A. A. ADDISON, plaintiff-appellant, vs.
MARCIANA FELIX and BALBINO two of the four parcels, and more than two-thirds of these two were found
TIOCO, defendants-appellees.
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
However, although we are not in agreement with the reasoning found in
to be in the possession of one Juan Villafuerte, who claimed to be the the decision appealed from, we consider it to be correct in its result. The
owner of the parts so occupied by him. The plaintiff admitted that the record shows that the plaintiff did not deliver the thing sold. With respect
purchaser would have to bring suit to obtain possession of the land (sten. to two of the parcels of land, he was not even able to show them to the
notes, record, p. 5). In August, 1914, the surveyor Santamaria went to purchaser; and as regards the other two, more than two-thirds of their area
Lucena, at the request of the plaintiff and accompanied by him, in order to was in the hostile and adverse possession of a third person.
survey the land sold to the defendant; but he surveyed only two parcels,
which are those occupied mainly by the brothers Leon and Julio
The Code imposes upon the vendor the obligation to deliver the thing sold.
Villafuerte. He did not survey the other parcels, as they were not
The thing is considered to be delivered when it is placed "in the hands and
designated to him by the plaintiff. In order to make this survey it was
possession of the vendee." (Civ. Code, art. 1462.) It is true that the same
necessary to obtain from the Land Court a writ of injunction against the
article declares that the execution of a public instruments is equivalent to
occupants, and for the purpose of the issuance of this writ the defendant, in
the delivery of the thing which is the object of the contract, but, in order
June, 1914, filed an application with the Land Court for the registration in
that this symbolic delivery may produce the effect of tradition, it is
her name of four parcels of land described in the deed of sale executed in
necessary that the vendor shall have had such control over the thing sold
her favor by the plaintiff. The proceedings in the matter of this application
that, at the moment of the sale, its material delivery could have been made.
were subsequently dismissed, for failure to present the required plans
It is not enough to confer upon the purchaser the ownership and
within the period of the time allowed for the purpose.
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
The trial court rendered judgment in behalf of the defendant, holding the tenancy of the purchaser by the sole will of the vendor, symbolic delivery
contract of sale to be rescinded and ordering the return to the plaintiff the through the execution of a public instrument is sufficient. But if,
P3,000 paid on account of the price, together with interest thereon at the notwithstanding the execution of the instrument, the purchaser cannot
rate of 10 per cent per annum. From this judgment the plaintiff appealed. 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
In decreeing the rescission of the contract, the trial judge rested his
yields to reality — the delivery has not been effected.
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 As Dalloz rightly says (Gen. Rep., vol. 43, p. 174) in his commentaries on
it is stipulated that ". . . within one year from the date of the certificate of article 1604 of the French Civil code, "the word "delivery" expresses a
title in favor of Marciana Felix, this latter may rescind the present contract complex idea . . . the abandonment of the thing by the person who makes
of purchase and sale . . . ." the delivery and the taking control of it by the person to whom the
delivery is made."
The appellant objects, and rightly, that the cross-complaint is not founded
on the hypothesis of the conventional rescission relied upon by the court, The execution of a public instrument is sufficient for the purposes of the
but on the failure to deliver the land sold. He argues that the right to abandonment made by the vendor; but it is not always sufficient to permit
rescind the contract by virtue of the special agreement not only did not of the apprehension of the thing by the purchaser.
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 supreme court of Spain, interpreting article 1462 of the Civil Code,
The wording of the clause, in fact, substantiates the contention. The one
held in its decision of November 10, 1903, (Civ. Rep., vol. 96, p. 560) that
year's deliberation granted to the purchaser was to be counted "from the
this article "merely declares that when the sale is made through the means
date of the certificate of title ... ." Therefore the right to elect to rescind the
of a public instrument, the execution of this latter is equivalent to the
contract was subject to a condition, namely, the issuance of the title. The
delivery of the thing sold: which does not and cannot mean that this
record show that up to the present time that condition has not been
fictitious tradition necessarily implies the real tradition of the thing sold,
fulfilled; consequently the defendant cannot be heard to invoke a right
for it is incontrovertible that, while its ownership still pertains to the
which depends on the existence of that condition. If in the cross-complaint
vendor (and with greater reason if it does not), a third person may be in
it had been alleged that the fulfillment of the condition was impossible for
possession of the same thing; wherefore, though, as a general rule, he who
reasons imputable to the plaintiff, and if this allegation had been proven,
purchases by means of a public instrument should be deemed . . . to be the
perhaps the condition would have been considered as fulfilled (arts. 1117,
possessor in fact, yet this presumption gives way before proof to the
1118, and 1119, Civ. Code); but this issue was not presented in the
contrary."
defendant's answer.
1
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.

2
LA FUERZA, INC., petitioner, vs. THE HON. COURT OF
APPEALS and ASSOCIATED ENGINEERING CO.,
INC., respondents.
Ordinary action for the recovery of a sum of money. In due course, the
Court of First Instance of Manila rendered judgment for defendant, La
Fuerza, Inc. — hereinafter referred to as La Fuerza — which was at first
affirmed by the Court of Appeals. On motion for reconsideration, the
latter, however, set aside its original decision and sentenced La Fuerza to
pay to the plaintiff, Associated Engineering Co., — hereinafter referred to
as the Plaintiff — the sum of P8,250.00, with interest at the rate of 1% per
month, from July, 1960 until fully paid, plus P500 as attorney's fees and
the costs. Hence, this Petition for review on certiorari.
FACTS:
The plaintiff (Associated Engineering, Co., Inc.) is a corporation engaged
in the manufacture and installation of flat belt conveyors. The defendant
(La Fuerza, Inc.) is also a corporation engaged in the manufacture of
wines. Sometime in the month of January, 1960, Antonio Co, the manager
of the plaintiff corporation, who is an engineer, called the office of the
defendant located at 399 Muelle de Binondo, Manila and told Mariano
Lim, the President and general manager of the defendant that he had just
visited the defendant's plant at Pasong Tamo, Makati, Rizal and was
impressed by its size and beauty but he believed it needed a conveyor
system to convey empty bottles from the storage room in the plant to the
bottle washers in the production room thereof. He therefore offered his
services to manufacture and install a conveyor system which, according to
him, would increase production and efficiency of his business. The
president of the defendant corporation did not make up his mind then but
suggested to Antonio Co to put down his offer in writing. Effectively, on
February 4, 1960, marked as Exhibit A in this case. Mariano Lim did not
act on the said offer until February 11, 1960, when Antonio Co returned to
inquire about the action of the defendant on his said offer. The defendants
president and general manager then expressed his conformity to the offer
made in Exhibit A by writing at the foot thereof under the word
"confirmation" his signature. He caused, however, to be added to this offer
at the foot a note which reads: "All specifications shall be in strict
accordance with the approved plan made part of this agreement hereof." A
few days later, Antonio Co made the demand for the down payment of
P5,000.00 which was readily delivered by the defendant in the form of a
check for the said amount. After that agreement, the plaintiff started to
prepare the premises for the installations of the conveyor system by
digging holes in the cement floor of the plant and on April 18, 1960, they
delivered one unit of 110' 26" wide flat belt conveyor, valued at
P3,750.00, and another unit measuring 190' and 4" wide flat conveyor,
valued at P4,500.00, or a total of P13,250.00. Deducting the down
payment of P5,000.00 from this value, there is a balance, of P8,250.00 to
be paid by the defendant upon the completion of the installation, Exhibit
B.
The work went under way during the months of March and
April, during which time the president and general manager of
the defendant corporation was duly apprised of the progress of
the same because his plant mechanic, one Mr. Santos, had kept
him informed of the installation for which he gave the go
signal. It seems that the work was completed during the month
of May, 1960. Trial runs were made in the presence of the
president and general manager of the defendant corporation,
Antonio Co, the technical manager of the plaintiff, and some
other people. Several trial runs were made then totalling about
five. These runs were continued during the month of June
where about three trial runs were made and, lastly, during the
month of July, 1960.
As a result of this trial or experimental runs, it was discovered,
according to the defendant's general manager, that the conveyor
system did not function to their satisfaction as represented by
the technical manager of the plaintiff Antonio Co for the reason
that, when operated several bottles collided with each other,
some jumping off the conveyor belt and were broken, causing
considerable damage. It was further observed that the flow of
the system was so sluggish that in the opinion of the said
general manager of the defendant their old system of carrying
the bottles from the storage room to the washers by hand
carrying them was even more efficient and faster.
After the last trial run made in the month of July and after the
plaintiff's technical manager had been advised several times to
make the necessary and proper adjustments or corrections in
order to improve the efficiency of the conveyor system, it
seems that the defects indicated by the said president and
general manager of the defendant had not been remedied so
that they came to the parting of the ways with the result that
when the plaintiff billed the defendant for the balance of the
contract price, the latter refused to pay for the reason that
according to the defendant the conveyor system installed by the
plaintiff did not serve the purpose for which the same was
manufactured and installed at such a heavy expense. The flat
belt conveyors installed in the factory of the defendant are still
there....
xxx     xxx     xxx
On March 22, 1961, the contractor commenced the present action to
recover the sums of P8,250, balance of the stipulated price of the
aforementioned conveyors, and P2,000, as attorney's fees, in addition to
the costs.
In its answer to the complaint, La Fuerza alleged that the "conveyors
furnished and installed by the plaintiff do not meet the conditions and
warrantings" (warranties?) of the latter, and set up a counterclaim for the
P5,000 advanced by La Fuerza, which prayed that the complaint be
dismissed; that its contract with the plaintiff be rescinded; and that
plaintiff be sentenced to refund said sum of P5,000 to La Fuerza, as well
as to pay thereto P1,000 as attorney's fees, apart from the costs.
After appropriate proceedings, the Court of First Instance of Manila
rendered a decision the dispositive part of which reads: WHEREFORE,
judgment is hereby rendered rescinding the contract entered into by the
parties in this case, marked as Exhibit A, and ordering the plaintiff to
refund or return to the defendant the amount of P5,000.00 which they had
received as down payment, and the costs of this action. On the other hand,
defendant is ordered to permit the plaintiff to remove the flat belt
conveyors installed in their premises.
As above indicated, this decision was affirmed by the Court of Appeals,
which, on motion for reconsideration of the plaintiff, later set aside its
original decision and rendered another in plaintiff's favor, as stated in the
opening paragraph hereof.
The appealed resolution of the Court of Appeals was, in effect, based upon
the theory of prescription of La Fuerza's right of action for rescission of its
contract with the plaintiff, for — in the language of said resolution —
"Article 1571 of the Civil Code provides that an action to rescind 'shall be
barred after six months from delivery of the thing sold'", and, in the case at
bar, La Fuerza did not avail of the right to demand rescission until the
filing of its answer in the Court of First Instance, on April 17, 1961,
or over ten (10) months after the installation of the conveyors in question
had been completed on May 30, 1960.
La Fuerza assails the view taken by the Court of Appeals, upon the
ground: 1) that there has been, in contemplation of law, no delivery of the
conveyors by the plaintiff; and 2) that, assuming that there has been such
delivery, the period of six (6) months prescribed in said Art. 1571 refers to
the "period within which" La Fuerza may "bring an action to demand
compliance of the warranty against hidden defects", not the action for
rescission of the contract. Both grounds are untenable.
3
With respect to the first point, La Fuerza maintains that plaintiff is deemed xxx     xxx     xxx
not to have delivered the conveyors, within the purview of Art. 1571, until
it shall have complied with the conditions or requirements of the contract
Among the "ten articles" referred to in this provision, are Articles 1566
between them — that is to say, until the conveyors shall meet La Fuerza's
and 1567, reading:
"need of a conveyor system that would mechanically transport empty
bottles from the storage room to the bottle workers in the production room
thus increasing the production and efficiency" of its business-and La Art. 1566. The vendor is responsible to the vendee for any hidden faults or
Fuerza had accepted said conveyors. 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.
On this point, the Court of Appeals had the following to say:

Art. 1567. In the cases of articles 1561, 1562, 1564, 1565 and 1566, the
Article 1571 of the Civil Code provides that an action to rescind 'shall be
vendee may elect between withdrawing from the contract and demanding a
barred after six months, from delivery of the thing sold". This article is
proportionate reduction of the price, with damages in either case.
made applicable to the case at bar by Article 1714 which provides that "the
pertinent provisions on warranty of title against hidden defect in a contract
of sale" shall be applicable to a contract for a piece of work. Considering xxx     xxx     xxx
that Article 1571 is a provision on sales, the delivery mentioned therein
should be construed in the light of the provisions on sales. Article 1497
Pursuant to these two (2) articles, if the thing sold has hidden faults or
provides that the thing sold shall be understood as delivered when it is
defects — as the conveyors are claimed to have — the vendor — in the
placed in the control and possession of the vendee. Therefore, when the
case at bar, the plaintiff — shall be responsible therefor and the vendee —
thing subject of the sale is placed in the control and possession of the
or La Fuerza, in the present case — "may elect between withdrawing from
vendee, delivery is complete. Delivery is an act of the vendor. Thus, one
the contract and demanding a proportional reduction of the price, with
of the obligations of the vendor is the delivery of the thing sold (Art.
damages in either case." In the exercise of this right of election, La Fuerza
1495). The vendee has nothing to do with the act of delivery by the
had chosen to withdraw from the contract, by praying for its rescission;
vendor. On the other hand, acceptance is an obligation on the part of the
but the action therefor — in the language of Art. 1571 — "shall be barred
vendee (Art. 1582). Delivery and acceptance are two distinct and separate
after six months, from the delivery of the thing sold." The period of four
acts of different parties. Consequently, acceptance cannot be regarded as a
(4) years, provided in Art. 1389 of said Code, for "the action to claim
condition to complete delivery.
rescission," applies to contracts, in general, and must yields, in the instant
case, to said Art. 1571, which refers to sales in particular.
xxx     xxx     xxx
Indeed, in contracts of the latter type, especially when goods, merchandise,
We find no plausible reason to disagree with this view. Upon the machinery or parts or equipment thereof are involved, it is obviously wise
completion of the installation of the conveyors, in May, 1960, particularly to require the parties to define their position, in relation thereto, within the
after the last trial run, in July 1960, La Fuerza was in a position to decide shortest possible time. Public interest demands that the status of the
whether or not it was satisfied with said conveyors, and, hence, to state relations between the vendor and the vendee be not left in a condition of
whether the same were a accepted or rejected. The failure of La Fuerza to uncertainty for an unreasonable length of time, which would be the case, if
express categorically whether they accepted or rejected the conveyors does the lifetime of the vendee's right of rescission were four (4) years.
not detract from the fact that the same were actually in its possession and
control; that, accordingly, the conveyors had already been delivered by the
plaintiff; and that, the period prescribed in said Art. 1571 had begun to THE appealed resolution of the Court of Appeals is hereby affirmed,
run. with costs against appellant, La Fuerza, Inc.

With respect to the second point raised by La Fuerza, Art. 1571 of the
Civil Code provides:

Actions arising from the provisions of the preceding ten articles shall be
barred after six months, from the delivery of the thing sold.

