SUPREME COURT REPORTS ANNOTATED VOLUME 110 11/18/19, 12:19 PM

46 SUPREME COURT REPORTS ANNOTATED

Penaco vs. Ruaya
*
No. L-28102. December 14, 1981.

ELIAS L. PENACO, plaintiff-appellee vs. ZOILO H.

RUAYA and FELICITAS E. RUAYA, defendants-appellants.

Civil Law; Contracts; Consideration; Consideration in

reciprocal contracts; Presumption that consideration exists and is
lawful.·In reciprocal contracts, like the one in question, the
obligation or promise of each party is the consideration for that of
the other. In the language of Article 1350 of the Civil Code, „in
onerous contracts the cause is understood to be, for each contracting
party, the prestation or promise of a thing or service by the other.‰
Besides, under Article 1354 of the Civil Code, it is presumed that
consideration exists and is lawful, unless the debtor proves the
contrary.
Same; Same; Same; Valuable consideration, even if small or
nominal, sufficient; Case at bar.·Besides, „a valuable
consideration, however small or nominal, if given or stipulated in
good faith is, in the absence of fraud, sufficient. A stipulation in
consideration of one dollar is just as effectual and valuable a
consideration as a larger sum stipulated for or paid.‰
Same; Same; Public Lands; Ownership; Rights, interests and
participation of claimants to public land can be waived, transferred
or alienated; Not sale of land.·Indeed, the lot on which the
building sold a retro is constructed is public land and the appellants
have no right to sell it. What is sought to be transferred and ceded,
however, is not the ownership of the land, but the rights, interests
and participation of the appellants „as public land claimants thereof
by virtue of the decision of the Bureau of Lands,‰ which rights could
be waived, transferred or alienated.
Same; Same; Same; Director of Lands has executive control over

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SUPREME COURT REPORTS ANNOTATED VOLUME 110 11/18/19, 12:19 PM

the concession and disposition of the lands of the public domain;

Qualification of a person to acquire land of the public domain
should be raised in the administrative proceedings.·By their
contract, the appellants have undertaken to effect legal transfer of
all their rights over the lot to the vendee a retro and his assigns
upon the consolidation of the title over the building in the vendee,
and whether or not the herein appellee is qualified to acquire that
land of the public domain claimed by the appellants depends upon
the Director of Landso

________________

* SECOND DIVISION

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VOL. 110, DECEMBER 14, 1981 47

Penaco vs. Ruaya

who has executive control over the concession and disposition of the
lands of the public domain. For this reason, the question of the
qualification of the appellee to acquire the land should be raised in
the administrative proceedings.
Same; Same; Statutory Construction; Terms and language of
contract clear and explicit; Obligation of vendors a retro as public
land claimants to transfer to the vendee a retro all their rights,
interests and participation over the land clearly stipulated.·The
terms and language of the contract are clear and explicit and leave
no doubt as to the intention of the parties that the vendors a retro
are obligated to transfer to the vendee a retro and his assigns all
their rights, interests and participation, as public land claimants, in
and to the lot on which the building sold a retro is constructed, after
the vendee a retro has consolidated his title over the building sold a
retro.

APPEAL from the decision of the Court of First Instance of

Misamis Occidental.

The facts are stated in the opinion of the Court.

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SUPREME COURT REPORTS ANNOTATED VOLUME 110 11/18/19, 12:19 PM

CONCEPCION JR., J.:

Appeal from the decision of the Court of First Instance of

Misamis Occidental in Civil Case No. OZ-110, entitled:
„Elias L. Penaco, plaintiff, versus Zoilo H. Ruaya and
Felicitas E. Ruaya, defendants,‰ the dispositive portion of
which reads, as follows:

„WHEREFORE, judgment is hereby rendered in favor of the

plaintiff and against the defendants, ordering the latter to convey,
relinquish and transfer all their rights, interests and participation
over a portion of Lot No. 373, Misamis Cadastre, on which the
building mentioned in the pacto de retro sale dated January 14,
1957 (Doc. No. 4, Page 75, Book VI, series of 1957, Notary Public
Valeriano S. Kaamino) is constructed in favor of the plaintiff. If
thirty days after the finality of this decision, the defendants fail or
neglect to convey and relinquish said rights, they shall be
considered as having so relinquished, conveyed and transferred said
rights to the plaintiff. The defendants are furthermore ordered to
pay to the plaintiff the sum of P200.00 as attorneyÊs fees, and to pay
1
the costs."

