Torres v. CA [G.R. No. 134559.  December 9, 1999.]
Third division, Panganiban (J): 4 concur

Facts: Sisters Antonia Torres and Emeteria Baring entered into a “joint venture agreement” with Manuel Torres for the development of a parcel of land into a subdivision. Pursuant to the contract, they executed a Deed of Sale covering the said parcel of land in favor of Manuel, who then had it registered in his name. By mortgaging the property, Manuel obtained from Equitable Bank a loan of P40,000 which, under the Joint Venture Agreement, was to be used for the development of the subdivision. All 3 of them also agreed to share the proceeds from the sale of the subdivided lots. The project did not push through, and the land was subsequently foreclosed by the bank. Antonia and Emeteria alleged that the project failed because of “Manuel’s lack of funds or means and skills.” They add that Manuel used the loan not for the development of the subdivision, but in furtherance of his own company, Universal Umbrella Company.On the other hand, Manuel alleged that he used the loan to implement the Agreement. With the said amount, he was able to effect the survey and the subdivision of the lots. He secured the Lapu Lapu City Council’s approval of the subdivision project which he advertised in a local newspaper. He also caused the construction of roads, curbs and gutters. Likewise, he entered into a contract with an engineering firm for the building of 60 low-cost housing units and actually even set up a model house on one of the subdivision lots. He did all of these for a total expense of P85,000.  He further claimed that the subdivision project failed because Antonia and Emeteria and their relatives had separately caused the annotations of adverse claims on the title to the land, which eventually scared away prospective buyers. Despite his requests, Antonia and Emeteria refused to cause the clearing of the claims, thereby forcing him to give up on the project.

Antonia and Emeteria filed a criminal case for estafa against Manuel and his wife, who were however acquitted. Thereafter, they filed the present civil case which, upon Manuel’s motion, was later dismissed by the trial court in an Order dated 6 September 1982. On appeal, however, the appellate court remanded the case for further proceedings. Thereafter, the RTC Cebu City (Civil Case R-21208) issued its assailed Decision, which was affirmed by the CA on 5 March 1998 (CA-GR CV 42378). Reconsideration was denied by the Court of Appeals through its Resolution of 5 March 1998. Hence, the petition for review on certiorari.

The Supreme Court denied the petition and affirmed the challenged decision; with costs against Antonia and Emeteria.

1.    Partnership exists
A reading of the terms embodied in the Agreement indubitably shows the existence of a partnership pursuant to Article 1767 of the Civil Code, which provides that “By the contract of partnership two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves.” In the present case, Antonia and Emeteria would contribute property to the partnership in the form of land which was to be developed into a subdivision; while Manuel would give, in addition to his industry, the amount needed for general expenses and other costs. Furthermore, the income from the said project would be divided according to the stipulated percentage. Clearly, the contract manifested the intention of the parties to form a partnership.

2.    Parties implemented contract; Partners may contribute not only money or property but also industry
The parties implemented the contract. Antonia and Emeteria transferred the title to the land to facilitate its use in the name of Manuel. On the other hand, Manuel caused the subject land to be mortgaged, the proceeds of which were used for the survey and the subdivision of the land. He developed the roads, the curbs and the gutters of the subdivision and entered into a contract to construct low-cost housing units on the property. Manuel’s actions clearly belie Antonia’s and Emeteria’s contention that he made no contribution to the partnership. Under Article 1767 of the Civil Code, a partner may contribute not only money or property, but also industry.

3.    Contract binds party to stipulations and all necessary consequences thereof
Under Article 1315 of the Civil Code, contracts bind the parties not only to what has been expressly stipulated, but also to all necessary consequences thereof. Article 1315 provides that “Contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law.” It is undisputed that Antonia and Emeteria are educated and are thus presumed to have understood the terms of the contract they voluntarily signed. If it was not in consonance with their expectations, they should have objected to it and insisted on the provisions they wanted.

4.    Courts may not extricate parties from the necessary consequences of their acts
Courts may not extricate parties from the necessary consequences of their acts, and the fact that the terms of a contract turn out to be financially disadvantageous to them will not relieve them of their obligations therein. They cannot now disavow the relationship formed from such agreement due to their supposed misunderstanding of its terms.

5.    Article 1773 must be interpreted in relation to Article 1771; Present case does not prejudice third parties
The lack of an inventory of real property will not ipso facto release the contracting partners from their respective obligations to each other arising from acts executed in accordance with their agreement. Article 1773 providing that “a contract of partnership is void, whenever immovable property is contributed thereto, if an inventory of said property is not made, signed by the parties, and attached to the public instrument” was intended primarily to protect third persons. Tolentino states that under the provision which is a complement of Article 1771, “the execution of a public instrument would be useless if there is no inventory of the property contributed, because without its designation and description, they cannot be subject to inscription in the Registry of Property, and their contribution cannot prejudice third persons. This will result in fraud to those who contract with the partnership in the belief [in] the efficacy of the guaranty in which the immovables may consist. Thus, the contract is declared void by the law when no such inventory is made.” The present case does not involve third parties who may be prejudiced.

6.    Parties cannot adopt inconsistent positions in regard to a contract
Antonia and Emeteria invoke the allegedly void contract as basis for their claim that Manuel should pay them 60% of the value of the property. They cannot in one breath deny the contract and in another recognize it, depending on what momentarily suits their purpose. Parties cannot adopt inconsistent positions in regard to a contract and courts will not tolerate, much less approve, such practice.

7.    Nullity of partnership does not prevent courts from considering Joint Venture Agreement as an ordinary contract
The alleged nullity of the partnership will not prevent courts from considering the Joint Venture Agreement an ordinary contract from which the parties’ rights and obligations to each other may be inferred and enforced.

8.    Joint Venture Agreement states consideration
The Joint Venture Agreement clearly states that the consideration for the sale was the expectation of profits from the subdivision project. Its first stipulation states that Antonia and Emeteria did not actually receive payment for the parcel of land sold to Manuel. Thus, it cannot be contended that the Joint Venture Agreement is void under Article 1422 of the Civil Code, because it is the direct result of an earlier illegal contract, which was for the sale of the land without valid consideration.

9.    Consideration or cause may take many forms
Consideration, more properly denominated as cause, can take different forms, such as the prestation or promise of a thing or service by another. In the present case, the cause of the contract of sale consisted not in the stated peso value of the land, but in the expectation of profits from the subdivision project, for which the land was intended to be used. The land was in effect given to the partnership as Antonia’s and Emeteria’s participation therein. There was therefore a consideration for the sale, Antonia and Emeteria acting in the expectation that, should the venture come into fruition, they would get 60% of the net profits.

10.    Factual issues cannot be resolved on a petition of review under Rule 45; Damages not due
Factual issues cannot be resolved in a petition for review under Rule 45, as in the present case.  Antonia and Emeteria have not alleged, not to say shown, that their petition constitutes one of the exceptions to this doctrine. The Court of Appeals held that the acts of Antonia and Emeteria did not cause the failure of the project, nor was Manuel responsible therefore. In imputing the blame solely to him, Antonia and Emeteria failed to give any reason why the Court should disregard the factual findings of the appellate court relieving him of fault.  Antonia and Emeteria, thus, are not entitled to damages.

Balatbat v. CA [G.R. No. 109410.  August 28, 1996.]
Second division, Torres Jr (J): 4 concur

Facts: On 15 June 1977, Aurelio A. Roque filed a complaint for partition against his children Corazon, Feliciano, Severa  and Osmundo Roque, and Alberto de los Santos before the CFI Manila (Branch IX, Civil Case 109032). The Roque children were declared in default and Aurelio presented evidence ex-parte. On 29 March 1979, the trial court rendered a decision in favor of Aurelio; holding that Aurelio and his wife Maria Mesina acquired the lot (TCT 51330) during their conjugal union, as well as the house that was constructed thereon; that when Maria Mesina died on 28 August 1966, leaving no debt, Aurelio (as surviving spouse) was entitled to ½ share pro-indiviso of the conjugal property (i.e. house and lot) and that Aurelio and his 4 children were entitled to 1/5 share pro-indiviso each of the ½ share pro-indiviso forming the estate of Maria Mesina; ordering the partition of the properties; and dismissing Aurelio’s claim for moral, exemplary and actual damages and attorney’s fees; without pronouncement as to costs. On 2 June 1979, the decision became final and executory; with the corresponding entry of judgment made 29 March 1979. On 5 October 1979, the Register of Deeds of Manila issued TCT 135671 (with Aurelio Roque having 6/10 share; and the Roque children with 1/10 share each).

On 1 April 1980, Aurelio sold his 6/10 share in TCT 135671 to spouses Aurora Tuazon-Repuyan and Jose Repuyan as evidenced by a “Deed of Absolute Sale.”  On 21 July 1980, Aurora Tuazon Repuyan caused the annotation of her affidavit of adverse claim on the TCT 135671, “claiming that she bought 6/10 portion of the property from Aurelio Roque for the amount of P50,000.00 with a downpayment of P5,000.00 and the balance of P45,000.00 to be paid after the partition and subdivision of the property.” On 20 August 1980, Aurelio Roque filed a complaint for “Rescission of Contract” against spouses Repuyan before the then CFI Manila (Branch IV, Civil Case 134131). The complaint is grounded on spouses Repuyan’s failure to pay the balance of P45,000.00 of the purchase price. On 5 September 1980, spouses Repuyan filed their answer with counterclaim.