4
FABIO CAHAYAG and CONRADO RIVERA, Petitioners, vs. COMMERCIAL
CREDIT CORPORATION, represented by its President, LEONARDO B.
ALEJANDRO; TERESITA T. QUA, assisted by her husband ALFONSO MA.
QUA; and the REGISTER OF DEEDS OF LAS PINAS, METRO MANILA,
DISTRICT IV, Respondents.
DULOS REALTY & DEVELOPMENT CORPORATION, represented by its
President, JUANITO C. DULOS; and MILAGROS E. ESCALONA, and
ILUMINADA D. BALDOZA, Petitioners, vs. COMMERCIAL CREDIT
CORPORATION, represented by its President, LEONARDO B.
ALEJANDRO; TERESITA T. QUA, assisted by her husband ALFONSO MA.
QUA; and the REGISTER OF DEEDS OF LAS PINAS, METRO MANILA,
DISTRICT IV, Respondents.
FACTS:
Petitioner Dulos Realty was the registered owner of certain residential lots
covered by Transfer Certificate of Title (TCT) Nos. S-39767, S-39775, S-
28335, S-39778 and S-29776, located at Airmen's Village Subdivision,
Pulang Lupa II, Las Pinas, Metro Manila.
On 20 December 1980, Dulos Realty obtained a loan from respondent
CCC in the amount of P300,000. To secure the loan, the realty executed a
Real Estate Mortgage over the subject properties in favor of respondent.
The mortgage was duly annotated on the certificates of title on 3 February
1981.5
On 29 March 1981, Dulos Realty entered into a Contract to Sell with
petitioner Cahayag over the lot covered by TCT No. S-39775.6
On 12 August 1981, Dulos Realty entered into another Contract to Sell,
this time with petitioner Rivera over the lot covered by TCT No. S-28335.7
Dulos Realty defaulted in the payment of the mortgage loan, prompting
respondent CCC to initiate extrajudicial foreclosure proceedings. On 17
November 1981, the auction sale was held, with respondent CCC
emerging as the highest bidder.8
On 23 November 1981, a Certificate of Sale covering the properties,
together with all the buildings and improvements existing thereon, was
issued in favor of CCC. 9 The Certificate of Sale was annotated on the
corresponding titles to the properties on 8 March 1982.10
Thereafter, or on 13 January 1983, Dulos Realty entered into a Contract to
Sell with petitioner Escalona over the house and lot covered by TCT No.
S-29776.11
On 10 November 1983, an Affidavit of Consolidation in favor of
respondent CCC dated 26 August 1983 was annotated on the
corresponding titles to the properties.12 By virtue of the affidavit, TCT
Nos. S-39775, S-28335, S-39778 and S-29776 - all in the name of Dulos
Realty - were cancelled and TCT Nos. 74531, 74532, 74533 and 74534
were issued in the name of respondent CCC on the same day.13
On 10 December 1983, Dulos Realty entered into a Deed of Absolute Sale
with petitioner Baldoza over the property covered by TCT No. S-39778,
together with the improvements existing thereon.14
On 21 December 1983, respondent CCC, through a Deed of Absolute Sale,
sold to respondent Qua the same subject properties, now covered by TCT
Nos. 74531, 74532, 74533 and 74534, which were in the name of
respondent CCC. The sale was duly annotated on the corresponding titles
to the properties on 5 January 1984.15
Accordingly, TCT Nos. 74531, 74532, 74533 and 74534 were cancelled;
and TCT Nos. 77012, 77013, 77014 and 770015 were issued to respondent
Qua on 5 January 1984.16
Subsequently, respondent Qua filed ejectment suits individually against
petitioners Du1os Realty,17 Cahayag,18Esca1ona,19 and Rivera20 before the
Metropolitan Trial Court (MTC) of Las Piñas, Metro Manila.
The MTC rendered Decisions in favor of respondent Qua. It ordered Dulos
Realty, Escalona, Cahayag, and Rivera to vacate the properties.
On 8 March 1988, the MTC issued a Writ of Execution to enforce its
Decision dated 20 October 1986 in Civil Case No. 2257 against Dulos
Realty "and all persons claiming right under defendant." 21 The subject of
the writ of execution was Lot 11 Block II,22 which was the lot sold by
Dulos Realty to petitioner Baldoza.
COMPLAINT FOR ANNULMENT OF SHERIFF'S SALE AND OTHER
DOCUMENTS
On 5 December 1988, petitioners filed a Complaint against respondents
for the "Annulment of Sherifff’s Sale and Other Documents with
Preliminary Injunction and/or Temporary Restraining Order" before the
RTC of Makati City, where it was docketed as Civil Case No. 88-2599.23
The Complaint24 alleged that petitioners Cahayag, Rivera, Escalona and
Baldoza were owners of the properties in question by virtue of Contracts
of Sale individually executed in their favor, and that the Real Estate
Mortgage between Dulos Realty and defendant-appellant CCC did not
include the houses, but merely referred to the lands themselves. 25 Thus, the
inclusion of the housing units in the Deed of Sale executed by respondent
CCC in favor of respondent Qua was allegedly illegal.26
Respondents failed to file an answer within the reglementary period.
Subsequently, they were declared in default. They appealed the order of
default but their appeal was dismissed on 8 February 1990.27
On 6 July 1992, the RTC rendered a Decision, 28 which ruled that the
houses were not included in the Real Estate Mortgage; and that the
foreclosure of the mortgage over the subject lots, as well as the housing
units, was not valid. 29 The trial court held that this conclusion was
established by the plaintiffs' evidence, which went unrefuted when
defendants were declared in default.30
THE CA DECISION
Respondents proceeded to the CA, where they secured a favorable ruling.
In its Decision rendered on 2 November 2004,31 the appellate court held
that the extrajudicial foreclosure was valid, since the Real Estate Mortgage
clearly included the buildings and improvements on the lands, subject of
the mortgage.
After establishing the inclusion of the housing units in the Real Estate
Mortgage, the CA determined the rights of the buyers in the Contracts to
Sell/Contract of Sale vis-a-vis those of the mortgagee and its successor-in-
interest.
In the cases of petitioners Cahayag, Rivera and Escalona, the CA pointed
to lack of evidence establishing full payment of the price. As supporting
reason, it stated that even if there were full payment of the purchase price,
the mortgagee and the latter's successor-in-interest had a better right over
the properties. The CA anchored this conclusion on the fact that the Real
Estate Mortgage was annotated at the back of the titles to the subject
properties before the execution of the Contracts to Sell. It said that the
annotation constituted sufficient notice to third parties that the property
was subject to an encumbrance. With the notice, Cahayag, Rivera and
Escalona should have redeemed the properties within the one-year
5
redemption period, but they failed to do so. Consequently, the right of
respondent CCC over the properties became absolute, and the transfer to
respondent Qua was valid.
As regards Baldoza, though the case involved a Contract of Sale, and not a
mere Contract to Sell, the CA declared the transaction null and void on the
purported ground that Dulos was no longer the owner at the time of the
sale.
The CA accordingly reversed and set aside the RTC Decision, dismissed
the case for lack of merit, and ordered petitioners to surrender possession
of the properties to respondent Qua.
THE RULE 45 PETITIONS
On 30 May 2005, petitioners Cahayag and Rivera filed their Rule 45
Petition with this Court.32 For their part, petitioners Dulos Realty, Baldoza
and Escalona filed their Rule 45 Petition on 19 July 2005.33
In the Petition under G.R. No. 168357, it is argued, among others, that the
Deed of Absolute Sale in favor of petitioner Baldoza was the culmination
of a Contract to Sell between her and Dulos Realty. She claims that the
Contract to Sell, marked as Exhibit "L" during the trial, was executed on
10 January 1979, which preceded the execution of the Deed of Real Estate
Mortgage and the registration of the mortgage on 3 February 1981.34 After
full payment of the price under the Contract to Sell, Dulos Realty executed
the Deed of Absolute Sale. In other words, Baldoza is arguing that she has
a better title to the property than respondent Qua since the unregistered
contract to sell in her favor was executed before the registration of the
mortgage. But the CA ignored Exhibit "L" and merely stated that there
was only a Deed of Absolute Sale in favor of Baldoza.
THE ARGUMENTS
The arguments of petitioners, as stated in their respective Memoranda, are
summarized as follows:
Coverage of the Mortgage
Initially, petitioners attempt to stave off the effects of the extra judicial
foreclosure by attacking the coverage of the Real Estate Mortgage with
respect to its subject-matter.35 They draw attention to the fact that the List
of Properties attached to the Deed of Real Estate Mortgage refers merely
to the lands themselves and does not include the housing units found
thereon.36 Petitioners also contend that doubts should be resolved against
the drafter inasmuch as the agreement is a contract of adhesion, having
been prepared by the mortgagee.37
As backup argument for the theory that the houses are outside the
coverage of the mortgage agreement, petitioners argue that the
improvements were not owned by Dulos Realty, the mortgagor, but by its
buyers under the Contracts to Sell and Contracts of Sale; hence, those
improvements are excluded from the coverage of the real estate mortgage.
Validity of the Mortgage
Petitioners next challenge the validity of the foreclosure sale on the ground
that the mortgage executed by the mortgagor (petitioner Dulos Realty) and
the mortgagee (respondent CCC) was null and void.38 Petitioners claim
that Dulos Realty was no longer the owner of the properties it had
mortgaged at the time of the execution of the mortgage contract, as they
were sold under existing Contracts to Sell and Deed of Absolute Sale.39
Petitioners Cahayag, Rivera and Escalona lean on the unregistered
Contracts to Sell they had individually executed with Dulos Realty as
vendor. For his part, petitioner Baldoza points to the Deed of Absolute
Sale executed by Dulos Realty in his favor.
Better Right over the Properties
Petitioners claim that respondent CCC cannot claim to be a mortgagee in
good faith, since it is a financial institution. 40 As such, respondent CCC
knew that it was dealing with a subdivision developer, which was in the
business of selling subdivision lots. 41 Dela Merced v. GSIS42 which states
that the general rule that a mortgagee need not look beyond the title cannot
benefit banks and other financial institutions, as a higher due diligence
requirement is imposed on them.
They also raise the contention that lack of full payment of the purchase
price under the Contracts to Sell on the part of Cahayag, Rivera and
Escalona was due to respondent Qua's "harassment and unlawful
actuations.43
Petitioners further state that respondent Qua is a mere transferee of
respondent CCC and that, like a stream, she cannot rise higher than her
source. They also argue that Qua is not an innocent purchaser for value,
since she is a former investor of respondent CCC and one of its principal
stockholders.44
No Prior Written HLURB Approval of the Mortgage
Finally, petitioners allege that the mortgage contract in this case was not
approved by the BLURB, which violates Section 18 of P.D. 957 45 and
results in the nullity of the mortgage.46
Exhibit "L" as Evidence of a Prior Contract to Sell
The matter of CA ignoring Exhibit "L" as evidence of a prior unregistered
Contract to Sell was not included in the Memoranda of petitioners.
THE ISSUES
1. Whether the real mortgage covers the lands only, as enumerated in the
Deed of Real Estate Mortgage or the housing units as well;
2. Whether Dulos Realty was the owner of the properties it had mortgaged
at the time of its execution in view of the various Contracts to Sell and
Deed of Absolute Sale respectively executed in favor of petitioners
Cahayag, Rivera, Escalona and Cahayag;
3. Who, as between petitioners-buyers and respondent Qua, has a better
right over the properties?
4. Whether the Deed of Absolute Sale in favor of Baldoza was not
preceded by a Contract to Sell and full payment of the purchase price; and
5. Whether the mortgage is void on the ground that it lacked the prior
written approval of the HLURB.
OUR RULING: We deny the Petition.
1. Attack on the Subject-matter of the Real Estate Mortgage
It is true that the List of Properties attached to the Deed of Real Estate
Mortgage refers merely to the lands themselves and does not include the
housing units found thereon. A plain reading of the Real Estate Mortgage,
however, reveals that it covers the housing units as well. We quote the
pertinent provision of the agreement:
The MORTGAGOR has transferred and conveyed and, by these presents,
do hereby transfer and convey by way of FIRST MORTGAGE unto the
MORTGAGEE, its successors and assigns the real properties described in
the list appearing at the back of this document and/or in a supplemental
document attached hereto as Annex "A" and made and integral part
hereof, together with all the buildings and/or other improvements now
6
existing or which may hereafter be place[d] or constructed thereon, all
of which the MORTGAGOR hereby warrants that he is the absolute owner
and exclusive possessor thereof, free from all liens and encumbrances of
whatever kind and nature. xxx.47 (Emphasis Ours)
Thus, the housing units would fall under the catch-all phrase "together
with all the buildings and/or other improvements now existing or
which may hereafter be placed or constructed thereon."
The contra proferentem rule finds no application to this case. The doctrine
provides that in the interpretation of documents, ambiguities are to be
construed against the drafter.48 By its very nature, the precept assumes the
existence of an ambiguity in the contract, which is why contra
proferentem is also called the ambiguity doctrine.49 In this case, the Deed
of Real Estate Mortgage clearly  establishes that the improvements found
on the real properties listed therein are included as subject-matter of the
contract. It covers not only the real properties, but the buildings and
improvements thereon as well.
2. Challenge to the Foreclosure Sale with Regard to the
Ownership of the Mortgaged Properties
To begin with, the Contracts to Sell and Deed of Absolute Sale could not
have posed an impediment at all to the mortgage, given that these
contracts had yet to materialize when the mortgage was constituted. They
were all executed after  the constitution of the Real Estate Mortgage on
20 December 1980.
As regards Cahayag, the Contract to Sell in his favor was executed on 29
March 1981, more than three months after the execution of the mortgage
contract.50 This is taken from the Contract to Sell itself, which forms part
of the records of this case.51
At this juncture, we note that the CA, for reasons unknown, specified 29
September 1980,52 and not 29 March 1981, as the date of the execution of
the Contract to Sell in its Decision. Respondent Qua has raised this point
in her Memorandum filed with us. This Court cannot be bound by the
factual finding of the CA with regard to the date of the Contract to Sell in
favor of Cahayag. The general rule that the Court is bound by the factual
findings of the CA must yield in this case, as it falls under one of the
exceptions: when the findings of the CA are contradicted by the evidence
on record.53 In this case, there is nothing in the records to support the CA's
conclusion that the Contract to Sell was executed on 29 September 1980.
The evidence on record, however, reveals that the correct date is 29 March
1981.
In the case of petitioner Rivera, the corresponding Contract to Sell in his
favor was executed only on 12 August 1981, or almost eight months after
the perfection of the mortgage contract on 20 December 1980.
Lastly, Dulos Realty executed the Deed of Absolute Sale in favor of
petitioner Baldoza on 10 December 1983, which was almost three years
from the time the mortgage contract was executed on 20 December 1980.
There was neither a contract to sell nor a deed of absolute sale to speak of
when the mortgage was executed.
Petitioners equate a contract to sell to a contract of sale, in which the
vendor loses ownership over the property upon its delivery. 54 But a
contract to sell, standing alone, does not transfer ownership. 55 At the point
of perfection, the seller under a contract to sell does not even have the
obligation to transfer ownership to the buyer.56 The obligation arises only
when the buyer fulfills the condition: full payment of the purchase
price.57 In other words, the seller retains ownership at the time of the
execution of the contract to sell.58
There is no evidence to show that any of petitioners Cahayag, Rivera and
Escalona were able to effect full payment of the purchase price, which
could have at least given rise to the obligation to transfer ownership.
Petitioners Cahayag and Rivera even admit that they defaulted on their
obligations under their respective Contracts to Sell, although they attribute
the default to respondent Qua's "harassment and unlawful
actuations."59 The statement, though, was a mere allegation that was left
unsubstantiated and, as such, could not qualify as proof of anything.60
3. Who Has a Better Right over the Properties
Registration of the mortgage hound the buyers under the Contracts to
Sell
Registration of the mortgage establishes a real right or lien in favor of the
mortgagee, as provided by Articles 1312 61and 212662 of the Civil
Code.63 Corollary to the rule, the lien has been treated as "inseparable from
the property inasmuch as it is a right in rem." 64 In other words, it binds
third persons to the mortgage.
The purpose of registration is to notify persons other than the parties to the
contract that a transaction concerning the property was entered
into.65 Ultimately, registration, because it provides constructive notice to
the whole world, makes the certificate of title reliable, such that third
persons dealing with registered land need only look at the certificate to
determine the status of the property.66
In this case, the Real Estate Mortgage over the property was registered on
3 February 1981. On the other hand, the Contracts to Sell were all
executed after the registration of the mortgage. The Contract to Sell in
favor of petitioner Cahayag was executed on 29 March 1981, or almost
two months after  the registration of the mortgage. The corresponding
Contract to Sell in favor of Rivera was executed only on 12 August 1981,
roughly six months after the registration of the mortgage contract. Lastly,
the Contract to Sell in favor of Escalona was executed on 13 January 1983,
or nearly two years after the registration of the mortgage on 3 February
1981.
Consequently, petitioners Cahayag, Rivera and Escalona, were bound to
the mortgage executed between mortgagor Dulos Realty and mortgagee
CCC, by virtue of its registration. Definitely, the buyers each had
constructive knowledge of the existence of the mortgage contract when
they individually executed the Contracts to Sell.
Dela Merced v. GSIS not applicable
Petitioner invokes the above case. Dela Merced involved a clash between
an unrecorded contract to sell and a registered mortgage contract. The
contract to sell between the mortgagors (Spouses Zulueta) and the buyer
(Francisco Dela Merced) was executed before the former's constitution of
the mortgage in favor of GSIS. Because the Zuluetas defaulted on their
loans, the mortgage was foreclosed; the properties were sold at public
auction to GSIS as the highest bidder; and the titles were consolidated
after the spouses' failure to redeem the properties within the one-year
redemption period. GSIS later sold the contested lot to Elizabeth D.
Manlongat and Ma. Therese D. Manlongat. However, Dela Merced was
able to fully pay the purchase price to Spouses Zulueta, who executed a
Deed of Absolute Sale in his favor prior to the foreclosure sale.
This Court stated therein the general rule that the purchaser is not required
to go beyond the Torrens title if there is nothing therein to indicate any
cloud or vice in the ownership of the property or any encumbrance
thereon. The case nonetheless provided an exception to the general rule.
The exception arises when the purchaser or mortgagee has knowledge of a
defect in the vendor's title or lack thereof, or is aware of sufficient facts to
induce a reasonably prudent person to inquire into the status of the
property under litigation. The Court applied the exception, taking into
consideration the fact that GSIS, the mortgagee, was a financing
institution.
But Dela Merced is not relevant here. Dela Merced involved a Contract to
Sell that was executed prior to the mortgage, while the Contracts to Sell in
this case were all executed after the constitution and registration of the
mortgage.
7
In Dela Merced,  since GSIS had knowledge of the contract to sell, this
knowledge was equivalent to the registration of the Contract to Sell.
Effectively, this constitutes registration canceled out the subsequent
registration of the mortgage. In other words, the buyer under the Contract
to Sell became the- first to register. Following the priority in time rule in
civil law, the lot buyer was accorded preference or priority in right in Dela
Merced.
In this case, the registration of the mortgage, which predated the Contracts
to Sell, already bound the buyers to the mortgage. Consequently, the
determination of good faith does not come into play.
Dela Merced  materially differs from this case on another point. The
Contract to Sell in favor of Dela Merced was followed by full payment of
the price and execution of the Deed of Absolute Sale. In this case, the
Contract to Sell in favor of each of petitioners Cahayag, Rivera and
Escalona, is not coupled with full payment and execution of a deed of
absolute sale.
This case also needs to be distinguished from Luzon Development Bank v.
Enriquez.67 In that case, the unregistered Contract to Sell was
executed after the execution of the mortgage. Instead of resorting to
foreclosure, the owner/developer and the bank entered into a dacion en
pago.  The Court declared that the bank was bound by the Contract to Sell
despite the non-registration of the contract. It reasoned that the bank
impliedly assumed the risk that some of the units might have been covered
by contracts to sell. On the other hand, the Court pronounced the mortgage
to be void, as it was without the approval of the Housing and Land Use
Regulatory Board (HLURB). The Court consequently ordered the unit
buyer in that case to pay the balance to the bank, after which the buyer was
obliged to deliver a clean title to the property.
There are points of distinction between the case at bar and Luzon
Development Bank. First, there is a definite finding in Luzon Development
Bank that the mortgage was without prior HLURB approval, rendering the
mortgage void. In the present case, as will be discussed later, there is no
proof from the records on whether the HLURB did or did not approve the
mortgage. Second, Luzon Development Bank did not even reach the
foreclosure stage of the mortgage. This case, however, not only reached
the foreclosure stage; it even went past the redemption period,
consolidation of the title in the owner, and sale of the property by the
highest bidder to a third person.
The first distinction deserves elaboration. The absence of prior written
approval of the mortgage by the HLURB rendered it void. This effectively
wiped out any discussion on whether registration bound the installment
buyer. In fact, Luzon Development Bank did not even bother to state
whether the mortgage was registered or not. More important, the tables
were turned when Luzon Development Bank  held that the bank was bound
to the Contract to Sell in view of the latter's constructive notice of the
Contract to Sell. Stated differently, the actually unregistered Contract to
Sell became fictionally registered, making it binding on the bank.
In this case, on account of its registration, and the fact that the contracts
were entered into after it, the mortgage is valid even as to petitioners.
No Redemption within One Year from the Foreclosure Sale
When it comes to extrajudicial foreclosures, the law68 grants mortgagors or
their successors-in-interest an opportunity to redeem the property within
one year from the date of the sale. The one-year period has been
jurisprudentially held to be counted from the registration of the foreclosure
sale with the Register of Deeds.69 An exception to this rule has been
carved out by Congress for juridical mortgagors. Section 47 of the General
Banking Law of 2000 shortens the redemption period to within three
months after the foreclosure sale or until the registration of the certificate
of sale, whichever comes first.70 The General Banking Law of 2000 came
into law on 13 June 2000.
If the redemption period expires and the mortgagors or their successors-in-
interest fail to redeem the foreclosed property, the title thereto is
consolidated in the purchaser.71 The consolidation confirms the purchaser
as the owner of the property; concurrently, the mortgagor-for failure to
exercise the right of redemption within the period-loses all interest in the
property.72
We now apply the rules to this case.
As the foreclosure sale took place prior to the advent of the General
Banking Law of 2000, the applicable redemption period is one year. In
this case, because the Certificate of Sale in favor of respondent CCC was
registered on 8 March 1982, the redemption period was until 8 March
1983. It lapsed without any right of redemption having been exercised by
Dulos Realty. Consequently, the right of respondent CCC, as purchaser of
the subject lots, became absolute. As a matter of right, it was entitled to
the consolidation of the titles in its name and to the possession of those
lots. Further, the right of respondent CCC over the lots was transferred to
respondent Qua by virtue of the Deed of Sale executed between them.
Given the foregoing considerations, respondent Qua, who now has title to
the properties subject of the various Contracts to Sell, is the lawful owner
thereof.
Foreclosure Sale vs. Contract of Sale
When Dulos Realty executed a Deed of Absolute Sale covering the real
property registered under TCT No. S-39778 in favor of petitioner Baldoza
on 10 December 1983, it was no longer the owner of the property. Titles to
the subject properties, including the one sold to Baldoza, had already been
consolidated in favor of respondent CCC as early as 10 November 1983.
In fact, on the same date, the titles to the subject lots in the name of Dulos
Realty had already been cancelled and new ones issued to respondent
CCC.
The fact that Dulos Realty was no longer the owner of the real property at
the time of the sale led the CA to declare that the Contract of Sale was null
and void. On this premise, the appellate court concluded that respondent
Qua had a better title to the property over petitioner Baldoza.
We find no error in the conclusion of the CA that respondent Qua has a
better right to the property. The problem lies with its reasoning. We
therefore take a different route to reach the same conclusion.
Proper place of nemo dat quod non habet in the Law on Sales
Undeniably, there is an established rule under the law on sales that one
cannot give what one does not have (Nemo dat quad non ha bet).73 The
CA, however, confuses the application of this rule with respect to time. It
makes the nemo dat quad non habet  rule a requirement for
the perfection of a contract of sale, such that a violation thereof goes into
the validity of the sale. But the Latin precept has been jurisprudentially
held to apply to a contract of sale at its consummation stage, and not at the
perfection stage.74
Cavite Development Bank v. Spouses Syrus Lim 75 puts nemo dat quad non
habet in its proper place.1âwphi1 Initially, the Court rules out ownership
as a requirement for the perfection of a contract of sale. For all that is
required is a meeting of the minds upon the object of the contract and the
price. The case then proceeds to give examples of the rule. It cites Article
1434 of the Civil Code, which provides that in case the seller does not own
the subject matter of the contract at the time of the sale, but later acquires
title to the thing sold, ownership shall pass to the buyer. The Court also
refers to the rule as the rationale behind Article 1462, which deals with
sale of "future goods."
Cavite Development Bank thereafter turns to Article 1459, which requires
ownership by the seller of the thing sold at the time of delivery or
consummation stage of the sale. The Court explains that if the rule were
otherwise, the seller would not be able to comply with the latter's
obligation to transfer ownership to the buyer under a perfected contract of
sale. The Court ends the discourse with the conclusion that "[i]t is at the
8
consummation stage where the principle of nemo dat quad non
habet applies.76
Case law also provides that the fact th,at the seller is not the owner of the
subject matter of the sale at the time of perfection does not make the sale
void.77
Hence, the lesson: for title to pass to the buyer, the seller must be the
owner of the thing sold at the consummation stage or at the time
of delivery of the item sold. The seller need not be the owner at the
perfection stage of the contract, whether it is of a contract to sell or a
contract of sale. Ownership is not a requirement for a valid contract of
sale; it is a requirement for a valid transfer of ownership'.
Consequently, it was not correct for the CA to consider the contract of sale
void. The CA erroneously considered lack of ownership on the part of the
seller as having an effect on the validity of the sale. The sale was very
much valid when the Deed of Absolute Sale between the parties was
executed on 10 December 1983, even though title to the property had
earlier been consolidated in favor of respondent CCC as early as 10
November 1983. The fact that Dulos Realty was no longer the owner of
the property in question at the time of the sale did not affect the validity of
the contract.
On the contrary, lack of title goes into the performance of a contract of
sale. It is therefore crucial to determine in this case if the seller was the
owner at the time of delivery of the object of the sale. For this purpose, it
should be noted that execution of a public instrument evidencing a sale
translates to delivery.78 It transfers ownership of the item sold to the
buyer.79
In this case, the delivery coincided with the perfection of the contract -The
Deed of Absolute Sale covering the real property in favor of petitioner
Baldoza was executed on 10 December 1983. As already mentioned,
Dulos Realty was no longer the owner of the property on that date.
Accordingly, it could not have validly transferred ownership of the real
property it had sold to petitioner.
Thus, the correct conclusion that should be made is that while there was a
valid sale, there was no valid transfer of title to Baldoza, since Dulos
Realty was no longer the owner at the time of the execution of the Deed of
Absolute Sale.
No Bad Faith on Qua
The contention that Qua is a stockholder and former member of the Board
of Directors of respondent CCC and therefore she is not exactly a stranger
to the affairs of CCC is not even relevant.
An innocent purchaser for value is one who "buys the property of another
without notice that some other person has a right to or interest in it, and
who pays a full and fair price at the time of the purchase or before
receiving any notice of another person's claim." 80 The concept thus
presupposes that there must be an adverse claim or defect in the title to the
property to be purchased by the innocent purchaser for value.
Respondent Qua traces her title to respondent CCC, whose acquisition
over the property proceeded from a foreclosure sale that was valid. As
there is no defect in the title of respondent CCC to speak of in this case,
there is no need to go into a discussion of whether Qua is an innocent
purchaser for value.
4. Dispute as to the Factual Finding of the CA that the Deed of Absolute
Sale in Favor of Baldoza was not Preceded by a Contract to Sell and Full
Payment of the Purchase Price
We absolutely discard the argument. We can think of at least four reasons
why. First, Exhibit "L" was not formally offered in evidence. Second, it
was not even incorporated into the records. Third, the argument is
irrelevant. Fourth,  it was even abandoned in the Memoranda filed by
petitioners with us. Last,  we are not a trier of facts and thus we yield to the
finding of the CA.
Exhibit "L" not formally offered
A perusal of the records shows that the Contract to Sell that Baldoza
referred to had in fact been marked as Exhibit "L" during her direct
examination in court.81 Even so, Exhibit "L" was never formally offered as
evidence. For this reason, we reject her contention. Courts do not consider
evidence that has not been formally offered. 82 This explains why the CA
never mentioned the alleged Contract to Sell in favor of Baldoza.
The rationale behind the rule rests on the need for judges to confine their
factual findings and ultimately their judgment solely and strictly to the
evidence offered by the parties to a suit. 83 The rule has a threefold purpose.
It allows the trial judge to know the purpose of the evidence presented;
affords opposing parties the opportunity to examine the evidence and
object to its admissibility when necessary; and facilitates review, given
that an appellate court does not have to review documents that have not
been subjected to scrutiny by the trial court.84
Exhibit "L" not incorporated into the records
The rule, of course, admits an exception. Evidence not formally offered
may be admitted and considered by the trial court so long as the following
requirements obtain: (1) the evidence is duly identified  by testimony duly
recorded; and (2) the evidence is incorporated into the records of the case.
The exception does not apply to the case of Baldoza. While she duly
identified the Contract to Sell during her direct examination, which was
duly recorded, Exhibit "L" was not incorporated into the records.
Exhibit "L" not relevant
Be that as it may, the contention that a Contract to Sell in favor of Baldoza
preceded the sale in her favor is irrelevant. It must be stressed that the sale
to Baldoza made by Dulos Realty took place after the lapse of the
redemption period and after consolidation of title in the name of
respondent CCC on 10 November 1983, one month prior to the sale to
Baldoza on 10 December 1983. Dulos Realty still would have lost all
interest over the property mortgaged.
The fact that Dulos Realty ceased to be the owner of the property and
therefore it could no longer effect delivery of the property at the time the
Deed of Absolute Sale in favor of Baldoza was executed is the very reason
why the case of Baldoza cannot be compared with Dela Merced. In the
case, the buyer in the Contract to Sell was able to effect full payment of
the purchase price and to execute a Deed of Absolute Sale in his
favor before the foreclosure sale. In this case, the full payment of the
purchase price and the execution of a Deed of Absolute Sale in favor of
Baldoza was done after the foreclosure sale.
Issue over Exhibit "L" not included in the Memorandum
Equally important is the fact that petitioners failed to include the issue
over Exhibit "L" in any of the Memoranda they filed with us. The
omission is fatal. Issues raised in previous pleadings but not included
in the memorandum are deemed waived or abandoned (A.M. No. 99-
2-04-SC). As they are "a summation of the parties' previous pleadings, the
memoranda alone may be considered by the Court in deciding or resolving
the petition."85 Thus, even as the issue was raised in the Petition, the Court
may not consider it in resolving the case on the ground of failure of
petitioners to include the issue in the Memorandum. They have either
waived or abandoned it.
5. Issue of HLURB's Non-Approval of the Mortgage
9
Petitioners allege before the Court that the mortgage contract in this case
was not approved by the HLURB. They claim that this violates Section 18
of P.D. 95786 and results in the nullity of the mortgage. Respondents have
disputed the claim and counter-argue that the allegation of the petitioners
is not supported by evidence. Respondents likewise aver that the argument
was raised for the first time on appeal.87
It is rather too late in the day for petitioners to raise this argument. Parties
are not permitted to change their theory of a case at the appellate
stage.88 Thus, theories and issues not raised at the trial level will not be
considered by a reviewing court on the ground that they cannot be raised
for the first time on appeal. 89 Overriding considerations of fair play, justice
and due process dictate this recognized rule. 90 This Court cannot even
receive evidence on this matter.
Petitioners raised the issue only after obtaining an unfavorable judgment
from the CA. Undoubtedly, if we allow a change of theory late in the
game, so to speak, we will unjustifiably close our eyes to the
fundamental right of petitioners to procedural due process. They will
lose the opportunity to meet the challenge, because trial has
already ended. Ultimately, we will be throwing the Constitutional
rulebook out the window.
DENIED, and the Court of Appeals Decision dated 2 November 2004 and
Resolution dated 10 May 2005 in CA-G.R. CV No. 47421 are
hereby AFFIRMED.