________________

1 Record on Appeal, p. 40.

48

48 SUPREME COURT REPORTS ANNOTATED

Penaco vs. Ruaya

There is no question as to the facts. On January 14, 1957,

the defendants, spouses Zoilo H. Ruaya and Felicitas E.
Ruaya, executed a document denominated: „PACTO DE
RETRO SALE OF RESIDENTIAL BUILDING WITH
GUARANTY TO RELINQUISH RIGHTS AS PUBLIC
LAND APPLICANT ON THE LOT ON WHICH
CONSTRUCTED," the terms and conditions of which are
as follows:

„That we, ZOILO H. RUAYA and FELICITAS E. RUAYA, husband

and wife, both 41 years old, Filipinos and residents of the City of

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SUPREME COURT REPORTS ANNOTATED VOLUME 110 11/18/19, 12:19 PM

Ozamis for and in consideration of the sum of One Thousand Pesos

(P1,000.00), Philippine Currency, receipt whereof in full is hereby
acknowledged and to us paid by PERSHING TAN QUETO, 44 years
old, married to Cristina Yap Siok Tin, Filipino citizen and resident
of the City of Ozamis, do by these presents hereby sell, cede and
convey by way of PACTO DE RETRO unto the said Pershing Tan
Queto, his heirs, successors and assigns, one (1) two-storey
residential building of 88 square meters floor area declared for
taxation purposes under Tax Dec. No. 36964 in the name of Zoilo H.
Ruaya and therein assessed at P1,500.00 and erected on a public
land along the road to the wharf, City of Ozamis, claimed by herein
vendors with a right as actual claimant-applicant given standing
and recognition by the Bureau of Lands in B.L. Claim No. 181 (N),
Portion of Lot 373 of the Misamis Cadastre, as per the decision of
the Director of Lands dated June 8, 1954, certified true copy of
which is hereto attached as Annex ÂA' and made an integral part of
the document; and which residential building we are the absolute
owners with a perfect right to convey the same and that it is free of
all liens, charges and encumbrances and we hereby warrant to
defend the rights of the herein vendee against the lawful claims of
any persons whomsoever on the same.
„IT IS A CONDITION OF THIS SALE that we hereby reserve
unto ourselves, our heirs, successors and assigns the right to
repurchase the herein conveyed building by paying back and
returning to the vendee, Pershing Tan Queto, his heirs, successors
and assigns the agreed purchase price of P. 1,000.00 within the
period of one (1) year after the lapse of one (1) year from the date of
the execution hereof; and that upon our failure to exercise the right
of repurchase within the period herein stipulated, title to the
building shall pass to and become vested unto the vendee, his heirs,
successors and assigns, as in the law made and provided; and in the
event of consolidation of ti

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VOL. 110, DECEMBER 14, 1981 49

Penaco vs. Ruay

atie to the building unto the vendee, we hereby promise, covenant

and guarantee to relinquish and effect complete legal transfer of all
our rights, interests and participation in and to the lot on which the
building is constructed, as public land claimants thereof by virtue of

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SUPREME COURT REPORTS ANNOTATED VOLUME 110 11/18/19, 12:19 PM

2
the decision of the Bureau of Lands hereto attached as Annex ÂA'."

The vendors a retro failed to exercise their right to

repurchase within the stipulated period so that the vendee
a retro filed an action with the Court of First Instance of
Misamis Occidental, docketed therein as Civil Case No.
2263, for consolidation of title. On September 30, 1960, the
trial court rendered judgment declaring that the title of the
building sold a retro is consolidated in the vendee a retro,
Pershing Tan Queto. On April 18, 1961, Pershing Tan
Queto assigned his rights and interests over the property
in favor of the herein plaintiff Elias3 L. Penaco, in
consideration of the amount of P2.800.00. Thereafter, Elias
L. Penaco demanded that the defendants relinquish and
effect complete legal transfer of all their rights, interests
and participation over the land on which the residential
land sold a retro is constructed, and when the defendants
refused, this action for specific performance was filed with
the Court of First Instance of Misamis Occidental on
November 3, 1965. The defendants answered that the
condition in the contract of sale with pacto de retro whereby
they promised, covenanted and guaranteed to relinquish
and transfer all their rights, interests and participation in
the lot on which the building sold a retro is constructed
upon the consolidation of title in the vendee a retro is void
and unenforceable for want 4
of consideration, there being no
price mentioned therein. On June 20,1967, the Court of
First Instance of Misamis Occidental rendered the decision
adverted to. Hence, the present recourse wherein the
defendants maintain that the promise to relinquish rights
and interests over the land on which the building sold a
retro is constructed is null and void for want of
consideration; and that the parcel of land which is sought
to be transferred has not been identified.

