Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 102909 September 6, 1993

SPOUSES VICENTE and LOURDES PINGOL, petitioners, vs.HON. COURT OF APPEALS and HEIRS OF FRANCISCO N. DONASCO, namely: MELINDA D. PELAYO, MARIETTA D. SINGSON, MYRNA D. CUEVAS, NATIVIDAD D. PELAYO, YOLANDA D. CACERES and MARY DONASCO, respondents.

Bernardo S. Chan for petitioners.

Orlando A. Galope for respondents.

DAVIDE, JR., J.:

An action denominated as one for specific performance and damages was brought by the private respondents against the petitioners before the Regional Trial Court (RTC) of Caloocan City which, after due trial, rendered a decision in favor of the petitioners. On appeal, the respondent Court reversed the trial court's decision.

It is from this judgment that the petitioners have appealed to this Court by way of a petition for review on certiorari.

The material facts of this case are simple and undisputed.

Petitioner Vicente Pingol is the owner of Lot No. 3223 of the Cadastral Survey of Caloocan, with an area of 549 square meters, located at Bagong Barrio, Caloocan City and more particularly described in Transfer Certificate of Title (TCT) No. 7435 of the Registry of Deeds of Caloocan City. On 17 February 1969, he executed a "DEED OF ABSOLUTE SALE OF ONE-HALF OF (1/2) [OF] AN UNDIVIDED PORTION OF A PARCEL OF LAND" in favor of Francisco N. Donasco which was acknowledged before a notary public. The parcel of land referred to herein is Lot No. 3223 and the pertinent portions of the document read as follows:

That for and in consideration of the sum of TWENTY THOUSAND AND FIVE HUNDRED THIRTY (P20,530.00) PESOS, Philippine Currency, the VENDOR hereby these presents SELL, CONVEY

AND CONVEY by way of Absolute Sale the one-half (1/2) portion, equivalent to Two Hundred Seventy Four and point Fifty (274.50) square meters, to VENDEE, the above-mentioned property, his heirs, assigns and successors-in- interest;

That the VENDOR hereby confesses and acknowledges the receipt of TWO THOUSAND (P2,000.00) PESOS from VENDEE as advanced (sic) and partial payment to the above-cited consideration of the Sale herein mentioned, leaving therefor a balance of Eighteen Thousand and Five Hundred Thirty (P18,530) Pesos to be paid in several equal installments within a period of six (6) years, beginning January, 1970;

That after computing the above-mentioned equal installments, the VENDEE agrees and undertakes to pay unto the VENDOR a monthly amount equivalent to Two Hundred Fifty Seven (sic) and Thirty Six Centavos (P257.36) within a period of Seventy One (71) months and on the Seven Two [sic] (72) month, the amount of (P257.44) as the last and final installment thereof;

That the VENDEE agrees that in case of default in the payment of the installment due the same shall earn a legal rate of interest, and to which the VENDOR likewise agrees;

That the VENDEE undertakes to pay unto the VENDOR the herein monthly installment within the first five (5) days of each month and the same shall be made available and to be paid at the residence of the VENDOR, payment to be made either directly to the VENDOR, his wife or his authorized representative or factor;

That in case of partition of the above-described property between herein VENDOR and VENDEE the same shall be divided into two (2) equal parts, the VENDOR gets the corner facing J. De Jesus and Malolos Avenue and the VENDEE shall get the portion with fifteen 15 meters frontage facing J. De Jesus Street only. 1

Pursuant to the contract, Donasco paid P2,000.00 to Pingol. The one-half portion, designated as Lot No. 3223-A, was then segregated from the mother lot, and the parties prepared a subdivision plan (Exhibit "C") which was approved by the Land Registration Commission. 2

Francisco immediately took possession of the subject lot and constructed a house thereon. In January 1970, he started paying the monthly installments but was able to pay only up to 1972.

On 13 July 1984, Francisco Donasco died. At the time of his demise, he had paid P8,369.00, plus the P2,000.00 advance payment, leaving a balance of P10,161.00 on the contract price. 3 Lot No. 3223-A remained in the possession of Donasco's heirs.

On 19 October 1988, the heirs of Francisco Donasco filed an action for "Specific Performance and Damages, with Prayer for Writ of Preliminary Injunction" against the spouses Vicente and Lourdes Pingol (petitioners herein) before the RTC of Caloocan City. The action was docketed as Civil Case No. 13572 and raffled off to Branch 125 of the said court.

In their complaint, 4 the plaintiffs (private respondents herein) averred that after the death of their father, they offered to pay the balance of P10,161.00 plus the stipulated legal rate of interest thereon to Vicente Pingol but the latter rebuffed their offer and has "been demanding for a bigger and unreasonable amount, in complete variance to what is lawfully due and payable." They stated that they had "exerted earnest efforts to forge or reach an amicable and peaceful settlement with the defendants" for the payment of the property in question but to no avail. They further alleged that the defendants were committing "acts of forcible entry and encroachment" upon their land and asked that a writ of preliminary injunction be issued to restrain the defendants from the acts complained of.

Plaintiffs then prayed that the defendants be ordered, inter alia:

a. . . . to accept the amount of P10,161.00, more or less, plus the stipulated legal rate of interest due thereon, as full and complete payment of the balance for the agreed price/consideration on the one- half (1/2) portion of the parcel of land . . .; [and]

b. . . . to execute the final deed of sale on the one-half (1/2) portion of the lot . . . in accordance with the partition reflected in the survey and subdivision plan, . . . . 5

In their answer with counterclaim, 6 defendants admitted the execution of the aforementioned deed of sale, the segregation of the portion sold and the preparation and approval of the subdivision plan, but set up the following special and affirmative defenses: (1) plaintiffs' cause of action had already prescribed; (2) the deed of sale embodied a conditional contract of sale "as the consideration is to be paid on installment basis within a period of six years beginning January, 1970"; (3) the subdivision plan was prepared on the assumption that Francisco Donasco would be able to comply with his obligation; (4) when Francisco died, he had not fully paid the total consideration agreed upon; and (5) They then asked that the plaintiffs be ordered to vacate the premises and to pay them attorney's fees and a reasonable compensation for the use of the land.

In their Reply and Answer to Counterclaim, 7 the plaintiffs pointed out that there is no provision in the deed of sale for its cancellation in case of default in the payment of the monthly installments and invoked Article 1592 of the New Civil Code. They specifically denied the allegations in the counterclaim.

The issues having been joined, the case was then tried on the merits.

On 22 January 1990, the trial court rendered a decision 8 dismissing the complaint and ordering the plaintiffs to pay the defendants P350.00 as reasonable monthly rental for the use of the premises from the filing of the complaint, P10,000.00 by way of attorney's fees, and the costs of the suit. It held that: (1) the deed of absolute sale in question, marked and offered in evidence as Exhibit "A," is a contract to sell, not a contract of sale, since Vicente Pingol had no intention to part with the ownership of the loan is unless the full amount of the agreed price had been paid; (2) the contract was deemed to have been cancelled from the moment the late father of

the plaintiffs defaulted in the payment of the monthly installments; (3) title and ownership over the lot did not pass to Francisco Donasco and his heirs since the contract to sell was never consummated; and 4 the sale was deemed cancelled because of failure to pay they were just allowed to stay bc of plaintiff's tolerance. 5) Assuming, arguendo, that the plaintiffs have a cause of action for specific performance, such action had already prescribed since the complaint was filed only on 19 October 1988 or more than ten years from the time that they could have lawfully demanded performance. 9

Plaintiffs elevated the case to the Court of Appeals where the appeal was docketed as CA-G.R. CV No. 25967. On 12 November 1991, the said court rendered a decision 10 reversing the appealed decision and decreeing as follows:

WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE and another one is rendered:

(1) Ordering appellee-vendor Vicente Pingol to accept the sum of P10,161.00, plus the legal interest due thereon from the date of institution of this action on October 19, 1988;

(2) Upholding the validity of the "DEED OF ABSOLUTE SALE OF ONE- HALF (1/2) (of) AN UNDIVIDED PORTION OF A PARCEL OF LAND" (Exh. A), and by virtue and on the strength of which declaring the "Heirs of the Deceased Francisco N. Domingo" as the owners of the 274.50 sq. m. land, denominated as Lot 3223-A, (LRC) Psd-146255 under the technical description (exh. D) and reflected in the Plan of Subdivision Survey which was approved By Commissioner of Land Registration on August 13, 1971 (exh. C), representing one-half portion [of] lot 3223, situated at the corner of Malolos Avenue and G. de Jesus St., Bagong Barrio, Caloocan City, and covered by TCT No. 7435 of the Registry of Deeds of Caloocan City (exh. B); and

(3) Ordering the defendants-appellees to pay the costs.

SO ORDERED. 11

The Court of Appeals ruled that the deed of sale in question reveals the clear intention of Vicente Pingol to part with the ownership of the one-half portion of the land by way of an absolute sale; that the failure to fully pay the agreed price was not a ground for the cancellation of the sale; and that the plaintiffs' action is imprescriptible since it is akin to an action to quiet title to property in one's possession. 12

Dissatisfied with the decision of the Court of Appeals, the defendants, hereinafter referred to as the petitioners, filed this petition for certiorarion 9 January 1992. Plaintiffs, hereinafter referred to as the private respondents, filed their comment thereto on 10 September 1992 to which the petitioners filed a reply 11 November 1992. We gave due course to the petition and required the parties to submit their respective memoranda, 13 which they subsequently complied with.

Petitioners contend that the Court of Appeals erred:

I

IN HOLDING THAT THE DOCUMENT (EXHIBIT "A") DENOMINATED AS "ABSOLUTE DEED OF SALE OF ONE-HALF (½) OF AN UNDIVIDED PORTION OF A PARCEL OF LAND" IS AN ABSOLUTE DEED OF SALE SUFFICIENT TO CONFER OWNERSHIP ON THE VENDEE AND HIS SUCCESSORS-IN-INTEREST, DESPITE THE FACT THAT BY ITS TERMS AND CONDITIONS, LIKE THE PRICE BEING PAYABLE ON INSTALLMENTS WITHIN A FIXED PERIOD, THE SAME IS A CONDITIONAL DEED OF SALE.

