THIRD DIVISION

[G.R. No. 103577. October 7, 1996]

ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL, ANNABELLE C.

GONZALES (for herself and on behalf of Floraida C. Tupper, as attorney-in-fact),
CIELITO A. CORONEL, FLORAIDA A. ALMONTE, and CATALINA BALAIS
MABANAG, petitioners, vs. THE COURT OF APPEALS, CONCEPCION D. ALCARAZ and
RAMONA PATRICIA ALCARAZ, assisted by GLORIA F. NOEL as attorney-infact,respondents.
DECISION
MELO, J.:
The petition before us has its roots in a complaint for specific performance to compel herein
petitioners (except the last named, Catalina Balais Mabanag) to consummate the sale of a parcel of
land with its improvements located along Roosevelt Avenue in Quezon City entered into by the parties
sometime in January 1985 for the price of P1,240,000.00.
The undisputed facts of the case were summarized by respondent court in this wise:
On January 19, 1985, defendants-appellants Romulo Coronel, et. al. (hereinafter referred to as
Coronels) executed a document entitled Receipt of Down Payment (Exh. A) in favor of plaintiff
Ramona Patricia Alcaraz (hereinafter referred to as Ramona) which is reproduced hereunder:
RECEIPT OF DOWN PAYMENT
P1,240,000.00 - Total amount
50,000.00 - Down payment
-----------------------------------------P1,190,000.00 - Balance
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand
Pesos purchase price of our inherited house and lot, covered by TCT No. 119627 of the Registry of
Deeds of Quezon City, in the total amount of P1,240,000.00.
We bind ourselves to effect the transfer in our names from our deceased father, Constancio P.
Coronel, the transfer certificate of title immediately upon receipt of the down payment above-stated.
On our presentation of the TCT already in or name, We will immediately execute the deed of absolute
sale of said property and Miss Ramona Patricia Alcaraz shall immediately pay the balance of
the P1,190,000.00.
Clearly, the conditions appurtenant to the sale are the following:
1. Ramona will make a down payment of Fifty Thousand (P50,000.00) pesos upon execution of the
document aforestated;

2. The Coronels will cause the transfer in their names of the title of the property registered in the name
of their deceased father upon receipt of the Fifty Thousand (P50,000.00) Pesos down payment;
3. Upon the transfer in their names of the subject property, the Coronels will execute the deed of
absolute sale in favor of Ramona and the latter will pay the former the whole balance of One Million
One Hundred Ninety Thousand (P1,190,000.00) Pesos.
On the same date (January 15, 1985), plaintiff-appellee Concepcion D. Alcaraz (hereinafter referred to
as Concepcion), mother of Ramona, paid the down payment of Fifty Thousand (P50,000.00) Pesos
(Exh. B, Exh. 2).
On February 6, 1985, the property originally registered in the name of the Coronels father was
transferred in their names under TCT No. 327043 (Exh. D; Exh 4)
On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to intervenorappellant Catalina B. Mabanag (hereinafter referred to as Catalina) for One Million Five Hundred
Eighty Thousand (P1,580,000.00) Pesos after the latter has paid Three Hundred Thousand
(P300,000.00) Pesos (Exhs. F-3; Exh. 6-C)
For this reason, Coronels canceled and rescinded the contract (Exh. A) with Ramona by depositing the
down payment paid by Concepcion in the bank in trust for Ramona Patricia Alcaraz.
On February 22, 1985, Concepcion, et. al., filed a complaint for a specific performance against the
Coronels and caused the annotation of a notice of lis pendens at the back of TCT No. 327403 (Exh. E;
Exh. 5).
On April 2, 1985, Catalina caused the annotation of a notice of adverse claim covering the same
property with the Registry of Deeds of Quezon City (Exh. F; Exh. 6).
On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject property in favor of
Catalina (Exh. G; Exh. 7).
On June 5, 1985, a new title over the subject property was issued in the name of Catalina under TCT
No. 351582 (Exh. H; Exh. 8).
(Rollo, pp. 134-136)
In the course of the proceedings before the trial court (Branch 83, RTC, Quezon City) the parties
agreed to submit the case for decision solely on the basis of documentary exhibits. Thus, plaintiffs
therein (now private respondents) proffered their documentary evidence accordingly marked as
Exhibits A through J, inclusive of their corresponding submarkings. Adopting these same exhibits as
their own, then defendants (now petitioners) accordingly offered and marked them as Exhibits 1
through 10, likewise inclusive of their corresponding submarkings. Upon motion of the parties, the trial
court gave them thirty (30) days within which to simultaneously submit their respective memoranda,
and an additional 15 days within which to submit their corresponding comment or reply thereto, after
which, the case would be deemed submitted for resolution.
On April 14, 1988, the case was submitted for resolution before Judge Reynaldo Roura, who was
then temporarily detailed to preside over Branch 82 of the RTC of Quezon City. On March 1, 1989,
judgment was handed down by Judge Roura from his regular bench at Macabebe, Pampanga for
the Quezon City branch, disposing as follows:
WHEREFORE, judgment for specific performance is hereby rendered ordering defendant to execute in
favor of plaintiffs a deed of absolute sale covering that parcel of land embraced in and covered by
Transfer Certificate of Title No. 327403 (now TCT No. 331582) of the Registry of Deeds for Quezon
City, together with all the improvements existing thereon free from all liens and encumbrances, and
once accomplished, to immediately deliver the said document of sale to plaintiffs and upon receipt
thereof, the plaintiffs are ordered to pay defendants the whole balance of the purchase price
amounting toP1,190,000.00 in cash. Transfer Certificate of Title No. 331582 of the Registry of Deeds
for Quezon City in the name of intervenor is hereby canceled and declared to be without force and

effect. Defendants and intervenor and all other persons claiming under them are hereby ordered to
vacate the subject property and deliver possession thereof to plaintiffs. Plaintiffs claim for damages
and attorneys fees, as well as the counterclaims of defendants and intervenors are hereby dismissed.
No pronouncement as to costs.
So Ordered.
Macabebe, Pampanga for Quezon City, March 1, 1989.
(Rollo, p. 106)
A motion for reconsideration was filed by petitioners before the new presiding judge of the
Quezon City RTC but the same was denied by Judge Estrella T. Estrada, thusly:
The prayer contained in the instant motion, i.e., to annul the decision and to render anew decision by
the undersigned Presiding Judge should be denied for the following reasons: (1) The instant case
became submitted for decision as of April 14, 1988 when the parties terminated the presentation of
their respective documentary evidence and when the Presiding Judge at that time was Judge
Reynaldo Roura. The fact that they were allowed to file memoranda at some future date did not
change the fact that the hearing of the case was terminated before Judge Roura and therefore the
same should be submitted to him for decision; (2) When the defendants and intervenor did not object
to the authority of Judge Reynaldo Roura to decide the case prior to the rendition of the decision,
when they met for the first time before the undersigned Presiding Judge at the hearing of a pending
incident in Civil Case No. Q-46145 on November 11, 1988, they were deemed to have acquiesced
thereto and they are now estopped from questioning said authority of Judge Roura after they received
the decision in question which happens to be adverse to them; (3) While it is true that Judge Reynaldo
Roura was merely a Judge-on-detail at this Branch of the Court, he was in all respects the Presiding
Judge with full authority to act on any pending incident submitted before this Court during his
incumbency. When he returned to his Official Station at Macabebe, Pampanga, he did not lose his
authority to decide or resolve cases submitted to him for decision or resolution because he continued
as Judge of the Regional Trial Court and is of co-equal rank with the undersigned Presiding
Judge. The standing rule and supported by jurisprudence is that a Judge to whom a case is submitted
for decision has the authority to decide the case notwithstanding his transfer to another branch or
region of the same court (Sec. 9, Rule 135, Rule of Court).
Coming now to the twin prayer for reconsideration of the Decision dated March 1, 1989 rendered in the
instant case, resolution of which now pertains to the undersigned Presiding Judge, after a meticulous
examination of the documentary evidence presented by the parties, she is convinced that the Decision
of March 1, 1989 is supported by evidence and, therefore, should not be disturbed.
IN VIEW OF THE FOREGOING, the Motion for Reconsideration and/or to Annul Decision and Render
Anew Decision by the Incumbent Presiding Judge dated March 20, 1989 is hereby DENIED.
SO ORDERED.
Quezon City, Philippines, July 12, 1989.
(Rollo, pp. 108-109)
Petitioners thereupon interposed an appeal, but on December 16, 1991, the Court of Appeals
(Buena, Gonzaga-Reyes, Abad-Santos (P), JJ.) rendered its decision fully agreeing with the trial court.
Hence, the instant petition which was filed on March 5, 1992. The last pleading, private
respondents Reply Memorandum, was filed onSeptember 15, 1993. The case was, however, re-raffled
to undersigned ponente only on August 28, 1996, due to the voluntary inhibition of the Justice to whom
the case was last assigned.

While we deem it necessary to introduce certain refinements in the disquisition of respondent

court in the affirmance of the trial courts decision, we definitely find the instant petition bereft of merit.
The heart of the controversy which is the ultimate key in the resolution of the other issues in the
case at bar is the precise determination of the legal significance of the document entitled Receipt of
Down Payment which was offered in evidence by both parties. There is no dispute as to the fact that
the said document embodied the binding contract between Ramona Patricia Alcaraz on the one hand,
and the heirs of Constancio P. Coronel on the other, pertaining to a particular house and lot covered by
TCT No. 119627, as defined in Article 1305 of the Civil Code of the Philippines which reads as follows:
Art. 1305. 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.
While, it is the position of private respondents that the Receipt of Down Payment embodied a
perfected contract of sale, which perforce, they seek to enforce by means of an action for specific
performance, petitioners on their part insist that what the document signified was a mere executory
contract to sell, subject to certain suspensive conditions, and because of the absence of Ramona P.
Alcaraz, who left for the United States of America, said contract could not possibly ripen into a contract
of absolute sale.
Plainly, such variance in the contending parties contention is brought about by the way each
interprets the terms and/or conditions set forth in said private instrument. Withal, based on whatever
relevant and admissible evidence may be available on record, this Court, as were the courts below, is
now called upon to adjudge what the real intent of the parties was at the time the said document was
executed.
The Civil Code defines a contract of sale, 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.
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-fulfillment 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. In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court had occasion to rule:
Hence, We hold that the contract between the petitioner and the respondent was a contract to sell
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.

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 of 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 (cf. Homesite and Housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). 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 owner-sellers 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.
With the above postulates as guidelines, we now proceed to the task of deciphering the real
nature of the contract entered into by petitioners and private respondents.

