G.R. No. L-24732 April 30, 1968

PIO SIAN MELLIZA, petitioner, vs.CITY OF ILOILO, UNIVERSITY OF THE PHILIPPINES and THE COURT APPEALS, respondents.

Cornelio P. Ravena for petitioner.Office of the Solicitor General for respondents.

BENGZON, J.P., J.:

Juliana Melliza during her lifetime owned, among other properties, three parcels of residential land in Iloilo City registered in her name under Original Certificate of Title No. 3462. Said parcels of land were known as Lots Nos. 2, 5 and 1214. The total area of Lot No. 1214 was 29,073 square meters.

On November 27, 1931 she donated to the then Municipality of Iloilo, 9,000 square meters of Lot 1214, to serve as site for the municipal hall. 1 The donation was however revoked by the parties for the reason that the area donated was found inadequate to meet the requirements of the development plan of the municipality, the so-called "Arellano Plan". 2

Subsequently, Lot No. 1214 was divided by Certeza Surveying Co., Inc. into Lots 1214-A and 1214-B. And still later, Lot 1214-B was further divided into Lots 1214-B-1, Lot 1214-B-2 and Lot 1214-B-3. As approved by the Bureau of Lands, Lot 1214-B-1 with 4,562 square meters, became known as Lot 1214-B; Lot 1214-B-2, with 6,653 square meters, was designated as Lot 1214-C; and Lot 1214-B-13, with 4,135 square meters, became Lot 1214-D.

On November 15, 1932 Juliana Melliza executed an instrument without any caption containing the following:

Que en consideracion a la suma total de SEIS MIL CUATRO CIENTOS VEINTIDOS PESOS (P6,422.00), moneda filipina que por la presente declaro haber recibido a mi entera satisfaccion del Gobierno Municipal de Iloilo, cedo y traspaso en venta real y difinitiva a dicho Gobierno Municipal de Iloilo los lotes y porciones de los mismos que a continuacion se especifican a saber: el lote No. 5 en toda su extension; una porcion de 7669 metros cuadrados del lote No. 2, cuya porcion esta designada como sub-lotes Nos. 2-B y 2-C del piano de subdivision de dichos lotes preparado por la Certeza Surveying Co., Inc., y una porcion de 10,788 metros cuadrados del lote No. 1214 cuya porcion esta designada como sub-lotes Nos. 1214-B-2 y 1214-B-3 del mismo plano de subdivision.

Asimismo nago constar que la cesion y traspaso que ariba se mencionan es de venta difinitiva, y que para la mejor identificacion de los lotes y porciones de los mismos que son objeto de la presente, hago constar que dichos lotes y porciones son los que necesita el Gobierno Municipal de Iloilo para la construccion de avenidas, parques y City Hall site del Municipal Government Center de iloilo, segun el plano Arellano.

On January 14, 1938 Juliana Melliza sold her remaining interest in Lot 1214 to Remedios Sian Villanueva who thereafter obtained her own registered title thereto, under Transfer Certificate of Title No. 18178. Remedios in turn on November 4, 1946 transferred her rights to said portion of land to Pio Sian Melliza, who obtained Transfer Certificate of Title No. 2492 thereover in his name. Annotated at the back of Pio Sian Melliza's title certificate was the following:

... (a) that a portion of 10,788 square meters of Lot 1214 now designated as Lots Nos. 1214-B-2 and 1214-B-3 of the subdivision plan belongs to the Municipality of Iloilo as per instrument dated November 15, 1932....

On August 24, 1949 the City of Iloilo, which succeeded to the Municipality of Iloilo, donated the city hall site together with the building thereon, to the University of the Philippines (Iloilo branch). The site donated consisted of Lots Nos. 1214-B, 1214-C and 1214-D, with a total area of 15,350 square meters, more or less.

Sometime in 1952, the University of the Philippines enclosed the site donated with a wire fence. Pio Sian Melliza thereupon made representations, thru his lawyer, with the city authorities for payment of the value of the lot (Lot 1214-B). No recovery was obtained, because as alleged by plaintiff, the City did not have funds (p. 9, Appellant's Brief.)

The University of the Philippines, meanwhile, obtained Transfer Certificate of Title No. 7152 covering the three lots, Nos. 1214-B, 1214-C and 1214-D.

On December 10, 1955 Pio Sian Melliza filed an action in the Court of First Instance of Iloilo against Iloilo City and the University of the Philippines for recovery of Lot 1214-B or of its value.

The defendants answered, contending that Lot 1214-B was included in the public instrument executed by Juliana Melliza in favor of Iloilo municipality in 1932. After stipulation of facts and trial, the Court of First Instance rendered its decision on August 15, 1957, dismissing the complaint. Said court ruled that the instrument executed by Juliana Melliza in favor of Iloilo municipality included in the conveyance Lot 1214-B. In support of this conclusion, it referred to the portion of the instrument stating:

Asimismo hago constar que la cesion y traspaso que arriba se mencionan es de venta difinitiva, y que para la major identificacion de los lotes y porciones de los mismos que son objeto de la presente, hago constar que dichos lotes y porciones son los que necesita el Gobierno municipal de Iloilo para la construccion de avenidas, parques y City Hall site del Municipal Government Center de Iloilo, segun el plano Arellano.

and ruled that this meant that Juliana Melliza not only sold Lots 1214-C and 1214-D but also such other portions of lots as were necessary for the municipal hall site, such as Lot 1214-B. And thus it held that Iloilo City had the right to donate Lot 1214-B to the U.P.

Pio Sian Melliza appealed to the Court of Appeals. In its decision on May 19, 1965, the Court of Appeals affirmed the interpretation of the Court of First Instance, that the portion of Lot 1214 sold by Juliana Melliza was not limited to the 10,788 square meters specifically mentioned but included whatever was needed for the construction of avenues, parks and the city hall site. Nonetheless, it ordered the remand of the case for reception of evidence to determine the area actually taken by Iloilo City for the construction of avenues, parks and for city hall site.

The present appeal therefrom was then taken to Us by Pio Sian Melliza. Appellant maintains that the public instrument is clear that only Lots Nos. 1214-C and 1214-D with a total area of 10,788 square meters were the portions of Lot 1214 included in the sale; that the purpose of the second paragraph, relied upon for a contrary interpretation, was only to better identify the lots sold and none other; and that to follow the interpretation accorded the deed of sale by the Court of Appeals and the Court of First Instance would render the contract invalid because the law requires as an essential element of sale, a "determinate" object (Art. 1445, now 1448, Civil Code).

Appellees, on the other hand, contend that the present appeal improperly raises only questions of fact. And, further, they argue that the parties to the document in question really intended to include Lot 1214-B therein, as shown by the silence of the vendor after Iloilo City exercised ownership thereover; that not to include it would have been absurd, because said lot is contiguous to the others admittedly included in the conveyance, lying directly in front of the city hall, separating that building from Lots 1214-C and 1214-D, which were included therein. And, finally, appellees argue that the sale's object was determinate, because it could be ascertained, at the time of the execution of the contract, what lots were needed by Iloilo municipality for avenues, parks and city hall site "according to the Arellano Plan", since the Arellano plan was then already in existence.

The appeal before Us calls for the interpretation of the public instrument dated November 15, 1932. And interpretation of such contract involves a question of law, since the contract is in the nature of law as between the parties and their successors-in-interest.

At the outset, it is well to mark that the issue is whether or not the conveyance by Juliana Melliza to Iloilo municipality included that portion of Lot 1214 known as Lot 1214-B. If not, then the same was included, in the instrument subsequently executed by Juliana Melliza of her remaining interest in Lot 1214 to Remedios Sian Villanueva, who in turn sold what she thereunder had acquired, to Pio Sian Melliza. It should be stressed, also, that the sale to Remedios Sian Villanueva from which Pio Sian Melliza derived title did not specifically designate Lot 1214-B, but only such portions of Lot 1214 as were not included in the previous sale to Iloilo municipality (Stipulation of Facts, par. 5, Record on Appeal, p. 23). And thus, if said Lot 1214-B had been included in the prior conveyance to Iloilo municipality, then it was excluded from the sale to Remedios Sian Villanueva and, later, to Pio Sian Melliza.

The point at issue here is then the true intention of the parties as to the object of the public instrument Exhibit "D". Said issue revolves on the paragraph of the public instrument aforequoted and its purpose, i.e., whether it was intended merely to further describe the lots already specifically mentioned, or whether it was intended to cover other lots not yet specifically mentioned.

First of all, there is no question that the paramount intention of the parties was to provide Iloilo municipality with lots sufficient or adequate in area for the construction of the Iloilo City hall site, with its avenues and parks. For this matter, a previous donation for this purpose between the same parties was revoked by them, because of inadequacy of the area of the lot donated.

Secondly, reading the public instrument in toto, with special reference to the paragraphs describing the lots included in the sale, shows that said instrument describes four parcels of land by their lot numbers and area; and then it goes on to further describe, not only those lots already mentioned, but the lots object of the sale, by stating that said lots are the ones needed for the construction of the city hall site, avenues and parks according to the Arellano plan. If the parties intended merely to cover the specified lots Lots 2, 5, 1214-C and 1214-D, there would scarcely have been any need for the next paragraph, since these lots are already plainly and very clearly described by their respective lot number and area. Said next paragraph does not really add to the clear description that was already given to them in the previous one.