II

IN HOLDING THAT NOTWITHSTANDING THE FACT THAT THE VENDEE FAILED TO COMPLY WITH THE TERMS OF THE CONTRACT (EXHIBIT "A") SPECIFICALLY TO COMPLETE THE PAYMENT OF THE CONSIDERATION ON THE DATE STIPULATED IN THE CONTRACT WHICH WAS SUPPOSED TO BE IN JANUARY 1976, COMPLETE PAYMENT THEREOF CAN STILL BE ENFORCED IN AN ACTION INSTITUTED BY THE HEIRS OF THE VENDEE FILED ONOCTOBER 19, 1988 OR A PERIOD OF MORE THAN TWELVE (12) YEARS FROM THE TIME COMPLETE PAYMENT SHOULD HAVE BEEN MADE;

III

IN HOLDING THAT THE PRIVATE RESPONDENTS' ACTION IS ONE WHICH IS AN OFFER TO COMPLETE THE PAYMENT LEFT UNPAID BY PRIVATE RESPONDENTS' FATHER WHICH DOES NOT PRESCRIBE;

IV

IN HOLDING THAT PRIVATE RESPONDENTS' CAUSE OF ACTION HAS NOT PRESCRIBE. 14

The decisive issue in this case is Whether Exhibit "A" embodies a contract of sale or a contract to sell. The distinction between the two is important for in a contract of sale, the title passes to the vendee upon the delivery of the thing sold, whereas in a contract to sell, by agreement, ownership is reserved in the vendor and is not to pass until the full payment of the price. In a contract of sale, the vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded, whereas in a contract to sell, title is retained by the vendor until the full payment of the price, such payment being a positive suspensive condition, failure of which is not a breach but an event that prevented the obligation of the vendor to convey title from becoming effective. 15

A perusal of Exhibit "A" leads to no other conclusion than that it embodies a contract of sale. The plain and clear tenor of the "DEED OF ABSOLUTE SALE OF ONE-HALF (1/2) [OF] AN UNDIVIDED PORTION OF A PARCEL OF LAND" is that "the VENDOR hereby . . . SELL, CONVEY

AND CONVEY by way Absolute Sale the one-half (1/2) portion . . . to the VENDEE . . . his heirs, assigns and successors-in-interest." That the vendor, petitioner Vicente Pingol, had that clear intention was further evidenced by his failure to reserve his title thereto until the full payment of the price.

In Dignos vs. Court of Appeals, 16 we held that a deed of sale is absolute in nature although denominated as a "Deed of Conditional Sale" where there is no stipulation in the deed that title to the property sold is reserved in the seller until the full payment of the price, nor is there a stipulation giving the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period. Exhibit "A" contains neither stipulation. What is merely stated therein is that "the VENDEE agrees that in case of default in the payment of the installments due the same shall earn a legal rate of interest, and to which the VENDOR likewise agrees."

Furthermore, as found by the Court of Appeals, the acts of the parties, contemporaneous and subsequent to the contract, clearly show that an absolute deed of sale was intended, by the parties and not a contract to sell:

[P]ursuant to the deed, the vendor delivered actual and constructive possession of the property to the vendee, who occupied and took such possession, constructed a building thereon, had the property surveyed and subdivided and a plan of the property was prepared and submitted to the Land Registration Commission which approved it preparatory to segregating the same and obtaining the corresponding TCT in his name. Since the sale, appellee continuously possessed and occupied the property as owner up to his death on July 13, 1984 and his heirs, after his death, continued the occupancy and possession of the property up to the present. Those contemporaneous and subsequent events are demonstrative acts that the vendor since the sale recognized the vendee as the absolute owner of the property sold. All those attributes of ownership are admitted by defendants in their answer, specifically in paragraphs 7 and 9 of their special and affirmative defenses. 17

The contract here being one of absolute sale, the ownership of the subject lot was transferred to the buyer upon the actual and constructive delivery thereof. The constructive delivery of the subject lot was made upon the execution of the deed of sale 18 while the actual delivery was effected when the private respondents took possession of and constructed a house on Lot No. 3223-A.

The delivery of the object of the contract divested the vendor of the ownership over the same and he cannot recover the title unless the contract is resolved or rescinded pursuant to Article 1592 of the New Civil Code which provides that:

In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as no demand for

rescission of the contract has been made upon him either judicially or by a notarial act. After the demand, the court may not grant him a new term.

Both the trial court and the Court of Appeals did not find that a notarial or judicial rescission of the contract had been made. Although Vicente Pingol asserts that he had declared to Francisco Donasco that he was cancelling the contract, he did not prove that his demand for rescission was made either judicially or by a notarial act.

Petitioners fault the respondent Court for holding that the action of the petitioners is not barred by the statute of limitations. They argue that the private respondents' action, being based upon a written contract, has prescribed since it was brought only in 1988 or more than ten years from the time when the latter could have lawfully demanded performance. 19

We disagree.

Although the private respondents' complaint before the trial court was denominated as one for specific performance, it is in effect an action to quiet title. In this regard, the following excerpt from Bucton vs. Gabar 20 is apropos:

The real and ultimate basis of petitioners' action is their ownership of one- half of the lot coupled with their possession thereof, which entitles them to a conveyance of the property. In Sapto, et al. v. Fabiana [103 Phil. 683, 686-87 (1958)], this Court, speaking thru Mr. Justice J.B.L. Reyes, explained that under the circumstances no enforcement of the contract is needed, since the delivery of possession of the land sold had consummated the sale and transferred title to the purchaser, and that, actually, the action for conveyance is one to quiet title, i.e., to remove the cloud upon the appellee's ownership by the refusal of the appellants to recognize the sale made by their predecessors.

That a cloud has been cast on the title of the private respondents is indubitable. Despite the fact that the title had been transferred to them by the execution of the deed of sale and the delivery of the object of the contract, the petitioners adamantly refused to accept the tender of payment by the private respondents and steadfastly insisted that their obligation to transfer title had been rendered ineffective.

A vendee in an oral contract to convey land who had made part payment thereof, entered upon the land and had made valuable improvements thereon, is entitled to bring suit to clear his title against the vendor who had refused to transfer the title to him. It is not necessary that the vendee has an absolute title, an equitable title being sufficient to clothe him with personality to bring an action to quiet title. 21

Prescription thus cannot be invoked against the private respondents for it is aphoristic that an action to quiet title to property in one's possession is imprescriptible. 22 The rationale for this rule has been aptly stated thus:

The owner of real property who is in possession thereof may wait until his possession is invaded or his title is attacked before taking steps to vindicate his right. A person claiming title to real property, but not in possession thereof, must act affirmatively and within the time provided by the statute. Possession is a continuing right as is the right to defend such possession. So it has been determined that an owner of real property in possession has a continuing right to invoke a court of equity to remove a cloud that is a continuing menace to his title. Such a menace is compared to a continuing nuisance or trespass which is treated as successive nuisances or trespasses, not barred by statute until continued without interruption for a length of time sufficient to affect a change of title as a matter of law. 23

Private respondents shall, however, be liable to pay the legal rate of interest on the unpaid balance of the purchase price from the date default or on 6 January 1976, when the entire balance should have been paid, pursuant to the provision in the deed of sale.

WHEREFORE, except as above modified, the Decision appealed from is hereby AFFIRMED. As modified, the interest on the unpaid balance of P10,161.00, at the legal rate, shall be computed from 6 January 1976. Upon the payment by the private respondents to the petitioners of the said amount and the interest thereon, the latter are ordered to deliver Transfer Certificate of Title No. 7435 to the Register of Deeds of Caloocan City who shall cancel the same and issue two new transfer certificates of title in lieu thereof, one of which shall be in the name of the herein private respondents covering Lot No. 3223-A and the other in the name of the petitioners covering the remainder of the lot.

SO ORDERED.

Cruz, Griño-Aquino, Bellosillo and Quiason, JJ., concur.

Republic of the PhilippinesSUPREME COURT

SECOND DIVISION

G.R. No. 154413 August 31, 2005

SPS. ALFREDO R. EDRADA and ROSELLA L. EDRADA, Petitioners, vs.CARMENCITA RAMOS, SPS. EDUARDO RAMOS, Respondents.

D E C I S I O N

Tinga, J.:

In this Petition1 under Rule 45, petitioner Spouses Alfredo and Rosella Edrada (petitioners) seek the reversal of the Former Second Division of the Court of Appeals’ Decision2 and Resolution3 in CA-G.R. CV No. 66375, which affirmed the Decision of Regional Trial Court (RTC) of Antipolo City, Branch 71,4 in Civil Case No. 96-4057, and denied the Motion for Reconsideration5 therein.

Respondent spouses Eduardo and Carmencita Ramos (respondents) are the owners of two (2) fishing vessels, the "Lady Lalaine" and the "Lady Theresa." On 1 April 1996, respondents and petitioners executed an untitled handwritten document which lies at the center of the present controversy. Its full text is reproduced below:

1st April 1996

This is to acknowledge that Fishing Vessels ‘Lady Lalaine’ and ‘Lady Theresa’ owned by Eduardo O. Ramos are now in my possession and received in good

running and serviceable order. As such, the vessels are now my responsibility.

Documents pertaining to the sale and agreement of payments between me and the owner of the vessel to follow. The agreed price for the vessel is Nine Hundred Thousand Only (P900,000.00).

(SGD.) (SGD.)

EDUARDO O. RAMOS ALFREDO R. EDRADA

(Seller) (Purchaser)

CONFORME: CONFORME:

(SGD.) (SGD.)

CARMENCITA RAMOS ROSIE ENDRADA6

Upon the signing of the document, petitioners delivered to respondents four (4) postdated Far East Bank and Trust Company (FEBTC) checks payable to cash drawn by petitioner Rosella Edrada, in various amounts totaling One Hundred Forty Thousand Pesos (P140,000.00). The first three (3) checks were honored upon presentment to the drawee bank while the fourth check for One Hundred Thousand Pesos (P100,000.00) was dishonored because of a "stop payment" order.

On 3 June 1996, respondents filed an action against petitioners for specific performance with damages before the RTC, praying that petitioners be obliged to execute the necessary deed of sale of the two fishing vessels and to pay the balance of the purchase price. In their Complaint,7 respondents alleged that petitioners contracted to buy the two fishing vessels for the agreed purchase price of Nine Hundred Thousand Pesos (P900,000.00), as evidenced by the above-quoted document, which according to them evinced a contract to

buy. However, despite delivery of said vessels and repeated oral demands, petitioners failed to pay the balance, so respondents further averred.

Belying the allegations of respondents, in their Answer with Counterclaim,8 petitioners averred that the document sued upon merely embodies an agreement brought about by the loans they extended to respondents. According to petitioners, respondents allowed them to manage or administer the fishing vessels as a business on the understanding that should they find the business profitable, the vessels would be sold to them for Nine Hundred Thousand Pesos (P900,000.00). But petitioners "decided to call it quits" after

spending a hefty sum for the repair and maintenance of the vessels which were already in dilapidated condition.