It is a canon in the interpretation of contracts that the words used therein should be given their
natural and ordinary meaning unless a technical meaning was intended (Tan vs. Court of Appeals, 212
SCRA 586 [1992]). Thus, when petitioners declared in the said Receipt of Down Payment that they -Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand
Pesos purchase price of our inherited house and lot, covered by TCT No. 1199627 of the Registry
of Deeds of Quezon City, in the total amount of P1,240,000.00.
without any reservation of title until full payment of the entire purchase price, the natural and ordinary
idea conveyed is that they sold their property.
When the Receipt of Down payment is considered in its entirety, it becomes more manifest that
there was a clear intent on the part of petitioners to transfer title to the buyer, but since the transfer
certificate of title was still in the name of petitioners father, they could not fully effect such transfer
although the buyer was then willing and able to immediately pay the purchase price. Therefore,
petitioners-sellers undertook upon receipt of the down payment from private respondent Ramona P.
Alcaraz, to cause the issuance of a new certificate of title in their names from that of their father, after
which, they promised to present said title, now in their names, to the latter and to execute the deed of
absolute sale whereupon, the latter shall, in turn, pay the entire balance of the purchase price.
The agreement could not have been a contract to sell because the sellers herein made no
express reservation of ownership or title to the subject parcel of land. Furthermore, the circumstance
which prevented the parties from entering into an absolute contract of sale pertained to the sellers
themselves (the certificate of title was not in their names) and not the full payment of the purchase
price. Under the established facts and circumstances of the case, the Court may safely presume that,
had the certificate of title been in the names of petitioners-sellers at that time, there would have been
no reason why an absolute contract of sale could not have been executed and consummated right
there and then.
Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely promise to sell
the property to private respondent upon the fulfillment of the suspensive condition. On the contrary,
having already agreed to sell the subject property, they undertook to have the certificate of title change
to their names and immediately thereafter, to execute the written deed of absolute sale.
Thus, the parties did not merely enter into a contract to sell where the sellers, after compliance by
the buyer with certain terms and conditions, promised to sell the property to the latter. What may be
perceived from the respective undertakings of the parties to the contract is that petitioners had already
agreed to sell the house and lot they inherited from their father, completely willing to transfer
ownership of the subject house and lot to the buyer if the documents were then in order. It just so
happened, however, that the transfer certificate of title was then still in the name of their father. It was
more expedient to first effect the change in the certificate of title so as to bear their names. That is why
they undertook to cause the issuance of a new transfer of the certificate of title in their names upon
receipt of the down payment in the amount of P50,000.00. As soon as the new certificate of title is
issued in their names, petitioners were committed to immediately execute the deed of absolute
sale. Only then will the obligation of the buyer to pay the remainder of the purchase price arise.
There is no doubt that unlike in a contract to sell which is most commonly entered into so as to
protect the seller against a buyer who intends to buy the property in installment by withholding
ownership over the property until the buyer effects full payment therefor, in the contract entered into in
the case at bar, the sellers were the ones who were unable to enter into a contract of absolute sale by
reason of the fact that the certificate of title to the property was still in the name of their father. It was
the sellers in this case who, as it were, had the impediment which prevented, so to speak, the
execution of an contract of absolute sale.

What is clearly established by the plain language of the subject document is that when the said
Receipt of Down Payment was prepared and signed by petitioners Romulo A. Coronel, et. al., the
parties had agreed to a conditional contract of sale, consummation of which is subject only to the
successful transfer of the certificate of title from the name of petitioners father, Constancio P. Coronel,
to their names.
The Court significantly notes that this suspensive condition was, in fact, fulfilled on February 6,
1985 (Exh. D; Exh. 4). Thus, on said date, the conditional contract of sale between petitioners and
private respondent Ramona P. Alcaraz became obligatory, the only act required for the consummation
thereof being the delivery of the property by means of the execution of the deed of absolute sale in a
public instrument, which petitioners unequivocally committed themselves to do as evidenced by the
Receipt of Down Payment.
Article 1475, in correlation with Article 1181, both of the Civil Code, plainly applies to the case at
bench. Thus,
Art. 1475. The 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.
From that moment, the parties may reciprocally demand performance, subject to the provisions of the
law governing the form of contracts.
Art. 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of
those already acquired, shall depend upon the happening of the event which constitutes the condition.
Since the condition contemplated by the parties which is the issuance of a certificate of title in
petitioners names was fulfilled on February 6, 1985, the respective obligations of the parties under the
contract of sale became mutually demandable, that is, petitioners, as sellers, were obliged to present
the transfer certificate of title already in their names to private respondent Ramona P. Alcaraz, the
buyer, and to immediately execute the deed of absolute sale, while the buyer on her part, was obliged
to forthwith pay the balance of the purchase price amounting to P1,190,000.00.
It is also significant to note that in the first paragraph in page 9 of their petition, petitioners
conclusively admitted that:
3. The petitioners-sellers Coronel bound themselves to effect the transfer in our names from
our deceased father Constancio P. Coronel, the transfer certificate of title immediately
upon receipt of the downpayment above-stated". The sale was still subject to this
suspensive condition. (Emphasis supplied.)
(Rollo, p. 16)
Petitioners themselves recognized that they entered into a contract of sale subject to a
suspensive condition. Only, they contend, continuing in the same paragraph, that:
. . . Had petitioners-sellers not complied with this condition of first transferring the title to the property
under their names, there could be no perfected contract of sale. (Emphasis supplied.)
(Ibid.)
not aware that they have set their own trap for themselves, for Article 1186 of the Civil Code expressly
provides that:
Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.
Besides, it should be stressed and emphasized that what is more controlling than these mere
hypothetical arguments is the fact that thecondition herein referred to was actually and

indisputably fulfilled on February 6, 1985, when a new title was issued in the names of petitioners
as evidenced by TCT No. 327403 (Exh. D; Exh. 4).
The inevitable conclusion is that on January 19, 1985, as evidenced by the document
denominated as Receipt of Down Payment (Exh. A; Exh. 1), the parties entered into a contract of sale
subject to the suspensive condition that the sellers shall effect the issuance of new certificate title from
that of their fathers name to their names and that, on February 6, 1985, this condition was fulfilled
(Exh. D; Exh. 4).
We, therefore, hold that, in accordance with Article 1187 which pertinently provides Art. 1187. The effects of conditional obligation to give, once the condition has been fulfilled, shall
retroact to the day of the constitution of the obligation . . .
In obligations to do or not to do, the courts shall determine, in each case, the retroactive effect of the
condition that has been complied with.
the rights and obligations of the parties with respect to the perfected contract of sale became mutually
due and demandable as of the time of fulfillment or occurrence of the suspensive condition on
February 6, 1985. As of that point in time, reciprocal obligations of both seller and buyer arose.
Petitioners also argue there could been no perfected contract on January 19, 1985 because they
were then not yet the absolute owners of the inherited property.
We cannot sustain this argument.
Article 774 of the Civil Code defines Succession as a mode of transferring ownership as follows:
Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and obligations to
the extent and value of the inheritance of a person are transmitted through his death to another or
others by his will or by operation of law.
Petitioners-sellers in the case at bar being the sons and daughters of the decedent Constancio P.
Coronel are compulsory heirs who were called to succession by operation of law. Thus, at the point
their father drew his last breath, petitioners stepped into his shoes insofar as the subject property is
concerned, such that any rights or obligations pertaining thereto became binding and enforceable
upon them. It is expressly provided that rights to the succession are transmitted from the moment of
death of the decedent (Article 777, Civil Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]).
Be it also noted that petitioners claim that succession may not be declared unless the creditors
have been paid is rendered moot by the fact that they were able to effect the transfer of the title to the
property from the decedents name to their names on February 6, 1985.
Aside from this, petitioners are precluded from raising their supposed lack of capacity to enter into
an agreement at that time and they cannot be allowed to now take a posture contrary to that which
they took when they entered into the agreement with private respondent Ramona P. Alcaraz. The Civil
Code expressly states that:
Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the person
making it, and cannot be denied or disproved as against the person relying thereon.
Having represented themselves as the true owners of the subject property at the time of sale,
petitioners cannot claim now that they were not yet the absolute owners thereof at that time.

Petitioners also contend that although there was in fact a perfected contract of sale between them
and Ramona P. Alcaraz, the latter breach her reciprocal obligation when she rendered impossible the
consummation thereof by going to the United States of America, without leaving her address,
telephone number, and Special Power of Attorney (Paragraphs 14 and 15, Answer with Compulsory
Counterclaim to the Amended Complaint, p. 2; Rollo, p. 43), for which reason, so petitioners conclude,
they were correct in unilaterally rescinding the contract of sale.
We do not agree with petitioners that there was a valid rescission of the contract of sale in the
instant case. We note that these supposed grounds for petitioners rescission, are mere allegations
found only in their responsive pleadings, which by express provision of the rules, are deemed
controverted even if no reply is filed by the plaintiffs (Sec. 11, Rule 6, Revised Rules of Court). The
records are absolutely bereft of any supporting evidence to substantiate petitioners allegations. We
have stressed time and again that allegations must be proven by sufficient evidence (Ng Cho Cio vs.
Ng Diong, 110 Phil. 882 [1961]; Recaro vs. Embisan, 2 SCRA 598 [1961]). Mere allegation is not an
evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]).
Even assuming arguendo that Ramona P. Alcaraz was in the United States of America on
February 6, 1985, we cannot justify petitioners-sellers act of unilaterally and extrajudicially rescinding
the contract of sale, there being no express stipulation authorizing the sellers to extrajudicially rescind
the contract of sale. (cf. Dignos vs. CA, 158 SCRA 375 [1988]; Taguba vs. Vda. De Leon, 132 SCRA
722 [1984])
Moreover, petitioners are estopped from raising the alleged absence of Ramona P. Alcaraz
because although the evidence on record shows that the sale was in the name of Ramona P. Alcaraz
as the buyer, the sellers had been dealing with Concepcion D. Alcaraz, Ramonas mother, who had
acted for and in behalf of her daughter, if not also in her own behalf. Indeed, the down payment was
made by Concepcion D. Alcaraz with her own personal Check (Exh. B; Exh. 2) for and in behalf of
Ramona P. Alcaraz. There is no evidence showing that petitioners ever questioned Concepcions
authority to represent Ramona P. Alcaraz when they accepted her personal check. Neither did they
raise any objection as regards payment being effected by a third person. Accordingly, as far as
petitioners are concerned, the physical absence of Ramona P. Alcaraz is not a ground to rescind the
contract of sale.
Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her obligation
to pay the full purchase price is concerned. Petitioners who are precluded from setting up the defense
of the physical absence of Ramona P. Alcaraz as above-explained offered no proof whatsoever to
show that they actually presented the new transfer certificate of title in their names and signified their
willingness and readiness to execute the deed of absolute sale in accordance with their
agreement. Ramonas corresponding obligation to pay the balance of the purchase price in the amount
of P1,190,000.00 (as buyer) never became due and demandable and, therefore, she cannot be
deemed to have been in default.
Article 1169 of the Civil Code defines when a party in a contract involving reciprocal obligations
may be considered in default, to wit:
Art. 1169. Those obliged to deliver or to do something, incur in delay from the time the obligee
judicially or extrajudicially demands from them the fulfillment of their obligation.
xxx
In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to
comply in a proper manner with what is incumbent upon him. From the moment one of the parties
fulfill his obligation, delay by the other begins. (Emphasis supplied.)

There is thus neither factual nor legal basis to rescind the contract of sale between petitioners and
respondents.
With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag, gave rise to
a case of double sale where Article 1544 of the Civil Code will apply, to wit:
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 record of the case shows that the Deed of Absolute Sale dated April 25, 1985 as proof of the
second contract of sale was registered with the Registry of Deeds of Quezon City giving rise to the
issuance of a new certificate of title in the name of Catalina B. Mabanag on June 5, 1985. Thus, the
second paragraph of Article 1544 shall apply.
The above-cited provision on double sale presumes title or ownership to pass to the buyer, the
exceptions being: (a) when the second buyer, in good faith, registers the sale ahead of the first buyer,
and (b) should there be no inscription by either of the two buyers, when the second buyer, in good
faith, acquires possession of the property ahead of the first buyer. Unless, the second buyer satisfies
these requirements, title or ownership will not transfer to him to the prejudice of the first buyer.
In his commentaries on the Civil Code, an accepted authority on the subject, now a distinguished
member of the Court, Justice Jose C. Vitug, explains:
The governing principle is prius tempore, potior jure (first in time, stronger in right). Knowledge by the
first buyer of the second sale cannot defeat the first buyers rights except when the second buyer first
registers in good faith the second sale (Olivares vs. Gonzales, 159 SCRA 33). Conversely, knowledge
gained by the second buyer of the first sale defeats his rights even if he is first to register, since
knowledge taints his registration with bad faith (see alsoAstorga vs. Court of Appeals, G.R. No. 58530,
26 December 1984). In Cruz vs. Cabana (G.R. No. 56232, 22 June 1984, 129 SCRA 656), it was held
that it is essential, to merit the protection of Art. 1544, second paragraph, that the second realty buyer
must act in good faith in registering his deed of sale (citingCarbonell vs. Court of Appeals, 69 SCRA
99, Crisostomo vs. CA, G.R. No. 95843, 02 September 1992).
(J. Vitug, Compendium of Civil Law and Jurisprudence, 1993 Edition, p. 604).
Petitioners point out that the notice of lis pendens in the case at bar was annotated on the title of
the subject property only on February 22, 1985, whereas, the second sale between petitioners
Coronels and petitioner Mabanag was supposedly perfected prior thereto or on February 18,
1985. The idea conveyed is that at the time petitioner Mabanag, the second buyer, bought the property
under a clean title, she was unaware of any adverse claim or previous sale, for which reason she is a
buyer in good faith.
We are not persuaded by such argument.
In a case of double sale, what finds relevance and materiality is not whether or not the second
buyer in good faith but whether or not said second buyer registers such second sale in good faith, that
is, without knowledge of any defect in the title of the property sold.

