G.R. No. 175554

December 23, 2008

EDSEL LIGA, petitioner, vs. ALLEGRO RESOURCES CORP., respondent. DECISION TINGA, J.: Before the Court is the petition for review 1 under Rule 45 of the Rules of Court assailing the Court of Appeals' Decision2 dated 25 January 2006 and Resolution3 dated 22 November 2006 in CA-G.R. SP No. 86331. The undisputed factual antecedents of the case are as follows: On 10 October 1975, Ortigas & Company, Limited Partnership (Ortigas) entered into a lease agreement with La Paz Investment & Realty Corporation (La Paz) wherein the former leased to the latter its parcel of land located in San Juan, Metro Manila (now San Juan City) consisting of 5,514 square meters for a period of twenty-five (25) years from 1 January 1976 to 31 December 2000. Under the lease agreement, La Paz undertook to construct a two or three-storey concrete framed commercial building for the establishment of first class stores which would be subdivided into various stalls for subleasing to interested parties.4 In compliance with its undertaking, La Paz constructed the Greenhills Shopping Arcade (GSA) and divided it into several stalls and subleased them to other people. One of the sub-lessees was Edsel Liga (Liga), who obtained the leasehold right to Unit No. 26, Level A of the GSA. As the lease of La Paz had expired on 31 December 2000, the stallholders, through the Greenhills Shoppesville Unit Lessees' Association, Inc. (GSULAI), made several attempts to have their leasehold rights extended. Even prior to the expiration of their leaseholds, the sub-lessees made several overtures to Ortigas but these were all denied. These developments notwithstanding, Liga was allowed by Ortigas to remain in possession of her leased property. On 30 August 2001, Ortigas formally informed the GSULAI of the impending lease of the GSA to respondent Allegro Resources Corporation (Allegro).5 On 3 September 2001, Ortigas and Allegro executed the corresponding Contract of Lease.6 On the same day, the same parties executed the Addendum to Agreement, Section 1 of which provides that "(t)he LESSEE (Allegro) shall take immediate possession and control of the leased premises upon the signing of the Contract of Lease." and "also assist in the collection of back rentals due to the LESSOR (Ortigas) in Shoppesville Arcade from 1 January 2001 up to the 31 August 2001, when it shall commence to pay rentals for its own account."7 As the new lessee, Allegro offered to sublease Unit No. 26, Level A to Liga. Subsequently they entered into a lease agreement dubbed Rental Information8 in which Liga agreed to pay rental of P40,000.00 monthly starting 1 September 2001. She also agreed to pay the back rentals covering the months of January through August 2001 due Ortigas. Upon signing the agreement, Liga also gave P40,000.00 as one month advance rental and another P40,000.00 as one month security deposit as provided in the agreement.9 Liga's compliance with the agreement ended as soon as it was executed. Despite repeated demands from Allegro, Liga had failed to pay her rentals for the subleased property, as well as the back rentals from January to August 2001 due Ortigas. Hence, Allegro filed a complaint for ejectment on 15 March 2002 with the Metropolitan Trial Court (MeTC) of San Juan, Metro Manila, Branch 57.10 The MeTC rendered a decision11 in favor of Allegro, ordering Liga to vacate the subleased stall and to pay back rentals for her continuous possession of the property. The MeTC held that Allegro has rightful possession over the disputed stall since Liga's continued occupancy from 1 January 2001 to 31 August 2001 was by mere tolerance of Ortigas and that ceased upon the execution of a contract of lease between Ortigas and Allegro. The MeTC found that Liga had agreed to sublease the property for P40,000.00 per month. In compliance with the lease agreement with Allegro, Liga even paid the sum of P80,000.00 corresponding to one-month advance rental and one-month security deposit as evidenced by a provisional receipt issued by the former. It thus ordered Liga to pay Allegro P210,000.00 representing back rentals from 1 October 2001 to February 2002 and P20,000.00 per month as reasonable compensation for the use of the premises from the filing of the ejectment suit until it is vacated. On appeal, the Regional Trial Court (RTC) affirmed the decision of the MeTC but made modifications with respect to its monetary awards.12 It extended the period of lease over the property for two years at a rental rate of P20,000.00 per month, and ordered Liga to pay P80,000.00 as back rentals for the period of September 2001 to February 2002 and P20,000.00 per month as rental from March 2002 until the property is vacated.

Allegro filed a petition for review13 under Rule 42 of the Rules of Court before the Court of Appeals assailing the modified decision of the RTC. The appellate court, in a Decision dated 25 January 2006, granted Allegro's petition and set aside the RTC's decision. 14 It held that after the expiration of La Paz's lease with Ortigas on 31 December 2000, Liga occupied the property merely by tolerance of Ortigas and that it was incorrect for the RTC to extend the lease contract for two years since it would infringe on the parties right to contract and Liga herself had never raised as an issue the extension of the lease contract before the MeTC. It found that Liga signed the Rental Information with Allegro and agreed to a monthly rental of P40,000.00 starting 1 September 2001. The appellate court ordered Liga to pay Ortigas back rentals of P20,000.00 per month for the period of 1 January 2001 to 31 August 2001 and P40,000.00 per month as rentals to Allegro starting 1 September 2001 until the property is vacated. In a Resolution dated 22 November 2006, the Court of Appeals denied Liga's motion for reconsideration.15 Hence, the present petition for review before this Court. The petition raised the following issues: whether the Court of Appeals had erred in ordering Liga to pay: (a) to Ortigas back rentals covering the period 1 January 2001 to 31 August 2001 totaling of P160,000.00; (b) to Allegro back rentals in the amount of P40,000.00 a month starting from 1 September 2001 until such time as she vacates the leased property; and (c) to Allegro the amount of P20,000.00 as attorney's fees and the costs of suit.16 Liga argues that the Court of Appeals erred in ordering her to pay Ortigas back rentals although the latter is not a party in the instant case. The ruling of the appellate court ran counter to the Court's doctrine that judgment cannot bind persons who are not parties to the action. 17 She avers that Allegro was already estopped from claiming monthly rentals in the amount of P40,000.00 starting from 1 September 2001 since it filed the Motion to Release Cash Bond in Favor of Plaintiff 18 with the MeTC. By filing the motion, Allegro signified its concurrence in the monthly rental of P20,000.00.19 Since Liga is willing and able to pay the appropriate rentals as evidenced by the deposits she made before the RTC, she should not be made liable for attorney's fees in the amount of P20,000.00 and for the costs of suit.20 The Court will discuss the issues in seriatim. We sustain Liga on the first issue. The Court of Appeals erred in awarding back rentals for the month of 1 January 2001 to 31 August 2001 in favor of Ortigas. Firstly, Ortigas is not a party to this case, whether as plaintiff or otherwise. It is basic that no relief can be extended in a judgment to a stranger or one who is not a party to a case.21 Secondly, Allegro cannot justify the award as a legal representative by virtue of a provision in its lease agreement with Ortigas. Although Section 1 of Rule 70 of the Rules of Court22 specifically allows "the legal representatives or assigns of any such lessor, vendor, vendee, or other person" to bring action for restitution of possession with damages and costs against persons who unlawfully withheld or deprived the lawful possessor of possession over any land or building, Allegro did not aver in its complaint that it was acting as Ortigas's legal representative and seeking the back rentals due Ortigas. Thirdly, there is no allegation or prayer in the complaint that Allegro was seeking the collection of the back rentals due Ortigas. Nor was there evidence to that effect. It is elementary that a judgment must conform to, and be supported by, both the pleadings and the evidence, and be in accordance with the theory of the action on which the pleadings are framed and the case was tried.23 The judgment must be secundum allegata et probata. In Falcon v. Manzano,24 the Court set aside the judgment of the trial court in conceding to her a remedy which was not prayed for in the complaint as the trial court rendered judgment allowing plaintiff to recover from the defendant the unpaid portion of the purchase price of a parcel of land when the plaintiff only asked for the nullification of the contract of sale of the realty and the return of the property to her. We held that courts, in rendering decisions, ought to limit themselves to the issues presented by the parties in their pleadings. In the analogous case of Lerma v. De la Cruz,25 the plaintiff therein brought an action to recover accrued rents and damages for the injury to the land but the trial court extended the relief sought by giving judgment for possession of the land. The Court held that "(t)he plaintiff did not ask for possession, nor is there any prayer to that effect in the complaint, and the judgment must, therefore be reversed insofar as it undertakes to provide for the restitution of the land in question to the plaintiff." As to the second issue, the Court cannot countenance the obstinate refusal of Liga to pay P40,000.00 a month to Allegro since she had already acquiesced to pay such rental rate when she signed the Rental Information. It is fundamental that a contract is the law between the parties. 26 Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.27 Unless the stipulations in a contract are contrary to law, morals, good customs, public order or public policy, the same are binding as between the parties.28 It is a general principle of law that no one may be permitted to change his mind or

