EN BANC[G.R. No.L-27454. April 30, 1970.]ROSENDO O. CHAVES,plaintiff-appellant,vs.FRUCTUOSO GONZALES,defendant-appellee.Chaves, Elio, Chaves & Associatesfor plaintiff-appellant.Sulpicio E. Platonfor defendant-appellee.SYLLABUS1.CIVIL LAW; CONTRACTS; BREACH OF CONTRACT FOR NON-PERFORMANCE; FIXING OF PERIOD BEFORE FILING OF COMPLAINT FOR NON-PERFORMANCE, ACADEMIC. Where the time for compliance had expired and there was breach of contract by non-performance, it was academic for the plaintiff to have first petitioned the court to fix a period for the performance of the contract before filing his complaint.2.ID.; ID.; ID.; DEFENDANT CANNOT INVOKE ARTICLE 1197 OF THE CIVIL CODE OF THE PHILIPPINES. Where the defendant virtually admitted non-performance of the contract by returning the typewriter that he was obliged to repair in a non-working condition, with essential parts missing, Article 1197 of the Civil Code of the Philippines cannot be invoked. The fixing of a period would thus be a mere formality and would serve no purpose than to delay.3.ID.; ID.; ID.; DAMAGES RECOVERABLE; CASE AT BAR. Where the defendant-appellee contravened the tenor of his obligation because he not only did not repair the typewriter but returned it "in shambles,'' he is liable for the cost of the labor or service expended in the repair of the typewriter, which is in the amount of P58.75, because the obligation or contract was to repair it. In addition, he is likewise liable under Art. 1170 of the Code, for the cost of the missing parts, in the amount of P31.10, for in his obligation to repair the typewriter he was bound, but failed or neglected, to return it in the same condition it was when he received it.4.ID.; ID.; ID.; CLAIMS FOR DAMAGES OR ATTORNEY'S FEES NOT RECOVERABLE; NOT ALLEGED OR PROVED IN INSTANT CASE. Claims for damages and attorney's fees must be pleaded, and the existence of the actual basis thereof must be proved. As no findings of fact were made on the claims for damages and attorney's fees, there is no factual basis upon which to make an award therefor.5.REMEDIAL LAW; APPEALS; APPEAL FROM COURT OF FIRST INSTANCE TO SUPREME COURT; ONLY QUESTIONS OF LAW REVIEWABLE. Where the appellant directly appeals from the decision of the trial court to the Supreme Court on questions of law, he is bound by the judgment of the court a quo on its findings of fact.D E C I S I O NREYES, J.B.L.,Jp:This is a direct appeal by the party who prevailed in a suit for breach of oral contract and recovery of damages but was unsatisfied with the decision rendered by the Court of First Instance of Manila, in its Civil Case No. 65138, because it awarded him only P31.10 out of his total claim of P690 00 for actual, temperate and moral damages and attorney's fees.The appealed judgment, which is brief, is hereunder quoted in full:"In the early part of July, 1963, the plaintiff delivered to the defendant, who is a typewriter repairer, a portable typewriter for routine cleaning and servicing. The defendant was not able to finish the job after some time despite repeated reminders made by the plaintiff. The defendant merely gave assurances, but failed to comply with the same. In October, 1963, the defendant asked from the plaintiff the sum of P6.00 for the purchase of spare parts, which amount the plaintiff gave to the defendant. On October 26, 1963, after getting exasperated with the delay of the repair of the typewriter, the plaintiff went to the house of the defendant and asked for the return of the typewriter. The defendant delivered the typewriter in a wrapped package. On reaching home, the plaintiff examined the typewriter returned to him by the defendant and found out that the same was in shambles, with the interior cover and some parts and screws missing. On October 29, 1963. the plaintiff sent a letter to the defendant formally demanding the return of the missing parts, the interior cover and the sum of P6.00 (Exhibit D). The following day, the defendant returned to the plaintiff some of the missing parts, the interior cover and the P6.00."On August 29, 1964, the plaintiff had his typewriter repaired by Freixas Business Machines, and the repair job cost him a total of P89.85, including labor and materials (Exhibit C)."On August 23, 1965, the plaintiff commenced this action before the City Court of Manila, demanding from the defendant the payment of P90.00 as actual and compensatory damages, P100.00 for temperate damages, P500.00 for moral damages, and P500.00 as attorney's fees."In his answer as well as in his testimony given before this court, the defendant made no denials of the facts narrated above, except the claim of the plaintiff that the typewriter was delivered to the defendant through a certain Julio Bocalin, which the defendant denied allegedly because the typewriter was delivered to him personally by the plaintiff."The repair done on the typewriter by Freixas Business Machines with the total cost of P89.85 should not, however, be fully chargeable against the defendant. The repair invoice, Exhibit C, shows that the missing parts had a total value of only P31.10."WHEREFORE, judgment is hereby rendered ordering the defendant to pay the plaintiff the sum of P31.10, and the costs of suit."SO ORDERED."The error of the courta quo,according to the plaintiff-appellant, Rosendo O. Chaves, is that it awarded only the value of the missing parts of the typewriter, instead of the whole cost of labor and materials that went into the repair of the machine, as provided for in Article 1167 of the Civil Code, reading as follows:"ART. 1167.If a person obliged to do something fails to do it, the same shall be executed at his cost.This same rule shall be observed if he does it in contravention of the tenor of the obligation. Furthermore it may be decreed that what has been poorly done he undone."On the other hand, the position of the defendant-appellee, Fructuoso Gonzales, is that he is not liable at all, not even for the sum of P31.10, because his contract with plaintiff-appellant did not contain a period, so that plaintiff-appellant should have first filed a petition for the court to fix the period, under Article 1197 of the Civil Code, within which the defendant appellee was to comply with the contract before said defendant-appellee could be held liable for breach of contract.Because the plaintiff appealed directly to the Supreme Court and the appellee did not interpose any appeal, the facts, as found by the trial court, are now conclusive and non-reviewable.1The appealed judgment states that the "plaintiff delivered to the defendant . . . a portable typewriter for routine cleaning and servicing"; that the defendant was not able to finish the job after some time despite repeated reminders made by the plaintiff"; that the "defendant merely gave assurances, but failed to comply with the same"; and that "after getting exasperated with the delay of the repair of the typewriter", the plaintiff went to the house of the defendant and asked for its return, which was done. The inferences derivable from these findings of fact are that the appellant and the appellee had a perfected contract for cleaning and servicing a typewriter; that they intended that the defendant was to finish it at some future time although such time was not specified; and that such time had passed without the work having been accomplished, far the defendant returned the typewriter cannibalized and unrepaired, which in itself is a breach of his obligation, without demanding that he should be given more time to finish the job, or compensation for the work he had already done. The time for compliance having evidently expired, and there being a breach of contract by non-performance, it was academic for the plaintiff to have first petitioned the court to fix a period for the performance of the contract before filing his complaint in this case. Defendant cannot invoke Article 1197 of the Civil Code for he virtually admitted non-performance by returning the typewriter that he was obliged to repair in a non-working condition, with essential parts missing. The fixing of a period would thus be a mere formality and would serve no purpose than to delay (cf. Tiglao. et al. V. Manila Railroad Co. 98 Phil. 181).It is clear that the defendant-appellee contravened the tenor of his obligation because he not only did not repair the typewriter but returned it "in shambles", according to the appealed decision. For such contravention, as appellant contends, he is liable under Article 1167 of the Civil Code.jam quot,for the cost of executing the obligation in a proper manner. The cost of the execution of the obligation in this case should be the cost of the labor or service expended in the repair of the typewriter, which is in the amount of P58.75. because the obligation or contract was to repair it.In addition, the defendant-appellee is likewise liable, under Article 1170 of the Code, for the cost of the missing parts, in the amount of P31.10, for in his obligation to repair the typewriter he was bound, but failed or neglected, to return it in the same condition it was when he received it.Appellant's claims for moral and temperate damages and attorney's fees were, however, correctly rejected by the trial court, for these were not alleged in his complaint (Record on Appeal, pages 1-5). Claims for damages and attorney's fees must be pleaded, and the existence of the actual basis thereof must be proved.2The appealed judgment thus made no findings on these claims, nor on the fraud or malice charged to the appellee. As no findings of fact were made on the claims for damages and attorney's fees, there is no factual basis upon which to make an award therefor. Appellant is bound by such judgment of the court,a quo,by reason of his having resorted directly to the Supreme Court on questions of law.IN VIEW OF THE FOREGOING REASONS, the appealed judgment is hereby modified, by ordering the defendant-appellee to pay, as he is hereby ordered to pay, the plaintiff-appellant the sum of P89.85, with interest at the legal rate from the filing of the complaint. Costs in all instances against appellee Fructuoso Gonzales.Concepcion, C.J., Dizon, Makalintal, Zaldivar, Castro, Fernando, TeehankeeandVillamor, JJ.,concur.Barredo, J.,did not take part.Footnotes1.Perez v. Araneta, L-18414, 15 July 1968, 24 SCRA 43; Cebu Portland Cement Co. v. Mun. of Naga L-24116-17, 22 August 1968, 24 SCRA 708.2.Malonzo v. Galang, L-13851, 27 July 1960; Darang v. Belizear, L-22399, 31 March 1967, 19 SCRA 214.SECOND DIVISION[G.R. No.L-29139. November 15, 1974.]CONSUELO P. PICZON, RUBEN O. PICZON and AIDA P. ALCANTARA,plaintiffs-appellants,vs.ESTEBAN PICZON and SOSING-LOBOS & CO., INC.,defendants-appellees.Vicente C. Santosfor plaintiff-appellants.Jacinto R. Boholfor defendant-appellee Sosing-Lobos & Co., Inc.Vicente M. Macabidangfor defendant-appellee Esteban Piczon.D E C I S I O NBARREDO,Jp:Appeal from the decision of the Court of First Instance of Samar in its Civil Case No. 5156, entitled Consuelo P. Piczon, et. al. vs. Esteban Piczon, et al., sentencing defendants-appellees, Sosing Lobos and Co., Inc., as principal, and Esteban Piczon, as guarantor, to pay plaintiffs-appellants "the sum of P12,500.00 with 12% interest from August 6, 1964 until said principal amount of P12,500.00 shall have been duly paid, and the costs."After issues were joined and at the end of the pre-trial held on August 22, 1967, the trial court issued the following order:"When this case was called for pre-trial, plaintiffs and defendants through their lawyers, appeared and entered into the following agreement:1.That defendants admit the due execution of Annexes 'A' and 'B' of the complaint;2.That consequently defendant Sosing-Lobos and Co., Inc. binds itself to the plaintiffs for P12,600.00, the same to be paid on or before October 31, 1967 together with the interest that this court may determine.That the issues in this case are legal ones namely:(a)Will the payment of twelve per cent interest of P12,500.00 commence to run from August 6, 1964 when plaintiffs made the first demand or from August 29, 1956 when the obligation becomes due and demandable?