As clearly borne out by the evidence in this case, petitioner Mabanag could not have in good faith,
registered the sale entered into on February 18, 1985 because as early as February 22, 1985, a notice
of lis pendens had been annotated on the transfer certificate of title in the names of petitioners,
whereas petitioner Mabanag registered the said sale sometime in April, 1985. At the time of
registration, therefore, petitioner Mabanag knew that the same property had already been previously
sold to private respondents, or, at least, she was charged with knowledge that a previous buyer is
claiming title to the same property. Petitioner Mabanag cannot close her eyes to the defect in
petitioners title to the property at the time of the registration of the property.
This Court had occasions to rule that:
If a vendee in a double sale registers the sale after he has acquired knowledge that there was a
previous sale of the same property to a third party or that another person claims said property in a
previous sale, the registration will constitute a registration in bad faith and will not confer upon him any
right.(Salvoro vs. Tanega, 87 SCRA 349 [1978]; citing Palarca vs. Director of Land, 43 Phil. 146;
Cagaoan vs. Cagaoan, 43 Phil. 554; Fernandez vs. Mercader, 43 Phil. 581.)
Thus, the sale of the subject parcel of land between petitioners and Ramona P. Alcaraz, perfected
on February 6, 1985, prior to that between petitioners and Catalina B. Mabanag on February 18, 1985,
was correctly upheld by both the courts below.
Although there may be ample indications that there was in fact an agency between Ramona as
principal and Concepcion, her mother, as agent insofar as the subject contract of sale is concerned,
the issue of whether or not Concepcion was also acting in her own behalf as a co-buyer is not squarely
raised in the instant petition, nor in such assumption disputed between mother and daughter. Thus, We
will not touch this issue and no longer disturb the lower courts ruling on this point.
WHEREFORE, premises considered, the instant petition is hereby DISMISSED and the appealed
judgment AFFIRMED.
SO ORDERED.
Narvasa, C.J. (Chairman), Davide, Jr., and Francisco, JJ., concur.
Panganiban, J., no part.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No.171692

June 3, 2013

SPOUSES DELFIN O. TUMIBAY and AURORA T. TUMIBAY-deceased; GRACE JULIE ANN

TUMIBAY MANUEL, legal representative, Petitioners,
vs.
SPOUSES MELVIN A. LOPEZ and ROWENA GAY T. VISITACION LOPEZ, Respondents.
DECISION
DEL CASTILLO, J.:
In a contract to sell, the seller retains ownership of the property until the buyer has paid the price in full. A -buyer
who covertly usurps the seller's ownership of the property prior to the full payment of the price is in breach of the
contract and the seller is entitled to rescission because the breach is substantial and fundamental as it defeats the
very object of the parties in entering into the contract to sell.
The Petition for Review on Certiorari1 assails the May 19, 2005 Decision2 of the Court of Appeals (CA) in CAG.R. CV No. 79029, which reversed the January 6, 2003 Decision3 of the Regional Trial Court (RTC) of
Malaybalay City, Branch 9 in Civil Case No. 2759-98, and the February 10, 2006 Resolution4 denying
petitioner-spouses Delfin O. Tumibay and Aurora5 T. Tumibays Motion for Reconsideration.6
Factual Antecedents
On March 23, 1998, petitioners filed a Complaint7 for declaration of nullity ab initio of sale, and recovery of
ownership and possession of land with the RTC of Malaybalay City. The case was raffled to Branch 9 and
docketed as Civil Case No. 2759-98.
In their Complaint, petitioners alleged that they are the owners of a parcel of land located in Sumpong,
Malaybalay, Bukidnon covered by Transfer Certificate of Title (TCT) No. T-253348 (subject land) in the name of
petitioner Aurora; that they are natural born Filipino citizens but petitioner Delfin acquired American citizenship
while his wife, petitioner Aurora, remained a Filipino citizen; that petitioner Aurora is the sister of Reynalda
Visitacion (Reynalda);9 that on July 23, 1997, Reynalda sold the subject land to her daughter, Rowena Gay T.
Visitacion Lopez (respondent Rowena), through a deed of sale10 for an unconscionable amount of P95,000.00
although said property had a market value of more than P2,000,000.00; that the subject sale was done without the
knowledge and consent of petitioners; and that, for these fraudulent acts, respondents should be held liable for
damages. Petitioners prayed that (1) the deed of sale dated July 23, 1997 be declared void ab initio, (2) the
subject land be reconveyed to petitioners, and (3) respondents be ordered to pay damages.
On May 19, 1998, respondents filed their Answer11 with counterclaim. Respondents averred that on December
12, 1990, petitioners executed a special power of attorney (SPA)12 in favor of Reynalda granting the latter the
power to offer for sale the subject land; that sometime in 1994, respondent Rowena and petitioners agreed that
the former would buy the subject land for the price of P800,000.00 to be paid on installment; that on January 25,
1995, respondent Rowena paid in cash to petitioners the sum of $1,000.00; that from 1995 to 1997, respondent
Rowena paid the monthly installments thereon as evidenced by money orders; that, in furtherance of the
agreement, a deed of sale was executed and the corresponding title was issued in favor of respondent Rowena;
that the subject sale was done with the knowledge and consent of the petitioners as evidenced by the receipt of
payment by petitioners; and that petitioners should be held liable for damages for filing the subject Complaint in
bad faith. Respondents prayed that the Complaint be dismissed and that petitioners be ordered to pay damages.

On May 25, 1998, petitioners filed an Answer to Counterclaim.13 Petitioners admitted the existence of the SPA
but claimed that Reynalda violated the terms thereof when she (Reynalda) sold the subject land without seeking
the approval of petitioners as to the selling price. Petitioners also claimed that the monthly payments from 1995
to 1997 were mere deposits as requested by respondent Rowena so that she (Rowena) would not spend the same
pending their agreement as to the purchase price; and that Reynalda, acting with evident bad faith, executed the
deed of sale in her favor but placed it in the name of her daughter, respondent Rowena, which sale is null and
void because an agent cannot purchase for herself the property subject of the agency.
Ruling of the Regional Trial Court
On January 6, 2003, the RTC rendered a Decision in favor of petitioners, viz:
WHEREFORE, Decision is hereby rendered, as follows;
(1) Ordering the petitioners, jointly and severally, to return the said amount of $12,000.00 at the present
rate of exchange less the expenses to be incurred for the transfer of the property in question under the
name of the petitioners;
(2) Ordering the Register of Deeds of Bukidnon to cancel TCT No. T-62674 in the name of the
respondent Rowena Gay T. Visitacion-Lopez and to issue a new TCT in the name of the petitioners;
(3) Ordering respondents, spouses Melvin and Rowena Gay Lopez, to execute a Deed of Reconveyance
in favor of the petitioners, or if said respondents should refuse to do so or are unable to do so, the Clerk
of Court of the RTC and ex-officio Provincial Sheriff to execute such Deed of Reconveyance;
(4) No x x x damages are awarded. The respective parties must bear their own expenses except that
respondents, jointly and severally, must pay the costs of this suit.
SO ORDERED.14
In ruling in favor of petitioners, the trial court held: (1) the SPA merely authorized Reynalda to offer for sale the
subject land for a price subject to the approval of the petitioners; (2) Reynalda violated the terms of the SPA
when she sold the subject land to her daughter, respondent Rowena, without first seeking the approval of
petitioners as to the selling price thereof; (3) the SPA does not sufficiently confer on Reynalda the authority to
sell the subject land; (4) Reynalda, through fraud and with bad faith, connived with her daughter, respondent
Rowena, to sell the subject land to the latter; and, (5) the sale contravenes Article 1491, paragraph 2, of the Civil
Code which prohibits the agent from acquiring the property subject of the agency unless the consent of the
principal has been given. The trial court held that Reynalda, as agent, acted outside the scope of her authority
under the SPA. Thus, the sale is null and void and the subject land should be reconveyed to petitioners. The trial
court further ruled that petitioners are not entirely free from liability because they received from respondent
Rowena deposits totaling $12,000.00. Under the principle of unjust enrichment, petitioners should, thus, be
ordered to reimburse the same without interest.
Petitioners filed a partial motion for reconsideration15 praying for the award of attorneys fees. In its January 14,
2003 Order16 denying the aforesaid motion, the trial court clarified that the reimbursement of $12,000.00 in
favor of respondents was without interest because there was also no award of rental income in favor of
petitioners. Both parties are deemed mutually compensated and must bear their own expenses.
From this Decision, respondents appealed to the CA.
Ruling of the Court of Appeals
On May 19, 2005, the CA rendered the assailed Decision reversing the judgment of the trial court, viz:
WHEREFORE, premises considered, the appealed Decision of the Court a quo is hereby REVERSED and SET
ASIDE. Accordingly, title to the subject property shall remain in the name of the Appellant ROWENA GAY
VISITACION-LOPEZ. The latter and her spouse MELVIN LOPEZ are directed to pay the balance of Four
Hundred Eighty Eight Thousand Pesos (P488,000.00) to the petitioners effective within 30 days from receipt of
this Decision and in case of delay, to pay the legal rate of interests [sic] at 12% per annum until fully paid.
SO ORDERED.17