Petitioners' original theory of the case is the nullity of the mortgage on the
grounds previously discussed. If petitioners are allowed to introduce their
new theory, respondents would have no more opportunity to rebut the new
claim with contrary evidence, as the trial stage has already been
terminated. In the interest of fair play and justice, the introduction of the
new argument must be barred.91

Exceptions Not Applicable

The Court is aware that the foregoing is merely a general rule. Exceptions
are written in case law: first, an issue of jurisdiction may be raised at any
time, even on appeal, for as long as the exercise thereof will not result in a
mockery of the demands of fair play;92 second, in the interest of justice
and at the sound discretion of the appellate court, a party may be allowed
to change its legal theory on appeal, but only when the factual bases
thereof would not require further presentation of evidence by the adverse
party for the purpose of addressing the issue raised in the new
theory; and last, which is actually a bogus exception, is when the question
falls within the issues raised at the trial court.94

The exceptions do not apply to the instant case. The new argument offered
in this case concerns a factual matter - prior approval by the HLURB. This
prerequisite is not in any way related to jurisdiction, and so the first
exception is not applicable. There is nothing in the record to allow us to
make any conclusion with respect to this new allegation.

Neither will the case fall under the second exception. Evidence would be
required of the respondents to disprove the new allegation that the
mortgage did not have the requisite prior HLURB approval. Besides, to
the mind of this court, to allow petitioners to change their theory at this
stage of the proceedings will be exceedingly inappropriate.