(b)Is defendant Esteban Piczon liable as a guarantor or a surety?That the parties are hereby required to file their respective memorandum if they so desire on or before September 15, 1967 to discuss the legal issues and therewith the case will be considered submitted for decision.WHEREFORE, the instant case is hereby considered submitted based on the aforesaid facts agreed upon and upon submission of the parties of their respective memorandum on or before September 15, 1967.SO ORDERED."1(Record on Appeal pp. 28-30.)Annex "A", the actionable document of appellants reads thus:"AGREEMENT OF LOANKNOW YE ALL MEN BY THESE PRESENTS:That I, ESTEBAN PICZON, of legal age, married, Filipino, and resident of and with postal address in the municipality of Catbalogan, Province of Samar, Philippines, in my capacity as the President of the corporation known as the 'SOSING-LOBOS and CO., INC.,' as controlling stockholder, and at the same time as guarantor for the same, do by these presents contract a loan of Twelve Thousand Five Hundred Pesos (P12,500.00), Philippine Currency, the receipt of which is hereby acknowledged, from the 'Piczon and Co., Inc.' another corporation, the main offices of the two corporations being in Catbalogan, Samar, for which I undertake, bind and agree to use the loan as surety cash deposit for registration with the Securities and Exchange Commission of the incorporation papers relative to the 'Sosing-Lobos and Co., Inc.,' and to return or pay the same amount with Twelve Per Cent (12%) interest per annum, commencing from the date of execution hereof, to the 'Piczon and Co., Inc., as soon as the said incorporation papers are duly registered and the Certificate of Incorporation issued by the aforesaid Commission.IN WITNESS WHEREOF, I hereunto signed my name in Catbalogan, Samar, Philippines, this 28th day of September, 1956.(Sgd.) ESTEBAN PICZON"(Record on Appeal, pp. 6-7.)The trial court having rendered judgment in the tenor aforequoted, appellants assign the following alleged errors:"ITHE TRIAL COURT ERRED IN ORDERING THE PAYMENT OF 12% INTEREST ON THE PRINCIPAL OF P12,500.00 FROM AUGUST 6, 1964, ONLY, INSTEAD OF FROM SEPTEMBER 28, 1956, WHEN ANNEX 'A' WAS DULY EXECUTED."IITHE TRIAL COURT ERRED IN CONSIDERING DEFENDANT ESTEBAN PICZON AS GUARANTOR ONLY AND NOT AS SURETY."IIITHE TRIAL COURT ERRED IN NOT ADJUDICATING DAMAGES IN FAVOR OF THE PLAINTIFFS-APPELLANTS." (Appellants' Brief, pp. a to b.)Appellants' first assignment of error is well taken. Instead of requiring appellees to pay interest at 12% only from August 6, 1964, the trial court should have adhered to the terms of the agreement which plainly provides that Esteban Piczon had obligated Sosing-Lobos and Co., Inc. and himself to "return or pay (to Piczon and Co., Inc.) the same amount (P12,500.00) with Twelve Per Cent (12%) interest per annum commencing from the date of the execution hereof", Annex A, which was on September 28, 1956. Under Article 2209 of the Civil Code "(i)f the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum." In the case at bar, the "interest agreed upon" by the parties in Annex A was to commence from the execution of said document.Appellees' contention that the reference in Article 2209 to delay incurred by the debtor which can serve as the basis for liability for interest is to that defined in Article 1169 of the Civil Code reading thus:"Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation.However, the demand by the creditor shall not be necessary in order that delay may exist:(1)When the obligation or the law expressly so declares; or(2)When from the nature and the circumstances of the obligation it appears that the designation of the time when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract; or(3)When demand would be useless, as when the obligor has rendered it beyond his power to perform.In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the other begins."is untenable. In Quiroz vs. Tan Guinlay, 5 Phil. 675, it was held that the article cited by appellees (which was Article 1100 of the Old Civil Code read in relation to Art. 1101) is applicable only when the obligation is to do something other than the payment of money. And in Firestone Tire & Rubber Co. (P.I.) vs. Delgado, 104 Phil. 920, the Court squarely ruled that if the contract stipulates from what time interest will be counted, said stipulated time controls, and, therefore interest is payable from such time, and not from the date of the filing of the complaint (at p. 925). Were that not the law, there would be no basis for the provision of Article 2212 of the Civil Code providing that "(I)nterest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point." Incidentally, appellants would have been entitled to the benefit of this article, had they not failed to plead the same in their complaint. Their prayer for it in their brief is much too late. Appellees had no opportunity to meet the issue squarely at the pre-trial.As regards the other two assignments of error, appellants' pose cannot be sustained. Under the terms of the contract, Annex A, Esteban Piczon expressly bound himself only as guarantor, and there are no circumstances in the record from which it can be deduced that his liability could be that of a surety. A guaranty must be express, (Article 2055, Civil Code) and it would be violative of the law to consider a party to be bound as a surety when the very word used in the agreement is "guarantor."Moreover, as well pointed out in appellees' brief, under the terms of the pre-trial order, appellants accepted the express assumption of liability by Sosing-Lobos & Co., Inc. for the payment of the obligation in question, thereby modifying their original posture that inasmuch as that corporation did not exist yet at the time of the agreement, Piczon necessarily must have bound himself as insurer.As already explained earlier, appellants' prayer for payment of legal interest upon interest due from the filing of the complaint can no longer be entertained, the same not having been made an issue in the pleadings in the court below. We do not believe that such a substantial matter can be deemed included in a general prayer for "any other relief just and equitable in the premises", especially when, as in this case, the pre-trial order does not mention it in the enumeration of the issues to be resolved by the court.PREMISES CONSIDERED, the judgment of the trial court is modified so as to make appellees liable for the stipulated interest of 12% per annum from September 28, 1956, instead of August 6, 1964. In all other respects, said judgment is affirmed. Costs against appellees.Fernando (Chairman), Antonio, FernandezandAquino, JJ.,concur.Footnotes1.Annex "B" is a document entitled "Mutual Quit Claims. Cessions and Amicable Settlement" under which the right of action of Piczon and Co., Inc. under Annex "A" was transferred to the heirs of Alejandro Piczon who are the appellants.SECOND DIVISION[G.R. No.124242. January 21, 2005.]SAN LORENZO DEVELOPMENT CORPORATION,petitioner,vs. COURT OF APPEALS, PABLO S. BABASANTA, SPS. MIGUEL LU and PACITA ZAVALLA LU,respondents.D E C I S I O NTINGA,Jp:From a coaptation of the records of this case, it appears that respondents Miguel Lu and Pacita Zavalla, (hereinafter, the Spouses Lu) owned two (2) parcels of land situated in Sta. Rosa, Laguna covered by TCT No. T-39022 and TCT No. T-39023 both measuring 15,808 square meters or a total of 3.1616 hectares.On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to respondent Pablo Babasanta, (hereinafter, Babasanta) for the price of fifteen pesos (P15.00) per square meter. Babasanta made a downpayment of fifty thousand pesos (P50,000.00) as evidenced by a memorandum receipt issued by Pacita Lu of the same date. Several other payments totaling two hundred thousand pesos (P200,000.00) were made by Babasanta.Sometime in May 1989, Babasanta wrote a letter to Pacita Lu to demand the execution of a final deed of sale in his favor so that he could effect full payment of the purchase price. In the same letter, Babasanta notified the spouses about having received information that the spouses sold the same property to another without his knowledge and consent. He demanded that the second sale be cancelled and that a final deed of sale be issued in his favor.cEAIHaIn response, Pacita Lu wrote a letter to Babasanta wherein she acknowledged having agreed to sell the property to him at fifteen pesos (P15.00) per square meter. She, however, reminded Babasanta that when the balance of the purchase price became due, he requested for a reduction of the price and when she refused, Babasanta backed out of the sale. Pacita added that she returned the sum of fifty thousand pesos (P50,000.00) to Babasanta through Eugenio Oya.On 2 June 1989, respondent Babasanta, as plaintiff, filed before the Regional Trial Court (RTC), Branch 31, of San Pedro, Laguna, aComplaint for Specific Performance and Damages1against his co-respondents herein, the Spouses Lu. Babasanta alleged that the lands covered by TCT No. T-39022 and T-39023 had been sold to him by the spouses at fifteen pesos (P15.00) per square meter. Despite his repeated demands for the execution of a final deed of sale in his favor, respondents allegedly refused.In theirAnswer,2the Spouses Lu alleged that Pacita Lu obtained loans from Babasanta and when the total advances of Pacita reached fifty thousand pesos (P50,000.00), the latter and Babasanta, without the knowledge and consent of Miguel Lu, had verbally agreed to transform the transaction into a contract to sell the two parcels of land to Babasanta with the fifty thousand pesos (P50,000.00) to be considered as the downpayment for the property and the balance to be paid on or before 31 December 1987. Respondents Lu added that as of November 1987, total