disavow and go back upon his own acts, or to proceed contrary thereto, to the prejudice of the other party.29 Likewise, it is settled that if the terms of the contract clearly express the intention of the contracting parties, the literal meaning of the stipulations would be controlling.30 The filing by Allegro of the Motion to Release Cash Bond in Favor of the Plaintiff did not operate to estop it from claiming a monthly rental rate of P40,000.00. Estoppel cannot be sustained by mere argument or doubtful inference.31 Allegro did not abandon its stance nor did it represent to Liga that it was doing so. Liga cannot feign ignorance of such fact since Allegro's petition for review before the Court of Appeals puts as an issue the reduction by the RTC of the monthly rentals from P40,000.00 to P20,000.00.32 Allegro never made any deed or representation that could have misled Liga. Moreover, the Court has previously sanctioned a similar partial execution of the trial court's decision awarding damages in an ejectment suit at the instance of the plaintiff. Not only is such an act procedurally sound, it also serves the ends of justice. As the Court succinctly held in Sps. Catungal v. Jao:33 Finally, respondent questions why petitioners would want to reinstate the RTC decision when in fact they had already applied for a writ of execution of the 8 March 1997 Decision. Respondent is of the view that since petitioners had already moved for the execution of the decision awarding a smaller amount of damages or fair rental value, the same is inconsistent with a petition asking for a greater fair rental value and, therefore, a possible case of unjust enrichment in favor of the petitioners. We are not persuaded. In order to avoid further injustice to a lawful possessor, an immediate execution of a judgment is mandated and the court's duty to order such execution is practically ministerial. In City of Manila, et al. v. CA, et al., We held that "Section 8 (now Section 19), Rule 70, on execution pending appeal, also applies even if the plaintiff-lessor appeals where, as in that case, judgment was rendered in favor of the lessor but it was not satisfied with the increased rentals granted by the trial court, hence the appeal xxx." As above discussed, the petitioners have long been deprived of the exercise of their proprietary rights over the leased premises and the rightful amount of rentals at the rate of P40,000.00 a month. Consequently, petitioners are entitled to accrued monthly rentals of P27,000.00, which is the difference between P40,000.00 awarded by the Regional Trial Court and P13,000.00 awarded by the MeTC and affirmed by the Court of Appeals. Said amount of P27,000.00 should rightly be the subject of another writ of execution being distinct from the subject of the first writ of execution filed by petitioners. (Emphasis supplied.) On the last issue regarding damages, Liga also ends up at the shorter end. Law and jurisprudence support the award of attorney's fees and costs of suit in favor of Allegro. The award of damages and attorney's fees is left to the sound discretion of the court, and if such discretion is well exercised, as in this case, it will not be disturbed on appeal.34 Attorney's fees and costs of litigation are awarded in instances where "the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and demandable claim." 35 Having delivered possession over the leased property to Liga, Allegro had already performed its obligation under the lease agreement. Liga should have exercised fairness and good judgment in dealing with Allegro by religiously paying the agreed monthly rental of P40,000.00. However, the Court deems it proper to award interest in favor of Allegro. In Eastern Shipping Lines, Inc. v. Court of Appeals,36 we gave the following guidelines in the award of interest: II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows: 1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.37 The back rentals in this case being equivalent to a loan or forbearance of money, the interest due thereon is twelve percent (12%) per annum from the time of extrajudicial demand on 15 December 2001.38 WHEREFORE, the petition for review is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 86331 is AFFIRMED with the MODIFICATIONS that the award of back rentals for the period of 1 January 2001 to 31 August 2001 to Ortigas & Company, Limited Partnership is DELETED and that petitioner Edsel Liga is ORDERED to pay respondent Allegro Resources Corporation legal interest of twelve percent (12%) per annum on the back rentals from the date of extrajudicial demand on 15 December 2001 until fully paid.

G.R. No. 100728 June 18, 1992 WILHELMINA JOVELLANOS, MERCY JOVELLANOS-MARTINEZ and JOSE HERMILO JOVELLANOS, petitioners, vs. THE COURT OF APPEALS, and ANNETTE H. JOVELLANOS, for and in her behalf, and in representation of her two minor daughters as natural guardian, ANA MARIA and MA. JENNETTE, both surnamed JOVELLANOS, respondents.

REGALADO, J.: This petition for review on certiorari seeks to reverse and set aside the decision 1 promulgated by respondent court on June 26, 1991 in CA-G.R. CV No. 27556 affirming with some modifications the earlier decision of the Regional Trial Court of Quezon City, Branch 85, which, inter alia, awarded one-half (1/2) of the property subject of Civil Case No. Q-52058 therein to private respondent Annette H. Jovellanos and one-sixth (1/6) each of the other half of said property to the three private respondents. all as pro indiviso owners of their aforesaid respective portions. As found by respondent court, 2 on September 2, 1955, Daniel Jovellanos and Philippine American Life Insurance Company (Philamlife) entered into a contract denominated as a lease and conditional sale agreement over Lot 8, Block 3 of the latter's Quezon City Community Development Project, including a bungalow thereon, located at and known as No. 55 South Maya Drive, Philamlife Homes, Quezon City. At that time, Daniel Jovellanos was married to Leonor Dizon, with whom he had three children, the petitioners herein. Leonor Dizon died on January 2, 1959. On May 30, 1967, Daniel married private respondent Annette H. Jovellanos with whom he begot two children, her herein co-respondents. On December 18, 1971, petitioner Mercy Jovellanos married Gil Martinez and, at the behest of Daniel Jovellanos, they built a house on the back portion of the premises. On January 8, 1975, with the lease amounts having been paid, Philamlife executed to Daniel Jovellanos a deed of absolute sale and, on the next day, the latter donated to herein petitioners all his rights, title and interests over the lot and bungalow thereon. On September 8, 1985, Daniel Jovellanos died and his death spawned the present controversy, resulting in the filing by private respondents of Civil Case No. Q-52058 in the court below. Private respondent Annette H. Jovellanos claimed in the lower court that the aforestated property was acquired by her deceased husband while their marriage was still subsisting, by virtue of the deed of absolute sale dated January 8, 1975 executed by Philamlife in favor of her husband, Daniel Jovellanos. who was issued Transfer Certificate of Title No. 212286 of the Register of Deeds of Quezon City and which forms part of the conjugal partnership of the second marriage. Petitioners, on the other hand, contend that the property, specifically the lot and the bungalow erected thereon, as well as the beneficial and equitable title thereto, were acquired by their parents during the existence of the first marriage under their lease and conditional sale agreement with Philamlife of September 2, 1955. On December 28, 1989, the court a quo rendered judgment 3 with the following dispositions: WHEREFORE, premises considered, judgment is hereby rendered as follows 1. Ordering the liquidation of the partnership of the second marriage and directing the reimbursement of the amount advanced by the partnership of the first marriage as well (as) by the late Daniel Jovellanos and the defendants spouses Gil and Mercia * J. Martinez in the acquisition of the lot and bungalow described in the Lease and Conditional Sale Agreement (Exhs. D and 1); 2. After such liquidation and reimbursement, declaring the plaintiff Annette Jovellanos as proindiviso owner of 1/2 of the property described in TCT No. 212268 (sic) and the bungalow erected therein; 3. Declaring the plaintiff Annette Jovellanos, as well as the minors Anna Marie and Ma. Jeannette (sic) both surnamed Jovellanos and the herein defendants, as owners pro indiviso of 1/6 each of the other half of said property; 4. Declaring the defendants spouses Gil and Mercia Martinez as exclusive owners of the twostorey house erected on the property at the back of the said bungalow, with all the rights vested in them as builders in good faith under Article 448 of the New Civil Code;

