SECOND DIVISION
T-113221
[G.R. No. 133895. October 2, 2001]
ZENAIDA M. SANTOS, petitioner, vs. CALIXTO SANTOS, ALBERTO SANTOS, ROSA
SANTOS-CARREON and ANTONIO SANTOS, respondents.
DECISION
QUISUMBING, J.:
This petition for review[1] seeks to annul and set aside the decision dated March 10, 1998 of the
Court of Appeals that affirmed the decision of the Regional Trial Court of Manila, Branch 48,
dated March 17, 1993. Petitioner also seeks to annul the resolution that denied her motion for
reconsideration.
Petitioner Zenaida M. Santos is the widow of Salvador Santos, a brother of private respondents
Calixto, Alberto, Antonio, all surnamed Santos and Rosa Santos-Carreon.
The spouses Jesus and Rosalia Santos owned a parcel of land registered under TCT No. 27571
with an area of 154 square meters, located at Sta. Cruz Manila. On it was a four-door apartment
administered by Rosalia who rented them out. The spouses had five children, Salvador, Calixto,
Alberto, Antonio and Rosa.
On January 19, 1959, Jesus and Rosalia executed a deed of sale of the properties in favor of
their children Salvador and Rosa. TCT No. 27571 became TCT No. 60819. Rosa in turn sold her
share to Salvador on November 20, 1973 which resulted in the issuance of a new TCT No.
113221. Despite the transfer of the property to Salvador, Rosalia continued to lease and receive
rentals from the apartment units.
On November 1, 1979, Jesus died. Six years after or on January 9, 1985, Salvador died,
followed by Rosalia who died the following month. Shortly after, petitioner Zenaida, claiming to
be Salvadors heir, demanded the rent from Antonio Hombrebueno,[2] a tenant of Rosalia. When
the latter refused to pay, Zenaida filed an ejectment suit against him with the Metropolitan Trial
Court of Manila, Branch 24, which eventually decided in Zenaidas favor.
On January 5, 1989, private respondents instituted an action for reconveyance of property with
preliminary injunction against petitioner in the Regional Trial Court of Manila, where they alleged
that the two deeds of sale executed on January 19, 1959 and November 20, 1973 were
simulated for lack of consideration. They were executed to accommodate Salvador in generating
funds for his business ventures and providing him with greater business flexibility.
In her Answer, Zenaida denied the material allegations in the complaint and as special and
affirmative defenses, argued that Salvador was the registered owner of the property, which could
only be subjected to encumbrances or liens annotated on the title; that the respondents right to
reconveyance was already barred by prescription and laches; and that the complaint stated no
cause of action.
On March 17, 1993, the trial court decided in private respondents favor, thus:
WHEREFORE, viewed from all the foregoing considerations, judgment is hereby made in favor
of the plaintiffs and against the defendants:
a) Declaring Exh. B, the deed of sale executed by Rosalia Santos and Jesus Santos on January
19, 1959, as entirely null and void for being fictitious or simulated and inexistent and without any
legal force and effect;
b) Declaring Exh. D, the deed of sale executed by Rosa Santos in favor of Salvador Santos on
November 20, 1973, also as entirely null and void for being likewise fictitious or simulated and
inexistent and without any legal force and effect;
c) Directing the Register of Deeds of Manila to cancel Transfer Certificate of Title No.
registered in the name of Salvador Santos, as well as, Transfer Certificate of Title No. 60819 in
the names of Salvador Santos, Rosa Santos, and consequently thereafter, reinstating with the
same legal force and effect as if the same was not cancelled, and which shall in all respects be
entitled to like faith and credit; Transfer Certificate of Title No. T-27571 registered in the name of
Rosalia A. Santos, married to Jesus Santos, the same to be partitioned by the heirs of the said
registered owners in accordance with law; and
d) Making the injunction issued in this case permanent.
Without pronouncement as to costs.
SO ORDERED.[3]
The trial court reasoned that notwithstanding the deeds of sale transferring the property to
Salvador, the spouses Rosalia and Jesus continued to possess the property and to exercise
rights of ownership not only by receiving the monthly rentals, but also by paying the realty taxes.
Also, Rosalia kept the owners duplicate copy of the title even after it was already in the name of
Salvador. Further, the spouses had no compelling reason in 1959 to sell the property and
Salvador was not financially capable to purchase it. The deeds of sale were therefore fictitious.
Hence, the action to assail the same does not prescribe.[4]
Upon appeal, the Court of Appeals affirmed the trial courts decision dated March 10, 1998. It
held that in order for the execution of a public instrument to effect tradition, as provided in Article
1498 of the Civil Code,[5] the vendor shall have had control over the thing sold, at the moment of
sale. It was not enough to confer upon the purchaser the ownership and the right of possession.
The thing sold must be placed in his control. The subject deeds of sale did not confer upon
Salvador the ownership over the subject property, because even after the sale, the original
vendors remained in dominion, control, and possession thereof. The appellate court further said
that if the reason for Salvadors failure to control and possess the property was due to his
acquiescence to his mother, in deference to Filipino custom, petitioner, at least, should have
shown evidence to prove that her husband declared the property for tax purposes in his name or
paid the land taxes, acts which strongly indicate control and possession. The appellate court
disposed:
WHEREFORE, finding no reversible error in the decision appealed from, the same is hereby
AFFIRMED. No pronouncement as to costs.
SO ORDERED.[6]
Hence, this petition where petitioner avers that the Court of Appeals erred in:
I.
...HOLDING THAT THE OWNERSHIP OVER THE LITIGATED PROPERTY BY THE LATE
HUSBAND OF DEFENDANT-APPELLANT WAS AFFECTED BY HIS FAILURE TO EXERCISE
CERTAIN ATTRIBUTES OF OWNERSHIP.
II
...HOLDING THAT DUE EXECUTION OF A PUBLIC INSTRUMENT IS NOT EQUIVALENT TO
DELIVERY OF THE LAND IN DISPUTE.
III
...NOT FINDING THAT THE CAUSE OF ACTION OF ROSALIA SANTOS HAD PRESCRIBED
AND/OR BARRED BY LACHES.
IV
...IGNORING PETITIONERS ALLEGATION TO THE EFFECT THAT PLAINTIFF DR. ROSA [S.]
CARREON IS NOT DISQUALIFIED TO TESTIFY AS TO THE QUESTIONED DEEDS OF SALE
CONSIDERING THAT SALVADOR SANTOS HAS LONG BEEN DEAD.[7]
In this petition, we are asked to resolve the following:
1. Are payments of realty taxes and retention of possession indications of continued ownership
by the original owners?
2. Is a sale through a public instrument tantamount to delivery of the thing sold?
3. Did the cause of action of Rosalia Santos and her heirs prescribe?
4. Can petitioner invoke the Dead Mans Statute?[8]
On the first issue, petitioner contends that the Court of Appeals erred in holding that despite the
deeds of sale in Salvadors favor, Jesus and Rosalia still owned the property because the
spouses continued to pay the realty taxes and possess the property. She argues that tax
declarations are not conclusive evidence of ownership when not supported by evidence. She
avers that Salvador allowed his mother to possess the property out of respect to her in
accordance with Filipino values.
It is true that neither tax receipts nor declarations of ownership for taxation purposes constitute
sufficient proof of ownership. They must be supported by other effective proofs.[9] These
requisite proofs we find present in this case. As admitted by petitioner, despite the sale, Jesus
and Rosalia continued to possess and administer the property and enjoy its fruits by leasing it to
third persons.[10] Both Rosa and Salvador did not exercise any right of ownership over it.[11]
Before the second deed of sale to transfer her 1/2 share over the property was executed by
Rosa, Salvador still sought the permission of his mother.[12] Further, after Salvador registered
the property in his name, he surrendered the title to his mother.[13] These are clear indications
that ownership still remained with the original owners. In Serrano vs. CA, 139 SCRA 179, 189
(1985), we held that the continued collection of rentals from the tenants by the seller of realty
after execution of alleged deed of sale is contrary to the notion of ownership.
Petitioner argues that Salvador, in allowing her mother to use the property even after the sale,
did so out of respect for her and out of generosity, a factual matter beyond the province of this
Court.[14] Significantly, in Alcos vs. IAC, 162 SCRA 823, 837 (1988), we noted that the buyers
immediate possession and occupation of the property corroborated the truthfulness and
authenticity of the deed of sale. Conversely, the vendors continued possession of the property
makes dubious the contract of sale between the parties.
On the second issue, is a sale through a public instrument tantamount to delivery of the thing
sold? Petitioner in her memorandum invokes Article 1477[15] of the Civil Code which provides
that ownership of the thing sold is transferred to the vendee upon its actual or constructive
delivery. Article 1498, in turn, provides that when the sale is made through a public instrument,
its execution is equivalent to the delivery of the thing subject of the contract. Petitioner avers that
applying said provisions to the case, Salvador became the owner of the subject property by
virtue of the two deeds of sale executed in his favor.
Nowhere in the Civil Code, however, does it provide that execution of a deed of sale is a
conclusive presumption of delivery of possession. The Code merely said that the execution shall
be equivalent to delivery. The presumption can be rebutted by clear and convincing
evidence.[16] Presumptive delivery can be negated by the failure of the vendee to take actual
possession of the land sold.[17]
In Danguilan vs. IAC, 168 SCRA 22, 32 (1988), we held that for the execution of a public
instrument to effect tradition, the purchaser must be placed in control of the thing sold. When
there is no impediment to prevent the thing sold from converting to tenancy of the purchaser by
the sole will of the vendor, symbolic delivery through the execution of a public instrument is
sufficient. But if, notwithstanding the execution of the instrument, the purchaser cannot have the
enjoyment and material tenancy nor make use of it himself or through another in his name, then
delivery has not been effected.
As found by both the trial and appellate courts and amply supported by the evidence on record,
Salvador was never placed in control of the property. The original sellers retained their control
and possession. Therefore, there was no real transfer of ownership.
Moreover, in Norkis Distributors, Inc. vs. CA, 193 SCRA 694, 698-699 (1991), citing the land
case of Abuan vs. Garcia, 14 SCRA 759 (1965), we held that the critical factor in the different
modes of effecting delivery, which gives legal effect to the act is the actual intention of the
vendor to deliver, and its acceptance by the vendee. Without that intention, there is no tradition.
In the instant case, although the spouses Jesus and Rosalia executed a deed of sale, they did
not deliver the possession and ownership of the property to Salvador and Rosa. They agreed to
execute a deed of sale merely to accommodate Salvador to enable him to generate funds for his
business venture.
On the third issue, petitioner argues that from the date of the sale from Rosa to Salvador on
November 20, 1973, up to his death on January 9, 1985, more or less twelve years had lapsed,
and from his death up to the filing of the case for reconveyance in the court a quo on January 5,
1989, four years had lapsed. In other words, it took respondents about sixteen years to file the
case below. Petitioner argues that an action to annul a contract for lack of consideration
prescribes in ten years and even assuming that the cause of action has not prescribed,
respondents are guilty of laches for their inaction for a long period of time.
Has respondents cause of action prescribed? In Lacsamana vs. CA, 288 SCRA 287, 292 (1998),
we held that the right to file an action for reconveyance on the ground that the certificate of title
was obtained by means of a fictitious deed of sale is virtually an action for the declaration of its
nullity, which does not prescribe. This applies squarely to the present case. The complaint filed
by respondents in the court a quo was for the reconveyance of the subject property to the estate
of Rosalia since the deeds of sale were simulated and fictitious. The complaint amounts to a
declaration of nullity of a void contract, which is imprescriptible. Hence, respondents cause of
action has not prescribed.
Neither is their action barred by laches. The elements of laches are: 1) conduct on the part of the
defendant, or of one under whom he claims, giving rise to the situation of which the complaint
seeks a remedy; 2) delay in asserting the complainants rights, the complainant having had
knowledge or notice of the defendants conduct as having been afforded an opportunity to
institute a suit; 3) lack of knowledge or notice on the part of the defendant that the complainant
would assert the right in which he bases his suit; and 4) injury or prejudice to the defendant in
the event relief is accorded to the complainant, or the suit is not held barred.[18] These elements
must all be proved positively. The conduct which caused the complaint in the court a quo was
petitioners assertion of right of ownership as heir of Salvador. This started in December 1985
when petitioner demanded payment of the lease rentals from Antonio Hombrebueno, the tenant
of the apartment units. From December 1985 up to the filing of the complaint for reconveyance
on January 5, 1989, only less than four years had lapsed which we do not think is unreasonable
delay sufficient to bar respondents cause of action. We likewise find the fourth element lacking.
Neither petitioner nor her husband made considerable investments on the property from the time
it was allegedly transferred to the latter. They also did not enter into transactions involving the
property since they did not claim ownership of it until December 1985. Petitioner stood to lose
nothing. As we held in the same case of Lacsamana vs. CA, cited above, the concept of laches
is not concerned with the lapse of time but only with the effect of unreasonable lapse. In this
case, the alleged 16 years of respondents inaction has no adverse effect on the petitioner to
make respondents guilty of laches.
 Republic of the Philippines
Lastly, petitioner in her memorandum seeks to expunge the testimony of Rosa Santos-Carreon SUPREME COURT
before the trial court in view of Sec. 23, Rule 130 of the Revised Rules of Court, otherwise Manila
known as the Dead Mans Statute.[19] It is too late for petitioner, however, to invoke said rule.
The trial court in its order dated February 5, 1990, denied petitioners motion to disqualify THIRD DIVISION
respondent Rosa as a witness. Petitioner did not appeal therefrom. Trial ensued and Rosa
testified as a witness for respondents and was cross-examined by petitioners counsel. By her G.R. No. 92989 July 8, 1991
failure to appeal from the order allowing Rosa to testify, she waived her right to invoke the dead
mans statute. Further, her counsel cross-examined Rosa on matters that occurred during PERFECTO DY, JR. petitioner,
Salvadors lifetime. In Goi vs. CA, 144 SCRA 222, 231 (1986), we held that protection under the vs.
dead mans statute is effectively waived when a counsel for a petitioner cross-examines a private COURT OF APPEALS, GELAC TRADING INC., and ANTONIO V. GONZALES, respondents.
respondent on matters occurring during the deceaseds lifetime. The Court of Appeals cannot be
faulted in ignoring petitioner on Rosas disqualification. Zosa & Quijano Law Offices for petitioner.
Expedito P. Bugarin for respondent GELAC Trading, Inc.
WHEREFORE, the instant petition is DENIED. The assailed decision dated March 10, 1998 of
the Court of Appeals, which sustained the judgment of the Regional Trial Court dated March 17,
1993, in favor of herein private respondents, is AFFIRMED. Costs against petitioner. GUTIERREZ, JR., J.:

SO ORDERED. This is a petition for review on certiorari seeking the reversal of the March 23, 1990 decision of
the Court of Appeals which ruled that the petitioner's purchase of a farm tractor was not validly
consummated and ordered a complaint for its recovery dismissed.

The facts as established by the records are as follows:

The petitioner, Perfecto Dy and Wilfredo Dy are brothers. Sometime in 1979, Wilfredo Dy
purchased a truck and a farm tractor through financing extended by Libra Finance and
Investment Corporation (Libra). Both truck and tractor were mortgaged to Libra as security for
the loan.

The petitioner wanted to buy the tractor from his brother so on August 20, 1979, he wrote a letter
to Libra requesting that he be allowed to purchase from Wilfredo Dy the said tractor and assume
the mortgage debt of the latter.

In a letter dated August 27, 1979, Libra thru its manager, Cipriano Ares approved the petitioner's
request.

Thus, on September 4, 1979, Wilfredo Dy executed a deed of absolute sale in favor of the
petitioner over the tractor in question.

At this time, the subject tractor was in the possession of Libra Finance due to Wilfredo Dy's
failure to pay the amortizations.

Despite the offer of full payment by the petitioner to Libra for the tractor, the immediate release
could not be effected because Wilfredo Dy had obtained financing not only for said tractor but
also for a truck and Libra insisted on full payment for both.

The petitioner was able to convince his sister, Carol Dy-Seno, to purchase the truck so that full
payment could be made for both. On November 22, 1979, a PNB check was issued in the
amount of P22,000.00 in favor of Libra, thus settling in full the indebtedness of Wilfredo Dy with
the financing firm. Payment having been effected through an out-of-town check, Libra insisted
that it be cleared first before Libra could release the chattels in question.

Meanwhile, Civil Case No. R-16646 entitled "Gelac Trading, Inc. v. Wilfredo Dy", a collection
case to recover the sum of P12,269.80 was pending in another court in Cebu.

On the strength of an alias writ of execution issued on December 27, 1979, the provincial sheriff
was able to seize and levy on the tractor which was in the premises of Libra in Carmen, Cebu.
The tractor was subsequently sold at public auction where Gelac Trading was the lone bidder.
Later, Gelac sold the tractor to one of its stockholders, Antonio Gonzales.
It was only when the check was cleared on January 17, 1980 that the petitioner learned about
GELAC having already taken custody of the subject tractor. Consequently, the petitioner filed an
action to recover the subject tractor against GELAC Trading with the Regional Trial Court of
Cebu City.
On April 8, 1988, the RTC rendered judgment in favor of the petitioner. The dispositive portion of
the decision reads as follows:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant,
pronouncing that the plaintiff is the owner of the tractor, subject matter of this case, and directing
the defendants Gelac Trading Corporation and Antonio Gonzales to return the same to the
plaintiff herein; directing the defendants jointly and severally to pay to the plaintiff the amount of
P1,541.00 as expenses for hiring a tractor; P50,000 for moral damages; P50,000 for exemplary
damages; and to pay the cost. (Rollo, pp. 35-36)
On appeal, the Court of Appeals reversed the decision of the RTC and dismissed the complaint
with costs against the petitioner. The Court of Appeals held that the tractor in question still
belonged to Wilfredo Dy when it was seized and levied by the sheriff by virtue of the alias writ of
execution issued in Civil Case No. R-16646.
The petitioner now comes to the Court raising the following questions:
A.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS MISAPPREHENDED THE
FACTS AND ERRED IN NOT AFFIRMING THE TRIAL COURT'S FINDING THAT OWNERSHIP
OF THE FARM TRACTOR HAD ALREADY PASSED TO HEREIN PETITIONER WHEN SAID
TRACTOR WAS LEVIED ON BY THE SHERIFF PURSUANT TO AN ALIAS WRIT OF
EXECUTION ISSUED IN ANOTHER CASE IN FAVOR OF RESPONDENT GELAC TRADING
INC.
B.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS EMBARKED ON MERE
CONJECTURE AND SURMISE IN HOLDING THAT THE SALE OF THE AFORESAID
TRACTOR TO PETITIONER WAS DONE IN FRAUD OF WILFREDO DY'S CREDITORS,
THERE BEING NO EVIDENCE OF SUCH FRAUD AS FOUND BY THE TRIAL COURT.
C.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS MISAPPREHENDED THE
FACTS AND ERRED IN NOT SUSTAINING THE FINDING OF THE TRIAL COURT THAT THE
SALE OF THE TRACTOR BY RESPONDENT GELAC TRADING TO ITS CO-RESPONDENT
ANTONIO V. GONZALES ON AUGUST 2, 1980 AT WHICH TIME BOTH RESPONDENTS
ALREADY KNEW OF THE FILING OF THE INSTANT CASE WAS VIOLATIVE OF THE
HUMAN RELATIONS PROVISIONS OF THE CIVIL CODE AND RENDERED THEM LIABLE
FOR THE MORAL AND EXEMPLARY DAMAGES SLAPPED AGAINST THEM BY THE TRIAL
COURT. (Rollo, p. 13)
The respondents claim that at the time of the execution of the deed of sale, no constructive
delivery was effected since the consummation of the sale depended upon the clearance and
encashment of the check which was issued in payment of the subject tractor.
In the case of Servicewide Specialists Inc. v. Intermediate Appellate Court. (174 SCRA 80
[1989]), we stated that:
xxx xxx xxx
The rule is settled that the chattel mortgagor continues to be the owner of the property, and
therefore, has the power to alienate the same; however, he is obliged under pain of penal
liability, to secure the written consent of the mortgagee. (Francisco, Vicente, Jr., Revised Rules
of Court in the Philippines, (1972), Volume IV-B Part 1, p. 525). Thus, the instruments of
mortgage are binding, while they subsist, not only upon the parties executing them but also upon
those who later, by purchase or otherwise, acquire the properties referred to therein.
The absence of the written consent of the mortgagee to the sale of the mortgaged property in
favor of a third person, therefore, affects not the validity of the sale but only the penal liability of
the mortgagor under the Revised Penal Code and the binding effect of such sale on the
mortgagee under the Deed of Chattel Mortgage.
xxx xxx xxx
The mortgagor who gave the property as security under a chattel mortgage did not part with the
ownership over the same. He had the right to sell it although he was under the obligation to
secure the written consent of the mortgagee or he lays himself open to criminal prosecution
under the provision of Article 319 par. 2 of the Revised Penal Code. And even if no consent was
obtained from the mortgagee, the validity of the sale would still not be affected.
Thus, we see no reason why Wilfredo Dy, as the chattel mortgagor can not sell the subject
tractor. There is no dispute that the consent of Libra Finance was obtained in the instant case. In
a letter dated August 27, 1979, Libra allowed the petitioner to purchase the tractor and assume
the mortgage debt of his brother. The sale between the brothers was therefore valid and binding
as between them and to the mortgagee, as well.
Article 1496 of the Civil Code states that the ownership of the thing sold is acquired by the
vendee from the moment it is delivered to him in any of the ways specified in Articles 1497 to
1501 or in any other manner signing an agreement that the possession is transferred from the
vendor to the vendee. We agree with the petitioner that Articles 1498 and 1499 are applicable in
the case at bar.
Article 1498 states:
Art. 1498. When the sale is made through a public instrument, the execution thereof shall be
equivalent to the delivery of the thing which is the object of the contract, if from the deed the
contrary does not appear or cannot clearly be inferred.
xxx xxx xxx
Article 1499 provides:
Article 1499. The delivery of movable property may likewise be made by the mere
consent or agreement of the contracting parties, if the thing sold cannot be transferred to the
possession of the vendee at the time of the sale, or if the latter already had it in his possession
for any other reason. (1463a)
In the instant case, actual delivery of the subject tractor could not be made. However, there was
constructive delivery already upon the execution of the public instrument pursuant to Article
1498 and upon the consent or agreement of the parties when the thing sold cannot be
immediately transferred to the possession of the vendee. (Art. 1499)
The respondent court avers that the vendor must first have control and possession of the thing
before he could transfer ownership by constructive delivery. Here, it was Libra Finance which
was in possession of the subject tractor due to Wilfredo's failure to pay the amortization as a
preliminary step to foreclosure. As mortgagee, he has the right of foreclosure upon default by the
mortgagor in the performance of the conditions mentioned in the contract of mortgage. The law
implies that the mortgagee is entitled to possess the mortgaged property because possession is
necessary in order to enable him to have the property sold.
While it is true that Wilfredo Dy was not in actual possession and control of the subject tractor,
his right of ownership was not divested from him upon his default. Neither could it be said that
Libra was the owner of the subject tractor because the mortgagee can not become the owner of
or convert and appropriate to himself the property mortgaged. (Article 2088, Civil Code) Said
property continues to belong to the mortgagor. The only remedy given to the mortgagee is to
have said property sold at public auction and the proceeds of the sale applied to the payment of
the obligation secured by the mortgagee. (See Martinez v. PNB, 93 Phil. 765, 767 [1953]) There
is no showing that Libra Finance has already foreclosed the mortgage and that it was the new
owner of the subject tractor. Undeniably, Libra gave its consent to the sale of the subject tractor
to the petitioner. It was aware of the transfer of rights to the petitioner.
We agree with the trial court's findings that the actuations of GELAC Trading were indeed
violative of the provisions on human relations. As found by the trial court, GELAC knew very well
of the transfer of the property to the petitioners on July 14, 1980 when it received summons
based on the complaint for replevin filed with the RTC by the petitioner. Notwithstanding said
summons, it continued to sell the subject tractor to one of its stockholders on August 2, 1980.
WHEREFORE, the petition is hereby GRANTED. The decision of the Court of Appeals
promulgated on March 23, 1990 is SET ASIDE and the decision of the Regional Trial Court
dated April 8, 1988 is REINSTATED.
SO ORDERED.

Where a third person purchases the mortgaged property, he automatically steps into the shoes
of the original mortgagor. (See Industrial Finance Corp. v. Apostol, 177 SCRA 521 [1989]). His
right of ownership shall be subject to the mortgage of the thing sold to him. In the case at bar,
the petitioner was fully aware of the existing mortgage of the subject tractor to Libra. In fact,
when he was obtaining Libra's consent to the sale, he volunteered to assume the remaining
balance of the mortgage debt of Wilfredo Dy which Libra undeniably agreed to.

The payment of the check was actually intended to extinguish the mortgage obligation so that
the tractor could be released to the petitioner. It was never intended nor could it be considered
as payment of the purchase price because the relationship between Libra and the petitioner is
not one of sale but still a mortgage. The clearing or encashment of the check which produced
the effect of payment determined the full payment of the money obligation and the release of the
chattel mortgage. It was not determinative of the consummation of the sale. The transaction
between the brothers is distinct and apart from the transaction between Libra and the petitioner.
The contention, therefore, that the consummation of the sale depended upon the encashment of
the check is untenable.

The sale of the subject tractor was consummated upon the execution of the public instrument on
September 4, 1979. At this time constructive delivery was already effected. Hence, the subject
tractor was no longer owned by Wilfredo Dy when it was levied upon by the sheriff in December,
1979. Well settled is the rule that only properties unquestionably owned by the judgment debtor
and which are not exempt by law from execution should be levied upon or sought to be levied
upon. For the power of the court in the execution of its judgment extends only over properties
belonging to the judgment debtor. (Consolidated Bank and Trust Corp. v. Court of Appeals, G.R.
No. 78771, January 23, 1991).

The respondents further claim that at that time the sheriff levied on the tractor and took legal
custody thereof no one ever protested or filed a third party claim.

It is inconsequential whether a third party claim has been filed or not by the petitioner during the
time the sheriff levied on the subject tractor. A person other than the judgment debtor who
claims ownership or right over levied properties is not precluded, however, from taking other
legal remedies to prosecute his claim. (Consolidated Bank and Trust Corp. v. Court of Appeals,
supra) This is precisely what the petitioner did when he filed the action for replevin with the RTC.

Anent the second and third issues raised, the Court accords great respect and weight to the
findings of fact of the trial court.1wphi1 There is no sufficient evidence to show that the sale of
the tractor was in fraud of Wilfredo and creditors. While it is true that Wilfredo and Perfecto are
brothers, this fact alone does not give rise to the presumption that the sale was fraudulent.
Relationship is not a badge of fraud (Goquiolay v. Sycip, 9 SCRA 663 [1963]). Moreover, fraud
can not be presumed; it must be established by clear convincing evidence.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-12342 August 3, 1918
A. A. ADDISON, plaintiff-appellant,
vs.
MARCIANA FELIX and BALBINO TIOCO, defendants-appellees.
Thos. D. Aitken for appellant.
Modesto Reyes and Eliseo Ymzon for appellees.
FISHER, J.:
By a public instrument dated June 11, 1914, the plaintiff sold to the defendant Marciana Felix,
with the consent of her husband, the defendant Balbino Tioco, four parcels of land, described in
the instrument. The defendant Felix paid, at the time of the execution of the deed, the sum of
P3,000 on account of the purchase price, and bound herself to pay the remainder in
installments, the first of P2,000 on July 15, 1914, and the second of P5,000 thirty days after the
issuance to her of a certificate of title under the Land Registration Act, and further, within ten
years from the date of such title P10, for each coconut tree in bearing and P5 for each such tree
not in bearing, that might be growing on said four parcels of land on the date of the issuance of
title to her, with the condition that the total price should not exceed P85,000. It was further
stipulated that the purchaser was to deliver to the vendor 25 per centum of the value of the
products that she might obtain from the four parcels "from the moment she takes possession of
them until the Torrens certificate of title be issued in her favor."
It was also covenanted that "within one year from the date of the certificate of title in favor of
Marciana Felix, this latter may rescind the present contract of purchase and sale, in which case
Marciana Felix shall be obliged to return to me, A. A. Addison, the net value of all the products of
the four parcels sold, and I shall obliged to return to her, Marciana Felix, all the sums that she
may have paid me, together with interest at the rate of 10 per cent per annum."
In January, 1915, the vendor, A. A. Addison, filed suit in Court of First Instance of Manila to
compel Marciana Felix to make payment of the first installment of P2,000, demandable in
accordance with the terms of the contract of sale aforementioned, on July 15, 1914, and of the
interest in arrears, at the stipulated rate of 8 per cent per annum. The defendant, jointly with her
husband, answered the complaint and alleged by way of special defense that the plaintiff had
absolutely failed to deliver to the defendant the lands that were the subject matter of the sale,
notwithstanding the demands made upon him for this purpose. She therefore asked that she be
absolved from the complaint, and that, after a declaration of the rescission of the contract of the
purchase and sale of said lands, the plaintiff be ordered to refund the P3,000 that had been paid
to him on account, together with the interest agreed upon, and to pay an indemnity for the losses
and damages which the defendant alleged she had suffered through the plaintiff's non-fulfillment
of the contract.
The evidence adduced shows that after the execution of the deed of the sale the plaintiff, at the
request of the purchaser, went to Lucena, accompanied by a representative of the latter, for the
purpose of designating and delivering the lands sold. He was able to designate only two of the
four parcels, and more than two-thirds of these two were found to be in the possession of one
Juan Villafuerte, who claimed to be the owner of the parts so occupied by him. The plaintiff
admitted that the purchaser would have to bring suit to obtain possession of the land (sten.
notes, record, p. 5). In August, 1914, the surveyor Santamaria went to Lucena, at the request of
the plaintiff and accompanied by him, in order to survey the land sold to the defendant; but he
surveyed only two parcels, which are those occupied mainly by the brothers Leon and Julio
Villafuerte. He did not survey the other parcels, as they were not designated to him by the
plaintiff. In order to make this survey it was necessary to obtain from the Land Court a writ of
injunction against the occupants, and for the purpose of the issuance of this writ the defendant,
in June, 1914, filed an application with the Land Court for the registration in her name of four
parcels of land described in the deed of sale executed in her favor by the plaintiff. The
proceedings in the matter of this application were subsequently dismissed, for failure to present
the required plans within the period of the time allowed for the purpose.
The trial court rendered judgment in behalf of the defendant, holding the contract of sale to be
rescinded and ordering the return to the plaintiff the P3,000 paid on account of the price,
together with interest thereon at the rate of 10 per cent per annum. From this judgment the
plaintiff appealed.
In decreeing the rescission of the contract, the trial judge rested his conclusion solely on the
indisputable fact that up to that time the lands sold had not been registered in accordance with
the Torrens system, and on the terms of the second paragraph of clause (h) of the contract,
whereby it is stipulated that ". . . within one year from the date of the certificate of title in favor of
Marciana Felix, this latter may rescind the present contract of purchase and sale . . . ."
The appellant objects, and rightly, that the cross-complaint is not founded on the hypothesis of
the conventional rescission relied upon by the court, but on the failure to deliver the land sold.
He argues that the right to rescind the contract by virtue of the special agreement not only did
not exist from the moment of the execution of the contract up to one year after the registration of
the land, but does not accrue until the land is registered. The wording of the clause, in fact,
substantiates the contention. The one year's deliberation granted to the purchaser was to be
counted "from the date of the certificate of title ... ." Therefore the right to elect to rescind the
contract was subject to a condition, namely, the issuance of the title. The record show that up to
the present time that condition has not been fulfilled; consequently the defendant cannot be
heard to invoke a right which depends on the existence of that condition. If in the cross-
complaint it had been alleged that the fulfillment of the condition was impossible for reasons
imputable to the plaintiff, and if this allegation had been proven, perhaps the condition would
have been considered as fulfilled (arts. 1117, 1118, and 1119, Civ. Code); but this issue was not
presented in the defendant's answer.
However, although we are not in agreement with the reasoning found in the decision appealed
from, we consider it to be correct in its result. The record shows that the plaintiff did not deliver
the thing sold. With respect to two of the parcels of land, he was not even able to show them to
the purchaser; and as regards the other two, more than two-thirds of their area was in the hostile
and adverse possession of a third person.
The Code imposes upon the vendor the obligation to deliver the thing sold. The thing is
considered to be delivered when it is placed "in the hands and possession of the vendee." (Civ.
Code, art. 1462.) It is true that the same article declares that the execution of a public
instruments is equivalent to the delivery of the thing which is the object of the contract, but, in
order that this symbolic delivery may produce the effect of tradition, it is necessary that the
vendor shall have had such control over the thing sold that, at the moment of the sale, its
material delivery could have been made. It is not enough to confer upon the purchaser the
ownership and the right of possession. The thing sold must be placed in his control. When there
is no impediment whatever to prevent the thing sold passing into the tenancy of the purchaser by
the sole will of the vendor, symbolic delivery through the execution of a public instrument is
sufficient. But if, notwithstanding the execution of the instrument, the purchaser cannot have the
enjoyment and material tenancy of the thing and make use of it himself or through another in his
name, because such tenancy and enjoyment are opposed by the interposition of another will,
then fiction yields to reality the delivery has not been effected.
As Dalloz rightly says (Gen. Rep., vol. 43, p. 174) in his commentaries on article 1604 of the
French Civil code, "the word "delivery" expresses a complex idea . . . the abandonment of the
thing by the person who makes the delivery and the taking control of it by the person to whom
the delivery is made."
The execution of a public instrument is sufficient for the purposes of the abandonment made by
the vendor; but it is not always sufficient to permit of the apprehension of the thing by the
purchaser.
The supreme court of Spain, interpreting article 1462 of the Civil Code, held in its decision of
November 10, 1903, (Civ. Rep., vol. 96, p. 560) that this article "merely declares that when the
sale is made through the means of a public instrument, the execution of this latter is equivalent
to the delivery of the thing sold: which does not and cannot mean that this fictitious tradition
necessarily implies the real tradition of the thing sold, for it is incontrovertible that, while its
ownership still pertains to the vendor (and with greater reason if it does not), a third person may
be in possession of the same thing; wherefore, though, as a general rule, he who purchases by
means of a public instrument should be deemed . . . to be the possessor in fact, yet this
presumption gives way before proof to the contrary."
It is evident, then, in the case at bar, that the mere execution of the instrument was not a
fulfillment of the vendors' obligation to deliver the thing sold, and that from such non-fulfillment
arises the purchaser's right to demand, as she has demanded, the rescission of the sale and the
return of the price. (Civ. Code, arts. 1506 and 1124.)
Of course if the sale had been made under the express agreement of imposing upon the
purchaser the obligation to take the necessary steps to obtain the material possession of the
thing sold, and it were proven that she knew that the thing was in the possession of a third
person claiming to have property rights therein, such agreement would be perfectly valid. But
there is nothing in the instrument which would indicate, even implicitly, that such was the
agreement. It is true, as the appellant argues, that the obligation was incumbent upon the
defendant Marciana Felix to apply for and obtain the registration of the land in the new registry of
property; but from this it cannot be concluded that she had to await the final decision of the Court
of Land Registration, in order to be able to enjoy the property sold. On the contrary, it was
expressly stipulated in the contract that the purchaser should deliver to the vendor one-fourth "of
the products ... of the aforesaid four parcels from the moment when she takes possession of
them until the Torrens certificate of title be issued in her favor." This obviously shows that it was
not forseen that the purchaser might be deprived of her possession during the course of the
registration proceedings, but that the transaction rested on the assumption that she was to have,
during said period, the material possession and enjoyment of the four parcels of land.
Inasmuch as the rescission is made by virtue of the provisions of law and not by contractual
agreement, it is not the conventional but the legal interest that is demandable.
It is therefore held that the contract of purchase and sale entered into by and between the
plaintiff and the defendant on June 11, 1914, is rescinded, and the plaintiff is ordered to make
restitution of the sum of P3,000 received by him on account of the price of the sale, together with
interest thereon at the legal rate of 6 per annum from the date of the filing of the complaint until
payment, with the costs of both instances against the appellant. So ordered.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-69970 November 28, 1988
FELIX DANGUILAN, petitioner,
vs.
INTERMEDIATE APPELLATE COURT, APOLONIA MELAD, assisted by her husband, JOSE
TAGACAY, respondents.
Pedro R. Perez, Jr. for petitioner.
Teodoro B. Mallonga for private respondent.
CRUZ, J.:
The subject of this dispute is the two lots owned by Domingo Melad which is claimed by both the
petitioner and the respondent. The trial court believed the petitioner but the respondent court, on
appeal, upheld the respondent. The case is now before us for a resolution of the issues once
and for all.
On January 29, 1962, the respondent filed a complaint against the petitioner in the then Court of
First Instance of Cagayan for recovery of a farm lot and a residential lot which she claimed she
had purchased from Domingo Melad in 1943 and were now being unlawfully withheld by the
defendant. 1 In his answer, the petitioner denied the allegation and averred that he was the
owner of the said lots of which he had been in open, continuous and adverse possession,
having acquired them from Domingo Melad in 1941 and 1943. 2 The case was dismissed for
failure to prosecute but was refiled in 1967. 3
At the trial, the plaintiff presented a deed of sale dated December 4, 1943, purportedly signed by
Domingo Melad and duly notarized, which conveyed the said properties to her for the sum of
P80.00. 4 She said the amount was earned by her mother as a worker at the Tabacalera factory.
She claimed to be the illegitimate daughter of Domingo Melad, with whom she and her mother
were living when he died in 1945. She moved out of the farm only when in 1946 Felix Danguilan
approached her and asked permission to cultivate the land and to stay therein. She had agreed
on condition that he would deliver part of the harvest from the farm to her, which he did from that
year to 1958. The deliveries having stopped, she then consulted the municipal judge who
advised her to file the complaint against Danguilan. The plaintiff 's mother, her only other
witness, corroborated this testimony. 5
For his part, the defendant testified that he was the husband of Isidra Melad, Domingo's niece,
whom he and his wife Juana Malupang had taken into their home as their ward as they had no
children of their own. He and his wife lived with the couple in their house on the residential lot
and helped Domingo with the cultivation of the farm. Domingo Melad signed in 1941 a private
instrument in which he gave the defendant the farm and in 1943 another private instrument in
which he also gave him the residential lot, on the understanding that the latter would take care of
the grantor and would bury him upon his death. 6 Danguilan presented three other witnesses 7
to corroborate his statements and to prove that he had been living in the land since his marriage
to Isidra and had remained in possession thereof after Domingo Melad's death in 1945. Two of
said witnesses declared that neither the plaintiff nor her mother lived in the land with Domingo
Melad. 8
The decision of the trial court was based mainly on the issue of possession. Weighing the
evidence presented by the parties, the judge 9 held that the defendant was more believable and
that the plaintiff's evidence was "unpersuasive and unconvincing." It was held that the plaintiff's
own declaration that she moved out of the property in 1946 and left it in the possession of the
defendant was contradictory to her claim of ownership. She was also inconsistent when she
testified first that the defendant was her tenant and later in rebuttal that he was her
administrator. The decision concluded that where there was doubt as to the ownership of the
property, the presumption was in favor of the one actually occupying the same, which in this
case was the defendant. 10
The review by the respondent court 11 of this decision was manifestly less than thorough. For
the most part it merely affirmed the factual findings of the trial court except for an irrelevant
modification, and it was only toward the end that it went to and resolved what it considered the
lone decisive issue.
The respondent court held that Exhibits 2-b and 3-a, by virtue of which Domingo Melad had
conveyed the two parcels of land to the petitioner, were null and void. The reason was that they
were donations of real property and as such should have been effected through a public
instrument. It then set aside the appealed decision and declared the respondents the true and
lawful owners of the disputed property.
The said exhibits read as follows:
EXHIBIT 2-b is quoted as follows: 12
I, DOMINGO MELAD, of legal age, married, do hereby declare in this receipt the truth of my
giving to Felix Danguilan, my agricultural land located at Barrio Fugu-Macusi, Penablanca,
Province of Cagayan, Philippine Islands; that this land is registered under my name; that I
hereby declare and bind myself that there is no one to whom I will deliver this land except to him
as he will be the one responsible for me in the event that I will die and also for all other things
needed and necessary for me, he will be responsible because of this land I am giving to him;
that it is true that I have nieces and nephews but they are not living with us and there is no one
to whom I will give my land except to Felix Danguilan for he lives with me and this is the length
175 m. and the width is 150 m.
IN WITNESS WHEREOF, I hereby sign my name below and also those present in the execution
of this receipt this 14th day of September 1941.
Penablanca Cagayan, September 14, 1941.
(SGD.) DOMINGO MELAD
WITNESSES:
1. (T.M.) ISIDRO MELAD
2. (SGD.) FELIX DANGUILAN
3. (T.M.) ILLEGIBLE
EXHIBIT 3-a is quoted as follows: 13
I, DOMINGO MELAD, a resident of Centro, Penablanca, Province of Cagayan, do hereby swear
and declare the truth that I have delivered my residential lot at Centro, Penablanca, Cagayan, to
Felix Danguilan, my son-in-law because I have no child; that I have thought of giving him my
land because he will be the one to take care of SHELTERING me or bury me when I die and this
is why I have thought of executing this document; that the boundaries of this lot ison the east,
Cresencio Danguilan; on the north, Arellano Street; on the south by Pastor Lagundi and on the
west, Pablo Pelagio and the area of this lot is 35 meters going south; width and length beginning
west to east is 40 meters.
IN WITNESS HEREOF, I hereby sign this receipt this 18th day of December 1943.
(SGD.) DOMINGO MELAD
WITNESSES:
(SGD.) ILLEGIBLE
(SGD.) DANIEL ARAO
It is our view, considering the language of the two instruments, that Domingo Melad did intend to
donate the properties to the petitioner, as the private respondent contends. We do not think,
however, that the donee was moved by pure liberality. While truly donations, the conveyances
were onerous donations as the properties were given to the petitioner in exchange for his
obligation to take care of the donee for the rest of his life and provide for his burial. Hence, it was
not covered by the rule in Article 749 of the Civil Code requiring donations of real properties to
be effected through a public instrument. The case at bar comes squarely under the doctrine laid
down in Manalo v. De Mesa, 14 where the Court held:
There can be no doubt that the donation in question was made for a valuable consideration,
since the donors made it conditional upon the donees' bearing the expenses that might be
occasioned by the death and burial of the donor Placida Manalo, a condition and obligation
which the donee Gregorio de Mesa carried out in his own behalf and for his wife Leoncia
Manalo; therefore, in order to determine whether or not said donation is valid and effective it
should be sufficient to demonstrate that, as a contract, it embraces the conditions the law
requires and is valid and effective, although not recorded in a public instrument.
The private respondent argues that as there was no equivalence between the value of the lands
donated and the services for which they were being exchanged, the two transactions should be
considered pure or gratuitous donations of real rights, hence, they should have been effected
through a public instrument and not mere private writings. However, no evidence has been
adduced to support her contention that the values exchanged were disproportionate or unequal.
On the other hand, both the trial court and the respondent court have affirmed the factual
allegation that the petitioner did take care of Domingo Melad and later arranged for his burial in
accordance with the condition imposed by the donor. It is alleged and not denied that he died
when he was almost one hundred years old, 15 which would mean that the petitioner farmed the
land practically by himself and so provided for the donee (and his wife) during the latter part of
Domingo Melad's life. We may assume that there was a fair exchange between the donor and
the donee that made the transaction an onerous donation.
Regarding the private respondent's claim that she had purchased the properties by virtue of a
deed of sale, the respondent court had only the following to say: "Exhibit 'E' taken together with
the documentary and oral evidence shows that the preponderance of evidence is in favor of the
appellants." This was, we think, a rather superficial way of resolving such a basic and important
issue.
The deed of sale was allegedly executed when the respondent was only three years old and the
consideration was supposedly paid by her mother, Maria Yedan from her earnings as a wage
worker in a factory. 16 This was itself a suspicious circumstance, one may well wonder why the
transfer was not made to the mother herself, who was after all the one paying for the lands. The
sale was made out in favor of Apolonia Melad although she had been using the surname Yedan
her mother's surname, before that instrument was signed and in fact even after she got married.
17 The averment was also made that the contract was simulated and prepared after Domingo
Melad's death in 1945. 18 It was also alleged that even after the supposed execution of the said
contract, the respondent considered Domingo Melad the owner of the properties and that she
had never occupied the same. 19
Considering these serious challenges, the appellate court could have devoted a little more time
to examining Exhibit "E" and the circumstances surrounding its execution before pronouncing its
validity in the manner described above. While it is true that the due execution of a public
instrument is presumed, the presumption is disputable and will yield to contradictory evidence,
which in this case was not refuted.
At any rate, even assuming the validity of the deed of sale, the record shows that the private
respondent did not take possession of the disputed properties and indeed waited until 1962 to
file this action for recovery of the lands from the petitioner. If she did have possession, she
transferred the same to the petitioner in 1946, by her own sworn admission, and moved out to
another lot belonging to her step-brother. 20 Her claim that the petitioner was her tenant (later
changed to administrator) was disbelieved by the trial court, and properly so, for its
inconsistency. In short, she failed to show that she consummated the contract of sale by actual
delivery of the properties to her and her actual possession thereof in concept of purchaser-
owner.
As was held in Garchitorena v. Almeda: 21
Since in this jurisdiction it is a fundamental and elementary principle that ownership does not
pass by mere stipulation but only by delivery (Civil Code, Art. 1095; Fidelity and Surety Co. v.
Wilson, 8 Phil. 51), and the execution of a public document does not constitute sufficient delivery
where the property involved is in the actual and adverse possession of third persons (Addison
vs. Felix, 38 Phil. 404; Masallo vs. Cesar, 39 Phil. 134), it becomes incontestable that even if
included in the contract, the ownership of the property in dispute did not pass thereby to Mariano
Garchitorena. Not having become the owner for lack of delivery, Mariano Garchitorena cannot
presume to recover the property from its present possessors. His action, therefore, is not one of
revindicacion, but one against his vendor for specific performance of the sale to him.
In the aforecited case of Fidelity and Deposit Co. v. Wilson, 22 Justice Mapa declared for the
Court:
Therefore, in our Civil Code it is a fundamental principle in all matters of contracts and a well-
known doctrine of law that "non mudis pactis sed traditione dominia rerum transferuntur". In
conformity with said doctrine as established in paragraph 2 of article 609 of said code, that "the
ownership and other property rights are acquired and transmitted by law, by gift, by testate or
intestate succession, and, in consequence of certain contracts, by tradition". And as the logical
application of this disposition article 1095 prescribes the following: "A creditor has the rights to
the fruits of a thing from the time the obligation to deliver it arises. However, he shall not acquire
a real right" (and the ownership is surely such) "until the property has been delivered to him."
In accordance with such disposition and provisions the delivery of a thing constitutes a
necessary and indispensable requisite for the purpose of acquiring the ownership of the same by
virtue of a contract. As Manresa states in his Commentaries on the Civil Code, volume 10,
pages 339 and 340: "Our law does not admit the doctrine of the transfer of property by mere
consent but limits the effect of the agreement to the due execution of the contract. ... The
ownership, the property right, is only derived from the delivery of a thing ... "
As for the argument that symbolic delivery was effected through the deed of sale, which was a
public instrument, the Court has held:
The Code imposes upon the vendor the obligation to deliver the thing sold. The thing is
considered to be delivered when it is placed "in the hands and possession of the vendee." (Civil
Code, art. 1462). It is true that the same article declares that the execution of a public instrument
is equivalent to the delivery of the thing which is the object of the contract, but, in order that this
symbolic delivery may produce the effect of tradition, it is necessary that the vendor shall have
had such control over the thing sold that, at the moment of the sale, its material delivery could
have been made. It is not enough to confer upon the purchaser the ownership and the right of
possession. The thing sold must be placed in his control. When there is no impediment whatever
to prevent the thing sold passing into the tenancy of the purchaser by the sole will of the vendor,
symbolic delivery through the execution of a public instrument is sufficient. But if,
notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and
material tenancy of the thing and make use of it himself or through another in his name, because
such tenancy and enjoyment are opposed by the interposition of another will, then fiction yields
to realitythe delivery has not been effected. 23
There is no dispute that it is the petitioner and not the private respondent who is in actual
possession of the litigated properties. Even if the respective claims of the parties were both to be
discarded as being inherently weak, the decision should still incline in favor of the petitioner
pursuant to the doctrine announced in Santos & Espinosa v. Estejada 24 where the Court
announced:
If the claim of both the plaintiff and the defendant are weak, judgment must be for the defendant,
for the latter being in possession is presumed to be the owner, and cannot be obliged to show or
prove a better right.
WHEREFORE, the decision of the respondent court is SET ASIDE and that of the trial court
REINSTATED, with costs against the private respondent. It is so ordered.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-21998 November 10, 1975
CALIXTO PASAGUI and FAUSTA MOSAR, plaintiffs-appellants,
vs.
ESTER T. VILLABLANCA, ZOSIMO VILLABLANCA, EUSTAQUIA BOCAR and CATALINA
BOCAR defendants-appellees.
Julio Siayngco for plaintiffs-appellants.
Filomeno Arteche, Jr. for defendants-appellees. .
ANTONIO, J.:
The only issue posed by this appeal is whether or not, from the nature of the action pleaded as
appears in the allegations of the complaint, the aforesaid action is one of forcible entry, within
the exclusive jurisdiction of the municipal court. .
On February 4, 1963, appellants Calixto Pasagui and Fausta Mosar filed a complaint with the
Court of First Instance at Tacloban City, alleging that onNovember 15, 1962, for and in
consideration of Two Thousand Eight Hundred Pesos (P2,800.00), they bought from appellees
Eustaquia Bocar and Catalina Bocar a parcel of agricultural land with an area of 2.6814
hectares, situated in Hamindangon, Pastrana, Leyte; that the corresponding document of sale
was executed, notarized on the same date, and recorded in the Registry of Deeds of Tacloban,
Leyte on November 16, 1962; that during the first week of February, 1963, defendant spouses
Ester T. Villablanca and Zosimo Villablanca, "illegally and without any right, whatsoever, took
possession of the above property harvesting coconuts from the coconut plantation thereon, thus
depriving plaintiffs" of its possession; that despite demands made by the plaintiffs upon the
above-mentioned defendants "to surrender to them the above-described property and its
possession" the latter failed or refused to return said parcel of land to the former, causing them
damage; and that Eustaquia and Catalina Bocar, vendors of the property, are included
defendants in the complaint by virtue of the warranty clause contained in the document of sale.
Plaintiffs prayed for a decision ordering defendants to surrender the possession of the parcel of
land above-described to them and to pay damages in the amounts specified. .
On February 21, 1963, appellees moved to dismiss the complaint on the ground that the Court of
First Instance had no jurisdiction over the subject matter, the action being one of forcible entry.
Appellants opposed the Motion to Dismiss asserting that the action is not one for forcible entry
inasmuch as in the complaint, there is no allegation that the deprivation of possession was
effected through "force, intimidation, threat, strategy or stealth." .
On May 13, 1963, the trial court issued an order dismissing the complaint for lack of jurisdiction,
it appearing from the allegations in the complaint that the case is one for forcible entry which
belongs to the exclusive jurisdiction of the Justice of the Peace (now Municipal Court) of
Pastrana, Leyte. The first Motion for Reconsideration was denied on May 27, 1963 and the
second was likewise denied on July 5, 1963. From the aforementioned orders, appeal on a pure
question of law was interposed to this Court. .
It is well-settled that what determines the jurisdiction of the municipal court in a forcible entry
case is the nature of the action pleaded as appears from the allegations in the complaint. In
ascertaining whether or not the action is one of forcible entry within the original exclusive
jurisdiction of the municipal court, the averments of the complaint and the character of the relief
sought are the ones to be consulted.. 1 .
In the case at bar, the complaint does not allege that the plaintiffs were in physical possession of
the land and have been deprived of that possession through force, intimidation, threat, strategy,
or stealth. It simply avers that plaintiffs-appellants bought on November 12, 1962 from
defendants-appellees Eustaquia Bocar and Catalina Bocar the parcel of land in question for the
amount of P2,800.00; that a deed of sale was executed, notarized and registered;that "during
this first week of February, 1963, defendants Ester T. Villablanca and her husband, Zosimo
Villablanca, illegally and without any right whatsoever, took possession of the above described
property, harvesting coconuts from the coconut plantation therein, thus depriving of its
possession herein plaintiffs, and causing them damages for the amount of EIGHT HUNDRED
PESOS (P800.00)"; that for the purpose of enforcing the vendors' warranty in case of eviction,
Eustaquia Bocar and Catalina Bocar were also included as defendants; and, therefore, plaintiffs-
appellants pray that a decision be rendered, ordering (a) defendants Ester T. Villablanca and her
husband, Zosimo Villablanca, "to surrender the possession of the above described property to
said plaintiffs"; (b) defendants Ester T. Villablanca and her husband, Zosimo Villablanca, "to pay
to said plaintiffs the amount of EIGHT HUNDRED PESOS (P800.00) as damages for the
usurpation by them of said property"; and (c) defendants Eustaquia Bocar and Catalina Bocar
"to pay the plaintiffs the amount of P2,800.00, plus incidental expenses, as provided for by Art.
1555 of the Civil Code, in case of eviction or loss of ownership to said above described property
on the part of plaintiffs." .
It is true that the execution of the deed of absolute sale in a public instrument is equivalent to
delivery of the land subject of the sale.2 This presumptive delivery only holds true when there is
no impediment that may prevent the passing of the property from the hands of the vendor into
those of the vendee. It can be negated by the reality that the vendees actually failed to obtain
material possession of the land subject of the sale.. 3 It appears from the records of the case at
bar that plaintiffs-appellants had not acquired physical possession of the land since its purchase
on November 12, 1962. As a matter of fact, their purpose in filing the complaint in Civil Case No.
3285 is precisely to "get the possession of the property."4 In order that an action may be
considered as one for forcible entry, it is not only necessary that the plaintiff should allege his
prior physical possession of the property but also that he was deprived of his possession by any
of the means provided in section 1, Rule 70 of the Revised Rules of Court, namely: force,
intimidation, threats, strategy and stealth. For, if the dispossession did not take place by any of
these means, the courts of first instance, not the municipal courts, have jurisdictions.. 5 The bare
allegation in the complaint that the plaintiff has been "deprived" of the land of which he is and
has been the legal owner for a long period has been held to be insufficient.6 It is true that the
mere act of a trespasser in unlawfully entering the land, planting himself on the ground and
excluding therefrom the prior possessor would imply the use of force. In the case at bar, no such
inference could be made as plaintiffs-appellants had not claimed that they were in actual
physical possession of the property prior to the entry of the Villablancas. Moreover, it is evident
that plaintiffs-appellants are not only seeking to get the possession of the property, but as an
alternative cause of action, they seek the return of the price and payment of damages by the
vendors "in case of eviction or loss of ownership" of the said property. It is, therefore, not the
summary action of forcible entry within the context of the Rules. .
WHEREFORE, the order of dismissal is hereby set aside, and the case remanded to the court a
quo for further proceedings. Costs against defendants-appellees
THIRD DIVISION
[G.R. No. 119745. June 20, 1997]
POWER COMMERCIAL AND INDUSTRIAL CORPORATION, petitioner, vs. COURT OF
APPEALS, SPOUSES REYNALDO and ANGELITA R. QUIAMBAO and PHILIPPINE
NATIONAL BANK, respondents.
DECISION
PANGANIBAN, J.:
Is the sellers failure to eject the lessees from a lot that is the subject of a contract of sale with
assumption of mortgage a ground (1) for rescission of such contract and (2) for a return by the
mortgagee of the amortization payments made by the buyer who assumed such mortgage?
Petitioner posits an affirmative answer to such question in this petition for review on certiorari of
the March 27, 1995 Decision[1] of the Court of Appeals, Eighth Division, in CA-G.R. CV Case
No. 32298 upholding the validity of the contract of sale with assumption of mortgage and
absolving the mortgagee from the liability of returning the mortgage payments already made.[2]
The Facts
Petitioner Power Commercial & Industrial Development Corporation, an industrial asbestos
manufacturer, needed a bigger office space and warehouse for its products. For this purpose, on
January 31, 1979, it entered into a contract of sale with the spouses Reynaldo and Angelita R.
Quiambao, herein private respondents. The contract involved a 612-sq. m. parcel of land
covered by Transfer Certificate of Title No. S-6686 located at the corner of Bagtican and St. Paul
Streets, San Antonio Village, Makati City. The parties agreed that petitioner would pay private
respondents P108,000.00 as down payment, and the balance of P295,000.00 upon the
execution of the deed of transfer of the title over the property. Further, petitioner assumed, as
part of the purchase price, the existing mortgage on the land. In full satisfaction thereof, he paid
P79,145.77 to Respondent Philippine National Bank (PNB for brevity).
On June 1, 1979, respondent spouses mortgaged again said land to PNB to guarantee a loan of
P145,000.00, P80,000.00 of which was paid to respondent spouses. Petitioner agreed to
assume payment of the loan.
On June 26, 1979, the parties executed a Deed of Absolute Sale With Assumption of Mortgage
which contained the following terms and conditions:[3]
That for and in consideration of the sum of Two Hundred Ninety-Five Thousand Pesos
(P295,000.00) Philippine Currency, to us in hand paid in cash, and which we hereby
acknowledge to be payment in full and received to our entire satisfaction, by POWER
COMMERCIAL AND INDUSTRIAL DEVELOPMENT CORPORATION, a 100% Filipino
Corporation, organized and existing under and by virtue of Philippine Laws with offices located
at 252-C Vito Cruz Extension, we hereby by these presents SELL, TRANSFER and CONVEY by
way of absolute sale the above described property with all the improvements existing thereon
unto the said Power Commercial and Industrial Development Corporation, its successors and
assigns, free from all liens and encumbrances.
We hereby certify that the aforesaid property is not subject to nor covered by the provisions of
the Land Reform Code -- the same having no agricultural lessee and/or tenant.
We hereby also warrant that we are the lawful and absolute owners of the above described
property, free from any lien and/or encumbrance, and we hereby agree and warrant to defend its
title and peaceful possession thereof in favor of the said Power Commercial and Industrial
Development Corporation, its successors and assigns, against any claims whatsoever of any
and all third persons; subject, however, to the provisions hereunder provided to wit:
That the above described property is mortgaged to the Philippine National Bank, Cubao, Branch,
Quezon City for the amount of one hundred forty-five thousand pesos, Philippine, evidenced by
document No. 163, found on page No. 34 of Book No. XV, Series of 1979 of Notary Public Herita
L. Altamirano registered with the Register of Deeds of Pasig (Makati), Rizal xxx;
That the said Power Commercial and Industrial Development Corporation assumes to pay in full
the entire amount of the said mortgage above described plus interest and bank charges, to the
said mortgagee bank, thus holding the herein vendor free from all claims by the said bank;
That both parties herein agree to seek and secure the agreement and approval of the said
Philippine National Bank to the herein sale of this property, hereby agreeing to abide by any and
all requirements of the said bank, agreeing that failure to do so shall give to the bank first lieu
(sic) over the herein described property.
On the same date, Mrs. C.D. Constantino, then General Manager of petitioner-corporation,
submitted to PNB said deed with a formal application for assumption of mortgage.[4]
On February 15, 1980, PNB informed respondent spouses that, for petitioners failure to submit
the papers necessary for approval pursuant to the formers letter dated January 15, 1980, the
application for assumption of mortgage was considered withdrawn; that the outstanding balance
of P145,000.00 was deemed fully due and demandable; and that said loan was to be paid in full
within fifteen (15) days from notice.[5]
Petitioner paid PNB P41,880.45 on June 24, 1980 and P20,283.14 on December 23, 1980,
payments which were to be applied to the outstanding loan. On December 23, 1980, PNB
received a letter from petitioner which reads:[6]
With regard to the presence of the people who are currently in physical occupancy of the (l)ot
xxx it is our desire as buyers and new owners of this lot to make use of this lot for our own
purpose, which is why it is our desire and intention that all the people who are currently
physically present and in occupation of said lot should be removed immediately.
For this purpose we respectfully request that xxx our assumption of mortgage be given favorable
consideration, and that the mortgage and title be transferred to our name so that we may
undertake the necessary procedures to make use of this lot ourselves.
It was our understanding that this lot was free and clear of problems of this nature, and that the
previous owner would be responsible for the removal of the people who were there. Inasmuch
as the previous owner has not been able to keep his commitment, it will be necessary for us to
take legal possession of this lot inorder (sic) to take physical possession.
On February 19, 1982, PNB sent petitioner a letter as follows:[7]
(T)his refers to the loan granted to Mr. Reynaldo Quiambao which was assumed by you on June
4, 1979 for P101,500.00. It was last renewed on December 24, 1980 to mature on June 4, 1981.
A review of our records show that it has been past due from last maturity with interest
arrearages amounting to P25,826.08 as of February 19, 1982. The last payment received by us
was on December 24, 1980 for P20,283.14. In order to place your account in current form, we
request you to remit payments to cover interest, charges, and at least part of the principal.
On March 17, 1982, petitioner filed Civil Case No. 45217 against respondent spouses for
rescission and damages before the Regional Trial Court of Pasig, Branch 159. Then, in its reply
to PNBs letter of February 19, 1982, petitioner demanded the return of the payments it made on
the ground that its assumption of mortgage was never approved. On May 31, 1983,[8] while this
case was pending, the mortgage was foreclosed. The property was subsequently bought by
PNB during the public auction. Thus, an amended complaint was filed impleading PNB as party
defendant.
On July 12, 1990, the trial court[9] ruled that the failure of respondent spouses to deliver actual
possession to petitioner entitled the latter to rescind the sale, and in view of such failure and of
the denial of the latters assumption of mortgage, PNB was obliged to return the payments made
by the latter. The dispositive portion of said decision states:[10]
IN VIEW OF ALL THE FOREGOING, the Court hereby renders judgment in favor of plaintiff and
against defendants:
(1) Declaring the rescission of the Deed of Sale with Assumption of Mortgage executed between
plaintiff and defendants Spouses Quiambao, dated June 26, 1979;
(2) Ordering defendants Spouses Quiambao to return to plaintiff the amount of P187,144.77
(P108,000.00 plus P79,145.77) with legal interest of 12% per annum from date of filing of herein
complaint, that is, March 17, 1982 until the same is fully paid;
(3) Ordering defendant PNB to return to plaintiff the amount of P62,163.59 (P41,880.45 and
P20,283.14) with 12% interest thereon from date of herein judgment until the same is fully paid.
No award of other damages and attorneys fees, the same not being warranted under the facts
and circumstances of the case.
The counterclaim of both defendants spouses Quiambao and PNB are dismissed for lack of
merit.
No pronouncement as to costs.
SO ORDERED.
On appeal by respondent-spouses and PNB, Respondent Court of Appeals reversed the trial
court. In the assailed Decision, it held that the deed of sale between respondent spouses and
petitioner did not obligate the former to eject the lessees from the land in question as a condition
of the sale, nor was the occupation thereof by said lessees a violation of the warranty against
eviction. Hence, there was no substantial breach to justify the rescission of said contract or the
return of the payments made. The dispositive portion of said Decision reads:[11]
WHEREFORE, the Decision appealed from is hereby REVERSED and the complaint filed by
Power Commercial and Industrial Development Corporation against the spouses Reynaldo and
Angelita Quiambao and the Philippine National Bank is DISMISSED. No costs.
Hence, the recourse to this Court .
Issues
Petitioner contends that: (1) there was a substantial breach of the contract between the parties
warranting rescission; and (2) there was a mistake in payment made by petitioner, obligating
PNB to return such payments. In its Memorandum, it specifically assigns the following errors of
law on the part of Respondent Court:[12]
A. Respondent Court of Appeals gravely erred in failing to consider in its decision that a breach
of implied warranty under Article 1547 in relation to Article 1545 of the Civil Code applies in the
case-at-bar.
B. Respondent Court of Appeals gravely erred in failing to consider in its decision that a mistake
in payment giving rise to a situation where the principle of solutio indebiti applies is obtaining in
the case-at-bar.
The Courts Ruling
The petition is devoid of merit. It fails to appreciate the difference between a condition and a
warranty and the consequences of such distinction.
Conspicuous Absence of an Imposed Condition
The alleged failure of respondent spouses to eject the lessees from the lot in question and to
deliver actual and physical possession thereof cannot be considered a substantial breach of a
condition for two reasons: first, such failure was not stipulated as a condition -- whether
resolutory or suspensive -- in the contract; and second, its effects and consequences were not
specified either.[13]
The provision adverted to by petitioner does not impose a condition or an obligation to eject the
lessees from the lot. The deed of sale provides in part:[14]
We hereby also warrant that we are the lawful and absolute owners of the above described
property, free from any lien and/or encumbrance, and we hereby agree and warrant to defend its
title and peaceful possession thereof in favor of the said Power Commercial and Industrial
Development Corporation, its successors and assigns, against any claims whatsoever of any
and all third persons; subject, however, to the provisions hereunder provided to wit:
By his own admission, Anthony Powers, General Manager of petitioner-corporation, did not ask
the corporations lawyers to stipulate in the contract that Respondent Reynaldo was
guaranteeing the ejectment of the occupants, because there was already a proviso in said deed
of sale that the sellers were guaranteeing the peaceful possession by the buyer of the land in
question.[15] Any obscurity in a contract, if the above-quoted provision can be so described,
must be construed against the party who caused it.[16] Petitioner itself caused the obscurity
because it omitted this alleged condition when its lawyer drafted said contract.
If the parties intended to impose on respondent spouses the obligation to eject the tenants from
the lot sold, it should have included in the contract a provision similar to that referred to in
Romero vs. Court of Appeals,[17] where the ejectment of the occupants of the lot sold by private
respondent was the operative act which set into motion the period of petitioners compliance with
his own obligation, i.e., to pay the balance of the purchase price. Failure to remove the squatters
within the stipulated period gave the other party the right to either refuse to proceed with the
agreement or to waive that condition of ejectment in consonance with Article 1545 of the Civil
Code. In the case cited, the contract specifically stipulated that the ejectment was a condition to
be fulfilled; otherwise, the obligation to pay the balance would not arise. This is not so in the
case at bar.
Absent a stipulation therefor, we cannot say that the parties intended to make its nonfulfillment a
ground for rescission. If they did intend this, their contract should have expressly stipulated so.
In Ang vs. C.A.,[18] rescission was sought on the ground that the petitioners had failed to fulfill
their obligation to remove and clear the lot sold, the performance of which would have given rise
to the payment of the consideration by private respondent. Rescission was not allowed,
however, because the breach was not substantial and fundamental to the fulfillment by the
petitioners of the obligation to sell.
As stated, the provision adverted to in the contract pertains to the usual warranty against
eviction, and not to a condition that was not met. The terms of the contract are so clear as to
leave no room for any other interpretation.[19]
Futhermore, petitioner was well aware of the presence of the tenants at the time it entered into
the sales transaction. As testified to by Reynaldo,[20] petitioners counsel during the sales
negotiation even undertook the job of ejecting the squatters. In fact, petitioner actually filed suit
to eject the occupants. Finally, petitioner in its letter to PNB of December 23, 1980 admitted that
it was the buyer(s) and new owner(s) of this lot.
Effective Symbolic Delivery
The Court disagrees with petitioners allegation that the respondent spouses failed to deliver the
lot sold. Petitioner asserts that the legal fiction of symbolic delivery yielded to the truth that, at
the execution of the deed of sale, transfer of possession of said lot was impossible due to the
presence of occupants on the lot sold. We find this misleading.
Although most authorities consider transfer of ownership as the primary purpose of sale, delivery
remains an indispensable requisite as our law does not admit the doctrine of transfer of property
by mere consent.[21] The Civil Code provides that delivery can either be (1) actual (Article 1497)
or (2) constructive (Articles 1498-1501). Symbolic delivery (Article 1498), as a species of
constructive delivery, effects the transfer of ownership through the execution of a public
document. Its efficacy can, however, be prevented if the vendor does not possess control over
the thing sold,[22] in which case this legal fiction must yield to reality.
The key word is control, not possession, of the land as petitioner would like us to believe. The
Court has consistently held that:[23]
x x x (I)n order that this symbolic delivery may produce the effect of tradition, it is necessary that
the vendor shall have had such control over the thing sold that xxx its material delivery could
have been made. It is not enough to confer upon the purchaser the ownership and the right of
possession. The thing sold must be placed in his control. When there is no impediment whatever
to prevent the thing sold passing into the tenancy of the purchaser by the sole will of the vendor,
symbolic delivery through the execution of a public instrument is sufficient. But if,
notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and
material tenancy of the thing and make use of it himself or through another in his name, because
such tenancy and enjoyment are opposed by the interposition of another will, then fiction yields
to reality -- the delivery has not been effected.
Considering that the deed of sale between the parties did not stipulate or infer otherwise,
delivery was effected through the execution of said deed. The lot sold had been placed under
the control of petitioner; thus, the filing of the ejectment suit was subsequently done. It signified
that its new owner intended to obtain for itself and to terminate said occupants actual possession
thereof. Prior physical delivery or possession is not legally required and the execution of the
deed of sale is deemed equivalent to delivery.[24] This deed operates as a formal or symbolic
delivery of the property sold and authorizes the buyer to use the document as proof of
ownership. Nothing more is required.
Requisites of Breach of Warranty Against Eviction
Obvious to us in the ambivalent stance of petitioner is its failure to establish any breach of the
warranty against eviction. Despite its protestation that its acquisition of the lot was to enable it to
set up a warehouse for its asbestos products and that failure to deliver actual possession thereof
defeated this purpose, still no breach of warranty against eviction can be appreciated because
the facts of the case do not show that the requisites for such breach have been satisfied. A
breach of this warranty requires the concurrence of the following circumstances:
(1) The purchaser has been deprived of the whole or part of the thing sold;

