[G.R. No. 118342.January 5, 1998]DEVELOPMENT BANK OF THE PHILIPPINES,petitioner, vs. COURT OF APPEALS and LYDIA CUBA,respondents.[G.R. No. 118367.January 5, 1998]LYDIA P. CUBA,petitioner,vs. COURT OF APPEALS, DEVELOPMENT BANK OF THE PHILIPPINES and AGRIPINA P. CAPERAL,respondents.D E C I S I O NDAVIDE, JR.,J.:These two consolidated cases stemmed from a complaint[1]filed against the Development Bank of the Philippines (hereafter DBP) and Agripina Caperal filed by Lydia Cuba (hereafter CUBA) on 21 May 1985 with the Regional Trial Court of Pangasinan, Branch 54.The said complaint sought (1) the declaration of nullity of DBPs appropriation of CUBAs rights, title, and interests over a 44-hectare fishpond located in Bolinao, Pangasinan, for being violative of Article 2088 of the Civil Code; (2) the annulment of the Deed of Conditional Sale executed in her favor by DBP; (3) the annulment of DBPs sale of the subject fishpond to Caperal; (4) the restoration of her rights, title, and interests over the fishpond; and (5) the recovery ofdamages, attorneys fees, and expenses of litigation.After the joinder of issues following the filing by the parties of their respective pleadings, the trial court conducted a pre-trial where CUBA and DBP agreed on the following facts, which were embodied in the pre-trial order:[2]1.Plaintiff Lydia P. Cuba is a grantee of a Fishpond Lease Agreement No. 2083 (new) dated May 13, 1974 from the Government;2.Plaintiff Lydia P. Cuba obtained loans from the Development Bank of the Philippines in the amounts ofP109,000.00;P109,000.00; andP98,700.00 under the terms stated in the Promissory Notes dated September 6, 1974; August 11, 1975; and April 4, 1977;3.As security for said loans, plaintiff Lydia P. Cuba executed two Deeds of Assignment of her Leasehold Rights;4.Plaintiff failed to pay her loan on the scheduled dates thereof in accordance with the termsof the Promissory Notes;5.Without foreclosure proceedings, whether judicial or extra-judicial, defendant DBP appropriated the Leasehold Rights of plaintiff Lydia Cuba over the fishpond in question;6.After defendant DBP has appropriated the Leasehold Rights of plaintiff Lydia Cuba over the fishpond in question, defendant DBP, in turn, executed a Deed of Conditional Sale of the Leasehold Rights in favor of plaintiff Lydia Cuba over the same fishpond in question;7.In the negotiation for repurchase, plaintiff Lydia Cuba addressed two letters to the Manager DBP, Dagupan City dated November 6, 1979 and December 20, 1979.DBP thereafter accepted the offer to repurchase in a letter addressed to plaintiff dated February 1, 1982;8.After the Deed of Conditional Sale was executed in favor of plaintiff Lydia Cuba, a new Fishpond Lease Agreement No. 2083-A dated March 24, 1980 was issued by the Ministry of Agriculture and Food in favor of plaintiff Lydia Cuba only, excluding her husband;9.Plaintiff Lydia Cuba failed to pay the amortizations stipulated in the Deed of Conditional Sale;10.After plaintiff Lydia Cuba failed to pay the amortization as stated in Deed of Conditional Sale, she entered with the DBP a temporary arrangement whereby in consideration for the deferment of the Notarial Rescission of Deed of Conditional Sale, plaintiff Lydia Cuba promised to make certain payments as stated in temporary Arrangement dated February 23, 1982;11.Defendant DBP thereafter sent a Notice of Rescission thru Notarial Act dated March 13, 1984,and which was received by plaintiff Lydia Cuba;12.After the Notice of Rescission, defendant DBP took possession of the Leasehold Rights of the fishpond in question;13.That after defendant DBP took possession of the Leasehold Rights over the fishpond in question, DBP advertised in the SUNDAY PUNCH the public bidding dated June 24, 1984, to dispose of the property;14.That the DBP thereafter executed a Deed of Conditional Sale in favor of defendant Agripina Caperal on August 16, 1984;15. Thereafter, defendant Caperal was awarded Fishpond Lease Agreement No. 2083-A on December 28, 1984 by the Ministry of Agriculture and Food.Defendant Caperal admitted only the facts stated in paragraphs 14 and 15 of the pre-trial order.[3]Trial was thereafter had on other matters.The principal issue presented was whether the act of DBP in appropriating to itself CUBAs leasehold rights over the fishpond in question without foreclosure proceedings was contrary to Article 2088 of the Civil Code and, therefore, invalid.CUBA insisted on an affirmative resolution.DBP stressed that it merely exercised its contractual right under the Assignments of Leasehold Rights, which was not a contract of mortgage.Defendant Caperal sided with DBP.The trial court resolved the issue in favor of CUBA by declaring that DBPs taking possession and ownership of the property without foreclosure was plainly violative of Article 2088 of the Civil Code which provides as follows:ART. 2088.The creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of them.Any stipulation to the contrary is null and void.It disagreed with DBPs stand that the Assignments of Leasehold Rights were notcontracts of mortgage because (1) they were given as security for loans, (2) although the fishpond land in question is still a public land, CUBAs leasehold rights and interest thereon are alienable rights which can be the proper subject of a mortgage; and (3) the intention of the contracting parties to treat the Assignment of Leasehold Rights as a mortgage was obvious and unmistakable; hence, upon CUBAs default, DBPs only right was to foreclose the Assignment in accordance with law.The trial court also declared invalid condition no. 12 of the Assignment of Leasehold Rights for being a clear case ofpactum commissoriumexpressly prohibited and declared null and void by Article 2088 of the Civil Code.It then concluded that since DBP never acquired lawful ownership of CUBAs leasehold rights, all acts of ownership and possession by the said bank were void.Accordingly, the Deed of Conditional Sale in favor of CUBA, the notarial rescission of such sale,and the Deed of Conditional Sale in favor of defendant Caperal, as well as the Assignment of Leasehold Rights executed by Caperal in favor of DBP, were also void and ineffective.As to damages, the trial court found ample evidence on record that in 1984 the representatives of DBPejected CUBA and her caretakers not only from the fishpond area but also from the adjoining big house; and that when CUBAs son and caretaker went there on 15 September 1985, they found the said house unoccupied and destroyed and CUBAs personal belongings, machineries, equipment, tools, and other articles used in fishpond operation which were kept in the house were missing.The missing items were valued at aboutP550,000.It further found that when CUBA and her men were ejected by DBP for the first time in 1979, CUBA had stocked the fishpond with 250,000 pieces of bangus fish (milkfish), all of which died because the DBP representatives prevented CUBAs men from feeding the fish.At the conservative price ofP3.00 per fish, the gross value would have beenP690,000, and after deducting 25% of said value as reasonable allowance for the cost of feeds, CUBA suffered a loss ofP517,500.It then set the aggregate of the actual damages sustained by CUBA atP1,067,500.The trial court further found that DBP was guilty of gross bad faith in falsely representing to the Bureau of Fisheries that it had foreclosed its mortgage on CUBAs leasehold rights.Such representation induced the said Bureau to terminate CUBAs leasehold rights and to approve the Deed of Conditional Sale in favor of CUBA.And considering that by reason of her unlawful ejectment by DBP, CUBA suffered moral shock, degradation, social humiliation, and serious anxieties for which she became sick and had to be hospitalized the trial court found her entitled to moral and exemplary damages.The trial court also held that CUBA was entitled toP100,000 attorneys fees in view of the considerable expenses she incurred for lawyers fees and in view of the finding that she was entitled to exemplary damages.In its decision of 31 January 1990,[4]the trial court disposed as follows:WHEREFORE,judgment is hereby rendered in favor of plaintiff:1.DECLARINGnull and void and without any legal effect the act of defendant Development Bank of the Philippines in appropriating for its own interest, without any judicial or extra-judicial foreclosure, plaintiffs leasehold rights and interest over the fishpond land in question under her Fishpond Lease Agreement No. 2083 (new);2.DECLARING the Deed of Conditional Sale dated February 21, 1980 by and between the defendant Development Bank of the Philippines and plaintiff (Exh. E and Exh. 1) and the acts of notarial rescission of the Development Bank of the Philippines relative to said sale (Exhs. 16 and26) as void and ineffective;3.DECLARINGthe Deed of Conditional Sale dated August 16, 1984 by and between theDevelopment Bank of the Philippines and defendant Agripina Caperal (Exh. F and Exh. 21), the Fishpond Lease Agreement No. 2083-A dated December 28, 1984 of defendant Agripina Caperal (Exh. 23) and the Assignment of Leasehold Rights dated February 12, 1985 executed by defendant Agripina Caperal in favor of the defendant Development Bank of the Philippines (Exh. 24) asvoid ab initio;4. ORDERINGdefendant Development Bank of the Philippines and defendant Agripina Caperal, jointly and severally, to restore to plaintiff the latters leasehold rights and interests and right of possession over the fishpond land in question, without prejudice to the right of defendant Development Bank of the Philippines to foreclose the securities given by plaintiff;5.ORDERING defendant Development Bank of the Philippines to pay to plaintiff the following amounts:a)The sum of ONE MILLION SIXTY-SEVEN THOUSAND FIVE HUNDRED PESOS (P1,067,500.00), as and for actual damages;b) The sum of ONE HUNDRED THOUSAND (P100,000.00) PESOS as moral damages;c) The sum of FIFTY THOUSAND (P50,000.00) PESOS, as and for exemplary damages;d) And the sum of ONE HUNDRED THOUSAND (P100,000.00) PESOS, as and for attorneys fees;6.And ORDERING defendant Development Bank of the Philippines to reimburse and pay to defendant Agripina Caperal the sum of ONE MILLION FIVE HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED TEN PESOS AND SEVENTY-FIVE CENTAVOS (P1,532,610.75) representing the amounts paid by defendant Agripina Caperal to defendant Development Bank of the Philippines under their Deed of Conditional Sale.CUBA and DBP interposed separate appeals from the decision to the Court of Appeals.The former sought an increase in the amount of damages, while the latter questioned the findings of fact and law of the lower court.In its decision[5]of 25 May 1994, the Court of Appeals ruled that (1)the trial court erred in declaring that the deed of assignment