10
VIRGILIO S. DAVID, Petitioner, vs. MISAMIS OCCIDENTAL II
ELECTRIC COOPERATIVE, INC., Respondent.
FACTS:
Petitioner Virgilio S. David (David) was the owner or proprietor of VSD
Electric Sales, a company engaged in the business of supplying electrical
hardware including transformers for rural electric cooperatives like
respondent Misamis Occidental II Electric Cooperative, Inc. (MOELCI),
with principal office located in Ozamis City.
To solve its problem of power shortage affecting some areas within its
coverage, MOELCI expressed its intention to purchase a 10 MVA power
transformer from David. For this reason, its General Manager, Engr.
Reynaldo Rada (Engr. Rada), went to meet David in the latter’s office in
Quezon City. David agreed to supply the power transformer provided that
MOELCI would secure a board resolution because the item would still
have to be imported.
On June 8, 1992, Engr. Rada and Director Jose Jimenez (Jimenez), who
was in-charge of procurement, returned to Manila and presented to David
the requested board resolution which authorized the purchase of one 10
MVA power transformer. In turn, David presented his proposal for the
acquisition of said transformer. This proposal was the same proposal that
he would usually give to his clients.
After the reading of the proposal and the discussion of terms, David
instructed his then secretary and bookkeeper, Ellen M. Wong, to type the
names of Engr. Rada and Jimenez at the end of the proposal. Both signed
the document under the word "conforme." The board resolution was
thereafter attached to the proposal.
As stated in the proposal, the subject transformer, together with the basic
accessories, was valued at P5,200,000.00. It was also stipulated therein
that 50% of the purchase price should be paid as downpayment and the
remaining balance to be paid upon delivery. Freight handling, insurance,
customs duties, and incidental expenses were for the account of the buyer.
The Board Resolution, on the other hand, stated that the purchase of the
said transformer was to be financed through a loan from the National
Electrification Administration (NEA). As there was no immediate action
on the loan application, Engr. Rada returned to Manila in early December
1992 and requested David to deliver the transformer to them even without
the required downpayment. David granted the request provided that
MOELCI would pay interest at 24% per annum. Engr. Rada acquiesced to
the condition. On December 17, 1992, the goods were shipped to Ozamiz
City via William Lines. In the Bill of Lading, a sales invoice was included
which stated the agreed interest rate of 24% per annum.
When nothing was heard from MOELCI for sometime after the shipment,
Emanuel Medina (Medina), David’s Marketing Manager, went to Ozamiz
City to check on the shipment. Medina was able to confer with Engr. Rada
who told him that the loan was not yet released and asked if it was
possible to withdraw the shipped items. Medina agreed.
When no payment was made after several months, Medina was
constrained to send a demand letter, dated September 15, 1993, which
MOELCI duly received. Engr. Rada replied in writing that the goods were
still in the warehouse of William Lines again reiterating that the loan had
not been approved by NEA. This prompted Medina to head back to
Ozamiz City where he found out that the goods had already been released
to MOELCI evidenced by the shipping company’s copy of the Bill of
Lading which was stamped "Released," and with the notation that the
arrastre charges in the amount of P5,095.60 had been paid. This was
supported by a receipt of payment with the corresponding cargo delivery
receipt issued by the Integrated Port Services of Ozamiz, Inc.
Subsequently, demand letters were sent to MOELCI demanding the
payment of the whole amount plus the balance of previous purchases of
other electrical hardware. Aside from the formal demand letters, David
added that several statements of accounts were regularly sent through the
mails by the company and these were never disputed by MOELCI.
On February 17, 1994, David filed a complaint for specific performance
with damages with the RTC. In response, MOECLI moved for its
dismissal on the ground that there was lack of cause of action as there was
no contract of sale, to begin with, or in the alternative, the said contract
was unenforceable under the Statute of Frauds. MOELCI argued that the
quotation letter could not be considered a binding contract because there
was nothing in the said document from which consent, on its part, to the
terms and conditions proposed by David could be inferred. David knew
that MOELCI’s assent could only be obtained upon the issuance of a
purchase order in favor of the bidder chosen by the Canvass and Awards
Committee.
Eventually, pursuant to Rule 16, Section 5 of the Rules of Court, MOELCI
filed its Motion for Preliminary Hearing of Affirmative Defenses and
Deferment of the Pre-Trial Conference which was denied by the RTC to
abbreviate proceedings and for the parties to proceed to trial and avoid
piecemeal resolution of issues. The order denying its motion was raised
with the CA, and then with this Court. Both courts sustained the RTC
ruling.
Trial ensued. By reason of MOELCI’s continued failure to appear despite
notice, David was allowed to present his testimonial and documentary
evidence ex parte, pursuant to Rule 18, Section 5 of the Rules. A Very
Urgent Motion to Allow Defendant to Present Evidence was filed by
MOELCI, but was denied.
In its July 17, 2008 Decision, the RTC dismissed the complaint. It found
that although a contract of sale was perfected, it was not consummated
because David failed to prove that there was indeed a delivery of the
subject item and that MOELCI received it.3
Aggrieved, David appealed his case to the CA.
On July 8, 2010, the CA affirmed the ruling of the RTC. In the assailed
decision, the CA reasoned out that although David was correct in saying
that MOELCI was deemed to have admitted the genuineness and due
execution of the "quotation letter" (Exhibit A), wherein the signatures of
the Chairman and the General Manager of MOELCI appeared, he failed to
offer any textual support to his stand that it was a contract of sale instead
of a mere price quotation agreed to by MOELCI representatives. On this
score, the RTC erred in stating that a contract of sale was perfected
between the parties despite the irregularities that tainted their transaction.
Further, the fact that MOELCI’s representatives agreed to the terms
embodied in the agreement would not preclude the finding that said
contract was at best a mere contract to sell.
A motion for reconsideration was filed by David but it was denied.4
Hence, this petition.
Before this Court, David presents the following issues for consideration:
I. WHETHER OR NOT THERE WAS A
PERFECTED CONTRACT OF SALE.
II. WHETHER OR NOT THERE WAS A DELIVERY
THAT CONSUMMATED THE CONTRACT.
The Court finds merit in the petition.
11
 I. On the issue as to whether or not there was a perfected contract
of sale, this Court is required to delve into the evidence of the
case. In a petition for review on certiorari under Rule 45 of the
Rules of Court, the issues to be threshed out are generally
questions of law only, and not of fact.
This was reiterated in the case of Buenaventura v. Pascual, 5 where it was
written:
Time and again, this Court has stressed that its jurisdiction in a petition for
review on certiorari under Rule 45 of the Rules of Court is limited to
reviewing only errors of law, not of fact, unless the findings of fact
complained of are devoid of support by the evidence on record, or the
assailed judgment is based on the misapprehension of facts. The trial
court, having heard the witnesses and observed their demeanor and
manner of testifying, is in a better position to decide the question of their
credibility. Hence, the findings of the trial court must be accorded the
highest respect, even finality, by this Court.
That being said, the Court is not unmindful, however, of the recognized
exceptions well-entrenched in jurisprudence. It has always been stressed
that when supported by substantial evidence, the findings of fact of the CA
are conclusive and binding on the parties and are not reviewable by this
Court, unless the case falls under any of the following recognized
exceptions:
(1) When the conclusion is a finding grounded entirely on
speculation, surmises and conjectures;
(2) When the inference made is manifestly mistaken, absurd or
impossible;
(3) Where there is a grave abuse of discretion:
(4) When the judgment is based on a misapprehension of facts;
(5) When the findings of fact are conflicting;
(6) When the Court of Appeals, in making its findings, went
beyond the issues of the case and the same is contrary to the
admissions of both appellant and appellee;
(7) When the findings are contrary to those of the trial court;
(8) When the findings of fact are without citation of specific
evidence on which the conclusions are based;
(9) When the facts set forth in the petition as well as in the
petitioner’s main and reply briefs are not disputed by the
respondents; and
(10) When the findings of fact of the Court of Appeals are
premised on the supposed absence of evidence and contradicted
by the evidence on record. 6 [Emphasis supplied]
In this case, the CA and the RTC reached different conclusions on the
question of whether or not there was a perfected contract of sale. The RTC
ruled that a contract of sale was perfected although the same was not
consummated because David failed to show proof of delivery.7
The CA was of the opposite view. The CA wrote:
Be that as it may, it must be emphasized that the appellant failed to offer
any textual support to his insistence that Exhibit "A" is a contract of sale
instead of a mere price quotation conformed to by MOELCI
representatives. To that extent, the trial court erred in laying down the
premise that "indeed a contract of sale is perfected between the parties
despite the irregularities attending the transaction." x x x
That representatives of MOELCI conformed to the terms embodied in the
agreement does not preclude the finding that such contract is, at best, a
mere contract to sell with stipulated costs quoted should it ultimately ripen
into one of sale. The conditions upon which that development may occur
may even be obvious from statements in the agreement itself, that go
beyond just "captions." Thus, the appellant opens with, "WE are pleased to
submit our quotation xxx." The purported contract also ends with. "Thank
you for giving us the opportunity to quote on your requirements and we
hope to receive your order soon" apparently referring to a purchase order
which MOELCI contends to be a formal requirement for the entire
transaction.8
In other words, the CA was of the position that Exhibit A was at best a
contract to sell.
A perusal of the records persuades the Court to hold otherwise.
The elements of a contract of sale are, to wit: a) Consent or meeting of the
minds, that is, consent to transfer ownership in exchange for the price; b)
Determinate subject matter; and c) Price certain in money or its
equivalent.9It is the absence of the first element which distinguishes a
contract of sale from that of a contract to sell.
In a contract to sell, the prospective seller explicitly reserves the transfer
of title to the prospective buyer, meaning, the prospective seller does not
as yet agree or consent to transfer ownership of the property subject of the
contract to sell until the happening of an event, such as, in most cases, the
full payment of the purchase price. What the seller agrees or obliges
himself to do is to fulfill his promise to sell the subject property when the
entire amount of the purchase price is delivered to him. In other words, the
full payment of the purchase price partakes of a suspensive condition, the
non-fulfillment of which prevents the obligation to sell from arising and,
thus, ownership is retained by the prospective seller without further
remedies by the prospective buyer.10
In a contract of sale, on the other hand, the title to the property passes to
the vendee upon the delivery of the thing sold. Unlike in a contract to sell,
the first element of consent is present, although it is conditioned upon the
happening of a contingent event which may or may not occur. If the
suspensive condition is not fulfilled, the perfection of the contract of sale
is completely abated. However, if the suspensive condition is fulfilled, the
contract of sale is thereby perfected, such that if there had already been
previous delivery of the property subject of the sale to the buyer,
ownership thereto automatically transfers to the buyer by operation of law
without any further act having to be performed by the seller. The vendor
loses ownership over the property and cannot recover it until and unless
the contract is resolved or rescinded.11
An examination of the alleged contract to sell, "Exhibit A," despite its
unconventional form, would show that said document, with all the
stipulations therein and with the attendant circumstances surrounding it,
was actually a Contract of Sale. The rule is that it is not the title of the
contract, but its express terms or stipulations that determine the kind of
contract entered into by the parties.12 First, there was meeting of minds as
to the transfer of ownership of the subject matter. The letter (Exhibit A),
though appearing to be a mere price quotation/proposal, was not what it
seemed. It contained terms and conditions, so that, by the fact that
Jimenez, Chairman of the Committee on Management, and Engr. Rada,
General Manager of MOELCI, had signed their names under the word
"CONFORME," they, in effect, agreed with the terms and conditions with
respect to the purchase of the subject 10 MVA Power Transformer. As
correctly argued by David, if their purpose was merely to acknowledge the
receipt of the proposal, they would not have signed their name under the
word "CONFORME."
Besides, the uncontroverted attending circumstances bolster the fact that
there was consent or meeting of minds in the transfer of ownership. To
begin with, a board resolution was issued authorizing the purchase of the
12
subject power transformer. Next, armed with the said resolution, top
officials of MOELCI visited David’s office in Quezon City three times to
discuss the terms of the purchase. Then, when the loan that MOELCI was
relying upon to finance the purchase was not forthcoming, MOELCI,
through Engr. Rada, convinced David to do away with the 50%
downpayment and deliver the unit so that it could already address its acute
power shortage predicament, to which David acceded when it made the
delivery, through the carrier William
Lines, as evidenced by a bill of lading.
Second, the document specified a determinate subject matter which was
one (1) Unit of 10 MVA Power Transformer with corresponding KV Line
Accessories. And third, the document stated categorically the price certain
in money which was P5,200,000.00 for one (1) unit of 10 MVA Power
Transformer and P2,169,500.00 for the KV Line Accessories.
In sum, since there was a meeting of the minds, there was consent on the
part of David to transfer ownership of the power transformer to MOELCI
in exchange for the price, thereby complying with the first element. Thus,
the said document cannot just be considered a contract to sell but rather a
perfected contract of sale.
II. Was there a delivery?
MOELCI, in denying that the power transformer was delivered to it,
argued that the Bill of Lading which David was relying upon was not
conclusive. It argued that although the bill of lading was stamped
"Released," there was nothing in it that indicated that said power
transformer was indeed released to it or delivered to its possession. For
this reason, it is its position that it is not liable to pay the purchase price of
the 10 MVA power transformer.
This Court is unable to agree with the CA that there was no delivery of the
items. On the contrary, there was delivery and release.
To begin with, among the terms and conditions of the proposal to which
MOELCI agreed stated:
2. Delivery – Ninety (90) working days upon receipt of your purchase
order and downpayment.
C&F Manila, freight, handling, insurance, custom duties and incidental
expenses shall be for the account of MOELCI II. 13 (Emphasis supplied)
On this score, it is clear that MOELCI agreed that the power transformer
would be delivered and that the freight, handling, insurance, custom
duties, and incidental expenses shall be shouldered by it.
On the basis of this express agreement, Article 1523 of the Civil Code
becomes applicable.1âwphi1 It provides:
Where, in pursuance of a contract of sale, the seller is authorized or
required to send the goods to the buyer delivery of the goods to a carrier,
whether named by the buyer or not, for the purpose of transmission to the
buyer is deemed to be a delivery of the goods to the buyer, except in the
cases provided for in Article 1503, first, second and third paragraphs, or
unless a contrary intent appears. (Emphasis supplied)
Thus, the delivery made by David to William Lines, Inc., as evidenced by
the Bill of Lading, was deemed to be a delivery to MOELCI. David was
authorized to send the power transformer to the buyer pursuant to their
agreement. When David sent the item through the carrier, it amounted to a
delivery to MOELCI.
Furthermore, in the case of Behn, Meyer & Co. (Ltd.) v. Yangco,14 it was
pointed out that a specification in a contract relative to the payment of
freight can be taken to indicate the intention of the parties with regard to
the place of delivery. So that, if the buyer is to pay the freight, as in this
case, it is reasonable to suppose that the subject of the sale is transferred to
the buyer at the point of shipment. In other words, the title to the goods
transfers to the buyer upon shipment or delivery to the carrier.
Of course, Article 1523 provides a mere presumption and in order to
overcome said presumption, MOELCI should have presented evidence to
the contrary. The burden of proof was shifted to MOELCI, who had to
show that the rule under Article 1523 was not applicable. In this regard,
however, MOELCI failed.
There being delivery and release, said fact constitutes partial performance
which takes the case out of the protection of the Statute of Frauds. It is
elementary that the partial execution of a contract of sale takes the
transaction out of the provisions of the Statute of Frauds so long as the
essential requisites of consent of the contracting parties, object and cause
of the obligation concur and are clearly established to be present.15
The Court now comes to David’s prayer that MOELCI be made to pay the
total sum of ₱ 5,472,722.27 plus the stipulated interest at 24% per annum
from the filing of the complaint. Although the Court agrees that MOELCI
should pay interest, the stipulated rate is, however, unconscionable and
should be equitably reduced. While there is no question that parties to a
loan agreement have wide latitude to stipulate on any interest rate in view
of the Central Bank Circular No. 905 s. 1982 which suspended the Usury
Law ceiling on interest effective January 1, 1983, it is also worth stressing
that interest rates whenever unconscionable may still be reduced to a
reasonable and fair level. There is nothing in the said circular which grants
lenders carte blanche authority to raise interest rates to levels which will
either enslave their borrowers or lead to a hemorrhaging of their
assets.16Accordingly, the excessive interest of 24% per annum stipulated in
the sales invoice should be reduced to 12% per annum.
Indeed, David was compelled to file an action against MOELCI but this
reason alone will not warrant an award of attorney’s fees. It is settled that
the award of attorney's fees is the exception rather than the rule. Counsel's