payments made by Babasanta amounted to only two hundred thousand pesos (P200,000.00) and the latter allegedly failed to pay the balance of two hundred sixty thousand pesos (P260,000.00) despite repeated demands. Babasanta had purportedly asked Pacita for a reduction of the price from fifteen pesos (P15.00) to twelve pesos (P12.00) per square meter and when the Spouses Lu refused to grant Babasanta's request, the latter rescinded the contract to sell and declared that the original loan transaction just be carried out in that the spouses would be indebted to him in the amount of two hundred thousand pesos (P200,000.00). Accordingly, on 6 July 1989, they purchased Interbank Manager's Check No. 05020269 in the amount of two hundred thousand pesos (P200,000.00) in the name of Babasanta to show that she was able and willing to pay the balance of her loan obligation.Babasanta later filed anAmended Complaintdated 17 January 19903wherein he prayed for the issuance of a writ of preliminary injunction with temporary restraining order and the inclusion of the Register of Deeds of Calamba, Laguna as party defendant. He contended that the issuance of a preliminary injunction was necessary to restrain the transfer or conveyance by the Spouses Lu of the subject property to other persons.The Spouses Lu filed theirOpposition4to the amended complaint contending that it raised new matters which seriously affect their substantive rights under the original complaint. However, the trial court in itsOrderdated 17 January 19905admitted the amended complaint.On 19 January 1990, herein petitioner San Lorenzo Development Corporation (SLDC) filed aMotion for Intervention6before the trial court. SLDC alleged that it had legal interest in the subject matter under litigation because on 3 May 1989, the two parcels of land involved, namely Lot 1764-A and 1764-B, had been sold to it in aDeed of Absolute Sale with Mortgage.7It alleged that it was a buyer in good faith and for value and therefore it had a better right over the property in litigation.In hisOppositionto SLDC's motion for intervention,8respondent Babasanta demurred and argued that the latter had no legal interest in the case because the two parcels of land involved herein had already been conveyed to him by the Spouses Lu and hence, the vendors were without legal capacity to transfer or dispose of the two parcels of land to the intervenor.Meanwhile, the trial court in itsOrderdated 21 March 1990 allowed SLDC to intervene. SLDC filed itsComplaint-in-Interventionon 19 April 1990.9Respondent Babasanta's motion for the issuance of a preliminary injunction was likewise granted by the trial court in itsOrderdated 11 January 199110conditioned upon his filing of a bond in the amount of fifty thousand pesos (P50,000.00).cAECSTSLDC in itsComplaint-in-Interventionalleged that on 11 February 1989, the Spouses Lu executed in its favor an Option to Buy the lots subject of the complaint. Accordingly, it paid an option money in the amount of three hundred sixteen thousand one hundred sixty pesos (P316,160.00) out of the total consideration for the purchase of the two lots of one million two hundred sixty-four thousand six hundred forty pesos (P1,264,640.00). After the Spouses Lu received a total amount of six hundred thirty-two thousand three hundred twenty pesos (P632,320.00) they executed on 3 May 1989 aDeed of Absolute Sale with Mortgagein its favor. SLDC added that the certificates of title over the property were delivered to it by the spouses clean and free from any adverse claims and/or notice oflis pendens. SLDC further alleged that it only learned of the filing of the complaint sometime in the early part of January 1990 which prompted it to file the motion to intervene without delay. Claiming that it was a buyer in good faith, SLDC argued that it had no obligation to look beyond the titles submitted to it by the Spouses Lu particularly because Babasanta's claims were not annotated on the certificates of title at the time the lands were sold to it.After a protracted trial, the RTC rendered itsDecisionon 30 July 1993 upholding the sale of the property to SLDC. It ordered the Spouses Lu to pay Babasanta the sum of two hundred thousand pesos (P200,000.00) with legal interest plus the further sum of fifty thousand pesos (P50,000.00) as and for attorney's fees. On the complaint-in-intervention, the trial court ordered the Register of Deeds of Laguna, Calamba Branch to cancel the notice oflis pendensannotated on the original of the TCT No. T-39022 (T-7218) and No. T-39023 (T-7219).Applying Article 1544 of the Civil Code, the trial court ruled that since both Babasanta and SLDC did not register the respective sales in their favor, ownership of the property should pertain to the buyer who first acquired possession of the property. The trial court equated the execution of a public instrument in favor of SLDC as sufficient delivery of the property to the latter. It concluded that symbolic possession could be considered to have been first transferred to SLDC and consequently ownership of the property pertained to SLDC who purchased the property in good faith.Respondent Babasanta appealed the trial court's decision to the Court of Appeals alleging in the main that the trial court erred in concluding that SLDC is a purchaser in good faith and in upholding the validity of the sale made by the Spouses Lu in favor of SLDC.Respondent spouses likewise filed an appeal to the Court of Appeals. They contended that the trial court erred in failing to consider that the contract to sell between them and Babasanta had been novated when the latter abandoned the verbal contract of sale and declared that the original loan transaction just be carried out. The Spouses Lu argued that since the properties involved were conjugal, the trial court should have declared the verbal contract to sell between Pacita Lu and Pablo Babasanta null and voidab initiofor lack of knowledge and consent of Miguel Lu. They further averred that the trial court erred in not dismissing the complaint filed by Babasanta; in awarding damages in his favor and in refusing to grant the reliefs prayed for in their answer.On 4 October 1995, the Court of Appeals rendered itsDecision11which set aside the judgment of the trial court. It declared that the sale between Babasanta and the Spouses Lu was valid and subsisting and ordered the spouses to execute the necessary deed of conveyance in favor of Babasanta, and the latter to pay the balance of the purchase price in the amount of two hundred sixty thousand pesos (P260,000.00). The appellate court ruled that theAbsolute Deed of Sale with Mortgagein favor of SLDC was null and void on the ground that SLDC was a purchaser in bad faith. The Spouses Lu were further ordered to return all payments made by SLDC with legal interest and to pay attorney's fees to Babasanta.SLDC and the Spouses Lu filed separate motions for reconsideration with the appellate court.12However, in aManifestationdated 20 December 1995,13the Spouses Lu informed the appellate court that they are no longer contesting the decision dated 4 October 1995.In itsResolutiondated 11 March 1996,14the appellate court considered as withdrawn the motion for reconsideration filed by the Spouses Lu in view of their manifestation of 20 December 1995. The appellate court denied SLDC's motion for reconsideration on the ground that no new or substantial arguments were raised therein which would warrant modification or reversal of the court's decision dated 4 October 1995.DIcSHEHence, this petition.SLDC assigns the following errors allegedly committed by the appellate court:THE COURT OF APPEALS ERRED IN HOLDING THAT SAN LORENZO WAS NOT A BUYER IN GOOD FAITH BECAUSE WHEN THE SELLER PACITA ZAVALLA LU OBTAINED FROM IT THE CASH ADVANCE OF P200,000.00, SAN LORENZO WAS PUT ON INQUIRY OF A PRIOR TRANSACTION ON THE PROPERTY.THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE ESTABLISHED FACT THAT THE ALLEGED FIRST BUYER, RESPONDENT BABASANTA, WAS NOT IN POSSESSION OF THE DISPUTED PROPERTY WHEN SAN LORENZO BOUGHT AND TOOK POSSESSION OF THE PROPERTY AND NO ADVERSE CLAIM, LIEN, ENCUMBRANCE OR LIS PENDENS WAS ANNOTATED ON THE TITLES.THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE FACT THAT RESPONDENT BABASANTA HAS SUBMITTED NO EVIDENCE SHOWING THAT SAN LORENZO WAS AWARE OF HIS RIGHTS OR INTERESTS IN THE DISPUTED PROPERTY.THE COURT OF APPEALS ERRED IN HOLDING THAT NOTWITHSTANDING ITS FULL CONCURRENCE ON THE FINDINGS OF FACT OF THE TRIAL COURT, IT REVERSED AND SET ASIDE THE DECISION OF THE TRIAL COURT UPHOLDING THE TITLE OF SAN LORENZO AS A BUYER AND FIRST POSSESSOR IN GOOD FAITH.15SLDC contended that the appellate court erred in concluding that it had prior notice of Babasanta's claim over the property merely on the basis of its having advanced the amount of two hundred thousand pesos (P200,000.00) to Pacita Lu upon the latter's representation that she needed the money to pay her obligation to Babasanta. It argued that it had no reason to suspect that Pacita was not telling the truth that the money would be used to pay her indebtedness to Babasanta. At any rate, SLDC averred that the amount of two hundred thousand pesos (P200,000.00) which it advanced to Pacita Lu would be deducted from the balance of the purchase price still due from it and should not be construed as notice of the prior sale of the land to Babasanta. It added that at no instance did Pacita Lu inform it that the lands had been previously sold to Babasanta.Moreover, SLDC stressed that after the execution of the sale in its favor it immediately took possession of the property and asserted its rights as new owner as opposed to Babasanta who has never exercised acts of ownership. Since the titles bore no adverse claim, encumbrance, or lien at the time it was sold to it, SLDC argued that it had every reason to rely on the correctness of the certificate of title and it was not obliged to go beyond the certificate to determine the condition of the property. Invoking the presumption of good faith, it added that the burden rests on Babasanta to prove that it was aware of the prior sale to him but the latter failed to do so. SLDC pointed out that the notice oflis pendenswas annotated only on 2 June 1989 long after the sale of the property to it was consummated on 3 May 1989.Meanwhile, in anUrgent Ex-Parte Manifestationdated 27 August 1999, the Spouses Lu informed the Court that due to financial constraints they have no more interest to pursue their rights in the instant case and submit themselves to the decision of the Court of Appeals.16On the other hand, respondent Babasanta argued that SLDC could not have acquired ownership of the property because it failed to comply with the requirement of registration of the sale in good faith. He emphasized that at the time SLDC registered the sale in its favor on 30 June 1990, there was already a notice oflis pendensannotated on the titles of the property made as early