5. Ordering the parties to make a partition among themselves by proper instruments of conveyances, subject to the confirmation of this Court, and if they are unable to agree upon the partition, ordering that the partition should be made by not more than three (3) competent and disinterested persons as commissioners who shall make the partition in accordance with Sec. 5, Rule 69 of the Revised Rules of Court; 6. Ordering the defendant(s) to pay plaintiffs, jointly and severally, the sum of P5,000.00 as attorney's fees, plus costs. SO ORDERED. 4 Respondent Court of Appeals, in its challenged decision, held that the lease and conditional sale agreement executed by and between Daniel Jovellanos and Philamlife is a lease contract and, in support of its conclusion, reproduced as its own the following findings of the trial court: It is therefore incumbent upon the vendee to comply with all his obligations, i.e., the payment of the stipulated rentals and adherence to the limitations set forth in the contract before the legal title over the property is conveyed to the lessee-vendee. This, in effect. is a pactum reservati dominii which is common in sales on installment plan of real estate whereby ownership is retained by the vendor and payment of the agreed price being a condition precedent before full ownership could be transferred (Wells vs. Samonte, 38768-R, March 23, 1973; Perez vs. Erlanger and Galinger Inc., CA 54 OG 6088). The dominion or full ownership of the subject property was only transferred to Daniel Jovellanos upon full payment of the stipulated price giving rise to the execution of the Deed of Absolute Sale on January 8, 1975 (Exh. 2) when the marriage between the plaintiff and Daniel Jovellanos was already in existence. The contention of the defendants that the jus in re aliena or right in the property of another person (Gabuya vs. Cruz, 38 SCRA 98) or beneficial use and enjoyment of the property or the equitable title has long been vested in the vendee-lessee Daniel Jovellanos upon execution of Exh. "1" is true, But the instant case should be differentiated from the cited cases of Pugeda v. Trias, et al., 4 SCRA 849; and Alvarez vs. Espiritu, G.R. L-18833, August 14, 1965, which cannot be applied herein even by analogy. In Pugeda. the subject property refers solely to friar lands and is governed by Act 1120 wherein the certificate of sale is considered a conveyance of ownership subject only to the resolutory condition that the sale may be rescinded if the agreed price has not been paid in full; in the case at bar, however, payment of the stipulated price is a condition precedent before ownership could be transferred to the vendee. 5 With the modification that private respondents should also reimburse to petitioners their proportionate shares on the proven hospitalization and burial expenses of the late Daniel Jovellanos, respondent Court of Appeals affirmed the judgment of the trial court. applying Article 118 of the Family Code which provides: Art. 118. Property bought on installment paid partly from exclusive funds of either or both spouses and partly from conjugal funds belongs to the buyer or buyers if full ownership was vested before the marriage and to the conjugal partnership if such ownership was vested during the marriage. In either case, any amount advanced by the partnership or by either or both spouses shall be reimbursed by the owner or owners upon liquidation of the partnership. Petitioners now seek this review, invoking their assignment of errors raised before the respondent court and which may be capsulized into two contentions, namely, that (1) the lower court erred in holding that the lot and bungalow covered by the lease and conditional sale agreement (Exhibit 1) is conjugal property of the second marriage of the late Daniel Jovellanos: and (2) the lower court erred in holding that the provisions of the Family Code are applicable in resolving the rights of the parties herein. 6 It is petitioners' position that the Family Code should not be applied in determining the successional rights of the party litigants to the estate of Daniel Jovellanos. for to do so would be to impair their vested property rights over the property in litigation which they have acquired long before the Family Code took effect. 7 To arrive at the applicable law, it would accordingly be best to look into the nature of the contract entered into by the contracting parties. As appositely observed by respondent court, the so-called lease agreement is, therefore, very much in issue. Preliminarily, we do not lose sight of the basic rule that a contract which is not contrary to law, morals, good customs, public order or public policy has the force of law between the contracting parties and should be complied with in good faith. 8 Its provisions are binding not only upon them but also upon their heirs and assigns. 9 The contract entered into by the late Daniel Jovellanos and Philamlife is specifically denominated as a "Lease and Conditional Sale Agreement" over the property involved with a lease period of twenty years at a monthly rental of P288.87, by virtue of which the former, as lessee-vendee, had only the right of possession over the property. 10 In a lease agreement, the lessor transfers merely the temporary use and enjoyment of the thing

leased. 11 In fact, Daniel Jovellanos bound himself therein, among other things, to use the property solely as a residence, take care thereof like a good father of a family, permit inspection thereof by representatives of Philamlife in regard to the use and preservation of the property. 12 It is specifically provided, however, that "(i)f, at the expiration of the lease period herein agreed upon, the LESSEE-VENDEE shall have fully faithfully complied with all his obligations herein stipulated, the LESSORVENDOR shall immediately sell, transfer and convey to the LESSEE-VENDEE the property which is the subject matter of this agreement; . . . 13 The conditional sale agreement in said contract is, therefore, also in the nature of a contract to sell, as contrdistinguished from a contract of sale. In a contract to sell or a conditional sale, ownership is not transferred upon delivery of the property but upon full payment of the purchase price. 14 Generally, ownership is transferred upon delivery, but even if delivered, the ownership may still be with the seller until full payment of the price is made, if there is stipulation to this effect. The stipulation is usually known as a pactum reservati dominii, or contractual reservation of title, and is common in sales on the installment plan. 15 Compliance with the stipulated payments is a suspensive condition. 16 the failure of which prevents the obligation of the vendor to convey title from acquiring binding force. 17 Hornbook lore from civilists clearly lays down the distinctions between a contract of sale in which the title passes to the buyer upon delivery of the thing sold, and a contract to sell where, by agreement, the ownership is reserved in the seller and is not to pass until full payment of the purchase price: In the former, non-payment of the price is a negative resolutory condition; in the latter, full payment is a positive suspensive condition. In the former, the vendor loses and cannot recover the ownership of the thing sold until and unless the contract of sale is rescinded or set aside; in the latter, the title remains in the vendor if the vendee does not comply with the condition precedent of making full payment as specified in the contract. Accordingly, viewed either as a lease contract or a contract to sell, or as a contractual amalgam with facets of both, what was vested by the aforestated contract in petitioners' predecessor in interest was merely the beneficial title to the property in question. His monthly payments were made in the concept of rentals, but with the agreement that if he faithfully complied with all the stipulations in the contract the same would in effect be considered as amortization payments to be applied to the predetermined price of the said property. He consequently acquired ownership thereof only upon full payment of the said amount hence, although he had been in possession of the premises since September 2, 1955, it was only on January 8, 1975 that Philamlife executed the deed of absolute sale thereof in his favor. The conditions of the aforesaid agreement also bear notice, considering the stipulations therein that Daniel Jovellanos, as lessee-vendee, shall not xxx xxx xxx (b) Sublease said property to a third party; (c) Engage in business or practice any profession within the property; xxx xxx xxx (f) Make any alteration or improvement on the property without the prior written consent of the LESSOR-VENDOR; (g) Cut down, damage, or remove any tree or shrub, or remove or quarry any stone, rock or earth within the property, without the prior written consent of the LESSOR-VENDOR; (h) Assign to another his right, title and interest under and by virtue of this Agreement, without the prior written consent and approval of the LESSOR-VENDOR. 18 The above restrictions further bolster the conclusion that Daniel Jovellanos did not enjoy the full attributes of ownership until the execution of the deed of sale in his favor. The law recognizes in the owner the right to enjoy and dispose of a thing, without other limitations than those established by law, 19 and, under the contract, Daniel Jovellanos evidently did not possess or enjoy such rights of ownership. We find no legal impediment to the application in this case of the rule of retroactivity provided in the Family Code to the effect that Art. 256. This Code shall have retroactive effect insofar as it does not prejudice or impair vested or acquired nights in accordance with the Civil Code or other laws.

The right of Daniel Jovellanos to the property under the contract with Philamlife was merely an inchoate and expectant right which would ripen into a vested right only upon his acquisition of ownership which, as aforestated, was contingent upon his full payment of the rentals and compliance with all his contractual obligations thereunder. A vested right as an immediate fixed right of present and future enjoyment. It is to be distinguished from a right that is expectant or contingent. 20 It is a right which is fixed, unalterable, absolute, complete and unconditional to the exercise of which no obstacle exists, 21 and which is perfect in itself and not dependent upon a contingency. 22 Thus, for a property right to be vested, there must be a transition from the potential or contingent to the actual, and the proprietary interest must have attached to a thing; it must have become fixed or established and is no longer open to doubt or controversy. 23 The trial court which was upheld by respondent court, correctly ruled that the cases cited by petitioners are inapplicable to the case at bar since said cases involved friar lands which are governed by a special law, Act 1120, which was specifically enacted for the purpose. In the sale of friar lands, upon execution of the contract to sell, a certificate of sale is delivered to the vendee and such act is considered as a conveyance of ownership, subject only to the resolutory condition that the sale may be rescinded if the agreed price shall not be paid in full. In the instant case, no certificate of sale was delivered and full payment of the rentals was a condition precedent before ownership could be transferred to the vendee. 24 We have earlier underscored that the deed of absolute sale was executed in 1975 by Philamlife, pursuant to the basic contract between the parties, only after full payment of the rentals. Upon the execution of said deed of absolute sale, full ownership was vested in Daniel Jovellanos. Since. as early as 1967, he was already married to Annette H. Jovellanos, this property necessarily belonged to his conjugal partnership with his said second wife. As found by the trial court, the parties stipulated during the pre-trial conference in the case below that the rentals/installments under the lease and conditional sale agreement were paid as follows (a) from September 2, 1955 to January 2, 1959, by conjugal funds of the first marriage; (b) from January 3, 1959 to May 29, 1967, by capital of Daniel Jovellanos; (c) from May 30, 1967 to 1971, by conjugal funds of the second marriage; and (d) from 1972 to January 8, 1975, by conjugal funds of the spouses Gil and Mercy Jovellanos Martinez. 25 Both courts, therefore, ordered that reimbursements should be made in line with the pertinent provision of Article 118 of the Family Code that "any amount advanced by the partnership or by either or both spouses shall be reimbursed by the owner or owners upon liquidation of the partnership." ACCORDINGLY, finding no reversible error in the judgment of respondent court, the same is hereby AFFIRMED. SO ORDERED.