fees are not awarded every time a party prevails in a suit because of the
policy that no premium should be placed on the right to litigate. Attorney's
fees, as part of damages, are not necessarily equated to the amount paid by
a litigant to a lawyer. In the ordinary sense, attorney's fees represent the
reasonable compensation paid to a lawyer by his client for the legal
services he has rendered to the latter; while in its extraordinary concept,
they may be awarded by the court as indemnity for damages to be paid by
the losing party to the prevailing party. Attorney's fees as part of damages
are awarded only in the instances specified in Article 2208 of the Civil
Code 17 which demands factual, legal, and equitable justification. Its basis
cannot be left to speculation or conjecture. In this regard, none was
proven.
Moreover, in the absence of stipulation, a winning party may be awarded
attorney's fees only in case plaintiffs action or defendant's stand is so
untenable as to amount to gross and evident bad faith.18 is MOELCI's case
cannot be similarly classified.
Also, David's claim for the balance of P73,059.76 plus the stipulated
interest is denied for being unsubstantiated.
GRANTED. The July 8, 2010 Decision of the Court of Appeals Is
REVERSED and SET ASIDE. Respondent Misamis Occidental II Electric
Cooperative, Inc. is ordered to pay petitioner Virgilio S. David the total
sum of P5,472,722.27 with interest at the rate of 12o/o per annum
reckoned from the filing of the complaint until fully paid.
13
SPOUSES JOSE C. ROQUE AND BEATRIZ DELA CRUZ ROQUE, with
deceased Jose C. Roque represented by his substitute heir JOVETTE
ROQUE-LIBREA, Petitioners, vs. MA. PAMELA P. AGUADO, FRUCTUOSO
C. SABUG, JR., NATIONAL COUNCIL OF CHURCHES IN THE PHILIPPINES
(NCCP), represented by its Secretary General SHARON ROSE JOY RUIZ-
DUREMDES, LAND BANK OF THE PHILIPPINES (LBP), represented by
Branch Manager EVELYN M. MONTERO, ATTY. MARIO S.P. DIAZ, in his
Official Capacity as Register of Deeds for Rizal, Morong Branch, and
CECILIO U. PULAN, in his Official Capacity as Sheriff, Office of the Clerk
of Court, Regional Trial Court, Binangonan, Rizal,Respondents.
Assailed in this petition for review on certiorari 1 are the Decision2 dated
May 12, 2010 and the Resolution 3 dated September 15, 2010 of the Court
of Appeals (CA) in CA G.R. CV No. 92113 which affirmed the
Decision4 dated July 8, 2008 of the Regional Trial Court of Binangonan,
Rizal, Branch 69 (RTC) that dismissed Civil Case Nos. 03-022 and 05-003
for reconveyance, annulment of sale, deed of real estate mortgage,
foreclosure and certificate of sale, and damages.
FACTS
The property subject of this case is a parcel of land with an area of 20,862
square meters (sq. m.), located in Sitio Tagpos, Barangay Tayuman,
Binangonan, Rizal, known as Lot 18089.5
On July 21, 1977, petitioners-spouses Jose C. Roque and Beatriz dela Cruz
Roque (Sps. Roque) and the original owners of the then unregistered Lot
18089 – namely, Velia R. Rivero (Rivero), Magdalena Aguilar, Angela
Gonzales, Herminia R. Bernardo, Antonio Rivero, Araceli R. Victa,
Leonor R. Topacio, and Augusto Rivero (Rivero, et al.) – executed a Deed
of Conditional Sale of Real Property6 (1977 Deed of Conditional Sale)
over a 1,231-sq. m. portion of Lot 18089 (subject portion) for a
consideration of ₱30,775.00. The parties agreed that Sps. Roque shall
make an initial payment of ₱15,387.50 upon signing, while the remaining
balance of the purchase price shall be payable upon the registration of Lot
18089, as well as the segregation and the concomitant issuance of a
separate title over the subject portion in their names. After the deed’s
execution, Sps. Roque took possession and introduced improvements on
the subject portion which they utilized as a balut factory.7
On August 12, 1991, Fructuoso Sabug, Jr. (Sabug, Jr.), former Treasurer
of the National Council of Churches in the Philippines (NCCP), applied
for a free patent over the entire Lot 18089 and was eventually issued
Original Certificate of Title (OCT) No. M-5955 8 in his name on October
21, 1991. On June 24, 1993, Sabug, Jr. and Rivero, in her personal
capacity and in representation of Rivero, et al., executed a Joint
Affidavit9 (1993 Joint Affidavit), acknowledging that the subject portion
belongs to Sps. Roque and expressed their willingness to segregate the
same from the entire area of Lot 18089.
On December 8, 1999, however, Sabug, Jr., through a Deed of Absolute
Sale10 (1999 Deed of Absolute Sale), sold Lot 18089 to one Ma. Pamela P.
Aguado (Aguado) for ₱2,500,000.00, who, in turn, caused the cancellation
of OCT No. M-5955 and the issuance of Transfer Certificate of Title
(TCT) No. M-96692 dated December 17, 199911 in her name.
Thereafter, Aguado obtained an ₱8,000,000.00 loan from the Land Bank
of the Philippines (Land Bank) secured by a mortgage over Lot
18089.12 When she failed to pay her loan obligation, Land Bank
commenced extra-judicial foreclosure proceedings and eventually tendered
the highest bid in the auction sale. Upon Aguado’s failure to redeem the
subject property, Land Bank consolidated its ownership, and TCT No. M-
11589513 was issued in its name on July 21, 2003.14
On June 16, 2003, Sps. Roque filed a complaint15 for reconveyance,
annulment of sale, deed of real estate mortgage, foreclosure, and
certificate of sale, and damages before the RTC, docketed as Civil Case
No. 03-022, against Aguado, Sabug, Jr., NCCP, Land Bank, the Register
of Deeds of Morong, Rizal, and Sheriff Cecilio U. Pulan, seeking to be
declared as the true owners of the subject portion which had been
erroneously included in the sale between Aguado and Sabug, Jr., and,
subsequently, the mortgage to Land Bank, both covering Lot 18089 in its
entirety.
In defense, NCCP and Sabug, Jr. denied any knowledge of the 1977 Deed
of Conditional Sale through which the subject portion had been
purportedly conveyed to Sps. Roque.16
For her part, Aguado raised the defense of an innocent purchaser for value
as she allegedly derived her title (through the 1999 Deed of Absolute Sale)
from Sabug, Jr., the registered owner in OCT No. M-5955, covering Lot
18089, which certificate of title at the time of sale was free from any lien
and/or encumbrances. She also claimed that Sps. Roque’s cause of action
had already prescribed because their adverse claim was made only on
April 21, 2003, or four (4) years from the date OCT No. M-5955 was
issued in Sabug, Jr.’s name on December 17, 1999.17
On the other hand, Land Bank averred that it had no knowledge of Sps.
Roque’s claim relative to the subject portion, considering that at the time
the loan was taken out, Lot 18089 in its entirety was registered in
Aguado’s name and no lien and/or encumbrance was annotated on her
certificate of title.18
Meanwhile, on January 18, 2005, NCCP filed a separate complaint 19 also
for declaration of nullity of documents and certificates of title and
damages, docketed as Civil Case No. 05-003. It claimed to be the real
owner of Lot 18089 which it supposedly acquired from Sabug, Jr. through
an oral contract of sale 20 in the early part of 1998, followed by the
execution of a Deed of Absolute Sale on December 2, 1998 (1998 Deed of
Absolute Sale).21 NCCP also alleged that in October of the same year, it
entered into a Joint Venture Agreement (JVA) with Pilipinas Norin
Construction Development Corporation (PNCDC), a company owned by
Aguado’s parents, for the development of its real properties, including Lot
18089, into a subdivision project, and as such, turned over its copy of
OCT No. M-5955 to PNCDC. 22 Upon knowledge of the purported sale of
Lot 18089 to Aguado, Sabug, Jr. denied the transaction and alleged
forgery. Claiming that the Aguados23 and PNCDC conspired to defraud
NCCP, it prayed that PNCDC’s corporate veil be pierced and that the
Aguados be ordered to pay the amount of ₱38,092,002.00 representing the
unrealized profit from the JVA. 24 Moreover, NCCP averred that Land
Bank failed to exercise the diligence required to ascertain the true owners
of Lot 18089. Hence, it further prayed that: (a) all acts of ownership and
dominion over Lot 18089 that the bank might have done or caused to be
done be declared null and void; (b) it be declared the true and real owners
of Lot 18089; and (c) the Register of Deeds of Morong, Rizal be ordered
to cancel any and all certificates of title covering the lot, and a new one be
issued in its name.25 In its answer, Land Bank reiterated its stance that Lot
18089 was used as collateral for the ₱8,000,000.00 loan obtained by the
Countryside Rural Bank, Aguado, and one Bella Palasaga. There being no
lien and/ or encumbrance annotated on its certificate of title, i.e., TCT No.
M-115895, it cannot be held liable for NCCP’s claims. Thus, it prayed for
the dismissal of NCCP’s complaint.26
On September 7, 2005, Civil Case Nos. 02-022 and 05-003 were ordered
consolidated.27
The RTC Ruling
After due proceedings, the RTC rendered a Decision 28 dated July 8, 2008,
dismissing the complaints of Sps. Roque and NCCP.
With respect to Sps. Roque’s complaint, the RTC found that the latter
failed to establish their ownership over the subject portion, considering the
following: (a) the supposed owners-vendors, i.e., Rivero, et al., who
executed the 1977 Deed of Conditional Sale, had no proof of their title
over Lot 18089; (b) the 1977 Deed of Conditional Sale was not registered
14
with the Office of the Register of Deeds; 29 (c) the 1977 Deed of
Conditional Sale is neither a deed of conveyance nor a transfer document,
as it only gives the holder the right to compel the supposed vendors to
execute a deed of absolute sale upon full payment of the consideration; (d)
neither Sps. Roque nor the alleged owners-vendors, i.e., Rivero, et al.,
have paid real property taxes in relation to Lot 18089; and (e) Sps.
Roque’s occupation of the subject portion did not ripen into ownership
that can be considered superior to the ownership of Land
Bank.30 Moreover, the RTC ruled that Sps. Roque’s action for
reconveyance had already prescribed, having been filed ten (10) years
after the issuance of OCT No. M-5955.31
On the other hand, regarding NCCP’s complaint, the RTC observed that
while it anchored its claim of ownership over Lot 18089 on the 1998 Deed
of Absolute Sale, the said deed was not annotated on OCT No. M-5955.
Neither was any certificate of title issued in its name nor did it take
possession of Lot 18089 or paid the real property taxes therefor. Hence,
NCCP’s claim cannot prevail against Land Bank’s title, which was
adjudged by the RTC as an innocent purchaser for value. Also, the RTC
disregarded NCCP’s allegation that the signature of Sabug, Jr. on the 1999
Deed of Absolute Sale in favor of Aguado was forged because his
signatures on both instruments bear semblances of similarity and appear
genuine. Besides, the examiner from the National Bureau of Investigation,
who purportedly found that Sabug, Jr.’s signature thereon was spurious
leading to the dismissal of a criminal case against him, was not presented
as a witness in the civil action.32
Finally, the RTC denied the parties’ respective claims for damages.33
The CA Ruling
On appeal, the Court of Appeals (CA) affirmed the foregoing RTC
findings in a Decision34 dated May 12, 2010. While Land Bank was not
regarded as a mortgagee/purchaser in good faith with respect to the subject
portion considering Sps. Roque’s possession thereof, 35 the CA did not
order its reconveyance or segregation in the latter’s favor because of Sps.
Roque’s failure to pay the remaining balance of the purchase price. Hence,
it only directed Land Bank to respect Sps. Roque’s possession with the
option to appropriate the improvements introduced thereon upon payment
of compensation.36
As regards NCCP, the CA found that it failed to establish its right over Lot
18089 for the following reasons: (a) the sale to it of the lot by Sabug, Jr.
was never registered; and (b) there is no showing that it was in possession
of Lot 18089 or any portion thereof from 1998. Thus, as far as NCCP is
concerned, Land Bank is a mortgagee/purchaser in good faith.37
Aggrieved, both Sps. Roque38 and NCCP39 moved for reconsideration but Sps. Roque claim that the subject portion covered by the 1977 Deed of
were denied by the CA in a Resolution 40dated September 15, 2010, Conditional Sale between them and Rivero, et al. was wrongfully included
prompting them to seek further recourse before the Court. in the certificates of title covering Lot 18089, and, hence, must be
segregated therefrom and their ownership thereof be confirmed. The
salient portions of the said deed state:
The Issue Before the Court
DEED OF CONDITIONAL SALE OF REAL PROPERTY
The central issue in this case is whether or not the CA erred in not
ordering the reconveyance of the subject portion in Sps. Roque’s favor.
KNOW ALL MEN BY THESE PRESENTS:
Sps. Roque maintain that the CA erred in not declaring them as the lawful
owners of the subject portion despite having possessed the same since the xxxx
execution of the 1977 Deed of Conditional Sale, sufficient for acquisitive
prescription to set in in their favor. 41 To bolster their claim, they also point
That for and in consideration of the sum of THIRTY THOUSAND
to the 1993 Joint Affidavit whereby Sabug, Jr. and Rivero acknowledged
SEVEN HUNDRED SEVENTY FIVE PESOS (₱30,775.00), Philippine
their ownership thereof.42 Being the first purchasers and in actual
possession of the disputed portion, they assert that they have a better right Currency, payable in the manner hereinbelow specified, the VENDORS
over the 1,231- sq. m. portion of Lot 18089 and, hence, cannot be ousted do hereby sell, transfer and convey unto the VENDEE, or their heirs,
therefrom by Land Bank, which was adjudged as a ortgagee/purchaser in executors, administrators, or assignors, that unsegregated portion of the
bad faith, pursuant to Article 1544 of the Civil Code.43 above lot, x x x.
That the aforesaid amount shall be paid in two installments, the first
In opposition, Land Bank espouses that the instant petition should be
installment which is in the amount of __________ (₱15,387.50) and the
dismissed for raising questions of fact, in violation of the proscription
balance in the amount of __________ (₱15,387.50), shall be paid as soon
under Rule 45 of the Rules of Court which allows only pure questions of
as the described portion of the property shall have been registered under
law to be raised.44 Moreover, it denied that ownership over the subject
the Land Registration Act and a Certificate of Title issued accordingly;
portion had been acquired by Sps. Roque who admittedly failed to pay the
remaining balance of the purchase price. 45 Besides, Land Bank points out
that Sps. Roque’s action for reconveyance had already prescribed.46 That as soon as the total amount of the property has been paid and the
Certificate of Title has been issued, an absolute deed of sale shall be
Instead of traversing the arguments of Sps. Roque, NCCP, in its executed accordingly;
Comment47 dated December 19, 2011, advanced its own case, arguing that
the CA erred in holding that it failed to establish its claimed ownership x x x x51
over Lot 18089 in its entirety. Incidentally, NCCP’s appeal from the CA
Decision dated May 12, 2010 was already denied by the Court, 48 and
hence, will no longer be dealt with in this case.
The Court’s Ruling
The petition lacks merit.
The essence of an action for reconveyance is to seek the transfer of the
property which was wrongfully or erroneously registered in another
person’s name to its rightful owner or to one with a better right. 49 Thus, it
is incumbent upon the aggrieved party to show that he has a legal claim on
the property superior to that of the registered owner and that the property
has not yet passed to the hands of an innocent purchaser for value.50
15
Examining its provisions, the Court finds that the stipulation above-
highlighted shows that the 1977 Deed of Conditional Sale is actually in the
nature of a contract to sell and not one of sale contrary to Sps. Roque’s
belief.52 In this relation, it has been consistently ruled that where the seller
promises to execute a deed of absolute sale upon the completion by the
buyer of the payment of the purchase price, the contract is only a contract
to sell even if their agreement is denominated as a Deed of Conditional
Sale,53 as in this case. This treatment stems from the legal characterization
of a contract to sell, that is, a bilateral contract whereby the prospective
seller, while expressly reserving the ownership of the subject property
despite delivery thereof to the prospective buyer, binds himself to sell the
subject property exclusively to the prospective buyer upon fulfillment of
the condition agreed upon, such as, the full payment of the purchase
price.54 Elsewise stated, in a contract to sell, ownership is retained by the
vendor and is not to pass to the vendee until full payment of the purchase
price.55 Explaining the subject matter further, the Court, in Ursal v.
CA,56 held that:
[I]n contracts to sell the obligation of the seller to sell becomes
demandable only upon the happening of the suspensive condition, that is,
the full payment of the purchase price by the buyer. 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. Prior to the existence
of the contract of sale, the seller is not obligated to transfer the ownership
to the buyer, even if there is a contract to sell between them.
Here, it is undisputed that Sps. Roque have not paid the final installment
of the purchase price.57 As such, the condition which would have triggered
the parties’ obligation to enter into and thereby perfect a contract of sale in
order to effectively transfer the ownership of the subject portion from the
sellers (i.e., Rivero et al.) to the buyers (Sps. Roque) cannot be deemed to
have been fulfilled. Consequently, the latter cannot validly claim
ownership over the subject portion even if they had made an initial
payment and even took possession of the same.58
The Court further notes that Sps. Roque did not even take any active steps
to protect their claim over the disputed portion. This remains evident from
the following circumstances appearing on record: (a) the 1977 Deed of
Conditional Sale was never registered; (b) they did not seek the
actual/physical segregation of the disputed portion despite their knowledge
of the fact that, as early as 1993, the entire Lot 18089 was registered in
Sabug, Jr.’s name under OCT No. M-5955; and (c) while they signified
their willingness to pay the balance of the purchase price, 59Sps. Roque
neither compelled Rivero et al., and/or Sabug, Jr. to accept the same nor
did they consign any amount to the court, the proper application of which
would have effectively fulfilled their obligation to pay the purchase
price.60 Instead, Sps. Roque waited 26 years, reckoned from the execution
of the 1977 Deed of Conditional Sale, to institute an action for
reconveyance (in 2003), and only after Lot 18089 was sold to Land Bank
in the foreclosure sale and title thereto was consolidated in its name. Thus, therefor were raised before the trial court or the CA.68 Accordingly, the
in view of the foregoing, Sabug, Jr. – as the registered owner of Lot 18089 Court applies the well-settled rule that litigants cannot raise an issue for
borne by the grant of his free patent application – could validly convey the first time on appeal as this would contravene the basic rules of fair
said property in its entirety to Aguado who, in turn, mortgaged the same to play and justice. In any event, such claims appear to involve questions of
Land Bank. Besides, as aptly observed by the RTC, Sps. Roque failed to fact which are generally prohibited under a Rule 45 petition.69
establish that the parties who sold the property to them, i.e., Rivero, et al.,
were indeed its true and lawful owners. 61 In fine, Sps. Roque failed to