as 2 June 1989. Hence, petitioner's registration of the sale did not confer upon it any right. Babasanta further asserted that petitioner's bad faith in the acquisition of the property is evident from the fact that it failed to make necessary inquiry regarding the purpose of the issuance of the two hundred thousand pesos (P200,000.00) manager's check in his favor.HTCISEThe core issue presented for resolution in the instant petition is who between SLDC and Babasanta has a better right over the two parcels of land subject of the instant case in view of the successive transactions executed by the Spouses Lu.To prove the perfection of the contract of sale in his favor, Babasanta presented a document signed by Pacita Lu acknowledging receipt of the sum of fifty thousand pesos (P50,000.00) as partial payment for 3.6 hectares of farm lot situated at Barangay Pulong, Sta. Cruz, Sta. Rosa, Laguna.17While the receipt signed by Pacita did not mention the price for which the property was being sold, this deficiency was supplied by Pacita Lu's letter dated 29 May 198918wherein she admitted that she agreed to sell the 3.6 hectares of land to Babasanta for fifteen pesos (P15.00) per square meter.An analysis of the facts obtaining in this case, as well as the evidence presented by the parties, irresistibly leads to the conclusion that the agreement between Babasanta and the Spouses Lu is a contract to sell and not a contract of sale.Contracts, in general, are perfected by mere consent,19which is manifested by the meeting of the offer and the acceptance upon the thing which are to constitute the contract.The offer must be certain and the acceptance absolute.20Moreover, contracts shall be obligatory in whatever form they may have been entered into, provided all the essential requisites for their validity are present.21The receipt signed by Pacita Lu merely states that she accepted the sum of fifty thousand pesos (P50,000.00) from Babasanta as partial payment of 3.6 hectares of farm lot situated in Sta. Rosa, Laguna. While there is no stipulation that the seller reserves the ownership of the property until full payment of the price which is a distinguishing feature of a contract to sell, the subsequent acts of the parties convince us that the Spouses Lu never intended to transfer ownership to Babasanta except upon full payment of the purchase price.Babasanta's letter dated 22 May 1989 was quite telling. He stated therein that despite his repeated requests for the execution of the final deed of sale in his favor so that he could effect full payment of the price, Pacita Lu allegedly refused to do so. In effect, Babasanta himself recognized that ownership of the property would not be transferred to him until such time as he shall have effected full payment of the price. Moreover, had the sellers intended to transfer title, they could have easily executed the document of sale in its required form simultaneously with their acceptance of the partial payment, but they did not. Doubtlessly, the receipt signed by Pacita Lu should legally be considered as a perfected contract to sell.The distinction between a contract to sell and a contract of sale is quite germane. In a contract of sale, title passes to the vendee upon the delivery of the thing sold; whereas in a contract to sell, by agreement the ownership is reserved in the vendor and is not to pass until the full payment of the price.22In a contract of sale, the vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded; whereas in a contract to sell, title is retained by the vendor until the full payment of the price, such payment being a positive suspensive condition and failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective.23The perfected contract to sell imposed upon Babasanta the obligation to pay the balance of the purchase price. There being an obligation to pay the price, Babasanta should have made the proper tender of payment and consignation of the price in court as required by law. Mere sending of a letter by the vendee expressing the intention to pay without the accompanying payment is not considered a valid tender of payment.24Consignation of the amounts due in court is essential in order to extinguish Babasanta's obligation to pay the balance of the purchase price. Glaringly absent from the records is any indication that Babasanta even attempted to make the proper consignation of the amounts due, thus, the obligation on the part of the sellers to convey title never acquired obligatory force.On the assumption that the transaction between the parties is a contract of sale and not a contract to sell, Babasanta's claim of ownership should nevertheless fail.Sale, being a consensual contract, is perfected by mere consent25and from that moment, the parties may reciprocally demand performance.26The essential elements of a contract of sale, to wit: (1) consent or meeting of the minds, that is, to transfer ownership in exchange for the price; (2) object certain which is the subject matter of the contract; (3) cause of the obligation which is established.27The perfection of a contract of sale should not, however, be confused with its consummation. In relation to the acquisition and transfer of ownership, it should be noted that sale is not a mode, but merely a title. A mode is the legal means by which dominion or ownership is created, transferred or destroyed, but title is only the legal basis by which to affect dominion or ownership.28UnderArticle 712 of the Civil Code, "ownership and other real rights over property are acquired and transmitted by law, by donation, by testate and intestate succession, and in consequence of certain contracts, by tradition." Contracts only constitute titles or rights to the transfer or acquisition of ownership, while delivery or tradition is the mode of accomplishing the same.29Therefore, sale by itself does not transfer or affect ownership; the most that sale does is to create the obligation to transfer ownership. It is tradition or delivery, as a consequence of sale, that actually transfers ownership.aHSCcEExplicitly,the law provides that the ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in Article 1497 to 1501.30The word "delivered" should not be taken restrictively to mean transfer of actual physical possession of the property. The law recognizes two principal modes of delivery, to wit: (1) actual delivery; and (2) legal or constructive delivery.Actual delivery consists in placing the thing sold in the control and possession of the vendee.31Legal or constructive delivery, on the other hand, may be had through any of the following ways: the execution of a public instrument evidencing the sale;32symbolical tradition such as the delivery of the keys of the place where the movable sold is being kept;33traditio longa manuor by mere consent or agreement if the movable sold cannot yet be transferred to the possession of the buyer at the time of the sale;34traditio brevi manuif the buyer already had possession of the object even before the sale;35andtraditio constitutum possessorium, where the seller remains in possession of the property in a different capacity.36Following the above disquisition, respondent Babasanta did not acquire ownership by the mere execution of the receipt by Pacita Lu acknowledging receipt of partial payment for the property. For one, the agreement between Babasanta and the Spouses Lu, though valid, was not embodied in a public instrument. Hence, no constructive delivery of the lands could have been effected. For another, Babasanta had not taken possession of the property at any time after the perfection of the sale in his favor or exercised acts of dominion over it despite his assertions that he was the rightful owner of the lands. Simply stated, there was no delivery to Babasanta, whether actual or constructive, which is essential to transfer ownership of the property. Thus, even on the assumption that the perfected contract between the parties was a sale, ownership could not have passed to Babasanta in the absence of delivery, since in a contract of sale ownership is transferred to the vendee only upon the delivery of the thing sold.37However, it must be stressed that the juridical relationship between the parties in a double sale is primarily governed by Article 1544 which lays down the rules of preference between the two purchasers of the same property. It provides:Art. 1544.If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property.Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property.Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith.The principle ofprimus tempore, potior jure(first in time, stronger in right) gains greater significance in case of double sale of immovable property. When the thing sold twice is an immovable, the one who acquires it and first records it in the Registry of Property, both made in good faith, shall be deemed the owner.38Verily, the act of registration must be coupled with good faith that is, the registrant must have no knowledge of the defect or lack of title of his vendor or must not have been aware of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor.39Admittedly, SLDC registered the sale with the Registry of Deeds after it had acquired knowledge of Babasanta's claim. Babasanta, however, strongly argues that the registration of the sale by SLDC was not sufficient to confer upon the latter any title to the property since the registration was attended by bad faith. Specifically, he points out that at the time SLDC registered the sale on 30 June 1990, there was already a notice oflis pendenson the file with the Register of Deeds, the same having been filed one year before on 2 June 1989.ACTIcSDid the registration of the sale after the annotation of the notice oflis pendensobliterate the effects of delivery and possession in good faith which admittedly had occurred prior to SLDC's knowledge of the transaction in favor of Babasanta?We do not hold so.It must be stressed that as early as 11 February 1989, the Spouses Lu executed theOption to Buyin favor of SLDC upon receiving P316,160.00 as option money from SLDC. After SLDC had paid more than one half of the agreed purchase price of P1,264,640.00, the Spouses Lu subsequently executed on 3 May 1989 aDeed of Absolute Salein favor or SLDC. At the time both deeds were executed, SLDC had no knowledge of the prior transaction of the Spouses Lu with Babasanta. Simply stated, from the time of execution of the first deed up to the moment of transfer and delivery of possession of the lands to SLDC, it had acted in good faith and the subsequent annotation oflis pendenshas no effect at all on the consummated sale between SLDC and the Spouses Lu.A purchaser in good faith is one who buys property of anotherwithoutnotice that some other person has a right to, or interest in, such property and pays a full and fair price for the same at the time of such purchase, orbefore he has noticeof the claim or interest of some other person in the