioners had decided before and after the respondents filed this complaint in Civil Case No. 15639 to accept the payment of P29,223.67, to execute the deed of absolute sale over the property and cause the transfer of the title of the subject property to the respondents.  The petitioners even filed its amended complaint in Civil Case No. 15984 for the collection of the said amount.  The Court of Appeals cannot, thus, be faulted for affirming the decision of the trial court and ordering the petitioners to convey the property to the respondents upon the latter’s payment of the amount of P29,223.67, provided that the property has not been sold to a third-party who acted in good faith.

IN VIEW OF ALL THE FOREGOING, the petition is DENIED DUE COURSE.  The Decision of the Court of Appeals in CA-G.R. CV No. 46727 is AFFIRMED, except as to the factual finding that the petitioners “usurped the payment of the last amortization on the mortgage upon the parcel of land.” Costs against the petitioners.

SO ORDERED.

Puno, (Chairman), Quisumbing, Austria-Martinez, and Tinga, JJ., concur.

SECOND DIVISION

G.R. No. 137845. September 9, 2004

ANGEL CLEMENO, JR., MALYN CLEMENO, and NILUS SACRAMENTO, Petitioners, vs. ROMEO R. LOBREGAT, Respondent.

D E C I S I O N

CALLEJO, SR., J.:

This is a petition for review of the Decision1 of the Court of Appeals in CA-G.R. CV No. 53655 reversing the decision of the Regional Trial Court of Quezon City, Branch 224, in Civil Case Nos. 92-12620 and 93-17268.

The Antecedents

The Spouses Nilus and Teresita Sacramento were the owners of a parcel of land covered by Transfer Certificate of Title (TCT) No. 158728 and the house constructed thereon located at No. 68 Madaling Araw Street, Teresa Heights Subdivision, Novaliches, Quezon City. The Spouses Sacramento mortgaged the property with the Social Security System (SSS) as security for their housing loan and, likewise, surrendered the owners and duplicate copies of the certificate of title. On September 2, 1980, the spouses executed a Deed of Sale with Assumption of Mortgage in favor of Maria Linda Clemeno and her husband Angel C. Clemeno, Jr., with the conformity of the SSS.2 On March 6, 1981, the Register of Deeds issued TCT No. 277244 over the property in the name of the vendees,3 who, in turn, executed a Real Estate Mortgage Contract over the property in favor of the SSS to secure the payment of the amount of P22,900.00, the balance of the loan.4 The Spouses Clemeno also surrendered the owners duplicate copy of the said title to the SSS. However, per the records of the SSS Loans Department, the vendors (the Spouses Sacramento) remained to be the debtors.

On July 1, 1992, respondent Romeo R. Lobregat, a lawyer and an Election Registrar in the Commission on Elections, filed a Complaint against the Petitioners, the Spouses Clemeno, and Nilus Sacramento for breach of contract, specific performance with damages with the RTC of Quezon City. The case was docketed as Civil Case No. 92-12620 and raffled to Branch 100. On May 7, 1993, the trial court dismissed the case without prejudice for lack of interest on the part of the plaintiff to prosecute.5 The Petitioners, for their part, filed a Complaint against the respondent for recovery of possession of property with damages, docketed as Civil Case No. 93-17268 and raffled to Branch 93 of the court. In the meantime, the RTC, Branch 100 set aside its Order in Civil Case No. 92-12620 and reinstated the case. The two (2) cases were then consolidated in the RTC, Branch 100.

The Evidence ofThe Respondent

On June 4, 1987, the respondent and petitioner Angel Clemeno, Jr., relatives by consanguinity, entered into a verbal contract of sale over the property covered by TCT No. 277244 under the following terms and conditions: (a) the respondent would pay the purchase price of the property in the amount of P270,000.00, inclusive of the balance of the loan of the Petitioners, the Spouses Clemeno with the SSS6within two years from June 4, 1987;7 (b) the respondent would pay the monthly amortizations of the vendors loan with the SSS; and (c) upon the payment of the purchase price of the property, the Spouses Clemeno would execute a deed of sale in favor of the respondent.8The respondent made a down payment of P25,000.00 for which petitioner Clemeno, Jr. issued a receipt dated June 4, 1987.9 He then made a partial payment of P5,000.00 to petitioner Clemeno, Jr. on July 8, 1987,10 and another partial payment of P50,000.00 on February 9, 1988.11 The respondent paid the realty taxes due on the property for 1987 and 1988.12