G.R. No. 129018

November 15, 2001

CARMELITA LEAO, assisted by her husband GREGORIO CUACHON, petitioner, vs. COURT OF APPEALS and HERMOGENES FERNANDO, respondents. PARDO, J.: The Case The case is a petition for review on certiorari of the decision1 of the Court of Appeals affirming that of the Regional Trial Court, Malolos, Branch 72 ordering petitioner Leao to pay respondent Hermogenes Fernando the sum of P183,687.70 corresponding to her outstanding obligations under the contract to sell, with interest and surcharges due thereon, attorney's fees and costs.1wphi1.nt The Facts On November 13, 1985, Hermogenes Fernando, as vendor and Carmelita Leao, as vendee executed a contract to sell involving a piece of land, Lot No. 876-B, with an area of 431 square meters, located at Sto. Cristo, Baliuag, Bulacan.3 In the contract, Carmelita Leao bound herself to pay Hermogenes Fernando the sum of one hundred seven thousand and seven hundred and fifty pesos (P107,750.00) as the total purchase price of the lot. The manner of paying the total purchase price was as follows: "The sum of TEN THOUSAND SEVEN HUNDRED SEVENTY FIVE (P10,775.00) PESOS, shall be paid at the signing of this contract as DOWN PAYMENT, the balance of NINETY SIX THOUSAND NINE HUNDRED SEVENTY FIVE PESOS (P96,975.00) shall be paid within a period of TEN (10) years at a monthly amortization of P1,747.30 to begin from December 7, 1985 with interest at eighteen per cent (18%) per annum based on balances."4 The contract also provided for a grace period of one month within which to make payments, together with the one corresponding to the month of grace. Should the month of grace expire without the installments for both months having been satisfied, an interest of 18% per annum will be charged on the unpaid installments.5 Should a period of ninety (90) days elapse from the expiration of the grace period without the overdue and unpaid installments having been paid with the corresponding interests up to that date, respondent Fernando, as vendor, was authorized to declare the contract cancelled and to dispose of the parcel of land, as if the contract had not been entered into. The payments made, together with all the improvements made on the premises, shall be considered as rents paid for the use and occupation of the premises and as liquidated damages.6 After the execution of the contract, Carmelita Leao made several payments in lump sum.7 Thereafter, she constructed a house on the lot valued at P800,000.00.8 The last payment that she made was on April 1, 1989. On September 16, 1991, the trial court rendered a decision in an ejectment case9 earlier filed by respondent Fernando ordering petitioner Leao to vacate the premises and to pay P250.00 per month by way of compensation for the use and occupation of the property from May 27, 1991 until she vacated the premises, attorney's fees and costs of the suit.10 On August 24, 1993, the trial court issued a writ of execution which was duly served on petitioner Leao. On September 27, 1993, petitioner Leao filed with the Regional Trial Court of Malolos, Bulacan a complaint for specific performance with preliminary injunction.11 Petitioner Leao assailed the validity of the judgment of the municipal trial court12 for being violative of her right to due process and for being contrary to the avowed intentions of Republic Act No. 6552 regarding protection to buyers of lots on installments. Petitioner Leao deposited P18,000.00 with the clerk of court, Regional Trial Court, Bulacan, to cover the balance of the total cost of Lot 876-B.13 On November 4, 1993, after petitioner Leao posted a cash bond of P50,000.00,14 the trial court issued a writ of preliminary injunction15 to stay the enforcement of the decision of the municipal trial court.16 On February 6, 1995, the trial court rendered a decision, the dispositive portion of which reads: "WHEREFORE, judgment is hereby rendered as follows: "1. The preliminary injunction issued by this court per its order dated November 4, 1993 is hereby made permanent;

"2. Ordering the plaintiff to pay to the defendant the sum of P103,090.70 corresponding to her outstanding obligations under the contract to sell (Exhibit "A" Exhibit "B") consisting of the principal of said obligation together with the interest and surcharges due thereon as of February 28, 1994, plus interest thereon at the rate of 18% per annum in accordance with the provision of said contract to be computed from March 1, 1994, until the same becomes fully paid; "3. Ordering the defendant to pay to plaintiff the amount of P10,000 as and by way of attorney's fees; "4. Ordering the defendant to pay to plaintiff the costs of the suit in Civil Case No. 1680 aforementioned. "SO ORDERED. "Malolos, Bulacan, February 6, 1995.

"(sgd.) DANILO A. MANALASTAS Judge"17 On February 21, 1995, respondent Fernando filed a motion for reconsideration18 and the supplement19 thereto. The trial court increased the amount of P103,090.70 to P183,687.00 and ordered petitioner Leao ordered to pay attorney's fees.20 According to the trial court, the transaction between the parties was an absolute sale, making petitioner Leao the owner of the lot upon actual and constructive delivery thereof. Respondent Fernando, the seller, was divested of ownership and cannot recover the same unless the contract is rescinded pursuant to Article 1592 of the Civil Code which requires a judicial or notarial demand. Since there had been no rescission, petitioner Leao, as the owner in possession of the property, cannot be evicted. On the issue of delay, the trial court held: "While the said contract provides that the whole purchase price is payable within a ten-year period, yet the same contract clearly specifies that the purchase price shall be payable in monthly installments for which the corresponding penalty shall be imposed in case of default. The plaintiff certainly cannot ignore the binding effect of such stipulation by merely asserting that the ten-year period for payment of the whole purchase price has not yet lapsed. In other words, the plaintiff has clearly defaulted in the payment of the amortizations due under the contract as recited in the statement of account (Exhibit "2") and she should be liable for the payment of interest and penalties in accordance with the stipulations in the contract pertaining thereto."21 The trial court disregarded petitioner Leaos claim that she made a downpayment of P10,000.00, at the time of the execution of the contract. The trial court relied on the statement of account22 and the summary23 prepared by respondent Fernando to determine petitioner Leao's liability for the payment of interests and penalties. The trial court held that the consignation made by petitioner Leao in the amount of P18,000.00 did not produce any legal effect as the same was not done in accordance with Articles 1176, 1177 and 1178 of the Civil Code. In time, petitioner Leao appealed the decision to the Court of Appeals.24 On January 22, 1997, Court of Appeals promulgated a decision affirming that of the Regional Trial Court in toto.25 On February 11, 1997, petitioner Leao filed a motion for reconsideration.26 On April 18, 1997, the Court of Appeals denied the motion.27 Hence, this petition.28 The Issues The issues to be resolved in this petition for review are (1) whether the transaction between the parties in an absolute sale or a conditional sale; (2) whether there was a proper cancellation of the contract to sell; and (3) whether petitioner was in delay in the payment of the monthly amortizations. The Court's Ruling Contrary to the findings of the trial court, the transaction between the parties was a conditional sale not an absolute sale. The intention of the parties was to reserve the ownership of the land in the seller until the buyer has paid the total purchase price. Consider the following:

First, the contract to sell makes the sale, cession and conveyance "subject to conditions" set forth in the contract to sell.29 Second, what was transferred was the possession of the property, not ownership. The possession is even limited by the following: (1) that the vendee may continue therewith "as long as the VENDEE complies with all the terms and conditions mentioned, and (2) that the buyer may not sell, cede, assign, transfer or mortgage or in any way encumber any right, interest or equity that she may have or acquire in and to the said parcel of land nor to lease or to sublease it or give possession to another person without the written consent of the seller.30 Finally, the ownership of the lot was not transferred to Carmelita Leao. As the land is covered by a torrens title, the act of registration of the deed of sale was the operative act that could transfer ownership over the lot.31 There is not even a deed that could be registered since the contract provides that the seller will execute such a deed "upon complete payment by the VENDEE of the total purchase price of the property" with the stipulated interest.32 In a contract to sell real property on installments, the full payment of the purchase price is a positive suspensive condition, the failure of which is not considered a breach, casual or serious, but simply an event that prevented the obligation of the vendor to convey title from acquiring any obligatory force.33 The transfer of ownership and title would occur after full payment of the price.34 In the case at bar, petitioner Leao's non-payment of the installments after April 1, 1989, prevented the obligation of respondent Fernando to convey the property from arising. In fact, it brought into effect the provision of the contract on cancellation. Contrary to the findings of the trial court, Article 1592 of the Civil Code is inapplicable to the case at bar.35However, any attempt to cancel the contract to sell would have to comply with the provisions of Republic Act No. 6552, the "Realty Installment Buyer Protection Act." R.A. No. 6552 recognizes in conditional sales of all kinds of real estate (industrial, commercial, residential) the right of the seller to cancel the contract upon non-payment of an installment by the buyer, which is simply an event that prevents the obligation of the vendor to convey title from acquiring binding force.36 The law also provides for the rights of the buyer in case of cancellation. Thus, Sec. 3 (b) of the law provides that: "If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty percent of the total payments made and, after five years of installments, an additional five percent every year but not to exceed ninety percent of the total payment made: Provided, That the actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer." [Emphasis supplied] The decision in the ejectment case37 operated as the notice of cancellation required by Sec. 3(b). As petitioner Leao was not given then cash surrender value of the payments that she made, there was still no actual cancellation of the contract. Consequently, petitioner Leao may still reinstate the contract by updating the account during the grace period and before actual cancellation.38 Should petitioner Leao wish to reinstate the contract, she would have to update her accounts with respondent Fernando in accordance with the statement of account39 which amount was P183,687.00.40 On the issue of whether petitioner Leao was in delay in paying the amortizations, we rule that while the contract provided that the total purchase price was payable within a ten-year period, the same contract specified that the purchase price shall be paid in monthly installments for which the corresponding penalty shall be imposed in case of default. Petitioner Leao cannot ignore the provision on the payment of monthly installments by claiming that the ten-year period within which to pay has not elapsed. Article 1169 of the Civil Code provides that in reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the other begins.1wphi1.nt In the case at bar, respondent Fernando performed his part of the obligation by allowing petitioner Leao to continue in possession and use of the property. Clearly, when petitioner Leao did not pay the monthly amortizations in accordance with the terms of the contract, she was in delay and liable for damages.41 However, we agree with the trial court that the default committed by petitioner Leao in respect of the obligation could be compensated by the interest and surcharges imposed upon her under the contract in question.42 It is a cardinal rule in the interpretation of contracts that if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulation shall control.43 Thus, as there is no ambiguity in the language of the contract, there is no room for construction, only compliance.