________________

2 Id, pp. 5–7.

3 Id, pp. 8–11.
4 Id, pp. 11–15.

50

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50 SUPREME COURT REPORTS ANNOTATED

Penaco vs. Ruaya

The first contention is clearly without merit. It is based

upon the premise that there were two (2) contracts entered
into by and between the appellants and Pershing Tan
Queto, viz: (1) a pacto de retro sale of a residential building;
and (2) a promise, covenant and guarantee to relinquish
and transfer to the vendee a retro, all the rights and
interests the appellants have on the lot on which the
building sold a retro is constructed, which is false because
there was only one (1) contract entered into by and between
the appellants and Pershing Tan Queto and which is a sale
of a residential building for P1,000.00 with the conditions
that: (1) the vendors may repurchase the same within the
period of one (1) year after the lapse of one (1) year from
the execution of sale, by paying back and returning to the
vendee the amount of P1,000.00; (2) upon the failure of the
vendors to exercise their right to repurchase within the
stipulated period, title to the building shall pass and
become vested in the vendee, and (3) in the event of
consolidation of title in the vendee, the vendors shall
transfer, relinquish and effect legal transfer of all their
rights over the lot on which the building is constructed to
the vendee or his assigns. In reciprocal contracts, like the
one in question, the obligation or promise of each party is
the consideration for that of the other. In the language of
Article 1350 of the Civil Code, „in onerous contracts the
cause is understood to be, for each contracting party, the
prestation or promise of a thing or service by the other.‰
Besides, under Article 1354 of the Civil Code, it is
presumed that consideration exists and is lawful, unless
the debtor proves the contrary. In the instant case, the
appellants failed to present evidence to disprove the
presumption.
The appellants, nevertheless, contend that the
consideration is for the house only since the lot on which it
is constructed is public land which they cannot sell, and in
view of the inadequacy of the price, the building alone
having an assessed value of P1,500.00, and the land is too
cheap for P5,000.00.
Indeed, the lot on which the building sold a retro is

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SUPREME COURT REPORTS ANNOTATED VOLUME 110 11/18/19, 12:19 PM

constructed is public land and the appellants have no right

to sell it. What is sought to be transferred and ceded,
however, is not the ownership of the land, but the rights,
interests and participation of the appellants „as public land
claimants thereof

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VOL. 110, DECEMBER 14, 1981 51

Penaco vs. Ruaya

by virtue of the decision of the Bureau of Lands,‰ which

rights could be waived, transferred or alienated. By their
contract, the appellants have undertaken to effect legal
transfer of all their rights over the lot to the vendee a retro
and his assigns upon the consolidation of the title over the
building in the vendee, and whether or not the herein
appellee is qualified to acquire that land of the public
domain claimed by the appellants depends upon the
Director of Lands who has executive control over the
concession and disposition of the lands of the public
domain. For this reason, the question of the qualification of
the appellee to acquire the land should be raised in the
administrative proceedings.
The inadequacy of the price is not sufficient proof that
the consideration of P1,000.00 was for the house alone. The
vendee a retro could not have possibly bought the house
alone without securing from the vendors a retro a specific
and fixed arrangement regarding the lot on which the
house is built, otherwise, he could be ejected therefrom at
the will of the vendors a retro. Besides, „a valuable
consideration, however small or nominal, if given or
stipulated in good faith is, in the absence of fraud,
sufficient. A stipulation in consideration of one dollar is
just as effectual and valuable5
a consideration as a larger
sum stipulated for or paid."
The second contention that the parcel of land on which
the building sold a retro is constructed has not been
identified is likewise without merit. The terms and
language of the contract are clear and explicit and leave no
doubt as to the intention of the parties that the vendors a
retro are obligated to transfer to the vendee a retro and his

