Republic of the Philippines

SUPREME COURT
Manila
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.
DECISION
TINGA, J.:
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.
In 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, a Complaint for Specific Performance and Damages 1 against his
co-respondents herein, the Spouses Lu. Babasanta alleged that the lands covered by TCT No. T39022 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 their Answer,2 the 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 Babasantas 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
Managers 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 an Amended Complaint dated 17 January 19903 wherein 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 their Opposition4 to the amended complaint contending that it raised new
matters which seriously affect their substantive rights under the original complaint. However, the trial
court in its Order dated 17 January 19905 admitted the amended complaint.
On 19 January 1990, herein petitioner San Lorenzo Development Corporation (SLDC) filed a Motion
for Intervention6 before 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 a Deed of Absolute Sale with Mortgage. 7 It 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 his Opposition to SLDCs motion for intervention, 8 respondent 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 its Order dated 21 March 1990 allowed SLDC to intervene. SLDC filed
its Complaint-in-Intervention on 19 April 1990.9 Respondent Babasantas motion for the issuance of a
preliminary injunction was likewise granted by the trial court in its Order dated 11 January
199110 conditioned upon his filing of a bond in the amount of fifty thousand pesos (P50,000.00).
SLDC in its Complaint-in-Intervention alleged that on 11 February 1989, the Spouses Lu executed in
its favor anOption 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
a Deed of Absolute Sale with Mortgage in 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
of lis 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 Babasantas 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 its Decision on 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 attorneys fees. On the complaint-in-intervention, the trial court ordered the Register of
Deeds of Laguna, Calamba Branch to cancel the notice of lis pendens annotated 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 courts 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 void ab initio for 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 its Decision11 which 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 the Absolute Deed of Sale with Mortgage in
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
attorneys fees to Babasanta.
SLDC and the Spouses Lu filed separate motions for reconsideration with the appellate
court.12 However, in aManifestation dated 20 December 1995,13 the Spouses Lu informed the
appellate court that they are no longer contesting the decision dated 4 October 1995.
In its Resolution dated 11 March 1996,14 the 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 SLDCs motion for reconsideration on the ground that no new or substantial
arguments were raised therein which would warrant modification or reversal of the courts decision
dated 4 October 1995.
Hence, 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. 15
SLDC contended that the appellate court erred in concluding that it had prior notice of Babasantas
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 latters 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 of lis pendens was annotated only on 2 June 1989 long after the sale of the property to it
was consummated on 3 May 1989.1awphi1.nt
Meanwhile, in an Urgent Ex-Parte Manifestation dated 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. 16
On 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 of lis pendens annotated on the titles of the property made as early as 2 June 1989.
Hence, petitioners registration of the sale did not confer upon it any right. Babasanta further
asserted that petitioners 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) managers check in his favor.

The 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.17 While the receipt signed by Pacita did not mention the price for which the property was
being sold, this deficiency was supplied by Pacita Lus letter dated 29 May 1989 18 wherein 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, 19 which 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. 20 Moreover, contracts shall be obligatory in whatever form they
may have been entered into, provided all the essential requisites for their validity are present. 21
The 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.
Babasantas 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.22 In 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.23
The 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.24 Consignation of the amounts due in court is essential in order to
extinguish Babasantas 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, Babasantas claim of ownership should nevertheless fail.
Sale, being a consensual contract, is perfected by mere consent 25 and from that moment, the parties
may reciprocally demand performance. 26 The 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. 27
The 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. 28 Under Article
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. 29 Therefore, 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.
Explicitly, 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. 30 The 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. 31 Legal
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; 32 symbolical tradition such as the delivery of the
keys of the place where the movable sold is being kept; 33 traditio longa manu or 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;34 traditio brevi manu if the buyer already had possession of the object even before the
sale;35 and traditio constitutum possessorium, where the seller remains in possession of the property
in a different capacity.36
Following 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.37
However, 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 of primus 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.38 Verily, 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.39
Admittedly, SLDC registered the sale with the Registry of Deeds after it had acquired knowledge of
Babasantas 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 of lis pendens on the file with the Register of Deeds, the
same having been filed one year before on 2 June 1989.
Did the registration of the sale after the annotation of the notice of lis pendens obliterate the effects
of delivery and possession in good faith which admittedly had occurred prior to SLDCs 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 the Option to Buy in
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 a Deed of Absolute Sale in 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 of lis
pendens has 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 another without notice 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, or beforehe has notice of the claim or interest of some other person in the
property.40 Following 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.l^vvphi1.net 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. 41 In assailing knowledge of the transaction between
him and the Spouses Lu, Babasanta apparently relies on the principle of constructive notice
incorporated in Section 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 suchby the express wording of Section 52from the
time of the registration of the notice of lis pendens which 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 of lis pendens cannot help Babasantas position a bit and it is irrelevant to
the good or bad faith characterization of SLDC as a purchaser. A notice of lis pendens, as the Court
held in Natao 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, SLDCs faith in the merit of its cause has been vindicated
with the Courts present decision which is the ultimate denouement on the controversy.
The Court of Appeals has made capital43 of SLDCs averment in its Complaint-in-Intervention44 that
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. 45 However, 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 the Deed of Absolute Sale with Mortgage in favor of SLDC and therefore,
as previously explained, it has no effect on the legal position of SLDC.
Assuming ex gratia argumenti that SLDCs registration of the sale had been tainted by the prior
notice of lis pendens and assuming further for the same nonce that this is a case of double sale, still
Babasantas claim could not prevail over that of SLDCs. In Abarquez v. Court of Appeals,46 this
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.
In Abarquez, 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 in Abarquez, 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.1a\^/phi1.net
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, SLDCs right is definitely
superior to that of Babasantas.
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. In Dichoso v. Roxas,47 we 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
[G.R. No. 144225. June 17, 2003]
SPOUSES GODOFREDO ALFREDO and CARMEN LIMON ALFREDO, SPOUSES ARNULFO
SAVELLANO and EDITHA B. SAVELLANO, DANTON D. MATAWARAN, SPOUSES DELFIN F.
ESPIRITU, JR. and ESTELA S. ESPIRITU and ELIZABETH TUAZON, petitioners, vs. SPOUSES
ARMANDO BORRAS and ADELIA LOBATON BORRAS,respondents.
DECISION
CARPIO, J.:
The Case
Before us is a petition for review assailing the Decision [1] of the Court of Appeals dated 26 November
1999 affirming the decision[2] of the Regional Trial Court of Bataan, Branch 4, in Civil Case No. DH256-94.Petitioners also question the Resolution of the Court of Appeals dated 26 July 2000 denying
petitioners motion for reconsideration.
The Antecedent Facts
A parcel of land measuring 81,524 square meters (Subject Land) in Barrio Culis, Mabiga,
Hermosa, Bataan is the subject of controversy in this case. The registered owners of the Subject
Land were petitioner spouses, Godofredo Alfredo (Godofredo) and Carmen Limon Alfredo
(Carmen). The Subject Land is covered by Original Certificate of Title No. 284 (OCT No. 284) issued
to Godofredo and Carmen under Homestead Patent No. V-69196.
On 7 March 1994, the private respondents, spouses Armando Borras (Armando) and Adelia
Lobaton Borras (Adelia), filed a complaint for specific performance against Godofredo and Carmen
before the Regional Trial Court of Bataan, Branch 4. The case was docketed as Civil Case No. DH256-94.

Armando and Adelia alleged in their complaint that Godofredo and Carmen mortgaged the
Subject Land for P7,000.00 with the Development Bank of the Philippines (DBP). To pay the debt,
Carmen and Godofredo sold the Subject Land to Armando and Adelia for P15,000.00, the buyers to
pay the DBP loan and its accumulated interest, and the balance to be paid in cash to the sellers.
Armando and Adelia gave Godofredo and Carmen the money to pay the loan to DBP which
signed the release of mortgage and returned the owners duplicate copy of OCT No. 284 to
Godofredo and Carmen. Armando and Adelia subsequently paid the balance of the purchase price
of the Subject Land for which Carmen issued a receipt dated 11 March 1970. Godofredo and
Carmen then delivered to Adelia the owners duplicate copy of OCT No. 284, with the document of
cancellation of mortgage, official receipts of realty tax payments, and tax declaration in the name of
Godofredo. Godofredo and Carmen introduced Armando and Adelia, as the new owners of the
Subject Land, to the Natanawans, the old tenants of the Subject Land. Armando and Adelia then
took possession of the Subject Land.
In January 1994, Armando and Adelia learned that hired persons had entered the Subject Land
and were cutting trees under instructions of allegedly new owners of the Subject
Land. Subsequently, Armando and Adelia discovered that Godofredo and Carmen had re-sold
portions of the Subject Land to several persons.
On 8 February 1994, Armando and Adelia filed an adverse claim with the Register of Deeds of
Bataan. Armando and Adelia discovered that Godofredo and Carmen had secured an owners
duplicate copy of OCT No. 284 after filing a petition in court for the issuance of a new
copy. Godofredo and Carmen claimed in their petition that they lost their owners duplicate
copy. Armando and Adelia wrote Godofredo and Carmen complaining about their acts, but the latter
did not reply. Thus, Armando and Adelia filed a complaint for specific performance.
On 28 March 1994, Armando and Adelia amended their complaint to include the following
persons as additional defendants: the spouses Arnulfo Savellano and Editha B. Savellano, Danton
D. Matawaran, the spouses Delfin F. Espiritu, Jr. and Estela S. Espiritu, and Elizabeth Tuazon
(Subsequent Buyers). The Subsequent Buyers, who are also petitioners in this case, purchased
from Godofredo and Carmen the subdivided portions of the Subject Land. The Register of Deeds of
Bataan issued to the Subsequent Buyers transfer certificates of title to the lots they purchased.
In their answer, Godofredo and Carmen and the Subsequent Buyers (collectively petitioners)
argued that the action is unenforceable under the Statute of Frauds. Petitioners pointed out that
there is no written instrument evidencing the alleged contract of sale over the Subject Land in favor
of Armando and Adelia. Petitioners objected to whatever parole evidence Armando and Adelia
introduced or offered on the alleged sale unless the same was in writing and subscribed by
Godofredo. Petitioners asserted that the Subsequent Buyers were buyers in good faith and for value.
As counterclaim, petitioners sought payment of attorneys fees and incidental expenses.
Trial then followed. Armando and Adelia presented the following witnesses: Adelia, Jesus
Lobaton, Roberto Lopez, Apolinario Natanawan, Rolando Natanawan, Tomas Natanawan, and
Mildred Lobaton. Petitioners presented two witnesses, Godofredo and Constancia Calonso.
On 7 June 1996, the trial court rendered its decision in favor of Armando and Adelia. The
dispositive portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiffs, the
spouses Adelia Lobaton Borras and Armando F. Borras, and against the defendant-spouses

Godofredo Alfredo and Carmen Limon Alfredo, spouses Arnulfo Sabellano and Editha B. Sabellano,
spouses Delfin F. Espiritu, Jr. and Estela S. Espiritu, Danton D. Matawaran and Elizabeth Tuazon, as
follows:
1. Declaring the Deeds of Absolute Sale of the disputed parcel of land (covered by OCT No. 284)
executed by the spouses Godofredo Alfredo and Camen Limon Alfredo in favor of spouses
Arnulfo Sabellano and Editha B. Sabellano, spouses Delfin F. Espiritu, Danton D. Matawaran
and Elizabeth Tuazon, as null and void;
2. Declaring the Transfer Certificates of Title Nos. T-163266 and T-163267 in the names of spouses
Arnulfo Sabellano and Editha B. Sabellano; Transfer Certificates of Title Nos. T-163268 and
163272 in the names of spouses Delfin F. Espiritu, Jr. and Estela S. Espiritu; Transfer
Certificates of Title Nos. T-163269 and T-163271 in the name of Danton D. Matawaran; and
Transfer Certificate of Title No. T-163270 in the name of Elizabeth Tuazon, as null and void and
that the Register of Deeds of Bataan is hereby ordered to cancel said titles;
3. Ordering the defendant-spouses Godofredo Alfredo and Carmen Limon Alfredo to execute and
deliver a good and valid Deed of Absolute Sale of the disputed parcel of land (covered by OCT
No. 284) in favor of the spouses Adelia Lobaton Borras and Armando F. Borras within a period of
ten (10) days from the finality of this decision;
4. Ordering defendant-spouses Godofredo Alfredo and Carmen Limon Alfredo to surrender their
owners duplicate copy of OCT No. 284 issued to them by virtue of the Order dated May 20, 1992
of the Regional Trial Court of Bataan, Dinalupihan Branch, to the Registry of Deeds of Bataan
within ten (10) days from the finality of this decision, who, in turn, is directed to cancel the same
as there exists in the possession of herein plaintiffs of the owners duplicate copy of said OCT
No. 284 and, to restore and/or reinstate OCT No. 284 of the Register of Deeds of Bataan to its
full force and effect;
5. Ordering the defendant-spouses Godofredo Alfredo and Carmen Limon Alfredo to restitute
and/or return the amount of the respective purchase prices and/or consideration of sale of the
disputed parcels of land they sold to their co-defendants within ten (10) days from the finality of
this decision with legal interest thereon from date of the sale;
6. Ordering the defendants, jointly and severally, to pay plaintiff-spouses the sum of P20,000.00 as
and for attorneys fees and litigation expenses; and;
7. Ordering defendants to pay the costs of suit.
Defendants counterclaims are hereby dismissed for lack of merit.
SO ORDERED.[3]
Petitioners appealed to the Court of Appeals.
On 26 November 1999, the Court of Appeals issued its Decision affirming the decision of the
trial court, thus:
WHEREFORE, premises considered, the appealed decision in Civil Case No. DH-256-94 is
hereby AFFIRMED in its entirety. Treble costs against the defendants-appellants.
SO ORDERED.[4]
On 26 July 2000, the Court of Appeals denied petitioners motion for reconsideration.
The Ruling of the Trial Court
The trial court ruled that there was a perfected contract of sale between the spouses Godofredo
and Carmen and the spouses Armando and Adelia. The trial court found that all the elements of a
contract of sale were present in this case. The object of the sale was specifically identified as the