In the meantime, petitioner Clemeno, Jr. read a press release from the SSS in the newspapers allowing delinquent borrowers to restructure the balance of their loans as of March 31, 1988 with no arrearages on the balance of their account under certain terms and conditions.13 On February 26, 1988, he paid

the amount of P6,692.63 to the SSS, in partial payment of his loan account.14 He also made a written request to the SSS for a restructuring of his loan.15 Thereafter, the SSS Loans Collection Department issued on March 15, 1988, addressed to the borrower on record, that effective March 15, 1988, the monthly amortization on the loan was P841.84.16 Petitioner Clemeno, Jr., as mortgagor, affixed his conformity thereto.17 He then wrote a letter authorizing the respondent to pay the balance of his restructured loan with the SSS, which payments would be considered as partial payment of the house and lot.18 Conformably, the respondent remitted to the SSS the monthly amortization payments for the account of petitioner Clemeno, Jr. However, the receipts issued by the SSS were in the name of petitioners Nilus Sacramento or Clemeno, Jr.19

The respondent made additional partial payments for the sale of the property to petitioner Clemeno, Jr. on January 17, 1989, and, March 20, 1989, in the total amount of P10,000.00.20 He also continued remitting to the SSS the monthly amortizations due for the account of petitioner Clemeno, Jr.21

The respondent was able to secure a loan of P160,000.00 on April 1, 1989, which was more than sufficient to cover his balance of the purchase of the property. He then offered to pay the said balance to petitioner Clemeno, Jr.,22 but the latter told him to keep the money because the owners duplicate copy of the title was still with the SSS and to instead continue paying the monthly amortizations due. The respondent did so and made payments until March 1990.23 He no longer paid after this date because the SSS informed him that petitioner Clemeno, Jr. had already paid the balance of his account in full on March 23, 1990. Indeed, on May 9, 1990, the SSS had executed a Release of Real Estate Mortgage in favor of petitioner Clemeno, Jr. and released the owners duplicate of TCT No. 277244.24

The respondent offered to pay the balance of the purchase price of the property to petitioner Clemeno, Jr. and asked the latter to execute the deed of sale over the property and deliver the title over the property under his name, but petitioner Clemeno, Jr. refused to do so unless the respondent agreed to buy the property at the price prevailing in 1992. The respondent refused.

On June 12, 1992, the respondents counsel wrote petitioner Clemeno, Jr., informing the latter that he (the respondent) had already paidP113,049.96 of the purchase price of the property and that he was ready to pay the balance thereof in the amount of P156,970.04. He demanded that petitioner Clemeno, Jr. execute a deed of absolute sale over the property and deliver the title thereto in his name upon his receipt of the amount of P156,970.04.25

In his reply-letter, petitioner Clemeno, Jr. stated that he never sold the property to the respondent; that he merely tolerated the respondents possession of the property for one year or until 1987, after which the latter offered to buy the property, which offer was rejected; and that he instead consented to lease the property to the respondent. The petitioner also declared in the said letter that even if the respondent wanted to buy the property, the same was unenforceable as there was no document executed by them to evince the sale.26

In their Answer to the complaint, the petitioners alleged that they entered into a verbal lease-purchase agreement over the house and lot with the respondent under the following terms and conditions:

(a) The purchase price will be P270,000.00 to be paid in full not later than June 1, 1988;

(b) The rental is P1,500.00 a month, for the whole period from June 1987 to June 1, 1988;

(c) If the whole purchase price is not paid on the agreed date, the total amount equivalent to one-year rental shall be deducted from the amount already paid by the plaintiff, who shall peacefully vacate the premises and surrender possession of the house and lot to the defendants.