In the meantime, the trial court issued an order in Civil Case 109032 (Partition case) dated 2 February 1982, ordering the Deputy Clerk of the court to sign the deed of absolute sale for and in behalf of Roque children pursuant to Section 10, Rule 39 of the Rules of Court, in order to effect the partition of the property involved in the case (P100,000 purchase price for the 84 sq. ms. In Callejon Sulu, Sta. Cruz, Manila is reasonable and fair; and that opportunities have been given to the children to sign the deed voluntarily).  A deed of absolute sale was executed on 4 February 1982 between Aurelio, Corazon, Feliciano, Severa and Osmundo Roque and Clara Balatbat, married to Alejandro Balatbat. On 14 April 1982, Clara Balatbat filed a motion for the issuance of a writ of possession which was granted by the trial court on 14 September 1982 “subject, however, to valid rights and interest of third persons over the same portion thereof, other than vendor or any other person or persons privy to or claiming any rights or interest under it.” The corresponding writ of possession was issued on 20 September 1982.

On 20 May 1982, Clara Balatbat filed a motion to intervene in Civil Case 134131 which was granted as per court’s resolution of 21 October 1982. However, Clara Balatbat failed to file her complaint in intervention. On 15 April 1986, the trial court rendered a decision dismissing the complaint, and declaring the Deed of Absolute Sale dated 1 April 1980 as valid and enforceable and Aurelio is, as he is hereby ordered, to partition and subdivide the land covered by TCT 135671, and to aggregate therefrom a portion equivalent to 6/10 thereof, and cause the same to be titled in the name of spouses Repuyan, and after which, the latter to pay Aurelio the sum of P45,000.00. Considering further that the spouses suffered damages since they were forced to litigate unnecessarily, by way of their counterclaim, Aurelio is hereby ordered to pay the spouses the sum of P15,000.00 as moral damages, attorney’s fees in the amount of P5,000.00; with costs against Aurelio.

On 3 March 1987, Balatbat filed a notice of lis pendens in Civil Case 109032 before the Register of Deeds of Manila.

On 9 December 1988, Balatbat and her husband filed a complaint for delivery of the owners duplicate copy of TCT 135671 before the RTC Manila (Branch 24, Civil Case 88-47176) against Jose and Aurora Repuyan. On 27 January 1989, spouses Repuyan filed their answer with affirmative defenses and compulsory counterclaim. The Repuyans and the Balatbats submitted their memoranda on 13 November 1989 and 23 November 1989, respectively. On 2 August 1990, the RTC Manila rendered a decision dismissing the complaint, finding that the Balatbats were not able to establish their cause of action against the Repuyans and have no right to the reliefs demanded in the complaint, and ordering Balatbat to pay the Repuyans the amount of P10,000 as attorney’s fees, P5,000 as costs of litigation, and to pay the costs of the suit.

Dissatisfied, Balatbat filed an appeal before the Court of Appeals (CA-GR CV 29994) which rendered decision on 12 August 1992, affirming the judgment appealed from with modification deleting the awards of P10,000 for attomey’s fees and P5,000 as costs of litigation. On 22 March 1993, the Court of Appeals denied Balatbat’s motion for reconsideration. Hence, the petition for review pursuant to Rule 45 of the Revised Rules of Court.

The Supreme Court dismissed the petition for review for lack of merit; without pronouncement as to costs.

1.    1 April 1980 sale consummated, valid and enforceable
The sale dated 1 April 1980 in favor the Repuyan spouses is consummated, hence, valid and enforceable; not merely executory for the reason that there was no delivery of the subject property and that consideration/price was not fully paid. In a decision dated 15 April 1986 of the RTC Manila (Branch IV, Civil Case 134131), the Court dismissed Aurelio complaint for rescission of the deed of sale and declared that the sale dated 1 April 1980, as valid and enforceable. No appeal having been made, the decision became final and executory. It must be noted that Balatbat filed a motion for intervention in that case but did not file her complaint in intervention.

2.    1 April 1980 Deed of Sale devoid of stipulation withholding ownership of thing until full payment; Ownership pass upon delivery of thing sold even if purchase price not fully paid
The terms and conditions of the “Deed of Sale” dated 1 April 1980, the P45,000.00 balance is payable only after the property covered by TCT 135671 has been partitioned and subdivided, and title issued in the name of the buyer hence, the vendor cannot demand payment of the balance unless and until the property has been subdivided and titled in the name of the Repuyan spouses. Devoid of any stipulation that “ownership in the thing shall not pass to the purchaser until he has fully paid the price”, ownership in the thing shall pass from the vendor to the vendee upon actual or constructive delivery of the thing sold even if the purchase price has not yet been fully paid.

3.    Non-payment in a contract of sale merely creates right to demand fulfillment of obligation or rescission of contract; Article 1191
The failure of the buyer to make good the price does not, in law, cause the ownership to revest to the seller unless the bilateral contract of sale is first rescinded or resolved pursuant to Article 1191 of the New Civil Code.  Non-payment only creates a right to demand the fulfillment of the obligation or to rescind the contract.

With respect to the non-delivery of the possession of the subject property to the private respondent, suffice it to say that ownership of the thing sold is acquired only from the time of delivery thereof, either actual or constructive. 28

4.    Ownership of a thing sold acquired from time of actual or constructive delivery; Possession of public instrument of the land accords buyer rights of ownership
Article 1498 of the Civil Code provides that — when the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot be inferred. The execution of the public instrument, without actual delivery of the thing, transfers the ownership from the vendor to the vendee, who may thereafter exercise the rights of an owner over the same. It is not necessary that vendee be physically present at every square inch of the land bought by him, possession of the public instrument of the land is sufficient to accord him the rights of ownership. Thus, delivery of a parcel of land may be done by placing the vendee in control and possession of the land (real) or by embodying the sale in a public instrument (constructive). In the present case, vendor Roque delivered the owner’s certificate of title to the Repuyan spouses.

5.    Necessity of public document merely for convenience, and not for validity or enforceability of a contract of sale
The provision of Article 1358 on the necessity of a public document is only for convenience, not for validity or enforceability. It is not a requirement for the validity of a contract of sale of a parcel of land that this be embodied in a public instrument.

6.    Contract of sale consensual, perfected by mere consent of the parties; Non-payment does not render sale null and void for lack of consideration
A contract of sale being consensual, it is perfected by the mere consent of the parties. Delivery of the thing bought or payment of the price is not necessary for the perfection of the contract; and failure of the vendee to pay the price after the execution of the contract does not make the sale null and void for lack of consideration but results at most in default on the part of the vendee, for which the vendor may exercise his legal remedies.

7.    Present case is a double sale
The present case is a case of double sale contemplated under Article 1544 of the New Civil Code. In the present case, Aurelio Roque sold 6/10 portion of his share in TCT 135671 to the Repuyan spouses on 1 April 1980. Subsequently, the same lot was sold again by vendor Aurelio Roque (6/10) and his children (4/10), represented by the Clerk of Court pursuant to Section 10, Rule 39 of the Rules of Court, on 4 February 1982.

8.     Article 1544; Double sale
Article 1544 of the New Civil Code provides that “if the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be movable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession and in the absence thereof, to the person who present the oldest title, provided there is good faith.” Article 1544 of the Civil Code provides that in case of double sale of an immovable property, ownership shall be transferred (1) to the person acquiring it who in good faith first recorded it in the Registry of Property; (2) in default thereof, to the person who in good faith was first in possession; and (3) in default thereof, to the person who presents the oldest title, provided there is good faith.

9.    Ownership vests in person who acquired the immovable property in good faith and who first recorded it in the Registry of Property; Annotation of adverse claim sufficient
In an instance of a double sale of an immovable property, the ownership shall vests in the person acquiring it who in good faith first recorded it in the Registry of Property. In the present case, the Repuyan spouses caused the annotation of an adverse claim on the title of the subject property denominated as Entry 5627/T-135671 on 21 July 1980. The annotation of the adverse claim on TCT 135671 in the Registry of Property is sufficient compliance as mandated by law and serves notice to the whole world. Balatbat, on the other hand, filed a notice of lis pendens only on 2 February 1982. Accordingly, the Repuyan spouses who first caused the annotation of the adverse claim in good faith shall have a better right over Balatbat.

10.    Possession of Balatbat merely provisionary
The physical possession of Balatbat by virtue of a writ of possession issued by the trial court on 20 September  1982 is “subject to the valid rights and interest of third persons over the same portion thereof, other than vendor or any other person or persons privy to or claiming any rights to interest under it.”

11.    First registrant, first in possession, else oldest title
As between two purchasers, the one who has registered the sale in his favor, has a preferred right over the other who has not registered his title even if the latter is in actual possession of the immovable property. Even in default of the first registrant or first in possession, the Repuyan spouses have presented the oldest title. Thus, the spouses who acquired the subject property in good faith and for valuable consideration established a superior right as against Balatbat.

12.    Due diligence in the purchase of real estate required to allege good faith
It is incumbent upon the vendee of the property to ask for the delivery of the owner’s duplicate copy of the title from the vendor. A purchaser of a valued piece of property cannot just close his eyes to facts which should put a reasonable man upon his guard and then claim that he acted in good faith and under the belief that there were no defect in the title of the vendor. One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot claim that he has acquired title thereto in good faith as against the true owner of the land or of an interest therein; and the same rule must be applied to one who has knowledge of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor. Good faith, or the want of it is not a visible, tangible fact that can be seen or touched, but rather a state or condition of mind which can only be judged of by actual or fancied tokens or signs.

13.    Balatbat not a buyer in good faith
Balatbat cannot be considered as a buyer in good faith. In the complaint for rescission filed by Aurelio Roque on 20 August 1980, Balatbat filed a motion for intervention on 20 May 1982 but did not file her complaint in intervention, hence, the decision was rendered adversely against her. If Balatbat did investigate before buying the land on 4 February 1982, she should have known that there was a pending case and an annotation of adverse claim was made in the title of the property before the Register of Deeds and she could have discovered that the subject property was already sold to the Repuyan spouses.