81,524-square meter lot in Barrio Culis, Mabigas, Hermosa, Bataan, covered by OCT No. 284 issued
by the Registry of Deeds of Bataan. The purchase price was fixed at P15,000.00, with the buyers
assuming to pay the sellers P7,000.00 DBP mortgage loan including its accumulated interest. The
balance of the purchase price was to be paid in cash to the sellers. The last payment of P2,524.00
constituted the full settlement of the purchase price and this was paid on 11 March 1970 as
evidenced by the receipt issued by Carmen.
The trial court found the following facts as proof of a perfected contract of sale: (1) Godofredo
and Carmen delivered to Armando and Adelia the Subject Land; (2) Armando and Adelia treated as
their own tenants the tenants of Godofredo and Carmen; (3) Godofredo and Carmen turned over to
Armando and Adelia documents such as the owners duplicate copy of the title of the Subject Land,
tax declaration, and the receipts of realty tax payments in the name of Godofredo; and (4) the DBP
cancelled the mortgage on the Subject Property upon payment of the loan of Godofredo and
Carmen. Moreover, the receipt of payment issued by Carmen served as an acknowledgment, if not a
ratification, of the verbal sale between the sellers and the buyers. The trial court ruled that the
Statute of Frauds is not applicable because in this case the sale was perfected.
The trial court concluded that the Subsequent Buyers were not innocent purchasers. Not one of
the Subsequent Buyers testified in court on how they purchased their respective lots. The
Subsequent Buyers totally depended on the testimony of Constancia Calonso (Calonso) to explain
the subsequent sale. Calonso, a broker, negotiated with Godofredo and Carmen the sale of the
Subject Land which Godofredo and Carmen subdivided so they could sell anew portions to the
Subsequent Buyers.
Calonso admitted that the Subject Land was adjacent to her own lot. The trial court pointed out
that Calonso did not inquire on the nature of the tenancy of the Natanawans and on who owned the
Subject Land.Instead, she bought out the tenants for P150,000.00. The buy out was embodied in
a Kasunduan. Apolinario Natanawan (Apolinario) testified that he and his wife accepted the money
and signed the Kasunduan because Calonso and the Subsequent Buyers threatened them with
forcible ejectment. Calonso brought Apolinario to the Agrarian Reform Office where he was asked to
produce the documents showing that Adelia is the owner of the Subject Land. Since Apolinario could
not produce the documents, the agrarian officer told him that he would lose the case. Thus,
Apolinario was constrained to sign the Kasunduan and accept the P150,000.00.
Another indication of Calonsos bad faith was her own admission that she saw an adverse claim
on the title of the Subject Land when she registered the deeds of sale in the names of the
Subsequent Buyers. Calonso ignored the adverse claim and proceeded with the registration of the
deeds of sale.
The trial court awarded P20,000.00 as attorneys fees to Armando and Adelia. In justifying the
award of attorneys fees, the trial court invoked Article 2208 (2) of the Civil Code which allows a court
to award attorneys fees, including litigation expenses, when it is just and equitable to award the
same. The trial court ruled that Armando and Adelia are entitled to attorneys fees since they were
compelled to file this case due to petitioners refusal to heed their just and valid demand.
The Ruling of the Court of Appeals
The Court of Appeals found the factual findings of the trial court well supported by the
evidence. Based on these findings, the Court of Appeals also concluded that there was a perfected
contract of sale and the Subsequent Buyers were not innocent purchasers.

The Court of Appeals ruled that the handwritten receipt dated 11 March 1970 is sufficient proof
that Godofredo and Carmen sold the Subject Land to Armando and Adelia upon payment of the
balance of the purchase price. The Court of Appeals found the recitals in the receipt as sufficient to
serve as the memorandum or note as a writing under the Statute of Frauds. [5] The Court of Appeals
then reiterated the ruling of the trial court that the Statute of Frauds does not apply in this case.
The Court of Appeals gave credence to the testimony of a witness of Armando and Adelia,
Mildred Lobaton, who explained why the title to the Subject Land was not in the name of Armando
and Adelia. Lobaton testified that Godofredo was then busy preparing to leave for Davao. Godofredo
promised that he would sign all the papers once they were ready. Since Armando and Adelia were
close to the family of Carmen, they trusted Godofredo and Carmen to honor their
commitment. Armando and Adelia had no reason to believe that their contract of sale was not
perfected or validly executed considering that they had received the duplicate copy of OCT No. 284
and other relevant documents. Moreover, they had taken physical possession of the Subject Land.
The Court of Appeals held that the contract of sale is not void even if only Carmen signed the
receipt dated 11 March 1970. Citing Felipe v. Heirs of Maximo Aldon,[6] the appellate court ruled
that a contract of sale made by the wife without the husbands consent is not void but merely
voidable. The Court of Appeals further declared that the sale in this case binds the conjugal
partnership even if only the wife signed the receipt because the proceeds of the sale were used for
the benefit of the conjugal partnership. The appellate court based this conclusion on Article 161 [7] of
the Civil Code.
The Subsequent Buyers of the Subject Land cannot claim that they are buyers in good faith
because they had constructive notice of the adverse claim of Armando and Adelia. Calonso, who
brokered the subsequent sale, testified that when she registered the subsequent deeds of sale, the
adverse claim of Armando and Adelia was already annotated on the title of the Subject Land. The
Court of Appeals believed that the act of Calonso and the Subsequent Buyers in forcibly ejecting the
Natanawans from the Subject Land buttresses the conclusion that the second sale was tainted with
bad faith from the very beginning.
Finally, the Court of Appeals noted that the issue of prescription was not raised in the Answer.
Nonetheless, the appellate court explained that since this action is actually based on fraud, the
prescriptive period is four years, with the period starting to run only from the date of the discovery of
the fraud. Armando and Adelia discovered the fraudulent sale of the Subject Land only in January
1994. Armando and Adelia lost no time in writing a letter to Godofredo and Carmen on 2 February
1994 and filed this case on 7 March 1994. Plainly, Armando and Adelia did not sleep on their rights
or lose their rights by prescription.
The Court of Appeals sustained the award of attorneys fees and imposed treble costs on
petitioners.
The Issues
Petitioners raise the following issues:
I
Whether the alleged sale of the Subject Land in favor of Armando and Adelia is valid and
enforceable, where (1) it was orally entered into and not in writing; (2) Carmen did not obtain the
consent and authority of her husband, Godofredo, who was the sole owner of the Subject Land in
whose name the title thereto (OCT No. 284) was issued; and (3) it was entered into during the 25-

year prohibitive period for alienating the Subject Land without the approval of the Secretary of
Agriculture and Natural Resources.
II
Whether the action to enforce the alleged oral contract of sale brought after 24 years from its
alleged perfection had been barred by prescription and by laches.IIIWhether the deeds of absolute
sale and the transfer certificates of title over the portions of the Subject Land issued to the
Subsequent Buyers, innocent purchasers in good faith and for value whose individual titles to their
respective lots are absolute and indefeasible, are valid.
IV
Whether petitioners are liable to pay Armando and Adelia P20,0000.00 as attorneys fees and
litigation expenses and the treble costs, where the claim of Armando and Adelia is clearly unfounded
and baseless.
V
Whether petitioners are entitled to the counterclaim for attorneys fees and litigation expenses,
where they have sustained such expenses by reason of institution of a clearly malicious and
unfounded action by Armando and Adelia.[8]
The Courts Ruling
The petition is without merit.
In a petition for review on certiorari under Rule 45, this Court reviews only errors of law and not
errors of facts.[9] The factual findings of the appellate court are generally binding on this Court. [10] This
applies with greater force when both the trial court and the Court of Appeals are in complete
agreement on their factual findings.[11] In this case, there is no reason to deviate from the findings of
the lower courts. The facts relied upon by the trial and appellate courts are borne out by the
record. We agree with the conclusions drawn by the lower courts from these facts.
Validity and Enforceability of the Sale
The contract of sale between the spouses Godofredo and Carmen and the spouses Armando
and Adelia was a perfected contract. A contract is perfected once there is consent of the contracting
parties on the object certain and on the cause of the obligation. [12] In the instant case, the object of
the sale is the Subject Land, and the price certain is P15,000.00. The trial and appellate courts found
that there was a meeting of the minds on the sale of the Subject Land and on the purchase price
of P15,000.00. This is a finding of fact that is binding on this Court. We find no reason to disturb this
finding since it is supported by substantial evidence.
The contract of sale of the Subject Land has also been consummated because the sellers and
buyers have performed their respective obligations under the contract. In a contract of sale, the
seller obligates himself to transfer the ownership of the determinate thing sold, and to deliver the
same, to the buyer who obligates himself to pay a price certain to the seller. [13] In the instant case,
Godofredo and Carmen delivered the Subject Land to Armando and Adelia, placing the latter in
actual physical possession of the Subject Land. This physical delivery of the Subject Land also
constituted a transfer of ownership of the Subject Land to Armando and Adelia. [14]Ownership of the
thing sold is transferred to the vendee upon its actual or constructive delivery. [15] Godofredo and
Carmen also turned over to Armando and Adelia the documents of ownership to the Subject Land,
namely the owners duplicate copy of OCT No. 284, the tax declaration and the receipts of realty tax
payments.

On the other hand, Armando and Adelia paid the full purchase price as evidenced by the receipt
dated 11 March 1970 issued by Carmen. Armando and Adelia fulfilled their obligation to provide
the P7,000.00 to pay the DBP loan of Godofredo and Carmen, and to pay the latter the balance
of P8,000.00 in cash. The P2,524.00 paid under the receipt dated 11 March 1970 was the last
installment to settle fully the purchase price. Indeed, upon payment to DBP of the P7,000.00 and the
accumulated interests, the DBP cancelled the mortgage on the Subject Land and returned the
owners duplicate copy of OCT No. 284 to Godofredo and Carmen.
The trial and appellate courts correctly refused to apply the Statute of Frauds to this case. The
Statute of Frauds[16] provides that a contract for the sale of real property shall be unenforceable
unless the contract or some note or memorandum of the sale is in writing and subscribed by the
party charged or his agent. The existence of the receipt dated 11 March 1970, which is a
memorandum of the sale, removes the transaction from the provisions of the Statute of Frauds.
The Statute of Frauds applies only to executory contracts and not to contracts either partially or
totally performed.[17] Thus, where one party has performed ones obligation, oral evidence will be
admitted to prove the agreement.[18] In the instant case, the parties have consummated the sale of
the Subject Land, with both sellers and buyers performing their respective obligations under the
contract of sale. In addition, a contract that violates the Statute of Frauds is ratified by the
acceptance of benefits under the contract. [19] Godofredo and Carmen benefited from the contract
because they paid their DBP loan and secured the cancellation of their mortgage using the money
given by Armando and Adelia. Godofredo and Carmen also accepted payment of the balance of the
purchase price.
Godofredo and Carmen cannot invoke the Statute of Frauds to deny the existence of the verbal
contract of sale because they have performed their obligations, and have accepted benefits, under
the verbal contract. [20]Armando and Adelia have also performed their obligations under the verbal
contract. Clearly, both the sellers and the buyers have consummated the verbal contract of sale of
the Subject Land. The Statute of Frauds was enacted to prevent fraud. [21] This law cannot be used to
advance the very evil the law seeks to prevent.
Godofredo and Carmen also claim that the sale of the Subject Land to Armando and Adelia is
void on two grounds. First, Carmen sold the Subject Land without the marital consent of
Godofredo. Second, the sale was made during the 25-year period that the law prohibits the
alienation of land grants without the approval of the Secretary of Agriculture and Natural Resources.
These arguments are without basis.
The Family Code, which took effect on 3 August 1988, provides that any alienation or
encumbrance made by the husband of the conjugal partnership property without the consent of the
wife is void. However, when the sale is made before the effectivity of the Family Code, the applicable
law is the Civil Code.[22]
Article 173 of the Civil Code provides that the disposition of conjugal property without the wifes
consent is not void but merely voidable. Article 173 reads:
The wife may, during the marriage, and within ten years from the transaction questioned, ask
the courts for the annulment of any contract of the husband entered into without her consent, when
such consent is required, or any act or contract of the husband which tends to defraud her or impair
her interest in the conjugal partnership property. Should the wife fail to exercise this right, she or her

heirs, after the dissolution of the marriage, may demand the value of property fraudulently alienated
by the husband.
In Felipe v. Aldon,[23] we applied Article 173 in a case where the wife sold some parcels of land
belonging to the conjugal partnership without the consent of the husband. We ruled that the contract
of sale was voidable subject to annulment by the husband. Following petitioners argument that
Carmen sold the land to Armando and Adelia without the consent of Carmens husband, the sale
would only be voidable and not void.
However, Godofredo can no longer question the sale. Voidable contracts are susceptible of
ratification.[24] Godofredo ratified the sale when he introduced Armando and Adelia to his tenants as
the new owners of the Subject Land. The trial court noted that Godofredo failed to deny categorically
on the witness stand the claim of the complainants witnesses that Godofredo introduced Armando
and Adelia as the new landlords of the tenants. [25] That Godofredo and Carmen allowed Armando
and Adelia to enjoy possession of the Subject Land for 24 years is formidable proof of Godofredos
acquiescence to the sale. If the sale was truly unauthorized, then Godofredo should have filed an
action to annul the sale. He did not. The prescriptive period to annul the sale has long
lapsed. Godofredos conduct belies his claim that his wife sold the Subject Land without his consent.
Moreover, Godofredo and Carmen used most of the proceeds of the sale to pay their debt with
the DBP. We agree with the Court of Appeals that the sale redounded to the benefit of the conjugal
partnership. Article 161 of the Civil Code provides that the conjugal partnership shall be liable for
debts and obligations contracted by the wife for the benefit of the conjugal partnership. Hence, even
if Carmen sold the land without the consent of her husband, the sale still binds the conjugal
partnership.
Petitioners contend that Godofredo and Carmen did not deliver the title of the Subject Land to
Armando and Adelia as shown by this portion of Adelias testimony on cross-examination:
Q -- No title was delivered to you by Godofredo Alfredo?
A -- I got the title from Julie Limon because my sister told me.[26]
Petitioners raise this factual issue for the first time. The Court of Appeals could have passed
upon this issue had petitioners raised this earlier. At any rate, the cited testimony of Adelia does not
convincingly prove that Godofredo and Carmen did not deliver the Subject Land to Armando and
Adelia. Adelias cited testimony must be examined in context not only with her entire testimony but
also with the other circumstances.
Adelia stated during cross-examination that she obtained the title of the Subject Land from Julie
Limon (Julie), her classmate in college and the sister of Carmen. Earlier, Adelias own sister had
secured the title from the father of Carmen. However, Adelias sister, who was about to leave for the
United States, gave the title to Julie because of the absence of the other documents. Adelias sister
told Adelia to secure the title from Julie, and this was how Adelia obtained the title from Julie.
It is not necessary that the seller himself deliver the title of the property to the buyer because
the thing sold is understood as delivered when it is placed in the control and possession of the
vendee.[27] To repeat, Godofredo and Carmen themselves introduced the Natanawans, their tenants,

to Armando and Adelia as the new owners of the Subject Land. From then on, Armando and Adelia
acted as the landlords of the Natanawans.Obviously, Godofredo and Carmen themselves placed
control and possession of the Subject Land in the hands of Armando and Adelia.
Petitioners invoke the absence of approval of the sale by the Secretary of Agriculture and
Natural Resources to nullify the sale. Petitioners never raised this issue before the trial court or the
Court of Appeals. Litigants cannot raise an issue for the first time on appeal, as this would
contravene the basic rules of fair play, justice and due process. [28] However, we will address this new
issue to finally put an end to this case.
The sale of the Subject Land cannot be annulled on the ground that the Secretary did not
approve the sale, which was made within 25 years from the issuance of the homestead title. Section
118 of the Public Land Act (Commonwealth Act No. 141) reads as follows:
SEC. 118. Except in favor of the Government or any of its branches, units, or institutions or legally
constituted banking corporation, lands acquired under free patent or homestead provisions shall not
be subject to encumbrance or alienation from the date of the approval of the application and for a
term of five years from and after the date of the issuance of the patent or grant.
xxx
No alienation, transfer, or conveyance of any homestead after 5 years and before twenty-five years
after the issuance of title shall be valid without the approval of the Secretary of Agriculture and
Commerce, which approval shall not be denied except on constitutional and legal grounds.
A grantee or homesteader is prohibited from alienating to a private individual a land grant within
five years from the time that the patent or grant is issued. [29] A violation of this prohibition renders a
sale void.[30] This prohibition, however, expires on the fifth year. From then on until the next 20
years[31] the land grant may be alienated provided the Secretary of Agriculture and Natural
Resources approves the alienation. The Secretary is required to approve the alienation unless there
are constitutional and legal grounds to deny the approval. In this case, there are no apparent
constitutional or legal grounds for the Secretary to disapprove the sale of the Subject Land.
The failure to secure the approval of the Secretary does not ipso facto make a sale void.[32] The
absence of approval by the Secretary does not nullify a sale made after the expiration of the 5-year
period, for in such event the requirement of Section 118 of the Public Land Act becomes merely
directory[33] or a formality.[34] The approval may be secured later, producing the effect of ratifying and
adopting the transaction as if the sale had been previously authorized. [35] As held in Evangelista v.
Montano:[36]