With the conclusions herein reached, the Court need not belabor on the
establish any superior right over the subject portion as against the
other points raised by the parties, and ultimately finds it proper to proceed
registered owner of Lot 18089, i.e., Land Bank, thereby warranting the
with the denial of the petition.
dismissal of their reconveyance action, without prejudice to their right to
seek damages against the vendors, i.e., Rivero et al.62 As applied in the
case of Coronel v. CA:63 WHEREFORE, the petition is DENIED. The Decision dated May 12, 2010
and the Resolution dated September 15, 2010 of the Court of Appeals in
CAG.R. CV No. 92113 are hereby AFFIRMED.
It is essential to distinguish between a contract to sell and a conditional
contract of sale specially in cases where the subject property is sold by the
owner not to the party the seller contracted with, but to a third person, as
in the case at bench. In a contract to sell, there being no previous sale of
the property, a third person buying such property despite the fulfilment of
the suspensive condition such as the full payment of the purchase price,
for instance, cannot be deemed a buyer in bad faith and the prospective
buyer cannot seek the relief of reconveyance of the property.
There is no double sale in such case.1âwphi1 Title to the property will
transfer to the buyer after registration because there is no defect in the
owner-seller’s title per se, but the latter, of course, may be sued for
damages by the intending buyer. (Emphasis supplied)
On the matter of double sales, suffice it to state that Sps. Roque’s
reliance64 on Article 154465 of the Civil Code has been misplaced since the
contract they base their claim of ownership on is, as earlier stated, a
contract to sell, and not one of sale. In Cheng v. Genato, 66 the Court stated
the circumstances which must concur in order to determine the
applicability of Article 1544, none of which are obtaining in this case, viz.:
(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 same seller.
Finally, regarding Sps. Roque’s claims of acquisitive prescription and
reimbursement for the value of the improvements they have introduced on
the subject property,67 it is keenly observed that none of the arguments
16
ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A.
CORONEL, ANNABELLE C. GONZALES (for herself and on
behalf of Floraida C. Tupper, as attorney-in-fact), CIELITO A.
CORONEL, FLORAIDA A. ALMONTE, and CATALINA BALAIS
MABANAG, petitioners, vs. THE COURT OF APPEALS,
CONCEPCION D. ALCARAZ and RAMONA PATRICIA
ALCARAZ, assisted by GLORIA F. NOEL as attorney-in-
fact, respondents.
The petition before us has its roots in a complaint for specific
performance to compel herein petitioners (except the last named, Catalina
Balais Mabanag) to consummate the sale of a parcel of land with its
improvements located along Roosevelt Avenue in Quezon City entered
into by the parties sometime in January 1985 for the price
of P1,240,000.00.
FACTS:
On January 19, 1985, defendants-appellants Romulo Coronel, et. al.
(hereinafter referred to as Coronels) executed a document entitled Receipt
of Down Payment (Exh. A) in favor of plaintiff Ramona Patricia Alcaraz
(hereinafter referred to as Ramona) which is reproduced hereunder:
RECEIPT OF DOWN PAYMENT
P1,240,000.00 - Total amount
50,000.00 - Down payment
------------------------------------------
P1,190,000.00 - Balance
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City,
the sum of Fifty Thousand Pesos purchase price of our inherited house
and lot, covered by TCT No. 119627 of the Registry of Deeds of Quezon
City, in the total amount of P1,240,000.00.
We bind ourselves to effect the transfer in our names from our deceased
father, Constancio P. Coronel, the transfer certificate of title immediately
upon receipt of the down payment above-stated.
On our presentation of the TCT already in or name, We will immediately
execute the deed of absolute sale of said property and Miss Ramona
Patricia Alcaraz shall immediately pay the balance of the P1,190,000.00.
Clearly, the conditions appurtenant to the sale are the following:
1. Ramona will make a down payment of Fifty Thousand (P50,000.00)
pesos upon execution of the document aforestated;
2. The Coronels will cause the transfer in their names of the title of the
property registered in the name of their deceased father upon receipt of the
Fifty Thousand (P50,000.00) Pesos down payment;
3. Upon the transfer in their names of the subject property, the Coronels
will execute the deed of absolute sale in favor of Ramona and the latter
will pay the former the whole balance of One Million One Hundred Ninety
Thousand (P1,190,000.00) Pesos.
On the same date (January 15, 1985), plaintiff-appellee Concepcion D.
Alcaraz (hereinafter referred to as Concepcion), mother of Ramona, paid
the down payment of Fifty Thousand (P50,000.00) Pesos (Exh. B, Exh. 2).
On February 6, 1985, the property originally registered in the name of the
Coronels father was transferred in their names under TCT No. 327043
(Exh. D; Exh 4)
On February 18, 1985, the Coronels sold the property covered by TCT No.
327043 to intervenor-appellant Catalina B. Mabanag (hereinafter referred
to as Catalina) for One Million Five Hundred Eighty Thousand
(P1,580,000.00) Pesos after the latter has paid Three Hundred Thousand
(P300,000.00) Pesos (Exhs. F-3; Exh. 6-C)
For this reason, Coronels canceled and rescinded the contract (Exh. A)
with Ramona by depositing the down payment paid by Concepcion in the
bank in trust for Ramona Patricia Alcaraz.
On February 22, 1985, Concepcion, et. al., filed a complaint for a specific
performance against the Coronels and caused the annotation of a notice
of lis pendens at the back of TCT No. 327403 (Exh. E; Exh. 5).
On April 2, 1985, Catalina caused the annotation of a notice of adverse
claim covering the same property with the Registry of Deeds of Quezon
City (Exh. F; Exh. 6).
On April 25, 1985, the Coronels executed a Deed of Absolute Sale over
the subject property in favor of Catalina (Exh. G; Exh. 7).
On June 5, 1985, a new title over the subject property was issued in the
name of Catalina under TCT No. 351582 (Exh. H; Exh. 8).
(Rollo, pp. 134-136)
In the course of the proceedings before the trial court (Branch
83, RTC, Quezon City) the parties agreed to submit the case for
decision solely on the basis of documentary exhibits. Thus, plaintiffs
therein (now private respondents) proffered their documentary
evidence accordingly marked as Exhibits A through J, inclusive of
their corresponding submarkings. Adopting these same exhibits as
their own, then defendants (now petitioners) accordingly offered
and marked them as Exhibits 1 through 10, likewise inclusive of
their corresponding submarkings. Upon motion of the parties, the
trial court gave them thirty (30) days within which to simultaneously
submit their respective memoranda, and an additional 15 days
within which to submit their corresponding comment or reply
thereto, after which, the case would be deemed submitted for
resolution.
On April 14, 1988, the case was submitted for resolution
before Judge Reynaldo Roura, who was then temporarily detailed
to preside over Branch 82 of the RTC of Quezon City. On March 1,
1989, judgment was handed down by Judge Roura from his regular
bench at Macabebe, Pampanga for the Quezon City branch,
disposing as follows:
WHEREFORE, judgment for specific performance is hereby rendered
ordering defendant to execute in favor of plaintiffs a deed of absolute sale
covering that parcel of land embraced in and covered by Transfer
Certificate of Title No. 327403 (now TCT No. 331582) of the Registry of
Deeds for Quezon City, together with all the improvements existing
thereon free from all liens and encumbrances, and once accomplished, to
immediately deliver the said document of sale to plaintiffs and upon
receipt thereof, the plaintiffs are ordered to pay defendants the whole
balance of the purchase price amounting to P1,190,000.00 in
cash. Transfer Certificate of Title No. 331582 of the Registry of Deeds
for Quezon City in the name of intervenor is hereby canceled and declared
to be without force and effect. Defendants and intervenor and all other
persons claiming under them are hereby ordered to vacate the subject
property and deliver possession thereof to plaintiffs. Plaintiffs claim for
damages and attorneys fees, as well as the counterclaims of defendants and
intervenors are hereby dismissed.
Macabebe, Pampanga for Quezon City, March 1, 1989.
(Rollo, p. 106)
17
 A motion for reconsideration was filed by petitioners before
the new presiding judge of the Quezon City RTC but the same was
denied by Judge Estrella T. Estrada, thusly:
The prayer contained in the instant motion, i.e., to annul the decision and
to render anew decision by the undersigned Presiding Judge should be
denied for the following reasons:  the following:
(1) The instant case became submitted for decision as of April 14, 1988
when the parties terminated the presentation of their respective
documentary evidence and when the Presiding Judge at that time was
Judge Reynaldo Roura. The fact that they were allowed to file memoranda
at some future date did not change the fact that the hearing of the case was
terminated before Judge Roura and therefore the same should be submitted
to him for decision; (2) When the defendants and intervenor did not object
to the authority of Judge Reynaldo Roura to decide the case prior to the
rendition of the decision, when they met for the first time before the
undersigned Presiding Judge at the hearing of a pending incident in Civil
Case No. Q-46145 on November 11, 1988, they were deemed to have
acquiesced thereto and they are now estopped from questioning said
authority of Judge Roura after they received the decision in question
which happens to be adverse to them; (3) While it is true that Judge
Reynaldo Roura was merely a Judge-on-detail at this Branch of the Court,
he was in all respects the Presiding Judge with full authority to act on any
pending incident submitted before this Court during his
incumbency. When he returned to his Official Station at Macabebe,
Pampanga, he did not lose his authority to decide or resolve cases
submitted to him for decision or resolution because he continued as Judge
of the Regional Trial Court and is of co-equal rank with the undersigned
Presiding Judge. The standing rule and supported by jurisprudence is that
a Judge to whom a case is submitted for decision has the authority to
decide the case notwithstanding his transfer to another branch or region of
the same court (Sec. 9, Rule 135, Rule of Court).
Coming now to the twin prayer for reconsideration of the Decision dated
March 1, 1989 rendered in the instant case, resolution of which now
pertains to the undersigned Presiding Judge, after a meticulous
examination of the documentary evidence presented by the parties, she is
convinced that the Decision of March 1, 1989 is supported by evidence
and, therefore, should not be disturbed.
IN VIEW OF THE FOREGOING, the Motion for Reconsideration and/or
to Annul Decision and Render Anew Decision by the Incumbent Presiding
Judge dated March 20, 1989 is hereby DENIED.
Quezon City, Philippines, July 12, 1989.
(Rollo, pp. 108-109)
Petitioners thereupon interposed an appeal, but
on December 16, 1991, the Court of Appeals (Buena, Gonzaga-
Reyes, Abad-Santos (P), JJ.) rendered its decision fully agreeing
with the trial court.
Hence, the instant petition which was filed on March 5,
1992. The last pleading, private respondents Reply Memorandum,
was filed on September 15, 1993. The case was, however, re-
raffled to undersigned ponente only on August 28, 1996, due to the
voluntary inhibition of the Justice to whom the case was last
assigned.
While we deem it necessary to introduce certain refinements
in the disquisition of respondent court in the affirmance of the trial
courts decision, we definitely find the instant petition bereft of merit.
The heart of the controversy which is the ultimate key in the
resolution of the other issues in the case at bar is the precise determination
of the legal significance of the document entitled
Receipt of Down Payment which was offered in evidence by both
parties. There is no dispute as to the fact that the said document embodied
the binding contract between Ramona Patricia Alcaraz on the one hand,
and the heirs of Constancio P. Coronel on the other, pertaining to a
particular house and lot covered by TCT No. 119627, as defined in Article
1305 of the Civil Code of the Philippines which reads as follows:
Art. 1305. A contract is a meeting of minds between two persons whereby
one binds himself, with respect to the other, to give something or to render
some service.
While, it is the position of private respondents that the Receipt of
Down Payment embodied a perfected contract of sale, which perforce,
they seek to enforce by means of an action for specific performance,
petitioners on their part insist that what the document signified was a mere
executory contract to sell, subject to certain suspensive conditions, and
because of the absence of Ramona P. Alcaraz, who left for the United
States of America, said contract could not possibly ripen into a contract of
absolute sale.
Plainly, such variance in the contending parties contention is
brought about by the way each interprets the terms and/or conditions set
forth in said private instrument.Withal, based on whatever relevant and
admissible evidence may be available on record, this Court, as were the
courts below, is now called upon to adjudge what the real intent of the
parties was at the time the said document was executed.
The Civil Code defines a contract of sale, thus:
Art. 1458. By the contract of sale one of the contracting parties obligates
himself to transfer the ownership of and to deliver a determinate thing, and
the other to pay therefor a price certain in money or its equivalent.
Sale, by its very nature, is a consensual contract because it is
perfected by mere consent. The essential elements of a contract of sale are
a) Consent or meeting of the minds, that is, consent to transfer ownership
in exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be considered as a
Contract of Sale because the first essential element is lacking. In a contract
to sell, the prospective seller explicitly reserves the transfer of title to the
prospective buyer, meaning, the prospective seller does not as yet agree or
consent to transfer ownership of the property subject of the contract to sell
until the happening of an event, which for present purposes we shall take
as the full payment of the purchase price. What the seller agrees or obliges
himself to do is to fulfill his promise to sell the subject property when the
entire amount of the purchase price is delivered to him. In other words the
full payment of the purchase price partakes of a suspensive condition, the
non-fulfillment of which prevents the obligation to sell from arising and
thus, ownership is retained by the prospective seller without further
remedies by the prospective buyer. In Roque vs. Lapuz (96 SCRA 741
[1980]), this Court had occasion to rule:
Hence, We hold that the contract between the petitioner and the
respondent was a contract to sell where the ownership or title is retained
by the seller and is not to pass until the full payment of the price, such
payment being a positive suspensive condition and failure of which is not
a breach, casual or serious, but simply an event that prevented the
obligation of the vendor to convey title from acquiring binding force.
Stated positively, upon the fulfillment of the suspensive condition
which is the full payment of the purchase price, the prospective sellers
obligation to sell the subject property by entering into a contract of sale
with the prospective buyer becomes demandable as provided in Article
1479 of the Civil Code which states:
Art. 1479. A promise to buy and sell a determinate thing for a price
certain is reciprocally demandable.
18
An accepted unilateral promise to buy or to sell a determinate thing for a
price certain is binding upon the promissor of the promise is supported by
a consideration distinct from the price.
A contract to sell may thus be defined as a bilateral contract
whereby the prospective seller, while expressly reserving the ownership of
the subject property despite delivery thereof to the prospective buyer,
binds himself to sell the said property exclusively to the prospective buyer
upon fulfillment of the condition agreed upon, that is, full payment of the
purchase price.
A contract to sell as defined hereinabove, may not even be
considered as a conditional contract of sale where the seller may likewise
reserve title to the property subject of the sale until the fulfillment of a
suspensive condition, because in a conditional contract of sale, the first
element of consent is present, although it is conditioned upon the
happening of a contingent event which may or may not occur. If the
suspensive condition is not fulfilled, the perfection of the contract of sale
is completely abated (cf. Homesite and Housing Corp. vs. Court of
Appeals, 133 SCRA 777 [1984]). However, if the suspensive condition is
fulfilled, the contract of sale is thereby perfected, such that if there had
already been previous delivery of the property subject of the sale to the
buyer, ownership thereto automatically transfers to the buyer by operation
of law without any further act having to be performed by the seller.
In a contract to sell, upon the fulfillment of the suspensive condition
which is the full payment of the purchase price, ownership will not
automatically transfer to the buyer although the property may have been
previously delivered to him. The prospective seller still has to convey title
to the prospective buyer by entering into a contract of absolute sale.
It is essential to distinguish between a contract to sell and a
conditional contract of sale specially in cases where the subject property is
sold by the owner not to the party the seller contracted with, but to a third
person, as in the case at bench. In a contract to sell, there being no
previous sale of the property, a third person buying such property despite
the fulfillment of the suspensive condition such as the full payment of the
purchase price, for instance, cannot be deemed a buyer in bad faith and the
prospective buyer cannot seek the relief of reconveyance of the
property. There is no double sale in such case. Title to the property will
transfer to the buyer after registration because there is no defect in the
owner-sellers title per se, but the latter, of course, may be sued for
damages by the intending buyer.
In a conditional contract of sale, however, upon the fulfillment of
the suspensive condition, the sale becomes absolute and this will definitely
affect the sellers title thereto.In fact, if there had been previous delivery of
the subject property, the sellers ownership or title to the property is
automatically transferred to the buyer such that, the seller will no longer
have any title to transfer to any third person. Applying Article 1544 of the
Civil Code, such second buyer of the property who may have had actual or
constructive knowledge of such defect in the sellers title, or at least was
charged with the obligation to discover such defect, cannot be a registrant
in good faith. Such second buyer cannot defeat the first buyers title. In
case a title is issued to the second buyer, the first buyer may seek
reconveyance of the property subject of the sale.
With the above postulates as guidelines, we now proceed to the task
of deciphering the real nature of the contract entered into by petitioners
and private respondents.
It is a canon in the interpretation of contracts that the words used
therein should be given their natural and ordinary meaning unless a
technical meaning was intended (Tan vs. Court of Appeals, 212 SCRA 586