(2) This eviction is by a final judgment;
(3) The basis thereof is by virtue of a right prior to the sale made by the vendor; and
(4) The vendor has been summoned and made co-defendant in the suit for eviction at the
instance of the vendee.[25]
In the absence of these requisites, a breach of the warranty against eviction under Article 1547
cannot be declared.
Petitioner argues in its memorandum that it has not yet ejected the occupants of said lot, and not
that it has been evicted therefrom. As correctly pointed out by Respondent Court, the presence
of lessees does not constitute an encumbrance of the land,[26] nor does it deprive petitioner of
its control thereof.
We note, however, that petitioners deprivation of ownership and control finally occurred when it
failed and/or discontinued paying the amortizations on the mortgage, causing the lot to be
foreclosed and sold at public auction. But this deprivation is due to petitioners fault, and not to
any act attributable to the vendor-spouses.
Because petitioner failed to impugn its integrity, the contract is presumed, under the law, to be
valid and subsisting.
Absence of Mistake In Payment
Contrary to the contention of petitioner that a return of the payments it made to PNB is
warranted under Article 2154 of the Code, solutio indebiti does not apply in this case. This
doctrine applies where: (1) a payment is made when there exists no binding relation between the
payor, who has no duty to pay, and the person who received the payment, and (2) the payment
is made through mistake, and not through liberality or some other cause.[27]
In this case, petitioner was under obligation to pay the amortizations on the mortgage under the
contract of sale and the deed of real estate mortgage. Under the deed of sale (Exh. 2),[28] both
parties agreed to abide by any and all the requirements of PNB in connection with the real estate
mortgage. Petitioner was aware that the deed of mortgage (Exh. C) made it solidarily and,
therefore, primarily[29] liable for the mortgage obligation:[30]
(e) The Mortgagor shall neither lease the mortgaged property xxx nor sell or dispose of the same
in any manner, without the written consent of the Mortgagee. However, if not withstanding this
stipulation and during the existence of this mortgage, the property herein mortgaged, or any
portion thereof, is xxx sold, it shall be the obligation of the Mortgagor to impose as a condition of
the sale, alienation or encumbrance that the vendee, or the party in whose favor the alienation or
encumbrance is to be made, should take the property subject to the obligation of this mortgage
in the same terms and condition under which it is constituted, it being understood that the
Mortgagor is not in any manner relieved of his obligation to the Mortgagee under this mortgage
by such sale, alienation or encumbrance; on the contrary both the vendor and the vendee, or the
party in whose favor the alienation or encumbrance is made shall be jointly and severally liable
for said mortgage obligations. xxx.
Therefore, it cannot be said that it did not have a duty to pay to PNB the amortization on the
mortgage.
Also, petitioner insists that its payment of the amortization was a mistake because PNB
disapproved its assumption of mortgage after it failed to submit the necessary papers for the
approval of such assumption.
But even if petitioner was a third party in regard to the mortgage of the land purchased, the
payment of the loan by petitioner was a condition clearly imposed by the contract of sale. This
fact alone disproves petitioners insistence that there was a mistake in payment. On the contrary,
such payments were necessary to protect its interest as a the buyer(s) and new owner(s) of the
lot.
The quasi-contract of solutio indebiti is one of the concrete manifestations of the ancient
principle that no one shall enrich himself unjustly at the expense of another.[31] But as shown
earlier, the payment of the mortgage was an obligation petitioner assumed under the contract of
sale. There is no unjust enrichment where the transaction, as in this case, is quid pro quo, value
for value.
All told, respondent Court did not commit any reversible error which would warrant the reversal
of the assailed Decision.
WHEREFORE, the petition is hereby DENIED, and the assailed Decision is AFFIRMED.
SO ORDERED.
FIRST DIVISION
[G.R. No. 119255. April 9, 2003]
TOMAS K. CHUA, petitioner, vs. COURT OF APPEALS and ENCARNACION VALDES-CHOY,
respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for review on certiorari seeking to reverse the decision[1] of the Court of
Appeals in an action for specific performance[2] filed in the Regional Trial Court[3] by petitioner
Tomas K. Chua (Chua) against respondent Encarnacion Valdes-Choy (Valdes-Choy). Chua
sought to compel Valdes-Choy to consummate the sale of her paraphernal house and lot in
Makati City. The Court of Appeals reversed the decision[4] rendered by the trial court in favor of
Chua.
The Facts
Valdes-Choy advertised for sale her paraphernal house and lot (Property) with an area of 718
square meters located at No. 40 Tampingco Street corner Hidalgo Street, San Lorenzo Village,
Makati City. The Property is covered by Transfer Certificate of Title No. 162955 (TCT) issued by
the Register of Deeds of Makati City in the name of Valdes-Choy. Chua responded to the
advertisement. After several meetings, Chua and Valdes-Choy agreed on a purchase price of
P10,800,000.00 payable in cash.
On 30 June 1989, Valdes-Choy received from Chua a check for P100,000.00. The receipt
(Receipt) evidencing the transaction, signed by Valdes-Choy as seller, and Chua as buyer,
reads:
30 June 1989
RECEIPT
RECEIVED from MR. TOMAS K. CHUA PBCom Check No. 206011 in the amount of ONE
HUNDRED THOUSAND PESOS ONLY (P100,000.00) as EARNEST MONEY for the sale of the
property located at 40 Tampingco cor. Hidalgo, San Lorenzo Village, Makati, Metro Manila (Area
: 718 sq. meters).
The balance of TEN MILLION SEVEN HUNDRED THOUSAND (P10,700,000.00) is payable on
or before 15[5] July 1989. Capital Gains Tax for the account of the seller. Failure to pay balance
on or before 15 July 1989 forfeits the earnest money. This provided that all papers are in proper
order.[6]
CONFORME: ENCARNACION VALDES
Seller
TOMAS K. CHUA
Buyer
x x x.[7]
In the morning of 13 July 1989, Chua secured from Philippine Bank of Commerce (PBCom) a
managers check for P480,000.00. Strangely, after securing the managers check, Chua
immediately gave PBCom a verbal stop payment order claiming that this managers check for
P480,000.00 was lost and/or misplaced.[8] On the same day, after receipt of Chuas verbal order,
PBCom Assistant VicePresident Julie C. Pe notified in writing[9] the PBCom Operations Group
of Chuas stop payment order.
In the afternoon of 13 July 1989, Chua and Valdes-Choy met with their respective counsels to
execute the necessary documents and arrange the payments.[10] Valdes-Choy as vendor and
Chua as vendee signed two Deeds of Absolute Sale (Deeds of Sale). The first Deed of Sale
covered the house and lot for the purchase price of P8,000,000.00.[11] The second Deed of
Sale covered the furnishings, fixtures and movable properties contained in the house for the
purchase price of P2,800,000.00.[12] The parties also computed the capital gains tax to amount
to P485,000.00.
On 14 July 1989, the parties met again at the office of Valdes-Choys counsel. Chua handed to
Valdes-Choy the PBCom managers check for P485,000.00 so Valdes-Choy could pay the
capital gains tax as she did not have sufficient funds to pay the tax. Valdes-Choy issued a
receipt showing that Chua had a remaining balance of P10,215,000.00 after deducting the
advances made by Chua. This receipt reads:
July 14, 1989
Received from MR. TOMAS K. CHUA PBCom. Check No. 325851 in the amount of FOUR
HUNDRED EIGHTY FIVE THOUSAND PESOS ONLY (P485,000.00) as Partial Payment for the
sale of the property located at 40 Tampingco Cor. Hidalgo St., San Lorenzo Village, Makati,
Metro Manila (Area 718 sq. meters), covered by TCT No. 162955 of the Registry of Deeds of
Makati, Metro Manila.
The total purchase price of the above-mentioned property is TEN MILLION EIGHT HUNDRED
THOUSAND PESOS only, broken down as follows:
SELLING PRICE P10,800,000.00
EARNEST MONEY P100,000.00
PARTIAL PAYMENT 485,000.00
____________________585,000.00
BALANCE DUE TO
ENCARNACION VALDEZ-CHOY P10,215,000.00
VVVVVVVVVVVV
PLUS P80,000.00 for documentary
stamps paid in advance by seller ___80,000.00
P10,295,000.00
x x x.[13]
On the same day, 14 July 1989, Valdes-Choy, accompanied by Chua, deposited the
P485,000.00 managers check to her account with Traders Royal Bank. She then purchased a
Traders Royal Bank managers check for P480,000.00 payable to the Commissioner of Internal
Revenue for the capital gains tax. Valdes-Choy and Chua returned to the office of Valdes-Choys
counsel and handed the Traders Royal Bank check to the counsel who undertook to pay the
capital gains tax. It was then also that Chua showed to Valdes-Choy a PBCom managers check
for P10,215,000.00 representing the balance of the purchase price. Chua, however, did not give
this PBCom managers check to Valdes-Choy because the TCT was still registered in the name
of Valdes-Choy. Chua required that the Property be registered first in his name before he would
turn over the check to Valdes-Choy. This angered Valdes-Choy who tore up the Deeds of Sale,
claiming that what Chua required was not part of their agreement.[14]
On the same day, 14 July 1989, Chua confirmed his stop payment order by submitting to
PBCom an affidavit of loss[15] of the PBCom Managers Check for P480,000.00. PBCom
Assistant Vice-President Pe, however, testified that the managers check was nevertheless
honored because Chua subsequently verbally advised the bank that he was lifting the stop-
payment order due to his special arrangement with the bank.[16]
On 15 July 1989, the deadline for the payment of the balance of the purchase price, Valdes-
Choy suggested to her counsel that to break the impasse Chua should deposit in escrow the
P10,215,000.00 balance.[17] Upon such deposit, Valdes-Choy was willing to cause the issuance
of a new TCT in the name of Chua even without receiving the balance of the purchase price.
Valdes-Choy believed this was the only way she could protect herself if the certificate of title is
transferred in the name of the buyer before she is fully paid. Valdes-Choys counsel promised to
relay her suggestion to Chua and his counsel, but nothing came out of it.
On 17 July 1989, Chua filed a complaint for specific performance against Valdes-Choy which the
trial court dismissed on 22 November 1989. On 29 November 1989, Chua re-filed his complaint
for specific performance with damages. After trial in due course, the trial court rendered
judgment in favor of Chua, the dispositive portion of which reads:
Applying the provisions of Article 1191 of the new Civil Code, since this is an action for specific
performance where the plaintiff, as vendee, wants to pursue the sale, and in order that the fears
of the defendant may be allayed and still have the sale materialize, judgment is hereby
rendered:
I. 1. Ordering the defendant to deliver to the Court not later than five (5) days from finality of this
decision:
a. the owners duplicate copy of TCT No. 162955 registered in her name;
b. the covering tax declaration and the latest tax receipt evidencing payment of real estate taxes;
c. the two deeds of sale prepared by Atty. Mark Bocobo on July 13, 1989, duly executed by
defendant in favor of the plaintiff, whether notarized or not; and
2. Within five (5) days from compliance by the defendant of the above, ordering the plaintiff to
deliver to the Branch Clerk of Court of this Court the sum of P10,295,000.00 representing the
balance of the consideration (with the sum of P80,000.00 for stamps already included);
3. Ordering the Branch Clerk of this Court or her duly authorized representative:
a. to make representations with the BIR for the payment of capital gains tax for the sale of the
house and lot (not to include the fixtures) and to pay the same from the funds deposited with her;
b. to present the deed of sale executed in favor of the plaintiff, together with the owners
duplicate copy of TCT No. 162955, real estate tax receipt and proof of payment of capital gains
tax, to the Makati Register of Deeds;
c. to pay the required registration fees and stamps (if not yet advanced by the defendant) and if
needed update the real estate taxes all to be taken from the funds deposited with her; and
d. surrender to the plaintiff the new Torrens title over the property;
4. Should the defendant fail or refuse to surrender the two deeds of sale over the property and
the fixtures that were prepared by Atty. Mark Bocobo and executed by the parties, the Branch
Clerk of Court of this Court is hereby authorized and empowered to prepare, sign and execute
the said deeds of sale for and in behalf of the defendant;
5. Ordering the defendant to pay to the plaintiff;
a. the sum of P100,000.00 representing moral and compensatory damages for the plaintiff; and
b. the sum of P50,000.00 as reimbursement for plaintiffs attorneys fees and cost of litigation.
6. Authorizing the Branch Clerk of Court of this Court to release to the plaintiff, to be taken from
the funds said plaintiff has deposited with the Court, the amounts covered at paragraph 5 above;
7. Ordering the release of the P10,295,000.00 to the defendant after deducting therefrom the
following amounts:
a. the capital gains tax paid to the BIR;
b. the expenses incurred in the registration of the sale, updating of real estate taxes, and
transfer of title; and
c. the amounts paid under this judgment to the plaintiff.
8. Ordering the defendant to surrender to the plaintiff or his representatives the premises with
the furnishings intact within seventy-two (72) hours from receipt of the proceeds of the sale;
9. No interest is imposed on the payment to be made by the plaintiff because he had always
been ready to pay the balance and the premises had been used or occupied by the defendant
for the duration of this case.
II. In the event that specific performance cannot be done for reasons or causes not attributable
to the plaintiff, judgment is hereby rendered ordering the defendant:
1. To refund to the plaintiff the earnest money in the sum of P100,000.00, with interest at the
legal rate from June 30, 1989 until fully paid;
2. To refund to the plaintiff the sum of P485,000.00 with interest at the legal rate from July 14,
1989 until fully paid;
3. To pay to the plaintiff the sum of P700,000.00 in the concept of moral damages and the
additional sum of P300,000.00 in the concept of exemplary damages; and
4. To pay to the plaintiff the sum of P100,000.00 as reimbursement of attorneys fees and cost of
litigation.
SO ORDERED.[18]
Valdes-Choy appealed to the Court of Appeals which reversed the decision of the trial court. The
Court of Appeals handed down a new judgment, disposing as follows:
WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE, and another
one is rendered:
(1) Dismissing Civil Case No. 89-5772;
(2) Declaring the amount of P100,000.00, representing earnest money as forfeited in favor of
defendant-appellant;
(3) Ordering defendant-appellant to return/refund the amount of P485,000.00 to plaintiff-appellee
without interest;
(4) Dismissing defendant-appellants compulsory counter-claim; and
(5) Ordering the plaintiff-appellee to pay the costs.[19]
Hence, the instant petition.
The Trial Courts Ruling
The trial court found that the transaction reached an impasse when Valdes-Choy wanted to be
first paid the full consideration before a new TCT covering the Property is issued in the name of
Chua. On the other hand, Chua did not want to pay the consideration in full unless a new TCT is
first issued in his name. The trial court faulted Valdes-Choy for this impasse.
The trial court held that the parties entered into a contract to sell on 30 June 1989, as evidenced
by the Receipt for the P100,000.00 earnest money. The trial court pointed out that the contract
to sell was subject to the following conditions: (1) the balance of P10,700,000.00 was payable
not later than 15 July 1989; (2) Valdes-Choy may stay in the Property until 13 August 1989; and
(3) all papers must be in proper order before full payment is made.
The trial court held that Chua complied with the terms of the contract to sell. Chua showed that
he was prepared to pay Valdes-Choy the consideration in full on 13 July 1989, two days before
the deadline of 15 July 1989. Chua even added P80,000.00 for the documentary stamp tax. He
purchased from PBCom two managers checks both payable to Valdes-Choy. The first check for
P485,000.00 was to pay the capital gains tax. The second check for P10,215,000.00 was to pay
the balance of the purchase price. The trial court was convinced that Chua demonstrated his
capacity and readiness to pay the balance on 13 July 1989 with the production of the PBCom
managers check for P10,215,000.00.
On the other hand, the trial court found that Valdes-Choy did not perform her correlative
obligation under the contract to sell to put all the papers in order. The trial court noted that as of
14 July 1989, the capital gains tax had not been paid because Valdes-Choys counsel who was
suppose to pay the tax did not do so. The trial court declared that Valdes-Choy was in a position
to deliver only the owners duplicate copy of the TCT, the signed Deeds of Sale, the tax
declarations, and the latest realty tax receipt. The trial court concluded that these documents
were all useless without the Bureau of Internal Revenue receipt evidencing full payment of the
capital gains tax which is a pre-requisite to the issuance of a new certificate of title in Chuas
name.
The trial court held that Chuas non-payment of the balance of P10,215,000.00 on the agreed
date was due to Valdes-Choys fault.
The Court of Appeals Ruling
In reversing the trial court, the Court of Appeals ruled that Chuas stance to pay the full
consideration only after the Property is registered in his name was not the agreement of the
parties. The Court of Appeals noted that there is a whale of difference between the phrases all
papers are in proper order as written on the Receipt, and transfer of title as demanded by Chua.
Contrary to the findings of the trial court, the Court of Appeals found that all the papers were in
order and that Chua had no valid reason not to pay on the agreed date. Valdes-Choy was in a
position to deliver the owners duplicate copy of the TCT, the signed Deeds of Sale, the tax
declarations, and the latest realty tax receipt. The Property was also free from all liens and
encumbrances.
The Court of Appeals declared that the trial court erred in considering Chuas showing to Valdes-
Choy of the PBCom managers check for P10,215,000.00 as compliance with Chuas obligation
to pay on or before 15 July 1989. The Court of Appeals pointed out that Chua did not want to
give up the check unless the property was already in his name.[20] Although Chua
demonstrated his capacity to pay, this could not be equated with actual payment which he
refused to do.
The Court of Appeals did not consider the non-payment of the capital gains tax as failure by
Valdes-Choy to put the papers in proper order. The Court of Appeals explained that the payment
of the capital gains tax has no bearing on the validity of the Deeds of Sale. It is only after the
deeds are signed and notarized can the final computation and payment of the capital gains tax
be made.
The Issues
In his Memorandum, Chua raises the following issues:
1. WHETHER THERE IS A PERFECTED CONTRACT OF SALE OF IMMOVABLE PROPERTY;
2. WHETHER VALDES-CHOY MAY RESCIND THE CONTRACT IN CONTROVERSY
WITHOUT OBSERVING THE PROVISIONS OF ARTICLE 1592 OF THE NEW CIVIL CODE;
3. WHETHER THE WITHHOLDING OF PAYMENT OF THE BALANCE OF THE PURCHASE
PRICE ON THE PART OF CHUA (AS VENDEE) WAS JUSTIFIED BY THE CIRCUMSTANCES
OBTAINING AND MAY NOT BE RAISED AS GROUND FOR THE AUTOMATIC RESCISSION
OF THE CONTRACT OF SALE;
4. WHETHER THERE IS LEGAL AND FACTUAL BASIS FOR THE COURT OF APPEALS TO
DECLARE THE EARNEST MONEY IN THE AMOUNT OF P100,000.00 AS FORFEITED IN
FAVOR OF VALDES-CHOY;
5. WHETHER THE TRIAL COURTS JUDGMENT IS IN ACCORD WITH LAW, REASON AND
EQUITY DESERVING OF BEING REINSTATED AND AFFIRMED.[21]
The issues for our resolution are: (a) whether the transaction between Chua and Valdes-Choy is
a perfected contract of sale or a mere contract to sell, and (b) whether Chua can compel Valdes-
Choy to cause the issuance of a new TCT in Chuas name even before payment of the full
purchase price.
The Courts Ruling
The petition is bereft of merit.
There is no dispute that Valdes-Choy is the absolute owner of the Property which is registered in
her name under TCT No.162955, free from all liens and encumbrances. She was ready, able
and willing to deliver to Chua the owners duplicate copy of the TCT, the signed Deeds of Sale,
the tax declarations, and the latest realty tax receipt. There is also no dispute that on 13 July
1989, Valdes-Choy received PBCom Check No. 206011 for P100,000.00 as earnest money from
Chua. Likewise, there is no controversy that the Receipt for the P100,000.00 earnest money
embodied the terms of the binding contract between Valdes-Choy and Chua.
Further, there is no controversy that as embodied in the Receipt, Valdes-Choy and Chua agreed
on the following terms: (1) the balance of P10,215,000.00 is payable on or before 15 July 1989;
(2) the capital gains tax is for the account of Valdes-Choy; and (3) if Chua fails to pay the
balance of P10,215,000.00 on or before 15 July 1989, Valdes-Choy has the right to forfeit the
earnest money, provided that all papers are in proper order. On 13 July 1989, Chua gave
Valdes-Choy the PBCom managers check for P485,000.00 to pay the capital gains tax.
Both the trial and appellate courts found that the balance of P10,215,000.00 was not actually
paid to Valdes-Choy on the agreed date. On 13 July 1989, Chua did show to Valdes-Choy the
PBCom managers check for P10,215,000.00, with Valdes-Choy as payee. However, Chua
refused to give this check to Valdes-Choy until a new TCT covering the Property is registered in
Chuas name. Or, as the trial court put it, until there is proof of payment of the capital gains tax
which is a pre-requisite to the issuance of a new certificate of title.
First and Second Issues: Contract of Sale or Contract to Sell?
Chua has consistently characterized his agreement with Valdez-Choy, as evidenced by the
Receipt, as a contract to sell and not a contract of sale. This has been Chuas persistent
contention in his pleadings before the trial and appellate courts.
Chua now pleads for the first time that there is a perfected contract of sale rather than a contract
to sell. He contends that there was no reservation in the contract of sale that Valdes-Choy shall
retain title to the Property until after the sale. There was no agreement for an automatic
rescission of the contract in case of Chuas default. He argues for the first time that his payment
of earnest money and its acceptance by Valdes-Choy precludes the latter from rejecting the
binding effect of the contract of sale. Thus, Chua claims that Valdes-Choy may not validly
rescind the contract of sale without following Article 1592[22] of the Civil Code which requires
demand, either judicially or by notarial act, before rescission may take place.
Chuas new theory is not well taken in light of well-settled jurisprudence. An issue not raised in
the court below cannot be raised for the first time on appeal, as this is offensive to the basic
rules of fair play, justice and due process.[23] In addition, when a party deliberately adopts a
certain theory, and the case is tried and decided on that theory in the court below, the party will
not be permitted to change his theory on appeal. To permit him to change his theory will be
unfair to the adverse party.[24]
Nevertheless, in order to put to rest all doubts on the matter, we hold that the agreement
between Chua and Valdes-Choy, as evidenced by the Receipt, is a contract to sell and not a
contract of sale. The distinction between a contract of sale and contract to sell is well-settled:
In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing
sold; in a contract to sell, ownership is, by agreement, reserved in the vendor and is not to pass
to the vendee until full payment of the purchase price. Otherwise stated, in a contract of sale, the
vendor loses ownership over the property and cannot recover it until and unless the contract is
resolved or rescinded; whereas, in a contract to sell, title is retained by the vendor until full
payment of the price. In the latter contract, payment of the price is a positive suspensive
condition, failure of which is not a breach but an event that prevents the obligation of the vendor
to convey title from becoming effective.[25]
A perusal of the Receipt shows that the true agreement between the parties was a contract to
sell. Ownership over the Property was retained by Valdes-Choy and was not to pass to Chua
until full payment of the purchase price.