14.    Gross negligence equvalent to intentional wrong
Balatbat had nobody to blame but herself in dealing with the disputed property for failure to inquire or discover a flaw in the title to the property, thus, it is axiomatic that — culpa lata dolo aequiparatur — gross negligence is equivalent to intentional wrong.

Republic v. Philippine Development Corp. [G.R. No. L-10141.  January 31, 1958.]
En Banc, Padilla (J): 10 concur

Facts: On 6 May 1955, the Republic of the Philippines in representation of the Bureau of Prisons instituted against Macario Apostol and the Empire Insurance Co. a complaint with the CFI Manila (Civil Case 26166). The complaint alleges that  Apostol submitted the highest bid in the amount of P450.00 per ton for the purchase of 100 tons of Palawan Almaciga from the Bureau of Prisons; that a contract therefor was drawn and by virtue of which, Apostol obtained goods from the Bureau of Prisons valued P15,878.59; that of said account, Apostol paid only P691.10 leaving a balance obligation of P15, 187.49. The complaint further avers that Apostol submitted the best bid with the Bureau of Prisons for the purchase of 3 million board feet of logs at P88.00 per 1,000 board feet; that a contract was executed between the Director of Prisons and Apostol pursuant to which contract Apostol obtained deliveries of logs valued at P65,830.00; and that Apostol failed to pay a balance account of P18,827.57. All told, the total demand set forth in complaint against Apostol is for P34,015.06 with legal interests thereon from 8 January 1952. The Empire Insurance Company was included in the complaint having executed a performance bond of P10,000.00 in favor of Apostol.

In his answer, Apostol interposed payment as a defense and sought the dismissal of the complaint. On 19 July 1955, the Philippine Resources Development Corp. moved to intervene, appending to its motion, the complaint in intervention of even date. The complaint recites that for sometime prior to Apostol’s transactions the corporate had some goods deposited in a warehouse at 1201 Herran, Manila; that Apostol, then the president of the corporation but without the knowledge or consent of the stockholders thereof, disposed of said goods by delivering the same to the Bureau of Prisons in an attempt to settle his personal debts with the latter entity; that upon discovery of Apostol’s act, the corporation took steps to recover said goods by demanding from the Bureau of Prisons the return thereof; and that upon the refusal of the Bureau to return said goods, the corporation sought leave to intervene in Civil Case 26166. The Judge (Magno Gatmaitan) denied the motion for intervention and thereby issued an order to this effect on 23 July 1955. A motion for the reconsideration of said order was filed by the corporation and the same was likewise denied on 18 August 1955.

On 3 September 1955, the corporation filed a petition for a writ of certiorari with the Court of Appeals by. On 12 December 1955 the Court of Appeals set aside the order denying the motion to intervene and ordered the trial court to admit the corporation’s complaint-in-intervention, with costs against Macario Apostol.  On 9 January 1956 the Government filed a petition under Rule 46 to review the judgment rendered by the appellate court (CA-GR 15767-R) with the Supreme Court. The Government contends that the intervenor has no legal interest in the matter in litigation, because the action brought in the CFI Manila against Macario Apostol and the Empire Insurance Company (Civil Case 26166) is just for the collection from the defendant Apostol of a sum of money, the unpaid balance of the purchase price of logs and almaciga bought by him from the Bureau of Prisons, whereas the intervenor seeks to recover ownership and possession of G.I. sheets, black sheets, M.S. plates, round bars and G.I. pipes that it claims it owns — an intervention which would change a personal action into one ad rem and would unduly delay the disposition of the case.

The Supreme Court affirmed the judgment under review, without pronouncement as to costs.

1.    Intervenor has legal capacity as it stands to be adversely affected by the judgment of the court
It is true that the very subject matter of the original case is a sum of money, but it is likewise true as borne out by the records, that the materials purportedly belonging to the corporation have been assessed and evaluated and their price equivalent in terms of money have been determined; and that said materials for whatever price they have been assessed, have been assigned by Apostol as tokens of payment of his private debts with the Bureau of Prisons. In view of these considerations, it becomes enormously plain in the event the judge decides to credit Macario Apostol with the value of the goods delivered by the latter to the Bureau of Prisons, the corporation stands to be adversely affected by such judgment. The conclusion is inescapable that the corporation possesses a legal interest in the matter in litigation and that such interest is of an actual, material, direct and immediate nature as to entitle the corporation to intervene.

2.    Lower court has discretion to allow or disapprove a motion for intervention; Principle
Section 3 of Rule 13 of the Rules of Court endows the lower court with discretion to allow or disapprove a motion for intervention (Santarromana et al. vs. Barrios, 63 Phil. 456); and that in the exercise of such discretion, the court shall consider whether or not the intervention will unduly delay or prejudice the adjudication of the rights of the original parties and whether or not the intervenor’s rights may be fully protected in a separate proceeding. In the present case, the corporation is positively authorized to file a separate action against any of all the respondents; but considering that the resolution of the issues raised in and joined by the pleadings in the main case, would vitally affect the rights not only of the original parties but also of the corporation; that far from unduly delaying or prejudicing the adjudication of the rights of the original parties or bringing about confusion in the original case, the admission of the complaint in intervention would help clarify the vital issue of the true and real ownership of the materials involved, besides preventing an abhorrent multiplicity of suits. The motion to intervene should be given due course.

3.    Article 1458 admits purchaser may pay a price certain in money or its equivalent
The Government argues that “Price is always paid in terms of money and the supposed payment being in kind, it is no payment at all,” citing article 1458 of the new Civil Code. However, the same article provides that the purchaser may pay “a price certain in money or its equivalent,” which means that payment of the price need not be in money. Whether the G.I. sheets, black sheets, M.S. plates, round bars and G.I. pipes claimed by the corporation to belong to it and delivered to the Bureau of Prisons by Apostol in payment of his account is sufficient payment therefor, is for the Court to pass upon and decide after hearing all the parties in the case. Should the trial court hold that it is as to credit Apostol with the value or price of the materials delivered by him, certainly the corporation would be affected adversely if its claim of ownership of such sheets, plates, bars and pipes is true.

4.    Authority of corporate counsel presumed
By virtue of Section 20 of Rule 127, the authority of corporation’s counsel is presumed. Withal, the claim of the counsel for the petitioner that a resolution to proceed against Apostol, had been unanimously adopted by the stockholders of the corporation, has not been refuted. It cannot be said that the counsel is acting merely in an individual capacity without the benefit of a corporate act authorizing him to bring suit. As counsel’s authority to appear for the corporation was never questioned in the CFI, it is to be presumed that he was properly authorized to file the complaint-in intervention and appear for his client. It was only in the Court of Appeals where his authority to appear was questioned. As the Court of Appeals was satisfied that counsel was duly authorized by his client to file the complaint-in-intervention and to appear in its behalf, the resolution of the Court of Appeals should not be disturbed.

5.    Corporation has separate personality from president or stockholder; Power to sue lodged in the board of directors and not the president
Philippine Resource Corporation is a duly organized corporation with offices at the Samanillo Building and that as such, it is endowed with a personality distinct and separate from that of its president or stockholders. It has the right to bring suit to safeguard its interests and ordinarily, such right is exercised at the instance of the president. However, under the circumstance, such right properly devolves upon the other officers of the corporation as said right is sought to be exercised against the president himself who is the very object of the intended suit. The power of a corporation to sue and be sued in any court is lodged in the board of directors which exercises its corporate powers, and not in the president.

6.    Counsel is the secretary-treasurer of the corporation
Granting that counsel has not been actually authorized by the board of directors to appear for and in behalf of the corporation, the fact that counsel is the secretary-treasurer of the corporation and a member of the board of directors; and that the other members of the board, namely, Macario Apostol, the president, and his wife Pacita R. Apostol, who should normally initiate the action to protect the corporate properties and interests are the ones to be adversely affected thereby, a single stockholder under such circumtances may sue in behalf of the corporation. Counsel as a stockholder and director of the corporation may sue in its behalf and file the complaint-in-intervention in the proper court.

Spouses Ladanga v. CA [G.R. No. L-55999.  August 24, 1984.]
Second Division, Aquino (J): 4 concur, 1 took no part, 1 reserved vote

Facts: Clemencia A. Aseneta, a spinster who retired as division superintendent of public schools at 65 in 1961, had a nephew named Bernardo S. Aseneta, the child of her sister Gloria, and a niece named Salvacion, the daughter of her sister Flora. She legally adopted Bernardo in 1961. On a single date, 6 April 1974, she 9then 78 years old) signed 9 deeds of sale in favor of Salvacion, for various real properties. One deed of sale concerned the said Paco property (166 sq. m. lot located at 1238 Sison Street Paco Manila and administered by the Ladanga spouses, Agustin and Salvacion) which purportedly was sold to Salvacion for P26,000. The total price involved in the 9 deeds of sale and in the 10th sale executed on 8 November 1974 was P92,200.  The deed of sale for the Paco property was signed in the office of the Quezon City registry of deeds.

In May 1975, Bernardo, as guardian of Clemencia, filed an action for reconveyance of the Paco property, accounting of the rentals and damages, with the CFI Manila. Clemencia was not mentally incompetent but she was placed under guardianship because she was an easy prey for exploitation and deceit. Clemencia testified and denied having “received even one centavo” of the price of P26,000), much less the P92,000. This testimony was corroborated by Soledad L. Maninang, 69, a dentist with whom Clemencia had lived for more than 30 years in Kamuning, Quezon City. The notary public stated that he did not see Salvacion hand any money to Clemencia for the purported sale when the deed was signed in the registry of deeds. The trial court declared void the sale of the Paco property.

