G.R. No. 109410. August 28, 1996.
] of the thing bought or payment of the price is not
CLARA M. BALATBAT, Petitioner, v. COURT OF
APPEALS and Spouses JOSE REPUYAN and AURORA
REPUYAN, Respondents.
SYLLABUS
1. CIVIL LAW; SPECIAL CONTRACTS; SALES; TRANSFER
OF OWNERSHIP; CONSUMMATED UPON ACTUAL OR
CONSTRUCTIVE DELIVERY THEREOF. — Devoid of any
stipulation that "ownership in the thing shall not pass to
the purchaser until he has fully paid the price,"
ownership in the thing shall pass from the vendor to
the vendee upon actual or constructive delivery of the
thing sold even if the purchase price has not yet been
fully paid. The failure of the buyer to make good the
price does not, in law, cause the ownership to revest to
the seller unless the bilateral contract of sale is first
rescinded or resolved pursuant to Article 1191 of the
New Civil Code. Non-payment only creates a right to
demand the fulfillment of the obligation or to rescind
the contract.
2. ID.; ID.; ID.; ID.; 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. — With
respect to the non-delivery of the possession of the
subject property to the private respondent, suffice it
to say that ownership of the thing sold is acquired only
from the time of delivery thereof, either actual or
constructive. Article 1498 of the Civil Code provides
that — 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 be inferred. The execution of the
public instrument, without actual delivery of the thing,
transfers the ownership from the vendor to the vendee,
who may thereafter exercise the rights of an owner
over the same. In the instant case, vendor Roque
delivered the owner’s certificate of title to herein
private Respondent. It is not necessary that vendee be
physically present at every square inch of the land
bought by him, possession of the public instrument of
the land is sufficient to accord him the rights of
ownership. Thus, delivery of a parcel of land may be
done by placing the vendee in control and possession of
the land (real) or by embodying the sale in a public
instrument (constructive). The provision of Article 1358
on the necessity of a public document is only for
convenience, not for validity or enforceability. It is not
a requirement for the validity of a contract of sale of a
parcel of land that this be embodied in a public
instrument.
3. ID.; ID.; ID.; PERFECTED BY MERE CONSENT OF THE
PARTIES. — A contract of sale being consensual, it is
perfected by the mere consent of the parties. Delivery
necessary for the perfection of the contract; and
failure of the vendee to pay the price after the
execution of the contract does not make the sale null
and void for lack of consideration but results at most in
default on the part of the vendee, for which the vendor
may exercise his legal remedies.
4. ID.; ID.; ID.; RULE IN CASE OF DOUBLE SALE OF AN
IMMOVABLE PROPERTY. — Article 1544 of the Civil Code
provides that in case of double sale of an immovable
property, 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. This is an
instance of a instance of a double sale of an immovable
property hence, the ownership shall vests in the person
acquiring it who in good faith first recorded it in the
Registry of Property. Evidently, private respondents
Repuyan’s caused the annotation of an adverse claim
on the title of the subject property denominated as
Entry No. 5627/T-135671 on July 21, 1980. The
annotation of the adverse claim on TCT No. 135671 in
the Registry of Property is sufficient compliance as
mandated by law and serves notice to the whole world.
5. ID.; ID.; ID.; IT IS INCUMBENT UPON THE VENDEE TO
ASK FOR THE DELIVERY OF THE OWNER’S DUPLICATE
COPY OF THE TITLE IN ORDER TO INQUIRE OR DISCOVER
A FLAW THEREOF. — It is incumbent upon the vendee of
the property to ask for the delivery of the owner’s
duplicate copy of the title from the vendor. A
purchaser of a valued piece of property cannot just
close his eyes to facts which should put a reasonable
man upon his guard and then claim that he acted in
good faith and under the belief that there were no
defect in the title of the vendor. One who purchases
real estate with knowledge of a defect or lack of title
in his vendor cannot claim that he has acquired title
thereto in good faith as against the true owner of the
land or of 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. 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 judged of by actual or fancied
tokens or signs. In fine, petitioner had nobody to blame
but herself in dealing with the disputed property for
failure to inquire or discover a flaw in the title to the
property, thus, it is axiomatic that — culpa lata dolo
aequiparatur — gross negligence is equivalent to
intentional wrong.
DECISION
TORRES, JR., J.:

Petitioner Clara M. Balatbat instituted this petition for
review pursuant to Rule 45 of the Revised Rules of
Court seeking to set aside the decision dated August
12, 1992 of the respondent Court of Appeals in CA-G.R.
CV No. 29994 entitled "Alejandro Balatbat and Clara
Balatbat, plaintiffs-appellants versus Jose Repuyan and
Aurora Repuyan, defendants-appellees", the dispositive
portion of which reads: 1
"WHEREFORE, the judgment appealed from is affirmed
with the modification that the awards of P10,000.00 for
attorney’s fees and P5,000.00 as costs of litigation are
deleted.
SO ORDERED."cralaw virtua1aw library
The records show the following factual
antecedents:chanrob1es virtual 1aw library
It appears that on June 15, 1977, Aurelio A. Roque filed
a complaint for partition docketed as Civil Case No.
109032 against Corazon Roque, Alberto de los Santos,
Feliciano Roque, Severa Roque and Osmundo Roque
before the then Court of First Instance of Manila,
Branch IX. 2 Defendants therein were declared in
default and plaintiff presented evidence ex-parte. On
March 29, 1979, the trial court rendered a decision in
favor of plaintiff Aurelio A. Roque, the pertinent
portion of which reads: 3
"From the evidence, it has been clearly established that
the lot in question covered by Transfer Certificate of
Title No. 51330 was acquired by plaintiff Aurelio Roque
and Maria Mesina during their conjugal union and the
house constructed thereon was likewise built during
their marital union. Out of their union, plaintiff and
Maria Mesina had four children, who are the defendants
in this case. When Maria Mesina died on August 28,
1966, the only conjugal properties left are the house
and lot above stated of which plaintiff herein, as the
legal spouse, is entitled to one-half share pro-indiviso
thereof. With respect to the one-half share pro-indiviso
now forming the estate of Maria Mesina, plaintiff and
the four children, the defendants here, are each
entitled to one-fifth (1/5) share pro-indiviso. The
deceased wife left no debt.
Wherefore, judgment is hereby rendered ordering the
partition of the properties, subject matter of this case
consisting of the house and lot, in the following
manner:chanrob1es virtual 1aw library
1. Of the house and lot forming the conjugal
properties, plaintiff is entitled to one-half share pro-
indiviso thereof while the other half forms the estate
of the deceased Maria Mesina;
2. Of the Estate of deceased Maria Mesina, the same is
to be divided into five (5) shares and plaintiff and his
four children are entitled each to one-fifth share
thereof pro-indiviso.
Plaintiff claim for moral, exemplary and actual
damages and attorney’s fees not having been
established to the satisfaction of the Court, the same is
hereby denied.
Without pronouncement as to costs.
SO ORDERED.”
On June 2, 1979, the decision became final and
executory. The corresponding entry of judgment was
made on March 29, 1979. 4
On October 5, 1979, the Register of Deeds of Manila
issued a Transfer Certificate of Title No. 135671 in the
name of the following persons in the following
proportions: 5
Aurelio A. Roque 6/10 share
Severina M. Roque 1/10 share
Osmundo M. Roque 1/10 share
Feliciano M. Roque 1/10 share
Corazon M. Roque 1/10 share
On April 1, 1980, Aurelio A. Roque sold his 6/10 share
in T.C.T. No. 135671 to spouses Aurora Tuazon-Repuyan
and Jose Repuyan as evidenced by a "Deed of Absolute
Sale." 6
On July 21, 1980, Aurora Tuazon Repuyan caused the
annotation of her affidavit of adverse claim 7 on the
Transfer Certificate of Title No. 135671, 8 to
wit:jgc:chanrobles.com.ph
"Entry No. 5627/T-135671 — NOTICE OF ADVERSE CLAIM
— Filed by Aurora Tuazon Repuyan, married, claiming
among others that she bought 6/10 portion of the
property herein described from Aurelio Roque for the
amount of P50,000.00 with a down payment of
P5,000.00 and the balance of P45,000.00 to be paid
after the partition and subdivision of the property
herein described, other claims set forth in Doc. No.
954, page 18, Book 94 of _________________ 64
__________________ PEDRO DE CASTRO, Notary Public
of Manila.
Date of instrument — July 21, 1980
Date of inscription -July 21, 1980 at 3:35 p.m.