In reversing the trial courts Decision, the appellate court ruled that: (1) the SPA sufficiently conferred on
Reynalda the authority to sell the subject land; (2) although there is no direct evidence of petitioners approval of
the selling price of the subject land, petitioner Auroras acts of receiving two money orders and several dollar
checks from respondent Rowena over the span of three years amount to the ratification of any defect in the
authority of Reynalda under the SPA; (3) petitioners are estopped from repudiating the sale after they had
received the deposits totaling $12,000.00; (4) the sale is not contrary to public policy because there is no rule or
law which prohibits the sale of property subject of the agency between the agent and his children unless it would
be in fraud of creditors which is not the case here; (5) petitioners impliedly ratified the subject SPA and contract
of sale as well as its effects; and, (6) the selling price of P800,000.00 for the subject land is deemed reasonable
based on the testimony of respondent Rowena as this was the selling price agreed upon by her and petitioner
Delfin. Considering that respondent Rowena proved that she remitted a total of $12,000.00 to petitioners and
pegging the exchange rate at that time at P26.00 per dollar, the appellate court ruled that P312,000.00 of
the P800,000.00 selling price was already received by petitioners. Thus, respondents are only liable for the
balance ofP488,000.00.
Hence, this Petition.
Issues
Petitioners raise the following issues for our resolution:
I. Whether the CA erred in resolving the issue in the case at bar.
II. Whether under the SPA Reynalda had the power to sell the subject land.
III. Whether the actuations of petitioner Aurora in receiving money from respondent Rowena amounted
to the ratification of the breach in the exercise of the SPA.
IV. Whether the CA erred in not declaring the sale void on grounds of public policy.
V. Whether the CA erred in adopting the testimony of respondent Rowena as to the P800,000.00 selling
price of the subject land.18
Petitioners Arguments
Petitioners argue that the appellate court went beyond the issues of this case when it ruled that there was a
contract of sale between respondent Rowena and petitioner Aurora because the issues before the trial court were
limited to the validity of the deed of sale dated July 23, 1997 for being executed by Reynalda beyond the scope
of her authority under the SPA. Further, the existence of the alleged contract of sale was not proven because the
parties failed to agree on the purchase price as stated by petitioner Aurora in her testimony. The money, in cash
and checks, given to petitioners from 1995 to 1997 were mere deposits until the parties could agree to the
purchase price. Moreover, Reynalda acted beyond the scope of her authority under the SPA because she was
merely authorized to look for prospective buyers of the subject land. Even assuming that she had the power to
sell the subject land under the SPA, she did not secure the approval as to the price from petitioners before
executing the subject deed of sale, hence, the sale is null and void. Petitioners also contend that there was no
ratification of the subject sale through petitioners acceptance of the monthly checks from respondent Rowena
because the sale occurred subsequent to the receipt of the aforesaid checks. They further claim that the sale was
void because it was not only simulated but violates Article 1491 of the Civil Code which prohibits the agent from
acquiring the property subject of the agency. Here, Reynalda merely used her daughter, respondent Rowena, as a
dummy to acquire the subject land. Finally, petitioners question the determination by the appellate court that the
fair market value of the subject land is P800,000.00 for lack of any factual and legal basis.
Respondents Arguments
Respondents counter that the issue as to whether there was a perfected contract of sale between petitioners and
respondent Rowena is inextricably related to the issue of whether the deed of sale dated July 23, 1997 is valid,
hence, the appellate court properly ruled on the former. Furthermore, they reiterate the findings of the appellate
court that the receipt of monthly installments constitutes an implied ratification of any defect in the SPA and deed
of sale dated July 23, 1997. They emphasize that petitioners received a total of $12,000.00 as consideration for
the subject land.
Our Ruling

The Petition is meritorious.

As a general rule, we do not disturb the factual findings of the appellate court. However, this case falls under one
of the recognized exceptions thereto because the factual findings of the trial court and appellate court are
conflicting.19 Our review of the records leads us to conclude that the following are the relevant factual
antecedents of this case.
Petitioners were the owners of the subject land covered by TCT No. T-25334 in the name of petitioner Aurora.
On December 12, 1990, petitioners, as principals and sellers, executed an SPA in favor of Reynalda, as agent, to,
among others, offer for sale the subject land provided that the purchase price thereof should be approved by the
former. Sometime in 1994, petitioners and respondent Rowena agreed to enter into an oral contract to sell over
the subject land for the price of P800,000.00 to be paid in 10 years through monthly installments.
On January 25, 1995, respondent Rowena paid the first monthly installment of $1,000.00 to petitioner Aurora
which was followed by 22 intermittent monthly installments of $500.00 spanning almost three years. Sometime
in 1997, after having paid a total of $10,000.00, respondent Rowena called her mother, Reynalda, claiming that
she had already bought the subject land from petitioners. Using the aforesaid SPA, Reynalda then transferred the
title to the subject land in respondent Rowenas name through a deed of sale dated July 23, 1997 without the
knowledge and consent of petitioners. In the aforesaid deed, Reynalda appeared and signed as attorney-in-fact of
petitioner Aurora, as seller, while respondent Rowena appeared as buyer. After which, a new title, i.e., TCT No.
62674,20 to thesubject land was issued in the name of respondent Rowena.
We explain these factual findings and the consequences thereof below.
Petitioners and respondent
Rowena entered into a contract to sell over the subject land.
Petitioners deny that they agreed to sell the subject land to respondent Rowena for the price of P800,000.00
payable in 10 years through monthly installments. They claim that the payments received from respondent
Rowena were for safekeeping purposes only pending the final agreement as to the purchase price of the subject
land.
We are inclined to give credence to the claim of the respondents for the following reasons.
First, the payment of monthly installments was duly established by the evidence on record consisting of money
orders21 and checks22 payable to petitioner Aurora. Petitioners do not deny that they received 23 monthly
installments over the span of almost three years. As of November 30, 1997 (i.e., the date of the last monthly
installment), the payments already totaled $12,000.00, to wit:
Date
January 25, 1995

Amount Paid
(in dollars)
1,000.0023

February 21, 1995

500.00

March 27, 1995

500.00

April 25, 1995

500.00

June 1, 1995

500.00

June 30, 1995

500.00

July 31, 1995

500.00

May 29, 1996

500.00

June 30, 1996

500.00

July 31, 1996

500.00

August 31, 1996

500.00

September 30, 1996

500.00

October 29, 1996

500.00

December 31, 1996

500.00

January 31, 1997

500.00

February 28, 1997

500.00

March 31, 1997

500.00

May 31, 1997

500.00

July 19, 1997

500.00

August 31, 1997

500.00

September 30, 1997

500.00

October 31, 1997

500.00

November 30, 1997

500.00

Total

12,000.00

Second, in her testimony, petitioner Aurora claimed that the $1,000.00 in cash that she received from respondent
Rowena on January 25, 1995 was a mere deposit until the purchase price of the subject land would have been
finally agreed upon by both parties.24 However, petitioner Aurora failed to explain why, after receiving this
initial sum of $1,000.00, she thereafter accepted from respondent Rowena 22 intermittent monthly installments
in the amount of $500.00. No attempt was made on the part of petitioners to return these amounts and it is fair to
assume that petitioners benefited therefrom.
Third, it strains credulity that respondent Rowena would make such monthly installments for a substantial
amount of money and for a long period of time had there been no agreement between the parties as to the
purchase price of the subject land.
We are, thus, inclined to rule that there was, indeed, a contractual agreement between the parties for the purchase
of the subject land and that this agreement partook of an oral contract to sell for the sum of P800,000.00. A
contract to sell has been 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."25 In a contract to sell, "ownership is retained by the seller and is not to pass
until the full payment of the price x x x."26 It is "commonly entered into so as to protect the seller against a
buyer who intends to buy the property in installments by withholding ownership over the property until the buyer
effects full payment therefor."27
In the case at bar, while there was no written agreement evincing the intention of the parties to enter into a
contract to sell, its existence and partial execution were sufficiently established by, and may be reasonably
inferred from the actuations of the parties, to wit: (1) the title to the subject land was not immediately transferred,
through a formal deed of conveyance, in the name of respondent Rowena prior to or at the time of the first
payment of $1,000.00 by respondent Rowena to petitioner Aurora on January 25, 1995;28 (2) after this initial
payment, petitioners received 22 intermittent monthly installments from respondent Rowena in the sum of
$500.00; and, (3) in her testimony, respondent Rowena admitted that she had the title to the subject land
transferred in her name only later on or on July 23, 1997, through a deed of sale, because she believed that she
had substantially paid the purchase price thereof,29 and that she was entitled thereto as a form of security for the
installments she had already paid.30
Respondent Rowena was in breach of the contract to sell.

Although we rule that there was a contract to sell over the subject land between petitioners and respondent
Rowena, we find that respondent Rowena was in breach thereof because, at the time the aforesaid deed of sale
was executed on July 23, 1997, the full price of the subject land was yet to be paid. In arriving at this conclusion,
we take judicial notice31 of the prevailing exchange rates at the time, as published by the Bangko Sentral ng
Pilipinas,32 and multiply the same with the monthly installments respondent Rowena paid to petitioners, as
supported by the evidence on record, to wit:
Date
January 25, 1995

Amount Paid
(in dollars)

Exchange Rate
(peso per dollar)

Peso Equivalent

1,000.00

24.7700

24,770.00

February 21, 1995

500.00

25.1140

12,557.00

March 27, 1995

500.00

25.9670

12,983.50

April 25, 1995

500.00

26.0270

13,013.50

June 1, 1995

500.00

25.8040

12,902.00

June 30, 1995

500.00

25.5750

12,787.50

July 31, 1995

500.00

25.5850

12,792.50

May 29, 1996

500.00

26.1880

13,094.00

June 30, 1996

500.00

26.203033

13,101.50

July 31, 1996

500.00

26.2280

13,114.00

August 31, 1996

500.00

26.202034

13,101.00

September 30, 1996

500.00

26.2570

13,128.50

October 29, 1996

500.00

26.2830

13,141.50

December 31, 1996

500.00

26.288035

13,144.00

January 31, 1997

500.00

26.3440

13,172.00

February 28, 1997

500.00

26.3330

13,166.50

March 31, 1997

500.00

26.3670

13,183.50

May 31, 1997

500.00

26.374036

13,187.00

July 19, 1997

500.00

28.574037

14,287.00

Total

260,626.50

Thus, as of July 19, 1997 or prior to the execution of the deed of sale dated July 23, 1997, the total amount of
monthly installments paid by respondent Rowena to petitioners was only P260,626.50 or 32.58%38 of
theP800,000.00 purchase price. That the full price was yet to be paid at the time of the subject transfer of title
was admitted by respondent Rowena on cross-examination, viz:
ATTY. OKIT:
Q - Let us make this clear. You now admit that x x x you agreed to buy the lot at eight hundred thousand, to
which the Plaintiff x x x agreed. Now based on the dollar rate, your total payment did not reach x x x eight
hundred thousand pesos? Is that correct? [sic]
A - Yes.

Q - Since notwithstanding the fact this eight hundred thousand which you have agreed is not fully paid why did
your mother finalize the deed of sale?
A - My mother is equipped with the SPA to transfer the lot to me only for security purposes but actually there is
no full payment.39 (Emphasis supplied)
Respondent Rowena tried to justify the premature transfer of title by stating that she had substantially paid the
full amount of the purchase price and that this was necessary as a security for the installments she had already
paid. However, her own evidence clearly showed that she had, by that time, paid only 32.58% thereof. Neither
can we accept her justification that the premature transfer of title was necessary as a security for the installments
she had already paid absent proof that petitioners agreed to this new arrangement. Verily, she failed to prove that
petitioners agreed to amend or novate the contract to sell in order to allow her to acquire title over the subject
land even if she had not paid the price in full.
Significantly, the evidence on record indicates that the premature transfer of title in the name of respondent
Rowena was done without the knowledge and consent of petitioners. In particular, respondent Rowenas
narration of the events leading to the transfer of title showed that she and her mother, Reynalda, never sought the
consent of petitioners prior to said transfer of title, viz:
COURT:
Q- Why is this check (in the amount of $1,000.00) in your possession now?
A- This is the check I paid to her (referring to petitioner Aurora) which is in cash. [sic]
ATTY. BARROSO:
Q - Now did you continue x x x paying the $500.00 dollar to him (referring to petitioner Delfin)?
A - Yes.
xxxx
Q - Now having stated substantially paid, what did you do with the land subject of this case? [sic]
A - I called my mother who has equipped with SPA to my Uncle that I have already bought the land. [sic]
Q - And you called your mother?
A - Yes.
xxxx
Q - Then what transpired next?
A - After two years my mother called me if how much I have paid the land and being equipped with SPA, so she
transferred the land to me. [sic]40 (Emphases supplied)
Respondent Rowenas reliance on the SPA as the authority or consent to effect the premature transfer of title in
her name is plainly misplaced. The terms of the SPA are clear. It merely authorized Reynalda to sell the subject
land at a price approved by petitioners. The SPA could not have amended or novated the contract to sell to allow
respondent Rowena to acquire the title over the subject land despite non-payment of the price in full for the
reason that the SPA was executed four years prior to the contract to sell. In fine, the tenor of her testimony
indicates that respondent Rowena made a unilateral determination that she had substantially paid the purchase
price and that she is entitled to the transfer of title as a form of security for the installments she had already paid,
reasons, we previously noted, as unjustified.
The contract to sell is rescissible.
Article 1191 of the Civil Code provides:
Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not
comply with what is incumbent upon him.