It is therefore the more reasonable interpretation, to view it as describing those other portions of land contiguous to the lots aforementioned that, by reference to the Arellano plan, will be found needed for the purpose at hand, the construction of the city hall site.

Appellant however challenges this view on the ground that the description of said other lots in the aforequoted second paragraph of the public instrument would thereby be legally insufficient, because the object would allegedly not be determinate as required by law.

Such contention fails on several counts. The requirement of the law that a sale must have for its object a determinate thing, is fulfilled as long as, at the time the contract is entered into, the object of the sale is capable of being made determinate without the necessity of a new or further agreement between the parties (Art. 1273, old Civil Code; Art. 1460, New Civil Code). The specific mention of some of the lots plus the statement that the lots object of the sale are the ones needed for city hall site, avenues and parks, according to the Arellano plan, sufficiently provides a basis, as of the time of the execution of the contract, for rendering determinate said lots without the need of a new and further agreement of the parties.

The Arellano plan was in existence as early as 1928. As stated, the previous donation of land for city hall site on November 27, 1931 was revoked on March 6, 1932 for being inadequate in area under said Arellano plan. Appellant claims that although said plan existed, its metes and bounds were not fixed until 1935, and thus it could not be a basis for determining the lots sold on November 15, 1932. Appellant however fails to consider that the area needed under that plan for city hall site was then already known; that the specific mention of some of the lots covered by the sale in effect fixed the corresponding location of the city hall site under the plan; that, therefore, considering the said lots specifically mentioned in the public instrument Exhibit "D", and the projected city hall site, with its area, as then shown in the Arellano plan (Exhibit 2), it could be determined which, and how much of the portions of land contiguous to those specifically named, were needed for the construction of the city hall site.

And, moreover, there is no question either that Lot 1214-B is contiguous to Lots 1214-C and 1214-D, admittedly covered by the public instrument. It is stipulated that, after execution of the contract Exhibit "D", the Municipality of Iloilo possessed it together with the other lots sold. It sits practically in the heart of the city hall site. Furthermore, Pio Sian Melliza, from the stipulation of facts, was the notary public of the public instrument. As such, he was aware of its terms. Said instrument was also registered with the Register of Deeds and such registration was annotated at the back of the corresponding title certificate of Juliana Melliza. From these stipulated facts, it can be inferred that Pio Sian Melliza knew of the aforesaid terms of the instrument or is chargeable with knowledge of them; that knowing so, he should have examined the Arellano plan in relation to the public instrument Exhibit "D"; that, furthermore, he should have taken notice of the possession first by the Municipality of Iloilo, then by the City of Iloilo and later by the University of the Philippines of Lot 1214-B as part of the city hall site conveyed under that public instrument, and raised proper objections thereto if it was his position that the same was not included in the same. The fact remains that, instead, for twenty long years, Pio Sian Melliza and his predecessors-in-interest, did not object to said possession, nor exercise any act of possession over Lot 1214-B. Applying, therefore, principles of civil law, as well as laches, estoppel, and equity, said lot must necessarily be deemed included in the conveyance in favor of Iloilo municipality, now Iloilo City.

WHEREFORE, the decision appealed from is affirmed insofar as it affirms that of the Court of First Instance, and the complaint in this case is dismissed. No costs. So ordered.

G.R. No. 135634May 31, 2000

HEIRS OF JUAN SAN ANDRES (VICTOR S. ZIGA) and SALVACION S. TRIA, petitioners,vs.VICENTE RODRIGUEZ, respondent.

MENDOZA, J.:

This is a petition for review on certiorari of the decision of the Court of Appeals 1 reversing the decision of the Regional Trial Court, Naga City, Branch 19, in Civil Case No. 87-1335, as well as the appellate court's resolution denying reconsideration.

The antecedent facts are as follows:

Juan San Andres was the registered owner of Lot No. 1914-B-2 situated in Liboton, Naga City. On September 28, 1964, he sold a portion thereof, consisting of 345 square meters, to respondent Vicente S. Rodriguez for P2,415.00. The sale is evidenced by a Deed of Sale. 2

Upon the death of Juan San Andres on May 5, 1965, Ramon San Andres was appointed judicial administrator of the decedent's estate in Special Proceedings No. R-21, RTC, Branch 19, Naga City. Ramon San Andres engaged the services of a geodetic engineer, Jose Peero, to prepare a consolidated plan (Exh. A) of the estate. Engineer Peero also prepared a sketch plan of the 345-square meter lot sold to respondent. From the result of the survey, it was found that respondent had enlarged the area which he purchased from the late Juan San Andres by 509 square meters. 3

Accordingly, the judicial administrator sent a letter, 4 dated July 27, 1987, to respondent demanding that the latter vacate the portion allegedly encroached by him. However, respondent refused to do so, claiming he had purchased the same from the late Juan San Andres. Thereafter, on November 24, 1987, the judicial administrator brought an action, in behalf of the estate of Juan San Andres, for recovery of possession of the 509-square meter lot.

In his Re-amended Answer filed on February 6, 1989, respondent alleged that apart from the 345-square meter lot which had been sold to him by Juan San Andres on September 28, 1964, the latter likewise sold to him the following day the remaining portion of the lot consisting of 509 square meters, with both parties treating the two lots as one whole parcel with a total area of 854 square meters. Respondent alleged that the full payment of the 509-square meter lot would be effected within five (5) years from the execution of a formal deed of sale after a survey is conducted over said property. He further alleged that with the consent of the former owner, Juan San Andres, he took possession of the same and introduced improvements thereon as early as 1964.

As proof of the sale to him of 509 square meters, respondent attached to his answer a receipt (Exh. 2) 5 signed by the late Juan San Andres, which reads in full as follows:

Received from Vicente Rodriguez the sum of Five Hundred (P500.00) Pesos representing an advance payment for a residential lot adjoining his previously paid lot on three sides excepting on the frontage with the agreed price of Fifteen (15.00) Pesos per square meter and the payment of the full consideration based on a survey shall be due and payable in five (5) years period from the execution of the formal deed of sale; and it is agreed that the expenses of survey and its approval by the Bureau of Lands shall be borne by Mr. Rodriguez.

Naga City, September 29, 1964.

(Sgd.)

JUAN R. SAN ANDRES

Vendor

Noted:

(Sgd.)

VICENTE RODRIGUEZ

Vendee

Respondent also attached to his answer a letter of judicial administrator Ramon San Andres (Exh. 3), 6 asking payment of the balance of the purchase price. The letter reads:

Dear Inting,

Please accommodate my request for Three Hundred (P300.00) Pesos as I am in need of funds as I intimated to you the other day.

We will just adjust it with whatever balance you have payable to the subdivision.

Thanks.

Sincerely,

(Sgd.)

RAMON SAN ANDRES

Vicente Rodriguez

Penafrancia Subdivision, Naga City

P.S.

You can let bearer Enrique del Castillo sign for the amount.

Received One Hundred Only

(Sgd.)

RAMON SAN ANDRES

3/30/66

Respondent deposited in court the balance of the purchase price amounting to P7,035.00 for the aforesaid 509-square meter lot.

While the proceedings were pending, judicial administrator Ramon San Andres died and was substituted by his son Ricardo San Andres. On the other band, respondent Vicente Rodriguez died on August 15, 1989 and was substituted by his heirs. 7

Petitioner, as plaintiff, presented two witnesses. The first witness, Engr. Jose Peero, 8 testified that based on his survey conducted sometime between 1982 and 1985, respondent had enlarged the area which he purchased from the late Juan San Andres by 509 square meters belonging to the latter's estate. According to Peero, the titled property (Exh. A-5) of respondent was enclosed with a fence with metal holes and barbed wire, while the expanded area was fenced with barbed wire and bamboo and light materials.

The second witness, Ricardo San Andres, 9 administrator of the estate, testified that respondent had not filed any claim before Special Proceedings No. R-21 and denied knowledge of Exhibits 2 and 3. However, he recognized the signature in Exhibit 3 as similar to that of the former administrator, Ramon San Andres. Finally, he declared that the expanded portion occupied by the family of respondent is now enclosed with barbed wire fence unlike before where it was found without fence.

On the other hand, Bibiana B. Rodriguez, 10 widow of respondent Vicente Rodriguez, testified that they had purchased the subject lot from Juan San Andres, who was their compadre, on September 29, 1964, at P15.00 per square meter. According to her, they gave P500.00 to the late Juan San Andres who later affixed his signature to Exhibit 2. She added that on March 30, 1966; Ramon San Andres wrote them a letter asking for P300.00 as partial payment for the subject lot, but they were able to give him only P100.00. She added that they had paid the total purchase price of P7,035.00 on November 21, 1988 by depositing it in court. Bibiana B. Rodriquez stated that they had been in possession of the 509-square meter lot since 1964 when the late Juan San Andres signed the receipt. (Exh. 2) Lastly, she testified that they did not know at that time the exact area sold to them because they were told that the same would be known after the survey of the subject lot.

On September 20, 1994, the trial court 11 rendered judgment in favor of petitioner. It ruled that there was no contract of sale to speak of for lack of a valid object because there was no sufficient indication in Exhibit 2 to identify the property subject of the sale, hence, the need to execute a new contract.

