Dignos vs. Lumungsod [G.R. No. L-59266.  February 29, 1988.]
Third Division,  Bidin (J): 4 concurring

Facts: The spouses Silvestre Dignos and Isabel Lumungsod were owners of a parcel of land (Lot 3453, Opon Cadastre), of the cadastral survey of Opon, Lapu-Lapu City. On 7 June 1965, the Dignos spouses sold the said parcel of land to Atilano J. Jabil for the sum of P28,000.00, payable in two installments, with an assumption of indebtedness with the First Insular Bank of Cebu in the sum of P12,000.00, which was paid and acknowledged by the vendors in the deed of sale executed in favor of Jabil, and the next installment in the sum of P4,000.00 to be paid on or before 15 September 1965. On 25 November 1965, the Dignos spouses sold the same land in favor of Luciano Cabigas and Jovita L. De Cabigas, who were then US citizens, for the price of P35,000.00. A deed of absolute sale was executed by the Dignos spouses in favor of the Cabigas spouses, and which was registered in the Office of the Register of Deeds pursuant to the provisions of Act 3344.

As the Dignos spouses refused to accept from Jabil the balance of the purchase price of the land, and as Jabil discovered the second sale made by the Dignos spouses to the Cabigas spouses, Jabil filed the suit with the CFI Cebu (Civil Case 23-L). After due trial, the CFI Cebu rendered its Decision on 25 August 1972, declaring the deed of sale executed on 25 November 1965 in favor of the Cabigas spouses null and void, and the deed of sale in favor of Jabil not rescinded; ordering Jabil to pay the sum of P16,0000 to the Dignos spouses upon the execution of the Deed of Absolute Sale and when the decision of the case becomes final and executory; ordering Jabil to reimburse the Cabigas couple reasonable amount corresponding to the expenses or costs of the hollow block fence, so far constructed; ordering the Dignos spouses to return to  the Cabigas spouses the sum of P35,000; and making the writ of preliminary injunction issued 23 September 1966 permanent by virtue of the decision.

Jabil and the Dignos spouses appealed to the Court of Appeals (CA-GR 54393-R). On 31 July 1981, the Court of Appeals affirmed the decision of the lower court except as to the portion ordering Jabil to pay for the expenses incurred by the Cabigas spouses for the building of a fence upon the land in question. A motion for reconsideration of said decision was filed by the Dignos spouses, but on 16 December 1981, a resolution was issued by the Court of Appeals denying the motion for lack of merit. Hence, the petition for review on certiorari.

In the resolution of 10 February 1982, the Second Division of the Supreme Court denied the petition for lack of merit. A motion for reconsideration of said resolution was filed on 16 March 1982. In the resolution dated 26 April 1982, Jabil was required to comment thereon, which comment was filed on 11 May 1982 and a reply thereto was filed on 26 July 1982 in compliance with the resolution of 16 June 1982 . On 9 August 1982, acting on the motion for reconsideration and on all subsequent pleadings filed, the Supreme Court resolved to reconsider its resolution of 10 February 1982 and to give due course to the present petition. On 6 September 1982, Jabil filed a rejoinder to reply of the Dignos spouses which was noted on the resolution of 20 September 1982. The Supreme Court dismissed the petition filed for lack of merit and affirmed the assailed decision of the Court of Appeals in toto.

1.    Contract is a Deed of Sale
The contract in question is a Deed of Sale, with the conditions that (1) Atilano G. Jabil is to pay the amount of Twelve Thousand Pesos (P12,000.00) Philippine Currency as advance payment; (2) Atilano G. Jabil is to assume the balance of Twelve Thousand Pesos (P12,000.00) Loan from the First Insular Bank of Cebu; (3) Atilano G. Jabil is to pay the said spouses the balance of Four Thousand Pesos (P4,000.00) on or before September 15, 1965. (4) That the said spouses agreed to defend the said Atilano G. Jabil from other claims on the said property; (5) the spouses agrees to sign a final deed of absolute sale in favor of Atilano G. Jabil over the above-mentioned property upon the payment of the balance of Four Thousand Pesos.” By and large, the issues in the present case have already been settled by the Court in analogous cases.

2.    Deed of Sale absolute although denominated as a “Deed of Conditional Sale”
A deed of sale is absolute in nature although denominated as a “Deed of Conditional Sale” where nowhere in the contract in question is a proviso or stipulation to the effect that title to the property sold is reserved in the vendor until full payment of the purchase price, nor is there a stipulation giving the vendor the right to unilaterally rescind the contract the moment the vendee fails to pay within a fixed period (Taguba v. Vda. de Leon, 132 SCRA 722; Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., 86 SCRA 305). In the present case, there is no stipulation reserving the title of the property on the vendors nor does it give them the right to unilaterally rescind the contract upon non-payment of the balance thereof within a fixed period.

3.    Elements of valid contract present; Article 1458
All the elements of a valid contract of sale under Article 1458 of the Civil Code, are present, such as: (1) consent or meeting of the minds; (2) determinate subject matter; and (3) price certain in money or its equivalent.

4.    Ownership transferred upon actual or constructive delivery; Froilan vs. Pan Oriental Shipping
In addition, Article 1477 of the same Code provides that “The ownership of the thing sold shall be transferred to the vendee upon actual or constructive delivery thereof. As applied in the case of Froilan v. Pan Oriental Shipping Co., et al. (12 SCRA 276), the Supreme Court held that in the absence of stipulation to the contrary, the ownership of the thing sold passes to the vendee upon actual or constructive delivery thereof.
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5.    Actual delivery made in the present case
While there was no constructive delivery of the land sold in the present case, as subject Deed of Sale is a private instrument, it is beyond question that there was actual delivery thereof. As found by the trial court, the Dignos spouses delivered the possession of the land in question to Jabil as early as 27 March 1965 so that the latter constructed thereon Sally’s Beach Resort also known as Jabil’s Beach Resort in March, 1965; Mactan White Beach Resort on 15 January 1966 and Bevirlyn’s Beach Resort on 1 September 1965. Such facts were admitted by the Dignos spouses.