The injured party may choose between fulfillment and the rescission of the obligation, with the payment of
damages in either case. He may also seek rescission even after he has chosen fulfillment, if the latter should
become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period. x x x
As a general rule, "rescission will not be permitted for a slight or casual breach of the contract, but only for such
breaches as are substantial and fundamental as to defeat the object of the parties in making the agreement."41
In the case at bar, we find that respondent Rowenas act of transferring the title to the subject land in her name,
without the knowledge and consent of petitioners and despite non-payment of the full price thereof, constitutes a
substantial and fundamental breach of the contract to sell. As previously noted, the main object or purpose of a
seller in entering into a contract to sell is to protect himself against a buyer who intends to buy the property in
installments by withholding ownership over the property until the buyer effects full payment therefor.42 As a
result, the sellers obligation to convey and the buyers right toconveyance of the property arise only upon full
payment of the price. Thus, a buyer who willfully contravenes this fundamental object or purpose of the contract,
by covertly transferring the ownership of the property in his name at a time when the full purchase price has yet
to be paid, commits a substantial and fundamental breach which entitles the seller to rescission of the contract.43
Indeed, it would be highly iniquitous for us to rule that petitioners, as sellers, should continue with the contract to
sell even after the discovery of the aforesaid breach committed by respondent Rowena, as buyer, considering that
these acts betrayed in no small measure the trust reposed by petitioners in her and her mother, Reynalda. Put
simply, respondent Rowena took advantage of the SPA, in the name of her mother and executed four years prior
to the contract to sell, to effect the transfer of title to the subject land in her (Rowenas) name without the
knowledge and consent of petitioners and despite non-payment of the full price.
We, thus, rule that petitioners are entitled to the rescission of the subject contract to sell.
Petitioners are entitled to moral damages and attorneys fees while respondent Rowena is entitled to the
reimbursement of the monthly installments with legal interest.
Article 1170 of the Civil Code provides:
Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those
who in any manner contravene the tenor thereof, are liable for damages.
Fraud or malice (dolo) has been defined as a "conscious and intentional design to evade the normal fulfillment of
existing obligations" and is, thus, incompatible with good faith.44 In the case at bar, we find that respondent
Rowena was guilty of fraud in the performance of her obligation under the subject contract to sell because (1)
she knew that she had not yet paid the full price (having paid only 32.58% thereof) when she had the title to the
subject land transferred to her name, and (2) she orchestrated the aforesaid transfer of title without the knowledge
and consent of petitioners. Her own testimony and documentary evidence established this fact. Where fraud and
bad faith have been established, the award of moral damages is proper.45 Further, under Article 2208(2)46 of the
Civil Code, the award of attorneys fees is proper where the plaintiff is compelled to litigate with third persons or
incur expenses to protect his interest because of the defendants act or omission. Here, respondent Rowenas
aforesaid acts caused petitioners to incur expenses in litigating their just claims. We, thus, find respondent
Rowena liable for moral damages and attorneys fees which we fix at P100,000.00 andP50,000.00,
respectively.47
Anent the monthly installments respondent Rowena paid to petitioners, our review of the records leads us to
conclude that respondent Rowena is entitled to the reimbursement of the same with legal interest. Although
respondent Rowena was clearly unjustified in prematurely and covertly transferring the title to the subject land in
her name, we deplore petitioners lack of candor in prosecuting their claims before the trial court and intent to
evade recognition of the monthly installments that they received from respondent Rowena. The records indicate
that, in their Complaint, petitioners made no mention of the fact that they had entered into a contract to sell with
respondent Rowena and that they had received 23 monthly installments from the latter. The Complaint merely
alleged that the subject sale was done without the knowledge and consent of petitioners. It was only later on,
when respondent Rowena presented the proof of payment of the monthly installments in her Answer to the
Complaint, that this was brought to light to which petitioners readily admitted. Further, no evidence was
presented to prove that respondent Rowena occupied the subject land or benefited from the use thereof upon

commencement of the contract to sell which would have justified the setting off of rental income against the
monthly installments paid by respondent Rowena to petitioners.
In view of the foregoing, the sums paid by respondent Rowena as monthly installments to petitioners should,
thus, be returned to her with legal interest. The total amount to be reimbursed by petitioners to respondent
Rowena is computed as follows:
Date
January 25, 1995

Amount Paid
(in dollars)

Exchange Rate
(peso per dollar)

Peso Equivalent

1,000.00

24.7700

24,770.00

February 21, 1995

500.00

25.1140

12,557.00

March 27, 1995

500.00

25.9670

12,983.50

April 25, 1995

500.00

26.0270

13,013.50

June 1, 1995

500.00

25.8040

12,902.00

June 30, 1995

500.00

25.5750

12,787.50

July 31, 1995

500.00

25.5850

12,792.50

May 29, 1996

500.00

26.1880

13,094.00

June 30, 1996

500.00

26.2030

13,101.50

July 31, 1996

500.00

26.2280

13,114.00

August 31, 1996

500.00

26.2020

13,101.00

September 30, 1996

500.00

26.2570

13,128.50

October 29, 1996

500.00

26.2830

13,141.50

December 31, 1996

500.00

26.2880

13,144.00

January 31, 1997

500.00

26.3440

13,172.00

February 28, 1997

500.00

26.3330

13,166.50

March 31, 1997

500.00

26.3670

13,183.50

May 31, 1997

500.00

26.3740

13,187.00

July 19, 1997

500.00

28.5740

14,287.00

August 31, 1997

500.00

30.1650

15,082.50

September 30, 1997

500.00

33.8730

16,936.50

October 31, 1997

500.00

34.9380

17,469.00

November 30, 1997

500.00

34.6550

17,327.50

Total

327,442.00

Since this amount is neither a loan nor forbearance of money, we set the interest rate at 6% per annum computed
from the time of the filing of the Answer48 to the Complaint on May 19, 199849 until finality of judgement and
thereafter at 12% per annum until fully paid in accordance with our ruling in Eastern Shipping Lines, Inc. v.
Court of Appeals.50 Petitioners are, thus, ordered to pay respondent Rowena the sum of P327,442.00 with an

interest of 6% per annum computed from May 19, 1998 until finality of judgment and thereafter of 12% per
annum until fully paid.
The sale of the subject land, effected through the deed of sale dated July 23, 1997, is void.
Having ruled that respondent Rowena was in substantial breach of the contract to sell because she had the title to
the subject land transferred in her name without the knowledge and consent of petitioners and despite lack of full
payment of the purchase price, we now rule on the validity of the deed of sale dated July 23, 1997 which was
used to effect the aforesaid transfer of ownership.
It will be recalled that on December 12, 1990, petitioners, as principals and sellers, executed an SPA in favor of
Reynalda, as agent. The SPA stated in part:
That we spouses, AURORA TUMIBAY and DELFIN TUMIBAY, of legal age and presently residing at 36
Armstrong Drive, Clark, New Jersey, 07066 name, constitute and appoint REYNALDA VISITACION, widow,
of legal age and residing at Don Carlos, Bukidnon, Philippines, to be our true and lawful Attorney-in-fact, for us
and in our name, place and stead and for our use and benefit to do and perform the following acts and deed:
To administer our real property located in the Province of Bikidnon, Town of Malaybalay, Barrio of Bantaunon,
Towns of Maramag, Paradise, Maramag and Barrio of Kiburiao, Town of Quezon.
To offer for sale said properties, the selling price of which will be subject to our approval.
xxxx
To sign all papers and documents on our behalf in a contract of sale x x x.51.
As can be seen, the SPA gave Reynalda the power and duty to, among others, (1) offer for sale the subject land to
prospective buyers, (2) seek the approval of petitioners as to the selling price thereof, and (3) sign the contract of
sale on behalf of petitioners upon locating a buyer willing and able to purchase the subject land at the price
approved by petitioners. Although the SPA was executed four years prior to the contract to sell, there would have
been no obstacle to its use by Reynalda had the ensuing sale been consummated according to its terms. However,
as previously discussed, when Reynalda, as attorney-in-fact of petitioner Aurora, signed the subject deed of sale
dated July 23, 1997, the agreed price of P800,000.00 (which may be treated as the approved price) was not yet
fully paid because respondent Rowena at the time had paid only P260,262.50.52 Reynalda, therefore, acted
beyond the scope of her authority because she signed the subject deed of sale, on behalf of petitioners, at a price
of P95,000.00 which was not approved by the latter. For her part, respondent Rowena cannot deny that she was
aware of the limits of Reynaldas power under the SPA because she (Rowena) was the one who testified that the
agreed price for the subject land was P800,000.00.
Article 1898 of the Civil Code provides:
Art. 1898. If the agent contracts in the name of the principal, exceeding the scope of his authority, and the
principal does not ratify the contract, it shall be void if the party with whom the agent contracted is aware of the
limits of the powers granted by the principal. In this case, however, the agent is liable if he undertook to secure
the principals ratification.
It should be noted that, under Article 1898 of the Civil Code, the principals ratification of the acts of the agent,
done beyond the scope of the latters authority, may cure the defect in the contract entered into between the agent
and a third person. This seems to be the line of reasoning adopted by the appellate court in upholding the validity
of the subject sale. The appellate court conceded that there was no evidence that respondents sought the approval
of petitioners for the subject sale but it, nonetheless, ruled that whatever defect attended the sale of the subject
land should be deemed impliedly ratified by petitioners acceptance of the monthly installments paid by
respondent Rowena. Though not clearly stated in its Decision, the appellate court seemed to rely on the four
monthly installments (i.e., August 31, September 30, October 31, and November 30, 1997) respondent Rowena
paid to petitioners which the latter presumably received and accepted even after the execution of the deed of sale
dated July 23, 1997.
We disagree.
That petitioners continued to receive four monthly installments even after the premature titling of the subject
land in the name of respondent Rowena, through the deed of sale dated July 23, 1997, did not, by itself, establish