Respondent appealed to the Court of Appeals, which on April 21, 1998 rendered a decision reversing the decision of the trial court. The appellate court held that the object of the contract was determinable, and that there was a conditional sale with the balance of the purchase price payable within five years from the execution of the deed of sale. The dispositive portion of its decision's reads:

IN VIEW OF ALL THE FOREGOING, the judgment appealed from is hereby REVERSED and SET ASIDE and a new one entered DISMISSING the complaint and rendering judgment against the plaintiff-appellee:

1.to accept the P7,035.00 representing the balance of the purchase price of the portion and which is deposited in court under Official Receipt No. 105754 (page 122, Records);

2.to execute the formal deed of sale over the said 509 square meter portion of Lot 1914-B-2 in favor of appellant Vicente Rodriguez;

3.to pay the defendant-appellant the amount of P50,000.00 as damages and P10,000.00 attorney's fees as stipulated by them during the trial of this case; and

4.to pay the costs of the suit.

SO ORDERED.

Hence, this petition. Petitioner assigns the following errors as having been allegedly committed by the trial court:

I.THE HON. COURT OF APPEALS ERRED IN HOLDING THAT THE DOCUMENT (EXHIBIT "2") IS A CONTRACT TO SELL DESPITE ITS LACKING ONE OF THE ESSENTIAL ELEMENTS OF A CONTRACT, NAMELY, OBJECT CERTAIN AND SUFFICIENTLY DESCRIBED.

II.THE HON. COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER IS OBLIGED TO HONOR THE PURPORTED CONTRACT TO SELL DESPITE NON-FULFILLMENT BY RESPONDENT OF THE CONDITION THEREIN OF PAYMENT OF THE BALANCE OF THE PURCHASE PRICE.

III.THE HON. COURT OF APPEALS ERRED IN HOLDING THAT CONSIGNATION WAS VALID DESPITE NON-COMPLIANCE WITH THE MANDATORY REQUIREMENTS THEREOF.

IV.THE HON. COURT OF APPEALS ERRED IN HOLDING THAT LACHES AND PRESCRIPTION DO NOT APPLY TO RESPONDENT WHO SOUGHT INDIRECTLY TO ENFORCE THE PURPORTED CONTRACT AFTER THE LAPSE OF 24 YEARS.

The petition has no merit.

First. Art. 1458 of the Civil Code provides:

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

A contract of sale may be absolute or conditional.

As thus defined, the essential elements of sale are the following:

a)Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price;

b)Determinate subject matter; and,

c)Price certain in money or its equivalent. 12

As shown in the receipt, dated September 29, 1964, the late Juan San Andres received P500.00 from respondent as "advance payment for the residential lot adjoining his previously paid lot on three sides excepting on the frontage; the agreed purchase price was P15.00 per square meter; and the full amount of the purchase price was to be based on the results of a survey and would be due and payable in five (5) years from the execution of a deed of sale.

Petitioner contends, however, that the "property subject of the sale was not described with sufficient certainty such that there is a necessity of another agreement between the parties to finally ascertain the identity; size and purchase price of the property which is the object of the alleged sale." 1 He argues that the "quantity of the object is not determinate as in fact a survey is needed to determine its exact size and the full purchase price therefor" 14 In support of his contention, petitioner cites the following provisions of the Civil Code:

Art. 1349.The object of every contract must be determinate as to its kind. The fact that the quantity is not determinable shall not be an obstacle to the existence of a contract, provided it is possible to determine the same without the need of a new contract between the parties.

Art. 1460. . . .The requisite that a thing be determinate is satisfied if at the time the contract is entered into, the thing is capable of being made determinate without the necessity of a new and further agreement between the parties.

Petitioner's contention is without merit. There is no dispute that respondent purchased a portion of Lot 1914-B-2 consisting of 345 square meters. This portion is located in the middle of Lot 1914-B-2, which has a total area of 854 square meters, and is clearly what was referred to in the receipt as the "previously paid lot." Since the lot subsequently sold to respondent is said to adjoin the "previously paid lot" on three sides thereof, the subject lot is capable of being determined without the need of any new contract. The fact that the exact area of these adjoining residential lots is subject to the result of a survey does not detract from the fact that they are determinate or determinable. As the Court of Appeals explained: 15

Concomitantly, the object of the sale is certain and determinate. Under Article 1460 of the New Civil Code, a thing sold is determinate if at the time the contract is entered into, the thing is capable of being determinate without necessity of a new or further agreement between the parties. Here, this definition finds realization.

Appellee's Exhibit "A" (page 4, Records) affirmingly shows that the original 345 sq. m. portion earlier sold lies at the middle of Lot 1914-B-2 surrounded by the remaining portion of the said Lot 1914-B-2 on three (3) sides, in the east, in the west and in the north. The northern boundary is a 12 meter road. Conclusively, therefore, this is the only remaining 509 sq. m. portion of Lot 1914-B-2 surrounding the 345 sq. m. lot initially purchased by Rodriguez. It is quite difined, determinate and certain. Withal, this is the same portion adjunctively occupied and possessed by Rodriguez since September 29, 1964, unperturbed by anyone for over twenty (20) years until appellee instituted this suit.

Thus, all of the essential elements of a contract of sale are present, i.e., that there was a meeting of the minds between the parties, by virtue of which the late Juan San Andres undertook to transfer ownership of and to deliver a determinate thing for a price certain in money. As Art. 1475 of the Civil Code provides:

The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. . . .

That the contract of sale is perfected was confirmed by the former administrator of the estates, Ramon San Andres, who wrote a letter to respondent on March 30, 1966 asking for P300.00 as partial payment for the subject lot. As the Court of Appeals observed:

Without any doubt, the receipt profoundly speaks of a meeting of the mind between San Andres and Rodriguez for the sale of the property adjoining the 345 square meter portion previously sold to Rodriguez on its three (3) sides excepting the frontage. The price is certain, which is P15.00 per square meter. Evidently, this is a perfected contract of sale on a deferred payment of the purchase price. All the pre-requisite elements for a valid purchase transaction are present. Sale does not require any formal document for its existence and validity. And delivery of possession of land sold is a consummation of the sale (Galar vs. Husain, 20 SCRA 186 [1967]). A private deed of sale is a valid contract between the parties (Carbonell v. CA, 69 SCRA 99 [1976]).

In the same vein, after the late Juan R. San Andres received the P500.00 downpayment on March 30, 1966, Ramon R. San Andres wrote a letter to Rodriguez and received from Rodriguez the amount of P100.00 (although P300.00 was being requested) deductible from the purchase price of the subject portion. Enrique del Castillo, Ramon's authorized agent, correspondingly signed the receipt for the P100.00. Surely, this is explicitly a veritable proof of he sale over the remaining portion of Lot 1914-B-2 and a confirmation by Ramon San Andres of the existence thereof. 16

There is a need, however, to clarify what the Court of Appeals said is a conditional contract of sale. Apparently, the appellate court considered as a "condition" the stipulation of the parties that the full consideration, based on a survey of the lot, would be due and payable within five (5) years from the execution of a formal deed of sale. It is evident from the stipulations in the receipt that the vendor Juan San Andres sold the residential lot in question to respondent and undertook to transfer the ownership thereof to respondent without any qualification, reservation or condition. In Ang Yu Asuncion v. Court of Appeals, 17 we held:

In Dignos v. Court of Appeals (158 SCRA 375), we have said that, although denominated a "Deed of Conditional Sale," a sale is still absolute where the contract is devoid of any proviso that title is reserved or the right to unilaterally rescind is stipulated, e.g., until or unless the price is paid. Ownership will then be transferred to the buyer upon actual or constructive delivery (e.g., by the execution of a public document) of the property sold. Where the condition is imposed upon the perfection of the contract itself, the failure of the condition would prevent such perfection. If the condition is imposed on the obligation of a party which is not fulfilled, the other party may either waive the condition or refuse to proceed with the sale. (Art. 1545, Civil Code).

Thus, in. one case, when the sellers declared in a "Receipt of Down Payment" that they received an amount as purchase price for a house and lot without any reservation of title until full payment of the entire purchase price, the implication was that they sold their property. 18 In People's Industrial Commercial Corporation v. Court of Appeals, 19 it was stated:

A deed of sale is considered absolute in nature where there is neither a stipulation in the deed that title to the property sold is reserved in the seller until full payment of the price, nor one giving the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period.

Applying these principles to this case, it cannot be gainsaid that the contract of sale between the parties is absolute, not conditional. There is no reservation of ownership nor a stipulation providing for a unilateral rescission by either party. In fact, the sale was consummated upon the delivery of the lot to respondent. 20 Thus, Art. 1477 provides that the ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof.

The stipulation that the "payment of the full consideration based on a survey shall be due and payable in five (5) years from the execution of a formal deed of sale" is not a condition which affects the efficacy of the contract of sale. It merely provides the manner by which the full consideration is to be computed and the time within which the same is to be paid. But it does not affect in any manner the effectivity of the contract. Consequently, the contention that the absence of a formal deed of sale stipulated in the receipt prevents the happening of a sale has no merit.

Second. With respect to the contention that the Court of Appeals erred in upholding the validity of a consignation of P7,035.00 representing the balance of the purchase price of the lot, nowhere in the decision of the appellate court is there any mention of consignation. Under Art. 1257 of this Civil Code, consignation is proper only in cases where an existing obligation is due. In this case, however, the contracting parties agreed that full payment of purchase price shall be due and payable within five (5) years from the execution of a formal deed of sale. At the time respondent deposited the amount of P7,035.00 in the court, no formal deed of sale had yet been executed by the parties, and, therefore, the five-year period during which the purchase price should be paid had not commenced. In short, the purchase price was not yet due and payable.