(d) The purchase price of P270,000.00 shall be payable: P90,000.00 upon taking possession of the property, P90,000.00 payable within six (6) months thereafter, and P90,000.00 not later than June 1, 1988.27

The petitioners further alleged that despite the respondents failure to comply with the conditions of their agreement, the latter was still granted an extension of until September 1989 to pay the purchase price of the property, but managed to pay only P113,049.96, including the monthly amortizations of their loan account with the SSS and realty tax payments. The petitioners further alleged that the respondent even failed to pay any rental for the property from June 1987 to June 1, 1988. They posited that the contract between the parties was unenforceable under Article 1403(2) of the New Civil Code, and prayed that judgment be rendered in their favor as prayed for by them in their complaint in Civil Case No. 93-17268, thus:

WHEREFORE, it is most respectfully prayed that after due hearing, a decision in favor of plaintiff be rendered, ordering Defendant

(a) And all other persons claiming under him to vacate the premises located at 86 Madaling Araw St., Teresa Heights Subdivision, Novaliches, Quezon City;

(b) To pay plaintiff a balance of P64,349.14 for the use and occupancy of the premises until May 31, 1993, and at the rate ofP3,628.80 a month from June 1, 1993 until the premises shall have been finally vacated;

(c) To pay P50,000.00 plus P2,000.00 per appearance as and for attorneys fees; and

(d) To pay the costs of suit.

Plaintiff further prays for such other relief reasonable and conscionable in the premises.28

The Evidence for thePetitioners

Petitioner Clemeno, Jr. and the respondent were townmates. Sometime in June 1987, petitioner Clemeno, Jr. agreed to sell the property for P270,000.00 payable in three (3) installments: (a) P90,000.00 upon the respondents taking possession of the property; (b)P90,000.00 payable within six (6) months thereafter; and (c) P90,000.00 not later than June 1, 1988. The respondent assured petitioner Clemeno, Jr. that there would be nothing to worry about the documentation of the sale; being a lawyer, he would take care of everything. However, the respondent failed to pay the balance of the purchase price of the property in the amount of P156,970.04 despite promises to do so.

On September 16, 1989, petitioner Clemeno, Jr. went to the respondents house to talk to him anew, but the latter was nowhere to be found. He made a typewritten letter to the respondent, stating that the latter had been given more than enough time to exercise the option to buy the property but failed to do so; hence, the offer was deemed cancelled. The petitioner left the letter with the respondents daughter, Michelle Lobregat.

The trial court rendered judgment in favor of the Petitioners, as follows:

Accordingly, therefore, the Court hereby renders judgment in favor of Angel Clemeno, [Jr.] as against Romeo Lobregat and orders the latter and other persons claiming under him to:

1. Vacate the premises located at No. 86 Madaling Araw Street, Teresa Heights Subdivision, Novaliches, Quezon City;

2. Pay Angel Clemeno, Jr. the amount of P64,349.14 for the use and occupancy of the premises until May 31, 1993 and at the rate of P3,628.80 a month from June 1, 1993 until the premises have been finally vacated;

3. Pay the amount of P50,000.00 as attorneys fees and other legal expenses, and

4. To pay the costs of suit.

IT IS SO ORDERED.29

The trial court ruled that since both the sale and lease agreements were not reduced to writing, both contracts were unenforceable under Article 1403(2) of the New Civil Code, and had decided the case based on justice and equity.

The respondent appealed the decision to the Court of Appeals and raised the following assignment of errors:

1. THE LOWER COURT, AFTER THE COMPLETE, MERITORIOUS AND WRITTEN PIECES OF EVIDENCE SUBMITTED BY PLAINTIFF-APPELLANT LOBREGAT, FAILED/REFUSED TO CONSIDER THE SAME. INSTEAD, DECIDED ONLY THE CASE OF ACCION PUBLICIANA FILED BY DEFENDANT-APPELLEE A. CLEMENO, JR.

2. THE LOWER COURT FAILED TO CONSIDER THAT RECEIPTS ARE NOT CONTRACT OF SALE BUT EVIDENCE FOR CONTRACT OF SALE AS EVEN NOTED BY THE LOWER COURT.

3. THAT THE LOWER COURT FAILED TO CONSIDER THAT THE PIECES OF EVIDENCE OF LOBREGAT CLEARLY SHOW THAT [THE] SALE WAS THE TRANSACTION BETWEEN HEREIN PARTIES AS ADMITTED BY DEFENDANT-APPELLEE A. CLEMENO, JR. (T.S.N., p. 16, Nov. 20, 1995) (T.S.N., pp. 26 & 27, April 19, 1996)

3. THAT THE HONORABLE LOWER COURT DISREGARDED ITS OWN RULING AS TO THE APPELLEES INTENTIONAL FAILURE TO FOLLOW/COMPLY WITH ITS ORDER DATED MAY 31, 1996.