First, the Receipt provides that the earnest money shall be forfeited in case the buyer fails to pay
the balance of the purchase price on or before 15 July 1989. In such event, Valdes-Choy can
sell the Property to other interested parties. There is in effect a right reserved in favor of Valdes-
Choy not to push through with the sale upon Chuas failure to remit the balance of the purchase
price before the deadline. This is in the nature of a stipulation reserving ownership in the seller
until full payment of the purchase price. This is also similar to giving the seller the right to rescind
unilaterally the contract the moment the buyer fails to pay within a fixed period.[26]
Second, the agreement between Chua and Valdes-Choy was embodied in a receipt rather than
in a deed of sale, ownership not having passed between them. The signing of the Deeds of Sale
came later when Valdes-Choy was under the impression that Chua was about to pay the
balance of the purchase price. The absence of a formal deed of conveyance is a strong
indication that the parties did not intend immediate transfer of ownership, but only a transfer after
full payment of the purchase price.[27]
Third, Valdes-Choy retained possession of the certificate of title and all other documents relative
to the sale. When Chua refused to pay Valdes-Choy the balance of the purchase price, Valdes-
Choy also refused to turn-over to Chua these documents.[28] These are additional proof that the
agreement did not transfer to Chua, either by actual or constructive delivery, ownership of the
Property.[29]
It is true that Article 1482 of the Civil Code provides that [W]henever earnest money is given in a
contract of sale, it shall be considered as part of the price and proof of the perfection of the
contract. However, this article speaks of earnest money given in a contract of sale. In this case,
the earnest money was given in a contract to sell. The Receipt evidencing the contract to sell
stipulates that the earnest money is a forfeitable deposit, to be forfeited if the sale is not
consummated should Chua fail to pay the balance of the purchase price. The earnest money
forms part of the consideration only if the sale is consummated upon full payment of the
purchase price. If there is a contract of sale, Valdes-Choy should have the right to compel Chua
to pay the balance of the purchase price. Chua, however, has the right to walk away from the
transaction, with no obligation to pay the balance, although he will forfeit the earnest money.
Clearly, there is no contract of sale. The earnest money was given in a contract to sell, and thus
Article 1482, which speaks of a contract of sale, is not applicable.
Since the agreement between Valdes-Choy and Chua is a mere contract to sell, the full payment
of the purchase price partakes of a suspensive condition. The non-fulfillment of the condition
prevents the obligation to sell from arising and ownership is retained by the seller without further
remedies by the buyer.[30] Article 1592 of the Civil Code permits the buyer to pay, even after the
expiration of the period, as long as no demand for rescission of the contract has been made
upon him either judicially or by notarial act. However, Article 1592 does not apply to a contract to
sell where the seller reserves the ownership until full payment of the price.[31]
Third and Fourth Issues: Withholding of Payment of the Balance
of the Purchase Price and Forfeiture of the Earnest Money
Chua insists that he was ready to pay the balance of the purchase price but withheld payment
because Valdes-Choy did not fulfill her contractual obligation to put all the papers in proper
order. Specifically, Chua claims that Valdes-Choy failed to show that the capital gains tax had
been paid after he had advanced the money for its payment. For the same reason, he contends
that Valdes-Choy may not forfeit the earnest money even if he did not pay on time.
There is a variance of interpretation on the phrase all papers are in proper order as written in the
Receipt. There is no dispute though, that as long as the papers are in proper order, Valdes-Choy
has the right to forfeit the earnest money if Chua fails to pay the balance before the deadline.
The trial court interpreted the phrase to include payment of the capital gains tax, with the Bureau
of Internal Revenue receipt as proof of payment. The Court of Appeals held otherwise. We quote
verbatim the ruling of the Court of Appeals on this matter:
The trial court made much fuss in connection with the payment of the capital gains tax, of which
Section 33 of the National Internal Revenue Code of 1977, is the governing provision insofar as
its computation is concerned. The trial court failed to consider Section 34-(a) of the said Code,
the last sentence of which provides, that [t]he amount realized from the sale or other disposition
of property shall be the sum of money received plus the fair market value of the property (other
than money) received; and that the computation of the capital gains tax can only be finally
assessed by the Commission on Internal Revenue upon the presentation of the Deeds of
Absolute Sale themselves, without which any premature computation of the capital gains tax
becomes of no moment. At any rate, the computation and payment of the capital gains tax has
no bearing insofar as the validity and effectiveness of the deeds of sale in question are
concerned, because it is only after the contracts of sale are finally executed in due form and
have been duly notarized that the final computation of the capital gains tax can follow as a
matter of course. Indeed, exhibit D, the PBC Check No. 325851, dated July 13, 1989, in the
amount of P485,000.00, which is considered as part of the consideration of the sale, was
deposited in the name of appellant, from which she in turn, purchased the corresponding check
in the amount representing the sum to be paid for capital gains tax and drawn in the name of the
Commissioner of Internal Revenue, which then allayed any fear or doubt that that amount would
not be paid to the Government after all.[32]
We see no reason to disturb the ruling of the Court of Appeals.
In a contract to sell, the obligation of the seller to sell becomes demandable only upon the
happening of the suspensive condition. In this case, the suspensive condition is the full payment
of the purchase price by Chua. Such full payment gives rise to Chuas right to demand the
execution of the contract of sale.
It is only upon the existence of the contract of sale that the seller becomes obligated to transfer
the ownership of the thing sold to the buyer. Article 1458 of the Civil Code defines a contract of
sale as follows:
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.
x x x. (Emphasis supplied)
Prior to the existence of the contract of sale, the seller is not obligated to transfer ownership to
the buyer, even if there is a contract to sell between them. It is also upon the existence of the
contract of sale that the buyer is obligated to pay the purchase price to the seller. Since the
transfer of ownership is in exchange for the purchase price, these obligations must be
simultaneously fulfilled at the time of the execution of the contract of sale, in the absence of a
contrary stipulation.
In a contract of sale, the obligations of the seller are specified in Article 1495 of the Civil Code,
as follows:
Art. 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant the
thing which is the object of the sale. (Emphasis supplied)
The obligation of the seller is to transfer to the buyer ownership of the thing sold. In the sale of
real property, the seller is not obligated to transfer in the name of the buyer a new certificate of
title, but rather to transfer ownership of the real property. There is a difference between transfer
of the certificate of title in the name of the buyer, and transfer of ownership to the buyer. The
buyer may become the owner of the real property even if the certificate of title is still registered in
the name of the seller. As between the seller and buyer, ownership is transferred not by the
issuance of a new certificate of title in the name of the buyer but by the execution of the
instrument of sale in a public document.
In a contract of sale, ownership is transferred upon delivery of the thing sold. As the noted civil
law commentator Arturo M. Tolentino explains it, -
Delivery is not only a necessary condition for the enjoyment of the thing, but is a mode of
acquiring dominion and determines the transmission of ownership, the birth of the real right. The
delivery, therefore, made in any of the forms provided in articles 1497 to 1505 signifies that the
transmission of ownership from vendor to vendee has taken place. The delivery of the thing
constitutes an indispensable requisite for the purpose of acquiring ownership. Our law does not
admit the doctrine of transfer of property by mere consent; the ownership, the property right, is
derived only from delivery of the thing. x x x.[33] (Emphasis supplied)
In a contract of sale of real property, delivery is effected when the instrument of sale is executed
in a public document. When the deed of absolute sale is signed by the parties and notarized,
then delivery of the real property is deemed made by the seller to the buyer. Article 1498 of the
Civil Code provides that
Art. 1498. When the sale is made through a public instrument, the execution thereof shall be
equivalent to the delivery of the thing which is the object of the contract, if from the deed the
contrary does not appear or cannot clearly be inferred.
x x x.
Similarly, in a contract to sell real property, once the seller is ready, able and willing to sign the
deed of absolute sale before a notary public, the seller is in a position to transfer ownership of
the real property to the buyer. At this point, the seller complies with his undertaking to sell the
real property in accordance with the contract to sell, and to assume all the obligations of a
vendor under a contract of sale pursuant to the relevant articles of the Civil Code. In a contract
to sell, the seller is not obligated to transfer ownership to the buyer. Neither is the seller
obligated to cause the issuance of a new certificate of title in the name of the buyer. However,
the seller must put all his papers in proper order to the point that he is in a position to transfer
ownership of the real property to the buyer upon the signing of the contract of sale.
In the instant case, Valdes-Choy was in a position to comply with all her obligations as a seller
under the contract to sell. First, she already signed the Deeds of Sale in the office of her counsel
in the presence of the buyer. Second, she was prepared to turn-over the owners duplicate of the
TCT to the buyer, along with the tax declarations and latest realty tax receipt. Clearly, at this
point Valdes-Choy was ready, able and willing to transfer ownership of the Property to the buyer
as required by the contract to sell, and by Articles 1458 and 1495 of the Civil Code to
consummate the contract of sale.
Chua, however, refused to give to Valdes-Choy the PBCom managers check for the balance of
the purchase price. Chua imposed the condition that a new TCT should first be issued in his
name, a condition that is found neither in the law nor in the contract to sell as evidenced by the
Receipt. Thus, at this point Chua was not ready, able and willing to pay the full purchase price
which is his obligation under the contract to sell. Chua was also not in a position to assume the
principal obligation of a vendee in a contract of sale, which is also to pay the full purchase price
at the agreed time. Article 1582 of the Civil Code provides that
Art. 1582. The vendee is bound to accept delivery and to pay the price of the thing sold at the
time and place stipulated in the contract.
x x x. (Emphasis supplied)
In this case, the contract to sell stipulated that Chua should pay the balance of the purchase
price on or before 15 July 1989. The signed Deeds of Sale also stipulated that the buyer shall
pay the balance of the purchase price upon signing of the deeds. Thus, the Deeds of Sale, both
signed by Chua, state as follows:
Deed of Absolute Sale covering the lot:
xxx
For and in consideration of the sum of EIGHT MILLION PESOS (P8,000,000.00), Philippine
Currency, receipt of which in full is hereby acknowledged by the VENDOR from the VENDEE,
the VENDOR sells, transfers and conveys unto the VENDEE, his heirs, successors and assigns,
the said parcel of land, together with the improvements existing thereon, free from all liens and
encumbrances.[34] (Emphasis supplied)
Deed of Absolute Sale covering the furnishings:
xxx
For and in consideration of the sum of TWO MILLION EIGHT HUNDRED THOUSAND PESOS
(P2,800,000.00), Philippine Currency, receipt of which in full is hereby acknowledged by the
VENDOR from the VENDEE, the VENDOR sells, transfers and conveys unto the VENDEE, his
heirs, successors and assigns, the said furnitures, fixtures and other movable properties
thereon, free from all liens and encumbrances.[35] (Emphasis supplied)
However, on the agreed date, Chua refused to pay the balance of the purchase price as
required by the contract to sell, the signed Deeds of Sale, and Article 1582 of the Civil Code.
Chua was therefore in default and has only himself to blame for the rescission by Valdes-Choy
of the contract to sell.
Even if measured under existing usage or custom, Valdes-Choy had all her papers in proper
order. Article 1376 of the Civil Code provides that:
Art. 1376. The usage or custom of the place shall be borne in mind in the interpretation of the
ambiguities of a contract, and shall fill the omission of stipulations which are ordinarily
established.
Customarily, in the absence of a contrary agreement, the submission by an individual seller to
the buyer of the following papers would complete a sale of real estate: (1) owners duplicate copy
of the Torrens title;[36] (2) signed deed of absolute sale; (3) tax declaration; and (3) latest realty
tax receipt. The buyer can retain the amount for the capital gains tax and pay it upon authority of
the seller, or the seller can pay the tax, depending on the agreement of the parties.
The buyer has more interest in having the capital gains tax paid immediately since this is a pre-
requisite to the issuance of a new Torrens title in his name. Nevertheless, as far as the
government is concerned, the capital gains tax remains a liability of the seller since it is a tax on
the sellers gain from the sale of the real estate. Payment of the capital gains tax, however, is not
a pre-requisite to the transfer of ownership to the buyer. The transfer of ownership takes effect
upon the signing and notarization of the deed of absolute sale.
The recording of the sale with the proper Registry of Deeds[37] and the transfer of the certificate
of title in the name of the buyer are necessary only to bind third parties to the transfer of
ownership.[38] As between the seller and the buyer, the transfer of ownership takes effect upon
the execution of a public instrument conveying the real estate.[39] Registration of the sale with
the Registry of Deeds, or the issuance of a new certificate of title, does not confer ownership on
the buyer. Such registration or issuance of a new certificate of title is not one of the modes of
acquiring ownership.[40]
In this case, Valdes-Choy was ready, able and willing to submit to Chua all the papers that
customarily would complete the sale, and to pay as well the capital gains tax. On the other hand,
Chuas condition that a new TCT be first issued in his name before he pays the balance of Republic of the Philippines
P10,215,000.00, representing 94.58% of the purchase price, is not customary in a sale of real SUPREME COURT
estate. Such a condition, not specified in the contract to sell as evidenced by the Receipt, cannot Manila
be considered part of the omissions of stipulations which are ordinarily established by usage or
custom.[41] What is increasingly becoming customary is to deposit in escrow the balance of the EN BANC
purchase price pending the issuance of a new certificate of title in the name of the buyer.
Valdes-Choy suggested this solution but unfortunately, it drew no response from Chua. G.R. No. 13203 September 18, 1918

Chua had no reason to fear being swindled. Valdes-Choy was prepared to turn-over to him the BEHN, MEYER & CO. (LTD.), plaintiff-appellant,
owners duplicate copy of the TCT, the signed Deeds of Sale, the tax declarations, and the latest vs.
realty tax receipt. There was no hindrance to paying the capital gains tax as Chua himself had TEODORO R. YANCO, defendant-appellee.
advanced the money to pay the same and Valdes-Choy had procured a managers check
payable to the Bureau of Internal Revenue covering the amount. It was only a matter of time Crossfield & O'Brien for appellant.
before the capital gains tax would be paid. Chua acted precipitately in filing the action for specific Charles C. Cohn for appellee.
performance a mere two days after the deadline of 15 July 1989 when there was an impasse.
While this case was dismissed on 22 November 1989, he did not waste any time in re-filing the MALCOLM, J.:
same on 29 November 1989.
The first inquiry to be determined is what was the contract between the parties.
Accordingly, since Chua refused to pay the consideration in full on the agreed date, which is a
suspensive condition, Chua cannot compel Valdes-Choy to consummate the sale of the The memorandum agreement executed by the duly authorized representatives of the parties to
Property. Article 1181 of the Civil Code provides that - this action reads:

ART. 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or Contract No. 37.
loss of those already acquired shall depend upon the happening of the event which constitutes
the condition. MANILA, 7 de marzo, de 1916.

Chua acquired no right to compel Valdes-Choy to transfer ownership of the Property to him Confirmanos haber vendido a Bazar Siglo XX, 80 drums Caustic Soda 76 per cent "Carabao"
because the suspensive condition - the full payment of the purchase price - did not happen. brand al precio de Dollar Gold Nine and 75/100 per 100-lbs., c.i.f. Manila, pagadero against
There is no correlative obligation on the part of Valdes-Choy to transfer ownership of the delivery of documents. Embarque March, 1916.
Property to Chua. There is also no obligation on the part of Valdes-Choy to cause the issuance
of a new TCT in the name of Chua since unless expressly stipulated, this is not one of the Comprador Bazar Siglo XX
obligations of a vendor. de Teodoro R. Yangco
J. Siquia
WHEREFORE, the Decision of the Court of Appeals in CA-G.R. CV No. 37652 dated 23
February 1995 is AFFIRMED in toto. Vendores
BEHN, MEYER & CO. (Ltd.)
SO ORDERED. O. LOMBECK.

This contract of sale can be analyzed into three component parts.

1. SUBJECT MATTER AND CONSIDERATION.

Facts. The contract provided for "80 drums Caustic Soda 76 per cent "Carabao" brand al
precio de Dollar Gold Nine and 75/100 1-lbs."

Resorting to the circumstances surrounding the agreement are we are permitted to do, in
pursuance of this provision, the merchandise was shipped from New York on the steamship
Chinese Prince. The steamship was detained by the British authorities at Penang, and part of
the cargo, including seventy-one drums of caustic soda, was removed. Defendant refused to
accept delivery of the remaining nine drums of soda on the ground that the goods were in bad
order. Defendant also refused the optional offer of the plaintiff, of waiting for the remainder of the
shipment until its arrival, or of accepting the substitution of seventy-one drums of caustic soda of
similar grade from plaintiff's stock. The plaintiff thereupon sold, for the account of the defendant,
eighty drums of caustic soda from which there was realized the sum of P6,352.89. Deducting
this sum from the selling price of P10,063.86, we have the amount claimed as damages for
alleged breach of the contract.
Law. It is sufficient to note that the specific merchandise was never tendered. The soda which
the plaintiff offered to defendant was not of the "Carabao" brand, and the offer of drums of soda
of another kind was not made within the time that a March shipment, according to another
provision the contract, would normally have been available.
2. PLACE OF DELIVERY.
Facts. The contract provided for "c.i.f. Manila, pagadero against delivery of documents."
Law. Determination of the place of delivery always resolves itself into a question of act. If the
contract be silent as to the person or mode by which the goods are to be sent, delivery by the
vendor to a common carrier, in the usual and ordinary course of business, transfers the property
to the vendee. A specification in a contact relative to the payment of freight can be taken to
indicate the intention of the parties in regard to the place of delivery. If the buyer is to pay the
freight, it is reasonable to suppose that he does so because the goods become his at the point
of shipment. On the other hand, if the seller is to pay the freight, the inference is equally so
strong that the duty of the seller is to have the goods transported to their ultimate destination and
that title to property does not pass until the goods have reached their destination. (See Williston
on Sales, PP. 406-408.)
The letters "c.i.f." found in British contracts stand for cost, insurance, and freight. They signify
that the price fixed covers not only the cost of the goods, but the expense of freight and
insurance to be paid by the seller. (Ireland vs. Livingston, L. R., 5 H. L., 395.) Our instant
contract, in addition to the letters "c.i.f.," has the word following, "Manila." Under such a contract,
an Australian case is authority for the proposition that no inference is permissible that a seller
was bound to deliver at the point of destination. (Bowden vs. Little, 4 Comm. [Australia], 1364.)
In mercantile contracts of American origin the letters "F.O.B." standing for the words "Free on
Board," are frequently used. The meaning is that the seller shall bear all expenses until the
goods are delivered where they are to be "F.O.B." According as to whether the goods are to be
delivered "F.O.B." at the point of shipment or at the point of destination determines the time
when property passes.
Both the terms "c.i.f." and "F.O.B." merely make rules of presumption which yield to proof of
contrary intention. As Benjamin, in his work on Sales, well says: "The question, at last, is one of
intent, to be ascertained by a consideration of all the circumstances." For instance, in a case of
Philippine origin, appealed to the United States Supreme Court, it was held that the sale was
complete on shipment, though the contract was for goods, "F.O.B. Manila," the place of
destination the other terms of the contract showing the intention to transfer the property. (United
States vs. R. P. Andrews & Co. [1907], 207 U.S., 229.)
With all due deference to the decision of the High Court of Australia, we believe that the word
Manila in conjunction with the letters "c.i.f." must mean that the contract price, covering costs,
insurance, and freight, signifies that delivery was to made at Manila. If the plaintiff company has
seriously thought that the place of delivery was New York and Not Manila, it would not have
gone to the trouble of making fruitless attempts to substitute goods for the merchandise named
in the contract, but would have permitted the entire loss of the shipment to fall upon the
defendant. Under plaintiffs hypothesis, the defendant would have been the absolute owner of
the specific soda confiscated at Penang and would have been indebted for the contract price of
the same.
This view is corroborated by the facts. The goods were not shipped nor consigned from New
York to plaintiff. The bill of lading was for goods received from Neuss Hesslein & Co. the
documents evidencing said shipment and symbolizing the property were sent by Neuss Hesslein
& Co. to the Bank of the Philippine Islands with a draft upon Behn, Meyer & Co. and with
instructions to deliver the same, and thus transfer the property to Behn, Meyer & Co. when and if
Behn, Meyer & Co. should pay the draft.
The place of delivery was Manila and plaintiff has not legally excused default in delivery of the
specified merchandise at that place.
3. TIME OF DELIVERY.
Facts. The contract provided for: "Embarque: March 1916," the merchandise was in fact
shipped from New York on the Steamship Chinese Prince on April 12, 1916.
Law. The previous discussion makes a resolution of this point unprofitable, although the
decision of the United States Supreme Court in Norrington vs. Wright (([1885], 115 U.S., 188)
can be read with profit. Appellant's second and third assignments of error could, if necessary, be
admitted, and still could not recover.
THE CONTRACT.
To answer the inquiry with which we begun this decision, the contract between the parties was
for 80 drums of caustic soda, 76 per cent "Carabao" brand, at the price of $9.75 per one
hundred pounds, cost, insurance, and freight included, to be shipped during March, 1916, to be
delivered to Manila and paid for on delivery of the documents.
PERFORMANCE.
In resume, we find that the plaintiff has not proved the performance on its part of the conditions
precedent in the contract. The warranty the material promise of the seller to the buyer has
not been complied with. The buyer may therefore rescind the contract of sale because of a
breach in substantial particulars going to the essence of the contract. As contemplated by article
1451 of the Civil Code, the vendee can demand fulfillment of the contract, and this being shown
to be impossible, is relieved of his obligation. There thus being sufficient ground for rescission,
the defendant is not liable.
The judgment of the trial court ordering that the plaintiff take nothing by its action, without special
finding as to costs, is affirmed, with the costs of this instance. Against the appellant. So ordered.
EN BANC
[G.R. No. L-8717. November 20, 1956.]
GENERAL FOODS CORPORATION, Plaintiff-Appellant, vs. NATIONAL COCONUT
CORPORATION,Defendant-Appellee.
DECISION
REYES, J. B. L., J.:
Appellant General Foods Corporation is a foreign corporation organized under the laws of the
State of Delaware, U. S. A., and licensed to do business in the Philippines; chan
roblesvirtualawlibrarywhile AppelleeNational Coconut Corporation (otherwise called NACOCO),
was, on the date of the transaction in question, a corporation created by Commonwealth Act No.
518, but later abolished and place in liquidation by Executive Order No. 3727 dated November
24, 1950.
On September 23, 1947, Appellee sold to Appellant 1,500 (later reduced to 1,000) long tons of
copra, at $164 (later reduced to $163) per ton of 2,000 pounds, under the following terms and
conditions:chanroblesvirtuallawlibrary
CONTRACT NO. RH-3551
FRANKLIN BAKER DIVISION OF GENERAL FOODS CORPORATION
15th & Bloomfield Streets
Hoboken, New Jersey
WE CONFIRM HAVING PURCHASED FOR YOU TODAY from Messrs. National Coconut
Corporation, Manila, Philippine Islands, through Mercantile, Inc., Manila, P. I.
COMMODITY:chanroblesvirtuallawlibrary COPRA Fair Merchantable Quality, Basis
6% F. F. A.
QUALITY:chanroblesvirtuallawlibrary As per rule 100 of National Institute of
 Oilseeds Products.
QUANTITY:chanroblesvirtuallawlibrary Fifteen Hundred (1500) tons of 2,240 pounds each.
Seller has the option of delivering 5 per cent more or less of the contracted quantity, such
surplus or deficiency to be settled as follows:chanroblesvirtuallawlibrary On the basis of the
delivered weight up to 3 per cent at the contract price and any excess or deficiency beyond
this 3 per cent at the market price of the day of arrival at port of discharge, this market price to
be fixed by the Executive Committee of the National Institute of Oilseeds Products. Each
shipment to be treated as a separate contract.
PACKING:chanroblesvirtuallawlibrary In bulk.
SHIPMENT:chanroblesvirtuallawlibrary November, 1947, earlier if possible, from Philippine
Islands.
PRICE:chanroblesvirtuallawlibrary One hundred and sixty-four dollars ($164) per ton of 2,000
pounds, CIF New York.
PAYMENT:chanroblesvirtuallawlibrary Buyers to open immediately by cable in favor of Sellers
Irrevocable Letter of Credit through the Philippine National Bank for 95 per cent of invoice
value based on shipping weight in exchange for the following
documents:chanroblesvirtuallawlibrary
1. Provisional Invoice.
2. Full set of negotiable ocean bills of lading, freight charges fully prepaid and showing the
material on board.
3. Weight Certificate confirming quantity shown on invoice and bill of lading.
4. Consular invoice or certificate of origin in duplicate.
5. Loading survey report and weight certificate of Superintendence Corporation.
6. Consular form No. 197 (Pure Food & Drug Certificate).
Balance due to be paid promptly upon ascertainment and based upon outturn weights and
quality at port of discharge.
WEIGHTS:chanroblesvirtuallawlibrary Net landed weights.
SAMPLING:chanroblesvirtuallawlibrary As per Rule 101 of National Institute of Oilseeds
Products.
INSURANCE:chanroblesvirtuallawlibrary Buyer to provide valid insurance for Marine and War
risks for 110 per cent of CIF contract value. Seller to allow buyer from the CIF price
an amount equivalent to the current rate of insurance prevailing on the date of shipment, in
lieu of sellers covering usual marine insurance themselves.
CLAUSE PARAMOUNT:chanroblesvirtuallawlibrary This contract is subject to published rules
of the National Institute of Oilseeds Products adopted and now in force, which are hereby
made a part hereof. Any dispute arising under this contract shall be settled by a Board of
Arbitrators selected by the Chairman of the Foreign Commerce Association of the San
Francisco Chamber of Commerce and to be judged according to the rules of the National
Institute of Oilseeds Products and the findings of said Board will be final and binding upon all
the signatories hereto, providing such rules are not in conflict with existing Government
regulations.
The above shipment to be made under Franklin Bakers license No. 26429. This contract covers
the sale made by the Nacoco thru the Mercantile, Inc. dated September 9, 1947 in the
Philippines. (Exhibit A). shipping documents, including full insurance, to draw upon the Defendants for 90 per cent of the
From November 14 to December 3, 1947, Appellee shipped 1054.6278 short tons of copra
toAppellant on board the S. S. Mindoro. The weighing of the cargo was done by the Luzon
Brokerage Co., in its capacity as agent of the General Superintendence Co., Ltd., of Geneva,
Switzerland, by taking the individual weight of each bag of copra and summing up the total gross
weight of the shipment, then weighing a certain number of empty bags to determine the average
tare of the empty bags, which was subtracted from the gross weight of the shipment to
determine the net weight of the cargo. On the strength of the net weigh thus
found, Appelleeprepared and remitted to Appellant the corresponding bills of lading and other
documents, and withdrew from the latters letter of credit 95 per cent of the invoice value of the
shipment, or a total of $136,686.95.
Upon arrival in New York, the net cargo was reweighed by Appellant and was found to weigh
only 898.792 short tons. Deducting from the value of the shortage the sum of $8,092.02 received
by Appellant from the insurer for 58.25 long tons lost or destroyed even before the copra was
loaded on board the vessel, Appellant demanded from Appellee the refund of the amount of
$24,154.59. Sometime after the receipt of Appellants demand, the Appellee, through its officers-
in-charge Jose Nieva, Sr., acknowledged in a letter liability for the deficiency in the outturn
weights of the copra and promised payment thereof as soon as funds were available (Exhibit
B). Then Appellee was, as already stated, abolished and went into
liquidation. Appellantsubmitted its claim to the Board of Liquidators, which refused to pay the
same; chan roblesvirtualawlibrarywherefore, it filed the present action in the Court of First
Instance of Manila to recover from Defendant-Appellee the amount of $24,154.49 and the 17 per
cent exchange tax thereon which, under the provisions of Republic Act 529, had to be paid in
order to remit said amount to the United States, plus attorneys fees and costs. The Court a quo
found for the Defendant and dismissed the complaint; chan roblesvirtualawlibraryhence, this
appeal by Plaintiff.
Plaintiff-Appellants theory is that although the sale between the parties quoted a CIF New York
price, the agreement contemplated the payment of the price according to the weight and quality
of the cargo upon arrival in New York, the port of destination, and that therefore, the risk of the
shipment was upon the seller. Defendant-Appellee, on the other hand, insists that the contract in
question was an ordinary C. I. F. agreement wherein delivery to the carrier is delivery to the
buyer, and that the shipment having been delivered to the buyer and the latter having paid its
price, the sale was consummated.
There is no question that under an ordinary C.I.F. agreement, delivery to the buyer is complete
upon delivery of the goods to the carrier and tender of the shipping and other documents
required by the contract and the insurance policy taken in the buyers behalf (77 C.J. S.
983; chan roblesvirtualawlibrary46 Am. Jur. 313; chan roblesvirtualawlibraryII Williston on Sales,
103 107). There is equally no question that the parties may, by express stipulation or
impliedly (by making the buyers obligation depend on arrival and inspection of the goods),
modify a CIF contract and throw the risk upon the seller until arrival in the port of destination (77
CJS 983- 984; chan roblesvirtualawlibraryWilliston, supra, 116; chan roblesvirtualawlibraryalso
Willits vs. Abekobei, 189 NYS 525; chan roblesvirtualawlibraryNational Wholesale Grocery Co.
vs. Mann. 146 NE 791, Klipstein vs. Dilsizian, 273 F 473).
In the transaction now in question, despite the quoted price of CIF New York, and the right of the
seller to withdraw 95 per cent of the invoice price from the buyers letter of credit upon tender of
the shipping and other documents required by the contract, the express agreement that the Net
Landed Weights were to govern, and the provision that the balance of the price was to be
ascertained on the basis of outturn weights and quality of the cargo at the port of discharge,
indicate an intention that the precise amount to be paid by the buyer depended upon the
ascertainment of the exact net weight of the cargo at the port of destination. That is furthermore
shown by the provision that the seller could deliver 5 per cent more or less than the contracted
quantity, such surplus or deficiency to be paid on the basis of the delivered weight.
In our opinion, the governing rule may be found in the decision of the Supreme Court of New
York in the case of Warner, Barnes & Co. vs. Warner Sugar R. Co., 192 NYS 151, cited
in Appellees brief (pp. 16-19.) In said case, the parties had expressly agreed that the payment
of the price was to be according to landed weights, and that delivery of the goods shipped from
the Philippine Islands to New York was to be in New York ex vessel at wharf; chan
roblesvirtualawlibrarybut it was also agreed that the seller had the right, upon presentation of full
invoice price, evidencing an intent to give the buyers dominion over the goods and to place the
risk of loss upon them. The reasonable construction given by the Court to this contract was
that:chanroblesvirtuallawlibrary
though the seller was required to deliver the goods at a customary wharf in New York, and the
price could not be finally determined until the goods were landed, yet the property in the goods
and the risk of loss was intended to pass when the full shipping documents were presented,
including an insurance policy. If the goods were totally lost, then by the express terms of the
contract the buyers were to pay the full amount of invoice and if the goods were partially lost,
then it is fairly inferable that, while payment was to be made according to landed weights, the
seller should not be deprived of the right to show that these landed weights were diminished by
loss or damage due to the risk of the voyage. Any other construction of the contract would
require the seller to provide insurance for the buyer for a loss which falls not on the buyer, but on
the seller. (Emphasis supplied.)
The same could be said in the instant case. While the risk of loss was apparently placed on
theAppellant after delivery of the cargo to the carrier, it was nevertheless agreed that the
payment of the price was to be according to the net landed weight. The net landed or outturn
weight of the cargo, upon arrival in New York, was 898.692 short tons. Although the evidence
shows that the estimated weight of the shipment when it left Manila was 1,054.6278 tons,
the Appelleehad the burden of proof to show that the shortage in weight upon arrival in New
York was due to risks of the voyage and not the natural drying up of the copra while in transit, or
to reasonable allowances for errors in the weighing of the gross cargo and the empty bags in
Manila. In the absence of such proof on the part of the shipper-Appellee, we are constrained to
hold that the net landed weight of the shipment in New York should control, as stipulated in the
agreement, and that therefore, the Appellee should be held liable for the amount of $24,154.59
which it had overdrawn from Appellants letter of credit.
Appellee contends that as it was only the balance due to be paid that was to be ascertained
and based upon outturn weights and quality at port of discharge, as provided in the contract,
there was no more balance due to be ascertained at the port of discharge because it had
already received full payment of the copra it sent to the Appellant when it withdrew $136,686.95
from the latters letter of credit. The argument is untenable. The provision regarding the
ascertainment of the balance due based upon outturn weight and quality of the shipment at the
port of discharge, should not be construed separately from the stipulation that the net landed
weight was to control. The manifest intention of the parties was for the total price to be finally
ascertained only upon determining the net weight and quality of the goods upon arrival in New
York, most likely because the cargo in question, being copra, by nature dries up and diminishes
in weight during the voyage; chan roblesvirtualawlibrarythat no bulk weigher was available in
Manila so that the best that could be done was to get the gross weight of the shipment and
deduct the average tare of the empty bags; chan roblesvirtualawlibraryand that the buyer in New
York had no agent in Manila to represent it and protect its interest during the weighing of the
cargo. The intention of the parties to be bound by the outturn or net landed weight in New York
is clearly shown in the letter of Appellees then officer-in-charge Jose Nieva, Sr., acknowledging
liability for the deficiency in the outturn weight of the copra (Exhibit B). Although this letter may
not be considered an admission of liability on the part of Appellee in the absence of a showing
that Nieva was authorized to admit liability for the corporation, it is nevertheless competent
evidence of the intention of the parties, particularly the NACOCO, to be bound by the net landed
weight or outturn weight of the copra at the port of discharge.
With respect to Appellants claim for damages equivalent to the 17 per cent excise tax which it
has to pay in order to remit the sum of $24,154.59 to the United States, such excise tax is no
longer imposed in view of the trade (Laurel-Langley) agreement, so that it need not be taken into
account.
Wherefore, the judgment appealed from is reversed and the Appellee National Coconut
Corporation is ordered to pay the Appellant General Foods Corporation the equivalent in
Philippine currency of the amount of $24,154.59, with legal interest from the time of the filing of
the complaint. No pronouncement as to costs. SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-38649 March 26, 1979
FACILITIES MANAGEMENT CORPORATION, J. S. DREYER, and J. V. CATUIRA,
petitioners,
vs.
LEONARDO DE LA ROSA AND THE HONORABLE COURT OF INDUSTRIAL RELATIONS,
respondents.
Sycip, Salazar, Feliciano & Associates for petitioners.
Benjamin M. Mendoza for respondent Court.
MAKASIAR, J:
Petition for review on certiorari of the decision of the Court of Industrial Relations, dated
February 14, 1972, ordering petitioners herein to pay private respondent Leonardo de la Osa his
overtime compensation, as wen as his swing shift and graveyard shift premiums at the rate of
fifty (50%) per cent of his basic sa (Annex E, p. 31, rollo).
The aforesaid decision was based on a report submitted by the Hearing Examiner, CIR
(Dagupan City Branch), the pertinent portions of which are quoted hereinbelow:::
In a petition filed on July 1, 1967, Leonardo dela Osa sought his reinstatement. with full
backwages, as well as the recovery of his overtime compensation, swing shift and graveyard
shift differentials. Petitioner alleged that he was employed by respondents as follows: (1) painter
with an hourly rate of $1.25 from March, 1964 to November, 1964, inclusive; (2) houseboy with
an hourly rate of $1.26 from December, 1964 to November, 1965, inclusive; (3) houseboy with
an hourly rate of $1.33 from December, 1965 to August, 1966, inclusive; and (4) cashier with an
hourly rate of $1.40 from August, 1966 to March 27, 1967, inclusive. He further averred that from
December, 1965 to August, 1966, inclusive, he rendered overtime services daily and that this
entire period was divided into swing and graveyard shifts to which he was assigned, but he was
not paid both overtime and night shift premiums despite his repeated demands from
respondents.
Respondents filed on August 7, 1967 their letter- answer without substantially denying the
material allegations of the basic petition but interposed the following special defenses, namely:
That respondents Facilities Management Corporation and J. S. Dreyer are domiciled in Wake
Island which is beyond the territorial jurisdiction of the Philippine Government; that respondent J.
V. Catuira, though an employee of respondent corporation presently stationed in Manila, is
without power and authority of legal representation; and that the employment contract between
petitioner and respondent corporation carries -the approval of the Department of Labor of the
Philippines.
Subsequently on May 3, 1968. respondents filed a motion to dismiss the subject petition on the
ground that this Court has no Jurisdiction over the instant case, and on May 24, 1968, petitioner
interposed an opposition thereto. Said motion was denied by this Court in its Order issued on
July 12, 1968 sustaining jurisdiction in accordance with the prevailing doctrine of the Supreme
Court in similar cases.
xxx xxx xxx
But before we consider and discuss the foregoing issues, let us first ascertain if this Court could
acquire jurisdiction over the case at bar, it having been contended by respondents that they are
domiciled in Wake Island which is beyond the territorial jurisdiction of the Philippine Government.
To this incidental question, it may be stated that while it is true the site of work is Identified as
Wake Island, it is equally true the place of hire is established in Manila (See Section B, Filipino
Employment Contract, Exhibit '1'). Moreover, what is important is the fact that the contract of
employment between the parties litigant was shown to have been originally executed and
subsequently renewed in Manila, as asserted by petitioner and not denied by respondents.
Hence, any dispute arising therefrom should necessarily be determined in the place or venue
where it was contracted.
xxx xxx xxx
From the evidence on hand, it has been proven beyond doubt that petitioner canvas assigned to
and performed work in respondent company at slight time which consisted of two different
schedules, namely, swing shift and graveyard shifts, particularly during his tenure as houseboy
for the second period and as cashier. Petitioner's testimony to this effect was not contradicted,
much less rebutted, by respondents, as revealed by the records. Since petitioner actually
rendered night time services as required by respondents, and considering the physical, moral
and sociological effects arising from the performance of such nocturnal duties, we think and
honestly believe that petitioner should be compensated at least fifty percent (50%) more than his
basic wage rate. This night shift premium pay would indeed be at par with the overtime
compensation stipulated at one and one-half (1 ) times of the straight time rate.
an office in this country, there exists no valid reason for me to participate in the continuation
and/or prosecution of this case (p. 194, rollo).
as if jurisdiction depends on the will of the parties to a case. At any rate, considering that
petitioner paid the claims of private respondent, the case had become moot and academic.
Besides, the fact of such payment amounts to an acknowledgment on the part of petitioner of the
jurisdiction of the court over it.
WE have also noted that the principal question involved in each of the above-numbered three (3)
cases is more or less Identical, to wit: Is the mere act by a non-resident foreign corporation of
recruiting Filipino workers for its own use abroad, in law doing business in the Philippines?
In the case at bar, which was filed with this Court on June 3, 1974, petitioners presented, inter
alia, the following issue: ... can the CIR validly affirm a judgment against persons domiciled
outside and not doing business in the Philippines, and over whom it did not acquire jurisdiction')
While it is true that the issues presented in the decided cases are worded differently from the
principal issue raised in the case at bar, the fact remains that they all boil down to one and the
same issue, which was aptly formulated and ably resolved by Mr. Justice Ramon C. Fernandez,
then with the Court of Appeals and now a member of this Court, in CA-G.R. No. SP-01485-R,
later elevated to this Court on appeal by certiorari in Case G.R. No. L-37117 this case, the
majority opinion of the Court of Appeals, which was penned by Justice Fernandez and which WE
hereby adopt, runs as follows:

xxx xxx xxx (pp. 31-36, rollo). The principal issue presented in this special civil action is whether petitioner has been 'doing
business in the Philippines' so that the service of summons upon its agent in the Philippines
Apropos before this Court were filed three (3) other cases involving the same petitioner, all of vested the Court of First Instance of Manila with jurisdiction.
which had been finally dispoded of, as follows:
From the facts of record, the petitioner may be considered as doing busuness un the Philippines
G.R. No Date of Filing Disposition within the the scope of Section 14, Rule 14 of the Rules of the Court which provide:

1. L-37117 July 30, 1973 Petition denied for SEC 14. Service upon private foreign corporations. If the defendant is a foreign corporation or a
lack of merit on Sept. non-resident joint stock company or association: doing business in the Philippines, service may
13, 1973. Motion for be made on its resident agent designated in accordance with law for that purpose or, if there be
Reconsideration no such agent, on the government official designated by law to that effect, or on any of its
denied lack of officers or agents within the Philippines.
merit, Nov. 20,1973.
Indeed, the petitioner, in compliance with Act 2486 as implemented by Department of Labor
2. L-38781 June 17,1974 Petition denied for Order No. IV dated May 20, 1968 had to appoint Jaime V. Catuira, 1322 A. Mabini, Ermita,
lack of merit on June Manila as agent for FMC with authority to execute Employment Contracts and receive, in behalf
21,1974. of that corporation, legal services from and be bound by processes of the Philippine Courts of
Justice, for as long as he remains an employee of FMC (Annex 'I', rollo, p. 56). It is a fact that
3. L-39111-12 Sept. 2,1974 Case dismissed on Feb. when the summons for the petitioner was served on Jaime V. Catuira he was still in the employ
6, 1976, pursuant to of the FMC.
voluntary manifesta
tion of private respon In his motion to dismiss Annex B', p. 19, Rollo), petitioner admits that Mr. Catuira represented it
dent Inocente R. Riel in this country 'for the purpose of making arrangements for the approval by the Department of
that his claims had all Labor of the employment of Filipinos who are recruited by the Company as its own employees
been settled to his entire for assignment abroad.' In effect, Mr. Catuira was a on officer representing petitioner in the
satisfaction. Philippines.

Incidentally, in connection with G.R. No. L-39111-12 (No. 3 above), WE found strong evidence Under the rules and regulations promulgated by the Board of Investments which took effect Feb.
that petitioner therein, which is also the petitioner in the case at bar, "twisted the arm" of private 3, 1969, implementing Rep. Act No. 5455, which took effect Sept. 30, 1968, the phrase 'doing
respondent, when the latter in his Manifestation dated July 3, 1975, stated: business' has been exemption with illustrations, among them being as follows:

