sales&leases cases

8/10/2019 Sales&Leases Cases

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SECOND DIVISION[G.R. No. 147321. January 21, 2004]

SPOUSES CRISPIN AUSTRIA and LEONISA HILARIO, petitioners, vs. SPOUSES DANILO GONZALES, JR., and VERONICGONZALES, respondents.

D E C I S I O NQUISUMBING, J.:For review on certiorari is the Court of Appeals decision1 dated February 23, 1999, in CA-G.R. CV No. 49581, which

reversed the decision2 of the Regional Trial Court (RTC) of Malolos, Bulacan, Branch 12, in Civil Case No. 552-M-91. TheRTC ruled that the disputed contract purporting to be a deed of sale was an equitable mortgage, and granted petitionersthe right to redeem the subject property. Also assailed is the appellate court's Resolution3 dated February 28, 2001,denying petitioners' motion for reconsideration.The facts as culled from the records are as follows:On September 4, 1991, petitioners Crispin Austria and Leonisa Hilario filed a civil action for Declaration of Nullity ofDocument and Reconveyance before the RTC of Malolos, Bulacan, against herein respondents Danilo Gonzales, Jr., andVeronica Gonzales. In their Complaint, docketed as Civil Case No. 552-M-91, petitioners alleged that they are the ownersand possessors of three (3) parcels of land, with areas of 1,000, 1,000 and 1,363 square meters, more or less, andcovered by the following Transfer Certificates of Title (TCT) Nos. T-210989, T-210990 and T-82297, respectively, all in the

name of petitioner Leonisa Hilario.Said parcels became the subject of two (2) Deeds of Absolute Sale, one dated July 21, 1979, priced at P50,000 and theother dated October 23, 1981 priced at P240,000. Both deeds were executed by petitioner Leonisa Hilario in favor ofrespondents. But petitioners claimed that the transactions entered between petitioners and respondents were notactually sales, but merely loans in the amount of P260,000. According to petitioners, they used this amount to redeemsome mortgaged properties from the Rural Bank of Pandi, Bulacan. To secure the loan, however, respondents requiredpetitioners to furnish them with ten (10) TCTs. Three of these certificates covered the petitioners' properties subject ofthe present case, while .the other seven belonged to their relatives. Petitioners admitted that their debts to respondentspouses remained unpaid due to business reverses.According to petitioners, respondents thereafter registered the disputed properties in their own names through the useof fraud, misrepresentation and falsification, using the fictitious contracts of sale. Petitioners alleged that they came toknow of said acts of respondents only when they were served with a notice dated May 22, 1991, from respondents'counsel to vacate said lots. Thus, petitioners sought the reconveyance of the three parcels from respondents, with moraldamages and attorney's fees.For their part, respondents insisted in their Answer that on October 1981, petitioner Leonisa Hilario sold to them thethree lots in question. Respondent Veronica Gonzales agreed to buy the same out of pity for petitioners, whose severalproperties had earlier been foreclosed by the bank. The transaction was embodied in a Deed of Absolute Sale andnotarized before Notary Public Protacio Cortez, Jr. The original amount in the Deed of Absolute Sale was P240,000.However, before the properties were registered, petitioner Leonisa Hilario in a letter dated July 20, 1983, requested for

the execution of another Deed of Absolute Sale indicating a price of P50,000, purportedly to lessen the taxes and feesthat they will be paying as the vendors. The letter, which was in the vernacular is reproduced in full below, thus:Ika-ng Hulyo, 1983Gng. Veronica R. GonzalezBaliwag, BulacanMahal na Gng. Gonzales;Nangyari kami ay lumiham sa inyo tungkol sa Kasulatan ng Bilihan na aming isinagawa sa inyong pangalan na tumutukoysa lupang nasasa (sic) Bunsuran Pandi, Bulacan at nasa ilalim ng TCT Nos. T-82297, T-210989, T-210990 ng Register ofDeeds of Bulacan na lalong magpapakikilala bilang Doc. No. 284; page no. 57; Book No. V; Series of 1981 ni Notary PublicP. Cortez, Jr. ng Bulakan na ang gastos sa kaukulang capital gains tax, registration fees at ibang gastos pa na may

kinalaman sa pagpapalipat sa pangalan ninyo ay kami ang mananagot na magbabayad.Dahilan po dito ay nais po sana naming hilingin sa inyo na sana ay makapagsagawa kami ng isa pang kasulatan ng bilihanna tumutukoy din sa mga binanggit na lupa at babaan ang halaga nito at ang petsa nito ay maging bata or maaga parakami ay huwag namang masyadong magastusan at kami ay nananagot sa pagsasagawa ng bilihang ito.Salamat po at umaasa kami sa inyong pagdinig sa aming kahilingang ito.Sumasainyo,Sgd.Gng. Leonisa H. Austria4


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According to respondents, a new Deed of Absolute Sale indicating a selling price of P50,000 for the 3 lots was executedand notarized before Notary Public Jose Ramos. Shortly afterwards, according to respondents, the titles of said lots weretransferred to them.After respondents wrote petitioners on June 20, 1983, asking them to vacate the disputed properties, petitioners sentrespondents on July 28, 1983, an UNDERTAKING5 promising to vacate and surrender possession of the properties on orabout December 15, 1983, without further extension. But then petitioners failed to vacate as promised on said date.Their failure to vacate and turn over the purchased lots prompted respondents to send a final demand letter asking

petitioners to vacate the premises but petitioners still refused. As a result, said respondents were forced to file anejectment suit docketed as Civil Case No. 2473 before the Municipal Trial Court of Pandi, Bulacan,6 against petitioners.That suit was decided by the municipal court in respondents' favor. Hence the petitioners elevated their case to theRegional Trial Court of Malolos.On August 11, 1995, after trial on the merits, the RTC of Malolos decided Civil Case No. 552-M-91 against respondentsand in favor of herein petitioners. It decreed as follows:WHEREFORE, conformably with all the foregoing, judgment is hereby rendered declaring the subject deeds of absolutesale (Exhs. "1" and "3") a loan transaction between the parties herein and, therefore, an equitable mortgage. Plaintiffsare declared entitled to redeem their mortgaged properties which shall be effected upon the payment of their mortgagedebt to defendants in the total amount of P260,000.00 with legal rate of interest from October 23, 1981, the date of

delivery of said loan amount to plaintiffs, until it is fully paid.Further, defendants are hereby ordered to pay P20,000.00 for attorney's fee (sic) of plaintiffs and the costs of suit.SO ORDERED.7In finding for petitioners, the trial court described petitioners as the classic example of persons who are willing to enterinto any kind of arrangement with another due to a desperate need of money. The trial court noted that petitioners hadto sign all those documents, including the undertaking dated July 28, 1983, simply because their hands were forced bythe need to avail of their last remaining chance to redeem their mortgaged properties from the foreclosing bank.Citing Uy v. Court of Appeals,8 the RTC opined that "necessitous men are not, truly speaking, free men; but to answer apresent emergency, will submit to any terms that the crafty may impose upon them."Applying Article 16049 of the Civil Code in relation to Article 1602,10 the RTC observed that: (a) petitioners as thevendor remained in physical possession of the lots even after the execution of the deed of sale; (b) petitioners paid therealty taxes for the years 1982 and 1983; and (c) the purchase price of P50,000.00 was unusually inadequate by anystandard for realties totaling more than 3,000 square meters in area, with house built thereon and other improvements.Respondents seasonably appealed the decision in Civil Case No. 552-M-91 to the Court of Appeals. It reversed the trialcourt's decision, to wit:WHEREFORE, the decision dated August 11, 1995 of the Regional Trial Court of Malolos, Bulacan (Branch 12) is herebySET ASIDE, and a new one rendered DISMISSING the complaint.Costs against the plaintiffs-appellees.SO ORDERED.11Further, in holding that the contract between the parties was an absolute sale, rather than equitable mortgage, theCourt of Appeals made the following observations in its decision on the ejectment suit: (1) petitioner Crispin Austriacould not present the document to prove that their transaction with respondents was a loan; (2) Austria could not eventestify as to the terms of such loan, i.e., he did not even know when the loan fell due; (3) petitioners had not paid anysingle centavo for such loan over a period of 13 years; (4) when confronted with the deed of sale during the trial, Austriacould only claim that he could not remember if the signatures appearing thereon were his or his wife's; (5) petitionersdid execute the Undertaking promising to vacate the disputed premises on or before December 14, 1983; and (6)petitioners did not deny writing the letter dated July 20, 1983 wherein they asked respondents to execute a secondantedated deed of sale with a reduced selling price indicated therein.12Hence, the instant petition.

Before this Court, petitioners aver that the Court of Appeals erred in:IHOLDING THAT THE CONTRACT BETWEEN PETITIONERS AND RESPONDENTS OVER THE TEN (10) TRANSFERCERTIFICATE(S) OF TITLE, AND ALL IMPROVEMENTS EERECTED THEREON (sic) SUBJECT THREE (3) PARCELS OF LANDCOVERED BY THREE (3) TRANSFER CERTIFICATE(S) OF TITLES INCLUDED WERE SALE AND NOT A MORTGAGE LOAN (sic).IIDISREGARDING THE FACTS AND EVIDENCES PRESENTED WHICH CLEARLY SUPPORT THE REGIONAL TRIAL COURT'SFINDINGS IN FAVOR OF THE PETITIONERS.