This is not to say, however, that the deposit of the purchase price in the court is erroneous. The Court of Appeals correctly ordered the execution of a deed of sale and petitioners to accept the amount deposited by respondent.

Third. The claim of petitioners that the price of P7,035.00 is iniquitous is untenable. The amount is based on the agreement of the parties as evidenced by the receipt (Exh. 2). Time and again, we have stressed the rule that a contract is the law between the parties, and courts have no choice but to enforce such contract so long as they are not contrary to law, morals, good customs or public policy. Otherwise, court would be interfering with the freedom of contract of the parties. Simply put, courts cannot stipulate for the parties nor amend the latter's agreement, for to do so would be to alter the real intentions of the contracting parties when the contrary function of courts is to give force and effect to the intentions of the parties.

Fourth. Finally, petitioners argue that respondent is barred by prescription and laches from enforcing the contract. This contention is likewise untenable. The contract of sale in this case is perfected, and the delivery of the subject lot to respondent effectively transferred ownership to him. For this reason, respondent seeks to comply with his obligation to pay the full purchase price, but because the deed of sale is yet to be executed, he deemed it appropriate to deposit the balance of the purchase price in court. Accordingly, Art. 1144 of the Civil Code has no application to the instant case. 21 Considering that a survey of the lot has already been conducted and approved by the Bureau of Lands, respondent's heirs, assign or successors-in-interest should reimburse the expenses incurred by herein petitioners, pursuant to the provisions of the contract.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with the modification that respondent is ORDERED to reimburse petitioners for the expenses of the survey.

SO ORDERED.

G.R. No. 108169 August 25, 1999

SPOUSES VENANCIO DAVID and PATRICIA MIRANDA DAVID and FLORENCIA VENTURA VDA. DE BASCO, petitioners, vs.ALEJANDRO and GUADALUPE TIONGSON, respondents.

PARDO, J.:

Before the Court is a petition for review on certiorari of the decision of the Court of Appeals1 modifying that of the trial court2 in an action for specific performance with damages filed by petitioners against respondents.

The facts are as follows:

On February 23, 1989, three sets of plaintiffs, namely, spouses Feliciano and Macaria Ventura, spouses Venancio and Patricia David and Florencia Ventura Vda. de Basco, filed with the Regional Trial Court, San Fernando, Pampanga, a complaint for specific performance with damages, against private respondents spouses Alejandro and Guadalupe Tiongson, alleging that the latter sold to them lots located in Cabalantian, Bacolor, Pampanga, as follows:

(a) a parcel of residential land with an area of 300 square meters (sq. m.), more or less, for a total purchase price of P16,500.00, sold to spouses Feliciano and Macaria Ventura;

(b) a parcel of land consisting of 308 sq.m., more or less, which is a portion of Lot No. 1547-G-2-G covered by TCT No. 187751-R, for a total consideration of P15,000.00, sold to spouses Venancio and Patricia M. David;

(c) two parcels of land with a total area of 169 sq. m., 109 sq. m., which is a portion of Lot No. 1547-G-2-G and a 60 sq. m., which is part of a lot covered by TCT No. 200835-R, for a total consideration of P10,400.00, sold to Florencia Ventura Vda. de Basco.

The parties expressly agreed that as soon as the plaintiffs fully paid the purchase price on their respective lots, respondents would execute an individual deed of absolute sale and cause the issuance of the corresponding certificate of title in plaintiffs' favor.

Spouses Ventura immediately took possession of the lot, erected their house thereon and fenced the perimeters. As of October 28, 1985, the Venturas had fully paid the price of their lot, evidenced by a certification3 issued by Alejandro Tiongson. Sometime in November 1985, the Venturas demanded the execution of a deed of sale and the issuance of the corresponding certificate of title, but the latter refused to issue the same.

Spouses David claimed that, as agreed by the parties, the P15,000.00 purchase price would be paid as follows: P3,800.00, as downpayment and a monthly amortization of P365.00, starting on March 8, 1983, until fully paid. On October 31, 1985, the Davids had paid a total of P15,050.00, evidenced by the receipts issued by Alejandro Tiongson.4 On the first week of November 1985, the Davids demanded the execution of a deed of sale and the issuance of the corresponding certificate of title, but respondents refused. Unlike the Venturas, they were not able to take possession of the property.

Plaintiff Florencia Ventura Vda. de Basco averred that she bought two parcels of land, a 109 sq. m. lot and a 60 sq. m. lot, for P6,425.00 and P6,500.00, respectively. As of February 6, 1984, Florencia had paid P12,945.00 for the two lots, evidenced by receipts issued by Alejandro Tiongson.5 Sometime in March 1984, she demanded the execution of the deeds of sale and issuance of the corresponding certificates of title over the lots. However, respondents failed to comply with their obligation.

After no settlement was reached at the barangay level, on February 23, 1989, plaintiffs filed a complaint with the Regional Trial Court, San Fernando, Pampanga, for specific performance with damages. On April 18, 1989, upon motion of the plaintiffs, respondents Tiongsons were declared in default for failure to file their answer, despite the fifteen (15) days extension granted by the trial court.1wphi1.nt

On June 14, 1989, the trial court rendered a decision, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the defendants:

1) Ordering the defendants to execute the deeds of absolute sale covering the lots respectively sold to plaintiffs and to cause the issuance of the title covering the aforesaid lots at their own expense;

2) Ordering the defendants to pay unto the plaintiffs P15,000.00 as moral damages.

Defendants are likewise ordered to pay the costs of suit.6

Respondents Tiongsons appealed the decision to the Court of Appeals. They claimed that their failure to file an answer in due time amounted to excusable negligence.7 They contended that the plaintiffs had not fully paid the agreed price of P120 per sq. m. They argued that the Venturas were still in arrears for P30,000.00, the Davids for P21,000.00 and Florencia for P9,880.00. Hence, the deeds of sale and certificates of title were not issued.

On October 19, 1992, the Court of Appeals8 modified the trial court's decision. Although it blamed respondents for their failure to file an answer in due time, it held that there was no perfected contracts of sale entered into by the Davids and Florencia Vda. de Basco with respondents. However, the Court of Appeals upheld the sale involving the Venturas and ordered respondents to execute a deed of sale and cause the issuance of the corresponding certificate of title in Venturas' favor.

With respect to spouses David, the Court of Appeals said that there was no agreement as to the price, as well as the manner and time of payment of the installments. It held that Patricia David's testimony regarding the price, P15,000.00, payable in monthly installments of P365.00, contradicted a receipt stating: ". . . the balance to be paid on installment to be agreed upon later on."9 The appellate court referred to another receipt10 wherein only P300.00 was paid but with the following statement "Subject to further discussion later on." It stated that there was no agreement as to the price, since it was subject to further discussion by the parties. It held that the P115.00 overpayment11 illustrate the lack of an agreed price. The receipts failed to state the total purchase price or prove that full payment was made. Thus, there was no meeting of minds regarding the price. Consequently, there was no perfected contract of sale.

In ruling against the Davids, the Court of Appeals applied the doctrine in Yuvienco v. Dacuycuy12 that in sale of real property on installments, the statute of frauds read together with the requirements of Article 1475, must be understood and applied in the sense that the payment on installments must be in the requisite form of a note or memorandum. In other words, there must be a note or memorandum evidencing the agreement to pay on installment, otherwise, the contract is unenforceable under the statute of frauds. In the instant case, the agreement to pay in installment was not reduced in writing.

As regards Florencia Ventura Vda. de Basco, the Court of Appeals ruled that there was no meeting of the minds with regard to both object and consideration of the contract. It held that the 109 sq. m. lot could not be specifically determined or identified by the parties.

As to the sixty (60) sq. m. lot, the Court of Appeals held that the object was not determinate nor determinable. Assuming arguendo that the lot was determinate or determinable, the Court of Appeals held that there was no purchase price agreed upon. The receipts indicated a price of P70.00 per sq. m., or a total of P4,200.00. However, Florencia paid P6,500.00 for the lot. The discrepancy between Florencia's claim of full payment and the last receipt13 stating that only a partial payment was made, bolstered the finding that there was no agreed price.

The Court of Appeals, however, upheld the contract of sale with respect to the spouses Ventura. It held that the Venturas had fully paid for the lot, evidenced by the certification issued by Alejandro Tiongson. There was also actual delivery when the Venturas took possession, erected their house thereon and fenced the perimeters.

The Court of Appeals decreed as follows:

PREMISES CONSIDERED, the appealed decision is hereby MODIFIED. The contracts of sale not having been perfected between plaintiff-appellee spouses Venancio and Patricia M. David, and plaintiff-appellee Florencia Ventura Vda. de Basco (vendees) and defendant-appellants Alejandro and Guadalupe D. Tiongson (vendors), hence, inefficacious, the former's action for specific performance must fail, but defendants-appellants must return to plaintiffs-appellees spouses Venancio and Patricia David the amount of fifteen thousand one hundred fifteen pesos (P15,115.00) and to plaintiff-appellee Florencia Ventura Vda. de Basco, the amount of twelve thousand nine hundred twenty five pesos (P12,925.00) with legal interest from the time of the filing of the complaint until the return of the said amounts.