6.    Contemporaneous acts show that absolute deed of sale was intended
The Court of Appeals in its resolution dated 16 December 1981 found that the acts of the Dignos spouses, contemporaneous with the contract, clearly show that an absolute deed of sale was intended by the parties and not a contract to sell.

7.    Subsequent sale to the Cabigas spouses null and void
When the Dignoes spouses sold said land to the Cabigas spouses, they were no longer owners of the same and the sale is null and void.

8.    Taguba vs. Vda. De Leon on all fours; Articles 1592 of the Civil Code
Applying the rationale of the case of Taguba v. Vda. de Leon (supra) which is on all fours with the present case, the contract of sale being absolute in nature is governed by Article 1592 of the Civil Code. The Dignos spouses never notified Jabil by notarial act that they were rescinding the contract, and neither did they file a suit in court to rescind the sale.

9.    Article 1358 of the Civil Code, Acts and contracts for the extinguishments of reaql rights over immovable property must appear in public document
The most that the Dignos spouses were able to show is a letter of Cipriano Amistad who, claiming to be an emissary of Jabil, informed the Dignos spouses not to go to the house of Jabil because the latter had no money and further advised the Dignos spouses to sell the land in litigation to another party. There is no showing that Amistad was properly authorized by Jabil to make such extra judicial rescission for the latter who, on the contrary, vigorously denied having sent Amistad to tell the Dignos spouses that he was already waiving his rights to the land in question. Under Article 1358 of the Civil Code, it is required that acts and contracts which have for their object the extinguishment of real rights over immovable property must appear in a public document.

10.    Slight delay by one party not sufficient ground fro rescission
Where time is not of the essence of the agreement, a slight delay on the part of one party in the performance of his obligation is not a sufficient ground for the rescission of the agreement (Taguba v. Vda. de Leon, supra). Considering that Jabil has only a balance of P4,000.00 and was delayed in payment only for one month, equity and justice mandate as in the case that Jabil be given an additional period within which to complete payment of the purchase price.

Babasa vs. CA [G.R. No. 124045.  May 21, 1998.]
First Division, Bellosillo (J): 4 concurring

Facts: On 11 April 1981 a contract of “Conditional Sale of Registered Lands” was executed between the spouses Vivencio and Elena Babasa as vendors and Tabangao Realty Inc. (Tabangao) as vendee over 3 parcels of land, Lots 17827-A, 17827-B and 17827-C, situated in Brgy. Libjo, Batangas City. Since the certificates of title over the lots were in the name of third persons who had already executed deeds of reconveyance and disclaimer in favor of the Babasas, it was agreed that the total purchase price of P2,121,920.00 would be paid in the following manner: P300,000.00 upon signing of the contract, and P1,821,920.00 upon presentation by the Babasas of transfer certificates of titles in their name, free from all liens and encumbrances, and delivery of registerable documents of sale in favor of Tabangao within 20 months from the signing of the contract. In the meantime, the retained balance of the purchase price would earn interest at 17% per annum or P20,648.43 monthly payable to the Babasas until 31 December 1982. It was expressly stipulated that Tabangao would have the absolute and unconditional right to take immediate possession of the lots as well as introduce any improvements thereon.  On 18 May 1981 Tabangao leased the lots to Shell Gas Philippines, Inc. (SHELL), which immediately started the construction thereon of a Liquefied Petroleum Gas Terminal Project, an approved zone export enterprise of the Export Processing Zone. Tabangao is the real estate arm of SHELL. The parties substantially complied with the terms of the contract. Tabangao paid the first installment of P300,000.00 to the Babasas while the latter delivered actual possession of the lots to the former. In addition, Tabangao paid P379,625.00 to the tenants of the lots as disturbance compensation and as payment for existing crops as well as P334,700.00 to the owners of the houses standing thereon in addition to granting them residential lots with the total area of 2,800 square meters. Tabangao likewise paid the stipulated monthly interest for the 20-month period amounting to P408,580.80. Meanwhile, the Babasas filed Civil Case 519 and Petition 373 for the transfer of titles of the lots in their name. However, 2 days prior to the expiration of the 20-month period, specifically on 31 December 1982, the Babasas asked Tabangao for an indefinite extension within which to deliver clean titles over the lots. They asked that Tabangao continue paying the monthly interest of P20,648.43 starting January 1983 on the ground that Civil Case 519 and Petition 373 had not yet been resolved with finality in their favor. Tabangao refused the request. In retaliation the Babasas executed a notarized unilateral rescission dated 28 February 1983 to which Tabangao responded by reminding the Babasas that they were the ones who did not comply with their contractual obligation to deliver clean titles within the stipulated 20-month period, hence, had no right to rescind their contract. The Babasas insisted on the unilateral rescission and demanded that SHELL vacate the lots.

On 19 July 1983 Tabangao instituted an action for specific performance with damages in the RTC Batangas City to compel the spouses to comply with their obligation to deliver clean titles over the properties. The Babasas moved to dismiss the complaint on the ground that their contract with Tabangao became null and void with the expiration of the 20-month period given them within which to deliver clean certificates of title. SHELL entered the dispute as intervenor praying that its lease over the premises be respected by the Babasas. Eventually, judgment was rendered in favor of Tabangao and SHELL, declaring that the notarial rescission executed by the Babasas void and of no legal effect; declaring that the lease contract between Tabangao and SHELL deemed legally binding on the spouses; ordering the spouses to deliver to Tabangao clean transfer certificates in their name and execute all necessary deeds and document necessary for the Register of Deeds to facilitate the issuance of TCTs; directing Tabangao to pay the spouses the remaining balance of  P1,821,920.00 out of the full purchase price for these three lots enumerated in the agreement plus interest thereon of 17% per annum or P20,648.43 a month compounded annually beginning January 1983 until fully paid; making the restraining order against the spouses in putting up structures interfering with the activities of SHELL, its employees and agents, and canceling the bond posted by Shell; and ordering the spouses to pay the cost of the proceedings as well as the premium SHELL paid in the posting of the P2 million bond for the issuance of the restraining order.

The spouses appealed to the Court of Appeals which on 29 February 1996 affirmed the decision of the trial court; but ordered that the compounded interest to be paid from 19 July 1983 only and not from January 1983 as decreed by the trial court. Hence, the appeal.