property.40Following the foregoing definition, we rule that SLDC qualifies as a buyer in good faith since there is no evidence extant in the records that it had knowledge of the prior transaction in favor of Babasanta. At the time of the sale of the property to SLDC, the vendors were still the registered owners of the property and were in fact in possession of the lands. Time and again, this Court has ruled that a person dealing with the owner of registered land is not bound to go beyond the certificate of title as he is charged with notice of burdens on the property which are noted on the face of the register or on the certificate of title.41In assailing knowledge of the transaction between him and the Spouses Lu, Babasanta apparently relies on the principle of constructive notice incorporated inSection 52 of the Property Registration Decree (P.D. No. 1529) which reads, thus:Sec. 52.Constructive notice upon registration. Every conveyance, mortgage, lease, lien, attachment, order, judgment, instrument or entry affecting registered land shall, if registered, filed, or entered in the office of the Register of Deeds for the province or city where the land to which it relates lies, be constructive notice to all persons from the time of such registering, filing, or entering.However, the constructive notice operates as such by the express wording of Section 52 from the time of the registration of the notice oflis pendenswhich in this case was effected only on 2 June 1989, at which time the sale in favor of SLDC had long been consummated insofar as the obligation of the Spouses Lu to transfer ownership over the property to SLDC is concerned.More fundamentally, given the superiority of the right of SLDC to the claim of Babasanta the annotation of the notice oflis pendenscannot help Babasanta's position a bit and it is irrelevant to the good or bad faith characterization of SLDC as a purchaser. A notice oflis pendens, as the Court held inNatao v. Esteban,42serves as a warning to a prospective purchaser or incumbrancer that the particular property is in litigation; and that he should keep his hands off the same, unless he intends to gamble on the results of the litigation." Precisely, in this case SLDC has intervened in the pending litigation to protect its rights. Obviously, SLDC's faith in the merit of its cause has been vindicated with the Court's present decision which is the ultimate denouement on the controversy.The Court of Appeals has made capital43of SLDC's averment in itsComplaint-in-Intervention44that at the instance of Pacita Lu it issued a check for P200,000.00 payable to Babasanta and the confirmatory testimony of Pacita Lu herself on cross-examination.45However, there is nothing in the said pleading and the testimony which explicitly relates the amount to the transaction between the Spouses Lu and Babasanta for what they attest to is that the amount was supposed to pay off the advances made by Babasanta to Pacita Lu. In any event, the incident took place after the Spouses Lu had already executed theDeed of Absolute Sale with Mortgagein favor of SLDC and therefore, as previously explained, it has no effect on the legal position of SLDC.EHSITcAssumingex gratia argumentithat SLDC's registration of the sale had been tainted by the prior notice oflis pendensand assuming further for the same nonce that this is a case of double sale, still Babasanta's claim could not prevail over that of SLDC's. InAbarquez v. Court of Appeals,46this Court had the occasion to rule that if a vendee in a double sale registers the sale after he has acquired knowledge of a previous sale, the registration constitutes a registration in bad faith and does not confer upon him any right. If the registration is done in bad faith, it is as if there is no registration at all, and the buyer who has taken possession first of the property in good faith shall be preferred.InAbarquez, the first sale to the spouses Israel was notarized and registered only after the second vendee, Abarquez, registered their deed of sale with the Registry of Deeds, but the Israels were first in possession. This Court awarded the property to the Israels because registration of the property by Abarquez lacked the element of good faith. While the facts in the instant case substantially differ from that inAbarquez, we would not hesitate to rule in favor of SLDC on the basis of its prior possession of the property in good faith. Be it noted that delivery of the property to SLDC was immediately effected after the execution of the deed in its favor, at which time SLDC had no knowledge at all of the prior transaction by the Spouses Lu in favor of Babasanta.The law speaks not only of one criterion. The first criterion is priority of entry in the registry of property; there being no priority of such entry, the second is priority of possession; and, in the absence of the two priorities, the third priority is of the date of title, with good faith as the common critical element. Since SLDC acquired possession of the property in good faith in contrast to Babasanta, who neither registered nor possessed the property at any time, SLDC's right is definitely superior to that of Babasanta's.At any rate, the above discussion on the rules on double sale would be purely academic for as earlier stated in this decision, the contract between Babasanta and the Spouses Lu is not a contract of sale but merely a contract to sell. InDichoso v. Roxas,47we had the occasion to rule that Article 1544 does not apply to a case where there was a sale to one party of the land itself while the other contract was a mere promise to sell the land or at most an actual assignment of the right to repurchase the same land. Accordingly, there was no double sale of the same land in that case.WHEREFORE, the instant petition is hereby GRANTED. The decision of the Court of Appeals appealed from is REVERSED and SET ASIDE and the decision of the Regional Trial Court, Branch 31, of San Pedro, Laguna is REINSTATED. No costs.SO ORDERED.Puno, Austria-Martinez, Callejo, Sr.andChico-Nazario, JJ.,concur.THIRD DIVISION[G.R. No.77365. April 7, 1992.]RITA CALEON,petitioner,vs.AGUS DEVELOPMENT CORPORATION and COURT OF APPEALS,respondents.Luis A. Cuevasfor petitioner.Pablito M. Rojasfor private respondent.SYLLABUS1.CIVIL LAW; LEASE; LEASE OF BUILDING INCLUDES LEASE OF LOT AND RENTALS OF BUILDING INCLUDES THOSE OF LOT. The issue has already been laid to rest in the case of Duellome v. Gotico (7 SCRA 841 [1963]) where this Court ruled that the lease of a building naturally includes the lease of the lot, and the rentals of the building includes those of the lot. Thus: ". . . the lease of a building would naturally include the lease of the lot and that the rentals of the building include the rentals of the lot. . . . "Furthermore, under our Civil Code, the occupancy of a building or house not only suggests but implies the tenancy or possession in fact of the land on which they are constructed. This is not a new pronouncement. An extensive elaboration of this rule was discussed by this Court in the case of Baquiran, et al.v. Baquiran et al., 53 O.G. p. 1130. '. . . the Court of Appeals should have found the herein appellees lessees of the house, and for all legal purposes, of the lot on which it was built as well'."2.ID.; ID.; BATAS PAMBANSA BLG. 25; GROUNDS FOR JUDICIAL EJECTMENT. Section 5 of Batas Pambansa Blg. 25 enumerates the grounds for judicial ejectment, among which is the subleasing of residential units without the written consent of the owner/lessor, to wit: "SEC. 5. Grounds for judicial ejectment. Ejectment shall be allowed on the following grounds: "a) Subleasing or assignment of lease of residential units in whole or in part, without the written consent of the owner/lessor: Provided that in the case of subleases or assignments executed prior to the approval of this Act, the sublessor/assignor shall have sixty days from the effectivity of this Act within which to obtain the written approval of the owner/lessor or terminate the sublease or assignment."3.ID.; ID.; ID.; RESIDENTIAL UNIT, DEFINED. Section 2(b) of Batas Pambansa Blg. 25 defines the term residential unit as follows: "SEC. 2.Definition of Terms Unless otherwise indicated wherever in this Act, the following shall have the following meaning: "b.A residential unit refers to an apartment, house and/or land on which another's dwelling is located used for residential purposes and shall include not only buildings, parts or units thereof used solely as dwelling places, except motels, motel rooms, hotels, hotel rooms, boarding houses, dormitories, rooms and bedspaces for rent, but also those used for home industries, retail stores, or other business purposes if the owner thereof and his family actually live therein and use it principally for dwelling purposes: . . .."4.CONSTITUTIONAL LAW; CONSTITUTIONALITY OF STATUTES PRESUMED; REQUISITES FOR SUPREME COURT DECISION ON QUESTION OF CONSTITUTIONALITY. It is well settled that all presumptions are indulged in favor of constitutionality; one who attacks a statute, alleging unconstitutionality must prove its invalidity beyond a reasonable doubt (Victorianov. Elizalde Rope Worker's Union, 59 SCRA 54 [1974]). In fact, this Court does not decide questions of a constitutional nature unless that question is properly raised and presented in appropriate cases and is necessary to a determination of the case, i.e., the issue of constitutionality must be the verylis motapresented (Tropical Homes, Inc.v. National Housing Authority, 152 SCRA 540 [1987]).5.ID.; POLICE POWER; GUARANTY OF NON-IMPAIRMENT OF OBLIGATIONS OF CONTRACT LIMITED BY POLICE POWER. It is now beyond question that the constitutional guaranty of non-impairment of obligations of contract is limited by and subject to the exercise of police power of the State in the interest of public health, safety, morals and general welfare (Kabiling, et al.v. National Housing Authority, 156 SCRA 623 [1987]). In spite of the constitutional prohibition, the State continues to possess authority to safeguard the vital interests of its people. Legislation appropriate to safeguarding said interest may modify or abrogate contracts already in effect (Victorianov. Elizalde Rope Worker's Union, et al.,supra). In fact, every contract affecting public interest suffers a congenital infirmity in that it contains an implied reservation of the police power as a postulate of the existing legal order. This power can be activated at anytime to change the provisions of the contract, or even abrogate it entirely, for the promotion or protection of the general welfare. Such an act will not militate against the impairment clause, which is subject to and limited by the paramount police power (Villanuevav. Castaeda, 154 SCRA 142 [1987]).6.ID.; ID.; ID.; BATAS PAMBANSA BLG. 25 APPLICABLE TO LEASES ENTERED INTO PRIOR TO ITS EFFECTIVITY. Batas Pambansa Blg. 25, "An Act Regulating Rentals of Dwelling Units or of Land On Which Another's