Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 167874 January 15, 2010 SPOUSES CARMEN S. TONGSON and JOSE C. TONGSON u!"#"u"$d !y %#&%#'dr$n na($'y) JOSE TONGSON, JR., RAU* TONGSON, T+TA TONG SON, G*OR+A TONGSON A*MA TONGSON,Petitioners, vs. EMERGENCPA-NSOP /U*A, +NC. and AN+*O R. NAPA*A, Respondents. D E C I S I O N CARP+O, J.: T%$ Ca$ efore the Court is a petition for revie! " of the #" $u%ust &''( Decision & and "' March &'') Resolution # of the Court of $ppeals in C$*+.R. CV No. )&(&. In the #" $u%ust &''( Decision, the Court of $ppeals partiall- %ranted the appeal filed b- Eer%enc- Pa!nshop ula, Inc. /EPI0 and Danilo R. Napala /Napala0 b- odif-in% the decision ofthe trial court. In the "' March &'') Resolution, the Court of $ppeals denied the otion for partial reconsideration filed b- the Spouses 1ose C. 2on%son and Caren S. 2on%son /Spouses 2on%son0. T%$ a&"In Ma- "33&, Napala offered to purchase frothe Spouses 2on%son their #4(*s5uare eter parcel of land, situated in Davao Cit- and covered b- 2ransfer Certificate of 2itle /2C20 No. "(#'&', for P#,''','''. 6indin% the offer acceptable, the Spouses 2on%son e7ecuted !ith Napala a Meoranduof $%reeent ( dated Ma- "33&. On & Deceber "33&, respondents8 la!-er $tt-. Petronilo $. Ra%anas, 1r. prepared a Deed of $bsolute Sale ) indicatin% the consideration as onl- P ('','''. 9hen Caren 2on%son :noticed that the consideration !as ver- lo!, she ;coplained< and called the attention of Napala but the latter told her not to !orr- as he !ould be the one to pa- for the ta7es and she !ould receive the net aount of P#,''','''.: 4 2o confor!ith the consideration stated in the Deed of $bsolute Sale, the parties e7ecuted another Meoranduof $%reeent, !hich alle%edl- replaced the first Meoranduof $%reeent, = sho!in% that the sellin% price of the land !as onl- P('','''.
SPOUSES CARMEN S. TONGSON and JOSE C. TONGSON u!"#"u"$d !y %#&%#'dr$n na($'y) JOSE TONGSON, JR., RAU* TONGSON, T+TA TONGSON,G*OR+A TONGSON A*MA TONGSON, Petitioners,vs.EMERGENC PA-NSOP /U*A, +NC. and AN+*O R. NAPA*A, Respondents.
D E C I S I O N
CARP+O, J.:
T%$ Ca$
efore the Court is a petition for revie!" of the #" $u%ust &''( Decision& and "' March&'') Resolution# of the Court of $ppeals in C$*+.R. CV No. )&(&. In the #" $u%ust&''( Decision, the Court of $ppeals partiall- %ranted the appeal filed b- Eer%enc-Pa!nshop ula, Inc. /EPI0 and Danilo R. Napala /Napala0 b- odif-in% the decision of the trial court. In the "' March &'') Resolution, the Court of $ppeals denied the otionfor partial reconsideration filed b- the Spouses 1ose C. 2on%son and Caren S.2on%son /Spouses 2on%son0.
T%$ a&"
In Ma- "33&, Napala offered to purchase fro the Spouses 2on%son their #4(*s5uareeter parcel of land, situated in Davao Cit- and covered b- 2ransfer Certificate of 2itle/2C20 No. "(#'&', for P#,''','''. 6indin% the offer acceptable, the Spouses 2on%sone7ecuted !ith Napala a Meorandu of $%reeent( dated Ma- "33&.
On & Deceber "33&, respondents8 la!-er $tt-. Petronilo $. Ra%anas, 1r. prepared aDeed of $bsolute Sale) indicatin% the consideration as onl- P('','''. 9hen Caren2on%son :noticed that the consideration !as ver- lo!, she ;coplained< and called the
attention of Napala but the latter told her not to !orr- as he !ould be the one to pa- forthe ta7es and she !ould receive the net aount of P#,''','''.: 4
2o confor !ith the consideration stated in the Deed of $bsolute Sale, the partiese7ecuted another Meorandu of $%reeent, !hich alle%edl- replaced the firstMeorandu of $%reeent,= sho!in% that the sellin% price of the land !as onl-P('','''.
>pon si%nin% the Deed of $bsolute Sale, Napala paid P&'',''' in cash to the Spouses2on%son and issued a postdated Philippine National an? /PN0 chec? in the aount of P&,'',''',3 representin% the reainin% balance of the purchase price of the sub@ectpropert-. 2hereafter, 2C2 No. "(#'&' !as cancelled and 2C2 No. 2*"4"& !as issuedin the nae of EPI."'
9hen presented for pa-ent, the PN chec? !as dishonored for the reason :Dra!n $%ainst Insufficient 6unds.: Despite the Spouses 2on%sonAs repeated deands to either pa- the full value of the chec? or to return the sub@ect parcel of land, Napala failed to doeither. Beft !ith no other recourse, the Spouses 2on%son filed !ith the Re%ional 2rialCourt, ranch "4, Davao Cit- a Coplaint for $nnulent of Contract and Daa%es !itha Pra-er for the Issuance of a 2eporar- Restrainin% Order and a 9rit of Preliinar-In@unction.""
In their $ns!er, respondents countered that Napala had alread- delivered to theSpouses 2on%son the aount of P&,'',''' representin% the face value of the PN
chec?, as evidenced b- a receipt issued b- the Spouses 2on%son. Respondents pointedout that the Spouses 2on%son never returned the PN chec? claiin% that it !asisplaced. Respondents asserted that the pa-ent the- ade rendered the filin% of thecoplaint baseless."&
$t the pre*trial, Napala aditted, aon% others, issuin% the postdated PN chec? in thesu of P&,'','''."# 2he Spouses 2on%son, on the other hand, aditted issuin% areceipt !hich sho!ed that the- received the PN chec? fro Napala. 2hereafter, trialensued.
T%$ Ru'#n o3 "%$ Tr#a' Cour"
2he trial court found that the purchase price of the sub@ect propert- has not been full-paid and that Napala8s assurance to the Spouses 2on%son that the PN chec? !ouldnot bounce constituted fraud that induced the Spouses 2on%son to enter into the sale.9ithout such assurance, the Spouses 2on%son !ould not have a%reed to the contract of sale. $ccordin%l-, there !as fraud !ithin the abit of $rticle "## of the Civil Code, "(
@ustif-in% the annulent of the contract of sale, the a!ard of daa%es and attorne-8sfees, and pa-ent of costs.
2he dispositive portion of the 3 Deceber "334 Decision of the trial court reads
9ERE6ORE, @ud%ent is hereb- rendered
I $nnullin% the contract entered into b- the plaintiffs !ith the defendantsF
II Declarin% the !rits of preliinar- in@unctions issued peranentF
"0 reconve- the propert- sub@ect atter of the case to the plaintiffsF
&0 pa- plaintiffs
a0 P"'',''' as oral daa%esF
b0 P)',''' as e7eplar- daa%esF
c0 P&',''' as attorne-8s feesF and
d0 P#),4'&.)' cost of suit bro?en do!n as follo!s
P='.'' bond fee
P4'.'' lis pendens fee
P3'&.'' doc?et fee
P#3'.'' doc?et fee
P.'' suons fee
P"&.'' SD6
P"=.)' Gero7
P3,''' Sidcor Insurance ond fee
P&),''' Sidcor Insurance ond feeor the total su of P&'),4'&.)'.
It is further ordered that the onetar- a!ard be offsetted ;sic< to defendants8do!npa-ent of P&'',''' thereb- leavin% a balance of P),4'&.)'.")
Respondents appealed to the Court of $ppeals.
T%$ Ru'#n o3 "%$ Cour" o3 A$a'
2he Court of $ppeals a%reed !ith the trial court8s findin% that Napala eplo-ed fraud!hen he isrepresented to the Spouses 2on%son that the PN chec? in the aount ofP&,'',''' !ould be properl- funded at its aturit-. o!ever, the Court of $ppealsfound that the issuance and deliver- of the PN chec? and fraudulent representationade b- Napala could not be considered as the deterinin% cause for the sale of thesub@ect parcel of land. ence, such fraud could not be ade the basis for annullin% thecontract of sale. Nevertheless, the fraud eplo-ed b- Napala is a proper and valid basisfor the entitleent of the Spouses 2on%son to the balance of the purchase price in the
aount of P&,'',''' plus interest at the le%al rate of 4H per annu coputed frothe date of filin% of the coplaint on "" 6ebruar- "33#.
6indin% the trial court8s a!ard of daa%es unconscionable, the Court of $ppealsreduced the oral daa%es fro P"'',''' to P)',''' and the e7eplar- daa%es
fro P)',''' to P&),'''.
2he dispositive portion of the #" $u%ust &''( Decision of the Court of $ppeals reads
9ERE6ORE, the instant appeal is P$R2I$BB +R$N2ED. 2he assailed decision ofthe Re%ional 2rial Court, ""th 1udicial Re%ion, ranch "4, Davao Cit-, in Civil Case No.&",)*3#, is hereb- MODI6IED, to read
9ERE6ORE, @ud%ent is hereb- rendered orderin% defendants to pa- plaintiffs
a0 the su of P&,'','''.'' representin% the balance of the purchase price of
the sub@ect parcel of land, plus interest at the le%al rate of 4H per annucoputed fro the date of filin% of the coplaint on "" 6ebruar- "33#, until thefinalit- of the assailed decisionF thereafter, the interest due shall be at the le%alrate of "&H per annu until full- paidF
b0 P)',''' as oral daa%esF
c0 P&),''' as e7eplar- daa%esF
d0 P&',''' as attorne-8s feesF and
e0 2he costs of suit in the total aount of P#),4'&.)'.
It is understood, ho!ever, that plaintiffs8 entitleent to ites a to d, is sub@ect to thecondition that the- have not received the sae or e5uivalent aounts in criinal casefor Violation of atas Pabansa ilan% &&, doc?eted as Criinal Case No. #')'*3#,before the Re%ional 2rial Court of Davao Cit-, ranch "&, instituted a%ainst thedefendant Danilo R. Napala b- plaintiff Caren S. 2on%son.
SO ORDERED."4
2he Spouses 2on%son filed a partial otion for reconsideration !hich !as denied b- the
Court of $ppeals in its Resolution dated "' March &'').
T%$ +u$
2he Spouses 2on%son raise the follo!in% issues
". 9E2ER 2E CON2R$C2 O6 S$BE C$N E $NN>BBED $SED ON2E 6R$>D EMPBOED N$P$B$F and
&. 9E2ER 2E CO>R2 O6 $PPE$BS ERRED IN RED>CIN+ 2E $MO>N2 O6 D$M$+ES $9$RDED 2E 2RI$B CO>R2.
T%$ Ru'#n o3 "%$ Cour"
2he petition has erit.
On the existence of fraud
$ contract is a eetin% of the inds bet!een t!o persons, !hereb- one is bound to%ive soethin% or to render soe service to the other."= $ valid contract re5uires theconcurrence of the follo!in% essential eleents /"0 consent or eetin% of the inds,that is, consent to transfer o!nership in e7chan%e for the priceF /&0 deterinate sub@ectatterF and /#0 price certain in one- or its e5uivalent."
In the present case, there is no question that the subject matter of the sale is the 364-
square meter Davao lot owned by the Spouses on!son and the sellin! price a!reedupon by the parties is "3,###,###$ hus, there is no dispute as re!ards the presence ofthe two requisites for a valid sales contract, namely, %&' a determinate subject matterand %(' a price certain in money$
2he proble lies !ith the e7istence of the reainin% eleent, !hich is consent of thecontractin% parties, specificall-, the consent of the Spouses 2on%son to sell the propert-to Napala. Claiin% that their consent !as vitiated, the Spouses 2on%son point out thatNapala8s fraudulent representations of sufficient funds to pa- for the propert- inducedthe into si%nin% the contract of sale. Such fraud, accordin% to the Spouses 2on%son,renders the contract of sale void.