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SUPREME COURT REPORTS ANNOTATED VOLUME 110 11/18/19, 12:19 PM

assigns all their rights, interests and participation, as

public land claimants, in and to the lot on which the
building sold a retro is constructed, after the vendee a retro
has consolidated his title over the building sold a retro. In
the contract of pacto de retro sale, the appellants described
the land on which the building is constructed as „a public
land along the road to the wharf, City of Ozamis, claimed
by herein vendors with a right as actual claimant-applicant
given standing and recognition by the Bureau of Lands to
B.L. Claim No.

________________

5 Lawrence vs. McCalmont, 2 How 126, 11 P2d 326.

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52 SUPREME COURT REPORTS ANNOTATED

Penaco vs. Ruaya

181 (N), Portion of Lot 373 of the Misamis Cadastre, as per

the decision of the Director of Lands dated June 8, 1954,
certified true copy of which is hereto attached as Annex ÂA'
and made an integral part of the document.‰ Such
description is sufficient, as reference to the decision of the
Director of Lands of June 8, 1954, adverted to, which in all
probability had delineated the parcel of land applied for by
the appellants in metes and bounds would pinpoint the lot
in question.
WHEREFORE, there being no error committed in the
judgment appealed from, the said judgment should be, as it
is hereby, AFFIRMED. With costs against the appellants.
SO ORDERED.

Barredo (Chairman), Aquino, Abad Santos, De

Castro, Ericta and Escolin, JJ., concur.

Judgment affirmed,

Notes.·Non-payment by the vendee of the balance of

the purchase price embodied in a Deed of Sale with right to
repurchase does not suspend the running of the period of

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SUPREME COURT REPORTS ANNOTATED VOLUME 110 11/18/19, 12:19 PM

redemption in the absence of a stipulation to that effect.

(Catangcatang vs. Legayada, 84 SCRA 51).
The effectivity exercise the right to repurchase, the
vendor a retro must make an actual and simultaneous
tender of payment or consignation. (Catangcatang vs.
Legayada, 84 SCRA 51).
During the period of redemption, the judgment debtor
cannot make a conveyance of the ownership of property
foreclosed as said ownership belongs to purchaser of
foreclosure sale. (Dizon vs. Gaborro, 83 SCRA 688).
A pacto de retro sale may be deemed an equitable
mortgage when executed due to urgent necessity for money
of the apparent vendor. (Labasan vs. Lacuesta, 86 SCRA
16).
If the vendor failed to redeem within the period agreed
upon, the vendeeÊs title became irrevocable by the mere
registration of an affidavit of consolidation. (Labasan vs.
Lacuesta, 86 SCRA 16).

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VOL. 110, DECEMBER 14, 1981 53

People vs. Orpilla

A contract of sale is perfected the moment there is

agreement upon the thing object of the contract and upon
the price. (Philippine Virginia Tobacco Administration vs.
De los Angeles, 87 SCRA 197).
Where the contract conditionally transfers ownership to
the vend upon its execution, the property is not merely
given as security for a loan; and the contract is not one of
equitable mortgage either, but a sale subject to a resolutory
condition. (Rodriguez vs. Francisco, 2 SCRA 648).
A person not a party obliged principally or subsidiarily
in a contract may exercise an action for nullity of the
contract if he is prejudiced in his rights with respect to one
of the contracting parties, and can show the detriment
which would positively result to him from the contract in
which he had no intervention. (Teves vs. PHHC, 23 SCRA
1141).
A contract of purchase is void where the same is without
cause or consideration in that the purchase price, which

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appears thereon as paid, has in fact never been paid by the

purchaser to the vendor. Mapalo vs. Mapalo, 17 SCRA 114).
The action for annulment of a contract on the ground of
falsity of consideration shall last 4, years, the term to run
from the date of the consummation of the contract. (Mapalo
vs. Mapalo, 17 SCRA 114).
A judicial action for rescission of contract is not
necessary where the contract provides that it may be
revoked and cancelled for violation of any of its terms and
conditions. (Enrile vs. Court of Appeals, 29 SCRA 504).

···o0o···

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