[1992]). Thus, when petitioners declared in the said Receipt of Down
Payment that they --
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City,
the sum of Fifty Thousand Pesos purchase price of our inherited house
and lot, covered by TCT No. 1199627 of the Registry of Deeds of Quezon
City, in the total amount of P1,240,000.00.
without any reservation of title until full payment of the entire purchase
price, the natural and ordinary idea conveyed is that they sold their
property.
When the Receipt of Down payment is considered in its entirety, it
becomes more manifest that there was a clear intent on the part of
petitioners to transfer title to the buyer, but since the transfer certificate of
title was still in the name of petitioners father, they could not fully effect
such transfer although the buyer was then willing and able to immediately
pay the purchase price. Therefore, petitioners-sellers undertook upon
receipt of the down payment from private respondent Ramona P. Alcaraz,
to cause the issuance of a new certificate of title in their names from that
of their father, after which, they promised to present said title, now in their
names, to the latter and to execute the deed of absolute sale whereupon,
the latter shall, in turn, pay the entire balance of the purchase price.
The agreement could not have been a contract to sell because the
sellers herein made no express reservation of ownership or title to the
subject parcel of land. Furthermore, the circumstance which prevented the
parties from entering into an absolute contract of sale pertained to the
sellers themselves (the certificate of title was not in their names) and not
the full payment of the purchase price. Under the established facts and
circumstances of the case, the Court may safely presume that, had the
certificate of title been in the names of petitioners-sellers at that time, there
would have been no reason why an absolute contract of sale could not
have been executed and consummated right there and then.
Moreover, unlike in a contract to sell, petitioners in the case at bar
did not merely promise to sell the property to private respondent upon the
fulfillment of the suspensive condition. On the contrary, having already
agreed to sell the subject property, they undertook to have the certificate of
title change to their names and immediately thereafter, to execute the
written deed of absolute sale.
Thus, the parties did not merely enter into a contract to sell where
the sellers, after compliance by the buyer with certain terms and
conditions, promised to sell the property to the latter. What may be
perceived from the respective undertakings of the parties to the contract is
that petitioners had already agreed to sell the house and lot they inherited
from their father, completely willing to transfer ownership of the subject
house and lot to the buyer if the documents were then in order. It just so
happened, however, that the transfer certificate of title was then still in the
name of their father. It was more expedient to first effect the change in the
certificate of title so as to bear their names.That is why they undertook to
cause the issuance of a new transfer of the certificate of title in their names
upon receipt of the down payment in the amount of P50,000.00. As soon
as the new certificate of title is issued in their names, petitioners were
committed to immediately execute the deed of absolute sale. Only then
will the obligation of the buyer to pay the remainder of the purchase price
arise.
There is no doubt that unlike in a contract to sell which is most
commonly entered into so as to protect the seller against a buyer who
intends to buy the property in installment by withholding ownership over
the property until the buyer effects full payment therefor, in the contract
entered into in the case at bar, the sellers were the ones who were unable
to enter into a contract of absolute sale by reason of the fact that the
certificate of title to the property was still in the name of their father. It
was the sellers in this case who, as it were, had the impediment which
prevented, so to speak, the execution of an contract of absolute sale.
What is clearly established by the plain language of the subject
document is that when the said Receipt of Down Payment was prepared
and signed by petitioners Romulo A. Coronel, et. al., the parties had
agreed to a conditional contract of sale, consummation of which is subject
only to the successful transfer of the certificate of title from the name of
petitioners father, Constancio P. Coronel, to their names.
The Court significantly notes that this suspensive condition was, in
fact, fulfilled on February 6, 1985 (Exh. D; Exh. 4). Thus, on said date, the
conditional contract of sale between petitioners and private respondent
Ramona P. Alcaraz became obligatory, the only act required for the
consummation thereof being the delivery of the property by means of the
execution of the deed of absolute sale in a public instrument, which
petitioners unequivocally committed themselves to do as evidenced by the
Receipt of Down Payment.
Article 1475, in correlation with Article 1181, both of the Civil
Code, plainly applies to the case at bench. Thus,
19
Art. 1475. The contract of sale is perfected at the moment there is a
meeting of minds upon the thing which is the object of the contract and
upon the price.
From that moment, the parties may reciprocally demand performance,
subject to the provisions of the law governing the form of contracts.
Art. 1181. In conditional obligations, the acquisition of rights, as well as
the extinguishment or loss of those already acquired, shall depend upon
the happening of the event which constitutes the condition.
Since the condition contemplated by the parties which is the
issuance of a certificate of title in petitioners names was fulfilled on
February 6, 1985, the respective obligations of the parties under the
contract of sale became mutually demandable, that is, petitioners, as
sellers, were obliged to present the transfer certificate of title already in
their names to private respondent Ramona P. Alcaraz, the buyer, and to
immediately execute the deed of absolute sale, while the buyer on her part,
was obliged to forthwith pay the balance of the purchase price amounting
to P1,190,000.00.
It is also significant to note that in the first paragraph in page 9 of
their petition, petitioners conclusively admitted that:
3. The petitioners-sellers Coronel bound themselves to effect
the transfer in our names from our deceased father
Constancio P. Coronel, the transfer certificate of title
immediately upon receipt of the downpayment above-
stated". The sale was still subject to this suspensive
condition. (Emphasis supplied.)
(Rollo, p. 16)
Petitioners themselves recognized that they entered into a contract
of sale subject to a suspensive condition. Only, they contend, continuing in
the same paragraph, that:
. . . Had petitioners-sellers not complied with this condition of first
transferring the title to the property under their names, there could be no
perfected contract of sale. (Emphasis supplied.)
(Ibid.)
not aware that they have set their own trap for themselves, for Article
1186 of the Civil Code expressly provides that:
Art. 1186. The condition shall be deemed fulfilled when the obligor
voluntarily prevents its fulfillment.
Besides, it should be stressed and emphasized that what is more
controlling than these mere hypothetical arguments is the fact that
the condition herein referred to was actually and indisputably fulfilled
on February 6, 1985, when a new title was issued in the names of
petitioners as evidenced by TCT No. 327403 (Exh. D; Exh. 4).
The inevitable conclusion is that on January 19, 1985, as evidenced
by the document denominated as Receipt of Down Payment (Exh. A; Exh.
1), the parties entered into a contract of sale subject to the suspensive
condition that the sellers shall effect the issuance of new certificate title
from that of their fathers name to their names and that, on February 6,
1985, this condition was fulfilled (Exh. D; Exh. 4).
We, therefore, hold that, in accordance with Article 1187 which
pertinently provides -
Art. 1187. The effects of conditional obligation to give, once the condition
has been fulfilled, shall retroact to the day of the constitution of the
obligation . . .
In obligations to do or not to do, the courts shall determine, in each case,
the retroactive effect of the condition that has been complied with.
the rights and obligations of the parties with respect to the perfected
contract of sale became mutually due and demandable as of the time of
fulfillment or occurrence of the suspensive condition on February 6,
1985. As of that point in time, reciprocal obligations of both seller and
buyer arose.
Petitioners also argue there could been no perfected contract on
January 19, 1985 because they were then not yet the absolute owners of
the inherited property.
We cannot sustain this argument.
Article 774 of the Civil Code defines Succession as a mode of
transferring ownership as follows:
Art. 774. Succession is a mode of acquisition by virtue of which the
property, rights and obligations to the extent and value of the inheritance
of a person are transmitted through his death to another or others by his
will or by operation of law.
Petitioners-sellers in the case at bar being the sons and daughters of
the decedent Constancio P. Coronel are compulsory heirs who were called
to succession by operation of law. Thus, at the point their father drew his
last breath, petitioners stepped into his shoes insofar as the subject
property is concerned, such that any rights or obligations pertaining
thereto became binding and enforceable upon them. It is expressly
provided that rights to the succession are transmitted from the moment of
death of the decedent (Article 777, Civil Code; Cuison vs. Villanueva, 90
Phil. 850 [1952]).
Be it also noted that petitioners claim that succession may not be
declared unless the creditors have been paid is rendered moot by the fact
that they were able to effect the transfer of the title to the property from
the decedents name to their names on February 6, 1985.
Aside from this, petitioners are precluded from raising their
supposed lack of capacity to enter into an agreement at that time and they
cannot be allowed to now take a posture contrary to that which they took
when they entered into the agreement with private respondent Ramona P.
Alcaraz. The Civil Code expressly states that:
Art. 1431. Through estoppel an admission or representation is rendered
conclusive upon the person making it, and cannot be denied or disproved
as against the person relying thereon.
Having represented themselves as the true owners of the subject property
at the time of sale, petitioners cannot claim now that they were not yet the
absolute owners thereof at that time.
Petitioners also contend that although there was in fact a perfected
contract of sale between them and Ramona P. Alcaraz, the latter breach
her reciprocal obligation when she rendered impossible the consummation
thereof by going to the United States of America, without leaving her
address, telephone number, and Special Power of Attorney (Paragraphs
14 and 15, Answer with Compulsory Counterclaim to the Amended
Complaint, p. 2; Rollo, p. 43), for which reason, so petitioners conclude,
they were correct in unilaterally rescinding the contract of sale.
We do not agree with petitioners that there was a valid rescission of
the contract of sale in the instant case. We note that these supposed
grounds for petitioners rescission, are mere allegations found only in their
responsive pleadings, which by express provision of the rules, are deemed
controverted even if no reply is filed by the plaintiffs (Sec. 11, Rule 6,
Revised Rules of Court). The records are absolutely bereft of any
supporting evidence to substantiate petitioners allegations. We have
stressed time and again that allegations must be proven by sufficient
evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882 [1961]; Recaro vs.
Embisan, 2 SCRA 598 [1961]). Mere allegation is not an evidence
(Lagasca vs. De Vera, 79 Phil. 376 [1947]).
Even assuming arguendo that Ramona P. Alcaraz was in the United
States of America on February 6, 1985, we cannot justify petitioners-
20
sellers act of unilaterally and extrajudicially rescinding the contract of
sale, there being no express stipulation authorizing the sellers to
extrajudicially rescind the contract of sale. (cf. Dignos vs. CA, 158 SCRA
375 [1988]; Taguba vs. Vda. De Leon, 132 SCRA 722 [1984])
Moreover, petitioners are estopped from raising the alleged absence
of Ramona P. Alcaraz because although the evidence on record shows that
the sale was in the name of Ramona P. Alcaraz as the buyer, the sellers
had been dealing with Concepcion D. Alcaraz, Ramonas mother, who had
acted for and in behalf of her daughter, if not also in her own
behalf. Indeed, the down payment was made by Concepcion D. Alcaraz
with her own personal Check (Exh. B; Exh. 2) for and in behalf of
Ramona P. Alcaraz. There is no evidence showing that petitioners ever
questioned Concepcions authority to represent Ramona P. Alcaraz when
they accepted her personal check. Neither did they raise any objection as
regards payment being effected by a third person. Accordingly, as far as
petitioners are concerned, the physical absence of Ramona P. Alcaraz is
not a ground to rescind the contract of sale.
Corollarily, Ramona P. Alcaraz cannot even be deemed to be in
default, insofar as her obligation to pay the full purchase price is
concerned. Petitioners who are precluded from setting up the defense of
the physical absence of Ramona P. Alcaraz as above-explained offered no
proof whatsoever to show that they actually presented the new transfer
certificate of title in their names and signified their willingness and
readiness to execute the deed of absolute sale in accordance with their
agreement. Ramonas corresponding obligation to pay the balance of the
purchase price in the amount of P1,190,000.00 (as buyer) never became
due and demandable and, therefore, she cannot be deemed to have been in
default.
Article 1169 of the Civil Code defines when a party in a contract
involving reciprocal obligations may be considered in default, to wit:
Art. 1169. Those obliged to deliver or to do something, incur in delay
from the time the obligee judicially or extrajudicially demands from them
the fulfillment of their obligation.
xxx
In reciprocal obligations, neither party incurs in delay if the other does
not comply or is not ready to comply in a proper manner with what is
incumbent upon him. From the moment one of the parties fulfill his
obligation, delay by the other begins. (Emphasis supplied.)
There is thus neither factual nor legal basis to rescind the contract
of sale between petitioners and respondents.
With the foregoing conclusions, the sale to the other petitioner,
Catalina B. Mabanag, gave rise to a case of double sale where Article
1544 of the Civil Code will apply, to wit:
Art. 1544. If the same thing should have been sold to different vendees,
the ownership shall be transferred to the person who may have first taken
possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person
who in good faith was first in the possession; and, in the absence thereof to
the person who presents the oldest title, provided there is good faith.
The record of the case shows that the Deed of Absolute Sale dated
April 25, 1985 as proof of the second contract of sale was registered with
the Registry of Deeds of Quezon City giving rise to the issuance of a new
certificate of title in the name of Catalina B. Mabanag on June 5,
1985. Thus, the second paragraph of Article 1544 shall apply.
The above-cited provision on double sale presumes title or
ownership to pass to the buyer, the exceptions being: (a) when the second
buyer, in good faith, registers the sale ahead of the first buyer, and (b)
should there be no inscription by either of the two buyers, when the
second buyer, in good faith, acquires possession of the property ahead of
the first buyer. Unless, the second buyer satisfies these requirements, title
or ownership will not transfer to him to the prejudice of the first buyer.
In his commentaries on the Civil Code, an accepted authority on the
subject, now a distinguished member of the Court, Justice Jose C. Vitug,
explains:
The governing principle is prius tempore, potior jure (first in time,
stronger in right). Knowledge by the first buyer of the second sale cannot
defeat the first buyers rights except when the second buyer first registers
in good faith the second sale (Olivares vs. Gonzales, 159 SCRA
33). Conversely, knowledge gained by the second buyer of the first sale
defeats his rights even if he is first to register, since knowledge taints his
registration with bad faith (see 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. No. 95843, 02
September 1992).
(J. Vitug, Compendium of Civil Law and Jurisprudence, 1993
Edition, p. 604).
Petitioners point out that the notice of lis pendens in the case at bar
was annotated on the title of the subject property only on February 22,
1985, whereas, the second sale between petitioners Coronels and petitioner
Mabanag was supposedly perfected prior thereto or on February 18,
1985. The idea conveyed is that at the time petitioner Mabanag, the second
buyer, bought the property under a clean title, she was unaware of any
adverse claim or previous sale, for which reason she is a buyer in good
faith.
We are not persuaded by such argument.
In a case of double sale, what finds relevance and materiality is not
whether or not the second buyer in good faith but whether or not said
second buyer registers such second sale in good faith, that is, without
knowledge of any defect in the title of the property sold.
As clearly borne out by the evidence in this case, petitioner
Mabanag could not have in good faith, registered the sale entered into on
February 18, 1985 because as early as February 22, 1985, a notice of lis
pendens had been annotated on the transfer certificate of title in the names
of petitioners, whereas petitioner Mabanag registered the said sale
sometime in April, 1985. At the time of registration, therefore, petitioner
Mabanag knew that the same property had already been previously sold to
private respondents, or, at least, she was charged with knowledge that a
previous buyer is claiming title to the same property. Petitioner Mabanag
cannot close her eyes to the defect in petitioners title to the property at the
time of the registration of the property.
This Court had occasions to rule that:
If a vendee in a double sale registers the sale after he has acquired
knowledge that there was a previous sale of the same property to a third
party or that another person claims said property in a previous sale, the
registration will constitute a registration in bad faith and will not confer
upon him any right. (Salvoro vs. Tanega, 87 SCRA 349 [1978]; citing
Palarca vs. Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43
Phil. 554; Fernandez vs. Mercader, 43 Phil. 581.)
Thus, the sale of the subject parcel of land between petitioners and
Ramona P. Alcaraz, perfected on February 6, 1985, prior to that between
petitioners and Catalina B. Mabanag on February 18, 1985, was correctly
upheld by both the courts below.
Although there may be ample indications that there was in fact an
agency between Ramona as principal and Concepcion, her mother, as
agent insofar as the subject contract of sale is concerned, the issue of
whether or not Concepcion was also acting in her own behalf as a co-
buyer is not squarely raised in the instant petition, nor in such assumption
disputed between mother and daughter. Thus, We will not touch this issue
and no longer disturb the lower courts ruling on this point.
21
DISMISSED and the appealed judgment AFFIRMED.