On the contrar-, Napala insists that the Spouses 2on%son !illin%l- consented to the saleof the sub@ect propert- a?in% the contract of sale valid. Napala aintains that no fraudattended the e7ecution of the sales contract.
2he trial and appellate courts had conflictin% findin%s on the 5uestion of !hether theconsent of the Spouses 2on%son !as vitiated b- fraud. 9hile the Court of $ppealsa%reed !ith the trial court8s findin% that Napala eplo-ed fraud !hen he assured theSpouses 2on%son that the postdated PN chec? !as full- funded !hen it fact it !asnot, the Court of $ppeals disa%reed !ith the trial court8s rulin% that such fraud could bethe basis for the annulent of the contract of sale bet!een the parties.
>nder $rticle "## of the Civil Code, there is fraud !hen, throu%h insidious !ords orachinations of one of the contractin% parties, the other is induced to enter into acontract !hich, !ithout the, he !ould not have a%reed to. In order that fraud a-vitiate consent, it ust be the causal /dolo causante0, not erel- the incidental /doloincidente0, induceent to the a?in% of the contract."3 $dditionall-, the fraud ust beserious.&'
9e find no causal fraud in this case to @ustif- the annulent of the contract of salebet!een the parties. It is clear fro the records that the Spouses 2on%son a%reed to selltheir #4(*s5uare eter Davao propert- to Napala !ho offered to pa- P#,''',''' aspurchase price therefor. Contrar- to the Spouses 2on%son8s belief that the fraudeplo-ed b- Napala !as :alread- operational at the tie of the perfection of the
contract of sale,: the isrepresentation b- Napala that the postdated PN chec? !ouldnot bounce on its aturit- hardl- e5uates to dolo causante. Napala8s assurance that thechec? he issued !as full- funded !as not the principal induceent for the Spouses2on%son to si%n the Deed of $bsolute Sale. Even before Napala issued the chec?, theparties had alread- consented and a%reed to the sale transaction. 2he Spouses2on%son !ere never tric?ed into sellin% their propert- to Napala. On the contrar-, the-!illin%l- accepted Napala8s offer to purchase the propert- at P#,''','''. In short, there!as a eetin% of the inds as to the ob@ect of the sale as !ell as the considerationtherefor.
Soe of the instances !here this Court found the e7istence of causal fraud include /"0
!hen the seller, !ho had no intention to part !ith her propert-, !as :tric?ed intobelievin%: that !hat she si%ned !ere papers pertinent to her application for thereconstitution of her burned certificate of title, not a deed of saleF&" /&0 !hen thesi%nature of the authoriJed corporate officer !as for%edF&& or /#0 !hen the seller !asseriousl- ill, and died a !ee? after si%nin% the deed of sale raisin% doubts on !hetherthe seller could have read, or full- understood, the contents of the docuents he si%nedor of the conse5uences of his act.&# Suffice it to state that nothin% analo%ous to thesebad%es of causal fraud e7ists in this case.
o!ever, !hile no causal fraud attended the e7ecution of the sales contract, there isfraud in its %eneral sense, !hich involves a false representation of a fact, &( !hen Napala
invei%led the Spouses 2on%son to accept the postdated PN chec? on therepresentation that the chec? !ould be sufficientl- funded at its aturit-. In other !ords,the fraud surfaced !hen Napala issued the !orthless chec? to the Spouses 2on%son,!hich is definitel- not durin% the ne%otiation and perfection sta%es of the sale. Rather,the fraud e7isted in the consuation sta%e of the sale !hen the parties are in theprocess of perforin% their respective obli%ations under the perfected contract of sale.In Swedish )atch, *+ v$ ourt of *ppeals,&) the Court e7plained the three sta%es of acontract, thus
I n %eneral, contracts under%o three distinct sta%es, to !it ne%otiationF perfection orbirthF and consuation. Ne%otiation be%ins fro the tie the prospective contractin%parties anifest their interest in the contract and ends at the oent of a%reeent ofthe parties. Perfection or birth of the contract ta?es place !hen the parties a%ree uponthe essential eleents of the contract. Consuation occurs !hen the parties fulfill orperfor the ters a%reed upon in the contract, culinatin% in the e7tin%uishentthereof.
Indisputabl-, the Spouses 2on%son as the sellers had alread- perfored their obli%ationof e7ecutin% the Deed of Sale, !hich led to the cancellation of their title in favor of EPI.
Respondents as the bu-ers, on the other hand, failed to perfor their correlativeobli%ation of pa-in% the full aount of the contract price. 9hile Napala paid P&'','''cash to the Spouses 2on%son as partial pa-ent, Napala issued an insufficientl- fundedPN chec? to pa- the reainin% balance of P&. illion. Despite repeated deandsand the filin% of the coplaint, Napala failed to pa- the P&. illion until the present.
Clearl-, respondents coitted a substantial breach of their reciprocal obli%ation,entitlin% the Spouses 2on%son to the rescission of the sales contract. 2he la! %rants thisrelief to the a%%rieved part-, thus
$rticle ""3" of the Civil Code provides
$rticle ""3". 2he po!er to rescind obli%ations is iplied in reciprocal ones, in case oneof the obli%ors should not copl- !ith !hat is incubent upon hi.
2he in@ured part- a- choose bet!een the fulfillent and the rescission of theobli%ation, !ith pa-ent of daa%es in either case. e a- also see? rescission, even
after he has chosen fulfillent, if the latter should becoe ipossible.
$rticle "#) of the Civil Code provides the effects of rescission, viJ
$R2. "#). Rescission creates the obli%ation to return the thin%s !hich !ere the ob@ectof the contract, to%ether !ith their fruits, and the price !ith its interestF conse5uentl-, itcan be carried out onl- !hen he !ho deands rescission can return !hatever he a-be obli%ed to restore.
Neither shall rescission ta?e place !hen the thin%s !hich are the ob@ect of the contractare le%all- in the possession of third persons !ho did not act in bad faith.
9hile the- did not file an action for the rescission of the sales contract, the Spouses2on%son specificall- pra-ed in their coplaint for the annulent of the sales contract,for the iediate e7ecution of a deed of reconve-ance, and for the return of the sub@ectpropert- to the.&4 2he Spouses 2on%son li?e!ise pra-ed :for such other reliefs !hicha- be deeed @ust and e5uitable in the preises.: In vie! of such pra-er, andconsiderin% respondents8 substantial breach of their obli%ation under the sales contract,the rescission of the sales contract is but proper and @ustified. $ccordin%l-, respondentsust reconve- the sub@ect propert- to the Spouses 2on%son, !ho in turn shall refundthe initial pa-ent of P&'',''' less the costs of suit.
Napala8s clais that rescission is not proper and that he should be %iven ore tie topa- for the unpaid reainin% balance of P&,'',''' cannot be countenanced. avin%acted fraudulentl- in perforin% his obli%ation, Napala is not entitled to ore tie to pa-the reainin% balance of P&,'',''', and thereb- erase the default or breach that hehad deliberatel- incurred.&= 2o do other!ise !ould be to sanction a deliberate andreiterated infrin%eent of the contractual obli%ations incurred b- Napala, an attituderepu%nant to the stabilit- and obli%ator- force of contracts.&
2he Court notes that the sellin% price indicated in the Deed of $bsolute Sale !as onl-P('',''', instead of the true purchase price of P#,''','''. 2he undervaluation of thesellin% price operates to defraud the %overnent of the ta7es due on the basis of thecorrect purchase price. >nder the la!,&3 the sellers have the obli%ation to pa- the capital%ains ta7. In this case, Napala undertoo? to :advance: the capital %ains ta7, aon%
other fees, under the Meorandu of $%reeent, thus
$22. $B$$S2RO
K Is it not a fact that -ou !ere the one !ho paid for the capital %ains ta7L
$ No, I onl- advanced the one-.
K 2o !hoL
$ 2o IR.
CO>R2
K ou !ere the one !ho !ent to the IR to pa- the capital %ains ta7L
$ It is ebodied in the eorandu a%reeent.#'
9hile Caren 2on%son protested a%ainst the :ver- lo! consideration,: sheeventuall- a%reed to the :reduced: sellin% price indicated in the Deed of $bsolutesince Napala assured her not to !orr- about the ta7es and e7penses, as he hadalle%edl- ade arran%eents !ith the ureau of Internal Revenue /IR0
re%ardin% the pa-ent of the ta7es, thus
K 9hat is the aount in the Deed of $bsolute SaleL
$ It !as onl- 6our undred 2housand. $nd he told e not to !orr- because 7 7 7the IR and not to !orr- because he !ill pa- e !hat !as a%reed the aountof 2hree Million and he !ill be pa-in% all these e7penses so I !as thin?in%, if thatis the case, an-!a- he paid e the 2!o undred 2housand cash and asubse5uent 2!o Point Ei%ht Million do!npa-ent chec? so I reall- thou%ht thathe !as pa-in% the !hole aount.
CO>R2
Proceed.
$22. BI$
K So -ou eventuall- a%reed that this consideration be reduced to 6our undred2housand Pesos and to be reflected in the Deed of $bsolute SaleL
$ es, but !hen I !as coplainin% to hi !h- it is so because I !as !orried !h-that !as li?e that but Mr. Napala told e don8t !orr- because ;he< can reed-this. $nd I as?ed hi ho! can ;he< reed- thisL $nd he told e !e can a?eanother Meorandu of $%reeent.
CO>R2
K efore -ou si%ned the Deed of $bsolute Sale, -ou found out the aountL
$ es, sir.
K $nd -ou coplainedL
$ es.#"
Considerin% that the undervaluation of the sellin% price of the sub@ect propert-, initiated
b- Napala, operates to defraud the %overnent of the correct aount of ta7es due onthe sale, the IR ust therefore be infored of this Decision for its appropriate action.
On the award of damages
Citin% $rticle "## of the Civil Code, the trial court a!arded P"'',''' oral daa%esand P)',''' e7eplar- daa%es to the Spouses 2on%son. 9hile a%reein% !ith the trialcourt on the Spouses 2on%son8s entitleent to oral and e7eplar- daa%es, theCourt of $ppeals reduced such a!ards for bein% unconscionable. 2hus, the oraldaa%es !as reduced fro P"'',''' to P)',''', and the e7eplar- daa%es !asreduced fro P)',''' to P&),'''.
$s discussed above, Napala defrauded the Spouses 2on%son in his acts of issuin% a!orthless chec? and representin% to the Spouses 2on%son that the chec? !as funded,coittin% in the process a substantial breach of his obli%ation as a bu-er. 6or suchfraudulent acts, the la!, specificall- the Civil Code, a!ards oral daa%es to thein@ured part-, thus
$R2. &&&'. 9illful in@ur- to propert- a- be a le%al %round for a!ardin% oral daa%esif the court should find that, under the circustances, such daa%es are @ustl- due. 2hesae rule applies to breaches of contract !here the defendant acted fraudulentl- or inbad faith. /Ephasis supplied0
Considerin% that the Spouses 2on%son are entitled to oral daa%es, the Court a-also a!ard e7eplar- daa%es, thus
$R2. &&#&. In contracts and 5uasi*contracts, the court a- a!ard e7eplar- daa%esif the defendant acted in a !anton, fraudulent, rec?less, oppressive, or alevolentanner.