TERESITA H. NOBLEJAS
Acting Register of Deeds
By:chanrob1es virtual 1aw library

RAMON D. MACARICAN
Acting Second Deputy"
On August 20, 1980, Aurelio A. Roque filed a complaint
for "Rescission of Contract" docketed as Civil Case No.
134131 against spouses Aurora Tuazon-Repuyan and
Jose Repuyan before Branch IV of the then Court of
First Instance of Manila. The complaint is grounded on
spouses Repuyan’s failure to pay the balance of
P45,000.00 of the purchase price. 9 On September 5,
1980, spouses Repuyan filed their answer with
counterclaim. 10
In the meantime, the trial court issued an order in Civil
Case No. 109032 (Partition case) dated February 2,
1982, to wit: 11
"In view of all the foregoing and finding that the
amount of P100,000.00 as purchase price for the sale of
the parcel of land covered by TCT No. 51330 of the
Registry of Deeds of Manila consisting of 84 square
meters situated in Callejon Sulu, District of Santa Cruz,
Manila, to be reasonable and fair, and considering the
opportunities given defendants to sign the deed of
absolute sale voluntarily, the Court has no alternative
but to order, as it hereby orders, the Deputy Clerk of
this Court to sign the deed of absolute sale for and in
behalf of defendants pursuant to Sec. 10, Rule 39 of
the Rules of Court, in order to effect the partition of
the property involved in this case.
SO ORDERED."cralaw virtua1aw library
A deed of absolute sale was executed on February 4,
1982 between Aurelio S. Roque, Corazon Roque,
Feliciano Roque, Severa Roque and Osmundo Roque and
Clara Balatbat, married to Alejandro Balatbat. 12 On
April 14, 1982, Clara Balatbat filed a motion for the
issuance of a writ of possession which was granted by
the trial court on September 14, 1982 "subject,
however, to valid rights and interest of third persons
over the same portion thereof, other than vendor or
any other person or persons privy to or claiming any
rights or interest under it." The corresponding writ of
possession was issued on September 20, 1982. 13
On May 20, 1982, petitioner Clara Balatbat filed a
motion to intervene in Civil Case No. 134131 14 which
was granted as per court’s resolution of October 21,
1982. 15 However, Clara Balatbat failed to file her
complaint in intervention. 16 On April 15, 1986, the
trial court rendered a decision dismissing the
complaint, the pertinent portion of which reads: 17
"The rescission of contracts are provided for in the laws
and nowhere in the provision of the Civil Code under
the title Rescissible Contracts does the circumstances
in the case at bar appear to have occurred, hence, the
prayer for rescission is outside the ambit for which
rescissible [sic] could be granted.
"The Intervenor — Plaintiff, Clara Balatbat, although
allowed to intervene, did not file her complaint in
intervention.
"Consequently, the plaintiff having failed to prove with
sufficient preponderance his action, the relief prayed
for had to be denied. The contract of sale denominated
as "Deed of Absolute Sale" (Exh. 7 and sub-markings)
being valid and enforceable, the same pursuant to the
provisions of Art. 1159 of the Civil Code which
says:jgc:chanrobles.com.ph
"Obligations arising from contracts have the force of
law between the contracting parties and should be
complied with in good faith."cralaw virtua1aw library
has the effect of being the law between the parties and
should be complied with. The obligation of the plaintiff
under the contract being to have the land covered by
TCT No. 135671 partitioned and subdivided, and title
issued in the name of the defendant buyer (see page 2
par. C of Exh. 7-A) plaintiff had to comply thereto to
give effect to the contract.
"WHEREFORE, judgment is rendered against the
plaintiff, Aurelio A. Roque, and the plaintiff in
intervention, Clara Balatbat, and in favor of the
defendants, dismissing the complaint for lack of merit,
and declaring the Deed of Absolute Sale dated April 1,
1980 as valid and enforceable and the plaintiff is, as he
is hereby ordered, to partition and subdivide the land
covered by T.C.T. No. 135671, and to aggregate
therefrom a portion equivalent to 6/10 thereof, and
cause the same to be titled in the name of the
defendants, and after which, the defendants to pay the
plaintiff the sum of P45,000.00. Considering further
that the defendants suffered damages since they were
forced to litigate unnecessarily, by way of their
counterclaim, plaintiff is hereby ordered to pay
defendants the sum of P15,000.00 as moral damages,
attorney’s fees in the amount of P5,000.00.
Costs against plaintiff.
SO ORDERED."cralaw virtua1aw library
On March 3, 1987, petitioner Balatbat filed a notice of
lis pendens in Civil Case No. 109032 before the Register
of Deeds of Manila. 18
On December 9, 1988, petitioner Clara Balatbat and
her husband, Alejandro Balatbat filed the instant
complaint for delivery of the owners duplicate copy of
T.C.T. No. 135671 docketed as Civil Case No. 88-47176
before Branch 24 of the Regional Trial Court of Manila
against private respondents Jose Repuyan and Aurora
Repuyan. 19
On January 27, 1989, private respondents filed their
answer with affirmative defenses and compulsory
counterclaim. 20
On November 13, 1989, private respondents filed their
memorandum 21 while petitioners filed their
memorandum on November 23, 1989. 22
On August 2, 1990, the Regional Trial Court of Manila,
Branch 24, rendered a decision dismissing the
complaint, the dispositive portion of which reads: 23
"Considering all the foregoing, this Court finds that the
plaintiffs have not been able to establish their cause of
action against the defendants and have no right to the
reliefs demanded in the complaint and the complaint of
the plaintiff against the defendants is hereby
DISMISSED. On the counterclaim, the plaintiff are
ordered to pay defendants the amount of Ten Thousand
Pesos by way of attorney’s fees, Five Thousand Pesos as
costs of litigation and further to pay the costs of the
suit.
SO ORDERED."cralaw virtua1aw library
Dissatisfied, petitioner Balatbat filed an appeal before
the respondent Court of Appeals which rendered the
assailed decision on August 12, 1992, to wit: 24
"WHEREFORE, the judgment appealed from is affirmed
with the modification that the awards of P10,000.00 for
attorney’s fees and P5,000.00 as costs of litigation are
deleted.
SO ORDERED."cralaw virtua1aw library
On March 22, 1993, the respondent Court of Appeals
denied petitioner’s motion for
reconsideration.25cralaw:red
Hence, this petition for review.
Petitioner raised the following issues for this Court’s
resolution:chanrob1es virtual 1aw library
I property has been subdivided and titled in the name of
WHETHER OR NOT THE ALLEGED SALE TO THE PRIVATE
RESPONDENTS WAS MERELY EXECUTORY AND NOT A
CONSUMMATED TRANSACTION?
II
WHETHER OR NOT THERE WAS A DOUBLE SALE AS
CONTEMPLATED UNDER ART. 1544 OF THE CIVIL CODE?
III
WHETHER OR NOT PETITIONER WAS A BUYER IN GOOD
FAITH AND FOR VALUE?
IV
WHETHER OR NOT THE COURT OF APPEALS ERRED IN
GIVING WEIGHT AND CONSIDERATION TO THE EVIDENCE
OF THE PRIVATE RESPONDENTS WHICH WERE NOT
OFFERED?
Petitioner asseverates that the respondent Court of
Appeals committed grave abuse of discretion
tantamount to lack or excess of jurisdiction in affirming
the appealed judgment considering (1) that the alleged
sale in favor of the private respondents Repuyan was
merely executory; (2) that there is no double sale; (3)
that petitioner is a buyer in good faith and for value;
and (4) that private respondents did not offer their
evidence during the trial.
Contrary to petitioner’s contention that the sale dated
April 1, 1980 in favor of private respondents Repuyan
was merely executory for the reason that there was no
delivery of the subject property and that
consideration/price was not fully paid, we find the sale
as consummated, hence, valid and enforceable. In a
decision dated April 15, 1986 of the Regional Trial
Court of Manila, Branch IV in Civil Case No. 134131, the
Court dismissed vendor’s Aurelio Roque complaint for
rescission of the deed of sale and declared that the
sale dated April 1, 1980, as valid and enforceable. No
appeal having been made, the decision became final
and executory. It must be noted that herein petitioner
Balatbat filed a motion for intervention in that case but
did not file her complaint in intervention. In that case
wherein Aurelio Roque sought to rescind the April 1,
1980 deed of sale in favor of the private respondents
for non-payment of the P45,000.00 balance, the trial
court dismissed the complaint for rescission. Examining
the terms and conditions of the "Deed of Sale" dated
April 1, 1980, the P45,000.00 balance is payable only
"after the property covered by T.C.T No. 135671 has
been partitioned and subdivided, and title issued in the
name of the BUYER" hence, vendor Roque cannot
demand payment of the balance unless and until the
the private respondents. Devoid of any stipulation that
"ownership in the thing shall not pass to the purchaser
until he has fully paid the price", 26 ownership in the
thing shall pass from the vendor to the vendee upon
actual or constructive delivery of the thing sold even if
the purchase price has not yet been fully paid. The
failure of the buyer to make good the price does not, in
law, cause the ownership to revest to the seller unless
the bilateral contract of sale is first rescinded or
resolved pursuant to Article 1191 of the New Civil
Code. 27 Non-payment only creates a right to demand
the fulfillment of the obligation or to rescind the
contract.