The Supreme Court denied the petition, and affirmed the appealed decision of the Court of Appeals in CA-GR CV 39554; without costs.

1.    Contract of sale and not of lease
The contract is replete with terms and stipulations clearly indicative of a contract of sale. Thus, the opening whereas clause states that the parties desire and mutually “agreed on the sale and purchase of the . . . three parcels of land;” the Babasas were described as the “vendors” while Tabangao as the “vendee” from the beginning of the contract to its end; the amount of P2,121,920.00 was stated as the purchase price of the lots; Tabangao, as vendee, was granted absolute and unconditional right to take immediate possession of the premises while the Babasas, as vendors, warranted such peaceful possession forever; Tabangao was to shoulder the capital gains tax, and; lastly, the Babasas were expected to execute a Final Deed of Absolute Sale in favor of Tabangao necessary for the issuance of transfer certificates of title the moment they were able to secure clean certificates of title in their name. It cannot be said that the contract was one of lease simply because the word “ownership” was never mentioned therein. Besides, the spouses did not object to the terms and stipulations employed in the contract at the time of its execution when they could have easily done so considering that they were then ably assisted by their counsel, Atty. Edgardo M. Carreon, whose legal training negates their pretended ignorance on the matter.

2.    Contracts valid thought parties entered into it against own wish and desire, or even against his better judgment
Although Tabangao dangled the threat of expropriation by the government (through the Export Processing Zone Authority) in the event voluntary negotiations failed, a cause to commiserate with the spouses may be perceived, it is not enough to provide them with an avenue to escape contractual obligations validly entered into. Contracts are valid even though one of the parties entered into it against his own wish and desire, or even against his better judgment. Besides, a threat of eminent domain proceedings by the government cannot be legally classified as the kind of imminent, serious and wrongful injury to a contracting party as to vitiate his consent. Private landowners ought to realize, and eventually accept, that property rights must yield to the valid exercise by the state of its all-important power of eminent domain.

3.    Contract is absolute although denominated a conditional sale; Actual and constructive delivery
Although denominated “Conditional Sale of Registered Lands,” the contract of 11 April 1981 between the spouses and Tabangao is one of absolute sale. Aside from the terms and stipulations used therein indicating such kind of sale, there is absolutely no proviso reserving title in the Babasas until full payment of the purchase price, nor any stipulation giving them the right to unilaterally rescind the contract in case of non-payment. A deed of sale is absolute in nature although denominated a conditional sale” absent such stipulations. In such cases, ownership of the thing sold passes to the vendee upon the constructive or actual delivery thereof. In the instant case, ownership over Lots 17827-A, 17827-B and 17827-C passed to Tabangao both by constructive and actual delivery. Constructive delivery was accomplished upon the execution of the contract of 11 April 1981 without any reservation of title on the part of the Babasas while actual delivery was made when Tabangao took unconditional possession of the lots and leased them to its associate company SHELL which constructed its multi-million peso LPG Project thereon.

4.    Distinction between conditions imposed on the perfection of contract and condition imposed on the performance of an obligation
In Romero v. Court of Appeals and Lim v. Court of Appeals, the Court distinguished between a condition imposed on the perfection of a contract and a condition imposed merely on the performance of an obligation. While failure to comply with the first condition results in the failure of a contract, failure to comply with the second merely gives the other party the option to either refuse to proceed with the sale or to waive the condition.  In the present case, the spouses’ contract with Tabangao did not lose its efficacy when the 20-month period stipulated therein expired without the spouses being able to deliver clean certificates of title such that Tabangao may no longer demand performance of their obligation.

5.    Unilateral rescission of the contract by the spouses unwarranted
The spouses’ act of unilaterally rescinding their contract with Tabangao is unwarranted. The failure of petitioners to deliver clean titles within 20 months from the signing of the contract merely gives Tabangao the option to either refuse to proceed with the sale or to waive the condition in consonance with Article 1545 of the New Civil Code. Besides, it would be the height of inequity to allow the Babasas to rescind their contract of sale with Tabangao by invoking as a ground therefor their own failure to deliver the titles over the lots within the stipulated period.

Aznar vs. Yapdiangco [G.R. No. L-18536.  March 31, 1965.]
En Banc, Regala (J): 10 concurring

Facts: In May 1959, Teodoro Santos advertised in two metropolitan papers the sale of his Ford Fairlane 500. In the afternoon of 28 May 1959, a certain L. De Dios, claiming to be a nephew of Vicente Marella, went to the Santos residence to answer the ad. However, Teodoro was out during this call and only the latter’s son, Irineo received and talked with De Dios. The latter told the young Santos that he had come in behalf of his uncle, Marella, who was interested to buy the advertised car. On being informed of the above, Teodoro instructed his son to see Marella the following day at his given address: 1642 Crisostomo Street, Sampaloc, Manila. And so, in the morning of 29 May 1959, Irineo went to said address. At this meeting, Marella agreed to buy the car for P14,700.00 on the understanding that the price would be paid only after the car had been registered in his name. Irineo then fetched his father who, together with De Dios, went to the office of a certain Atty. Jose Padolina where the deed of sale for the car was executed in Marella’s favor. The parties to the contract thereafter proceeded to the Motor Vehicles’ Office in Quezon City where the registration of the car in Marella’s name was effected. Up to that stage of the transaction, the purchase price had not been paid. From the Motor Vehicles Office, Teodoro returned to his house. He gave the registration papers and a copy of the deed of sale to his son and instructed him not to part with them until Marella shall have given the full payment for the car. Irineo and De Dios then proceeded to 1642 Crisostomo Street, Sampaloc in Manila where the former demanded for the payment from Marella. Marella said that the amount he had on hand then was short by some P2,000.00 and begged off to be allowed to secure the shortage from a sister supposedly living somewhere in Azcarraga Street, also in Manila. Thereafter, he ordered De Dios to go to the said sister and suggested that Irineo to go with him. At the same time, he requested for the registration papers and the deed of sale from Ireneo on the pretext that he would like to show them to his lawyers. Trusting the good faith of Marella, Ireneo handed over the same to the latter and thereupon, in the company of De Dios and another unidentified person, proceeded to the alleged house of Marella’s sister. At a place in Azcarraga, Irineo and De Dios alighted from the car and entered a house, while their unidentified companion remained in the car. Once inside, De Dios asked Irineo to wait at the sala while he went inside a room. That was the last that Ireneo saw of him. For, after a considerable length of time waiting in vain for De Dios to return, Ireneo went down to discover that neither the car nor their unidentified companion was there anymore. Going back to the house, he inquired from a woman he saw for De Dios and he was told that no such name lived or was even known therein. Whereupon, Ireneo rushed to 1642 Crisostomo to see Marella. He found the house closed and Marella gone. Finally, he reported the matter to his father who promptly advised the police authorities. That very same day, Marella was able to sell the car in question to Jose B. Aznar, for P15,000.00. Aznar acquired the said car from Marella in good faith, for a valuable consideration and without notice of the defect appertaining to the vendor’s title. While the car was thus in the possession of Aznar and while he was attending to its registration in his name, agents of the Philippine Constabulary seized and confiscated the same in consequence of the report to them by Teodoro that the said car was unlawfully taken from him.