After trial, the RTC rendered a Decision9 dated 22 February 1999, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants and the latter are ordered to pay to the former the amount of Eight Hundred Sixty Thousand Pesos (P860,000.00) with legal interests thereon from June 30, 1996 until fully paid; the amount of P20,000.00 as attorney’s fees and the cost of suit.

The counterclaim of the defendants for moral and exemplary damages and for attorney’s fees is dismissed for lack of merit.

SO ORDERED.10

The RTC treated the action as one for collection of a sum of money and for damages and considered the document as a perfected contract of sale. On 19 April 1999, petitioners filed a Motion for Reconsideration which the RTC denied in an Order11 dated 2 July 1999.

Both parties appealed the RTC Decision. However, finding no reversible error in the appealed decision, the Court of Appeals, in its Decision,12 affirmed the same and dismissed both appeals. Only petitioners elevated the controversy to this Court.

Petitioners raised the nature of the subject document as the primary legal issue. They contend that there was no perfected contract of sale as distinguished from a contract to sell. They likewise posed as sub-issues the purpose for which the checks were issued, whether replacement of the crew was an act of ownership or administration, whether petitioners failed to protest the dilapidated condition of the vessels, and whether the instances when the vessels went out to sea proved that the vessels were not seaworthy.13 It is also alleged in the petition that the true agreement as between the parties was that of a loan.

Evidently, the petition hinges on the true nature of the document dated 1 April 1996. Normally, the Court is bound by the factual findings of the lower courts, and accordingly, should affirm the conclusion that the document in question was

a perfected contract of sale. However, we find that both the RTC and the Court of Appeals gravely misapprehended the nature of the said document, and a reevaluation of the document is in order.14 Even if such reevaluation would lead the court to examine issues not raised by the parties, it should be remembered that the Court has authority to review matters even if not assigned as errors in the appeal, if it is found that their consideration is necessary in arriving at a just decision of the case.15

In doing so, we acknowledge that the contending parties offer vastly differing accounts as to the true nature of the agreement. Still, we need not look beyond the document dated 1 April 1996 and the stipulations therein in order to ascertain what obligations, if any, have been contracted by the party. The parol evidence rule forbids any addition to or contradiction of the terms of a written agreement by testimony or other evidence purporting to show that different terms were agreed upon by the parties, varying the purport of the written

contract. Whatever is not found in the writing is understood to have been waived and abandoned.16

We disagree with the RTC and the Court of Appeals that the document is a perfected contract of sale. A contract of sale is defined as an agreement whereby one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefore a price certain in money or its equivalent.17 It must evince the consent on the part of the seller to transfer and deliver and on the part of the buyer to pay.18

An examination of the document reveals that there is no perfected contract of sale. The agreement may confirm the receipt by respondents of the two vessels and their purchase price. However, there is no equivocal agreement to transfer ownership of the vessel, but a mere commitment that "documents pertaining to the sale and agreement of payments…[are] to follow." Evidently, the document or documents which would formalize the transfer of ownership and contain the terms of payment of the purchase price, or the period when such would become due and demandable, have yet to be executed. But no such document was executed and no such terms were stipulated upon.

The fact that there is a stated total purchase price should not lead to the conclusion that a contract of sale had been perfected. In numerous cases,19 the

most recent of which is Swedish Match, AB v. Court of Appeals,20 we held that before a valid and binding contract of sale can exist, the manner of payment of the purchase price must first be established, as such stands as essential to the validity of the sale. After all, such agreement on the terms of payment is integral to the element of a price certain, such that a disagreement on the manner of payment is tantamount to a failure to agree on the price.

Assuming arguendo that the document evinces a perfected contract of sale, the absence of definite terms of payment therein would preclude its enforcement by the respondents through the instant Complaint. A requisite for the judicial enforcement of an obligation is that the same is due and demandable. The absence of a stipulated period by which the purchase price should be paid indicates that at the time of the filing of the complaint, the obligation to pay was not yet due and demandable.

Respondents, during trial, did claim the existence of a period. Respondent Carmencita Ramos, during cross-examination, claimed that the supposed balance shall be paid on 30 June 1996.21 But how do respondents explain why the Complaint was filed on 3 June 1996? Assuming that the 30 June 1996 period was duly agreed upon by the parties, the filing of the Complaint was evidently premature, as no cause of action had accrued yet. There could not have been any breach of obligation because on the date the action was filed, the alleged maturity date for the payment of the balance had not yet arrived.

In order that respondents could have a valid cause of action, it is essential that there must have been a stipulated period within which the payment would have become due and demandable. If the parties themselves could not come into agreement, the courts may be asked to fix the period of the obligation, under Article 1197 of the Civil Code.22 The respondents did not avail of such relief prior to the filing of the instant Complaint; thus, the action should fail owing to its obvious prematurity.

Returning to the true nature of the document, we neither could conclude that a "contract to sell" had been established. A contract to sell is defined as a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the said property exclusively to the prospective buyer upon

fulfillment of the condition agreed upon, that is, full payment of the purchase price.23

A contract is perfected when there is concurrence of the wills of the contracting parties with respect to the object and the cause of the contract. In this case, the agreement merely acknowledges that a purchase price had been agreed on by the parties. There was no mutual promise to buy on the part of petitioners and to sell on the part of respondents. Again, the aforestated proviso in the agreement that documents pertaining to the sale and agreement of payments between the parties will follow clearly manifests lack of agreement between the parties as to the terms of the contract to sell, particularly the object and cause of the contract.

The agreement in question does not create any obligatory force either for the transfer of title of the vessels, or the rendition of payments as part of the purchase price. At most, this agreement bares only their intention to enter into either a contract to sell or a contract of sale.

Consequently, the courts below erred in ordering the enforcement of a contract of sale that had yet to come into existence. Instead, the instant Complaint should be dismissed. It prays for three reliefs arising from the enforcement of the document: execution by the petitioners of the necessary deed of sale over the vessels, the payment of the balance of the purchase price, and damages. The lower courts have already ruled that damages are unavailing. Our finding that there is no perfected contract of sale precludes the finding of any cause of action that would warrant the granting of the first two reliefs. No cause of action arises until there is a breach or violation thereof by either party.24 Considering that the documents create no obligation to execute or even pursue a contract of sale, but only manifest an intention to eventually contract one, we find no rights breached or violated that would warrant any of the reliefs sought in the Complaint.

WHEREFORE, the petition is GRANTED. The assailed Decision and Resolution of the Court of Appeals areREVERSED and SET ASIDE. The case before the Regional Trial Court is ordered dismissed. no pronouncement as to costs.

SO ORDERED.

DANTE O. TINGA Associate Justice

WE CONCUR:

REYNATO S. PUNO

Associate Justice

Chairman

MA. ALICIA AUSTRIA-MARTINEZ ROMEO J. CALLEJO, SR.

Associate Justice Associate Justice

MINITA V. CHICO-NAZARIO

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO

Associate JusticeChairman, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairman’s Attestation, it is hereby certified that the conclusions in the above

Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

HILARIO G. DAVIDE, JR.

Chief Justice

Republic of the PhilippinesSUPREME COURTManila

EN BANC

G.R. No. L-22487 May 21, 1969

ASUNCION ATILANO, CRISTINA ATILANO, ROSARIO ATILANO, assisted by their respective husbands, HILARIO ROMANO, FELIPE BERNARDO, and MAXIMO LACANDALO, ISABEL ATILANO and GREGORIO ATILANO, plaintiffs-appellees,vs.LADISLAO ATILANO and GREGORIO M. ATILANO, defendants-appellants.

Climaco and Azcarraga for plaintiff-appellee.T. de los Santos for defendants-appellants.

MAKALINTAL, J.:

In 1916 Eulogio Atilano I acquired, by purchase from one Gerardo Villanueva, lot No. 535 of the then municipality of Zamboanga cadastre. The vendee thereafter obtained transfer certificate of title No. 1134 in his name. In 1920 he had the land subdivided into five parts, identified as lots Nos. 535-A, 535-B, 535-C, 535-D and 535-E, respectively. On May 18 of the same year, after the subdivision had been effected, Eulogio Atilano I, for the sum of P150.00, executed a deed of sale covering lot No. 535-E in favor of his brother Eulogio Atilano II, who thereupon obtained transfer certificate of title No. 3129 in his name. Three other portions, namely lots Nos. 535-B, 535-C and 535-D, were likewise sold to other persons, the original owner, Eulogio Atilano I, retaining for himself only the remaining portion of the land, presumably covered by the title to lot No. 535-A. Upon his death the title to this lot passed to Ladislao Atilano, defendant in this case, in whose name the corresponding certificate (No. T-5056) was issued.

On December 6, 1952, Eulogio Atilano II having become a widower upon the death of his wife Luisa Bautista, he and his children obtained transfer certificate of title No. 4889 over lot No. 535-E in their names as co-owners. Then, on July 16, 1959, desiring to put an end to the co-ownership, they had the land resurveyed so that it could properly be subdivided; and it was then discovered that the land they were actually occupying on the strength of the deed of sale executed in 1920 was lot No. 535-A and not lot 535-E, as referred to in the deed, while the land which remained in the possession of the vendor, Eulogio Atilano I, and which passed to his successor, defendant Ladislao Atilano, was lot No. 535-E and not lot No. 535-A.

On January 25, 1960, the heirs of Eulogio Atilano II, who was by then also deceased, filed the present action in the Court of First Instance of Zamboanga, alleging, inter alia, that they had offered to surrender to the defendants the possession of lot No. 535-A and demanded in return the possession of lot No. 535-E, but that the defendants had refused to accept the exchange. The plaintiffs' insistence is quite understandable, since lot No. 535-E has an area of 2,612 square meters, as compared to the 1,808 square-meter area of lot No. 535-A.

In their answer to the complaint the defendants alleged that the reference to lot No. 535-E in the deed of sale of May 18, 1920 was an involuntary error; that the intention of the parties to that sale was to convey the lot correctly identified as lot No. 535-A; that since 1916, when he acquired the entirety of lot No. 535, and up to the time of his death, Eulogio Atilano I had been possessing and had his house on the portion designated as lot No. 535-E, after which he was succeeded in such possession by the defendants herein; and that as a matter of fact Eulogio Atilano I even increased the area under his possession when on June 11, 1920 he bought a portion of an adjoining lot, No. 536, from its owner Fruto del Carpio. On the basis of the foregoing allegations the defendants interposed a counterclaim, praying that the plaintiffs be ordered to execute in their favor the corresponding deed of transfer with respect to lot No. 535-E.