With respect to the non-delivery of the possession of
the subject property to the private respondent, suffice
it to say that ownership of the thing sold is acquired
only from the time of delivery thereof, either actual or
constructive. 28 Article 1498 of the Civil Code provides
that — 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 be inferred. 29 The execution of the
public instrument, without actual delivery of the thing,
transfers the ownership from the vendor to the vendee,
who may thereafter exercise the rights of an owner
over the same. 30 In the instant case, vendor Roque
delivered the owner’s certificate of title to herein
private Respondent. It is not necessary that vendee be
physically present at every square inch of the land
bought by him, possession of the public instrument of
the land is sufficient to accord him the rights of
ownership. Thus, delivery of a parcel of land may be
done by placing the vendee in control and possession of
the land (real) or by embodying the sale in a public
instrument (constructive). The provision of Article 1358
on the necessity of a public document is only for
convenience, not for validity or enforceability. It is not
a requirement for the validity of a contract of sale of a
parcel of land that this be embodied in a public
instrument. 31
A contract of sale being consensual, it is perfected by
the mere consent of the parties. 32 Delivery of the
thing bought or payment of the price is not necessary
for the perfection of the contract; and failure of the
vendee to pay the price after the execution of the
contract does not make the sale null and void for lack
of consideration but results at most in default on the
part of the vendee, for which the vendor may exercise
his legal remedies. 33
Article 1544 of the New Civil Code
provides:jgc:chanrobles.com.ph
"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 movable 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 present the oldest title, provided there is good
faith."cralaw virtua1aw library
Article 1544 of the Civil Code provides that in case of
double sale of an immovable property, 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. 34
In the case at bar, vendor Aurelio Roque sold 6/10
portion of his share in TCT No. 135671 to private
respondents Repuyan on April 1, 1980. Subsequently,
the same lot was sold again by vendor Aurelio Roque
(6/10) and his children (4/10), represented by the
Clerk of Court pursuant to Section 10, Rule 39 of the
Rules of Court, on February 4, 1982. Undoubtedly, this
is a case of double sale contemplated under Article
1544 of the New Civil Code.
This is an instance of a double sale of an immovable
property hence, the ownership shall vests in the person
acquiring it who in good faith first recorded it in the
Registry of Property. Evidently, private respondents
Repuyan’s caused the annotation of an adverse claim
on the title of the subject property denominated as
Entry No. 5627/T-135671 on July 21, 1980. 35 The
annotation of the adverse claim on TCT No. 135671 in
the Registry of Property is sufficient compliance as
mandated by law and serves notice to the whole world.
On the other hand, petitioner filed a notice of lis
pendens only on February 2, 1982. Accordingly, private
respondents who first caused the annotation of the
adverse claim in good faith shall have a better right
over herein petitioner. Moreover, the physical
possession of herein petitioners by virtue of a writ of
possession issued by the trial court on September 20,
1982 is "subject to the valid rights and interest of third
persons over the same portion thereof, other than
vendor or any other person or persons privy to or
claiming any rights to interest under it." 36 As between
two purchasers, the one who has registered the sale in
his favor, has a preferred right over the other who has
not registered his title even if the latter is in actual
possession of the immovable property. 37 Further, even
in default of the first registrant or first in possession,
private respondents have presented the oldest title. 38
Thus, private respondents who acquired the subject
property in good faith and for valuable consideration
established a superior right as against the petitioner.
Evidently, petitioner cannot be considered as a buyer
in good faith. In the complaint for rescission filed by
vendor Aurelio Roque on August 20, 1980, herein
petitioner filed a motion for intervention on May 20,
1982 but did not file her complaint in intervention,
hence, the decision was rendered adversely against
her. If petitioner did investigate before buying the land
on February 4, 1982, she should have known that there
was a pending case and an annotation of adverse claim
was made in the title of the property before the
Register of Deeds and she could have discovered that
the subject property was already sold to the private
respondents. It is incumbent upon the vendee of the
property to ask for the delivery of the owner’s
duplicate copy of the title from the vendor. A
purchaser of a valued piece of property cannot just
close his eyes to facts which should put a reasonable
man upon his guard and then claim that he acted in
good faith and under the belief that there were no
defect in the title of the vendor. 39 One who purchases
real estate with knowledge of a defect or lack of title
in his vendor cannot claim that he has acquired title
thereto in good faith as against the true owner of the
land or of 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. 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 judged of by actual or fancied
tokens or signs. 40
In fine, petitioner had nobody to blame but herself in
dealing with the disputed property for failure to inquire
or discover a flaw in the title to the property, thus, it
is axiomatic that — culpa lata dolo aequiparatur —
gross negligence is equivalent to intentional wrong.
IN VIEW OF THE FOREGOING PREMISES, this petition for
review is hereby DISMISSED for lack of merit. No
pronouncement as to costs.
IT IS SO ORDERED.
Regalado, Romero, Puno and Mendoza, JJ., concur.
G.R. No. 82508 September 29, 1989
FILINVEST CREDIT CORPORATION, Petitioner, vs. THE
COURT OF APPEALS, JOSE SY BANG and ILUMINADA
TAN SY BANG,*Respondents.
Labaquis, Loyola, Angara and Associates for
petitioner.chanrobles virtual law library
Alfredo 1. Raya for private respondents.
SARMIENTO, J.:
This is a petition for review on certiorari of the
decision, 1 dated March 17, 1988, of the Court of
Appeals which affirmed with modification the
decision 2of the Regional Trial Court of Quezon, Branch
LIX, Lucena City. The controversy stemmed from the
following facts: The private respondents, the spouses
Jose Sy Bang and Iluminada Tan, were engaged in the
sale of gravel produced from crushed rocks and used
for construction purposes. In order to increase their
production, they engaged the services of Mr. Ruben
Mercurio, the proprietor of Gemini Motor Sales in
Lucena City, to look for a rock crusher which they
could buy. Mr. Mercurio referred the private
respondents to the Rizal Consolidated Corporation
which then had for sale one such machinery described
as:
ONE UNIT LIPPMAN PORTABLE CRUSHING PLANT
(RECONDITIONED) [sic]
JAW CRUSHER-10xl6 DOUBLE ROLL CRUSHER 16x16
3 UNITS PRODUCT CONVEYOR
75 HP ELECTRIC MOTOR
8 PCS. BRAND NEW TIRES CHASSIS NO. 19696 GOOD
RUNNING CONDITION 3chanrobles virtual law library
Oscar Sy Bang, a brother of private respondent Jose Sy
Bang, went to inspect the machine at the Rizal
Consolidated's plant site. Apparently satisfied with the
machine, the private respondents signified their intent
to purchase the same. They were however confronted
with a problem-the rock crusher carried a cash price
tag of P 550,000.00. Bent on acquiring the machinery,
the private respondents applied for financial assistance
from the petitioner, Filinvest Credit Corporation. The
petitioner agreed to extend to the private respondents
financial aid on the following conditions: that the
machinery be purchased in the petitioner's name; that
it be leased (with option to purchase upon the
termination of the lease period) to the private
respondents; and that the private respondents execute
a real estate mortgage in favor of the petitioner as
security for the amount advanced by the latter.