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a. FROM HER OWN LIPS, RESPONDENT VERONICA GONZALES ADMITTED HAVING ACQUIRED THE FIVE (5) PROPERTIESOF PABLO HILARIO, JR., ONE (1) PROPERTY OF PABLO HILARIO, SR., AND ONE (1) PROPERTY OF MANSUETO DIE LA CRUZ;b. UNDER THE FACTUAL CIRCUMSTANCES OBTAINING IN THE INSTANT CASE AND EXISTING JURISPRUDENCE, THECONTRACT BETWEEN PETITIONERS AND RESPONDENTS WAS, AT THE VERY LEAST, AN EQUITABLE MORTGAGE.The pertinent issue for our resolution is whether the transaction in this case involves an absolute sale or equitablemortgage of real property.Petitioners contend that the Court of Appeals erred in failing to consider the following circumstances: (a) they remained

in possession of the premises until 1992; (b) the price of P50,000 is grossly inadequate; (c) they are paying the realestate taxes and that they were left with no choice but to yield to respondents' fraudulent scheme because they were indire need of money.13 They claim that all the foregoing are earmarks of an equitable mortgage. They add, quoting anadage in Filipino, "Ang taong nagigipit, kahit sa patalim ay kumakapit".14For their part, respondents argue that the instant petition raises factual issues not proper in a petition for review oncertiorari. On the merits, they aver that petitioners' mere denial is not sufficient to overcome the existence of the deedof sale, which was notarized by the notary public, who testified thereon in court as a witness. Moreover, they contendthat petitioners are landowners used to transacting business involving real properties, including the prior loanarrangements with respondents. Thus, according to respondents, the petitioners cannot claim ignorance of the requireddocumentation for realty transactions.

At this juncture, we must stress that while, as general rule, only questions of law may be raised in a petition for reviewunder Rule 45 of the Rules of Court, nonetheless factual issues may be entertained by this Court in exceptional cases.These include instances where the findings of fact are conflicting or when the findings of the Court of Appeals arecontrary to those of the trial court,15 as in the present case. The different findings of the trial court and the Court ofAppeals as to the nature of the transaction entered into between petitioners and respondents in this case compel us tomake our own.Decisive for the proper determination of the true nature of the transaction between the parties is the intent of theparties. There is no conclusive test to determine whether a deed absolute on its face is really a simple loanaccommodation secured by a mortgage.16 To determine whether a deed absolute in form is a mortgage in reality, thecourt is not limited to the written memorials of the transaction. This is so because the decisive factor in evaluating suchagreement is the intention of the parties, as shown not necessarily by the terminology used in the contract but by all thesurrounding circumstances, such as the relative situations of the parties at that time; the attitudes, acts, conduct, anddeclarations of the parties; the negotiations between them leading to the deed; and generally, all pertinent facts havinga tendency to fix and determine the real nature of their design and understanding. As such, documentary and parolevidence may be submitted and admitted to prove the intention of the parties.17At first blush, petitioners appear persuasive in invoking the presumption created by Articles 1602 and 1604 of the CivilCode as to an equitable mortgage. Petitioners point out that the requirements of an equitable mortgage have beensatisfied by the following circumstances, to wit: (1) inadequacy of the selling price; (2) possession in the premises, and(3) payment of realty taxes. However, such presumption of equitable mortgage is not conclusive. It may be rebutted bycompetent and satisfactory proof to the contrary. In the instant case, petitioners' claim that the selling price of the lotsin question was inadequate needs closer scrutiny. Petitioners' allegation that the insufficiency of the selling price createsthe presumption that the transaction is an equitable mortgage is unsupported by the evidence on record. Petitionersfailed to present any proof whatsoever that the fair market values of the real property in the area at the time of thetransaction were much higher than the selling price of the parcels in question. Mere allegation that the price paid byrespondents was inadequate, without more, does not make a case favorable to petitioners. Moreover, there is candidtestimony by respondents that the actual price paid was P240,000. This testimony was buttressed by a letter dated July20, 1983, written by petitioner Leonisa H. Antonio that a price be put in the deed lower than what was actually paid, soas to lower the seller's taxes, fees, and other expenses.As to the allegation that petitioners were in possession of the properties even after the sale, it is obviated by the fact

that they executed an undertaking promising to vacate the premises. But they repeatedly delayed honoring it. Therecords also show that they did not object when improvements were made on the premises by respondents. As aptlystated by the Court of Appeals:Plaintiffs responded to a demand to vacate made on them by the defendant by executing an "Undertaking" dated July28, 1983 promising to vacate the premises on or before December 14, 1983. (Exh. "7"). Such undertaking was consistentwith the fact that a sale was indeed made in October 1981. Plaintiffs, however, failed to make good their promise and soan ejectment suit was filed against them which eventually led to their ejectment from the subject properties. After theirejectment, a certain Mr. Rivera occupied the lots. The latter introduced permanent improvements thereon and had infact converted the pigpens, which used to belong to plaintiff Austria, into a fishpond. When all these improvements


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were being undertaken, plaintiffs were aware thereof but did not object to any of the work done on the subjectpremises, (tsn, pp. 8-11, August 9, 1993). Such inaction is contrary to their claim of ownership over the subjectproperties, considering that the owner of a thing has the right to exclude any person from the enjoyment and disposalthereof and may, for this purpose, use such force as may be reasonably necessary to repel or prevent an actual orthreatened unlawful physical invasion or usurpation of his property. (Article 429, Civil Code).18Petitioners insist that they entered into a contract only to obtain a loan with respondents and nothing more. Petitionersfailed, however, to present a copy of said contract in the proceedings before the RTC, nor could they testify as to its

details. Petitioners surely cannot now pretend to be ignorant of the real nature of their transaction with respondents.For this was not the first time they dealt with each other. Petitioner Crispin Austria even admitted in his testimony thathe knew the meaning of the phrase "hereby sell, transfer and convey" and "deed of sale".19 But he was less than candidin his testimony under oath. While he could identify his own signature in the Complaint, he was struck with selectiveamnesia when shown the same signature in the Deed of Sale.20 Moreover, he failed to rebut the testimony of theNotary Public who testified in court that the petitioners as vendors of the properties personally appeared andacknowledged the sale documents before him.Lastly petitioners' contentions must fail in the face of Leonisa's letter of July 20, 1983 to respondent Veronica Gonzales,requesting respondents to execute another antedated deed of sale, providing for a decreased selling price, so as toreduce petitioners' taxes, e.g. capital gains tax. The existence and genuineness of the letter was never rebutted by

petitioners. Note that in said letter Leonisa used the term "Kasulatan ng Bilihan" (Deed of Sale). Note likewise that shemade mention about capital gains tax and registration fees, which can only find relevance and necessity in a contract ofsale and not in a contract of mortgage. Apparently, petitioners were aware all along that what they had entered intowith respondents is a contract of sale. Petitioners cannot feign ignorance and illiteracy as to its contents. Said letter iswritten not in English but in Filipino in which petitioners are conversant. Thus, we are constrained to find that indeedthe true intent of the parties involves a contract of sale. It is not merely a loan, much less an equitable mortgage, thatthey had in mind. The decision reached by the appellate court favoring the respondents over the petitioners, byreve rsing the trial courts judgment and dismissing the complaint, deserves our concurrence. WHEREFORE, the petition is DENIED, and the decision of the Court of Appeals dated February 23, 1999, in CA-G.R. CVNo. 49581 as well as its resolution dated February 28, 2001, is AFFIRMED. Costs against petitioners.SO ORDERED.Puno, (Chairman), Austria-Martinez, Callejo, Sr. and Tinga, JJ., concur.


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FIRST DIVISION

[G.R. No. 146608. October 23, 2003]SPOUSES CONSTANTE FIRME AND AZUCENA E. FIRME, petitioners, vs. BUKAL ENTERPRISES AND DEVELOPMEN

CORPORATION, respondent. D E C I S I O NCARPIO, J.:

The CaseThis is a petition for review on certiorari of the Decision [1] dated 3 January 2001 of the Court of Appeals in CA-G.R. CVNo. 60747. The Court of Appeals reversed the Decision [2] of the Regional Trial Court, Branch 223, Quezon City (trialcourt), which held that there was no perfected contract of sale since there was no consent on the part of the seller.The FactsPetitioner Spouses Constante and Azucena Firme (Spouses Firme) are the registered owners of a parcel of land [3](Property) located on Dahlia Avenue, Fairview Park, Quezon City. Renato de Castro (De Castro), the vice president ofBukal Enterprises and Development Corporation (Bukal Enterprises) authorized his friend, Teodoro Aviles (Aviles), abroker, to negotiate with the Spouses Firme for the purchase of the Property.On 28 March 1995, Bukal Enterprises filed a complaint for specific performance and damages with the trial court,

alleging that the Spouses Firme reneged on their agreement to sell the Property. The complaint asked the trial court toorder the Spouses Firme to execute the deed of sale and to deliver the title to the Property to Bukal Enterprises uponpayment of the agreed purchase price.During trial, Bukal Enterprises presented five witnesses, namely, Aviles, De Castro, Antonio Moreno, Jocelyn Napa andAntonio Ancheta.Aviles testified that De Castro authorized him to negotiate on behalf of Bukal Enterprises for the purchase of theProperty. According to Aviles, he met with the Spouses Firme on 23 January 1995 and he presented them with a draftdeed of sale [4] (First Draft) dated February 1995. The First Draft o f the deed of sale provides:DEED OF ABSOLUTE SALEKNOW ALL MEN BY THESE PRESENTS:This DEED OF ABSOLUTE SALE made and executed by and between the Spouses CONSTANTE FIRME and AZUCENA E.FIRME, both of legal age, Filipino citizens and with postal address at No. 1450 Union, Paco, City of Manila, hereinaftercalled the VENDOR, andBUKAL ENTERPRISES and DEVELOPMENT CORPORATION, a corporation duly organized and registered in accordance withPhilippine Laws, with business address at Dahlia Avenue, Fairview Park, Quezon City, herein represented by itsPRESIDENT, MRS. ZENAIDA A. DE CASTRO, hereinafter called the VENDEE.WITNESSETH:That the VENDOR is the absolute and registered owner of a certain parcel of land located at Fairview Park, Quezon City,and more particularly described as follows:A parcel of land (Lot 4, Block 33 of the consolidation-subdivision plan (LRC) Pcs-8124, Sheet No. I, being a portion of theconsolidation of Lots 41-B-2-A and 41-B-2-C, Psd-1136 and Lot (LRC) Pcs-2665, (LRC) GLRO) Record. No. 1037), situatedin Quezon City, Island of Luzon. Bounded on the NE., points 2 to 5 by Road Lot 24, of the consolidation-subdivision plan.Beginning at a point marked 1 on plan, being S. 67 deg. 23W., 9288.80 m. from BLLM I, Mp of Montalban, Rizal;thenc e N. 85 deg. 35E., 17.39 m. to point 2; thence S. 54 deg. 22E., 4.00 m. to point 3; thence S. 14 deg. 21E., 17.87 m.to point 4; thence 3 deg. 56E., 17.92 m. to point 5; thence N. 85 deg. 12 W., 23.38 m. to point 6; thence N. 4 deg. 55W., 34.35 m. to the point of beginning; containing an area of EIGHT HUNDRED AND SIX (806) SQUARE METERS, more orless.VENDORS title thereto being evidenced by Transfer Certificate of Title No. 264243 issued by the Register of Deeds ofQuezon City;