As to plaintiff-appellee spouses Feliciano and Macaria Ventura, the decision of the court a quo is AFFIRMED. We hereby order: (a) Plaintiff-appellee spouses Feliciano and Macaria Ventura to have the lot purchased by them segregated by a licensed surveyor from the rest of the Lot 8 described in TCT No. 200835-R and to have the corresponding subdivision plan, duly approved by the Land Registration Authority, submitted to the court of origin for approval; (b) the defendants-appellants Alejandro and Guadalupe D. Tiongson to be divested of their title to the lot purchased under Rule 39, Section 10, Rules of Court; and (c) the Register of Deeds of Pampanga to cancel TCT No. 200835-R and issue, in lieu thereof, one title to the names of Feliciano and Macaria Ventura for the lot they purchased another title in the names of Alejandro and Guadalupe D. Tiongson.

In the light of the above, moral damages in the amount of three thousand pesos (P3,000.00) to be paid to plaintiffs-appellees Feliciano and Macaria Ventura by defendant-appellant spouses Tiongson is considered fair and reasonable. Without costs.14

On November 6, 1992, Venancio and Patricia M. David and Florencia Ventura Vda. de Basco filed a motion for reconsideration of the foregoing decision. On December 11, 1992, the Court of Appeals denied the motion.15

Hence, this petition for review.

We shall discuss the sales transactions between petitioners and respondents in seriatim.

As to the Spouses Venancio and Patricia David

Petitioners Davids contend that there was an implied agreement on the price and manner of installment payments. The receipts issued by respondents and Patricia David's testimony clearly indicate the agreement.

We disagree with the finding of the Court of Appeals that there was no agreement as to the price of the lots. The Court of Appeals relied heavily on the receipts issued by Alejandro Tiongson. However, Patricia David testified that there was an agreement to purchase the lot for P15,000.00, payable as follows: P3,800.00 as down payment, with P385.00 monthly installments thereafter.16 The respondents failed to rebut such declaration, as the default order rendered them without personality to adduce evidence in their behalf.

However, in the brief filed with the appellate court, the Tiongsons alleged that the agreed price was P120.00 per sq. m. Hence, they are now estopped to deny the existence of an agreed price. The question to be determined should not be whether there was an agreed price, but what that agreed price was, whether for a total of P15,000.00, as claimed by the Davids or P120.00 per sq. m., as alleged by respondents. The sellers could not render invalid a perfected contract of sale by merely contradicting the buyers' allegation regarding the price, and subsequently raising the lack of agreement as to the price.

It is a fact that for three consecutive years, the Davids had religiously paid P385.00 as monthly installments, until it amounted to P15,050.00, including the downpayment. As to the first installment receipt, wherein only P300.00 was paid and a notation was written, to wit "Subject to further discussion later on," Patricia David explained that what was subject to further discussion was not the total purchase price, but only the P65.00 underpayment.

The Court of Appeals held that the P115.00 overpayment confirmed the lack of agreement as to the price. However, the receipts showed that Davids paid only P15,050.00. It perplexes this Court how the appellate court came up with the P15,115.00 figure. At any rate, an overpayment of P50.00, as in this case, does not negate the existence of an agreed purchase price. Instead, this entitles the buyer to claim reimbursement of any overpayment made.

Furthermore, the Court of Appeals erred in applying the statute of frauds. The rule presupposes the existence of a perfected contract and requires only that a note or memorandum be executed in order to compel judicial enforcement thereof.17

At any rate, we rule that there was a perfected contract. However, the statute of frauds is inapplicable. The rule is settled that the statute of frauds applies only to executory and not to completed, executed, or partially executed contracts.18 In the case of spouses David, the payments made rendered the sales contract beyond the ambit of the statute of frauds.

The Court of Appeals erred in concluding that there was no perfected contract of sale. However, in view of the stipulation of the parties that the deed of sale and corresponding certificate of title would be issued after full payment, then, they had entered into a contract to sell and not a contract of sale.19

As to Florencia Ventura Vda. de Basco

Petitioner Florencia Ventura Vda. de Basco contends that the receipts described the two (2) lots that she bought. The receipts also indicated the price of each lot, to wit, P6,425.00 for the 109 sq. m. lot, and P6,500.00 for the 60 sq. m. lot.

As regards the 109 sq. m. lot, Florencia presented the following receipts as evidence of full payment:

Received from Mrs. Florencia Ventura-Basco of Cabalantian, Bacolor Pampanga, the sum of FIVE HUNDRED PESOS (P500.00), Philippine Currency, as additional partial payment on the parcel of land located at Cabalantian, Bacolor Pampanga, being the portion of Lot 1547-G-2-G of Psd-03-004803.

It is understood that this lot is the portion formerly earmarked for Mrs. Rosita Ventura-Muslan wherein she already paid the sum of P1,500.00; hence, by agreement of Mrs. Basco and Mrs. Muslan, who are sisters, the sum of P1,500.00 are applied herein as additional payment for and in behalf of Mrs. Basco, thereby making the total payments made by Mrs. Basco to said lot in the sum of P2,000.00, as of this date.

San Fernando, Pampanga, June 4, 1983.

(signed)

C O N F O R M E:

ALEJANDRO C. TIONGSON(signed)

FLORENCIA VENTURA-BASCO(signed)

ROSITA VENTURA-MUSLAN20

Received from Mrs. Florencia Ventura-Basco of Cabalantian, Bacolor Pampanga, the sum of FOUR THOUSAND FOUR HUNDRED TWENTY FIVE PESOS (P4,425.00), Philippine Currency, representing the last and full payment on the purchase price of Lot 1547-G-2-G-2, Plan Psd-03-05957, located at Cabalantian, Bacolor Pampanga, with an area of 109 square meters, more or less, as regards the sum of P3,625 and the sum of P800.00 applied for the payment of the segregation survey of said lot.

Title over this lot shall be issued upon the survey and segregation of the additional portion which Mrs. Florencia V. Basco is also buying to be taken from Lot 1547-G-2-G-I, wherein the said portion of said Lot 1547-G-2-G-2 shall be consolidated into one lot only at the expense of the buyer.

San Fernando, Pampanga, September 1, 1983.

C O N F O R M E: FOR ALEJANDRO TIONGSON

Seller

(signed)FLORENCIA VENTURA-BASCO

By: (signed)PORFIRIO C. PINEDABuyer21According to the Court of Appeals, the object is neither determinate nor determinable. It held that the receipts described two different lots, one described as Psd-03-004803, while the other as Psd-03-05957. It stated that the discrepancy showed there was no meeting of the minds as regards the object of the contract.

We disagree. We find that the 109 sq. m. lot was adequately described in the receipt, or at least, can be easily determinable. The receipt issued on June 4, 1983 stated that the lot being purchased by Florencia was the one earlier earmarked for her sister, Rosita Muslan. Thus, the subject lot is determinable. Any mistake in the designation of the lot does not vitiate the consent of the parties or affect the validity and binding effect of the contract of sale.22 The receipt issued on September 1, 1983 clearly described the lot area as 109 sq. m. It also showed that Florencia had fully paid the purchase price.

With respect to the sixty (60) sq. m. lot, Florencia presented the following receipts to prove full payment:

Received from Mrs. Florencia Basco of Cabalantian, Bacolor, Pampanga, the sum of THREE THOUSAND PESOS (P3,000.00), Philippine Currency, as partial and down payment on the purchase price of the additional portion adjacent to Lot 1547-G-2-G. The price on this portion shall be computed at P70.00 per square meter, and said portion shall be determined later as to its area, but in no case shall it be extended farther than the gate opening at Juan Cunanan's lot and the acacia tree on the north.

San Fernando, Pampanga, November 8, 1983.

(signed)

ALEJANDRO TIONGSONSeller

x x x x x x x x x

Received from Mrs. Florencia Basco of Cabalantian, Bacolor, Pampanga, the sum of ONE THOUSAND PESOS (P1,000.00), Philippine Currency, as partial and down payment on a portion of Lot 1547-G-2-I, which is a portion of Lot 6 of the provisional plan with marking of Lot 35 on the sketch plan. The price shall be computed at P70.00 per square meter. The final area shall be determined in the final survey to be conducted.

This portion shall be across the road opposite the portion of same lot purchased by Macaria Ventura.

San Fernando, Pampanga, November 8, 1983.

(signed)

ALEJANDRO TIONGSONSeller

x x x x x x x x x

Received from Mrs. Florencia Basco of Cabalantian, Bacolor, Pampanga, the sum of TWO THOUSAND FIVE HUNDRED PESOS (P2,500.00), to be applied as partial payment on the purchase price of Lots 8-A (60 square meters), computed at P70.00 and Lot 6-U (338 square meters), computed at P70.00 per square meter.

San Fernando, Pampanga, February 6, 1984.

(signed)

ALEJANDRO TIONGSONSeller23

Regarding this lot, we find that there was also a perfected contract of sale. In fact, in the last receipt the parties agreed on the specific lot area. This suffices to identify the specific lot involved. It was unnecessary for the parties to enter into another agreement to determine the exact property bought. What remained to be done was the actual segregation of the 60 square meters.

Furthermore, the parties agreed on the price. The receipts clearly indicate the price as P70.00 per sq. m., hence the total price should be P4,200.00. However, Florencia paid P6,500.00 for the lot. Hence, there was even an overpayment of P2,300.00.