Dwelling is Located and For Other Purposes" shows that the subject matter of the law is the regulation of rentals and is intended only for dwelling units with specified monthly rentals constructed before the law became effective (Baensv. Court of Appeals, 125 SCRA 634 [1983]). Batas Pambansa Blg. 25 is derived from P.D. No. 20 which has been declared by this Court as a police power legislation, applicable to leases entered into prior to July 14, 1971 (effectivity date of RA 6539), so that the applicability thereof to existing contracts cannot be denied (Gutierrezv. Cantada, 90 SCRA 1 [1979]).7.ID.; SOCIAL JUSTICE; OBJECTIVE OF BATAS PAMBANSA BLG. 25 NOT SUBJECT TO EXPLOITATION BY LESSEES. The objective of Batas Pambansa Blg. 25 is to remedy the plight of lessees, but such objective is not subject to exploitation by the lessees for whose benefit the law was enacted. Thus, the prohibition provided for in the law against the sublease of the premises without the consent of the owner. As enunciated by this Court, it must be remembered that social justice cannot be invoked to trample on the rights of property owners, who under our Constitution and laws are also entitled to protection. The social justice consecrated in our Constitution was not intended to take away rights from a person and give them to another who is not entitled thereto (Salongav. Farrales, 105 SCRA 360 [1981]).D E C I S I O NBIDIN,Jp:This is a petition for review on certiorari seeking the reversal of the January 28, 1987 decision of the Court of Appeals in CA-G.R. SP No. 10990 entitled "Rita Caleon v. Hon. Samilo Barlongay, et al." dismissing the petition for review of the decision of the Regional Trial Court of Manila, Branch 34, which affirmed the decision of the Metropolitan Trial Court of Manila, Branch XII, ejecting the petitioner.prLLThe undisputed facts of the case are as follows:Private respondent Agus Development Corporation is the owner of a parcel of land denominated as Lot 39, Block 28, situated at 1611-1619 Lealtad, Sampaloc, Manila, which it leased to petitioner Rita Caleon for a monthly rental of P180.00. Petitioner constructed on the lot leased a 4-door apartment building.Without the consent of the private respondent, the petitioner sub-leased two of the four doors of the apartment to Rolando Guevarra and Felicisima Estrada for a monthly rental of P350.00 each. Upon learning of the sub-lease, private respondent through counsel demanded in writing that the petitioner vacate the leased premises (Rollo, Annex "A", p. 20).prcdFor failure of petitioner to comply with the demand, private respondent filed a complaint for ejectment (Civil Case No. 048908) with the Metropolitan Trial Court of Manila, Branch XII against the petitioner citing as ground therefor the provisions of Batas Pambansa Blg. 25, Section 5, which is the unauthorized sub-leasing of part of the leased premises to third persons without securing the consent of the lessor within the required sixty (60)-day period from the promulgation of the new law (B.P. 25). (Rollo, Petition, p. 8).After trial, the courta quorendered its decision ordering petitioner and all persons claiming possession under her (a) to vacate the premises alluded to in the complaint; (b) to remove whatever improvement she introduced on the property; (c) to pay private respondent the amount of P2,000.00 as attorney's fees; and (d) to pay the costs (Rollo, Annex "A", p. 19).Petitioner appealed the decision to the Regional Trial Court and on November 24, 1980, presiding judge of the RTC, the Hon. Samilo Barlongay, affirmedin totothe decision of the Metropolitan Trial Court (Rollo, Annex "A", p. 19).The decision of the Regional Trial Court was appealed to the Court of Appeals for review. The respondent Court of Appeals rendered its decision dated January 28, 1987, the dispositive portion of which reads as follows:"PREMISES CONSIDERED, the petition not being prima facie meritorious, the same is outright dismissed.""SO ORDERED." (Rollo, Annex "A", p. 21)Hence, the petition for review on certiorari.The principal issue in this case is whether or not the lease of an apartment includes a sublease of the lot on which it is constructed, as would constitute a ground for ejectment under Batas Pambansa Blg. 25.Petitioner is of the view that Batas Pambansa Blg. 25 is not applicable because what she leased was her own apartment house which does not include a sublease of the lot she leased from private respondent on which the apartment is constructed.Petitioner's contention is untenable.The issue has already been laid to rest in the case of Duellome v. Gotico (7 SCRA 841 [1963]) where this Court ruled that the lease of a building naturally includes the lease of the lot, and the rentals of the building includes those of the lot. Thus:". . . the lease of a building would naturally include the lease of the lot and that the rentals of the building include the rentals of the lot.xxx xxx xxx"Furthermore, under our Civil Code, the occupancy of a building or house not only suggests but implies the tenancy or possession in fact of the land on which they are constructed. This is not a new pronouncement. An extensive elaboration of this rule was discussed by this Court in the case of Baquiran, et al. v. Baquiran et al., 53 O.G. p. 1130.'. . . the Court of Appeals should have found the herein appellees lessees of the house, and for all legal purposes, of the lot on which it was built as well'."But petitioner insists that the ruling in the aforecited case is not applicable to the case at bar because the former is a damage suit while the latter is an ejectment case.Be that as it may, this Court has categorically answered in the affirmative, the principal question, common to both cases and on which rests the resolution of the issues involved therein. Under the above ruling it is beyond dispute that petitioner in leasing her apartment has also subleased the lot on which it is constructed which lot belongs to private respondent. Consequently, she has violated the provisions of Section 5, Batas Pambansa Blg. 25 which is a ground for ejectment.Section 5 of Batas Pambansa Blg. 25 enumerates the grounds for judicial ejectment, among which is the subleasing of residential units without the written consent of the owner/lessor, to wit:"SEC. 5.Grounds for judicial ejectment. Ejectment shall be allowed on the following grounds:"a)Subleasing or assignment of lease of residential units in whole or in part, without the written consent of the owner/lessor: Provided that in the case of subleases or assignments executed prior to the approval of this Act, the sublessor/assignor shall have sixty days from the effectivity of this Act within which to obtain the written approval of the owner/lessor or terminate the sublease or assignment."Section 2(b) of Batas Pambansa Blg. 25 defines the term residential unit as follows:"SEC. 2.Definition of Terms Unless otherwise indicated wherever in this Act, the following shall have the following meaning:xxx xxx xxx"b.A residential unit refers to an apartment, house and/or land on which another's dwelling is located used for residential purposes and shall include not only buildings, parts or units thereof used solely as dwelling places, except motels, motel rooms, hotels, hotel rooms, boarding houses, dormitories, rooms and bedspaces for rent, but also those used for home industries, retail stores, or other business purposes if the owner thereof and his family actually live therein and use it principally for dwelling purposes: . . .."Petitioner argued further that Batas Pambansa Blg. 25 cannot be applied in this case because there is a perfected contract of lease without any express prohibition on subleasing which had been in effect between petitioner and private respondent long before the enactment of Batas Pambansa Blg. 25. Therefore, the application of said law to the case at bar is unconstitutional as an impairment of the obligation of contracts.LLphilIt is well settled that all presumptions are indulged in favor of constitutionality; one who attacks a statute, alleging unconstitutionality must prove its invalidity beyond a reasonable doubt (Victoriano v. Elizalde Rope Worker's Union, 59 SCRA 54 [1974]). In fact, this Court does not decide questions of a constitutional nature unless that question is properly raised and presented in appropriate cases and is necessary to a determination of the case, i.e., the issue of constitutionality must be the verylis motapresented (Tropical Homes, Inc. v. National Housing Authority, 152 SCRA 540 [1987]).In any event, it is now beyond question that the constitutional guaranty of non-impairment of obligations of contract is limited by and subject to the exercise of police power of the State in the interest of public health, safety, morals and general welfare (Kabiling, et al. v. National Housing Authority, 156 SCRA 623 [1987]). In spite of the constitutional prohibition, the State continues to possess authority to safeguard the vital interests of its people. Legislation appropriate to safeguarding said interest may modify or abrogate contracts already in effect (Victoriano v. Elizalde Rope Worker's Union, et al.,supra). In fact, every contract affecting public interest suffers a congenital infirmity in that it contains an implied reservation of the police power as a postulate of the existing legal order. This power can be activated at anytime to change the provisions of the contract, or even abrogate it entirely, for the promotion or protection of the general welfare. Such an act will not militate against the impairment clause, which is subject to and limited by the paramount police power (Villanueva v. Castaneda, 154 SCRA 142 [1987]).Batas Pambansa Blg. 25, "An Act Regulating Rentals of Dwelling Units or of Land On Which Another's Dwelling is Located and For Other Purposes" shows that the subject matter of the law is the regulation of rentals and is intended only for dwelling units with specified monthly rentals constructed before the law became effective (Baens v. Court of Appeals, 125 SCRA 634 [1983]).Batas Pambansa Blg. 25 is derived fromP.D. No. 20 which has been declared by this Court as a police power legislation, applicable to leases entered into prior to July 14, 1971 (effectivity date ofRA 6539), so that the applicability thereof to existing contracts cannot be denied (Gutierrez v. Cantada, 90 SCRA 1 [1979]).Finally, petitioner invokes, among others, the promotion of social justice policy of the New Constitution. Like P.D. No. 20, the objective of Batas Pambansa Blg. 25 is to remedy the plight of lessees, but such objective is not subject to exploitation by the lessees for whose benefit the law was enacted. Thus, the prohibition provided for in the law against the sublease of the premises without the consent of the owner. As enunciated by this Court, it must be remembered that social justice cannot be invoked to trample on the rights of property owners, who under our Constitution and