The Fallo IN VIEW WHEREOF, we DENY the petition and AFFIRM the decision of the Court of Appeals44 in toto. No costs. SO ORDERED.

G.R. No. 127695

December 3, 2001

HEIRS OF LUIS BACUS, namely: CLARA RESMA BACUS, ROQUE R. BACUS, SR., SATURNINO R. BACUS, PRISCILA VDA. DE CABANERO, CARMELITA B. SUQUIB, BERNARDITA B. CARDENAS, RAUL R. BACUS, MEDARDO R. BACUS, ANSELMA B. ALBAN, RICARDO R. BACUS, FELICISIMA B. JUDICO, and DOMINICIANA B. TANGAL, petitioners, vs. HON. COURT OF APPEALS and SPOUSES FAUSTINO DURAY and VICTORIANA DURAY, respondents. QUISUMBING, J.: This petition assails the decision dated November 29, 1996, of the Court of Appeals in CA-G.R. CV No. 37566, affirming the decision dated August 3, 1991, of the Regional Trial Court of Cebu City, Branch 6, in Civil Case No. CEB-8935. The facts, as culled from the records, are as follows: On June 1, 1984, Luis Bacus leased to private respondent Faustino Duray a parcel of agricultural land in Bulacao, Talisay, Cebu. Designated as Lot No. 3661-A-3-B-2, it had an area of 3,002 square meters, covered by Transfer Certificate of Title No. 48866. The lease was for six years, ending May 31, 1990. The contract contained an option to buy clause. Under said option, the lessee had the exclusive and irrevocable right to buy 2,000 square meters of the property within five years from a year after the effectivity of the contract, at P200 per square meter. That rate shall be proportionately adjusted depending on the peso rate against the US dollar, which at the time of the execution of the contract was fourteen pesos.1 Close to the expiration of the contract, Luis Bacus died on October 10, 1989. Thereafter, on March 15, 1990, the Duray spouses informed Roque Bacus, one of the heirs of Luis Bacus, that they were willing and ready to purchase the property under the option to buy clause. They requested Roque Bacus to prepare the necessary documents, such as a Special Power of Attorney authorizing him to enter into a contract of sale,2 on behalf of his sisters who were then abroad. On March 30, 1990, due to the refusal of petitioners to sell the property, Faustino Duray's adverse claim was annotated by the Register of Deeds of Cebu, at the back of TCT No. 63269, covering the segregated 2,000 square meter portion of Lot No. 3661-A-3-B-2-A.3 Subsequently, on April 5, 1990, Duray filed a complaint for specific performance against the heirs of Luis Bacus with the Lupon Tagapamayapa of Barangay Bulacao, asking that he be allowed to purchase the lot specifically referred to in the lease contract with option to buy. At the hearing, Duray presented a certification4 from the manager of Standard Chartered Bank, Cebu City, addressed to Luis Bacus, stating that at the request of Mr. Lawrence Glauber, a bank client, arrangements were being made to allow Faustino Duray to borrow funds of approximately P700,000 to enable him to meet his obligations under the contract with Luis Bacus.5 Having failed to reach an agreement before the Lupon, on April 27, 1990, private respondents filed a complaint for specific performance with damages against petitioners before the Regional Trial Court, praying that the latter, (a) execute a deed of sale over the subject property in favor of private respondents; (b) receive the payment of the purchase price; and (c) pay the damages. On the other hand, petitioners alleged that before Luis Bacus' death, private respondents conveyed to them the former's lack of interest to exercise their option because of insufficiency of funds, but they were surprised to learn of private respondents' demand. In turn, they requested private respondents to pay the purchase price in full but the latter refused. They further alleged that private respondents did not deposit the money as required by the Lupon and instead presented a bank certification which cannot be deemed legal tender. On October 30, 1990, private respondents manifested in court that they caused the issuance of a cashier's check in the amount of P650,0006 payable to petitioners at anytime upon demand. On August 3, 1991, the Regional Trial Court ruled in favor of private respondents, the dispositive portion of which reads: Premises considered, the court finds for the plaintiffs and orders the defendants to specifically perform their obligation in the option to buy and to execute a document of sale over the property covered by Transfer Certificate of Title # T-63269 upon payment by the plaintiffs to them in the amount of Six Hundred Seventy-Five Thousand Six Hundred Seventy-Five (P675,675.00) Pesos within a period of thirty (30) days from the date this decision becomes final. SO ORDERED.7

Unsatisfied, petitioners appealed to the respondent Court of Appeals which denied the appeal on November 29, 1996, on the ground that the private respondents exercised their option to buy the leased property before the expiration of the contract of lease. It held: . . . After a careful review of the entire records of this case, we are convinced that the plaintiffs-appellees validly and effectively exercised their option to buy the subject property. As opined by the lower court, "the readiness and preparedness of the plaintiff on his part, is manifested by his cautionary letters, the prepared bank certification long before the date of May 31, 1990, the final day of the option, and his filing of this suit before said date. If the plaintiff-appellee Francisco Duray had no intention to purchase the property, he would not have bothered to write those letters to the defendant-appellants (which were all received by them) and neither would he be interested in having his adverse claim annotated at the back of the T.C.T. of the subject property, two (2) months before the expiration of the lease. Moreover, he even went to the extent of seeking the help of the Lupon Tagapamayapa to compel the defendantsappellants to recognize his right to purchase the property and for them to perform their corresponding obligation.8 xxx xxx xxx

We therefore find no merit in this appeal. WHEREFORE, the decision appealed from is hereby AFFIRMED.9 Hence, this petition where petitioners aver that the Court of Appeals gravely erred and abused its discretion in: I. . . . UPHOLDING THE TRIAL COURT'S RULING IN THE SPECIFIC PERFORMANCE CASE BY ORDERING PETITIONERS (DEFENDANTS THEREIN) TO EXECUTE A DOCUMENT OF SALE OVER THE PROPERTY IN QUESTION (WITH TCT NO. T-63269) TO THEM IN THE AMOUNT OF P675,675.00 WITHIN THIRTY (30) DAYS FROM THE DATE THE DECISION BECOMES FINAL; II. . . . DISREGARDING LEGAL PRINCIPLES, SPECIFIC PROVISIONS OF LAW AND JURISPRUDENCE IN UPHOLDING THE DECISION OF THE TRIAL COURT TO THE EFFECT THAT PRIVATE RESPONDENTS HAD EXERCISED THEIR RIGHT OF OPTION TO BUY ON TIME; THUS THE PRESENTATION OF THE CERTIFICATION OF THE BANK MANAGER OF A BANK DEPOSIT IN THE NAME OF ANOTHER PERSON FOR LOAN TO RESPONDENTS WAS EQUIVALENT TO A VALID TENDER OF PAYMENT AND A SUFFICIENT COMPLAINCE (SIC) OF A CONDITION FOR THE EXERCISE OF THE OPTION TO BUY; AND III. . . . UPHOLDING THE TRIAL COURT'S RULING THAT THE PRESENTATION OF A CASHER'S (SIC) CHECK BY THE RESPONDENTS IN THE AMOUNT OF P625,000.00 EVEN AFTER THE TERMINATION OF THE TRIAL ON THE MERITS WITH BOTH PARTIES ALREADY HAVING RESTED THEIR CASE, WAS STILL VALID COMPLIANCE OF THE CONDITION FOR THE PRIVATE RESPONDENTS' (PLAINTIFFS THEREIN) EXERCISE OF RIGHT OF OPTION TO BUY AND HAD A FORCE OF VALID AND FULL TENDER OF PAYMENT WITHIN THE AGREED PERIOD.10 Petitioners insist that they cannot be compelled to sell the disputed property by virtue of the nonfulfillment of the obligation under the option contract of the private respondents. Private respondents first aver that petitioners are unclear if Rule 65 or Rule 45 of the Rules of Court govern their petition, and that petitioners only raised questions of facts which this Court cannot properly entertain in a petition for review. They claim that even assuming that the instant petition is one under Rule 45, the same must be denied for the Court of Appeals has correctly determined that they had validly exercised their option to buy the leased property before the contract expired. In response, petitioners state that private respondents erred in initially classifying the instant petition as one under Rule 65 of the Rules of Court. They argue that the petition is one under Rule 45 where errors of the Court of Appeals, whether evidentiary or legal in nature, may be reviewed. We agree with private respondents that in a petition for review under Rule 45, only questions of law may be raised.11 However, a close reading of petitioners' arguments reveal the following legal issues which may properly be entertained in the instant petition: a) When private respondents opted to buy the property covered by the lease contract with option to buy, were they already required to deliver the money or consign it in court before petitioner executes a deed of transfer? b) Did private respondents incur in delay when they did not deliver the purchase price or consign it in court on or before the expiration of the contract?