4. THAT THE LOWER COURT FAILED TO CONSIDER THE DELIBERATE OMISSION OF DEFENDANTS-APPELLEES TO OBSERVE THE NON-FORUM SHOPPING REQUIREMENT.

5. THAT THE LOWER COURT MISAPPLIED THE PRINCIPLE OF STATUTE OF FRAUDS.30

On February 23, 1999, the Court of Appeals rendered judgment reversing the decision of the trial court. The fallo of the decision reads:

WHEREFORE, the decision appealed from is REVERSED, and judgment is hereby rendered:

1. In Civil Case No. Q-92-12620

(a) Ordering defendants-appellees to accept the remaining balance of the purchase price of the house and lot subject of sale in the amount of P156,109.00 and, thereafter, execute in favor of plaintiff-appellant the corresponding deed of sale or proper mode of conveyance; and

(b) Ordering defendants-appellees to pay, jointly and severally, plaintiff-appellant P50,000.00 by way of moral damages,P25,000.00 by way of exemplary damages, and P15,000.00 as attorneys fees.

2. In Civil Case No. Q-93-17268 dismissing the complaint therein.

Costs against defendants-appellees.

SO ORDERED.31

The Court of Appeals ruled that the contract entered into between the parties was a contract of sale, not a contract to sell. The appellate court also ruled that Article 1403(2) was not applicable because

the contract was already partly performed, since partial payments had been made by the respondent as evidenced by receipts signed by the petitioners.

The petitioners now come to this Court, contending that:

I

The Honorable Court of Appeals grossly erred in holding that the contract entered by the parties is a contract of sale and not a contract to sell.32

II

The Court of Appeals erred seriously when it held that Under Article 1356 of the Civil Code, contract shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present and that the contract of sale of a piece of land may be proved orally, totally ignoring the positive mandate of Article 1358 of the Civil Code, 33

III

The Honorable Court of Appeals erred in holding that the Statute of Frauds cannot be raised as a defense against specific performance, there being partial performance of the down-payment and subsequent installments, even if short of the full price and after the expiry of the agreed dates of payment.34

The Court shall resolve these issues simultaneously as they are interrelated.

The petitioners posit that the respondent failed to prove the essential elements of a contract of sale over the subject property. They contend that the receipts wherein they acknowledged the receipt of the amounts therein specified do not conform to the legal requirements of a contract of sale, and cited the ruling of this Court in Manotok Realty, Inc. vs. Court of Appeal.35 They also posit that even by his own admission, the respondent defaulted in the payment of the purchase price of the property; hence, they are not obliged to execute a deed of absolute sale over the property and deliver the title to him. The petitioners assert that even if they had entered into an agreement with the respondent, such agreement was a mere contract to sell, not a contract of sale. They further assert that even if, indeed, the parties had entered into a contract of sale, the same is unenforceable under paragraph 2, Article 1403 of the New Civil Code, which provides that such contract must be in writing; and Article 1358 of the New Civil Code which requires that such contract must appear in a public document.

On the other hand, the appellate court held that the petitioners and the respondent entered into a verbal contract of sale and not a contract to sell over the subject property, thus:

In the case at bench, Clemeno had agreed to sell his house and lot to Lobregat for a total consideration of P270,000.00 payable in installments within a period of two (2) years. The receipt, Exhibit A, is self-explanatory: it speaks of the receipt by Clemeno of the sum ofP25,000.00 from Lobregat as advance payment of the subject house and lot, the total purchase price of which is P270,000.00. Significantly, upon his receipt of the advance payment, Clemeno delivered the possession of the premises to Lobregat who is now the present possessor thereof. Subsequent payments were made by Lobregat on the purchase price, all of which were duly receipted for by Clemeno. The receipts Exhibits A-1, A-2 and A-3, for example, speak uniformly of additional part payment for the house and lot subject of this case. Moreover, as suggested by Clemeno himself, Lobregat had been religiously remitting the monthly payments on Clemenos loan obligation with the SSS. Note, for instance, Exhibit A-4 one of the many receipts of payment to SSS where it is indicated that the real estate loan is in the name of Angel C. Clemeno, Jr., as borrower, but bears the name of Romeo Lobregat, as payor, on behalf of Clemeno. It is as clear as sunlight that the parties had entered into a contract of sale and not merely a contract to sell.36

The petition has no merit.