3. ... Furthermore, since petitioner FMC is a foreign corporation domiciled in California, xxx xxx xxx
U.S.A. and has never been engaged in business in the Philippines, nor does it have an agent or
(f) the performance within the Philippines of any act or combination of acts enumerated in
section l(l) of the Act shall constitute 'doing business' therein. in particular, 'doing business
includes:
(1) Soliciting orders, purchases (sales) or service contracts. Concrete and specific
solicitations by a foreign firm, not acting independently of the foreign firm amounting to
negotiation or fixing of the terms and conditions of sales or service contracts, regardless of
whether the contracts are actually reduced to writing, shall constitute doing business even if the
enterprise has no office or fixed place of business in the Philippines. xxx
(2) Appointing a representative or distributor who is dociled in the Philippines, unless said
representative or distributor has an independent status, i.e., it transacts business in its name and
for its own account, and not in the name or for the account of the principal.
xxx xxx xxx
(4) Opening offices, whether called 'liaison'offices, agencies or branches, unless proved
otherwise.
xxx xxx xxx
(10) Any other act or acts that imply a continuity of commercial dealings or arrangements,
and contemplate to that extent the performance of acts or works, or the exercise of some of the
functions normally incident to, or in the progressive prosecution of, commercial gain or of the
purpose and objective of the business organization (54 O.G. 53).
Recently decided by this Court again thru Mr. Justice Ramon C. Fernandez which is
similar to the case at bar, is G.R. No. L-26809, entitled Aetna Casualty & Curety Company,
plaintiff- appellant versus Pacific Star Line, the Bradman Co., Inc., Manila Port Service and/or
Manila Railroad Company, Inc., defendants-appellees." The case is an appeal from the decision
of the Court of First Instance of Manila, Branch XVI, in its Civil Case No. 53074, entitled Aetna
Casualty & Surety Company vs. Pacific Star Lines, The Bradman Co., Inc., Manila Port Service
and/or Manila Railroad Company, Inc." dismissing the complaint on the ground that the plaintiff
has no legal capacity to bring the suit.
It appears that on February 11, 1963, Smith Bell & Co. (Philippines), Inc. and Aetna Casualty &
Surety Co., Inc., as subrogee instituted Civil Case No. 53074 in the Court of First Instance of
Manila against Pacific Star Line, The Bradman Co., Inc., Manila Port Service and/or Manila
Railroad Company, Inc. to recover the amount of US$2,300.00 representing the value of stolen
and damaged cargo plus litigation expenses and exemplary damages in the amounts of
P1,000.00 and P2,000.00, respectively, with legal interest thereon from the filing of the suit and
costs.
After all the defendants had filed their answer, the defendants Manila Port Service and Manila
Railroad Company, Inc. amended their answer to allege that the plaintiff, Aetna Casualty &
Surety Company, is a foreign corporation not duly licensed to do business in the Philippines and,
therefore, without capacity to sue and be sued.
After the parties submitted a partial stipulation of facts and additional documentary evidence, the
case was submitted for decision of the trial court, which dismissed the complaint on the ground
that the plaintiff insurance company is subject to the requirements of Sections 68 and 69 of Act
1459, as amended, and for its failure to comply therewith, it has no legal capacity to bring suit in
this jurisdiction. Plaintiff appealed to this Court.
The main issue involved in the appeal is whether or not the plaintiff appellant has been doing
business in the Philippines, considering the fact that it has no license to transact business in the
Philippines as a foreign corporation. WE ruled:
The object of Sections 68 and 69 of the Corporation Law was not to prevent the foreign
corporation from performing single acts, but to prevent it from acquiring a domicile for the
purpose of business without taking the steps necessary to render it amenable to suit in the local
courts. It was never the purpose of the Legislature to exclude a foreign corporation which
happens to obtain an isolated order for business from the Philippines, from securing redress in
the Philippine courts (Marshall Co. vs. Elser & Co., 46 Phil 70,75).
In Mentholatum Co., Inc., et al vs- M Court rules that-
No general rule or governing principle can be laid down as to what constitutes 'doing' or
'engaging in' or 'transacting' business. Indeed, each case must be judged in the light of its
peculiar environmental circumstances. The true test, however, seems to be whether the foreign
corporation is continuing the body or substance of the business or enterprise for which it was
organized or whether it has substantially retired from it and turned it over to another. (Traction
Cos. v. Collectors of Int Revenue [C.C.A Ohio], 223 F. 984, 987). The term implies a continuity
of commercial dealings and arrangements, and contemplates, to that extent, the performance of
acts or works or the exercise of some of the functions normally incident to, and in progressive
prosecution of, the purpose and object of its organization (Griffin v. Implement Dealers' Mut. Fire
Ins. Co., 241 N.W. 75, 77; Pauline Oil & Gas Co. v. Mutual Tank Line Co., 246 P. 851, 852, 118
Okl. III; Automotive Material Co. vs. American Standard Metal Products Corp., 158 N.E. 698,
703, 327 III. 367)'. 72 Phil. 524, 528-529.
And in Eastboard Navigation, Ltd., et al. vs. Juan Ysmael & Co., Inc., this Court held:
(d) While plaintiff is a foreign corporation without license to transact business in the
Philippines, it does not follow that it has no capacity to bring the present action. Such license is
not necessary because it is not engaged in business in the Philippines. In fact, the transaction
herein involved is the first business undertaken by plaintiff in the Philippines, although on a
previous occasion plaintiff's vessel was chartered by the National Rice and Corn Corporation to
carry rice cargo from abroad to the Philippines. These two isolated transactions do not constitute
engaging in business in the Philippines within the purview of Sections 68 and 69 of the
Corporation Law so as to bar plaintiff from seeking redress in our courts. (Marshall Wens Co. vs.
Henry W. Elser & Co. 49 Phil., 70; Pacific Vegetable Oil Corporation vs. Angel O. Singson, G.R.
No. L-7917, April 29, 1955)'. 102 Phil., pp. 1, 18.
Based on the rulings laid down in the foregoing cases, it cannot be said that the Aetna Casualty
& Surety Company is transacting business of insurance in the Philippines for which it must have
a license. The Contract of insurance was entered into in New York, U.S.A., and payment was
made to the consignee in its New York branch. It appears from the list of cases issued by the
Clerk of Court of the Court of First Instance of Manila that all the actions, except two (2) cases
filed by Smith, Beer & Co., Inc. against the Aetna Casualty & Surety Company, are claims
against the shipper and the arrastre operators just like the case at bar.
Consequently, since the appellant Aetna Casualty & Surety Company is not engaged in the
business of insurance in the Philippines but is merely collecting a claim assigned to it by the
consignee, it is not barred from filing the instant case although it has not secured a license to
transact insurance business in the Philippines.
Indeed, if a foreign corporation, not engaged in business in the Philippines, is not banned from
seeking redress from courts in the Philippines, a fortiori, that same corporation cannot claim
exemption from being sued in Philippine courts for acts done against a person or persons in the
Philippines.
WHEREFORE, THE PETITION IS HEREBY DENIED WITH COSTS AGAINST THE
PETITIONERS.
SO ORDERED.
SECOND DIVISION
RUDOLF LIETZ, INC., G.R. No. 122463
Petitioner,
Present:
- versus- PUNO, J.,
Chairman, AUSTRIA-MARTINEZ,
CALLEJO, SR.,
THE COURT OF APPEALS, TINGA, and
AGAPITO BURIOL, TIZIANA CHICO-NAZARIO, JJ.
TURATELLO & PAOLA SANI,
Respondents. Promulgated:
December 19, 2005
x --------------------------------------------------------------------x
DECISION
Tinga, J.:
This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court, praying for
the annulment of the Decision[1] dated April 17, 1995 and the Resolution[2] dated October 25,
1995 of the Court of Appeals in CA-G.R. CV No. 38854. The Court of Appeals affirmed the
Decision[3] in Civil Case No. 2164 of the Regional Trial Court (RTC), Branch 48, of Palawan and
Puerto Princesa City with the modification that herein respondents Tiziana Turatello and Paola
Sani are entitled to damages, attorneys fees, and litigation expenses.
The dispositive portion of the RTC Decision reads:
WHEREFORE, in view of the foregoing and as prayed for by the defendants, the instant
complaint is hereby DISMISSED. Defendants counterclaim is likewise DISMISSED. Plaintiff,
however, is ordered to pay defendant Turatello and Sanis counsel the sum of P3,010.38 from
August 9, 1990 until fully paid representing the expenses incurred by said counsel when the trial
was cancelled due to the non-appearance of plaintiffs witnesses. With costs against the plaintiff.
SO ORDERED.[4]
As culled from the records, the following antecedents appear:
Respondent Agapito Buriol previously owned a parcel of unregistered land situated at Capsalay
Island, Port Barton, San Vicente, Palawan. On August 15, 1986, respondent Buriol entered into
a lease agreement with Flavia Turatello and respondents Turatello and Sani, all Italian citizens,
involving one (1) hectare of respondent Buriols property. The lease agreement was for a period
of 25 years, renewable for another 25 years. The lessees took possession of the land after
paying respondent Buriol a down payment of P10,000.00.[5] The lease agreement, however,
was reduced into writing only in January 1987.
On November 17, 1986, respondent Buriol sold to petitioner Rudolf Lietz, Inc. the same parcel of
land for the amount of P30,000.00. The Deed of Absolute Sale embodying the agreement
described the land as follows:
A parcel of land, consisting of FIVE (5) hectares, more or less, a portion of that parcel of land
declared in the name of Agapito Buriol, under Tax Declaration No. 0021, revised in the year
1985, together with all improvements thereon, situated at the Island of Capsalay, Barangay Port
Barton, municipality of San Vicente, province of Palawan which segregated from the whole
parcel described in said tax declaration, has the following superficial boundaries: NORTH, Sec.
01-017; and remaining property of the vendor; EAST, by Seashore; SOUTH, 01-020; and
WEST, by 01-018 (now Elizabeth Lietz).[6]
Petitioner later discovered that respondent Buriol owned only four (4) hectares, and with one
more hectare covered by lease, only three (3) hectares were actually delivered to petitioner.
Thus, petitioner instituted on April 3, 1989 a complaint for Annulment of Lease with Recovery of
Possession with Injunction and Damages against respondents and Flavia Turatello before the
RTC. The complaint alleged that with evident bad faith and malice, respondent Buriol sold to
petitioner five (5) hectares of land when respondent Buriol knew for a fact that he owned only
four (4) hectares and managed to lease one more hectare to Flavia Turatello and respondents
Tiziana Turatello and Paola Sani. The complaint sought the issuance of a restraining order and a
writ of preliminary injunction to prevent Flavia Turatello and respondents Turatello and Sani from
introducing improvements on the property, the annulment of the lease agreement between
respondents, and the restoration of the amount paid by petitioner in excess of the value of the
property sold to him. Except for Flavia Turatello, respondents filed separate answers raising
similar defenses of lack of cause of action and lack of jurisdiction over the action for recovery of
possession. Respondents Turatello and Sani also prayed for the award of damages and
attorneys fees.[7]
After trial on the merits, the trial court rendered judgment on May 27, 1992, dismissing both
petitioners complaint and respondents counterclaim for damages. Petitioner and respondents
Turatello and Sani separately appealed the RTC Decision to the Court of Appeals, which
affirmed the dismissal of petitioners complaint and awarded respondents Turatello and Sani
damages and attorneys fees. The dispositive portion of the Court of Appeals Decision reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED, with the following
modification:
Plaintiff-appellant Rudolf Lietz, Inc. is hereby (1) ordered to pay defendants-appellants Turatello
and Sani, the sum of P100,000.00 as moral damages; (2) P100,000.00 as exemplary damages;
(3) P135,728.73 as attorneys fees; and (4) P10,000.00 as litigation expenses.
SO ORDERED.[8]
Petitioner brought to this Court the instant petition after the denial of its motion for
reconsideration of the Court of Appeal Decision. The instant petition imputes the following errors
to the Court of Appeals.
I. IN DEFENDING AGAPITO BURIOLS GOOD FAITH AND IN STATING THAT
ASSUMING THAT HE (BURIOL) WAS IN BAD FAITH PETITIONER WAS SOLELY
RESPONSIBLE FOR ITS INEXCUSABLE CREDULOUSNESS.
II. IN ASSERTING THAT ARTICLES 1542 AND 1539 OF THE NEW CIVIL CODE
ARE, RESPECTIVELY, APPLICABLE AND INAPPLICABLE IN THE CASE AT BAR.
III. IN NOT GRANTING PETITIONERS CLAIM FOR ACTUAL AND EXEMPLARY
DAMAGES.
IV. IN GRANTING RESPONDENTS TIZIANA TURATELLO AND PAOLA SANI
EXHORBITANT [sic] AMOUNTS AS DAMAGES WHICH ARE EVEN BEREFT OF
EVIDENTIARY BASIS.[9]
Essentially, only two main issues confront this Court, namely: (i) whether or not petitioner is
entitled to the delivery of the entire five hectares or its equivalent, and (ii) whether or not
damages may be awarded to either party.
Petitioner contends that it is entitled to the corresponding reduction of the purchase price
because the agreement was for the sale of five (5) hectares although respondent Buriol owned
only four (4) hectares. As in its appeal to the Court of Appeals, petitioner anchors its argument
on the second paragraph of Article 1539 of the Civil Code, which provides:
Art. 1539. The obligation to deliver the thing sold includes that of placing in the control of the
vendee all that is mentioned in the contract, in conformity with the following rules:
If the sale of real estate should be made with a statement of its area, at the rate of a certain price
for a unit of measure or number, the vendor shall be obliged to deliver to the vendee, if the latter
should demand it, all that may have been stated in the contract; but, should this be not possible,
the vendee may choose between a proportional reduction of the price and the rescission of the
contract, provided that, in the latter case, the lack in the area be not less than one-tenth of that
stated.
....
The Court of Appeals Decision, however, declared as inapplicable the abovequoted provision
and instead ruled that petitioner is no longer entitled to a reduction in price based on the
provisions of Article 1542 of the Civil Code, which read:
Art. 1542. In the sale of real estate, made for a lump sum and not at the rate of a certain sum for
a unit of measure or number, there shall be no increase or decrease of the price, although there
be a greater or lesser area or number than that stated in the contract.
The same rule shall be applied when two or more immovables are sold for a single price; but if,
besides mentioning the boundaries, which is indispensable in every conveyance of real estate,
its area or number should be designated in the contract, the vendor shall be bound to deliver all
that is included within said boundaries, even when it exceeds the area or number specified in the
contract; and, should he not be able to do so, he shall suffer a reduction in the price, in
proportion to what is lacking in the area or number, unless the contract is rescinded because the
vendee does not accede to the failure to deliver what has been stipulated.
Article 1539 governs a sale of immovable by the unit, that is, at a stated rate per unit area. In a
unit price contract, the statement of area of immovable is not conclusive and the price may be
reduced or increased depending on the area actually delivered. If the vendor delivers less than
the area agreed upon, the vendee may oblige the vendor to deliver all that may be stated in the
contract or demand for the proportionate reduction of the purchase price if delivery is not
possible. If the vendor delivers more than the area stated in the contract, the vendee has the
option to accept only the amount agreed upon or to accept the whole area, provided he pays for
the additional area at the contract rate.[10]
In some instances, a sale of an immovable may be made for a lump sum and not at a rate per
unit. The parties agree on a stated purchase price for an immovable the area of which may be
declared based on an estimate or where both the area and boundaries are stated.
In the case where the area of the immovable is stated in the contract based on an estimate, the
actual area delivered may not measure up exactly with the area stated in the contract. According
to Article 1542[11] of the Civil Code, in the sale of real estate, made for a lump sum and not at
the rate of a certain sum for a unit of measure or number, there shall be no increase or decrease
of the price although there be a greater or lesser area or number than that stated in the contract.
However, the discrepancy must not be substantial. A vendee of land, when sold in gross or with
the description more or less with reference to its area, does not thereby ipso facto take all risk of
quantity in the land. The use of more or less or similar words in designating quantity covers only
a reasonable excess or deficiency.[12]
Where both the area and the boundaries of the immovable are declared, the area covered within
the boundaries of the immovable prevails over the stated area. In cases of conflict between
areas and boundaries, it is the latter which should prevail. What really defines a piece of ground
is not the area, calculated with more or less certainty, mentioned in its description, but the
boundaries therein laid down, as enclosing the land and indicating its limits. In a contract of sale
of land in a mass, it is well established that the specific boundaries stated in the contract must
control over any statement with respect to the area contained within its boundaries. It is not of
vital consequence that a deed or contract of sale of land should disclose the area with
mathematical accuracy. It is sufficient if its extent is objectively indicated with sufficient precision
to enable one to identify it. An error as to the superficial area is immaterial.[13] Thus, the
obligation of the vendor is to deliver everything within the boundaries, inasmuch as it is the
entirety thereof that distinguishes the determinate object.[14]
As correctly noted by the trial court and the Court of Appeals, the sale between petitioner and
respondent Buriol involving the latters property is one made for a lump sum. The Deed of
Absolute Sale shows that the parties agreed on the purchase price on a predetermined area of
five hectares within the specified boundaries and not based on a particular rate per area. In
accordance with Article 1542, there shall be no reduction in the purchase price even if the area
delivered to petitioner is less than that stated in the contract. In the instant case, the area within
the boundaries as stated in the contract shall control over the area agreed upon in the contract.
The Court rejects petitioners contention that the propertys boundaries as stated in the Deed of
Absolute Sale are superficial and unintelligible and, therefore, cannot prevail over the area
stated in the contract. First, as pointed out by the Court of Appeals, at an ocular inspection prior
to the perfection of the contract of sale, respondent Buriol pointed to petitioner the boundaries of
the property. Hence, petitioner gained a fair estimate of the area of the property sold to him.
Second, petitioner cannot now assail the contents of the Deed of Absolute Sale, particularly the
description of the boundaries of the property, because petitioners subscription to the Deed of
Absolute Sale indicates his assent to the correct description of the boundaries of the property.
Petitioner also asserts that respondent Buriol is guilty of misleading petitioner into believing that
the latter was buying five hectares when he knew prior to the sale that he owned only four
hectares. The review of the circumstances of the alleged misrepresentation is factual and,
therefore, beyond the province of the Court. Besides, this issue had already been raised before
and passed upon by the trial court and the Court of Appeals. The factual finding of the courts
below that no sufficient evidence supports petitioners allegation of misrepresentation is binding
on the Court.
The Court of Appeals reversed the trial courts dismissal of respondents Turatello and Sanis
counterclaim for moral and exemplary damages, attorneys fees and litigation expenses. In
awarding moral damages in the amount of P100,000 in favor of Turatello and Sani, the Court of
Appeals justified the award to alleviate the suffering caused by petitioners unfounded civil action.
The filing alone of a civil action should not be a ground for an award of moral damages in the
same way that a clearly unfounded civil action is not among the grounds for moral damages.[15]
Exemplary or corrective damages are imposed, by way of example or correction for the public
good, in addition to the moral, temperate, liquidated or compensatory damages.[16] With the
deletion of the award for moral damages, there is no basis for the award of exemplary damages.
WHEREFORE, the instant petition for review on certiorari is GRANTED in PART. The Court of
Appeals Decision in CA-G.R. CV No. 38854 is AFFIRMED with the MODIFICATION that the
award of moral and exemplary damages is DELETED.
SO ORDERED.
THIRD DIVISION
[G.R. No. 128573. January 13, 2003]
NAAWAN COMMUNITY RURAL BANK INC., petitioner, vs. THE COURT OF APPEALS and
SPOUSES ALFREDO AND ANNABELLE LUMO, respondents.
DECISION
CORONA, J.:
Under the established principles of land registration, a person dealing with registered land may
generally rely on the correctness of a certificate of title and the law will in no way oblige him to
go beyond it to determine the legal status of the property.
Before us is a Petition for Review on Certiorari challenging the February 7, 1997 Decision[1] of
the Court of Appeals in CA-G.R. CV No. 55149, which in turn affirmed the decision[2] of the
Regional Trial Court of Misamis Oriental, Branch 18 as follows:
WHEREFORE, the plaintiffs-spouses are adjudged the absolute owners and possessors of the
properties in question (Lot 18583, under TCT No. T-50134, and all improvements thereon) and
quieting title thereto as against any and all adverse claims of the defendant. Further, the sheriffs
certificate of sale, Exhibit 4; 4-A; Sheriffs deed of final conveyance, Exhibit 5, 5-A; Tax
Declarations No. 71211, Exhibit 7, and any and all instrument, record, claim, encumbrance or
proceeding in favor of the defendant, as against the plaintiffs, and their predecessor-in-interest,
which may be extant in the office of the Register of Deeds of Province of Misamis Oriental, and
of Cagayan de Oro City, and in the City Assessors Office of Cagayan de Oro City, are declared
as invalid and ineffective as against the plaintiffs title.
The counterclaim is dismissed for lack of merit.
SO ORDERED.[3]
The facts of the case, as culled from the records, are as follows:
On April 30, 1988, a certain Guillermo Comayas offered to sell to private respondent-spouses
Alfredo and Annabelle Lumo, a house and lot measuring 340 square meters located at Pinikitan,
Camaman-an, Cagayan de Oro City.
Wanting to buy said house and lot, private respondents made inquiries at the Office of the
Register of Deeds of Cagayan de Oro City where the property is located and the Bureau of
Lands on the legal status of the vendors title. They found out that the property was mortgaged
for P8,000 to a certain Mrs. Galupo and that the owners copy of the Certificate of Title to said
property was in her possession.
Private respondents directed Guillermo Comayas to redeem the property from Galupo at their
expense, giving the amount of P10,000 to Comayas for that purpose.
On May 30, 1988, a release of the adverse claim of Galupo was annotated on TCT No. T-41499
which covered the subject property.
In the meantime, on May 17, 1988, even before the release of Galupos adverse claim, private
respondents and Guillermo Comayas, executed a deed of absolute sale. The subject property
was allegedly sold for P125,000 but the deed of sale reflected the amount of only P30,000 which
was the amount private respondents were ready to pay at the time of the execution of said deed,
the balance payable by installment.
On June 9, 1988, the deed of absolute sale was registered and inscribed on TCT No. T-41499
and, on even date, TCT No. T-50134 was issued in favor of private respondents.
After obtaining their TCT, private respondents requested the issuance of a new tax declaration
certificate in their names. However, they were surprised to learn from the City Assessors Office
that the property was also declared for tax purposes in the name of petitioner Naawan
Community Rural Bank Inc. Records in the City Assessors Office revealed that, for the lot
covered by TCT No. T-50134, Alfredo Lumos T/D # 83324 bore the note: This lot is also
declared in the name of Naawan Community Rural Bank Inc. under T/D # 71210.
Apparently, on February 7, 1983, Guillermo Comayas obtained a P15,000 loan from petitioner
Bank using the subject property as security. At the time said contract of mortgage was entered
into, the subject property was then an unregistered parcel of residential land, tax-declared in the
name of a certain Sergio A. Balibay while the residential one-storey house was tax-declared in
the name of Comayas.
Balibay executed a special power of attorney authorizing Comayas to borrow money and use the
subject lot as security. But the Deed of Real Estate Mortgage and the Special Power of Attorney
were recorded in the registration book of the Province of Misamis Oriental, not in the registration
book of Cagayan de Oro City. It appears that, when the registration was made, there was only
one Register of Deeds for the entire province of Misamis Oriental, including Cagayan de Oro
City. It was only in 1985 when the Office of the Register of Deeds for Cagayan de Oro City was
established separately from the Office of the Register of Deeds for the Province of Misamis
Oriental.
For failure of Comayas to pay, the real estate mortgage was foreclosed and the subject property
sold at a public auction to the mortgagee Naawan Community Rural Bank as the highest bidder
in the amount of P16,031.35. Thereafter, the sheriffs certificate of sale was issued and
registered under Act 3344 in the Register of Deeds of the Province of Misamis Oriental.
On April 17, 1984, the subject property was registered in original proceedings under the Land
Registration Act. Title was entered in the registration book of the Register of Deeds of Cagayan
de Oro City as Original Certificate of Title No. 0-820, pursuant to Decree No. N-189413.
On July 23, 1984, Transfer Certificate of Title No. T-41499 in the name of Guillermo P. Comayas
was entered in the Register of Deeds of Cagayan de Oro City.
Meanwhile, on September 5, 1986, the period for redemption of the foreclosed subject property
lapsed and the MTCC Deputy Sheriff of Cagayan de Oro City issued and delivered to petitioner
bank the sheriffs deed of final conveyance. This time, the deed was registered under Act 3344
and recorded in the registration book of the Register of Deeds of Cagayan de Oro City.
By virtue of said deed, petitioner Bank obtained a tax declaration for the subject house and lot.
Thereafter, petitioner Bank instituted an action for ejectment against Comayas before the MTCC
which decided in its favor. On appeal, the Regional Trial Court affirmed the decision of the
MTCC in a decision dated April 13, 1988.
On January 27, 1989, the Regional Trial Court issued an order for the issuance of a writ of
execution of its judgment. The MTCC, being the court of origin, promptly issued said writ.
However, when the writ was served, the property was no longer occupied by Comayas but
herein private respondents, the spouses Lumo who had, as earlier mentioned, bought it from
Comayas on May 17, 1988
Alarmed by the prospect of being ejected from their home, private respondents filed an action for
quieting of title which was docketed as Civil Case No. 89-138. After trial, the Regional Trial Court
rendered a decision declaring private respondents as purchasers for value and in good faith, and
consequently declaring them as the absolute owners and possessors of the subject house and
lot.
Petitioner appealed to the Court of Appeals which in turn affirmed the trial courts decision.
Hence, this petition.
Petitioner raises the following issues:
I. WHETHER OR NOT THE SHERIFFS DEED OF FINAL CONVEYANCE WAS DULY
EXECUTED AND REGISTERED IN THE REGISTER OF DEEDS OF CAGAYAN DE ORO CITY
ON DECEMBER 2, 1986;
II. WHETHER OR NOT REGISTRATION OF SHERIFFS DEED OF FINAL CONVEYANCE IN
THE PROPER REGISTRY OF DEEDS COULD BE EFFECTIVE AS AGAINST SPOUSES
LUMO.
Both parties cite Article 1544 of the Civil Code which governs the double sale of immovable
property.
Article 1544 provides:
x x x. 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.
Petitioner bank contends that the earlier registration of the sheriffs deed of final conveyance in
the day book under Act 3344 should prevail over the later registration of private respondents
deed of absolute sale under Act 496,[4] as amended by the Property Registration Decree, PD
1529.
This contention has no leg to stand on. It has been held that, where a person claims to have
superior proprietary rights over another on the ground that he derived his title from a sheriffs sale
registered in the Registry of Property, Article 1473 (now Article 1544) of the Civil Code will apply
only if said execution sale of real estate is registered under Act 496.[5]
Unfortunately, the subject property was still untitled when it was acquired by petitioner bank by
virtue of a final deed of conveyance. On the other hand, when private respondents purchased
the same property, it was already covered by the Torrens System.
Petitioner also relies on the case of Bautista vs. Fule[6] where the Court ruled that the
registration of an instrument involving unregistered land in the Registry of Deeds creates
constructive notice and binds third person who may subsequently deal with the same property.
However, a close scrutiny of the records reveals that, at the time of the execution and delivery of
the sheriffs deed of final conveyance on September 5, 1986, the disputed property was already
covered by the Land Registration Act and Original Certificate of Title No. 0-820 pursuant to
Decree No. N189413 was likewise already entered in the registration book of the Register of
Deeds of Cagayan De Oro City as of April 17, 1984.
Thus, from April 17, 1984, the subject property was already under the operation of the Torrens
System. Under the said system, registration is the operative act that gives validity to the transfer
or creates a lien upon the land.
Moreover, the issuance of a certificate of title had the effect of relieving the land of all claims
except those noted thereon. Accordingly, private respondents, in dealing with the subject
registered land, were not required by law to go beyond the register to determine the legal
condition of the property. They were only charged with notice of such burdens on the property as
were noted on the register or the certificate of title. To have required them to do more would
have been to defeat the primary object of the Torrens System which is to make the Torrens Title
indefeasible and valid against the whole world.
Private respondents posit that, even assuming that the sheriffs deed of final conveyance in favor
of petitioner bank was duly recorded in the day book of the Register of Deeds under Act 3344,
ownership of the subject real property would still be theirs as purchasers in good faith because
they registered the sale first under the Property Registration Decree.
The rights created by the above-stated statute of course do not and cannot accrue under an
inscription in bad faith. Mere registration of title in case of double sale is not enough; good faith
must concur with the registration.[7]
Petitioner contends that the due and proper registration of the sheriffs deed of final conveyance
on December 2, 1986 amounted to constructive notice to private respondents. Thus, when
private respondents bought the subject property on May 17, 1988, they were deemed to have
purchased the said property with the knowledge that it was already registered in the name of
petitioner bank.
Thus, the only issue left to be resolved is whether or not private respondents could be
considered as buyers in good faith.
The priority in time principle being invoked by petitioner bank is misplaced because its
registration referred to land not within the Torrens System but under Act 3344. On the other
hand, when private respondents bought the subject property, the same was already registered
under the Torrens System. It is a well-known rule in this jurisdiction that persons dealing with
registered land have the legal right to rely on the face of the Torrens Certificate of Title and to
dispense with the need to inquire further, except when the party concerned has actual
knowledge of facts and circumstances that would impel a reasonably cautious man to make
such inquiry.[8]
Did private respondents exercise the required diligence in ascertaining the legal condition of the
title to the subject property so as to be considered as innocent purchasers for value and in good
faith?
We answer in the affirmative.
Before private respondents bought the subject property from Guillermo Comayas, inquiries were
made with the Registry of Deeds and the Bureau of Lands regarding the status of the vendors
title. No liens or encumbrances were found to have been annotated on the certificate of title.
Neither were private respondents aware of any adverse claim or lien on the property other than
the adverse claim of a certain Geneva Galupo to whom Guillermo Comayas had mortgaged the
subject property. But, as already mentioned, the claim of Galupo was eventually settled and the
adverse claim previously annotated on the title cancelled. Thus, having made the necessary
inquiries, private respondents did not have to go beyond the certificate of title. Otherwise, the
efficacy and conclusiveness of the Torrens Certificate of Title would be rendered futile and
nugatory.
Considering therefore that private respondents exercised the diligence required by law in
ascertaining the legal status of the Torrens title of Guillermo Comayas over the subject property
and found no flaws therein, they should be considered as innocent purchasers for value and in
good faith.
Accordingly, the appealed judgment of the appellate court upholding private respondents Alfredo
and Annabelle Lumo as the true and rightful owners of the disputed property is affirmed.
WHEREFORE, petition is hereby DENIED.
SO ORDERED.
THIRD DIVISION
HON. DOMINADOR F. CARILLO, Presiding Judge, R.T.C. XI-19 Digos, Davao del Sur,
BONIFACIO J. GUYOT, Clerk of Court and Provincial Sheriff of Davao del Sur, ALFREDO
C. SENOY, Deputy Prov. Sheriff assigned to R.T.C. XI-19 Digos, Davao del Sur, MARCOS
D. RISONAR, JR., Registrar of Deeds of Davao del Sur, and MARIA GONZALES,
Petitioners,
- versus -
G.R. No. 121165
Present:
QUISUMBING, J., Chairperson,
CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.
HON. COURT OF APPEALS, MARIA PAZ DABON and ROSALINA DABON, Respondents.
Promulgated:
September 26, 2006
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
RESOLUTION
QUISUMBING, J.:
For review on certiorari is the Decision[1] dated February 22, 1995 of the Court of Appeals in
CA-G.R. SP No. 23687, which annulled and set aside the judgment and orders of the Regional
Trial Court (RTC) of Digos, Davao del Sur, Branch 19, in Civil Case No. 2647, Maria Gonzales v.
Priscilla Manio and Jose Manio.
The facts as culled from the records are as follows:
On April 2, 1990, petitioner Maria Gonzales filed a complaint against the spouses Priscilla and
Jose Manio with the RTC of Digos, Davao del Sur, Branch 19. Gonzales sought the execution of
the deed of sale in her favor for the property she bought from Priscilla Manio. She also asked for
damages and attorneys fees.
Gonzales alleged that on April 26, 1988, she paid P10,000 to Priscilla as downpayment on the
P400,000 purchase price of the lot with improvements, since Priscilla had a special power of
attorney from her son, Aristotle, the owner of the land. They also agreed that the balance would
be paid within three months after the execution of the deed of sale. Yet, after the lapse of the
period and despite repeated demands, Priscilla did not execute the deed of sale. Thus,
Gonzales filed an action for specific performance against the spouses Priscilla and Jose Manio.
For failure to file an Answer, the Manios were declared in default and Gonzales was allowed to
present evidence ex parte.
After trial, the court rendered judgment in favor of Gonzales, which we quote verbatim:
WHEREFORE, premises considered, it is hereby ordered that judgment is rendered in favor of
plaintiff and against defendants, ordering defendants:
1) To execute the final deed of sale and transfer of the property mentioned in paragraph 4
above to plaintiff, or should the defendant refuse to execute the deed of sale, the Clerk of Court
be directed to execute the same upon plaintiffs depositing of the sum of P390,000.00 with the
Clerk of Court as complete and valid payment thereof to defendant Priscilla Manio;
2) To pay plaintiff the sum of P100,000.00 for moral damages and P50,000.00 for exemplary
damages;
3) To pay plaintiff the sum of P50,000.00 for attorneys fees plus P700.00 per appearances of
plaintiffs counsel before this Honorable Court as appearance fees;
4) To pay plaintiff the sum of P5,000.00 as litigation expenses.
SO ORDERED.[2]
Gonzales deposited with the Clerk of Court the P390,000 balance of the price and filed a motion
for execution.[3] She later withdrew the motion because the trial courts decision was not properly
served on the defendants. After numerous delays, the sheriff finally personally served a copy of
the decision on Priscilla on August 4, 1990, at the ungodly hour of 12:00 midnight at Sitio
Wilderness, Barangay Mount Carmel, Bayugan, Agusan del Sur.[4]
Since there was no appeal, the trial courts decision became final and executory. But the writ of
execution was not served upon the defendants, since according to the Sheriffs Return, the
defendants could not be located. The sheriff, likewise, informed the trial court that the money
judgment could be readily satisfied by the petitioners cash deposit should the trial court grant the
motion to release the cash deposit filed by Gonzales.[5]
Subsequently, Gonzales filed a motion asking that the Clerk of Court be directed to be the one to
execute a deed of conveyance. Gonzales also filed a motion to withdraw the cash deposit for the
balance of the price to offset the award of damages. The trial court granted both motions but
later modified the amount to P207,800.
On October 29, 1990, Gonzales filed a petition for the nullification of the Owners Duplicate
Certificate of Title No. 16658 and asked that a new certificate be issued in her name to give
effect to the deed of conveyance since Priscilla refused to relinquish the owners duplicate copy.
Consequently, the trial court declared the owners duplicate copy of TCT No. 16658 void, and
directed the City Civil Registrar to issue a new certificate of title in favor of Gonzales. The orders
were reiterated in subsequent orders and TCT No. T-23690 was issued under the name of
Gonzales.
On December 14, 1990, herein respondents Maria Paz Dabon and Rosalina Dabon, claiming to
have bought the aforementioned lot from Aristotle Manio filed before the Court of Appeals a
petition for annulment of judgment and orders of the RTC in Civil Case No. 2647. The case was
docketed as CA G.R. SP No. 23687, entitled Maria Paz Dabon and Rosalina Dabon v. Hon.
Dominador F. Carillo, Presiding Judge, RTC Branch 19, Digos, Davao del Sur; Bonifacio J.
Guyot, Clerk of Court and Provincial Sheriff of Davao del Sur; Alfredo C. Senoy, Deputy Prov.
Sheriff assigned to RTC Br. 19, Digos, Davao del Sur; Marcos D. Risonar, Jr., Registrar of
Deeds of Davao del Sur; and Maria Gonzales. The Dabons alleged therein that the judgment of
the trial court was void ab initio because of lack of jurisdiction over their persons, as the real
parties in interest, and that they were fraudulently deprived of their right to due process. They
also prayed for a Temporary Restraining Order and for Preliminary Prohibitory Injunction against
Gonzales. They gave the trial court a notice of their action for the annulment of the judgment and
subsequent orders in Civil Case No. 2647.[6]
Meanwhile, Gonzales filed before the trial court a motion for the issuance of a writ of possession.
The Dabons filed an opposition on the following grounds: (1) The writ of possession cannot be
enforced because the defendants named in the writ, the Manios, were no longer in possession
of the property; (2) They had bought the lot with the improvements therein and had taken
possession, although they had not yet registered their ownership with the Register of Deeds;
and (3) The court did not acquire jurisdiction over them as the real parties in interest.
On December 17, 1990, the Court of Appeals, without giving due course to the petition, issued a
resolution restraining the trial court from implementing its Decision dated June 19, 1990[7] and
its subsequent orders thereto in Civil Case No. 2647 until further notice from the Court of
Appeals. It also required Gonzales to file her Comment.[8]
The Court of Appeals in a resolution denied the application for preliminary injunction and
appointed a commissioner to receive evidence of the parties.[9]
Following the Commissioners report, the Court of Appeals found that (1) the contract of sale
between Gonzales and Priscilla was unenforceable because the sale was evidenced by a
handwritten note which was vague as to the amount and which was not notarized; (2) the trial
court did not acquire jurisdiction over the indispensable parties; and (3) the proceedings were
attended with fraud. The Court of Appeals nullified the judgment of the RTC in Civil Case No.
2647 and cancelled TCT No. T-23690. The dispositive portion of said judgment reads as follows:
WHEREFORE, premises considered, the questioned decision, dated June 19, 1990 (and all
orders arising therefrom), of the Regional Trial Court (Branch 19) in Digos, Davao del Sur is
hereby ANNULLED and SET ASIDEand the Transfer Certificate of Title No. T-23690 which was
issued thereafter declared null and void and ordered canceled. Costs against the private
respondent.
SO ORDERED.[10]
On July 17, 1995, Gonzales Motion for Reconsideration was denied. Hence, the instant petition,
assigning the following errors:
I in case the action is brought against the agent, the action must be brought against an agent
THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE PURCHASE
OF THE DISPUTED PROPERTY BY PETITIONER MARIA GONZALES FROM ARISTOTLE
MANIO THRU THE LATTERS MOTHER AND ATTORNEY-IN-FACT WAS A VALID
CONTRACT AS BETWEEN THE CONTRACTING PARTIES.
II
THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT PETITIONER
MARIA GONZALES WAS IN GOOD FAITH IN BUYING THE DISPUTED PROPERTY FROM
ARISTOTLE MANIO THRU THE LATTERS MOTHER AND ATTORNEY-IN-FACT.
III
THE HONORABLE COURT OF APPEALS ERRED IN NOT APPLYING IN THE INSTANT CASE
THE DOCTRINE IN DOUBLE SALE UNDER ARTICLE 1544 OF THE CIVIL CODE OF THE
PHILIPPINES.
IV
THE HONORABLE COURT OF APPEALS GRAVELY FAILED TO APPRECIATE THE FACT
THAT PRIVATE RESPONDENTS [PETITIONERS BELOW] CLAIM IS HIGHLY INCREDIBLE,
IMPROBABLE, AND FRAUDULENT.
V order granting the cancellation of TCT No. 16658 and issuance of a new title, null and void.
THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT PRIVATE
RESPONDENTS MARIA PAZ DABON AND ROSALINA DABON HAVE NO RIGHT TO BRING
THE INSTANT SUIT.
VI
COROLLARILY, THE HONORABLE COURT OF APPEALS ERRED IN NOT SUSTAINING
PETITIONER MARIA GONZALES [PRIVATE RESPONDENT BELOW] CLAIM FOR DAMAGES
AGAINST THE PRIVATE RESPONDENTS [PETITIONERS BELOW].[11]
Simply, the threshold issues in this petition are: (1) whether the Court of Appeals erred in
declaring the sale of the land to Gonzales by Priscilla invalid; (2) whether there was basis to
annul the judgment of the RTC; and (3) whether the Dabons could file the action for annulment
of judgment.
We shall discuss the issues jointly.
Prefatorily, we note that named as petitioners are Presiding Judge Dominador Carillo; Bonifacio
Guyot, Alfredo Senoy, Clerk of Court and Deputy Sheriff of the same court, respectively; Marcos
D. Risonar, Registrar of Deeds of Davao del Sur; and Maria Gonzales. In our view, petitioner
Gonzales apparently had impleaded Judge Carillo, Guyot, Senoy and Risonar in this petition by
merely reversing the designation of said public officers among the respondents below in the
Court of Appeals, as now among the petitioners herein. Since they are not interested parties and
would not benefit from any of the affirmative reliefs sought, only Maria Gonzales remains as the
genuine party-petitioner in the instant case.
We now come to the main issues: (1) Was there sufficient basis to annul the judgment in Civil
Case No. 2647? (2) Are the Dabons proper parties to file the petition for annulment of judgment?
Petitioner Gonzales contends that the respondents do not have standing before the Court of
Appeals to file a petition for annulment of the judgment in Civil Case No. 2647 because
respondents were not parties therein. Petitioner maintains that respondents have no right that
could be adversely affected by the judgment because they are not the owners of the property.
Petitioner claims that the Court of Appeals should have applied the doctrine of double sale to
settle the issue of ownership and declare her the true owner of the property. Petitioner
concludes that respondents not being the owners and are not real parties in interest in the
complaint for specific performance have no right to bring the action for annulment of the
judgment. According to petitioner Gonzales, she did not implead Aristotle as defendant in Civil
Case No. 2647 since a decision against Priscilla, Aristotles attorney-in-fact, would bind Aristotle
also.
Respondents (Maria Paz and Rosalina Dabon) now insist that they are parties in interest as
buyers, owners and possessors of the contested land and that they had been fraudulently
deprived of their day in court during the proceedings in the trial court in Civil Case No. 2647.
They have no remedy in law other than to file a case for the annulment of judgment of the trial
court in said case.
Petitioner Gonzales should be reminded of Section 3 of Rule 3 of the Rules on Civil Procedure
which explicitly states that an action should be brought against the real party in interest,[12] and
acting in his own name and for the benefit of an undisclosed principal without joining the
principal, except when the contract involves things belonging to the principal.[13] The real party
in interest is the party who would be benefited or injured by the judgment or is the party entitled
to the avails of the suit. We have held that in such a situation, an attorney-in-fact is not a real
party in interest and that there is no law permitting an action to be brought by and against an
attorney-in-fact.[14]
Worth stressing, the action filed by Gonzales before the RTC is for specific performance to
compel Priscilla to execute a deed of sale, involving real property which, however, does not
belong to Priscilla but to Aristotle Manio, the son of Priscilla. The complaint only named as
defendant Priscilla, joined by her spouse, yet Priscilla had no interest on the lot and can have no
interest whatever in any judgment rendered. She was not acting in her own name, nor was she
acting for the benefit of an undisclosed principal. The joinder of all indispensable parties is a
condition sine qua non of the exercise of judicial powers, and the absence of indispensable party
renders all subsequent actions of the court null and void for want of authority to act, not only as
to the absent parties but even as to those present.[15] Accordingly, the failure to implead
Aristotle Manio as defendant renders all proceedings in the Civil Case No. 2647, including the
It is settled that a person need not be a party to the judgment sought to be annulled.[16] What is
essential is that he can prove his allegation that the judgment was obtained by fraud or collusion
and he would be adversely affected thereby,[17] because if fully substantiated by
preponderance of evidence, those allegations could be the basis for annulment of the assailed
judgment.
In the present case, even if respondents were not parties to the specific performance case, any
finding that there was extrinsic fraud in the institution of the complaint, i.e. exclusion of the real
party in interest, and collusion between petitioner and Sheriff Senoy, would adversely affect the
respondents ownership and thus, could be their basis for annulment of the judgment.
Pertinently, Section 2 of Rule 47 of the Rules on Civil Procedure explicitly provides the two
grounds for annulment of judgment, namely: extrinsic fraud and lack of jurisdiction.[18]
There is extrinsic fraud when a party has been prevented by fraud or deception from presenting
his case. Fraud is extrinsic where it prevents a party from having a trial or from presenting his
entire case to the court, or where it operates upon matters pertaining not to the judgment itself
but to the manner in which it is procured. The overriding consideration when extrinsic fraud is
alleged is that the fraudulent scheme of the prevailing litigant prevented a party from having his
day in court.[19] It must be distinguished from intrinsic fraud which refers to acts of a party at a
trial which prevented a fair and just determination of the case, and which could have been
litigated and determined at the trial or adjudication of the case.[20]
In its Decision dated February 22, 1995, the Court of Appeals found that indices of fraud
attended the case before the trial court: First, the plaintiff deliberately excluded the Dabons as
party to the case despite knowledge that the Dabons had alleged that they had bought the land
from Aristotle. Second, the Sheriffs Return was suspiciously served on a Saturday, at midnight,
on August 4, 1990. Third, the trial court ordered the plaintiff to deposit the full payment of
property, but subsequently ordered its withdrawal. Lastly, there was no notice given to the
person named in the certificate of title which Gonzales wanted to be annulled.
Of the indices of fraud cited by the Court of Appeals, the failure to comply with the notification
requirement in the petition for the cancellation of title amounts to extrinsic fraud. Under the
Property Registration Decree, all parties in interest shall be given notice.[21] There is nothing in
the records that show Gonzales notified the actual occupants or lessees of the property. Further,
the records show that Gonzales had known of the sale of the land by Aristotle to the Dabons and
despite her knowledge, the former did not include the Dabons in her petition for the annulment of
title. Deliberately failing to notify a party entitled to notice also constitutes extrinsic fraud.[22] This
fact is sufficient ground to annul the order allowing the cancellation of title in the name of
Gonzales.
Likewise, under Rule 47, a judgment is void for lack of jurisdiction over the persons of the real
parties in interest, i.e., Aristotle Manio and the Dabons.
Lastly, petitioner insists that the contract of sale between her and Priscilla was valid and
enforceable because under the provision on double sale,[23] she owned the land because she
bought the lot on April 26, 1988, while the same was allegedly sold to the Dabons on October
19, 1989. In our view, the doctrine on double sale holds no relevance in this case. The pertinent
article of the Civil Code provides:
ART. 1544. If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first 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 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 possession; and in the absence thereof; to the person who presents the oldest title,
provided there is good faith.
Otherwise stated, where it is immovable property that is the subject of a double sale, ownership
shall be transferred (1) to the person acquiring it who in good faith first recorded it in the Registry
of Property; (2) in default thereof, to the person who in good faith was first in possession; and (3)
in default thereof, to the person who presents the oldest title, provided there is good faith. The
requirement of the law is two-fold: acquisition in good faith and registration in good faith.[24]
At this juncture, we must emphasize that the action for annulment of judgment under Rule 47 of
the Rules of Court does not involve the merits of the final order of the trial court.[25] The issue of
whether before us is a case of double sale is outside the scope of the present petition for review.
The appellate court only allowed the reception of extraneous evidence to determine extrinsic
fraud. To determine which sale was valid, review of evidence is necessary. This we cannot do in
this petition. An action for annulment of judgment is independent of the case where the judgment
sought to be annulled is rendered[26] and is not an appeal of the judgment therein.[27]
The extraneous evidence presented to the appellate court cannot be used to supplant the
evidence in the records of the specific performance case because the extraneous evidence was
not part of the records on the merits of the case. Again, the extraneous evidence was only
allowed merely to prove the allegations of extrinsic fraud. Accordingly, we hold that the issue of
ownership of the subject real property cannot be addressed in this petition for review.
Annulment of judgment is not a relief to be granted indiscriminately by the courts. It is a recourse
equitable in character and allowed only in exceptional cases as where there is no available or
other adequate remedy.[28] This case falls under said exception. In this case, where it was
found that the trial court did not have jurisdiction over the real parties in interest, and that notices
were deliberately not given, amount to extrinsic fraud. The Court of Appeals did not err in
granting the annulment of the judgment in Civil Case No. 2647 and the orders subsequent
thereto, for lack of jurisdiction and extrinsic fraud.
WHEREFORE, the petition is DENIED for lack of merit. The assailed Decision dated February
22, 1995 of the Court of Appeals in CA-G.R. SP No. 23687, is AFFIRMED. Costs against
petitioner Maria Gonzales.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-29972 January 26, 1976
ROSARIO CARBONELL, petitioner,
vs.
HONORABLE COURT OF APPEALS, JOSE PONCIO, EMMA INFANTE and RAMON
INFANTE, respondents.
MAKASIAR, J.
Petitioner seeks a review of the resolution of the Court of Appeals (Special Division of Five)
dated October 30, 1968, reversing its decision of November 2, 1967 (Fifth Division), and its
resolution of December 6, 1968 denying petitioner's motion for reconsideration.
The dispositive part of the challenged resolution reads:
Wherefore, the motion for reconsideration filed on behalf of appellee Emma Infante, is hereby
granted and the decision of November 2, 1967, is hereby annulled and set aside. Another
judgement shall be entered affirming in toto that of the court a quo, dated January 20, 1965,
which dismisses the plaintiff's complaint and defendant's counterclaim.
Without costs.
The facts of the case as follows:
Prior to January 27, 1955, respondent Jose Poncio, a native of the Batanes Islands, was the
owner of the parcel of land herein involve with improvements situated at 179 V. Agan St., San
Juan, Rizal, having an area of some one hundred ninety-five (195) square meters, more or less,
covered by TCT No. 5040 and subject to mortgage in favor of the Republic Savings Bank for the
sum of P1,500.00. Petitioner Rosario Carbonell, a cousin and adjacent neighbor of respondent
Poncio, and also from the Batanes Islands, lived in the adjoining lot at 177 V. Agan Street.
Both petitioners Rosario Carbonell and respondent Emma Infante offered to buy the said lot from
Poncio (Poncio's Answer, p. 38, rec. on appeal).
Respondent Poncio, unable to keep up with the installments due on the mortgage, approached
petitioner one day and offered to sell to the latter the said lot, excluding the house wherein
respondent lived. Petitioner accepted the offer and proposed the price of P9.50 per square
meter. Respondent Poncio, after having secured the consent of his wife and parents, accepted
the price proposed by petitioner, on the condition that from the purchase price would come the
money to be paid to the bank.
Petitioner and respondent Jose Poncio then went to the Republic Savings Bank and secured the
consent of the President thereof for her to pay the arrears on the mortgage and to continue the
payment of the installments as they fall due. The amount in arrears reached a total sum of
P247.26. But because respondent Poncio had previously told her that the money, needed was
only P200.00, only the latter amount was brought by petitioner constraining respondent Jose
Poncio to withdraw the sum of P47.00 from his bank deposit with Republic Savings Bank. But
the next day, petitioner refunded to Poncio the sum of P47.00.
On January 27, 1955, petitioner and respondent Poncio, in the presence of a witness, made and
executed a document in the Batanes dialect, which, translated into English, reads:
CONTRACT FOR ONE HALF LOT WHICH I BOUGHT FROM
JOSE PONCIO
Beginning today January 27, 1955, Jose Poncio can start living on the lot sold by him to me,
Rosario Carbonell, until after one year during which time he will not pa anything. Then if after
said one can he could not find an place where to move his house, he could still continue
occupying the site but he should pay a rent that man, be agreed.
(Sgd) JOSE PONCIO
(Sgd.) ROSARIO CARBONELL
(Sgd) CONSTANCIO MEONADA
Witness
(Pp. 6-7 rec. on appeal).
Thereafter, petitioner asked Atty. Salvador Reyes, also from the Batanes Islands, to prepare the
formal deed of sale, which she brought to respondent Poncio together with the amount of some
P400.00, the balance she still had to pay in addition to her assuming the mortgaged obligation to
Republic Savings Bank.
Upon arriving at respondent Jose Poncio's house, however, the latter told petitioner that he
could not proceed any more with the sale, because he had already given the lot to respondent
Emma Infants; and that he could not withdraw from his deal with respondent Mrs. Infante, even if
he were to go to jail. Petitioner then sought to contact respondent Mrs. Infante but the latter
refused to see her.
On February 5, 1955, petitioner saw Emma Infante erecting a all around the lot with a gate.
Petitioner then consulted Atty. Jose Garcia, who advised her to present an adverse claim over
the land in question with the Office of the Register of Deeds of Rizal. Atty. Garcia actually sent a
letter of inquiry to the Register of Deeds and demand letters to private respondents Jose Poncio
and Emma Infante.
In his answer to the complaint Poncio admitted "that on January 30, 1955, Mrs. Infante improved
her offer and he agreed to sell the land and its improvements to her for P3,535.00" (pp. 38-40,
ROA).
In a private memorandum agreement dated January 31, 1955, respondent Poncio indeed bound
himself to sell to his corespondent Emma Infante, the property for the sum of P2,357.52, with
respondent Emma Infante still assuming the existing mortgage debt in favor of Republic Savings
Bank in the amount of P1,177.48. Emma Infante lives just behind the houses of Poncio and
Rosario Carbonell.
On February 2, 1955, respondent Jose Poncio executed the formal deed of sale in favor of
respondent Mrs. Infante in the total sum of P3,554.00 and on the same date, the latter paid
Republic Savings Bank the mortgage indebtedness of P1,500.00. The mortgage on the lot was
eventually discharged.
Informed that the sale in favor of respondent Emma Infante had not yet been registered, Atty.
Garcia prepared an adverse claim for petitioner, who signed and swore to an registered the
same on February 8, 1955.
The deed of sale in favor of respondent Mrs. Infante was registered only on February 12, 1955.
As a consequence thereof, a Transfer Certificate of Title was issued to her but with the
annotation of the adverse claim of petitioner Rosario Carbonell.
Respondent Emma Infante took immediate possession of the lot involved, covered the same
with 500 cubic meters of garden soil and built therein a wall and gate, spending the sum of
P1,500.00. She further contracted the services of an architect to build a house; but the
construction of the same started only in 1959 years after the litigation actually began and
during its pendency. Respondent Mrs. Infante spent for the house the total amount of
P11,929.00.
On June 1, 1955, petitioner Rosario Carbonell, thru counsel, filed a second amended complaint
against private respondents, praying that she be declared the lawful owner of the questioned
parcel of land; that the subsequent sale to respondents Ramon R. Infante and Emma L. Infante
be declared null and void, and that respondent Jose Poncio be ordered to execute the
corresponding deed of conveyance of said land in her favor and for damages and attorney's fees
(pp. 1-7, rec. on appeal in the C.A.).
Respondents first moved to dismiss the complaint on the ground, among others, that petitioner's
claim is unenforceable under the Statute of Frauds, the alleged sale in her favor not being
evidenced by a written document (pp. 7-13, rec. on appeal in the C.A.); and when said motion
was denied without prejudice to passing on the question raised therein when the case would be
tried on the merits (p. 17, ROA in the C.A.), respondents filed separate answers, reiterating the
grounds of their motion to dismiss (pp. 18-23, ROA in the C.A.).
During the trial, when petitioner started presenting evidence of the sale of the land in question to
her by respondent Poncio, part of which evidence was the agreement written in the Batanes
dialect aforementioned, respondent Infantes objected to the presentation by petitioner of parole
evidence to prove the alleged sale between her and respondent Poncio. In its order of April 26,
1966, the trial court sustained the objection and dismissed the complaint on the ground that the
memorandum presented by petitioner to prove said sale does not satisfy the requirements of the
law (pp. 31-35, ROA in the C.A.).
From the above order of dismissal, petitioner appealed to the Supreme Court (G.R. No. L-
11231) which ruled in a decision dated May 12, 1958, that the Statute of Frauds, being
applicable only to executory contracts, does not apply to the alleged sale between petitioner and
respondent Poncio, which petitioner claimed to have been partially performed, so that petitioner
is entitled to establish by parole evidence "the truth of this allegation, as well as the contract
itself." The order appealed from was thus reversed, and the case remanded to the court a quo
for further proceedings (pp. 26-49, ROA in the C.A.).
After trial in the court a quo; a decision was, rendered on December 5, 1962, declaring the
second sale by respondent Jose Poncio to his co-respondents Ramon Infante and Emma
Infante of the land in question null and void and ordering respondent Poncio to execute the
proper deed of conveyance of said land in favor of petitioner after compliance by the latter of her
covenants under her agreement with respondent Poncio (pp. 5056, ROA in the C.A.).
On January 23, 1963, respondent Infantes, through another counsel, filed a motion for re-trial to
adduce evidence for the proper implementation of the court's decision in case it would be
affirmed on appeal (pp. 56-60, ROA in the C.A.), which motion was opposed by petitioner for
being premature (pp. 61-64, ROA in the C.A.). Before their motion for re-trial could be resolved,
respondent Infantes, this time through their former counsel, filed another motion for new trial,
claiming that the decision of the trial court is contrary to the evidence and the law (pp. 64-78,
ROA in the C.A.), which motion was also opposed by petitioner (pp. 78-89, ROA in the C.A.).
The trial court granted a new trial (pp. 89-90, ROA in the C.A.), at which re-hearing only the
respondents introduced additional evidence consisting principally of the cost of improvements
they introduced on the land in question (p. 9, ROA in the C.A.).