Clemencia died on 21 May 1977 at the age of 80. She allegedly bequeathed her properties in a holographic will dated 23 November 1973 to Doctor Maninang. In that will she disinherited Bernardo. The will was presented for probate. The testate case was consolidated with the intestate proceeding filed by Bernardo in the sala of Judge Ricardo L. Pronove at Pasig, Rizal. He dismissed the testate case. He appointed Bernardo as administrator in the intestate case.

On appeal, the Court of Appeals affirmed the decision of the CFI, ordered the register of deeds to issue a new title to Clemencia, and ordered the spouses to pay Clemencia’s estate P21,000 as moral and exemplary damages and attorney’s fees and to render to Bernardo an accounting of the rentals of the property from 6 April 1974. The spouses appealed to the Supreme Court.

The Supreme Court affirmed the judgment of the Appellate Court with the modification that the adjudication for moral and exemplary damages is discarded; Without costs.

1.    Only legal issues may be raised in a review of the decision of the appellate court
As a rule, only important legal issues, as contemplated in section 4, Rule 45 of the Rules of Court, may be raised in a review of the Appellate Court’s decision. The present case does not fall within any of the exceptions to that rule (2 Moran’s Comments on the Rules of Court, 1979 Ed. p. 475; Ramos vs. Pepsi-Cola Bottling Co., 125 Phil. 701).

2.    Burden of proof
Clemencia herself testified that the price of P26,000 was not paid to her; and thus, the burden of the evidence shifted to the Ladanga spouses. They were not able to prove the payment of that amount, thus the sale was fictitious.

3.    Void contract in the absence of price being paid; Sale inexistent and cannot be considered consummated
A contract of sale is void and produces no effect whatsoever where the price, which appears therein as paid, has in fact never been paid by the purchaser to the vendor (Meneses Vda. de Catindig vs. Heirs of Catalina Roque, L-25777, November 26, 1976, 74 SCRA 83, 88; Mapalo vs. Mapalo, 123 Phil. 979, 987; Syllabus, Ocejo, Perez & Co. vs. Flores and Bas, 40 Phil. 921). Such a sale is inexistent and cannot be considered consummated (Borromeo vs. Borromeo, 98 Phil. 432; Cruzado vs. Bustos and Escaler, 34 Phil. 17; Garanciang vs. Garanciang, L-22351, May 21, 1969, 28 SCRA 229).

4.    No evidence of intention of vendor to donate the property
Clemencia did not intended to donate the Paco property to the Ladangas. Her testimony and the notary’s testimony destroyed any presumption that the sale was fair and regular and for a true consideration. It seemed that the Ladangas abused Clemencia’s confidence and defrauded her of properties with a market value of P393,559.25 when she was already 78 years old.

5.    Bernardo’s capacity to sue
Bernardo was Clemencia’s adopted son. Moreover, Clemencia, by testifying in this case, tacitly approved the action brought in her behalf. Bernardo had the right to institute the instant action.

6.    Award of moral damages not sanctioned
The moral damages awarded by the trial court is not sanctioned by articles 2217 to 2220 of the Civil Code. Clemencia’s own signature in the deed brought about the mess within which she was entangled.

Uy v. CA [G.R. No. 120465.  September 9, 1999.]
First Division, Kapunan (J): 3 concur, 1 on leave

Facts: William Uy and Rodel Roxas are agents authorized to sell 8 parcels of land by the owners thereof. By virtue of such authority, they offered to sell the lands, located in Tuba, Tadiangan, Benguet to National Housing Authority (NHA) to be utilized and developed as a housing project.  On 14 February 1989, the NHA Board passed Resolution 1632 approving the acquisition of said lands, with an area of 31.8231 hectares, at the cost of P23.867 million, pursuant to which the parties executed a series of Deeds of Absolute Sale covering the subject lands. Of the 8 parcels of land, however, only 5 were paid for by the NHA because of the report it received from the Land Geosciences Bureau of the Department of Environment and Natural Resources (DENR) that the remaining area is located at an active landslide area and therefore, not suitable for development into a housing project. On 22 November 1991, the NHA issued Resolution 2352 cancelling the sale over the 3 parcels of land. The NHA, through Resolution 2394, subsequently offered the amount of P1.225 million to the landowners as daños perjuicios.

On 9 March 1992, petitioners Uy and Roxas filed before the RTC Quezon City a Complaint for Damages against NHA and its General Manager Robert Balao. After trial, the RTC rendered a decision declaring the cancellation of the contract to be justified. The trial court nevertheless awarded damages to plaintiffs in the sum of P1.255 million, the same amount initially offered by NHA to petitioners as damages.

Upon appeal by petitioners, the Court of Appeals reversed the decision of the trial court and entered a new one dismissing the complaint. It held that since there was “sufficient justifiable basis” in cancelling the sale, “it saw no reason” for the award of damages. The Court of Appeals also noted that petitioners were mere attorneys-in-fact and, therefore, not the real parties-in-interest in the action before the trial court. Their motion for reconsideration having been denied, petitioners seek relief from the Supreme Court.

The Supreme Court denied the petition.

1.    Real party-in-interest defined; Action to be prosecuted in the name of a party whose right is sought to be enforced
Section 2, Rule 3 of the Rules of Court requires that every action must be prosecuted and defended in the name of the real party-in-interest. The real party-in-interest is the party who stands to be benefited or injured by the judgment or the party entitled to the avails of the suit. “Interest,” within the meaning of the rule, means material interest, an interest in the issue and to be affected by the decree, as distinguished from mere interest in the question involved, or a mere incidental interest. Cases construing the real party-in-interest provision can be more easily understood if it is borne in mind that the true meaning of real party-in-interest may be summarized as follows: An action shall be prosecuted in the name of the party who, by the substantive law, has the right sought to be enforced.

2.    Action brought by an attorney-in-fact in his name and not in the name of his principal dismissed
Where the action is brought by an attorney-in-fact of a land owner in his name, (as in our present action) and not in the name of his principal, the action was properly dismissed (Ferrer vs. Villamor, 60 SCRA 406 [1974]; Marcelo vs. de Leon, 105 Phil. 1175) because the rule is that every action must be prosecuted in the name of the real parties-in-interest (Section 2, Rule 3, Rules of Court).

3.    Article 1311 of the Civil Code
Article 1311 of the Civil Code, provides that “Contracts take effect only between the parties, their assigns, and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation, or by provision of law. If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person.”

4.    Agents rendering service in behalf of parties do not render them parties to the contract of sale
Petitioners are not parties to the contract of sale between their principals and NHA. They are mere agents of the owners of the land subject of the sale. As agents, they only render some service or do something in representation or on behalf of  their principals. The rendering of such service did not make them parties to the contracts of sale executed in behalf of the latter. Since a contract may be violated only by the parties thereto as against each other, the real parties-in-interest, either as plaintiff or defendant, in an action upon that contract must, generally, either be parties to said contract. Neither has there been any allegation, much less proof, that petitioners are the heirs of their principals.

5.    Assignment of rights
In McMicking vs. Banco Español-Filipino, it was held that the rule requiring every action to be prosecuted in the name of the real party-in-interest recognizes the assignments of rights of action and also recognizes that when one has a right of action assigned to him he is then the real party in interest and may maintain an action upon such claim or right. The purpose is to require the plaintiff to be the real party in interest, or, in other words, he must be the person to whom the proceeds of the action shall belong, and to prevent actions by persons who have no interest in the result of the same.  Thus, an agent, in his own behalf, may bring an action founded on a contract made for his principal, as an assignee of such contract.

6.    Section 372 (1) of the Restatement of the Law on Agency
Section 372 (1) of the Restatement of the Law on Agency [Agent as Owner of Contract Right] declares that “Unless otherwise agreed, an agent who has or who acquires an interest in a contract which he makes on behalf of his principal can, although not a promisee, maintain such action thereon as might a transferee having a similar interest.”

7.    Agent-transferee; Section 372 (1) explained
One who has made a contract on behalf of another may become an assignee of the contract and bring suit against the other party to it, as any other transferee. The customs of business or the course of conduct between the principal and the agent may indicate that an agent who ordinarily has merely a security interest is a transferee of the principal’s rights under the contract and as such is permitted to bring suit. If the agent has settled with his principal with the understanding that he is to collect the claim against the obligor by way of reimbursing himself for his advances and commissions, the agent is in the position of an assignee who is the beneficial owner of the chose in action. He has an irrevocable power to sue in his principal’s name. And, under the statutes which permit the real party in interest to sue, he can maintain an action in his own name. This power to sue is not affected by a settlement between the principal and the obligor if the latter has notice of the agent’s interest. Even though the agent has not settled with his principal, he may, by agreement with the principal, have a right to receive payment and out of the proceeds to reimburse himself for advances and commissions before turning the balance over to the principal. In such a case, although there is no formal assignment, the agent is in the position of a transferee of the whole claim for security; he has an irrevocable power to sue in his principal’s name and, under statutes which permit the real party in interest to sue, he can maintain an action in his own name.

8.    Petitioners not assignees
Petitioners have not shown that they are assignees of their principals to the subject contracts. While they alleged that they made advances and that they suffered loss of commissions, they have not established any agreement granting them “the right to receive payment and out of the proceeds to reimburse themselves for advances and commissions before turning the balance over to the principals.” Further, it does not appear that petitioners are beneficiaries of a stipulation pour autrui under the second paragraph of Article 1311 of the Civil Code. Indeed, there is no stipulation in any of the Deeds of Absolute Sale “clearly and deliberately” conferring a favor to any third person.