The trial court rendered judgment for the plaintiffs on the sole ground that since the property was registered under the Land Registration Act the defendants could not acquire it through prescription. There can be, of course, no dispute as to the correctness of this legal proposition; but the defendants, aside from alleging adverse possession in their answer and counterclaim, also alleged error in the deed of sale of May 18, 1920, thus: "Eulogio Atilano 1.o, por equivocacion o error involuntario, cedio y traspaso a su hermano Eulogio Atilano 2.do el lote No. 535-E en vez del Lote No. 535-A."lawphi1.ñet

The logic and common sense of the situation lean heavily in favor of the defendants' contention. When one sells or buys real property — a piece of land, for example — one sells or buys the property as he sees it, in its actual setting and by its physical metes and bounds, and not by the mere lot number assigned to it in the certificate of title. In the particular case before us, the portion correctly referred to as lot No. 535-A was already in the possession of the vendee, Eulogio Atilano II, who had constructed his residence therein, even before the sale in his favor even before the subdivision of the entire lot No. 535 at the instance of its owner, Eulogio Atillano I. In like manner the latter had his house on the portion correctly identified, after the subdivision, as lot No. 535-E, even adding to the area thereof by purchasing a portion of an adjoining property belonging to a different owner. The two brothers continued in possession of the respective portions the rest of their lives, obviously ignorant of the initial mistake in the designation of the lot subject of the 1920 until 1959, when the mistake was discovered for the first time.

Issue: Whether or not there was a valid contract of sale due to an involuntary mistake in drafting the document

The real issue here is not adverse possession, but the real intention of the parties to that sale. From all the facts and circumstances we are convinced that the object thereof, as intended and understood by the parties, was that specific portion where the vendee was then already residing, where he reconstructed his house at the end of the war, and where his heirs, the plaintiffs herein, continued to reside thereafter: namely, lot No. 535-A; and that its designation as lot No. 535-E in the deed of sale was simple mistake in the drafting of the document. The mistake did not vitiate the consent of the parties, or affect the validity and binding effect of

the contract between them. The new Civil Code provides a remedy for such a situation by means of reformation of the instrument. This remedy is available when, there having been a meeting of the funds of the parties to a contract, their true intention is not expressed in the instrument purporting to embody the agreement by reason of mistake, fraud, inequitable conduct on accident (Art. 1359, et seq.) In this case, the deed of sale executed in 1920 need no longer reformed. The parties have retained possession of their respective properties conformably to the real intention of the parties to that sale, and all they should do is to execute mutual deeds of conveyance.

WHEREFORE, the judgment appealed from is reversed. The plaintiffs are ordered to execute a deed of conveyance of lot No. 535-E in favor of the defendants, and the latter in turn, are ordered to execute a similar document, covering lot No. 595-A, in favor of the plaintiffs. Costs against the latter.

Reyes, J.B.L., Dizon, Zaldivar, Sanchez, Fernando and Capistrano, JJ., concur.Teehankee and Barredo, JJ., took no part.Concepcion C.J., and Castro, J., are on leave.

The Lawphil Project - Arellano Law Foundation

Republic of the PhilippinesSUPREME COURTManila

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 Luis Pichel, 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 of 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 shall 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 shall 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 the Vendee 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 Order dated November 9, 1972 which in part read thus:

The following facts are admitted by the parties:

Plaintiff Prudencio Alonzo was awarded by the Government 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 defendant directly to Ramon Sua so as to

release the land from the 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 the complaint 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 full payment thereof by defendant. 3 The 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 its branches, 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, it is the judgment of this Court that the deed of sale, Exhibit 'A', should be, as it is, hereby declared null and void; that plaintiff be, as he is, ordered to pay back to defendant the consideration of the sale in the sum of P4,200.00 the same to bear legal interest from the date of the filing of the complaint until paid; that defendant shall pay to the plaintiff the sum of P500.00 as attorney's fees.

Costs against the defendant. 6

Before going into the issues raised by the instant Petition, the matter of whether, under the admitted facts of this case, the respondent had the right or authority to execute the "Deed of Sale" in 1968, his award over Lot No. 21 having been cancelled previously by the Board of Liquidators on January 27, 1965, must be clarified. The case in point is Ras vs. Sua 7 wherein it was categorically stated by this Court that a cancellation of an award granted pursuant to the provisions of Republic Act No. 477 does not automatically divest the awardee of his rights to the land. Such cancellation does not result in the immediate reversion of the property subject of the award, to the State. Speaking through Mr. Justice J.B.L. Reyes, this Court ruled that "until and unless an appropriate proceeding for reversion is instituted by the State, and its reacquisition of the ownership and possession of the land decreed by a competent court, the grantee cannot be said to have been divested of whatever right that he may have over the same property." 8

There is nothing in the record to show that at any time after the supposed cancellation of herein respondent's award on January 27, 1965, reversion proceedings against Lot No. 21 were instituted by the State. Instead, the admitted fact is that the award was reinstated in 1972. Applying the doctrine announced in the above-cited Ras case, therefore, herein respondent is not deemed to have lost any of his rights as grantee of Lot No. 21 under Republic Act No. 477 during the period material to the case at bar, i.e., from the cancellation of the award in 1965 to its reinstatement in 1972. Within said period, respondent could exercise all the rights pertaining to a grantee with respect to Lot No. 21.

This brings Us to the issues raised by the instant Petition. In hi

s Brief, petitioner contends that the lower Court erred:

1. In resorting to construction and interpretation of the deed of sale in question where the terms thereof are clear and unambiguous and leave no doubt as to the intention of the parties;

2. In declaring — granting without admitting that an interpretation is necessary — the deed of sale in question to be a contract of lease over the land itself where the respondent himself waived and abandoned his claim that said deed did not express the true agreement of the parties, and on the contrary, respondent admitted at the pre-trial that his agreement with petitioner was one of sale of the fruits of the coconut trees on the land;

3. In deciding a question which was not in issue when it declared the deed of sale in question to be a contract of lease over Lot 21;

4. In declaring furthermore the deed of sale in question to be a contract of lease over the land itself on the basis of facts which were not proved in evidence;

5. In not holding that the deed of sale, Exhibit "A" and "2", expresses a valid contract of sale;

6. In not deciding squarely and to the point the issue as to whether or not the deed of sale in question is an encumbrance on the land and its improvements prohibited by Section 8 of Republic Act 477; and

7. In awarding respondent attorney's fees even granting, without admitting, that the deed of sale in question is violative of Section 8 of Republic Act 477.

The first five assigned errors are interrelated, hence, We shall consider them together. To begin with, We agree with petitioner that construction or interpretation of the document in question is not called for. A perusal of the deed fails to disclose any ambiguity or obscurity in its provisions, nor is there doubt as to the real intention of the contracting parties. The terms of the agreement are clear and unequivocal, hence the literal and plain meaning thereof should be observed. Such is the mandate of the Civil Code of the Philippines which provides that:

Art. 1370. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulation shall control ... .

Pursuant to the afore-quoted legal provision, the first and fundamental duty of the courts is the application of the contract according to its express terms, interpretation being resorted to only when such literal application is impossible. 9

Simply and directly stated, the "Deed of Sale dated August 14, 1968 is precisely what it purports to be. It is a document evidencing the agreement of herein parties for the sale of coconut fruits of Lot No. 21, and not for the lease of the land itself as found by the lower Court. In clear and express terms, the document defines the object of the contract thus: "the herein sale of the coconut fruits are for an the fruits on the aforementioned parcel of land during the years ...(from) SEPTEMBER 15, 1968; up to JANUARY 1, 1976." Moreover, as petitioner correctly asserts, the document in question expresses a valid contract of sale. It has the essential elements of a contract of sale as defined under Article 1485 of the New Civil Code which provides thus:

Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.

A contract of sale may be absolute or conditional.

The subject matter of the contract of sale in question are the fruits of the coconut trees on the land during the years from September 15, 1968 up to January 1, 1976, which subject matter is a determinate thing. Under Article 1461 of the New Civil Code, things having a potential existence may be the object of the contract of sale. And in Sibal vs. Valdez, 50 Phil. 512, pending crops which have potential existence may be the subject matter of the sale. Here, the Supreme Court, citing Mechem on Sales and American cases said which have potential existence may be the subject matter of sale. Here, the Supreme Court, citing Mechem on Sales and American cases said:

Mr. Mechem says that a valid sale may be made of a thing, which though not yet actually in existence, is reasonably certain to come into existence as the natural increment or usual incident of something already in existence, and then belonging to the vendor, and the title will vest in the buyer the moment the thing comes into existence. (Emerson vs. European Railway Co., 67 Me., 387; Cutting vs. Packers Exchange, 21 Am. St. Rep. 63) Things of this nature are said to have a potential existence. A man may sell property of which he is potentially and not actually possess. He may make a valid sale of the wine that a vineyard is expected to produce; or the grain a field may grow in a given time; or the milk a cow may yield during the coming year; or the wool that shall thereafter grow upon sheep; or what may be taken at the next case of a fisherman's net; or fruits to grow; or young animals not yet in existence; or the goodwill of a trade and the like. The thing sold, however, must be specific and Identified. They must be also owned at the time by the vendor. (Hull vs. Hull 48 Conn. 250 (40 Am. Rep., 165) (pp. 522-523).

We do not agree with the trial court that the contract executed by and between the parties is "actually a contract of lease of the land and the coconut trees there." (CFI Decision, p. 62, Records). The Court's holding that the contract in question fits the definition of a lease of things wherein one of the parties binds himself to give to another the enjoyment or use of a thing for a price certain and for a period which may be definite or indefinite (Art. 1643, Civil Code of the Philippines) is erroneous. The essential difference between a contract of sale and a lease of things is that the delivery of the thing sold transfers ownership, while in lease no such transfer of ownership results as the rights of the lessee are limited to the use and enjoyment of the thing leased.

In Rodriguez vs. Borromeo, 43 Phil. 479, 490, the Supreme Court held:

Since according to article 1543 of the same Code the contract of lease is defined as the giving or the concession of the enjoyment or use of a thing for a specified time and fixed price, and since such contract is a form of enjoyment of the property, it is evident that it must be regarded as

one of the means of enjoyment referred to in said article 398, inasmuch as the terms enjoyment, use, and benefit involve the same and analogous meaning relative to the general utility of which a given thing is capable. (104 Jurisprudencia Civil, 443)

In concluding that the possession and enjoyment of the coconut trees can therefore be said to be the possession and enjoyment of the land itself because the defendant-lessee in order to enjoy his right under the contract, he actually takes possession of the land, at least during harvest time, gather all of the fruits of the coconut trees in the land, and gain exclusive use thereof without the interference or intervention of the plaintiff-lessor such that said plaintiff-lessor is excluded in fact from the land during the period aforesaid, the trial court erred. The contract was clearly a "sale of the coconut fruits." The vendor sold, transferred and conveyed "by way of absolute sale, all the coconut fruits of his land," thereby divesting himself of all ownership or dominion over the fruits during the seven-year period. The possession and enjoyment of the coconut trees cannot be said to be the possession and enjoyment of the land itself because these rights are distinct and separate from each other, the first pertaining to the accessory or improvements (coconut trees) while the second, to the principal (the land). A transfer of the accessory or improvement is not a transfer of the principal. It is the other way around, the accessory follows the principal. Hence, the sale of the nuts cannot be interpreted nor construed to be a lease of the trees, much less extended further to include the lease of the land itself.