that petitioners ratified such sale. On the contrary, the fact that petitioners continued to receive the aforesaid
monthly installments tended to establish that they had yet to discover the covert transfer of title in the name of
respondent Rowena. As stated earlier, the evidence on record established that the subject sale was done without
petitioners knowledge and consent which would explain why receipt or acceptance by petitioners of the
aforementioned four monthly installments still occurred. Further, it runs contrary to common human experience
and reason that petitioners, as sellers, would forego the reservation or retention of the ownership over the subject
land, which was intended to guarantee the full payment of the price under the contract to sell, especially so in this
case where respondent Rowena, as buyer, had paid only 32.58% of the purchase price. In a contract to sell, it
would be unusual for the seller to consent to the transfer of ownership of the property to the buyer prior to the
full payment of the purchase price because the reservation of the ownership in the seller is precisely intended to
protect the seller from the buyer. We, therefore, find that petitioners claim that they did not ratify the subject
sale, which was done without their knowledge and consent, and that the subsequent discovery of the aforesaid
fraudulent sale led them to promptly file this case with the courts to be more credible and in accord with the
evidence on record. To rule otherwise would be to reward respondent Rowena for the fraud that she committed
on petitioners.
Based on the foregoing, we rule that (1) Reynalda, as agent, acted beyond the scope of her authority under the
SPA when she executed the deed of sale dated July 23, 1997 in favor of respondent Rowena, as buyer, without
the knowledge and consent of petitioners, and conveyed the subject land to respondent Rowena at a price not
approved by petitioners, as principals and sellers, (2) respondent Rowena was aware of the limits of the authority
of Reynalda under the SPA, and (3) petitioners did not ratify, impliedly or expressly, the acts of Reynalda. Under
Article 1898 of the Civil Code, the sale is void and petitioners are, thus, entitled to the reconveyance of the
subject land.
WHEREFORE, the Petition is GRANTED. The May 19, 2005 Decision and February 10, 2006 Resolution of the
Court of Appeals in CA-G.R. CV No. 79029 are ANNULLED and SET ASIDE. The January 6, 2003 Decision of
the Regional Trial Court of Malaybalay City, Branch 9 in Civil Case No. 2759-98 is REINSTATED and
MODIFIED to read as follows:
1. The deed of sale dated July 23, 1997 over the subject land, covered by TCT No. T-62674, between
petitioner Aurora, represented by Reynalda as her attorney-in-fact, and respondent Rowena is declared
void.
2. The contract to sell over the subject land, covered by TCT No. T-25334, between petitioners, as
sellers, and respondent Rowena, as buyer, is declared rescinded.1wphi1
3. The Register of Deeds of Malaybalay City is ordered to cancel TCT No. T-62674 in the name of
respondent Rowena and to reinstate TCT No. T-25334 in the name of petitioner Aurora.
4. Respondent Rowena is ordered to pay petitioners the sum of P100,000.00 as moral damages
andP50,000.00 as attorneys fees.
5. Petitioners are ordered to pay respondent Rowena the sum of P327,442.00 with legal interest of 6%
per annum from May 19, 1998 until finality of this Decision. In case petitioners fail to pay the amount
due upon finality of this Decision, they shall pay legal interest thereon at the rate of 12% per annum
until fully paid.
No costs.
SO ORDERED.
MARIANO C. DEL CASTILLO
Associate Justice
WE CONCUR:

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-35367 April 9, 1987
MANOTOK REALTY, INC., petitioner,
vs.
THE HONORABLE COURT OF APPEALS and APOLONIO SIOJO, respondents.
GUTIERREZ, JR., J.:
This is an appeal by way of certiorari seeking to set aside the decision of the Court of Appeals which reversed the
decision of the trial court and upheld the sale of the disputed lot in favor of the private respondent.
Wayback on November 21, 1951, the Court of First Instance of Manila, acting as a probate court in the special
proceedings of the testate estate of Clara Tambunting de Legarda, authorized Vicente Legarda, as special coadministrator, to sell the Legarda Tambunting Subdivision. The order of the probate court partly states:
xxx xxx xxx
The co-administrator herein are hereby authorized to sold the "Legarda Tambunting
Subdivision" covered by Transfer Certificate of Title Nos. 62042, 45149, 29578, 40957, and
59585, with a total area of 80,238.90 square meters, more or less, at a price of P50.00 per
square meter, executing the necessary document or documents and submitting the same to this
Court for Approval
xxx xxx xxx
On December 10, 1952, Vicente Legarda as co-administrator allegedly sold an area of about 280 square meters of
the subdivision denominated as Lot 6, Block 4 situated at Dinalupihan, Tondo, Manila at P30.00 per square meter
to Abelardo Lucero. The sale was on an installment basis and Lucero paid an initial amount of P200.00 by virtue
of which a receipt was issued by Legarda. On the same day, Lucero took possession of the lot,
In 1953, Lucero leased the lot to six persons, one of whom is herein private respondent. Like the other tenants,
respondent constructed a house on an area of 73 square meters of the lot now denominated as Lot III, Block 2,
and paid P15.00 as monthly rentals.
On July 31, 1956, the probate court issued another order authorizing the Philippine Trust Company as
administrator, to sell the subdivision at the earliest possible time at the best obtainable price.
Sometime in 1957, the lessees of Lucero, including the private respondent, defaulted in their payment of rentals.
Separate actions for ejectment were filed against them However, a compromise agreement was concluded and the
tenants resumed the payment of rentals. Up until 1966, the private respondent continued paying monthly rentals
to Lucero.
In the meantime, Lucero accordingly awaited the sending by Legarda of the formal contract but as none came, he
could not make further payments. In 1957-58, he, therefore, went to the Philippine Trust Company to make
further payments, showing it the receipt evidencing the down payment but the latter refused either to receive
payment or to issue a formal contract because the Legarda-Tambunting Subdivision was involved in litigation.
The petitioner was subsequently awarded the sale of the entire subdivision. On March 13, 1959, the deed of sale
was executed by and between petitioner and Philippine Trust Company and the same was approved by the
probate court. The petitioner obtained Transfer Certificate of Title Numbers 62042, 45149, 29578, 40957 and
59585 which covered the whole Legarda-Tambunting estate including the lot sold to Lucero.
On January 1966, the petitioner caused to be published in the Manila Times and Taliba notices addressed to "all
squatter-occupants" of the subdivision advising them to surrender the material and actual possession of the
portions occupied by them otherwise judicial action would be taken. On March 4, 1966, the petitioner filed the
complaint below for ejectment against the private respondent. On March 11, 1966, summons was served on the

latter. These circumstances, notwithstanding, on May 23, 1966, Lucero executed a deed of assignment of the lot
in question in favor of his lessees, including the private respondent.
After hearing, the trial court rendered judgment in favor of the petitioner, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered declaring the plaintiff (petitioner) to be the owner
and entitled to the possession of the land described as Lot III, Block 2, located at 1286
Dinalupihan, Tondo, Manila, and defendant (private respondent) is hereby ordered to deliver
the possession thereof to the plaintiff, to pay a monthly rental at the rate of P50 centavos a
square meter per month from March 20, 1959 until the land is delivered to the plaintiff, and to
pay the cost. (pp, 44-47, Rec. on Appeal).
On appeal, the Court of Appeals reversed the decision of the trial court and held that the sale made by Legarda to
Lucero was valid because the former acted within his authority as special co-administrator and that there was no
need for the approval of the probate court of such sale. According to the appellate court, where the coadministrator sold the estate pursuant to an authority granted him by the probate court, and where, the
administrator acted in obedience to the court's directive and within the scope of his authority, the sale could well
be considered the act of the probate court itself. Therefore, the approval of the probate court, if wanting, cannot
affect the validity of the administrator's act.
The appellate court also ruled that there was a consummated sale between Legarda and Lucero because they had
agreed on the subject matter and the purchase price and that the latter paid part of the purchase price while the
former delivered the land.
In this petition, the petitioner contends the appellate court committed an error of law when: a) it upheld the
validity of the contract of sale between Legarda and Lucero; and b) it ruled that the approval of the probate court
was not necessary for the validity of the said sale.
The petitioner argues that the receipt evidencing the alleged sale by Legarda to Lucero does not conform to the
legal requirements of contracts of sale and that when the law requires that a contract be in a public document in
order that it may be valid or enforceable, such as contracts which have for their object of the creation or
transmission of real rights over immovable property, that requirement is absolute and indispensable. Therefore,
the questioned sale cannot be enforced against third persons such as petitioner by the private respondent who
only derived his right to the property from Lucero. Furthermore, the alleged sale was on an installment basis and
thus, necessitated court approval because the same was patently not in accordance with the express terms and
conditions specified in the authorization to sell by the probate court.
We find merit in the petition.
The alleged sale made by Legarda to Lucero should have been embodied in a public instrument in accordance
with Article 1358 of the Civil Code and should have been duly registered with the Register of Deeds to make it
binding against third persons. The authority given by the probate court to Legarda specifically required the
execution of necessary documents. Lucero not only failed to obtain a deed of sale from Legarda but also failed to
secure any kind of writing evidencing the contract of sale other than the receipt issued by Legarda
acknowledging the amount of P200.00. No explanation was offered by the private respondent as to why there
was no effort on the part of Lucero to pay the balance of the purchase price during the time that Legarda was the
special co- administrator. The private respondent merely alleged that Lucero awaited the sending of the formal
contract by Legarda but as none came, he could not make further payments. It was only after about five years
that Lucero allegedly went to the administrator and offered to pay the balance. By this time, Philippine Trust
Company was already the administrator of the Legarda-Tambunting estate and it refused to accept further
payments from Lucero who had only the receipt in the amount of P200.00 and nothing more as proof that more
than five years earlier a piece of real property was sold to him by a special administrator acting under court
orders.
We, therefore, rule that the alleged sale made by Legarda to Lucero did not bind the Legarda-Tambunting estate,
much less, the petitioner who acquired the property in dispute with the approval of the probate court and in a sole
reliance on the clean title of the said property. As correctly ruled by the trial court:
The plaintiff (petitioner), as the registered owner of the property, is entitled to the possession
thereof, unless the defendant (private respondent) could show that he is entitled to its

possession or to purchase the same. The property was advertised for sale, but neither Abelardo
Lucero nor the defendant herein appeared in the testate proceedings of Clara Tambunting de
Legarda to claim their right to the particular lot in question. The records of the testate
proceedings of Clara Tambunting de Legarda did not show that any claim was made by Dr.
Abelardo Lucero or by the defendant herein. The alleged sale made by Vicente Legarda in
favor of Dr. Lucero did not bind the estate, for aside from the fact that no formal deed of sale
was executed by Vicente Legarda specifying the terms thereof, it was never approved by the
Court. Sales of immovable properties by the administrators did not bind the estate and have no
validity unless they are approved by the Court. Moreover, the alleged receipt issued by Vicente
Legarda does not constitute even a memorandum of sale, because it did not specify the price of
the land and the manner of payment ...
We also find that the appellate court committed an error of law when it held that the sale of the lot in question did
not need the approval of the probate court.
Although the Rules of Court do not specifically state that the sale of an immovable property belonging to an
estate of a decedent, in a special proceeding, should be made with the approval of the court, this authority is
necessarily included in its capacity as a probate court.
An administrator under the circumstances of this case cannot enjoy blanket authority to dispose of real estate as
he pleases, especially where he ignores specific directives to execute proper documents and get court approval
for the sale's validity.
In the case of Estate of Olave v. Reyes (123 SCRA 767, 772), we ruled:
Section 1, Rule 73 of the Rules of Court, expressly provides that "the court first taking
cognizance of the settlement of the estate of a decedent, shall exercise jurisdiction to the
exclusion of all other courts." (Emphasis supplied). The law is clear that where the estate of the
deceased person is already the subject of a testate or intestate proceeding, the administrator
cannot enter into any transaction involving it without prior approval of the probate court.
Also, in Vda. de Gil v. Cancio (14 SCRA 796, 800), we ruled:
xxx xxx xxx
... And bearing in mind this situation of the two heirs which happened during the Japanese
occupation, the probate court did not hesitate in approving the agreement thereby giving to the
administratrix the necessary authority to execute the deed of sale covering the two properties of
the deceased in favor of Agustin Cancio provided that the deed of sale be submitted to the court
for its approval. And this matter is sanctioned by Section 4, Rule 89 of the Rules of Court,
which provides:
When it appears that the sale of the whole or a part of the real or personal estate will be
beneficial to the heirs, devisees, legatees, and other interested persons, the court may, upon
application of the executor or administrator and on written notice to the heirs, devisees, and
legatees who are interested in the estate to be sold, authorize the executor or administrator to
sell the whole or a part of said estate, although not necessary to pay debts, legacies. or expenses
of administration; ...
Moreover, the authority granted by the probate court in the case at bar specifically ordered Legarda to submit the
document of sale for its approval.
Thus, as stated earlier, the sale made by Legarda to Lucero, having been done without the approval of the probate
court and without the execution of the necessary documents did not bind the Legarda-Tambunting estate and
could not have affected the rights of the petitioner over the disputed lot. Furthermore, the private respondent is
only a transferee of Lucero. At the time of the transfer of rights, the private respondent already had notice of the
petitioner's ownership because he was served with a summons in the ejectment case filed against him by the
petitioner. More importantly, the private respondent is deemed to have constructive notice of such ownership
from the time the petitioner was able to secure a title over the said property in 1959. The controversies and
litigations over the estate, the problems with numerous squatters, and other aspects of the acquisition of the