Accordingly, on May 18,1981, a contract of lease of
machinery (with option to purchase) was entered into
by the parties whereby the private respondents agreed
to lease from the petitioner the rock crusher for two
years starting from July 5, 1 981 payable as follows:
P10,000.00 - first 3 months chanrobles virtual law
library
23,000.00 - next 6 months chanrobles virtual law
library
24,800.00 - next 15 months
The contract likewise stipulated that at the end of the
two-year period, the machine would be owned by the
private respondents. Thus, the private respondents
issued in favor of the petitioner a check for
P150,550.00, as initial rental (or guaranty deposit), and
twenty-four (24) postdated checks corresponding to the
24 monthly rentals. In addition, to guarantee their
compliance with the lease contract, the private
respondents executed a real estate mortgage over two
parcels of land in favor of the petitioner. The rock
crusher was delivered to the private respondents on
June 9, 1981. Three months from the date of delivery,
or on September 7, 1981, however, the private
respondents, claiming that they had only tested the
machine that month, sent a letter-complaint to the
petitioner, alleging that contrary to the 20 to 40 tons
per hour capacity of the machine as stated in the lease
contract, the machine could only process 5 tons of
rocks and stones per hour. They then demanded that
the petitioner make good the stipulation in the lease
contract. They followed that up with similar written
complaints to the petitioner, but the latter did not,
however, act on them. Subsequently, the private
respondents stopped payment on the remaining checks
they had issued to the petitioner. 5 chanrobles virtual
law library
As a consequence of the non-payment by the private
respondents of the rentals on the rock crusher as they
fell due despite the repeated written demands, the
petitioner extrajudicially foreclosed the real estate
mortgage. 6 On April 18, 1983, the private respondents
received a Sheriff s Notice of Auction Sale informing
them that their mortgaged properties were going to be
sold at a public auction on May 25, 1983 at 10:00
o'clock in the morning at the Office of the Provincial
Sheriff in Lucena City to satisfy their indebtedness to
the petitioner. 7 To thwart the impending auction of
their properties, the private respondents filed before
the Regional Trial Court of Quezon, on May 4, 1983, 8 a
complaint against the petitioner, for the rescission of
the contract of lease, annullment of the real estate
mortgage, and for injunction and damages, with prayer
for the issuance of a writ of preliminary
injunction. 9 On May 23, 1983, three days before the
scheduled auction sale, the trial court issued a
temporary restraining order commanding the Provincial
Sheriff of Quezon, and the petitioner, to refrain and
desist from proceeding with the public auction. 10 Two
years later, on September 4, 1985, the trial court
rendered a decision in favor of the private respondents,
the dispositive portion of which reads:chanrobles
virtual law library
WHEREFORE, PREMISES CONSIDERED, judgment is
hereby rendered:
1. making the injunction permanent; chanrobles virtual
law library
2. rescinding the contract of lease of the machinery
and equipment and ordering the plaintiffs to return to
the defendant corporation the machinery subject of
the lease contract, and the defendant corporation to
return to plaintiffs the sum of P470,950.00 it received
from the latter as guaranty deposit and rentals with
legal interest thereon until the amount is fully
restituted; chanrobles virtual law library
3. annulling the real estate mortgage constituted over
the properties of the plaintiffs covered by Transfer
Certificate of Title Nos. T32480 and T-5779 of the
Registry of Deeds of Lucena City; chanrobles virtual law
library
4. ordering the defendant corporation to pay plaintiffs
P30,000.00 as attorney's fees and the costs of the suit.
11
SO ORDERED. chanrobles virtual law library
Dissatisfied with the trial court's decision, the
petitioner elevated the case to the respondent Court of
Appeals.chanroblesvirtualawlibrary chanrobles virtual
law library
On March 17, 1988, the appellate court, finding no
error in the appealed judgment, affirmed the same in
toto. 12 Hence, this
petition.chanroblesvirtualawlibrary chanrobles virtual
law library
Before us, the petitioner reasserts that the private
respondents' cause of action is not against it (the
petitioner), but against either the Rizal Consolidated
Corporation, the original owner-seller of the subject
rock crusher, or Gemini Motors Sales which served as a
conduit facilitator of the purchase of the said machine.
The petitioner argues that it is a financing institution
engaged in quasi-banking activities, primarily the
lending of money to entrepreneurs such as the private
respondents and the general public, but certainly not
the leasing or selling of heavy machineries like the
subject rock crusher. The petitioner denies being the
seller of the rock crusher and only admits having
financed its acquisition by the private respondents.
Further, the petitioner absolves itself of any liability
arising out of the lease contract it signed with the
private respondents due to the waiver of warranty
made by the latter. The petitioner likewise maintains
that the private respondents being presumed to be
knowledgeable about machineries, should be held
responsible for the detection of defects in the machine
they had acquired, and on account of that, they are
estopped from claiming any breach of warranty.
Finally, the petitioner interposed the defense of
prescription, invoking Article 1571 of the Civil Code,
which provides:chanrobles virtual law library
Art. 1571. Actions arising from the provisions of the
preceding ten articles shall be barred after six months,
from the delivery of the thing
sold.chanroblesvirtualawlibrarychanrobles virtual law
library
We find the petitioner's first contention untenable.
While it is accepted that the petitioner is a financing
institution, it is not, however, immune from any
recourse by the private respondents. Notwithstanding
the testimony of private respondent Jose Sy Bang that
he did not purchase the rock crusher from the
petitioner, the fact that the rock crusher was
purchased from Rizal Consolidated Corporation in the
name and with the funds of the petitioner proves
beyond doubt that the ownership thereof was
effectively transferred to it. It is precisely this
ownership which enabled the petitioner to enter into
the "Contract of Lease of Machinery and Equipment"
with the private
respondents.chanroblesvirtualawlibrary chanrobles
virtual law library
Be that as it may, the real intention of the parties
should prevail. The nomenclature of the agreement
cannot change its true essence, i.e., a sale on
installments. It is basic that a contract is what the law
defines it and the parties intend it to be, not what it is
called by the parties. 13 It is apparent here thatthe
intent of the parties to the subject contract is for the
so-called rentals to be the installment payments. Upon
the completion of the payments, then the rock crusher,
subject matter of the contract, would become the
property of the private respondents. This form of
agreement has been criticized as a lease only in name.
Thus in Vda. de Jose v. Barrueco 14 we
stated:chanrobles virtual law library
Sellers desirous of making conditional sales of their
goods, but who do not wish openly to make a bargain in
that form, for one reason or another, have frequently
resorted to the device of making contracts in the form
of leases either with options to the buyer to purchase
for a small consideration at the end of term, provided
the so-called rent has been duly paid, or with
stipulations that if the rent throughout the term is
paid, title shall thereupon vest in the lessee. It is
obvious that such transactions are leases only in name.
The so-called rent must necessarily be regarded as
payment of the price in installments since the due
payment of the agreed amount results, by the terms of
bargain, in the transfer of title to the
lessee. 15chanrobles virtual law library
The importance of the criticism is heightened in the
light of Article 1484 of the new Civil Code which
provides for the remedies of an unpaid seller of
movables on installment basis.
Article 1484. In a contract of sale of personal property
the price of which is payable in installments, the
vendor may exercise any of the following
remedies: chanrobles virtual law library
(1) Exact fulfillment of the obligation, should the
vendee fail to pay; chanrobles virtual law library
(2) Cancel the sale, should the vendee's failure to pay
cover two or more installments;chanrobles virtual law
library
(3) Foreclose the chattel mortgage or the thing sold, if
one has been constituted, should the vendee's failure
to pay cover two or more installments. In this case, he
shall have no further action against the purchaser to
recover any unpaid balance of the price. Any
agreement to the contrary shall be void.
Under the aforequoted provision, the seller of
movables in installments, in case the buyer fails to pay
two or more installments may elect to pursue either of
the following remedies: (1) exact fulfillment by the
purchaser of the obligation; (2) cancel the sale; or (3)
foreclose the mortgage on the purchased property if
one was constituted thereon. It is now settled that the
said remedies are alternative and not cumulative and
therefore, the exercise of one bars the exercise of the
others.chanroblesvirtualawlibrary chanrobles virtual
law library
Indubitably, the device contract of lease with option to
buy is at times resorted to as a means to circumvent
Article 1484, particularly paragraph (3)
thereof.Through the set-up, the vendor, by retaining
ownership over the property in the guise of being the
lessor, retains, likewise, the right to repossess the
same, without going through the process of
foreclosure, in the event the vendee-lessee defaults in
the payment of the installments. There arises therefore
no need to constitute a chattel mortgage over the
movable sold. More important, the vendor, after
repossessing the property and, in effect, canceling the
contract of sale, gets to keep all the installments-cum-
rentals already paid. It is thus for these reasons that
Article 1485 of the new Civil Code provides that:
Article 1485. The preceding article shall be applied to
contracts purporting to be leases of personal property
with option to buy, when the lessor has deprived the
lessee of possession or enjoyment of the thing.
(Emphasis ours.)
Unfortunately, even with the foregoing findings, we
however fail to find any reason to hold the petitioner
liable for the rock crusher's failure to produce in
accordance with its described capacity. According to
the petitioner, it was the private respondents who
chose, inspected, and tested the subject machinery. It
was only after they had inspected and tested the
machine, and found it to their satisfaction, that the
private respondents sought financial aid from the
petitioner. These allegations of the petitioner had
never been rebutted by the private respondents. In
fact, they were even admitted by the private
respondents in the contract they signed.