The real and pivotal issue of this case which is taken up in petitioner's sixth assignment of error and as already stated above, refers to the validity of the "Deed of Sale", as such contract of sale, vis-a-vis the provisions of Sec. 8, R.A. No. 477. The lower Court did not rule on this question, having reached the conclusion that the contract at bar was one of lease. It was from the context of a lease contract that the Court below determined the applicability of Sec. 8, R.A. No. 477, to the instant case.

Resolving now this principal issue, We find after a close and careful examination of the terms of the first paragraph of Section 8 hereinabove quoted, that the grantee of a parcel of land under R.A. No. 477 is not prohibited from alienating or disposing of the natural and/or industrial fruits of the land awarded to him. What the law expressly disallows is the encumbrance or alienation of the land itself or any of the permanent improvements thereon. Permanent improvements on a parcel of land are things incorporated or attached to the property in a fixed manner, naturally or artificially. They include whatever is built, planted or sown on the land which is characterized by fixity, immutability or immovability. Houses, buildings, machinery, animal houses, trees and plants would fall under the category of permanent improvements, the alienation or encumbrance of which is prohibited by R.A. No. 477. While coconut trees are permanent improvements of a land, their nuts are natural or industrial fruits which are meant to be gathered or severed from the trees, to be used, enjoyed, sold or otherwise disposed of by the owner of the land. Herein respondents, as the grantee of Lot No. 21 from the Government, had the right and prerogative to sell the coconut fruits of the trees growing on the property.

By virtue of R.A. No. 477, bona fide occupants, veterans, members of guerilla organizations and other qualified persons were given the opportunity to acquire government lands by purchase, taking into account their limited means. It was intended for these persons to make good and productive use of the lands awarded to them, not only to enable them to improve their standard of living, but likewise to help provide for the annual payments to the Government of the purchase price of the lots awarded to them. Section 8 was included, as stated by the Court a quo, to protect the grantees from themselves and the incursions of opportunists who prey on their misery and poverty." It is there to insure that the grantees themselves benefit from their respective lots, to the exclusion of other persons.

The purpose of the law is not violated when a grantee sells the produce or fruits of his land. On the contrary, the aim of the law is thereby achieved, for the grantee is encouraged and induced to be more industrious and productive, thus making it possible for him and his family to be economically self-sufficient and to lead a respectable life. At the same time, the Government is assured of payment on the annual installments on the land. We agree with herein petitioner that it could not have been the intention of the legislature to prohibit the grantee from selling the natural and industrial fruits of his land, for otherwise, it would lead to an absurd situation wherein the grantee would not be able to receive and enjoy the fruits of the property in the real and complete sense.

Respondent through counsel, in his Answer to the Petition contends that even granting arguendo that he executed a deed of sale of the coconut fruits, he has the "privilege to change his mind and claim it as (an) implied lease," and he has the "legitimate right" to file an action for annulment "which no law can stop." He claims it is his "sole construction of the meaning of the transaction that should prevail and not petitioner. (sic). 10 Respondent's counsel either misapplies the law or is trying too hard and going too far to defend his client's hopeless cause. Suffice it to say that respondent-grantee, after having received the consideration for the sale of his coconut fruits, cannot be allowed to impugn the validity of the contracts he entered into, to the prejudice of petitioner who contracted in good faith and for a consideration.

The issue raised by the seventh assignment of error as to the propriety of the award of attorney's fees made by the lower Court need not be passed upon, such award having been apparently based on th e erroneous finding and conclusion that the contract at bar is one of lease. We shall limit Ourselves to the question of whether or not in accordance with Our ruling in this case, respondent is entitled to an award of attorney's fees. The Civil Code provides that:

Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be recovered, except:

(1) When exemplary damages are awarded;

(2) When the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest;

(3) In criminal cases of malicious prosecution against the plaintiff;

(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;

(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and demandable claim;

(6) In actions for legal support;

(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;

(8) In actions for indemnity under workmen's compensation and employer's liability laws;

(9) In a separate civil action to recover civil liability arising from a crime;

(10) When at least double judicial costs are awarded;

(11) In any other case where the court deems it just and equitable that attorney's fees and expenses of litigation should be recovered.

In all cases, the attorney's fees and expenses of litigation must be reasonable.

We find that none of the legal grounds enumerated above exists to justify or warrant the grant of attorney's fees to herein respondent.

IN VIEW OF THE FOREGOING, the judgment of the lower Court is hereby set aside and another one is entered dismissing the Complaint. Without costs.

SO ORDERED.

Teehankee (Chairman), Makasiar, Fernandez, Melencio-Herrera and Plana, JJ., concur.

Footnotes

1 Exhibit "A", Folder of Exhibits.

2 Order of the lower Court dated November 9, 1972, Original Record on Appeal pp. 9-10. The first issue was originally phrased thus: "Was the partial consideration of sale in the sum of P 3,650.00 paid by defendant to Ramon Sua as agreed upon by the parties?," but was later changed to what appears above, in an Order dated November 21, 197 2, Original Record on Appeal p. 12.

3 Decision of the lower Court dated January 5, 1973, Original Record on Appeal p. 16.

4 Ibid, pp. 17-18.

5 This provision has been amended by Section 2 of Presidential Decree No. 967, promulgated on June 24, 1976, to read as follows:

"Sec. 8. Any provision of law, executive order, rules or regulations to the contrary notwithstanding, an applicant who has acquired land pursuant to the provisions of this Act and to whom a certificate of title has been issued covering such land may sell, cede, transfer, or convey his rights and interests therein, including the permanent improvements on the land, to any interested party."

6 Decision of the lower Court dated January 5, 1973, Original Record on Appeal, p. 19.

7 L-23302, September 25, 1968, 25 SCRA 153.

8 Ibid, p. 160.

9 See Pacific Oxygen and Acetylene Co. vs. Central Bank, L-21881, March 1, 1968, 22 SCRA 917, 921.

10 Respondent's Answer to Petition for Review, p. 5; Rollo, p. 74.

The Lawphil Project - Arellano Law Foundation

Republic of the PhilippinesSUPREME COURT

THIRD DIVISION

G.R. No. 132864 October 24, 2005

PHILIPPINE FREE PRESS, INC., Petitioner, vs.COURT OF APPEALS (12th Division) and LIWAYWAY PUBLISHING, INC., Respondents.

D E C I S I O N

GARCIA, J.:

In this petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Philippine Free Press, Inc. seeks the reversal of the Decision1 dated February 25, 1998 of the Court of Appeals (CA) in CA-GR CV No. 52660, affirming, with modification, an earlier decision of the Regional Trial Court at Makati, Branch 146, in an action for annulment of deeds of sale thereat instituted by petitioner against the Presidential Commission for Good

Government (PCGG) and the herein private respondent, Liwayway Publishing, Inc.

As found by the appellate court in the decision under review, the facts are:

xxx [Petitioner] . . . is a domestic corporation engaged in the publication of Philippine Free Press Magazine, one of the . . . widely circulated political magazines in the Philippines. Due to its wide circulation, the publication of the Free Press magazine enabled [petitioner] to attain considerable prestige prior to the declaration of Martial Law as well as to achieve a high profit margin. . . .

Sometime in . . . 1963, [petitioner] purchased a parcel of land situated at No. 2249, Pasong Tamo Street, Makati which had an area of 5,000 square meters as evidenced by . . . (TCT) No. 109767 issued by the Register of Deeds of Makati (Exh. Z). Upon taking possession of the subject land, [petitioner] constructed an office building thereon to house its various machineries, equipment, office furniture and fixture. [Petitioner] thereafter made the subject building its main office . . . .

During the 1965 presidential elections, [petitioner] supported the late President Diosdado Macapagal against then Senate President Ferdinand Marcos. Upon the election of the late President Ferdinand Marcos in 1965 and prior to the imposition of Martial law on September 21, 1972, [petitioner] printed numerous articles highly critical of the Marcos administration, exposing the corruption and abuses of the regime. The [petitioner] likewise ran a series of articles exposing the plan of the Marcoses to impose a dictatorship in the guise of Martial Law . . . .

In the evening of September 20, 1972, soldiers surrounded the Free Press Building, forced out its employees at gunpoint and padlocked the said establishment. The soldier in charge of the military contingent then informed Teodoro Locsin, Jr., the son of Teodoro Locsin, Sr., the President of [petitioner], that Martial Law had been declared and that they were instructed by the late President Marcos to take over the building and to close the printing press. xxx.

On September 21, 1972 . . ., Teodoro Locsin, Sr. was arrested [and] . . . . was brought to Camp Crame and was subsequently transferred to the maximum security bloc at Fort Bonifacio.

Sometime in December, 1972, Locsin, Sr. was informed . . . that no charges were to be filed against him and that he was to be provisionally released subject to the following conditions, to wit: (1) he remained (sic) under ‘city arrest’; xxx (5) he was not to publish thePhilippine Free Press nor was he to do, say or write anything critical of the Marcos administration . . . .

Consequently, the publication of the Philippine Free Press ceased. The subject building remained padlocked and under heavy military guard (TSB, 27 May 1993, pp. 51-52; stipulated). The cessation of the publication of the ... magazine led to the financial ruin of [petitioner] . . . . [Petitioner’s] situation was further aggravated when its employees demanded the payment of separation pay as a result of the cessation of its operations. [Petitioner’s] minority stockholders, furthermore, made demands that Locsin, Sr. buy out their shares. xxx.

On separate occasions in 1973, Locsin, Sr. was approached by the late Atty. Crispin Baizas with offers from then President Marcos for the acquisition of the [petitioner]. However, Locsin, Sr. refused the offer stating that [petitioner] was not for sale (TSN, 2 May 1988, pp. 8-9, 40; 27 May 1993, pp. 66-67).