That the VENDOR, for and in consideration of the sum of THREE MILLION TWO HUNDRED TWENTY FOUR THOUSANDPESOS (P3,224,000.00) Philippine Currency, to them in hand paid and receipt whereof is hereby acknowledged, dohereby SELL, TRANSFER and CONVEY unto the said VENDEE, its assigns, transferees and successors in interest the abovedescribed property, free from all liens and encumbrances whatsoever;It is hereby mutually agreed that the VENDEE shall bear all the expenses for the capital gains tax, documentary stamps,documentation, notarization, removal and relocation of the squatters, registration, transfer tax and other fees as may berequired by law;That the VENDOR shall pay the real estate tax for the current year and back real estate taxes, charges and penalties ifthere are any.


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IN WITNESS WHEREOF, we have hereunto affixed our signatures this ____ day of February, 1995, at Quezon City,Philippines.CONSTANTE FIRME BUKAL ENTERPRISES AND

DEVELOPMENT CORP.BY:

AZUCENA E. FIRME ZENAIDA A. DE CASTROVENDOR President

x x xThe Spouses Firme rejected this First Draft because of several objectionable conditions, including the payment of capitalgains and other government taxes by the seller and the relocation of the squatters at the sellers expense . During theirsecond meeting, Aviles presented to the Spouses Firme another draft deed of sale [5] (Second Draft) dated March1995. The Spouses Firme allegedly accepted the Second Draft in view of the deletion of the objectionable conditionscontained in the First Draft. According to Aviles, the Spouses Firme were willing to sell the Property at P4,000 persquare meter. They then agreed that payment would be made at the Far East Bank and Trust Company (FEBTC), PadreFaura Branch, Manila. However, the scheduled payment had to be postponed due to problems in the transfer of funds.The Spouses Firme later informed Aviles that they were no longer interested in selling the Property. [6]De Castro testified that he authorized Aviles to negotiate for Bukal Enterprises the purchase of the Property owned by

the Spouses Firme. The Property was located beside the Dahlia Commercial Complex owned by Bukal Enterprises. Avilesinformed him that the Spouses Firme agreed to sell the Property at P4,000 per square meter, payable in cash for a lumpsum of P3,224,000. Furthermore, Bukal Enterprises agreed to pay the taxes due and to undertake the relocation of thesquatters on the Property. For this purpose, Bukal Enterprises applied for a loan of P4,500,000 which FEBTC granted.Bukal Enterprises then relocated the four families squatting on the Property at a cost of P60,000 per family. After thesquatters vacated the Property, Bukal Enterprises fenced the area, covered it with filling materials, and constructedposts and riprap. Bukal Enterprises spent approximately P300,000 for these improvements. In a letter [7] dated 7 March1995, Bukal Enterprises offered to pay the purchase price of P3,224,000 to the Spouses Firme upon execution of thetransfer documents and del ivery of the owners duplicate copy of TCT No. 264243. The Spouses Firme did not accept thisoffer but instead sent Bukal Enterprises a letter demanding that its workers vacate the Property. Bukal Enterprises thenfiled a complaint for specific performance and damages. [8]Antonio Moreno, one of the alleged squatters on the Property, testified that he constructed his house on the Propertysometime in 1982. On 26 February 1995, he was summoned together with the other squatters to a meeting with Avilesregarding their relocation. They agreed to relocate provided they would be given financial assistance of P60,000 perfamily. Thus, on 6 March 1995, the squatter families were each paid P60,000 in the presence of De Castro and Aviles.Thereafter, they voluntarily demolished their houses and vacated the Property. [9]Jocelyn Mapa, the manager of FEBTC, Padre Faura Branch, testified that Bukal Enterprises has been their client since1994. According to her, Bukal Enterprises applied for a loan of P4,500,000 on the third week of February 1995 allegedlyto buy a lot in Fairview. FEBTC approved the loan on the last week of February and released the proceeds on the firstweek of March. [10]Antonio Ancheta (Ancheta), barangay captain of Barangay Fairview, testif ied that he was present when one of theofficers of Bukal Enterprises, a certain Renato, paid each of the four squatter families around P60,000 to P100,000.Ancheta informed Dr. Constante Firme that he told the squatters to leave considering that they already receivedpayment for their relocation. According to Ancheta, Dr. Constante Firme must have misunderstood him and thoughtthat the squatters left through Anchetas own efforts. [11] On the other hand, Dr. Constante Firme (Dr. Firme) was the sole witn ess for the defendant spouses.Dr. Firme testified that on 30 January 1995, he and his wife met with Aviles at the Aristocrat Restaurant in Quezon City.Aviles arranged the meeting with the Spouses Firme involving their Property in Fairview. Aviles offered to buy theProperty at P2,500 per square meter. The Spouses Firme did not accept the offer because they were reserving the

Property for their children. On 6 February 1995, the Spouses Firme met again with Aviles upon the latters insistence.Aviles sh owed the Spouses Firme a copy of a draft deed of sale [12] (Third Draft) which Aviles prepared. The ThirdDraft of the deed of sale provides:CONRACT OF SALEKNOW ALL MEN BY THESE PRESENTS:This AGREEMENT, executed this ___ day of February, 1995, by and between the Spouses CONSTANTE FIRME andAZUCENA E. FIRME, both of legal age, Filipino citizen and with postal address at __________, Quezon City, hereinafterreferred to as the VENDORS, and BUKAL ENTERPRISES and DEVELOPMENT CORPORATION, a corporation duly organized


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and registered in accordance with Philippine Laws, with postal address at Fairview Park, Quezon City, hereinrepresented by its President and Chief Executive Officer, hereinafter referred to as the VENDEE.WITNESSETH:That for and in consideration of the sum of THREE MILLION TWO HUNDRED TWENTY FOUR THOUSAND PESOS(P3,224,000.00), Philippine Currency, payable in the form hereinafter expressed, agreed to sell to the VENDEE and theVENDEE has agreed to buy from the VENDORS, a parcel of land situated at Dahlia Avenue corner Rolex Street, FairviewPark, Quezon City, containing an area of 806 Square Meters more or less, of which the VENDORS are the absolute

registered owners in accordance with the Land Registration Act, as evidenced by Transfer Certificate of Title No. 264243issued by the Register of Deeds of Quezon City, more particularly described and bounded as follows:(DESCRIPTION AND BOUNDARIES OF PROPERTY)THE FURTHER TERMS AND CONDITIONS OF THE CONTRACT ARE AS FOLLOWS:1. The VENDEE agrees to pay the VENDORS upon execution of this Contract the sum of ONE MILLION PESOS(P1,000,000.00), Philippine Currency, as downpayment and agrees to pay the balance of TWO MILLION TWOHUNDRED TWENTY FOUR THOUSAND PESOS (P2,224,000.00) at the post office address of the VENDORS in Quezon City,or such other place or Office as the VENDORS may designate within a period of sixty (60) days counted from the date ofthis Contract;2. The VENDORS have hereunto authorized the VENDEE to mortgage the property and submit this Contract,

together with a certified true copy of the TCT, Tax Declaration, Tax Clearance and Vicinity/Lot Plan, with their LendingBank. The proceeds of the VENDEES Loan shall directly be paid and remitted by the Bank to the VENDORS; 3. The said parcel of land shall remain in the name of the VENDORS until the Lending Bank of the VENDEE shallhave issued a Letter Guaranty Payment in favor of the VENDORS, at which time the VENDORS agree to execute a Deed ofAbsolute Sale in favor of the VENDEE and cause the issuance of the Certificate of Title in the name of the latter. TheCapital Gains Tax and Documentary Stamps shall be charged from the VENDORS in accordance with law;4. The payment of the balance of P2,224,000.00 by the VENDEE to the VENDORS shall be within a period of sixty(60) days effective from the date of this Contract. After the lapse of 60 days and the loan has not yet been released dueto fortuitous events the VENDEE shall pay an interest of the balance a monthly interest based on existing bank rateuntil said fortuitous event is no longer present;5. The VENDEE shall remove and relocate the Squatters, however, such actual, reasonable and necessary expensesshall be charged to the VENDORS upon presentation of receipts and documents to support the act;6. The VENDEE shall be allowed for all legal purposes to take possession of the parcel of land after the executionof this Contract and payment of the downpayment;7. The VENDEE shall shoulder all expenses like the documentation, registration, transfer tax and relocation of theproperty.IN WITNESS WHEREOF, we have hereunto affixed our signatures this ____ day of February, 1995, at Quezon City,Philippines.CONSTANTE E. FIRME BUKAL ENTERPRISES DEV. CORP.VENDOR VENDEEAZUCENA E. FIRME BY:VENDOR ________________________