WHEREFORE, we REVERSE and SET ASIDE the decision of the Court of Appeals in CA G.R. CV No. 24667. In lieu thereof, we render judgment ordering the respondents Tiongsons to execute deeds of absolute sale covering the following lots respectively sold to petitioners, and cause the issuance of the corresponding certificates of title, to wit:

1. 300 sq. m. lot sold to spouses Venancio and Patricia David;

2. 109 sq. m. lot sold to Florencia Ventura Vda. de Basco.

With respect to the 60 sq. m. lot sold to Florencia Ventura Vda. de Basco, respondent Tiongson is ordered to cause the segregation of the lot, and thereafter, to execute a deed of absolute sale to Florencia Ventura Vda. de Basco and cause the issuance of a certificate of title thereto.

We delete the award for moral damages, for lack of basis.1wphi1.nt

No costs.

SO ORDERED.

G.R. No. 87880April 7, 1992

CECILIA MATA, petitioner, vs.HON. COURT OF APPEALS AND METROPOLITAN BANK & TRUST COMPANY, respondents.

CRUZ, J.:

This controversy arose from a contract of lease between petitioner Cecilia Mata as lessor with private respondent Metropolitan Bank and Trust Company (Metrobank) as lessee over a parcel of land belonging to her and located in Binakayan, Kawit, Cavite. The contract was executed on August 20, 1973, 1 and provided pertinently as follows:

a)That the lessor shall construct on her land described above, at her own expense, a reinforced and concrete building in accordance with the plans and specifications prepared at the instance of the lessor and with the approval of the lessee Metrobank insofar as the portion to be occupied by the said bank;

b)That the lease shall be for a period of twenty (20) years, renewable at the option of the lessee bank, starting thirty days from occupancy of the premises;

c)That the lessee bank shall grant a loan of P390,000.00 upon signing of the contract to finance the construction of the aforementioned commercial building under terms and conditions contained in a separate document of loan and mortgage, which loan shall be partially settled out of the monthly rentals on the leased premises.

d)That the lessee-appellant shall pay to the lessor-appellee rentals at the rate of

1.1st to 5th year P800.00 a month

2.6th to 10th year P1,300.00 a month

3.11th to 15th year P1,800.00 a month

4.16th to 20th year P2,200.00 a month.

Pursuant thereto, the petitioner received from Metrobank during the period from October 2, 1973, to February 25, 1974, separate amounts totaling P396,046.00. 2

To secure payment thereof, the petitioner executed the following deeds of real estate mortgage in favor of Metrobank:

a)Real Estate Mortgage for P300,000.00 on September

18, 1973 3

b)Real Estate Mortgage for P90,000.00 on January 9, 1974 4

c)Real Estate Mortgage for P50,000.00 on March 28, 1974 5

and signed the following promissory notes:

1.Promissory Note dated October 2, 1973 for P100,000.00 6

2.Promissory Note dated November 6, 1973 for P100,000.00 7

3.Promissory Note dated December 10, 1973 for P60,000.00 8

4.Promissory Note dated December 19, 1973 for P40,000.00 9

5.Promissory Note dated January 11, 1974 for P90,000.00 10

To renew the loans covered by these instruments, the petitioner executed another promissory note for P435,200.00 on September 12, 1974. 11

With the money received from these loans, the petitioner proceeded to construct the commercial building on her lot, with Metrobank's approval as to the part of the structure to be occupied by it in accordance with their contract. Concepcion Veles, the petitioner's niece, acted on her behalf in administering the construction of the building.

On November 4, 1977, the petitioner filed with the then Court of First Instance of Cavite a complaint for reformation of the above-mentioned contracts.

She claimed that she was induced into signing the contract of lease, the deeds of mortgage and the promissory notes as a result of her ignorance, lack of skill and proper advice and the bad faith of Metrobank. She said she had never consented to pay for the construction of the building and neither did she agree to repay Metrobank with compounded interest. She pointed out that she could not have assented to the one-sided contracts, considering that upon the expiration of the lease after twenty years, her debt wound amount to P1,277,496.00, representing the unpaid principal of P440,000.00 plus the interest of P1,203,946.00 less the total rental of P366,000.00.

On June 3, 1982, the court, through Judge Luis L. Victor, ruled for the petitioner, holding inter alia as follows:

Indeed, the record is bereft of any evidence to establish that defendant bank took the pains to advise plaintiff, considering her age and educational limitations, that the details of her loan agreement would entail such heavy burden on the part of the plaintiff that practically placed her in a situation where, during her lifetime, she may not be able to fulfill her end of the bargain to the defendant with the concomitant loss of her property consequent to non-payment of her indebtedness.

The import of the real estate mortgages, which plaintiff signed, Exhibits C, D and E, was not explained to plaintiff, nor its terms clearly elucidated to her. The promissory notes, Exhibits H, I, J, and K, were not shown to have been discussed by the parties and plaintiff Mata made aware of the contents and legal effects thereof. Evidence is lacking that defendant Metrobank made plaintiff Mata understood the meaning of the credit line, Exhibit F. Nor is there ample proof that defendant explained to plaintiff Mata why she had to sign the promissory note, Exhibit M, for P435,200.00 when she had already signed four (4) previous promissory notes.

xxxxxxxxx

. . . this Court is convinced that the loan agreement between the parties herein is altogether inequitably one-sided in favor of the defendant bank and unconscionably disadvantageous to plaintiff. Had defendant bank explained fully to plaintiff the terms of the promissory notes she signed and the interest she will have to assume on the principal obligation, the manner she can offset her account with the anticipated income derivable from the lease, and such other details of payment, perhaps this Court may not constitute itself guardian of plaintiff in the light of the Vales v. Villa pronouncement. But in the case at bar, defendant, the more knowledgeable of the contracting parties, did not clear the doubt, contingency or risk affecting the object of the lease agreement to plaintiff Mata, whose layman's grasp of the contract emanated only from a general understanding of the contents thereof. Thus, this Court will intervene between the parties herein to prevent an apparent injustice and to give meaning and substance to the dictum that when one of the parties is unable to understand the signification of a contract because of ignorance, or lack of skill, the person enforcing the contract must show that all the terms thereof have been fully explained to the former. As earlier stated, there is no evidence that defendant Metrobank had taken the necessary steps to enlighten the plaintiff Cecilia Mata on the signification of the mortgages and promissory notes that she signed in support of the contract of lease.

Premises considered, in view of the conclusions arrived at by this Court, as above discussed, judgment is hereby rendered ordering the reformation of the contract of lease, more particularly the terms and conditions contained in the separate documents of law, mortgages and promissory notes in accordance with justice and equity, ever guided by the maxim of law of rendering to everyone his due.

Metrobank appealed to the respondent court, contending that the trial court erred in ordering reformation, this not being allowed by law, let alone the fact that the petitioner had not adduced sufficient evidence to show that the contracts sought to be reformed were inequitable.

In its decision dated November 22, 1988, 12 the Court of Appeals reversed the trial court and on April 10, 1989, denied reconsideration. It ruled that it was not legally possible to reform the contract of lease because it expressed the true intention of the parties and the petitioner understood its terms and conditions. If it was true that the contacts were not explained to her, the lack of meeting of the minds between the parties would also make reformation legally inapplicable. The respondent court also said that there was not factual basis for the finding that the loan agreement was inequitable. The error of the trial court, it said, lay in its misimpression that the total loan granted to Mata would be paid or amortized solely from the agreed graduated rentals of the portions occupied by Metrobank. In fact, the loan would only be partially paid with its monthly rentals as the rest of the building was to be leased by Mata to other tenants whose rentals would also be used for paying the loans.

This Court has carefully examined the questioned decision and agrees that the lease contract and the other related contracts are not inequitable as alleged by the petitioner. The contract of lease was somewhat complicated by the inclusion of the loan agreement for P390,000.00 but that did not make the contract unconscionable.

Like the contract of lease, the real estate mortgages and the promissory notes are not contrary to law, morals, good customs or public policy. They are the usual transactions entered into by banks in the regular course of their business of lending money at stipulated interests and for adequate security.

It is not denied that the loan was for P440,000.00 and that at the end of the 20-year period, the petitioner's liability with interest at 12% per annum would amount to P753,512.00, representing the unpaid interest of P679,512.00 plus the outstanding capital of P74,000.00 13 But this amount would not make the contract per se inequitable. The interest rate charged by Metrobank on the loan was the ordinary banking rate on forebearance of money at that time and it was definitely not usurious then, nor is it now.

It is noted that in leases of this nature, which are normally for 20 years, the loan granted by the bank will eventually be offset at the end of the lease period by the rentals it would have paid during that time. However, this arrangement is not applicable in the case at bar because Metrobank occupies only a portion of the building and so does not pay the total revenue derived from the lease of the whole building. In her computations, the petitioner does not take into account the rentals derived from the lease of the rest of the building, which is the reason why her payments to Metrobank appear lop-sided vis-a-vis the payments of Metrobank to her. Her total indebtedness to Metrobank should be juxtaposed against not only the rentals of Metrobank but the total rentals to be derived from the lease of the whole building. Let it be added, as a no less significant consideration, that the building will remain in her name even after the end of the 20-year lease to Metrobank.