was null and void and that defendant Caperal could not validly acquire the leasehold rights from DBP; (2) contrary to the claim of DBP, the assignment was not a cession under Article 1255 of the Civil Code because DBP appeared to be the sole creditor to CUBA - cession presupposes plurality of debts and creditors; (3) the deeds of assignment represented the voluntary act of CUBA in assigning her property rights in payment of her debts, which amounted to a novation of the promissory notes executed by CUBA in favor of DBP; (4) CUBA was estopped from questioning the assignment of the leasehold rights, since she agreed to repurchase the said rights under a deed of conditional sale; and (5) condition no. 12 of the deed of assignment was an express authority from CUBA for DBP to sell whatever right she had over the fishpond.It also ruled that CUBA was not entitled to loss of profits for lack ofevidence, but agreed with the trial court as to the actual damages ofP1,067,500. It, however, deleted the amount of exemplary damages and reduced the award of moral damages fromP100,000 toP50,000 and attorneys fees, fromP100,000 toP50,000.The Court of Appeals thus declared as valid the following: (1) the act of DBP in appropriating Cubas leasehold rights and interest under Fishpond Lease Agreement No. 2083;(2) the deeds of assignment executed by Cuba in favor of DBP; (3) the deed of conditional sale between CUBA and DBP; and (4) the deed of conditional sale between DBP and Caperal, the Fishpond Lease Agreement in favor of Caperal, and the assignment of leasehold rightsexecuted by Caperal in favor of DBP.It then ordered DBP to turn over possession of the property to Caperal as lawful holder of the leasehold rights and to pay CUBA the following amounts: (a)P1,067,500 as actual damages;P50,000 as moral damages; andP50,000 as attorneys fees.Since their motions for reconsideration were denied,[6]DBP and CUBA filed separate petitions for review.In its petition (G.R. No. 118342), DBP assails the award of actual and moral damages and attorneys fees in favor of CUBA.Upon the other hand, in her petition (G.R. No. 118367), CUBA contends that the Court of Appeals erred (1) in not holding that the questioned deed of assignment was apactum commissoriumcontrary to Article 2088 of the Civil Code; (b) in holding that the deed of assignment effected a novation of the promissory notes;(c) in holding that CUBA was estopped from questioningthe validity of the deed of assignment when she agreed to repurchase her leasehold rights under a deed of conditional sale;and (d) in reducing the amounts of moral damages and attorneys fees, in deleting the award of exemplary damages, and in not increasing the amount of damages.We agree with CUBA that the assignment of leasehold rights was a mortgage contract.It is undisputed that CUBA obtained from DBP three separate loans totallingP335,000, each of which was covered by a promissory note.In all of these notes, there was a provision that: In the event of foreclosure of the mortgage securing this notes, I/We further bind myself/ourselves, jointly and severally, to pay the deficiency, if any.[7]Simultaneous with the execution of the notes was the execution of Assignments of Leasehold Rights[8]where CUBA assigned her leasehold rights and interest on a 44-hectare fishpond, together with the improvements thereon.As pointed out by CUBA, the deeds of assignment constantly referred to the assignor (CUBA) as borrower; the assigned rights, as mortgaged properties; and the instrument itself, as mortgage contract.Moreover, under condition no. 22 of the deed, it was provided that failure to comply with the terms and condition of any of the loans shall cause all other loans to become due and demandable and all mortgages shall be foreclosed.And, condition no. 33 provided that if foreclosure is actually accomplished, the usual 10% attorneys fees and 10% liquidated damages of the total obligation shall be imposed.There is, therefore, no shred of doubt that a mortgage was intended.Besides, in their stipulation of facts the parties admitted that the assignment was by way of security for the payment of the loans; thus:3.As security for said loans, plaintiff Lydia P. Cuba executed two Deeds of Assignment of her Leasehold Rights.InPeoples Bank & Trust Co. vs. Odom,[9]this Court had the occasion to rule that an assignment to guarantee an obligation is in effect a mortgage.We find no merit in DBPs contention that the assignment novated the promissory notes in that the obligation to pay a sum of money the loans (under the promissory notes) was substituted by the assignment of the rights over the fishpond (under the deed of assignment).As correctly pointed out by CUBA, the said assignment merely complemented or supplemented the notes; both could stand together.The former was only an accessory to the latter.Contrary to DBPs submission, the obligation to pay a sum of money remained, and the assignment merely served as security for the loans covered by the promissory notes.Significantly, both the deeds of assignment and the promissory notes were executed on the same dates the loans were granted.Also, the last paragraph of the assignment stated: The assignor further reiterates and states all terms, covenants, and conditions stipulated in the promissory note or notes covering the proceeds of this loan, making said promissory note or notes, to all intent and purposes, an integral part hereof.Neither did the assignment amount to payment bycessionunder Article 1255 of the Civil Code for the plain and simple reason that there was only one creditor, the DBP.Article 1255 contemplates the existence of two or more creditors and involves the assignment of all the debtors property.Nor did the assignment constitutedationin payment under Article 1245 of the civil Code, which reads: Dationin payment, whereby property is alienated to the creditor in satisfaction of a debt in money, shall be governed by the law on sales.It bears stressing that the assignment, being in its essence a mortgage, was but a security and not a satisfaction of indebtedness.[10]We do not, however, buy CUBAs argument that condition no. 12 of the deed of assignment constitutedpactum commissorium.Said condition reads:12.That effective upon the breach of any condition of this assignment, the Assignor hereby appoints the Assignee his Attorney-in-fact with full power and authority to take actual possession of the property above-described, together with all improvements thereon, subject to the approval of the Secretary of Agriculture and Natural Resources, to lease the same or any portion thereof and collect rentals, to make repairs or improvements thereon and pay the same, to sell or otherwise dispose of whatever rights the Assignor has or might have over said property and/or its improvements and perform any other act which the Assignee may deem convenient to protect its interest.All expenses advanced by the Assignee in connection with purpose above indicated which shall bear the same rate of interest aforementioned are also guaranteed by this Assignment.Any amount received from rents, administration, sale or disposal of said property may be supplied by the Assignee to the payment of repairs, improvements, taxes, assessments and other incidental expenses and obligations and the balance, if any, to the payment of interest and then on the capital of the indebtedness secured hereby.If after disposal or sale of said property and upon application of total amounts received there shall remain a deficiency, said Assignor hereby binds himself to pay the same to the Assignee upon demand, together with all interest thereon until fully paid.The power herein granted shall not be revoked as long as the Assignor is indebted to theAssignee and all acts that may be executed by the Assignee by virtue of said power are hereby ratified.The elements ofpactum commissoriumare as follows: (1) there should be a property mortgaged by way of security for the payment of the principal obligation, and (2) there should be a stipulation for automatic appropriation by the creditor of the thing mortgaged in case of non-payment of the principal obligation within the stipulated period.[11]Condition no. 12 did not provide that the ownership over the leasehold rights would automatically pass to DBP upon CUBAs failure to pay the loan on time.It merely provided for the appointment of DBP as attorney-in-fact with authority, among other things, to sell or otherwise dispose of the said real rights, in case of default by CUBA, and to apply the proceeds to the payment of the loan.This provision is a standard condition in mortgage contracts and is in conformity with Article 2087 of the Civil Code, which authorizes the mortgagee to foreclose the mortgage and alienate the mortgaged property for the payment of the principal obligation.DBP, however, exceeded the authority vested by condition no. 12 of the deed of assignment.As admitted by it during the pre-trial, it had [w]ithout foreclosure proceedings, whether judicial or extrajudicial, appropriated the [l]easehold [r]ights of plaintiff Lydia Cuba over the fishpond in question.Its contention that it limited itself to mere administration by posting caretakers is further belied by the deed of conditional sale it executed in favor of CUBA.The deed stated:WHEREAS, the Vendor [DBP]by virtue of a deed of assignmentexecuted in its favor by the herein vendees [Cuba spouses] the formeracquired all the rights and interestof the latter over the above-described property;Thetitleto the real estate property [sic] and all improvements thereonshall remain in the name of the Vendoruntil after the purchase price, advances and interest shall have been fully paid.(Emphasis supplied).It is obvious from the above-quoted paragraphs that DBP had appropriated and taken ownership of CUBAs leasehold rights merely on the strength of the deed of assignment.DBP cannot take refuge in condition no. 12 of the deed of assignment to justify its act of appropriating the leasehold rights.As stated earlier, condition no. 12 did not provide that CUBAs default would operate to vest in DBP ownership of the said rights.Besides, an assignment to guarantee an obligation, as in the present case, is virtually a mortgage and not an absolute conveyance of title which confers ownership on the assignee.