9.    Section 372 (2) of the Restatement of the Law on Agency
Section 372 (2) of the Restatement of the Law on Agency (Second) provides that “An agent does not have such an interest in a contract as to entitle him to maintain an action at law upon it in his own name merely because he is entitled to a portion of the proceeds as compensation for making it or because he is liable for its breach.” The fact that an agent who makes a contract for his principal will gain or suffer loss by the performance or nonperformance of the contract by the principal or by the other party thereto does not entitle him to maintain an action on his own behalf against the other party for its breach. An agent entitled to receive a commission from his principal upon the performance of a contract which he has made on his principal’s account does not, from this fact alone, have any claim against the other party for breach of the contract, either in an action on the contract or otherwise. An agent who is not a promisee cannot maintain an action at law against a purchaser merely because he is entitled to have his compensation or advances paid out of the purchase price before payment to the principal.

10.    Failure to obtain commissions due non-performance of contract does not entitle petitioners to file action against NHA
In Hopkins vs. Ives, the Supreme Court of Arkansas, citing Section 372 (2) above, denied the claim of a real estate broker to recover his alleged commission against the purchaser in an agreement to purchase property. In Goduco vs. Court of Appeals, it was held that “granting that appellant had the authority to sell the property, the same did not make the buyer liable for the commission she claimed. At most, the owner of the property and the one who promised to give her a commission should be the one liable to pay the same and to whom the claim should have been directed.” Similarly, in the present case, that petitioners did not obtain their commissions or recoup their advances because of the non-performance of the contract did not entitle them to file the action below against NHA. As petitioners are not parties, heirs, assignees, or beneficiaries of a stipulation pour autrui under the contracts of sale, they do not, under substantive law, possess the right they seek to enforce.

11.    Decision pointless if petitioners are not real parties-in-interest
Petitioners not being the real parties-in-interest, any decision rendered would be pointless since the same would not bind the real parties-in-interest.

12.    Cancellation of contract in present case not rescission under Article 1191
The right of rescission or, more accurately, resolution, of a party to an obligation under Article 1191 is predicated on a breach of faith by the other party that violates the reciprocity between them. The power to rescind, therefore, is given to the injured party. Article 1191 states that “the power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.” In the present case, the NHA did not rescind the contract. Indeed, it did not have the right to do so for the other parties to the contract, the vendors, did not commit any breach, much less a substantial breach, of their obligation. Their obligation was merely to deliver the parcels of land to the NHA, an obligation that they fulfilled. The NHA did not suffer any injury by the performance thereof.

13.    Cancellation based on the negation of cause
The cancellation was based on the negation of the cause arising from the realization that the lands, which were the object of the sale, were not suitable for housing.

14.    Cause defined; Distinguished from motive
Cause is the essential reason which moves the contracting parties to enter into it. The cause is the immediate, direct and proximate reason which justifies the creation of an obligation through the will of the contracting parties. Cause, which is the essential reason for the contract, should be distinguished from motive, which is the particular reason of a contracting party which does not affect the other party. For example, in a contract of sale of a piece of land, such as in this case, the cause of the vendor in entering into the contract is to obtain the price. For the vendee, it is the acquisition of the land. The motive of the NHA, on the other hand, is to use said lands for housing.

15.    Motives ordinarily affects the contract, unless if it predetermines the cause; motive thus may be regarded as the cause
Ordinarily, a party’s motives for entering into the contract do not affect the contract. However, when the motive predetermines the cause, the motive may be regarded as the cause. In Liguez vs. Court of Appeals, it was noted that “Manresa himself (Vol. 8, pp. 641-642), while maintaining the distinction and upholding the inoperativeness of the motives of the parties to determine the validity of the contract, expressly excepts from the rule those contracts that are conditioned upon the attainment of the motives of either party.” The same view is held by the Supreme Court of Spain, in its decisions of 4 February 1941, and 4 December 1946, holding that the motive may be regarded as causa when it predetermines the purpose of the contract. In the present case, it is clear that NHA would not have entered into the contract were the lands not suitable for housing. The quality of the land was an implied condition for the NHA to enter into the contract. On the part of the NHA, therefore, the motive was the cause for its being a party to the sale.

16.    Report of Land Geosciences Bureau is sufficient basis for the cancellation of the sale
The findings contained in the report of the Land Geosciences Bureau dated 15 July 1991 sufficient basis for the cancellation of the sale. The report stated that “In Tadiangan, Tuba, the housing site is situated in an area of moderate topography. There are more areas of less sloping ground apparently habitable. The site is underlain by thick slide deposits (4-45m) consisting of huge conglomerate boulders mixed with silty clay materials. These clay particles when saturated have some swelling characteristics which is dangerous for any civil structures especially mass housing development.

17.    Assessment preliminary only insofar as to the ascertainment of geological attributes; otherwise conclusive
The portion stating that “there is a need to conduct further geottechnical [sic] studies in the NHA property. Standard Penetration Test (SPT) must be carried out to give an estimate of the degree of compaction (the relative density) of the slide deposit and also the bearing capacity of the soil materials. Another thing to consider is the vulnerability of the area to landslides and other mass movements due to thick soil cover. Preventive physical mitigation methods such as surface and subsurface drainage and regrading of the slope must be done in the area” mean only that further tests are required to determine the “degree of compaction,” “the bearing capacity of the soil materials,” and the “vulnerability of the area to landslides,” since the tests already conducted were inadequate to ascertain such geological attributes. It is only in this sense that the assessment was “preliminary.”

18.    Vendee justified in canceling contract; Requisites of contract
NHA was justified in cancelling the contract. The realization of the mistake as regards the quality of the land resulted in the negation of the motive/cause thus rendering the contract inexistent. Article 1318 of the Civil Code states that “There is no contract unless the following requisites concur: (1) Consent of the contracting parties; (2) Object certain which is the subject matter of the contract; and (3) Cause of the obligation which is established.

19.    Petitioners not entitled to damages
Assuming that petitioners are parties, assignees or beneficiaries to the contract of sale, they would not be entitled to any award of damages, as the cancellation of the contract is justified.

Loyola v. CA [G.R. No. 115734.  February 23, 2000.]
Second Division, Quisumbing (J): 3 concur, 1 on leave

Facts: A parcel of land (Lot 115-A-1 of subdivision plan [LRC] Psd-32117, a portion of Lot 115-A described on Plan Psd-55228, LRC [GLRO] Record 8374, located in Poblacion, Binan, Laguna, and containing 753 sq.m., TCT T-32007) was originally owned in common by the siblings Mariano and Gaudencia Zarraga, who inherited it from their father. Mariano predeceased his sister who died single, without offspring on 5 August 1983, at the age of 97. Victorina Zarraga vda. de Loyola and Cecilia Zarraga, are sisters of Gaudencia and Mariano.

The property was subject of Civil Case B-1094 before the then CFI Laguna (Branch 1, Spouses Romualdo Zarraga, et al. v. Gaudencia Zarraga, et al.). Romualdo Zarraga was the plaintiff in Civil Case B-1094. The defendants were his siblings: Nieves, Romana, Guillermo, Purificacion, Angeles, Roberto, Estrella, and Jose, all surnamed Zarraga, as well as his aunt, Gaudencia. The trial court decided Civil Case B-1094 in favor of the defendants. Gaudencia was adjudged owner of the 1/2 portion of Lot 115-A-1. Romualdo elevated the decision to the Court of Appeals and later the Supreme Court. The petition (GR 59529) was denied by the Court on 17 March 1982.

On 24 August 1980, nearly 3 years before the death of Gaudencia while GR 59529 was still pending before the Supreme Court. On said date, Gaudencia allegedly sold to the children of Mariano Zarraga (Nieves, Romana, Romualdo, Guillermo, Lucia, Purificacion, Angeles, Roberto, Estrella Zarraga) and the heirs of Jose Zarraga Aurora, Marita, Jose, Ronaldo, Victor, Lauriano, and Ariel Zarraga; first cousins of the Loyolas) her share in Lot 115-A- 1 for P34,000.00. The sale was evidenced by a notarized document denominated as “Bilihang Tuluyan ng Kalahati (1/2) ng Isang Lagay na Lupa.” Romualdo, the petitioner in GR 59529, was among the vendees.

The decision in Civil Case B-1094 became final. The children of Mariano Zarraga and the heirs of Jose Zarraga (private respondents) filed a motion for execution. On 16 February 1984, the sheriff executed the corresponding deed of reconveyance to Gaudencia. On 23 July 1984, however, the Register of Deeds of Laguna, Calamba Branch, issued in favor of private respondents, TCT T-116067, on the basis of the sale on 24 August 1980 by Gaudencia to them.

On 31 January 1985, Victorina and Cecilia filed a complaint, docketed as Civil Case B-2194, with the RTC of Biñan, Laguna, for the purpose of annulling the sale and the TCT. Victorina died on 18 October 1989, while Civil Case B-2194 was pending with the trial court.  Cecilia died on 4 August 1990, unmarried and childless. Victorina and Cecilia were substituted by Ruben, Candelaria, Lorenzo, Flora, Nicadro, Rosario, Teresita and Vicente Loyola as plaintiffs. The trial court rendered judgment in favor of complainants; declaring the simulated deed of absolute sale as well as the issuance of the corresponding TCT null and void, ordering the Register of Deeds of Laguna to cancel TCT T-116087 and to issue another one in favor of the plaintiffs and the defendants as co-owners and legal heirs of the late Gaudencia, ordering the defendants to reconvey and deliver the possession of the shares of the plaintiff on the subject property, ordering the defendants to pay P20,000 as attorney’s fees and cost of suit, dismissing the petitioner’s claim for moral and exemplary damages, and dismissing the defendants’ counterclaim for lack of merit.

On appeal, and on 31 August 1993, the appellate court reversed the trial court (CA-GR CV 36090). On September 15, 1993, the petitioners (as substitute parties for Victorina and Cecilia, the original plaintiffs) filed a motion for reconsideration, which was denied on 6 June 1994. Hence, the petition for review on certiorari.