A few months later, the late Secretary Guillermo De Vega approached Locsin, Sr. reiterating Marcos’s offer to purchase the name and the assets of the [petitioner].xxx

Sometime during the middle of 1973, Locsin, Sr. was contacted by Brig. Gen. Hans Menzi, the former aide-de-camp of then President Marcos concerning the sale of the [petitioner]. Locsin, Sr. requested that the meeting be held inside the [petitioner] Building and this was arranged by Menzi (TSN, 27 May 1993, pp. 69-70). During the said meeting, Menzi once more reiterated Marcos’s offer to purchase both the name and the assets of [petitioner] adding that "Marcos cannot be denied" (TSN, 27 May 1993, p. 71). Locsin, Sr. refused but Menzi insisted that he had no choice but to sell. Locsin, Sr. then made a counteroffer that he will sell the land, the building and all the machineries and equipment therein but he will be allowed to keep the name of the [petitioner]. Menzi promised to clear the matter with then President Marcos (TSN, 27 May 1993, p. 72). Menzi thereafter contacted Locsin, Sr. and informed him that President Marcos was amenable to his counteroffer and is offering the purchase price of Five Million Seven Hundred Fifty Thousand (P5, 750,000.00) Pesos for the land, the building, the machineries, the office furnishing and the fixtures of the [petitioner] on a "take-it-or-leave-it" basis (TSN, 2 May 1988, pp.42-43; 27 May 1993, p. 88).

On August 22, 1973, Menzi tendered to Locsin, Sr. a check for One Million (P1, 000,000.00) Pesos downpayment for the sale, . . . Locsin, Sr. accepted the check, subject to the condition that he will refund the same in case the sale will not push through. (Exh. 7).

On August 23, 1973, the Board of Directors of [petitioner] held a meeting and reluctantly passed a resolution authorizing Locsin, Sr. to sell the assets of the [petitioner] to Menzi minus the name "Philippine Free Press (Exhs. A-1 and 1; TSN, 27 May 1993, pp. 73-76).

On October 23, 1973, the parties [petitioner, as vendor and private respondent, represented by B/Gen. Menzi, as vendee] met . . . and executed two (2) notarized Deeds of Sale covering the land, building and the machineries of the [petitioner]. Menzi paid the balance of the purchase price in the amount of . . . (P4,750,000.00) Pesos (Exhs. A and (; B and 10;TSN, 27 May 1993, pp. 81-82; 3 June 1993, p. 89).

Locsin, Sr. thereafter used the proceeds of the sale to pay the separation pay of [petitioner’s] employees, buy out the shares of the minority stockholders as well as to settle all its obligations.

On February 26, 1987, [petitioner] filed a complaint for Annulment of Sale against [respondent] Liwayway and the PCGG before the Regional Trail Court of Makati, Branch 146 on the grounds of vitiated consent and gross inadequacy of purchase price. On motion of defendant PCGG, the complaint against it was dismissed on October 22, 1987. (Words in bracket and underscoring added)

In a decision dated October 31, 1995,2 the trial court dismissed petitioner’s complaint and granted private respondent’s counterclaim, to wit:

WHEREFORE, in view of all the foregoing premises, the herein complaint for annulment of sales is hereby dismissed for lack of merit.

On [respondent] counterclaim, the court finds for [respondent] and against [petitioner] for the recovery of attorney’s fees already paid for at P1,945,395.98, plus a further P316,405.00 remaining due and payable.

SO ORDERED. (Words in bracket added)

In time, petitioner appealed to the Court of Appeals (CA) whereat its appellate recourse was docketed as CA-G.R. C.V. No. 52660.

As stated at the outset hereof, the appellate court, in a decision dated February 25, 1998, affirmed with modification the appealed decision of the trial court, the modification consisting of the deletion of the award of attorney’s fees to private respondent, thus:

WHEREFORE, with the sole modification that the award of attorney’s fees in favor of [respondent] be deleted, the Decision appealed from is hereby AFFIRMED in all respects.

SO ORDERED.

Hence, petitioner’s present recourse, urging the setting aside of the decision under review which, to petitioner, decided questions of substance in a way not in accord with law and applicable jurisprudence considering that the appellate court gravely erred:

I

xxx IN ITS MISAPPLICATION OF THE DECISIONS OF THE HONORABLE COURT THAT RESULTED IN ITS ERRONEOUS CONCLUSION THAT PETITIONER'S CAUSE OF ACTION HAD ALREADY PRESCRIBED.

II

xxx IN CONCLUDING THAT THE UNDISPUTED FACTS AND CIRCUMSTANCES PRECEDING THE EXECUTION OF THE CONTRACTS OF SALE FOR THE PETITIONER'S PROPERTIES DID NOT ESTABLISH THE FORCE, INTIMIDATION, DURESS AND UNDUE INFLUENCE WHICH VITIATED PETITIONER'S CONSENT.

A. xxx IN CONSIDERING AS HEARSAY THE TESTIMONIAL EVIDENCE WHICH CLEARLY ESTABLISHED THE THREATS MADE UPON PETITIONER AND THAT RESPONDENT LIWAYWAY WILL BE USED AS THE CORPORATE VEHICLE FOR THE FORCED ACQUISITION OF PETITIONER'S PROPERTIES.

B. xxx IN CONCLUDING THAT THE ACTS OF THEN PRESIDENT MARCOS DURING MARTIAL LAW DID NOT CONSTITUTE THE FORCE, INTIMIDATION, DURESS AND UNDUE INFLUENCE WHICH VITIATED PETITIONER'S CONSENT.

C. xxx IN RESOLVING THE INSTANT CASE ON THE BASIS OF MERE SURMISES AND SPECULATIONS INSTEAD OF THE UNDISPUTED EVIDENCE ON RECORD.

III

xxx IN CONCLUDING THAT THE GROSSLY INADEQUATE PURCHASE PRICE FOR PETITIONER'S PROPERTIES DOES NOT INDICATE THE VITIATION OF PETITIONER'S CONSENT TO THE CONTRACTS OF SALE.

IV

xxx IN CONCLUDING THAT PETITIONER'S USE OF THE PROCEEDS OF THE SALE FOR ITS SURVIVAL CONSTITUTE AN IMPLIED RATIFICATION [OF] THE CONTRACTS OF SALE.

V

xxx IN EXCLUDING PETITIONER'S EXHIBITS "X-6" TO "X-7" AND "Y-3" (PROFFER) WHICH ARE ADMISSIBLE EVIDENCE WHICH COMPETENTLY PROVE THAT THEN PRESIDENT MARCOS OWNED PRIVATE RESPONDENT LIWAYWAY, WHICH WAS USED AS THE CORPORATE VEHICLE FOR THE ACQUISITION OF PETITIONER'S PROPERTIES.

The petition lacks merit.

Petitioner starts off with its quest for the allowance of the instant recourse on the submission that the martial law regime tolled the prescriptive period under Article 1391 of the Civil Code, which pertinently reads:

Article 391. The action for annulment shall be brought within four years.

This period shall begin:

In cases of intimidation, violence or undue influence, from the time the defect of the consent ceases.

xxx xxx xxx

It may be recalled that the separate deeds of sale3 sought to be annulled under petitioner’s basic complaint were both executed on October 23, 1973. Per the appellate court, citing Development Bank of the Philippines [DBP] vs. Pundogar4, the 4-year prescriptive period for the annulment of the aforesaid deeds ended "in late 1977", doubtless suggesting that petitioner’s right to seek such annulment accrued four (4) years earlier, a starting time-point corresponding, more or less, to the date of the conveying deed, i.e., October 23, 1973. Petitioner contends, however, that the 4-year prescriptive period could not have commenced to run on October 23, 1973, martial law being then in full swing. Plodding on, petitioner avers that the continuing threats on the life of Mr. Teodoro Locsin, Sr. and his family and other menacing effects of martial law – which should be considered as force majeure - ceased only after the February 25, 1986 People Power uprising.

Petitioner instituted its complaint for annulment of contracts on February 26, 1987. The question that now comes to the fore is: Did the 4-year prescriptive period start to run in late October 1973, as postulated in the decision subject of review, or on February 25, 1986, as petitioner argues, on the theory that martial law has the effects of a force majeure5, which, in turn, works to suspend the running of the prescriptive period for the main case filed with the trial court.

Petitioner presently faults the Court of Appeals for its misapplication of the doctrinal rule laid down in DBP vs. Pundogar6 where this Court, citing and quoting excerpts from the ruling in Tan vs. Court of Appeals 7, as reiterated in National Development Company vs. Court of Appeals, 8 wrote –

We can not accept the petitioners’ contention that the period during which authoritarian rule was in force had interrupted prescription and that the same began to run only on February 25, 1986, when the Aquino government took power. It is true that under Article 1154 [of the Civil Code] xxx fortuitous events have the effect of tolling the period of prescription. However, we can not say, as a universal rule, that the period from September 21, 1972 through February 25, 1986 involves a force majeure. Plainly, we can not box in the "dictatorial" period within the term without distinction, and without, by necessity, suspending all liabilities, however

demandable, incurred during that period, including perhaps those ordered by this Court to be paid. While this Court is cognizant of acts of the last regime, especially political acts, that might have indeed precluded the enforcement of liability against that regime and/or its minions, the Court is not inclined to make quite a sweeping pronouncement, . . . . It is our opinion that claims should be taken on a case-to-case basis. This selective rule is compelled, among others, by the fact that not all those imprisoned or detained by the past dictatorship were true political oppositionists, or, for that matter, innocent of any crime or wrongdoing. Indeed, not a few of them were manipulators and scoundrels. [Italization in the original; Underscoring and words in bracket added]

According to petitioner, the appellate court misappreciated and thus misapplied the correct thrust of the Tan case, as reiterated inDBPwhich, per petitioner’s own formulation, is the following:9

The prevailing rule, therefore, is that on a case-to-case basis, the Martial Law regime may be treated as force majeure that suspends the running of the applicable prescriptive period provided that it is established that the party invoking the imposition of Martial Law as a force majeure are true oppositionists during the Martial Law regime and that said party was so circumstanced that is was impossible for said party to commence, continue or to even resist an action during the dictatorial regime. (Emphasis and underscoring in the original)

We are not persuaded.