property attracted wide public attention and anybody in the subsidivision could not have avoided being involved
or aware. Therefore, the private respondent cannot even be considered a possessor and builder in good faith.
Again, as correctly held by the trial court:
After this case had been filed on March 4, 1966, Dr. Abelardo Lucero, on May 23, 1966,
executed a deed of sale of the lot in question in favor of his lessees, including the defendant.
This deed of sale did not confer upon the defendant the character of a builder in good faith, He
built his house at the time when he was a mere lessee of Dr. Abelardo Lucero. The fact that he
subsequently bought the rights of Dr. Lucero did not change the character of his possession to a
possessor in good faith. Moreover, it is apparent that the deed of sale was executed in bad faith
with the intention of giving the defendant the character of a possessor in good faith. The
records show that the defendant was served with summons on March 11, 1966. At the time of
the execution of the deed of sale (Exh. C) on March 26, 1966, defendant already knew, or had
been informed, that the plaintiff claims to be the owner of the land in question, and that
plaintiff's ownership is evidenced by Transfer Certificate of Title Nos. 62042, 45149, 29578,
40957 and 59585. The alleged sale made by Vicente Legarda to Abelardo Lucero was not
annotated in the certificate of title of the plaintiff, and therefore, was not binding upon it. When
Dr. Abelardo Lucero executed the deed of sale in favor of the defendant, he already knew of the
plaintiff's claim of ownership.
WHEREFORE, IN VIEW OF THE FOREGOING, the questioned decision of the Court of Appeals is
REVERSED and SET ASIDE. The decision of the then Court of First Instance of Manila in Civil Case No.
64559 is REINSTATED.
SO ORDERED.
Fernan (Chairman), Padilla, Bidin and Cortes, JJ., concur.
Paras, J., concur in the result.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. L-4402

July 28, 1952

CANUTO MARTIN, petitioner,

vs.
MARIA REYES and PEDRO REVILLA, respondents.
Delgado and Flores for petitioner.
Ramon Diokono and Jose W. Diokno for respondents.
BENGSON, J.:
Coming from the Court of Appeals for revision, this litigation presents two principal question: the price at which
the respondents were entitled to repurchase the property, and the exercise of such right within the period of
redemption. Apparently issues of fact, they really depend upon legal points, as will presently be seen.
According to the Court of Appeals, the respondents Pedro Revilla and Maria Reyes obtained from the La
Previsora Filipina sometime before November 18, 1939 a loan of P6,500; and with the money, they the price of a
lot, with improvements, which they paid had previously purchased from the Archibishop of Manila. And they
mortgaged the property to La Previsora for the purpose of guaranteeing repayment of the debt in installments
with interest at 12 per cent per annum.
It turned out later that Monte de Piedad y Caja de Ahorros had obtained a judgment against Pedro Revilla for the
sum of P45,000 and had levied execution therefor upon the property and its rentals. Apprised of this
development, the La Previsora started foreclosure proceedings, alleging non-payment of its credit by the
mortgagors. The conflicting interests were later the object of amicable settlement among the parties, as a result of
which the herein respondents notarized the deed Exhibit E whereby in satisfaction of their obligations to La
Previsora (then amounting to P8,204.60) they ceded the property to the said institutions, reserving the right to
repurchase for P8,204.60 within sixty days. The deed was acknowledged on November 3, 1941.
It seems that La Previsora at the same time, or immediately thereafter conveyed the property by Exhibit C to
petitioner Canuto Martin, who then executed the document Exhibit D undertaking to allow respondents to
repurchase the property within sixty days from October 31, 1941, but at the price of P14,000. This document
Exhibit D was signed by Maria Reyes signifying her assent. At the trial she pleaded that the document, without
embodying their true agreement, had been obtained thru deceit and abuse of confidence. However, her assertions
were not credited by the Court of Appeals. Nevertheless, that court declared the document void (Exhibit D) for
the only reasons that it had been signed by Canuto Martin before acquiring ownership of the property by the
cession of Maria Reyes and Pedro Revilla to the La Previsora, and from the latter to them. The Court noted that
whereas Exhibit E was acknowledged before the notary on November 3, 1941, Exhibit Dbore the date October
30, 1941, a few days before.
Wherefore the Court of Appeals held that the respondent's right to repurchase was to be found in Exhibit E, and
that they had seasonably exercised such right.
The validity of Exhibit D is the subject-matter of Martin's principal attack on the appellate court's judgment.
The documents Exhibits C, D and E were undoubtedly part of the same amicable settlement. Acknowledgment of
the document Exhibit E was delayed on account of the necessity of securing the approval of the Monte de Piedad
y Caja de Ahorros. For that reason it bears the date November 3. The arrangements were obviously: (a) transfer
to La Previsora with right to repurchase at P8,204.60; (b) transfer by La Previsora to Canuto Martin and (c)
option to repurchase from Martin at P14,000.
Why at P14,00, when it is admitted that Martin got the property at P7,000 from La Previsora the claims of Monte
de Piedad arising from the attachment heretofore described.
The Court of Appeals pronounced Exhibit D invalid because at the time of its execution, Martin had no title over
the property. This is rather too technical a viewpoint. Remembering that Exhibit D constituted a part of the whole
friendly settlement and could be considered as simultaneous with the other documents, specially the documents
of transfer from Maria Reyes and La Previsora, the disparity of dates should imply no annulling consequences.
At any rate, Exhibit D may be placed in the same category as a promise to convey land not yet owned by the
vendor, obligation which may be enforced, according to the authorities:

Property or goods which, at the time of the sale, are not owned by the seller, but which are thereafter to
be acquired by him, cannot be the subject of an executed sale, but may be the subject of a contract for
the future sale and delivery thereof, and it has been held that even though the contract is in the form of
the present sale it will not pass the title, after the goods have been acquired, until the seller has done
some act appropriating them to the contract. Such a contract of the future sale and delivery of goods,
which the seller has not in possession but which he intends to acquire by producing, manufacturing, or
purchasing before the day of delivery, is valid as an executory contract to be fulfilled by acquiring and
delivering the goods specified in the contract, even though the acquisition of the goods by the seller
depends upon a contingency which may or may not happen. (55 Corpus Juris, 65). (Emphasis ours)
It is not unusual for persons to agree to convey by a certain time, notwithstanding they have no title to
the land at the time of the contract, and the validity of such agreement is upheld. In such cases, the
vendor assume the risk of acquiring the title and making the conveyance, or responding in damages for
the vendee's loss of his bargain, One having an option to purchase real estate has a legal right to enter
into an executory contract to sell the property. A fortiori, it is not necessary that the vendor be the
absolute owner of the property at the time he enters into agreement of sale because the owner of the
land, is as much the subject of sale as is the land itself, and whenever one is so suited with reference to a
tract of land that he can acquire the title thereto, either by the voluntary act of the parties holding the
title, or by proceeding at law or in equity, he is in a position to make a valid agreement for the sale
thereof, without disclosing the nature of his title. (55 American Jurisprudence, 480). (Emphasis ours)
The above principles express the same the ideas in articles 1462 and 1459 of the New Civil Code.
Therefore erroneous is the ruling that, because executed before Canuto Martin became the owner, Exhibit D, was
null and void. Consequently, as Reyes voluntarily agreed under Exhibit D, to repurchase at P14,000, she should
not repurchase at any other price.
Now, have the respondents properly exercised their right to repurchase?
The Court of Appeals stated that in December 1941, Maria Reyes accompanied by Marcela Mota de Malonso
went to the office of La Previsora, not for the purpose of repurchasing the property, but to ask for extension of
the period. Nevertheless, that Court opined that inasmuch as the complaint to compel repurchase had been filed
on January 2, 1952 within the sixty-day period mentioned in Exhibit E, the vendors had preserved their
redemption option. Upon a move to reconsider, the Court of Appeals amplified its decision saying,
In view of the refusal of Atty. Pete A. Revilla who was acting in behalf of appellee Canuto Martin, to
receive any amount less than P14,000, nor to accept in behalf of the La Previsora Filipina, claiming that
the latter's right were already ceded to appellee Canuto Martin, we hold that the question to the
efficiency of the amount offered at the time is not as vital to the issue as the necessity of making
one. . . . We find that the plaintiff Maria Reyes, accompanied to one Marcela Mota de Malonso did make
an offer to redeem the property in the property days of December, 1941. Whether or not the amount they
had on that occasion was sufficient to redeem the property at P8,204.60 or P10,204.60 is not vital to the
preservation of the rights of the plaintiff's in view of the refusal to accept any amount less than P14,000.
Having declared that Exhibit E was valid and that the repurchase had to be made at P14,000, we must necessarily
conclude that under the above findings of the Court of Appeals the right to repurchase had not been preserved.
Nevertheless, let us suppose for the moment that the rights of Revilla and Reyes are governed by Exhibit E onlynot by Exhibit D.
From the findings of the Court of Appeals it is to be deduced that in December Maria Reyes offered to redeem
forless than P8,204.60. The decision of the court of first instance says "all the money she had at that time was
P7,000."
Now then: the repurchase price was P8,204.60 (on the supposition that Exhibit E governs the parties' rights);
Maria Reyes offered to repay in December P7,000 only. The fact that she was told Canuto Martin wanted
P14,000, does not excuse her obligation to offer, within the time stipulated, the full price for the repurchase:
P8,204.60. If it was her theory and position that she had a right to redeem from La Previsora in accordance with
Exhibit E, she would have acted in accordance therewith by offering P8,204.60 to La Previsora entirely
disregarding the demands of any other individual. Undoubtedly, she failed to offer that amount.