Action Not Barred by Prescription and Laches

Petitioners insist that prescription and laches have set in. We disagree.
The Amended Complaint filed by Armando and Adelia with the trial court is captioned as one for
Specific Performance. In reality, the ultimate relief sought by Armando and Adelia is the
reconveyance to them of the Subject Land. An action for reconveyance is one that seeks to transfer
property, wrongfully registered by another, to its rightful and legal owner. [37] The body of the pleading
or complaint determines the nature of an action, not its title or heading. [38] Thus, the present action
should be treated as one for reconveyance.[39]
Article 1456 of the Civil Code provides that a person acquiring property through fraud becomes
by operation of law a trustee of an implied trust for the benefit of the real owner of the property. The
presence of fraud in this case created an implied trust in favor of Armando and Adelia. This gives
Armando and Adelia the right to seek reconveyance of the property from the Subsequent Buyers. [40]
To determine when the prescriptive period commenced in an action for reconveyance, plaintiffs
possession of the disputed property is material. An action for reconveyance based on an implied
trust prescribes in ten years. [41] The ten-year prescriptive period applies only if there is an actual
need to reconvey the property as when the plaintiff is not in possession of the property. [42] However, if
the plaintiff, as the real owner of the property also remains in possession of the property, the
prescriptive period to recover title and possession of the property does not run against him. [43] In
such a case, an action for reconveyance, if nonetheless filed, would be in the nature of a suit for
quieting of title, an action that is imprescriptible. [44]
In this case, the appellate court resolved the issue of prescription by ruling that the action
should prescribe four years from discovery of the fraud. We must correct this erroneous application
of the four-year prescriptive period. In Caro v. Court of Appeals,[45] we explained why an action for
reconveyance based on an implied trust should prescribe in ten years. In that case, the appellate
court also erroneously applied the four-year prescriptive period. We declared in Caro:
We disagree. The case of Liwalug Amerol, et al. v. Molok Bagumbaran, G.R. No. L-33261,
September 30, 1987,154 SCRA 396 illuminated what used to be a gray area on the prescriptive
period for an action to reconvey the title to real property and, corollarily, its point of reference:
xxx It must be remembered that before August 30, 1950, the date of the effectivity of the new Civil
Code, the old Code of Civil Procedure (Act No. 190) governed prescription. It provided:

SEC. 43. Other civil actions; how limited.- Civil actions other than for the recovery of real property
can only be brought within the following periods after the right of action accrues:
Section 118 of Commonwealth Act No. 141, as amended, specifically enjoins that the approval by xxx xxx xxx
the Department Secretary "shall not be denied except on constitutional and legal grounds." There 3. Within four years: xxx An action for relief on the ground of fraud, but the right of action in such
being no allegation that there were constitutional or legal impediments to the sales, and no pretense case shall not be deemed to have accrued until the discovery of the fraud;
xxx xxx xxx
that if the sales had been submitted to the Secretary concerned they would have been disapproved,
In contrast, under the present Civil Code, we find that just as an implied or constructive trust is an
approval was a ministerial duty, to be had as a matter of course and demandable if refused. For
offspring of the law (Art. 1456, Civil Code), so is the corresponding obligation to reconvey the
this reason, and if necessary, approval may now be applied for and its effect will be to ratify and
property and the title thereto in favor of the true owner. In this context, and vis-a-vis prescription,
adopt the transactions as if they had been previously authorized. (Emphasis supplied)
Article 1144 of the Civil Code is applicable.

Article 1144. The following actions must be brought within ten years from the time the right of action
Following Caro, we have consistently held that an action for reconveyance based on an implied
accrues:
trust prescribes in ten years.[47] We went further by specifying the reference point of the ten-year
(1) Upon a written contract;
prescriptive period as the date of the registration of the deed or the issuance of the title. [48]
(2) Upon an obligation created by law;
Had Armando and Adelia remained in possession of the Subject Land, their action for
(3) Upon a judgment.
reconveyance, in effect an action to quiet title to property, would not be subject to prescription.
xxxxxxxxx
Prescription does not run against the plaintiff in actual possession of the disputed land because
(Emphasis supplied).
such plaintiff has a right to wait until his possession is disturbed or his title is questioned before
initiating an action to vindicate his right. [49] His undisturbed possession gives him the continuing right
An action for reconveyance based on an implied or constructive trust must perforce
to seek the aid of a court of equity to determine the nature of the adverse claim of a third party and
prescribe in ten years and not otherwise. A long line of decisions of this Court, and of very recent
its effect on his title.[50]
vintage at that, illustrates this rule. Undoubtedly, it is now well-settled that an action for
Armando and Adelia lost possession of the Subject Land when the Subsequent Buyers forcibly
reconveyance based on an implied or constructive trust prescribes in ten years from the drove away from the Subject Land the Natanawans, the tenants of Armando and Adelia. [51] This
issuance of the Torrens title over the property. The only discordant note, it seems, is Balbin vs. created an actual need for Armando and Adelia to seek reconveyance of the Subject Land. The
Medalla which states that the prescriptive period for a reconveyance action is four years. However, statute of limitation becomes relevant in this case. The ten-year prescriptive period started to run
this variance can be explained by the erroneous reliance on Gerona vs. de Guzman. But in Gerona, from the date the Subsequent Buyers registered their deeds of sale with the Register of Deeds.
the fraud was discovered on June 25,1948, hence Section 43(3) of Act No. 190, was applied, the
The Subsequent Buyers bought the subdivided portions of the Subject Land on 22 February
new Civil Code not coming into effect until August 30, 1950 as mentioned earlier. It must be 1994, the date of execution of their deeds of sale. The Register of Deeds issued the transfer
stressed, at this juncture, that article 1144 and article 1456, are new provisions. They have no certificates of title to the Subsequent Buyers on 24 February 1994. Armando and Adelia filed the
counterparts in the old Civil Code or in the old Code of Civil Procedure, the latter being then resorted Complaint on 7 March 1994. Clearly, prescription could not have set in since the case was filed at
to as legal basis of the four-year prescriptive period for an action for reconveyance of title of real the early stage of the ten-year prescriptive period.
property acquired under false pretenses.
Neither is the action barred by laches. We have defined laches as the failure or neglect, for an
An action for reconveyance has its basis in Section 53, paragraph 3 of Presidential Decree No. unreasonable time, to do that which, by the exercise of due diligence, could or should have been
1529, which provides:
done earlier.[52] It is negligence or omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has abandoned it or declined to assert it.
In all cases of registration procured by fraud, the owner may pursue all his legal and equitable [53] Armando and Adelia discovered in January 1994 the subsequent sale of the Subject Land and
remedies against the parties to such fraud without prejudice, however, to the rights of any innocent they filed this case on 7 March 1994. Plainly, Armando and Adelia did not sleep on their rights.
holder of the decree of registration on the original petition or application, xxx
Validity of Subsequent Sale of Portions of the Subject Land
Petitioners maintain that the subsequent sale must be upheld because the Subsequent Buyers,
the co-petitioners of Godofredo and Carmen, purchased and registered the Subject Land in good
This provision should be read in conjunction with Article 1456 of the Civil Code, which provides:
faith. Petitioners argue that the testimony of Calonso, the person who brokered the second sale,
Article 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of should not prejudice the Subsequent Buyers. There is no evidence that Calonso was the agent of
law, considered a trustee of an implied trust for the benefit of the person from whom the property the Subsequent Buyers and that she communicated to them what she knew about the adverse claim
and the prior sale. Petitioners assert that the adverse claim registered by Armando and Adelia has
comes.
no legal basis to render defective the transfer of title to the Subsequent Buyers.
We are not persuaded. Godofredo and Carmen had already sold the Subject Land to Armando
The law thereby creates the obligation of the trustee to reconvey the property and the title thereto in
and Adelia. The settled rule is when ownership or title passes to the buyer, the seller ceases to have
favor of the true owner. Correlating Section 53, paragraph 3 of Presidential Decree No. 1529 and
any title to transfer to any third person. [54] If the seller sells the same land to another, the second
Article 1456 of the Civil Code with Article 1144(2) of the Civil Code, supra, the prescriptive period for
buyer who has actual or constructive knowledge of the prior sale cannot be a registrant in good faith.
the reconveyance of fraudulently registered real property is ten (10) years reckoned from the date of [55]
Such second buyer cannot defeat the first buyers title. [56] In case a title is issued to the second
the issuance of the certificate of title xxx (Emphasis supplied)[46]
buyer, the first buyer may seek reconveyance of the property subject of the sale. [57]
Thus, to merit protection under the second paragraph of Article 1544 [58] of the Civil Code, the
second buyer must act in good faith in registering the deed. [59] In this case, the Subsequent Buyers
good faith hinges on whether they had knowledge of the previous sale. Petitioners do not dispute

that Armando and Adelia registered their adverse claim with the Registry of Deeds of Bataan on 8
February 1994. The Subsequent Buyers purchased their respective lots only on 22 February 1994
as shown by the date of their deeds of sale. Consequently, the adverse claim registered prior to the
second sale charged the Subsequent Buyers with constructive notice of the defect in the title of the
sellers,[60] Godofredo and Carmen.
It is immaterial whether Calonso, the broker of the second sale, communicated to the
Subsequent Buyers the existence of the adverse claim. The registration of the adverse claim on 8
February 1994 constituted, by operation of law, notice to the whole world. [61] From that date onwards,
the Subsequent Buyers were deemed to have constructive notice of the adverse claim of Armando
and Adelia. When the Subsequent Buyers purchased portions of the Subject Land on 22 February
1994, they already had constructive notice of the adverse claim registered earlier. [62] Thus, the
Subsequent Buyers were not buyers in good faith when they purchased their lots on 22 February
1994. They were also not registrants in good faith when they registered their deeds of sale with the
Registry of Deeds on 24 February 1994.
The Subsequent Buyers individual titles to their respective lots are not absolutely indefeasible.
The defense of indefeasibility of the Torrens Title does not extend to a transferee who takes the
certificate of title with notice of a flaw in his title. [63] The principle of indefeasibility of title does not
apply where fraud attended the issuance of the titles as in this case. [64]
Attorneys Fees and Costs
We sustain the award of attorneys fees. The decision of the court must state the grounds for the
award of attorneys fees. The trial court complied with this requirement. [65] We agree with the trial
court that if it were not for petitioners unjustified refusal to heed the just and valid demands of
Armando and Adelia, the latter would not have been compelled to file this action.
The Court of Appeals echoed the trial courts condemnation of petitioners fraudulent
maneuverings in securing the second sale of the Subject Land to the Subsequent Buyers. We will
also not turn a blind eye on petitioners brazen tactics. Thus, we uphold the treble costs imposed by
the Court of Appeals on petitioners.
WHEREFORE, the petition is DENIED and the appealed decision is AFFIRMED. Treble costs
against petitioners.

the Regional Trial Court of La Trinidad, Benguet, Branch 10, ordering petitioner Betty Tolero to
execute a deed of absolute sale in favor of respondents, spouses Joaquin and Julia Pacson, over
the lots covered by Transfer Certificate of Title (TCT) Nos. T-18650 and T-18651 upon payment to
her by respondents of the sum of P57,544.[8]4 representing the balance due for the full payment of
the property subject of this case; and ordering petitioner Betty Tolero to surrender to respondents her
owners duplicate copy of TCT Nos. T-18650 and T-18651.
The facts, as stated by the trial court,3 are as follows:
The spouses Bate and Julie Nabus were the owners of parcels of land with a total area of 1,665
square meters, situated in Pico, La Trinidad, Benguet, duly registered in their names under TCT No.
T-9697 of the Register of Deeds of the Province of Benguet. The property was mortgaged by the
Spouses Nabus to the Philippine National Bank (PNB), La Trinidad Branch, to secure a loan in the
amount of P30,000.00.
On February 19, 1977, the Spouses Nabus executed a Deed of Conditional Sale 4 covering 1,000
square meters of the 1,665 square meters of land in favor of respondents Spouses Pacson for a
consideration of P170,000.00, which was duly notarized on February 21, 1977. The consideration
was to be paid, thus:
THAT, the consideration of the amount of P170,000.00 will be paid by the VENDEE herein in my
favor in the following manner:
a. That the sum of P13,000.00, more or less, on or before February 21, 1977 and which amount
will be paid directly to the PNB, La Trinidad Branch, and which will form part of the purchase
price;
b. That after paying the above amount to the PNB, La Trinidad, Benguet branch, a balance of
aboutP17,500.00 remains as my mortgage balance and this amount will be paid by the VENDEE
herein at the rate of not less than P3,000.00 a month beginning March 1977, until the said
mortgage balance is fully liquidated, and that all payments made by the VENDEE to the PNB, La
Trinidad, Benguet branch, shall form part of the consideration of this sale;
c. That, as soon as the mortgage obligation with the PNB as cited above is fully paid, then the
VENDEE herein hereby obligates himself, his heirs and assigns, to pay the amount of not less
than P2,000.00 a month in favor of the VENDOR, his heirs and assigns, until the full amount
of P170,000.00 is fully covered(including the payments cited in Pars. a and b above);
THAT,
as soon as the full consideration of this sale has been paid by the VENDEE, the
SO ORDERED.
corresponding transfer documents shall be executed by the VENDOR to the VENDEE for the portion
sold;
Republic of the Philippines
THAT, the portion sold is as shown in the simple sketch hereto attached as Annex "A" and made part
SUPREME COURT
hereof;
Manila
THAT, a segregation survey for the portion sold in favor of the VENDEE and the portion remaining in
THIRD DIVISION
favor of the VENDOR shall be executed as soon as possible, all at the expense of the VENDEE
G.R. No. 161318
November 25, 2009
herein;
JULIE NABUS,* MICHELLE NABUS* and BETTY TOLERO, Petitioners, vs. JOAQUIN PACSON
THAT, it is mutually understood that in as much as there is a claim by other persons of the entire
and JULIA PACSON, Respondents.
property of which the portion subject of this Instrument is only a part, and that this claim is now the
DECISION
subject of a civil case now pending before Branch III of the Court of First Instance of Baguio and
PERALTA, J.:
This is a petition for review on certiorari 1 of the Decision2 of the Court of Appeals in CA-G.R. CV No. Benguet, should the VENDOR herein be defeated in the said civil action to the end that he is
44941 dated November 28, 2003. The Court of Appeals affirmed with modification the Decision of divested of title over the area subject of this Instrument, then he hereby warrants that he shall return