President & Chief Executive Officerx x xThe Spouses Firme did not accept the Third Draft because they found its provisions one-sided. The Spouses Firmeparticularly opposed the provision on the delivery of the Propertys title to Bukal Enterprises for the latter to obtain aloan from the bank and use the proceeds to pay for the Property. The Spouses Firme repeatedly told Aviles that theProperty was not for sale when Aviles called on 2 and 4 March 1995 regarding the Property. On 6 March 1995, theSpouses Firme visited their Property and discovered that there was a hollow block fence on one side, concrete posts on

another side and bunkers occupied by workers of a certain Florante de Castro. On 11 March 1995, Spouses Firme visitedthe Property again with a surveyor. Dr. Firme talked with Ancheta who told him that the squatters had voluntarilydemolished their shanties. The Spouses Firme sent a letter [13] dated 20 March 1995 to Bukal Enterprises demandingremoval of the bunkers and vacation by the occupants of the Property. On 22 March 1995, the Spouses Firme receiveda letter [14] dated 7 March 1995 from Bukal Enterprises demanding that they sell the Property. [15]On 7 August 1998, the trial court rendered judgment against Bukal Enterprises as follows:WHEREFORE, in the light of the foregoing premises, the above-entitled case [is] hereby DISMISSED and plaintiff BUKALENTERPRISES DEVELOPMENT CORPORATION is hereby ordered to pay the defendants Spouses Constante and AzucenaFirme:


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1. the sum of Three Hundred Thirty Five Thousand Nine Hundred Sixty Four and 90/100 (P335,964.90) as and byway of actual and compensatory damages;2. the sum of Five Hundred Thousand Pesos (P500,000.00) as and by way of moral damages;3. the sum of One Hundred Thousand Pesos (P100,000.00) as and by way of attorneys fees; and4. the costs of the suit.SO ORDERED. [16]Bukal Enterprises appealed to the Court of Appeals, which reversed and set aside the decision of the trial court. The

dispositive portion of the decision reads:WHEREFORE, premises considered, the Decision, dated August 7, 1998, is hereby REVERSED and SET ASIDE. Thecomplaint is granted and the appellees are directed to henceforth execute the Deed of Absolute Sale transferring theownership of the subject property to the appellant immediately upon receipt of the purchase price of P3,224,000.00 andto perform all such acts necessary and proper to effect the transfer of the property covered by TCT No. 264243 toappellant. Appellant is directed to deliver the payment of the purchase price of the property within sixty days from thefinality of this judgment. Costs against appellees.SO ORDERED. [17]Hence, the instant petition.The Ruling of the Trial Court

The trial court held there was no perfected contract of sale. Bukal Enterprises failed to establish that the Spouses Firmegave their consent to the sale of the Property. The parties did not go beyond the negotiation stage and there was noevidence of meeting of the minds between the parties. Furthermore, Aviles had no valid authority to bind BukalEnterprises in the sale transaction. Under Sections 23 and 36 (No. 7) of the Corporation Code, the corporate power topurchase a specific property is exercised by the Board of Directors of the corporation. Without an authorization fromthe Board of Directors, Aviles could not validly finalize the purchase of the Property on behalf of Bukal Enterprises. Thereis no basis to apply the Statute of Frauds since there was no perfected contract of sale.The Ruling of the Court of AppealsThe Court of Appeals held that the lack of a board resolution authorizing Aviles to act on behalf of Bukal Enterprises inthe purchase of the Property was cured by ratification. Bukal Enterprises ratified the purchase when it filed thecomplaint for the enforcement of the sale.The Court of Appeals also held there was a perfected contract of sale. The appellate court ruled that the Spouses Firmerevealed their intent to sell the Property when they met with Aviles twice. The Spouses Firme rejected the First Draftbecause they considered the terms unacceptable. When Aviles presented the Second Draft without the objectionableprovisions, the Spouses Firme no longer had any cause for refusing to sell the Property. On the other hand, the acts ofBukal Enterprises in fencing the Property, constructing posts, relocating the squatters and obtaining a loan to purchasethe Property are circumstances supporting their claim that there was a perfected contract of sale.The Spouses Firme allowed Bukal Enterprises to exercise acts of ownership over the Property when the latter introducedimprovements on the Property and evicted the squatters. These acts constitute partial performance of the contract ofsale that takes the oral contract out of the scope of the Statute of Frauds.The IssuesThe Spouses Firme raise the following issues:1. WHETHER THE COURT OF APPEALS ERRED IN FINDING THAT THERE WAS A PERFECTED CONTRACT OF SALEBETWEEN PETITIONERS AND RESPONDENT DESPITE THE ADDUCED EVIDENCE PATENTLY TO THE CONTRARY;2. WHETHER THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE ALLEGED CONTRACT OF SALE ISENFORCEABLE DESPITE THE FACT THAT THE SAME IS COVERED BY THE STATUTE OF FRAUDS;3. WHETHER THE COURT OF APPEALS ERRED IN DISREGARDING THE FACT THAT IT WAS NOT LEGALLY ANDFACTUALLY POSSIBLE FOR RESPONDENT TO PERFECT A CONTRACT OF SALE; AND4. THE COURT OF APPEALS ERRED IN RULING THAT THE AWARD BY THE TRIAL COURT OF MORAL AND

COMPENSATORY DAMAGES TO PETITIONERS IS IMPROPER. [18]The Ruling of the CourtThe petition is meritorious.The fundamental question for resolution is whether there was a perfected contract of sale between the Spouses Firmeand Bukal Enterprises. This requires a review of the factual and legal issues of this case. As a rule, only questions of laware appealable to this Court under Rule 45 [19] of the Rules of Civil Procedure. The findings of fact by the Court ofAppeals are generally conclusive and binding on the parties and are not reviewable by this Court. [20] However, whenthe factual findings of the Court of Appeals are contrary to those of the trial court or when the inference made ismanifestly mistaken, this Court has the authority to review the findings of fact. [21] Likewise, this Court may review


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findings of fact when the judgment of the Court of Appeals is premised on a misapprehension of facts. [22] This is thesituation in this case.Whether there was a perfected contract of saleWe agree with the finding of the trial court that there was no perfected contract of sale. Clearly, the Court of Appealsmisapprehended the facts of the case in ruling otherwise.First, the records indubitably show that there was no consent on the part of the Spouses Firme. Aviles did not presentany draft deed of sale during his first meeting with the Spouses Firme on 30 January 1995. [23] Dr. Firme was consistent

in his testimony that he and his wife rejected the provisions of the Third Draft presented by Aviles during their secondmeeting on 6 February 1995. The Spouses Firme found the terms and conditions unacceptable and told Aviles that theywould not sell the property. [24] Aviles showed them only one draft deed of sale (Third Draft) during their second andlast meeting on 6 February 1995. [25] When shown a copy of the First Draft, Dr. Firme testified that it was not the deedof sale shown to them by Aviles during their second meeting [26] and that the Third Draft was completely different fromthe First Draft. [27]On the other hand, Aviles gave conflicting testimony as to what transpired during the two meetings with the SpousesFirme. In his direct examination, Aviles testified that during his first meeting with the Spouses Firme on 23 January1995, he showed them the First Draft which the Spouses Firme rejected. [28] On their second meeting, Aviles showedthe Spouses Firme the Second Draft, which the Spouses Firme allegedly approved because the objectionable conditions

contained in the First Draft were already deleted. However, a perusal of the First Draft and the Second Draft wouldshow that both deeds of sale contain exactly the same provisions. The only difference is that the date of the First Draft isFebruary 1995 while that of the Second Draft is March 1995.When Aviles testified again as rebuttal witness, his testimony became more confusing. Aviles testified that during hisfirst meeting with the Spouses Firme on 30 January 1995, he showed them the Third Draft, which was not acceptable tothe latter. [29] However, upon further questioning by his counsel, Aviles concurred with Dr. Firmes testimony that hepr esented the Third Draft (Exh. 5; Exh. L) to the Spouses Firme only during their second meeting. He also stated thathe prepared and presented to the Spouses Firme the First Draft (Exh. C) and the Second Draft (Exh. C -1) during theirfirst or second meeting. He testified:ATTY. MARQUEDA:Q: On page 11 of the tsn dated August 5, 1997 a question was posed How did you find this draft the Contract ofSale which was presented to you by Mr. Aviles on the second meeting? The answer is On the first meet ing(sic), wefind it totally unacceptable, sir. [30] What can you say on this? Before that, Mr. Witness, what is this Contract of Sale that you presented to Mr. Aviles on the second meeting? Is this different from the Contract of Sale that was marked asExhibit 5 -L? Q: May I see the document Exhibit 5 L? [31]INTERPRETER:

Witness going over the record.ATTY. MARQUEDA:Q: Is that the same document that was presented by you to Mr. Firme on the second meeting or there is adifferent contract?A: This is the same document draft of the document that I submitted to them during our second meeting. Thatwas February. This was the draft.Q: What about Exhibit C and C-1 [which] were identified by you. When was this presented to Dr. Firme?A: This is the same.Q: Exhibit C and C-1?A: Yes because I prepared two documents during our meeting. One already with notarial, the one without notarialpage and the other one with notarial page already, so I prepared two documents but with the same contents both weredated February of 1995. [32]

Q: So, you are referring now to Exhibit C and C-1 for the plaintiff?A: C-1 is already in the final form because we agreed already as to the date of the payment, so I prepared alreadyanother document which is dated March 1995. [33] (Emphasis supplied)In his cross-examination, Aviles again changed his testimony. According to him, he presented the Third Draft to theSpouses Firme during their first meeting. [34] However, when he went over the records, he again changed his answerand stated that he presented the Third Draft during their second meeting. [35]In his re-direct examination, Aviles gave another version of what he presented to the Spouses Firme during the twomeetings. According to him, he presented the Third Draft during the first meeting. On their second meeting, hepresented the First and the Second Drafts to the Spouses Firme. [36]