$rticle &&#(. 9hen the aount of the e7eplar- daa%es need not be proved, theplaintiff ust sho! that he is entitled to oral, teperate or copensator- daa%esbefore the court a- consider the 5uestion of !hether or not e7eplar- daa%es !ouldbe a!arded. In case li5uidated daa%es have been a%reed upon, althou%h no proof ofloss is necessar- in order that such li5uidated daa%es a- be recovered,
nevertheless, before the court a- consider the 5uestion of %rantin% e7eplar- inaddition to the li5uidated daa%es, the plaintiff ust sho! that he !ould be entitled tooral, teperate or copensator- daa%es !ere it not for the stipulation for li5uidateddaa%es. /Ephasis supplied0
$ccordin%l-, !e affir the Court of $ppeals8 a!ards of oral and e7eplar- daa%es,!hich !e find e5uitable under the circustances in this case.
9ERE6ORE, !e P$R2I$BB +R$N2 the petition. 9e SE2 $SIDE the #" $u%ust&''( Decision and "' March &'') Resolution of the Court of $ppeals in C$*+.R. CVNo. )&(&, e7cept as to the a!ard of oral and e7eplar- daa%es, and ORDER the
rescission of the contract of sale bet!een the Spouses 2on%son and Eer%enc-Pa!nshop ula, Inc.
Bet a cop- of this Decision be for!arded to the ureau of Internal Revenue for itsappropriate action.
SO ORDERED.
ANTON+O T. CARP+O $ssociate 1ustice
9E CONC>R
ARTURO . /R+ON $ssociate 1ustice
MAR+ANO C. E* CAST+**O $ssociate 1ustice
RO/ERTO A. A/A $ssociate 1ustice
JOSE P. PERE $ssociate 1ustice
$ 2 2 E S 2 $ 2 I O N
I attest that the conclusions in the above Decision had been reached in consultationbefore the case !as assi%ned to the !riter of the opinion of the Court8s Division.
Pursuant to Section "#, $rticle VIII of the Constitution, and the Division Chairperson8s $ttestation, I certif- that the conclusions in the above Decision had been reached inconsultation before the case !as assi%ned to the !riter of the opinion of the Court8s
Division.
RENATO S. PUNOChief 1ustice
oo"no"$
" >nder Rule () of the Rules of Court.
&
Rollo, pp. ##*4#. Penned b- $ssociate 1ustice Perlita 1. 2ria 2irona !ith $ssociate 1ustices Ruben 2. Re-es and 1ose C. Re-es, 1r., concurrin%.
# Id. at =#*=(.
( E7hibit :.:
) E7hibit :C.:
4 Records, pp. (*)F 2SN, &3 $pril "33(, pp. "'*"".
=
2SN, &= 1anuar- "33), pp. )*4. $tt-. Petronilo Ra%anas testified on this atter,thus
$22. $B$$S2RO
K $fter this E7hibit :: !as prepared, a ne! Meorandu $%reeent!as prepared to replace this Meorandu of $%reeent ar?ed asE7hibit ::L
$ 2hat other Meorandu $%reeent !as ade to replace thatMeorandu $%reeent in the aount of 2hree Million pesos to @ibe !ith
the Deed of Sale.
K So the first Meorandu $%reeent !hich !as prepared and replacedb- another Meorandu $%reeent !ith the consideration of 6ourundred 2housand pesos !as this Meorandu $%reeent !herein theconsideration !as 2hree Million PesosL
K $nd of course, this !as notariJed b- -ou, this E7hibit ::L
$ $ctuall-, this !as notariJed but this !as replaced b- anotherMeorandu of $%reeent usin% the sae docuent.
K ou ean usin% the sae docuent nuber, pa%e nuberL
$ es, to @ibe.
K I8 sho!in% to -ou these docuents consistin% of & pa%es ar?ed asE7hibit :1: and :1*": !ith the letter head of Ra%anas Ba! Office. 2hat is in-ou o!n hand!ritin%L
$ es, sir.
K So, the true consideration of the transaction involvin% the propert- of the
spouses is 2hree Million and not 6our undred 2housandL
$ In principle, the- a%reed on that aount.
E7hibit :EE*".:
3 E7hibit :D.:
"' E7hibit :6.:
"" Doc?eted as Civil Case No. &",)*3#.
"& Records, p. &=.
"# Id. at ""'.
"( $R2. "##. 2here is fraud !hen, throu%h insidious !ords or achinations ofone of the contractin% parties, the other is induced to enter into a contract !hich,!ithout the, he !ould not have a%reed to.
") Rollo, p. "(. Penned b- 1ud%e Roeo D. Marasi%an.
"4
Id. at 4"*4&."= $rticle "#') of the Civil Code.
" $rticle "#" of the Civil Code in relation to $rticle "() of the sae Code.
$R2. "#". 2here is no contract unless the follo!in% re5uisites concur
/&0 Ob@ect certain !hich is the sub@ect atter of the contractF
/#0 Cause of the obli%ation !hich is established.
$R2. "(). - the contract of sale one of the contractin% parties obli%ateshiself to transfer the o!nership of and to deliver a deterinate thin%, andthe other to pa- therefor a price certain in one- or its e5uivalent.
"3 9oodhouse v. alili, 3# Phil. )&4, )#= /"3)#0.
&' $rticle "#(( of the Civil Code provides :In order that fraud a- a?e acontract voidable, it should be serious and should not have been eplo-ed b-both contractin% parties.
Incidental fraud onl- obli%es the person eplo-in% it to pa- daa%es.:&" $rchipela%o Mana%eent and Mar?etin% Corp. v. C$, #)3 Phil. #4# /"330.
/"0 In +eneral. * 2he provisions of Section #3/0 not!ithstandin%, a finalta7 of si7 percent /4H0 based on the %ross sellin% price or current fairar?et value as deterined in accordance !ith Section 4/E0 of this Code,!hichever is hi%her, is hereb- iposed upon capital %ains presued tohave been realiJed fro the sale, e7chan%e, or other disposition of realpropert- located in the Philippines, classified as capital assets, includin%pacto de retro sales and other fors of conditional sales, b- individuals,includin% estates and trusts Provided, 2hat the ta7 liabilit-, if an-, on %ains
fro sales or other dispositions of real propert- to the %overnent or an-of its political subdivisions or a%encies or to %overnent*o!ned or*controlled corporations shall be deterined either under Section &(/$0 orunder this Subsection, at the option of the ta7pa-erF 7 7 7
#'
2SN, &' 1ul- "33), p. 4".#" 2SN, &3 $pril "33(, pp. "'*"".
2his is a petition for revie! on certiorari under Rule () !hich see?s to annul and setaside the $u%ust &&, &'') Decision" of the Court of $ppeals %*' in C$*+.R. CV No.4#"' and its Noveber "(, &'') Resolution& den-in% petitioner8s otion for thereconsideration thereof. 2he 5uestioned C$ decision reversed the 1une , "33Decision# of the Re%ional 2rial Court of Manila, ranch "(, in Civil Case No. 3=*#3"4,!hich %ranted petitioner8s action for specific perforance.
2he factual and procedural antecedents have been succinctl- recited in the sub@ectCourt of $ppeals decision in this !ise(
Plaintiff Sar%asso Construction and Developent Corporation, Pic? and Shovel, Inc.and $tlantic Erectors, Inc., a @oint venture, !as a!arded the construction of Pier & andthe roc? cause!a- /R.C. Pier &0 for the port of San 6ernando, Ba >nion, after a publicbiddin% conducted b- the defendant PP$. Ipleentation of the pro@ect coenced on
$u%ust "(, "33'. 2he port construction !as in pursuance of the developent of theNorth!est BuJon +ro!th Kuadran%le. $d@acent to Pier & is an area of P(,&' s5uareeters intended for the reclaation pro@ect as part of the overall port developent plan.
In a letter dated October ", "33& of Mr. Melecio 1. +o, E7ecutive Director of theconsortiu, plaintiff offered to underta?e the reclaation bet!een the 2iber Pier and
Pier & of the Port of San 6ernando, Ba >nion, as an e7tra !or? to its e7istin%construction of R.C. Pier & and Roc? Cause!a- for a price of P#4,&3(,)=.'#.Defendant replied thru its $ssistant +eneral Mana%er 2eofilo . Bandicho !ho sent thefollo!in% letter dated Deceber ", "33&
:2his is to ac?no!led%e receipt of -our letter dated '" October "33& offerin% tounderta?e the reclaation bet!een the 2iber Pier and Pier &, at the Port of San6ernando, Ba >nion as an e7tra !or? to -our e7istin% contract.
:our proposal to underta?e the pro@ect at a total cost of 2IR2 SIG MIBBION 29O>NDRED NINE2 6O>R 2O>S$ND EI+2 >NDRED 6I62 SEVEN $ND '#"''
PESOS /P#4,&3(,)=.'#0 is not acceptable to PP$. If -ou can reduce -our offer to2IR2 MIBBION SEVEN >NDRED NINE2 6O>R 2O>S$ND 29O >NDRED2IR2 $ND 3"'' /P#',=3(,&#'.30 =$ (ay &on#d$r 3a>ora!'y a=ard o3 "%$ro?$&" #n your 3a>or, u!?$&" "o "%$ aro>a' o3 %#%$r au"%or#"y.
Please si%nif- -our a%reeent to the reduced aount of P#',=3(,&#'.3 b- si%nin% inthe space provided belo!. /ephasis in the ori%inal0
On $u%ust &4, "33#, a Notice of $!ard si%ned b- PP$ +eneral Mana%er Ro%elio Da-an!as sent to plaintiff for the phase I Reclaation Contract in the aount ofP#',=3(,&#'.3 and instructin% it to :enter into and e7ecute the contract a%reeent !iththis Office: and to furnish the docuents representin% perforance securit- and creditline. Defendant li?e!ise stated ;and< ade it a condition that :fenderin% of Pier No. &
Port of San 6ernando, and the Port of 2abaco is copleted before the approval of thecontract for the reclaation pro@ect.: Installation of the rubber doc? fenders in the saidports !as accoplished in the -ear "33(. PP$ Mana%eent further set a condition;that< :the acceptance b- the contractor that obiliJationdeobiliJation cost shall notbe included in the contract and that escalation shall be rec?oned upon approval of theSuppleental $%reeent.: 2he a!ard of the ne%otiated contract as additional orsuppleental pro@ect in favor of plaintiff !as intended :to save on theobiliJationdeobiliJation costs and soe ites as provided for in the ori%inalcontract.: ence, then +eneral Mana%er Carlos B. $%ustin presented for considerationb- the PP$ oard of Directors the contract proposal for the reclaation pro@ect.
$t its eetin% held on Septeber 3, "33(, the oard decided not to approve thecontract proposal, as reflected in the follo!in% e7cerpt of the inutes ta?en durin% saidboard eetin%
:$fter due deliberation, the oard advised Mana%eent to bid the pro@ect since there isno stron% le%al basis for Mana%eent to a!ard the suppleental contract throu%hne%otiation. 2he oard noted that the Pier & Pro@ect !as basicall- for the construction of a pier !hile the suppleental a%reeent refers to reclaation. 2hus there is no basis tocopare the ters and conditions of the reclaation pro@ect !ith the ori%inal contract/Pier & Pro@ect0 of Sar%asso.:)
It appears that PP$ did not forall- advise the plaintiff of the oard8s action on theircontract proposal. $s plaintiff learned that the oard !as not inclined to favor itsSuppleental $%reeent, Mr. +o !rote +eneral Mana%er $%ustin re5uestin% that thesae be presented a%ain to the oard eetin% for approval. o!ever, no repl- !asreceived b- plaintiff fro the defendant.