Aznar filed a complaint for replevin before the CFI Quezon City (Branch IV) against Captain Rafael Yapdiangco, the head of the Philippine Constabulary unit which seized the car. Claiming ownership of the vehicle, he prayed for its delivery to him. In the course of the litigation, however, Teodoro Santos moved and was allowed to intervene by the lower court. At the end of the trial, the lower court rendered a decision awarding the disputed motor vehicle to Santos. From the decision, Aznar appealed.

The Supreme Court dismissed the appeal and affirmed the decision of the lower court in full; with costs against Aznar.

1.    Article 559 of the Civil Code; Santos entitled to recovery of personal property
Santos had been unlawfully deprived of his personal property by Marella, from whom Aznar traces his right. Consequently, although Aznar acquired the car in good faith and for a valuable consideration from Marella, the said decision concluded, still Santos was entitled to its recovery on the mandate of Article 559 of the New Civil Code which provides: ” The possession of movable property acquired in good faith is equivalent to title. Nevertheless, one who has lost any movable or has been unlawfully deprived thereof, may recover it from the person in possession of the same. If the possessor of a movable lost or of which the owner has been unlawfully deprived, has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor.” Under Article 559, the rule is to the effect that if the owner has lost the thing, or if he has been unlawfully deprived of it, he has a right to recover it, not only from the finder, thief or robber, but also from the third person who may have acquired it in good faith from such finder, thief or robber.

2.    Seller’s title, voidable at least, essential in Article 1506; Article 559 applies
Article 1506 provides:” Where the seller of goods has a voidable title thereto, but his title has not been voided at the time of the sale, the buyer acquires a good title to the goods, provided he buys them in good faith, for value, and without notice of the seller’s defect of title.” Under the provision, it is essential that the seller should have a voidable title at least. It is very clearly inapplicable where the seller had no title at all.

3.    Ownership or title acquired only by tradition or delivery; Article 712 of the Civil Code
Under Article 712 of the Civil Code, “ownership and other real rights over property are acquired and transmitted by law, by donation, by testate and intestate succession, and in consequence of certain contracts, by tradition.” As interpreted by this Court in a host of cases, by this provision, ownership is not transferred by contract merely but by tradition or delivery. Contracts only constitute titles or rights to the transfer or acquisition of ownership, while delivery or tradition is the mode of accomplishing the same. (Gonzales vs. Rojas, 16 Phil. 51; Ocejo, Perez and Co. vs. International Bank, 37 Phil. 631; Fidelity and Deposit Co. vs. Wilson, 8 Phil. 51; Kuenzle & Streiff vs. Wacke & Chandler, 14 Phil. 610; Easton vs. Diaz & Co., 32 Phil. 180). For the legal acquisition and transfer of ownership and other property rights, the thing transferred must be delivered, inasmuch as, according to settled jurisprudence the tradition of the thing is a necessary and indispensable requisite in the acquisition of said ownership by virtue of a contract. (Walter Easton vs. E. Diaz & Co. & the Provincial Sheriff of Albay, supra.) So long as property is not delivered, the ownership over it is not transferred by contract merely but by delivery. Contracts only constitute titles or rights to the transfer or acquisition of ownership, while delivery or tradition is the method of accomplishing the same, the title and the method of acquiring it being different in our law.” (Gonzales vs. Rojas, 16 Phil. 51) In the present case, the car was never delivered to the vendee by the vendor as to complete or consummate the transfer of ownership by virtue of the contract. It should be recalled that while there was indeed a contract of sale between Vicente Marella and Teodoro Santos, the former, as vendee, took possession of the subject matter thereof by stealing the same while it was in the custody of the latter’s son.

4.    Delivery of key not delivery contemplated by Article 712; Intent must be present
There is no adequate evidence on record as to whether Irineo Santos voluntarily delivered the key to the car to the unidentified person who went with him and L. De Dios to the place in Azcarraga where a sister of Marella allegedly lived. But even if Irineo Santos did, it was not the delivery contemplated by Article 712 of the Civil Code. For then, it would be indisputable that he turned it over to the unidentified companion only so that he may drive Irineo Santos and De Dios to the said place in Azcarraga and not vest the title to the said vehicle to him as agent of Vicente Marella. Article 712 above contemplates that the act be coupled with the intent of delivering the thing. (10 Manresa 132)

5.    Article 559 establishes exception to the general rule or irrevindicability
Article 559 establishes two exceptions to the general rule of irrevindicability to wit: when the owner (1) has lost the thing, or (2) has been unlawfully deprived thereof. In these cases, the possessor cannot retain the thing as against the owner, who may recover it without paying any indemnity, except when the possessor acquired it in a public sale. (Del Rosario vs. Lucena, 8 Phil. 535; Varela vs. Finnick, 9 Phil. 482; Varela vs. Matute, 9 Phil. 479; Arenas vs. Raymundo, 19 Phil. 46. Tolentino, id., Vol II, p. 261.)