Thus:chanrobles virtual law library
LESSEE'S SELECTION, INSPECTION AND VERIFICATION.-
The LESSEE hereby confirms and acknowledges that he
has independently inspected and verified the leased
property and has selected and received the same from
the Dealer of his own choosing in good order and
excellent running and operating condition and on the
basis of such verification, etc. the LESSEE has agreed to
enter into this Contract." 16chanrobles virtual law
library
Moreover, considering that between the parties, it is
the private respondents, by reason of their business,
who are presumed to be more knowledgeable, if not
experts, on the machinery subject of the contract, they
should not therefore be heard now to complain of any
alleged deficiency of the said machinery. It is their
failure or neglect to exercise the caution and prudence
of an expert, or, at least, of a prudent man, in the
selection, testing, and inspection of the rock crusher
that gave rise to their difficulty and to this conflict. A
well- established principle in law is that between two
parties, he, who by his negligence caused the loss, shall
bear the same.chanroblesvirtualawlibrary chanrobles
virtual law library
At any rate, even if the private respondents could not
be adjudged as negligent, they still are precluded from
imputing any liability on the petitioner. One of the
stipulations in the contract they entered into with the
petitioner is an express waiver of warranties in favor of
the latter. By so signing the agreement, the private
respondents absolved the petitioner from any liability
arising from any defect or deficiency of the machinery
they bought. The stipulation on the machine's
production capacity being "typewritten" and that of the
waiver being "printed" does not militate against the
latter's effectivity. As such, whether "a capacity of 20
to 40 tons per hour" is a condition or a description is of
no moment. What stands is that the private
respondents had expressly exempted the petitioner
from any warranty whatsoever. Their Contract of Lease
Of Machinery And Equipment states:chanrobles virtual
law library
WARRANTY-LESSEE absolutely releases the lessor from
any liability whatsoever as to any and all matters in
relation to warranty in accordance with the provisions
hereinafter stipulated. 17chanrobles virtual law library
Taking into account that due to the nature of its
business and its mode of providing financial assistance
to clients, the petitioner deals in goods over which it
has no sufficient know-how or expertise, and the
selection of a particular item is left to the client
concerned, the latter, therefore, shoulders the
responsibility of protecting himself against product
defects. This is where the waiver of warranties is of
paramount importance. Common sense dictates that a
buyer inspects a product before purchasing it (under
the principle of caveat emptor or "buyer beware") and
does not return it for defects discovered later on,
particularly if the return of the product is not covered
by or stipulated in a contract or warranty. In the case
at bar, to declare the waiver as non-effective, as the
lower courts did, would impair the obligation of
contracts. Certainly, the waiver in question could not
be considered a mere surplusage in the contract
between the parties. Moreover, nowhere is it shown in
the records of the case that the private respondent has
argued for its nullity or illegality. In any event, we find
no ambiguity in the language of the waiver or the
release of warranty. There is therefore no room for any
interpretation as to its effect or applicability vis-a- vis
the deficient output of the rock crusher. Suffice it to
say that the private respondents have validly excused
the petitioner from any warranty on the rock crusher.
Hence, they should bear the loss for any defect found
therein.chanroblesvirtualawlibrarychanrobles virtual
law library
WHEREFORE, the Petition is GRANTED; the Decision of
the Court of Appeals dated March 17, 1988 is hereby
REVERSED AND SET ASIDE, and another one rendered
DISMISSING the complaint. Costs against the private
respondents.chanroblesvirtualawlibrary chanrobles
virtual law library
SO ORDERED.
Melencio-Herrera (Chairperson), Paras and Regalado,
ii., concur,chanrobles virtual law library
Padilla, J., took no part
G.R. No. 83432. May 20, 1991.]
RADIOWEALTH FINANCE COMPANY, Petitioner, v.
MANUELITO S. PALILEO, Respondent.
Rolando A. Calang for Petitioner.
Sisenando Villaluz, Sr. for Respondent.
SYLLABUS
1. CIVIL LAW; DOUBLE SALE OF IMMOVABLE PROPERTY;
REGISTRATION IS THE OPERATIVE ACT TO CONVEY OR
AFFECT REGISTERED LANDS AS FAR AS THIRD PERSONS
ARE CONCERNED. — Article 1544 of the Civil Code
provides that in case of double sale of an immovable
property, 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. There is no
ambiguity regarding the application of the law with
respect to lands registered under the Torrens System.
Section 51 of Presidential Decree No. 1529 (amending
Section 50 of Act No. 496 clearly provides that the act
of registration is the operative act to convey or affect
registered lands insofar as third persons are concerned.
Thus, 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 certificate of title.
Following this principle, this Court has time and again
held that a purchaser in good faith of registered land
(covered by a Torrens Title) acquires a good title as
against all the transferees thereof whose right is not
recorded in the registry of deeds at the time of the
sale.
2. REMEDIAL LAW; EVIDENCE; FINDINGS OF FACT OF
THE COURT OF APPEALS CONCLUSIVE ON THE SUPREME
COURT. — As regards the first and second assigned
errors, suffice it to state that findings of fact of the
Court of Appeals are conclusive on this Court and will
not be disturbed unless there is grave abuse of
discretion. The finding of the Court of Appeals that the
property in question was already sold to private
respondent by its previous owner before the execution
sale is evidenced by a deed of sale. Said deed of sale is
notarized and is presumed authentic. There is no
substantive proof to support petitioner’s allegation that
the document is fictitious or simulated. With this in
mind, We see no reason to reject the conclusion of the
Court of Appeals that private respondent was not a
mere administrator of the property. That he exercised
acts of ownership through his mother also remains
undisputed.
3. CIVIL LAW; LAND REGISTRATION; PHRASE "WITHOUT
PREJUDICE TO A THIRD PARTY WITH A BETTER RIGHT",
CONSTRUED; CASE OF CARUMBA V. CA, 31 SCRA 558,
APPLICABLE. — 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 one’s favor
does not give him any light 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 v.
Court of Appeals is a case in point. It was held therein
that Article 1644 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 35, Rule 39 of the Revised
Rules of Court, 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 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.
DECISION
GANCAYCO, J.:
If the same piece of land was sold to two different
purchasers, to whom shall ownership belong? Article
1544 of the Civil Code provides that in case of double
sale of an immovable property, 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. There is no ambiguity regarding the
application of the law with respect to lands registered
under the Torrens System. Section 51 of Presidential
Decree No. 1529 (amending Section 50 of Act No. 496
clearly provides that the act of registration is the
operative act to convey or affect registered lands
insofar as third persons are concerned. Thus, 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 certificate of title. 1 Following this
principle, this Court has time and again held that a
purchaser in good faith of registered land (covered by a
Torrens Title) acquires a good title as against all the
transferees thereof whose right is not recorded in the
registry of deeds at the time of the sale. 2
The question that has to be resolved in the instant
petition is whether or not the rule provided in Article
1544 of the Civil Code as discussed above, is applicable
to a parcel of unregistered land purchased at a judicial
sale. To be more specific, this Court is asked to
determine who, as between two buyers of unregistered
land, is the rightful owner — the first buyer in a prior
sale that was unrecorded, or the second buyer who
purchased the land in an execution sale whose transfer
was registered in the Register of Deeds.chanrobles
lawlibrary : rednad
The facts as found by the Court of Appeals are as
follows:jgc:chanrobles.com.ph
"On April 13, 1970, defendant spouses Enrique Castro
and Herminia R. Castro sold to plaintiff-appellee
Manuelito Palileo (private respondent herein), a parcel
of unregistered coconut land situated in Candiis,
Mansayaw, Mainit, Surigao del Norte. The sale is
evidenced by a notarized Deed of Absolute Sale (Exh.
"E"). The deed was not registered in the Registry of
Property for unregistered lands in the province of
Surigao del Norte. Since the execution of the deed of
sale, appellee Manuelito Palileo who was then
employed at Lianga, Surigao del Sur, exercised acts of
ownership over the land through his mother Rafaela
Palileo, as administratrix or overseer. Appellee has
continuously paid the real estate taxes on said land
from 1971 until the present (Exhs. "C" to "C-7",
inclusive).
On November 29, 1976, a judgment was rendered
against defendant Enrique T. Castro, in Civil Case No.
0103145 by the then Court of First Instance of Manila,
Branch XIX, to pay herein defendant-appellant
Radiowealth Finance Company (petitioner herein), the
sum of P22,350.35 with interest thereon at the rate of
16% per annum from November 2, 1975 until fully paid,
and the for the sum of P2,235.03 as attorney’s fees,
and to pay the costs. Upon the finality of the
judgment, a writ of execution was issued. Pursuant to
said writ, defendant provincial Sheriff Marietta E.