On 1une #', "33=, plaintiff filed a coplaint for specific perforance and daa%esbefore the Re%ional 2rial Court of Manila alle%in% that defendant PP$8s un@ustifiedrefusal to copl- !ith its underta?in%, unnecessaril- leadin% to the dela- in theipleentation of the a!ard under the $u%ust &4, "33# Notice of $!ard, has put onhold plaintiff8s en and resources earar?ed for the pro@ect, aside fro effectivel- t-in%its hands in underta?in% other pro@ects for fear that plaintiff8s incapacit- to underta?e!or? i%ht be spread thinl- and it i%ht not be able to function efficientl- if the PP$pro@ect and other pro@ects should re5uire siultaneous attention. Plaintiff averred that itsou%ht reconsideration of the $u%ust 3, "334 letter of PP$ inforin% it that it did not5ualif- to bid for the proposed e7tension of RC Pier No. &, Port of San 6ernando, Ba>nion for not havin% I$C Re%istration and Classification and not copl-in% !ithe5uipent re5uireent. In its letter dated Septeber "3, "334, plaintiff pointed out thatthe dis5ualification !as clearl- un@ust and totall- !ithout basis considerin% that
individual contractors of the @oint venture have underta?en separatel- bi%%er pro@ects,and have been such individual contractors for alost "4 -ears. It thus pra-ed that
@ud%ent be rendered b- the court directin% the defendant /a0 to copl- !ith itsunderta?in% under the Notice of $!ard dated $u%ust &4, "33#F and /b0 to pa- plaintiffactual daa%es /P",''','''.''0, e7eplar- daa%es /P",''','''.''0, attorne-8s fees
/P#'','''.''0 and e7penses of liti%ation and costs /P)','''.''0.
Defendant PP$ thru the Office of the +overnent Corporate Counsel /O+CC0 filed its $ns!er !ith Copulsor- Counterclai contendin% that the alle%ed Notice of $!ard hasalread- been properl- revo?ed !hen the Suppleental $%reeent !hich should haveipleented the a!ard !as denied approval b- defendant8s oard of Directors. $s toplaintiff8s pre*dis5ualification fro participatin% in the biddin% for the e7tension of R.C.Pier No. & Pro@ect at the Port of San 6ernando, Ba >nion, the sae is based on factualdeterination b- the defendant that plaintiff lac?ed I$C Re%istration and Classificationand e5uipent for the said pro@ect as counicated in the $u%ust 3, "334 letter.Defendant disclaied an- liabilit- for !hatever daa%es suffered b- the plaintiff !hen it
:@uped the %un: b- coittin% its alle%ed resources for the reclaation pro@ect despitethe fact that no Notice to Proceed !as issued to plaintiff b- the defendant. 2he cause ofaction insofar as the E7tension of R.C. Pier No. & of the Port of San 6ernando, Ba>nion, is barred b- the statute of liitation since plaintiff filed its re5uest forreconsideration !a- be-ond the seven /=0 da-*period allo!ed under I 4*) of theIpleentin% Rules and Re%ulations of P.D. ")3(. Defendant clarified that theproposed Reclaation Pro@ect and E7tension of R.C. Pier No. & San 6ernando, Ba>nion, are separate pro@ects of PP$. 2he oard of Directors denied approval of theSuppleental $%reeent on Septeber 3, "33( for lac? of le%al basis to a!ard thesuppleental contract throu%h ne%otiation !hich !as properl- counicated to theplaintiff as sho!n b- its letter dated Septeber "3, "33( see?in% reconsideration
thereof. $s advised b- the oard, PP$ Mana%eent be%an to a?e preparations for thepublic biddin% for the proposed reclaation pro@ect. In the eantie, defendant decidedto pursue the e7tension of R.C. Pier &, San 6ernando, Ba >nion. 777 It ;pra-ed that thecoplaint be disissed<. /Ephasis supplied0
$fter trial, the lo!er court rendered a decision in favor of the plaintiff, the dispositiveportion of !hich reads
:9ERE6ORE, and in vie! of the fore%oin% considerations, @ud%ent is hereb-rendered orderin% the defendant to e7ecute a contract in favor of the plaintiff for thereclaation of the area bet!een the 2iber Pier and Pier & located at San 6ernando,Ba >nion for the price of P#',=3(,&#'.3 and to pa- the costs.
2he counterclai is disissed for lac? of erit.
SO ORDERED.4
In addressin% affirativel- the basic issue of !hether there !as a perfected contractbet!een the parties for the reclaation pro@ect, the trial court ruled that the :hi%her
authorit- 7 7 adverted to does not necessaril- ean the oard of Directors %+oard'$ >nder IRR, P.D. ")3( /"0"'.4, approval of a!ard and contracts is vested on the headof the infrastructure departent or its dul- authoriJed representative. >nder Sec. 3 /iii0of P.D. )= !hich has aended P.D. )') that created the PP$, one of the particularpo!ers and duties of the +eneral Mana%er and $ssistant +eneral Mana%er is to si%n
contracts.:=
It !ent on to sa- that :in the case of the PP$, the po!er to enter intocontracts is not onl- vested on the oard of Directors, but also to the ana%er: citin%Section 3 /III0 of P.D. No. )=.
2he trial court added that the tenor of the Notice of $!ard iplied that respondent8s%eneral ana%er had been epo!ered b- its oard of Directors to bind respondent b-contract. It noted that !hereas the letter*repl- contained the phrase :approval of thehi%her authorit-,: the conspicuous absence of the sae in the Notice of $!ardsupported the findin% that the %eneral ana%er had been vested !ith authorit- to enterinto the contract for and in behalf of respondent. 2o the trial court, the disapproval b- thePP$ oard of the suppleentar- contract for the reclaation on a %round other than the
%eneral ana%er8s lac? of authorit- !as an e7plicit reco%nition that the latter !as soauthoriJed to enter into the purported contract.
Respondent oved for a reconsideration of the R2C decision but it !as denied for lac?of erit. Respondent then filed its Notice of $ppeal. Subse5uentl-, petitioner oved todisiss the appeal on the %round that respondent failed to perfect its appealseasonabl-. On 1une &=, &''', the Court of $ppeals issued a Resolution 3 disissin%respondent8s appeal for havin% been filed out tie. Respondent8s otion forreconsideration of said resolution !as also denied."'
>ndaunted, respondent elevated its proble to this Court via a petition for revie! on
certiorari under Rule () assailin% the denial of its appeal. On 1ul- #', &''(, the Courtrendered an en banc decision"" %rantin% respondent8s petition on a liberal interpretationof the rules of procedure, and orderin% the C$ to conduct further proceedin%s.
On $u%ust &&, &''), the C$ rendered the assailed decision reversin% the trial court8sdecision and disissin% petitioner8s coplaint for specific perforance and daa%es.2hus, the dispositive portion thereof reads
9ERE6ORE, preises considered, the present appeal is hereb- +R$N2ED. 2heappealed Decision dated 1une , "33 of the trial court in Civil Case No. 3=*#3"4 ishereb- REVERSED and SE2 $SIDE. $ ne! @ud%ent is hereb- entered DISMISSIN+
the coplaint for specific perforance and daa%es filed b- Plaintiff Sar%assoConstruction and Developent CorporationPic? Shovel, Inc.$tlantic Erectors, Inc.,/1oint Venture0 a%ainst the Philippine Ports $uthorit- for lac? of erit.
In settin% aside the trial court8s decision, the C$ ruled that the la! itself should serve asthe basis of the %eneral ana%er8s authorit- to bind respondent corporation and, thus,the trial court erred in erel- rel-in% on the !ordin%s of the Notice of $!ard and theMinutes of the oard eetin% in deterinin% the liits of his authorit-F that the po!er of
the %eneral ana%er :to si%n contracts: is different fro the oard8s po!er :to a?e orenter /into0 contracts:F and that, in the e7ecution of contracts, the %eneral ana%er onl-e7ercised a dele%ated po!er, in reference to !hich, evidence !as !antin% that the PP$oard dele%ated to its %eneral ana%er the authorit- to enter into a suppleentar-contract for the reclaation pro@ect.
2he C$ also found the disapproval of the contract on a %round other than the %eneralana%er8s lac? of authorit- rather inconse5uential because E7ecutive Order #' "& e7pressl- authoriJed the %overnin% boards of %overnent*o!ned or controlledcorporations :to enter into ne%otiated infrastructure contracts involvin%Q not ore thanfift- illion /P)' illion0.: 2he C$ further noted that the Notice of $!ard !as onl- one of those docuents that coprised the entire contract and, therefore, did not in itselfevidence the perfection of a contract.
ence, this petition.
2he issue to be resolved in this case is !hether or not a contract has been perfectedbet!een the parties !hich, in turn, depends on !hether or not the %eneral ana%er ofPP$ is vested !ith authorit- to enter into a contract for and on behalf of PP$.
2he petition fails.
Petitioner contends that the e7istence of :Notice of $!ard of Contract and Contractor8sConfore thereto,: resultin% fro its ne%otiation !ith respondent, proves that a contracthas alread- been perfected, and that the other docuents enuerated under theaended Rules and Re%ulations"# ipleentin% P.D. ")3("( are ere ph-sicalrepresentations of the parties8 eetin% of the indsF that the :$pproval of $!ard b-
$pprovin% $uthorit-: is onl- a :supportin% docuent,: and not an evidence of perfectionof contract, and !hich erel- :facilitates the approval of the contractF:") that PP$ isbound b- the acts of its %eneral ana%er in issuin% the Notice of $!ard under thedoctrine of apparent authorit-F and that the doctrine of estoppel, bein% an e5uitabledoctrine, cannot be invo?ed to perpetuate an in@ustice a%ainst petitioner.
$t the outset, it ust be stated that there are t!o /&0 separate and distinct, thou%hrelated, pro@ects involvin% the parties herein, viJ /i0 the construction of Pier & and theroc? cause!a- for the port of San 6ernando, Ba >nion, and /ii0 the reclaation of thearea bet!een the 2iber Pier and Pier & of the sae port. Petitioner8s action for specificperforance and daa%es erel- relates to the latter.
Ever- contract has the follo!in% essential eleents /i0 consent, /ii0 ob@ect certain and/iii0 cause. Consent has been defined as the concurrence of the !ills of the contractin%parties !ith respect to the ob@ect and cause !hich shall constitute the contract. "4 In%eneral, contracts under%o three distinct sta%es, to !it ne%otiation, perfection or birth,and consuation. N$o"#a"#on"= be%ins fro the tie the prospective contractin%parties anifest their interest in the contract and ends at the oent of theira%reeent. P$r3$&"#on or birth of the contract ta?es place !hen the parties a%ree upon
the essential eleents of the contract, i$e$, consent, ob@ect and price. Conu((a"#on occurs !hen the parties fulfill or perfor the ters a%reed upon in the contract,culinatin% in the e7tin%uishent thereof. 2he birth or the perfection of the contract,!hich is the cru7 of the present controvers-, refers to that oent in the life of acontract !hen there is finall- a concurrence of the !ills of the contractin% parties !ith
respect to the ob@ect and the cause of the contract."
$ o>$rn($n" or u!'#& &on"ra&" has been defined as a contract entered into b- stateofficers actin% on behalf of the state, and in !hich the entire people of the state aredirectl- interested. It relates !holl- to atter of public concern, and affects private ri%htsonl- so far as the statute confers such ri%hts !hen its provisions are carried out b- theofficer to !ho it is confided to perfor."3
$ %overnent contract is essentiall- siilar to a private contract conteplated under theCivil Code. 2he le%al re5uisites of consent of the contractin% parties, an ob@ect certain!hich is the sub@ect atter, and cause or consideration of the obli%ation ust li?e!ise
concur. Other!ise, there is no %overnent contract to spea? of.
&'
$s correctl- found b- the C$, the issue on the reclaation of the area bet!een 2iberPier and Pier & of the Port of San 6ernando involves a %overnent infrastructurepro@ect, and it is be-ond dispute that the applicable la!s, rules and re%ulations on%overnent contracts or pro@ects appl-.