6.    Cruz vs. Pahati on Article 559
In the case of Cruz vs. Pahati, et al., 52 OG 3053, the Court ruled that “Under Article 559 of the new Civil Code, a Person illegally deprived of any movable may recover it from the person in possession of the same and the only defense the latter may have is if he has acquired it in good faith at a public sale, in which case, the owner cannot obtain its return without reimbursing the price paid therefor. In the present case, plaintiff has been illegally deprived of his car through the ingenious scheme of defendant B to enable the latter to dispose of it as if he were the owner thereof. Plaintiff, therefore, can still recover possession of the car even if it is in the possession of a third party who had acquired it in good faith from defendant B. The maxim that “no man can transfer to another a better title than he has himself’ obtains in the civil as well as in the common law.” (U.S. vs. Sootelo, 28 Phil. 147)

7.    Common law principle yields to statutory provision
The right of the owner to recover personal property acquired in good faith by another, is based on his being dispossessed without his consent. The common law principle that where one of two innocent persons must suffer by a fraud perpetrated by another, the law imposes the loss upon the party who, by his misplaced confidence, has enabled the fraud to be committed, cannot be applied in a case which is covered by an express provision of the new Civil Code, specifically Article 559. Between a common law principle and a statutory provision, the latter must prevail in this jurisdiction. (Cruz vs. Pahati, supra).

Coronel vs. Ona [G.R. No. 10280.  February 7, 1916.]
First Division, Torres (J): 3 concurring, 1 took no part

Facts: In the administration of the intestate estate of the deceased Isidra Coronel, the administrator thereof, Engracio Coronel, discovered certain arrangements between the surviving spouse, Cenon Ona, and other persons, which decreased and injured the property under administration, whereof, by permission of the court, the said administrator on 16 May 1913, filed suit against Cenon, et. al., in which suit, by agreement of the parties, they were included as plaintiffs the heirs of the said deceased named Francisco Coronel, Agripina Coronel, Engracia Torres, Manuela Torres and her husband Lucio Pañganiban, and the minor Anastacia Ramon, represented by his curator ad litem, Engracio Coronel. Coronel, et. al. allege in their complaint that the administration is the owner of one-half pro indiviso of a rural estate, 10 hectares and 42 centares in area, situate in the barrio of Lagalag of the town of Tiaong, Province of Tayabas, planted with 2,000 coco palms from 4 to 5 years old, the boundaries whereof are set forth in the complaint, said realty being conjugal property as it was acquired for a consideration by the deceased Isidra Coronel and her husband Cenon Ona during their marriage; that upon the death of the wife in April 1911, the surviving spouse Cenon Ona became the administrator of said undivided property, taking all its products and refusing to make partition of the land with the lawful heirs of his deceased wife; that on 5 November 1912, Cenon Ona and the other defendants formed a conspiracy, with intent of gain for themselves, to the fraud and injury of the plaintiff administration, and drew up and signed an alleged instrument of sale, whereby Cenon Ona sold to the spouses Benigno Nadres and Victoria Villa the said land, which instrument they falsely dated as prior to the death of his wife Isidra Coronel and forged and imitated her signature or mark by writing her name and surname thereon with a cross between them; that on the same date, 5 November 1912, the same defendants, continuing their fraudulent proceedings, executed another instrument of sale of the same land, wherein they made to appear as vendors thereof Benigno Nadres and Victoria Villa and as vendees the spouses Crispin Castillo and Maria recto, so that thereby it would be more difficult for the plaintiff administration to recover said estate, and from that date Cenon Ona surrendered possession and enjoyment of the said land to the spouses Crispin Castillo and Maria Recto, who have been up to the present time in possession thereof and have taken the products therefrom, having refused to give the administration any portion of the latter; that by reason of the malicious and fraudulent acts of these defendants the administration has suffered damages to the extent of P1,000. On 29 May  1913, Benigno Nadres, Victoria Villa, Crispin Castillo, and Maria Recto answered the complaint, denying all the allegations thereof generally and specifically, and alleging in special defense: That on 8 November 1910, the spouses Benigno Nadres and Victoria Castillo [Villa] had acquired the land which is the subject matter of the complaint at a genuine and absolute sale from the spouses Cenon Ona and Isidra Coronel, and that spouses Crispin Castillo and Maria Recto acquired the same land on 5 November 1912, at a genuine and absolute sale from Nadres and Villa. In another document of a later date, Crispin Castillo and Maria Recto, denied the facts set forth in the complaint and in special defense alleged that they are the exclusive owners of the land described in the complaint, as they acquired it by purchase from the spouses Nadres and Villa. Counsel for Cenon Ona in answer denied generally and specifically all the paragraphs of the complaint and alleged solely in special defense that he had never, either before or at the time of the sale made by him and his deceased wife Isidra Coronel of the land which is the subject matter of the complaint, concerted or conspired with his codefendants to effect said sale. After trial and examination of the evidence adduced by both parties and on 29 April 1914, the CFI Tayabas rendered the judgment denying the claim of spouses Crispin Castillo and Maria Recto, for recovery of damages they had suffered by reason of the filing of the complaint against them, finding that the instruments of conveyance of the land in litigation void and of no force or legal effect because the parties who sold the land by means of said instruments lacked any right to alienate it; denying the claim of Coronel, et. al. that the defendants pay the value of one-half of the products of this land received by them and a sum of money in the nature of compensatory damages, and merely sentencing Cenon Ona and Benigno Nadres to the payment of the costs in equal parts. Hence the appeal through a bill of exceptions by counsel for the defendants.

The Supreme affirmed the judgment appealed from, with the costs against the appellants.

1.    Facts: Identity of property not disputed
There is no question whatsoever as to the identity of the land claimed in the complaint, it being a rural estate situated in the barrio of Lagalag of the municipality of Tiaong, Tayabas, with an area of ten hectares and forty-two centiares and planted with 2,000 coco palms.