After the re-hearing, the trial court rendered a decision, reversing its decision of December 5,
1962 on the ground that the claim of the respondents was superior to the claim of petitioner, and
dismissing the complaint (pp. 91-95, ROA in the C.A.), From this decision, petitioner Rosario
Carbonell appealed to the respondent Court of Appeals (p. 96, ROA in the C.A.).
On November 2, 1967, the Court of Appeals (Fifth Division composed of Justices Magno
Gatmaitan, Salvador V. Esguerra and Angle H. Mojica, speaking through Justice Magno
Gatmaitan), rendered judgment reversing the decision of the trial court, declaring petitioner
therein, to have a superior right to the land in question, and condemning the defendant Infantes
to reconvey to petitioner after her reimbursement to them of the sum of P3,000.00 plus legal
interest, the land in question and all its improvements (Appendix "A" of Petition).
Respondent Infantes sought reconsideration of said decision and acting on the motion for
reconsideration, the Appellate Court, three Justices (Villamor, Esguerra and Nolasco) of Special
Division of Five, granted said motion, annulled and set aside its decision of November 2, 1967,
and entered another judgment affirming in toto the decision of the court a quo, with Justices
Gatmaitan and Rodriguez dissenting (Appendix "B" of Petition).
Petitioner Rosario Carbonell moved to reconsider the Resolution of the Special Division of Five,
which motion was denied by Minute Resolution of December 6, 1968 (but with Justices
Rodriguez and Gatmaitan voting for reconsideration) [Appendix "C" of Petition].
Hence, this appeal by certiorari.
Article 1544, New Civil Code, which is decisive of this case, recites:
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 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 (emphasis supplied).
It is essential that the buyer of realty must act in good faith in registering his deed of sale to merit
the protection of the second paragraph of said Article 1544.
Unlike the first and third paragraphs of said Article 1544, which accord preference to the one
who first takes possession in good faith of personal or real property, the second paragraph
directs that ownership of immovable property should be recognized in favor of one "who in good
faith first recorded" his right. Under the first and third paragraph, good faith must characterize
the act of anterior registration (DBP vs. Mangawang, et al., 11 SCRA 405; Soriano, et al. vs.
Magale, et al., 8 SCRA 489).
If there is no inscription, what is decisive is prior possession in good faith. If there is inscription,
as in the case at bar, prior registration in good faith is a pre-condition to superior title.
When Carbonell bought the lot from Poncio on January 27, 1955, she was the only buyer thereof
and the title of Poncio was still in his name solely encumbered by bank mortgage duly annotated
thereon. Carbonell was not aware and she could not have been aware of any sale of
Infante as there was no such sale to Infante then. Hence, Carbonell's prior purchase of the land
was made in good faith. Her good faith subsisted and continued to exist when she recorded her
adverse claim four (4) days prior to the registration of Infantes's deed of sale. Carbonell's good
faith did not cease after Poncio told her on January 31, 1955 of his second sale of the same lot
to Infante. Because of that information, Carbonell wanted an audience with Infante, which desire
underscores Carbonell's good faith. With an aristocratic disdain unworthy of the good breeding
of a good Christian and good neighbor, Infante snubbed Carbonell like a leper and refused to
see her. So Carbonell did the next best thing to protect her right she registered her adversed
claim on February 8, 1955. Under the circumstances, this recording of her adverse claim should
be deemed to have been done in good faith and should emphasize Infante's bad faith when she
registered her deed of sale four (4) days later on February 12, 1955.
Bad faith arising from previous knowledge by Infante of the prior sale to Carbonell is shown by
the following facts, the vital significance and evidenciary effect of which the respondent Court of
Appeals either overlooked of failed to appreciate:
(1) Mrs. Infante refused to see Carbonell, who wanted to see Infante after she was
informed by Poncio that he sold the lot to Infante but several days before Infante registered her
deed of sale. This indicates that Infante knew from Poncio and from the bank of the prior
sale of the lot by Poncio to Carbonell. Ordinarily, one will not refuse to see a neighbor. Infante
lives just behind the house of Carbonell. Her refusal to talk to Carbonell could only mean that
she did not want to listen to Carbonell's story that she (Carbonell) had previously bought the lot
from Poncio.
(2) Carbonell was already in possession of the mortgage passbook [not Poncio's saving
deposit passbook Exhibit "1" Infantes] and Poncio's copy of the mortgage contract, when
Poncio sold the lot Carbonell who, after paying the arrearages of Poncio, assumed the balance
of his mortgaged indebtedness to the bank, which in the normal course of business must have
necessarily informed Infante about the said assumption by Carbonell of the mortgage
indebtedness of Poncio. Before or upon paying in full the mortgage indebtedness of Poncio to
the Bank. Infante naturally must have demanded from Poncio the delivery to her of his mortgage
passbook as well as Poncio's mortgage contract so that the fact of full payment of his bank
mortgage will be entered therein; and Poncio, as well as the bank, must have inevitably informed
her that said mortgage passbook could not be given to her because it was already delivered to
Carbonell.
If Poncio was still in possession of the mortgage passbook and his copy of the mortgage
contract at the time he executed a deed of sale in favor of the Infantes and when the Infantes
redeemed his mortgage indebtedness from the bank, Poncio would have surrendered his
mortgage passbook and his copy of the mortgage contract to the Infantes, who could have
presented the same as exhibits during the trial, in much the same way that the Infantes were
able to present as evidence Exhibit "1" Infantes, Poncio's savings deposit passbook, of which
Poncio necessarily remained in possession as the said deposit passbook was never involved in
the contract of sale with assumption of mortgage. Said savings deposit passbook merely proves
that Poncio had to withdraw P47.26, which amount was tided to the sum of P200.00 paid by
Carbonell for Poncio's amortization arrearages in favor of the bank on January 27, 1955;
because Carbonell on that day brought with her only P200.00, as Poncio told her that was the
amount of his arrearages to the bank. But the next day Carbonell refunded to Poncio the sum of
P47.26.
(3) The fact that Poncio was no longer in possession of his mortgage passbook and that
the said mortgage passbook was already in possession of Carbonell, should have compelled
Infante to inquire from Poncio why he was no longer in possession of the mortgage passbook
and from Carbonell why she was in possession of the same (Paglago, et. al vs. Jara et al 22
SCRA 1247, 1252-1253). The only plausible and logical reason why Infante did not bother
anymore to make such injury , w because in the ordinary course of business the bank must have
told her that Poncio already sold the lot to Carbonell who thereby assumed the mortgage
indebtedness of Poncio and to whom Poncio delivered his mortgage passbook. Hoping to give a
semblance of truth to her pretended good faith, Infante snubbed Carbonell's request to talk to
her about the prior sale to her b Poncio of the lot. As aforestated, this is not the attitude expected
of a good neighbor imbued with Christian charity and good will as well as a clear conscience.
(4) Carbonell registered on February 8, 1955 her adverse claim, which was accordingly
annotated on Poncio's title, four [4] days before Infante registered on February 12, 1955 her
deed of sale executed on February 2, 1955. Here she was again on notice of the prior sale to
Carbonell. Such registration of adverse claim is valid and effective (Jovellanos vs. Dimalanta, L-
11736-37, Jan. 30, 1959, 105 Phil. 1250-51).
(5) In his answer to the complaint filed by Poncio, as defendant in the Court of First
Instance, he alleged that both Mrs. Infante and Mrs. Carbonell offered to buy the lot at P15.00
per square meter, which offers he rejected as he believed that his lot is worth at least P20.00 per
square meter. It is therefore logical to presume that Infante was told by Poncio and consequently
knew of the offer of Carbonell which fact likewise should have put her on her guard and should
have compelled her to inquire from Poncio whether or not he had already sold the property to
Carbonell.
As recounted by Chief Justice Roberto Concepcion, then Associate Justice, in the preceding
case of Rosario Carbonell vs. Jose Poncio, Ramon Infante and Emma Infante (1-11231, May 12,
1958), Poncio alleged in his answer:
... that he had consistently turned down several offers, made by plaintiff, to buy the land in
question, at P15 a square meter, for he believes that it is worth not less than P20 a square
meter; that Mrs. Infante, likewise, tried to buy the land at P15 a square meter; that, on or about
January 27, 1955, Poncio was advised by plaintiff that should she decide to buy the property at
P20 a square meter, she would allow him to remain in the property for one year; that plaintiff
then induced Poncio to sign a document, copy of which if probably the one appended to the
second amended complaint; that Poncio signed it 'relying upon the statement of the plaintiff that
the document was a permit for him to remain in the premises in the event defendant decided to
sell the property to the plaintiff at P20.00 a square meter'; that on January 30, 1955, Mrs. Infante
improved her offer and agreed to sell the land and its improvement to her for P3,535.00; that
Poncio has not lost 'his mind,' to sell his property, worth at least P4,000, for the paltry sum
P1,177.48, the amount of his obligation to the Republic Saving s Bank; and that plaintiff's action
is barred by the Statute of Frauds. ... (pp. 38-40, ROA, emphasis supplied).
II
EXISTENCE OF THE PRIOR SALE TO CARBONELL
DULY ESTABLISHED
(1) In his order dated April 26, 1956 dismissing the complaint on the ground that the
private document Exhibit "A" executed by Poncio and Carbonell and witnessed by Constancio
Meonada captioned "Contract for One-half Lot which I Bought from Jose Poncio," was not such
a memorandum in writing within the purview of the Statute of Frauds, the trial judge himself
recognized the fact of the prior sale to Carbonell when he stated that "the memorandum in
question merely states that Poncio is allowed to stay in the property which he had sold to the
plaintiff. There is no mention of the reconsideration, a description of the property and such other
essential elements of the contract of sale. There is nothing in the memorandum which would
tend to show even in the slightest manner that it was intended to be an evidence of contract
sale. On the contrary, from the terms of the memorandum, it tends to show that the sale of the
property in favor of the plaintiff is already an accomplished act. By the very contents of the
memorandum itself, it cannot therefore, be considered to be the memorandum which would
show that a sale has been made by Poncio in favor of the plaintiff" (p. 33, ROA, emphasis
supplied). As found by the trial court, to repeat the said memorandum states "that Poncio is
allowed to stay in the property which he had sold to the plaintiff ..., it tends to show that the sale
of the property in favor of the plaintiff is already an accomplished act..."
(2) When the said order was appealed to the Supreme Court by Carbonell in the previous
case of Rosario Carbonell vs. Jose Poncio, Ramon Infante and Emma Infante
(L-11231, supra), Chief Justice Roberto Concepcion, then Associate Justice, speaking for a
unanimous Court, reversed the aforesaid order of the trial court dismissing the complaint,
holding that because the complaint alleges and the plaintiff claims that the contract of sale was
partly performed, the same is removed from the application of the Statute of Frauds and
Carbonell should be allowed to establish by parol evidence the truth of her allegation of partial
performance of the contract of sale, and further stated:
Apart from the foregoing, there are in the case at bar several circumstances indicating that
plaintiff's claim might not be entirely devoid of factual basis. Thus, for instance, Poncio admitted
in his answer that plaintiff had offered several times to purchase his land.
Again, there is Exhibit A, a document signed by the defendant. It is in the Batanes dialect, which,
according to plaintiff's uncontradicted evidence, is the one spoken by Poncio, he being a native
of said region. Exhibit A states that Poncio would stay in the land sold by him to plaintiff for one
year, from January 27, 1955, free of charge, and that, if he cannot find a place where to transfer
his house thereon, he may remain upon. Incidentally, the allegation in Poncio's answer to the
effect that he signed Exhibit A under the belief that it "was a permit for him to remain in the
premises in the" that "he decided to sell the property" to the plaintiff at P20 a sq. m." is, on its
face, somewhat difficult to believe. Indeed, if he had not decided as yet to sell the land to
plaintiff, who had never increased her offer of P15 a square meter, there was no reason for
Poncio to get said permit from her. Upon the other hand, if plaintiff intended to mislead Poncio,
she would have caused Exhibit A to be drafted, probably, in English , instead of taking the
trouble of seeing to it that it was written precisely in his native dialect, the Batanes. Moreover,
Poncio's signature on Exhibit A suggests that he is neither illiterate nor so ignorant as to sign
document without reading its contents, apart from the fact that Meonada had read Exhibit A to
him and given him a copy thereof, before he signed thereon, according to Meonada's
uncontradicted testimony.
Then, also, defendants say in their brief:
The only allegation in plaintiff's complaint that bears any relation to her claim that there has been
partial performance of the supposed contract of sale, is the notation of the sum of P247.26 in the
bank book of defendant Jose Poncio. The noting or jotting down of the sum of P247.26 in the
bank book of Jose Poncio does not prove the fact that the said amount was the purchase price
of the property in question. For all we knew, the sum of P247.26 which plaintiff claims to have
paid to the Republic Savings Bank for the account of the defendant, assuming that the money
paid to the Republic Savings Bank came from the plaintiff, was the result of some usurious loan
or accomodation, rather than earnest money or part payment of the land. Neither is it competent
or satisfactory evidence to prove the conveyance of the land in question the fact that the bank
book account of Jose Poncio happens to be in the possession of the plaintiff. (Defendants-
Appellees' brief, pp. 25-26).
How shall We know why Poncio's bank deposit book is in plaintiffs possession, or whether there
is any relation between the P247.26 entry therein and the partial payment of P247.26 allegedly
made by plaintiff to Poncio on account of the price of his land, if we do not allow the plaintiff to
explain it on the witness stand? Without expressing any opinion on the merits of plaintiff's claim,
it is clear, therefore, that she is entitled , legally as well as from the viewpoint of equity, to an
opportunity to introduce parol evidence in support of the allegations of her second amended
complaint. (pp. 46-49, ROA, emphasis supplied).
(3) In his first decision of December 5, 1962 declaring null and void the sale in favor of the
Infantes and ordering Poncio to execute a deed of conveyance in favor of Carbonell, the trial
judge found:
... A careful consideration of the contents of Exh. 'A' show to the satisfaction of the court that the
sale of the parcel of land in question by the defendant Poncio in favor of the plaintiff was covered
therein and that the said Exh. "a' was also executed to allow the defendant to continue staying in
the premises for the stated period. It will be noted that Exh. 'A' refers to a lot 'sold by him to me'
and having been written originally in a dialect well understood by the defendant Poncio, he
signed the said Exh. 'A' with a full knowledge and consciousness of the terms and
consequences thereof. This therefore, corroborates the testimony of the plaintiff Carbonell that
the sale of the land was made by Poncio. It is further pointed out that there was a partial
performance of the verbal sale executed by Poncio in favor of the plaintiff, when the latter paid
P247.26 to the Republic Savings Bank on account of Poncio's mortgage indebtedness. Finally,
the possession by the plaintiff of the defendant Poncio's passbook of the Republic Savings Bank
also adds credibility to her testimony. The defendant contends on the other hand that the
testimony of the plaintiff, as well as her witnesses, regarding the sale of the land made by
Poncio in favor of the plaintiff is inadmissible under the provision of the Statute of Fraud based
on the argument that the note Exh. "A" is not the note or memorandum referred to in the to in the
Statute of Fraud. The defendants argue that Exh. "A" fails to comply with the requirements of the
Statute of Fraud to qualify it as the note or memorandum referred to therein and open the way
for the presentation of parole evidence to prove the fact contained in the note or memorandum.
The defendant argues that there is even no description of the lot referred to in the note,
especially when the note refers to only one half lot. With respect to the latter argument of the
Exhibit 'A', the court has arrived at the conclusion that there is a sufficient description of the lot
referred to in Exh. 'A' as none other than the parcel of land occupied by the defendant Poncio
and where he has his improvements erected. The Identity of the parcel of land involved herein is
sufficiently established by the contents of the note Exh. "A". For a while, this court had that
similar impression but after a more and thorough consideration of the context in Exh. 'A' and for
the reasons stated above, the Court has arrived at the conclusion stated earlier (pp. 52-54,
ROA, emphasis supplied).
(4) After re-trial on motion of the Infantes, the trial Judge rendered on January 20, 1965
another decision dismissing the complaint, although he found
1. That on January 27, 1955, the plaintiff purchased from the defendant Poncio a parcel
of land with an area of 195 square meters, more or less, covered by TCT No. 5040 of the
Province of Rizal, located at San Juan del Monte, Rizal, for the price of P6.50 per square meter;
2. That the purchase made by the plaintiff was not reduced to writing except for a short
note or memorandum Exh. A, which also recited that the defendant Poncio would be allowed to
continue his stay in the premises, among other things, ... (pp. 91-92, ROA, emphasis supplied).
From such factual findings, the trial Judge confirms the due execution of Exhibit "A", only that his
legal conclusion is that it is not sufficient to transfer ownership (pp. 93-94, ROA).
(5) In the first decision of November 2, 1967 of the Fifth Division of the Court of Appeals
composed of Justices Esguerra (now Associate Justice of the Supreme Court), Gatmaitan and
Mojica, penned by Justice Gatmaitan, the Court of Appeals found that:
... the testimony of Rosario Carbonell not having at all been attempted to be disproved by
defendants, particularly Jose Poncio, and corroborated as it is by the private document in
Batanes dialect, Exhibit A, the testimony being to the effect that between herself and Jose there
had been celebrated a sale of the property excluding the house for the price of P9.50 per square
meter, so much so that on faith of that, Rosario had advanced the sum of P247.26 and binding
herself to pay unto Jose the balance of the purchase price after deducting the indebtedness to
the Bank and since the wording of Exhibit A, the private document goes so far as to describe
their transaction as one of sale, already consummated between them, note the part tense used
in the phrase, "the lot sold by him to me" and going so far even as to state that from that day
onwards, vendor would continue to live therein, for one year, 'during which time he will not pay
anything' this can only mean that between Rosario and Jose, there had been a true contract of
sale, consummated by delivery constitutum possession, Art. 1500, New Civil Code; vendor's
possession having become converted from then on, as a mere tenant of vendee, with the special
privilege of not paying rental for one year, it is true that the sale by Jose Poncio to Rosario
Carbonell corroborated documentarily only by Exhibit A could not have been registered at all, but
it was a valid contract nonetheless, since under our law, a contract sale is consensual, perfected
by mere consent, Couto v. Cortes, 8 Phil 459, so much so that under the New Civil Code, while
a sale of an immovable is ordered to be reduced to a public document, Art. 1358, that mandate
does not render an oral sale of realty invalid, but merely incapable of proof, where still executory
and action is brought and resisted for its performance, 1403, par. 2, 3; but where already wholly
or partly executed or where even if not yet, it is evidenced by a memorandum, in any case where
evidence to further demonstrate is presented and admitted as the case was here, then the oral
sale becomes perfectly good, and becomes a good cause of action not only to reduce it to the
form of a public document, but even to enforce the contract in its entirety, Art. 1357; and thus it
is that what we now have is a case wherein on the one hand Rosario Carbonell has proved that
she had an anterior sale, celebrated in her favor on 27 January, 1955, Exhibit A, annotated as
an adverse claim on 8 February, 1955, and on other, a sale is due form in favor of Emma L.
Infante on 2 February, 1955, Exhibit 3-Infante, and registered in due form with title unto her
issued on 12 February, 1955; the vital question must now come on which of these two sales
should prevail; ... (pp. 74-76, rec., emphasis supplied).
(6) In the resolution dated October 30, 1968 penned by then Court of Appeals Justice
Esguerra (now a member of this Court), concurred in by Justices Villamor and Nolasco,
constituting the majority of a Special Division of Five, the Court of Appeals, upon motion of the
Infantes, while reversing the decision of November 2, 1967 and affirming the decision of the trial
court of January 20, 1965 dismissing plaintiff's complaint, admitted the existence and
genuineness of Exhibit "A", the private memorandum dated January 27, 1955, although it did not
consider the same as satisfying "the essential elements of a contract of sale," because it "neither
specifically describes the property and its boundaries, nor mention its certificate of title number,
nor states the price certain to be paid, or contrary to the express mandate of Articles 1458 and
1475 of the Civil Code.
(7) In his dissent concurred in by Justice Rodriguez, Justice Gatmaitan maintains his
decision of November 2, 1967 as well as his findings of facts therein, and reiterated that the
private memorandum Exhibit "A", is a perfected sale, as a sale is consensual and consummated
by mere consent, and is binding on and effective between the parties. This statement of the
principle is correct [pp. 89-92, rec.].
III
ADEQUATE CONSIDERATION OR PRICE FOR THE SALE
IN FAVOR OF CARBONELL
It should be emphasized that the mortgage on the lot was about to be foreclosed by the bank for
failure on the part of Poncio to pay the amortizations thereon. To forestall the foreclosure and at
the same time to realize some money from his mortgaged lot, Poncio agreed to sell the same to
Carbonell at P9.50 per square meter, on condition that Carbonell [1] should pay (a) the amount
of P400.00 to Poncio and 9b) the arrears in the amount of P247.26 to the bank; and [2] should
assume his mortgage indebtedness. The bank president agreed to the said sale with assumption
of mortgage in favor of Carbonell an Carbonell accordingly paid the arrears of P247.26. On
January 27, 1955, she paid the amount of P200.00 to the bank because that was the amount
that Poncio told her as his arrearages and Poncio advanced the sum of P47.26, which amount
was refunded to him by Carbonell the following day. This conveyance was confirmed that same
day, January 27, 1955, by the private document, Exhibit "A", which was prepared in the Batanes
dialect by the witness Constancio Meonada, who is also from Batanes like Poncio and
Carbonell.
The sale did not include Poncio's house on the lot. And Poncio was given the right to continue
staying on the land without paying any rental for one year, after which he should pay rent if he
could not still find a place to transfer his house. All these terms are part of the consideration of
the sale to Carbonell.
It is evident therefore that there was ample consideration, and not merely the sum of P200.00,
for the sale of Poncio to Carbonell of the lot in question.
But Poncio, induced by the higher price offered to him by Infante, reneged on his commitment to
Carbonell and told Carbonell, who confronted him about it, that he would not withdraw from his
deal with Infante even if he is sent to jail The victim, therefore, "of injustice and outrage is the
widow Carbonell and not the Infantes, who without moral compunction exploited the greed and
treacherous nature of Poncio, who, for love of money and without remorse of conscience,
dishonored his own plighted word to Carbonell, his own cousin.
Inevitably evident therefore from the foregoing discussion, is the bad faith of Emma Infante from
the time she enticed Poncio to dishonor his contract with Carbonell, and instead to sell the lot to
her (Infante) by offering Poncio a much higher price than the price for which he sold the same to
Carbonell. Being guilty of bad faith, both in taking physical possession of the lot and in recording
their deed of sale, the Infantes cannot recover the value of the improvements they introduced in
the lot. And after the filing by Carbonell of the complaint in June, 1955, the Infantes had less
justification to erect a building thereon since their title to said lot is seriously disputed by
Carbonell on the basis of a prior sale to her.
With respect to the claim of Poncio that he signed the document Exhibit "A" under the belief that
it was a permit for him to remain in the premises in ease he decides to sell the property to
Carbonell at P20.00 per square meter, the observation of the Supreme Court through Mr. Chief
Justice Concepcion in G.R. No. L-11231, supra, bears repeating:
... Incidentally, the allegation in Poncio's answer to the effect that he signed Exhibit A under the
belief that it 'was a permit for him to remain in the premises in the event that 'he decided to sell
the property' to the plaintiff at P20.00 a sq. m is, on its face, somewhat difficult to believe.
Indeed, if he had not decided as yet to sell that land to plaintiff, who had never increased her
offer of P15 a square meter, there as no reason for Poncio to get said permit from her. Upon the
they if plaintiff intended to mislead Poncio, she would have Exhibit A to be drafted, probably, in
English, instead of taking the trouble of seeing to it that it was written precisely in his native
dialect, the Batanes. Moreover, Poncio's signature on Exhibit A suggests that he is neither
illiterate nor so ignorant as to sign a document without reading its contents, apart from the fact
that Meonada had read Exhibit A to him-and given him a copy thereof, before he signed thereon,
according to Meonada's uncontradicted testimony. (pp. 46-47, ROA).
As stressed by Justice Gatmaitan in his first decision of November 2, 1965, which he reiterated
in his dissent from the resolution of the majority of the Special Division. of Five on October 30,
1968, Exhibit A, the private document in the Batanes dialect, is a valid contract of sale between
the parties, since sale is a consensual contract and is perfected by mere consent (Couto vs.
Cortes, 8 Phil. 459). Even an oral contract of realty is all between the parties and accords to the
vendee the right to compel the vendor to execute the proper public document As a matter of fact,
Exhibit A, while merely a private document, can be fully or partially performed, to it from the
operation of the statute of frauds. Being a all consensual contract, Exhibit A effectively
transferred the possession of the lot to the vendee Carbonell by constitutum possessorium
(Article 1500, New Civil Code); because thereunder the vendor Poncio continued to retain
physical possession of the lot as tenant of the vendee and no longer as knew thereof. More than
just the signing of Exhibit A by Poncio and Carbonell with Constancio Meonada as witness to
fact the contract of sale, the transition was further confirmed when Poncio agreed to the actual
payment by at Carbonell of his mortgage arrearages to the bank on January 27, 1955 and by his
consequent delivery of his own mortgage passbook to Carbonell. If he remained owner and
mortgagor, Poncio would not have surrendered his mortgage passbook to' Carbonell.
IV
IDENTIFICATION AND DESCRIPTION OF THE DISPUTED LOT IN THE MEMORANDUM
EXHIBIT "A"
The claim that the memorandum Exhibit "A" does not sufficiently describe the disputed lot as the
subject matter of the sale, was correctly disposed of in the first decision of the trial court of
December 5, 1962, thus: "The defendant argues that there is even no description of the lot
referred to in the note (or memorandum), especially when the note refers to only one-half lot.
With respect to the latter argument of the defendant, plaintiff points out that one- half lot was
mentioned in Exhibit 'A' because the original description carried in the title states that it was
formerly part of a bigger lot and only segregated later. The explanation is tenable, in (sic)
considering the time value of the contents of Exh. 'A', the court has arrived at the conclusion that
there is sufficient description of the lot referred to in Exh. As none other than the parcel of lot
occupied by the defendant Poncio and where he has his improvements erected. The Identity of
the parcel of land involved herein is sufficiently established by the contents of the note Exh. 'A'.
For a while, this court had that similar impression but after a more and through consideration of
the context in Exh. 'A' and for the reasons stated above, the court has arrived to (sic) the
conclusion stated earlier" (pp. 53-54, ROA).
Moreover, it is not shown that Poncio owns another parcel with the same area, adjacent to the
lot of his cousin Carbonell and likewise mortgaged by him to the Republic Savings Bank. The
transaction therefore between Poncio and Carbonell can only refer and does refer to the lot
involved herein. If Poncio had another lot to remove his house, Exhibit A would not have
stipulated to allow him to stay in the sold lot without paying any rent for one year and thereafter
to pay rental in case he cannot find another place to transfer his house.
While petitioner Carbonell has the superior title to the lot, she must however refund to
respondents Infantes the amount of P1,500.00, which the Infantes paid to the Republic Savings
Bank to redeem the mortgage.
It appearing that the Infantes are possessors in bad faith, their rights to the improvements they
introduced op the disputed lot are governed by Articles 546 and 547 of the New Civil Code. Their
expenses consisting of P1,500.00 for draining the property, filling it with 500 cubic meters of
garden soil, building a wall around it and installing a gate and P11,929.00 for erecting a b '
bungalow thereon, are useful expenditures, for they add to the value of the property (Aringo vs.
Arenas, 14 Phil. 263; Alburo vs. Villanueva, 7 Phil. 277; Valencia vs. Ayala de Roxas, 13 Phil.
45).
Under the second paragraph of Article 546, the possessor in good faith can retain the useful
improvements unless the person who defeated him in his possession refunds him the amount of
such useful expenses or pay him the increased value the land may have acquired by reason
thereof. Under Article 547, the possessor in good faith has also the right to remove the useful
improvements if such removal can be done without damage to the land, unless the person with
the superior right elects to pay for the useful improvements or reimburse the expenses therefor
under paragraph 2 of Article 546. These provisions seem to imply that the possessor in bad faith
has neither the right of retention of useful improvements nor the right to a refund for useful
expenses.
But, if the lawful possessor can retain the improvements introduced by the possessor in bad faith
for pure luxury or mere pleasure only by paying the value thereof at the time he enters into
possession (Article 549 NCC), as a matter of equity, the Infantes, although possessors in bad
faith, should be allowed to remove the aforesaid improvements, unless petitioner Carbonell
chooses to pay for their value at the time the Infantes introduced said useful improvements in
1955 and 1959. The Infantes cannot claim reimbursement for the current value of the said useful
improvements; because they have been enjoying such improvements for about two decades
without paying any rent on the land and during which period herein petitioner Carbonell was
deprived of its possession and use.
WHEREFORE, THE DECISION OF THE SPECIAL DIVISION OF FIVE OF THE COURT OF
APPEALS OF OCTOBER 30, 1968 IS HEREBY REVERSED; PETITIONER ROSARIO
CARBONELL IS HEREBY DECLARED TO HAVE THE SUPERIOR RIGHT TO THE LAND IN
QUESTION AND IS HEREBY DIRECTED TO REIMBURSE TO PRIVATE RESPONDENTS
INFANTES THE SUM OF ONE THOUSAND FIVE HUNDRED PESOS (P1,500.00) WITHIN
THREE (3) MONTHS FROM THE FINALITY OF THIS DECISION; AND THE REGISTER OF
DEEDS OF RIZAL IS HEREBY DIRECTED TO CANCEL TRANSFER CERTIFICATE OF TITLE
NO. 37842 ISSUED IN FAVOR OF PRIVATE RESPONDENTS INFANTES COVERING THE
DISPUTED LOT, WHICH CANCELLED TRANSFER CERTIFICATE OF TITLE NO. 5040 IN
THE NAME OF JOSE PONCIO, AND TO ISSUE A NEW TRANSFER CERTIFICATE OF TITLE
IN FAVOR OF PETITIONER ROSARIO CARBONELL UPON PRESENTATION OF PROOF OF
PAYMENT BY HER TO THE INFANTES OF THE AFORESAID AMOUNT OF ONE THOUSAND
FIVE HUNDRED PESOS (P1,500.00).
PRIVATE RESPONDENTS INFANTES MAY REMOVE THEIR AFOREMENTIONED USEFUL
IMPROVEMENTS FROM THE LOT WITHIN THREE (3) MONTHS FROM THE FINALITY OF
THIS DECISION, UNLESS THE PETITIONER ROSARIO CARBONELL ELECTS TO ACQUIRE
THE SAME AND PAYS THE INFANTES THE AMOUNT OF THIRTEEN THOUSAND FOUR
HUNDRED TWENTY-NINE PESOS (P13,429.00) WITHIN THREE (3) MONTHS FROM THE
FINALITY OF THIS DECISION. SHOULD PETITIONER CARBONELL FAIL TO PAY THE SAID
AMOUNT WITHIN THE AFORESTATED PERIOD OF THREE (3) MONTHS FROM THE
FINALITY OF THIS DECISION, THE PERIOD OF THREE (3) MONTHS WITHIN WHICH THE
RESPONDENTS INFANTES MAY REMOVE THEIR AFOREMENTIONED USEFUL
IMPROVEMENTS SHALL COMMENCE FROM THE EXPIRATION OF THE THREE (3)
MONTHS GIVEN PETITIONER CARBONELL TO PAY FOR THE SAID USEFUL
IMPROVEMENTS.
WITH COSTS AGAINST PRIVATE RESPONDENTS.
Castro, C.J, Aquino and Martin, JJ., concur.
SECOND DIVISION
[G.R. No. 124242. January 21, 2005]
SAN LORENZO DEVELOPMENT CORPORATION, petitioner, vs. COURT OF APPEALS,
PABLO S. BABASANTA, SPS. MIGUEL LU and PACITA ZAVALLA LU, respondents.
DECISION
TINGA, J.:
From a coaptation of the records of this case, it appears that respondents Miguel Lu and Pacita
Zavalla, (hereinafter, the Spouses Lu) owned two (2) parcels of land situated in Sta. Rosa,
Laguna covered by TCT No. T-39022 and TCT No. T-39023 both measuring 15,808 square
meters or a total of 3.1616 hectares.
On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to respondent
Pablo Babasanta, (hereinafter, Babasanta) for the price of fifteen pesos (P15.00) per square
meter. Babasanta made a downpayment of fifty thousand pesos (P50,000.00) as evidenced by a
memorandum receipt issued by Pacita Lu of the same date. Several other payments totaling two
hundred thousand pesos (P200,000.00) were made by Babasanta.
Sometime in May 1989, Babasanta wrote a letter to Pacita Lu to demand the execution of a final
deed of sale in his favor so that he could effect full payment of the purchase price. In the same
letter, Babasanta notified the spouses about having received information that the spouses sold
the same property to another without his knowledge and consent. He demanded that the second
sale be cancelled and that a final deed of sale be issued in his favor.
In response, Pacita Lu wrote a letter to Babasanta wherein she acknowledged having agreed to
sell the property to him at fifteen pesos (P15.00) per square meter. She, however, reminded
Babasanta that when the balance of the purchase price became due, he requested for a
reduction of the price and when she refused, Babasanta backed out of the sale. Pacita added
that she returned the sum of fifty thousand pesos (P50,000.00) to Babasanta through Eugenio
Oya.
On 2 June 1989, respondent Babasanta, as plaintiff, filed before the Regional Trial Court (RTC),
Branch 31, of San Pedro, Laguna, a Complaint for Specific Performance and Damages[1]
against his co-respondents herein, the Spouses Lu. Babasanta alleged that the lands covered
by TCT No. T- 39022 and T-39023 had been sold to him by the spouses at fifteen pesos
(P15.00) per square meter. Despite his repeated demands for the execution of a final deed of
sale in his favor, respondents allegedly refused.
In their Answer,[2] the Spouses Lu alleged that Pacita Lu obtained loans from Babasanta and
when the total advances of Pacita reached fifty thousand pesos (P50,000.00), the latter and
Babasanta, without the knowledge and consent of Miguel Lu, had verbally agreed to transform
the transaction into a contract to sell the two parcels of land to Babasanta with the fifty thousand
pesos (P50,000.00) to be considered as the downpayment for the property and the balance to
be paid on or before 31 December 1987. Respondents Lu added that as of November 1987,
total payments made by Babasanta amounted to only two hundred thousand pesos
(P200,000.00) and the latter allegedly failed to pay the balance of two hundred sixty thousand
pesos (P260,000.00) despite repeated demands. Babasanta had purportedly asked Pacita for a
reduction of the price from fifteen pesos (P15.00) to twelve pesos (P12.00) per square meter
and when the Spouses Lu refused to grant Babasantas request, the latter rescinded the contract
to sell and declared that the original loan transaction just be carried out in that the spouses
would be indebted to him in the amount of two hundred thousand pesos (P200,000.00).
Accordingly, on 6 July 1989, they purchased Interbank Managers Check No. 05020269 in the
amount of two hundred thousand pesos (P200,000.00) in the name of Babasanta to show that
she was able and willing to pay the balance of her loan obligation.
Babasanta later filed an Amended Complaint dated 17 January 1990[3] wherein he prayed for
the issuance of a writ of preliminary injunction with temporary restraining order and the inclusion
of the Register of Deeds of Calamba, Laguna as party defendant. He contended that the
issuance of a preliminary injunction was necessary to restrain the transfer or conveyance by the
Spouses Lu of the subject property to other persons.
The Spouses Lu filed their Opposition[4] to the amended complaint contending that it raised new
matters which seriously affect their substantive rights under the original complaint. However, the
trial court in its Order dated 17 January 1990[5] admitted the amended complaint.
On 19 January 1990, herein petitioner San Lorenzo Development Corporation (SLDC) filed a
Motion for Intervention[6] before the trial court. SLDC alleged that it had legal interest in the
subject matter under litigation because on 3 May 1989, the two parcels of land involved, namely
Lot 1764-A and 1764-B, had been sold to it in a Deed of Absolute Sale with Mortgage.[7] It
alleged that it was a buyer in good faith and for value and therefore it had a better right over the
property in litigation.
In his Opposition to SLDCs motion for intervention,[8] respondent Babasanta demurred and
argued that the latter had no legal interest in the case because the two parcels of land involved
herein had already been conveyed to him by the Spouses Lu and hence, the vendors were
without legal capacity to transfer or dispose of the two parcels of land to the intervenor.
Meanwhile, the trial court in its Order dated 21 March 1990 allowed SLDC to intervene. SLDC
filed its Complaint-in-Intervention on 19 April 1990.[9] Respondent Babasantas motion for the
issuance of a preliminary injunction was likewise granted by the trial court in its Order dated 11
January 1991[10] conditioned upon his filing of a bond in the amount of fifty thousand pesos
(P50,000.00).
SLDC in its Complaint-in-Intervention alleged that on 11 February 1989, the Spouses Lu
executed in its favor an Option to Buy the lots subject of the complaint. Accordingly, it paid an
option money in the amount of three hundred sixteen thousand one hundred sixty pesos
(P316,160.00) out of the total consideration for the purchase of the two lots of one million two
hundred sixty-four thousand six hundred forty pesos (P1,264,640.00). After the Spouses Lu
received a total amount of six hundred thirty-two thousand three hundred twenty pesos
(P632,320.00) they executed on 3 May 1989 a Deed of Absolute Sale with Mortgage in its favor.
SLDC added that the certificates of title over the property were delivered to it by the spouses
clean and free from any adverse claims and/or notice of lis pendens. SLDC further alleged that it
only learned of the filing of the complaint sometime in the early part of January 1990 which
prompted it to file the motion to intervene without delay. Claiming that it was a buyer in good
faith, SLDC argued that it had no obligation to look beyond the titles submitted to it by the
Spouses Lu particularly because Babasantas claims were not annotated on the certificates of
title at the time the lands were sold to it.
After a protracted trial, the RTC rendered its Decision on 30 July 1993 upholding the sale of the
property to SLDC. It ordered the Spouses Lu to pay Babasanta the sum of two hundred
thousand pesos (P200,000.00) with legal interest plus the further sum of fifty thousand pesos
(P50,000.00) as and for attorneys fees. On the complaint-in-intervention, the trial court ordered
the Register of Deeds of Laguna, Calamba Branch to cancel the notice of lis pendens annotated
on the original of the TCT No. T-39022 (T-7218) and No. T-39023 (T-7219).
Applying Article 1544 of the Civil Code, the trial court ruled that since both Babasanta and SLDC
did not register the respective sales in their favor, ownership of the property should pertain to the
buyer who first acquired possession of the property. The trial court equated the execution of a
public instrument in favor of SLDC as sufficient delivery of the property to the latter. It concluded
that symbolic possession could be considered to have been first transferred to SLDC and
consequently ownership of the property pertained to SLDC who purchased the property in good
faith.
Respondent Babasanta appealed the trial courts decision to the Court of Appeals alleging in the
main that the trial court erred in concluding that SLDC is a purchaser in good faith and in
upholding the validity of the sale made by the Spouses Lu in favor of SLDC.
Respondent spouses likewise filed an appeal to the Court of Appeals. They contended that the
trial court erred in failing to consider that the contract to sell between them and Babasanta had
been novated when the latter abandoned the verbal contract of sale and declared that the
original loan transaction just be carried out. The Spouses Lu argued that since the properties
involved were conjugal, the trial court should have declared the verbal contract to sell between
Pacita Lu and Pablo Babasanta null and void ab initio for lack of knowledge and consent of
Miguel Lu. They further averred that the trial court erred in not dismissing the complaint filed by
Babasanta; in awarding damages in his favor and in refusing to grant the reliefs prayed for in
their answer.
On 4 October 1995, the Court of Appeals rendered its Decision[11] which set aside the judgment
of the trial court. It declared that the sale between Babasanta and the Spouses Lu was valid and
subsisting and ordered the spouses to execute the necessary deed of conveyance in favor of
Babasanta, and the latter to pay the balance of the purchase price in the amount of two hundred
sixty thousand pesos (P260,000.00). The appellate court ruled that the Absolute Deed of Sale
with Mortgage in favor of SLDC was null and void on the ground that SLDC was a purchaser in
bad faith. The Spouses Lu were further ordered to return all payments made by SLDC with legal
interest and to pay attorneys fees to Babasanta.
SLDC and the Spouses Lu filed separate motions for reconsideration with the appellate
court.[12] However, in a Manifestation dated 20 December 1995,[13] the Spouses Lu informed
the appellate court that they are no longer contesting the decision dated 4 October 1995.
In its Resolution dated 11 March 1996,[14] the appellate court considered as withdrawn the
motion for reconsideration filed by the Spouses Lu in view of their manifestation of 20 December
1995. The appellate court denied SLDCs motion for reconsideration on the ground that no new
or substantial arguments were raised therein which would warrant modification or reversal of the
courts decision dated 4 October 1995.
Hence, this petition.
SLDC assigns the following errors allegedly committed by the appellate court:
THE COURT OF APPEALS ERRED IN HOLDING THAT SAN LORENZO WAS NOT A BUYER
IN GOOD FAITH BECAUSE WHEN THE SELLER PACITA ZAVALLA LU OBTAINED FROM IT
THE CASH ADVANCE OF P200,000.00, SAN LORENZO WAS PUT ON INQUIRY OF A PRIOR
TRANSACTION ON THE PROPERTY.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE ESTABLISHED FACT
THAT THE ALLEGED FIRST BUYER, RESPONDENT BABASANTA, WAS NOT IN
POSSESSION OF THE DISPUTED PROPERTY WHEN SAN LORENZO BOUGHT AND TOOK
POSSESSION OF THE PROPERTY AND NO ADVERSE CLAIM, LIEN, ENCUMBRANCE OR
LIS PENDENS WAS ANNOTATED ON THE TITLES.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE FACT THAT
RESPONDENT BABASANTA HAS SUBMITTED NO EVIDENCE SHOWING THAT SAN
LORENZO WAS AWARE OF HIS RIGHTS OR INTERESTS IN THE DISPUTED PROPERTY.
THE COURT OF APPEALS ERRED IN HOLDING THAT NOTWITHSTANDING ITS FULL
CONCURRENCE ON THE FINDINGS OF FACT OF THE TRIAL COURT, IT REVERSED AND
SET ASIDE THE DECISION OF THE TRIAL COURT UPHOLDING THE TITLE OF SAN
LORENZO AS A BUYER AND FIRST POSSESSOR IN GOOD FAITH. [15]
SLDC contended that the appellate court erred in concluding that it had prior notice of
Babasantas claim over the property merely on the basis of its having advanced the amount of
two hundred thousand pesos (P200,000.00) to Pacita Lu upon the latters representation that she
needed the money to pay her obligation to Babasanta. It argued that it had no reason to suspect
that Pacita was not telling the truth that the money would be used to pay her indebtedness to
Babasanta. At any rate, SLDC averred that the amount of two hundred thousand pesos
(P200,000.00) which it advanced to Pacita Lu would be deducted from the balance of the
purchase price still due from it and should not be construed as notice of the prior sale of the land
to Babasanta. It added that at no instance did Pacita Lu inform it that the lands had been
previously sold to Babasanta.
Moreover, SLDC stressed that after the execution of the sale in its favor it immediately took
possession of the property and asserted its rights as new owner as opposed to Babasanta who
has never exercised acts of ownership. Since the titles bore no adverse claim, encumbrance, or
lien at the time it was sold to it, SLDC argued that it had every reason to rely on the correctness
of the certificate of title and it was not obliged to go beyond the certificate to determine the
condition of the property. Invoking the presumption of good faith, it added that the burden rests
on Babasanta to prove that it was aware of the prior sale to him but the latter failed to do so.
SLDC pointed out that the notice of lis pendens was annotated only on 2 June 1989 long after
the sale of the property to it was consummated on 3 May 1989.
Meanwhile, in an Urgent Ex-Parte Manifestation dated 27 August 1999, the Spouses Lu
informed the Court that due to financial constraints they have no more interest to pursue their
rights in the instant case and submit themselves to the decision of the Court of Appeals.[16]
On the other hand, respondent Babasanta argued that SLDC could not have acquired ownership
of the property because it failed to comply with the requirement of registration of the sale in good
faith. He emphasized that at the time SLDC registered the sale in its favor on 30 June 1990,
there was already a notice of lis pendens annotated on the titles of the property made as early
as 2 June 1989. Hence, petitioners registration of the sale did not confer upon it any right.
Babasanta further asserted that petitioners bad faith in the acquisition of the property is evident
from the fact that it failed to make necessary inquiry regarding the purpose of the issuance of the
two hundred thousand pesos (P200,000.00) managers check in his favor.
The core issue presented for resolution in the instant petition is who between SLDC and
Babasanta has a better right over the two parcels of land subject of the instant case in view of
the successive transactions executed by the Spouses Lu.
To prove the perfection of the contract of sale in his favor, Babasanta presented a document
signed by Pacita Lu acknowledging receipt of the sum of fifty thousand pesos (P50,000.00) as
partial payment for 3.6 hectares of farm lot situated at Barangay Pulong, Sta. Cruz, Sta. Rosa,
Laguna.[17] While the receipt signed by Pacita did not mention the price for which the property
was being sold, this deficiency was supplied by Pacita Lus letter dated 29 May 1989[18] wherein
she admitted that she agreed to sell the 3.6 hectares of land to Babasanta for fifteen pesos
(P15.00) per square meter.
An analysis of the facts obtaining in this case, as well as the evidence presented by the parties,
irresistibly leads to the conclusion that the agreement between Babasanta and the Spouses Lu
is a contract to sell and not a contract of sale.
Contracts, in general, are perfected by mere consent,[19] which is manifested by the meeting of
the offer and the acceptance upon the thing which are to constitute the contract. The offer must
be certain and the acceptance absolute.[20] Moreover, contracts shall be obligatory in whatever
form they may have been entered into, provided all the essential requisites for their validity are
present.[21]
The receipt signed by Pacita Lu merely states that she accepted the sum of fifty thousand pesos
(P50,000.00) from Babasanta as partial payment of 3.6 hectares of farm lot situated in Sta.
Rosa, Laguna. While there is no stipulation that the seller reserves the ownership of the property
until full payment of the price which is a distinguishing feature of a contract to sell, the
subsequent acts of the parties convince us that the Spouses Lu never intended to transfer
ownership to Babasanta except upon full payment of the purchase price.
Babasantas letter dated 22 May 1989 was quite telling. He stated therein that despite his
repeated requests for the execution of the final deed of sale in his favor so that he could effect
full payment of the price, Pacita Lu allegedly refused to do so. In effect, Babasanta himself
recognized that ownership of the property would not be transferred to him until such time as he
shall have effected full payment of the price. Moreover, had the sellers intended to transfer title,
they could have easily executed the document of sale in its required form simultaneously with
their acceptance of the partial payment, but they did not. Doubtlessly, the receipt signed by
Pacita Lu should legally be considered as a perfected contract to sell.
The distinction between a contract to sell and a contract of sale is quite germane. In a contract of
sale, title passes to the vendee upon the delivery of the thing sold; whereas in a contract to sell,
by agreement the ownership is reserved in the vendor and is not to pass until the full payment of
the price.[22] In a contract of sale, the vendor has lost and cannot recover ownership until and
unless the contract is resolved or rescinded; whereas in a contract to sell, title is retained by the
vendor until the full payment of the price, such payment being a positive suspensive condition
and failure of which is not a breach but an event that prevents the obligation of the vendor to
convey title from becoming effective.[23]
The perfected contract to sell imposed upon Babasanta the obligation to pay the balance of the
purchase price. There being an obligation to pay the price, Babasanta should have made the
proper tender of payment and consignation of the price in court as required by law. Mere
sending of a letter by the vendee expressing the intention to pay without the accompanying
payment is not considered a valid tender of payment.[24] Consignation of the amounts due in
court is essential in order to extinguish Babasantas obligation to pay the balance of the purchase
price. Glaringly absent from the records is any indication that Babasanta even attempted to
make the proper consignation of the amounts due, thus, the obligation on the part of the sellers
to convey title never acquired obligatory force.
On the assumption that the transaction between the parties is a contract of sale and not a
contract to sell, Babasantas claim of ownership should nevertheless fail.
Sale, being a consensual contract, is perfected by mere consent[25] and from that moment, the
parties may reciprocally demand performance.[26] The essential elements of a contract of sale,
to wit: (1) consent or meeting of the minds, that is, to transfer ownership in exchange for the
price; (2) object certain which is the subject matter of the contract; (3) cause of the obligation
which is established.[27]
The perfection of a contract of sale should not, however, be confused with its consummation. In
relation to the acquisition and transfer of ownership, it should be noted that sale is not a mode,
but merely a title. A mode is the legal means by which dominion or ownership is created,
transferred or destroyed, but title is only the legal basis by which to affect dominion or
ownership.[28] Under Article 712 of the Civil Code, ownership and other real rights over property
are acquired and transmitted by law, by donation, by testate and intestate succession, and in
consequence of certain contracts, by tradition. Contracts only constitute titles or rights to the
transfer or acquisition of ownership, while delivery or tradition is the mode of accomplishing the
same.[29] Therefore, sale by itself does not transfer or affect ownership; the most that sale does
is to create the obligation to transfer ownership. It is tradition or delivery, as a consequence of
sale, that actually transfers ownership.
Explicitly, the law provides that the ownership of the thing sold is acquired by the vendee from
the moment it is delivered to him in any of the ways specified in Article 1497 to 1501.[30] The
word delivered should not be taken restrictively to mean transfer of actual physical possession of
the property. The law recognizes two principal modes of delivery, to wit: (1) actual delivery; and
(2) legal or constructive delivery.
Actual delivery consists in placing the thing sold in the control and possession of the vendee.[31]
Legal or constructive delivery, on the other hand, may be had through any of the following ways:
the execution of a public instrument evidencing the sale;[32] symbolical tradition such as the
delivery of the keys of the place where the movable sold is being kept;[33] traditio longa manu or
by mere consent or agreement if the movable sold cannot yet be transferred to the possession
of the buyer at the time of the sale;[34] traditio brevi manu if the buyer already had possession of
the object even before the sale;[35] and traditio constitutum possessorium, where the seller
remains in possession of the property in a different capacity.[36]
Following the above disquisition, respondent Babasanta did not acquire ownership by the mere
execution of the receipt by Pacita Lu acknowledging receipt of partial payment for the property.
For one, the agreement between Babasanta and the Spouses Lu, though valid, was not
embodied in a public instrument. Hence, no constructive delivery of the lands could have been
effected. For another, Babasanta had not taken possession of the property at any time after the
perfection of the sale in his favor or exercised acts of dominion over it despite his assertions that
he was the rightful owner of the lands. Simply stated, there was no delivery to Babasanta,
whether actual or constructive, which is essential to transfer ownership of the property. Thus,
even on the assumption that the perfected contract between the parties was a sale, ownership
could not have passed to Babasanta in the absence of delivery, since in a contract of sale
ownership is transferred to the vendee only upon the delivery of the thing sold.[37]
However, it must be stressed that the juridical relationship between the parties in a double sale
is primarily governed by Article 1544 which lays down the rules of preference between the two
purchasers of the same property. It provides:
Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it should
be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in
good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was
first in the possession; and, in the absence thereof, to the person who presents the oldest title,
provided there is good faith.
The principle of primus tempore, potior jure (first in time, stronger in right) gains greater
significance in case of double sale of immovable property. When the thing sold twice is an
immovable, the one who acquires it and first records it in the Registry of Property, both made in
good faith, shall be deemed the owner.[38] Verily, the act of registration must be coupled with
good faith that is, the registrant must have no knowledge of the defect or lack of title of his
vendor or must not have been aware of facts which should have put him upon such inquiry and
investigation as might be necessary to acquaint him with the defects in the title of his vendor.[39]
Admittedly, SLDC registered the sale with the Registry of Deeds after it had acquired knowledge
of Babasantas claim. Babasanta, however, strongly argues that the registration of the sale by
SLDC was not sufficient to confer upon the latter any title to the property since the registration
was attended by bad faith. Specifically, he points out that at the time SLDC registered the sale
on 30 June 1990, there was already a notice of lis pendens on the file with the Register of
Deeds, the same having been filed one year before on 2 June 1989.
Did the registration of the sale after the annotation of the notice of lis pendens obliterate the
effects of delivery and possession in good faith which admittedly had occurred prior to SLDCs
knowledge of the transaction in favor of Babasanta?
We do not hold so.
It must be stressed that as early as 11 February 1989, the Spouses Lu executed the Option to
Buy in favor of SLDC upon receiving P316,160.00 as option money from SLDC. After SLDC had
paid more than one half of the agreed purchase price of P1,264,640.00, the Spouses Lu
subsequently executed on 3 May 1989 a Deed of Absolute Sale in favor or SLDC. At the time
both deeds were executed, SLDC had no knowledge of the prior transaction of the Spouses Lu
with Babasanta. Simply stated, from the time of execution of the first deed up to the moment of
transfer and delivery of possession of the lands to SLDC, it had acted in good faith and the
subsequent annotation of lis pendens has no effect at all on the consummated sale between
SLDC and the Spouses Lu.
A purchaser in good faith is one who buys property of another without notice that some other
person has a right to, or interest in, such property and pays a full and fair price for the same at
the time of such purchase, or before he has notice of the claim or interest of some other person
in the property.[40] Following the foregoing definition, we rule that SLDC qualifies as a buyer in
good faith since there is no evidence extant in the records that it had knowledge of the prior
transaction in favor of Babasanta. At the time of the sale of the property to SLDC, the vendors
were still the registered owners of the property and were in fact in possession of the lands. Time
and again, this Court has ruled that a person dealing with the owner of registered land is not
bound to go beyond the certificate of title as he is charged with notice of burdens on the property
which are noted on the face of the register or on the certificate of title.[41] In assailing knowledge
of the transaction between him and the Spouses Lu, Babasanta apparently relies on the
principle of constructive notice incorporated in Section 52 of the Property Registration Decree
(P.D. No. 1529) which reads, thus:
Sec. 52. Constructive notice upon registration. Every conveyance, mortgage, lease, lien,
attachment, order, judgment, instrument or entry affecting registered land shall, if registered,
filed, or entered in the office of the Register of Deeds for the province or city where the land to
which it relates lies, be constructive notice to all persons from the time of such registering, filing,
or entering.
However, the constructive notice operates as suchby the express wording of Section 52from the
time of the registration of the notice of lis pendens which in this case was effected only on 2
June 1989, at which time the sale in favor of SLDC had long been consummated insofar as the
obligation of the Spouses Lu to transfer ownership over the property to SLDC is concerned.
More fundamentally, given the superiority of the right of SLDC to the claim of Babasanta the
annotation of the notice of lis pendens cannot help Babasantas position a bit and it is irrelevant
to the good or bad faith characterization of SLDC as a purchaser. A notice of lis pendens, as the
Court held in Natao v. Esteban,[42] serves as a warning to a prospective purchaser or
incumbrancer that the particular property is in litigation; and that he should keep his hands off
the same, unless he intends to gamble on the results of the litigation. Precisely, in this case
SLDC has intervened in the pending litigation to protect its rights. Obviously, SLDCs faith in the
merit of its cause has been vindicated with the Courts present decision which is the ultimate
denouement on the controversy.
The Court of Appeals has made capital[43] of SLDCs averment in its Complaint-in-
Intervention[44] that at the instance of Pacita Lu it issued a check for P200,000.00 payable to
Babasanta and the confirmatory testimony of Pacita Lu herself on cross-examination.[45]
However, there is nothing in the said pleading and the testimony which explicitly relates the
amount to the transaction between the Spouses Lu and Babasanta for what they attest to is that
the amount was supposed to pay off the advances made by Babasanta to Pacita Lu. In any
event, the incident took place after the Spouses Lu had already executed the Deed of Absolute
Sale with Mortgage in favor of SLDC and therefore, as previously explained, it has no effect on
the legal position of SLDC.
Assuming ex gratia argumenti that SLDCs registration of the sale had been tainted by the prior
notice of lis pendens and assuming further for the same nonce that this is a case of double sale,
still Babasantas claim could not prevail over that of SLDCs. In Abarquez v. Court of Appeals,[46]
this Court had the occasion to rule that if a vendee in a double sale registers the sale after he
has acquired knowledge of a previous sale, the registration constitutes a registration in bad faith
and does not confer upon him any right. If the registration is done in bad faith, it is as if there is
no registration at all, and the buyer who has taken possession first of the property in good faith
shall be preferred.
In Abarquez, the first sale to the spouses Israel was notarized and registered only after the
second vendee, Abarquez, registered their deed of sale with the Registry of Deeds, but the
Israels were first in possession. This Court awarded the property to the Israels because
registration of the property by Abarquez lacked the element of good faith. While the facts in the
instant case substantially differ from that in Abarquez, we would not hesitate to rule in favor of
SLDC on the basis of its prior possession of the property in good faith. Be it noted that delivery
of the property to SLDC was immediately effected after the execution of the deed in its favor, at
which time SLDC had no knowledge at all of the prior transaction by the Spouses Lu in favor of
Babasanta.
The law speaks not only of one criterion. The first criterion is priority of entry in the registry of
property; there being no priority of such entry, the second is priority of possession; and, in the
absence of the two priorities, the third priority is of the date of title, with good faith as the
common critical element. Since SLDC acquired possession of the property in good faith in
contrast to Babasanta, who neither registered nor possessed the property at any time, SLDCs
right is definitely superior to that of Babasantas.
At any rate, the above discussion on the rules on double sale would be purely academic for as
earlier stated in this decision, the contract between Babasanta and the Spouses Lu is not a
contract of sale but merely a contract to sell. In Dichoso v. Roxas,[47] we had the occasion to
rule that Article 1544 does not apply to a case where there was a sale to one party of the land
itself while the other contract was a mere promise to sell the land or at most an actual
assignment of the right to repurchase the same land. Accordingly, there was no double sale of
the same land in that case.
WHEREFORE, the instant petition is hereby GRANTED. The decision of the Court of Appeals
appealed from is REVERSED and SET ASIDE and the decision of the Regional Trial Court,
Branch 31, of San Pedro, Laguna is REINSTATED. No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-16420 October 12, 1921
AGRIPINO MENDOZA, petitioner-appellee,
vs.
PRIMITIVO KALAW, objector-appellant.
Guillermo M. Katigbak for appellant.
Felipe A. Jose for appellee.
JOHNSON, J.:
From the record it appears that on the 26th day of November, 1919, the petitioner presented a
petition in the Court of First instance of the City of Manila for the registration, under the Torrens
system, of a piece or parcel of land, particularly described in paragraph A of the petition. The
said lot is alleged to have an area of 371.6 square meters. The petitioner alleged that he was the
owner in fee simple of said parcel of land for the reason that he had purchased the same of
Federico Caet on the 8th day of November, 1919. Accompanying the petition, there was united
a plan (marked Exhibit A) containing a technical description of the metes and bounds of said
parcel of land.
To the registration of said parcel of land the oppositor, Primitivo Kalaw, presented his opposition,
alleging that he was the owner of the same and that he had acquired it from the said Federico
Caet.
Upon the issue thus presented by the petitioner and opposition, the Honorable James A.
Ostrand, on the 23d day of January, 1920, in a carefully prepared opinion, reached the
conclusion that the petitioner was the owner in fee simple of said parcel of land, and ordered it
registered in his name in accordance with the provisions of the Land registration Act. From that
decree the oppositor appealed to this court.
From an examination of the record the following facts seem to be proved by a large
preponderance of the evidence:
(1) That on the 24th day of September, 1919, the said Federico Caet sold, under a conditional
sale, the parcel of land in question to the appellant (Exhibit 1);
(2) That on the 8th day of November, 1919, the said Federico Caet made an absolute sale of
said parcel of land to the petitioner Agripino Mendoza (Exhibit B);
(3) That on the 12th day of November, 1919, Agripino Mendoza entered upon, and took actual
possession of, said parcel of land, enclosed it with a fence, and began to clean the same;
(4) That after the petitioner had fenced and cleaned said lot, as above indicated, a
representative of the oppositor claimed and attempted to obtain possession of said lot, but the
petitioner, who was then in possession, refused to deliver the possession, upon the ground that
the was the owner;
(5) That on the 17th day of November (18th day of November), 1919, the oppositor attempted to
have his title registered in the registry of deeds of the City of Manila, but such registration was
denied by the register of deeds for the reason that there existed some defect in the description
of the property, and for the reason that the title of the vendor had not therefore been registered.
The register of deeds, however, did make an "anotacion preventiva."
It will be noted from the foregoing that Federico Caet made two sales of the same property
one of the oppositor and the other to the petitioner. The first was but a conditional sale while the
latter was an absolute sale. It will also be noted that while the absolute sale to the petitioner was
subsequent to the conditional sale to the oppositor, the former obtained the actual possession of
the property first. It will further be noted from a reading of Exhibits 1 and B that the petitioner
actually paid to his vendor the purchase price of the property in question, while the payment by
the oppositor depended upon the performance of certain conditions mentioned in the contract of
sale. 1awph!l.net
While was have stated that there were two sales of the parcel of land in question, that is hardly
the fact, because a conditional sale, before the performance of the condition, can hardly be said
to be a sale of property, especially where the condition has not been performed or complied
with. That being true, article 1473 of the Civil Code can hardly be said to be applicable.
Neither can the "anotacion preventiva" obtained by the oppositor be said to have created any
advance in his favor, for the reason that a preventative precautionary notice on the records of
the registry of deeds only protects the rights of the person securing it for a period of thirty days.
(Par. 2, art. 17, Mortgage Law.) A preventative precautionary notice only protects the interests
and rights of the person who secures it against those who acquire an interest in the property
subsequent thereto, and then, only for a period of thirty days. It cannot affect the rights or
interests of persons who acquired an interest in the property theretofore. (Veguillas vs. Jaucian,
25 Phil., 315; Samson vs. Garcia and Ycalina, 34 Phil., 805.) In the present case the petitioner
had acquired an absolute deed to the land in question, and had actually entered into the
possession of the same, before the preventative precautionary notice was noted in the office of
the registry of deeds. Therefore, under the provisions of the Mortgage Law above cited, it could
in no way affect the rights or interests of persons, acquired theretofore.
For all of the foregoing reasons, we are fully persuaded that the judgment ordering the
registration of the parcel of land in question in the name of the petitioner should be and is hereby
affirmed, with costs. So ordered.
FIRST DIVISION
[G.R. No. 120191. October 10, 1997]
LORETO ADALIN, CARLOS CALINGASAN, DEMETRIO ADAYA and MAGNO ADALIN,
petitioners, vs. THE HON. COURT OF APPEALS, FAUSTINO L. YU, ANTONIO T. LIM, ELENA
K. PALANCA, JOSE PALANCA, EDUARDA K. VARGAS, JOSE VARGAS, MERCEDES K.
CABALLERO, EBERHARDO CABALLERO, ISABEL K. VILLAMOR, FEDERICO VILLAMOR,
JOSE KADO, URSULA KADO, MARIA K. CALONZO, BAYANI L. CALONZO, TEOFILA KADO,
NESTOR KADO and LILIA KADO, respondents.
DECISION
HERMOSISIMA, JR., J.:
Before us is a petition for review seeking the reversal of the Decision[1] of the Court of
Appeals[2] and in lieu thereof, the reinstatement of the Decision[3] of the Regional Trial Court[4]
in an action for specific performance filed by private respondents Faustino L. Yu and Antonio T.
Lim against the Kado siblings, namely, private respondents Elena K. Palanca, Eduarda K.
Vargas, Mercedes K. Caballero, Isabel K. Villamor, Jose Kado, Maria K. Calonzo, Teofila Kado
and Nestor Kado, and their respective spouses.
In essence, the petition poses a challenge against the respondent appellate courts legal
conclusion that the transaction entered into by private respondents Yu and Lim with private
respondents Kado siblings, is one of an absolute sale and not merely a conditional sale as
denominated in the document signed by said parties. As such, there is no dispute as to the
following facts:
xxx [F]rom the welter of evidence and the record, it has been established that Elena Kado
Palanca, and her brothers and sisters, namely, Eduarda K. Vargas, Mercedes K. Caballero,
Isabel K. Villamor, Jose Kado, Maria K. Calonzo, Teofila Kado and Nestor Kado, hereinafter
referred to, for brevitys sake, as the Appellees-Vendors, were the owners of a parcel of land,
with an area of 1,343 square meters, with a five-door, one storey commercial building
constructed thereon, fronting the Imperial Hotel, located along Magallanes Street, Cotabato City,
described in and covered by Transfer Certificate of Title No. T-12963 of the Registry of Deeds of
Cotabato City x x x. One of the five (5) doors was leased to Loreto Adalin, hereinafter referred to
as the Appellee Adalin, two (2) doors were leased to Carlos Calingasan and Demetrio Adaya
respectively, and two (2) doors were leased to Magno Adalin, all of whom are hereinafter
referred to, for brevitys sake, as the Appellees-Vendees. The Appellees-Vendees and Appellee
Adalin paid a monthly rental of P1,500.00 for each door. The Appellees-Vendors commissioned
Ester Bautista to look for and negotiate with prospective buyers for the sale of their property for
the price of P3,000,000.00. Sometime in August, 1987, Ester Bautista offered the property, for
sale, to the Appellants and the latter agreed to buy the property. A conference was held in the
office of the Appellant Faustino Yu, at the Imperial Hotel, where he was the President-Manager,
with both Appellants, the Appellee Adalin, the Appellees-Vendors Elena Palanca and Teofilo
Kado, in their behalf and in behalf of the Appellees-Vendors, in attendance, to discuss the terms
and conditions of the sale. The Appellants and Appellee Adalin, the Appellees-Vendors agreed
that the Appellants will each buy two (2) doors while Appellee Adalin will buy the fifth door which
he was leasing from the Appellees-Vendors, all for the price of P2,600,000.00. During the
conference, the Appellants inquired from the Appellee-Vendor Elena Palanca whether the
Appellees-Vendees were interested to buy the property but the Appellee-Vendor Elena Palanca
replied that the property had been offered to the Appellees-Vendees for sale but that the latter
were not interested to buy the same. The conferees then agreed to meet, on September 2,
1987, in the house of the Appellee-Vendor Palanca, with Atty. Bayani Calonzo, her brother-in-
law, in attendance, to finalize the sale. However, unknown to the Appellants, the Appellee-
Vendor Elena Palanca, in her behalf and in behalf of the other Appellees-Vendors, sent, on
September 2, 1987, separate letters to each of the Appellees-Vendees informing them that
someone was interested to buy the property and requested them to vacate the property within
thirty (30) days unless all of you could buy the property at the same price x x x. During the
conference in the house of the Appellee-Vendor Elena Palanca, on September 2, 1987, the
Appellants, the Appellee Adalin and the Appellees-Vendors Elena Palanca and Teofilo Kado in
their behalf and in behalf of the other Appellees-Vendors, Atty. Bayani Calonzo, the husband of
the Appellee Maria Kado, Atty. Eugenio Soyao, the counsel of the appellants and the Appellee-
Vendee Magno Adalin who attended in his behalf and in behalf of the Appellees-Vendees, were
present. When asked by the Appellants if the Appellees-Vendees were interested to buy the
property, the Appellee-vendee Magno Adalin forthrightly replied that the Appellees-Vendees
were not interested to buy the property because they cannot afford the purchase price thereof.
However, he claimed that the Appellees Vendees were entitled to P50,000.00 each as
disturbance money, in consideration for their vacating the property, to be borne by the
Appellees-Vendors. The Appellants, the Appellee Adalin and the Appellees-Vendors forthwith
agreed that each Appellant will buy two (2) doors while the fifth door leased by Appellee Adalin
will be purchased by him, all for the purchased price of P2,600,000.00 and that the appellants
and Appellee Adalin will pay, P300,000.00 as downpayment for the property, the balance to be
payable upon the eviction of the Appellees-Vendees from the property and the execution of a
'Deed of Absolute Sale'. Atty. Bayani Calonzo forthwith assured the Appellants that he could
secure the eviction of the Appellees-Vendees from the property within a month because the
latter were his close friends and compadres. Atty. Bayani Calonzo then gave Atty. Eugenio
Soyao, the counsel of the Appellants, the go-signal to prepare the deed for the signatures of the
parties. On September 8, 1987, the Appellants and Appellee Adalin, as buyers of the property,
and the Appellees-Vendors, met in the office of the Appellant Faustino Yu at the Imperial Hotel
and executed the Deed of Conditional Sale prepared by Atty. Eugenio Soyao x x x. The
Appellants and Appellee Adalin each contributed P100,000.00 and gave the total amount of
P300,000.00 to the Appellee-Vendor Elena Palanca as the downpayment for the property. The
Appellees-Vendors Elena Palanca and Eduarda Vargas signed an Acknowledgment Receipt for
the downpayment x x x in their behalf and in behalf of the other Appellees-vendors. In the
meantime, the Appellants deferred registration of the deed until after the eviction of the
Appellees-Vendees from the property and the payment of the balance of the purchase price of
the property to the Appellees-Vendors as agreed upon under the Deed of Conditional Sale.
In the interim, on October 14, 1987, the Appellees-Vendors, through the Appellee-Vendor Elena
Palanca, wrote, conformably with the terms of the Deed of Conditional Sale x x x a letter
complaint against the Appellees-Vendees with the Barangay Captain for unlawful detainer x x x.
The case was docketed as Barangay Case No. 7,052-87 x x x. On October 16, 1987, the
Appellee-Vendee Magno Adalin wrote a letter to the Appellees-Vendors, through the Appellee-
Vendor Elena Palanca, informing them that he had decided to purchase the two doors he was
leasing for the purchase price of P600,000.00 per door and was ready to tender the amount by
the end of the month x x x. The Appellee-Vendee Demetrio Adaya and the Appellee-Vendee
Carlos Calingasan likewise wrote separate letters to the Appellees-vendors informing the latter
of their decision to purchase the premises occupied by them respectively for the amount of
P600,000.00 each x x x. Inspite of the prior sale of the property to the Appellants and Appellee
Adalin, the Appellees-Vendors decided to back out from said sale to the Appellants and to sell
the property to the Appellees-vendees and to return the downpayments of the Appellants for the
property in the total amount of P200,000.00 with interest thereon. The Appellees-Vendees
procured TCBT Check No. 195031 in the amount of P101,416.66 payable to the Appellant
Faustino Yu and TCBT Check No. 195032 in the amount of P101,416.66 payable to the
Appellant Antonio Lim and transmitted the same to the Appellants with a covering letter x x x.
The Appellants were flabbergasted. Both the Appellants refused to receive the said letter and
checks and insisted, instead, that the Appellees-Vendors comply with the Deed of Conditional
Sale x x x. On November 16, 1987, the Appellants, through their counsel, wrote a letter to the
Appellees-Vendors, copies of which were furnished the Appellees-vendees, inquiring if the
appropriate action has been undertaken towards the eviction of the Appellees-Vendees x x x.
The Appellees-Vendors ignored the said letter. Instead, the Appellees-Vendors signed, in
December, 1987, a Deed of Sale of Registered Land under which they sold the said property to
the Appellees-Vendees, including the Appellee Adalin for the price of only P1,000,000.00 x x x
much lower than the price of the Appellant under the Deed of Conditional Sale x x x. Although it
appears that the deed was notarized by Atty. Bayani Calonzo, however, the deed does not bear
any number in the notarial register of the lawyer. In the same month, the Appellees-Vendors
signed another Deed of Sale of Registered Land under which they sold to the Appellees-
Vendees including Appellee Adalin the aforesaid property for the considerably increased price of
P3,000,000.00 x x x. The deed was notarized by Atty. Bayani Calonzo. Interestingly, both deeds
were not filed with the Register of Deeds of Cotabato City. Not content with the two (2) Deeds of
Sale of registered Land x x x the Appellees-Vendors, signed a third Deed of Sale of Registered
land which appears dated February 5, 1988 under which they purportedly sold to the Appellees-
Vendees, including Appellee Adalin, the aforesaid property for the much reduced price of only
P860,000.00 x x x. However, the aforesaid deed was not immediately filed with the Register of
Deeds of Cotabato City. On February 26, 1988, the Appellees-Vendors, through Atty. Bayani
Calonzo, filed a Petition against the Appellants for the consignation of their downpayment of
P200,000.00, with the Regional Trial Court of General Santos City entitled Maria K. Calonzo, et
al. versus Faustino Yu, Special Civil Case No. 259. x x x
Undaunted, the Appellants filed a complaint with the Barangay captain for Breach of Contract
against the Appellees-vendors entitled Faustino Yu, et al. Versus Elena K. Palanca, et al.,
Barangay Case No. 9,014-88. The Barangay Captain issued, on April 7, 1988, summons to the
Appellees-Vendors for them to appear for a conference on April 22, 1988 at 9:00 oclock in the
morning x x x. Invitations were also sent to the Appellees-Vendees x x x. During the conference
attended by Appellee-Vendees, the Appellants, if only to accommodate the Appellee-Vendee
Magno Adalin and settle the case amicably, agreed to buy only one door each so that the
Appellee-Vendee Magno Adalin could purchase the two doors he was occupying. However, the
Appellee-Vendee Magno Adalin adamantly refused, claiming that he was already the owner of
the two (2) doors. When the Appellant Antonio Lim asked the Appellee-Vendee Magno Adalin to
show the Deed of Sale for the two doors, the latter insouciantly walked out. Atty. Bayani Calonzo
likewise stated that there was no need to show the deed of sale. No settlement was forged and,
on May 16, 1988, the Barangay Captain issued the Certification to File Action x x x.
On May 5, 1988, the Appellants filed their complaint for Specific Performance against the
Appellees-Vendors and appellee Adalin in the Court a quo.
On June 14, 1988, the Appellants caused the annotation of a Notice of Lis Pendens at the dorsal
portion of Transfer Certificate of Title No. 12963 under the names of the Appellees-Vendors x x
x. On October 25, 1988, the Appellees-Vendees filed a Motion for Intervention as Plaintiffs-
Intervenors appending thereto a copy of the Deed of Sale of Registered land signed by the
Appellees-Vendors x x x. On October 27, 1988, the Appellees-Vendees filed the Deed of Sale of
Registered Land x x x with the Register of Deeds on the basis of which Transfer certificate of
Title No. 24791 over the property was issued under their names x x x. On the same day, the
Appellees-Vendees filed in the Court a quo a Motion To Admit Complaint-In-Intervention x x x.
Attached to the Complaint-In-Intervention was the 'Deed of Sale of Registered land signed by
the Appellees-Vendees x x x. The Appellants were shocked to learn that the Appellees-Vendors
had signed the said deed. As a counter-move, the Appellants filed a motion for leave to amend
Complaint and, on November 11, 1988, filed their Amended Complaint impleading the
Appellees-Vendees as additional defendants x x x.
xxx
The Appellees-Vendors suffered a rebuff when, on January 10, 1989, the Regional Trial Court of
General Santos City issued an Order dismissing the Petition of the Appellees-Vendors for
consignation x x x. In the meantime, on November 30, 1989, Appellee Adalin died and was
substituted, per order of the Court a quo, on January 5, 1990, by his heirs, namely, Anita,
Anelita, Loreto, Jr., Teresita, Wilfredo, Lilibeth, Nelson, Helen and Jocel, all surnamed Adalin, as
Appellees-Vendees x x x.
After trial, the Court a quo rendered judgment in favor of the Appellees-Vendees x x x.[5]
In the opinion of the court a quo, petitioners became the owners of the parcel of land in question
with the five-door, one storey commercial building standing thereon, when they purchased the
same following the offer and the 30-day option extended to them by private respondent Elena
Palanca, in behalf of the other Kado siblings, in her letter to them dated September 2, 1987. The
trial court disregarded the fact that the Kado siblings had already finished transacting with
private respondents Faustino Yu and Antonio Lim and had in fact entered into a conditional sale
with them respecting the same property. The trial court brushed aside this fact as it reasoned
that:
x x x In conditional deed of sale, ownership is only transferred after the purchase price is fully
paid or the fulfillment of the condition and the execution of a definite or absolute deed of sale are
made. x x x
In this case, it is clear from the provision of the Deed of Conditional Sale x x x that the balance of
the price of P2,300,000.00 shall be paid only after all the defendants-vendees shall have
vacated and surrendered the premises to the defendants-vendors. However, the tenants did not
leave the premises. In fact they opted to buy the property. Moreover, at that time, the property
was legally leased to the defendants-vendees. x x x
xxx
Clearly therefore, the condition set forth in the said Deed of Conditional Sale between the
plaintiffs and the defendants-vendors was not fulfilled. Since the condition was not fulfilled, there
was no transfer of ownership of the property from the defendants-vendors to the plaintiffs. x x x
x x x [In] the letters of Elena Palanca to the defendants-vendees dated September 2, 1987 x x x
[t]hey were given the option or preferential right to purchase the property.
xxx
When the defendants-vendors accepted defendants-vendees option to buy, the former returned
the initial payment of P200,000.00 to the plaintiffs x x x but they refused to accept the same.
This refusal however did not diminish the effect of the acceptance of the option to buy, which in
fact led to the execution of the said Deed of Sale of Registered Land x x x and the subsequent
issuance of the Transfer Certificate of Title No. T-24791 of the Registry of Deeds for the City of
Cotabato in the names of the defendants-vendees x x x. x x x
x x x [T]he defendants-vendors acted in bad faith when, while during the effectivity of the period
of the option to buy [that] they gave to the defendants-vendees, they executed a Deed of
Conditional Sale x x x in favor of the plaintiffs. This was only six (6) days from date of the option.
x x x[6]
The trial court also ruled that the conditional sale of the subject property to private respondents
Faustino Yu and Antonio Lim and the sale of the same property to petitioners, did not involve a
double sale as to warrant the application of Article 1544 of the Civil Code. The court a quo
ratiocinated in this manner:
x x x [T]he plaintiffs assert that this case is one of double sale and should be governed by Article
1544 of the Civil Code. The first sale, plaintiffs claim, is that under the Deed of Conditional Sale
x x x in their favor and the second sale is that ultimately covered by the Deed of sale of
registered Land for P860,000.00 x x x in favor of the defendants-vendees. As already pointed
out by the court, the execution of the Deed of Conditional Sale did not transfer ownership of the
property to the plaintiffs, hence, there can be no double sale. As held in the case of Mendoza vs.
Kalaw, 42 Phil. 236, Article 1544 does not apply to situations where one sale was subject to a
condition which was not complied with. This is because a conditional sale, before the
performance of the condition, can hardly be said to be a sale of property, specially where the
condition has not been performed or complied with.[7]
Pursuant to the above ruminations of the court a quo, it ordered the following in the dispositive
portion of its decision:
WHEREFORE, the court hereby orders the dismissal of plaintiffs complaint against the
defendants-vendees for lack of merit, and hereby further sustains the validity of Transfer
Certificate of Title No. T-24791 issued in their names (defendants-vendees) by the Registry of
Deeds for the City of Cotabato.
The defendants-vendors are hereby jointly and severally ordered to pay moral damages of
P500,000.00 to each of the plaintiffs, P100,000.00 exemplary damages to each of the plaintiffs
and P50,000.00 as and for attorneys fees.
Defendants-vendors are hereby further ordered to return the P200,000.00 initial payment
received by them with legal interest from date of receipt thereof up to November 3, 1987.
Defendants-vendees counterclaim is hereby ordered dismissed.
With cost against the defendants-vendors.
SO ORDERED.[8]
Private respondents Faustino Yu and Antonio Lim wasted no time in appealing from the above
decision of the court a quo. They were vindicated when the respondent Court of Appeals
rendered its decision in their favor. The respondent appellate court reversed the trial court as it
ruled, thus:
x x x We find, and so declare, that the Deed of Conditional Sale x x x executed by the Appellees-
Vendors in favor of the Appellants was an absolute deed of sale and not a conditional sale.
xxx