The Supreme Court denied the petition, and affirmed the assailed decision of the Court of Appeals; with costs against petitioners.

1.    Presumption of regularity of notarized document
A notarized document carries the evidentiary weight conferred upon it with respect to its due execution, and documents acknowledged before a notary public have in their favor the presumption of regularity. In the present case, the petitioners allege that since the notary public who prepared and acknowledged the questioned Bilihan did not personally know Gaudencia, the execution of the deed was suspect. However, the notary public testified that he interviewed Gaudencia prior to preparing the deed of sale. By their failure to overcome this presumption, with clear and convincing evidence, petitioners are estopped from questioning the regularity of the execution of the deed.

2.    Jose Zarraga alive when the sale took place
Petitioners charge that one of the vendees, Jose Zarraga, was already dead at the time of the sale. However, the records reveal that Jose died on 29 July 1981. He was still alive on 24 August 1980, when the sale took place.

3.    Simulation defined
Simulation is “the declaration of a fictitious will, deliberately made by agreement of the parties, in order to produce, for the purposes of deception, the appearances of a juridical act which does not exist or is different what that which was really executed.” Characteristic of simulation is that the apparent contract is not really desired or intended to produce legal effect or in any way alter the juridical situation of the parties. Further, in a simulated contract, the parties have no intention to be bound by the contract. In the present case, perusal of the questioned deed shows that the sale of the property would convert the co-owners to vendors and vendees, a clear alteration of the juridical relationships. This is contrary to the requisite of simulation that the apparent contract was not really meant to produce any legal effect. The parties clearly intended to be bound by the contract of sale, an intention they did not deny.

4.    Simulation, requisites
The requisites for simulation are: (a) an outward declaration of will different from the will of the parties; (b) the false appearance must have been intended by mutual agreement; and (c) the purpose is to deceive third persons. In the present case, none of these are present in the assailed transaction.

5.    Contracts binding only upon parties executing them
Contracts are binding only upon the parties who execute them. Article 1311 of the Civil Code clearly covers this situation. In the present case Romualdo had no knowledge of the sale, and thus, he was a stranger and not a party to it. Even if curiously Romualdo, one of those included as buyer in the deed of sale, was the one who questioned Gaudencia’s ownership in Civil Case B-1094, Romana testified that Romualdo really had no knowledge of the transaction and he was included as a buyer of the land only because he was a brother.

6.    Fraud is never presumed
Fraud is never presumed, but must be both alleged and proved. For a contract to be annulled on the ground of fraud, it must be shown that the vendor never gave consent to its execution. If a competent person has assented to a contract freely and fairly, said person is bound. There also is a disputable presumption, that private transactions have been fair and regular. Applied to contracts, the presumption is in favor of validity and regularity. In the present case, the allegations of fraud was unsupported, and the presumption stands that the contract Gaudencia entered into was fair and regular.

7.    Person not incapacitated to contract merely because of advanced age or due to physical infimities
A person is not incapacitated to contract merely because of advanced years or by reason of physical infirmities. Only when such age or infirmities impair his mental faculties to such extent as to prevent him from properly, intelligently, and fairly protecting his property rights, is he considered incapacitated. In the present case, petitioners show no proof that Gaudencia had lost control of her mental faculties at the time of the sale. The notary public who interviewed her, testified that when he talked to Gaudencia before preparing the deed of sale, she answered correctly and he was convinced that Gaudencia was mentally fit and knew what she was doing.

8.    Undue influence defined, circumstances considered; Article 1337
Article 1337 of the Civil Code provides that “there is undue influence when a person takes improper advantage of his power over the will of another, depriving the latter of a reasonable freedom of choice. The following circumstances shall be considered: confidential, family, spiritual, and other relations between the parties, or the fact that the person alleged to have been unduly influenced was suffering from mental weakness, or was ignorant or in financial distress.”

9.    Undue influence case-to-case basis; Elements
Undue influence depends upon the circumstances of each case and not on bare academic rules. For undue influence to be established to justify the cancellation of an instrument, three elements must be present: (a) a person who can be influenced; (b) the fact that improper influence was exerted; (c) submission to the overwhelming effect of such unlawful conduct.

10.    Confidential or fiduciary relationship
In the absence of a confidential or fiduciary relationship between the parties, the law does not presume that one person exercised undue influence upon the other. A confidential or fiduciary relationship may include any relation between persons, which allows one to dominate the other, with the opportunity to use that superiority to the other’s disadvantage. Included are those of attorney and client, physician and patient, nurse and invalid, parent and child, guardian and ward, member of a church or sect and spiritual adviser, a person and his confidential adviser, or whenever a confidential relationship exists as a fact. To prove a confidential relationship from which undue influence may arise, the relationship must reflect a dominant, overmastering influence which controls over the dependent person. In the present case, that Gaudencia looked after Romana in her old age is not sufficient to show that the relationship was confidential. Petitioners failed to show that Romana used her aunt’s reliance upon her to take advantage or dominate her and dictate that she sell her land.

11.    Undue influence cannot be inferred from age, sickness, or debility of body
Undue influence is not to be inferred from age, sickness, or debility of body, if sufficient intelligence remains. In the present case. petitioners never rebutted the testimony of the notary public that he observed Gaudencia still alert and sharp.

12.    Solicitation, importunity, argument, and persuasion not undue influence
In Bañez v. Court of Appeals, (59 SCRA 15 [1974]), it was held that solicitation, importunity, argument, and persuasion are not undue influence. A contract is not to be set aside merely because one party used these means to obtain the consent of the other. In Martinez v. Hongkong and Shanghai Bank (15 Phil. 252 [1910]), that influence obtained by persuasion, argument, or by appeal to the affections is not prohibited either in law or morals, and is not obnoxious even in courts of equity. In the present case, absent any proof that Romana exerted undue influence, the presumption is that she did not.

13.    Issue cannot be raised for the first time on appeal
Lesion was not an issue raised before the lower courts. An issue which was neither averred in the complaint nor raised in the court below, cannot be raised for the first time on appeal. To do so would be offensive to the basic rules of fair play.

14.    Grounds of simulated sale and inadequacy of the price not reconcilable
Petitioners seem to be unsure whether they are assailing the sale of Lot 115-A-1 for being absolutely simulated or for inadequacy of the price. These two grounds are irreconcilable. If there exists an actual consideration for transfer evidenced by the alleged act of sale, no matter how inadequate it be, the transaction could not be a “simulated sale.” No reversible error was thus committed by the Court of Appeals in refusing to annul the questioned sale for alleged inadequacy of the price.

Mate v. CA [G.R. Nos. 120724-25.  May 21, 1998.]
Second Division, Martinez (J): 4 concur

Facts: On 6 October 1986 Josefina R. Rey and Inocencio Tan went to the residence of Fernando Mate at Tacloban City. Josie who is a cousin of Mate’s wife solicited his help to stave off her and her family’s prosecution by Tan for violation of BP 22 on account of the rubber checks that she, her mother, sister and brother issued to Tan amounting to P4,432,067.00. She requested Mate to cede to Tan his 3 lots in Tacloban City in order to placate him. On hearing Josie’s proposal, he immediately rejected it as he owed Tan nothing and he was under no obligation to convey to him his properties. Furthermore, his lots were not for sale. Josie explained to him that he was in no danger of losing his properties as he will merely execute a simulated document transferring them to Tan but they will be redeemed by her with her own funds. After a long discussion, he agreed to execute a fictitious deed of sale with right to repurchase covering his 3 lots, subject to the conditions that the amount to be stated in the document is P1,400,000.00 with interest thereon at 5% a month; the properties will be repurchased within 6 months or on or before 4 April 1987; although it would appear in the document that Mate is the vendor, it is Josie who will provide the money for the redemption of the properties with her own funds; and the titles to the properties will be delivered to Tan but the sale will not be registered in the Register of Deeds and annotated on the titles. Josie, to assure Mate that she will redeem the properties, issued him 2 BPI checks both postdated 15 December 1986. One check was for P1,400,000.00 supposedly for the selling price and the other was for P420,000.00 corresponding to the interests for 6 months. Immediately thereafter Mate prepared the Deed of Sale with Right to Repurchase and after it has been signed and notarized, it was given to Tan together with the titles of the properties and the latter did not register the transaction in the Register of Deeds as agreed upon. On 14 January 1987, Mate deposited the check for P1,400,000.00 in his account at the UCPB and the other check for P420,000.00 in his account at MetroBank preparatory to the redemption of his properties. Both of them were dishonored by the drawee bank for having been drawn against a closed account. Realizing that he was swindled, he sent Josie a telegram about her checks and when she failed to respond, he went to Manila to look for her but she could not be found.

Mate returned to Tacloban City and filed Criminal Cases 8310 and 8312 against her for violation of BP 22 but the cases were later archived as the accused (Josie) could not be found as she went into hiding. To protect his interest, he filed Civil Case 7396 of the RTC Leyte (Branch VII, Mate vs. Rey and Tan) for Annulment of Contract with Damages. Josie was declared in default and the case proceeded against Tan. But during the trial the RTC court asked Tan to file an action for consolidation of ownership of the properties subject of the sale and pursuant thereto he filed Civil Case 7587 that was consolidated with the case he filed earlier which were later decided jointly by the trial court in favor of Tan and was subsequently appealed to the Court of Appeals. The appellate court, on 29 August 1994 (CA-GR CV 28225-26), affirmed the decision with modification that Mate is ordered to pay Tan the sum of P140,000 for and as attorney’s fees; with costs against Mate. Thereupon, Mate filed a motion to reconsider the decision but it was denied. Hence, the petition for review.