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Furthermore, Aviles admitted that the first proposal of Bukal Enterprises was at P2,500 per square meter for theProperty. [37] But the First, Second and Third Drafts of the deed of sale prepared by Aviles all indicated a purchase priceof P4,000 per square meter or a lump sum of P3,224,000 (P4,000 per sq.m. x 806 sq.m. = P3,224,000) for the Property.Hence, Aviles could not have presented any of these draft deeds of sale to the Spouses Firme during their first meeting.Considering the glaring inconsistencies in Aviles testimony, it was proper for the trial court to give more credence to thetestimony of Dr. Firme.Even after the two meetings with Aviles, the Spouses Firme were firm in their decision not to sell the Property. Aviles

called the Spouses Firme twice after their last meeting. The Spouses Firme informed Aviles that they were not sellingthe Property. [38] Aviles himself admitted this during his testimony, thus:Q. Now, the next question which states: But did you not have any occasion to talk to him after that secondmeeting? and the answer of Dr. Firme is He called up a month after, thats March 2, 1995. What can y ou say on this?A. I called him to inform him that the loan was already transferred from Makati to Padre Faura Branch of the FarEast Bank, so I scheduled already the payment of their property.Q. When?A. On March 4, 1995.Q. And then the next question which also states: What did you talked (sic) about over the telephone? The answerof Dr. Firme was When I found out that he was calling, I told him that the property is not for sale. What can you say

on this?A. He mentioned that they are no longer interested to sell their property, perhaps they would like a higher price ofthe property. They did not mention to me. I do not know what was their reason.Q. The next question So, what happened next? The answer is He cal led up two days later, March 4 and my wifeanswered the telephone and told him that the property is not for sale, sir. What can you say on this? A. That is true. That is what Mrs. Firme told me during our conversation on the telephone that they are no longerinterested to sell the property for obvious reason.Q. When was that?A. March 4, 1995, your honor. [39] (Emphasis supplied)Significantly, De Castro also admitted that he was aware of the Spouses Firmes refusal to sell the Property. [40] The confusi ng testimony of Aviles taken together with De Castros admission that he was aware of the Spouses Firmesrefusal to sell the Property reinforces Dr. Firmes testimony that he and his wife never consented to sell the Property.Consent is one of the essential elements of a valid contract. The Civil Code provides:Art. 1318. There is no contract unless the following requisites concur:1. Consent of the contracting parties;2. Object certain which is the subject matter of the contract;3. Cause of the obligation which is established.The absence of any of these essential elements will negate the existence of a perfected contract of sale. [41] Thus,where there is want of consent, the contract is non-existent. [42] As held in Salonga, et al. v. Farrales, et al.: [43]It is elementary that consent is an essential element for the existence of a contract, and where it is wanting, the contractis non-existent. The essence of consent is the conformity of the parties on the terms of the contract, the acceptance byone of the offer made by the other. The contract to sell is a bilateral contract. Where there is merely an offer by oneparty, without the acceptance of the other, there is no consent. (Emphasis supplied)In this case, the Spouses Firme flatly rejected the offer of Aviles to buy the Property on behalf of Bukal Enterprises.There was therefore no concurrence of the offer and the acceptance on the subject matter, consideration and terms ofpayment as would result in a perfected contract of sale. [44] Under Article 1475 of the Civil Code, the contract of sale isperfected at the moment there is a meeting of minds on the thing which is the object of the contract and on the price.Another piece of evidence which supports the contention of the Spouses Firme that they did not consent to the contractof sale is the fact they never signed any deed of sale. If the Spouses Firme were already agreeable to the offer of Bukal

Enterprises as embodied in the Second Draft, then the Spouses Firme could have simply affixed their signatures on thedeed of sale, but they did not.Even the existence of a signed document purporting to be a contract of sale does not preclude a finding that thecontract is invalid when the evidence shows that there was no meeting of the minds between the seller and buyer. [45]In this case, what were offered in evidence were mere unsigned deeds of sale which have no probative value. [46] BukalEnterprises failed to show the existence of a perfected contract of sale by competent proof.Second, there was no approval from the Board of Directors of Bukal Enterprises as would finalize any transaction withthe Spouses Firme. Aviles did not have the proper authority to negotiate for Bukal Enterprises. Aviles testified that hisfriend, De Castro, had asked him to negotiate with the Spouses Firme to buy the Property. [47] De Castro, as Bukal


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Enterprises vice president, testified that he authorized Aviles to buy the Property. [48] However, there is no BoardResolution authorizing Aviles to negotiate and purchase the Property on behalf of Bukal Enterprises. [49]It is the board of directors or trustees which exercises almost all the corporate powers in a corporation. Thus, theCorporation Code provides:SEC. 23. The board of directors or trustees. Unless otherwise provided in this Code, the corporate powers of allcorporations formed under this Code shall be exercised, all business conducted and all property of such corporationscontrolled and held by the board of directors or trustees to be elected from among the holders of stock, or where there

is no stock, from among the members of the corporation, who shall hold office for one (1) year and until their successorsare elected and qualified. x x xSEC. 36. Corporate powers and capacity. Every corporation incorporated under this Code has the power and capacity:x x x7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal with such real andpersonal property, including securities and bonds of other corporations, as the transaction of a lawful business of thecorporation may reasonably and necessarily require, subject to the limitations prescribed by the law and theConstitution.x x xUnder these provisions, the power to purchase real property is vested in the board of directors or trustees. While a

corporation may appoint agents to negotiate for the purchase of real property needed by the corporation, the final saywill have to be with the board, whose approval will finalize the transaction. [50] A corporation can only exercise itspowers and transact its business through its board of directors and through its officers and agents when authorized by aboard resolution or its by-laws. [51] As held in AF Realty & Development, Inc. v. Dieselman Freight Services, Co.: [52]Section 23 of the Corporation Code expressly provides that the corporate powers of all corporations shall be exercisedby the board of directors. Just as a natural person may authorize another to do certain acts in his behalf, so may theboard of directors of a corporation validly delegate some of its functions to individual officers or agents appointed by it.Thus, contracts or acts of a corporation must be made either by the board of directors or by a corporate agent dulyauthorized by the board. Absent such valid delegation/authorization, the rule is that the declarations of an individualdirector relating to the affairs of the corporation, but not in the course of, or connected with, the performance ofauthorized duties of such director, are held not binding on the corporation. (Emphasis supplied)In this case, Aviles, who negotiated the purchase of the Property, is neither an officer of Bukal Enterprises nor a memberof the Board of Directors of Bukal Enterprises. There is no Board Resolution authorizing Aviles to negotiate and purchasethe Property for Bukal Enterprises. There is also no evidence to prove that Bukal Enterprises approved whatevertransaction Aviles made with the Spouses Firme. In fact, the president of Bukal Enterprises did not sign any of thedeeds of sale presented to the Spouses Firme. Even De Castro admitted that he had never met the Spouses Firme. [53]Considering all these circumstances, it is highly improbable for Aviles to finalize any contract of sale with the SpousesFirme.Furthermore, the Court notes that in the Complaint filed by Bukal Enterprises with the trial court, Aviles signed [54] theverification and certification of non-forum shopping. [55] The verification and certification of non-forum shopping wasnot accompanied by proof that Bukal Enterprises authorized Aviles to file the complaint on behalf of Bukal Enterprises.The power of a corporation to sue and be sued is exercised by the board of directors. The physical acts of thecorporation, like the signing of documents, can be performed only by natural persons duly authorized for the purpose bycorporate by-laws or by a specific act of the board of directors. [56] The purpose of verification is to secure an assurance that the allegations in the pleading are true and correct and that itis filed in good faith. [57] True, this requirement is procedural and not jurisdictional. However, the trial court shouldhave ordered the correction of the complaint since Aviles was neither an officer of Bukal Enterprises nor authorized byits Board of Directors to act on behalf of Bukal Enterprises.Whether the Statute of Frauds is applicable

The Court of Appeals held that partial performance of the contract of sale takes the oral contract out of the scope of theStatute of Frauds. This conclusion arose from the appellate courts erroneous finding that there was a perfected contractof sale. The records show that there was no perfected contract of sale. There is therefore no basis for the application ofthe Statute of Frauds. The application of the Statute of Frauds presupposes the existence of a perfected contract. [58]Article 1403 of the Civil Code provides:Art. 1403. The following contracts are unenforceable, unless they are ratified:(1) Those entered into in the name of another person by one who has been given no authority or legalrepresentation, or who has acted beyond his powers;


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WITNESS:A: At the time when they refused to sell the lot.ATTY. EJERCITO:Q: Was that before the squatters were relocated allegedly by Bukal Enterprises?A: Yes, sir.Q: In fact, it was the lawyer who advised you to relocate the squatters. Is it not true?A: No, sir. [59] (Emphasis supplied)

Bukal Enterprises is obviously a builder in bad faith. No deed of sale has been executed in this case. Despite the refusalof the Spouses Firme to sell the Property, Bukal Enterprises still proceeded to introduce improvements on the Property.Bukal Enterprises introduced improvements on the Property without the knowledge and consent of the Spouses Firme.When the Spouses Firme learned about the unauthorized constructions made by Bukal Enterprises on the Property, theyadvised the latter to desist from further acts of trespass on their Property. [60]The Civil Code provides:Art. 449. He who builds, plants or sows in bad faith on the land of another, loses what is built, planted or sown withoutright of indemnity.Art. 450. The owner of the land on which anything has been built, planted or sown in bad faith may demand thedemolition of the work, or that the planting or sowing be removed, in order to replace things in their former condition at

the expense of the person who built, planted or sowed; or he may compel the builder or planter to pay the price of theland, and the owner the proper rent.Under these provisions the Spouses Firme have the following options: (1) to appropriate what Bukal Enterprises has builtwithout any obligation to pay indemnity; (2) to ask Bukal Enterprises to remove what it has built; or (3) to compel BukalEnterprises to pay the value of the land. [61] Since the Spouses Firme are undoubtedly not selling the Property to BukalEnterprises, they may exercise any of the first two options. They may appropriate what has been built without payingindemnity or they may ask Bukal Enterprises to remove what it has built at Bukal Enterprises own expense. Bukal Enterprises is not entitled to reimbursement for the expenses incurred in relocating the squatters. BukalEnterprises spent for the relocation of the squatters even after learning that the Spouses Firme were no longerinterested in selling the Property. De Castro testified that even though the Spouses Firme did not require them toremove the squatters, they chose to spend for the relocation of the squatters since they were interested in purchasingthe Property. [62]Whether the Spouses Firme are entitled tocompensatory and moral damagesThe Court agrees with the Court of Appeals to delete the award for compensatory and moral damages. In awardingactual damages, the trial court took into account the traveling expenses incurred by the Spouses Firme who are alreadyresiding in the United States. However, the trial court failed to consider the testimony of Dr. Firme that they normallytravel to the Philippines more than once a year to visit their children. [63] Thus, the expenses for the roundtrip ticketsdated 1996-1997 could not be attributed solely for the attendance of hearings in the case.Nevertheless, an award of nominal damages of P30,000 is warranted since Bukal Enterprises violated the property rightsof the Spouses Firme. [64] The Civil Code provides:Art. 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded bythe defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any losssuffered by him.Art. 2222. The court may award nominal damages in every obligation arising from any source enumerated in article1157, or in every case where any property right has been invaded.The award of damages is also in accordance with Article 451 of the Civil Code which states that the landowner is entitledto damages from the builder in bad faith. [65]WHEREFORE, we SET ASIDE the Decision of the Court of Appeals and RENDER a new one:

1. Declaring that there was no perfected contract of sale;2. Ordering Bukal Enterprises to pay the Spouses Firme P30,000 as nominal damages.SO ORDERED.Davide, Jr., C.J., (Chairman), Vitug, and Azcuna, JJ., concur.Ynares-Santiago, J., on official leave.


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SECOND DIVISION[G.R. No. 135721. May 27, 2004]

CHUA TEE DEE, doing business under the name and style of PIONEER ENTERPRISES, petitioner, vs. COURT OF APPEALSand J.C. AGRICOM DEVELOPMENT CORPORATION, INC., respondents.

D E C I S I O NCALLEJO, SR., J.:Before us is a special civil action for certiorari under Rule 65 of the Revised Rules of Court assailing the Decision [1] of

the Court of Appeals in CA-G.R. CV No. 50306 which affirmed with modification, the Order [2] of the Regional Trial Courtof Davao City, Branch 9, ordering the petitioner Chua Tee Dee to pay the private respondent back rentals plus interestand attorneys fees. The antecedent facts are as follows:J.C. Agricom Development Corporation, Inc. (Agricom, for brevity), a corporation duly organized and existing under andby virtue of the laws of the Republic of the Philippines, is the owner of a rubber plantation located at Bayabas, Toril,Davao City, with an area of 132.4012 hectares, more or less. Agricom planned to lease the plantation.Chua Tee Dee, married to Amado Dee, is a businesswoman doing business under the name and style of PioneerEnterprises (Pioneer, for brevity).Manuel G. Alba, the president of Agricom, had a business meeting in Davao City with Amado Dee where they discussed

the possibility of leasing the rubber plantation to Chua Tee Dee/Pioneer. [3] Thereafter, a draft contract of lease wasmade and delivered to Alba on May 22, 1985. [4]The final contract of lease [5] was signed and acknowledged before a notary public on July 22, 1985. The Agricom,represented by Alba, was referred to as the FIRST PARTY under the contract, while Chua Tee Dee doing business underthe style of Pioneer was the SECOND PARTY. Lillian Carriedo, a stockholder of Agricom, also signed the contract. Thepertinent portions of the lease contract were as follows:1. TERM: The lease shall be for a period of fifteen (15) years counted from the date of execution of this contract andmay be renewed for another period of five (5) years upon such terms as may be agreed upon by the parties.2. That the plantation, together with all the inventoried machineries, equipment and improvements found therein shallupon the execution of this contract be turned over to the SECOND PARTY free from any and all liens and/orencumbrances, provided, however, that the SECOND PARTY shall upon expiration and/or termination of the contractreturn all the inventoried machineries, equipment and improvements to the FIRST PARTY.3. RENTAL: The SECOND PARTY shall pay the FIRST PARTY within the first ten (10) days of the current month thefollowing rentals, to wit:P45,000.00 per month for the first three (3) years of the leaseP60,000.00 per month for the second three (3) years of the leaseP75,000.00 per month for the third four (4) years of the leaseP90,000.00 per month for the last five (5) years of the lease4. NON-PAYMENT OF RENTALS: Delay in the payment of the monthly rental by the SECOND PARTY shall entitle the FIRSTPARTY to charge to the former interest of two (2) percent per month as penalty. Non-payment of rentals for three (3)months shall automatically bring about the termination of the lease. In such an event, the FIRST PARTY shall be entitledto recover from the SECOND PARTY back rentals.5. DEPOSIT: In addition to the monthly rental stipulated in paragraph 3 of this contract, the SECOND PARTY upon signingof this contract shall deposit to the FIRST PARTY an amount equivalent to ONE HUNDRED THIRTY-FIVE THOUSAND PESOS(P135,000.00) Philippine Currency and on the first day of September of the same year another amount equivalent toONE HUNDRED THIRTY-FIVE THOUSAND PESOS (P135,000.00) Philippine Currency, both interest-free which the lattershall apply against rentals for the last year of the lease.6. FARM PERSONNEL: Upon the effectivity of this Contract, the SECOND PARTY has the option to select and screen thosefarm personnel that the SECOND PARTY shall retain; those not selected shall then be terminated by the FIRST PARTY,

whose separation from the FIRST PARTYs employment shall be the concern of the FIRST PARTY. 10. RIGHT TO ENTER PREMISES: The FIRST PARTY or its duly-authorized representative shall have the right to enter theleased premises at any reasonable time during business days, with due notice to the SECOND PARTY, to verifycompliance with the terms and conditions of this contract. In addit ion, the FIRST PARTY may use the REST HOUSElocated in the leased premises with at least two (2) days advanced notice to the SECOND PARTY.11. LESSEES OPTION TO BUY: The FIRST PARTY shall maintain the SECOND PARTY in the quiet peaceful possession andenjoyment of the leased premises during the effectivity of the lease.


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If at any time during the lease or renewal thereof, the first party shall opt to sell, assign, transfer or convey the leasedpremises for a valuable consideration, the SECOND PARTY shall be given written notice thereof, and the latter shall havefirst option to buy the leased premises upon such terms and conditions as may be mutually agreed by the parties. In theevent [that] this FIRST PARTY receives an offer to buy from a THIRD PARTY, the SECOND PARTY shall be advised thereofin writing and shall have the option to match said offer within a period of thirty (30) days from receipt of said advice.If the SECOND PARTY or his nominees fail to exercise the option granted under this aforementioned paragraph, andthere is a sale, assignment, transfer or conveyance of the leased premises to a third party, it shall be a condition thereof

that this contract of lease shall be respected and shall continue under the terms and conditions herein stipulated.13. (sic) VENUE: UPON the expiration of this lease contract or its earlier termination for violation of its terms andconditions, the SECOND PARTY binds himself to peacefully turn over the possession of and surrender the leasedpremises to the FIRST PARTY is compelled, to resort to the courts to protect its rights under this contract, the partiesagree that venue thereof shall be in the courts at Davao City. In such an event, the SECOND PARTY shall be answerablefor all damages that the FIRST PARTY may suffer or be entitled to plus attorneys fees equivalent to twenty -five (25%)percent thereof and costs of suit.On May 27, 1985, Alba met with the employees of the rubber plantation [6] and updated them on the impendingtermination of their employment due to the companys contract of lease with Chua Tee Dee. The employees were toldthat they would be given separation pay.

On June 3, 1985, Amado Dee delivered the amount of two hundred seventy thousand pesos (P270,000.00) to theSpouses Manuel and Suzanne Alba in compliance with paragraph 5 of the lease contract. The corresponding receipt wasissued. [7]In the meantime, Azarinas P. Liguiz of Agricom sent letters to the said employees, confirming the termination of theiremployment and informing them that their separation pay shall be computed at one- half (1/2) months salary for everyyear of service rendered, and that a fraction of at least six (6) months service shall be considered as one year.Thereafter, the corresponding vouchers were prepared. [8]Sometime thereafter, the severed employees filed a complaint for illegal dismissal and unfair labor practice againstAgricom, Amado Dee and Pioneer, docketed as NLRC Case No. 1815-LR-XI-85. The labor arbiter rendered his decision onAugust 22, 1986, holding that the termination of the complainants employment was illegal. The respondents wereordered to pay its employees separation pay and backwages, but the complaint for unfair labor practice was dismissedfor lack of merit. [9] The dispositive portion of the decision reads:WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered:(1) Declaring the termination of complainants as illegal, thereby ordering respondents J.C. Agricom DevelopmentCompany and/or Pioneer Enterprises and Amado Dee to pay all complainants herein, jointly and severally, the following,to wit:(a) Separation pay at one (1) month salary per year of service, from date of hiring to date this Decision becomes finaland executory;(b) Backwages from date employment stopped up to the date this Decision becomes final and executory.(2) Dismissing the charge of unfair labor practice for lack of merit.SO ORDERED. [10]The respondents appealed the decision. Amado Dee and Pioneer posted a supersedeas bond of P21,415.58, as well asP142,770.54 covered by Check No. 610489625, [11] and P142,770.54 covered by Check No. 610489624 [12] to stave offexecution pending appeal.Because Pioneer was dragged into labor disputes not of its own making, it wrote Agricom, through its counsel, onOctober 20, 1987 suggesting a conference to settle the labor case, otherwise, it would consider the contract of lease asrescinded. [13]Aside from the labor case, Pioneer, through Amado Dee, complained of being pestered by some individuals who claimedportions of the plantation as their own property. Some of them went to its office and even presented tax declarations

to prove their claims. [14] Pioneer claimed that the foregoing circumstances prevented it from operating fully the agreedarea stated in the lease contract. It also complained that the death of Pioneers foreman sometime in 1990 evenexacerbated the unresolved labor problem.On May 24, 1990, the counsel of the Carriedo heirs, the stockholders-owners of Agricom, sent a telegraphic note toAmado Dee demanding payment of long overdue rentals. [15] On June 21, 1990, Pioneer sent a letter to Agricomcomplaining of facts and events which disrupted its operations in the plantation. In a Letter dated August 2, 1990,Agricom informed Pioneer that, after due investigation, it concluded that the latters complaints were unfounded. Italso demanded the payment of back rentals for June, July and August 1990. [16]