any and all monies paid by the VENDEE herein whether paid to the PNB, La Trinidad, Benguet
Branch, or directly received by herein VENDOR, all such monies to be returned upon demand by the
VENDEE;
THAT, [a] portion of the parcel of land subject of this instrument is presently in the possession of Mr.
Marcos Tacloy, and the VENDOR agrees to cooperate and assist in any manner possible in the
ouster of said Mr. Marcos Tacloy from said possession and occupation to the end that the VENDEE
herein shall make use of said portion as soon as is practicable;
THAT, finally, the PARTIES hereby agree that this Instrument shall be binding upon their respective
heirs, successors or assigns.5
Pursuant to the Deed of Conditional Sale, respondents paid PNB the amount of P12,038.86 on
February 22, 19776 and P20,744.30 on July 17, 19787 for the full payment of the loan.
At the time of the transaction, Mr. Marcos Tacloy had a basket-making shop on the property, while
the spouses Delfin and Nelita Flores had a store. Tacloy and the Spouses Flores vacated the
property after respondents paid them P4,000.00 each.
Thereafter, respondents took possession of the subject property. They constructed an 80 by 32-feet
building and a steel-matting fence around the property to house their truck body-building shop which
they called the "Emiliano Trucking Body Builder and Auto Repair Shop."
On December 24, 1977, before the payment of the balance of the mortgage amount with PNB, Bate
Nabus died. On August 17, 1978, his surviving spouse, Julie Nabus, and their minor daughter,
Michelle Nabus, executed a Deed of Extra Judicial Settlement over the registered land covered by
TCT No. 9697. On the basis of the said document, TCT No. T- 17718 8 was issued on February 17,
1984 in the names of Julie Nabus and Michelle Nabus.
Meanwhile, respondents continued paying their balance, not in installments of P2,000.00 as agreed
upon, but in various, often small amounts ranging from as low as P10.009 to as high
as P15,566.00,10 spanning a period of almost seven years, from March 9, 1977 11 to January 17,
1984.12
There was a total of 364 receipts of payment, 13 which receipts were mostly signed by Julie Nabus,
who also signed as Julie Quan when she remarried. The others who signed were Bate Nabus; PNB,
La Trinidad Branch; Maxima Nabus; Sylvia Reyes; Michelle Nabus and the second husband of Julie
Nabus, Gereon Quan. Maxima Nabus is the mother of Bate Nabus, while Sylvia Reyes is a niece.
The receipts showed that the total sum paid by respondents to the Spouses Nabus
was P112,455.16,14 leaving a balance of P57,544.84. The sum of P30,000.00 which was the value of
the pick-up truck allegedly sold and delivered in 1978 to the Spouses Nabus, was not considered as
payment because the registration papers remained in the name of its owner, Dominga D. Pacson,
who is the sister of Joaquin Pacson. The vehicle was also returned to respondents.
During the last week of January 1984, Julie Nabus, accompanied by her second husband,
approached Joaquin Pacson to ask for the full payment of the lot. Joaquin Pacson agreed to pay, but
told her to return after four days as his daughter, Catalina Pacson, would have to go over the
numerous receipts to determine the balance to be paid. When Julie Nabus returned after four days,
Joaquin sent her and his daughter, Catalina, to Atty. Elizabeth Rillera for the execution of the deed of
absolute sale. Since Julie was a widow with a minor daughter, Atty. Rillera required Julie Nabus to
return in four days with the necessary documents, such as the deed of extrajudicial settlement, the

transfer certificate of title in the names of Julie Nabus and minor Michelle Nabus, and the
guardianship papers of Michelle. However, Julie Nabus did not return.
Getting suspicious, Catalina Pacson went to the Register of Deeds of the Province of Benguet and
asked for a copy of the title of the land. She found that it was still in the name of Julie and Michelle
Nabus.
After a week, Catalina Pacson heard a rumor that the lot was already sold to petitioner Betty Tolero.
Catalina Pacson and Atty. Rillera went to the Register of Deeds of the Province of Benguet, and
found that Julie Nabus and her minor daughter, Michelle Nabus, represented by the formers mother
as appointed guardian by a court order dated October 29, 1982, had executed a Deed of Absolute
Sale in favor of Betty Tolero on March 5, 1984, covering the whole lot comprising 1,665 square
meters.15 The property was described in the deed of sale as comprising four lots: (1) Lot A-2-A, with
an area of 832 square meters; (2) Lot A-2-B, 168 square meters; (3) Lot A-2-C, 200 square meters;
and (4) Lot A-2-D, 465 square meters. Lots A-2-A and A-2-B, with a combined area of 1,000 square
meters, correspond to the lot previously sold to Joaquin and Julia Pacson in the Deed of Conditional
Sale.
Catalina Pacson and Atty. Rillera also found that the Certificate of Title over the property in the name
of Julie and Michelle Nabus was cancelled on March 16, 1984, and four titles to the fours lots were
issued in the name of Betty Tolero, namely: TCT No. T-18650 16 for Lot A-2-A; TCT No. 18651 17 for
Lot A-2-B; TCT No. T-1865218 for Lot A-2-C; and T-1865319 for Lot A-2-D.
On March 22, 1984, the gate to the repair shop of the Pacsons was padlocked. A sign was displayed
on the property stating "No Trespassing."20
On March 26, 1984, Catalina Pacson filed an affidavit-complaint regarding the padlocking incident of
their repair shop with the police station at La Trinidad, Benguet.
On March 28, 2008, respondents Joaquin and Julia Pacson filed with the Regional Trial Court of La
Trinidad, Benguet (trial court) a Complaint21 for Annulment of Deeds, with damages and prayer for
the issuance of a writ of preliminary injunction. 22 They sought the annulment of (1) the Extra-judicial
Settlement of Estate, insofar as their right to the 1,000-square-meter lot subject of the Deed of
Conditional Sale23 was affected; (2) TCT No. T-17718 issued in the names of Julie and Michelle
Nabus; and (3) the Deed of Absolute Sale 24 in favor of Betty Tolero and the transfer certificates of
title issued pursuant thereto. They also prayed for the award of actual, moral and exemplary
damages, as well as attorneys fees.
In their Answer,25 Julie and Michelle Nabus alleged that respondent Joaquin Pacson did not proceed
with the conditional sale of the subject property when he learned that there was a pending case over
the whole property. Joaquin proposed that he would rather lease the property with a monthly rental
of P2,000.00 and apply the sum of P13,000.00 as rentals, since the amount was already paid to the
bank and could no longer be withdrawn. Hence, he did not affix his signature to the second page of a
copy of the Deed of Conditional Sale. 26 Julie Nabus alleged that in March 1994, due to her own
economic needs and those of her minor daughter, she sold the property to Betty Tolero, with
authority from the court.
During the hearing on the merits, Julie Nabus testified that she sold the property to Betty Tolero
because she was in need of money. She stated that she was free to sell the property because the
Deed of Conditional Sale executed in favor of the Spouses Pacson was converted into a contract of
lease. She claimed that at the time when the Deed of Conditional Sale was being explained to them

by the notary public, Joaquin Pacson allegedly did not like the portion of the contract stating that
there was a pending case in court involving the subject property. Consequently, Joaquin Pacson did
not continue to sign the document; hence, the second page of the document was
unsigned.27 Thereafter, it was allegedly their understanding that the Pacsons would occupy the
property as lessees and whatever amount paid by them would be considered rentals.
Betty Tolero put up the defense that she was a purchaser in good faith and for value. She testified
that it was Julie Nabus who went to her house and offered to sell the property consisting of two lots
with a combined area of 1,000 square meters. She consulted Atty. Aurelio de Peralta before she
agreed to buy the property. She and Julie Nabus brought to Atty. De Peralta the pertinent papers
such as TCT No. T-17718 in the names of Julie and Michelle Nabus, the guardianship papers of
Michelle Nabus and the blueprint copy of the survey plan showing the two lots. After examining the
documents and finding that the title was clean, Atty. De Peralta gave her the go-signal to buy the
property.
Tolero testified that upon payment of the agreed price of P200,000.00, the Deed of Absolute Sale
was executed and registered, resulting in the cancellation of the title of Julie and Michelle Nabus and
the issuance in her name of TCT Nos. T-18650 and T-18651 28 corresponding to the two lots.
Thereafter, she asked her common-law husband, Ben Ignacio, to padlock the gate to the property
and hang the "No Trespassing" sign.
Tolero also testified that as the new owner, she was surprised and shocked to receive the Complaint
filed by the Spouses Pacson. She admitted that she knew very well the Spouses Pacson, because
they used to buy vegetables regularly from her. She had been residing along the highway at
Kilometer 4, La Trinidad, Benguet since 1971. She knew the land in question, because it was only 50
meters away across the highway. She also knew that the Spouses Pacson had a shop on the
property for the welding and body-building of vehicles. She was not aware of the Deed of Conditional
Sale executed in favor of the Pacsons, and she saw the document for the first time when Joaquin
Pacson showed it to her after she had already bought the property and the title had been transferred
in her name. At the time she was buying the property, Julie Nabus informed her that the Pacsons
were merely renting the property. She did not bother to verify if that was true, because the Pacsons
were no longer in the property for two years before she bought it.
In a Decision dated September 30, 1993, the trial court ruled in favor of respondents. The dispositive
portion of the Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs, ordering
defendant Betty Tolero to execute a deed of absolute sale in favor of the Spouses Joaquin and Julia
Pacson over the lots covered by Transfer Certificates of Title Nos. T-18650 and T-18651 upon
payment to her by the plaintiffs of the sum of P57,544.[8]4 representing the balance due for the full
payment of the property subject of this case. In addition to the execution of a deed of absolute sale,
defendant Betty Tolero shall surrender to the plaintiffs her owners duplicate copy of Transfer
Certificates of Title Nos. T-18650 and T-18651.
Defendants Julie Nabus, Michelle Nabus, and Betty Tolero shall also pay the plaintiffs damages as
follows:P50,000.00 for moral damages; P20,000.00 for exemplary damages; and P10,000.00 for
attorneys fees and expenses for litigation.29

Two issues determined by the trial court were: (1) Was the Deed of Conditional Sale between the
Spouses Pacson and the Nabuses converted into a contract of lease? and (2) Was Betty Tolero a
buyer in good faith?
The trial court held that the Deed of Conditional Sale was not converted into a contract of lease
because the original copy of the contract30 showed that all the pages were signed by all the parties to
the contract. By the presumption of regularity, all other carbon copies must have been duly signed.
The failure of Joaquin Pacson to sign the second page of one of the carbon copies of the contract
was by sheer inadvertence. The omission was of no consequence since the signatures of the parties
in all the other copies of the contract were complete. Moreover, all the receipts of payment expressly
stated that they were made in payment of the lot. Not a single receipt showed payment for rental.
Further, the trial court held that Betty Tolero was not a purchaser in good faith as she had actual
knowledge of the Conditional Sale of the property to the Pacsons.
The trial court stated that the Deed of Conditional Sale contained reciprocal obligations between the
parties, thus:
THAT, as soon as the full consideration of this sale has been paid by the VENDEE, the
corresponding transfer documents shall be executed by the VENDOR to the VENDEE for the portion
sold;
xxxx
THAT, finally, the PARTIES hereby agree that this Instrument shall be binding upon their respective
heirs, successors or assigns.31
In other words, the trial court stated, when the vendees (the Spouses Pacson) were already ready to
pay their balance, it was the corresponding obligation of the vendors (Nabuses) to execute the
transfer documents.
The trial court held that "[u]nder Article 1191 of the Civil Code, an injured party in a reciprocal
obligation, such as the Deed of Conditional Sale in the case at bar, may choose between the
fulfillment [or] the rescission of the obligation, with the payment of damages in either case." It stated
that in filing the case, the Spouses Pacson opted for fulfillment of the obligation, that is, the
execution of the Deed of Absolute Sale in their favor upon payment of the purchase price.
Respondents appealed the decision of the trial court to the Court of Appeals.
In the Decision dated November 28, 2003, the Court of Appeals affirmed the trial courts decision,
but deleted the award of attorneys fees. The dispositive portion of the Decision reads:
WHEREFORE, finding no reversible error in the September 30, 1993 Decision of the Regional Trial
Court of La Trinidad, Benguet, Branch 10, in Civil Case No. 84-CV-0079, the instant appeal is hereby
DISMISSED for lack of merit, and the assailed Decision is hereby AFFIRMED and UPHELD with the
modification that the award of attorneys fees is deleted. 32
Petitioners filed this petition raising the following issues:
I
THE [COURT OF APPEALS] ERRED IN CONSIDERING THE CONTRACT ENTERED INTO
BETWEEN THE SPOUSES BATE NABUS AND JULIE NABUS AND SPOUSES JOAQUIN PACSON
AND JULIA PACSON TO BE A CONTRACT OF SALE.
II
THE COURT A QUO ERRED IN FINDING THAT THERE ARE ONLY TWO ISSUES IN THE CASE
ON APPEAL AND THEY ARE: WHETHER THE DEED OF CONDITIONAL SALE WAS

CONVERTED INTO A CONTRACT OF LEASE; AND THAT [WHETHER] PETITIONER BETTY

TOLERO WAS A BUYER IN GOOD FAITH.
III
THAT THE TRIAL COURT ERRED IN HOLDING THAT [RESPONDENTS] BALANCE TO THE
SPOUSES NABUS UNDER THE CONDITIONAL SALE IS ONLY P57,544.[8]4.
IV
THAT ASSUMING WITHOUT ADMITTING THAT PETITIONER BETTY TOLERO WAS AWARE OF
THE EXISTENCE OF THE DEED OF CONDITIONAL SALE, THE TRIAL COURT, AS WELL AS THE
[COURT OF APPEALS], ERRED IN ORDERING PETITIONER BETTY TOLERO TO EXECUTE A
DEED OF ABSOLUTE SALE IN FAVOR OF THE [RESPONDENTS] AND TO SURRENDER THE
OWNER'S DUPLICATE COPY OF TCT NOS. T-18650 AND T-18651, WHICH WAS NOT PRAYED
FOR IN THE PRAYER IN THE COMPLAINT.
V
THAT THE [COURT OF APPEALS] ERRED IN FINDING BETTY TOLERO [AS] A BUYER [WHO]
FAILED TO TAKE STEPS IN INQUIRING FROM THE [RESPONDENTS] THE STATUS OF THE
PROPERTY IN QUESTION BEFORE HER PURCHASE, CONTRARY TO FACTS ESTABLISHED
BY EVIDENCE.
VI
THE [COURT OF APPEALS] ERRED IN CONSIDERING PETITIONER BETTY TOLERO A BUYER
IN BAD FAITH, IGNORING THE APPLICATION OF THE DOCTRINE IN THE RULING OF THE
SUPREME COURT IN THE CASE OF RODOLFO ALFONSO, ET AL. VS. COURT OF APPEALS,
G.R. NO. 63745.33
The main issues to be resolved are:
1) Whether or not the Deed of Conditional Sale was converted into a contract of lease;
2) Whether the Deed of Conditional Sale was a contract to sell or a contract of sale.
As regards the first issue, the Deed of Conditional Sale entered into by the Spouses Pacson and the
Spouses Nabus was not converted into a contract of lease. The 364 receipts issued to the Spouses
Pacson contained either the phrase "as partial payment of lot located in Km. 4" or "cash vale" or
"cash vale (partial payment of lot located in Km. 4)," evidencing sale under the contract and not the
lease of the property. Further, as found by the trial court, Joaquin Pacsons non-signing of the
second page of a carbon copy of the Deed of Conditional Sale was through sheer inadvertence,
since the original contract34 and the other copies of the contract were all signed by Joaquin Pacson
and the other parties to the contract.
On the second issue, petitioners contend that the contract executed by the respondents and the
Spouses Nabus was a contract to sell, not a contract of sale. They allege that the contract was
subject to the suspensive condition of full payment of the consideration agreed upon before
ownership of the subject property could be transferred to the vendees. Since respondents failed to
pay the full amount of the consideration, having an unpaid balance ofP57,544.84, the obligation of
the vendors to execute the Deed of Absolute Sale in favor of respondents did not arise. Thus, the
subsequent Deed of Absolute Sale executed in favor of Betty Tolero, covering the same parcel of
land was valid, even if Tolero was aware of the previous deed of conditional sale.
Moreover, petitioners contend that respondents violated the stipulated condition in the contract that
the monthly installment to be paid was P2,000.00, as respondents gave meager amounts as low
as P10.00.