In ascertaining the nature of a contract and the intention of the parties thereto, it behooves the
trier of facts to look into the context of the contract in its entirety and not merely specific words or
phrases therein, standing alone, as well as the contemporaneous and subsequent acts of the
parties. It bears stressing that the title of the contract is not conclusive of its nature. x x x
Although a contract may be denominated a Deed of Conditional Sale, or Agreement to Sell, the
same may be, in reality a deed of absolute sale or a contract of sale x x x.
Under Article 1458 of the New Civil Code, a sale may be absolute or conditional. A contract may
be conditional when the ownership of the thing sold is retained until the fulfillment of a positive
suspensive condition, generally the payment of the purchase price, the breach of which
condition will prevent the onset of the obligation to deliver title x x x. A sale of immovables is
absolute where the contract does not contain any provision that title to the property sold is
reversed to the Vendors or that the Vendor is entitled to unilaterally rescind the same.
xxx
The Court a quo x x x resolutely subscribed to the view that the x x x deed is conditional, its
efficacy dependent upon a suspensive condition--that of the payment by the Appellants of the
balance of the purchase price of the property, after the Appellees-Vendees shall have been
evicted from the property or shall have voluntarily vacated the same and the Deed of Absolute
Sale shall have been executed in favor of the Appellants; and, since the condition was not
fulfilled, the sale never became effective x x x. x x x Even a cursory reading of the deed will
readily show absence of any stipulation in said deed that the title to the property was reserved to
the Appellees-Vendors until the balance of the purchase price was paid nor giving them the right
to unilaterally rescind the contract if the Appellants failed to pay the said amount upon the
eviction of the Appellees-Vendees. Inscrutably then, the deed is a perfected deed of absolute
sale, not a conditional one. x x x
xxx
There may not have been delivery of the property to the Appellants either symbolically or
physically and more, the Appellees-Vendors may have deferred their obligation of delivering
physical possession of the property to the Appellees only after the Appellees-Vendees shall
have vacated the property, however, the right of retention of the Appellees-Vendors of title to or
ownership over the property cannot thereby be inferred therefrom. x x x
In fine, the non-payment of the balance of the purchase price of the property and the
consequent eviction of the Appellees-Vendees therefrom were not conditions which suspended
the efficacy of the Deed of Conditional Sale. Rather, the same, if due to the fault of the
Appellants, merely accorded the Appellees-Vendors the option to rescind the already existing
and effective sale.
The Appellants and the Appellees-Vendors, having entered into, under the Deed of Conditional
Sale x x x an absolute sale, the Appellants thus had every right to demand that the Appellees-
Vendors performed their prestation under the deed, to wit--the eviction of the Appellees-
Vendees from the property--so that the Appellants may then pay the balance of the purchase
price of the property.
xxx
The Court a quo and the Appellees, however, posit that the Deed of Conditional sale x x x had
not been consummated and title to and ownership over the property had not been transferred to
the Appellants because there had been neither constructive nor actual delivery of the property to
the Appellants x x x.
We do not agree. The evidence in the record shows that the Appellants and the Appellees-
Vendors met in the house of Appellee Elena Palanca on September 2, 1987. The Appellees-
Vendees were represented by the Appellee-Vendee, Retired Col. Magno Adalin. The latter did
not object to the sale of the property to the Appellants but merely insisted that each of the
Appellees-Vendees be given P50,000.00 as disturbance fee by the Appellees-Vendors to which
the latter acquiesced because Atty. Bayani Calonzo forthwith gave Atty. Eugenio Soyao, the go-
signal to prepare the Deed of Conditional Sale for the signatures thereof by the parties on
September 8, 1987. The Appellees-Vendors, on September 2, 1987, wrote letters to the
Appellees-Vendees giving them the option to match the price offered by the Appellants. The
Appellees-Vendees maintained a resounding silence to the letter-offer of the Appellees-Vendors.
It was only, on October 16, 1987, that the Appellees-Vendees, after the execution by the
Appellants and the Appellees-Vendors of the Deed of Conditional Sale, that the Appellees-
Vendees finally decided to, themselves, purchase the property. The Appellees are estopped
from claiming that the property had not been delivered to the appellants. The Appellants cannot
use their gross bad faith as a shield to frustrate the enforcement, by the Appellants, of the Deed
of Conditional Sale. x x x
xxx
The Appellees-Vendors cannot invoke the refusal of the Appellees-Vendees to vacate the
property and the latters decision to themselves purchase the property as a valid justification to
renege on and turn their backs against their obligation to deliver or cause the eviction of the
Appellees-vendees from and deliver physical possession of the property to the Appellants. For, if
We gave our approbation to the stance of the Appellees, then We would thereby be sanctioning
the performance by the Appellees-Vendors of their obligations under the deed subject to the will
and caprices of the Appellees-Vendees, which we cannot do x x x.
It would be the zenith of inequity for the Appellees-Vendors to invoke the occupation by the
Appellees-Vendees, as of the property, as a justification to ignore their obligation to have the
Appellees-Vendees evicted from the property and for them to give P50,000.00 disturbance fee
for each of the Appellees-Vendees and a justification for the latter to hold on to the possession
of the property.
xxx
Assuming, gratia arguendi, for the nonce, that there had been no consummation of the Deed of
Conditional sale x x x by reason of the non-delivery to the appellants of the property, it does not
thereby mean that the Deed of Sale of Registered Land x x x executed by the Appellees should
be given preference. Apropos to this, We give our approbation to the plaint of the Appellants that
the Court a quo erred in not applying the second and third paragraphs of Article 1544 x x x.
For, the evidence in the record shows that, although the Appellees-Vendees managed to cause
the registration of the Deed of Sale of Registered Land x x x on October 27, 1988 and procure
Transfer Certificate of Title No. 24791 under their names, on said date, and that they were, as of
said date, in physical possession of the property, however, the evidence in the record shows that
the Appellees-Vendees were in gross evident bad faith. At the time the Appellees executed the
Deed of Sale of Registered Land in December 1987 x x x they were aware that the Appellees-
Vendors and the Appellants had executed their Deed of Conditional Sale as early as September
8, 1987. x x x In the light of the foregoing, We arrive at the ineluctable conclusion that preference
must be accorded the Deed of Conditional Sale executed by the appellants and the Appellees-
Vendors.[9]
Accordingly, the respondent Court of Appeals rendered another judgment in the case and
ordered the following:
1.The Deed of Conditional Sale, Exhibit A is hereby declared valid;
2.The Deeds of Sale of Registered Land, Exhibits E, F and G and Transfer Certificate of Title
No. 24791 are hereby declared null and void;
3.The Appellees-Vendees except the heirs of Loreto Adalin are hereby ordered to vacate the
property within thirty (30) days from the finality of this Decision;
4.The Appellees-Vendors are hereby ordered to execute, in favor of the Appellants, a Deed of
Absolute Sale covering four (4) doors of the property (which includes the area of the property on
which said four doors are constructed) except the door purchased by the Appellee-Vendee
Loreto Adalin, free of any liens or encumbrances;
5.The Appellants are hereby ordered to remit to the Appellees-Vendors the balance of the
purchase price of the four (4) doors in the amount of P1,880,000.00;
6.The Appellees-Vendors are hereby ordered to refund to the Appellees-Vendees the amount of
P840,000.00 which they paid for the property under the Deed of Conditional Sale of Registered
Land, Exhibit G, without interest considering that they also acted in bad faith;
7.The Appellee-Vendee Magno Adalin is hereby ordered to pay the amount of P3,000.00 a
month, and each of the Appellees-Vendees, except the Appellee Adalin, the amount of
P1,500.00 to the Appellants, from November, 1987, up to the time the property is vacated and
delivered to the Appellants, as reasonable compensation for the occupancy of the property, with
interest thereon at the rate of 6% per annum;
8.The Appellees-Vendors are hereby ordered to pay, jointly and severally, to each of the
Appellants the amount of P100,000.00 by way of moral damages, P20,000.00 by way of
exemplary damages and P20,000.00 by way of attorneys fees;
9.The counterclaims of the Appellees are dismissed.
With costs against the Appellees.
SO ORDERED.[10]
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 129760 December 29, 1998
RICARDO CHENG, petitioner,
vs.
RAMON B. GENATO and ERNESTO R. DA JOSE & SOCORRO DA JOSE, respondents.
MARTINEZ, J.:
This petition for review on certiorari seeks to annul and set aside the Decision of the Court of
Appeals (CA) 1 dated July 7, 1997 in CA-G.R. No. CV No. 44706 entitled "Ricardo Cheng,
plaintiff-appellee vs. Ramon B. Genato, defendant-appellant, Ernesto R. Da Jose & Socorro B.
Da Jose, Intervenors-Appellants" which reversed the ruling of the Regional Trial Court, Branch
96 of Quezon City dated January 18, 1994. The dispositive portion of the CA Decision reads:
WHEREFORE, based on the foregoing, appealed decision is hereby REVERSED and SET
ASIDE and judgment is rendered ordering;
1. The dismissal of the complaint;
2. The cancellation of the annotations of the defendant-appellant's Affidavit to Annul
Contract to Sell and plaintiff-appellee's Notice of Adverse Claim in the subject TCT's, namely,
TCT No. T-76.196 (M) and TCT No. T-76.197 (M);
3. Payment by the intervenors-appellants of the remaining balance of the purchase price
pursuant to their agreement with the defendant-appellant to suspend encashment of the three
post-dated checks issued since 1989.
4. Ordering the execution by the defendant-appellant Genato of the Deed of Absolute
Sale over the subject two lots covered by TCT No. T-76.196 (M) and TCT No. T-76.197 (M) in
favor of intervenors-appellants Spouses Da Jose;
5. The return by defendant-appellant Genato of the P50,000.00 paid to him by the
plaintiff-appellee Cheng, and
6. Payment by plaintiff-appellee Cheng of moral damages to herein intervenors-
appellants Da Jose of P100,000.00, exemplary damages of P50,000.00, attorney's fees of
P50,000.00, and costs of suit; and to defendant-appellant, of P100,000.00 in exemplary
damages, P50,000.00 in attorney's fees. The amounts payable to the defendant-appellant may
be compensated by plaintiff appellee with the amount ordered under the immediately foregoing
paragraph which defendant-appellant has to pay the plaintiff-appellee.
SO ORDERED. 2
The antecedents of the case are as follows:
Respondent Ramon B. Genato (Genato) is the owner of two parcels of land located at Paradise
Farms, San Jose del Monte, Bulacan covered by TCT No. T-76.196 (M) 3 and TCT No. T-
76.197 (M) 4 with an aggregate area of 35,821square meters, more or less.
On September 6, 1989, respondent Genato entered into an agreement with respondent-spouses
Ernesto R. Da Jose and Socorro B. Da Jose (Da Jose spouses) over the above-mentioned two
parcels of land. The agreement culminated in the execution of a contract to sell for which the
purchase price was P80.00 per square meter. The contract was in a public instrument and was
duly annotated at the back of the two certificates of title on the same day. Clauses 1and 3
thereof provide:
1. That the purchase price shall be EIGHTY (P80.00) PESOS, Philippine Currency per
square meter, of which the amount of FIFTY THOUSAND (P50,000.00) PESOS shall be paid by
the VENDEE to the VENDOR as partial down payment at the time of execution of this Contract
to Sell.
xxx xxx xxx
3. That the VENDEE, Thirty (30) DAYS after the execution of this contract, and only after
having satisfactorily verified and confirmed the truth and authenticity of documents, and that no
restrictions, limitations, and developments imposed on and/or affecting the property subject of
this contract shall be detrimental to his interest, the VENDEE shall pay to the VENDOR, NINE
HUNDRED FIFTY THOUSAND (P950,00.00) PESOS. Philippine Currency, representing the full
payment of the agreed Down Payment, after which complete possession of the property shall be
given to the VENDEE to enable him to prepare the premises and any development therein.
On October 4, 1989, the Da Jose spouses, not having finished verifying the titles mentioned in
clause 3 as aforequoted, asked for and was granted by respondent Genato an extension of
another 30 days or until November 5, 1989. However, according to Genato, the extension
was granted on condition that a new set of documents is made seven (7) days from October 4,
1989. 6 This was denied by the Da Jose spouses.
Pending the effectivity of the aforesaid extension period, and without due notice to the Da Jose
spouses, Genato executed an Affidavit to Annul the Contract to Sell, 7 on October 13, 1989.
Moreover, no annotation of the said affidavit at the back of his titles was made right away. The
affidavit contained, inter alia, the following paragraphs;
xxx xxx xxx
That it was agreed between the parties that the agreed downpayment of P950,000.00 shall be
paid thirty (30) days after the execution of the Contract, that is on or before October 6, 1989;
The supposed VENDEES failed to pay the said full downpayment even up to this writing, a
breach of contract;
That this affidavit is being executed to Annul the aforesaid Contract to Sell for the vendee having
committed a breach of contract for not having complied with the obligation as provided in the
Contract to Sell; 8
On October 24, 1989, herein petitioner Ricardo Cheng (Cheng) went to Genato's residence and
expressed interest in buying the subject properties. On that occasion, Genato showed to Ricardo
Cheng copies of his transfer certificates of title and the annotations at the back thereof of his
contract to sell with the Da Jose spouses. Genato also showed him the aforementioned Affidavit
to Annul the Contract to Sell which has not been annotated at the back of the titles.
Despite these, Cheng went ahead and issued a check for P50,000.00 upon the assurance by
Genato that the previous contract with the Da Jose spouses will be annulled for which Genato
issued a handwritten receipt (Exh. "D"), written in this wise:
10/24/89
Received from Ricardo Cheng
the Sum of Fifty Thousand Only (P50.000-)
as partial for T-76196 (M)
T-76197 (M) area 35.821 Sq.m.
Paradise Farm, Gaya-Gaya, San Jose Del Monte
P70/m2 Bulacan
plus C. G. T. etc.
Check # 470393 (SGD.) Ramon B. Genato
10/24/89 9
On October 25, 1989, Genato deposited Cheng's check. On the same day, Cheng called up
Genato reminding him to register the affidavit to annul the contract to sell. 10
The following day, or on October 26, 1989, acting on Cheng's request, Genato caused the
registration of the Affidavit to Annul the Contract to Sell in the Registry of Deeds, Meycauayan,
Bulacan as primary entry No. 262702. 11
While the Da Jose spouses were at the Office of the Registry of Deeds of Meycauayan, Bulacan
on October 27, 1989, they met Genato by coincidence. It was only then that the Da Jose
spouses discovered about the affidavit to annul their contract. The latter were shocked at the
disclosure and protested against the rescission of their contract. After being reminded that he
(Genato) had given them (Da Jose spouses) an additional 30-day period to finish their
verification of his titles, that the period was still in effect, and that they were willing and able to
pay the balance of the agreed down payment, later on in the day, Genato decided to continue
the Contract he had with them. The agreement to continue with their contract was formalized in
a conforme letter dated October 27, 1989.
Thereafter, Ramon Genato advised Ricardo Cheng of his decision to continue his contract with
the Da Jose spouses and the return of Cheng's P50,000.00 check. Consequently, on October
30, 1989, Cheng's lawyer sent a letter 12 to Genato demanding compliance with their agreement
to sell the property to him stating that the contract to sell between him and Genato was already
perfected and threatening legal action.
On November 2, 1989, Genato sent a letter 13 to Cheng (Exh. "6") enclosing a BPI Cashier's
Check for P50,000.00 and expressed regret for his inability to "consummate his transaction" with
him. After having received the letter of Genato on November 4, 1989, Cheng, however, returned
the said check to the former via RCPI telegram 14 dated November 6, 1989, reiterating that "our
contract to sell your property had already been perfected."
Meanwhile, also on November 2, 1989, Cheng executed an affidavit of adverse claim 15 and
had it annotated on the subject TCT's.
On the same day, consistent with the decision of Genato and the Da Jose spouses to continue
with their Contract to Sell of September 6, 1989, the Da Jose spouses paid Genato the complete
down payment of P950,000.00 and delivered to him three (3) postdated checks (all dated May 6,
1990, the stipulated due date) in the total amount of P1,865,680.00 to cover full payment of the
balance of the agreed purchase price. However, due to the filing of the pendency of this case,
the three (3) postdated checks have not been encashed.
On December 8, 1989, Cheng instituted a complaint 16 for specific performance to compel
Genato to execute a deed of sale to him of the subject properties plus damages and prayer for
preliminary attachment. In his complaint, Cheng averred that the P50,000.00 check he gave was
a partial payment to the total agreed purchase price of the subject properties and considered as
an earnest money for which Genato acceded. Thus, their contract was already perfected.
In Answer 17 thereto, Genato alleged that the agreement was only a simple receipt of an option-
bid deposit, and never stated that it was a partial payment, nor is it an earnest money and that it
was subject to condition that the prior contract with the Da Jose spouses be first cancelled.
The Da Jose spouses, in their Answer in Intervention, 18 asserted that they have a superior right
to the property as first buyers. They alleged that the unilateral cancellation of the Contract to Sell
was without effect and void. They also cited Cheng's bad faith as a buyer being duly informed by
Genato of the existing annotated Contract to Sell on the titles.
After trial on the merits, the lower court ruled that the receipt issued by Genato to Cheng
unerringly meant a sale and not just a priority or an option to buy. It cannot be true that the
transaction was subjected to some condition or reservation, like the priority in favor of the Da
Jose spouses as first buyer because, if it were otherwise, the receipt would have provided such
material condition or reservation, especially as it was Genato himself who had made the receipt
in his own hand. It also opined that there was a valid rescission of the Contract to Sell by virtue
of the Affidavit to Annul the Contract to Sell. Time was of the essence in the execution of the
agreement between Genato and Cheng, under this circumstance demand, extrajudicial or
judicial, is not necessary. It falls under the exception to the rule provided in Article 1169 19 of the
Civil Code. The right of Genato to unilaterally rescind the contract is said to be under Article
1191 20 of the Civil Code. Additionally, after reference was made to the substance of the
agreement between Genato and the Da Jose spouses, the lower court also concluded that
Cheng should be preferred over the intervenors-Da Jose spouses in the purchase of the subject
properties. Thus, on January 18, 1994 the trial court rendered its decision the decretal portion of
which reads:
WHEREFORE, judgment is hereby rendered:
1. Declaring the contract to sell dated September 6, 1989 executed between defendant
Ramon Genato, as vendor, and intervenors Spouses Ernesto and Socorro Da Jose, as vendees,
resolved and rescinded in accordance with Art. 1191, Civil Code, by virtue of defendant's
affidavit to annul contract to sell dated October 13, 1989 and as the consequence of intervenors'
failure to execute within seven (7) days from October 4, 1989 another contract to sell pursuant to
their mutual agreement with defendant;
2. Ordering defendant to return to the intervenors the sum of P1,000,000.00, plus
interest at the legal rate from November 2, 1989 until full payment;
3. Directing defendant to return to the intervenors the three (3) postdated checks
immediately upon finality of this judgment;
4. Commanding defendant to execute with and in favor of the plaintiff Ricardo Cheng, as
vendee, a deed of conveyance and sale of the real properties described and covered in Transfer
Certificates of Title No. T-76-196 (M) and T-76.197 (M) of the Registry of Deeds of Bulacan,
Meycauayan Branch, at the rate of P70.000/square meter, less the amount of P50,000.00
alreaddy paid to defendant, which is considered as part of the purchase price, with the plaintiff
being liable for payment of the capital gains taxes and other expenses of the transfer pursuant to
the agreement to sell dated October 24, 1989; and
5 Ordering defendant to pay the plaintiff and the intervenors as follows:
a/ P50,000.00, as nominal damages, to plaintiff;
b/ P50,000.00, as nominal damages, to intervenors;
c/ P20,000.00, as and for attorney's fees, to plaintiff;
d/ P20,000.00, as and for attorney's fees, to intervenors; and
e/ Cost of the suit.
xxx xxx xxx
Not satisfied with the aforesaid decision, herein respondents Ramon Genato and Da Jose
spouses appealed to the court a quo which reversed such judgment and ruled that the prior
contract to sell in favor of the Da Jose spouses was not validly rescinded; that the subsequent
contract to sell between Genato and Cheng, embodied in the handwritten receipt, was without
force and effect due to the failure to rescind the prior contract; and that Cheng should pay
damages to the respondents herein being found to be in bad faith.
Hence this petition.21
This petition for review, assails the Court of Appeals' Decision on the following grounds: (1) that
the Da Jose spouses' Contract to Sell has been validly rescinded or resolved; (2) that Ricardo
Cheng's own contract with Genato was not just a contract to sell but one of conditional contract
of sale which gave him better rights, thus precluding the application of the rule on double sales
under Article 1544, Civil Code; and (3) that, in any case, it was error to hold him liable for
damages.
The petition must be denied for failure to show that the Court of Appeals committed a reversible
error which would warrant a contrary ruling.
No reversible error can be ascribed to the ruling of the Court of Appeals that there was no valid
and effective rescission or resolution of the Da Jose spouses Contract to Sell, contrary to
petitioner's contentions and the trial court's erroneous ruling.
In a Contract to Sell, the payment of the purchase price is a positive suspensive condition, the
failure of which is not a breach, casual or serious, but a situation that prevents the obligation of
the vendor to convey title from acquiring an obligatory force.22 It is one where the happening of
the event gives rise to an obligation. Thus, for its non-fulfillment there will be no contract to
speak of, the obligor having failed to perform the suspensive condition which enforces a juridical
relation. In fact with this circumstance, there can be no rescission of an obligation that is still
non-existent, the suspensive condition not having occurred as yet.23 Emphasis should be made
that the breach contemplated in Article 1191 of the New Civil Code is the obligor's failure to
comply with an obligation already extant, not a failure of a condition to render binding that
obligation.24
Obviously, the foregoing jurisprudence cannot be made to apply to the situation in the instant
case because no default can be ascribed to the Da Jose spouses since the 30-day extension
period has not yet expired. The Da Jose spouses' contention that no further condition was
agreed when they were granted the 30-days extension period from October 7, 1989 in
connection with clause 3 of their contract to sell dated September 6, 1989 should be upheld for
the following reason, to wit; firstly, If this were not true, Genato could not have been persuaded
to continue his contract with them and later on agree to accept the full settlement of the
purchase price knowing fully well that he himself imposed such sine qua non condition in order
for the extension to be valid; secondly, Genato could have immediately annotated his affidavit to
annul the contract to sell on his title when it was executed on October 13, 1989 and not only on
October 26, 1989 after Cheng reminded him of the annotation; thirdly, Genato could have sent at
least a notice of such fact, there being no stipulation authorizing him for automatic rescission, so
as to finally clear the encumbrance on his titles and make it available to other would be buyers. It
likewise settles the holding of the trial court that Genato "needed money urgently."
Even assuming in gratia argumenti that the Da Jose spouses defaulted, as claimed by Genato,
in their Contract to Sell, the execution by Genato of the affidavit to annul the contract is not even
called for. For with or without the aforesaid affidavit their non-payment to complete the full
downpayment of the purchase price ipso facto avoids their contract to sell, it being subjected to
a suspensive condition. When a contract is subject to a suspensive condition, its birth or
effectivity can take place only if and when the event which constitutes the condition happens or
is fulfilled.25 If the suspensive condition does not take place, the parties would stand as if the
conditional obligation had never
existed. 26
Nevertheless, this being so Genato is not relieved from the giving of a notice, verbal or written,
to the Da Jose spouses for his decision to rescind their contract. In many cases,27 even though
we upheld the validity of a stipulation in a contract to sell authorizing automatic rescission for a
violation of its terms and conditions, at least a written notice must be sent to the defaulter
informing him of the same. The act of a party in treating a contract as cancelled should be made
known to the other.28 For such act is always provisional. It is always subject to scrutiny and
review by the courts in case the alleged defaulter brings the matter to the proper courts. In
University of the Philippines vs. De Los Angeles,29 this Court stressed and we quote:
In other words, the party who deems the contract violated may consider it resolved or rescinded,
and act accordingly, without previous court action, but it proceeds at its own risk. For it is only
the final judgment of the corresponding court that will conclusively and finally settle whether the
action taken was or was not correct in law. But the law definitely does not require that the
contracting party who believes itself injured must first file suit and wait for a judgment before
taking extrajudicial steps to protect its interest. Otherwise, the party injured by the other's breach
will have to passively sit and watch its damages accumulate during the pendency of the suit until
the final judgment of rescission is rendered when the law itself requires that he should exercise
due diligence to minimize its own damages (Civil Code, Article 2203).
This rule validates, both in equity and justice, contracts such as the one at bat, in order to avoid
and prevent the defaulting party from assuming the offer as still in effect due to the obligee's
tolerance for such non-fulfillment. Resultantly, litigations of this sort shall be prevented and the
relations among would-be parties may be preserved. Thus, Ricardo Cheng's contention that the
Contract to Sell between Genato and the Da Jose spouses was rescinded or resolved due to
Genato's unilateral rescission finds no support in this case.
Anent the issue on the nature of the agreement between Cheng and Genato, the records of this
case are replete with admissions30 that Cheng believed it to be one of a Contract to Sell and not
one of Conditional Contract of Sale which he, in a transparent turn-around, now pleads in this
Petition. This ambivalent stance of Cheng is even noted by the appellate court, thus:
At the outset, this Court notes that plaintiff-appellee was inconsistent in characterizing the
contract he allegedly entered into. In his complaint.31 Cheng alleged that the P50,000.00 down
payment was earnest money. And next, his testimony32 was offered to prove that the
transaction between him and Genato on October 24, 1989 was actually a perfected contract to
sell.33
Settled is the rule that an issue which was not raised during the trial in the court below cannot be
raised for the first time on appeal.34 Issues of fact and arguments not adequately brought to the
attention of the trial court need not be and ordinarily will not be considered by a reviewing court
as they cannot be raised for the first time on appeal.35 In fact, both courts below correctly held
that the receipt which was the result of their agreement, is a contract to sell. This was, in fact
Cheng's contention in his pleadings before said courts. This patent twist only operates against
Cheng's posture which is indicative of the weakness of his claim.
But even if we are to assume that the receipt, Exh. "D," is to be treated as a conditional contract
of sale, it did not acquire any obligatory force since it was subject to suspensive condition that
the earlier contract to sell between Genato and the Da Jose spouses should first be cancelled or
rescinded a condition never met, as Genato, to his credit, upon realizing his error, redeemed
himself by respecting and maintaining his earlier contract with the Da Jose spouses. In fact, a
careful reading of the receipt, Exh. "D," alone would not even show that a conditional contract of
sale has been entered by Genato and Cheng. When the requisites of a valid contract of sale are
lacking in said receipt, therefore the "sale" is neither valid or enfoceable.36
To support his now new theory that the transaction was a conditional contract of sale, petitioner
invokes the case of Coronel vs. Court of Appeals 37 as the law that should govern their Petition.
We do not agree. Apparently, the factual milieu in Coronel is not on all fours with those in the
case at bar.
In Coronel, this Court found that the petitioners therein clearly intended to transfer title to the
buyer which petitioner themselves admitted in their pleading. The agreement of the parties
therein was definitively outlined in the "Receipt of Down Payment" both as to property, the
purchase price, the delivery of the seller of the property and the manner of the transfer of title
subject to the specific condition that upon the transfer in their names of the subject property the
Coronels will execute the deed of absolute sale.
Whereas, in the instant case, even by a careful perusal of the receipt, Exh. "D," alone such kind
of circumstances cannot be ascertained without however resorting to the exceptions of the Rule
on Parol Evidence.
To our mind, the trial court and the appellate court correctly held that the agreement between
Genato and Cheng is a contract to sell, which was, in fact, petitioner connection in his pleadings
before the said courts. Consequently, both to mind, which read:
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 possession; and in the absence thereof, to the person who presents he oldest title,
provided there is good faith.
However, a meticulous reading of the aforequoted provision shows that said law is not apropos
to the instant case. This provision connotes that the following circumstances must concur:
(a) The two (or more) sales transactions in issue must pertain to exactly the same subject
matter, and must be valid sales transactions.
(b) The two (or more) buyers at odds over the rightful ownership of the subject matter
must each represent conflicting interests; and
(c) The two (or more) buyers at odds over the rightful ownership of the subject matter
must each have bought from the very same seller.
These situations obviously are lacking in a contract to sell for neither a transfer of ownership nor
a sales transaction has been consummated. The contract to be binding upon the obligee or the
vendor depends upon the fulfillment or non-fulfillment of an event.
Notwithstanding this contrary finding with the appellate court, we are of the view that the
governing principle of Article 1544, Civil Code, should apply in this situation. Jurisprudence38
teaches us that the governing principle is PRIMUS TEMPORE, PORTIOR JURE (first in time,
stronger in right). For not only was the contract between herein respondents first in time; it was
also registered long before petitioner's intrusion as a second buyer. This principle only applies
when the special rules provided in the aforcited article of the Civil Code do not apply or fit the
specific circumstances mandated under said law or by jurisprudence interpreting the article.
The rule exacted by Article 1544 of the Civil Code for the second buyer to be able to displace the
first buyer are:
(1) that the second buyer must show that he acted in good faith (i.e. in ignorance of the
first sale and of the first buyer's rights) from the time of acquisition until title is transferred to him
by registration or failing registration, by delivery of possession;39
(2) the second buyer must show continuing good faith and innocence or lack of
knowledge of the first sale until his contract ripens into full ownership through prior registration
as provided by law.40
Thus, in the case at bar, the knowledge gained by the Da Jose spouses, as first buyers, of the
new agreement between Cheng and Genato will not defeat their rights as first buyers except
where Cheng, as second buyer, registers or annotates his transaction or agreement on the title
of the subject properties in good faith ahead of the Da Jose spouses. Moreover, although the Da
Jose spouses, as first buyers, knew of the second transaction it will not bar them from availing of
their rights granted by law, among them, to register first their agreement as against the second
buyer.
In contrast, knowledge gained by Cheng of the first transaction between the Da Jose spouses
and Genato defeats his rights even if he is first to register the second transaction, since such
knowledge taints his prior registration with bad faith.
innocent purchaser for value, if it afterwards develops that the title was in fact defective, and it
appears that he had such notice of the defect as would have led to its discovery had he acted
with that measure of precaution which may reasonably be required of a prudent man in a like
situation. Good faith, or lack of it, is in its last analysis a question of intention; but in ascertaining
the intention by which one is actuated on a given occasion, we are necessarily controlled by the
evidence as to the conduct and outward acts by which alone the inward motive may with safety,
be determined. So it is that "the honesty of intention," "the honest lawful intent," which
constitutes good faith implies a "freedom from knowledge and circumstances which ought to put
a person on inquiry," and so it is that proof of such knowledge overcomes the presumption of
good faith in which the courts always indulge in the absence of the proof to the contrary. "Good
faith, or the want of it, is not a visible, tangible fact that can be seen or touched, but rather a
state or condition of mind which can only be judge of by actual or fancied tokens or signs."
(Wilder vs. Gilman, 55 Vt. 504, 505; Cf. Cardenas vs. Miller, 108 Cal., 250; Breaux-Renoudet,
Cypress Lumber Co. vs. Shadel, 52 La. Ann., 2094-2098; Pinkerton Bros. Co. vs. Bromely, 119
Mich., 8, 10, 17.) (Emphasis ours)
Damages were awarded by the appellate court on the basis of its finding that petitioner "was in
bad faith when he filed the suit for specific performance knowing fully well that his agreement
with Genato did not push through.46 Such bad faith, coupled with his wrongful interference with
the contractual relations between Genato and the Da Jose spouses, which culminated in his
filing of the present suit and thereby creating what the counsel for the respondents describes as
"a prolonged and economically unhealthy gridlock47 on both the land itself and the respondents'
rights provides ample basis for the damages awarded. Based on these overwhelming evidence
of bad faith on the part of herein petitioner Ricardo Cheng, we find that the award of damages
made by the appellate court is in order.