It strains credulity to believe that petitioner found it impossible to commence and succeed in an annulment suit during the entire stretch of the dictatorial regime. The Court can grant that Mr. Locsin, Sr. and petitioner were, in the context of DBP and Tan, "true oppositionists"during the period of material law. Petitioner, however, has failed to convincingly prove that Mr. Locsin, Sr., as its then President, and/or its governing board, were so circumstanced that it was well-nigh impossible for him/them to successfully institute an action during the martial law years. Petitioner cannot plausibly feign ignorance of the fact that shortly after his arrest in the evening of September 20, 1972, Mr. Locsin, Sr., together with several other journalists10, dared to file suits against powerful figures of the dictatorial regime and veritably challenged the legality of the declaration of martial law. Docketed in this Court as GR No. L-35538, the case, after its consolidation with eight (8) other petitions against the martial law regime, is now memorialized in books of jurisprudence and cited in legal publications and case studies as Aquino vs. Enrile.11

Incidentally, Mr. Locsin Sr., as gathered from the ponencia of then Chief Justice Querube Makalintal in Aquino, was released from detention notwithstanding his refusal to withdraw from his petition in said case. Judging from the actuations of Mr. Locsin, Sr. during the onset of martial law regime and immediately thereafter, any suggestion that intimidation or duress forcibly stayed his hands during the dark days of martial law to seek judicial assistance must be rejected.12

Given the foregoing perspective, the Court is not prepared to disturb the ensuing ruling of the appellate court on the effects of martial law on petitioner’s right of action:

In their testimonies before the trial court, both Locsin, Sr. and Locsin, Jr. claimed that they had not filed suit to recover the properties until 1987 as they could not expect justice to be done because according to them, Marcos controlled every part of the government, including the courts, (TSN, 2 May 1988, pp. 23-24; 27 May 1993, p. 121). While that situation may have obtained during the early years of the martial law administration, We could not agree with the proposition that it remained consistently unchanged until 1986, a span of fourteen (14) years. The unfolding of subsequent events would show that while dissent was momentarily stifled, it was not totally silenced. On the contrary, it steadily simmered and smoldered beneath the political surface and culminated in that groundswell of popular protest which swept the dictatorship from power.13

The judiciary too, as an institution, was no ivory tower so detached from the ever changing political climate. While it was not totally impervious to the influence of the dictatorship’s political power, it was not hamstrung as to render it inutile to perform its functions normally. To say that the Judiciary was not able to render justice to the persons who sought redress before it . . . during the Martial Law years is a sweeping and unwarranted generalization as well as an unfounded indictment. The Judiciary, . . . did not lack in gallant jurists and magistrates who refused to be cowed into silence by the Marcos administration. Be that as it may, the Locsin’s mistrust of the courts and of judicial processes is no excuse for their non-observance of the prescriptive period set down by law.

Corollary to the presented issue of prescription of action for annulment of contract voidable on account of defect of consent14 is the question of whether or not duress, intimidation or undue influence vitiated the petitioner’s consent to the subject contracts of sale. Petitioner delves at length on the vitiation issue and, relative thereto, ascribes the following errors to the appellate court: first, in considering as hearsay the testimonial evidence that may prove the element of "threat" against petitioner or Mr. Locsin, Sr., and the dictatorial regime's use of private respondent as a corporate vehicle for forcibly acquiring petitioner’s properties; second, in concluding that the acts of then President Marcos during the martial law years did not have a consent-vitiating effect on petitioner; and third, in resolving the case on the basis of mere surmises and speculations.

The evidence referred to as hearsay pertains mainly to the testimonies of Messrs. Locsin, Sr. and Teodoro Locsin, Jr. (the Locsins, collectively), which, in gist, established the following facts: 1) the widely circulated Free Press magazine, which, prior to the declaration of Martial Law, took the strongest critical stand against the Marcos administration, was closed down on the eve of such declaration, which closure eventually drove petitioner to financial ruin; 2) upon Marcos’ orders, Mr. Locsin, Sr. was arrested and detained for over 2 months without charges and, together with his family, was threatened with execution; 3) Mr. Locsin, Sr. was provisionally released on the condition that he refrains from reopening Free Press and writing anything

critical of the Marcos administration; and 4) Mr. Locsin, Sr. and his family remained fearful of reprisals from Marcos until the 1986 EDSA Revolution.

Per the Locsins, it was amidst the foregoing circumstances that petitioner’s property in question was sold to private respondent, represented by Gen. Menzi, who, before the sale, allegedly applied the squeeze on Mr. Locsin, Sr. thru the medium of the "Marcos cannot be denied" and "[you] have no choice but to sell" line.

The appellate court, in rejecting petitioner’s above posture of vitiation of consent, observed:

It was under the above-enumerated circumstances that the late Hans Menzi, allegedly acting on behalf of the late President Marcos, made his offer to purchase the Free Press. It must be noted, however, that the testimonies of Locsin, Sr. and Locsin, Jr. regarding Menzi’s alleged implied threat that "Marcos cannot be denied" and that [respondent] was to be the corporate vehicle for Marcos’s takeover of the Free Press is hearsay as Menzi already passed away and is no longer in a position to defend himself; the same can be said of the offers to purchase made by Atty. Crispin Baizas and Secretary Guillermo de Vega who are also both dead. It is clear from the provisions of Section 36, Rule 130 of the 1989 Revised Rules on Evidence that any evidence, . . . is hearsay if its probative value is not based on the personal knowledge of the witness but on the knowledge of some other person not on the witness stand. Consequently, hearsay evidence, whether objected to or not, has no probative value unless the proponent can show that the evidence falls within the exceptions to the hearsay evidence rule (Citations omitted)

The appellate court’s disposition on the vitiation-of-consent angle and the ratio therefor commends itself for concurrence.

Jurisprudence instructs that evidence of statement made or a testimony is hearsay if offered against a party who has no opportunity to cross-examine the witness. Hearsay evidence is excluded precisely because the party against whom it is presented is deprived of or is bereft of opportunity to cross-examine the persons to whom the statements or writings are attributed.15 And there can be no quibbling that because death has supervened, the late Gen Menzi, like the other purported Marcos subalterns, Messrs. Baizas and De Vega, cannot cross-examine the Locsins for the threatening statements allegedly made by them for the late President.

Like the Court of Appeals, we are not unmindful of the exception to the hearsay rule provided in Section 38, Rule 130 of the Rules of Court, which reads:

SEC. 38. Declaration against interest. – The declaration made by a person deceased or unable to testify, against the interest of the declarant, if the fact asserted in the declaration was at the time it was made so far contrary to the declarant's own interest, that a reasonable man in his position would not have made the declaration unless he believed it to be true, may be received in evidence against himself or his successors-in-interest and against third persons.

However, in assessing the probative value of Gen. Menzi’s supposed declaration against interest, i.e., that he was acting for the late President Marcos when he purportedly coerced Mr. Locsin, Sr. to sell the Free Press property, we are loathed to give it the evidentiary weight petitioner endeavors to impress upon us. For, the Locsins can hardly be considered as disinterested witnesses. They are likely to gain the most from the annulment of the subject contracts. Moreover, allegations of duress or coercion should, like fraud, be viewed with utmost caution. They should not be laid lightly at the door of men whose lips had been sealed by death.16 Francisco explains why:

[I]t has been said that "of all evidence, the narration of a witness of his conversation with a dead person is esteemed in justice the weakest.’" One reason for its unreliability is that the alleged declarant can not recall to the witness the circumstances under which his statement were made. The temptation and opportunity for fraud in such cases also operate against the testimony. Testimony to statements of a deceased person, at least where proof of them will prejudice his estate, is regarded as an unsafe foundation for judicial action except in so far as such evidence is borne out by what is natural and probable under the circumstances taken in connection with actual known facts. And a court should be very slow to act upon the statement of one of the parties to a supposed agreement after the death of the other party; such corroborative evidence should be adduced as to satisfy the court of the truth of the story which is to benefit materially the person telling it. 17

Excepting, petitioner insists that the testimonies of its witnesses – the Locsins - are not hearsay because:

In this regard, hearsay evidence has been defined as "the evidence not of what the witness knows himself but of what he has heard from others." xxx Thus, the mere fact that the other parties to the conversations testified to by the witness are already deceased does [not] render such testimony inadmissible for being hearsay. 18

xxx xxx xxx

The testimonies of Teodoro Locsin, Sr. and Teodoro Locsin, Jr. that the late Atty. Baizas, Gen. Menzi and Secretary de Vega stated that they were representing Marcos, that "Marcos cannot be denied", and the fact that Gen. Menzi stated that private respondent Liwayway was to be the corporate vehicle for the then President Marcos' take-over of petitioner Free Press are not hearsay. Teodoro Locsin, Sr. and Teodoro Locsin, Jr. were in fact testifying to matters of their own personal knowledge because they were either parties to the said conversation or were present at the time the said statements were made. 19

Again, we disagree.

Even if petitioner succeeds in halving its testimonial evidence, one-half purporting to quote the words of a live witness and the other half purporting to quote what the live witness heard from

one already dead, the other pertaining to the dead shall nevertheless remain hearsay in character.

The all too familiar rule is that "a witness can testify only to those facts which he knows of his own knowledge". 20 There can be no quibbling that petitioner’s witnesses cannot testify respecting what President Marcos said to Gen. Menzi about the acquisition of petitioner’s newspaper, if any there be, precisely because none of said witnesses ever had an opportunity to hear what the two talked about.

Neither may petitioner circumvent the hearsay rule by invoking the exception under the declaration-against-interest rule. In context, the only declaration supposedly made by Gen. Menzi which can conceivably be labeled as adverse to his interest could be that he was acting in behalf of Marcos in offering to acquire the physical assets of petitioner. Far from making a statement contrary to his own interest, a declaration conveying the notion that the declarant possessed the authority to speak and to act for the President of the Republic can hardly be considered as a declaration against interest.

Petitioner next assails the Court of Appeals on its conclusion that Martial Law is not per se a consent-vitiating phenomenon. Wrote the appellate court: 21

In other words, the act of the ruling power, in this case the martial law administration, was not an act of mere trespass but a trespass in law - not a perturbacion de mero hecho but a pertubacion de derecho - justified as it is by an act of government in legitimate self-defense (IFC Leasing & Acceptance Corporation v. Sarmiento Distributors Corporation, …, citing Caltex (Phils.) v. Reyes, 84 Phil. 654 [1949]. Consequently, the act of the Philippine Government in declaring martial law can not be considered as an act of intimidation of a third person who did not take part in the contract (Article 1336, Civil Code). It is, therefore, incumbent on [petitioner] to present clear and convincing evidence showing that the late President Marcos, acting through the late Hans Menzi, abused his martial law powers by forcing plaintiff-appellant to sell its assets. In view of the largely hearsay nature of appellant’s evidence on this point, appellant’s cause must fall.

According to petitioner, the reasoning of the appellate court is "flawed" because:22

It is implicit from the foregoing reasoning of the Court of Appeals that it treated the forced closure of the petitioner's printing press, the arrest and incarceration without charges of Teodoro Locsin, Sr., the threats that he will be shot and the threats that other members of his family will be arrested as legal acts done by a dictator under the Martial Law regime. The same flawed reasoning led the Court of Appeals to the erroneous conclusion that such acts do not constitute force, intimidation, duress and undue influence that vitiated petitioner's consent to the Contracts of Sale.