Eviota, through defendant Deputy Provincial Sheriff
Leopoldo Risma, levied upon and finally sold at public
auction the subject land that defendant Enrique Castro
had sold to appellee Manuelito Palileo on April 13,
1970. A certificate of sale was executed by the
Provincial Sheriff in favor of defendant-appellant
Radiowealth Finance Company, being the only bidder.
After the period of redemption has (sic) expired, a
deed of final sale was also executed by the same
Provincial Sheriff. Both the certificate of sale and the
deed of final sale were registered with the Registry of
Deeds." 3
Learning of what happened to the land, private
respondent Manuelito Palileo filed an action for
quieting of title over the same. After a trial on the
merits, the court a quo rendered a decision in his
favor. On appeal, the decision of the trial court was
affirmed. Hence, this petition for review on certiorari.
In its petition, Radiowealth Finance Company presents
the following errors:jgc:chanrobles.com.ph
"1. THE COURT OF APPEALS ERRED IN NOT FINDING
THAT THE DEED OF ABSOLUTE SALE (EXHIBIT B)
ALLEGEDLY EXECUTED BY ENRIQUE CASTRO IN FAVOR
OF APPELLEE MANUELITO PALILEO, WAS SIMULATED OR
FICTITIOUS.
2. THE COURT OF APPEALS ERRED IN NOT FINDING
APPELLEE MANUELITO PALILEO AS ADMINISTRATOR
ONLY OF THE DISPUTED PROPERTY; AND
3. THE COURT OF APPEALS ERRED IN NOT FINDING
DEFENDANT-APPELLANT RADIOWEALTH FINANCE
COMPANY OWNER OF THE DISPUTED PROPERTY BY
REASON OF THE CERTIFICATE OF SALE AND THE DEED
OF FINAL SALE WHICH WERE ALL REGISTERED IN THE
REGISTER OF DEEDS, HENCE, SUPERIOR TO THAT OF
THE DEED OF SALE IN POSSESSION OF MANUELITO
PALILEO, FOR BEING NOT REGISTERED." 4
As regards the first and second assigned errors, suffice
it to state that findings of fact of the Court of Appeals
are conclusive on this Court and will not be disturbed
unless there is grave abuse of discretion. The finding of
the Court of Appeals that the property in question was
already sold to private respondent by its previous
owner before the execution sale is evidenced by a deed
of sale. Said deed of sale is notarized and is presumed
authentic. There is no substantive proof to support
petitioner’s allegation that the document is fictitious
or simulated. With this in mind, We see no reason to
reject the conclusion of the Court of Appeals that
private respondent was not a mere administrator of the
property. That he exercised acts of ownership through
his mother also remains undisputed.chanrobles virtual
lawlibrary
Going now to the third assigned error which deals with
the main issue presented in the instant petition, We
observe that the Court of Appeals resolved the same in
favor of private respondent due to the following
reason; what the Provincial Sheriff levied upon and sold
to petitioner is a parcel of land that does not belong to
Enrique Castro, the judgment debtor, hence the
execution is contrary to the directive contained in the
writ of execution which commanded that the lands and
buildings belonging to Enrique Castro be sold to satisfy
the execution. 5
There is no doubt that had the property in question
been a registered land, this case would have been
decided in favor of petitioner since it was petitioner
that had its claim first recorded in the Registry of
Deeds. For, as already mentioned earlier, it is the act
of registration that operates to convey and affect
registered land. Therefore, a bona fide purchaser of a
registered land at an execution sale acquires a good
title as against a prior transferee, if such transfer was
unrecorded.
However, it must be stressed that this case deals with a
parcel of unregistered land and a different set of rules
applies. We affirm the decision of the Court of Appeals.
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 one’s favor does not give
him any light 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.chanrobles law library
The case of Carumba v. Court of Appeals 6 is a case in
point. It was held therein that Article 1644 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 35,
Rule 39 of the Revised Rules of Court, 7 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 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.chanrobles virtual lawlibrary
Applying this principle, the Court of Appeals correctly
held that the execution sale of the 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.
WHEREFORE, in view of the foregoing, the decision of
the Court of Appeals in CA-G.R. CV No. 10788 is hereby
AFFIRMED. No costs.
SO ORDERED.
Narvasa, Cruz, Griño-Aquino and Medialdea, JJ.,
concur.
G.R. No. 211175, January 18, 2017
ATTY. REYES G. GEROMO, FLORENCIO BUENTIPO, JR.,
ERNALDO YAMBOT AND LYDIA
BUSTAMANTE, Petitioners, v. LA PAZ HOUSING AND
DEVELOPMENT CORPORATION AND GOVERNMENT
SERVICE INSURANCE SYSTEM, Respondents.
DECISION
MENDOZA, J.:
Before the Court is a Petition for Review
on Certiorari under Rule 45 of the Rules of Court
assailing the September 26, 2013 Decision1 and the
January 29, 2014 Resolution2 of the Court of Appeals
(CA), in CA-G.R. SP No. 123139, which affirmed the
January 11, 2012 Decision3 of the Office of the
President (OP), dismissing the action for damages filed
by the petitioners before the Housing and Land
Regulatory Board (HLURB) against La Paz Housing and
Development Corporation (La Paz) and the Government
Service Insurance System (GSIS), on the ground of
breach of warranty against hidden defects.
The Antecedents
Petitioners Atty. Reyes G. Geromo (Geromo), Florencio
Buentipo, Jr. (Buentipo), Ernaldo Yambot (Yambot),
and Lydia Bustamante (Bustamante) acquired individual
housing units of Adelina 1-A Subdivision (Adelina) in San
Pedro, Laguna from La Paz, through GSIS financing, as
evidenced by their deeds of conditional sale.4 The
properties were all situated along the old Litlit Creek.
In 1987, Geromo, Bustamante and Yambot started
occupying their respective residential dwellings, which
were all located along Block 2 (Pearl Street) of the said
subdivision. Buentipo, on the other hand, opted to
demolish the turned-over unit and build a new
structure thereon. After more than two (2) years of
occupation, cracks started to appear on the floor and
walls of their houses. The petitioners, through the
President of the Adelina 1-A Homeowners Association,
requested La Paz, being the owner/developer, to take
remedial action. They collectively decided to construct
a riprap/retaining wall along the old creek believing
that water could be seeping underneath the soil and
weakening the foundation of their houses. Although La
Paz was of the view that it was not required to build a
retaining wall, it decided to give the petitioners
P3,000.00 each for expenses incurred in the
construction of the said riprap/retaining wall. The
petitioners claimed that despite the retaining wall, the
condition of their housing units worsened as the years
passed. When they asked La Paz to shoulder the
repairs, it denied their request, explaining that the
structural defects could have been caused by the 1990
earthquake and the renovations/improvements
introduced to the units that overloaded the foundation
of the original structures.
In 1998, the petitioners decided to leave their housing
units in Adelina.5
In May 2002, upon the request of the petitioners, the
Municipal Engineer of San Pedro and the Mines and
Geosciences Bureau (MGB) of the Department of
Environment and Natural Resources (DENR) conducted
an ocular inspection of the subject properties. They
found that there was "differential settlement of the
area where the affected units were constructed."6
On the basis thereof, Geromo filed a complaint for
breach of contract with damages against La Paz and
GSIS before the HLURB.7 On May 3, 2003, Buentipo,
Yambot and Bustamante filed a similar complaint
against La Paz and GSIS.8 They all asserted that La Paz
was liable for implied warranty against hidden defects
and that it was negligent in building their houses on
unstable land. Later on, the said complaints were
consolidated.