"Registration", as defined by Soler and Castillo, means any entry made in the books of the WHEREFORE, premises considered, the instant petition for review is DENIED and the assailed
registry, including both registration in its ordinary and strict sense, and cancellation, annotation, decision is hereby AFFIRMED EN TOTO.
and even marginal notes.41 In its strict acceptation, it is the entry made in the registry which
records solemnly and permanently the right of ownership and other real rights.42 We have SO ORDERED.
ruled43 before that when a Deed of Sale is inscribed in the registry of property on the original
document itself, what was done with respect to said entries or annotations and marginal notes
amounted to a registration of the sale. In this light, we see no reason why we should not give
priority in right the annotation made by the Da Jose spouses with respect to their Contract to Sell
dated September 6, 1989.

Moreover, registration alone in such cases without good faith is not sufficient. Good faith must
concur with registration for such prior right to be enforceable. In the instant case, the annotation
made by the Da Jose spouses on the titles of Genato of their "Contract To Sell" more than
satisfies this requirement. Whereas in the case of Genato's agreement with Cheng such is
unavailing. For even before the receipt, Exh. "D," was issued to Cheng information of such pre-
existing agreement has been brought to his knowledge which did not deter him from pursuing his
agreement with Genato. We give credence to the factual finding of the appellate court that
"Cheng himself admitted that it was he who sought Genato in order to inquire about the property
and offered to buy the same.44 And since Cheng was fully aware, or could have been if he had
chosen to inquire, of the rights of the Da Jose spouses under the Contract to Sell duly annotated
on the transfer certificates of titles of Genato, it now becomes unnecessary to further elaborate
in detail the fact that he is indeed in bad faith in entering into such agreement. As we have held
in Leung Yee vs. F.L. Strong Machinery Co.:45

One who purchases real estate with knowledge of a defect . . . of title in his vendor cannot claim
that he has acquired title thereto in good faith as against . . . . an interest therein; and the same
rule must be applied to one who has knowledge of facts which should have put him upon such
inquiry and investigation as might be necessary to acquaint him with the defects in the title of his
vendor. A purchaser cannot close his eyes to facts which should put a reasonable man upon his
guard, and then claim that he acted in good faith under the belief that there was no defect in the
title of the vendor. His mere refusal to believe that such defect exists, or his willful closing of his
eyes to the possibility of the existence of a defect in his vendor's title, will not make him an
SECOND DIVISION
[G.R. No. 132161. January 17, 2005]
CONSOLIDATED RURAL BANK (CAGAYAN VALLEY), INC., petitioner, vs. THE
HONORABLE COURT OF APPEALS and HEIRS OF TEODORO DELA CRUZ, respondents.
DECISION
TINGA, J.:
Petitioner Consolidated Rural Bank, Inc. of Cagayan Valley filed the instant Petition for
Certiorari[1] under Rule 45 of the Revised Rules of Court, seeking the review of the Decision[2]
of the Court of Appeals Twelfth Division in CA-G.R. CV No. 33662, promulgated on 27 May
1997, which reversed the judgment[3] of the lower court in favor of petitioner; and the
Resolution[4] of the Court of Appeals, promulgated on 5 January 1998, which reiterated its
Decision insofar as respondents Heirs of Teodoro dela Cruz (the Heirs) are concerned.
From the record, the following are the established facts:
Rizal, Anselmo, Gregorio, Filomeno and Domingo, all surnamed Madrid (hereafter the Madrid
brothers), were the registered owners of Lot No. 7036-A of plan Psd-10188, Cadastral Survey
211, situated in San Mateo, Isabela per Transfer Certificate of Title (TCT) No. T-8121 issued by
the Register of Deeds of Isabela in September 1956.[5]
On 23 and 24 October 1956, Lot No. 7036-A was subdivided into several lots under subdivision
plan Psd- 50390. One of the resulting subdivision lots was Lot No. 7036-A-7 with an area of Five
Thousand Nine Hundred Fifty-Eight (5,958) square meters.[6]
On 15 August 1957, Rizal Madrid sold part of his share identified as Lot No. 7036-A-7, to Aleja
Gamiao (hereafter Gamiao) and Felisa Dayag (hereafter, Dayag) by virtue of a Deed of Sale,[7]
to which his brothers Anselmo, Gregorio, Filomeno and Domingo offered no objection as
evidenced by their Joint Affidavit dated 14 August 1957.[8] The deed of sale was not registered
with the Office of the Register of Deeds of Isabela. However, Gamiao and Dayag declared the
property for taxation purposes in their names on March 1964 under Tax Declaration No. 7981.[9]
On 28 May 1964, Gamiao and Dayag sold the southern half of Lot No. 7036-A-7, denominated
as Lot No. 7036-A-7-B, to Teodoro dela Cruz,[10] and the northern half, identified as Lot No.
7036-A-7-A,[11] to Restituto Hernandez.[12] Thereupon, Teodoro dela Cruz and Restituto
Hernandez took possession of and cultivated the portions of the property respectively sold to
them.[13]
Later, on 28 December 1986, Restituto Hernandez donated the northern half to his daughter,
Evangeline Hernandez-del Rosario.[14] The children of Teodoro dela Cruz continued
possession of the southern half after their fathers death on 7 June 1970.
In a Deed of Sale[15] dated 15 June 1976, the Madrid brothers conveyed all their rights and
interests over Lot No. 7036-A-7 to Pacifico Marquez (hereafter, Marquez), which the former
confirmed[16] on 28 February 1983.[17] The deed of sale was registered with the Office of the
Register of Deeds of Isabela on 2 March 1982.[18]
Subsequently, Marquez subdivided Lot No. 7036-A-7 into eight (8) lots, namely: Lot Nos. 7036-
A-7-A to 7036-A-7-H, for which TCT Nos. T-149375 to T-149382 were issued to him on 29
March 1984.[19] On the same date, Marquez and his spouse, Mercedita Mariana, mortgaged
Lots Nos. 7036-A-7-A to 7036-A-7-D to the Consolidated Rural Bank, Inc. of Cagayan Valley
(hereafter, CRB) to secure a loan of One Hundred Thousand Pesos (P100,000.00).[20] These
deeds of real estate mortgage were registered with the Office of the Register of Deeds on 2 April
1984.
On 6 February 1985, Marquez mortgaged Lot No. 7036-A-7-E likewise to the Rural Bank of
Cauayan (RBC) to secure a loan of Ten Thousand Pesos (P10,000.00).[21]
As Marquez defaulted in the payment of his loan, CRB caused the foreclosure of the mortgages
in its favor and the lots were sold to it as the highest bidder on 25 April 1986.[22]
On 31 October 1985, Marquez sold Lot No. 7036-A-7-G to Romeo Calixto (Calixto).[23]
Claiming to be null and void the issuance of TCT Nos. T-149375 to T-149382; the foreclosure
sale of Lot Nos. 7036-A-7-A to 7036-A-7-D; the mortgage to RBC; and the sale to Calixto, the
Heirs-now respondents herein-represented by Edronel dela Cruz, filed a case[24] for
reconveyance and damages the southern portion of Lot No. 7036-A (hereafter, the subject
property) against Marquez, Calixto, RBC and CRB in December 1986.
Evangeline del Rosario, the successor-in-interest of Restituto Hernandez, filed with leave of
court a Complaint in Intervention[25] wherein she claimed the northern portion of Lot No. 7036-
A-7.
In the Answer to the Amended Complaint,[26] Marquez, as defendant, alleged that apart from
being the first registrant, he was a buyer in good faith and for value. He also argued that the sale
executed by Rizal Madrid to Gamiao and Dayag was not binding upon him, it being unregistered.
For his part, Calixto manifested that he had no interest in the subject property as he ceased to
be the owner thereof, the same having been reacquired by defendant Marquez.[27]
CRB, as defendant, and co-defendant RBC insisted that they were mortgagees in good faith and
that they had the right to rely on the titles of Marquez which were free from any lien or
encumbrance.[28]
After trial, the Regional Trial Court, Branch 19 of Cauayan, Isabela (hereafter, RTC) handed
down a decision in favor of the defendants, disposing as follows:
WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered:
1. Dismissing the amended complaint and the complaint in intervention;
2. Declaring Pacifico V. Marquez the lawful owner of Lots 7036-A-7 now Lots 7036-A-7-A to
7036-A-7-H, inclusive, covered by TCT Nos. T-149375 to T-149382, inclusive;
3. Declaring the mortgage of Lots 7036-A-7-A, 7036-A-7-B, 7036-A-7-C and 7036-A-7-D in favor
of the defendant Consolidated Rural Bank (Cagayan Valley) and of Lot 7036-A-7-E in favor of
defendant Rural Bank of Cauayan by Pacifico V. Marquez valid;
4. Dismissing the counterclaim of Pacifico V. Marquez; and
5. Declaring the Heirs of Teodoro dela Cruz the lawful owners of the lots covered by TCT Nos.
T-33119, T-33220 and T-7583.
No pronouncement as to costs.
SO ORDERED.[29]
In support of its decision, the RTC made the following findings:
With respect to issues numbers 1-3, the Court therefore holds that the sale of Lot 7036-A-7
made by Rizal Madrid to Aleja Gamiao and Felisa Dayag and the subsequent conveyances to
the plaintiffs and intervenors are all valid and the Madrid brothers are bound by said contracts by
virtue of the confirmation made by them on August 14, 1957 (Exh. B).
Are the defendants Pacifico V. Marquez and Romeo B. Calixto buyers in good faith and for value
of Lot 7036-A-7?
It must be borne in mind that good faith is always presumed and he who imputes bad faith has
the burden of proving the same (Art. 527, Civil Code). The Court has carefully scrutinized the
evidence presented but finds nothing to show that Marquez was aware of the plaintiffs and
intervenors claim of ownership over this lot. TCT No. T-8121 covering said property, before the
issuance of Marquez title, reveals nothing about the plaintiffs and intervenors right thereto for it
is an admitted fact that the conveyances in their favor are not registered.
The Court is therefore confronted with two sales over the same property. Article 1544 of the Civil
Code provides:
ART. 1544. If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it should
be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in
good faith first recorded it in the Registry of Property. x x x (Underscoring supplied).
From the foregoing provisions and in the absence of proof that Marquez has actual or
constructive knowledge of plaintiffs and intervenors claim, the Court has to rule that as the
vendee who first registered his sale, Marquez ownership over Lot 7036-A-7 must be upheld.[30]
The Heirs interposed an appeal with the Court of Appeals. In their Appellants Brief,[31] they
ascribed the following errors to the RTC: (1) it erred in finding that Marquez was a buyer in good
faith; (2) it erred in validating the mortgage of the properties to RBC and CRB; and (3) it erred in
not reconveying Lot No. 7036-A-7-B to them.[32]
Intervenor Evangeline del Rosario filed a separate appeal with the Court of Appeals. It was,
however, dismissed in a Resolution dated 20 September 1993 for her failure to pay docket fees.
Thus, she lost her standing as an appellant.[33]
On 27 May 1997, the Court of Appeals rendered its assailed Decision[34] reversing the RTCs
judgment. The dispositive portion reads:
WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE. Accordingly,
judgment is hereby rendered as follows:
1. Declaring the heirs of Teodoro dela Cruz the lawful owners of the southern half portion and
Evangeline Hernandez-del Rosario the northern half portion of Lot No. 7036-A-7, now covered
by TCT Nos. T-149375 to T-149382, inclusive;
2. Declaring null and void the deed of sale dated June 15, 1976 between Pacifico V. Marquez
and the Madrid brothers covering said Lot 7036-A-7;
3. Declaring null and void the mortgage made by defendant Pacifico V. Marquez of Lot Nos.
7036-A-7-A, 7036-A-7-B, 7036-A-7-C and 7036-A-7-D in favor of the defendant Consolidated
Rural Bank and of Lot 7036-A-7-E in favor of defendant Rural Bank of Cauayan; and
4. Ordering Pacifico V. Marquez to reconvey Lot 7036-A-7 to the heirs of Teodoro dela Cruz and
Evangeline Hernandez-del Rosario.
No pronouncement as to costs.
SO ORDERED.[35]
In upholding the claim of the Heirs, the Court of Appeals held that Marquez failed to prove that
he was a purchaser in good faith and for value. It noted that while Marquez was the first
registrant, there was no showing that the registration of the deed of sale in his favor was coupled
with good faith. Marquez admitted having knowledge that the subject property was being taken
by the Heirs at the time of the sale.[36] The Heirs were also in possession of the land at the
time. According to the Decision, these circumstances along with the subject propertys attractive
locationit was situated along the National Highway and was across a gasoline stationshould
have put Marquez on inquiry as to its status. Instead, Marquez closed his eyes to these matters
and failed to exercise the ordinary care expected of a buyer of real estate.[37]
Anent the mortgagees RBC and CRB, the Court of Appeals found that they merely relied on the
certificates of title of the mortgaged properties. They did not ascertain the status and condition
thereof according to standard banking practice. For failure to observe the ordinary banking
procedure, the Court of Appeals considered them to have acted in bad faith and on that basis
declared null and void the mortgages made by Marquez in their favor.[38]
Dissatisfied, CRB filed a Motion for Reconsideration[39] pointing out, among others, that the
Decision promulgated on 27 May 1997 failed to establish good faith on the part of the Heirs.
Absent proof of possession in good faith, CRB avers, the Heirs cannot claim ownership over the
subject property.
In a Resolution[40] dated 5 January 1998, the Court of Appeals stressed its disbelief in CRBs
allegation that it did not merely rely on the certificates of title of the properties and that it
conducted credit investigation and standard ocular inspection. But recalling that intervenor
Evangeline del Rosario had lost her standing as an appellant, the Court of Appeals accordingly
modified its previous Decision, as follows:
WHEREFORE, the decision dated May 27, 1997, is hereby MODIFIED to read as follows:
WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE insofar as
plaintiffs-appellants are concerned. Accordingly, judgment is hereby rendered as follows:
1. Declaring the Heirs of Teodoro dela Cruz the lawful owners of the southern half portion of Lot
No. 7036-A-7;
2. Declaring null and void the deed of sale dated June 15, 1976 between Pacifico V. Marquez
and the Madrid brothers insofar as the southern half portion of Lot NO. (sic) 7036-A-7 is
concerned;
3. Declaring the mortgage made by defendant Pacifico V. Marquez in favor of defendant
Consolidated Rural Bank (Cagayan Valley) and defendant Rural Bank of Cauayan as null and
void insofar as the southern half portion of Lot No. 7036-A-7 is concerned;
4. Ordering defendant Pacifico V. Marquez to reconvey the southern portion of Lot No. 7036-A-7
to the Heirs of Teodoro dela Cruz.
No pronouncement as to costs.
SO ORDERED.[41]
Hence, the instant CRB petition. However, both Marquez and RBC elected not to challenge the
Decision of the appellate court.
Petitioner CRB, in essence, alleges that the Court of Appeals committed serious error of law in
upholding the Heirs ownership claim over the subject property considering that there was no
finding that they acted in good faith in taking possession thereof nor was there proof that the first
buyers, Gamiao and Dayag, ever took possession of the subject property. CRB also makes
issue of the fact that the sale to Gamiao and Dayag was confirmed a day ahead of the actual
sale, clearly evincing bad faith, it adds. Further, CRB asserts Marquezs right over the property
being its registered owner.
The petition is devoid of merit. However, the dismissal of the petition is justified by reasons
different from those employed by the Court of Appeals.
Like the lower court, the appellate court resolved the present controversy by applying the rule on
double sale provided in Article 1544 of the Civil Code. They, however, arrived at different
conclusions. The RTC made CRB and the other defendants win, while the Court of Appeals
decided the case in favor of the Heirs.
Article 1544 of the Civil Code reads, thus:
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 possession; and, in the absence thereof, to the person who presents the oldest title,
provided there is good faith.
The provision is not applicable in the present case. It contemplates a case of double or multiple
sales by a single vendor. More specifically, it covers a situation where a single vendor sold one
and the same immovable property to two or more buyers.[42] According to a noted civil law
author, it is necessary that the conveyance must have been made by a party who has an
existing right in the thing and the power to dispose of it.[43] It cannot be invoked where the two
different contracts of sale are made by two different persons, one of them not being the owner of
the property sold.[44] And even if the sale was made by the same person, if the second sale was
made when such person was no longer the owner of the property, because it had been acquired
by the first purchaser in full dominion, the second purchaser cannot acquire any right.[45]
In the case at bar, the subject property was not transferred to several purchasers by a single
vendor. In the first deed of sale, the vendors were Gamiao and Dayag whose right to the subject
property originated from their acquisition thereof from Rizal Madrid with the conformity of all the
other Madrid brothers in 1957, followed by their declaration of the property in its entirety for
taxation purposes in their names. On the other hand, the vendors in the other or later deed were
the Madrid brothers but at that time they were no longer the owners since they had long before
disposed of the property in favor of Gamiao and Dayag.
Citing Manresa, the Court of Appeals in 1936 had occasion to explain the proper application of
Article 1473 of the Old Civil Code (now Article 1544 of the New Civil Code) in the case of Carpio
v. Exevea,[46] thus:
In order that tradition may be considered performed, it is necessary that the requisites which it
implies must have been fulfilled, and one of the indispensable requisites, according to the most
exact Roman concept, is that the conveyor had the right and the will to convey the thing. The
intention to transfer is not sufficient; it only constitutes the will. It is, furthermore, necessary that
the conveyor could juridically perform that act; that he had the right to do so, since a right which
he did not possess could not be vested by him in the transferee.
This is what Article 1473 has failed to express: the necessity for the preexistence of the right on
the part of the conveyor. But even if the article does not express it, it would be understood, in our
opinion, that that circumstance constitutes one of the assumptions upon which the article is
based.
This construction is not repugnant to the text of Article 1473, and not only is it not contrary to it,
but it explains and justifies the same. (Vol. 10, 4th ed., p. 159)[47]
In that case, the property was transferred to the first purchaser in 1908 by its original owner,
Juan Millante. Thereafter, it was sold to plaintiff Carpio in June 1929. Both conveyances were
unregistered. On the same date that the property was sold to the plaintiff, Juan Millante sold the
same to defendant Exevea. This time, the sale was registered in the Registry of Deeds. But
despite the fact of registration in defendants favor, the Court of Appeals found for the plaintiff
and refused to apply the provisions of Art. 1473 of the Old Civil Code, reasoning that on the date
of the execution of the document, Exhibit 1, Juan Millante did not and could not have any right
whatsoever to the parcel of land in question.[48]
Citing a portion of a judgment dated 24 November 1894 of the Supreme Court of Spain, the
Court of Appeals elucidated further:
Article 1473 of the Civil Code presupposes the right of the vendor to dispose of the thing sold,
and does not limit or alter in this respect the provisions of the Mortgage Law in force, which
upholds the principle that registration does not validate acts or contracts which are void, and that
although acts and contracts executed by persons who, in the Registry, appear to be entitled to
do so are not invalidated once recorded, even if afterwards the right of such vendor is annulled
or resolved by virtue of a previous unrecorded title, nevertheless this refers only to third
parties.[49]
In a situation where not all the requisites are present which would warrant the application of Art.
1544, the principle of prior tempore, potior jure or simply he who is first in time is preferred in
right,[50] should apply.[51] The only essential requisite of this rule is priority in time; in other
words, the only one who can invoke this is the first vendee. Undisputedly, he is a purchaser in
good faith because at the time he bought the real property, there was still no sale to a second
vendee.[52] In the instant case, the sale to the Heirs by Gamiao and Dayag, who first bought it
from Rizal Madrid, was anterior to the sale by the Madrid brothers to Marquez. The Heirs also
had possessed the subject property first in time. Thus, applying the principle, the Heirs, without a
scintilla of doubt, have a superior right to the subject property.
Moreover, it is an established principle that no one can give what one does not havenemo dat
quod non habet. Accordingly, one can sell only what one owns or is authorized to sell, and the
buyer can acquire no more than what the seller can transfer legally.[53] In this case, since the
Madrid brothers were no longer the owners of the subject property at the time of the sale to
Marquez, the latter did not acquire any right to it.
In any event, assuming arguendo that Article 1544 applies to the present case, the claim of
Marquez still cannot prevail over the right of the Heirs since according to the evidence he was
not a purchaser and registrant in good faith.
Following Article 1544, in the double sale of an immovable, the rules of preference are:
(a) the first registrant in good faith;
(b) should there be no entry, the first in possession in good faith; and
(c) in the absence thereof, the buyer who presents the oldest title in good faith. [54]
Prior registration of the subject property does not by itself confer ownership or a better right over
the property. Article 1544 requires that before the second buyer can obtain priority over the first,
he must show that he acted in good faith throughout (i.e., in ignorance of the first sale and of the
first buyers rights)from the time of acquisition until the title is transferred to him by registration or
failing registration, by delivery of possession.[55]
In the instant case, the actions of Marquez have not satisfied the requirement of good faith from
the time of the purchase of the subject property to the time of registration. Found by the Court of
Appeals, Marquez knew at the time of the sale that the subject property was being claimed or
taken by the Heirs. This was a detail which could indicate a defect in the vendors title which he
failed to inquire into. Marquez also admitted that he did not take possession of the property and
at the time he testified he did not even know who was in possession. Thus, he testified on direct
examination in the RTC as follows:
ATTY. CALIXTO
Q Can you tell us the circumstances to your buying the land in question?
A In 1976 the Madrid brothers confessed to me their problems about their lots in San Mateo that
they were being taken by Teodoro dela Cruz and Atty. Teofilo A. Leonin; that they have to pay
the lawyers fee of P10,000.00 otherwise Atty. Leonin will confiscate the land. So they begged
me to buy their properties, some of it. So that on June 3, 1976, they came to Cabagan where I
was and gave them P14,000.00, I think. We have talked that they will execute the deed of sale.
Q Why is it, doctor, that you have already this deed of sale, Exh. 14, why did you find it
necessary to have this Deed of Confirmation of a Prior Sale, Exh. 15?
A Because as I said a while ago that the first deed of sale was submitted to the Register of
Deeds by Romeo Badua so that I said that because when I became a Municipal Health Officer in
San Mateo, Isabela, I heard so many rumors, so many things about the land and so I requested
them to execute a deed of confirmation.[56]
...
ATTY. CALIXTO-
Q At present, who is in possession on the Riceland portion of the lot in question?
A I can not say because the people working on that are changing from time to time.
Q Why, have you not taken over the cultivation of the land in question?
A Well, the Dela Cruzes are prohibiting that we will occupy the place.
Q So, you do not have any possession?
A None, sir.[57]
One who purchases real property which is in actual possession of others should, at least, make
some inquiry concerning the rights of those in possession. The actual possession by people
other than the vendor should, at least, put the purchaser upon inquiry. He can scarcely, in the
absence of such inquiry, be regarded as a bona fide purchaser as against such possessions.[58]
The rule of caveat emptor requires the purchaser to be aware of the supposed title of the vendor
and one who buys without checking the vendors title takes all the risks and losses consequent to
such failure.[59]
It is further perplexing that Marquez did not fight for the possession of the property if it were true
that he had a better right to it. In our opinion, there were circumstances at the time of the sale,
and even at the time of registration, which would reasonably require a purchaser of real property
to investigate to determine whether defects existed in his vendors title. Instead, Marquez willfully
closed his eyes to the possibility of the existence of these flaws. For failure to exercise the
measure of precaution which may be required of a prudent man in a like situation, he cannot be
called a purchaser in good faith.[60]
As this Court explained in the case of Spouses Mathay v. Court of Appeals:[61]
Although it is a recognized principle that a person dealing on a registered land need not go
beyond its certificate of title, it is also a firmly settled rule that where there are circumstances
which would put a party on guard and prompt him to investigate or inspect the property being
sold to him, such as the presence of occupants/tenants thereon, it is, of course, expected from
the purchaser of a valued piece of land to inquire first into the status or nature of possession of
the occupants, i.e., whether or not the occupants possess the land en concepto de dueo, in
concept of owner. As is the common practice in the real estate industry, an ocular inspection of
the premises involved is a safeguard a cautious and prudent purchaser usually takes. Should he
find out that the land he intends to buy is occupied by anybody else other than the seller who, as
in this case, is not in actual possession, it would then be incumbent upon the purchaser to verify
the extent of the occupants possessory rights. The failure of a prospective buyer to take such
precautionary steps would mean negligence on his part and would thereby preclude him from
claiming or invoking the rights of a purchaser in good faith.[62]
This rule equally applies to mortgagees of real property. In the case of Crisostomo v. Court of
Appeals,[63] the Court held:
It is a well-settled rule that a purchaser or mortgagee cannot close his eyes to facts which should
put a reasonable man upon his guard, and then claim that he acted in good faith under the belief
that there was no defect in the title of the vendor or mortgagor. His mere refusal to believe that
such defect exists, or his willful closing of his eyes to the possibility of the existence of a defect
in the vendors or mortgagors title, will not make him an innocent purchaser or mortgagee for
value, if it afterwards develops that the title was in fact defective, and it appears that he had such
notice of the defects as would have led to its discovery had he acted with the measure of a
prudent man in a like situation.[64]
Banks, their business being impressed with public interest, are expected to exercise more care
and prudence than private individuals in their dealings, even those involving registered lands.
Hence, for merely relying on the certificates of title and for its failure to ascertain the status of the
mortgaged properties as is the standard procedure in its operations, we agree with the Court of
Appeals that CRB is a mortgagee in bad faith.
In this connection, Marquezs obstention of title to the property and the subsequent transfer
thereof to CRB cannot help the latters cause. In a situation where a party has actual knowledge
of the claimants actual, open and notorious possession of the disputed property at the time of
registration, as in this case, the actual notice and knowledge are equivalent to registration,
because to hold otherwise would be to tolerate fraud and the Torrens system cannot be used to
shield fraud. [65]
While certificates of title are indefeasible, unassailable and binding against the whole world, they
merely confirm or record title already existing and vested. They cannot be used to protect a
usurper from the true owner, nor can they be used for the perpetration of fraud; neither do they
permit one to enrich himself at the expense of others.[66]
We also find that the Court of Appeals did not err in awarding the subject property to the Heirs
absent proof of good faith in their possession of the subject property and without any showing of
possession thereof by Gamiao and Dayag.
As correctly argued by the Heirs in their Comment,[67] the requirement of good faith in the
possession of the property finds no application in cases where there is no second sale.[68] In
the case at bar, Teodoro dela Cruz took possession of the property in 1964 long before the sale
to Marquez transpired in 1976 and a considerable length of timeeighteen (18) years in factbefore
the Heirs had knowledge of the registration of said sale in 1982. As Article 526 of the Civil Code
aptly provides, (H)e is deemed a possessor in good faith who is not aware that there exists in his
title or mode of acquisition any flaw which invalidates it. Thus, there was no need for the
appellate court to consider the issue of good faith or bad faith with regard to Teodoro dela Cruzs
possession of the subject property.
Likewise, we are of the opinion that it is not necessary that there should be any finding of
possession by Gamiao and Dayag of the subject property. It should be recalled that the
regularity of the sale to Gamiao and Dayag was never contested by Marquez.[69] In fact the
RTC upheld the validity of this sale, holding that the Madrid brothers are bound by the sale by
virtue of their confirmation thereof in the Joint Affidavit dated 14 August 1957. That this was
executed a day ahead of the actual sale on 15 August 1957 does not diminish its integrity as it
was made before there was even any shadow of controversy regarding the ownership of the
subject property.
Moreover, as this Court declared in the case of Heirs of Simplicio Santiago v. Heirs of Mariano
E. Santiago,[70] tax declarations are good indicia of possession in the concept of an owner, for
no one in his right mind would be paying taxes for a property that is not in his actual or
constructive possession.[71]
WHEREFORE, the Petition is DENIED. The dispositive portion of the Court of Appeals Decision,
as modified by its Resolution dated 5 January 1998, is AFFIRMED. Costs against petitioner.
SO ORDERED.
FIRST DIVISION
[G.R. No. 154409. June 21, 2004]
Spouses NOEL and JULIE ABRIGO, petitioners, vs. ROMANA DE VERA, respondent.
DECISION
PANGANIBAN, J.:
Between two buyers of the same immovable property registered under the Torrens system, the
law gives ownership priority to (1) the first registrant in good faith; (2) then, the first possessor in
good faith; and (3) finally, the buyer who in good faith presents the oldest title. This provision,
however, does not apply if the property is not registered under the Torrens system.
The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, seeking to set aside
the March 21, 2002 Amended Decision[2] and the July 22, 2002 Resolution[3] of the Court of
Appeals (CA) in CA-GR CV No. 62391. The Amended Decision disposed as follows:
WHEREFORE, the dispositive part of the original DECISION of this case, promulgated on
November 19, 2001, is SET ASIDE and another one is entered AFFIRMING in part and
REVERSING in part the judgment appealed from, as follows:
1. Declaring [Respondent] Romana de Vera the rightful owner and with better right to possess
the property in question, being an innocent purchaser for value therefor;
2. Declaring Gloria Villafania [liable] to pay the following to [Respondent] Romana de Vera and
to [Petitioner-]Spouses [Noel and Julie] Abrigo, to wit:
As to [Respondent] Romana de Vera:
1. P300,000.00 plus 6% per annum as actual damages;
2. P50,000.00 as moral damages;
3. P50,000.00 as exemplary damages;
4. P30,000.00 as attorneys fees; and
5. Cost of suit.
As to [Petitioner-]Spouses [Noel and Julie] Abrigo:
1. P50,000.00 as moral damages;
2. P50,000.00 as exemplary damages;
3. P30,000.00 as attorneys fees;
4. Cost of suit.[4]
The assailed Resolution denied reconsideration.
The Facts
Quoting the trial court, the CA narrated the facts as follows:
As culled from the records, the following are the pertinent antecedents amply summarized by the
trial court:
On May 27, 1993, Gloria Villafania sold a house and lot located at Banaoang, Mangaldan,
Pangasinan and covered by Tax Declaration No. 1406 to Rosenda Tigno-Salazar and Rosita
Cave-Go. The said sale became a subject of a suit for annulment of documents between the
vendor and the vendees.
On December 7, 1993, the Regional Trial Court, Branch 40 of Dagupan City rendered judgment
approving the Compromise Agreement submitted by the parties. In the said Decision, Gloria
Villafania was given one year from the date of the Compromise Agreement to buy back the
house and lot, and failure to do so would mean that the previous sale in favor of Rosenda Tigno-
Salazar and Rosita Cave-Go shall remain valid and binding and the plaintiff shall voluntarily
vacate the premises without need of any demand. Gloria Villafania failed to buy back the house
and lot, so the [vendees] declared the lot in their name.
Unknown, however to Rosenda Tigno-Salazar and Rosita Cave-Go, Gloria Villafania obtained a
free patent over the parcel of land involved [on March 15, 1988 as evidenced by OCT No. P-
30522]. The said free patent was later on cancelled by TCT No. 212598 on April 11, 1996.
On October 16, 1997, Rosenda Tigno-Salazar and Rosita Cave-Go, sold the house and lot to
the herein [Petitioner-Spouses Noel and Julie Abrigo].
On October 23, 1997, Gloria Villafania sold the same house and lot to Romana de Vera x x x.
Romana de Vera registered the sale and as a consequence, TCT No. 22515 was issued in her
name.
On November 12, 1997, Romana de Vera filed an action for Forcible Entry and Damages
against [Spouses Noel and Julie Abrigo] before the Municipal Trial Court of Mangaldan,
Pangasinan docketed as Civil Case No. 1452. On February 25, 1998, the parties therein
submitted a Motion for Dismissal in view of their agreement in the instant case that neither of
them can physically take possession of the property in question until the instant case is
terminated. Hence the ejectment case was dismissed.[5]
Thus, on November 21, 1997, [petitioners] filed the instant case [with the Regional Trial Court of
Dagupan City] for the annulment of documents, injunction, preliminary injunction, restraining
order and damages [against respondent and Gloria Villafania].
After the trial on the merits, the lower court rendered the assailed Decision dated January 4,
1999, awarding the properties to [petitioners] as well as damages. Moreover, x x x Gloria
Villafania was ordered to pay [petitioners and private respondent] damages and attorneys fees.
Not contented with the assailed Decision, both parties [appealed to the CA].[6]
Ruling of the Court of Appeals
In its original Decision promulgated on November 19, 2001, the CA held that a void title could
not give rise to a valid one and hence dismissed the appeal of Private Respondent Romana de
Vera.[7] Since Gloria Villafania had already transferred ownership to Rosenda Tigno-Salazar
and Rosita Cave-Go, the subsequent sale to De Vera was deemed void.
The CA also dismissed the appeal of Petitioner-Spouses Abrigo and found no sufficient basis to
award them moral and exemplary damages and attorneys fees.
On reconsideration, the CA issued its March 21, 2002 Amended Decision, finding Respondent
De Vera to be a purchaser in good faith and for value. The appellate court ruled that she had
relied in good faith on the Torrens title of her vendor and must thus be protected.[8]
Hence, this Petition.[9]
Issues
Petitioners raise for our consideration the issues below:
1. Whether or not the deed of sale executed by Gloria Villafania in favor of [R]espondent
Romana de Vera is valid.
2. Whether or not the [R]espondent Romana de Vera is a purchaser for value in good faith.
3. Who between the petitioners and respondent has a better title over the property in
question.[10]
In the main, the issues boil down to who between petitioner-spouses and respondent has a
better right to the property.
The Courts Ruling
The Petition is bereft of merit.
Main Issue:
Better Right over the Property
Petitioners contend that Gloria Villafania could not have transferred the property to Respondent
De Vera because it no longer belonged to her.[11] They further claim that the sale could not be
validated, since respondent was not a purchaser in good faith and for value.[12]
Law on Double Sale
The present case involves what in legal contemplation was a double sale. On May 27, 1993,
Gloria Villafania first sold the disputed property to Rosenda Tigno-Salazar and Rosita Cave-Go,
from whom petitioners, in turn, derived their right. Subsequently, on October 23, 1997, a second
sale was executed by Villafania with Respondent Romana de Vera.
Article 1544 of the Civil Code states the law on double sale thus:
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.
Otherwise stated, the law provides that a double sale of immovables transfers ownership to (1)
the first registrant in good faith; (2) then, the first possessor in good faith; and (3) finally, the
buyer who in good faith presents the oldest title.[13] There is no ambiguity in the application of
this law with respect to lands registered under the Torrens system.
This principle is in full accord with Section 51 of PD 1529[14] which provides that no deed,
mortgage, lease or other voluntary instrument -- except a will -- purporting to convey or affect
registered land shall take effect as a conveyance or bind the land until its registration.[15] Thus,
if the sale is not registered, it is binding only between the seller and the buyer but it does not
affect innocent third persons.[16]
In the instant case, both Petitioners Abrigo and respondent registered the sale of the property.
Since neither petitioners nor their predecessors (Tigno-Salazar and Cave-Go) knew that the
property was covered by the Torrens system, they registered their respective sales under Act
3344.[17] For her part, respondent registered the transaction under the Torrens system[18]
because, during the sale, Villafania had presented the transfer certificate of title (TCT) covering
the property.[19]
Respondent De Vera contends that her registration under the Torrens system should prevail
over that of petitioners who recorded theirs under Act 3344. De Vera relies on the following
insight of Justice Edgardo L. Paras:
x x x If the land is registered under the Land Registration Act (and has therefore a Torrens Title),
and it is sold but the subsequent sale is registered not under the Land Registration Act but under
Act 3344, as amended, such sale is not considered REGISTERED, as the term is used under
Art. 1544 x x x.[20]
We agree with respondent. It is undisputed that Villafania had been issued a free patent
registered as Original Certificate of Title (OCT) No. P-30522.[21] The OCT was later cancelled
by Transfer Certificate of Title (TCT) No. 212598, also in Villafanias name.[22] As a
consequence of the sale, TCT No. 212598 was subsequently cancelled and TCT No. 22515
thereafter issued to respondent.
Soriano v. Heirs of Magali[23] held that registration must be done in the proper registry in order
to bind the land. Since the property in dispute in the present case was already registered under
the Torrens system, petitioners registration of the sale under Act 3344 was not effective for
purposes of Article 1544 of the Civil Code.
More recently, in Naawan Community Rural Bank v. Court of Appeals,[24] the Court upheld the
right of a party who had registered the sale of land under the Property Registration Decree, as
opposed to another who had registered a deed of final conveyance under Act 3344. In that case,
the priority in time principle was not applied, because the land was already covered by the
Torrens system at the time the conveyance was registered under Act 3344. For the same
reason, inasmuch as the registration of the sale to Respondent De Vera under the Torrens
system was done in good faith, this sale must be upheld over the sale registered under Act 3344
to Petitioner-Spouses Abrigo.
Radiowealth Finance Co. v. Palileo[25] explained the difference in the rules of registration under
Act 3344 and those under the Torrens system in this wise:
Under Act No. 3344, registration of instruments affecting unregistered lands is without prejudice
to a third party with a better right. The aforequoted phrase has been held by this Court to mean
that the mere registration of a sale in ones favor does not give him any right over the land if the
vendor was not anymore the owner of the land having previously sold the same to somebody
else even if the earlier sale was unrecorded.
The case of Carumba vs. Court of Appeals[26] is a case in point. It was held therein that Article
1544 of the Civil Code has no application to land not registered under Act No. 496. Like in the
case at bar, Carumba dealt with a double sale of the same unregistered land. The first sale was
made by the original owners and was unrecorded while the second was an execution sale that
resulted from a complaint for a sum of money filed against the said original owners. Applying
[Section 33], Rule 39 of the Revised Rules of Court,[27] this Court held that Article 1544 of the
Civil Code cannot be invoked to benefit the purchaser at the execution sale though the latter was
a buyer in good faith and even if this second sale was registered. It was explained that this is
because the purchaser of unregistered land at a sheriffs execution sale only steps into the shoes
of the judgment debtor, and merely acquires the latters interest in the property sold as of the
time the property was levied upon.
Applying this principle, x x x the execution sale of unregistered land in favor of petitioner is of no
effect because the land no longer belonged to the judgment debtor as of the time of the said
execution sale.[28]
Petitioners cannot validly argue that they were fraudulently misled into believing that the property
was unregistered. A Torrens title, once registered, serves as a notice to the whole world.[29] All
persons must take notice, and no one can plead ignorance of the registration.[30]
Good-Faith Requirement
We have consistently held that Article 1544 requires the second buyer to acquire the immovable
in good faith and to register it in good faith.[31] Mere registration of title is not enough; good faith
must concur with the registration.[32] We explained the rationale in Uraca v. Court of
Appeals,[33] which we quote:
Under the foregoing, the prior registration of the disputed property by the second buyer does not
by itself confer ownership or a better right over the property. Article 1544 requires that such
registration must be coupled with good faith. Jurisprudence teaches us that (t)he governing
principle is primus tempore, potior jure (first in time, stronger in right). Knowledge gained by the
first buyer of the second sale cannot defeat the first buyers rights except where the second
buyer registers in good faith the second sale ahead of the first, as provided by the Civil Code.
Such knowledge of the first buyer does not bar her from availing of her rights under the law,
among them, to register first her purchase as against the second buyer. But in converso,
knowledge gained by the second buyer of the first sale defeats his rights even if he is first to
register the second sale, since such knowledge taints his prior registration with bad faith. This is
the price exacted by Article 1544 of the Civil Code for the second buyer being able to displace
the first buyer; that before the second buyer can obtain priority over the first, he must show that
he acted in good faith throughout (i.e. in ignorance of the first sale and of the first buyers rights) -
--- from the time of acquisition until the title is transferred to him by registration, or failing
registration, by delivery of possession.[34] (Italics supplied)
Equally important, under Section 44 of PD 1529, every registered owner receiving a certificate of
title pursuant to a decree of registration, and every subsequent purchaser of registered land
taking such certificate for value and in good faith shall hold the same free from all
encumbrances, except those noted and enumerated in the certificate.[35] Thus, a person
dealing with registered land is not required to go behind the registry to determine the condition of
the property, since such condition is noted on the face of the register or certificate of title.[36]
Following this principle, this Court has consistently held as regards registered land that a
purchaser in good faith acquires a good title as against all the transferees thereof whose rights
are not recorded in the Registry of Deeds at the time of the sale.[37]
Citing Santiago v. Court of Appeals,[38] petitioners contend that their prior registration under Act
3344 is constructive notice to respondent and negates her good faith at the time she registered
the sale. Santiago affirmed the following commentary of Justice Jose C. Vitug:
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 buyer's 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 such knowledge taints his registration with bad faith (see also Astorga
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 (citing Carbonell vs. Court of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R.
95843, 02 September 1992).
xxxxxxxxx
Registration of the second buyer under Act 3344, providing for the registration of all instruments
on land neither covered by the Spanish Mortgage Law nor the Torrens System (Act 496), cannot
improve his standing since Act 3344 itself expresses that registration thereunder would not
prejudice prior rights in good faith (see Carumba vs. Court of Appeals, 31 SCRA 558).
Registration, however, by the first buyer under Act 3344 can have the effect of constructive
notice to the second buyer that can defeat his right as such buyer in good faith (see Arts. 708-
709, Civil Code; see also Revilla vs. Galindez, 107 Phil. 480; Taguba vs. Peralta, 132 SCRA
700). Art. 1544 has been held to be inapplicable to execution sales of unregistered land, since
the purchaser merely steps into the shoes of the debtor and acquires the latter's interest as of
the time the property is sold (Carumba vs. Court of Appeals, 31 SCRA 558; see also Fabian vs.
Smith, Bell & Co., 8 Phil. 496) or when there is only one sale (Remalante vs. Tibe, 158 SCRA
138).[39] (Emphasis supplied)
Santiago was subsequently applied in Bayoca v. Nogales,[40] which held:
Verily, there is absence of prior registration in good faith by petitioners of the second sale in their
favor. As stated in the Santiago case, registration by the first buyer under Act No. 3344 can have
the effect of constructive notice to the second buyer that can defeat his right as such buyer. On
account of the undisputed fact of registration under Act No. 3344 by [the first buyers],
necessarily, there is absent good faith in the registration of the sale by the [second buyers] for
which they had been issued certificates of title in their names. x x x.[41]
Santiago and Bayoca are not in point. In Santiago, the first buyers registered the sale under the
Torrens system, as can be inferred from the issuance of the TCT in their names.[42] There was
no registration under Act 3344. In Bayoca, when the first buyer registered the sale under Act
3344, the property was still unregistered land.[43] Such registration was therefore considered
effectual.
Furthermore, Revilla and Taguba, which are cited in Santiago, are not on all fours with the
present case. In Revilla, the first buyer did not register the sale.[44] In Taguba, registration was
not an issue.[45]
As can be gathered from the foregoing, constructive notice to the second buyer through
registration under Act 3344 does not apply if the property is registered under the Torrens
system, as in this case.
We quote below the additional commentary of Justice Vitug, which was omitted in Santiago. This
omission was evidently the reason why petitioner misunderstood the context of the citation
therein:
"The registration contemplated under Art. 1544 has been held to refer to registration under Act
496 Land Registration Act (now PD 1529) which considers the act of registration as the
operative act that binds the land (see Mediante vs. Rosabal, 1 O.G. [12] 900, Garcia vs.
Rosabal, 73 Phil 694). On lands covered by the Torrens System, the purchaser acquires such
rights and interest as they appear in the certificate of title, unaffected by any prior lien or
encumbrance not noted therein. The purchaser is not required to explore farther than what the
Torrens title, upon its face, indicates. The only exception is where the purchaser has actual
knowledge of a flaw or defect in the title of the seller or of such liens or encumbrances which, as
to him, is equivalent to registration (see Sec. 39, Act 496; Bernales vs. IAC, G.R. 75336, 18
October 1988; Hernandez vs. Sales, 69 Phil 744; Tajonera vs. Court of Appeals, L-26677, 27
March 1981),"[46]
Respondent
in Good Faith
The Court of Appeals examined the facts to determine whether respondent was an innocent
purchaser for value.[47] After its factual findings revealed that Respondent De Vera was in good
faith, it explained thus:
x x x. Gloria Villafania, [Respondent] De Veras vendor, appears to be the registered owner. The
subject land was, and still is, registered in the name of Gloria Villafania. There is nothing in her
certificate of title and in the circumstances of the transaction or sale which warrant [Respondent]
De Vera in supposing that she need[ed] to look beyond the title. She had no notice of the earlier
sale of the land to [petitioners]. She ascertained and verified that her vendor was the sole owner
and in possession of the subject property by examining her vendors title in the Registry of Deeds
and actually going to the premises. There is no evidence in the record showing that when she
bought the land on October 23, 1997, she knew or had the slightest notice that the same was
under litigation in Civil Case No. D-10638 of the Regional Trial Court of Dagupan City, Branch
40, between Gloria Villafania and [Petitioners] Abrigo. She was not even a party to said case. In
sum, she testified clearly and positively, without any contrary evidence presented by the
[petitioners], that she did not know anything about the earlier sale and claim of the spouses
Abrigo, until after she had bought the same, and only then when she bought the same, and only
then when she brought an ejectment case with the x x x Municipal Court of Mangaldan, known
as Civil Case No. 1452. To the [Respondent] De Vera, the only legal truth upon which she had to
rely was that the land is registered in the name of Gloria Villafania, her vendor, and that her title
under the law, is absolute and indefeasible. x x x.[48]
We find no reason to disturb these findings, which petitioners have not rebutted. Spouses Abrigo
base their position only on the general averment that respondent should have been more vigilant
prior to consummating the sale. They argue that had she inspected the property, she would have
found petitioners to be in possession.[49]
This argument is contradicted, however, by the spouses own admission that the parents and the
sister of Villafania were still the actual occupants in October 1997, when Respondent De Vera
purchased the property.[50] The family members may reasonably be assumed to be Villafanias
agents, who had not been shown to have notified respondent of the first sale when she
conducted an ocular inspection. Thus, good faith on respondents part stands.
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against
petitioners.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-18497 May 31, 1965
DAGUPAN TRADING COMPANY, petitioner,
vs.
RUSTICO MACAM, respondent.
Angel Sanchez for petitioner.
Manuel L. Fernandez for respondent.
DIZON, J.:
Appeal taken by the Dagupan Trading Company from the decision of the Court of Appeals
affirming the one rendered by the Court of First Instance of Pangasinan in Civil Case No. 13772,
dismissing its complaint.
On September 4, 1958, appellant commenced the action mentioned above against appellee
Rustico Macam, praying that it be declared owner of one-eighth portion of the land described in
paragraph 2 of the complaint; that a partition of the whole property be made; that appellee be
ordered to pay it the amount of P500.00 a year as damages from 1958 until said portion is
delivered, plus attorney's fees and costs.
Answering the complaint, appellee alleged, in the main, that Sammy Maron's share in the
property described in the complaint, as well as that of all his co-heirs, had been acquired by
purchase by appellee since June 19 and September 21, 1955, before the issuance of the
original certificate of title in their name; that at the time the levy in execution was made on
Sammy Maron's share therein, the latter had no longer any right or interest in said property; that
appellant and its predecessor in interest were cognizant of the facts already mentioned; that
since the sales made in his favor, he had enjoyed uninterrupted possession of the property and
introduced considerable improvements thereon. Appellee likewise sought to recover damages
by way of counterclaim.
After trial upon the issue thus joined, the court rendered judgment dismissing the complaint,
which, on appeal, was affirmed by the Court of Appeals.
The facts of the case are not disputed.
In the year 1955, Sammy Maron and his seven brothers and sisters were pro-indiviso owners of
a parcel of unregistered land located in barrio Parayao, Municipality of Binmaley, Pangasinan.
While their application for registration of said land under Act No. 496 was pending, they
executed, on June 19 and September 21, 1955, two deeds of sale conveying the property to
appellee, who thereafter took possession thereof and proceeded to introduce substantial
improvements therein. One month later, that is, on October 14, 1955, Original Certificate of Title
No. 6942 covering the land was issued in the name of the Maron's, free from all liens and
encumbrances.
On August 4, 1956, by virtue of a final judgment rendered in Civil Case No. 42215 of the
Municipal Court of Manila against Sammy Maron in favor of the Manila Trading and Supply
Company, levy was made upon whatever interest he had in the aforementioned property, and
thereafter said interest was sold at public auction to the judgment creditor. The corresponding
notice of levy, certificate of sale and the Sheriff's certificate of final sale in favor of the Manila
Trading and Supply Co. because nobody exercised the right of redemptions were duly
registered. On March 1, 1958, the latter sold all its rights and title to the property to appellant.
The question before Us now is: Who has the better right as between appellant Dagupan Trading
Company, on the one hand, and appellee Rustico Macam, on the other, to the one-eighth share
of Sammy Maron in the property mentioned heretofore?
If the property covered by the conflicting sales were unregistered land, Macam would
undoubtedly have the better right in view of the fact that his claim is based on a prior sale
coupled with public, exclusive and continuous possession thereof as owner. On the other hand,
were the land involved in the conflicting transactions duly registered land, We would be inclined
to hold that appellant has the better right because, as We have consistently held, in case of
conveyance of registered real estate, the registration of the deed of sale is the operative act that
gives validity to the transfer. This would be fatal to appellee's claim, the deeds of sale executed
in his favor by the Maron's not having been registered, while the levy in execution and the
provisional certificate of sale as well as the final deed of sale in favor of appellant were
registered. Consequently, this registered conveyance must prevail although posterior to the one
executed in favor of appellee, and appellant must be deemed to have acquired such right, title
and interest as appeared on the certificate of title issued in favor of Sammy Maron, subject to no
lien, encumbrance or burden not noted thereon. (Anderson & Co. vs. Garcia, 64 Phil. 506;
Reynes, et al. vs. Barrera, et al., 68 Phil. 656; Banco Nacional, etc. vs. Camus, 70 Phil. 289)
The present case, however, does not fall within either, situation. Here the sale in favor of
appellee was executed before the land subject-matter thereof was registered, while the
conflicting sale in favor of appellant was executed after the same property had been registered.
We cannot, therefore, decide the case in the light of whatever adjudicated cases there are
covering the two situations mentioned in the preceding paragraph. It is our considered view that
what should determine the issue are the provisions of the last paragraph of Section 35, Rule 39
of the Rules of Court, to the effect that upon the execution and delivery of the final certificate of
sale in favor of the purchaser of land sold in an execution sale, such purchaser "shall be
substituted to and acquire all the right, title, interest and claim of the judgment debtor to the
property as of the time of the levy." Now We ask: What was the interest and claim of Sammy
Maron on the one-eighth portion of the property inherited by him and his co-heirs, at the time of
the levy? The answer must necessarily be that he had none, because for a considerable time
prior to the levy, his interest had already been conveyed to appellee, "fully and retrievably as
the Court of Appeals held. Consequently, subsequent levy made on the property for the purpose
of satisfying the judgment rendered against Sammy Maron in favor of the Manila Trading
Company was void and of no effect (Buson vs. Licuaco, 13 Phil. 357-358; Landig vs. U.S.
Commercial Company, G.R. No. L-3597, July 31, 1951). Needless to say, the unregistered sale
and the consequent conveyance of title and ownership in favor of appellee could not have been
cancelled and rendered of no effect upon the subsequent issuance of the Torrens title over the
entire parcel of land. We cannot, therefore, but agree with the following statement contained in
the appealed decision:
... . Separate and apart from this however, we believe that in the inevitable conflict between a
right of ownership already fixed and established under the Civil Law and/or the Spanish
Mortgage Law which cannot be affected by any subsequent levy or attachment or execution
and a new law or system which would make possible the overthrowing of such ownership on
admittedly artificial and technical grounds, the former must be upheld and applied.1wph1.t possession of the land, planting bananas, coffee and other vegetables thereon, declared him to
But to the above considerations must be added the important circumstance that, as already
stated before, upon the execution of the deed of sale in his favor by Sammy Maron, appellee
took possession of the land conveyed as owner thereof, and introduced considerable
improvements thereon. To deprive him now of the same by sheer force of technicality would be
against both justice and equity.
IN VIEW OF ALL THE FOREGOING, the decision appealed from is affirmed, with costs.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-27587 February 18, 1970
AMADO CARUMBA, petitioner,
vs.
THE COURT OF APPEALS, SANTIAGO BALBUENA and ANGELES BOAQUIA as Deputy
Provincial Sheriff, respondents.
Luis N. de Leon for petitioner.
Reno R. Gonzales for respondents.
REYES, J.B.L., J.:
Amado Carumba petitions this Supreme Court for a certiorari to review a decision of the Court of
Appeals, rendered in its Case No. 36094-R, that reversed the judgment in his favor rendered by
the Court of First Instance of Camarines Sur (Civil Case 4646).
The factual background and history of these proceedings is thus stated by the Court of Appeals
(pages 1-2):
On April 12, 1955, the spouses Amado Canuto and Nemesia Ibasco, by virtue of a "Deed of
Sale of Unregistered Land with Covenants of Warranty" (Exh. A), sold a parcel of land, partly
residential and partly coconut land with a periphery (area) of 359.09 square meters, more or
less, located in the barrio of Santo Domingo, Iriga, Camarines Sur, to the spouses Amado
Carumba and Benita Canuto, for the sum of P350.00. The referred deed of sale was never
registered in the Office of the Register of Deeds of Camarines Sur, and the Notary, Mr. Vicente
Malaya, was not then an authorized notary public in the place, as shown by Exh. 5. Besides, it
has been expressly admitted by appellee that he is the brother-in-law of Amado Canuto, the
alleged vendor of the property sold to him. Amado Canuto is the older brother of the wife of the
herein appellee, Amado Carumba.
On January 21, 1957, a complaint (Exh. B) for a sum or money was filed by Santiago Balbuena
against Amado Canuto and Nemesia Ibasco before the Justice of the Peace Court of Iriga,
Camarines Sur, known as Civil Case No. 139 and on April 15, 1967, a decision (Exh. C) was
rendered in favor of the plaintiff and against the defendants. On October 1, 1968, the ex-officio
Sheriff, Justo V. Imperial, of Camarines Sur, issued a "Definite Deed of Sale (Exh. D) of the
property now in question in favor of Santiago Balbuena, which instrument of sale was registered
before the Office of the Register of Deeds of Camarines Sur, on October 3, 1958. The aforesaid
property was declared for taxation purposes (Exh. 1) in the name of Santiago Balbuena in 1958.
The Court of First instance, finding that after execution of the document Carumba had taken
be the owner of the property under a consummated sale; held void the execution levy made by
the sheriff, pursuant to a judgment against Carumba's vendor, Amado Canuto; and nullified the
sale in favor of the judgment creditor, Santiago Balbuena. The Court, therefore, declared
Carumba the owner of the litigated property and ordered Balbuena to pay P30.00, as damages,
plus the costs.
The Court of Appeals, without altering the findings of fact made by the court of origin, declared
that there having been a double sale of the land subject of the suit Balbuena's title was superior
to that of his adversary under Article 1544 of the Civil Code of the Philippines, since the
execution sale had been properly registered in good faith and the sale to Carumba was not
recorded.