Petitioners also assert that respondents allegation that Julie Nabus failure to bring the pertinent
documents necessary for the execution of the final deed of absolute sale, which was the reason for
their not having paid the balance of the purchase price, was untenable, and a lame and shallow
excuse for violation of the Deed of Conditional Sale. Respondents could have made a valid tender of
payment of their remaining balance, as it had been due for a long time, and upon refusal to accept
payment, they could have consigned their payment to the court as provided by law. This,
respondents failed to do.
The Court holds that the contract entered into by the Spouses Nabus and respondents was a
contract to sell, not a contract of sale.
A contract of sale is defined in Article 1458 of the Civil Code, thus:
Art. 1458. By the contract of sale, one of the contracting parties obligates himself to transfer the
ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in
money or its equivalent.
A contract of sale may be absolute or conditional.
Ramos v. Heruela35 differentiates a contract of absolute sale and a contract of conditional sale as
follows:
Article 1458 of the Civil Code provides that a contract of sale may be absolute or conditional. A
contract of sale is absolute when title to the property passes to the vendee upon delivery of the thing
sold. A deed of sale is absolute when there is no stipulation in the contract that title to the property
remains with the seller until full payment of the purchase price. The sale is also absolute if there is
no stipulation giving the vendor the right to cancel unilaterally the contract the moment the vendee
fails to pay within a fixed period. In a conditional sale, as in a contract to sell, ownership remains with
the vendor and does not pass to the vendee until full payment of the purchase price. The full
payment of the purchase price partakes of a suspensive condition, and non-fulfillment of the
condition prevents the obligation to sell from arising. 36
Coronel v. Court of Appeals37 distinguished a contract to sell from a contract of sale, thus:
Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The
essential elements of a contract of sale are the following:
a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the
price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the
first essential element is lacking. In a contract to sell, the prospective seller explicitly reserves the
transfer of title to the prospective buyer, meaning, the prospective seller does not as yet agree or
consent to transfer ownership of the property subject of the contract to sell until the happening of an
event, which for present purposes we shall take as the full payment of the purchase price. What the
seller agrees or obliges himself to do is to fulfill his promise to sell the subject property when the
entire amount of the purchase price is delivered to him. In other words, the full payment of the
purchase price partakes of a suspensive condition, the non-fulfilment of which prevents the
obligation to sell from arising and, thus, ownership is retained by the prospective seller without
further remedies by the prospective buyer.
xxxx

Stated positively, upon the fulfillment of the suspensive condition which is the full payment of the
purchase price, the prospective sellers obligation to sell the subject property by entering into a
contract of sale with the prospective buyer becomes demandable as provided in Article 1479 of the
Civil Code which states:
Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally
demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding
upon the promissor if the promise is supported by a consideration distinct from the price.
A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while
expressly reserving the ownership of the subject property despite delivery thereof to the prospective
buyer, binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of
the condition agreed upon, that is, full payment of the purchase price.
A contract to sell as defined hereinabove, may not even be considered as a conditional contract of
sale where the seller may likewise reserve title to the property subject of the sale until the fulfillment
of a suspensive condition, because in a conditional contract of sale, the first element of consent is
present, although it is conditioned upon the happening of a contingent event which may or may not
occur. If the suspensive condition is not fulfilled, the perfection of the contract of sale is completely
abated. However, if the suspensive condition is fulfilled, the contract of sale is thereby perfected,
such that if there had already been previous delivery of the property subject of the sale to the buyer,
ownership thereto automatically transfers to the buyer by operation of law without any further act
having to be performed by the seller.
In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the
purchase price, ownership will not automatically transfer to the buyer although the property may
have been previously delivered to him. The prospective seller still has to convey title to the
prospective buyer by entering into a contract of absolute sale. 38
Further, Chua v. Court of Appeals 39 cited this distinction between a contract of sale and a contract to
sell:
In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold;
in a contract to sell, ownership is, by agreement, reserved in the vendor and is not to pass to the
vendee until full payment of the purchase price. Otherwise stated, in a contract of sale, the vendor
loses ownership over the property and cannot recover it until and unless the contract is resolved or
rescinded; whereas, in a contract to sell, title is retained by the vendor until full payment of the price.
In the latter contract, payment of the price is a positive suspensive condition, failure of which is not a
breach but an event that prevents the obligation of the vendor to convey title from becoming
effective.40
It is not the title of the contract, but its express terms or stipulations that determine the kind of
contract entered into by the parties. In this case, the contract entitled "Deed of Conditional Sale" is
actually a contract to sell. The contract stipulated that "as soon as the full consideration of the sale
has been paid by the vendee, the corresponding transfer documents shall be executed by the
vendor to the vendee for the portion sold." 41 Where the vendor promises to execute a deed of
absolute sale upon the completion by the vendee of the payment of the price, the contract is only a
contract to sell."42 The aforecited stipulation shows that the vendors reserved title to the subject
property until full payment of the purchase price.

If respondents paid the Spouses Nabus in accordance with the stipulations in the Deed of
Conditional Sale, the consideration would have been fully paid in June 1983. Thus, during the last
week of January 1984, Julie Nabus approached Joaquin Pacson to ask for the full payment of the
lot. Joaquin Pacson agreed to pay, but told her to return after four days as his daughter, Catalina
Pacson, would have to go over the numerous receipts to determine the balance to be paid.
When Julie Nabus returned after four days, Joaquin Pacson sent Julie Nabus and his daughter,
Catalina, to Atty. Elizabeth Rillera for the execution of the deed of sale. Since Bate Nabus had
already died, and was survived by Julie and their minor daughter, Atty. Rillera required Julie Nabus
to return in four days with the necessary documents such as the deed of extrajudicial settlement, the
transfer certificate of title in the names of Julie Nabus and minor Michelle Nabus, and the
guardianship papers of Michelle. However, Julie Nabus did not return.
As vendees given possession of the subject property, the ownership of which was still with the
vendors, the Pacsons should have protected their interest and inquired from Julie Nabus why she
did not return and then followed through with full payment of the purchase price and the execution of
the deed of absolute sale. The Spouses Pacson had the legal remedy of consigning their payment to
the court; however, they did not do so. A rumor that the property had been sold to Betty Tolero
prompted them to check the veracity of the sale with the Register of Deeds of the Province of
Benguet. They found out that on March 5, 1984, Julie Nabus sold the same property to Betty Tolero
through a Deed of Absolute Sale, and new transfer certificates of title to the property were issued to
Tolero.1avvphi1
Thus, the Spouses Pacson filed this case for the annulment of the contract of absolute sale
executed in favor of Betty Tolero and the transfer certificates of title issued in her name.
Unfortunately for the Spouses Pacson, since the Deed of Conditional Sale executed in their favor
was merely a contract to sell, the obligation of the seller to sell becomes demandable only upon the
happening of the suspensive condition. 43 The full payment of the purchase price is the positive
suspensive condition, the failure of which is not a breach of contract, but simply an event that
prevented the obligation of the vendor to convey title from acquiring binding force. 44 Thus, for its nonfulfilment, there is no contract to speak of, the obligor having failed to perform the suspensive
condition which enforces a juridical relation. 45 With this circumstance, there can be no rescission or
fulfilment of an obligation that is still non-existent, the suspensive condition not having occurred as
yet.46 Emphasis should be made that the breach contemplated in Article 1191 of the New Civil Code
is the obligors failure to comply with an obligation already extant, not a failure of a condition to
render binding that obligation.47
The trial court, therefore, erred in applying Article 1191 of the Civil Code 48 in this case by ordering
fulfillment of the obligation, that is, the execution of the deed of absolute sale in favor of the Spouses
Pacson upon full payment of the purchase price, which decision was affirmed by the Court of
Appeals. Ayala Life Insurance, Inc. v. Ray Burton Development Corporation 49 held:
Evidently, before the remedy of specific performance may be availed of, there must be a breach of
the contract.
Under a contract to sell, the title of the thing to be sold is retained by the seller until the purchaser
makes full payment of the agreed purchase price. Such payment is a positive suspensive condition,
the non-fulfillment of which is not a breach of contract but merely an event that prevents the seller
from conveying title to the purchaser. The non-payment of the purchase price renders the contract to

sell ineffective and without force and effect. Thus, a cause of action for specific performance does
not arise.50
Since the contract to sell was without force and effect, Julie Nabus validly conveyed the subject
property to another buyer, petitioner Betty Tolero, through a contract of absolute sale, and on the
strength thereof, new transfer certificates of title over the subject property were duly issued to
Tolero.51
The Spouses Pacson, however, have the right to the reimbursement of their payments to the
Nabuses, and are entitled to the award of nominal damages. The Civil Code provides:
Art. 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which has been
violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by him.
Art. 2222. The court may award nominal damages in every obligation arising from any source
enumerated in article 1157, or in every case where any property right has been invaded.
As stated by the trial court, under the Deed of Conditional Sale, respondents had the right to
demand from petitioners Julie and Michelle Nabus that the latter execute in their favor a deed of
absolute sale when they were ready to pay the remaining balance of the purchase price. The
Nabuses had the corresponding duty to respect the respondents right, but they violated such right,
for they could no longer execute the document since they had sold the property to Betty
Tolero.52 Hence, nominal damages in the amount of P10,000.00 are awarded to respondents.
Respondents are not entitled to moral damages because contracts are not referred to in Article
221953 of the Civil Code, which enumerates the cases when moral damages may be recovered.
Article 222054 of the Civil Code allows the recovery of moral damages in breaches of contract where
the defendant acted fraudulently or in bad faith. However, this case involves a contract to sell,
wherein full payment of the purchase price is a positive suspensive condition, the non-fulfillment of
which is not a breach of contract, but merely an event that prevents the seller from conveying title to
the purchaser. Since there is no breach of contract in this case, respondents are not entitled to moral
damages.
In the absence of moral, temperate, liquidated or compensatory damages, exemplary damages
cannot be granted for they are allowed only in addition to any of the four kinds of damages
mentioned.55
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. CV No.
44941, dated November 28, 2003, is REVERSED and SET ASIDE. Judgment is hereby rendered
upholding the validity of the sale of the subject property made by petitioners Julie Nabus and
Michelle Nabus in favor of petitioner Betty Tolero, as well as the validity of Transfer Certificates of
Title Nos. T-18650 and T-18651 issued in the name of Betty Tolero. Petitioners Julie Nabus and
Michelle Nabus are ordered to reimburse respondents spouses Joaquin and Julia Pacson the sum of
One Hundred Twelve Thousand Four Hundred Fifty-Five Pesos and Sixteen Centavos
(P112,455.16), and to pay Joaquin and Julia Pacson nominal damages in the amount of Ten
Thousand Pesos (P10,000.00), with annual interest of twelve percent (12%) until full payment of the
amounts due to Joaquin and Julia Pacson.
No costs.
SO ORDERED.

THIRD DIVISION
G.R. No. 179653, July 31, 2009
UNITED MUSLIM AND CHRISTIAN URBAN POOR ASSOCIATION, INC. represented by its
President, MANUEL V. BUEN, Petitioner vs. BRYC-V DEVELOPMENT CORPORATION
represented by its President, BENJAMIN QUIDILLA; and SEA FOODS CORPORATION,
represented by its Executive Vice President, VICENTE T. HERNANDEZ
x------------------------------------------------------------------------------------x
DECISION
NACHURA, J.:
This petition for review on certiorari seeks to set aside the Decision[1] of the Court of Appeals
(CA) in CA G.R. CV No. 62557 which affirmed in toto the Decision[2] of the Regional Trial Court
(RTC), Branch 16, Zamboanga City in Civil Case No. 467(4544).
The facts are simple.
Respondent Sea Foods Corporation (SFC) is the registered owner of Lot No. 300 located in
Lower Calainan, Zamboanga City and covered by Transfer Certificate of Title (TCT) No. 3182 (T576).
Sometime in 1991, petitioner United Muslim and Christian Urban Poor Association, Inc.
(UMCUPAI), an organization of squatters occupying Lot No. 300, through its President, Carmen T.
Diola, initiated negotiations with SFC for the purchase thereof. UMCUPAI expressed its intention to
buy the subject property using the proceeds of its pending loan application with National Home
Mortgage Finance Corporation (NHMF). Thereafter, the parties executed a Letter of Intent to Sell by
[SFC] and Letter of Intent to Purchase by UMCUPAI, providing, in pertinent part:
WHEREAS, [SFC] is the registered owner of a parcel [of] land designated as Lot No.
300 situated in Lower Calarian, Zamboanga City, consisting of 61,736 square meters, and
more particularly described in Transfer Certificate of Title No. 576 of the Registry of Deeds
of Zamboanga City;
WHEREAS, UMCUPAI, an association duly registered with the SEC (Registration No.
403410) and duly accredited with the Presidential Commission for the Urban Poor, has
approached [SFC] and negotiated for the ACQUISITION of the above-described property of
[SFC];
WHEREAS, in pursuance to the negotiations between [SFC] and UMCUPAI, the latter
has taken steps with the proper government authorities particularly the Mayor of
Zamboanga City and its City Housing Board which will act as Originator in the acquisition of
said property which will enable UMCUPAI to avail of its Community Mortgage Program;
WHEREAS, it appears that UMCUPAI will ultimately apply with the Home Mortgage
and Finance Corporation for a loan to pay the acquisition price of said land;
WHEREAS, as one of the steps required by the government authorities to initiate
proceedings is to receive a formal manifestation of Intent to Sell from [SFC];