La Paz, in its Answer, averred that it had secured the
necessary permits and licenses for the subdivision
project; that the houses thereon were built in
accordance with the plans and specifications of the
National Building Code and were properly delivered to
the petitioners; that it did not violate Presidential
Decree (P.D.) No. 957 as it was issued compliance
documents, such as development permits, approved
alteration plan, license to sell, and certificate of
completion by HLURB; that the Philippine Institute of
Volcanology and Seismology (PHILVOLCS), based on the
serial photo interpretation of its field surveyors in
1996, reported that a portion of the topography of the
subdivision developed an active fault line; and lastly,
that there were unauthorized, irregular
renovation/alteration and additional construction in
the said units. Hence, it argued that it should not be
held liable for any damage incurred and that the same
should be for the sole account of the petitioners.9
In its defense, GSIS moved for the dismissal of the
complaint for lack of cause of action. It asserted that
the deeds of conditional sale were executed between
La Paz and the petitioners only and that its only
participation in the transactions was to grant loans to
the petitioners for the purchase of their respective
properties.10
The Decision of the HLURB Arbiter
In its August 9, 2004 Decision,11 the HLURB Arbiter
found La Paz liable for the structural damage on the
petitioners' housing units, explaining that the damage
was caused by its failure to properly fill and compact
the soil on which the houses were built and to maintain
a three (3) meter easement from the edge of the creek
as required by law. As to GSIS, the HLURB ruled that
there was no cogent reason to find it liable for the
structural defects as it merely facilitated the financing
of the affected units. The decretal portion of the
decision of the HLURB Arbiter reads:
WHEREFORE, premises considered, judgment is hereby
rendered as follows:
1) Ordering respondent La Paz Housing and Dev't. Corp.
to immediately undertake and cause the necessary
repairs/construction of the subject units to make it
suitable for human habitation for which it was
originally intended for;
2) In the alternative, if it is no longer possible for the
said units to be repaired to make it suitable for human
habitation, respondent LPHDC is hereby ordered to give
each complainant a substitute property of the same
nature and area, more or less, within the subdivision
project or in any project owned and developed by
LPHDC within the vicinity of San Pedro, Laguna;
3) Ordering respondent LPHDC to pay complainants:
a. the equivalent sum of what each complainant may
prove by documentary evidence such as receipts and
the like, as actual damages;
b. the sum of P15,000.00 each as moral damages;
c. the sum of P10,000.00 each as exemplary damages;
d. the sum of P10,000.00 as attorney's fees.;
e. cost of suit.
SO ORDERED.12
The Decision of the HLURB
Board of Commissioners
In its September 12, 2005 Decision,13 the HLURB Board
of Commissioners set aside the Arbiter's decision,
explaining that there was no concrete evidence
presented to prove that the houses of the petitioners
were indeed damaged by the failure of La Paz to
comply with the building standards or easement
requirements.
The petitioners moved for reconsideration, but the
HLURB Board of Commissioners denied their motion in
its Resolution,14 dated January 31, 2006.
The Decision of the OP
Aggrieved, the petitioners elevated the case to the OP
which initially dismissed the appeal on December 18,
2006 for late filing.15 The petitioners questioned the
dismissal before the CA and, in its Decision,16dated
March 31, 2009, the appellate court reversed the
resolution of the OP and ordered the latter to resolve
the appeal on the merits.
On January 11, 2012, the OP finally rendered a decision
dismissing the appeal for lack of merit. It found that on
the culpability of La Paz, the petitioners merely relied
on the report submitted by the team that conducted
the "ocular inspection" of the subject properties. It
wrote that "[w]hat is visual to the eye, though, is not
always reflective of the real cause behind, xxx other
than the ocular inspection, no investigation was
conducted to determine the real cause of damage on
the housing units." According to the OP, the petitioners
"did not even show that the plans, specifications and
designs of their houses were deficient and defective." It
concluded that the petitioners failed to show that La
Paz was negligent or at fault in the construction of the
houses in question or that improper filing and
compacting of the soil was the proximate cause of
damage.17
The CA Decision
Not in conformity, the petitioners appealed the OP
decision, dated January 11, 2012, before the CA. On
September 26, 2013, the CA affirmed the ruling of the
OP and found that the petitioners had no cause of
action against La Paz for breach of warranty against
hidden defects as their contracts were merely
contracts to sell, the titles not having been legally
passed on to the petitioners. It likewise ruled that La
Paz could not be held liable for damages as there was
not enough evidence on record to prove that it acted
fraudulently and maliciously against the petitioners.18
On January 29, 2014, the CA denied the motion for
reconsideration19 filed by the petitioners.
Hence, the present petition raising the following
ISSUES
The CA gravely erred in the issuance of the assailed
Decision and challenged Resolution which affirmed in
toto the Decision of the O.P. [dismissing the petition
for lack of merit] despite the conclusive:
A. Findings of the MGB, DENR, Engineer's Office, San
Pedro, Laguna and HLURB Director that petitioners'
housing are unfit for human habitation. Hence, they
are entitled to the protective mantle of PD 957
which was enacted to protect the subdivision lot
buyers against the commission of fraud or negligence
by the developer/contractor like La Paz.
B. The contractual relationship between the parties
is not governed by Articles 1477 or 1478, the New
Civil Code as the correct issue is the liability of La
Paz as the contractor/developer to the petitioners'
housing units declared by government agencies unfit
for human habitation. What governs are Art. 2176 in
relation to Art. 1170, 1173 and Art. 19 in relation to
Art. 20 and Art. 21, the Civil Code of the Philippines.
C. La Paz is liable for warranty against hidden
defects when it sold to the petitioners the housing
units declared unfit for human habitation. La Paz's
defense of force majeure will not lie.
D. GSIS' privity to the Contract (Deed of Conditional
Sale) executed by and between the petitioners and
La Paz for the housing loans which it financed makes
it jointly and severally liable for the petitioners'
defective housing units.20
The central issue in this case is whether La Paz should
be held liable for the structural defects on its implied
warranty against hidden defects.
The petitioners assert that La Paz was grossly negligent
when it constructed houses over a portion of the old
Litlit Creek. They claim that La Paz merely covered the
old creek with backfilled materials without properly
compacting the soil.21 They argue that they, or any
buyer for that matter, could not have known that the
soil beneath the cemented flooring of their housing
units were not compacted or leveled properly and that
the water beneath continuously seeped, causing the
soil foundation to soften resulting in the differential
settlement of the area.22
The Court's Ruling
After a judicious review of the records of this case, the
Court finds merit in the petition.
Under the Civil Code, the vendor shall be answerable
for warranty against hidden defects on the thing sold
under the following circumstances:
Art. 1561. The vendor shall be responsible for warranty
against the hidden defects which the thing sold may
have, should they render it unfit for the use for which
it is intended, or should they diminish its fitness for
such use to such an extent that, had the vendee been
aware thereof, he would not have acquired it or would
have given a lower price for it; but said vendor shall
not be answerable for patent defects or those which
may be visible, or for those which are not visible if the
vendee is an expert who, by reason of this trade or
profession, should have known them. (Emphasis
supplied)
Art. 1566. The vendor is responsible to the vendee for
any hidden faults or defects in the thing sold, even
though he was not aware thereof.
This provision shall not apply if the contrary has been
stipulated and the vendor was not aware of the hidden
faults or defects in the thing sold.
For the implied warranty against hidden defects to be
applicable, the following conditions must be met:
a. Defect is Important or Serious
i. The thing sold is unfit for the use which it is intended
ii. Diminishes its fitness for such use or to such an
extent that the buyer would not have acquired it had
he been aware thereof
b. Defect is Hidden
c. Defect Exists at the time of the sale
d. Buyer gives Notice of the defect to the seller within
reasonable time
Here, the petitioners observed big cracks on the walls
and floors of their dwellings within two years from the
time they purchased the units. The damage in their
respective houses was substantial and serious. They
reported the condition of their houses to La Paz, but
the latter did not present a concrete plan of action to
remedy their predicament. They also brought up the
issue of water seeping through their houses during
heavy rainfall, but again La Paz failed to properly
address their concerns. The structural cracks and water
seepage were evident indications that the soil
underneath the said structures could be unstable.
Verily, the condition of the soil would not be in the
checklist that a potential buyer would normally inquire
about from the developer considering that it is the
latter's prime obligation to ensure suitability and
stability of the ground.
Furthermore, on June 11, 2002, HLURB Director Belen
G. Ceniza, after confirming the cracks on the walls and
floors of their houses, requested MGB-DENR and the
Office of the Municipal Mayor to conduct a
geological/geohazard assessment and thorough
investigation on the entire Adelina subdivision.23 Thus,
in its August 8, 2002 Letter-Report,24 MGB reported
that there was evident ground settlement in the area
of the Litlit Creek where the houses of the petitioners
were located, probably "caused by hydrocompaction of
the backfill and or alluvial deposits xxx." The
Engineering Department of San Pedro Municipality, on
the other hand, confirmed the settlement affecting at
least six (6) houses along Block 2, Pearl St., including
that of Geromo, resulting in various structural
damage.25 Records reveal that a portion of Pearl Street
itself had sunk, cracking the concrete pavement of the
road. For several years, the petitioners had to endure
the conditions of their homes while La Paz remained
silent on their constant follow-ups. Eventually, they
had to leave their own dwellings due to safety
concerns.
Based on the said findings, the Court is of the
considered view that the petitioners were justified in
abandoning their dwellings as they were living therein
under unsafe conditions. With the houses uncared for,
it was no surprise that, by the time the case was filed
in 2004, they were in a worse condition.