Furthermore, there is no evidenceand the Court of Appeals did not findthat Pedro Revilla was actually
authorized by La Previsora to refuse to repurchase at P8,204.60.
Needless to add, the date of filing of the complaint is immaterial, so long as it is filed within the period of
limitations, its purpose being to enforce a right which must be established within the time to repurchase.
Wherefore with the declaration that option to repurchase, whether under Exhibit E or under Exhibit D, had not
been asserted to the proper time, we hereby absolve the petitioner Canuto Martin from the complaint. Costs
against respondents.
Pablo, Padilla, Tuason, Montemayor, Bautista Angelo, and Labrador, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-29320 September 19, 1988
FELIPE SEGURA, ANTONIA SEGURA, NICANORA SEGURA, BERNANDINA SEGURA, ALIPIO
SEGURA and MONSERRAT SEGURA, plaintiffs-appellants,
vs.
NICOLAS SEGURA, SANTIAGO SEGURA, GAUDENCIO SEGURA, EMILIANO AMOJIDO,
MILDRED ELISON VDA. DE JAVELOSA, ERNESTO AMOJIDO, EPIFANIA DE AMOJIDO,
IGMEDIO AMOJIDO, and THE RURAL BANK OF SANTA BARBARA, defendants-appellees.
Robert B. Maroma for plaintiffs-appellants.
Estefano Caspe for defendants-appellees.
CRUZ, J.:
This is another distasteful case where kin is pitted against kin in a bitter dispute over property inherited from a
common ancestor who probably would have been distressed to see her progeny quarreling over it as if they were
hostile strangers.
The land in question consists of 4,060 square meters and was originally registered under Original Certificate of
Title No. 1994 in the Registry of Deeds of Iloilo in the name of Gertrudes Zamora. 1 She died intestate and
without debts in 1936 and was survived by four children, who never got around to dividing the property among
themselves. This controversy is not among the four brothers, who are now also deceased. It is Gertrudes's
grandchildren by three of her sons (the fourth having died without issue) who are involved in this complaint for
recovery of ownership and possession of the disputed inheritance, plus damages.
The conflict began when on April 6, 1941, three of these nine grandchildren, namely, Nicolas, Santiago and
Gaudencio Segura, executed a deed of extrajudicial partition arrogating the entire property to themselves alone as
equal pro indiviso owners 2 (thereby, curiously, excluding Nicolas and Santiago's own brother and two sisters,
and Gaudencio's own sister, besides the other two co-heirs.) This partition was not registered immediately, but
only in 1946, or five years later.
Before and after such registration, the following developments transpired:
1. The land was sold for P50.00 to Emiliano Amojido, with right to repurchase on or before February 15, 1942.
This right was not exercised. 3
2. On November 28, 1946, Amojido executed an affidavit of consolidation of ownership and obtained TCT No.
28336, with a reservation of the rights of the other heirs annotated therein. 4

3. On March 31, 1953, Amojido sold the land for P1,500.00 to Mirope Mascareias vda. de Elison, who obtained
TCT No. T-19396 in her name, which did not retain the annotation. 5
4. On May 28, 1956, the plaintiffs filed Civil Case No. 3941, for recovery of possession and ownership of the
subject land from Nicolas, Santiago and Gaudencio Segura. 6
5. On February 14, 1957, Elison sold the land for P1,000.00 to Mildred Elison vda. de Javelosa, who obtained
TCT No. 22074 in her name. 7
6. On January l5, 1958, Mildred sold the land for P1,500.00 to Ernesto and Igmedio Amojido, who obtained TCT
No 24342 in their names. 8
7. On January 16,1958, Civil Case No. 3941 was dismissed on motion of the plaintiffs' counsel.
8. On July 23, 1961, the land was mortgaged to the Rural Bank of Sta. Barbara, which is one of the appellees
herein.
The complaint in the case at bar was filed on January 11, 1968, and docketed as Civil Case No. 7477 in the Court
of First Instance of Iloilo. In it, the six excluded grandchildren alleged that the partition and all subse quent
transfers of the subject land were null and void insofar as these transactions deprived them of their shares as coowners of the said property. The defendants moved to dismiss, contending that the action was barred by prior
judgment and that in any event whatever rights might have pertained to the plaintiffs had already prescribed
under the Rules of Court and the Civil Code. The plaintiffs opposed the motion. Thereafter, issues having been
joined, the trial courts 9 issued its order of March 28, 1968, dismissing the complaint on the ground of
prescription. The motion for reconsideration was denied in an order dated May 28, 1968, on the further ground,
as if it were an afterthought, ofres judicata. The plaintiffs then appealed to this Court and now ask that the said
orders be reversed and the complaint reinstated.
We hold at the outset that the present action is not barred by prior judgment as the dismissal of the earlier
complaint was without prejudice to its refiling at a future date. It appears that when Civil Case No. 3941 was
called for hearing, the plaintiffs' counsel himself moved for its dismissal on the ground that his clients had gone
to Mindanao and he did not know when they would be returning. 10 There is here no showing of failure to
prosecute, such as an unreasonable delay on the part of the complainants, and the appellees have not so
contended. It was clear that the plaintiffs' counsel had the intention of reviving the case, and that must have been
the impression too of the trial judge because his order of dismissal did not state that it was with prejudice to the
refiling of the case. 11 The applicable rule is Rule 17, Section 2, of the Rules of Court reading thus:
Dismissal by order of the court.-Except as provided in the preceding section, an action shall not
be dismissed at the plaintiffs instance save upon order of the court and upon such terms and
conditions as the court deems proper. If a counterclaim has been pleaded by a defendant prior
to the service upon him of the plaintiffs motion to dismiss, the action shall not be dismissed
against the defendant's objection unless the counterclaim can remain pending for independent
adjudication by the court. Unless otherwise specified in the order, a dismissal under this
paragraph shall be without prejudice.
It follows that even, if, as noted by the trial court in its Order of May 28, 1968, "the same case Civil Case No.
3941 of this Court. Exh. 'A' with the same subject matter, with the same plaintiffs, almost with the same
defendants, and the same theory, was dismissed by this Court on January 16,1958," the present action is not
barred by res judicata.
The second ground is not as simple.
The claim of prescription is based first on the contention that under the Rules of Court the deed of extrajudicial
partition should have been impugned within two years from the date of its execution in 1941. As the challenge in
the instant case was made only in 1956, when Civil Case No. 3941 was filed, that first case, and more so the case
at bar which was commenced in 1968, should be and were properly dismissed for tardiness under Rule 74,
Section 4, of the Rules of Court.
This section provides in gist that a person who has been deprived of his lawful participation in the estate of the
decedent, whether as heir or as creditor, must assert his claim within two years after the extrajudicial or summary

settlement of such estate under Sections 1 and 2 respectively of the same Rule 74. Thereafter, he will be
precluded from doing so as the right will have prescribed.
It is clear that Section 1 of Rule 74 does not apply to the partition in question which was null and void as far as
the plaintiffs were concerned. The rule covers only valid partitions. The partition in the present case was invalid
because it excluded six of the nine heirs who were entitled to equal shares in the partitioned property. Under the
rule, "no extrajudicial settlement shall be binding upon any person who has not participated therein or had no
notice thereof." As the partition was a total nullity and did not affect the excluded heirs, it was not correct for the
trial court to hold that their right to challenge the partition had prescribed after two years from its execution in
1941.
The appellees invoke a second basis for their claim of prescription and argue that even under the Civil Code the
complaint should also be deemed prescribed pursuant to the following provisions:
Art. 1134. Ownership and other real rights over immovable property are acquired by ordinary
prescription through possession of ten years (1957a).
Art. 1144. The following actions must be brought within ten years from the time the right of
action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
It is recalled that following the execution of the deed of partition, the owners named therein sold the entire land
to Emiliano Amojido who, after the vendors had failed to exercise their right of repurchase, executed an affidavit
of consolidation in his favor on November 28, 1946. He subsequently obtained a transfer certificate of title in his
name, but this contained the following annotation:
This land is subject to any claim that may be presented by any heir or any other person
deprived of his lawful participation in the estate of Gertrudes Zamora, within two years from
date of the Extra-judicial Settlement and distribution of the estate. 12
As a person can sell only what he owns or is authorized to sell, the buyer can as a consequence acquire no more
than what the seller can legally transfer. The deed of partition being invalid as to the other heirs, the vendors
could dispose only of their respective shares in the land, or one-third only of the property and not the other twothirds as well which did not belong to them.
Article 493 of the Civil Code reads as follows:
Each co-owner shall have the full ownership of his part and the fruits and benefits pertaining
thereto, and he may therefore alienate, assign or mortgage it, and even substitute another person
in its enjoyment, except when personal rights are involved. But the effect of the alienation or
the mortgage, with respect to the co-owners, shall be limited to the portion which may be
allotted to him in the division upon the termination of the co-ownership.
Applying this provision, we have held in previous cases:
When a real property belongs pro indiviso to three persons, who acquired it by inheritance from
a common ancestor, the action for recovery by the legal representative of one of the heirs can
only concern one-third of the property; and if the other co-owners have, by sale to third person,
disposed of one-third of the said pro indiviso property, the plaintiff who sues for recovery is not
entitled to ask for the annulment of the sale, inasmuch as the latter merely exercised their
rights; such alienation does not affect the rights of the heir who claims only one-third, which
belongs to the other two co-owners whose rights must be respected by the
plaintiff. 13
Every co-heir has the absolute ownership of his share in the community property and may
alienate, assign or mortgage the same, except as to purely personal rights, but the effect of any
such transfer is limited to the portion which may be awarded to him upon the partition of the
property. 14

None of the other co-heirs who did not participate in the sale can demand the nullification of
the same, inasmuch as every co-owner may alienate, transfer, or mortgage his share in the
common thing, and even substitute another person in the enjoyment thereof, unless personal
rights are in question; although the effect of the alienation or mortgage, in relation to the coowners shall be limited to the portion that may be adjudicated to him when the community
ceased. 15
To repeat, the general rule is that no one can give what he does not have nemo dat quod non habet. Hence,
even if it be assumed that Amojido had bought the land in good faith from the parties to the extrajudicial
partition, only so much of their share could be validly acquired by him, with the rest of the property remaining
under the ownership of the six excluded co-heirs In other words, Amojido became pro indiviso co-owner of the
land with the other six heirs, who retained title to their respective shares although he had possession of the entire
property. The portion pertaining to the herein appellants should be deemed held by Amojido under an implied
trust for their benefit, conformably to the ruling in Bargayo v. Camumot, 16 thus:
In law it is understood that the co-owners or co-heir who is in possession of an inheritance pro
indiviso for himself and in representation of his co-owners or co-heirs, if, as such owner, he
administers or takes care of the rest thereof with the obligation of delivering it to his co-owners
or co-heirs, is under the same situation as a depository, a lessee, or a trustee.
There is no question that an action for reconveyance of property held in implied trust is
imprescriptible. 17However, this is true only as long as the trustee continues to acknowledge the title of
the cestui que trust, or, otherwise stated, provided he does not repudiate such title." 18 The moment he does so,
the prescriptive period will begin to run and may eventually operate to divest the real owners of their right to the
property after the lapse of the applicable statutory period. Under the provision above-quoted, that period is fixed
at ten years, whether the claim be based upon an obligation created by law under Article 1144 or covered by
Article 1134 on rights over immovable property.
When did such prescriptive period start in the case at bar?
It is noted that when Amojido secured the registration of the land in his name following the deed of sale executed
in his favor by the parties to the extrajudicial partition, his certificate of title carried an express reservation of
whatever rights might pertain to the other heirs. This annotation constituted an acknowledgement of the
possibility that a portion of the land might not belong to him and the commitment that he would be holding such
part as impliedly conveyed to him in trust by and for its true owners. However, when Amojido himself sold the
land to Mirope Mascareas vda. de Elison on March 13, 1953, the transfer certificate of title issued in her name
no longer carried the said encumbrance. By the deletion of this annotation, Mirope, as the new transferee,
repudiated as of the date of registration the claim of the other heirs to their shares in the property. From then on
her assertion of ownership over the whole land became adverse even as against the appellants herein. And as the
certificate of title was notice to the whole world of her exclusive title to the land, such rejection was binding on
the said heirs and started as against them the period of prescription.
The record does not show when TCT No. T-19396 in the name of Mirope Mascareas vda. de Elison was issued,
but it can be conjectured that this was done before February 14, 1957, when she sold the land to Mildred Elison
vda. de Javelosa. On the assumption that the land was registered in the name of Mirope in 1953 following her
purchase without acknowledgement of the co-heirs' rights, the 10-year prescriptive period would have started
from that year. Suspended on May 28, 1956, when the first complaint was filed, it began running again on
February 16, 1958, 30 days after it was dismissed, and was completed after seven more years in 1965, two years
before the second complaint was filed in 1968. Hence, that complaint was barred by prescription, as correctly
held by the trial court, although the different starting point it used, erroneously, was 1941, date of the
extrajudicial partition.
The unavoidable consequence of all this is that whatever claims the co-heirs could have validly asserted before
can no longer be invoked by them at this time. They have let the time inexorably pass while they were
slumbering on their rights, and now it is too late.
WHEREFORE, the appeal is DISMISSED, with costs against the appellants. It is so ordered.
Narvasa, Gancayco, Grio-Aquino and Medialdea, JJ., concur.