NOW, THEREFORE, for and in consideration of the foregoing premises, the parties
hereto agree as follows:
1. [SFC] expressly declares its intention to sell Lot No. 300 with an area of 61,736
square meters situated in Lower Calarian, Zamboanga City and covered by TCT No. 576 of
the Registry of Deeds of Zamboanga City to UMCUPAI at the price of P105.00 per square
meter, free from all liens, charges and encumbrances;
2. That UMCUPAI hereby expressly declares its intention to buy the aforesaid property
and shall endeavor to raise the necessary funds to acquire same at the abovementioned
price of P105.00 per square meter;
3. That the Absolute Deed of Sale shall be executed, signed and delivered together
with the title and all other pertinent documents upon full payment of the purchase price;
4. That [SFC] shall pay the capital gains tax and documentary stamps, Registration,
transfer tax and other expenses shall be paid by the UMCUPAI. [3]
However, the intended sale was derailed due to UMCUPAIs inability to secure the loan from NHMF
as not all its members occupying Lot No. 300 were willing to join the undertaking. Intent on buying
the subject property, UMCUPAI, in a series of conferences with SFC, proposed the subdivision of Lot
No. 300 to allow the squatter-occupants to purchase a smaller portion thereof.
Consequently, sometime in December 1994, Lot No. 300 was subdivided into three (3) parts
covered by separate titles:
1. Lot No. 300-A with an area of 41,460 square meters under TCT No. T-117,448;
2. Lot No. 300-B with an area of 1,405 square meters under TCT No. T-117,449; and
3. Lot No. 300-C with an area of 18,872 square meters under TCT No. T-117,450.
On January 11, 1995, UMCUPAI purchased Lot No. 300-A for P4,350,801.58. In turn, Lot No.
300-B was constituted as road right of way and donated by SFC to the local government.
UMCUPAI failed to acquire Lot No. 300-C for lack of funds. On March 5, 1995, UMCUPAI
negotiated anew with SFC and was given by the latter another three months to purchase Lot No.
300-C. However, despite the extension, the three-month period lapsed with the sale not
consummated because UMCUPAI still failed to obtain a loan from NHMF. Thus, on July 20, 1995,
SFC sold Lot No. 300-C for P2,547,585.00 to respondent BRYC-V Development Corporation
(BRYC).
A year later, UMCUPAI filed with the RTC a complaint against respondents SFC and BRYC
seeking to annul the sale of Lot No. 300-C, and the cancellation of TCT No. T-121,523. UMCUPAI
alleged that the sale between the respondents violated its valid and subsisting agreement with SFC
embodied in the Letter of Intent. According to UMCUPAI, the Letter of Intent granted it a prior, better,
and preferred right over BRYC in the purchase of Lot No. 300-C.
In refutation, BRYC said that UMCUPAIs complaint did not state a cause of action since
UMCUPAI had unequivocally recognized its ownership of Lot No. 300-C when UMCUPAI likewise
sent BRYC a Letter of Intent dated August 18, 1995 imploring BRYC to re-sell the subject lot.
In a separate Answer, SFC countered that the Letter of Intent dated October 4, 1991 is not, and
cannot be considered, a valid and subsisting contract of sale. On the contrary, SFC averred that the
document was drawn and executed merely to accommodate UMCUPAI and enable it to comply with
the loan documentation requirements of NHMF. In all, SFC maintained that the Letter of Intent dated
October 4, 1991 was subject to a condition i.e., payment of the acquisition price, which UMCUPAI
failed to do when it did not obtain the loan from NHMF.

After trial, the RTC dismissed UMCUPAIs complaint. The lower court found that the Letter of
Intent was executed to facilitate the approval of UMCUPAIs loan from NHMF for its intended
purchase of Lot No. 300. According to the RTC, the Letter of Intent was simply SFCs declaration of
intention to sell, and not a promise to sell, the subject lot. On the whole, the RTC concluded that the
Letter of Intent was neither a promise, nor an option contract, nor an offer contemplated under Article
1319 of the Civil Code, or a bilateral contract to sell and buy.
As previously adverted to, the CA, on appeal, affirmed in toto the RTCs ruling.
Hence, this recourse by UMCUPAI positing a sole issue for our resolution:
IS THE LETTER OF INTENT TO SELL AND LETTER OF INTENT TO BUY A BILATERAL
RECIPROCAL CONTRACT WITHIN THE MEANING OR CONTEMPLATION OF ARTICLE 1479,
FIRST PARAGRAPH, CIVIL CODE OF THE PHILIPPINES?[4]
The petition deserves scant consideration. We completely agree with the lower courts rulings.
Well-entrenched in jurisprudence is the rule that factual findings of the trial court, especially
when affirmed by the appellate court, are accorded the highest degree of respect and are considered
conclusive between the parties.[5] A review of such findings by this Court is not warranted except
upon a showing of highly meritorious circumstances, such as: (1) when the findings of a trial court
are grounded entirely on speculation, surmises or conjectures; (2) when a lower courts inference
from its factual findings is manifestly mistaken, absurd or impossible; (3) when there is grave abuse
of discretion in the appreciation of facts; (4) when the findings of the appellate court go beyond the
issues of the case, or fail to notice certain relevant facts which, if properly considered, would justify a
different conclusion; (5) when there is a misappreciation of facts; (6) when the findings of fact are
conclusions without mention of the specific evidence on which they are based, or are premised on
the absence of evidence, or are contradicted by evidence on record. [6] None of the foregoing
exceptions necessitating a reversal of the assailed decision obtain in this instance.
UMCUPAI is adamant, however, that the CA erred when it applied the second paragraph of
Article 1479 of the Civil Code instead of the first paragraph thereof. UMCUPAI urges us that the first
paragraph of Article 1479 contemplates a bilateral reciprocal contract which is binding on the parties.
Yet, UMCUPAI is careful not to designate the Letter of Intent as a Contract to Sell. UMCUPAI simply
insists that the Letter of Intent is not a unilateral promise to sell or buy which has to be supported by
a consideration distinct from the price for it to be binding on the promissor. In short, UMCUPAI claims
that the Letter of Intent did not merely grant the parties the option to respectively sell or buy the
subject property. Although not stated plainly, UMCUPAI claims that the Letter of Intent is equivalent
to a conditional contract of sale subject only to the suspensive condition of payment of the purchase
price.
UMCUPAI appears to labor under a cloud of confusion. The first paragraph of Article 1479
contemplates the bilateral relationship of a contract to sell as distinguished from a contract of sale
which may be absolute or conditional under Article 1458 [7] of the same code. It reads:
Art. 1479. A promise to buy and sell a determinate thing for a price certain is
reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is
binding upon the promissor if the promise is supported by a consideration distinct from the
price.
The case of Coronel v. Court of Appeals[8] is illuminating and explains the distinction between a
conditional contract of sale under Article 1458 of the Civil Code and a bilateral contract to sell under
Article 1479 of the same code:
A contract to sell may thus be defined as a bilateral contract whereby the prospective
seller, while expressly reserving the ownership of the subject property despite delivery

thereof to the prospective buyer, binds himself to sell the said property exclusively to the
prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the
purchase price.
A contract to sell as defined hereinabove, may not even be considered as a conditional
contract of sale where the seller may likewise reserve title to the property subject of the
sale until the fulfillment of a suspensive condition, because in a conditional contract of sale,
the first element of consent is present, although it is conditioned upon the happening of a
contingent event which may or may not occur. If the suspensive condition is not fulfilled, the
perfection of the contract of sale is completely abated. However, if the suspensive condition
is fulfilled, the contract of sale is thereby perfected, such that if there had already been
previous delivery of the property subject of the sale to the buyer, ownership thereto
automatically transfers to the buyer by operation of law without any further act having to be
performed by the seller.
In a contract to sell, upon the fulfillment of the suspensive condition which is the full
payment of the purchase price, ownership will not automatically transfer to the buyer
although the property may have been previously delivered to him. The prospective seller
still has to convey title to the prospective buyer by entering into a contract of absolute sale.
It is essential to distinguish between a contract to sell and a conditional contract of sale
specially in cases where the subject property is sold by the owner not to the party the seller
contracted with, but to a third person, as in the case at bench. In a contract to sell, there
being no previous sale of the property, a third person buying such property despite the
fulfillment of the suspensive condition such as the full payment of the purchase price, for
instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the
relief of reconveyance of the property. There is no double sale in such case. Title to the
property will transfer to the buyer after registration because there is no defect in the ownersellers title per se, but the latter, of course, may be sued for damages by the intending
buyer.
In a conditional contract of sale, however, upon the fulfillment of the suspensive
condition, the sale becomes absolute and this will definitely affect the sellers title thereto. In
fact, if there had been previous delivery of the subject property, the sellers ownership or title
to the property is automatically transferred to the buyer such that, the seller will no longer
have any title to transfer to any third person. Applying Article 1544 of the Civil Code, such
second buyer of the property who may have had actual or constructive knowledge of such
defect in the sellers title, or at least was charged with the obligation to discover such defect,
cannot be a registrant in good faith. Such second buyer cannot defeat the first buyers
title. In case a title is issued to the second buyer, the first buyer may seek reconveyance of
the property subject of the sale.
In the instant case, however, the parties executed a Letter of Intent, which is neither a contract to
sell nor a conditional contract of sale. As found by the RTC, and upheld by the CA, the Letter of
Intent was executed to accommodate UMCUPAI and facilitate its loan application with NHMF. The
4th and 5th paragraphs of the recitals (whereas clauses) specifically provide:
WHEREAS, it appears that UMCUPAI will ultimately apply with the Home Mortgage
and Finance Corporation for a loan to pay the acquisition price of said land;
WHEREAS, as one of the steps required by the government authorities to initiate
proceedings is to receive a formal manifestation of Intent to Sell from [SFC].

Nowhere in the Letter of Intent does it state that SFC relinquishes its title over the subject
property, subject only to the condition of complete payment of the purchase price; nor, at the least,
that SFC, although expressly retaining ownership thereof, binds itself to sell the property exclusively
to UMCUPAI. The Letter of Intent to Buy and Sell is just that a manifestation of SFCs intention to sell
the property and UMCUPAIs intention to acquire the same. This is quite obvious from the reference
to the execution of an Absolute Deed of Sale in paragraph three [9] of the Letter of Intent.
As the CA did, we quote with favor the RTCs disquisition:
The Decision in this case hinges on the legal interpretation of the Agreement entered into
by SFC and UMCUPAI denominated as Letter of Intent to Sell by Landowner and Letter of
Intent to Purchase by United Muslim and Christian Urban Poor Association, Inc.
Blacks Law Dictionary says that a Letter of Intent is customarily employed to reduce to
writing a preliminary understanding of parties who intend to enter into contract. It is a
phrase ordinarily used to denote a brief memorandum of the preliminary understanding of
parties who intend to enter into a contract. It is a written statement expressing the intention
of the parties to enter into a formal agreement especially a business arrangement or
transaction.
In their Agreement, SFC expressly declared its intention to sell and UMCUPAI
expressly declared its intention to buy subject property. An intention is a mere idea, goal, or
plan. It simply signifies a course of action that one proposes to follow. It simply indicates
what one proposes to do or accomplish. A mere intention cannot give rise to an obligation
to give, to do or not to do (Article 1156, Civil Code). One cannot be bound by what he
proposes or plans to do or accomplish. A Letter of Intent is not a contract between the
parties thereto because it does not bind one party, with respect to the other, to give
something, or to render some service (Art. 1305, Civil Code).
xxxxxxxxx
The Letter of Intent/Agreement between SFC and UMCUPAI is merely a written preliminary
understanding of the parties wherein they declared their intention to enter into a contract of
sale. It is subject to the condition that UMCUPAI will apply with the Home Mortgage and
Finance Corporation for a loan to pay the acquisition price of said land. One of the
requirements for such loan is a formal manifestation of Intent to Sell from SFC. Thus, the
Letter of Intent to Sell fell short of an offer contemplated in Article 1319 of the Civil Code
because it is not a certain and definite proposal to make a contract but merely a declaration
of SFCs intention to enter into a contract. UMCUPAIs declaration of intention to buy is also
not certain and definite as it is subject to the condition that UMCUPAI shall endeavor to
raise funds to acquire subject land. The acceptance of the offer must be absolute; it must
be plain and unconditional. Moreover, the Letter of Intent/Agreement does not contain a
promise or commitment to enter into a contract of sale as it merely declared the intention of
the parties to enter into a contract of sale upon fulfillment of a condition that UMCUPAI
could secure a loan to pay for the price of a land.
The Letter of Intent/Agreement is not an option contract because aside from the fact that it
is merely a declaration of intention to sell and to buy subject to the condition that UMCUPAI
shall raise the necessary funds to pay the price of the land, and does not contain a binding
promise to sell and buy, it is not supported by a distinct consideration distinct from the price
of the land intended to be sold and to be bought x x x No option was granted to UMCUPAI
under the Letter of Intent/Agreement to buy subject land to the exclusion of all others within

a fixed period nor was SFC bound under said Agreement to Sell exclusively to UMCUPAI
only the said land within the fixed period.
Neither can the Letter of Intent/Agreement be considered a bilateral reciprocal contract to
sell and to buy contemplated under Article 1479 of the Civil Code which is reciprocally
demandable. The Letter of Intent/Agreement does not contain a PROMISE to sell and to
buy subject property. There was no promise or commitment on the part of SFC to sell
subject land to UMCUPAI, but merely a declaration of its intention to buy the land, subject
to the condition that UMCUPAI could raise the necessary funds to acquire the same at the
price of P105.00 per square meter x x x
While UMCUPAI succeeded in raising funds to acquire a portion of Lot No. 300-A, it failed
to raise funds to pay for Lot No. 300-C. From October 4, 1991 when the Letter of Intent was
signed to June, 1995, UMCUPAI had about three (3) years and eight (8) months within
which to pursue its intention to buy subject land from SFC. Within that period, UMCUPAI
had ample time within which to acquire Lot No. 300-C, as in fact it had acquired Lot No.
300-A which is much bigger than Lot No. 300-C and occupied by more members of
UMCUPAI. The failure of UMCUPAI to acquire Lot No. 300-C before it was sold to BRYC-V
cannot be blamed on SFC because all that UMCUPAI had to do was to raise funds to pay
for Lot No. 300-C which it did with respect to Lot No. 300-A. SFC had nothing to do with
SFCs unilateral action through Mrs. Antonina Graciano to postpone the processing of the
acquisition of Lot No. 300-C, which it referred to as Phase II, until after the payment to SFC
of the acquisition price for Lot No. 300-A or Phase I x x x
WHEREFORE, premises considered, the petition is hereby DENIED. The Decision of the Court
of Appeals in CA G.R. CV No. 62557 and the Regional Trial Court in Civil Case No. 467(4544)
areAFFIRMED. Costs against the petitioner.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 166790
November 19, 2014
JUAN P. CABRERA, Petitioner, vs. HENRY YSAAC, Respondent.
DECISION
LEONEN, J.:
Unless all the co-owners have agreed to partition their property, none of them may sell a definite
portion of the land. The co-owner may only sell his or her proportionate interest in the co-ownership.
A contract of sale which purports to sell a specific or definite portion of unpartitioned land is null and
void ab initio.
In this petition for review on certiorari,1 Juan P. Cabrera assails the Court of Appeals' decision dated
June 19, 20032 and resolution dated January 3, 2005. 3 These decisions ruled that a specific
performance to execute a deed of sale over a parcel of land is not available as a relief for Juan
Cabrera.
It appears that the heirs of Luis and Matilde Ysaac co-owned a 5,517-square-meter parcel of land
located in Sabang, Naga City, covered by Original Certificate of Title (OCT) No. 506. 4 One of the coowners is respondent, Henry Ysaac.