[12]At any rate, DBPs act of appropriating CUBAs leasehold rights was violative of Article 2088 of the Civil Code, which forbids a creditor from appropriating, or disposing of, the thing given as security for the payment of a debt.The fact that CUBA offered and agreed to repurchase her leasehold rights from DBP did not estop her from questioning DBPs act of appropriation.Estoppel is unavailing in this case.As held by this Court in some cases,[13]estoppel cannot give validity to an act that is prohibited by law or against public policy.Hence, the appropriation of the leasehold rights, being contrary to Article 2088 of the Civil Code and to public policy, cannot be deemed validated by estoppel.Instead of taking ownership of the questioned real rights upon default by CUBA, DBP should have foreclosed the mortgage, as has been stipulated in condition no. 22 of the deed of assignment.But, as admitted by DBP, there was no such foreclosure.Yet, in its letter dated 26 October 1979, addressed to the Minister of Agriculture and Natural Resources and coursed through the Director of the Bureau of Fisheries and Aquatic Resources, DBP declared that it had foreclosed the mortgage and enforced the assignment of leasehold rights on March 21, 1979 for failure of said spouses [Cuba spouces] to pay their loan amortizations.[14]This only goes to show that DBP was aware of the necessity of foreclosure proceedings.In view of the false representation of DBP that it had already foreclosed the mortgage, the Bureau of Fisheries cancelled CUBAs original lease permit, approved the deed of conditional sale, and issued a new permit in favor of CUBA.Said acts which were predicated on such false representation, as well as the subsequent acts emanating from DBPs appropriation of the leasehold rights, should therefore be set aside.To validate these acts would open the floodgates to circumvention of Article 2088 of the Civil Code.Even in cases where foreclosure proceedings were had, this Court had not hesitated to nullify the consequent auction sale for failure to comply with the requirements laid down by law, such as Act No. 3135, as amended.[15]With more reason that the sale of property given as security for the payment of a debt be set aside if there was no prior foreclosure proceeding.Hence, DBP should render an accounting of the income derived from the operation of the fishpond in question and apply the said income in accordance with condition no. 12 of the deed of assignment which provided: Any amount received from rents, administration, may be applied to the payment of repairs, improvements, taxes, assessment, and other incidental expenses and obligations and the balance, if any, to the payment of interest and then on the capital of the indebtedness.We shall now take up the issue of damages.Article 2199 provides:Except asprovided by law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved.Such compensation is referred to as actual or compensatory damages.Actual or compensatory damages cannot be presumed, but must be proved with reasonable degree of certainty.[16]A court cannot rely on speculations, conjectures, or guesswork as to the fact and amount of damages, but must depend upon competent proof that they have been suffered by the injured party and on the best obtainable evidence of the actual amount thereof.[17]It must point out specific facts which could afford a basis for measuring whatever compensatory or actual damages are borne.[18]In the present case, the trial court awarded in favor of CUBAP1,067,500 as actual damages consisting ofP550,000 which represented the value of the alleged lost articles of CUBA andP517,500 which represented the value of the 230,000 pieces of bangus allegedly stocked in 1979 when DBP first ejected CUBA from the fishpond and the adjoining house.This award was affirmed by the Court of Appeals.We find that the alleged loss of personal belongings and equipment was not proved by clear evidence.Other than the testimony of CUBA and her caretaker, there was no proof as to the existence of those items before DBP took over the fishpond in question.As pointed out by DBP, there was not inventory of the alleged lost items before the loss which is normal in a project which sometimes, if not most often, is left to the care of other persons.Neither was a single receipt or record of acquisition presented.Curiously, in her complaint dated 17 May 1985, CUBA included losses of property as among the damages resulting from DBPs take-over of the fishpond.Yet, it was only in September 1985 when her son and a caretaker went to the fishpond and the adjoining house that she came to know of the alleged loss of several articles. Such claim for losses of property, having been made before knowledge of the alleged actual loss, was therefore speculative.The alleged loss could have been a mere afterthought or subterfuge to justify her claim for actual damages.With regard to the award ofP517,000 representing the value of the alleged 230,000 pieces of bangus which died when DBP took possession of the fishpond in March 1979, the same was not called for.Such loss was not duly proved; besides, the claim therefor was delayed unreasonably.From 1979 until after the filing of her complaint in court in May 1985, CUBA did not bring to the attention of DBP the alleged loss.In fact, in her letter dated 24 October 1979,[19]she declared:1.That from February to May 1978, I was then seriously ill in Manila and within the same period I neglected the management and supervision of the cultivation and harvest of the produce of the aforesaid fishpond thereby resulting to the irreparable loss in the produce of the same in the amount of aboutP500,000.00 to my great damage and prejudice due to fraudulent acts of some of my fishpond workers.Nowhere in the said letter, which was written seven months after DBP took possession of the fishpond, did CUBA intimate that upon DBPs take-over there was a total of 230,000 pieces of bangus, but all of which died because of DBPs representatives prevented her men from feeding the fish.The award of actual damages should, therefore, be struck down for lack of sufficient basis.In view, however, of DBPs act of appropriating CUBAs leasehold rights which was contrary to law and public policy, as well as its false representation to the then Ministry of Agriculture and Natural Resources that it had foreclosed the mortgage, an award of moral damages in the amount ofP50,000 is in order conformably with Article 2219(10), in relation to Article 21, of the Civil Code.Exemplary or corrective damages in the amount ofP25,000 should likewise be awarded by way of example or correction for the public good.[20]There being an award of exemplary damages, attorneys fees are also recoverable.[21]WHEREFORE, the 25 May 1994 Decision of the Court of Appeals in CA-G.R. CV No. 26535 is hereby REVERSED, except as to the award ofP50,000 as moral damages, which is hereby sustained.The 31 January 1990 Decision of the Regional Trial Court of Pangasinan, Branch 54, in Civil Case No. A-1574 is MODIFIED setting aside the finding that condition no. 12 of the deed of assignment constitutedpactum commissoriumand the award of actual damages; and by reducing the amounts of moral damages fromP100,000 toP50,000; the exemplary damages, fromP50,000 toP25,000; and the attorneys fees, fromP100,000 toP20,000.The Development Bank of the Philippines is hereby ordered to render an accounting of the income derived from the operation of the fishpond in question.Let this case be REMANDED to the trial court for the reception of the income statement of DBP, as well as the statement of the account of Lydia P. Cuba, and for the determination of each partys financial obligation to one another.SO ORDERED.

[G. R. No. 126800.November 29, 1999]NATALIA P. BUSTAMANTE,petitioner vs. SPOUSES RODITO F. ROSEL and NORMA A. ROSEL,respondents.R E S O L U T I O NPARDO,J. :The case before the Court is a petition for review on certiorari[1]to annul the decision of the Court of Appeals,[2]reversing and setting aside the decision of the Regional Trial Court,[3], dated November 10, 1992, Judge Teodoro P. Regino. 3Quezon City, Branch 84, in an action for specific performance with consignation.On March 8, 1987, at Quezon City, Norma Rosel entered into a loan agreement with petitioner Natalia Bustamante and her late husband Ismael C. Bustamante, under the following terms and conditions:1.That the borrowers are the registered owners of a parcel of land, evidenced by TRANSFER CERTIFICATE OF TITLE No. 80667, containing an area of FOUR HUNDRED TWENTY THREE (423) SQUARE Meters, more or less, situated along Congressional Avenue.2.That the borrowers were desirous to borrow the sum of ONE HUNDRED THOUSAND (P100,000.00) PESOS from the LENDER, for a period of two (2) years, counted from March 1, 1987, with an interest of EIGHTEEN (18%) PERCENT per annum, and to guaranty the payment thereof, they are putting as a collateral SEVENTY (70) SQUARE METERS portion, inclusive of the apartment therein, of the aforestated parcel of land, however, in the event the borrowers fail to pay, the lender has the option to buy or purchase the collateral for a total consideration of TWO HUNDRED THOUSAND (P200,000.00) PESOS, inclusive of the borrowed amount and interest therein;3.That the lender do hereby manifest her agreement and conformity to the preceding paragraph, while the borrowers do hereby confess receipt of the borrowed amount.[4]When the loan was about to mature on March 1, 1989, respondents proposed to buy at the pre-set price ofP200,000.00, the seventy (70) square meters parcel of land covered by TCT No. 80667, given as collateral to guarantee payment of the loan. Petitioner, however, refused to sell and requested for extension of time to pay the loan and offered to sell to respondents another residential lot located at Road 20, Project 8, Quezon City, with the principal loan plus interest to be used as down payment.Respondents refused to extend the payment of the loan and to accept the lot in Road 20 as it was occupied by squatters and petitioner and her husband were not the owners thereof but were mere land developers entitled to subdivision shares or commission if and when they developed at least one half of the subdivision area.[5]Hence, on March 1, 1989, petitioner tendered payment of the loan to respondents which the latter refused to accept, insisting on petitioners signing a prepared deed of absolute sale of the collateral.On February 28, 1990, respondents filed with the Regional Trial Court, Quezon City, Branch 84, a complaint for specific performance with consignation against petitioner and her spouse.[6]Nevertheless, on March 4, 1990, respondents sent a demand letter asking petitioner to sell the collateral pursuant to the option to buy embodied in the loan agreement.On the other hand, on March 5, 1990, petitioner filed in the Regional Trial Court, Quezon City a petition for consignation, and deposited the amount ofP153,000.00 with the City Treasurer of Quezon City on August 10, 1990.[7]When petitioner refused to sell the collateral and barangay conciliation failed, respondents consigned the amount ofP47,500.00 with the trial court.[8]In arriving at the amount deposited, respondents considered the principal loan of P100,000.00 and 18% interest per annum thereon, which amounted toP52,500.00.