The Supreme Court affirmed the decision of the Court of Appeals dated 29 August 1994, and denied due course to the petition for review for lack of merit.

1.    Consideration exist in the Deed of Sale with Right to Repurchase (Sale with Pacto de Retro)
To ensure that he could repurchase his lots, Mate got a check of P1,400,000.00 from Josie. By allowing his titles to be in possession of Tan for a period of 6 months, Mate secured from her another check for P420,000.00. It is thus plain that consideration existed at the time of the execution of the deed of sale with right of repurchase. It is not only Mate’s kindness to Josefina, being his cousin, but also his receipt of P420,000.00 from her which impelled him to execute such contract. While Mate did not receive the P1.4M purchase price from Tan, he had in his possession a postdated check of Josie in an equivalent amount precisely to repurchase the 2 lots on or before the 6th month.

2.    No basis to file an action to annul the pacto de retro sale; Proper cause of action is BP 22 against Josie; Filing of criminal case a tacit admission that there is consideration of the pacto de retro sale
There is absolutely no basis for Mate to file a complaint against Tan and Josie to annul the pacto de retro sale on the ground of lack of consideration, invoking his failure to encash the two checks. Mate’s cause of action was to file criminal actions against Josie under BP 22, which he did. The filing of the criminal cases was a tacit admission by petitioner that there was a consideration of the pacto de retro sale. Mate knew that he was bound by the deed of sale with right to repurchase, as evidenced by his filing criminal cases against Josie when the two checks bounced.

3.    Singson v. Isabela Sawmill does not apply
Mate’s reliance on the  doctrine in Singson vs. Isabela Sawmill (88 SCRA 633, 643),  where the Court said that “where one or two innocent persons must suffer, that person who gave occasion for the damages to be caused must bear consequences” is misplaced. He is not an innocent person. As a matter of fact, he gave occasion for the damage caused by virtue of the deed of sale with right to repurchase which he prepared and signed. Thus, there is the equitable maxim that between two innocent parties, the one who made it possible for the wrong to be done should be the one to bear the resulting loss.

4.    Tan incurred no false pretense; Mate has no one to blame but himself for his misfortune; Mate a lawyer
Tan did not employ any devious scheme to make the former sign the deed of sale. Tan waived his right to collect from Josie by virtue of the pacto de retro sale. In turn, Josie gave Mate a postdated check in the amount of P1.4M to ensure that the latter would not lose his two lots. Mate, a lawyer, should have known that the transaction was fraught with risks since Josie and family had a checkered history of issuing worthless checks. But had Mate not agreed to the arrangement, Tan would not have agreed to waive prosecution of Josie.  Apparently, it was Mate’s greed for a huge profit that impelled him to accede to the scheme of Josie even if he knew it was a dangerous undertaking. When he drafted the pacto de retro document, he threw caution to the winds forgetting that prudence might have been the better course of action. When Josie’s checks bounced, he should have repurchased his lots with his own money. Instead, he sued not only Josie but also Tan for annulment of contract on the ground of lack of consideration and false pretenses on their part.

5.    Contracts
A contract is a contract. Once agreed upon, and provided all the essential elements are present, it is valid and binding between the parties.

Ong v. Ong [G.R. No. L-67888.  October  8, 1985.]
First Division, Relova (J): 5 concur, 1 concur in result

Facts: On 25 February 1976, Imelda Ong for and in consideration of P1 and other valuable considerations, executed in favor of Sandra Maruzzo, then a minor, a Quitclaim Deed whereby she transferred, released, assigned and forever quitclaimed to Sandra Maruzzo, her heirs and assigns, all her rights, title, interest and participation in 1/2 undivided portion of a parcel of land (Lot 10-B of the subdivision plan (LRC) Psd-157841, a portion of lot 10 Block 18 of PSD-13288 LCR (GLRC) Record  2029, situated in Makati, containing 125 square meters. On 19 November 1980, Imelda Ong revoked the aforesaid Deed of Quitclaim and, thereafter, on 20 January 1982 donated the whole property to her son, Rex Ong Jimenez.

On 20 June 1983, Sandra Maruzzo, through her guardian ad litem Alfredo Ong, filed with the RTC Makati an action against Imelda Ong, for the recovery of ownership/possession and nullification of the Deed of Donation over the portion belonging to her and for accounting. Imelda Ong claimed that the Quitclaim Deed is null and void inasmuch as it is equivalent to a Deed of Donation, acceptance of which by the donee is necessary to give it validity. Further, it is averred that the donee, Sandra Maruzzo, being a minor, had no legal personality and therefore incapable of accepting the donation.  Upon admission of the documents involved, the parties filed their responsive memoranda and submitted the case for decision. On 12 December 1983, the trial court rendered judgment in favor of Maruzzo and held that the Quitclaim Deed is equivalent to a Deed of Sale and, hence, there was a valid conveyance in favor of the latter.

Imelda Ong appealed to the Intermediate Appellate Court. On 20 June 1984, IAC promulgated its Decision affirming the appealed judgment and held that the Quitclaim Deed is a conveyance of property with a valid cause or consideration; that the consideration is P1 which is clearly stated in the deed itself; that the apparent inadequacy is of no moment since it is the usual practice in deeds of conveyance to place a nominal amount although there is a more valuable consideration given. Hence, the petition for review on certiorari.

On 15 March 1985, Sandra Maruzzo, through her guardian ad litem Alfredo Ong, filed an Omnibus Motion informing this Court that she has reached the age of majority as evidenced by her Birth Certificate and she prays that she be substituted as private respondent in place of her guardian ad litem. On 15 April 1985, the Court issued a resolution granting the same.

The Supreme Court affirmed the appealed decision of the IAC, with costs against Imelda Ong.

1.    Consideration or cause is not P1 alone but also other valuable considerations
The subject deed reveals that the conveyance of the 1/2 undivided portion of the property was for and in consideration of P1 and the other valuable considerations paid by Sandra Maruzzo, through her representative, Alfredo Ong, to petitioner Imelda Ong. Stated differently, the cause or consideration is not P1 alone but also the other valuable considerations.

2.    Cause not stated in contract is presumed existing unless proven to the contrary; Execution of deed a prima facie evidence of existence of valuable consideration
Although the cause is not stated in the contract it is presumed that it is existing unless the debtor proves the contrary (Article 1354 of the Civil Code). One of the disputable presumptions is that there is a sufficient cause of the contract (Section 5, (r), Rule 131, Rules of Court). It is a legal presumption of sufficient cause or consideration supporting a contract even if such cause is not stated therein (Article 1354, New Civil Code) This presumption cannot be overcome by a simple assertion of lack of consideration especially when the contract itself states that consideration was given, and the same has been reduced into a public instrument with all due formalities and solemnities. To overcome the presumption of consideration the alleged lack of consideration must be shown by preponderance of evidence in a proper action. (Samanilla vs. Cajucom, et al., 107 Phil. 432). The execution of a deed purporting to convey ownership of a realty is in itself prima facie evidence of the existence of a valuable consideration, the party alleging lack of consideration has the burden of proving such allegation. (Caballero, et al. vs. Caballero, et al., (CA), 45 O.G. 2536).

3.    Acceptance by legal representatives of minor applies to onerous and conditional donations
Granting that the Quitclaim deed is a donation, Article 741 of the Civil Code provides that the requirement of the acceptance of the donation in favor of minor by parents of legal representatives applies only to onerous and conditional donations where the donation may have to assume certain charges or burdens (Article 726, Civil Code). The acceptance by a legal guardian of a simple or pure donation does not seem to be necessary (Perez vs. Calingo, CA-40 O.G. 53). Thus, Supreme Court ruled in Kapunan vs. Casilan and CA (109 Phil. 889) that the donation to an incapacitated donee does not need the acceptance by the lawful representative if said donation does not contain any condition. In simple and pure donation, the formal acceptance is not important for the donor requires no right to be protected and the donee neither undertakes to do anything nor assumes any obligation. The Quitclaim in question does not impose any condition.

4.    Bad faith and inadequacy of monetary consideration does not render conveyance inexistent, assignor’s liberality may be sufficient cause for a valid contract
It is not unusual in deeds of conveyance adhering to the Anglo-Saxon practice of stating that the consideration given is the sum of P1, although the actual consideration may have been much more. Moreover, assuming that said consideration of P1 is suspicious, this circumstance, alone, does not necessarily justify the inference that the vendees were not purchasers in good faith and for value. Neither does this inference warrant the conclusion that the sales were null and void ab initio. Indeed, bad faith and inadequacy of the monetary consideration do not render a conveyance inexistent, for the assignor’s liberality may be sufficient cause for a valid contract (Article 1350, Civil Code), whereas fraud or bad faith may render either rescissible or voidable, although valid until annulled, a contract concerning an object certain entered into with a cause and with the consent of the contracting parties(See Morales Development v. CA, 27 SCRA 484).

Taxicab Operators v. The Board of Transportation [GR L-59234, 30 September 1982]
En Banc, Melencio-Herrera (p):  12 concur, 2 concur in the result

Facts: Taxicab Operators of Metro Manila, Inc. (TOMMI) is a domestic corporation composed of taxicab operators, who are grantees of Certificates of Public Convenience to operate taxicabs within the City of Manila and to any other place in Luzon accessible to vehicular traffic. Ace Transportation Corporation and Felicisimo Cabigao are two of the members of TOMMI, each being an operator and grantee of such certificate of public convenience.