2.    Property conjugal; Coronel’s heirs by operation of law
Cenon Ona was lawfully married to Isidra Coronel and during their marriage they acquired by purchase from Juan Cadiz the land, wherefore said realty is their conjugal property. This marriage was dissolved by the death of Isidra Coronel on 13 April 1911, without issue from these spouse and without a will executed in life by the woman, so the heirs that by operations of law must succeed said deceased Isidra Coronel are her brothers and sisters and nephews and nieces, residing in the town of San Juan de Bocboc, Batangas. The land in litigation is not only conjugal property, with one-half thereof belonging to the deceased Isidra Coronel, but also from the moment of her death it passed by operation of law into the ownership of her intestate heirs, and for this reason her widower could not dispose of said half to the injury of the nearest relatives and heirs of his deceased wife. (Arts. 657, 659, 661, Civil Code.)

3.    Facts: Stipulations in the instrument of purchase and sale
In the instrument of purchase and sale, written in the Tagalog dialect (Case 776) and translated in the present case, the spouses Cenon Ona and Isidra Coronel transferred by absolute sale on 8 November 1910, the land litigation to te spouses Benigno Nadres and Victoria Villa, under the following conditions: (1) The spouses Cenon Ona and Isidra Coronel had planted coco palms on a certain tract of land belonging to Benigno Nadres and his wife, which land Cenon Ona and Isidra Coronel had alienated without the consent of the owners thereof, the said Nadres and wife; (2) on their part the spouses Ona and Coronel possessed another tract of land which they had purchased from Juan Cadiz, whereon they has already set out 1,400 young coco palms and 800 more could be planted; (3) as Benigno Nadres and his wife were demanding return of the land previously sold by Ona and Coronel, the latter thought it fair to cede their own land to said Nadres and wife in exchange for what they had alienated, Nadres and his wife there in hand paying P2,500 as the increase in the price; (4) this exchange was made on the condition that Cenon Ona and his wife should for the period of four years; (5) the betel nut, paddy, buri, and other products shall pertain exclusively to the vendors, Cenon Ona and Isidra Coronel, who shall pay the land tax for the said four years of the life of the contract; and (6) the spouses Benigno Nadres and Victoria Villa were agreed that they would no participation in the crops from the land. This instrument is signed by the contracting parties and the witnesses, except Isidra Coronel, who placed her mark on the instrument her name and surname, which must have been affixed by another person, as she could not write.

4.    Deduced facts of the case
From the abundant, but contradictory, evidence adduced at the trial, the following facts are deduced: (1) The consideration which gave rise to the execution by Cenon Ona and Isidra Coronel, with reference to their having alienated a parcel of land belonging to Benigno Nadres and his wife, is not a valid one; (2) the consideration for the transfer of the land in question to the Nadres couple, with payment by them of P2,500 to the vendors, is false and simulated; (3) the instrument evidencing the sale of this land was executed after Isidra Coronel’s death and cannot therefore produce any effect against her heirs; and (4) the transfer by exchange and sale of the land to the vendee Benigno Nadres is not valid, as said transfer was recorded in the instrument for the sole and deliberate purpose of preventing the lawful heirs of Isidra Coronel from inheriting their portion thereof.

5.    Consideration false and simulated
Cenon Ona stated that he and his wife Isidra Coronel had received a tract of land from said Benigno Nadres, on which to set out coco-palms, with the condition that after the planting had been finished and 6 years had elapsed, he and his wife should become the owners if one-half of the said tract, as had happened, and as he was then in need of money he had sold to a third person said portion of land that then belonged to him; but it is not true that he obligated himself not to sell that portion of land to anybody but its original owner, Nadres. This testimony of Ona, which was not rebutted or contradicted by the other defendants, constitutes conclusive proof of the invalidity of the reason given for the exchange of the land in question for that previously sold and for transferring it to the said Benigno Nadres and his wife; and it is furthermore to be noted that Ona himself stated under oath that in transferring this land to Nadres on 8 November 1910, he had no intention of transferring it absolutely but had made this transfer appear in an instrument so that Nadres might take charge of the land and not bother him, as he was then old, and also to prevent the heirs of his wife Coronel from participating in her inheritance. Hence it is inferred that the consideration which gave rise to the transfer of this land to Nadres and his wife is not valid, but false and simulated. Hence, said realty was not sold to Nadres but a pretense was made of transferring it in order to sell it as the agent of Ona, and therefore the land continued to belong to Ona and his wife, the deceased Coronel. It is furthermore to be noted that when said transfer was made to Nadres the heirs of the deceased Coronel had already filed a claim for the land and consequently any alienation thereof that may have been made after the date of said claim filed by the heirs of the deceased Coronel is fraudulent. (Oria vs. McMicking, 21 Phil., Rep., 243,249)

7.    Instrument simulated
The simulation of the instrument is corroborated by the fact that Cenon Ona delivered to the administrator, Engracio Coronel, the sum of P900 so that the latter and his coplaintiffs should desist from filing a judicial, claim to the land in litigation, and, according to agreement, they executed the instrument setting forth that sum, both parties, signing it in the presence of two witnesses and ratifying it before a justice of the peace. Coronel and Ona affirm the truth of the fact set forth in said instrument to demonstrate that the land was not absolutely alienated but continued to be at the disposition of the widower. But the CFI disapproved said agreement and ordered restitution to the widower Ona of the money received by Coronel.

8.    Suppressed testimony presumed prejudicial
One of the individuals who played a principal part in the sale of the realty, Benigno Nadres, was not presented by the defendants s a witness at the trial to clear up certain obscure and doubtful points, for he only testified in rebuttal, although he was present in the court at the last session of the trial in this case; wherefore it is to be supposed, in the absence of proof to the contrary, that his testimony, which was willfully suppressed by the defendants, would have been prejudicial to them (No. 5, section 334, Code of Civil Procedure), while the record shows that Cenon Ona made declarations contrary to the interest of his other codefendants, which could not be contradicted or impugned as false.

9.    First sale simulated, Second sale void and ineffective for lack of right to dispose of land
Having reached the conclusion that the instrument, where it appears that the spouses Benigno Nadres and Victoria Villa purchased the land in question, is false and void, because said sale was not effected. Therefore, the sale made by them to the spouses Crispin Castillo and Maria Recto on 5 November 1912, is also void and ineffective, for the parties who figure therein as vendors had no right to dispose of the land, nor could they transmit to the vendees any title of ownership, nor could the latter acquire ownership of the land sold.