[9]The principal loan and the interest taken together amounted toP152,500.00, leaving a balance of P 47,500.00.[10]After due trial, on November 10, 1992, the trial court rendered decision holding:WHEREFORE, premises considered, judgment is hereby rendered as follows:1. Denying the plaintiffs prayer for the defendants execution of the Deed of Sale to Convey the collateral in plaintiffs favor;2.Ordering the defendants to pay the loan ofP100,000.00 with interest thereon at 18% per annum commencing on March 2, 1989, up to and until August 10, 1990, when defendants deposited the amount with the Office of the City Treasurer under Official Receipt No. 0116548 (Exhibit 2); and3. To pay Attorneys Fees in the amount of P 5,000.00, plus costs of suit.SO ORDERED.Quezon City, Philippines, November 10, 1992.TEODORO P. REGINOJudge[11]On November 16, 1992, respondents appealed from the decision to the Court of Appeals.[12]On July 8, 1996, the Court of Appeals rendered decision reversing the ruling of the Regional Trial Court. The dispositive portion of the Court of Appeals decision reads:IN VIEW OF THE FOREGOING, the judgment appeal (sic) from isREVERSEDandSET ASIDEand a new one entered in favor of the plaintiffs ordering the defendants to accept the amount ofP47,000.00 deposited with the Clerk of Court of Regional Trial Court of Quezon City under Official Receipt No. 0719847, and for defendants to execute the necessary Deed of Sale in favor of the plaintiffs over the 70 SQUARE METER portion and the apartment standing thereon being occupied by the plaintiffs and covered by TCT No. 80667 within fifteen (15) days from finality hereof.Defendants, in turn, are allowed to withdraw the amount ofP153,000.00 deposited by them under Official Receipt No. 0116548 of the City Treasurers Office of Quezon City. All other claims and counterclaims areDISMISSED, for lack of sufficient basis.No costs.SO ORDERED.[13]Hence, this petition.[14]On January 20, 1997, we required respondents to comment on the petition within ten (10) days from notice.[15]On February 27, 1997, respondents filed their comment.[16]On February 9, 1998, we resolved to deny the petition on the ground that there was no reversible error on the part of respondent court in ordering the execution of the necessary deed of sale in conformity the with the parties stipulated agreement. The contract is the law between the parties thereof (Syjuco v. Court of Appeals,172 SCRA 111, 118, citingPhil. American General Insurance v. Mutuc,61 SCRA 22;Herrera v. Petrophil Corporation,146 SCRA 360).[17]On March 17, 1998, petitioner filed with this Court a motion for reconsideration of the denial alleging that the real intention of the parties to the loan was to put up the collateral as guarantee similar to an equitable mortgage according to Article 1602 of the Civil Code.[18]On April 21, 1998, respondents filed an opposition to petitioners motion for reconsideration. They contend that the agreement between the parties was not a sale with right of re-purchase, but a loan with interest at 18% per annum for a period of two years and if petitioner fails to pay, the respondent was given the right to purchase the property or apartment forP200,000.00, which is not contrary to law, morals, good customs, public order or public policy.[19]Upon due consideration of petitioners motion, we now resolve to grant the motion for reconsideration.The questions presented are whether petitioner failed to pay the loan at its maturity date and whether the stipulation in the loan contract was valid and enforceable.We rule that petitioner did not fail to pay the loan.The loan was due for payment on March 1, 1989. On said date, petitioner tendered payment to settle the loan which respondents refused to accept, insisting that petitioner sell to them the collateral of the loan.When respondents refused to accept payment, petitioner consigned the amount with the trial court.We note the eagerness of respondents to acquire the property given as collateral to guarantee the loan. The sale of the collateral is an obligation with a suspensive condition.[20]It is dependent upon the happening of an event, without which the obligation to sell does not arise.Since the event did not occur, respondents do not have the right to demand fulfillment of petitioners obligation, especially where the same would not only be disadvantageous to petitioner but would also unjustly enrich respondents considering the inadequate consideration(P200,000.00) for a 70 square meter property situated at Congressional Avenue, Quezon City.Respondents argue that contracts have the force of law between the contracting parties and must be complied with in good faith.[21]There are, however, certain exceptions to the rule, specifically Article 1306 of the Civil Code, which provides:Article 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.A scrutiny of the stipulation of the parties reveals a subtle intention of the creditor to acquire the property given as security for the loan.This is embraced in the concept ofpactum commissorium, which is proscribed by law.[22]The elements ofpactum commissoriumare as follows: (1) there should be a property mortgaged by way of security for the payment of the principal obligation, and (2) there should be a stipulation for automatic appropriation by the creditor of the thing mortgaged in case of non-payment of the principal obligation within the stipulated period.[23]In Nakpil vs. Intermediate Appellate Court,[24]we said:The arrangement entered into between the parties, wherebyPulong Maulapwas to be considered sold to him (respondent) xxx in case petitioner fails to reimburse Valdes, must then be construed as tantamount topactum commissoriumwhich is expressly prohibited by Art. 2088ofthe Civil Code.For, there was to be automatic appropriation of the property by Valdes in the event of failure of petitioner to pay the value of the advances.Thus, contrary to respondents manifestation, all the elements of a pactum commissorium were present: there was a creditor-debtor relationship between the parties; the property was used as security for the loan; and there was automatic appropriation by respondent ofPulong Maulapin case of default of petitioner.A significant task in contract interpretation is the ascertainment of the intention of the parties and looking into the words used by the parties to project that intention.In this case, the intent to appropriate the property given as collateral in favor of the creditor appears to be evident, for the debtor is obliged to dispose of the collateral at the pre-agreed consideration amounting to practically the same amount as the loan.In effect, the creditor acquires the collateral in the event of non payment of the loan. This is within the concept ofpactum commissorium.Such stipulation is void.[25]All persons in need of money are liable to enter into contractual relationships whatever the condition if only to alleviate their financial burden albeit temporarily.Hence, courts are duty bound to exercise caution in the interpretation and resolution of contracts lest the lenders devour the borrowers like vultures do with their prey.WHEREFORE, we GRANT petitioners motion for reconsideration and SET ASIDE the Courts resolution of February 9,1998.We REVERSE the decision of the Court of Appeals in CA-G. R. CV No. 40193.In lieu thereof, we hereby DISMISS the complaint in Civil Case No. Q-90-4813.No costs.SO ORDERED.

SECOND DIVISIONSPOUSES WILFREDO N. ONG and EDNA SHEILA PAGUIO-ONG,Petitioners,- versus -ROBAN LENDING CORPORATION,Respondent.G.R. No.172592Present:QUISUMBING,J.,Chairperson,CARPIO MORALES,TINGA,BRION, andAUSTRIA-MARTINEZ,*JJ.Promulgated:July 9, 2008

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -xD E C I S I O NCARPIO MORALES,J.:On different dates fromJuly 14, 1999toMarch 20, 2000, petitioner-spouses Wilfredo N. Ong and Edna SheilaPaguio-Ongobtained several loans from Roban Lending Corporation (respondent) in the total amount ofP4,000,000.00.These loans were secured by a real estate mortgage on petitioners parcels of land located in Binauganan,TarlacCityand covered by TCT No. 297840.[1]OnFebruary 12, 2001, petitioners and respondent executed an Amendment to Amended Real Estate Mortgage[2]consolidating their loans inclusive of charges thereon which totaledP5,916,117.50.On even date, the parties executed a Dacion in Payment Agreement[3]wherein petitioners assigned the properties covered by TCT No. 297840 to respondent in settlement of their total obligation, and a Memorandum of Agreement[4]reading:That the FIRST PARTY [Roban Lending Corporation] and the SECOND PARTY [the petitioners] agreed to consolidate and restructure all aforementioned loans, which have been all past due and delinquent sinceApril 19, 2000, and outstanding obligations totaling P5,916,117.50.The SECOND PARTY hereby sign [sic] another promissory note in the amount of P5,916,117.50 (a copy of which is hereto attached and forms xxx an integral part of this document), with a promise to pay the FIRST PARTY in full within one year from the date of the consolidation and restructuring, otherwise the SECOND PARTY agree to have their DACION IN PAYMENT agreement, which they have executed and signed today in favor of the FIRST PARTY be enforced[.][5]In April 2002 (the day is illegible), petitioners filed a Complaint,[6]docketed as Civil Case No. 9322, before the Regional Trial Court (RTC) of Tarlac City, for declaration of mortgage contract as abandoned, annulment of deeds, illegal exaction, unjust enrichment, accounting, and damages, alleging that the Memorandum of Agreement and the Dacion in Payment executed are void for beingpactum commissorium.[7]Petitioners alleged that the loans extended to them from July 14, 1999 to March 20, 2000 were founded on several uniform promissory notes, which provided for 3.5% monthly interest rates, 5% penalty per month on the total amount due and demandable, and a further sum of 25% attorneys fees thereon,[8]and in addition, respondent exacted certain sums denominated as EVAT/AR.[9]Petitioners decried these additional charges as illegal, iniquitous, unconscionable, and revolting to the conscience as they hardly allow any borrower any chance of survival in case of default.[10]Petitioners further alleged that they had previously made payments on their loan accounts, but because of the illegal exactions thereon, the total balance appears not to have moved at all, hence, accounting was in order.