laws are also entitled to protection. The social justice consecrated in our Constitution was not intended to take away rights from a person and give them to another who is not entitled thereto (Salonga v. Farrales, 105 SCRA 360 [1981]).WHEREFORE, the Petition is Denied for lack of merit and the assailed decision of the Court of Appeals is Affirmed.SO ORDERED.Gutierrez, Jr., Davide, Jr.andRomero, JJ.,concur.Feliciano, J.,is on leave.FIRST DIVISION[G.R. No.117190. January 2, 1997.]JACINTO TANGUILIG doing business under the name and style J.M.T. ENGINEERING AND GENERAL MERCHANDISING,petitioner,vs. COURT OF APPEALS and VICENTE HERCE JR.,respondents.Ricardo C.Valmontefor petitioner.Restituto M.Mendozafor private respondent.SYLLABUS1.CIVIL LAW; CONTRACT; INTERPRETATION; INTENTION OF THE PARTIES SHALL BE ACCORDED PRIMORDIAL CONSIDERATION. It is a cardinal rule in the interpretation of contracts that the intention of the parties shall be accorded primordial consideration and, in case of doubt, their contemporaneous and subsequent acts shall be principally considered.prLL2.OBLIGATION; NATURE AND EFFECTS; EXEMPTION FROM LIABILITY BY REASON OF FORTUITOUS EVENTS; REQUISITES. This Court has consistently held that in order for a party to claim exemption from liability by reason of fortuitous event under Art. 1174 of the Civil Code the event should be the sole and proximate cause of the loss or destruction of the object of the contract. InNakpil vs.Court of Appeals, Nos. L-47851 and L- 47896, 3 October 1986, 144 SCRA 596, four (4) requisites must concur: (a) the cause of the breach of the obligation must be independent of the will of the debtor; (b) the event must be either unforseeable or unavoidable; (c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and, (d) the debtor must be free from any participation in or aggravation of the injury to the creditor.3.ID.; ID.; ID.; APPLICATION OF ART. 1167 OF THE CIVIL CODE; WHEN A PERSON OBLIGED TO DO SOMETHING FAILS TO DO IT, THE SAME SHALL BE EXECUTED AT HIS COST. In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. (Art. 1169, last par., New Civil Code) When the windmill failed to function properly it became incumbent upon petitioner to institute the proper repairs in accordance with the guaranty stated in the contract. Thus, respondent cannot be said to have incurred in delay; instead, it is petitioner who should bear the expenses for the reconstruction of the windmill. Article 1167 of the Civil Code is explicit on this point that if a person obliged to do something fails to do it, the same shall be executed at his cost.llcdD E C I S I O NBELLOSILLO,Jp:This case involves the proper interpretation of the contract entered into between the parties.Sometime in April 1987 petitioner Jacinto M. Tanguilig doing business under the name and styleJ.M.T. Engineering and General Merchandisingproposed to respondent Vicente Herce Jr. to construct a windmill system for him. After some negotiations they agreed on the construction of the windmill for a consideration of P60,000.00 with a one-year guaranty from the date of completion and acceptance by respondent Herce Jr. of the project. Pursuant to the agreement respondent paid petitioner a down payment of P30,000.00 and an installment payment of P15,000.00, leaving a balance of P15,000.00.On 14 March 1988, due to the refusal and failure of respondent to pay the balance, petitioner filed a complaint to collect the amount. In hisAnswerbefore the trial court respondent denied the claim saying that he had already paid this amount to the San Pedro General Merchandising Inc. (SPGMI) which constructed the deep well to which the windmill system was to be connected. According to respondent, since the deep well formed part of the system the payment he tendered to SPGMI should be credited to his account by petitioner. Moreover, assuming that he owed petitioner a balance of P15,000.00, this should be offset by the defects in the windmill system which caused the structure to collapse after a strong wind hit their place.1Petitioner denied that the construction of a deep well was included in the agreement to build the windmill system, for the contract price of P60,000.00 was solely for the windmill assembly and its installation, exclusive of other incidental materials needed for the project. He also disowned any obligation to repair or reconstruct the system and insisted that he delivered it in good and working condition to respondent who accepted the same without protest. Besides, its collapse was attributable to a typhoon, aforce majeure, which relieved him of any liability.In finding for plaintiff, the trial court held that the construction of the deep well was not part of the windmill project as evidenced clearly by the letter proposals submitted by petitioner to respondent.2It noted that "[i]f the intention of the parties is to include the construction of the deep well in the project, the same should be stated in the proposals. In the absence of such an agreement, it could be safely concluded that the construction of the deep well is not a part of the project undertaken by the plaintiff."3With respect to the repair of the windmill, the trial court found that "there is no clear and convincing proof that the windmill system fell down due to the defect of the construction. "4The Court of Appeals reversed the trial court. It ruled that the construction of the deep well was included in the agreement of the parties because the term "deep well" was mentioned in both proposals. It also gave credence to the testimony of respondent's witness Guillermo Pili, the proprietor of SPGMI which installed the deep well, that petitioner Tanguilig told him that the cost of constructing the deep well would be deducted from the contract price of P60,000.00. Upon these premises the appellate court concluded that respondent's payment of P15,000.00 to SPGMI should be applied to his remaining balance with petitioner thus effectively extinguishing his contractual obligation. However, it rejected petitioner's claim offorce majeureand ordered the latter to reconstruct the windmill in accordance with the stipulated one-year guaranty.His motion for reconsideration having been denied by the Court of Appeals, petitioner now seeks relief from this Court. He raises two issues:firstly, whether the agreement to construct the windmill system included the installation of a deep well and,secondly, whether petitioner is under obligation to reconstruct the windmill after it collapsed.We reverse the appellate court on the first issue but sustain it on the second.The preponderance of evidence supports the finding of the trial court that the installation of a deep well was not included in the proposals of petitioner to construct a windmill system for respondent. There were in fact two (2) proposals: one dated 19 May 1987 which pegged the contract price at P87,000.00 (Exh. "1"). This was rejected by respondent. The other was submitted three days later, i.e., on 22 May 1987 which contained more specifications but proposed a lower contract price of P60,000.00 (Exh. "A"). The latter proposal was accepted by respondent and the construction immediately followed. The pertinent portions of the first letter-proposal (Exh. "1") are reproduced hereunder In connection with your Windmill System and Installation, we would like to quote to you as follows:One (1) Set Windmill suitable for 2 inches diameter deepwell, 2 HP, capacity, 14 feet in diameter, with 20 pieces blade, Tower 40 feet high, including mechanism which is not advisable to operate during extra-intensity wind. Excluding cylinder pump.UNIT CONTRACT PRICE P87,000.00The second letter-proposal (Exh. "A") provides as follows:In connection with your Windmill system, Supply of Labor Materials and Installation, operated water pump, we would like to quote to you as follows One (1) set Windmill assembly for 2 inches or 3 inches deep-well pump, 6 Stroke, 14 feet diameter, 1-lot blade materials, 40 feet Tower complete with standard appurtenances up to Cylinder pump, shafting U.S. adjustable International Metal.One (1) lot Angle bar, G. I. pipe, Reducer Coupling, Elbow Gate valve, cross Tee coupling.One (1) lot Float valve.One (1) lot Concreting materials foundation.F. O. B. LagunaContract Price P60,000.00Notably, nowhere in either proposal is the installation of a deep well mentioned, even remotely. Neither is there an itemization or description of the materials to be used in constructing the deep well. There is absolutely no mention in the two (2) documents that a deep well pump is a component of the proposed windmill system. The contract prices fixed in both proposals cover only the features specifically described therein and no other. While the words "deep well" and "deep well pump" are mentioned in both, these do not indicate that a deep well is part of the windmill system. They merely describe the type of deep well pump for which the proposed windmill would be suitable. As correctly pointed out by petitioner, the words "deep well" preceded by the prepositions"for" and "suitable for" were meant only to convey the idea that the proposed windmill would be appropriate for a deep well pump with a diameter of 2 to 3 inches. For if the real intent of petitioner was to include a deep well in the agreement to construct a windmill, he would have used instead the conjunctions "and" or "with." Since the terms of the instruments are clear and leave no doubt as to their meaning they should not be disturbed.aisadcMoreover, it is a cardinal rule in the interpretation of contracts that the intention of the parties shall be accorded primordial consideration5and, in case of doubt, their contemporaneous and subsequent acts shall be principally considered.6An examination of such contemporaneous and subsequent acts of respondent as well as the attendant circumstances does not persuade us to uphold him.Respondent insists that petitioner verbally agreed that the contract price of P60,000.00 covered the installation of a deep well pump. He contends that since petitioner did not have the capacity to install the pump the latter agreed to have a third party do the work the cost of which was to be deducted from the contract price. To prove his point, he presented Guillermo Pili of SPGMI who declared that petitioner Tanguilig approached him with a letter from respondent Herce Jr. asking him to build a deep well pump as "part of the price/contract which Engineer (Herce) had with Mr. Tanguilig."7We are disinclined to accept the version of respondent. The claim of Pili that Herce Jr. wrote him a letter is unsubstantiated. The alleged letter was never presented in court by private respondent for reasons known only to him. But granting that this written communication existed, it could not have simply contained a request for Pili to install a deep well; it would have also mentioned the party who would pay for the undertaking. It strains credulity that respondent would keep silent on this matter and leave