10.    Article 1254 of the Civil Code; Consent
Article 1254 of the Civil Code states “A contract exists from the moment one or more persons consent to bind himself or themselves, with regard to another or others, to give something or to render some service.” In the present case, since Coronel was dead on the date when the contract was drawn up and could not have taken part in the execution thereof or given her consent to the pretended sale of the land to which it refers and which belonged to the conjugal partnership of Ona and Coronel, said contract has never existed, and being void it could not serve as a legal means for transferring ownership to the alleged purchasers, Nadres and Villa; and as they could not acquire any right of ownership to the land sold by virtue of a contract that had not existed and was consequently null and void they had not transfer such a right to the spouses Crispin Castillo and Maria Recto.

11.    Requisites of a valid contract; Article 1261
There is no contract, says article 1261 of the same Code, unless there exist the essential requisites of consent of the contracting parties, a definite object which may be the subject of the contract, and the consideration for the obligation which may be established. In the present case, Isidra Coronel was not present to give her consent to the alleged contract of sale, because she was dead when said contract was simulated, nor is any consideration for the obligation stated therein, and consequently the contract set forth in said instrument is flagrantly null and void. Although it appears to have been dated 8 November 1910, while Isidra Coronel was still alive, it was prepared on 5 November 1912, for the widower Cenon Ona so testified.

12.    Crispin Castillo and Maria Recto not entitled to damages
Since Coronel, et. al. did not take part in the execution of the contracts of sale and did not act in bad faith in filing this complaint against the efendants, Crispin Castillo and Maria Recto, the latter are not entitled to recover any indemnity for damages.

13.    Coco palms not yet borne fruit, therefore claim on value of products cannot be granted
By the declaration of the administrator himself, Engracio Coronel, and by that of Cenon Ona, that the coco palms set out on the land in dispute have not yet borne fruit, wherefore Coronel et.al’s claim that they be paid the value of one-half of the products taken from the land in question cannot be granted.

Interprovincial Autobus Co. vs. Collector of Internal Revenue
GR L-6741, 31 January 1956
First Division, Labrador (J): 8 concur

Facts: Interprovincial Autobus Co. is a common carrier engaged in transporting passengers and freight by means of TPU buses in Misamis Occidental and Northern Zamboanga. The company was not able to preserve the receipt stubs from 1936 to 1938 but was able to preserve those for 1939 and 1940. The provincial revenue agent for Misamis Occidental ascertained the number of receipts by referring to the conductor’s daily report for the said period 1936 to 1938. From there, the tax assessed amounted to P7,776.24, which was collected from the company’s deposit in Philippine National Bank. The company demanded the refund of the said amount, but which was denied.

Issue: Whether the freight receipts were actually issued for more than P5 each, to warrant the assessed tax of  P7,776.24.

Held: Receipts must have been issued for valuable cargo to insure against the loss of which, unlike cargo handcarried by townfolks and farmers where the latter avoid to secure receipts thereto. Such finding by the revenue agent was not controverted. In actions fro the recovery of taxes assessed and collected, the taxpayer has the burden of proving that the assessment is illegal as all presumptions are in favor of the correctness of tax assessments. The good faith of tax assessors and the validity of their actions are presumed. As such rule, on the burden of proof, has not been complied with, the action for recovery must be denied.

Republic vs. Limaco and De Guzman Commercial Co.
GR L-13081, 31 August 1962
En Banc, Paredes (J): 8 concur, 2 took no part

Facts: In 1946, Limaco & De Guzman Co. was engaged in the importation of cigarettes. To guarantee payment of revenue taxes, the company and the Visayan Surety and Insurance Corp.. as surety, executed 2 importer bonds. On 27 June 1946, the company filed with the Bureau of Customs entry papers covering shipment of 2 million “Spud” cigarettes it had imported from New York. the specific tax due thereon amounted to P6,000. The company, through its agent/broker J. O. Hiponia, paid the Bureau of Customs the tax with P1000 in cash and P5,000 in a PNB Check on 15 July 1946. The cigarettes were released to the company but the check bounced. On 17 June 1948, the Collector of Internal Revenue demanded the payment of the deficiency specific tax. The amount remained unpaid. On 15 April 1951, the company requested that action be deferred as it intends to settle the matter amicably with the BIR. The Republic filed a complaint for the forfeiture of the bonds, and the payment of the sum of P5,000 plus interest. The company invoked the defense of estoppel and prescription.

Issue: Whether the action has prescribed.

Held: Under Section 332 (c) of the Tax Code, the collection of the tax by summary method or by judicial action shall be effected within 5 years after the assessment of the tax. To assess means to impose a tax; to charge with a tax; to declare a tax to be payable; to apportion a tax to be paid or contributed; to fix a rate, to fix or settle a sum to be paid by way of tax; to set, fix or charge a certain sum to each taxpayer; to settle, determine or fix the amount of tax to be paid. Herein, the assessment was made on 17 June 1948 (when a letter of demand for the amount of the rubber check was sent to the company) and not on 15 Jne 1946 (the date of payment). Even assuming that the latter date is the date of assessment, the action is still not barred by the statute of limitations as teh statute was suspended when the company acknowledged the debt in writing in April 1951, and requested the deferment of the judicial action to be taken by the Government towards the collection of the obligation, so that the company could make representations with the COllector to settle the matter amicably. Prescription has not set in.

Guagua Electric Light Plant Co. vs. Collector
GR L-23611, 24 April 1967
En Banc, Bengzon JP (J): 8 concur

Facts: Guagua Electric Light Plant Co. is a grantee of municipal franchises by the municpal councils of Guagua and Sexmoan, Pampanga. It reported a gross income of P1,133,003.44 for 1947 go 1956 and paid thereon a franchise tax of P56,664.97 computed at 5% in accordance with Section 259 of the Tax Code. Believing that it should pay a lower franchise tax as provided by its franchises, it filed a claim for refund on 25 March 1957 for overpayment. The Commissioner denied the refund of franchise tax for the period prior to the 4th quarter of 1951 on the ground that the right to refund has prescribed. The Commissioner allowed the refund of P16,593.87. Later however, due to the holding in Hoa Hin Co. vs. David, the Commissioner assessed against the company deficiency franchise tax subject to a 25% surcharge, and thereby including the amount previously allowed by the Commissioner to be refunded.