On the atter of enterin% into ne%otiated contracts b- %overnent*o!ned andcontrolled corporations, the provisions of e7istin% la!s are cr-stal clear in re5uirin% the%overnin% board8s approval thereof. 2he Court holds that the C$ correctl- applied thepertinent la!s, to !it
E7ecutive Order No. #'Q provides for revised levels of authority on approval of!overnment contracts. Section " thereof authoriJesQ +OCCs
". 2o enter into infrastructure contracts a!arded throu%h public biddin%re%ardless of the aount involvedF
&. 2o enter into ne!otiated infrastructure contracts involvin% not ore than onehundred illion pesos /P"'' illion0 in the case of the Departent of2ransportation and Counications and the Departent of Public 9or?s andi%h!a-s, and no" (or$ "%an 3#3"y (#''#on $o ;P50 (#''#on< #n "%$ &a$ o3
"%$ o"%$r $ar"($n" and o>$rn($n" &orora"#onF Provided, 2hatcontracts e7ceedin% the said aounts shall onl- be entered into upon priorauthorit- fro the Office of the PresidentF and Provided, 6urther, 2hat saidcontracts shall onl- be a!arded in strict copliance !ith Section ) of E7ecutiveOrder No. "4(, S. of "3=.
2he rule on ne%otiated contracts, as aended on $u%ust "&, &''' /I "'.4.&0 no!reads
". Ne%otiated contract a- be entered into onl- !here an- of the follo!in%conditions e7ists and the ipleentin% officea%enc-corporation is not capable
of underta?in% the contract b- adinistration
a. In ties of eer%encies arisin% fro natural calaities !hereiediate action is necessar- to prevent iinent loss of life andorpropert- or to restore vital public services, infrastructure and utilities suchasQ
b. 6ailure to a!ard the contract after copetitive public biddin% for validcause or causes
c. 9here the sub@ect pro@ect is ad@acent or conti%uous to an on*%oin%
pro@ect and it could be econoicall- prosecuted b- the sae contractorprovided that sub@ect contract has siilar or related scope of !or?s and itis !ithin the contractin% capacit- of the contractor, in !hich case, directne%otiation a- be underta?en !ith the said contractorQ
7 7 7
In cases a and b above, biddin% a- be underta?en throu%h sealed canvass of at leastthree /#0 5ualified contractorsQ Au"%or#"y "o n$o"#a"$ &on"ra&" 3or ro?$&" und$r"%$$ $@&$"#ona' &a$ %a'' !$ u!?$&" "o r#or aro>a' !y %$ad o3 a$n&#$=#"%#n "%$#r '#(#" o3 aro>#n au"%or#"y.:&" /ephasis in the ori%inal0
6urtherore, the Revised $dinistrative Code&& la-s do!n the sae re5uireent, thus
Sec. )". 9ho Ma- E7ecute Contracts. Contracts in behalf of the Republic of thePhilippines shall be e7ecuted b- the President unless authorit- therefore is e7pressl-vested b- la! or b- hi in an- other public officer.
Contracts in behalf of the political subdivisions and corporate a%encies orinstruentalities shall be approved b- their respective %overnin% boards or councils ande7ecuted b- their respective e7ecutive heads.
Petitioner neither disputes nor adits the application of the fore%oin% statutor-provisions but insists, nonetheless, that the Notice of $!ard itself alread- ebodies aperfected contract havin% passed the ne%otiation sta%e&# despite the clear absencethereon of a condition re5uirin% the prior approval of respondent8s hi%her authorit-.
Petitioner8s ar%uent is untenable. Contracts to !hich the %overnent is a part- are!enerally sub@ect to the sae la!s and re%ulations !hich %overn the validit- andsufficienc- of contracts bet!een private individuals.&( $ %overnent contract, ho!ever,
is perfected&) onl- upon approval b- a copetent authorit-, !here such approval isre5uired.&4
2he contractin% officer functions as a%ent of the Philippine %overnent for the purposeof a?in% the contract. 2here arises then, in that re%ard, a principal*a%ent relationship
bet!een the +overnent, on one hand, and the contractin% official, on the other. 2helatter thou%h, in conteplation of la!, possesses onl- actual a!ency authority . 2his is tosa- that his contractin% po!er e7ists, !here it e7ists at all, on'y !$&au$ and !y >#r"u$o3 a 'a=, or !y au"%or#"y o3 'a=, &r$a"#n and &on3$rr#n #". $nd it is !ell settled that%$ (ay (a$ on'y u&% &on"ra&" a %$ # o au"%or#B$d "o (a$. 6lo!in% frothese basic %uidin% principles is another statin% that the %overnent is bound onl- tothe e7tent of the po!er it has actuall- %iven its officers*a%ents. It %oes !ithout sa-in%then that, conforabl- to a fundaental principle in a%enc-, the acts of such a%ents inenterin% into a%reeents or contracts be-ond the scope of their actual authorit- do notbind or obli%ate the +overnent. 2he oent this happens, the principal*a%entrelationship bet!een the +overnent and the contractin% officer ceases to e7ist.&=
/ephasis supplied0
It !as stressed that
Qthe contractin% official !ho %ives his consent as to the sub@ect atter and theconsideration ou%ht to be epo!ered le%all- to bind the +overnent and that hisactuations in a particular contractual underta?in% on behalf of the %overnent coe!ithin the abit of his authorit-. On top of that, the approval of the contract b- a hi%herauthorit- is usuall- re5uired b- la! or adinistrative re%ulation as a re5uisite for itsperfection.&
>nder $rticle "" of the Civil Code, the a%ent ust act !ithin the scope of his authorit-to bind his principal. So lon% as the a%ent has authorit-, e7press or iplied, the principalis bound b- the acts of the a%ent on his behalf, !hether or not the third person dealin%!ith the a%ent believes that the a%ent has actual authorit-.&3 2hus, all si%natories in acontract should be clothed !ith authorit- to bind the parties the- represent.
P.D. )= li?e!ise states that one of the corporate po!ers of respondent8s oard ofDirectors is to :reclaiQ an- part of the lands vested in the $uthorit-.: It also:e7ercise;s< all the po!ers of a corporation under the Corporation Ba!.: On the otherhand, the la! erel- vests the %eneral ana%er the :%eneral po!erQ to si%n contracts:and :to perfor such other duties as the oard a- assi%nQ: 2herefore, unless
respondent8s oard validl- authoriJes its %eneral ana%er, the latter cannot bindrespondent PP$ to a contract.
2he Court copletel- a%rees !ith the C$ that the petitioner failed to present copetentevidence to prove that the respondent8s %eneral ana%er possessed such actualauthorit- dele%ated either b- the oard of Directors, or b- statutor- provision. 2heauthorit- of %overnent officials to represent the %overnent in an- contract ustproceed fro an e7press provision of la! or valid dele%ation of authorit-.#' 9ithout such
actual authorit- bein% possessed b- PP$8s %eneral ana%er, there could be no realconsent, uch less a perfected contract, to spea? of.
It is of no oent if the phrase :approval of hi%her authorit-: appears no!here in theNotice of $!ard. It neither @ustifies petitioner8s presuption that the re5uired approval
:had alread- been %ranted: nor supports its conclusion that no other condition /than thecopletion of fenderin% of Pier & as stated in the Notice of $!ard0 ou%ht to be coplied!ith to create a perfected contract.#" $pplicable la!s for part of, and are read into, thecontract !ithout need for an- e7press reference theretoF#& ore so, to a purported%overnent contract, !hich is ibued !ith public interest.
$doptin% the trial court8s ratiocination, petitioner further ar%ues that had it been true thatrespondent8s %eneral ana%er !as !ithout authorit- to bind respondent b- contract,then the forer should have disapproved the suppleental contract on that %round.## Petitioner also interprets the oard8s silence on the atter as an e7plicit reco%nition ofthe latter8s authorit- to enter into a ne%otiated contract involvin% the reclaation pro@ect.
2his posture, ho!ever, does not confor !ith the basic provisions of the la! to !hich!e al!a-s %o bac?. Section ( of P.D. ")3(#( provides#)
Section (. +iddin!$ Construction pro@ects shall %enerall- be underta?en b- contract after copetitive public biddin%. Pro@ects a- be underta?en b- adinistration or forceaccount or b- ne%otiated contract on'y #n $@&$"#ona' &a$ !here tie is of theessence, or !here there is lac? of 5ualified bidders or contractors, or !here there is aconclusive evidence that %reater econo- and efficienc- !ould be achieved throu%hthis arran%eent, and in accordance !ith provision of la!s and acts on the atter,sub@ect to the approval of the Ministr- of Public 9or?s, 2ransportation andCounications, the Minister of Public i%h!a-s, or the Minister of Ener%-, as the case
a- be, if the pro@ect cost is less than P" Million, and of the President of the Philippines,upon the recoendation of the Minister, if the pro@ect cost is P" Million or ore.
Precisel-, the oard of Directors of the respondent did not see fit to approve thecontract b- ne%otiation after findin% that :the Pier & Pro@ect !as basicall- for theconstruction of a pier !hile the suppleental a%reeent refers to reclaation. 2hus,there is no basis to copare the ters and conditions of the reclaation pro@ect !ith theori%inal contract /Pier & Pro@ect0 of Sar%asso.: So even %rantin% ar!uendo that theoard8s action or inaction is an :e7plicit: reco%nition of the authorit- of the %eneralana%er, the purported contract cannot possibl- be the basis of an action for specificperforance because the ne!otiated contract itself basicall- contravenes strin%ent le%alre5uireents aied at protectin% the interest of the public. 2he botto line here is thatthe facts do not confor to !hat the la! re5uires.
No !onder petitioner convenientl- oitted an- attept at presentin% its case !ithin thestatutor- e7ceptions, and insisted that respondent8s disapproval of the suppleentala%reeent !as :a ere afterthou%ht: :perhaps realiJin% the infirit- of its e7cuse:/referrin% to petitioner8s belated pre*dis5ualification in the construction pro@ect0. ut theCourt, at the ver- outset, has previousl- clarified that the t!o pro@ects involved herein
are distinct fro each other. ence, petitioner8s dis5ualification in the constructionpro@ect due to its lac? of certain re5uireents has no si%nificant bearin% in this case.
Bastl-, petitioner8s invocation of the doctrine of apparent authorit-#4 is isplaced. 2hisdoctrine, in the real of %overnent contracts, has been restated to ean that the
%overnent is NO2 bound b- unauthoriJed acts of its a%ents, even thou%h !ithin theapparent scope of their authorit-.#= >nder the la! on a%enc-, ho!ever, :apparentauthorit-: is defined as the po!er to affect the le%al relations of another person b-transactions !ith third persons arisin% fro the other8s anifestations to such thirdperson# such that the liabilit- of the principal for the acts and contracts of his a%ente7tends to those !hich are !ithin the apparent scope of the authorit- conferred on hi,althou%h no actual authorit- to do such acts or to a?e such contracts has beenconferred.#3&avvphi&
$pparent authorit-, or !hat is soeties referred to as the :holdin% out: theor-, ordoctrine of ostensible a%enc-, iposes liabilit-, not as the result of the reality of a
contractual relationship, but rather because of the actions of a principal or an eplo-erin soeho! isleadin% the public into believin% that the relationship or the authorit-e7ists.(' 2he e7istence of apparent authorit- a- be ascertained throu%h /"0 the %eneralanner in !hich the corporation holds out an officer or a%ent as havin% the po!er to actor, in other !ords, the apparent authorit- to act in %eneral, !ith !hich it clothes hiF or/&0 the ac5uiescence in his acts of a particular nature, !ith actual or constructive?no!led%e thereof, !hether !ithin or be-ond the scope of his ordinar- po!ers. Itre5uires presentation of evidence of siilar act/s0 e7ecuted either in its favor or in favorof other parties.("
Easil- discernible fro the fore%oin% is that apparent authorit- is deterined onl- b- the
acts of the principal and not b- the acts of the a%ent. 2he principal is, therefore, notresponsible !here the a%ent8s o!n conduct and stateents have created the apparentauthorit-.(&
In this case, not a sin%le act of respondent, actin% throu%h its oard of Directors, !ascited as havin% clothed its %eneral ana%er !ith apparent authorit- to e7ecute thecontract !ith it.
9ith the fore%oin% dis5uisition, the Court finds it unnecessar- to discuss the otherar%uents posed b- petitioner.
I attest that the conclusions in the above Decision had been reached in consultationbefore the case !as assi%ned to the !riter of the opinion of the Court8s Division.