La Paz remained unconcerned even after receiving
incident reports of structural issues from homeowners
and despite constant follow-ups from them for many
years. In fact, the petitioners took it upon themselves
to build a riprap/retaining wall due to La Paz's
indifference.
One of the purposes of P.D. No. 957, also known as The
Subdivision and Condominium Buyers' Protective
Decree, is to discourage and prevent unscrupulous
owners, developers, agents, and sellers from reneging
on their obligations and representations to the
detriment of innocent purchasers.26
Considering the nature of the damage sustained by the
structures, even without the findings of the local
governmental agency and the MGB-DENR, La Paz is still
liable under the doctrine of res ipsa loquitur. In the
case of D.M. Consunji, Inc. v. CA,27 the Court
expounded on this doctrine in this wise:
The concept of res ipsa loquitur has been explained in
this wise:
While negligence is not ordinarily inferred or
presumed, and while the mere happening of an
accident or injury will not generally give rise to an
inference or presumption that it was due to negligence
on defendants part, under the doctrine of res ipsa
loquitur, which means, literally, the thing or
transaction speaks for itself, or in one jurisdiction, that
the thing or instrumentality speaks for itself, the facts
or circumstances accompanying an injury may be such
as to raise a presumption, or at least permit an
inference of negligence on the part of the defendant,
or some other person who is charged with negligence.
xxx where it is shown that the thing or instrumentality
which caused the injury complained of was under the
control or management of the defendant, and that the
occurrence resulting in the injury was such as in the
ordinary course of things would not happen if those
who had its control or management used proper care,
there is sufficient evidence, or, as sometimes stated,
reasonable evidence, in the absence of explanation by
the defendant, that the injury arose from or was
caused by the defendant's want of care.
One of the theoretical bases for the doctrine is its
necessity, i.e., that necessary evidence is absent or not
available.
The res ipsa loquitur doctrine is based in part upon the
theory that the defendant in charge of the
instrumentality which causes the injury either knows
the cause of the accident or has the best opportunity of
ascertaining it and that the plaintiff has no such
knowledge, and therefore is compelled to allege
negligence in general terms and to rely upon the proof
of the happening of the accident in order to establish
negligence. The inference which the doctrine permits is
grounded upon the fact that the chief evidence of the
true cause, whether culpable or innocent, is practically
accessible to the defendant but inaccessible to the
injured person.
It has been said that the doctrine of res ipsa
loquitur furnishes a bridge by which a plaintiff, without
knowledge of the cause, reaches over to defendant
who knows or should know the cause, for any
explanation of care exercised by the defendant in
respect of the matter of which the plaintiff complains.
The res ipsa loquitur doctrine, another court has said,
is a rule of necessity, in that it proceeds on the theory
that under the peculiar circumstances in which the
doctrine is applicable, it is within the power of the
defendant to show that there was no negligence on his
part, and direct proof of defendants negligence is
beyond plaintiffs power. Accordingly, some courts add
to the three prerequisites for the application of the res
ipsa loquitur doctrine the further requirement that for
the res ipsa loquitur doctrine to apply, it must appear
that the injured party had no knowledge or means of
knowledge as to the cause of the accident, or that the
party to be charged with negligence has superior
knowledge or opportunity for explanation of the
accident.28
Under the said doctrine, expert testimony may be
dispensed with to sustain an allegation, of negligence if
the following requisites obtain: a) the event is of a kind
which does not ordinarily occur unless someone is
negligent; b) the cause of the injury was under the
exclusive control of the person in charge; and c) the
injury suffered must not have been due to any
voluntary action or contribution on the part of the
person injured.29
In this case, the subdivision plan/layout was prepared
and approved by La Paz. The actual excavation, filling
and levelling of the subdivision grounds were
exclusively done under its supervision and control.
There being no contributory fault on the part of the
petitioner, there can be no other conclusion except
that it was the fault of La Paz for not properly
compacting the soil, which used to be an old creek.
It should have taken adequate measures to ensure the
structural stability of the land before they started
building the houses thereon. The uneven street
pavements and visible cracks on the houses were
readily apparent yet La Paz did not undertake any
corrective or rehabilitative work.
La Paz's argument that the damage could have been
sustained because of the 1990 earthquake or through
the various enhancements undertaken by the
petitioners on their respective structures was not
substantiated. Records undeniably show that the
petitioners had raised their concerns as early as 1988 -
before the earthquake occurred in 1990.
On Damages
Due to the indifference and negligence of La Paz, it
should compensate the petitioners for the damages
they sustained. On actual damages, the standing rule is
that to be entitled to them, there must be pleading
and proof of actual damages suffered.
Actual damages, to be recoverable, must not only be
capable of proof, but must actually be proved with a
reasonable degree of certainty. Courts cannot simply
rely on speculation, conjecture or guesswork in
determining the fact and amount of damages. To
justify an award of actual damages, there must be
competent proof of the actual amount of loss,
credence can be given only to claims which are duly
supported by receipts.30
In this regard, the petitioners failed to prove with
concrete evidence the amount of the actual damages
they suffered. For this reason, the Court does not have
any basis for such an award.
Nevertheless, temperate or moderate damages may be
recovered when some pecuniary loss has been suffered
but its amount cannot, from the nature of the case, be
proved with certainty.31 The amount thereof is usually
left to the discretion of the courts but the same should
be reasonable, bearing in mind that temperate
damages should be more than nominal but less than
compensatory.32 In this case, the petitioners suffered
some form of pecuniary loss due to the impairment of
the structural integrity of their dwellings. In view of
the circumstances obtaining, an award of temperate
damages amounting to P200,000.00 is just and
reasonable.
The petitioners are also entitled to moral and
exemplary damages. Moral damages are not meant to
be punitive but are designed to compensate and
alleviate the physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and similar
harm unjustly caused to a person. To be entitled to
such an award, the claimant must satisfactorily prove
that he indeed suffered damages and that the injury
causing the same sprung from any of the cases listed in
Articles 221933 and 222034 of the Civil Code. Moreover,
the damages must be shown to be the proximate result
of a wrongful act or omission. Moral damages may be
awarded when the breach of contract was attended
with bad faith,35 or is guilty of gross negligence
amounting to bad faith.36Obviously, the uncaring
attitude of La Paz amounted to bad faith. For said
reason, the Court finds it proper to award moral
damages in the amount of P150,000.00.
Petitioners are also entitled to exemplary damages
which are awarded when a wrongful act is accompanied
by bad faith or when the guilty party acted in a
wanton, fraudulent, reckless, oppressive, or
malevolent manner"37 under Article 223238 of the Civil
Code. The indifference of La Paz in addressing the
petitioners' concerns and its subsequent failure to take
remedial measures constituted bad faith.
Considering that the award of moral and exemplary
damages is proper in this case, attorney's fees and cost
of the suit may also be recovered as provided under
Article 220839 of the Civil Code.40
GSIS not liable
As to the petitioners' prayer to make GSIS jointly and
severally liable with La Paz, the Court finds that there
is no legal basis to juridically bind GSIS because it was
never a party in the contracts between La Paz and the
petitioners. The housing loan agreements that the
petitioners entered into with GSIS were separate and
distinct from the purchase contracts they executed
with La Paz. GSIS merely agreed to pay the purchase
price of the housing unit that each petitioner
purchased from La Paz. It was merely the lender, not
the developer.
WHEREFORE, the petition is GRANTED. The August 9,
2004 Decision of the HLURB Arbiter is
hereby REINSTATED with MODIFICATIONS to read as
follows:
WHEREFORE, Judgment is hereby rendered
1) Ordering respondent La Paz Housing and
Development Corporation to immediately undertake
and cause the necessary repairs/construction of the
subject units to make it suitable for human habitation
for which it was originally intended;
2) In the alternative, if it would no longer possible for
the said units to be repaired to make it suitable for
human habitation, ordering respondent La Paz to give
each petitioner another property of the same nature
and size, more or less, within the subdivision project or
in any project owned and developed by La Paz in San
Pedro, Laguna, or pay the monetary equivalent
thereof; and

3) Ordering respondent La Paz to pay each of the

petitioners:

a. the sum of P200,000.00 as temperate

damages;
b. the sum of P150,000.00 as moral
damages;
c. the sum of P150,000.00 as exemplary
damages;
d. the sum of P100,000.00 as attorney's
fees; and
e. cost of suit.

All awards shall earn legal interest at the rate of six

percent (6%) per annum from the finality of judgment
until full payment, in line with recent jurisprudence. 41

SO ORDERED.

Carpio, (Chairperson), Peralta, Leonen, and Jardeleza,

JJ., concur.