We find and so hold that the contract between the parties was a perfected verbal contract of sale, not a contract to sell over the subject property, with the petitioner as vendor and the respondent as vendee. Sale is a consensual contract and is perfected by mere consent, which is manifested by a meeting of the minds as to the offer and acceptance thereof on three elements: subject matter, price and terms of payment of the price.37 The petitioners sold their property to the respondent for P270,000.00, payable on installments, and upon the payment of the purchase price thereof, the petitioners were bound to execute a deed of sale in favor of the respondent and deliver to him the certificate of title over the property in his name. The parties later agreed for the respondent to assume the payment of the petitioners loan amortization to the SSS, which payments formed part of the purchase price of the property. The evidence shows that upon the payment made by the respondent of the amount of P27,000.00 on June 4, 1987, the petitioners vacated their house and delivered possession thereof to the respondent. Conformably to Article 1477 of the New Civil Code, the ownership of the property was transferred to the respondent upon such delivery. The petitioners cannot re-acquire ownership and recover possession thereof unless the contract is rescinded in accordance with law.38 The failure of the respondent to complete the payment of the purchase price of the property within the stipulated period merely accorded the petitioners the option to rescind the contract of sale as provided for in Article 1592 of the New Civil Code.39

The contract entered into by the parties was not a contract to sell because there was no agreement for the petitioners to retain ownership over the property until after the respondent shall have paid the purchase price in full, nor an agreement reserving to the petitioners the right to unilaterally resolve the contract upon the buyers failure to pay within a fixed period.40 Unlike in a contract of sale, the payment of the price is a positive suspensive condition in a contract to sell, failure of which is not a breach but an event that prevents the obligation of the vendor to convey the title from becoming effective.41

The fact that the receipts issued by the SSS evidencing the respondents remittances of the monthly amortization payments of the petitioners loan, and that the receipts issued to the respondent for the payment of realty taxes for 1987 and 1988 were in the name of Nilus Sacramento and/or the petitioner Clemeno, Jr., does not negate the fact of the transfer of the ownership over the property to the respondent on June 4, 1987. Moreover, the deed of sale over the property in favor of the respondent had not yet been executed by the petitioners. The Spouses Sacramento and later, the Petitioners, were the borrowers, as per the records of the SSS.

The contract of sale of the parties is enforceable notwithstanding the fact that it was an oral agreement and not reduced in writing as required by Article 1403(2) of the New Civil Code, which reads:

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

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

(d) An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the buyer accepts and receives part of such goods and chattels, or the evidences, or some of them, of such things in action, or pay at the time some part of the purchase money: but when a sale is made by auction and entry is made by the auctioneer in his sales book, at the time of the sale, of the amount and kind of property sold, terms of sale, price, names of the purchasers and person on whose account the sale is made, it is a sufficient memorandum;

This is so because the provision applies only to executory, and not to completed, executed or partially executed contracts.42 In this case, the contract of sale had been partially executed by the parties, with the transfer of the possession of the property to the respondent and the partial payments made by the latter of the purchase price thereof.

We agree with the petitioners contention that the respondent did not pay the total purchase price of the property within the stipulated period. Moreover, the respondent did not pay the balance of the

purchase price of the property. However, such failure to pay on the part of the respondent was not because he could not pay, but because petitioner Angel Clemeno, Jr. told him not to do so. The latter instructed the respondent to continue paying the monthly amortizations due to the SSS on the loan. Unknown to the respondent, petitioner Angel Clemeno, Jr. wanted to increase the purchase price of the property at the prevailing market value in 1992, and not its value in 1987 when the contract of sale was perfected.

The petitioners failed to prove their claim that a lease purchase agreement over the property was entered into. Except for their bare claim, they failed to adduce a morsel of documentary evidence to prove the same. On the other hand, all the receipts issued by them on the partial payments made by the respondent were for the purchase price of the property, and not as rentals thereof.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs against the petitioners.

SO ORDERED.

Puno, (Chairman), Tinga, and Chico-Nazario, JJ., concur.

Austria-Martinez, J., on official leave.