Issue: Whether the tax “refunded erroneously” should be imposed against the company, or if the right to recover has prescribed.

Held: Guagua Electric would be paying the same deficiency tax for the period of 1 January to 30 November 1956 if it is required to pay P16,593.87 in addition to the sum of P19,938.12, the difference between the tax computed at 5% pursuant to Section 259 of the Tax Code and the franchise tax paid at 1% and 2% under the franchise. Further, by insisting on the payment of P16,593.87 (September 1951 to November 1956), the Commissioner is trying to collect the same deficiency tax where the right to assess the same, according to him, has been lost by prescription. The demand on the taxpayer to pay the sum of P16,593.87 is in effecct an assessment of deficiency franchise tax. The right to assess, thus, and to collect is governed by Section 331 of the Tax Code rather than by Article 1145 of the Civil Code, as a special law prevails over a general law. Guagua Electric is absolved from the payment of P16,593.87.

Meralco Securities Corp. vs. Savellano
GR L-36181, 23 October 1982
First Division, Teehankee (J): 4 concur, 1 took no part

Facts: In 1967, the late Juan G. Maniago submitted to the Commissioner confidential denunciation against the Meralco Securities Corp. for tax evasion for not having paid income tax on 25% of the dividends it received from the Manila Electric Co. for years 1962 to 1966. The Commissioner caused the investigation of the denunciation and found that no deficiency corporate tax was due from Meralco Securities. Maniago was informed of the findings. The Secretary of Finance sustained the Commissioner’s action. Maniago filed a petition for mandamus against the Commissioner so as to compel it to impose the alleged deficiency tax assessment against Meralco Securities and to award him the corresponding informer’s award.

Issue: Whether the Commissioner may be compelled to impose the alleged deficiency tax assessment.

Held: Mandamus only lies to enforce the performance of a ministerial act or duty and not to control the performance of discretionary power. Mandamus may not be made against teh Commissioner to compel him to impose a tax assessment not found by him to be due or proper, for that would be tantamount to a usurpation of executive functions. Purely administrative and discretionary functions may not be interfered with by the Courts. The discretionary power vested in the proper executive official, in the absence of arbitrariness or grave abuse so as to go beyonf the statutory authority, is not subject tot he contrary judgment or control of others.

Collector vs. Benipayo
GR L-13656, 31 January 1962
En Banc, Dizon (J): 8 concur, 1 took no part

Facts: Alberto Benipayo is the owner of the Lucena Theater in Lucena, Quezon. In 1953, the internal revenue agent investigated Benipayo’s tax liability for the period of August 1952 to September 1953. The examiner recommended a deficiency tax assessment in the sum of P11,193.45 inclusive of 25% surcharge plus a suggested compromise penalty of P900.00 based on the conclusion that Benipayo sold 2 tax-free 20c ticlets fraudulently in order to avoid payment of amusement tax prescribed by Section 260 of the Tax Code (based on a reverse ratio of adult to children; 3:1 in 1949 to 1951, and 1:3 for period in question; and average attendance for the past years). Benipayo protested, claiming that the findings of the examiners are mrere presumptions and conclusions, devoid of findings of fact of alleged fraudulent practices by him.

Issue: Whether there is evidence in the record to show Benipayo committed the alleged act to cheat or defraud the Government.

Held: An assessment fixes and determines the tax liability of a taxpayer. In order to stand the test of judicial scrutiny, the assessment must be based on actual facts. The presumption of correctness of assessment, being a mere presumption, cannot be made to rest on another presumption, no matter how reasonable or logical such may be; i.e. that the circumstances in 1952 and 1953 are presumed to be the same as those existing in 1949 to 1951, and July 1955. There are no substantial facts to support the assessment in question. Neither was there any proof of the fraud allegedly committed. Fraud is a serious charge, and to be sustained, it must also be supported by clear and convincing proof.

Dayrit vs. Cruz
GR L-39910, 26 September 1988
First Division, Gancayco (J): 3 concur, 1 took no part

Facts: Cecilia Teodoro Dayrit, Toribia Teodoro Castaneda, Prudencio Teodor, Francisco Teodoro and Josefina Teodoro Tiongson are legitimate children and heirs of the deceased spouses Marta and Toribio Teodoro who died intestate on 1 July 1965 and 30 August 1965. The heirs separately filed estate and inheritance tax returns for the estates of the spouses with the BIR. In 1972, the BIR issued deficiency estate and inheritance tax assessments for P1,662,072,34 and P1,747,790.94 respectively for the Estate of Dona Marta and P1,542,293.01 amd P518,458.72, respectively for the Estate of Don Toribio. The heirs asked for reconsideration as the assessment was allegedly contrary to law and not supported by sufficient evidence. In a tax return dated 31 March 1973, Dayrit declared an additional amount of P3,655,595.78 as part of the estates of the Teodoro spouses. The BIR issued tax payment acceptance orders, as the heirs and estate have paid a total of P285,046.88. In 1974, the Commissioner filed a motion for allowance of claim against the estates, and for an order of payment of taxes before the trial court, praying that Dayrit be ordered to pay the BIR the sum of P6,470,391.91 plus surcharges and interest. Dayrit filed oppositions contending that the taxes have been settled according to the  provisions of PD 23, as amended by PD 67.

Issue: Whether the assessment is final, executory, and demandable.

Held: The act of the Commissioner, in filing an action for allowance of the claim for estate and inheritance taxes, may be construed as a denial of the taxpayers’ request for reconsideration. From the date of receipt of the copy of the Commissioner’s letter for collection of taxes, the taxpayers must contest and dispute the same, and upon denial thereof, they have a period of 30 days to appeal the case to the Court of Tax Appeals. Tax assessment made by tax examiners are presumed correct and made in good faith. A taxpayer has to prove otherwise. Failure of the taxpayers to appeal to the Court of Tax Appeals in due time made the assessments fina, executory and demandable.