Henry Ysaac leased out portions of the property to several lessees. Juan Cabrera, one of the
lessees, leased a 95-square-meter portion of the land beginning in 1986. 5
On May 6, 1990, Henry Ysaac needed money and offered to sell the 95-square-meter piece of land
to Juan Cabrera.6 He told Henry Ysaac that the land was too small for his needs because there was
no parking space for his vehicle.7
In order to address Juan Cabreras concerns, Henry Ysaac expanded his offer to include the two
adjoining lands that Henry Ysaac was then leasing to the Borbe family and the Espiritu family. Those
three parcels of land have a combined area of 439-square-meters. However, Henry Ysaac warned
Juan Cabrera that the sale for those two parcels could only proceed if the two families agree to it.
Juan Cabrera accepted the new offer. Henry Ysaac and Juan Cabrera settled on the price
of P250.00 per square meter, but Juan Cabrera stated that he could only pay in full after his
retirement on June 15, 1992. 8 Henry Ysaac agreed but demanded for an initial payment
of P1,500.00, which Juan Cabrera paid.9
According to Juan Cabrera, Henry Ysaac informed him that the Borbe family and the Espiritu family
were no longer interested in purchasing the properties they were leasing. Since Mamerta Espiritu of
the Espiritu family initially considered purchasing the property and had made an initial deposit for it,
Juan Cabrera agreed to reimbursethis earlier payment. On June 9, 1990, Juan Cabrera paid the
amount of P6,100.00.10 Henry Ysaac issued a receipt for this amount. P3,100.00 of the amount paid
was reimbursed to Mamerta Espiritu and, in turn, she gaveJuan Cabrera the receipts issued to her
by Henry Ysaac.11
On June 15, 1992, Juan Cabrera tried to pay the balance of the purchase price to Henry Ysaac.
However,at that time, Henry Ysaac was in the United States. The only person in Henry Ysaacs
residence was his wife. The wife refused to accept Juan Cabreras payment. 12
Sometime in September 1993, JuanCabrera alleged that Henry Ysaac approached him, requesting
to reduce the area of the land subject of their transaction. Part of the 439-square-meter land was
going to be made into a barangay walkway, and another part was being occupied by a family that
was difficult to eject.13 Juan Cabrera agreed to the proposal. The land was surveyed again.
According to Juan Cabrera, Henry Ysaac agreed to shoulder the costs of the resurvey, which Juan
Cabrera advanced in the amount of P3,000.00.
The resurvey shows that the area now covered by the transaction was 321 square meters. 14 Juan
Cabrera intended to show the sketch plan and pay the amount due for the payment of the lot.
However, on that day, Henry Ysaac was in Manila. Once more, Henry Ysaacs wife refused to
receive the payment because of lack of authority from her husband. 15
On September 21, 1994, Henry Ysaacs counsel, Atty. Luis Ruben General, wrote a letter addressed
to Atty. Leoncio Clemente, Juan Cabreras counsel. 16 Atty. General informed Atty. Clemente that his
client is formally rescinding the contract of sale because Juan Cabrera failed to pay the balance of
the purchase price of the land between May 1990 and May 1992. The letter also stated that Juan
Cabreras initial payment of P1,500.00 and the subsequent payment of P6,100.00 were going to be
applied as payment for overdue rent of the parcel of land Juan Cabrera was leasing from Henry
Ysaac.17 The letter also denied the allegation of Juan Cabrera that Henry Ysaac agreed to shoulder
the costs of the resurveying of the property.18 Juan Cabrera, together with his uncle, Delfin Cabrera,
went to Henry Ysaacs house on September 16, 1995 to settle the matter. 19 Henry Ysaac told Juan

Cabrera that he could no longer sell the property because the new administrator of the property was
his brother, Franklin Ysaac.20
Due to Juan Cabreras inability to enforce the contract of sale between him and Henry Ysaac, he
decided to file a civil case for specific performance on September 20, 1995. 21 Juan Cabrera prayed
for the execution of a formal deed of sale and for the transfer of the title of the property in his
name.22 He tendered the sum of P69,650.00 to the clerk of court as payment of the remaining
balance of the original sale price. 23 On September 22, 1995, a notice of lis pendenswas annotated
on OCT No. 560.24
In his answer with counterclaim, 25 Henry Ysaac prayed for the dismissal of Juan Cabreras
complaint.26 He also prayed for compensation in the form of moral damages, attorneys fees, and
incidental litigation expenses.27
Before the Regional Trial Court decided the case, the heirs of Luis and Matilde Ysaac, under the
administration of Franklin Ysaac, sold their property to the local government ofNaga City on
February 12, 1997.28 The property was turned into a projectfor the urban poor of the city.29 During the
trial, Corazon Borbe Combe of the Borbe family testified that contrary to what Juan Cabrera claimed,
her family never agreed to sell the land they were formerly leasing from Henry Ysaac in favor of Juan
Cabrera.30 The Borbe family bought the property from NagaCitys urban poor program after the
salebetween the Ysaacs and the local government of Naga City.31
On September 22, 1999, the Regional Trial Court of Naga City ruled that the contract of sale
between Juan Cabrera and Henry Ysaac was duly rescinded when the former failed to pay the
balance of the purchase price in the period agreed upon. 32 The Regional Trial Court found that there
was an agreement between Juan Cabrera and Henry Ysaac as to the sale of land and the
corresponding unit price.33 However, aside from the receipts turned over by Mamerta Espiritu of the
Espiritu family to Juan Cabrera, there was no "evidence that the other adjoining lot occupants
agreed to sell their respective landholdings" to Juan Cabrera. 34 The Regional Trial Court also
doubted that Juan Cabrera was willing and able to pay Henry Ysaac on June 15, 1992. According to
the trial court:
[A]fter the said refusal of Henry Ysaacs wife, plaintiff [Juan Cabrera] did not bother to write tothe
defendant [Henry Ysaac] or to any of the co-owners his intention to pay for the land or he could have
consigned the amount in court at the same time notifying [Henry Ysaac] of the consignation in
accordance with Article 1256 of the Civil Code. Furthermore, in September, 1993 [Juan Cabrera]
was able to meet [Henry Ysaac] whenthe latter allegedly talked to him about the reduction of the
areahe was going to buy. There is no showing that [Juan Cabrera] again tendered his payment to
Henry Ysaac. Instead, he allegedly made his offer after he had the land resurveyed but defendant
was then in Manila. There is no evidence as to what date this offer was made. . . . . .
[T]he court does not see any serious demand made for performance of the contract on the part of
[Juan Cabrera] in 1992 when he allegedly promised to pay the balance of the purchase price.
Neither could he demand for the sale of the adjoining lots because the occupants thereof did not
manifest their consent thereto. At the most, he could have demanded the sale of the lot which he
was occupying. If his payment was refused in 1995, he cannot demand for damages because the
rescission of the contract was relayed to him in writing in Exhibit "4". 35
The Regional Trial Court dismissed Juan Cabreras complaint and Henry Ysaacs
counterclaim.36 Juan Cabrera appealed the Regional Trial Courts decision. 37

The Court of Appeals agreed with the Regional Trial Court that there was a perfected contract of sale
between Juan Cabrera and Henry Ysaac.38 According to the Court of Appeals, even if the subject of
the sale is part of Henry Ysaacs undivided property, a co-owner may sell a definite portion of the
property.39
The Court of Appeals also ruled that the contract of sale between Juan Cabrera and Henry Ysaac
was not validly rescinded.40 For the rescission to be valid under Article 1592 of the Civil Code, it
should have been done through a judicial or notarial act and not merely through a letter. 41
However, due to the sale of the entire property of the Ysaac family in favor of the local government of
Naga City, the Court of Appeals ruled that the verbal contract between Juan Cabrera and Henry
Ysaac cannot be subject to the remedy of specific performance. 42 The local government of Naga City
was an innocent purchaser for value, and following the rules on double sales, it had a preferential
right since the sale it entered into was in a public instrument, while the one with Juan Cabrera was
only made orally.43 The only recourse the Court of Appeals could do is to order Henry Ysaac to return
the initial payment of the purchase price of P10,600.00 (P1,500.00 andP6,100.00 as evidenced by
the receipts issued by Henry Ysaac to Juan Cabrera, and P3,000.00 for the surveying expenses) as
payment of actual damages. The Court of Appeals likewise awarded attorneys fees and litigation
costs. To wit:
WHEREFORE, premises considered, the assailed decision of the lower court is hereby SET ASIDE
and a new one is entered as follows:
1. Declaring that there is no valid rescission of the contract of sale of the subject lot between
plaintiff-appellant [Juan P. Cabrera] and defendant-appellee [Henry Ysaac]; however, specific
performance is not an available relief to plaintiff because of the supervening sale of the property
to the City of Naga, an innocent purchaser and for value;
2. Ordering [Henry Ysaac] to pay [Juan P. Cabrera] actual damages in the amount
of P10,600.00, with legal interest of 12% per annum from September 20, 1995 until paid;
3. Ordering [Henry Ysaac] to pay [Juan P. Cabrera], the amount of thirty thousand pesos
(P30,000.00) by way of attorneys fees and litigation expenses.
Henry Ysaac filed his motion for reconsideration dated July 14, 2003 of the decision of the Court of
Appeals.44 On the other hand, Juan Cabrera immediately filed a petition for reviewon certiorari with
this court.45 In the resolution dated October 15, 2003, this court denied the petition "for being
premature since respondents motion for reconsideration of the questioned decision of the Court of
Appeals is still pending resolution."46
In the resolution dated January 3,2005, the Court of Appeals denied Henry Ysaacs motion for
reconsideration. On February24, 2005, Juan Cabrera filed another petition with this court,
questioning the propriety of the Court of Appeals decision and resolution.
This court initially noted that the petition was filed out of time. The stamp on the petition states that it
was received by this court on March 24, 2005, 47 while the reglementary period to file the petition
expired on February 28, 2005. Thus, the petition was dismissed in this courts resolution dated April
27, 2005.48 Petitioner filed a motion for reconsideration. 49 However, the same was denied with finality
in this courts resolution dated August 17, 2005.50
In a letter addressed to the Chief Justice, petitioner argued that it would be unfair to him if a clerical
error would deprive his petition from being judged on the merits. Petitioner emphasized that the
registry receipts show that he filed the petition on February 24, 2005, not March 24, 2005, as noted

by this court in his pleading.51 This court treated the letter as a second motion for reconsideration. In
the resolution dated March 31, 2006, this court found merit in petitioners letter.52 The petition was
reinstated, and respondent was ordered to file his comment. 53Respondent filed his comment on
September 18, 2006.54 This court required petitioner to file a reply,55 which petitioner complied with
on January 15, 2007.56
The issues raised by petitioner and respondent are summarized as follows:
1. Whether this court could take cognizance of issues not raised by petitioner but by respondent
in his comment to the petition for review;
2. Whether there was a valid contractof sale between petitioner and respondent;
3. Whether the contract ofsale still subsisted;
a. Whether the contract was terminated through rescission;
b. Whether the contract was no longer enforceable due to the supervening sale of the
property to the local government of Naga City;
4. Whether petitioner is entitled to the execution of a deed of sale in his favor; and
5. Whether petitioner is entitled to actual damages, attorneys fees, and costs of litigation.
The petition should be denied.
I
This court can resolve issues raised by both parties
Petitioner stated that the errors inthis case are: (1) "the [Court of Appeals] erred in holding that the
relief of specific performance is not available to [petitioner] supposedly because of the supervening
sale of [the] property to the City Government of Naga"; 57 and (2) "consequently, the [Court of
Appeals] erred in not ordering the execution of the necessary deed of sale in favor of
[petitioner]."58 Petitioner argues that this court should limit its adjudication to these two errors. 59
On the other hand, respondent raised issues on the validity of the contract of sale in favor of
petitioner, and the propriety of the award of actual damages with interest, attorneys fees, and
litigation expenses.60
For petitioner, if respondent wanted to raise issues regarding the Court of Appeals decision,
respondent should have interposed a separate appeal. 61
Petitioners position is erroneous. This court can resolve issues and assignments of error argued by
petitioner and respondent.
This court "is clothed with ample authority to review matters, even if they are not assigned as errors
in their appeal,if it finds that their consideration is necessary to arriveat a just decision of the
case."62 We can consider errors not raised by the parties,more so if these errors were raised by
respondent.
Respondent raised different issues compared with those raised by petitioner. However, the
assignment of error of respondent was still responsive to the main argument of petitioner.
Petitioners argument works on the premise that there was a valid contract. By attacking the validity
of the contract, respondent was merely responding to the premise of petitioners main argument. The
issue is relevant to the final disposition of this case; hence, it should be considered by this court in
arriving at a decision.
II
There was no valid contract of sale between petitioner and respondent
Petitioner agrees with the decision of the Court of Appeals that there was a perfected contract of
sale between him and respondent.63