ANTON+O T. CARP+O
$ssociate 1usticeChairperson, Second Division
C E R 2 I 6 I C $ 2 I O N
Pursuant to Section "#, $rticle VIII of the Constitution and the Division Chairperson8s $ttestation, I certif- that the conclusions in the above Decision had been reached inconsultation before the case !as assi%ned to the !riter of the opinion of the Court8sDivision.
RENATO C. CORONA
Chief 1ustice
oo"no"$
" Penned b- $ssociate 1ustice Martin S. Villaraa, 1r., /no! a eber of thisCourt0 !ith $ssociate 1ustice ienvenido B. Re-es and $ssociate 1usticeBucenito N. 2a%le concurrin%.
Providin% for the Reor%aniJation of Port $dinistrative and Operation 6unctionsin the Philippines, Revisin% Presidential Decree No. )') dated 1ul- "", "3=(,Creatin% 2he Philippine Port $uthorit-, b- Substitution, and for other Purposes
other!ise ?no!n as the Revised Charter of the Philippine Ports $uthorit-. Section3 thereof provides
Section 3. +eneral Po!ers and Duties of the +eneral Mana%er and $ssistant +eneral Mana%ers
a0 +eneral Po!ers and Duties of the +eneral Mana%er.
2he +eneral Mana%er shall be responsible to the oard, and shall havethe follo!in% %eneral po!ers, functions, and duties 777
/iii0 2o si%n contracts, to approve e7penditures and pa-ents !ithin thebud%et provisions, and %enerall- to do an- all acts or thin%s for the properoperations of the $uthorit- or an- of the Ports under the @urisdiction,control or o!nership of the $uthorit-.
"4 1urado. Desiderio P., Coents and 1urisprudence on Obli%ations andContracts, "33#, 2enth Revised Edition, p. #34F citin! # Castan, =th Ed., pp. #&4*#&=, Manresa, )th Ed., ?. P. #4), and SancheJ Roan "3".
"= $ ne%otiation is forall- initiated b- an offer !hich should be certain !ithrespect to both the ob@ect and the cause or consideration of the envisionedcontract. In order to produce a contract, there ust be acceptance, !hich a- bee7press or iplied, but it ust not 5ualif- the ters of the offer. 2he acceptanceof an offer ust be un5ualified and absolute to perfect the contract. In other!ords, it ust be identical in all respects !ith that of the offer so as to produceconsent or eetin% of the inds.
" Supra note "4 at #3'.
"3
Cobacha, $%apito P. and Bucenario, Doin%o O, Ba! on Public iddin% and+overnent Contracts, "34', p. &#, citin% People v. Paler, #) N..S. &&&, "(Misc. (".
&' 6ernandeJ, 1r., artoloe C., $ 2reatise on +overnent Contracts underPhilippine Ba!, &''# Revised Edition, p. "'.
&" Decision of the Court of $ppeals, pp. "(,"4*"=F rollo, pp. 4, *3.
&& Chapter II oo? I Section )".
&#
Meorandu for the Petitioner, p. &'F rollo, p. ('".&( Manual on Contracts Revie!, March "33=, p. "(.
&) 2he Court in entral +an. of the "hilippines vs$ ourt of *ppeals, +.R. No. B*##'&&, $pril &&, "3=), 4# SCR$ ((4*((=, involvin% a %overnent contract, said: *n a!reement presupposes a meetin! of minds and when that point is reachedin the ne!otiations between two parties intendin! to enter into a contract, the
purported contract is deemed perfected and none of them may thereafterdisen!a!e himself therefrom without bein! liable to the other in an action forspecific performance$ 777 1ven a !overnment-owned corporation may not under
the !uise of protectin! the public interest unceremoniously disre!ard contractualcommitments to the prejudice of the other party .,: cited in +overnent Contracts,>.P. Ba! Center, "3&, p. (&. In said case, ho!ever, it is the Monetar- oard ofrespondent Central an? !hich :unaniousl- voted and approved the a!ard tothe plaintiff ;petitioner therein<.:
## Meorandu for the Petitioner, p. &3F rollo, pp. ("'*("&.
#(
No! e7pressl- repealed b- R.$. 3"( /$n $ct Providin% for the ModerniJation,StandardiJation and Re%ulation of the Procureent $ctivities of the +overnentand for Other Purposes0 other!ise ?no!n as +overnent Procureent Refor
$ct of &''#.
#) ited in the Decision of the Court of $ppeals.
#4 Meorandu for Petitioner, p. #&, citin% the case of 5irst "hil$ International+an. v$ ourt of *ppeals, &)& SCR$ &)3,&3)F rollo, p. ("#.
MANUE* T. E GU+A, 3or %#($'3 and a A""orn$y#na&" o3 E A+S MARAM/A,RENATO A+S, *ORE*+A . E, JOCE*N . DUE/*AT+N and /ETTA+S, Petitioners,vs.ON. PRES++NG JUGE, REG+ONA* TR+A* COURT, /RANC 12, MA*O*OS,/U*ACAN SPOUSES TEO+*O R. MORTE, ANGE*+NA C. +**AR+CO SPOUSESRUPERTO and M+*AGROS +**AR+CO AN EPUT SER+ /ENJAM+N C.AO, Respondents.
D E C I S I O N
PERA*TA, J.:
efore us is a petition for revie! on certiorari !hich assails the Decision" dated $u%ust#', &''& and the Resolution& dated Noveber &, &''# of the Court of $ppeals /C$0 inC$*+.R. CV No. #'#".
Petitioners 6e Davis Maraba, Renato Davis, 6lordeliJa D. eh, 1ocel-n D. Kueblatinand ett- Davis are the heirs of the late Priitiva Be@ano Davis /Priitiva0, the o!ner of
the undivided portion /sub@ect propert-0 of t!o parcels of land /fishpond0, situated inMe-caua-an, ulacan, covered b- 2C2 No. 2*4#) of the Re%ister of Deeds ofulacan. Petitioner Manuel 2. de +uia alle%ed to be the o!ner of the sub@ect propert-,havin% ac5uired the sae fro his co*petitioners.
2he antecedents, as borne b- the records, are as follo!s
On $u%ust , "3=#, Priitiva e7ecuted a docuent denoinated as 8asulatan n!San!laan /E7hibit :1:0,# a deed of ort%a%e, in favor of respondents spouses 2eofilo R.Morte and $n%elina C. Villarico /respondents Spouses Morte0 over the sub@ect propert-in consideration of PriitivaAs loan in the aount of P&','''.''.
On 6ebruar- "), "3=(, Priitiva e7ecuted another docuent, 8asunduan n! +ilihan!uluyan /E7hibit :6:0,( a deed of sale, over the sae sub@ect propert- in favor ofspouses Ruperto C. Villarico and Mila%ros D. arretto /respondents Spouses Villarico0for and in consideration of the aount of P##,'''.''.
On 6ebruar- "(, "3==, respondents Spouses Villarico e7ecuted a docuentdenoinated as 8asunduan n! +ilihan! uluyan /E7hibit :+:0,) a deed of sale, !hereinthe- sold bac? the sub@ect propert- to Priitiva for the sae aount of P##,'''.''.
On March &4, "3==, Priitiva e7ecuted another docuent, 8asunduan n! +ilihan!
uluyan /E7hibit::0,4
a deed of sale, !herein she a%ain sold the sub@ect propert- torespondents Spouses Villarico for the aount of P"','''.''.
On March &, "3==, Priitiva e7ecuted a 8asulatan n! San!laan /E7hibit :I:0,= a deed of ort%a%e, over the sub@ect propert- in favor of respondents Spouses Morte inconsideration of a loan in the aount of P"','''.''.
E7cept for E7hibit :,: all docuents !ere dul- notariJed and petitioner Renato !asone of the instruental !itnesses in all these docuents.
On Noveber "', "3=3, Priitiva, respondents Spouses Villarico and Spouses Morte
e7ecuted before Notar- Public Maerto $. $baTo the follo!in% five /)0 docuents, eachof !hich !as si%ned b- petitioner Renato as an instruental !itness, to !it
". 8asulatan n! San!laan /E7hibit :$:0 * e7ecuted b- Priitiva ort%a%in% thesub@ect propert- to respondent Spouses Morte in consideration of a loan in theaount of P)'','''.'' pa-able in one /"0 -ear fro date of contract at "&HinterestF
&. +eneral Po!er of $ttorne- /E7hibit ::03 * e7ecuted b- Priitiva appointin%respondent Spouses Villarico as her attorne-*in*fact in the e7ercise of %eneralcontrol and supervision over the sub@ect propert- !ith full authorit- to act as her
representative and a%ent, to lease, ort%a%e or sell said share, aon% otherthin%s, for and in her behalfF
#. 8asulatan n! "a!papabuwis n! "alaisdaan /E7hibit :C:0"' * e7ecuted bet!eenPriitiva, as lessor, and respondent Spouses Villarico, as lessees, over the saesub@ect propert- at P"','''.'' per -ear as rental. Priitiva also ac?no!led%ed inthe sae docuent the receipt of P")','''.'' as advance pa-ent of the-earl- rentals for a period of fifteen /")0 -ears F
(. "a!papawalan! Saysay n! 8asulatan n! San!laan /E7hibit :D:0"" * e7ecutedb- respondent spouses Morte cancelin% and renderin% !ithout an- valid force
and effect the :Uasulatan n% San%laan: /E7hibit :I:0 dated March &, "3== for aloan of P"','''.''F
). 8asulatan n! "a!papawalan! Saysay at "a!papawalan! +isa n! m!a8asulatan /E7hibit :E:0"& * e7ecuted b- Priitiva and respondent SpousesVillarico cancelin% the follo!in% docuents
because the aounts stated in those deeds had alread- been returned b- Priitiva torespondent Spouses Villarico.
Priitiva failed to pa- her loan in the aount of P)'','''.'' to respondents SpousesMorte as secured b- a real estate ort%a%e on the sub@ect propert- /E7hibit :$:0e7ecuted on Noveber "', "3=3. 2hus, the latter filed !ith the Office of the ProvincialSheriff of ulacan, a petition for e7tra@udicial foreclosure of real estate ort%a%e. On1anuar- "4, "34, a Notice of Sheriffs8 Sale of the propert- !as published.
On 6ebruar- "=, "34, petitioner De +uia, for hiself and as attorne-*in*fact of theother co*petitioners, filed !ith the Re%ional 2rial Court /R2C0 of Malolos, ulacan, an
$ended Coplaint for annulent of real estate ort%a%e and contract of lease !ithpreliinar- in@unction a%ainst respondents Spouses Morte, Spouses Villarico, andDeput- Sheriff en@ain C. ao. Petitioners sou%ht to annul the 8asulatan n! San!laan/E7hibit :$:0 and 8asulatan n! "a!bubuwis n! "alaisdaan /E7hibit :C:0, both e7ecutedb- Priitiva in favor of respondents Spouses on Noveber "', "3=3, contendin% thatthe docuents !ere null and void, since Priitiva si%ned the under threat ofiediate foreclosure of ort%a%e on the sub@ect propert- and !ithout an- valuableconsiderationF and that respondent Sheriff ao had scheduled the auction sale of thesub@ect propert- !hich !ould cause %reat and irreparable in@ur- to petitioners. 2hus,the- pra-ed that the public auction be en@oined.
In their $ns!er, respondents Spouses ar%ued that these docuents !ere e7ecuted forvaluable consideration, and that petitioner Renato !as one of the instruental!itnesses in these docuentsF that $tt-. Maerto $baTo, the Notar- Public !honotariJed the 5uestioned docuents, !as then PriitivaAs la!-er and not ofrespondents. Respondents clarified that the docuents "a!papawalan! Saysay n!8asulatan n! San!laan /E7hibit :D:0 and the "a!papawalan! Saysay at"a!papawalan! +isa n! )!a 8asulatan /E7hibit :E:0, both dated Noveber "', "3=3,!hich ade the earlier docuents, to !it E7hibits :6,: :+,: :: and :I,: e7ecutedbet!een Priitiva and the respondents Spouses of no force and effect, !ere e7ecutedto avoid confusion and to sho! that the latest docuents dated Noveber "', "3=3represented the actual and subsistin% transactions bet!een the parties. In their
Counterclai, respondents Spouses Villarico claied that the- should have been inpossession of the fishpond since "3=3 if not for the un!arranted refusal of petitioner De+uia to vacate the fishpond despite deands.