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As Pioneer was unable to pay its monthly rentals, Agricom filed, on September 4, 1990, a civil complaint for sum ofmoney, damages and attorneys fees against Chua Tee Dee before the Regional Trial Court of Davao City, Branch 9. Thecase was docketed as Civil Case No. 20,312-90. The plaintiff Agricom alleged, inter alia, in the said complaint, thus:2.02 That defendant regularly paid the monthly rentals for the years 1985 to 1989. The payment of the monthlyrentals for the first six (6) months of 1990 in the amount of Sixty Thousand (P60,000.00), however, was occasioned bydelay and those for July and August 1990, unpaid;2.03 That as of August 1990, defendant has an outstanding arrearage of One Hundred Twenty Thousand

(P120,000.00) Pesos in favor of plaintiff, exclusive of penalty thereon at the rate of two (2%) percent per month;2.04 That several demands, both verbally and in writing, had been made by plaintiff upon defendants to make herpayment of the monthly rentals current, but said demands, notwithstanding, defendant failed and refused and stillcontinues to fail and refuse to do so;2.05 That by reason of defendants unjustified and wanton refusal to pay plaintiff its plainly, valid, and demandableclaims, the latter has been compelled to engage the services of counsel to enforce and protect its interest at an agreedfee of twenty- five (25%) percent of the amount due and collectible, as provided for in said Contract of Lease (Annex A)and has, otherwise, been placed into unnecessary expenses of litigation in an amount which could not be less than TenThousand (P10,000.00) Pesos; [17]It prayed that after due proceedings, judgment be rendered in its favor, as follows:

WHEREFORE, it is most respectfully prayed of this Honorable Court that judgment be rendered in favor of plaintiff andagainst the defendant ordering the lattera.) to pay plaintiff the sum of P120,000.00 as of August 1990, with penalty thereon at the rate of two (2%) percentper month, plus the sum of P60,000.00 a month thereafter;b.) to pay plaintiff the sum equivalent to twenty-five (25%) of the amount due and collectible, as and for attorneysfees;c.) to reimburse the litigation expenses of plaintiff in the amount of not less than P10,000.00 or such amount whichwill be proven during the trial;d.) to pay the cost of suit;PLAINTIFF further prays for such other reliefs and remedies, just and equitable under the premises. [18]On October 16, 1990, the defendant filed her Answer with Damages where she asserted that the plaintiff had no causeof action against her. She claimed that it was the plaintiff which failed to comply with the terms and conditions of thecontract of lease when it failed to settle the labor dispute with its former employees, thus, dragging the defendant asrespondent in NLRC Case No. 1815-LR-XI-85; and that the plaintiff failed to maintain her in the quiet and peacefulpossession and enjoyment of the leased premises during the effectivity of the lease contract, in violation of paragraphs 6and 11 thereof.The defendant also claimed that she had paid premiums for the appeal bond in the labor case, and that she depositedwith the NLRC the total amount of P306,956.66 to avert execution pending appeal, which was supposed to be the soleresponsibility of the plaintiff.By way of counterclaim, the defendant asserted that she was exposed to public contempt and ridicule which besmirchedher reputation; and that she suffered mental anguish and sleepless nights because of the violation of the contract oflease. She prayed, thus:WHEREFORE, defendant respectfully prays this Honorable Court, that after considering all the foregoing facts andcircumstances, judgment be rendered in favor of defendant and against plaintiff:1. Ordering the termination or rescission of the Contract of Lease;2. Dismiss the complaint;3. Ordering the plaintiff to pay defendant:a) P316,956.66 as actual damagesb) P500,000.00 as moral damages

c) P200,000.00 as exemplary damagesd) P100,000.00 as attorneys fees DEFENDANT FURTHER prays for such other relief and remedies available and legally tenable under the premises. [19]On November 8, 1990, the plaintiff filed its Motion to Strike Out Portion of the Pleading, [20] particularly paragraph 8thereof and to dismiss the counterclaim of the defendant with regard to the labor case on the ground that the NLRC hadalready rendered a decision ordering the dismissal of the complaint of its former employees. The plaintiff appended acopy of the decision of the NLRC to its motion. [21]On November 9, 1990, defendant Chua Tee Dee filed her Motion to Declare Plaintiff in Default [22] for failure to answerher counterclaim.


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During the pre-trial, the parties admitted the following:1. Legal Capacities of the respective party (sic);2. The Contract of Lease entered into on July 22, 1985 between parties herein over the 132.4102 hectares ofrubber plantation located in Bayabas, Toril, Davao City;3. The Labor Case entitled NLRC Case No. 1815-LR-XI-85, BONIFACIO LANSANG, et al. vs. JC AGRICOM DEV. CORP.and/or PIONEER ENT. and AMADO DEE; [23]In the meantime, on June 4, 1991, the defendant extended a personal loan of P30,000 to Lillian Carriedo as evidenced by

a voucher [24] and a personal receipt [25] signed by Ma. Cecilia and Elaine, both surnamed Carriedo. [26]On October 21, 1992, the court rendered judgment dismissing the complaint and declaring the lease contractterminated for failure of the plaintiff to implement the terms thereof. The court ruled as follows:The evidence on record proves that plaintiff failed to effectively complement, implement and enforce the foregoingprovision. The inevitable consequence was the impleading and involvement of defendant in a vexatious labor probleminstituted by plaintiffs original farm workers. This violation of paragra ph 6 caused the problems that in great measureprejudiced the efficient operations intended by defendant, because of the peace and order situation caused by themalcontents, among others, resulted in the death of defendants foreman Elicano Apolonio. 11. Leases option to buy, the First Party shall maintain the Second Party in the quiet possession and employment (sic)of the leased premises during the effectivity of the lease.

The evidence establishes that defendants possession was anything but peaceful and enjoyable. Within a comparativelyshort span of time from entry and occupation, defendant suffered from vexatious labor problems caused by plaintiffsoriginal farm workers who instituted a labor case impleading the defendant. Many of them remained in the area andmade trouble to the workers hired by defendant, so terrorizing the latter that they were afraid to go to work for fear ofbodily harm. Defendants foreman Elicano Apolonio, who reported early for work was shot to death in the premises(Exhibits 11, 12). [27] The decretal portion of the decision reads:WHEREFORE, premises considered, judgment is rendered dismissing the complaint and declares the lease contractbetween the parties terminated and of no force and effect.Cost against the plaintiff.SO ORDERED. [28]The plaintiff received its copy of the above decision on March 11, 1993 and filed its motion for reconsideration prayingthat the defendant be ordered to pay for the unpaid rentals in accordance with the contract of lease until it had actuallyvacated and surrendered the leased premises. [29]The defendant filed her manifestation and compliance, declaring that when she learned about the RTC decision that thelease contract between the parties no longer had force and effect, she pulled out her enterprise and stopped operationsin the leased premises. [30] She also filed her opposition to the motion for reconsideration. [31]On March 8, 1995, the court issued an Order granting the plaintiffs motion and modifying its decision. It ordere d thedefendant to pay rentals to the plaintiff since the defendant had occupied, used and continually operated the rubberplantation during the time the case was pending; equity demanded that compensation for the use thereof was just andproper. [32] The decretal portion reads:WHEREFORE, premises considered, the Motion for Reconsideration is GRANTED and the Decision dated October 21,1992 is hereby recalled and modified as follows:1. Judgment is rendered in favor of the plaintiff, J.C. AGRICOM DEVELOPMENT CORPORATION, INC. and against thedefendant, CHUA TEE DEE.2. Defendant is ordered to pay the plaintiff:a. P45,000.00 per month for the first three (3) years, less the deposit made in the amount of P270,000.00 or the amountof P1,350,000.00;b. P60,000.00 per month for the second three (3) years of the lease or the equivalent amount of P2,160,000.00;

c. P75,000.00 per month for the succeeding years up to the time this case was decided on October 21, 1992, or theamount of P1,125,000.00;d. To pay the interest of 2% of the arrears as penalty for the delay in the payment of the rentals, or in the amount ofP92,700.00; and,e. Attorneys fees equivalent to 10% of the total amount due to plaintiff or in the amount of P463,500.00. Accordingly, the contract of lease entered into by the parties on July 22, 1985 is declared terminated and of no force andeffect.SO ORDERED. [33]


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The defendant appealed the March 8, 1995 Order to the Court of Appeals. [34] The appeal was docketed as CA-G.R. CVNo. 50306. It ascribed the following errors to the trial court:ITHE LOWER COURT ERRED WHEN IT REVERSED ITS DECISION DATED OCTOBER 21, 1992 IN AN ORDER DATED MARCH 8,1995, THE SAID REVERSAL NOT BEING IN ACCORDANCE WITH LAW.IITHE LOWER COURT ERRED IN ITS ORDER DATED MARCH 8, 1995, THE SAME NOT BEING SUPPORTED BY THE EVIDENCE