On 10 October 1977, Board of Transportation (BOT) issued Memorandum Circular 77-42 which phases out old and dilapidated taxis; refusing registration to taxi units within the National Capitol Region having year models over 6 years old. Pursuant to the above BOT circular, Director of the Bureau of Land Transportation (BLT) issued Implementing Circular 52, dated 15 August 1980, instructing the Regional Director, the MV Registrars and other personnel of BLT, all within the NCR, to implement said Circular, and formulating a schedule of phase-out of vehicles to be allowed and accepted for registration as public conveyances. In accordance therewith, cabs of model 1971 were phase-out in registration year 1978; those of model 1972, in 1979; those of model 1973, in 1980; and those of model 1974, in 1981.

On 27 January 1981, petitioners filed a Petition with the BOT (Case 80-7553), seeking to nullify MC  77-42 or to stop its implementation; to allow the registration and operation in 1981 and subsequent years of taxicabs of model 1974, as well as those of earlier models which were phased-out, provided that, at the time of registration, they are roadworthy and fit for operation. On 16 February 1981, petitioners filed before the BOT a “Manifestation and Urgent Motion”, praying for an early hearing of their petition. The case was heard on 20 February 1981. On 28 November 1981, petitioners filed before the same Board a “Manifestation and Urgent Motion to Resolve or Decide Main Petition” praying that the case be resolved or decided not later than 10 December 1981 to enable them, in case of denial, to avail of whatever remedy they may have under the law for the protection of their interests before their 1975 model cabs are phased-out on 1 January 1982. Petitioners, through its President, allegedly made personal follow-ups of the case, but was later informed that the records of the case could not be located. On 29 December 1981, the present Petition was instituted.

The Supreme Court denied the writs prayed for and dismissed the petition; without costs.

1.    Procedural and Substantive Due Process; Statutory Construction: “May”
PD 101 grants to the Board of Transportation the power to fix just and reasonable standards, classification, regulations, practices, measurements, or service to be furnished, imposed, observed, and followed by operators of public utility motor vehicles. Section 2 of said Decree provides procedural guidelines for said agency to follow in the exercise of its powers. Leeway was accorded the Board giving it a wide range of choice in gathering necessary information or data in the formulation of any policy, plan or program. It is not mandatory that it should first call a conference or require the submission of position papers or other documents from operators or persons who may be affected, this being only one of the options open to the Board, which is given wide discretionary authority.

2.    Dispensing with a public hearing prior to issuance of Circulars not violative of procedural due process
Dispensing with a public hearing prior to the issuance of the Circulars is not violative of procedural due process. Previous notice and hearing as elements of due process, are constitutionally required for the protection of life or vested property rights, as well as of liberty, when its limitation or loss takes place in consequence of a judicial or quasi-judicial proceeding, generally dependent upon a past act or event which has to be established or ascertained. It is not essential to the validity of general rules or regulations promulgated to govern future conduct of a class or persons or enterprises, unless the law provides otherwise. (Central Bank vs. Cloribel and Banco Filipino)

3.    Adoption of a reasonable standard; Requirement of due process met
It is impractical to subject every taxicab to constant and recurring evaluation to determine its road-worthiness, not to speak of the fact that it can open the door to the adoption of multiple standards, possible collusion, and even graft and corruption. A reasonable standard must be adopted to apply to all vehicles affected uniformly, fairly, and justly. The span of six years supplies that reasonable standard. The product of experience shows that by that time taxis have fully depreciated, their cost recovered, and a fair return on investment obtained. They are also generally dilapidated and no longer fit for safe and comfortable service to the public specially considering that they are in continuous operation practically 24 hours everyday in three shifts of eight hours per shift. With that standard of reasonableness and absence of arbitrariness, the requirement of due process has been met.

4.    Equal Protection of the Law; Substantial distinction; Rationale of initial implementation in Metro Manila
Equal protection clause does not imply that the same treatment be accorded all and sundry. It applies to things or persons identically or similarly situated. It permits of classification of the object or subject of the law provided classification is reasonable or based on substantial distinction, which make for real differences, and that it must apply equally to each member of the class.  What is required under the equal protection clause is the uniform operation by legal means so that all persons under identical or similar circumstance would be accorded the same treatment both in privilege conferred and the liabilities imposed.The challenged Circulars satisfy the foregoing criteria.
The Circular was enforced initially in Metro Manila is that taxicabs in said metropolis, compared to those of other places, are subjected to heavier traffic pressure and more constant use (common knowledge). Considering that traffic conditions are not the same in every city, a substantial distinction exists so that infringement of the equal protection clause can hardly be successfully claimed. The implementation of the Circular outside Metro Manila was also envisioned in MC 77-42 as its provision provides that “for an orderly implementation of this Memorandum Circular, the rules … shall immediately be effective in Metro Manila. Its implementation outside Metro Manila shall be carried out only after the project has been implemented in Metro Manila and only after the date has been determined by the Board.” Further, the implementation of the Circulars in Cebu City is already being effected, with the BOT in the process of conducting studies regarding the operation of taxicabs in other cities.

5.    Rationale behind exercise of police power
The overriding consideration is the safety and comfort of the riding public from the dangers posed by old and dilapidated taxis. The State, in the exercise of its police power, can prescribe regulations to promote the health, morals, peace, good order, safety and general welfare of the people. It can prohibit all things hurtful to comfort, safety and welfare of society.  It may also regulate property rights.  The necessities imposed by public welfare may justify the exercise of governmental authority to regulate even if thereby certain groups may plausibly assert that their interests are disregarded.

Villaflor v. CA [G.R. No. 95694.  October 9, 1997.]
Third Division, Panganiban (J): 3 concur, 1 took no part

Facts: On 16 January 1940, Cirilo Piencenaves, in a Deed of Absolute Sale, sold to Vicente Villafor, a parcel of agricultural land (planted to Abaca) containing an area of 50 hectares, more or less. The deed states that the land was sold to Villaflor on 22 June 1937, but no formal document was then executed, and since then until the present time, Villaflor has been in possession and occupation of the same. Before the sale of said property, Piencenaves inherited said property form his parents and was in adverse possession of such without interruption for more than 50 years. On the same day, Claudio Otero, in a Deed of  Absolute Sale sold to Villaflor a parcel of agricultural land (planted to corn), containing an area of 24 hectares, more or less; Hermogenes Patete, in a Deed of Absolute Sale  sold to Villaflor, a parcel of agricultural land (planted to abaca and corn), containing an area of 20 hectares, more or less. Both deed state the same details or circumstances as that of Piencenaves’. On 15 February 1940, Fermin Bocobo, in a Deed of Absolute Sale sold to Villaflor, a parcel of agricultural land (planted with abaca), containing an area of 18 hectares, more or less.

On 8 November 1946, Villaflor leased to Nasipit Lumber Co., Inc. a parcel of land, containing an area of 2 hectares, together with all the improvements existing thereon, for a period of 5 years (from 1 June 1946) at a rental of P200.00 per annum to cover the annual rental of house and building sites for 33 houses or buildings. The lease agreement allowed the lessee to sublease the premises to any person, firm or corporation; and to build and construct additional houses with the condition the lessee shall pay to the lessor the amount of 50 centavos per month for every house and building; provided that said constructions and improvements become the property of the lessor at the end of the lease without obligation on the part of the latter for expenses incurred in the construction of the same. On 7 July 1948, in an “Agreement to Sell” Villaflor conveyed to Nasipit Lumber, 2 parcels of land. Parcel 1 contains an area of 112,000 hectares more or less, divided into lots 5412, 5413, 5488, 5490, 5491, 5492, 5850, 5849, 5860, 5855, 5851, 5854, 5855, 5859, 5858, 5857, 5853, and 5852; and containing abaca, fruit trees, coconuts and thirty houses of mixed materials belonging to the Nasipit Lumber Company. Parcel 2 contains an area of 48,000 more or less, divided into lots 5411, 5410, 5409, and 5399, and containing 100 coconut trees, productive, and 300 cacao trees. From said day, the parties agreed that Nasipit Lumber shall continue to occupy the property not anymore in concept of lessee but as prospective owners.

On 2 December 1948, Villaflor filed Sales Application V-807 with the Bureau of Lands, Manila, to purchase under the provisions of Chapter V, XI or IX of CA 141 (The Public Lands Act), as amended, the tract of public lands. Paragraph 6 of the Application, states: ‘I understand that this application conveys no right to occupy the land prior to its approval, and I recognize that the land covered by the same is of public domain and any and all rights I may have with respect thereto by virtue of continuous occupation and cultivation are hereby relinquished to the Government. On 7 December 1948, Villaflor and Nasipit Lumber executed an “Agreement,” confirming the Agreement to Sell of 7 July 1948, but with reference to the Sales Application filed with the Bureau of Land. On 31 December 1949, the Report by the public land inspector (District Land Office, Bureau of Lands, in Butuan) contained an endorsement of the said officer recommending rejection of the Sales Application of Villaflor for having leased the property to another even before he had acquired transmissible rights thereto. In a letter of Villaflor dated 23 January 1950, addressed to the Bureau of Lands, he informed the Bureau Director that he was already occupying the property when the Bureau’s Agusan River Valley Subdivision Project was inaugurated, that the property was formerly claimed as private property, and that therefore, the property was segregated or excluded from disposition because of the claim of private ownership. Likewise, in a letter of Nasipit Lumber dated 22 February 1950 addressed to the Director of Lands, the corporation informed the Bureau that it recognized Villaflor as the real owner, claimant and occupant of the land; that since June 1946, Villaflor leased 2 hectares inside the land to the company; that it has no other interest on the land; and that the Sales Application of Villaflor should be given favorable consideration. On 24 July 1950, the scheduled date of auction of the property covered by the Sales Application, Nasipit Lumber offered the highest bid of P41.00 per hectare, but since an applicant under CA 141, is allowed to equal the bid of the highest bidder, Villaflor tendered an equal bid, deposited the equivalent of 10% of the bid price and then paid the assessment in full.

On 16 August 1950, Villaflor exec