[11]Petitioners thus prayed for judgment:a)Declaring the Real Estate Mortgage Contract and its amendments x x x as null and void and without legal force and effect for having been renounced, abandoned, and given up;b)Declaring the Memorandum of Agreement xxx and Dacion in Payment x x x as null and void for beingpactum commissorium;c)Declaring the interests, penalties, Evat [sic] and attorneys fees assessed and loaded into the loan accounts of the plaintiffs with defendant as unjust, iniquitous, unconscionable and illegal and therefore, stricken out or set aside;d)Ordering an accounting on plaintiffs loan accounts to determine the true and correct balances on their obligation against legal charges only; ande)Ordering defendant to [pay] to the plaintiffs: --e.1Moral damages in an amount not less than P100,000.00 and exemplary damages of P50,000.00;e.2Attorneys fees in the amount of P50,000.00 plus P1,000.00 appearance fee per hearing; ande.3The cost of suit.[12]as well as other just and equitable reliefs.In its Answer with Counterclaim,[13]respondent maintained the legality of its transactions with petitioners, alleging that:x x x xIf the voluntary execution of the Memorandum of Agreement and Dacion in Payment Agreement novated the Real Estate Mortgage then the allegation of Pactum Commissorium has no more legal leg to stand on;The Dacion in Payment Agreement is lawful and valid as it is recognized x x x under Art. 1245 of the Civil Code as a special form of payment whereby the debtor-Plaintiffs alienates their property to the creditor-Defendant in satisfaction of their monetary obligation;The accumulated interest and other charges which were computed for more than two (2) years would stand reasonable and valid taking into consideration [that] the principal loan isP4,000,000 and if indeed it became beyond the Plaintiffs capacity to pay then the fault is attributed to them and not the Defendant[.][14]After pre-trial, the initial hearing of the case, originally set onDecember 11, 2002, was reset several times due to, among other things, the parties efforts to settle the case amicably.[15]During the scheduled initial hearing ofMay 7, 2003, the RTC issued the following order:Considering that the plaintiff Wilfredo Ong is not around on the ground that he is inManilaand he is attending to a very sick relative, without objection on the part of the defendants counsel, the initial hearing of this case is reset toJune 18, 2003at10:00 oclockin the morning.Just in case [plaintiffs counsel] Atty. Concepcion cannot present his witness in the person of Mr. Wilfredo Ong in the next scheduled hearing, the counsel manifested that he will submit the case for summary judgment.[16](Underscoring supplied)It appears that theJune 18, 2003setting was eventually rescheduled toFebruary 11, 2004at which both counsels were present[17]and the RTC issued the following order:The counsel[s] agreed to reset this case onApril 14, 2004, at10:00 oclockin the morning.However, the counsels are directed tobe ready with their memorand[a]together with all the exhibits or evidence neededto support their respective positions which should be the basis for the judgment on the pleadingsif the parties fail to settle the case in the next scheduled setting.x x x x[18](Underscoring supplied)At the scheduledApril 14, 2004hearing, both counsels appeared but only the counsel of respondent filed a memorandum.[19]By Decision ofApril 21, 2004, Branch 64 of the Tarlac City RTC, finding on the basis of the pleadings that there was nopactum commissorium, dismissed the complaint.[20]On appeal,[21]the Court of Appeals[22]noted thatx x x [W]hile the trial court in its decision stated that it was rendering judgment on the pleadings, x x xwhat it actually rendered was a summary judgment.A judgment on the pleadings is proper when the answer fails to tender an issue, or otherwise admits the material allegations of the adverse partys pleading.However,a judgment on the pleadings would not have been proper in this case as the answer tendered an issue, i.e. the validity of the MOA and DPA.On the other hand, a summary judgment may be rendered by the court if the pleadings, supporting affidavits, and other documents show that, except as to the amount of damages, there is no genuine issue as to any material fact.[23]Nevertheless, finding the error in nomenclature to be mere semantics with no bearing on the merits of the case,[24]the Court of Appeals upheld the RTC decision that there was nopactum commissorium.[25]Their Motion for Reconsideration[26]having been denied,[27]petitioners filed the instant Petition for Review on Certiorari,[28]faulting the Court of Appeals for having committed a clear and reversible errorI.. . . WHEN IT FAILED AND REFUSED TO APPLY PROCEDURAL REQUISITES WHICH WOULD WARRANT THE SETTING ASIDE OF THE SUMMARY JUDGMENT IN VIOLATION OF APPELLANTS RIGHT TO DUE PROCESS;II.. . . WHEN IT FAILED TO CONSIDER THAT TRIAL IN THIS CASE IS NECESSARY BECAUSE THE FACTS ARE VERY MUCH IN DISPUTE;III.. . . WHEN IT FAILED AND REFUSED TO HOLD THAT THE MEMORANDUM OF AGREEMENT (MOA) AND THE DACION EN PAGO AGREEMENT (DPA) WERE DESIGNED TO CIRCUMVENT THE LAW AGAINSTPACTUM COMMISSORIUM; andIV.. . . WHEN IT FAILED TO CONSIDER THAT THE MEMORANDUM OF AGREEMENT (MOA) AND THE DACION EN PAGO (DPA) ARE NULL AND VOID FOR BEING CONTRARY TO LAW AND PUBLIC POLICY.[29]The petition is meritorious.Both parties admit the execution and contents of the Memorandum of Agreement and Dacion in Payment.They differ, however, on whether both contracts constitutepactum commissoriumordacion en pago.This Court finds that the Memorandum of Agreement and Dacion in Payment constitutepactum commissorium, which is prohibited under Article 2088 of the Civil Code which provides:The creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of them.Any stipulation to the contrary is null and void.The elements ofpactum commissorium,which enables the mortgagee to acquire ownership of the mortgaged property without the need of any foreclosure proceedings,[30]are:(1) there should be a property mortgaged by way of security for the payment of the principal obligation, and (2) there should be a stipulation for automatic appropriation by the creditor of the thing mortgaged in case of non-payment of the principal obligation within the stipulated period.[31]In the case at bar, the Memorandum of Agreement and the Dacion in Payment contain no provisions for foreclosure proceedings nor redemption.Under the Memorandum of Agreement, the failure by the petitioners to pay their debt within the one-year period gives respondent the right to enforce the Dacion in Payment transferring to it ownership of the properties covered by TCT No. 297840. Respondent, in effect, automatically acquires ownership of the properties upon petitioners failure to pay their debt within the stipulated period.Respondent argues that the law recognizesdacion en pagoas a special form of payment whereby the debtor alienates property to the creditor in satisfaction of a monetary obligation.[32]This does not persuade.In a truedacion en pago, the assignment of the property extinguishes the monetary debt.[33]In the case at bar, the alienation of the properties was by way of security, and not by way of satisfying the debt.[34]The Dacion in Payment did not extinguish petitioners obligation to respondent.On the contrary, under the Memorandum of Agreement executed on the same day as the Dacion in Payment, petitioners had to execute a promissory note forP5,916,117.50 which they were to pay within one year.[35]Respondent citesSolid Homes, Inc. v. Court of Appeals[36]where this Court upheld a Memorandum of Agreement/Dacion en Pago.[37]That case did not involve the issue ofpactum commissorium.[38]That the questioned contracts were freely and voluntarily executed by petitioners and respondent is of no moment,pactumcommissoriumbeing void for being prohibited by law.[39]Respecting the charges on the loans, courts may reduce interest rates, penalty charges, and attorneys fees if they are iniquitous or unconscionable.[40]This Court, based on existing jurisprudence,[41]finds the monthly interest rate of 3.5%, or 42% per annum unconscionable and thus reduces it to 12% per annum.This Court finds too the penalty fee at the monthly rate of 5% (60% per annum) of the total amount due and demandable principal plus interest, with interest not paid when due added to and becoming part of the principal and likewise bearing interest at the same rate, compounded monthly[42] unconscionable and reduces it to a yearly rate of 12% of the amount due, to be computed from the time of demand.[43]This Court finds the attorneys fees of 25% of the principal, interests and interests thereon, and the penalty fees unconscionable, and thus reduces the attorneys fees to 25% of the principal amount only.[44]The prayer for accounting in petitioners complaint requires presentation of evidence, they claiming to have made partial payments on their loans,vis a visrespondents denial thereof.[45]A remand of the case is thus in order.Prescindingfrom the above disquisition, the trial court and the Court of Appeals erred in holding that a summary judgment is proper.A summary judgment is permitted only if there is no genuine issue as to any material fact and a moving party is entitled to a judgment as a matter of law.[46]A summary judgment is proper if, while the pleadings on their face appear to raise issues, the affidavits, depositions, and admissions presented by the moving party show that such issues are not genuine.[47]A genuine issue, as opposed to a fictitious or contrived one, is an issue of fact that requires the presentation of evidence.[48]As mentioned above, petitioners prayer for accounting requires the presentation of evidence on the issue of partial payment.But neither is a judgment on the pleadings proper.A judgment on the pleadings may be rendered only when an answer fails to tender an issue or otherwise admits the material allegations of the adverse partys pleadings.[49]In the case at bar, respondents Answer with Counterclaim disputed petitioners claims that the Memorandum of Agreement and Dation in Payment are illegal and that the extra charges on the loans are unconscionable.[50]Respondent disputed too petitioners allegation of bad faith.[51]WHEREFORE, the challenged Court of Appeals Decision isREVERSEDandSET ASIDE.The Memorandum of Agreement and the Dacionin Payment executed by petitioner- spouses Wilfredo N. Ong and Edna Sheila Paguio-Ong and respondent Roban Lending Corporation onFebruary 12, 2001are declared NULL AND VOID for beingpactum commissorium.In line with the foregoing findings, the following terms of the loan contracts between the parties areMODIFIEDas follows:1.The monthly interest rate of 3.5%, or 42%per annum, is reduced to 12%per annum;2.The monthly penalty fee of 5% of the total amount due and demandable is reduced to 12%per annum, to be computed from the time of demand; and3.The attorneys fees are reduced to 25% of the principal amount only.Civil Case No. 9322 isREMANDEDto the court of origin only for the purpose of receiving evidence on petitioners prayer for accounting.SO ORDERED.