We disagree. While under the invoked Article 1544 registration in good faith prevails over
possession in the event of a double sale by the vendor of the same piece of land to different
vendees, said article is of no application to the case at bar, even if Balbuena, the later vendee,
was ignorant of the prior sale made by his judgment debtor in favor of petitioner Carumba. The
reason is that the purchaser of unregistered land at a sheriff's execution sale only steps into the
shoes of the judgment debtor, and merely acquires the latter's interest in the property sold as of
the time the property was levied upon. This is specifically provided by section 35 of Rule 39 of
the Revised Rules of Court, the second paragraph of said section specifically providing that:
Upon the execution and delivery of said (final) deed the purchaser, redemptioner, or his
assignee shall be substituted to and acquire all the right, title, interest, and claim of the judgment
debtor to the property as of the time of the levy, except as against the judgment debtor in
possession, in which case the substitution shall be effective as of the time of the deed ...
(Emphasis supplied)
While the time of the levy does not clearly appear, it could not have been made prior to 15 April
1957, when the decision against the former owners of the land was rendered in favor of
Balbuena. But the deed of sale in favor of Canuto had been executed two years before, on 12
April 1955, and while only embodied in a private document, the same, coupled with the fact that
the buyer (petitioner Carumba) had taken possession of the unregistered land sold, sufficed to
vest ownership on the said buyer. When the levy was made by the Sheriff, therefore, the
judgment debtor no longer had dominical interest nor any real right over the land that could pass
to the purchaser at the execution sale.1 Hence, the latter must yield the land to petitioner
Carumba. The rule is different in case of lands covered by Torrens titles, where the prior sale is
neither recorded nor known to the execution purchaser prior to the levy;2 but the land here in
question is admittedly not registered under Act No. 496.
WHEREFORE, the decision of the Court of Appeals is reversed and that of the Court of First
Instance affirmed. Costs against respondent Santiago Balbuena.
THIRD DIVISION
[G.R. No. 148376. March 31, 2005]
LEONARDO ACABAL and RAMON NICOLAS, petitioners, vs. VILLANER ACABAL, EDUARDO
ACABAL, SOLOMON ACABAL, GRACE ACABAL, MELBA ACABAL, EVELYN ACABAL,
ARMIN ACABAL, RAMIL ACABAL, and BYRON ACABAL, respondents.
DECISION
CARPIO MORALES, J.:
Before this Court is a Petition for Review on Certiorari of the February 15, 2001 Decision[1] of
the Court of Appeals reversing that of the Regional Trial Court (RTC) of Dumaguete City, Branch
35.[2]
In dispute is the exact nature of the document[3] which respondent Villaner Acabal (Villaner)
executed in favor of his godson-nephew-petitioner Leonardo Acabal (Leonardo) on April 19,
1990.
Villaners parents, Alejandro Acabal and Felicidad Balasabas, owned a parcel of land situated in
Barrio Tanglad, Manjuyod, Negros Oriental, containing an area of 18.15 hectares more or less,
described in Tax Declaration No. 15856.[4] By a Deed of Absolute Sale dated July 6, 1971,[5]
his parents transferred for P2,000.00 ownership of the said land to him, who was then married to
Justiniana Lipajan.[6]
Sometime after the foregoing transfer, it appears that Villaner became a widower.
Subsequently, he executed on April 19, 1990 a deed[7] conveying the same property[8] in favor
of Leonardo.
Villaner was later to claim that while the April 19, 1990 document he executed now appears to
be a Deed of Absolute Sale purportedly witnessed by a Bais City trial court clerk Carmelo
Cadalin and his wife Lacorte, what he signed was a document captioned Lease Contract[9]
(modeled after a July 1976 lease agreement[10] he had previously executed with previous
lessee, Maria Luisa Montenegro[11]) wherein he leased for 3 years the property to Leonardo at
P1,000.00 per hectare[12] and which was witnessed by two women employees of one Judge
Villegas of Bais City.
Villaner thus filed on October 11, 1993 a complaint[13] before the Dumaguete RTC against
Leonardo and Ramon Nicolas to whom Leonardo in turn conveyed the property, for annulment
of the deeds of sale.
At the witness stand, Villaner declared:
Q: It appears, Mr. Acabal, that you have signed a document of sale with the defendant Leonardo
Acabal on April 19, 1990, please tell the court whether you have really agreed to sell this
property to the defendant on or before April 19, 1990?
A: We had some agreement but not about the selling of this property.
Q: What was your agreement with the defendant Leonardo Acabal?
A: Our agreement [was] that he will just rent.[14]
xxx
Q: Now, please tell the court how were you able to sign this document on April 19, 1990?
A: I do not know why I signed that, that is why I am puzzled.
Q: Why, did you not read the contents of this document?
A: I have not read that. I only happened to read the title of the Lease Contract.
Q: And do you recall who were the witnesses of the document which you signed in favor of
Leonardo Acabal?
A: Employees of Judge Villegas of Bais City.
Q: Did you see them sign that document?
A: Yes, sir.
Q: These signatures appearing in this document marked as Exhibit C for the plaintiff and Exhibit
1 for the defendant, please examine over (sic) these signatures if these were the signatures of
these witnesses who signed this document?
A: These are not the signatures of the two women.
Q: And after signing this document on April 19, 1990, did you appear before a notary public to
have this notarized?
A: No, I went home to San Carlos.[15]
xxx
Q: According to this document, you sell (sic) this property at P10,000.00, did you sell this
property to Leonardo Acabal?

A: No, sir.
Q: How about after April 19, 1990, did you receive this amount from Leonardo Acabal?
A: No, sir.[16]
xxx
Q: Now you said that on May 25, 1990, Leonardo Acabal did not pay the amount that he
promised to you, what did you do of (sic) his refusal to pay that amount?
A: I went to Mr. [Carmelo] Mellie Cadalin because he was the one who prepared the papers and
to ask Leonardo Acabal why he will not comply with our agreement.
Q: By the way, who is this Mellie Cadalin?
A: Mellie Cadalin is also working in the sala of Judge Villegas.
Q: Who requested Mellie Cadalin to prepare this document?
A: Maybe it was Leonardo Acabal.
Q: By the way, when for the first time did you talk to Leonardo Acabal regarding your agreement
to lease this property to him?
A: March 14, 1990, in San Carlos.
Q: And what document did you give to him in order that that document will be prepared?
A: I have given (sic) some papers and contract of lease that I have signed to (sic) Mrs.
Montenegro.[17] (Emphasis and underscoring supplied)
xxx
Q: Now, Carmelo Cadalin [Mellie] also testified before this court that in fact he identified the
document marked as Exhibit C for the plaintiff that what you executed on April 19, 1990 was a
deed of sale and not a contract of lease, what can you say to that statement?
A: That is a lie.
Q: And whats the truth then?
A: What really (sic) I have signed was the document of lease contract.
Q: Now, can you explain to the Honorable Court why it so happened that on April 19, you were
able to sign a deed of sale?
A: What I can see now is that perhaps those copies of the deed of sale were placed by Mr.
Cadalin under the documents which I signed the lease contract. But why is it that it has already a
deed of sale when what I have signed was only the lease of contract or the contract of lease.
Q: Now, Mr. Cadalin also stated before this court that he handed over to you this Deed of Sale
marked as Exhibit C and according to him you read this document, what can you say to this
statement?
A: Yes, there was a document that he gave me to read it (sic)but it was a contract of lease.
Q: How sure are you that what you signed on April 19, 1990 was really a contract of lease and
not a contract of sale?
A: Because when I signed the contract of lease the witnesses that witnessed my signing the
document were the employees of Judge Villegas and then I am now surprised why in the deed
of sale which I purportedly signed are witnessed by Carmelo Cadalin and his wife Lacorte.[18]
(Emphasis and underscoring supplied)
On the other hand, Leonardo asserts that what Villaner executed was a Deed of Absolute Sale
for a consideration of P10,000.00 which he had already paid,[19] and as he had become the
absolute owner of the property, he validly transferred it to Ramon Nicolas on May 19, 1990.[20]
Carmelo Cadalin who admittedly prepared the deed of absolute sale and who appears as a
witness, along with his wife, to the execution of the document corroborated Leonardos claim:
Q: Mr. Cadalin, do you know the plaintiff Villaner Acabal?
A: Yes, I know.[21]
xxx
Q: And I would like to ask you Mr. witness why do you know Villaner Acabal?
A: At the time that he went to our house together with Leonardo Acabal he requested me to
prepare a deed of sale as regards to a sale of the property.[22]
xxx
Q: And after they requested you to prepare a document of sale, what did you do?
A: At first I refused to [do] it because I have so many works to do, but then they insisted so I
prepared the deed.
Q: After you prepared the document, what did you do?
A: After I prepared it I gave it to him so that he could read the same.
Q: When you say him, whom do you refer to?
A: Villaner Acabal.
Q: And did Villaner Acabal read the document you prepared?
A: Yes, he read it.
Q: And after reading it what did Villaner Acabal do?
A: He signed the document.
Q: Showing to you a document which is marked Exhibit C for the plaintiff and Exhibit 1 for the
defendants, please tell the Honorable Court what relation this document has to the document
which you described earlier?
COURT INTERPRETER:
Witness is confronted with the said document earlier marked as Exhibit C for the prosecution
and Exhibit 1 for the defense.
A: Yes, this is the one.[23]
xxx
Q: Also stated in the document is the phrase Signed in the presence of and there is a number
and then two signatures, could you please examine the document and say whether these
signatures are familiar to you?
A: Yes, number one is my signature and number 2 is the signature of my wife as witness.[24]
xxx
Q: After Villaner Acabal signed the document, what did Villaner Acabal do?
A: He was given the payment by Leonardo Acabal.[25]
xxx
Q: Aside from the document, deed of absolute sale, that you mentioned earlier that you prepared
for Villaner Acabal and Leonardo Acabal, what other documents, if any, did you prepare for
them?
A: Affidavit of non-tenancy and aggregate area.[26] (Emphasis and underscoring supplied)
The complaint was later amended[27] to implead Villaners eight children as party plaintiffs, they
being heirs of his deceased wife.
By Decision of August 8, 1996, the trial court found for the therein defendants-herein petitioners
Leonardo and Ramon Nicolas and accordingly dismissed the complaint.
Villaner et al. thereupon brought the case on appeal to the Court of Appeals which reversed the
trial court, it holding that the Deed of Absolute Sale executed by Villaner in favor of Leonardo
was simulated and fictitious.[28]
Hence, Leonardo and Ramon Nicolas present petition for review on certiorari,[29] anchored on
the following assignments of error:
I.
THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT RULED THAT
RESPONDENT VILLANER ACABAL WAS DECEIVED INTO SIGNING THE DEED OF
ABSOLUTE SALE WHEN THE LATTER KNOWINGLY, FREELY AND VOLUNTARILY
EXECUTED THE SAME IN FAVOR OF PETITIONER LEONARDO ACABAL.
II.
THE COURT OF APPEALS ERRED WHEN IT RULED THAT THE CONSIDERATION OF THE
DEED OF ABSOLUTE SALE IN THE AMOUNT OF TEN THOUSAND PESOS (P10,0000.00)
WAS UNUSUALLY LOW AND INADEQUATE, ESPECIALLY TAKING INTO ACCOUNT THE
LOCATION OF THE SUBJECT PROPERTY.
III.
THE COURT OF APPEALS ERRED WHEN IT FAILED TO CONSIDER WHY RESPONDENT
VILLANER ACABAL ONLY QUESTIONED THE POSSESSION AND OWNERSHIP OF
PETITIONER RAMON NICOLAS IN COURT AFTER THE LATTER WAS IN OPEN,
CONTINUOUS AND PEACEFUL POSSESSION OF THE SUBJECT PROPERTY FOR
ALMOST THREE (3) YEARS.
IV.
THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN LAW WHEN IT FAILED
TO DECLARE PETITIONER RAMON NICOLAS AS A BUYER IN GOOD FAITH AS THE
LATTER TOOK THE NECESSARY STEPS AN ORDINARY AND PRUDENT MAN WOULD
HAVE TAKEN BEFORE BUYING THE QUESTIONED PROPERTY.
V.
THE COURT OF APPEALS ERRED IN RULING IN FAVOR OF RESPONDENT VILLANER
ACABAL WHEN THE LATTER DID NOT PRESENT A SINGLE WITNESS TO TESTIFY ON
THE ALLEGED CONTRACT OF LEASE WHICH HE ALLEGEDLY SIGNED AND WITNESSED
BY THE EMPLOYEES OF JUDGE VILLEGAS.
VI.
THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN LAW WHEN IT RULED
THAT RULE 8, SECTION 8 OF THE 1987 (sic) RULE (sic) OF CIVIL PROCEDURE IS NOT
APPLICABLE IN THE CASE AT BAR, CONTRARY TO THE RULING OF THE LOWER COURT.
VII.
THE COURT OF APPEALS ERRED WHEN IT ORDERED PETITIONERS TO PAY
RESPONDENTS JOINTLY AND SEVERALLY BY WAY OF RENTAL THE SUM OF P10,000.00
PER YEAR FROM 1990 UP TO THE TIME THEY VACATE THE PREMISES.[30]
Procedurally, petitioners contend that the Court of Appeals erred when it failed to apply Section
8, Rule 8 of the Rules of Court, respondent Villaner having failed to deny under oath the
genuineness and due execution of the April 19, 1990 Deed of Absolute Sale.
Petitioners contention does not persuade. The failure to deny the genuineness and due
execution of an actionable document does not preclude a party from arguing against it by
evidence of fraud, mistake, compromise, payment, statute of limitations, estoppel, and want of
consideration.[31]
On the merits, this Court rules in petitioners favor.
It is a basic rule in evidence that the burden of proof lies on the party who makes the
allegations[32] ei incumbit probatio, qui dicit, non qui negat; cum per rerum naturam factum
negantis probatio nulla sit.[33] If he claims a right granted by law, he must prove it by competent
evidence, relying on the strength of his own evidence and not upon the weakness of that of his
opponent.
More specifically, allegations of a defect in or lack of valid consent to a contract by reason of
fraud or undue influence are never presumed but must be established not by mere
preponderance of evidence but by clear and convincing evidence.[34] For the circumstances
evidencing fraud and misrepresentation are as varied as the people who perpetrate it in each
case, assuming different shapes and forms and may be committed in as many different
ways.[35]
In the case at bar, it was incumbent on the plaintiff-herein respondent Villaner to prove that he
was deceived into executing the Deed of Absolute Sale. Except for his bare allegation that the
transaction was one of lease, he failed to adduce evidence in support thereof. His conjecture
that perhaps those copies of the deed of sale were placed by Mr. Cadalin under the documents
which I signed the contract of lease,[36] must fail, for facts not conjectures decide cases.
Attempting to seek corroboration of his account, Villaner presented Atty. Vicente Real who
notarized the document. While on direct examination, Atty. Real virtually corroborated Villaners
claim that he did not bring the document to him for notarization,[37] on cross-examination, Atty.
Real conceded that it was impossible to remember every person who would ask him to notarize
documents:
Q: And in the course of your notarization, can you remember each and every face that come
(sic) to you for notarization?
A: No, it is impossible.
Q: In the case of Villaner Acabal which you have his document notarized (sic) in 1990, can you
remember his face when he came to you?
A: No.
Q: And can you also say, if a person who came to you having a document to be notarized and if
he will appear again after a month, can you remember whether he was the one who came to
you?
A: Not so much because everyday there are many people who appear with documents to be
notarized,
Q: So, it is safe to say that if Villaner Acabal came to you on April 25 or rather April 16, 1990
andhave (sic) his document notarized if he comes back in, say May 25, can you still remember if
he was the one who came to you?
A: I cannot be sure but at least, there are times I can remember persons because he seems to
be close to me already.
Q: Is this Villaner close to you?
A: Because he has been frequenting the house/asking for a copy of the document.
Q: So, he became close to you after you notarized the document?
A: Yes.[38] (Emphasis and underscoring supplied)
On Villaners claim that two women employees of Judge Villegas signed as witnesses to the
deed[39] but that the signatures appearing thereon are not those of said witnesses,[40] the
same must be discredited in light of his unexplained failure to present such alleged women
employee-witnesses.
In another vein, Villaner zeroes in on the purchase price of the property P10,000.00 which to him
was unusually low if the transaction were one of sale. To substantiate his claim, Villaner
presented Tax Declarations covering the property for the years 1971,[41] 1974,[42] 1977,[43]
1980,[44] 1983,[45] 1985,[46] as well as a Declaration of Real Property executed in 1994.[47]
It bears noting, however, that Villaner failed to present evidence on the fair market value of the
property as of April 19, 1990, the date of execution of the disputed deed. Absent any evidence of
the fair market value of a land as of the time of its sale, it cannot be concluded that the price at
which it was sold was inadequate.[48] Inadequacy of price must be proven because mere
speculation or conjecture has no place in our judicial system.[49]
Victor Ragay, who was appointed by the trial court to conduct an ocular inspection[50] of the
property and to investigate matters relative to the case,[51] gave an instructive report dated
December 3, 1994,[52] the pertinent portions of which are hereby reproduced verbatim:
a) Only three (3) to four (4) hectares of the eighteen (18) were planted to sugar cane, the rest
was never cultivated;
b) the soil is reddish and somewhat sandy in composition;
c) the soil contains so much limestones (rocks consisting mainly of calcium carbonate);
d) no part of the land in question is plain or flat, contrary to claim of the plaintiff that almost 10
hectares of the land in question is plain or flat;
e) some areas, eastward of and adjacent of the land in question (mistakenly to be owned by the
defendant Nicolas) were planted to sugar cane by the owners Kadusales;
f) the road going to the land in question (as claimed to be the road) is no longer passable
because it has been abandoned and not maintained by anyone, thus it makes everything
impossible for anybody to get and haul the sugar cane from the area;
g) the Commissioner has discovered some stockpiles of abandoned harvested sugar canes left
to rot, along the side of the road, undelivered to the milling site because of the difficulty in
bringing up trucks to the scene of the harvest;
h) the sugarcanes presently planted on the land in question at the time of the ocular inspection
were three (3) feet in height and their structural built was thin or lean;
i) Most of the part of the 18 hectares is not planted or cultivated because the same is too rocky
and not suitable for planting to sugarcane.[53]
Additionally, Ragay reported that one Anatolio Cabusog recently purchased a 6-hectare property
adjoining that of the subject property for only P1,600.00[54] or P266.67 per hectare. Given that,
had the 18-hectare subject property been sold at about the same time, it would have fetched the
amount of P4,800.00,[55] hence, the P10,000.00 purchase price appearing in the questioned
April 19, 1990 document is more than reasonable.
Even, however, on the assumption that the price of P10,000.00 was below the fair market value
of the property in 1990, mere inadequacy of the price per se will not rule out the transaction as
one of sale. For the price must be grossly inadequate or shocking to the conscience such that
the mind revolts at it and such that a reasonable man would neither directly nor indirectly be
likely to consent to it.[56]
Still in another vein, Villaner submits that Leonardos transfer of the property to Nicolas in a span
of one month for a profit of P30,000.00 conclusively reflects Leonardos fraudulent intent. This
submission is a non sequitur.
As for Villaners argument that the sale of the property to Leonardo and the subsequent sale
thereof to Nicolas are void for being violative of the retention limits imposed by Republic Act No.
6657, otherwise known as the Comprehensive Agrarian Reform Law, the same fails. The
pertinent provisions of said law read:
SECTION 6. Retention Limits. Except as otherwise provided in this Act, no person may retain,
directly or indirectly, any public or agricultural land, the size of which may vary according to
factors governing a viable family-sized farm, such as commodity produced, terrain,
infrastructure, and soil fertility as determined by the Presidential Agrarian Reform Council
(PARC) created hereunder, but in no case shall retention by the landowner exceed five (5)
hectares. Three (3) hectares may be awarded to each child of the landowner, subject to the
following qualifications: (1) that he is at least fifteen (15) years of age; and (2) that he is tilling the
land or directly managing the farm: Provided, That landowners whose lands have been covered
by Presidential Decree No. 27 shall be allowed to keep the areas originally retained by them
thereunder:[57] Provided further, That original homestead grantees or direct compulsory heirs
who still own the original homestead at the time of the approval of this Act shall retain the same
areas as long as they continue to cultivate said homestead.
xxx
Upon the effectivity of this Act, any sale, disposition, lease, management, contract or transfer of
possession of private lands executed by the original landowner in violation of this Act shall be
null and void: Provided, however, that those executed prior to this Act shall be valid only when
registered with the Register of Deeds within a period of three (3) months after the effectivity of
this Act. Thereafter, all Registers of Deeds shall inform the DAR within thirty (30) days of any
transaction involving agricultural lands in excess of five (5) hectares.
xxx
SECTION 70. Disposition of Private Agricultural Lands. The sale or disposition of agricultural
lands retained by a land owner as a consequence of Section 6 hereof shall be valid as long as
the total landholdings that shall be owned by the transferee thereof inclusive of the land to be
acquired shall not exceed the landholding ceilings provided for in this Act.
Any sale or disposition of agricultural lands after the effectivity of this Act found to be contrary to
the provisions hereof shall be null and void.
Transferees of agricultural lands shall furnish the appropriate Register of Deeds and the BARC
an affidavit attesting that his total landholdings as a result of the said acquisition do not exceed
the landholding ceiling. The Register of Deeds shall not register the transfer of any agricultural
land without the submission of his sworn statement together with proof of service of a copy
thereof to the BARC. (Emphasis and underscoring supplied)
As the above-quoted provisions of the Comprehensive Agrarian Reform Law show, only those
private lands devoted to or suitable for agriculture are covered by it.[58] As priorly related, Victor
Ragay, who was appointed by the trial court to conduct an ocular inspection of the property,
observed in his report that only three (3) to four (4) hectares were planted with sugarcane while
the rest of the property was not suitable for planting as the soil was full of limestone.[59] He also
remarked that the sugarcanes were only 3 feet in height and very lean,[60] whereas sugarcanes
usually grow to a height of 3 to 6 meters (about 8 to 20 feet) and have stems 2 to 5 centimeters
(1-2 inches) thick.[61]
It is thus gathered that the property was not suitable for agricultural purposes. In any event,
since the area devoted to the planting of sugarcane, hence, suitable for agricultural purposes,
comprises only 4 hectares at the most, it is less than the maximum retention limit prescribed by
law. There was then no violation of the Comprehensive Agrarian Reform Law.
Even assuming that the disposition of the property by Villaner was contrary to law, he would still
have no remedy under the law as he and Leonardo were in pari delicto, hence, he is not entitled
to afirmative relief one who seeks equity and justice must come to court with clean hands. In pari
delicto potior est conditio defendentis.[62]
The proposition is universal that no action arises, in equity or at law, from an illegal contract; no
suit can be maintained for its specific performance, or to recover the property agreed to be sold
or delivered, or the money agreed to be paid, or damages for its violation. The rule has
sometimes been laid down as though it were equally universal, that where the parties are in pari
delicto, no affirmative relief of any kind will be given to one against the other.[63] (Emphasis and
underscoring supplied)
The principle of pari delicto is grounded on two premises: first, that courts should not lend their
good offices to mediating disputes among wrongdoers;[64] and second, that denying judicial
relief to an admitted wrongdoer is an effective means of deterring illegality.[65] This doctrine of
ancient vintage is not a principle of justice but one of policy as articulated in 1775 by Lord
Mansfield in Holman v. Johnson:[66]
The objection, that a contract is immoral or illegal as between the plaintiff and defendant, sounds
at all times very ill in the mouth of the defendant. It is not for his sake, however, that the
objection is ever allowed; but it is founded in general principles of policy, which the defendant
has the advantage of, contrary to the real justice, as between him and the plaintiff, by accident, if
I may so say. The principle of public policy is this; ex dolo malo non oritur actio.[67] No court will
lend its aid to a man who founds his cause of action upon an immoral or an illegal act. If, from
the plaintiffs own stating or otherwise, the cause of action appears to arise ex turpi causa,[68] or
the transgression of a positive law of this country, there the court says he has no right to be
assisted. It is upon that ground the court goes; not for the sake of the defendant, but because
they will not lend their aid to such a plaintiff. So if the plaintiff and the defendant were to change
sides, and the defendant was to bring his action against the plaintiff, the latter would then have
the advantage of it; for where both are equally in fault potior est conditio defendentis.[69]
Thus, to serve as both a sanction and as a deterrent, the law will not aid either party to an illegal
agreement and will leave them where it finds them.
The principle of pari delicto, however, is not absolute, admitting an exception under Article 1416
of the Civil Code.
ART. 1416. When the agreement is not illegal per se but is merely prohibited, and the prohibition
by the law is designed for the protection of the plaintiff, he may, if public policy is thereby
enhanced, recover what he has paid or delivered.
Under this article, recovery for what has been paid or delivered pursuant to an inexistent
contract is allowed only when the following requisites are met: (1) the contract is not illegal per
se but merely prohibited; (2) the prohibition is for the protection of the plaintiffs; and (3) if public
policy is enhanced thereby.[70] The exception is unavailing in the instant case, however, since
the prohibition is clearly not for the protection of the plaintiff-landowner but for the beneficiary
farmers.[71]
In fine, Villaner is estopped from assailing and annulling his own deliberate acts.[72]
More. Villaner cannot feign ignorance of the law, nor claim that he acted in good faith, let alone
assert that he is less guilty than Leonardo. Under Article 3 of the Civil Code, ignorance of the law
excuses no one from compliance therewith.
And now, Villaners co-heirs claim that as co-owners of the property, the Deed of Absolute Sale
executed by Villaner in favor of Leonardo does not bind them as they did not consent to such an
undertaking. There is no question that the property is conjugal. Article 160 of the Civil Code[73]
provides:
ART. 160. All property of the marriage is presumed to belong to the conjugal partnership, unless
it be proved that it pertains exclusively to the husband or to the wife.[74]
The presumption, this Court has held, applies to all properties acquired during marriage. For the
presumption to be invoked, therefore, the property must be shown to have been acquired during
the marriage.[75]
In the case at bar, the property was acquired on July 6, 1971 during Villaners marriage with
Justiniana Lipajan. It cannot be seriously contended that simply because the tax declarations
covering the property was solely in the name of Villaner it is his personal and exclusive property.
In Bucoy v. Paulino[76] and Mendoza v. Reyes[77] which both apply by analogy, this Court held
that registration alone of the properties in the name of the husband does not destroy the
conjugal nature of the properties.[78] What is material is the time when the land was acquired by
Villaner, and that was during the lawful existence of his marriage to Justiniana.
Since the property was acquired during the existence of the marriage of Villaner and Justiniana,
the presumption under Article 160 of the Civil Code is that it is the couples conjugal property.
The burden is on petitioners then to prove that it is not. This they failed to do.
The property being conjugal, upon the death of Justiniana Lipajan, the conjugal partnership was
terminated.[79] With the dissolution of the conjugal partnership, Villaners interest in the conjugal
partnership became actual and vested with respect to an undivided one-half portion.[80]
Justiniana's rights to the other half, in turn, vested upon her death to her heirs[81] including
Villaner who is entitled to the same share as that of each of their eight legitimate children.[82] As
a result then of the death of Justiniana, a regime of co-ownership arose between Villaner and his
co-heirs in relation to the property.[83]
With respect to Justinianas one-half share in the conjugal partnership which her heirs inherited,
applying the provisions on the law of succession, her eight children and Villaner each receives
one-ninth (1/9) thereof. Having inherited one-ninth (1/9) of his wifes share in the conjugal
partnership or one eighteenth (1/18)[84] of the entire conjugal partnership and is himself already
the owner of one half (1/2) or nine-eighteenths (9/18), Villaners total interest amounts to ten-
eighteenths (10/18) or five-ninths (5/9).
While Villaner owns five-ninths (5/9) of the disputed property, he could not claim title to any
definite portion of the community property until its actual partition by agreement or judicial
decree. Prior to partition, all that he has is an ideal or abstract quota or proportionate share in
the property.[85] Villaner, however, as a co-owner of the property has the right to sell his
undivided share thereof. The Civil Code provides so:
ART. 493. Each co-owner shall have the full ownership of his part and of 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.
Thus, every co-owner has absolute ownership of his undivided interest in the co-owned property
and is free to alienate, assign or mortgage his interest except as to purely personal rights. While
a co-owner has the right to freely sell and dispose of his undivided interest, nevertheless, as a
co-owner, he cannot alienate the shares of his other co-owners nemo dat qui non habet.[86]
Villaner, however, sold the entire property without obtaining the consent of the other co-owners.
Following the well-established principle that the binding force of a contract must be recognized
as far as it is legally possible to do so quando res non valet ut ago, valeat quantum valere
potest[87] the disposition affects only Villaners share pro indiviso, and the transferee gets only
what corresponds to his grantors share in the partition of the property owned in common.[88]
As early as 1923, this Court has ruled that even if a co-owner sells the whole property as his, the
sale will affect only his own share but not those of the other co-owners who did not consent to
the sale. This is because under the aforementioned codal provision, the sale or other disposition
affects only his undivided share and the transferee gets only what would correspond to this
grantor in the partition of the thing owned in common. Consequently, by virtue of the sales made
by Rosalia and Gaudencio Bailon which are valid with respect to their proportionate shares, and
the subsequent transfers which culminated in the sale to private respondent Celestino Afable,
the said Afable thereby became a co-owner of the disputed parcel of land as correctly held by
the lower court since the sales produced the effect of substituting the buyers in the enjoyment
thereof.
From the foregoing, it may be deduced that since a co-owner is entitled to sell his undivided
share, a sale of the entire property by one co-owner without the consent of the other co-owners
is not null and void. However, only the rights of the co-owner-seller are transferred., thereby
making the buyer a co-owner of the property.
The proper action in cases like this is not for the nullification of the sale or the recovery of
possession of the thing owned in common from the third person who substituted the co-owner or
co-owners who alienated their shares, but the DIVISION of the common property as if it
continued to remain in the possession of the co-owners who possessed and administered it.[89]
Thus, it is now settled that the appropriate recourse of co-owners in cases where their consent
were not secured in a sale of the entire property as well as in a sale merely of the undivided
shares of some of the co-owners is an action for PARTITION under Rule 69 of the Revised
Rules of Court. Neither recovery of possession nor restitution can be granted since the
defendant buyers are legitimate proprietors and possessors in joint ownership of the common
property claimed.[90] (Italics in the original; citations omitted; underscoring supplied)
This Court is not unmindful of its ruling in Cruz v. Leis[91] where it held:
It is conceded that, as a rule, a co-owner such as Gertrudes could only dispose of her share in
the property owned in common. Article 493 of the Civil Code provides:
xxx
Unfortunately for private respondents, however, the property was registered in TCT No. 43100
solely in the name of Gertrudes Isidro, widow. Where a parcel of land, forming part of the
undistributed properties of the dissolved conjugal partnership of gains, is sold by a widow to a
purchaser who merely relied on the face of the certificate of title thereto, issued solely in the
name of the widow, the purchaser acquires a valid title to the land even as against the heirs of
the deceased spouse. The rationale for this rule is that a person dealing with registered land is
not required to go behind the register to determine the condition of the property. He is only
charged with notice of the burdens on the property which are noted on the face of the register or
the certificate of title. To require him to do more is to defeat one of the primary objects of the
Torrens system.[92] (Citation omitted)
Cruz, however, is not applicable for the simple reason that in the case at bar the property in
dispute is unregistered. The issue of good faith or bad faith of a buyer is relevant only where the
subject of the sale is a registered land but not where the property is an unregistered land.[93]
One who purchases an unregistered land does so at his peril.[94] Nicolas claim of having bought
the land in good faith is thus irrelevant.[95]
WHEREFORE, the petition is GRANTED. The Court of Appeals February 15, 2001 Decision in
CA-G.R. CV No. 56148 is REVERSED and SET ASIDE and another is rendered declaring the
sale in favor of petitioner Leonardo Acabal and the subsequent sale in favor of petitioner Ramon
Nicolas valid but only insofar as five-ninths (5/9) of the subject property is concerned.
No pronouncement as to costs.
SO ORDERED.