The onus probandi is upon the party who insists that the contract should be reformed because of the unfairness of its provisions. It was thus incumbent upon the petitioner to establish, through a preponderance of evidence, that the contract was unconscionably operating to her disadvantage. She has not done so. In this connection, it bears stressing that a contract may not be reformed simply because a party later finds itself at the shorter end of an unwise bargain. It is only when the agreement is shown to be so grossly unjust as to be unduly oppressive that the strong arm of equity may intervene to grant relief to the aggrieved party.

The respondent court was correct when it said that if the petitioner never really intended to be bound by the said contracts, there consequently could have been no meeting of the minds between her and Metrobank. This could make reformation unavailable for lack of the first of the requisites of reformation as enumerated in Article 1359 of the Civil Code, thus:

1)there must have been a meeting of the minds upon the contract;

2)the instrument or document evidencing the contract does not express the true agreement between the parties; and

3)the failure of the instrument to express the agreement must be due to mistake, fraud, inequitable conduct or accident.

The other reason why reformation is not available is that, contrary to the second requisite, the contracts in question do express the true agreement between the parties.

The Court does not accept the petitioner's claim that she did not understand the terms and conditions of the transactions because she only reached Grade Three and was already 63 years of age when she signed the documents. She was literate, to begin with, and her age did not make her senile or incompetent. Moreover, the respondent court found that the terms of the contracts were explained to her by Edgardo B. Espiritu, the senior vice-president of Metrobank, and Rodolfo Gaspar, the lawyer in charge of its building and real estate properties. 14

At any rate, Metrobank had no obligation to explain the documents to the petitioner as nowhere has it been proven that she is unable to read or that the contracts were written in a language not known to her. It was her responsibility to inform herself of the meaning and consequence of the contracts she was signing and, if she found them difficult to comprehend, to consult other persons, preferably lawyers, to explain them to her. After all, the transactions involved not only a few hundred or thousand pesos but, indeed, hundreds of thousand of pesos.

As the Court has held:

. . . The rule that one who signs a contract is presumed to know its contents has been applied even to contracts of illiterate persons on the ground that if such persons are unable to read, they are negligent if they fail to have the contract read to them. If a person cannot read the instrument, it is as much his duty to procure some reliable persons to read and explain it to him, before he signs it, as it would be to read it before it signed it if he were able to do so and his failure to obtain a reading and explanation of it is such gross negligence as will estop him from avoiding it on the ground that he was ignorant of its contents. 15

We see no reversible error in the well-written and exhaustive decision penned by Justice Regina G. Ordoez-Benitez, based as it is on the evidence of record and the pertinent law and jurisprudence. Indeed, it reflects the careful and conscientious study given to the case by the members of the appellate court who participated in its resolution.

ACCORDINGLY, the petition is DENIED and the challenged decision of the respondent Court of Appeals is AFFIRMED, with costs against the petitioner. It is so ordered.

G.R. No. 85869November 6, 1992

THE NATIONAL IRRIGATION ADMINISTRATION (NIA), represented by the Project Manager, Magat River Multi-Purpose Project, petitioner, vs.ESTANISLAO GAMIT and THE HONORABLE COURT OF APPEALS, respondents.

PADILLA, J.:

On 23 January 1985, the plaintiff Estanislao Gamit (private respondent herein) filed with the RTC of Roxas, Isabela, Branch XXIII, a complaint 1 against the defendant National Irrigation Administration (petitioner herein) for reformation of contract, recovery of possession and damages, docketed therein as Civil Case No. 4, alleging, among others, as follows:

2.That defendant is in charge of the implementation of the Irrigation Program of the national government to increase food production nationwide, and in pursuance of the policy, the Magat River Multi-Purpose Project was undertaken to provide irrigation in the Cagayan Valley region, particularly in the province of Isabela, funded by a multi-billion loan from the world bank; that as an indispensable component of the project, massive infrastructure improvements such as buildings and the like, were constructed to house the different offices monitoring the actual implementation of the project;

3.That for the purpose above mentioned and sometime on June 5, 1975, herein plaintiff and defendant, thru its Officer-in-Charge, Magat River Multi-Purpose Project (MRMP) then with business office at San Mateo, Isabela, after some negotiations were made, entered into a CONTRACT OF LEASE, over plaintiff's urban parcel of land, more particularly described as follows:

An undivided portion of twenty five thousand (25,000) square meters, more or less, and forming part of that parcel of land with a total area of thirty thousand and five (30,005) square maters, more or less, embraced in TCT No. T-85689 of the land records of Isabela, under Tax Declaration No. S3-5603, situated at the poblacion (Centro), San Manuel, Isabela, which portion leased is bounded as follows:

NORTH: Estanislao Gamit; EAST National Road; SOUTH: Dominador Bullungan; WEST: Dominador Bullagan

For a consideration or rental in the sum of ten centavos (P0.10) per square meter, per year for ten (10) years, from date of execution of the instrument, for the use by defendant on which to construct the Administration Building and other facilities for Division III, Magat River Multi-Purpose Project at San Manuel, Isabela, and other purposes that may be deemed necessary for the operation and maintenance of the system when completed; certified xerox copy of the title is hereto attached as Annex "A" to form part hereof.

4.That in at least three paragraphs, (4, 8, 9) of the contract of lease the defendant surreptitiously inserted, the following stipulations, which are hereby quoted:

4.That should LESSEE decides (sic) to continue utilizing the said portion of twenty five thousand (25.000) square meters, more or less, beyond the ten (10) year period that this contract is in force, then lessee may purchase the property and all rentals paid to lessor shall be considered part of the purchase price (which) shall not exceed twenty five thousand (P25,000.00) Pesos: (Emphasis Supplied)

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8.That six (6) months before the expiration of the ten (10) year period, LESSOR shall request LESSEE in writing about the latter's final intention on the herein (property) leased; likewise, LESSEE shall inform LESSOR in writing about LESSEE'S definite intention on the area; failure of parties to make bilateral communication shall be deemed that this contract is in force and effect even after the ten (10) year period, as if LESSOR, his successors, or assigns allowed continued use of the property by LESSEE without any additional compensation whatsoever. (Emphasis Supplied.)

9.That upon payment of the said amount of Twenty Five Thousand (P25,000.00) Pesos, the land owner, Estanislao Gamit shall be deemed to have ceded and conveyed all his rights and interest on the subject property free from all liens and encumbrances in favor of the National Irrigation Administration. (Emphasis Supplies). Certified xerox copy of the contract is hereto attached as Annex "B", to form part hereof.

5.That prior to the signing of the contract of lease as stated in the immediately preceding paragraphs, serious negotiations were made, the first was, when the Municipal Mayor and Chief of Police of the Municipality of San Manuel, Isabela, approached plaintiff in behalf of defendant, to allow the later thru its Project Manager or his duly authorized representatives and equipments to enter into and occupy three (3) hectares or 30,000 square meters of his land on which to establish the Office of Division III, of the Project, and plaintiff and his wife signed a written permit dated April 24, 1975, witnessed by Mayor Paulino A. Domingo and Chief of Police Pedro R. Pascua, which permit was granted "pending the perfection of documents pertinent to a formal lease contract with the right to purchase" to be executed by and between plaintiff and defendant. Certified xerox copy of the permit is hereto attached as Annex "B-1", to form part hereof;

That further negotiations followed, and a document denominated as "'AGREEMENT" was prepared by herein defendant for the signature of plaintiff and the latter and his wife signed the same, with one Engr. Antonio A. Ramos, then the Chief of Division III, MRMP, San Manuel, Isabela, signing as an instrumental witness; for reasons known only to the Asst. Project Manager, the document was not however signed by him, for which reason, the contract of lease was not perfected possibly because defendant's Assistant Project Manager wanted to prolong plaintiff's anxiety and the same was aggravated by the latter's deep financial need, which fact is known by the Assistant Project Manager during the negotiations, thereby exercising undue influence or advantage over that of plaintiff, when the contract of lease was finally signed on June 6, 1975. Certified xerox copy of the unperfected agreement is hereto attached as Annex "B-2", to form part hereof.

6.That contemporaneously or subsequently thereafter and sometime on August 27, 1975 or thereabout, the whole rental of the leased premises was offered to be paid by the defendant and the plaintiff being then in need of cash, as he was then in financial distress, accepted the offer, and finally received the whole amount, as evidenced by a certified xerox copy of the corresponding voucher, hereto attached as Annex "C", to form part hereof.

7.That only recently, in a letter dated November 23, 1984, sent by the Assistant Project Manager to the plaintiff, herein defendant notified the former, of the election to purchase the leased premises, allegedly in accordance with stipulation No. 8 quoted above, and contained in the contract of lease (Annex "B"). Certified xerox copy of the same is hereto attached as Annex "D", to form part hereof.

8.That the contract of lease entered into, by and between herein plaintiff and defendant does not express the real agreement or intention of the parties, as there was error or mistake of fact on the part of plaintiff, aggravated by his state of financial distress at the time the contract was signed, and herein defendant acted fraudulently or inequitably, exercising undue influence over plaintiff on account of the latter's financial distress, in such a way that their real agreement was not reflected or expressed in the contract of lease signed by the parties.