G.R. No. 131679 February 1, 2000CAVITE DEVELOPMENT BANK and FAR EAST BANK AND TRUST COMPANY,petitioners,vs.SPOUSES CYRUS LIM and LOLITA CHAN LIM and COURT OF APPEALS,respondents.MENDOZA,J.:This is a petition for review oncertiorariof the decision1of the Court of Appeals in C.A. GR CV No. 42315 and the order dated December 9, 1997 denying petitioners' motion for reconsideration.The following facts are not in dispute.Petitioners Cavite Development Bank (CDB) and Far East Bank and Trust Company (FEBTC) are banking institutions duly organized and existing under Philippine laws. On or about June 15, 1983, a certain Rodolfo Guansing obtained a loan in the amount of P90,000.00 from CDB, to secure which he mortgaged a parcel of land situated at No. 63 Calavite Street, La Loma, Quezon City and covered by TCT No. 300809 registered in his name. As Guansing defaulted in the payment of his loan, CDB foreclosed the mortgage. At the foreclosure sale held on March 15, 1984, the mortgaged property was sold to CDB as the highest bidder. Guansing failed to redeem, and on March 2, 1987, CDB consolidated title to the property in its name. TCT No. 300809 in the name of Guansing was cancelled and, in lieu thereof, TCT No. 355588 was issued in the name of CDB.1wphi1.ntOn June 16, 1988, private respondent Lolita Chan Lim, assisted by a broker named Remedios Gatpandan, offered to purchase the property from CDB. The written Offer to Purchase, signed by Lim and Gatpandan, states in part:We hereby offer to purchase your property at #63 Calavite and Retiro Sts., La Loma, Quezon City for P300,000.00 under the following terms and conditions:(1) 10% Option Money;(2) Balance payable in cash;(3) Provided that the property shall be cleared of illegal occupants or tenants.Pursuant to the foregoing terms and conditions of the offer, Lim paid CDB P30,000.00 as Option Money, for which she was issued Official Receipt No. 3160, dated June 17, 1988, by CDB. However, after some time following up the sale, Lim discovered that the subject property was originally registered in the name of Perfecto Guansing, father of mortgagor Rodolfo Guansing, under TCT No. 91148. Rodolfo succeeded in having the property registered in his name under TCT No. 300809, the same title he mortgaged to CDB and from which the latter's title (TCT No. 355588) was derived. It appears, however, that the father, Perfecto, instituted Civil Case No. Q-39732 in the Regional Trial Court, Branch 83, Quezon City, for the cancellation of his son's title. On March 23, 1984, the trial court rendered a decision2restoring Perfecto's previous title (TCT No. 91148) and cancelling TCT No. 300809 on the ground that the latter was fraudulently secured by Rodolfo. This decision has since become final and executory.Aggrieved by what she considered a serious misrepresentation by CDB and its mother-company, FEBTC, on their ability to sell the subject property, Lim, joined by her husband, filed on August 29, 1989 an action for specific performance and damages against petitioners in the Regional Trial Court, Branch 96, Quezon City, where it was docketed as Civil Case No. Q-89-2863. On April 20, 1990, the complaint was amended by impleading the Register of Deeds of Quezon City as an additional defendant.On March 10, 1993, the trial court rendered a decision in favor of the Lim spouses. It ruled that: (1) there was a perfected contract of sale between Lim and CDB, contrary to the latter's contention that the written offer to purchase and the payment of P30,000.00 were merely pre-conditions to the sale and still subject to the approval of FEBTC; (2) performance by CDB of its obligation under the perfected contract of sale had become impossible on account of the 1984 decision in Civil Case No. Q-39732 cancelling the title in the name of mortgagor Rodolfo Guansing; (3) CDB and FEBTC were not exempt from liability despite the impossibility of performance, because they could not credibly disclaim knowledge of the cancellation of Rodolfo Guansing's title without the admitting their failure to discharge their duties to the public as reputable banking institutions; and (4) CDB and FEBTC are liable for damages for the prejudice caused against the Lims.3Based on the foregoing findings, the trial court ordered CDB and FEBTC to pay private respondents, jointly and severally, the amount of P30,000.00 plus interest at the legal rate computed from June 17, 1988 until full payment. It also ordered petitioners to pay private respondents, jointly and severally, the amounts of P250,000.00 as moral damages, P50,000.00 as exemplary damages, P30,000.00 as attorney's fees, and the costs of the suit.4Petitioners brought the matter to the Court of Appeals, which, on October 14, 1997, affirmedin totothe decision of the Regional Trial Court. Petitioners moved for reconsideration, but their motion was denied by the appellate court on December 9, 1997. Hence, this petition. Petitioners contend that 1. The Honorable Court of Appeals erred when it held that petitioners CDB and FEBTC were aware of the decision dated March 23, 1984 of the Regional Trial Court of Quezon City in Civil Case No. Q-39732.2. The Honorable Court of Appeals erred in ordering petitioners to pay interest on the deposit of THIRTY THOUSAND PESOS (P30,000.00) by applying Article 2209 of the New Civil Code.3. The Honorable Court of Appeals erred in ordering petitioners to pay moral damages, exemplary damages, attorney's fees and costs of suit.I.At the outset, it is necessary to determine the legal relation, if any, of the parties.Petitioners deny that a contract of sale was ever perfected between them and private respondent Lolita Chan Lim. They contend that Lim's letter-offer clearly states that the sum of P30,000,00 was given as option money, not as earnest money.5They thus conclude that the contract between CDB and Lim was merely an option contract, not a contract of sale.The contention has no merit. Contracts are not defined by the parries thereto but by principles of law.6In determining the nature of a contract, the courts are not bound by the name or title given to it by the contracting parties.7In the case at bar, the sum of P30,000.00, although denominated in the offer to purchase as "option money," is actually in the nature of earnest money or down payment when considered with the other terms of the offer. InCarceler v.Court of Appeals,8we explained the nature of an option contract,viz. An option contract is a preparatory contract in which one party grants to the other, for a fixed period and under specified conditions, the power to decide, whether or not to enter into a principal contract, it binds the party who has given the option not to enter into the principal contract with any other person during the period; designated, and within that period, to enter into such contract with the one to whom the option was granted, if the latter should decide to use the option. It is a separate agreement distinct from the contract to which the parties may enter upon the consummation of the option.An option contract is therefore a contract separate from and preparatory to a contract of sale which, if perfected, does not result in the perfection or consummation of the sale. Only when the option is exercised may a sale be perfected.In this case, however, after the payment of the 10% option money, the Offer to Purchase provides for the payment only of the balance of the purchase price, implying that the "option money" forms part of the purchase price. This is precisely the result of paying earnest money under Art. 1482 of the Civil Code. It is clear then that the parties in this case actually entered into a contract of sale, partially consummated as to the payment of the price. Moreover, the following findings of the trial court based on the testimony of the witnesses establish that CDB accepted Lim's offer to purchase:It is further to be noted that CDB and FEBTC already considered plaintiffs' offer as good and no longer subject to a final approval. In his testimony for the defendants on February 13, 1992, FEBTC's Leomar Guzman stated that he was then in the Acquired Assets Department of FEBTC wherein plaintiffs' offer to purchase was endorsed thereto by Myoresco Abadilla, CDB's senior vice-president, with a recommendation that the necessary petition for writ of possession be filed in the proper court; that the recommendation was in accord with one of the conditions of the offer,i.e., the clearing of the property of illegal occupants or tenants (tsn, p. 12); that, in compliance with the request, a petition for writ of possession was thereafter filed on July 22, 1988 (Exhs. 1 and 1-A); that the offer met the requirements of the banks; and that no rejection of the offer was thereafter relayed to the plaintiffs (p. 17); which was not a normal procedure, and neither did the banks return the amount of P30,000.00 to the plaintiffs.9Given CDB's acceptance of Lim's offer to purchase, it appears that a contract of sale was perfected and, indeed, partially executed because of the partial payment of the purchase price. There is, however, a serious legal obstacle to such sale, rendering it impossible for CDB to perform its obligation as seller to deliver and transfer ownership of the property.Nemo dat quod non habet, as an ancient Latin maxim says. One cannot give what one does not have. In applying this precept to a contract of sale, a distinction must be kept in mind between the "perfection" and "consummation" stages of the contract.A 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.10It is, therefore, not required that, at the perfection stage, the seller be the owner of the thing sold or even that such subject matter of the sale exists at that point in time.11Thus, under Art. 1434 of the Civil Code, when a person sells or alienates a thing which, at that time, was not his, but later acquires title thereto, such title passes by operation of law to the buyer or grantee. This is the same principle behind the sale of "future goods" under Art. 1462 of the Civil Code. However, under Art. 1459, at the time of delivery or consummation stage of the sale, it is required that the seller be the owner of the thing sold. Otherwise, he will not be able to comply with his obligation to transfer ownership to the buyer. It is at the consummation stage where the principle ofnemo dat quod non habetapplies.InDignos v.Court of Appeals,12the subject contract of sale was held void as the sellers of the subject land were no longer the owners of the same because of a prior sale.13Again, inNool v.Court of Appeals,14we ruled that a contract of repurchase, in which the seller does not have any title to the property sold, is invalid:We cannot sustain petitioners' view. Article 1370 of the Civil Code is applicable only to valid and enforceable contracts. The Regional Trial Court and the Court of Appeals rules that the principal contract of sale contained in Exhibit C and the auxiliary contract of repurchase in Exhibit D are