On March 4, "34, the R2C issued an Order %rantin% petitionersA application for theissuance of a !rit of preliinar- in@unction upon the filin% of an in@unction bond. $ !rit ofpreliinar- in@unction !as, subse5uentl-, issued and !as served on Sheriff ao andrespondents Spouses.
On 6ebruar- &, &''&, the R2C rendered its Decision,"# the dispositive portion of !hichreads
9ERE6ORE, the evidence havin% sho!n the plaintiffs, particularl- Manuel de +uia,their successor*in*interest, not entitled upon the facts and the la! to the relief pra-ed for in the aended coplaint, the sae is hereb- DISMISSED !ith costs a%ainst saidplaintiff. Instead as pra-ed for b- defendants, @ud%ent is hereb- rendered
". Declarin% the :Uasulatan n% San%laan /E7hs. :$: :":0 dated Noveber "',"3=3, and the :Uasulatan n% Pa%papabu!is n% Palaisdaan /E7hs. :C: :#:0 alsodated Noveber "', "3=3, as valid for all le%al intents and purposesF
&. Orderin% the 19-:fficio Sheriff, R2C, ulacan, to proceed !ith the e7tra@udicialforeclosure of the sub@ect real estate ort%a%eF and
#. Orderin% plaintiffs to pa- defendants attorne-As fees in the aount ofP&','''.''
SO ORDERED."(
2he R2C found that petitioner Renato, PriitivaAs son and an instruental !itness to allthe 5uestioned docuents, did not den- the outstandin% obli%ations of his other torespondentsF that he e7plicitl- declared that his other had to e7ecute E7hibit :$: torestructure her indebtedness to respondents Spouses Morte, so as to avoid theforeclosure of the ort%a%e over the sub@ect propert-F that there !as no other force or
intiidation used b- respondents Spouses upon hi or his other. 2he R2C ruled thatif respondents Spouses Morte threatened to foreclose the ort%a%e because ofPriitivaAs failure to pa- her indebtedness to the, the- !ere onl- e7ercisin% their ri%htas ort%a%ees and it !as !ithin their ri%ht to file a petition for e7tra@udicial foreclosureof the real estate ort%a%e. 2he R2C also found that Priitiva e7ecuted the 5uestioneddocuents for valuable consideration as established b- petitioner RenatoAs testion-that his other e7ecuted the docuents to restructure her outstandin% obli%ation !ithrespondents. $nd it !as also established b- $tt-. $baTo, a forer la!-er of Priitiva,that in his presence, certain aounts of one- !ere %iven or paid b- respondentsSpouses to Priitiva.
Petitioners filed their appeal !ith the C$. On $u%ust #', &''&, the C$ issued itsassailed Decision, the dispositive portion of !hich reads
>PON 2E VIE9 9E 2$UE O6 2IS C$SE, 2>S, the @ud%ent appealed fro ustbe, as it hereb- is $66IRMED. Costs shall be ta7ed a%ainst appellants.")
PetitionersA otion for reconsideration !as denied in a Resolution dated Noveber &,&''#.
C. 2E INS2$N2 PE2I2ION INVOBVES $ K>ES2ION O6 B$9 9EBB 9I2IN2E PO9ER O6 REVIE9 2IS ONOR$BE 2RI>N$B."4
2he issue for resolution of !hether the C$ coitted a reversible error !hen it upheld
the R2C @ud%ent declarin% the 8asulatan n! San!laan /E7hibit :$:0 and the 8asulatann! "a!papabuwis n! "alaisdaan /E7hibit :C:0, both dated Noveber "', "3=3, as valid,is a factual issue.
In petitions for revie! on certiorari as a ode of appeal under Rule () of the Rules ofCourt, the petitioner can raise onl- 5uestions of la! the Supree Court is not theproper venue to consider a factual issue as it is not a trier of facts. "= $ departure frothe %eneral rule a- be !arranted !here the findin%s of fact of the Court of $ppeals arecontrar- to the findin%s and conclusions of the trial court, or !hen the sae isunsupported b- the evidence on record," !hich !e found not obtainin% in this case.
PetitionersA clai that E7hibit :$: !as siulated, since the si%natures of Priitiva andpetitioner Renato, as one of the instruental !itnesses, !ere obtained under threat ofan iediate foreclosure of the sub@ect propert-, is devoid of erit.
2he C$ affired the R2CAs findin% that petitioner Renato aditted his otherAsoutstandin% obli%ations to respondents Spouses Morte !hen he testified that his other had to e7ecute E7hibit :$: to restructure her indebtedness to respondents SpousesMorte to avoid the foreclosure of the ort%a%e on the sub@ect propert-F that other thanthe threat of foreclosure, petitioner Renato declared that there !as no other force orintiidation e7erted on the b- respondents Spouses Morte to e7ecute E7hibit :$:F andthat a threat to enforce oneAs @ust and le%al clai throu%h a copetent authorit- did not
vitiate Priitiva and petitioner RenatoAs consent.
9e a%ree. Records sho! that petitioner Renato indeed aditted that his otherPriitiva !as not able to pa- her loan in the aount of P"','''.'', plus interest, asa%reed upon in the earlier Deed of Mort%a%e dated March &, "3== e7ecuted bet!eenhis other and respondents Spouses Morte. Conse5uentl-, Priitiva approached theSpouses Morte for the restructurin% of her loan and, thus, she e7ecuted E7hibit :$: in
$. $fter the interest accuulated and since !e cannot pa- !e have to e7ecute
another ort%a%e in order not to foreclose the propert-, sir.
K. 9hich ort%a%e are -ou referrin% to no!, Mr. DavisL
$. 9e e7ecuted another ort%a%e for P)'','''.'', sir.
K. Do -ou recall !hat docuent !as thatL
$. It !as a ort%a%e for P)'','''.'' re%ardin% the sae propert-
K. ou are referrin% to E7h. :$.:
$22. P>NO
K. Could -ou recall , Mr. Davis, !hen !as the due date of that ort%a%e forP"'.'''.'' !hich !as si%ned b- -our other and attested b- -ou as aninstruental !itness thereonL
$. $ctuall-, it !as intended for onl- one /"0 -ear, sir.
K. 9hat -ear !as thatL
$. $bout "3==, sir.
K. No! is this E7hibit :$: one of the docuents !hich -ou said -ou si%ned in theoffice of Notar- Public Maerto $baToL
$. es, sir.
K. No! !hen -ou read efore -ou si%ned this docuent as an instruental!itness -ou read its contents, Mr. DavisL
K. our other also si%ned this docuent :Uasulatan n% San%laan:L
$. es, sir."3
Petitioner RenatoAs clai that he and his other !ere threatened of foreclosure of thesub@ect propert- if his other !ould not si%n E7hibit :$,: thus, their consent !erevitiated, does not persuade us. $s correctl- ruled b- the lo!er courts, the last para%raphof $rticle "##) of the Ne! Civil Code !as applicable in this case, !hich provides that athreat to enforce oneAs clai throu%h copetent authorit-, if the clai is @ust or le%al,does not vitiate consent. It has been held that foreclosure of ort%a%ed properties incase of default in pa-ent of a debtor is a le%al reed- afforded b- la! to a creditor.ence, a threat to foreclose the ort%a%e !ould not per se vitiate consent. &'
9e, li?e!ise, find no erit in petitionersA contention that E7hibit :C,: e7ecuted bet!eenPriitiva and the Spouses Villarico, !as also siulated. $s correctl- found b- the C$,petitioners failed to adduce an- evidence in support of such clai. It had beenestablished that petitioner Renato, an instruental !itness to this docuent, adittedthat he read and understood and !as satisfied !ith the e7planation of Notar- Public
$baTo re%ardin% the contents of the sae, before he and his other affi7ed theirsi%natures on the docuents. 2hus, !e find no reason to deviate fro the findin%s ofboth the trial and appellate courts that the assailed docuents !ere validl- e7ecuted b-Priitiva in favor of the respondents Spouses.&avvphi&
PetitionersA ar%uent that both docuents !ere e7ecuted !ithout valuableconsideration deserves scant consideration. Notabl-, petitioner Renato aditted thatE7hibit :$: !as e7ecuted b- his other to restructure his otherAs outstandin% loanobli%ation to respondents Spouses Morte, !hich had not been paid. Moreover,respondent 2eofilo Morte had also %iven P&'','''.'' to Priitiva !hen E7hibit :$: !ase7ecuted, thus, increasin% the loaned aount to P)''.'''.''.&" In fact, Notar- Public
$baTo cate%oricall- declared that on the da- the docuents !ere e7ecuted, he sa!respondents, the Spouses Morte and the Spouses Villarico, %ive one- to Priitiva andhis son petitioner Renato. 2hus, it had been established that there !as sufficientconsideration for the e7ecution of the assailed docuents.
Petitioners tried to sho! the fraudulent character of the assailed docuents b- alle%in%that several docuents had earlier been e7ecuted bet!een Priitiva and therespondents Spouses involvin% the sub@ect propert-, to !it Deed of Sale dated6ebruar- "), "3=( /E7hibit :6:0, !here Priitiva sold the sub@ect propert- to theSpouses Villarico for P##,'''.''F Deed of Sale dated 6ebruar- "(, "3== /E7hibit :+:0!here the sub@ect propert- !as sold bac? to Priitiva for the sae aount ofP##,'''.''F and Deed of Sale dated March &4, "3== /E7hibit ::0, !here Priitiva soldthe sub@ect propert- to the Spouses Villarico for P"','''.''. Petitioners contend that
Priitiva could no lon%er ort%a%e the sub@ect propert- to respondents Spouses Morteon March &, "3==, since the sae !as earlier sold b- Priitiva to respondentsSpouses Villarico on March &4, "3== /E7hibit ::0.
9e are not persuaded.
Respondent Mila%ros Villarico provided the e7planation for the e7ecution of E7hibits :6,::+: and :.: She testified that she, her husband Ruperto and Priitiva e7ecuted E7hibit:6.: o!ever, !hen the- !ent to the house of 1ud%e 2eofilo $be@o, the co*o!ner of theother undivided portion of the propert- covered b- 2C2 No. 2*4#), /the other half isthe sub@ect propert-0 to as? his consent to the sale, the latter did not %ive his consentthereto as he !anted to bu- the sub@ect propert-.&& 2hus, the- /respondents SpousesVillarico0 had to e7ecute E7hibit :+: sellin% bac? the sub@ect propert- to Priitiva.o!ever, Priitiva e7ecuted E7hibit :,: sellin% the sub@ect propert- a%ain torespondents Spouses Villarico. $%ain, 1ud%e $be@o did not %ive his consent to suchsale, thus, the sale did not push throu%h, and in fact, the deed !as not notariJed. &#
Notabl-, Mila%rosAs testion- !as corroborated b- the fact that Priitiva e7ecuted onNoveber "', "3=3, a docuent denoinated as "a!papawalan! Saysay at"a!papawalan! +isa n! m!a 8asulatan /E7hibit :E:0, !herein she declared E7hibits :6,:+: and :,: of no force and effect. It bears stressin% that petitioner Renato !as one ofthe instruental !itnesses in the e7ecution of E7hibit :E: and he testified that Notar-Public $baTo had e7plained to hi the reason !h- E7hibit :E: !as e7ecuted, to%ether!ith the other docuents, includin% the assailed docuents, i$e$, the docuentse7ecuted on Noveber "', "3=3 !hich !ere the latest transactions bet!een theparties, !ere intended to sho! the nullit- of the previousl- si%ned docuents. $spetitioner Renato !as satisfied !ith such e7planation, coupled !ith the fact that he read
and understood the docuent, he and his other then affi7ed their si%natures onE7hibit :E.:
6inall-, petitioner De +uiaAs clai that he !as an innocent purchaser for value, !hobou%ht the sub@ect propert- !ithout notice of the ort%a%e on the sub@ect propert-, !asnot raised in the trial court. $s a rule, no 5uestion !ill be entertained on appeal unless ithas been raised in the court belo!. Points of la!, theories, issues and ar%uents notbrou%ht to the attention of the lo!er court need not be, and ordinaril- !ill not be,considered b- a revie!in% court, as the- cannot be raised for the first tie at that latesta%e. asic considerations of due process ipel this rule.&(
-EREORE, the Petition is hereb-
EN+E.2he assailed Decision of the Court of $ppeals, dated $u%ust #', &''& in C$*+.R. CV No. #'#", is A+RME.