On the first issue, petitioners contend that private respondents failed to comply with their obligation because there was neither actual delivery to them nor consignation in court or with the Municipal, City or Provincial Treasurer of the purchase price before the contract expired. Private respondents' bank certificate stating that arrangements were being made by the bank to release P700,000 as a loan to private respondents cannot be considered as legal tender that may substitute for delivery of payment to petitioners nor was it a consignation. Obligations under an option to buy are reciprocal obligations.12 The performance of one obligation is conditioned on the simultaneous fulfillment of the other obligation.13 In other words, in an option to buy, the payment of the purchase price by the creditor is contingent upon the execution and delivery of a deed of sale by the debtor. In this case, when private respondents opted to buy the property, their obligation was to advise petitioners of their decision and their readiness to pay the price. They were not yet obliged to make actual payment. Only upon petitioners' actual execution and delivery of the deed of sale were they required to pay. As earlier stated, the latter was contingent upon the former. In Nietes vs. Court of Appeals, 46 SCRA 654 (1972), we held that notice of the creditor's decision to exercise his option to buy need not be coupled with actual payment of the price, so long as this is delivered to the owner of the property upon performance of his part of the agreement. Consequently, since the obligation was not yet due, consignation in court of the purchase price was not yet required. Consignation is the act of depositing the thing due with the court or judicial authorities whenever the creditor cannot accept or refuses to accept payment and it generally requires a prior tender of payment. In instances, where no debt is due and owing, consignation is not proper.14 Therefore, petitioners' contention that private respondents failed to comply with their obligation under the option to buy because they failed to actually deliver the purchase price or consign it in court before the contract expired and before they execute a deed, has no leg to stand on. Corollary, private respondents did not incur in delay when they did not yet deliver payment nor make a consignation before the expiration of the contract. In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. Only from the moment one of the parties fulfills his obligation, does delay by the other begin.15 In this case, private respondents, as early as March 15, 1990, communicated to petitioners their intention to buy the property and they were at that time undertaking to meet their obligation before the expiration of the contract on May 31, 1990. However, petitioners refused to execute the deed of sale and it was their demand to private respondents to first deliver the money before they would execute the same which prompted private respondents to institute a case for specific performance in the Lupong Tagapamayapa and then in the RTC. On October 30, 1990, after the case had been submitted for decision but before the trial court rendered its decision, private respondents issued a cashier's check in petitioners' favor purportedly to bolster their claim that they were ready to pay the purchase price. The trial court considered this in private respondents' favor and we believe that it rightly did so, because at the time the check was issued, petitioners had not yet executed a deed of sale nor expressed readiness to do so. Accordingly, as there was no compliance yet with what was incumbent upon petitioners under the option to buy, private respondents had not incurred in delay when the cashier's check was issued even after the contract expired. WHEREFORE, the instant petition is DENIED. The decision dated November 29, 1996 of the Court of Appeals is hereby AFFIRMED. Costs against petitioners. SO ORDERED.

G.R. No. 121772 January 13, 2003 ELNORA R. CORTES AND EDMUNDO CORTES, Petitioners, -versusCOURT OF APPEALS, F. S. MANAGEMENT & DEVELOPMENT CORP. AND FELIX MOYA, Respondents.

DECISION

AUSTRIA-MARTINEZ, J.: . Before us is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to set aside the Decision of the Court of Appeals dated March 17, 1995[1], the dispositive portion of which reads:chan robles virtual law library

WHEREFORE, premises considered, the appealed Order dated July 16, 1992 is hereby AFFIRMED with modification. Appellants spouses Cortes in addition to the P100,000.00 is further ORDERED to pay six percent (6%) per annum legal interest of such amount from July 25, 1992 until fully paid.chan robles virtual law library

Cost against appellants spouses Cortes. SO ORDERED.[2] The controversy stemmed from a civil case for specific performance with damages filed by F.S. Management and Development Corporation (FSMDC) against spouses Edmundo and Elnora Cortes involving the sale of the parcel of land owned by the said spouses.[3] Spouses Cortes retained the professional services of Atty. Felix Moya for the purpose of representing them in said case. However, they did not agree on the amount of compensation for the services to be rendered by Atty. Moya.chan robles virtual law library Before a full-blown trial could be had, defendants spouses Cortes and plaintiff FSMDC decided to enter into a compromise agreement. On June 4, 1991, defendants spouses received from plaintiff FSMDC, three checks totaling P2,754,340.00 which represents the remaining balance of the purchase price of the subject land. On June 7, 1991, Atty. Moya filed an "Urgent Motion to Fix Attorneys Fees, Etc." praying that he be paid a sum equivalent to thirty-five percent (35%) of the amount received by the defendants spouses[4] which the latter opposed contending that the amount Atty. Moya seeks to recover is utterly excessive and is not commensurate to the nature, extent and quality of the services he had rendered.[5]chan robles virtual law library

On July 2, 1991, the Cortes spouses and Atty. Moya settled their differences by agreeing in open court that the former will pay the latter the amount of P100,000.00 as his attorneys fees. Pursuant to such agreement, the trial court issued an order of even date which reads as follows: Parties in open Court agreed to movants attorneys fees of P100,000.00 to be paid out of any check paid by the plaintiff to defendants. Not later than July 15, 1991, parties are hereby ordered to inform the Court whether or not this is complied with, so the Court can act accordingly. SO ORDERED.[6] Subsequently, the Cortes spouses terminated the services of Atty. Moya and retained the services of another lawyer. On January 8, 1992, or about six months after the afore-quoted Order, Atty. Moya filed an Ex-Parte

Manifestation praying that his Motion to Fix Attorneys Fees be resolved on the basis of the agreement of the parties "in chambers".[7]chan robles virtual law library The Cortes spouses filed their Comment claiming: "1. That they agreed to the settlement of P100,000.00 attorneys fees expecting that the checks paid by plaintiff by way of settlement will be good and may be encashed by them but it turned out that they were all dishonored, and no compromise agreement was pushed through;chan robles virtual law library 2. That defendants are willing to pay Atty. Moya as additional compensation for his services only in the amount of P50,000.00 subject to the condition that same shall be paid after the case is terminated in their favor and/or the property involved is sold;chan robles virtual law library 3. That defendants shall compensate Atty. Moya said amount in addition to what they have paid before."[8] On June 26, 1992, Atty. Moya filed a "Motion for Early Resolution of Pending Incidents and to Order Defendants to Pay Their Previous Counsel".[9] On July 16, 1992, the trial court issued an Order directing the Cortes spouses to pay Atty. Moya the sum of P100,000.00 as and by way of attorneys fees.[10] The Cortes spouses filed a Notice of Appeal to the Court of Appeals.[11] On July 31, 1992, Atty. Moya filed an "Ex-Parte Motion to Dismiss Defendants Appeal" which was denied by the trial court in its Order dated August 4, 1992.[12] Consequently, he filed a notice of appeal questioning the Orders of the trial court dated July 16, 1992 and August 4, 1992.[13] On March 17, 1995, the Court of Appeals rendered the herein assailed decision resolving the respective appeals of spouses Cortes and Atty. Moya in favor of the latter.[14] Spouses Cortes moved for the reconsideration of the decision of the appellate court which the Court denied in its Resolution issued on August 30, 1995.[15] Hence, herein petition filed by the Cortes spouses, raising the following issues:chan robles virtual law library "1. Whether the award of P100,000.00 in favor of private respondent as and by way of attorneys [fees] for the handling of petitioners case before the services of the former was legally terminated is tenable under the facts of this case. 2 Whether the respondent Honorable Court of Appeals misapplied the principle of Estoppel in this case."[16] As both issues are interrelated, we shall resolve them jointly.chan robles virtual law library Petitioners spouses claim that they have already paid private respondent Moya the total amount of P36,000.00 in acceptance and appearance fees.[17] However, a perusal of the records shows that no competent evidence, oral or documentary, was presented to prove said claim. It is settled that he who alleges a fact has the burden of proving it; that mere allegation is not evidence.[18] Besides, records show that the alleged payment by petitioners of said amount was never raised before the lower court. It was only raised on appeal with respondent appellate court. Settled is the rule that litigants cannot raise an issue for the first time on appeal as this would contravene the basic rules of fair play and justice.[19]chan robles virtual law library Nevertheless, petitioners main contention is that the award of P100,000.00 to private respondent Moya as and by way of attorneys fees "is unconscionable and unreasonable." On its face, the Order dated July 2, 1991 appears to be explicit and leaves no room for any other interpretation. The first paragraph of said Order states that parties in open Court agreed that the attorneys fees in the amount of P100,000.00 shall be paid out of any check paid by the plaintiff to defendants.[20] The said agreement is therefore in the nature of a compromise agreement. However, petitioners contend that they agreed to pay private respondent P100,000.00 out of the three (3) checks paid by FSMDC on June 4, 1991 and not out of any other check issued by FSMDC. This contention finds support in the prayer of private respondent, Atty. Moya himself, in his Urgent Motion to Fix Attorneys Fees, Etc.explicitly asking that he "be paid immediately upon the encashment of the P1,000,000.00 check dated June 10, 1991 by the defendants". He even expressed concern that he "may not be paid the corresponding attorneys fees out of the check that is due for payment on said date". [21] Clearly therefrom, the amount of P100,000.00 due to Atty. Moya was expected to be taken not from any check paid by FSMDC to petitioners but specifically from the check dated June 10, 1991 given to petitioners spouses.chan robles virtual law library As already stated, the Order in question appears to be a compromise agreement between spouses Cortes and Atty. Moya. It is true that under the doctrine of estoppel, an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon.[22] A party may not go back on his own acts and representations to the prejudice of the other party who relied upon them. [23] But, in technical estoppel, the party to be estopped must knowingly have acted so as to mislead his