both void. This conclusion of the two lower courts appears to find support inDignos v.Court of Appeals, where the Court held:Be that as it may, it is evident that when petitioners sold said land to the Cabigas spouses, they were no longer owners of the same and the sale is null and void.In the present case, it is clear that the sellers no longer had any title to the parcels of land at the time of sale. Since Exhibit D, the alleged contract of repurchase, was dependent on the validity of Exhibit C, it is itself void. A void contract cannot give rise to a valid one. Verily, Article 1422 of the Civil Code provides that (a) contract which is the direct result of a previous illegal contract, is also void and inexistent.We should however add that Dignos did not cite its basis for ruling that a "sale is null and void" where the sellers "were no longer the owners" of the property. Such a situation (where the sellers were no longer owners) does not appear to be one of the void contracts enumerated in Article 1409 of the Civil Code. Moreover, the Civil Code itself recognizes a sale where the goods are to be acquired . . . by the seller after the perfection of the contract of sale, clearly implying that a sale is possible even if the seller was not the owner at the time of sale, provided he acquires title to the property later on.In the present case, however, it is likewise clear that the sellers can no longer deliver the object of the sale to the buyers, as the buyers themselves have already acquired title and delivery thereof from the rightful owner, the DBP. Thus, such contract may be deemed to be inoperative and may thus fall, by analogy, under item No. 5 of Article 1409 of the Civil Code: Those which contemplate an impossible service. Article 1459 of the Civil Code provides that "the vendor must have a right to transfer the ownership thereof [subject of the sale] at the time it is delivered." Here, delivery of ownership is no longer possible. It has become impossible.15In this case, the sale by CDB to Lim of the property mortgaged in 1983 by Rodolfo Guansing must, therefore, be deemed a nullity for CDB did not have a valid title to the said property. To be sure, CDB never acquired a valid title to the property because the foreclosure sale, by virtue of which, the property had been awarded to CDB as highest bidder, is likewise void since the mortgagor was not the owner of the property foreclosed.A foreclosure sale, though essentially a "forced sale," is still a sale in accordance with Art. 1458 of the Civil Code, under which the mortgagor in default, the forced seller, becomes obliged to transfer the ownership of the thing sold to the highest bidder who, in turn, is obliged to pay therefor the bid price in money or its equivalent. Being a sale, the rule that the seller must be the owner of the thing sold also applies in a foreclosure sale. This is the reason Art. 208516of the Civil Code, in providing for the essential requisites of the contract of mortgage and pledge, requires, among other things, that the mortgagor or pledgor be the absolute owner of the thing pledged or mortgaged, in anticipation of a possible foreclosure sale should the mortgagor default in the payment of the loan.There is, however, a situation where, despite the fact that the mortgagor is not the owner of the mortgaged property, his title being fraudulent, the mortgage contract and any foreclosure sale arising therefrom are given effect by reason of public policy. This is the doctrine of "the mortgagee in good faith" based on the rule that all persons dealing with property covered by a Torrens Certificate of Title, as buyers or mortgagees, are not required to go beyond what appears on the face of the title.17The public interest in upholding the indefeasibility of a certificate of title, as evidence of the lawful ownership of the land or of any encumbrance thereon, protects a buyer or mortgagee who, in good faith, relied upon what appears on the face of the certificate of title.This principle is cited by petitioners in claiming that, as a mortgagee bank, it is not required to make a detailed investigation of the history of the title of the property given as security before accepting a mortgage.We are not convinced, however, that under the circumstances of this case, CDB can be considered a mortgagee in good faith. While petitioners are not expected to conduct an exhaustive investigation on the history of the mortgagor's title, they cannot be excused from the duty of exercising the due diligence required of banking institutions. InTomas v.Tomas,18we noted that it is standard practice for banks, before approving a loan, to send representatives to the premises of the land offered as collateral and to investigate who are real owners thereof, noting that banks are expected to exercise more care and prudence than private individuals in their dealings, even those involving registered lands, for their business is affected with public interest. We held thus:We, indeed, find more weight and vigor in a doctrine which recognizes a better right for the innocent original registered owner who obtained his certificate of title through perfectly legal and regular proceedings, than one who obtains his certificate from a totally void one, as to prevail over judicial pronouncements to the effect that one dealing with a registered land, such as a purchaser, is under no obligation to look beyond the certificate of title of the vendor, for in the latter case, good faith has yet to be established by the vendee or transferee, being the most essential condition, coupled with valuable consideration, to entitle him to respect for his newly acquired title even as against the holder of an earlier and perfectly valid title.There might be circumstances apparent on the face of the certificate of title which could excite suspicion as to prompt inquiry, such as when the transfer is not by virtue of a voluntary act of the original registered owner, as in the instant case, where it was by means of a self-executed deed of extra-judicial settlement, a fact which should be noted on the face of Eusebia Tomas certificate of title. Failing to make such inquiry would hardly be consistent with any pretense of good faith, which the appellant bank invokes to claim the right to be protected as a mortgagee, and for the reversal of the judgment rendered against it by the lower court.19In this case, there is no evidence that CDB observed its duty of diligence in ascertaining the validity of Rodolfo Guansing's title. It appears that Rodolfo Guansing obtained his fraudulent title by executing an Extra-Judicial Settlement of the Estate With Waiver where he made it appear that he and Perfecto Guansing were the only surviving heirs entitled to the property, and that Perfecto had waived all his rights thereto. This self-executed deed should have placed CDB on guard against any possible defect in or question as to the mortgagor's title. Moreover, the alleged ocular inspection report20by CDB's representative was never formally offered in evidence. Indeed, petitioners admit that they are aware that the subject land was being occupied by persons other than Rodolfo Guansing and that said persons, who are the heirs of Perfecto Guansing, contest the title of Rodolfo.21II.The sale by CDB to Lim being void, the question now arises as to who, if any, among the parties was at fault for the nullity of the contract. Both the trial court and the appellate court found petitioners guilty of fraud, because on June 16, 1988, when Lim was asked by CDB to pay the 10% option money, CDB already knew that it was no longer the owner of the said property, its title having been cancelled.22Petitioners contend that: (1) such finding of the appellate court is founded entirely on speculation and conjecture; (2) neither CDB nor FEBTC was a party in the case where the mortgagor's title was cancelled; (3) CDB is not privy to any problem among the Guansings; and (4) the final decision cancelling the mortgagor's title was not annotated in the latter's title.As a rule, only questions of law may be raised in a petition for review, except in circumstances where questions of fact may be properly raised.23Here, while petitioners raise these factual issues, they have not sufficiently shown that the instant case falls under any of the exceptions to the above rule. We are thus bound by the findings of fact of the appellate court. In any case, we are convinced of petitioners' negligence in approving the mortgage application of Rodolfo Guansing.III.We now come to the civil effects of the void contract of sale between the parties. Article 1412(2) of the Civil Code provides:If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed:x x x x x x x x x(2) When only one of the contracting parties is at fault, he cannot recover what he has given by reason of the contract, or ask for the fulfillment of what has been promised him. The other, who is not at fault, may demand the return of what he has given without any obligation to comply with his promise.Private respondents are thus entitled to recover the P30,000,00 option money paid by them. Moreover, since the filing of the action for damages against petitioners amounted to a demand by respondents for the return of their money, interest thereon at the legal rate should be computed from August 29, 1989, the date of filing of Civil Case No. Q-89-2863, not June 17, 1988, when petitioners accepted the payment. This is in accord with our ruling inCastillo v.Abalayan24that in case of avoid sale, the seller has no right whatsoever to keep the money paid by virtue thereof and should refund it, with interest at the legal rate, computed from the date of filing of the complaint until fully paid. Indeed, Art. 1412(2) which provides that the non-guilty party "may demand the return of what he has given" clearly implies that without such prior demand, the obligation to return what was given does not become legally demandable.Considering CDB's negligence, we sustain the award of moral damages on the basis of Arts. 21 and 2219 of the Civil Code and our ruling inTan v.Court of Appeals25that moral damages may be recovered even if a bank's negligence is not attended with malice and bad faith. We find, however, that the sum of P250,000.00 awarded by the trial court is excessive. Moral damages are only intended to alleviate the moral suffering undergone by private respondent, not to enrich them at the expenses of the petitioners.26Accordingly, the award of moral damages must be reduced to P50,000.00.Likewise, the award of P50,000.00 as exemplary damages, although justified under Art. 2232 of the Civil Code, is excessive and should be reduced to P30,000.00. The award of P30,000.00 attorney's fees based on Art. 2208, pars. 1, 2, 5 and 11 of the Civil Code should similarly be reduced to P20,000.00.WHEREFORE, the decision of the Court of Appeals is AFFIRMED with the MODIFICATION as to the award of damages as above stated.1wphi1.ntSO ORDERED.