it all to petitioner Tanguilig to verbally convey to Pili that the deep well was part of the windmill construction and that its payment would come from the contract price of P60,000.00.We find it also unusual that Pili would readily consent to build a deep well the payment for which would come supposedly from the windmill contract price on the mere representation of petitioner, whom he had never met before, without a written commitment at least from the former. For if indeed the deep well were part of the windmill project, the contract for its installation would have been strictly a matter between petitioner and Pili himself with the former assuming the obligation to pay the price. That it was respondent Herce Jr. himself who paid for the deep well by handing over to Pili the amount of P15,000.00 clearly indicates that the contract for the deep well was not part of the windmill project but a separate agreement between respondent and Pili. Besides, if the price of P60,000.00 included the deep well, the obligation of respondent was to pay the entire amount to petitioner without prejudice to any action that Guillermo Pili or SPGMI may take, if any, against the latter. Significantly, when asked why he tendered payment directly to Pili and not to petitioner, respondent explained, rather lamely, that he did it "because he has (sic) the money, so (he) just paid the money in his possession.8Can respondent claim that Pili accepted his payment on behalf of petitioner? No. While the law is clear that "payment shall be made to the person in whose favor the obligation has been constituted, or his successor in interest, or any person authorized to receive it, "9it does not appear from the record that Pili and/or SPGMI was so authorized.Respondent cannot claim the benefit of the law "concerning payments made by a third person."10The Civil Code provisions do not apply in the instant case because no creditor-debtor relationship between petitioner and Guillermo Pili and/or SPGMI has been established regarding the construction of the deep well. Specifically, witness Pili did not testify that he entered into a contract with petitioner for the construction of respondent's deep well. If SPGMI was really commissioned by petitioner to construct the deep well, an agreement particularly to this effect should have been entered into.The contemporaneous and subsequent acts of the parties concerned effectively belie respondent's assertions. These circumstances only show that the construction of the well by SPGMI was for the sole account of respondent and that petitioner merely supervised the installation of the well because the windmill was to be connected to it. There is no legal nor factual basis by which this Court can impose upon petitioner an obligation he did not expressly assume nor ratify.The second issue is not a novel one. In a long line of cases11this Court has consistently held that in order for a party to claim exemption from liability by reason of fortuitous event underArt. 1174 of the Civil Code the event should be the sole and proximate cause of the loss or destruction of the object of the contract. InNakpil vs.Court of Appeals,12four (4) requisites must concur: (a) the cause of the breach of the obligation must be independent of the will of the debtor; (b) the event must be either unforeseeable or unavoidable; (c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and, (d) the debtor must be free from any participation in or aggravation of the injury to the creditor.Petitioner failed to show that the collapse of the windmill was due solely to a fortuitous event. Interestingly, the evidence does not disclose that there was actually a typhoon on the day the windmill collapsed. Petitioner merely stated that there was a "strong wind." But a strong wind in this case cannot be fortuitous unforeseeable nor unavoidable. On the contrary, a strong wind should be present in places where windmills are constructed, otherwise the windmills will not turn.The appellate court correctly observed that "given the newly-constructed windmill system, the same would not have collapsed had there been no inherent defect in it which could only be attributable to the appellee."13It emphasized that respondent had in his favor the presumption that "things have happened according to the ordinary course of nature and the ordinary habits of life."14This presumption has not been rebutted by petitioner.Finally, petitioner's argument that private respondent was already in default in the payment of his outstanding balance of P15,000.00 and hence should bear his own loss, is untenable. In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him.15When the windmill failed to function properly it became incumbent upon petitioner to institute the proper repairs in accordance with the guaranty stated in the contract. Thus, respondent cannot be said to have incurred in delay; instead, it is petitioner who should bear the expenses for the reconstruction of the windmill.Article 1167 of the Civil Code is explicit on this point that if a person obliged to do something fails to do it, the same shall be executed at his costWHEREFORE, the appealed decision is MODIFIED. Respondent VICENTE HERCE JR. is directed to pay petitioner JACINTO M. TANGUILIG the balance of P15,000.00 with interest at the legal rate from the date of the filing of the complaint. In return, petitioner is ordered to "reconstruct subject defective windmill system, in accordance with the one-year guaranty"16and to complete the same within three (3) months from the finality of this decision.SO ORDERED.Padilla, Vitug, KapunanandHermosisima, Jr., JJ.,concur.Footnotes1.TSN, 20 December 1988, pp. 10-12.2.Exh. "A" and Exh. "1.3.Rollo, p. 36.4.Id., p. 37.5.Kasilag v.Rodriguez, 69 Phil. 217 (1939).6.Art. 1371, New Civil Code;GSIS v.Court of Appeals, G.R. No. 52478, 30 October 1986, 145 SCRA 311;Serrano v.Court of Appeals, No. L-46357, 9 October 1985, 139 SCRA 179.7.TSN, 13 April 1989, pp. 18-19.8.TSN, 13 April 1989, p. 22.9.Art. 1240, New Civil Code.10.Arts. 1236 and 1237, New Civil Code .11.Nakpil v.Court of Appeals, Nos. L-47851, L-47863, L-47896, 3 October 1986, 144 SCRA 596;National Power Corporation v.Court of Appeals, G.R. Nos. L-47379 and 47481, 16 May 1988, 161 SCRA 334;National Power Corporation v.Court of Appeals, G.R. Nos. 103442-45, 21 May 1993, 222 SCRA 415.12.See Note 11.13.Rollo, p. 44.14.Sec. 3, par. (y), Rule 131, Revised Rules on Evidence.15.Art. 1169, last par., New Civil Code.16.See CA Decision, p. 7;Rollo, p. 27.THIRD DIVISION[G.R. Nos.180631-33. February 22, 2012.]PHILIPPINE CHARTER INSURANCE CORPORATION,petitioner,vs. CENTRAL COLLEGES OF THE PHILIPPINES and DYNAMIC PLANNERS AND CONSTRUCTION CORPORATION,respondents.DECISIONMENDOZA,Jp:This is a petition for review oncertiorariunder Rule 45 of the 1997 Rules of Civil Procedure challenging the June 29, 2007 Decision1and November 19, 2007 Resolution2of the Court of Appeals(CA)in the consolidated cases CA-G.R. SP Nos. 90361, 90383 and 90384.THE FACTSOn May 16, 2000, Central Colleges of the Philippines(CCP), an educational institution, contracted the services of Dynamic Planners and Construction Corporation(DPCC)to be its general contractor for the construction of its five (5)-storey school building at No. 39 Aurora Boulevard, Quezon City, with a total contract price of P248,000,000.00. As embodied in a Contract Agreement,3the construction of the entire building would be done in two phases with each phase valued at P124,000,000.00.To guarantee the fulfillment of the obligation, DPCC posted three (3) bonds, all issued by the Philippine Charter Insurance Corporation(PCIC), namely: (1) Surety Bond No. PCIC-45542, dated June 25, 2003, amounting to P7,031,460.74;4(2) Performance Bond No. PCIC-455415in the amount of P2,929,775.31 which was subsequently increased to P6,199,999.99 through Bond Endorsement No. E-2003/12527;6and (3) Performance Bond No. PCIC-46172 for P692,890.74.7All the bonds were callable on demand and set to expire on October 30, 2003.The Phase 1 of the project was completed without issue. Thereafter, CCP paid DPCC P14,880,000.00 or 12% of the agreed price of P124,000,000.00 with a check dated March 14, 2002 as downpayment for the Phase 2 of the project.The Phase 2 of the project, however, encountered numerous delays. When CCP audited DPCC on July 25, 2003, only 47% of the work to be done was actually finished.Thus, in a letter dated October 29, 2003 addressed to DPCC and PCIC, CCP informed them of the breach in the contract and its plan to claim on the construction bonds. Pertinent portions of the letter are herein quoted:You are both hereby NOTIFIED that the Bonds referred to above for the faithful performance of a Contract, dated 16 May 2000 for the construction of CCP EXTENSION BLDG. (Phase 2) at 39 Aurora Blvd., Quezon City, Metro Manila and the Variation Order No. 2 has been breached by the CONTRACTOR for which reason, the CENTRAL COLLEGES OF THE PHILIPPINES, as owner, hereby gives NOTICE that it will file an action on the said performance and surety bonds.8On November 6, 2003, CCP notified DPCC and PCIC that only 51% of the project was completed, which was way behind the construction schedule, prompting it to declare the occurrence of default against DPCC. It formally requested PCIC to remit the proceeds of the bonds.9DACTSaOn November 14, 2003, DPCC wrote PCIC confirming the finding that Phase 2 was only 51% finished and, at the same time, requesting for the extension of its performance and surety bonds because the supposed revision of the plans would require more days.10In a letter dated November 21, 2003, CCP notified PCIC that because of DPCC's inability to complete the project on time, it decided to terminate its contract with the latter and to continue the construction on its own. The full text of the letter is herein reproduced:We acknowledge the receipt of your letter dated November 14, 2003 and we are in the process of compiling the documents you requested. The said documents will be submitted as soon as possible.Furthermore, we would like to reiterate that your principal, the Dynamic Planners & Construction Corporation has breached the Contract of Agreement dated May 16, 2000 by having completed only an estimated 51% of the construction of the 5-storey CCP Extension Building, Phase 2 and has therefore failed to perform the work within the agreed schedule.In view thereof, as stated in our earlier letter of 6 November 2003, we were compelled to declare the occurrence of a default on the part of your principal, and have terminated their contract. Please remit to us the proceeds of the captioned Bonds within the earliest possible time.The Central Colleges of the Philippines will complete the construction of the 5-storey CCP Extension Building, Phase 2 on its own.11Meanwhile, on December 5, 2003, PCIC informed DPCC that it had approved its request for extension of the bonds.12Eventually, negotiations to continue on with the construction