adversary, and the adversary must have placed reliance on the action and acted as he would otherwise not have done.[24] In the present case, petitioners had evidently agreed to pay private respondent P100,000.00 out of the checks paid by FSMDC on June 4, 1991. However, the trial court ordered the payment to be sourced out of any check paid by FSMDC to petitioners. Yet, it does not appear from the original records that both the petitioners and the private respondent were actually sent copies of the Order of July 2, 1991. Thus, petitioners spouses were deprived of the opportunity to question the content of the Order on ground of mistake or excusable negligence, pursuant to the remedy provided for under Section 1, Rule 38 of the Rules of Court. Since petitioners did not receive a copy of the said Order they could not therefore be considered as having knowingly agreed to it as to mislead the court or the private respondent into believing that they unconditionally acceded to pay private respondent the amount of P100,000.00 out of any check given by FSMDC. Consequently, they are not estopped from questioning the correctness of such Order. Elementary fairness dictates that petitioners, who were unaware of the questioned Order, should not be estopped from questioning the same.chan robles virtual law library Having disposed of the issue on estoppel, we now turn to the question of whether or not the amount of P100,000.00 awarded to the private respondent is in consonance with the prevailing principles and guidelines governing compensation due to attorneys for the professional services they have rendered. The reasonableness of the amount of attorneys fees awarded to private respondent should be properly gauged on the basis of the long-standing rule of quantum meruit, meaning, "as much as he deserves". Where a lawyer is employed without agreement as to the amount to be paid for his services, the courts shall fix the amount on quantum meruit basis. In such a case, he would be entitled to receive what he merits for his services.[25] In this respect, Section 24, Rule 138 of the Rules of Court provides: "Sec. 24. Compensation of attorneys, agreement as to fees. - An attorney shall be entitled to have and recover from his client no more than a reasonable compensation for his services, with a view to the importance of the subject matter of the controversy, the extent of the services rendered, and the professional standing of the attorney. x x x" In addition, the following circumstances, codified in Rule 20.1, Canon 20 of the Code of Professional Responsibility, serves as a guideline in fixing a reasonable compensation for services rendered by a lawyer on the basis of quantum meruit:chan robles virtual law library time spent and the extent of the services rendered or required; The novelty and difficulty of the questions involved; c) The importance of the subject matter; d) The skill demanded;chan robles virtual law library e) The probability of losing other employment as a result of acceptance of the proffered case; f) The customary charges for similar services and the schedule of fees of the IBP chapter to which he belongs; b) g) The amount involved in the controversy and the benefits resulting to the client from the services; h) The contingency or certainty of compensation; i) The character of the employment, whether occasional or established; and j) The professional standing of the lawyer. In the present case, aside from invoking his professional standing, private respondent claims that he was the one responsible in forging the initial compromise agreement wherein FSMDC agreed to pay P2,754,380.00. The fact remains, however, that such agreement was not consummated because the checks given by FSMDC were all dishonored. It was not the private respondent who was responsible in bringing into fruition the subsequent compromise agreement between petitioners and FSMDC. Nonetheless, it is undisputed that private respondent has rendered services as counsel for the petitioners. He prepared petitioners Answer and Pre- Trial Brief, appeared at the Pre-Trial Conference, attended a hearing held on July 13, 1990, cross-examined the witness of FSMDC, and was present in the conference at the Manila Hotel between the parties and their respective counsels. All these services were rendered in the years 1990 and 1991 where the value of a peso is higher. Thus, we find the sum of P100,000.00 awarded to private respondent as his attorneys fees to be disproportionate to the services rendered by him to petitioners. The amount of P50,000.00 as compensation for the services rendered by Atty. Moya is just and reasonable. Besides, the imposition of legal interest on the amount payable to private respondent is unwarranted. Article 2209[26] of the Civil Code invoked by Atty. Moya and cited by the appellate court, finds no application in the present case. It is a provision of law governing ordinary obligations and contracts. Contracts for attorneys services in this jurisdiction stand upon an entirely different footing from contracts for the payment of compensation for any other services.[27]chan robles virtual law library We have held that lawyering is not a moneymaking venture and lawyers are not merchants.[28] a) The

"Law advocacy x x x is not capital that yields profits. The returns it births are simple rewards for a job done or service rendered. It is a calling that, unlike mercantile pursuits which enjoy a greater deal of freedom from government interference, is impressed with a public interest, for which it is subject to State regulation."[29] Thus, a lawyers compensation for professional services rendered are subject to the supervision of the court, not just to guarantee that the fees he charges and receives remain reasonable and commensurate with the services rendered, but also to maintain the dignity and integrity of the legal profession to which he belongs.[30] WHEREFORE, the decision appealed from is AFFIRMED WITH MODIFICATIONS to the effect that the attorneys fees awarded to private respondent Felix Moya is REDUCED to P50,000.00 and the legal interest of 6% per annum imposed by the Court of Appeals on the amount due to respondent Moya is DELETED. No costs. SO ORDERED.

[G.R. No. 158768, February 12, 2008] TITAN-IKEDA CONSTRUCTION & DEVELOPMENT CORPORATION, Petitioner, vs. PRIMETOWN PROPERTY GROUP, INC., Respondent. DECISION CORONA, J.: This petition for review on certiorari[1] seeks to set aside the decision of the Court of Appeals (CA) in CA-G.R. CV No. 61353[2] and its resolution[3] denying reconsideration. In 1992, respondent Primetown Property Group, Inc. awarded the contract for the structural works[4] of its 32storey Makati Prime Tower (MPT) to petitioner Titan-Ikeda Construction and Development Corporation. [5] The parties formalized their agreement in a construction contract[6] dated February 4, 1993.[7] Upon the completion of MPT's structural works, respondent awarded the P130,000,000 contract for the tower's architectural works[8] (project) to petitioner. Thus, on January 31, 1994, the parties executed a supplemental agreement.[9] The salient portions thereof were: 1. the [project] shall cover the scope of work of the detailed construction bid plans and specifications and bid documents dated 28 September 1993, attached and forming an integral part hereof as Annex A. 2. the contract price for the said works shall be P130 million.

3. the payment terms shall be full swapping or full payment in condominium units. Thecondominium units earmarked for the [petitioner] are shown in the attached Annex B.

4. the [respondent] shall transfer and surrender to [petitioner] the condominium units abovestated inaccordance with the following schedule:

(a)

80% of units upon posting and acceptance by [respondent] of the performance bond [and] 20% or remaining balance upon completion of the project as provided in the construction contract and simultaneous with the posting by [petitioner] of the reglementary guarantee bond.

(b)

5. the contract period shall be fifteen (15) months reckoned from the release of the condominium certificates of title (CCTs) covering eighty percent (80%) of the units transferable to [petitioner] as aforesaid[.] Significantly, the supplemental agreement adopted those provisions of the construction contract which it did not specifically discuss or provide for.[10] Among those carried over was the designation of GEMM Construction Corporation (GEMM) as the project's construction manager.[11] Petitioner started working on the project in February 1994.

On June 30, 1994, respondent executed a deed of sale [12] (covering 114 condominium units and 20 parking slots of the MPT collectively valued by the parties at P112,416,716.88)[13] in favor of petitioner pursuant to the full-swapping payment provision of the supplemental agreement. Shortly thereafter, petitioner sold some of its units to third persons. [14]

In September 1995, respondent engaged the services of Integratech, Inc. (ITI), an engineering consultancy firm, to evaluate the progress of the project.[15] In its September 7, 1995 report,[16] ITI informed respondent that petitioner, at that point, had only accomplished 31.89% of the project (or was 11 months and six days behind schedule).[17] Meanwhile, petitioner and respondent were discussing the possibility of the latters take over of the projects supervision. Despite ongoing negotiations, respondent did not obtain petitioners consent in hiring ITI as the projects construction manager. Neither did it inform petitioner of ITIs September 7, 1995 report.

On October 12, 1995, petitioner sought to confirm respondent's plan to take over the project.[18] Its letter stated: The mutual agreement arrived at sometime in the last week of August 1995 for [respondent] to take over the construction supervision of the balance of the [project] from [petitioner's] [e]ngineering staff and complete [the] same by December 31, 1995 as promised by [petitioner's] engineer. The [petitioner's] accomplished works as of this date of [t]ake over is of acceptable quality in materials and workmanship. This mutual agreement on the take over should not be misconstrued in any other way except that the take over is part of the long range plan of [respondent] that [petitioner], in the spirit of cooperation, agreed to hand over the construction supervision to [respondent] as requested. (emphasis supplied)[19] Engineers Antonio Co, general construction manager of respondent, and Luzon Y. Tablante, project manager of petitioner, signed the letter.