9.That the real agreement or intention of the parties was only for the lease of the twenty five (25,000) thousand square meters by defendant at the rate of P0.10 centavos per square meter, for a period of ten (10) years from date of execution with the right of defendant to purchase the area upon the termination of the lease, on a price certain or consideration to be negotiated and agreed upon, by and between the parties after the lapse of the ten (10) year period;

10.That it was not the real agreement or intention of the parties, at least that of herein plaintiff, to have the rentals paid as forming part of the purchase price later to be negotiated or agreed upon, much less was it their intention at least on the part of herein plaintiff, that the price shall, not exceed P25,000.00 (see stipulation No. 4, Lease of Contract), otherwise, there will be a gross inadequacy of the purchase price, enough to shock the conscience of man and that of the court; that it was not also the intention or agreement of the parties, at least that of herein plaintiff, that in case the lease contract is not renewed after the lapse of the ten (10) year period, for failure of the parties to make bilateral communication, the lessor or his successors or assigns are deemed to have allowed continued use of the land in suit without any additional compensation whatsoever (see stipulation No. 8, contract of lease) and neither was it the true agreement or real intention the parties, at least on the part of herein plaintiff, that upon payment of the rental amount of P25,000.00, herein plaintiff shall be deemed to have conveyed and ceded all his rights and interest on the subject property, in favor of herein defendant. (see stipulation No. 9)

11.That herein defendant acted fraudulently and inequitably, taking advantage of the financial distress of herein plaintiff, when it caused the unlawful insertion of the stipulation contained in paragraphs 4, 8 and 9 quoted above, in the contract of lease, and the same are all contrary to law and void ab-initio, because the fixing of the price of the land to be purchased can never be left to the discretion or will of one of the contracting parties; and in this case, it was defendant alone who determined the price and if this is so, then the validity or compliance of the contract can not be demanded by herein defendant, for the reason that a contract of sale, is essentially bilateral in character;

12.That evidently, the contract as drafted and prepared by herein defendant for the signature of herein plaintiff is a contract commonly known as ADHESION CONTRACT, which is one where one party (plaintiff herein) merely signs carefully prepared contracts of big companies, such as contracts of insurance, construction and the like; as in the case of herein defendant where the project involves multi-billion contracts funded from the World Bank, thus, the same should be strictly interpreted against defendant, and liberally in favor of herein plaintiff, because the latter was virtually helpless to bargain for better terms on account of his financial need at the time;

13.That the fair and reasonable price or market value of the land in suit which is an urban land located at the Poblacion or Centro of the town of San Manuel, this province, is no less than Fifty Pesos (50.00) per square meter, and plaintiff makes this offer, subject to the acceptance of herein defendant;

14.That as agreed upon, the area to be leased is only twenty five (25.000) thousand square meters, as evidenced by the encumbrance registered at the back of TCT No. T-85689, in the name of plaintiff leaving a portion of five (5,000) thousand square meters, as free from the lien and encumbrance;

15.That after the lease contract was executed and registered, herein defendant fenced the area leased, but in the process, the latter stealthily and surreptitiously expanded its occupation and it included the remaining portion of five (5,000) thousand square meters, unencumbered, as evidenced by a relocation survey conducted by one Geodetic Engineer Apolinar P. Alvarez in the premises, a blue print copy of the sketch map is hereto attached as Annex "E" to form part hereof, and there xerox copy of the letter of plaintiff dated August 27, 1984, addressed to the Manager of Division III, Magat River Multi-Purpose Project, San Manuel, Isabela, requesting for a relocation of the leased premises, is hereto attached as Annex "E-1", to form part hereof;

16.That the encroached area of five (5,000) thousand square meters which is irrigated, can be easily planted to palay and would yield an average of no less than one (100) hundred cavans of palay at 46 kilos per cavan, per crop, for three (3) croppings a year, with a selling price of P3.50 per kilo;

17.That herein plaintiff failed to realize the expected income stated in the immediately preceding paragraph due to the unlawful occupation of the area by defendant since the year 1975 to the present, and despite repeated demands, the defendant refuses to deliver the possession of the encroached portion of 5,000 square meters to the plaintiff, with accounting of its corresponding produce, up to the present; however, should defendant desires to purchase the remaining portion of 5,000 square meters, plaintiff offers a price of no less than P50.00 per square meter which is the fair and reasonable market value of the land;

18.That due to the unlawful, inequitable and malicious actuations of herein defendant, plaintiff was forced to engage the services of counsel for a contingent fee of 30% of whatever is due plaintiff, plus P300.00 as appearance fee, for the protection, respect, and preservation of his rights and interests in the premises;

19.That likewise, for fraudulent and inequitable acts committed by defendant, plaintiff is entitled to actual or compensatory damages representing unrealized income of the 5,000 square meters encroached portion, which is estimated to be no less that 25 cavans of palay (25% of 100 as rental per crop, for three (3) croppings a year), or a total of 75 cavans per year and/or a grand total of 750 cavans of palay at 46 kilos per cavan for the (10) years, at the current price of P3.50 per kilo; and entitled to nominal or temperate damages in the sum of P30,000.00 plus moral and exemplary damages of no less that P60,000.00 for the public good;

WHEREFORE, premises considered, it is most respectfully prayed of this Honorable Court that judgment be rendered in favor of your plaintiff and against herein defendant by:

1.Ordering, that the contract of lease with right to purchase (Annex "B") be reformed, so that the real and true agreement or intention of the parties be reflected and/or expressed therein;

2.In the alternative, should the defendant pursue to BUY the land in suit (30,000 square meters) at a price certain agreed upon by the parties after serious negotiations at the rate of P50.00 per square meter, then the necessary and proper document be drawn and prepared, under the strict supervision of the Court, and the corresponding purchase price or compensation to be paid by defendant, be deposited with the court under custodia legis;

3.Ordering the defendant to pay plaintiff, the unrealized income or profit, plaintiff suffered, by virtue of the unlawful occupation by defendant of the remaining portion of 5,000 square meters from 1975 to the present or until possession is finally restored;

4.Ordering defendant to pay plaintiff, the sum of P30,000.00, by way of nominal or temperate damages and the sum of P60,000.00, by way of moral and exemplary damages, for the public good, plus attorney's fees on a contingent basis of 30% depending on the amount finally adjudicated in favor of plaintiff, plus appearance fee of P3000.00 when the case is called for hearing or for any other purpose;

5.Ordering the parties to strictly abide by, and comply with their commitments in the documents that may be executed in the premises;

6.If for any reason, the parties can not agree on reasonable terms for the continuation of their relationship and the lease contract ordered terminated, and/or, should the defendant elects not to purchase the whole 30,000 square meters, defendant be ordered to deliver the possession of the land in suit to the plaintiff, and the defendant allowed to remove the infrastructure improvement introduced on the land, with right of retention to the former;

In due time, the defendant filed its answer 2 alleging, inter alia, as follows:

2.That defendant admits the allegations in paragraph 2 of the complaint;

3.That defendant admits the allegations in paragraph 3 of the complaint that a Contract of Lease With Right to Purchase was entered into between the parties on June 6, 1975, but it specifically denies the rest of the allegation therein, more specifically that plaintiff's land is urban land, the fact of the matter being that it is riceland at the time NIA took possession of the same;

4.That defendant specifically denies the material allegations in paragraph 4 of the complaint alleging that stipulations No. 4, 8 and 9 of the Contract of Lease with Right to Purchase was surreptitiously inserted it appearing plaintiff is an intelligent person who knows English, and that his wife, Estilita Santos, is likewise a signatory to the document;

5.That defendant admits the allegations in paragraph 5 of the compaint concerning plaintiff's issuance of a permit to enter the property in question on April 24, 1975, but it specifically denies the rest of the allegations therein, for being without basis in fact and in law;

6.That defendant admits the allegations in paragraph 6 of the complaint whereby plaintiff acknowledged receipt of the amount of P25,000.00 as payment for the land in question, but specifically denies the rest of the allegations therein for being self-serving and baseless conclusions of fact, it appearing the delay in the payment for such property was due to plaintiff's fault, who was not paid until he was able to register the property in his own name;

7.That defendant admits the material allegations in paragraph 7 of the complaint;

8.That defendant specifically denies the allegations in paragraphs 8 and 9 of the complaint for being self-serving, without basis in fact, and for reasons to be stated in the Special and Affirmative defenses;

9.That defendant specifically denies the allegations in paragraphs 10, 11, 12 and 13, of the complaint for being without basis in law and in fact;

10.That defendant admits the allegations in paragraph 14 of the complaint that 25,000 square meters was the subject of the Contract of Lease with Right of Repurchase, with the qualification that the remaining 5,000 square meters was intended to be donated by the plaintiff to defendant upon the execution of a Deed of Sale;

11.That defendant specifically denies the allegations in paragraph 15 of the complaint for reasons stated in the preceding paragraph;

12.That defendant specifically denies the allegations in paragraphs 16 of the complaint for being unwarranted conclusions of fact;

13.That defendant specifically denies the allegations in paragraphs 17, 18 and 19 of the complaint for being self-serving, speculative and without basis in fact; and by way of

SPECIAL AND AFFIRMATIVE DEFENSES

defendant respectfully alleges:

14.That it repleads and incorporates the foregoing as integral part hereof;

15.That the contract entered into on June 6, 1975 is the law between the parties and the same should be complied with in good faith (Art. 1159, Civil Code);

16.That there could not have been any fraud or mistake in the execution of said contract because plaintiff appears to know English and his wife is a signatory to the instrument; besid