G.R. No. 77465 May 21, 1988SPOUSES UY TONG & KHO PO GIOK,petitioners,vs.HONORABLE COURT OF APPEALS, HONORABLE BIENVENIDO C. EJERCITO, Judge of the Court of First Instance of Manila, Branch XXXVII and BAYANIHAN AUTOMOTIVE CORPORATION,respondents.Platon A. Baysa for petitioner.Manuel T. Ybarra for respondents.CORTES,J.:In the present petition, petitioners assail the validity of a deed of assignment over an apartment unit and the leasehold rights over the land on which the building housing the said apartment stands for allegedly being in the nature of apactum commissorium.The facts are not disputed.Petitioners Uy Tong (also known as Henry Uy) and Kho Po Giok (SPOUSES) used to be the owners of Apartment No. 307 of the Ligaya Building, together with the leasehold right for ninety- nine (99) years over the land on which the building stands. The land is registered in the name of Ligaya Investments, Inc. as evidenced by Transfer Certificate of Title No. 79420 of the Registry of Deeds of the City of Manila. It appears that Ligaya Investments, Inc. owned the building which houses the apartment units but sold Apartment No. 307 and leased a portion of the land in which the building stands to the SPOUSES.In February, 1969, the SPOUSES purchased from private respondent Bayanihan Automotive, Inc. (BAYANIHAN) seven (7) units of motor vehicles for a total amount of P47,700.00 payable in three (3) installments. The transaction was evidenced by a written "Agreement" wherein the terms of payment had been specified as follows:That immediately upon signing of this Agreement, the VENDEE shall pay unto the VENDOR the amount of Seven Thousand Seven Hundred (P7,000.00) Pesos, Philippine Currency, and the amount of Fifteen Thousand (P15,000.00) Pesos shah be paid on or before March 30, 1969 and the balance of Twenty Five Thousand (P25,000.00) Pesos shall be paid on or before April 30, 1969, the said amount again to be secured by another postdated check with maturity on April 30, 1969 to be drawn by the VENDEE;That it is fully understood that should the two (2) aforementioned checks be not honored on their respective maturity dates, herein VENDOR will give VENDEE another sixty (60) days from maturity dates, within which to pay or redeem the value of the said checks;That if for any reason the VENDEE should fail to pay her aforementioned obligation to the VENDOR,the latter shall become automatically the owner of the former's apartment which is located at No. 307, Ligaya Building, Alvarado St., Binondo, Manila, with the only obligation on its part to pay unto the VENDEE the amount of Three Thousand Five Hundred Thirty Five (P3,535.00) Pesos, Philippine Currency; and in such event the VENDEE shall execute the corresponding Deed of absolute Sale in favor of the VENDOR and or the Assignment of Leasehold Rights.[emphasis supplied]. (Quoted in Decision in Civil Case No. 80420, Exhibit "A" of Civil Case No. 1315321].After making a downpayment of P7,700.00, the SPOUSES failed to pay the balance of P40,000.00. Due to these unpaid balances, BAYANIHAN filed an action for specific performance against the SPOUSES docketed as Civil Case No. 80420 with the Court of First Instance of Manila.On October 28, 1978, after hearing, judgment was rendered in favor of BAYANIHAN in a decision the dispositive portion of which reads:WHEREFORE, judgment is hereby rendered, ordering the defendants, jointly and severally, to pay the plaintiffs, the sum of P40,000.00, with interest at the legal rate from July 1, 1970 until full payment.In the event of their failure to do so within thirty (30) days from notice of this judgment, they are hereby ordered to execute the corresponding deed of absolute sale in favor of the plaintiff and/or the assignment of leasehold rights over the defendant's apartment located at 307 Ligaya Building, Alvarado Street, Binondo, Manila, upon the payment by the plaintiff to the defendants of the sum of P3,535.00.[emphasis supplied].Pursuant to said judgment, an order for execution pending appeal was issued by the trial court and a deed of assignment dated May 27, 1972, was executed by the SPOUSES [Exhibit "B", CFI Records, p. 127] over Apartment No. 307 of the Ligaya Building together with the leasehold right over the land on which the building stands. The SPOUSES acknowledged receipt of the sum of P3,000.00 more or less, paid by BAYANIHAN pursuant to the said judgment.Notwithstanding the execution of the deed of assignment the SPOUSES remained in possession of the premises. Subsequently, they were allowed to remain in the premises as lessees for a stipulated monthly rental until November 30,1972.Despite the expiration of the said period, the SPOUSES failed to surrender possession of the premises in favor of BAYANIHAN. This prompted BAYANIHAN to file an ejectment case against them in the City Court of Manila docketed as Civil Case No. 240019. This action was however dismissed on the ground that BAYANIHAN was not the real party in interest, not being the owner of the building.On February 7, 1979, after demands to vacate the subject apartment made by BAYANIHAN's counsel was again ignored by the SPOUSES, an action for recovery of possession with damages was filed with the Court of First Instance of Manila, docketed as Civil Case No. 121532 against the SPOUSES and impleading Ligaya Investments, Inc. as party defendant. On March 17, 1981, decision in said case was rendered in favor of BAYANIHAN ordering the following:WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants spouses UY TONG and KHO GIOK and defendant Ligaya Investment, Inc., dismissing defendants' counterclaim and ordering:1. The defendants spouses UY TONG and KHO PO GIOK and any andlor persons claiming right under them, to vacate, surrender and deliver possession of Apartment 307, Ligaya Building, located at 64 Alvarado Street, Binondo, Manila to the plaintiff;2. Ordering defendant Ligaya Investment, Inc. to recognize the right of ownership and possession of the plaintiff over Apartment No. 307, Ligaya Building;3. Ordering Ligaya Investment, Inc. to acknowledge plaintiff as assignee-lessee in liue of defendants spouses Uy Tong and Kho Po Giok over the lot on which the building was constructed;4. Ordering the defendants spouses Uy Tong and Kho Po Giok to pay to the plaintiff the sum of P200.00 commencing from June, 1971 to November 30, 1972, or a total amount of P3,400.00 as rental for the apartment, and the sum of P200.00 from December 1, 1972 until the premises are finally vacated and surrendered to the plaintiff, as reasonable compensation for the use of the apartment; and5. Ordering the defendants spouses Uy Tong and Kho Po Giok to pay P3,000.00 as and for attorney's fees to the plaintiff, and the costs of this suit.Not satisfied with this decision, the SPOUSES appealed to the Court of Appeals. On October 2,1984, the respondent Court of Appeals affirmedin totothe decision appealed from [Petition, Annex "A", Rollo, pp. 15-20]. A motion for reconsideration of the said decision was denied by the respondent Court in a resolution dated February 11, 1987 [Petition, Annex "C", Rollo, pp. 31- 34].Petitioners-SPOUSES in seeking a reversal of the decision of the Court of Appeals rely on the following reasons:I. The deed of assignment is null and void because it is in the nature of apactum commissoriumand/or was borne out of the same.II. The genuineness and due Prosecution of the deed of assignment was not deemed admitted by petitioner.III. The deed of assignment is unenforceable because the condition for its execution was not complied with.IV. The refusal of petitioners to vacate and surrender the premises in question to private respondent is justified and warranted by the circumstances obtaining in the instant case.I. In support of the first argument, petitioners bring to the fore the contract entered into by the parties whereby petitioner Kho Po Giok agreed that the apartment in question will automatically become the property of private respondent BAYANIHAN upon her mere failure to pay her obligation. This agreement, according to the petitioners is in the nature of apactum commissoriumwhich is null and void, hence, the deed of assignment which was borne out of the same agreement suffers the same fate.The prohibition onpactum commissoriumstipulations is provided for by Article 2088 of the Civil Code:Art. 2088. The creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of the same. Any stipulation to the contrary is null and void.The aforequoted provision furnishes the two elements forpactumcommissoriumto exist: (1) that there should be a pledge or mortgage wherein a property is pledged or mortgaged by way of security for the payment of the principal obligation; and (2) that there should be a stipulation for an automatic appropriation by the creditor of the thing pledged or mortgaged in the event of non-payment of the principal obligation within the stipulated period.A perusal of the terms of the questioned agreement evinces no basis for the application of thepactum commissoriumprovision. First, there is no indication of 'any contract of mortgage entered into by the parties. It is a fact that the parties agreed on the sale and purchase of trucks.Second, there is no case of automatic appropriation of the property by BAYANIHAN. When the SPOUSES defaulted in their payments of the second and third installments of the trucks they purchased, BAYANIHAN filed an action in court for specific performance. The trial court rendered favorable judgment for BAYANIHAN and ordered the SPOUSES to pay the balance of their obligation and in case of failure to do so, to execute a deed of assignment over the property involved in this case. The SPOUSES elected to execute the deed of assignment pursuant to said judgment.Clearly, there was no automatic vesting of title on BAYANIHAN because it took the intervention of the trial court to exact fulfillment of the obligation, which, by its very nature is ". . anathema to the concept ofpacto commissorio" [Northern Motors, Inc. v. Herrera, G.R. No. L-32674, February 22, 1973, 49 SCRA 392]. And even granting that the original agreement between the parties had the badges ofpactum commissorium, the deed of assignment does not suffer the same fate as this was executed pursuant to a valid judgment in Civil Case No. 80420 as can be gleaned from its very terms and conditions:DEED OF ASSIGNMENTKNOW ALL MEN BY THESE PRESENTS:This deed made and entered into by Uy Tiong also known as Henry Uy and Kho Po Giok, both of legal age, husband and wife, respectively, and presently residing at 307 Ligaya Bldg., Alvarado St., Binondo, Manila, and hereinafter to be known and called as the ASSIGNORS, in favor of Bayanihan Automotive Corporation, an entity duly organized and existing under the laws of the Philippines, with principal business address at 1690 Otis St., Paco, Manila and hereinafter to be known and called the ASSIGNEE;-witnesseth-WHEREAS, the ASSIGNEE has filed a civil complaint for "Specific Performance with Damages" against the ASSIGNORS in the Court of First Instance of Manila, Branch V, said case having been docketed as Civil Case No. 80420;WHEREAS, the ASSIGNEE was able to obtain a judgment against the ASSIGNOR wherein the latter was ordered by the court as follows, to wit:WHEREFORE, judgment is hereby rendered ordering the defendants, jointly and severally to pay the plaintiff the sum of P40,000.00, with interest at the legal rate from July 31, 1970 until full payment. In the event of their failure to do so within thirty (30) days from notice of this judgment, they are hereby ordered to execute the corresponding deed of absolute sale in favor of the plaintiff and/or the assignment of leasehold, rights over the defendants' apartment located at No. 307 Ligaya Building, Alvarado Street, Binondo, Manila, upon the payment by the plaintiff to the defendants the sum of P 3,535.00. The defendants shall pay the costs.WHEREAS, the court, upon petition by herein ASSIGNEE and its deposit of sufficient bond, has ordered for the immediate execution of the said decision even pending appeal of the aforesaid decision;WHEREAS, the ASSIGNORS have elected to just execute the necessary deed of sale and/or assignment of leasehold rights over the apartment mentioned in the decision in favor of the herein ASSIGNEE;NOW, THEREFORE, for and in consideration of the foregoing premises, the ASSIGNORS have transferred assigned and ceded, and by these presents do hereby transfer, assign and cede all their rights and interests over that place known as Apartment No. 307 at the Ligaya Building which is located at No. 864 Alvarado St., Binondo, Manila, together with the corresponding leasehold rights over the lot on which the said building is constructed, in favor of the hererein ASSIGNEE, its heirs or assigns.IN WITNESS WHEREOF, We have hereunto signed our names this 2