In its September 7, 1995 report, ITI estimated that petitioner should have accomplished 48.71% of the project as of the October 12, 1995 takeover date.[20] Petitioner repudiated this figure[21] but qualifiedly admitted that it did not finish the project.[22] Records showed that respondent did not merely take over the supervision of the project but took full control thereof.[23] Petitioner consequently conducted an inventory.[24] On the basis thereof, petitioner demanded from respondent the payment of its balance amounting to P1,779,744.85.[25] On February 19, 1996, petitioner sent a second letter to respondent demanding P2,023,876.25. This new figure included the cost of materials (P244,331.40) petitioner advanced from December 5, 1995 to January 26, 1996.[26]

On November 22, 1996, petitioner demanded from respondent the delivery of MPT's management certificate[27] and the keys to the condominium units and the payment of its (respondent's) balance.[28] Because respondent ignored petitioner's demand, petitioner, on December 9, 1996, filed a complaint for specific performance[29] in the Housing and Land Use Regulatory Board (HLURB). While the complaint for specific performance was pending in the HLURB, respondent sent a demand letter to petitioner asking it to reimburse the actual costs incurred in finishing the project (or P69,785,923.47). [30] In view of the pendency of the HLURB case, petitioner did not heed respondent's demands. On April 29, 1997, the HLURB rendered a decision in favor of petitioner. [31] It ruled that the instrument executed on June 30, 1994 was a deed of absolute sale because the conveyance of the condominium units and parking slots was not subject to any condition. [32] Thus, it ordered respondent to issue MPTs management certificate and to deliver the keys to the condominium units to petitioner. [33] Respondent did not appeal this decision. Consequently, a writ of execution was issued upon its finality. [34] Undaunted by the finality of the HLURB decision, respondent filed a complaint for collection of sum of money[35] against petitioner in the Regional Trial Court (RTC) of Makati City, Branch 58 on July 2, 1997. It prayed for the reimbursement of the value of the projects unfinished portion amounting to P66,677,000.[36] During trial, the RTC found that because respondent modified the MPT's architectural design, petitioner had to adjust the scope of work.[37] Moreover, respondent belatedly informed petitioner of those modifications. It also failed to deliver the concrete mix and rebars according to schedule. For this reason, petitioner was not responsible for the project's delay.[38] The trial court thus allowed petitioner to set-off respondent's other outstanding liabilities with respondents excess payment in the project.[39] It concluded that respondent owed petitioner P2,023,876.25.[40] In addition, because respondent refused to deliver the keys to the condominium units and the management certificate to petitioner, the RTC found that petitioner lost rental income amounting to US$1,665,260.[41] The dispositive portion of the RTC decision stated: WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered dismissing [respondent's] [c]omplaint for lack of merit. On the other hand, finding preponderance of evidence to sustain [petitioner's] counterclaim, judgment is hereby rendered in favor of [petitioner] ordering [respondent] to pay the former: 1. The unpaid balance of the consideration for [petitioner's] services in [the project] in the amount of P2,023,867.25 with legal interest from the date of demand until fully paid; 2. Compensatory damages in the amount of US$1,665,260 or its peso equivalent at the current foreign exchange rate representing lost rental income due only as of July 1997 and the accrued lost earnings from then on until the date of actual payment, with legal interest from the date of demand until fully paid; and 3. Attorney's fees in the amount of P100,000 as acceptance fee, P1,000 appearance fee per hearing and 25% of the total amount awarded to [petitioner].

With

costs

against

the

[respondent].

SO ORDERED.[42] Respondent appealed the RTC decision to the CA.[43] The appellate court found that respondent fully performed its obligation when it executed the June 30, 1994 deed of absolute sale in favor of petitioner. [44] Moreover, ITI's report clearly established that petitioner had completed only 48.71% of the project as of October 12, 1995, the takeover date. Not only did it incur delay in the performance of its obligation but petitioner also failed to finish the project. The CA ruled that respondent was entitled to recover the value of the unfinished portion of the project under the principle of unjust enrichment.[45] Thus: WHEREFORE, the appealed decision is REVERSED and a new one entered dismissing [petitioner's] counterclaims of P2,023,867.25 representing unpaid balance for [its] services in [the project]; US$1,665,260 as accrued lost earnings, and attorney's fees. [Petitioner] is hereby ordered to return to [respondent] the amount of P66,677,000 representing the value of unfinished [portion of the project], plus legal interest thereon until fully paid. Upon payment by [petitioner] of the aforementioned amount, [respondent] is hereby ordered to deliver the keys and [m]anagement [c]ertificate of the [Makati Prime Tower] paid to [petitioner] as consideration for the [project].[46] Petitioner moved for reconsideration but it was denied. Hence, this petition. Petitioner contends that the CA erred in giving weight to ITI's report because the project evaluation was commissioned only by respondent,[47] in disregard of industry practice. Project evaluations are agreed upon by the parties and conducted by a disinterested third party.[48] We REVIEW FACTUAL grant OF the CONFLICTING FINDINGS petition.

As a general rule, only questions of law may be raised in a petition for review on certiorari. Factual issues are entertained only in exceptional cases such as where the findings of fact of the CA and the trial court are conflicting.[49] Here, a glaring contradiction exists between the factual findings of the RTC and the CA. The trial court found that respondent contributed to the project's delay because it belatedly communicated the modifications and failed to deliver the necessary materials on time. The CA, however, found that petitioner incurred delay in the performance of its obligation. It relied on ITI's report which stated that petitioner had accomplished only 48.71% of the project as of October 12, 1995. JANUARY SUPPLEMENTAL WAS 31, 1994 AGREEMENT EXTINGUISHED

A contract is a meeting of the minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service.[50] This case involved two contracts entered into by the parties with regard to the project. The parties first entered into a contract for a piece of work[51] when they executed the supplemental agreement. Petitioner as contractor bound itself to execute the project for respondent, the owner/developer, in consideration of a price certain (P130,000,000). The supplemental agreement was reciprocal in nature because the obligation of respondent to pay the entire contract price depended on the obligation of petitioner to complete the project (and vice versa). Thereafter, the parties entered into a second contract. They agreed to extinguish the supplemental agreement as evidenced by the October 12, 1995 letter-agreement which was duly acknowledged by their respective representatives.[52] While the October 12, 1995 letter-agreement stated that respondent was to take over merely the supervision of the project, it actually took over the whole project itself. In fact, respondent subsequently hired two contractors in petitioner's stead.[53] Moreover, petitioner's project engineer at site only monitored the progress of architectural works undertaken in its condominium units.[54] Petitioner never objected to this arrangement; hence, it voluntarily surrendered its participation in the project. Moreover, it judicially admitted in its answer that respondent took over the entire project, not merely its supervision, pursuant to its (respondents) long-range plans. [55] Because the parties agreed to extinguish the supplemental agreement, they were no longer required to fully perform their respective obligations. Petitioner was relieved of its obligation to complete the project while respondent was freed of its obligation to pay the entire contract price. However, respondent, by executing the June 30, 1994 deed of absolute sale, was deemed to have paid P112,416,716.88. Nevertheless, because petitioner applied part of what it received to respondents outstanding liabilities, [56] it admitted overpayment. Because petitioner acknowledged that it had been overpaid, it was obliged to return the excess to respondent. Embodying the principle of solutio indebiti, Article 2154 of the Civil Code provides:

Article 2154. If something is received when there is no right to demand it and it was unduly delivered through mistake, the obligation to return it arises. For the extra-contractual obligation of solutio indebiti to arise, the following requisites must be proven: 1. the absence of a right to collect the excess sums and

2. the payment was made by mistake.[57]With regard to the first requisite, because the supplemental agreement had been extinguished by the mutual agreement of the parties, petitioner became entitled only to the cost of services it actually rendered (i.e., that fraction of the project cost in proportion to the percentage of its actual accomplishment in the project). It was not entitled to the excess (or extent of overpayment). On the second requisite, Article 2163 of the Civil Code provides: Article 2163. It is presumed that there was a mistake in the payment if something which had never been due or had already been paid was delivered; but, he from whom the return is claimed may prove that the delivery was made out of liberality or for any other just cause. (emphasis supplied) In this instance, respondent paid part of the contract price under the assumption that petitioner would complete the project within the stipulated period. However, after the supplemental agreement was extinguished, petitioner ceased working on the project. Therefore, the compensation petitioner received in excess of the cost of its actual accomplishment as of October 12, 1995 was never due. The condominium units and parking slots corresponding to the said excess were mistakenly delivered by respondent and were therefore not due to petitioner. Stated simply, respondent erroneously delivered excess units to petitioner and the latter, pursuant to Article 2154, was obliged to the return them to respondent.[58] Article 2160 of the Civil Code provides: Article 2160. He who in good faith accepts an undue payment of a thing certain and determinate shall only be responsible for the impairment or loss of the same or its accessories and accessions insofar as he has thereby been benefited. If he has alienated it, he shall return the price or assign the action to collect the sum. One who receives payment by mistake in good faith is, as a general rule, only liable to return the thing delivered. [59] If he benefited therefrom, he is also liable for the impairment or loss of the thing delivered and its accessories and accessions.[60] If he sold the thing delivered, he should either deliver the proceeds of the sale or assign the action to collect to the other party.[61] The situation is, however, complicated by the following facts: a) the basis of th