PRESENTED DURING TRIAL. [35]The appellant therein alleged that the motion for reconsideration of the appellee of the decision of the trial court wasactually a motion for new trial; [36] that while she admitted being in possession of the leased premises, there was noevidence that she had profited from operating the rubber plantation. [37] She also posited that, under Article 1658 ofthe New Civil Code, she had the right to suspend payment of the rentals since the lessor failed to maintain her in thepeaceful and adequate enjoyment of the leased property. She noted that the lower court even found in its October 21,1992 decision that her possession of the property was anything but peaceful and enjoyable. [38] The appellant assertedthat the order of the trial court ordering her to pay the plaintiff-appellee was not supported by evidence presentedduring trial. [39]The appellate court in its Decision dated May 6, 1998 affirmed the assailed order of the lower court, but modified it by

reducing the award of attorneys fees: WHEREFORE, subject to the modification concerning the award of attorneys fees, which is hereby reduced toP50,000.00, the Order appealed from is AFFIRMED in all other respects. Without pronouncement as to costs. [40]The appellant filed her motion for reconsideration on June 2, 1998 but the same was denied by the CA in its October 2,1998 Resolution. [41]Chua Tee Dee, now the petitioner, filed her supplemental petition and/or amended petition for certiorari with this Courtunder Rule 65 of the Rules of Court and assigned the following as errors committed by the CA:I. THE PUBLIC RESPONDENT COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WITH GRAVE ABUSE OFDISCRETION AMOUNTING TO LACK OF JURISDICTION IN SWIFTLY CONCLUDING THAT THE CONTRACT OF LEASE ISVALID, BINDING AND EFFECTIVE BETWEEN THE CONTRACTING PARTIES. FOR IN DOING SO, THE COURT OF APPEALSDISREGARDED THE INVALIDITY OF THE CONTRACT OF LEASE WHICH PRIVATE RESPONDENT LEASED, (A PLANTATIONTHAT IT DID NOT OWN), AND AGAIN, CLEARLY DID NOT INSTALL PETITIONER IN PEACEFUL ENJOYMENT OF THELEASED PREMISES, AND WHICH PETITIONER WAS NOT ABLE TO POSSESS AND ENJOY, IN CLEAR, DELIBERATE AND VERYIRRESPONSIBLE VIOLATION OF THE CONTRACT OF LEASE. THIS JUSTIFIES LESSEES SUSPENSION OF RENTALS. II. IN DENYING PETITIONERS MOTION FOR RECONSIDERATION (ANNEX O), PUBLIC RESPONDENT COURT OFAPPEALS, WITH DUE RESPECT, COMMITTED REVERSIBLE ERROR IN ORDERING PETITIONER TO PAY RENTALS WHICH HADALREADY BEEN PAID. [42]The petitioner asserts that the suspension of the payment of rentals is justified by the fact that the private respondentAgricom breached its lease contract with her, relying on the provision of Art. 1658 of the Civil Code which provides:Art. 1658. The lessee may suspend the payment of the rent in case the lessor fails to make the necessary repairs or tomaintain the lessee in peaceful and adequate enjoyment of the property leased.The petitioner claims that the private respondent failed to maintain her in a quiet and peaceful enjoyment of the leasedpremises. [43] She asserts that while she occupied the property, she was pestered and harassed by squatters and severalclaimants of the leased premises. [44] As such, the private respondent violated paragraphs 6 and 11 of the leasecontract. The petitioner also alleges that her business was dragged to a labor case which caused her to shell out theamounts of P 306,956.99 and P10,000 as bond premiums and attorneys fees, respectively. While machine copies of thechecks were presented during trial, the court ordered the presentation of the original checks, which, however, havebeen lost and cannot be found. [45] According to the petitioner, the various claimants of the premises fenced theirclaimed areas, thus, reducing the area of the leased premises and the production of rubber latex, the produce of the

rubber plantation. [46] The petitioner also alleges that she made verbal demands to the private respondent to observeand enforce the contract, but such demands fell on deaf ears. [47]The petitioner further asserts that the private respondent included in their contract of lease areas in the rubberplantation that belonged to other persons. [48] She further alleges that the private respondent misrepresented itself asthe owner of a rubber plantation covering an area of 132.4102 hectares when, in fact, only an area of 36 hectares wasfree from any claimants. [49] Thus, the petitioner argues, the diminution of the area resulted in loss of profits in theoperation of the plantation.The petitioner also claims that since the private respondent failed to maintain her, as lessee, in the quiet and peacefulpossession of the leased premises, she is entitled to moral damages. [50] The petitioner further claims that she agreed


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to remain in the leased premises upon the request of Mrs. Carriedo, a stockholder of Agricom. The petitioner avers thatshe did the private respondent a favor because due to her presence in the premises, the same was protected fromoutside forces. [51] Thus, she should not be ordered to pay any back rentals.Anent the second assigned error, the petitioner asserts that she had religiously paid rentals up to June 30, 1990, andthat she suspended the payment thereof due to the private respondents breach of the lease contract. She avers thatthe lower court erred when it ordered her to pay rentals starting from 1985, when the contract commenced. She positsthat her liability for back rentals, if any, should cover only the period of July 1990 to October 21, 1992, when the

decision of the RTC was promulgated, computed as follows:Second 3 years at P60,000.00 monthly rentalPayment stopped on July 1990:July 31, 1990 P60,000.00August 31 60,000.00September 30 60,000.00October 31 60,000.00November 30 60,000.00December 31 60,000.00January 31, 1991 60,000.00

February 28 60,000.00March 31 60,000.00April 30 60,000.00May 31 60,000.00June 30, 1991 60,000.00

Total P720,000.00Succeeding 3 years at P75,000.00 per monthRental up to the time this case was decidedOn October 21, 1992:July 31, 1991 P75,000.00August 31 75,000.00September 30 75,000.00October 31 75,000.00November 30 75,000.00December 31 75,000.00January 31, 1992 75,000.00February 28 75,000.00March 31 75,000.00April 30 75,000.00May 31 75,000.00June 30, 1992 75,000.00

Total P900,000.00July 31, 1992 75,000.00August 31 75,000.00September 30 75,000.00October 21, 1992 52,500.00

Total P280,500.00Grand Total P1,900,500.00 [52]

For its part, the private respondent contends that the petition should be dismissed for having been filed under Rule 65,

an inappropriate remedy or wrong mode of appeal in the present case. And even if the Court considers the same asfiled under Rule 45, the same is still unavailing as only questions of law can be raised therein, while the present petitionraises questions of fact. [53]The private respondent maintains that the appellate court did not commit any grave abuse of its discretion when itdecided the case and affirmed with modification the assailed RTC Order. It contends that the sweeping statements ofthe petitioner, that the Court of Appeals committed grave abuse of its discretion, are baseless and unfounded. It assertsthat the petition is without merit.The petition is partly meritorious.


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Preliminarily, we note that the remedy resorted to by the petitioner is a petition for certiorari under Rule 65 of the Rulesof Court, a remedy resorted to where the issues raised involve lack of jurisdiction or grave abuse of discretion. For thewrit of certiorari under Rule 65 to issue, the petitioner must show not only that the lower court acted with grave abuseof discretion, but also that there is no appeal, or any ot her plain, speedy, and adequate remedy in the ordinary courseof law. [54] The assailed CA decision was a disposition on the merits; hence, the proper remedy of the petitioner was apetition for review on certiorari under Rule 45 of the Rules of Court. For this procedural lapse, the instant petitionshould be dismissed outright. [55]

Nonetheless, as the petition was filed within the reglementary period under Rule 45, and in the interest of justice, thisCourt shall treat the action as a petition for review on certiorari under Rule 45.We now delve into the merits of the case.The cause or essential purpose in a contract of lease is the use or enjoyment of a thing. [56] It is consensual, bilateral,onerous and commutative, the owner temporarily grants the use of his or her property to another who undertakes topay rent therefor. [57] In the case at bar, petitioner Chua Tee Dee is the lessee of the private respondent Agricom. Aslessor, the Agricom had the duty to maintain the petitioner in the peaceful and adequate enjoyment of the leasedpremises. Such duty was made as part of the contract of lease entered into by the parties. Even if it had not been so,the lessor is still duty-bound under Art. 1654 of the Civil Code, thus:Art. 1654. The lessor is obliged:

(1) To deliver the thing which is the object of the contract in such a condition as to render it fit for the use intended;(2) To make on the same during the lease all the necessary repairs in order to keep it suitable for the use to which ithas been devoted, unless there is a stipulation to the contrary:(3) To maintain the lessee in the peaceful and adequate enjoyment of the lease for the entire duration of thecontract.The duty to maintain the lessee in the peaceful and adequate enjoyment of the lease for the duration of the contractmentioned in no. 3 of the article is merely a warranty that the lessee shall not be disturbed in his legal, and not physical,possession. Thus, in the case of Goldstein v. Roces, [58] the Court ruled in favor of the lessor and denied the lessee'sclaim for damages which resulted from the opening of holes in the roof, as the lessor had allowed another lessee toconstruct another floor to the leased building. The Court had the occasion to state:Article 1554 provides that the lessor is obliged to maintain the lessee in the peaceful enjoyment of the lease during allthe time covered by the contract.Nobody has in any manner disputed, objected to, or placed any difficulties in the way of plaintiff's peaceful enjoyment,or his quiet and peaceable possession of the floor he occupies. The lessors, therefore, have not failed to maintain him inthe peaceful enjoyment of the floor leased to him and he continues to enjoy this status without the slightest oppositionon the part of any one. That there was a disturbance of the peace or order in which he maintained his things in theleased story does not mean he lost the peaceful enjoyment of the thing rented. The peace would likewise have beendisturbed or lost had some tenant of the Hotel de Francia, living above the floor leased by plaintiff, continually pouredwater on the latter's bar and sprinkled his bar-tender and his customers and tarnished his furniture; or had some gaypatrons of the hotel gone down into his saloon and broken his crockery or glassware, or stunned him with deafeningnoises. Numerous examples could be given to show how the lessee might fail peacefully to enjoy the floor leased to him,in all of which cases he would, of course, have a right of action for the recovery of damages from those who disturbedhis peace, but he would have no action against the lessor to compel the latter to maintain him in his peaceful enjoymentof the thing rented. The lessor can do nothing, nor is it incumbent upon him to do anything, in the examples or casesmentioned, to restore his lessee's peace. [59]In the case at bar, the petitioner claims that several people presented tax declarations to her and claimed some portionsof the leased premises. However, no case was filed by

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