The contention is a rehash of petitioner’s bid to impute on private respondent acts of force and intimidation that were made to bear on petitioner or Mr. Locsin, Sr. during the early years of

martial law. It failed to take stock of a very plausible situation depicted in the appellate court’s decision which supports its case disposition on the issue respecting vitiation. Wrote that court:

Even assuming that the late president Marcos is indeed the owner of [respondent], it does not necessarily follow that he, acting through the late Hans Menzi, abused his power by resorting to intimidation and undue influence to coerce the Locsins into selling the assets of Free Press to them (sic).

It is an equally plausible scenario that Menzi convinced the Locsins to sell the assets of the Free Press without resorting to threats or moral coercion by simply pointing out to them the hard fact that the Free Press was in dire financial straits after the declaration of Martial Law and was being sued by its former employees, minority stockholders and creditors. Given such a state of affairs, the Locsins had no choice but to sell their assets.23

Petitioner laments that the scenario depicted in the immediately preceding quotation as a case of a court resorting to "mere surmises and speculations", 24 oblivious that petitioner itself can only offer, as counterpoint, also mere surmises and speculations, such as its claim about Eugenio Lopez Sr. and Imelda R. Marcos offering "enticing amounts" to buy Free Press.25

It bears stressing at this point that even after the imposition of martial law, petitioner, represented by Mr. Locsin, Sr., appeared to have dared the ire of the powers-that-be. He did not succumb to, but in fact spurned offers to buy, lock-stock-and-barrel, the Free Pressmagazine, dispatching Marcos’ emissaries with what amounts to a curt "Free Press is not for sale". This reality argues against petitioner’s thesis about vitiation of its contracting mind, and, to be sure, belying the notion that Martial Law worked as a Sword of Damocles that reduced petitioner or Mr. Locsin, Sr. into being a mere automaton. The following excerpt from the Court of Appeals’ decision is self-explanatory 26

Noteworthy is the fact that although the threat of arrest hung over his head like the Sword of Damocles, Locsin Sr. was still able to reject the offers of Atty. Baizas and Secretary De Vega, both of whom were supposedly acting on behalf of the late President Marcos, without being subjected to reprisals. In fact, the Locsins testified that the initial offer of Menzi was rejected even though it was supposedly accompanied by the threat that "Marcos cannot be denied". Locsin, Sr. was, moreover, even able to secure a compromise that only the assets of the Free Press will be sold. It is, therefore, quite possible that plaintiff-appellant’s financial condition, albeit caused by the declaration of Martial Law, was a major factor in influencing Locsin, Sr. to accept Menzi’s offer. It is not farfetched to consider that Locsin, Sr. would have eventually proceeded with the sale even in the absence of the alleged intimidation and undue influence because of the absence of other buyers.

Petitioner’s third assigned error centers on the gross inadequacy of the purchase price, referring to the amount of P5,775,000.00 private respondent paid for the property in question. To petitioner, the amount thus paid does not even approximate the actual market value of the assets and properties,27 and is very much less than the P18 Million offered by Eugenio

Lopez.28 Accordingly, petitioner urges the striking down, as erroneous, the ruling of the Court of Appeals on purchase price inadequacy, stating in this regard as follows: 29

Furthermore, the Court of Appeals in determining the adequacy of the price for the properties and assets of petitioner Free Press relied heavily on the claim that the audited financial statements for the years 1971 and 1972 stated that the book value of the land is set at Two Hundred Thirty-Seven Thousand Five Hundred Pesos (P237,500.00). However, the Court of Appeals' reliance on the book value of said assets is clearly misplaced. It should be noted that the book value of fixed assets bears very little correlation with the actual market value of an asset. (Emphasis and underscoring in the original).

With the view we take of the matter, the book or actual market value of the property at the time of sale is presently of little moment. For, petitioner is effectively precluded, by force of the principle of estoppel,30 from cavalierly disregarding with impunity its own books of account in which the property in question is assigned a value less than what was paid therefor. And, in line with the rule on the quantum of evidence required in civil cases, neither can we cavalierly brush aside private respondent’s evidence, cited with approval by the appellate court, that tends to prove that-31

xxx the net book value of the Properties was actually only P994,723.66 as appearing in Free Press's Balance Sheet as of November 30, 1972 (marked as Exh. 13 and Exh. V), which was duly audited by SyCip, Gorres, and Velayo, thus clearly showing that Free Press actually realized a hefty profit of P4,755,276.34 from the sale to Liwayway.

Lest it be overlooked, gross inadequacy of the purchase price does not, as a matter of civil law, per se affect a contract of sale. Article 1470 of the Civil Code says so. It reads:

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

Following the aforequoted codal provision, it behooves petitioner to first prove "a defect in the consent", failing which its case for annulment contract of sale on ground gross inadequacy of price must fall. The categorical conclusion of the Court of Appeals, confirmatory of that of the trial court, is that the price paid for the Free Press’ office building, and other physical assets is not unreasonable to justify the nullification of the sale. This factual determination, predicated as it were on offered evidence, notably petitioner’s Balance Sheet as of November 30, 1972 (Exh. 13), must be accorded great weight if not finality.32

In the light of the foregoing disquisition, the question of whether or not petitioner’s undisputed utilization of the proceeds of the sale constitutes, within the purview of Article 1393 of the Civil Code,33implied ratification of the contracts of sale need not detain us long. Suffice it to state in this regard that the ruling of the Court of Appeals on the matter is well-taken. Wrote the appellate court: 34

In the case at bench, Free Press’s own witnesses admitted that the proceeds of the 1973 sale were used to settle the claims of its employees, redeem the shares of its stockholders and finance the company’s entry into money-market shareholdings and fishpond business activities (TSN, 2 May 1988, pp. 16, 42-45). It need not be overemphasized that by using the proceeds in this manner, Free Press only too clearly confirmed the voluntaries of its consent and ratified the sale. Needless to state, such ratification cleanses the assailed contract from any alleged defects from the moment it was constituted (Art. 1396, Civil Code).

Petitioner’s posture that its use of the proceeds of the sale does not translate to tacit ratification of what it viewed as voidable contracts of sale, such use being a "matter of [its financial] survival",35 is untenable. As couched, Article 1393 of the Civil Code is concerned only with the act which passes for ratification of contract, not the reason which actuated the ratifying person to act the way he did. "Ubi lex non distinguit nec nos distinguere debemus. When the law does not distinguish, neither should we". 36

Finally, petitioner would fault the Court of Appeals for excluding Exhibits "X-6" to "X-7" and "Y-3" (proffer). These excluded documents which were apparently found in the presidential palace or turned over by the US Government to the PCGG, consist of, among others, what appears to be private respondent’s Certificate of Stock for 24,502 shares in the name of Gen. Menzi, but endorsed in blank. The proffer was evidently intended to show that then President Marcos owned private respondent, Liwayway Publishing Inc. Said exhibits are of little relevance to the resolution of the main issue tendered in this case. Whether or not the contracts of sale in question are voidable is the issue, not the ownership of Liwayway Publishing, Inc.

WHEREFORE, the petition is DENIED, and the challenged decision of the Court of Appeals AFFIRMED.

Costs against petitioner.

SO ORDERED.

CANCIO C. GARCIA

Associate Justice

WE CONCUR:

ARTEMIO V. PANGANIBAN

Associate Justice

Chairman

ANGELINA SANDOVAL-GUTIERREZ

Associate Justice

RENATO C. CORONA

Associate Justice

CONCHITA CARPIO MORALES

Associate Justice

A T T E S T A T I O N

I attest that the conclusions in the above decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

ARTEMIO V. PANGANIBAN

Associate Justice

Chairman, Third Division

C E R T I F I C A T I O N

Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairman's Attestation, it is hereby certified that the conclusions in the above decision were reached in consultation before the case was assigned to the writer of the opinion of the Court.

HILARIO G. DAVIDE, JR.

Chief Justice

Footnotes

1 Penned by then Associate Justice Consuelo Ynares-Santiago (now a member of this Court), with then Associate Justices Bernardo LL. Salas (ret.) and Demetrio G. Demetria, concurring; Rollo, pp. 149-177.

2 Rollo, pp. 194-201.

3 Rollo, p. 178 et seq., and p. 182 et seq.

4 218 SCRA 118 [1993].

5 Art. 1154. The period during which the obligee was prevented by a fortuitous event from enforcing his right is not reckoned against him.

6 See Note #4, supra.

7 195 SCRA 355 [1991].

8 211 SCRA 422, 435 [1992].

9 Petition, p. 32; Rollo, p- 40.

10 Joaquin P. Roces, Rolando Fadul, Rosalind Galang, Go Eng Guan, Maximo M. Soliven, Renato Constantino, and Luis R. Mauricio.

11 59 SCRA 183, 184 [1974].

12 Tan v. Court of Appeals, See Note # 7, supra.

13 Court of Appeals Decision, Rollo, pp. 172-173.

14 Art. 1330. A contract where consent is given through mistake, violence, intimidation, undue influence or frauds is voidable.

15 Philippine Home Assurance Corp. vs. Court of Appeals, 257 SCRA 468 [1996], citing Baguio v. Court of Appeals, 226 SCRA 366 [1993].

16 Rodriguez v. Rodriguez, 20 SCRA 908 [1967]).

17 Francisco R. J., BASIC EVIDENCE, 1999 ed., p. 496; citing II Moore on Facts, 1014-1015.

18 Petition, p. 83; Rollo, p. 90.

19 Petition, p. 83; Rollo, p. 91.

20 Rules on Evidence, Rule 130, Section 36.

21 Court of Appeals Decision; Rollo, pp. 166-167.

22 Petition, p. 94; Rollo, p. 102.

23 Court of Appeals Decision; Rollo, pp. 167.

24 Petition, pp. 100-105; Rollo, pp. 108-113.

25 Petition, pp. 101; Rollo, p. 109.

26 Court of Appeals Decision; Rollo, pp. 168.

27 Petition, p. 109.

28 Ibid., p. 107.

29 Petition, p. 108; Rollo, p. 116.

30 Civil Code, Article 1431. Through estoppel an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon.

31 Memorandum for Liwayway, p. 35; Rollo, p. 880.

32 Chan vs. Court of Appeals, 298 SCRA 713; Ibay vs. Court of Appeals, 212 SCRA 160 [1992).

33 Article 1393. Ratification may be effected expressly or tacitly. It is understood that there is a tacit ratification if, with knowledge of the reason which renders the contract voidable and such reason having ceased, the person who has a right to invoke it should execute an act which necessarily implies an intention to waive his right.

34 Court of Appeals Decision; Rollo, p. 174.

35 Memorandum for Free Press, p. 146; Rollo, p. 1041.

36 Tecson vs. COMELEC, 424 SCRA 277, 439 [2004], separate opinion of Justice Alicia Austria-Martinez.

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