Respondent, however, argues that there was no contract between him and petitioner because under
Article 1475 of the Civil Code, there has to be a meeting of the minds as to the price and the object
of the contract.64Respondent argues that there was no meeting of the minds as to the final
price65 and size66 of the property subject of the sale.
In addition, while respondent admits that he was willing to sell the property being leased from him by
the Borbe family and the Espiritu family, petitioner presented no evidence to show that these families
agreed to the sale in favor of petitioner. During trial, Corazon Borbe Combe of the Borbe family
testified that her family never agreed to allow the sale of the property in favor of
petitioner.67 Respondent likewise alleged that Mamerta Espiritu of the Espiritu family eventually
bought the property occupied by her family, which is contrary to the claim that petitioner obtained the
consent of Mamerta Espiritu to have the land sold in his favor. 68 Petitioner replied that respondent
sold 113 square meters of the 321-square-meter property to the Espiritu family on January 17,
1996.69 Petitioner argued that Mamerta Espiritu was not a buyer in good faith because in 1990, she
voluntarily agreed to surrender the lot for sale in favor of petitioner because she did not have the
money to pay for the lot. Hence, the sale in favor of Mamerta Espiritu should not supersede the sale
in favor of petitioner.70
The Regional Trial Court ruled that there was a valid contract of sale, although it found that there
was no evidence to support petitioners claim that he was able to secure the consent of the Espiritu
family and the Borbe family to the sale of the land. 71 There was a valid contract of sale subject to a
suspensive condition, but the suspensive condition was not complied with.
For the Court of Appeals, there was a valid contract of sale. 72 The Court of Appeals ruling was based
on the idea that a co-owner could sell a definite portion of the land owned in common, and not
because the suspensive conditions of the contract were complied with. In ruling this way, the Court
of Appeals relied on Pamplona v. Morato,73 which stated that:
. . . [A] "co-owner may validly sell his undivided share of the property owned in common. (If the part
sold happens to be his allotted share after partition, the transaction is entirely valid). Now then if
there has been no express partition as yet, but the co-owner who sells points out to his buyers the
boundaries of the parthe was selling, and the other coowners make no objection, there is in effect
already a partial partition, and the sale of the definite portioncan no longer be assailed." 74
We find that there was no contract of sale. It was null ab initio.
As defined by the Civil Code, "[a] contract is a meeting of minds between two persons whereby one
binds himself, with respect to the other, to give something or to render some service." 75 For there to
be a valid contract, there must be consent of the contracting parties, an object certain which is the
subject matter of the contract, and cause of the obligation which is established. 76 Sale is a special
contract. The seller obligates himself to deliver a determinate thing and to transfer its ownership to
the buyer. In turn, the buyer pays for a price certain in money or its equivalent. 77 A "contract of sale is
perfected at the moment there is a meeting of minds upon the thing which is the object of the
contract and upon the price." 78 The seller and buyer must agree as to the certain thing that will be
subject of the sale as well as the price in which the thing will be sold. The thing to be sold is the
object of the contract, while the price is the cause or consideration.
The object of a valid sales contract must be owned by the seller. If the seller is not the owner, the
seller must be authorized by the owner to sell the object. 79

Specific rules attach when the seller co-ownsthe object of the contract. Sale of a portion of the
property is considered an alteration of the thing owned in common. Under the Civil Code, such
disposition requires the unanimous consent of the other co-owners. 80 However, the rules also allow a
co-owner to alienate his or her part in the co-ownership. 81
These two rules are reconciled through jurisprudence.
If the alienation precedes the partition, the co-owner cannot sell a definite portion of the land without
consent from his or her co-owners. He or she could only sell the undivided interest of the co-owned
property.82 As summarized in Lopez v. Ilustre,83 "[i]f he is the owner of an undivided half of a tract of
land, he has a right to sell and convey an undivided half, but he has no right to divide the lot into two
parts, and convey the whole of one part by metes and bounds." 84
The undivided interestof a co-owner is also referred to as the "ideal or abstract quota" or
"proportionate share." On the other hand, the definite portion of the land refers to specific metes and
bounds of a co-owned property.
To illustrate, if a ten-hectare property is owned equally by ten coowners, the undivided interest of a
co-owner is one hectare. The definite portion of that interest is usually determined during judicial or
extrajudicial partition. After partition, a definite portion of the property held in common is allocated to
a specific co-owner. The co-ownership is dissolved and, in effect, each of the former co-owners is
free to exercise autonomously the rights attached to his or her ownership over the definite portion of
the land. It is crucial that the co-owners agree to which portion of the land goes to whom.
Hence, prior to partition, a sale of a definite portion of common property requires the consent of all
co-owners because it operates to partition the land with respect to the co-owner selling his or her
share. The co-owner or seller is already marking which portion should redound to his or her
autonomous ownership upon future partition.
The object of the sales contract between petitioner and respondent was a definite portion of a coowned parcel of land. At the time of the alleged sale between petitioner and respondent, the entire
property was still held in common. This is evidenced by the original certificate of title, which was
under the names of Matilde Ysaac, Priscilla Ysaac, Walter Ysaac, respondent Henry Ysaac,
Elizabeth Ysaac, Norma Ysaac, Luis Ysaac, Jr., George Ysaac, Franklin Ysaac, Marison Ysaac,
Helen Ysaac, Erlinda Ysaac, and Maridel Ysaac.85
The rules allow respondent to sell his undivided interestin the coownership. However, this was not
the object of the sale between him and petitioner. The object of the sale was a definite portion. Even
if it was respondent who was benefiting from the fruits of the lease contract to petitioner, respondent
has "no right to sell or alienate a concrete, specific or determinate part of the thing owned in
common, because his right over the thing is represented by quota or ideal portion without any
physical adjudication."86
There was no showing that respondent was authorized by his coowners to sell the portion of land
occupied by Juan Cabrera, the Espiritu family, or the Borbe family. Without the consent of his coowners, respondent could not sell a definite portion of the co-owned property.
Respondent had no right to define a 95-square-meter parcel of land, a 439-square-meter parcel of
land, or a 321-square-meter parcel of land for purposes of selling to petitioner. The determination of
those metes and bounds are not binding to the co-ownership and, hence, cannot be subject to sale,
unless consented to by all the co-owners.

In finding that there was a valid contract of sale between petitioner and respondent, the Court of
Appeals erred in the application of Pamplona v. Moreto. 87 The ruling in Pamplona should be read
and applied only in situations similar to the context of that case.
Pamplona involved the Spouses Moreto who owned three (3) parcels of land with a total area of
2,346 square meters. The spouses had six (6) children. After the wife had died, the husband sold
one of the parcels to the Pamplona family, even if the conjugal partnership had not yet been
liquidated. The parcel sold measured 781 square meters, which was less than the ideal share of the
husband in the estate. This court allowed the sale to prosper because of the tolerance from the
husbands co-heirs. This court ruled:
The title may be pro-indiviso or inchoate but the moment the coowner as vendor pointed out its
location and even indicated the boundaries over which the fences were to be erected without
objection, protest or complaint bythe other co-owners, on the contrary they acquiesced and tolerated
such alienation, occupation and possession, We rule that a factual partition or termination of the coownership, although partial, was created, and barred not only the vendor, Flaviano Moreto, butalso
his heirs, the private respondents herein from asserting as against the vendees petitioners any right
or title in derogation of the deed of sale executed by said vendor Flaviano Moreto. 88(Emphasis
supplied)
In Pamplona, the co-heirs of Flaviano Moreto only questioned the sale to the Pamplona family nine
(9) years after the sale. By then, the Pamplona family had exercised several acts of ownership over
the land. That is why this court considered it acquiescence or tolerance on the part of the co-heirs
when they allowed the Pamplonas to take possession and build upon the land sold, and only
questioned these acts several years later.
The ruling in Pamplonadoes not apply to petitioner. There was no evidence adduced during the trial
that respondents co-owners acquiesced or tolerated the sale to petitioner. The co-owners tolerated
petitioners possession of a portion of their land because petitioner was a lessee over a 95-squaremeter portion of the property, not the buyer of the 321-squaremeter portion.
There was also no evidence of consent to sell from the co-owners. When petitioner approached
respondent in 1995 to enforce the contract of sale, respondent referred him to Franklin Ysaac, the
administrator over the entire property. Respondents act suggests the absence of consent from the
co-owners. Petitioner did not show that he sought Franklin Ysaacs consent as administrator and the
consent of the other co-owners. Without the consent of the co-owners, no partial partition operated
in favor of the sale to petitioner.
At best, the agreement between petitioner and respondent is a contract to sell, not a contract of sale.
A contract to sell is a promise to sell an object, subject to suspensive conditions. 89 Without the
fulfillment of these suspensive conditions, the sale does not operate to determine the obligation of
the seller to deliver the object.
A co-owner could enter into a contract to sell a definite portion of the property. However, such
contract is still subject to the suspensive condition of the partition of the property, and that the other
co-owners agree that the part subject of the contract to sell vests in favor of the co-owners buyer.
Hence, the co-owners consent is an important factor for the sale to ripen.
A non-existent contract cannot be a source of obligations, and it cannot be enforced by the courts
Since petitioner believes that there was a perfected contract of sale between him and respondent,
he argues that a deed of sale should be formally executed. Petitioner agrees with the Court of

Appeals finding that there was no valid rescission of the contract in accordance with Article 1592 of
the Civil Code.90 However, petitioner disagrees with the Court of Appeals when it ruled that the
contract was no longer enforceable due to the supervening sale with the local government of Naga
City. Petitioner argues that the sale in favor of the local government of Naga City was not made in
good faith. Before the sale was finalized between the local government and the heirs of Luis and
Matilde Ysaac, petitioner had a notice of lis pendens annotated to OCT No. 506. 91 It was presumed
that the local government had due notice of petitioners adverse claim, thus, it cannot be considered
an innocent purchaser.
For respondent, due to the inexistence of a valid contract of sale, petitioner cannot demand specific
performance from respondent.92 Respondent disagrees with the Court of Appeals when it stated that
Article 1592 of the rescission of contract of sale applies. There is no need to apply Article 1592
because there was no contract to begin with. 93 The contract between respondent and petitioner was
terminated by virtue of the letter dated September 21, 1994. 94
We rule in favor of respondent.
The absence of a contract of sale means that there is no source of obligations for respondent, as
seller, orpetitioner, as buyer. Rescission is impossible because there is no contract to rescind. The
rule in Article 1592 that requires a judicial or notarial act to formalize rescission of a contract of sale
of an immovable property does not apply. This court does not need to rule whether a letter is a valid
method of rescinding a sales contract over an immovable property because the question is moot and
academic.
Even if we assume that respondent had full ownership of the property and that he agreed to sell a
portion of the property to petitioner, the letter was enough to cancel the contract to sell. Generally,
"[t]he power to rescind obligations is implied in reciprocal ones, in case one of the obligors should
not comply with what is incumbent on him."95
For the sale of immovable property, the following provision governs its rescission:
Article 1592. In the sale of immovable property, even though it may have been stipulated that upon
failure to pay the price at the time agreed upon the rescission of the contract shall of right take place,
the vendee may pay, even after the expiration of the period, as long as no demand for rescission of
the contract has been made upon him either judicially or by notarial act. After the demand, the court
may not grant him a new term.
This provision contemplates (1) a contract of sale of an immovable property and (2) a stipulation in
the contract that failure to pay the price at the time agreed upon will cause the rescission of the
contract. The vendee or the buyer can still pay even after the time agreed upon, if the agreement
between the parties has these requisites. This right of the vendee to pay ceases when the vendor or
the seller demands the rescission of the contract judicially or extra judicially. In case of an extra
judicial demand to rescind the contract, it should be notarized.
Hence, this provision does not apply if it is not a contract of sale of an immovable property and
merely a contract to sellan immovable property. A contract to sell is "where the ownership or title is
retained by the seller and is not to pass until the full payment of the price, such payment being a
positive suspensive condition and failure of which is not a breach, casual or serious, but simply an
event that prevented the obligation of the vendor to convey title from acquiring binding force." 96
In a similar case entitled Manuel v. Rodriguez, 97 Eusebio Manuel offered to buy the land owned by
Payatas Subdivision, Inc. The Secretary Treasurer of Payatas Subdivision, Eulogio Rodriguez, Sr.,

agreed to sell the land to Eusebio Manuel after negotiations. Similar to this case, the agreement was
only made orally and not in writing. An initial payment was made, and a final payment was to be
madenine (9) to ten (10) months later. Manuel never paid for the latter installment; hence, Eulogio
Rodriguez cancelled their agreement and sold the land to someone else.
In Manuel, this court categorically stated that Article 1592 "does not apply to a contract to sell or
promise to sell, where title remains with the vendor until fulfillment to a positive suspensive condition,
such as full payment of the price."98 This court upheld that the contract to sell was validly cancelled
through the non-payment of Eusebio Manuel. The same conclusion applies in this case.
The law does not prescribe a form to rescind a contract to sell immovable property. In Manuel, the
non-payment operated to cancel the contract. If mere non-payment is enough to cancel a contract to
sell, the letter given to petitioners lawyer is also an acceptable form of rescinding the contract. The
law does not require notarization for a letter to rescind a contract to sell immovable property.
Notarization is only required if a contract of sale is being rescinded.
Petitioner argued that he was willing to comply with the suspensive condition on the contract to sell
because he was ready to pay the balance of the purchase price on June 15, 1992. 99 However, his
argument is unmeritorious. As ruled by the Regional Trial Court, petitioner should have resorted to
the various modes of consignment when respondents wife refused to accept the payment on
respondents behalf.100
Therefore, even if we assumed that the contract between petitioner and respondents were perfected,
the strict requisites in Article 1592 did not apply because the only perfected contract was a contract
to sell, not a contract of sale. The courts cannot enforce the right of petitioner to buy respondents
property. We cannot order the execution of a deed of sale between petitioner and respondent.
The question of double sale also becomes moot and academic. There was no valid sale between
petitioner and respondent, while there was a valid sale between the local government of Naga City
and respondent and his co-owners. Since there is only one valid sale, the rule on double sales under
Article 1544 of the Civil Code does not apply.101
Compensatory damages, attorneys fees, and costs of litigation
Respondent argued that petitioner is not entitled to the compensatory damages that the Court of
Appeals awarded. According to respondent, petitioner continues to occupy the 95-square-meter
property that he has been leasing since 1986 because the parcel was not included in the sale to the
local government of Naga City.102 Since April 30, 1990, petitioner has not been paying rent to
respondent despite his continued occupation of the property.103 Therefore, there was no unjust
enrichment on the part of respondent when he applied petitioners initial payment over the sale of the
property as payment for rent.
Respondent argued further that the award of attorneys fees and litigation expenses in favor of
petitioner was also erroneous because prior to this litigation, respondent already informed petitioner
that his claim has no basis in law and fact.104 Yet, petitioner persisted on filing this case.105
We rule that petitioner is entitled to the return of the amount of money because he paid it as
consideration for ownership of the land. Since the ownership of the land could not be transferred to
him, the money he paid for that purpose must be returned to him. Otherwise, respondent will be
unjustly enriched.

Respondents claim for rent in arrears is a separate cause of action from this case.1wphi1 For
petitioners earnestmoney payment to be considered payment for his rent liabilities, the rules of
compensation under Article 1279 of the Civil Code must be followed. 106
It was not proven during trial if petitioner's rental liability to respondent is due, or if it is already
liquidated and demandable. Hence, this court is limited to uphold the ruling of the Court of Appeals,
but such payment could be subject to the rule on compensation.
However, petitioner is not entitled to attorney's fees and the costs of litigation. The Court of Appeals
awarded attorney's fees to petitioner "just to protect his right [because petitioner] reached this court
to seek justice for himself."107
Contrary to the Court of Appeals' ruling, we find that petitioner did not have a clear right over the
property in question. The Court of Appeals awarded attorney's fees and litigation costs on the
premise that the contract between petitioner and respondent was perfected. Without a valid contract

that stipulates his rights, petitioner risked litigation in order to determine if he has rights, and not to
protect rights that he currently has. Hence, the award of attorney's fees and litigation costs was not
properly justified.
WHEREFORE, the petition is DENIED. The Court of Appeals' decision dated June 19, 2003 in CAG.R. CV No. 65869 is SET ASIDE. The contract between petitioner and respondent is DECLARED
invalid and, therefore, cannot be subject to specific performance. Respondent is ORDERED to
return P10,600.00 to petitioner, with legal interest of 12% per annum from September 20, 1995 until
June 30, 2013 and 6% per annum from July 1, 2013 until fully paid. The award of attorney's fees
and litigation expenses is DELETED.
SO ORDERED.