22
ANGEL M. PAGADUAN, AMELIA P. TUCCI, TERESITA P. DEL MONTE,
ORLITA P. GADIN, PERLA P. ESPIRITU, ELISA P. DUNN, LORNA P.
KIMBLE, EDITO N. PAGADUAN and LEO N. PAGADUAN, Petitioners,  with damages, against respondents before the RTC of Olongapo City.
- versus - SPOUSES ESTANISLAO & FE  POSADAS OCUMA,
In this Petition for  Review,[1] petitioners assail the Decision[2] of the Court
of Appeals dated September 18, 2006 which ruled that petitioners action
for reconveyance is barred by prescription and consequently reversed the
decision[3] dated June 25, 2002 of the Regional Trial Court (RTC)
of Olongapo City.
Petitioners Angel N. Pagaduan, Amelia P. Tucci, Teresita P.
del Monte, Orlita P. Gadin, Perla P. Espiritu, Elisa P. Dunn, Lorna P.
Kimble, Edito N. Pagaduan and Leo N. Pagaduan are all heirs of the late
Agaton Pagaduan. Respondents are the spouses Estanislao Ocuma and Fe
Posadas Ocuma.
 
FACTS:
 
 
The subject lot used to be part of a big parcel of land that
originally belonged to Nicolas Cleto as evidenced by Certificate of Title
(C.T.) No. 14. The big parcel of land was the subject of two separate lines
of dispositions. The first line of dispositions began with the sale by Cleto
to Antonio Cereso on May 11, 1925. Cereso in turn sold the land to the
siblings with the surname Antipolo on September 23, 1943. The Antipolos
sold the property to Agaton Pagaduan, father of petitioners, on March 24,
1961. All the dispositions in this line were not registered and did not result
in the issuance of new certificates of title in the name of the purchasers.
The second line of dispositions started on January 30, 1954,
after Cletos death, when his widow Ruperta Asuncion as his sole heir and
new owner of the entire tract, sold the same to Eugenia Reyes. This
resulted in the issuance of Transfer Certificate of Title (TCT) No. T-1221
in the name of Eugenia Reyes in lieu of TCT No. T-1220 in the name of
Ruperta Asuncion.
 
On November 26, 1961, Eugenia Reyes executed a unilateral
deed of sale where she sold the northern portion with an area of 32,325
square meters to respondents for P1,500.00 and the southern portion
consisting of 8,754 square meters to Agaton Pagaduan for P500.00. Later,
on June 5, 1962, Eugenia executed another deed of sale, this time
conveying the entire parcel of land, including the southern portion, in
respondents favor. Thus, TCT No. T-1221 was cancelled and in lieu
thereof TCT No. T-5425 was issued in the name of respondents. On June
27, 1989, respondents subdivided the land into two lots. The subdivision
resulted in the cancellation of TCT No. T-5425 and the issuance of TCT
Nos. T-37165 covering a portion with 31,418 square meters and T-37166
covering the remaining portion with 9,661 square meters.
 
On July 26, 1989, petitioners instituted a complaint for
reconveyance of the southern portion with an area of 8,754 square meters,
 
On June 25, 2002, the trial court rendered a decision in
petitioners favor. Ruling that a constructive trust over the property was
created in petitioners favor, the court below ordered respondents to
reconvey the disputed southern portion and to pay attorneys fees as well as
litigation expenses to petitioners. The dispositive portion of the decision
reads: WHEREFORE, foregoing premises considered, judgment is hereby
rendered:
1.  Ordering the defendants to reconvey to the plaintiffs, a
portion of their property originally covered by Certificate of
Title No. T-54216[4] now TCT Nos. 37165 and 37166 an area
equivalent to 8,754 square meters.
2.  Ordering the defendant to pay plaintiffs P15,000.00 as
attorneys fees and P5,000.00 for litigation expenses.
3.  Defendants counterclaims are dismissed.
Dissatisfied with the decision, respondents appealed it to the
Court of Appeals. The Court of Appeals reversed and set aside the
decision of the trial court; with the dispositive portion of the decision
reading, thus:
WHEREFORE, premises considered, the appeal is granted.
Accordingly, prescription having set in, the assailed June 25,
2002 Decision of the RTC is reversed and set aside, and the
Complaint for reconveyance is hereby DISMISSED.
The Court of Appeals ruled that while the registration of the
southern portion in the name of respondents had created an implied trust in
favor of Agaton Pagaduan, petitioners, however, failed to show that they
had taken possession of the said portion. Hence, the appellate court
concluded that prescription had set in, thereby precluding petitioners
recovery of the disputed portion.
 
 
 
Unperturbed by the reversal of the trial courts decision, the
petitioners come to this Court via a petition for review on certiorari.
[7]
 They assert that the Civil Code provision on double sale is controlling.
They submit further that since the incontrovertible evidence on record is
that they are in possession of the southern portion, the ten (10)-year
prescriptive period for actions for reconveyance should not apply to them.
[8]
 Respondents, on the other hand, aver that the action for reconveyance
has prescribed since the ten (10)-year period, which according to them has
to be reckoned from the issuance of the title in their name in 1962, has
elapsed long ago.[9]
The Court of Appeals decision must be reversed and set aside,
hence the petition succeeds.
An action for reconveyance respects the decree of registration as
incontrovertible but seeks the transfer of property, which has been
wrongfully or erroneously registered in other persons' names, to its rightful
and legal owners, or to those who claim to have a better right. However,
contrary to the positions of both the appellate and trial courts, no trust was
created under Article 1456 of the new Civil Code which provides:
 
Art. 1456. If property is acquired
through mistake or fraud, the person obtaining it
is, by force of law, considered a trustee of an
implied trust for the benefit of the person
from whom the property comes. (Emphasis
supplied)
 
The property in question did not come from the petitioners. In
fact that property came from Eugenia Reyes. The title of the Ocumas can
be traced back from Eugenia Reyes to Ruperta Asuncion to the original
owner Nicolas Cleto. Thus, if the respondents are holding the property in
trust for anyone, it would be Eugenia Reyes and not the petitioners.
Moreover, as stated in Berico v. Court of Appeals,[10] Article
1456 refers to actual or constructive fraud. Actual fraud consists in
deception, intentionally practiced to induce another to part with property or
to surrender some legal right, and which accomplishes the end
designed. Constructive fraud, on the other hand, is a breach of legal or
equitable duty which the law declares fraudulent irrespective of the moral
guilt of the actor due to the tendency to deceive others, to violate public or
private confidence, or to injure public interests. The latter proceeds from a
breach of duty arising out of a fiduciary or confidential relationship. In the
instant case, none of the elements of actual or constructive fraud exists. The
respondents did not deceive Agaton Pagaduan to induce the latter to part
with the ownership or deliver the possession of the property to them.
Moreover, no fiduciary relations existed between the two parties.
23
 This lack of a trust relationship does not inure to the benefit of
the respondents. Despite a host of jurisprudence that states a certificate of
title is indefeasible, unassailable and binding against the whole world, it
merely confirms or records title already existing and vested, and it cannot
be used to protect a usurper from the true owner, nor can it be used for the
perpetration of fraud; neither does it permit one to enrich himself at the
expense of others.[11]
Rather, after a thorough scrutiny of the records of the instant
case, the Court finds that this is a case of double sale under article 1544 of
the Civil Code which reads:
 
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 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.
 
Otherwise stated, where it is an 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 then is two-
fold: acquisition in good faith and registration in good faith.
In this case there was a first sale by Eugenia Reyes to Agaton
Pagaduan and a second sale by Eugenia Reyes to the respondents. [13]  For a
second buyer like the respondents to successfully invoke the second
paragraph, Article 1544 of the Civil Code, it must possess good faith from
the time of the sale in its favor until the registration of the same. 
Respondents sorely failed to meet this requirement of good faith since they
had actual knowledge of Eugenias prior sale of the southern portion
property to the petitioners, a fact antithetical to good faith. This cannot be
denied by respondents since in the same deed of sale that Eugenia sold
them the northern portion to the respondents for P1,500.00, Eugenia also
sold the southern portion of the land to Agaton Pagaduan for P500.00.[14]
 
It is to be emphasized that the Agaton Pagaduan never parted
with the ownership and possession of that portion of Lot No. 785 which he
had purchased from Eugenia Santos. Hence, the registration of the deed of
sale by respondents was ineffectual and vested upon them no preferential
rights to the property in derogation of the rights of the petitioners.
Respondents had prior knowledge of the sale of the questioned
portion to Agaton Pagaduan as the same deed of sale that conveyed the
northern portion to them, conveyed the southern portion to Agaton
Pagaduan.[15] Thus the subsequent issuance of TCT No. T-5425, to the
extent that it affects the Pagaduans portion, conferred no better right than
the registration which was the source of the authority to issue the said title.
Knowledge gained by respondents of the first sale defeats their rights even
if they were first to register the second sale. Knowledge of the first sale
blackens this prior registration with bad faith. [16] Good faith must concur
with the registration.[17] Therefore, because the registration by the
respondents was in bad faith, it amounted to no registration at all.
 
As the respondents gained no rights over the land, it is
petitioners who are the rightful owners, having established that their
successor-in-interest Agaton Pagaduan had purchased the property from
Eugenia Reyes on November 26, 1961 and in fact took possession of the
said property. The action to recover the immovable is not barred by
prescription, as it was filed a little over 27 years after the title was
registered in bad faith by the Ocumas as per Article 1141 of the Civil Code.
[18]
WHEREFORE, the petition is GRANTED. The Decision of the
Court of Appeals dated January 25, 2006 and its Resolution dated May 5,
2006 are hereby REVERSED and SET ASIDE.  The Decision of the Regional
Trial Court is hereby REINSTATED.
24
ROSARIO CARBONELL, petitioner, vs. HONORABLE COURT OF
APPEALS, JOSE PONCIO, EMMA INFANTE and RAMON
INFANTE, respondents.
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.
FACTS:
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.
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 correspondent 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.).
25
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). Hence, this appeal.
RULING:
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.
26
(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 by 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
27
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
28
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
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546 and 547 of the New Civil Code. Their expenses consisting of twenty-nine pesos (p13,429.00) within three (3) months from the finality
P1,500.00 for draining the property, filling it with 500 cubic meters of of this decision. Should petitioner carbonell fail to pay the said amount
garden soil, building a wall around it and installing a gate and P11,929.00 within the aforestated period of three (3) months from the finality of this
for erecting a b ' bungalow thereon, are useful expenditures, for they add decision, the period of three (3) months within which the respondents
to the value of the property (Aringo vs. Arenas, 14 Phil. 263; Alburo vs. infantes may remove their aforementioned useful improvements shall
Villanueva, 7 Phil. 277; Valencia vs. Ayala de Roxas, 13 Phil. 45). commence from the expiration of the three (3) months given petitioner
carbonell to pay for the said useful improvements.
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

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