I attest that the conclusions in the above Decision had been reached in consultationbefore the case !as assi%ned to the !riter of the opinion of the Court8s Division.
RENATO C. CORONA $ssociate 1ustice2hird Division, Chairperson
C E R 2 I 6 I C $ 2 I O N
Pursuant to Section "#, $rticle VIII of the Constitution and the Division Chairperson8s $ttestation, I certif- that the conclusions in the above Decision had been reached inconsultation before the case !as assi%ned to the !riter of the opinion of the Court8sDivision.
RENATO S. PUNOChief 1ustice
oo"no"$
" Penned b- $ssociate 1ustice Renato C. Dacudao, !ith $ssociate 1usticesRuben 2. Re-es and $elita +. 2olentino, concurrin%F rollo, pp. (3*4'.
OFA ROSANA REA*T AN EE*OPMENT CORPORAT+ON and S :A :+ENG,Petitioners,vs.MO*AE EE*OPMENT CORPORAT+ON r$r$$n"$d !y TEO+STA T+N+T+GAN, Respondent.
D E C I S I O N
A/A, J.:
2his case is about the propriet- of the trial court8s disissal of the plaintiff8s coplaintafter receivin% evidence at a preliinar- hearin% of the affirative defenses raised b-the defendant.
2he 6acts and the Case
Carelita $ustria Medina /Medina0 o!ned an 4.(3)3*hectare land in $nupil, aban,2arlac, covered b- 2ransfer Certificate of 2itle /2C20 2*#")3'. On Deceber "4, "33(she e7ecuted a contract to sell the land to respondent Molave Developent Corporation
/Molave Developent0, represented b- its president, 2eofista P. 2initi%an /2initi%an0, forP"( illion. Molave Developent paid P" illion to Medina upon the si%nin% of thecontract and P".# illion ore as first installent. ut it refused to pa- the rest of theinstallents on bein% infored b- the Departent of $%rarian Refor /D$R0 of thee7istence of alle%ed tenants on the land.
2!o -ears later or in 1anuar- "33=, Medina !rote respondent Molave Developent aletter, rescindin% the contract to sell bet!een the. Molave Developent later learnedthat a onth earlier or on Deceber ", "334, Medina sold the land to petitioner DoTaRosana Realt- and Developent Corporation /DoTa Rosana Realt-0 to !ho theRe%ister of Deeds issued 2C2 &4##.
$fter learnin% of the sale or on March #, "33= respondent Molave Developent filed!ith the Re%ional 2rial Court /R2C0 of Capas, 2arlac, an action for specific perforance,deliver- of possession, and annulent of title in Civil Case #3 a%ainst Medina,petitioner DoTa Rosana Realt-, and its chairan of the board of directors, S- Ua Uien%.Molave Developent claied that Medina and DoTa Rosana Realt- conspired todeprive it of the lot and pra-ed for an a!ard of oral and e7eplar- daa%es plusattorne-8s fees for a total of P"." illion.
- !a- of third part- coplaint, petitioner DoTa Rosana Realt- sued Medina8s nephe!,9ilfredo Miranda, and the latter8s la!-er, $tt-. Delfin Supapo, 1r., for alle%edl- connivin%!ith Medina in concealin% fro it the contract to sell that Medina entered into !ithrespondent Molave Developent.
2he R2C declared Medina in default. Petitioner DoTa Rosana Realt-, on the other hand,filed an ans!er and a otion to set the case for preliinar- hearin% on its special andaffirative defenses. DoTa Rosana Realt- claied that it acted in %ood faith inpurchasin% the propert- and that respondent Molave Developent !as estopped fro5uestionin% the sale because it a%reed to cancel the contract to sell and, after thecoplaint !as filed, its president, 2initi%an, received fro Medina8s counsel a P".#illion partial reiburseent as sho!n b- a receipt dated March "#, "33=."
6or its part, Molave Developent presented 2initi%an8s letter to Medina dated March "),"33=, inforin% the latter that she /2initi%an0 !as treatin% the P".# illion as partialpa-ent for the daa%es she sou%ht in the pendin% case before the trial
court.&avvphi&
On 6ebruar- ), "33 the R2C denied petitioner DoTa Rosana Realt-8s otion todisiss& but, on petition !ith the Court of $ppeals /C$0, the latter court directed the R2Cto conduct a preliinar- hearin% on DoTa Rosana Realt-8s special affirative defenseof %ood faith.# 2he R2C did so and on Noveber "3, &''# it disissed the coplaintinsofar as DoTa Rosana Realt- and S- Ua Uien% !ere concerned.( It held that the latter!ere bu-ers in %ood faith and, therefore, respondent Molave Developent had nocause of action a%ainst the. On 1ul- "4, &''( the trial court denied MolaveDevelopent8s otion for reconsideration.)
On appeal, the C$ held that contrar- to the rulin% of the trial court, respondent MolaveDevelopent8s coplaint in fact stated a cause of action a%ainst Medina and petitionerDoTa Rosana Realt-. 2he C$ thus reanded the case to the R2C for furtherproceedin%s.4 Not satisfied !ith this rulin%, DoTa Rosana Realt- too? recourse to thisCourt throu%h the present petition.
2he Issue Presented
2he issue presented in this case is !hether or not the C$ erred in holdin% that no%round e7isted for disissin% respondent Molave Developent8s coplaint a%ainstpetitioner DoTa Rosana Realt- %iven that such coplaint stated a cause of action.
2he Court8s Rulin%
2he C$ held, after closel- e7ainin% respondent Molave Developent8s coplaintbelo!, that the sae in fact stated a cause of action. 2he coplaint alle%ed that the:circustances sho! conspirac- andor collusion to defraud plaintiffs b- defendants.:
ut the C$ sees to have issed the point in the R2C decision. It !ill be recalled thatpetitioner DoTa Rosana Realt- filed a otion !ith the R2C to hear and resolve itsaffirative defenses. 2he R2C did so and resolved to den- the otion. On a petitionfiled !ith the C$, ho!ever, the latter court directed the R2C to hear and resolve DoTaRosana Realt-8s affirative defense of %ood faith in bu-in% Medina8s propert-. 2he R2C
coplied and, after hearin% the evidence of the parties, disissed the case, holdin% thatDoTa Rosana Realt- and its president !ere bu-ers of the propert- in %ood faith andMolave Developent did not have a cause of action a%ainst the. Clearl-, 2he R2C didnot disiss the case on the %round that the coplaint did not state a cause of action,!hich is an entirel- different atter.
Section ", Rule "4 of the Rules of Civil Procedure provides that the trial court a-disiss a coplaint on the %round that the clai or deand set forth in the plaintiff8scoplaint has been paid, !aived, abandoned, or other!ise e7tin%uished. 2his %roundessentiall- adits the obli%ation set out in the coplaint but points out that suchobli%ation has been e7tin%uished, in this case apparentl- b- abandonent after
respondent Molave Developent received partial reiburseent fro Medina as aconse5uence of the cancellation of contract to sell bet!een the.
On March "#, "33=, "' da-s after it filed its coplaint !ith the R2C, MolaveDevelopent ac?no!led%ed havin% received P".# illion as a consideration for thecancellation of its contract to sell !ith Medina. 2he ac?no!led%ent receipt itspresident si%ned reads
$CUNO9BED+MEN2 RECEIP2
2his is to ac?no!led%e the receipt of one /"0 $llied an? Chec? No. &)"""3)( dated
March (, "33= in the aount of ONE MIBBION 2REE >NDRED 2O>S$ND/P",#'','''.''0 fro Ms. Carelita $ustria Medina as partial reiburseent pursuantto the cancelled Contract to Sell /Doc. No. ((=F pa%e "3'F oo? ""(F Series of "33(Notarial Re%ister of $tt-. Delfin R. Supapo, 1r.0 entered into bet!een Ms. Medina andMolave Dev. Corporation over that parcel of land located at aban, 2arlac covered b-2C2 No. 2*#")3'.=
Ma?ati Cit-. March "#, "33=.
MOB$VE DEV. CORPOR$2ION
b-
2EO6IS2$ P. 2INI2I+$NPresident
2initi%an of respondent Molave Developent of course later asserted that she si%nedthe above receipt because Medina8s la!-er !ould not have released the chec? to her.ut this is not a valid %round for claiin% vitiation of consent. If she did not !ant to
a%ree to the cancellation, she had no business si%nin% the receipt and acceptin% thechec?. She could ver- !ell have stood her %round and pressed for copleteperforance of the contract to sell. avin% received the P".# illion, MolaveDevelopent8s reainin% reed- !as to pursue a clai for the balance of P" illionthat it paid Medina upon the e7ecution of the contract to sell.
6urther, as the R2C correctl- held, respondent Molave Developent failed to overcoethe presuption of %ood faith in favor of petitioner DoTa Rosana Realt-.3 2he title to thepropert- !as unencubered !hen it bou%ht the sae. $nd the evidence sho!s thatDoTa Rosana Realt- learned of the e7istence of the unre%istered contract to sell onl-after it had bou%ht the land. Indeed, it even filed a third part- coplaint a%ainst 9illieMiranda and $tt-. Supapo, 1r., for alle%edl- connivin% !ith Medina in concealin% thatcontract to sell.
2he letter of petitioner DoTa Rosana Realt-8s la!-er to the D$R dated Septeber "=,"334, statin% that Medina had retained hi to represent her in the tenanc- case
involvin% the land cannot serve as notice to DoTa Rosana Realt- that Medina e7ecuteda contract to sell in favor of respondent Molave Developent. 2he letter did not entionsuch contract. $t best, the letter served as notice to DoTa Rosana Realt- that the landcould have a tenanc- proble.
In li%ht of the fore%oin%, the Court holds that respondent Molave Developent has novalid clai a%ainst petitioner DoTa Rosana Realt- and its president.
-EREORE, the Court REVERSES and SE2S $SIDE the Septeber "", &''=Decision and Noveber 3, &''= Resolution of the Court of $ppeals in C$*+.R. CV#)33 and REINS2$2ES the Noveber "3, &''# Resolution of the Re%ional 2rial Court
of Capas, 2arlac, ranch 44, disissin% the coplaint a%ainst DoTa Rosana Realt-Developent Corporation and S- Ua Uien% in Civil Case #3.
Pursuant to Section "#, $rticle VIII of the Constitution, I certif- that the conclusions inthe above Decision had been reached in consultation before the case !as assi%ned tothe !riter of the opinion of the Court8s Division.
ANTON+O T. CARP+O $ctin% Chief 1ustice
oo"no"$
" Records, p. )=.
& Id. at "'.
# C$*+.R. SP (3'=3. Molave filed a otion for reconsideration but !as denied onOctober "(, "333 /Records, Vol. I, p. ('40.
( 2he Resolution !as penned b- 1ud%e $lipio C. uul /Rollo, p. "&0.
) Records, Vol. II, p. 34.
4 Penned b- $ssociate 1ustice M-rna Diaranan*Vidal and concurred in b- $ssociate 1ustices 1ose B. Sabio, 1r. and 1ose C. Re-es, 1r.
